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The ''Wirtschaftswunder'' (, "economic miracle"), also known as the Miracle on the Rhine, was the rapid reconstruction and development of the economies of
West Germany West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 ...
and
Austria Austria, , bar, Östareich officially the Republic of Austria, is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine states, one of which is the capital, Vienna, the most populous ...
after
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
(adopting an ordoliberalism-based social market economy). The expression referring to this phenomenon was first used by ''
The Times ''The Times'' is a British daily national newspaper based in London. It began in 1785 under the title ''The Daily Universal Register'', adopting its current name on 1 January 1788. ''The Times'' and its sister paper '' The Sunday Times'' ( ...
'' in 1950. Beginning with the replacement of the
Reichsmark The (; sign: ℛℳ; abbreviation: RM) was the currency of Germany from 1924 until 20 June 1948 in West Germany, where it was replaced with the , and until 23 June 1948 in East Germany, where it was replaced by the East German mark. The Reich ...
with the Deutsche Mark in 1948 as legal tender (the Schilling was similarly re-established in Austria), a lasting era of low inflation and rapid industrial growth was overseen by the government led by West German Chancellor Konrad Adenauer and his Minister of Economics,
Ludwig Erhard Ludwig Wilhelm Erhard (; 4 February 1897 – 5 May 1977) was a German politician affiliated with the Christian Democratic Union (CDU), and chancellor of West Germany from 1963 until 1966. He is known for leading the West German postwar economic ...
, who went down in history as the "father of the West German economic miracle." In Austria, efficient labor practices led to a similar period of
economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate o ...
. The era of economic growth raised West Germany and Austria from total wartime devastation to developed nations in modern
Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...
. At the founding of the European Common Market in 1957 West Germany's economic growth stood in contrast to the struggling conditions at the time in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
.


West Germany

The fundamental reason for the quick economic recovery of West Germany can be found in the ordoliberal growth model. Germany had a skilled workforce and a high technological level in 1946, but its capital stock had largely been destroyed during and after the war. This small capital stock was compounded by the difficulty in converting the German economy to the production of civilian goods, as well as rampant monetary and regulatory problems, leading to an unusually low economic output during the first post-war years. These initial problems were overcome by the time of the currency reform of 1948, which replaced the
Reichsmark The (; sign: ℛℳ; abbreviation: RM) was the currency of Germany from 1924 until 20 June 1948 in West Germany, where it was replaced with the , and until 23 June 1948 in East Germany, where it was replaced by the East German mark. The Reich ...
with the Deutsche Mark as legal tender, halting rampant inflation. This act to strengthen the West German economy had been explicitly forbidden during the two years that
JCS 1067 The Morgenthau Plan was a proposal to eliminate Germany following World War II and eliminating its arms industry and removing or destroying other key industries basic to military strength. This included the removal or destruction of all industri ...
was in effect. JCS 1067 had directed the U.S. forces of occupation in Germany to "take no steps looking toward the economic rehabilitation of Germany". At the same time, the government, following Erhard's advice, cut taxes sharply on moderate incomes.
Walter Heller Walter Wolfgang Heller (27 August 1915 – 15 June 1987) was a leading American economist of the 1960s, and an influential adviser to President John F. Kennedy as chairman of the Council of Economic Advisers, 1961–64. Life and career Heller ...
, a young economist with the U.S. occupation forces who was later to become chairman of President Kennedy's Council of Economic Advisers, wrote in 1949 that to "remove the repressive effect of extremely high rates, Military Government Law No. 64 cut a wide swath across the German tax system at the time of the currency reform." Individual income tax rates, in particular, fell dramatically. Previously the tax rate on any income over 6,000 Deutschmark had been 95 percent. After tax reform, this 95 percent rate applied only to annual incomes above 250,000 Deutschmark. For the West German with an annual income of about 2,400 Deutschmark in 1950, the marginal tax rate fell from 85 percent to 18 percent. The Allied dismantling of the West German coal and steel industries decided at the
Potsdam Conference The Potsdam Conference (german: Potsdamer Konferenz) was held at Potsdam in the Soviet occupation zone from July 17 to August 2, 1945, to allow the three leading Allies to plan the postwar peace, while avoiding the mistakes of the Paris P ...
was virtually completed by 1950; equipment had then been removed from 706 manufacturing plants in the west and steel production capacity had been reduced by 6,700,000 tons. Although the industrially important
Saarland The Saarland (, ; french: Sarre ) is a state of Germany in the south west of the country. With an area of and population of 990,509 in 2018, it is the smallest German state in area apart from the city-states of Berlin, Bremen, and Hamburg, a ...
with its rich coal fields was returned to West Germany in 1957, it remained economically integrated in a customs union with
France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
until 1959 and
France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
extracted coal from the area until 1981. West Germany proceeded quickly after 1948 to rebuild its capital stock and thus to increase its economic output at stunning rates. The very high capital investment rate thanks to low consumption and a very small need for replacement capital investments (due to the still small capital stock) drove this recovery during the 1950s. Living standards also rose steadily, with the purchasing power of wages increasing by 73% from 1950 to 1960. As noted by the British journalist
Terence Prittie Publius Terentius Afer (; – ), better known in English as Terence (), was a Roman African playwright during the Roman Republic. His comedies were performed for the first time around 166–160 BC. Terentius Lucanus, a Roman senator, brought T ...
in the early Sixties: Productivity growth in West Germany enabled most workers to obtain significant improvements in their living standards and 'security of life.' In addition, as noted by David Eversley, As there was no
Bundeswehr The ''Bundeswehr'' (, meaning literally: ''Federal Defence'') is the armed forces of the Federal Republic of Germany. The ''Bundeswehr'' is divided into a military part (armed forces or ''Streitkräfte'') and a civil part, the military part con ...
prior to 1955 and NATO forces defended West Germany, there was little spending on national defence.


Reparations

In addition to the physical barriers that had to be overcome for the West German economic recovery, there were also intellectual challenges. The Allies confiscated intellectual property of great value, all German patents, both in Germany and abroad, and used them to strengthen their own industrial competitiveness by licensing them to Allied companies. Immediately after the German surrender and for the next two years, the U.S. pursued a vigorous program to harvest all technological and scientific know-how as well as all patents in Germany. John Gimbel's book "''Science Technology and Reparations: Exploitation and Plunder in Postwar Germany''" concludes the "intellectual reparations" taken by the U.S. and the UK amounted to close to $10 billion. During the more than two years that this policy was in place, new industrial research in Germany was hampered because it was unprotected and freely available to overseas competitors, encouraged by occupation authorities to access all records and facilities.


Marshall Plan

Meanwhile, thousands of the best German researchers and engineers were working in the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
and in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
. The
Marshall Plan The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative enacted in 1948 to provide foreign aid to Western Europe. The United States transferred over $13 billion (equivalent of about $ in ) in economic re ...
was only extended to Western Germany after it was realized the suppression of its economy was holding back the recovery of other European countries and was not the main force behind the ''Wirtschaftswunder''. However, it likely greatly contributed to Germany's overall economic recovery. Furthermore, often overlooked is the effect of the "unofficial contributions" of 150,000 U.S. occupation troops, earning as much as 4 Deutschmark to the dollar. These marks were spent within West Germany to buy food, luxury items, beer and cars, as well as entertaining the locals and for prostitutes."Deployment of Military Personnel by Country," U.S. Department of Defense, Washington Headquarters Services. During exercises such numbers of soldiers would swell to over 250,000. Nonetheless, the amount of monetary aid, which was mainly in the form of loans, about $1.4 billion, was greatly overshadowed by the amount the Germans had to pay back as war reparations and by the charges the Allies made on the Germans for the ongoing cost of the occupation, about $2.4 billion per year. In 1953 it was decided that Germany would repay $1.1 billion of the aid it had received. The last repayment was made in June 1971. The demands of the
Korean War {{Infobox military conflict , conflict = Korean War , partof = the Cold War and the Korean conflict , image = Korean War Montage 2.png , image_size = 300px , caption = Clockwise from top:{ ...
in 1950–53 led to a global shortage of goods that helped overcome lingering resistance to the purchase of West German products. At the time West Germany had a large pool of skilled labour, partly as a result of the deportations and migrations which affected up to 16.5 million Germans. This helped West Germany to more than double the value of its exports during and shortly after the war. Apart from these factors, hard work and long hours at full capacity among the population in the 1950s, 1960s and early 1970s and extra labour supplied by thousands of '' Gastarbeiter'' ("guest workers", since the late 1950s) provided a vital base for the sustainment of the economic upturn with additional workforce. From the late 1950s onwards, West Germany had one of the world's strongest economies. The
East German East Germany, officially the German Democratic Republic (GDR; german: Deutsche Demokratische Republik, , DDR, ), was a country that existed from its creation on 7 October 1949 until its dissolution on 3 October 1990. In these years the state ...
economy also showed strong growth, but not as much as in West Germany, due to the bureaucratic system, emigration of working-age East Germans to West Germany and continued reparations to the
USSR The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nati ...
in terms of resources. Unemployment hit a record low of 0.7–0.8% in 1961–1966 and 1970–1971.
Ludwig Erhard Ludwig Wilhelm Erhard (; 4 February 1897 – 5 May 1977) was a German politician affiliated with the Christian Democratic Union (CDU), and chancellor of West Germany from 1963 until 1966. He is known for leading the West German postwar economic ...
, who served as Minister of the Economy in
Chancellor Chancellor ( la, cancellarius) is a title of various official positions in the governments of many nations. The original chancellors were the of Roman courts of justice—ushers, who sat at the or lattice work screens of a basilica or law cou ...
Adenauer's cabinet from 1949 until 1963 and would later rise to Chancellor himself, is often associated with the West German ''Wirtschaftswunder''.


Austria

Austria was also included in the
Marshall Plan The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative enacted in 1948 to provide foreign aid to Western Europe. The United States transferred over $13 billion (equivalent of about $ in ) in economic re ...
and can thus be included in any consideration of the ''Wirtschaftswunder''. Through the nationalisation of key industries ( VOEST, AMAG,
Steyr-Puch Steyr-Daimler-Puch () was a large manufacturing conglomerate based in Steyr, Austria, which was broken up in stages between 1987 and 2001. The component parts and operations continued to exist under separate ownership and new names. History Th ...
) and yet more long working hours, full economic capacity was reached. Using West Germany as a guide, the currency was stabilised when the Schilling was reintroduced in place of the
Reichsmark The (; sign: ℛℳ; abbreviation: RM) was the currency of Germany from 1924 until 20 June 1948 in West Germany, where it was replaced with the , and until 23 June 1948 in East Germany, where it was replaced by the East German mark. The Reich ...
. This economic policy was known in journalistic circles as the ''Raab-Kamitz-Kurs'', named after
Julius Raab Julius Raab (29 November 1891 – 8 January 1964) was a conservative Austrian politician, who served as Federal Chancellor of Austria from 1953 to 1961. Raab steered Allied-occupied Austria to independence, when he negotiated and signed the Austri ...
, Austrian
chancellor Chancellor ( la, cancellarius) is a title of various official positions in the governments of many nations. The original chancellors were the of Roman courts of justice—ushers, who sat at the or lattice work screens of a basilica or law cou ...
from 1953, and his Finance Minister
Reinhard Kamitz Reinhard is a German, Austrian, Danish, and to a lesser extent Norwegian surname (from Germanic ''ragin'', counsel, and ''hart'', strong), and a spelling variant of Reinhardt. Persons with the given name *Reinhard of Blankenburg (after 1107 – 11 ...
similar to the West German ''Adenauer-Erhard-Kurs''. By state major projects such as the Kaprun hydroelectric plant or the West Autobahn, unemployment fell and social peace was ensured. In the 1950s the first ''Gastarbeiter'' from Southern Italy and
Greece Greece,, or , romanized: ', officially the Hellenic Republic, is a country in Southeast Europe. It is situated on the southern tip of the Balkans, and is located at the crossroads of Europe, Asia, and Africa. Greece shares land borders wi ...
arrived in the country, as more manual labour was required to maintain the economic upswing.


See also

* Economy of Germany * GARIOA *
History of the Ruhr District The actual boundaries of the Ruhr vary slightly depending on the source, but a good working definition is to define the Lippe and Ruhr as its northern and southern boundaries respectively, the Rhine as its western boundary, and the town of Hamm a ...
* Industrial plans for Germany * Japanese economic miracle *
Marshall Plan The Marshall Plan (officially the European Recovery Program, ERP) was an American initiative enacted in 1948 to provide foreign aid to Western Europe. The United States transferred over $13 billion (equivalent of about $ in ) in economic re ...
* Miracle on the Han River * Miracolo economico * Morgenthau Plan * Post-World War II boom * Record years * Social market economy * Spanish miracle * Trente Glorieuses


Notes


External links

*  
Interview with Gunther Harkort
Representative of the Federal Republic of Germany to the Economic Cooperation Administration (ECA), 1949–1952.

General Lucius D. Clay Deputy to U.S. General Dwight D. Eisenhower, 1945; deputy military governor, Germany (U.S.) 1946; commander in chief, U.S. Forces in Europe and military governor, U.S. Zone, Germany, 1947–49; retired 1949.
Interview with
General
William Henry Draper Jr. William Henry Draper Jr. (August 10, 1894 – December 26, 1974) was an American army officer, banker, government official, and diplomat. Early life William Henry Draper Jr., was born on August 10, 1894 in Harlem, New York City. His parents w ...
Chief, Economics Division, Control Council for Germany, 1945–1946; Military Government Adviser to the Secretary of State, Moscow Conference of Foreign Ministers, 1947; Under Secretary of War, 1947; Under Secretary of the Army, 1947–1949;
'Time Magazine ''Faceless Crisis
4 April 1949.

(26 July 1949) Warning him of the consequences of the dismantling policy.

(7 June 1949) Workers in the Ruhr demonstrate against the dismantling of their factories by the Allied forces of occupation.

'We want to work, we will help you to rebuild Europe' Workers at dismantled plant protest.

(19 August 1949) {{Authority control 1950s economic history Aftermath of World War II in Austria Aftermath of World War II in Germany American influence in post–World War II Europe Economy of Austria Economy of West Germany Economic booms German words and phrases Konrad Adenauer Ordoliberalism Post–World War II economic booms