How Did Germany Pick Itself Back Up Economically after WWI?

The Treaty of Versailles, signed in 1919, imposed severe restrictions on Germany, including a drastic reduction of the size of its military. However, the German government and military found ways to circumvent these limitations, which played a significant role in the country's economic recovery in the following years.

The Military Crisis and Counter-Measures

The Treaty of Versailles mandated that the German army be reduced to 100,000 men. Nonetheless, the German government ensured that this reduction was only on paper. The official military force, the Reichswehr, was restricted to 100,000 personnel, but the government also had paramilitary forces to augment the army, collectively called the Black Reichswehr. While this organization was officially dissolved in 1923, similar paramilitary groups persisted well into the Nazi era, contributing to the militarization of German society.

Similar to the Reichswehr, in the Weimar Republic era, various other paramilitary groups operated independently. The Stahlhelm and the Nazi Sturmabteilung (SA) were prominent examples of these organizations. The SA would later swell the ranks of the army as Hitler openly defied the Versailles treaty and expanded the military after 1933.

Military Industry and New Technologies

Despite strict conditions, the Versailles Treaty did not have the authority to ban the development of new military technologies. This void allowed Germany to pioneer the development of rocket weapons, which adhered to the treaty's conditions while enabling the country to advance in military innovation.

German heavy industry continued to produce arms through devious means, such as selling weapons to the Soviets under the guise of "farm equipment." The flexibility in the treaty meant that while the spirit of the agreement was maintained, the letter could be circumvented through diplomatic and commercial maneuvers.

Hyperinflation and Reparations

The German economy suffered greatly after the First World War, leading to hyperinflation in the early 1920s. While this hyperinflation made the reparations easier to pay off (as the real value of debts fell), it also caused significant social and economic turmoil.

The Dawes Plan and Economic Recovery

The economic recovery of Germany experienced a turning point with the Dawes Plan in 1924. This plan, backed by the United States, involved the infusion of a large loan into the German economy, stabilizing the Mark. This led to a significant period of economic growth, known as the “Golden Years,” from 1925 to 1929. This period saw the construction of infrastructure like the Autobahn, which was initiated by Chancellor Brüning, but later championed by Hitler.

However, the economic recovery was tied to American interests, which ultimately led to the Great Depression of 1929. Germany faced a severe economic crisis, marked by soaring unemployment under Chancellor Brüning's mismanagement. This period was a harsh reminder of the fragility of economic recovery based on external factors.

The Hitler Era and Economic Policies

Hitler sought to put Germany on a war footing, which led to full employment by 1936. However, his policies to finance this economic boost were not sustainable. Hitler created a "funny money" scheme, involving the issuance of a new fiat currency to be used within industry, which eventually circulated back to the central bank in exchange for Marks. This attempt to solve the financial situation through unconventional means is widely debated, with some arguing that it even contributed to the European war.

It is important to note that it was not Hitler who started the post-depression recovery, but rather Chancellor Schleicher, who devised job creation programs and public work projects, including the Autobahn. Hitler quickly claimed credit for these initiatives once he assumed power in 1933.

Exploring the full story behind this economic recovery and its implications can be fascinating. Consider watching the documentary “Blood Money” to delve deeper into the complex economic and financial strategies employed by Germany during this tumultuous period.