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Slaves to the Marshall Myth
by D.W. MacKenzie

Of all the myths that persist concerning economic history, the myth that the United States rebuilt Europe and Japan following the Second World War is among the most popular. While there is considerable disagreement concerning other myths, like the notion that FDR saved us all during the Great Depression, the myth of the Marshall Plan enjoys wide support....

...West Germany rebuilt itself in a similar fashion. Marshall Plan aid consisted of only a tiny percentage of German GDP. Also, the money that West Germany paid in reparations offset Marshall Plan aid. West Germany received military defense from the U.S. and England, but paid substantial fees for this service. The German Economic Miracle began with a radical program of privatization and deregulation, beginning in 1948. This ended the regulatory controls and elaborate tax system imposed by Hitler and his National Socialists.

Foreign aid had, at best, minimal influence on the West German revival. A free and nondemocratic Germany experienced a strong recovery. If there was anything wrong with the German approach, it is that it allowed for future extensions by the government into private markets.

Japan also experienced great success due to a relative lack of governmental interference (Henderson 1993). Low taxes and high savings rates translated into strong economic growth in postwar Japan. Once again, foreign aid and intervention were too small to have accounted for this success. Japan did not need massive intervention to recover, even though it lacked the natural resources that Iraq possesses in its oil fields....