Economic change in Germany and West Germany 1871-1990

Question 1

What sort of industrial/infrastructural improvements took place in Bismarck’s Germany?

Answer 1

From 1845-1870, the German railway network grew 6 times from 3,280 km to 19,575 km

Electrical output increased by 18% every year from 1890-1913

World leader in electricity and chemical industries developed a reputation for technological excellence

Question 2

How did big business develop in Bismarck’s Germany?

Answer 2

Cartelisation meant that companies merged to reduce competition and allowed for more stable employment

German industry was concentrated into several massive cartels, such as Rhenish-Westphalian Coal Syndicate, the Steelworks Association, Thyssen AG and the largest company in Europe, Friedrich Krupp AG

In 1883, Deutsche Edison Gesellschaft, later known as the one and only AEG, one of the first major industrial companies focused on electricity

Question 3

How did trade improve under Bismarck’s Germany?

Answer 3

Chancellor Caprivi’s commercial treaties signed with numerous countries from 1890-4 lowered tariffs on imports of cattle, timber, rye, and wheat and guaranteed a market for German goods for 12 years

This helped Germany become the biggest industrial nation in Europe; exports increased by £365 million between 1872-1914 (only behind GB)

Question 4

How much did Bismarck’s Germany actually produce?

Answer 4

By 1914, Germany produced 2/3 of Europe’s steel, 1/2 its coal, and led the continent in chemicals, electrics, and cotton

Germany produced 20% more electricity than Britain, France, and Italy combined

The German Mark was almost as strong as the £ and was Britain’s biggest economic rival

Question 5

The Great War required the mobilisation of all German industry, but still Germany lacked key aspects such as cotton, rubber, petrol, copper, and tin. How did they try to deal with this?

Answer 5

The director of AEG, Walther Rathenau, established the War Raw Materials Department in 1914 which reorganised industry to ensure the country had enough materials to fight in the war, creating synthetic materials like nitrates

The Central Purchasing Company was created in 1916 to organise imports from neutral countries and to try some elements of trade during the war

The Supreme War Office was given substantial control over industry and labour

Question 6

What were some initial economic problems in Weimar Germany?

Answer 6

The new govt. inherited 140 billion marks of war debt, with the currency seriously devalued, foreign investment nonexistent, and hyperinflation

Germany also lost important regions of the Saarland due to the Treaty of Versailles and the imposing of reparations in 1921 which demanded DM2 million per year

Despite this, the devalued currency did increase exports dramatically after the war, and manufacturing expanded

Question 7

Weimar was suffering from hyperinflation, where in 1923 $1 = DM4.2 trillion. How did the situation improve?

Answer 7

The Dawes Plan with the USA in 1924 helped improve the situation considerably

In 1924, Under Chancellor Stresemann, a new currency was introduced with help from Schacht called the Rentenmark, which stabilised the economy

By 1927, industrial production had reached pre-WW1 levels and the GNP grew significantly from 1925-9

Question 8

The Wall Street Crash hit German Industry and the country suffered more than some neighbours, with high unemployment. How did the Nazis try and improve the situation?

Answer 8

By 1934, unemployment had halved due to actions of the Nazi government which focused on public work schemes, self-sufficiency and rearmament

By 1939, there was actually a labour shortage in German industry because the building and metal industries had expanded

Question 9

What were the prime economic focuses of the Nazi regime, and how did this create conflicts?

Answer 9

Work creation schemes like the RAD, and from 1936, the Four Year Plan focused on German industry and armaments production. By 1938, 44% of government expenditure was on rearmament

As a result, there was a huge shortage of consumer goods.

The chaotic nature of this meant that there was much infighting on how to manage the economy, especially between Hjalmar Schacht and Göring

Question 10

How did the economy of Nazi Germany change during WW2?

Answer 10

Occupied countries were used to further the economy with millions of slave labourers making munitions and farming

Albert Speer reorganised the Central Planning Board from 1942, recognising the infighting in the state

He introduced better techniques and reorganised industry such that industrial production actually peaked in 1944(!), despite the mass bombing and a decline in the number of victories

Question 11

At the end of the war, the new West German government had to rebuild, under the leadership of economics minister Ludwig Erhard. How much did German industry begin to redevelop with help from US Marshall Plan aid?

Answer 11

The Korean War 1950-3 boosted German industry because the US army required goods that Germany excelled in producing

West Germany’s GNP trebled during the 1950s as a result of the economy adapting to the changing environment in Western Europe - moving from heavy industry towards machinery, electronics, cars and services like banking

By the 1980s, there was a move to consulting, advertising, and research, all highly skilled and lucrative areas of new industries

Question 12

The Great Depression began in October 1929 and wiped out US loans in Europe, which was very bad for Weimar. What was the result?

Answer 12

40% of the workforce became unemployed due to the depression and in machine-building industries the figure was 48.9%. In Shipbuilding, it was 63.5%

Chancellor Brüning (1930-2) raised taxes and cut unemployment benefits in an attempt to solve the problems but this merely increased the suffering of Germany’s population

Question 13

How did the Nazis capitalise on the Great Depression?

Answer 13

The Nazi’s exploited the situation by opening soup kitchens and running charity fundraisers and by 1931, the Nazis were feeding 200 people a day in some areas

The Nazis worked with the Communists to call a vote of no confidence on Papen and he was removed with another election in November 1932. The Nazi vote declined but they were still the largest party in the Reichstag

Question 14

West Germany underwent impressive economic growth from the 1950s into the 1960s. How impressive, and why?

Answer 14

By 1963, West Germany was the strongest economic power in Europe and the third biggest economy in the world, facilitated by Germany having the second biggest economy prior to WW2

West Germany’s GDP grew by 12% in 5 years and this was helped by a cooperative union sector that restricted wage increases

Furthermore, West Germany was not burdened with reparation payments from WW2, and had 3.6 million young refugees from the East

Question 15

When did the economic miracle in West Germany end?

Answer 15

By 1958, the FRG was near full employment and the demand for labour meant it was difficult to restrict wage increases

There was a slowdown in the economy in the 1960s as the country changed from heavy industry to services, slowing down relative to France and Italy

By 1963, the economic miracle was effectively over

Question 16

How did German agriculture change in Bismarck’s Germany (ww1)?

Answer 16

The First World War caused significant shortages and the lack of men and horses damaged the farming sector; much of the agricultural work was take up by women and children

The damaging Turnip Winter of 1916-7 meant that food supplies were seriously short from 1917

Question 17

How did food prices change in Weimar Germany?

Answer 17

Overproduction of food meant that prices dropped during the 1920s, hitting farmers hard. By 1931, wheat prices had fallen to 1/3 of pre-1920s prices

In 1928, agricultural prices crashed with the price of wheat and rye dropping by 35%. The price of cattle declined too. As a result, from 1928-32, agricultural income dropped by 40% and the average income of farmers was 40% below average

Question 18

How were the farmers in Weimar Germany aided by both economic circumstances and government aid, and how was this limited still?

Answer 18

The hyperinflation actually benefitted agriculture because the worthless currency meant farmers could pay off their fixed-mortgages easily

Weimar taxes on agriculture were 4x that of Imperial Germany, but 1925 laws tried to subsidise agriculture. Still, rural debt and bankruptcy rose, increasing by 20-30% in the late 1920s

The Osthilfe Programme was supposed to help keep farms afloat, but this was too little too late. The Nazis became the party of agricultural protest in all of the early 1930s elections

Question 19

The decline of farming continued during the 1930s despite romanticised Nazi propaganda. How much worse did it get?

Answer 19

Industry required an ever increasing workforce and much of this came from workers leaving the land

Furthermore, investment in modern farming techniques lagged behind investment in industry and resultd in a decline in the living standards of farmers

From 1933-8, almost 1 million people left rural areas in order to look for work fin the cities, the highest rate of internal migration in Germany during the 20th Century

Question 20

How did the Nazis attempt to stave off the decline of agriculture in industry?

Answer 20

The drive for autarky did help farmers as food imports were restricted

In 1938, the Nazis gave greater subsidies to farmers but the decline continued as preparations for war quickened

Question 21

The decline in agriculture reached record levels in the 1960s, and West Germany had relatively few farms due to the nature of divisions between East and West. How did it try to compensate?

Answer 21

West Germany had to import lots of food for the population, but farmers maintained strong political influence and in 1955, the government introduced the Agriculture Act (or Green Law), which supported agricultural prices through protective tariffs on agricultural imports

This resulted in a 10% increase in domestic agriculture production as domestic consumption increased, but it failed to stem the overall decline in agriculture

Question 22

How did other industries take over from agriculture in West Germany?

Answer 22

Non-agricultural employment increased by 9 million from 1950-70 whilst agriculutural employment dropped by 1.6 million

Greater mechanisation led to a further decline in farm owrkers as machines took over the jobs. By 1989, the agricultural sector contributed 1.6% of GDP, a decline from 11% in 1956 and the number of farms dropped from 1.6 million in 1950 to just 630,000 in 1990

Question 23

The campaign for protective tariffs reached a peak in 1879, as a response to a slowdown in the German economy that had occured during the 1870s. Why else did the campaign increase?

Answer 23

In 1873, the German economy collpased and over 150 companies went bankrupt.

German agriculture, too, was facing difficulties and Russia and the USA were developing as major exporters of wheat. Following a series of poor harvests in Germany, the country began to rely on imported wheat from Russia

As a result, German wheat prices collapsed and smaller farms faced bankruptcy

Question 24

What tariffs were passed, or were attempted to be passed, by the Reichstag in Bismarck’s Germany to help “protect” German industry through tariffs?

Answer 24

In 1876, a bill to set tariffs on pig iron was defeated in the Reichstag but Bismarck was determined to pursue a policy on tariffs, against the predominant NLs

In 1879, the Reichstag passes the protective tariff law with two conservative parties and the Z party backing the bill

Question 25

What was the reaction of industry and Junkers to the new tariffs in Bismarck’s Germany?

Answer 25

Those in heavy industry were disappointed the tariffs on iron were lower than on agirculture but they were grateful for the support from the government

The industrialists therefore became more closely allied to the Junkers in what became know as the Marriage of Rye and Steel. This powerful bloc managed to prevent major change in Germany over the next 40 years (and contributed to the revolution in 1918 as a result!)

Question 26

The desire for a large navy, and the building of one, came from the whims of Kaiser Wilhelm II from 1898 onwards. How did he hope to achieve this?

Answer 26

In 1897, the Kaiser appointed Admiral Alfred von Tirpitz as secretary of state for the navy, who went on to establish the Navy League, a pressure group with the support of several industrialists

In 1898, Tirpitz introduced a bill to create 17 ships over 7 years, and it passed. The Kaiser was not content with just 17, so in 1900, another bill was sent to the Reichstag to increase construciton further, increasing contruction to 36 ships

Question 27

How large was Germany’s navy by the end of Kaiser Wilhelm II’s campagin for consutruction, and how did Britain react?

Answer 27

By 1914, Germany had doubled the size of its navy and had the second largest navy after Britain. However, this led Britain to seeing Germany as a threat.

In 1904, Britain signed the Entente Cordiale with France, and then the Triple Entente in 1907 which included Russia

Question 28

What was Kaiser Wilhelm II’s personal and domestic reason for supporting the building of a large navy?

Answer 28

For one, he wanted to transform Germany into a dominant world power, gain a foothold in Africa, and move it beyond the 7th most powerful in 1897

Internally, he wanted heavy invesment to appeal to Germany’s academic and middle classes who were keen to secure world power status due to the economic benefits, and to unite the middle classes and Junkers

He also sought to appeal to nationalists military fervour, indusitralists for the huge investment and money, and to unite the working class in construction. He wanted to unite his country through this navy

Question 29

In March 1933, Hjalmar Schacht was appointed as President of the Reichsbank and from August 1934 to November 1937, Schacht was also Reich Minister of Economics. What did he do?

Answer 29

Schacht overhauled the banking system to avoid another collpase in the future. He was Keynesian, and thus from 1933-5, RM5 billion was invested into public works, reducing unemployment from 2.7 million in 1934 to 1.7 million in 1935

Beforehand, Schacht was a well known economist who helped sovel the hyperinflation in Weimar in 1923

Question 30

What was Schacht’s MEFO bill programme?

Answer 30

Schacht introduced Mefo Bills, in which government contracts of large industries were not paid in RM but in credit notes to be paid in 4 years time, allowing the state to rearm without reducing the value of the currency and using cash

Mefo bills could also be spent domestically too. The Reichsbank issued RM12 billion worth of Mefo bills to German industry and they financed 50% of arms expenditure from 1934-6. As the economy recovered, the bills were used less and les because taxation and loans could be used to fund the war

Question 31

Germany had to import lots more raw materials, and coudln’t export enough to keep up due to Versailles. Furthermore, consumer goods couldn’t be imported. What was Hjalmer Schacht’s ‘New Plan’ to solve this?

Answer 31

The New Plan in 1934 regulated imports by signing a series of agreements with south-eastern European countries and Latin America; imports were to be paid in RM but the deals states that these marks had to be used to buy German goods or to invest in German industries

The New Plan ensured a steady supply of raw materials, and trade partners were happy as they had lacked markets for their raw materials

Question 32

Why did Schacht resign from his position?

Answer 32

From 1933-6, the primary aim of the German economy was to overcome the problems of the Great Depression and increase employment.

From 1936, the Nazis shifted the economy to rearmement and the drive to war. As a result, Schacht was side-lined and resigned in 1937. The economy came under the control of Göring in his role as Plenipotentary of the Four Year Plan

Schacht resigned because he believed the economy was focusing too much on rearmament and not enough on consumer goods

Question 33

Göring took over the economy from Shacht after he resigned. What did his Four Year Plan hope to accomplish in Germany?

Answer 33

As a result of Göring’s policies, rearmament was increased significantly. The plan invested heavily in ersatz (substitute) goods, such as rubber, petrol, and oil

The plan was successful in that it increased military capability, but not to the amount Hitler wanted. Synthetic fuel production increased 130%, but only met 18% of demand for fuel. Hitler wanted to maintain his parties popularity and not go into ‘total war’, predicted they would be ready by 1942.

Question 34

How sustainable was the Nazi economy?

Answer 34

By 1939, the economic policies had become unsustainable as consumer spending was restricted and increasing taxation, with some historians arguing there would be total collapse by 1940

The war saved the Nazis, making the burden bearable because resources and one could me claimed from the defeated nations, especially with the invasion of the USSR

Question 35

Economic administration in Nazi germany was split between numerous ministries. How was this control streamlined in 1940?

Answer 35

Fritz Todt was appointed Minister of Armaments and munitions to streamline the confusion, taking arms production from Göring’s Four Year Plan and industry was given greater independence. The army was prioritised over the navy and airforce

Todt would die in a plane crash on 7th February, 1942, and was replaced by Albert Speer, who reorganised the economiy further to improve production

Question 36

Albert Speer took over from Fritz Todt over control of the economy from 1942. How did he improve the Nazis situation, and what did Gobbels do too?

Answer 36

Speer took control of raw materials production to reduce wasteage, increaseing arms production per head, roughly 32% higher in 1942 than in 1939.

Goebbels was made Total War Plenipotentary in 1944 to focus the war effort, shutting down none-essential industries. His policies failed, with only 271,000 more women hired and war losses mounting

By the end of 1944, the German war economy was barely functioning, not helped by 20% of workers being foreign and not wanting to help the war efforts

Question 37

On the 5th June, 1947, secretary of state Goerge Marshall promised economic aid to Europe in what would be known as the Marshall Plan. How much did West Germany benefit of the $17 billion total that was given to Europe?

Answer 37

West Germany received $2.7 billion during the 1940s and 1950s to support and redevelop her economy, and according to a US report this aid was important as it ‘fired’ the economy

The Plan invested heavily in German industry under Ludwig Erhard, helping the economy grow significantly between 1952-69. The Marshall Plan also helped pay for 37% of West Germany’s imports

Question 38

What were some concerns over the Marshall Plan at the time and as of current?

Answer 38

The FRG had achieved 40% of its pre-war output by 1946 and appeared to be recovering well on its own. Furthermore, there was plenty of money available in the country for hiring workers and and investing before the money arrive in 1948

Despite this, the political impact was very significant with all the aid being coordinated by the OEEC, and creating greater cooperation in Western Europe, strengthening Liberal Democracy

Question 39

How did Adenauer first try and integrate West Germany with the rest of Western Europe?

Answer 39

April 1951, the formation of the European Coal & Steel Community (ECSC) which combined heavy industrial sectors in France, Germany, and elsewhere so these resources may be pooled. The ESCS was so successful that the nations agreed to economic union in June 1957

On 25th March, 1957, the Treaty of Rome established the EEC, creating a common market for the six founding nations.

Question 40

How powerful was West Germany in the EEC?

Answer 40

West Germany’s industrial products were in high demand and by 1981, 45% of German exports went to EEC members and 47% of imports came from the EEC too. By 1987, the FRG was the main economic power in the EEC

Question 41

What was the Common Agricultural Policy (CAP) in the EEC, introduced in 1962?

Answer 41

The CAP tried to reduce competition between nations as they subisidised agriculture to various degrees, altering prices. The CAP introduced more common prices in the EEC, with common prices on wheat, rice,fruit, sugar, etc from 1962-70

West Germany’s agricultural exports increased, such that between 1971-7, West Germany’s share of sugar exports in the EEC rose by 19%

Question 42

How expensive was the CAP for the EEC, and what was a huge negative?

Answer 42

The cAP rook up 70% of the EEC’s budget, and at times the FRG was spending 30% of its total expenditure on the CAP due to lobbying from agricultural pressure groups

Since farms were guaranteed a fixed price, they overproduced. This sometimes led to ‘mountain of grain’ or ‘olive-oil lakes’ simply b destroying unneeded produce. There was no compeition and no need to improve inefficient systems

Question 43

What was the end result of the CAP in the EEC?

Answer 43

EEC food prices, without USA imports, were 2-5x higher than prices on the world markets in the 1970s. By 1989, 2/3 of the value of the FRG’s agriculture came from subsidies and the CAP amounted to 50% of the EECs total budget

FRG farmers therefore benefitted hugely from the CAP despite a reduction in the agricultural sector overall