The FRG Economy Flashcards
What was the refugee crisis post war?
- 10M refugees were in Germany
- Initially were a major crisis to house them and feed them
- They were a long term asset for the work force
What were the main economic issues facing Germany post war?
- Currency was effectively useless and the wages of workers were therefore useless
- Transport links and communication was hampered and therefore stopping economic recovery
- Formation of a black market due to increasing prices, e.g sugar went from RM120 to RM180
What was the Marshall Plan and how much money was given through it?
- Economic funding from the US
- Gave 1.4 million dollars to the three Western Zones
When was the DM created and what did it cause?
- 20th June 1948 to the three western zones
- DM6.5 per RM100 and DM60 to each adult
- Split the FRG and GDR (GDR formed their own currency)
- Led to Berlin blockade
- Polarisation between the western zones and Soviet Zones
When was Ludwig Erhard promoted, and what was his primary belief in?
- March 1948, Director of economic administration
- 1949 to 1963 Economics Minister
- Social Market Economy = A ‘socially responsible’ free market economy
What were Ludwig Erhards first steps to recovery?
- Creation of the new currency DM
- 24th June 1948 abolished rationing appear from some essentials and abolished price controls
- Wages were fixed til November 1948 to allow businesses to establish themselves
Were Erhard’s early policies a success?
- Cakes, vegetables, butters and eggs available in shops and non-food items (FOCUS ON CONSUMER GOODS)
- Higher quality goods, people stopped hoarding and the black market broke down
- Car production up 4.5x from 1950-59
- Steel production doubled
Was 1948-49 a recession?
- At first wages didn’t rise as fast as prices and caused a payment deficit
- Unemployment as high as 13.5%
- Businesses could not pay wages
- Businesses had to lay off workers
- Worst was over by 1951
What was the Equalisations of Burden Act?
1952
- A military government tax to redistribute income to the poor
What was the rate of unemployment in Jan 1949?
937,000
What was the rate of unemployment in 1955?
1,000,000
- NOTE this is not as high as it seems, it was falling from higher and the economy was improving
Who opposed a social market economy?
- Bundestag, Economic Council and Britain were afraid it would lead to exploitation of workers
- Industrialists wanted pre-command economy with cartels and price fixing
- Socialists wanted more nationalisation and state control
- However the USA supported due to their similar ‘New Deal’
How did the Korean War help the economic miracle of 1955-66?
- 1950 war in Korea broke out and they needed supplies
- The FRG’s industrial, chemical, steel and electric good were in high demand
- 1955 joined NATO allowing rearmament and selling of weapons
How did Investment help the economic miracle of 1955-66?
- More efficient equipment and new factories were built
- Higher quality goods and lower prices allowed them to compete
- Exports grew stimulating more investment
- Manufacturers of consumer goods bought more raw materials
How did an influx of workers help the economic miracle of 1955-66?
- Lots of refugees meant lots of guest workers
- During the 1950’s 3.6 million workers moved from the GDR to the FRG
- GDR workers were highly educated and skilled, .e.g doctors, engineers etc
- These workers accepted low wages and wanted to integrate to West German culture quicker
- They were employed on short term contracts, allowing the gov to save and redistribute money to housing etc
