The post-WWII "German Miracle"

Ivan Pongracic - The post-WWII "German Miracle", where (West)...:
"The post-WWII "German Miracle", where (West) Germany rebuilt its economy in record time after the utter destruction of the war is a highly instructive case of what works and what doesn't in economics. (Post-WWII Great Britain, which followed a socialist path, is a classic example of what doesn't.) Here's a fascinating passage by one of the architects of the German miracle, the great German free market economist Wilhelm Ropke (also friend of Ludwig von Mises and Friedrich Hayek). (H/T: Darrin Moore)"

"In 1948, "Germany lay prostrate, ravaged by war, impoverished by ten years of repressed inflation, mutilated, demoralized by defeat in an unjustified war and by the exposure of a hateful tyranny, and teeming with refugees . . ."
The Germans in the summer of '48 discarded the concept of a government-run economy and instead unleashed the free market economy and thereby spawned the all-but-forgotten 'German Miracle'. 
"This was the beginning of an impressive chapter in economic history when in the span of a few years we witnessed a nation's precipitous fall and its rebirth and the almost total collapse and subsequent swift recovery of its economy.
The world was treated to a unique and instructive example of the paralysis and anarchy which can afflict an economy when utterly mistaken economic policies destroy the foundation of economic order and how quickly and thoroughly it can recover from its fall and start on the steep, upward climb if only economic policy recognizes its error and reverses its course. . . of all countries, it was precisely this one which had the courage to swim against the tide of collectivist and inflationary policies in Europe and set up its own―and contrary―program of free markets and monetary discipline, much to the dismay of the young economists of the Occupation Powers, who had been reared on the doctrines of Marx and Keynes and their disciples.
Not only was the success overwhelming, but it also happened to coincide with the patent failure of socialism in Great Britain (which had replaced the hopelessly discredited Soviet Union as the promised land of the socialists).
It began to look as if the country that had lost the war were better off than the winners.(8)
This was an outrage because it meant the end of the socialist myth. 
What made it still harder to swallow was that the defeated Germany should be the one to set this example of prosperity through freedom, for there were few who grasped that this was a not unworthy manner of making good some of the evil that this same country had brought upon the world by means of its previous, opposite example of inflationary collectivism, which had marked the beginning of National Socialism and had been lapped up eagerly by others.
But the success of the new economic course was proscribed by every single chapter of the fashionable Leftist economic doctrine.
This success simply could not be tolerated, and thus false theories combined with wishful thinking to produce those repeated prophecies of doom which accompanied German economic policy from one triumph to the next. 
When the false prophets, along with all their various disproved predictions, finally fell into ridicule, they took refuge in the tactics of either remaining as silent as possible on the success of the German market economy or obscuring it with all kinds of statistical juggling and gross misrepresentation of facts."

Ivan Pongracic I should mention that there is an amazing chapter on this whole episode (as well as one on the failure of post-war British socialism) in my good friend Larry White's remarkable book "The Clash of Economic Ideas: The Great Policy Debates and Experiments of the Last Hundred Years" - HIGHLY RECOMMENDED! http://www.amazon.com/The-Clash-Economic.../dp/1107012422

The Clash of Economic Ideas: The Great Policy Debates and Experiments of the…

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