Why did unemployment in Germany increase by 1932?

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Please use the video below to help you with this content.

Although the country didn’t know it, in autumn 1929 Germany was on the brink of collapse. On 3rdOctober 1929, Gustav Stresemann, the Weimar Republic’s most gifted politician, died of a heart attack. Just two weeks later, the Wall Street Crash put the world into a global depression.

What was the Wall Street Crash?

America was the world’s strongest economy. Many countries relied heavily on the USA’s financial strength for their own economic success.

America’s economy failed in 1929 because too many goods were being produced – farmers and factories were making things at too fast a pace. There were simply not enough people to buy these products. This caused shares of these companies to plummet, and on ‘Black Thursday’, 24 October 1929, 13 million shares were sold. Shares worth $20,000 in the morning were worth just $1,000 in the afternoon. It was clear that the American economy was failing.

America’s GNP (the amount that the country was producing) fell by 50%. 659 banks collapsed by the end of 1929.

How did this impact Germany?

In fear of collapsing, American banks hurriedly requested German companies and banks to pay back their loans. Unable to pay, American banks subsequently collapsed. In fear that people wouldn’t be able to access their money, people in Germany rushed to the banks to take their money out. Some banks ran out of money to give people, and some, such as The German Civil Servant Bank, collapsed – hundreds of thousands of Germans lost their savings.

The collapse of the German banking system led to a general collapse of German industry. Under pressure to pay back American banks, German industries and farms had to cut back on production or even close completely.

The impact on the German people

Unemployment

  • As companies were under pressure to pay back their loans, companies cut as much cost as they could. Many German workers were laid off from their jobs.
  • As demand for German goods fell worldwide, even more companies went bust and laid off their workers.
  • As people lost their jobs they had less money to spend on goods themselves. People were spending less money, deciding to only spend on what was vital. Businesses lost even more money, meaning that even more companies went out of business, leading to more unemployment. Germany was in a downward spiral.
  • As more people became unemployed, the government was eventually unable to pay unemployment benefits. Taxes were raised and unemployment benefits were cut in an attempt to deal with the crisis, but poorer people were hit harder by these changes.

Savings

  • Anyone who had stocks or shares as a method of savings found that their shares were worth a lot less than what they originally were. Many savers were affected heavily by the Depression.

Workers

  • To ensure their businesses were able to go on, employers cut wages of their staff drastically. Real wagesin 1932 were at 70% compared to where they had been in 1928. The German people who were lucky enough to still be working found themselves much poorer than what they had been.

Homeless

  • Many people who lost their jobs became homeless as they could not pay their rents on time.
  • Shanty towns sprang up on the outskirts of the cities where people built their own houses out of anything they could find. People wandered the streets looking for work or food.
  • Tensions in these shanty towns turned to fighting. Arrests for theft were up 24% in Berlin in 1932 from the previous year.

How did the Weimar government try to deal with the situation?

From 1930-32, The Weimar government showed its inability in dealing with the economic crisis. Germany’s new Chancellor, Heinrich Brüning, bred outrage in Germany by increasing taxation (angering the middle classes) and cutting benefits (angering the working classes). Although he was trying to balance the spending of the German economy, it could be argued that his actions actually worsened everyone’s financial position in Germany.

Opposition parties refused to work with Brüning in his efforts, and in July 1930, his policies were rejected by 256 votes to 193. The failure of the moderate parties in working together brought the Reichstag (Germany’s parliament) to a grinding halt. The Reichstag met 94 times in 1930, but in 1931 it only met 41 times. It only met 13 times in 1932.

Unable to get laws through parliament, Brüning asked the President of Germany to pass emergency laws. Brüning had to, for the most part, rely on this constitutional measure to rule Germany throughout the crisis. Democracy was falling apart.

By spring 1932, Brüning lost control of the Reichstag. The economy was in ruins and people began rioting in the streets. Brüning resigned in May 1932.

How did the Depression affect the far-left and far-right in Germany?

The Communist Party (KPD)

Where only 10% of Germans had voted for the KPD in the Reichstag elections of 1928, 15% of voters backed them in 1932, representing a million more votes for the far-left party. The KPD became the biggest communist organisation outside of the communist Soviet Union.

The KPD was popular with German workers in large towns due to growing unemployment and a fall in real wages. Many working class people saw the KPD as the only party that would protect their jobs and wages against their employers.

The Nazi Party (NSDAP)

Middle class people, however, were extremely worried about the rise of communism in Germany. They feared that if Germany became a communist country then they could lose their lands and businesses to the new communist government. As the KPD grew then, Nazi support grew in the middle and upper classes as Hitler was seen as the best defence against this communist threat.

TASKS

Complete the starter activities as outlined on the YouTube video:

Create a flowchart for the information above, outlining the key details for each part. You should include:

The Wall Street Crash -> What did this lead to? -> How did this affect Germany? -> How did this affect the German people? -> What did the government do to deal with the situation? -> How did this affect extremist parties.

Complete the two interpretation questions as outlined on the YouTube video.

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