Economic Development And Policies Flashcards
1
Q
Impact of war on economy
A
- gov had spent all of the gold reserves on the war - had been printing more and more money
- June 1914 only approx 6.3 million marks in circulation
- December 1918 approx 33 million marks in circulation - causing inflation
- at the end of the war - 150 printing forms with 2k printing presses running day and night
- money lost value quickly
- bad for trade - trade had been disrupted by war = businesses suffered + unemployment
- made worse by end of armament production
2
Q
Impact of war on farming
A
- farm production dropped by 20% during the war + industrial output halved
- loss of agricultural + industrial land due to Treaty of Versailles
- black market flourished as goods became scarce
3
Q
Effect of Inflation 1918 to 1923 on prices + wages
A
- cost of goods increased rapidly
- employeurs had reduced wages
- pensioners unable to survive on fixed pensions
- value of money decreasing daily
4
Q
How did the government deal with social welfare
A
- retraining schemes for soldiers
- provided loans to demobilised soldiers until they found work
- set up pension payments for the wounded + widows + orphans
- set up national committees to oversee care in the Länder
- federal gov + Lander provided support
5
Q
Various social welfare programs
A
- in 1920 there were approx 1.5 million disabled veterans + 1.9 million survivors not classed as disabled
- the gov looked after them with a mix of lump sum payments + pensions
- by 1924 the gov was still supporting 800k disabled veterans + 420k war widows + 1 million orphans + 190k parents of dead soldiers
- 10% of the population were receiving federal welfare payments
- many more on regional poor relief
- led to more debt
6
Q
Debt and Reparations
A
- by 1918 the gov owed owed about 150 Billion marks - 3x the amount in 1914
- the policy of reparations from the Treaty of V increased debt
- gov tried to meet the reparations payments + take loans from US
- from 1921 onwards Germany was stuck in negotiations with the Allies about payments
- surtout France felt that Germany was trying to escape payments
- all European countries suffering from economic issues
- until 1924 Germany continued with regular reparation payments - coal + wood + railway carriages
7
Q
What led to French occupation of the Ruhr
A
- Jan 1923 Germany failed to deliver reparation payment in full
- in 1921 it had been decided by the London Ultimatum of the Allies that the Allies would occupy the Ruhr of payments fell behind
- Ruhr important to German economy - coal + industries based there
- 1923 French + Belgian troops occupied the Ruhr
8
Q
Events of the Ruhr occupation
A
- gov stopped payments to France - but not to other countries
- Germans encouraged passive resistance - strike + sabotage + slow work
- French cut of the Ruhr from the rest of Germany - set up border + patrols + control of postal service
French tried to bring in own workers - killed 132 people + expelled over 150k people from their homes
- in 1923 new German coalition gov began negotiations with the french as neither side was benefiting
9
Q
Hyperinflation
A
- Ruhr crisis escalated inflation to hyperinflation - out of control - price increase multiple times daily
- 1 mark newspaper in 1 May 1922 = 100k marks by 1 September 1923 = 700 B by November 1923
- people began to rely on barter + black market - only rich could afford
- those making profit on black market flourished
- towns + regions began issuing their own emergency money - Notgeld
- mass layoffs - 750k federal + regional gov employees
- people on fixed pensions + social welfare suffering
- rich Von Lingans Family had to sell house + servants + move to job in factory - loss of prestige
10
Q
August 1923 Change of Government
A
- August 1923 hyperinflation at worst
- gov collapsed
- new coalition gov with Gustav Stresemann (DVP member) as chancellor
- made use of Emergency Decree of 10 August to postpone Reichstag meetings - most significant policy decision
- the gov acted more rapidly - didn’t need to negotiate with Reichstag
- used Emergency decrees to control rents + wages + prices - to stabilise currency
11
Q
Gustav Stresemann
A
- chancellor + foreign minister in August 1923
- coalition gov only lasted until November 1923
- Stresemann asked to serve as foreign minister in the next gov
- stabilising force - urged compromise
12
Q
Rentenmark
A
- replaced the Mark with the Rentenmark - temporary measure - October 1923
- various forms of emergency money banned
- people complained as Rentenmark worth less than a gold mark
13
Q
Hjalmar Schacht
A
- Hjalmar Schacht oversaw the introduction of the Rentenmark
- Hjalmar made President of the Reichsbank in December 1923
- currency changes restored faith in Germany currency abroad + at home
- Schacht oversaw change to Reichsmark (RM) in August 1924
14
Q
Why was foreign policy vital to the economy
A
- Dawes Plan and the Young Plan made reparations more manageable + provided loans
- foreign policy Treaties like the Locarno Treaty made Germany a Foreign Power again
- economic recovery based on US loans
15
Q
Dawes Plan 1924
A
- sum value of 132 B marks fixed in 1921 as reparations
- over 5 years annual payments would rise from 1 B to 2.5 B then at varying levels
- allies had control over railways + Reichsbank + customs duties
- sanctions for lack of payments must be agreed on by all Allies
- temporary arrangement
- Germany given a loan of 800 Million marks to help stabilise currency
16
Q
Effect of Dawes Plan
A
- helped economic recovery
- led to reparations being paid on time
- no single country could decide on sanctions
17
Q
Young Plan 1929
A
- total sum of reparations reduced to 37 B marks
- annual payments lowered + would be paid over 58 years
- allied supervision discontinued
- intended as the final settlement
- Germany participated in the negotiations
18
Q
Effect of the Young Plan
A
- Allied troops withdrew in June 1930
- major internal opposition
- campaign for a referendum
19
Q
Locarno Pact 1925
A
- Stresemann signed the pact with Britain + France +Belgium + Italy
- acceptance of Germany’s western borders
- all countries renounced use of force + invasion
- reassured France about its borders + reassured Germany about further French invasion
- Germany signed arbitration treaties with Poland + Czechoslovakia - didn’t accept borders though
20
Q
League of Nation 1926
A
- Germany joined the League of Nations in September 1926
- given great power status + ability to veto
- Germany used the position to raise matters of German interest
- Germany not allowed to participate in collective action against aggression
21
Q
Treaty of Berlin 1926
A
- singed with the USSR in April 1926
- had public and secret clauses
- economic + military exchanges
- Stresemann used the treaty to put pressure on the West to imprisoned its relations with Germany
22
Q
Recovery of Business 1924 onwards
A
- small businesses collapsed in the early 1920s
- in 1924 there were more bankruptcies than in the previous five years altogether
- many factories were rebuilt with the latest mass-production assembly lines + time and motion thinking
- by 1925 the chemical industry was production a third more than in 1913 and two thirds more by 1930
23
Q
Cartels
A
- big businesses formed cartels - made agreements to set + control prices
- cartels helped stabilise economy
- some cartels formed associations of shared interests
- biggest cartel association was I.G. Farben - set up in 1925 - united various chemical based cartels
24
Q
Business disputes
A
- disputes between business owners + workers about conditions + better pay
- strikes + lockouts were common
- fewer in 1926-27
- never went away even after they gov setting up state arbitration in October 1923
25
State arbitration
- arbitration boards set up in *October 1923*
- dealt with management of pay + disputes
- after *1924* the boards made more compromise rulings
26
Trade Recovery
- difficult for Germany to set up trade links after WW1 due to reputation
- US **policy of isolationism** made things worse
- many countries introduced **tariffs** on foreign goods - Germany suffered from heavier tariffs
- Germany was producing **steel + chemicals** needed by other countries
- German exports back to same *1913* level of **10 B marks** by *1926*
- by *1929* exports were **34%** higher than in *1913*
27
Agriculture
- approx *25%* of all workers were agricultural workers
- bigger farms managed better than smaller farms - invested in **new machinery + farming techniques**
- many small farmers in debt + couldn’t even pay taxes
28
Political influence of big landowners
- big landowners like **President Hindenburg** had political influence
- enabled them to block land reforms such as the **1918 Reich Settlement Law**
- would’ve made landowners sell land to the gov to redistribute amongst the poorer tenants
- strung out negotiations over the land sales
- big landowners pressed for **high grain subsidiaries** that benefits those with big farms
29
Government spending
- the gov subsidised grain production + industry + provided social welfare for the poor
- took loans from US + high taxes
- most ordinary people paid less taxes + disliked tax rises
- in *1913* the lowest tax bracket was made of **47%** of the population - **62%** by *1926*
- **55%** by *1928*
- economic recovery dependent on loans + gov support
- industrial expansion damaged by constant disputes between owners + workers - lead to wage increase until *1930*
- great depression after **Wall Street Crash** meant that people were willing to work for any wage
30
What caused the Great Depression
- in *1929* the **Wall Street Crash** occurred
- US banks stopped renewing short-term loans
- US called in their loan repayments
31
Effect of Great Depression on economy
- businesses sell **less goods** - have to **lay off** workers - buy fewer suppliers
- **unemployment** rises - people have less spending money
- some suppliers + businesses can’t pay off their debts - **bankrupt**
- people can’t pay taxes + mortgage - lose their homes
- some banks fail - people can’t pay back loans
32
Effect of Great Depression on industry
- industrial production fell - by *1932* it was half of that in *1928*
- unemployment rose - wages fell by **15%**
- prices also fell
33
Effect of great Depression the Weimar Government
- the coalition gov was arguing - Stresemann dead so couldn’t help with cooperation
- **President Hindenburg** reluctant to govern by emergency decree
- coalition collapses - replaced in *1930* with **Chancellor Brüning**
- cuts in gov spending + wage cuts + higher taxes - rejected by the Reichstag but Hindenburg agreed
- Hindenburg used the emergency decree in *July 1930* to put Bruning’s polices into practice
34
Effect of Bruning’s policies
- lead to deflation but avoided devaluing the currency
- no country was able to pay back loans or reparation - not just Germany
- **Hoover Moratrium** on *I July 1931* - international agreement - suspended Germany’s reparation payments
- another emergency decree used to cut wages + rents + tax increase
- the policies deepened the recession
- industrial production fell + prices fell + exports fell - all by **50%**
- unemployment at highest ever in *1932*
35
Chancellor changes
- Bruning replaced by **Von Papen** in *May 1932*
- **Von Papen** introduced tax concessions + subsidies for businesses - new jobs created
- the gov too caught up in political problems for focus on economy
- *December 1932* Von Papen replaced by **Von Schleicher**
- **Schleicher** appointed a **Reich Commissioner** for employment - drew up a list of public works to be financed by the gov
- Reich Commissioner given a budget of **500 Million marks** - didn’t have time to put anything into effect as the Nazis came to power
36
What the Nazis inherited
- Germany **short on essential raw materials**
- low investment
- **6 million** unemployed people
- effects of Depression
37
How Nazis created jobs
- **increased public expenditure + investment**
- **extended public works schemes** - building **homes + motorways** - companies hire more workers
- **tax concessions + special grants** - to stimulate demand
- **destruction of independent unions** - renew confidence of industrialists
- **subsidiaries for hiring workers** + growth of jobs in gov bureaucracy
-
38
Dealing with unemployment numbers
- definition of workforce changed
- **married woman** forced to leave workforce + sacked - didn’t count in workforce statistics
- **Jews** can’t work in civil service + other jobs
- **Youth Service RAD** took youth off the unemployment register - **400k removed** *1934*
- *1935* **2 year conscription** removed **all 18 - 25 year old males**
39
Hitler + Hjalmar Schacht
- *March 1933* - **President of the Reichsbank** + *August 1934* - **Economics Minister**
- reassured economic elite as Schacht had links
- **deficit financing** to boost economy + **suspended debt repayments**
- **Mefo Bills** (**credit notes with interest after 5 years**) to **finance increased public expenditure** without causing **inflation**
40
Germany’s Balance of Trade problem
- **trade deficit** problem by *1934* - imports higher than exports
- **gold + foreign currency reserves running low**
41
1934 New Plan
- Schacht created the *1934* **New Plan** - gave gov power to **regulate imports** by **controlling allocation of foreign exchange** (imports controlled by gov)
- **series of bilateral trade agreements** - surtout avec **Balkan States** - to supply **raw material imports**
- used **barter** to avoid use of foreign currency
- New Plan helped BUT ** problem of increase demand for imports**
42
Alfred Hugenburg
- *Jan - May 1933* **minster of agriculture**
- **increased import tariffs on agricultural produce** - made German produce cheaper
- **banned banks from repossessing from farmers in debt** - to keep farmers farming
- made **margarine manufacturers** put **German butter in their margarine**
43
Reich Food Estate RNS
- created on *13 September 1933*
- **regulate food production + distribution of farm produce + set prices + farm wages**
- RNS fined people **RM100k** for not conforming
- set up Reich agencies to control import of farm produce
- **work creation schemes** sent people - young women - to work on farms + building projects
- **command economy established** - not all farmers happy
- in *1928* German farmers provided **68%** of all farm produce vs by *1934* it was **80%**
44
Big businesses + small businesses
- some big businesses supported Hitler - iron + steel industry - **I.G. Farben**
- *1939* **Law for the Protection of Retail Trade** - **stopped the building of new stores + banned expansion of existing stores**
- **nazi propaganda discouraged using department stores** as small businesses had supported Hitler
45
Union problem
- unions cause disruptions - **wage disputes + working hours + strikes + lockouts**
- *1 May 1933* became an official holiday - a traditional socialist workers’ festival
- *6 May 1933* - took over all unions and declared **DAF as only legitimate union** - used to control workers
- *19 May 1933* - **Reich Trustees of Labour** set up - often **sided with employees** in disputes over working conditions
46
1935 - 36 economic crisis
- by *1935* most countries demanding cash not barter for their goods
- Germany wasn’t self-sufficient enough - **relied on imports** - growing **shortage of fats + meats**
- Schacht struggled to choose between **food vs raw-material imports** - alternative was to cut consumption
47
Reinhardt Programmes
- *1 June 1933* - **Law to Reduce Unemployment** draw up by **Fritz Reinhardt**
- renamed **RAD - State Labour Service**
- *21 September* - second programme set up - provide jobs by giving businesses **tax concessions + gov loans**
- *26 June 1935* - RAD projects made compulsory for ages **19 - 25** - usually **live in state labour camps**
48
First Four-Year Plan
- only lasted 3 years until *1936*
- high foreign debts led to second Plan
49
Second Four-Year Plan
- focus on **autarky + war prep** - *4 Sept 1936* - **Hermann Goering** in charge of Plan + **Office of Four-Year Plan**
- raw materials that couldn’t be produced to be replaced with **ersatz products** - substitutes
- **rubber** replaced with ***Buna** + using **coal to make oil**
- processes were new = technical difficulties = slow results
- **6 tonnes of coal** = **1 tonne of synthetic fuel**
50
Guns or Butter
- people believed priority was rearmament over public necessities - **Hitler’s speeches** focused on **rearmament**
- **rationing would deplete support** - attempt to balance production to satisfy both - **Work and Bread** election promise from *1933*
- attempted to **re-educate** people to **change consumption habits8* - **less meat + fats**
51
Important distinction 1933 - 36 vs post 1936
- *1933 - 36* - focus on **public works + revival of consumer demand + creating jobs**
- *post 1936* - focus on **rearmament**
52
The situation in 1939
- Four-Year Plan targets not always met + unrealistic
- still **importing 17%** of agricultural needs vs **20%** in *1934*
- *1928 - 38* - **jam** (alternative to sausage) consumption **trebled**
- **command economy** approach made Nazis **unpopular** - **industrialists + manufactures**
- EVEN SO **rearmament achieved without rationing + high price increases**
53
Policy of Dualism not working by 1939
- the **Office of the Four-Year Plan** not managing war production well
- **war ministry + economic ministry + army + navy + airforce** - with separate competing departments
- **Goering was head of airforce** too so he favoured it
- **nazi officials** given **power** instead **engineers with knowledge**
54
Fritz Todt
- *26 Feb 1940* - Todt made **minster of armaments and munitions** - to **organise industry for effective production**
- Goering refusing to accept Todt’s control
- *3 December 1941* - **Hitler’s Memorandum** on simplifying + improving armaments industry through policy of rationalising needs + updating factories + equipment
- Todt dies in plane crash *8 Feb 1942*
55
Central Planning Board
- set up through **Hitler’s Decree** on *22 April 1942* - only Hitler coud override its decisions
- to distribute raw materials + organise transportation + decide on factory expansion
- had various committees - each with a specific responsibility - **6k administrators**
56
Effect of Central Planning Board
- closed smaller factories + factory machinery standardised + factories adapted for efficiency
- production became more mechanised - workers being conscripted for war
- production in *1944* was almost **3 times higher** than in *1940*
57
How blitzkrieg impacted economy
- need for **planes + tanks + armoured vehicles**
- after conquering France *22 June 1940* - need for **U-Boats + long-range planes** for Britain
- **Operation Barbarossa** began in *June 1941* - against **USSR** - need for weapons
- supply problems by *1940* - unable to replace planes lost in the **Battle of Britain**
- gained resources from countries conquered - **Austria + Czechoslovakia**
58
An overstretched economy
- **carpet bombing** of German cities wiped out **factories + mines + transport links**
- loss of land that had provided raw materials - **Upper Silesia**
- damage to **electricity + gas + water supplies** + **sabotage by foreign workers** - deliberate mistakes
- food production affected - people were starving again
59
The Third Reich and Workers
- by *1939* only **35k** out of **25 million males** were officially unemployed
- wages frozen at **1933 levels** BUT **Christmas bonuses + insurance schemes**
- average wage by *1936* was **35 marks** - 10x wage in *1932*
- average paid holidays rose from **3 days** in *1933* to **6-12** by *1939*
60
DAF - German Labour Front
- set up *6 May 1933* after independent trade unions banned - headed by **Robert Ley**
- important for **Volksgemeinschaft**
- **22 million members** by *1939* - hard to avoid joining
- *1938* **Volkswagen Scheme** - workers could subscribe **5 marks weekly to fund a car** - no one actually received a car - *1939* **production switched to military needs**
61
Strength Through Joy (Kraft durch Freude)
- set up *November 1939* - subsidised activities like **holidays + hikes + sport + cinema visits**
- in *1938* **over 10 million** took KDF holidays
- subdivision of **Beauty of Work** - **improved work facilities**
62
restrictions to economy post-war?
- **war-based industries banned** - munitions
- war-related industries restricted in output - **chemical industries**
- reparations taken in the form of **machinery + equipment** in each zone -
- French + Soviets **dismantled factories for reparations** - undermined economic recovery
63
problems for economy
- Reichsmark = almost worthless - **black market thrived**
- hard to get workers - wages bought nothing
- **Transport + communication links** crossed zones = bad
- **Allied Control Council** attempted to work together BUT each zone ran differently
64
population problem
- initial influx of **10 million Germans** as refugees
- Allies struggled with refugees + forced to introduce **RATIONING**
- some houses in camps
- returning soldiers + prisoners from concentration camps
65
West Germany after 1949
- relations between USSR + West deteriorated
- **Marshall Aid** gave approx **$1.4 million** to **Western zones***
- creation of **Deutschmark** - helped stabilise economy + break up black markets as backed by Western Powers
- Soviet Zone created own currency
- by *1949* creation of FRG vs GDR
66
Ludwig Erhard
- appointed **Director of Economic Administration** in *March 1948*
- wanted **social market economy** - free market + social support for the poor
- announced currency change in *June 1948* BUT **wages fixed** until *November*
- **Economic Council** gave Erhard price control power + power to abolish **almost all rationing** BUT essentials like bread + milk
67
Currency Reform
- people had confidence in currency reform - wages worth something again
- higher levels **factory production** - especially consumer goods
- *1952* **Equalisation of Burdens Act** - to **regulate compensation for loss of assets in war**
68
impact of Erhard's reforms
- did't cause immediate economic recovery
- some businesses failed as after currency reform - **couldn't pay wages** + had to **lay off workers**
- unemployment initially increased until *1950* then fell
- steel production doubled + car production increased
69
opposition to Erhard
- change from **command economy** to **social market economy**
- Britain supported **labour union leaders** who feared **exploitation of workers**
- USA supported Erhard due to own success with **New Deal**
- socialists wanted to **nationalise industries**
- combination of capitalist market + social safety net for poor = enough support to continue **tax concessions + remove wage restrictions**
70
co-determination
- all businesses had worker's councils
- *1951* policy of **co-determination** allowing workers' representatives on managerial board in industry
71
economic miracle: Korean War
- *1950* Korean war = need for supplies
- chemical + steel + electrical goods in high demand in countries like USA
- in *1955* FRG joined **NATO** and allowed to **re-arm + produce war materials**
72
economic miracle: New Investment
- many businesses had recovered enough to invest in **EQUIPMENT + NEW FACTORIES**
- production of high quality goods + low prices
- reputation of german goods grew + **increased exports** = more investment
73
economic miracle: Workers
- influx of **guest workers**
- during *1950s* approx **3.6 million** young + educated + skilled workers came
- kept on **short-term contracts**
- gov saved money on **education + training** - could spend elsewhere
74
1966-67 recession
- **trade reduced + unemployment increased** - fall in productivity
- gov spending on **social welfare policies** to high
- Erhard was Chancellor
75
Karl Schiller helped in recession
- **economics minister** - reorganised gov approach to economy + **increased subsidiaries** for agriculture + coal industry
- **1967 Economics Stabilisation Law** - allowed gov intervention in times of economic crisis to limit regional spending + introduce 5 year Plan system for gov spending
- *1968* provision to Basic Law = fed. Gov could move money around form Landers
- Schiller considered a failure - replaced by **Helmut Schmidt** in *1972*
76
Oil crises in 1973 and 1978
- FRG relied on **oil** rather than COAL as a fuel - car ownership increased fuel consumption
- *October 1973* **Fourth Arab-Israeli War** broke out = **OPEC** increased oil prices in *1973 + 1978*
- unemployment increase + guest worker contrasts not renewed + ban on recruiting more
77
Tactics to combat oil crisis
- helped by export income
- **car-free Sundays** + speed limits to reduce fuel consumption = gov propaganda of energy-saving ideas
- investment into **atomic power** tor deuce dependence on oil
- gov DIDN’T subsidise oil prices - allowed them to rise - made it expensive for consumers to buy = natural reduction of consumption
- public spending cuts + **higher income tax** in *1975*
78
1980s problems
- unemployment hit approximately **2 million** in *1981* - highest since *1950* = increased gov spending on **social welfare** - benefits + assistance
- *1981* Schmidt’s gov cut **public spending + benfits** = deeply unpopular with public
- *1982* Kohl’s gov thought ** welfare = public dependency** = made further cuts - **welfare support + maternity benefit + public holidays + reduce retirement age to 58**
- partially privatised state-run institutions like **Volkswagen** - led to decreased unemployment
79
OECC
- *April 1948* - **Organisation for European Economic Recovery**
- set up to **manage economic recovery**
- administered Marshal Plan Aid
80
EEC
- Signed *1957* but came into effect in *1958*
- **European Economic Community**
- between *1958 and 1969* **FRG exports doubled**
