How far did the German economy change from 1871 to 1990?

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  • Created by: becky.65
  • Created on: 16-05-18 18:50

The reasons for 19th-century industrial growth

  • Germany's economic growth began before the country was politically unified 
  • 1850s - Germany experienced industrial revolution due to worldwide economic growth
  • The first major industrial development related to the railways and heavy industry 
  • 1845/70 - railway network grew from 3,280km to 19,575km
  • Large banks fuelled this industrial revolution through investments
  • Labour from declining artisan economy flooded into growing urban centres providing a cheap workforce
  • Trade between Prussia and France, Belgium, Britain and Italy expanded
  • New technologies helped to expand Germany's mining industries 
  • The extension of the railways allowed German states to transport more of their raw materials at a greater pace 
  • 1850s/60 - exports of coal and iron to Austria-Hungary, the Netherlands, Belgium, France, Russia, Switzerland and Italy increased at a rapid rate  
  • Worker productivity increased rapidly 
  • 1873 - Germany experienced an economic crisis due to:
    • overinvestment 
    • corrupt practices 
    • an economy that was naturally slowing
    • railways reached a point where they could no longer expand 
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The reasons for 19th-century industrial growth

  • The depression lasted until 1890
  • 1890s/1914 - Germany underwent another industrial boom
  • 'The second industrial revolution' was driven by:
    • German scientists invented the world's first electrical generators and synthetic dyes
    • German companies invested heavily in research and development and then benefitted from the new technologies produced 
    • The country posses a skilled workforce and management 
    • New industries such as advanced machine tools, chemicals and electricity were the main parts; 1890/1913 - electrical output increased 18% every year
    • The urbanised population grew at a substantial rate, providing jobs in construction as the demand for housing increased
  • 1883 - AEG was formed; their leading rival was Siemens and Halske 
  • 1895/1911 - those employed in the construction industry increased by one million
  • Germany became the world leader in electricity and chemicals and had a reputation for technological excellence 
  • Growth was also fuelled by cartelisation:
    • the economic crisis encouraged companies to move, reducing competition and allowing for more stable employment as it was less likely for them to go out of business
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The reasons for 19th-century industrial growth

  • This led to cartels by the 1890s:
    • Rhenish-Westfalian Coal Syndicate and the Steelworks Association 
    • 1891 - Thyssen AG
    • Krupps 
  • The stability of these cartels encouraged further investment from German banks 
  • 1890/1910 - population increased from 50 million to 60 million 
  • This provided an expanding workforce and a huge domestic market that sustained the growth of industries 
  • The population was young which aided the expansion of its workforce
  • Germany had massive reserves of raw materials; iron ore in Alsace-Lorraine, coalfields in the Ruhr, potassium salts and coal tar for the chemical industry 
  • Shipbuilding developed as considerable attention was given to improving the river and canal systems which drove Germany's ability to export
  • Germany's growth was enhanced by Caprivi's commercial treaties 
  • 1890/4 - signed with Italy, Austria-Hungary, Russia, Belgium, Switzerland and Romania
  • These lowered import tariffs from these countries on cattle, timber, rye and wheat and in return they guaranteed Germany a market for exports for at least 12 years
  • 1900 - Germany was the biggest industrial nation in Europe
  • 1872/1914 - the value of German exports increased by £365 million 
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Change in German industry during the 20th century

  • The government heavily subsidised economic growth
  • As Germany approached 1914, military expansion drove industrial production further 
  • This was advanced by a German scientist inventing synthetic ammonia, a key ingredient in the production of nitrates for explosives 
  • 1914:
    • 2/3 of European steel
    • mined half of Europe's coal
    • led in chemicals, electrics and cotton 
    • produced 20% more electricity than Britain, France and Italy combined 
    • its currency was nearly as strong as the British pound 
  • WWI required the mobilisation of the entire German industry 
  • Germany lacked cotton, rubber, petrol, copper and tin needed for modern warfare 
  • 1914 - the director of AEG, Rathenau, helped to establish the War Raw Materials Department which reorganised the war industry to ensure that Germany had sufficient raw materials to wage war 
  • August 1915 - Rathenau has been reasonably successful 
  • German scientists made major breakthroughs in producing synthetic materials to replace elements they were unable to import; discovered how to manufacture nitrates from air
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Change in German industry during the 20th century

  • The government established agencies to control industry centrally:
    • 1916 - Central Purchasing Company; organised imports from neutral countries and attempted to maintain some elements of trade
    • Imperial Grain Office controlled food rationing and supplies
    • Auxiliary Service Act directed the labour of all men aged between 17 and 60
    • Supreme War Office was given control over German industry and labour; deciding which workers in which industries would be exempt from military conscription
    • They had successes in iron and steel and munitions production 
  • Germany continued to suffer from serious problems in coal and transport supplies 
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Change in German industry during the 20th century

  • Faced considerable challenges
    • debt was 140,000 million marks 
    • the currency had lost considerable value
    • trade had been destroyed
    • foreign investment had dried up
    • inflation was pushing up the cost of living
    • lost economically important areas of the Saarland and Upper Silesia in the Versailles Treaty
    • 1921 - reparations demanded payment of two billion marks a year
  • Compared to the 19th century, Weimar's growth rates and technological advancements were quite minimal
  • German exports did recover
  • There was an expansion of manufacturing and investment in industry 
  • German products being inexpensive overseas helped the economic transition from war to peacetime 
  • 1923/4 - French occupation of the Ruhr and hyperinflation crisis slowed Germany's industrial production
  • With the end of hyperinflation, resumed production in the Ruhr and the Dawes plan helped to rebuild German industry 
  • The renewal of the economy under the Rentenmark and investment from US financial institutions drove a resurgence of industrial production
  • 1927 - industrial production reached pre-war levels
  • 1925/9 - GNP grew significantly 
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Change in German industry during the 20th century

  • German industrial bosses used new assembly lines
  • Allowed them to boost production without expanding their workforce
  • Ruhr - workforce declined 33%, yet production increased by 18% per hour 
  • 1929 - financial crisis set off by the stock market crash in the US led to a massive crisis in German industry 
  • The high rates of industrialisation in the economy meant it was hit worse than its neighbours
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Mass unemployment from 1930 to 1932

  • October 1929 - Great Depression began in the United States; collapse in the stock market led to American investors losing 40,000 million US dollars in a month 
  • This wiped out out US loans in Europe, which was particularly bad for Germany as it was the most reliant on American Investment 
  • 1930 - many short-term US loans had been withdrawn 
  • September 1930 - Nazi Party made significant gains; the rise of extemist parties prompted further withdrawal of US loans which made the situation worse
  • June 1931:
    • 1,000 million marks in loans were withdrawn from Germany 
    • three major banks collapsed 
  • This set off mass panic among German savers
  • The worldwide economic downturn resulted in a mass decline in global imports; for Germany, whose economy was reliant on exports, this was a further blow
  • Dec 1929/Dec 1930 - factories closed down and unemployment rose by 2.1 million 
  • January 1932 - unemployment reached six million 
  • Unemployment and banking collapse caused economic despair 
  • 40% of the workforce was unemployed 
  • Unemployment in shipbuilding was 48.9%
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Mass unemployment from 1930 to 1932

  • Unemployment in shipbuilding was 63.5%
  • Brunning belived the solution was to raise taxes and slash unemployment benefits, which increased the suffering of Germany's unemployed
  • Growing despair, mass poverty, starvation, general deterioration in town life, with factories left dormant and town parks overgrown, became common
  • The mass numbers of unemployed young men led to the growth of extremist private armies; Nazi SA and the SPD's Reichsbanner 
  • Military organisation and street battles against their opponents gave disenchanted, unemployed young men a purpose
  • 1932 - SA had grown from 100,000 to 400,000 strong 
  • There were mass clashes in the streets and at political rallies
  • German politics largely centred on the streets
  • The Great Depression had been partly caused by the US stock market crash
  • Germany was the most vunerable country also due to:
    • over-reliance on American loans
    • lack of domestic investment
    • decline of the agricultural sector 
    • focus on a small range of export sectors as the basis of economic growth
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Mass unemployment from 1930 to 1932

  • Bruning's attempts to alleviate the crisis only deepened it further 
  • Industrial workers, teachers, white-collar workers and civil servants all suffered a decline in their standard of living
  • June 1932 - Bank of International Settlement agreed to end Germany's reparations 
  • Nazi Party exploited this suffering by establishing their own soup kitchens and charity fundraisers
  • 1931 - they were feeding 200 people a day 
  • 1930 - Bruning called an election to gain a mandate for his economic policy; Nazi Party increased its vote from 800,000 to 6.4 million, gaining 18.2% of the vote; Communist Party increased it's vote from 3.3 million to 4.4 million, taking 13.1% of the vote 
  • 30 May 1932 - Bruning was removed and replaced with Papen, who continued Bruning's economic direction 
  • July 1932 - Papen called an election to gain support for his economic programme; Nazis become the largest party in the Reichstag with 37.2% of the vote
  • Voting with the Communists, the Nazis could now hamper the running of the Reichstag, forcing through a no-confidence motion in Papen 
  • November 1932 - election; Nazi vote declined, but it was still the largest party in Germany
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Mass unemployment from 1930 to 1932

  • The situation influenced the Junkers and Hindenburg to appoint Hitler Chancellor due to:
    • the economic suffering 
    • the inability to find a popular leader
    • deadlock in the Reichstag 
    • growing violence on the street
  • Without the Great Depression, it is difficult to see how the rise of the Nazis could have taken place
  • Mass unemployment, the inability of ruling politicians to deal with the situation and the ability of the Nazis to exploit the hardships all contributed to the fall of the Weimar government
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Change in German industry during the 20th century

  • The Nazi Party focused German industry on:
    • public work schemes
    • self-sufficency 
    • rearmament 
  • 1934 - unemployment had halved 
  • 1939 - there was a labour shortage in industry 
  • Building and metal industries increased substabtially
  • Road construction and the growth of the German car industry were a key aspect of Germany's industrial rejuvenation in the mid-1930s
  • Government invested heavily in work creation schemes and industry to get the economy back on its feet
  • 1936 - Four-Year Plan was launched focusing the German industry on armaments production 
  • 1938 - 44% of government expenditure focused on rearmament 
  • Preparation for war meant there was an increased investment in ensuring Germany was self-sufficient; industry made greater efforts to produce synthetic forms of rubber, petrol and oils 
  • Nazi control over industry was increased 
  • The economy was distorted towards large-scale industries, such as steel and coal
  • There was the decline of consumer-based manufacturing
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Change in German industry during the 20th century

  • During WWII, the economy made significant use of the lands Germany invaded and occupied, putting millions of slave labourers to work in munitions production and farming
  • Inefficiency and infighting within the economic sector hampered the production of armaments
  • Production only began to rise after it was reorganised under the Central Planning Board 
  • 1942 - established by Speer
  • Differing sectors of the economy improves due to:
    • Better techniques 
    • Reorganisation of industry 
    • Allocation of raw materials 
  • 1944 - wartime industrial production reached its peak
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The post-war 'economic miracle'

  • 1963 - West Germany was the strongest economic power in Europe and third biggest in the world
  • This economic growth was driven by:
    • Germany being the second biggest economy in the world prior to WWII
    • there remained a considerable number of workable factories in 1945
    • a largest skilled population 
    • the economic programme of Erhard
    • American assistance from Mashall Aid; 99 million US dollars which it used to expand coal-mining, railway, electrical, steel and iron industries 
  • The economy benefitted from the Korean War, which further boosted industrial production
  • 1951 - economic boom enhanced the demand for products and the German car industry grew substantially 
  • The growth in the prosperity in the economy and the need to rebuild after the Second World War led to a massive house-building programme, which enhanced domestic industries 
  • GDP grew 12% in five years 
  • Industrial growth was helped by:
    • co-operative union sector that restricted wage increases
    • influx of 3.6 million refugees from East Germany who were young and highly skilled 
    • did not bear the costs of rearmament that some competitors were going through due to the Cold War
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The post-war 'economic miracle'

  • 1951 - co-determination was introduced:
    • Any business with over 1,000 employees in the iron and steel industry had to allow representatives of the workforce to have a say in the running of the business
  • 1952 - Work Councils:
    • facilitated joint discussions between employers and employees
    • enhanced the economy 
    • minimised the days lost to strikes 
  • 1958 - West Germany had near full employment and the demand for labour meant it was difficult to restrict wage rises
  • 1960s - slowdown of the economy as it transititioned from heavy industry to one based on the service industries 
  • Growth slowed in comparison to France and Italy, which had higher growth rates
  • 1963 - 'economic miracle' had ended 
  • The 1950s was less an 'economic miracle', rather the re-establishment of one of the world's most powerful economies which had been disrupted by both World Wars 
  • 1980s - consulting, advertising and research began to play an important part in the economy 
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