Economic Recovery under Stresemann, 1924–1928 (AQA A Level History: Component 2: Depth study): Revision Note

Summary

• Stresemann helped bring the immediate economic crisis of hyperinflation to an end with the introduction of a new currency and a central bank

• The longer-term problems of the reparations and the lack of investment in German industry were targeted with the Dawes Plans and Young Plans

  • These led to a recovery for Germany's industries and improved relations with other countries

  • However, the recovery did not stretch to the countryside, where Germany's farmers continued to struggle

• The decision to continue to repay the reparations and extend the period over which they were paid caused great anger amongst Germany's right-wing parties and their supporters

Gustav Stresemann and the end of hyperinflation

• Gustav Stresemann became Chancellor in August 1923

  • Stresemann was a nationalist

  • Initially, he did not like the Weimar Republic

  • After the assassination of Rathenau, Germany’s foreign minister, Stresemann’s opinion of the government changed

  • He established the DVP (People’s Party), a moderate right political group

• As chancellor, Stresemann had three aims for Germany:

  • Bring inflation under control

  • Regain Europe’s respect

  • Minimise the support for extremist parties

The creation of the Rentenmark

• Germany’s currency, the mark, was beyond saving:

  • The largest note was 100,000,000,000,000 (100 trillion) marks

  • The government believed there were 400.3 billion trillion marks in circulation

• In November 1923, Stresemann created a new currency called the Rentenmark

  • One Rentenmark was the equivalent of a trillion marks

  • Stresemann established a new state-owned bank called the Rentenbank

  • The German public brought marks into the Rentenbank to transfer them into Rentenmarks

• The Rentenmark was backed by a mortgage on German land and industrial assets, because Germany's gold reserves had been exhausted

  • This gave people confidence the new currency had real value behind it

• In August 1924, the Reichsbank (Germany's central bank since 1876) was reorganised

  • It was made independent of government under the Dawes Plan, with Hjalmar Schacht as its president

  • A new currency, the Reichsmark, replaced the Rentenmark

  • The new currency allowed German businesses to trade with foreign countries

• These measures brought the chaos of hyperinflation to a close

The Dawes Plan, 1924

• Since 1919, Germany had been unable to meet the reparations payments stated in the Treaty of Versailles

• Hyperinflation in 1923 led the Allies to consider reducing Germany’s reparation bill

• The USA was in a position to help Germany

  • The USA experienced a boom in their economy. Britain and France were repaying their wartime loans. As a result, the USA had a surplus of money in their economy

• Charles G. Dawes, an American banker, created a plan for Germany

  • The Dawes Plan did not reduce the total reparations bill — only the annual payments

    • The total was only reduced later, by the Young Plan

• Stresemann called off the passive resistance in the Ruhr in September 1923

  • This was a precondition of the Dawes Plan

The terms and impacts of the Dawes Plan

"The finding of the experts, which is known as the Dawes Report, has recently been made and published. It shows a great deal of research and investigation, and a broad comprehension of the requirements of the situation. It has been favorably received by the Reparations Commission. It is gratifying to understand that the Allies are looking upon it with full sympathy, and Germany has expressed a willingness to cooperate in the execution of the plan. There appears to be every reason to hope that the report offers a basis for a practical solution of the reparations problem. I trust that it may commend itself to all the European governments interested as a method by which, through mutual concessions, they can arrive at a stable adjustment of the intricate and vexatious problem of reparations, and that such an outcome will provide for the restoration of Germany and the largest possible payments to the other countries.

A situation at once both intricate and difficult has been met in a most masterful way. Our countrymen are justified in looking at the result with great pride. Nothing of more importance to Europe has occurred since the Armistice."

Part of a speech given by the US President Calvin Coolidge, 22nd April 1924.

Recovery in industry and agriculture

• The Dawes Plan and the investment it brought helped Germany's industry to recover

  • German factories became more efficient and expanded into new areas such as motor vehicles and aircraft

  • Exports increased

  • The wages for industrial workers increased, and there were fewer strikes

• However, farmers continued to struggle with high debts

  • This was made worse by low prices for agricultural produce

  • Rural incomes did not increase after the Dawes Plan, and many farmers were forced to give up their farms

The Young Plan and the reparations issue

• The Allies believed that they could provide Germany with more help

  • In February 1929, the Allies established a committee to reduce Germany’s reparations further

  • An American banker called Owen Young led the committee

• In June 1929, the committee agreed upon the Young Plan

The terms and impacts of the Young Plan

"It is a very notable contribution to stability and to progress, and I think the American people should be gratified at the contribution which Messrs. Young, Morgan and Lamont have made to bring it to a successful conclusion."

The response of US President Herbert Hoover to a question from a reporter about the Young Plan in May 1929.

• The Nationalists united to organise a campaign against the Young Plan and to demand that the government repudiate the War Guilt clause of the Treaty of Versailles

  • Hitler was given a prominent role in the campaign andstated in his speeches that Weimar's agreement to extend the reparations deadline was ‘passing on the penalty to the unborn’

• In 1929, the nationalist campaign led to a referendum

• Only 13.8% of people voted

  • This was well below the 50% threshold needed

    • Of the voters, only 15% were against the Young Plan

How complete was Germany's economic recovery, 1924–1928?

• Historians disagree over the extent of Germany's recovery between 1924 and 1928

• Some argue the recovery was genuine and Germany had turned a corner

  • They believe Germany had made fundamental steps to improve the economy

• Others argue that the recovery did not help all parts of German society and was overly reliant on foreign investment

  • They believe that not all Germans benefited from the investment of the Dawes Plan and that serious issues remained