Division to unity: 22 economic developments 1949-1989

Question 1

why was an economic miracle considered during the first 35 years of West Germany’s existence?

Answer 1

• economy grew at rapid rates
• country re-established as as one of the world’s leading industrial nations
• GNP more than quadrupled over this period

Question 2

what happened to GDP annual growth each decade from 1950s?

Answer 2

1950s - 8.2% each year
1960s - 4.6% each year
1970s - 2.8% each year
1980s - 0.7% each year until 1984 where it grew to 2.6%

Question 3

what was Ludwig Erhard’s role from 1949-63?

Answer 3

minister of trade and commerce
(minister of economics)

Question 4

why was West Germany inheriting the Rhineland so positive? postWW2

Answer 4

West Germany inherited the industrially strong Rhineland area - helped make Germany the world’s second-largest economy in 1939 and provided a secure economic base to build upon - loss of older factories enabled new complexes could be built to incorporate new technology

Question 5

how did the Allied occupation provide a foundation for economic growth? postWW2

Answer 5

British and Americans were keen to listen to new economic ideas of German professors
e.g. wage controls removed, income tax reduced, major industries decentralised, credit schemes for small industries set up
currency reform and Marshall Plan funds ($1.5 billion over the 1948-52 period) helped FRG buy essential equipment and expand industry

Question 6

what were West Germany’s labour resources like? postWW2

Answer 6

plentiful
millions of refugees ‘escaping’ the Soviet Zone flooded into West Germany

Question 7

what helped German exports and general consumerism at home? postWW2

Answer 7

huge demands for consumer goods that had not been available during the war years and for rebuilding
Korean War outbreak in 1950 brought a sharp rise in demand for German exports
also began from low level of production meaning growth was bound to be strong

Question 8

why was it positive that West Germany had no colonies? postWW2

Answer 8

no colonies to sustain and did not have to lay aside large amounts of money for post-war rearmament (as happened elsewhere)

Question 9

what helped Germany gain maximum advantage from growing world trade? postWW2

Answer 9

Adenauer sought to cooperate with the French and was anxious to reintegrate the FRG into Europe
West Germany became a founding member of the European Coal and Steel Community and from 1957, the European Economic Community (EEC)

Question 10

as minister of economics under Adenauer what did Erhard advise?

Answer 10

advised occupying authorities and subsequently became minister of economics
strong supporter of the ‘free market’ and believed that provided the economy was guided in the right direction, market forces could be relied upon to bring about an economic transformation
his idea was ‘social market economy’

Question 11

what is a social market economy?

Answer 11

would compromise between a completely free and unregulated market and a state-controlled socialist economy
- private businesses were free to set their own prices and wages in response to market forces
- state would regulate to ensure fair competition and fair labour relations

Question 12

Measures implemented in Erhard’s social market economy in the 1950s - Investment Aid Law 1951

Answer 12

Investment Aid Law of December 1951 - gov subsidies to aid heavy manufacturing industry, which was picking up less quickly than consumer industries

Question 13

Measures implemented in Erhard’s social market economy in the 1950s - Co-determination Law 1951

Answer 13

Co-determination law 1951 - permitted workers in iron and steel a say management decisions - extended in the establishment of Works Councils for joint discussion between workers and employees in 1952

Question 14

Measures implemented in Erhard’s social market economy in the 1950s - trade agreements

Answer 14

series of trade agreements and the halving of West Germany’s protective tariffs through the 1950s
at least a half of overall growth in production between 1950-4 was generated by demand from abroad

Question 15

Measures implemented in Erhard’s social market economy in the 1950s - monopolies

Answer 15

laws to prevent establishment of monopolies and therefore encourage competition for example Adenauer’s 1957 Anti-Trust (or decartelisation) Law

Question 16

Measures implemented in Erhard’s social market economy in the 1950s - banking controls

Answer 16

banking controls to ensure Germany maintained a strong currency
imported raw materials were cheap and whilst export prices were high goods were sold on quality

Question 17

Measures implemented in Erhard’s social market economy in the 1950s - associations for both manufacturers and employees

Answer 17

enabled the development of a collective bargaining system within separate industries
more than 1000 German employer’s associations were affiliated with the Confederation of German Employers’ Association (BDA) whilst the German Confederation of Trade Unions (DGB) acted as an umbrella organisation.
helped foster the idea of a ‘social partnership’ between employers known as ‘co-determination’ - helped keep wage demands low and strikes down

Question 18

the social market economy was not a completely trustworthy system, nor was it universally applied - how did Erhard support it?

Answer 18

resorted to government-sponsored ‘work creation schemes’ in 1950 to reduce unemployment and agriculture remained heavily subsidised by the gov under Erhard’s ‘green plan’
some big conglomerates flourished despite the anti-monopoly legislation
after Erhard becomes chancellor the social market economy’s essential elements remained however it is modified, updated and questioned

Question 19

what happened to unemployment, consumer demand and exports in the 1950s?

Answer 19

unemployment fell to 0.5%
consumer demand grew boosting the internal market from 19% in 1950 to 24% in 1960
by 1960s Germany had the third largest economy in the world
well over half of exports came from mechanical engineering - old firms such as Krupp and Thyssen thrived - car industry did super well
Allies had regulations preventing Germany from exporting tanks, aeroplanes or submarines in the 1950s
trade boomed in supply of mechanical equipment such as machine tools, to the armaments manufacturers of the Allied countries

Question 20

what was Erhard’s slogan?

Answer 20

‘wohlstand fur alle’
wealth for all