Economic recovery, 1945-55 Flashcards
ww2
WW2 did not end with armistice and people believing Germany won
7 july - 12 august 1945
Potsdam Conference. Allies decide what would happen
◦ Agreed it was important to rebuild economy but also that Germany could not start another war
▪ War industries banned and others war-related (eg. chemical) were restricted
▪ Reparations to be taken in equipment and machinery from each zone
▪ Bombing; many places did not have
Reichsmark
black market thrived; 1kg of sugar was RM 120-180, but RM1 on black market
◦ Hard to get workers; wages bought hardly anything
◦ Transportation and communication links crossed zones, hampering economic recovery
allied control council
Allied Control Council worked together to overcome difficulties, each zone run by military high command and control varied
some germans left
16,000 German prisoners of war in France stayed there
◦ 10M German refugees ahead of soviet army or were expelled from Eastern Europe
▪ Allies forced to deal with refugees and homeless Germans through rationing
▪ Many refugees housed on camps, eg. Dachau (ex concentration camp)
▪ 4.5M soldiers returning home and people from labour camps had to be housed
after 1949
Relations deteriorated rapidly as cold war developed
Marshall Plan
$1.4M aid given to Western zones under Marshall Plan, 1948
◦ Set off creation of Deutschmark to administer aid
▪ Helped to stabilise economy and break up black market
▪ Soviet zone set up its own currency
1949
1949: Divided into FRG and GDR
currency reform
◦ Currency reform: every adult given DM60 and could exchange old RM100 or DM6.5; confidence in reform; people
worked, saved and spent; higher factory production
Ludwig Erhard
Erhard: director of economic administration in March 1948
◦ Believed in social market economy
◦ Economics minister 1949-63
18 June 1948
announced that RM would be replaces by DM on 21 June
24 June
economic council gave Erhard power to abolish all but essential rationing
wages fixed
Wages fixed until 1948 to allow businesses ot establish themselves
purchasing habits
Cakes, vegetables, butter, eggs were now on sale in shops
• People stopped hoarding and started selling
• People started shopping for quality and not for anything that became available
• Currency reform only affected cash and monetary savings
tax on assets
Military government wanted tax on all assets, money to be used to compensate those who lost everything
◦ 1952: Bundestag passed Equalisation of Burdens Act
◦ Money raised and redistributed
immediate reform?
Reform was not immediate; factories and businesses could start trading and producing again, but needed to replace machinery
and train workers
business failure
Some businesses failed; could not afford to pay wages
◦ Others kept going but had to lay off some workers
unemployment
June 1948: 442,000; January 1949: 937,000, 1950: 1,800,000, 1955: 1,000,000 and continued to fall
car production
production 1959: 4.5x than 1950 and steel production x2
opposition to erhard
first in Economic Council, then in Bundestag for wanting to convert command economy to social market
economy
• Britain opposed idea and supported concerned labour
leaders who feared social market economy would lead to
exploitation of workers by business owners
• USA supported social market economy
• Industrialists were not supportive
◦ Many wanted pre-command economy with
cartels and price fixing; Erhard wanted to break
up cartels
• Socialists wanted to nationalise industries and use state
control
safety net
Capitalist market with responsible government provided
safety net for poorest ; Erhard won support in Bundestag
to continue policies, so business tax concessions and
removing wage restrictions while encouraging trade
unions
co-determination
1951: policy of co-determination, allowing workers’
representatives on managerial boards in industry
