The Economy in Germany

The Economic Miracle in Germany or Why Growth and Consumption Are Not Infinite

No infinite consumption  Copyright: iStockphoto - Marcus ClacksonTime to say goodbye to the belief in economic growth?  Copyright: iStockphoto - Johannes NorpothIn Germany, belief in economic growth has taken on almost religious dimensions. That is hardly surprising, given the fact that prosperity in this country stems from the economic miracle in the late 1940s. The current crisis gives cause for reflection.

The prognoses are not very encouraging. Germany’s economic growth is likely to be significantly less than 1 per cent in 2009, which means that the country that once saw an economic miracle is on the brink of recession. The labour market is panicking. Up to a million people could lose their jobs. Perhaps it is time to say goodbye to the belief in economic growth.

Miracle upturn

But let us recall how it all began. At the end of World War II, Germany was in a catastrophic situation which it had brought upon itself. More than four million men had been killed in action and hundreds of thousands were injured. Some of the educated elite were not available to industry, or only available to a limited extent, on account of their Nazi past. The infrastructure, too, was a disaster. What was later to become the GDR, the most industrialised area, was practically excluded from reconstruction on account of it being part of the Soviet zone of occupation. Major parts of the energy supply, road and rail networks had been destroyed. Germany had also lost all its patents and its public foreign assets.

No infinite consumption  Copyright: iStockphoto - Marcus ClacksonYet it succeeded in achieving huge economic growth, giving West Germany the prosperity it still enjoys today. Ludwig Erhard, Federal Minister of Economics from 1949 to 1963, is regarded as the father of the economic miracle.The prerequisite for Germany’s wealth was and remains the booming economy. With reconstruction, Germany experienced growth of 20 per cent, which levelled off at around 5 per cent in the decades that followed. In the 1980s and 1990s, the oil price exploded, slowing down growth in Germany to two to three percent. Increasing unemployment is presumed to be a result of weak economic growth.

A voice crying out in the wilderness

Economic growth is not unanimously acclaimed as a cure-all, however. In a book entitled Limits to Growth, published in 1972, the research team around co-author Dennis L. Meadows predicted the collapse the world economic system in the 21st century. In the decades that followed, however, some of their predictions turned out to be incorrect, and critics of the study thus appeared to have been proven right. In 1972, Yale professor Henry C. Wallich criticised the study as being “a piece of irresponsible nonsense”.

In fact, Meadows and his colleagues had only identified the problem of a growth-based economic system: that consumption, too, must grow. Basically, in order to be able to produce an unlimited number of cars, one must give them the qualities of bread. One must use them like a perishable food, because that is the only way for there to be an infinite need. A first consequence of this was what came to be described by the apt term “throwaway society”. Manufactured goods are only intended to be used for an ever shorter period of time after which they have to be replaced. Production and consumption that are mutually dependent and conditional cannot end. Every manufactured good needs a consumer. That is the principle on which a growth-orientated economy functions.

Infinite consumption?

Throwaway society  Copyright: iStockphoto - Johannes NorpothHowever, this unlimited increase in production and consumption requires there to be an endless supply of resources and an endless ability to consume on the part of consumers. However, both these things are illusions. Even though Germany, the former world champion exporter, managed to tap new sales markets, the world is finite. At some point, the last market will have been tapped and the last consumer provided for, particularly since the only people of interest as consumers are those who can afford to consume. This is a resource as finite as oil or clean air. It is debatable how long the resources will last. Michel Mallet, Managing Director in Germany of the energy giant Total, recently predicted in Spiegel Online that oil reserves would run out within 20 years. It is not in dispute that they will run out.

There are an enormous number of people who can no (longer) consume to any significant extent. Some 50 per cent of all people in employment around the world have only one to two dollars per day at their disposal. These people are of no interest to a globally expanding economy. Even in Germany, many people can hardly afford to consume. According to a survey by Creditreform, some 6.9 Germans over the age of 18 were overindebted at the end of 2008, with their debt repayment obligations exceeding their monthly income. But what happens to a world economic system that does not fulfil the two conditions on which it is based?

Beyond growth

The time is ripe for a new economic miracle  Copyright: iStockphoto - Johannes NorpothToday, we are on the brink of a global financial and economic crisis. The Greek-derived word “crisis” means the turning point in a dangerous situation. Seen in this way, the situation can certainly be seen positively – if we manage to achieve the turnaround. Away from more economic growth and to …? Mahatma Gandhi recognised the dilemma of a growth-orientated economy: “Earth provides enough to satisfy every man’s need, but not every man’s greed.” If we succeed in reducing consumption, increasing ecological compatibility and making quality of life the basis of economic and political activity, the crisis will not become a catastrophe. The time is ripe for a new economic miracle that is “Made in Germany“.

Literature:

Hans Christoph Binswanger:
Die Wachstumsspirale (The Growth Spiral) (Marburg 2006)

Dennis Meadows et al.:
Grenzen des Wachstums. Das 30-Jahre-Update: Signal zum Kurswechsel (Limits to Growth: the 30-Year Update) (Stuttgart 2006)

Tibor Scitovsky:
The Joyless Economy: The Psychology of Human Satisfaction (Oxford 1976)

Wuppertal Institut für Klima, Umwelt, Energie (Hrsg.):
Fair Future. Begrenzte Ressourcen und Globale Gerechtigkeit (Fair Future, Resource Conflicts, Security and Global Justice) (München 2006)

Dr. Andreas M. Bock
Is a political scientist and journalist. He teaches at the Ludwig Maximilian University of Munich, the University of Augsburg, the University of the Federal Armed Forces in Munich and Munich University.

Translation: Eileen Flügel
Copyright: Goethe-Institut e. V., Online-Redaktion
April 2009

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