- Created by: izx.a
- Created on: 08-03-18 10:08
Economy post WWI
War debt - gov. borrowed vast amounts of money and thought they could pay it back by imposing reparations on B, F and R, but their debt turned out to be massive. the currency devolved because they kept printing money to pay off this debt, and so money became worthless. Interests kept rising, internal debt was €144 billion. However, there was serious debt before reparations were imposed. This led to inflation, as although the gov. made enough to pay the interest on the debt, they didn't make enough to start to reduce it.
Reparations - ToV forced G to pay for reparations. Allowed to pay this back by sending goods (coal etc) to the victor nations, but still, the vast majority of it was paid (M6.6 billion).
Loss of income- G's capacity to generate wealth fell. They lost territory as a result of the ToV. Production declined more than 15%, as well as loss of industries. This made the whole economy less profiterable.
Post war unemployment - Demobilised soldiers struggled to find work (6 mill of them). Women workers were also sacked to allow those returning to take back the roles. By 1919, approx. 1.1 million unemployed. However, it dropped and by 1922 was 12,000; wages were low and so able to take on more workers - they needed more to transition for war economy to consumer.
The Great Inflation
1921 - Germany began to pay reparations. Started printing the money which flooded G without a rise in the amount of goods = inflation and destabilisation.
1922 - Negotiations to try and reduce or delay reparations. Allied agreed 720 million marks paid as well as 1450 worth of material. However, G didn't want to raise taxes or prices of services such as rail fares, so the gov. asked for a payment holiday. Foreign investors lost confidence in G currency. The mar slumped in value, increasing inflation and cost of imported goods.
Dec 1923 - France & Belgium sent troops to the Ruhr to seize coal in replacement of the missed payments.
Jan 1923 - Gov announced all furture rep payments would be suspended until F + B left G. Started campaign of passive resistance using strikes, yet the gov kept paying these striking workers, which meant printing more money, leading to hyper-inflaion. F continued occupation. Wages and prices spiralled out of control. The value of money fell drastically so by mid 1923 it was worthless. This meant wages were higher, prices of food higher than wages, many people starved.
Effects of hyper inflation
Economic - Shops remianed unopened, wages failed to keep pace with inflation, middle class affected worse as they lost all of their savings, food prices sky-rocketed.
Social - People started to blame the Jews, People stopped being able to afford healthcare, housing and food.
Political - People blamed the government and politicians - they felt alienated. People from the middle class resented the republic and felt more inclined to listen to radicals.
- People who owed money could pay their debts off easily
- Hyperinflation didn't cause loss of jobs, people's wages increased
- led to higher level of production
Winners and losers
1. Working Class
2. Land owners
3. Borrowers (house loans etc)
5. Producers of essential goods
1. Upper class
2. Middle class
4. Those on fixed incomes (students etc)
August 1923 Gustav Stresemann became chancellor and immediately began introducing policies to end inflation:
Problem - Passive resistance was costing the gov too much money
Solution - Introduced the policiy of fulfilment (cooperation with Allied powers and ToV)
Effect - Stabilised the economy to an extent, restored tax revenues, the transport and production resumed, Occupation eventually ended. However, many German's resented the ToV and didn't agree with cooperation with the allies. Certified stab in the back myth.
Problem - Gov spending too much money
Solution - Initiated deep cuts in public spending, reuced benefits and civil service pay
Effect - Budget became more balanced and debt was reduced, restored confidence of investors and financers (both domestic and international) BUT public wouldn't like the cut in spending and middle/working classes wouldn't be overjoyed with the reduce in benefits, so they partially lost out.
Problem - Currency had become worthless
Solution - Introduced a new currency called the Rentenmark. He also limited credit and money supply. 'Notgeld' and tokens banned. Emergency decrees were used to control rents, wages and prices.
Effect - Inflation brought under control and it laid the foundation for american loans to start coming in
1. Was a revisionist and sought cooperation with allied powers under the ToV. Seen as brill negotiator with the French to pay reparations over a longer period. Also with the Americans under the Dawes Plan.
2. He saw US investment as protection, but also thought US involvement would prohibit French demands for larger reps. However, relations with Russia was also made for German security.
3. Put his faith in global economies. He believed that GB & uUSA would be the two global dominant powers, with Germany as the third. He was a traditional German nationalist and wouldn't rely too heavily on the military.
The Dawes Plan
The Dawes plan came about to find a workable way for G to pay its loans. This plan transformed G's reparation payments;
1. G received a loan of 800 million marks provided mainly by US business leaders
2. If paying reparations disrupted German economic stability, the USA had the right to allow Germany to take a payment holiday
3. The annual repayment amount was reduced by 1929
4. Repayments would be allowed over a longer period of time to reduce the annual reparations bill
However, the Dawes Plan meant that Germany was part of a cycle of international debt.
Impact of the Dawes Plan
1. Solved Germanys immediate reparation problems by establishing a system whereby the Germans used US loans to pay the French and British, who then paid the USA the money they had borrowed from them in WWI.
2. By late 1920s German GDP had recovered to its 1913 levels and tax revenues were increasing. The gov used this money to invest in public work schemes, urban housing, sports arenas, public swimming pools and opera houses.
3. As German economy grew it attracted more investment from overseas, particularly from USA. As the USA was keen to protect its investment it became increasingly committed to reducing German reparation payments - thus leading to 1929 Young Plan.
4. Wages and welfare payments increased for gov employees - working classes benefitted from this.
5. The Young Plan fuelled hostility to the WR. Extremists thought the plan as betrayal and international humiliation.
Time period - The 'golden years' from 1924-29 were generally more prosperous for most German families, especially the industrial working class. The hyper-inflationary crisis of 1923 was a time of uncertainty and problems for most Germans. The mittelstand suffered especially. The depression years from 1929-32 brought high unemployment, falling wages and bankrupcies to many working class people.
Wages and employment - The increase in retailing and service jobs led to more opportunities for women in white collar roles. The unemployment law scheme set up in 1927. Farmers suffered a severe fall in incomes from 1926 onwards. Unemployment remained around 1 million for most of the 1920s, peaking at 2 million in 1926. Rose steeply. Wages dropped severly during the depression and unemployment rose.
Housing - 2.8 million new homes built 1919-32, over 80% provided through state funding. In the cities these housing estates were well designed with green spaces and plumbed bathrooms. Severe shortage, especially in early years - an estimated 1 million homes needed in 1923.
Health and welfare - Up until 1929 life expectancy and infant mortality improved. For the working class, spending was more than 60% higher in 1929 than it was in 1913. Working classes were also protected by powerful unions and the SPD who were committed to advancing rights and welfare of the working people. The effects of WWI - malnutrition, infectious disease, war wounded, orphans and widows - were serious, especially in early years of the republic.
Groups, Class, Gender - Through the 1920s the pool of women workers expanded. White blouse jobs available to more women. Also possible for single women to go further in education and professions than ever before. Working class benefits meant they could prosper in education etc. Artists and people who worked in the media did very well, as well as small city businesses. In hard times women and ethnic minorties suffered the most - likely to be fire, paid less etc. The mittelstand lost status and savings eg. war bonds, hyperinflation (1923), collapse of banks (1931-2). Farmers did well in the early years but suffered low incomes from 1925 onwards.
Living standards 2
1. In general terms, the standard of living of working classes rose between 1918-30. They recieved a greater share of national income and were supported by strong unions as well as the SPD, who received a strong amount of the vote. The max work hours per day changed to 8, which meant people had more lesuire time and government spending increased.
2. Middle class suffered the most. The frowned upon the americanisation of the WR and how they weren't able to spend their lesuire time as before. Hyperinflation knocked out their savings and those on fixed incomes failed to see them rise in line with inflation. The emerging middle classes did better because they could pay off their debts. As well as this, farmers also lost out due to cheap imports of foreign grain and low income.
3. Once the SoL increased, so did the support and stability of the Weimar state. The SPD's, 'Bismarkian welfare state' encouraged working class cooperation, as did the 1922 Youth welfare law. The gov. built institutions for them. They also attmepted to create more housing, investment, tax breaks and grants and law investment loans to increase wages for workers.
The Weimar gov. introduced ground-breaking policies such as increase in housing and welfare systems, which seemed to encourage support for the republic and democracy, therefore providing somewhat stability to the system.
1918-24 and 1924-29
Similarities between the two economies;
- In both economies, debt was always a problem but just mattered more/less to different people. After 1924 it's helped by America/Stresemann with the Dawes Plan.
- Public spending was always a problem, even though Stresemann controlled it for a small period.
- Unemployment was quite low throughout, but not all the time - it rose but not significantly. There was never mass unemployment during this time.
Differences between the two;
- Farmers went from being well off in hyperinflation (due to demand in food after the war) to not so much during the golden years
- Exports rose in golden years and so did productivity (became better than france and britain).
The Great Depression
Economic and social consequences of the depression;
- Huge decline in industrial production and agricultural prices
- Between 1929-32, exports fell by 55%
- Unemployment rose - 1.8m in 1929, 5.6m in 1932
- Collapse of 5 major banks in 1931 meant 50,000 businesses went bankrupt
- State benefits reduced - 15% recieved nothing
- Widespread poverty that created dependency to which extremists thrived on
- Psychological fear that Germany would never recover (esp since the problems of the 1923 hyperinflation)
Short term and long term
Political effects of the Great Depression
Bruning's main policies (and thus which further heightened support for the Nazi party);
1. Bruning's economic priority was to end reparation payments.
2. His strategy was to use the economic crisis to prove that the country could not pay - he also wanted to persuade France and Britain to drop their reparation demands.
3. His strategy paid off and the Hoover Moratorium of June 1931 suspended the paymets. This meant that the German gov. now had more money to spend.
4. Bruning refused to increase gov. spending and wanted to use the economic crisis to abolish the welfare state and destroy Germany's trade unions.
5. Also imposed greater budget cuts and passed a decree lowering wages to 1927 levels.
(Bruning was in office 1930-1932)
The Weimar Republic's greatest weakness throughout its history was its failure to establish lasting political stability. From the disastrous association with Versailles, the 'stab in the back' myth and the 'November Criminals' , to the turmoil of its last years, the period 1924-9 stands out as a time when a stable political system seemed to be developing. However, not only was this stability unable to resist the effects of depression in the 1930s, its very existence was something of an illusion;
There not only seemed to be an economic recovery between 1924 and 1929 but it also seemed as if some form of political recovery was underway. The election results of this period gave people grounds to believe the long term survival of Weimar was a strong possibility (notable decline of support for the extremist right and left wing parties) However, superficial prosperity and the growing international status of Weimar served to mask a state of political weakness. There was no progress made in the parliamentary and political system: the coalition governments did not enhance the credit of party politics in Germany, where the foundations of democracy were insecure.
Politicians had failed to capitalise on the opportunities offered by economic prosperity to establish democratic values strong enough to resist future crises. America suffered comparably to Germany in the depression of the Thirties, but its political system was never under threat. Germany's political system in contrast succumbed quickly, even before Hitler, and democracy was effectively dead with the appointment of Brüning's government in 1930.
Compacted info taken from http://www.johndclare.net/weimar5_affleck.htm
Its in the field of foreign policy that Weimar seemed to make the most progress, yet even here the work of Stresemann had drawbacks:
Stresemann's main aim was to bring about a revision of the Treaty of Versailles. The Dawes Plan of 1924 and the Locarno Treaties of 1925 were seen to be diplomatic successes for Stresemann, who 'achieved a great deal... at very little cost' (Layton). Germany joined the League of Nations; pacts and treaties such as these, including the Treaty of Berlin with Russia and reduced reparations in the Young Plan, led Germany to believe she was no longer the losing european power. However, his policy had not lasted long enough or gone far enough to establish a momentum that could survive the very different circumstances of the 1930s.
The problem with Stresemann's policy of revision was that by 1929 it had seemed to reach a dead end, and he himself was disappointed by its limits. There was a growing feeling inside Germany that a more dynamic approach was required. Certainly one of Hitler's most powerful attractions was his promise to overthrow the Versailles Treaty, and he won genuine popularity for his moves in this direction in the 1930s.