uilibrium level of capital for each laborer, workers are unable to be as productive as possible, resulting in lower levels of production. The Solow growth model can visually explain why a loss in capital will cause a country to deviate from its steady-state growth rate and cause major setbacks in the countrys level of production. (Refer to model on page.). When level of capital stock drops while labor stays the same, the capital-labor ratio (K/L) will drop. Loss in capital will also cause production to drop and cause the output-labor ratio (Y/L) to drop. In order for Y/L to return to its original state, increased investment is needed in order to boost capital and, in turn, raise K/L. As K/L rises, Y/L will also rise, until K/L and Y/L eventually reach their steady states.One reason why Germanys recovery was so amazing is because it was so difficult to invest in the early years after the war. When allies took over post-WWII Germany, they continued the wage and labor controls that were devised under Nazi control, including the wage freeze imposed in 1938. Although wages were frozen, prices continued to rise, as did levels of taxes. This combination left workers with dramatically reduced real incomes. For many workers, especially those in already low-paying jobs, the income they received was barely enough to live on, leaving incomes of nearly zero after accounting for consumption.The frozen wages that existed in Germany after World War II hindered economic growth not only by reducing investment, but also by lessening worker productivity. In the years following WWII, the low real earnings received by workers were coupled with a shortage of food, caused by the loss of Germanys former breadbasket (Bulabkins 100). This combination made sufficient levels of caloric intake nearly impossible to achieve, leading to lessened productivity both because of unhealthy, weak workers and because of increased absenteeism as workers scrounged th...
