The Wall Street Crash, October 1929
In October 1929, the share prices on the New York Stock Exchange collapsed.
The impact of the Wall Street Crash was felt around the world. Due to Germany's reliance on US loans and investment, she was hit particularly savagely.
Economic Impact of the WSC
- TRADE - There was a slump in world trade, causing German exports to fall rapidly. By 1932, the value of Germany's exports had fallen by 55%.
- UNEMPLOYMENT -By 1932, there were 6.1million people in Germany unemployed (Note: this caused further problems as it men 6.1 million were entitled to welfare, which had been written into the Constitution).
- INDUSTRY - Industrial production fell rapidly.
- AGRICULTURE - Farmers had faced a decline in income since 1926. Therefore, the WSC simply catalysed the decline of their wages.
- BUSINESSES - many businesses closed as demand for no essential items plummetted. This added to the rising unemployment levels.
- FINANCE - The banking sector was also dislocated due to a loss of confidence.
Social Impact of the WSC
- Young people were amongst the worst affected: due to their lack of experience, they were the most likely to be unemployed during this period.
- Industrial workers, both skilled and unskilled, faced the prospects of long-term unemployment.
- For the first time, the middle classes were affected. From small shopkeepers to professionals in law and medicine, there was little demand for their goods and so their position declined. This was made worse by the loss of pride and respectability.
- Many farmers had witnessed declines in their income since that of 1926. The WSC only worsened this problem and led to widespread rural poverty.
By 1932, unemployment peaked at 6.1 MILLION.
Political Implications of the WSC
- Generally, as the situation in Germany worsened people abandoned mainstream political parties and looked for more radical alternatives.
- Sine anyone over the age of 20 could vote, youngsters (who were arguably one of the worst hit groups during the Depression) that were disgruntled with democracy turned to extremism.
- It can generally be said that youngsters were also more susceptible to extremism.
- Political parties were divided as to how to deal with the impacts of the Depression, and so it seemed to the German people that democracy was ineffective and did not work.
- Extremist parties were seen to be doing more to combat the Depression than the democratic parties themselves. For example, Nazis set up soup kitchens: this was simple but very, very effective.
- The extremist parties had greater appeal as people could relate to them: they too blamed democracy.
- Hitler offered hope, strong leadership and prosperity. He promised to create new jobs and homes. He appealed to a mass audience.
The Reichstag Election of May 1928
The Nazis faced severe disappointment in the May 1928 Reichstag elections, receiving a mere 2.6% of the vote and 12 seats in the Reichstag.
In the favourable socio-economic circumstances, Weimar Democracy had successfully managed to stabilise its position.
However, the Nazis did make gains in the northern rural area of Germany, suggesting that the fall in agrarian prices had sparked discontent. In Thuringia alone, the Nazis trebled their vote in regional elections and for the first time broke the ten percent barrier.
This revealed for the first time that the Nazis would be able to exploit difficult economic situations.
Hermann Muller and his Grand Coalition
Herman Muller became Chancellor in May 1928 and created his Grand Coalition, which consisted of the DDP, the SPD, the Z party and the DVP. This was the last government to be based on support in the Reichstag and marked the beginning of the decline of parliamentary democracy.
In 1929, it became clear that the Dawes Plan of January 1924 had not been successful in alleviating the problem of reparations. Therefore, the Young Plan is proposed and accepted by Stresemann.
To the right-wing Nationalists in Germany, this is an act of betrayal by Stresemann, as they believed any payment of reparations was based upon the 'lie' of Germany's 'war guilt'. They, therefore, felt the Young Plan had to be opposed.
A national committee was created, led by DNVP leader and media tycoon Alfred Hugenburg, that opposed the Young Plan. It amassed much support, especially from the variety of right-wing factions in Germany. This 'National Opposition' gained enough support to evoke a National Referendum in December 1929. However, it did not gain enough votes to push the proposal through.
The committee did, however, manage to generate national opposition in Germany, focussing it towards the democratic system at a vital time.
The Nazis supported the 'National Opposition', giving Hitler access to Hugenburg's media empire and bringing the Nazis to national attention.
The Collapse of Muller's Grand Coalition
Muller's Grand Coalition collapsed due to internal divisions over finance. Due to the dramatic increase in unemployment, a large deficit in the new national insurance scheme had been created, and the four major parties could not agree on a solution.
- The SPD, who supported he trade unions, wished to maintain the welfare payments.
- The DVP, who had strong ties with the large businesses and industries, wanted to reduce these benefits.
The coalition therefore collapsed in March 1930.
Heinrich Bruning was appointed Chancellor in March 1930 - he was the leader of the Z party, the second largest party in the Reichstag. His appointment was a vital step away from parliamentary democracy for two main reasons:
- He was manoeuvred into office by a select circle of political intriguers, including Kurt von Schleicher and Oskar von Hindenburg.
- They were conservative nationalists that did not support the democratic programme: they instead felt a more authoritarian government could be established through the President and Article 48.
Heinrich Bruning's Economic Policy
Heinrich Bruning wanted to cut government expenditure and increase taxes to balance the budget. However, in July 1930, the Reichstag voted to reject this policy. Bruning retaliated by using Article 48 to pass his budget, sparking outrage in the Reichstag, which had voted for its rejection.
Therefore, Bruning asked Hindenburg to dissolve the Reichstag and call for new elections in September 1930 in the hope that this would amass support. However, these elections backfired and led to the rise of support of the KPD and SPD.
From September 1930, Bruning's position became increasingly more difficult due to opposition from the committed extremists. He, therefore, began to rely on the use of Article 48 to pass legislation.
In 1930, five presidential decrees were issued compared to 44 in 1931.
The SPD actually tolerated the use of Article 48, as they feared another election would lead to another gain for extremism.
Bruning was dismissed in 1932 when he lost the support of Hindenburg over plans to distribute spare land to unemployed workers.
Franz von Papen
Franz von Papen was appointed Chancellor in May 1932. He was an inexperienced politician that represented the more conservative, nationalistic government that the elites had been striving towards. His cabinet gained the nickname 'cabinet of barons', as it contained no members of the Reichstag: it was a presidential government consisting of aristocratic landowners and industrialists.
Both Papen and Schleicher wanted to gain the political support of the NSDAP, which Hitler agreed in return for two concessions:
- A new election to be held.
- The ban on the SA to be lifted.
Consequently, a new election was held in July 1932.
July 1932 elections and Papen's Coup
In the July 1932 elections:
- The Nazis gained 37% of the vote and became the largest party in the Reichstag.
- The Communists gained 14% of the vote.
- In total the democratic parties received 39.5% of the vote: support for the DVP and DDP collapsed, whilst the SPD was on the decline.
- The German people had voted to reject democracy.
The July 1932 election campaigns were brutal and led to political fights. Papen, therefore, used this breakdown of law and order to intervene using Article 48 and abolish the regional state government of Prussia and appoint himself as Reich Commissioner.
This was a unconstitutional act: it saw the replacement if parliamentary democracy with an authoritarian government.
November 1932 Elections
After the July 1932 elections, it became increasingly difficult for Papen to run Germany. In September 1932, the humiliating vote of no confidence in Papen was passed (512 votes to 42). Consequently, Papen called for new elections in November 1932:
- The Nazis gained 33% of the vote. Although there was a slight decrease in support, they remained the largest party in the Reichstag.
- Hitler refused to join the government unless he was made Chancellor.
Due to his frustration, Papen began to consider a drastic alternative: the declaration of martial law and the establishment of a presidential dictatorship.
Schleicher did not agree with Papen's plans as he feared it would start a civil war. He therefore encourage Hindenburg to dismiss Papen.
Kurt von Schleicher
Kurt von Schleicher was appointed Chancellor in December 1932. He aimed to restore political stability and national confidence in the Germany government by creating a broadly based government.
- He appealed to the left by proposing a programme of public works.
- He appealed to the right, particularly the NSDAP, by offering Gregor Strasser the position of Vice-Chancellor.
Strasser responded positively to this suggestion. However, Hitler remained adamant that it was Chancellor or nothing. Within the party, Hitler retained the loyalty of its members, consequently isolating Strasser and promptly forcing him to resign.
Schleicher's plans were treated with suspicion from both the left and right, effectively alienating both sides of the political spectrum.
Papen was seeking revenge against Schleicher. He suggested to Hindenburg that Hitler should be made Chancellor, with Papen as Vice-Chancellor and a maximum of two nazis in the cabinet. This way, they falsely believed that they would be able to control Hitler's power: he would become a 'Chancellor in chains'. On the 30th January 1933, Hindenburg agreed.
Hindenburg - a personal motive?
It has been argued that Hindenburg's decision to appoint Hitler was initially a selfish one: in 1932 a Reichstag committee investigating the misuse of funds provided to large landowners to help them stay afloat revealed that much of this money was being used to maintain a lavish lifestyle. Therefore, Hindenburg perhaps appointed Hitler in hope that the investigation would cease.