Germany And The Great Economic Depression (II)

Part I

The pattern of trade for the Weimar Republic, before the Great Economic Depression, was comparable with that of the Second German Reich (1871-1918) before 1914. However, from 1930 the real crisis of the German external trade was one of the outcomes of the Great Economic Depression. In contrast to the mid-1920s, German export during the depression could not compensate for the lower demand at home. Still, even in the crisis, Germany’s foreign trade balance was favorable, with a surplus of RM 1,560 million in 1930, RM 2,780 million in 1931 and RM 1,050 million in 1932.[1] Nevertheless, the most important point was that this was not sufficient to compensate for the gold and foreign currency losses by credit withdrawals and capital flight. A bright spot was, for instance, the German trade with the Soviet Union (the so-called “Russengeschaeft”) which increased continuously.[2] The most significant reason for this was the fact that the Soviet Union was not affected by the Great Economic Depression and actually successfully continued with the process of great industrialization. In 1932 German capital goods exports to the USSR amounted to 26% of her total exports. The German government decided to reduce the German imports in order to improve her payments to abroad. However, foreign trade problems and difficulties became very severe and dangerous after the mid-1931. Protectionist measures by most of Germany’s trading partners negatively influenced the German export of the final products.[3] According to Dietmar Petzina, Anselm Faust and Werner Abelshauser, if the 1913 year has index 100, export to import was: in 1929-105.8; in 1930-115.4; in 1931-128.8; in 1932-147.5; in 1933-152.6; and in 1934-144.8. The situation regarding a raw material to raw material was as the following: in 1928-112.9; in 1929-109.2; in 1930-116.1; in 1931-126.7; in 1932-125.1; in 1933-120.3; and in 1934-112.6. Regarding final products to final products the situation was: in 1929-99.4; in 1930-98.4; in 1931-93.1; in 1932- 100.6; in 1933-109.1; and in 1934-111.9.[4]

The terms of trade changed in favor of industrial goods and at the expense of primary goods. For Germany, they decreased by 20% between 1890 and 1913 and increased by 7% from 1910/1913 to 1924/1930, and more than 30% during the 1930s.[5] From 1931 onwards import prices fell below their pre-war level whereas export prices remained above that level for another two years. It is important to notice that the export prices in 1933 reached their highest point at more than 50% above the 1913 level. With regard to the import, the raw material played the most important role. Although their import share fell from 43.1% in 1910/1913 to 38.8% in 1924/1929 it later rose up to 39.9% in 1930/1934. The import of foodstuffs rose until 1924/1928 but then fell in the late 1920s and early 1930s while the import of the final products rose up constantly during the period of the Weimar Republic.[6]

Breadline in New York City during the Depression
Breadline in New York City during the Depression

Germany had introduced exchange control in 1931 and Berlin introduced measures to settle import and export, as far as possible on a bilateral basis. In some cases, Germany was able to manipulate trade to her advantage and accumulate trade deficits with primary product exports. The Weimar Republic established new bilateral trading arrangements with many countries in both Europe and outside. However, the German most important economic (export-import) sphere of influence was in South-Eastern Europe: Yugoslavia, Romania, Hungary and Bulgaria. Germany had a surplus on the trade with the rest of Europe and a deficit with the rest of the world, but especially with the USA.[7] Germany gained particularly from her trade with the UK. The German industrial export was funding the import of the raw material and some of the foodstuffs. From 1931 Germany made preferential trade treaties with Romania and Hungary which allowed these two agricultural exporters access to a major European national market at a time of severe price depression as an outcome of the economic crisis. For instance, Hungary signed a new treaty in 1934 which guaranteed a quota of food exports to the German market. According to D. E. Kaiser, the figures regarding the German share of the trade in the Eastern and South-Eastern Europe were as the following: in 1928 with Czechoslovakia export 22.1%, import 24.9%; Hungary 11.8% export and 19.5% import; Romania export 18.4%, import 23.7%; Yugoslavia 12.1% export, 13. 6% import, Poland (including Danzig) export 34.2%, import 26.9%, and Austria 18.5% export and 19.9% import. The figures concerning the German trade with the same countries in 1933 were: Czechoslovakia export 17.7%, import 19.9%; Hungary export 11.2%, import 19.7%; Romania export 10.6%, import 18.6%; Yugoslavia export 13.9%, import 13.2%; Poland (with Danzig) export 17.5%, import 17.6%; and finally Austria 15.1% export and 18.8% import.[8]

Germany was able to make a marginal transfer of trade to the economics of South-Eastern Europe, but this was trade diversion rather than creation. By 1936 Czechoslovakia, Hungary, Yugoslavia, Bulgaria, Austria, Romania, Poland and the Baltic states (Estonia, Latvia and Lithuania) together provided nearly 13.8% of the German import against 5.9% in 1928. During the same period, a total German import had fallen to 41% of their 1928-level. Generally, Germany was the largest market for the Netherlands (24% of export in 1928), Austria, Czechoslovakia (over 20%), Poland (40%) and the agrarian countries of South-Eastern Europe. Anyway, Germany without the overseas colonies was forced to extend her influence in Europe.[9]

The economic downturn and the problem of unemployment

The mass unemployment in Weimar Germany in the early 1930s was one of the greatest and most difficult outcomes of the economic downturn and declination of the agricultural and industrial production. The main problem in the agricultural sphere of the economy became severe unemployment similar to the case of the German industry. In 1929 unemployment figures had amounted to 1.9 million, but they quickly rose to 5.6 million as a yearly average in 1932 and reached their maximum in the period from January to March 1933 with 6 million registered as unemployed. However, the actual figure was much higher than the official one because many people who had given up hope of finding a job or were longer eligible for unemployment benefits were not registered as unemployed.[10] In reality, it is very difficult to assess the real number of unregistered unemployed people, but the figure probably amounted from 1.7 to 1.8 million at the end of July 1932. In addition, the “short-time” work was another problem as, for instance, in February 1933 24.1% of those employed were in the short-time. Mainly because of the vast reserve army of the unemployed people the wages were reduced from 1930 onwards. The reduced wages became the direct aftermath of the mass unemployment in the Weimar Republic. Between 1929 and 1932 real wages were reduced by 16%. According to F. Blaich, the civil servants did not have to fear unemployment, but their salaries were particularly affected by the crisis and government policy, failing by 25% to 28% in real terms during the depression years.[11]

Breadline in Germany during the Great Economic Depression
Breadline in Germany during the Great Economic Depression

According to Karl Hardach, in 1932 the German unemployment was 30.8%. This figure compared to 7% of the unemployment in 1928 (the last of the so-called “golden years”) is surely quite unfavorable.[12] According to R. Muntling and B. A. Holderness, the unemployment mounted to over 30% of the labor force in 1932, an annual average figure of 5.6 million. The unemployment was most severe in the major industrial regions of the Ruhr and Silesia but was lesser locally concentrated than in Great Britain, for instance.[13]

The huge unemployment figure in Germany gave rise to various job creation plans, some of them sensible, others less so. To the latter category belonged, for instance, a program worked out by the Reich Association for the Reform of Male Clothing, founded in Munich in 1931, which was of the opinion that the economic recovery could be positively affected by producing of the large quantities of the men’s clothing.[14] During the years 1931-1932 the Bruning, Papen and Schleicher governments set up various employment programs in order to save the German economy and social peace. During the Bruning government, unemployment rose up from 2.3 to 6 million. Nevertheless, his export-based policy of promoting employment had failed for two basic reasons:  1) the other countries responded to the crisis with protectionist measures: 2) the world market prices had fallen faster than those of the German export commodities. In addition, the Bruning domestic market policy for promoting employment, for which the preparations had been started in the second half of 1931, had equally little success. The planned emergency work projects, for example, the land improvement, settlements, etc., did, however, provide a counterbalance to certain very unpopular economic measures, particularly the drastic reduction in unemployment benefits, and were supposed to show the government’s good intentions from the social point of view. The employment of the jobless masses rather than stimulation of the economy was the goal of the RM 135 million program decided on in May 1932, for which the government had succeeded in the gathering of the tight-fisted “Reichsbank” to provide credits.

Public restaurants in Germany with free food during the Depression
Public restaurants in Germany with free food during the Depression

A long-standing plan of a plant-based “Werksgemeinschaft” – a trade union of free works community on the basis of individual or factory contracts – became a sort of way out. However, under the conditions of mass unemployment, which was running at an average of 23.4% already in 1930 (36.2% and 46.8% in 1931 and 1932 respectively), the offer of a “Werksgemeinschaft” took on the form of hardly disguised blackmail. The Papen government continued the RM 135 million employment scheme begun under Bruning one and, having in mind that a budget deficit was unavoidable, added RM 220 million for immediate job-creating purposes. According to H. J. Braun, in September 1932 Franz von Papen increased the funds available for a public works program by another RM 167 million to a total of RM 302.[15] The main task of Papen’s government’s policy was to reduce the number of 1.75 million unemployed men by the end of 1933. The policy was based on indirect job-creating measures, which meant that the entrepreneurs would receive tax incentives to employ workers and to expand production. However, for the reason of an unstable political situation, a ponderous bureaucracy, and the limited size of the program, the effects of Papen’s government’s efforts were rather small. His successor from December 1932, Schleicher, put more emphasis on public works in order to reduce the unemployment. Schleicher’s government continued with Papen’s employment efforts and supplemented them by a new RM 500 million program for emergency measures, of which RM 100 million were earmarked for the armament contracts. In order to employ as many people as possible, machinery had to be used sparingly and the maximum working time per week was fixed at 40 hours.[16] Nevertheless, these measures were insufficient to produce an immediate or “magic” cure for the economic depression but the fact was that at the time of A. Hitler’s appointment as the chancellor of the Republic on January 30th, 1933 there were already glimmerings of economic recovery as the unemployment was falling down in general point of view (the 1933-average was 4.8 million or 26.4%).


In the whole complex of causes of the world-wide Great Economic Depression in 1929-1934, the most important were:

1) The mistaken equation of the post-war backlog demand with long-term demand.

2) The overestimation of the market’s ability to absorb the products of the new industries.

3) The creation of over capacities resulting from these miscalculations.

4) Vast speculative dealings in securities.

5) Long term investment of funds from short-term credits.

6) International money transfers with no counterblow of goods and services.

7) Disrupted international trade relations through restrictive measures on the part of individual states.

The Great Economic Depression and its outcomes were strongest in the Weimar Republic because of several reasons, but the most direct and important was that the German post-war economy was not sufficiently recovered from the First World War’s struggles and its consequences.[17] As an additional economic problem in which was Germany as a loser of the Great War were the war’s reparations, particularly to be paid to France. During the depression years, every country held the so-called policy of protectionism which made the German export very difficult and particularly to the western partners. These reasons influenced negatively the German production especially in the area of the industry, but in agriculture as well as. The most difficult and also politically serious outcome of the economic slump in Germany was mass unemployment. Actually, unemployment in Germany took the highest level all over the world during the time of depression, but the government’s attempts and measures to solve or alleviate this problem were unsuccessful. The offer by A. Hitler (1889-1945) and his NSDAP to try to resolve the German economic problems became accepted and he became appointed as a chancellor of the Weimar Republic on January 30th, 1933. However, together with the economic recovery of Germany under his dictatorship, it was and a road to the Second World War in which Hitler wanted to “expand his country’s boundaries, most particularly southward and eastward”.[18]

Reposts are welcomed with the reference to ORIENTAL REVIEW.


[1] H. J. Joachim Braun, The German Economy in the Twentieth Century, p. 66.

[2] Hans-Juergen Perrey, Der russlandausschuss der deutschen Wirtschaf, pp. 128-202.

[3] Verena Schroeter, Die deutsche Industrie auf dem Weltmarkt 1929 bis 1932, pp. 54-59.

[4] Dietmar Petzina, werner Abelshauser, Anselm Faust, Sozialgeschichtliches Arbeitsbuch, p. 77.

[5] Hoffmann, W.G., F. Grumbach, H. Hesse, Das Wachstum der deutschen Wirtschaft seit der Mitte des 19. Jahrhunderts, Berlin-Heilderberg-New York, 1965, pp. 548-549.

[6] Hans – Joachim Braun, The German Economy in the Twentieth Century, p. 58.

[7] Roger Munting, B.A. Holderness, Crisis, Recovery and War, p. 36-40.

[8] D. E. Kaiser, Economic Diplomacy and the Origins of the Second World War, pp. 325-326.

[9] Roger Munting, B. A. Holderness, Crisis, Recovery and War, p. 33.

[10] See: Peter D. Stachura (ed.), Unemployment and the great depression in Weimar Germany.

[11] F. Blaich, Der Schwarze Freitag. Inflation und Weltwirtschaftskrise, pp. 68-71.

[12] Karl Hardach, The Political Economy of Germany in the Twentieth Century, p. 40.

[13] Roger Munting, B. A. Holderness, Crisis, Recovery and War, pp. 136-137.

[14] Willi A. Boelcke, Die deutsche Wirtschaft 19301945. Interna des Reichswirtschaftsministeriums, p. 13.

[15] Hans-Joachim Braun, The German Economy in the Twentieth Century, p. 72.

[16] Karl Hardach, The Political Economy of Germany in the Twentieth Century, p. 48.

[17] On the Weimar Republic’s economy see deeper analysis in: Theo Balderson, Economics and Politics in the Weimar Republic; Anthony McElligott (ed.), The Short Oxford History of Germany. Weimar Germany, “The Weimar Economy”, pp. 102-126.

[18] Paul Robert Magocsi, Historical Atlas of Central Europe, p. 177. However, during the WWII the Nazi Germany economy became apocalyptic (Timothy Snyder, Bloodlands. Europe Between Hitler and Stalin).

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