3- Economic and Social Problems in Germany, 1919-24

Question 1

What financial problems affected Germany?

Answer 1

Germany’s defeat plunged the finances of the state into crisis

Question 2

How was gov spending financed in Britain?

Answer 2

1. Higher taxes

2. Gov borrowing

Question 3

How did wartime German gov choose to finance the war?

Answer 3

1. Increased borrowing
2. Printing more money

This meant that

1. More gov debt
2. Value of the currency decreased

This risky strategy was based on the assumption that Germany would win the war and would be able to balance the losses by annexing industrial areas of its defeated enemies and forcing them to pay heavy financial reparations.

Question 4

What did the defeat mean for Germany financially given its previous expectations and the way they had financed war?

Answer 4

Defeat not only deprived the country from the repayment method, but also imposed a heavy burden of reparations and a loss of some industrial areas

Question 5

What was the debt in 1919?

Answer 5

1.44 marks or 6.6 billion pounds

Question 6

How would govs normally reduce national debt?

Answer 6

1. Raise taxes
2. Reduce spending
   or both

Question 7

Why did raising taxes or reducing spending pose serious risks for the Weimar Republic?

Answer 7

1. Rise in taxation would alienate support for new republic as anti-republican parties would claim that taxes were being raised to pay for reparations to the allies.
2. Reduce spending difficult bc although military was reduced, there were civil servants to be paid. Support for gov was fragile so govs avoided making civil servants redundant.

Question 8

What had disappeared by 1921?

Answer 8

Unemployment- rapid recovery in economic activity. 1.8% compared to nearly 17% in GB- this encouraged investment from the USA

In many ways Germany coped with the transition to peace more successfully than other economies

Question 9

What had happened to the prices between 1918 and 1920?

Answer 9

1918-19: prices had doubled

1919-20: prices had quadrupled

Question 10

Why had the gov allowed for inflation to happen?

Answer 10

Political issues:
1920 coalition led by Konstantine Fehrenbach dominated by ZP, supported by many powerful industrialists who were benefiting from inflation by taking short-term loans to expand their businesses.
By the time loans were due to be paid their value had been reduced by inflation

Question 11

What could be considered an advantage of inflation?

Answer 11

It reduced gov’s burden of debt and it has been suggested that German politicians had an interest in allowing it to continue unchecked

Question 12

What did the inflation lead to left unchecked?

Answer 12

Hyperinflation in 1923

Question 13

What happened after the gov agreed to the reparation payments set in 1921?

Answer 13

Fehrenbach resigned in protest bc he considered them extremely harsh and was replaced by another cabinet led by Chancellor Joseph Wirth

Question 14

Could Germany choose whether to accept the reparations payments or not?

Answer 14

No- gov signed and begun the policy of fulfilment

Question 15

What had happened by January 1922?

Answer 15

Germany was in such economic difficulties that the Reparations Commission granted a postponement of the January and February instalments

Question 16

What happened in July 1922?

Answer 16

German gov asked for a further suspension of the payments due that year

Question 17

What happened in November 1922?

Answer 17

Gov asked for

1. A loan of 500 million gold marks to stabilise the economy and
2. to be released of its obligations for 3-4 years

Question 18

What happened after the petitions of Nov 1922?

Answer 18

French suspicious that this was an excuse and refused to agree to Germany’s requests and led to a major clash over reparations.

Question 19

What are different writer’s views on the amount of reparations to pay?

Answer 19

1. English economist Maynard Keyne argued 2 billion pounds should have been the limit for reparations. More would damage Germany’s and Europe’s economy

Historian Peukert argued the reparations were manageable as they only amounted to 2% of its gross national product. He argued the financial problems that arose in the early 1920s, were a result of post-war loans and the way Germany funded her war effort, and not the result of reparations.

Question 20

What was the economic impact of reparations on Germany?

Answer 20

1. Germany’s gold reserves inadequate for the amount of reparations payments that had to be made in gold
2. It also had to make payments in coal but Germany had lost large part of its coal reserves in the TofV

Question 21

How did the Allies limit the ways of payment of reparations?

Answer 21

1. Possible method of payment in manufactured goods but manufacturers in allied countries wouldn’t agree to this as it would threaten their jobs and businesses
2. Germany might have been able to increase their ability to make payments by increasing exports to other nations, but allies confiscated its entire merchant fleet and had imposed high tariffs on imports of German goods.

Allies forcing Germany to make payments but made it difficult for Germany to find the means to do so.

Question 22

What was Germany’s response to the allies limiting the payment of reparations?

Answer 22

Printing more money, making inflation even worse and the currency falling even further

Question 23

What happened in January 1923?

Answer 23

French and Belgians sent a military force of 60,000 men to occupy the Ruhr industrial area in order to make Germans comply with the TofV

Question 24

What was the aim of the invasion of the Ruhr?

Answer 24

To seize the coal, steel and manufactured goods as reparations

Question 25

What happened in 1923?

Answer 25

Numbers of occupying forces in the Ruhr increased to 100,000

Question 26

Who was the leader of the cabinet during the French invasion of the Ruhr and what did they suggest?

Answer 26

Wilhelm Cuno

Knew people couldn’t fight back bc TofV has reduced the size of the German army

He responded by stopping all reparations payments and ordering a policy of passive resistance whereby no one in the area would cooperate with the French authorities.

Gov promised workers that they would still get paid if they went on strike and paramilitary groups worked with the German army to sabotage the French

Question 27

What was the response of the French to Cuno’s policy of passive resistance?

Answer 27

Scale of operation grew.

French set military courts and punished those who wouldn’t comply with their authority

 - Approx 150,000 Germans were expelled from the area
 - 132 Germans shot in 8 moths of occupation

Question 28

What were the economic effects of the French occupation of the Ruhr?

Answer 28

1. Paying wages/providing goods for striking workers was a further drain on the German economy
2. Tax revenue lost- businesses closed and unemployment
3. Germany had to import coal and pay for it
4. Shortages of goods pushed prices up further

Question 29

What was the gov response to the economic effects of the Ruhr occupation?

Answer 29

Printing more money- led to hyperinflation

Question 30

What happened during the hyperinflation crisis?

Answer 30

Money lost its meaning as prices rose to unimaginable levels

Workers collected their wages in wheelbarrows and tried to spend it before prices rose further

Shortage of food bc everyone wanted to buy everything before prices rose up again

Food riots- + convictions for theft

People resorted to trading possessions in exchange for vital supplies

Question 31

Can you illustrate inflation by comparing nº of American dollars to German marks?

Answer 31

January 1919- 8.9

January 1923- Approx 18.000

September 1923- 98,860,000
`
November 1923- 4,200,000,000,000

Question 32

Social impact of hyperinflation- who were the winners?

Answer 32

1. Black-marketeers who bought food and sold it at vastly inflated prices
2. Those who had debts, mortgages and loans bc they could pay the money in worthless currency
3. Business people who took loans and repaid them once currency had fallen further
4. People leasing property on long-term rents as value of rents decreased
5. Foreigners/owners of foreign exchange in Germany
   6- Farmers, since food was in demand and money less important in rural communities

Question 33

Who could be considered one of the winners of hyperinflation?

Answer 33

Stinnes- business owner

Question 34

Social impact of hyperinflation- who were the losers?

Answer 34

1. Pensioners, including war widows
2. Those who had lent money to gov in wartime
3. Landlords reliant on fixed rents
4. Unskilled workers or those who didn’t belong to trade unions
5. Artisans and small businesses
6. The sick- costs of medical care increased and food prices led to malnutrition
7. The Mittelstand- became impoverished. Had grown up believing in hard work and saving for the future, only to find their savings wiped out and their comfortable lifestyles destroyed

Question 35

What are other social effects of the hyperinflation apart from winners and losers?

Answer 35

1. Effects on behaviour- decline in law and order, growth of suicides and increase in prejudice
2. Lack of faith in the republic

Question 36

Chapter 3 summary

Answer 36

• Immediate post-war years were difficult for the German economy
• In some ways Germany coped with unemployment
• War left Germany a serious debt
• Large reparation payments added to economic difficulties
• By 1923 inflation spiraled out of controla brought chaos to millions of Germans

Question 37

Summary key dates chapter 3

Answer 37

• 1919
• 1920
• 1921
• January 1922
• July 1922
• November 1922
• January 1923