Archive
Illusions of Decontrol
The founding myth of modern Germany can be traced back to June 20, 1948, when Ludwig Erhard, economic director of the Anglo-American occupation zone in Germany, created the Deutsche Mark. To stabilize the new currency, he paired the paper issue with the removal of price controls. By spring 1949, German production rose from 51 percent to 78 percent of its 1936 level. Over the next eleven years, GDP grew at an annual average of over seven percent.
Profits, Prices, and Power
If they are remembered at all, the 1950s are now thought of as a lost golden age of stable growth and political economic consensus. But the second half of the decade saw rising prices, tightening financial conditions, diminished industrial employment, and stagnant investment. If contemporaries did not yet use the word “stagflation,” they might as well have, referring to this “new inflation” with terms such as “recession-cum-inflation.”
Pragmatic Prices
European and American traditions of economic theorizing on price control are intimately connected with war—practices and debates over price control peaked amid the two world wars. The experience of the First World War had been one of inflation and limited price controls followed by a sudden liberalization when the war was over. The transition from war to peace gave rise to a sharp boom bust cycle and eventually led to the Great Depression. This experience stood as a warning when the world was once
The Price of Oil
In October 2021 the price of gasoline in the United States rose to its highest level in seven years. There were many reasons for this: surging demand following a year-and-a-half of lockdown, a slower than expected recovery of oil production, and imbalances in products inventories due to energy shortages in Europe and East Asia. Experts believed prices would fall in the new year. Instead, Russia’s invasion of Ukraine in February 2022 sent prices to new and historic heights, rattling markets and increasing the US price of gasoline to more than $4 a gallon.
Politics and the Price Level
In 1959, the leaders of the Organization for European Economic Cooperation (OEEC, now the OECD) appointed a Group of Independent Experts “to study the experience of rising prices” in the recent history of the advanced capitalist countries. Between the end of World War II and the termination of the Korean War conflict, economic planners had tolerated rising prices as an insurmountable consequence of postwar reconstruction and war-induced commodity speculation. These governments expected inflation to end as economies readjusted following the stalemate in Korea. “In the event, however,” the Group of Independent Experts wrote in their final report, “rising prices proved to be a continuing problem.”