The Golden Years - Economic Developments, 1924-28

Question 1

When was Stresemann’s gov established?

Answer 1

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’).

Question 2

What parties were in the great coalition?

Answer 2

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.

Question 3

How long was Stresemann chancellor and what did he achieve in that time?

Answer 3

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.

Question 4

What were Stresemann’s three key steps to tackle hyperinflation?

Answer 4

1) End passive resistance.
2) The issuing of a new currency.
3) Balancing the budget.

Question 5

How did the end of passive resistance stabilise the Germany currency?

Answer 5

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.

Question 6

How was the issuing of a new currency important in stabilising the German currency?

Answer 6

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.

Question 7

How was balancing the budget important in stabilising the German currency?

Answer 7

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.

Question 8

How did Stresemann try to solve the reparations issue and how did the Dawes plan come into being?

Answer 8

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.

Question 9

What was stated in the Dawes Plan?

Answer 9

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.

Question 10

What was the reaction to the Dawes plan in Germany?

Answer 10

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.

Question 11

What benefits did the Dawes Plan bring to Germany?

Answer 11

• 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.

Question 12

What happened to industry during economic recovery?

Answer 12

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.

Question 13

What happened to German industry in terms of how it was operated during economic recovery?

Answer 13

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.

Question 14

In what industries were advancements made?

Answer 14

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.

Question 15

What improvements were made to German life during economic recovery?

Answer 15

• 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.

Question 16

How was industry in practice during economic recovery?

Answer 16

• Number of strikes declined due to compulsory arbitration. Employers did not like this and felt it was bias towards unions.
• 1928 there was a dispute over wages in the iron and steel industry, the arbitrator granted a small wage increase but the employers refused to pay and ‘locked out’ the workers, workers received payment from the state.

Question 17

What did Stresemann say about the German economy before his death?

Answer 17

In his 1929 speech he said: “The economic position is only flourishing on the surface. Germany is dancing on a volcano. If the short-term loans are called in, a large section of our economy would collapse”.

Question 18

What happened to unemployment during the economic recovery?

Answer 18

End of 1925 - Unemployment reached 1 million.
March 1926 - Over 3 million.

This was due to more people seeking work, public spending cuts and companies reducing workforces to make efficiency savings.
Mining companies: cut around 135,000 workers between 1922-25 and around a further 55,000 between 1925-29.

Question 19

How were the Mittelstand and Middle-Class effected by the economic recovery?

Answer 19

They gained little.

Middle class clerks, managers and bureaucrats were bankrupt from the 1923 hyperinflation crisis and did not fully benefit from the new economic situation.

White-collar workers did not enjoy wage rises, by late 1920s industrial wages were level with the middle class ones and sometimes even exceeded them.

Question 20

How was agriculture effected during the economic recovery?

Answer 20

• Farmers gained little.
• Worldwide agricultural depression kept food prices low so few farmers able to make profit.
• During the depression large landowners took out loans to improve but smaller ones tended to hoard money which was wiped out.
• After 1923, gov made it easier for farmers to borrow money but due to falling prices farmers were not able to repay.
• Gov tried to impose import tariffs to help but this did little.
• Global grain surplus and price slumps in 1925-26.
• Farmers began to lose land to banks.

Question 21

What did farmers do in response to their bad situation during the economic recovery of Germany?

Answer 21

In 1928 there were small scale riots know as the ‘farmer’s revenge’ in protest of foreclosures and low market prices.

Question 22

How was agriculture during the economic recovery compared to pre-war times?

Answer 22

In 1929 agricultural production was less than 3/4 of the pre-war levels.

Question 23

Why was the Young Plan drawn up?

Answer 23

The Dawes Plan was meant to be a temporary settlement to the reparations issue and France would not agree to withdraw their forces in the Rhineland until a final settlement was made. Stresemann agreed the issue should be considered by an international committee headed by Owen Young (US businessman). It met in Paris in 1929 with Schacht as one of Germany’s representatives.

Question 24

What were the conditions of the Young Plan?

Answer 24

• Required Germany to continue paying reparations until 1988.
• The total reparations were reduced to £1.8 billion (instead of the previous £6.6 billion) but the annual payments by Germany were required to increase.
• Foreign control over reparations would end and responsibility placed on the German government.
• Britain and France agreed to withdraw all troops from the Rhineland by June 1930.

Question 25

What was the response to the Young Plan in Germany?

Answer 25

It had massive right-wing opposition. DNVP leader (Alfred Hugenberg) launched a nationwide campaign against the plan which involved other groups like the Nazis. They drew up the ‘freedom law’ which received over 4 million signatures so had to be debated by the Reichstag and put to referendum. It was defeated in both but over 5 million people (13.8% of the electorate) voted for it showing right-wing nationalist support. Hitler’s leading role in the campaign enabled him to become more of a political figure.

Question 26

What did the ‘freedom law’ state?

Answer 26

It required the government to: - Reject the war guilt clause of the Treaty of Versailles. - Demand the evacuation of the occupied areas. - Declare any minister who signed a treaty accepting the war guilt clause to be put on trial for treason.