Economic Development And Policies 1945-89 Flashcards
How much did the Western zones of Germany receive in Marshall Aid in 1948?
$1.4 billion from the US
What did Ludwig Erhard have to do with the German economy 1948-1955?
He was appointed director of the economic administration in March 1948. He was then economic minister until 1963. He also introduced a new currency: Deutschmark
What was the currency reform?
20th June 1948: New currency introduced : Deutschmark, converted RM 100 to DM 6.5. Debts to value of RM 400 billion were wiped out. Authorities gave large deposits of Deutschmarks to banks to loans to businesses to develop production which was successful
What happened to the economy with the end to rationing and price controls?
Most rationing ended on June 20th 1948. Wages stayed fixed until November 1948. Erhard believed that if prices found their own levels, producers would have more incentive to produce and farmers to send their food to markets = goos would return to markets (this worked). Most people could afford goods which re-emerged in the shops
How did tax reforms impact the economy?
In 1950, the rate for those o average incomes of DM 2,400 fell to 18% prior to this. The highest tax rate for incomes on more than DM 250,000 = 95%. This stimulates the economy so ordinary working people have more money to spend which stimulates demand and therefore stimulates supply
What is the social market economy?
An economic order where industry and trade are run by private enterprise within limits set by the government to ensure equality of opportunity and social and environmental responsibility
What were the 3 positive impacts of the reforms?
- Helped kickstart the economy
- Less absenteeism (staying away from work without reason) meant more productivity and the index of industrial production rose significantly. In 1950 alone, the growth rate of industrial production was 25% while unemployment fell from 10.3% in 1950 to 1.2% by the end of the decade. = more jobs to stimulate the economy
- Between the years 1949 and 1955, salaries rose by 80% which meant that people had more money to spend so more freedom
Examples of government intervention during the economic miracle 1955-66
-investment aid law 1952 - provided DM3.2 billion to industrial development
-anti-trust law 1957, laws to prevent the development of economic monopolies, designed to prevent and dismantle cartels.
-work creation schemes to tackle unemployment in 1950 - rapid rebuilding of German cities
Examples of external factors during economic miracle 1955-66
-Marshall plan $1.5 billion in aid from the USA between 1948-52 enabled German industry to rebuild, modernise and buy new equipment
-in 1955, unemployment at 1 million, 4.2% of the workforce. 1960s = full employment achieved. = 2 million Germans fled from GDR
-economy stimulated by the Korean War, this caused a rise in demand for german exports such as industrial goods and motor vehicles which boosted industrial production = create more jobs in the FRG
Examples of factors which are unique to Germany, during the economic miracle
-exports: german industry (machinery, cars and electrical goods) had a long reputation for quality and value
-co-determination led to economic stability as it allowed workers to elect representatives often from trade unions to participate in management of business. This led to a good relationship between management and workers so wage demands remained modest.
-economic foundations - Germany had good sea ports, an abundance of certain of certain raw materials such as coal, educated and skilled workforce.
What are free market economies?
Based on supply and demand where prices set freely between sell and consumer, without intervention from the government
What industrial goods in germany had a strong reputation and were exported?
Machinery, cars ad electrical cars
Summary of the German economy from 1966-1989
-new coalition government in 1966 seemed fairly successful as measures such as the law for promoting stability and growth in economy caused a reduction in unemployment and industrial growth of 6% per annum
-Brandt’s new government introduced increased spending on social welfare and educational support law made more grants available to poorer students. This fuelled inflation
-Helmt Schmidt tool role of minister of finance and economics
-1973, OPEC announced a 70% increase in oil pice and a 5% reduction in output
-1974 = oil prices had risen from $3-$12 a barrel
-unemployment rose from 1.2% in 1973 to 4.7% b 1975.
-government actions included a ban on rearmament of migrant workers, private sector investment
-1980 = introduced tax cuts, reduced public spending
-1989 = unemployment fallen to 3.5% = good growth and low inflation
What were 3 key events which marked Germany’s integration into europe?
- EEC
- ECSC
- Treaty of Rome 1957
EEC
Created to facilitate economic prosperity between its member states and inevitably move towards greater European intergration
