3. Economic development and policies 1918–32

Question 1

Debt and reparations

Answer 1

By 1918, the government owed 150 billion marks (due to heavy borrowing during the war) + ToV - 132 billion gold marks

The government tried to meet the payments by continuing borrowing and printing money

Until 1924, reparations were paid in kind for example in coal, wood and railway carriages

Question 2

The Ruhr invasion

Answer 2

In January 1923, Germany failed to deliver reparations so the French with the help of Belgian troops occupied the Ruhr (vital to German economy because of its coal and other industries based there)

Question 3

consquences of the Ruhr invasion

Answer 3

The government stopped all reparation payments to France (but not other allies)

German officials were told not to accept orders from non-Germans and workers urged to passive resistance e.g. working slowly, strikes and sabotage

Neither France nor Germany benefited: in 1923, the new German coalition called for a stop to passive resistance and began negotiations with the French

Question 4

Hyperinflation

Answer 4

The crisis in Ruhr escalated inflation into hyperinflation

A newspaper cost: 1 mark in May 1922 - 100,000 marks in September 1923 and 700 billion marks in November 1923

All fixed payments including social welfare lost value so people lost faith in money and relied on barter and the black market

Question 5

Response to Hyperinflation - the government

Answer 5

In August 1923 the crisis was at its worst and the government collapsed.

The new coalition government with Gustav Stresemann used emergency decrees to avoid decision-making in the Reichstag

Using decrease, the government could act rapidly and decisively to solve the economic crisis.

Question 6

Making money work

Answer 6

Worthless mark was withdrawn as a temporary measure and replaced with the Rentenmark in October 1923 which restored faith in German currency so Germans changed their hoarded foreign currency and ‘emergency money’ and prices settled

The government used emergency decrees to control rent, wages and prices to stabilise the currency

Schact further oversaw the change to the Reichsmark in August 1924

Question 7

Policies of Stresemann and the Government that affected the Economy in 1923

Answer 7

September: Stresemann ends passive resistance in the Ruhr

October: Rentenmark (emergency money) replaces worthless mark

Question 8

Policies of Stresemann and the Government that affected the Economy in 1924

Answer 8

April: Negotiations for the Dawes Plan begin

August: Rentenmark is replaced by Reichsmark

September: Dawes Plan comes into force

Question 9

Policies of Stresemann and the Government that affected the Economy 1925-1928

Answer 9

1925 December: Locarno Treaty signed - Germany agrees to accept the borders set by the Treaty of Versailles and the demilitarisation of the Rhineland

1926 September: Germany joins the League of Nations

Question 10

Policies of Stresemann and the Government that affected the Economy 1929

Answer 10

January: Negotiations to replace Dawes Plan with the Young Plan
October: Death of Stresemann
Late October: Wall Street Crash: US stock market collapses; thus Great Depression

Question 11

Dawes Plan

Answer 11

1924 - provided an end to the Franco-Belgian occupation of the Ruhr and a staggered payment plan + Germany would be loaned $2 millon through wall street bonds
(made reparations more manageable)

Question 12

Young Plan

Answer 12

1929 - further reduced reparation payment by 20% but wasnt put in action because of the depression

Question 13

US policy of isolation

Answer 13

encouraged other countries introducing tarrifs on foreign goods - Germany suffered heavier tarrifs because of its part in WWI

Question 14

Germany’s admission in to the League of Nations

Answer 14

Germany’s admission into the League of Nations meant German exports were back to their 1913 levels of ten billion marks by 1926

Question 15

Impact of the Depression

Answer 15

In 1929, the US economy collapsed and US banks stopped renewing short-term foreign lending but also called in loans from abroad.

Germany’s industrial production fell - by the end of 1932 it was about half its 1928 levels

Unemployment rose and wages fell by 20-30%

Question 16

Benefit of 1929 Depression for Germany

Answer 16

In July 1931 - the Hoover Moratorium (an international agreement) suspended the need for Germany to pay back loans or pay interest on them for a year as they realised Germany would not be able to meet the payments

Question 17

Policy of deflation after 1929

Answer 17

Chancellor Brüning suggested cuts
in government spending, wage cuts and higher taxes

Brüning’s Policies brought deflation by keeping prices low and reducing government spending but avoideing devaluing the currency

Question 18

The result of Bruning’s deflation policy

Answer 18

Brüning’s policies did not work; they simply deepened the recession
industrial production fell
prices and exports fell by around 50% unemployment rose to its highest level ever in 1932.

Question 19

Von Papen

Answer 19

In May 1932, Von Papen replaced Brüning as chancellor and introduced some tax concessions/subsidies for businesses that created new jobs

The government was caught up in political problems so it was hard to focus on the economy and produce a coherent policy

Question 20

Policies of Recovery from the 1929 Depression

Answer 20

Policies imposed by decree were hard on the German people and did not seem to work, making coalition governments unpopular and look like a failure

President Hindenburg stayed popular; the ever-changing ministers were held responsible for the problems but the government’s unpopularity did lead to a rise in popularity of more extreme parties (The Nazi’s and Hitler)

Question 21

Impact of the depression - employment

Answer 21

As unemployment rose people barely scraped by doing badly paid jobs with long hours

1. Women especially single parents had to take home-based work paid by the ‘piece’
2. The eight hour working day established in 1918 had disappeared by 1924 - it was still the law but workers could not afford to press for it and employers never wanted it
3. Small family businesses were only able to scrape by if they had savings - many that didn’t ended up losing their businesses and sometimes their homes

Question 22

Standard of living after WWI

Answer 22

Immediately after the war the standard of living improved as more people were employed and wages rose however as inflation rose the standard of living dropped sharply