The Great Depression hits Germany
The October 1929 Wall Street Crash devastated Germany. US loans were recalled, exports collapsed, banks failed, and unemployment rose to over 6 million by early 1933.
The Wall Street Crash (24-29 October 1929). The Great Depression began on Wall Street. On 24 October 1929 ('Black Thursday') and 29 October ('Black Tuesday'), the New York stock market crashed, wiping out billions of dollars in shares. The US economy plunged into depression. Within weeks the consequences spread to Germany.
Why Germany was hit so hard. Germany was uniquely vulnerable for three reasons:
- Dependence on US loans. The Stresemann recovery from 1924 had been built on short-term US loans (the Dawes Plan had channelled them in). When American banks recalled their loans to repair their own balance sheets, German industry and government were starved of credit almost overnight.
- Export-dependence. Germany was a major exporter of industrial goods; the collapse of world trade hit German factories badly.
- Reparations obligation. Germany was still paying reparations (rescheduled under the Young Plan of 1929), straining government finances at exactly the wrong moment.
The collapse 1929-32. The result was the worst economic collapse in modern German history:
- Unemployment rose from 1.3 million (September 1929) to 3 million (Sept 1930) to 4.4 million (Sept 1931) to 5.6 million (Sept 1932) and over 6 million by January 1933.
- Industrial production halved between 1929 and 1932.
- Exports fell by around 60%.
- The middle class was ruined by bankruptcies, falling salaries and the collapse of savings; small businesses went bust.
- Farmers faced collapsing prices and many lost their land.
The 1931 banking crisis. In May 1931 Austria's largest bank, Creditanstalt, collapsed. The shock triggered runs on German banks, including the failure of the major Danatbank in July 1931. To prevent total collapse:
- The German government closed the banks for two weeks in July 1931.
- Hoover (US President) declared a moratorium on reparations and war debts (June 1931).
- Credit dried up; lending stopped; recovery became impossible.
The social impact. The Depression created mass misery:
- Long queues of unemployed at the labour exchanges and soup kitchens.
- Families thrown out of their homes; many living in shanty-towns.
- Suicide rates rose sharply.
- Hunger became widespread, particularly among children.
- Berlin's famous nightlife continued for the rich; for the poor it was a city of despair.
Political consequences. The Depression destroyed the political stability of the late 1920s. The moderate parties had no answer to mass unemployment. The economic crisis became a legitimacy crisis for the Republic itself: the parties that had presided over the Golden Years now appeared to have failed completely. In this atmosphere, voters turned to the extremes — the Nazis on the right, the Communists (KPD) on the left.
Why this matters for Topic 8. The Depression is the indispensable starting-point for explaining the Nazi rise. Without it, the Nazis would have remained the marginal party of 1928. With it, the audience for Nazi extremism appeared overnight. Crisis was the missing ingredient — and after October 1929 it was no longer missing.
- October 1929: Wall Street Crash triggered global Depression.
- Germany hit uniquely hard: US loans recalled, exports collapsed, reparations still owed.
- Unemployment: 1.3m (1929) → 3m (1930) → 4.4m (1931) → 5.6m (1932) → 6m+ (Jan 1933).
- 1931 banking crisis: Creditanstalt and Danatbank failed; banks closed for two weeks.
- Social misery: bankruptcies, hunger, shanty-towns, rising suicides — and a legitimacy crisis for the Republic.