FRG Economy Flashcards
(37 cards)
What kind of industries were banned when allies took control of Germany?
Munitions were banned, and other war related industries like chemical manufacturing.
Which countries wanted to undermine economic recovery
USSR and France, who dismantled the remaining factories for reparations in chance of undermining any chance of an economic recovery
What was the reichsmaek worth?
Nothing - this damaged the economy as the back market thrived
Due to economic problems did people leave or stay?
160 000 prisoners of war stayed in France rather than return, but there was an influx of around 10 million refugees into Germany, after they were expelled from east Europe or deserted the soviet army, however they were to become essential in transforming Germans economy
What did Marshall aid do to help west Germany?
1.4 million dollars was given to the western zones, which set off the creation of the Deutschmark to administer the aid. It helped stabilise the economy and break up the black markets as currency was backed by western powers
What were the main economic policies of erhard?
Was director of the economic administration in march 1948 and worked to create a social market, or free market economy. He worked to create one from 1949 - 1963. On June 1948 he announced the replacement of the RM with the DM. On 24th of June he also abolished all, but the most essential rationing: such as bread, milk powder and price control
When did wages stay fixed until?
November 1948 - to allow businesses to establish themselves
What did the combination of a new currency and all the other things of erhard mean?
Stuff like cakes, vegetables, butter and eggs were for sale In shops as well as non food items like stoves and stuff. People stopped hoarding and started selling. Additionally rather than buying anything that became available, people shopped with more care as they were confident that supplies would be less erratic
Did erhards reforms bring immediate economic recovery?
No - economic recovery was not immediate. Factories and businesses could produce and trade again, but machinery had to be replaced and train workers. Unemployment rose from 400 000 in June 1948 to 900 000 in January 1949. And by 1950 it was as high as 1.8m. However after it started to decline and production of some industries increased. For example in 1959, car production was 4.5x greater than 1950. In the same time span, steel production doubled.
What did erhard receive opposition for and by whom?
Economic council and then Bundestag criticised him for his policy of converting command economy to free market economy. Britain also opposed the idea who feared that it would lead to exploitation of workers by business owners, however USA supported him
What economy did people want
The pre command economy which featured cartels and price fixing. However erhard wanted cartels broken up and price fixing abolished to allow competition within industries. Socialists opposed this, not because of price fixing, but the fact that they wanted nationalisation of industry not industries to set their own prices
With support from the Bundestag erhard could continue his policies:
Allowing business tax concessions, removed wage restrictions, encouraged the setting up of trade unions to ensure that workers had adequate representation in wage negotiation. 1951 there was a policy of co determination which allowed workers’ representatives on managerial boards in industry
When was the economic boom/miracle
1955 - 1966
How did the Korean War contribute to economic miracle?
1950 - war in Korea sparked a need for war supplies. FRG was banned from producing these, but it’s industrial goods, chemicals, steel and electrical goods were now in greater demand where other countries, such as USA, had shifted to war production. In 1955, FRG joined NATO, which allowed them to re arm and start producing war materials due to the war
How did new investment contribute towards the economic miracle?
Due to the recovery of many businesses in the mid 1950s, they could invest in new and more efficient equipment. Even new factories. They could then concentrate on producing high quality goods and keeping prices low as possible to compete. Reputation of German goods increased and so did exports. As exports grew, so did businesses, which could then employ more workers and invest more. Mandem who produce consumer goods could also buy raw materials
How did workers contribute to the economic boom?
Influx of refugees meant that there was a large pool of guest workers for the businesses to draw on. At first they needed training, but after this was overcome, they provided an efficient workforce. And the fact that there was many workers kept wages low
During the 1950s, how many workers came into the FRG from the GDR?
3.6 more million workers came into the FRG from the GDR. Many young, skilled and highly educated and all actively seeking work and wanting to become a part of west Germany consumer culture, thereby helping the economy twice over
Why did erhard not like the term economic miracle
He liked to see it as a result of good economic planning and hard work from the German population
What problems was there for the economy?
There were possible problems, however. Growth could not keep going at the rapid rate of the 1950s and early 1960s. Once everyone had bought their consumer goods for the first time, demand fell to a lower level as people replaced these goods at different times. The Berlin Wall, put up in August 1961 by the GDR to cut it off from the FRG, stopped workers crossing from the GDR into the FDR and reduced the ‘free’ professionals that had helped the expanding economy.
How much was spent on social welfare in 1965 compared to 1970?
DM46.7 millions -> DM115.9 MILLION
During the first oil crisis, what did the chancellor Schmidt do?
Worked hard to persuade other world leaders not to introduce protective tariffs to limit world trade during the first oil crisis of 1973. Additionally german exports remained healthy due to demand
Features of the economic recession of 1966-67
Domestic and international trade decreased and unemployment rose. Guest workers would be vital for economic recovery. 1966 there were 1.3m, by 1967 there were 990 000. Productivity fell and due to welfare policies, public spending spiralled out of control.
What did Mandem do to help the recession
Chancellor erhard and economics minister Karl Schiller reorganised the governments approach to economy. He increased government planning, intervention and control. E.g. there were subsidies for agriculture and the coal industry. He also reintroduced cartels to fix prices. 1967 the economic stabilisation law allowed for government intervention in times of economic crisis to limit regional spending and introduced a 5 year plaAm system for all government spending
What was added to the basic law in 1968?
A provision added to the basic law that allows money to be moved around länder, from the more wealthier ones to the poorer ones to help fund social welfare, however these policies were seen as failures and chiller was replaced by Schmidt in 1972 just in time for the next crisis
