The Fading Miracle: Four Decades of Market Economy in Germany.

• Author: Guender, Alfred V.

This book traces the development of the West German economy from its humble beginnings in 1945 to its absorption of the East German economy in 1990. The authors, all of whom are affiliated with the Kiel Institute of World Economics, present a lucid, well-organized discussion of events and economic policy making in post-war Germany. For students of post-war German economic history this book will serve as a handy reference work as it offers a comprehensive account of the reemergence of the West German economy as a major player in the league of trading nations. A notable plus is the extensive list of references which should be of great help in locating primary sources of documentation. Another noteworthy feature is the compact discussion of the overall track record of the German economy during the post-war period in the introductory chapter of the book. From an organizational standpoint this arrangement has the advantage that the reader gets a clear picture of the overall performance of the West German economy over the 1945-89 period right at the beginning of the book.

The main part of the book divides the post-war period into four distinct periods. They are: 1945-48, 1948-60, 1960-73, and 1973-89. Chapter 2 begins with an assessment of the state of the German economy after the collapse of the Nazi regime and the ensuing imposition of controls in the economic and political domain by the Western Allies. Against this background the economy could hardly be expected to rebound on its own. Radical economic reform was necessary to provide the foundation for a new economic order. In retrospect, the main pillar of the reform process was the unique German concept of ordoliberalism according to which the existence of individual freedom is not incompatible with the existence of a strong state. Far from curtailing individual freedom, the state serves the purpose of protecting the individual from the vested interests of large organizations, monopolies and cartels. The radical reforms carried out in 1948 and beyond bear the firm imprint of ordoliberal beliefs. Along with the currency reform, the establishment of a liberal economic order and the ensuing unleashing of market forces laid the foundation of the German economic miracle.

The unfolding of the miracle in the 1950s is described in chapter 3. The rapid growth in real output over the 1948-60 period was attributable to immense gains in labor productivity. These, in turn, were realized as a direct...