The Downfall of Money: Germanys Hyperinflation and the Destruction of the Middle Class by Frederick Taylor Page A
Authors: Frederick Taylor
Tags: History, Germany, Europe, Economics, Finance, Professional & Technical, Business & Money, Money & Monetary Policy, Inflation, Accounting & Finance
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certainly not the speech of a revolutionary, of someone creating a new world from scratch, with confidence and passion and preparedness to risk all for the chance of a bright future. In fact, there was an air of mild apology about parts of the speech. The phrase ‘insolvency administrators’ said it all.
Behind Ebert’s assurances to the newly elected deputies of the Republic’s constituent assembly was an awareness that, for the new Germany to work, it had to offer its citizens a better life than the previous regime. The Social Democratic Party itself had spent the previous half-century promising that, when it won power, it would transform life for the mass of Germans, providing work, social welfare, equality and prosperity within a framework of ideal socialist democracy.
Excluded from power while the German Empire lasted, the Social Democratic Party and its members had come, over more than four decades, to form a parallel society within society. Inside this sheltered environment flourished paradisiacal, even fantastic imaginings of what life would be like when the day of proletarian power finally arrived. The party had never planned on carrying out the transition to this ideal state under the circumstances of a catastrophic lost war. Nor had it foreseen taking power in a nation exhausted by war, heavily loaded with debt, excluded from world markets and threatened with heavy reparations, and half-starved thanks to a ruthless blockade that continued even after the armistice. Worst of all, although the end of the monarchy had been welcome to many Germans at the time of the Kaiser’s abdication, the nation was already subject to bitter political and social divisions that promised only to get worse.
A late twentieth-century American political fixer would invent the slogan ‘It’s the economy, stupid’ to express the reality of how elections were decided. There were many other factors responsible for the wild and ultimately tragic ride that would follow the establishment of the First German Republic, but ultimately the economy would indeed dictate how those factors played out.
As for the value of the German currency, it was relatively well placed in the spring of 1918 at a little over five marks to the dollar. By the time Herr Ebert made his less than certain speech to the National Assembly at the beginning of 1919, it was running at 8.20, and the direction of movement was downwards.
9
Social Peace at Any Price?
The German Republic established on 9 November 1918 could not call on divine right to justify its existence, as its imperial and monarchical predecessors had done. It presented itself as democratic, egalitarian, and above all as a state whose whole reason for existence was to improve the welfare of its citizens, and to make Germany a fairer society.
Despite the sometimes devious behind-the-scenes manoeuvring to prevent a Bolshevik-style transformation of society, the first days after the revolution saw the representatives of the new Germany establish the basis for a status quo that they trusted would earn the loyalty of the vast majority of Germans – and, above all, of the industrial working class, which formed the bedrock of the Social Democratic Party’s support and therefore of the republic.
The fact that the government of the new Germany felt constrained to do this, though arguably virtuous in itself, underpinned the whole social and political tendency of the post-war years. It also, virtue apart, played an important part in ensuring that, whenever a choice needed to be made by Weimar’s politicians, socialist or not, they showed a tendency to make decisions in terms of perceived political and social benefit. Economic considerations, even apparently urgent ones, came a poor second. In other words, a major part of the reason why the Weimar Republic – perhaps the first of many modern states to find itself in this situation – let its economy drift into an inflationary state was because for some
Behind Ebert’s assurances to the newly elected deputies of the Republic’s constituent assembly was an awareness that, for the new Germany to work, it had to offer its citizens a better life than the previous regime. The Social Democratic Party itself had spent the previous half-century promising that, when it won power, it would transform life for the mass of Germans, providing work, social welfare, equality and prosperity within a framework of ideal socialist democracy.
Excluded from power while the German Empire lasted, the Social Democratic Party and its members had come, over more than four decades, to form a parallel society within society. Inside this sheltered environment flourished paradisiacal, even fantastic imaginings of what life would be like when the day of proletarian power finally arrived. The party had never planned on carrying out the transition to this ideal state under the circumstances of a catastrophic lost war. Nor had it foreseen taking power in a nation exhausted by war, heavily loaded with debt, excluded from world markets and threatened with heavy reparations, and half-starved thanks to a ruthless blockade that continued even after the armistice. Worst of all, although the end of the monarchy had been welcome to many Germans at the time of the Kaiser’s abdication, the nation was already subject to bitter political and social divisions that promised only to get worse.
A late twentieth-century American political fixer would invent the slogan ‘It’s the economy, stupid’ to express the reality of how elections were decided. There were many other factors responsible for the wild and ultimately tragic ride that would follow the establishment of the First German Republic, but ultimately the economy would indeed dictate how those factors played out.
As for the value of the German currency, it was relatively well placed in the spring of 1918 at a little over five marks to the dollar. By the time Herr Ebert made his less than certain speech to the National Assembly at the beginning of 1919, it was running at 8.20, and the direction of movement was downwards.
9
Social Peace at Any Price?
The German Republic established on 9 November 1918 could not call on divine right to justify its existence, as its imperial and monarchical predecessors had done. It presented itself as democratic, egalitarian, and above all as a state whose whole reason for existence was to improve the welfare of its citizens, and to make Germany a fairer society.
Despite the sometimes devious behind-the-scenes manoeuvring to prevent a Bolshevik-style transformation of society, the first days after the revolution saw the representatives of the new Germany establish the basis for a status quo that they trusted would earn the loyalty of the vast majority of Germans – and, above all, of the industrial working class, which formed the bedrock of the Social Democratic Party’s support and therefore of the republic.
The fact that the government of the new Germany felt constrained to do this, though arguably virtuous in itself, underpinned the whole social and political tendency of the post-war years. It also, virtue apart, played an important part in ensuring that, whenever a choice needed to be made by Weimar’s politicians, socialist or not, they showed a tendency to make decisions in terms of perceived political and social benefit. Economic considerations, even apparently urgent ones, came a poor second. In other words, a major part of the reason why the Weimar Republic – perhaps the first of many modern states to find itself in this situation – let its economy drift into an inflationary state was because for some
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