Until the early 19th century, Germany, a federation of numerous states of varying size and development, retained its pre-industrial character, where trade centered around a number of free cities. After the extensive development of the railway network during the 1840s, rapid economic growth and modernization sparked the process of industrialization. Under Prussian leadership Germany was united in 1871 and its economy grew rapidly. The largest economy in Europe by 1900, Germany had established a primary position in several key sectors, like the chemical industry and steel production. High production capacity, permanent competitiveness and subsequent protectionist policies fought out with the US and Britain were essential characteristics.
By the end of World War II, the country's economic infrastructure was completely destroyed. West Germany embarked in its program of reconstruction guided by the economic principles of the Minister of Economics Ludwig Erhard excelled in the economic miracle during the 1950s and 1960s. East Germany was embedded in the Eastern Bloc system of socialist planned economy. It fell far behind in terms of living standards.
