Some General Lessons from West Germany’s Postwar Experiences
West Germany is widely acclaimed for having produced an economic “miracle” in the wake of the 1948 currency reform and the parallel decontrol of prices. A miracle, it was indeed. It came as a surprise to everybody, except perhaps some notorious optimists. This is already part of the explanation. Germany’s economic performance would have been much less impressive had the fast productivity advance been fully anticipated at the wage bargaining table. Profits and profit expectations would have been lower, and much less business investment would have come forth. The structural (classical) unemployment, which was related to an inadequate capital stock (capital shortage unemployment), would have persisted for a longer time, and the tensions between the indigenous population and the immigrants from the eastern part of the former “Reich” (refugees and so-called expellees) could well have led to social unrest. In this respect, one can say that positive surprises produced positive suprises. A virtuous circle developed. One cannot say how important this “pure miracle” was. But it is unlikely to repeat itself elsewhere, not even in East Germany.
KeywordsCentral Bank Trade Liberalization Current Account Deficit Flexible Exchange Rate Export Sector
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