• On 9th November 1918, Germany had a new government called Weimar
Republic.
• It had a number f problems whose origin was the signing of the Versailles Treaty
in 1919 as this affected her economy:
•»* The reparations led to shortage of money.
» Cutting down of the navy and army led to the closure of armament factories.
> Taking away of Danzig and Memmel led to trade failure.
EFECTS OF THE WAR REPARATIONS
• In 1922, Germany failed to pay because she had no money.
• As a result, in 1923, French and Belgian troops invaded the Ruhr Valley which
produced 80% of
page11
coal, iron and steel: it was German's industrial area. • The workers decided to go
on strike and sabotage. This caused a great shortage of goods which
led to an increase in prices and shortage of money. • The government decided to
print large sums of paper money which became plenty but worthless
(inflation).
SOLUTIONS TO THE ECONOMIC PROBLEMS
In 1924, the Weimar Republic elected Gustav Stressemann as Chancellor and
foreign secretary. Between 1924-1929, he came up with the following solutions:
• Established new money.
• Persuaded the French to leave the Ruhr and the workers to go back to work.
• Persuaded American banks to give Germany loans to pay the reparations and
recover her economy.
THE DAWES PLAN
o Through this plan, Germany got $40 million from America.
o This helped Germany to print more new money, open more factories, construct
more buildings
and create more jobs. o The French and the Belgians left the Ruhr and the
economy improved.
GERMANY (1925-1929)
• In 1925, Germany entered a period of prosperity. Stressemann believed that
Germany could get better if the terms of the treaty were fulfilled. This was called a
Policy of Fulfillment.
• As a result, other nations started considering Germany as an equal. France,
Britain, Belgium and Italy signed the Locarno Treaty with Germany.
• In 1926, Germany became a member of the League of Nations.
• In 1929, the Young Plan reduced the amount of £6,600 million to three-quarters
and extended the period of payment to 59 years.
• Unfortunately, few weeks after signing of this treaty, Stressemann died.
THE ECONOMIC DEPRESSION
• In 1929, Germany had an economic depression (crisis) due to the depression
which started in America.
• Loans from America were cancelled and trade declined. As a result:
• Many Germans were bankrupt.
• Many Germany industries were closed down. Unemployment rose.
THE ECONOMIC DEPRESSION IN AMERICA
o Between 1929-1933, America faced an economic depression.
o She had no markets for her products.
o This was because countries like Britain had no money due to their economic
problems.
CAUSES OF THE DEPRESSION
1. Overproduction:
• Due to use of machinery, industrialists produced too many goods for the home
market to absorb.
• Fewer men were needed in factories due to building up of stocks, therefore the
rest were laid off thereby increasing he unemployment level.
2. Maldistribution of income: Industrialists and workers did not share their profits
evenly leading to a wide gap between the rich and the poor.
3. Tariffs: America could export but could not import so other countries introduced
tariffs against American goods.
4. Speculation on the stock market (wall street crash)
• People who had invested outside withdrew and invested home to get higher
prices on their shares
• Due to more people who sold their shares, the process collapsed.
• This economic disaster was described as Wall Street crash.
EFFECTS OF THE DEPRESSION
• Ruined investors: those who sold their shares at a loss could not pay their
brokers (middle persons) who later failed to pay their banks.
• Banks were closed: This was mainly due to speculation and massive withdraws.
10
• Unemployment and closure of factories: Demand for goods fell drastically
which meant less need for factory workers hence closure of many factories.
• Countries which relied on America for loans suffered economically.
THE NEW DEAL
In 1932, Franklin Delano Roosevelt replaced Herbert Hoover. He promised the
Americans the New Deal. Under this:
√ The Federal government paid large sums of money to estate owners.
√ The social security through which the sick and the unemployed were paid.
√ The work-finding schemes were started e.g Tennessee Valley Authority. This
boosted agriculture and industry.
√ Provided loans for housing schemes.
√ Created National parks which attracted tourists and created employment.
√ Found market for arm produces.
NB: By 1936, economic problems were solved by the New Deal.