Shortly after the Second World War, Germany was a devastated country. A very large part of its infrastructure was damaged, entire cities such as Dresden collapsed, and the population of Köln had decreased from 750,000 to 32,000, or in other words it fell by 96%.
Hunger was also claiming its share of lives; with the Allied forces allocating 1,000 calories per day per person, much less than what the human body needs to function properly. The German currency “Mark” had become worthless, so people had to go back to the principles of bargaining in order to meet their needs. At that time, Germany was facing a very dark and unpredictable future.
After the fall of the Berlin wall, however, Germany reunited and managed to become one of the largest economies in the world. This revival was called “The German Economic Miracle”.
Popular figures that helped the rebirth of Germany after WW2
Perhaps one of the most prominent figures to contribute to the renaissance of modern Germany is Walter Euken, a famous teacher at the University of Freiberg in Germany. Euken developed his economic theories, as a school of economic thought that he named the “Freiburg School”. His idea were rooted in the free market of capitalism and he strongly believed that this system could be capable of bringing the greatest benefit to the largest amount of people.
Euken supported the idea of having a central bank, independent to the government, to focus on monetary policy and ensure price stability. His ideas nowadays seem natural, but at that time, they were seen as very strange and extreme.
Another important role played by was researcher Ludwig Erhard, who worked in a well-known organization that focused on economic recovery activities. In 1944 he wrote an article discussing the German financial situation after the soon-to-come defeat of the Nazis. In 1963, Erhard was appointed Minister of Economic Affairs in Bavaria and Chancellor of Germany. He had made an enormous effort in many aspects of the economy of Western Germany, playing a major role in shaping a new currency to replace the “mark” that had become worthless. The introduction of a new currency has reduced the amount of the old Marks available to the public by 93%, thus reducing the volume of wealth owned by individuals and even by German companies. In addition to this, tax cuts were also implemented, in order to stimulate spending and investment.
As a result, West Germany came back to life. Shops became filled with goods once again, the barter system was no longer used, commercial markets returned to work, and thus people became more willing to work. One of the main reasons for this was they finally realized that the new currency was valuable.
Contribution of US Secretary of State George Marshall to the rise of Germany
The Marshall Plan: The European Recovery Program was prepared by the United States Secretary of State at the time, George Marshall. This plan contributed to the renaissance of new Germany and other European countries affected.
Through this agenda, the United States provided 14 billion dollars to European countries affected by WW2. A large share of this money went to Germany, as being the most affected country throughout the war. However, some economic analysts argue that this plan contributed by less than 5% to bringing Germany back up on the economic forefront.
Western Germany continued to grow tremendously – in 1958, the industrial production level was four times higher than in 1948.
There was no comparison between the thriving West Germany and East Germany, which was weak in its economy and lacked political freedoms, this leading to protests. The departure of large numbers of people from Eastern Germany to the West was one of the most important reasons for the falling of the Berlin Wall and the reunification of Germany.