Economy

• Post War Devastation:

  • USSR stripped them of machinery
  • economy was in ruins
  • food was 1/2 pre war levels
  • industrial output was 1/3 pre war levels
  • US$10 billion in reparations
  • east/west tensions due to a fear of communism
• Recovery in the west and western advantages:

  • Bizonia 1947 => introduction of new economic policies
  • price and wage control removed
  • less strikes
  • advantages in industrial areas due to skilled labour and there being coal ==> given the Saar which was an industrial heartland
• Ludwig Erhard:

  • director of German Economic Council of the Bizone
  • economic liberalism
  • free market capitalism
  • achieving what has often been called the German “economic miracle.”
  • special provisions for housing, farming, and social programs
• The Recession to Boom 1949-1963:

  • currency reform + abolition of price control liberated the economy
  • steep price rise => affected the poorest
  • 1949-50 ==> forced recession -> 13.5%
  • 1952 ==> success of economic recovery
• Economic Recovery: gross national product

  • 1950 - 1955 => doubled
  • motorisation
  • 1960 => 50% increase
• Economic Recovery: economic growth

  • average annual growth 8%
  • 12% rise in 1955
• Economic Recovery: agriculture

  • 2.5% increase in farming
  • substantial increase
• Economic Recovery: balance of trade

  • rapid growth of exports
  • 3rd biggest trading power
  • DM (currency) was quite undervalued at first
• Economic Recovery: employment

  • full employment till the 1970s
  • 2.5% in farming
  • at first unemployment went down by 1 million
  • increased by another 3 million
• The economic miracle: Refugees

  • influx ==> mainly from the East
  • moderate incomes
  • highly motivated workers
• The economic miracle: World Trade

  • Korean War allowed an increase in trade with America => need for German goods and raw material ==> domestic consumption increased also
  • European market opened up to West Germany
  • Marshal Plan Aid stopped by OEEC ==> West Germany wasn't reliant on it
• The economic miracle: Industrial Peace

  • co-determination (employees have a role of management within the company)
  • Co-determination Law of 1951 - It provided for equal representation on the supervisory board of directors for workers and employers
  • Works' Constitution Law of 1952 - giving more powers for participation in personal and social affairs of company employees
  • number of strikes decreased -> rise in wages
• The economic miracle: consumption demands

  • expanded enormously because there was an increase in wages
  • increase in consumerism ==> fridges, TVs, cars
• The economic miracle: Financial Stability

  • Marshall Aid
  • Bundesbank helped keep the money stable
• The economic miracle: Government Experience

  • Bundesbank in 1957 => provided financial stability by controlling the money in circulation and interest rates
  • government expenditure was lower than countries like Britain
  • didn't have to pay extensive reparations and its defence costs were limited
  • until they joined NATO in 1955
• Marshall Aid:

  • was a stimulus for the economy
  • less than 5% of Germany's national income ==> US$ 2 billion
  • half of what Britain received
  • some argue that it was crucial