3. Economic development and policies 1918–32 Flashcards
Debt and reparations
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
The Ruhr invasion
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)
consquences of the Ruhr invasion
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
Hyperinflation
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
Response to Hyperinflation - the government
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.
Making money work
Worthless mark was withdrawn as a temporary measure and replaced with the Rentenmark in October 1923 which restored faith in German currency so Germans changed their hoarded foreign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
Policies of Stresemann and the Government that affected the Economy in 1923
September: Stresemann ends passive resistance in the Ruhr
October: Rentenmark (emergency money) replaces worthless mark
Policies of Stresemann and the Government that affected the Economy in 1924
April: Negotiations for the Dawes Plan begin
August: Rentenmark is replaced by Reichsmark
September: Dawes Plan comes into force
Policies of Stresemann and the Government that affected the Economy 1925-1928
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
Policies of Stresemann and the Government that affected the Economy 1929
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
Dawes Plan
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)
Young Plan
1929 - further reduced reparation payment by 20% but wasnt put in action because of the depression
US policy of isolation
encouraged other countries introducing tarrifs on foreign goods - Germany suffered heavier tarrifs because of its part in WWI
Germany’s admission in to the League of Nations
Germany’s admission into the League of Nations meant German exports were back to their 1913 levels of ten billion marks by 1926
Impact of the Depression
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%
Benefit of 1929 Depression for Germany
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
Policy of deflation after 1929
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
The result of Bruning’s deflation policy
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.
Von Papen
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
Policies of Recovery from the 1929 Depression
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)
Impact of the depression - employment
As unemployment rose people barely scraped by doing badly paid jobs with long hours
- Women especially single parents had to take home-based work paid by the ‘piece’
- 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
- 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
Standard of living after WWI
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
