FRG - Economy

Question 1

Key issues after WW2 (5)

Answer 1

By 1947, only 33% of 1938’s productivty had been reached
Currency had collasped
People had resorted to barter
Major displacement
Food was rationed <1,500 calories a day

Question 2

Impact of Marshall Aid (4)

Answer 2

In 1948, Trizonia recieved c. $1.4bn in aid.

Funded infrastructure reconstruction / industrial development

2 million still unemployed (1950)

Much of the Nazi infrastructure was still intact - potential for successful growth

Question 3

Currency Reform (3)

Answer 3

June 1948 - Introduced a new currency (Deutschmark)

Reduced money supply, ie. RM60 to DM40 exhchange rate.

The majority of the new currency wa given to banks to faciliatate credit creation / investment loans.

Question 4

Tax Reform + Impact (3)

Answer 4

In 1948, Tax rates fell from around 85% to 18%

Reduced Absenteeism
Higher productivity
1949-55 = Salaries rose 80%

Question 5

Ending Rationing / Price Controls + Impact (2)

Answer 5

June 1948 - Erhard announces the removal of price controls and the relaxation of rationing

Free-Market Forces
Removal of black markets

Question 6

Social Market Economy (Definition / characteristics -3)

Answer 6

A middle-ground between Free-Market and Command Economies

Businesses develop independently
Set their own wages / prices
State monitor the economy to protect consumer interest

Question 7

Overall impact of Reforms (3)

Answer 7

Industrial production 4x (1948-58)

Unemployment fell from 10.3% (1950) to 1.2 % (1960)

Growing confidence / investment

Question 8

Govt. Intervention led to the Economic Miracle (1955-66) (5)

Answer 8

Work Creation Schemes (1950)

Investment Aid Law (1952) = DM3.2bn to development

Joining the ECSC (1951) + EEC (1957) = Increased volume of free-trade.

Anti-Trust Law (1957) - Prevented Monopolies

Banking Controls - 1957 = Central Bank created, able to implement monetary policy / monitor money supply

Question 9

External Factors led to Economic Miracle (1955-66)

Answer 9

World economic recovery after WW2

Marshall Plan (1948) - $1.4bn

Korean War (1950-53) - War demand, eg. German vehicles

Emigrants - By 1960, Germany was at full employment, East Germans were able to get jobs in FRG.

Question 10

German Factors led to Economic Miracle (1955-66) (4)

Answer 10

Limited defence spending
Strong Export industries - eg. cars / machinery = High quality (eg. BMW / Krupp)
Economic foundations - Seaports, Natural resources, skilled workers + modern factories
Co-determination between employers + employees

Question 11

Evidence of Economic Miracle (1955-60)(4)

Answer 11

3.0bn deficit (1950 BoP) to 5.2bn surplus (1960 BoP)
Full employment - 1960
Unemployment - 10.3% (1950) to 1.2% (1960)
25% Growth rate in 1950

Question 12

Key Challenges (1960 - 89)

Answer 12

Recession (1965-69)
Collaspe of Erhard (1966)
Oil Crisis (1973)

Question 13

1965-69 Recession (problem / solution)

Answer 13

Problem -
Excessive Govt. spending had led to inflation

Solution -
Erhard resigned 1966 - unable to cut spending
Stabilisation Law (1967) = Co-operation during hardships
A109 adjusted - Greater Govt. control of tax
Supply-side policy = Education / Infrastructure

Question 14

1965-69 Recession (Outcome)

Answer 14

Unemployment Falling
6% growth - 1968
Inflation fallen to 1.5% (1969)

Question 15

Brandt’s Social Reform

Answer 15

Education - 300% increase budget, leaving age = 16
Pensions - War widow pensions increased by 16%
Health - Preventative examination, sick child grants
Housing - Budget increased 36%

Question 16

1973 Oil Crisis (Problem + Solution)

Answer 16

Problem -
OPEC were mad at the USA, increased the price of their oil exports to all NATO, FRG’s import costs from by DM17bn

Unemployment 1.2% (1973) to 4.7% (1975)

Solution -
Car-free sundays
Temporary Ban on Guest Workers
Use of nuclear energy
European Monetary System begins to develop
DM7-8bn for private investment
Merger Laws relaxed - EoS benefits

Question 17

Key features of Kohl’s Economic Policy

Answer 17

Reduced public spending / tax cuts
Budget increases limited to 3%
Farming / Steel industry subsidised
Exports rose
BoP = + 135bn (1989)

Question 18

European Coal + Steel Community (ECSC)

Answer 18

1951 - Treaty of Paris

Free trade of coal + steel between France, FRG, Belgium, Luxembourg and Netherlands.

Question 19

European Economic Community (EEC)

Answer 19

1957 - Treaty of Rome

Suceeded the ECSC in creating a free trade area (FTA), dominated by France + FRG, now including Italy

Question 20

European Monetary System (EMS)

Answer 20

1978

The EEC nations adopted the DM, creating controlled exchange + interest rates, DM replaced the US Dollar as the crucial European currency

Question 21

Living Standards - Housing

Answer 21

Brandt increase social housing budget by 36%
Living space per person increase (1950-80)
Most citizens rented / ownership only 37.8% (1987)

Question 22

Costs of Living

Answer 22

Cheaper living costs than the UK
Coffee beans were 4x more expensive in the GDR

Question 23

Disposable Incomes

Answer 23

Car ownership - 2 million (1950) to 12.1 million (1965)
Average Disposable Income = DM904 (1964)
95% ownership of modern appliances (eg. fridge)