Economic Challenges (1966-89) and Integration into the European Economy (1945-89) Flashcards
What 3 phases can the economy of the FRG be split into?
- Social market economy 1949-66
- More state intervention 1966-82
- Free market economy 1982-89
What major economic challenges did the government face in the 1960s and 70s? When exactly did they face these challenges?
- Recession in 1966-67
- Oil crises of 1973 and 1978
What other, minor, economic challenges did governments of the FRG face?
- Rising levels of government spending, particularly on social welfare
Give figures to show the increase in social welfare. What fact made this situation even worse?
- 1965: DM47 million
- 1970: DM116 million
- This had happened despite various cuts to benefits
What response did the recession elicit in the FRG?
- Shock, as West Germans had become used to continued growth and prosperity
What were 6 impacts of the recession? Give a figure.
- There was a risk of inflation; prices were 4% higher by 1966
- Trade decreased
- Unemployment increased
- Public spending was spiralling out of control
- There were fewer guest workers (some didn’t have their contracts renewed)
- Productivity began to fall
Give figures showing the decrease in the number of guest workers.
- Start of 1966: 1.3 million
- September 1967: 991,000
Why did Erhard resign due to the recession?
- His policies were ineffective, and Germany remained in a recession
When did Erhard resign?
- November 1966
Who led the response to the recession? What was unique about him?
- Karl Schiller, the economics minister (under Kiesinger)
- He was the first economics minister to use economic planning
What were 4 steps taken by Schiller to deal with the recession?
- He increased government involvement in the economy through planning, intervention and control
- He reintroduced cartels to stop prices from rising
- The 1967 Stabilisation Law
- In 1968 article 109 of the Basic Law was amended
What was the 1967 Stabilisation Law? Give 2 details.
- It allowed government intervention in times of economic crisis
- It introduced five-year financial plans for the different levels of government
What did the amendment of article 109 of the Basic Law mean for the economy?
- It allowed for money to be shifted from wealthy Länder to provide social welfare for poorer ones
Using 3 statistics, show how successful Schiller was.
- By 1968:
- unemployment was falling
- industrial growth was at 6% (annually)
- In 1969, inflation was at 1.5%
What did Brandt do as chancellor?
- He introduced a range of social measures
How did Brandt’s introduction of social measures affect the economy?
- He increased social welfare
- Social welfare rose from one quarter of GDP to one third
What caused the oil crises?
- The OPEC (Organisation of Petroleum Exporting Countries) put up oil prices sharply in 1973 and 1978
Give 3 reasons why the FRG was hit hard by the oil crises.
- During the 1960s and 70s, the FRG had started to rely on oil as fuel rather than coal
- Car ownership increased petrol consumption
- The FRG got 40% of its fuel needs from OPEC
Compare how much the FRG would normally pay for oil, and how much they paid during the oil crises.
- 1972: DM11 billion
- 1973: DM33 billion
- 1978: DM49 billion
Give 3 impacts of the first oil crisis. Give 2 figures.
- Unemployment rose from 1.2% in early 1973 to 4.7% by 1975
- Guest workers did not have their contracts renewed
- The balance of payments went from a surplus to a $692 million deficit within a year
What were 3 actions the government took during the first oil crisis?
- The government encouraged people to use less oil
- They began to invest in nuclear power to reduce their dependence on oil
- In 1975 they brought in public spending cuts and higher income tax
How did the government encourage people to use less oil? Give 4 examples.
- ‘Car free Sundays’
- Speed limits on the autobahns to save fuel
- Propaganda pushed energy-saving tactics
- The government didn’t subsidise oil prices like other countries did, so it was expensive to buy
Why was the FRG not hit as hard by the oil crises when compared to other countries? Give an example.
- It had income from its high level of exports
- In 1978, the FRG even exported more to OPEC countries than it imported
What 2 economic issues were there in the 1980s? What social issue did they cause?
- The gap between the rich and the poor widened
- Inflation increased
- This caused hostility towards guest workers
