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Germany And West Germany 1918 - 89 > Economic Development And Policies FRG > Flashcards

Economic Development And Policies FRG Flashcards

1
Q

What did the Allies agree on and what action did they take for this?

A
  • Rebuild GER economy –> reparations taken in equipment and machinery from each zone eg. FRA + USSR dismantled any remaining factories
  • Keep GER out of war –> War industries were banned
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2
Q

What 6 problems did the economy have?

A
  • Reichsmark was almost worthless
  • Black market thrived (1kg of sugar could only be obtained here)
  • Hard to get workers
  • Transport and communication was difficult as it crossed the zones
  • Businesses had to replace machinery and train workers
  • Some businesses closed down, others laid off workers as they could not afford to pay wages –> unemployment rose from 442,000 in Jun 1948 to 937,000 in Jan 1949
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3
Q

Which 4 domestic measures resulted in economic improvement?

A
  • Currency reform
  • Removal of price controls
  • Tax reforms
  • Social market economy
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4
Q

What new currency was created, when and how did it help the economy?

A
  • 20 Jun 1948 –> Deutschmark (DM)
  • Stabilised economy w/ greater production
  • Broke up black market
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5
Q

Give 3 effects of the currency reform:

A
  • Creditors and savers lost out as monetary supply was cut by as much as 90%
  • Banks were given large deposits of DM to loan to businesses, which was successful
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6
Q

How did the removal of price controls stimulate the economy?

A

Greater incentive to produce would mean goods would return to the market

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7
Q

Give one stat showing the tax reform and two impacts of this:

A
  • 1950 –> Those on avg incomes of DM2400 fell to 18% compared to previous 85%
  • Absenteeism reduced
  • Salaries also rose
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8
Q

How many left the country and how many arrived?

A
  • 160,000 German prisoners of war stayed in FRA after war rather than returning
  • 10 million Germans from Soviet army or expelled from Eastern Europe under reallocation of land or people agreed at Potsdam
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9
Q

What was the view towards these refugees and how were they dealt with by the Allies?

A
  • Adding to German’s troubles
  • Forced to introduce rationing
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10
Q

When was Erhard appointed and what were his beliefs about the economy?

A
  • Mar 1948
  • Believed in social market economy (free market w/ elements of social support for poorest)
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11
Q

Features of social market economy:

A
  • Businesses allowed to develop independently and set own prices
  • State ensures fair competition
  • State introduces measures to support most vulnerable
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12
Q

What 3 reforms did Erhard bring about?

A
  • Abolish all but most essential rationing (granted by Economic council on 24 Jun)
  • Wages stayed fixed until Nov 1948
  • Equalisation of Burdens Act –> tax on all assets as compensation for those who had lost everything
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13
Q

What 5 policies were introduced as part of social market economy?

A
  • Businesses had tax concessions
  • Removal of wage restriction
  • Setting up TUs
  • All businesses had worker councils
  • 1951 –> Co-determination allowing workers to participate in management of business
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14
Q

Give two facts showing sustained economic growth during 1950s:

A
  • Rapidly declining unemployment falling to 1.2% by 1960
  • Rising exports
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15
Q

Give 2 examples of interventionist gov policies that led to growth:

A
  • Work creation schemes
  • Investment Aid Law of 1952 –> provided gov subsidy of DM3.2 bil to facilitate industrial investment
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16
Q

What 7 external factors contributed to the growth between 1949 and 1960?

A
  • Korean War
  • Growing world economy
  • Economic foundations
  • Marshall Aid
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17
Q

How did the Korean War contribute to the period of growth?

A
  • 1950 –> sparked need for war supplies, especially from FRG
  • 1955 –> FRG joined NATO, which allowed them to rearm and produce these materials
18
Q

How did a growing world economy contribute to the period of growth?

A
  • Growing demand for exports due to growing economy
  • Exports grew as GER goods had low prices + high-quality eg VW exporting 16000 cars a yr to UK
19
Q

What were 3 features of GER’s economic foundations that aided growth?

A
  • Good sea ports
  • Abundance of raw materials
  • Skilled workforce
20
Q

How much Marshall Aid was given?

A

$1.4 mil

21
Q

What 3 key factors contributed to the economic miracle?

A
  • Korean War
  • Growing global economy (continuous trade surpluses)
  • Influx of refugees
22
Q

How did the influx of refugees contribute to the economic miracle?

A
  • 3.6 mil more workers in 1950s came to FRG from GDR (many were skilled), keeping wages low + providing efficient workforce
  • Wanted to become part of West German consumer culture
  • Allowed gov to save money that could be spent elsewhere
23
Q

What were the possible problems of the economic miracle?

A
  • Free professional numbers reduced as Berlin Wall put up in 1961
  • Growth could not continue at the rapid rate it was forever
24
Q

What were the 2 crises that occurred between 1966 and 1989?

A
  • Recession of 1966-67
  • Oil crises of 1973 and 78
25
Q

Describe 5 problems of the recession of 1966-67:

A
  • Unemployment increased
  • Productivity fell
  • Trade reduced
  • Guest worker numbers fell
  • Excessive public spending
26
Q

What measures did Erhard take in an attempt to solve the recession?

A
  • Raised interest rates
  • Cut spending by 10%
27
Q

Give two examples of how the problems of 1966-7 recession was solved and who was responsible for these?

A
  • Karl Schiller (SPD deputy under Kiesinger)
    1) Increased gov planning, intervention and control
    2) 1967 Stabilisation Law –> formalising co-operation between federal gov, employers and employees in times of economic difficulties
28
Q

After the coalition collapsed over the issue of revaluation, who was in charge and how did they help the recession?

A
  • Willy Brandt (SPD) + FDP
  • Devalued DM by 10%
  • Although exports were now more expensive, people were willing to pay the extra amount
29
Q

What did the focus of the economy switch to when Brandt came to power and give two examples of what he introduced:

A
  • Social welfare
    1) Pension for those wounded in war raised by 5%
    2) School leaving age raised to 16
30
Q

Describe the problems of the oil crisis of 1973 and 1978:

A
  • Relied heavily on oil eg 1972 –> DM10.8 bil on 140 mil tonnes
  • Oct 1973 –> 4th Arab Israeli War
  • OPEC, which FRG mainly got oil from, put up prices sharply in this yr and 1978
  • As a result, unemployment increased
31
Q

How were the problems of oil crisis of 1973 and 1978 solved?

A
  1. Oil consumption fell due to:
    - ‘Car-free Sundays’
    - Speed limits on autobahns
    - Did not subsidise oil
    - Investment in atomic power
    - Propaganda pushed energy saving tactics
  2. Public spending cuts
  3. 1975 –> Higher income tax
32
Q

What about the FRG economy also helped this?

A

Its export income

33
Q

What challenges were faced in 1980?

A
  • Wealth gap increased, which created friction between guest workers
  • Real growth shrank as prices increased
  • 1981 –> Unemployment hit 1.7 mil (highest since 1950)
  • Drove up unemployment benefit spending
34
Q

What two things did Kohl’s government do?

A
  • Cut public spending, which was very unpopular
  • Cut taxes
35
Q

What did the government in 1982 do as a response?

A
  • Cut spending even more fiercely to force people into finding work
  • Cut public holidays
  • Reduced retirement age to 58
  • Sold off shares in state-run institutions
36
Q

What was the effect of the response of 1982 gov?

A

Slight but growing improvement

37
Q

When was European Coal and Steel Community (ECSC) created and what were its 2 aims?

A
  • Due to Treaty of Paris in 1951
    1) Use free market of steel and coal for greater economic integration
    2) Help Europe recover economically after war
38
Q

Who were the 5 members of ECSC?

A
  • FRG
  • Belgium
  • Luxembourg
  • Netherlands
  • France
39
Q

Give 2 examples of successes of ECSC:

A

1) Trade in coal increased ten times amongst its members
2) Acted as treaty of friendship between France and FRG

40
Q

How was European Economic Community (EEC) created, what was its aim and which country joined?

A
  • ECSC was that successful, so it was created through Treaty of Rome in 1957
  • Creating free trade zone w/ common economic policies and possible goal of political union
  • Italy joined on

Germany And West Germany 1918 - 89 (14 decks)

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