Economy of Germany

overview of the economy in the Federal Republic of Germany

The economy of Germany is a highly developed social market economy. It has the largest national economy in Europe, the third-largest by nominal GDP in the world, and fifth by GDP (PPP). Due to a volatile currency exchange rate, Germany's GDP as measured in dollars fluctuates sharply. In 2017, the country accounted for 28% of the euro area economy according to the International Monetary Fund (IMF). Germany is a founding member of the European Union and the eurozone.


  • The French fear of German resurgence which caused France to press for a policy of dismemberment of Germany seemed to be altogether exaggerated. After 1945 Germany lay prostrate - militarily, economically and politically - and in my opinion this condition was a sufficient guarantee that Germany could not again threaten France. In the future United States of Europe I saw great hope for Europe and thus for Germany. We had to try to remind France, Holland, Belgium, and the other European countries that they were - as we were - situated in Western Europe, that they are and will forever remain our neighbours, that any violence they do to us must in the end lead to trouble, and that no lasting peace can be established in Europe if it is founded on force alone.
  • In 1871 Bismarck consummated both the Prussian victory over the French and the unification of Germany under Prussian leadership by inaugurating the German Empire in the Hall of Mirrors at Versailles. It was a fateful achievement. From its moment of birth the new German Empire was of an order of magnitude greater than that of the other states of Europe; and which became greater still during the next forty years. To the modern Europe of the industrial age, Germany was what Spain and France had been in turn to pre-industrial Europe, a giant overtopping its neighbours. From 1871 onwards the salient fact of European politics was German power. By 1914 Germany's population, at 67,000,000, was more than half as much again as either that of France or Great Britain, and was exceeded only by that of Russia among European powers. Moreover, German industry and technology were immensely stronger and more vigorous than those of either her friends or rivals. Her steel production, to give a basic index, amounted to 17,320,000 tons in 1914, as against a French total of only 5,000,000 tons and a British total of 7,000,000 tons (average for 1910–14). Nor could any other European country match the thoroughness of Germany's application of scientific research to industrial development or her system of national or technical education.
  • I leave undecided the question whether complete mutual freedom of international commerce, such as is contemplated by the theory of Free Trade, would not serve the interests of Germany. But as long as most of the countries with which our trade is carried on surround themselves with customs does not seem to me justifiable, or to the economic interest of the nation, that we should allow ourselves to be restricted in the satisfaction of our financial wants by the apprehension that German products will thereby be slightly preferred to foreign ones. ... The minority of the population, which does not produce at all, but exclusively consumes, will apparently be injured by a customs system favouring the entire national production. Yet if by means of such a system the aggregate sum of the values produced in the country increase, and thus the national wealth be on the whole enhanced, the non-producing parts of the population...will eventually be benefited.
    • Otto von Bismarck, Letter to the Bundesrath committee on tariff revision (15 December 1878), quoted in Percy Ashley, Modern Tariff History: Germany–United States–France [1904] (1970), pp. 45–46
  • Many measures which we have adopted to the great blessing of the country are Socialistic, and the State will have to accustom itself to a little more Socialism yet. ... I am glad that this Socialism was adopted, for we have as a consequence secured a free and very well-to-do peasantry, and I hope that we shall in time do something of the sort for the labouring classes. ... The establishment of the freedom of the peasantry was Socialistic; Socialistic, too, is every expropriation in favour of railways; Socialistic to the utmost extent is the aggregation of estates—the law exists in many provinces—taking from one and giving to another, simply because this other can cultivate the land more conveniently; Socialistic is expropriation under the Water Legislation, on account of irrigation, etc., where a man's land is taken away from him because another can farm it better; Socialistic is our entire poor relief, compulsory school attendance, compulsory construction of roads, so that I am bound to maintain a road upon my lands for travellers. That is all Socialistic, and I could extend the register further; but if you believe that you can frighten any one or call up spectres with the word “Socialism,” you take a standpoint which I abandoned long ago, and the abandonment of which is absolutely necessary for our entire imperial legislation.
    • Otto von Bismarck, Speech to the Reichstag (1882), quoted in W. H. Dawson, Bismarck and State Socialism: An Exposition of the Social and Economic Legislation of Germany since 1870 (1891), pp. 63–64
  • Despite continuing certain Weimar-era social welfare programs, the Nazis proceeded to restrict their availability to "racially worthy" (non-Jewish) beneficiaries. In terms of labor, worker strikes were outlawed. Trade unions were replaced by the party-controlled German Labor Front, primarily tasked with increasing productivity, not protecting workers. In lieu of the socialist ideal of an egalitarian, worker-run state, the National Socialists erected a party-run police state whose governing structure was anti-democratic, rigidly hierarchical, and militaristic in nature. As to the redistribution of wealth, the socialist ideal "From each according to his ability, to each according to his need" was rejected in favor of a credo more on the order of "Take everything that belongs to non-Aryans and keep it for the master race." Above all, the Nazis were German white nationalists. What they stood for was the ascendancy of the "Aryan" race and the German nation, by any means necessary. Despite co-opting the name, some of the rhetoric, and even some of the precepts of socialism, Hitler and party did so with utter cynicism, and with vastly different goals. The claim that the Nazis actually were leftists or socialists in any generally accepted sense of those terms flies in the face of historical reality.
  • The creation of two German states, an event unforeseen at Tehran, Yalta, or even at Potsdam, was a signal Cold War phenomenon. Foreshadowed by the dual occupation of Korea, Germany’s partition in 1949 combined both real and symbolic elements as a means of stabilizing Central Europe as well as a punishment for the Nazis’ crimes. Four-power occupation had worked in Austria—thanks to the smaller strategic stakes, a moderate socialist government, and the Allies’ Tehran decision to treat this country gently as “Hitler’s first victim”—and the country remained intact. In the more populous, resource-rich Germany, which lacked a central government, the occupiers were able to dominate the revival of local politics. East Germany became the first “workers’ and peasants’ state on German soil,” and West Germany a liberal, robustly capitalist state. Both regimes represented not only a renunciation of the Nazi past but also the revitalization of two opposing political traditions—Marxism and liberalism—each claiming redemptive power over Germany and Europe’s future and each mirroring the Cold War itself.
    • Carole C. Fink, The Cold War: An International History (2017), p. 74
  • The destruction of representative government and private capitalism of the old school was complete when Hitler came to power. He had contributed mightily to the final result by his ceaseless labors to create chaos. But when he stepped into the chancellery all the ingredients of national socialist dictatorship were there ready to his hand…The aim in which Bismarck had failed was accomplished almost at a stroke in the Weimar Constitution – the subordination of the individual states to the federal state. The old imperial state had to depend on the constituent states to provide it with a part of its funds. Now this was altered, and the central government of the republic became the great imposer and collector of taxes, paying to the states each a share. Slowly the central government absorbed the powers of the states. The problems of business groups and social groups were all brought to Berlin. The republican Reichstag, unlike its imperial predecessor, was now charged with the vast duty of managing almost every energy of the social and economic life of the republic. German states were always filled with bureaus, so that long before World War I travelers referred to the ‘bureaucratic tyrannies’ of the empire. But now the bureaus became great centralized organisms of the federal government dealing with the multitude of problems which the Reichstag as completely incapable of handling. Quickly, the actual function of governing leaked out of the parliament into the hands of the bureaucrats. The German republic became a paradise of bureaucracy on a scale which the old imperial government never knew. The state, with its powers enhanced by the acquisition of immense economic powers and those powers brought to the center of government and lodged in the executive, was slowly becoming, notwithstanding its republican appearance, a totalitarian state that was almost unlimited in its powers.
      • John T. Flynn, ''As We Go Marching: A Biting Indictment of the Coming of Domestic Fascism in America''
  • Liberalism was failing. If I'd been German and not a Jew, I could see I might have become a Nazi, a German nationalist. I could see how they'd become passionate about saving the nation. It was a time when you didn't believe there was a future unless the world was fundamentally transformed.
    • Eric Hobsbawm, “A Question of Faith,” Maya Jaggi, The Guardian (Sept. 14, 2002)
  • The reaction to the sabotage of three of the four Nord Stream 1 and 2 pipelines in four places on Monday, September 26,[2022] has focused on speculations about who did it and whether NATO will make a serious attempt to discover the answer. Yet instead of panic, there has been a great sigh of diplomatic relief, even calm. ... Disabling these pipelines ends the uncertainty and worries on the part of US/NATO diplomats that nearly reached a crisis proportion the previous week, when large demonstrations took place in Germany calling for the sanctions to end and to commission Nord Stream 2 to resolve the energy shortage... The German public was coming to understand what it will mean if their steel companies, fertilizer companies, glass companies and toilet-paper companies were shutting down. These companies were forecasting that they would have to go out of business entirely – or shift operations to the United States – if Germany did not withdraw from the trade and currency sanctions against Russia and permit Russian gas and oil imports to resume, and presumably to fall back from their astronomical eight to tenfold price increase... If policymakers were to put German business interests and living standards first, NATO’s common sanctions and New Cold War front would be broken. Italy and France might follow suit. That prospect made it urgent to take the anti-Russian sanctions out of the hands of democratic politics.
  • [The effect of the Suez Crisis on the French was quite different.] We turned across the Atlantic. They turned across the Rhine, and Europe was built without us. There is room for argument about the causes of what followed. There is no doubt about what happened. Over the first 13 years of the [European] Community's life national income per head increased by 72 per cent in the Six and by 35 per cent in Britain. The result was that from being almost the richest country in Western Europe we became one of the poorest. France for the first time since the industrial revolution surpassed us in economic strength. The German economy achieved nearly twice our weight.
  • The sharp down-turn in the European economy in the 1870s had produced in most advanced economies save Britain a 'return to protection', marked especially by Bismarck's split with the Liberals, his imposition of protective tariffs in 1879, and the development in the Second Reich of a political economy of cartelization married to harrying the trade unions and suppressing the S.P.D. For those who wished an alternative to the British liberal state, here was one, with all its implications and consequences. Few, of course, advocated out-and-out Germanization, but increasingly Germany was coming to be regarded as the alternative model, the seed-bed for the future.
  • The ‘totalitarian’ label is part of ideological warfare in another way as well – in so far as it covers both Communist and Fascist regimes, and is thereby intended to suggest that they are very similar systems. More specifically, the suggestion is that Communism and Nazism are more or less identical. This may be good propaganda but it is very poor political analysis. There were similarities between Stalinism and Nazism in the use of mass terror and mass murder. But there were also enormous differences between them. Stalinism was a ‘revolution from above’, which was intended to modernise Russia from top to bottom, on the basis of the state ownership of the means of production (most of those ‘means of production’ being themselves produced as part of the ‘revolution from above’); and Russia was indeed transformed, at immense cost. Nazism, on the other hand, was, for all its transformative rhetoric, a counter-revolutionary movement and regime, which consolidated capitalist ownership and the economic and social structures which Hitler had inherited from Weimar. As has often been observed, twelve years of absolute Nazi rule did not fundamentally change, and never sought to change fundamentally, the social system which had existed when Hitler came to power. To assimilate Nazism and Stalinism, and equate them as similarly ‘totalitarian’ movements and regimes of the extreme right and the extreme left is to render impossible a proper understanding of their nature, content and purpose.
  • Fascism, at any rate the German version, is a form of capitalism that borrows from Socialism just such features as will make it efficient for war purposes. Internally, Germany has a good deal in common with a Socialist state. Ownership has never been abolished, there are still capitalists and workers, and—this is the important point, and the real reason why rich men all over the world tend to sympathise with Fascism—generally speaking the same people are capitalists and the same people workers as before the Nazi revolution. But at the same time the State, which is simply the Nazi Party, is in control of everything. It controls investment, raw materials, rates of interest, working hours, wages. The factory owner still owns his factory, but he is for practical purposes reduced to the status of a manager. Everyone is in effect a State employee, though the salaries vary very greatly. The mere efficiency of such a system, the elimination of waste and obstruction, is obvious. In seven years it has built up the most powerful war machine the world has ever seen.
  • National Socialism is a form of Socialism, is emphatically revolutionary, does crush the property owner as surely as it crushes the worker. The two regimes, having started from opposite ends, are rapidly evolving towards the same system—a form of oligarchical collectivism. . . . It is Germany that is moving towards Russia, rather than the other way about. It is therefore nonsense to talk about Germany ‘going Bolshevik’ if Hitler falls. Germany is going Bolshevik because of Hitler and not in spite of him.
    • George Orwell,Orwell: My Country Left or Right 1940 to 1943, Vol. 2, Essays, Journalism & Letters, Sonia Orwell and Ian Angus, edit., Boston, MA, Nonpareil Books (2000), p. 25, originally from “Review of The Totalitarian Enemy by F. Borkenau,” Time and Tide (4 May 1940)
  • In the long run the [Nazi] movement was moving to a position in which the economic New Order would be controlled by the Party through a bureaucratic apparatus staffed by technical experts and dominated by political interests, not unlike the system that had already been built up in the Soviet Union.
    • Richard Overy, War and Economy in the Third Reich, Oxford: UK, Oxford University Press, 1994, p. 118
  • During the Third Reich state ownership expanded into the productive sectors, based on the strategic industries, aviation, aluminium, synthetic oil and rubber, chemicals, iron and steel, and army equipment. Government finances for state-owned enterprises rose from RM 4,000m in 1933 to RM 16,000m 10 years later; the capital assets of state-owned industry doubled during the same period; the number of state-owned firms topped 500.
    • Richard Overy, War and Economy in the Third Reich, Oxford: Clarendon, (1994) p.16
  • Buried under mountains of red tape, directed by the State as to what they could produce, how much and at what price, burdened by increasing taxation and milked by steep and never ending 'special contributions' to the party, the businessmen, who had to welcome Hitler's regime so enthusiastically because they expected it to destroy organized labor and allow an entrepreneur to practice untrammeled free enterprise, became greatly disillusioned... Fritz Thyssen, one of the earliest and biggest contributors to the party,... recognized that the 'Nazi regime has ruined German industry.'
    • William L. Shirer, The Rise and Fall of the Third Reich: A History of Nazi Germany, New York: NY, Simon & Schuster, 2011, p. 261.
  • In 1933, the Soviet and Nazi governments shared the appearance of a capacity to respond to the world economic collapse. Both radiated dynamism at a time when liberal democracy seemed unable to rescue people from poverty. Most governments in Europe, including the German government before 1933, had believed that they had few means at their disposal to address the economic collapse. The predominant view was that budgets should be balanced and money supplies tightened. This, as we know today, only made matters worse. The Great Depression seemed to discredit the political response to the end of the First World War: free markets, parliaments, nation-states. The market had brought disaster, no parliament had an answer, and nation-states seemingly lacked the instruments to protect their citizens from immiseration. The Nazis and Soviets both had a powerful story about who was to blame for the Great Depression (Jewish capitalists or just capitalists) and authentically radical approaches to political economy. The Nazis and Soviets not only rejected the legal and political form of the postwar order but also questioned its economic and social basis. They reached back to the economic and social roots of postwar Europe, and reconsidered the lives and roles of the men and women who worked the land. In the Europe of the 1930s, peasants were still the majority in most countries, and arable soil was a precious natural resource, bringing energy for economies still powered by animals and humans. Calories were counted, but for rather different reasons than they are counted now: economic planners had to make sure that populations could be kept fed, alive, and productive. Most of the states of Europe had no prospect of social transformation, and thus little ability to rival or counter the Nazis and the Soviets. Poland and other new east European states had tried land reform in the 1920s, but their efforts had proven insufficient. Landlords lobbied to keep their property, and banks and states were miserly with credit to peasants. The end of democracy across the region (except in Czechoslovakia) at first brought little new thinking on economic matters. Authoritarian regimes in Poland, Hungary, and Romania had less hesitation about jailing opponents and better recourse to fine phrases about the nation. But none seemed to have much to offer in the way of a new economic policy during the Great Depression.