The devastation was immense: millions of Jewish Germans had been mercilessly murdered in concentration camps, joined by other victims like Gypsies, Jehovah’s Witnesses, and anyone who expressed political opposition to the Nazis.
Millions more had died when German cities were destroyed by bombs dropped from aircraft, and millions of young men had died on the battlefields. The German population was decimated.
Physically, the nation’s infrastructure was in shambles. Roads, electrical and telephone wires, and the pipes bringing water to houses were often non-functional. Buildings of all types had been destroyed.
The nation’s economy had also been gravely damaged by Hitler’s policies. The Nazis had controlled the prices of nearly anything that could be bought or sold, and taxed the people harshly.
Many observers assumed that Germany would permanently become a “third world” country, an ongoing economic disaster. As David R. Henderson writes,
After World War II the German economy lay in shambles. The war, along with Hitler’s scorched-earth policy, had destroyed 20 percent of all housing. Food production per capita in 1947 was only 51 percent of its level in 1938, and the official food ration set by the occupying powers varied between 1,040 and 1,550 calories per day. Industrial output in 1947 was only one-third its 1938 level. Moreover, a large percentage of Germany’s working-age men were dead. At the time, observers thought that West Germany would have to be the biggest client of the U.S. welfare state; yet, twenty years later its economy was envied by most of the world. And less than ten years after the war people already were talking about the German economic miracle.
How did Germany rise from such devastation? Other nations have remained in the category of “developing world” without actually developing.
There are many complex aspects to Germany’s Wirtschaftswunder - its ‘economic miracle’ - including the cultural attitudes and ethics of central Europe. Self-discipline, focus, farsightedness, and societal emphases on education all played a part.
Additionally, the policies implemented by West Germany’s first chancellor, Konrad Adenauer, and his appointee, Ludwig Erhard, opened the door to economic growth. Simply put, they reduced taxes and reduced regulation.
Individuals were free to discuss the prices they wanted to pay. The give-and-take of talking about prices with local merchants revitalized the markets.
Lower taxes meant that opportunities arose for individuals to start their own small businesses and shops. Larger businesses could sell more because smaller businesses were thriving.
To understand why the Wirtschaftswunder was regarded as something like a miracle, we need to remember that Germany was rising from near-total destruction: millions of its people dead, its physical infrastructure demolished, and its economy shattered by years of Nazi socialist policies.
The time immediately after the war’s end, and immediately before the economic recovery, was called Stunde Null - the ‘zero hour’ - because it was almost as if history were starting over again. Germany had to rebuild itself from almost nothing.
Today, more than half a century later, economists still study the years of the Wirtschaftswunder - roughly 1949 to 1966 - as a landmark era of growth in world history. The Germans built one of the world’s most powerful economies from piles of rubble.