The Great Depression

The Great Depression was most severe in Germany as the economy was built on American loans. As  companies shut down or downsized, making workers redundant, unemployment affected millions of working class Germans. Others lost their savings as banks folded.

In the 1920s, production boomed for American companies as European countries were relying on imports during and following the War. Thousands of Americans rushed to take advantage of the share market and many used their life savings or borrowed money that they did not have to take advantage of the booming economy.

However, by 1928, declining sales and falling profits resulted from over-production in many American industries.

The Wall Street Crash

Share prices on the New York stock exchange began to fall rapidly and people rushed to sell their stocks.  As a result, share prices plummeted over the next three weeks as an increasing number of stocks were sold.

There were extremely serious economic and social effects of the Wall Street crash. From 1929 to 1932, American industrial productivity decreased 45%. While many companies went bankrupt or ceased trading, others those that stayed in business released workers to cut costs. By 1932, 24% of American workers (>12 million) were jobless.

Impact on Germany

Effects on Industry

By the early 1930s, there was a significant reduction in the demand for industrial products. As a result, the US introduced tariff barriers to protect its own companies. As a result, many German factories and industries either closed or downsized dramatically. This is because the US was the main importer of German goods. As a result of the reduced demand, German industrial production had fallen to just 58% from 1928 by 1932.

Weimar Government Failures

The Weimar government failed to solve the crisis. Many argue that they exacerbated it.

The Nazis Benefit

The Nazis popularity increased due to their proposals to solve the Great Depression. In the July 1932 elections, the Nazis won 230 seats. Hitler demanded to be made chancellor as the Nazi Party was the largest political party with 32% of the votes