Economic miracle

Question 1

What factors contributed towards the economic miracle? (7 headers in total)

Answer 1

West Germany advantages
The policies in Bizonia, 1947-49
The role of Ludwig Erhard & the ‘social market economy’
Marshall aid
The Korean War
Industrial relations
The role the government

Question 2

What does Richard Overy argue about the economic miracle?

Answer 2

it was not a miracle because it did not defy explanation

Question 3

What examples show that there was an economic miracle?

Answer 3

the balance of trade was positive as the amount of exports grew
by 1954, West Germany was the third largest trading power after the USA and Britain
Employment rose
Industrial production increased, led to growth in wages

Question 4

Who was the minister of trade and industry 1949-63?

Answer 4

Ludwig Erhard
he became the symbol of the ‘economic miracle’ as he put the idea of the ‘social market economy’ into practice

Question 5

How did the annual growth rate of the economy show that there had been an economic miracle?

Answer 5

the annual growth rate of the economy average 8% between 1951 and 1965, even reaching 12% in 1955
this can be compared with the growth of between 2-3% being seen as good in Britain today

Question 6

How did the gross national product show that there had been an economic miracle?

Answer 6

the gross national product almost doubled between 1950 and 1955, and by 1960 had risen by nearly another 50%

Question 7

How does the rate of employment show that there had been an economic miracle?

Answer 7

employment rose, so that unemployment was just 1 million by 1955, soon West Germany experienced a period of full employment

Question 8

How does the growth in industrial production show that there had been an economic miracle?

Answer 8

the growth in industrial production also led to a growth in wages as incomes rose some 400% between 1949 and 1963

Question 9

What statistics show that the recovery was quite extraordinary?

Answer 9

food production in 1947 was only 51% of the levels of 1938, while industrial production at 38% was even lower

Question 10

What advantages did West Germany have?

Answer 10

possessed war materials (eg coal)
long term damage caused by war wasn’t as bad as they feared, not as many reparations as the east
refugees from the east

Question 11

How was the arrival of refugees from the East, an advantage for West Germany?

Answer 11

they provided a qualified and well disciplined supply of labour that was often cheap
work ethic of population meant they could meet demands of occupying forces

Question 12

How did the possession of raw materials, longer-term damage caused by war not as great as they feared & reparations not as much as the east, an advantage for West Germany?

Answer 12

meant the potential for recovery was there
many of the population had the technical skills that were needed to exploit the raw materials & bring about the recovery

Question 13

When was the creation of Bizonia

Answer 13

1947

Question 14

What policies in Bizonia did much to start the economy?

Answer 14

the removal of price controls
removing wage & production control, and allowing workers a role in management & decision making
ending inflation through currency reform
reducing marginal tax rates

Question 15

How did the policy of removal of price controls help the economy?

Answer 15

stimulated business activity by allowing free competition between private enterprises

Question 16

How did the policy of removing wage & production controls, and allowing workers a role in a role in management + decision making help the economy?

Answer 16

it resulted in fewer strikes and created a sense of ownership in trade unions, which would continue into the 1950s with the Co-determination Law of 1951 and Works’ Constitution Law of 1952

Question 17

How did the policy of currency reform help the economy?

Answer 17

it helped to end the black market and also reduced inflation

Question 18

How did the policy of reducing marginal tax rates help the economy?

Answer 18

meant that those on higher incomes had more money to spend on goods, stimulating the economy

Question 19

How did the policies in Bizonia contribute towards the economic miracle/help the economy?

Answer 19

all these policies encouraged people to work, clearly reflected in decline absenteeism

Question 20

Why were the policies in Bizonia significant?

Answer 20

the industrial production index for Bizonia increased from 51% in June 1948 to 78% by Dec
they provided the basis for recovery, alongside the work of Ludwig Erhard + his currency reform

Question 21

Why is the significance of the policies in Bizonia limited?

Answer 21

the impact was not immediate
there was initially a steep rise in prices, not matched by a wage increase and therefore the poor suffered
there was still a shortage of resources (coal) which had to be imported, caused a balance of payments deficit, led to recession in years 1949-50 as there was not enough demand to sustain growth

Question 22

How did Ludwig Erhard and the ‘social market economy’ contribute to the economic miracle?

Answer 22

Erhard developed the ‘social market economy’, combining gov legislation & capitalism to produce ‘prosperity for all’, economic recovery helped to provide political stability
His work in implementing currency reform in Western zones was crucial, new currency provided

Question 23

Why was Erhard’s work in implemented currency reform in Western zones crucial?

Answer 23

the new currency provided stability in contrast to the instability of the previous years

Question 24

Why was the success of Erhard’s role limited?

Answer 24

success was not immediate
in 1950, insufficient demand & a lack of foreign investment made it difficult to sustain growth + there was a recession
Erhard under pressure to abandon social market policy + revert to state control

Question 25

Why did pressure on Erhard decline?

Answer 25

the demands created by the Korean War abd exports the USA began to have an impact

Question 26

How did Marshall Aid contribute to the Economic Miracle?

Answer 26

Provided a stimulus for the economy
It was used to rebuild industry, housing & stimulate the economy

Question 27

How can Marshall Aid being a crucial factor in bringing about recovery, be challenged?

Answer 27

by Oct 1954, aid totalled only US$2 billion, and in 1948-19 provided less than 5% of West German national income.
The amount of aid West Germ received was only half of what Britain received

Question 28

What does J. Singleton argue?
(to do with aid)

Answer 28

“it is policy that principally matters, rather than the amount of aid a country gets”
suggesting again that it was the policies of Erhard & the gov that were crucial

Question 29

How did the Korean War contribute towards the economic miracle?

Answer 29

increased the demand for goods that the Ruhr could supply - reducing pressure Erhard was under to abandon his ‘social market economy’
other nations couldn’t supply the required war materials, West Germany took advantage of this & their exports doubled

Question 30

When was the Korean War?

Answer 30

1950-53

Question 31

Why was there an improvement in industrial relations?

Answer 31

the growth in the economy led to a rise in wages, this led to an improvement in industrial relations

Question 32

How did industrial relations contribute to the economic miracle?

Answer 32

it helped to end conflicts between workers & employers
growth in wages stimulated the economy as workers had more disposable income available
there was a growth in demand for consumer goods
as living standards rose, there was little reason to challenge the system, helped to create political stability, helped the economy

Question 33

What were the conflicts between workers & employers replaced by?

Answer 33

discussions on how to divide up an ever-growing cake as annual growth averaged 8%

Question 34

When was the Bundesbank established?

Answer 34

1957

Question 35

How did the establishment of the Bundesbank provide financial stability?

Answer 35

because it controlled both the money in circulation and interest rates, as a result inflation was controlled–> maintained confidence + helped sustain the recovery in the second half of the 1950s + into the 1960s

Question 36

How did the role of government contribute to the economic miracle?

Answer 36

provided financial stability through the establishment of the Bundesbank, controlled inflation, maintained confidence
furthermore, gov expenditure was lower than in other countries eg Britain

Question 37

Why was the gov expenditure lower in West Germany than in other countries eg Britain?

Answer 37

West Germany didn’t have to pay extensive reparations & its defence costs were limited as it didn’t have an army until it joined NATO in 1955, meaning it had more money to spend on solving social issues, helping to further stimulate the economy

Question 38

Why was the economic miracle NOT miraculous?

Answer 38

it wasn’t miraculous because there was reasons for the changes in economy eg exploited refugees by paying them cheaply for skilled labour

Question 39

Was was the economic miracle miraculous?

Answer 39

miraculous due to West Germany’s advantages, were these just luck?