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A Walkthrough of German Economic History

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  • Post last modified:October 29, 2022

Germany was considered a federation with numerous states and cities of different sizes and development until the 19th century. However, modernization and change in the nation’s economic growth sparked industrialization. By 1999, Germany was also known as the latest economic nation with the introduction of the steel and chemical industries.

However, after World War II, the dynamics of the ancient German economic structure changed utterly. With the help of Ludwig Erhard, it was still able to recover and faced an economic miracle by the end of 1960. The economic growth post world war grew to great heights, so much that it was also embedded in the Eastern Block as a well-planned economy for social standards.


Economic miracle in Germany

After World war II, West Germany had to undergo a total miracle to regain all its lost economic growth. Germany took help from several sources, including the European Recovery Program funds, called the Marshall Plan. Germans were ready to work for lower wages and longer hours to rebuild and reconstruct their economic structure. However, the miraculous breakthrough was seen through Erhard’s reforms and the country’s introduction of a new currency. Some of the benefits lead to the following:

  • The growth rate in industrial production rose from 18.1% to 25% in 1950
  • In 1960, the growth increased further, and profits were nearly two and a half times that of 1950.
  • GDP also rose by two–thirds of the gains in that every decade.
  • Employment also rose from 13 million to 18 million
  • The unemployment rate fell from 10.3 to 1.2 % in 1960
  • Between 1949 and 1955, wages and salaries increased to 80% for all minimum and high-wage workers.
  • The Federal Cartel Office was created the same year to prevent German monopolies from a return to the country.

Economic balance in Germany

By the end of 1976, the nation was stabilized, and economic growth was linear with a decline in the inflation rate. By 1980, Bundesbank and Schmidt were able to establish complete economic balance in the country. However, by early 1981, problems returned, and the situation started taking a downfall with an increase in unemployment and a decrease in growth. Due to the government’s involvement in the economic growth factor, people decided to exclude the growth from having a say!

However, despite crucial measures in the role of government in the economic state, the needle barely moved, and positive shifts were slow and uneven. However, the German reunification after 1990 led to the nation’s reorientation.

21st century

Due to the rapid downfalls of Germany, it was called the ‘Sick Man of Europe’ and still led to inflation and recession in 2003. The great recession Worldwide also contributed to its worsening conditions, which led to a sharp decline in German GDP. But after 2010, while the rest of the countries faced economic issues, Germany started to make financial changes, which led to the growth of a robust economic nation.