The Economy of Germany

[Music] this is Germany the largest economy in all of Europe by a significant margin and the fourth largest in the world falling just behind Japan the economy of Germany is so interesting not just because of its sheer size but more because of its tenuous and surprisingly short history Germany is a hugely influential economy in the world today and even more so amongst the other European economies it has been a stabilizing force in the eurozone and its prosperity has overflowed into other nations that have been less stable Germany is today home to a system called the social market economy or Ryan capitalism an economic system thought up by the German government during the reconstruction of the nation after World War two this is a unique system that has been the guiding policy of the nation for over 70 years but it wasn't something that was just dreamt up out of thin air it was the product of the history of the nation up until that point something that is often forgotten about Germany is that it is a very very young nation in the grand scheme of things the United Kingdom France Spain the Netherlands and even countries like Greece and Italy have been around for hundreds of years and they had a chance to build up wealth through Empire and technical innovation these other nations by extension worth far wealthier than the Germanic States that would later form the German Empire when they came together in 1871 which is not even 150 years ago as of 2020 and as is the case with all great patience it was born out of the aftermath of a war in this case it was the franco-prussian war Prussia was one of the more prominent states that would go on to form the German Empire and Franco was France who for the first time in over a century was starting to lose the undeniable influence it had over the European continent the newly founded German Empire then went on to go through its own Industrial Revolution building factories and ports and mines and laying down railroads wherever it could Germany was a bit of a late comer to this whole industrial revolution business but because of this it was able to import the technical knowledge of nations that had already gone through the whole process they were able to innovate and develop their economy at a mind-blowing rate by the turn of the new century the German Empire had surpassed both America and the United Kingdom it's steel production which at this time was a very bare strong measure of industriousness the new German Empire was growing and modernizing its economy at such a rate that the whole turnaround was dubbed the German miracle and it was a bit of a big deal at the time nowadays of course every country that rapidly industrialized gets dubbed a miracle the Chinese miracle the Japanese miracle the time era called the South Korean miracle one has to wonder if these really are miracles at all but in Germany's case it was probably fair enough to call this turnaround a miracle but then it decided that going to war sounds like a jolly idea and World War one was declared and they lost badly from this the German Empire was dissolved the Kaiser was abdicated and the vine my republic was formed and as with all other great nations it was borne out of the aftermath of a war to make these less than ideal circumstances even better for the newly founded Republic a massive massive economic burden was placed on Germany in the form of war reparations the victorious Allies in the war were very very angry at the massive cost that they had ensued fighting in this war and they decided that it was up to Germany to pay them back this put an extremely heavy burden on the already crippled nation and the nation was beat down over and over again oh you just lost a war on all of your productive infrastructure here is a huge reparations debt that you have to repay oh you're trying to get your currency off the ground to support a domestic consumer market boom hyperinflation oh for some reason you can't pay back this onerous war debt that we are placed on you no problem we will just take back the rule the most industrially proficient region in your nation oh you are finally finding your feet again and starting to make progress towards paying your debts and looking after your own people here you go have the worst financial crisis in history things were not going well for Germany and as most of you know these kinds of conditions were a hotbed for nationalist leaders like Adolf Hitler to rise to power now this period of German history was of course horrendous but once again the nation was making progress towards getting back on track infrastructure spending was hugely increased leading to almost full employment this was something that was actually widely praised at the time but it wasn't without its issues even if we ignore the catastrophic social issues of the country at this time first of all full employment is normally a really positive thing for an economy but there were a few considerations here the Nazi Party basically kicked all women and any individuals that they considered unworthy out of working for the government and a lot of large companies followed the lead of the government on this issue either because of the ideology of their own leadership or simply to curry favor with the government what this meant is sure unemployment is now nearly at 100% but this is only because you count white men as employable another big consideration was that this economic growth came about through a huge fiscal stimulus fueled by debt the nation was literally buying its way out of its economic woes which is not necessarily a bad plan general anti-cyclical fiscal policy calls for strong government spending and low taxation during times of economic stagnation the problem here was how the nation planned to repay this skyrocketing debt normally government's repay their debt by taxing their citizens more and spending less during good times but no no Germany decided that annexing their neighbours and plundering their wealth was a better strategy for repaying their debts this of course was not a particularly popular economic policy amongst other nations and once again Germany found itself in another war which it lost from this Germany once again found its fate decided on by the victorious Allies the nation had been divided into two split between the Allies in the West and the Soviet Union in the East and as with all other great nations these were born out of the aftermath of a war West Germany officially the Federal Republic of Germany was the half of Germany that was allied with the Western bloc powers now unlike in the aftermath of World War one victorious Allies decided that beating a country while it was down was probably not the greatest idea they decided instead to enact the Marshall Plan which actually meant that the victorious nations paid to rebuild the infrastructure of Germany from the rubble that was left of it from the war this did three things firstly it meant that the citizens of West Germany were given a good quality of life meaning that they were less likely to support nationalist leaders all over again and bring the world back into another world war it also meant that the Allied nations would have a new strong trading partner and a source of cheap export goods and of course perhaps most importantly it meant that West Germany would not be enticed to embrace the communist ideologies of the Soviet Union West Germany was of course given a lot of assistance early on by nations like France England and above all the USA but it's still prospered under its own merit it introduced a new currency at the deutsche mark which stemmed the issues it was having with hyperinflation and got down to building cars and consumer goods and exporting them all over the world this was a very similar story to what we saw in Japan Germany's axis friend to the east this all goes to show that Germany just really really wanted to be a prosperous and industrious nation but it kept getting beat down over and over again the story was a little bit different though for the second Germany that was formed in the East East Germany officially the German Democratic Republic was the half of Germany that became part of the Eastern Bloc under the control of the Soviet Union and oh boy was this a Tale of Two Cities it was the best of times and it was the worst of times as West Germany underwent its economic miracle giving rise to household brand names and some of the best living conditions the world had seen at that point East Germany lagged behind typical Soviet esque economic plans were enacted industries when nationalized and rations were established the nation did not officially label itself as communist state instead branding itself as a Socialist Workers State but it was still heavily influenced by the Soviet Union and its economic systems in fairness East Germany did not have many of the same blessings that West Germany had remember the rule that zone that France invaded in 1923 to call in its debts because it housed a good majority of German industry well that region was in West Germany on top of this East Germany is just geographically more disadvantaged than West Germany it was smaller it didn't have the same access to oceans for trade it was colder and as couldn't produce as much food despite this East Germany was put on a pedestal amongst the Eastern Bloc nations it was kind of the showpiece for the world to demonstrate how great life was under the communist rule spoiler alert it still wasn't great nowhere was this divided more evident than in Berlin Berlin was a special case of weird borders he technically fell within the borders of the socialist East Germany but West Berlin was still controlled by will the West this was a point of much contention and the Soviet Union tried to flex it economic might in East Berlin because it was one of the few places in all of the Soviet Union that the Western Empire could see beyond the Iron Curtain and perhaps more importantly one of the only places where Soviet citizens were able to see into the West this really got on the nerves of the Soviet leadership who tried pumping lots and lots of money into East Berlin to make it the crown jewel of living standards in the Soviet Union the envy of every other city in the world spoiler alert living conditions weren't great it then tried cutting off West Berlin from supplies from abroad which it could do because it's around little capitalist island the West got around this by basically saying stuff you and flying in all of the supplies that they need it the Soviets then basically said stuff it will build a giant wall and that wasn't great but it kind of did the trick for a little while about a year before the total collapse of the Soviet Union East and West Germany were reunified into a single nation and as with all other great nations this was born out of the aftermath of a war the new nation all under the banner of the Federal Republic of reunified Germany or today simply Germany re-established its national capital in Berlin a few months later the Berlin Wall came down and everything was great and everyone lived happily ever after except they didn't West Germany at this point was a thriving economic powerhouse exporting world-class products all over the globe East Germany could barely feed itself believe it or not smashing these two together didn't go flawlessly strangely enough though a lot of these problems didn't come from East Germany's inability to embrace the free market economy but rather these social policies already built into the system in the West a major part of the modern German economy is a socio-economic model called Rhine capitalism the idea of this model is that it provides the best aspects of capitalism things like entrepreneurship incentives to work harder innovation and all of that good stuff and also combines this with the best parts of a social democracy things like strong social safety nets a universal access to education and health care strong workers rights and very stringent controls on business Germany loves its businesses today it is home to some of the largest companies in the world think of things like Mercedes Porsche Volkswagen Allianz Deutsche Bank Schwarz Group they are all in the light all very profitable companies that operate all over the world but Germany also makes sure it keeps them in control if a company gets too big to the point of forming a monopoly Germany will take aggressive action to keep it in line if a company is causing environmental damage or abusing workers it will be taken care of this has done a lot of things but above all else it has made Germany a very competitive marketplace no German company can be complacent because they know that they must compete and if they are not competing with anybody the German government will make them compete now all this is fantastic and Ryan capitalism is very similar to the economic ideologies we have explored in countries like Norway before though in this instance Germany is fueling this prosperity through industriousness rather than will feel this all kind of tame a little bit unstuck though when Germany unified and the strong social aspect of Ryan capitalism had to pick up the slack of the weak industrial capacity of the east this led to a long period of stagnation as the West struggled to make up for the burden of the East as a deadweight they had to pull along with them getting the east up to speed wasn't as simple as just setting up factories either decades of separation meant that they had separate electricity grids different infrastructure and had become very different places culturally though through a lot of hard work the East and West have today blurred the lines of past separation and industry has found a foothold in the East which has led to prosperity for the nation overall getting East Germany up to speed was by no means the last time that Germany had to carry it steam and make up for economic deadweight many supporters today note that between Germany Italy and France the European Union would not be nearly as stable as it is today I mean relatively speaking Germany is a truly remarkable nation and economic case study purely just because of how resilient its culture of industriousness is there are lucky countries that do everything wrong think of oil-rich African nations we have seen lucky countries that do everything right think of Norway but it is hard do you think of a nation that was as unlucky and simultaneously smart as Germany it was formed after a war it then industrialized and then found itself in the greatest conflict in the world he tried to pick itself back up and rebuild its crippled infrastructure and then it got hit with crippling war reparations once again it tried to pick itself back up and rebuild and then boom hyperinflation it tried to pick itself back up and rebuild and then boom France takes your most productive region it tried to pick itself back up and rebuild and then boom the Great Depression it tried to pick itself back up and rebuild and then boom your new tyrannical dictator wants to invade Poland it tried to pick itself back up and rebuild and then boom your nation is now splitting - it tried to pick itself back up again and rebuild and then boom now your nation is back together again and you've got to deal with the crippled mess that we are duct-taping you back together with it tried to pick itself back up again and rebuild and then boom the global financial crisis and the eurozone crisis and now Briggs it and amongst all of this Germany has really not been able to catch a break despite all of this Germany is still the fourth largest economy in the world it has the world's largest export surplus and its products a universally recognized as some of the finest in the world it is hard to think of a nation that has been so prosperous despite such adversity and it is hard to say that Germany has been anything other than prosperous the social market economy system has been a strong guiding force and the mixture of the best parts of a lot of economic systems has potentially meant that Germany has maintained a certain level of flexibility to work around all the adverse issues it is often presented with but there without all of this I can't help but just think maybe German efficiency really is a superpower thanks for watching guys I hope you enjoyed the latest video I want to take the time to say a huge thank you to our new patrons over on patreon your support continues to make this channel possible otherwise as always I will be hosting a Q&A session for the video for an hour after this video goes live to answer any questions you may have you can watch that over on our second channel linked in the video description or you can come hop onto our discord server also linked in the description below thanks guys bye

Channel: Economics Explained

Views: 1,561,105

Keywords: rhine capitalism explained, the economy of germany, the economics of germany, the economics of germany explained, the economy of germany explained, the economic system of germany explained, german economics explained, germany economy explained, is german efficiency real, germany economics explained, economics explained germany, what is the economy of germany like, german economy, economy in germany, german economy explained, economics explained

Id: TzheqMtbEWY

Length: 15min 23sec (923 seconds)

Published: Sun Jan 05 2020