Chapter 5 - Economic developments Flashcards
In August 1923 which government collapsed and who was it replaced by
The government of Cuno collapsed and it was replaced by a new coalition led by Gustav Stresemann
Which parties were involved in Stresemanns great coalition
Stresemanns own party, the DVP , the centre party, the socialists and the DDP
How long was stresemann chancellor for
103 days
What were Stresemanns three steps to bring inflation under control
The end of passive resistance, the issuing of a new currency and balancing the budget
How did stresemann achieve the end of passive resistance
He called off passive resistance against the occupation of the Ruhr in September. This was an unpopular and risky move because the government stopped paying workers who refused to work for the French. This led to unrest and the Beer hall putsch in Munich. Stresemann had calculated that he had no other choice and that this was essential to reducing expenditure.
How did Stresemann issue a new currency
In November he introduced a new currency called the Rentenmark which would replace the old and worthless Reichsmark. The Rentenmark was worth 1trillion old marks. Germany didn’t have sufficient gold reserves to back the new currency so it was supported by mortgages on all industrial and agricultural land. The government kept tight control over the currency to prevent inflation reappearing. The old inflated marks were gradually cashed in and in Aug 1924 the Rentenmark became the Reichsmark which was backed by the gold reserve. This was all oversaw by Schacht
How did Stresemann balance the budget
Stresemanns government cut expenditure and raised taxes. The salaries of government employees were cut, about 300,000 civil servants lost their jobs and taxes were raised for both individuals and companies. Confidence was restored as government debt began to fall
What effect did the 3 changes by Stresemann have
Well managed companies that were run prudently and didn’t build up excessive debt would prosper and weaker companies that were heavily reliant on debt crumbled. The number of companies that went bankrupt in Germany rose from 233 in 1923 to over 6000 in 1924. Those who had lost their savings in the collapse of the old currency didn’t gain anything from the introduction of a new currency.
How did Stresemann address Germany’s repayment concern
He asked the allies reparation committee to set up a committee of financial experts to address Germany’s repayment concern. The US wanted Germany to get back into a position where they could pay of the reparations to France. The American banker Charles Dawes acted as a new committee chairman and the Dawes plan was formed in April 1924. The Dawes plan made the payments more manageable by reducing the amount Germany had to pay each year until 1929. It was proposed they begin paying 1000 million marks and this increases by 2500 million marks per year for 5 years. Germany would also receive a loan of 800 million marks from the US to help invest in infrastructure and to start the plan.
What benefits did the Dawes plan bring Germany
The allies accepted that Germany’s problems with the payment of reparations was real, loans were granted with which new machinery, factories, houses and jobs could be provided and the German economy rebuilt.
How was industry affected by the economic recovery
Industrial output grew after 1924 but did not reach 1913 levels until 1929. Growth rates were unsteady for example the years 1924-25 and 27 were good years but the economy shrank in 1928 and 1929. However Germany appeared more stable and prosperous compared to before Stresemanns policies. The number of strikes in industry decreased during these years in 1924 there was 1973 strikes and in 1929 there was 429 strikes this was mainly due to compulsory arbitration. German workers benefited from increases in the real value of wages in each year after 1924. In 1927 real wages increased by 9%
What did German industry undergo
It underwent rationalisation as new management and production techniques were used and antiquated machinery was replaced with new machinery. The big industrialists began to buy out or make cooperative agreements with smaller firms to form cartels. By 1925 there was 3000 cartels. After 1925 Germany was able to protect its industries by introducing tariffs on imported foreign goods.
What were the limits to the German economic recovery
Germany was said to be ‘dancing on a volcano’ because of short term loans were called in then a large section of the economy would collapse. There was still unemployment in these years. By the end of 1925 unemployment had reached 1 million and by 1926 it had reached over 3 million. This was due to more people seeking work after public spending cuts and companies reducing their workforce to make efficiency savings. For example mining companies reduced their workforce by 136,000 from 1922 to 1925. The mittlestand especially the white collar workers gained little from this era. They didn’t enjoy the wage rises of the industrial sector and by the 1920s industrial sector wages had drawn level or exceeded those of the middle class. They didn’t obtain the access to welfare benefits available to industrial workers
Why did farmers gain very little from the economic recovery
A worldwide agricultural depression kept food prices low and few farmers were able to make a profit on their land. Small peasant farmers who had hoarded their money during hyperinflation had their savings wiped out by inflation. By 1923 it was easier to borrow money but this saddled farmers with debt and they couldn’t keep up repayments. The increased taxes used for welfare benefits were regarded as an unfair burden on farmers. The government didn’t go far enough when they introduced high import tariffs on food products to try and relive the farmers plight and their were further price slumps in 1925 and 26. By the late 1920s there was an increase in bankruptcies for farmers and banks demanded repayment of loans.
What were the issues with the reparations
The Dawes plan was only ever intended to be a temporary settlement of the reparations. Allied forces refused to to leave the Rhineland until a final settlement of the reparations issue had been agreed. The issue was considered by an international committee headed by the American businessman Owen Young. The young plan created in Paris 1929 obliged Germany to keep to continue paying reparations until 1988. The total reparations bill was reduced from 6.5 billion to 1.8billion but the annual payment increased. All foreign control over reparations was ended and Germany was solely responsible for paying reparations. In return Britain and France agreed to withdraw all their troops from the Rhineland in 1930.
