Wirtschaftswunder
Encyclopedia
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
of West Germany
West Germany
West Germany is the common English, but not official, name for the Federal Republic of Germany or FRG in the period between its creation in May 1949 to German reunification on 3 October 1990....
and Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
(adopting a social market economy
Social market economy
The social market economy is the main economic model used in West Germany after World War II. It is based on the economic philosophy of Ordoliberalism from the Freiburg School...
). The expression was used by The Times
The Times
The Times is a British daily national newspaper, first published in London in 1785 under the title The Daily Universal Register . The Times and its sister paper The Sunday Times are published by Times Newspapers Limited, a subsidiary since 1981 of News International...
in 1950. Beginning with the replacement
Monetary reform
Monetary reform describes any movement or theory that proposes a different system of supplying money and financing the economy from the current system.Monetary reformers may advocate any of the following, among other proposals:...
of the Reichsmark
German reichsmark
The Reichsmark was the currency in Germany from 1924 until June 20, 1948. The Reichsmark was subdivided into 100 Reichspfennig.-History:...
with the Deutsche Mark as legal tender (the Schilling
Austrian schilling
The schilling was the currency of Austria from 1924 to 1938 and from 1945 to 1999, and the circulating currency until 2002. The euro was introduced at a fixed parity of €1 = 13.7603 schilling to replace it...
was similarly established in Austria), a lasting period of low inflation and rapid industrial growth was overseen by the government led by German Chancellor Konrad Adenauer
Konrad Adenauer
Konrad Hermann Joseph Adenauer was a German statesman. He was the chancellor of the West Germany from 1949 to 1963. He is widely recognised as a person who led his country from the ruins of World War II to a powerful and prosperous nation that had forged close relations with old enemies France,...
and his Minister of Economics, Ludwig Erhard
Ludwig Erhard
Ludwig Wilhelm Erhard was a German politician affiliated with the CDU and Chancellor of West Germany from 1963 until 1966. He is notable for his leading role in German postwar economic reform and economic recovery , particularly in his role as Minister of Economics under Chancellor Konrad Adenauer...
, who went down in history as the "father of the German economic miracle." In Austria, efficient labor practices led to a similar period of economic growth. The era of economic growth raised Germany and Austria from total wartime devastation to developed nations in modern Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. At the founding of the European Common Market, Germany's economic growth stood in contrast to the struggling conditions at the time in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
.
West Germany
Exogenous growth model
The neoclassical growth model, also known as the Solow–Swan growth model or exogenous growth model, is a class of economic models of long-run economic growth set within the framework of neoclassical economics...
. West Germany had a skilled workforce and a high technological level in 1946, but its capital stock had largely been destroyed during the war. This small capital stock as well as production conversion back to civilian goods, monetary and regulatory problems led to an unusually low economic output during the first post-war years.
These initial problems were overcome by the time of the currency reform
Monetary reform
Monetary reform describes any movement or theory that proposes a different system of supplying money and financing the economy from the current system.Monetary reformers may advocate any of the following, among other proposals:...
of 1948 which replaced the Reichsmark
German reichsmark
The Reichsmark was the currency in Germany from 1924 until June 20, 1948. The Reichsmark was subdivided into 100 Reichspfennig.-History:...
with the Deutsche Mark as legal tender, halting rampant inflation. This act to strengthen the German economy had been explicitly forbidden during the two years that the occupation directive JCS 1067 was in effect. JCS 1067 had directed the U.S. forces of occupation in Germany to "…take no steps looking toward the economic rehabilitation of Germany". The Allied dismantling of the West German coal and steel industries decided at the Potsdam conference
Potsdam Conference
The Potsdam Conference was held at Cecilienhof, the home of Crown Prince Wilhelm Hohenzollern, in Potsdam, occupied Germany, from 16 July to 2 August 1945. Participants were the Soviet Union, the United Kingdom, and the United States...
was virtually completed by 1950; equipment had then been removed from 706 manufacturing plants in the west and steel production capacity had been reduced by 6,700,000 tons. Although the industrially important Saarland
Saarland
Saarland is one of the sixteen states of Germany. The capital is Saarbrücken. It has an area of 2570 km² and 1,045,000 inhabitants. In both area and population, it is the smallest state in Germany other than the city-states...
with its rich coal fields was returned to West Germany in 1957, it remained economically integrated in a customs union with France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
until 1959 and France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
extracted coal from the area until 1981.
West Germany proceeded quickly after 1948 to rebuild its capital stock and thus to increase its economic output at stunning rates. The very high capital investment rate thanks to low consumption and a very small need for replacement capital investments (due to the still small capital stock) drove this recovery during the 1950s.
Reparations
In addition to the physical barriers that had to be overcome for the German economic recovery (see the Morgenthau PlanMorgenthau Plan
The Morgenthau Plan, proposed by United States Secretary of the Treasury Henry Morgenthau, Jr., advocated that the Allied occupation of Germany following World War II include measures to eliminate Germany's ability to wage war.-Overview:...
) there were also intellectual challenges. The Allies confiscated intellectual property of great value, all German patents, both in Germany and abroad, and used them to strengthen their own industrial competitiveness by licensing them to Allied companies. Beginning immediately after the German surrender and continuing for the next two years the U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
pursued a vigorous program to harvest all technological and scientific know-how as well as all patents in Germany. John Gimbel comes to the conclusion, in his book "Science Technology and Reparations: Exploitation and Plunder in Postwar Germany", that the "intellectual reparations" taken by the U.S. and the UK amounted to close to $10 billion
1000000000 (number)
1,000,000,000 is the natural number following 999,999,999 and preceding 1,000,000,001.In scientific notation, it is written as 109....
. During the more than two years that this policy was in place, no industrial research in Germany could take place, as any results would have been automatically available to overseas competitors who were encouraged by the occupation authorities to access all records and facilities.
Marshall Plan
The Marshall PlanMarshall Plan
The Marshall Plan was the large-scale American program to aid Europe where the United States gave monetary support to help rebuild European economies after the end of World War II in order to combat the spread of Soviet communism. The plan was in operation for four years beginning in April 1948...
gave a moral boost, but very little actual financial assistance until the recovery was already in full swing.
Meanwhile thousands of the best German researchers and engineers were being put to work in the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
and in the U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
(see Operation Paperclip
Operation Paperclip
Operation Paperclip was the Office of Strategic Services program used to recruit the scientists of Nazi Germany for employment by the United States in the aftermath of World War II...
)
The Marshall Plan was only extended to Western Germany after it was realized that the suppression of its economy was holding back the recovery of other European countries and was not the main force behind the Wirtschaftswunder. Had that been the case, other countries such as the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, which received much greater economic assistance than Germany, should have experienced the same phenomenon. However, often overlooked is the effect of the "unofficial contributions" of 150,000 U.S. occupation troops, earning as much as 4 Deutsche Marks to the dollar. These marks were spent within Germany to buy food, luxury items, beer and cars, as well as entertaining the locals and for prostitutes. During exercises such numbers of soldiers would swell to over a quarter-million. Nonetheless, the amount of monetary aid, which was mainly in the form of loans, about $1.4 billion, was greatly overshadowed by the amount the Germans had to pay back as war reparations
War reparations
War reparations are payments intended to cover damage or injury during a war. Generally, the term war reparations refers to money or goods changing hands, rather than such property transfers as the annexation of land.- History :...
and by the charges the Allies made on the Germans for the ongoing cost of the occupation, about $2.4 billion per year. In 1953 it was decided that Germany would repay $1.1 billion of the aid it had received. The last repayment was made in June 1971.
The demands of the Korean war
Korean War
The Korean War was a conventional war between South Korea, supported by the United Nations, and North Korea, supported by the People's Republic of China , with military material aid from the Soviet Union...
in 1950-53 led to a a global shortage of goods that helped overcome lingering resistance to the purchase of German products. At the time Germany had a large pool of skilled labour, partly as a result of the deportations and migrations
Expulsion of Germans after World War II
The later stages of World War II, and the period after the end of that war, saw the forced migration of millions of German nationals and ethnic Germans from various European states and territories, mostly into the areas which would become post-war Germany and post-war Austria...
which affected up to 16.5 million Germans. This helped Germany to more than double the value of its exports during and shortly after the war. Apart from these factors, hard work and long hours at full capacity among the population in the 1950s, 1960s and early 1970s and extra labour supplied by thousands of Gastarbeiter
Gastarbeiter
Gastarbeiter is German for "guest worker." It refers to migrant workers who had moved to West Germany mainly in the 1960s and 70s, seeking work as part of a formal guest worker programme...
("guest workers", since the late 50's) provided a vital base for the sustainment of the economic upturn with additional workforce.
From the late 1950s onwards, West Germany had one of the world's strongest economies. The East German economy also showed strong growth, but not as much as in West Germany, due to the bureaucratic system, emigration of working-age Germans to West Germany and continued reparations to the USSR
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
in terms of resources. Unemployment hit a record low of 0.7-0.8% in 1961-1966 and 1970-1971.
Ludwig Erhard
Ludwig Erhard
Ludwig Wilhelm Erhard was a German politician affiliated with the CDU and Chancellor of West Germany from 1963 until 1966. He is notable for his leading role in German postwar economic reform and economic recovery , particularly in his role as Minister of Economics under Chancellor Konrad Adenauer...
, who served as the Minister of the Economy in Adenauer
Konrad Adenauer
Konrad Hermann Joseph Adenauer was a German statesman. He was the chancellor of the West Germany from 1949 to 1963. He is widely recognised as a person who led his country from the ruins of World War II to a powerful and prosperous nation that had forged close relations with old enemies France,...
's cabinet from 1949 until 1963 and later became Chancellor, is often associated with the German Wirtschaftswunder.
Austria
Austria was also included in the Marshall PlanMarshall Plan
The Marshall Plan was the large-scale American program to aid Europe where the United States gave monetary support to help rebuild European economies after the end of World War II in order to combat the spread of Soviet communism. The plan was in operation for four years beginning in April 1948...
and can thus be included in any consideration of the Wirtschaftswunder. Through the nationalisation of some industries (VOEST, AMAG
Austria Metall AG
AMAG is situated in the village of Ranshofen which is in Braunau am Inn and was founded in 1938.It is the biggest company in the Austrian Aluminium industry sector and is part of Constantia Packaging AG.- Companies:...
) and yet more long working hours, full economic capacity was reached. Using West Germany as a guide, the currency was stabilised when the Schilling
Austrian schilling
The schilling was the currency of Austria from 1924 to 1938 and from 1945 to 1999, and the circulating currency until 2002. The euro was introduced at a fixed parity of €1 = 13.7603 schilling to replace it...
was reintroduced in place of the Reichsmark
German reichsmark
The Reichsmark was the currency in Germany from 1924 until June 20, 1948. The Reichsmark was subdivided into 100 Reichspfennig.-History:...
. This economic policy was known in journalistic circles as the Raab-Kamitz-Kurs, named after Chancellor Julius Raab
Julius Raab
Julius Raab was a Conservative Austrian politician. He was Federal Chancellor of Austria from 1953 to 1961. Raab steered Allied-occupied Austria to independence. In 1955 he negotiated and signed the Austrian State Treaty...
and his Finance Minister Reinhard Kamitz similar to the German Adenauer-Erhard-Kurs.
In the 1950s the first Gastarbeiter
Gastarbeiter
Gastarbeiter is German for "guest worker." It refers to migrant workers who had moved to West Germany mainly in the 1960s and 70s, seeking work as part of a formal guest worker programme...
from Southern Italy and Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
arrived in the country, as more manual labour was required to maintain the economic upswing.
See also
- Economy of GermanyEconomy of GermanyGermany is the largest national economy in Europe, the fourth-largest by nominal GDP in the world, and fifth by GDP in 2008. Since the age of industrialisation, the country has been a driver, innovator, and beneficiary of an ever more globalised economy...
- GARIOAGARIOAGovernment and Relief in Occupied Areas was a program under which the US after the 1945 end of World War II from 1946 onwards provided emergency aid to the occupied nations, Japan, Germany, Austria. The aid was predominantly in the form of food to alleviate starvation in the occupied...
- History of the Ruhr DistrictHistory of the Ruhr DistrictThe actual boundaries of the Ruhr district differ slightly according to the source but a good working definition is to define the Lippe and Ruhr as the northern and southern boundaries respectively, with the Rhein the western boundary, stretching to the East as far as Hamm.In the Middle Ages, local...
- Industrial plans for GermanyIndustrial plans for GermanyThe Industrial plans for Germany were designs the Allies considered imposing on Germany in the aftermath of World War II to reduce and manage Germany's industrial capacity.-Background:...
- Morgenthau PlanMorgenthau PlanThe Morgenthau Plan, proposed by United States Secretary of the Treasury Henry Morgenthau, Jr., advocated that the Allied occupation of Germany following World War II include measures to eliminate Germany's ability to wage war.-Overview:...
- Marshall PlanMarshall PlanThe Marshall Plan was the large-scale American program to aid Europe where the United States gave monetary support to help rebuild European economies after the end of World War II in order to combat the spread of Soviet communism. The plan was in operation for four years beginning in April 1948...
- Post-World War II boom
- Social market economySocial market economyThe social market economy is the main economic model used in West Germany after World War II. It is based on the economic philosophy of Ordoliberalism from the Freiburg School...
Other countries
- Baltic TigerBaltic TigerBaltic Tiger is a term used to refer to any of the three Baltic states of Estonia, Latvia, and Lithuania during their periods of economic boom, which started after the year 2000 and continued until 2006–2007...
- Celtic TigerCeltic TigerCeltic Tiger is a term used to describe the economy of Ireland during a period of rapid economic growth between 1995 and 2007. The expansion underwent a dramatic reversal from 2008, with GDP contracting by 14% and unemployment levels rising to 14% by 2010...
(IrelandRepublic of IrelandIreland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
) - Four Asian Tigers
- Greek economic miracleGreek economic miracleThe "Greek economic miracle" was the high rate of economic and social development in Greece from 1950 to 1973. The economy grew an average of 7% a year, second in the world only to Japan during that period. Growth rates were highest during the 1950s, often exceeding 10%, close to those of a modern...
- Italian economic miracleItalian economic miracleThe Italian economic miracle is the name often used by historians, economists and mass media to designate the prolonged period of sustained economic growth in Italy comprised between the end of World War II and the late 1960s, and in particular the years 1950-63...
- Japanese post-war economic miracleJapanese post-war economic miracleThe Japanese post-war economic miracle is the name given to the historical phenomenon of Japan's record period of economic growth following World War II, spurred mainly by Japanese economic policy, in particular through the Ministry of International Trade and Industry...
- Miracle of ChileMiracle of ChileThe "Miracle of Chile" was a term used by free market Nobel Prize winning economist Milton Friedman to describe liberal and free market reorientation of the economy of Chile in the 1980s, 1990s and the purported benefits of his style of economic liberalism...
- Miracle on the Han RiverMiracle on the Han RiverMiracle on the Han River refers to South Korea's highly accelerated export-fueled economic growth, including rapid industrialization, technological achievement, education boom, exponential rise in living standards, rapid urbanization, skyscraper boom, modernization, successful hosting of the 1988...
(South KoreaSouth KoreaThe Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
) - Spanish miracleSpanish miracleThe Spanish miracle was the name given to a broadly based economic boom in Spain from 1959 to 1974. The international oil and stagflation crises of the 1970s ended the boom.- The pre-boom situation :...
- Trente GlorieusesTrente GlorieusesLes Trente Glorieuses refers to the thirty years from 1945-1975 following the end of the Second World War in France. The name was first used by the French demographer Jean Fourastié...
(FranceFranceThe French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
)
External links
- German Economic "Miracle" - The library of economics and liberty
- Interview with Gunther Harkort Representative of the Federal Republic of Germany to the Economic Cooperation Administration (ECA), 1949-1952.
- http://www.trumanlibrary.org/oralhist/clayl.htmInterview with General Lucius D. ClayLucius D. ClayGeneral Lucius Dubignon Clay was an American officer and military governor of the United States Army known for his administration of Germany immediately after World War II. Clay was deputy to General Dwight D. Eisenhower, 1945; deputy military governor, Germany 1946; commander in chief, U.S....
] Deputy to U.S. General Dwight D. EisenhowerDwight D. EisenhowerDwight David "Ike" Eisenhower was the 34th President of the United States, from 1953 until 1961. He was a five-star general in the United States Army...
, 1945; deputy military governor, Germany (U.S.) 1946; commander in chief, U.S. Forces in Europe and military governor, U.S. Zone, Germany, 1947-49; retired 1949. - http://www.trumanlibrary.org/oralhist/draperw.htmInterview with General William Henry Draper Jr.William Henry Draper Jr.William Henry Draper Jr. was a U.S. army officer, banker, and diplomat.- Biography :Draper was born in Harlem, New York City, and received a B.A. and M.A. in economics at New York University. He joined the United States Army soon after finishing college and served during World War I as a major in...
] Chief, Economics Division, Control Council for Germany, 1945-1946; Military Government Adviser to the Secretary of State, Moscow Conference of Foreign Ministers, 1947; Under Secretary of War, 1947; Under Secretary of the Army, 1947-1949; - 'Time Magazine Faceless Crisis, April 4, 1949
- Letter from Konrad Adenauer to Robert Schuman (26 July 1949) Warning him of the consequences of the dismantling policy. (requires Flash Player)
- Picture of demonstration against dismantling (7 June 1949) Workers in the Ruhr demonstrate against the dismantling of their factories by the Allied forces of occupation. (requires Flash Player)
- Picture: dismantling the Iron and Steel Industry ‘We want to work, we will help you to rebuild Europe' Workers at dismantled plant protest. (requires Flash Player)
- Picture: 12,000 factory workers demonstrate against the dismantling of German industry (19 August 1949) (requires Flash Player)
- German Economic Miracle