FRG Economy Flashcards
1948-55 Reforms
- Erhard’s currency reforms
- Tax reforms
- End rationing and price controls
- Capitalist market with socialist elements
1948-55 Reforms
- Introduced Deutschmark in small quantities, to facilitate spending and get economy moving (harmed savers)
- Average tax rates fell from a high of 85% to 18%
- Successfully stimulated economy and black market disappeared
- Co-determination, free market, end monopolies
Impact of Erhard’s Reforms 1948-55
- Industrial output
- Tax rate
- Unemployment
Impact of Erhard’s Reforms 1948-55
- Industrial output increased 50%
- Tax rate rate average income fell to 18% from high of 85%
- Unemployment was 1.2% by 1960
Economic Miracle (1955-66) Govt Intervention
- Work creation schemes
- Investment law 1952
- 1957 antitrust law
- Banking controls
- EEC
Economic Miracle (1955-66) Govt Intervention
- Rapid rebuilding of German cities
- Investment law 1952 provided DM3.2bn to industry
- 1957 antitrust law prevented monopolies and cartels
- Banking controls created authority over monetary policy
- EEC reduced protective tariffs an expanded export market
Economic Miracle (1955-66) External Factors
- World recovery
- Marshall plan
- Korean war
- Emigrants
Economic Miracle (1955-66) External Factors
- World recovery increased demand for German exports
- Marshall plan gave $1.5bn in aid to industry
- Korean war increased demand for industrial goods and motor vehicles
- Emigrants from East Germany increased skilled workers
Economic Miracle (1955-66) Unique Factors
- Defence spending
- Exports
- Foundations
- Co-determination
Economic Miracle (1955-66) Unique Factors
- Defence spending was limited by restrictions
- Exports were known for quality and value
- Foundations of raw materials, ports and skilled workforce
- Co-determination led to good working relationships and few strikes
Economic Challenges 1966-69
- 65-69 recession caused by slow growth compared to wages
- Inflation reached 4% in 1966
Economic Challenges 1966-89
- Keisinger increased cooperation and planning
- reduced spending and increased taxes
- Industrial growth reached 6%/annum in 1969 and inflation fell to 1.5%
Economic Challenges 1969-72
- Brandt made social reforms in education, pensions, healthcare, housing
Economic Challenges 1969-72
- Debt increased from 16% on GNP in 1970 to 26% in 1975
Economic Challenges 1973-1980
- Oil prices rose 300% in 1973
- Unemployment rose from 1.2% in 1973 to 4.7% in 1975
Economic Challenges 1973-1980
- German exports fell
- Car free sunday
- Migrant workers banned
- Abolition of merger regulation
- Switch to nuclear energy
- Moving to a unified European currency
- Grant to increase competitiveness, economies of scale, efficiency and research
Economic Challenges 1982-1989
- CDU/CSU Kohl supported social market economy
Economic Challenges 1982-1989
- Balance of trade increased from DM51bn to DM134bn from 1982-89
- Inflation fell under 1% in 1986
European Economy
- France and BeNeLux joined Germany in ECSC
- ECSC extended into EEC after 1957 treaty of Rome, now including Italy
- 1978 Schmidt created EMS to fix exchange rates within EEC, replacing USD with Deutschmark
European Economy
- Coal trade increased 10x among members
- Free trade zone with common economic policies and possible future political union; Fully integrated internal market with free trade and free worker movement
Changing living standards
- Employment
- Housing
- Working conditions
- Disposable income/luxury goods
Changing living standards
- Families needed 2 incomes to maintain affluent lifestyle
- 0.9 rooms/person in 1950 rose to 1.5 by 1970s; home ownership low at 37.8% in 1987; older houses still had 90% missing indoor toilet, shower or heating in 1960, fell to 18% in 1983
- Car ownership rose form 2m in 190 to 12.1m in 1965; 95% ownership of washing machines, fridges, tvs by 1980s
