The Great Depression in Germany


great depression

Unemployed Berliners queue during the Great Depression

The Great Depression was a worldwide economic slump that began as an American crisis. The 1920s was a boom decade for American companies, which tallied up record production figures, ever-increasing sales and millions of dollars profit. These profits meant high dividends and increasing share prices, which encouraged investment in shares. In 1927 and 1928, the Wall Street Stock Exchange was home to the new gold rush, as thousands of Americans rushed to take advantage of the booming share market. Some sold what they had or borrowed heavily to purchase shares. Few seemed to believe the boom would end – but it inevitably did. The trigger was industrial and agricultural over-production: American companies had grown so rapidly that by the late 1920s they were making more goods that could be bought by consumers. This in turn led to falls in sales, prices and profits.

The investment bubble burst on ‘Black Thursday’, October 24th 1929, when share prices on the New York stock exchange plummeted. Share owners began panic-selling, which caused prices to drop further. This trend continued for three weeks. On two consecutive days in late October, the entire stock exchange lost almost one-eighth of its value. The Dow Jones, a statistic showing the average share prices of major companies, had peaked at 381.2 shortly before the crash; by mid-November 1929 it had fallen to 198. The Wall Street crash had disastrous effects on the US economy. Between 1929 and 1932, American industrial production fell by 45 per cent. Many companies were bankrupted or ceased trading; others attempted to cut costs by releasing workers. The result was mass unemployment; by 1932, more than 12 million Americans were out of work. The collapse in economic confidence fuelled a run on banks, as people rushed to secure their savings. Hundreds of banks also closed and many lost cash investments and savings.

“Germany appeared to be on the brink of civil war. The young Weimar Republic was wracked by armed street fighting waged mainly between Communists and Nazis. Foreclosures, bankruptcies, suicides and malnourishment all skyrocketed. Six million Germans, 40 per cent of the working population, were unemployed; and thousands found themselves without a place to live… As anxiety and fear gripped the masses of unemployed men, blatant prejudices resurfaced against full-time female workers. Women were urged to give up their jobs and return home to their traditional roles as wives and mothers. Some of them gladly complied. Others were despondent, either because of their financial need to work or because they worried that the few advances made by women would be permanently stifled.”
Irene Guenther, historian

The Great Depression had profound effects on American society. With no system of state welfare, the jobless were forced to rely on charity. ‘Breadlines’ were a common sight as thousands of desperate people queued to receive food handouts. Others scavenged for scraps in dustbins and rubbish heaps. Between 1929 and 1933 hundreds of Americans starved to death. The jobless often became homeless, with more than a million people evicted from their homes. In 1932 alone there were 23,000 suicides in the United States. There were knock-on effects around the world, with few developed nations spared at least some economic misery. Countries that relied on industrial or agricultural exports, like  Britain and Australia, suffered the worst. British unemployment more than doubled to 2.5 million; in its northern industrial areas, the unemployment rate was as high as 70 per cent. In Australia the demand for wool and food exports slumped, along prices, wages and unemployment. By 1932 almost 30 per cent of Australian workers were without a job.

The impact on Weimar Germany was even more dire. Germans were not so much reliant on exports as they were on American loans, which had been propping up the Weimar economy since 1924. No further loans were issued from late 1929, while American financiers began to call in existing loans. Despite its rapid growth, the German economy was not equipped for this retraction of cash and capital. Banks struggled to provide money and credit; in 1931 there were runs on German and Austrian banks and several of them folded. In 1930 the US, the largest purchaser of German industrial exports, put up tariff barriers to protect its own companies. German industrialists lost access to US markets and found credit almost impossible to obtain. Many industrial companies and factories either closed or shrank dramatically. By 1932 German industrial production was at 58 per cent of its 1928 levels. The effect of this decline was spiraling unemployment. By the end of 1929 around 1.5 million Germans were out of work; within a year this figure had more than doubled. By early 1933 unemployment in Germany had reached a staggering six million.

The effects this unemployment had on German society were devastating. While there were few shortages of food, millions found themselves without the means to obtain it. The children suffered worst, thousands dying from malnutrition and hunger-related diseases. Millions of industrial workers – who in 1928 had become the best-paid blue collar workers in Europe – spent a year or more in idleness. But the Great Depression affected all classes in Germany, not just the factory workers. Unemployment was high among white-collar workers and the professional classes. A Chicago news correspondent in Berlin reported that “60 per cent of each new university graduating class was out of work”. British novelist Christopher Isherwood, who lived in Berlin during the worst of the depression, described its scenes:

Morning after morning, all over the immense, damp, dreary town and the packing-case colonies of huts in the suburb allotments, young men were waking up to another workless empty day, to be spent as they could best contrive: selling boot-laces, begging, playing draughts in the hall of the Labour Exchange, hanging about urinals, opening the doors of cars, helping with crates in the market, gossiping, lounging, stealing, overhearing racing tips, sharing stumps of cigarette ends picked up in the gutter.

The Weimar government failed to muster an effective response to the Depression. The usual response to any recession is a sharp increase in government spending to stimulate the economy – but Heinrich Bruning, who became chancellor in March 1930, seemed to fear inflation and a budget deficit more than unemployment. Rather than ramping up spending, Bruning decided to increase taxes to reduce the budget deficit; he then implemented wage cuts and spending reductions, an attempt to lower prices. Bruning’s policies were rejected by the Reichstag – but the chancellor was backed by president Hindenburg, who in mid-1930 issued his policies as emergency decrees. Bruning’s measures failed and probably contributed to increased unemployment and public suffering in 1931-32. They also revived government instability and bickering between parties in the Reichstag.

The real beneficiary of the Great Depression and Bruning’s disastrous policy response was Adolf Hitler. With public discontent soaring, membership of the NSDAP grew to record levels. In September 1930 the NSDAP increased its representation in the Reichstag almost tenfold, winning 107 seats. Two years later they won 230 seats, the most won by any single party during the entire Weimar period. Hitler found the failures and misery of the Great Depression to his liking, remarking: “Never in my life have I been so well disposed and inwardly contented as in these days. For hard reality has opened the eyes of millions of Germans.”

 

 

 

1. The Great Depression was triggered by a collapse in US share prices in 1929, after a decade-long economic boom.
2. It led to years of economic downturn in developed nations, as businesses closed or cut back by shedding workers.
3. Unemployment was the most noticeable effect of the Depression; in Germany it put six million men out of work.
4. The Bruning government failed to respond effectively, passing tax increases and cutbacks rather than spending.
5. Public dissatisfaction with the economic conditions and the government led to a dramatic increase in voter support for Hitler and the NSDAP, who became the largest party in the Reichstag.


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