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Ideas and Reality

September 21st, 2010 by Myrhaf · 7 Comments · Uncategorized

Ideas have consequences. It’s a catch phrase that has been repeated so much on the right that it is something of a bromide. And yet, the premise of this statement is little held in our pragmatist age.

Look at the $787 stimulus bill that the Democrats, under the sway of the dead economist John Maynard Keynes, passed into law. We were told unemployment would go down; it went up. Does Keynes get the blame?

An anonymous White House insider says Obama believes the banks are conspiring against him.

The jobs reports are always setting him off, and he is getting increasingly conspiratorial over the unemployment numbers.  I never heard it myself, but was told that Obama thinks the banking system is out to get him now.  That they and the big industries are making him pay for trying to regulate them more. 

There’s a complete disconnect between Obama’s ideas and what he thinks moves the world. It’s tempting to call him stupid, but his problem is not a low IQ or an inability to deal with abstract ideas. His problem is that he has learned the wrong things. Perhaps you could say his university learning has made him stupid. (What does that say about the modern university?)

Laurence H. White has written a good piece on “The German Miracle.” It shows how good economic ideas can lead to good results in reality.

Sixty-two years ago Germany became a role model for recovery from a very different crisis. In the aftermath of World War II, Germany’s cities, factories and railroads lay in ruins. Severe shortages of food, fuel, water and housing posed challenges to sheer survival.

Unfortunately, occupation policy makers actually perpetuated the shortages by retaining the price controls the Nazi government had imposed before and during the war. Consumers and businessmen battled against the bureaucratic regime of controls and rationing in what the German economist Ludwig Erhard described as Der Papierkrieg — the paper war. Black markets were pervasive.

Germany’s new Social Democratic Party wanted to continue the controls and rationing, and some American advisers agreed, particularly John Kenneth Galbraith. Galbraith, an official of the U.S. State Department overseeing economic policy for occupied Germany and Japan, had been the U.S. price-control czar from 1941-1943; he completely dismissed the idea of reviving the German economy through decontrol.

Fortunately for ordinary Germans, Erhard — who became director of the economic administration for the U.K.-U.S. occupation Bizone in April 1948 — thought otherwise. A currency reform that he helped to design was slated to replace the feeble old Reichsmark with the new Deutsche mark in all three Western zones on June 20. Without approval from the Allied military command, Erhard used the occasion to issue a sweeping decree abolishing most of the price controls and rationing directives. He later told friends that the American commander, Gen. Lucius Clay, phoned him when he heard about the decree and said: “Professor Erhard, my advisers tell me that you are making a big mistake.” Erhard replied, “So my advisers also tell me.”

It was not a big mistake. In the following weeks Erhard removed most of the Bizone’s remaining price controls, wage controls, allocation edicts and rationing directives. The effects of decontrol were dramatic.

The shortages ended, black markets disappeared, and Germany’s recovery began. Buying and selling with Deutsche marks replaced barter. Observers remarked that almost overnight the factories began to belch smoke, delivery trucks crowded the streets, and the noise of construction crews clattered throughout the cities.

Erhard was a student of Ludwig von Mises. Just imagine if Germany after WWII had followed Galbraith’s ideas instead of Mises’s.

Let us take heart that there are good ideas out there, and they seem to be spreading in our culture. Atlas Shrugged is selling better than ever in its history. The ideas of the free market and limited, constitutional government are core values of the Tea Parties.

Good ideas are out there. I believe good consequences will follow.

7 Comments so far ↓

  • Guaman

    What the heck – Ayn was right and time will continue to reinforce the truth distilled from observation and experience. There ARE absolutes; I own me and what I make, earn, create is mine.

  • madmax

    If that White House insider story is legit, then the portrayal of Obama shows him to be the very essence of a New Leftist nihilist. The guy’s favorite channel is ESPN? And sports conversations are his favorite? If Obama really is as described in that interview, he makes Bill Clinton look like a giant (think about that).

    I also found the description of Obama’s wife to be interesting. She is the committed altruist of the group who really, really hates America as it is and wants to transform it into a country dedicated to social justice principles. Myrhaf wrote on this two years ago when he analyzed her “we’re going to make you work” speech. But the interview confirms that she is anti-American to her core and detests the Enlightenment principles that the country was founded on. Apparently even more than her husband.

    It has take the Communists over 100 years but they really have staged a coup of the United States.

  • North Bridge

    The “insider interview” smells like a hoax. The portion linked by Myrhaf seems convincing on the face of it, but the style and language of the third installment makes it fairly apparent that it is fiction.

    Also, an interview like this would be the scoop of the year. A legitimate “insider” with a story like this could easily get a book contract and become the next regular guest at Fox News. How likely is it that he would break his story to an anonymous blogger at … The site’s homepage puts things in perspective; it is not exactly a formidable news organization.

  • Myrhaf

    I think Obama is the first affirmative action president. This is one of those things you can’t say in America — to even bring it up it to make oneself open to the “racist” charge — and that’s why you never hear this discussed in the media. From Harvard law school to the Oval Office, his career has advanced because of who he is, not what he has done. When he first declared why he would like to be president, he said it was because who he is would make people happy.

    Now he has to actually do things and think about things other than himself — tasks for which his experience has left him woefully unprepared.

  • Mike Bahr

    Hey, wait a minute. My favorite channel is ESPN, and my favorite conversations are sports conversations. What are you implying?

    (Then again, I’m not the titular leader of the most powerful nation in the world, so one supposes I have enough time free of other responsibilities to pursue such interests.)

  • Katrina

    I second the skepticism of the “insider.” I won’t count that story of evidence of anything until the name is revealed and his employment in the WH can be confirmed, at the very least.

  • Myrhaf

    The insider interview could well be fake. So long as the source remains anonymous, we should take it with a grain of salt. Perhaps I should have left it out of the post.

    Regardless, we know Obama-Reid-Pelosi are Keynesians because of their enormous stimulus bill. That’s more important than the insider interview.