West Germany - West German "economic Miracle"

West German "economic Miracle"

The West German Wirtschaftswunder ("economic miracle", coined by The Times in 1950) was partly due to the economic aid provided by the United States and the Marshall Plan, but mainly due to the currency reform of 1948 which replaced the Reichsmark with the Deutsche Mark and halted rampant inflation. The Allied dismantling of the West German coal and steel industry finally ended in 1950.

In addition to the physical obstacles that had to be overcome for the German economic recovery (see the Morgenthau Plan) there were also intellectual challenges. The Allies confiscated intellectual privileges of huge value, such as all German patents, both in Germany and abroad, and used them to strengthen their own industrial competitiveness by licensing them to Allied companies. Meanwhile some of the best German researchers were being put to work in the Soviet Union and in America.

Contrary to popular belief, the Marshall Plan, which was extended to include the newly formed West Germany in 1949, was not the main force behind the Wirtschaftswunder. Had that been the case, other countries such as the United Kingdom and France (which both received higher economic assistance from the plan than Germany) should have experienced the same phenomenon. In fact, the amount of monetary aid (which was in the form of loans) received by Germany through the Marshall Plan was far overshadowed by the amount the Germans had to pay back as war reparations and by the charges the Allies exacted from the Germans for the ongoing cost of occupation (about $2.4 billion per year). In 1953 it was decided that Germany was to repay $1.1 billion of the aid it had received. The last repayment was made in June 1971.

The Korean War (1950–1953) led to a worldwide increased demand for goods, and the resulting shortage helped overcome lingering resistance to the purchase of German products. At the time Germany had a large pool of skilled and cheap labour, partly as a result of the deportations and migrations, which affected up to 16.5 million Germans. This helped Germany to more than double the value of its exports during the war. Apart from these factors, hard work and long hours at full capacity among the population and in the late 1950s and 1960s extra labour supplied by thousands of Gastarbeiter ("guest workers") provided a vital base for the economic upturn. This would have implications later on for successive German governments as they tried to assimilate this group of workers.

From the late 1950s onwards, West Germany had one of the strongest economies in the world, almost as strong as before the Second World War. The East German economy showed a certain growth, but not as much as in West Germany, partly because of continued reparations to the USSR in terms of resources.

In 1952, West Germany became part of the European Coal and Steel Community, which would later evolve into the European Union. On 5 May 1955 West Germany was declared "fully sovereign". The British, French and U.S. militaries remained in the country, just as the Soviet Army remained in East Germany. Four days after becoming "fully sovereign" in 1955, West Germany joined NATO. The U.S. retained an especially strong presence in West Germany, acting as a deterrent in case of a Soviet invasion. In 1976 West Germany became one of the founding nations of the Group of Six (G6). In 1973, West Germany—home to roughly 1.26% of the world's population—featured the world's fourth largest GDP of 944 billion (5.9% of the world total). In 1987 the FRG held a 7.4% share of total world production.