Islington College

Economic and Society

Essay

Comparison-of-German-and-French-Economy between 1918-1930

Submitted by

Student Name: Anuja Dallakoti

Group: B3

Date: 9th February 2018

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Contents
Introduction ............................................................................................................................................ 3
Germany ................................................................................................................................................. 4
France ..................................................................................................................................................... 6
Conclusion............................................................................................................................................... 8
Bibliography ........................................................................................................................................... 9

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Introduction
This essay is determined to talk about the economy status of Germany and France between the
years 1918-1930. The First World War ended with the Versailles Treaty that led Germany to pay
a huge sum of reparation money to France, a fine that was imposed by the allies to them as a fine
for causing the war. In spite of significantly small army, France won the war. France too relied
on the foreign loans as the Germans did to fulfill the monetary needs during the war. France has
its own story so does the Germany. Both the countries faced the financial problem. The
economic factors of the time play a significant role in determining how a society will behave.
Definitely the war doesn’t bring any positivity anywhere. It very much affects the socio-
economic condition as there’s nothing but the devastation is found followed by the poverty and
other calamities. This essay here discusses the effect of war in a brief and talks about the
economic condition of losing nation Germany and the winner France.

The result of WWI was that “World War One was one of the deadliest conflicts in the history of
the human race, in which over 16 million people died. The total number of both civilian and
military casualties is estimated at around 37 million people. The war killed almost 7 million
civilians and 10 million military personnel”.(History On the Net, 2000)Germany has 7.1million
plus casualties, and France has6.1million plus casualties.(Encyclopaedia Britannica, 2018).

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Germany
With the Versailles Treaty, the World War I ended in 1919 though the Germans believed the
treaty was unfair and tried to have change in it as they were to lose the territories not only in the
Europe but outside the Europe too. They were threatened by the allies of continuation of
hostilities and the starvation blockade unless the Germans signed. Germans had to agree on it as
they didn’t have strong military to face any sort of military invasion. (Versailles Treaty, 2003)

After the Versailles treaty Germany lost many of its territories; 13 percent of its European
territory (more than 27,000 square miles) and one-tenth of its population (between 6.5 and 7
million people. Outside Europe it lost all the colonies. (The Holocaust, 2018)

Historians and many scholars have criticized Germany’s War Finance during the WWI (1914-
1918). Germans assumed the quick victory over the France but it was stretched to 4 long years
trench war which cost millions of lives. They didn’t have any provision to cover the cost of war.
Instead of raising taxes, they borrowed funds. They thought to redeem the cost imposing on the
war losers as reparation by payments.

Here I feel the knowledge about Germany’s history a little would assist to understand its
economy better. Looking back to the history we can find that in 1870 modern German nation
was created which showed the establishment of major industries that led to Germany’s
industrialization. The development of rail system with the high demand of coal and steel led
Germany to become Europe’s leading coal producer. This led to the development of steel
industry along with the existing coal industry to expand. With the effect of this, banking and
capital markets came into existence which led to the establishment of chemical and electrical
industries and made Germany the most advanced in Chemical Industry in the world in the later
part of 19th century. (Economic History, 2018).

Eventhe starting of the war too was not fairly analyzed. So, now, a look at the beginning of the
First World War would show extra light to understand its impact on German’s overall health.
Germany assumed the war between Austro-Hungarian Empire and Serbia would end soon and
supported Austro-Hungary while Russia supported Serbia. France had treaty to support Russia in
such situations. It put Germany at war with France. Right here the German speculation went
wrong as they thought of the quick victory over France through the invasion across Belgium.

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They thought defeating France would lead them to win over Russians too. Russians collapsed in
the east but they couldn’t defeat Russians in the west. It led Germans to the disappointment.
German general Ludendorf then suggested that Germany should seek peace which never was
done. The unrest in the navy was a clear sign that Germany was to go through the revolution; so
finally, by 1918 there was the dissatisfaction with the conduct of the war which led to the
National Assembly in 1919.

Germany saw a devastating defeat in WWI and had to pay really a big reparation amount to
Great Britain and France and had to lose its almost 13 percent of lands. To overcome the loss
from the war and to create the employment Germany then started the social spending and started
transportation projects, modernized the power plants and gas works. Approximately 20.5 per
resident was being spent in 1913, but in 1929 it reached over the hundred marks per resident.
The increasing social spending and the reducing revenues caused ongoing shortfalls. Eventually,
the municipal finance collapsed in 1930. Though Germany had a huge debt and it seemed the
reason of economy collapse, the real reason was the ordinary budgets. It was obvious that the
revenue from income tax began to fall which supported over fifty three percent of all tax
revenues in 1913; it dropped down to 28 percent in 1925. As soon as the returns and income
taxes decreased, the government then was dependent on state trade and property tax, profits
made from the municipal utilities such as electric power plants.

Protective tariffs on Germany’s goods in foreign countries prevented Germany to sell its goods
which could have helped them to pay the reparation amount easily. In frustration, as they
couldn’t afford the reparation payment, they began printing excessive amounts of money which
led Germany to the super inflation. This made foreign lenders withdrew capital. Foreign markets
were further closed against German imports. Another big reason of Germany’s economy collapse
was the US great depression. The US then asked the loan which they had lend to Germany
during the war demanded to pay back. This was big shock to the Germans which later threw
Germany in hyperinflation. Likewise, the war brings with it the destruction, death and numerous
bad things which many future generations have to pay the price for.

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France
Now let’s have a look at France, a brief history and its economy over this time. In 1792, the
First Republic of France was established after the abolishment of the monarchy followed by the
execution of Louis XVI in 1793. But, Napoleon Bonaparte then came to the power and declared
himself as the ruler of France and cancelled the republic in 1848. Through another revolution,
French people established the Second Republic and Napoleon became the president who restored
the limited monarchy. In 1871, the Third Republic was founded until WWI. The Fifth Republic
was established in 1958. In 1981, Francois Mitterrand was elected its first socialist president.
(Mojahedin Organization, 2018)

France was not that much well prepared for the war as they had very few war materials because
the production of ammunition and other materials were very low. Due to the lack of the
sufficient war materials, proper payment, leave and the chance to see their families played a huge
role for the mutiny in the French Army when they were asked to participate in war. The
mutineers asked for the peace. Even the industrial workers went for the strikes.

“The mainly economic agitation and strikes of 1917, leavened with anti-war demonstrations in
Paris, were followed in 1918 by tremendous upsurges in political agitation and strikes in the
Rhône and Loire industrial regions” (International Socialism, 2017).It shows that the French
people were worried of the war and the severe consequences that would leave.

War definitely brings no good so it did to France as well. About 1,300,000 were dead, 3.5
million men wounded, the north was devastated and the country was in huge debt. Though
Germany was to pay the reparation, it was materialized partially. In 1919, the Spanish Influenza
took 166,000 lives. As the soldiers were not given the sufficient leave during the war caused the
low birth rate. The coal-rich Saargebiet region separated from Germany went to the
administration of France economically, until a plebiscite was to be held in 1935

French government lost 157 billion gold Francs, 60 million of which were paid by the war bonds,
52 by other loans, only 45 billion through ordinary government revenues such as taxation. As
attempt to introduce an income tax was rejected by parliament.

In 1919, they decided against the revolution and introduced the multi-party democracy. France
experienced some inflation, the doubling of prices between 1922 and 1926, but not that huge

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compared to the hyperinflation that central and Eastern Europe faced. Industrial pre-war
production figures were reached in 1924; the agriculture, except in the north, resumed the
peacetime productivity. With the frequent changes in the French administration, French economy
saw many ups and downs. In 1924, out of fear of socialist policy of nationalization of certain
sectors capital was transferred to Swiss bank accounts or elsewhere. This government was
succeeded by Raymond Poincare as prime minister between 1922 and 1924who restored
confidence in French economic policy. (Sparknotes, 2018).

French were demanding 62 billion Francs but German paid only 13 million by 1931. In 1923,
French and Belgian troops occupied Rhineland in order to press their demands but the world
sympathized the German side and the international negotiations repeatedly reduced the sum that
was to be paid by the Germans. Among the new industries were the car producers such as
Renault (founded 1899), Peugeot (1896), and Citroen (1919) are still in existence and doing good
business. (World History, 2007)

Though the French inflation was mild compared to the German, it has its impact over French
economy. “By the mid-1920s the franc had slipped from its prewar value of twenty cents against
the dollar to a dangerous low of about two cents. Premier Raymond Poincare (1860-1934)
initiated new taxes and stern economic measures which stemmed the decline of the franc. In
1928 it was officially revalued at 3.92 cents.”(Big Site of History, 2008).

Still, among the European economies, France saw the strongest growth in 1920s. Almost zero
unemployment, and in 1928, the Gold Standard was reestablished at 20% of the prewar level
causing the dissatisfaction among bond holders. This led to the devaluation of the French
currency and benefitted French exports. In 1928 and 1929 French state revenue exceeded state
expenses. This set French economy less affected by the Great Depression than any other
industrialized nations in Europe.

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Conclusion
Though it’s not yet clearly established that who started the First World War but Germany’s
comes in between. German, as far as possible were never to seize the war if there were no
mutinies in its armed forces. The revolution in its army forced Germany to back off. And in 1919
there happened the treaty called Versailles Treaty where Germany was dominated hugely. “The
Versailles Treaty was one of the most outrageous and predatory treaties in history.” (Marxism,
2009).

Germany was hugely dependent on foreign loan during the war rather than the internal sources
like tax etc. Such is the case with France also. The only difference is that Germany lost its
territory as well was had to pay a huge sum of money to France which it never did. France too
had lent the money from the USA as Germany did but, at least France received the money from
the Germans which made Germany more vulnerable economically. In 1923, Germany missed
the reparation payment as Germany had really nothing so that it could pay France so it asked for
the moratorium also which France denied.

The hyperinflation in Germany is associated to the American Stock Market crash on October 29,
1929, widely known as great depression. With the beginning of the Great Depression, Germany
which led Germans were asked to return the loan which led German economy to further collapse
and go into the hyperinflation. Whereas, this affected the whole world, France was less affected
than Germany.

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Bibliography
Big Site of History, 2008. [Online] Available at: https://bigsiteofhistory.com/the-impact-of-
world-war-one-in-france-1918-1928-the-democracies/ [Accessed 15 June 2008].

Economic History, 2018. [Online] Available at:

http://www.sjsu.edu/faculty/watkins/germany.htm [Accessed 03 February 2018].

Encyclopaedia Britannica, 2018. [Online] Available at:

https://www.britannica.com/event/World-War-I/Killed-wounded-and-missing [Accessed 02
February 2018].

History On the Net, 2000. [Online] Available at: https://www.historyonthenet.com/how-many-

people-died-in-ww1/ [Accessed 8 November 2000].

International Socialism, 2017. [Online] Available at: http://isj.org.uk/the-mutiny-in-the-french-

army-in-1917/ [Accessed 13 October 2017].

Marxism, 2009. [Online] Available at: https://www.marxist.com/treaty-of-versailles-to-end-all-

peace.htm [Accessed 13 April 2009].

Mojahedin Organization, 2018. [Online] Available at:

https://english.mojahedin.org/eventsen/158/establishment-of-first-republic-in-france [Accessed
03 February 2018].

Sparknotes, 2018. [Online] Available at:

http://www.sparknotes.com/history/european/interwaryears/section8/ [Accessed 04 February
2018].

The Holocaust, 2018. [Online] Available at:

https://www.ushmm.org/outreach/en/media_nm.php?MediaId=1620 [Accessed 22 January
2018].

Versailles Treaty, 2003. [Online] Available at:

http://www.history.ucsb.edu/faculty/marcuse/classes/33d/projects/1920s/CarlosTreaty.htm
[Accessed 11 December 2003].

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World History, 2007. [Online] Available at:
http://www.zum.de/whkmla/region/france/france19181929ec.html [Accessed 30 March 2007].

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