Weimar, 1929 - 1933

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Weimar, 1929 - 1933

  1. Economic Depression
  2. The Müller Government
  3. The Brüning Government
  4. 1932 Presidential Election
  5. Kurt von Schleicher
  6. The von Papen Government
  7. The von Schleicher Government

1.        Economic Depression

RJ Overy

[By 1932] economic conditions had now reached their lowest ebb, circumstances were ripe for some departure from the negative policies of the depression years.”

It is often argued that economic depression was vital in Hitler’s acquisition of power. Indeed, two major aspects in the increase in popular support for the Nazis are the economic depression and the Nazis’ proposals for recovery.

Before considering how the depression helped Hitler and the Nazis, it is important to see the details of the depression.

                                1928        1929        1930        1931        1932

GNP / bn RM                        89.5        89.7        83.9        70.4        57.6

Nat. Income / bn RM                75.4        76.0        70.2        57.5        45.2

Ind. Prd. Index (base 1928)        100.0        100.1        87.0        70.1        58.0

Exports / bn RM                        12.3        13.5        12.0        9.6        5.7

Imports / bn RM                        14.0        13.5        10.4        6.7        4.7

Unemployment / millions                1.4        1.8        3.1        4.5        5.6

When considering the history of the German economy in the inter-war years, it is important to note that low growth and recession began before the Wall Street Crash.

a.        Weak Foundations

By 1929, the American economy was 70% larger than in 1913; the French economy had grown by 38%; the German economy, however, had grown a mere 4%. The German economy, despite beginning to recover from the war and the other economic strains of the early 1920s, was still structurally weak.

  • It was still dependent on old, traditional heavy manufacturing industries whereas in America, Britain and France, new industries had begun to develop;
  • Agriculture was outdated and inefficient;
  • Reparations were still a major strain on the economy;
  • High interest rates brought money into the country but meant that investment and borrowing were too expensive for most German firms.

In the 1920s, the German economy was still dependent upon foreign loans, notably from America. Money was lent on both short- and long-term bases. Almost 50% of all deposits in banks were foreign in origin. Most of this money was re-lent by the banks on a long-term basis. Therefore, there would be problems if the foreign loans were suddenly recalled. From 1927 onwards, foreign investment became predominantly short-term; this reflected a downturn in the German economy.

b.        Before the Wall Street Crash

RJ Overy

“Was the depression in Germany caused by the withdrawal of foreign investments and the collapse of the American stock market in late 1929, or was the withdrawal a result of the downswing of business activity in Germany already evident by the middle of 1928? Or a result of both.”

The above question is the key issue in an historical debate of some magnitude; there is not enough space here to consider it in any great depth. However, the key point is one that must be noted: the downturn in the German economy started before 1929. From the middle of 1928 onwards, it can be seen that:

  • lending slowed down;
  • interest rates rose;
  • imports of raw materials declined;
  • industrial investment fell;
  • unemployment rose.

At the start of 1929, before the Wall Street Crash, capital imports fell further: in 1928 they stood at 4.3 billion Marks; in 1929 they fell to 2.7 billion Marks. By March 1929, unemployment had already reached 2.8 million. The basic cause was the structural weakness of the economy, which limited expansion of demand. Investors saw there were few opportunities for profit and, therefore, pulled their money out. This occurred not only after the Wall Street Crash, but before it as well.

c.        After the Wall Street Crash

The depression from 1929-32 was characterised by:

  • a sharp fall in prices (especially in agriculture);
  • high levels of unemployment;
  • business failure;
  • government spending falling more quickly than National Income.

The international economic depression affected all the main industrial powers, but Germany more so than others. There was a sharp drop in the number of loans to Germany and a withdrawal of funds already loaned. This was not a sudden phenomenon, though; it started before 1929, and accelerated as the economic situation worsened.

RJ Overy

“In 1931 … the withdrawal of funds became a flood.”

By the end of 1931, 6.5 billion Marks had left the country, either withdrawn by foreign investors or sent abroad by German ones. The effects of the depression are clearly visible on the table on the previous page.

The crisis reached a peak in June - July 1931: the Kreditanstallt Bank (in Austria) collapsed in May; the Darmstädter und Nationalbank (in Germany) then collapsed on July 13th. At this point the German government proposed a customs union with Austria; funds were rapidly withdrawn from Germany.

d.        Hitler and the Depression

It is often argued that Hitler’s greatest ally in achieving power was the Depression.

WL Shirer

“The depression … gave Adolf Hitler his opportunity, and he made the most of it. Like most great revolutionaries he could thrive only in evil times.”

To understand the ‘evil times’, we must see that the governments’ actions were perceived as inadequate.

RJ Overy

“The actions of the German government throughout the crisis have had the appearance of shutting the stable door well after the horse has bolted.”

Supporters of this point of view say that the governments, viz. Brüning’s, should have used their powers to reduce the impact of the depression. This argument was strong in the post-war Keynesian era, when the majority of western governments used demand management techniques in controlling the economy.

However, in the governments’ defence:

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  • It was not until 1931 that it became obvious that this was different from other depressions: industrial production and unemployment were worse in the downturn of 1926 than at the end of 1930.
  • The government and states were already playing important parts in the German economy before 1929.
  • There was widespread resistance to government interference in the economy.
  • The orthodox policies of budget surplus and deflation were adopted by GB and other western countries.
  • Alternatives had not been fully developed: Keynes published his ‘General Theory’ in 1936.

RJ Overy

“For the government … it made much more ...

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