Between the periods 1950 to 1959, the economy of West Germany grew rapidly attaining increases of up to 8% percent in gross domestic product (GDP). It surpassed that of most countries in Europe against the expectations of many, owing to the effects of the First World War. Only countries like Austria had the benefit of getting closer to the rate at which West Germany was performing economically. The growth resulted in doubled rates in living standards among citizens within a decade. This meant that citizens could afford a wide range of products, ranging from basic needs to luxuries. Within this period, West Germany’s automobile industry was characterized by new cars especially the Volkswagen Beetle, which had become so popular for travel and luxury among a majority of citizens. With the prevailing economic boom, there was no doubt that government economic policies could have allowed an average middle class citizen to own a Volkswagen Beetle. This was made possible through changes that highly favored an all-inclusive economy.
Through the 1950s, West Germany experienced a major shift in the manner that her human capital resource was being utilized. Research shows an annual increase of 1.1% of labor outside agriculture between the period 1950 and 1960. A big percentage of labor migrated from lowly performing sectors like peasant farming to more productive sectors like industrial production. Previously, West Germany had stuck to a tradition of protecting the agricultural sector by ensuring a large number of citizens practiced farming. This saw West Germany possess an expansive agricultural sector that was largely occupied by small but unproductive family farmers. Consequently, the agricultural sector provided constructive employment for only a small percentage of Germany’s population. During the First World War, West Germany saw a big influx of refugees who took over agriculture thus accounting for at least 20% of the total employment. A shift from agriculture to more productive sectors automatically meant that a big percentage of citizens stood a better chance in improving their lives. Consequently, they could afford luxurious lives.
After the First World War, West Germany’s leadership was willing to establish major economic reforms that could involve all citizens. It adopted a social market economy that was free from excessive intervention by the Nazis and social divisions of Weimar. It was one of the major reasons why the West Germany economy performed better in the 1950s relative to the 1920s. Previously, the economy was under tight regulation with only industrialists and professionals allowed to control markets in terms of entry, price determination and contract regulation. Most of the control measures were as a result of the negative effects that had accrued from the Great Depression and they characterized the West Germany economy up to the 1940s. This meant that most of the sectors, including banking, healthcare, energy and transport, were exempted from competition, thus out of reach by normal citizens. Adoption of social reforms saw the introduction of collective bargaining in the health sector, a more comprehensive vocational training that focused more on industrial training rather than traditional craftsman skills, and a less regulated banking sector. The reforms put many industries under government watch, thus it could come up with measures to enhance economic stability. A good example involved wage control that saw the government set wage limits for workers in the mid-1950s. Commodity prices were also kept low, which was a deliberate move aimed at keeping consumer purchasing power high. The government also subsidized the construction industry, which kept rents affordable for ordinary citizens.
West Germany’s economic stimulation was also backed up by appropriate macroeconomic policies adopted within the 1950s that made it a capital exporter rather than a capital consumer. They encouraged increased saving among ordinary citizens and the government. Saving became so amplified that the government experienced surpluses within the period, with the money being allocated for use in the following years. Such an upsurge in government savings resulted from the government attempt to invest its funds into a rearmament plan. Additionally, West Germany had a very low debt ratio. A low debt ratio combined with high levels of savings meant that West Germany stood a favorable balance-of-payments position. Furthermore, West Germany loosened on its foreign exchange rules that brought about stability in its fiscal policy. Basically, West Germany became a major capital exporter. This allowed West Germany to accumulate large sums of foreign trade income, allowing her to improve the lives of her citizens.
Another key factor that led to enormous growth was the abolishment of American made form of competition in West Germany. American regulators had tried to create a state banking system that that would have taken over in postwar Germany. Big Berlin banks were to be split with branches in both East and West Germany. However, in 1955, West Germany became independent and such laws were abolished. This greatly reduced the effects of cartels that were against public interest by enhancing a healthy competition in the banking sector within West Germany. Furthermore, markets shifted to relying on market forces to allocate resources, which gave all citizens a good chance to influence the economy.
Evidently, the economic boom in West Germany during the 1950s can majorly be attributed to policies aimed at making it an all-inclusive economy. The policies saw increased government savings, healthy competition, increased wages, elimination of cartels, increased human capital development and a shift to better paying jobs. Furthermore, citizens enjoyed better living standards and increased savings. These conditions automatically elevated their lives to an extent that ordinary citizens in West Germany could afford a Volkswagen Beetle within the 1950s.
- Eichengreen, Barry, and Albrecht Ritschl. “Understanding West German economic growth in the 1950s.” Cliometrica 3, no. 3 (2009), 191-219. doi:10.1007/s11698-008-0035-7.
- Orlow, Dietrich. A History of Modern Germany: 1871 to Present. London: Pearson, 2016.