Back to the video list: German History

 

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