Recovery's Steward

When the harried leaders of the free world's economies get to daydreaming, West Germany must seem to be something like Valhalla. It has virtually full employment with negligible inflation, and its gross national product is growing at a brisk rate of 5 1/2% a year. In addition, its Economics Minister enjoys a political popularity that is unusual in his profession. From posters that went up all over Frankfurt last week in support of local Social Democratic Party candidates gazed the youthful, horn-rimmed visage of a man who was not even up for election. He was Karl Schiller, 57, who is considered the architect of West Germany's recent economic resurgence.

In 22 months under Schiller's stewardship, Germany has recovered from a severe recession and served as the U.S's and Britain's closest ally in defense of the dollar and the pound. Reflecting the strength of Schiller's mark, Germany is by far the largest lender ($1.57 billion) to the 111-nation International Monetary Fund. Such achievements won due recognition three weeks ago when Schiller traveled to Washington for the IMF's annual meeting. The moneymen representing the powerful Group of Ten elected him their next president.

No Planning. Schiller himself is an improbable hero. A self-assured former professor of political economics, he was virtually unknown outside West Germany when he joined New Chancellor Kurt Kiesinger's Cabinet in 1966. Nor was he a household word at home. As the first socialist in the top economic job since the war, he was automatically distrusted by German business. At the same time, he seemed suspiciously capitalistic to old-line Social Democrats. What West Germany needed, said Schiller, was a mix of "the competitive play of market forces" and as much government planning as necessary.

For years, West Germany had no real planning whatever. Former Chancellor Ludwig Erhard's Santa Claus approach to government spending was harmless as long as Germany's postwar boom continued. But in 1966, when inflationary pressures appeared, his refusal to cut spending and raise taxes proved catastrophic. Moving on its own to brake the boom, the Bundesbank squeezed credit too tightly, eventually causing mass unemployment and a deep recession.

Schiller wasted little time after he took over as Economics Minister. He joined Finance Minister Franz Josef Strauss in balancing Erhard's deficit-plagued budget, then ordered up a flock of measures to revive the economy--pump-priming expenditures, generous investment write-offs, a moratorium on major new taxes. He journeyed to Frankfurt for a showdown with Bundesbank President Karl Blessing, an old Erhard ally, and warned that the bank's continuing tight-money policy would only worsen the recession. Blessing reluctantly relented, has allowed the central bank rate to fall gradually from its 5% high to the current 3%.

No Soul Massager. Schiller also fought through legislation providing for Keynesian control of the economy from the top, a council of economic "wise men," and four-year fiscal planning where none had existed before. Other Schiller ideas and slogans came in salvos. He junked the verbal Seelen-massagen (soul massages) that Erhard used to aim at German employers and unions. He substituted regular private sessions with business and labor at which he preaches "social symmetry," his way of describing wage and price restraint and equilibrium.

Hoping to get recession-wary shoppers to spend more, Schiller recently ordered a minimum 6% wage-increase guideline, calmed outraged employers by pointing out that productivity was rising at a 7% rate. Union leaders, conditioned to 4% and 5% wage pack ages, were speechless--but only for a while. Now they want 8%.

A testy, mercurial sort, Schiller was an academic prodigy before he got into government. The son of an engineer, he earned his economics doctorate at 24, developed a fascination for Keynesian economics as a lecturer at Kiel and a full professor at Hamburg. He got a chance to put his theories into practice in 1961, when Willy Brandt, then socialist mayor of Berlin, put Schiller to work at reversing the divided city's economic decline. By offering various tax incentives, Schiller successfully stanched a worrisome exodus of citizens from the city.

Downright Scurrilous. Not everyone approves of Schiller, of course. In recent weeks, both Izvestia and French Foreign Minister Michel Debre have accused West Germany of economic aggression. Partly because of the recent recession, the country will spend about $4 billion less for imports this year than other nations will spend for German goods. That only increases the strength of the mark at the expense of the pound and the dollar.

For his part, Schiller considers it "downright scurrilous for people to accuse us of too much strength." With some justification, he is inclined to blame much of the imbalance on countries whose own exports have been hobbled by unchecked inflation.

An upward revaluation of the mark would be a quick if drastic way of righting the balance by putting the undervalued mark on a par with the dollar and the pound. In effect, however, that would raise the prices of Germany's exports, perhaps crippling its vital auto industry. Recently, Schiller responded to persistent revaluation rumors by snapping, "Nein, no, non, nyetl" He means that Germany is not about to pull down its own house--especially when others have yet to put their own economic households in order.

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