Economic And Social Problems In Germany, 1919-1924 Flashcards
What caused the economic crisis in Germany?
TOV payments
Germany’s defeat
Revolution within Germany
How did the war efforts impact both Britain and Germany differently?
Both countries used huge levels of government spending to recover
. Britain - situation was resolved with higher taxes and government borrowing
. Germany - wartime government increased borrowing and printed more money, causing government debt to grow and currency lost value
What was Germany’s original plan to deal with the financial problem after the war efforts?
To win the war and reverse financial losses by annexing industrial areas of defeated areas and forcing them to pay heavy reparations. This didn’t work at all
How much debt was the Weimar Republic in when it came into government in 1919?
1.44 billion marks of debt
What were the Weimar’s obvious options to fixing their debt and what was wrong with these ideas?
Raise taxes or reduce spending, both too risky due to political instability during early years of Weimar Republic, would’ve caused an outrage
What were the problems with Weimar Republic raising taxes?
Risks losing support for Weimar Republic as anti-republican parties could claim taxes were being raised to pay reparations to the Allies, which Germans didn’t want to do.
What was the problem with Weimar Republic reducing government spending and how did they respond to this?
despite the now lowered military spending after war, civil servants still had to be paid
Support for Weimar was so fragile that successive governments avoided making civil servants redundant to avoid conflict and even extended welfare benefits to keep people happy and maintain support
Why didn’t Germany want to impose unpopular means of addressing economic issues?
Due to the political instability of Germany
How were things looking good in Germany by 1921 despite high debt?
Unemployment was virtually zero and there was a fast recovery in economic activity
Germany economy coped surprisingly well from wartime to peacetime
What was the main fault in Germany’s seemingly improving economy by 1921?
They’d left inflation to increase unchecked
Why did the German government allow inflation to sky-rocket?
. 1920 coalition of Konstantin-Fehrenbach was dominated by centre party who were supported by POWERFUL GERMAN INDUSTRIALISTS
- took short-term loans from central bank to expand businesses
- only repaid the loans when the value of currency was significantly reduced by inflation, taking advantage of the economic state
How were the TOV reparations to be paid?
Gold marks or goods
What were some of the ways that inflation could be seen as beneficial?
. Effectively reduced government burden of debt
. By 1921, unemployment in Germany was only 1.8% compared to 17% in Britain, encouraging investments, especially with USA
What year did high inflation become hyperinflation?
1923
Why was a Reparations Commission set up and what was the result?
To assess the damage done by Germany in allied countries to come up with a reparations figure which hadn’t been fixed yet:
. Result: Germany should pay:
- 132 billion gold marks (£6.6 billion), paid in annual investments
- ultimatum for Germany to accept terms within 6 days
How did the result of the reparations commission cause a political crisis in Germany?
Fehrenbach’s cabinet resigned in protest to the harsh terms of the TOV reparations
- replaced by Chancellor Wilhelm Wirth
No alternative but to pay the reparations so this government signed unwillingly, the first payment was made soon after
How did the start of Germany’s policy of fulfilment towards the TOV come about?
From a belief that cooperation would win sympathy from the Allies and Germans hoped a revision of the terms would come about once it was clear that Germany couldn’t possibly pay full reparations figures
What were the attempts and successes at compromising the reparations figures in 1922?
January - Germany in such bad economic state that Reparations commission postponed the January and February instalments
July - Germany asked for further suspension of payment for that year
November - Germany asked for 500 million gold marks loan and to be released from payments for the next 3/4 years to stabilise their currency
- French refused as they were suspicious Germany were just making up excuses to not pay reparations
- set the scene for the invasion of the Ruhr in 1923
What were three of the problems with paying the reparations payments?
. Made paying government debt more difficult
. German gold reserves were not adequate for the required gold
. Germany couldn’t pay coal part of the reparations as they’d lost many coals reserves in the Saar and Ruhr areas due to TOV
What was the other possible way of paying reparations but why did the allies not approve of this method?
Paying with manufactured goods
- allied countries (workers and manufacturers) saw it as a threat to jobs and businesses
How could Germany have increased its reserves of foreign currency but why didn’t this work?
By increasing exports to other nations. However:
. Allies confiscated Germany’s entire merchant fleet
. Allies later imposed high tariffs on import of German goods
Allies generally making it hard to pay reparations
What was Germany’s final solution to paying reparations?
Print more money, causing worse inflation as the value of the mark fell further
What did John Maynard Keynes calculate about the reparations issue?
£2 billion in reparations was a ‘safe maximum figure of Germany’s capacity to pay.’
- he predicted that the burden of reparations wouldn’t only damage German economy but also that of Allied countries as reparations would delay economic recovery across all of Europe
What did Peukert argue and believe about the reparations issue in 1991?
Argued that the reparations only amounted to 2% of Germany’s gross national product and that the demands were over exaggerated
He believed that Germany used inflation as an excuse to delay payments when Germany had been allowing it to spiral after the war
Which part of the reparations payment were Germany very behind in by the end of 1922?
The coal payments to France
What happened in January 1923 and what was the aim?
France and Belgium sent 60,000 men to occupy the Ruhr (industrial area) to force the Germans to comply with the TOV reparations
Aim: steal Ruhr’s coal, steel and manufactured goods as reparations
Occupying forces grew to 100,000
What did the Belgium and French forces do in the Ruhr?
. Took control of mines, factories, steelworks and railways
. Demanded food from shops
. Set up machine gun posts in the streets
How did Chancellor Wilhelm Cuno know they had no chance agains the occupying forces in the Ruhr?
The TOV has reduced the size of the Germany army and the Rhineland had become demilitarised
How did Cuno deal with the invasion of the Ruhr?
. Stopped all reparations payments
. Ordered a policy of ‘passive resistance’ - no one living in the area would cooperate with French authorities
How were Germans encouraged to go on strike and undergo ‘passive resistance’?
German workers promised that their wages would continue even on strike
How did Germany attempt to halter French efforts physically in the Ruhr?
Germany paramilitary troops secretly sabotaged French by secretly crossing the customs barrier at night and blew up railways, sank bridges and destroyed bridges
How did the French respond to paramilitary sabotage and passive resistance?
. Set up military courts
. Punished mine owners, miners and civil servants who wouldn’t comply with their authority
. Around 150,000 Germans were expelled from the Ruhr
. Some miners shot after clashes with the police
. French brought in own workers to operate railways and get coal out of the Ruhr, but this wasn’t very effective
How was it clear that French using own workers while Germans were in strike in the Ruhr not very effective?
May 1923: The output in the Ruhr fell to 1/5 per-occupation output
What were the total deaths during the invasion of the Ruhr?
132 Germans shot in the 8 months, including a 7 year old boy
How was passive resistance and economic damage from the occupation catastrophic for the German economy?
. Paying wages for striking workers was a further strain to government finances
. Germany had to import coal and pay for it using limited foreign currency reserves
. Shortage of goods increased prices further as there was no manufacturing due to the occupation
. Tax revenue lost from those who’s businesses were closed and workers who became unemployed
How bad were the economic effects of the occupation?
A total cost worth twice the annual reparations payments (should’ve just payed up)
What were the impacts of the hyperinflation crisis?
. Money lost its meaning
. Workers collected wages in wheelbarrows, trying to spend money immediately before prices arose further
. Food run short as speculators hoarded supplies in anticipation of higher prices
. Food riots where crowds looted shops
. Gangs of city dwellers went to countryside to take food from farms
. Large increase in number of convictions for theft
. People bartered possessions in exchange for vital supplies
What German needs needed to be put into legal rights in the Weimar Republic?
Those involved in the November revolution desired a better and freer life
Many people needed support after death/injury in war (post-war grievances)
How did the Weimar constitution help legalise some of the needs of the German people?
Every German citizen should have the right to work/welfare
What reforms to the welfare system and employment rights were put in place to fulfill the promises in the Weimar constitution?
. 1919: law passed to limit working days to 8 hours max
. 1919: state health insurance system extended to include wives, daughters and the disabled
. 1919: aid for war veterans who couldn’t work due to injury became a responsibility of national government
. 1922: National Youth Welfare Act declared that all children had the right to an education
How did the new social welfare reforms worsen the hyperinflation crisis?
Printing of money was now needed also to pay out these benefits
How was the cost of living clearly worsened by hyperinflation?
Prices of Rye bread (staple of German diet):
. January 1923: 163 marks per kg loaf
. October 1923: 9 million marks per kg loaf
. 19 November 1923: 233 billion marks per kg loaf
Who were the winners of hyperinflation?
. Black-marketeers brought up food stocks and sold them at inflated prices
. Those with debts and mortgages could pay them off with worthless currency
. Helped business people who took out loans and paid them back when currency further devalued
. Most farmers as food was in demand and money less important in rural communities
Who were the losers of hyperinflation?
. Pensioners, including war widows living on state pensions
. Landlords reliant on fixed rents
. Mittlestand (artisans and small business owners) badly hit as they paid a disproportionate share of taxes
. Sick were badly hit as cost of medical care increased
- increased food prices led to malnutrition
- suicide rates increased
How did the effects of hyperinflation vary?
Across different classes and geographical regions of Germany (e.g money less important in rural areas than in the city)
How did hyperinflation particularly affect middle classes?
They became impoverished and felt they had lost everything they worked so hard for (angered them)
How did the number of American dollars to one German mark change from 1920-1923?
Jan 1920 - 65
Jan 1923 - 18000 (when it got bad)
15 Nov 1923 - 4,200,000,000,000 (peak hyperinflation)
