HIST2128
Germany, 1871-1933: From Empire to Republic
From the treaty of Versailles
to the Dawes Plan
(1919-1924)
Lecture 18
12 April 2012
Election to National Assembly, Jan 1919: A two-third majority for SPD, (Catholic) Centre Party, and (left-liberal) DDP
= ‘Weimar Coalition’ of pro-democratic & pro-republican 3 parties
Versailles Peace Treaty, 1919
• 27 victorious powers ‘Big 4’: US, GB, F, I
• No defeated powers present:
• USA: For League of Nations
• GB: For balance-of-power in Europe + no F dominance
• F: For strongly enhanced ‘security’ vs. G
Treaty contents(440 articles)
• Territory: G lost 13% with 10% of people + all colonies• Disarmament: 100,000 men G troops with no heavy
weapons, tanks, airplanes, U-boats, big warships• Reparations: 60% of coal production, merchant fleet, 50%
of cattle, 25% chemical products, etc.• War guilt clause (art. 231)
☻Very strong burdens for Weimar Republic + regarded as uunbearable in G public
☼ No dismemberment of G but remained intact
☼ Cleavages between Allies + SU offered new policy options for G in Eastern Europe
1920 Reichstag elections: A disaster for ‘Weimar Coalition’ (SPD, Centre Party, DDP): New government of (Catholic) Centre Party, (left-liberal) DDP and (right-liberal) DVP under Chancellor Fehrenbach: Begin of a long period of instable minority governments in Weimar Republic
Post-war economy (1)
• Pre-war exports markets disappeared• Industrial production at all-time low (1919)• Millions of demobilized soldiers back on
labour market (their jobs kept open)
• Relatively low unemployment• Trend towards larger firms • Decline of self-employed
Post-war economy (2)
• General inflation through war financing
• Large reparations sums to pay:↓
• Option 1: Raising taxation level
But: Economically impossible + socially unacceptable
• Option 2: Inflating the mark ☺
Dual advantage of overcoming economic crisis + getting rid of old & future debts
Mark inflation (1)
→ Positive effects for German economy
But: • Infuriated Allies who insisted on proper pays• Ruined wealth of war bonds holders + people with
savings or fixed incomes (esp. middle-class civil servants)
• Caused bankruptcies of professionals + self-employed
• Left little pensions to masses of professional soldiers who were superfluous in smaller army
Mark inflation (2)
☼ 1914: 1 US$ = 4,20 marks
• 1919: 14 marks• 1921: 64.90 marks• 1922: 191.90
☻ Hyperinflation propelled by Ruhr Occupation:
• Jan 1923: 17,972.00 marks• Nov 1923: 4,420,000,000,000
Inflation 1914-23
Gold needed for war costs: Expansion of bank notes
164 billion war debts: War bonds cannot not be paid back
More bank notes in circulation+ equal volume of products = Rise of prices
Extremely high debts ofGerman government
Huge reparation paymentsto Allied countries
Welfare payments to war victimsand family members
Domestic prices are exploding !
Occupation of the Ruhr (1)Chancellor Cuno’s reparation policy:
• Reparations only when economically possible for German economy
• Demanded temporary halts of payments (moratoriums)• Asked for large foreign bank loans to stabilize German
economy
French government Poincarè policy:• Demanded ‘No moratoriums without pawns: ‘Politics of
productive pawns’• Ruhr regarded as very important economic and military-
strategic pawn
→ Long-term plan of F. to occupy the Ruhr to weaken G. economically and militarily
Occupation of the Ruhr (2)
• Inter-Allied Reparation Commission declares against resistance of GB members “a delay in German provisions of coal & wood” (9 Jan 1923):
→ Invasion of 60,000 Fr/B troops into Ruhr area→ Call for passive resistance in Ruhr by Chancellor Cuno but partly
an active resistance struggle by extreme-Rightists
= Huge financial & material supports from German government to the Ruhr (40 million gold marks daily)
= Falling tax revenues for G. government= Need to purchase expensive foreign coal
Occupation of the Ruhr (3)
Consequences:
• High inflation and strong drop of mark, 1923= Socially disastrous counter effects
• Resistance unsuccessful: Cuno stepped back• Passive resistance stopped by ‘Cabinet of the Great
Coalition’ (DVP, Centre Party, DDP, SPD) of Chancellor Stresemann
• Start of fresh negotiations with Allied Powers to save the Ruhr from permanent French occupation
Dawes Plan (1)
• US initiative named after General Charles C. Dawes (Apr 1924)
• Hoped for outlet for US excessive gold reserves + new markets for US products
• Recommend a temporary solution to reparation problem
= ☼ Offered a loan of 800 million gold marks + realistic schedule for annual payments
Dawes Plan (2)
Germany accepted:a) Railways + Reichsbank removed from own controlb) Reparations Commission as controller over G’s financial
policy
= Begin of ease of tensions between German + Allied Powers
= Stronger US engagement in Europe= Temporarily economic relief for German economy= End of Ruhr occupation by F + B
► Start of G’s economic recovery & expansion !
Characteristics of German industry in 1920s
• Willingness to learn from US experience
• Introduction of rationalisation of industry
• Foreign investments (70% from US banks)
• Founding of big concerns (I.G. Farben: chemical & dyestuff, 1925; Vereinigte Stahlwerke A.G.: steel, 1926)
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