economy FRG

• economic growth in 1958-9 was 18.7%, compared with US average of 3.2%
• In June 1948 the Deutschmark replaced the reichsmark; therefore destroying the black market
• A total of $1.5 billion was given to West Germany over 4 years in marshal aid from the US; aid was also seen in form of industrial goods and accounted for 39% of West Germany imports however this dropped to 3% by 1952
• There was an economic boom due to the Korean war with a demand for machinery and cars which the FRG was in a strong position to provide
• between 1949-59 5 million new houses were built
• in 1960 there was an economic boom which the economy grew by 8.6% annually
• there were still wealth inequalities as the top 1.5% of west Germans owned 40% of the wealth
• Erhard implemented a social market economy
• by 1954 the FRG became the 3rd largest trading power
• unemployment decreased to 1 million in 1955; the creation of jobs satisfied the 3 million people which entered from the GDR before 1961
• the workforce in agriculture decreased from 23% to 13% in the 1950s
• Britain received 2x as much money than Germany in their marshal plan
• The organisation for European economic co-operation which began in 1948 opened up European trade markets. There was also the European economic commitee
• The co-determination law of 1951 and the works constitution law of 1952 meant that in businesses that have 2000 people, 33% of workers have to be on the board of directors, any more than 2000 they need 50% which helped improve working conditions etc
• demand for housing, cars, goods expanded hugely
• the FRG was not allowed an army (and only joined NATO in 1955) so had less expenditure than other countries
• the policies of Bizonia 1947-9 removed price controls and allowed free competition, removed wage and production controls
• economic miracle by Erhard and social market economy
• average growth rate 8% 1955 reached 12%
• production doubled
• exports grew; 3rd largest trading power
• growth in wages with 400% increase 1949-63
• Food production in 1947 was 51% of than in 1938
• wages increased by 400%
• Growth rates were 8% in the 1950s
• why was there an economic miracle?

  • removing price controls, allowed free competition between business
  • removing control over wages
  • ending inflation through currency reform
  • reducing marginal tax rates, those om higher wages could spend more on goods
• In Bizonia, industrial production had risen 51% in June 1948 to 78% in December 1948
• West possessed raw materials and had fewer damage than the east from war
• Korean war increased demands which the Ruhr could supply
• Industry increased from 109.6% in 1951 to 179.8% in 1959