Empire to Democracy: 10 economic developments Flashcards
how did the government finance the war?
decided against imposing new taxes or raising money by increasing tax on the wealthy
issued treasury bills (provincial banks purchased short-term treasury bills from the Reich central bank, which could be redeemed at a higher value) and borrowed heavily from anyone prepared to provide war loans on the basis they would receive repayment with interest post war
gov put more money into circulation - expecting the victory would enable the gov to pay back what it had borrowed
how did the circulation of money change from 1913 to 1919?
increased from 2000 million Marks to 45,000 million Marks
national debt also grew from 5000 million to 144,000 million Marks
war years saw a 4% decrease in productivity and value of currency fell - 1919 worth less than 20% of its pre war value
how did the price of basic food and consumer goods change post war?
tripled or more
prices of goods in short supply rose even more rapidly on the Black Market
what were some of the terms of the 1919 Treaty of Versailles?
- had to pay £6.6 billion in reparations
- 90% of merchant fleet surrendered to the Allies
- coal miners of the Saar passed to the French for their benefit for 15 years
- Germany had to supply free coal to France, Belgium and Italy
100% of pre-war colonies
80% of pre-war fleet
48% of all iron production
16% of all coal production
13% of 1914 territory
12% of population
No air force.
100,000 soldiers, 6 battleships.
Poland created again.
Czechoslovakia created and known as Sudetenland
Clause 231 ‘war guilt clause’
what encouraged investment from the USA helping the economy grow rapidly between 1920-22?
some post-war inflation which helped stimulate the economy
low unemployment rates at 1.8% compared to Britain’s 17%
what happened to prices by 1920?
danger signs!
prices doubled between 1918 and 1919
quadrupled between 1919 and 1920
14x higher than 1913
who benefitted from inflation in 1920?
- elites by taking short-term loans from Germany’s central bank to expand their businesses - could repay with inflated currency - could also make seemingly generous wage agreements paid with worthless money
- lessened the govs debt - suggested that German politicians had a vested interest in allowing inflation to continue unchecked - hope that the Allies would see their reparation demands were too high
by May 1921 how much of the reparations had been paid?
2.6 billion gold marks’ worth of goods (merchant fleet, railway locomotives, wagons, horses, cattle and agricultural machine)
France also had the Saarland coalfields worth 2.5 billion marks
Germans claimed to have paid around 37 billion Marks
what policy did Rathenau encourage?
fulfilment
encourage German politicians to leave the economy alone
if Germany showed it could manage the payments, the whole purpose of the fulfilment policy would disappear
what was Germany’s first reparations instalment?
£50 million at the end of May 1921
by Jan 1923 Germany had fallen behind and the French accused them of deliberately defaulting on their coal and timber deliveries to France
11 January 1923 French and Belgian troops marched into the Ruhr
what was the Treaty of Rapallo?
contained provisions for economic cooperation between Germany and Russia
when did Germany try and renegotiate an extension and further loans for reparations?
January 1922
what policy did Chancellor Cuno order?
‘passive resistance’ during the Ruhr occupation
how did the Ruhr occupation damage the economy?
- paying wages or providing goods for striking workers was a drain on gov money
- tax revenue was lost from businesses ceased and workers who became unemployed
- Germany had to import coal and pay for it from limited foreign currency reserves within Germany
- shortages of goods pushed prices up further
- international confidence in the value of the Mark collapsed
what happened to the economy in November 1923?
hyperinflation
currency was worthless
in July 1922 monthly rate of inflation passed 50%
workers had to paid daily/twice daily as prices rose by the hour
cost more to print money than it was worth
