The Economic Miracle

Following World War II, Germany was a country in shambles. Entire cities were devastated by bombing, and its population had suffered from war crimes committed both by Nazis and Soviets alike. However, following the reconstruction of West Germany in the image of the Western Allies, a great period of economic prosperity, which is known as the Wirtschaftswunder, or “the economic miracle,” came about. During this time, the reconstruction of the damaged West German economy was managed by the Chancellor of the Federal Republic of Germany, Konrad Adenauer and his financial minister, Ludwig Erhard, were considered the fathers of the economic miracle. Austria also experienced an era of rapid economic development, due in large part to the nationalization of industries and improved plans for labor efficiency.

In West Germany, the economic miracle was spurred by economic aid from the United States through the Marshall Plan, an attempt to combat the spread of communism in Europe by offering nearly $13 billion in aid to foreign nations rebuilding after the Second World War. The West German government also replaced the ailing Reichsmark with the new Deutsche Mark, which put a stop to uncontrolled inflation. However, the Allies also placed some obstacles in the way of German economic progress, dismantling the steel production industry, annexing territories that were rich in natural resources, and assuming control of German intellectual property, such as patents, in order to bolster their own competitiveness. Experts estimate that this postwar plunder cost West Germany more than $10 billion dollars. However, the outbreak of the Korean War, along with the realization that the suppression of West Germany’s economy was impeding the economic development of the rest of Europe led the Allies to promote the economic miracle.

With the outbreak of war in Korea in August of 1950, a worldwide gap in production and an increased demand for goods led to the increased purchasing of German products. Because of mass migrations and deportations, Germany had a huge labor pool that would work cheaply at skilled trades. Germany, along with Austria, also implemented a program of hiring “guest workers,” or Gastarbeiter, foreigners who would be given temporary visas and allowed to work within the country. For three decades, the German people worked long shifts and ran their economy at maximum efficiency. By the end of the 1950s, West Germany was a worldwide economic powerhouse. The economic miracle had turned a country that had been destroyed by war into one of the most successful nations on Earth. This trend of economic growth has continued even to the present. Today, Germany has the third largest GDP (PPP) in the world.