Situation in Economics of West Germany in 1945-1960s: Analytical Essay

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Introduction

The surrender of Nazi Germany on 7th May 1945 ended its war with the Allies and Soviet Union giving them victory over Axis power of Europe. After ending the Second World War in 2nd September 1945 the country was divided into four half with the Soviets controlling east and Allied countries (USA, Britain, France) controlling west. In the postwar scenario many cities, mines, farms, factories and industries were destroyed during war time bombing which created problems in West Germany. With factories and farms destroyed they weren’t producing sufficient goods to be distributed in the market, destroyed cities lead many civilians homeless creating shortage of food, health service and other essentials. Germany was ordered to pay 30 billion marks as war reparation. The growing unemployment rate, industrial disarmament, insufficient output from the factories and high taxation with government control on pricing instantly created inflation in West Germany. The German economy had collapsed.

The economic downfall in West Germany created doubt for Allies on west Germanys ability to pay the war reparation back to them. Allies decided to start collecting machineries and equipment’s and using their resources like coal mines and steel extractions to collect as reparations. There was labor shortages for reconstruction as many male German population were doing forced labor work for allies. The economic condition turned even worse after machineries and equipment’s being taken away and government price control on the market. West Germany experienced rise of black market where their currency Reich marks were turning valueless where American cigarettes were used as currency over it and people started barter system in the market.

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Revival of the Economy

The Allies agreed to restore self-government in West Germany which had to function under democratic principles with elections between post-war German’s political parties. Although allies imposed and promulgated economic policies, there are evidence of active participation of different German political parties in the post-war reconstruction. Many scholars were presenting their economic design to control the economic condition of Germany. The Allied forces agreed to form economic council and Ludwig Erhard was given power to control. Erhard was an economist who believed in social market economy or free market economy.

The governments control over price and wage with Reich marks getting value less on the other hand was creating problems as black market was influencing the economy. Erhard made currency reform by introducing new currency Deutschemark replacing the old valueless Reichmarks. The currency reform policy had started to have control over black markets yet the shops and markets were still empty and factories had no workers as the governments controlled prices and wages. The lack of economic activates and circulation of money was not helping to change the economy

Erhard decided to remove the government price control over the good and wages declaring social free market in West Germany. The labor union agreed to work after pay raise. After the declaration of free market people started selling their goods and products in shops and markets which used to be empty, skilled labors started returning to Germany as they could get paid more salary. The currency reform and free market allowed people to price their products based on market competition and increase in labor force started increasing factories and industries production capacity. This event made the term ‘Economic miracle of West Germany Popular’

The Marshall Plan

The United States came up with a plan to provide fund and aid for revival of European economy which had collapsed after the Second World War from 1948 to 1952. Through the plan they provided European countries with food, medicines, machines and many more essentials. They started investing in West Germany reconstructing the damaged factories and cities, developing farming, research and technology. The aid helped to generate more labors to work for reconstruction as they provided them machinery like tractors, it allowed many people to work in the factories as tractors could do as much work as 5 to 7 people in the fields. Germany also encouraged female encouragement in the work force. The war time factories producing war equipment’s were converted into consumer good producing factories. The United Sates had encouraged Americans companies to invest in Germany. Although, other countries like Britain and France took large amount from the aid, Germany was the fastest nation to recover. The countries who received the aid had surpassed pre-war economy growth.

Overall we can see in many books, articles and documentaries people giving Marshall Plan all credits but, the whole world as saw the capacity and ability of German engineering, research and development and innovations. Germany had advanced military equipment’s compared to the allies in Second World War, it has always been a nation with high literacy and good education foundation. German population its self also had a role in economic recovery as they had skilled labor force in various sectors. Marshall Plan was a success as the countries receiving support from aid did recover its agriculture and industrial power as well as raised their countries GDP.

We could also see United Sates doing it for its personal benefit by forming a new market for American products. United States faced economic boost by its rapid growth in production and export, with high employment rates. Marshall Plan benefited American economy, gave American brands global exposure in international market. American automobiles were introduced in West Germany and Europe in this duration.

Recovery Phase

Till 1955 West Germany had repaired its factories, cities and stability was appearing in West German economy. West Germany war reparation debt was reduced form 30billion Deutsch Mark to 14 billion Deutsche Mark .Germany started manufacturing its own product for its domestic markets. The companies that made war equipment’s or were related with war time activities were converted and started producing consumer goods. Companies like Volkswagen, Daimler, Porsche, and Opel started manufacturing German cars which started the legacy of German automobile which still exists. Agriculture industry was recovered, improved workers condition and well paid wages in factories had uplifted standard of living of people living in West Germany. Due to better standard of living in West Germany faced mass immigration from East Germany which also provided skill man force. As Germany was always ahead in innovation, research and development they started producing their own radios, televisions, cameras with other home appliances. As living standards were getting improved the domestic demands of products were increasing productions. Factories were getting mechanized for maximum outputs.

Talking about the change in their society, allies call the process Denazification as they were changing people’s opinion on previous fascist government to avoid future resistance against the occupied allied nation and started boosting democratic ideologies with removing fascist people from administrative posts on the government. They spared democracy through radios, televisions news, magazines and posters. Allies started providing social services in the society like free education and health services. The course books in schools were re published by changing the content in the books which included fascist propagandas. Educational institutions, laboratories and vocational training facilities were developed for youths to be skilled and get jobs as soon as they complete their training. They were being successful in establishing capitalism in West Germany. They offered youth sports different sports facilities and western sports like golf, rugby and baseball were introduced to them.

Economic Prosperity

West Germany had achieved economy prosperity tin 1960s, as German population had raised their living standard. New wage policies increased their wages and social free market they had controlled hyperinflation and purchasing power of their currency had increased. Germans started living a comfortable life with good food and clothing, they were able to buy house for themselves as well as own home appliances like television radio and ovens. They were able to send their children’s to school and feed their children’s with good food as well as an safe environment for children’s and playgrounds were also offered to them. Government investment in infrastructure in West Germany increased as they were able to raise funds from tax. They were able provide better service and own better infrastructures like schools, theatres, railways, airports, libraries and many more facilities.

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