Surviving economic challenges 1966-89

Question 1

What did the government do in 1966?

Answer 1

Urged by the economics minister Karl Schiller began to accept that it had to intervene in the economy, with the Bundesbank managing the money supply and a new system of federal and regional budgeting.

Question 2

What were some other problems that were running along with the crises between 1966-89?

Answer 2

• Rising levels of government spending especially on social welfare.

Question 3

Give a statistic about rising levels of government spending?

Answer 3

In 1965 government spent DM46.7 million on social welfare but by 1970 this was DM115.9 million. This happened despite various cuts to benefits.

Question 4

What things helped Germany weather economic crises’ between 1966-89?

Answer 4

Germany’s export figures stayed healthy thanks to demand and the fact that Chancellor Schmidt worked hard to persuade other world leaders not to introduce protective tariffs to limit world trade during the first oil crisis of 1973.

Question 5

What happened between 1966-67?

Answer 5

Recession which hit Germany hard

Question 6

What was a consequence of the recession?

Answer 6

Trade - domestic and international reduced and unemployment increased.

Question 7

What did the recession do to guest workers?

Answer 7

• Many were on 1-year renewable contracts without social benefits. Guest workers had been vital to economic growth and vital to managing the effects of an economic crisis.
• At the start of 1966 there were 1.3 million but by September 1967 there were 991k. Productivity began to fall.

Question 8

Why was social welfare a problem?

Answer 8

• Government had been spending more and more : public spending was spiralling out of control.

Question 9

What did Schiller the economics minister do to help combat this?

Answer 9

• Reorganised government’s approach to the economy
• Increased government planning, intervention, and control for eg subsidies for agriculture and the coal industry.
• Reintroduced cartels to stop prices rising.

Question 10

What was the 1967 Economic Stabilisation law?

Answer 10

• Allowed for government intervention in times of crisis to limit regional spending and introduced a 5-year plan system for all government sending.
• In 1968 a provision was added to the basic law that said the federal government could move money around between Lander using money from the wealthy ones to provide more social welfare to the struggling ones.

Question 11

Was Schiller’s economic policies a success or failure?

Answer 11

Failure and he was replaced with Helmut Schmidt in 1972 just in time for the next crisis?

Question 12

What major crises occured in 1973 and 78?

Answer 12

Oil crisis

Question 13

Why did the oil crisis affect Germany?

Answer 13

During 1960s and 70s FRG came to rely on oil rather than coal as a fuel and car ownership pushed up petrol consumption.

Oil rich countries of the Middle East grew rich on oil sales but they had so much oil they sold it an affordable price.

In 1972 the FRG spent DM10.8 billion on 140 mill tonnes of oil.

Question 14

What happened during the oil crisis?

Answer 14

October 1973 - fourth Arab-Israeli war broke out and OPEC put up prices sharply in 1973 and again in 1978.

The FRG got 40% of its fuel needs through OPEC: 140 million tonnes of oil cost DM32.8 billion in 1973 and DM 1949 billion in 1978.

Question 15

What were the consequences of the oil crisis?

Answer 15

Unemployment rose sharply again made worse by the fact that the FRG’s baby boomers were just hitting the employment market.

Question 16

How did the oil crisis affect guest workers?

Answer 16

Again foreign guest workers found out that their contracts were not renewd and a ban was placed on recruiting guest workers. As before this helped to prevent the crisis from becoming worse.

Question 17

What helped the FRG combat the oil crisis better than other countries?

Answer 17

Its export income helped the economy recover rapidly.

Oil consumption dropped partly because of government measures such as encouraging “car-free Sundays” and introducing speed limits on the autobahns to save fuel.

Question 18

What else did the government to do help combat the oil crisis?

Answer 18

Government propaganda pushed energy-saving tactics in homes and the government also began to invest seriously in atomic power to reduce dependence on oil,

The biggest push for the cut in consumption was the government unlike other governments eg the USA didn’t subsidize oil prices but just let them rise in line with their actual cost. This made it expensive and encouraged cutbacks. German industries converted new fuels much more rapidly than any other country. The government also brought in public spending cuts and higher income tax in 1975.

Question 19

What were the challnges in the 1980s?

Answer 19

Gap between richest and poorest widened. Created friction for eg hostility towards guest workers.

Question 20

What was Germany’s economic situation like?

Answer 20

• Ridden out the crises of the 1970s much better than some countries , largely due to its healthy exports. In 1978 Germany even exported more to OPEC countries than it imported.
• Even though much of the rest of the world was in recession, Germany’s total exports continued to rise and stayed consistently ahead of imports.

Question 21

Why were there still however problems with Germany’s economy?

Answer 21

• Never regained the economic heights of the 1960s and real growth in the economy shrank as prices that Germany had kept under control began to rise with inflation.
• Unemployment hit 1.7 mill in 1981, the highest since 1950. This drove up the amount of spending on unemployment benefits and assistance for the long-term unemployed.

Question 22

How did the German people react to this?

Answer 22

The 1981 government cut public spending including benefits and housing allowance, and was deeply unpopular especiallay with those who felt Germany should return to a social market economy.

There were arguments in the Bundestag about whether to create more work by reducing the working week or setting up job sharing programmes to get the unemployed back into at least part time work.