Post-War Germany Comparison and Problems of Economic Development Essay Example

more than the United Kingdom.

In the eyes of many observers, United Kingdom is becoming Europe's patients. The fate of the two distinct and with ironic, today it seems very educative. 1950 's Germany an "economic miracle" the background lies in its 1930 revival plan. The Nazis had invested a large amount of financial and material resources in communication, arms, vehicles, optics, chemical industry and non-ferrous metals and light engines were originally part of a war economy, but 20 years later took effect. Economist Ludwig Wilhelm Erhard's "social market economy" theory as Germany as provided strong support, in fact, political and business young talent of the post-war West Germany emerged initially were Nazi officials. Germany business critical infrastructure is not damaged in the war. The early 1950, manufacturing companies, banks, insurance companies, wholesalers and recovery operations, providing products and services to foreign markets. Even Germany mark rising failed to hinder Germany economic development that he reduce the import cost of raw materials, but there is no limit on foreign Germany product demand, Germany is a high value, technologically advanced goods.

They win depends on quality, rather than price. What's more, in the first decades after World War I, they had little competition: Sweden, and French and the Netherlands who wants to buy some engines product or tool who, in addition to from Germany purchases, had no choice. Power of suppliers higher than buyers' power. By introducing an industry can learn about circumstances. In 1960, the Germany automobile manufacturing because of quality and reliable engine has won international prestige.

Stuttgart's Mercedes-Benz and BMW in Munich near-monopoly on the premium-car market, first at home,

then continuously overseas. The Bonn Government to openly support the industry, providing early support preferential loans to them, and to encourage cooperation between banks and enterprises, to Germany companies provide cash investments . Volkswagen as early as 1945 completes the infrastructure. And like many other industries in West Germany after the war, Volkswagen benefited from a free market economy, it has not suffered a loss of competition. Volkswagen in 1939 before access to a steady stream of resources.

It worked for the Nazi, war and military occupation service, because when the coalition Government from relocating a public company, its production capacity has been established before the war, so no further investments can be put into production after the war. United Kingdom also has the national lead industries, Morris, Austin independent car makers, such as a merger of the British Motor Corporation, British Motor Corporation and subsequently integrated into the Leyland Motor Corporation, specializing in United Kingdom Leyland cars. By the year 1980, Leyland Motor Company franchised United Kingdom featured automobile products.

And Germany manufacturer, United Kingdom auto makers are increasingly concerned with overseas markets. However the outcome is completely different. After the second world war, successive United Kingdom Government have urged car companies try to sell vehicles overseas in order to attract foreign exchange earnings to offset the huge war debt owed by the State. (Tony Judt writes in the Postwar:A History of Europe Since 1945, the Government's export target is at the end of the 1940 's, United Kingdom production of automobile exports to 75% per cent of the total production).

Some companies in order to quickly increase production and even

wilful neglect of quality management. Initially, United Kingdom cars of poor quality and did not have a negative impact. United Kingdom company has monopolized the market: United Kingdom orders in domestic and European markets far exceeds the supply. Manufacturers on the production of the European continent is not United Kingdom rivals: 1949 United Kingdom production total production for the bus than in other European countries (Robert ,1995) However, with the passage of time, United Kingdom car industry the low quality and reputation for poor service.

Other States car lot listing types to choose from, European people do not buy United Kingdom cars any more . When the British decided to upgrade the auto industry, and production lines to improve modernized equipment, United Kingdom, car companies could not like Germany companies as cash investments and loans from the banks. They cannot look to get help from the Government for assistance. However, in London, under political pressure, in order to obey the decision of the local government and to reassure the local politicians and trade union organizations, they have to build in undeveloped rural areas distribution centre .

In 1968, the United Kingdom of the Leyland Motor Corporation was under 60 different plants. United Kingdom Government policy make manufacturers very negative. After the war, Government in accordance with the manufacturer's market share before the war to them very small amount of iron and steel, the past mode of economic development in many industries to be frozen. Security of supply is not in place, a false high demand and political pressure. Eventually led to the United Kingdom car industry go bankrupt.

By the year 1970,

Europe and Japan automotive manufacturers began occupation of the British market, and on the quality and price beat the United Kingdom. The 70 's oil crisis, United Kingdom joined the European Community, and the United Kingdom finally protected market disappeared because of a reversal of colonial, which eventually destroyed the United Kingdom independent of the automotive industry. United Kingdom independent auto industry decline and ultimate demise, largely on behalf of United Kingdom general course of economic development.

United Kingdom economy aren't so bad at the outset: Roger in The British economy since 1945:engaging with in the debate pointed out that the 1951 United Kingdom is Europe's major manufacturing centers, total production was Germany and France and twice times. United Kingdom achieving full employment, and economic development has been slower than other countries, but also in the growth phase. United Kingdom's payments crisis, mainly from 6 years to fight Germany and Japan accumulate huge debts owed by, in addition, to support effective defense system after the war and the substantial expenditure.

In 1955 defense spending as a share of national income of 8. 2%, Germany spending less than United Kingdom half. (Roger,2000) . In the 1950 sterling was overvalued, United Kingdom it would be difficult to sell enough overseas products, to make up for Sterling against the dollar's long-term deficit. As an island nation, United Kingdom is totally dependent on imported food and plenty of raw materials, in the history of United Kingdom relies entirely on the Commonwealth took over control of privileged markets to make up for this disadvantage.

Two forces of conflict Through the comparison of the above we can see

that in the special period of government intervention in the economy, Germany has achieved a successful social market economy path, but the process was not smooth sailing. Basic Law of the Federal Republic of Germany came into effect on May 24, 1949, section 2,3,9,12,14 provides:Must have its boundaries the State in managing the economy. Thus, negating the centralized economic management system.

Mission mainly in the framework of the provisions of the country's economic order and checks and balances and manage conflict that is raised at the community level. States should not intervene directly in labour conflicts, but must develop a legal framework for labour relations into a certain amount of redistribution through the tax and social policy implementation. (Overy,2003). Due to the inclusion of social and market two elements, that is, the balance between economic and social development, therefore, inevitable in the process of economic development, there were two rival of heterogeneous elements.

When this counter is functioning as a complementary relationship, economic takeoff, and when excessive when there is a confrontation between the two complementary, economy will enter a period of struggling in the doldrums. Politically, the two forces dominated by the Christian Democratic Union (CDU) and the Social Democratic Party (SPD), the two major political parties reflect. Therefore, the actual relationship between these two heterogeneous elements to a large extent associated with the Government party structure.

Back to post-war Germany economic course, followed before and after can be divided into three stages: the CDU's ruling period of economic development;The social construction of social democratic party in power;Competing with each other in economic downturn. I. Construction of market-oriented economy Postwar Germany,

devastated. Economic reconstruction is a priority. Before the advent of the first Government, as the supreme body management "Frankfurt Economist" (Frankfurter Wirtschaftsrat) made it clear that the direction of economic development is: sharp weakening of government intervention, strongly stimulating market vitality.

The 1949 election, in favour of market mechanism and economic regulation of the CDU was pushed on the first stage of the Government, Ludwig Erhard became Economics Minister. Thus, Germany within the framework of the social market economy has embarked on a road of economic rehabilitation of maximize the free market energy. General policy: cancel rationing imposed by the occupation authorities after the war, reducing economic regulation, the maximum possible to liberalize markets. Management of absolute respect for the law of Economics, strongly resisted non-economic factors adverse intervention in the economy.

Initially, by currency reform cleared after all economic ties with the Nazi era, liberalize prices lead to higher prices are the direct problems. The Government has not taken any administrative intervention, but by economic means, namely by monetary tightening and reducing tax rates to stimulate investment and productivity, such as keeping enterprises ' working capital, worker overtime zero income tax. As soon as production increases, increased incomes for the people. With the formation of the market mechanism, the emergence of competition, companies are more and more rational, unemployed workers in large numbers there.

Faced with this situation, the Government did not change its policies, mandatory intervention, but the use of economic instruments. While in May 1949, by State help to enable Bank discount rate from 5% to 4% per cent,to further stimulate domestic investment;The other hand for the international market

(mainly the United Kingdom and France) price increases, on September 19 active devaluation of the Deutsche 20% in order to boost exports. (James, 1998). Soon, production should rise further, unemployment pressure has been effectively alleviated.

As the June 1950 the Korean peninsula crisis occurs, a hoard purchase occurred in West Germany, prices rose, also accompanied by an increase in imports. At the same time, unemployment rates begin to rise. In this case, the forces of planned economies began requiring synchronization in response to price increases to pay. This was at the request of demagoguery, but economy Minister Ludwig Wilhelm Erhard did not waver but continued to adhere to the principles of a market economy. In his view, the market economy can be achieved through improved productivity and wages.

Corresponding to this, he immediately withdraw liquidity, raise the minimum reserve amount, limit the discount, the discount rate from 4% per cent to 6%, and mortgage rate from 5% per cent to 7%per cent. Soon, in 1951, the second quarter, a turnaround occurs, exports began to outpace imports. Improvement in the relationship between supply and demand rise in prices has been contained. The unemployment rate began to decrease again. (James, 1998). Economic and political success of CDU and easily won the general election of 1953. Since then, Federal Germany economy enters a period of rapid development, and lasted until 1958.

In the meantime, another force of society could only be achieved with the acoustic echo. Economic policies so widely recognized, on the one hand due to the economic imperative of the age of;Also while stimulating the economy, because the Government did not take the

British and American models or free economy model of the Weimar period, but consider the social adjustment and social construction in a timely manner, and effectively and this regulation into economic construction construction operation auxiliary rather than obstacles.

According to Hans-Joachim Braun , in his book “The German economy in the twentieth century”, between 1949-1957 and West Germany issued a series of community-building law, such as 1949 's "Social Security Balance Act" and "Emergency Assistance Act", in 1952, introduced a "War Loss Balance Act" and "minimum working conditions found that law" in 1957 and introduced a social security law to the pensions. It can be said that, at this time, no country on Earth like the Federal Germany enacted so many of the social balance and regulation laws.

These laws balance social conflicts, peace including internal labour conflicts, thus, for the protective effect of sustained economic development. Erhard was not random came to the practice of the social market economy, but has a clear rationale, is economist Walfer Eucken thought. Eucken advocated the establishment of a free competition and pointing to balanced economic policy. Thus, countries ' task is to establish an effective market-based. In his view, economic and social issues do not come from between socialism and capitalism, but only from the analysis of the economic order.

Therefore, and contrary to Adam Smith, he does not "competition" as unchanging natural laws, but simply believes that "competition" must be protected as a human freedom. He was also against collective power against private power. It is based on the "neo-liberal" economic thought, in 1957 the West German Government had established antitrust laws, except

transport, mining and metallurgy, banking, insurance, agriculture, and limit the emergence of private monopolies.

Because of market mechanisms has been effectively activated, balanced also played a supporting role, and post-war reconstruction full release of enthusiasm. 1959-1966, the West German economy enters a period of high growth, even economic overheating. At this point, the voices of the community there have been improvements in social policy, asking the Government to increase social equilibrium. Erhard also did not yield, because he believes that it is not necessary, not only exceeded the means of, but would also drag down the entire economy.

He knew that when West German society has differentiated into the various interest groups, and these groups have set out their respective positions to get more benefits from the society or the State, national politics if satisfied by these different interest groups, it would be caught in some kind of multivariate dependence mechanisms. In this way, States would lose their capacity for action and fall prey to interest groups. Moreover, he knew, on community-building measures cannot be reversed, once the excessive leave the State the economy is in crisis. So, he does not meet another force in the community of the greater ocial redistribution requirements but to build "an ordered society":A community ceased to be contrary to the purpose of class and organizations with each other, but put aside all differences of opinion on the country-cooperation community at root, that is, a building based on community organizations and interests working together. In such a society are included in the social market economy, his cooperative did not have a strong compulsion, but from their own forces,

from their will, from each other is inseparable from each other is becoming increasingly clearer awareness and understanding. James, 1998) Due to his perseverance and the neo-liberal economic protection at that time, West German economic growth in a continuously high growth in a few years. However, high growth comes immediately after the overheating of imbalance, in late 1966 eventually led to the economic downturn, there is a West German economic recession for the first time in the history of 1966-1967 economic growth rate was-0. 2%. In the 1965 election, SDP vote up votes than the CDU of growth rates.

At this point, Erhard with the most total votes remained in coalition with the Liberal Democratic Party largely the outcome of economic policy disagreements have emerged, resulting in rupture of the ruling coalition, Erhard to step down. 1966 Kurt Georg Kiesinger CDU Prime Minister after the failure of coalition talks with the Liberal Democratic Party, and the social democratic party form a new Government, but also by the social democratic party who served as economy Minister. Since then, the West German economic progressive efforts to increase social construction of the beginning of a new era.

Regulation-Led Period of Social Construction

The new Government soon introduced the so-called economic stabilization policies, main content is strengthening national regulation, such as the accumulation of reserves in order to overcome the cyclical economic growth;Establishment of mechanisms for consultations between employers, to exert influence on wage;Establishment of economic forecasting and planning system;Enhanced global perspective of macroeconomic regulation and control, and so on.

At the same time also raised the slogan of full employment. This desire for criticism's

goal just when almost no one objected, but also enjoy the support of a number of authoritative economic theorists,a market economy is not a purely economic order, but a social, moral and ethical element to set up the system. Prior to economic reconstruction, strengthen the market economy, and now, well, it makes perfect sense to take into account social policy construction.

Economic growth Advisory Council was established by the Government, and at the same time established federal and State mechanisms, both employers and employees sharing information. However, due to the overestimation of the capacity of economic forecast, while the lack of an effective means of control, and while it is difficult to agree on consultations among the parties, the original targets not only to achieve, and increased government spending.

In 1967 although the recession be overcome by two government economic stimulus program, and genuine economic improvement since then, in 1969, economic growth rate even reached 8. 2%. But these are not the result of the Government's economic policies, and people thought it was a result of increased government regulation, which enable the country to gain the role to maintain social welfare, many up to the question on the State of the market;In one hand, and the social democratic party in the people's advancement.

The 1969 elections, when all major parties decline in almost all of the votes, only the social democratic party's tally has improved significantly. Apparently, there was an increasing number of voters tend to national social equilibrium. The Social Democratic Party and the Liberal Democratic Party form a new Government, the social democratic party who Willv Brandt as Prime Minister,

by the social democratic party who served as Economics Minister also, Karl Schiller, followed by Helmut Schmidt.

After the formation of the new Government was fully pursued a policy of State, whereby the State stepped in to control the national economy and social life: on the one hand, in stimulating the economy and to overcome the unemployment rate started to ignore market means on the issue, will mainly focus on the national finance;The other hand, are pushing relies primarily on community-building process of State financial benefits. End of 1972, the West German social policy had reached unprecedented heights.

This makes the State finances a huge deficit for the first time. Lucky is that started in the late 1960 's, West Germany enterprise, productivity has been increased significantly, making statistical figures show overall growth of the national economy. Thus, the community generally have a feeling, the Social Democratic Party Government's national policies focus on people's living standards and welfare, concerned about the growth of the national economy through hard intervention, that there is nothing wrong.

Such results on the one hand allows to continue the ruling social democratic party along with the established policy of the Government to move on;We will also respect economic laws, market-oriented mechanisms of voice is not up, many acute economic problems do not have enough attention, such as productivity while improving the overall economic growth, presents promote consumption issues, and led to the production of consumption in a new situation.

At that time the Government was not trying to deal with, but, as always, will focus on the macro-control and promoting the welfare of the process. 1973

oil crisis inflation have gotten even up to 7%, to the collapse of the Bretton Woods international monetary system of fixed exchange rates for content, followed by the worldwide economic crisis has also affected the West Germany. In 1975, the West German economy fell to its lowest point: all sectors of the economy crisis, an unprecedented slowdown in economic growth, the unemployment rate reached a record high, the 1974-1975 recession.

Even under such adverse economic circumstances, the Government is also trying to implement macro-economic control and community-building, only between 1970-1975, West Germany State welfare spending has doubled . Which makes the budget deficit rising at an alarming rate. So the poor economic situation and irrational acts of States when the community was aware of the error of excessive value State regulation and welfare. The 1976 election results made it clear that former excessive importance to macro-control and social policy has begun on the construction of public discontent.

Thus, the Government began to change economic policy, no macro-economic control, but to enable the market mechanism to make an adjustment, Germany Mark's fixed exchange rate with the US dollar has been cancelled opportunities, linked with productivity growth and stable price level over the medium term the currency merchant policies In this way, by controlling the money supply causes lack of marks on the market, and thus marks compared to the appreciation of the dollar more than 1 time, then rapid import growth.

Strong marks and imports accelerated first oil crisis impact on West Germany obviously failed to other Western countries, especially inflation significantly smaller than other countries, which makes rapid upgrading of West Germany's

position in the world. Facing export difficulties arising therefrom, the State did not conduct a mandatory intervention, but to use market mechanisms to bring West German industrial structure transformation themselves, enhance the market competitiveness of products, such as those of traditional labour-intensive industries such as coal, textile, shipbuilding, iron and steel industry gradually atrophy.

This structural transformation will allow the industry to release a lot of unemployed persons of the community, but the Government in view of the inherent law of economic development, or stick to the policies. Therefore, West Germany began in 1976 and continued economic growth. Although in 1979 and there is a second world-wide oil crisis, but the stronger mark makes the impact on Western Germany is significantly less than other Western countries, which increases the international status of West Germany continued to improve, the European financial system, Germany's Federal Bank in a leadership position.

Precisely because of the success of this session of the Government's economic policy, the 1980 election, LDP votes most improved significantly compared with the other political parties, SPD is only slightly elevated. This clearly shows that new economic policies to save the fate of the Liberal Democratic party coalition Government, as long as the economy is not affected, people wanted the national focus for community-building. In fact, late 60 's benefits to the construction of the second half of the 70 and never stopped, just slowed.

The late 70 and early 80 's, as economic growth and trade union involvement in the enterprise for a rise in a row, both corporate and personal income growth. However, due to the appreciation of the mark and

the national framework for intervention persists, investments did not appear accordingly, some enterprises take advantage of the strong mark and cheap labor in foreign countries this should be invested in domestic market began to be moved abroad.

This directly lead to the economic recession that began in 1980, inflation and unemployment rate rising rapidly. At that time, the West German economy has experienced continuous recession that began in 1980, and recessions than 1974-1975 that bad. At the 1983 general election, notable decline in number of votes of the Social Democratic Party and the Liberal Democratic Party, Social Democratic Party Government to step down, West German economic history on the social welfare of the end of the construction period. (James, 1998)

Difficult Period

When headed by Helmut Kohl's CDU in power, immediately offered to go back to era of Erhard's road to a social market economy, but also admits this is not entirely dependent on market mechanisms. Clear specific policies to reduce government spending and to stimulate investment as a core. On October 1, 1983 starts austerity plans, such as reducing the amount of childcare support, was in hospital and nursing homes are no longer exclusively by the State a full payment, individuals must be part of the burden.

These initiatives reduced national social expenditure only reduces new issuance of government bonds, but not to have total accumulated national debt reduction, because the national welfare systems have been set up, it has been used and tasted States contemplated social welfare benefits. Therefore, reducing State spending, refers only to reduce the amount of newly issued Government bonds, rather than simply to reduce the

national debt as a whole.

In order to improve the financial situation of the country, Kohl Government also initiated the privatization of State-owned enterprises, such as postal services, telecommunications, energy, and later raised the sales tax. These harmonize national fiscal revenue has significantly improved. But after building up huge social welfare, financial situation did not show substantial improvement. Thus, in stimulating investment in the Kohl Government would attempt to relieve pressure on enterprises through tax reform, but, under pressure from bad financial situation in the country could not take too much action.

Fortunate is that international economic situation improved after the Kohl Government came into power, in particular the United States and Japan, which makes the already high level of internationalization of West Germany economy through foreign trade rises pick up right away. With the devaluation of the dollar, beginning in 1985, the rapid growth in imports, prices began to drop, growth in domestic demand. From 1983 to 1990, West Germany's overall economic growth rate from five began to grow to the end of the 80 's 2% and per cent in 1990.

However, the improved little from the internal market, because profits faster than investment growth during this period. Second half of the 80, investment has also accelerated growth, but unemployment does not appear synchronized better. It is clear that the growth largely from domestic enterprises to invest overseas. Kohl on the economic policy of the Government is in a difficult phase, and for high unemployment and no growth in domestic investment economic growth when frustrated, East German voluntary dissolution, and federal Germany merged.

The German reunification is undoubtedly a

great blessing for the German nation, but temporary prosperity to Flash briefly. To achieve the transformation, reconstruction of infrastructure and social safety nets in the eastern part, including common revitalization project in the East, and the consolidated fund, all levels of Government transfer payments between the 1990 and the medium-term to the East has over trillion-mark, weighed on Western economies.

To raise funds and curb inflation, the Germany Government had to be more than more than 10 times in a row to raise key interest rates. Trouble has been brewing for quite some time. Germany economic weakening, mainly because of the welfare system and a series of structural reasons. Excessive protection of the social welfare system has pushed up the cost of production, and formed a "higher welfare – higher taxes under the low growth – high liability – high cost – low growth – low investment," a vicious cycle. From the early 1970 's to the late 1990 's, Germany 5. times more than double the increase in welfare expenditure per capita, down to become a drag on economic growth;1970, 1980, too protect sunset industries in the industrial structure and the information technology industry research and development keep lagging, its lack of wealth growth force leading leading industry;The lack of flexibility of the system of corporate governance and incentive mechanism, led by profits, the lack of micro-economic vitality;Excessive fire protection and high unemployment security benefits labour market rigidities and unemployment reduction.

Faced with rising unemployment, helpless Government of Helmut Kohl in 1998, replaced by a Government of the Social Democratic Party was Gerhard Fritz Kurt Schroder, Schroder economic policy compatible with the

two party ideas: on the one hand through tax breaks to stimulate investment and consumer demand, dynamic economy.

The other hand, in the field of social security, and former advocate of personal responsibility at the same time, try to keep the original treatment, does not increase social security contributions in favour of eco-taxes to fill the gap and promote environmental protection. Now Germany as the third largest economy in the world today, the second-largest exporter, its per capita GDP of more than 27,000 euros.

Germany agriculture production value less than 1%, share services near two-thirds, is a highly developed industrial structure to serve the community, its industrial machinery manufacturing, automotive, electronics and chemical industry led;Its national economy by relying heavily on exports, and export share of world total exports of nearly 10%, 70% about trade is concentrated in Europe and the United States, Japan and other developed countries, long-term surplus in balance of payments, inflation rate, unemployment rate at around 9%.

Looking at the Germany of economic development after the war, at some point, despite the many problems, but judging from the overall economic and social development, was ranked the highest in the world, experience and lessons have left us a valuable asset.

Reference

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4. Overy, R; Ogilvie, S. Germany: a new social and economic history, Vol. 3, Since
   

1800. London : Arnold 2003