Economic Problems in Germany After

Economic problems in Germany after WWI

The aftermaths of the World War I resulted in Germany facing several problems in the economic sector. The treaty of Versailles was one of the principal causes of these problems which led to a lot of disappointment. The Germans were enraged by the fact that the Weimar Republic would support the clauses stated by the Versailles treaty even though it was their government. One of the conditions (the war-guilt clause) held Germany accountable for starting the World War I. The amounts which Germany had to pay to compensate for being the reason for the war were almost incomprehensible. It also caused territories such as Alsace-Lorraine to be taken away from their possession. This adversely affected their economic situation as most of Germany's economic and industrial headquarters were located in those areas.

The Germans were administered by the Weimar republic, which had to encounter a lot of problems during two periods. One was between 1919 and 1923 and another was between 1929 and 1933. While it had managed to survive the issues faced in the first one, the second one led to its downfall. The unfair behavior of the allies towards the Germans coupled with the breakdown of the economic and political framework was the main reasons behind this. The Germans had given over the reins of their administration to the allies in the November of 1918; a couple of days after the Weimar republic were created. The clauses of the treaty of Versailles were declared in the June of the following year. Germany was blatantly declared as the cause of the World War I and all the consequences which resulted from the war. They were asked to pay for all the damages.

The Weimar republic was formed as a result of the World War I when Germany lost. The German troops could not intrude into the western front in their war against the British and French armies. The British navy obstructed their ports which caused the Germans to be subjected to a lot of adversities. It caused the loss of Germany to be almost certain. All the disorder led to the new government being organized. They had two options as far as the government was concerned. One of them was to form a democratic organization supported by the social democrats, which were among the most powerful political parties at that time. The other one was to follow a communistic approach which was among the top priorities of the Spartacus league guided by Karl Liebknecht and Rosa Luxemburg. They made a lot of efforts to take control with an attack over Berlin. This uprising was soon stopped by the freikorps units who had a larger army. The freikorps made several merciless attacks in early 1919 killing off a lot of people including Karl and Rosa, who were taken into custody on the 14th of January and then shot. Their death was the start of a lot of proceedings in Germany's political sector. It caused a significant dent in the relations between the Communist party of Germany or the KPD and the Social Democratic part of the SPD, who were responsible for how the freikorps operated. It eventually led to a situation where a reunion of the two parties during the period of the Weimar was not probable.

The treaty of Versailles was made official on the 28th of June, 1919. Clemenceau from France and Lloyd George from Britain had set up a plan as a way to satisfy their vengeance against Germany even though some of their points-of-view were different. Clemenceau wanted to direct all his efforts towards destroying Germany. This was due to the repercussions of France having its north eastern side demolished by Germany. He did not want that to happen again and wanted to make sure that Germany was in no position to consider future attacks.

The peace resolution which was finalized was considered as a shame by the extreme right front, most of which was blamed on the Weimar republic. The politicians who accepted the settlement in 1918 were discouraged in the following years and treated as criminals. As the terms of the peace treaty were declared to the public, they were highly criticized by both the extreme right front and the general opinion which voiced the nation's politics. Not only did they protest against the conditions of the treaty but also on the way it was presented against Germany. When it came out, it was believed that Germany would make further discussions with the allies to negotiate the terms and that these would be decided based on Woodrow Wilson's fourteen points, neither of which happened. It led to the treaty of Versailles to be stamped as a dictated peace treaty or diktat.

Germany had to deal with a lot of retributions as a result of the clause. They had to present themselves as being the cause of starting a war. This directly implied that they were financially responsible for the damages which were brought on by the war. Considering the magnitude of devastation caused, this amounted to a lot of money. Most of the compensation was supposed to be received by Belgium and France. Their financial architecture and general life were affected the most by the war. The final amount charged from Germany was not declared by the treaty right away. As per the calculations of a team set up in this regard (Inter-Allied Reparations Commission), the final amount equaled to over several billion pounds. This was way beyond what Germany could manage to accumulate. The financial losses were coupled with losing different territories which were distributed to other countries. Belgium took over Malmedy and Eupen, France received the control over Lorraine and Alsace while West Prussia and Posen were given to Poland. The territories located overseas, under the control of Germany came under the rule of France and Britain. Germany was also forced to restrict its military strength. It was forbidden to have strength of over 10 thousand in its army, with only six battleships in the navy and was not allowed to have any kind of air force. Operations of any military forces were disallowed in the Rhineland area on the border of Germany and France. This was to protect the French from having to deal with attacks and feel safe. Readily accepting the conditions presented by the treaty was very hard for the Germans. They were left with no other option but to taking steps of reprisal against the allies and the group who had signed the treaty in the first place.

The early steps in the retaliation included a demonstration across Berlin where Wolfgang Kapp got together with over 5000 others on the march of 1920 to create the right wing government. They declared a strike where all the workers stopped performing their duties. This did not work out the way he had planned causing him to flee to another country. He tried to cover up his acts of trying to bring down the republic by declaring the treaty of Versailles and the downfall of Germany's strength as the reasons. He tried his best to lay the blame on the German politicians saying that they had double crossed the German army, breaking their trust. This implied that the political leaders in the German government had accepted defeat even though the army was still in a position and had the motivation to keep fighting. This was however a lie and failed in breaking down the republic. A couple of reasons prevented the Weimar republic from splitting up. Wolfgang Kapp did not have a large following of supporters in the extreme right front. The number accounted to a small minority who were not strong enough to carry out his beliefs. Another reason was that the German working class supported the actions of the republic in the 1920's and prevented its downfall. Germany was not under the pressure of yielding to the communistic activities going on in the early 19th century. This is mainly because the Communist party of Germany or the KPD was not backed up by a lot of supporters. This was evident from the low share of votes that they received in the 1920's (just over 12%). The leaders of the KPD were not good enough to successfully execute what they wanted. Neither were Leibknecht and Luxemberg any better in guiding the spartacist movement in 1919.

The payments imposed on Germany ignited numerous economic problems which along with its retaliation, can be considered as the primary factors which caused the Weimar republic to end eventually, making way for Adolf Hitler's regime as a dictator. The costs of damages had the potential of destroying the Germany economic and political sector. Some historians hold the belief that even though Germany was capable of paying the amount, they did not want to. The views of John Maynard Keynes and the French economist Etienne Mantoux are significant in this regard. Mantoux was against Keynes and believed that Germany needed to pay for the results of the war in order to be fair to the countries who suffered the losses. 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.