The Coming of the Third Reich (22 page)

Klemperer spent more and more of his time scrambling about for money, writing on 2 November:

Yesterday I waited for money in the university cashier’s office the whole morning up to almost 2. o’clock and in the end I didn’t get a penny, not even what was left from the October payment, since the dollar rose yesterday from 65 to 130 billion, so today I will have to pay my gas bill and other things at twice yesterday’s price. In the case of gas that is likely to make a difference of a good 150 billion.
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Food riots were breaking out in Dresden, he reported, some of them with an antisemitic tinge, and Klemperer began to fear that his house would be broken into in the frantic search for supplies. Work was impossible. ‘Money matters take up a very great deal of time and frazzle one’s nerves.’
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Germany was grinding to a halt. Businesses and municipalities could no longer afford to pay their workers or buy supplies for public utilities. By 7 September sixty out of the ninety tram routes in Berlin had stopped running.
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The situation clearly could not continue any longer. The country was brought back from the brink by a combination of astute political moves and clever financial reforms. Beginning his long period of service as Foreign Minister in August 1923, Gustav Stresemann, who combined the office with the Reich Chancellorship for the first few months, initiated a policy of ‘fulfilment’, negotiating the withdrawal of the French from the Ruhr in September in return for a guarantee that Germany would meet its reparations payments, come what might. As a result, the international community agreed to look again at the reparations system, and a plan drawn up by a committee under the chairmanship of the American financial expert Charles Dawes was negotiated and accepted the following year.

The Dawes Plan did not hold out any prospect of an end to the payments, but at least it put in place a series of arrangements to ensure that paying them was a practical proposition, and for the next five years they were indeed paid without too many problems.
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Stresemann’s policy did not earn him any plaudits from the nationalist right, who resisted any concession to the principle of reparations. But the extent of the hyperinflation by this time convinced most people that this was the only realistic policy, a view they would most probably not have taken a year or so earlier.
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On the financial front, the Stresemann government appointed Hjalmar Schacht, an astute financier with strong political connections, to head the central state bank, the Reichsbank, on 22 December 1923. A new currency had already been issued on 15 November, the Rentenmark, whose value was tied to the price of gold.
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Schacht put a number of measures in place to defend the Rentenmark from speculation, and as the new currency, soon renamed the Reichsmark, became more widely available, it replaced the old one and achieved general acceptance.
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The hyperinflation was over.

Other countries were affected by postwar inflation, but none so badly as Germany. At the height of the hyperinflation, which varied from country to country, prices stood at 14,000 times their prewar level in Austria, 23,000 times in Hungary, 2,500,000 times in Poland and 4,000 million times in Russia, although the inflation here was not strictly comparable to its counterparts elsewhere since the Bolsheviks had largely withdrawn the Soviet economy from the world market. These rates were bad enough. But in Germany, prices had reached a billion times their prewar level, a decline that has entered the annals of economic history as the greatest hyperinflation ever. It was noticeable that all these countries had not fought on the winning side in the war. Each country eventually stabilized its currency, but without much reference to the others. No viable new international financial system emerged in the 1920s to compare with the elaborate set of institutions and agreements that was to govern international finance after the Second World War.
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II

The consequences both of the hyperinflation and of the way it came to an end were momentous. Yet its long-term effects on the economic situation of Germany’s population are hard to measure. It used to be thought that it destroyed the economic prosperity of the middle class. But the middle class was a very diverse group in economic and financial terms. Anyone who had invested money in war bonds or other loans to the state lost it, but anyone who had borrowed a large sum of money as a mortgage for a house or flat was likely to end up acquiring the property for virtually nothing. Often these two situations were united to one degree or another in the same person. But for those who depended on a fixed income, the. results were ruinous. Creditors were embittered. The economic and social cohesion of the middle class was shattered, as winners and losers confronted one another across new social divides. The result was a growing fragmentation of the middle-class political parties in the second half of the 19 20S, rendering them helpless in the face of demagogic assaults from the far right. And, crucially, as the deflationary effects of the stabilization began to bite, all social groups felt the pinch. Popular memory conflated the effects of the inflation, the hyperinflation and the stabilization into a single economic catastrophe in which virtually every group in German society was a loser.
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Victor Klemperer was a typical figure in this process. When the stabilization came, the ‘fear of sudden monetary devaluation, the mad rush of having to shop’ were over, but ‘destitution’ came in their place, for in the new currency Klemperer had virtually nothing of any value and hardly any money at all. After all his speculation, he concluded gloomily, ‘my shares have a value of scarcely 100 marks, my cash reserves at home about the same, and that’s all - my life insurance is utterly and completely lost. 150 paper millions are = 0.015 pfennigs.’
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As money lost its value, goods became the only thing worth having, and a huge crime wave swept the country. Convictions for theft, which had numbered 115,000 in 1913, peaked at 365,000 in 1923. Seven times more offenders were convicted of handling stolen goods in 1923 than in 1913. So desperate were the poor even in 1921 that a Social Democratic newspaper reported that out of 100 men sent to. Berlin’s Plötzensee prison, 80 had no socks on, 60 were without shoes and 50 did not even have a shirt on their back.
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Pilfering in the Hamburg docks, where workers had traditionally helped themselves to a portion of the cargoes they were paid to load and unload, reached unprecedented levels. Workers were said to be refusing to load some goods on the grounds that they could not use any of them. Trade unions reported that many workers only went to the quayside in order to steal, and that anyone who tried to stop them was beaten up. Coffee, flour, bacon and sugar were favoured booty. In effect, workers were increasingly enforcing payment in kind as money wages declined in value. So widespread did the phenomenon become that some foreign shipping firms began unloading goods elsewhere in 1922-3.
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A similar economy of theft and barter began to replace money transactions in other trades and other centres as well.

Violence, or the threat of violence, sometimes made itself evident in spectacular ways. Gangs of up to two hundred heavily armed youths were seen storming barns in the countryside and carrying off the produce. Yet, despite this atmosphere of barely controllable criminality, convictions for wounding fell from 113,000 in 1913 to a mere 3 5,000 in 1923, and there was a comparable fall in other categories of crime not directly related to theft. Almost everybody seemed to be concentrating on stealing small amounts of food and supplies in order to stay alive. There were reports of girls selling themselves for packets of butter. Bitterness and resentment at this situation were increased by the feeling that some people were making huge profits from it, through illicit currency dealing, cross-border smuggling, profiteering and the illegal moving of goods. The black marketeer and the profiteer had become objects of denunciation by populist demagogues even before galloping inflation became hyperinflation. Now they became popular hate-figures. There was a widespread feeling that profiteers were partying the night away while honest shopkeepers and artisans were having to sell their household furniture to buy a loaf of bread. Traditional moral values appeared to many to be in decline along with traditional monetary values.
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The descent into chaos - economic, social, political, moral - seemed to be total.
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Money, income, financial solidity, economic order, regularity and predictability had been at the heart of bourgeois values and bourgeois existence before the war. Now all this seemed to have been swept away along with the equally solid-seeming political system of the Wilhelmine Reich. A widespread cynicism began to make itself apparent in Weimar culture, from films like
Dr Mabuse the Gambler
to Thomas Mann’s
The Confessions of the Swindler Felix Krull
(written in 1922 though put aside and not completed until more than thirty years later). It was not least as a consequence of the inflation that Weimar culture developed its fascination with criminals, embezzlers, gamblers, manipulators, thieves and crooks of all kinds. Life seemed to be a game of chance, survival a matter of the arbitrary impact of incomprehensible economic forces. In such an atmosphere, conspiracy theories began to abound. Gambling, whether at the card table or on the Stock Exchange, became a metaphor for life. Much of the cynicism that gave Weimar culture its edge in the mid-1920s and made many people eventually long for the return of idealism, self-sacrifice and patriotic dedication, derived from the disorienting effects of the hyperinflation.
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Hyperinflation became a trauma whose influence affected the behaviour of Germans of all classes long afterwards. It added to the feeling in the more conservative sections of the population of a world turned upside down, first by defeat, then by revolution, and now by economics. It destroyed faith in the neutrality of the law as a social regulator, between debtors and creditors, rich and poor, and undermined notions of the fairness and equity that the law was supposed to maintain. It debased the language of politics, already driven to hyperbolic overemphasis by the events of 1918-19. It lent new power to stock fantasy-images of evil, not just the criminal and the gambler, but also the speculator and, fatefully, the financially manipulative Jew.
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III

Among the groups widely regarded as winners in the economic upheavals of the early 1920s were the big industrialists and financiers, a fact that caused widespread resentment against ‘capitalists’ and ‘profiteers’ in many quarters of German society. But German businessmen were not so sure they had gained so much. Many of them looked back to the Wilhelmine Reich with nostalgia, a time when the state, the police and the courts had kept the labour movement at bay and business itself had bent the ear of government in key matters of economic and social policy. Misconceived though this rose-tinted retrovision might have been, the fact remained that big business had indeed held a privileged position before the war despite occasional irritations with state interference in the economy.
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The rapidity and scale of Germany’s industrialization had not only made the country into mainland Europe’s major economic power by 1914, it had also created a business sector that was remarkable for the scale of its enterprises and the public prominence of its managers and entrepreneurs. Men like the arms manufacturer Krupp, the iron and steel magnates Stumm and Thyssen, the shipowner Ballin, the electricity company bosses Rathenau and Siemens, and many more, were household names, rich, powerful and politically influential.

Such men tended, with varying emphases, to resist unionization and reject the idea of collective bargaining. During the war, however, they had softened their antagonism under the impact of growing state interference in labour relations, and on 15 November 1918 business and the unions, represented respectively by Hugo Stinnes and Carl Legien, signed a pact establishing a new framework of collective bargaining, including recognition of the eight-hour day. Both sides had an interest in warding off the threat of sweeping socialization from the extreme left, and the agreement preserved the existing structure of big business while giving the unions equal representation on a nationwide network of joint bargaining committees. Like other elements of the Wilhelmine establishment, big business accepted the Republic because it seemed the most likely way of warding off something worse.
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Things did not, then, seem too bad for business during the early years of the Republic. Once they had cottoned on to the fact that the inflation was going to continue, many industrialists purchased large quantities of machinery with borrowed money that had lost its value by the time they came to pay it back. But this did not mean, as some have claimed, that they drove on the inflation because they saw its advantages for themselves. On the contrary, many of them were confused about what to do, above all during the hyperinflation of 1923, and the gains they made from the whole process were not as spectacular as has often been alleged.
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Moreover, the sharp deflation that was the inevitable outcome of currency stabilization brought serious problems for industry, which had in many cases invested in more plant than it needed. Bankruptcies multiplied, the huge industrial and financial empire of Hugo Stinnes collapsed, and major companies sought refuge in a wave of mergers and cartels, most notably the United Steelworks, formed in 1924 from a number of heavy industrial companies, and the massive I.G. Farben, the German Dye Trust, created the same year from the chemical firms of Agfa, BASF, Bayer, Griesheim, Hoechst and Weiler-ter-Meer, to form the largest corporation in Europe and the fourth largest in the world after General Motors, United States Steel and Standard Oil.
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