The economy of Germany during the Hitler era (1933 – 1945) developed a hothouse prosperity, supported with high government subsidies to those sectors that Hitler favored because they gave Nazi Germany military power and economic autarky, that is, economic independence from the global economy.
Adolf Hitler, believing that “the economy is something of secondary importance”, left the details of the economic National Socialist Programme out of Mein Kampf. The Nazis rose to power while unemployment was very high, but achieved full employment later thanks to massive rearmament. Their pre-war economic policies, resembling Keynesianism, were in the beginning the brainchildren of their non-Nazi Minister of Economics, Hjalmar Schacht, who was later made to focus more on war production (cf: Military Keynesianism), and was eventually replaced by a Nazi, Hermann Göring.
The trading policies of the Third Reich aimed at discouraging trade with countries outside the German sphere of influence, while making southern Europe largely dependent on Germany. Eventually, the Nazi party developed strong relationships with big business and abolished trade unions while real wages dropped by a fourth, and employees could not easily change employer. Taxes, though, were still low well into the war. Already before the war, people undesirable to the regime were used as slave labour, and in 1944 they reached one quarter of the workers.
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Wirtschaftswunder of the West
Beginning with the replacement of the Reichsmark with the Deutsche Mark as legal tender, a lasting period of low inflation and rapid industrial growth was overseen by the government led by German Chancellor Konrad Adenauer and his minister of economics, Ludwig Erhard, raising West Germany from total wartime devastation to developed nations in modern Europe.
Contrary to popular belief, the Marshall Plan, which was extended to also include Western Germany after it was realized that the suppression of the Western German economy was holding back the recovery of the rest of Europe, was not the main force behind the Wirtschaftswunder.
Nonetheless, the amount of monetary aid (which was in the form of loans) received by Germany through the Marshall Plan (about $1.65 billion in total) was far overshadowed by the amount the Germans had to pay back as war reparations and by the charges the Allies made on the Germans for the ongoing cost of occupation (about $2.4 billion per year). In 1953 it was decided that Germany was to repay $1.1 billion of the aid it had received. The last repayment was made in June 1971.
Apart from these factors, hard work and long hours at full capacity among the population in the 1950s, 1960s and early 1970s and extra labour supplied by thousands of Gastarbeiter (“guest workers”) provided a vital base for the economic upturn.
The Trabant was the most common car manufactured in the GDR.
By the early 1950s the Soviet Union had seized reparations in form of agricultural and industrial products and demanded further heavy reparation payments. Lower Silesia, which contained coal mines, and Stettin, a prominent natural port, were lost to Poland.
Exports from West Germany exceeded $323 billion in 1988. In the same year, East Germany exported $30.7 billion of goods; 65% to other communist states. East Germany officially had zero unemployment.
In 1976 average annual GDP growth was roughly 5.9%.
Due to Germany’s aging population and struggling economy, the welfare system came under a lot of strain from the 1990s. This led the government to push through a wide-ranging programme of belt-tightening reforms, Agenda 2010, including the labour market reforms known as Hartz I – IV.
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The nominal GDP of Germany contracted in the second and third quarters of 2008, putting the country in a technical recession following a global and European recession cycle. German industrial output dropped to 3.6% in September vis-a-vis August. Sebastian Wanke at Dekabank predicted: “There won’t be an improvement in the fourth quarter. The situation will only get worse.” Carsten Brzeski at ING Financial Markets said: “Anecdotal evidence and leading indicators are scary.” In January 2009 the German government under Angela Merkel approved a €50 billion ($70 billion) economic stimulus plan to protect several sectors from a downturn and a subsequent rise in unemployment rates.