The 1948 Currency Reform: Structure and Purpose 1 Keith Tribe 1. Introduction The Currency Reform of 20.June 1948 represents a turning-point in the development of the post- war German economy. The abolition of a money supply denominated in the Reichsmark and its replacement with the new Deutsche Mark was a symbolic act whose political, cultural and economic impact has resonated throughout the latter half of the twentieth century. The inauguration of the DM as a stable currency reinstated the conditions for regular price formation and economic calculation absent in Germany since the mid-1930s. Contemporaries witnessed the overnight disappearance of disorderly market phenomena - goods shortages combined with currency excess, fixed prices, exchanges in kind, and the black market – and the dawn of a new day with fresh currency, goods in the shops, and an incentive to earn money wages. In popular mythology this event stands therefore at the inception of the Economic Miracle; it is thought of as the founding moment of West Germany’s political and economic recovery, and it is generally linked to the elaboration of a Social Market Economy as the foundation of prosperity. The Reform also had profound political effects: it pre-dates the Federal Republic, but precipitated its formation. Introduced by the three Western military governments subsequent to the breakdown of efforts to reconstruct the German economy on a four- power basis, a parallel currency reform in the Soviet Zone sealed the monetary division of Germany and foreshadowed the partition of post-war Germany, whose territory then became for the next forty years the focus of a Cold War confrontation between western and eastern blocs. In 1990 this relationship between monetary and political sovereignty was played out once more; in early July the creation of a unitary German state was foreshadowed by the replacement of the currency of the (still extant) German Democratic Republic with the DM. The experience of post-war European reconstruction was often recalled during the progressive dismantling of eastern European state socialist economies that followed. Politicians and economists who favoured a “big-bang” approach to the creation of market-led growth turned instinctively to the 1948 Currency Reform as a model for 1 This essay was prepared for a 1998 conference at the Institute for German Studies, University of Birmingham, and published in J. Hölscher (ed.) 50 Years of the German Mark. Essays in Honour of Stephen F. Frowen, Macmillan, Basingstoke 2001 pp. 15-51. 1948 Currency Reform.odt 17 May, 2020: page 1