Germany and Reparations

THE INTERWAR PERIOD HIST 1301 | History Germany and Reparations The father of Keynesian economics, John Maynard Keynes, was a British economist present at the 1919 Paris Peace Conference. He was so concerned about the treaty's possible financial consequences that he authored a book arguing that Germany's huge reparations would bring down her economy and jeopardise the stability of the European economy as a whole. His forecasts soon came to pass. As the 1920s got underway, Germany was beset by several issues. It was not only held responsible for the war, but it had also suffered a physical decline as a result of the treaty's seizure of its overseas financial holdings, which further undermined its economic might. Therefore, figuring out how to pay the reparations was one of the first issues the newly elected democratic Weimar Republic administration had to deal with. When the first payment was due in 1921, Germany was unable to provide the entire sum owed, and the unsolved matter of how to carry out the conditions of the treaty reappeared. Germany fell behind in its payments to France and Britain the next year, 1922. In retaliation, German producers of iron, coal, and steel were forced to pay back their debts by French and Belgian forces taking control of the Ruhr Valley. The valley's resources were essential to the French (particularly coal). Many Germans in the valley lost their lives in the ensuing fighting against the occupation. Germany started printing more money in an attempt to find a quick fix. However, this set off a cycle of inflation, and the ensuing hyperinflation quickly overwhelmed the economy. The paper that the new money was printed on was literally not worth it. In order to purchase a loaf of bread, individuals would wheelbarrow their currency to the store, forcing the government to produce ever-larger denominations of notes. When income could not keep up with a daily rising rate of inflation, having a job seemed absurd. Every member of the middle class in Germany witnessed their savings evaporate, and along with them, their government assistance. Germany's monthly payments were reduced under the Dawes Plan, an American-arranged intervention that was implemented in 1924 and was scheduled to rise again when Germany's economy recovered. Germany also received loans from foreign banks, many of them based in the US, to help stabilise its inflationary economy. Germany was able to pay its bills as a result, but it also meant accruing further debt. Essentially, American banks were lending money to Germany, which it used to settle its debts with Britain and France, which then utilised the funds to settle their own obligations to the United States. Germany was still experiencing severe economic difficulties as a result of reparations. The United States unveiled a new plan in 1929. The Young Plan cut the overall amount of German reparations to $29 billion and obtained extra loans worth hundreds of millions of dollars. It also extended out the payment timetable over fifty-nine years. Germany kept up payments until 1932, when the global Great Depression rendered it impossible to keep up the payments. More of the outstanding debt was cancelled in later agreements, and the last payment was eventually completed in 2010. Germany only contributed around one-eighth of the entire amount. The Weimar Republic's poor choices in Germany led to a rise in popular dissatisfaction with the country's newly elected democratic government. Many political parties made an effort to rise to political prominence by taking advantage of the nation's economic issues. The Nazi Party and National Socialists were among them; its members advocated for a more autocratic form of governance. Adolf Hitler was one of the men who joined the organisation in the early 1920s. Hitler was a combat veteran who had the erroneous belief that one should stab one's opponent in the back and had a deep-seated dislike for the Treaty of Versailles. In the 1920s, he developed into a charismatic speaker who helped the Nazis advance in membership as more individuals were brought in. He made the decision to begin the seizure of Munich's state administration in 1923. Hitler and several of his allies were captured when the planned Beer Hall Putsch, so named because the targeted politicians were supposed to be abducted in a beer hall, failed. While incarcerated for the next year, Hitler composed the book Mein Kampf, or "My Struggle," in which he delineated the Nazis' strategy for seizing governmental authority and their objectives for the revival of Germany. The unification of all German-speaking peoples under a single administration and an eastward expansion in pursuit of Lebensraum, or "living space," were among these objectives. In the 1920s, his remarks found a receptive audience.