The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (25 page)

In 1806, as almost any German schoolboy – and absolutely any German nationalist – would remind everyone, Prussia had paid a huge indemnity to Napoleon Bonaparte in cash, territory and men. In 1815, with the roles reversed, defeated France had paid hefty reparations to the Allies who beat Napoleon. In 1871, under the Treaty of Frankfurt, France had been forced to pay the new German nation its notorious reparations bill of 5 billion gold francs, a sum precisely calculated on the basis of the 1806 penalty extracted by Napoleon from the defeated Prussians. All these treaties, with their heavy financial penalties for the losers in the wars to which they provided the legal conclusion, stated clearly at the time of signature what indemnities were due. And paid those indemnities were.

Versailles was the first treaty where reparations were left open-ended, and remained so for a matter of years. Unsurprisingly, under these circumstances, when the Allies’ bill was finally issued, the mark tumbled. It would never again, in its current form, reach a level comparable to that in the spring of 1921. The only way now was down.

Although Matthias Erzberger had been elected as a member of the Reichstag in June 1920, he was, meanwhile, no longer Finance Minister. He had been forced to resign his post shortly before the Kapp putsch, under circumstances that caused most observers to consider him politically finished.

Karl Helfferich, the former banker and establishment economic wizard who had blithely told the Reichstag in 1915 that the Allies would have to pay for the war, had moved radically to the right under the influence of defeat and Versailles. He was now a passionate and vocal leader of the anti-republican nationalist opposition. Helfferich had made it his business to bring about the downfall of Erzberger. In his budget speech in July 1919, Erzberger had publicly blamed Helfferich’s allegedly lax behaviour in office as Imperial Treasury Secretary during the war for both the size of Germany’s post-war deficit and the large-scale, unhindered profiteering by arms and munitions contractors. Helfferich responded to these accusations by publishing a broadside,
Fort mit Erzberger!
(Away with Erzberger!) in which he in return accused the reforming Finance Minister of corrupt relations with big business.

Erzberger felt compelled to sue Helfferich for libel – it was while emerging from a Berlin court building after one day’s legal proceedings that he was wounded by the would-be assassin, Hirschfeld – but although his persecutor was convicted of a ‘defamatory statement (
üble Nachrede
), Helfferich was fined only 300 marks. Much of the evidence presented had cast Erzberger in a very unflattering light. Substantial parts of Helfferich’s accusations were considered justified by the court, and in any case he had acted, so the judge said in a remark typical of the judiciary at that time, ‘from patriotic motives’. Meanwhile, the right-wing
Hamburger Nachrichten
had published leaked copies of Erzberger’s tax returns which also led to suspicions of tax evasion. Erzberger resigned that same day.
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Since the spring of 1920, Erzberger had assumed a low profile. However, perhaps inevitably for a man of his talent and energy, he was clearly planning a political comeback at some point, an ambition in which he was encouraged by further court rulings that cleared him of tax evasion and various other financial chicanery. With the Reichsbank’s attempts to scrape together the tranche of a billion gold marks demanded by the Allies spread all over the newspapers, and feelings running high on the right against the politicians who had acceded to the London Ultimatum, towards the end of the summer Erzberger left Berlin to take a health cure at Bad Griesbach, a spa in the Black Forest in his native south-west Germany.

Erzberger was fully aware of the degree of hatred he aroused among German nationalists. He reportedly announced in the spring of 1921 to his daughter, Maria: ‘The bullet that will kill me has already been cast.’
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On 26 August 1921, he set off for his regular morning walk in the woods with a friend and fellow Centre Party politician, Karl Diez. At around eleven o’clock, they came under fire from two armed young men, who had been lying in wait among the trees. Erzberger, seriously wounded, scrambled down a slope in the hope of evading his attackers. Eighteen months earlier, Hirschfeld’s second bullet had been deflected by Erzberger’s watch chain. This time, he was not so lucky. The assassins pursued him relentlessly, raining fire on him until he fell still. They then stood over his body and shot him twice more in the head. It was a brutal, professional ‘hit’.
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A police hunt was set in motion, and the assassins were rapidly identified, but to no avail. The two young men, both in their late twenties, were named as Heinrich Schulz and Heinrich Tillesen. The first was a former army lieutenant, the second the son of an artillery general and former torpedo boat officer. Both were Freikorps volunteers who had fought with the Erhardt Brigade and taken part in the Kapp putsch the previous year. Both were fanatical nationalists and enemies of the post-war German state.

Captain Erhardt was directly responsible for the murder of Erzberger. After the failure of the March 1920 coup, aware of being a marked man so far as the democratic government in Berlin was concerned, he had dissolved his Freikorps and headed south to the reactionary stronghold of Munich. There he had the protection of powerful friends within the authorities. Once established in Munich, over the next few months he gathered loyal followers around him and set up a conspiratorial group, codenamed Organisation Consul. The group, whose purpose was to murder politicians and public figures considered to have ‘betrayed’ Germany during the war and its aftermath, soon commanded a loose network of branches throughout the country, though Munich remained its nerve centre and place of refuge.

Schulz and Tillesen were duly selected from among Organisation Consul’s members to kill Erzberger. After the murder, they fled back to Munich. They were quickly supplied with fake passports and spirited away to Hungary, where a ‘white’ terror had replaced the red. Like many other fugitive members of the German far right, they were afforded shelter by sympathetic authorities.
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The murder of Erzberger showed firstly that the nationalist right was prepared to kill anyone judged to be responsible for the country’s post-war condition (a judgement which was, of course, arrived at entirely according to their political prejudices), but, more shockingly, it also showed that the more mainstream anti-republican elements were prepared, if not to actively participate in such violence, to tolerate, even half condone, it. The venerable
Kreuz-Zeitung
, mouthpiece of landed Prussian conservatism, compared the killers of Erzberger with Brutus, William Tell, and Charlotte Corday, who in 1793, as France’s revolutionary terror reached its climax, had stabbed the Jacobin demagogue Marat in his bath. The like-minded
Berliner Lokalanzeiger
wrote, ‘any other country would extend boundless understanding to such conspirators’, and in East Prussia – heartland of the Kapp putsch – another local newspaper proclaimed that ‘we must sow hatred’:

A man who, like Erzberger, probably bears the main responsibility for our country’s misfortune, must, so long as he remained alive, have presented a constant danger to Germany. It may seem coarse and heartless to write such an epitaph for a dead man, but sentimentality will get us nowhere . . . only through extremes can Germany once more become what she was before the war.
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Ernst Troeltsch, one of an always small and now dwindling band of liberal academics, wrote two weeks later that he expected more political murders:

The current Reich ministers and others are receiving masses of anonymous death threats, and they know that this is no joke. Some months ago one of these gentlemen said to me that being a minister today was an uneasy business; he knew that it was a matter of riding for a fall, but he felt it his duty to persist.
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Erzberger’s long-term legacy would be recognised. He created the modern German tax system and might have done much more for his country had he not been cut down at the age of not quite forty-six, but that was for posterity to realise. At the time it was more the symbolism that mattered, to both right and left, authoritarians and democrats. The government responded with an ordinance forbidding anti-republican propaganda and the glorification of anti-constitutional and disorderly acts. Bavaria, where Organisation Consul and its killers were being sheltered by the authorities, refused to obey, and there was nothing the central government could do about it.

The perilous raising of the billion gold marks for reparations; the murder of one of the republic’s founding fathers; the renewed decline in the value of the mark and the continued rise in the prices of life’s necessities: Germany in the late summer of 1921 seemed economically and politically doomed.

Except that the coming months would seem to witness not doom but boom.

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Boom

Nearing the third anniversary of the end of the world war, Germany was not the only country in Europe in which violence and political chaos were rife.

If 1920 had been a turbulent year for the world, 1921 was scarcely less so. There were race riots in Tulsa, Oklahoma, in which twenty-one whites and sixty blacks died. There was a coup in Portugal, during which the Prime Minister and several of his cabinet were murdered. The Prime Minister of Japan was assassinated, the Prime Minister of Spain likewise. Russia remained convulsed by civil war and racked by famine. Greek and Turkish forces were engaged in a bloody war in Anatolia. Karl I, deposed King-Emperor of Austria-Hungary, undertook two separate and equally unsuccessful attempts at restoring himself to the throne of Hungary. An upstart demagogic leader by the name of Benito Mussolini was elected to the Italian parliament along with twenty-nine deputies, representatives of a thuggish new political movement known as the
Fascisti
, which made no bones about its determination to seize power when the opportunity arose. Until a truce was declared in July, Britain continued to be involved in a vicious and costly war against Irish Nationalists demanding independence for the whole island of Ireland; in the course of the struggle, the London government had recruited a force of officially approved irregulars not dissimilar to the Freikorps in Germany, made up of unemployed war veterans and known dismissively by most Irish people, because of colour of their ad hoc uniforms, as the ‘Black and Tans’.

Post-war political disturbances were in almost all Western countries poisonously combined with post-war economic depression. In Britain, after the 1918-19 boom, there had been no growth in 1920, while in 1921 industrial production fell by a massive 31 per cent. In America the figures were 3 per cent growth followed by a shrinkage of 22 per cent, leading to around 12 per cent unemployment in 1921.
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France experienced 8 per cent growth in 1920 followed by a fall of 12 per cent. Unemployment among trade union members in Britain in 1921 was 17 per cent. By comparison, in Germany industrial production during 1920-21 grew by 45 per cent, in the next year by 20 per cent. Unemployment among trade union members in Germany (more than 9 million at that time) was 4.5 per cent in January 1921, and fell to a record low of 0.9 per cent in April 1922.
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Germany was apparently, so far as the figures went, booming. And yet almost all the talk was still of hardship and shortages. The cheap mark – getting cheaper all the time once the fall in its value resumed in the summer of 1921 – was fuelling increased exports even in a generally depressed industrial world, but outside of a minority of industrialists, speculators and black marketeers, it was not actually feeding through into the general standard of living. Already, voices were asking how this could be. It was a situation unknown in a modern industrial country.

‘German Trade Boom and the Sinking mark: How Long Will It Last?’ ran the headline in the
Manchester Guardian
in October 1921. Sub-headlines referred to ‘Wild Stock Exchange Gambling’ and the ‘Soaring Cost of Living’. The crisis over the 1 billion gold mark reparations payment and the consequent fall in the value of the mark had, the paper’s correspondent in Berlin wrote, led to:

. . . wild gambling on the German stock exchange – gambling wilder than has ever been known before. The public does not seem to care what it buys so long as it can get rid of marks.

The results of the depreciation are threefold. In the first place German industry is flourishing in an unprecedented manner. Profits are enormous, big dividends are being paid, export trade has been stimulated, production has increased, and unemployment has almost vanished. In the second place the cost of living is going up and the standard of living down. In the third place foreign countries are being hit harder than ever by German competition.
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But the paradox was blatantly apparent:

The cost of living in Germany has risen by about 40 per cent during the last three months, and will probably continue to rise at an accelerated pace. The buying power even of full-time wages is steadily decreasing. The price of cereals has reached its highest point since the abolition of
Zwangswirtschaft
.
*

The price of wheat has risen about 300 marks per ton and of rye about 250 marks per ton during the last fortnight. Railway tariffs are to be raised by 30 per cent . . . Potatoes cost 1 mark a kilo on February 5, 9 marks on June 4, and 10 marks now.