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
What economic challenges did the FRG government face in the 1980s?
✔growth in economy shrank
✔inflation and price rise
✔unemployment hit 1.7 million
How did the governemtn overcome economic challenged in the 1980s?
✔Schmidt cut public spending
✔Kohl cut public spending more fiercely e.g. maternity benefit and reduced retirement to 58
✔sold off shares in state run industries e.g. VW
Were the economic policies of the 1980s a success?
Yes
By 1989 unemployment was at its lowest and economic growth had risen
Why did the FRG seek to establish closer ties with Europe?
Adenauer saw politcla and economic integration as vital to Germany’s success
What evidence is there that the FRG sought to establish closer ties with Europe?
✔1951 : council of Europe
✔1952: IMF
✔1955: NATO
✔1957: treaty of rome. founding member of EEC
How did world war two affect living standards in west germany?
1/5 of housing bombed
influx of refugees
rationing of essential food items
How did the FRG governments raise living standards in Germany?
✔ministry of housing established
✔rents frozen
✔building industry given tax concessions
what evidence is there that living standards rose 1949-1989?
✔numbers of new homes built rose
✔average size of houses rose
✔real wages kept ahead of prices
✔by 1963, 63% of homes had a fridge
Did everyone experience a rise in living standards 1949-1989?
social inequaliuty deepened
in the 1960s, 1% of all households owned 35% of the wealth
– 1973 78%
–1988 45%
