The Rise and Fall of the German Miracle

The fast recovery of Germany’s economy after World War II—the so-called “German miracle”—can be explained by the market-oriented economic policies pursued in the 1950s, based upon the ideas of Ordoliberalism. The slowing growth rates and increasing economic difficulties since the 1970s seem to have resulted from the extension of interventionist and redistributionist policies beyond those sanctioned by Ordoliberalism.The roots of the German economic decline are political: already in the 1950s, a broad consensus existed about the need to integrate market-oriented economic policy with a highly redistributory welfare state in a “social market economy.” After the catastrophe of National Socialism and World War II, West Germany’s economy recovered surprisingly quickly in the s—the period of the “German miracle.” But although Germany still has the strongest economy in Europe, it is widely acknowledged that today the German economy suffers from considerable structural problems, manifesting themselves in slow growth, high unemployment, a huge government debt, and severe financial crises in the social security system (e.g., Sachverständigenrat , –). Several years ago, in The Fading Miracle: Four Decades of Market Economy in Germany, Herbert Giersch, Karl-Heinz Paqué, and Holger Schmieding suggested that the German miracle was due to sound market-oriented economic Crtical Review  (), nos. – . ISSN ‒. ©  Critical Review Foundation. Wolfgang Kerber is Professor of Economics, Philipps-University of Marburg, Germany, email . Sandra Hartig is the manager of the Society for Business History in Frankfurt/Main. Both authors would like to thank Ismene Grohmann, Karl v. Delhaes, and Gerd Hardach for helpful comments and criticisms.