Economic Instability

- August, 1914: Phase 1 of economic mobilization

- War Laws of August 1914 prevented transport & export of goods needed in war
- Increased food import
- Maximum price limits established on resources
- July - September 1914: Economic turbulence and effect on human resources
- number of people out of work to jump dramatically from 2.7 percent in July 1914 to 22.7 percent in September of the same year
- 13 August 1914: War Raw Materials Department established by Walther Rathenau
- established to help the German military gain access to raw materials.
- reopened economically insatiable factories
- Used readily available resources to replace scarcely available ones
- Haber-Bosch process of ammonia production, when the Allied Powers' blockaded the importation of Chilean saltpeter.
- favored larger companies over small ones and easily evaded state control
- September-October 1914: Phase 2 of economic mobilization
- rapid transformation from a peacetime to a wartime economy
- Financial incentives to private companies
- More goods were produced for the military as army procurement was a lucrative business and other business was not coming in
- End of 1914: index of non-military industrial production fell during the war
- Went from 100 to 83 in this year alone
- expenditure increased to 9 milliard mark
- Changes in supply and demand had destroyed markets
- Increased prices —> little supplies
- an adverse effect on markets, destroyed domestic and international economic relations, shifted weights and profits within industry,
overburdened the transport system and caused a shortage of labor
- Beginning of 1915: Britain institutes economic blockade on Germany
- Outward-bound trade from Germany was brought to a complete standstill
- Germany attacked Britain’s economy instead
- surface commerce raiders eliminated from the conflict, they were forced to rely entirely on the submarine
- Had to make an increasing number of submarines which took away from the resources and finance needed for German
citizens
- March 1915: In the whole of March 1915, 6,000 sailings were recorded, only 21 ships were sunk, and in April only 23 ships from a similar
number.
- Harassed Britain’s antisubmarine measures, which included nets, specially armed merchant ships, hydrophones for locating the noise of a
submarine’s engines, and depth bombs for destroying it underwater.
- Spring 1915: Harvests worsened
- rationing and queuing becoming commonplace towards the end of the year.
- Not enough food reaching military nor the citizens
- July 1915: Secretary of treasury Karl Helfferich invited finance ministers of states
- Government financed through taxes, short-term credits and long-term loans
- No plan to pay debt back
- States would receive the important direct taxes on income and property, would have to support the central government whose tax base, mainly
indirect taxes, was weak
- End of 1915: Expenditure rose to 26 milliard mark
- End of 1915: real national production decreased 81-85%
- War-related production amounted to 35-37% national production
- August 31 1916: Hindenburg programme was launched
 - Plan for German economic mobilization
- aimed to double the supply of munitions and triple the output of machine guns and artillery by May 1917
- Not enough resources to produce raw materials
- No trade and no geographical advantage to build resources
- 60% of farmers had 5 or less acres of land
- Were being called into war so they weren’t even being tended to
- December 1916: Von Hindenburg argued for Auxiliary Service Law
- compulsory service is extended to the entire male population between the ages of 16 and 60 and is applied to the entire war economy
- Civilian service over military
- Increasing conscription —> not enough artillery or armaments
- conscripted workers soon had to be released back into the armaments industry where they were urgently needed
- 1.2 million workers were exempted from army
- Focused on army and military production and aid and didn’t consider civilians and their lives and necessities such as food and
clothing
- armaments industry attracted workers from other branches of industry, partly through higher wages and partly through state
regulations
- End of 1916: Germany was spending 50% of nation’s economy on wartime effort
- October 1917: Establishment of New Reich Economic Office
- bureaucracy that took over economic control tasks
- Civilian economic administration for after the wat
- Caused businesses to enter the war and help Germany with production
- Felt more secure and helped in increasing Germany’s chances of winning the war
- Did not happen because even with economic backing, the raw materials and production was happening too late to win the
war
- Military tactics were planning without taking into account the resources they had left in terms of the economy and this
caused an oversurge in people leaving other industries to support the armaments, which led to civilians being ignored
- Naval blockade worsened this. Nothing was being traded with Germany. No resources, at all.
- Winter 1917: domestic production reached only 60 percent of the pre-war level
- Auxiliary Service Law was ignored. Men were sent to the frontlines.
- In their place, women and forced laborers were made to work
- Were not willing to work, morale was low and civilians found working pointless and felt that they would lose the war
- Men were taken from comfortable positions and put in war. No morale and loss of hope because no artillery either
- decline in production led to poor nutrition which reduced the ability to work. This led to a further downward movement in
production
- End of 1917: proportion of public spending to the national product increased
- Rose to over 70%
- Beginning of 1918: 7.7 million men were called to join the war in 1918
- Were then sent back to armament industries
- This caused a lack of men at the frontlines and low morale within Germany because the war was draining resources and their wasn’t
enough food reaching the civilians nor the army, causing the civilians to give up
- Beginning of 1918: Industrial production had fallen significantly
- 57% of what the 1913 value was
- August 1918: Germany and Russia signed a treaty
- Russia gave Germany 25% of Azeri oil for production
- End of 1918: Index of non-military industrial production fell during the war
- Went from 100 in 1913 to 57 in 1918
- End of 1918: 40% reduction in industrial production and the war destroyed a third of the nation’s wealth
 - End of 1918: Germany obtained a 60-milliard debt
Every progressing year in the Great War had led to the rapid depletion of vital resources for Germany. Their geographical position had led to the lack of access
to resources that are agricultural based, such as wheat and cotton. Additionally their reliance on other nations for access to water sources to conduct trade
proved to be disadvantageous to Germany as the blockade imposed by Britain had led to virtually no trade to and from Germany for 4 years during the war,
which is when foreign resources were especially necessary. Because of the factors mentioned above, the German economy had resulted in a rapid depletion
which led to nearly all of its wealth being depleted by the end of the war in 1918. Additionally, the treaty drawn up at the end of the war had led to Germany
owing debt to not just foreign powers it had acquired loans from but also the Allies, which worsened the already horrifying conditions of the Germans. This led to
hyperinflation and strict economic policies that were restrictive and worsened Germany in the preceding years of the war specifically during the Great
Depression. Overall, the economic state of Germany was a major factor that led to her defeat in WW1.
Political Instability:
- 4th August 1914
- Kaiser Wilhelm II declares “Ich kenne keine Parteien mehr, ich kenne nur noch Deutsche!” in an attempt to unify the nation
- Reichstag (second chamber of German government) could not initiate a war against Russia then France
- The Social Democratic Party of Germany (SPD) had an internal debate on voting for the war credits bill, however, reformists right
wing argued that tsarist autocratic Russia had already initiated a war via mobilization of troops so the war bill was passed
- SPD were under threat of being banned under state of emergency regulations so a truce for all domestic political competetion
between parties was called for
- September 1914
- The failure of the shleiffen plan at the battle of Marne challenged the initial decision
- With war efforts grew nationalist feelings causing an increase in demands specifically from the left wing liberals in the SPD such as
French, Russian and Belgian territory annexations which were not resulted in at the end of Battle of Marne (causing the terms for
which the liberals had supported the war to be unfullfilled) which was not acceptable to majority of the SPD (National liberals, center
party, conservatives, etc).
- Government propaganda increases as as nationalistic sentiment and demand increases
- December 1914
- Karl Liebknecht became the first member of SPD, Reichstag to vote against the second war credits bill
- Beginning of anti-war sentiments in SPD
- Up until now SPD was in support of the war (with internal conflict)
- August 1915
- The American ship “The Arabic” was sunk by German submarines
- Prior to this event, Bethmann and Tirpitz debated in the reichstag whether to acknowledge the American ultimatum after the sinking
of the Lusitania in May or to continue submarine warfare. Only the SPD supported Bethmann, Tirpitz won.
- Eventually rather than the political Reichstag deciding the continuation of the war, military leaderahip terminaated submarine warfare
as General Erich Von Falkenhyen proved to the Kaiser, the significance of Americas involvement in the war.
- December 1915
- Over 20 non-conformists to the war credits bill in the SPD party
- Governement propaganda increases to maintain war sentiments justified by Germany’s defence against entente aggression
- January to March 1916:
- Erich Von Falkenhyen demanded the reinitiation of submarine warfare
- Reichstag and Chancellor Bethmann revoke the idea and gains support from SPD
- Indicates the power of Political vs Military influence
- Though not supported by Tirpitz, conservatives, National liberals and left wing liberals of the SPD, Kaiser Wilhelm refused the
reinitiation of submarine warfare causing Tirpits to resign and his resignation to be immediately accepted creation a nationalist public
shock
- Parties in support of unrestricted submarine warfare increased propaganda against the chancellor via pamphlets calling him
weak and a defeatist
- March 1916
- Anti war members of the SPD were excluded and formed the socialist working group and the SPD was split to USPD after further
internal debates and conflicts regarding the war credits bill.
- Anti war spartacus league was formed and joined the USPD in 1919
- 1917- January 1918
 - Spartacus league was banned under the state of emergency
- Their objective was to agitating the masses such as the working class to great a revolutionary peace via the masses of both
Allied and Central powers which proved to be successful in the Bolshevik revolution in Russia and its strikes on Germany
- July 1917
- A new bill is introduced to finance the war for which a debate session is set
- Left liberal and center party were in cooperation of ending submarine warfare and calling a truce for annexations (to aid in ending the
naval blockade)
- However Pacifict left and USPD opposed the peace resolution jusftified by its doubtful chances of success (also their objective
revolves around annexations)
- August-November 1918
- In mid-August 1918, German troops began retreating on the Western Front and in the second half of September 1918, Germany’s
Turkish, Bulgarian, and Austrian allies acknowledged defeat and asked the Allied powers for a ceasefire. On 29 September 1918,
Hindenburg and Ludendorff finally disclosed to the Kaiser that the military situation was desperate and that the war could not be won.
- Though the terms of the armistice were approved by Reichstag, its admiralty initiated a naval battle (without reichstag’s knowledge)
and no monarchal resistance to the issue causing mutiny and revolutionists reaching Berlin on November 9th (and eventually the
abdication of Kaiser Wilhelm)
Though the internal political conflicts are consistent through the duration of WW1, it signifies the influence of political German parties in deciding the
war (Specifically reichstag). Since Reichstag depends on majority and represents the public internal conflicts between left and right wings is bound
to shift as public opinion changes. An example is the initiation of anti-war sentiments within the SDP whereas prior to that, the SDP was in full
support of the war and demanded annexations as well as increased nationalist public sentiments. Moreover, the instability of the Reichstag caused
it to be relatively indecisive compared to military leadership as seen with the descision to terminate unrestricted submarine warfare (convinced by a
military leader rather than a political party). This displays the weakness of German politics and its irregularity causing the eventual initiation of the
German Revolution and abdication of its own kaiser.