Q4. What economic conditions led to the collapse of German economy?
There were several characteristics which Germany possessed after the First World War which made them vulnerable to being manipulated by someone like Adolf Hitler. Germany was economically devastated after a draining defeat in World War I. Due to the Versailles treaty, Germany was forced to pay incredibly sizeable reparations to France and Great Britain. In addition, the Versailles treaty, which many agreed was far too harsh, forced Germany to give up thirteen percent of its land.
At first Germany tried to recover from the war by way of social spending to battle increasing unemployment rate. Germany began creating transportation projects, modernization of power plants and gas works. The elevating amounts of money which were used for social spending combined with plummeting revenues caused continuing deficits. The government also became highly dependent on the profits made from municipal utilities, such as electric power plants as the revenue from income from taxes reduced.
foreign countries placed protective tariffs on Germany’s goods. Faced with reparation payments they could not afford, Germany began printing exaggerated amounts of money. This threw Germany into a state of super inflation. With the approach of world economic crisis in 1928 foreign lenders withdrew capital and markets further closed against German imports. When the U.S. was hit by the great depression they immediately sought to get the loans paid back. This practically caused the German economy to collapse.