The term Wirtschaftswunder (German: [ˈvɪʁtʃaftsˌvʊndɐ] (
An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents. Understood in its broadest sense, 'The economy is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources'. Economic agents can be individuals, businesses, organizations, or governments. Economic transactions occur when two parties agree to the value or price of the transacted good or service, commonly expressed in a certain currency. However, monetary transactions only account for a small part of the economic domain.
West Germany, officially the Federal Republic of Germany, and referred to by historians as the Bonn Republic, was a country in Central Europe that existed from 1949 to 1990, when the western portion of Germany was part of the Western bloc during the Cold War. It was created during the Allied occupation of Germany in 1949 after World War II, established from eleven states formed in the three Allied zones of occupation held by the United States, the United Kingdom and France. Its capital was the city of Bonn.
Austria, officially the Republic of Austria, is a country in Central Europe comprising 9 federated states. Its capital, largest city and one of nine states is Vienna. Austria has an area of 83,879 km2 (32,386 sq mi), a population of nearly 9 million people and a nominal GDP of $477 billion. It is bordered by the Czech Republic and Germany to the north, Hungary and Slovakia to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the west. The terrain is highly mountainous, lying within the Alps; only 32% of the country is below 500 m (1,640 ft), and its highest point is 3,798 m (12,461 ft). The majority of the population speaks local Bavarian dialects as their native language, and German in its standard form is the country's official language. Other regional languages are Hungarian, Burgenland Croatian, and Slovene.
Beginning with the replacement of the Reichsmark with the Deutsche Mark in 1948 as legal tender (the Schilling was similarly re-established in Austria), a lasting period of low inflation and rapid industrial growth was overseen by the government led by West German Chancellor Konrad Adenauer and his Minister of Economics, Ludwig Erhard, 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.
Monetary reform is any movement or theory that proposes a system of supplying money and financing the economy that is different from the current system.
The Deutsche Mark, abbreviated "DM" or
The schilling was the currency of Austria from 1925 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. The schilling was divided into 100 groschen.
The era of economic growth raised West Germany and Austria from total wartime devastation to developed nations in modern Europe. At the founding of the European Common Market in 1957 West Germany's economic growth stood in contrast to the struggling conditions at the time in the United Kingdom.
Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the west and the Mediterranean Sea to the south. It comprises the westernmost part of Eurasia.
The United Kingdom (UK), officially the United Kingdom of Great Britain and Northern Ireland, and sometimes referred to as Britain, is a sovereign country located off the north-western coast of the European mainland. The United Kingdom includes the island of Great Britain, the north-eastern part of the island of Ireland, and many smaller islands. Northern Ireland is the only part of the United Kingdom that shares a land border with another sovereign state, the Republic of Ireland. Apart from this land border, the United Kingdom is surrounded by the Atlantic Ocean, with the North Sea to the east, the English Channel to the south and the Celtic Sea to the south-west, giving it the 12th-longest coastline in the world. The Irish Sea lies between Great Britain and Ireland. With an area of 242,500 square kilometres (93,600 sq mi), the United Kingdom is the 78th-largest sovereign state in the world. It is also the 22nd-most populous country, with an estimated 66.0 million inhabitants in 2017.
The fundamental reason for the quick economic recovery of West Germany can be found in the ordoliberal growth model. West Germany had a skilled workforce and a high technological level in 1946, but its capital stock had largely been destroyed during and after the war. This small capital stock was compounded by the difficulty in converting the German economy to the production of civilian goods, as well as rampant monetary and regulatory problems, leading to an unusually low economic output during the first post-war years.
These initial problems were overcome by the time of the currency reform of 1948, which replaced the Reichsmark with the Deutsche Mark as legal tender, halting rampant inflation. This act to strengthen the West German economy had been explicitly forbidden during the two years that JCS 1067 was in effect. JCS 1067 had directed the U.S. forces of occupation in West Germany to "take no steps looking toward the economic rehabilitation of Germany".
At the same time, the government, following Erhard's advice, cut taxes sharply on moderate incomes. Walter Heller, a young economist with the U.S. occupation forces who was later to become chairman of President Kennedy's Council of Economic Advisers, wrote in 1949 that to "remove the repressive effect of extremely high rates, Military Government Law No. 64 cut a wide swath across the German tax system at the time of the currency reform." Individual income tax rates, in particular, fell dramatically. Previously the tax rate on any income over 6,000 Deutschmark had been 95 percent. After tax reform, this 95 percent rate applied only to annual incomes above 250,000 Deutschmark. For the West German with an annual income of about 2,400 Deutschmark in 1950, the marginal tax rate fell from 85 percent to 18 percent.
Walter Wolfgang Heller was a leading American economist of the 1960s, and an influential adviser to President John F. Kennedy as chairman of the Council of Economic Advisers, 1961–64.
The Allied dismantling of the West German coal and steel industries decided at the Potsdam Conference 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 with its rich coal fields was returned to West Germany in 1957, it remained economically integrated in a customs union with France until 1959 and France extracted coal from the area until 1981.
The Potsdam Conference was held at Cecilienhof, the home of Crown Prince Wilhelm in Potsdam, occupied Germany, from 17 July to 2 August 1945. The participants were the Soviet Union, the United Kingdom, and the United States, represented respectively by Communist Party General Secretary Joseph Stalin, Prime Ministers Winston Churchill and Clement Attlee, and President Harry S. Truman.
Saarland is a state of Germany.
France, officially the French Republic, is a country whose territory consists of metropolitan France in Western Europe and several overseas regions and territories. The metropolitan area of France extends from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic Ocean. It is bordered by Belgium, Luxembourg and Germany to the northeast, Switzerland and Italy to the east, and Andorra and Spain to the south. The overseas territories include French Guiana in South America and several islands in the Atlantic, Pacific and Indian oceans. The country's 18 integral regions span a combined area of 643,801 square kilometres (248,573 sq mi) and a total population of 67.3 million. France, a sovereign state, is a unitary semi-presidential republic with its capital in Paris, the country's largest city and main cultural and commercial centre. Other major urban areas include Lyon, Marseille, Toulouse, Bordeaux, Lille and Nice.
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. Living standards also rose steadily,with the purchasing power of wages increasing by 73% from 1950 to 1960. As noted by the British journalist Terence Prittie in the early Sixties:
Today the German working-man leads a comfortable life and wears a well-filled waistcoat. He eats well, and his food – although German cooking lacks the elegance of French – is wholesome and appetizing. He buys good clothes, and he dresses his wife and children well. He generally has money to spare for television sets, week-end excursions and football matches. And he is not afraid of celebrating occasionally on a grander scale.
Productivity growth in West Germany enabled most workers to obtain significant improvements in their living standards and 'security of life.' In addition, as noted by David Eversley,
As real incomes rose, so public authorities were enabled (and indeed encouraged) to raise funds, both from taxation and through borrowing, to accelerate the rate of investment and current spending in projects which are partly immediately productive, partly conducive to the creation of the good life, as seen in Germany ... Any superficial examination of the German townscape, let alone perusal of the statistics, shows that Germany has spent sums on hospitals, libraries, theatres, schools, parks, railway-stations, socially-aided housing, underground railways, airports, museums, and so on which are simply not to be compared with British efforts in this direction.
In addition to the physical barriers that had to be overcome for the West German economic recovery, 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.
Immediately after the German surrender and for the next two years, the U.S. pursued a vigorous program to harvest all technological and scientific know-how as well as all patents in Germany. John Gimbel's book "Science Technology and Reparations: Exploitation and Plunder in Postwar Germany" concludes the "intellectual reparations" taken by the U.S. and the UK amounted to close to $10 billion.
During the more than two years this policy was in place, new industrial research in Germany was hampered because it was unprotected and freely available to overseas competitors, encouraged by occupation authorities to access all records and facilities.
Meanwhile, thousands of the best German researchers and engineers were working in the Soviet Union and in the U.S. See Operation Osoaviakhim, Operation Paperclip.
The Marshall Plan was only extended to Western Germany after it was realized 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, which received much greater economic assistance than West 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 Deutschmark to the dollar. These marks were spent within West 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 250,000. 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 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 in 1950–53 led to a global shortage of goods that helped overcome lingering resistance to the purchase of West German products. At the time West Germany had a large pool of skilled labour, partly as a result of the deportations and migrations which affected up to 16.5 million Germans. This helped West 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 ("guest workers", since the late 1950s) 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 East Germans to West Germany and continued reparations to the USSR in terms of resources. Unemployment hit a record low of 0.7–0.8% in 1961–1966 and 1970–1971.
Ludwig Erhard, who served as Minister of the Economy in Chancellor Adenauer's cabinet from 1949 until 1963 and would later rise to Chancellor himself, is often associated with the West German Wirtschaftswunder.
Austria was also included in the Marshall Plan and can thus be included in any consideration of the Wirtschaftswunder. Through the nationalisation of key industries (VOEST, AMAG, Steyr-Puch) and yet more long working hours,[ clarification needed ] full economic capacity was reached. Using West Germany as a guide, the currency was stabilised when the Schilling was reintroduced in place of the Reichsmark. This economic policy was known in journalistic circles as the Raab-Kamitz-Kurs, named after Julius Raab, Austrian chancellor from 1953, and his Finance Minister Reinhard Kamitz similar to the West German Adenauer-Erhard-Kurs.
By state major projects such as the Kaprun hydroelectric plant or the West Autobahn, unemployment fell and social peace was ensured. In the 1950s the first Gastarbeiter from Southern Italy and Greece arrived in the country, as more manual labour was required to maintain the economic upswing.
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The economy of Croatia is a developed high-income service based economy with the tertiary sector accounting for 60% of total gross domestic product (GDP). After the collapse of socialism, Croatia went through a process of transition to a market-based economy in the 1990s, but its economy suffered badly during the Croatian War of Independence. After the war the economy began to improve, before the financial crisis of 2007–08 the Croatian economy grew at 4-5% annually, incomes doubled, and economic and social opportunities dramatically improved.
Konrad Hermann Joseph Adenauer was a German statesman who served as the first Chancellor of the Federal Republic of Germany from 1949 to 1963. He was co-founder and first leader of the Christian Democratic Union (CDU), a Christian Democratic party that under his leadership became one of the most influential parties in the country.
The Marshall Plan was an American initiative passed in 1948 to aid Western Europe, in which the United States gave over $12 billion in economic assistance to help rebuild Western European economies after the end of World War II. Replacing the previous Morgenthau Plan, it operated for four years beginning on April 3, 1948. The goals of the United States were to rebuild war-torn regions, remove trade barriers, modernize industry, improve European prosperity, and prevent the spread of Communism. The Marshall Plan required a reduction of interstate barriers, a dropping of many regulations, and encouraged an increase in productivity, as well as the adoption of modern business procedures.
Ludwig Wilhelm Erhard was a German politician affiliated with the CDU, and the second Chancellor of the Federal Republic of Germany from 1963 until 1966. He is often famed for leading the West German postwar economic reforms and economic recovery in his role as Minister of Economic Affairs under Chancellor Konrad Adenauer from 1949 to 1963. During that period he promoted the concept of the social market economy, on which Germany's economic policy in the 21st century continues to be based. In his tenure as Chancellor, however, Erhard lacked support from Adenauer, and failed to win the public's confidence in his handling of a budget deficit and his direction of foreign policy. His popularity waned, and he resigned his chancellorship on 1 December 1966.
As a consequence of the defeat of Nazi Germany in World War II, Germany was divided between the two global blocs in the East and West, a period known as the division of Germany. Germany was stripped of its war gains and lost territories in the east to Poland and the Soviet Union. At the end of the war, there were in Germany some eight million foreign displaced persons; mainly forced laborers and prisoners; including around 400,000 from the concentration camp system, survivors from a much larger number who had died from starvation, harsh conditions, murder, or being worked to death. Over 10 million German-speaking refugees arrived in Germany from other countries in Central and Eastern Europe. Some 9 million Germans were POWs, many of whom were kept as forced laborers for several years to provide restitution to the countries Germany had devastated in the war, and some industrial equipment was removed as reparations.
The Morgenthau Plan by the Allied occupation of Germany following World War II was a proposal to eliminate Germany's ability to wage war by eliminating its arms industry, and the removal or destruction of other key industries basic to military strength. This included the removal or destruction of all industrial plants and equipment in the Ruhr. It was first proposed by United States Secretary of the Treasury Henry Morgenthau Jr. in a memorandum entitled Suggested Post-Surrender Program for Germany.
Nazism and the acts of the Nazi German state profoundly affected many countries, communities, and people before, during and after World War II. The regime's attempt to exterminate several groups viewed as subhuman by Nazi ideology was eventually stopped by the combined efforts of the wartime Allies headed by Britain, the Soviet Union, and the United States.
The social market economy, also called Rhine capitalism, is a socioeconomic model combining a free market capitalist economic system alongside social policies that establish both fair competition within the market and a welfare state. It is sometimes classified as a coordinated market economy. The social market economy was originally promoted and implemented in West Germany by the Christian Democratic Union (CDU) under Chancellor Konrad Adenauer in 1949. Its origins can be traced to the interwar Freiburg school of economic thought.
Wilhelm Röpke was Professor of Economics, first in Jena, then in Graz, Marburg, Istanbul, and finally Geneva, Switzerland, and one of the spiritual fathers of the social market economy, theorising and collaborating to organise the post-World War II economic re-awakening of the war-wrecked German economy, deploying a program sometimes referred to as the sociological neoliberalism.
The Reichsmark was the currency in Germany from 1924 until 20 June 1948 in West Germany, where it was replaced with the Deutsche Mark, and until 23 June in East Germany when it was replaced by the East German mark. The Reichsmark was subdivided into 100 Reichspfennig. The Mark is an ancient Germanic weight measure, traditionally a half pound, later used for several coins; whereas Reich, that is realm in English, comes from the official name for the German nation state from 1871 to 1945, Deutsches Reich.
The reconstruction of Germany after World War II was a long process. Germany had suffered heavy losses during the war, both in lives and industrial power. 6.9 to 7.5 million Germans had been killed, roughly 8.26 to 8.86 percent of the population. The country's cities were severely damaged from heavy bombing in the closing chapters of the War and agricultural production was only 35 percent of what it was before the war.
The Petersberg Agreement is an international treaty that extended the rights of the Federal Government of Germany vis-a-vis the occupying forces of Britain, France, and the United States, and is viewed as the first major step of Federal Republic of Germany towards sovereignty. It was signed by Chancellor of West Germany Konrad Adenauer and the Allied High Commissioners Brian Hubert Robertson (Britain), André François-Poncet (France), and John J. McCloy on 22 November 1949. The Hotel Petersberg, near Bonn, was at that time the seat of the High Commissioners and the place of signature. It was the first modification of the Occupation statute.
Until the early 19th century Germany, a federation of numerous states of varying size and development, retained its pre-industrial character, where trade centered around a number of free imperial cities. After the extensive development of the railway network during the 1840s, rapid economic growth and modernisation sparked the process of industrialisation. The largest economy in Europe by 1900, Germany had established a primary position in several key sectors, like the Chemical industry and steel production. High production capacity, permanent competitiveness and subsequent protectionist policies fought out with the USA and Britiain were essential factors for Germanys entry into the World Wars. By the end of World War II, the country's economic infrastructure was completely destroyed. West Germany embarked in its program of reconstruction with financial support provided by the Marshall Plan and, guided by the economic principles of the Minister of Economics Ludwig Erhard excelled in the economic miracle during the 1950s and 1960s. East Germany's last remaining economic facilities were dismantled by the Soviet occupation force as one of the first steps of the war reparations plan. The country was embedded in the Eastern Block system of socialist planned economy. Contemporary Germany employes a highly skilled work force in the largest national economy as the largest exporter of high quality goods in Europe, like cars, machinery, pharmaceutics, chemical and electrical products with a GDP of 3.67 trillion USD in 2017.
The 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.
The Allied occupation of Austria started on 27 April 1945 as a result of the Vienna Offensive and ended with the Austrian State Treaty on 27 July 1955.
The Wirtschaftswunder was a German band consisting of musicians Angelo Galizia, Tom Dokoupil, Mark Pfurtschneller and Jürgen Beuth. They were part of the so-called Neue Deutsche Welle that emerged as part of the English new wave/post-punk movement in the early 1980s and included bands such as D.A.F, Malaria!, or ZK.
The post–World War II economic expansion, also known as the Golden Age of Capitalism, postwar economic boom, the long boom, was a period of strong economic growth beginning after World War II and ending with the 1973–75 recession. The United States, Soviet Union, Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment. Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as Japan, West Germany and Austria (Wirtschaftswunder), South Korea, France, Italy, and Greece.
The Administration for Soviet Property in Austria, or the USIA was formed in the Soviet zone of Allied-occupied Austria in June 1946 and operated until the withdrawal of Soviet troops in 1955. USIA operated as a de facto state corporation and controlled over four hundred expropriated Austrian factories, transportation and trading companies. USIA assets included formerly independent Austrian companies (ÖAF), factories once owned by German corporations (AEG) and former SS enterprises (DEST). At its peak in 1951 the conglomerate employed around 60 thousand people, or 10% of Austrian industrial labor. USIA was exempt from Austrian tariffs, disregarded Austrian taxation, and could easily trade with Eastern Europe despite the Iron Curtain and Western trade embargoes. The extraterritorial corporation attempted to be self-sufficient and was very weakly integrated with the rest of Austrian economy.
After World War II, both West Germany and East Germany were obliged to pay war reparations to the Allied governments, according to the Potsdam Conference. Other Axis nations were obliged to pay war reparations according to the Paris Peace Treaties, 1947.