The German Economy: 1919-1939 INFLATION AND NAZISM The German Economy, 1919

World War I was essentially a contest of mutual exhaustion: moral, human, and economic. France had been come close to the breaking point in 1917, and Russia had been driven past it, leading to the Russian Revolution and Russia's withdrawal from the war. In 1918, however, Germany reached the end of its resources, while the Allies were revitalized by the influx of American manpower and resources. In November 1918, Germany had not been invaded, and only a few scattered bombs had fallen on its cities. The German army was still able to launch offensives in mid-1918, and even at that point Germany had a credible chance of winning the war on the battlefield. When its last offensive fell short, however, Germany had no option left to capitulate.

The postwar German economy was thus left in a shambles. Its factories were not bombed-out shells, as in 1945, but they had been worn down by the strains of four years of war production with nothing left over for upkeep. The farm economy was equally devastated by the war: the shortage of men and draft animals, both sent to the front in millions, brought the population to the edge of starvation. Nevertheless, recovery was possible, as it was even in the much worse conditions of 1945. In spite of wartime losses, Germany had still a large and well-educated work force, and in spite of wartime strains the economic infrastructure was still more or less intact.

Two related factors, however, contrasted the period after 1918 from that

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a German state post office, the way dollars and pounds of the era could be cashed in for gold. Nevertheless even a theoretical backing was sufficient to restore confidence in the currency and thus a return to economic stability. With the "Miracle of the Rentenmark," and the international debt adjustment of the Dawes Plan (Hardach, 1976, pp. 29-30), the economic turmoil that had shaken Germany during the first five postwar years seemed at last to be at an end. The middle years of the 1920s were generally prosperous in the western world, and Weimar Germany now shared in the prosperity. In the United States these were years of spectacular boom, the Roaring Twenties, and for the first time the US economy played a role that would later become familar as the "engine" of the world economy. In fact there was considerably less of a truly global economy than in the free-trade years prior to World War I (Johnson, 1987, pp. 281-82). Recovery in Britain was sluggish, and beset by frequent social tensions and labor strife. The French economy, still only semi-industrialized and little tied to the rest of the world, was still held back by France's staggering manpower losses in the war. (The low cost of living in France was a major fa

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