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The Failure of the Weimar Republic

Scholar says economic policy was one reason

Feb 15, 2019

With the global economic crisis at the end of the “Golden Twenties,” many people began to go hungry again. The picture shows a soup kitchen for the needy in Berlin-Schönweide (1931).

With the global economic crisis at the end of the “Golden Twenties,” many people began to go hungry again. The picture shows a soup kitchen for the needy in Berlin-Schönweide (1931).
Image Credit: picture alliance akg

Germany, the early 1930s: More than six million are unemployed, many companies have gone bankrupt, and families have been cast into poverty. It is an economic crisis the likes of which have never been seen before. Poverty offers fertile ground for hate.

The National Socialist German Workers’ Party, better known as the Nazi party, which had taken just 2.6 percent of votes in the Reichstag elections in 1928, scored a landslide 43.9 percent victory in the election held on March 5, 1933. Some one month before, Adolf Hitler had been named the Chancellor of the Reich by President Paul von Hindenburg.

“If unemployment had been gotten under control, the Nazis wouldn’t have had a chance,” says Carl-Ludwig Holtfrerich, a professor emeritus of economic history at the John F. Kennedy Institute at Freie Universität Berlin. He is one of the foremost experts on the economic history of the Weimar Republic. “The reasons for the catastrophic failure of the first German democracy lie in part in economic policy,” Holtfrerich says. “And we can still learn from that failure today.”

In the mid-1920s, the young Weimar Republic was booming. But economic crisis would bring the “Roaring Twenties” to a screeching halt. “In Germany, the crash occurred a full year before the big crash on Wall Street,” Holtfrerich explains. In 1928, the United States was still in the grip of stock market fever to such a degree that the American investment so urgently needed in Germany failed to materialize. The Americans were putting their money in stocks instead of lending into the German economy. The effects began to show in the German labor market. Finally, in 1929, the entire world fell deep into crisis. “The German government should have immediately implemented an expansive job creation program, financed through domestic sources of credit, meaning the Reichsbank first and foremost.”

Instead, nothing happened, for tactical reasons. Heinrich Brüning, who was then Chancellor, wanted to prompt the powers that had emerged victorious from World War I to waive the reparations they were owed under the Treaty of Versailles. His aim was to present Germany’s poverty to the rest of the world as a demonstration of their poverty. “Brüning always said we had to show the other countries that Germany couldn’t afford the reparations,” Holtfrerich explains. “That being the case, they couldn’t invest domestically at the same time.”

It was not until July 1932, at the Lausanne Conference, that the German government achieved its aims – but by then, Brüning had already been deposed, and the rise of the Nazis was in full swing. “By 1932, it was much too late to change course,” says Holtfrerich. “Then, when things started to improve, the Nazis were able to claim all the credit.” The failure of the democratic Weimar Republic can teach us two lessons in terms of economic policy. “First, a country should always keep a cushion so it can fight a massive economic crash,” Holtfrerich says.

But governments should also maintain a climate of cooperation on the international stage as well and be able to work together on currency and economic policy in times of crisis. That is exactly where things went wrong in 1929. “At the time, each country was trying to save its own neck alone,” says Holtfrerich. The United States and the United Kingdom also contributed to Germany’s decline with their national economic policies. “It was really lucky that things were so different in the financial crisis of 2007 and 2008. That was the only way that the worst could be averted.” Holtfrerich views U.S. President Donald Trump, who is leading his country toward national isolation and protectionism, with concern. “Of all countries, the United States, which created the international framework after World War II, is shaking its foundations today. It’s truly an absurd situation.”

This text originally appeared in German on December 15, 2019, in the Tagesspiegel newspaper supplement published by Freie Universität.

Further Information

Professor Carl-Ludwig Holtfrerich, John F. Kennedy Institute for North American Studies, Freie Universität Berlin, Tel.: +49 30 838 52478, Sec: +49 30 838 53603, Email: carl-ludwig.holtfrerich@fu-berlin.de