Economic Development and Policies

Question 1

What is hyperinflation?

Early crisis years 1919-23

Answer 1

Where prices spiral out of control because the government increases the amount of money being printed. It leads to money becoming worthless

Question 2

How did WWI contribute to hyperinflation crisis?

Early crisis years 1919-23

Answer 2

• Germany was not prepared for such a long war and borrowed money to pay for the increasing costs (85% of money was borrowed by 1918) rather than raise taxes
• The reparations (£6.6 million) demanded of Germany in ToV had to be paid in Gold Marks which held their value as the currency declined. This forced the Weimar government to print larger quantities of money to meet the payment deadlines

Question 3

How did Weimar Republic’s constitution contribute to hyperinflation crisis of 1923?

(Early crisis years 1919-23)

Answer 3

The constitution made social security a constitutional right - the government had to support the unemployed. The cost of introducing social reforms and welfare (e.g. housing and benefits for the disabled, orphans war widows etc) increased national debt and worsened inflation of the currency

Question 4

What event triggered the hyperinflation crisis of 1923?

Early crisis years 1919-23

Answer 4

The French occupation of the Ruhr in 1923 (in revenge for Germany’s failure to pay its reparations) resulted in the government ordering German workers to adopt passive resistance. The Weimar government had to rely on expensive import of essential raw materials (e.g. coal), printing more banknotes to pay for it. This led to hyperinflation

Question 5

Who suffered during hyperinflation?

Early crisis years 1919-23

Answer 5

• Anyone with savings saw them become worthless

- People on fixed incomes / pensioners wages became worthless

Question 6

Who benefitted during hyperinflation?

Early crisis years 1919-23

Answer 6

• Anyone with debts, mortgages or loans were able to pay these off easily with the inflated money. Groups of businessmen and homeowners took advantage and bought businesses / houses at fractions of the cost

Question 7

How did Stresemann deal with hyperinflation?

Stresemann years 1923-29

Answer 7

• He ordered sharp cuts in the government spending to try and reduce the national debt
• He introduced a new German currency - the Retenmark - in December 1923
• He negotiated a fixed timetable for Germany’s reparation payments in the Dawes plan in 1924

Question 8

What evidence is there of a more stable economy under Stresemann 1924-29?

(Stresemann years 1923-29)

Answer 8

• Certain sectors of the economy prospered - chemicals company I.G> Farben became the largest in Europe
• Exports rose 40% between 1925-29

Question 9

What evidence is there of improved living standards under Stresemann?

(Stresemann years 1923-29)

Answer 9

Wages rose every year between 1924 and 1929

Question 10

What was the main weakness of the German economy 1924-29?

Stresemann years 1923-29

Answer 10

Germany’s economic recovery was too dependent on the USA - when the effects of the Wall Street Crash and Great Depression hit Germany, credit (loans) dried up and the USA demanded immediate repayment of loans

Question 11

What evidence is there that the German economy had not fully recovered by 1929?

(Stresemann years 1923-29)

Answer 11

• Agriculture was in recession by 1927. Farmers’ incomes was 44% below national average
• Unemployment did not fall below 1.3 million and levels were climbing before 1929
• Overseas trade was sluggish - Germany always imported more than it exported

Question 12

How did the Wall street Crash (WSC) contribute to the Depression in Germany?

(Depression 1929-32)

Answer 12

• US loans and investments immediately dried up. America then demanded repayment of its short-term loans
• Demand for exports collapsed as other countries reduced their imports - world trade slumped
• Without overseas loans and export trade falling, prices and wages fell and bankruptcies increased

Question 13

How far did the Wall Street Crash (WSC) contribute to the depression in Germany?

(Depression 1929-32)

Answer 13

Even without the WSC, the German economy would probably have faced a serious depression. The WSC was the final push that brought the Weimar economy crashing down - it determined the timing of the Depression, and made the effects much worse. But it was not the only cause of Germany’s Great Depression

Question 14

Name 4 effects the Depression had on Germany’s economy?

Depression 1929-32

Answer 14

1. National income shrunk by 39% between 1929-32
2. Number of unemployed rose to over 6 million. 1/3 of people of working age were jobless
3. 50,000 businesses went bankrupt
4. 5 major banks collapsed in 1931