World Economic Crisis 1929: Causes & Course

the Great Depression of the year 1929 was a global financial crisiswhich also had a major impact on the Weimar Republic and German history.

In this article you will find out to what extent this crisis also influenced German history and what the consequences were Great Depression of 1929 on the domestic political situation in the Weimar Republic.

Financial dependence of Germany

In the postwar years Germany had to live through some crises. From 1924, however, a phase of relative stability set in. However, this stability was only possible with the help of foreign loans from the US accessible. In Germany there was still one lack of capital due to the Hyperinflation of 1923 and the ongoing reparations payments.

After the First World War, Germany had to accept the conditions from the the Versailles Treatythe peace treaty of 1919, fulfill. So Germany wore them sole war guilt. Next to demilitarization and assignments of territory belonged high reparation payments to the terms of the contract.

This compensation payments Germany had to give to the victorious powers. raw materials such as coal or livestock went to the Allies as repayment for resources lost in the war. But Germany also had a large amount of money as reparations pay to finance the loans that the US had given to the Allies.

The aim of the Versailles Treaty was to weaken Germany as much as possible.

Great Depression 1929 causes

However, this also resulted in the demand after commercial goods in the German market not very strong was. That’s why she had to German industry on goods exports put. In addition, the Permanent crisis in German agriculture. From a technical point of view, the lack of modernization made it uncompetitive internationally, and agriculture became highly indebted and dependent on state aid. The German economy was, despite the «Golden Twenties» designation for the time epoch, anything but «golden» and very heavily dependent on foreign industry and capital.

You will also find an exciting summary of the Golden Twenties!

Great Depression 1929 Course

As the triggered the financial crisis became and how they then moved into the world spread, learn you in the following sections.

Stock market crash in the US

In the 1920s had many private individuals to invest in stocks taken out loans. But this was the American economy’s undoing as the Stock prices fell immensely in the fall of 1929. Shares lost more than 15% of their value in some cases.

Black Friday

Of the October 25, 1929 is used in Europe as Black Friday referred to, in the USA because of the time difference from Black Thursday at the October 24, 1929 spoken. On that day, the New York Stock Exchange burst huge speculative bubble and the stock market crash picked up speed.

Figure 1: Dow Jones, 1929 stock market crash

The investors hastily sold their sharesbecause they feared losing a lot of money and not being able to repay the debt they had taken on. Thereby the stock market finally collapsed. Several million shareholders suffered losses totaling several billions.

Late Roaring Twenties

Of the economic boom the post-war period was over and the Roaring Twenties turned into mass unemployment and poverty. In order to protect domestic companies and strengthen the national capital market, the USA began a new one protection policy to pursue.

So became foreign imports more difficult and the short-term foreign loanson which Germany was heavily dependent, from the banks withdrawn. As a result, what had hitherto been the American economic crisis spread to the whole world.

Great Depression 1929 Germany

Although the US crisis was the last straw and triggered the global financial crisis, Germany already had its own little banking crisis, exacerbating the effects of the New York stock market crash. That was because the banks were through mutual competition, hostile takeovers of small banks and speculative dealings in commodities and securitiesthat again Business volume of 1914 had achieved. Combined with that unequal international credit market the German banks were in a very critical situation even before 1929.

Great Depression 1929 Consequences

The consequences of the global economic crisis for Germany were serious and affected various areas of industry and the population. The consequences can be economic and social consequences split, in turn, on the political affected the landscape.

economic consequences

The protectionist measures taken by the USA soon spilled over to other countries in Europe, so that less world trade took place.

protectionism aims to protect national producers from international competition. To this end, the state intervenes in cross-border transactions, i.e. import and export. These interventions are referred to as protectionist measures.

To the bottom of the recession world trade volume fell by 25%.

recession is an economic term. A recession is an economic phase with no or negative economic growth. So she describes you economic downturn.

This also led to a decline in goods exports from the German Reich, which fell from 13.5 to 5.7 billion Reichsmarks. the industrial production of Germany sank also by 40% during this period. This led to further austerity measures, bank failures and layoffs.

Social consequences of the financial crisis

There were also a number of social consequences that emanated from Germany’s economic decline. Among other things, the unemployment at record levels, rising from 1.3 million to over 6 million by early 1933. This also led to a Overburdening of the social systemsso that the unemployed could not hope for help from the state.

Figure 2: Unemployed in the crisis around 1930. Source: dhm.de

For many Germans, this was a miserable situation that they only got through crime could escape. The sad circumstances in Germany finally led to a radicalization of the German populationwhich are also in the coming parliamentary elections reflected.

Political consequences of the world economic crisis

The political consequences of the global economic crisis in 1929 were devastating for Germany and had a lasting impact on the country’s development. The poor economic and social situation led to collapse of the government and new elections. Both Reichstag elections 1930 could the NSDAP (National-socialist German Workers’ Party) around Adolf Hitler finally one big increase observe on voters. This electorate has moved away from the old parties like the SPD (Social Democratic Party of Germany) or the DNVP (German National People’s Party) felt let down. This enabled the NSDAP to become the second largest party in the Reichstag.

Great Depression 1929 Winner

At the next Reichstag elections in 1932 could the NSDAP even more and became by far the strongest party. But also the other anti-democratic party KPD could continue increaseso that the anti-democrats now have a negative majority formed. Thus, no majority government could be formed because nobody wanted to form a coalition with these two parties.

Rise of the NSDAP

The newly formed government had to NSDAP include, otherwise the Reichstag would continue to be paralyzed and only by one dictatorship of the President could be governed. This could possibly lead to one civil war led, and to this impede, agreed President Hindenburg finally to Hitler to chancellor to appoint, as he was the leader of the strongest party in Germany, the NSDAP. So he paved the way for Hitler’s seizure of powerwho the time of National Socialism entailed.