Western Germany’s economic rebound after the Second World War was extremely impressive and many even call it an economic miracle. There are many scholarly perspectives on how Germany accomplished such economic growth. The three main explanations for Germany’s quick recovery and growth are Erhard’s social market economy and abolishment of prices, the United States’ Marshall Plan, and the opportune timing of other global events happening after 1945 that allowed for Germany to export its machinery, which Germany had excess capacity from the war.

In Van Hook’s Rebuilding Germany, the author offers insights from Germany’s postwar economic system He emphasizes a lot on German Economics minister Ludwig Erhard’s critical role in rebuilding Germany through introducing the social market economy in 1948 and creating competition through his trade and investments policies. Erhard wanted to dismantle the control economy that was inherited from the Nazis and replace it with a genuine competitive system (Stunde Null or zero hour) (RG 141). In this case, the economic miracle was not really a miracle, because the free market would naturally bring in free international trade, competition, and monetary stability. This also led to increased productivity, raised real wages, and raised the living standards of average Western Germans (RG3).

When Erhard moved Germany towards the social market economy, it is also important to note the international and structure context. Erhard succeeded Johannes Semler, who had rebuilt transportation and power infrastructure in Germany and Germany received benefits from the Marshall Plan for recovery (RG 141). Nevertheless, Erhard still played an important role. Through the Anticartel law of 1957, his government extended the free market by exposing West Germany industry to international markets by reducing tariffs, creating private markets, and instilling competition (RG 293). Additionally, Erhard resisted pressures from the Americans, the Social Democratic Party of Germany, and the use of Keynesian planning to combat unemployment crisis. Instead, he supported the Investment law of 1952 to overcome industrial bottlenecks in the heavy industries. Erhard wanted solutions that involved the least government intervention that would still create a private capital market (RG 294).

Maier and Bischof looked at Germany’s recovery from the framework of The Marshall Plan in The Marshall Plan and Germany. The book presented two major opposing critiques of the Marshall Plan. One of the critics is Werner Abelshauser who believes that Western German recovery was fine without the Marshall Plan. Abelshauser claims that the Marshall Plan was public relations: “Do good and let everyone know about it” (TMPG368)! Abelshauser justified by saying at the second year of the Marshall Plan, economic aid to Europe remained below the planned amount and France, Austria, and the Netherlands received more total per capital aid than Germany (TMPG 389). Abelshauser argues even though Germany was battered with transportation and production bottleneck and weakened by hunger, it was not underdeveloped.

Conversely, Knut Borchardt and Christoph Buchheim believe that the American funds cleared critical bottlenecks and offered partial solutions to the capital shortage and the problem of re-directing the available investment capital to areas of the greatest need. More importantly, bottleneck traced back to shortage of capital. (TMPG 415). The Marshall Plan helped supply raw materials, which was essential for the revival of the textile industry. There was a coal shortage and the counterpart funds helped finance and expand electricity for public consumption (TMPG 433). Moreover, the American initiative helped reinvigorate animal spirits and contributed to psychological buoyancy for generating investments (TMPG 365-366).

Contrasting Borchardt and Buchheim, in Mainsprings of the German Revival, Wallich believes that Germany’s industries and losses were easily made up. He did not think it was a great problem to rebuild a textile machinery industry and believed the amount of war damage was overrated too. Instead, he argues that “Though dismantling did hurt in many places, it often led to the replacement of an old plant by one of the latest design and to an increase in Germany’s power to compete”(MGR 7). While Wallich credits Marshall Plan and other policies like currency reforms, increase of employment, increase of trade and investments, capital-output ratio, savings ratio, he also brings new interesting points about other ongoing events in the world that helped Germany’s economy.

The 1950-1951 Korean War, or the Korea boom, helped Germany’s economy revive because there was demand for German goods and machinery, and this significantly helped Germany’s export industries. German industries specialized in machinery and other capital equipment and Germany had excess capacity for the things that were most in demand (MGR 87). Although Wallich does not state it explicitly, he seems to suggest that Western Germany had preconditions for economic growth from the war that allowed Germany to be in an advantageous situation during this time. Furthermore, Wallich brings the example of entrepreneurs and businessmen that were active and politically powerful, and how they continued to focus on technology and technological inventiveness (MGR 337).

Although the authors present contrasting theories on which aspects contributed most to Germany’s recovery from WWII, it is at least consensual that there were many reasons and channels for Germany to rebound and that Germany was headed in a positive economic direction.

Bibliography:
Maier, Charles S., and Günter Bischof. The Marshall Plan and Germany: West German Development within the Framework of the European Recovery Program.  New York: Berg, 1991.
Van Hook, James C. Rebuilding Germany: The Creation of the Social Market Economy, 1945-1957.  New York: Cambridge University Press, 2004.
Wallich, Henry C. Mainsprings of the German Revival. New Haven: Yale University Press, 1955.