Gustav Stresemann & Economic Recovery (AQA GCSE History): Revision Note

How did Weimar’s Economy Recover by 1929? - Timeline & Summary

In 1923, the German economy crashed. The French invasion of the Ruhr had caused hyperinflation and the German currency, the mark, was worthless.

Stresemann was chancellor from August to November 1923. He made many decisions in an attempt to save Germany's economy. He brought inflation under control by implementing a new currency, the Rentenmark. Stresemann negotiated the Dawes (1924) and Young (1929) plans, which reduced Germany's reparations payments to the Allies.

Historians debate the success of Gustav Stresemann’s economic policies. Some historians argue that Stresemann saved Germany's economy. Other historians highlight the risk of tying the German economy to the USA. They state that Stresemann could have minimised the impact of the Wall Street Crash on Germany by pursuing a different economic policy.

Who was Gustav Stresemann?

• 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 Rentenmark

• The Rentenmark was a gold standard currency

  • This means that the value of the Rentenmark matched the price of gold

  • European countries trusted gold standard currencies

• In August 1924, the government created the Reichsbank to control the Rentenmark

  • The government renamed the Rentenmark the Reichsmark

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

The Dawes Plan

• 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 terms of the Dawes Plan

• The temporary reduction of reparations to £50 million a year

• A guarantee of US bank loans for German industry

The impacts of the Dawes Plan

• Reparations became more manageable

  • The Allies trusted that Germany would meet their reparation payments

  • Stresemann called off the passive resistance in the Ruhr and France agreed to leave

• The USA gave $25 billion to German industry from 1924-30

  • Germany’s industrial output increased by 50% between 1923 and 1928

  • The government achieved more income from trade

How did Germans react to the Dawes Plan?

The Young Plan

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

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

  • An American banker called Owen Young led the committee

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

The terms of the Young Plan

• Reduction of the total reparations bill from £6.6 billion to £2 billion

• The Allies extended the time that Germany had to repay their reparation debts. Reparations had to be fully repaid by 1988

The impacts of the Young Plan

• The government was able to lower taxes on German citizens

  • Citizens could spend more, boosting German industry and creating more jobs

    • This gave the government more money to spend 

• There was less pressure on Germany to pay off the reparations debt

  • This improved relations between Germany and the Allies

  • France decided to leave the Rhineland in 1930

• The Young Plan created a favourable reaction in Germany

  • In 1929, 85% of voters were in favour of the Young Plan. This was roughly 35 million German citizens

• Weimar’s insistence on fulfilling the reparations payments outraged Germany's extremist parties:

  • In his speeches, Hitler stated that Weimar's consent to the extension of the reparations deadline was ‘passing on the penalty to the unborn’

Did Weimar Economically Recover by 1929?

• Historians continue to debate today if the Weimar Republic economically recovered by 1929

Arguments that Weimar economically recovered

• His policies facilitated a ‘Golden Years' from 1924 to 1929

  • Living standards improved

  • Average working wages increased

  • Unemployment reduced

• Germany fulfilled its reparation payments until 1929

  • There was not a repeat of the occupation of the Ruhr

Arguments that Weimar did not economically recover

• Britain, France and Germany were gambling their economies on the USA’s prosperity

  • Stresemann was aware of the dangers involved in accepting American loans

    • In 1929, Stresemann stated that Germany was “dancing on a volcano”

  • If the USA recalled the loans or experienced a depression, the ‘volcano’ would erupt and destroy the stability of Weimar Germany

    • This occurred in 1929 due to the Wall Street Crash

• Germany still owed a large amount of reparations

  • Germany took 92 years to pay off their reparations debt

    • German Chancellor Angela Merkel made the final payment in October 2010