The beginning of a strong economy

Modern economic history of Germany

Things didn't look too good for the German economy at the end of World War II after the unconditional surrender. The nation was frustrated and exhausted, after a war that stretched the limits of the people. Almost everything lay in ashes, especially the residential properties, which had to be recreated. It can be considered a lucky strike, that 80 to 85% of the production capacity had not been bombed by the Ally winners of the war. Luckily they kept in mind, that there had to be a process of recreation in Germany after the war. These production capacities were the key to a rapid restoration of the German economy and lead to the so called "Wirtschaftswunder" in the 50s. This term describes the swift economic boom after the war and is still a myth in Germany nowadays. Between 1952 and 1960 the GNP rose by 80% and the investment rate by 120%.

 

But this huge success was not only due to the, often mentioned, German traits like the work mania. The Allies, especially the US created the European Recovery Act, also known as Marshall Plan, which laid the foundations for Germany's recovery. The US-government saw that Germany needed foreign money, backed by a stable currency, to rebuild faster. Over the years, the US granted over 1.4 Billion Dollars as a credit for the German economy. Another crucial point for the success of the plan and the ultimate renaissance of the economy was the stability of the currency. The head behind this monetary reform was Ludwig Erhard, who granted most of the political glory for bringing Germany back to former prosperous times. This reform was needed because of a massive glut of money that harmed the German trade and only left room for bartering. Furthermore the Bretton-Woods-System was introduced, which linked the "Deutsche Mark" to the US-Dollar.

 

Having a stable currency and a flood of American money meant a lot to the economy and its people. The country started rebuilding bombed structures and reached a reasonable economic vitality in the 60s. People in West-Germany started to enjoy life, and the consumption reached western levels. The economic story of success continued to the oil crisis in 1972, despite two minor economic dips in 1966 and 1967. Germany was struck very hard by the oil crisis because it relied mainly on oil imports and the car industry marks one of the main industries in Germany to this day.

 

Germany witnessed by far the biggest challenge with the reunification of its two parts. Attaching the Eastern Part to Western Germany meant to clear a very high hurdle, financially speaking. The Kohl-Government attempted this step with a brief privatization of the formerly state-owned enterprises. The reunification also meant a huge cash flow from Western- to Eastern- Germany to rebuild its ruined structures. Germany still struggles with this problem today, even though one cannot feel the ambivalence between the former parts any more.

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