West German track record gives hope for recovery
Koblenz, West Germany
''We had our 'economic miracle' because there was nothing here to begin with [at the end of World War II]; we built from zero up,'' remarks senior white-collar employee Ludwig Bauer.
He isn't excessively troubled by the contrast between West Germany's renowned boom years of the 1950s and '60s and the current decline in gross national product, with more than 2 million unemployed. He views the slowdown as understandable - but does think in the present recession, jobless pay (though not pensions) must be cut back some.
Nineteen-year-old conscript Florian S. agrees in general. He would welcome trims in the pensions that he and his generation will find an increasing burden in this aging society. But he takes it for granted that the broad social welfare he has grown up with should be continued. He isn't worried about any structural weakness of the economy; he thinks the Christian Democrats' nurturing of business confidence can revive growth, and thus generate the funds for welfare.
From a vantage point midway between these two generations, Franz Siebenborn says a review of social spending is now due. He contends belt-tightening could be accomplished without upsetting West Germany's vaunted social harmony, so long as the overhaul helps create rather than kill jobs.
His 15-year-old daughter, Simone, interjects, however, that she hopes the government will restore the student grants it has recently cut.
The details differ in these man-in-the-audience opinions about the economy gleaned at a conservative election rally. But they are all upbeat. There is implicit faith in the underlying strength of the German economy; there is pride in the fairness of a system of social welfare that has Bismarckian as well as Social Democratic origins; there is acceptance that minor, but not major, trims will have to be made in these years of sluggish and even negative growth.
The mood is appropriate for supporters of the perennially optimistic Helmut Kohl, campaigning for re-election as chancellor by counseling his fellow citizens not to fear the future.
Even the auditorium itself, the well-appointed Rhine-Mosel Hall, radiates confidence in the future. It is a symbol of optimism fulfilled, of the Rhineland-Palatinate's emergence from a picturesque wine and farm backwater, to prosperity. Of late, it has become famous as the training ground for the native son who has been West Germany's leader for the past five months.
A stage orchestra (and not the rock band favored by the Social Democrats and the Greens) fills in the hour before the celebrities appear. Trim Young Union ushers steer new arrivals to their proper seats with a minimum of fuss. There's none of the random proprietary pugnaciousness of Social Democrats at their rallies - and certainly none of the reveling in chaos of Greens at their happenings.
Outside, there's little to disturb the storybook image of Germany. Doorsteps in front of cozy half-timbered houses have been freshly washed. Rhine barges ply their way toward the Lorelei in the morning sun. The brilliant winter haze romanticizes even the emissions of chemical and cement factory smokestacks.
The idyll is deceptive, as is the relatively idyllic mood in the Rhine-Mosel hall. A lot of the smokestacks in the industrial German heartlands, both upriver in the Saarland and downriver in the Ruhr, are only spewing out at half capacity or less.
West Germany's economic miracle ended abruptly with the second oil shock of 1979-80, when doubled fuel prices reversed economic growth (- 0.2 percent GNP change in 1981, - 1.2 percent in 1982, a third year of decline or at best a break-even in 1983). Unemployment jumped from 3.5 percent in 1980, to 5.4 percent in '81, to today's 10.2 percent, for a postwar record of 2.5 million jobless. The number is growing every month, and is expected to do so for the next few years, as the early 1960s boom babies reach adulthood. Bankruptcies are at a postwar high.
Nor is there much hope of outside rescue. European Community unemployment has reached 12 million now, the highest figure since the Great Depression half a century ago. The Organization for Economic Cooperation and Development (OECD) projects 35 million jobless in the industrialized world by next year. The protracted world recession - with the first contraction of trade since World War II - makes protectionism tempting, and threatens to plunge recession once more into depression. Once again ex-Chancellor Helmut Schmidt has deemed it imperative to warn against this danger.
The problem is, once the warning is given, no one really knows how to react to it. Schmidt can urge the United States to lower its interest rates. Europe can hope projections of an American and Japanese upswing this year will be borne out and pull Europe up with it. But nobody has much faith in these measures.
And nobody is promoting any of the old economic nostrums very enthusiastically. Keynesians, Reaganites, German pragmatists, and everybody in between, have all been confounded in recent years. The worst pessimists speculate that the West is in the deepening trough of a decades-long Kondratyev recession.
The typical mood even in West Germany, then, is gloomy - not only at Social Democratic rallies of laid-off Ruhr steelworkers, but also in the back rooms where conservative economists are drawing up blueprints for the 1980s. No one knows what to do any more.
For three decades it all looked quite simple here. The traditional Prussian, Hanseatic, and Swabian virtues of hard work, frugality, and foresight paid off. Faster than anyone thought possible, Mr. Bauer and his contemporaries rebuilt Germany, brick by brick, bolt by bolt. The economic miracle saw production triple, real wages double, exports more than sextuple, and gold and currency reserves multiply 2,500-fold between 1950 and 1962 alone.
In these years the West Europeans formed an iron and steel community, and then a common market, that worked - for the first time in the continent's history. Europe came to equal the US in its output. West Germany benefited from an open market of unprecedented size. This country - despite its lack of any raw materials, other than increasingly expensive coal - moved up to become the fourth largest economy in the world (after the US, the Soviet Union, and Japan), and the second largest trader (after the US).
Grundig, Zeiss, and Mercedes-Benz became household words in Asia and South America. Bayer AG, Hoechst AG, and other firms made West Germany the world's leading trader in chemicals; Thyssen Steel, Krupp, and others cornered (and still hold) a fifth of the world structural steelmarket.
Less well-known medium-sized and small companies, often run by a few thrifty Swabians in their ancestral towns in Baden-Wurttemberg, became the world's leading producers of this or that specialty. West Germans, it seemed, could do no wrong economically.
There were some failures, of course. The West Germans (like all the Europeans and the Americans too) lost out to the Japanese in electronics. They fell behind both the Americans and the Japanese in computers and integrated circuits. But they did regear their Ruhr smelters (better than their European allies) to high-quality steels, as low-wage third-world nations began churning out cheap steel. They did redirect their traditional heavy industries to engineering of whole-plant exports.
When the first oil shock hit in 1973, then, West Germany came out of it better than any other Western country except Japan. There was a hiccup; GNP declined almost 2 percent in 1975. But it bounced back to a healthy 3.6 percent average between 1975 and '80, as German exporters picked up lucrative new construction orders for Mideast petrodollars. Exports and imports, totaling one-half of GNP, continued to match each other.
The strong deutsche mark kept appreciating, offsetting the quadrupled dollar price for fuel. Inflation was contained at 4.1 percent in the second half of the decade, well below the double-digit average of the OECD. Expansion was not as spectacular as in the '50s and '60s, but the German economic miracle still maintained a momentum that was the envy of Bonn's partners.
Then came the 1979-80 oil price doubling, and the slump that has beset West Germany ever since.
By now there are a few hopeful signs. The current-account deficit of 1979, ' 80, and '81 were turned around to a slight surplus in '82. Government forecasters (though not private economic institutes) are anticipating a climb back from decline to zero growth this year. The collapse of oil prices is improving West Germany's terms of trade. There's an upturn in the construction industry, and in consumer spending.
Yet all of these favorable trends fall far short of restoring what not so long ago was still viewed as the West German ''locomotive.'' This may not bother West Germany's countercultural, ecological Greens, who advocate no growth (while still wanting to accelerate social redistribution). It very much bothers both conservative and Social Democratic economists, however. They interpret it as a structural crisis that neither traditional virtues nor traditional common-sense tinkering can overcome.
What this leaves in West Germany is an array of individual proposals for combating unemployment, rather than comprehensive economic recommendations. Suggestions include earlier retirement age; shortened work weeks and job-sharing with the unemployed; state-initiated make-work social or environmental projects; and an increase in the self-financed portion of social security.
Amidst all the current bewilderment, though, there is still one crucial element of the old economic miracle left to build on: social consensus. This is manifested in a negative way at the moment - in agreement that everyone must now tighten his belt.
Mr. Bauer, after a lifetime of work, would of course prefer the jobless sacrifice more than the pensioner. Florian and Simone, with their careers still ahead of them, would prefer the pensioner sacrifice more than the student or young graduate. Far more than in any other European country, however, the different classes or interest groups accept they are all going to have to discipline themselves in their adjustment from 30 fat years to an unknown number of lean years.
Taxpayers have already decreased private consumption for the first time since the war, as real disposable income fell one-half a percent in 1981. Workers have taken cuts in real income in the last two years of wage negotiations and - despite some more militant young second-echelon leaders in the trade unions - will probably settle this year for wage hikes corresponding to inflation. Chancellor Kohl's conservatives have abandoned their earlier aims of major reductions in the state's share of payments to the elderly and to health care, and are even raising the taxes on their natural constituents, the wealthy.
West Germany is at least experiencing none of the political agony of a Holland facing an unpleasant lowering of expectations for the first time in a generation. There are none of the ideological battles of a Britain. There is no real concern yet that today's socially secure 2.5 million unemployed West Germans might follow the radical path of the Weimar Republic's very insecure 6 million unemployed.
This hardly qualifies as an economic miracle. And it hardly points the way out of West Germany's (or the West's) stubborn recession. For Germany, however, it must rank as something of a social miracle - and it goes far toward explaining that basic confidence of Mr. Bauer, Mr. Siebenborn, and their juniors in the West German ability to cope with economic troubles. Next: attitudes of West German youth