What were the building blocks for making the FRG an ‘economic giant’? Flashcards
How did currency reforms help make the FRG an ‘economic giant’?
-in 1957 it was reconstructed and officially became the federal bank (the Bundesbank)->operated independently from the government->it watched over the stability of the currency by controlling the money circulation and the interest rates in order to prevent an overheating of the market and rising inflation
How did population increase help make the FRG an ‘economic giant’?
-population increase from refugees was seen as an imposing problem but as industry began to grow again they became an advantage
How did refugees help make the FRG an ‘economic giant’?
-Provided continuous supply (Magnet Effect) of qualified workers who were easily satisfied with moderate wages
How did industrial peace help make the FRG an ‘economic giant’?
-the government was keep to establish more peaceful industrial relations by creating a sense of responsibility and ownership of the trade unions
-the idea of co-determination between employers and employees was shaped by 2 crucial laws: the Co-determination Law of 1951 and the Works’ Constitution Law of 1952->number of strikes in West Germany fell dramatically and the country enjoyed real industrial peace for 20 years->both sides reaped the benefits
How did financial stability help make the FRG an ‘economic giant’?
-West German banking came to be seen as a symbol of financial correctness
-Bank Deutscher Lӓnder was created by Western powers in 1948 to establish the Deutsche Mark
-in 1957 it was reconstructed and officially became the federal bank (the Bundesbank)->operated independently from the government->it watched over the stability of the currency by controlling the money circulation and the interest rates in order to prevent an overheating of the market and rising inflation
How did resources help make the FRG an ‘economic giant’?
-as resources improved and more people bought them Germany’s economy grew
How did the Marshall Plan help make the FRG an ‘economic giant’?
-the aid from the Marshall Plan was only meant to last 3 years but superseded by the OEEC->helped to open up the European markets and speed up the reintegration of German trade into the world markets and speed up the reintegration of German trade into the world market
How did world trade help make the FRG an ‘economic giant’?
-since 1914 world trade had been seriously hampered by the effects of both world wars and the economic depression
-after 1945 the USA used its influence to reduce tariffs globally
-Korean war led to a real growth in world trade (early 1950s)
-the aid from the Marshall Plan was only meant to last 3 years but superseded by the OEEC->helped to open up the European markets and speed up the reintegration of German trade into the world markets and speed up the reintegration of German trade into the world market
How did consumption demand help make the FRG an ‘economic giant’?
-demand expanded enormously and housing was the motor of economic recovery
-incentives like special subsidised saving programmes to buy your own property pushed up private demand for consumer goods (eg cars, tvs etc) served as evidence of increasing prosperity
How did government expenditure help make the FRG an ‘economic giant’?
-the 1952 FRG signed an agreement in London to pay debts from the Marshall Plan credits and the Dawes Plan->it didn’t have to pay reparations and it’s defence costs were at first limited
-was only allowed to form an army in 1955 when the FRG became a member of NATO->it’s government expenditure was more limited than other countries
-Erhard was able to be more generous with social spending which enhanced the stability of the young democracy in comparison to the Weimar
How did Erhard overcome post-war inflation and the Black Market?
-ending state regulation which led to an increase in production and he abolished price controls and increases consumption->prices went down and production went up
-currency reform
