The Downfall of Money: Germanys Hyperinflation and the Destruction of the Middle Class
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The General and the Party Secretary knew each other quite well. Groener had been a key military functionary on the home front during 1916-17, the High Command’s man at the Reich Food Office, then from November 1916 to August 1917 Deputy Prussian War Minister and war production supremo. In these capacities, he had worked together with Ebert and other leading Social Democrats on the crucial tasks of keeping the industrial workforce fed and manageable.
There is a simple way of viewing the conversation between these two men. This says that Ebert, unsure of his longer-term position in the face of the revolutionary process, asked his old acquaintance Groener for the army’s support against the far left, in return guaranteeing the position of the army’s leadership and the disciplinary powers of its officers in the face of the recent wave of democratisation.
There is, however, another view. The fact was that at that point Groener had virtually no army to lend Ebert. As Prince Max’s attempts to use the 4th Rifles against the crowds early on 9 November had shown, there were almost no troops who could be trusted to act as instruments of ‘order’. There was plenty of discontent and defeatism at the front, but this was particularly true in the cities of Germany proper, where radical ideas had spread like wildfire among civilians and soldiers alike. Arguably, judging from the evidence of the past few days’ events, Ebert had more power over the average soldier than did their nominal commander, Groener. But both men had an interest in an orderly retreat to the armistice lines that had already been agreed with the Entente, and also in an efficient carrying out of the demobilisation process of (more than 8 million) German citizens in uniform that would undoubtedly also be taking place over the following weeks and months. This meant that the Social Democrat was prepared to give the High Command assurances that the essential integrity of the old army and its officer corps would be respected.2 As for Groener, he would do anything to save what could be saved of the old army, and to buy time for that army to be rebuilt as a post-war factor in the country.
Groener remained a monarchist, of course. However, it is difficult to know what else he could have done other than swear his and the army’s fealty to the new regime in Berlin. It had been Groener himself, born in the Grand Duchy of Württemberg in southern Germany, originally commissioned into the Grand Duke’s rather than the Prussian army, who had finally, it could be said, driven the Kaiser into exile on the morning of 9 November. At a headquarters meeting that morning, the Supreme Warlord had conveyed his intention, once the armistice came into force, of marching ‘his’ army back into the homeland, with his royal self at its head, and suppressing the revolution by force. Few officers were prepared to support his scheme. It would cause civil war and most probably a resumption of hostilities with the victorious Entente as well. The emperor found himself deserted by his paladins. And it was Groener who told Wilhelm II so to his face: ‘The army will return to the homeland under its leaders and commanding generals in a quiet and orderly fashion, but not under the orders of Your Majesty; for it no longer stands behind Your Majesty!’3
What Groener said was true. There were soldiers’ councils springing up everywhere. However, most of the troops – certainly those that, as the end of the war neared, had not informally ‘demobilised’ themselves - wanted the withdrawal to Germany’s borders, as stipulated in the armistice agreement, to occur in an orderly fashion. And almost none of them, except some diehard officers, were prepared to fight for the restoration of Prussian royal power.
It was a strange revolution that overtook Germany in 1918. The parliamentary regime instituted in October had been a creature of Ludendorff and the High Command rather than the result of pressure by parliamentary politicians or, perish the thought, of a popular uprising. The Republic that had been created, in a way by chance and certainly not by Ebert’s design, on 9 November, was the most radical transformation of the state in German history. However, it had already been made clear that the old imperial officials would keep their jobs. How else were ordinary Germans to be fed and the order of their day-to-day lives to be assured? Now, it became clear, the old imperial officers would also remain in place, if Ebert and Groener had their way. How else was the army to hold together and its soldiers be got home safely and in good order?
One thing was certain. In the brief vacuum that had followed the announcement of the Kaiser’s abdication, the far left had failed to take control. Liebknecht’s call for a socialist republic of Germany and for a world revolution had fallen mostly on deaf ears. The masses had stuck overwhelmingly with their familiar democratic socialist leaders, including the relatively moderate leaders of the Independents, with Ebert at the apex of that new power structure.
By the day after the great transformation, Sunday, 10 November, Berlin was surprisingly calm. The theologian and philosopher Professor Ernst Troeltsch described the scene in the leafy Berlin suburb of Grunewald, where he noticed the solid middle-class burghers taking their usual Sunday strolls in the woods, though with one or two concessions to the new era:
No elegant grooming, a conspicuous ‘citizen’ look. With many, probably deliberately, simply dressed. Everyone somewhat subdued, as you might expect from people whose fate was being decided somewhere far away, but all the same reassured and comfortable that things had gone so well. The trams and the underground railways were running as usual, a sort of pledge that, so far as the immediate necessities of life were concerned, all was in order. On every face was written: Salaries are still being paid.4
The mixture of relief and apprehension that characterised the great majority of Germans’ attitudes during this interlude – the armistice followed the next day, on Monday, 11 November – seemed to bode well for change. But most Germans, including the leadership of the Social Democratic Party, typified by Friedrich Ebert, did not want too much of it.
The new governing elite wanted enough to give the country’s citizens some more freedom and equality, to brush aside the stuffy authoritarianism of the Empire, and, so far as the outside world was concerned, perhaps to induce a more merciful peace settlement along the lines of President Wilson’s Fourteen Points. And perhaps a little socialism, too. Even before 1914, German industry had already developed along lines that diverged consciously from the free-market, individualist ‘Manchesterism’ of Britain or the USA, and the passions and necessities of war had done much to move the Reich’s economy towards a kind of corporate socialism that was even more peculiarly German. But not so much socialism that ‘Russian conditions’ would be created, for both the prosperous classes and the majority of workers did not want Bolshevism.
The main thing was that the old system seemed both discredited and ruined. The Kaiser, after his apparently panic-stricken flight across the border into Holland, was held in widespread contempt. The generals and the officer class had brought their nation nothing but drawn-out suffering and defeat. Germans had stood together for four years with remarkable fortitude, it was true, but to what end? And what would happen now?
A few months later, Ebert would give a speech in which he spoke of his motives at the time of the November revolution:
We were in the real meaning of the word the insolvency administrators of the old regime: All the warehouses were empty, all stocks dwindling, all creditworthiness shattered, our morale sunk to the depths. We . . . exercised our best energies to overcome the dangers and the misery of the transitional period. We did not prejudge things that were the business of this National Assembly. But where time and necessity were of the essence, we made every effort to fulfil the most urgent demands of the workers. We did everything we could to restore economic life. If our degree of success did not accord with our wishes, then the circumstances that prevented us from doing so must be properly judged . . .5
This speech was many things but it was 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 th
e 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.
6
Fourteen Points
Although the fighting on the Western Front ceased at 11 a.m. on 11 November 1918, the war did not actually end on that day. Technically, it merely paused. The armistice that had been signed early on the same morning, shortly after 5 a.m., was a time-limited agreement, valid for only thirty-six days from that date. The armistice could be – and was – extended by agreement several times until the last belligerent power ratified the peace treaty in January 1920, although the constant threat of resumption of hostilities remained until that final hour.
There was another respect in which the armistice was far from representing a return to ‘normality’. Among the Fourteen Points originally proposed by President Wilson as a basis for a fair and lasting peace had been ‘freedom of the seas in peace and in war’. During the increasingly ill-tempered exchange of notes preceding the armistice, it had nonetheless been made clear that freedom of the seas would not apply until the conclusion of a peace treaty. This meant that the blockade on all seaborne trade between Germany and the rest of the world, enforced by the British and French navies since 1915, would continue even after the guns fell silent. In other words, Germans would continue to go hungry for an indefinite period to come, and, furthermore, be barred from pursuing the foreign trade through which it could actually pay to feed itself.
Both the insult and the injury were increased by the fact that a sub-clause in the armistice agreement stipulated that ‘The Allies and the United States contemplate the provisioning of Germany during the armistice to the extent as shall be found necessary’.1
This left the question for the Entente and the Americans (and, indeed, everyone else) to ‘contemplate’. What would be considered ‘necessary’? The answer was, initially at least, just about nothing. Even though, after German protests, an agreement was reached that allowed food imports, in return for Allied control over 2.5 million tons of German cargo space,2 the months of nit-picking argument that followed further delayed any progress, stoking (and providing justification for) German resentments. The French in particular refused for the next several months to countenance the idea of the German government importing food for its needy population.3
So the end of the fighting would bring no relief. During the period of eight months or so during which the blockade continued after the armistice, Germany would protest repeatedly, and with justice, that the Allied stranglehold not only conflicted with the spirit of the armistice but continued to inflict unnecessary suffering on the country’s innocents, especially its poor and its children. It would be well into the new year before some controls were relaxed, and even then the concessions were motivated by anti-Bolshevik political calculation on the part of the victors, rather than pure humanitarianism. And what extra food could be imported by the German government, against payment in gold, turned out, in any case, to be too little, too late.
Of course, not everyone in Germany went hungry. By 1918, few German civilians’ lives were not to some extent touched by encounters with the black market. Farmers, manufacturers and retailers had all become adept at circumventing the myriad wartime regulations and restrictions. But those who bought on the black market had to be able to pay the prices that market demanded.
The question of whether Germany was ‘really’ starving played an important role in the debates on the Entente side about lifting the blockade, or at least supplying the defeated population with foodstuffs. Military missions started conducting visits of inspection, an important part of whose remit was to ascertain how bad (or otherwise) things were in Germany under the continued blockade.
One such military mission, a British one, visited Berlin in February 1919. The three officers involved set off from Cologne, now occupied by the British under the armistice agreement, at the beginning of the month and stayed for nine days at the luxurious Hotel Adlon on Unter den Linden. There they found ‘no sign of want of anything’. Dinner in the hotel restaurant consisted of mock turtle soup, boiled turbot and potatoes, followed by a large plate of veal and vegetables and salad, stewed apples and coffee. Price eighteen marks.4
The mission found likewise other parts of the city where – for a price – meat, fish and other palatable foods could be had. Other visits, however, to working-class areas and to orphanages and hospitals, did show serious shortages and resultant health problems. And, tellingly, given the currency’s escalating inflationary tendencies, even at the Adlon the staff were, according to the officers’ report, glad to be rewarded with leftover British military rations as gratuities. These were ‘evidently much more acceptable than money would have been’.5
Reporters from Allied countries also began to visit Germany again, for the first time since before August 1914, initially tending to stay in the Allied-occupied areas of western Germany, which were not entirely typical of the whole country. All the same, one of their chief tasks seemed to be to judge, on their readers’ behalf, the state of the German economy, of the food supply, and of the population’s general health.
The tone of their comments veered between the fairly sympathetic and the pitilessly hostile. In fact, even a liberal paper such as the British Manchester Guardian could print material that seemed inclined towards an extraordinary callousness in its attitude to the suffering of the defeated Germans.
In the second week of January 1919, one of the Manchester Guardian’s correspondents reported on the sorry state of British prisoners of war still in German hands, who, it was claimed, were ‘in so feeble and demoralised a condition when brought in that they were like dumb animals, hardly speaking and incapable even of showing joy at their rescue. It was not until they had a meal that a French officer turned on “God Save the King!” on a gramophone . . . it was a moving sight to watch their haggard faces brighten as they heard the familiar tune.’ The reporter went on to compare this with what he claimed to be the condition of the Germans. ‘Everywhere I have been during the journey of 250 miles on both banks of the Rhine I have seen no sign o
f food shortage.’ He continued:
At Mainz the cafés serve delicious creamy cakes in unlimited quantities. London had not seen such luxuries for a long while until the armistice was signed, and no one needs to remember that here the blockade is still maintained, and that the food one gets now is what the Germans have been having right through the war.
When they complain of shortage, most Germans mean shortage compared with the vast and superfluous quantities they used to eat in peace, and instead of affecting health unfavourably the restrictions, such as they were, that our blockade imposed have probably lengthened many a German life which dyspepsia or fatty degeneration of the heart would have brought to an untimely end.6
What the reporter ignored (or, viewed more charitably, perhaps did not know) was that the French authorities, hoping that the inhabitants of the occupied Rhineland could be seduced into a pro-French attitude, possibly even willingness to secede from Germany altogether, had abolished all trade restrictions for their zone. The Allied blockade did not, in fact, apply in the area concerned. As a British official recollected some years later, ‘We regarded the occupied territory at that time for trading purposes as if it were part of France or Belgium.’7
More balanced reports pointed to the supply problems which had further exacerbated the shortages since the end of the war, especially outside the occupied areas.