Economic Crises & Government Response, 1918-1923

The Effect of Reparations on Germany's Economy

Reparations seriously damaged Germany's economy. It became quickly apparent that Germany would not be able to pay them in full.

The sum of reparations

The sum was fixed in 1921 at £6.6 billion. Payments were to be made in gold or in kind (goods, raw materials).

Government expenditure

Expenditure was rising because the Weimar Republic brought in welfare benefits and had to pay widows’ and veterans’ pensions and compensate war victims.
It also paid compensation to people who lost land under Versailles and gave cheap loans and subsidies to help industry.

Government debt

The German government was already in debt because of war expenditure. It soon exhausted its already low gold reserves.
The government had to buy goods and raw materials to meet reparations payments. The government printed money to meet its expenditures.

Inflation

Printing more money without economic growth leads to inflation. The currency loses value, so more money is demanded for goods by suppliers and shops.
Marks were soon losing value quickly. In January 1918, there were 8.9 marks to $1. In January 1920, there were 14; in January 1921, there were 64.9.
The fall in the value of marks accelerated in 1922. In January 1922, there were 191.8 marks to $1. In January 1923, there were 17, 792 marks to $1.
The German government fell behind with reparation payments.

Historical and economic assessment

Economists debate whether the terms of the Treaty of Versailles actually had a negative impact on the German economy.
Whilst 2.5% of GDP was spent on reparations between 1925 and 1930 those in the Cobdenite camp would argue that the limited military spending imposed by Versailles was fiscally beneficial for Germany. Cobden argues that spending lots of money on the military slows economic growth and means there is less spending elsewhere in the economy.

The Effect of Hyperinflation

Inflation escalated in Germany to uncontrollable hyperinflation in 1923. By autumn, prices were rising daily or hourly.

Impact of the French occupation of the Ruhr

As Germany fell behind its reparation payments, France invaded the Ruhr (an industrial region in Germany).
The German government ordered the workers to stop working (passive resistance).
The government still had to pay unemployment and welfare benefits, but with no income from the Ruhr, hyperinflation simply got worse.

Stabilising German currency

Stresemann called off passive resistance in September. This was important. The German economy needed to be productive if a new currency were to work.
The new currency was the Rentenmark. It was introduced in November 1923.
1 trillion marks were swapped for 1 Rentenmark. As people had confidence in the new currency, it was readily accepted.
Hyperinflation was ended. But the memory of it haunted the Weimar Republic.

The losers of hyperinflation

Money lost all value.
Cash savings and fixed incomes became worthless.
Monthly salaries did not hold their value.
This affected mainly the middle class
People with assets or heirlooms sold them to bring in money.

The winners of hyperinflation

People who held money in foreign currencies (e.g. dollars) benefitted because foreign currencies’ purchasing power soared.
People with fixed rents benefitted.
The value of loans plummeted, helping borrowers. Some entrepreneurs took out loans to buy out competitors.
- Industrialist Hugo Stinnes used loans to buy competitors and other firms. By 1924, he owned 1,535 companies or 20% of German industries.
The German government benefitted. It was 150,000 million marks in debt. This was equal to 15 pfennigs in Rentenmark.

Assessment of hyperfinflation

Peukert (1996):
- Different people from the same background were affected differently depending on where they lived, or their exact place in society.
George Grosz: -‘Even an additional minute meant an increase in price … a rabbit…might cost two million marks more by the time it took to walk into the store'.
Populist politicians offered simple explanations:
- ‘The crisis was...blamed on Jewish finance, the Versailles Treaty, Weimar democracy and socialists’.

The Invasion of the Ruhr 1923

The German government’s reaction to the occupation of the Ruhr triggered political unrest, social hardship and hyperinflation.

Motive behind the invasion

Germany could not pay France and Belgium reparations.
France and Belgium were dissatisfied and wanted to seize what was (in their eyes) theirs from the German economy.

Course of the invasion

On 11 January 1923, French and Belgian troops invaded the Ruhr.
They troops took control of all factories, mines, steelworks, railways and rolling stock throughout the Ruhr.
On 19 January, the German government ordered passive resistance. The Germans refused to produce or transport goods. Communications were cut. Economic activity halted.
The French and Belgians shot 132 Germans dead during their occupation. They also removed 150,000 people from the region for refusing to obey orders.

End of the crisis

On 26 September, Gustav Stresemann (the new German Chancellor) ended the campaign of passive resistance.
The Rentenmark was introduced and the currency stabilised.
But the invasion led to considerable political unrest and social hardship in Germany.

1Political & Governmental Change, 1918-1989

1.1Creation & Collapse of Weimar, 1918-1932

1.1.1Creation of a Republic

1.1.2Strengths & Weaknesses of Weimar Constitution

1.1.3Overcoming Challenges to the Constitution

1.1.4The Great Depression

1.1.5The Collapse of Democracy

1.1.6The Collapse of Democracy 2

1.1.7Hitler Becomes Chancellor

1.2Nazi Dictatorship, 1933-1945

1.2.1Establishing a Dictatorship

1.2.2Consolidating Power

1.2.3Nature of Government

1.2.4Government in Wartime

1.2.5Top Grade AO2/3 - Political & Governmental Change

1.3Return to Democratic Government, 1945-1989

1.3.1Creation of the FRG, 1945-1949

1.3.2Consolidation Under Adenauer

1.3.3Consolidation Under Erhard

1.3.4Maintaining Stability Under Brandt

1.3.5Maintaining Stability Under Schmidt

1.3.6Maintaining Stability Under Kohl

1.3.7Top Grade AO2/3 - Return to Democratic Government

2Opposition, Control & Consent 1918-1989

2.1Opposition to Government, 1918-1989

2.1.1Impact of Versailles

2.1.2Political Extremism & Crises, 1918-1932

2.1.3Opposition & Dissent in Nazi Germany, 1933-1945

2.1.4Political Dissent from the Left, 1949-1989

2.1.5Political Dissent from the Right, 1949-1989

2.1.6Top Grade AO2/3 - Opposition to Government 1918-89

2.2Controlling the People, 1918-1989

2.2.1Attempts to Control Extremism

2.2.2Repression, 1933-1945

2.2.3Censorship & Propaganda, 1933-1945

2.2.4De-Nazification Policies of Western Allies, 1945

2.2.5Constitutional & Legal Response to Extremism, 1949

2.3Popular Support, 1918-1989

2.3.1The Nature of Support for the Weimar Government

2.3.2Support for the Nazi Regime

2.3.3The Nature of Support for Democracy, 1945-1989

2.3.4Top Grade AO2/3 - Controlling the People

3Economic Developments & Policies, 1918-1989

3.1Reacting to Economic Challenges, 1918-1932

3.1.1Economic Crises & Government Response, 1918-1923

3.1.2Economic Loans, 1924-1928

3.1.3Policies for Recovery, 1924-1929

3.1.4The Great Depression

3.1.5Change in Living Standards

3.1.6Top Grade AO2/3 - Reacting to Economic Challenges

3.2Controlling the Economy, 1933-1945

3.2.1Attempting Economic Recovery

3.2.2Creating a Command Economy

3.2.3Change in Living Standards

3.2.4Impact of War

3.2.5Impact of War 2

3.2.6Top Grade AO2/3 - Controlling the Economy

3.3Creating the Social Market Economy, 1945-1989

3.3.1Economic Recovery, 1945-1955

3.3.2The Economic Miracle, 1955-1966

3.3.3Surviving the Recession, 1960-1969

3.3.4The Oil Crisis

3.3.5Integration into the European Economy

3.3.6Change in Living Standards

3.3.7Top Grade AO2/3 - Creating Social Market Economy

4Aspects of Life, 1918-1989

4.1Attitudes Towards Women, 1918-1989

4.1.1Role & Status of Women in the Weimar Republic

4.1.2Impact of Kinder, Küche, Kirche

4.1.3Impact of WW2 on Women

4.1.4Role & Status of Women in the FRG

4.1.5Top Grade AO2/3 - Attitudes Towards Women

4.2Education & Cultural Developments, 1918-1989

4.2.1Education in Weimar

4.2.2Cultural Experimentation in Weimar

4.2.3Education Under the Nazis

4.2.4Nazi Culture

4.2.5Education in the FRG

4.2.6Generational Conflict

4.2.7Top Grade AO2/3 - Education & Cultural Development

4.3Position of Ethnic Minorities, 19189-1989

4.3.1Ethnic Minorities in the Weimar Republic

4.3.2Nazi Racial Policies, 1933-1939

4.3.3Nazi Racial Policies During the War

4.3.4Ethnic Minorities in the FRG

4.3.5Top Grade AO2/3 - Position of Ethnic Minorities

5Historical Interpretations

5.1Influence of German History

5.1.1Influence of German History

5.2Hitler & Foreign Policy

5.2.1Hitler & Foreign Policy

5.3Contribution of Other Nations to WW2

5.3.1Weak Nations

5.3.2Appeasement

5.3.3The Rise of Fascism

5.4Reasons for Invading Poland

5.4.1Reasons for Invading Poland

5.4.2Top Grade AO2/3 - Historical Interpretation

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