World economic crisis

the crisis fell many families into bitter emergency: Moving female worker, California 1936, (Fotografin: Dorothea long one)

as world economic crisis one calls oneself the 1929 using heavy economical break-down in all important industrial nations, that and. A. in enterprise collapses, solid unemployment and deflationexpressed. The simultaneousness of the crisis features promoted by the grown teeth of the Einzelwirtschaften and financial stream (capital mobility), while many today natural market-adjusting elements were still missing. The world economic crisis terminated the so-called. „Golden ones twenties “.

Table of contents

overview

first only more easily a decrease of the growth of the US-American national economy leading world-wide left speculative thatoverestimated stock market of the USA in October 1929 (black Thursday) break down. This forced a reversal of the financial stream. Funds, which had been invested in the years before it into other national economies, were rushed into taken off. In Europe (in addition, in other statesthe world) this credit departure released heaviest crisis features into their usually anyway already weak managing. In the chain of the events it came among other things to mass unemployment and a substantial decrease of the world trade.

In the individual states became different on thoseChallenge reacts: On the basis of the Scandinavian countries, in particular Sweden, the functioning democracies with the transition began to intervene to the welfare state in the market happening. Zaghafte of beginnings of the US president Hoover became starting from 1933 as new Deal of its successor Franklin D. Roosevelt strengthens,so also by growth-promoting public investments, finances by increased debt admission (Deficit spending) (to further political and cultural effects of the crisis in the USA see large depression.) many states such as Great Britain uncoupled their currencies of the gold foreign exchange standard andso at least their currency reserves could receive. Again different states like the German Reich tried to come against it by stabilization of their currencies accompanying with rapid welfare cutses from the crisis. This contributed those to a radicalization of the policy, the ascent of theNational socialism favoured.

As consequence of the world economic crisis a paradigm change in the political economy took place. The valid classical economic theory was replaced to a large extent from the Keynesianismus. This demanded stronger national interferences and asked the demand into the foreground. These tendencies became into thatSubsequent year tenth however partly retrogressive made.

causes

the world economic crisis can be attributed to several causes. The crisis proceeded from a world-wide price purge on the agrarian and raw material markets. In the First World War had the USA, South America and also someColonies their production strongly expanded, in order to satisfy the grown demand of the European states, which failed war conditionally to a large extent as producers. When Europe took up its production after 1918 then again, it came to an offer in excess, on the markets with fallingReacted to prices.

The collapse of the stock market at the New Yorker stock exchange from October 1929 had a similar effect: The stock exchange had seen a boom experienced never before in the months before, why many citizens had taken up short term credits, in order to participate on the boom.When the courses began to then fall, they could not their credits any longer hold and had sell, which continued to press the courses. The result was a sharp fall in prices of several days of up to 90%. The sharp fall in prices of 24. October 1929 becomes thereforealso as black Thursday calls and is considered beginning of the world economic crisis. By the extreme course purge billions dollar, from which the Americans had believed, it would possess it (in reality was only the venture capital) at one blow quasi destroyed. This ledto a clear decrease of the investments, to sinking consumption and at sinking prices, with a word: to the deflation. Milton Friedman knows some decades later after that the length and strength of the crisis were affected by the issuing banks of the USA.Their catastrophic monetary policy had led to a decrease of the money supply over over 30%, whereby mass unemployment and deflation were only released.

If one regards the development of the German share quotations somewhat more exactly, then one recognizes that itself after a relatively constant rise ofDecember 1925 had developed already before by April 1927 a clear downtrend. This downward development particularly justified itself on a decrease of national and private investments in the years 1927/1928, that on a smaller Crash at the citizens of Berlin stock exchange inMay 1927 had followed. Therefore the American is also not regarded boron-loweringrapidly of most researchers as trip for the economic crisis in Germany, because he accelerated the development only.

In Germany rather the following reasons played a basic role: Those Hyperinflation of 1922/1923 had destroyed private net assets to large extent and had lastingly undermined the confidence into the state. Realm chancellor Heinrich Brüning felt therefore one strictly deflation eras course obligated. Falling prices increased however real wages and led to mass redundancies. Thisdecreased the private consumption and as a result also the desire to invest of the enterprises, so that the sinking demand caused further price reductions. The extent of utilization of the industriellen production capacity fell from approximately 73% in the next three years continuously on approx. 45 %,thus on half that generally as optimally estimated extent of utilization of 90%.

Since it concerned a crisis arising world-wide, it was not possible to create by the export of surplus goods a reconciliation to the declining domestic demand howRealm chancellor Heinrich Brüning it had actually intended: By wage lowerings and reducing in price the wage costses he wanted to expand the German export, so that it overcomes the crisis and the Reparationsgläubigern at the same time to prove that Germany only on this - for the recipient countries very unpleasant -Ways to pay knows. This plan did not come up meanwhile, because increases in customs duties, trade restrictions and soon also devaluations of the currencies for the protection of the domestic economy stood everywhere on the agenda. One calls this politics Beggar thy neighbour politics (too German about: Bring your next ones to the begging staff like you), because the own economic growth at expense of other countries (above all the neighboring countries) one produces. The world trade altogether shrank strongly, therefore the German economy (despite a certain export surplus) knew not sufficient goods abroadset off, in order to diminish the over-capacities in production.

Brüning held nevertheless to its deflationary policy , which aggravated however the crisis clearly. The thesis often belonged, it operated this politics intentionally, in order to release Germany from its Reparationsverpflichtungen to, becomes recentlywith weighty reasons doubted.

production

the stock exchange courses the economic development do not show there, but for speculative reasons often opposite trends show, is important it to regard the development of the industriellen more exactly production. In the comparison it shows up thatthe stock exchange courses in the USA despite a stagnation in the economic development to in the middle of had completely extremely risen 1928. In Germany against it already 1929 were to be registered shrinking the economy from 2% to. Thus the economic crisis was also in thatProduction the trip for the downtrend, because this development had not begun also before. The economic crisis had in Germany not only in former times begun as in the USA, but also not so strong effects on production had had. Already 1928the contradiction between the expansion of the production capacity and the reduced demand intensified itself. Until 1929 one can speak in the middle of only of a stagnation of the production, which accompanied however with rising unemployment. The industrial production halved itself until 1932 andthe shares lost even two thirds of their value. In the middle of 1931 affected the collapse of the banks large industrial trusts, which were prevented by the locking of the banks from raising of credit and new investments. In the international comparison it is to be recognized easily thatit in each country another course process gave, what suggests extent, start time that everywhere a downtrend took place, and end of the crisis however was very different. These differences had several causes. However already the strength of the contrast betweenexcessive offer and the reduced demand in the individual countries here a role, likewise, played the question how export dependent domestic production was. In countries, in those many workers in the agriculture worked and even if this only little export-orientedwere, the crisis affected itself less strongly. In Germany the portion in the primary sector of the economy of the persons employed amounted to against it only 30%. At the beginning of the crisis took place in the agricultural produce also at the beginning of no downtrend. On the contrary, starting from 1931 those becameProduction expanded by food even, in order to create a reconciliation to the income losses, which had resulted from price arrears.

job market situation

the economic development of Germany did not seem to differ until 1930 from the years before. The numberthe unemployed persons was 1927 below 5%; At the end of September 1929 gave it to 1.4 millions Unemployed persons, in February 1930 were it 3.5 millions, which was attributed to seasonal fluctuations. When this number did not decrease/go back against expecting in the spring 1930, hoped realm government andthe realm bank is still enough on a Selbstheilung of the economy, although the number of unemployed already end of the yearly with 5 millions In the world-wide comparison on highest level stood for unemployed persons. Only as itself the small decrease in the middle of 1931 did not continue, became onethe extreme development of the crisis completely consciously. At this time Brünings savings program was running on full routes. The public salaries were decreased by 25% and the unemployment relief and social welfare assistance were brutally shortened. In February 1932 the crisis on that reachedJob market their high point: 6.120.000 unemployed persons, thus for 16.3% of the total population, stood only 12 millions Opposite person employed. Among the unemployed persons one could rank also still the large mass of the badly paid workers on short time and employees, in addition, briefly before the ruinstanding little businessman.

bank crisis

the German bank crisis marked the beginning of the second part of the economic crisis, the beginning „of the hyperdeflation “. It had two causes. Had by mutual competition, by hostile takeovers of smaller banks and due to speculative security and goods businessthe large banks 1925 again the volume of business of 1914 attains. They were aligned to expansion, but by own capital funds and liquid means badly prepared for it. If they would have supplemented their own capital funds with smaller dividend payments and if further shares would have been published, would bethe difference of both sizes become the sum of the accounts payable by far not so largely. In addition the instability of the international credit market came. As the most important characteristic for this one must call one-sided the flow of capital and money. Are from 1925 to 1929 foreignCredits of altogether 21 billion Realm Mark (RM) flowed to Germany, those in same period only 7.7 billion RM German plants abroad faced. A majority of the taken up credits was in addition short term nature, i.e., they had within three months paid backbecome. Until 1929 was however regularly extended it; the banks borrowed these short term funds every now and then with long running times out. Thus the situation of the banks was already critical before the world economic crisis: The foreign creditors their confidence should into the solvencythe banks lose and the short term credits once do not extend, threatened immediately a sensitive foreign exchange shortage up to the Illiquidität. Abroad the crisis led likewise to the shortage of the liquidity of the banks. In November 1930 the banks in the USA turned outand in France, where the economic crisis had become still not at all apparent otherwise, into a crisis and large sums of short term funds of Germany took off. Here the crisis seized first mainly smaller banks, so that the extent firstnot like that transparency was.

In the spring 1931 now the Austrian Creditanstalt turned out in difficulties, which had taken over itself with the assumption of the soil loan corporation. Contemporaries assumed, behind it would stand for the French government, that would have wanted to torpedieren so the plan of a GermanAustrian customs union.Although such manipulations were actually discussed in the French government, it could not be proven that they were responsible for the noise of the Creditanstalt.

One feared now that this development would spread to Germany. In this dangerous situation realm chancellor Brüning explainedeven in June 1931 for reasons relating to domestic affairs - he hoped for the support that rights and the right-wing extremists in Reichstag for a new package of economy measures - the reparations publicly for “intolerablly”. That seemed on a forthcoming inability to pay of theRich to interpret and undermined the confidence foreign capital markets lastingly. Foreign exchange in the value of several billion RM was taken off, and after in July 1931 one had become the citizen of Berlin major banks illiquide, also still another massive attack of the population cameon the banks in addition: Nobody at home and abroad had more confidence into the solvency of the German banks. Therefore they had to 13. July 1931 their payments stop, because they could publish simply no more money. The amounts of account payable sank inJune/July around 21,4%. In order to overcome the bank crisis, the banks were closed for several days and subordinated to control of the government. Also the stock exchange remained for months closed - credits and new investments were so for months impossible. Besides was one month beforethe Hoover moratorium, which cancelled all political debts for the re-establishment of the confidence for one year, psychologically verpufft, because French reservations had made negotiations lasting for weeks and most difficult necessary. Since realm bank president Hans Luther the discharge of foreign exchange abroad with all means stopwanted, it increased the rate of discount to 15% and caused thereby an extreme domestic credit raising the price of and - shortage. The note circulation amounted to 1929 still 5 billion RM, but by Luther's measures he was reduced by 30% to 3,5 billion RM in the year 1932.

foreign trade

in the First World War and in the postwar years decreased/went back the foreign trade substantially. The hyperinflation of 1923 had facilitated but also to substantial bad investments had led the resurgence of the German industry. The German industrial production already reached1926 again their Vorkriegsstand, but the import exceeded already 1925 the import value of the Vorkriegsjahres: Germany had a passive commercial balance sheet until 1930. In the world economic crisis the import sank faster than export, adjusted themselves an export surplus. The relationship betweendomestic and foreign goods shifted therefore to of Germany favour. The prices fell between 1928 and 1933 for imported goods around 55%, for implemented goods around 26%. In relation to the Vorkriegsjahren the import structure had itself however onlyslightly changes. The finished good import rose from 13% 1913 to approximately 17% 1925 to 1933. Their export amounted to 1913 66% and in the period evenly specified 75%. With food, half goods and raw materials there were hardly changes. ThoseFood import amounted to already before the war a third of the entire import. The export quota was 1913 at 19%, in the period of 1925 and 1931 at approximately 15%, 1932 about 11% and 1933 to even only about 9%.


measures for overcoming and effects in Germany

the crisis seemed the German economy first directly to leg-pregnant, and the foreign credits of the countries just like those the private sector remained until September 1930 in the country. To 14. September 1930became the NSDAP with the realm tag elections a second-strongest party and grew immediately the credit departures into swindle-exciting heights, because abroad one was concerned by the political development.

But because of the choice success of the NSDAP foreign capital was not only taken off; it should also increase the liquidity in the countries concerned. The realm government regarded the economic crisis as an imbalance of the state household. The deficit amounted to end of 1929 1.5 billion RM. The realm bank undertook only something, as the covering of the gold reserve and foreign exchange reserves of the money circulationby the transfer of the quit foreign credits under the legally specified 40%-Grenze fell (see gold foreign exchange standard), but the increases of the key interest intensified the crisis still. Also crisis-aggravatingly worked the measures, which realm chancellor Heinrich Brüning seized.

Brüning had always tried, the populationto make clear the causes of the economic crisis and its concept to the remedy. He explained that the met government decisions would lead to a rerecovery of the German economy, but only, if the population the hardnesses devoted from it bore itself patiently. He hoped, itsDeflationary policy would revive the export and would gain so sufficient foreign exchange reserves for the reparation payments. In addition it wanted to create so more jobs in the industry. By emergency decrees he tried the public expenditures and above all the state State of the sinking pricesand falling tax receipts adapt - running, which it could not win, because its measures contributed to the fact that prices and tax receipts continued to sink ever.

Due to in the review obvious the missingness of Brünings deflationary policy assumed the older research, it was its primary goal been to convince by intentional aggravation of the crisis the allied ones of the fact that the Reparationsforderungen was simply not fulfillable. Besides the attitude of the payments would weaken the radical political forces. Because it the connection between reparations and deflationary policybut almost exclusively in public speeches, however in internal discussions it expresses, does not believe newer research against the fact that he was convinced honestly to have to its politics no alternative.

Brüning was in a dilemma: It had the Reparationsgläubigern Germany honestSake prove to fulfill the Young plan made itself however evenly thereby for the political rights open to attack, for whose support relating to domestic affairs he hoped nevertheless. Thus it exerted the customs union with Austria, however, as previously mentioned, because of of France resistance thatCollapse of the bank system introduced.

Whether there were realizable alternatives to Brünings deflationary policy and to the economical housekeeping, which only intensified the crisis, is very disputed in the historical research. A would have been conceivable) uncoupling of the realm Marks of the gold foreign exchange standard, b) one Credit expansion or C) an increase of the money supply e.g. by issuing bank credits. Against all three options it has to prove like the resident of Munich restaurant economics Knut Borchardt tried, important arguments given: Due to (partially by own debt aggravated) the confidence crisis would have the realm governmentno credit possibilities been open - the almost chronic crisis of the finances of the state threatened to change repeated to an acute inability to pay of the public hand, which would have had unpredictable social, political and externaleconomical consequences; a break from the gold foreign exchange standard was according to international law by the Young plan impossibleand the memories of the inflation of 1923 to trauma tables would have evoked. The same arguments would have spoken deficit eras of the household also against a reconciliation with the help of the Notenpresse. The credit expansion, those under Brünings successors was introduced and the Hjalmar pit, realm bank presidentfrom 1933 to 1939, then substantial operated, was possible anyhow only by the completely substantial masking mechanisms of the Mefo changes.

literature

  • Balderston, Theodore, The Origins and Course OF the German Economic Crisis, November 1923 - May 1932, Berlin 1993
  • Edward W. Bennett:Germany and the Diplomacy OF the Financial Crisis 1931, Cambridge, measure. 1932
  • Borchhardt, Knut: Growth, crises, action clearance of the economic policy, Goettingen 1982.
  • Fount, Karl Erich: The German bank crisis, Munich 1967.
  • Eichengreen, Barry: Golden Fetters. The gold standard andthe Great depression 1919 - 1939, New York 1992.
  • Heyde, Philipp: The end of the reparations. Germany, France and the Young plan, Paderborn 1998.
  • James, Harold: Germany in the world economic crisis 1924 - 1936, Stuttgart 1988.
  • Kindleberger, Charles P.: The world economic crisis 1929 -1939, Munich 1973.
  • Master, Rainer: The large depression: Positions of constraint and action clearance of the economic and financial policy in Germany 1929-1932, Regensburg 1991, ISBN 3-924956-74-X
  • Holtfrerich, Carl Ludwig: Alternative to Brünings economic policy in the world economic crisis, 1982

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