Federal Repulic - EDP Flashcards
Which industries were banned in Germany after WW2 and why?
War industries such as munitions and war related industries like chemical, had restricted outputs as the Allies wanted to rebuild the economy but avoid war
Where were reparations taken from in Germany after WW2?
In equipment and machinery from each zone
What undermined the chance of economic recovery in Germany post WW2?
The French and Sovietâs dismantled many remaining factories for reparations and the Reichsmark was worthless and damaging the economy. Transport and communication links crossed cones
What thrived in the face of the worthless Reichsmark?
The black market
How many German POW stayed in franch after WW2 ended?
160,000
What was one of the major factors in the separation?
Economic aid given to western zones under the Marshall Plan, setting up the Deutschmark. It led the soviet zone to set up its own currency.
What was the impact of the introduction of the Deutschmark?
Stabilised the economy and broke up the black market as the currency was backed by western powers
Who was appointed director of the economic administration in March 1948?
Ludwig Erhard
What idea did Ludwig Erhard believe in?
Social market economy
When was the replacement of the RM announced?
18th June 1948, Ludwig Erhard announced that the RM would be replaced by the DM on the 21st June
What did Erhard abolish from the 24th June after the Economic Council gave him the power to do so?
Abolish almost all but the most essential rationing such as bread and milk powder and all price controls
Why did wages stay fixed until November 1948 under Erhard?
to allow businesses to establish themselves
What impact did Erhards actions in 1948 have on the economy?
Cakes, vegetables, butter and eggs were for sale in shops again as well as non-food items such as stoves and stockings. People stopped hoarding and began selling. People began shopping with concern for price.
What did Erhardâs currency reforms have an impact on?
cash and monetary savings
Why did the military government want to tax all assets?
So that the money could be used to compensate those who had lost everything
When was. the Equalisation of Burdens Act passed and what did this do?
Was passed in 1952 and compensated those who had lost everything helping them to start again
Social market economy
A free market economy with elements of social support for the poorest built in.
A socially responsible free market economy
What was unemployment at in June 1948 compared to January 1949?
442,000 in June 1948 to 937,000 in January 1949
What was unemployment in 1950
1,800,00
What was unemployment in 1955?
1,000,000 and declining
Why did Erhard face opposition from the Economic Council and the Bundestag?
for his policy of converting from a command economy to a social market economy
Who, other than the Economic Council and the Bundestag, opposed the social market economy? Why was this?
Britain, supporting the concerned labour union leaders who feared a SME would lead to the exploitation of workers by business owners
Who supported the Social market economy? Why was this?
USA, because they had a positive experience of it under the new deal
What type of economy did many people, like industrialists, want back?
The pre-command economy with cartels and price fixing, however Erhard wanted cartels broken up and more competition in industries
Why did socialists oppose the change to not support price fixing?
They wanted to nationalise industries and use state control, not allowing a capitalist market to set its own levels
What was the policy of co-determination in 1951?
Allowed for workers representatives on managerial boards in industry. It was the right of workers to take part in the management of the business they work for.
Which factors contributed to the economic miracle between 1955 and 1966?
- The Korean war
- New investment
- Workers
- People from the GDR
How did the Korean war contribute to the economic miracle of 1955 - 1966?
In 1950 it sparked a need for supplies, in 1955 the FRG joined NATO and was allowed to re-arm and start producing war materials as a result of the Korean war.
How did new investment contribute to the economic miracle of 1955 - 1966?
Many businesses had recovered and could invest in new, more efficient equipment and factories, concentrating on high-quality goods with low prices to compete. The reputation of German goods grew and exports grew. Businesses expanded.
How did workers contribute to the economic miracle of 1955 - 1966?
Influx of refugees after the war meant there was a large pool of âguest workersâ, providing efficient workers. The fact that there was so many, kept wages low.
How did people from the GDR contribute to the economic miracle of 1955 - 1966?
3.6 million workers from the GDR came to the FRG, many skilled, young, educated and seeking work and wanted to become part of FRG consumer culture. This helped the economy twice over. The government also saved money on education costs and training on these workers.
What were the issues with the âeconomic miracleâ?
- Erhard didnât like the phrase, preferring to see it as a result of good planning and hard work than a miracle
- Growth could not keep going at the rapid rate it was. Once goods had been bought, demand would fall.
- The Berlin wall put up in August 1961 stopped workers from entering the FRG from GDR
Who urged the government to intervene in the economy in 1966?
Karl Schiller
What contributed to the economic challenges of 1966 - 1989?
- The recession of 1966-67
- The oil crises of 1973 and 1978
How did the recession of 1966-67 contribute to the economic challenges between 1966 - 1989?
Both domestic and international trade reduced, increasing unemployment. Due to social welfare policies, public spending was out of control. Guest workers were leaving (1.3mil in 1966 -> 991,000), productivity fell. Karl Schillerâs economic policies failed.
How did the economics minister, Karl Schiller, under the chancellor, Erhard, attempt to reorganise the governments approach to the economy during the recession of 1966-67?
- Increased government planning, intervention and control (eg, subsidies for agriculture and the coal industry)
- Reintroduced cartels to stop prices rising
- 1967 Economic Stabilisation Law
- Five-Year plan system for government spending
1967 Economic stabilisation law
Allowed for government intervention at times of economic crisis to limit regional spending
What provision was added to the basic law in 1968?
One that meant the federal government could move money between LĂ€nder using money from wealthy ones to provide more social welfare in struggling ones.
Who replaced Schiller in 1972 after his policies were regarded as having failed?
Helmet Schmidt
How did the oil crises of 1973 and 1978 contribute to the economic challenges of 1966 - 1989?
- During the 60s and 70s the FRG was using oil more and car ownership pushed up petrol consumption
- The fourth Arab-Israeli war broke out October 1973 and OPEC increased prices sharply in 1973 and 78
- Economic crisis hit the FRG in 1974-75
- Unemployment rose and baby boomers were hitting employment market
What helped to ease the impact of the oil crisis?
- Foreign guest workers contracts were not renewed and a ban was placed. on guest workers
- Export income helped to recover the economy
- Oil consumption dropped due to government measures (car-free Sundays, speed limits)
- Propaganda to push energy saving tactics and investment in atomic power
- did not subsidise oil prices and this encouraged cutbacks
- Converted to new fuels rapidly and brought public spending cuts and higher income tax
What did the government do in the economy in 1981 and 1982?
Cut public spending (benefits and housing allowance)
Why did the government cut public spending so fiercely in 1982?
They believed that welfare support created dependency and Helmut Kohl said that this caused productivity levels to fall
What did Helmut Kohlâs government do from 1982 to fix unemployment?
Brought in more cuts in social welfare including maternity benefit. Cut public holidays and reduced retirement to 58. They sold off shares in state run institutions (Volkswagen and Lufthansa), partially privatising them.
How did war damage impact the lives of German families?
People were starving and many people were homeless. 1/5 of housing had been bombed flat and about 1/3 of stuff still standing was damaged. A ministry of housing was set up to oversee rebuilding.
When did the western zones of Germany form part of the OEEC?
16th April 1948
What is the OEEC?
Organisation of European Economic Cooperation, set up to manage European economic recovery. It administers the Marshall Plan aid in Europe
Who set up the European Payment Union (EPU)?
OEEC
EPU
European Payment Union
When did OEEC set up the EPU and why?
In September 1950, to manage economic co-operation across various national finances
When did the FRG join the GATT and what does this stand for ?
In 1951 after it was set up in January of 1948. It is the General agreement of tariffs and trade
What does the General Agreement on Tariffs and Trade (GATT) do?
Establishes favourable trade agreements among its members
