What effect did the Creation of a "social market" economy have on the FDR

How Far was economic revovery achieved in the years 1945-55?

The allies agreed to rebuild on Germanys Economy, but they didn't want Germany to be able to start another war so industries considered as 'War Industries' were banned, and outputs were restricted.

Reparations were to be taken in equipment and machinery from each zone. Considering the bombing, some places had very little of either. The French and Soviets dismantled remaining factories undermining any chance of recovery.

Reichmark was alsmost worthless so the Black Market was thriving, and it was hard to get workers when their wages boight hardly anything. At first, the allies worked together but the way they ran their zones were so different that they separated apart.

The devastation in Germany was so great that some people left and chose not to return. For example, 160,000 POWs stayed in France rather than coming back to Germany. Refugees from Russia became Germanys biggest asset.

Relations between the USSR and the West deteriorated quickly with the Development of the Cold War. A major factor in the separation was the Marshall Plan which set off the creation of the Deutschmark. The new currency helped to stabilise the economy and break up the black market. This caused the Soviets to set up their own currency. By the end of 1949, Germany had divided into the FRG ans GDR.

Ludwig Erhard was appointed Director of the Economic Administration in March 1948. He wanted a Social Market Economy and worked to create one under the Allies. Wages were fixed until November 1948 to allow businesses to establish themselves. The currency reform onyl affected cash and monetary savings. The military government wanted a tax on all assets. The money raised and redistributed helped many people to start again.

Erhards reforms did not bring immediate economic recovery, for problems that had to overcome were great. Factories and businesses could start trading again, but they had to replace machinery and train workers. Unemployment rose from 442,000 in June 1948 to 937,000 in January 1949. By 1950, it was as high as 1,800,000. But then began to fall.

Erhard faced opposition in the economic council and in the Bundestag this was because he wanted to convert from a Command Economy to a Social Market economy. The UK didn't support it, the USA did and Industrialists were not supportive. A combination of a capitalist market with a responsible government that provided a social safety net for the poorest won Erhard enough support to continue his Policies. There was a policy of co determination which gave workers rights

The Economic Miracle 1955-1956

Korean War: Sparked a need for Supplies so they sold industrial goods, chemicals, steel and electrial goods. The FRG joined NATO and was allowed to rearm and produce War Materials

New Investment: Businesses had revovered effienciently to be able to invest in new equipment they created high quality goods so Germanys reputation grew, and increased exports

Workers: An increase in Refugees after the war meant there were 'guest workers' so once these were trained, they provided an effiecient workforce with low wages.

During the 1950s, about 3.6 millkion workers came from the GDR many of whom were young, skilled and highly educated. The government saved money on training staff by using them.

Erhard disliked the term 'economic miracle' as he believed it occured through good planning and hard work, as well as business contribution

Growth could not continue at the rate of the 1950s so once people had bought their goods, the demand fell. The berlin wall stopped workers crossing and reduced the free professionals

How did the Federal Republic survive the economic challenges in the hears 1966-1989?

Between 1966-1989, the FRG experienced many economic challenges. Real economic growth varied significantly but tended to move at a slower rate. There were rising levels of Government Spending on social welfare. This happened despite various cuts to benefits. The economy was helped by the fact that Germanys exports figures stayed healthy.

The Recession of 66-67: This hit confidence hard as it reduced trade and umemployment rose. Productivity began to fall, and there was more Government intervention in times of economic crisis.

The Oil Crisis of 1973-1978: During the 60s, the FRG relied on oil rather than coal. Oil rich countires of the middle east grew rich and had so much oil that they so,d it at an affordable price. However, in 1973, the Arab-Israeli War broke out so prices were put up sharply which contributed to the economic crisis. Unemployment rose sharply again, made worse by the fact the FRGs baby boomers were hitting the employment market.

The FRG was not hid as hard as some other countries helped by its export income so the economy recovered rapidly. Oil consumption dropped and government propaganda pushed energy saving tactics

In the 1980s, the gap between the rich and poor widened which created friction. Germanys exports continued to rise and stayed consistently ahead of imports. In 1981, unemployment hit 1.7 million which drove the amount of benefits up.

Chancellor Kohl said productivity levels were falling because of the dependancy of welfare support and because of the baby boomers. His government bought in even more cuts to social welfare spending.

Integration into the Eurpoean Econonomy, 1949-89

From the moment rhe FRG was set up, Chancellor Adenauer was concerned to establish closer ties with Europe. He saw political and economic integration as vital for success. He wanted a close working relationship with France

Changing living standards 1945-89

Living standards went under huge change between 45-89. War damage meant families were torn apart, people were starving and many were homeless. There was huge pressure on housing.

The economy stengthened so standard of living rose meaning people spent their money on consumer goods. Real wages kept ahead of prices. Pension reforms meant most people recieved a pension. However, social inequality had deepened.

Made with Adobe Slate

Make your words and images move.

Get Slate

Report Abuse

If you feel that this video content violates the Adobe Terms of Use, you may report this content by filling out this quick form.

To report a Copyright Violation, please follow Section 17 in the Terms of Use.