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The economic potential and the national wealth were the main factors of German self-esteem during the second half of the twentieth century. The deciding phase was the German Economic Miracle which transformed a devastated country in one of the world's leading industrial nations
Video
Overview
- Date: 21 Jun 1949 – Oct 1973
- Location: Germany
- Start: Currency reform & introduction of the Deutsche Mark
- End: 1973 Oil Crisis
Parties & Persons Involved
- Federal Republik of Germany
- Ludwig Erhard (1897 – 1977), Business secretary / “Vater des Wirtschaftswunders“
- Alfred Müller-Armack (1901 – 1978), Economist / Founder of the social market economy (Soziale Marktwirtschaft)
Background
- After losing World War II Germany is in a catastrophic situation with regards to politics & morality
- Western allies decide to found a (West-)German state
- (after firstly hesitating) the western powers accept economic reconstruction of West-Germany
- Economic situation in West-Germany:
- Living space (in the cities) is vastly destroyed
- 80 – 85 % of the production capacity remains intact
- The physical infrastructure is only punctually destroyed
History
Development until 1949
- 08 May 1945: Unconditional surrender
- 1945 – 1947: Allies confiscate German patents, business secrets & human capital
- 1947: Müller-Armack publishes the book „Wirtschaftslenkung und Marktwirtschaft“ & designs the concept of Social Market Economy (“Soziale Marktwirtschaft“)
- 21 Jun 1948: Currency reform & introduction of the Deutsche Mark in West Germany
- 23 May / 20 Sep 1949: Foundation of the Federal Republic of Germany
- Until 1949: The infrastructure is mostly restored & the western allies restrain from extensive dismantling
Development until 1955
- 1948 – 1952: Credits of DM 1.4bn as part of the Marshall Plan support German investments
- 1950 – 1952: Korea Boom supports German exports
- 27 Feb 1953: London Agreement on German Debt – The debt is reduced from approx. DM 30bn to DM 14bn
- 05 May 1955: The Treaties of Paris grant Germany de facto full sovereignty
- From 1955: Increased wealth becomes visible, i.e. in the first traffic jams on the autobahns during the holiday season
- 1955: “Wirtschaftswunder“ becomes a well-known saying
- Until around 1955: German technology is amongst the world leaders & the consumption from basic needs to luxury
Development until 1973
- 1945 – 1961: Extensive immigration of a qualified workforce & profitable companies from East Germany, i.e. Auto Union AG (Audi) from Chemnitz to Ingolstadt
- Development from 1955 (in parts earlier):
- Growth of exports due to securing the cost advantage over the international competition
- Extensive investments to expand industrial capacities
- Growth is more and more based on the domestic demand
- Reduction of debts & accumulation of large gold reserves
- Development from mid 1960s:
- Change from sellers markets to buyers markets
- Extensive government interventions with substantial increases of the wage level & social benefits
- Oct 1973: 1st Oil Crisis & End of the Wirtschaftswunder
Possible Explanations for the German Wirtschaftswunder
- Investments through the Marshall Plan
- Reconstruction of an only superficially damaged economy with strong basis of real & human capital
- A process of catching-up with the USA as the leading economic power at the time
- “Global economic miracle”
- Currency reform & system of the Social Market Economy
- A question of mentality
- After the lost war main focus on increase of productivity & wealth
Consequences & Impact
- High prosperity level & standard of living in West Germany
- Economic & social precondition for a stable German democracy
- Basis for the ability to act of the German state
- Precondition for the German Reunification