Federal Republic of Germany and the Economic Miracle

Reconstruction

After 1945 Rhenish cities assumed the heritage of Berlin as the capital of Germany and Prussia, the commercial centre of the old empire. In 1946 the British made Düsseldorf the seat of government in North Rhine-Westphalia in what was formerly Prussia. In 1949 Bonn became capital city of West Germany. The German Chamber of Commerce and Industry, the German Trades Union Congress and other associations moved to the Rhine. For the economy of the Rhineland, the distance to influential politicians and lobbyists was shortened by almost 600 kilometres.

Companies continued to move away from Berlin, after the Soviet blockade of 1948/49 had exposed the frail position of the western part.

Despite the war and confiscations, the Rhineland still retained a large potential labour force and structurally productive major industries. The growing East-West conflict supported the understanding among Western powers that the reconstruction of their zones, or even of western Europe, could not succeed without an economic recovery at the Rhine and Ruhr. Instead of continually weakening the west German infrastructure by removing parts of the remaining machinery of production, the Marshall-Plan of the USA helped the Germans to achieve strategic financial stimulation and new creditworthiness.

With half on loan and repayment scheduled for the middle of 1952, American help for West Germany had the effect of an economic and psychological kick-start. The main recipient was North Rhine-Westphalia, where the money flowed principally into coal mining, communications and transport, as well as energy and public utilities.

By 1951 industrial production in West Germany had exceeded that of 1938. At the end of the decade it had more than doubled.

 

Data relating to the Economic Development of West Germany from 1949 till 1959:

Year	Industrial production (1950 =100)	Employed(Mio.)	Unemploy-ment among dependent employees (%)	Cost of Living Index(1950 =100)	Gross hourly earnings (1950 =100)
1949	80	13,5	8,3	107	95
1950	100	13,8	10,3	100	100
1951	118	14,6	9,0	108	115
1952	126	15,0	8,4	110	124
1953	139	15,6	7,5	108	130
1954	155	16,3	7,0	108	133
1955	178	17,2	5,2	110	142
1956	192	18,1	4,1	113	156
1957	203	18,6	3,4	115	170
1058	209	18,8	3,5	119	182
1959	225	19,4	2,4	121	191

From 1950 till 1960 Gross Domestic Product tripled. In 1952, for the first time an export surplus was achieved.

The Marshall-Plan, the deutschmark and a market economy breathed new life into Germany in an astoundingly short time. For example, average earnings increased in real terms by 50 percent during the 1950's. The labour expenditure for basic consumer articles fell by 30, for luxury goods, alcohol and tobacco by 50 or 60 percent.

Labour expenditure of a West German industrial worker for selected goods:

Month and Year	1 Kg Sugar	1 Kg Butter	1 Kg Coffee	1 VW Beetle
November 1949	58 min.	4 hrs. 23 min.	22 hrs. 37 min.	3.946 hrs.
November 1958	32 min.	2 Std. 58 min.	8 hrs. 2 min.	1.675 hrs.
October 1970	11 min.	1 Std. 11 min.	2 hrs. 41 min.	787 hrs.
October 1975	10 min.	52 min.	1 hrs. 37 min.	690 hrs.
July 1983	9 min.	42 min.	1 hrs. 36 min.	607 hrs.

However, working hours remained at roughly 48 in a six-day week. The deutschmark made many goods more expensive and had lost a fifth of its purchasing power by 1959.

On the introduction of the deutschmark in June 1948, the population started with a "reward" of 40 DM per capita. Companies received an interim payment of DM 60 per employee for business purposes. Initially, the new banknotes looked foreign. The appearance of 20-DM-notes even resembled American dollar bills. In addition there were 1/2-DM-notes, because of the continuing shortage of metal for coins.
The hope that currency reform would distribute wealth more justly among the people was a deceit: in 1960 almost three quarters of private wealth belonged to one sixth of all households.