How Bad Economies Recover Fast When Governments Get out of the Way | Jim Powell | Cato Institute: Commentary

How Bad Economies Recover Fast When Governments Get out of the Way | Jim Powell | Cato Institute: Commentary: 'A new currency, however, wouldn't buy anything as long as chronic shortages persisted, so Erhard announced that price controls and rationing regulations would be abolished. Price controls simultaneously (1) discourage suppliers from providing more goods and (2) encourage consumers to line up for whatever might be available, which is why such controls cause shortages. U.S. commander Gen. Lucius Clay reportedly warned Erhard, "My advisers tell me you're making a terrible mistake." Erhard said, "Don't listen to them, General. My advisers tell me the same thing."

Within hours after Erhard's announcement, goods that had been reserved for black market deals began to reappear on long-empty store shelves. During the 1950s, West Germany's industrial production soared 225 percent. West Germany became a leading exporter. Overall, West Germany turned in the best economic performance of any developed country during this period. West Germany charged through the 1970s without the stagflation that afflicted the United States and other countries.

Although it's well-known that a devastated economy like Germany's could grow at above-average rates, the fact is nobody predicted the German economic miracle.'