This Country Tried Central Planning; Free Markets Won!
After World War II, Germany was in ruins. Cities leveled, infrastructure destroyed, tens of millions killed or severely injured, morale shattered…
The Nazi regime had left behind not only devastation, but a command-and-control economy riddled with inflation and rationing. Police forces were gutted by the Allied regime. Theft and black markets became a way of life. Survival depended more on what you could pilfer or barter than what you could earn by producing new goods.
But from those ashes, a miracle emerged — the miracle of free enterprise.
The division of the country and its capital, Berlin, became the ultimate experiment in comparative economic theory and practice. East Germany, under the Red Army occupation, clung to central planning and price controls and stagnated for decades under the weight of inefficiency. West Germany, on the other hand, embraced economic freedom. The results couldn’t have been clearer.
Even before the war ended, a small group of intellectuals was secretly planning how to rebuild Germany. Led by Walter Eucken, they drafted a blueprint for a system based on free markets, competition, and moral responsibility. They called it Ordo-Liberalism.
This movement rejected the old idea (dating back to Bismarck) that the state should run the economy in the pursuit of nationalist goals. Eucken and his colleagues argued that too much government power over markets had paved the way for tyranny. Their answer? A “social market” economy: private property and business initiative, paired with limited government safeguards to ensure fair competition and protect the vulnerable.
One of the most important reforms came in 1957 with the creation of the Bundesbank, Germany’s independent central bank. Free from political interference, this institution focused on controlling inflation and restoring faith in the German mark.
With price controls removed and competition unleashed, the “economic miracle” (or Wirtschaftswunder) began. Businesses thrived. Jobs returned. Citizens once again controlled their own economic destinies.
Germans were free to pursue profit based on consumer demand (not political goals), to succeed and fail on their own terms. And competition worked so well that the economy didn’t even need a minimum wage. Incomes rose naturally as businesses competed for talent.
No figure symbolizes this transformation more than Ludwig Erhard, often called the “Father of the German Economic Miracle.” Appointed Economics Minister by the Allies, Erhard took bold action. While introducing the new currency, he abolished most price controls and ended rationing against the advice of nearly everyone around him.
The results were almost immediate. Overnight, the Germans went from being ration card users to customers. The country was lucky to be served by Erhard, who understood that real leadership sometimes means standing up to your own party.
In a similar way, Reagan’s 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) infuriated both sides: it cut income taxes but raised corporate taxes to balance the budget. Right or wrong, the President didn’t cave to political pressure — he did what he thought was best for the country.
Both Erhard and Reagan showed something rare in politics today: integrity. They focused on principles, not polls.
Germany was rebuilt from scratch to become Europe’s strongest economy. It was not due to generous foreign aid or benevolent government interventions. Germany rose as a phoenix after the war because it trusted its people to run their businesses.
That’s a lesson for Americans who vote for ideas promoted by AOC or Mamdani today. Civil debate, open minds, and personal responsibility — those are the foundations of a free society. Without them, division wins and freedom loses.
We can experience another “economic miracle” right here in America and without the devastation of a world war. The first step is rebuilding something even more important than infrastructure — trust, civility, and liberty.
About this Piece
This piece, inspired by the 2025 Northwood University Freedom Seminar, was co-authored by Northwood University students Madeline Heil and Dani Pohl, and Northwood alumna Kristin Tokarev, a producer for Stossel TV who has mentored several Freedom Seminar students. Dani is an Economics student from Westphalia, Michigan, and Madeline is an Accounting student from Bourbonnais, Illinois. This piece originally was featured in the February 2026 edition of When Free to Choose, Northwood’s signature publication dedicated to exploring the importance of free enterprise. Click here to receive this complimentary publication in your inbox!