Telefonnummer und Adresse

If you’re making a phone call in Deutschland, you’ll need to know not only the person’s Telefonnummer, but also her or his Vorwahl - the area code.

In the United States, an area code always has three digits: 734 is the area code for Ann Arbor, Michigan; 402 for Leigh, Nebraska; 812 for Mifflin, Indiana.

In Deutschland a Vorwahl can have different amounts of digits. For Berlin, the Vorwahl is 030; for Bebenhausen, it’s 07071; for Liebstadt, it’s 035025. A Vorwahl always begins with null.

A Telefonnummer in Deutschland can have as few as three or as many as eight digits.

In Österreich, the Vorwahl can have from one to four digits, and also begins with null.

In der Schweiz, most area codes are three digits and begin with null. There are a few longer area codes reserved for special telecommunication services, not for regular phone numbers.

In all of these cases, however, the null is omitted when dialing into the country from another country.

Telephone etiquette, while variable and changing, often dictates that the person receiving the call answer either by stating her or his name, or by saying the phone number receiving the call. This confirms to the caller that the correct number has been reached.

Let’s change topics from phone numbers to address.

If you’re looking at a written address in Österreich, in Deutschland, oder in der Schweiz, note that the building number is after the street name: Uhland-Str. 24 or Kirch-Str. 7. In the United States, the number is before the street name: 2727 Fuller Road or 1928 Packard Street.

In the United States, a ZIP (“Zoning Improvement Plan”) code is five digits, sometimes extended with an optional four-digit suffix.

In Österreich und in der Schweiz, the Postleitzahl (PLZ) is four digits; in Deutschland it’s five.

When reading or writing an address, note that the Postleitzahl is written before the name of the town or city. (In the United States, the ZIP code appears after the city and state).

Written addresses in Deutschland do not contain the name of the Bundesland, and in der Schweiz addresses don’t contain the name of the Kanton. Likewise, in Österreich, the Bundesland does not appear in the written address.

Reviving Germany after the War: the Economics of Freedom

At the end of WW2, Germany was a devastated nation. The physical infrastructure was nearly nonexistent; the population lacked the millions who died during the war; the economy was barely functioning, and what little function it mustered was shackled by rigid regulations - regulations originally imposed by the Nazis and bizarrely kept in place by the victorious western Allies.

When the Allies began to turn over control of West Germany to the civilian government, debate arose among the Germans about the best way to revive the economy.

The Social Democratic Party (SPD) wanted to keep in place the wage controls, price controls, and high taxes imposed by the Nazis. They feared that deregulation would kill the tiny amount of economic activity which still took place.

By contrast, the Freiburger Schule (a group of economists known as the ‘Freiburg School’) favored deregulation. The Freiburg School had formed in opposition to the Nazis during the late 1930s. They saw a connection between personal political liberty and the free market.

This debate between the SPD and the Freiburg School occurred during Germany’s Stunde Null - the ‘zero hour,’ a historical reset as the nation restarted itself. Thomas Hazlett writes:

There wasn’t much in the program of the Social Democrats that the Freiburg School found to agree with. During the dark days of the Hitler epoch, a liberal resistance movement had developed at the University of Freiburg. Under the leadership of Walter Euken, it included Alfred Muller-Armack. Wilhelm Roepke and Ludwig Erhard. These men constructed one of the most comprehensive political-economic doctrines of this century: the Soziale Marktwirtschaft. The idea of a “socially conscious free market,” as the translation goes, was that totalitarianism is the evil to be most guarded against and that the only way to prevent tyranny is to promote freedom. The theory spread freedom across political and economic lines and espoused a policy of noncontrol - by either the State or individuals - of individual choice. The conclusion was that free markets, and only free markets, can provide human society with the incentives, efficiencies, and freedoms that can lead to a vital and progressive society.

The Freiburg School won the debate. Konrad Adenauer, elected in 1949, appointed Ludwig Erhard to deal with economic matters. Deregulation and tax cuts followed.

The free market approach energized the German economy. In 1945, many observers feared that Germany would permanently be relegated to a ‘third world’ status. By the late 1950s, Germany was one of the most powerful economies in the world, and the economic leader of Europe.

Historians use the word Wirtschaftswunder to describe this amazing recovery: an ‘economic miracle.’ But it was no miracle: it was the predictable and replicable results of the Freiburg School’s free market idea.

Leading from a Position of Economic Strength

During the first two decades of the twenty-first century, Germany has emerged into a pivotal diplomatic role in the world. Why this premiere?

At a time when the EU and the United States were wrestling with massive national debt and crippling trade deficits, Germany had worked to balance its budget, and enjoyed strong manufacturing and exporting sectors.

Other nations began to look to Germany, and to its chancellor Angela Merkel, because it was one nation which seemed stable while others were floundering. Greece, Italy, Spain, Portugal, and Ireland became symbols for the EU’s economic woes.

The United States expanded its national debt in the years after 2008, hobbling its opportunities to provide prosperity for its own citizens or leadership for other nations. Germany’s foreign minister, Frank-Walter Steinmeier, writes:

Some politicians, such as the former Polish foreign minister Radek Sikorski, have described Germany as Europe’s “indispensable nation.” Germany has not aspired to this status. But circumstances have forced it into a central role. Perhaps no other European nation’s fate is so closely connected to the existence and success of the EU. For the first time in its history, Germany is living in peace and friendship with France, Poland, and the rest of the continent.

Germany’s leadership in the EU, and in the world, shows the way for other nations to move toward fiscal responsibility. Balancing national budgets is one step. Austerity – the word itself has become a political symbol – in social spending is another step.

To the extent that other nations can adopt German national virtues – industriousness, diligence, punctuality, craftsmanship, thrift – to this extent they will enjoy prosperity and stability they are so eager to mimic.

The Euro Crisis: German Leadership

When an economic crisis emerged in the European Union (EU) during the first decade or two of the twenty-first century, the EU was unable to exert itself to address the situation.

The EU had spent much of its energy and political capital in an effort to admit and absorb new member states. It had needed to persuade the existing member states to accept the new members; it needed to organize the new members for the EU structure.

The existing member states were somewhat skeptical of the new members, yet the EU was simultaneously attempting to persuade the existing member states to increase their commitment, involvement, and integration into the EU.

In 2005, member states chose not to ratify a proposed EU constitution. This decision took some momentum away from the EU’s political progress. It also become more clear that some of member states were economically incompetent.

The fiscal weakness, and deceptiveness used in attempts to disguise that weakness, threatened the stability of the EU as a trading bloc, and threatened the stability of the euro as a currency.

Greece became the symbol for the crisis, although several other member states had also been irresponsible. Greece had continued unsustainable programs, like nationwide single-payer universal healthcare, which created a large national debt.

With the EU itself lacking political momentum and diplomatic capital, member states looked to other sources for leadership during the crisis. They looked to Germany, and to Germany’s chancellor, Angela Merkel.

Germany’s foreign minister, Frank-Walter Steinmeier, writes:

During the euro crisis, meanwhile, Germany was forced to confront the danger posed by the excessive debt levels of some Mediterranean EU states. The overwhelming majority of the eurozone’s members and the International Monetary Fund supported plans to demand that countries such as Greece impose budgetary controls and hard but unavoidable economic and social reforms to ensure the eventual convergence of the economies of the eurozone.

Why did Germany emerge, reluctantly and even unwillingly, as a world leader in this situation? Because Germany had proven its ability to manage its own economy.

Many ‘first world’ or ‘industrialized’ nations had lost ground in trade wars. Some east Asian nations gained ground by violating intellectual property rights, by inhumane ‘sweatshop’ labor practices, and by ‘dumping’ and ‘flooding’ markets with low-priced products – selling products below cost in order to drive competitors out of the market.

In these circumstances, Germany had found a way to continue a significant and strong manufacturing sector, and to make money by selling its products, in both domestic markets and in export markets:

Germany has merely held its ground better than most of its peers in the face of rising competition.

The other member states of the EU naturally turned to Germany for leadership, because Germany had shown that it was able to keep a healthy manufacturing sector, both in the face of the trend toward an ‘information economy,’ and in the face of fierce Asian competition.

Germany Takes the Lead

During the first two decades of the twenty-first century, Germany has played an increasingly central role in the world, both economically and diplomatically. One reason for this emergence is that both the United States and the European Union have faced challenges which have depleted their political capital.

The United States had spent its resources dealing with increased threats from the Muslim world, and, after 2009, an increasingly aggressive Putin in Russia. Chinese expansionism in the South China Sea also absorbed American attention.

The EU encountered the challenges of absorbing a few – perhaps a few too many – new members states into its economic community, while attempting to encourage its existing members to deepen their commitments to the EU. Voters in EU member states rejected a proposed EU constitution in 2005, while newer member states gradually manifested symptoms of economic incompetence.

With both the United States and the EU otherwise engaged, the nations of the world looked to Germany, and to its chancellor Angela Merkel, for leadership. German foreign minister Frank-Walter Steinmeier writes:

Against this backdrop, Germany has remained remarkably stable. This is no small achievement, considering the country’s position in 2003, when the troubles of the United States and the EU were just beginning. At the time, many called Germany “the sick man of Europe.”

In this condition, Germany was an unlikely candidate for leadership. Steinmeier notes that “unemployment had peaked at above 12 percent, the economy had stagnated, social systems were overburdened,” and the German government had shown a too-lenient policy toward Putin’s Russia. The German federal court system later found that Germany had lost 1.2 billion euros, as the German government and the Russian government had not equally shared the burdens of projects undertaken in allegedly ‘equal’ partnership.

Within a remarkably short time, Germany turned itself around. The election of Angel Merkel as chancellor in late 2005, combined with a series of legislative reforms designed to trim back a too-generous set of government ‘handout’ social programs, allowed Germany to show its strength.

Those reforms laid the foundation for Germany’s return to economic strength, a strength that has lasted to the present day. And Germany’s reaction to the 2008 financial crisis only bolstered its economic position. German businesses focused on their advantages in manufacturing and were quick to exploit the huge opportunities in emerging markets, especially China. German workers wisely supported the model of export-led growth.

Germany’s quick climb to the top is reminiscent of an earlier such ascent. In the mid-1940s, at the end of WW2, Germany was so economically devastated that many observers thought that it would be permanently relegated to a ‘third world’ status.

Yet within a decade, Germany had rebounded so quickly that it was known as the Wirtschaftswunder – the ‘economic miracle.’

The first two decades of the twenty-first century may one day be known as a ‘miniature’ version of that Wirtschaftswunder. Whether or not that happens, Germany has in any case provided needed leadership for the EU during times of economic and diplomatic turmoil.

The next challenge for the EU, and for the world, is to manage the danger coming from the Islamic world. The EU faces desperate refugees seeking humanitarian aid and fleeing from violence in Muslim countries.

But hidden among those displaced persons are also violent jihadi extremists. The EU must find a way to distinguish between the innocent refugees and the Islamic extremists: a way to help the former and shut out the latter.

For this next great task, the EU, the United States, and Germany – the entire world, really, – will need courage, creativity, and leadership.

An Unsought Crown: Merkel’s Role as World Leader; Germany’s Place as Global Power

In the years after WW2, many observers wondered whether Germany would be permanently relegated to a ‘third world’ status. Some, like U.S. politician Henry Morgenthau, even proposed turning the entire nation into farmland, bereft of technology and industry.

At the war’s end in 1945, Germany entered its Stunde Null - its ‘zero hour,’ a pause in world history, a historic reset, the near-total destruction finally complete, a despair-inspiring level of hardship, but also a chance to start over. Within a decade, the Wirtschaftswunder created one of the quickest economic rebounds in history, as the nation rebuilt itself with dizzying speed.

It was no “economic miracle,” but rather the predictable results of the policies put into place by Germany’s first postwar chancellor, Konrad Adenauer, and his appointee, Ludwig Erhard.

Adenauer and Erhard unleashed the industriousness of the people by cutting tax rates and deregulating the economy. The nation grasped the opportunity with industriousness and creativity.

The blossoming economy, however, had unintended consequences. Germany had no desire to be a world leader. After the trauma of WW2, the Germans rather wanted to attract as little attention from other nations as possible.

But other nations noticed. They noticed the enviable economic growth which the Germans created year after year. They noticed the technological advancements in many industrial sectors. They noticed how leaders like Adenauer built relations with former enemies.

Against its will, Germany was placed into a leadership role among the nations. As German foreign minister Frank-Walter Steinmeier writes,

As Germany’s power has grown, so, too, has the need for the country to explain its foreign policy more clearly. Germany’s recent history is the key to understanding how it sees its place in the world.

Unexpectedly and unintentionally becoming a leader, Germany has been expected to produce answers about global situations.

Germany’s world leadership is not the result of some grand plan to rise above other nations. It was the unintended byproduct of simply being responsible and providing for one’s own future.

Since 1998, I have served my country as a member of four cabinets and as the leader of the parliamentary opposition. Over that time, Germany did not seek its new role on the international stage.

Germany, for example, worked to avoid debt, both in the public sector and the private sector. It worked to keep strong manufacturing and export.

It turns out that by simply being responsible with your own country, you become a leader to the rest of the world: an example, a role-model. Steinmeier continues:

Rather, it emerged as a central player by remaining stable as the world around it changed. As the United States reeled from the effects of the Iraq war and the EU struggled through a series of crises, Germany held its ground.

Europe began to look to German leadership as many of the other EU nations dealt with self-inflicted damage in their own economies.

Money influences diplomatic relationships: in addition to economic guidance, other nations look to Germany to manage international relations, as Steinmeier writes:

It fought its way back from economic difficulty, and it is now taking on the responsibilities befitting the biggest economy in Europe. Germany is also contributing diplomatically to the peaceful resolution of multiple conflicts around the globe: most obviously with Iran and in Ukraine, but also in Colombia, Iraq, Libya, Mali, Syria, and the Balkans. Such actions are forcing Germany to reinterpret the principles that have guided its foreign policy for over half a century. But Germany is a reflective power: even as it adapts, a belief in the importance of restraint, deliberation, and peaceful negotiation will continue to guide its interactions with the rest of the world.

Becoming the chancellor of Germany means become an international diplomatic broker. Angela Merkel, chancellor since 2005, has had to face not only Germany’s challenges, but the world’s as well.

Writing about Chancellor Merkel’s time in office, Alan Crawford and Tony Czuczka note that

Barring an 18-month honeymoon period, Merkel’s time in office came to be defined by a continuous thread of unprecedented turmoil not of her making but which required her to act nonetheless. Her first term was dominated by the U.S. subprime-led banking meltdown and subsequent global recession, which led straight into the crisis in the euro area spreading from Greece that rocked her second term.

Within a few decades, Germany has gone from a postwar wasteland to a world leader. In 1945, the world looked at Germany with pity. In 2016, the world looks to Germany for answers.

In 1945, Germany was not expected to be able even to feed its own citizens. In 2016, Germany is expected to explain, and solve, the planet’s toughest problems.

Germany as a World Power; Merkel as a World Leader

In 1945, at the end of WW2, many observers wondered whether Germany would permanently sink to the level of a ‘third world’ nation. Some leaders, like Henry Morgenthau, proposed that all of Germany be turned into farmland, and be left without technology or industry.

Within a decade, however, Germany had left behind the postwar Stunde Null – a sort of historical pause in the wake of the war’s devastation and simultaneously a historic reset, a chance to start over, the ‘zero hour’ – and progressed toward its Wirtschaftswunder – its ‘economic miracle’ orchestrated by Konrad Adenauer and his appointee, Ludwig Erhard, who cut taxes and deregulated the economy, empowering the Germans to construct one of history’s most dazzling economic recoveries and breathtaking postwar reconstruction.

Eager to keep a low profile and shy about any form of assertiveness, Germany did not seek a leading role among the world’s nations. But the power of its economy, and the creativity and industriousness of its people, placed that role upon a hesitant and even unwilling Germany. Germany’s foreign minister, Frank-Walter Steinmeier, writes:

Over the past two decades, Germany’s global role has undergone a remarkable transformation. Following its peaceful reunification in 1990, Germany was on track to become an economic giant that had little in the way of foreign policy. Today, however, the country is a major European power that attracts praise and criticism in equal measure. This holds true both for Germany’s response to the recent surge of refugees — it welcomed more than one million people last year — and for its handling of the euro crisis.

Just as Germany was reluctant to assume a guiding role in the world, so was its chancellor, Angela Merkel.

Merkel’s style is calm, steady, and reticent. She hardly fits the romanticized notion of a world-historical leader. Yet history demonstrates that such people rarely correspond to this romanticized concept. Alan Crawford and Tony Czuczka write:

A scientist by training whose defining trait is caution, Merkel was forced to look beyond just Germany’s interests and to assume leadership in Europe. Thrust to the fore of policy making, she stepped up, slowly but with growing determination, to defend the euro she saw as the glue holding together the European Union (EU) that had been forged out of the ashes of war to stop the continent ever again descending into conflict. But how did the chancellor who came to office pledging to govern by means of many “small steps” come to take on the role of European savior? And what would the rest of Europe make of her prescription for Europe’s ills?

Germany did not seek a key role among the world’s nations, but by maintaining a consistent record of economic growth and productivity, Germany became a model to which other nations looked for counsel.

Merkel did not seek to be a world leader, but by demonstrating her abilities in global diplomatic relations, domestic policy, and party politics, she displayed the skills which caused other leaders to seek her guidance.

From the banking meltdown of 2008 to the subsequent Greece crisis, from Putin’s adventurism in the Crimean Peninsula to the ‘Brexit’ vote in 2016, Merkel has handled decisions with an unflustered proficiency which causes other world leaders to study her, and which caused the Germans themselves to forgive her for allowing a mass of dubious immigrants, posing as Syrian refugees, into the country.

Without seeking it, wanting it, or trying to get it, Germany and Merkel have obtained roles as a world leaders.

Postwar Economic Thought Develops

Following the end of WW2, Germany was in shambles, a country nearly totally destroyed. Millions of men had died in combat; millions of civilians had died at home from bombing raids; millions of Jewish Germans had died in the horrors of the Holocaust.

Physically, the nation was a wreck. Roads, water pipes, sewage pipes, telephone lines, bridges, railroads, and electrical power lines were greatly damaged in some places, and nonexistent in other places.

Economically, the nation had been ravaged by the viciousness of the Nazi government. High rates of taxation burdened the citizens, a centralized bureaucracy dictated the exact price for everything from bread to butter, wages for any job from surgeon to barber were determined by the central government, and large quantities of money had been printed rapidly.

Hitler’s government had inflicted economic atrocities: innocent civilians, in some cases, starved to death.

At war’s end, Germany began to regain its freedom. The Nazi oppressors were gone, and although the western Allies were at first hesitant, they eventually allowed German citizens to obtain the civil rights which they hadn’t had in over a dozen years.

(Sadly, the one eastern Ally - the USSR - kept Nazi policies in place in the eastern sector of Germany.)

As freedom reappeared in West Germany, so did debate. People finally had the liberty to express opinions. One question was about the future of the German economy.

The aftermath of Hitler’s dictatorship left the Germans facing massive inflation - the quick increase of prices, making it difficult for ordinary people to purchase the necessities of daily life.

Historian Thomas Hazlett describes the exciting intellectual discussions of the era:

Meanwhile, an exciting intellectual debate roared in the academic institutions and councils of government, exploding from its previously suppressed condition in an inflationary blast mirroring the flare-up of prices. Out of the haze of viewpoints emerged two predominant schools of thought: the Social Democrats and the “Freiburg School.”

The Social Democrats, whose party was known as the SPD, favored a return to the Nazi’s “national socialism,” with governmental control over prices and wages. The SPD wanted high taxes and government regulation of the marketplace.

The Freiburger Schule wanted to reduce the government’s control, and let ordinary people make decisions about how much they wanted to pay for products, and about which wages they wanted in their places of work.

It would be the Freiburger Schule which eventually won. Konrad Adenauer, Germany’s first postwar chancellor elected in 1949, appointed Ludwig Erhard, a leader of the Freiburg movement.

Quickly, Erhard set about reducing government regulations. The result was the Wirtschaftswunder - the “economic miracle,” which was no miracle at all, but rather the replicable and predictable laws of economics in action.

Soon, Germany’s economy was one of the strongest in Europe, and one of the strongest in the world, thanks to the concept of deregulation and lower taxes. From the horrors of wartime destruction, modern Germany had been reborn.

Alienation and Identity in Kafka

Kafka lived in a tension between a cultural Judaism and a cultural Christianity in Prague shortly after the turn of the century. The adjective ‘cultural’ is used because this particular tension had little or nothing to do with the theological propositional content of the two faiths.

While there certainly are other tensions which do directly connect to the beliefs and assertions of the two creeds, Kafka’s predicament manifested itself most directly in concrete social situations. Among Kafka’s peers, the two main responses to this tension were either a self-ghettoizing orthodoxy or a modernistic assimilationism.

Like Kafka, author Fritz Mauthner went through the educational system in Prague. Concerning his spiritual formation, Mauthner wrote:

So bestand unser jüdischer Religionsunterricht aus zwei unzusammengehörigen Hälften: aus der moralisierenden Religionslehre, die für die Dümmsten unter uns zu dumm war, und aus einem Praktikum der semitischen Philologie, das manchem gelehrten Orientalisten noch Nüsse aufzuknacken gegeben hätte. Die wir uns längst als jüdische Deutsche fühlten oder als deutsche Juden, gewöhnten uns mit den Jahren daran, an diesem Unterrichte so selten wie möglich teilzunehmen; wir erlangten eine Virtuosität darin, die Religionsstunde zu schwänzen.

While Mauthner accurately describes the situation, his response to it was different than Kafka’s. While Mauthner shrugged it off in favor of agnosticism, Kafka lived in the tension and felt pulled in two directions.

Kafka internalized the conflict. We can see this, e.g., in the text of Die Verwandlung, when three bearded borders rent living space in the Samsa family home.

The long beard is a visual symbol for orthodoxy. The full beard was worn by every, or nearly every, orthodox adult male Jew in Prague, and very few men outside of orthodoxy would have such a full beard in the early 1900s in that city.

The borders are in the same house as Gregor Samsa, just as Kafka lived in the same town with a large orthodox population. But they do not establish any personal relationship with Gregor, and emit an attitude of disapproval toward him, just as Kafka was not included in the orthodox community.

Simultaneously, Kafka felt little kinship with the assimilationists. When his father referred his Bar-Mitzvah as a Confirmation, Kafka was disappointed, as Klaus Wagenbach notes.

The assimilationists sought to minimize any conspicuous visible differences between themselves and the gentile majority in Prague. Assimilationism focused on externals, because externals created the perceptible distinctions between Jews and Gentiles.

Kafka dismissed his father’s assimilationism as purely a business ploy, smoothing relations with Gentile clients, vendors, and coworkers. For Kafka, assimilationism was inauthentic, hypocritical, and insincere.

He therefore found himself in a sort of spiritual “no man’s land.” He belonged neither to orthodoxy nor to assimilationism. He demonstrated some affinity toward Christianity: Christmas is mentioned three times in Die Verwandlung.

But the cultural barriers between Kafka and Christianity were even greater. The actual propositional content of Christianity was less problematic than the cultural trappings in which that content was packaged.

Much of Kafka’s thought was not far from Christian doctrine, as some passages in Betrachtungen über Sünde, Leid, Hoffnung und den wahren Weg show. But it was social barriers, not theological ones, which prevented him from exploring these potential connections.

Kafka was thus alienated from the Judaism which should have been his by birth, and alienated from the Christian doctrines with which he sometimes flirted. Alienation led to diminished identity: if he wasn’t a Jew or a Christian, what was he?

He felt therefore like an ungeheueres Ungeziefer - something which doesn’t belong. This phrase is notoriously complex, and many have commented on it, but it will suffice to note that ungeheuer can mean ‘very large’ and geheuer can mean ‘secure’ - Gregor Samsa was too large to belong in his family home, and was not something secure or safe.

Tax Reform, Currency Reform, and Deregulation: Recipe for an Economic Miracle

To even attempt to reconstruct Germany from the near-total devastation of WW2 was an audacious thought. Millions of civilians had died in bombing raids, millions of young German men had died in combat, and millions of Jewish Germans had died in Hitler’s horrific genocide.

Physically, the nation’s infrastructure was utterly shattered: roads, telephone lines, electrical power lines, water pipes, sewage pipes, bridges, and roads were in many places nonexistent.

The economy had been smothered by Nazi policies of wage control and price control: the government had dictated the exact price of nearly every retail product from bread to bedsheets, and had dictated the exact wage of everyone from teachers to dentists.

Hitler had further damaged the economy by printing huge amounts of money: this was how the Nazi government paid for its war efforts. Further, the German civilians had suffered under crushing taxes.

The victorious western Allies kept these Nazi policies in place at the war’s end in May 1945. In the east, the Soviets established a socialist dictatorship which ended any hopes for personal freedom or individual political liberty.

In the West, the Allies - France, Britain, and the United States - retained Hitler’s economics, in part because some of them wanted to ensure that Germany would remain weak. The French in particular were vindictive. The British wanted to continue the damaging policies because they had not realized how utterly such policies would prevent any form of growth or prosperity. Among the Americans, some agreed simply because they didn’t know what to do, and because they wanted to get along with the other Allies. Some Americans, like Henry Morgenthau, wanted to utterly dismantle Germany’s industrial base, and keep it permanently in the ‘third world’ status.

Eventually, the Allies saw that a strong West Germany was the only effective defense against the Soviet Union. The USSR was ready to expand westward, and West Germany was the first line of defense. A weak West Germany would have been quickly overrun by the Soviets.

Gradually, the Allies turned control of the country over to the Germans. Initially, in 1945, the occupying Allied armies controlled everything in the country. By 1949, the Germans were able to elect their first chancellor, Konrad Adenauer, and operate with near-complete independence. The Allies retained some influence, but let the Germans, for the most part, run their own country.

As the Germans regained control of their own country, they worked to shed the economic policies which had caused so much suffering. Freedom returned to ordinary transactions: merchants were free to set prices, and consumers free to bargain.

The oversupply of currency was reduced. Currency oversupply had created inflationary pressures, which had been kept in check only by wage and price controls. But those controls, in turn, had given rise to widespread black market activity.

Concurrent with this deregulation and currency reform, a third aspect of Germany’s economic rebirth was tax reform, as David Henderson explains:

Along with currency reform and decontrol of prices, the government also cut tax rates. A young economist named Walter Heller, who was then with the U.S. Office of Military Government in Germany and was later to be the chairman of President John F. Kennedy’s Council of Economic Advisers, described the reforms in a 1949 article. To “remove the repressive effect of extremely high rates,” wrote Heller, “Military Government Law No. 64 cut a wide swath across the [West] German tax system at the time of the currency reform.” The corporate income tax rate, which had ranged from 35 percent to 65 percent, was made a flat 50 percent. Although the top rate on individual income remained at 95 percent, it applied only to income above the level of DM 250,000 annually. In 1946, by contrast, the Allies had taxed all income above 60,000 reichsmarks (which translated into about DM 6,000) at 95 percent. For the median-­income German in 1950, with an annual income of a little less than DM 2,400, the marginal tax rate was 18 percent. That same person, had he earned the reichsmark equivalent in 1948, would have been in an 85 percent tax bracket.

Adenauer appointed Ludwig Erhard to address economic policy. Together, Adenauer and Erhard took Germany from its Stunde Null - its ‘zero hour’ and historic reset after the war’s destruction - to its Wirtschaftswunder - its ‘economic miracle’ which is not a violation of natural laws, but merely the predictable and replicable application of the laws of economics.

In less than a decade, Germany went from a likely candidate for permanent ‘third world’ status to the most powerful and quickest-growing economy in Europe, and one of the most significant economies in the world.

The Struggle for Economic Freedom: Postwar Germany

The end of WW2 in May 1945 brought freedom for the Germans. A dozen years of ghastly atrocities inflicted by the Nazi government were over. The people would finally be able to experience liberty.

Or so it seemed.

But freedom didn’t arrive easily or quickly.

The eastern portion of Germany was swallowed up into a Soviet socialist dictatorship. Freedom wouldn’t arrive for another 45 years in that place.

The western portion was governed by occupying military powers: French, English, and American. Although these western Allies represented liberty, they kept Hitler’s economic policies in place. These were the policies which enslaved the people and fueled the horrors of the Holocaust.

Nazi economics were based on high rates of taxation, government control of wages and prices, and a huge money supply. The Nazi government dictated the retail prices of everything from bread to shirts, and it dictated the wages of everyone from taxicab drivers to engineers. There were no free choices for consumers.

To pay for its war efforts, the Nazi government printed huge amounts of money. Oversupply of money causes hyperinflation. The Nazis avoided hyperinflation by strict price controls, which led, however, to shortages of retail goods.

The occupying Allies kept this system in place for several years after the war’s end. Historian Thomas Hazlett writes:

The Allies were thorough in their regulation of Germany. Censorship was so tight, for example, that James T. Farrell’s popular novel Studs Lonigan was declared contraband. The victors attempted to administer the economy through a patchwork assortment of price regulations, allocation details, and rationing. In the fall of 1946 the mechanism had reached bankruptcy, the officially rationed food allotment being under 1,500 calories per person per day. Ludwig Erhard was to report: “All attempts at mending matters were frustrated, not only by the prevailing conditions of devastation, exhaustion and disruption, but also by the supposed experts, in and outside Germany, clinging tenaciously to their reliance on controls. The people worked on doggedly, tormented by hunger and exasperated by zonal restrictions, corruption and the black market.”

The Allies gradually allowed the Germans to form their own civilian government. Ludwig Erhard and others persuaded the Allies to let the Germans form their own economic policies.

In 1948, Erhard oversaw a radical currency reform, in which the amount of money in circulation was significantly reduced. At the same time, Erhard phased out wage and price controls.

This was the turning point which allowed Germany to rescue itself from become a permanent member of the ‘third world’ group of nations. This was Stunde Null - the ‘zero hour’ of a massive economic reset. This was the beginning of the Wirtschaftswunder, which was not an ‘economic miracle,’ but rather the predictable and replicable results of economic laws.

In a single decade, Germany would rise to be the strongest and largest economy in Europe, and one of the most powerful economies in the world.

Germany's Big Choice: Postwar Economics

After WW2 ended in 1945, the USSR controlled the eastern part of Germany, and imposed there a socialist dictatorship. The western Allies - England, France, and the United States - administered the western side of the country.

Over the next several years, the western Allies gradually turned control over the Germans, who began to govern themselves. In 1947 and 1948, the Germans were making important decisions about economic policy, but the Allies still had the final power to approve or reject any legislation.

One central question faced the Germans: should they continue the economic policy of control, which the Nazis had imposed on the them in the 1930s and which the Allies had continued to impose at war’s end? This policy meant that the government dictated the retail price of everything from shoelaces to paint, and dictated the wages of everyone from the gardener to the surgeon.

This policy also included high rates of taxation. The combined effects of price controls, wage controls, and high taxes had inflicted misery on the Germans for over a decade.

Ludwig Erhard was an economist who’d opposed Hitler’s government during the war, and now, in peacetime, wanted to free people from the last vestiges of Nazi oppression. The Germans debated among themselves about how to move forward, as David Henderson writes:

Ludwig Erhard won the debate. Because the Allies wanted non-­Nazis in the new German government, Erhard, whose anti-­Nazi views were clear (he had refused to join the Nazi Association of University Teachers), was appointed Bavarian minister of finance in 1945. In 1947 he became the director of the bizonal Office of Economic Opportunity and, in that capacity, advised U.S. General Lucius D. Clay, military governor of the U.S. zone. After the Soviets withdrew from the Allied Control Authority, Clay, along with his French and British counterparts, undertook a currency reform on Sunday, June 20, 1948. The basic idea was to substitute a much smaller number of deutsche marks (DM), the new legal currency, for reichsmarks. The money supply would thus contract substantially so that even at the controlled prices, now stated in deutsche marks, there would be fewer shortages. The currency reform was highly complex, with many people taking a substantial reduction in their net wealth. The net result was about a 93 percent contraction in the money supply.

The debate about the money supply had been a technical one: until 1945, the Nazi government had financed its aggression by printing currency which it used to pay for war supplies. This massive flood of currency would have led to hyperinflation, but the Nazis prevented that by using strict price controls. The price controls tamed inflation, but led instead to extreme shortages.

So, if money supply was the first part of the debate, price controls were the second part. Both were important, but price controls were more easily seen as a direct attack on personal freedom. The German people had been tormented by over a decade of totalitarian controls in which the government dictated the prices on all retail goods.

Ludwig Erhard saw deregulation of the market not only as an economic step toward growth, prosperity, and the rebuilding of a nation destroyed by war, but also as a step toward personal freedom and individual liberty. Consumers were free to go to different stores, compare different products at different prices, and make a choice.

So it was simultaneously that the German government contracted the money supply while deregulating its markets:

On that same Sunday the German Bizonal Economic Council adopted, at the urging of Ludwig Erhard and against the opposition of its Social Democratic members, a price decontrol ordinance that allowed and encouraged Erhard to eliminate price controls.

That was merely the beginning. The money supply was contracted, for the most part, all at once. But the deregulation went on, bit by bit, in different sectors, on wholesale and retails prices.

At the same time, Erhard also began advocating for the strategy of lowering taxes. When Konrad Adenauer was elected to be Germany’s first chancellor in 1949, he would appoint Erhard to oversee economic policy. David Henderson notes that

Erhard spent the summer de-­Nazifying the West German economy. From June through August 1948, wrote Fred Klopstock, an economist at the Federal Reserve Bank of New York, “directive followed directive removing price, allocation, and rationing regulations.” Vegetables, fruit, eggs, and almost all manufactured goods were freed of controls. Ceiling prices on many other goods were raised substantially, and many remaining controls were no longer enforced. Erhard’s motto could have been: “Don’t just sit there; undo something.”

In 1948, Germany faced a monumental choice: continue the oppressive fascist economic system of high taxes and government-controlled prices, or deregulate the economy and create a free market. Because they chose the path of freedom, Germans enjoyed an amazing level of prosperity only a few years later.

Because they went from a ruined nation to a prosperous economy, and because they were not permanently cast onto the heap of ‘third-world’ nations, history books routinely refer to this as the Wirtschaftswunder - the ‘economic miracle’ - which was, in fact, no miracle at all, but merely the predictable and replicable results of the laws of economics.

Women in Germany - Seeking Value and Seeking Values

During the first decade or two of the twenty-first century, women in Germany continue to refine their roles in society, in business, in government, and in the family.

Given that Germany's chancellor, Angela Merkel, is regularly listed not only in Forbes magazine’s list of the world’s most powerful women, but also in its list of most powerful people, German females need little convincing that they can play influential roles.

They seem now to be asking questions, not about what they can do, but rather about what they want to do. Having proven that they can rise to the highest levels, they can now ask if it should be assumed that they must always want to do so.

Rather than fighting for economic or political power, German women seem to be working for the right not to be forced into business or politics. Why should anyone assume that women with university educations automatically want to devote the bulk of their lives to careers?

An interesting consequence of this trend is that men, too, are beginning to ask why professional activities are expected to be the core of man’s identity, instead of, e.g., his roles as husband or father. Germans, who still lead most of the world in efficiency and productivity, are asking if they can prioritize family life above the work world. In July 2014, Rose Jacobs wrote in Newsweek magazine:

Where American women can only dream of a system that encourages men to share more of the burdens of family life, Germany has replaced maternity leave with “parent time,” offering up to 14 months’ paid leave to couples who both take time off after their child’s birth.

Placing family ahead of career doesn’t mean surrendering the option of being active in business or politics. German men and women both want that alternative left open to them. But they don’t want to sacrifice the chance to be fully engaged parents and spouses - two roles regarded by many people as life’s most meaningful experiences.

The numbers show that women don’t have to surrender political influence to be active mothers and wives: while Germany has more full-time stay-at-home mothers than the US or the UK,

The US and the UK both have a lower proportion of women in their legislatures.

So German women win on both fronts: they can fully rival the men in the political world, and yet not be forced into the monotony and drudgery of full-time, lifelong employment in the business or political worlds.

Hitting Bottom: Postwar Germany

When WW2 ended in May 1945, nearly everyone in central Europe was relieved that the fighting was finally over. But other difficulties soon appeared.

The economy and infrastructure had been so damaged that mere physical survival was a full-time occupation for many people. They devoted their days to finding food, and some starved.

Germany had been carved into four sectors, one for each of the victorious Allies: the USSR, the USA, France, and Britain. The Soviet zone soon isolated itself, and the remaining three zones began, for practical purposes, to merge into a single territory, which would eventually become West Germany.

Starting in the early 1930s, the German economy had been savagely abused by the Nazis: the government had controlled the prices of retail goods and the wages of workers. Tax rates were high. These brutal policies kept the populace in misery.

The Allies, who controlled Germany as an occupational force after the war’s end, did not rescind Hitler’s policies. The three western Allies, each for its own reasons, kept the economic cruelty in place. Thomas Hazlett writes:

In the eastern zone, the Russian formula was basic: loot everything of value. In the west, however, there was a different problem: total indecisive ness. As Wilhelm Roepke relates: “Among the victors only Russia could be said to have had a German policy at all.” The western zones were afflicted by an acute case of disarray, and government policy fluctuated among the vengeance of the French, the reformist zeal of the British (Laborites), and the bewilderment of the Americans. About the only consensus to be found anywhere was to rely on economic controls.

It would not be until 1949, when Konrad Adenauer became Chancellor and appointed Ludwig Erhard to address economic concerns, that the suffering would begin to end. Together, Adenauer and Erhard initiated policies of deregulation and lower tax rates.

This was the moment of Stunde Null - the ‘zero hour’ when there was a monumental historical reset: a chance to start over and rebuild the economy.

Adenauer and Erhard allowed the consumers, merchants, and manufacturers to have a degree of free which they’d not experienced in over a decade. The result was the Wirtschaftswunder - the ‘economic miracle’ of amazingly quick growth. Germany would become, within a decade or two, the most powerful economy in Europe, and one of the most significant economies on the planet.

Whither Deutschland - Debating the Direction for the Postwar Economy

Before and during WW2, German scholars saw clearly the misery inflicted by the Nazis, and began to think about how to develop a better politico-economic system. One group of professors in Freiburg formed a group known as the Freiburger Schule.

This group, composed mainly of thinkers in the fields of economics and political science, included Walter Eucken, and had significant influence on the post-war policies of chancellors Konrad Adenauer and Ludwig Erhard.

The Freiburger Schule emphasized that the dignity and value of human life could be respected only in a society whose government also respected property rights: low rates of taxation and free domestic markets.

Parallel to the Freiburger Schule was another group, the Freiburger Kreis. The membership was to a significant extent overlapping between the two.

The Freiburger Kreis was less engaged in technical economics, and more concerned with a moral and cultural analysis of the situation in the late 1930s and early 1940s. It came to the conclusion that people who considered themselves followers of Jesus had a moral obligation to oppose Hitler’s government.

Both the Freiburger Kreis and the Freiburger Schule had connections with anti-Nazi resistance groups throughout Germany, and with anti-Hitler leaders like Dietrich Bonhoeffer. The Nazis executed members of both groups who’d been complicit in the July 1944 assassination attempt on Hitler.

The groups also had contact with a larger underground network outside of Germany. Scholars like Wilhelm Röpke had been forced to flee Germany when the Nazis took over in 1933.

Yet Röpke remained, by means of published articles, a part of the discussions held by the two groups. Referring to the Freiburger Schule as the ‘German school,’ David Henderson writes:

Among the members of the German school were Wilhelm Röpke and Ludwig Erhard. To clean up the postwar mess, Röpke advocated currency reform, so that the amount of currency could be in line with the amount of goods, and the abolition of price controls. Both were necessary, he thought, to end repressed inflation. The currency reform would end inflation; price decontrol would end repression.

The groups in Freiburg dealt with economic questions: how to revitalize Germany which had been devastated by Nazi monetary policies, by wartime bombing, and by the Allied occupation. They also considered social and political forms: how to increase personal freedom and political liberty, to prevent a repetition of dictatorship’s horrors and enable prosperity. They pondered moral and social questions: the obligation to oppose Hitler was tied to the obligation to respect the dignity of human life, including the obligation to respect property rights.

The last point followed from this line of reasoning: if a person spends time working to earn money, and the government confiscates money, the government is essentially confiscating time. Because life consists of time, the government would be confiscating a person’s life, which would amount to slavery or murder, an accurate description of the Nazi regime.

To control retail prices, or dictate wages, is likewise a violation of a human being. These Freiburg discussions, held before the fall of the Nazi government, constituted a radical resistance, treason against Hitler, and a courageous stand for human dignity:

Ludwig Erhard agreed with Röpke. Erhard himself had written a memorandum during the war laying out his vision of a market economy. His memorandum made clear that he wanted the Nazis to be defeated.

Although several members of the Freiburger Kreis and the Freiburger Schule were murdered by the Nazis, those who lived faced opposition after the war.

As the postwar situation clarified, two large political parties emerged in West Germany, the SPD and the CDU/CSU, alongside several minor parties. Among those minor parties was the FDP. The SPD wanted to keep in place the same economic program which had been in operation since the mid 1930s.

More a scholar than a politician, Ludwig Erhard eventually made his home in the CSU/CDU. He could have easily wound up in the FDP. Both the CDU/CSU and the FDP were friendly, in slightly different ways, to Erhard’s views. David Henderson describes the opposition to the program of the Freiburger Schule.

The Social Democratic Party (SPD), on the other hand, wanted to keep government control. The SPD’s main economic ideologue, Dr. Kreyssig, argued in June 1948 that decontrol of prices and currency reform would be ineffective and instead supported central government direction. Agreeing with the SPD were labor union leaders, the British authorities, most West German manufacturing interests, and some of the American authorities.

Despite this opposition, Adenauer and Erhard were able to implement policies of lower taxation and deregulation. This ushered in the Stunde Null - the ‘Zero Hour.’ This was a pivotal historic reset, a chance to restart after the destruction of the war.

Adenauer became chancellor in September 1949 and held office until 1963. Erhard was chancellor from 1963 until December 1966. During these years, the high tax rates from the Nazi era were reduced, and the price controls and wage controls largely eliminated.

The free market was, at first, a strange experience for ordinary German consumers, who hadn’t experienced such a thing for well over a decade. Ludwig Erhard introduced education programs for shoppers, helping them learn to look for good prices.

As obvious as it may seem to some readers, it was an odd notion for postwar Germans that the same package of coffee could be sold for three different prices in three different stores. They had to learn the skill of comparison shopping.

The effects of deregulation appeared quickly, and in nearly every metric: production rose, unemployment fell, infrastructure was rebuilt, and general economic health appeared. This was the Wirtschaftswunder - the ‘economic miracle’ - which was no miraculous violation of natural laws, but rather the predictable and replicable result of economic principles.

The growth during the years of Adenauer and Erhard formed the foundation for, and provided the momentum of, the German economy in the following decades, when it became not only the most powerful in Europe, but one of the most powerful in the world.

Freedom Revitalizes a Decimated Nation: Postwar West Germany

The chaos which followed the war’s end in May 1945 brought most economic activity to stop, and of what little production continued, much of it was carried out off the books, either as black market activity, or as barter.

Germany was a nation largely destroyed. Millions of people had died. Physical infrastructure was nonexistent in some part of the country, badly damaged in others.

The economy had been demolished, bit by bit, since the early 1930s, when the Nazis imposed high tax rates, controls on retails prices, and strict regulation of wages. This lead to a decline in economic activity.

In an effort to escape Hitler’s harsh economic policies, buyers and sellers engaged in off-the-books black market activity, which the Nazis in turn harshly persecuted.

After more than a decade of suffering at the hands of Hitler’s National Socialist market regulators, the Germans found that the war’s end did not immediately end the misery. In West Germany, the Allies and their occupational forces kept the Nazi policies in place.

In fact, conditions got at first worse after May 1945, rather than better. Currency flooded the economy and became nearly worthless. There were widespread shortages of retail goods. David Henderson describes the result:

Barter was very inefficient compared with straight purchase of goods and services for money. German economist Walter Eucken wrote that barter and self-­sufficiency were incompatible with an extensive division of labor and that the economic system had been “reduced to a primitive condition.” The numbers bear him out. In March 1948 bizonal production was only 51 percent of its level in 1936.

The reports used the word ‘bizonal’ to reflect that these were aggregate numbers for both West Germany and East Germany - the Soviet occupational zone and the combined British, French, and U.S. zone.

A complex technological economy cannot survive if its trading mechanisms are reduced to barter and black market tactics. Many observers expected that Germany would sink permanently into a ‘third world’ category.

Indeed, some among the western Allies wanted precisely that: Henry Morgenthau, the U.S. Secretary of the Treasury, argued that all Germany should be turned into farmland, with no industrial capabilities whatsoever.

Thomas Hazlett describes the ongoing deterioration of the German economy in the first postwar months:

The stupendous gap between the legal and illegal prices grew to such proportions that a general collapse of the currency ensued. People resorted to barter, and German cities typically saw a mass exodus on weekends as city-dwellers flocked to the countryside to trade with the farmers in kind. As the German economist Walter Eucken summed up: “The failure of money and the central administration of the economy has led to increasing self-sufficiency of economic units and to the emergence of a system of barter, two things incompatible with an extensive division of labor. The economic system is reduced to a primitive condition.”

A turning point was the election of Konrad Adenauer, Germany’s first postwar chancellor, in 1949. He convinced the western Allies to allow the Germans to form their own economic policies and make an effort to rebuild.

This was the Stunde Null for West Germany - the ‘zero hour’ when history experienced a gigantic ‘reset’ and there was a chance to begin again from the rubble of wartime devastation.

In East Germany, sadly, things did not go well under the Soviet socialist dictatorship. The economy continued to crumble, creating an ever-widening gap between East Germany and West Germany.

But the economics were merely one aspect of a larger difference: West Germany respected personal liberty: the freedoms of the press, of speech, of religious belief, of the political process, etc.

Economic freedom - the observance of property rights and of the free market - were inseparably tied to the other liberties. Because East Germany denied the right to personal expression, it denied rights of people to freely buy and sell.

Adenauer’s appointee, Ludwig Erhard, carried out policies of deregulation and lower taxes. Government control over wages and prices was greatly reduced, and retailers were allowed to compete by offering lower prices to consumers.

Instead of sinking into the swamp of ‘third world’ or ‘developing world’ countries - most which never ‘develop’ - West Germany revitalized both its political liberty and its free market. Personal freedom, in terms of deregulation and lower taxes, led to prosperity.

This was the Wirtschaftswunder - the ‘economic miracle’ - which was no violation of nature’s laws, but rather the predictable and replicable result of economic principles. Free markets and low rates of taxation are inextricably intertwined with those personal freedoms which both the Nazis and the Soviets so harshly oppressed.

Economics Professors Bravely Resist Hitler

Many professors and academics in Germany opposed the Nazi government during the 1930s and 1940s. It was dangerous to do so: many were imprisoned or murdered because they spoke against Hitler.

Professor Walter Eucken worked at the University of Freiburg. When Hitler came to power in early 1933, Eucken began telling university administrators that Hitler’s policies, which affected the daily operations of the university, were wrong.

Among the university’s students, a small but vocal group were committed Nazis. They protested Eucken’s lectures.

After the horrors of Kristallnacht, Walter Eucken joined a group of clergymen and professors who explained that anyone who considered himself a follower of Jesus was morally obligated to oppose Hitler. This group was called the Freiburger Kreis and was ecumenical, meaning that it contained both Lutherans and Roman Catholics.

This resistance group in Freiburg had contacts with leaders of the nationwide resistance. Walter Eucken was in contact with Dietrich Bonhoeffer, who was leading both the efforts to smuggle Jews out of Germany to safety and the effort to assassinate Hitler.

As an economist, Eucken saw that genocide carried out by the Nazis was founded on their fiscal system. The Holocaust was based Hitler’s control of the nation’s finances. Eucken’s group formulated an economic opposition, called Soziale Marktwirtschaft, as historian David Henderson explains:

Eucken was the leader of a school of economic thought, called the Soziale Marktwirtschaft, or “social free market,” based at Germany’s University of Freiburg. Members of this school hated totalitarianism and had propounded their views at some risk during Hitler’s regime.

The Nazi economic system was based on the government’s ability to control how people earned their money, and how they spent it. The members of the Freiburger Kreis resistance group understood that this was how Hitler would finance his genocidal schemes.

The Freiburger Schule - the economic school of Eucken and his colleagues - understood the liberty was antipode of the Nazi government. The word ‘Nazi’ itself is an abbreviation for ‘National Socialist.’

Companies were ‘nationalized’ by Hitler’s government, meaning that individuals were not allowed to own, or make decisions about, businesses. The economy was ‘socialist’ because it had high rates of taxation, because healthcare and education were state owned and state operated, because the government dictated the exact price at which nearly everything was bought and sold, and because the government dictated the wages which people earned at any and every job.

Walter Eucken, the Freiburger Schule, and the Freiburger Kreis all saw the connection between individual political liberty and free markets. Only in a free market environment could the dignity of human life be respected.

Deregulation and lower rates of taxation would erase the foundations on which the Holocaust was carried out. As historian Henry Wallich writes,

During the Nazi period, the school represented a kind of intellectual resistance movement, requiring great personal courage as well as independence of mind. The free market doctrine protested against the dominant conditions of the times. It sought to construct an ideal system that would embody the opposites of these conditions and guard against relapses. The most oppressive condition was totalitarianism.

Three core ideas would effectively erase the horrors of Naziism: first, personal freedom and individual political liberty; second, eliminate government planning and control; third, eliminate cartels and monopolies.

When planning and controls are eliminated, the people who work in a factory can decide if they want to build 5000 or 6000 cars next year. The people in the bakery decide if they want to produce 400 or 500 loaves of bread per day.

This same flexibility would extent to setting prices and wages. Such flexibility and autonomous decisionmaking allows the economy to explore new options, respond to changing circumstances more quickly, and fine-tune itself with more nuance. Henry Wallich writes:

Freedom therefore is the prime tenet of the doctrine, and its program is designed to safeguard freedom. Planning and controls were a second major aspect of the contemporary scene. The free market doctrine rejects all planning and controls except those needed to insure competition. A third important fact of German economic life was cartelization of industry. The free market doctrine opposes all restraints upon competition.

Walter Eucken and his colleagues in Freiburg saw how the Nazi economic system led to monopolies and cartels. Cartels are groups of companies in the same industry which effective function as monopolies, setting prices and enforcing those prices because they are collectively the sole source of the product.

Monopolies form and exist only because of the government’s collusion in their formation and continued existence. David Henderson writes:

The school’s members believed in free markets, along with some slight degree of progression in the income tax system and government action to limit monopoly. (Cartels in Germany had been explicitly legal before the war.) The Soziale Marktwirtschaft was very much like the Chicago school, whose budding members Milton Friedman and George Stigler also believed in a heavy dose of free markets, slight government redistribution through the tax system, and antitrust laws to prevent monopoly.

The powerful ideas of Walter Eucken and the Freiburger Schule influenced Ludwig Erhard. Appointed by Konrad Adenauer, Erhard shaped the German postwar economic system, and succeeded Adenauer as chancellor in 1963.

From Stunde Null to Wirtschaftswunder

At the end of WW2, Germany was threatened with the prospect of permanently sinking to a “Third World” status. Indeed, some among the Western Allies, like Henry Morgenthau, wanted to take deliberate steps to ensure this fate.

As a nation, Germany was devastated. The population had been decimated: millions of Jewish Germans had been murdered; millions of civilians had been killed by bombs dropped from Allied aircraft onto German cities; millions of young men had died in battle.

Physically, the country was a wreck. All types of infrastructure were extensively damaged or destroyed: roads, electrical and telephone lines, pipes for fresh water and sewage.

The German economy was also in shambles. The Nazis had inflicted oppressive wage and price controls, along with high taxes, for a dozen years. Hitler’s government had dictated the exact retail prices for nearly every consumer good: bread, potatoes, clothing, furniture, books, etc.

The economy was in such bad condition that not only individuals, but also businesses, resorted to the practice of bartering. Historian David Henderson writes:

Barter also was so widespread in business-­to-­business transactions that many firms hired a “compensator,” a specialist who bartered his firm’s output for needed inputs and often had to engage in multiple transactions to do so. In September 1947 U.S. military experts estimated that one-­third to one-­half of all business transactions in the bizonal area (the U.S. and British zones) were in the form of “compensation trade” (i.e., barter).

The end of the war in May 1945 might have brought relief. The fall of the Nazi government represented a chance for freedom: the end of wage and price controls and the end of high taxes.

But instead of liberty, the victorious Allies at first brought only prolonged suffering. They maintained Hitler’s economic policies. The resulting suffering was immense, as historian Thomas Hazlett writes:

Enter crisis-source number two: Allied control policies. In an effort to forestall the inevitable realignment of money and prices, the Allied commanders of France, Britain, and the United States slapped on an extensive control network that fixed wages and prices at preinflation (1936) levels. The economically obvious occurred: goods disappeared from legal markets and were sold illegally at prices far above the official prices. Severe misallocation of resources took place; cigarette lighters, for instance, which were unregulated by price controls, zoomed in value and were much sought after by people desperately in need of food and shelter.

Germany had been divided into four sectors. The eastern sector was given to the Soviets, who promptly established a socialist dictatorship. Hope for any form of personal, political, or economic liberty in that sector was lost for several decades.

The remaining three sectors of Germany - one each for the British, the French, and the U.S. - were merged into West Germany.

One of the first major challenges for West Germany, and for its first chancellor, Konrad Adenauer, was to persuade the western Allies that Germany was not a threat, that Germany could be trusted with its own sovereignty, and that the Allies did not need to keep the Germans subjected to economic servitude.

Adenauer succeeded in convincing the Allies to give the Germans and their own elected government a large measure of sovereignty - although not complete sovereignty. The Allies would still maintain some control.

But the Germans got enough sovereignty that this could be their Stunde Null - their ‘zero hour’ when there was a chance to start over, a massive reset.

To launch the postwar economy, Adenauer relied on his appointee, Ludwig Erhard. Erhard was a scholar and an economist, but not much of a politician.

Erhard’s tactic was simple: reduce regulation and reduce taxation. As historian Henry Wallich writes:

Germany’s adoption of a policy of free markets and free enterprise is probably the most widely discussed of her postwar measures. It does not imply an economy altogether free from government intervention or monopoly; on the contrary there still exists a good deal of state control and market restriction in Germany. But it does represent a sharp change of direction, and there is ample justification for regarding freedom as the keynote of German economic policy. That Germany with an experience of full-scale peacetime planning unique among Western nations should have chosen this road is not without wider significance.

The was the beginning of Germany’s Wirtschaftswunder - its ‘economic miracle’ which was, however, no miracle, but rather simply the predictable and replicable working of the natural laws of economics.

The freeing of Germany’s economy was, however, not without difficulties. The German public was not used to a competitive marketplace, and did not understand how to shop for bargains.

Consumers raised under the Nazi regime assumed that a loaf of bread or a jar of jelly would have the same price in every store. Ludwig Erhard undertook a program of consumer education, teaching shoppers to compare prices and get the best deal.

Freed from regulation, German consumers and German businesses engaged in a remarkably fruitful period of activity. Combined with lower rates of taxation, the free market, as historian Alfred Mierzejewski writes, created prosperity for Germans at every income level:

The middle years of the 1950s saw a spectacular boom in the West German economy. Both domestic and export demand rose sharply. The result was that the economy grew at a high annual rate, peaking in 1955 at 12 percent. This explosive growth caused unemployment to decline as the economy generated enough jobs to employ most of those seeking work, whether they were longtime residents of the country or immigrants from the east. The boom led to the first attempts to recruit foreign labor in 1955. Initially coming from Italy, the flow of foreign workers, especially from Turkey, soon became a flood. They were indispensable to the continued growth of the West German economy. By mid-1955, the rapid economic expansion caused fears of inflation to spread among policy makers. The result was that Erhard and the Bank of the German States took a series of measures to moderate growth, leading to a decline in the rate of expansion in 1956 and 1957. In the late 1950s, only the Japanese economy grew more rapidly. West Germany continued to enjoy the fastest rate of growth of any European economy until 1961, when it was overtaken by France. Inflation remained low throughout.

Germans in the lower classes, middle classes, and upper classes saw their real incomes and net worths rise. These were the core years of the Wirtschaftswunder, and this growth was the economic momentum in German for decades afterward.

From a country that was teetering, at the time of Stunde Null, on the brink of “Third World” status, Germany arose to become an industrial power, indeed, the major industrial power in Europe.

The growth during the years of the Wirtschaftswunder provided the momentum which allowed Germany to move through the doldrums of the 1970s, and which allowed Germany to survive both later bad decisions in domestic economic policy and worldwide downturns.

All of this was the legacy of Ludwig Erhard and Soziale Marktwirtschaft - his program of free markets and reduced taxation.

Up from Stunde Null

When WW2 ended in May 1945, Germany was a destroyed country. Millions of Jewish Germans had been murdered in concentration camps; millions of German civilians had died when Allied aircraft dropped bombs on German cities; millions of German young men had died on battlefields.

Physically, the nation was in ruins. Electrical and telephone lines were, in some places, non-existent. Pipes for water, sewage, and gas were absent in other places.

Economically, the nation had been oppressed for a dozen years by brutal Nazi policies. The horrifying genocides had been built upon, and powered by, the twin foundations of taxation and regulation.

Hitler’s government controlled and specified the prices at which nearly everything could be bought and sold: bread, milk, onions, potatoes, clothing, fuel, furniture.

At the same time, there was equally little freedom in the wages of a worker: the government dictated the wages and salaries in all sectors of the economy.

With the war’s end, perhaps Germany would have a chance to recover. But there was one more obstacle to overcome: the economic policies imposed by the victorious Allies.

Germany had been divided into four sectors, one for each of the victors: French, British, American, and Soviet.

The Soviet zone quickly and clearly became a region devoid of economic or political hope: a brutal socialist dictatorship prevented the free exchange of ideas or goods.

The British, French, and American sectors were merged into what would become the territory of West Germany. Here, one might suppose, economic freedom would blossom.

But that didn’t happen right away.

Oddly, the three western Allies retained the Nazi economic policies. They were probably hoping to keep Germany crippled until such time as they could trust it.

Historian David Henderson describes how the Allies continued Hitler’s economic policies:

Each of the Allied governments controlled a “zone” of German territory. In the U.S. zone, a cost-­of-­living index in May 1948, computed at the controlled prices, was only 31 percent above its level in 1938. Yet in 1947, the amount of money in the German economy — currency plus demand deposits — was five times its 1936 level. With money a multiple of its previous level but prices only a fraction higher, there were bound to be shortages. And there were.

Price controls on food made the shortages so severe that some people started growing their own food, and others made weekend treks to the countryside to barter for food.

From 1945 to 1949, daily life in Germany was as bad, and sometimes even worse, than during the Nazi years. Henry Wallich documents the shortages:

Grotesque conditions resulted. Each day, and particularly on weekends, vast hordes of people trekked out to the country to barter food from the farmers. In dilapidated railway carriages from which everything pilferable had long disappeared, on the roofs and on the running boards, hungry people traveled sometimes hundreds of miles at snail’s pace to where they hoped to find something to eat. They took their wares — personal effects, old clothes, sticks of furniture, whatever bombed-out remnants they had — and came back with grain or potatoes for a week or two. Many who lacked the strength to provide for themselves in some such way succumbed to their hardships.

It was up to Konrad Adenauer, postwar Germany’s first chancellor, to convince the Allies that Germany could be trusted, and that therefore they could grant economic freedom to the Germans. Adenauer succeeded.

Adenauer had become chancellor in 1949.

Having obtained the ability to formulate economic policy - with some remaining Allied oversight - Adenauer turned to his trusted appointee, Ludwig Erhard. More an academic economist than a politician, Erhard set about revitalizing Germany’s economy.

This was Stunde Null - the “zero hour” when history started over for Germany, a massive reset.

Ludwig Erhard set about creating economic liberty, something the Germans hadn’t seen more than fifteen years. His policies were direct and simple: deregulate markets and reduce taxes.

Although the principles were simple, the implementation became complex: there was a new generation of Germans who’d come of age under Hitler’s rule, and they didn’t know how to look for a good deal.

They weren’t used to the idea that two stores might compete with each other and have different prices for the same loaf of bread. The notion of consumers doing ‘comparison shopping’ was unknown to them.

But businesses, workers, and consumers quickly learned to use their new freedoms.

By the early 1950s, newspapers were referring to the Wirtschaftswunder - the ‘economic miracle’ of postwar Germany. By every metric, ordinary citizens in Germany were benefitting from liberty: increased wages, personal net worth, and standard of living.

The ‘miracle’ was no violation of nature’s laws, but rather a predictable and replicable result of those laws: lower taxes and deregulated markets create prosperity. Political liberty and economic growth are largely coincident.

The War Ends, But Things Get Worse

When WW2 ended in 1945, Germany was destroyed in more than one way: millions of its people were dead; millions more wounded; and millions held hostage by the USSR.

The physical facilities of the nation were shattered: buildings and infrastructure were in some areas totally ruined, in other areas partially.

With the end of the war, and the end of Nazi oppression, the reader might think that this was the time that postwar rebuilding began. But things actually got worse after the war’s end, not better.

Although the German citizens were no longer held captive to Nazi subjugation, they were still shackled by Nazi economic policies. Ironically, those policies were continued by the western Allies.

England, France, and the United States continued those policies - high tax rates, regulated markets, government controls over wages and prices - perhaps partly in order to ensure that Germany remained weak.

In the first year or two after the war, these policies threatened to shape Germany into a “third world” country. Poverty increased, while worker motivation decreased. The economic environment lacked opportunity, predictability, and stability.

Historian Thomas Hazlett writes:

Yet the shocking reality was that war-scorched Germany was to face its greatest economic crisis in the years after 1945. The postwar devastation was the combined effect of two principal factors.

What drove Germany downward during these years? The effects of regulation and taxation, combined with an oversupply of money.

The Nazi government had printed huge amounts of cash, while rigidly regulating both prices and wages. This caused the buildup of inflationary pressure, which erupted at war’s end.

The Nazis could keep the economy functioning only through harsh repression, including draconian steps taken again the black market. Thomas Hazlett reports:

First, a tremendous inflation broke loose - the predictable result of prior history. Under the Third Reich, the German government had financed a colossal industrial build-up to accommodate the designs of the Nazi war machine. The tremendous industrial expansion was paid for with rampant monetary expansion. All the screws of the Nazi State had to be tightened to their breaking point to suppress the resultant inflation; the guns of the Gestapo turned on black marketeers and others who sought to evade the officially posted prices of goods and services. The result of the effective price controls under Fascism was the explosion of liquidity after Fascism.

Ironically, it was the black market which kept much of the country alive. It functioned after the visible economy collapsed.

The steps which eventually brought the German economy back from the brink of “third world” status began with Adenauer’s ability to persuade the western Allies that the Germans needed some sovereignty, including economic sovereignty, over their own country.

Adenauer had been elected chancellor in 1949. After the western Allies gave the German government some control over the national economy, Adenauer’s key economic appointee, Ludwig Erhard, masterminded policies of deregulation, lower tax rates, and currency reform.

Konrad Adenauer was chancellor from 1949 to 1963; Ludwig Erhard succeeded him in office and remained until 1966. Between the two of them, they unleashed the market forces which pulled Germany back from the brink of permanent “third world” status.

Ludwig Erhard: Freeing Germany

The horrors of WW2 inflicted almost every conceivable type of misery: Central Europe had seen the deaths of millions of Jewish Germans at the hands of the genocidal Nazis, the death of millions of young men on the battlefields, the deaths of millions of civilians during the bombing of cities, and the near-complete destruction of the physical infrastructure.

Roads, water pipes, telephone service, and electrical power lines were, in many places, nonexistent.

During the twelve years of Nazi dictatorship, the people had been oppressed by high taxes and by government control of wage and price levels. Free markets and property rights were nearly unknown.

Historian Thomas Hazlett details the devastation in Germany:

In 1945 Germany lay in ruins, the vanquished victim of mankind’s most grotesque holocaust. The war had shaken the German economy by its very roots: it destroyed one-fifth of all housing, decimated the transit lines between regions, reduced industrial output to but a third of its 1936 level, erased a huge percentage of the working-age male population, and swamped the countryside with a tidal wave of immigrants that would reach the 8.5 million mark by 1948. While the defeat belonged to the Nazis, the immense destruction belonged to the entire German nation.

Although the war ended in 1945, the misery continued for several more years. The victorious Allies were at first suspicious of the Germans, and did not want to allow them a chance to rebuild. In 1949, Konrad Adenauer became chancellor, and was able to convince the three western Allies that Germany would pose no threat.

Indeed, it became slowly clear that West Germany would be a hedge against Soviet socialist aggression, and an example of what the western Allies meant by ‘freedom.’

Adenauer received permission to begin restoring Germany’s economy. Two steps were decisive in repairing the extensive damage: lower tax rates and deregulated markets.

One of Adenauer’s key appointees was Ludwig Erhard. Born in Bayern, Erhard earned his doctorate at the University of Frankfurt. Alfred Mierzejewski writes:

Ludwig Erhard is difficult to characterize because he was unique. He was a man with economic training who was active in politics but who did not consider himself a politician. Erhard saw himself as an intellectual who understood how the economy functioned and who, therefore, could offer prescriptions to the German public to solve its economic problems. He had developed ideas over almost five decades based on the values transmitted to him by his liberal, tolerant parents. These ideas had been shaped but not fundamentally changed by his education and his professional experience. Yet, as Erhard was the first to admit, he was not a theorist or an original thinker.

More an intellectual than a politician, Erhard persisted in the strategies of reducing taxes and deregulating markets. But Erhard was not an extreme libertarian or an anarcho-capitalist. The phrase soziale Marktwirtschaft captures Erhard’s willingness to allow for some element of government spending; under his chancellorship, e.g., spending on education increased.

Erhard became chancellor in 1963 after Adenauer left office. Mierzejewski reports:

Some have criticized Erhard for this, attempting to minimize his accomplishment. Yet there is no reason to accept this critique. Many prominent theorists, not the least of them Karl Marx, have developed their theories based on ideas borrowed from others. Moreover, originality, by itself, is no guarantee of insight. Erhard advocated a set of ideas, unlike Marx and his followers, and unlike theorists of the right, based on practical experience and a sound understanding of human behavior. Moreover, unlike any of them, his ideas were effective. Just as important, they threatened no one and made no provision for violence or [for] the domination [of] a particular group. Erhard advocated ideas that - whatever their imperfections, whatever their internal contradictions, and they were few - were intended to improve the lives of all and to direct Germany toward a peaceful relationship with its neighbors.

During the chancellorships of Adenauer and Erhard, from 1949 to 1966, the German economy thrived because of the policies of lower tax rates, deregulated markets, and the abolition of government control over wages and prices. The Encyclopedia Britannica reports:

There was easier access to higher education and cheaper mass travel. There was more varied food; there was better health, preserved by better medicine. There were new synthetic materials, more plentiful housing, and wider automobile ownership. There were stereophonic recordings, color television, high-fidelity audio equipment, and cheap paperback editions of serious books. There were new, more classless eating-houses, pedestrian precincts, supermarkets, and shopping malls.

This amazing recovery is now routinely recorded in economic textbooks as the Wirtschaftswunder - the ‘economic miracle.’ But it was not a violation of natural laws. It was the logical unfolding of known economic principles.

Economists see Ludwig Erhard as paradigmatic. He released the power of the market and allowed it to accomplish an amazing event: an economic recovery which is still viewed as one of the most powerful in history.

Adenauer and Erhard Lay the Foundations for Prosperity

At the end of WW2, Germany was a nation nearly destroyed. You might even take the ‘nearly’ out of the previous sentence.

Major cities had been bombed to rubble. Millions of Jewish Germans had been ruthlessly murdered in concentration camps. Millions of young men had died on the battlefields, and millions of civilians had died at home. There wasn’t much of Germany left.

The German economy, too, had been devastated. Hitler’s Nazi government had done everything possible to inflict misery: high taxes, price controls on retail goods, and government ownership of industries. This was the economics of genocide.

When the war ended in 1945, the totalitarian oppression did not immediately end. Germany was governed by the four victorious Allies: England, France, the Soviet Union, and the United States. They kept the harsh economic system in place, because they wanted to make sure that the Germans did not rise again to pose a danger.

Historian David Henderson describes how the Nazi system cruelly inflicted abuse on the Germans:

By 1948 the German people had lived under price controls for twelve years and rationing for nine years. Adolf Hitler had imposed price controls on the German people in 1936 so that his government could buy war materials at artificially low prices. Later, in 1939, one of Hitler’s top Nazi deputies, Hermann Goering, imposed rationing. (Roosevelt and Churchill also imposed price controls and rationing, as governments tend to do during all-­out wars.) During the war, the Nazis made flagrant violations of the price controls subject to the death penalty. In November 1945 the Allied Control Authority, formed by the governments of the United States, Britain, France, and the Soviet Union, agreed to keep Hitler’s and Goering’s price controls and rationing in place. They also continued the Nazi conscription of resources, including labor.

It would be the first challenge, and the first victory, for Germany’s Chancellor Konrad Adenauer, to persuade the Allies - more accurately, the three Western Allies - that the Germans did not pose a threat, that they would not rearm, and that they should be granted human rights, especially property rights and free market rights.

When Adenauer succeeded, he and his appointee Ludwig Erhard undertook a comprehensive program to free the Germans from totalitarian economics. Tax rates were reduced. Wages and prices were deregulated.

The result is known today in textbooks as the Wirtschaftswunder - the “economic miracle.” Personal freedom and economic growth grew together. The Encyclopedia Britannica describes the blossoming of Germany:

By 1950 West Germany’s gross national product had caught up with the 1936 figure. Between 1950 and 1955 the national income rose by 12 percent a year, while exports grew even faster. From a small deficit in 1950, gold and foreign currency reserves increased to nearly 13 billion deutsche marks by 1955, while unemployment fell from 2.5 million to 900,000. Per capita income nearly doubled. New homes were built at the rate of 500,000 a year. By 1955 West Germany had more than 100,000 television sets. Bombed cities had been rebuilt. Every other family seemed to possess a Volkswagen “beetle” car.

The policies of Adenauer and Erhard demonstrated that various forms of liberty are connected: to ensure basic human rights like freedom of speech and political liberty, it is necessary also to secure property rights and a free market.

Germany’s stellar economic performance during the second half of the twentieth century is built upon the foundations laid during Adenauer’s chancellorship from 1949 to 1963, and during Erhard’s chancellorship from 1963 to 1966.