The Early Years - The Economic And Social Problems In Germany, 1919-24

Question 1

How did Germany pay for the war compared to how other countries did?

Answer 1

Wartime govs chose to finance the war through increased borrowing and by printing more money meaning that gov debt grew and the value of the currency fell. Britain used a combination of higher taxes and borrowing.

Question 2

Why did Germany decide to fund the war in this way?

Answer 2

Germany would win the war and would be able to recoup its losses by annexing the industrial areas of its defeated enemies and forcing them to pay heavy financial reparations. So defeat for Germany deprived the country of this repayment method while also making it worse due to their reparations and the loss of some of their industrial areas.

Question 3

How could the Weimar Republic work on repaying debt?

Answer 3

They could raise taxes and/or reduce spending. If they raised taxes they would risk losing support for the Republic and would fuel anti-republic claims that taxes were being raised to pay the Allies but apart from military expenditure decreasing reducing spending is harder as civil servants, etc need to be payed. Support for the Republic was considered to be so fragile that successive govs avoided making civil servants redundant and extended welfare benefits.

Question 4

What happened to unemployment after the war for Germany?

Answer 4

Unemployment had virtually disappeared by 1921 and there was a rapid recovery in economic activity.

Question 5

What happened with inflation between the years 1913-1920?

Answer 5

Prices had doubled between 1918 and 1919, had quadrupled again between 1919 and 1920, reaching a point 14 times higher than in 1913.

Question 6

Why did the govs in Germany allow inflation to happen like this?

Answer 6

It was partly political. The 1920 coalition, led by Fehrenbach, was dominated by the Centre Party which was supported by many German industrialists who benefitted from withdrawing short term loans to expand their businesses and then pay back the loan when inflation had taken its tole. Furthermore, inflation and the effect of lessening the gov’s burden of debt (but the reparations were not affected as they were paid in gold marks or goods) and it is suggested that politicians had vested an interest in allowing it to continue unchecked. As a result, inflation was beneficial in some ways before it got out of control.

Question 7

What was Germany’s unemployment compared to Britain by 1921 and what did this cause?

Answer 7

Unemployment in Germany was only 1.8% compared with nearly 17% in Britain. Consequently, this encouraged investment, especially from the USA.

Question 8

When did inflation in Germany become hyperinflation?

Answer 8

By 1923.

Question 9

What did the Reparations Commission’s report say Germany’s reparations should be?

Answer 9

Germany should pay 132 billion gold marks, or £6.6 billion and this would be paid in annual instalments.

Question 10

What did the Germans hope to do by committing to the policy of fulfilment?

Answer 10

They hoped to win over the Allies sympathy and a subsequent revision in the terms of the Treaty once it became clear that full payment of the reparations was beyond Germany’s capacity.

Question 11

What problems with reparations did Germany face off the bat?

Answer 11

• By Jan 1922 the Reparations Commission granted a postponement of the Jan and Feb instalments due to Germany’s poor financial situation.
• In July, the German gov asked for a further suspension of the payments due that year.
• In Nov 1922, it asked for a loan of 500 million gold marks and to be released from its obligations for 3-4 years in order to stabilise its currency.

Question 12

What did the French think of Germany’s request to delay their obligations in 1922?

Answer 12

They were suspicious that this was simply an excuse and refused to agree to Germany’s requests. This set the scene for reparations disagreements where in 1923 French and Belgian forces occupied the Ruhr industrial area in an attempt to extract payment by force.

Question 13

Why did Germany have limited ways to deal with the reparations?

Answer 13

• Its gold reserves were inadequate for the scale of the reparations.
• Part of the reparations had to be made in coal but most of its coal reserves had been lost in the Treaty of Versailles.
• They could also pay in manufactured good but workers and manufacturers in Allied countries would not accept this as they regarded it as a threat.
• Germany may of been able to increase its reserves of foreign currency by increasing exports to other nations but this was also made difficult as the Allies confiscated Germany’s merchant fleet and later imposed high tariffs on imports of German goods.

The Allies wanted the Germans to pay reparations but making it extremely hard for them to do so.

Question 14

What was the gov’s response to the economic difficulties of paying reparations?

Answer 14

There response was to print more money, making inflation even worse and making the value of the mark fall even further.

Question 15

When did the French occupy the Ruhr?

Answer 15

January 1923.

Question 16

Why did the Ruhr occupation occur and how was it obtained?

Answer 16

By the end of 1922 Germany was seriously behind on its coal payments to France. The French and the Belgians sent a military force of 60,000 men to occupy the Ruhr in January 1923 to force the Germanys to comply with the Treaty of Versailles.

Question 17

What was the French aim when occupying the Ruhr?

Answer 17

To seize the area’s coal, steel and manufactured goods as reparations.

Question 18

What did the French troops do in the Ruhr during the course of 1923?

Answer 18

Occupied the whole Ruhr area and numbers of occupying forces grew to 100,000. They took control of all the mines, factories, steelworks and railways while also demanding food from shops and setting up machine-gun posts in the streets.

Question 19

What did the German Gov do as a response of French occupation of the Ruhr?

Answer 19

The gov of Chancellor Wilhelmina Cuno knew they couldn’t fight back so they stopped all reparations payments and ordered a policy of ‘passive resistance’ calling on anyone living in the Ruhr to not cooperate with the French authorities. German workers were promised their wages if they went on strike and paramilitary groups working with the army secretly organised acts of sabotage against the French: blowing up railways, sinking barges and destroying bridges, etc.

Question 20

What did the French do in response to German ‘ passive resistance’ in the Ruhr?

Answer 20

The scale of the French effort grew and they set up military courts to punish mine owners, miners, civil servants, etc who would not comply. Around 150,000 Germans were expelled from the area and some miners were shot due to clashes with the police. 132 Germans were shot during the time of the occupation.

The french also brought in some of their own workers to get coal out of the Ruhr but this was not that effective.

Question 21

What did the policy of ‘passive resistance’ do the French effort in the Ruhr as a whole?

Answer 21

In May 1923, deliveries were only a 1/3rd of the average monthly deliveries in 1922 and output in the Ruhr had fallen to around 1/5th of its pre-occupation output.

Question 22

What were the economic effects on Germany due to the occupation of the Ruhr?

Answer 22

Its was catastrophic:
1) paying the wages/providing goods for the German workers was a further drain on gov finances.
2) Tax revenue lost from businesses being closed and now unemployed workers.
3) Germany had to import coal and pay for it.
4) Shortage of goods pushed prices up even further.
The combined cost of this amounted to twice the annual reparations payments. The gov still refused to increase taxes so printing more money was the only option.

Question 23

In what area did the rising prices of the hyperinflation crisis have the most serious effects?

Answer 23

The rising prices of food had the most serious effects. Speculators hoarded supplies in anticipation of higher prices in the future and this led to a break down of law and order in many areas. Food riots occurred and crowds looted shops, gangs of city dwellers travelled the the countryside and tried to take food from farms and there was a large increase in the number of convictions for theft. People also began to exchange their possessions for vital supplies.

Question 24

How did Social Welfare change in Weimar Germany?

Answer 24

A series of reforms to the welfare system and to employment rights were made.
1919 - law passed limiting working day to max 8 hours.
1919 - State health insurance system, introduced under Bismarck but limited to workers in employment, was extended to include wives, daughters, and the disabled.
1919 - Aid for war veterans incapable of working became the responsibility of the national gov; aid for war widows and orphans was also increased.
1922 - National Youth Welfare Act required all local authorities to set up youth offices with responsibility for child protection and decreed that all children had the right to an education.

Question 25

How was the social welfare system bad for the Weimar economy?

Answer 25

It put a huge demand on the gov. The printing of money was largely to pay out to welfare benefits that the Republic was committed to providing, which aggravated the hyperinflation crisis.

Question 26

Who were the winners of the hyperinflation crisis?

Answer 26

• Black marketeers who bought up food stocks and sold them at vastly inflated prices.
• Those who had debts, mortgages and loans could pay off the money they owed in worthless currency.
• Enterprising business people took out new loans and repaid them once the currency had devalued.
• Those leasing property on long term fixed rents gained as the real value of the rents they were paying decreased.
• Owners of foreign exchange and foreigners living in Germany could benefit.
• Most farmers coped well as food was in demand and money was less important in rural communities.

Question 27

Who were the losers of the hyperinflation crisis?

Answer 27

This mostly included those relying on savings, investments, fixed income or welfare support. Among these were students, the retired and the sick.

• Pensioners and war widows were badly hit.
• Those who lent money to the gov in wartime by purchasing ‘war bonds’ lost out because the interest payments decreased in value.
• Landlords reliant on fixed rents.
• Unskilled workers and those who did not belong to trade unions fared the worst out of the workers. Wages increased but could not keep up with rising prices. Standard of living declined, by 1923 increase in unemployment and short-time working, by end of year only 29.3% of the workforce was fully employed.
• The Mittelstand. Their costs rose and the prices they charged could not keep pace with inflation. Also payed disproportionate share of taxes.
• Sick. Costs of medical care increased and the rapid rise of food prices led to increased malnutrition. Death rates in large cities increased and suicide rates increased.
• Increase of diseases associated with dietary deficiency increased.