The historic value of this 1st video is for students of history to get a visual on Berlin after WWII.
Berlin, July 1945.
Do not forget about Ludwig Erhard and the German Economic Miracle. See also Robert Wenzel’s “The Greatest Economic Policymaker Ever.” There, Wenzel provides extraordinary praise for Erhard as an economic policymaker but also as a brilliant strategist against the socialist Fuhrer, Adolph Hitler.
I consider Erhard the greatest economic policymaker ever. Not because he was a great economic theoretician. He wasn’t a theoretician. And if you compare him against Ludwig von Mises or Murray Rothbard, he wasn’t as consistent a free market advocate as they were. But he was principled, a strong free market advocate and always stuck to his principles.
Erhard is most well known for going up against Allied occupation leadership after World War 2 and lifting price controls—without authorization from anyone.
On how Erhard lifted price controls without authorization from anyone else and his actions went unchallenged–that I would like to read more on.
Berlin, 1947. The German word at the 19-second mark, Ausverkauft, means “Sold Out.”
On Erhard, Wenzel points to a biography on him by Alfred C. Mierzejewski. On the book, free-market economist, Robert Wenzel, offered this praise
Alfred C. Mierzejweski has written a very important biography, Ludwig Erhard, A Biography. The book should be read by every economic policymaker and wannabe policymaker, perhaps it will provide the courage for some to be at least a tenth of the principled man that Erhard was and also provide lessons on how to navigate the policy landmines and stay relevant while being principled.
For another economic miracle, be sure to read about Britain’s Sir John Cowperthwaite.
Writing for the Foundation of Economic Education, Kai Weiss performs a mighty task by laying out the key forces that led Germany out of war and hyperinflation during the war to economic prosperity after the war and price controls were lifted.
Common knowledge says that the United States’ Marshall Plan was responsible for the rapid economic growth, rebuilding the country by throwing a lot of money at it. But that’s a mistaken view — and an important one, because to this day it helps perpetuate the myth that nation-building such as in the Middle East or sending billions of dollars of aid to Africa works in any way (“It worked in Germany, so …”).
The effects of the Marshall Plan can be seen as no more than minuscule, as David Henderson explains (and as Tyler Cowen shows in more detail in this must-read essay):
Marshall Plan aid to West Germany was not that large. Cumulative aid from the Marshall Plan and other aid programs totaled only $2 billion through October 1954. Even in 1948 and 1949, when aid was at its peak, Marshall Plan aid was less than 5 percent of German national income. Other countries that received substantial Marshall Plan aid exhibited lower growth than Germany.
So, why was there a “Wirtschaftswunder”? Henderson gives two main reasons: a monetary reform and the freeing of the economy by abolishing price controls and cutting taxes. All of this was implemented thanks to one man: Ludwig Erhard.
Erhard, who had lost his pre-WWII job because he refused to join the Nazis, was the perfect man for the Allies’ goal of de-Nazification. But even better for advocates of free markets, he was influenced by the likes of Wilhelm Röpke, Friedrich Hayek, and especially the Freiburg School, a group of economists led by Walter Eucken who advocated for ordoliberal policies. Ordoliberals don’t advocate for completely free markets, but pretty darn close: They want the state to only set the framework, provide some small welfare services, and use anti-trust measures when monopolies start to build.
What Erhard did was unthinkable in a hostile environment. The Allied forces, still heavily controlling Germany, left the Nazi price controls and rationing intact. But when Erhard became Secretary of the Economy in West Germany, he quickly ended all price controls and stopped rationing — to the dismay of the US advisors. After enacting these new policies, Erhard was confronted by US General Clay:
Clay: “Herr Erhard, my advisers tell me what you have done is a terrible mistake. What do you say to that?”
Erhard: “Herr General, pay no attention to them! My advisers tell me the same thing.”
It is no surprise that Robert Wenzel calls Erhard “the greatest policymaker ever.” He is certainly in the running. He, not a Keynesian Project like the Marshall Plan, enabled the miracle that wasn’t miraculous — as he admitted himself in his book Prosperity Through Competition:
What has taken place in Germany … is anything but a miracle. It is the result of the honest efforts of a whole people who, in keeping with the principles of liberty, were given the opportunity of using personal initiative and human energy.
San Gabriel Tutor 