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1929-1933 Depression and the Development of Germany
Introduction
The great depression of 1929 was preceded by a number of economic, social and political events. In Germany the depression was considered as the turning point of the economic and development jurisprudence. A historical interrogation of Germany between 1880 and 1933 presents a better understanding of this claim.
Argument
The period before 1880 was characterized by a series of misfortunes for Germany. At the time it was still coming to terms with the loss of Alcase and Lorraine as well as the defeat by the French back in 1870. In an effort to maintain a safe position for Germany in the European context, then German Chancellor Bismarck settled with staying out of the colonization rush that was occurring in parts of African and Asian territories.
Germany after Bismarck received successors who were neither able nor willing to maintain this development pace, perspective and approach. Come 1905 the first Moroccan crisis saw Germany and France lock horns over the occupation and interests of the Moroccan colony (Scheck 2006). The French claimed an interest in this territory but it had not informed Germany of the intention of occupying it. The issue was however negotiated with Germany settling with an agreement to cede part of their mandate in Morocco. This would not however last long since come 1911 there was another problem which involved the two countries interests in Morocco. The matter was settled peacefully with France agreeing to let go of its mandate in the promise of an alternative territory.
Ethnic demands that were associated with the nation states during this time caused an imbalance in the various constituent empires in Europe marking the beginning of the First World War in august 1914. This saw Germany stand behind Austria which was its ally at the time in the confrontation. Serbia was under a pact with Russia that allured the Russians to extend protection to them. Russia on the other hand was allied to France. The number of individuals who lost employment at the time went up to 600,000 of whom four million white-collar workers were working in Germany 1931.
By 1919, Germany was facing fundamental economic problems resulting from different factors (Schweitzer 1964, p. 269). The loss of rich natural resource areas such as the Saar, Alsace-Lorraine and Silesia resulted in a 16 per cent decline in coal production, 13 per cent decline in arable agricultural land and 48 per cent loss of iron-ore. These losses of territories were dictated under the Treaty of Versailles (Delong 1997). Under the Treaty of Versailles, it was decided that Germany would have to pay reparations to the ally victors and the amount was not set until in 1921 at 132,000 million gold marks by the Reparation Commission.
The mark fell against the dollar during the war and the price of basic goods quadrupled. National debt was dramatically increased from 5000 million marks in 1914 to 144,000 million marks (Layton 2008). In addition, Germanys export market fell during the war and in 1919; the market was still sluggish for German goods.
According to Snyder, the entire inflation problem was closely connected with the reparations demanded by Allies (Lee 1998). Layton however, believed that reparations issue was a contributory factor to the inflation and was not the primary cause (Lee 1998).The causes of inflation according to Layton were divided into three phases: long term, medium term and short term and Lee agrees with this. Hyper-inflation happened as a result of the German government printing large amount of paper money to pay off the interest on its massive debts. In fact both Laytons position is not entirely correct (Lee 1998). Rising inflation started at the beginning of the war as Germany made no provisions for a long-drawn war. Instead of raising taxes to pay for the war, the government borrowed large sums by selling war bonds to the public and increasing public borrowing. Military production was increased at the expense of consumer production therefore this increase in civilian demand increased the prices of basic goods (Layton 2008).
A majority of the German population found it unbearable to live with the consequences of the war after 1918. They found it quite impossible to come to terms with the political results that became of Germany after this war. As it were Kurt Tucholsky was not exaggerating when he suggested in his first article compiled in the credo of the bourgeoisie that Under the Kaiser everything was better (Tucholsky 1965, p.8). Winker however eluded this feeling of sentimentality, which arose naturally from sequence of events and an attempt at reconciling with the status quo and accepting the new conditions (Winkler 1972, p. 78).
The climax of this mounting spiral of international crisis was marked by the onset of a global economic depression. The crisis took its position in the headlines with a massive show of effect that saw the crash of key Western banks in 1929 which in fact had been doing very well and had gone to establish their branches in the most lucrative parts of the world economy.
According to Hennock, the main and actual cause of the depression in Germany was the misfortunes that were associated the industrial economy. The situation was coupled with the poor performance and long term weakness that was associated with economies such as Latin America which had a perpetual dependence on cheap export commodities of the international marketplace. The consequences were a pull down of a majority of world economies (OHara 1999, p. 1245).
The consequences of the war dominated the world scene between 1920 and 1930. The greatest responsibility of the effects of the depression in Germany was borne by the war induced inflation that tormented the government into seeking a quick solution (Overy 1999, p. 103).British economist John Maynard Keynes in his book General Theory of Employment, Interest, and Money (1936) proposed a theory that suggested increases in government spending alongside tax cuts as well as monetary expansion could be used as mechanisms to reduce the effects of the depression. This insight was motivated by the growing consensus that governments should make attempts at stabilizing the levels of employment (Keynes 1936).
To rescue the position the German government resulted to devaluation of currency. This however did little in restoring lost savings. The brief recession of 1920 and 1921 brought to perspective the implications of the postwar dislocations. A critical journalist in attempting to describe the causes of the depression in Germany said:
No other World War I combatant nation so destroyed its currency. This factor alone would have produced a depression for Germany. Add this ingredient to the others and you can see why Germans were especially hard-hit (Reed 2001).
The German economy at this time was facing its worst times, investors were shying away from it due to the hostile environment that it received from other nations industries were cutting down on their levels of production with the effects of the crisis taking its toll on the capital producing industries and spreading to the consumer product based industries. Production reduced by a third across the industry. Inadvertently the effect was obvious, beginning with falling employment and lower wages, which translated into a greater demand within the economy and causing greater hardship (Lambi 1962, pp.-70).
This period was an adequate test of the stretch of the German economy. There was a rising demand for food and minerals in a sector that strained to maintain a weak market that was marred with inflation and shortage in supply from the farm sector and the non-industrial world (Braun1990, p. 83-84).
The period between 1929 and 1933 saw the German economy gradually grow from a steady and self-sufficient economy to a crumbling and developing economy. By 1931, the depression began to take its toll on countries such France and Italy that were considered less affected slowly drawing them into the vortex. As Scheck puts it:
In my opinion, & I do not think that they explain all of it. The world was growing together. Improving communications and cheap transportation through the steamship made the globe a smaller place in which peripheral matters no longer existed. German industrialization reached the typical point at which the agrarian sector becomes so small compared to the industrial sector that a country becomes dependent upon imported foods and raw materials. (Scheck 2006)
This period marked a turning point Germany and the society in a strict sense. The political social and economic realms were reviewed and re-evaluated to embrace the consequences of the war and the depression (Mahmud et al 2006, pp.5-228). Families were disrupted by the sudden attitude in the male population that was motivated by their inability to provide for their families. The women and children on their part were disgusted at authority figures and therefore had little regard for their policies (Munroe 1901, pp.9).
Roles were reversed as wives and mothers found it easier to procure employment within the economy as compared to their husbands (Haverkamp 1988). This had the positive impact of motivating the onset of the feminist movement in Germany that saw women have a better grasp at opportunities. It however acted to create confusion in family roles in the patrilineal German society (Layton 2008). The depression also led to the formulation adoption and implementation of new welfare programs whose objective was to stimulate demand and aid the restoration of confidence (Glovka 1979, pp.-64). The pressures and demands of the depression led to the birth of a radical generation that embraced radical social and political experiments that was experienced in the German Nazi administration.
The period between 1933 and 1945 allowed Germany to go through a period of recollection under the Hitler administration. The economy developed and graduated into a hothouse of prosperity motivated by the high government subsidies specifically designed to entice sectors that tended to give Germany military power and economic autarky. The objective here was to restore Germany to economic independence from the global economy (Carr 1972, p. 49-52).
The rise to power of Adolph Hitler saw the entry of the most aggressive era of German history. His ideology was seen in the various Nazi programs in the agricultural sector. By September 1933, the Hereditary Farm Law came into force with the objective of consolidating land that was less than 300 acres. No such farm could be divided and could only be passed to the male heir of the family. Such a farm could also not be seized to cover a debt or bankruptcy claim. The prices of land generally went up by up to 20 percent. The finance sector took advantage of the gold standard and the freedom that came with this approach to keep interest rates low and the levels of deficit in the governments budget at their maximum (Gosta 1999).The deficits were used to fund public works projects that created employment opportunities for the public.
Germany went to war under the Nazi regime and lost in 1945. The consequence of this loss was a split of the unified Germany into two global blocs in the east and the west. East and West Germany emerged with West Germany being a parliamentary democracy and a member of NATO and among the largest economies in the world at the time. East Germany on the other end was a totalitarian dictatorship that was widely known as a soviet satellite state allied to the Soviet Union. Germany would remain split until 1990(Maier 2009, pp. 76-260).The country had successfully been initiated through a historical economic process whose impact continued to be experienced even as Germany went through the cold war.
This loss coupled with the removal of the Nazi administration presented a situation that had never been experienced in the history of Germany. The country was occupied by foreign armies and cities. The level of infrastructure was in a state of mayhem and the number of refugees was unmanageable with the majority of them suffering from hunger and homelessness due to loss of their homes (Braun 1990).
This led to aggressive migration of refugees from east to West Germany probing the building of the Berlin wall that was to reduce the movement of these refugees due to the constrained relations. This state of affairs continued until 1989 when the people began to speak out of their discontent of their state of affairs. There were nationwide protests and migration of citizens between east and West Germany probing the demolition of the Berlin war (Maier 2009, pp. 76-260). By November 1989 a plan for the unification of Germany was developed by the chancellor culminating in an election in 1990 as well as a review of the constitution which would see the economic and monetary unification.
Conclusion
After the commencement of these development initiatives Germany did not look back. It has faced numerous challenges that are similar to those faced by any growing economy but it managed to survive the Second World War and the economic challenges of the century. The depression was a definite turning point for the development aspects of Germany (Fuhrmann 1986). As it were it initiated Germany into a new era of ideology and growth.
References
Journals
Glovka, E. (1979) Rules of the Ruhr: Leadership and Authority in German Big Business Before 1914, Business History Review, 53 (1) pp 40-64.
Lambi, N. (1962) The Protectionist Interests of the German Iron and Steel Industry, 1873-1879, Journal of Economic History, 22(1), pp 59-70.
Mahmud, R., Goodin R and Parpo, A. (2006) The Temporal Welfare State: A Cross-national Comparison . Journal of Public Policy 26 (3) pp 195228.
Munroe, S. (1901) Four German Jurists. IV . Political Science Quarterly (4) pp 669.
Books
Braun, H. (1990) The German Economy in the Twentieth Century , London, United Kingdom : Routledge , p. 8384.
Carr, W. (1972) Arms, Autarky and Aggression.. London, United Kingdom : Edward Arnold, p 49-52.
Fuhrmann, H. (1986) Germany in the High Middle Ages.Cambridge: Cambridge University Press.
Gosta, E. (1999) Social Foundations of Postindustrial Economies. Oxford: Oxford University Press.
Haverkamp, A. (1988) Medieval Germany, 1056-1273.UK :Oxford University Press.
Keynes, J. (1936) General Theory of Employment, Interest, and Money Cambridge: Macmillan Cambridge University Press.
Tucholsky, K. (1965) Die Glaubenssätze der Bourgeoisie Hamburg:Ausgewählte Werke.p,148.
Layton, G. (2008) From Second Reich to Third Reich: Germany 1918-1945.London: Hodder Education.
Lee, S.J. (1998) The Weimar Republic. London and New York: Routledge.
Maier, S.,(2009) Civil Resistance and Civil Society: Lessons from the Collapse of the German Democratic Republic in 19893, in Roberts, A., and Garton, T. Civil Resistance and Power Politics: The Experience of Non-violent Action from Gandhi to the Present, Cambridge:Oxford University Press, pp. 260-76.
OHara, P. (1999) welfare state . Encyclopedia of political economy. London, United Kingdom:Routledge, p. 1245.
Overy, R. (1999) Misjudging Hitler from The Origins of the Second World War Reconsidered. London, United Kingdom: Gordon Martel Routledge, p 103
Schweitzer, A. (1964) Big Business in the Third Reich , Bloomington, Indiana University Press, p. 269.
Winkler, H. (1972) Mittelstand, Demokratie und Nationalsozialismus: Die politische Entwicklung von Handwerk und Kleinhandel.Cologne: der Weimarer Republik, p. 78.
Internet sources
DeLong, J. (1997) Slouching Towards Utopia?: The Economic History of the Twentieth Century -XV. Nazis and Soviets. Web.
Scheck, R (2006) World Politics and Domestic Challenges, 1890-1914. Web.
Reed, L. (2001) Germany and the Great Depression. Web.
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