HIST2128 Germany, 1871-1933: From Empire to Republic

1. HIST2128Germany, 1871-1933: From Empire to Republic From the treaty of Versailles to the Dawes Plan (1919-1924) Lecture 18 12 April 2012

2. 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

3. 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

4. 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 u unbearable in G public ☼ No dismemberment of G but remained intact ☼ Cleavages between Allies + SU offered new policy options for G in Eastern Europe

5. 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

6. 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

7. 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

8. 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

9. 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

10. Inflation 1914-23 164 billion war debts: War bonds cannot not be paid back Gold needed for war costs: Expansion of bank notes Extremely high debts of German government More bank notes in circulation + equal volume of products = Rise of prices Huge reparation payments to Allied countries Welfare payments to war victims and family members Domestic prices are exploding !

11. 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

12. 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

13. 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

14. 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

15. Dawes Plan (2) Germany accepted: a) Railways + Reichsbank removed from own control b) 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 !

16. 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)

17. Germany’s Production 1913-29