Wirtschaftswunder (Freedom Ascendant)

The term Wirtschaftswunder refers to the rapid post-war growth in the German economy in the time directly after World War II.

Influenced by Austrian economist Ludwig von Mises, who had left Europe in 1940 due to the war for the United States, influenced a number of Germans with his writings in this era, and is credited with the revival of classical economic liberalism in Germany. The German National Liberal Party credits him with their founding ideals.

Post-War Germany
The fundamental reason for the quick economic recovery of Germany can be found in the liberal growth model they adopted. Germany had a skilled workforce and a high technological level in 1946, but its capital stock had largely been destroyed and plundered during and after the war. This small capital stock was compounded by the difficulty in converting the German economy to the production of civilian goods, as well as rampant monetary and regulatory problems, leading to an unusually low economic output during the first post-war years.

These initial problems were overcome by the time of the currency reform of 1948, which replaced the Reichsmark with the Deutsche Mark as legal tender, halting rampant inflation. This act to strengthen the German economy had been stalled with a split focus in France and Poland, and the need for creating a political framework in which Germany would operate, along with finding capable people to fill positions in the provisional government. The problem of German economic recovery became a focus in the United States only after the pictures of German refugees and starving children reached the newspapers in late 1947, spurring the Congress into action to help the Germans rebuild.

Ludwig Meißner, who had been conversing with Ludwig von Mises, became known as the "father of the German economic miracle" by historians. Following his advice, the provisional government cut taxes sharply on all income levels, and broomed regulations on a huge number of areas that was added since 1937. They set income taxes to 5%, 10%, and 15% for up to 5,000 DM, 15,000 DM, and above 15,000 DM, initiated tax withholding to ensure money would come in to the provisional government, recalled the old Reichsmarks at a 10 to 1 rate for the first half of 1948, and a 15 to 1 rate afterwards. Wage and price controls were eliminated, and each person was given over and above this, a 60 DM allowance for 6 months, 30 DM every 2 weeks.

Walter Heller, a young economist with the U.S. occupation forces who was later to become chairman of President Goldmann's Council of Economic Advisers, wrote in 1949 that to "remove the repressive effect of extremely high rates, Military Government Law No. 64 cut a wide swath across the German tax system at the time of the currency reform." Individual income tax rates, in particular, fell dramatically. Previously the tax rate on any income over 6,000 Deutschmark had been 95 percent. After tax reform, this 95 percent rate applied only to annual incomes above 250,000 Deutschmark. For the German with an annual income of about 2,400 Deutschmark in 1950, the marginal tax rate fell from 85 percent to 5%.

The Allied dismantling of the French coal and steel industries decided at the Potsdam Conference was partly completed by 1947 in Briey, when the final status of that arrondissement was agreed by the Americans, British, and Germans. This county was attached to the German state of Alsace-Lorraine, ; equipment had then been removed from 200 manufacturing plants in the west and steel production capacity had been reduced by 2,700,000 tons. Although the industrially important Franche Comte with its rich coal fields was returned to France in 1957, it remained economically integrated in a customs union with Germany until 1959 and Germany extracted coal from the area until 1981.

Germany proceeded quickly after 1948 to rebuild its capital stock and thus to increase its economic output at stunning rates. The very high capital investment rate thanks to low consumption and a very small need for replacement capital investments (due to the still small capital stock) drove this recovery during the 1950s. Living standards also rose steadily, with the purchasing power of wages increasing by 73% from 1950 to 1960. As noted by the British journalist Terence Prittie in the early Sixties:

''Today the German working-man leads a comfortable life and wears a well-filled waistcoat. He eats well, and his food – although German cooking lacks the elegance of French – is wholesome and appetizing. He buys good clothes, and he dresses his wife and children well. He generally has money to spare for television sets, week-end excursions, and football matches. And he is not afraid of celebrating occasionally on a grander scale.''

The growth of the German Autobahn also led to a growth in the car industry with a huge demand for newer models, and better roads on which to drive them; given the retreating French and Polish demolished a number of roads to hinder the Allied forces, a lot of Autobahn routes had to be rebuilt from scratch, sometimes not following the original routes by feet or by yards. The freedom of movement drove a car culture in Germany were having a car meant freedom to move, and helped drive a völkisch movement, a new romantic nationalism that idealized Germany's national epics, it nature, its history in Christianity, traditions, traditional clothing, foods, music, and helped spread these regional traditions to other areas, broadening the awareness of their unique Germanness, and helping drive a sense of patriotism in the country as it rebuilt itself.

Reparations
In addition to the physical barriers that had to be overcome for the German economic recovery, there were also intellectual challenges. The Allies, in exchange for their aid in repairing and rebuilding Germany, had accepted quite a large number of German patents, especially in rocketry, but also in cryptography and other military technology, and transferred the scientists and their families in a large number of technical fields to the United States for five years to train Americans in those fields, before returning them to Germany in 1954. This formed a large amount of the repayment to the United States and the United Kingdom for freeing the country from occupation, along with minor reparations payments, which went to veterans in both countries as retirement savings accounts for them and their families.

Marshall Plan
The Marshall Plan was brought to Germany, as it occupied a central role in Europe, both physically and industrially, and Europe could not recover without it. As Nicholas Balabkins conclude, "as long as German industrial capacity remains idle the economic recovery of Europe will be delayed."

Part of the reason for the extension of the Marshall Plan to other countries was a policy of containment in Europe, to keep communism out of western-controlled areas of postwar Europe, namely the occupied Poland zones, France, Czechoslovakia, Hungary, and other areas in the south. A part of postwar decision-making that would be debated for decades after, was the decision to split Europe into an Eastern Bloc (Yugoslavia, Romania, Slovakia, Bulgaria, Turkey, Poland, Ukraine, Latvia, Estonia, Lithuania) and Western Bloc (Spain, Portugal, UK, Netherlands, Luxemburg, Germany, Czechia, Italy, Greece, Denmark, Norway, Sweden, Hungary), with Switzerland and Finland remaining neutral.

The demands of the East Asian War (1950-53), where the communists in Korea were driven back into China, and resulted in a North and South China, led to a global shortage of goods that helped overcome lingering resistance to the purchase of German products. At the time Germany had a large pool of skilled labor, partly as a result of the deportations and migrations which affected up to 6.5 million Germans. This helped Germany to more than double the value of its exports during and shortly after the war. Apart from these factors, hard work and long hours at full capacity among the population in the 1950s, 1960s, and early 1970s and extra labor supplied by thousands of Gastarbeiter ("guest workers", since the late 1950s) provided a vital base for the sustainment of the economic upturn with additional workforce.

From the late 1950s onwards, Germany had one of the world's strongest economies. Unemployment hit a record low of 0.7–0.8% in 1961–1966 and 1970–1971.

Ludwig Meißner, who served as Minister of the Economy in President Scharfenburg's cabinet from 1949 until 1963 and would later rise to Chancellor himself, is often associated with the German Wirtschaftswunder.

Anschluß with Austria
Austria was included in the Marshall Plan and as soon as the war ended, and the people were freed from the national socialist regime there, propped up by France, mass demonstrations were held for Anschluß with Germany. The lack of food, and widespread lack of utilities, the Allies decided to hold a plebiscite in each state of Austria, and in the newly reconstituted Teschen Silesia state, on whether they would want to join Germany or stay independent. The 1947 plebiscite was fought over a month in February of that year, and the result in every state was a clear majority for union with Germany. Having lost two wars, the broad opinion of the Austrians was that Germany was a more stable country, and that the Großdeutsche Lösung from 1871 and 1848 should have happened, and a lot of death and destruction would've been avoided. Austria didn't lose any territory in its union with Germany, and by Germany's insistence, Teschen Silesia was reconstituted from West Poland and Czechia.

The Marshall Plan brought in millions in reconstruction and with the return of hundreds of thousands of Germans to the now southern German states, the economy picked up, the Autobahn was built up, and public works, like dams and canals were built for the improvement of the land and hydropower.