Chapter 9 Flashcards
What happened in the Wall Street Crash?
On 24 October 1929, the New York Stock Exchange experienced its worst ever fall in share prices in an event that became known as ‘Black Thursday. This was followed by another collapse the following Tuesday, on 29 October. On that one day alone, the value of the largest American companies fell by ten billion dollars. Overnight, millionaires lost their fortunes and many smaller investors lost all their savings. Many companies went bankrupt, workers lost their jobs, and banks stopped lending and called in their existing loans. This was the start of a prolonged depression, which spread from the USA around the world. For Germany the Wall Street Crash had a profound impact on its economy, its society and its political system.
Economic effect of Wall Street Crash on Germany
The German economy had been stagnating since 1928 as investment decreased. Germany’s economic recovery in the years 1924-28 had been largely financed by American loans but, in the aftermath of the Wall Street Crash, those loans dried up. To make matters worse, the American banks that had lent money to Germany on short-term loans demanded immediate repayment. Thus, at a time when the German economy needed more investment to stimulate the economy, money was being withdrawn. The USA had also been the largest overseas market for German manufactured goods, but the Depression drastically reduced demand for imported goods in the USA and Germany’s export trade declined rapidly. Between 1929 and 1932, Germany’s export trade declined by 61 per cent and its industrial production fell by 58 per cent of its 1928 level. The result was that the German economy entered a deep depression.
Effect of the Depression of German industrial production
The Depression affected other countries as well, but Germany suffered a greater fall in industrial production than other European countries. In Britain, for example, the decline in industrial production between 1929 and 1932 was 11 per cent.
Effect of Depression on trade and companies
As Germany’s foreign trade collapsed and prices fell, many companies had no alternative but to declare themselves bankrupt and make their workers redundant. Even those companies that survived had to reduce their workforces and cut the hours and wages of those workers who continued working. Banks also began to get into difficulties as customers withdrew their money and outstanding loans were not repaid.
Impact of Depression on banks
Following the collapse of an Austrian bank in May 1931, the German banking system was plunged into crisis. In July 1931, the government closed the banks and the stock exchange for two days to provide the financial system with some breathing space, but these measures gave mere temporary respite. The Depression deepened, became more prolonged and economic conditions for millions of Germans became more desperate.
Impact of Depression on unemployment rate
Unemployment increased. By 1932, about one third of all German workers was registered as unemployed. These official figures did not, however, reflect the true scale of unemployment since they only recorded those who registered as unemployed. Many redundant workers, especially women, did not register and so were not counted. It has been estimated that in January 1933, the true number of unemployed was about eight million.
Who did unemployment hit worst?
The impact of the Depression fell very heavily on the main industrial areas, such as the Ruhr, Silesia and the main port cities such as Hamburg. White-collar workers were also badly hit. In the civil service, here were severe cuts in the workforce and reductions in the salaries of those who remained.
Wall Street Crash
the sudden collapse of the stock market in New York in October 1929 after a long period of rising prosperity and overconfidence by investors
Effect of Depression on farmers
Farming was also very badly hit by the Depression. Farmers had struggled gren during the so-called golden age between 1924 and 1928, but the Depression pushed many of them into serious difficulty. Prices collapsed, sports of agricultural produce declined and sales of food fell as Germans had as money to spend. Many more farmers were forced to give up their farms
“ the banks demanded repayment of loans. Unemployment spread to the countryside as farm labourers lost their jobs.
Areas impacted socially by Depression
People: workers, women, the young
Poverty
Poverty caused by the Depression and benefits situation
Mass unemployment had a highly corrosive effect on German society. Although the Weimar Republic had a well-developed system of unemployment and welfare benefits, the costs very quickly overwhelmed the welfare budget and, from 1930, there were moves to limit the amount of benefits being paid. The unemployed were only entitled to state benefits for a fixed period, after
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which they had to apply to local authorities for relief, and local benefits were less generous and strictly means-tested. Women received less benefit than men and young people less than adults. Some areas were hit harder than others by the Depression. In towns that depended on a single industry, the impact was far worse than in towns with a more diverse economy.
Effects of the Depression on Brand-Erbisdorf
For example, the small town of Brand-Erbisdorff near Dresden was a centre for glass-making. By April 1931, after the local glassworks had closed, nearly half of the population was receiving welfare payments. However, since most of the unemployed had been out of work for at least two years, they no longer qualified for state unemployment benefits. Instead, they had to rely on the much less generous relief provided by the local authority. A visitor to the area in 1930 reported that: Everywhere, I came to: increasing poverty, increasing bitterness, increasing doubt; a world of impoverishment and hunger and exploitation. I got to know Germany from below’.
Impact on living conditions of Depression
There were many indications that poverty was rising as a result of the Depression. Diseases linked to poor nutrition and living conditions - such as tuberculosis and rickets - began to show an increase after a period of decline.
Doctors reported numerous cases of malnutrition among children. The suicide rate increased as hope for the future disappeared. Meanwhile, as unemployed tenants were unable to pay their rents and were evicted, tent cities and shanty towns began to appear on the edges of large cities such as Berlin.
What was a Shanty town?
rough shelters built without official permission in areas with no access to running water or gas and electricity supplies; they were inhabited by the poor, especially those who no longer qualified for benefits
Difference between male and female unemployment rates
The difference between the unemployment rates of males and females was partly because women were less likely to register as unemployed and partly because some traditional female occupations in service industries were less affected by the Depression than traditional male occupations in manufacturing and transport.
Plus women cheaper to employ
Poverty diets
An American journalist, Hubert Knickerbocker, who travelled through
Germany during the Depression, reported on the average family’s diet. He said that the daily meal for an average family consisted of six small potatoes, five slices of bread, a small cabbage and a knob of margarine. Each adult could expect to eat a herring on about three Sundays in every month. Meat rarely figured in the diet. He expressed the view that this diet was too little to live on but too much to die from.
How did the Depression affect youth employment and why was it a problem?
The Depression led to a high rate of unemployment among young people. In Hamburg in June 1933, for example, the unemployment rate among males in the
14-25 age group was 39 per cent, whilst among females it was 25.2 per cent. Such high rates of youth unemployment had a number of consequences. With no jobs, and little prospect in the foreseeable future, gangs of young men congregated in public spaces in German towns and cities, their very presence causing alarm among older, middle-class citizens. There were fears that youth involvement in crime was increasing and that young men were being drawn into extremist political organisations.
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