In 1955, he was elected to Tel Aviv city council, and became a member of the Liberal Party. In 1969, he quit the city council and was elected to the Knesset on the Gahal list (Gahal being a coalition between the Liberal Party and Herut). In 1976, he was elected chairman of the Liberal Party.[2]
After the 1977 elections, he was appointed Finance Minister and Deputy Prime Minister. As Minister of Finance, he tried sought to liberalise the Israeli economy by abolishing foreign currency regulations and travel taxes, as well as cheapening imported goods. In 1978, Erlich presented a budget that he predicted would reduce the country's deficit.[3]
It soon turned out that Israel's economy was not prepared for such a drastic change, as could be seen by the subsequent deterioration of the balance of payments, the mass increase of goods import and sharp rise of inflation rate.
Consequently, Erlich was forced to resign as Minister of Finance. However, he remained Deputy Prime Minister and was in charge of the development of the Galilee, the Arab sector and re-absorption of emigrants.[2]
After the 1981 elections, Erlich was appointed Agriculture Minister and remained Deputy Prime Minister.[2]
