To what extent was there economic instability in Germany from 1923-1928? (25 marks)

The Treaty of Versailles (1919) created a difficult and fragile legacy for Germany, with 1923-1928 being a period of intense economic turmoil. Germany experienced significant economic instability from 1923-1928 to a very large extent.Firstly, the Dawes Plan of 1924 was hailed as a saving grace for Germany, and provided an illusion of economic stability. Devised by the American financier, Charles Dawes, the plan involved reducing the amount of reparations Germany had to pay annually to 1 billion marks per year for the first 5 years. In addition, Dawes negotiated a loan of 800 million marks to Germany in order to boost German industrial production. On a superficial level Germany appeared to have economic stability, however this reliance on foreign loans later revealed to exacerbate economic instability. Chancellor Stresemann was reported to have found this dependency on the American economy to be like 'dancing on a volcano'. It also proved to be flawed when Germany felt even more economic hardship due to the 1929 Wall Street Crash and subsequent Great Depression. This destroyed the German economy, as it lacked the support from a floundering American economy. It is evident that relying on the American economy for loans merely delayed the economic realities for Germany, as once the support was removed the economy suffered further. Thus, despite the opportunities the Dawes Plan offered initially, the German economy was unstable to a large extent from 1923-1928 due to the instability of relying on a foreign economy. Domestically, Germany was also experiencing instability due to unemployment and the degradation of the agricultural sector. The industrial sector of Germany, involving industries such as aeroplane, car, and chemical, did see minor improvements to their recovery. More importantly, the large-scale unemployment negates the progress made in other areas of the economy. Unemployment rose to 3 million people by 1926, and never fell below 1.6 million throughout this period. By 1928-1929, Germany had seen a huge shrinkage of their domestic economy, with many of its citizens struggling to feed themselves due to this chronic unemployment crisis. The agricultural sector never recovered from the Treaty of Versailles during this period either. It was plagued by debt, bankruptcy, and falling prices. Even by 1929 the production was three-quarters less than pre-war level. Combined it is clear that Germany experienced instability as it could not provide economic security to its citizens, and its biggest sector of the economy proved to be failing significantly. Consequently, it is clear that despite small improvements in technology and industry, the overwhelming problem was the shrinking economy and falling unemployment in Germany. As such Germany suffered from economic instability to a very significant extent from 1928-1929.