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After their loss in WW1, Germany was left economically devastated. This was in part due to the Treaty of Versailles, which forced Germany to pay expensive reparations to France and Britain. In addition to this, the treaty also forced Germany to give up 13% of their land. Initially, Germany attempted to recover from the war and the treaty through social spending. This social spending included creating transportation projects, as well as the modernization of power plants and gas works; which were all used to battle the increasing unemployment rate. Social spending would continue, and began to rise at a high rate.
In 1913, the government was spending approximately $20.5 per resident, and by 1925 it had risen to almost $65 per resident. Finally, in 1929, spending reached over $100 per resident. This increasing amount of government would subsequently cause continual deficits. The municipal finance of Germany would eventually collapse in 1930. Although it seemed as if this collapse was due to debt, the reality of the situation was that ordinary budgets were responsible, as municipal officials and politicians were unable to restore order to them. Further adding to Germany’s economic problems, revenue from income tax began to fall. In 1913, over 53% of all tax revenue came from income, but in 1925, it dropped down to 28%. As the revenue from income taxes continued to decrease, the government began to depend more and more on state trade and property tax; as well as on profits made from municipal utilities (like power plants).
Adding to its economic despair, Germany, faced with reparation payments they could not afford, began printing exaggerated amounts of money. This threw the country into a state of hyperinflation, which got to the point where millions of dollars were left worthless. With Germany in such a weak and vulnerable point, Hitler began his ascent to power. He was successful in doing so in part due to the fact that whenever something bad happens, people always desire someone to blame. Hitler convinced Germans that Jewish people were the ones to blame for Germany’s poor economic state, as well as the other problems the nation had. He also convinced the people that he had a plan for a swift economic recovery. He outlined the plan, which he said in four years, would completely eliminate unemployment throughout Germany. Although this plan would not raise the level of income for the enrichment of the people, it would increase military strength.
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