The Great Depression was a global economic
slump that erupted in late 1929 and lasted for several years. It began as an
American crisis, specifically a huge stock market crash, but had knock-on
effects around the world. The Great Depression was severely felt in Germany,
where it caused widespread unemployment, starvation and misery. These
conditions were instrumental in the rise to power of Adolf Hitler and the National Socialists (NSDAP).
Background
- The
1920s had been a boom decade for the United States economy. American companies
tallied up record production figures, ever-increasing sales and millions of
dollars profit. These profits meant high dividends and increasing share prices.
This, in turn, encouraged growing investment in shares.
In
1927 and 1928, the Wall Street Stock Exchange became the epicenter of a
new gold rush, as thousands of Americans rushed to invest in the booming share
market. The rapid returns on investment of the 1920s fueled reckless
acquisitions. Some investors borrowed heavily, mortgaged homes or sold whatever
they had to purchase shares.
Few seemed to believe this boom would end but,
like all economic booms, it inevitably did. The trigger was industrial and
agricultural over-production. American companies had grown so rapidly that by
the late 1920s, they were making more goods that could be bought by consumers.
This led to dips in sales, prices and profits.
The Dow Jones Industrial Average rose from 50
in 1915 to 350 in 1929 and dropped back to 50 in 1932.
The investment bubble
burst on ‘Black Thursday’, October 24th 1929, when share prices on the New York
stock exchange plummeted. Shareowners began panic-selling, causing prices to
drop further. This trend would continue over the next three weeks.
On two consecutive
days in late October, the entire stock exchange lost almost one-eighth of its
value. The Dow Jones, an index showing the average share prices of major
companies, peaked at 381.2 shortly before the crash but had fallen to 198 by
mid-November.
The Wall Street crash had disastrous effects on
the US economy. Between 1929 and 1932, American industrial production fell by
45 per cent. Many companies were bankrupted or ceased trading; others attempted
to cut costs by releasing workers.
The result was mass unemployment; by 1932, more than 12
million Americans were out of work. The collapse in economic confidence fueled
a run on banks, as people rushed to secure their savings. Hundreds of banks
also closed and many lost cash investments and savings.
The
Great Depression had profound effects on American society. With no system of
state welfare, the jobless were forced to rely on charity. ‘Breadlines’ were a
common sight as thousands of desperate people queued to receive food handouts.
Others scavenged for scraps in dustbins and rubbish heaps.
Other
outcomes were even more disastrous. Between 1929 and 1933, hundreds of
Americans starved to death. The jobless often became homeless, with more than a
million people evicted. In 1932 alone, there were 23,000 suicides across the
United States.
Global
misery - The crash had knock-on effects around the world. Few
developed nations suffered as much as the United States but nor were they
spared.
Countries
that relied on industrial or agricultural exports, such as Great Britain and
Australia, suffered the worst. British unemployment more than doubled to 2.5
million. In its northern industrial areas, the unemployment rate was as high as
70 per cent.
In
Australia, the demand for wool and food exports slumped, along with prices,
wages and unemployment. By 1932, almost 30 per cent of Australian workers were
without a job.
The
impact on Weimar Germany was particularly dire.
Germans
were not so much reliant on exports as they were on American loans, which had been propping up the Weimar
economy since 1924. From late 1929, no further loans were issued while American
financiers began to call in existing loans.
Despite
its rapid growth, the German economy could not endure this retraction of cash
and capital. Banks struggled to provide money and credit. In 1931, there were
runs on German and Austrian banks and several of them folded.
In
1930, the United States, by then the largest purchaser of German industrial
exports, put up tariff barriers to protect its own companies. German
industrialists lost access to US markets and found credit almost impossible to
obtain.
Many
industrial companies and factories either closed or shrank dramatically. By
1932, German industrial production was at 58 per cent of its 1928 levels. The
effect of this decline was spiraling unemployment.
Homelessness,
starvation and misery - The effects on German society were devastating.
By the end of 1929, around 1.5 million Germans were out of work. Within a year,
this figure had more than doubled. By early 1933, unemployment in Germany had
reached six million, more than one-third of its working population.
While
there were few shortages of food, millions found themselves without the means
to obtain it. Children suffered worst, thousands dying from malnutrition and
hunger-related diseases. Millions of industrial workers – who during the ‘Golden Age of Weimar‘ had become the best-paid
blue-collar workers in Europe – spent a year or more in idleness.
The
Great Depression affected all classes in Germany, not just the factory workers.
Unemployment climbed markedly among white-collar workers and professional
classes. A Chicago news correspondent in Berlin reported that “60 per cent of
each new university graduating class was out of work”.
British
novelist Christopher Isherwood, who lived in Berlin during the worst of the depression,
described scenes of unemployment and impoverishment in the German capital:
“Morning after
morning, all over the immense, damp, dreary town and the packing-case colonies
of huts in the suburb allotments, young men were waking up to another workless
empty day, to be spent as they could best contrive: selling boot-laces,
begging, playing draughts in the hall of the Labour Exchange, hanging about
urinals, opening the doors of cars, helping with crates in the market,
gossiping, lounging, stealing, overhearing racing tips, sharing stumps of
cigarette ends picked up in the gutter.”
The
Weimar government could muster no effective answer to the Great Depression. The
usual response to any recession is a sharp increase in government spending to
stimulate the economy – but Heinrich Bruning, who became chancellor in
March 1930, seemed to fear inflation and a budget deficit more than
unemployment.
Rather
than ramping up spending, Bruning increased taxes to reduce the budget deficit.
He then implemented wage cuts and spending reductions, an attempt to lower
prices. Bruning’s policies were rejected by the Reichstag but
the chancellor was backed by President Paul von Hindenburg, who in mid-1930 issued his
policies as emergency decrees.
Bruning’s
measures failed and only contributed to increased unemployment and public
suffering in 1931-32. They also revived government instability and bickering
between parties in the Reichstag.
The
NSDAP gains support - The real beneficiaries of the Great Depression
and Bruning’s disastrous policy responses were Adolf Hitler and the National
Socialists (NSDAP). At the time of the Wall Street stock market crash, the
NSDAP held just 12 seats in the Reichstag while Hitler was a figure of
curiosity rather than a legitimate political candidate.
As
conditions worsened, public discontent soared and membership of the NSDAP grew.
In September 1930 elections, the NSDAP increased its representation in
the Reichstag almost
tenfold, winning 107 seats. Two years later, they won 230 seats, the most won
by any single party during the entire Weimar period.
Hitler
found the failures and misery of the Great Depression to his liking, remarking:
“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.”
A historian’s view: “Germany
appeared to be on the brink of civil war. The young Weimar Republic was wracked
by armed street fighting waged mainly between Communists and Nazis.
Foreclosures, bankruptcies, suicides and malnourishment all skyrocketed. Six
million Germans, 40 per cent of the working population, were unemployed; and
thousands found themselves without a place to live… As anxiety and fear gripped
the masses of unemployed men, blatant prejudices resurfaced against full-time
female workers. Women were urged to give up their jobs and return home to their
traditional roles as wives and mothers. Some of them gladly complied. Others
were despondent, either because of their financial need to work or because they
worried that the few advances made by women would be permanently stifled.” - Irene
Guenther
1. The Great Depression was a global
economic disaster that began in late 1929. It was triggered by a collapse in US
share prices, following a decade-long economic boom.
2. The Great Depression led to years
of economic downturn and disinvestment in several developed nations, as
businesses closed or cut back by shedding workers.
3. Unemployment was the most
noticeable effect of the Depression. In Germany, the Depression left six
million people, more than one-third of the working population, without a job.
4. The government of Heinrich
Bruning failed to respond effectively to the Depression, passing tax increases
and spending cutbacks rather than attempts to stimulate the economy.
5. Public dissatisfaction with the
economic conditions and the government led to a dramatic increase in voter
support for Adolf Hitler and the NSDAP, which became the largest party in
the Reichstag.
Norb
Leahy, Dunwoody GA Tea Party Leader
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