How SUCCESSFULLY did the weimar republic respond to economic challenges in the years 1918-32?

Economic crises and government response 1918-32

  • The ending of war production and soldiers leaving the army meant that many were unemployed and employers had to reduce the wages.
  • Social welfare:
  • After the war the government set up retraining schemes or those who had fought in the war, provided loans for those leaving the army until they could find work and set up pension payments for the wounded, widowed and orphaned
  • The lander provided support. There were a variety of social welfare programs for different groups e.g. The government looked after the estimated 1,537,000 disabled veterans and 1,945,000 survivors with lump sum payments and pensions
  • Around 10% of the population were receiving federal welfare payments and many more were on regional poor relief.
  • Debt and reparations:
  • By 1918 the government owed about 150 billion marks (3 times what it owed in 1914)
  • The policy do reparations laid down by the treaty of Versailles also added to this debt
  • From 1921 Germany was negotiating with the allies about how much it should pay, how much it old pay and when payments should and could be made
  • The allies felt Germany was trying to avoid any payments at all
  • Until 1924 reparations were paid with things like coal, wood and railway carriages
  • The Ruhr:
  • In January 1923 Germany failed to deliver its reparation payments in full, the London ultimatum of the allies had been that the payments should be met or the allies would occupy the Ruhr
  • In 1923, the French did just that with the aid of Belgian troops
  • The government stopped all reparation payments to France, told all German officials not to accept orders from non-Germans and urged the workers in the Ruhr to passive resistance e.g working slowly and sabotage
  • The French replied with cutting the Ruhr off from the rest of Germany by setting up a boarder which was patrolled by armed forces an taking control of the postal and telegraph services
  • In 1923 the new German coalition government called for a stop to passive resistance tactics and began negotiations with the French
  • Hyperinflation:
  • The crisis in the Ruhr escalated inflation to hyperinflation, prices were going up several times a day
  • A newspaper that cost one mark on 1 May 192 cost 100,000 marks by 1 September 1923 and 700 billion marks by 17 November 1923
  • People lost their faith in money entirely and came to rely on bartering and the black market
  • The poor were the worst hit as they had nothing to fall back on however the well off families suffered too
  • A change of government:
  • In August 1923 the crises was at its worst.
  • There was a new coalition government with Stresemann as the chancellor.
  • The government benefited from the Emergency Decree o 10th August as it meant that they could act more rapidly and decisively than any other coalitions.

Policies for recovery 1924-28

  • Stresemann was chancellor and and foreign minister in August 1923, he was asked to serve as foreign minister in the next government in November 1923
  • Making money work:
  • To get rid of hyperinflation Stresemann introduced he rentenmark temporarily in October 1923
  • People objected to the rentenmark because it had such a low value against one gold mark
  • Form of emergency money were banned
  • The currency change restored the faith in the German currency both at home and abroad
  • The government used emergency decrees to control rents, wages and prices which also helped to stabilise the currency
  • Why the foreign policy was vital to the economy:
  • The Dawes plan and the young plan made reparations more manageable and provided loans to build the economy
  • Stresemann's other foreign policy moves made Germany acceptable foreign power again so other countries were happier to lend Germany money and make trade agreements
  • However this meant that the economic recovery was based on loans many from the USA and these loans could be recalled at any time
  • The recovery of business:
  • In 1924 there were more bankruptcies than in the previous five years altogeher
  • The surviving big businesses began to form cartels whose fixed prices helped to stabilise the economy
  • There were lots of dispute between business owners and workers , workers wanted better conditions and owners were trying to cut wages and extend working hours. This resulted in common strikes and lockouts
  • Trade recovery:
  • At first it was difficult for Germany to establish trade links because of the bad feeling after the war
  • Shifting in trade led to many countries introducing tariffs on foreign goods
  • Germany suffered from heavier tariffs because of the reaction of many countries to Germany's part in the war although Germany was producing steel and chemicals that other countries needed
  • As Germany was now part of the League of Nations again, German exports were back to their 1913 level of 10 billion marks by 1926 and by 1929 exports were 34% higher than in 1913
  • Agriculture
  • A third and a quarter of all workers were agriculture workers
  • Many of the small farmers were heavily in debt and some couldn't even pay their taxes
  • President Hindenburg blocked farming reforms like the 1918 Reich settlement law that made landowners, like him sell land to the government to give to the poorest tenants
  • Government spending
  • The government had a big budget deficit as it kept borrowing heavily and then spending heavily too, they were spending money they didn't have
  • Most people were still not as well off as they were before the war and so resented any increases in tax
  • In 1926 the lowest tax band was at 62% meaning the government had to borrow money it could otherwise have made by raising taxes.
  • Constant disputes between businesses and workers meant that industrial expansion and production was damaged

What impact did the Great Depression have on the Weimar Republic 1929-32

  • In Germany industrial production fell , by the end of 1932 I was about half its 1928 levels
  • Wages fell by 20-30% and unemployment rose
  • Because prices also fell however, real wages only fell by 14%
  • Without Stresemann the parties in the grand coalition government were arguing, the government couldn't cope with the depression because it could not make decisions and act quickly
  • In 1930 the coalition government collapsed and was replaced Boone led by Chancellor Bruning who suggested cuts in government spending, wage cuts and higher taxes
  • These policies were rejected by the Reichstag but Hindenburg agreed with brunings policies and went back to government by decree in July 1930 in order to put brunings policies into practice
  • Did government policies work?
  • Brunings policies brought deflation but avoided devaluing the currency, he feared it would bring inflation
  • On 1 July 1931 the Hoover Moratorium suspended the need for Germany to pay back loans or to pay interest on them for a year.
  • Brunings response to devaluing the currency was an emergency decree that introduced wage cuts, rent cuts and tax rises
  • Brunings policies in the years 1930-32 did not work they just deepened the recession
  • Bruning was replaced by Von papen who introduced some tax concessions and subsidies for businesses that created new jobs and produced some economic improvement but the government was caught up in political problems
  • Von Schleicher replaced Von papen in 1932, he dew up a list of public works to be financed by the government in order to create employment
  • Changing living standards 1918-32
  • During the First World War there were severe shortages
  • Food shortages meant alternative foods such as 'k-brot' bread made from potatoes, oats and sometimes even straw
  • Infant mortality and stillbirths often due to the poor health of the mothers were high
  • 90% of all children aged between 2 and 6 were undernourished
  • From 1919 the German government ran an analysis of the standard of living in Germany based on the cost of a basket of goods for a family of five
  • The Weimar government regulated pensions and did its best to cope with the large number of people who had been dependent on those who had died in the war
  • After the war more people were employed and wages rose however after inflation went down, the standard of living dropped and unemployment rose
  • The eight hour working day established in 1918 had all disappeared by 1924
  • Many families lived in cramped housing with shared toilets and washing facilities
  • Some of the poorest shared one room and had no running water
  • Many businesses preferred to employ women because they were paid significantly less
  • Everyone suffered from hyperinflation, even the rich

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