FRG Economy Flashcards
which industries were banned at the beginning of the FRG?
war related industry to make sure that war did not happen again
how did Germany pay its reparations?
reparations were taken in equipment and machinery
how did the French and Soviets take reparations?
they destroyed most remaining factories which made economic recovery difficult
what was the problem with the Reichsmark after the war?
it was completely worthless no wages became worthless too
why were refugees a short term problem?
they needed to be housed and also rationed with food
what was Dachau concentration camp used for after the war?
to house refugees
how much money was given by the Marshall Plan in 1948?
$1.4 million
what did the creation of the DM do for Germany?
- helped stabilise the economy
- break up the black market
- led to the Soviets making their own currency
- further polarisation from the Soviet zone
who became the Director of Economic Administration?
Ludwig Erhard
what kind of economy did Erhard believe in?
a social market economy
which is a free market economy which offered social support for the poor
what replaced the RM?
the Deutschmark
when did the DM replace the RM?
June 1948
when was rationing ended in the FRG?
June 1948
what did the change in currency lead to?
- people stopped hoarding
- shops started selling consumer goods
- people had more confidence in currency and stocks
- wages meant something
what was the Equalisation of Burdens Act 1952?
they had a tax on all assets and the money generated was spent on compensating those that had lost everything
a LEFT WING policy
why did wages stay fixed until 1948?
to help companies deal with a rise in prices and a rise in wages
what was a problem with Erhard’s early economic reform?
many companies could not replace workers
some businesses could not afford to pay their workers after the currency change
how high was unemployment in 1949?
13.5%
what showed that Germany was focussing on consume r goods?
- steel production doubled by the end of the 50s
- car production in 1959 was 4.5x greater than in 1950
who disliked the social market economy?
the Economic Council
the Bundestag
Britain
what did labour union leaders believe would happen with a social market economy?
more exploitation of workers by companies
who supported the social market economy?
the US
they had experience with their New Deal
how did Erhard win over enough of the Bundestag?
his economic policy combines a capitalist market with a responsible government which was providing social security
this allowed him to pass more policies
what further economic policies did Erhard bring?
- business tax concessions
- removing wage constrictions
- encouraging trade unions
what was the policy of codetermination?
allowed worker’s representation on managerial boards in industry
what were the factors that led to an economic BOOM?
- the Korean War
- new investment
- refugee workers
how did the outbreak of the Korean War help the FRG’s economy?
since many countries were involved in war production due to the war, FRG’s industrial goods, chemical, steel and electrical goods industry was in high demand
the FRG joining NATO allowed them to re-arm and also start producing war materials which means more in demand goods
how did new investment help the FRG’s economy?
with new investment, companies invested in better factories, more workers and efficient machinery
companies started to produce high quality goods and kept prices low to allow the goods to compete
with better quality, there were more sales which meant more money to be spent on more investment and raw materials
how did the influx of refugee workers help the FRG’s economy?
a large amount of refugees meant there were immediately a large amount of workers available for businesses
after training was completed these workers ended up keeping labour costs low
how did the influx of workers from the GDR help the FRG’s economy?
workers from the GDR were highly skilled and educated who were willing to work in the FRG
by employing highly skilled workers, the government did not have to spend money on training them and instead invest that money elsewhere
what problems did Erhard face with his economic policy?
- once everyone had bought consumer goods, they were replaced at different times which meant demand fluctuated
- the construction of the Berlin Wall in 1961 meant that skilled workers from the GDR were unable to join the FRG which reduced the number of professionals
how much of the FRG’s workforce was unemployed in 1950?
8.1%
how much of the FRG’s workforce was unemployed in 1971?
0.7%
what year saw the greatest real growth?
1955 with 12%
how did the recession of 1966 challenge the FRG’s economy?
- trade both foreign and domestic fell
- unemployment increased
what caused the recession of 1996?
the FRG was spending far too much on public spending
how was the recession of 1966 fixed by Schiller?
- government intervention was increased
- reintroduction of cartels to stop prices rising
- changes to the Basic Law
what was the 1967 Economic Stabilisation Law?
allowed government intervention in times of economic crisis
integrated a 5 year plan for all government spending
what was added to the Basic Law to combat the 1966 recession?
the federal government could now move money between Lander and therefore direct money from wealthy Lander to Landers which needed more social welfare
what was the perception of Schiller’s economic policy?
it was deemed a failure and was replaced by Schmidt in 1972
what made the FRG susceptible to falling victim to an oil crisis?
in the 1960s and 1970s, the FRG was relying more on oil instead of coal as fuel and to add to this car ownership was on the rise
how much did the FRG spend on 140 tonnes of oil in 1972?
DM 10.8 billion
what caused the 1973 oil crisis?
the Fourth Arab-Israeli War broke out which led to OPEC raising their prices sharply
how much oil did the FRG receive from OPEC during the 1973 crisis?
40% of its normal needs
what was the cost of 140 tonnes of oil in 1973?
DM 32.8 billion
what effect did the 1973 crisis have on the FRG?
caused an economic crisis with unemployment rising
what did the FRG government do to cushion the effect of the 1973 recession?
- a ban on recruiting guest workers
- guest worker contracts were not renewed
what government initiatives did the government introduce to help the economy recover after the 1973 crisis?
- car free Sundays
- speed limits on Autobahns
- promoting energy saving tactics at home and in industry
- investment in atomic energy
- higher income tax in 1975
why did the FRG keep prices of oil rise?
to push companies to spend more on newer fuels
what was unemployment level in 1981?
1.7 million
meant more money was spent on unemployment benefits
what did the 1981 government do to deal with high level of unemployment?
cut public spending which included benefits
made them VERY unpopular
what was Kohl’s economic policy?
- more cuts to social welfare
- cut public holidays
- encouraged early retirement by reducing the age to 58
- privatised many state run companies by selling shares
which state run companies were partially privatised?
Volkswagen and Lufthansa
did Kohl’s economic policy work?
it created some economic growth and unemployment decreased by 1989
why was Adenauer similar to Stresemann?
they both saw European integration as vital to restore Germany’s economy
