chapter 5 - economic developments Flashcards
stabilisation of new currency
aug 1923 - height of the hyperinflation crisis
cunos gov collapsed
replaced by new coalition led by stresemann (the grand coalition)
first in history of weimar republic to include parties from both the left and the right
stresemanns priority was to bring hyperinflation under control
end of passive resistance
called off in september
highly unpopular and risky move
led to serious unrest and attempted beer hall putsch
ending passive resistance meant the gov stopped paying money to workers who refused to work for the french
essential step towards reducing gov expenditure
issuing a new currency
november 1923 - new currency was introduced
called the rentenmark
replaced old worthless reichsmark
new currency was exchanged - one rentenmark for one trillion old marks
government kept tight control over the amount of money in circulation to prevent inflation happening again
aug 1924 - rentenmark became the reichsmark
backed by germanys gold reserve which had to be maintained at 30% of the value of the reichsmarks in circulation
happened under direction of hjalmar schacht
balancing the budget
stresemanns gov cut expenditure and raised taxes
salaries of gov employees were cut
some 300,000 civil servants lost their jobs and taxes were raised for both individuals and companies
as gov debt began to fall confidence was restored
dawes plan
november 1923
stresemann asked reparations committee to set up committee of financial experts to address germanys reparations concerns
did not reduce the overall cost of reparations (£6.6 billion) but it made payments more manageable
amounts paid by germany should be reduced until 1929
- start paying 1000 million marks and should be increased over 5 years by £2500 million marks each year
germany should receive loan of 800 million marks from USA
allow for heavy investment in german infrastructure
industry
by 1925 - germany appeared more stable and prosperous
american loans helped to stimulate the economy
industrial output grew after 1924 but did not reach 1913 levels until 1929
years 1924-25 and 1927 were good years but economy shrunk in 1928 and 1929
investment in new machinery and factories was falling by 1929
advances in chemical industry eg large scale production of artificial fertilisers
car and aeroplane industries also developed although cars were still too expensive for the average german person
inflation rate was close to 0 and living standards rose as wages began to increase from 1924
compulsory arbitration
definition - industrial disputes are often settled by arbitration in which both sides agree to allow an independent figure known as the arbitrator decide on a solution
in weimar germany, arbitration was made compulsory by law
number of strikes in german industry declined - new system of compulsory arbitration for settling industrial disputes was issued
employers felt that this system was biased in favour of the unions and resented the states interference in their affairs
weimar republic had already set a maximum of 8 hours for working day and had given trade unions the right to be part of work councils in factories and mines
population growth and housing
loans helped to finance building of schools, housing, municipal buildings, road and public works
massive population growth created acute housing shortage in germany by early 20th century
overcrowding and insanitary conditions were linked to political instability
state initiatives to provide affordable homes were important for future stability
1925- 178,930 dwellings were built —> over 70,000 more than in the previous year
1926 - to be 205,793 more new homes
money was spent on welfare payments and health improvements
1924 new schemes of relief were launched
disputes over wages
1928
dispute over wages in iron and steel industry in the ruhr
resulted in arbitrator granting a small wage increase to the workers
employers refused to pay the increase and locked out the workers (an action made by and employer to stop workers doing their jobs until they agree to the employers terms and conditions) for 4 weeks
workers were backed by the government and paid by the state
undoubtedly improvements in living standards for ordinary german workers, especially those who were backed by powerful trade unions
benefitted from increases in the real value of wages in each year after 1924
1927- real wages increased by 9% and in 1928 they rose a further 12%
limits to economic recovery
stresemann gave a speech before his death in 1929 - “the economic recovery is only flourishing on the surface. germany is dancing on a volcano. if short term loans are called in, a large section of our economy would collapse”
unemployment was a continuing problem
by end of 1925 - unemployment had reached 1 million
by march 1926 - over 3 million although it did fall after that
more people were seeking work due to public spending cuts and also due to companies reducing their workforces in order to make efficiency savings
mining companies reduced their workforces by 136,000 between 1922 and 1925 and reduced them by a further 56,000 between 1925 and 1929
weimar economic miracle did not benefit everyone
mittelstand - gained very little in the golden age, bankrupted by hyperinflation, middle class managers, clerks and bureaucrats did not benefit fully from the improved economic climate
white collar workers did not did not enjoy the wage rises from the industrial sector
by late 1920s - industrial sector wages had drawn level with those of the middle class and in some cases exceeded them
agriculture
farmers gained very little benefit from the economic recovery of these years
worldwide agricultural depression kept food prices low and few farmers were able to make a profit on their land
during inflation of early 1920s, large landowners and farmers borrowed money to buy new machinery and improve their farms
small peasant farmers tended to hoard money and their saving were wiped out by inflation
after 1923, government made it easy for farmers to borrow money, this made matters worse farmers became full of debt at a time when prices were falling and they could not keep up with repayments
increased taxes introduced to pay for the welfare benefits of the unemployed and sick were regarded as an unfair burden on farmers and landowners
governments of these years tried to relieve the farmers plight by introducing high import tariffs on food products, import controls and subsidies to farmers - measures did not go far enough
plight of the german farmers
bankruptcies
worsened due to a global grain surplus and price slump in 1925 and 1926
by late 1920s there was an increase in bankruptcies amongst farmers and many of them lost their land as the banks demanded repayments in loans
what did farmers do in 1928
initiated a series of small scale riots - know as farmers revenge
in protest against foreclosures (taking possession of mortgaged property when someone fails to keep up their repayments) and low market prices
by 1929 - german agricultural production was at less than 3/4 of pre war levels
the young plan
stresemann agreed the issue should be considered by an international committee headed by american businessman owen young
committee met in paris in 1929, with schacht as one of germanys representatives, and produced a report on a final settlement of the reparations issue
young plan obliged germany to continue paying reparations until 1988
total reparations bill was reduced - germany required to pay £1.8 billion instead of initial £6.6 billion
annual payment however was increased
all foreign control over reparations was ended and the responsibility for paying reparations was place solely on the german gov
june 1930 - britain and france agreed to withdraw troops from the rhineland
