The Political Economy of Germany, 1918–49 and the Formation of the West German State

It is self-evident that the first half of the 20th century determined the political economy of West Germany drastically. Two world wars resulted in the loss of millions of lives, of land and raw materials in Europe and overseas and of vast amounts of capital through military expenditure, war damage and reparations. If one adds the inflationary and recessionary crises of the Weimar Republic, Germany was exposed to four extended periods of economic instability (1914–18), (1919–23), 1929–34 and 1940–45, which together can be seen to have thrown back social and economic development significantly. Even allowing for lower rates of growth before 1913, the growth trend for net industrial production suggested irregular but constant growth for the period beyond. (See Figure 2.1) However, it was 1928 before the previouseak of 1913 was reached again, and this recovery was in turn very Short-lived, with the world depression hitting Germany at the end of 1929. Measured against a putative uninterrupted trend from 1913 or against the real trade cycles of the 1920s, the recovery in the 1930s and ear 1940s is not as dramatic as the legends of the Nazi economy would have us believe. As is known, it was a recovery based on rearmament and glectful of consumer goods production; this meant that a good prop tion of the industrial values produced were used to destroy other valu and were destroyed themselves, and that behind the price controls trong inflationary pressures built up through state indebtedness an increased money circulatio.