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 after 1945. After World War II, at least in what became West Germany, the US Marshall Plan poured in short-term reconstruction assistance, aiding the German economy in getting back on its feet. In contrast, at Versailles in 1919 the vengeful Allies imposed heavy war reparations on Germany. These reparations had a dual effect: They placed a tax on resources that could otherwise have gone into reconstruction, and drained Germany of gold at a time when that metal ...