The subtitle of this excellent book about Weimar Germany is 'Germany's Hyperinflation and the Destruction of the Middle Class'. One of the author's opening observations is that as the Great War approached, unified Germany..."was for the last time until well into the latter half of the twentieth century simultaneously fully solvent, fully employed and fully at peace." That all ended with the war. Because Britain was able to blockade Germany, the home front saw four years of declining food production and near starvation. As the armies walked home in the third quarter of 1918, the German population also faced severe economic challenges. Fully sixty percent of the war had been paid for by war bonds - a superb 5% yielding investment that now would not be paid back. The food blockade continued until June, 1919 when Germany signed the peace treaty. Armistice and peace did not bring quiet to the German political scene. Revolt and fighting in the streets between the left and right were legacies of the war. The Weimar Republic, effective in August 1919, was never quite able to get its arms around the political turmoil that preceded the economic conflagration. By signing the peace treaty, Weimar sealed its own fate. The right vehemently opposed the signing, despised the war guilt clause, never accepted the treaty's terms and was bent on overthrowing the government. The country was irretrievably divided. The economic situation throughout Europe was equally troubled. The two victorious allies, Britain and France, were suffering from inflation after years of wartime expenditures. They were effectively broke and owed the US billions of dollars. They needed reparations from Germany to pay the US. Essentially the three largest European economies needed to run surpluses in order to generate dollars to pay the US. But, who would they trade with who would be running a deficit? Not the US. The situation was hopeless. And for the Germans, most hopeless of all. They were obligated to pay crippling reparations and there was no political will to comply. Governments came and went; ministers were assassinated. The strongest economy on the continent became a 'banana republic'. Government printing presses tamped down the social unrest. The author summarizes it as: "the government continued to use wartime legislation to subsidize employment, and to regulate food prices and rents broadly in favor of the workers. ....it continued to print money in order to do so. Inflation crept up." Further straining the system were the needs of 550,000 war widows, 1.3 million war orphans and 1.5 million disabled vets. When the in-kind coal reparation for 1921 fell behind schedule, the French occupied the Ruhr Valley. The arrest of Germans, from the head of Krupp's down to street fighters, further inflamed emotions. The Germans struck and resisted at every turn as the French tried to seal off the Ruhr from the rest of the country. The country came close to collapse. Insurgents on the right and left sought to revolt, as Berlin lost control of the country. Hitler's Beer Hall Putsch failed in Munich in the fall of 1923. Soon thereafter, a currency reform led by Chancellor Gustav Stresemann and future Finance Minister Schacht ended the papiermark and introduced the rentenmark. Virtually every debt in the nation, including the obligations of the state to its people, were reduced to pennies. Hyperinflation was over. Within a year, a new Reichsmark was introduced and stability came to Germany. In the mid-twenties, normalcy returned thanks to a significant amount of foreign, particularly American, investment. But of course, the Depression was a worldwide event and one that saw the return of extremism and eventually the end of the Weimar Republic.
The author makes a compelling case that the German educated and middle classes, the supporters of the monarchy, were the ones who suffered the most during the war and its aftermath. They fought and lost and were saddled with the 'war guilt' clause. Their savings were destroyed by inflation and currency reform. "They went from a position of unchallenged privilege within continental Europe's most powerful country to become, in practical terms, just one group competing in a modern political and economic marketplace for which it felt little else but contempt and loathing." Without a centrist middle class, Germany was easily susceptible to the radicals who followed. Although not an easy read, this book helped to connect the dots for me going from war to reparations to inflation to the failure of Weimar Germany.
No comments:
Post a Comment