The Weimar government sought to operate in the postwar circumstances under the influences of the Versailles treaty while facing pressure from different factors during this time. The main political parties did not act in concert to defend the republic. The chancellor and the cabinet ministers required possessing th confidence of the Reichstag in accordance with common democratic procedure, and were obliged to resign when this was forfeited, which made creating coalition government inevitable. This had the effect of jeopardizing a democratic government from functioning normally by allowing for anti-republican representation and an opportunity for exposure and growth. The entire foreign policy of the Weimar Republic throughout the 1920s, resulted from the peace concluded at Versailles that was imposed on Germany. Since the western allies rebuffed Germany’s interests though imposing the Treaty of Versailles, German authorities established an independent foreign policy by establishing diplomatic relations with the Soviet Union on 12 April 1922 in the Treaty of Rapallo, while Russia sought to drive a wedge between the western powers when it was apparent that world proletarian revolution was to be delayed indefinitely, with this prevailing pessimism having already had been admitted through the introduction of the New Economic Programme as a temporary accommodation with world capitalism. The Russians took advantage of the German reaction against what was considered French sabotage of the Genoa conference on reparations, and it provided for the normalization of diplomatic relations between the two countries. Russia abandoned any claims to reparations, in exchange for Germany waiving all claims for expropriated German property.
There were grave economic problems that had been aggravated by the Versailles Treaty that continued worsening. The problem of reparations that the allies sought to impose to placate popular public demands from their national populations contributed to the uncontrollable inflation of the early 1920s. The Allied Reparations Commission imposed a total of 132 billion gold Reichsmarks, with another 6 billion for Belgium, in April 1921, superseding the initial demand for 40 million tons of coal to be delivered annually, which further depressed the value of German currency. J. M. Keynes estimated these demands exceeded Germany’s ability to pay by three times, and would inevitably result in facing paying reparations for seventy years. He therefore denounced this settlement as a “Carthaginian peace” that would lead to Germany’s economic destruction. The German government made a single payment in 1921 when 50 billion gold RM were due to be paid, and had not made any responsible attempt to stabilise the currency before 1923, and direct taxation was actually reduced in 1921 as a form of passive resistance against raising funds for paying reparations, which in turn led to failing to balance revenue that could have been raised from drawing taxes from high income earners and government expenditure. The Reparations Committee declared Germany to be in default of making reparations payments on 9 January, which culminated in the occupation of the Ruhr as Germany’s main centre of industrial activity by French and Belgian troops from on 11 January 1923, which finally triggered the final strangulation of Germany’s economy. Due to a delay in the payment of German reparations in kind in the form of wood, coal, and 140,000 telephone poles, French and Belgian troops occupied the Ruhr district and areas on the right bank of the Rhine with support from the Italian government on the pretext of “supervising” production in the Ruhr, which held eighty-five percent of Germany’s coal resources, eighty percent of its steel and iron production, and ten percent of the national population, by occupying coal mines, railways and steel factories that were critical for the postwar reconstruction of the German economy.
The German government reacted to the unexpected intervention in the Ruhr by declaring passive resistance against the forcible seizure commodities on 16 January in the form of a state-sponsored general strike in the occupied areas, which temporarily nullified the economic value of this industrial heartland and had disastrous consequences for the viability of how the national economy could continue functioning as the value of currency became unsustainable. The staggering costs of maintaining this passive resistance against military force aggravated inflation since the government subsidised the Ruhr strikers to not go to work at the cost of approximately forty-one million Reichsmarks per day by July and August. The systematic conversion of the Ruhr, from which eighty-five percent of Germany’s coal reserves were drawn, into an economic unit under foreign control deprived Germany as a whole of vital resources. Production was disrupted, which then led to increasing unemployment in the rest of Germany, where the numbers of unemployed required governmental financial assistance, and it inevitably became impossible for the central government to sustain these extraordinary obligations with its existing resources. After not having any remaining monetary reserves left, the government had resorted to printing money in 1916, which was further aggravated by paying reparations to the allies. The Weimar governments did not make take action to arrest triggering inflation as a weapon of economic defence, while having paid 1.5 billion gold RM by 1923 under the direction of the central bank president, Rudolf Havenstein, who maintained the practice of incessantly printing increasingly valueless currency as a form of national resistance to the foreign occupation. Hyperinflation eventually reduced the value of the mark from 18,000 Reichsmarks to the dollar in early 1923 to 4,600,000 by August, and then to 4 billion in November.
The worst runaway hyperinflation in history destroyed the currency that had already lost value since 1914 as the result of huge wartime deficit spending. The resulting hyperinflation eliminated personal savings and earning power of anyone receiving fixed incomes or wage earners who did not possess tangible currency, which had catastrophic social effects as a result of economic hardship that affected them the most, while casting blame on failed governmental functions. A new governmental coalition that succeeded the Cuno administration, which resigned on 12 August 1923, was formed on the following day under Gustav Stressemann unconditionally ceased the passive resistance on 26 September in the face of overwhelming economic hardships, and agreed to resume reparations payments. An emergency measure was passed on 13 October 1923 that empowered the cabinet to enact legislation without parliamentary approval to contribute to restoring political stability, while concentrating re-establishing economic stability through controlling governmental expenditures on civil service remuneration and reducing social services, which caused hardship, but also contributed to stabilising the economy. The introduction of a new temporary Rentenmark as a transitional currency on 15 November, as orchestrated by a prominent banker, Hjalmar Schacht, as a special commissar for the currency along with Hans Luther, the minister of finance, superseded the increasingly worthless Reichsmark as fiat currency constituting loan collateral value on the basis of the entire nation’s public and private assets, with a pledge of potential future repayment for its non-existent current value. Receiving Dawes Plan loan assistance that also structured a reparations payment schedule, as well as removing the threat of sanctions and military occupation, which altogether rapidly ended hyperinflation on 20 November 1923.
Apart from the disastrous hyperinflation, another effect at this time of renewed hostility between Germany and the wartime allies intensifying secret rearmament. The Commander-in-Chief of the Germany, Colonel-General Hans von Seeckt, restored a concealed form of general staff by preserving its operations staff that was repurposed as the “troop office.” He also maintained efforts to ascertain the munitions and equipment requirements for an expanded army by enlisting the clandestine cooperation of heavy industry in Germany, as well as abroad. Soon after the Treaty of Riga obliged the Soviet Union in 1921 to accept a substantial loss of territory to Poland, when Lenin asked for German assistance in reorganising the Red Army after the Russo-Polish war. German industrial concerns evaded the Versailles Treaty restrictions on rearmament to maintain their commercial activities through establishing industrial facilities in neutral countries. War material production was also shifted into neutral companies, including Rheinmetall moved its plant to continue producing war materials in the Netherlands and Switzerland. German companies, such as Zeiss, Siemens, Mauser, Heinkel and Krupp set up military production facilities at the Bofors gun plants in Sweden, as well as separate developments in Switzerland and developmental submarine work in the Netherlands where torpedo works were in operation in Utrecht and the Hague. Prototypes of heavy armaments were manufactured abroad by anonymous limited companies with foreign subsidiaries. These included producing and testing experimental submarines in Spain and Finland, and also designing these craft at a German navy civil engineering office in the Netherlands. Aircraft development took place in Sweden under the direction of Hugo Junkers.
Renewed domestic hostility against the nascent Weimar Republic was further armed strife, and intensifying secret rearmament. Contact between German and Soviet military authorities was maintained that likewise circumvented the Versailles Treaty provisions on disarmament. The Commander-in-Chief of the German army, Colonel-General Hans von Seeckt, restored a concealed form of general staff by preserving its operations staff that was repurposed as the “troop office.” He also maintained efforts to ascertain the munitions and equipment requirements for an expanded army by enlisting the clandestine cooperation of heavy industry in Germany, as well as abroad. Secret military cooperation was already in progress between the German army (Reichswehr) and the Soviet Red Army in 1920. Seeckt formed a special department, Sondergruppe R (Special Group Russia) to administer military cooperation with Russia in 1921-1922, which was followed by the Reichswehr providing technological assistance to Russia with the means to build an arms industry that were conducted secretly in flagrant contravention of the Versailles Treaty.
Aircraft and chemical factories were set up in the Russia from 1920, as German representatives provided capital, technical expertise and military training, in exchange for Russia providing secret training bases and factory sites to build war materials that were forbidden by the Versailles Treaty. Secret rearmament in the Soviet Union continued by developing and testing aircraft and tanks in the Soviet Union until 1933, beginning with Junkers providing investment capital for constructing a Junkers aircraft factory in exchange for production facilities in Fili outside Moscow in 1921. A poison gas factory was planned to be established outside Samara, but construction was never completed. Artillery shell factories under Krupp administration were established at Tula, Leningrad, and Schlüsselberg from 1923. A flight school was opened in Lipetsk in 1925 with German financing and Soviet production and personnel under a German director, with the Dutch aircraft manufacturer, Fokker, providing modern single engine fighter aircraft for training German pilots in a Red Army flying school near Lipetsk in the Tambov province. Training in the Soviet Union subsequently continued with training expanded to include ground-air coordination, reconnaissance training and technical ground personnel that formed the core of the future German air force. Apart from German facilities in the Soviet Union that included weapons testing facilities for various types of military aircraft, a tank school was set up near Kazan in 1927 to develop and test new prototypes and train tank crew personnel to operate them while simulating wartime conditions, with engineers, technicians and mechanics from Daimler, Rheinmetall, Büssing and Magirus taking part in the production process. During this time, German military personnel developed notions of mechanised warfare led by tank divisions achieving breakthroughs on a battle front. A separate chemical research and training facility was established called Tomka, near Volsk.
Relations between the government, the military and the population remained tense, which could trigger continued armed conflict. Right wing paramilitary groups received military assistance from the army to form secret military units known as the Black Reichswehr under the leadership of Colonel-General von Seeckt, who surreptitiously augmented the strength of the standing army. An agreement was concluded on 7 February 1923 between the defence minister, Otto Karl Geßler and Carl Severing, the Prussian Minister of Police, with the approval of President Ebert and Chancellor Wilhelm Cuno. A reserve army, which existed in defiance of the Versailles Treaty working in close coordination with the legally constituted army, was thus created by disguising these units as labour battalions, which would be financed, garrisoned and trained by the army, and placed under the immediate authority of Lieutenant-Colonel Fedor von Bock.
Meanwhile, radical rightists and communists began planning for a putsch, and a new government coalition during the growing crisis was formed under Gustav Stresemann who took office on 13 August 1923 that lifted the passive resistance on 26 September. Certain Black Reichswehr military units attempted to transform the passive resistance on 1 October 1923 into an active war against France and to overthrow the democratic government in the Buchrucker Putsch, whereby Major Buchrucker, a former free corps commander, planned to use the four battalions under his command at Küstrin to seize control of Berlin. This attempt failed immediately due to a lack of sufficient amount of army support while Ebert declared a state of siege on 27 September that gave full power to the military authorities. This affair led to the dissolution of these labour battalions of dubious reliability, while further measures were introduced to circumvent the limitations on military power through later establishing a defence police force (Schutzpolizei) that was organised into units commanded by former army officers, quartered in military barracks, and participated in Reichswehr exercises and manouevres.
A separate threat to public order emanated from communists in Saxony and Thuringia who organised the “red hundreds” paramilitary formations. The army later deposed the leftist governments in Saxony and Thuringia on 29 October and early November, while not staging a similar intervention taken against the right-wing Bavarian nationalist government to the same degree. On the day that Stresemann called off passive resistance in the Ruhr, Gustav von Kahr, the former Bavarian prime minister was brought back as state commissioner with dictatorial powers to check the most militant radicals in Bavaria, including the NSDAP that was still a party without any significant support outside Bavaria.
Ludendorff encouraged Hitler to stage a revolt in Bavaria and take the initiative to take power in Bavaria, and then challenge the government of Germany, following the example of Mussolini’s march on Rome in October 1922 and the Turkish revolution in 1922, and offering the hope of a better regime than the Weimar republic. A large political gathering met in the Bürgerbräukeller beer hall on the evening of 8 November 1923, where the Bavarian Prime Minister, Gustav von Kahr, and police chief and other members of the government were present. Hitler planned to coerce Kahr and the leaders of the state police and the military to join this coup attempt. In the middle of the proceedings, Hitler, whose stormtroopers had surrounded the hall, burst in with fifty SA bodyguards that he led into the meeting. He went up the rostrum, fired shots at the ceiling, announced that the governments in Munich and Berlin had been overthrown, and that a new provisional national government of a “National Republic” was being formed. He would himself lead the regime in Bavaria, with Kahr as Regent. Ludendorff, as a famous nationalist personality was the figurehead symbolic figure of this revolt was to be given command of the army at the national level. Temporarily stunned by this interruption, Kahr and his associates agreed to Hitler’s plans at gunpoint, while Hitler gambled that the politicians would be on his side. In the meantime, Ludendorff arrived and gave Hitler his support. Kahr and his associates found their colleagues were against the enterprise during that night, and decided not to support this attempt any further.
Ludendorff was not dissuaded from taking further action, and persuaded Hitler to hold a demonstration in Munich to rally support and convinced him that the army would not oppose a march on Berlin and staging a coup d’état, much as Mussolini had staged a march on Rome, while exploiting the disintegration of German political life and the ongoing hyperinflation crisis while the French were occupying the Ruhr. On its way to the Ministry of Defence in the centre of Munich, the procession of between two to three thousand Nazis found the way blocked by police who were standing by to confront them. A shot was fired, followed by more shooting, and altogether sixteen Nazis and four police officers were killed. Ludendorff was arrested, Hitler fled and was arrested two days later. Göring was wounded, but escaped, and the SA leader Ernst Röhm, who occupied army headquarters in Munich, capitulated. Although this attempt at seizing political power was a total failure, Hitler gained prestige on the right by attempting to overthrow the Weimar republic and demonstrating his talent for expressing political rhetoric that contributing to gathering support for the NSDAP.
The trial of the accused Nazis who led the coup attempt took place in February and March 1924. Ludendorff was acquitted, and Hitler’s trial took place from 26 February to 1 April, in which he took sole responsibility for the coup attempt, and appears to have impressed the judges with his narrative about being the nation’s failed saviour. A conservative law court judge allowed Hitler to speak in support of his political agenda while being clearly biased in his favour, and was allowed light imprisonment conditions after being imposed with a five year prison sentence as the minimum length for treason, which the court justified by claiming he had been inspired by “the pure spirit of patriotism.” Hitler only served nine months in Landsberg prison with personal privileges, and spent this time outlining his political beliefs in Mein Kampf during this time of introspection with the assistance of his associate Rudolf Hess, in which he claimed that Marxism and Judaism were the two primary threats facing all of humanity, claiming that Marxism was created and controlled by Jewish interests, while also claiming that they controlled that international finance in a centrally organised conspiracy to achieve the unified purpose of domination of the human race. All races other than the so-called “Aryans” were inherently inferior while the Jews were especially supposedly dangerous, and therefore the “Aryan race” needed to be purified by eliminating undermining elements to continue its evolutionary survival. He explained away Germany’s defeat in the First World War and its consequences by the theory of the racial-biological decay of Nordic man, who was taken to be the creator and carrier of all culture, and how the “nordification” of the German people and the eradication of Judaism were considered to create the necessary preconditions for the “thousand-year Reich” of the Germans, and therefore the final supremacy of the “Nordic race.”
The Stresemann government achieved currency stabilisation by 15 November 1923 when a strict re-evaluation placed the mark on a stable foundation through emergency decrees, the effects left an ongoing bitter hatred of the Weimar Republic among the middle classes who had lost their savings, the trade unions their funds, and working wages never kept pace with the currency decline. Nevertheless, Stresemann accomplished the purpose of subduing right and left extremists while turning to concentrating on currency stabilization and dealing with the question of reparations demands. In response to a German request, the Reparations Commission agreed to set up two financial committees of financial experts to deal with the problem posed by the flight of capital from Germany, and the other, chaired by the American government’s budget director Charles G. Dawes, to consider possibilities of stabilising the German currency and balancing its budget, which would encourage western nations to advance credit to Germany, and benefit the European economy as a whole as a result of restoring the German economy and placing reparations payments on a realistic footing, which would supersede the Weimar government blaming the hyperinflation on the Versailles Treaty reparations demands. American loans would thus enable Germany to meet reparations demands once German currency was stabilised, which would then allow for allied nations to repay their loans from the U.S., while American loans to Germany would allow for payment reparations to be made to allied countries.
A severe financial crisis then broke out in January 1924, which made France more dependent on American capital and more willing to find a cooperative solution to the problem of extracting reparations alone and by force. This led to a new settlement for German reparations by offering lower annual payments, and American loans to Germany through the Dawes Plan that was proposed in April and later ratified in August, which restored confidence in the German economy along with the end of the French exploitations of the Ruhr resources in January. American loans were supposed to restart the economy, to enable Germany to pay reparations to France and Britain, which in turn could start reducing their war debts to the U.S. American authorities immediately pledged to loan 800 million gold Reichsmarks to help stabilise the currency, and although the final reparations total remained unsettled, annual payment amounts were fixed that corresponded to Germany’s ability to pay for as long as American support was sustained under its supervision, with the initial requirement set at 1 billion Reichsmarks for five years, and then rising to 2.5 billion. The re-introduction of the gold standard financed by the Dawes Plan that placed reparations on a businesslike footing contributed to ending the destructive hyperinflation. The new Reichsbank president, Hjalmar Schacht, compelled speculators to sell 1.5 billion American dollars that they had accumulated during currency depreciation to the Reichsbank, which led to virtually doubling the bank’s gold and international currency reserves. Ending the passive resistance also enabled a simultaneous cutback in government expenditures led to balancing the budget, and the Rentenmark was reconverted back into the Reichsmark at par in August 1924.
The influx of American credits secured a phase of relative, although unsound and deceptive prosperity over the next few years as Germany’s industrial capacity was restarted while paying 1.7 percent of its national income in reparations. However, the Reichstag elections in May 1924 reflected the intense anger left by the chaotic preceding year, as radicals on the left and right made massive gains, with the DNVP, right-wing anti-democratic nationalists becoming the strongest party until gains returned to more moderate parties in new elections in December. Another consequence of the Dawes Plan was there was some hope of Germany and its former enemies coming to terms, and reduce the harshness of the terms of the Treaty of Versailles, while American and British foreign policy aimed at restoring the German economy. The government moved in this direction by preparing subsequent treaties concerning maintaining postwar borders at the council of foreign ministers of Germany, France, Belgium, Britain and Italy in Locarno on 5 October 1925, leading to the signing of separate Locarno treaties on 1 December 1925, which were aimed at establishing postwar cordial relations between Germany and neighbouring countries by agreeing to respect all post-Versailles Treaty national boundaries.
The first agreement guaranteed that the German western borders would not be changed by other than by peaceful means. England, France, Italy and Germany all guaranteed the French-German and Belgian-German frontiers. The second and third were arbitration treaties between Germany and Belgium, and Germany and Czechoslovakia, which guaranteed that these states relinquished the right to alter their frontiers by force, and obliging to submit disputes to international arbitration, with fourth and fifth treaties establishing arbitration terms. The sixth and seventh constituted arbitration agreements between Germany with Poland and Czechoslovakia, and guaranteed Poland and Czechoslovakia would act in accordance with the League of Nations Covenant to take action against unprovoked armed aggression in the event of Germany’s failure to observe these arbitration treaties. Stresemann agreed to sign arbitration treaties with Poland and Czechoslovakia, and agreed to maintain the territorial status quo that the Versailles Treaty imposed. Separate acts of postwar reconciliation took place as signs of Germany’s foreign policy orientation of promoting peaceful international relations, while the government remained depending on international support to contribute to ensuring domestic stability.
These agreements with separate eastern and western European countries composed the first of Stresemann’s aims to bring Germany into European political life, and consequently led to reducing the numbers and adherent costs of maintaining occupation troops in the Rhineland, and the evacuation of British troops from Cologne on 30 January 1926, and the withdrawal of the Inter-Allied Control Commission on 31 January 1927. The Rapallo Treaty that had initially averted Germany’s complete international isolation was reinforced with signing the German-Soviet Treaty of Neutrality and Non-aggression with Russia on 26 April 1926, which assured neutrality if either one was attacked by a third power, or was subjected to economic sanctions. Although the formal limitations on German weaponry stated in the Versailles Treaty remained, the means to enforce them were abandoned. The Locarno agreements, which resulted from Germany’s economic dependence on western powers, especially on the United States, were supplemented with a mutual defence treaty between Germany and the Soviet Union was signed on 24 April 1926, which reinforced its security in the east, stating that either signatory would remain neutral for the duration of a conflict with a third party, and would not take part in an economic or financial boycott by a coalition of powers. The underlying element of extension of the Rapallo Treaty was Germany’s continued dependence on the Soviet Union for the continued secret war material manufacturing and training German military personnel on using prohibited weapons, such as aviation and tank warfare in Russia’s wide expanses.
Germany appeared to be accepted into the European community on equal terms upon joining the League of Nations on 8 September 1926, while Stresemann as foreign minister intended to create two standards for Germany’s treaties. Germany recognised certain Versailles Treaty provisions could be increasingly undermined, and could thereby renegotiate the peace terms in the spirit of reconciliation and mutual trust that would lead to more advantageous conditions. Germany was later unanimously admitted to the League of Nations on 8 September 1926, an agreement was reached on the evacuation of the Rhineland during the same month. Germany was later a signatory to the Kellogg-Briand Pact as an agreement to outlaw war on 27 August 1928. Re-examining Germany’s total liability and ending foreign supervision of payments came under consideration by a committee of financial experts in 1927, which met in Paris in early 1929 chaired by Owen Young, which formulated a new reparations plan. The Young Plan that drafted a new total amount of reparations to be paid was adopted on 7 June with a reduced annual average compared to the Dawes Plan that made these payments more manageable, which was accepted with certain minor alterations at the Hague Conference in August. Germany agreed to pay reparations until 1988, and further reduced Germany’s annual payments. The German government, rather than an agency, was responsible for their collection, and thus restored German economic sovereignty while ending all foreign control of reparations with the dissolution of the Reparations Commission. A Bank of International Settlement was established in Basel to manage the payments, and the only redress the creditors could apply would be appealing to the International Court. Allied occupation troops withdrew from the Rhineland took place in 1929, and the Saar was returned in exchange for this Young Plan final settlement of the reparations question, while political sovereignty remained lacking as the Rhineland was to remain demilitarized.
The SPD established a coalition government in the 1928 elections, with broad parliamentary support with a Social Democrat, Hermann Müller, as the first SPD Chancellor since 1920, and although the interests of the parties in this coalition contradicted each other, especially since worker and employer interests were both represented. However, German nationalists undermined a destructive role upon Alfred Hugenberg became the chairman of the DVP in 1928 while also operating a vast newspaper and cinema network that disseminated virulent Pan-German nationalist propaganda that was inimical to the republic, and bitterly opposed its policy of fulfilling reparations through increasing state intervention in the economy that could have a negative impact on industrial interests. He launched a major vulgar political campaign against the Young Plan, which initially paved the way for Adolf Hitler, from being a small-time Bavarian politician whose NSDAP had only secured twelve seats in the 1928 elections, to becoming a national figure whose propaganda publicity was amplified toward reaching hitherto inaccessible middle-class circles as a result of Hugenberg’s vast press network.
After Hitler was released from prison in December 1924, one of his first acts was to assure the Bavarian Prime Minister that he had abandoned violent tactics. In turn, the ban on the NSDAP that was imposed after the events of November 1923 was lifted, on the condition that the party was to operate within the framework of the constitution. However, the party maintained its private forces of thugs to engage in street fighting, and the reconstituted party included the Schutzstaffel, or SS, in March 1925 formed by Julius Schreck to function as Hitler’s personal bodyguard contingents along with forcibly suppressing political opposition under the leadership of Heinrich Himmler on 20 January 1929, which became separate from the SA. A second change was the decision to stand for parliament, and thereby gain power through participation in elections and propaganda.
Political parties in the Reichstag managed to solve their conflicts through compromise as long as the economic situation remained stable. Germany had paid approximately eight billion Reichsmarks in reparations under the Dawes Plan, and had borrowed the equivalent of 23 billion Reichsmarks, out of which roughly half had come from American investors seeking high interest rate returns. Hence, the German economy had already rested on perilously insecure economic foundations, which was further exacerbated by the fact that approximately half of Germany’s loans were in the form of short-term credits from abroad that were rapidly withdrawn. German banks had lent out these funds in long term credits while expecting continued economic recovery, and had been used to pay for public works programmes, such as housing, schools and hospital that allowed German political leaders to attempt to bolster their political support and the republic as a whole, rather than investing in economically productive enterprises.
The earlier economic boom that had been fuelled by short American loans from 1928 that were invested into unproductive public works then rapidly crashed when those funds were recalled immediately upon the onset of the Great Depression. As short-term loan funds were locked into these long term works projects, the withdrawal of American funds required obliging German banks to depend heavily on German business enterprises to repay American investors, which in turn led to a proliferation of business failures, sharp increases in unemployment. Unemployment remained a persistent problem, which was on the increase in the late 1920s. The German central bank meanwhile printed currency and manipulated interest rates to artificial levels before and after 1927 led to misallocating scarce resources to industries and businesses that did not require them, which led to an economic bubble. In one such instances, agricultural products that did not reflect their actual value, with maintaining high prices while receiving easy credit stimulation for German agricultural workers who could not compete against more inexpensive imports, and therefore faced increasing debts from 4.6 billion RM in 1924 to 11.5 billion in 1929. Public debts were also accrued from costly welfare programmes that fixed incomes above productivity gains. This redistribution of capital to the workforce further reduced productivity and efficiency, which in turn decreased living standards and becoming increasingly less competitive against imports from producers abroad, and then leading to increasing unemployment. Public spending, such as for road building, electrification and developing municipal services accounted for 47 percent of building works in 1928, which stimulated demand and maintained business activity was based on large foreign loans from 1925 to 1929 made Germany subject to high degrees of vulnerability as a result of shifts in the world economy. Industrial production, investments, and farm income declined while unemployment began rising in 1928 as a result of these underlying economic factors.
The New York stock market crash in October 1929, following an abundance of capital leading to share values increasing completely out of proportion to the earning power of assets in the absence of economic controls while production and prices of raw materials were declining. The consequent results from inherent defects in the economic system and a consequent inflationary boom during the 1920s struck industrialised countries the most, including in Germany where there had been six years of stability with the assistance of international loan funding and depending on international trade, when these sources of income remained feasible. Advanced industrial nations drastically reduced overseas purchases, which caused dramatic price decreases, which in turn deprived primary producers of income, and then obliged them to drastically reduce manufactured imports that then caused serious unemployment and rampant poverty in Europe and America. The contraction of world market consequently led to a sharp decline in Germany’s export trade, while also being heavily dependent on capital goods, and the recall of American loans to Germany began having serious reverberations on the German economy, as the worldwide economic depression exacerbated ongoing weaknesses. The German gross domestic product rapidly declined from 89.7 billion RM in 1929 to 57.6 billion RM in 1932. Industrial production dropped by 42 percent in 1929, and would remain stagnant at this level until 193, and unemployment consequently rose to an estimated roughly half of the workforce, and led to decreased government revenues by 13 percent between 1930 and 1931, which made covering the budgetary deficit impossible following earlier unsustainable public overspending and depending on international loans.
In addition to having disastrous economic effects on industry, the unemployment insurance law of 1927 provided comprehensive coverage was financed by both employers and employees, whereas the state was obliged to grant a bridging loan if the unemployment insurance fund went into debt, which further aggravated the economic crisis. Unemployment would increase rapidly from 1.3 million in September 1929 to over five million by September 1930, and then dramatically reaching over six million, composing a third of the working population in both urban and rural areas, by the beginning of 1932, which seriously jeopardised preserving unemployment insurance. A conflict over dealing with the economic crisis through disputes over finance reform ended in the breakup of the governing coalition on 27 March 1930 that sought to preserve the welfare state while facing a deadlock in the Reichstag over how to deal with the budgetary deficit. Hindenburg and his advisers were determined to eliminate the socialists from the government upon the passing of the Young Plan legislation in March 1930, and refused to allow the chancellor’s request to apply emergency powers to pass a budget through the Reichstag, which led to its resignation. This Heinrich Müller SPD-led coalition government cabinet was the last government of the Weimar Republic to be based on parliamentary majorities, marking a decisive step from parliamentary democracy to a presidential regime, culminating in presidential cabinets governed without the Reichstag by using the emergency decree powers that the constitution granted to the president.
The economic and resulting political ills that had plagued Germany in 1923 became increasingly apparent in more greatly aggravated forms, with political extremism increasing correspondingly with economic difficulties, as was demonstrated by reinvigorated Communist party and support for the NSDAP on a national scale, and a Reichstag majority that did not support any government until after the National Socialists passed enabling acts following manipulated elections in March 1933. There is evidence that on the side of the non-socialist parties and President Hindenburg’s advisors, the will to compromise had diminished, and exacerbated conflicts with the SPD to push it out of the government and start a phase of presidential government and a more authoritarian system that would reduce parliamentary rights and keep the socialists and trade unions out of the state while re-creating the monarchical political system.
The government no longer functioned as a parliamentary democracy after the Centre Party leader Heinrich Brüning became Chancellor of a “non-party government” in March 1930, with the support of the German general staff. This new government sought to restore the German economy by reducing public spending, tax increases and deflation, but could not secure Reichstag approval for introducing stringent economic measures including sharp tax increases and expenditure cuts. Brüning therefore arbitrarily applied Article 48 of the constitution with Hindenburg’s consent, and thereby allowing for emergency economic powers to enact legislation by decree through circumventing the Reichstag without legal safeguards, including the Reichstag not taking action to impeach Hindenburg. At a time when economic issues were volatile and the parliamentary situation was insecure, Brüning agreed to govern by emergency decree in what became known as a “constitutional dictatorship” in which only twelve out of fifty decrees dealt with the economic and financial crisis. In the interest of imposing stringent economic measures to bring about recovery that could not be executed by collective agreement.
Brüning’s policies upset the political balance, since those who had to make economic sacrifices, such imposing severe additional taxes and cutting salaries and pensions, turned to rightist propaganda in desperation. Brüning could have had positive intentions through pursuing a rigid economic policy, but the Keynesian idea of compensatory spending was not yet accepted as a means of dealing with economic depression. Moreover, Germans remain traumatized by the fear of inflation, following its horrifying effects that had led to the economy disintegrating in 1923. Hence, reduction in spending, wages and benefits, along with higher taxation, were to the only tolerable solutions. However, they did little to stop the increasing rate of unemployment, which threatened social stability by potentially generating high numbers of discontented radicals that would pose a threat to the state, which was aggravated by the structure of German political structure. When the Reichstag voted on a socialist motion on 18 June 1930 to abrogate such decrees, Brüning decided to dissolve the Reichstag and appealed to the country by calling for new elections on 20 July, two years before they were required according to the constitution, to marshal moderate opinion in support of presidential government, in the face of unpopular higher taxes combined with salary cuts and welfare payments, while the stringent deflationary programme accelerated the process of economic decline, which led to further business failures, higher unemployment, and decreases in purchasing power. The ongoing economic crisis likely exacerbated political extremism, as was demonstrated in the 14 September election results, in which the numbers of KPD representatives rose from fifty-four Reichstag seats won in 1928 to seventy-seven, and the NSDAP from twelve to a hundred and seven, thus dealing a blow to Germany’s continued parliamentary stability by intensifying the political crisis.
A dangerous precedent was therefore set by governing by emergency decree, since this emergency clause was used in a situation that was not the kind of military or foreign-induced emergency that the constitution writers had in mind, not having planned this measure as a political expedient. Although Article 48 gave the president special rights to issue emergency legislation, the Reichstag could disapprove the president’s decree later, but in turn, the president could dissolve the Reichstag and call new elections. Between the dissolution and the election, the president and the chancellor could enact laws without parliamentary control, which is what Brüning and his successors did while Hindenburg abused this power that was meant to protect the democratic functioning of the constitution. Making matters worse, Hindenburg who was eighty-five years old with failing energy when he was re-elected in 1932 made him an easy target for a group of narrow-minded rightists among his advisors. This development partly contributed to the extremist parties profiting from the economic crisis, which made enormous gains in the elections of the summer of 1930 and 1932. The severe economic crisis and the breakdown of the national political administration enabled Hitler and the National Socialist followers to agitate against the Weimar democracy with increasing effect, while the democratic forces were in a weakened position to resist the Nazi menace in view of their inability to resolve their acute differences to formulate a plausible compromise coalition in the face of this common danger, as well as the conservatives who supported the NSDAP while expecting to be able to use Hitler for their own purposes.
The Weimar Republic succumbed to a large degree because radical political parties succeeded in building a mass followership that intensified Germany’s political crisis. Whereas the Nazis polled 810,000 votes in September 1928, constituting 2.6 percent of popular support during improved economic conditions leading to diminishing political support, they polled nearly 6.5 million votes in September 1930, constituting a major political victory by increasing the number of Reichstag seats from 12 to 107 seats based on a national popular vote of 18.3 percent, which made the NSDAP the second largest party in the Reichstag, after the SPD, on the strength of Hitler’s new course at acquiring power from above with a brilliantly conducted propaganda campaign, including through exploiting the influence of cinematic imagery, during the prevailing economic distress that was reinforced by the parliamentary political deadlock, while Hitler campaigned against the ineffectiveness of coalition governments and advocated destroying parliamentary democracy and pledging to offer hope for a promising future of the state. They outpaced the considerable increase of voting for the KPD that gained well over one million votes, which increased its representation from 54 to 77 seats. German political life was thus completely transformed with the emerged considerable presence of the extremist parties, as forty percent of voters were bitterly opposed to the principles on which the republic rested. There were also grave international repercussions, as foreign investors accelerated the withdrawal of funds from Germany, totaling 633 million Reichsmarks in gold and foreign exchange currency in September and October.
The landslide of support for the NSDAP was partly due to the constitution that provided for proportional representation that allowed for a certain number of Reichstag seats to be assigned depending on the total percentage of the popular vote a party received. The Nazis also gained a great deal of support due to the image as a determined force of order and reconstruction from various elements of society when all economic and social structures seemed to break down, and therefore gained successes outside of socialist and Catholic strongholds, regardless of how the NSDAP contributed to undermining parliamentary democracy in the Reichstag and exacerbating political violence on the streets through the SA, which fought pitched street battles against other paramilitary political organisations, especially against the Communists, while promising to deliver Germany from the distressing problems that plagued the Weimar republic, which was identified with the lost war, a humiliating peace settlement, economic turmoil and social chaos. Apart from the prevailing economic distress and the increasing dissatisfaction with the Weimar party system, the NSDAP proved to be the main beneficiary of the voting public due to the character of its leader and the party’s unsurpassed propaganda appeal that successfully exploited contemporary discontent, regardless of incessant repetition, half-truths and downright lies.
Faltering economic conditions gravely undermined political life, as the national parliament proved unable to deal with the worldwide financial crisis. The deadlock in the Reichstag over resolving the question of issuing unemployment insurance when the rising numbers of unemployed could no longer be supported according to the levels that had been agreed in the 1927 Law on Unemployment Insurance. Any compromise could not be reached, with unions, employers and members of different parties all having different intransigent positions. Attempting to ensure that the government had political support from the parliamentary parties was abandoned in March 1930, resulting in the appointment of a presidential cabinet under Heinrich Brüning governing without serious regard for democracy. There was increasing use of Article 48 of the constitution to promulgate emergency decrees. Brüning pursued deflationary policies, combined with fulfilling reparations payments, which were only temporarily relieved by the Hoover Moratorium on 20 June 1931 that called for foregoing repayments from France, the U.K. and Italy for a year in exchange for suspending reparations demands from Germany. This measure ultimately led to suspending reparations in 1932, prior to a final decision to settle reparations for a final (unpaid) payment of three billion Reichsmarks at the Lausanne Conference in June 1932. Nevertheless, parliamentary democracy could not be sustained in the face of attacks from hostile military, economic and political leaders, while the economic situation worsened dramatically with continually rising unemployment under dire worldwide economic circumstances, marked by soaring inflation and unemployment.
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