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.