Soaring inflation keeps surging and hits the most vulnerable in 18 years.

 Germany is one of the largest exporters globally with $1810.93 billion worth of goods and services exported in 2019. But just like every economy, Germany’s economy vicissitudes more than any other economy to date. Inflation is particularly worrisome in Germany, where purchasing power has evaporated several times over the last century. There are several reasons behind one being the tragic World Wars. Germans did not only face inflation in the 1900s but hyperinflation.

The last German Emperor Wilhelm II decided to fund the war by borrowing. (debt) This move proved to be one of the greatest mistakes of all times by modern economists. In 1923, banknotes had lost so much value that they were used as wallpaper. Purchasing power in Germany had evaporated, leading to hyperinflation, and losing WWI led to the mass exit of the workers class on a daily basis. With consumer prices rising every day, workers would collect their wages and rush to go spend it before their money lost even more value. Many turned to barter services for goods like groceries and coal. Since then, Germany has suffered through other bouts of inflation, including after World War II and during the energy crisis in the 1970s.

The next blow was well tackled by Adolf Hitler when he became Chancellor of Germany in 1933 and introduced policies aimed at improving the economy. The changes included privatization of state industries, autarky (national economic self-sufficiency), and tariffs on imports. Women were now permitted to work for the Nazis and make a living and they were no longer included in the ‘unemployed’ class. Germany regained its prominent position and achieved economic efficiency (wirtschaftliche Effizienz) but it was short-lived (only till the early 1940s).

Talking about modern economics, ‘Germans have good reason to worry about rising consumer prices. With inflation at a 30-year high, it's the country's neediest who will be hit the hardest.’ – recent report. This year Germany witnessed the highest hike in decades. The figures point out that the consumer prices hiked to 3.1% in 2021, the largest spike in 30 years when German inflation clocked in at 0.5%, and significantly higher than the inflation target of 2% the European Central Bank (ECB) has set for the eurozone, where Germany is located. According to Heino Buddenberg, “Germany had a thriving textile industry in the 1950s until the business moved almost entirely to Asia because production was cost-prohibitive”. This could be one of the resulting factors of the current German economy. American economist and Nobel Prize winner Robert Shiller has said that even just the fear of a theoretical inflation is enough to harm the economy. The latest inflation numbers show that the threat is quite concrete. Now let us take a look at the statistics –

In 1993, the inflation rate soared to 4.5 percent, whereas during 2020, annual inflation hovered at 0.5 percent.

The Federal Statistical Office said the economy grew by 2.7 percent in 2020, but the final quarter did drop off compared to earlier parts of the year.

Newly-installed German Chancellor Olaf Scholz has been criticized for "exacerbating the inflation problem" and "ignoring the needs of citizens". German economist Dorothea Siems argued that the new 'traffic light coalition' headed up by Mr. Scholz had a hand in pushing up inflation rates. She attributed "additional price pressure" to Mr. Scholz's "daring monetary policy", adding it was "doing everything to exacerbate the problem".

Source - Federal Statistical Office.

However, the current and newly elected Germany’s Chancellor Olaf Scholz of the Social Democratic Party of Germany and its members continue to strive to find out solutions and remedies to reduce the inflation of the country.

- By Aanuj Shrotriya