FRG - Economic Recovery - Erhard's reforms

Question 1

How far was economic recovery achieved in the years 1945-55?

What was the allies belief surrounding Germany after the war

Answer 1

• The Allies agreed it was important to rebuild Germany’s economy
• However, they also agreed that it was important that Germany did not start another war

Question 2

How far was economic recovery achieved in the years 1945-55?

How did the allies ensure Germany were not fit for another war, with attempts at economic recovery

Answer 2

• Industries considered to be war industries e.g munitions were banned and others that were war-related e.g chemical industries had their outputs restricted
• Reparations were to be taken in equipment and machinery from each zone
• Considering the level of bombing, some places had very little of either
• French and the Soviets dismantled many remaining factories for reparations, undermining any chance of an economic recovery

Question 3

How far was economic recovery achieved in the years 1945-55?

What was the state of the German currency 1945-55ish

Answer 3

• The Reichsmark was almost worthless
• This meant that the black market thrived - 1 kg of sugar in 1947 had its price fixed at RM1; it could only be obtained on the black market, where it cost RM120- RM180)
• It was hard to get workers when their wages bought hardly anything

Question 4

How far was economic recovery achieved in the years 1945-55?

What other factors contributed to poor economic recovery for Germany because of the allies

Answer 4

• Transport and communication links crossed the zones, hampering economic recovery
• At first the Allied Control Council (see page 26) worked together to overcome these difficulties,
• but each zone was run by a military high command and the way they ran their zones varied,
• with the difference between the Soviet zone and the others widening

Question 5

How far was economic recovery achieved in the years 1945-55?

Describe the immigration away from Germany after WW2

Answer 5

• The economic and physical devastation in Germany was so great, and the occupation so dislocating, that some Germans left and others chose not to return
• e.g 160,000 German prisoners of war in France stayed there after the war rather than returning to Germany

Question 6

How far was economic recovery achieved in the years 1945-55?

Describe the migration towards Germany after WW2

Answer 6

• Immigration numbers were far exceeded by the influx of some ten million Germans who came as refugees ahead of the Soviet army,
• or were expelled from Eastern Europe under the reallocation of land and people agreed at Potsdam
• These refugees, at first seen as adding to Germany’s troubles, were to become one of the country’s biggest assets
• The Allies had to deal with the refugees and homeless Germans and were forced to introduce ratoning

Question 7

Describe the refugee problem in the aftermath of WW2

Answer 7

• Some refugees were found work on farms as part of the rebuilding of Germany’s agriculture
• Many refugees were housed was in camps, some were even housed in Bachidu, an ex-concentration camp
• 4.5 million Soldiers returning home & people from Nazi labour camps or concentrations camps, had to be housed and fed until they could go home

Question 8

West Germany after 1949

Summarise how Relations between the USSR and the West deteriorating rapidly, and the Cold War developing led to the split of Germany

Answer 8

• Tthe Western zones received the Marshall Plan of 1948’s aid of 1.4 million, which set off the creation of the Deutschmark (DM) to administer the aid
• The new currency helped to stabilise the economy and break up the black market as the currency was backed by the Western powers.
• However, it led to the Soviet zone setting up its own currency because it was not included in the DM, and it made separation more likely
• By the end of 1949, Germany had divided into the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR

Question 9

When was Erhard given his major role in German economic recovery

Answer 9

• Ludwig Erhard was appointed director of the economic administration in March 1948
• then as economics minister of Germany from 1949 to 1963

Question 10

What did Erhard believe in

Answer 10

• He believed in the idea of a social market economy and worked to create one under the Allies

Question 11

Erhard’s reforms

On 18 June 1948, Erhard announced that….

Answer 11

• the RM would be replaced by the DM on 21 June

Question 12

Erhard’s reforms

On 24 June, the Economic Council gave Erhard the power to….

Answer 12

• abolish almost all but the most essential rationing. such as bread and milk powder, and all price controls

Question 13

Erhard’s reforms

What was put in place to control wages

Answer 13

• Wages stayed fixed until November 1948 to allow businesses to establish themselves

Question 14

Erhard’s reforms

What was the effect of the new currency and other measures

Answer 14

• suddenly cakes, vegetables, butter and eggs were for sale in the shops,
• as were non-food items from stoves to stockings
• people stopped hoarding goods and began selling them
• rather than buying anything that became available, they began to shop with a more careful concern for price and quality because they felt more confident that supplies would be less erratic

Question 15

Erhard’s reforms

The currency reform only affected……&……

Answer 15

cash & monetary savings

Question 16

Erhard’s reforms

What compensation scheme was established

Answer 16

• The military government wanted a tax on all assets, the money to be used to compensate those who had lost everything
• The system of compensation was complicated and took some time to work out,
• but in 1952 the Bundestag eventually passed the Equalisation of Burdens Act
• The money raised and redistributed helped many people to start again

Question 17

What is a social market economy

Answer 17

• This is a free market economy with elements of social support for the poorest built in - a ‘socially responsible free market economy’

Question 18

Erhard’s reforms successes?

Erhard’s reforms ………………… economic recovery, for the problems that had to be overcome were great

Answer 18

did not bring immediate

Question 19

Erhard’s reforms successes?

What evidence is there that businesses still struggled slightly following Erhard’s reforms

Answer 19

• Factories and businesses could start producing and trading again, but they had to replace machinery and train workers
• Some businesses failed after the currency reform because they could not afford to pay wages
• Other businesses managed to keep going, but they had to lay off some of their workers

Question 20

Erhard’s reforms successes?

Unemployment rose from …….. in June 1948 to …….. in January 1949.
By 1950, it was as high as …….. but then it began to fall.
In 1955, it was ………. and it continued to fall.

Answer 20

Unemployment rose from 442,000 in June 1948 to 937,000 in January 1949.
By 1950, it was as high as 1,800,000, but then it began to fall.
In 1955, it was 1,000,000 and it continued to fall.

Question 21

Erhard’s reforms successes?

Car production in 1959 was ….. times greater than in 1950

Answer 21

4.5

Question 22

Erhard’s reforms successes?

In the same period, steel production …….., underlining Germany’s new focus on ………

Answer 22

In the same period, steel production doubled, underlining Germany’s new focus on consumer goods

Question 23

Opposition to Erhard’s reform

Where did Erhard first face internal opposition for his policy of converting from a command economy to a social market economy

Answer 23

• First in the Economic Council then in the Bundestag

Question 24

Erhards Policy - ……….. economy to a ……… economy

Answer 24

• command economy to a social market economy

Question 25

Opposition to Erhard’s reform

What did Britain think about a social market economy

Answer 25

• Britain had also opposed the idea, supporting the concerned labour union leaders who feared a social market economy would lead to exploitation of the workers by business owners

Question 26

Opposition to Erhard’s reform

What did USA think about a social market economy

Answer 26

• The USA, with a fairly positive experience of a form of social market economy under the New Deal, had supported Erhard

Question 27

Opposition to Erhard’s reform

What did Industrialists think about a social market economy

Answer 27

• It was a gamble - Industrialists were not all supportive
• The pre-command economy, with cartels and price fixing, was what many wanted back;
• Erhard wanted the cartels broken up and price fixing abandoned in favour of competition within industries

Question 28

Opposition to Erhard’s reform

What did Socialists think about a social market economy

Answer 28

• Socialists opposed the change not to support price fixing,
• but that was because they wanted to nationalise industries and use state control,
• not allowing a capitalist market to set its own levels

Question 29

Opposition to Erhard’s reform

What did the poorest members of society think about a social market economy

Answer 29

• the combination of a capitalist market with a responsible government that provided a social safety net for the poorest,
• won Erhard enough supporters in the Bundestag to continue his policies,
• allowing businesses tax concessions and removing wage restrictions,
• while encouraging the setting up of trade unions to make sure that workers had adequate representation in wage negotiations

Question 30

Opposition to Erhard’s reform

How did workers become better represented

Answer 30

• All businesses had workers’ councils
• In 1951, there was a policy of co-determination allowing for workers’ representatives on managerial boards in industry

Question 31

Describe the success of Volkswagen (finally) in the 1950s

Answer 31

• Sales of the VW expanded beyond success in Germany, into Europe to become part of the economic miracle’s export success
• VW carried out market research and targeted students and young professionals or wealthy families looking for a cheap, reliable second car
• By 1960, there were 500 VW dealerships in the USA and half a million cars had been sold