FRG Economy: 1945-89 Flashcards
How was the German economy immediately post war?
-Massive inflation
- black markets
-low wages - so why would people want to work if their money was worthless
-influx of refugees - 10 million
Economy of the Western Zones 1948:
-By 1948 industrial prodction rose to 75% of its production in 1938 which was a huge increase in that year.
-Whilst many factories were destroyed, lots were still functional so there was still potential for economic growth.
Describe the currency reform?
-1.4 billion dollars from marshal aid boosted the Deutschmark from 1948
- This stabilized the economy and destroyed the black market, as well as boosting industrial production - production increased by 50%.
-Had a negative effect on savers as it was converted from RM100 to DM6.5
What did Erhardt do to recover the economy? (including tax and price controls)
-He established SM economy.
-Ended price controls to create competition between producers.
-He abolished most rationing which meant people stopped hoarding.
-He fixed wages for 2 years to let businesses establish until 1948
-He passed 1952 Equalisation of Burdens Act.
Tax:
-reduced tax which gave ordinary people more spending money to stimulate economic growth –> also increased productivity as absenteeism dropped.
-As a result, salaries rose by 80% between 1948 and 55.
How did unemployment change?
Unemployment reached 1.8 mill by 1950 but then steadily fell.
How much did steel produce increase by? What was the significance of this?
It doubled.
- shows new focus on consumer goods.
Examples of gov. intervention that helped maintain good economy post war and external factors:
-Labour schemes to reduce unemployment
-Investment aid law of 1952 which provided DM3.2 billion to businesses.
-laws to prevent monopolies and cartels e.g. 1957 Anti-Trust Law
-Co-determination –> prospering industrial relations keeping productivity high.
External factors:
-growing world economy that needed the quality goods from the FRG.
-Limited defence spending.
-Korean war.
What opposition did Erhardt face in economic reform?
-Many opposed the shift from the command economy
-big businesses wanted cartels and price fixing back.
-Socialists didn’t support shift from price fixing.
What level of support was there for there SM economy?
The combination of capitalist economy with social support gained him enough support along with
-his policy of co-determination from 1951 (workers being involved in management)
1955-65: How did the Korean War help the FRG?
They supplied non-war goods e.g. steel and chemicals where other countries couldn’t.
-Rearmament wasn’t allowed until they re-joined NATO in 1955.
How did the growth of workers benefit the FRG?
There were an influx in refugees which could be paid less as they were mostly unskilled.
-Many skilled and educated workers (3.6 mill) came from the GDR until the Berlin Wall went up (didn’t need training, short term contracts)
How did investment help the FRG?
Many businesses recovered by the 1950s which meant there was more investment into new machinery and exports grew,
-specially due to the good reputation of German goods.
-A good example is the success of the Volkswagen, they sold half a million cars by 1960s.
1966-89 (Karl Schiller): What happened during the 1966-67 recession?
-Trade went down as unemployment went up.
-The Berlin Wall meant less workers and there was
-overspending in social welfare (115 mill in 1970)
-wages were reaching too high which risked inflation.
How much was spent on social welfare in 1970?
DM 115 Million.
What was the response to the 66-67 recession?
-subsidized agriculture and coal industry and reintroduced cartels.
-introduced laws to allow gov. intervention e.g. article 109 of basic law was amended to increase control over tax and spending.
