Inflation refers to the augmentation or increment of the general price levels in a given region while unemployment refers to the inhabitants of a region, who have not been able to secure a position in a working environment, and therefore do not have a fixed or regular source of income.
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There is a general consensus among economic experts that there is an unwavering correlation between the rate of inflation and the level of employment in any given country. This in turn, means that whenever there is a high level of inflation, the rate of unemployment is equally affected since the number of unemployed people will increase.
Whenever the rate of inflation rises, the people in a region spend less on items, and this in turn, means that the factories have to lay off workers in order to be able to stay afloat due to reduced orders. Germany has encountered its fair share of inflation, which has had an impact on various aspects of the people’s lives in the country.
The political aspects of the country have been shaped mainly by the activities that revolve around economic stimulus programs, which were set in this position in order to counter the long-term effects of the great depression that Germany underwent decades ago.
In the earlier years of the last century, the economy of Germany went below acceptable levels with the lowest dip being at a point where the currency lost value. The currency became virtually useless with money being carried around in large quantities. It was evident that the nation had taken a turn for the worse since the citizens became billionaires without any value. This goes to show that the economy of the nation was at its lowest.
The economic system was affected seriously since the citizens resorted to other means of trade such as barter. The political scene was also adversely affected by the rate of inflation since, the leaders had to change their tact when addressing issues that touched on the economic stability of the country. The German economy has seen vast improvement from years of around the late 1970s to date (Gordon 61).
There has been a steady increase in stability with regards to the economy in a way that has seen the people, as well as the nation, grow. There was a severe and noteworthy loss of welfare, which came about as a result of the relations of fairly judicious rates of price increases, coupled with some additional factors such as the system of taxation which was in place. This goes to elucidate the fact that inflation is nothing apart from an option that may be considered as being attractive.
The rate that Germany has experienced a change from the rather equilibrium rate of inflation which was considered rather low, down to the level of zero rating. This enormous loss is attributed to several factors that are implemented by the governing bodies in the country. It is notable to recognize the fact that the rate of savings in the nation is quite high causing a dip in the rate of inflation.
Another factor that is notable is that the capital income is taxed quite heavily, and the system of taxation is not indexed. One notable aspect of this feature is that the distortion of taxation on the income capital aggravates the entire situation. At present, the German consumer price index is affected by inflation and unemployment, in that, it depicts the diversity of the prices of an average package of items as well as services that are bought and used by an average household in the country for their consumption.
As is the case with all governments, the German government strived to attain the rate of inflation at 2 to 3 percent in a year. They managed to keep it low so as to encourage the populace to purchase goods.
The main aim of attaining economic growth for the ruling party was to ensure their survival in the coming elections. The political scene is normally affected by the rate of inflation in Germany since, most people view slow economic growth as a sign of failure by the government to address the needs as well as the plight of the citizens.
The people’s confidence in the government may wane if the rate of inflation rises. The political figureheads have to ensure that the rate is maintained at a rate that is not bordering on inflation yet does not spill over into deflation. It is necessary for the German economists to maintain the rate of inflation so that it does not rise above 2 percent. The economists in Germany had the belief that the rate of inflation would be substantially affected by the election reruns in Greece.
The trade unions have gained significant ground in attaining benefits for their members. There have been significant wage increments in the early months of 2012. This could eventually lead to the rate of inflation rising in the country. The unions have been highly aggressive and have attained gains for member such as the ones belonging to the engineering union. This plays a significant role in the politics of the region.
The impact of business cycles on Germany from 1950 to 2012
Business cycles may be defined as the fluctuating and recurring levels of activity that are experienced within the economy over a certain period of time. There are five main stages of the business cycle, which encompass expansion or growth, peak or climax, contraction or recession trough and recovery.
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There came a point in time when it was figured that business cycles were exceptionally customary and that they had durations that were quite conventional. This has so far changed since they are mostly believed to be quite unbalanced and that they may vary in various aspects such as the magnitude, frequency, as well as the duration of time that it takes.
The route to growth of the economy for any nation is largely dependent on quite a number of aspects that may encompass structural transformations within the economy, self-feeding business cycles, the political instabilities, as well as the rate of capital formation and natural calamities. The business cycle is the broken up but unequal up and down movement of activity in the economy, which is metered by variations in the bona fide gross domestic product, as well as, other variables that deal with macroeconomics.
Within the German governmental arm of administration, the Federal Ministry of Finance maintains a crucial part in abetting to mold the policies on Europe. The economy of Germany experiences quite an erratic scenario in terms of impacts on the economical facets.
For example, the times when the economy is at its peak is when there is a lot of economic activities that are taking place although they may not be on the same level playing field as the previous or following years. This may also be interpreted into the times when it hits an all time low (Schiller 44).
The economy may face a slump and the effects may be felt all over the country in terms of the prices of commodities. The cushioning of the crush is essential since the full brunt of the effects of a slump or pick may have to be distributed out and absorbed by the business world.
In the year 1950, there was a rapid improvement on productivity in Germany. The country’s comparative productivity levels increased immensely, and it surpassed that of Britain. This was for the entire economy. The effect was accredited to the inclinations in services as opposed to those in the industry.
The Germans took up a scheme that would bring up to date, the processes of business as they modeled and made proper use of the finest practices. The same changes were at the same time being revoked in Britain. One notable aspect with regards to the German economy was the rapid rise in the economic activities.
The rate of growth of production in the industries was an astounding 25 percent in the year 1950 and 18.1 percent in 1951 which was a year later. As much as there was the occasional slump, this rate continued to rise through the 60’s. Industrial productivity rose to a whole two and a half percent by 1960.
The same period saw a steady rise in the gross domestic product. It was so high that it was a record. At no other time had it gone this high. The unemployment rate fell by a huge margin as more people sought employment and worked in the nation. There were more employed people in the country than ever before.
The rates in terms of percentage were so unequivocal, and the wages that were considered meager were increased many times over between 1949 and 1957. After the West German central bank was attained in the year 1957, the monetary policy was accorded much more power than before. The policies did away with the ideology of monopolistic economic powerhouses and cartels that had influenced sweeping economic aspects in the past.
The policy on economic activities was further enhanced in 1963 when parliament created the council of experts of economic activities (CEE). This was done to ensure that the policies were followed as per the objective evaluations at hand. All in all, business cycles played a significant role in shaping the economy of the nation at the point when it required a major boost to enhance the nation’s economy.
The injection of well over two trillion dollars in a bid to reform East Germany, in a bid to enable it transition from its former self into an economically viable region, as well as, clear up the environmental disintegration that it had developed over the previous year’s, depicts a sense of economic viability.
The years have brought about a major change in the world as a whole since the business cycle continues to play a major role in the economy of Germany. It is evident that, by the year 2011, there were plenty of mixed results since there was a go-slow on the economic growth in terms of development in the Eastern region. This was unlike the increases that were envisioned in the Western region. There was a higher rate of unemployment in the East compared to the West of Germany.
Gordon, Robert. Macroeconomics, Boston: Addison-Wesley Longman, 1998. Print.
Schiller, Bradley. The Macro Economy Today + Global Poverty Chapter, New York: McGraw-Hill Higher Education, 2007. Print.