FRG: Economy Flashcards
When the war finished, and the allies had to rebuild Germany’s economy. What did they do?
- agreed it was important that Germany didn’t start another war. So industries considered to be war. Industries like munitions were banned and chemical industries restricted.
- Reparations taken in equipment and machinery
- And dismantled many remaining factories for reparations, undermining chance of economic recovery
What was the influx of refugees?
Economic devastation meant some Germans decided to never return with many staying in France after being prisoners of war
But this was for exceed by the influx over around 10 million Germans, who came as refugees. These refugees were eventually one of the countries biggest assets..
E.g. some worked on the farms as part of the rebuilding of German agriculture
How did the Marshall plan help the western zone of Germany’s economy? How did this make separation between the Soviets more likely?
Around $13.6 billion under Marshall aid was given to the western zones. This set off the creation of the Deutschmark to administer the aid. Currency help to stabilise economy and break up black markets as currency was backed by West.
But let Soviet setting up own currency, as it was not included in the DM, and made separation more likely
How did the currency reform help the economy?
Finally made peoples wages worth something so they worked and saved and spent allowing for higher levels of factory production, especially consumer goods. (Some initial problems due to money being limited)
Who was Ludwig erhard
Appointed director of economic administration in March 1948. Believe in the idea of social market economy.
On the 24th of June, what did the economic council give Erhard? How did this help the economy?
- gave him power to abolish, almost all essential rationing, e.g. bread and milk powder and all price controls.
- Wages were fixed until November 1948, to allow businesses to establish themselves
- New currency, and these Measure, things like cakes and vegetables were in sale in the shops and people stopped hoarding goods and began selling
- People also felt more confident as supplies would be less erratic
What was the equalisation of burdens act and why had it come about?
Pass by the Bundestag in 1952, It raised money and redistributed it to help people start again.
The military government wanted tax on all assets, so the money could be used to compensate those who had lost everything so the act was eventually put in place
Who criticised/supported Erhard policy of converting from a command to social market economy
Opposed:
- Britain, as they supported concerned, labour union leaders who feared social market economy would lead to worker exploitation
-Industrialist wanted the pre-command economy, where cartels and price fixing was present.
Support:
- USA had fairly positive experience of social market economy under the New Deal, so supported him
Despite opposition to his policies, how had Erhard still managed to gain control in the Bundestag
Combination of a capitalist market and responsible government provided a social safety net for the poorest, which one him enough supporters to continue his policies. E.g. allowing business tax concessions and removing wage restrictions.
What four factors contributed to the economic miracle between 1955 to 1966
- The Korean War
- New investment
- Workers
- GDR workers
How did the Korean War contribute to the economic miracle?
The war in Korea sparked a new need for war supplies, which the FRG was banned from making. But they could still produce goods like chemicals, steel and electrical goods which were in greater demand, in countries, where war economy was the main aim like America.
West Germany join NATO in 1955, and more than allowed to rearm and start producing war materials, mainly as a result of the Korean war
How did the new investment contribute to the economic miracle?
As many businesses recovered sufficiently by mid 1950s, they could reinvest into more efficient, equipment, factories, etc. Focused on producing better quality goods and the reputation of German goods improved.
Import, screw and so businesses could invest more and more and buy more raw materials
How did the guest workers contribute to the economic miracle?
Large influx of refugees after the war = large pool of ‘ guestworkers’.
Need to training, but once a problem was solved, they provided an efficient workforce (and low wages)
How did the new GDR workers contribute to the economic miracle?
During the 50s, around 3.6 million workers came from the GDR, many of whom were young and skilled who all wanted work.
Many became part of West German consumer culture. How can the economy twice over.
Most employed on short term fix contracts
What was some possible problems in the 1950s and 60s, which could stop economic growth
Growth couldn’t keep at the rapid rate of the 50s and early 60s.
Once everyone bought, they can see a good for the first time demand found lower as people replaced them at different times.
The Berlin Wall was put up in August 1961, cutting off GDR workers from crossing into the FDR , and reducing the number of ‘free’ professionals that helped expand the economy
