Wednesday WSJ had a nice opinion piece by Lawrence H. White, a professor at George Mason U., on the lessons of history for economic recovery. Taking exception to German Finance Minister Wolfgang Schauble’s policies that will try to spur economic activity and avoid the hyperinflation of 1920s Germany, Mr. White cites instead the case of Germany’s post-WWII recovery as the proper example. It was a case of John Kenneth Galbriath, at that time a state department official and well-known peddler of MIT’s Keynsian economics, versus Germany’s economist and later Minister of Economic Affairs Ludwig Erhard. Erhard flouted post-war Allied military command, abolishing cripping post-war price controls and rationing.
Apparently, one day American commander Gen. Lucius Clay telephoned Erhard: “Professor Erhard, my advisers tell me that you are making a big mistake”. Erhard: “So my advisers also tell me.” I gather JKG and MIT were Clay's advisors -- but who were Erhard’s? The article doesn’t mention, but I looked it up: among others, it was Wilhelm Röpke and Alfred Müller-Armack. And who were they? Students of the great free-market Austrian economist Ludwig von Mises -- the first man who challenged Marx's socialism.
Dr. White is a well-known expert in economics and the gold standard at George Mason U. and author of a forthcoming book “The Clash of Economic Ideas.” The example of post-War Germany certainly was such a clash, with a good outcome: Germany’s growth was legendary.