Economic recovery 1945-55 Flashcards
What were the Allies views on the German economy?
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
What were the Allies views on reparations?
- 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
What other problems did the economy face post WW2?
Reichsmark was almost worthless which was damaging the economy and the black market was thriving.
Give an example of the black market thriving despite poor ecconomic conditions?
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.
Why did Germans leave the country , and Germans living in other countries not return?
Because the economic devastation was so great and the occupation so dislocating
Give an example of Germans not returning?
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.
Was this refugee influx good or bad?
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.
What was the economic situation of West Germany?
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
What effect did the Deutschark have?
- Helped to stabilise the economy
- Break up the black market as the currency was backed by Western powers
What was a consequence of the Deutschmark?
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)
Who was appointed director of the economic administration in March 1948?
Ludwig Erhard
What did Erhard believe in?
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.
What did Erhard do on 18 June 1948?
Announced the Reichsmark would be replaced by the Deutschmark on 21 June
What did the Economic council give power to do , to Erhard on 24th June?
Abolish almost all but the most essential rationing such as bread and milk powder and all price contols.
What were some of Erhard’s economic policies?
Fixed wages until Nov 1948 to allow businesses to establish themselves.
What effect did these combinations of economic policies have?
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.
What was a possible concern of these measures and the currency reform?
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.
Did this system of compensation workout?
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.
What were the short term impacts of Erhard’s reforms?
- 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.
What were the unemployment levels like after Erhard’s reforms?
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.
What were some of the other benefits of Erhard’s reforms?
- 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
Did Erhad face any opposition when implementing his reforms and the idea of a social markety economy?
- 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
Who didn’t support the social market economy?
- Britain: supported the concerned labour union leaders who feared a social market economy would lead to exploitation of workers by business owners
- Industrialists
Who supported the social market economy?
USA - with a fairly positive experience of a form of social market economy under the new deal had supported Erhard. It was a gamble.
