Economic Problems in Germany After Research Paper

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He opposed the thoughts of Keynes based on previous predictions which proved false in the future. The war affected different sectors of Germany. Germany saw its steel output increase by around 30% and iron output increase by 38% from 1913 to 1927, contrary to Keynes prediction that it would decrease. Germany's efficiency in mining coal was also predicted to decrease, which proved wrong when the efficiency of labor increased by almost 30% from 1913 to 1929. It was also predicted that German coal exports would stop right after the treaty. However it showed a consistent increase to 15 million tons in the year following the treaty and rose up to 35 million tons in 1925. In a similar fashion, the German savings figure, which was expected to decline showed a steady increase. Mantoux demonstrated how Germany was in a position to pay according to the terms of the treaty, given that its expenses in rearmaments was close to 7 times that amount in the years following 1933. Keynes believed that compensating for the damages as per the terms of the treaty was next to impossible. Keylor, an American historian on the other hand calculated how increasing taxes and checking on the utilization of resources in the Weimar Republic would easily churn out the amount required to satisfy the debt of war reparation. Even thought this was one of the options, it brought on the possibility of a political crisis.

The compensation was divided in three parts as a, B and C. bonds. Out of these the C. bonds constituted the biggest portion. However it was mostly imaginary and was aimed at creating a false impression to the French that large amounts were going to be collected. The allies were looking to get the a and B. bonds. The combined amount of these bonds were almost 50 billion marks (where a kilogram of gold equaled 2790 marks), which was close to a slightly higher amount (51 billion marks) which the Germans had planned on paying. It was observed that Germany continued to submit all payments during the period when the Dusseldorf area came under French control in 1921. Things changed when they left its possession in the following year as they began delaying their payments. France and Belgium were planning on seizing Ruhr as a way to force the Germans to pay. Germany was declared to be in default on the December of 1922 by the Reparations Commission. This eventually led to Ruhr being taken over in the January of the following year. The Germans had failed to deliver the amount of timber that they were supposed to. It was obvious that Wilhelm Cuno, the government of Chancellor had stopped the delivery of timber as a way of assessing the eagerness of the allies to impose the clauses of the compensation in a situation when they were not being made. Things got worse when non-payments of coal continued in early 1923, a continuation of the over thirty instances of coal defaults which had occurred in the last 3 years.

The acquisition of Ruhr was in the least of the interests of the French Premier Raymond Poincare. It was the last resort which was undertaken when all other reasonable options were denied by the British. Poincare was against violence but had to encounter opposition. He saw the waste of potentially useful coal which could be used in French steel plants and finances which could be used to rebuild industries. He led the occupation of Ruhr himself on the 11th of January, 1923. The combined amount collected as a result of the Ruhr-Rhineland struggle crossed 900 million in golden marks. Germany considered this struggle as a way of protecting the clauses of the treaty of Versailles rather than an opposition to their defaults in coal and timber deliveries.

In an effort to compensate for the issues faces in the Ruhr, hyper-inflation was introduced by the German government which wrecked their economic situation in 1923. Historians have pointed out how the Germans were responsible for the way in which hyper-inflation affected them and how they favored that instead of coming up with payments. Even though it hampered their economy at that point, the hyper inflation coupled with the passive resistance implemented in Ruhr brought their situation on a global scale compelling the French to consent to the Dawes Plan of 1924. According to the conditions of the plan, Germany needed to pay around a billion marks by 1924 followed by larger amounts over the next few years reaching 2.25 billion marks by 1927. The delays in German payments did not stop even though the terms were a lot easier now. A conference was organized in London in mid-1924 where several dispensations were made in the payments expected from Germany. This was led by the prime minister of Britain at that time, J.Ramsay MacDonald.,who believed in what Keynes had stated about the payments charged from Germany being impossible. The Dawes plan was the first instance of Germany getting any success in opposing the treaty of Versailles and bringing in a change which was in their favor.

Germany went on to oppose the Dawes Plan as well, with the reasoning that the payments demanded were not low enough. This resulted in the Young Plan which asked Germany to make a set of payments such that they were never over 2.25 billion at a time, from 1928 to 1988. The Reparations Commission was brought to an end as a part of the Young Plan and substituted by the Bank of international settlements. One of the conditions under which Germany accepted this plan was evacuating Rhinestone before its original schedule. This led to the French being pressurized into letting go of Rhineland in the June of 1930. The Young plan was supposed to be started on the September of 1929, but got delayed till January next year. This cut down on the money that the Germans had to pay, had it started on time. In the latter half of 1930, Heinrich Bruning, the German Chancellor at that time declared the payments demanded to be too high and asked for them to be removed completely. Even though the effects of the Great depression were presented as the reason for this, the main motive was to boost the impact of Bruning's failing government. He was pushing towards eliminating the part V of the treaty which disallowed Germany to possess arms.

Some opinions state that considering the payments made to compensate for the war to be the only cause of German economy from 1919 to 1939 would be wrong. Germany ended up paying a fraction of the amount originally demanded. The effects of hyper inflation were more significant in shaping the German economy at the time. It led to a steady rise of instability in both the political and economic sectors. Another myth about these reparations was the belief that they were the only reason behind establishing the economic condition under which the Hitler era came into being.

The proceedings of the German economy went along fairly well until the Stock market crash happened in 1929. This led to the investments from foreign countries nourishing the economy being pulled away along with the loans supplying funds to the war payments. The payments which were to be made according to the Dawes plan were mainly funded by loans from other countries. Most of these international loans accumulated and presented themselves as a large amount together. Historians have written how Germany was not the only country challenged with economic problems. All the countries involved in the World War I had to face the consequences. The net national product of Germany went up to 17% in the early 1920's. The German trade shortfall was a result of the combination of factors such as the low rate of exchange for the Mark not being consistent with the economic changes at that time. The value of Mark increased soon and this kind of re-examination resulted in inflation which went on to cause further problems. The sum of the debts owed by Germany in 1921 as a ratio with its gross national product was less in proportion to the amount owed by Britain as a ratio with its gross national product at that time. The amounts demanded by the conference in 1921 was less than 8% of the National income of Germany at that time, rather than close to half as was predicted by Keynes. A comparison made with a similar situation in France during the late 1800's reveals how they had to pay close to a quarter of their national income in reparations without causing the nation to face an economic breakdown. Thus the amounts asked from Germany being nowhere close to that percentage would not result in them going bankrupt. In fact Germany had to pay over 160 billion marks towards the demands of Economic European…

Sources Used in Document:

Works Cited

Castillo, Daniel. "German Economy in the 1920's", Dec. 2003, Web 27 June 2010

DeLong, J.Bradford " Slouching Towards Utopia?: The Economic History of the Twentieth

Century-XI. Restoring the Pre-World War I Economy" Feb. 1997, Web 27

June 2010

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