FRG ECONOMY Flashcards
What type of economy was the FRG?
A Social Market economy
Who was appointed to administer Economic development?
Ludwig Erhard was appointed director of economic administration under Allied rule in March 1948. He was then economics minister under the FRG between 1949 and 1963.
How did the Allies try to prevent Germany from starting another War?
War-related industries were banned or their outputs were restricted, eg munitions and chemicals industries respectively
How did the French and Soviets hold back the FRG’s economic recovery 1945-9?
They took reparations in equipment and machinery from each zone of occupation- The French and Soviets dismantled remaining factories for reparations undermining any chance at economic recovery
What was the Reichsmark like 1945-9?
Virtually worthless
What was each allied zone of Germany ran by?
a military high command; each governed very differently
How many German prisoners of war chose to remain in France?
160,000
How much aid did the FRG receive under Marshall plan from 1948-52?
$1.4 billion
What evidence is there that the Black market thrived in post war Germany?
1kg of sugar in 1947 had its price fixed at 1RM, buy it could only be obtained on the black market where it cost 120-180RM
What was the new currency implemented? When?
The Deutschmark was created to administer economic aid; it was announced in June 1948
What was the effect of creating the DM?
-It helped to stabilise the economy and break up the black market
-It also meant that real wages were worth something and boosted the economy by encouraging consumerism
Other than the created of the DM, what else occurred in June 1948? What was the effect of this?
All but the most essential rationing (milk powder and bread) , and price controls were abolished.
This along with the new currency saw the rise of consumer goods available in shops. People stopped hoarding goods and began selling them + People’s confidence in the economy rose and they became more concerned with the price and quality of goods, hence increasing competition in the market
What was passed in 1952? What did it do?
The equalisation of Burdens act- this enforced a tax on peoples assets
What evidence of improvement is there in the economy from 1950 to 1959?
-car production was 4x greater
-steel production doubled
What was unemployment at in 1955?
1 million, and continued to fall
Who opposed Erhard’s initial reforms? Why?
-Britain, labour union leaders, and members of the Bundestag were concerned with E’s policy of converting a command economy into a social market economy; they feared it would lead to the exploitation of workers by business workers (USA supported E’s vision)
-Industrialists called for a return to the pre-command economy with cartels and price fixing. Instead, E wanted to encourage competition between industries, the cartels broken up and price fixing abandoned
-Socialists opposed the abandonment of price fixing. They wanted to nationalise industries and use state control, instead of allowing a capitalist market to set its own levels
What did exports increase from following E’s initial policies?
1950- 8,383 million marks
1970-125,300 million marks
What did unemployment fall to following E’s initial policies
1950-8.1% unemployed
1965-0.5% unemployed
What did Volkswagen sales average in the 1960’s?
400,000 a year
What did cumulative aid from Marshall plan and other aid programmes total?
$2 billion through October 1954
How did Marshall aid help the economic miracle?
It provided a stimulus to the German economy and an important boost in morale to the emerging state.
What fact elucidates limitations to the Marshall plan in causing the economic miracle?
Even in 1948 and 1949, when aid was at its peak, Marshall plan aid was less than 5% of West German national income
When was the economic miracle?
1948-60
When was the Korean War?
1950-53
How did the Korean War precipitate economic growth?
Although the FRG was banned from producing war supplies for the Korean War, the FRG’s industrial goods (eg chemicals, steels, electrical goods) were in higher demand
When was the FRG allowed to re-arm?
When it joined NATO in 1955; it was permitted to start producing war materials
Why was there new investment in the FRG in the 1950’s?
-Many businesses had recovered by the mid-1950’s and were able to invest in new, more efficient equipment and factories
-They produced high-quality goods which were sold at low prices. The reputation of German goods improved and exports grew, which led to greater investment, the need for more workers and a higher demand for raw materials
How many cars was the FRG exporting to the UK in the 1960’s?
16,000 cars per year
How many workers came to the FRG from the GDR? How did this help economically?
During the 1950’s approximately 2.6 million workers came to the FRG from the GDR; many were skilled and highly educated. The gov thus were able to save money on education and training costs, and could use it elsewhere
What was there an influx of after the war?
Refugees
How did the influx of refugees constitute economic prosperity?
Influx of refugees meant that there was a large pool of workers for businesses to draw on. This provided an efficient workforce.
How much did social welfare spending increase by?
46.7 million DM in 1965
115.9 million DM in 1970
What happened to economic growth after 1966?
Economic growth slowed- The FRG government accepted the need to intervene in the economy with the Bundesbank managing the country’s money supply and a new system of federal and regional budgeting
What happened during the recession 1966-67?
-Trade reduced and unemployment increased
-Number of GW’s decreased from 1.3 million at the start of 1966 to 991,000 by the end of 1967
-industrial productivity fell
-Due to social welfare policies, public spending spiralled out of control
How did Karl Schiller respond to the recession?
-Government planning, intervention & control was increased (eg coal and agricultural industries received subsidies)
-Cartels introduced to stop prices rising
-1967 Economic stabilisation law
-1968 provision added to basic law
What was the 1967 Economic stabilisation law?
It allowed gov intervention in time of economic crisis to limit regional spending and introduced 5 year plan system for all spending
what was the 1968 provision added to basic law?
Increased gov control over the budgets of the lander; struggling regional governments would be provided with more welfare
What triggered the oil crises of 1973 and 1978?
The Fourth Arab-Israeli war broke out in October 1973 and OPEC put oil prices up drastically
How much did oil prices increase by following the breakout of the fourth Arab Israeli war?
1972- 140 million tonnes of oil cost 10.8 billion DM
1973- 140 million tonnes of oil cost 32.8 billion DM
1978- 140 million tonnes of oil cost 49 billion DM
Were Germanys exports affected by economic crises in the 1960’s and 70’s?
Not to a significant extent- export figures stayed healthy thanks to a continued demand for German products abroad
What measures were introduces to reduce oil spending in Germany?
-Car free Sunday’s
-propaganda messages encouraging people to use energy saving tactics at home
-rising investment in atomic power
-KEY; the gov didn’t subsidise oil prices, instead allowing them to rise and fall
What economic policy in 1975 was an attempt to overcome economic crises?
-Public spending was cut
-income tax was raised
How was unemployment controlled in the 1970’s?
1973- put a temporary ban on hiring GW’s and banned permits for families of workers already in the country
What happened to the economy in the 1980’s?
-growth in the economy shrank and prices began to rise with inflation
-Unemployment hit 1.7 million (highest since 1950); initially this drove up amount of public spending on unemployment benefits
What did the 1981 government under Chancellor Schmidt do?
cut public spending (including benefits and housing allowance); people began to call for a return to a social Market economy with an increased focus on providing welfare
What economic policy occurred under Kohls government?
- determined to boost the economy by cutting public spending more fiercely; further cuts to public spending
including maternity benefits & public holidays
-Retirement age reduced to 58, urging people to take early retirement to increase employment opportunities
-Sold shares in state-run industries such as VW and Lufthansa
Were the economic policies of the 1980’s a success?
Yes, by 1989 unemployment was at its lowest and economic growth had risen
When did the FRG join The IMF?
1952; The IMF oversaw the stability of international currencies
How did joining the EEC improve German exports?
1958-69 FRG exports and imports to and from other EEC countries doubled
What was the impact of WW2 on living standards?
-1/5 of all housing destroyed
-1/3 of housing that stood was damaged
-influx of refugees led to greater pressure on availability of housing
How did the FRG Gov raise living standards?
-rents were frozen
-ministry of housing established to oversee building
-Building industry given tax concessions to encourage building
-Housing associations were set up to build homes (both state-ran and private)
Describe homes in 1963
-63% had a fridge
-42% had a TV
indicative of rising living standards and consumerism
How many homes were built?
1949; 222,000
1971; 553,000
What evidence is there of social inequality deepening?
in the 1960’s 1% of households owned 35% of wealth in the FRG
