Economic Recovery (1945-1965) Flashcards
Identify three examples of economic instability in Germany after the Second World War.
- 20% of housing had been destroyed, a further 30% badly damaged.
- Food shortages; average food consumption per day dropped to between 950 and 1150 calories.
- The Reichsmark (RM), had become worthless. A bag of sugar cost between 120RM and 180RM on the black market.
Who was appointed Economics Minister of the FRG in 1949?
Ludwig Erhard
What was Erhard Ludwig’s vision for the economy?
Erhard’s vision was to create a social market economy (a “socially responsible” free market economy where the government does not interfere in the policies of businesses, but does provide social support/welfare for the poorest in society).
What happened to the currency in 1948? Why did this help the economy to grow?
On June 18, 1948 the Reichsmark (RM) was replaced by the Deutschemark (DM). This increased people’s confidence in the economy, as their wages were no longer worthless and led to a rise in spending and the production of consumer goods.
What happened to price controls and rationing? Why did this help the economy to grow?
Price controls on products and rationing were abolished on June 24, 1948. This created competition between businesses and prevented food hoarding.
What happened to wages? Why did this help the economy to grow?
Wages stayed fixed until November 1948. This allowed businesses to establish and stabilise themselves as well as maximise profits.
What was the 1952 Equalisation of Burdens Act? Why did this help the economy to grow?
This placed an additional tax on all assets. This was redistributed to Germans who had suffered severely under Nazi rule. This gave many germans more disposable income, increasing spending and thus stimulating the economy.
What was the consequence of Erhard’s economic reforms in the short term?
- Factories and businesses began producing again, but had to spend huge amounts of money replacing machinery and employing workers.
- Some businesses had collapsed after the currency reform as they could not afford to pay their employees’ wages. This caused a rise in unemployment from 442,000 in June 1948 to 1.8 million in 1950.
What was the consequence of Erhard’s economic reforms in the long term?
- The average economic growth rate in the mid-1960s was 8%.
- Between 1950 and 1955, GDP almost doubled, and rose by another 25% by 1960.
- Unemployment dropped to 4.2% by 1955. By 1965 it was less than 1%.
What is the period of 1955-1965 also known as?
The “economic miracle”.
What happened to the FRG’s GDP between 1950 and 1955?
It doubled
What happened to unemployment in the FRG by 1965?
It was less than 1%.
What happened to trade and exports from the FRG in the 1950s and 1960s?
Exports rose from 8,368 million DM to 125,300 million DM.
What happened to standards of living in the FRG in the 1950s and 1960s?
Standards of living rose. By 1963, 63% of homes had a fridge, 42% had a television and 36% had a washing machine.
Identify three reasons that led to rapid economic growth between 1955 and 1965.
- Between 1955 and 1965 unemployment reduced from 4.2% to < 1%
- Agricultural production increased by 25%
- Car production was 4.5 greater in 1959 at 400,000 a year than in 1950
