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
