Division to unity 1949-1991: Economic Flashcards
What was the economic state of this time period described as?
An economic miracle
What are the reasons for Germany’s economic miracle?
- Germany was reestablished as 1 of the world’s leading industrial nations
- GNP quadrupled over the time period
What was the GDP annual growth rate of each decade?
1950s- 8.2% per year
1960s- 4.6% per year
1970s- 2.8% per year
1980- 0.7%
1984- 2.6%
What are the reasons for the FRG’s great economic performance in the 1950’s?
- West Germany inherited the industrially strong Rhineland
- Period of allied occupation provided a foundation for growth, particularly UK and USA area (wage controls removed, income tax reduced, currency reform and Marshall Plan funds helped FRG to buy essential equipment and expand heavy industry)
- West Germany had no colonies to sustain
What did the social market economy promise?
- Private businesses could set their own prices and wages
- The state would regulate as necessary to ensure fair competition and fair labour relations
What measures did the social market economy take?
- 1951 Investment Aid Law- Provided government subsidies to aid the heavy manufacturing industry
- 1951 Codetermination Law- Permitted workers in iron and steel a say in management decisions
- Series of trade agreements and the halving of protective tariffs
- Laws to prevent the establishment of monopolies to increase competition (Adenauer’s 1957 Anti Trust Law)
- Banking controls to ensure Germany maintained a strong currency
What was the 1950’s boom?
- Unemployment fell to 0.5%
- Exports remained strong and incomes increased in 1952/53
- Consumer demand grew which boosted the internal market
- Investment increases from 19% in 1950 to 24% by 1960
- By 1960 West Germany had the 3rd largest economy in the world
What was the economy like in the 1960’s and how was it resolved?
- Economy was stretched to full capacity and finding enough workers became a problem
- Solved by employing foreign workers who were encouraged by government schemes to come to the FRG and take up jobs in shortage areas
- Their numbers rose from 150,000 in 1959 to 1.2 million in 1966
- Made up 10% of the German workforce by 1970’s
What was the economic state of Germany in the 1960’s?
- Unemployment was kept below 1%
- From 1965 there was a sudden unexpected economic slump when GDP fell to 2.9% and industrial growth fell to 1.2%
- 1966- Inflation running at 4%
- Schmidt complained that the CDU/CSU government had overspent on modernising railways, paid more than it should have on US military equipment and was ober subsidising agriculture
- Erhard tried to address the problems by reducing his spending plans by 10% and raising interest rates, but this put Germany into a further recession and he was forced to resign in 1966
What measures did Kiesinger, Karl Schiller (Minister of Economics) and Strauss (Minister of Finance) take to help the 1960’s economy?
- 1967 Stabilisation Law- Increased power of the federal government to raise loans, alter taxes and build funds for economic investment (key statement of FRG’s commitment to economic growth by making full employment, price stability and a healthy trade balance into government priorities)
- Allocated special funds to improve infrastructure
- Constitutional change which gave the central government greater control over the spending and taxation policies of the Lander
- Increased direct and indirect taxation and public spending cuts of nearly 2000 million marks
What was the economic state of Germany like by the end of the 1960’s?
1967- The budget balanced again
1968- Unemployment had decreased and industrial growth had increased to 6%
1969- Inflation fell to 1.5%
What did the French suggest in 1950 and what did it lead to?
- Suggested merging the Western European coal and steel industries under a single supranational control
- An agreement was negotiated and in 1951 the Treaty of Paris was signed
- This established a single authority which merged the coal, iron and steel industries of West Germany, France, Italy, Belgium, Netherlands and Luxembourg
- It eliminated tariffs and created a free labour market
- European Coal and Steel Community began functioning in 1952 (also served as a ‘peace treaty’ between 2 traditionally opposed powers)
When did Germany join the EEC?
1957
Was membership of the EEC economically successful for Germany and why/why not?
- Yes, it proved a great success
- By 1968 all internal tariffs had been removed between member states
- From 1958-1968 trade among the EEC’s members quadrupled in value
What was Germany’s economy like in the early 1970’s?
1974- West Germany hit its 1st serious post war recession
1971-1973: Inflation increased which wasn’t helped by the public spending of Brandt on welfare reforms
- World price of non oil commodities increased by 70% and that of food by 100%
