How successfully did the Weimar Republic respond to economic challenges in the years 1918-32?

In 1918 , the German economy was in trouble. The war had hit the economy hard.

In June 1914, there were just over 6,300 million marks in circulation; by December 1918, this had increased to just over 33,000 million causing severe inflation

This meant that wages, and savings, lost value as prices shot up!

At the end of the war there were 150 printing firms with 2,000 printing presses to make new banknotes.

Economic crises and government response 1918-23

Social welfare: After the war the govt set up retraining schemes for those who had fought in the war, and it provided loans to help those leaving the army until they could find work.

By 1924, government was still supporting about 768,000 disabled veterans, 420,000 war widows with 1,020,000 children and 190,000 parents of dead soldiers- the govt had to go into debt to make these payments.

Debt and reparations: The govt had borrowed heavily during the war by 1918, it owed about 150 billion marks. To add to this debt, the policy of reparations laid down by the ToV put the govt even deeper into debt.

The Ruhr: In Jan Germany failed to deliver its reparations payments in full. The French occupied the Ruhr, which was vital to the German economy because of its coal and industries based there.

Hyperinflation: The crisis in the Ruhr escalated inflation into hyperinflation- prices were going up several times a day. A newspaper cost on mark on 1 May 1922 cost 100,000 marks by 1 Sept 1923 and 700 billion marks by 17 November of that year.

A change in government

In August 1923 the crisis was at its worse. The govt collapsed. The new coalition govt, with Gustav Stresemann of the DVP as chancellor, benefited from the Emergency Decree of 10 August which gave his govt powers that included postponing Reichstag meetings and governing by decree if necessary.

Policies for recovery, 1924-28

Stresemann was chancellor and foreign minister in August 1923.

Stresemann's first significant policy measures were undertaken to regain control over money- he introduced the Rentenmark in Oct 1923 and the various forms of 'emergency money' were banned.

The govt also used emergency decrees to control rents, wages and prices, which also helped to stabilise the currency.

Why was the foreign policy vital to the economy?

The Dawes plan and the Young plan made reparations more manageable and provided loans to rebuild the economy. Also Stresemann's other foreign policy moves made Germany an acceptable foreign power again, so other countries were happier to lend Germany money and make trade agreements.

The recovery of business: Big businesses were more able to ride out economic problems. In the early 1920s, however, many small businesses collapsed; in 192; there were more bankruptcies than in the pervious five years altogether.

Trade recovery: At first it was difficult for Germany to establish trade links. Germany suffered from heavier tariffs initially as part of the reaction of many other countries to Germany's part in the war.

  • But with Germany's admission to the League of Nations; German exports were back to their 1913 levels of ten billion marks by 1926 and by 1929 exports were 34% higher than in 1913.

Agriculture: Framing was still a significant employer in the 1920s; between a third and a quarter of all workers were agricultural workers.

  • Many small farmers were heavily in debt and could not afford to pay the interest on their loans or even, in some cases, their taxes.

Govt spending: The new economy was built on foreign loans, many of them short term.

  • As well as borrowing heavily, the govt also spent heavily. It subsided grain production, it subsided industry and it spent heavily on social welfare, providing housing and benefits for the poorest.

The Great Depression 1929-32:

  • Unemployment rose and wages fell by 20-30%.
  • The govt failed to cope with the Depression because it could not make decisions or act quickly
  • The coalition collapsed and was replaced in 1930 by one led by Chancellor Bruning, who suggested cuts in govt spending, wage cuts and higher taxes.

Did govt policies work?

Bruning:

  • One of the few benefits of his policies was that, as Germany's depression deepened, it was clear to all countries that it would not be able to meet any reparation payments or even repay loans from other countries.
  • His policies in the years 1930-32 did not work; they simply deepened there recession.
  • Industrial production fell, prices fell and exports fell, all by around 50%. Unemployment rose to its highest level ever in 1932.

Von Papen:

  • In late May, Bruning was replaced by Bon Papen who introduced some tax concessions and subsides for businesses that created new jobs and produced economic improvement.

Von Schleicher:

In Dec 1932, Schleicher drew up a list of public works to be financed by the govt in order to create employment.

The fact that coalition govt had failed and govt was increasingly by decree, made the Weimar govt look a failure

The govt's unpopularity led to rise in the popularity of more extreme parties, which led to the rise of the Nazis and Hitler!!

Changing living standards 1918-32:

  • During ww1 there were several shortages
  • Allied blockages of ports stopped supplies getting into Germany.
  • Food shortages meant 'alternative foods' such as ,K-Brit' bread made from potatoes, oats and sometimes even straw, were common.
  • Malnutrition was common
  • The Weimar govt inherited a country where the standard of living, especially for the poor, was very low.
  • The Weimar govt provided benefits for the poorest. It regulated pensions.
  • Many families lived in cramped housing with shared toilets and washing facilities
  • Skilled workers and low- level clerical workers also experienced rising unemployment and many ended up spending all of their saving and having to claim benefit.
  • Many ended up losing their business and sometime their homes too
Created By
Lorna Johnston
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