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   Gustav Stresemann* predicted in 1928 that "if crisis ever hits us, and the Americans recall their short-term loans, we face bankruptcy." Indeed, the economic crisis that beset Germany from 1929 until Hitler's* ap-pointment had roots in the Dawes Plan* of 1924, the stringent financial policies that served as the domestic counterpart to Dawes, and the decision to pursue a policy of fulfillment*—with major deflationary implications—vis-a-vis the Ver-sailles Treaty.* The German "stability" of 1924-1929, dubbed die goldenen zwanziger Jahre (the Golden Twenties), was an illusion. These years were marked by high unemployment, a high rate of bankruptcy, and banks making long-term investments with short-term money. Moreover, the agricultural com-munity had already sunk into depression by 1928. By regularly accepting high-interest/short-term American loans, while shunning comparably higher taxes, the Republic could temporarily pay reparations* and finance large-scale government deficits. No one more forcefully condemned the proliferation of foreign debt than Hjalmar Schacht,* the Reichsbank President; indeed, by 1928 the loans were a source of severe conflict between Schacht and the government. The Republic's inability to finance growing deficits (1926 was the only year in which Germany had a favorable balance of trade), due in part to rising unem-ployment, was integral to the social conflict that destabilized Germany. When the Americans refused to fund a further loan request in December 1929, Strese-mann's prediction became reality.

   Two related financial problems, both evident before the New York Stock Exchange debacle, drove Germany's economic crisis: a decrease in government income from taxes and the growth of unemployment-relief expenditure. Bitter Reichstag* debates spawned remedies that were impotent to meet the growing emergency; indeed, emergency cost-saving reforms added to the agony of the unemployed while failing to address the crisis. Between 1928 and 1930 bank-ruptcies soared, while production dropped by 31 percent. The number of Ger-mans seeking work, 4.4 million at the end of 1930, climbed to 4.9 million one month later. The slight improvement of early 1931 was neutralized in June when the Reichsbank, disclosing that its gold reserves were nearing the minimum required to print currency, induced a banking crisis. A dramatic boost in the discount rate from 5 to 10 percent and Herbert Hoover's 23 June moratorium on reparations failed to stem the collapse. Unemployment reached 5.6 million in 1932, including 43.8 percent of all trade-union* members; it is estimated that another 2 million who had stopped seeking work had vanished from the un-employment rolls. While there were signs of economic recovery by the end of 1932, the impact did not register with Germany's unemployed.

   Although the link between the depression and Hitler's rise may be obvious, it bears noting that unemployment and crisis impacted all industrialized countries during 1929-1933; conditions in the United States and Britain approximated those in Germany. What set the Germans apart was a habit of blaming every problem on the Allies, the Versailles Treaty, and the Weimar regime. With the depression's onset, the middle-class parties were decimated at the polls, and the economic system, such as it was, found itself without a base of support. The street violence of the early 1930s, which helped polarize politics, would have been impossible without the availability of masses of young Germans. The NSDAP was prepared to house its uniformed soldiers in SA* barracks and feed them in SA kitchens—factors vital to Party growth, as the typical German city was bordered by a shantytown by 1932. Since the KPD made similar offers to hungry and embittered young men, one can see how mass unemployment com-bined with the breakdown of traditional allegiances to dramatically enhance the political extremes. But in the last analysis, the Republic's collapse and the NSDAP's victory were not the same; the first occurred about two years before the second, had significant economic underpinnings, and helped prepare the way for Hitler's triumph.

   REFERENCES:Balderston, Origins and Course of the German Economic Crisis; Bennett, Germany and the Diplomacy of the Financial Crisis; Bessel, Political Violence; Richard Evans and Geary, German Unemployed; Eyck, History of the Weimar Republic, vol. 2; Petzina, "Germany"; Stachura, Unemployment.