The recovery of the Republic, 1924–29

Gustav Stresemann and economic recovery

In 1923, the Weimar Republic was on the verge of collapse socially and economically. But surprisingly, this crisis was followed by a period of relative stability and success. The period 1924-1929 was a time when the Weimar economy recovered and cultural life in Germany flourished.

This dramatic turnabout happened in large part because of the role played by Gustav Stresemann who became Chancellor in August 1923 during the hyperinflation crisis. This was a time when prices in Germany went up quicker than people could spend their money and the German currency lost its value. Stresemann was Chancellor for only three months but continued to serve as Foreign Minister, rebuilding and restoring Germany’s international status until his death in October 1929, ironically just weeks before the Wall Street Crash that would end Weimar’s period of greater prosperity and stability.

The end of hyperinflation

Gustav Stresemann
Gustav Stresemann

Stresemann’s single greatest achievement as Chancellor was to end hyperinflation. He did this in just three months by:

  • Calling off the ‘passive resistance’ of German workers in the Ruhr. This helped Germany’s economy because goods were back in production and the Government could stop printing money to pay striking workers.
  • Promising to begin reparations payments again. This persuaded France and Belgium to end the occupation of the Ruhr by 1925.
  • Introducing a new currency called the Rentenmark. This stabilised prices as only a limited number were printed meaning money rose in value. This helped to restore confidence in the German economy both internally and internationally.
  • Reducing the amount of money the government spent (700,000 government employees lost their jobs) so that its budget deficit reduced.

Gustav Stresemann's Nobel Peace Prize speech

Renegotiating reparations

The payment of reparations, which had caused the hyperinflation crisis in the first place, had to resume, but Stresemann’s decisive actions in the autumn of 1923 gained Germany the sympathy of the Allies. They agreed to renegotiate payments and this led to two new repayment plans in the next 5 years:

The Dawes Plan 1924 on the left and The Young Plan 1930 on the right.
The Dawes PlanThe Young Plan
DateProposed April 1924, agreed September 1924Proposed August 1929, agreed January 1930
Amount of reparations to be paidStayed the same overall (50 billion Marks) but Germany only had to pay 1 billion Marks per year for the first 5 years and 2.5 billion per year after thatReduced the total amount by 20 per cent. Germany was to pay 2 billion Marks per year, two thirds of which could be postponed each year if necessary
Amount of time over which they would be paidIndefinite59 years, with payments to end in 1988
Loans made available to GermanyGermany was loaned 800 million Marks from the USAUS banks would continue to loan Germany money, coordinated by J P Morgan, one of the world’s leading bankers

Did the Weimar Republic economy really recover?

The years 1924 to 1929 have been referred to as Weimar’s ‘Golden Years’, but historians disagree as to just how much the German economy recovered from the effects of World War One and hyperinflation.

Signs of recoverySigns of continued weakness
By 1928 industrial production levels were higher than those of 1913 (before World War One)But… agricultural production did not recover to its pre-war levels
Between 1925 and 1929 exports (sending goods or services abroad) rose by 40 per centBut… it spent more on imports than it earned from exports, so Germany was losing money every year
Hourly wages rose every year from 1924 to 1929 and by 10 per cent in 1928 aloneBut… unemployment did not fall below 1.3 million and in 1929 increased to 1.9 million
IG Farben, a German chemical manufacturing company, became the largest industrial company in EuropeBut… German industry became dependent upon loans from the USA
Generous pension, health and unemployment insurance schemes were introduced from 1927But…The government ended up spending more than it received in taxes and so continued to run deficits from 1925 onwards