This document provides an in depth summary of many aspects of the FRG. This includes key facts and dates, and information on the Basic Law, the Economic Miracle, the Oil Crisis, integration into the European economy and more. It also contains detailed notes on each chancellor of the FRG in chronolo...
Germany’s economic problems
- Bombings destroyed considerable parts of industry
- Transport and communication lines destroyed
- Reichsmark worthless — as a result Black Market was booming
- Di erent allied zones were run di erently by the Allied High Commission
- Lack of workers due to deaths
- At the Potsdam conference the Allies agreed that Germany’s economy had to be rebuilt but
also agreed it was important that Germany doesn’t start a war
Refugee problem
- 10-12 million Germans came as refugees to West Germany
• Escaping from the invading Russian army
• Expelled from eastern Europe
• Relocation of land and people agreed at Potsdam as a result of Germany’s newly drawn
borders
- Rationing had to be introduced to deal with the problem
• Rations were incredibly low — those in allied zones only received 1000-1250 kcals per day
The Basic Law
- There was a legacy of anti-parliamentarian traditions in Germany, thus the Basic Law assigned
the key rights and functions to Parliament
- The German Bundestag is the only organ of the Constitution that is directly elected by the
people; it is the task of Parliament to elect the Federal Chancellor and the Basic Law places
emphasis on the functions of political parties
- The Basic Law curtailed the rights of the Federal President in favour of the Bundestag in order
to prevent the concentration of power to an individual
- Due to the disastrous election of Hitler during the Weimar period, the Federal President was to
now be elected by the Federal Convention which represented the state parliaments
- An electoral threshold of 5% was introduced meaning that no candidates could enter
parliament unless they won 5% of the overall vote
• This prevented small and potentially extremist parties from having political representation
• It made it easier for parliamentary majorities to form and promoted stability
Stabilising the economy
- The economic aid given to western Europe (Marshall Plan 1948) and the creation of the
Deutschmark led to increasing tensions with the USSR and eventually the creation of the FRG
- Germany received 1.5 billion dollars (now approx. 24 billion)
- Erhard was appointed director of the economic administration who oversaw the introduction of
the new currency
• Rationing was abolished
• Wages were xed for a few months
- As a result of these measures people stopped hoarding goods and began selling them
- The ongoing compensation (Equalisation of Burdens Act 1952) helped many people to start
again
Social market economy
- Erhard faced opposition for converting from a command economy to a market economy
- Many wanted the pre-command economy back with cartels and price xing
- A combination of a capitalist market with a responsible government that provided safety for the
poor won Erhard enough supporters
- This allowed businesses tax concessions as well as setting up trade unions
- A policy of codetermination allowed workers’ representatives on managerial boards in industry
Economic takeo
- Companies that made pro ts during the war (robbing Europe and exploiting slave labour) were
left untouched by and large
• For example IG Farben, Commerzbank, Audi and Hugo Boss
- The unions agreed to peaceful coexistence with the employers, helps to create social
cooperation and peace
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, - The Allies paid for a lot of the rebuilding
Reasons for economic miracle
- The Korean War
• Sparked the need for war supplies
• The FRG produced chemicals, steel and electrical goods
- New investment
• Many businesses had recovered by this point which were able to invest in equipment and
factories
- Workers
• Refugees meant there was a large number of workers, many of them highly skilled and
educated and poor so willing to work for not very much
• So in a sense East Germany was educating and funding West Germany’s work force
- State funded reparations
• Adenauer agreed with the state of Israel in 1952 which meant lucrative contracts for German
companies
Economic miracle
- Living standards improved
- Germany receives a hard working cheap labour force from refugees from East Germany
- Post 1950 more exports than imports
- Unemployment declined
- Marshall plan — no strikes
First stage of economic strategy
- Neo-liberal social market economy or caring capitalism — with this approach and the support
of the USA Marshall Aid programme the FRG experienced an ‘economic miracle’
- This was needed to entrench democracy in the post-war world of the Cold War
- Statistically the FRG was inevitably going to progress economically as the base line was so
low but regardless the growth was very impressive
Second phase of economic strategy — Neo-Keynesianism 1966-82
- From the mid 1960s onwards until the early 1980s Germany experienced more uneven growth
and indeed recession in the 1970s
- In many ways this mirrored other European countries including the UK
- The government policy under Chancellor Brandt with economics minister Schiller was to
abandon the more laissez-faire economics and adopt more state intervention to allow
government to shape the economy to foster growth
- Also an expansion of social security, so the government take a greater role than before
Recession of 1966-67
- Trade reduced and unemployment increased
- Productivity began to fall
- Public spending was spiralling out of control due to government’s spending on welfare
- The economics minister, Schiller, introduced government planning and control
• 1967 economics Stabilisation Law (government intervention)
• 1968 provision was added to the Basic Law to enable moving money around between
Landers
• The economic downturn of the early 70s led to Schiller’s resignation
Oil crisis 1973
- As a result of the fourth Arab-Israeli War, OPEC put up oil prices sharply in 1973 and 1978
again — severe in ation
- The FRG got 80% of its oil from OPEC which cost 10.8 billion Deutschmark before the crisis
then raised to 49 billion in 1978
- Growth fell due to a decline in global trade
- Unemployment rose which was made worse by the baby boomers (increased working age
population)
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