Germany

Country summary
Capital	Berlin
Borders	Austria 784 km, Belgium 167 km, Czech Republic 646 km, Denmark 68 km, France 451 km, Luxembourg 138 km, Netherlands 577 km, Poland 456 km, Switzerland 334 km
Government type	federal republic
Population	82,329,758 (July 2010 est.)
Population growth %	-0.05 (2010 est.)
Life expectancy	79.26 years
Unemployment	7.5% (2009 est.)
Index of Economic Freedom	23
Corruption Perceptions Index	14
Doing Business ranking	25

As Europe's largest economy and second most populous nation (after Russia), Germany is a key member of the continent's economic, political, and defense organizations. European power struggles immersed Germany in two devastating World Wars in the first half of the 20th century and left the country occupied by the victorious Allied powers of the US, UK, France, and the Soviet Union in 1945. With the advent of the Cold War, two German states were formed in 1949: the western Federal Republic of Germany (FRG) and the eastern German Democratic Republic (GDR). The democratic FRG embedded itself in key Western economic and security organizations, the EC, which became the EU, and NATO, while the Communist GDR was on the front line of the Soviet-led Warsaw Pact. The decline of the USSR and the end of the Cold War allowed for German unification in 1990. Since then, Germany has expended considerable funds to bring Eastern productivity and wages up to Western standards. In January 1999, Germany and 10 other EU countries introduced a common European exchange currency, the euro.

Points of interest

The following notable inflations have affected German lands:

• the 15th century Schinderling inflation
• the 16th century Kipper and wipper inflation in Hapsburg lands
• the 18th century inflation during the Seven Year War under Frederick the Great
• the 20th century Inflation in the Weimar Republic
• the price-stopped Inflation in Nazi Germany

Other notable events:

• Banking crisis: 1857, 1901, 1931, 1977
• Hyperinflation: 1923-1924
• Years in inflation: 9.5% (share of years 1800-2009 with annual inflation above 20 per cent per annum)
• Public default: 1807, 1812, 1850, 1932-1953(external), 1948 (domestic)

Levees in Frisia

One typical and popular example of public goods is the case of dikes or levees. If a dike is built for one person, additional consumers can benefit from its services, i.e., protection from flooding. But once a dike has been built, no one living behind the dike can be excluded from its service, whether he participated in financing it or not. Hence, people would wait for others to build a dike hoping to enjoy it without having to pay for it. But when everyone waits, the dike that everyone needs is not built. This line of thinking ignores individual actions and motivations, and social pressures that may also come into play. People can decide to take the higher subjective risk or come to an agreement of sharing the burden.

Historically, as other public goods that allegedly need government provision, dikes have been built on the private market for a long time. In Germany, mainly in Frisia and Dithmarschen, the first dikes were built without any government help about 1,000 years ago. The population grew quickly in these very fertile areas made accessible by diking. As the population grew and became wealthier, monumental churches were built, symbolizing the success of private dike building. The newly diked areas were almost independent territories. Although they nominally formed part of the Holy Roman Empire, only in some cases were they required to support the army in case of war and pay taxes. They were autonomous with their own jurisdiction and diplomatic contacts. The land of the Fries was without a feudal order or without feudal overlords. Diking not only had the incentive to create new fertile and profitable land but also to create free land.

It is striking to realize that dikes were not only built without the state, but also that the dike areas can be regarded as seceding areas, that came close to private law societies. The government of Friesland in the thirteenth century has been characterized as a 'harmless anarchy.' Officials were not appointed by a higher authority but were chosen by the free farmers. The institution of diking could have been one of the main reasons for the liberty in Frisia along with the "unique autonomy" the Fries enjoyed in Germany.

In dike law, there were two fundamental principles: the dike duty for maintaining one’s own section of the dike and the duty to help others in cases of emergency dike repairs. Both duties were tied to the property so that the property could only be sold with them. Penalties for violating common dike law could be rather draconian. Whoever did not help in maintaining the dike or did not help in time of emergency would lose his property inside the dike area. According to Steding (a region near Bremen and Oldenburg) dike law, he who did not manage his part of the dike and therefore was the cause of a dike break would be buried alive in the dike. The second pillar of dike law, the duty to help in case of emergency, referred to cases of dike breaks and storm floods. In 1533, certain Frisians who did not help the island of Pellworm with a dike break were beheaded.

Over time, the state got involved in the lucrative business of diking and claimed ownership of "polders" (reclaimed land) that were to be built by virtue of "sovereign fiat." The "Oktrois" as the rights to build a dike were called, were tied to a number of liberties, for instance, tax and duty liberty for a number of years, property rights for the fouling, freedom for inns, breweries and mills, free hunting and fishing, freedom for the building of churches and schools, etc. Often the "Oktrois" polders were autonomous, having their own jurisdiction and police power. These rights were very attractive due to the extensive liberties and religious refugees, even from the Netherlands, came for this reason. For the prince with a low time preference the system of the Oktrois polder was a very lucrative investment. By selling the right to the dike in the beginning, he would receive payment for these time-limited rights. Then for a number of contracted years the community would prosper in a state of anarchy and the population would grow. After a number of free years the prince could impose taxes, like property taxes, which would generate solid revenues for him.

The dike associations had an autonomy that the developing territorial states found difficult to tolerate. Over the course of 500 years, sovereigns of nearby states gained control over diking and the dike areas by employing a strategy of carrot and stick. Some of the areas were conquered in grimly fought battles, allowed by advancements in drainage methods which made it possible to dry out the swamps. But normally, the extension of state power was achieved by gradual means. For example, after the storm floods of 1717 and 1721 and the subsequent rebuilding, dike associations in Frisia were heavily indebted. In 1744, Prussia took over the debt payments of the dike associations and began to dike on its own account. The sovereign also tried to merge the dike associations into larger ones and to gain influence in the dike administration. State supervision and an organizational restructuring were introduced; a dike commissar was appointed as a public servant by Prussia; later a dike and sluice legislation was adopted, which gave government agencies supervisory power over the dike associations. Hence, the formerly autonomous dike associations increasingly became state entities in the nineteenth century. The state paid for this growing influence with subsidies in the form of credits or guarantees. Finally, in the twentieth century, the responsibility for all aspects of dike management from construction to damage repair went completely from property owner to the state.

Economical characteristics

• Currency: Euro (ISO code: EUR)
• Central bank discount rate: 1.75% (31 December 2009)
• Commercial banks lending rate: 5.97% (31 December 2008)
• is part of the Eurozone

Statistics

Statistic / Year	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
GDP (million USD)	2 143 620	1 900 220	1 890 970	2 016 920	2 442 210	2 745 100	2 789 700	2 912 430	3 316 130	3 649 490
Govt. debt (% of GDP)			37.778	38.968	40.608	42.629	44.251	43.255	40.775
Govt. revenue (% of GDP)	30.540	30.342	29.617	29.592	29.755	28.584	28.732	28.681	28.471
Govt. expenses (% of GDP)	32.069	31.752	31.444	31.943	32.436	31.341	31.260	30.161	29.021
Debt to revenue (years)			1.276	1.317	1.365	1.491	1.540	1.508	1.432

References

Note: statistical data was rounded. Different sources may use different methodologies for their estimates. Debt to revenue is calculated by dividing the two variables from their original ('unrounded') values. It represents how long it would a government take to repay its entire debt if it used its whole revenue for this purpose.

External links

• Central bank of Germany
• Studies from the Library of Congress (1986-1998)
• BBC country profile
• German Economic Miracle by David R. Henderson
• "Die Krankmacher" (in German) ('The Sick-makers) by Alexander Neubacher, about healthcare in Germany
• German public debt (in German)
• Origin and Rise of Compulsory Medicine by Melchior Palyi, from Compulsory Medical Care and the Welfare State, 1950
• "The German Miracle vs. the Welfare State" by Ludwig Erhard, 1957
• Prosperity through Competition (pdf) by Ludwig Erhard, 1958
• Nation, Prussia by Ludwig von Mises, 1919, from Nation, State, and Economy
• Wilhelm von Humboldt by Ralph Raico
• John Prince Smith and the German Free-Trade Movement by Ralph Raico, 1988
• De-Socialization in a United Germany (pdf) by Hans-Hermann Hoppe, 1991
• Goethe on National Greatness by Hans-Hermann Hoppe, October 1999
• Hyperinflation in Germany, 1914-1923 by Hans F. Sennholz, October 2006
• Nazism is Socialism by Adam Young, September 2001
• Some Costs of the Great War: Nationalizing Private Life by T. Hunt Tooley, January 2009
• The Economic Comeback of Germany by Hans F. Sennholz, August 2009
• Steuerberater Magazin (pdf, German), about the total size of German tax literature
• Eugen Richter and Late German Manchester Liberalism: A Reevaluation by Ralph Raico, June 2010
• No Copyright Law: The Real Reason for Germany's Industrial Expansion? by Frank Thadeusz, August 2010
• The Blockade and Attempted Starvation of Germany by Ralph Raico, May 2010
• German unification conditioned to acceptance of Euro, reveal documents, MercoPress, September 2010
• EU rescue costs start to threaten Germany itself by Ambrose Evans-Pritchard, November 2010
• From Socialism to the Market Economy - Postwar West Germany versus Post-1989 East Bloc (pdf) by Svetozar Pejovich, 2001
• Germany: From the Market to Socialism—and Back? by Norman Barry, April 2003
• The Party of Freedom: Studies in the History of German Liberalism by Ralph Raico reviewed by Joseph R. Stromberg, 2000
• Germany's Energy Poverty: How Electricity Became a Luxury Good, Spiegel, September 2013
• Germany at Wikipedia