German Economy

Germany has had many tumultuous events in its past, especially before and after World War II. Although Germany experienced turmoil before the start of the war, after the war, they decided to take a different approach to foreign policy and focused on rebuilding their economy as well as improving their skilled labor force. Now Germany has a stable economy and healthy and skilled workforce. The old saying: "German engineering" shows the caliber of artisanship involved in German manufacturing.

They reduced their need to prove their military might in lieu for labor force development and reduction of foreign military interference. In a recent article by Kundnani, the writer details the determination of Germany to remain out of foreign affairs. "…it illustrates the strength of Germany's ongoing reluctance to use military force as a foreign-policy tool even in a multilateral context and to prevent a humanitarian catastrophe" (Kundnani, 2011, p. 31).

This plays a crucial role in the economy of Germany as they did not have to and do not have to spend much on their military. United States exhausted a lot of their budget on military spending in order to conduct foreign policy overseas in places like Afghanistan and Iraq. This is not the case for Germany. They opted to stay out of it.

This is perhaps a direct consequence of WWII as Germany did not want to be seen or associated with the negativity of the Nazi regime, but it inevitably helped them cement a stronger economy. The economy prior to the world wars was hard for Germans. Many complained of poor living standards and unfair wages. They lacked proper training and education. Many in Germany were unhappy and sought to change their living conditions. It was because of their poor economy, Germans decided to begin conflict.

In chapter 2 of Economic Growth in Europe Since 1945, titled "Institutions and economic growth: Europe after World War II, Eichengreen explains Europe in general, including Germany, experienced high investment and a growth in exports. "Wage moderation stimulated both the supply of and demand for investment-demand making investment profitable, supply by making available the profits to finance it" (Crafts & Toniolo, 1996, p. 39). Because there was higher investment within the country, Germans were able to acquire a higher level of skill and apply that into producing higher quality products.

They then attracted more buyers and export within Germany and other European countries increased. Within the decades after World War II, Germany saw some improvement with increased improvement later on in the 1990's after the Berlin wall came down. Much of what happened in Germany following the war was a result of American intervention during and after the war.

"American blueprints for international monetary order, policy toward trade unions, and the intervention of occupation authorities in West Germany and Japan sought to transform political issues into problems of output, to adjourn class conflict for a consensus on growth" (Maier, 1977, p. 607). Germany transformed much of its policy to keep from appearing like a threat or a power, much like Japan did when they removed certain things like military strength and instituted strict gun control.

If one looks at the economy of Japan and Germany after the war and their reduction of military force and growth of skilled laborers, it easy to see the impact the war had on policy and political development. Another big impact that affected countries like Germany and Japan, especially Germany, were the bombing of cities. If the war shock has only a temporary impact, then there will be a tendency towards mean reversion.

Our main finding is that the bombing had a significant but temporary impact on post-war city growth in Germany as a whole as well as in West Germany separately, but that this is not the case for city growth in East Germany (Brakman, Garretsen & Schramm, 2004, p. 201). The cities ruined by the bombings had to be quickly rebuilt by skilled laborers. Not only that, but they also had to come up with the resources to pay for such building.

It was a scare that Germany experienced, that propelled them into turning their direction into construction, repair, and economic survival. Sometimes people say catastrophe can bring the best out of people and this was the case in Germany, especially West Germany where the economy flourished and people quickly improved along with the government and living standards. In conclusion, Germany experienced a big difference when it came to their economy after World War II. They saw the negative impact their actions.