economy Flashcards
what is a free market economy?
gov does not interfere with policies of businesses, including prices and wages
what is a social market economy?
a free market economy with social support for the poorest
Who was appointed director of economic administration in 1948?
Erhard
then economics minister under FRG until 1963
believed in social market economy
How did the allies try to prevent Germany from starting another war?
war related industries were banned (munitions) or their outputs were restricted (chemicals)
why was economic recovery held back under the allies (1945-9)?
✔reparations were taken in equipment and machinery, the french and soviets even dismantled factories
✔Reichsmark almost worthless and black market thrived
✔each zone was governed differently
✔devastation in Germany meant many chose not to return or left
How was the economic recovery of the FRG kick started 1945-55?
✔Marshall plan
✔Deutschmark encouraged consumerism and saving
✔all but essential rationing and price controls abolished in 1948, confidence in economy rose
✔1952 equalization of burdens act enforced taxed on assets
what evidence is there that the economy was recovering 1945-55?
✔car production x4
✔steel production doubled
✔unemployment fell
Who opposed Erhard’s initial reforms and why?
✔Britain, labour unions and Bundestag members worry exploitation of workers will rise
✔Industrialists want cartels and price fixing back
✔Socialists wanted price fixing and state control back
What evidence is there that the FRG economy had recovered dramatically 1955-66?
✔rise in exports
✔falling unemployment figures fell
✔Sales of Volkswagen expanded
Why did the economy recover so rapidly 1955-66?
✔Korean war. Demand for war supplies. Joining NATO allowed them to provide these
✔new investment. Recovered businesses more efficient. exports rose
✔Workers. Influx of guest workers. Skilled and educated.
What economic challenges did the government face 1966-89?
✔Rising spending in social welfare
✔economic growth slowed
-gov accepted need to intervene in economy
what happened during the recession of 1966-7?
✔trade reduced and unemployment increased
✔decreasing numbers of guest workers
✔industrial productivity fell
✔public spending out of control
How did Karl Schiller (economics minister) respond to the recession?
✔increased gov planning intervention and control
✔ cartels stop prices rising
✔1967 economic stabilisation law allowed intervention
✔1968 provision added to basic law increased gov control over Lander budgets
What were the oil crises of 1973 and 1978?
Fourth Arab-Israeli war
OPEC (provides 40% of FRG oil) put up oil prices sharply
unemployment rose (+post war baby boom need jobs)
ban on guest workers
How did the FRG governments overcome the economic challenges in the 60s and 70s?
✔export figures stayed healthy thanks to demand
✔measures for reduced oil consumption e.g. care free Sundays. Propaganda encourages energy saving
✔public spending cut and income tax raised 1975
✔banned permits for families of guest workers already in Germany
