Germany Booklet 9- FRG economy Flashcards
German Economy after 1949- marshall aid
IN 1948
Marshall Aid gave Germany $1.4 billion from the US
Currency reforms
Erhard was director of economics in 1948 until 1963.
New currency introduced called the Deutschmark- 1948
RM60=DM40 but the exchange between the two currencies were bad
RM400 billion worth of debt wiped out- amazing for the people
End to rationing and price controls
1948- abolished price controls and relaxed rationing
Prices increased but new DM meant people could afford it
=stimulated economy and ended the black market
Tax Reforms
Over DM 250 000 was taxed up to 95%
1950- avg income of DM 2400 tax fell by 18%
Meaning people had more money to spend= stimulated economy
Capitalist market with socialist elements
Co-determination- improved relations between employer and employee=less strikes and more produced
FRG had efficient work force.
Social Market Economy
By Eucken
It was a middle way between a completely free and resulted market and a state controlled socialist economy
Allowed more companies to develp and find their own prices whilst still have some state controlled aspects
Govt control could break up monopolies and provdie social welfare.
The economic miracle 1955-1966
Govt intervention
Work creation schemes helped reduce unemployment
Investment Aid Law 1952- provided DM 3.2 billion to industrial dev
Joining EEC- reduced Germany’s tariffs
Anti-Trust Law 1957 prevented and dismantled cartels
Banking controls- =strong currency, Deutche Bundesbank had authority over omnetary policy. Was one bank system
The economic miracle 1955-1966
External Factors
Marshall Plan of $1.5 billion in aid from the us
Korean War 1950-53= increased demand for German goods
Emigrants- 4.2% unemployed in 1955 but by 1960 they had full employment. = thriving economy
The economic miracle 1955-1966
Factors unique to Germany
Limited defence spending- due to restircitons FRG could not spend more on defence
Exports- German goods seen to be of good quality= high demand for machinery, cars goods etc
Economic foundations- had natural resources and good sea ports. Newer factories from WW2
Co-determination- better relations between employer and employee
ECSC
Adenauer European Coal and Steel Community Designed by Schumann Was a free market in coal and steel= greater economic integration and helped Europe recover Friendship between FRG and France x10 coal grade 112500 apartments for workers
EEC
European Economic Community
A free trade zone with similar economic policies
Dominated by FRG and France
Late 1980s FRG balance of payments surplus of DM100 billion
FRG within the EEC
FRG becomes leader of EEC
FRG paid most of EEC budget, 25% int total
DM56.7 million to toher EEC states
Integration into European Economy
Employment
Pay rise increased by 6%
Number of employees in public sector increased by 250%
Integration into European Economy
Housing
Homes got larger, 0.9 rooms per person
30m2 per person compared to 19m2 in 1950
But older homes lacked inside toilets and showers (18%)
Low home ownership of only 37.8%
Integration into European Economy
Working conditions
Strikes over hours and unofficial disputes in early 1970s
Labour output declined to 2.5 labour production level
