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Germany And West Germany 1918 - 89 > Economic Development And Policies FRG > Flashcards

Economic Development And Policies FRG Flashcards

1
Q

What did the Allies agree on and what action did they take for this?

A
  • Rebuild GER economy –> reparations taken in equipment and machinery from each zone eg. FRA + USSR dismantled any remaining factories
  • Keep GER out of war –> War industries were banned
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2
Q

What problems did the economy have?

A
  • Reichsmark was almost worthless
  • Black market thrived (1kg of sugar could only be obtained here)
  • Hard to get workers
  • Transport and communication was difficult as it crossed the zones
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3
Q

How many left the country and how many arrived?

A
  • 160,000 German prisoners of war stayed in FRA after war rather than returning
  • 10 million Germans from Soviet army or expelled from Eastern Europe under reallocation of land or people agreed at Potsdam
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4
Q

What was the view towards these refugees and how were they dealt with by the Allies?

A
  • Adding to German’s troubles
  • Forced to introduce rationing
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5
Q

What was the name of the economic aid, and how much was given?

A
  • Marshall Aid
  • $1.4 mil
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6
Q

What new currency was created, when and how did it help the economy?

A
  • 21 Jun –> Deutschmark (DM)
  • Stabilised economy w/ greater production
  • Broke up black market
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7
Q

What did the creation of the new currency cause in Soviet zone?

A
  • Set up its own currency
  • By end of 1949 –> division into FRG and GDR
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8
Q

When was Erhard appointed and what were his beliefs about the economy?

A
  • Mar 1948
  • Believed in social market economy (free market w/ elements of social support for poorest)
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9
Q

What 2 reforms did Erhard bring about?

A
  • Abolish all but most essential rationing (granted by Economic council on 24 Jun)
  • Wages stayed fixed until Nov 1948
  • Equalisation of Burdens Act –> tax on all assets as compensation for those who had lost everything
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10
Q

What were the positive effects of these measures?

A
  • People stopped hoarding goods and sold them
  • Shopped w/ more careful concern for price
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11
Q

Give one stat to show the effectiveness of these measures:

A

Steel production doubled from 1950 to 1959

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12
Q

What problems did Erhard face w/ economy?

A
  • Businesses had to replace machinery and train workers
  • Some businesses closed down, others laid off workers as they could not afford to pay wages –> unemployment rose from 442,000 in Jun 1948 to 937,000 in Jan 1949
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13
Q

Who had Erhard faced opposition from for converting from command to social market economy and why?

A
  • Economic Council
  • Bundestag
  • Britain –> may lead to exploitation of workers by businesses
  • Industrialists –> wanted price fixing + cartels again
  • Socialists –> nationalisation of industry
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14
Q

What 5 policies were introduced as part of social market economy?

A
  • Businesses had tax concessions
  • Removal of wage restriction
  • Setting up TUs
  • All businesses had worker councils
  • 1951 –> Co-determination allowing workers to participate in management of business
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15
Q

What 3 key factors contributed to the economic miracle after 1955?

A
  • Korean War
  • New investment
  • Influx of refugees
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16
Q

How did the Korean War contribute to the economic miracle?

A
  • 1950 –> sparked need for war supplies, especially from FRG
  • 1955 –> FRG joined NATO, which allowed them to rearm and produce these materials
17
Q

How did new investment contribute to the economic miracle?

A
  • Investment increased due to recovery
  • Reputation of German goods increased, as prices were low + high-quality
  • Exports grew eg VW exporting 16000 cars a yr to UK
18
Q

How did the influx of refugees contribute to the economic miracle?

A
  • 3.6 mil more workers in 1950s came to FRG from GDR (many were skilled), keeping wages low + providing efficient workforce
  • Wanted to become part of West German consumer culture
  • Allowed gov to save money that could be spent elsewhere
19
Q

What were the possible problems of the economic miracle?

A
  • Free professional numbers reduced as Berlin Wall put up in 1961
  • Growth could not continue at the rapid rate it was forever
20
Q

What key problem occurred in 1966 that resulted in gov intervention, who urged this and how did they intervene?

A
  • Low growth
  • Karl Schiller (economics minister)
  • Increased gov spending on social welfare to DM115.9 mil by 1970 compared to DM46.7 mil in 1965
21
Q

What were the 3 crises that occurred between 1966 and 1989?

A
  • Recession of 1966-67
  • ## Oil crises of 1973 and 78
22
Q

Describe the problems of the recession of 1966-67:

A
  • Trade reduced
  • Unemployment increased
  • Guest worker numbers fell
  • Productivity fell
  • Excessive public spending
23
Q

How were the problems of recession of 1966-67 solved (3) and by who?

A
  • Karl Schiller
  • Increased gov planning, intervention and control
  • Reintroduced cartels to stop rising prices
  • 1967 Economic Stabilisation Law
  • 1968 –> Provision added to Basic Law allowing federal gov to move money around Länder
24
Q

What was the 1967 Economic Stabilisation Law?

A

Gov intervention in times of crisis to limit regional spending and introduce 5 Year Plan system for all gov spending

25
Q

What was the result of Schiller’s policies in the recession of 1966-67?

A
  • Failed
  • Replaced by Schmidt in 1972
26
Q

Describe the problems of the oil crisis of 1973 and 1978:

A
  • Relied heavily on oil eg 1972 –> DM10.8 bil on 140 mil tonnes
  • Oct 1973 –> 4th Arab Israeli War
  • OPEC, which FRG mainly got oil from, put up prices sharply in this yr and 1978
  • As a result, unemployment increased
27
Q

How were the problems of oil crisis of 1973 and 1978 solved?

A
  1. Oil consumption fell due to:
    - ‘Car-free Sundays’
    - Speed limits on autobahns
    - Did not subsidise oil
    - Investment in atomic power
    - Propaganda pushed energy saving tactics
  2. Public spending cuts
  3. 1975 –> Higher income tax
28
Q

What about the FRG economy also helped this?

A

Its export income

29
Q

What challenges were faced in 1980?

A
  • Wealth gap increased, which created friction between guest workers
  • Real growth shrank as prices increased
  • 1981 –> Unemployment hit 1.7 mil (highest since 1950)
  • Drove up unemployment benefit spending
30
Q

What did the government in 1981 do as a response?

A

Cut public spending, which was very unpopular

31
Q

What did the government in 1982 do as a response?

A
  • Cut spending even more fiercely to force people into finding work
  • Cut public holidays
  • Reduced retirement age to 58
  • Sold off shares in state-run institutions
32
Q

What was the effect of the response of 1982 gov?

A

Slight but growing improvement

33
Q

What were the Western zones of Germany included in?

A

Organisations trying to rebuild Europe like OEEC

Germany And West Germany 1918 - 89 (11 decks)

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