In Germany, this happened with an administrative upheaval through the establishment of a bureaucracy that took over economic control tasks. This resulted in a radical change in the economic order and state policy. The state took on a new role during the war and there was a clear modification of economic guidelines. This view starts in the political sphere. This theory assumes that an economic system is replaced by another because of fundamental changes within the institutional framework. Some scholarly debates on long-term economic development are explicitly based on the structural break thesis. Despite deep cuts, a lot of growth-determining factors remained unchanged: Germany’s geographic and climatic location, the use of land, human capital, level of knowledge, mentality, volume of assets, communication networks, and significant parts of the legal system. If long-term growth is chosen as the leitmotif for economic development in the 19 th and 20 th centuries, one can recognize many constants across the war. The war did not bring a crisis that led to the end of capitalist development, a secular stagnation, or a gradual slowing of the dynamics of technical and economic progress. The article ends with the mid-1920s, when the German economy entered a brief period of calm until the Great Depression hit the country with full strength.įrom which perspective should one consider the possibility of a structural break caused by the war? A revolutionary break, as expected and partly longed for by many contemporaries, did not occur. The currency reform of 1923, conceived to save the state’s finances, depended on a change in the mode of reparations payment as well as on a reorientation of the foreign economy (section 5). The financial room for manoeuvre narrowed visibly with the onset of hyperinflation which also had a considerable impact on the real economy. In order to achieve social pacification and to meet the economic expectations of the population, high wage settlements were politically supported, thus accepting the progression of inflation (section 4). The war-induced deformation of the economic structure as well as the war-related shortages had a negative impact on production during the phase of demobilization (section 3). First, the extent to which the war represented a structural break will be discussed (section 2). The economic problems of the post-war period must be viewed in a more differentiated way than contemporaries did in their political arguments. The reduction in the state territory did not mean that the Germans had become poorer. This consideration, however, seems more important than the absolute size of the national economy. the per capita endowment with real capital. Despite population losses in the millions, the war did not bring about a significant shift in German capital intensity, i.e. In assessing the initial economic conditions, one must consider the low level of war destruction in German territory, but also the lack of investment during the war. German production capacities were reduced by about 10 percent. The territorial cessions as another political sanction of the Treaty of Versailles were opposed by a swelling circle of German nationalists. We will see later how the problem of reparations fits into the complexity of the economic burdens of war. Since Germany’s payment morale was poor, only small amounts were transferred in the 1920s. In addition to the reimbursement of war costs in the narrower sense, this commission also negotiated damages such as the Allies’ state debts incurred by the issue of war bonds, or the pensions paid to war victims. The determination of the amount of this politically defined debt was entrusted to the inter-allied reparations commission. They were obliged to pay reparations to their war opponents. According to Article 231, Germany and its allies, as the sole aggressors, were responsible for all damages resulting from the war. These high burdens on the German economy, as they were perceived at the time, resulted from the Treaty of Versailles. Germany’s territorial losses and the imposed reparations are the key words that not only came up in contemporary discussions, but are still mentioned today when considering the economic legacy of World War I. There are a lot of myths about the legacy of the Versailles Treaty.
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