By 1933, low economic growth, high unemployment and hyperinflation had many German families on the brink of starvation. The economic growth that came after World War I was a direct result of US loans to Germany that allowed the economy to grow and the country to pay the extremely high...
By 1933, low economic growth, high unemployment and hyperinflation had many German families on the brink of starvation. The economic growth that came after World War I was a direct result of US loans to Germany that allowed the economy to grow and the country to pay the extremely high reparations payments imposed by the Treaty of Versailles. The Dawes Plan provided loans that were to be directly invested in the Germany economy, thus enabling Germany to pay the exorbitant reparations payments. It was a circular plan that looked like this:
- The US landed money to Germany
- Germany paid reparations to France, Great Britain, Belgium, et al.
- The former Allies paid loans back to the United States for monies lent doing WWI.
The loans to Germany dried up in 1928 due to the faltering economy in the United States, and when the US Stock Market crashed in 1929, the consequences to all of Europe were extreme. Germany was especially hard hit as the fiscal response of the Weimar Government showed its shocking ineptitude.
Germany fell into a crisis called hyperinflation because the government was printing money to compensate for the faltering economy at the same time they were raising taxes. Unfortunately, this caused families in Germany to fall into crisis as well. Over six million German men were left unemployed as factories/businesses cut their work forces. Upper middle class families were equally hard hit as 60% of new university graduates were unable to find work.
Because many working families were on the brink of starvation, while the government kept raising taxes and cutting back expenditures, the German people became more and more frustrated with the Weimar Government and looked to the more radical parties, including Hitler’s Nazi Party (the National Socialist German Workers Party). The NSDAP became the strongest party in the Reichstag by 1932. Hitler, of course, was well pleased by the depression, as it afforded him the path to power. He is reported to have announced, “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.” (Quoted from: http://alphahistory.com/weimarrepublic/great-depression/#sthash.eQ2TfbUH.dpuf).
More and more Germans became enamored by the early Nazi Party’s ideology, which included unification of all Germany, repudiation of the Treaty of Versailles, and expulsion of all Jews from German life. Little did they know what would become of Germany under Nazi control.