Chapter 5

Question 1

Stresemann’s coalition

Answer 1

• the August 1923, at the height of the hyperinflation crisis, the government of Cuno collapsed and was replaced by the new coalition led by Gustav Stresemann
• Stesemann’s coalition - the so called ‘great coalition’ - was the first in the Weimar Republic to include parties from both the left and right
• Stresemann’s party, the DVP, shared power with the Centre Party, the socialists and the DDP
• Stresemann who was only chancellor for 103 days, took office at a time when the Weimar Republic was in serious political and economic difficulty
• by the time he left office in November, the currency had been stabilised, inflation had been brought under control and attempts to overthrow the republic from both the left and right had ended in failure

Question 2

What key things did Stresemann need to do to bring inflation under control

Answer 2

• end passive resistance
• the issuing of new currency
• balancing the budget

Question 3

the end of passive resistance

Answer 3

• passive resistance against the occupation of the Ruhr was called off in September
• this was a highly unpopular and risky move, which led to serious unrest and the attempted Beer Hall Putsch in Munich
• Stresemann calculated, however, that he had no alternative
• Germany’s economy was beginning to grind to a halt and inflation was completely out of control
• ending passive resistance = government stopped paying workers who refused to work for the French = was an essential first step towards reducing government expenditure

Question 4

the issuing of a new currency

Answer 4

• in November, a new currency called the Rentenmark was introduced to replace old and worthless Reichsmark
• one Rentenmark = one trillion old marks
• since Germany did not have sufficient gold reserves to back the new currency, it was supported by a mortgage on all industrial and agricultural land
• once new currency successfully launched, government kept tight control over amount of money in circulation in order to prevent inflation reappearing
• old inflated marks gradually cashed in and, in August 1924, the Rentenmark became the Reichsmark, backed by the German gold reserve, which had to be maintained at 30% of the value of the Reichsmarks in circulation
• inflation ceased to be a problem and value of new currency was established at home and abroad
• all this happened under the direction of Hjalmar Schacht

Question 5

Balancing the budget

Answer 5

• Stresemann’s government cut expenditure and raised taxes
• the salaries of government employees were cut, some 300,000 civil servants lost their jobs and taxes were raised for both individuals and companies
• as government debt began to fall, confidence was restored
• these changes made considerable difference to the way German economy operated
• well-managed companies that were run prudently and were careful not to build up excessive debt continued to prosper
• weaker companies that were heavily reliant on credit crumbled
• the number of companies that went bankrupt in Germany rose from 223 in 1923 to over 6000 in 1924
• moreover, those who had lost their savings in collapse of old currency, did not gain anything from introduction of new currency

Question 6

How did Stresemann suggest to resolve the reparations dispute

Answer 6

• the stabilisation of Germany’s economy was as much dependent on settling the reparations dispute as it was on domestic issues
• in November 1923, Stresemann asked the Allies’ reparations committee to set up a committee of financial experts to address Germany’s repayment concerns
• the USA had a vested interest in getting Germany back to a position where reparations could be paid to France, because much of this money was then passed onto the USA to repay loans
• Therefore, the American banker Charles Dawes acted as the new committee’s chairman
• by time Dawes plan was finalised in April 1924, Stresemann’s government had fallen, but he remained as foreign secretary and took credit for much of what was achieved

Question 7

the Dawes plan - what did it recommend?

Answer 7

• Dawes plan confirmed original figure of £6.6 billion but to make the payments more manageable, it recommended that:
• the amount paid by Germany each year should be reduced until 1929, when the situation would be reappraised. It proposed that Germany should re-start reparations by paying 1000 million marks (a fraction of what had been expected before) and that this sum should be raised by annual increments over five years by 2500 million marks per year. After this, the sum paid should be related to German industrial performance
• Germany should receive a large loan of 800 million marks from the USA to help get the plan started and to allow for heavy investment in German infrastructure

Question 8

What did people think of the Dawes Plan? Did Stresemann agree to it?

Answer 8

• there was heated debate in Reichstag over the Dawes plan
• Stresemann himself did not actually believe in the plan, privately referring to it as ‘no more than an economic armistice’, but he agreed to it as a way of securing foreign loans
• the so-called ‘national opposition’ (mainly the DNVP, but also smaller right wing groups like the Nazi movement) bitterly attacked this policy of compromise, since they believed Germany should defy unjust ToV and refuse to pay reparations altogether
• however, Dawes plan eventually agreed and accepted by both Germany and the allies in July 1924

Question 9

how would the Dawes Plan benefit Germany

Answer 9

• the Allies accepted that Germany’s problems with the payment of reparations were real
• loans were granted, which which new machine, factories, houses and jobs could be provided and the German economy rebuilt

Question 10

What happened to the Ruhr after Germany agreed to start paying reparations again?

Answer 10

• the French gradually left the Ruhr during 1924-25, once it became clear that Germany was going to restart paying reparations and the occupation could no longer be justified
• such measures contributed to German optimism that their country was once again its own master

Answer 11

• by 1925 Germany appeared more stable and prosperous
• combination of new currency, Dawes plan Schacht’s work at the Reichsbank helped improve Germany’s situation enormously
• American loans helped to stimulate the economy

Question 12

What happened to the German industry after 1924

Answer 12

• industrial output grew after 1924 but did not reach 1913 levels until 1929
• growth rates were unsteady
• the years 1924-25 and 1927 were good years, but the economy shrank in 1928and 1929
• investment in new machinery and factories was falling by 1929

Question 13

Closer look at German industry

Answer 13

• the fact Germany had to hand over many of its materials as reparations at end of war opened the way for this ne start to industry
• with American finance, the big industrialists began to buy our or make cooperative agreements with smaller firms to form cartels
• by 1925, there were around 3000 such cartel arrangements in operation, including 90% of Germany’s coal and steel production
• after 1925, Germany was allowed, under terms of ToV, to protect its industries by introducing tariffs on imported foreign goods
• many firms also received state subsidies to enable them to survive
• all these practices reduced competition and propped up inefficient enterprises

Question 14

developments in industry

Answer 14

• advances were made in the chemical industry, such as the large-scale production of artificial fertilisers
• the car and aeroplane industries also developed, although cars were still too expensive for the average German
• the inflation rate was lose to zero and living standards rose as wages began to increase from 1924

Question 15

housing

Answer 15

• loans helped to finances building of housing, schools, municipal buildings, road and public works
• massive population growth had created an acute housing shortage in Germany by early twentieth century, and the overcrowding and insanitary conditions of working-class city accommodation had been linked to political instability
• consequently, state initiatives to provide affordable homes were of great importance for future stability
• in 1925, 178,930 dwellings were built = over 70,000 more than in previous year
• in 1926, there were to be 205,793 more new homes

Question 16

Strikes in German industry

Answer 16

• number of strikes in German industry declined in these years, partly because a new system of compulsory arbitration for settling industrial disputes was issued
• however, employers felt that this system was biased in favour of the unions and resented the state’s interference in their affairs
• the Weimar Republic had already set a maximum of 8 hours for a working day and had given trade unions the right to be part of work councils in factories and mines

Question 17

1928 dispute over wages

Answer 17

• in 1928, a dispute over wages in the iron and steel industry in the Ruhr resulted in the arbitrator granting a small wage increase to the workers
• the employers then refused to pay the increase and locked out the workers for four weeks
• in this dispute the workers were backed by the government and paid by the state

Question 18

How did workers benefit

Answer 18

• there were undoubtedly improvements in living standards for ordinary German workers, especially those who were backed by powerful trade unions
• they benefitted from increases in the real value of wages in each year after 1924
• in 1927, real wages increased by 9%
• in 1928 they rose by a further 12%

Question 19

What did Gustav Stresemann think about Germany’s improved economic position

Answer 19

• in a speech given shortly before his death in 1929, Gustav Stresemann warned, ‘The economic position is only flourishing on the surface. Germany is dancing on a volcano. If the short term loans are called in, a large section of our economy would collapse’

Question 20

limits to the economic recovery - unemployment

Answer 20

• unemployment was a continuing problem in these years
• By end of 1925, unemployment had reached one million
• By March 1926, it was over three million, although it did fall after that
• this was due partly to there being more people seeking work, partly to public spending cuts, but also to companies reducing their workforces in order to make efficiency savings
• the mining companies reduced their workforces by 136,000 between 1922 and 1925, and reduced them by another 56,000 between 1925 and 1929

Question 21

Did the Weimar ‘economic miracle’ benefit everyone?

Answer 21

• the Weimar ‘economic miracle’ did not benefit everyone
• the Mittelstand, the professional middle class, gained very little in so called ‘golden age’
• bankrupted by the hyperinflation of 1923, middle-class managers, clerks, and bureaucrats did not benefit fully from the improved economic climate
• White-collar workers did not enjoy the wage rises of the industrial sector
• by the late 1920s, industrial sector wages had drawn level with those of the middle class and in some cases exceeded them

Question 22

did farmers benefit from the economic recovery

Answer 22

• farmers gained very little benefit from the economic recovery of these years
• a worldwide agricultural depression kept food prices low and few farmers were able to make a profit on their land
• during the inflation of early 1920s, large landowners and farmers borrowed money to buy new machinery and improve their farms. Smaller peasant farmers, however, tended to hoard money and their savings were wiped out by inflation

Question 23

What did the government do to try and help farmers?

Answer 23

• after 1923, the government made it easier for farmers to borrow money, but this made matters worse
• farmers became saddled with debt at a time where prices were falling and they could not, therefore, keep up the repayments
• the increased taxes introduced to pay for the welfare benefits of the unemployed and sick were regarded as an unfair burden on farmers and landowners
• the governments of these years tried to relieve the farmers’ plight by introducing high import tariffs on food products, import controls and subsidies to farmers, but these measures did not go far enough

Question 24

How did the farmers suffer?

Answer 24

• the plight of German farmers worsened due to a global grain surplus and price slump in 1925 and 1926
• by late 1920s, there was an increase in bankruptcies amongst farmers and many of them lost their land as the banks demanded repayment of loans
• in 1928, farmers initiated a series of small-scale riots = known as the ‘farmers revenge’ - in protest against foreclosures and low market prices
• by 1929, German agricultural production was at less than three quarters of its pre-war levels

Question 25

What was the problem with the Dawes plan? Why was a final settlement of the reparations issue needed?

Answer 25

- Dawes plan of 1924 only ever intended to be temporary settlement of reparations issue - although French and Belgians left Ruhr by 1925, Allied forces remained in occupation of Rhineland and French would not agree to withdraw these forces unless and until a final settlement of the reparations issue had been agreed - therefore Stresemann, who had continued to serve as foreign minister after his own coalition government collapsed, agreed that the issue should be considered by an international committee headed by the American businessman Owen Young - this committee met in Paris in 1929, which Schacht as one of Germany's representatives, and produced a report on the final settlement of the reparations issue

Question 26

What did the Young Plan say?

Answer 26

- the Young Plan obliged Germany to continue paying reparations until 1988 - the total reparations bill was considerably reduced, with Germany being required to pay £1.8 billion instead of original sum 0f £6.6 billion - but the annual payment Germany was required to make increased - all foreign control over reparations was ended and the responsibility for paying reparations was placed solely on the German government - in return Britain and France agreed to withdraw all their troops from the Rhineland by June 1930

Question 27

did everyone agree/like the Young Plane?

Answer 27

- despite containing number of concessions to Germany, the Young Plan nevertheless inflamed nationalist opinion in Germany - the new leader of right wing DNVP, Alfred Hugenberg, launched a nationwide campaign against the plan, which involved other conservative groups, including Adolf Hitler and the Nazis - this campaign drew up the draft of a law - the so called 'freedom law' - which they demanded should be submitted to a national referendum - this law required the government to repudiate the war guilt clause of the ToV, to demand immediate evacuation of the occupied areas and declared that any minister who signed a treaty that involved acceptance of war guilt would be tried for treason

Question 28

What did Hugenberg's group do to try and pass the 'freedom law'? Who had a leading role in this campaign and what did this mean for them?

Answer 28

- Hugenberg's group launched a petition in support of their 'freedom law' - and attracted 4,135,000 signatures - this was enough to ensure that it would have to be debated by the Reichstag and put to a referndum - in the Reichstag debate the 'freedom law' was decisively defeated and it was also rejected in the referendum - on the other hand, the fact that 5,825,000 or 13.8% of the electorate, voted for the 'freedom law' was an indication of the depth of support for right-wing nationalism - moreover, Adolf Hitler's leading role in the campaign, which was financed by Hugenberg, enabled him to make a decisive breakthrough as a national political figure