5) 'Golden Age' 1924-28: Economic Developments

According to spec: Stresemann; the Dawes Plan; industry, agriculture and the extent of recovery; the reparations issue and the Young Plan.

Explain the ending of passive resistance in Ruhr? (3)

> Stresemann ended it in September 1923.

> Stresemann felt there was no alternative despite being widely unpopular and led to serious unrest (e.g. Beer Hall Putsch).

> ending passive resistance, meaning the government stopped paying workers who refused to work for the French, was essential in reducing government expenditure.

Explain the issuing of a new currency?

> called the Rentenmark - replaced the old/worthless Reichsmark.

> exchanged on the basis of one Rentenmark for one trillion Reichsmark - supported by a mortgage on all industrial & agricultural land as it did not have sufficient gold reserves.

Why was the new Rentenmark successful (initially)? (3)

> government kept tight control over the amount of money in circulation to prevent inflation from reappearing.

> by August 1924, the Rentenmark became the Reichsmark and was backed by the German gold reserve which had to be maintained at 30% of the value of the Reichsmarks in circulation.

> Overseen by Hjalmar Schacht.

Who was Hjalmar Schacht? (3)

> co-founder of the DDP (German Democratic Party - liberal left wing) in Nov 1918.

> In 1923 became Reich Currency Commissioner & head of the Reichsbank - introduced the Rentenmark.

> helped negotiate the Dawes & Young plans which modified/lessened Germany's reparations payments.

Outline Stresemann's 'balancing the budget'?

cut expenditure & raised taxes:

> Salaries of government employees were cut.

> approx 300,000 civil servants lost their jobs.

> taxes raised for both individuals & companies.

What was the impact of Stresemann's policy of cutting expenditure/raising taxes? (3)

> well-managed companies that were run prudently & careful not to build up excessive debt continued to prosper in comparison to companies that became heavily reliant on credit and so crumbled.

> Number of bankrupt companies rose from 233 in 1923 to over 600 in 1924.

> those who had lost their savings in the midst of the collapse of the old currency did not gain anything from the introduction of a new currency.

Explain the context of the Dawes Plan? (3)

> stabilisation of German economy as dependent on settling reparations dispute as also domestic issues.

> November 1923, Stresemann asked allies to set up a Reparations Committee with financial experts to address concerns - America had vested interest in Germany's situation as needed reparations to be paid to France so US loans could also be repaid.

> committee's chairman was US banker Charles Dawes.

Explain the Dawes Plan 1924? (4)

> although confirmed the original figure of £6.6 billion (132 billion gold marks), it made payments more manageable.

> recommended that the amount paid should be reduced until 1929 when the situation would be appraised - re-start reparations by paying 1000 million marks which would be raised by annual increments over 5 years by 2500 million marks per year - after sum would be related to German industrial performance.

> Germany would be given a loan by the US for 800 million marks to ge the plan started and allow for heavy investment in German infrastructure.

> Finally accepted & signed by both allies & Germany in July 1924.

Explain the German politician's view of the Dawes' plan? (2)

> Stresemann did not believe in the plan saying it was 'no more than an economic armistice' but agreed it to be a way of securing foreign investment/loans.

> national opposition (including DNVP & other groups e.g. Nazis) attacked this policy as believed Germany should defy requirement of reparations as an unjust condition of the Treaty of Versailles.

What were the benefits for Germany from the Dawes' plan? (3)

> Allies accepted that Germany's problems with the payment of reparations were real.

> Loans were granted, with which new machinery, factories, houses and jobs could be provided - rebuilt German economy.

> encouraged the French to stop occupying the Ruhr during 1924-25 as it became clear Germany was to re-start reparation payments.

Define 'economic armistice'?

typically in a conflict situation, an armistice is a temporary agreement to suspend action - Stresemann believed the Dawes' plan was no more than a temporary agreement on the reparations issue & not the final solution.

Define 'cartel'? (2)

• groups of companies in the same industries, which combined together to fix prices and protect profits; cartels reduced competition but allowed more of the profits to be reinvested, for example, in research.

• In relation to Weimar Germany: due to the handing over much of it's materials in the form of reparation payments, industry underwent reformation - big industrialists began to buy out or make cooperative agreements with smaller firms to form cartels.

Define 'tariff'?

duties or taxes that have to be paid on goods entering a country; their purpose is to make foreign goods more expensive than those produced in the country, thereby protecting firms from foreign competition.

Outline the extent of economic recovery following the economic reforms of 1923/24? INDUSTRY?

> American loans helped stimulate the economy - US corporations e.g. Ford & General Motors invested selectively in mass manufacture.

> Industrial output grew after 1924 BUT still did not reach 1913 levels until 1929.

> years 1924-1927 were good BUT economy shrank in 1928/29 - investment in machinery & factories was falling by 1929.

> inflation rate was close to 0 & living standards rose as wages began to increased after 1924.

Cartels? INDUSTRY? (3)

> German cartels had better purchasing power & could reduce costs.

> by 1925, there were roughly 3000 cartels in operation - included 90% of all coal & steel production.

> e.g. IG Farben, the chemical giant, became the largest manufacturing enterprise in Europe/ Vereinigte Stahlwerke controlled nearly 1/2 of all Germany's coal, iron & steel production.

Tariffs? INDUSTRY?

After 1925, permitted under the terms of the T of V to protect its industries by introducing tariffs on imported foreign goods.

> reduced competition and propped up inefficient enterprises.

Exports?

> between 1925 & 1929, German exports rose by 40% because of the mark's low value - brought social benefits for workers.

Specific industries? Extent of economic recovery?

> Chemical industry - large scale production of artificial fertilisers.

> car & aeroplane industry developed despite prices still being too high for the average German.

> state initiatives provided affordable homes - in 1925, 178,930 dwellings were built & in 1926, there was to be 205,793 more homes built.

> new schemes of relief were launched + increased welfare & health improvements.

Number of stikes - comparison?

In 1925 there were 1708 compared to only 351 in 1926.

Define 'compulsory arbitration'?

Industrial disputes are often settled by arbitration, in which both sides agree to allow an independent figure, known as the arbitrator, to decide on a solution; in Weimar Germany, arbitration was made compulsory by law.

Why did the number of strikes decrease in Germany? (2)

• partially because a new system of compulsory arbitration for settling industrial disputes was issued BUT employers felt this was biased in favour of the unions & resented the state for interfering.

• benefitted from increases in the real value of wages in each year after 1924 - rose by 9% in 1927 and rose again by 12% in 1928.

Define 'locked out'?

an action by an employer to stop workers doing their jobs until they agree to the employers terms and conditions.

Describe the wage dispute (crisis?) in 1928 arising from compulsory arbitration?

dispute over the wages in iron and steel industry in the Ruhr resulted in the arbitrator granting a small wage increase to the workers - employers refused and locked out the workers for 4 weeks.

> workers were backed by government and paid by the state.

Describe the weaknesses of the German economy? (3)

> uneven economic growth - production in 1926 actually declining + in overseas trade, the value of imports always exceeded the value of exports.

> unemployment never falls below 1.3 million during this period (1924-28) & even before the Wall Street Crash, unemployment averaged 1.9 million in 1929.

> agriculture - grain production was 3/4 of 1913 levels + farmers (already in debt) faced falling incomes + by the late 1920s, income per head in farming was 44% below national average (food production levels increased BUT food prices decreased).

Give reasons for higher unemployment? (2)

> more people seeking work, partially related to public spending cuts but also to companies reducing work forces in order to make efficiency savings.

> e.g. mining companies reduced workforces by 136,000 between 1922-25 & further by another 56,000 between 1925-29.

Describe the unfavourable world economic conditions in this period? (3/4)

*traditionally, Germany had relied on export industries to boost economic growth BUT world trade not yet at pre-war levels.

> German exports were hindered post-war by protective tariffs in many countries.

> Germany had lost territories, e.g. Alsace-Lorraine & East Upper Slesia, with valuable raw material.

> The German balance of trade (difference in the value between exports/imports) was therefore regularly in deficit (= in debt) - not inherently bad BUT can lead to reduction in investment & unemployment.

Savings & investment?

> German savers lost massive amounts of money in the hyperinflation crisis in 1923.

> They were wary of investing again, and, as a result, Germany needed to attract foreign investment through the prospect of higher interest rates than in their own countries BUT higher interest rates for foreign investors (savers) also made interest rates higher for domestic borrowers.

= dangerously dependent on short-term foreign investment, especially from US.

Gustav Stresemann quote about foreign investment in 1928?

1928 - "Germany in dancing on a volcano. If the short-term credits are called in, a large section of our economy will collapse."

German agriculture? (3/4)

• World prices for food fell dramatically from the mid-1920s as food production increased.

  • millions of soldiers were farmers/agricultural labourers so as they came home, began producing food so globally, an overproduction of food = farm prices & profits plummeted.

• German farmers failed to make profits in spite of government help - in 1928, farmers initiated a series of small-scale riots known as 'farmers' revenge', protesting against foreclosures & low market prices.

• As peasantry made up 1/3 of pop - reduction in spending power of German peasantry led to sig fall in demand within economy.

Government finances? (2)

> despite balancing the budget in 1924, from 1925 onwards, it ran up a budget deficit & by 1928, public expenditure head reached 26% of GNP (Gross National Product) - x2 the pre-war figure.

> government struggled to encourage domestic savings despite high interest rates due to experience of hyperinflation crisis of 1923 = government forced to rely on international loans (US).

Who was Alfred Hugenberg? (4)

> civil servant & banker pre-war.

> owned newspapers/film companies + deputy in Reichstag representing conservative DNVP.

> became leader of DNVP in 1928 - became increasingly hostile against democracy & the Republic - utilised his resources to campaign against the Young Plan.

> appointed in 1933 as Minister for Economics and Food in the Nazi government.

Explain the context of the Young Plan? (3)

> Dawes Plan of 1924 only ever intended as temporary - despite French & Belgians leaving the Ruhr by 1925, Allied forces remained in occupation of the Rhineland & required a final settlement of reparations issue before withdrawing.

> Stresemann - now Foreign Minister - agreed issue should be considered by an international committee headed by American businessman Owen Young.

> committee met in Paris in 1929 which Schacht as one of Germany's representatives...

What was the Young Plan 1929?

> obliged Germany to continue paying reparations until 1988 BUT reduced amount from £6.5 billion to £1.8 billion!

> annual payment increased + all foreign control over reparations was ended & responsibility for Germany paying them was placed solely on the German government!

> British and French forces agreed to completely withdraw from the Rhineland by June 1930.

Right-wing/nationalist reactions to the Young Plan 1929? (4)

> new DNVP leader Hugenberg launched a nationwide campaign, with involvement from other right-wing parties including Hitler & Nazis, against the Young Plan.

> drew up the 'freedom law' which they demanded it be submitted to a referendum - required he government to repudiate the war-guilt clause of the T of V + demand the evacuation of the occupied areas + declared any minister who signed any treaty involved in accepting 'war-guilt' would be tried for treason.

> in Reichstag debate, it was decisively defeated BUT 13.8% voted for it - indication of right wing support.

> Hitler's leading role in the campaign enabled him to make a decisive breakthrough as a national political figure.