remained higher than the population was accustomed to.
The ruling coalition was strained by differences over economic policy. In the
early 1980s observers wondered what effects stagflation (recession or economic
stagnation combined with inflation) would have on labor and other groups in
the society used to more favorable economic conditions.
For more than a century the economy has experienced abrupt changes,
including major wars and sudden losses or additions of territory. In the
mid-1800s the economy began the transition from a predominantly agrarian
society to an industrialized one. Some events and factors retained importance
in shaping policies and economic development after 1949.
The industrial revolution came late to Germany, but the new German
industrialists found they could compete with established French and British
firms by applying scientific advances to industrial processes. A high level
of German education and scientific research provided a base for technological
innovation in industry. By the late 1800s German industrialists held
international rights to many formulas and processes, particularly in chemical
fields. German industry and exports earned a reputation for advanced design
and technology (see Major Industrial Sectors, ch. 6). The links between
scientific research and industry have continued, but by 1982 observers at
home and abroad were questioning if industry was introducing new designs
and technology fast enough to meet international competition.
Along with and abetted by technological innovations, German industries
in the nineteenth century frequently organized production and marketing to
avoid destabilizing competition and to enhance profits. In some situations
vertical integration accomplished what cartels and cartel-like arrangements
did for other industries. The process accelerated after World War I with the
formatio...