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
What were the main problems after the economic miracle?
- Once people bought something they did not buy again (good quality)
- Aug 1961 Berlin Wall stopped workers coming across
- Real Economic Growth slowed after 1966
- Lots of spending on social welfare
What was the increase in social welfare spending?
- 1965 = DM 46.7 million
- 1970 = DM 115.9 million
What were the features of the recession of 1966-67?
- Guest workers only had 1 year contracts
- 1966, 1.3 million | Sep 1967, 991,000
- Productivity fell
- Too much welfare spending
How did Karl Schiller attempt to battle the recession of 1966-67?
- 1967 Economic Stabilisation Law to allow for gov intervention
- A Five Year plan for gov spending
- Provision to Basic Law (1968) to move money between Länder
- Regarded as a failure, Helmut Schmidt replace him in 1972
What was the oil crisis of 1973 and 1978?
- October 1974 Fourth Arab-Israeli war broke out and OPEC pushed up oil prices
- 1973 140 million tonnes was DM 32.8 billion
- 1978 140 million tonnes was DM 49 billion
- Unemployment rose, baby boomers were entering the market and bans were placed on recruiting guest workers
What were the oil prices like before the crisis?
- FRG used lots of petrol therefore oil instead of coal
- 1972 140 million tonnes of oil cost DM 10.8 billion
How did the FRG battle the oil crisis?
- Propaganda, e.g ‘car free’ Sundays to save oil and invest in atomic power
- Speed limits on Autobahn
- Did not subsidise oil, allowed the price to rise and consumption to fall unlike USA
- Germans switched to new fuels and increased public spending
- Higher income tax was instated in 1975
What were the main challenges to the economy in the 1980’s?
- Large gap between the rich and the poor
- Hostility towards guest workers
- 1981 had 1.7 million unemployed
- Gov had cut spending on benefits and housing allowance causing great debate
What did Helmut Kohl do in 1982 and why?
- Cut spending as he believed it caused dependancy
- Cut social welfare, maternity benefits, public holidays and reduced retirement aged to 58
- Sold off shares in state run companies, e.g Volkswagen, to introduce partial privatisation
- 1989 unemployment was at its lowest and economic growth improved
What were living standards like in 1945?
- Families torn apart and homeless
- 1/5 of all housing bombed flat
- 1/3 of housing damaged in bombings
What did the gov do to help the living standards in 1945?
- Ministry of housing set up
- Rents were frozen and tax concessions granted
- Housing associations both social and private
How many people had a fridge (1963 and 1985)
- 1963 only 63%
- 1985 82%
How many people had a TV (1963 and 1985)
- 1963 only 42%
- 1985 82%
How many people had a washing machine (1963 and 1985)
- 1963 only 36%
- 1985 87%
What were the successes of the FRG economy near the end?
- Real wages had stayed ahead of prices
- Most people received a state pension
- 1980’s 90% of people received a state pension
- 1980 people lived on average 12 years longer than the 1950’s
What remained the biggest issue even at the end of the FRG?
- 1% of households owned 35% of wealth
- 1973 they owned 78%
- 1988 they owned 45%
Who was concerned with European integration as soon as the FRG was set up?
- Chancellor Adenauer was concerned to establish closer ties with Europe
- Much like Stressemann he saw it as vital for the success of Germany both economically and politically
What was the OEEC and what did it achieve?
Est April 16th 1948
- Organisation for European Economic Cooperation (OEEC) and it contained the western zones
- It was set up to manage European economic recovery
- Administered the Marshall Plan aid in Europe
What was the EPU?
Est in 1950
- European Payment Union (EPU) set up by the OEEC
- Manage economic co-operation across various national finances including the FRG
What was GATT?
Est in January 1948
- FRG joins General Agreement on Tariffs and Trades
- Established favourable trade agreements amongst its members
When did the FRG join the International Monetary Fund?
13th August 1952
- Oversees the stability of the world currencies
When does the FRG join the ECSC?
18th April 1951
- European Coal and Steel Community with France, Italy, Belgium, Netherlands and Luxembourg
- Sets up preferential trade links between these countries
When does the FRG join NATO?
- 9th May 1955
- An anti-communist alliance of Western Countries
When does the FRG sign the Treaty of Rome and what does this mean?
25th March 1957
- Becomes one of the founding members of the European Economic Committee (EEC)
What was Co-determination?
- Was established by laws passed in 1951 and 1952
- Was a call for industrial peace and led to a dramatic fall in the number of strikes and established industrial peace for 20 years
