FRG 1.3 Flashcards
How was the economy after WW2?
in cripples again, people were starving
How did the allies intervention worsen the economy?
no ally agreed on how to stabilise Germany- all focussed on their self interest, The french and soviets took every remaining bit of factories to halt any chance of economic recover, reparations were taken from in machinery, transport and links crossed zones- hampering recovery
How did the allies stabilise the economy?
the Marshall plan helped create the new currency- Deuthschmark- to administer aid- this broke up the black market
Who was Ludwig Erhard?
he was appointed as director of the economic administration in march 1948
what were Erhard’s aims?
Believed in the idea of a social market economy
What did Erhard do?
came up with a currency reform. 18 june 1948- RM would replace DM. due to this new food was sold in shops and so people stopped hoarding and started selling- however it didn’t bring about immediate recovery
What effect did Erhards reforms have?
factories and businesses were bought back on track however were replaced by machinery. some businesses completely failed as they couldnt pay wages, unemployment rose in 1948 but fell by 1955, car production was 4.5x greater than 1950, steel production doubled .
what opposition did Erhard face?
Erhard faced opposition throughout, He was highly opposed for changing the command economy to a social market economy
What factors contributed to the economic miracle of 1955-66?
- The korean war- increased demand for war supplies + FRG joined NATO
- New investment: high quality goods at low prices drove up exports
- Influx of workers: huge pool of guest workers after war. 3.6m were skilled- here govt saved money on training.
Why didn’t Erhard like the phrase ‘Economic miracle’?
he preferred to see economic growth as a result of good planning and hard work
what were the problems that came with the economic miracle?
growth couldn’t keep increasing rapidly, once people bought consumer goods, demand would fall as they would replace it at diff times, Berlin wall was put up in 1961 which stopped working coming in
what were the economic challenges FRG faced?
The 1966-67 Recession
The 1973-78 oil crisis
what was the economic impact of the 1966-67 recession?
trade reduced, unemployment increased, guest workers decreased, productivity fell, public spending was out of control
What did Karl Schiller do to stabilise economy during the recession?
increased govt spending, intervention and control, reintroduced cartels however his plan failed and was replaced by Schmidt
What caused the oil crisis?
FRGs heavy reliance on oil instead of coal, that when the Arab Israeli war broke out, prices rose- this was detrimental
What was the economic impact of the oil crisis?
increased unemployment, ban placed on guest workers
How did the economy recover from the oil crisis?
The FRG was not hit as hard as the other countries, it was helped by export income, govt pushed energy saving tactics to reduce oil consumption, they also bought in public spending cuts and higher income tax
what were some of the economic challenges faced in the 1980s?
gap between rich and poor widened, growing hostility to guest workers, unemployment hit 1.7m in ‘81, this drove up unemployment benefits?
what did the govt do to solve the economic challenges of the 1980s?
they cut govt spending even further- copied from countries like USA. they said welfare support created dependency. Kohl’s govt cut welfare spending. This actually worked as by 1989, unemployment was at its lowest and economic growth had risen
Was building ties international important for the economy?
Yes, adenauer like Stresemann saw this integration as vital for Germanys economic and political success
How did living standards change for the FRG from the start to end?
As the economy strengthened, standards of living rose and people began to spend their money on different things, life expectancy rose, however social inequality deepened and the rich just got richer.
