ECONOMIC CRISES, STRUCTURAL CHANGE 107
declined noticeably from then on.^18 Despite (or rather because of) the re-
turn of more state price-fi xing measures from the 1970s onward, infl ation
sped up in the GDR in the 1970s and 1980s, leading to an appreciation
of prices in the early 1980s in particular.^19 Thanks to this trend—as well
as continuing supply shortages, state-ordered austerity measures, and a
waning trust in the planned economy—most East Germans felt that the
country was in a fl uctuating state of permanent crisis by the early 1980s.^20
Especially in light of the economic downturns in 1974/75 and 1981/82,
as well as persistent structural unemployment, many West Germans also
became aware of a general sense of crisis that seemed to linger in the
air at the time. As in the East, the average growth rates in West Germany
sank continually from the 1950s onward. From a long-term perspective,
though, it can be said that they normalized rather than shrank in the wake
of the extraordinary growth of the “Golden Age.”^21 Nonetheless, twenty
years of almost uninterrupted economic growth had a lasting impact on
the expectations of the population in the years that followed. A steeper
than usual rise in prices in the 1970s, combined with relatively weak eco-
nomic growth, thus raised concerns among average West Germans. This
constellation, which came to be known as stagfl ation, was an entirely new
phenomenon for the FRG.
The short-term causes of the economic downturn in the FRG in the
1970s can be summed up in three main points. First, the existing in-
creases in prices for raw materials and foodstuff s on the global market
were followed by an explosion in oil prices in 1973, which put a damper
on consumption. Second, the Bretton Woods international monetary sys-
tem, with its fi xed, yet adaptable exchange rates, collapsed in 1973. This
heightened the volatility of the entire economic cycle, instigating a gen-
eral feeling of insecurity within the societies aff ected. International capital
mobility also continued to increase, which boosted international demand
but also capital costs for national producers. Third, the perceived crisis
in 1966/67, which was only a moderate downswing in hindsight, was
relatively quickly overcome, but the upswing that followed on its heels
brought labor shortages as well as growing infl ation, which resulted in
demands for higher wages. As a consequence, gross wages and salaries
across the board climbed between 1969 and 1974 by a nominal annual
average of 11.4 percent, further fueling infl ation in turn. The jump in
costs for primary production factors—capital, labor, and raw materials—
eff ectively capped profi ts and investments. In response, the government
introduced economic policies to combat these short-term causes (we will
return to the long-term factors later) behind the economic downturn.^22
The Bundesbank (the German central bank) took advantage of the lee-
way aff orded in terms of currency and other monetary policies in the