5 - Economic Developments

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  • Economic Developments
    • The stabilisation of the currency
      • August 1923 government collapsed and was replaced by Stresemann's coalition
        • DVP, Centre Party, Socialists, DDP.
          • Stresemann's priority was to bring inflation under control
      • Stresemann called off passive resiostance in the Ruhr in Spetember
        • Led to the Beer Hall Putsch
        • Meant that work could restart + government could stop having to pay workers who refused to work
      • New Rentenmark currency was introduced
        • 1 Rentenmark for 1 trillion old marks
          • Insufficient gold reserves to back the currency - backed by mortgage on land
            • Government kept a tight control on amount of money in circulation
              • In August 1924 the Rentenmark became the Reichsmark backed by the gold reserve.
                • This all happened under the direction Hjalmar Schacht
      • Government cut expenditure - 300,000 civil servants lost their jobs; salaries were cut, taxes were raised.
        • Over 6000 companies went bankrupt in 1924
          • Those who had lost their savings in the inflation gained nothing from the new currency
    • The Reparations Issue + The Dawes Plan
      • November 1923 Stresemann asked the Allies' Reparations committee for financial advice committee
        • The American banker Charles Dawes acted as the committee's chairman
          • Stresemann's government had fallen by this point but he remained foreign minister and got a lost of credit for his achievings.
      • Until 1929 the amount paid each year should be reduced
        • Start by paying 1000 million marks - raised in annual increments over 5 years by 2500 million marks each year
          • Germany would receive a loan of 800 million marks from USA to help start the plan
      • Stresemann didn't have faith in the plan but agreed to it
        • 'National Opposition' (DNVP + other small right wing groups) attacked this compromise
          • Wanted defiance of the Versailles Treaty
          • In July 1924 the plan was agreed - with new loans the German economy could be rebuilt
            • 1924-25 French left the Ruhr
    • The Extent of Economic Recovery
      • Industry
        • After 1924 Industrial output grew but didn't reach 1913 levels until 1929
          • Economy shrank in 1928 + 1929
            • By 1929 investment in new machinery and factories was falling
        • Chemical industry advances - production of artificial fertilisers; car + aeroplane industry developed
          • There was massive population growth in the 20th century leading to a housing shortage
            • In 1925 178,930 dwellings were built. In 1926 2015,793 new homes were built
              • In 1924 new schemes of relief were created. Money was spent on welfare payments + health improvements
        • Compulsory Arbitration - an independent figure decides on a solution in disputes
          • Less strikes thanks to this
            • Republic gave max 8 hours of work per day + trade unions could be in work councils
              • 1928 a small wage increase was granted to workers after a dispute
                • Employers locked workers out + refused to pay the increase
                  • Workers were backed by the government + paid by the state
            • 1927 - wages increased by 9%
              • 1928 - rose by further 12%
      • Limits to the Economic Recovery
        • End of 1925 - unemployment reached 1 million; by March 1926 it was over 3 million.
          • Due to public spending cuts - more people searching for work - companies reducing workforces
            • Mining companies reduced workforces by 136,000 between 1922-25; reduced by another 56,000 between 1925-29.
        • The Mittelstand (middle-class) gained very little in this period
          • By late 1920s industrial wages drew level with those of the middle class and sometimes exceeded them.
      • Agriculture
        • Farmers gained very little from economic recovery
          • A worldwide agricultural depression kept food prices low
          • Smaller farmers had made savings which had been wiped out by the depression
        • 1923 - government made it easier for farmers to borrow money
          • This increased their debt
            • Taxes to pay for welfare benefits were seen as unfair for farmers
              • To reduce pressure on farmers import tariffs were introduced + import controls + subsidies to farmers
        • 1925-26 there was a grin surplus + a price slump
          • Late 1920s increase in bankruptcies among farmers
            • 1928 small scale farmer riots ('farmers' revenge')
              • Protest against foreclosures + low market prices
        • By 1929 German agricultural production was less than 3/4 of its pre-war levels
    • The Reparations Issue + The Young Plan
      • Allied forces remained in occupation of the Rhineland + French woudn't remove their forces
        • Stresemann agreed for Owen Young (American businessman) to head up a committe into reparations again
          • Young Plan obliged Germany to continue paying reparations until 1988
            • Germany required to pay £1.8 billion rather than £6.5 billion
              • Britain + France agreed to remove their troops by June 1930
      • Alfred Hugenberg (leader of DNVP) launched a campaign against the plan.
        • Hitler supported it
        • They drew up the 'freedom law' for national referendum - required the government to repudiate the guilt clause + demand immediate evacuation of occupied areas
          • Any minister who signed the Versailles Treaty should be tried for treason
          • Petition for this law got £4,135,000 signatures + was put to a referendum but the rejected.
            • The support that it got showed the depth of support for right-wing nationalism

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