Economic and social problems in Germany, 1919 - 1924 Flashcards
How did Germany pay for WW1 ?
- Paid for the war through increased borrowing and printing more money
What was Germany’s economic situation after loss of the war ?
- 1.44 billion in debt
- value of the currency fell
What were all the costs of WW1 ?
- huge debts
- damages to industry
- cost of army
- war widow pensions
What two option did the Weimar government have to reduce national debts ?
- raise taxes and reduce spending
- print monet
Why was raising taxes and reducing spending a bad thing to do for the Weimar Republic ?
- rise In taxation would risk alienating support for the new republic as anti republican parties could claim that taxes were being raised to pay reparations
- Reduction in spending as the government had very weak support
Why did the Weimar government decide not to raise taxes and reduce public spending ?
- given the severe political difficulties and their weak support
What was unemployment and economic activity like in Germany after the war ?
- unemployment had virtually disappeared after 1921
- there was rapid recovery in economic activity
How was the payment of reparations made difficult for Germany ?
- Germany’s gold reserves were inadequate for the scale of the reparations payments that had to be made in gold.
- Another part of reparations payments had to be made in coal, but Germany had lost part of its coal reserves in the Versailles Treaty
- A further possible method of payment was through manufactured goods but the Allied countries did not agree as they saw it as a threat to their jobs and businesses.
- Germany may have been able to increase its reserves of foreign currency by increasing its export to other nations to make the payments. However, Allies hampered Germany’s export trade by confiscating merchant fleets and imposing huge tariffs on imports of German goods
What was the economic impact of the reparations ?
- Reparation payments made repayment of the huge government debt resulting in war even more difficult.
How did Germany respond to the Allies making it difficult to pay reparations ?
- The response of the German government was to print more money
Effect / Impact of the German government printing more money ?
- made inflation worse and made the value of the mark fall even further
What caused the Franco - Belgian invasion of the Ruhr ?
- By the end of 1922, Germany had been seriously behind in its payment of reparations to France in the form of coal
Details of the Franco - Belgian invasion of the Ruhr ?
- French, alongside the Belgians, sent a military force of 60,000 men to occupy the Ruhr industrial area
What was the purpose of invading the Ruhr ?
- Ruhr was an industrial area
- Seen as a way for the allied forces to get their money from Germany either from making Germans work harder or seizing the area’s coal, steel and manufactured goods
How did German respond to the invasion of the Ruhr ?
- Chancellor Cuno responded by stopping all reparations payments
- Ordered a policy of ‘passive resistance’ to the Germans in the area toot cooperate with the French
Why could the Germans not fight back the invasion of the Ruhr ?
- The Ruhr was a demilitarised zone as it was part of the Rhineland.
What did the ‘policy of passive resistance’ include ?
- included not working
Why did the German workers comply with the ‘policy of passive resistance’ ?
- German workers were promised by their government that their wages would continue if they went on strike.
What were the economic effect of occupation in the Ruhr ?
- paying the wages or proving goods for workers was a further strain on government finances.
- Tax revenue was lost from businesses that were closed and people who became unemployed
- Shortage of goods pushed up prices further
- Production decreased, France and Belgian workers brought in but output was not the same.
What was the combined costs of the economic effects of occupation in the Ruhr ?
Combined cost of all amounted to twice the annual reparation payments
How was the occupation of the Ruhr a challenge for the government ?
- shortage of goods pushed prices up further
- more poverty which made German situation even worse.
- Government had no money to help people, casing unpopularity.
How did the government respond to the amount of twice the annual reparations fee ?
- printed more money which was the trigger for hyperinflation
What event caused hyperinflation ?
- occupation of the Ruhr
Why was the Weimar government unpopular ?
- stab in the back theory
- war guilt clause
- acceptance of Versailles settlement
What was the hyperinflation crisis ?
- money lost its meaning as prices rose to unimaginable levels
How big was the production of money in Germany ?
- Around 200 factories worked full time to produce banknotes which was put into the economy
Negative Impacts of the hyperinflation crisis
- hyperinflation caused chaos
- Rising prices of food
- Food began to run short as speculators hoarded supplies in anticipation of higher prices in the future
- Large breakdown in law and order, large increase in the number of convictions for theft.
Positive social impacts of hyperinflation ?
- those who had debts, mortgages or loans could play the money they owned in worthless currency
- helped enterprising business people who took out new loans and repaid them once the currency devalues further
- Owners of foreign exchange and foreigners living in Germany could benefit
- Most farmers coped well as food was in high demand
- Those leasing property on long term fixed rates gained because the real value of the rents they were paying decreased.
What types of people suffered the most from hyperinflation ?
- those relying on savings, fixed income or welfare support
- students, retired and the sick
Negative social impacts of hyperinflation ?
- Workers, especially the unskilled and those not in a trade union were hit hard. Workers were given wage increases, but these did not keep up with rising pieces, standards of living declined
- Artisans and small business owners hit badly. Costs rose and the prices they charged could not keep pace with inflation. They also paid a disproportionate share of taxes.
- landlords reliant on fixed rates were badly hit.
- Sick were very badly hit. Costs of medical care increased whilst rapid rise in food prices led to widespread malnutrition. Death rates in large cities increased and suicide rates.
How was unemployment affected by hyperinflation ?
- By 1923, there was an increase in unemployment and short time working ; at the end of 1923, only 29.3 % of the workforce was fully employed
How were the middle class affected / impacted by hyperinflation ?
- Many middle class people became impoverished a a result of hyperinflation and left with a sense of that they had lost the most
- These people had grown up believing in hard work, thrift and saving for the future, only to find their savings wiped out and their comfortable lifestyles destroyed.
What happened to people’s saving was a result of hyperinflation ?
- those with savings and who had lent money to the government were badly hit as their money became worthless
Figures that show hyperinflation ?
1919 - Loaf of bread cost 1 mark
1923 - Loaf of bread cost 100 billion marks
how did hyperinflation affect Germany’s international economics ?
- Hyperinflation caused imports to dry up
- German marks became worthless against other currencies
- Foreign suppliers start refusing to accept German marks
What new social welfare changes did the government make ?
1919- State health insurance which was limited to workers employment was extended to wives, daughters and the disabled
1919 - aid for war veterans, war widows and orphans increased
1922 - National Welfare Act required all local authorities to set up youth offices with responsibility for child protection and decreed that all children had the right to education
Impact of the social welfare policies ?
- put a huge demand on the government
What did the printing of money also go out for ?
- largely to pay out welfare benefits that the Weimar Republic was committed to providing
Why were social welfare policies increased ?
- pressure of a better and freer life for working class Germans
