Economic recovery 1945-55

Question 1

What were the Allies views on the German economy?

Answer 1

Agreed that it was important to rebuild. However, at the same time didn’t want Germany to start a war so banned war-related industries eg munitions and restricted the outputs of chemical industries

Question 2

What were the Allies views on reparations?

Answer 2

• Were to be taken in equipment and machinery from each zone
• Some places had very little of this due to heavy bombing
• The French and Soviets dismantled many remaining factories for reparations undermining any chance of economic recovery

Question 3

What other problems did the economy face post WW2?

Answer 3

Reichsmark was almost worthless which was damaging the economy and the black market was thriving.

Question 4

Give an example of the black market thriving despite poor ecconomic conditions?

Answer 4

1kg of sugar in 1947 had its price fixed at RM1 ; it could only be obtained on the blackmarket where it cost RM120-RM180 and it was hard to get for workers when their wages bought hardly anything.

Question 5

Why did Germans leave the country , and Germans living in other countries not return?

Answer 5

Because the economic devastation was so great and the occupation so dislocating

Question 6

Give an example of Germans not returning?

Answer 6

160k German POWs in France stayed there after the war rather than returning to Germany.

However, these numbers were far exceeded by the influx of some 10mill Germans who came as refugees ahead of the Soviet army or were expelled from Eastern Europe under the reallocation of land and people agreed at Potsdam.

Question 7

Was this refugee influx good or bad?

Answer 7

At first, it was seen as adding to Germany’s problems but it was to become one of the country’s biggest assets. The Allies had to deal with the refugees and homeless Germans and were forced to introduce rationing.

Question 8

What was the economic situation of West Germany?

Answer 8

Economic aid worth 1.4 million was given to the Western zones under the Marshall Plan of 1948 which set off the creation of the Deutschmark to administer the aid

Question 9

What effect did the Deutschark have?

Answer 9

• Helped to stabilise the economy

- Break up the black market as the currency was backed by Western powers

Question 10

What was a consequence of the Deutschmark?

Answer 10

Soviet zone was not included so set up its own currency which made separation more likely. By 1949 Germany had divided into the FRG and the German Democratic Republic (GDR)

Question 11

Who was appointed director of the economic administration in March 1948?

Answer 11

Ludwig Erhard

Question 12

What did Erhard believe in?

Answer 12

The idea of a social market economy , which he worked to create under the Allies and then as economic minister of Germany from 1949 to 1963.

Question 13

What did Erhard do on 18 June 1948?

Answer 13

Announced the Reichsmark would be replaced by the Deutschmark on 21 June

Question 14

What did the Economic council give power to do , to Erhard on 24th June?

Answer 14

Abolish almost all but the most essential rationing such as bread and milk powder and all price contols.

Question 15

What were some of Erhard’s economic policies?

Answer 15

Fixed wages until Nov 1948 to allow businesses to establish themselves.

Question 16

What effect did these combinations of economic policies have?

Answer 16

Suddenly cakes, vegetables, butter and eggs were for sale in the shops as were non-food items from stoves to stockings. People stopped hoarding goods and began selling them.

Also rather than buying anything that became available they began to shop with a more careful concern for price and quality because they felt more confident that supplies would be less eratic.

Question 17

What was a possible concern of these measures and the currency reform?

Answer 17

Currency reform only affected cash and monetary savings. Military government wanted a tax on all assets, the money was to be used to compensate those who had lost everything.

Question 18

Did this system of compensation workout?

Answer 18

Was complicated and took some time to workout but in 1952 the Bundestag eventually passed Equalisation of Burdens act. The money raised and redistributed helped many people to start again.

Question 19

What were the short term impacts of Erhard’s reforms?

Answer 19

• Didn’t bring immediate recovery as the problems that had to be overcome were so great.
• Factories and businesses could start producing and trading again but they had to replace machinery and train workers.
• Some businesses failed after the currency reform because they could not afford to pay wages. Other businesses managed to keep going but they had to lay off some of the workers.

Question 20

What were the unemployment levels like after Erhard’s reforms?

Answer 20

Unemployment rose from 442k in Juine 1948 to 937k in January 1949. By 1950 it was as high as 1.8 mill but then it began to fall. In 1955 it was 1 mill and it continued to fall.

Question 21

What were some of the other benefits of Erhard’s reforms?

Answer 21

• Car production in 1959 was 4.5 times greater than in 1950. In the same period steel production doubled underlining Germany’s new focus on consumer goods

Question 22

Did Erhad face any opposition when implementing his reforms and the idea of a social markety economy?

Answer 22

• Faced oppsition first in the Economic Council then in the Bundestag for his policy of converting from a command economy to a social market economy

Question 23

Who didn’t support the social market economy?

Answer 23

• Britain: supported the concerned labour union leaders who feared a social market economy would lead to exploitation of workers by business owners
• Industrialists

Question 24

Who supported the social market economy?

Answer 24

USA - with a fairly positive experience of a form of social market economy under the new deal had supported Erhard. It was a gamble.

Question 25

Those that didn’t support the social market economy what did they want?

Answer 25

Industrialists were not all supportive. The pre-command economy, with cartels and fixed pricing was what many wanted back; Erhard wanted the cartels broken up and price fixing abandoned in favour of competition with industries.

Question 26

What did the Socialists want?

Answer 26

Opposed the change not to support price fixing but that was because they wanted to nationalise industries and use state control not allowing a capitalist market to set its own levels.

Question 27

How did Erhard manage to implement his economic policies despite opposition?

Answer 27

• Combination of a capitalist market with a responsible government that provided a social safety net for the poorest won Erhard enough supporters in the Bundestag to continue his policies , allowing business tax concessions and removing wage restrictions while encouraging the setting up of trade unions to make sure that workers had adequate representation in wage negotiations.

Question 28

What happened in 1951?

Answer 28

All businesses had workers’ councils and in 1951 there was a policy of co-determination allowing for workers’ representatives on managerial boards in industry.