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.
