Article by Vladislav B. Sotirovic: “The Great Economic Depression in the Weimar Republic, 1929-1933” (2014)

8/12/2019 Article by Vladislav B. Sotirovic: The Great Economic Depression in the Weimar Republic, 1929-1933 (2014)

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Economics2014; 3(1): 1-8Published online March 10, 2014 (http:// !sciencepublishin""roup!co#/$/eco)doi: 10!11%48/$!eco!20140301!11

The great economic depression in the weimar republic,

1929 1933Vladislav B. Sotirovi

&acult' o Politics and Mana"e#ent, nstitute o Political *ciences, M'+olas o#eris ni.ersit', ilnius, ithuania

Email address:.ladisla. sotiro.ic!eu

To cite this article:ladisla. ! *otiro.i ! he 5reat 6cono#ic 7epression in the ei#ar epublic, 1929 1933! Economics. ol! 3, o! 1, 2014,

pp! 1-8! doi: 10!11%48/$!eco!20140301!11

Abstract: he article deals ith the 5reat 6cono#ic 7epression o 19291933! he research proble# is the depression sne"ati.e consedol ?itler and his *7>P to the po er in 5er#an'! &ro# the #ethodolo"ical point o.ie e used a rele.ant scienti ic literature ollo ed b' the historical sourses! e ound that a "lobal 5reat 6cono#ic7epression had #ostl' na"ati.e econo#ic, social and political in luences to the 5er#an ei#ar epublic hich inall' beca#e on @anuar' 30th, 1933 a prison o ?itler s *7>P part' in order to see+ its sal.ation!

Keywords: ei#ar epublic, 5reat 6cono#ic 7epression, Aapitalis#, Protectionis#, Arises

1. Introduction7urin" the "reatest, and at the sa#e ti#e, the #ost

di icult econo#ic crisis, in the orld histor' ro# 1929 to1933, the (5er#an) ei#ar epublic 1 as one o the #osta ected countries in the orld! he conse


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2 ladisla. ! *otiro.i : he 5reat 6cono#ic 7epression in the ei#ar epublic, 1929 1933

his orld- ide inancial collapse as the #ani estation odeeper ea+nesses o the orld econo#'! arious actorscontributed to recession:

1) A'clical contractions in de#and in #uch o 6urope!2) > "eneral tendenc' or pri#ar' product prices to all!

3) &inancial crises in 6urope and the *>!he "lobal sources o this econo#ic crash and instabilit'ere:1) he &irst orld ar caused a dra#atic increase in

producti.e capacit', especiall' outside 6urope, but thereas no correspondin" increase in de#and!2) here as a orld- ide i#balance bet een

a"riculture and industr'!3) he re ards o "ro th accrued disproportionatel' to

the industrialiGed countries and, ithin these countries, totheir industrial and inancial sectors!

4) nternational inance as ne.er ull' reco.ered ro#the dislocation o the &irst orld ar!2

H) ncreased production allo ed ood and ra #aterial prices to decline throu"h the 1920s, orsenin" the ter#s otrade or countries depended on the e=port o suchco##odities, and decreasin" their abilit' to bu' theindustrial products o 6urope and the *>!

More speci ied and concrete ori"ins o the slu#p andecono#ic recession in 1929 #ust be located in the *>! tis clear that the >#erican econo#' as the stor# centre othe orld depression! ?ere national econo#ic #ana"e#ent

as po erless to pre.ent the collapse o #one' andco##odit' #ar+ets to"ether ith the #anu acturin" production!3 he #a$or destabiliGin" in luence ca#e ith

the collapse in >#erican lendin"! his be"an in the su##ero 1928 and it as pro#pted b' the do#estic boo# and theaction o the &ederal eser.e to chec+ it b' raisin" interestrates! oth o the# had the e ect o attractin" unds intothe ho#e #ar+et! 4 his dra#atic curtail#ent o lendin"e=ercised a po er ul de lationar' i#pact on the orldecono#'! t as su icientl' idespread to under#ine the

ra"ile stabilit' o the international econo#'! t also in turnreduced 6uropeIs i#port de#and or products outside there"ion!

he second econo#ic shoc+ ca#e in the su##er o 1929hen the *> boo# petered out! > ti"htenin" in #onetar'

polic' at this ti#e #a' also ha.e contributed, thou"h#onetar' actors probabl' pla'ed a relati.el' #inor part inthe initial brea+in" o the >#erican econo#ic boo#! he>#erican econo#ic slu#p as touched o b' inancialcrisis!

2 he pre- ar s'ste# o i=ed e=chan"e rates and ree con.ertibilit' asreplaced b' a co#pro#ise - the Gold Exchange Standard - hich ne.erachie.ed the stabilit' necessar' to rebuild orld trade! n re"ard to this proble# is i#portant to present opinion b' 7ere+ ?! >ldcro t: Dit ould bedi icult to ar"ue that the &irst orld ar and its a ter#ath as the pri#ecausal actor o the crisis than be"an at the and o the 1920sE (7ere+ ?!>ldcro t,The European Economy 1 1! 1 " , p! %%)!3 Aarlo M! Aipolla (ed!),The #ontana Economic History. $ontemporary

Economies%1, p! 332!4 he * capital issues on orei"n account ell b' o.er H0B bet een the irstand second hal.es o 1928!

he 5reat ull Mar+et o 1928 "a.e a' to a precipitousall in stoc+ prices in Fctober o 1929!H n conditions o

#onetar' instabilit' and i#balance o pa'#ents, the "oldstandard as a +ind o unda#ental la o international#onetar' relations as obsolete! % n the other ords,

easiest solution or the o.erhaul the D all *treet ArashEas to brea+ the lin+s b' abandonin" the "old standard!his as done b' se.eral atin >#erican countries and also

b' >ustralia and e Jealand late in 1929 and earl' in1930! Fn the other hand, this action ine.itabl' i#posed a"reater burden or the countries still depended on the "oldstandard and hence intensi ied the de lationar' spiral eitherauto#aticall' or throu"h deliberate "o.ern#ent action!Fnce started, there ore, the de lationar' process beca#ecu#ulati.e and e.entuall' it led to the "eneral collapse othe "old standard and the adoption o restricti.e policies to protect do#estic econo#ies! ith re"ard to the proble# othe ori"ins o the depression in the nited *tates it isi#portant to #erica, and the sha+' 6uropean prosperit' collapsed! n Ma' 1931, the Austrian $redit%

Anstalt ban+ de aulted! ut, hen the nited Kin"do# le tthe 5old *tandard, allo in" sterlin" to depreciate in*epte#ber 1931, .irtuall' the entire orld as a ected!

he orld #ar+et or co##odities ollo ed the >#ericancrash! &or instance, b' 1931, the price o heat on the

i.erpool *toc+ 6=chan"e as onl' a hal in co#parison to1929! he prices o the ritish i#ports o ra #aterial eredo n b' t o- i ths; and ood i#port prices as a hole ereto all do n as ell as in the ollo in" 'ear! he earnin"so o.erseas suppliers ere correspondin"l' reduced; andthe #ar+ets or 6urope s e=ports ere conse


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6cono#ics 2014, 3(1): 1-8 3

trade #ar+ san+ to 3HB o its 1929-.alue!8 he le.el odecrease o the industrial production reached its pea+ in1929! t beca#e acco#panied b' the risin" le.el oune#plo'#ent and allin" prices or all "oods, but particularl' o pri#ar' produce!9 onetheless, the ne policies o trade protection and currenc' #anipulationturned to be the ha##er or the econo#'! >ccordin" to

e is, Dthe decline o trade in #anu actures as dueneither to tari s nor to the industrialisation o necountriesE! n realit', the trade in #anu actures as loonl' because the industrial countries ere bu'in" too littleo pri#ar' products b' pa'in" so lo price or hat the' bou"ht!10

e thin+ it ould be o a "reat .alue to present hereopinion b' o"er Muntin" and ! >! ?olderness that the

all *treet crash did not cause the depression in 6urope, but the loss o inancial con idence resultin" ro# it and the poor #onetar' policies hich ollo ed, to"ether ith thecollapse o >#erican de#and, #ade the recession #orese.ere in 6urope than in the *> ha.in" ne"ati.econse, the>#erican depression undoubtedl' ad.ersel' a ected therest o the orld!11

'. The (risis o# )inancial *olicy and the%eclination o# Industrial *roductionn the autu#n o 1929 it as b' no #eans clear that a

"eneral econo#ic depression in al#ost all industrialcountries as under a' and that the slu#p ould ha.e aduration o se.eral 'ears! >ccordin" to ?! @! raun, there

ere t o #ain reasons or the deterioration o econo#icconditions in the ei#ar epublic:

1) he disinte"ration o international econo#ic relations,especiall' the decline o international trade and ban+in",acco#panied b' protectionis# and co#petiti.e de.aluation!

2) he hi"h de"ree o #onopolisation o the 5er#anindustr'!12

he act as that instead o lo erin" prices, bi"corporations tended to reduce production and dis#isse#plo'ees! 13

8 he i#es, Atlas of World History , chapter D he 5reat 7epression19291939E, able: 3 D he orld econo#', 1929 to 1939E, p! 2%%; *i#onKuGnets, odern Economic Gro-th/ Rate0 Structure and Spread0 pp! 30%309!9 o"er Muntin", ! >! ?olderness, $risis0 Reco*ery and War. An Economic

History of $ontinental Europe 1 1 1 !, , p! 1H!10 ! >rthur e is, Economic Sur*ey0 1 1 1 2 , p! 1HH!11 o"er Muntin", ! >! ?olderness, $risis0 Reco*ery and War. An Economic

History of $ontinental Europe 1 1 1 !, , p! 1C!12?ans-@oachi# raun,The German Economy in the T-entieth $entury. TheGerman Reich and the #ederal Republic , p! %%!13 n the depression 'ear o 1932 industrial production in 5er#an' asappro=i#atel' 30B belo in co#parison ith its the pre- ar le.el! &ro# 1929to 1932 consu#er "oods productions declined b' 18B, producer "oods

production b' as #uch as H2B (5! ?ardach, DJur politischen Fe+ono#ieE,einchard KLhnl, 5erd ?ardach (eds!) )ie 3erst4rung der Weimarer Republi5 , pp! 2%30)!

here as a sharp c'clical recession in 5er#an' in theirst


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6cono#ics 2014, 3(1): 1-8 H

point as that this as not su icient to co#pensate or the"old and orei"n currenc' losses b' credit ithdra als andcapital li"ht! > bri"ht spot as, or instance, the 5er#antrade ith the *o.iet nion (the so-calledD Russengeschaeft E) hich increased continuousl'!28 he#ost si"ni icant reason or this as the act that the *o.iet

nion as not a ected b' the 5reat 6cono#ic 7epressionand actuall' success ull' continued ith the process o"reat industrialisation! n 1932 5er#an capital "oodse=ports to the ** a#ounted to 2%B o her total e=ports!

he 5er#an "o.ern#ent decided to reduce the 5er#ani#ports in order to i#pro.e her pa'#ents to abroad!?o e.er, orei"n trade proble#s and di iculties beca#e.er' se.ere and dan"erous a ter the #id-1931! Protectionist#easures b' #ost 5er#an' s tradin" partners ne"ati.el'in luenced the 5er#an e=port o the inal products!29 >ccordin" to 7iet#ar PetGina, >nsel# &aust and erner>belshauser, i the 1913 'ear has inde= 100, e=port toi#port as: in 1929-10H!8; in 1930-11H!4; in 1931-128!8;in 1932-14C!H; in 1933-1H2!%; and in 1934-144!8! hesituation re"ardin" a ra #aterial to ra #aterial as as the

ollo in": in 1928-112!9; in 1929-109!2; in 1930-11%!1; in1931-12%!C; in 1932-12H!1; in 1933-120!3; and in 1934-112!%! e"ardin" inal products to inal products thesituation as: in 1929-99!4; in 1930-98!4; in 1931-93!1; in1932- 100!%; in 1933-109!1; and in 1934-111!9!30

he ter#s o trade chan"ed in a.our o industrial "oodsand at the e=pense o pri#ar' "oods! &or 5er#an' the'decreased b' 20B bet een 1890 and 1913, and increased b' CB ro# 1910/1913 to 1924/1930, and #ore than 30B

durin" the 1930s!31

&ro# 1931 on ards i#port prices ell belo their pre- ar le.el hereas e=port prices re#ainedabo.e that le.el or another t o 'ears! t is i#portant tonotice that the e=port prices in 1933 reached their hi"hest point at #ore than H0B abo.e the 1913 le.el! ith re"ardto i#port, the ra #aterial pla'ed the #ost i#portant role!>lthou"h their i#port share ell ro# 43!1B in 1910/1913to 38!8B in 1924/1929 it later rose up to 39!9B in1930/1934! he i#port o oodstu s rose until 1924/1928, but then ell in the late 1920s and earl' 1930s hile thei#port o the inal products rose up constantl' durin" the period o the ei#ar epublic!32

5er#an' had introduced e=chan"e control in 1931 anderlin introduced #easures to settle i#port and e=port, asar as possible on a bilateral basis! n so#e cases, 5er#an'as able to #anipulate trade to her ad.anta"e and

accu#ulate trade de icits ith pri#ar' product e=ports! he

28 ?ans-@uer"en Perre', )er russlandausschuss der deutschen Wirtschaf0 pp!128202!29 erena *chroeter, )ie deutsche (ndustrie auf dem Weltmar5t 1 9 bis 1 290 pp! H4H9!30 7iet#ar PetGina, erner >belshauser, >nsel# &aust,So=ialgeschichtliches

Arbeitsbuch , p! CC!31 ?o #ann, !5!, &! 5ru#bach, ?! ?esse, )as Wachstum der deutschenWirtschaft seit der itte des 1 . >ahrhunderts , erlin?eilderber" e or+,

19%H, pp! H48H49!32 ?ans - @oachi# raun,The German Economy in the T-entieth $entury , p!H8!

ei#ar epublic established ne bilateral tradin"arran"e#ents ith #an' countries in both 6urope andoutside! ?o e.er, the 5er#an #ost i#portant econo#ic(e=port-i#port) sphere o in luence as in the *outh-6astern 6urope: u"osla.ia, o#ania, ?un"ar' and

ul"aria! 5er#an' had a surplus on the trade ith the resto 6urope and a de icit ith the rest o the orld, butespeciall' ith the *>! 33 5er#an' "ained particularl'

ro# her trade ith the K! he 5er#an industrial e=portas undin" the i#port o the ra #aterial and so#e o theoodstu s! &ro# 1931 5er#an' #ade pre erential trade

treaties ith o#ania and ?un"ar' hich allo ed theset o a"ricultural e=porters an access to a #a$or 6uropeannational #ar+et at a ti#e o se.ere price depression as anoutco#e o the econo#ic crisis! &or instance, ?un"ar'si"ned a ne treat' in 1934 hich "uaranteed a ccordin" to 7! 6!Kaiser, the i"ures re"ardin" the 5er#an share o the tradein the 6astern and the *outh-6astern 6urope ere as the

ollo in": in 1928 ith AGechoslo.a+ia e=port 22!1B,i#port 24!9B; ?un"ar' 11!8B e=port and 19!HB i#port;

o#ania e=port 18!4B, i#port 23!CB; u"osla.ia 12!1Be=port, 13! %B i#port, Poland (includin" 7anGi") e=port34!2B, i#port 2%!9B, and >ustria 18!HB e=port and 19!9Bi#port! he i"ures concernin" the 5er#an trade ith thesa#e countries in 1933 ere: AGechoslo.a+ia e=port 1C!CB,i#port 19!9B; ?un"ar' e=port 11!2B, i#port 19!CB;

o#ania e=port 10!%B, i#port 18!%B; u"osla.ia e=port13!9B, i#port 13!2B; Poland ( ith 7anGi") e=port 1C!HB,i#port 1C!%B; and inall' >ustria 1H!1B e=port and 18!8B

i#port!34

5er#an' as able to #a+e a #ar"inal trans er o trade tothe econo#ics o the *outh-6astern 6urope, but this astrade di.ersion rather than creation! ' 193%AGechoslo.a+ia, ?un"ar', u"osla.ia, ul"aria, >ustria,

o#ania, Poland and the altic states (6stonia, at.ia andithuania) to"ether pro.ided nearl' 13!8B o the 5er#an

i#port a"ainst H!9B in 1928! 7urin" the sa#e period, atotal 5er#an i#port had allen to 41B o their 1928-le.el!5enerall', 5er#an' as the lar"est #ar+et or the etherlands (24B o e=port in 1928), >ustria,AGechoslo.a+ia (o.er 20B), Poland (40B) and the a"rariancountries o the *outh-6astern 6urope! >n' a', 5er#an'

ithout the o.erseas colonies as orced to e=tend herin luence in 6urope!3H

,. The Economic %ownturn and the*roblem o# -nem&loyment

he #ass une#plo'#ent in the ei#ar 5er#an' in theearl' 1930s as one o the "reatest and #ost di icultoutco#es o the econo#ic do nturn and declination o the

33 o"er Muntin", !>! ?olderness,$risis0 Reco*ery and War , p! 3%40!34

7! 6! Kaiser, Economic )iplomacy and the ;rigins of the Second WorldWar , pp! 32H32%!3H o"er Muntin", ! >! ?olderness,$risis0 Reco*ery and War , p! 33!


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% ladisla. ! *otiro.i : he 5reat 6cono#ic 7epression in the ei#ar epublic, 19291933

a"ricultural and industrial production! he #ain proble# ina"ricultural sphere o econo#' beca#e se.ereune#plo'#ent si#ilar to the case o the 5er#an industr'!

n 1929 une#plo'#ent i"ures had a#ounted to 1!9 #illion, but the' ccordin" to Karl ?ardach, in 1932 the 5er#anune#plo'#ent as 30!8B! his i"ure co#pared to CB othe une#plo'#ent in 1928 (the last o the so-called D"olden'earsE) is surel' ccordin" to !

Muntlin" and ! >! ?olderness, the une#plo'#ent#ounted to o.er 30B o the labour orce in 1932, an annuala.era"e i"ure o H!% #illion! he une#plo'#ent as #ostse.ere in the #a$or industrial re"ions o the uhr and*ilesia, but as lesser locall' concentrated than in 5reat

ritain, or instance!39 he hu"e une#plo'#ent i"ure in 5er#an' "a.e rise to

.arious $ob creation plans, so#e o the# sensible, other lessso! o the latter cate"or' belon"ed, or instance, a pro"ra##e or+ed out b' the Reich association for thereform of male clothing , ounded in Munich in 1931, hich

as o the opinion that the econo#ic reco.er' could be positi.el' a ected b' producin" o the lar"e ! ?olderness,$risis0 Reco*ery and War , pp! 13%13C!40 illi >! oelc+e, )ie deutsche Wirtschaft 1 2" 1 !,. (nterna des Reichs-irtschaftsministeriums , p! 13!

e.ertheless, his e=port-based polic' o pro#otin"e#plo'#ent had ailed or t o basic reasons: 1) the othercountries responded to the crisis ith protectionist#easures: 2) the orld #ar+et prices had allen aster thanthose o the 5er#an e=port co##odities! n addition, the

runin" do#estic #ar+et polic' or pro#otin" e#plo'#ent,or hich the preparations had been started in the secondhal o 1931, had e lon"-standin" plan o a plant-basedDWer5sgemeinschaft E - a trade union o ree or+sco##unit' on the basis o indi.idual or actor' contracts N beca#e a sort o a' out! ?o e.er, under the conditions o#ass une#plo'#ent, hich as runnin" at an a.era"e o23!4B alread' in 1930 (3%!2B and 4%!8B in 1931 and1932 respecti.el'), the o er o a DWer5sgemeinschaft E too+on the or# o hardl' dis"uised blac+#ail! he Papen"o.ern#ent continued the M 13H #illion e#plo'#entsche#e be"un under runin" one and, ha.in" in #ind that a bud"et de icit as una.oidable, added M 220 #illion or

i##ediate $ob creatin" purposes! >ccordin" to ?! @! raun,in *epte#ber 1932 &ranG .on Papen increased the undsa.ailable or a public or+s pro"ra##e b' another M 1%C#illion to a total o M 302!41 he #ain tas+ o Papen s"o.ern#ent s polic' as to reduce the nu#ber o 1!CH#illion une#plo'ed #en b' the end o 1933! he polic'

as based on indirect $ob creatin" #easures, hat #eantthat the entrepreneurs ould recei.e ta= incenti.es toe#plo' or+ers and to e=pand production! ?o e.er, orthe reason o an unstable political situation, a ponderous bureaucrac', and the li#ited siGe o the pro"ra##e, thee ects o Papen s "o.ern#ent s e orts ere rather s#all!?is successor ro# 7ece#ber 1932, *chleicher, put #oree#phasis on public or+s in order to reduce theune#plo'#ent! *chleicher s "o.ern#ent continued ithPapen s e#plo'#ent e orts and supple#ented the# b' ane M H00 #illion pro"ra##e or e#er"enc' #easures,o hich M 100 #illion ere ear#ar+ed or the ar#a#entcontracts! n order to e#plo' as #an' people as possible,#achiner' had to be used sparin"l' and the #a=i#u#

or+in" ti#e per ee+ as i=ed at 40 hours!42 e.ertheless, these #easures ere insu icient to produce

41 ?ans-@oachi# raun,The German Economy in the T-entieth $entury , p!

C2!42 Karl ?ardach, The 'olitical Economy of Germany in the T-entieth $entury , p! 48!


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Article by Vladislav B. Sotirovic: “The Great Economic Depression in the Weimar Republic, 1929-1933” (2014)