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In short, Germany was a ruined state facing an incredibly bleak future. But by
1989, when the Berlin Wall fell and Germany was once again reunited, it was the
envy of most of the world. [5] Germany had the third-biggest economy in the
world, trailing only Japan and the United States in terms of gross domestic
product (GDP). [6]
KEY TAKEAWAYS
The German economic miracle refers to Germany's rebirth as a global
economic power after the devastation of World War II.
German economist Walter Eucken is credited with developing the
"social market economy," a concept that promoted free-market
capitalism while allowing government involvement in creating social
policies.
Ludwig Erhard, Federal Minister for Economic Affairs, became known as
the "father of the German economic miracle" after successfully
promoting Germany's social market economy.
During the war, Hitler had instituted food rations, limiting its civilian population
to no more than 2,000 calories per day. After the war, the Allies continued this
food rationing policy and limited the population to between 1,000 to 1,500
calories per day. [2]
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Price controls on other goods and services led to shortages and a massive black
market. Germany's currency, the reichsmark, had become completely
worthless, requiring its populace to resort to bartering for goods and services.
[4]
The country was occupied by four nations, and soon it would be divided into
halves. The eastern half became a socialist state, part of the Iron Curtain that
was heavily influenced by Soviet policy. The western half became a democracy.
And caught in the middle was the former capital of Berlin, which was divided in
two, eventually separated by what became known as the Berlin Wall. [5]
Walter Eucken
Perhaps the most important person in Germany's stunning rebirth was Walter
Eucken. The son of a Noble Prize winner in literature, Eucken studied
economics at the University of Bonn. After a stint in World War I, Eucken started
teaching at his alma mater. He eventually moved on to the University of
Freiburg, which he would make internationally known. [7]
Eucken's ideas were firmly rooted in the camp of free-market capitalism while
also allowing a role for government involvement to ensure that this system
worked for as many people as possible. [2] For instance, strong regulations
would be put in place to prevent cartels or monopolies from forming. In
addition, a large social welfare system would serve as a safety net for those who
found themselves struggling. [9] [8]
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members of the Social Democratic Party, wanted to have a system that still
maintained government control. But a protégé of Eucken, a man by the name of
Ludwig Erhard (who became known as the "father of the German economic
miracle") had begun to gain prominence with the American forces which were
still in de facto control of Germany. [13] [2]
Erhard's Beginnings
Erhard, a World War I veteran who attended business school, was a largely
under-the-radar figure who worked as a researcher for an organization that
focused on the economics of the restaurant industry. [14] [13] But in 1944, with
the Nazi Party still in firm control of Germany, Erhard daringly wrote an essay
discussing Germany's financial position which assumed that the Nazis lost the
war. [14] [2]
His work eventually reached U.S. intelligence forces who soon sought him out.
[13] And once Germany did surrender, he was appointed to the position of the
finance minister of Bavaria and then worked his way up the ladder to become
the director of the economic council of the still occupied western half of
Germany.
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However, the success of the Marshall Plan has been debated by economic
historians. [16] Some have estimated that aid from the Marshall Plan
contributed less than 5% to Germany's national income during this time period.
West Germany's growth continued over the years. By 1958, its industrial
production was four times higher than it was just one decade earlier. [8]
But it would be a long time before the two sides would be equal. When
reunification began, the eastern parts of the country had only 30% of the per
capita gross domestic product of the western half. [19] Over 30 years later, the
east still has only about 75% of the GDP of its counterparts. [20] But in 1948,
none of this was even conceivable. And, if it were not for Walter Eucken and
Ludwig Erhard, the German economic miracle might never have happened.
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ARTICLE SOURCES
PART OF
Guide to Economics
uropean Union (EU): The German Economic The Econom of the Ho the Nort
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