Economic Recovery and German History

Konrad Adenauer - Wikipedia
Konrad Adenauer, Orchestrator of the German Economic Miracle. Image Credit: Wikipedia.

As if the coronavirus alone were not bad enough, we also have to be concerned about the long term economic impacts of the disease and the near shutdown of the nation that is necessary to stop its spread. As a result of the halt of a great deal of economic activity, many companies may go out of business and workers will be laid off, the number suffering this fate depending on the duration of the pandemic.

Germany is no stranger to economic collapse. The German economy crashed during the First World War and again during the Great Depression and also during the Second World War. During WWI the British blockade and massive war expenditures proved too much for the nation to bear and it collapsed economically near the end of the war. This was exacerbated by the reparations imposed by Germany by the Treaty of Versailles. The German economy, in large part due to American investment and the easing of reparations, rebounded in the late 1920s in an era called the Weimar Golden Age. This was a short period of relative wealth and culture that saw a strengthened Weimar government. The Great Depression, however, put an end to the Golden Age and plunged Germany into the depths of crisis. The German people turned to radical parties and by 1934 Hilter had taken full control of the nation. Through several monetary schemes and government infrastructure spending, Hitler’s government was able to improve the economy and at least create an image of economic stability, although many believe that the German Economy, based on large part on loans and the use of MEFO bills to finance rearmament, would have collapsed in the 1940s if not for the Second World War pushing concerns of debt repayment to the wayside. Of course during the second World War Germany suffered devastation like it had never seen in its history, and the nation’s economy, especially its industry, was essentially wiped out by allied bombing campaigns and Soviet pillaging.

The Post-WW2 German Economic Miracle, or Wirtschaftswunder, was the most profound of all of the German recoveries. Under Chancellor Konrad Adenaur, the West German Economy saw low inflation and rapid growth for several decades. The German economy grew at a startling pace, rapidly restoring the nations to its prewar standard of living and surpassing it by the early 1960s. While the Marshall Plan certainly aided Germany’s recovery, it is worth noting that Germany recovered far faster than Britain did and Britain recieved the most Marshall Plan aid. The German economic miracle resulted from currency reform in 1948 and massive income tax cuts on the middle class. This allowed the educated German populace to quickly rebuild the nation’s skilled industries once allied programs of technology harvesting from Germany and the dismantling of the steel industry ended.

The German economic recoveries are not simply historically important and interesting, but sources of hope in the present situation If a nation reduced to ruin and occupied by its enemies can recover in little more than a decade, than a nation with all of its industries intact should be able to quickly recover from a month-long freeze on much, but not all, of it’s economic activity. Given that the economy will not collapse from a short-term halt, we should focus on stopping the virus rather than keeping the economy running at the cost of too many lives. 

2 thoughts on “Economic Recovery and German History

  1. As a fifth and sixth grade student in the US military school in Wiesbaden, 1948-1950, I observed the post-war pause before the Adenauer years. The rubble in cities had been cleared from the streets, but was heaped onto sites where buildings once stood. The only rebuilding I saw was upon an occasional Grundstuck next to a destroyed private home. My best friend lived in a fine requisitioned house with a swimming pool. His father was a civilian with the equivalent rank of colonel. Down the hill, one hundred meters away, the owners of the house had constructed and lived in a modest chalet. The US forces occupied all public buildings, such as theaters, hotels, swimming pools, clubs, restaurants, former casinos, and more. The German population went quietly on with their lives and I noticed no hostility or resentment of the occupying forces. A key factor was the looming threat of the Russians. We were their protectors, brought payrolls to the economy and supplied coffee and cigarettes through a brisk black market. My family of four was authorized to buy one carton of cigarettes each week @ 1$ per carton. Coffee was equally inexpensive in our PX’s (post exchanges) and we received a pound a week for each family member. Our maid, Elizabeth then paid us 20 Marks for each carton and 8 Marks for each pound, as she began the path of distribution.

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    1. This is a very interesting story. I expect that the money spent by occupying American soldiers and their families probably helped the German economy recover by increasing consumption in the economy.

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