Saturday, July 03, 2004

German Economic "Miracle" and the Nazi economics

One important lesson in the history of economics is the revival of the German economy after the WWII. Most people think that the Marshall plan was to thank for the miracle, although the plan only contributed 5% of the German GNI at its peak. The reason for the miracle is the same as for any other economic miracle: sound economic policies. Of course a country does not have to install a perfect economical system to prosper. Capitalism is resilient and can evidently thrive in moderately socialistic countries.

After the war the old Nazi system was still in place with high taxes and price controls. In an article by David R. Henderson the results of the abolishment of the old system is described quite well:

The effect on the German economy was electric. Wallich wrote: "The spirit of the country changed overnight. The gray, hungry, dead-looking figures wandering about the streets in their everlasting search for food came to life."

The same old story all over again, abolish restrictive controls of the economy and the results are foreseeable. Something for the politicians of today to think about.

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