Economic development and policies, 1945-89 Flashcards
What is a ‘social market economy’?
A free market economy with elements of social support for the poorest e.g a ‘socially responsible’ free market economy.
Who was appointed to administer economic development?
Ludwig Erhard was appointed director of economic administration under Allied rules in March 1948. He was then economics minister under the FRG between 1949 and 1963. He believed in the idea of a social market economy.
What evidence is there that the economy was starting to recover? 1945-55
- Car production was 4.5 times greater in 1959 than it was in 1950.
- In the same period, steel production doubled. This underlines Germany’s new focus on consumer goods.
- By 1955, unemployment had fallen to 1,000,000 and continued to fall.
Who opposed Erhard’s initial reforms and why?
- Britain, labour union leaders and members of the Bundestag were concerned with Gerhard’s policy of converting a command economy into a social market economy. They feared it would lead to an exploitation of workers by business owners. (The USA on the other hadn’t had supported Erhard’s vision as they had success with a form of social market economy under the New Deal).
- Industrialists called for a return to the pre-command economy. with cartels and price fixing. Instead, Erhard wanted to encourage competition between industries, the cartels broken up and price fixing abandoned.
- Socialists opposed the abandonment of price fixing. They wanted to nationalise industries and use state control, instead of allowing a capitalist market to set its own levels.
How did the Allies try to prevent Germany from starting another war?
War-related industries were banned or their outputs were restricted e.g munitions industries and chemical industries, respectively.
Why was economic recovery held back between 1945 and 1949 (e.g under the rule of the Allies)
- Reparations were taken in equipment and machinery from each zone of occupation. The French and Soviets dismantled the remaining factories for reparations, undermining any chance of economic recovery.
- The Reichsmark was almost worthless and the black market thrived (e.g 1KG of sugar in 1947 had its price fixed at 1 RM, but it could only be obtained on the black market, where it cost RM120-180).
- Each Allied zone was run by a military high command and was governed very differently.
- The economic and physical devastation in Germany means that some Germans left and others chose not to return e.g 160,000 German prisoners of war chose to remain in France).
Who dismantled remaining factories after the war for reparations? (undermining any chance of economic recovery)
French and Soviets
How many Germans chose to remain prisoners of war in France due to the devastation in Germany?
160,000 - thus holding back economic recovery.
How was economic recovery of West Germany kickstarted between 1945 and 1955?
- From 1947, American economic aid (of approx 1.4 million) was given to the Western zones of Germany under the Marshall Plan.
- A new West German currency - the Deutschmark (DM) - was created to administer the economic aid. It was announced in June 1948 (Erhard). The new currency helped to stabilise the economy and break up the black market. It also meant wages were worth something and boosted the economy by encouraging consumerism and people to work, save and spend.
- In June 1948, almost all but the most essential rationing (e.g bread and milk powder) and price controls were abolished. This, along with the new currency, saw the rise of consumer goods available in shops. People stopped hoarding goods and began selling them. People’s confidence in the economy rose and they became more concerned with price and quality of goods, increasing the level of competition on the market.
- Wages stayed fixed until November 1948, allowing German businesses to re-establish themselves.
- 1952, the Equalisation of Burdens Act, compensating those who had lost assets in the war.
What did the introduction of the new currency in June 1948 do? Deutschmark
The new currency helped to stabilise the economy and break up the black market. It also meant wages were worth something and boosted the economy by encouraging consumerism and people to work, save and spend. Wages and salaries acquired genuine purchasing power.
During economic recovery what happened to wages?
Wages stayed fix until November 1948, allowing German businesses to re-establish themselves.
What was passed by the Bundestag in 1952?
The Equalisation of Burdens Act, compensating those who had lost assets in the war.
What evidence is there that the West German economy had recovered dramatically?
- Rise in exports (in millions of marks)
- 1950: 8,363
- 1970: 125,300 - Unemployment figures (% of workforce)
- 1950: 8.1%
- 1965: 0.5% - Volkswagen (VW) - sales of VW expanded. In the 1960s, sales averaged 400,000 a year.
Stats about VWs
- By 1960, VW was exporting 16,000 cars a year to the UK.
- By 1960, there were 500 VW dealerships in the USA and half a million cars had been sold.
- In the 60s, sales averaged 400,000 per year.
Why did the economy recover so rapidly? (Economic miracle)
- The Korean War 1950-53
- New investment, reputation of German goods improved.
- Workers - refugees provided an efficient workforce.
- Also a huge demand for consumer goods + factories were producing these goods.
