The impact of the Depression on Germany

In October 1929 the Wall Street Crash on the US stock exchange brought about a global economic depression. In Europe, Germany was worst affected because American banks called in all of their foreign loans at very short notice. These loans, agreed under the Dawes Plan in 1924, had been the basis for Weimar’s economic recovery from the disaster of hyperinflation. The loans funded German industry and helped to pay reparations. Without these loans German industry collapsed and a depression began:

A flow chart of the causes and effects of the depression in Germany
Portrait of Adolf Hitler

The most obvious consequence of this collapse was a huge rise in unemployment. Over the winter of 1929-30 the number of unemployed rose from 1.4 million to over 2 million. By the time Hitler became Chancellor in January 1933 one in three Germans were unemployed, with the figure hitting 6.1 million. Industrial production had also more than halved over the same period.

The impact of unemployment

  • The rise in unemployment significantly raised government expenditure on unemployment insurance and other benefits.
  • Germans began to lose faith in democracy and looked to extreme parties on the both the Left (the communists) and the Right (the Nazis) for quick and simple solutions.

Political failure

In March 1930 the German Chancellor, Hermann Müller, resigned when his government could not agree on how to tackle the rise in government spending caused by the rise in unemployment. He was replaced by Heinrich Brüning. His policies were ineffective in dealing with the unemployment crisis and further undermined Germans’ faith in democracy:

  • In July 1930 Chancellor Brüning cut government expenditure, wages and unemployment pay. This added to the spiral of decline and unemployment continued to rise, as well as making those who had lost their jobs even poorer.
  • However, Brüning could not get the Reichstag to agree to his actions, so President Hindenburg used Article 48 of the Weimar constitution, which gave the President the power to pass laws by decree, to govern. This undermined democracy and weakened the power of the Reichstag – arguably opening the way for Hitler’s later dictatorship.

The rise of extremism

When people are unemployed, hungry and desperate, as millions were in Germany between 1930 and 1933, they often turn to extreme political parties offering simple solutions to their problems. Between 1930 and 1933 support for the extreme right-wing Nazis and the extreme left-wing communists soared.

By 1932 parties committed to the destruction of the Weimar Republic held 319 seats out of a total of 608 in the Reichstag, with many workers turning to communism. However, the real beneficiaries were the Nazis.