The primary tranche of Marshall Plan funds helped West Germany reform its foreign money and jump-start a surprisingly speedy financial and political revival. Integral to the Marshall Plan was the Truman administration’s elimination of German debt and reparations. In consequence, actual output elevated by 18.5 p.c in 1948 and leveled off at a median enhance of 8 p.c a 12 months through the first half of the Fifties.
The above is a quote from David L. Roll, “The 11-Minute Harvard Speech that Rebuilt Postwar Europe,” Wall Road Journal, Saturday/Sunday, June 4-5, 2022. It’s primarily based on Roll’s guide titled George Marshall: Defender of the Republic.
Roll missed many of the reason behind the German restoration and financial growth. It wasn’t the Marshall Plan, as Tyler Cowen laid out cogently in his 1985 guide chapter titled “The Marshall Plan: Myths and Realities” and in a 1986 article primarily based on that chapter in Motive. The latter is titled “The Nice Twentieth-Century Overseas-Support Hoax,” Motive, April 1986.
So what did trigger what has come to be generally known as the German financial miracle? I inform the story in some element in “German Financial Miracle,” in David R. Henderson, ed., The Concise Encyclopedia of Economics, Liberty Fund, 2008.
The quick model: foreign money reform, ending value controls, and considerably chopping marginal earnings tax charges.
The image above is of the one that, greater than anybody else, deserves credit score for the German financial miracle: Ludwig Erhard.
