1.8 The Occupation of the Ruhr and Hyperinflation Flashcards
What were Germany’s economic problems by 1923?
Germany had high reparations and had lost key income-generating areas.
The German government handed over the first instalment of £50m but in 1922 they anounced they could not pay any more. Many thought that the burden of reparations was too harsh and ultimately it would affect the rest of the Europe.
Historians have since argued that Germany could pay given that reparations only accounted for 2% of their national output a year.
What was the French occupation of the Ruhr?
The French reacted quickly to Germany’s non-payment. French and Belgian troops occupied the Ruhr, Germany’s key industrial area of iron, steel and coal. They helped themselves to resources instead of money.
The government encouraged the workers to strike (passive resistance). Some Germans also used arson and sabotage to damage the factories and mines so that production had to stop. Germany was already facing huge economic problems and this made it worse.
In response, the French brought in their own workers. Over 100 French civilians were killed because of fighting. However, the occupation was profitable to France and Belgium. They did not remove their forces until July 1925, after the Dawes Plan was signed.
What was the impact of the occupation of the Ruhr?
The German government’s reaction to the occupation brought about a temporary popularity. It resisted France and paid the workers for striking.
The occupation united Germany against France and Belgium.
The German economy got even worse. Germany lost income and was forced to print more money to pay the workers. This led to the value of currency falling and hyperinflation
What were the causes of hyperinflation?
Between 1919 and 1923, the income of Germany was only a quarter of what it needed to be. The government printed more banknotes so it had enough money. By 1923, the government had 300 paper mills and 200 printing shops.
Unfortunately, most countries linked the value of their bank notes with gold. If the German government had 10 million marks’ worth of gold in its banks then it should have 10 million marks’ worth of notes. If there were more banknotes in circulation their value drops and prices rise.
To pay for the striking workers, this is what Germany did and money rapidly lost its value.
What were the effects of hyperinflation?
It led to rapid price increases called hyperinflation. Prices rose so rapidly, that in some cases, customers in restaurants who had enough money to pay for their meal when they sat down, did not have enough to pay for it by the time they had finished eating.
For example, in December 1918, bread cost 0.5 marks. In November 1923 bread cost 200 billion marks.
Hyperinflation forced millions of Germans into poverty. People on fixed incomes e.g. pensioners were affected the most, their income was almost worthless. Many people who were financially secure suddenly found themselves struggling.
Wages rose but it was slower than the increase in price rises.
Some groups benefited:
- People with loans and mortgages could pay them off much quicker because the real value of the loan had fallen
- People who owned buildings and land were generally protected
- Most farmers benefited, their prices rose.
Overall, hyperinflation was a disaster for Germany. Millions of middle-class Germans were thrown into poverty and they blamed the Weimar government for their problems. People were desperate and there was a real possibility of the government being overthrown.
