Economic and social problems

Question 1

Summarise the causes of hyperinflation

Answer 1

• Wartime Govs chose to finance the war through increased borrowing and printing more money.
  -> gov debt grew and value of currency fell.
• based on assumption Germany would win and recoup losses by annexing industrial areas and forcing enemies to pay reparations.
• 1919, new W rep faced debt of 1.44 billion marks.
  -> had option of raising taxes and reducing spending to debt.
  -> however raising taxes would alienate support -> anti-rep parties can claim they were raising taxes to pay reparations.
  -> difficult to reduce spending -> still civil servants needed to be payed despite the military being reduced.
  -> W gov avoided unpopular measures, avoided firing civil servants, even extended welfare benefits of there was so little support.
• Inflation was somewhat beneficial -> by 1921 unemployment only 1.8% -> encouraged investment in USA.
  -> however, unchecked, became uncontrollable and by 1923 became hyperinflation.

Question 2

What was the political impact of reparations

Answer 2

• When sum of £6.6 billion was presented to government in 1921, cabinet of Fehrenbach resigned in protest.
  -> replaced by chancellor Joseph Worth.
• no alternative and gov signed unwillingly.
• By Jan 1922, lots of economic difficulties -> Reparations commission grant postponement of Jan and Feb instalments.
  -> Nov 1922 asked for loan of 500 million gold marks and to be released for 3.4 years to stabilise the currency.
• French see this as an excuse and refuse to agree.
  -> this dispute set the scene for a major clash over reparations in 1923 -> Franco-Belgian invasion of the Ruhr.

Question 3

What was the economic impact of reparations

Answer 3

• Part of reparations required coal -> however Germany lost large part of coal reserves in T of V.
• Export trade hampered by confiscation of merchant fleet and impose high tariffs on imports of German goods.
• no option but to print more money -> worsened inflation.
  -> allies possibly took away mean by which Germany could pay reparations.

Question 4

What were the key features of the Franco-Belgian occupation of the Ruhr

Answer 4

• By end of 1922, Germany was falling behind in payment of reparations to France in the form of the coal.
  -> French and Belgians send military force of 60,000 men to occupy the Ruhr industrial area in Jan 1923.
  -> Aims: seize coal, steel and manufactured goods as reparations.
• over 1923, forces grew to 100,000.
• took control of mines, factories, steelworks and railways.

Question 5

How did Germany respond to the Franco-Belgian occupation of the Ruhr and how did the French respond to this

Answer 5

• gov of chancellor Wilhelm -> stopped reparations payment and ordered policy of passive resistance.
  -> businessmen, railwaymen and miners would not cooperate with French.
• Promised workers wages would continue -> paramilitary troops secretly sabotage the French.
  -> blew up railways and destroy bridges to disrupt the French.
• set up military courts, punish mine owners, miners and civil servants who would not comply.
  -> 150,000 Germans expelled from area.

Question 6

What was the economic impact of occupation and passive resistance

Answer 6

• paying wages and providing goods for strikes was another drain on finances.
• tax revenue lost from business being closed down and workers being unemployed.
• shortage of manufactured goods pushed prices up.
  -> combined with cost of this amounted to twice annual reparations.
• Gov refuse to raise taxes and resort to printing more money -> leading hyperinflation.

Question 7

Summarise the hyperinflation crisis (social impact)

Answer 7

• Workers collected wages and salaries in wheelbarrows and shopping baskets.
• rising food prices had the most serious effect -> speculators hoarded supplies in anticipation of higher prices in the future.
  -> breakdown in law and order.
  -> crowds looted shops.
• large increase in number of convictions for theft.

Question 8

Explain social welfare in the Weimar Republic

Answer 8

• key right was that every German citizen should have the right to work or to welfare.
• 1919: law passed limiting working day to max of 8 hours.
• 1919: aid for war veterans incapable of working due to injury -> and for war widows and orphans also increased.
• 1922: National Youth welfare Act decreed all children had right to education.
• But social welfare budget put huge strain on the government.
  -> printing largely done to pay welfare benefits the Rep was committing to -> feeding hyperinflation.

Question 9

Who were the winners of hyperinflation

Answer 9

• Black marketeers: bought food stacks and sold at inflated prices.
• those with debts, mortgages and loans can pay off owed money with worthless currency.
• Helped firm owners who took out loans and repaid them when they devalued further.
• farmers coped well as food was in demand and money end less important in rural areas.

Question 10

Who were the losers of hyperinflation

Answer 10

• patriots who lent money in war by purchasing fixed interest rate ‘war bonds’ -> interest payments decrease in value.
• Unskilled and workers not in trade unions hit hard -> by end of 1923 -> only 29.3% workforce was fully employed.
• pensioners -> including war widows living on state pensions.
• Mittelstand -> costs rose, prices charged unable to keep pace with inflation.
  -> payed disproportionate share of taxes.