The social market economy that dominates Germany is one of the most sophisticated in the world. It has the fifth-largest economy in the world and the fourth-largest by nominal GDP (PPP). In 2017, the country was responsible for 28% of the Euro Area GDP, as reported by the International Monetary Fund (IMF). Germany has always played a crucial role in both the European Union and the Eurozone.
Because of its federal structure, Germany lacks a centralized government and economy. Frankfurt Am Main is home to the country’s stock exchange; Gütersloh is where you’ll find the headquarters of media giant Bertelsmann SE & Co. KGaA; and the cities of Wolfsburg (home to Volkswagen), Stuttgart (to Mercedes-Benz and Porsche), and Munich are where you’ll find the world’s largest automobile manufacturers (Audi and BMW).
Germany Economy In Europe 2023 [Facts & History]
At $310 billion, Germany’s trade surplus in 2016 is the biggest of any country. Due to its economic development, it has become the primary capital exporter in the world. One of the world’s leading exporters, Germany shipped out $1810.93 billion worth of products and services in 2019.
Seventy percent of GDP is derived from service provision, compared to 29.1 percent from manufacturing and 0.9 percent from agriculture. More than 41% of 2016’s economic output came from exports. The top ten exports from Germany include automobiles, machinery, chemicals, electronics, power, medicines, transportation equipment, metals, foodstuffs, and rubber and plastics.
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The German economy, which is Europe’s largest manufacturing economy, is less vulnerable to a financial catastrophe. Germany does practical, industry-relevant applied research to fill the gap between basic science and marketable technologies. It generates a plethora of data using its own in-house laboratories.
Wood, lignite, potash, and salt are just a few of the many natural resources that Germany has in plenty. Lower Saxony is tapping into a small number of its natural gas reserves. Until the reunification of Germany, the German Democratic Republic mined uranium in the Ore Mountains.
30 percent of Germany’s energy comes from fossil fuels, with the rest coming from renewable sources like wind, nuclear, gas, sun, biomass (wood and biofuels), and hydro. When compared to other wealthy countries, Germany’s dedication to Energiewende, the transition to renewable energy sources, is revolutionary. Germany is the world’s largest producer of wind turbines.
Almost half (46%) of Germany’s electricity comes from green sources (as of 2019). In Germany, small and medium-sized enterprises (also known as “Mittelstand”) make up 99.9% of all firms and are primarily held by families. Germany is home to 53 of the Fortune Global 2000, the list of the world’s largest publicly traded companies based on revenue, with several of the top 10 being headquartered there, including Allianz, Daimler, Volkswagen, Siemens, BMW, Deutsche Telekom, Bayer, BASF, Munich Re, and SAP.
The German government supports further political and economic union in Europe
Its business practices are increasingly shaped by the single market legislation of the European Union (EU), as well as by agreements between EU members. On January 1, 1999, Germany was the first country to adopt the euro as its national currency. The European Central Bank, headquartered in Frankfurt, determines the country’s monetary policy.
Northern Germany is economically weaker than the southern states (“Bundesländer”), particularly Bavaria, Baden-Württemberg, and Hessen. The Ruhr area, which spans the western cities of Duisburg and Dortmund, is one of Germany’s most prosperous (and oldest) economic centers.
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That area is home to 27 of the 100 largest corporations in the United States. However, the region’s unemployment rate has risen dramatically in recent years (8.7% in 2010) despite its reliance on natural resources and heavy industry for economic growth.
However, the economies of Bayern and Baden-Württemberg, the states with the lowest unemployment rates in the country (2018: 2.7% and 3.1% respectively), are founded on high-value products.
Automobiles, electronics, aerospace, and biology are just a few examples of crucial industries. Baden-Württemberg is a major economic hub in Germany, particularly for the automotive and machine-building industries.
Germany’s reunification on October 3, 1990, marked the beginning of the country’s primary objective of bringing the economies of the two former republics into harmony. Economic intervention meant that eastern Germany would catch up to the standards of former West Germany, but annual income and standard of living are still much greater in western German states.
With annual transfers from west to east totalling to almost $80 billion, the modernization and integration of the eastern German economy remains a long-term process set to extend through the year 2019.
Since 2005, the national unemployment rate has decreased steadily, reaching a 20-year low in 2012. In July of 2014, the government started passing laws that would eventually result in a federally required minimum wage that would go into effect on January 1, 2015.
Germany and International Trade
Germany is a popular location for hosting international trade shows. Germany is home to almost two-thirds of the world’s most significant trade exhibitions. Hanover, Frankfurt, Cologne, Leipzig, and Düsseldorf are just a few of the German cities that regularly host the world’s greatest annual trade fairs and conferences.
Germany Industrial Revolution
Germany’s industrialization and political unification were propelled by the building of railway networks and the 1834 formation of the Deutscher Zollverein (German Customs Union). Beginning in 1834, tariffs were gradually abolished between many of the Kleindeutschland German states.
The Nuremberg and Fürth railway opened in 1835 in Franconia, and its success sparked a nationwide “railway fever” in the 1840s. German locomotive production began in 1850, and the country’s rail network expanded to 8,000 kilometers (5,000 miles) between 1845 and 1870.
As time went on, more and more German states joined the customs union and began connecting their railroads, bringing the country’s many regions closer together. German economic growth was accelerated by the expansion of free trade and the construction of a national rail network, which led to the emergence of new markets for domestic goods, the emergence of a large pool of middle managers, a rise in the demand for engineers, architects, and skilled machinists, and an uptick in investments in coal and iron.
The unification of Germany’s monetary system, which was made feasible in part by the country’s political union, was another element that spurred German industry forward. In 1871, Germany adopted the new gold-backed Deutsche Mark currency. Due to silver coinage’ continued value, however, this method didn’t catch on until 1907.
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After defeating France under Napoleon III in 1870–1871, Prussia and her allies declared their independence and established the German Empire the next year.
With the rise of the empire came the fact that a new populous and industrializing state was emerging on Europe’s doorstep, one with a large and steadily growing economic and diplomatic presence.
Several major institutional changes occurred in Germany as a result of the French economic model being adopted there. These changes included the elimination of feudal restrictions on the sale of large landed estates, the weakening of the urban guilds’ influence, and the implementation of a new, more effective commercial law.
Still, a coalition of “rye and iron,” or Prussian Junker landowners in the east and Ruhr heavy industry in the west, controlled political choices about the economy of the empire.
Otto von Bismarck, chancellor of Germany from 1881 until 1889, pushed for legislation to improve working conditions and expand social security. In effect, he created the first welfare state in human history.
Germany pioneered the concept of social insurance and was the first country to implement universal healthcare, compulsory education, sickness insurance, accident insurance, disability insurance, and a retirement pension.
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Germany also has the highest literacy rate in the world at 99% thanks to the government’s push for compulsory education, which has resulted in a rise in the number of the country’s mathematicians, engineers, chemists, ophthalmologists, factory employees, managers, farmers, and soldiers.
The German steel industry had already overtaken that of Britain and the United States by 1900. Growth in the German population from 35 million in 1850 to 67 million in 1913 was exceptional and contributed significantly to the country’s economic miracle. The number of people employed in the machine-building industry more than doubled from 1895 to 1907.
From 67% at the Empire’s inception, only 40% of Germans called the countryside home by 1910. 60 percent of the country’s GDP came from the industrial sector in 1913. By 1914, Germany was making half of the world’s electrical equipment and had the world’s most advanced chemical industry.
The country’s economic condition saw a dramatic transformation as a result of Germany’s quick development towards industrial maturity, from a rural economy to a significant exporter of completed goods. Finished goods as a percentage of exports increased from 38% in 1872 to 63% in 1912. By 1913, Germany had risen to become the undisputed leader across Europe. Germany had grown to become a major exporter by 1914.