In October 1929 the Wall Street Crash on the US stock exchange brought about a global economic depression. In Europe, Germany was worst affected because American banks called in all of their foreign loans at very short notice. These loans, agreed under the Dawes Plan in 1924, had been the basis for Weimar’s economic recovery from the disaster of hyperinflation. The loans funded German industry and helped to pay reparations. Without these loans German industry collapsed and a depression began:
The most obvious consequence of this collapse was a huge rise in unemployment. Over the winter of 1929-30 the number of unemployed rose from 1.4 million to over 2 million. By the time Hitler became Chancellor in January 1933 one in three Germans were unemployed, with the figure hitting 6.1 million. Industrial production had also more than halved over the same period.
In March 1930 the German Chancellor, Hermann Müller, resigned when his government could not agree on how to tackle the rise in government spending caused by the rise in unemployment. He was replaced by Heinrich Brüning. His policies were ineffective in dealing with the unemployment crisis and further undermined Germans’ faith in democracy:
When people are unemployed, hungry and desperate, as millions were in Germany between 1930 and 1933, they often turn to extreme political parties offering simple solutions to their problems. Between 1930 and 1933 support for the extreme right-wing Nazis and the extreme left-wing communists soared.
“When I realised that there were six million workless in the same position as myself the responsibility of getting a job seemed completely hopeless. Depression and panic were in the air…The Government was always changing and couldn’t do anything, and the police didn’t seem to care …”Fritz Muehlebach wrote about his reasons for joining the SA in 1932
By 1932 parties committed to the destruction of the Weimar Republic held 319 seats out of a total of 608 in the Reichstag, with many workers turning to communism. However, the real beneficiaries were the Nazis.