Economic Recovery Flashcards
Who was in place to deal w Hyperinflation
Afterthe trauma ofthe hyperinflation crisis, this turnaround war wesstabilised and some secions Attre economy began to grow and prosper. This turnaround was due to the actions of Gusse Stresenants great coalition’ government, which held office between August and November 1023.
One ofthe key architects of this stabilisation was Hjalmar Schacht, the Currency Commissioner under Stresemann and subsequent governments.
Actions taken to stabilise the currency
Actions taken by Stresemann’s government included:
• The ending, in September 1923, of passive resistance to the occupation of the Ruhr. This reduced government spending on payments to workers on strike.
• The introduction, in November 1923, of a new currency - the Rentenmark. The new currency was exchanged for the old at a rate one rentenmark for one trillion old marks. The currency was backed by a mortgage on all industrial and agricultural land.
• The government kept tight control over the amount of money in circulation to stop inflation getting out of control again.
° Stresemann’s government cut spending and raised taxes in order to reduce government debt.
Result of actions taken to stabilise currency
As a result of these changes, government debt was reduced, confidence in the currency was restored and business confidence began to grow. Not all companies thrived: those that were well-managed and avoided excessive debt were able to prosper; those that relied heavily on credit went out of business. henumber of bankruptcies showed a sharp increase in 1924. People who had lost their savings in the hyperinitation crisis gained nothing from the introduction of the new currency.
Reparations issue background
Long termstablisation of the German economy depended overseer imes, or the reparations issue.
There were two attempts to reach a settlement, Firstly, in November 1923, Stresemann asked the Alles Reparations Committee to investigate how the reparations issue could be resolved. Under the Chairmanship of the American banker Charles Dawes, a committee of financial experts drew up an interim plan to reduce the burden of reparations payments. The result was the Dawes Plan of 1924.
Dawes plan
• The total reparations bill remained unchanged but annual payments were reduced for the period
1924-29.
• A loan of 800 million marks from the USA would fund investment in the German economy and therefore help to stimulate economic growth. This would enable Germany to meet its reparations
payments.
•The Allies took control over Germany’s banks and railways.
The American loans that were a key part of the Dawes Plan helped the German economy to recover. The Plan also led to the withdrawal of French and Belgian troops from the Ruhr in 1924-25.
Debate about Dawes Plan in G
There was a heated debate in Germany about whether to accept the Plan. The ‘national opposition’ of DNVP, the Nazi Party and other right- wing groups attacked the government for agreeing to the Plan, arguing that Germany should defy the unjust Treaty of Versailles and refuse to pay any reparations.
Stresemann believed that Germany had no alternative to accepting the Plan, but privately he called it
‘no more than an economic armistice’.
Young Plan
In 1929 a committee led by an American businessman, Owen Young, drew up a plan for a final settlement of the reparations issue.
• The total bill was reduced (from £6.6 billion to £1.8 billion).
•Annual payments were increased and the repayment period was set at 59 years.
•Allied control over banks and railways was relinquished.
• Allied occupation forces were to withdraw from the Rhineland by June 1930.
Debate in G over Young Plan
The Young Plan was accepted by the German government but not without fierce opposition from nationalist parties on the right. The DNVP’s new leader, Hugenberg, organised a national campaign against the Plan and gave Adolf Hitler a leading role. This succeeded in forcing the government to put their freedom (aw’ - which would require the government to repudiate the war guilt clauses of the Treaty of Versailles - to a referendum. Although the freedom law’ was rejected by a majority in the referendum, nearly 6 million people voted in favour; the referendum campaign also gave Hitler the chance to make an impact on national politics for the first time.
Evidence for economic progress
There was monetary stability and a significant influx of foreign capital - around 25.5 billion marks.
• By 1928 industrial production levels generally exceeded those of 1913. This was the result of more efficient production techniques.
• German industry achieved economies of scale by the growing number of cartels.
German exports rose by 40 per cent.
• German agriculture became more mechanised and more efficient.
• A state arbitration scheme was introduced in 1924 to try to prevent strikes. Workers were able to argue their case for more pay or fewer hours before neutral judges who were often sympathetic to the workers’ claims.
• Hourly wages rose in real terms every year from 1924 to 1929.
• In 1927 a compulsory unemployment insurance covered 17 million workers, the largest of its kind in
the world.
Evidence for economic weakness?
• Unemployment never fell below 1.3 million in the period and by 1929 had reached nearly 3 million.
• Government intervention in the labour market, generally on the side of organised labour (for example, the higher employer contributions for social insurance), increased production costs, which made German goods more expensive and thus more difficult to sell.
• Between 1925 and 1929 German imports always exceeded exports.
• The collapse in world food prices from 1922 resulted in widespread rural poverty. Farmers made up one-third of Germany’s population.
• After 1924 governments continually ran deficits, relying on foreign loans to balance the books.
• Germany’s dependence on foreign capital made it susceptible to any future dislocation in the world economic system.
• Farmers made up one-third of the population.
Successive Weimar governments appeared to disregard their interests, preferring to support policies that ensured urban workers were fed cheaply.
