Summary 2: 1919-1923/4 Flashcards
What was the legacy of the Kaiser Reich ?
- war had been financed by borrowing and printing money (meant govt. debt grew and value of the mark fell)
- Germany relied on winning and using reparations to repay the costs of the war
- Cost of war: national debt in 1913; 5,000 million marks - in 1919 144,000 million marks
- Inflation: 1920 the mark was worth 10% of its 1914 value
- reperations
What was the cost of the war ?
- national debt in 1913; 5,000 million marks
- in 1919 144,000 million marks
How did the Weimar constitution chose to deal with the financial consequences of the war ?
- decided they could not risks further unpopularity and so refused to raise taxes of cut spending so carried on borrowing and adding to debts and inflation
- most significantly this led to more inflation (1918-1919: prices doubled) and (1919-1920: prices quadrupled)
What were the benefits of the rising inflation ?
- industrialists benefitted by taking out short term loans (by the time they had to pay back the loan the value of the money borrowed had significantly fallen)
- the burden of govt debt was also lessened by inflation
What where the terms of reparations made in 1921 ?
a total of £6.6bn or 132 marks to be paid in annual instalments
What was the political impact of reparations ?
- the govt resigned rather than signed the treaty
- the new govt under Wirth saw no alternative than accepting the terms (first payment was the beginning of the policy of fulfilment)
- by Jan 1922 Germany asking for 1st postponement then again in July
- by nov 22 Germany asking for loan to help pay obligations causing France to become increasing suspicious
What was the economic impact of reparations ?
- reparations added to existing economic problems (DID NOT CREATE THEM ALL)
- harder for govt to pay off debts
- payments in coal difficult as TofV had taken reserves and Saar areas
- Merchant fleet had been confiscated by Allies so difficult to earn money through exports
- Govt resorted to printing more money (adding to inflationary pressure)
What happened during the Ruhr occupation 1923?
- Jan 23: French and Belgium forces occupied the Ruhr after Germany missed a reparation payment
- up to 100,000 men occupied German soil/factories/mines/steelwork and railways
- Germany military response impossible so govt of Wilhem Cuno ordered passive resistance and the German workers in the Ruhr went on strike - this stopped the French seizing coal and steel (briefly uniting the Germans in resisting foreign invaders)
- however put huge pressure on the Germany economy as the govt promised to keep paying German workers
- french response escalated eg.military courts and violent police confrontations
What were the economics effects of the Ruhr occupation ?
- paying workers further drained govt resources
- tax revenue lost from business in the Ruhr
- Germany had to import coal (draining valuable foreign currency reserves)
- shortage of goods added to inflations as prices rose
❗️the combined cost was x2 that of annual reparations - the new constitution had established the right for germans to work or receive welfare, crisis meant more germans needed welfare and more money had to be printed
How did the Ruhr crisis impact hyper inflation ?
- govt had to pay strikers and compensate for lost tax revenue therefore had to print more money which caused inflation to accelerate into out of control hyperinflation
- by aug 1923, the german mark was virtually valueless which meant the prices of goods rose every day
- people collected salaries in wheelbarrows and spent it immediately (as it would buy them much less tomorrow)
- food started to run out as people hoarded it in anticipation of higher prices
What were the underlying causes of hyperinflation ?
- inflation did not start in 1923, it had grown into a serious problem since 1914 and so Germany made no provision for a long drawn out war. Kaiser did not raise taxes to pay for the war (maintain popular support) and therefore massive sums of money were borrowed through war bonds and increasing national debt
- there was an assumption that the Germans would win and so be able to charge the losers high reparations to pay off their debts
- ❗️the new Weimar Government was faced with financial mess which would need to be tackled by cutting expenditure or raising taxes- neither option was attractive as it would alienate support for the new republic, instead they opted to pursue a policy of DEFICIENT FINANCING (funding govt spending by more borrowing)
- 🔔therefore, reparations seen as a contributory factor and not a primary cause
Who were the winners from hyperinflation ?
- black marketeers
- those with debt: could pay of their loans/mortgages with inflated worthless money)
- entrepreneurs: took out new loans to establish a business and easily pay it off with worthless money later
- big businessmen: could buy small bankrupt businesses for later
- owners of foreign exchange: kept its value
- famers: coped well as they could produce food and barter (avoid using money)
Who were the losers of hyperinflation ?
- pensioners: (living off a fixed income) lost out bcs their incomes bought less
- workers: wages did not keep pace with prices + hyperinflation meant businesses cut back on workers ❗️by end of 1923 only 30% of workforce employed
- those with wages and salaries saw their incomes erode
- middle classes (Mittlestand): were badly hit as their hard earned savings became worthless = their faith in the new democracy was badly shaken (if not lost!)
- increased cases of malnutrition and dietary diseases like rickets reported in children
Did hyperinflation pave the way for the collapse of the WR ?
- inflation of 1923 was not the occasion of Weimar’s demise, but it did leave a deep and lasting psychological scar, particularly among the middle classes
- when another economic crisis hit Germany in the early 1930’s many could not forgive the WR for a second failure (just 7 years after 1923)
What were the problems of a coalition government ?
1) Germany had a wide array of political parties = a problem for the new WR as govts needed to command a majority in the Reichstag, with the PR voting system and so many parties it was virtually impossible for one party to gain a majority of seats and coalition govts were inevitable
2) coalitions of different parties were likely to be unstable particularly with the challenges facing the WR. If govt parties disagreed then the coalition would fail = short lived coalItions (often perceived as weak)
3) forming a STABLE coalition was increasingly difficult as more hostility to the WR and political extremism grew (more parties anti-democratic/ anti-republic) so refused to take part in the coalition which meant centre parties found it increasingly difficult to reach an agreement with various parties to create a govt
❗️Feb 1919-Nov 1923 = 10 coalitions govts: continuity difficult + confidence in democracy undermined