Edexcel AS/A Level History
Paper 1: Germany and West Germany, 1918-89
Theme 3: Economic Development
and Policies, 1918-89
Weimar Republic
An overview of the Economy of the Weimar Republic:
● The period enjoyed two crises: the hyperinflation crisis of 1923 and the Great
Depression of 1929-32.
● It could be argued that these events were of such severity that the Weimar
Republic was to recover from its first crisis only to be destroyed largely due to
the second crisis, as it accommodated the rise of Nazism.
● The Weimar Republic held a generally weak economy; ridden with war debt and
the effects of the Treaty of Versailles. Therefore, it benefited from pragmatic and
innovative economic policy of Stresemann and US loans. Yet the impact was
short-term, as the devastating effect of the Great Depression went on to prove.
Reacting to Economic Challenges, 1918-32
A period of growing economic crisis, exacerbated by 1923 hyperinflation crisis. Resulted
in currency reforms and increased dependency upon US loans: two rather radical
measures.
War Debt -
● M150 billion borrowed, yet just M7-8 billion made in taxes. Simply enough to pay
the interest on the loans.
● Government of Wilhelm II spent so such as it had assumed Germany would win
the war and so would be able to pay back the money through subsequently
imposed reparations.
The Cost of Reparations -
● Set at £6.6 billion by the Inter-Allied Reparations Commission in 1921.
● Paid in money and goods.
● British historian, John Maynard Keynes, held the popular idea that the
reparations aspect of the TOV was a Carthaginian peace that would
economically destroy Germany.
,Historians’ Perspectives on Reparations: GENERAL CONTEMPORARY CONSENSUS THAT
THEY WEREN’T AS BAD AS THEY HAVE BEEN MADE OUT TO BE
- Mark Hantke and Mark Spoerer - Not that bad because budget helped by ToV
requirement that Germany cut 115,000 from her army. Humiliating yet “beneficial in fiscal
terms”. Though, wouldn’t they have to be provided for somehow, i.e. welfare, entitlement
to a civil service role until 1918.
- AJP Taylor: “[Germany] borrowed far more from private American investors... than she
paid in reparations. '' Therefore, loans more considerable as a cause for the economic
crisis.
- Niall Ferguson - Even without reparations, Germany would be troubled with need to pay
war debts, or by demands for greater social services. Therefore insignificant.
- Detlev Peukert - Financial problems were suffered due to post-war loans and Germany’s
wartime economic policy, whereby she failed to raise taxes whilst relying upon foreign
loans; a strategy which destroyed the link between the papiermark and German gold
reserves.
Impact of Treaty of Versailles [loss of territory and trade] -
● Lost 10% of German territories, including Alsace-Lorraine and the Saar.
● Loss of 50% iron ore deposits.
● 15% reduction in coal production.
● Reduced trade: due to Article 231 and the effect of demobilisation (e.g. American
isolationism).
● However, according to Bell, French investment in German products increased by
60% throughout the early 1920s.
State Spending Commitments -
By 1924, 10% of the German population were receiving state welfare payments. This
included:
➢ 768,000 disabled veterans.
➢ 420,000 war widows.
➢ 1,020,000 children
➢ 190,000 parents of deceased soldiers.
Weakness Comparable to the Economies of Other Major Global Powers -
● The US post-war economic recession lasted just 7 months; over by March 1919.
Post-War Unemployment
● 6 million soldiers leave the army in 1919. Take over women’s jobs.
● 1.1 million unemployed in February 1919: 7% of German workforce.
, ● Fell to 550,000 by late 1919, and 22,000 by 1922. Needed workers for
reconstruction, so only short-term. Also could employ more workers as there was
a 50% wage drop between 1913-19. Therefore not necessarily indicative of
progress.
The Great Inflation
Background for Crisis: created by high government debt and the falling value of the
mark.
Reparations
● Payments commenced in 1921. Government had to print money in bulk to pay for
foreign currency that would fund the reparations. Printed money flooded the
economy and so the value of products fell as a considerable amount of consumer
goods wasn’t simultaneously being produced. Prices rose as a result.
● Negotiations with Allies over rearrangement of payments initiated in early 1922.
New arrangement:
- 720 million gold marks
- 1,450 million gold marks’ worth of raw materials
● Yet, to cope, German government would have to raise taxes and the prices of
government services, such as postal charges and public transport costs. These
measures would be unpopular and would further minimise the popularity of an
already unpopular regime.
● Therefore requested further reductions, in the form of a temporary ‘payment
holiday’. This meant that the Allies felt that Germany was not taking its
responsibilities seriously. Also implied to international investors and major banks
that the German economy was weak, and so investment fell further, meaning that
the value of the mark fell even more. German goods then seemed more
expensive so international traders lost all incentive to invest, whilst the cost of
foreign goods increased as mark worth less than other currencies.
Occupation of the Ruhr (January 1923)
● Exchange rate of the mark against the USD gradually grew increasingly more
unfavourable.
- July 1914: 1USD = M4.2
- January 1919: 1USD = M8.9
- July 1922: 1USD = M493.2
- January 1923: 1USD = M17,792
● December 1922 - Germany fails to make planned reparations payment. This
placed Germany in default, and further reduced confidence in the German
economy, allowing for further minimised investment and thus even further
exacerbated inflation.
, ● PM Raymond Poincaré orders that the Ruhr region be occupied by 60,000
Franco-Belgian troops, accompanied by French mining engineers. Set up Inter-
Allied Mission for Control of Factories and Mines (MICUM). He saw that, if she
was to be allowed to manipulate this aspect of the TOV, she would bring an end
to all of it, and this would result in another world war.
● Ruhrkampf led to public outrage across Germany, and initiated something of
similarity to the ‘spirit of 1914’, whereby all German people felt unified by a
common goal to defeat the common enemy that was the occupying troops.
Blame shifts from WR to Allies: less public opposition. However, following World
War I, and the aspects of the TOV that saw German demilitarisation, the German
army was too weak to force the troops out of the territory [humiliating weakness],
and so Germany was forced to resort to passive resistance efforts (striking,
damaging machinery, working inefficiently, calling fake sickies). Government has
to reimburse the workers and this drives inflation up further. 130 Germans die.
● The comparable strength of France at the time meant that she was able to
continue the occupation of the Ruhr, even if this was actually quite inefficient. It
was hurting the German government more than it was the French.
● By 1923, the government was using 30 paper mills and 130 print firms to produce
notes of higher and higher denominations. Newspaper printing presses were
even being used, and machines ran according to 24/7 continuous flow production
methods.
Month/Year - Maximum Note Denomination
January 1922 - M10,000 [1USD = M14]
January 1923 - M100,000 [1USD = M17,792]
July 1923 - M 20 million [1USD = M353,412]
November 1923 - M1 trillion [1USD = M200 billion]
The Consequences of Hyperinflation
● Money was effectively worthless by mid-1923. It began to be used as a cheaper
alternative to fire fuel and toys. This worthlessness led to difficulty in paying
workers, who had to begin to be paid daily by late 1923 as prices were changing
to rapidly. Even this soon proved inadequate, as it became the case that prices
were changing hour by hour. Indeed, a cup of coffee could cost M5,000 at 11am
then M8,000 at 12pm.
● As retail prices for everyday essential goods were increasing, Germans struggled
to invest in staple products.
Product Price on 3rd January 1923 Price on 19th November 1923
1kg rye bread M163 M233 billion
1kg beef M1,800 M4.8 trillion
50kg pressed coal M1,865 M1.372 trillion
Paper 1: Germany and West Germany, 1918-89
Theme 3: Economic Development
and Policies, 1918-89
Weimar Republic
An overview of the Economy of the Weimar Republic:
● The period enjoyed two crises: the hyperinflation crisis of 1923 and the Great
Depression of 1929-32.
● It could be argued that these events were of such severity that the Weimar
Republic was to recover from its first crisis only to be destroyed largely due to
the second crisis, as it accommodated the rise of Nazism.
● The Weimar Republic held a generally weak economy; ridden with war debt and
the effects of the Treaty of Versailles. Therefore, it benefited from pragmatic and
innovative economic policy of Stresemann and US loans. Yet the impact was
short-term, as the devastating effect of the Great Depression went on to prove.
Reacting to Economic Challenges, 1918-32
A period of growing economic crisis, exacerbated by 1923 hyperinflation crisis. Resulted
in currency reforms and increased dependency upon US loans: two rather radical
measures.
War Debt -
● M150 billion borrowed, yet just M7-8 billion made in taxes. Simply enough to pay
the interest on the loans.
● Government of Wilhelm II spent so such as it had assumed Germany would win
the war and so would be able to pay back the money through subsequently
imposed reparations.
The Cost of Reparations -
● Set at £6.6 billion by the Inter-Allied Reparations Commission in 1921.
● Paid in money and goods.
● British historian, John Maynard Keynes, held the popular idea that the
reparations aspect of the TOV was a Carthaginian peace that would
economically destroy Germany.
,Historians’ Perspectives on Reparations: GENERAL CONTEMPORARY CONSENSUS THAT
THEY WEREN’T AS BAD AS THEY HAVE BEEN MADE OUT TO BE
- Mark Hantke and Mark Spoerer - Not that bad because budget helped by ToV
requirement that Germany cut 115,000 from her army. Humiliating yet “beneficial in fiscal
terms”. Though, wouldn’t they have to be provided for somehow, i.e. welfare, entitlement
to a civil service role until 1918.
- AJP Taylor: “[Germany] borrowed far more from private American investors... than she
paid in reparations. '' Therefore, loans more considerable as a cause for the economic
crisis.
- Niall Ferguson - Even without reparations, Germany would be troubled with need to pay
war debts, or by demands for greater social services. Therefore insignificant.
- Detlev Peukert - Financial problems were suffered due to post-war loans and Germany’s
wartime economic policy, whereby she failed to raise taxes whilst relying upon foreign
loans; a strategy which destroyed the link between the papiermark and German gold
reserves.
Impact of Treaty of Versailles [loss of territory and trade] -
● Lost 10% of German territories, including Alsace-Lorraine and the Saar.
● Loss of 50% iron ore deposits.
● 15% reduction in coal production.
● Reduced trade: due to Article 231 and the effect of demobilisation (e.g. American
isolationism).
● However, according to Bell, French investment in German products increased by
60% throughout the early 1920s.
State Spending Commitments -
By 1924, 10% of the German population were receiving state welfare payments. This
included:
➢ 768,000 disabled veterans.
➢ 420,000 war widows.
➢ 1,020,000 children
➢ 190,000 parents of deceased soldiers.
Weakness Comparable to the Economies of Other Major Global Powers -
● The US post-war economic recession lasted just 7 months; over by March 1919.
Post-War Unemployment
● 6 million soldiers leave the army in 1919. Take over women’s jobs.
● 1.1 million unemployed in February 1919: 7% of German workforce.
, ● Fell to 550,000 by late 1919, and 22,000 by 1922. Needed workers for
reconstruction, so only short-term. Also could employ more workers as there was
a 50% wage drop between 1913-19. Therefore not necessarily indicative of
progress.
The Great Inflation
Background for Crisis: created by high government debt and the falling value of the
mark.
Reparations
● Payments commenced in 1921. Government had to print money in bulk to pay for
foreign currency that would fund the reparations. Printed money flooded the
economy and so the value of products fell as a considerable amount of consumer
goods wasn’t simultaneously being produced. Prices rose as a result.
● Negotiations with Allies over rearrangement of payments initiated in early 1922.
New arrangement:
- 720 million gold marks
- 1,450 million gold marks’ worth of raw materials
● Yet, to cope, German government would have to raise taxes and the prices of
government services, such as postal charges and public transport costs. These
measures would be unpopular and would further minimise the popularity of an
already unpopular regime.
● Therefore requested further reductions, in the form of a temporary ‘payment
holiday’. This meant that the Allies felt that Germany was not taking its
responsibilities seriously. Also implied to international investors and major banks
that the German economy was weak, and so investment fell further, meaning that
the value of the mark fell even more. German goods then seemed more
expensive so international traders lost all incentive to invest, whilst the cost of
foreign goods increased as mark worth less than other currencies.
Occupation of the Ruhr (January 1923)
● Exchange rate of the mark against the USD gradually grew increasingly more
unfavourable.
- July 1914: 1USD = M4.2
- January 1919: 1USD = M8.9
- July 1922: 1USD = M493.2
- January 1923: 1USD = M17,792
● December 1922 - Germany fails to make planned reparations payment. This
placed Germany in default, and further reduced confidence in the German
economy, allowing for further minimised investment and thus even further
exacerbated inflation.
, ● PM Raymond Poincaré orders that the Ruhr region be occupied by 60,000
Franco-Belgian troops, accompanied by French mining engineers. Set up Inter-
Allied Mission for Control of Factories and Mines (MICUM). He saw that, if she
was to be allowed to manipulate this aspect of the TOV, she would bring an end
to all of it, and this would result in another world war.
● Ruhrkampf led to public outrage across Germany, and initiated something of
similarity to the ‘spirit of 1914’, whereby all German people felt unified by a
common goal to defeat the common enemy that was the occupying troops.
Blame shifts from WR to Allies: less public opposition. However, following World
War I, and the aspects of the TOV that saw German demilitarisation, the German
army was too weak to force the troops out of the territory [humiliating weakness],
and so Germany was forced to resort to passive resistance efforts (striking,
damaging machinery, working inefficiently, calling fake sickies). Government has
to reimburse the workers and this drives inflation up further. 130 Germans die.
● The comparable strength of France at the time meant that she was able to
continue the occupation of the Ruhr, even if this was actually quite inefficient. It
was hurting the German government more than it was the French.
● By 1923, the government was using 30 paper mills and 130 print firms to produce
notes of higher and higher denominations. Newspaper printing presses were
even being used, and machines ran according to 24/7 continuous flow production
methods.
Month/Year - Maximum Note Denomination
January 1922 - M10,000 [1USD = M14]
January 1923 - M100,000 [1USD = M17,792]
July 1923 - M 20 million [1USD = M353,412]
November 1923 - M1 trillion [1USD = M200 billion]
The Consequences of Hyperinflation
● Money was effectively worthless by mid-1923. It began to be used as a cheaper
alternative to fire fuel and toys. This worthlessness led to difficulty in paying
workers, who had to begin to be paid daily by late 1923 as prices were changing
to rapidly. Even this soon proved inadequate, as it became the case that prices
were changing hour by hour. Indeed, a cup of coffee could cost M5,000 at 11am
then M8,000 at 12pm.
● As retail prices for everyday essential goods were increasing, Germans struggled
to invest in staple products.
Product Price on 3rd January 1923 Price on 19th November 1923
1kg rye bread M163 M233 billion
1kg beef M1,800 M4.8 trillion
50kg pressed coal M1,865 M1.372 trillion
