Chapter 5 Flashcards
1
Q
Stresemann’s coalition
A
- the August 1923, at the height of the hyperinflation crisis, the government of Cuno collapsed and was replaced by the new coalition led by Gustav Stresemann
- Stesemann’s coalition - the so called ‘great coalition’ - was the first in the Weimar Republic to include parties from both the left and right
- Stresemann’s party, the DVP, shared power with the Centre Party, the socialists and the DDP
- Stresemann who was only chancellor for 103 days, took office at a time when the Weimar Republic was in serious political and economic difficulty
- by the time he left office in November, the currency had been stabilised, inflation had been brought under control and attempts to overthrow the republic from both the left and right had ended in failure
2
Q
What key things did Stresemann need to do to bring inflation under control
A
- end passive resistance
- the issuing of new currency
- balancing the budget
3
Q
the end of passive resistance
A
- passive resistance against the occupation of the Ruhr was called off in September
- this was a highly unpopular and risky move, which led to serious unrest and the attempted Beer Hall Putsch in Munich
- Stresemann calculated, however, that he had no alternative
- Germany’s economy was beginning to grind to a halt and inflation was completely out of control
- ending passive resistance = government stopped paying workers who refused to work for the French = was an essential first step towards reducing government expenditure
4
Q
the issuing of a new currency
A
- in November, a new currency called the Rentenmark was introduced to replace old and worthless Reichsmark
- one Rentenmark = one trillion old marks
- since Germany did not have sufficient gold reserves to back the new currency, it was supported by a mortgage on all industrial and agricultural land
- once new currency successfully launched, government kept tight control over amount of money in circulation in order to prevent inflation reappearing
- old inflated marks gradually cashed in and, in August 1924, the Rentenmark became the Reichsmark, backed by the German gold reserve, which had to be maintained at 30% of the value of the Reichsmarks in circulation
- inflation ceased to be a problem and value of new currency was established at home and abroad
- all this happened under the direction of Hjalmar Schacht
5
Q
Balancing the budget
A
- Stresemann’s government cut expenditure and raised taxes
- the salaries of government employees were cut, some 300,000 civil servants lost their jobs and taxes were raised for both individuals and companies
- as government debt began to fall, confidence was restored
- these changes made considerable difference to the way German economy operated
- well-managed companies that were run prudently and were careful not to build up excessive debt continued to prosper
- weaker companies that were heavily reliant on credit crumbled
- the number of companies that went bankrupt in Germany rose from 223 in 1923 to over 6000 in 1924
- moreover, those who had lost their savings in collapse of old currency, did not gain anything from introduction of new currency
6
Q
How did Stresemann suggest to resolve the reparations dispute
A
- the stabilisation of Germany’s economy was as much dependent on settling the reparations dispute as it was on domestic issues
- in November 1923, Stresemann asked the Allies’ reparations committee to set up a committee of financial experts to address Germany’s repayment concerns
- the USA had a vested interest in getting Germany back to a position where reparations could be paid to France, because much of this money was then passed onto the USA to repay loans
- Therefore, the American banker Charles Dawes acted as the new committee’s chairman
- by time Dawes plan was finalised in April 1924, Stresemann’s government had fallen, but he remained as foreign secretary and took credit for much of what was achieved
7
Q
the Dawes plan - what did it recommend?
A
- Dawes plan confirmed original figure of £6.6 billion but to make the payments more manageable, it recommended that:
- the amount paid by Germany each year should be reduced until 1929, when the situation would be reappraised. It proposed that Germany should re-start reparations by paying 1000 million marks (a fraction of what had been expected before) and that this sum should be raised by annual increments over five years by 2500 million marks per year. After this, the sum paid should be related to German industrial performance
- Germany should receive a large loan of 800 million marks from the USA to help get the plan started and to allow for heavy investment in German infrastructure
8
Q
What did people think of the Dawes Plan? Did Stresemann agree to it?
A
- there was heated debate in Reichstag over the Dawes plan
- Stresemann himself did not actually believe in the plan, privately referring to it as ‘no more than an economic armistice’, but he agreed to it as a way of securing foreign loans
- the so-called ‘national opposition’ (mainly the DNVP, but also smaller right wing groups like the Nazi movement) bitterly attacked this policy of compromise, since they believed Germany should defy unjust ToV and refuse to pay reparations altogether
- however, Dawes plan eventually agreed and accepted by both Germany and the allies in July 1924
9
Q
how would the Dawes Plan benefit Germany
A
- the Allies accepted that Germany’s problems with the payment of reparations were real
- loans were granted, which which new machine, factories, houses and jobs could be provided and the German economy rebuilt
10
Q
What happened to the Ruhr after Germany agreed to start paying reparations again?
A
- the 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
- such measures contributed to German optimism that their country was once again its own master
11
Q
A
- by 1925 Germany appeared more stable and prosperous
- combination of new currency, Dawes plan Schacht’s work at the Reichsbank helped improve Germany’s situation enormously
- American loans helped to stimulate the economy
12
Q
What happened to the German industry after 1924
A
- industrial output grew after 1924 but did not reach 1913 levels until 1929
- growth rates were unsteady
- the years 1924-25 and 1927 were good years, but the economy shrank in 1928and 1929
- investment in new machinery and factories was falling by 1929
13
Q
Closer look at German industry
A
- the fact Germany had to hand over many of its materials as reparations at end of war opened the way for this ne start to industry
- with American finance, the big industrialists began to buy our or make cooperative agreements with smaller firms to form cartels
- by 1925, there were around 3000 such cartel arrangements in operation, including 90% of Germany’s coal and steel production
- after 1925, Germany was allowed, under terms of ToV, to protect its industries by introducing tariffs on imported foreign goods
- many firms also received state subsidies to enable them to survive
- all these practices reduced competition and propped up inefficient enterprises
14
Q
developments in industry
A
- advances were made in the chemical industry, such as the large-scale production of artificial fertilisers
- the car and aeroplane industries also developed, although cars were still too expensive for the average German
- the inflation rate was lose to zero and living standards rose as wages began to increase from 1924
15
Q
housing
A
- loans helped to finances building of housing, schools, municipal buildings, road and public works
- massive population growth had created an acute housing shortage in Germany by early twentieth century, and the overcrowding and insanitary conditions of working-class city accommodation had been linked to political instability
- consequently, state initiatives to provide affordable homes were of great importance for future stability
- in 1925, 178,930 dwellings were built = over 70,000 more than in previous year
- in 1926, there were to be 205,793 more new homes
