Economic Stability in Weimar Germany 1924-1929

Weimar before 1924: (see notes on economic threats)

 The Weimar Republic was born out of German defeat in World War I. Many associated the
Weimar Republic with the defeat and the hated Treaty of Versailles.
 Germany struggled to accept democracy and both left-wing and right-wing extremists
attempted to undermine Weimar democracy.
 1923 – A year of crisis for Weimar. The Munich Putsch, the French occupation of the Ruhr
and Hyperinflation; this all caused huge problems for the Republic.

Positive view of achievements:

 “Stresemann…worked hard to rebuild his shattered country and for peace and co-operation
abroad.” – The Times, 4th October 1929.
 “Greatest statesman since the days of Birsmarck.” – British ambassador, Sir Horace Rumbold.
 “He could not have achieved more.” – Adolf Hitler according to Ribbentrop.

Economic stability/achievements:

 Gustav Stresemann became Chancellor of Germany in August 1923 in a time of

economic crisis (French occupation of the Ruhr, hyper-inflation, separatists’ active in
the Rhineland, Hitler in Bavaria and Communists in “Saxony Summer 1923”.)
Stresemann wrote to his wife Kate that to become Chancellor in such circumstances
would be ‘all but political suicide.’
 September 1923: Stresemann agreed to resume payment of reparations.
 November 1923: Hans Luther, finance minister establishes a new currency called the
Rentenmark (then renamed Reichsmark in 1924 and is backed by gold reserves =
has worth).
 November 1923: Currency is sustained and stabilised by mortgage bonds covering
industrial and agricultural assets, sacking 700,000 state employees to balance
budget and establishment of a new central bank under Hjalmar Schacht called the
Reichsbank.
 April 1924: Passing of the Dawes plan. This plan worked under the slogan “business,
not politics.” Germany is given longer to pay the reparations (pay 1,000 marks a
year until 1929 and then pay 2,500 million marks a year after 1929). It also included
a loan of 800 million marks to kick-start reparations and generates investment.
 The establishment of a new bank and the Dawes Plan meant France and Belgium
agreed to leave the Ruhr.
 1924-1929/1930: Massive investment in the German economy. Between 1924-1930,
25.5 billion marks invested in the German economy from other countries especially
from USA.
 1925-1929: Exports rose by 40%.
 1927: Stresemann introduced reforms to make life better for the working classes –
Labour exchanges 1927 and unemployment pay.
 1928: National income in Germany was 12% higher than it was in 1913.
 1929: Young Plan. The ‘time-frame’ for payment of reparations would be extended
(paid over next 59 years) the amount to be paid would be reduced (cut from 2,500
million marks a year as agreed in 1929 to 2,000 million marks a year). Germany
saved 1,700 marks between 1929-1932 as a result of this plan.
  1929: Industry output had reached its pre-war levels again by 1923 and the figure
actually doubled by 1929.
 Society in general improves. Infrastructure, public buildings and schools were built
throughout Germany. Women had an increasingly important role to play in the
German economy.

Cultural stability/achievements

 1929: The ‘Golden Age’ had seen an explosion of art and literature and many people enjoyed
new freedoms.
 The Weimar Republic was one of the most fertile grounds for the modern arts and sciences in
history.
 Greater sexual freedom and tolerance.
 Berlin resembled similar art that happened in New York in 1945, they were advanced.
 Bauhaus school near Weimar revolutionised architecture and the theatres in Berlin and
Frankfurt had the plays of Tomas and Heinrich Mann and Bertolt Brecht (world famous
writers). Philosophy also began to flourish.
 Film companies made German cinema one of the most notable in the world. Fritz Lang’s
work was regarded as pioneering at the time.
 Cabaret became very popular and the singer Marlene Dietrich became world famous.
 Weimar Republic inherited excellent universities and science centres from the Wilhelmine
period. Göttingen was the world’s most famous centre for physics. Germany was the
international language in physics and chemistry.
 Albert Einstein lived and taught in Berlin.
 Not everyone was happy with the new cultural freedom in Weimar. The right-wing elites
looked down upon the arts and associated it with the Communist Party and strong
representation of Jews in the new artistic movements increased this hostility.

Economic instability

 Food prices collapse in 1922 – ‘grain glut’ affecting Eastern Europe agriculture.
This ‘mini-depression in agriculture’ causes disaffection in rural community in
Germany throughout the 1920s and the peasantry turned to Nazism while the
Junker class desired return to the authoritarian regime of the Kaiser.
 Problems in the industrial sector of economy – plethora of strikes and lockouts.
 1928: 739 strikes and 20,339 working days lost.
 1924-1932: Many cases of legal arbitration reflecting growing hostility between
the employees and workers. (Most cases focused on working hours and wages.)
 Unemployment rate remained reasonably high.
 1928: 3 million people unemployed (14.5% of workforce).
 February 1929: 17.7% of population unemployed. Unemployment actually rose.
 Budget deficit exacerbated by the creation of ‘insurance fund’.
 1927: The Law on unemployment insurance stated that the fixed benefit had to be
paid to all those who out of work and insured.
 Employment at only 1.3 million.
 1928-1929 (Wall Street Crash): Unemployment figures rose rapidly. The 342
million marks were borrowed to fund this scheme creating severe financial
problems.
  SPD wanted increase in contributions to the fund by both the government and
employers WHEREAS the DVP (employers’ party/representative) wanted to cut
benefits.
 ‘Grand Coalition’ does little to help economy and a lack of agreement further
heightens issues.
 Germany depend on US for loans, if the US experiences financial difficulty it will
recall loans. This is evident in 1929 with the Wall Street Crash which plunges
Germany into ‘Great Depression.’

For what reasons did the German economy show signs of recovery in the period 1924-1928?

Welfarism extended in the Weimar Republic which highlights commitment of the Weimar
Governments to provide a decent standard of living for all in Germany. The Insurance Law of 1927
allowed 17 million workers to be protected in the event of unemployment.
Instalment payments of reparations resumed in 1923; Stresemann realised that the resumption of
reparation (£6,600 million) payment would increase the likelihood of bringing to an end the Franco-
Belgium occupation of the Ruhr which could only increase industry and benefit the German economy.

New currency established in 1923 called the Rentenmark. In 1924, the Rentenmark was converted
into a permanent currency called the Reichsmark which was backed by gold reserves. This meant the
money in Germany had worth/value.

End to passive resistance by German workers in the Ruhr (1924). The resumption of reparation
payments and the establishment of a new currency and a new bank helped to stabilise the German
economy and Germany’s relationship with the Allies which created the circumstances for bringing
passive resistance in the Ruhr to an end. All this meant that Germany’s industrial heartland could get
back to full production. (It actually doubled by 1929)

New central bank established in November 1923 called the Reichsbank; alongside the new currency,
the Reichsbank was crucial in returning stability and confidence to Germany’s financial system.

Dawes Plan (April 1924) is crucial in facilitating the recovery of the German economy. The plan
witnessed the lengthening of the timeframe Germany had to pay reparations (59 years) as well as the
advancing of 800 million mark loan to Germany from the US in order to kick start the German
economy. The Dawes Plan was crucial in giving the German economy the time and means necessary
to regenerate itself.

Investment in German economy is ongoing in the five years or so after the Dawes Plan of 1924;
between 1924-1930 Germany received 135 long term loans totally $1,430 million as well as short
term loans totalling $1,560 million. These loans facilitated the modernisation of the German economy
so that the Germany of 1928 appeared a world away from the Germany of 1918.

National income in Germany increased in this 1924-1929 period; the National Income in Germany
was 12% higher in 1928 than in 1919 when the militaristic and authoritarian Kaiser Reich was very
much at its zenith. All this highlights that, in many respects, the German economy was characterised
by sound production levels in the 1924-1928 period.

Exports, industrial production and wages all increased in Germany in the 1924-1928 period; German
exports totalled 6.70 thousand million marks in 1924 but had risen to 13.50 thousand million marks
by 1929. Coal, steel and industrial production in Germany were all substantially higher in 1928 than
in 1924; and real weekly earnings stood at the baseline figure of 100 in 1925 but, on average, had
increased by around 10% by 1928.