Economic Impacts of the First World War on Germany (AQA GCSE History)
Revision Note
Written by: Zoe Wade
Reviewed by: Natasha Smith
How damaging was the First World War on Germany's economy? - Timeline & Summary
The First World War had a devastating effect on Germany's economy. Before the war, Germany had borrowed a lot of money to fund its military and industrial growth. This put the country into significant debt. Germany spent even more money on weapons, supplies, and soldiers when the war began. However, when Germany lost the war in 1918, they were left with a massive debt and no way to pay it off. This financial situation worsened dramatically when the Treaty of Versailles was signed in 1919. The treaty demanded that Germany pay huge reparations to the Allied countries, which added even more strain to an already struggling economy.
This debt and economic pressure eventually led to hyperinflation. By 1923, prices in Germany were rising so fast that people needed wheelbarrows full of money just to buy basic goods like bread. Savings became worthless and many Germans fell into poverty. The economic hardship caused by the war and the Treaty of Versailles created a lot of anger and resentment among the German people. This economic chaos and suffering also made people lose trust in their government, setting the stage for political instability in Germany in the years that followed.
The Treaty of Versailles
The armistice only ensured temporary peace
There needed to be an official peace document where the Allies agreed on the terms of Germany’s defeat
Discussions began in January 1919 at the Palace of Versailles, Paris. This is where the treaty gets its name from
The Allies eventually agreed on their terms for peace and signed the treaty on 28th June 1919
No German representatives were allowed to attend the peace talks
The treaty was known as a ‘diktat’. This means the losing side has the terms of peace imposed upon them
Germany had 15 days to ask the Allies to change sections of the treaty. The Allies denied every concession the Germans requested
The terms of the Treaty of Versailles
The military terms
Article Number | Description of Term | Impact on Germany |
|---|---|---|
42 | The Rhineland (an area in Western Germany that bordered France) became demilitarised. Allied troops were stationed there until 1930 | Germany was not allowed to have soldiers in the Rhineland. This made them vulnerable to an invasion from France |
160 | Germany’s army was restricted to 100,000 men | Many ex-soldiers became unemployed |
181 | Germany’s navy was restricted to six battleships and could not produce submarines | Germany became weaker. They could not develop the military technology that other countries had |
198 | Germany was not allowed to have an air force |
The territorial terms
Article Number | Description of Term | Impact on Germany |
|---|---|---|
45 | France was given the area of the Saar, with its coalfields, for 15 years | Germany lost 15% of their coal resources. This affected their economy |
51 | Alsace-Lorraine became a part of France again | Germany did not have a buffer between themselves and France anymore |
80 | Anschluss (the union between Germany and Austria) was forbidden | Austria was a part of Germany’s cultural identity. Many Austrians considered themselves to be German |
87 | Germany lost Posen and West Prussia, which allowed the Allies to create a ‘Polish Corridor’. This gave Poland access to the sea | The ‘Polish Corridor’ divided Germany into two. Roughly one million Germans were under Polish rule |
199 | France and Britain ruled all 11 of Germany’s colonies in Africa and the Far East as mandates | Germany’s reputation as a global power was destroyed. They had fewer items to trade with other countries |
Territorial changes after the Treaty of Versailles
The political and economic terms
Article Number | Description of Term | Impact on Germany |
|---|---|---|
1-26 | Germany could not join the League of Nations | Germany felt excluded from world politics. They were more likely to resort to violence to resolve disputes |
231 | The ‘War Guilt’ Clause. Germany had to agree that they started the First World War. The clause made Germany accept responsibility for the deaths and destruction during wartime | This clause created the most anger among the German population. They felt it was unfair to take all of the blame for the atrocities caused by the First World War |
232 | Germany would have to pay the Allies reparations as a condition of their surrender. The amount was set at 132 billion gold marks (£6.6 billion) | This amount would be enough to bankrupt Germany, especially, as the territorial terms reduced their ability to trade |
Examiner Tips and Tricks
Students sometimes struggle to remember the key agreements made in the Treaty of Versailles. In your revision, use the acronym LAMB.
Land
Army
Money
Blame
German reactions to the Treaty of Versailles
Many Germans argued that the Weimar government should not have signed the treaty
They believed that German politicians committed a ‘dolchstoss’ - or a ‘stab in the back’
Many Germans felt that the Weimar government had lied to them about the reality of surrendering to the Allies
Many Germans compared Weimar's acceptance of the treaty to committing a crime against the German state
They called the Weimar politicians who signed the treaty 'November Criminals'
The terms of the Treaty of Versailles destroyed Germany’s economy
The Allies theorised that, by imposing large reparations, Germany would be unable to finance another war
Germany had already been financially ruined by the First World War
The economic impacts of the treaty made the Weimar government seem weak
Many Germans felt humiliated and weaker than the rest of Europe
Many extremist political groups gained wider support when they campaigned that they would ignore the Treaty of Versailles if elected
Hitler made the destruction of the Treaty of Versailles one of the main points in the Nazi Party’s manifesto
Worked Example
Describe two problems with the Treaty of Versailles for Germany
[4 marks]
Answer
One problem with the Treaty of Versailles for Germany was the amount of reparations (1). Germany was ordered to pay £6.6 billion. Germany was already financially ruined by the First World War so this amount was too high (1).
Another problem with the Treaty of Versailles for Germany was the 'War Guilt' clause (1). Germany was expected to take full responsibility for starting the First World War which many Germans felt was unfair (1).
Examiner Tips and Tricks
When answering a "Describe" question, you need to:
read the question carefully
include all of the key parts of the question in your answer
include specific and relevant knowledge
describe two reasons
Our exam skills pages give further guidance and advice on the 'Describe' question
Why could Germany not pay their reparations?
From 1922, it was clear that Germany could not pay the reparation bill set at Versailles. This is because:
reparations were set at 132 billion gold marks (£6.6 million)
Reparations were purposefully set too high for Germany to be able to repay
German industry could not make enough goods to raise this money by exports
The treaty took valuable industrial lands from Germany
Germany was paying much of their reparations in goods like coal, wood and iron. This created shortages within Germany
The occupation of the Ruhr
In December 1922, France accused Germany of not sending the amount of coal required by the Treaty of Versailles
French and Belgium troops entered the Ruhr in January 1923
The Ruhr was Germany’s most valuable industrial area
The soldiers seized coal, manufactured products and machinery
The Weimar government urged the coal workers to use passive resistance against the French and Belgian soldiers. Passive resistance is protesting in a non-violent way.
The workers:
went on strike
sabotaged machinery
The French responded by bringing their own workers into the Ruhr
The Weimar government could not force the soldiers out of the Ruhr because:
the Treaty of Versailles restricted Germany’s army to 100,000 men whereas the French had 750,000 soldiers
The public had a poor opinion of the Weimar government. They believed that the government could do more to force the French out of the Ruhr
Hyperinflation in Germany
What is hyperinflation?
The term inflation means the increase in prices
Inflation happens in an economy over time
For example, a loaf of bread in January 1971 cost 10p. The average price of bread in January 2023 was £1.06
Inflation is measured as a percentage
Hyperinflation is when prices rise rapidly and become out of control
In hyperinflation, wages struggle to match the cost of living
Hyperinflation can become so bad that currency loses its monetary value. Governments can print more money to counteract the effects of hyperinflation
Examiner Tips and Tricks
Inflation can be a tricky concept to understand, especially how it can cause money to lose all its value.
Imagine that you have a rare diamond necklace. It would cost a lot of money to purchase the necklace because it is so rare.
Now imagine that someone made 100 more diamond necklaces. The necklace is now not as rare, meaning it would not be worth as much as it was previously.
Applying this concept to money, the more currency there is in circulation, the less it is worth. As a result, printing money can limit the impact of inflation but overprinting money can be dangerous to an economy.
Why did the occupation of the Ruhr cause hyperinflation?
In early 1923, the invasion of the Ruhr caused inflation
Prices rose because there was a shortage of essential goods
However, the government made this situation worse because:
they continued to pay the wages of the striking Ruhr workers
they had to purchase coal from other countries to meet Germany’s demand for coal
The Weimar government decided to print more money
In 1923, there were 300 paper mills and 2,000 printers whose sole purpose was to print currency
The decision to print an excessive amount of money caused the hyperinflation crisis
By November 1923, the German currency (mark) had become worthless
Some workers received pay twice a day so they could purchase essential goods before their wages became worthless
People filled wheelbarrows full of money to buy a loaf of bread
The impacts of hyperinflation in 1923
Group | Positive impacts | Negative impacts |
|---|---|---|
Working classes | Some workers coped with hyperinflation as their employer paid them in essential items rather than the mark People hoarded goods and sold them for a high price | Many people resorted to stealing food to survive Unemployment rose and some workers died from starvation |
Middle classes | People who had mortgages, rent or loans could pay off the money they owed as the debt became worthless | The middle classes lost their life savings, insurance policies and pensions The government lost their backing. The middle classes looked to extremist parties for solutions |
Businesses | If a business took out a loan, it could fully repay the loan when the value of the mark began to decrease | Businesses could not afford to pay their workers, they were forced to close or make redundancies |
Foreign visitors | Visitors saw that their currency was worth more than the mark. They could buy more items in Germany with their currency | The German public did not like visitors profiting from their suffering |
Examiner Tips and Tricks
A question could ask you in what ways were the German people affected by hyperinflation.
For this question, you should focus on a wide range of groups and their differing experience of hyperinflation. Examples of these groups are:
the working classes
the middle classes
businessmen
Our exam skills pages give further guidance and advice on the 'In what ways' question
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