The Golden Years - Economic Developments, 1924-28 Flashcards
When was Stresemann’s gov established?
In August 1923, at the height of the hyperinflation crisis, the gov of Cuno collapsed and was replaced by a new coalition led by Gustav Stresemann (‘great coalition’).
What parties were in the great coalition?
It wa the first coalition in the history of the Weimar Republic to include parties from both the left and the right. The DVP(Stressemann’s party) shared power with the Centre Party, the Socialists and the DDP.
How long was Stresemann chancellor and what did he achieve in that time?
103 days. By the time he left office in the currency had been stabilised, inflation had been brought under control and attempts to overthrow the republic from both the left and the right had ended in failure.
What were Stresemann’s three key steps to tackle hyperinflation?
1) End passive resistance.
2) The issuing of a new currency.
3) Balancing the budget.
How did the end of passive resistance stabilise the Germany currency?
Passive resistance against the occupation of the Ruhr was called off in September 1923. This was very unpopular and led to the Beer Hall Putsch. Germany’s economy was coming to a halt and inflation was out of control so ending passive resistance was the only option. This meant that the gov stopped paying workers who refused to work for the French which was essential in reducing gov expenditure.
How was the issuing of a new currency important in stabilising the German currency?
In November 1923 a new currency called the Rentenmark was introduced to replace the old, now worthless Reichsmark. 1 Rentenmark was equivalent to 1 trillion old marks. As Germany did not have sufficient gold reserves to back the new currency, it was supported by a mortgage on all industrial and agricultural land. The gov kept tight control over its circulation and in August 1924 the Rentenmark became the Reichsmark, backed by the German go,d reserve which had to be maintained at 30% of the value of the Reichsmark in circulation. inflation stopped and a new stable currency was established at home and abroad.
Hjalmar Schacht directed this.
How was balancing the budget important in stabilising the German currency?
Stresemann’s gov reduced expenditure and raised taxes. The salaries of gov employees were cut, around 300,000 civil servants lost their jobs and taxes were raised for individuals and companies.
Well-managed companies who did not build up debt prospered whereas companies heavily reliant on credit crumbled. Number of companies that went bankrupt rose from 233 in 1923 to over 6,000 in 1924.
Those who had lost their savings due to hyperinflation gained nothing from the introduction of the new currency.
How did Stresemann try to solve the reparations issue and how did the Dawes plan come into being?
In November 1923, Stresemann asked the Allies’ Reparations Committee to set up a committee of financial experts to address Germany’s repayment concerns. The USA vested interest because they wanted Germany to be able to repay France so France could repay US loans.
American banker Charles Dawes acted as the new committee’s chairman. By the time the plan was finished Stresemann’s gov had fallen but he remained as Foreign Secretary and took credit for much of what was achieved.
What was stated in the Dawes Plan?
It confirmed the original figure of £6.6 billion (132,000 million gold marks) but made the payments more manageable.
- The amount paid each year by Germany should be reduced until 1929. Germany should start by paying 1000 million marks and this sum would be raised by annual increments over 5 years by 2500 million marks per year. After this the sum paid would be related to German industrial performance.
- Germany should receive a loan of 800 million marks from the USA to help get the plan started and to allow for investment in German infrastructure.
What was the reaction to the Dawes plan in Germany?
Stresemann himself did not believe in the plan and referred to it as “no more than an economic armistice” but agreed to it as a way of securing foreign loans. The ‘national opposition’ (mainly the DNVP and smaller right-wing parties like the Nazis) attacked this policy of compromise as they believed Germany should defy the treaty of Versailles all together. The Dawes Plan was eventually accepted by both the Allies and Germany in July 1924.
What benefits did the Dawes Plan bring to Germany?
- Allies accepted that Germany’s struggle to pay reparations was real.
- Loans were granted, with which new machinery, factories, houses and jobs could be provided and the German economy rebuilt.
- The French gradually left the Ruhr during 1924-25 once it became clear that Germany would restart paying reparations and they could no longer justifiably stay there. German optimism rose as they began to believe Germany was its own master again.
What happened to industry during economic recovery?
Industrial output grew after 1924 but did not reach 1913 levels until 1929. Growth rates were unsteady, the years 1924-25 and 1927 were good years, the economy shrank in 1928 and 29. Investment in new machinery and factories was falling by 1929.
What happened to German industry in terms of how it was operated during economic recovery?
It underwent extensive ‘rationalisation’ as new management and production techniques were introduced and old equipment was replaced with new machinery. With American finance the big industrialists began to buy out or make cooperative agreements with smaller firms to form cartels. By 1925 there were around 3,000 cartel arrangements, including 90% of German’s coal and steel production.
After 1925, the Treaty of Versailles allowed Germany to impose tariffs on imported foreign goods. Many firms received state subsidies to help survive. All of this reduced competition and propped up inefficient enterprises.
In what industries were advancements made?
Advances were made in the chemical industry such as large scale production of artificial fertilisers. The car and aeroplane industry also developed despite ordinary Germans no being able to afford cars.
What improvements were made to German life during economic recovery?
- Inflation rate was close to 0.
- Living standards rose as real value of wages began to increase from 1924.
- Loans helped finance the building of housing, schools, public works, etc.
- Population growth caused housing shortage by early 20th century, overcrowding and insanitary conditions was linked to political instability. Affordable homes were built, 1925 just under 200,000 new dwellings built (70,000 more than 1924) and in 1926 over 200,000 more were built.
- More money was spent on welfare and health improvements and new schemes of relief launched in 1924.
