Summary
Summary Economy FRG
- Institution
- PEARSON (PEARSON)
These notes include all the essential information on the Economy of the FRG, including unemployment and the Oil Shock Crisis and the Recession.
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Economy The Reichsmark was almost worthless which was damaging the
economy.
The black market thrived as many goods such as sugar could only
be found there, for example a kilogram of sugar had its price fixed
at 1 RM but could only be bought for between 120-180 RM
160,000 German prisoners of war in France decided to stay there,
however these numbers were far exceeded by the influx of 10
million Germans who came as refugees ahead of the Soviet army or
were expelled from Eastern Europe, these refugees became one of
the country’s biggest assets
$1.4 million was giving to West Germany under the Marshall Plan of
1948
On the 1st June 1948, Erhard announced that the Reichsmark would
be replaced by the deutschmark
On the 24th June 1948, the Economic Council gave Erhard the power
to abolish almost all but the most essential rationing such as bread
and milk powder, and all price controls
Wages stayed fixed until November 1948 to allow businesses to
establish themselves
The combination of the new currency and these measures meant
that suddenly cakes, vegetables, butter and eggs were on sale, as
were non-food items
The currency reform only affected cash and monetary savings
The military government wanted a tax on all assets, the money to
be used to compensate those who had lost everything. The system
was complicated and took some time to work out but in 1952 the
Bundestag eventually passed the Equalisation of Burdens Act. The
money raised and redistributed helped many people to start again.
Erhard’s reforms didn’t bring immediate economic recovery
Factories and businesses could start producing and trading again,
but they had to replace machinery and train workers
Some businesses failed after the currency reform because they
couldn’t afford to pay wages, others managed to keep going but
they had to lay off some of their 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 it
began to fall. In 1955 it was 1,000,000 and it continued to fall
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