In 1923, the Weimar Republic was on the verge of collapse socially and economically. But surprisingly, this crisis was followed by a period of relative stability and success. The period 1924-1929 was a time when the Weimar economy recovered and cultural life in Germany flourished.
This dramatic turnabout happened in large part because of the role played by Gustav Stresemann who became Chancellor in August 1923 during the hyperinflation crisis. This was a time when prices in Germany went up quicker than people could spend their money and the German currency lost its value. Stresemann was Chancellor for only three months but continued to serve as Foreign Minister, rebuilding and restoring Germany’s international status until his death in October 1929, ironically just weeks before the Wall Street Crash that would end Weimar’s period of greater prosperity and stability.
Stresemann’s single greatest achievement as Chancellor was to end hyperinflation. He did this in just three months by:
The payment of reparations, which had caused the hyperinflation crisis in the first place, had to resume, but Stresemann’s decisive actions in the autumn of 1923 gained Germany the sympathy of the Allies. They agreed to renegotiate payments and this led to two new repayment plans in the next 5 years:
|The Dawes Plan||The Young Plan|
|Date||Proposed April 1924, agreed September 1924||Proposed August 1929, agreed January 1930|
|Amount of reparations to be paid||Stayed the same overall (50 billion Marks) but Germany only had to pay 1 billion Marks per year for the first 5 years and 2.5 billion per year after that||Reduced the total amount by 20 per cent. Germany was to pay 2 billion Marks per year, two thirds of which could be postponed each year if necessary|
|Amount of time over which they would be paid||Indefinite||59 years, with payments to end in 1988|
|Loans made available to Germany||Germany was loaned 800 million Marks from the USA||US banks would continue to loan Germany money, coordinated by J P Morgan, one of the world’s leading bankers|
The years 1924 to 1929 have been referred to as Weimar’s ‘Golden Years’, but historians disagree as to just how much the German economy recovered from the effects of World War One and hyperinflation.
|Signs of recovery||Signs of continued weakness|
|By 1928 industrial production levels were higher than those of 1913 (before World War One)||But… agricultural production did not recover to its pre-war levels|
|Between 1925 and 1929 exports (sending goods or services abroad) rose by 40 per cent||But… it spent more on imports than it earned from exports, so Germany was losing money every year|
|Hourly wages rose every year from 1924 to 1929 and by 10 per cent in 1928 alone||But… unemployment did not fall below 1.3 million and in 1929 increased to 1.9 million|
|IG Farben, a German chemical manufacturing company, became the largest industrial company in Europe||But… German industry became dependent upon loans from the USA|
|Generous pension, health and unemployment insurance schemes were introduced from 1927||But…The government ended up spending more than it received in taxes and so continued to run deficits from 1925 onwards|