Lessons from the German Economic Miracle

In a recent comment a reader proposed that the post-WWII Marshall Plan was a great example of government stimulus leading to national prosperity. Based on my previous posts on foreign aid, you might guess I don't agree with the common assumption. Economist David Henderson also disagrees and claims economic growth was mostly due to three other factors:

The two main factors were currency reform and the elimination of price controls, both of which happened over a period of weeks in 1948. A further factor was the reduction of marginal tax rates later in 1948 and in 1949.

The article goes into a lot more detail, but here's his specific response to the Marshall Plan story:

Marshall Plan aid to West Germany was not that large. Cumulative aid from the Marshall Plan and other aid programs totaled only $2 billion through October 1954. Even in 1948 and 1949, when aid was at its peak, Marshall Plan aid was less than 5 percent of German national income. Other countries that received substantial Marshall Plan aid exhibited lower growth than Germany.