Germany’s Economic Growth In 1950–60 and the Problem of the Country’s Balance of Payments Sustainability

The 1950s in Germany, especially the period 1953–1958, were later recognised as the ‘golden years of the post-war period’. By the end of this period, most of the war damage had been removed and the economy was in a state of dynamic growth. In the period 1949–59, the average real GDP growth rate was about 7.4% with an average investment rate of 24.2% (in current prices). In the years (1950–53), a massive housing construction programme was carried out that was financed almost in half from public funds. Germany’s economic growth in 1950–60 mainly influenced by investment activities and the growth of exports. During this period, state expenditure did not play a major role in the growth of the West German economy (its share in national income steadily declined during the period in question). A the same time, the share of exports in national income was very high and showed a continuously increasing trend. A long-term growth of exports — affecting constantly the expansion of demand — became an important factor stimulating investment activity, which is the main lever of economic growth. At the same time, unusually strong export activity improved the balance of payments, which showed systematic surpluses. It should also be stressed that private consumption was not a factor driving economic prosperity in West Germany in this period. The share of consumption in Germany’s national income showed a declining trend in favour of investment.

Ordoliberalism, the Social-Market Economy, and Keynesianism in Germany, 1945–1974

The chapter deals with the development of the welfare state in the first three decades after World War II, in which the West German economy ran through a remarkable catching-up process. Economic policy in the new Federal Republic of Germany in that period was decisively shaped and influenced by the ordoliberal ideas of Walter Eucken and the Freiburg school and the principles of the social-market economy. Whereas Keynesianism of the Hicks-Samuelson neoclassical synthesis had already evolved into the dominant view in the academic sphere during the 1950s, it took until the 1966–67 recession for Keynesianism to find a late (and short) entry into German economic policy with the entry of the Social Democrats into government and their charismatic minister of economics, Karl Schiller.

Cultural Transmission Versus Perceptions of the Economy

The formal division of Germany in 1949 and the fall of the Berlin wall in 1989 demarcate a monumental quasi-experiment. Whereas the political culture aspects of this experiment have been studied extensively, the implications of these events for the economic culture in West and East Germany have received less attention. This article attempts to fill this gap in scholarship by examining the basic economic values of parliamentarians in East and West Germany. To this end, I interviewed 168 parliamentarians from the united Parliament in Berlin (79 from the East, 89 from the West). The study finds that the socialist order successfully imbued East MPs with socialist economic values—especially among the postwar cohort—independent of MPs' evaluation of contemporary economic conditions. In contrast, West MPs' economic values reflect the social market system of the West German economy. These results suggest that basic institutional arrangements, once put into place, have a substantial influence on individuals' ideological predispositions.