It was only possible to end the hyperinflation in November 1923 when an international agreement was reached on the temporary suspension of reparations.
[15] Currency stabilization failed until the monetary reform that followed the hyperinflation of 1923. In quantitative terms, the economic results of the following years were moderate. However, the reparations problem remained unsolved and its solution was further complicated by the wave of foreign loans which were now pouring into the country and would have to be repaid in the future.
In some circles this detachment and disillusionment with politics and conflict fostered an increase in pacifist sentiment. Economic reconstruction after World War I remained incomplete. Broadberry, Stephen / Howlett, Peter: The United Kingdom During World War I: Business as Usual?, in: Broadberry / Harrison, The Economics of World War I 2005, pp. Feldman, Gerald D.: Army, Industry and Labor in Germany, 19141918, Princeton 1966, p. 521. The overall weakness of growth in the world economy was due to the massive distortions in international markets and to global protectionism. In order to achieve social pacification and to meet the economic expectations of the population, high wage settlements were politically supported, thus accepting the progression of inflation (section 4).
Despite population losses in the millions, the war did not bring about a significant shift in German capital intensity, i.e. The United States government organized a stabilization plan for Germany, which included the granting of loans by American private banks. It's not supposed buy the bonds of troubled countries. Efforts of the western European powers to marginalize Germany undermined and isolated its democratic leaders.
So Germany's central bank printed a bunch of money and loaned it to the government. The state took on a new role during the war and there was a clear modification of economic guidelines. [7] This low level could no longer be increased until the end of the war. During the same period, industrial production roughly doubled and the GDP also increased, so that Germany was spared the 1921 economic collapse of other western industrialized countries. The devaluation of the Mark was in turn accelerated by the late payment of taxes, taking advantage of generous deadlines for self-assessment of income tax. The difficulties imposed by social and economic unrest following World War I and itssevere peace terms, along with the raw fear of the potential for a Communist takeover in the German middle classes, worked to undermine pluralistic democratic solutions in Weimar Germany. In the United States public opinion favored a return to isolationism; such popular sentiment was at the root of the US Senate's refusal to ratify the Versailles Treaty and approve US membership in President Wilson's own proposed League of Nations. Ritschl, Albrecht / Spoerer, Mark: Das Bruttosozialprodukt in Deutschland nach den amtlichen Volkseinkommens- und Sozialproduktstatistiken 19011995, in: Jahrbuch fr Wirtschaftsgeschichte 2 (1997), p. 51. Workers had to work less, but they also had lower earnings over a longer period of time. The economic depression during the war was followed by a brief upswing which lasted until the Ruhr occupation and hyperinflation. German industrial production, which had fallen back to the level of the late 1880s by the end of the war, could only reach its pre-war level in 1927. The official line is that he resigned for personal reasons. The miserable supply led to a vicious cycle: the decline in production led to poor nutrition which reduced the ability to work. [11] However, some of the weaknesses observed domestically were related to the unfavourable external economic relations. An intensive debate began about the negative consequences of too high wages. Jahrhunderts, Gttingen 1982, p. 114. The result was possibly the most destructive case of inflation in history. Many Germans felt that Germany's prestige should be regained through remilitarization and expansion. Geschichte der ffentlichen Finanzen vom 18. View of one of the dormitories which can house up to 100 people.". the per capita endowment with real capital. "Weimar Republic" is the name given to the German government between the end of the Imperial period (1918) and the beginning of Nazi Germany (1933). However, production now fell sharply, and Germany experienced a recession with raging inflation. This relative golden age was reflected in the strong support for moderate pro-Weimar political parties in the 1928 elections. It could lend that money to the governments in need.
currency reform; fulfilment policy; hyper inflation; reparations; unemployment, Unemployed man looking for work, Germany 1928, Public finance, reparations, and foreign trade. In the reparations-receiving countries, too, the private sectors interest in the low-priced state imports was divided. As a result, the reparations would be paid on credit and the real economic transfer would be close to zero. Konjunkturpolitik 1925/26 und die Grundlagen der Krisenpolitik Brnings, Frankfurt 1982. So it's no surprise that the ECB wound with its headquarters in Frankfurt, and with a single mission: Keep inflation in check. The waiter says, 'Well, you haven't finished!'
Between 1915 and 1918, German imports and consumption-oriented production declined in parallel. [25] When recovery began in 1927, it was interrupted a short time later by the outbreak of the Great Depression in 1929. Ullmann, Hans-Peter: Der deutsche Steuerstaat. International Encyclopedia of the First World War, ed. Workers representatives and trade unionists, Deutschland ; Inflation ; Geschichte 1918-1923, Germany ; Economic aspects ; Inflation (Finance). Already in a phase of demobilization, the young German republic went through a crisis, which the government tried to get under control with a wage-price spiral that was driving up inflation. The new Reich Economic Office within the Ministry of the Interior, established in 1917, aimed in the same direction. ): The Cambridge Economic History of Modern Europe, vol. Total labour productivity also remained at a low level until that year. Economic chaos increased social unrest and destabilized the fragile Weimar Republic. 2: 1870 to the Present, Cambridge 2010, p. 177. Many Germans forgot that they had applauded the fall of the emperor (the Kaiser), had initially welcomed parliamentary democratic reform, and had rejoiced at the armistice. In the years following World War I, there was spiraling hyperinflation of the German currency (Reichsmark) by 1923. In order to stabilize wartime production, an improvised control of raw material distribution was installed. All these circumstances were a considerable burden on German exports. Many of the causes of this disorder had their roots in World War I and its aftermath. However, the extensive money transfers abroad posed a particular problem. The Treaty of Versailles had left the exact amount of reparations undetermined. Learn about the period of disastrous inflation inWeimar Germany after World War I and consider the effects of this era on German citizens. The article ends with the mid-1920s, when the German economy entered a brief period of calm until the Great Depression hit the country with full strength. ), the story of a German "everyman," caught up in the turmoil of economic crisis and unemployment, and equally vulnerable to thecalls of the radical political Left and Right. Boldorf, Marcel: Post-war Economies (Germany) , in: 1914-1918-online. Their attempts to face post-war deflation by restoring the gold parity of their currencies led to a rise in unemployment. The determination of the amount of this politically defined debt was entrusted to the inter-allied reparations commission. The financial room for manoeuvre narrowed visibly with the onset of hyperinflation which also had a considerable impact on the real economy. Disillusionment with international and national politics and a sense of distrust in political leaders and government officialsspread throughout the consciousness of a public which had witnessed the ravages of a devastating four-year conflict. In the first months of the war, mobilization led to a significant drop in production and employment and at the same time unemployment rose. This was mainly the result of an incorrectly implemented recruitment policy. After all, the ECB has the unique ability to print unlimited amounts of euros. The number of taxes which had to be paid to the Reich expanded considerably. The economic problems of the post-war period must be viewed in a more differentiated way than contemporaries did in their political arguments. The territorial cessions as another political sanction of the Treaty of Versailles were opposed by a swelling circle of German nationalists.
At an international level, this change became apparent in the sharp crises of the transition economies in the United States and Britain after the end of the war. The tax reform of 1919/20, initiated and implemented by the Minister of Finance Matthias Erzberger (1875-1921), placed the states budget on a new foundation. hide caption. See Tooze, Adam: The Deluge. Everything you need to get started teaching your students about racism, antisemitism and prejudice. Export surpluses were to be used to procure sufficient foreign currencies to manage the reparation transfer. But it's no secret that he hated the bond buying program. This made labour considerably more expensive for industry without being compensated by higher growth rates. Mass unemployment and suffering followed. Zeitreihen zur Historischen Statistik, Bonn 2015, p. 239. Germanys territorial losses and the imposed reparations are the key words that not only came up in contemporary discussions, but are still mentioned today when considering the economic legacy of World War I. The reduction in the state territory did not mean that the Germans had become poorer.[2]. Kocka, Jrgen: Facing Total War: German Society, 19141918, Cambridge 1984.
The impoverishment of these population groups increased their susceptibility to political radicalization. This site is protected by reCAPTCHA and the Google, Our headquarters are located in Boston, Massachusetts, The Weimar Republic: The Fragility of Democracy, Women Waiting in Line to Buy Sub-standard Meat (1923), Personal Accounts of the Inflation Years (1919-1924).
The necessary agreement was often lacking, such that the Reich Office for Economic Demobilisation or, in important cases, the Reich Minister of Labour intervened in collective bargaining disputes. The most important achievement was the introduction of the eight-hour day, which meant a considerable reduction in the working week.
23-66. ): Deutschland in Daten. During the demobilization phase in Germany, state orders, subsidies, and public works provided an increase in the demand for labour, thus balancing the labour market.[16]. Anne Frank Biography: Who was Anne Frank? Ritschl, Albrecht: The Pity of Peace: Germany's War Economy, 19141918 and Beyond, in: Broadberry, Stephen / Harrison, Mark (eds. European countries are setting up the euro, and the new currency needs a new central bank. In addition, the external devaluation of German notes was fueled by speculative transactions with short-term Reichsbank loans, e.g. Politics, Economics, and Society in the German Inflation, 19141924, Oxford/New York 1993, pp. The long-term effect was that regulatory interventions in the economic process became more frequent, as long as they were based on sound expertise. Industrial entrepreneurs, who initially held transitional positions in the high ministerial bureaucracy during the war, were now more involved in economic policy decisions. Correction: An earlier version of this story incorrectly quoted a former Bundesbank president as criticizing the bond buying program of the European Central Bank. Unemployment in Germany remained at a low level from mid-1919 to the end of 1922. According to Article 231, Germany and its allies, as the sole aggressors, were responsible for all damages resulting from the war. This incentive was reinforced by the fact that the price level in the other European countries fell sharply when they tried to return to the gold standard. ): Das Reichswirtschaftsministerium der Weimarer Republik und seine Vorlufer.
By 1924, after years of crisis management and attempts at tax and finance reform, the economy was stabilized with the help of foreign, particularly American, loans. Fischer, Conan: The Ruhr Crisis, 19231924, Oxford 2003; Tooze, The Deluge 2014, pp. The social and economic upheaval that followed World War I gave rise to many radical right wing parties in Weimar Germany. Some scholarly debates on long-term economic development are explicitly based on the structural break thesis. Paper money is stacked in a Berlin Bank in 1922. Collective wage formation in the post-war years initially led to clear redistribution effects in favour of the working class. Practitioners from the business world now entered the state bureaucracy more frequently. The aim was to buy social stability in return for generous wage concessions; wage enforcement was made possible through the described means of state arbitration. 344-384. [12] In a favourable climate, the trade unions were able to push through long-standing demands against the employers. Soldiers back from the war needed money for pensions. is licensed under: CC by-NC-ND 3.0 Germany - Attribution, Non-commercial, No Derivative Works. The treaty also deprived Germany of territory, natural resources, and even ships, trains, and factory equipment. As a sanction against German coal deliveries in arrears, French and Belgian troops moved into the Ruhr region in January 1923 to force the fulfilment of the agreed quotas.
And no other country would lend it money. The currency was so worthless, it was used as wallpaper in German bathrooms. The German nationalist Right promised to revise the Versailles Treaty through force if necessary, and such promises gained traction in respectable circles. Industrial production was also severely affected. In the end, banknotes were overstamped with increased denominations in the billions and then put back into circulation. Holocaust Survivors and Victims Resource Center. A turnover tax and a standardized, highly progressive income tax were newly introduced, placing a heavier burden particularly on persons with high incomes. This international experience did not initially apply to Germany, because it continued a path of inflation. War widows needed compensation. After World War I, coal production in the Ruhr and Saar districts continued at a high level, encouraged by the obligation to deliver coal to France and Belgium.[19]. The thought of hitting up a central bank's ATM would send many Germans fleeing in panic.
By 1918, it had fallen to 57 percent of its 1913 value. This consideration, however, seems more important than the absolute size of the national economy. For troubled European countries, the European Central Bank could be like a giant ATM. It rose to 81 percent in 1923 and to 96 percent in 1925, and in 1927 it exceeded pre-war levels for the first time. 165-182.
[3] If long-term growth is chosen as the leitmotif for economic development in the 19th and 20th centuries, one can recognize many constants across the war. These fears and challenges also increased public longing for more authoritarian direction, a kind of leadership which German voters ultimately and unfortunately found in Adolf Hitler and his National Socialist Party. And he says, 'Yes, but if I don't order now, prices will be double by the time I finish my first beer!' Germany emerged from World War Iwith huge debts incurred to finance a costly war for almost five years. Washington, DC 20024-2126 by Ute Daniel, Peter Gatrell, Oliver Janz, Heather Jones, Jennifer Keene, Alan Kramer, and Bill Nasson, issued by Freie Universitt Berlin, Berlin 2021-12-13.
This view starts in the political sphere. In Germany, this happened with an administrative upheaval through the establishment of a bureaucracy that took over economic control tasks. While some transfers were levied as deliveries in kind, for example by sending coal, others were payable as monetary amounts in foreign currency. Webb, Steven: Hyperinflation and Stabilization in Weimar Germany, Oxford 1989. In accordance with the Weimar Constitution, it centralized tax sovereignty and tax collection at the state level. It was only in 1928 that real wages per week exceeded the pre-war level. On the one hand, the risk had to be countered that this transfer would cause German export prices to change too much in relation to those for imports. (Kleiner Mann, was nun? In agriculture, the decline was most severe in the famine winter of 1916/17, when domestic production reached only 60 percent of the pre-war level. [8] Labour productivity also fell sharply during the war. The unions were keen to maintain weekly incomes and demanded significant wage increases. Picture taken in the municipal refuge for the homeless. Since Germanys payment morale was poor, only small amounts were transferred in the 1920s.
TTY: 202.488.0406, [caption=020993dc-cabe-4014-aed6-86ebf73280aa], [credit=020993dc-cabe-4014-aed6-86ebf73280aa], United States Holocaust Memorial Museum, Washington, DC. Driven by the idea of a quick and short war, the decisions of the political and military leadership initially took little account of economic issues. Hourly wages rose so sharply during the 1920s such that towards the end of the decade they were around 30 percent higher than in 1913 taking into account the cost of living. But for more than a year now ever since Greece first put up its hand and said, "We need help" that's exactly what the ECB been doing. From then on, the Reich no longer bore the costs of the federal states, but the Lnder were financially dependent on the Reich. They tried to steer their compatriots away from polarization to the radical Left and Right. In 1919, the GDP per capita was 73 percent of the 1913 level. During the prison sentence he wrote his political manifesto, Mein Kampf (My Struggle). In fact, he was criticizing the bond buying program of the US Federal Reserve. Jahrhundert, Darmstadt 2018, p. 47. The treasury was empty, the currency was losing value, and Germany needed to pay its war debts and the huge reparations bill imposed on it by the Treaty of Versailles, which officially ended the war. The transfers were initially to be paid according to the provisional annuities fixed by the Reparation Commission. See also for the following paragraphs, Ritschl, Wirtschaftliche Folgen 2020, pp. Kopsidis, Michael: Landwirtschaft, in: Rahlf, Thomas (ed.
51-53. Meanwhile, there was fear of an imminent Communist threat following the Bolshevik Revolution in Russia and short-lived Communist revolutions or coups in Hungary (Bela Kun) and in Germany itself (e.g., the Sparticist Uprising). Many Germans believe it helped lay the groundwork for the rise of the Nazi party a belief that has left the nation with a profound fear of inflatoin. Boldorf, Deutsche Wirtschaft und Politik 2020, pp. Even in the Golden Twenties after the currency reform, there were still signs of crisis: the number of company bankruptcies reached a peak after the collapse of the inflationary consensus. Fast forward 70 years from Germany's inflation nightmare to 1992. This is the key finding of Holtfrerich, Carl-Ludwig: The German Inflation 19141923.
Boldorf, Marcel: Ordnungspolitik und wirtschaftliche Lenkung, in: Boldorf, Deutsche Wirtschaft im Ersten Weltkrieg 2020, pp. This was not so much related to the revolution since the implementation of far-reaching socialisation goals failed in early 1919. After World War I, Germany was deep in debt. Berlin/Boston 2016, p. 96-145. The American stock market crash and bank failures led to a recall of American loans to Germany. On the other hand, there was the risk that there would be no export surplus at all: any attempt to transfer money to the reparations account would attract an inflow of capital to Germany via the international capital markets. The original caption for this photo, taken in Weimar Germany during the Great Depression, reads: "When night comes! Up to this point, we can state that World War I was a dramatic slump for the German economy, especially with regard to material production. On the other hand, radical rightwing activists like Adolf Hitler, whose Nazi Party had attempted to depose the government of Bavaria and commence a "national revolution" in the November 1923 Beer Hall Putsch, served only nine months of a five year prison sentence for treasonwhich was a capital offense. In the period between 1924 and 1929, known as the Golden Twenties, Germany experienced relative economic and political stabilization.[24]. discounted bills of exchange, which could be repaid after maturity in heavily devalued currency. The other side of this self-destruction of the German financial system was the further intensification of the reparation conflict. Causes and Effects in International Perspective, Berlin 1986.
From which perspective should one consider the possibility of a structural break caused by the war? 397ff. 101-103. They now felt compelled to support the Weimar Republic as the least worst alternative. Germany was not alone with these poor figures; a similar picture emerged for the Habsburg Monarchy and the warring states of continental Europe as a whole. Money started losing value by the second: "There's this famous example that somebody sits in a pub and orders a beer," says historian Carl Ludvig-Holtfrerich. The first thing on the economic policy agenda was the elimination of the structural consequences of war. ". 203-207. 206-234. The ECB is not supposed to be bailing out governments, according to many Germans. Workers representatives and trade unionists were recognized as equal negotiating partners.
Thus, the state authorities were able to secure social peace through arbitration but very often against the will of the bargaining parties. However, it can also be shown that the reparations created demand in the post-war depression and thus had a positive effect on production. "Immediately, when the waiter carries the beer to his table, he orders the second one. Many Germans became increasingly disillusioned with the Weimar Republic and began to turn toward radical anti-democratic parties whose representatives promised to relieve their economic hardships. However, the introduction of the eight-hour day meant that weekly wages, except for unskilled workers, were significantly lower than before the war. You don't do this.". Finally, the destruction and catastrophic loss of life during World War I led to what can best be described as a cultural despair in many former combatant nations. These high burdens on the German economy, as they were perceived at the time, resulted from the Treaty of Versailles. Unemployment rose to an unprecedented level of 10 percent by 1926, so that an interventionist economic policy was pursued. Across Europe, the war reduced the repression of the labour movement. 100 Raoul Wallenberg Place, SW The path which Germany took would lead to a still more destructive war in the years to come. Fallada's 1932 novel accurately portrayed the Germany of his time: a country immersed in economic and social unrest and polarized at the opposite ends of its political spectrum. Hungry boys eating a school lunch in Weimar-era Germany during its years of hyper-inflation and malnutrition (1921). The ECB says it's not just printing money to buy the bonds of Greece and other troubled countries. Studien zur Wirtschaftsgeschichte des 19. und 20. Agitators from the political left served heavy prison sentences for inspiring political unrest. They were obliged to pay reparations to their war opponents. The previously dominant taxes paid to the municipalities and federal states (Lnder) played only a subordinate role in the new system. While the top income tax rate was 10 percent before the war, it now rose to 60 percent. Boldorf, Marcel: Deutsche Wirtschaft und Politik. It helped to further discredit German socialist and liberal circles who felt most committed to maintain Germany's fragile democratic experiment. Vernunftsrepublikaner ("republicans by reason"), individuals like the historian Friedrich Meinecke and Nobel prize-winning author Thomas Mann, had at first resisted democratic reform. Fisch, Stefan: Strukturwandel vom Reichswirtschaftsamt und Reichswirtschaftsministerium im bergang zur Weimarer Republik, in: Holtfrerich, Carl-Ludwig (ed. [caption=020993dc-cabe-4014-aed6-86ebf73280aa] - [credit=020993dc-cabe-4014-aed6-86ebf73280aa]. In response, the Reich government called for passive resistance by halting industrial production. Another important innovation was the establishment of collective agreements on wage and working conditions. A revolutionary break, as expected and partly longed for by many contemporaries, did not occur. A period of relative prosperity prevailed from 1924 to 1929. Supply chains were broken and branches of production that were important for the armament industry, and also for consumers, were disrupted in their activities. See Spoerer, Mark / Streb, Jochen: Neue deutsche Wirtschaftsgeschichte des 20. Most European countries had lost virtually a generation of their young men. Rather, the negotiating successes were based on a corporatist social alliance that employers and trade unions formed shortly after the end of the war: the Zentralarbeitsgemeinschaft, the Central Working Community of the German commercial and industrial employers and leading trade unionists. "This historical experience tells every policy maker: You don't mess around with inflation," says Klaus Frankenberger, an editor in Frankfurt. This text Above all, this meant fighting against hunger, reintegrating returning soldiers into the workforce, and converting war production to a peacetime economy. During the Weimar inflation, people carted money around in wheelbarrows to do their shopping.
As often in the interwar period, entrepreneurs demanded protective tariffs to prevent business from being affected by German competition. This development added to Germanys economic hardship. Financial constraints and a lack of credit restricted the governments scope of action. In contrast, the war brought a marked upswing both in the United States and Great Britain, despite the German attempt at a counter-blockade through submarine warfare.
[5] Thus, the Reich had a civilian economic administration after the war. The problem with this idea? [9] Thus, weak growth was characteristic of the entire post-war period. The Gold Standard and the Great Depression, 19191939, Oxford 1992, pp. In more detail: Hertz-Eichenrode, Dieter: Wirtschaftskrise und Arbeitsbeschaffung. "Never. Eine Auseinandersetzung mit Holtfrerichs Berechnungen zur Lohnposition der Arbeiterschaft 19251932, in: Geschichte und Gesellschaft 16 (1990), pp. Jahrhundert bis heute, Munich 2005, pp. We would like to thank Crown Family Philanthropies and the Abe and Ida Cooper Foundation for supporting the ongoing work to create content and resources for the Holocaust Encyclopedia. However, economic disaster struck with the onset of the world depression in 1929. World War I did not set an economic dynamic in motion but marked the beginning of a long-lasting period of economic weakness. The Great War and the Remaking of Global Order, 19161931, London 2014, pp. These war effects give hints about the economic burdens that the newly founded German Republic had to bear. The rise of nominal wages postponed the escalation of the wage conflict.
Ritschl, Albrecht: Wirtschaftliche Folgen des Erstens Weltkriegs, in: Boldorf, Marcel (ed. The Dawes Plan of August 1924 succeeded in postponing the payments for a few years. See Eichengreen, Barry J.: Golden Fetters. We will see later how the problem of reparations fits into the complexity of the economic burdens of war. German production capacities were reduced by about 10 percent. In 1992, Germany was the biggest economy in Europe, and it had a lot of influence over the shape of the new European Central Bank. Borchardt, Knut: Wachstum, Krisen, Handlungsspielrume der Wirtschaftspolitik. In the middle of the war, in August 1916, a Reich Commissariat for transitional economics (Reichskommissat fr die bergangswirtschaft) came into being, which had to prepare the peace economy after the armistice. Reparations to France and Britain were enormous. They recalled only that the German LeftSocialists, Communists, and Jews, in common imaginationhad surrendered German honor to a disgraceful peace when no foreign armies had even set foot on German soil. [6] Industries that were not important to the war effort were combed out for labour, raw materials, and machinery.
Cue inflation-fearing, deep-pocketed Germany. The expansion of such organizations also had personnel consequences. Fiercely opposed by the nationalist camp, the additional income from higher tax revenues were to be used for the reparation transfers in fulfilment of the Treaty of Versailles. As early as 15 November 1918, the labour market parties reached a contractual agreement on essential social issues. This fear shifted German political sentiment decidedly toward right-wing causes. Maybe the political unwillingness of the administration to collect taxes for the benefit of the hated reparation creditors or even the hated Republic played an additional role.
[15] Currency stabilization failed until the monetary reform that followed the hyperinflation of 1923. In quantitative terms, the economic results of the following years were moderate. However, the reparations problem remained unsolved and its solution was further complicated by the wave of foreign loans which were now pouring into the country and would have to be repaid in the future.
In some circles this detachment and disillusionment with politics and conflict fostered an increase in pacifist sentiment. Economic reconstruction after World War I remained incomplete. Broadberry, Stephen / Howlett, Peter: The United Kingdom During World War I: Business as Usual?, in: Broadberry / Harrison, The Economics of World War I 2005, pp. Feldman, Gerald D.: Army, Industry and Labor in Germany, 19141918, Princeton 1966, p. 521. The overall weakness of growth in the world economy was due to the massive distortions in international markets and to global protectionism. In order to achieve social pacification and to meet the economic expectations of the population, high wage settlements were politically supported, thus accepting the progression of inflation (section 4).
Despite population losses in the millions, the war did not bring about a significant shift in German capital intensity, i.e. The United States government organized a stabilization plan for Germany, which included the granting of loans by American private banks. It's not supposed buy the bonds of troubled countries. Efforts of the western European powers to marginalize Germany undermined and isolated its democratic leaders.
So Germany's central bank printed a bunch of money and loaned it to the government. The state took on a new role during the war and there was a clear modification of economic guidelines. [7] This low level could no longer be increased until the end of the war. During the same period, industrial production roughly doubled and the GDP also increased, so that Germany was spared the 1921 economic collapse of other western industrialized countries. The devaluation of the Mark was in turn accelerated by the late payment of taxes, taking advantage of generous deadlines for self-assessment of income tax. The difficulties imposed by social and economic unrest following World War I and itssevere peace terms, along with the raw fear of the potential for a Communist takeover in the German middle classes, worked to undermine pluralistic democratic solutions in Weimar Germany. In the United States public opinion favored a return to isolationism; such popular sentiment was at the root of the US Senate's refusal to ratify the Versailles Treaty and approve US membership in President Wilson's own proposed League of Nations. Ritschl, Albrecht / Spoerer, Mark: Das Bruttosozialprodukt in Deutschland nach den amtlichen Volkseinkommens- und Sozialproduktstatistiken 19011995, in: Jahrbuch fr Wirtschaftsgeschichte 2 (1997), p. 51. Workers had to work less, but they also had lower earnings over a longer period of time. The economic depression during the war was followed by a brief upswing which lasted until the Ruhr occupation and hyperinflation. German industrial production, which had fallen back to the level of the late 1880s by the end of the war, could only reach its pre-war level in 1927. The official line is that he resigned for personal reasons. The miserable supply led to a vicious cycle: the decline in production led to poor nutrition which reduced the ability to work. [11] However, some of the weaknesses observed domestically were related to the unfavourable external economic relations. An intensive debate began about the negative consequences of too high wages. Jahrhunderts, Gttingen 1982, p. 114. The result was possibly the most destructive case of inflation in history. Many Germans felt that Germany's prestige should be regained through remilitarization and expansion. Geschichte der ffentlichen Finanzen vom 18. View of one of the dormitories which can house up to 100 people.". the per capita endowment with real capital. "Weimar Republic" is the name given to the German government between the end of the Imperial period (1918) and the beginning of Nazi Germany (1933). However, production now fell sharply, and Germany experienced a recession with raging inflation. This relative golden age was reflected in the strong support for moderate pro-Weimar political parties in the 1928 elections. It could lend that money to the governments in need.
currency reform; fulfilment policy; hyper inflation; reparations; unemployment, Unemployed man looking for work, Germany 1928, Public finance, reparations, and foreign trade. In the reparations-receiving countries, too, the private sectors interest in the low-priced state imports was divided. As a result, the reparations would be paid on credit and the real economic transfer would be close to zero. Konjunkturpolitik 1925/26 und die Grundlagen der Krisenpolitik Brnings, Frankfurt 1982. So it's no surprise that the ECB wound with its headquarters in Frankfurt, and with a single mission: Keep inflation in check. The waiter says, 'Well, you haven't finished!'
Between 1915 and 1918, German imports and consumption-oriented production declined in parallel. [25] When recovery began in 1927, it was interrupted a short time later by the outbreak of the Great Depression in 1929. Ullmann, Hans-Peter: Der deutsche Steuerstaat. International Encyclopedia of the First World War, ed. Workers representatives and trade unionists, Deutschland ; Inflation ; Geschichte 1918-1923, Germany ; Economic aspects ; Inflation (Finance). Already in a phase of demobilization, the young German republic went through a crisis, which the government tried to get under control with a wage-price spiral that was driving up inflation. The new Reich Economic Office within the Ministry of the Interior, established in 1917, aimed in the same direction. ): The Cambridge Economic History of Modern Europe, vol. Total labour productivity also remained at a low level until that year. Economic chaos increased social unrest and destabilized the fragile Weimar Republic. 2: 1870 to the Present, Cambridge 2010, p. 177. Many Germans forgot that they had applauded the fall of the emperor (the Kaiser), had initially welcomed parliamentary democratic reform, and had rejoiced at the armistice. In the years following World War I, there was spiraling hyperinflation of the German currency (Reichsmark) by 1923. In order to stabilize wartime production, an improvised control of raw material distribution was installed. All these circumstances were a considerable burden on German exports. Many of the causes of this disorder had their roots in World War I and its aftermath. However, the extensive money transfers abroad posed a particular problem. The Treaty of Versailles had left the exact amount of reparations undetermined. Learn about the period of disastrous inflation inWeimar Germany after World War I and consider the effects of this era on German citizens. The article ends with the mid-1920s, when the German economy entered a brief period of calm until the Great Depression hit the country with full strength. ), the story of a German "everyman," caught up in the turmoil of economic crisis and unemployment, and equally vulnerable to thecalls of the radical political Left and Right. Boldorf, Marcel: Post-war Economies (Germany) , in: 1914-1918-online. Their attempts to face post-war deflation by restoring the gold parity of their currencies led to a rise in unemployment. The determination of the amount of this politically defined debt was entrusted to the inter-allied reparations commission. The financial room for manoeuvre narrowed visibly with the onset of hyperinflation which also had a considerable impact on the real economy. Disillusionment with international and national politics and a sense of distrust in political leaders and government officialsspread throughout the consciousness of a public which had witnessed the ravages of a devastating four-year conflict. In the first months of the war, mobilization led to a significant drop in production and employment and at the same time unemployment rose. This was mainly the result of an incorrectly implemented recruitment policy. After all, the ECB has the unique ability to print unlimited amounts of euros. The number of taxes which had to be paid to the Reich expanded considerably. The economic problems of the post-war period must be viewed in a more differentiated way than contemporaries did in their political arguments. The territorial cessions as another political sanction of the Treaty of Versailles were opposed by a swelling circle of German nationalists.
At an international level, this change became apparent in the sharp crises of the transition economies in the United States and Britain after the end of the war. The tax reform of 1919/20, initiated and implemented by the Minister of Finance Matthias Erzberger (1875-1921), placed the states budget on a new foundation. hide caption. See Tooze, Adam: The Deluge. Everything you need to get started teaching your students about racism, antisemitism and prejudice. Export surpluses were to be used to procure sufficient foreign currencies to manage the reparation transfer. But it's no secret that he hated the bond buying program. This made labour considerably more expensive for industry without being compensated by higher growth rates. Mass unemployment and suffering followed. Zeitreihen zur Historischen Statistik, Bonn 2015, p. 239. Germanys territorial losses and the imposed reparations are the key words that not only came up in contemporary discussions, but are still mentioned today when considering the economic legacy of World War I. The reduction in the state territory did not mean that the Germans had become poorer.[2]. Kocka, Jrgen: Facing Total War: German Society, 19141918, Cambridge 1984.
The impoverishment of these population groups increased their susceptibility to political radicalization. This site is protected by reCAPTCHA and the Google, Our headquarters are located in Boston, Massachusetts, The Weimar Republic: The Fragility of Democracy, Women Waiting in Line to Buy Sub-standard Meat (1923), Personal Accounts of the Inflation Years (1919-1924). The necessary agreement was often lacking, such that the Reich Office for Economic Demobilisation or, in important cases, the Reich Minister of Labour intervened in collective bargaining disputes. The most important achievement was the introduction of the eight-hour day, which meant a considerable reduction in the working week.
23-66. ): Deutschland in Daten. During the demobilization phase in Germany, state orders, subsidies, and public works provided an increase in the demand for labour, thus balancing the labour market.[16]. Anne Frank Biography: Who was Anne Frank? Ritschl, Albrecht: The Pity of Peace: Germany's War Economy, 19141918 and Beyond, in: Broadberry, Stephen / Harrison, Mark (eds. European countries are setting up the euro, and the new currency needs a new central bank. In addition, the external devaluation of German notes was fueled by speculative transactions with short-term Reichsbank loans, e.g. Politics, Economics, and Society in the German Inflation, 19141924, Oxford/New York 1993, pp. The long-term effect was that regulatory interventions in the economic process became more frequent, as long as they were based on sound expertise. Industrial entrepreneurs, who initially held transitional positions in the high ministerial bureaucracy during the war, were now more involved in economic policy decisions. Correction: An earlier version of this story incorrectly quoted a former Bundesbank president as criticizing the bond buying program of the European Central Bank. Unemployment in Germany remained at a low level from mid-1919 to the end of 1922. According to Article 231, Germany and its allies, as the sole aggressors, were responsible for all damages resulting from the war. This incentive was reinforced by the fact that the price level in the other European countries fell sharply when they tried to return to the gold standard. ): Das Reichswirtschaftsministerium der Weimarer Republik und seine Vorlufer.
By 1924, after years of crisis management and attempts at tax and finance reform, the economy was stabilized with the help of foreign, particularly American, loans. Fischer, Conan: The Ruhr Crisis, 19231924, Oxford 2003; Tooze, The Deluge 2014, pp. The social and economic upheaval that followed World War I gave rise to many radical right wing parties in Weimar Germany. Some scholarly debates on long-term economic development are explicitly based on the structural break thesis. Paper money is stacked in a Berlin Bank in 1922. Collective wage formation in the post-war years initially led to clear redistribution effects in favour of the working class. Practitioners from the business world now entered the state bureaucracy more frequently. The aim was to buy social stability in return for generous wage concessions; wage enforcement was made possible through the described means of state arbitration. 344-384. [12] In a favourable climate, the trade unions were able to push through long-standing demands against the employers. Soldiers back from the war needed money for pensions. is licensed under: CC by-NC-ND 3.0 Germany - Attribution, Non-commercial, No Derivative Works. The treaty also deprived Germany of territory, natural resources, and even ships, trains, and factory equipment. As a sanction against German coal deliveries in arrears, French and Belgian troops moved into the Ruhr region in January 1923 to force the fulfilment of the agreed quotas.
And no other country would lend it money. The currency was so worthless, it was used as wallpaper in German bathrooms. The German nationalist Right promised to revise the Versailles Treaty through force if necessary, and such promises gained traction in respectable circles. Industrial production was also severely affected. In the end, banknotes were overstamped with increased denominations in the billions and then put back into circulation. Holocaust Survivors and Victims Resource Center. A turnover tax and a standardized, highly progressive income tax were newly introduced, placing a heavier burden particularly on persons with high incomes. This international experience did not initially apply to Germany, because it continued a path of inflation. War widows needed compensation. After World War I, coal production in the Ruhr and Saar districts continued at a high level, encouraged by the obligation to deliver coal to France and Belgium.[19]. The thought of hitting up a central bank's ATM would send many Germans fleeing in panic. By 1918, it had fallen to 57 percent of its 1913 value. This consideration, however, seems more important than the absolute size of the national economy. For troubled European countries, the European Central Bank could be like a giant ATM. It rose to 81 percent in 1923 and to 96 percent in 1925, and in 1927 it exceeded pre-war levels for the first time. 165-182.
[3] If long-term growth is chosen as the leitmotif for economic development in the 19th and 20th centuries, one can recognize many constants across the war. These fears and challenges also increased public longing for more authoritarian direction, a kind of leadership which German voters ultimately and unfortunately found in Adolf Hitler and his National Socialist Party. And he says, 'Yes, but if I don't order now, prices will be double by the time I finish my first beer!' Germany emerged from World War Iwith huge debts incurred to finance a costly war for almost five years. Washington, DC 20024-2126 by Ute Daniel, Peter Gatrell, Oliver Janz, Heather Jones, Jennifer Keene, Alan Kramer, and Bill Nasson, issued by Freie Universitt Berlin, Berlin 2021-12-13.
This view starts in the political sphere. In Germany, this happened with an administrative upheaval through the establishment of a bureaucracy that took over economic control tasks. While some transfers were levied as deliveries in kind, for example by sending coal, others were payable as monetary amounts in foreign currency. Webb, Steven: Hyperinflation and Stabilization in Weimar Germany, Oxford 1989. In accordance with the Weimar Constitution, it centralized tax sovereignty and tax collection at the state level. It was only in 1928 that real wages per week exceeded the pre-war level. On the one hand, the risk had to be countered that this transfer would cause German export prices to change too much in relation to those for imports. (Kleiner Mann, was nun? In agriculture, the decline was most severe in the famine winter of 1916/17, when domestic production reached only 60 percent of the pre-war level. [8] Labour productivity also fell sharply during the war. The unions were keen to maintain weekly incomes and demanded significant wage increases. Picture taken in the municipal refuge for the homeless. Since Germanys payment morale was poor, only small amounts were transferred in the 1920s.
TTY: 202.488.0406, [caption=020993dc-cabe-4014-aed6-86ebf73280aa], [credit=020993dc-cabe-4014-aed6-86ebf73280aa], United States Holocaust Memorial Museum, Washington, DC. Driven by the idea of a quick and short war, the decisions of the political and military leadership initially took little account of economic issues. Hourly wages rose so sharply during the 1920s such that towards the end of the decade they were around 30 percent higher than in 1913 taking into account the cost of living. But for more than a year now ever since Greece first put up its hand and said, "We need help" that's exactly what the ECB been doing. From then on, the Reich no longer bore the costs of the federal states, but the Lnder were financially dependent on the Reich. They tried to steer their compatriots away from polarization to the radical Left and Right. In 1919, the GDP per capita was 73 percent of the 1913 level. During the prison sentence he wrote his political manifesto, Mein Kampf (My Struggle). In fact, he was criticizing the bond buying program of the US Federal Reserve. Jahrhundert, Darmstadt 2018, p. 47. The treasury was empty, the currency was losing value, and Germany needed to pay its war debts and the huge reparations bill imposed on it by the Treaty of Versailles, which officially ended the war. The transfers were initially to be paid according to the provisional annuities fixed by the Reparation Commission. See also for the following paragraphs, Ritschl, Wirtschaftliche Folgen 2020, pp. Kopsidis, Michael: Landwirtschaft, in: Rahlf, Thomas (ed.
51-53. Meanwhile, there was fear of an imminent Communist threat following the Bolshevik Revolution in Russia and short-lived Communist revolutions or coups in Hungary (Bela Kun) and in Germany itself (e.g., the Sparticist Uprising). Many Germans believe it helped lay the groundwork for the rise of the Nazi party a belief that has left the nation with a profound fear of inflatoin. Boldorf, Deutsche Wirtschaft und Politik 2020, pp. Even in the Golden Twenties after the currency reform, there were still signs of crisis: the number of company bankruptcies reached a peak after the collapse of the inflationary consensus. Fast forward 70 years from Germany's inflation nightmare to 1992. This is the key finding of Holtfrerich, Carl-Ludwig: The German Inflation 19141923.
Boldorf, Marcel: Ordnungspolitik und wirtschaftliche Lenkung, in: Boldorf, Deutsche Wirtschaft im Ersten Weltkrieg 2020, pp. This was not so much related to the revolution since the implementation of far-reaching socialisation goals failed in early 1919. After World War I, Germany was deep in debt. Berlin/Boston 2016, p. 96-145. The American stock market crash and bank failures led to a recall of American loans to Germany. On the other hand, there was the risk that there would be no export surplus at all: any attempt to transfer money to the reparations account would attract an inflow of capital to Germany via the international capital markets. The original caption for this photo, taken in Weimar Germany during the Great Depression, reads: "When night comes! Up to this point, we can state that World War I was a dramatic slump for the German economy, especially with regard to material production. On the other hand, radical rightwing activists like Adolf Hitler, whose Nazi Party had attempted to depose the government of Bavaria and commence a "national revolution" in the November 1923 Beer Hall Putsch, served only nine months of a five year prison sentence for treasonwhich was a capital offense. In the period between 1924 and 1929, known as the Golden Twenties, Germany experienced relative economic and political stabilization.[24]. discounted bills of exchange, which could be repaid after maturity in heavily devalued currency. The other side of this self-destruction of the German financial system was the further intensification of the reparation conflict. Causes and Effects in International Perspective, Berlin 1986.
From which perspective should one consider the possibility of a structural break caused by the war? 397ff. 101-103. They now felt compelled to support the Weimar Republic as the least worst alternative. Germany was not alone with these poor figures; a similar picture emerged for the Habsburg Monarchy and the warring states of continental Europe as a whole. Money started losing value by the second: "There's this famous example that somebody sits in a pub and orders a beer," says historian Carl Ludvig-Holtfrerich. The first thing on the economic policy agenda was the elimination of the structural consequences of war. ". 203-207. 206-234. The ECB is not supposed to be bailing out governments, according to many Germans. Workers representatives and trade unionists were recognized as equal negotiating partners.
Thus, the state authorities were able to secure social peace through arbitration but very often against the will of the bargaining parties. However, it can also be shown that the reparations created demand in the post-war depression and thus had a positive effect on production. "Immediately, when the waiter carries the beer to his table, he orders the second one. Many Germans became increasingly disillusioned with the Weimar Republic and began to turn toward radical anti-democratic parties whose representatives promised to relieve their economic hardships. However, the introduction of the eight-hour day meant that weekly wages, except for unskilled workers, were significantly lower than before the war. You don't do this.". Finally, the destruction and catastrophic loss of life during World War I led to what can best be described as a cultural despair in many former combatant nations. These high burdens on the German economy, as they were perceived at the time, resulted from the Treaty of Versailles. Unemployment rose to an unprecedented level of 10 percent by 1926, so that an interventionist economic policy was pursued. Across Europe, the war reduced the repression of the labour movement. 100 Raoul Wallenberg Place, SW The path which Germany took would lead to a still more destructive war in the years to come. Fallada's 1932 novel accurately portrayed the Germany of his time: a country immersed in economic and social unrest and polarized at the opposite ends of its political spectrum. Hungry boys eating a school lunch in Weimar-era Germany during its years of hyper-inflation and malnutrition (1921). The ECB says it's not just printing money to buy the bonds of Greece and other troubled countries. Studien zur Wirtschaftsgeschichte des 19. und 20. Agitators from the political left served heavy prison sentences for inspiring political unrest. They were obliged to pay reparations to their war opponents. The previously dominant taxes paid to the municipalities and federal states (Lnder) played only a subordinate role in the new system. While the top income tax rate was 10 percent before the war, it now rose to 60 percent. Boldorf, Marcel: Deutsche Wirtschaft und Politik. It helped to further discredit German socialist and liberal circles who felt most committed to maintain Germany's fragile democratic experiment. Vernunftsrepublikaner ("republicans by reason"), individuals like the historian Friedrich Meinecke and Nobel prize-winning author Thomas Mann, had at first resisted democratic reform. Fisch, Stefan: Strukturwandel vom Reichswirtschaftsamt und Reichswirtschaftsministerium im bergang zur Weimarer Republik, in: Holtfrerich, Carl-Ludwig (ed. [caption=020993dc-cabe-4014-aed6-86ebf73280aa] - [credit=020993dc-cabe-4014-aed6-86ebf73280aa]. In response, the Reich government called for passive resistance by halting industrial production. Another important innovation was the establishment of collective agreements on wage and working conditions. A revolutionary break, as expected and partly longed for by many contemporaries, did not occur. A period of relative prosperity prevailed from 1924 to 1929. Supply chains were broken and branches of production that were important for the armament industry, and also for consumers, were disrupted in their activities. See Spoerer, Mark / Streb, Jochen: Neue deutsche Wirtschaftsgeschichte des 20. Most European countries had lost virtually a generation of their young men. Rather, the negotiating successes were based on a corporatist social alliance that employers and trade unions formed shortly after the end of the war: the Zentralarbeitsgemeinschaft, the Central Working Community of the German commercial and industrial employers and leading trade unionists. "This historical experience tells every policy maker: You don't mess around with inflation," says Klaus Frankenberger, an editor in Frankfurt. This text Above all, this meant fighting against hunger, reintegrating returning soldiers into the workforce, and converting war production to a peacetime economy. During the Weimar inflation, people carted money around in wheelbarrows to do their shopping.
As often in the interwar period, entrepreneurs demanded protective tariffs to prevent business from being affected by German competition. This development added to Germanys economic hardship. Financial constraints and a lack of credit restricted the governments scope of action. In contrast, the war brought a marked upswing both in the United States and Great Britain, despite the German attempt at a counter-blockade through submarine warfare.
[5] Thus, the Reich had a civilian economic administration after the war. The problem with this idea? [9] Thus, weak growth was characteristic of the entire post-war period. The Gold Standard and the Great Depression, 19191939, Oxford 1992, pp. In more detail: Hertz-Eichenrode, Dieter: Wirtschaftskrise und Arbeitsbeschaffung. "Never. Eine Auseinandersetzung mit Holtfrerichs Berechnungen zur Lohnposition der Arbeiterschaft 19251932, in: Geschichte und Gesellschaft 16 (1990), pp. Jahrhundert bis heute, Munich 2005, pp. We would like to thank Crown Family Philanthropies and the Abe and Ida Cooper Foundation for supporting the ongoing work to create content and resources for the Holocaust Encyclopedia. However, economic disaster struck with the onset of the world depression in 1929. World War I did not set an economic dynamic in motion but marked the beginning of a long-lasting period of economic weakness. The Great War and the Remaking of Global Order, 19161931, London 2014, pp. These war effects give hints about the economic burdens that the newly founded German Republic had to bear. The rise of nominal wages postponed the escalation of the wage conflict.
Ritschl, Albrecht: Wirtschaftliche Folgen des Erstens Weltkriegs, in: Boldorf, Marcel (ed. The Dawes Plan of August 1924 succeeded in postponing the payments for a few years. See Eichengreen, Barry J.: Golden Fetters. We will see later how the problem of reparations fits into the complexity of the economic burdens of war. German production capacities were reduced by about 10 percent. In 1992, Germany was the biggest economy in Europe, and it had a lot of influence over the shape of the new European Central Bank. Borchardt, Knut: Wachstum, Krisen, Handlungsspielrume der Wirtschaftspolitik. In the middle of the war, in August 1916, a Reich Commissariat for transitional economics (Reichskommissat fr die bergangswirtschaft) came into being, which had to prepare the peace economy after the armistice. Reparations to France and Britain were enormous. They recalled only that the German LeftSocialists, Communists, and Jews, in common imaginationhad surrendered German honor to a disgraceful peace when no foreign armies had even set foot on German soil. [6] Industries that were not important to the war effort were combed out for labour, raw materials, and machinery.
Cue inflation-fearing, deep-pocketed Germany. The expansion of such organizations also had personnel consequences. Fiercely opposed by the nationalist camp, the additional income from higher tax revenues were to be used for the reparation transfers in fulfilment of the Treaty of Versailles. As early as 15 November 1918, the labour market parties reached a contractual agreement on essential social issues. This fear shifted German political sentiment decidedly toward right-wing causes. Maybe the political unwillingness of the administration to collect taxes for the benefit of the hated reparation creditors or even the hated Republic played an additional role.