The Occupation of the Ruhr & Hyperinflation, 1923 (Edexcel IGCSE History: Paper 1: Depth Studies): Revision Note

Summary

• Germany was close to bankruptcy after the war

  • Reparations and the loss of coal and iron regions made recovery even harder

• After Germany fell behind on its reparations payments, French and Belgian troops occupied the Ruhr in January 1923

• The government ordered passive resistance and paid the striking workers by printing more money, which turned high inflation into hyperinflation

  • By November 1923, a loaf of bread cost about 201 billion marks

• Savers, pensioners and the middle class lost the most

  • Borrowers, farmers and property owners often gained from the crisis

• The year 1923 also brought the Munich Putsch, so a series of overlapping crises badly damaged middle-class trust in the Republic

The French occupation of the Ruhr, 1923

Why did France occupy the Ruhr?

• Germany was near bankruptcy by 1918

  • The Treaty of Versailles added reparations while taking away income-producing regions such as the Saar and the Silesian coalfields

• The Allies needed the reparations in order to repay their own war debts to the USA

  • They refused to reduce Germany's payments

• Germany missed payments throughout 1922 and defaulted again in December 1922

The occupation and passive resistance

• In January 1923, French and Belgian troops seized the Ruhr, which was Germany's coal, iron and steel heartland, in order to take goods instead of cash

• Germany could not resist militarily with an army of only 100,000 men

• The government called for passive resistance, which meant:

  • workers went on strike

  • Germans refused to work for or serve the occupying troops

  • Some Germans went further and sabotaged railways, mines and factories

• The occupying forces killed more than 100 Germans

  • The troops did not leave until 1925, after the Dawes Plan

The effects of the occupation

• In the short term, the Weimar government gained popularity

  • It appeared patriotic for standing up to France

• In the longer term, the occupation did serious economic damage

  • Germany lost the output and the tax revenue of the Ruhr

  • The government's approach caused hyperinflation

The causes of hyperinflation

• Germany had paid for the First World War by borrowing and printing money rather than by raising taxes

  • The mark was already weak in 1918

• Between 1919 and 1923, the government raised only about a quarter of the money it needed

  • It printed banknotes to fill the gap

• After the occupation of the Ruhr, the government printed even more to pay the Ruhr strikers

  • At the same time, the tax revenue from the Ruhr disappeared

• By 1923, the government was running about 300 paper mills and around 2,000 printing works non-stop, purely to produce banknotes

• Germany printed far more banknotes than it had gold or goods to back them

  • With so many notes in circulation, each one was worth less

  • Prices spiralled out of control

The collapse of the mark

The cost of a loaf of bread in Berlin

The effects of hyperinflation on Germany

Daily life

• Prices rose so fast that:

  • shops changed them several times a day

  • employers paid workers twice a day so that they could spend their wages before they lost value

Who lost out from hyperinflation?

• Millions of Germans fell into poverty

• People on fixed incomes, especially pensioners, suffered the most

  • This is because their money did not keep pace with prices

• Hyperinflation wiped out people's savings and insurance policies

• The middle class was ruined

  • Many of its members blamed the Weimar government, even though the economic problems had begun before the Republic existed

Who gained from hyperinflation?

• Borrowers could repay their loans and mortgages in money that was now almost worthless

• People who owned land or property kept their wealth, because its value rose with inflation

• Farmers did well, because they could sell food at ever-higher prices

• Tourists benefited from the crisis as their money was worth more in Germany

How far was 1923 the Weimar Republic's greatest crisis?

Arguments that 1923 was the greatest crisis

• Germany faced three crises at the same time:

  • The occupation of the Ruhr

  • The economic collapse of hyperinflation

  • An armed revolt in the Munich Putsch of November 1923

• Hyperinflation destroyed the savings of the middle class, which was the group whose support the Republic most needed

• The Republic looked powerless

  • It could neither defend the Ruhr nor protect its citizens' money

• The crisis left a lasting legacy, because middle-class bitterness later helped the Nazis gain power

Arguments that 1923 was not the greatest crisis

• The Republic survived 1923 and then recovered under Gustav Stresemann

• The revolution of 1918 and the revolts of 1919 to 1920 had also threatened the Republic's very existence

• Some groups, such as borrowers, farmers and property owners, actually benefited in 1923

• The crisis that finally destroyed the Republic came later, with the Great Depression

Conclusions

• The year 1923 brought the most concentrated set of crises of the Republic's early period

  • It did lasting damage to public confidence

  • It increased support for political extremism

• However, the Republic survived and recovered under Gustav Stresemann