The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (16 page)

It quickly became apparent that the three-day time limit was impractical. Berlin was thus granted another four days, until 23 June. Meanwhile, the German cabinet, initially committed to acceptance, fell apart. Scheidemann resigned as Chancellor on 20 June, arguing that after what he had said he could not possibly accede to the Allied terms. The Foreign Minister left office – and German politics – along with his Chancellor.

President Ebert was faced with a grim deadline. If the treaty was not signed by 7 p.m. on 23 June, the Allies had threatened to invade Germany and impose a final settlement by force. Although Lloyd George in particular, along with his ministers, was far from eager to send his rapidly demobilising army back into conflict,
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he, too, could see no other option. Then, on 21 June, the German naval commander, Admiral Reuter, ordered the scuttling of what was left of the German fleet, which had been interned at Scapa Flow, in the Orkneys. The fleet had been due, under the terms of the treaty, to be delivered up to the victors. The news added powerfully to existing Allied resolve. This was an act of brazen defiance that confirmed, at this crucial juncture, the worst of Allied prejudices regarding German duplicity and fanaticism.

In the end, a Reich cabinet was formed of ministers prepared to accept the treaty, this time under another Social Democrat, the innocuous and frankly dull Gustav Bauer. The new Deputy Chancellor and Minister of Finance was Matthias Erzberger, the Centre Party politician and Minister without Portfolio who had acted as Chairman of the Armistice Commission, and who had been the most prominent German signatory of the armistice agreement at Compiègne on 11 November 1918.

Erzberger, the son of a tailor and part-time postman from Württemberg, had quickly made a name as a journalist and activist in the Catholic trade union movement before being elected to the Reichstag in 1903 at the early age of twenty-eight. Brilliant and phenomenally hardworking, but considered uncouth by his social superiors, and rather inclined to let his version of any given event run away with him, Erzberger was a classic example of the new professional political class, often originating from humble backgrounds, which came into being in Germany in the years before 1914.

During the war, evolving from a fanatical supporter of a war of conquest to a more moderate stance, he had pushed hard, though unsuccessfully, for a compromise peace. As a result, Erzberger had become a bugbear of the nationalist, annexationist right. During the months that preceded the Allied presentation of the draft treaty, he had been engaged in a constant struggle with Brockdorff-Rantzau, whose high-minded rejectionism he considered a romantic indulgence. Now, because of his reluctant endorsement of the treaty and his advance to a position of prominence in the new government, Erzberger became a target for the growing number of right-wingers who, as the post-war horizon darkened and they sought scapegoats for Germany’s unconscionable defeat, saw the Republic and its leaders as evils to be fought at all costs and by any means.

Erzberger saw clearly that a German refusal to sign the treaty, though tempting, would bring disaster. He predicted Allied occupation of the country and the probable disintegration of the German state into petty statelets, the crippling of German industry and an even greater risk of civil war than already existed. Not to mention the fact that, according to the Minister for Food, the Reich was on the brink of even more disastrous shortages.
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Germany would lose territory as a result of the treaty, it was true, but the country itself, and its infrastructure, remained intact. After all, no fighting had actually occurred on German soil. Even General Groener recognised this fact, sending a telegram to Ebert during those fateful June days in which he recommended compliance. A resumption of military operations held no prospect of success, Groener conceded, and the only chance of avoiding civil tumult at home and chaos on the borders was for the government to firmly state the necessity of signing the treaty. Recovery and, potentially, resurgence were still possible as long as the Reich remained whole and more or less in control of its own destiny.
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On 22 June, the National Assembly voted by 237 to 138, with five abstentions, to accept the treaty, though with the proviso that Germany did not accept the ‘war guilt’ clause, or the section demanding the surrender to the Allies of alleged German war criminals.

The answer from Paris was unyielding. Germany must accept the entire package, without reservations or modifications. After lengthy cabinet discussions and a new debate in the National Assembly, Germany’s unconditional acceptance was finally conveyed to the Allied governments at Versailles late on the afternoon of 23 June. The time was 5.40, one hour and twenty minutes before the expiry of the ultimatum.
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The actual signing of the peace treaty took place in the Hall of Mirrors at Versailles on 28 June – the fifth anniversary of the assassination of the Archduke Franz Ferdinand at Sarajevo, the spark that had lit the conflagration of the First World War. Date and location alike were thick with historical symbolism. The Hall of Mirrors had been the place where, on 18 January 1871, the Prussian king had been acclaimed as Emperor Wilhelm I of Germany by his peers, in the presence of the genius of German unification, Otto von Bismarck. Forty-eight years later, the signature ceremony took place at 3 p.m., amidst crowds of Allied delegates and also the press, whose photographers crowded around as the two German delegates – the new Foreign Minister, Social Democrat Hermann Müller, and the Transport Minister, the Centre Party’s Johannes Bell – entered the enormous room.

Everything about the ritual seemed designed to inflict maximum humiliation on the representatives of the defeated. Pale-faced and dressed in formal dark suits, hands trembling, Müller and Bell wrote their names on the document, using fountain pens they had brought specially from Germany so as not to have to use anything provided by the victors. They were then required to remain seated, and largely ignored, until the representatives of all the Allied countries (and there were many) had also signed. This took three-quarters of an hour. Both the Germans managed a studied calm. Müller wrote afterwards that he ‘wanted our former enemies to see nothing of the deep pain of the German people, whose representative I was at this tragic moment’. Once back at his hotel, however, he broke down in a cold sweat. The entire German party left for home that same night.

The atmosphere back in the Reich resembled one of a nation in mourning. Professor Ernst Troeltsch wrote in his regular ‘Spektator’ column:

Among the people, the effect was of a visible unity in pain, fury and offended honour . . . One heard once again accusations against a government that had allowed itself to be fooled by Wilson’s phrases about peace, and because of that had abandoned a victory almost won. The whole legend was once more spreading abroad that only the defeatists at home, the Jews and the Social Democrats, had broken the backbone of our proud army and that if we had not been so sentimental the most glorious victory could have been ours.
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This wave of irrational hatred would cause the nationalist right, including much of the German educated middle class, to damn the entire republican establishment as traitors. It would not matter that Friedrich Ebert had given his political all to the war effort until the very final phase, or, indeed, that he had lost two sons killed in action at the front. He, and all the others, were ‘the November criminals’. Although it was Ebert who could be seen as overthrowing the Kaiser, and it was Müller and Bell who had signed the treaty, Erzberger seemed nonetheless to have become uniquely identified with the so-called ‘betrayal’ that it represented. ‘I am very sure,’ Harry Kessler had written shortly before the event, ‘that Erzberger will share Liebknecht’s fate.’
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This level of loathing was particularly ominous given the fact that the postman’s son from Württemberg had just been charged with the crucial task of bringing Germany’s broken finances back from the brink. He was determined to do this from the point of view of a socially aware Catholic. Erzberger’s first aim as Finance Minister was to make sure that Germans paid the fair taxes the Reich needed to fuel its recovery. Although some reforms had taken place during the war, most taxes were still raised by the individual German states, which jealously protected their ancient fiscal rights under the monarchy. That would have to change in the new republican Germany. Erzberger had already informed the states as much. And the rich had to pay more: ‘The State will try through radical laws and radical implementation of laws to make good the injustices of the war. The broad masses of the people have been waiting since the revolution for the great sacrifices on the part of the propertied classes.’
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Erzberger also found time to warn Germans against another danger, that of inflation, though he did not call it that. ‘Whether rich or poor,’ he said, ‘we all have too much paper money in our pockets. When the paying of taxes starts, our wallets will become thinner.’

Ah, easier said than done.

Footnotes

*
i.e. the last Tsar of Russia.

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 years social and political priorities took more or less absolute precedence over economics. This would remain the case until the government had no choice in the matter but to change it. However that lay a long way down the line.

On 10 November, Friedrich Ebert made his famous (or notorious) phone call to General Groener, and began the process of making an accommodation with the status quo, so that his version of the ‘revolution’, which was a very modest one, might win out.

A major reason why the government found itself in this situation was, of course, that it had decided to keep the capitalist economy and therefore, perforce, allow the country’s capitalists to survive. A Bolshevik-style reorganisation of the economy might have allowed the kind of central control that would permit the government to dictate terms (though admittedly the Bolsheviks themselves had to cope with a vicious, if temporary, inflation during their own civil war). This, however, was not what Ebert and his colleagues wanted, and probably rightly so.

Of course, in public Ebert and his Majority Social Democrats preached the end of capitalism. This would theoretically enable the peaceful transition to a new, more efficient and equal socialised economy that would function alongside a democratised, egalitarian society. But we know that in fact Ebert ‘hated the social revolution like sin’. That is why he did the deal with Groener.

The alternative to the social revolution was a social agreement. Accordingly, on 15 November 1918, another meeting took place in Berlin that would, in its way, be just as significant in ensuring that, whatever the revolution of 9 November might come to mean, it would not be the end of German capitalism. Again, men who considered themselves leaders of the working class offered a hand to the beleaguered establishment, and again the aim was not the furtherance but the prevention of radical change.

Carl Legien was the most powerful man in the Social Democrat-controlled trade union movement. Its membership had dipped from 2.5 million before the war to less than 1 million, before entering a steep upward curve during the last months of the war, rising on a steeper trajectory during the first weeks and months of peace as working-class men returned from the front to take up employment once more. In November 1918, Legien was a few weeks short of his fifty-seventh birthday, not only one of the Social Democrats’ leading lights but also one of the handful of men who really mattered in post-war Germany.

Born to a working-class family in Thorn, a Prussian city that in 1918 passed to Poland, after the early death of his parents Legien grew up in an orphanage and was then apprenticed as a turner. His rise through the ranks of the trade union movement, from such a heavily disadvantaged background, was astonishingly swift. In 1890, though not yet thirty, Legien became Chair of the (socialist) General Commission of German Trade Unions. He served as a member of the Reichstag between 1893 and 1918 as a Social Democrat. During the war, Legien’s status as a practical dealmaker of some genius enabled him to mediate between the employers, government and trade unions. He was a pivotal figure in the fight to keep production going, even in the war’s darkest moments.