The German Economic Miracle (?)

I remember the hype back in the 1980s and 1990s regarding the reported ascent of the German and Japanese economies--how it seemed they were edging the U.S. out of the number one spot. I remember, too, how that talk faded during the '90s amid fuss over globalization and the New Economy, and how supposedly the Eurosclerotic Germans with their unaffordable welfare states, and the rigid Japanese, were missing that train as such dynamic firms as Enron were, in Thomas Friedman's words, "discovering the equivalent of cyber-oil."

Of course, that hype faded in its turn (even as it remained the conventional wisdom), but the appraisal of at least the German economy became less harsh as it turned out to be, after all, a global champion in manufacturing exports (doubling the share of these in its GDP in 1990-2009, and outdoing the four times' larger U.S. to become number one in the world), and weathered the Great Recession better than just about anyone else, and laid down the law in the European economic space it dominated. (It was also far from trivial to the essentially neoliberal commentariat that its government increasingly embraced their preferred theories, not least in the Hartz IV labor reforms, cheered by the economically orthodox, not so cheered by, you know, actual working people in Germany or anywhere else.)

Naturally one hears, from time to time, reference to not just the country's successes of the present, but those of its past, touching in particular on its recovery from the Second World War, which they are quick to chalk up in a vaguely racialist way to German propensity for hard and attentive work, and to the home-grown variant on neoliberal, supply-side economics, "ordoliberalism."

Of course, as is always the case, the reality is more complex than this morality tale so beloved of those observers who like to talk about "culture," and the virtues of hard work and right-wing economic prescriptions--as I was reminded when researching Geography, Technology and the Flux of Opportunity (principally about Britain's economic history, of course, but its premise was that what the country's rivals did mattered, making Germany's ascent part of Britain's own story).

The reality is that before the war Germany had been the world's number two industrial power for decades, substantially due to the opportunities afforded by its unique geographic position in nineteenth century Europe (and the ways in which it improved on them through conquest, especially in the Franco-Prussian War, not least its scoring the continent's richest industrial territory as spoils).

Moreover, catastrophic as World War II was for the world, and for the tens of millions of Germans killed, maimed and rendered homeless or even stateless, and virtually all the rest whose lives were stunted or scarred by the experience, German industry did relatively well for itself. In the 1930s and 1940s German industry gorged itself on military spending and the spoils of war to such a degree that even after the losses of wartime destruction and post-war occupation and confiscations the German industrial base was still ahead of where it was pre-war. In itself that would seem to have been enough to lay the foundations for German industry's leap into the "Fordist" era, while it did well, too, out of the post-war, which is to say, the early Cold War in which it was all too clear that a strong Germany was far more useful to the Western alliance than a weak one. The result was astonishing debt relief; the Marshall Aid that compensated for confiscations by the Allies and enabled its trading partners to afford its products; and the very light defense burden it bore compared with America, Britain, or even France; along with the massive stimulus of America's military Keynesianism in the Korean War period and after. (Far from insignificant, too, was German capital's finding the country awash in cheap labor with all those millions of ethnic Germans expelled from the East refugees in the West, and millions more guest workers come north from the shores of the Mediterranean. Oh, and an undervalued currency, too.)

All that made the miracle possible, a miracle that it must be remembered was only one miracle among others in that period. (There was an even more spectacular Japanese miracle, after all, and great leaps on the part of the Italians and French and even Soviets in these decades, while the U.S. economy, the biggest and richest of all, went on exploding.) And like all the rest the German miracle was running its course by the 1970s, Germany like all the others slowing down as post-war boom turned to post-post-war bust. Still, starting out in a different place Germany's advance put it well ahead of the rest of the European pack (and save for the U.S. and Japan, the world pack) at a moment when the terms of the race changed profoundly. (The market got crowded, the rate of profit fell, the rate of growth slowed, and the neoliberal turn delivered an age of anemic growth indeed.) That left rather little room for anyone to make up the distance, perhaps especially within the framework of the European Union whose consumption of German goods has been so crucial to its success.