The Post-War Economic Miracle in West Germany

15 Pages Posted: 19 Jun 2012

See all articles by Basainey Ebrahima Jammeh

Basainey Ebrahima Jammeh

Gambia Investment and Export Promotion Agency

Date Written: July 9, 2009

Abstract

From the words of James C. Von Hook (2004), no society has ever become more associated with its economic system than post-war West Germany with the possible exception of Japan. However, when one looks into West Germany’s post-war economic history, one is able to clearly indentify the crucial role played by the social market economy system because it has always been invested with greater meaning and significance. The introduction of social market system of economy brought an end to economic controls of the highly condemned Nazi era. It was championed by Ludwig Erhard and his supporters in 1948. Erhard later became West Germany’s first finance minister appointed by the then Chancellor of the Federal Republic, Konrad Adenaur. Many scholars believed that West Germany’s unexpected rapid and prosperous recovery during the 1950s from the devastations caused by World War II was influenced by his social market reforms of 1948 that represented a radical break away from West Germany’s authoritarian past. Erhard was quoted as saying that the highly proclaimed economic miracle was in fact not a miracle, but rather, the natural and scientific result of the free market, free international trade, competition and monetary stability that prevailed in post-war West Germany. He argued that the rising productivity caused by the introduction of free market relationships after WWII has resulted in raising real wages which trickled down on the standard of living of the average West German. Erhard´s social market economic model received opposition from the Social Democratic Party who continue to argue that West Germany’s post-war economic success came as a result of the reconstruction boom after WWII. Other scholars still argue that the intervention provided by the Marshall Plan of the United States government was the propelling force behind this unprecedented economic and social progress. However, Von Hook (2004) observed that one of the greatest ironies of post-war economic history is how the definition of the social market economic changed over time. Today, he said, it represents the European welfare state which is the opposite of the 1950s. In an effort to present a balanced report on the subject matter, this paper aims to take into consideration the conflicting views expressed by scholars regarding the origins of the so-called the post-war West Germany economic miracle as well as highlight three competing explanations. Also, the economic situation of West Germany before the miracle and the debate between schools of thought shall be looked into. Since Ludwig Erhard´s economic reforms are widely accepted as suitable explanations for the miracle, the paper will endeavor to find out the positive economic changes it brought to West Germany as a whole. The disagreements that continue to occupy center stage in the discussion of the so-called miracle shall also be looked into in order to balance and give a fair view of the ideas presented here in this paper.

Keywords: Economic Miracle, Ludwig Erhard, Social Market Economy, Marshall Plan

Suggested Citation

Jammeh, Basainey Ebrahima, The Post-War Economic Miracle in West Germany (July 9, 2009). Available at SSRN: https://ssrn.com/abstract=1743047 or http://dx.doi.org/10.2139/ssrn.1743047

Basainey Ebrahima Jammeh (Contact Author)

Gambia Investment and Export Promotion Agency ( email )

GIEPA House
48 Kairaba Avenue
Serrekunda, Kanifing Municipal Council
Gambia
00220-9824517 (Phone)
00220- 437 7379 (Fax)

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