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)

Germany’s Production 1913-29

Year Hard coal

in mill. tons

Brown coal in mill. tons

Raw steel in mill. tons

Electricity in mil. kWh.

1913 190.1 87.2 20.8 -

1923 62.3 118.8 6.3 -

1926 145.3 139.2 12.3 21,218

1929 163.4 174.5 16.1 30,660