5- Golden Age: Economic develpments

Question 1

What happened in August 1923?

Answer 1

Cuno’s gov collapsed bc of the pressures of hyperinflation and was replaced by a coalition under Stresemann called the Great Coalition

Question 2

What was particular about the Great Coalition?

Answer 2

First in the WR to include parties from both left and right (Stresemann’s party DVP, ZP, SPD and DDP)

Question 3

For how many days was Stresemann Chancellor?

Answer 3

103

Question 4

What did Stresemann achieve?

Answer 4

1. Currency had been stabilised
2. Inflation had been brought under control
3. Attempts to overthrow the republic from both left and right had ended in FAILURE

Question 5

How did Stresemann bring inflation under control?

Answer 5

1. End of passive resistance
   - Called off in September
   - It led to unrest and attempted putsch by Hitler in November
   - It meant that gov stopped paying striking workers but it was a necessary step towards reducing gov expenditure
2. Issuing of a new currency
   - In Nov, new currency called the Rentenmark was introduced to replace the old one. 1 Rentenmark = 1 trillion old marks.
   - In August 1924 the Rentenmark became the Reichsmark.
   - Inflation ceased to be a problem and the value of the new currency was established at home and abroad.
3. Balancing the budget
   - Stresemann’s gov cut expenditure and raised taxes
   - Many civil servants lost their jobs (300,000)
   - As gov debt began to fall, confidence in the gov was restored
   - Well-managed companies prospered and weaker companies heavily reliant on credit crumbled- nº of companies bankrupt rose from 233 to over 6,000 in 1924
   - Those who had lost their savings in the collapse of the currency did not gain anything from the introduction of the new currency

Question 6

What did the US have an interest in?

Answer 6

Getting Germany back to a position where it could pay reparations to France, as much of this money was then passed on to the USA to repay loans.

American banker Charles Dawes as a new Allied Reparations Committee Chairman

Question 7

When was Dawes Plan accepted by Germany and the Allies?

Answer 7

July 1924

Question 8

What did the Dawes Plan do?

Answer 8

It confirmed the original figure of 6.6 billion (132,000 million gold marks) of reparations, but it made the payments more manageable by recommending:

1. Amount paid/year by Germans to be reduced until 1929 when the situation would be assessed again.
2. Proposed that Germany should start paying 1,000 million marks/year (fraction of what was required before) and that this sum should be raised by annual increments over 5 years to 2,500 million marks/year. After this, the sum payed should be related to industrial performance
3. Germany should receive a large loan of 800 million marks from the USA to help get the plan started and allow for investment in German infrastructure.

Question 9

Why was there a debate over the Dawes Plan?

Answer 9

Stresemann didn’t believe in the plan, referring to it as no more than an economic armistice (temporary agreement but not the final solution), but he agreed to it as a way of securing foreign loans.

Question 10

Who opposed Stresemann’s policy of compromise with the Dawes Plan?

Answer 10

Right wing parties who thought Germany should defy the treaty and not pay reparations altogether

Question 11

What benefits did the Dawes Plan bring to Germany?

Answer 11

1. Allies accepted that Germany’s problems with the payment of reparations was real
2. Loans were granted, with which new machinery, factories, houses and jobs could be provided and the Germany economy rebuilt
3. French gradually left the Ruhr during 1924-25 once it became clear that Germany would start paying reparations, which contributed to German optimism

Question 12

What had happened by 1925?

Answer 12

Germany appeared more stable and prosperous.

Combination of new currency, Dawes Plan and the bringing of hyperinflation under control helped improve Germany’s situation enormously.
American loans helped stimulate the economy

Question 13

What was the extent of industrial recovery?

Answer 13

• Industrial output grew after 1924 but did not reach 1913 levels until 1929.
• Extent of industrial boom not to be exaggerated- growth rates were unsteady
• 1924-1925 and 1927 were good years, but economy shrank in 1928 and 1929.
• Investment in new machinery and factories was falling by 1929

Question 14

What are cartels?

Answer 14

Groups of companies from the same industry that worked together to fix prices and protect benefits. Reduced competition but allowed for more profits to be reinvested

Question 15

What was Germany allowed to do after 1925?

Answer 15

Allowed to protect its industries by introducing tariffs on imported foreign goods

Question 16

What advances were made after the apparent stabilisation of the economy?

Answer 16

• In chemical industry
• Car and aeroplane industries
• Inflation rate close to 0
• Wages began to increase from 1924
• Loans helped build schools, roads, housing and public works
• Nº of strikes massively reduced- 1924: 1973, 1929: 429 bc new system of compulsory arbitration for settling industrial disputes was issued- however, employers thought this was biased in favour of unions and resented state’s interference in their affairs.
• Improvement in living standards for German workers, especially those backed by powerful trade unions.

Question 17

What did Stresemann say before his death in 1929 regarding Germany’s economic situation?

Answer 17

‘The economic position is only flourishing on the surface. Germany is dancing on a volcano’

Question 18

What were the limits to economic recovery during the Golden Years?

Answer 18

• Unemployment was still a problem- by end of 1925 it had reached 1 million and by March 1926 3 million due to public spending cuts and companies reducing their workforce to make efficiency savings
• Mittelstand gained very little in the so-called Golden Age- bankrupted after the hyperinflation, they did not benefit from the improved economic climate. - Industrial sector wages had drawn level to those of the middle class, in some cases exceeded them.

Question 19

What did farmers gain from the economic recovery of the Golden Years?

Answer 19

Very little- worldwide agricultural depression kept food prices very low and few farmers could make profit from their land

Large landowners and farmers borrowed money to buy new machinery and improve their farms.

Smaller farmers tended to save the money, which was wiped out by hyperinflation

Question 20

How did the gov try to economically help farmers and why didn’t it work?

Answer 20

It made it easier for them to borrow money.

It made matters worse bc they became indebted at a time when prices were falling and could not keep up with the repayments

Gov also tried to help by introducing high import tariffs on food products, but these measures didn’t go far enough

Question 21

What had happened by the late 20s to farmers?

Answer 21

Many had gone bankrupt and lost their lands

By 1929 German agricultural production was at less than 3/4 of its prewar levels

Question 22

Had the French left Germany by 1925?

Answer 22

No, they had left the Ruhr area but not the Rhineland, they did not agree to withdraw their forces until a final settlement for the reparations had been decided.

Question 23

How did Stresemann deal with the fact that the Dawes Plan was temporary?

Answer 23

He agreed that the issue should be considered by an international committee headed by the American Owen Young.

Question 24

When did the international committee headed by OwenYoung take place?

Answer 24

Paris 1929 and produced a report of final settlement of the reparations

Question 25

What did the Young Plan say?

Answer 25

1. Germany had to pay reparations until 1988
2. Total reparations bill was considerably reduced, Germany being required to pay 1.8 billion instead of original 6.6
3. Annual payment was to be increased

Question 26

What benefits did the Young Plan bring to Germany?

Answer 26

1. Britain and France agreed to withdraw their troops from the Rhineland by June 1930

Question 27

What were the negative effects of the Young Plan?

Answer 27

Great nationalist opposition- leader of right-wing DNVP Alfred Hugenberg launched a campaign against the plan, which included other nationalist group including Nazis

Drafted a so-called ‘freedom law’ which called for the repudiation by gov of the war guilt clause, immediate evacuation of forces occupying German territories and that any minister involved in the acceptance of the war guilt should be tried for treason.

It attracted over 4 million signatures but was decisively defeated by the Reichstag.

However, the fact that that many people voted for the freedom law was an indication of the depth of support for right wing nationalism

Question 28

Chapter 5 summary

Answer 28

• After trauma of hyperinflation, German economy had begun to estabilise itself in the years 1924-29
• Inflation under control, new currency, Dawes and Young Plans to help rebuild the economy.
• Industry boomed, better worker’s standards of living
• Mittelstand and farmers didn’t benefit from economic prosperity
• Reliance on short and long term foreign loans left Germany vulnerable to the changing economic climate

Question 29

Chapter 5 key dates

Answer 29

• August 1923
• Nov 1923
• July 1924
• August 1924
• 1929
• June 1930