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Recovery Is Possible: The Case of Post-War Germany

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“I spent my career as an academic studying great depressions. I can tell you from history that if we don’t act in a big way, you can expect another great depression, and this time it’s going to be far, far worse.” Those are the words of then Federal Reserve Chairman Ben Bernanke. He directed them in 2008 to Speaker of the House Nancy Pelosi. The often wrong, never in doubt Bernanke quite literally believed that a failure to bail out institutions like Citibank (as of 2008 it had already been saved four times previously) would cause the mother of all economic collapses; one that would take many, many years to recover from.

It’s hard to know where to begin. To paraphrase Henry Hazlitt about economists who believe in the impossibility that is a “savings glut” (Bernanke naturally does), it’s hard to imagine even the ignorant could believe something so ridiculous. But Bernanke did, and still obviously does. He felt that absent the propping up of financial institutions that actual market actors no longer felt worth saving, the U.S. economy would implode; recovery a very distant object. To say that Bernanke got things backwards insults understatement. You build an economy by bailing out what’s holding it down? The very notion…The sad and comical reality is that Bernanke to this day believes himself the hero of 2008. Delusion is powerful.

Bernanke’s self-regard came to mind while reading German journalist Harald Jahner’s fascinating and obviously depressing 2022 book, Aftermath: Life in the Fallout of the Third Reich, 1945-1955. Anyone who reads Jahner’s study of how just how thoroughly wrecked Germany was in terms of humans and property will see just how desperately foolish Bernanke’s assertion was. Germany was rubble, period. The rubble was so ever-present that it was a cultural phenomenon that Jahner notes inspired books, plays, and movies.

In numeric terms Germany’s “starving, tattered, shivering, poverty-stricken” people moved about, often aimlessly amid “500 million cubic metres of rubble.” If piled up, “the rubble would have produced a mountain 4,000 metres high,” which in feet terms amounts to something on the order of 13,000. There were 40 cubic meters of rubble per each surviving Dresden resident. Properly, “former Nazi Party members were pressed to work to help remove the rubble” that they had such an outsize role in instigating.

Cologne’s pre-war population was 770,000. Post-war? 40,000. More than 5 million German soldiers had died in the war, at war’s end over 6.5 million were still in POW camps, and of those who returned, they were near completely destroyed. More on return from war in a bit, but as a preview, Jahner described the returnees as individuals who “hobbled around on crutches, groaning and spitting blood.” Bernanke is a prominent member of a profession that near monolithically believes war is economically stimulative…

Yet there was recovery in Germany. Those with reasonable knowledge of history know the latter to be true, not to mention what we can visually see in Germany today. The people are a country’s economy, the German people were bludgeoned by a war that they (and most notably their primitive leadership) tragically brought on, but they recovered. In Frankfurt, a rubble reprocessing plant was built such that new Frankfurt “sprang from the ruins of old Frankfurt.”

It hopefully makes one think: what we deem “crisis” in the U.S. is anything but in a relative sense. And while it’s shooting fish in a barrel to say that bank failures are microscopic barriers to recovery contra Bernanke, these fish need to be shot. Over and over again. If people are interested in being reasonable, it should similarly be said over and over again that as opposed to restraining rebound, business failure is the surest sign of an economy in recovery as the mediocre and bad are relieved of directing crucial resources (human and physical) to their best use so that the good and great can take their place.

Descriptive as Jahner plainly is, it’s no insight to say that there’s really no way for him or anyone to adequately describe the physical and mental state of Germany in the post-war years. Still, it’s valuable to contemplate as a reminder for all of how crucial it is to avoid war, and perhaps more importantly, to avoid glorifying it.

In the Germany that hobbled out of a needless war, “nothing belonged to anyone anymore, unless they were sitting on it.” Really, what would people have desired to keep amid so much nothingness? As for food, the people were once again starving.

Amid all this devastation, it’s fascinating to read that it was “also a time of laughing, dancing, flirting, and lovemaking.” Life goes on? Jahner observes that “death’s proximity” oddly fostered “delight in life.” It brought to mind (in a sense) George Melloan’s observation about the years of the Great Depression in Whiteland, IN in his very excellent book When the New Deal Came to Town (review here). While only an abject fool would compare the relative economic want in the U.S. of the 1930s to the hell that was post-war Germany, Melloan described the decade as a time when Whitelanders “ate, slept, made love, raised children, and tried to keep body and soul together by finding ways to make a living.” There’s perhaps an indomitable aspect of the human spirit that cannot be crushed? One hopes. There has to be after reading Jahner’s book.

The endless destruction also brought on a lot of re-invention. It’s eye-opening for sure, but really not surprising. With so many who remembered the past exterminated, and so much of the past erased in general, “swarms of fake doctors, fake aristocrats and marriage impostors” emerged. Fascinating.

In 1952, there was The Equalization of Burdens Act, whereby those “who had only suffered slight damage as a result of the war” were required “to pay up to half of what they owned so that those who had nothing could survive.” In pure economic terms, the rule was senseless. Destroying value hardly creates more of it. Better it would have been to allow those with something to keep what was theirs as a form of capital that would attract investment. The bet here is that the rule hindered recovery. Collectivism’s origins are German, so maybe that explains the Burdens Act, or can it be sympathetically said that the Act was written at a time when no one knew anything? Seriously, how do you talk about property when so much has been destroyed? How do you explain it? Jahner observes that “If skill and hard work had hitherto been seen to correlate in some way to success and property, that connection had now literally been blown apart.”

The main thing is Germany once again recovered. This rates thought and repeated thought as a reminder of the stupidity of bailouts and intervention in countries like the U.S. As readers will learn from Aftermath, nothing is forever. Central bankers and economists more broadly should be required to read Jahner’s account of revival from the rubble, but also to understand currency policy better.

While your reviewer wishes Jahner had spent more time on Ludwig Erhard and his reforms that fostered what the author deems a miracle, his discussion of currencies was very worthwhile. He writes that in Germany, the “cigarette became the cowry shell of the post-war era.” While its “exchange rate might have fluctuated,” the cigarette “remained one of the more dependable certainties of those years.” Cigarettes circulated more than the reichsmark. Stop and think about that. What’s lousy as money plainly disappears, and it does precisely because all trade is products for products; money the measure of value that facilitates exchange. Since cigarettes had real market value, they were better as an exchange medium.

Jahner goes on to write that “Doubts about the reichsmark meant that traders had held back more and more goods, hoarding for the day when there would be a stable currency with better prices in the future.” Brilliant! Money on its own is not wealth, but if accepted as a credible measure, money facilitates the exchange that is the basis of all production. By 1948 the deutsche mark was introduced, and with its peg to a dollar that was pegged to gold, Germany had a credible currency again. And “shops filled up with goods overnight.” Precisely. We produce in order to get things, in order to import, but without a credible medium there’s no need to bring goods to market for “money” that is anything but such that it commands little in the marketplace.

Interesting for American readers about all of this is the assertion from George Marshall that “The manufacturer and farmer throughout wide areas must be able and willing to exchange their product for currencies, the continuing value of which is not open to question.” Absolutely. And Marshall’s quote explains why the State not only didn’t invent money, but also why money would be abundant with or without the central banks that those who should know much better spend so much time thinking about.

Since we produce in order to consume, credible money is essential as a way for us producers to exchange with one another. Which means money of credible quality doesn’t just facilitate trade, it’s also an essential driver of economic specialization without which there’s no growth. Marshall got it. Though his Marshall Plan’s spending as a driver of economic revival is an obvious myth, he should be credited for understanding money in the 1940s in a way that few understand it today.

Jahner writes that “Food rationing was an intervention in the free market.” Germans were limited to 1,550 calories per day, and they could only get those insufficient calories with stamps. “Without these stamps you got nothing.” Jahner was making the correct and sad point that without markets, shortages arise. Indeed, he’s clear that the stamps entitling Germans to 1,550 calories per day didn’t always get them that. Jahner writes so well that the stamps “infantilized the population.” Worse, it brought on the “’deprofessionalisation of criminality.’” Post-war was a “’time of wolves.’”

At the same time, a stretch of years defined by lots of crime born of market intervention ultimately created a real market. In Jahner’s words, “Any market restriction automatically creates its own black market.” The rules were 1,550 calories per day, which meant the people worked around the rules. Jahner cites estimates “that at least a third, sometimes even half, of the goods in circulation were being traded illegally.” Markets speak. Always they do. Thank goodness they do.

A great friend once remarked about the late Pat Conroy’s comments on Vietnam service with disdain. The Citadel grad in Conroy said with hindsight that he wished he’d fought in the war. My friend’s response was “No, you don’t wish you’d fought in Vietnam, you wish you had come home from Vietnam.” It all made sense, and in a sense still does, but Aftermath surely causes a rethink. In some ways, coming home for the defeated soldiers was the worst part.

For families, the thought of a surviving father actually returning from war embodied “the promise of a better life.” Not so fast. The returnee wasn’t the person who’d left. Not even close. Jahner writes that “all of a sudden he was standing at the door, barely recognizable, scruffy, emaciated and hobbling. A stranger, an invalid.” The site was said to be shocking. “Eyes stared out of dark hollows from which all delight in life seemed to have vanished. The shaven skulls and sunken cheeks intensified the impression of one half-dead.”

The “half-dead” no longer mattered. “Most children stoutly refused to sit on the knee of a ghost.” And then “it was now a country run by women.” Not only did the soldiers return from hell defeated, they did so only to realize they’d been replaced in a very real way, and that “as a result their wives had changed too.” Returning husbands were more than “superfluous.” If as was so often the case the family was broke, there was little these broken men could do to improve their economic circumstances.

Insecure, the men lashed out. They searched for ways to lift themselves up by demeaning others; their kids who didn’t know them and didn’t view them as providers, and their wives. One wife wrote of how her husband berated her for not raising the kids well in his absence such that they didn’t know how to use forks and knives when the wife cooked the rarest of delicacies for dinner: a roast.” In the wife’s words, “During the blockade everything had been powdered.” They’d never used forks and knives. In short, homecoming was not homecoming. Jahner writes that the Heimkehrer men were “homecomers,” but not in the heroic, kissing the girl in Times Square kind of way. Coming home was a “state of being,” a “disability,” and a tragic one at that. Of those lucky enough to come home, there “was much discussion of the experience of seeing a leg-stump for the first time.”

It’s all terrible to read, at which point some readers will perhaps understandably respond that the returning German soldiers deserved their hell. Jahner reminds readers that the “Russians had lost 27 million people” during this most tragic of wars, many Russian soldiers “had fought for four years without a day’s leave,” and they’d seen their families and land destroyed by the Germans. Jahner quotes a Red Army soldier as saying “I took revenge, and would take revenge again.” This is the other side of the story.

As my recent review of Giles Milton’s very excellent Checkmate In Berlin made plain, the arriving Soviets brutalized the German people in the sickest of ways. Of course, the Russians would say the Germans had done much worse. We turn to Jahner again for a comment from a German woman who was terrorized and presumably raped by the Russians as accepting of her treatment as “terrible payback for what our men did in Russia.” What to make of all this? Does cruel treatment justify the same in return?

Of course, in writing all of this about a book about post-war Germany, the proverbial elephant must be obvious. So much suffering has been discussed, but no mention of the Holocaust. About it, Jahner writes in disapproving fashion that in post-war Germany “there was hardly so much as a word about the holocaust.” Why? One speculation of Jahner is that the Germans knew, and in knowing, their view was that “the crimes committed against the Jews were no less than what they essentially remain: unspeakable.” The response here is that “unspeakable” isn’t a worthy excuse.

Notable about what’s hard to contemplate is that part of the country’s post-war “denazification” was required viewing of documentaries about the concentration camps. Jahner reports that those who didn’t look away or who weren’t “staring firmly at the floor,” and who “had seen the mountains of corpses on the screen vomited or collapsed in tears as they left” the theater, yet they didn’t discuss it. One other anecdote: American director extraordinaire Billy Wilder, who had left Germany in 1933, and who “had lost many family members in the camps,” was not a fan of the documentaries when asked to pass judgement. In his estimation, “we cannot afford to antagonize” a people we’re now allied with.

It’s apparent Jahner thinks there wasn’t enough atonement. He sees it as a cop-out that so many chose to bill themselves victims of Adolf Hitler. In his harrowing words, “The collective agreement of most Germans to count themselves among Hitler’s victims amounts to an intolerable insolence.” But at the same time it’s an insolence Jahner is willing to live with. As he sees it, the collective victimhood “was a necessary prerequisite because it formed the mental basis for a new beginning.” In other words, Germany had to move on. It had to become a country again.

Which is what this remarkable book is about: Germany reforming in the aftermath of something indescribably horrific. Jahner writes that the “intention of this book has been to explain how the majority of Germans, for all their stubborn rejection of individual guilt; at the same time managed to rid themselves of the mentality that had made the Nazi regime possible.”

My conclusion is that Jahner’s intent was in a sense impossible. How to explain the brutal Germans that were, and the peaceful, civilized, growth-focused people they’ve become? There’s no way to, and that’s not a knock on Harald Jahner. It’s more an expression of horror about what people can become, while asking if what’s unspeakable could happen again.

Republished from RealClearMarkets

Author

  • John Tamny, Senior Scholar at Brownstone institute, is an economist and author. He is the editor of RealClearMarkets and Vice President at FreedomWorks.


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