The Impact of the Wall Street Crash on Germany (Edexcel GCSE History)

The Wall Street Crash & its Impact on Weimar Germany - Summary

Historians identify the Wall Street Crash on 24 October 1929 as the ‘turning point’ in the success of the Weimar Republic. A turning point is an event in which a decisive change occurs that affects the course of history. In 1929, many people in Weimar Germany were experiencing a ‘Golden Age’. Extremist parties like the Nazi Party were unpopular in elections. Many historians would argue that, without another economic depression, the Weimar government would have continued to gain popularity and strength. The death of Stresemann on 3rd October 1929 weakened the government.  Stresemann possessed the ability to combat the economic impact of the Wall Street Crash on Germany. Some historians claim that, without Stresemann, the Weimar government lacked decisiveness.

Other historians suggest that Weimar Germany was doomed to fail. The foundations of the Republic were insecure. The Weimar Constitution contained some significant loopholes. The biggest issue was the wording and overuse of Article 48. Historians also argue that Stresemann’s connection of the USA’s economy to Germany through the Dawes Plan would have led to economic collapse sooner or later. 

In either case, the Wall Street Crash signified the end of the Weimar Republic’s ‘Golden Age’. The subsequent depression in Germany from 1930 marked the true beginning of Hitler’s rise to power.

The Wall Street Crash, 1929

• Throughout the 1920s, the USA experienced a boom in their economy

  • Britain and France were repaying their wartime loans to the USA

  • As a result, the USA had a surplus of money in their economy

• The USA’s economy was growing at such a rapid rate that, by October 1929, stockbrokers began to speculate that the market would decline

  • Americans from all areas of society had bought shares in the 1920s. Working-class Americans could not afford for their share prices to drop too far

  • Share prices began to fall

  • Shareholders rushed to sell their shares before their value dropped too significantly

• Between 24th and 30th October 1929, the USA’s economy collapsed

  • This event is called ‘Black Thursday’

  • People sold 13 million shares

  • Prices plummeted due to the amount of shares available

  • Shares that were worth $20,000 on the morning of 24 October 1929 were worth $1,000 by the end of the day

  • By 30th October 1929, investors had lost $4 billion

  • This event is called the ‘Wall Street Crash’ as Wall Street is where the Stock Exchange is based in New York

Impacts of the Wall Street Crash on Germany

• The Wall Street Crash created economic collapses across Europe, including Germany

  • The Dawes Plan connected Britain, France and Germany to the USA’s economy. The USA's money allowed the payment of reparations and First World War loans

  • The USA began to recall its loans to save its economy. This jeopardised the economies in Europe

• The below diagram explains how Wall Street impacted Germany’s economy:

How did the Wall Street Crash cause an economic depression in Germany?

The Effects of Unemployment

• The economic issues triggered an employment crisis

  • German banks recalled loans, which forced businesses to close and workers to lose their jobs

  • The USA’s crash affected other countries across the world. Other countries stopped purchasing German goods, which increased unemployment

  • Unemployed workers did not spend money on goods or services. This resulted in even more companies having to make redundancies

• By September 1931, 4.3 million German workers were unemployed

  • 40% were factory workers

  • Half of all 16 and 30-year-olds did not work

  • By January 1933, unemployment hit 6.1 million people

• The below table shows how unemployment affected different economic groups in German society:

The impact of unemployment in Weimar Germany

Weimar Reaction to Unemployment

• From 1930 to 1932, the Chancellor of Germany was Heinrich Brüning

  • He was the leader of the Centre Party from 1929

  • The Centre Party was Germany’s moderate party. It was neither left-wing nor right-wing

• Brüning’s policies to tackle unemployment were controversial

  • He attempted to raise taxes on workers

  • This was ineffective when levels of unemployment increased

  • He began to cut the salaries of public workers and decrease unemployment benefits. This meant that the government could afford these payments to the unemployed

• The Reichstag did not approve of Brüning’s policies

  • This marked the end of moderate parties working together in the Reichstag

  • Hermann Muller, the leader of the SPD, refused to support Brüning’s approach to unemployment

  • In July 1930, the Reichstag voted against Brüning’s measures

• Brüning began to bypass the Reichstag in an attempt to rescue Germany’s economy

  • This allowed Brüning to go to President Hindenburg to approve policies rather than the Reichstag

  • In 1932, the Reichstag met only 13 times

  • From 1930-32, the Reichstag passed 29 bills. In the same period, Brüning enacted Article 48 115 times

• Instead of improving Germany, Brüning weakened the Weimar Republic

  • People started to lose faith in democracy. An increasing number of the German public started to believe that the Weimar government was inefficient and corrupt

  • The autocratic government that Hitler campaigned for did not seem so different to how Brüning was acting

  • Using Article 48 made the chancellor look like a dictator

  • The measures that Brüning implemented did not improve Germany’s economy

Growing Support for the Communist Party (KPD)

• The support for the KPD grew after the Wall Street Crash

  • From 1928 to 1932, the KPD gained 1 million voters

  • By 1932, the KPD was the largest communist party outside of Russia

• The KPD benefited from Germany’s economic crisis

  • The levels of unemployment increased. Workers felt frightened that they were going to lose their jobs

  • The value of wages fell. Workers’ living standards dropped significantly. The working classes believed that the KPD would improve their living conditions if they came to power

What prevented the KPD from becoming the largest party in Germany?

• A communist government scared the middle and upper classes

  • Communists threatened to remove the wealth of the middle and upper classes

    • Communism was against the private ownership of land and property, which was the source of wealth for the middle and upper classes

  • The government in Russia caused fear of communism across Europe

    • Communist Russia was a dictatorship - the people lacked freedom. The German people believed that a communist government would revoke their rights

• This fear forced the middle and upper classes to look for alternative solutions

  • Their conservative values aligned with the NSDAP’s policies

  • Hitler believed in autocratic rule. Middle- and upper-class Germans believed that the NSDAP were strong enough to repel communism

  • Hindenburg held nationalist, right-wing beliefs. He would not stand for a communist government in Germany