Beginning of an Economic Recovery

PLACE: Frankfurt, Germany in July 1948 

PEOPLE: 

• General Lucius D. Clay, military governor of the U.S. occupation zone in Germany 
• Professor Ludwig Erhard, chairman of the Economic Council of the emerging West German government

SITUATION: Erhard has just abolished the rationing of food and other essentials and has removed all wage and price controls.

GENERAL CLAY: "Herr Erhard, my advisers tell me that what you have done is a terrible mistake. What do you say to that?"

PROFESSOR ERHARD: "Herr General, pay no attention to them! My own advisers tell me the same thing."

Erhard then went on to explain the advantages of a "socially responsive free-market economy."

Clay agreed with him.

[Adapted from an account in The Fourth and Richest Reich by Edwin Hartrich]