The effects of the Treaty of Versailles crushed Germany’s economy after World War I. Germany lost land they needed to grow food, boats they needed to bring in raw supplies from abroad and the government could not afford to pay back reparations promised to the Allied nations.

Although Germany had once been an agricultural powerhouse in Europe their economy became more industrial and they were unable to feed their own population without importing goods. Forty million Germans needed the potato and wheat crops that were grown in the East part of Germany that was now under Allied control. Germany could not import food because they had lost their merchant marine vessels. Germany also needed from materials including coal that they could no longer import. Many citizens could not find work and the German currency was devalued to the point that it became worthless. Inflation was so bad at one point in 1923 that prices were being marked up by 20% every day.


The economic crisis in Germany led to significant changes in the daily life of Germans. Many people in Germany were forced into prostitution or illegal activities because they had no choices. Many families were tossed onto the streets and had to bake to survive. Because German money was worthless foreigners found that they could live like kings in Germany during this time period. Foreign travelers came in and snatched up German antiquities and treasures for almost nothing. Barter became the new system of currency. People traded butter for services and shoe factory workers were paid in shoes.

The United States tried to stabilize the German economy with the Dawes plan from 1924 to 1929. The Dawes plan was a series of loans from foreign investors including the United States meant to soften the burden of war reparation payments. The Great Depression in the United States affected Germany as well because now their economy is dependent upon the US economy flourishing. The Dawes plan worked until the United States economy and the stock market collapsed. After the stock market collapsed Germany's industrial output fell by 40% and unemployment was at 40%.