The German Economy 1923-30 PDF

[The German Economy: 1923 -- 30] Germany's economy had been devasted by hyperinflation, rising national debt due to various factors such as the Treaty of Versailles and, the French and Belgian occupation of the Ruhr, and the government's inability to tackle the crisis well -- e.g. passive resistanc...

[The German Economy: 1923 -- 30] Germany's economy had been devasted by hyperinflation, rising national debt due to various factors such as the Treaty of Versailles and, the French and Belgian occupation of the Ruhr, and the government's inability to tackle the crisis well -- e.g. passive resistance.\ \ Gustav Stresemann is elected Chancellor in August 1923, begging his 100 days as Chancellor (he also held role of Foreign Minister). He led the *Große Koalition* of the DVP, DDP, SPD and ZP, a broad coalition in order to form national unity, and to tackle the economic crisis. *Stresemann's 100 Days (August -- November 1923):* First, he called off **passive resistance** -- passive resistance enabled the striking workers to still be paid their wages, encouraging them to strike, but it furthered hyperinflation and was costly for the government. The French ended up sending their own workers in, however they still refused to cooperate -- it led to a sense of national pride. Stresemann calling this off allows extremists to use this as a propaganda win. However, he needed to consolidate negotiations with France, and slow down inflation, so he saw it as necessary. Stresemann, along with guidance from the Finance Minister Hans Luther pushed a new more stable currency -- The Rentenmark -- into circulation (December 1923): this currency was a temporary fix, and tied to land and industry rather then gold. The new currency also had a limit on the number of denomination that could be printed so the currency could limit inflation. - This new confidence in the currency worked, allowing inflation to start to be stabilised, and for goods/produce to be put back into stores. People could now earn and spend money again. Government expenditure was sharply cut however -- over 700,000 employees were sacked. *Dawes Plan -- April 1924* Stresemann, now as Foreign Minister, sat down with Charles Dawes (US banker and Vice President) and set out a plan, along with other allies, to help the German economy recover.\ \ The plan had these details agreed on: - Germany was to be given *800 million RM (Reichsmark*) in loans from the United States - Annual reparations payments were to be reduced to *1 bn RM* in the first 5 years, and afterwards it will go to *2.5 bn*, and after that it will depend on Germany's economic performance - The reparations sum of 132,000 million RM was set in stone (\$6.6 bn) - Allies remained in control of the railways, the Reichsbank and customs duties - Sanctions for non-payments must be agreed by all Allies - French promised to evacuate the Ruhr during 1925 Impact: - Bought some *stability to Germany* -- they had a stable currency and international aid - Industrial capacity and production grew as a result of this - *Ordinary German lives were improved*; living standards and work standards improved - Germany was more involved in international affairs There were some backlash to the Dawes plan from the nationalists, claiming that the plan was like a 'second Versailles', and trying to rial support against it. However, the nationalists were split, and the plan had the support of the army. *Young Plan - 1929* The Young Plan was formulated by Stresemann, the allies and US banker Owen Young in 1929. They set out a plan with the following details: - The total sum of reparations was lowered by over a 1/3 to 37,000 million marks with interest - Annual payments lowered from the Dawes Plan, and they to be paid over 58 years (1988) - Allied supervision over all infrastructure in Germany was discontinued, meaning Germany held control over her own institutions again - Allied troops from the Rhineland were withdrawn from June 1930 - The French and Belgians left the Ruhr in 1925 (as before in the Dawes Plan) Impact: - The nationalist parties and organisations (DNVP, the *Stahlhelm*, the Pan-German League, NSDAP) all opposed and were disgusted by the Young Plan, who believed that it was an acceptance of the Treaty of Versailles and a humiliation to the nation. Any acceptance of the Treaty and war guilt clause was a 'lie'. The DNVP led by Hugenburg used all his media resources to promote his campaign against the plan. - Together, the National Opposition managed to get 4.5 million signatures in favour of a referendum for 'the Law Against the Enslavement of the German People' (Freedom Law), denouncing any ministers who supported the plan, make them criminals, and to renounce their acceptance of the occupation of land and the war guilt -- the bill was put into the Reichstag, where it was shot down by a 318-82 margin. - A referendum for the law was then held. 94.5% of the votes cast were in favour of the proposed law, but voter turnout was just 14.9%, meaning that only 13.8% of eligible voters had voted in favour of the law (5.8 million). 50% of all voters was needed for the referendum to be successful, however this was not achieved. The plan was enacted on the 12^th^ March 1930 by the Reichstag. *Strengths:* - Progressive taxation was introduced, with the high-end tax bracket increasing from 4 to 60% - Better welfare laws - State produced facilities -- schools, parks, hospitals, homes - 2 million homes were built between 1924-31, homelessness went down 60% - Hourly real wages increase - Foreign bankers invest massively into the German economy (Ford, General Motors) due to high interest rates - Heavy industry returns to pre-1913 levels in 1928 -- use more efficient methods - Growing number of cartels led to lower cost of industry -- IG Farben, chemicals giant (6 chemical plants) Vereinigte Stahlwerke - coal, iron, steel - 1925-29, exports rose 40% *Weaknesses:* - Economic growth was uneven, and in 1926, production declined. - Overseas, imports \> exports - Unemployment never fell below 1.3 million, and even before the Great Depression, the number had risen t0 1.9 million by 1929 (6%) -- this was not helped by more school leavers (33.4m in 1931) - Grain production only ¾ of pre-1913 levels -- 1/3 of German industry was agriculture, and this was hit majorly - Farmers couldn't compete with lowering prices leaving farmers in debt - 44% below national average -- income in agriculture - Trade did not return to pre-war levels, and tariffs which were placed on German exports hindered their economy - Savers did not want to invest in the economy after hyperinflation -- the economy was not supported domestically very well, relying on foreign supplies - After 1925, the budget continually ran into debt due to public spending and relied on borrowing and loans after 1928 (26% of GNP on public spending)