Germany's Economy
The Wirtschaftswunder: West Germany's Miracle
How West Germany recovered rapidly after 1948 through currency reform, price liberalisation and exports, and the role of Ludwig Erhard.
After World War II, Germany lay in ruins and was divided. West Germany then grew so fast it was called the Wirtschaftswunder (economic miracle).
Currency reform
In June 1948, the Deutsche Mark replaced the worthless Reichsmark. People exchanged old money at harsh rates, wiping out excess money.
Price liberalisation
At the same time, economist and official Ludwig Erhard abolished many price controls. Shops that had been empty filled with goods almost overnight as producers had reason to sell.
Growth
- West Germany grew at around 8 percent a year in the 1950s.
- Unemployment fell sharply.
- Exports of cars, machinery and chemicals boomed.
Other factors
- Marshall Plan aid.
- Skilled workers, including refugees from the east.
- Debt relief: the London Debt Agreement of 1953 cut Germany’s external debts roughly in half.
- Cooperative labour relations.
Guest workers
Labour shortages led West Germany to recruit guest workers from Italy, Turkey and elsewhere from the late 1950s.
Days after the 1948 currency reform, shops that had displayed nothing suddenly showed shoes, food and tools, as sellers now trusted the new money.
Currency reform, liberalisation, skills and debt relief were key.
- The Deutsche Mark replaced the Reichsmark in June 1948.
- Erhard abolished many price controls.
- West Germany grew around 8 percent a year in the 1950s.
- Debt relief and guest workers supported growth.
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