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The imposed gift of Versailles: the fiscal effects of restricting the size of Germany’s armed forces, 1924–1929

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  • Hantke, Max
  • Spoerer, Mark

Abstract

Weimar’s politicians used to attribute the continuous budget crises after the currency stabilization of 1923–4 to the burden put on the German economy by the Treaty of Versailles, in particular the reparation payments. This argument, which is still popular, neglects the fact that the restriction of the German military to 115,000 men relieved the German central budget considerably. In a counterfactual analysis we assess the savings in additional military costs and compare them to the reparation payments. Depending on the character of the foreign policy pursued by an unrestricted Germany, we find that the net effect of the Treaty’s stipulations on the German central budgets was either much lower than hitherto thought or even positive. This finding gives support to the argument that Germany suffered from home-made political failure even in the relatively stable period from 1924 to 1929.

Suggested Citation

  • Hantke, Max & Spoerer, Mark, 2010. "The imposed gift of Versailles: the fiscal effects of restricting the size of Germany’s armed forces, 1924–1929," MPRA Paper 20054, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20054
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    Cited by:

    1. Alfred Reckendrees, 2015. "Weimar Germany: The first open access order that failed?," Constitutional Political Economy, Springer, vol. 26(1), pages 38-60, March.
    2. Mark Harrison, 2016. "Myths of the Great War," Studies in Economic History, in: Jari Eloranta & Eric Golson & Andrei Markevich & Nikolaus Wolf (ed.), Economic History of Warfare and State Formation, pages 135-158, Springer.
    3. Ho, Tai-kuang & Yeh, Kuo-chun, 2019. "Were capital flows the culprit in the Weimar economic crisis?," Explorations in Economic History, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    Treaty of Versailles; reparations; military budget; Dawes plan; Weimar Germany; peace dividend;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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