Introduction

If history teaches anything, it is that government cannot be trusted to manage money. When
currency is not redeemable in gold, its value depends entirely on the judgment and the
conscience of the politicians. (That is the situation in this country today.)

Especially in an economic crisis or a war, the pressure to inflate becomes overwhelming. Any
alternative may seem politically disastrous. Whether it be the Roman emperors repeatedly
debasing their coinage, the French revolutionary government printing a flood of assignats, John
Law flooding France with debased money, or the Continental Congress issuing money until it
was literally "not worth a Continental," the story is similar. A government in financial straits
finds its easiest recourse is to issue more and more money until the money loses its value. The
entire process is accompanied by a barrage of explanations, propaganda and new regulations
which hide the true situation from the eyes of most people until they have lost all their savings.
In World War I, Germany -- like other governments -- borrowed heavily to pay its war costs.
This led to inflation, but not much more than in the U.S. during the same period. After the war
there was a period of stability, but then the inflation resumed. By 1923, the wildest inflation in
history was raging. Often prices doubled in a few hours. A wild stampede developed to buy
goods and get rid of money. By late 1923 it took 200 billion marks to buy a loaf of bread.

Millions of the hard-working, thrifty German people found that their life's savings would not buy
a postage stamp. They were penniless. How could this happen in a highly civilized nation run at
the time by intelligent, democratically chosen leaders? What happened to business, to wages and
employment? How did some people manage to save their capital while a few speculators made
Hyperinflation

In economics, hyperinflation is inflation that is very high or "out of control", a condition in

which prices increase rapidly as a currency loses its value. Definitions used by the media vary
from a cumulative inflation rate over three years approaching 100% to "inflation exceeding 50%
a month."In informal usage the term is often applied to much lower rates. As a rule of thumb,
normal inflation is reported per year, but hyperinflation is often reported for much shorter
intervals, often per month.

The definition used by most economists is "an inflationary cycle without any tendency toward
equilibrium. A vicious circle is created in which more and more inflation is created with each
iteration of the cycle. Although there is a great deal of debate about the root causes of
hyperinflation, it becomes visible when there is an unchecked increase in the money supply (or
drastic debasement of coinage) usually accompanied by a widespread unwillingness to hold the
money for more than the time needed to trade it for something tangible to avoid further loss.
Hyperinflation is often associated with wars (or their aftermath), economic depressions, and
political or social upheavals.

Characteristics

In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, generally regarded as
the first serious study of hyperinflation and its effects. In it, he defined hyperinflation as a
monthly inflation rate of at least 50%. International Accounting Standard 1 requires a
presentation currency. IAS 21 provides for translations of foreign currencies into the presentation
currency. IAS 29 establishes special accounting rules for use in hyperinflationary environments,
and lists four factors which can trigger application of these rules:

1. The general population prefers to keep its wealth in non-monetary assets or in a relatively
stable foreign currency. Amounts of local currency held are immediately invested to
maintain purchasing power.
 2. The general population regards monetary amounts not in terms of the local currency but
in terms of a relatively stable foreign currency. Prices may be quoted in that foreign
currency.
3. Sales and purchases on credit take place at prices that compensate for the expected loss of
purchasing power during the credit period, even if the period is short.
4. Interest rates, wages and prices are linked to a price index and the cumulative inflation
rate over three years approaches, or exceeds, 100%.

Weimar Republic

The Weimar Republic is the name given by historians to the parliamentary republic established
in 1919 in Germany to replace the imperial form of government, named after Weimar, the city
where the constitutional assembly took place. Its official name was still Deutsches Reich
(German Empire), however. Following World War I, the republic emerged from the German
Revolution in November 1918. In 1919, a national assembly convened in the city of Weimar,
where a new constitution for the German Reich was written, to be adopted on 11 August.

The name Weimar Republic was never used officially during its existence. Despite its political
form, the new republic was still known as Deutsches Reich in German. The republic was
established after workers and troops revolted in early 1918 against the government's refusal to
end the First World War. On November 9, Kaiser Wilhelm II fled the country and a provisional
(temporary) government was formed by Friedrich Ebert. The new parliament met in Weimar,
in February 1919 and drew up a constitution that established Germany as a democracy. There
were two houses of parliament, the Reichstag and the Reichsrat. Ebert was elected first
president of the new republic.

Weimar Germany was created from the chaos and turbulence surrounding the defeat of
Imperial Germany in World War One. The opening years of the Weimar Republic from 1919-
23 were years of insurrection and economic instability with attacks from political extremists on
both the Left and the Right. However, Weimar Germany emerged from these crisis-ridden
years to enter a period of relative stability between 1924-29. A subsequent period of chronic
instability after 1929 led to a severe decline in the fortunes of Weimar Germany leading to its
eventual collapse during the early years of Nazi rule under Adolf Hitler in 1933-34.

During the early years of Weimar Germany (1919-23), the Weimar Republic appeared to be in a
constant state of crisis. From its inception, Weimar faced many challenges to its stability and
strength. Born out of the catastrophic defeat of World War One the republic itself was declared,
not in the old imperial capital of Berlin, but in the small German town of Weimar in southern
Germany, mainly because Berlin was in the grip of a workers rebellion. Therefore from the
outset of its short existence, Weimar Germany was seen by some groups within Germany as
alien and artificial.

Treaty of Versailles

The permanent economic crisis was a result of lost pre-war industrial exports, the loss of supplies
in raw materials and foodstuffs from Alsace-Lorraine, Polish districts and the colonies, along
with worsening debt balances and reparations payments. Military-industrial activity had almost
ceased, although controlled demobilization kept unemployment at around one million. The fact
that the Allies continued to blockade Germany until after the Treaty of Versailles did not help
matters, either.

The allies permitted only low import levels of goods that most Germans could not afford. After
four years of war and famine, many German workers were exhausted, physically impaired and
discouraged. Millions were disenchanted with capitalism and hoping for a new era. Meanwhile
the currency depreciated.

The German peace delegation in France signed the Treaty of Versailles accepting mass
reductions of the German military, substantial war reparations payments, and the controversial
"War Guilt Clause". Adolf Hitler later blamed the republic and its democracy for the oppressive
terms of this treaty. The Republic's first Reichspräsident ("Reich President"), Friedrich Ebert of
the SPD , signed the new German constitution into law on 11 August 1919.

The new post-World War I Germany, stripped of all colonies, became 13.3% smaller in its
European territory than its imperial predecessor.
 The Year of Turmoil 1914-1923

When the war broke out on July 31, 1914, the Reichsbank (German Central Bank) suspended
redeemability of its notes in gold. After that there was no legal limit as to how many notes it
could print. The government did not want to upset people with heavy taxes. Instead it borrowed
huge amounts of money which were to be paid by the enemy after Germany had won the war;
much of the borrowing was discounted and monetized by the Reichsbank.

By the end of the war, the amount of money in circulation had increased four-fold. In view of
this, the extent of inflation was less than one might have expected. The consumer price index had
risen 140% by December 1918. This was equal to the inflation during the same time in England,
a little more than in the United States, but less than in France. Yet the floating debt of the
Reichsbank had increased from 3 billion to 55 billion marks!

Why inflation was kept within bounds Unites States during World War II? Necessities were
rationed and luxury goods were not easily available. Millions of men were at the front and not in
the market for goods. Civilians worked hard and had little leisure for spending. People saved
money against peace time, and in some cases to evade taxes. But the fuel for inflation was
accumulating in the form of vast hoards of money.

The harsh reparation payments imposed on Germany led the mark to depreciate against foreign
currencies. Also, the new democratic socialist leaders had promised the people all types of
bounties--increased wages, reduced hours, an expanded educational system, and new social
benefits. But all this meant a vastly increased demand on a limited production capacity.

For these reasons inflation resumed after the peace until by February 1920 the price level was
five times as high as it had been at the armistice. Yet during this same time the amount of
currency in circulation had only doubled. Prices were in fact rising much faster than the rate at
which money was being printed. Therefore, reasoned the officials, the price inflation could
hardly be blamed on the government. Confidence in the mark had weakened. At the same time,
and as a consequence, billions of hoarded marks came out of hiding and entered the marketplace.
The accumulated fuel was burning.
By February 1920 this inflationary episode had run its course. For the next fifteen months the
price index held stable. The mark actually gained in value against foreign currencies, so that
prices of imported goods fell by some 50%. Here was a golden opportunity to establish a stable
currency. However, during these fifteen months the government kept issuing new money. The
currency in circulation increased by 50% and the floating debt of the Reichsbank by 100%,
providing fuel for a new outbreak.

In May 1921, price inflation started again and by July 1922 prices had risen 700%. The
Reichsbank continued printing new currency, although more slowly than the rate at which prices
were rising. In fact, all through this period the issue of currency proceeded at a fairly smooth
steady rate, while the price index moved up in great surges, interspersed by periods of stability.

After July 1922 the phase of hyperinflation began. All confidence in money vanished and the
price index rose faster and faster for fifteen months, outpacing the printing presses which could
not run out money as fast as it was depreciating.

Wholesale Price Index

July 1914 1.0
Jan 1919 2.6
July 1919 3.4
Jan 1920 12.6
Jan 1921 14.4
July 1921 14.3
Jan 1922 36.7
July 1922 100.6
Jan 1923 2,785.0
July 1923 194,000.0
Nov 1923 726,000,000,000.0
 Exchange rates: 1US$ value in German marks.

Jan. 1918 5.21 Mar. 1923 21,190.00

Jan. 1919 8.20 Apr. 1923 24,475.00
Jan. 1920 64.80 May 1923 47,670.00
Jan. 1921 64.91 June 1923 109,966.00
Jan. 1922 191.81 July 1923 353,412.00
April 1922 291.00 Aug. 1923 4,620,455.00
July 1922 493.22 Sept. 1923 98,860,000.00
Oct. 1922 3,180.96 Oct. 1923 25,260,000,000.00
Jan. 1923 17,972.00 Nov. 1923 2,193,600,000,000.00
Feb. 1923 27,918.00 Dec. 1923 4,200,000,000,000.00

Reparations repayments led to the German economy becoming devalued. Having to pay such
large sums to the Allies resulted in the German economy having a rapidly reduced capacity to
purchase goods, as they were compelled to give much of their accumulated wealth and produce
to the Allies in part payment towards the Reparations bill.

This had several consequences. First, it resulted in the value of the German currency falling.
Second, it resulted in the cost of items within Germany rising as the relative cost of importation
rose as the value of the currency declined. This is inflationary in nature and has several
consequences. In situations such as this people make use of their savings, as they cannot afford
to make purchases using only their weekly or monthly income. In Germany billions of dollars
worth of hoarded and saved marks re-entered the economy in the period after the war. Again, this
results in inflation rising and the value of the currency falling when compared to other
currencies. Combined, these factors lead to a cycle of devaluation and inflation that can, and did,
become hyperinflation.

It is not however the case that the economy within Germany continued to decline throughout the
whole of the period 1919 – 1923. In 1920 the currency stabilized for a period of some 6 months.
The price index remained almost constant and the value of the German mark remained at
approximately 1US$ to 69 German marks. Weimar Government continued to increase the
amount of money in circulation – which is inflationary. The result was hyperinflation in 1923.
 Effects of Inflation on Business
As inflation proceeded, people rushed to buy goods and get rid of their depreciated money. For
similar reasons, businessmen hastened to buy machinery, to build new factories, to buy huge
stocks of coal, steel and other raw materials. Those who had access to credit borrowed heavily
for these purposes, and inflation wiped out their debt. There was a tremendous conversion of
working capital into fixed investments. Business was booming and unemployment virtually
vanished until the last stages of the inflation.

Farmers got rid of currency by heavy purchases of equipment, and later many were left holding
large supplies of useless machinery. Shipbuilding was expanded beyond all market needs.
Marginal mines were opened leading to serious overproduction later on. But while basic
industries prospered, there was a severe depression in consumer goods industries such as textiles,
meat, beer, sugar and tobacco. Too many workers and persons on fixed incomes had lost their
purchasing power.

There was a tremendous move toward concentration of industry. Large firms or combinations
found it much easier to raise prices, to obtain raw materials and above all to obtain bank credit.
Also, they could issue "notgeld" or emergency money which more and more came to replace the
paper mark as a medium of exchange. Some of these new industrial combinations were rational
and efficient, but many were purely speculative operations. A new breed of financier arose.

Earlier the great German industrial leaders--men like Krupp, Thyssen and Siemens--had
developed basic new ideas in technology or in organization. But now the rising stars were those
of shrewd speculators and manipulators geared to quick trading and to jumping from deal to deal
and from company to company. The most successful were those who saw the trend of events
early, who borrowed to the hilt and bought up goods, shares and companies at bargain prices.
Conglomerates sprung up forty years before the heyday of the conglomerate movement in the
U.S. Perhaps the biggest operator of the day, Hugo Stinnes, formed a giant conglomerate
including companies in oil, coal, steel, shipyards, electrical works, insurance, newspapers and
hotels. He died in 1924, just before his empire fell apart in the cold winds of the stabilization
period. Most of these new mushroom combinations and conglomerates were speculative bubbles
which were only able to survive as long as they benefited from ongoing inflation.

Beneath the surface of prosperity there was enormous waste and inefficiency. Much of the new
capital plant proved inefficient or unneeded. Middlemen multiplied like locusts, and more and
more time and energy went to speculation and to endless paperwork generated by currency
fluctuations, new tax law regulations and labor disputes. Speculation caused banks to multiply;
there were 100,000 bank workers in 1913 and 375,000 in 1923. Labor became much less
productive. Workmen were pre-occupied with their own problems of trading, getting wage
boosts, and staying ahead of inflation. With paper wages rising rapidly and full employment,
they were less inclined to work hard. Despite the surface boom, net production was really much
less than before the war.

Bewildering fluctuations in costs prices and wages made it impossible to allocate resources and
production rationally. More and more, the businessman became a speculator in goods and
currencies. However, very few businesses failed, since their debts were constantly wiped out by
inflation. Bankruptcies had run to 815 per month in 1913; by late 1923 they were 10 per month.

Finally, however, in the last stages of the inflation, the economy began to collapse. Retailers
could not get goods or else could not sell at a profit. The money they received was depreciating
too fast. Farmers stopped selling their produce. More and more stores became empty. Now
unemployment began to soar.

On the whole, much energy and wealth was wasted in unproductive channels--speculation,
paperwork and unprofitable equipment. The working capital of industry was largely dissipated,
making that much harder the eventual process of economic rebuilding and rationalization.

The Ruhr Crisis 1923

World War I had left Germany with many economic, social, and political problems. In addition
to enduring high inflation and a large national debt, Germans were deeply embittered by the
harsh terms of the Treaty of Versailles, signed in June 1919, which formally ended the war.
The treaty called for German disarmament and huge reparation payments to the Allies. Unable
to meet the payments, Germany's currency collapsed and the German people suffered large
financial losses. In January 1923 French and Belgian forces occupied Germany's main
industrial region, the Ruhr, claiming that Germany had stopped making reparation deliveries.
German workers were encouraged to strike in protest at the French and Belgian occupation.
The result was a period of hyperinflation when the German mark became worthless. Many
Germans were desperate by 1923 and were ready to support extremists such as the Nazis or the
Communists.

The Munich Putsch or Beer Hall Putsch 1923

This was a short-lived rebellion started by Nazi party leader Adolf Hitler, which began in
Munich on November 8, 1923. Hitler planned to make the veteran general Erich Ludendorff a
dictator. He kidnapped the leader of the Bavarian government, declared a revolution, and the
next day marched on Munich. Police crushed the rebellion, shot 16 of the 3,000 Nazi party
demonstrators dead, and arrested Hitler, who served nine months in prison. Hitler used his time
in Landsberg prison to write ‘Mein Kampf’ (My Struggle). This set out Hitler’s beliefs for the
future of Germany and many people read it and were fooled by its false promises.

The Kapp Putsch

Right wing dissatisfaction with the new government was worsened when the government moved
to disband Freikorps units. A nationalist politician, Wofgang Kapp led a revolt in Berlin backed
by the Freikorps and the military commander of Berlin. The regular army refused to crush the
revolt and the government fled to Stuttgart. Its call for a general strike was carried out by the
trade unions in the city and the putsch collapsed. At the same time a communist revolt was
crushed in the Ruhr, the industrial heartland of Germany, with over a thousand dead.

Right wing assassinations were to plague the early years of the new republic with leading
politicians such as Matthias Erzberger and Walther Rathenau assassinated. Many of the
murderers were treated with great leniency by the courts but the murders did have the effect of
strengthening support for the institutions of the republic.
 The Stresemann Era

During the dark days of 1923, Gustav Stresemann was appointed chancellor and his policies
would help to transform the fortunes of Weimar. He had been a strong supporter of Germany’s
involvement in World War I and advocated unrestricted submarine warfare as the only means to
defeat Britain.

At first, Stresemann felt no loyalty to the new Weimar Republic and he opposed the Treaty of
Versailles. He set up his own party the German People’s Party (DVP). However his views
developed and he advocated a great coalition from the SPD to the DVP to consolidate democracy
against the extremes of left and right.

He became Chancellor in August 1923. His government lasted a hundred days until November
1923 but he remained as foreign minister in successive coalitions until his death in October 1929.
As Chancellor he took the crucial step of ceasing financial support to the general strike in the
Ruhr. He introduced a new and stable currency (the Rentenmark) that ended the hyper-inflation.
He also crushed a communist revolt in Saxony and faced down the threat from Hitler in Bavaria.

The Period of Prosperity

He achieved a large measure of success. Under Anglo-American pressure France withdrew from
the Ruhr. Stresemann accepted the recommendations of the Dawes committee for a settlement of
the reparations issue. A moderate scale of payments was fixed rising from £50 million to £125
million after 5 years and a 2-year moratorium (suspension) on reparation payments was set. A
loan of $800 million was raised for Germany, mainly in America. For the next 5 years
American loans poured into Germany which greatly improved the economic position.
 Loan

USA Germany
The
Dawe
War Loans s Reparations
repaid Plan

Britain and France

The Locarno Pact

In 1925 he took the initiative that led to the Locarno Pact. Under this agreement Germany
recognised her Western frontiers as final and agreed to use peaceful means to ensure revision of
her frontiers in the east. Stresemann was a German nationalist and was not prepared to give up
what he saw as legitimate demands for the return of Danzig and the northern half of the Polish
Corridor.

In September 1926 Germany joined the League of Nations with a permanent seat on the Council
in recognition of her status as a great power.

As part of this policy of co-operation, the first of the three Rhineland zones which had been
placed under Allied military occupation by the Treaty of Versailles were evacuated in 1926. In
1927 the Inter-Allied Control Commission to supervise German disarmament was withdrawn.
The Young Plan agreed in 1929 greatly reduced German reparations to a figure of £2 billion and
Repayments were to be made over a period of 59 years. Stresemann also won complete allied
evacuation of the Rhineland by June 1930 (five years ahead of schedule).

It is hardly surprising that when he died of a stroke in October 1929 at the early age of fifty-one
Stresemann’s reputation stood very high. He had also become a focus for hopes of European
peace. Hitler is reported to have remarked that in Stresemann’s position “he could not have
achieved more”.

Stabilization
In November 1923, a currency reform was undertaken and 12 zeros were cut from prices. A new
bank, the Rentenbank, was created to issue a new currency--the Rentenmark. This money was
exchangeable for bonds supposedly backed up by land and industrial plant A total of 2.4 billion
Rentenmarks was created, and each Rentenmark was valued at one trillion old paper marks.
From that moment on the depreciation stopped--the Rentenmarks held their value; even the old
paper marks held stable. Inflation ceased.

The monetary law of August 30, 1924 permitted exchange of each old paper 1,000,000,000,000
mark note for one new Reichsmark, equivalent in value to one Rentenmark.

The gold bonds were defined at the rate of 2,790 gold Marks per kilogram of gold, which was the
same definition as the pre-war goldmarks. The rentenmarks were not redeemable in gold, but
were only indexed to the gold bonds. This rentenmark plan was adopted in monetary reform
decrees on October 13-15, 1923 that set up a new bank, the Rentenbank controlled by Hans
Luther who had become the new Finance Minister.

By November 30, 1923, there were 500 million Rentenmarks in circulation, which increased to
1000 million by January 1, 1924, and again to 1,800 million Rentenmarks by July 1924.
Meanwhile, the old paper marks continued in circulation. The total paper marks increased to
1,211 quintillion in July 1924 and continued to fall in value to one third of their conversion value
in Rentenmarks. Confidence was developed through:-
First, the government announced that the new currency would be "wertbestaendig"--stable in
value. In their hunger for usable money people accepted this, at least until it should be proven
false. Then the property backing seemed to give the currency value. True, the Assignats of the
French Revolution, backed by fixed property, had depreciated, but still the backing helped.

Second, and certainly most important, the government limited strictly the amount of
Rentenmarks which could be issued and it halted the issue and discounting of notes and the
creation of paper marks. Finally, after April 1924, the Reichsbank stopped the expansion of
credit to businesses which had been stimulating inflation. Businessmen were required to repay
loans in gold marks, equal to the original value of the loan. Thereafter, incentive was gone to
borrow except for legitimate needs.

After the stabilization, most companies found that they were critically short of working capital.
Their funds had been dissipated or converted into goods and plant, and cash was very short. They
could no longer rely on a stream of incoming capital at the cost of bond holders and workers.
Taxes were again a serious burden, as were wage agreements that had been made under the
inflation.

In other ways the business climate changed. Now there was a huge demand for consumer goods,
but the capital goods industries which had so over expanded in the inflation were depressed.
Huge stocks of coal, steel and other materials which had been accumulated was a drug on the
market. Agriculture and building, however, flourished.

Many of the speculative and conglomerate companies which had been formed in the inflation
were unable to survive. They failed, or split up into their original components. In 1923 there had
been only 263 bankruptcies; in 1924 there were 6,033. Most of the great inflation speculators
were ruined or faded from the business scene. However, strong, well-organized companies like
Krupp and Thyssen which had resisted overexpansion and speculation were able to weather the
stabilization period and to thrive.
 The Collapse of Weimar, 1930-1933
The Great Depression and Germany

Stresemann’s death could not have come at a worse time for the young republic. The onset of the
Great Depression was to have dramatic effects on Germany

The German economy’s recovery after the inflation of 1923 had been financed by loans from the
United States. Many of these short term loans had been used to finance capital projects such as
road building. State governments financed their activities with the help of these loans.

German interest rates were high, and capital flowed in. Large firms borrowed money and
depended heavily on American loans. German banks took out American loans to invest in
German businesses. The German economic recovery was based on shaky foundations.

The Wall Street Crash 1929

Streseman died in 1929 and a worldwide economic depression began with the Wall Street
Crash in 1929, throwing the Weimar Republic into crisis. The value of shares dropped
dramatically forcing businesses all over the world to go bust. Six million Germans were made
unemployed by 1932. Extreme groups became popular again. Reichstag elections held in
September 1930 made the Nazis the second-largest party, their support growing as the
Depression deepened. In the elections of July 1932, the Nazis became the largest party in the
Reichstag. Hindenburg was persuaded to bring Hitler into the government, with conservative
politicians believing they could control Hitler in a coalition government. Hindenburg appointed
Hitler chancellor on January 30, 1933. Hitler soon abolished the office of president and
declared himself Führer (leader) of the Third Reich, bringing to an end the Weimar Republic.

Effects on Germany

As a result American demand for imports collapsed. American banks saw their losses mount and
they started calling in their short term loans with which so much of German economy had been
financing itself for the past five years.
Firms began to cut back drastically. Industrial production fell quickly and by 1932 it was 40% of
its 1929 level. To make matters worse in 1931 a number of Austrian and German banks went out
of business. . Unemployment rose from 1.6 million in October 1929 to 6.12 million in February
1932. 33% percent of the workforce were now unemployed.

By 1932 roughly one worker in three was registered as unemployed with rates even higher in
industrial areas of Germany. Matters were made worse by the fact that the drastic fall in people’s
income caused a collapse in tax revenues. Many soon were not in receipt of unemployment
benefits as state governments could not afford to pay it.

Crime and suicide rates rose sharply and many lost hope. People deserted the democratic parties
in droves and turned to either the Communists or the Nazis. In the election of 1930, the Nazis
made their electoral breakthrough winning 107 deputies while the Communists won 77. Both
parties were opposed to the democratic system and used violence against their political
opponents. Hitler’s Brownshirts clashed frequently on the streets with their Communist enemies.

Bruning (1930-2)

The new chancellor, the Centre politician Heinrich Bruning, followed a policy of economic
austerity where government spending was cut in order to keep inflation under control and keep
German exports competitive. He increased taxes, reduced salaries and reduced unemployment
assistance.

While it was sound economic thinking at the time, it only worsened the situation. The banking
collapse in 1931 made matters even worse. Bruning was so unpopular that when he travelled by
train he had to keep the blinds down as when people caught sight of him, they threw rocks! He
was nicknamed the “hunger chancellor”.

The end of Parliamentary democracy

Given the unpopularity of Bruning’s policies, he found it very difficult to get a majority in the
Reichstag. He relied on Article 48 and the emergency powers of the president to get laws passed.
By 1932, parliament was being largely ignored.
Some of the advisors to the President including General Kurt von Schleicher wanted to include
the Nazis in government which Bruning opposed. They wanted to bypass the Reichstag
completely and bring in a right wing authoritarian government.

Hindenburg lost confidence in Bruning and they quarrelled about land reform. Bruning was
replaced as chancellor by the equally unpopular von Papen. His cabinet of barons had
absolutely no support and this was shown in the election of July 1932.

The result was a disaster for democracy in Weimar Germany. The Nazis received 37% of the
vote and 230 seats while their communist enemies got 89 seats. A majority of Germans had
voted for non-democratic parties. Political violence intensified with twelve people killed on the
day of the polls.

The election of November 1932 saw a decline in Nazi but they still remained the largest party in
the Reichstag. Communist support continued to rise and this worried many industrialists. Von
Papen was replaced as chancellor by von Schleicher.
Von Papen immediately began to plot against von Schleicher and met Hitler. They agreed that
Hitler would become the chancellor of a government made up mainly of von Papen’s supporters.
Hindenburg who disliked Hitler, was persuaded to appoint him chancellor on the 30th of

January. The Weimar Republic was dead!

Annexure

1. Important dates in the history of Weimar Republic in 1923 are:-

a. January 11 - French and Belgian troops occupy the Ruhr after Germany defaults
on coal payments.
b. August 6 - Foreign Minister Gustav Stresemann becomes German Chancellor
upon the resignation of Wilhelm Cuno.
c. August 10-13 - Strikes and riots break out in response to the government's failure
to deal with the economic crisis.
d. September 15 - Germany's bank rate is raised to 90% due to hyperinflation.
e. September 26 - Gustav Stresemann calls for an end to passive resistance and
protests by Germans against the French and Belgian occupation of the Ruhr.
f. September 26 - The German government declares a state of emergency under
Article 48 of the German Weimar Constitution due to the economic and political
violence.
g. October 21 - A separatist government is formed in the Rhineland Palatinate and is
quickly recognized by the French government.
h. November 8-9 - Members of the National Socialist German Workers Party (Nazi),
led by Adolf Hitler, fail in a coup attempt to overthrow the Bavarian government
in Munich, Germany which is later known as the "Munich Putsch".
i. November 15 - The value of the German Papiermark falls to 4.2 × 1012 mark to
the United States dollar causing the German government to issue the Rentenmark
as a replacement for the Papiermark.
j. November 23 - Gustav Stresemann resigns as German Chancellor after a vote of
no confidence from members of the government.
k. December 1 - Center Party member Wilhelm Marx forms a new coalition
government becoming the new German Chancellor.
l. December 8 - Germany signs an economic treaty with the United States.
2. The Main Political Parties are:-
a. The parties of the Republic

 The SPD (Social Democrats) were a moderate socialist party and the largest
of the parties committed to the Republic. It was strongly anti-communist.
 The Centre Party (Zentrum) was set up to defend Catholic interests in 1870.
It drew support from all classes. It was present in every Weimar coalition
government until 1933. The BVP was its Bavarian ally.
 The DDP (German Democratic Party) was a middle class Liberal party. It
lost support rapidly after 1920. In 1919 it received 19% of the vote. By 1932
this was down to 1%.
 The DVP (German People’s Party) had reservations about the new Republic
and at heart they were Monarchists. They were supported by the middle-
classes. The outstanding political figure of the Weimar Republic, Gustav
Stresemann, was the leader of this party. Its highest point of support was in
1920 when it received 14% of the vote. By 1932 this was down to 2%.

b. The opposition of the left

 The USPD (Independent Socialist Party) had broken from the SPD in 1917
because they did not support Germany’s continued participation in WWI. It
declined rapidly after 1920 with the rise of the Communist party.
 The KPD (Communist Party) was formed from the Spartacus Union that
had led a revolt against the Weimar government in January 1919. It was very
closely allied to Moscow and it refused to co-operate, in any way, with the
parties that supported Weimar. They were especially hostile to the SPD. This
refusal to support Democratic parties went as far as allying with the Nazis
(their sworn enemies) in Reichstag votes. This was in order to further
destabilize the Republic

c. The opposition of the right

  The DNVP (German National People’s Party) was set up in 1918. It was
composed of supporters of the old Monarchy. It had strong rural support
especially in Protestant areas. They were Hitler’s coalition partners when he
came to power in 1933.
 The NSDAP (National Socialist German Worker’s Party) was founded in
Munich in 1919. At first it favoured the violent overthrow of the Weimar
Republic. But after the failed Putsch of 1923 it adopted a legal approach to
achieving power. The onset of the Great Depression and the economic chaos
of the 1930s greatly aided its rise. It came to national prominence in 1930
when it won 18% of the vote and by 1932 it was the largest party in the
Reichstag.

Political Parties in the May Dec. May 1928 1930 1932 Mar.
Reichstag 1928 Sep. July Nov. 1933
192 192
4 4
Communist Party (KPD) 62 45 54 77 89 100 81
Social Democratic Party (SDP) 100 131 153 143 133 121 120
Catholic Centre Party 81 88 78 87 97 90 93
Nationalist Party (DNVP) 95 103 73 41 37 52 52
Nazi Party (NSDAP) 32 14 12 107 230 196 288
Other Parties (esp. DDP and 102 112 121 122 22 35 23
DVP)

3. Main Weaknesses of political system

a. Electoral system too democratic. It was too easy for splinter parties to get elected and
very difficult to form stable governments. Parties could contest elections that did not
accept the democratic system. After 1930 many of the deputies in the Reichstag were
ether communist or Nazi and this made parliamentary government became almost
impossible.
b. There were twenty separate coalition governments in the period and this gave the
impression of instability. Many believed that democracy was too weak to defend
Germany against the communist threat.
c. It was a republic born out of defeat. Many Germans refused to accept its legitimacy
especially monarchists. They blamed it for accepting the hated treaty of Versailles.
d. Many within important groups in society such as the army, big business, the civil
service and the judiciary wished to see a more authoritarian form of government.
They admired pre-war Germany and there was little respect for democratic
institutions.
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