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Was the Marshall Plan the cause for the successful economic recovery in post war Germany?

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Introduction

EXTENDED ESSAY The " Economic Miracle" in post war Germany Was the Marshall Plan the cause for the successful economic recovery in post war Germany? Eran Neuberger Table of Contents THE QUESTION OF ECONOMIC PROSPERITY 3 EUROPE AFTER THE WAR 3 THE BEFORE AND AFTER BRIEFING 3 GERMANY IN PIECES 3 THE ECONOMIC THRUST FORWARD 3 THE CURRENCY REFORM OF 1948 3 THE MARSHALL PLAN 3 THE CLEAN CUT DIFFERENCE 3 GERMANY UNDER CHANCELLOR ADENAUER 3 THE ECONOMIC MIRACLE UNDER ADENAUER 3 APPENDIX 3 Was the Marshall Plan the cause for the successful economic recovery in post war Germany? The Question of Economic Prosperity The German economic miracle has become a true landmark in economic history. The intensity of economic growth was a real phenomenon at the time and until this day is viewed as Germany's most successful period in the last century. The dramatic transformation from the destroyed post-war country Germany was, to one of the world's leading economic powers and the ability to reduce so drastically unemployment were incomparable at the time. Many historians believe that the conditions in which Germany found itself at the end of the war are comparable to the bottom of a deep trough from which ascend is the only way out - meaning from which it only can get better. Nevertheless, it is beyond belief how much the entire physical, socio-economic and political environment of a country and its people can be changed within a short period of 15 years, a period known as Germany's "economic miracle". Nowadays it is commonly assumed that such a miracle could only have happened in Germany because stereotypically its people are perceived to be endowed with immense organizational capacity and discipline, and that for years Germany's workers have always been in the "drivers seat", metaphorically speaking. However, this essay will prove that this assumption is a misconception and that it is mainly thanks to the wisdom and prudence of one of the century's great leaders that Germany underwent an economic miracle in the first 15 years of the post World War 2 era. ...read more.

Middle

The prevailing attitude was that communism means a dark future for America and the end of free trade and civilized life in general. To that end, the Marshall Plan was introduced with the aim to "win over" Western Europe, and to ensure the support of its countries for democracy. We learn that more than aiding Western European countries in their development and reconstruction efforts, the true objectives of the Marshall Plan were basically a cold war effort intended to counteract real or imagined, by the Soviets inspired, communist activities, thus preventing the feared communism from enslaving Western Europe. The Soviets, on the other hand, reacted to these efforts by building in August 1961 the Berlin Wall and isolating Soviet dominated countries from Western, capitalistic influence.. Although its intentions were laudable, the Marshall Plan only provided Germany with less than 5 percent of its national income. France, for example, received substantially more than Germany from this Plan but never achieved such a dramatic growth rate as Germany, which further proves that the Marshall Plan was not the dominant factor in Germany's economic growth. In addition, while the German government was receiving help from the Marshall Plan, it was still obliged to make reparations and restitution payments that amounted to well over half the funds received from the United States from the Marshall Plan. Moreover, since the United States decided to keep after the war large occupation forces in Germany, and in many German city there is still until now a presence of US troops, the United States charged Germany an annual fee of 2.4 billion USD for the up-keeping of these forces. On the other hand, the military presence of the United States in Germany has saved the German government substantial funds, which otherwise would have been used for its own military protection. With this in mind, we clearly see that the Marshall Plan was beneficial for Germany, however, it was by no means the major thrust that propelled economic development forwards during the years following the war. ...read more.

Conclusion

In other words, unit labor costs were declining. The prescription for dealing with the capital shortage problem by the Keynesian economic advisers to the government was three-fold: * 1. expansionary monetary policy * 2. tax incentives for saving * 3. investment planning by the government William Ropke, an economist whom Americans would call conservative but in European terminology is called liberal, recommended increasing the interest rate to encourage savings. The Tax Law Adjustment Acts of June 1948 and April 1949 created tax breaks for capital creation. West Germany had a high, graduated income tax imposed by the Allied Occupation Force after World War II modeled upon the New Deal income tax of the U.S. There were income tax reforms over the period 1948 to 1955 to reduce the severity of the income tax program. The West German government was directed involved in investment planning in the "bottleneck sectors" of mining, steel and energy. West Germany retained the rent control program created during the days of the Weimar Republic, continued by the Nazis and later by the Occupation. There was thus a chronic shortage of housing which the government tried to alleviate with construction subsidies and public housing. German foreign trade recovered dramatically despite the loss of Eastern European markets. Foreign trade increased 84.4% per year over the two year period 1948-1950. Throughout the 1950s it increased 16% per year in real terms. Thus West Germany very quickly wiped out its trade deficit and commenced running a trade surplus. Initial exports were raw materials such as coke from coal and scrap metal but by the end of the 1950s exports were mainly manufactured goods. Also by the end of the 1950s Western Europe had become the major customer and major supplier for West Germany. i Quote from Encyclopedia Britannica book 7 page 881 ii Quote from "Questions on German history" by German Bundestag Public relations Division (English edition 1998) page 364 iii Quote from Encyclopedia Britannica book 1 page 96 iv Quote from CNN interactive, Knowledge Bank: Profiles: Konrad Adenauer ?? ?? ?? ?? 2 ...read more.

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