Saturday, October 26, 2013
The U.S. economy is not doing well.
In 1948 in West Germany, things were far worse. Having lost the war the country had been occupied by the victorious powers. They printed the German currency, the Reich mark, and gave a set of plates to the Russians, who, following communist dogma, churned them out in huge quantities in order to debase the currency, which Marx believed would lead to revolution.
To prevent inflation, the Western allies imposed wage and price controls and food rationing. The average German lived on 1,500 calories a day, and life was miserable.
When West Germany became independent, Chancellor Konrad Adenauer made Ludwig Erhard his economics minister.
The British had just nationalized their own coal mines, and were urging him to do the same. Erhard rejected their advice, abolished the controls, introduced a new currency, the Deutschmark, and a regressive tax system favoring investors.
Set free, the economy prospered in what became known as the German economic miracle. Living standards rose markedly.
Until the introduction of the euro, the Deutschmark was the strongest currency in Europe. Today the European countries that have lurched too far to the left look to Germany to bail them out.
In the United States, politicians pay lip service to the middle class, while pursuing policies that put the economy in a regulatory straitjacket. The tax system seems deliberately designed to discourage investment.
The large banks are under assault from three sides, from the Department of Justice, the regulatory agencies and state attorneys general. The energy industry is pilloried by the EPA.
It is impossible to imagine a German government in which Erhard served treating Deutsche Bank the way the Obama administration treated J.P. Morgan.
The middle class shrinks, not by its members moving into the upper class, the traditional American way, but by their falling below it. The incomes of those remaining in it stagnate.
If we ever needed an American version of Ludwig Erhard, the time is now.