economy in FRG Flashcards
what was the economy like in 1945?
devastated by war, physical infrastructure destroyed, homelessness huge, worthless currency
what economic challenges did the FRG still face in 1949 despite Allied economic reforms?
rising unemployment + prices, need to rebuild housing, integration of Germans expelled from Eastern Europe
what was FRG industrial output in 1947?
33% of its 1938 level
what reforms took place in 1948 that helped the economy?
currency reform, ending of price controls, Marshall aid
what was Marshall aid?
US monetary aid that helped stimulate economy and funded improvements to infrastructure + industrial development
what signs where there in 1950 that the economy was slowing down?
unemployment rose to over 2 million, inflation rising
what did currency reform bring back to the economy?
confidence in the economy
How did the Nazi period actually help FRG economic recovery?
wealthiest European economy during that period, many industrial plants unaffected by war so country had potential for growth and production
what did people increasingly resort to when the currency was worthless?
bartering for goods
what happened to food and calories because of the bad economy?
food rationed, people on less than 1,500 calories per day
what did the industrial production in Bizonia rise from between Jan-Dec 1948?
51% of 1936 levels to 75%
what was economy recovery due to according to historians?
currency + tax reform + free market forces, marshall aid important but less so
when was the new Deutschmark introduced?
20th June 1948
why did the Deutschmark have a negative effect on creditors and savers?
assets were changed at less generous rates, savings reduced e.g from RM100 to DM6.5
why were large deposits of Deutschmarks given to banks?
used to loan to businesses to develop production, stimulate economy
how does industrial output increasing by 50% show successes of currency reform?
people more willing to invest in strong currency, producing goods easier with loans from banks
what did Erhard do on 20th June 1948?
abolish price controls and relaxed rationing
what happened as a result of the abolition of price controls (success)?
prices found own levels, gave producers more incentive to produce, goods returned to markets, competition
why did it not matter that prices rose after the abolition of price controls?
people had money to spend that was worth something, they would be more willing to buy, greater demand greater production, stimulate economy
what happened to the black market after currency and price control reform?
disappeared, goods present in shops
what did the tax rate fall to in 1950 for those on incomes of DM2,400? what was the rate in 1948?
18%
as high as 85% (on Reichsmarks)
how did tax reforms stimulate the economy?
ordinary working people had more money to spend, stimulated demand, stimulated supply, helped economy find its momentum
what was the change in absenteeism after initial FRG reforms?
down from 9.5 hours per week to less than 2 hours
why did absenteeism reduce?
people didn’t have to spend time queuing, bartering and finding food
what did less absenteeism mean for the economy?
more productivity, index of industrial production rose
what was the growth of industrial production in 1950?
25%
what was the rate of unemployment in 1950 and 1960?
1950-10.3%
1960-1.2%
what did salaries rise by between 1949 to 1955?
80%
when was the economic miracle in the FRG?
1955-66
what was the social market economy?
middle way between completely free and unregulated marked and state controlled socialist economy
how did the state monitor the economy?
ensured fair competition, intervened to protect vulnerable members through social welfare
what criteria shows the extent of economic recovery?
reduction in unemployment, amount of income saved, standard of living, production rates, absenteeism, trade
what was the FRG economy characterised by in the 50s?
declining unemployment, rising exports, rising real incomes, growing consumer confidence and demands for goods, growing investment, new industrial centres, growing profits
what did government work creation schemes to do help the economy?
tackle initial problem of unemployment
what was the Investment Aid Law of 1952?
provided gov subsidy of DM3.2 million to facilitate industrial investment
what did the gov rebuilding programme do?
dealt with destruction of WW2, increase industry and production
what other measures did the government take to initially grow the German economy?
reduced protective tariffs, laws to prevent economic monopolies (Anti Trust Law1957), strong banking controls
what was the Anti Trust Law of 1957?
law to prevent development of economic monopolies, designed to prevent and dismantle cartels
what other factors contributed to economic growth?
growing world economy, limited defence spending, economic foundations, Korean War, foreign policy, Marshall plan, codetermination
what did the growing world economy increase in Germany?
exports, in higher demand
why was limited defence spending beneficial for the FRG?
not hampered with spending on rearmament, more finances available for investment in economy
what economic foundations did Germany have that helped the economy?
sea ports, abundance of raw materials, educated and skilled workforce
how did the Korean War 1950-53 help the German economy?
rise in demand for German exports, boosted industrial production and created more jobs
what did the country’s economic cooperation help it do?
increase trade, expand export markets, increase investment and confidence in economy
how much money was given by the Marshall plan 1948-52, what was this used for?
1.5 billion, bought equipment to rebuild and modernise industry
what was co-determination?
allowed workers to elect representatives to participate in management of business, led to good working relationship between management and workers
what was the FRG economy like worldwide by 1960?
3rd largest
why did trade become a priority in the economy?
german industrial goods had reputation for quality and value so exports rose and prioritised
why were investors more willing to invest in the economy?
confidence had grown, tax concessions, wanted to create new designs and products
why did industrialists oppose the social market economy?
wanted pre-command economy back with cartels + price fixing
what kind of economy did the Economic council and Bundestag want + why?
pre-command economy, worried workers could be exploited
why did socialists oppose the social market economy?
opposed not having fixed prices, wanted nationalised industries and state control
how did Erhard overcome opposition to the social market economy?
codetermination for workers, economy had elements all could support
how many refugees were there in Germany in 1945?
10 million
what role did Erhard occupy 1949-63?
minister of economics
what was the average economic growth rate of the FRG between 1955 to 1966?
8%
by mid-1950s Germany was the _ largest trading power in the world?
3rd
what did FRG share of world trade grow from between 1965 and 1975?
6.6% to 7.9%
what was unemployment at in 1955?
1 million
what had been achieved by the 1960s regarding employment?
full employment
why was full employment so remarkable?
found not only jobs for its original population but also for the 2 million east Germans who fled from the GDR and other refugees
how much of coal and iron production did the gov own or control by the 50s?
40%
why can year zero not be applied to the economy?
infrastructure and technical know how remained providing perfect conditions for economic miracle
what is an economic miracle?
period of dramatic economic development that is entirely unexpected and shocking/unexpectedly strong
what did the number of exports rise from and to in a 20 year period?
8363 to 125300
why did consumerism increase during the economic miracle?
real wages increased, people had more money to spend, brought consumer goods like radios, tvs etc
what were Volkswagens average sales yearly in the 60s?
400,000
what did the central bank created in 1957 do?
monitor and control interest rates and inflation
what did joining NATO in 1955 allow the FRG to do?
rearm and produce war materials, increased exports and trade further
why did demand for goods fall?
after people initially brought things, only brought when needed, no influx of need
what happened in the mid 60s, bad for economy?
recession hit and growth slowed
what was the biggest effect of the recession?
psychological effects, complete loss of confidence in economy
what happened to unemployment rates during the recession?
rose to 3.2% 1966 but 0.8% in 1968
how did the government work together to mitigate the effects of the recession?
Grand Coalition, parties worked together to come up with solutions
when was the economic recession?
1965-69
what factors led to the recession?
slowing growth rates, wages growing faster than productivity threatened price stability + risked inflation
how much had prices risen by by 1966?
4%
what gov measures influenced the recession?
increased gov spending + gov budget doubled
what was Erhard criticised for spending too much on?
modernising railway infrastructure, Us military hardware (rearmament), agricultural subsidies
what did Erhard cut his spending plans by during the recession?
10%
what rates did Erhard raise during the recession?
interest rates
what was the main problem with the recession for Germany, how was this affected by global economic downturn?
to pay for increased spending + greater wage demands needed to raise productivity and sell even more abroad but all economy’s suffering, demand less and less money to buy goods
why did Erhard resign as chancellor in 1966?
US refused to reduce FRG financial contributions to US forces and bases in FRG, disagreement in his FDP + CDU?CSU coalition - FDP wanted spending cuts, CDU raise taxes
when was Erhard chancellor?
1963-66
who replaced Erhard as chancellor?
Kurt Kiesinger
who was the new economics minister under Kiesinger?
Karl Schiller
what did Schiller believe should be done in the economy?
more gov intervention to counter limitations of free market
what did Schiller introduce in Dec 1967?
five year financial plans + attempted to coordinate budgets of different levels of gov
what was the Stabilisation Law, when was it introduced?
June 1967, process of cooperation in times of economic difficulties, increased federal gov activity in economy by altering taxes + raising loans
why was Article 109 of the Basic Law amended?
to allow increased gov control of tax and spending policies
why were moves made to improve coordination, what did Kiesinger’s gov want to expand?
higher education opportunities, improving health facilities, further develop infrastructure
who was cooperation encouraged between?
workers, employees and the state
what happened to public spending and taxes during the recession, what change was there to VAT?
spending reduced, taxes raised, VAT from 10% to 12%
what statistics showed the measures to end the recession seemed successful?
(unemployment, growth, inflation)
by 1968 unemployment falling, industrial growth at 6% per year,
1969 inflation fallen to 1.5%
who became the chancellor after Kiesinger in 1969?
Willy Brandt
what was Brandt’s 1st economic action?
revalued DM by almost 9.3%
what did the revaluing of the DM mean for exports, why did this not matter?
exports more expensive, quality and reputation continued tho so customers prepared to pay extra
what was the shift in priorities under Brandt?
shift from social market economy to pursuit of social welfare
how much did Brandt increase spending on welfare by?
25% to 33%
what did increased gov spending under Brandt fuel?
inflation
when did Schiller resign, who replaced him?
June 1972, Helmut Schmidt as minister of finance and economics
what happened to expenditure on education under Brandt?
increased by 300%
what did the Education Support law do?
made more grants available to poorer students
when was the school leaving age raised to?
16
what were pensions for those wounded in the war raised by?
5%
what happened to pensions for widows of soldiers?
raised by 16%
what was given to full time carers?
state pensions
what happened to health insurance
extended to different groups
what did the social housing budget increase by?
36%
when was the first OPEC oil crisis?
1973
what was the result of the crisis (imports, balance of payments)?
had to pay DM17 billion more for imports, balance of payments from surplus to $692 million deficit in 1 year
what happened to unemployment between 1973 to 1975?
from 1.2% to 4.7%
what were the 3 main interlinking problems of the 1973 oil crisis/
rising public expenditure because of unemployment, falling revenues from taxes from unemployment, rising rates of taxation for those still in work
what gov initiatives were introduced to deal with the oil crisis?
car free Sundays- save on fuel, ban on recruitment of migrant workers,
how did exports help the economy deal with the 1973 oil crisis?
continued to stay high, kept money coming into the economy and stimulating some growth
why was a switch to nuclear energy a good gov measure?
meant energy and fuel supply no longer dependant on foreign political issues
what would the European monetary system do?
make all currencies of EEC member states be tied together so they operate together in one economic bloc
how did the gov support private sector investment during the 1973 crisis?
DM 7/8 billion in grants, public works contracts to create jobs
what did the gov allow back during the 1973 crisis?
cartels and mergers, abolished legislation that regulated them, allowed for more competitive markets and more efficient production
what did OPEC do that caused the 1973 oil crisis?
announced 70% increase in price of oil and 5% decrease in output
what principles did Kohl support?
principles of social market economy
what did growth rates average at in the 80s?
3.6%
what had unemployment fallen to by 1989?
7.6%
what had inflation fallen to by 1986?
less than 1%
what did Kohls government do to public spending, taxes and gov budget?
public spending reduced, tax cuts, kept budget increases to max 3%
what was met with opposition in the 80s?
efforts at privatisation, remained committed to social market economy
what happened to exports under Kohl, statistic?
rose significantly, favourable balance of payments surplus
DM 73.4 billion - 1985
DM 134 billion - 1989
when was the second oil crisis?
1978
what was the key gov measure that helped the FRG economy deal with the oil crises better than other countries?
gov didn’t subsidise fuel costs, let prices rise, incentive for people to use less fuel, economy and people less impacted with the cost
what happened to the gap between rich and poor in the 80s?
increased
what was the balance of payments 1950, 55 and 60?
-3
1.2
5.2
how did the price of a barrel of fuel change?
$3 to $12
why was there a refugee crisis in the FRG?
kicked out of Nazi occupied territory, fled new Soviet countries, from extermination + labour camps
what did Adenauer accept international control over in 1949, what did it show?
control over Ruhr, showed German willingness no to revert to militarism or aggression
when was the ECSC created?
by Treaty of Paris 1951
why was the EEC created?
to facilitate economic prosperity between member states and move towards greater European integration
what does ECSC stand for?
European Coal and Steel Community
what were the motives of the ECSC?
place key areas of German industry under international supervision, help Europe recover, merge industries so they plan and develop together by sharing ideas and trading freely
what countries joined the ECSC?
france, FRG, belgium, luxembourg and netherlands
how was the ECSC successful?
improved french german relations, provided route to closer cooperation
how did trade and welfare improve under the ECSC?
trade in coal increased 10x
welfare- provided more than 112,500 apartments for workers
when was the EEC created, what was it a development of?
1957 by Treaty of Rome, development of ECSC
what was the initial purpose of the EEC?
free trade zone with common economic policies and possible goal of political union
what 2 countries dominated the EEC?
france and FRG
in what 3 ways was the FRG the leader of the EEC by the 80s?
clear knowledge of how it wanted EEC to develop, honest broker in disputes - willing to pay more + make compromises to reach agreement, supported interests of smaller member countries
how much of the EEC budget did the FRG pay?
sometimes as much as 25%, paid largest share
what percent of the GDP of the EEC did the FRG have?
25%
why did the FRG support developmental aid to less developed countries under the EEC?
gave countries free access to EEC markets but also gave FRG increased markets for its exports
what did the European money system do, what would the effect be?
fix exchange rates within EEC, keep inflation down over Europe
how did the living standard change in the FRG?
drastically, from bombed buildings and shortages of all goods to a country of affluence and plenty
how did car ownership rise?
1950- 2 million
1965- 12.1 million
what was there more than 95% ownership of by the 80s?
washing machines, fridges, tvs, telephones and at least bi-annual holidays
how did living space per person rise?
1950- 19 square metres
1980- 30 square metres
what happened to home ownership, statistic?
remained low, most preferred to rent, 37.8% of people owned in 1987
what was the improved standard of living fuelled by?
low cost of living caused by low inflation and restraint in wage demands
what did prices rise by annually in the 70s?
6%
what was the price rise in the UK in 1975?
24%
when did the FRG join NATO?
9th May 1955
how were reparations for the FRG different to those of Weimar?
taken in equipment and machinery rather than money
