Opinion //
Weimar Germany's Economic Catastrophe — And What it Means for Us Today
In years one of Europe’s strongest and most stable governments toppled and made way for the Nazis. What about Europe now?
Prelude to Gustav Stresemann’s Weimar Germany: Kaiser Wilhelm’s abdication and Germany’s Messy Reichstag
After World War I, Germany was bankrupt and humiliated — and it lost 40% of her territory, including the Saar coal region (Saarland), had Ruhr invaded briefly when it couldn’t pay back reparations and lost all of her overseas territory in Africa and Asia. Talk about being in a bad shape.
After Kaiser Wilhelm II abdicated and fled to his cousin’s palace in Holland, Germany was basically left to its own devices — with no leader whatsoever. And remember that when Wilhelm fled Germany was STILL fighting the First World War, which it was losing. It was at this point that a coalition government emerged, made up of a messy assortment of parties that all wanted to rule Germany by their own ideals. This was the coalition government that made Germany sign the November Armistice with the allies.
However, after the armistice was signed and punishment talks came underway, it was clear that nobody in particular was leading the Reichstag. This was the period of absolute mess, called the Years of Crisis (1919–1923). There was every possible bad thing happening — hyperinflation, large sum of war reparations that couldn’t be paid, un-recovering economy, widespread poverty and job loss, as well as many veterans from the German Army being retrenched during the cuts on the German military at the Treaty of Versailles.
Gustav Stresemann’s Weimar Germany: A Stable Economy?
Germany’s trip to Gustav Stresemann’s highly successful Germany was no easy walk in the park. The Spartacist Rebellion and the Kapp Putsch highlighted just how fragile the Weimar Republic was. A rising force in German politics, young Adolf Hitler, a brilliant orator and leader of the NSDAP was arrested and imprisoned for plotting the Beer Hall Putsch, a half-baked attempt to overthrow the Weimar government.
Once civil stability had been restored, Stresemann began stabilising the German currency, which promoted confidence in the German economy and helped the recovery that was so greatly needed for the German nation to keep up with their reparation repayments, while at the same time feeding and supplying the nation.
Once the economic situation had stabilised, Stresemann could begin putting a permanent currency in place, called the Rentenmark (October 1923), which again contributed to the growing level of international confidence in the Weimar Republic’s economy.
To help Germany meet reparation obligations, the Dawes Plan was created in 1924. This was an agreement between American banks and the German government in which the American banks lent money to German banks with German assets as collateral to help it pay reparations. The German railways, the National Bank and many industries were therefore mortgaged as securities for the stable currency and the loans.
Above: Extract from the Wikipedia article about Stresemann’s policies.
Stresemann’s new Rentenmark revived the Weimar economy and brought value to the German currency, thus officially ending hyperinflation. The Dawes Plan and the Young Plan (Later, in 1929) helped pour American aid into Germany, giving the German government the ability to create jobs and revive the economy by means of public works and bank loans. The Treaty of Rapallo with the Soviet Union further lightened the burden of the German economy by cancelling German war reparations to the Soviet Union.
This however, was only a farce. The same Wikipedia article put it nicely:
Overall trade increased and unemployment fell. Stresemann’s reforms did not relieve the underlying weaknesses of Weimar but gave the appearance of a stable democracy.
Gustav Stresemann’s reforms, although beneficial to the German economy, was nothing but a pretence of stability that was truly undermined by its over-reliance on the American economy, which is never a good thing, as we will see later.
Collapse of Gustav Stresemann’s Weimar Republic & Rise of Adolf Hitler
The Young Plan came at the worst possible time. 1929. History students will recognise this date as the worst economic recession before 2008, and possibly the most disastrous for the world.
The Great Depression.
The Great Depression was no laughing matter. At least not for the Germans whose day-to-day income in 1929 was ever so linked to the ups and downs of the American economy.
When American banks withdrew their line of credit to German companies, the onset of severe unemployment could not be abated by conventional economic measures. Unemployment thereafter grew dramatically, at 4 million in 1930, and in September 1930 a political earthquake shook the republic to its foundations. The National Socialist German Workers’ Party (NSDAP), until then a minor far-right party, increased its votes to 19%, becoming Germany’s second largest party, while the Communist Party of Germany (KPD) also increased its votes; this made the unstable coalition system by which every chancellor had governed increasingly unworkable.
Above: An extract of the same Wikipedia article.
Eventually, Adolf Hitler was elected as chancellor, and through the Reichstag Fire Decree and the Enabling Act — eventually declaring himself “Fuhrer” shortly after the death of President of the Reich Paul Von Hindenburg.
Adolf Hitler’s Nazi Germany: Improving Economy & Rising Military Force
Adolf Hitler soon began making policies, and soon Nazi economic and military policies came into play. Adolf Hitler appointed Hjalmar Schacht as economic minister and released the Reichsmark as a new currency.
He also began German remilitarisation, which created jobs and economic opportunities for Germans. He also created public works for employment opportunities. He further forced big companies to make donations to the NSDAP so that he could use these donations to pay for remilitarisation and the cost of building factories and producing weapons. In this manner, the NSDAP forcibly forced the money to flow around in the German economy, preventing stagnation and hence overprinting. This prevented hyperinflation for the most part of Nazi rule in Germany.
Eventually, Adolf was confident enough to start a war.
The second World War.
So, Why Should We Care?
Good question.
I think the best part of this question is that it really shows how vulnerable we've become.
Joe Biden messed up the economy. That we can all attest to. Unprecedented inflation, loss of jobs, loss of value … And Sleepy Joe doesn't seem like he's waking up.
President Joe Biden on Friday brushed off economic warnings from Tesla CEO Elon Musk and JPMorgan Chase CEO Jamie Dimon as he touted May’s jobs report, saying the nation is likely to see more moderate gains as his administration struggles to get a handle on high inflation.
Is America heading towards the same place that the Weimar Republic headed to so many years before?
I really don't think so.
Most likely not in our lifetime.
But my big point is: inflation feeds discontent — and discontent feeds autocratic regimes. Hitler and the Communists rose in popularity polls because of the Weimar Republic's complete economic collapse.
The article above made one point very clear: political equilibriums can quickly fall out of balance.
So here I am, trying to draw parallels with the modern world.
In fact, so much of our world is falling to autocratic regimes.
India, the world's largest democracy, has had its rating downgraded to a "flawed democracy". (See the article for how your country ranks)
America, the beacon of democracy, fell to a "flawed democracy" status.
Meanwhile, almost all of Asia, led by the PRC and Russia, are converting to authoritarian regimes.
I'm not saying authoritarian regimes are bad. For one, China has got better gun control rules than the US. Shootings happen less often, and COVID laws are more effective.
But are you ready for that kind of system yet?
Is this a cause for worry? You decide.
But be quick.
Democracy may not have long left.
