Summary
Highlights
The global economic crisis of 1929 originated in the United States, the center of the world economy. After World War I, the US experienced an economic boom, leading to widespread stock market speculation. As demand for shares drove prices unrealistically high, investors started selling, causing a massive crash. On October 24, 1929 (Black Thursday in the US, Black Friday in Germany), stock values plummeted by up to 90%, leading to the bankruptcy of 9,000 banks and over 100,000 companies in the US.
American banks, heavily invested worldwide, began withdrawing their loans from foreign countries to salvage their finances. This particularly impacted Germany, whose economic recovery in the Golden Twenties was largely financed by American dollars. This withdrawal escalated the crisis globally, with Germany being especially vulnerable due to existing high levels of debt. As banks collapsed, companies went bankrupt or had to lay off millions of workers, signaling a deepening economic collapse.
Unemployment in Germany soared from over two million in 1926 to about five and a half million by 1932, with the unemployment rate rising from under 10% to almost 30%. Other European countries and the US also faced massive unemployment, with industrial production falling by about 40%. Germany's social welfare systems were overwhelmed, with benefits drastically reduced and eligibility tightened, leading to widespread poverty, homelessness, and despair. Many young people, entering a job market with no opportunities, experienced profound frustration.
The economic hardship led many to blame democracy and its politicians. Radical parties like the Communist Party (KPD) and the newly formed National Socialist German Workers' Party (NSDAP) gained significant traction. While people in the US and UK united politically, Germans became increasingly divided. The democratic parties faced immense pressure, and the Grand Coalition government, in power since 1928, collapsed in 1930, marking the beginning of the end for the Weimar Republic.