The Ruhr: An Economic Downturn

The Weimar government was struggling to pay the reparations demanded by the Treaty of Versailles. The views of the Allied powers differed: the US had taken the isolationist route and paid little interest to what was happening in Europe; while Italy was in the midst of a fascist takeover. Britain felt that Versailles had been too harsh and sought reconciliation with the Germans, and advocated a reduction in reparations to aid the recovery of the Germany economy, which, in turn, would benefit the economy of Europe as a whole. Only the French were determined that Germany should fully meet her obligations.

In 1923 the Ruhr industrialists had stopped supplying France the requisite quota of German coal. The French and Belgium governments, angered by this breaking of the rules, sent troops into the region (pictured below). When the German workers of the Ruhr, affronted by this occupation, refused to work for the French, the French government sent in its own workforce. The occupation of the Ruhr caused chaos for Germany’s economy, triggering a period of high unemployment and hyperinflation. The inflation wiped lifetime savings out overnight: in 1921 the mark was worth one dollar. Two years later it was an unimaginable 4,000,000,000,000 to the dollar.

logo

French soldiers during the occupation of the Ruhr, 1924

Bundesarchiv, Bild 102-00654 / CC-BY-SA

America began to realize, as had the British, that an economically unstable Germany would be detrimental to all Europe and tasked Charles Dawes, an American banker, to formulate a recovery programme. The Dawes Plan had the desired effect and from 1924 Germany enjoyed a period of relative prosperity. American loans and investment brought inflation down to a manageable level and unemployment fell. With American money, Germany began paying the French, Belgian and British reparations, albeit at a lesser rate, and the Allied nations, in turn, were able to start repaying their war debts to the US. It was an unending circular movement of money. By 1925 the French and Belgians had withdrawn from the Ruhr.

On the international stage too, relations between Germany and its European neighbours became less tense, ending Germany’s sense of isolation, and leading, in 1926, to Germany joining the League of Nations. In 1929, based on the recommendation of the American commissioned Young Plan (after its author Owen D. Young), reparations were cut by 75 per cent. Following the Great Depression payments were suspended for a year and by 1931 reparations were dropped altogether. Germany had paid back only an eighth of the original demand.

Following the failed Munich Putsch, Hitler’s name had become known throughout Germany. However, during the Weimar years of relative economic stability the Nazis were marginalized and, even on Hitler’s release, lacked electoral support, rarely polling more than 3 per cent throughout the 1920s.

If you find an error please notify us in the comments. Thank you!