The fall of the Berlin Wall represented a political victory of the free market against a centrally planned economy. Though highly interventionist and dependent on international defense and industrial subsidy, West Germany was a model of economic expansion in the post-war era. East Germany, while relatively successful in comparison with other Eastern Bloc nations, was far behind West Germany with regard to the buying power of its people. It was hard to avoid obvious comparisons such as the fact that 1 in 4 East Germans did not even have an indoor toilet. Western German authorities were therefore committed to rapid integration of the two Germanys without resorting to massive controls on internal migration, external capital controls, or continuation of a large state-owned industrial sector.
Other nations were already wary of a united Germany. France, a perpetual competitor, saw Germany's size advantage increase overnight. In Gross Domestic Product ("GDP") alone, an historical size advantage of 23% jumped to nearly 30%, with stronger growth promised when East Germany was fully integrated.
Within Germany, there should have been no doubt that integration would be costly. The question was whether the government was up to the task. In Italy, for example, the central government has invested tremendous resources in promoting the economy of its under-performing Southern region. In contrast, in the United States, the local population bears the burden of varying economic performance. For example, the American South is allowed to exist with much higher rates of poverty and lower education than the rest of the nation.
Rather than allow East Germany to fall into total disrepair, with millions fleeing to the West and a long-term negative impact on national GDP growth, West German authorities decided to try to spend their way out of the crisis, creating almost overnight an infrastructure in East Germany to provide a standard of living comparable to that in West Germany. The goal was to take an under-performing country and raise it to "first world" standards in only a few years. This goal would have been preposterous had not West Germany possessed the resources to accomplish the task.
Other nations were already wary of a united Germany. France, a perpetual competitor, saw Germany's size advantage increase overnight. In Gross Domestic Product ("GDP") alone, an historical size advantage of 23% jumped to nearly 30%, with stronger growth promised when East Germany was fully integrated.
Within Germany, there should have been no doubt that integration would be costly. The question was whether the government was up to the task. In Italy, for example, the central government has invested tremendous resources in promoting the economy of its under-performing Southern region. In contrast, in the United States, the local population bears the burden of varying economic performance. For example, the American South is allowed to exist with much higher rates of poverty and lower education than the rest of the nation.
Rather than allow East Germany to fall into total disrepair, with millions fleeing to the West and a long-term negative impact on national GDP growth, West German authorities decided to try to spend their way out of the crisis, creating almost overnight an infrastructure in East Germany to provide a standard of living comparable to that in West Germany. The goal was to take an under-performing country and raise it to "first world" standards in only a few years. This goal would have been preposterous had not West Germany possessed the resources to accomplish the task.
