To what extent was government intervention in the economy  the crucial factor in maintaining the prosperity of the German economy from 1871-1990?

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  • To what extent was government intervention in the economy  the crucial factor in maintaining the prosperity of the German economy from 1871-1990?
    • Weimar
    • Nazi
      • Hitler had always been purposely vague on economic policy, promising to overcome unemployment without any detail of how this would be achieved.
        • Hitler appointed Hjalmar Schacht as President of the Reichsbank in March 1933, and Reichsminister of economics in August 1934.
          • His first major decision was to establish a new supervisory office for banking which regulated the German banking system.
          • There was major investment into public work schemes. Between 1933 and 1935, 500 million marks were invested and unemployment fell from 2.7 million to 1.7 million.
          • Schacht also wanted to revitalise German armaments.
            • He needed to invest more in German industry but did not know how to do this without causing inflation. His solution to this problem was using Mefo Bills.
              • Mefo bills were essentially government contracts to large industrial companies which were not paid in cash but were to be paid after 4 years. This also hid government debt from the public as they were not in fact spending money at the time.
                • Mefo bills paid for 50% of arms expenditure between 1934 and 1936.
          • Under Schacht, GDP grew by 40% in a single year and production increased by 60%.
    • Second Reich
      • Protectionist policies introduced by Bismarck as a response to economic crash in 1873,
        • He also wanted to undermine the largest party, the National Liberals. He claimed that they were unpatriotic for supporting free trade as protectionist policies strengthened the German economy against foreign competition.
        • In the short term, the 1879 protectionist policies did advance Germany's agricultural and industrial sectors. They drove up the price of German agriculture and helped to revitalise industry by strengthening the domestic market.
          • Tariffs also meant that there was a lack of cheap wheat imports from Russia, which drove up the cost of bread. This perpetuated the problem of the class divide as policies seemed to benefit the Junkers at the cost of the well being of the poorest and most vulnerable.
      • Russia and the United States were becoming large exporters of wheat, and this, combined with several poor harvests in Germany resulted in a heavy reliance on imports.
      • Growing pressure on Bismarck to introduce reform by Central Association of German Industrialists.
    • Post war 1945-90
      • The US was concerned with the industrial recovery of Europe as this would both help to stop the spread of communism and boost the US economy.
        • Germany therefore recieved around 2.7 billion dollars


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