Economic system and policy : Germany

The Federal Republic of Germany is one of the major industrial countries. In terms of overall economic performance it is the third largest, and with regard to world trade it holds second place. It is one of the seven leading western industrial countries (the Group of Seven) who, since 1975, have every year held a summit meeting at which they coordinate their economic and financial policies at the level of the heads of state or of government.

In 1996 the gross domestic product (GDP), that is to say, the value of all finished goods produced and services in the course of a year, came to a record DM3,143.3 billion in the western part of the country, a per capita amount of DM43,200. After price adjustments, GDP has doubled in the past 25 years, and in 40 years increased even fivefold. Expressed in 1991 prices, that is a growth from DM 426.7 billion in 1950 to DM 3,064.6 billion in 1996.

Germany owes its rise from the devastation of the Second World War to its present position among the world’s leading industrial nations not to its natural resources or financial reserves but to its skilled manpower. The crucial factors which account for a country’s economic efficiency are the training and industry of the labor force, managerial skills, and the broad scope which the social market economy affords to hard-working people.

After the Second World War, people often spoke of the German “economic miracle”. Ludwig Erhard, the Federal Republic’s first Minister of Economics, disliked this term. He said it was no miracle, “merely the result of honest endeavor on the part of a whole nation who were given the opportunity and freedom to make the best of human initiative, freedom and energy”.