Reacting to Economic Challenges 1918-32 Flashcards
what were the main economic problems during 1918-32
-debt
-reparations
-loss of income from loss of territory and trade
-governments spending commitments e.g. welfare, widows
-weakness of german economy compared to other major countries
-post war unemployment which reduced tax revenue and increased welfare spending
describe the problem of war debt
-as germany assumed they would win the war they took huge amounts of loans thinking they could pay this back by imposing reparations on the allies
-led to inflation
-had to pay this off by raising taxes which outraged the germans
how much did germany borrow from 1914-1918
150 billion marks
how much did prices rise by from 1914-1918
200%
describe the problem of reparations
-interallied reparations commission of 1921 set the figure of 6,600 million
-were allowed to pay this using goods such as coal
describe the problem of loss of income
-lost territory of Saar and Alsace Lorraine which were rich in resources
-this made the economy less profitable and tax revenues dropped
-other countries also suffered from unstable economy and demobilisation so there was a global economic slump
-this depressed trade so germany couldnt return to prewar trade levels
how much did coal production decline
over 15%
how much iron deposits did they lose
almost half
describe the problem of unemployment
-many soldiers returning to their jobs, women often sacked to give their jobs to them
-1.1 mill unemployed in 1919
-by second half of 1919 unemployment dropped by 50% due to the wages being half of that in 1913 so employers could afford to take in more workers
-also a need for workers to change from war economy back to consumer production
how many soldiers left the army in 1919
6 million
how many unemployed in feb 1919
1.1 million
7% of the work force
how did the inflation begin
-started paying reparations in 1921
-began printing more money to buy foreign currencies which could be used to pay
-too much money for too few products led to increased prices
how did germany try to negotiate to reduce the problem of inflation in 1922
-allies and germany agreed with allies that they would pay 720 million marks and 1450 million gold marks worth of material
-allies wanted it in gold so it wouldnt lose its value
-germany forced to increase taxes and prices of services which was unpopular
-negotiated again for a payment “holiday” but proved to allies their economy too unstable
-investors and major banks lost faith in germany economy and the value of the mark fell more compared to foreign currencies
-made foreign goods in germany more expensive
what happened in the occupation of the ruhr
-germany failed to pay france reparations
-france and belgium sent 60,000 troops into the ruhr and seize coal
-unified germany in outrage, they couldnt fight france as their army too small
how did germany react to occupation of the ruhr
-would suspend all future reparation payments
-would act in a campaign of passive resistance
-german workers went on strike and refused to produce coal
-this only hurt german economy more as they had to pay striking workers which led to printing more money
what was the german mark exchange rate against the dollar in 1914-1923
1914- 4.2
1923- 200 million
how did the government satisfy the demand for more money
-used 30 paper mills and 130 print firms and newpaper printing presses
-in january 1922 largest bank note in circulation was 10,000 marks
-by november government was issuing 1 trillion mark notes
by how much did bread prices rise
in january 1923- 163 marks
November- 200 billion
what were consequences of hyperinflation
-money became worthless
-made more sense to barter than pay cash as goods retained value
-had to pay workers daily due to the value of money changing hour by hour
-farmers refused to sell goods so people in cities began to starve
-middle class lost savings, they had to barter valued possessions or take on manual labour in return for food, blamed democracy
-working class and farmers could pay off debt
what did stresemann do to solve hyperinflation
-policy of fulfilment
-rentenmark
-dawes plan
-spending cuts (reducing pay of civil servants by 50% and benefits)
what was the policy of fulfilment
-stresemann recognised that passive resistance in the ruhr wasnt working, had to end it by meeting their terms
-gained sympathy to negotiate a better deal which led to an agreement that the french and belgians would leave in 1925
what was the rentenmark
-stresemann negotiated with Schacht to make a new temporary currency at the same value of the 1913 gold mark
-this remained stable and regular forms of trading restarted
why did people see stresemanns policies negatively
-right wing saw it as a betrayal of germany, sparked unrest in Bavaria in beer hall putsch
-left wing disliked the cut on benefits for workers who already struggle economically or are unemployed
what was the dawes plan
-US business leaders gave germany a loan of 800 million gold marks to aid recovery
-asserted that germany’s economic stability was more important than reparations
-if paying reparations threatened germany’s economic stability, US had right to let them take a payment holiday
-annual payment reduced until 1929
-repayments allowed over a longer period to reduce annual reparations bill
what were the impacts of the dawes plan
-solved germany immediate reparation problems
-1924-28 germany recieved M16,000 million in loans and payed only M7,000 to britain and france, they had more to spend on improving industry
-1928 GDP recovered to 1913 levels
-tax revenues increased so government could spend more on public work schemes e.g. housing, leisure
-welfare payments and wages for government workers increased
-US investments increased after they saw the growth in german economy
by how much did industrial production increase in 1923-28
doubled
who demanded a renegotiation of german reparations in 1928
Benjamin Strong
-feared that US investors would lose their investments
what was the young plan
-extended the period of reparation payments till 1988
-reduce reparation total to £1,850 million, a quarter of the original amount
what problems still werent solved during the golden years
-labour relations increasingly strained
-1928 big businessed trying to keep wages down but workers were demanding pay rises
-pay rose but cost of living rose with it
-Germany had trouble exporting to US as they introduced tariffs and Britain as they traded with their empire
-Balance of trade always negative
-farming failed to modernise and stagnated
-cereal production was below 20 million tonnes when previously it was 30 million
-unemployment rose from 1.2 million in 1928 to 1.9 million in 1929
why was the dawes plan bad
-economic growth dependent on US money
-insecure as it wasnt self sustaining
what did stresemann say about the economy
“dancing on the edge of a volcano”
when was the wall street crash
october 1929
how did the great depression affect the people
Unemployment:
-led to fall in average income and less money spent on food
-increased prostitution
-children scavenged for food or joined gangs to commit petty crimes
-sold possessions
-homeless squatted in disused office buildings
-hopelessness, people lost faith in democracy
-welfare committed to providing for unemployed but was only designed that the economy would have high growth
-welfare unable to deal with millions of unemployed who were out of work for 2-3 yrs
how many did the welfare budget cover
-could only cover 800,00 unemployed for only a few months
how many unemployed in 1929-32
1929- 1.9 million
1932- 6.1 million
what were the affects of the great depression on the economy
-economic decline led to bankruptcies
-5 major banks closed in 1931
-50,000 firms closed in 1929-32
-rise in unemployment led to decreased workforce so economy unable to grow
-trade fell by 55%
-business profits fell, less money to pay on welfare bills
-decline in domestic demand for food drove prices of food down by 45%
what was the affects of great depression on the politics
Hitler:
-said the only way to get out of crisis was to rearm and attack the east by force to gain raw materials and liebenraum (military strength essential for properity
-took opportunity to win over ppl
-appealed to middle class
-undermined democracy and persuaded people to support alternative governments
-it was twice in a decade that democracy failed, it failed to restore prosperity
Communism:
-communist party wanted an economy that benefitted workers, this threatened middle class wealth
-communists organised Red Front and rent strikes where workers couldnt afford rent
-Nazis benefitted from growth of communism as they could stand against them and gain middle class support
how did spending cuts help reduce great depression
-cut civil servants wage by 20%
-Muller refused to sanction welfare cuts which let to collapse of grand coalition
-Bruning used article 48 to reduce government spending on welfare which led to increase of poverty for 4 million dependent on benefits
-Bruning aimed to cancel reparations
how did diplomacy help great depression
-bruning wanted to end reparations by using economic crisis to prove they cant pay, had to wait for the crisis to get worse
-Lausanne conference made reparations abolished
how did public works improve great depression
-bruning made public work schemes to give jobs for construction and roads
-Von Papen expanded further by increasing the budget to RM302 million
-Schleicher made RM 500 million emergency fund to employ people to do repair work and land improvement schemes
-led to unemployment declining by 1932 but nazis claimed credit
how did working class living standards change in weimar
-earnings increased between 1924-29
-weekly wages in 1932 were 30% higher than in 1924
-legal changes imposed 8 hr working day so they had more leisure time
-government spending on housing 20 times higher in 1925 than 1913 and welfare increased by 60% in 1929 than in 1913
-workers living standards increased due to support from unions and SPD power
-during hyperinflation could pay off debt
-were affected from unemployment of great depression
how did established middle class living standards change in weimar
-had fixed income that failed to rise in line with inflation
-lost savings
-forced to barter or sell their goods
-were critical of americanisation of weimar culture which affected their leisure time
-income dropped by 60%
-felt insecure and threatened by working class who had SPD to support them
-affected by great depression as pay declined and lost savings/jobs
how did emerging middle class living standards change in weimar
-paid off debts
-more willing to accept american forms of leisure
-improved lifestyle from greater availability of consumer goods
-1924 standard of living was 25% lower than 1913
-affected by great depression as pay declined and lost savings/jobs
how did farmer living standards change in weimar
-farmers affected by initial policies e.g. weimar government imposed tight regulations so basic needs of pop. were met such as capping prices farmers could charge
-could pay off deb in inflation
-food they produced became more valuable in inflation, farmers did well
-1924 farmers hit with cheap imports which drove down value of their produce
-agricultural prices declined further in mass unemployment as germans cut back on purchases
-price of agricultural products dropped by 25% in 1927-30
how much did agricultural prices drop by in 1927-1930
25%
