FRG Economy

• The Social Market Economy is a free market (Government had little control over it) that had elements of social support for the poorest built in.
• Erhard's reforms consisted of lifting non-essential rationing and price controls and to help businesses establish themselves, wages stayed fixed until Nov 1948.
• Erhard's reforms did not have initial success. Due to some business failing to pay workers after the currency reform and having to replace machinery and train workers Mid 1948 - 442,000 unemployed 1950 peaked at 1,800,000Then declining onwards to 1,000,000 in 1955.
• Car production in 1959 was 4.5 times greater than in 1950, whilst steel production also doubled during this period.
• The Korean war, shifted USA to war production and as the FRG was 'banned from producing war supplies for other countries', the USA needed industrial goods, leading the FRG's chemicals, electrical goods and steel to be in greater demand.
• As most Businesses' recovered by the mid-1950's, it meant there was new investment in new equipment and factories. Focusing on producing high quality goods, whilst keeping prices low, leading to growth in exports.
• $1.5 Billion given to Germany under the Marshall plan (1948), to help restore the German Economy and rebuild its infrastructure.
• The recession of 1966-67 saw domestic and international trade reduced, whilst unemployment was increasing. Guest workers started to leave, 1.3 million at the start of 1966 but just over 990,000 by late 1967.
• Schiller (Economic minster during 1966-67 crisis) had increased government intervention in the Economy. Such as such as agricultural and coal subsidies.
• 1968, provision added to the Basic Law, saying that the government could move money between Lander, using money from wealthy ones to provide more social welfare for the struggling ones.
• The oil crises of 1973 and 1978.Just under 11 billion DM for 140 million tonnes of oil in 1972, but changed to just under 33 billion DM for the same amount of oil in 1973 and 49 billion DM in 1978.
• The oil crises of 1973 and 1978 led to a sharp rise in unemployment, guest workers not having their contracts renewed again and a ban being put in place to prevent recruiting them.