Lessons From Germany’s Rapid Recovery After WWII

Posted: Jan 14, 2020 11:50 AM
Lessons From Germany’s Rapid Recovery After WWII

Source: Monika Skolimowska/dpa via AP

The nation of Germany made an amazing recovery after World War II. Much of what had been Germany’s major cities had been utterly destroyed from massive bombing and fires during the war, the Marshall Plan was an American program designed to aid in recovery of the European region that suffered so much devastation and loss of life. The plan provided what now would equal one hundred billion dollars of aid for rebuilding infrastructure in the various European states, and while that surely did have a positive effect, that, as it turns out, is only a part of the story, arguably a relatively small part. After 1948, strangling regulations and price controls that were imposed during war time were lifted, often in spite of resistance by business owners, who enjoyed protection, and officials of the Marshal plan. Rapid recovery then commenced.

I recently came upon a book title in the footnotes of another book I was reading and found it as an ebook on Mises.org, one of the hundreds of important books that they have made available for free download for anyone. Though I had heard reference to it, I hadn’t read it before, and it provides a very good insight regarding the situation in Germany following the war. The book, written by the minister of economics at the time, Ludwig Erhard, entitled “Prosperity Through Competition,” describes that rapid transformation. In Erhard’s words,

“The successful rehabilitation of my country must serve as clear documentary evidence to put before the still vacillating and doubting people, of the fact that only by firmly rejecting socialist dogmas, of whatever complexion, and by affirming a free economic order can mounting prosperity and genuine security be achieved. In a Europe which allowed the life of the individual to be dragooned into ever more regimented collectives, the intellectual and spiritual powers would atrophy...”

The most amazing and instructive paragraph of the book was a description of what happened the day after the economic reforms. I include the whole paragraph because it highlights the power of the whole thing and the entire philosophy:

“The black market suddenly disappeared. Shop windows were full of goods; factory chimneys were smoking; and the streets swarmed with lorries [buses]. Everywhere the noise of new buildings going up replaced the deathly silence of the ruins. If the state of recovery was a surprise, its swiftness was even more so. In all sectors of economic life it began as the clocks struck on the day of currency reform. Only an eye-witness can give an account of the sudden effect which currency reform had on the size of stocks and the wealth of goods on display. Shops filled up with goods from one day to the next; the factories began to work. On the eve of currency reform the Germans were aimlessly wandering about their towns in search of a few additional items of food. A day later they thought of nothing but producing them. One day apathy was mirrored on their faces while on the next a whole nation looked hopefully into the future.”

This is a piece of history that is relevant to every time and every place. Economic manipulations by politicians have brought about disastrous results as far back as the Sumerian Empire, the first recorded instance of price controls. The opposite is also the case, that when people are free to compete, free to prosper, free to fail, free to succeed, and free to associate and cooperate with whoever will agree, societies prosper. That is why general prosperity spread so rapidly in western societies, while those like China, which had civilizations and technology millennia ago, suffered thousands of years of generalized poverty. Freedom benefits the people while economic manipulation benefits politicians and cronies.