Theme 3 - Economic

Development and
Policies
 Factors That Led to Hyperinflation in 1923
Factor Action
Economic  Government had spent all gold reserves on the war but continued printing more and
more money
o June 1914 - Just over 6300 million marks circulating
o December 1914 - Just over 33,000 million marks circulating
 Caused severe inflation by 1918
 End of war = 150 printing firms with 2000 presses running day and night
o Meant wages and savings lost value and prices shot up
 People less willing to spend money as wages worth less which was
bad for trade
 Trade disrupted by war so businesses suffered and people lost jobs
o Worse at end of war as war goods production finished
 Farm production dropped by 20% during war and industrial output almost halved
during war
o Loss of both and land taken from the Treaty of Versailles slowed the
economy and lost people as well
 Black market developed during war when inflation increased and less goods to sell
 After war, strikes, political unrest and changes to government = economy going out
of control
Social  Government set up retraining schemes for fighters in war
o Gave loans to help army leavers until they could find work
 Set up pension payments for the wounded, widowed and orphaned
 Social welfare programs set up for different groups
o 1920 - 1,537,000 disabled veterans and 1,945,000 survivors not classed as
disabled
 1924 - Reduced to 768,000 disabled veterans
o 1924 - Supporting 420,000 war widows with 1,020,000 children and 190,000
dead soldier parents
o Government paid mixture of lump sums and pensions to take care of them
o About 10% population receiving payments and many more on poor relief
 All payments made by government, had to go into debt to pay them
Political  ToV reparations created more debt
o Carried on borrowing and printing money to try and pay
o If they tried to change policy, wouldn't have been able to make any payments
o 1921 - negotiations over how much, when and whether payments could be
made
 Caused arguments, especially with France
 Up to 1924 - Reparations paid in coal, wood, etc.
 Government borrowed large sums of money in war
o 1918 - owed 150 billion marks, 3x owed in 1914
 1923 - France (with Belgium aid) invaded the Ruhr after failing to pay reparations in
full
o Ruhr vital to German economy from coal and industries
o Loss of Ruhr meant loss of economy
o Neither France nor Germany benefitted and 1923 coalition government put
stop to it
 Polices for Recovery, 1924-28
Area Policy and Effect
Money  October 1923 - Temporary Rentenmark replaced almost worthless Mark
o People with savings in old mark unhappy due to low value
o Various "emergency money" banned
o Replacement restored faith in German currency and allowed prices to settle
 Dawes Plan and Young Plan
o Made reparations more manageable and gave loans to help economy
o Meant recovery based on loans from USA
 Dangerous is USA call in loans or economy crashes
 Government spending
o Borrowed and spent heavily from other countries
o Subsidised grain and industry production
 Spent heavily on social welfare on housing and benefits for the poorest
o Had own bank to give federal and regional funding
 Helped businesses for as long as government could keep lending them money
o Economy began to recover but public generally not as well off as before war
 Paid less tax and resented idea of tax increase so had to borrow money otherwise
made by taxes
 Lowest tax band: 1913 - 47%, 1926 - 62%, 1928 - 55%
 Emergency decrees used to control rent, wages and prices
o Helped to further stabilise currency
Trade  Many countries introduced tariffs on foreign goods
o Germany had heavier ones due to other countries reactions to their part in the war
o Did produce steel and chemicals which other countries needed
 Hard for Germany to create trade links with UK and France
o Returned to 1913 levels of 10 billion marks by 1926 and 34% higher by 1929 than 1913
o Admission into LoN and other international agreements helped trade increase again
 Stresemann's foreign policies helped stabilise the economy
o Made Germany more acceptable foreign power again
o Made countries more willing to make trade agreements and to loan money
Agriculture  Big landowners had political influence as could block reforms that didn't help them
o 1918 - Reich Settlement Law made landowners sell land to government to be distributed to
poorest tenants
o Able to press for higher grain subsidies that benefitted big farms
 Bigger managed better off than the smaller
o Could get new machinery and farming techniques
o Small farmers heavily in debt, couldn't pay interest on loans or taxes
Industry  Significant dispute between owners and workers
o Affected productivity and increased wages until 1930
 Depression led to high unemployment so willing to work for any wage
o Damaged industrial expansion and production as strikes very common
o Owners wanted wages cut and extended work hours, workers wanted better conditions
 Early 1920's many small businesses collapsed
o Bigger businesses more able to ride out economic problems
o 1924 - more bankruptcies than in previous 5 years together
 1925 - chemical industry producing 1/3 more than 1913 and almost 2/3 more by 1930
 Big businesses began forming cartels
o Fixed prices which helped stabilise the economy
o Groups of businesses in same industry making agreements to set and control prices
 o Mid 1920's had 2500 cartels
o Gave stability as stopped prices moving so much

The Effects of the Great Depression, 1929-32

Area Effect
Employment  1929-30 unemployment rose above 2 million
 12 months after crash reached 3 million
 January 1932 - reached 6.1 million and didn't fall until spring
1933
 Number of registered unemployed increased
o 1929 = 1.8 million, 1932 = 5.6 million
 1 in 3 workers unemployed
Industry  1931 - 5 major banks collapsed
 50,000 businesses bankrupted
 Production fell by 42%
Trade  Export value fell by 55%
o 1929 = £630 million, 1932 = £280 million
 Less demand for exports
 Germany no longer received overseas loans
 Exports poor due to reduction in imports
 Prices and wages fell
 Number of bankruptcies increased
 Decline in price of food and raw materials as industrialised
nations reduced their imports
 World trade fell as there was less demand for exports
 Changing Living Standards, 1918-32
Graph of living standards

1. Effects of WW1
a. Most food went to the front, Allied blockades of ports stopped
supplies getting into Germany, many food shortages
b. High infant mortality and stillbirths due to poor health of mothers
i. Malnutrition common, 1 Berlin district had 90% all children
aged 2-6 undernourished
2. Hyperinflation
a. Prices increasingly rose even several times throughout a day
i. Newspaper costing 1 mark on 1 May 1922 but 100,000
marks by 1 September 1923 and 700 billion marks by 17
November 1923
3. Gustav Stresemann's work
a. Helped improve the economy and people's overall living standards
4. The Golden Years (1924-28)
a. Living standards started to improve
i. Wages increased
ii. Top in 1928 and increased from 77% to 100% between
1925-28
b. Unemployment still high but decreased
i. 1926 = 2025, 1928 = 1391
c. Berlin 1925 - 130,500 lodges and 44,600 paying just for a bed
5. The Wall Street Crash
a. Unemployment started to increase again
i. 1929 = 1899, 1932 = 5603
b. Cost of living increased
i. 101% compared to 1928
ii. Wages higher as well
6. Unemployment at highest point
a. Wages and cost of living 80% of 1928
 Attempting Economic Recovery, 1933-36
Autarky - economic self-sufficiency, without the need for imports in any area
of life
Nazi's achieved/worked towards
achieving autarky
 Businesses started employing
people again
o Nazi's created more work
and encouraged
businesses to do the same,
even temp work
 Number unemployed dramatically
decreased
o 1930 = 5603, 1936 = 1593
 RAD schenes for unemployed
men and women gave manual
work, basic food and living
o Generally less pay than
being unemployed
o Accommodation in labour
camps
o Help with agriculture and
supplies to the economy to
help achieve
 Increased import tariffs so
German produce cheaper and
fewer imports needed
 Banks couldn't repossess farms
from farmers in debt
o More farms = more
produce so fewer imports
for produce
 DAF (founded 6 May) announced
only union
o Fewer strikes as possible to
exploit workers more
 RNS set up to regulate food
production and distribution
Nazis did not achieve autarky
 Definition of unemployment and
workforce dramatically changed
o Jewish people not allowed
to work in civil service or
other occupations
 Were removed from
statistics
o Women discouraged from
working, married women
left work or were sacked
 Didn't count on
statistics either
o Faked statistics to pretend
unemployment was getting
better
 Not autarky as still
couldn't do anything
and contribute to the
economy
 Still needed to import raw
materials and non-produce foods
o Growing shortages in fats
and meats
 1935 - had to choose between
introducing rationing or increasing
exports
o Also had to choose
between food or raw
material imports
 Stopped big businesses
expanding/building on new land
o Made 80% less
o Supported small
businesses
 Creating a Command Economy, 1936-39

Command Economy - where the state decides what and how much to
produce, not businesses or agriculture

Outputs of Industries Between 1936-42

Oil/Syntheti Buna Explosives Steel Iron Coal
c Petrol (rubber) Ore
Actual 10,390 101.7 363 62,352 9752 1,112,930
Output
Target 13,830 120 223 24,500 5549 213,000
(Targets set by 4 year plan)

 Buna was overall closest to the original target set

 Four of the industries overproduced compared to the targets set out
o Explosives, steel, iron ore and coal
 In meeting the target, oil industries did least well being 3440 below the
target
o However, in being level with the target, coal industry was most
off being 899,930 above the target
 Coal was needed in much larger quantities for industries and to heat
homes
o Took 6 tonnes of coal to produce 1 tonne of synthetic fuel
 Explains why so much more coal was produced and used
while Buna and oil under produced
o More factories needed to be built
 Explains why some industries output more than others
o Many of these supplies would need to be produced to help in the
war and to make war supplies
 Nazi party would fake and influence statistics a lot of the time to make it
look like they were doing a better job of improving the country than they
actually were
o Means we cannot be sure how true they really are as they could
be fake or adjusted to make look better
 Changing Living Standards, 1933-39

Graph showing living standards for different groups

1. 1 April 1933 - Jewish shops, cafes and businesses boycotted

a. SA picketed these places and tried to persuade people not to
enter
i. Received a lot of negative press abroad
b. 7 April 1933 - Jews excluded from the governments civil service
2. 5 September 1935 - Nuremburg Race Laws
a. Meant Jews lost their citizenship in Germany
b. Marriage/extramarital relationships between Jews and Germans
banned
3. 26 April 1938 onwards - Many decrees further prohibit Jewish lifestyle
a. Created restrictions for their lives including exclusions from
schools and being banned from public places
4. 1 December 1939 - Decree for curfew of Jews introduced
5. Winter Aid Programme distributed food and clothing
a. Also ran soup kitchens making it easier for poorer people
6. 2.1 million people took part in KdF/Strength through Joy schemes which
improved leisure activities available
7. 9.6 million took part in KdF events
8. 30 million Germans members of KdF
9. About 10,800 crèches available for mothers and children
10. Unemployment at an all time low
a. 1593 people/7.4%
b. Wages had significantly increased to an all time high too
i. 108% compared to 1928
 Impact of War, 1939-45
Problems with Wartime Economy at Beginning of War
 More prepared than France or Britain but not as self-sufficient as Hitler
wanted
 Army wanted 4 months of ammunition supplies before going to war, in
September 1939 there were 6 weeks’ worth

Problems with Goering

 Was head of the air force and office of 4 year plan so favoured air force
 Allocated more resources to air force than other areas that needed them

Economy Reorganisation due to War (Centralisation)

 22 April 1942 – Central Planning Board set up
o Each committee looked at all factories producing same equipment
o Many small factories closed to concentrate on building fewer larger
ones
o Factory machinery standardised so only 1 model for each making
construction and maintenance easier
o Factories adapted to most efficient mass production techniques
o Production had to become more mechanical as thousands of skilled
workers had to go to war and were replace by less skilled women
and foreign workers
 1929 – 1.4% workforce in army, 1944 – 13%

Successes of Changes in 1942

 Monthly production of 200cm searchlights was 20 in 1942
o Rose to 80 by end of 1943 and 150 by end of 1944
 Production in 1944 almost 3 times what it was in 1940

Change in Military Tactics

 Blitzkreig tactic
o Had German army marching through Belgium, Holland and France
 Was the tactic at the start of the war
 June 1941 – Operation Barbarossa
o Against USSR
o Needed tanks and armoured vehicles again
 Caused changes to factory production that made new system
easier but still caused delays
 Economic Recovery, 1945-55
Free market economy – prices set by vendors and consumers, free from government
intervention and government price fixing
Social market economy – a free market economy with social support for the poorest built in

Economic recovery was achieved in West Germany between 1945-55

For
 24 June 1949 – almost all
rationing was abolished
o Had products in shops that
weren’t there before
o People stopped hording
goods instead selling them
 New currency, Deutschmark,
meant wages were worth
something
o People began saving and
spending money
o Factory production
increased
 Money was raised and
redistributed to help people who
had lost everything start again
o Done through taxing on
assets
o Meant people had more
money to spend
 1948 – Marshall Plan gave
economic aid
o $1.4million given to West
Germany by Allies
o Helped restart economy
o Meant new currency could
be introduced and rationing  Forced
abolished
Against
 Reichsmark was worthless
o Led to black market thriving
 Similar to Weimar
o 1kg sugar in 1947 had price
fixed at RM1
 Could get on black
market for RM120-
180
o Hard to get workers when
wages bought hardly
anything
 Transport and communication
links crossed zones which
hampered recovery as they were
run differently
 Some Germans left and never
returned because economy was
so bad
o 160,000 German prisoners
of war in France stayed
after the war rather than
return
o About 10million Germans
came as refugees ahead of
Soviet army or expelled
from Eastern Europe
to introduce rationing
o Had to deal with the
refugees and homeless
Germans
 French and Soviets dismantled
many remaining factories for
reparations
o Undermined any chance for
recovery

Though appears to be more against, nearly all happened before the for
column meaning they were the cause for the economic recovery as the for’s
happened as a result of the against’s.
 The "Economic Miracle", 1955-66
Factor Evidence Explanation
Erhard and  Unemployment fell from 1950 onwards  Contributed to economic miracle as
the Social  Currency reform from RM to DM provided a stable, longer term base
Market o Stabilised economy from which the economy could recover
Economy o End to rationing and black market
 Business and industry could trade again
o 1959 – car production 4.5x greater than
1950
o Steel production doubled
Korean War  Stimulated demand for steel  More output = more money coming
o Output of mechanical engineering almost into the country and more supplies
doubled industry between 1950-52 available to them
 Industrial, chemicals, steel and electrical goods in
greater demand where other countries had shifted
to war production
 Joined NATO
o Allowed to rearm and start producing war
materials
New  Many businesses had recovered by mid 1950s  As businesses could afford to employ
Investment o Able to invest in new, more efficient more workers, employment would
equipment and new factories increase and encourage more people
 Focused on producing high quality goods and kept to work
prices low to compete  More exports = more money coming
 Reputation of German goods improved and exports into the country and a good reputation
increases would encourage more countries to
o Businesses could invest more, employ more trade with them
workers and buy more raw materials o Builds and improves foreign
market
 Increased investment in factory
machines, etc. means more money
circulating in country
Refugees  Influx in refugees after war meant more “guest  Wages kept low means that money
workers” for businesses can stay and increase within
o Did need training but once trained proved businesses
efficient workforce o More money to spend on
 Large pool of workers meant wages could be kept equipment
low  Being efficient workers after training
meant better workers so more outputs
could be made
Workers  About 3.6million more workers came into FRG from  The government saved money that
from the GDR in 1950s would be spent on education costs or
GDR o Many young, skilled and highly educated training people in FRG
 All wanted work and to become part of West o Got to spend it elsewhere like
consumer culture funding housing construction
o Helped economy twice by increasing work and had more money to spend
force and purchasing the outputs and could help people in the
 Most employed on fixed, short-term contracts country

Challenge Evidence
1966-67 > Domestic and international
Recession trade reduced
> Real growth of economy
fell from 2.9% in 1966 to -0.2%
in 1967
> Unemployment increased
> Number of guest workers fell
> 1966 – 1.3mil, Sept. 1967
– 991,000
> Also meant productivity fell
1973 and 1978 > 1972 – FRG spent DM10.8
Oil Crisis billion on 140mil tonnes of oil
> 1973 – 4th Arab-Israeli war
broke out and OPEC put up
prices sharply (again in 1978)
> FRG only got 40% of fuel
needed through OPEC
> 1973 - 140mil tonnes cost
DM32.8 billion, 1978 – DM49
billion
> Contributed to economic
crisis in 1974-75
> Unemployment rose sharply
again
1980s > 1.7million unemployed in
Unemployment 1981
> Highest since 1950
Surviving Economic Challenges, 1966-1989
Government actions Successful? Keeping with idea of a social
market economy?
> Karl Schiller (economics minister) reorganised the government’s > Generally regarded as No -> Introduced many subsidies
approach to the economy having failed and allowed for government
> Increased government planning, intervention and control > Didn’t solve anything in intervention meaning not free from
> Reintroduced cartels to stop prices rising the long term as another government intervention and price
> 1967 – Economic Stabilisation Law allowed government challenge followed soon fixing -> Also had little support for
intervention in times of economic crisis to limit regional spending after it the poor
and introduced 5 year plan system for all government spending
> 1968 – Provision added to the Basic Law that meant federal However -> Provision added to
government could move money between Lander using money of Basic Law meant taken from
wealthy ones to give more social welfare to struggling ones wealthy ones to help poorer ones
> Ban was placed on recruiting guest workers who found their > Not subsidising oil No -> Introduced public spending
contracts were not renewed prices meant industries cuts -> Controlled prices and
> Helped prevent crisis becoming worse converted to other fuels intervened
> Oil consumption dropped more rapidly
> Government measures like encouraging “car free Sundays” > Weren’t affected as However -> Didn’t subsidise oil
and introducing speed limits on autobahns to save fuel badly prices and let them rise -> Didn’t
> Government propaganda pushed energy saving tactics in interfere and were in keeping with
homes and industry it
> Also began investing seriously in atomic power to reduce
dependence on oil
> Didn’t subsidise oil prices but let them rise
> Made expensive and encouraged cutbacks
> 1975 – Brought in public spending cuts and higher income tax
> 1981 – Government cut public spending > Policies produced slight No -> Had many cuts on many
> Benefits and housing allowance but growing improvement areas -> Meant much less support
> 1982 – Government brought in more cuts in social welfare > 1989 – Unemployment for the poor as a whole
spending at its lowest and
> Cuts on public holidays and reduced retirement age to 58 economic growth rate had
> Sold off shares in state-run institutions partially privatising them risen
 Integration into the European Economy, 1949-89
Marshall Plan
 American initiative to aid Western Europe
 Gave $13billion between 1948-51 (approx. $130billion in current dollar
value as of August 2015)
o To be used as economic support to help rebuild Western
European countries after WW2
 Not just Germany
 1948-49 – Marshall Plan was at its peak but aid was still less than 5%
of German national income
 Whilst West Germany received aid, it also made reparations and
restitution payments well in excess of $1billion
 Allies charged the Germans DM 7.2billion annually ($2.4billion) for their
costs of occupying Germany

Steps to Joining Europe, 1948-79

TIMELINE
 Changing Living Standards, 1945-89
1940s
 1949 – 222,000 new houses built
o 69% social housing, none had central heating
 Housing and food was main issue
o Not as many new houses built
o Bad living standards as little to no housing and war damage
 1945 – War damage left many people homeless and starving
o 1/3 all housing bombed flat, 1/3 still standing were damaged
 Increase in refugees led to more pressure on housing

1950s
 1952 – 461,000 new houses built
o 69% social housing, none had central heating
 1954 – 572,000 new houses built
o 53% social housing, 7% had central heating
 Percentage of income spent 1957
o 36.6% food, 12.5% clothing, 9.3% housing, 8% savings, 33.6% leisure
 74% personal income needed for bare necessities
 Living standards still not great but better than 1940s, especially later 1950s
o Social housing reduced over 10% in 2 years, some had central heating

1960s
 1960 – 574,000 new houses built
o 46% social housing, 31% had central heating
 1963 – facilities in homes
o 63% had fridges, 42% had TV, 36% had a washing machine
 1966 – 605,000 new houses built
o 34% social housing, 76% had central heating
 Percentage of income spent in 1967
o 29.3% food, 9.4% clothing, 13.5% housing, 11.7% savings, 36.1% leisure
 Food shortages not as bad so less money spent on food
 Economy at its best, however, social inequality had deepened
o 1% of all households owned 35% of the wealth

1970s (Oil Crisis)

 1971 – 553,000 houses built
o 27% social housing, 16% had central heating
 Percentage of income spent in 1977
o 23% food, 8.2% clothing, 14.4% housing, 13.7% savings, 40.7% leisure
 Only 46% income spent on bare necessities (1950s = 74%)
 Top percent of all households owned 78% of the wealth in 1973

1980s
 1985 – facilities in homes
o 82% had fridges, 82% had TV, 82% had a washing machine
 90% all people covered by benefits and healthcare
 Pension reforms meant most people received a state pension
o People in 1980 lived on average 12 years longer than people in 1950
 Top percent of households owned 45% of the wealth in 1988
 Percent of income spent in 1985
o 17.4% food, 6.5% clothing, 15.6% housing, 12.7% savings, 47.8% leisure