Economic Recovery and the 'Economic Miracle' (1945-66)

Question 1

What attitudes did the Allies have about the German economy when they each controlled a zone in Germany?

Answer 1

• They recognised the need to rebuild the German economy
• However, they did not want Germany to be able to wage another war

Question 2

List 2 actions taken by the Allies to stop Germany’s ability to wage war through their economy.

Answer 2

• War industries (e.g. munitions) were banned
• Other linked to war (e.g. chemical industries) had their outputs restricted

Question 3

In what form did the Allies plan to take reparations? What were 2 issues with this?

Answer 3

• Equipment and machinery
• Due to bombing, many places had neither
• The Soviets and the French dismantled many remaining factories for reparations, which undermined the chances of economic recovery

Question 4

What were 5 issues the German economy faced following WW2?

Answer 4

• The Reichsmark was worthless and people had lost confidence in it, so they turned to bartering and the black market
• On the black market, prices could be even 180 times as high as decreed by price controls; the price of 1kg of sugar was fixed to RM1 in 1947, but was being sold on the black market for RM120 to RM180
• Food was rationed
• It was hard to employ workers when their wages would be worthless
• 10 million Germans came to the FRG as refugees ahead of the Soviet army, or were expelled from Eastern Europe due to the agreements at Potsdam

Question 5

What were the 2 main ways the Allies helped the German economy?

Answer 5

• Currency reform
• Marshall Aid

Question 6

How much Marshall Aid did the FRG receive? In what period of time?

Answer 6

• $1.5 billion
• 1948-52

Question 7

What was the new currency that was introduced?

Answer 7

• The Deutschmark (DM)

Question 8

What were 2 benefits of the introduction of the Deutschmark?

Answer 8

• It was stable, so it helped break up the black market
• The authorities gave banks large deposits of Deutschmarks so this money could be loaned to businesses, which increased production by 50%

Question 9

What were 2 drawbacks of the introduction of the Deutschmark?

Answer 9

• The revaluation of the Reichsmark against the Deutschmark negatively impacted some people
• The Soviet zone had to introduce its own currency as it wasn’t included in the DM, which made separation more likely

Question 10

How did the revaluation of the Reichsmark against the Deutschmark negatively impact some people?

Answer 10

• Savings were converted from RM100 to only DM6.5 (wages were converted at a rate of RM1 to DM1)

Question 11

Who was in charge of the German economy after the war, and for how long?

Answer 11

• Ludwig Erhard
• Director of the Economic Administration 1948-49
• Economics minister 1949-63

Question 12

What was the first thing Erhard did to try to help the economy to recover (2 steps), and when?

Answer 12

• In June 1948 he abolished price controls and almost all rationing
• In November 1948 he ended wage controls (he didn’t do this immediately so that businesses could establish themselves)

Question 13

What 2 impacts did Erhard’s changes have?

Answer 13

• Goods re-emerged in shops, as producers had more incentive to produce goods since prices could naturally find their own levels
• The black market and hoarding disappeared

Question 14

What was done to help the poorest in society?

Answer 14

• In 1952 the Bundestag passed the Equalisation of Burdens Act
• It taxed assets and redistributed this money to those who had lost everything

Question 15

What did Erhard create through his economic reforms?

Answer 15

• A social market economy

Question 16

List 3 aspects of a social market economy.

Answer 16

• A free market
• No monopolies or cartels
• A fairer tax system

Question 17

What was Erhard’s social market economy like?

Answer 17

• A capitalist market, but the government provided a social safety net for the poorest through social welfare

Question 18

Name 2 groups that opposed a social market economy, and explain why they were against it.

Answer 18

• Industrialists wanted cartels and price fixing back
• Socialists wanted price fixing as they wanted to nationalise industries instead of allowing a capitalist market to set its own prices

Question 19

What were 2 benefits of this new social market economy for workers?

Answer 19

• All business had workers’ councils
• In 1951, there was a policy of co-determination (the right of workers to take part in the management of the business they work for), so they had representatives on the managerial boards in industry

Question 20

Using 4 examples, show how successful the FRG’s economy was in the 1950s.

Answer 20

• By the mid-1950s the FRG was the third largest trading power in the world
• In the 1950s, car production increased by 4.5 times
• In the 1950s, steel production doubled
• Full employment had been achieved by the 1960s

Question 21

What was Germany’s economic recovery called as a result?

Answer 21

• An economic miracle

Question 22

What were 3 reasons behind the German economy’s successful recovery?

Answer 22

• The Korean War (1950-53)
• The FRG’s trading success
• The number of workers

Question 23

In what 2 ways did the Korean War help the FRG’s economy?

Answer 23

• Other countries such as the USA had shifted to war production, so while the FRG was not allowed to produce these, there was a higher demand for other goods, such as chemicals, steel and electrical goods
• Mainly as a result of the war, the FRG joined NATO in 1955, and was allowed to (rearm and) produce weapons

Question 24

Why was the FRG so successful at exporting goods?

Answer 24

• The FRG was known globally for producing high-quality goods at competitive prices

Question 25

Describe 4 ways in which the number of workers was useful to the FRG.

Answer 25

• The influx of refugees after the war meant that there was a large pool of ‘guest workers’ that businesses could hire
• There were a lot of them, which kept wages low
• 3.6 million more refugees came from the GDR in the 1950s, and many of them were skilled, which saved the government money (as they didn’t need to spend it on education)
• They were also a part of consumer culture

Question 26

What are 3 limitations of the use of the phrase ‘economic miracle’ to describe the FRG’s recovery?

Answer 26

• It can be argued that it wasn’t a complete miracle; there was surviving infrastructure and know-how
• It was more down to hard work by workers and good planning than a ‘miracle’
• Growth could not continue at the same rate as the 1950s and early 1960s