Reacting to Economic Challenges 1918-32

Question 1

Why was the German government in trouble in 1918?

Answer 1

The war! The government had spent ALL gold reserves on it and had been printing more and more money.

Question 2

How many marks were in circulation in June 1914?

Answer 2

6,300 million.

Question 3

How many marks were in circulation by December 1918?

Answer 3

Over 33,000 million - causing severe inflation.

Question 4

What is inflation?

Answer 4

When money loses value/prices go up.

Question 5

How did the end of the war make things even worse?

Answer 5

Arms production, which employed a lot of people, stopped.

Question 6

What other effects did the war have on the German economy?

Answer 6

Agricultural production dropped by 20% and industrial output halved. Also, many soldiers returned as unemployed workers.

Question 7

When was inflation at its worst?

Answer 7

Inflation went up with increasing speed until it peaked in 1923.

Question 8

What was the crisis with social welfare?

Answer 8

Simply put, the Weimar government tried to look after a large number of people such as war veterans, disabled veterans and the families of victims - but had to go into debt to maintain the programmes.

Question 9

Give examples of the social welfare crisis?

Answer 9

in 1920 - 1,537,000 disabled veterans and almost 2 million survivors not classed as disabled.

By 1924, there were still 768,000 disabled veterans.

About 10% of the population were getting federal welfare payments.

Question 10

How did the federal government help these people?

Answer 10

By making one-off lump payments and paying pensions.

Question 11

What was the crisis with debt and reparations?

Answer 11

The government had borrowed heavily during the war - by 1918, it owed about 150 billion marks (3 times what it owed in 1914). The reparations from the Treaty of Versailles made the situation even worse.

Question 12

What was the German government’s immediate response?

Answer 12

They tried to meet the payments by borrowing more and printing even more money - but this was unsustainable.

Question 13

What happened from 1921?

Answer 13

The Germans entered into negotiations about how much, and when, they should pay.

Question 14

What was the reaction to this?

Answer 14

The Allies, especially France, believed Germany was trying to get away with not paying at all. They argued that all economies had problems - especially France.

Question 15

How did Germany continue to pay?

Answer 15

Until 1924, they paid in kind - e.g. with coal, wood and railway carriages.

Question 16

What happened in the Ruhr in 1923?

Answer 16

Following the London Ultimatum in 1921 when Germany fell behind with reparations payments, the French enacted a term which allowed for the military occupation of the Ruhr.

Question 17

Why was the Ruhr important?

Answer 17

Because it is a key industrial area with much coal production and industries located there.

Question 18

What effects did the French (and Belgian) occupation of the Ruhr have?

Answer 18

The government instantly stopped all reparations payments to the French (but not the other allies), told all German officials not to accept orders from non Germans encouraged workers to engage in passive resistance.

Question 19

What is passive resistance?

Answer 19

Working slowly, striking and carrying out acts of sabotage.

Question 20

How did the French escalate matters in the Ruhr?

Answer 20

They cut the Ruhr off from the rest of Germany by setting up a border, patrolled by soldiers and took control of postal and telegraph services - the main means of communication.

They tried to solve the problem of passive resistance by using force or importing their own workers.

Question 21

What was the eventual outcome of the Ruhr crisis?

Answer 21

Neither side benefited from the crisis, so in 1923, the Germans stopped passive resistance and entered into negotiations with the French.

Question 22

What was the Hyperinflation crisis?

Answer 22

Inflation that spiralled out of control. Prices went up several times in one day. For example, a newspaper that cost 1 mark on May the 1st 1922 cost 100,000 marks by September 1st 1923 and 700 billion marks by November 17th 1923!

People lost all faith in money and came to rely on barter and the black market.

Question 23

How did the black market affect hyperinflation?

Answer 23

Prices grew even higher as goods were scarce - eventually only the rich could afford to ‘buy’ on it.

Question 24

What was ‘Notgeld’?

Answer 24

Emergency (Not) Money (geld). This was made by businesses, towns and regions as a substitute for real German marks.

Question 25

Was it only the poor who suffered?

Answer 25

No, everyone did - even rich families lost wealth, savings and prestige.

Question 26

How did things come to a climax and what happened?

Answer 26

In August 1923, the crisis reached a peak. The government collapsed and a new coalition government headed by Stresemann of the DVP took over.

Question 27

What advantages did Stresemann have when he took over?

Answer 27

The Emergency Decree of 10 August. This enabled his government powers to postpone Reichstag meetings and rule by decree - so they could act rapidly.

Question 28

How long did Streseman last?

Answer 28

The coalition only lasted until November 1923, but he was asked to stay on as foreign minister in the next government. He was a stabilising force who urged compromise on political ideals and collaboration to solve Germany’s problems.

Question 29

How did Stresemann and the new president of the Reichsbank, Shacht make money work again?

Answer 29

1. Mark withdrawn and Rentenmark introduced in October 1923.
2. All forms of ‘emergency money’ were banned
3. Emergency decrees were used to control rents, wages and prices.

Question 30

What were the effects of these attempts to make money work again?

Answer 30

The Rentenmark restored faith in the German currency, at home and abroad.

There was much resentment among people who still had savings as the Rentenmark had such a low initial value against one gold mark.

Germans changed hoarded foreign currency and ‘emergency money’ into Rentenmarks - prices settled.

On 30th August 1924, Shacht oversaw the change to the Reichsmark.

Question 31

What happened on 26th September 1923?

Answer 31

Stresemann called for abandonment of passive resistance in the Ruhr.

Question 32

October and November 1923?

Answer 32

Decrees, using Stresemann’s new powers, to introduce the Rentenmark, set up state arbiters to settle disputes in the workplace and set wages and working hours. Also, ‘emergency money’ banned.

Question 33

February 1924?

Answer 33

Third Emergency Tax Decree sets the value of the new Reichmark.

Question 34

August 1924?

Answer 34

Reichmark replaced Rentenmark.

Question 35

1st September, 1924?

Answer 35

Dawes Plan comes into force - the Reichmark’s introduction was planned just before this so that reparations could be fixed in the new currency.

Question 36

1st December 1924?

Answer 36

Locarno Treaty signed - Germany agrees to borders set out in Treaty of Versailles and the demilitarisation of the Rhineland.

Question 37

September 26th 1924?

Answer 37

Germany joins the League of Nations.

Question 38

August 1928?

Answer 38

Germany signs the Kellog-Briand Pact that outlaws war.

Question 39

January 1929?

Answer 39

Negotiations begin to replace the Dawes Plan with the Young Plan.

Question 40

October 1919? Why such a disaster?

Answer 40

Stresemann died! Wall Street Crash! This triggers a worldwide depression.

Question 41

Why was foreign policy so vital to the German economy?

Answer 41

1. The Dawes and Young Plans helped stabilise Germany’s economy and made reparations more manageable.
2. Signing treaties and agreements such as Locarno and Kellog-Briand made Germany a more acceptable foreign power.

Question 42

How did expansion of businesses and cartels help the recovery of the economy?

Answer 42

Bigger businesses are more able to get through economic difficulties.

Smaller business began to form cartels - setting and controlling prices within a particular area - this helped stabilise the economy. For example, I.G. Farben, which sought to monopilise the chemicals industry, leading to far greater production by 1925.

Question 43

How did Stresemann’s actions help the German economy in terms of trade tariffs?

Answer 43

There was a lot of bad feeling after the war towards Germany, so it was difficult for Germany to set up trade links without being punished by high tariffs.

The combination of Germany producing goods that other countries really needed, such as chemicals and steel, and Stresemann overseeing the signing of key treaties and joining the League of Nations meant that tariffs came down and Germany’s exports returned to pre-war levels by 1926.

Question 44

Why was the economic ‘recovery’ flawed?

Answer 44

1. It was heavily dependent on loans.
2. It was subsidised by the government, which spent heavily on social welfare.
3. It was marred by industrial dispute, which decreased productivity and drove wages up.

Question 45

What was the impact of the Great Depression on the Weimar Republic?

Answer 45

The USA stopped lending and called in foreign loans.

Question 46

How did unemployment rise in Germany from 1929 to 1933?

Answer 46

From 1,899K to 4,804K.

Question 47

How was German industrial production affected by the Great Depression?

Answer 47

By the end of 1932, it was half its 1928 levels.

Question 48

How did government react to the effects of the Great Depression?

Answer 48

They argued, rather than co-operating (remember that Stresemann had died!). They failed to make quick decisions, partly because Hindenburg resisted more government by emergency decree.

Question 49

What happened to the coalition government?

Answer 49

It was replaced in 1930 by a government led by Chancellor Bruning.

Question 50

What did Bruning want?

Answer 50

Cuts in government spending (social welfare).
Wage cuts.
Higher taxes.

Question 51

How did the Reichstag react to Brunings policies?

Answer 51

They rejected his ideas, so Hindenburg went back to ruling by emergency decree.

Question 52

Did Bruning’s policies work in the period from 1930-32?

Answer 52

No. They did cause some deflation, but ultimately deepened the depression in Germany. Industrial production, prices and exports all fell by around 50%. Unemployment rose to the highest ever levels in 1932 (5,600K).

Question 53

Were there any benefits to Bruning’s policies?

Answer 53

Yes, at least it became clear that Germany was unable to pay reparations or even loans from other countries.

Question 54

What was decided about Germany’s inability to pay reparations or loans at the Hoover Moratorium?

Answer 54

on 1st July, 1931, the Hoover Moratorium, an international agreement, suspended the need for Germany to pay back loans, or to pay interest on them, for a year.