Empire to democracy 1914-1929: Economic Flashcards
(22 cards)
How did the war impact Germany’s economic situation?
- Funded through treasury bills rather than increased taxation
- Due to losing the war, paying back these bills was very hard
- Government resorted to printing more money which increased national debt
- Loss of the war also made paying back the debts more difficult due to added burdens of the Treaty of Versailles
- However, the decision to continue borrowing paid off, as, with low unemployment, investment into Germany was encouraged
What was the national debt situation within this period?
1913- 2000 million marks
1919- rose from 5000 million to 144,000 million marks (due to printing money)
1919- 45,000 million marks
What led to hyperinflation?
- Prices doubled between 1918 and 1919
- Prices quadrupled between 1919 and 1920 (14x higher than 1913)
- Government was dominated by Centre Party who benefitted from inflation by taking short term loans to expand their businesses
- Germany paid 1st instalment of £50 million in 1921
- However, by 1923 they stalled the payment which prompted the occupation of the Ruhr
- Led to hyperinflation in 1923
How did Stresemann respond to hyperinflation?
- Called off passive resistance to the occupation of the Ruhr in 1923
- His government introduced a new currency; The Rentenmark to replace the mark which was now worthless
How did Stresemann address the reparations bill?
- 1924 Dawes Plan
- 1929 Young Plan
When was industrial action picked back up?
- After 1923
- Pre war levels were reached by 1927
- Pre war levels exceeded from 1928/1929
What was the rate of unemployment in Germany compared to Britain?
1921 Germany- 1.8%
1921 Britain- 17%
How did the occupation of the Ruhr worsen Germany’s economic situation?
- Paying wages or providing goods for strikers drained government money
- Tax revenue was lost from businesses who ceased and workers who became unemployed
- Germany had to import coal and pay for it with limited foreign currency reserves
- Goods shortages increased prices
- Value of the mark collapsed
What did the government printing money lead to?
- German currency being completely worthless by 1923
- Workers had to be paid daily or twice a day due to prices rising by the hour
- When people received money they had to spend it as quick as they could before the currency further devalued
What were the inflation statistics within this time?
- Inflation exceeded 100% for most of 1920
- In 1922 the monthly rate of inflation passed 50% for the 1st time
- Fell below 0 in 1926
Who did Stresemann appoint as Reich currency commissioner?
Hjalmar Schacht
What measures did Hjalmar Schacht implement?
- 1923- Introduced the Rentenmark (valued at 1 Rentenmark to 1 trillion marks) It’s supply was strictly limited, sp was seen as safe and it ended up holding its value
- Took over leadership of the Reichsbank and created a range of measures to reduce inflation and balance expenditure against income
- Taxes on individuals and companies were introduced
- Enabled the government to reinvest a larger proportion of the nation’s wealth
Did Hjalmar Schacht’s measures improve Germany’s economic situation?
- Helped the economy to grow rapidly in 1924 and 1925
- Companies prospered
- Number of companies that went bankrupt increased from 233 in 1923 to over 6000 in 1924, but this helped to make the economy more efficient
- Old inflated marks were cashed in and in 1924 the Rentenmark became the Reichsmark
- Inflation was no longer much of a problem
What did the Dawes Plan state?
- Reparation payment of £6.6 billion remained, but the amount paid each year would be reduced until 1929
- Germany should receive a large loan of 800 million marks from the USA
- Germany would reorganise the Reichsbank and establish a new stable currency
What was the response to the Dawes Plan?
- DNVP and smaller right wing groups, such as the Nazis, bitterly attacked it
- Accepted by Germany and the Allies
How did the Dawes Plan benefit Germany?
- Allies accepted that Germany’s problems with the payment of reparations was real
- Loans to the value of 25.5 billion marks were received between 1924-1930, mainly from USA (helped to provide new machinery, factories, houses, jobs)
- Evacuation of the Ruhr and better relationship with France
What did the Young Plan do?
- Reduced total reparations by 75%
- Reduced annual payments by extending period of payments to 59 years
- Ended allied supervision of German banking
- Provided the deferment of payments in times of economic hardship
What was the response to the Young Plan?
- Severely criticised by right wing politicians such as Hitler
- Schacht disagreed with it and resigned
What was the rate of economic growth in Germany in comparison to the USA?
- German economy grew by 4% between 1913 and 1929
- US economy grew by 70%
What was unemployment like within Germany during this period?
- Never fell below 1.3 million
- By 1929 it reached 3 million
What were some of the industrial developments?
- Industrialists rationalised their plants- introduced new technology, adopted new management/production techniques and formed cartels (by 1925 there were around 3000 cartels)
- 1927- Coal production reached 79% of its pre 1913 level, iron reached 68% and steel reached 86%
- Advancements in the chemical industry
- Electrical industry continued pre war expansion
- Car and aeroplane industry expanded
What was the agriculture situation?
- Suffered greatly during the war from the loss of unprotected rural labour (army conscription), leaving the fields to women and old men
- 1916 failure of the potato crop which led to the 1916-1917 turnip winter (population was reduced to living on traditional animal fodder)
- 1917-1918 poor harvests
- 1919- More than 20% of cultivated land belonged to less than 1% of landowners
- 1927-1928 Farmers were getting barely any return on the cost of running farms, and were faced with high tax demands, rents, interest payments
