Sunday Morning Audio: The German Economic Miracle
By David Henderson
Garrett M. Petersen, aka the “Economics Detective,” interviewed me a few weeks ago about the post-World War II German economic miracle. I had written about it in “German Economic Miracle” in The Concise Encyclopedia of Economics. Garrett, a Ph.D. student in economics at Simon Fraser University, is a first-rate interviewer. The interview is titled “The German Economic Miracle with David Henderson.” It goes longer than the usual, at about 52 minutes.
Some highlights follow.
The first 5 minutes: The setting. What horrible shape the German postwar economy was in and how much of was due to extreme price controls.
5:10: Reminiscence about interaction with Bill Meckling and Milton Friedman at the 1979 Hoover/Rochester conference on the draft. The issue: conscription during WWII.
6:30: Good for the Allies that the Germans had price controls during the war.
6:50: The Allies kept the German price controls after WWII.
8:40: Why Konrad Adenauer (“der Alte”) stood out and looked good to Allies.
9:45: Adenauer recommends Ludwig Erhard, who had good anti-Nazi bona fides.
11:45: Currency reform.
12:20: How Erhard had a fun summer in 1948.
13:00: Erhard’s humorous confrontation with General Clay.
13:25: The DM is a ration coupon.
13:50: The dramatic effect on the German economy.
15:20: Walter Heller, later JFK’s chief economist, on the value of currency reform and elimination of price controls.
16:28: My personal story about my phone conversation with Walter Heller.
18:00: Heller sees the value of cutting marginal tax rates to improve incentives.
20:45: I couldn’t find support for the claim that Erhard clearly broke the rules on his own.
25:00: My story about my mentor, Clancy Smith, and his “cigar interaction” with Ludwig Erhard in Winnipeg.
26:20: Recovery not due to Marshall Plan. I draw on Tyler Cowen’s excellent 1986 article on this.
32:50: Contrast with East Germany.
33:50: Katarina Witt’s rewards for good skating.
35:50: Petersen’s insight about the incentives in research and how they can distort our understanding of the big picture.
37:25: Natural disasters in a fairly free economy don’t have big long-term effects. Jack Hirshleifer’s work. “Disaster and Recovery.”
39:35: Ludwig Erhard takes the government’s foot off the hose.
42:20: The moral of the story.
42:30: How I got the chance to do The Fortune Encyclopedia of Economics in 1990.
44:20: The role of Alan Russell of Liberty Fund in getting the Fortune Encyclopedia on line as The Concise Encyclopedia of Economics.
46:50: My George Stigler story; also Paul Krugman easy to work with.
47:45: Petersen’s point about the Encyclopedia being non-partisan.
48:50: My confrontation with my editor at Fortune. The Kip Viscusi story about worker safety.
50:25: My willingness to go to the mat–run my net worth down to zero–over quality.