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The Treaty of Versailles and Subsequent Hyperinflation in Germany: Finding the Culprit (continued) The liberal, flexible People's Party member Gustav Stresemann became the next Chancellor, with a strong Reichstag confidence vote of 240 to 76. As Foreign Minister, he engaged in extensive negotiations with French ambassador de Margerie, who was likeminded but forced to transmit Poincar�'s adamant refusal of any compromise. When British Premier Lord Baldwin expressed unconditional multilateral cooperation with France on both purpose and principle in an official address on September 20, Stresemann realized that passive resistance was no longer sustainable. On September 26, he proclaimed, “To preserve the life of the nation and the state, we are confronted now with the bitter necessity of ceasing our struggle.”24 Instead of attempting to rejuvenate the paper mark and the Reichsbank, with which the populace was, by now, wholly disillusioned, the economic mastermind Helfferich advocated introducing the Rentenbank (National Mortgage Bank) and a new currency, the Rentenmark, based on agricultural and industrial land holdings in Germany. As both the public and officials lost confidence in Reichsbank President Havenstein, Hjalmar Schacht was appointed Currency Commissioner, and the former was relegated to a negligible secondary role in fiscal administration. The new directorship proceeded to drastically cut government expenditure and curtail credit. The Rentenmark proved to be the savior of the livelihood of the German economy. Upon its introduction, it was valued at 80 gold pfennig, and the concentration of government effort on calculated fiscal planning rather than the immediate satisfaction of the masses coupled with repeated stringent Emergency Tax Programs prevented its deterioration. Loans from abroad and finally, the introduction of the Dawes Plan in April 1924, which significantly alleviated the austerity of the reparations terms, appreciably contributed to economic revival. The question yet remains: could Germany have paid the original 132 billion mark reparations bill? Considering only her financial situation, it would invariably have been plausible with capable and experienced fiscal planning. Judging from the enormous foreign investment in the German mark and loans from the United States, a committed country should have been able to accomplish such a task. Between 1919 and 1932, Germany received 27 billion gold marks in capital, while she paid 19.1 billion in reparations, resulting in a net gain of 7.9 billion. The reparations required an annual payment of 4-7% of total national income, far less than those delivered by France between June 1871 and September 1873--9% in the first year and 16% in the second. However, other factors must be taken into consideration. The French would probably have derived more benefits from the Versailles Treaty if its citizens had not been so consumed by an overarching lust for vengeance. Seemingly more compassionate terms tolerable by Germany could have prevented any motivation for her to evade payments or her businessmen to encourage inflation. The Treaty itself would have undergone more thorough revision if the delegates weren't spurred on relentlessly so the German blockade could be lifted, or if Article XIX, which permitted the alteration and insertion of provisions according to future circumstances, had never been included. The blatant harshness of the Treaty and the manner in which the victorious powers dealt with Germany kindled a nationalist militant flame following the era of appeasement subsequent to the Armistice. The Weimar Republic, from its inception, was beleaguered by hostility from both right and left. The internal political predicaments with which it was intermittently confronted were far too distracting to allow politicians inexperienced in the art of democracy to deal with the economic corrosion simultaneously. The period of German hyperinflation is ultimately a product human shortsightedness, an episode that warns of the dangers of prodigious hopes that fail to stand the test of reality.  
Copyright ©2001-2003, Allegra H., all rights reserved. Please contact me via e-mail if you wish to reproduce this material.
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