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    German Economy Essay (1105 words)

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    TheFederal Republic of Germanys economy has now flourished despite its harshtimes that have been faced throughout the decades. Most people know aboutGermany from its historic involvement in World War II; its successful campaignto unite East and West with the successful collapse of the Berlin Wall; and itsworld class development and production of automobiles. Unfortunately, what mostpeople dont know is that Germany continues to fight an uphill battle inkeeping its established ranking among the worlds most important economicpowers. A historic look back at Germany shows that after its fall in World WarII, 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 year1948 brought a currency reform that was the turning point for economic reform. There was a continuous economic growth each year for Western Germany, but thestrict, conservative ways of East Germanys communist rule still slowed truegrowth in the Gross Domestic Product (GDP). To make matters worse, the wholecountry experienced a significant drop in its GDP, causing a recession from 1976through to 1985. There was a growth again for the next eight years before amajor down ward spiral began in 1992. Germanys early 90s spiral wasattributed to the reunification of the country between 1989 and 1990.

    Once thetwo countries formed their one republic, the economy took its major tumble. Economists have figured this to be true because West Germany continued to evolvewith industrial and technological breakthroughs and standards, while thecommunist East Germany adhered to traditional, unproductive ways that in somecases dated back to the 1940s and World War II times. So instead of combining toform an economic powerhouse, the GDP tumbled and caused a massive surge torestructure and work began to regain the decades of reform that were no longernoticeable. The Republic formed after reunification consists of 16 states, whichis still looked at and measured as East and West Germany. Despite all of thesestates following the established free-market economy, there is still anoticeable gap between the economies of the two sections.

    German governmentassistance of nearly $100 billion annually has helped contribute to an increasedgrowth rate for eastern states. Despite this growth, a look at the added GrossDomestic Product (GDP) of eastern states $108. 3 billion, an increase of 9%from the previous year shows it falls significantly short of the $1. 23trillion GDP of western states.

    The Western states recouped with a 2. 3% increasethat 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 noteanother significant difference the $5,950 national product per capita forworkers in the East severely undercuts the $19, 660 for Western workers. One ofthe largest contributors to the GDP is manufacturing and the goods that itproduces claiming nearly 40% of the total GDP every year since 1992. Thisshows that the industry has steadily improved after its immediate 40% tumble ittook back in 1989.

    It has not yet been figured if the GDP dropped because of thelack if manufacturing output, or the fact that both East and West Germany werenow being figured into the equation as one instead of a split. Germanys mainindustrial area is the Ruhr Valley, in which a various amount of products areproduced. The principle production item is the refinement of petroleum. Thisranks first among other items such as steel castings; iron; cement; chemicals,resins and plastics; automotive vehicles, railroad rolling stock, aircraft; andcotton and other woolen fibers. Agriculture accounts for 2% of the GDP.

    Itschief vegetable crops include cabbage, carrots and cauliflower; while pears,apples, plums and strawberries lead the fruit crops. The country is also aleader in the production of hops, which helps contribute to its notoriety in thebeer-industry. Wine grapes grown in the Rhine and Moselle Valleys help developthat notable industry. Germany has a fair balance of trade. Its exports includechemicals, motor vehicles, iron, steel and other raw materials. The value ofthese and other exports in 1996 where estimated at DM772 billion.

    Among itemsimported into the country are electrical products and apparel. With theseproducts, the value of imports to Germany were DM670 billion. The most tradeactivity occurred with France, valuing their partnership at DM71 billion forexports and DM84 billion for imports. The United States figures stand at DM48billion and DM60 billion form import/export respectively. The largest differencein commodity distribution is raw materials with DM35 billion of it beingimported and DM6 billion being exported.

    German government, or Bundestag, hascontinued to work hard to make sure that the economy has continued on the pathto stabilization. It had faced tough issues that have arisen because ofunification. The Bundestag may make the decisions on what to do about theeconomic status and how to make corrections, but it is the job of the CentralBank to carry them out. The economic growth of Western Germany had see-sawedconsiderably.

    There was a economic boom caused by the increase in consumerdemand and capital spending for two years followed by a drop. All this happenedas the eastern states needed an increase in support payments to help them getback on their feet. The Central Bank, known as the Bundesbank, needed to preventany more pressures of inflation placed on them. In doing so, a high, short-terminterest rate was instituted thus curbing any further economic activity.

    TheBundesbank saw an improvement in conditions and the eastern states experienced a10% rate of growth, one of the highest in the entire European region. To furtherimprovement, the Bundesbank saw the appreciation of the Deutsche Mark. Unemployment is one problem that has faced the country for decades. From thehorrors of World War II to 1998, Germany has faced this problem forever. It hasreached its highs and lows, with a 1996 statistic stating that of the 39.

    96million in the work force, 3. 97 million of those were unemployed. A large partof it has to do with the countrys economy that continues to see-saw,requiring quick intervention by the Bundesbank and Bundestag. The eastern statesfaced the worst of it because to this day they continue to reform and withreform comes work force reduction. Germanys labor is fully unionized and thegovernment has special courts to help settle any disputes. To help further curbthe unemployment rate increases, a national program is in place to help placeworkers whose jobs have been phased out due to automation.

    Germany has had itsshare of economic hardships and successes. Its the commitment to the peopleby the Bundestag that has helped rank it among the top economic powers of theworld. BibliographyClements, John, ed. Clements Encyclopedia of World Governments.

    Dallas,TX: Political Research, 1996. Culturegrams 1995. Brigham Young University: DavidM. Kennedy Center for International Study, 1998. “German Economy. ” Online.

    Available at http://www. cnnfn. com. “Germany. ” Encyclopedia Britanica. 1997edition.

    Turner, Barry, ed. Statesmans Yearbook 1998-1999. New York, NY:Macmillan Reference, 1998. United States Department Of State.

    Germany. Background Notes. Washington, DC: Department of State, 1995.

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