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Social Market Economy in Germany
Germany's economic growth during the first decades after the war at
times overshadowed its marked success at joining the international community.
In 1945 the country's economy was shattered. A good part of what survived
was later dismantled and carried off by the victorious Allies. Within
Germany there was much argument about how to rebuild the economy and what
its nature should be. Socialist politicians argued for a central distribution
system, extensive state controls, and the nationalization of banks and
industry. Their main opponent was Ludwig Erhard, a liberal economist appointed
to head the office of economic affairs in the Bizone, who later became
minister for economics and ultimately FRG chancellor (1963-66), succeeding
Adenauer.
Erhard's concept of a socially responsive market economy based on free
trade and private enterprise, aided by the infusion of capital through
the Marshall Plan, proved to be the ideal basis for the strong recovery
of the West German economy, culminating in the
economic miracle (Wirtschaftswunder) of the 1950s. In some
areas, for instance in housing and in agriculture, prevailing circumstances
required the introduction of price controls and subsidies. Controls to
prevent the formation of cartels and to foster monetary stability also
remained the state's responsibility. The state likewise furthered the
accumulation of private capital and protected ordinary citizens by establishing
a generous system of social services that included statutory health, unemployment,
and pension insurance programs.
West Germany's economy functioned very well for several decades, and
the country became one of the world's wealthiest. Thanks to the strong
social welfare component and the system of codetermination, which gave
workers in factories some say about their management, West German industry
enjoyed a long period of labor peace. The export-oriented economy received
another boost with the creation of the European Economic Community by
the Treaty of Rome in March 1957. West Germany was one of the EEC's founding
members.
- West Germany and the
Community of Nations
- Rearmament and the European
Defense Community
- Social Market Economy
- Ludwig Erhard
and the Grand Coalition
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