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Unlock This CourseIn August 1923, at the height of the hyperinflation crisis, Gustav Stresemann became chancellor. He led the German People's Party and headed a 'great coalition' that included the SPD. He was chancellor for only about 100 days, until November 1923. After that he served as foreign minister in every government until his death in October 1929. In both jobs he worked to get the German economy back on its feet.
His first step was unpopular but necessary. In September 1923 he called off passive resistance in the Ruhr. Germany could not afford to keep paying millions of people not to work. Nationalists called this a surrender to France, but it stopped the biggest drain on the government's money and made talks with the Allies possible.
Next, Stresemann had to replace the worthless paper mark. In October 1923 the government set up a new bank, the Rentenbank. In November it began to issue a new currency called the Rentenmark. One Rentenmark replaced one trillion old marks.
The Rentenmark worked for two reasons. First, the number of notes was strictly limited, so the government could no longer print its way out of trouble. Second, the currency was backed by a mortgage on German farmland and industry, which gave people a reason to trust it. The banker Hjalmar Schacht was put in charge of the changeover. Prices steadied within weeks.
In August 1924 the Rentenmark was replaced by a permanent currency, the Reichsmark. It was backed by gold and controlled by the Reichsbank, which was now independent of the government. Germans could trust their money again, and so could foreign businesses. But there was a limit to this success: the savings wiped out in 1923 were not given back, and many middle-class Germans stayed bitter.
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A new currency would not last unless reparations were sorted out. Stresemann, now foreign minister, asked the Allies to look again at the payments. A committee led by the American banker Charles Dawes drew up a plan, which was agreed in 1924.
The Dawes Plan mattered because it gave Germany payments it could afford and made the country look like a safe place to invest. Nationalists still attacked it, because it meant accepting that Germany should pay reparations at all.
After the Dawes Plan, American money poured into Germany. Between 1924 and 1930 German governments, cities and businesses borrowed about 25 billion marks, most of it from the USA. Much of it was spent on new factories and machinery, and on public works.
Money in fact moved in a circle. US banks lent to Germany, Germany paid reparations to Britain and France, and Britain and France repaid their war debts to the USA. The circle worked only while the loans kept coming.
The Dawes Plan was never meant to be final. In 1929 a second committee, led by the American businessman Owen Young, agreed a new deal.
Lower payments meant the government could keep taxes down. But nationalists were furious at the idea of paying until 1988. The newspaper owner Alfred Hugenberg, helped by Adolf Hitler, forced a national vote against the plan in December 1929. It failed badly: only about 14 per cent of voters backed it. Stresemann did not live to see this. He died on 3 October 1929.
The currency was stable. Reparations were being paid at a rate Germany could manage. The French had left the Ruhr. Industry was producing more than before the war, wages were rising and new homes were being built. Germans who remembered 1923 felt that life had returned to normal.
The recovery was paid for with borrowed money, much of it in short-term loans that US banks could call back quickly. Stresemann himself warned that Germany was 'dancing on a volcano'. Unemployment stayed high: about 1.3 million people were still out of work in 1928. Farmers missed out as food prices fell, and many went into debt. Germany bought more from abroad than it sold, and the government spent more than it raised in taxes.
So the recovery was real, but it depended on the USA staying rich and willing to lend. What happened when the loans stopped is covered in the lesson The Great Depression and Growing Nazi Support.
Don't mix up the two plans. The Dawes Plan (1924) lowered the yearly payments and brought loans, but left the total alone. The Young Plan (1929) cut the total and gave more time. Also, don't write that Stresemann 'solved' Germany's economic problems. Examiners reward answers that weigh the recovery against its weaknesses, above all the reliance on US loans.
Extract A (a practice extract written for this lesson, in the style of a modern history textbook)
The so-called recovery of the German economy after 1924 was little more than an illusion. The new factories and smart housing estates were paid for with American money, not German wealth. Germany was living on credit, and its leaders knew it. Well over a million Germans were still out of work in 1928, and farmers sank deeper into debt each year. The whole glittering structure rested on short-term loans that could be withdrawn at any moment. It was a house of cards waiting for the first gust of wind.
(a) What impression does the author give about the recovery of the German economy in the years 1924-29?
You must use Extract A to explain your answer. [6 marks]
The author gives the impression that the recovery was false and fragile. This is shown by the language used. Calling it a 'so-called recovery' and 'little more than an illusion' suggests it was not a real recovery at all. The image of 'a house of cards waiting for the first gust of wind' makes it sound certain to collapse, and 'glittering' implies it only looked good on the surface. The author also selects only the weaknesses: 'American money', 'living on credit', unemployment and farmers' debts. Nothing is said about the stable currency, rising wages or industry passing its pre-war level, so successes are left out to make the recovery seem hollow. Even the new factories and housing are mentioned only to stress that they were bought with borrowed money.
What lifts this to the top level: it names one clear impression, then explains how the author creates it through loaded words and through what is included and what is left out, instead of just repeating the extract.
Start with the sentence 'The author gives the impression that...' and finish it with one or two describing words, such as 'false and fragile'. Then quote short phrases, like 'house of cards', and say what each suggests. Always add one sentence on what the author chose to leave out. You don't need any facts of your own for this question.