• US ' Plan’ (1944): proposed weakening Germany’s industry to prevent future threats. US JCS 1067 directive prohibited economic recovery efforts.
• July 1945: British Field-Marshal Montgomery issued a directive requiring reconstruction of German economy & politics.
• British Army repaired infrastructure → goods production/distribution improved → economic growth.
• Sep 1946: US Sec. of State James Byrnes’ ‘Speech of Hope’ advocated economic recovery, though JCS 1067 not rescinded until 1947 & reparations (industrial plant removal) continued until 1950.
2. A New Currency
• 1948: replaced worthless Reichsmark. Stabilized economy, boosted business confidence & investment, ended the black market, restored market economy.
• Impact: Money moved from Soviet zone → Stalin’s Berlin Blockade.
3. Aid
• 1946-50: US program: $1.62b aid (food, fertilizer, seeds, etc.) to "prevent disease/unrest."
• 1948: Plan: West Germany (FRG) received $1.5b (1949-52) mainly in industrial materials/plant PLUS ERP ‘counterpart funds’ financed loans for energy, coal, iron/steel, housing, etc. PLUS Technical Assistance Program: exchanges US & German experts/scientists.
4. Govt Policies
• Ludwig (Bizone econ director; later Econ Min): stabilized economy w. free-market policies, ending price controls/quotas; prioritized growth → spurred innovation/productivity.
• Compensation scheme helped business owners rebuild industries.
5. International Integration
• Aug 1948: Western zones merged into ‘Trizonia’ → 1949: FRG formed → created stability/confidence.
• 1951: FRG joined European Community (ECSC); 1957: founding member EEC → free trade/econ links in Europe.
6. Skilled/Motivated Workforce
• Wartime efficiency; returning soldiers brought skills; 3m East German refugees (many skilled workers) → boosted economy.
• 1951 Co-determination Law: large firms required union reps on boards; 1952: established → good industrial relations, reduced strikes.
• FDJ youth group activities reinforced party loyalty; dissent discouraged.
• Limited career choices → focus on state-prioritized industries.
5. Heimat
• Love of Heimat (homeland) fostered loyalty to GDR and fear of the West → 1955: made compulsory in schools.
6. Failure
• Migration: 1945–52 → 3m fled to West Germany.
• Uprising: 1m protested Stalin’s death, shortages & conscription; USSR crushed revolt w. 20k troops → 32 executed → GDR’s dependence on Stasi for social control.
Rebuilding West Germany, 1945-55
1. A Change of Policy
• US 'MORGENTHAU Plan’ (1944): proposed weakening Germany’s industry to prevent future threats. US JCS 1067 directive prohibited economic recovery efforts.
• July 1945: British Field-Marshal Montgomery issued a directive requiring reconstruction of German economy & politics.
• British Army repaired infrastructure → goods production/distribution improved → economic growth.
• Sep 1946: US Sec. of State James Byrnes’ ‘Speech of Hope’ advocated economic recovery, though JCS 1067 not rescinded until 1947 & reparations (industrial plant removal) continued until 1950.
2. A New Currency
• 1948: DEUTSCHE MARK placed worthless Reichsmark. Stabilized economy, boosted business confidence & investment, ended the black market, restored market economy.
• Impact: Money moved from Soviet zone → Stalin’s Berlin Blockade.
3. Aid
• 1946-50: US GARIOA program: $1.62b aid (food, fertilizer, seeds, etc.) to "prevent disease/unrest."
• 1948: MARSHALL Plan: West Germany (FRG) received $1.5b (1949-52) mainly in industrial materials/plant PLUS ERP ‘counterpart funds’ financed loans for energy, coal, iron/steel, housing, etc. PLUS Technical Assistance Program: exchanges US & German experts/scientists.
4. Govt Policies
• Ludwig ERHARD (Bizone econ director; later Econ Min): stabilized economy w. free-market policies, ending price controls/quotas; prioritized growth → spurred innovation/productivity.
• Compensation scheme helped business owners rebuild industries.
5. International Integration
• Aug 1948: Western zones merged into ‘Trizonia’ → 1949: FRG formed → created stability/confidence.
• 1951: FRG joined European COAL AND STEEL Community (ECSC); 1957: founding member EEC → free trade/econ links in Europe.
6. Skilled/Motivated Workforce
• Wartime efficiency; returning soldiers brought skills; 3m East German refugees (many skilled workers) → boosted economy.
• 1951 Co-determination Law: large firms required union reps on boards; 1952: WORKS COUNCILS established → good industrial relations, reduced strikes.