Blackwell Reference Online

Extract

The revival of the Federal Republic of Germany (FRG) from the devastation of the Second World War to become the leading European economy by 1961. The recovery began with the currency reform of 1948 (see germany divided ) and the removal of most price controls which brought a flood of goods onto the market. The exchange rate of the new Deutschmark (DM) was fixed at 4.2 to the American dollar, an undervaluation which soon enabled the FRG to build up its exports. The economy was aided by the creation of an autonomous central bank (which became the Bundesbank in 1957), with a statutory obligation to maintain a stable currency and with control over the money supply and interest rates. Other banks too played a large part in economic revival by investing heavily, the Deutsche Bank becoming part owner of many leading firms, such as Bayer, Bosch, Siemens and VW. Large‐scale American aid in the marshall plan and the demand engendered by the korean war (1950–3) also helped industry. The need for a highly trained workforce was met (until the berlin wall was built in 1961) by a flood of refugees from the German Democratic Republic (GDR: East Germany), but the Wirtschaftswunder owed most to Ludwig erhard , Chancellor adenauer 's Economics Minister (1949–63), who freed industry from the restrictions imposed by the Third Reich and by the Allied occupation authorities and established ... log in or subscribe to read full text