Hyperinflation in Germany, 1923 (Edexcel GCSE History)
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Author
Zoe WadeExpertise
History
The Impact of Hyperinflation on the Weimar Government - Summary
Germany began the process of paying off the 132 billion gold mark reparations bill set by the Allies in 1919. It soon became clear that Germany could not meet their monthly repayments. The Treaty of Versailles had taken away all of Germany’s overseas colonies as well as 50% of its iron production. The treaty also stated Germany had to send coal to France to help increase its industrial output. European countries did not want to buy the goods that Germany produced. Citizens of Britain and France bought their own country’s products. This was an attempt to boost their economies back to pre-war levels. Many European countries had taken out loans in 1914-18 to fund their war efforts. The USA received a large proportion of Germany’s monthly reparations bill indirectly from Britain and France. This was because the USA requested that Britain and France pay back the money lent them for the First World War. If Germany could not pay their reparations, countries like Britain and France would default on their loans to the USA. As a result, in January 1922, Britain and France rejected Germany’s request to reduce their monthly payments. By 1922, Germany could not fulfil its coal obligations to France. This forced France, supported by Belgium, to invade the Ruhr coalfields in January 1923. The resulting events triggered a hyperinflation crisis in Germany. A loaf of bread cost 200,000 billion marks in 1923 compared to 1 mark in 1919. The crisis of 1923 permanently damaged the Weimar government's reputation. Many blamed the government's handling of the French invasion of the Ruhr as the cause of the depression. Hyperinflation destroyed the life savings of the middle classes. As a result, the government lost the support and trust of a key electorate group. The legacy of hyperinflation would push many to support extremist political groups such as the Nazi Party. |
Occupation of the Ruhr
In December 1922, France accused Germany of not sending the amount of coal required by the Treaty of Versailles
France was already suspicious of Germany because:
In November 1922, Germany had requested to stop reparation payments to Britain and France for the next four years
In April, Germany had signed the Treaty of Rapallo with Russia. They had agreed that Russia would supply Germany with economic support
French and Belgium troops entered the Ruhr in January 1923
The Ruhr was Germany’s most valuable industrial area
The soldiers seized coal, manufactured products and machinery
Chancellor Cuno urged the coal workers to use passive resistance against the French and Belgian soldiers. Passive resistance is protesting in a non-violent way.
The workers:
Went on strike
Sabotaged machinery
The French responded by bringing their own workers into the Ruhr
The Weimar government could not force the soldiers out of the Ruhr because:
The Treaty of Versailles restricted Germany’s army to 100,000 men whereas the French had 750,000 soldiers
The public had a poor opinion of the Weimar government. They believed that the government could do more to force the French out of the Ruhr
The French occupation of the Ruhr damaged Germany’s economy because:
The Weimar government insisted on paying wages to the striking workers
Germany was not producing enough coal to meet demand. The government began importing coal from other countries. This additional cost was more than they could afford
The government could not make essential goods because coal fuelled many factories. This caused shortages in other products
As Germany had fewer products to trade internationally, countries lost confidence in the mark as a currency
Germans experienced shortages in everyday items. This increased the prices of these products
What is Hyperinflation?
The term inflation means the increase in prices
Inflation happens in an economy over time. For example, a loaf of bread in January 1971 cost 10p. The average price of bread in January 2023 was £1.06
Inflation is measured as a percentage
Hyperinflation is when prices rise rapidly and become out of control
In hyperinflation, wages struggle to match the cost of living
Hyperinflation can become so bad that currency loses its monetary value. Governments can print more money to counteract the effects of hyperinflation
Exam Tip
Inflation can be a tricky concept to understand, especially how it can cause money to lose all its value. Imagine that you have a rare diamond necklace. It would cost a lot of money to purchase the necklace because it is so rare. Now imagine that someone made 100 more diamond necklaces. The necklace is now not as rare, meaning it would not be worth as much as it was previously. Applying this concept to money, the more currency there is in circulation, the less it is worth. As a result, printing money can limit the impact of inflation but overprinting money can be dangerous to an economy.
In early 1923, the invasion of the Ruhr caused inflation
Prices rose because there was a shortage of essential goods
The government had a reduced amount of money because:
The Weimar government continued to pay the wages of the striking Ruhr workers. Technically the government was paying for coal they were not receiving
The government purchased coal from other countries to meet Germany’s demand for coal
Some businesses closed down because of the drop in demand for their products or services. This increased levels of unemployment and reduced the amount of money the government earned in taxes
The Weimar government decided to print more money
In 1923, there were 300 paper mills and 2,000 printers whose sole purpose was to print currency
The decision to print an excessive amount of money caused the hyperinflation crisis
By November 1923, the German currency (mark) had become worthless
Some workers received pay twice a day so they could purchase essential goods before their wages became worthless
People filled wheelbarrows full of money to buy a loaf of bread
The Impact of Hyperinflation on the Weimar Republic
The impacts of hyperinflation in 1923
Group | Positive impacts | Negative impacts |
Working classes | Some workers coped with hyperinflation as their employer paid them in essential items rather than the mark People hoarded goods and sold them for a high price | Many people resorted to stealing food to survive Unemployment rose and some workers died from starvation |
Middle classes | People who had mortgages, rent or loans could pay off the money they owed as the debt became worthless | The middle classes lost their life savings, insurance policies and pensions The government lost their backing. The middle classes looked to extremist parties for solutions |
Businesses | If a business took out a loan, it could fully repay the loan when the value of the mark began to decrease | Businesses could not afford to pay their workers, they were forced to close or make redundancies |
Foreign visitors | Visitors saw that their currency was worth more than the mark. They could buy more items in Germany with their currency | The German public did not like visitors profiting from their suffering |
Worked Example
Give two things you can infer from Source A about the impact of hyperinflation in 1923
4 marks
Source A: An interview with Frieda Wunderlich in 1960. Frieda lived in Germany in 1923 and shared her experience of hyperinflation
“As soon as I received my salary I rushed out to buy the daily necessities. My daily salary, as editor of the periodical Soziale Praxis, was just enough to buy one loaf of bread and a small piece of cheese or some oatmeal. An acquaintance of mine, a clergyman, came to Berlin from a suburb with his monthly salary to buy a pair of shoes for his baby; he could only buy a cup of coffee”
Answers:
i) What I can infer:
I can infer that reasonably wealthy people were impacted by hyperinflation (1)
Details in the source that tell me this:
“As editor of the periodical Soziale Praxis” (1)
ii) What I can infer:
I can also infer that people could just afford to eat (1)
Details in the source that tell me this:
“just enough to buy one loaf of bread and a small piece of cheese or some oatmeal” (1)
Exam Tip
There is a slight difference when answering an inference question on a written source instead of a visual source. In the “Details in the source” section, ensure you use quotes to support your inferences. This shows the examiner that you have picked specific evidence to maintain a focus on the question.
Short & long-term impacts of hyperinflation on the Weimar government
Short-term impacts of hyperinflation | Long-term impacts of hyperinflation |
In 1923, the public saw the Weimar government as weak | Despite successes in 1924-28, the public would never again trust Weimar politicians in a time of crisis |
Many people blamed the Weimar government for their suffering. This was especially true for the middle classes who suffered the most from hyperinflation | The legacy of hyperinflation would haunt the German public. Some people lost family members to poverty and starvation |
There was a growth in support for extremism. The Nazi Party attempted a putsch in Munich in 1923 | Unemployment rates remained high throughout the 1920s. Hitler’s promise of more jobs for young men persuaded many to vote for the Nazi Party in the 1930s |
Causes & consequences of hyperinflation
A diagram illustrating the causes and consequences of hyperinflation
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