The nation was mostly destroyed. German civilians had died in bombing raids. German soldiers had died on the battlefields. German Jews had died in concentration camps.
The physical condition of the country was pathetic. Thousands of houses, stores, schools, churches, and factories had been demolished. Infrastructure was mostly gone: there were hardly any usable roads or bridges. Electricity, running water, sewage systems, and telephone systems were mostly absent.
The Nazi government was gone, and the country was ruled by the occupational armies of the four victorious Allies: England, France, the Soviet Union, and the United States. While these four countries had defeated the Nazis, they oddly kept Nazi regulations in effect.
The Nazi policies were responsible for death and destruction on a massive scale. Those policies included high taxes and government controls on wages and retail prices. The government dictated exactly how much each worker would earn and exactly what the price of retail goods would be.
Of course, the word Nazi is an abbreviated form of ‘National Socialism’ which was the official name for Nazi policy.
With these policies still in place, even though the Nazis who implemented them were long gone, the German people had no chance to recover from the damage the Nazis had done to them.
There was, however, one man who saw a path to recovery. Ludwig Erhard had been a professor of economics, a business analyst, and a dedicated opponent of the Nazis. He had risked his life by networking with those who attempted to assassinate Hitler.
This moment in history is known as Stunde Null, the zero hour, the gigantic reset of the German economy. It had been almost entirely destroyed, and something new would have to be put in its place.
Erhard saw that, with the war over, Germany’s chance to succeed would be found in a complete rejection of the Nazi policies. Erhard first had to convince the Allied occupational officers to abandon the high taxes and regulated markets which were the core of Nazi policy.
A skeptical American army officer was willing to give Erhard a chance. In June 1948, Erhard headed the introduction of new economic policies. Taxes were reduced. He worked energetically and thoroughly to eliminate government regulations on any type of buying, selling, or other business activity.
The result was the Wirtschaftswunder — the economic miracle. The nation which had been in danger of being permanently a third-world country was now prospering. The quick rise of the German economy amazed people around the world. Charles Moritz’s Current Biography Yearbook notes:
Under Erhard’s guidance, the West German economy continued its upward trend. Aided by generous tax concessions, reductions in tariffs and import duties, and the absence of controls, manufacturers steadily increased their output, and by 1952 production had passed the prewar peak of 1938. During Erhard’s fourteen years as Economic Minister, West Germany became the second industrial power and the third trading nation in the world. Exports increased by 700 percent to a total of $14 billion; unemployment practically disappeared; the German mark became one of the world’s most stable currencies.
Ludwig Erhard had brought Germany from a zero to a leading economic power in the world. It would have been amazing for any nation to do this, but for a nation which had been utterly destroyed only a few years before, the meteoric rise seemed miraculous.
The currency used in Germany at that time, die Deutsche Mark, became a valued international currency, and Germany’s industrial output was second only to the United States.
For the German people, who’d suffered under more than a decade of Nazi dictatorship, the sense of freedom and sense of prosperity were euphoric, and were due largely to Ludwig Erhard.