Take, for example, the 15-minute city, which is a radical proposal that people should be able to get pretty much anywhere they need to go within fifteen minutes and ideally without needing a car. It’s a lovely idea, and the parts of residential America that are like that — most of them former suburbs — are insanely desirable and therefore insanely expensive. If it were easy to make more of them, you’d think the market would have figured out how! And if I had any confidence whatsoever that anyone involved in municipal planning could produce more neighborhoods like that — leafy green places full of parks, libraries, schools, and shops — or even that they wanted to have safe, clean, and reliable transit options, I’d be all for it. But these are the same people who are gutting public safety in the cities while failing to maintain or enforce order on existing transit. These are the same people who imposed draconian Covid mitigation policies like Zoom kindergarten, padlocked churches, and old people dying alone with nothing but a glove full of warm water to mimic human touch, all of which were meant to buy time for … something (human challenge trials? nationalized N95 production?) that never happened. It’s easy to ban things; it’s hard to do things. So you’ll excuse my doubts about their ability to build a 15-minute city that looks like Jane Jacobs’s ideal mixed-use development, with safe, orderly streets and a neighborhood feel. One rather suspects they would find it far more within their wheelhouse to simply abolish single-family zoning or imposing restrictions on who can go where, when.
Jane Psmith, “REVIEW: The Wizard and the Prophet, by Charles C. Mann”, Mr. and Mrs. Psmith’s Bookshelf, 2024-01-22.
April 13, 2025
QotD: The 15-minute city
March 8, 2025
February 27, 2025
QotD: The ANC, the Inkatha Freedom Party, and the Zulus during Apartheid
… one underappreciated fact is that [South Africa] was handed over to Leninists. Before reading this book, I think I had in the back of my mind some vague sense, probably absorbed from racist Twitter accounts, that Nelson Mandela had some sort of communist affiliation, but the reality is so much worse than I’d imagined and very curiously unpublicized. Mandela’s African National Congress was a straightforwardly revolutionary communist party during their decades of exile, with leaders constantly flying to the Soviet Union and to East Germany to be wined and dined, and to get lessons on governance from the Stasi.
Those lessons were enthusiastically put into practice — the ANC set up a network of death camps in Angola at which traitors and enemies and just plain inconvenient people were worked or tortured to death. They also founded a paramilitary terrorist army called uMkhonto we Sizwe (MK) that waged a brutal dirty war, supposedly against the apartheid government but actually against anybody they didn’t like. The vast majority of the victims of MK were black people who happened not to support the ANC, especially Zulus in their tribal homeland in what’s now KwaZulu-Natal province, who were subjected to regular massacres in the 80s and early 90s.
The ANC and the MK had a special hatred for the Zulus. In part, because the ANC’s leadership was disproportionately Xhosa, and their ancestors had suffered during King Shaka’s wars of expansion in the 19th century. But this ancient ethnic grudge wasn’t the fundamental problem, and indeed it was later papered over. The real problem was that the Zulus dared to engage in political organization outside the ANC and its subsidiary, the South African Communist Party (SACP). The preferred Zulu political vehicle was the Inkatha Freedom Party (IFP), which was associated with the Zulu monarchy and the traditional amakhosi (chieftains). This made it an independent base of power within black South Africa, and a competing claim on the loyalty of Zulu citizens. The ANC considered this situation unacceptable.
Like many avowedly communist organizations, the ANC was allergic to political competition of any sort. Internally, the party practiced an especially harsh form of democratic centralism — most policy decisions were made by a tiny and incestuous central committee, and members were expected to be totally submissive in the face of party discipline. This extended even to the point of party permission being necessary for senior members to marry. Externally, the party had an entitled attitude common to successful revolutionary organizations from North Korea to Albania — they were the incarnation of the aspirations of the South African people and the vanguard of their brilliant future, so all other political organizations were ipso facto illegitimate. Can you guess what happened when these people were handed power?
John Psmith, “REVIEW: South Africa’s Brave New World, by R.W. Johnson”, Mr. and Mrs. Psmith’s Bookshelf, 2023-03-20.
February 21, 2025
QotD: Why does it cost so much to build modern infrastructure?
Now, obviously, there are reasons why building infrastructure is expensive. One is that politicians have taken unto themselves the power to decide what infrastructure should be built how and where. Therefore infrastructure is built by fuckwits, obvious, innit? We’ve also allowed far too many people to dip their ladle in the gravy — that £300 million planning inquiry into a tunnel under the Thames. And did I say fuckwits already — that £100 million bat tunnel.
But one reason all these things are so expensive is because we’re not doing them on terra nullius. If we start with a bare field a ground source heat pump might well not be that bad an idea. Communal heating systems into an entirely new development, maybe.
But putting ground heat pumps into central London? Can’t do that ‘ere mate, someone’s already built central London right where you want to dig up. HS2 goes right through some of the most expensive — and inhabited by the highly vocal — countryside in the nation. Edinburgh, minor though it is, still has that central London problem.
This also explains why Mercury Comms employed the ferrets. The tubes already existed and fibreoptic could be stuffed down them. They didn’t have to dig up central London, see?
Agreed, this isn’t one of the world’s truly great insights but it is something to keep in mind. The reason building the infrastructure for the next level of civilisation costs so much is because we already have a civilisation. The existence of which gets in the way of the building men …
Tim Worstall, “Why Is Infrastructure So Damn F’n Expensive?”, It’s all obvious or trivial except …, 2024-11-18.
February 1, 2025
QotD: In a centrally planned economy, all that matters is meeting or exceeding the Gross Output Target
The mobbed-up oligarchs currently running Russia, for instance, were almost all members of an informal class whose name I forget, which translates as “brokers” or “wheeler-dealers” or something. They learned how best to manipulate the Soviet system of “gross output targets”. Back when he was funny, P.J. O’Rourke had a great bit about this in Eat the Rich, a book I still recommend.
When told to produce 10,000 shoes, the shoe factory manager made 10,000 baby shoes, all left feet, because that was easiest to do with the material on hand — he didn’t have to retool, or go through nearly as many procurement processes, and whatever was left over could be forwarded to the “broker”, who’d make deals with other factory managers for useful stuff. When Comrade Commissar came around and saw that the proles still didn’t have any shoes, he ordered the factory manager to make 10,000 pairs of shoes … so the factory manager cranked out 20,000 baby shoes, all left feet, tied them together, and boom. When Comrade Commissar switched it up and ordered him to make 10,000 pounds of shoes, the factory manager cranked out one enormous pair of concrete sneakers …
So long as Comrade Commissar doesn’t rat him out to the NKVD — and why would he? he’s been cut in for 10% — nobody will ever be the wiser, because on the spreadsheet, the factory manager not just hit, but wildly exceeded, the Gross Output Target. That nobody in Krasnoyarsk Prefecture actually has any shoes is irrelevant.
Severian, “The Finger is Not the Moon”, Rotten Chestnuts, 2021-09-14.
January 26, 2025
QotD: The map is not the territory, state bureaucrat style
… most bureaucrats aren’t evil, just ignorant … and as Scott shows, this ignorance isn’t really their fault. They don’t know what they don’t know, because they can’t know. Very few bureaucratic cock-ups are as blatant as Chandigarh, where all anyone has to do is look at pictures for five minutes to conclude “you couldn’t pay me enough to move there”. For instance, here’s the cover of Scott’s book:
That’s part of the state highway system in North Dakota or someplace, and though again my recall is fuzzy, the reason for this is something like: The planners back in Bismarck (or wherever) decreed that the roads should follow county lines … which, on a map, are perfectly flat. In reality, of course, the earth is a globe, which means that in order to comply with the law, the engineers had to put in those huge zigzags every couple of miles.
No evil schemes, just bureaucrats not mentally converting 2D to 3D, and if it happens to cost a shitload more and cause a whole bunch of other inconvenience to the taxpayers, well, these things happen … and besides, by the time the bureaucrat who wrote the regulation finds out about it — which, of course, he never will, but let’s suppose — he has long since moved on to a different part of the bureaucracy. He couldn’t fix it if he wanted to … which he doesn’t, because who wants to admit to that obvious (and costly!) a fuckup?
Add to this the fact that most bureaucrats have been bureaucrats all their lives — indeed, the whole “educational” system we have in place is designed explicitly to produce spreadsheet boys and powerpoint girls, kids who do nothing else, because they know nothing else. Oh, I’m sure the spreadsheet boys and powerpoint girls know, as a factual matter, that the earth is round — we haven’t yet declared it rayciss to know it. But they only “know” it as choice B on the standardized test. It means nothing to them in practical terms, so it would never occur to them that the map they’re looking at is an oversimplification — a necessary one, no doubt, but not real. As the Zen masters used to say, the finger pointing at the moon is not, itself, the moon.
Severian, “The Finger is Not the Moon”, Rotten Chestnuts, 2021-09-14.
January 4, 2025
January 2, 2025
How to solve Britain’s housing crisis
Tim Worstall outlines why just increasing the number of building permits allowed won’t — by itself — increase the total number of houses built. This is because the process of awarding the permits has been largely captured by the biggest players, and the supply is artificially restricted by local governments:

Kensington High Street at the intersection with Kensington Church Street. Kensington, London, England.
Photo by Ghouston via Wikimedia Commons.
The first bit is to diagnose the problem properly. If the big builders won’t build because they don’t want to then and therefore we want to find other builders who will and do want to. And the important part of this is that the big builders do indeed have market power. It costs a lot — a lorra lots — of money to be able to get a scheme through planning. Thus we not only have that problem of a shortage of places to build — because planning — but we’ve also handed market power to those able to build — because planning.
The answer is to shoot the planners, obviously. But then that always is the correct answer. Here, more specifically, we need to flood the zone with permissions. Really, grossly, oversupply. Like issue 15 million permits. Say. At which point the value of a permit is zero. So, anyone with a scrap of land can gain a permit and build.
This brings back the small housebuilder. Instead of being held back by the ideals of half a dozen national builders we’ve got 50,000 blokes all looking to build 2 or 3 houses a year. Or 10 or 20 even.
There’s no way that the big builders can then delay building on their plots. For they don’t have market power any more. And even if they do want to delay then it doesn’t matter a damn.
And this always is the way that you deal with those with market power. You flood that zone with supply so as to destroy their market power.
December 6, 2024
QotD: Herbert Hoover in the Harding and Coolidge years
[Herbert] Hoover wants to be president. It fits his self-image as a benevolent engineer-king destined to save the populace from the vagaries of politics. The people want Hoover to be president; he’s a super-double-war-hero during a time when most other leaders have embarrassed themselves. Even politicians are up for Hoover being president; Woodrow Wilson has just died, leaving both Democrats and Republicans leaderless. The situation seems perfect.
Hoover bungles it. He plays hard-to-get by pretending he doesn’t want the Presidency, but potential supporters interpret this as him just literally not wanting the Presidency. He refuses to identify as either a Democrat or Republican, intending to make a gesture of above-the-fray non-partisanship, but this prevents either party from rallying around him. Also, he might be the worst public speaker in the history of politics.
Warren D. Harding, a nondescript Senator from Ohio, wins the Republican nomination and the Presidency. Hoover follows his usual strategy of playing hard-to-get by proclaiming he doesn’t want any Cabinet positions. This time it works, but not well: Harding offers him Secretary of Commerce, widely considered a powerless “dud” position. Hoover accepts.
Harding is famous for promising “return to normalcy”, in particular a winding down of the massive expansion of government that marked WWI and the Wilson Administration. Hoover had a better idea – use the newly-muscular government to centralize and rationalize American In his first few years in Commerce – hitherto a meaningless portfolio for people who wanted to say vaguely pro-prosperity things and then go off and play golf – Hoover instituted/invented housing standards, traffic safety standards, industrial standards, zoning standards, standardized electrical sockets, standardized screws, standardized bricks, standardized boards, and standardized hundreds of other things. He founded the FAA to standardize air traffic, and the FCC to standardize communications. In order to learn how his standards were affecting the economy, he founded the NBER to standardize government statistics.
But that isn’t enough! He mediates a conflict between states over water rights to the Colorado River, even though that would normally be a Department of the Interior job. He solves railroad strikes, over the protests of the Department of Labor. “Much to the annoyance of the State Department, Hoover fielded his own foreign service.” He proposes to transfer 16 agencies from other Cabinet departments to the Department of Commerce, and when other Secretaries shot him down, he does all their jobs anyway. The press dub him “Secretary of Commerce and Undersecretary Of Everything Else”.
Hoover’s greatest political test comes when the market crashes in the Panic of 1921. The federal government has previously ignored these financial panics. Pre-Wilson, it was small and limited to its constitutional duties – plus nobody knows how to solve a financial panic anyway. Hoover jumps into action, calling a conference of top economists and moving forward large spending projects. More important, he is one of the first government officials to realize that financial panics have a psychological aspect, so he immediately puts out lots of press releases saying that economists agree everything is fine and the panic is definitely over. He takes the opportunity to write letters saying that Herbert Hoover has solved the financial panic and is a great guy, then sign President Harding’s name to them. Whether or not Hoover deserves credit, the panic is short and mild, and his reputation grows.
While everyone else obsesses over his recession-busting, Hoover’s own pet project is saving the Soviet Union. Several years of civil war, communism, and crop failure have produced mass famine. Most of the world refuses to help, angry that the USSR is refusing to pay Czarist Russia’s debts and also pretty peeved over the whole Communism thing. Hoover finds $20 million to spend on food aid for Russia, over everyone else’s objection […]
So passed the early 1920s. Warren Harding died of a stroke, and was succeeded by Vice-President “Silent Cal” Coolidge, a man famous for having no opinions and never talking. Coolidge won re-election easily in 1924. Hoover continued shepherding the economy (average incomes will rise 30% over his eight years in Commerce), but also works on promoting Hooverism, his political philosophy. It has grown from just “benevolent engineers oversee everything” to something kind of like a precursor modern neoliberalism:
Hoover’s plan amounted to a complete refit of America’s single gigantic plant, and a radical shift in Washington’s economic priorities. Newsmen were fascinated by is talk of a “third alternative” between “the unrestrained capitalism of Adam Smith” and the new strain of socialism rooting in Europe. Laissez-faire was finished, Hoover declared, pointing to antitrust laws and the growth of public utilities as evidence. Socialism, on the other hand, was a dead end, providing no stimulus to individual initiative, the engine of progress. The new Commerce Department was seeking what one reporter summarized as a balance between fairly intelligent business and intelligently fair government. If that were achieved, said Hoover, “we should have given a priceless gift to the twentieth century.”
Scott Alexander, “Book Review: Hoover”, Slate Star Codex, 2020-03-17.
December 5, 2024
Look at Life – The City’s for Living In (1968)
Classic Vehicle Channel
Published Apr 19, 2020Traffic was still an issue in the 60’s. Residents discuss how they can divert to traffic from the city. This film features great archive of city traffic in the late 60s
November 25, 2024
QotD: Le Corbusier
If you don’t know much about Le Corbusier, for instance, Scott’s book [Seeing Like A State] will reveal to you that he was as banally evil in his way as Adolf Eichmann, and for the same reason: to him, humans were just cells on spreadsheets. They need so many square feet in which to sleep, shit, and eat, and so the only principle of architecture should be, what’s the most efficient way to get them their bare minimums? “Machines for living”, he called his apartment buildings, and may God have mercy on his shriveled little soul, he meant it. Image search “Chandigarh, India” to see where this leads — an entire city designed for machinelike “living”, totally devoid of anything human.
But most bureaucrats aren’t evil, just ignorant … and as Scott shows, this ignorance isn’t really their fault. They don’t know what they don’t know, because they can’t know. Very few bureaucratic cock-ups are as blatant as Chandigarh, where all anyone has to do is look at pictures for five minutes to conclude “you couldn’t pay me enough to move there”.
Severian, “The Finger is Not the Moon”, Rotten Chestnuts, 2021-09-14.
November 3, 2024
Kemi Badenoch replaces Rishi Sunak as UK Conservative leader
In the National Post, Michael Murphy discusses the new British Tory leader and why she could be a viable challenger to Two-tier Keir’s Labour government:
… in July, the Tories were ousted by Labour after 14 years in power, limping on with only 121 seats in the 650 seat House of Commons. But the honeymoon period for Sir Keir Starmer’s Labour government ended almost immediately, as its popularity plummeted faster than that of any administration in recent memory. This has made the Tories interesting once again at precisely the moment when they’ve chosen a new leader: Kemi Badenoch.
The Nigerian-raised mother of three, elected today to lead the Conservative party, threatens to be kryptonite for a Labour party wedded to identity politics. A black, female immigrant at the dispatch box is apt to leave Labour frontbenchers — particularly Sir Keir, a one-time BLM kneeler — somewhat stumped. To make matters worse, Badenoch is a persuasive speaker, commanding a charisma and eloquence that Sir Keir — a dull, po-faced lawyer — does not possess.
These qualities have given Badenoch cross-party appeal within the Tories, rallying endorsements from both the left and right. By endorsing her, however, the party has effectively signed a blank cheque, as Badenoch, unlike her opponents, has made few specific pledges. She has chosen instead to reflect on the election loss and the party’s ideological roots; she is prepared to play the long game, hoping this will allow the Tories to “earn back trust”.
On some issues, though, Badenoch is clear. “The government is doing far too much and it is not doing any of it well — and it is growing and growing,” she declared recently. “The state is too big; we need to make sure there is more personal responsibility.” These ideas are common fare among Conservatives, especially in bloated welfare states like Britain — but her zeal for them evokes, for many, memories of Margaret Thatcher. As the political commentator Simon Heffer wrote, “Mrs Badenoch is the politician who most reminds me of Mrs Thatcher since I last saw Mrs Thatcher”. He noted both women’s hard-mindedness, “deep principles”, and grasp of the “art of the possible”.
Badenoch’s Conservatism can be traced, as the writer Tom Mctague has argued elsewhere, to her beginnings in Africa. Having fled Nigeria during a 1996 military coup, she has a keen, outsider’s appreciation for Britain’s core ideals — not least the rule of law and policing by consent. She is therefore a champion of Britain, of both “the good” and “bad” of its former empire, at a time when it is fashionable to denigrate it, precisely because of her first hand experience that these norms are rare and fragile.
Like Thatcher, Badenoch studied a hard science (computing), marking them out in a Parliament filled with lawyers and humanities graduates. And the swift rise of both women, from modest beginnings through the ranks of the Conservative party, suggests that the “art of the possible” is indeed etched into their stars.
The Armchair General has a few suggestions for Badenoch’s agenda to turn the British economy around:
My one reservation [about Badenoch] was that, being a software engineer, instead of espousing liberty or slashing laws and regulations, Kemi might reach for more tinkering technocratic solutions — and your humble General is surely not alone in his opinion that we have had quite enough, thank you, of technocratic governments.
However, the more that I consider the severe problems that afflict this country, the more I believe that a process-driven leader, who can focus on the details, might make the biggest difference in the short to medium term.
The immigration issue
As we know, uncontrolled immigration has seized the public imagination greatly — and, indeed, Jenrick centred his campaign around leaving the European Convention on Human Rights (ECHR). We should almost certainly do this anyway — simply because, like the Americans, we should refuse to sign any treaties that raises foreign courts above our own Parliament.
But leaving that aside, the stated problems with mass immigration can largely be divided into two halves:
- cultural differences — these are not insignificant, and it is claimed that they lead to an increase in crime (especially sexual crimes) and an undermining of our high-trust society;
- economic issues — the evidence shows that a massive net influx of low-skilled immigrants depresses wages at the lower end, puts a strain on public services (which cannot expand swiftly enough to accommodate the increase in demand), raises the demand for houses (of which there is a shortage) and thus pushes up prices, and, ultimately, only increases nominal GDP whilst per capita GDP has barely shifted in a decade and a half.
For the purposes of this post, I shall address only the latter issue; given where we are right now, the former is a much thornier problem — at least politically — and probably cannot be solved without radical (and some might say “authoritarian”) action.
The second problem is easier to solve because it is caused, essentially, by the single biggest drag on our economy — our planning system.
[…]
Planning: the Conservatives’ political agenda
The core of the new Conservative manifesto must be a growth agenda; it needs to set out the following core principles:
- if we carry on the current trajectory, the British government will be effectively bankrupt in the next 50 years — so something needs to change;
- therefore, in order to pay for all the goodies that we have promised ourselves (now and in the future), we need to massively accelerate economic growth;
- unless we can build the roads, railways, power stations, research labs, data centres, and homes that we need, then our economy will not grow at the required rate — and spending will need to be cut to the bone;
- given the above, the only way to grow is to reform planning laws;
- removing the barriers to building will lead to greater investment, lower energy prices (leading to even greater investment), greater social mobility, regeneration of all the regions (so-called “levelling up”), and vast increases in per capita GDP;
- where the state invests in infrastructure, then it will cost considerably less than it does currently — meaning that not only will those projects undertaken provide more value for money, but also that many more projects will be viable;
- this prosperity and increased mobility will remove even the perceived need for immigrants to perform low-wage jobs (including in our public services), and remove the economic pressures of those that we have already taken in;1
- if we do it right, then we will also be able to cut taxes without drastically cutting the size of the state.2
The argument needs to be as stark and inevitable as that.
What this means is that the Conservatives need not stand on a platform of slashing state spending — thus addressing the huge numbers of people in this country who, incredibly, still believe in the benevolent state.
Except for one caveat, there really is no downside to adopting Foundations [discussed here], in full, as the core of the next Conservative manifesto (although it should not be the full extent of said manifesto — there are many other areas that need to be addressed, which I shall write about later).
1. As I say, the cultural issues are for another time.
2. Obviously, as a classical liberal, I believe that the size of the state should be drastically cut — but this is not a popular argument in a country that has been raised and educated on socialist doctrine for decades.
September 15, 2024
August 26, 2024
QotD: The job of a Soviet economic planner
Matthew Mitchell (MM): Tell us a little bit about the job of a planner. What were your responsibilities? And how did you go about doing them?
Gia Jandieri (GM): Our department inside of Gossnab [the State Supply Committee for the Central Planning Authority] was responsible for monitoring the execution of agreements for production of goods and government orders. My task was to verify that the plans had been executed correctly, to find failures and problems, and to report to the higher authorities.
This included reading lots of reports and visiting the factories and their warehouses for auditing.
The Soviet economy had been in a troublesome condition since the 1970s. We (at the Gossnab) had plenty of information about failures, but it wasn’t useful. We knew that the quality of produced goods was very low, that any household good that was of usable quality was in deficit, and that the shortages encouraged people to buy on the black market through bribes.
In reality, a bribe was a substitute for a market-determined price; people were interested in paying more than the official price for the goods they valued, and the bribe was a way for them to indicate that they valued it more than others.
The process of planning was long. The government had to study demand, find resources and production capacities, create long-run production and supply plans, compare these to political priorities, and get approval for general plans at the Communist Party meetings. Then the general plans needed to be converted to practical production and supply plans, with figures about resources, finances, material and labour, particular producers, particular suppliers, transportation capacities, etc. After this, we began the process of connecting factories and suppliers to one another, organizing transportation, arranging warehousing, and lining up retail shops.
The final stage of the planning process was to send the participating parties their own particular plans and supply contracts. These were obligatory government orders. Those who refused to follow them or failed to fulfill them properly were punished. The production factories had no right or resources to produce any other goods or services than those described in the supply contracts and production plans they received from the authorities. Funny enough, though, government officials could demand that they produce more goods than what was indicated in the plans.
Matthew Mitchell, “Central planning from the inside—an interview with a Soviet-era economist”, Fraser Institute, 2024-05-25.
June 13, 2024
Debunking the “miraculous” Marshall Plan
If you’ve read anything about the state of Europe in the aftermath of the Second World War, you’ll undoubtedly have heard of the way the Marshall Plan did wonders to get (western) Germany and the other battle-devastated nations back on their feet economically. At FEE, Christian Monson suggest that you’ve been provided with a very rosy scenario that doesn’t actually accord with the facts:

Konrad Adenauer in conversation with Ludwig Erhard.
KAS-ACDP/Peter Bouserath, CC-BY-SA 3.0 DE via Wikimedia Commons.
Unfortunately, the ubiquity of the myth that the Marshall Plan rebuilt Germany is proof that state-controlled education favors propaganda over economic literacy. Despite the fact that most modern historians don’t give the Marshall Plan much credit at all for rebuilding Germany and attribute to it less than 5 percent of Germany’s national income during its implementation, standard history textbooks still place it at the forefront of the discussion about post-war reconstruction.
Consider this section from McDougal Littell’s World History (p. 968), the textbook I was given in high school:
This assistance program, called the Marshall Plan, would provide food, machinery, and other materials to rebuild Western Europe. As Congress debated the $12.5 billion program in 1948, the Communists seized power in Czechoslovakia. Congress immediately voted approval. The plan was a spectacular success.
Of course, the textbook makes no mention of the actual cause of the Wirtschaftwunder: sound economic policy. That’s because, for the state, the Marshall Plan makes great statist mythology.
Not only is it frequently brought up to justify the United States getting involved in foreign conflicts, but it simply gives support for central planning. Just look at the economic miracle the government was able to create with easy credit, they say.
And of course, admitting that the billions of dollars pumped into Germany after WWII accomplished next to nothing, especially when compared to something as simple as sound money, would be tantamount to admitting that the government spends most of its time making itself needed when it isn’t and thereby doing little besides getting in the way.
The Inconvenient Truth of Currency Reform
You are unlikely to find the real cause of the Wirtschaftwunder mentioned in any high school history textbook, but here is what it was. In 1948, the economist and future Chancellor of West Germany Ludwig Erhard was chosen by the occupational Bizonal Economic Council as their Director of Economics. He went on to liberalize the West German economy with a number of good policies, the most important being currency reform.
The currency in Germany immediately after WWII was still the Reichsmark, and both the Nazis and then the occupying Soviet authorities had increased the amount in circulation significantly. As a result, by 1948 the Reichsmark was so worthless that people had turned to using cigarettes and coffee as money.
To give people a true store of value so that they could calculate economic costs accurately, assess risk and invest in the future, Erhard created the Deutsche Mark, West Germany’s new currency. Like ripping off a bandaid, he decreased the money supply by 93 percent overnight.
It’s also worth noting that while Erhard, following his school of Ordoliberalism, did form a central bank, it was at least designed independent from the government and followed a hard-money policy (preserving a stable amount of money) through the length of the Wirtschaftswunder. In fact, the original Bank Deutsche Länder was rather limited in scope until it was reorganized as the considerably more centralized Bundesbank in 1957, incidentally when Germany’s economic miracle began to lose steam.
Other notable liberal policies instituted by Erhard included removing all price controls and lowering taxes from the Nazis’ absurd 85 percent to 18 percent. The American occupational authorities opposed these reforms, but Erhard went through with them anyway. This liberalization had an immediate effect. The black market disappeared almost overnight, and in one year, industrial output almost doubled.
Perhaps most poignantly, unemployment dropped from more than 10 percent to around 1 percent by the end of the 1950s. Normally the government tries to justify currency manipulation as a means to eliminate unemployment, but the Wirtschaftwunder is evidence that sound money does the job far better.