Currency Reform in Berlin in 1940s

Currency reform for Berlin in the late-1940s was a part of a wider currency reform for all of Germanyù-both East and West. In turn, currency reform for Germany was but a part of the broader political struggle of the day between the Western Allies and the Soviet Union.

Currency reform for Berlin assumed an exaggerated significance in 1948, because it served as the formal pretext for the imposition of the Berlin Blockade by the Soviet Union (Kennan, 1967, p. 443). Sight must be lost of the fact, however, that German (and Berlin) currency reform was not the major issue. The major issue was the political confrontation between East and West over the future of Germany (Binder, 1981, p. 73). The political issue was brought to a head in the winter and spring of 1947-1948 though a volatile combination of Soviet fears, an erroneous perception and analysis of events by the American commander in Berlin (General Lucius Clay), and by the ideological contest between capitalism and commu

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development of adverse conditions with respect to these factors. Conveniently overlooked by most free market advocates, however, is that fact that the reason laws concerning these factors are in existence in the United States and most other free market economies is because free market principles did not preclude the development of adverse conditions with respect to them. A key theory upon which the free market concept rests is rational expectationsù-how an economic agent would act when in possession of complete and correct information relative to the economy (Shotter, p. 102). Rational expectations are supposed to insure that a free market economy will be self-correcting (Shotter, p. 101). Shotter concluded, however, that (1) agents seldom have complete and correct information, and (2) rational expectations do not work even when they do because too few agents in the economy exercise control over key endogenous variables (Shotter, p. 116). The Soviets, of course, recognized none of the good and all of the bad in market capitalism. They proposed to create and preserve economic wealth and equity in Germany through a Marxist economic system (Binder, p. 73). Marxian economic thought is theoretically close to classical econ
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Approximate Pages = 12 (250 words per page)