The first tranche of Marshall Plan funds helped West Germany reform its currency and jump-start a surprisingly rapid economic and political revival. Integral to the Marshall Plan was the Truman administration’s elimination of German debt and reparations. As a result, real output increased by 18.5 percent in 1948 and leveled off at an average increase of 8 percent a year during the first half of the 1950s.

The above is a quote from David L. Roll, “The 11-Minute Harvard Speech that Rebuilt Postwar Europe,” Wall Street Journal, Saturday/Sunday, June 4-5, 2022. It’s based on Roll’s book titled George Marshall: Defender of the Republic.

Roll missed most of the cause of the German recovery and economic expansion. It wasn’t the Marshall Plan, as Tyler Cowen laid out cogently in his 1985 book chapter titled “The Marshall Plan: Myths and Realities” and in a 1986 article based on that chapter in Reason. The latter is titled “The Great Twentieth-Century Foreign-Aid Hoax,” Reason, April 1986.

So what did cause what has come to be known as the German economic miracle? I tell the story in some detail in “German Economic Miracle,” in David R. Henderson, ed., The Concise Encyclopedia of Economics, Liberty Fund, 2008.

The short version: currency reform, ending price controls, and substantially cutting marginal income tax rates.

The picture above is of the person who, more than anyone else, deserves credit for the German economic miracle: Ludwig Erhard.