Selected Aspects of the development of the German Economy in the Great Depression

Vybrané aspekty vývoje německého hospodářství za Velké hospodářské krize

Radek Soběhart and František Stellner

Acta Oeconomica Pragensia, 2005, vol. 2005, issue 3, 252-267

Abstract: The Great Depression deepened problems of the Weimar Republic and contributed to the establishment of the Nazi dictatorship. However, the symptoms of weakness in the economical sphere could be already seen in the late 1920s. The indebtedness of the state and high public expenditures related to the great bulk of foreign loans became the biggest problems of this state. Political parties could not achieve unanimity in anti-crisis reforms and, as a result, in 1930 President Paul von Hindenburg appointed new Chancellor Dr Heinrich Brüning. His cabinet focused on balancing of the national budget and nullification of reparations. Consecutively, the German government adopted a wide range of drastically saving provisions with the intention of lowering state expenditures and maintaining the stability of currency. The adopted deflation policy did not take into account rapidly increasing unemployment and social instability that was reflected in the rising preferences of radical political parties - NSDAP and KPD. Economic slump reached its peak after the outbreak of the socalled Bank crisis, caused by the collapse of influential Berlin bank houses. German government continued to pursue the deflation policy which was based on an experience with the hyperinflation in the years 1923-1924 and the majority of politicians feared that new credits and state interventions would cause depreciation of currency and political unrest. Following cabinets of Franz von Papen and Kurt von Schleicher did not manage to stop the impact of the Great Depression. Only the new cabinet of Adolf Hitler started the era of state investments into armament and construction and thus contributed to the finishing of the depression.

Keywords: German economic policy; the great deppression; politics of deflation; banking cisis; unemployment (search for similar items in EconPapers)
JEL-codes: N14 N44 P20 (search for similar items in EconPapers)
Date: 2005
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DOI: 10.18267/j.aop.172

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