Economic Development

Question 1

What was the background behind Stresemann’s ‘Great Coalition’

Answer 1

• Aug 1923, government of Cuno collapsed and was replaced by a new coalition led by Stresemann.
• Stresemann’s ‘Great Coalition’ -> the 1st to include parties in both the left and right: the DVP, Centre Party, Socialists and DDP.
• It’s aim was to bring inflation under control:
  3 policies:
• end passive resistance
• new currency
• balancing the budget

Question 2

What was Stresemann’s policy of ending passive resistance

Answer 2

• passive resistance against the occupation of the Ruhr was called off in Sep 1923.
• a highly unpopular decision -> one of the causes of the Beer Hall Putsch in Munich.
  -> Stresemann saw no alternative.
• Ending passive resistance means the government stops paying workers who refuse to work for the French -> reduces government expenditure.

Question 3

What was Stresemann’s policy of introducing a new currency

Answer 3

• Nov 1923: the new currency, the ‘Rentenmark’ was introduced to replace the old and worthless Reichsmark.
  -> one Rentenmark = one trillion old marks.
• once the new currency is introduced, gov keeps control over the amount of money in circulation to prevent inflation reappearing.
• Aug 1924, Rentenmark became the Reichsmark, backed by the German gold reserve.
  -> gold reserve was maintained at 30% of the value of the Reichsmarks in circulation.
• Inflation ceased to be a problem -> the value of the new currency was established at home and abroad.
• the policy was implemented under Hjalmar Schacht.

Question 4

What was Stresemann’s policy of balancing the budget

Answer 4

• gov cuts expenditure and raises taxes.
• salaries of gov employees were cut, 300,000 civil servants lost their jobs -> taxes were raised both for individuals and companies.
• as gov debt started falling, confidence was restored.

Impact:
- well-managed companies that didn’t build debt prospered.
- companies reliant on credit crumbled.
- bankrupt companies rose from 233 in 1923 to over 6000 in 1924.
- those who lost savings gained nothing from the new currency.

Question 5

Who was Hjalmar Schacht

Answer 5

• described as a financial genius in his role in the stabilisation of the new currency.
• in 1923 -> became the Reich Currency Commissioner and head of the Reichsbank, which introduced the Rentenmark.
• Helped negotiate the Dawes and Young Plan.

Question 6

What was the background behind the Dawes Plan (reparations issues)

Answer 6

• the stabilisation of the economy was as much dependent on settling the reparations dispute as it was on domestic issues,
• November 1923, Stresemann asks Allies’ Reparations Committee to create a committee of financial experts to address Germany’s repayment concerns.
• The USA was interested in helping Germany pay reparations to France as this money will be passed onto the USA to repay loans.
• by the time the plan was finalised in April 1924, Stresemann’s gov had fallen but was given credit for his achievements.

Question 7

What were the terms of the Dawes Plan

Answer 7

• Although figure still set at £6.6 billion, it made payments more manageable.
• amount paid each year would be reduced until 1929, where the situation would be reassessed.
  -> would restart reparations by paying 1000 million marks and this sum would be raised by annual increments over 5 years by 2500 million marks per year.
• After, the sum paid should be related to German industrial performance.
• Germany receive a large loan of 800 million marks from the USA to help start the plan and allow investment in German infrastructure.
• Stresemann not optimistic of the plan -> ‘an economic armistice’.
  -> agreed to it to secure foreign loans.
• Dawes Plan was eventually signed in July 1924.

Question 8

What was the negative impact of the Dawes Plan

Answer 8

• ‘National opposition’ (DNVP and smaller right-wingers like the Nazis) attacked this policy of ‘compromise’.
  -> believed Germany should defy the unjust T of V and completely ignore reparations.

Question 9

What was the positive impact of the Dawes Plan

Answer 9

• Allies accept that Germany’s problems will payments of reparations was real.
• Loans were granted -> new factories, houses and jobs can be provided to help rebuild the economy.
• France leave the Ruhr during 1924-25 once it was clear Germany would start reparations and occupation was no longer justified.
  -> boosts optimism -> the country was no its own master.

Question 10

List the ways in which the German economy recovered

Answer 10

• car and plane industries developed, although cars were expensive for the avg person.
• Inflation rate was close to 0 -> living standards and wages rose from 1924.
• loans helped finance building of housing, schools, municipal buildings, roads and public works.
• affordable homes were made a priority -> in 1925, around 179,000 homes were built.
  -> in 1926, around 206,000 new homes were built.
• Number of strikes declined -> new system of ‘compulsory arbitration’
  -> 1924 = 1973 strikes
  -> 1926 = 351 strikes
• improvements in living standards for ordinary German workers -> esp those backed by powerful trade unions.
  -> 1927 -> wages increased by 9%
  -> 1928 -> rose by a further 12%

Question 11

what was the new system of ‘compulsory arbitration’

Answer 11

• both sides (workers and employers) agree to allow an independent figure (arbitrator) to decide a solution.
• Employers felt the system was biased in favour of unions -> resented government interference in their affairs.

Question 12

What were the limits to economic recovery

Answer 12

• By 1926, unemployment was over 3 million.
  -> was due to more job seekers, public spending cuts, companies reducing workforces to make efficient savings.
  -> mining companies reduced workforces by 136,000 between 1922-1925.
• middle class (mittelstand) gained little in the ‘golden age’.
• managers, clerks and bureaucrats did not fully benefit from an improved economy.
• white collar workers did not benefit from pay rises of industrial sector.
• late 1920s, industrial sector wages had equalled those of the middle-class and sometimes exceeded them.
  -> April 1928, official publications counted that a total of 183,000 white-collar workers were seeking employment.

Question 13

Explain the limits of economic recovery in agriculture

Answer 13

• farmers gain little -> an agricultural depression kept food prices low, few farmers were able to profit off their land.
  -> after 1923, gov makes it easier for farmers to borrow which worsens their situation as farmers fall in further debt and can’t keep up with repayments.
• situation worsened due to global grain surplus and price slump in 1925-26.
• In 1928, farmers initiate series of small-scale riots -> ‘farmer’s revenge’ in protest of foreclosures and small market prices.
• by 1929, German agricultural production was at less than 3/4s of pre-war levels.

Question 14

What was the background behind the Young Plan (reparations issues)

Answer 14

• the 1924 Dawes Plan was only a temporary settlement of the reparations issue.
• allied forces remained in the Rhineland -> the French would not withdraw until a final settlement of reparations was agreed upon.
• an International committee (with Schacht as a representative) produced a final settlement in Paris in 1929.

Question 15

What were the terms of the Young Plan (1929)

Answer 15

• Germany was to continue paying reparations until 1988.
• Overall sum of reparations was significantly reduced to £1.8 billion, but the annual payment increase.
• all foreign control over reparations ended -> the responsibility for repayment was placed solely on the German government.
• GB and France agree to withdraw from the Rhineland by June 1930.