5 - Economic developments 1924-28

Question 1

The ‘great coalition’

Answer 1

• Replaced the government of Cuno.
• First to include parties from both the left and right.

Question 2

Stresemann

Answer 2

• Took office at a time of serious political and economic difficulty.
• When he left, the currency had been stabilised, inflation brought under control and political extremism had ended in failure.
• Stresemann’s priority was to bring inflation under control and involved 3 key steps:

Question 3

1. The end of passive resistance

Answer 3

• Passive resistance against the occupation of the Ruhr was called off in September.
• Essential first step towards reducing government expenditure.

Question 4

2. Issuing of a new currency

Answer 4

• Rentenmark was introduced to replace the old and worthless Reichsmark.
• new currency was exchanged for the old on the basis of one Rentenmark for one trillion old marks.
• Supported by a mortgage on all industrial and agricultural land.
• In August 1924 the Rentenmark became the Reichsmark, backed by the German gold reserve.

Question 5

3. Balancing the budget

Answer 5

• Cut expenditure and raised taxes.
• Salaries of government employees were cut, some 300,000 civil servants lost their jobs and taxes were raised.

Question 6

Effects

Answer 6

• Well-managed companies who were careful not to build up debt continued to prosper.
• Weaker companies heavily reliant on credit crumbled.
• Number of companies that went bankrupt rose from 233 in 1923 to over 6000 in 1924.
• Those who had lost savings in the collapse of the old currency did not gain anything from the introduction of the new currency.

Question 7

Reparations issue

Answer 7

• November 1923 Stresemann asked the Allies’ Reparations Committee to set up a committee of financial experts to address Germany’s repayment concerns.
• USA had a vested interest because of repayment of loans.
• American banker, Charles Dawes, acted as the new committee’s chairman.

Question 8

Dawes Plan

Answer 8

Recommended that:
1. The amount paid each year by Germany should be reduced until 1929, when the situation would be reappraised.
2. Proposed Germany re-start reparations by paying 1000 million marks and raised by annual increments over 5 years by 2500 million marks per year.
3. Germany should receive a loan of 800 million marks from the USA to help get the plan started and allow for heavy investment in German infrastructure.

Question 9

Debate in the Reichstag

Answer 9

• Stresemann agreed to the plan as a way of securing foreign loans.
• ‘national opposition’ bitterly attacked the policy since they believed Germany should refuse to pay altogether.
• Dawes Plan was eventually agreed by German and the Allies in July 1924.

Question 10

Benefits to Germany

Answer 10

• The Allies accepted that Germany’s problems with the payment of reparations were real.
• Loans were granted, with which new machinery, factories, houses and jobs could be provided and the German economy rebuilt.

Question 11

French leave the Ruhr

Answer 11

French gradually left the Ruhr during 1924-25 once it became clear that Germany was going to restart paying reparations and the occupation could no longer be justified.

Question 12

Extent of economic recovery - Industry

Answer 12

• Industrial output grew after 1924 but did not reach 1913 levels until 1929.
• German industry underwent extensive ‘rationalisation’ as new management and production techniques were introduced.
• Car and aeroplane industries developed.

Question 13

Extent of economic recovery - Housing

Answer 13

• Loans helped finance the building of housing, schools, municipal buildings, road and public works.
• In 1925, 178,000 dwellings were built and in 1926 there were to be 205,000 new homes.
• Money was spent on welfare payments and health improvements and in 1924 new schemes of relief were launched.

Question 14

Extent of economic recovery - Strikes

Answer 14

• Number of strikes declined.
• New system of compulsory arbitration for settling industrial disputes was issued.
• Employers felt this system was biased in favour of the unions.

Question 15

Iron and steel industry

Answer 15

• Dispute over wages in the Ruhr resulted in the arbitrator granting a small wage increase to the workers.
• The employers refused to pay the increase and locked out the workers for 4 weeks.
• In this dispute the workers were backed by the government and paid by the state.

Question 16

Living standards

Answer 16

• Improvements for ordinary German workers, especially those backed by powerful trade unions.
• In 1927 real wages increased by 9% and in 1928 they rose by a further 12%.

Question 17

Limits to the economic recovery

Answer 17

• Unemployment was a continuing problem.
• By the end of 1925 it reached 1 million and by March 1926 it was over 3 million.
• ## Due partly to there being more people seeking work, public spending cuts and companies reducing their workforces.

Question 18

Weimar ‘economic miracle’

Answer 18

• Did not benefit everyone.
• The Mittelstand gained very little.
• Bankrupted by the hyperinflation middle-class managers, clerks and bureaucrats did not benefit fully.
• White-collar workers did not enjoy the wage rises of the industrial sector.
• Late 1920s: industrial sector wages had drawn level with middle class and in some cases exceeded them.

Question 19

Agriculture

Answer 19

• Farmers gained very little.
• A worldwide agricultural depression kept food prices low and few farmers were able to make profit on their land.
• During the inflation large landowners and farmers borrowed money to buy new machinery and improve their farms.
• Smaller peasant farmers tended to hoard money and their savings were wiped out by inflation.

Question 20

Borrowing money

Answer 20

• After 1923 the government made it easier for farmers to borrow money.
• Farmers became saddled with debt at a time when prices were falling and they couldn’t keep up the repayments.
• Increased taxes introduced to pay for the welfare benefits were regarded as an unfair burden on farmers and landowners.
• Governments tried to relieve the farmers’ plight by introducing high import tariffs on food products, import controls and subsidies to farmers.

Question 21

Plight of farmers

Answer 21

• Worsened due to a global grain surplus and price slump in 1925 and 1926.
• Late 1920s there was an increase in bankruptcies amongst farmers and many of them lost their land as the banks demanded repayment of loans.
• By 1929, German agricultural production was at less than three-quarters of its pre-war levels.

Question 22

Occupation of the Rhineland

Answer 22

Allied forces remained in occupation of the Rhineland and the French would not agree to withdraw unless and until a final settlement of the reparations issue had been agreed.

Question 23

The Young Plan

Answer 23

• Obliged Germany to continue paying reparations until 1988.
• Total reparations bill was considerably reduced to £1.8 billion instead of £6.5.
• Annual payment Germany was required to make increased.
• All foreign control was ended and the responsibility for paying reparations was placed solely on the German government.

Question 24

Nationalist opinion

Answer 24

• Inflamed nationalist opinion in Germany.
• Leader of the DNVP launched a nationwide campaign against the plan.
• Drew up the ‘freedom law’ demanding it be submitted to a national referendum.

Question 25

‘Freedom law’

Answer 25

• Required the government to reupdate the war-guilt clause of the ToV, to demand immediate evacuation of the occupied areas.
• Launched a petition in support of it and attracted over 4 million signatures.
• In the Reichstag debate the ‘freedom law’ was defeated and rejected in the referendum.