Surviving economic challenges, 1966-89

Question 1

Karl Schiller

Answer 1

1966: government urged by new economics minister Karl Schiller to accept it had to intervene in economy
Bundestag managed money supply and new system of federal and regional budgeting
rising levels of government spending, especially on social welfare

Question 2

welfare

Answer 2

1965: government spent DM46.7M on welfare
1970: 115.9M
exports stayed healthy; Schmidt persuaded world leaders to not introduce protective tariffs to limit world trade during first oil crisis of 1973

Question 3

1966-67 recession

Answer 3

Trade reduced, unemployment increased
guest workers on one-year contracts with no social benefits
they were vital to economic growth and managing effects of economic crisis
1.3M at start of 1966, 991,000 in 1967
unemployment: 3.8%

Question 4

1966-67 productivity

Answer 4

productivity fell
government had been spending more on social welfare
Schiller reorganised government’s approach to economy, increased government planning, intervention and control (eg. subsidies for agriculture and coal, reintroduced cartels)
1967 Economic Stabilisation Law allowed government intervention in times of economic crisis and introduced a five year plan for all government spending
1968: provision added to Basic Law, using money from wealthy ones to provide more social welfare in struggling ones
Schiller’s economic policies regarded as failures; replaced by Helmut Schmidt

Question 5

the oil crises

Answer 5

60s and 70s: FRG came to rely on oil, not coal, as fuel, car ownership increased petrol consumption
oil-rich countries grew rich
1978: FRG spent DM 10.8B on 140M tonnes of oil
1973: oil crisis, Arab-Israeli war, oil prices increased
price of oil increased by 70%
switch to nuclear power
support from private sector (7.8B DM)

Question 6

baby boomers

Answer 6

unemployment rose
FRG’s baby boomers were hitting employment market
foreign guest workers’ contracts not renewed, ban on recruiting guest workers
government encouraged ‘car free Sundays’; oil consumption fell
government propaganda pushed energy-saving tactics
unlike countries like USA, government did not subsidise oil prices; encouraged cutbacks
government industry converted to new fuels quicker than other countries

Question 7

1980s

Answer 7

rich-poor gap widened
created hostility towards guest workers
1970s: healthy exports, even exported more to OPEC than it imported, was growing more than other countries
never matched economic heights of 1906s and real economic growth shrank as prices grew
1981: unemployment at 1.7M, highest since 1950
drove up spending on unemployed
1981 government cut spending on benefits and housing; unpopular as some wanted to return to social market economy
arguments in Bundestag: create more work by reducing work week or setting up job-share programmes for part-time work

Question 8

1982

Answer 8

1982 government determined to cut spending even more
welfare support increased dependency
this side was taken up by many countries in recession, including USA
Chancellor Kohl: productivity levels falling because of dependency and slack values of baby boomers; people needed to be more independent in order to find work
more cuts in social welfare, including maternity benefit, cut public holidays and reduced retirement age to 58
government sold off shares in state-run institutions (eg. Volkswagen); partially privatised
slight improvement
1989: unemployment at lowest, economic growth grew

Question 9

Stabilisation Law

Answer 9

1967
improve cooperation between govt and employees
concerted action
increase govt powers, alter taxes and raise loans

Question 10

The EEC

Answer 10

Treaty of Rome, 1957
promote European harmony and prosperity through creating common market
DM = key currency