Tuesday, July 07, 2015

Piketty is Wrong About German War Debt

Colette Browne quotes economist Thomas Piketty in her column in today's Irish Independent as saying that Germany had sixty per cent of its war debt written off after the Second World War. This is not true.

It's not true for this reason: there wasn't a Germany after the Second World War to pay any debts. Germany was gone, and there were two states, East and West Germany, in its place.

Britain, France and the USA were in charge of West Germany and the Union of Soviet Socialist Republics was in charge of East Germany. The NATO powers quickly began to cut West Germany a break, as they had made a deal with the devil in the form of Josef Stalin to win the war in the first place, and now needed a strong Germany to protect Western Europe from the Soviets.

No such luck for the East Germans, which the Soviets already had in their mitts. Anne Applebaum has written an excellent book about rise of the Iron Curtain in the first ten years after the end of the war. From that we learn that the Soviets carried off everything in the occupied territories that wasn't nailed down, and would have continued to do so if Stalin hadn't kicked the bucket in 1953. East Germany remained a slave state, of course, but the Soviets went easy on populating the concentration camps left behind by the Nazis with people who didn't toe the state line.

Germany paid for her sins after the war, and now Germany is the main reason why there hasn't been a European war since – the longest period of European history without a war since Alaric and the Visgoths sacked Rome fifteen hundred years ago.

Beware, beware the celebrity economist. There's always a bottle of snake-oil that needs selling.