FRG, 1945-89: Economy Flashcards
How was the German economy recovered after WW2?
- Currency worthless, Reichsmark replaced with the Deutschmark
- Marshall Plan gave $1.5 billion to rebuild infrastructure
- Price controls and rationing ended in June 1948
What new economic model was introduced in Germany and what did this mean?
- Social market economy, capitalist free market with elements of social support for the poorest
- Governmental oversight to prevent unfair practices, state ownership of parts of the economy, e.g. railways
What was the Co-Determination Law?
- 1951, worker involvement in commercial enterprises, worker representatives sat on the board of companies
- Had a right to be consulted about major decisions
What was the Investment Aid Law?
- 1952, provided subsidies to assist with industrial developments
- Industrial investment increased by 50% after banks were given money to loan to businesses
How did guest workers improve the economy?
- 1950s, around 3.6 million young, highly skilled and educated workers came to the FRG from the GDR
- Most did not need training, saved the government money and time
What international event helped to boost the German economy?
-Korean War, 1950, industrial goods, chemicals and steel were in greater demand where other countries had moved to war production (FRG banned from such)
How did the FRG build up international relations in the 1950s?
- 1951, joined European Coal & Steel Community which eliminated tariffs and created a single authority
- 1955, joined NATO which allowed them to re-arm
- 1957, joined European Economic Community, established common policies for areas like labour
What is the period of 1949-66 known as in German economic history?
-Wirtschaftwunder (Economic Miracle)
What happened in 1966-67 and how did the government deal with this?
- Economic recession, international and domestic trade reduced, unemployment rose and public spending was spiralling
- 1967 Stabilisation Law, increased the powers of the federal government to raise loans and alter taxes
What happened in 1973-75?
- Oil Shock, the OPEC introduced an embargo on western countries that supported Israel in the war
- Prices rocketed, causing a worldwide depression
- Unemployment rose to 1 million in 1975, GDP fell by 1.4%
How did Schmidt attempt to recover the economy after the Oil Shock?
- Public spending increased, taxation reduced
- Unemployment kept below 8% and inflation was kept at an average of 4.7%, lower than other countries
- State debt increased to 75.7 billion DM in 1982
What was the policy of Die Wende?
-The turnaround, Kohls policy aimed to reduce deficit by cutting expenditure, removing restrictions on businesses, early retirement schemes and increasing privatisation
How successful was the policy of Die Wende?
- Growth occurred to 3.7% in 1988, unemployment dropped
- Welfare spending was not cut as much as hoped as it would not be popular, govt. expenditure still high
- Economic growth remained lower compared to the 50/60s, however this may be due to the Asian Tiger economies that were on the rise
How did housing improve in the FRG?
- 1940-50s, new homes to built to recover from the war, 69% social housing, around 50-60sqm., no central heating
- By 1970s, houses bigger at 84sqm., 96% had central heating, however decline in social housing, only 27%
What was employment and spending like in the FRG?
- 1950, 8.1% of people were unemployed
- by 1971, unemployment fell to 0.7%
- 1960s, 63% of homes had fridges, 36% had washing machines, by 1980s, this was 82 and 87%
- 14% increase on spending between 1950-80s
