Wirtschaftswunder
Wirtschaftswunder, German for “economic miracle,” referring to the swift and dramatic improvement in the western German economy between 1948 and the 1960s.
By the end of World War II the German economy had been devastated by bombing and other effects of the war. Food production was half what it had been before the war, 20 percent of housing stock had been destroyed, and infrastructure had been severely damaged. Casualties of the war meant that the labor force was depleted. Germany was divided between four occupying powers, and large numbers of ethnic German refugees were entering the country, primarily from eastern Europe. All food was rationed, and industrial productivity—which had for years been shaped by Nazi policies to promote military aims—was extremely low.
While the occupation administration of what became East Germany created a closed and ultimately stagnating system, the occupiers of the territories that became West Germany created a situation in which the Wirtschaftswunder could begin and gain momentum. Aid from the Marshall Plan and other postwar programs provided some stimulus for the economy, and the rebuilding of crucial transportation and logistical infrastructure is considered to have been a precondition for the Wirtschaftswunder.
In April 1948 Ludwig Erhard—considered the main figure behind the Wirtschaftswunder—was appointed head of economic administration for the U.K.- and U.S.-occupied areas of Germany. Erhard oversaw a major currency reform in all western German zones, implemented on June 20, 1948, in which the inflated Reichsmark was replaced by the deutsche mark. At the same time, without informing his superiors, Erhard abolished Nazi-era price controls.
These measures, according to contemporary reports, kicked the economy into high gear practically overnight. Industrial production from June 20 to December 31 was more than double what it had been during the previous six months. The currency reform, though it had led to a devaluing of savings, effectively increased the value of new goods sold. This created a massive incentive for Germans at all levels to participate enthusiastically in the market economy. Furthermore, without price controls in place, profits became far easier to attain.
The currency reform and removal of price controls were two key elements in the Wirtschaftswunder. In addition, according to some economists and historians, such as Michael Peters and Manfred Kittel, the large number of refugees and high rate of unemployment before these reforms were helpful to the economy overall, because a large volume of labor was available to fuel rising productivity. In 1949 Erhard became the top economic official in the newly elected government of West Germany.
The Wirtschaftswunder-era German economy, as shaped by Erhard and his allies, was a social market system (soziale Marktwirtschaft). In contrast to a free market system, the intention behind the German social market economic policy was to attain a high average living standard, in part by regulating capitalism in order to benefit society as a whole. The intellectual foundation for this type of economy was provided by ordoliberalism—a specifically German approach to liberal economics. Ordoliberalism—specifically, the Freiburg school founded in the 1930s by economist Walter Eucken and jurists Franz Böhm and Hans Grossmann-Doerth—was guided by the idea that legislation should influence markets indirectly, via setting the rules under which they operate, rather than by intervening in order to promote certain outcomes. This led to policies that encouraged the growth of organized labor and also to periodic changes in the German tax code. Germany continues to maintain this type of system, irrespective of changes in the ruling party.
The Wirtschaftswunder was at its peak during the 1950s, when the West German gross national product grew at a rate of 8 percent per year, exports doubled, and industrial production per capita more than tripled. According to some scholars, however, to call this phenomenon a “miracle” is a misnomer. The initial period of rapid growth, they have argued, was a natural result of urgent efforts to rebuild a shattered economy. Moreover, they have noted, by the mid-1960s, annual growth rates had slowed to 3−4 percent.