German Economy

Federal Republic of Germany’s economy has now flourished despite its harsh
times that have been faced throughout the decades. Most people know about

Germany from its historic involvement in World War II; its successful campaign
to unite East and West with the successful collapse of the Berlin Wall; and its
world class development and production of automobiles. Unfortunately, what most
people don’t know is that Germany continues to fight an uphill battle in
keeping its established ranking among the world’s most important economic
powers. A historic look back at Germany shows that after its fall in World War

II, it needed a massive rebuilding in order regain its status that it once held.

Various events took place that helped it re-climb the pedestal ladder. The year

1948 brought a currency reform that was the turning point for economic reform.

There was a continuous economic growth each year for Western Germany, but the
strict, conservative ways of East Germany’s communist rule still slowed true
growth in the Gross Domestic Product (GDP). To make matters worse, the whole
country experienced a significant drop in its GDP, causing a recession from 1976
through to 1985. There was a growth again for the next eight years before a
major down ward spiral began in 1992. Germany’s early ‘90s spiral was
attributed to the reunification of the country between 1989 and 1990. Once the
two countries formed their one republic, the economy took its major tumble.

Economists have figured this to be true because West Germany continued to evolve
with industrial and technological breakthroughs and standards, while the
communist East Germany adhered to traditional, unproductive ways that in some
cases dated back to the 1940s and World War II times. So instead of combining to
form an economic powerhouse, the GDP tumbled and caused a massive surge to
restructure and work began to regain the decades of reform that were no longer
noticeable. The Republic formed after reunification consists of 16 states, which
is still looked at and measured as East and West Germany. Despite all of these
states following the established free-market economy, there is still a
noticeable gap between the economies of the two sections. German government
assistance of nearly $100 billion annually has helped contribute to an increased
growth rate for eastern states. Despite this growth, a look at the added Gross

Domestic Product (GDP) of eastern states – $108.3 billion, an increase of 9%
from the previous year – shows it falls significantly short of the $1.23
trillion GDP of western states. The Western states recouped with a 2.3% increase
that year, recovering from their 1.9% decline the previous year. So combined,
this gives the Republic a valued GDP, in 1994, of nearly $1.34 trillion. To note
another significant difference – the $5,950 national product per capita for
workers in the East severely undercuts the $19, 660 for Western workers. One of
the largest contributors to the GDP is manufacturing and the goods that it
produces – claiming nearly 40% of the total GDP every year since 1992. This
shows that the industry has steadily improved after its immediate 40% tumble it
took back in 1989. It has not yet been figured if the GDP dropped because of the
lack if manufacturing output, or the fact that both East and West Germany were
now being figured into the equation as one instead of a split. Germany’s main
industrial area is the Ruhr Valley, in which a various amount of products are
produced. The principle production item is the refinement of petroleum. This
ranks first among other items such as steel castings; iron; cement; chemicals,
resins and plastics; automotive vehicles, railroad rolling stock, aircraft; and
cotton and other woolen fibers. Agriculture accounts for 2% of the GDP. Its
chief vegetable crops include cabbage, carrots and cauliflower; while pears,
apples, plums and strawberries lead the fruit crops. The country is also a
leader in the production of hops, which helps contribute to its notoriety in the
beer-industry. Wine grapes grown in the Rhine and Moselle Valleys help develop
that notable industry. Germany has a fair balance of trade. Its exports include
chemicals, motor vehicles, iron, steel and other raw materials. The value of
these and other exports in 1996 where estimated at DM772 billion. Among items
imported into the country are electrical products and apparel. With these
products, the value of imports to Germany were DM670 billion. The most trade
activity occurred with France, valuing their partnership at DM71 billion for
exports and DM84 billion for imports. The United States figures stand at DM48
billion and DM60 billion form import/export respectively.