108 RALF AHRENS AND ANDRÉ STEINER
wake of the collapse of the Bretton Woods system, choosing to withdraw
its support for the U.S. dollar in early 1973. It opted to raise interest rates
in order to rein in infl ation. Over the next few years, it came to adopt
more and more monetarist policies. The federal government, on the
other hand, sought to cool down the overheated economy along Keynes-
ian lines, in part because its council of economic experts still forecasted
growth even though the recession had already begun to set in. The result,
in 1975, was the deepest economic slump that the FRG had yet to expe-
rience. Despite the rather surprising introduction of a program aimed
at boosting the economy, which ultimately fueled infl ation further, un-
employment climbed. At the same time, growing budget defi cits limited
the options for additional fi scal injections. In response, the West German
federal government passed its fi rst Budget Structure Act (Haushaltsstruk-
turgesetz), which was supposed to help reduce the public defi cit. The new
phenomenon of stagfl ation accompanied by high unemployment and the
government’s uncertainty when it came to dealing with this problem thus
account for the vacillations in economic policy in the years that followed.
The government went back and forth between attempts to consolidate
the budget and self-contradictory fi scal interventions with diff erent agen-
das. But, these goals were only partially achieved, and the state defi cit
continued to grow.^23
On a political level, West Germany lost its faith in the ability of reforms
and political planning to live up to expectations—expectations that were
linked in terms of economic policy to Globalsteuerung and the concerted
action of employers and employees (Konzertierte Aktion) dating back to
the second half of the 1950s.^24 Indeed it was one of the ironies of history
that just as the extent of unemployment made it seem expedient to adopt
Keynesian process policies for the fi rst time since the 1930s, the weak-
nesses of these policies were criticized—or, rather, their theoretical basis
was. In the end, not only the Christian-liberal government but also the
social-liberal coalition already began to successively turn away from this
approach.^25
This loss of trust had two consequences: on the one hand, it created
the basis for abandoning Keynesian-inspired demand-based politics in fa-
vor of a monetarist approach to combating infl ation and business-friendly
“supply-based” policies. To a certain extent, this corresponded to the
general trend toward the adoption of neoliberal tendencies in Western
industrialized nations, although the comparably radical economic turn
taken in the United States and Great Britain only appeared in a much
more moderate form in the FRG and continental Europe in general.^26 On
the other hand, companies reduced their demand for capital goods in
light of the ensuing uncertainty. Ultimately, it was the “cumulation of