Academic

THE GERMAN MIRACLE: Germany has cut government spending and its economy is growing smartly. It?s no?

By Glenn Reynolds

THE GERMAN MIRACLE: Germany has cut government spending and its economy is growing smartly. It’s not the first time that market-friendly policies have led the nation out of crisis.

In the following weeks Erhard removed most of the Bizone’s remaining price controls, wage controls, allocation edicts and rationing directives. The effects of decontrol were dramatic.

The shortages ended, black markets disappeared, and Germany’s recovery began. Buying and selling with Deutsche marks replaced barter. Observers remarked that almost overnight the factories began to belch smoke, delivery trucks crowded the streets, and the noise of construction crews clattered throughout the cities.

The remarkable success of the reforms made them irreversible. A few months later the French zone followed suit. The Allied authorities went on to lower tax rates substantially.

Between June and December of 1948, industrial production in the three Western zones increased by an astounding 50%. In May 1949 the three zones were merged to form the Federal Republic of Germany, commonly called West Germany, while East Germany remained under Soviet domination as the German Democratic Republic.

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Full post as published by Instapundit.com on September 08, 2010 (boomark / email).