After World War II, the German economy was in shambles. The country was consumed with chaos and destruction. Couple with the fiscal drain caused by Allied Control, Moreover, German territories were divided up, the economy was destroyed and many of the population were not just injured but killed. Germany had little hope of ever rising again to its previous glory however there was one thing that emerged from this darkness: A Work Ethic. This work ethic became the foundation for Germany's economic revival -- creating a miracle that aids in today's world economy and after one hundred years after World War I and 70 years after World War II ended, Germany has risen from its ashes to be one of the richest countries in the world. The country had a huge debt at the time of reunification in 1990, but due to challenging work, ingenuity, and prudent economic reforms it has repaid all its loans. How did this occur? And what lessons can be learned from Germany's economic miracle? This blog will uncover all these questions.
Germany
after WWII
German people were living under
the price control and rationing during the period of 1948. In 1936, Adolf
Hitler had imposed price controlled on German people to buy cheaper war
material through artificial pricing. Leading to this, in 1939 one of the Nazi’s
top deputies Hermann Goering also apply rationing strategy. This was not
surprising because most of the government usually apply this type of strategy
during war as Roosevelt and Churchill also apply this. Death penalties was
given to individuals going against the price control even the Nazis were not allowed
to go against this price control and rationing policy. Even after the takeover
of Germany by Allied forces America, France, Britain and Soviet Union in
November 1948, they also adopted the same policies of Nazi after forming the
Allied control authority (ACA). Which looks like a revenge
policy on their part that the German people deserve the same policy.
This leads to the alarming
situation of food shortage which results in the loss of confidence on current currency
“Reichsmark,” people instead started bartering they use their expensive
households travel for hours in weekends to exchange with food items for their
survival. Most of the people started farming to overcome the food the crises.
In these all-severe situations where no hope was seen that could lift the
drowned economy something just happens within few months of 1948 that German’s
economy stands on its feet within few years even before the economic rebuild of
France.
Germany was the first to
experience a full-scale economic miracle. It began in the early 1950s, when
West Germany was still a country occupied by the Allies and living under a
generous welfare state. World War II had destroyed the country’s economy, and
many of its citizens were living in desperate poverty.
Factors
behind Germany’s Economic Recovery
The main key factors that lied
behind the economic recovery of German economy was 1948 currency reforms and
the elimination of price controls occurred within weeks—but reductions
in marginal tax rates happened later that same year also the vital factor for
the rebuild of German economy.
German economist Walter
Eucken is credited with developing the "social market economy,"
which envisions free-market capitalism combined with government intervention
for social ends.
Ludwig Erhard, who served as the Federal
Minister for Economic Affairs during the early years of post-war Germany, is
credited with creating and promoting a new economic system known as the social
market economy.
Despite these leading aspects
the Marshall Plan also function as catalyst for German economic rebuild,
which provided billions of dollars in aid to help rebuild Western Europe
after the war. At first, most of the money went to rebuild devastated countries
like France and Italy, but eventually some of it found its way to Germany as
well.
The plan helped German
factories rebuild and modernize their equipment; it also allowed them to hire
skilled workers from around the world who could work for lower wages than
Germans could afford on their own. As these foreigners began arriving in
Germany, they were shocked by what they saw — a country where people were not
working just for themselves but also for someone else. They were impressed with
how well-organized everything seemed to be; how efficient everything ran.
