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.
