The rebuilding of German capitalism through massive foreign loans had by 1929 produced an industry that was the most advanced in the world. Huge combines were built up for which the internal German market was completely insufficient. “We need markets, but the markets of the world are closed to us,” grumbled Krupp. “Great Britain has erected tariff walls. In France, Italy, Sweden, the Balkans, in fact everywhere, German trade is up against barriers which little by little are becoming insurmountable.” The Wall Street crash of October 1929 and the following slump in world production proved a catastrophe for German capitalism. In 1929 German exports amounted to 13 billion marks, but by 1933 they had slumped by more than half to 5 billion marks. Banks failed, foreign credit evaporated and Germany lurched into crisis.
The introduction of a new revised policy by the Allies, the Young Plan, seemed to compound the problems of German capitalism. On the basis of the projected recovery, Germany would now pay higher reparations in cash until 1988. The Crash forced the great powers to abandon this utopian scheme. The German bourgeois responded to the crisis with mass sackings. In the first fortnight of January 1930, 40,000 were thrown out of work; Krupp had reduced his staff from 100,000 to 50,000; the Gutehoffnungs-Hutte from 80,000 to 36,000. Within six months unemployment had increased from just over one million to three million. In the words of one historian, “Germany became once more a country of beggars.”
By March the “Grand Coalition” of Müller had collapsed, torn apart by economic policy differences. It was the last Weimar government to rest on a parliamentary majority. Germany now faced a catastrophe. Within a few years unemployment would spiral upwards to over six million – on official figures. A decisive section of the German bourgeoisie now began to recognize that the only possible solution to the crisis was fascist reaction. Their attitude was summed up by Krupp, when he said, “We want only loyal workers who are grateful from the bottom of their hearts for the bread we let them earn.” In 1918 the German capitalists had been forced to give big concessions: the eight-hour day, trade union recognition, unemployment insurance, universal suffrage and other reforms, in order to prevent revolution. They gave these concessions while grinding their teeth and biding their time for revenge.