Economic developments, 1924-28

• In the hyper-inflation crisis, Cuno's government collapsed and was replaced by Gustav Stresemann's government - the 'Great Coalition'. It included parties from both the left and right.
• Stresemann was only in office for 103 days but he managed to stabilise the currency, bring inflation under control and attempts to overthrow the government ended in failure.

Ending passive resistance

• In September 1923, passive resistance was called off.
• This was very unpopular and led to unrest and the Beer Hall Putsch.
• The government refused to pay workers who would not work for the French - this reduced government expenditure.

Issuing a new currency

• In November 1923, he introduced the Rentenmark to replace the old worthless Reichsmark. The new currency was exchanged for the old.
• When the Rentenmark was introduced, the government kept tight control over the amount of money in circulation to prevent inflation happening again.
• Inflation was no longer a problem and the Rentenmark was established at home and abroad.

Balancing the budget

• They cut expenditure and raised taxes - civil servants' salaries were cut and 300,000 civil servants lost their jobs. Taxes were raised for people and businesses.
• Government debt was reduced nad confidence was restored.

These policies changed how the economy operated:

E.g. well-managed companies which tried not to build up too much debt prospered, whereas weaker companies that relied on credit went bankrupt.

bankrupt companies in 1923: 233
bankrupt companies in 1924: 6000

• In November 1923, Stresemann asked the Allies' Reparations Committee to set up a committee to address Germany's reparations concerns.
• USA wanted Germany to pay reparations to France as it would mean that France would repay US loans - therefore, Charles Dawes, an American banker, was the committee's chairman.
• In April 1924, the Dawes Plan was finalised. It confirmed that the total reparations bill was £6.6 billion but it made payments more manageable:
  • The annual amount to be paid would be reduced until 1929 when this would be reviewed.
  • Germany would start paying reparations again by paying 1000 million marks (much less than what had previously been expected). 
  • Germany would receive a US loan of 800 million marks (investment in industry).
• There was heated debate in the Reichstag over the Dawes Plan. Stresemann himself only saw it as an "economic armistice" (a temporary agreement) but saw it as a way of getting loans. Also, right-wing parties opposed the Plan. But, it was eventually agreed and accepted.
• Between 1924 and 1925, France left the Ruhr once they saw that Germany was starting to pay reparations. 

Industry

• By 1925, Germany appeared more stable and prosperous due to Stresemann's work and the Dawes Plan.
• After 1924, industrial output grew but didn't reach 1913 levels until 1929.
• German industry underwent 'rationalisation' - new management and production techniques were introduced and old equipment was replaced with new machinery.
• Due to American finance, big industrialists began to buy out smaller firms or formed cartels (groups of companies which combine together to fix prices and protect profits). By 1925, there were 3000 cartel arrangements.
• After 1925, Germany was allowed to protect its industries by introducing tariffs on imported goods, according to the Versailles Treaty.
• But, growth rates were unsteady - 1924, 1925 and 1927 were good years though the economy shrank in 1928 and 1929.

• Investment in new machinery and factories was falling by 1929.
• The chemical industry advanced and car and aeroplane industries developed.
• Living standards rose as wages began to increase - loans helped to finance the building of housing, schools and road and public works.
• There was an acute housing shortage - there were state initiatives to provide affordable homes.
• The no. of strikes in industry declined due to compulsory arbitration (when an independent figure decides on a solution to a dispute). But, employers felt that this was biased in favour of unions. 

Limits to economic recovery

• Unemployment was a continuing problem. At the end of 1925, unemployment had reached one million. In March 1926, this was over three million.
• This was due to public spending cuts and companies reducing their workforces to make efficiency savings. Mining companies reduced their workforces.
• It did not benefit everyone - the Mittelstand gained very little as they were bankrupted by hyperinflation and did not benefit fully from the improved economic miracle. White-collar workers didn't have the same wage rises as the industrial sector. By the late 1920s, industrial sector wages were level with those of the middle classes and sometimes exceeded them. 

Agriculture

• Farmers gained very little from the economic recovery.
• A worldwide agricultural depression kept food prices low and few farmers could make a profit off their land.
• In the inflation of the early 1920s, large landowners and families borrowed money to buy new machinery. After 1923, government made it easier for farmers to borrow money - farmers now had a lot of debt when prices were falling and they couldn't keep up with the repayments. 
• Government introduced increased taxes to pay for welfare benefits for the unemployed and sick which farmers had to pay.
• The different governments tried to help farmers by introducing high import tariffs on food products and subsidies for farmers.
• In 1925 and 1926, there was a global grain surplus and a price slump. 
• In the late 1920s, there was an increase in bankruptcies among farmers and many lost their land as the banks wanted the repayment of loans. 
• By 1929, agricultural production was at less than three-quarters of its pre-war levels. 

• The Dawes Paln was only a temporary settlement and Allied forces still occupied the Rhineland. Stresemann agreed that the reparations issue should be considered by a committee headed by Owen Young. The committe met in Paris in 1929.
• It confirmed that:
  • Germany should pay reparations until 1988.
  • The otal reparations bill was to be reduced: £1.8 billion.
  • Annual payment that Germany had to make was increased.
  • Foreign control over reparations was ended and Britain and France agreed to withdraw troops from the Rhineland in 1930.
  • German government had the sole responsibility for paying reparations.
• It inflamed nationalist opinion.
  • The new leader of the DNVP, Alfred Hugenburg, launched a nationwide campaign against the plan. It created the 'freedom law' - they wanted the government to take away the war-guilt clause from the Treaty of Versailles and declared that all occupied areas should be evacuated.
  • Over 4 million people signed a petition in support of the 'freedom law' so it had to be debated in the Reichstag and put to a referendum. It was defeated in the Reichstag and rejected in the Referendum. 
  • But, 13.8% of the electorate voted for the 'freedom law' for right-wing nationalism. And, Adolf Hitler's leading role in the campaign helped him to break through as a political figure.

• The German economy became more stable between 1924 and 1929.
• Inflation was brought under control. 
• Resolving the reparations issue helped Germany attract foreign loans to help rebuild the economy.
• Parts of German industry boomed and many Germans experienced prosperity. 
• But, not all Germans had a good experience: farmers had a difficult time and many lost their livelihoods. The Mittelstand's living standards did not improve and they could not access the welfare benefits that industrial workers could.
• Relying on short-term foreign loans made Germany very vulnerable to international economic changes.