The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (35 page)

That same day, sullen Germans stood in the streets of Essen, capital of the Ruhr, watching France’s finest taking possession of their proud city, the heart of the Reich’s heavy industry. The occupation force stationed in Essen alone would soon total 6,000. By 16 January, the Franco-Belgian force was in control of the entire Ruhr area as far east as Dortmund, an area with a population of 4.25 million and containing (now that Upper Silesia had been given to Poland) 72 per cent of Germany’s coal resources, 54 per cent of its pig iron and 53 per cent of its steel production.
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According to the Franco-Belgian proclamation that accompanied the Ruhr occupation, the troops were sent there to provide protection for a seventy-strong commission of French and Belgian engineers (plus two Italians), whose job was to take control of the mines and workshops intended to act as ‘productive guarantees’ for German reparations payments. The engineers, known collectively as the
Mission Interallié de Contrôle des Usines et des Mines
(Inter-Allied Mission for Control of Factories and Mines = MICUM) would ensure that the coal dug by German miners would be collected and shipped to the beneficiary countries.

A note to the German government on the eve of the occupation proclaimed blithely that France had ‘no intention thereby of engaging in a military operation or an occupation of a political nature’. ‘The French government,’ it added, ‘ . . . is simply sending a mission of engineers and officials into the Ruhr District, whose purpose is strictly limited to ensuring that Germany observes its obligations contained in the Treaty of Versailles.’ The innocent sounding ‘escort’ force would in fact consist of 70,000-100,000 French and Belgian troops, whose equipment would include, on the contrary, an extremely military sounding array of tanks, light artillery and machine guns.
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The German government was surprisingly poorly prepared for the crisis. Everyone had suspected during the preceding weeks that the French and the Belgians were becoming increasingly likely to invade. The currency markets certainly reflected this. The value of the mark fell from 7,260 to the dollar on 2 January, to 8,700 on 5 January following the failure of the Paris conference. On Wednesday, 10 January, the day before the occupation, with a Franco-Belgian military operation considered inevitable, it dipped further, to 10,250.

The authorities in Berlin, however, had made little special provision for the occupation. No coal or raw materials had been stockpiled to keep the rest of the country going in case of Germany’s main coal-producing area falling into foreign hands. The same went in the financial sphere. A ninth supplementary appropriation to the 1922 budget was about to come into force, and a tenth was in preparation. Neither of these measures, which had become common in the hyperinflationary age, had anything to do with the Ruhr. The tenth supplementary was all about covering inflation-related pay increases for civil servants. No broad organisational plan was in place. A supplementary finance bill providing for what were clearly going to be massive costs relating to the Ruhr occupation was not ready for presentation to the Reichstag until 29 January, and would not pass into law until 16 February.
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Kirdorf, Thyssen, Stinnes and co., meanwhile, were not caught so flat-footed. The shrewd gentlemen of the Rhenish-Westphalian Coal Syndicate had on 9 January moved the administrative headquarters of their powerful cartel, including its technical records and key technical staff, 600 personnel in all, several hundred kilometres north from Essen to the safety of Hamburg.
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The individual mines were to make their own policy when dealing with the French and the Belgians. This was intended to make the occupiers’ task of exploiting the mines a lot harder, and it did.

The only explanation for the government’s lack of preparation seems to be that neither Chancellor Wirth, responsible for planning until his government fell on 14 November 1922, nor Chancellor Cuno, properly installed in power since 22 November, expected the French actually to go through with the Ruhr invasion.

Curiously, the apparent complacency in government circles may have been in part a result of the reparations guru J. M. Keynes’s close relationship with leading figures in Germany. At the end of August 1922, the great man, who, since publishing
The
Economic Consequences of the Peace
, could do no wrong in German eyes, had visited Hamburg as guest of honour for its Overseas Week, an event attended by President Ebert, General Groener (now Transport Minister) and numerous other worthies. The event was generally agreed to have been part of the continuing German pitch for an international loan. On 26 August, Keynes delivered an address. First he was introduced by no less a figure than Dr Cuno, then still Director of the HAPAG, as ‘the man most responsible for the changed attitude in the English-speaking world towards Germany’. Keynes’s speech was equally favourably received by a cheering audience.

‘I do not believe,’ Keynes told them, ‘. . . France may actually carry into effect her threat of renewing war,’ and he continued:

One or two years ago France might have acted thus with the necessary inner conviction. But not now. The confidence of the Frenchmen in the official reparations policy is utterly undermined . . . They know in their hearts that it has no reality in it. For many reasons they are reluctant to admit the facts. But they are bluffing. They know perfectly well that illegal acts of violence on their part will isolate them morally and sentimentally, ruin their finances and bring them no advantage whatever. M. Poincaré . . . may make harsh speeches and inflict futile minor outrages . . . but he will not act on a big scale. Indeed his speeches are an alternative not a prelude to action. The bigger he talks the less he will do . . .

‘The Germans,’ he added, ‘will do well to keep cool and not be much alarmed.’
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The lack of foresight on the part of the government was nonetheless remarkable, not just because of the sheer likelihood of the Ruhr occupation, but, whatever the actual odds, because of the immensity of the consequences if and when it happened. The Franco-Belgian seizure of Germany’s (and Europe’s) most important single industrial area was, in effect - and despite the fact that there was no military resistance - an act of war.

Although it would have been suicide for the Reichswehr to try to resist the French army, at this point in history the largest military force on the European continent, in many other respects the situation resembled that of 1914. Certainly the fierce reaction of the vast majority of Germans, inside and outside the occupation area, was comparable to that which had greeted the outbreak of the last war. Except for the Communists, who, before Moscow decreed otherwise, followed the usual policy of ‘a plague on both your houses’, every other major political party and national institution in Germany united to condemn the French act and to support any measures necessary to oppose it. The country experienced a temporary revival of the wartime
Burgfrieden
.

The consequence of the national determination to resist the French seizure of such vital national assets was the so-called ‘passive resistance’ policy. On 11 January, Coal Commissar Stutz, the state’s representative and main authority in the Ruhr now that the Coal Syndicate had removed itself from the firing line, instructed the mines to cease supplying coal to the occupying powers.
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But what if the French and Belgian military authorities forced them to deliver? On 19 January, Cuno’s government ordered the railways to refuse to transport coal to Belgium and France. Railway workers and officials were to obey only the German authorities, not the foreign occupiers. This included railway employees in the ‘old’, i.e. legitimately occupied, areas.
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The Berlin government also enjoined the population of the Ruhr to keep resistance strictly on a peaceful basis. This would prove hard to enforce in the face both of German patriotic fervour and the French army’s increasingly harsh enforcement of its own government’s will.

The response of the French and Belgian occupiers to the official non-collaboration policy was severe and often disturbingly inhumane. Martial law was declared in the Ruhr. German customs and tax receipts were declared forfeit. German mine owners were arrested and fined for refusing to obey French orders. German government officials who refused to cooperate with the occupying authorities were arrested and expelled with their families over the new ‘border’ into unoccupied Germany by French troops, often at short notice and with considerable brutality. During the occupation, close to 150,000 German civilians of all kinds, including civil servants, railway employees, police officials and mine and factory employees, were expelled across the internal border by the French authorities. An unknown number left voluntarily to escape hardship or the threat of persecution.
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By February 1923, a customs barrier had been set up between the Ruhr and unoccupied Germany. Initially, this was to enable the occupiers to confiscate German customs revenues in order to pay for the costs of the occupation, but it quickly developed into an economic instrument. Trade between the Rhine-Ruhr area and Germany proper required licences. Exports of coal and raw materials into the Reich were banned and an export duty of 10 per cent on other goods imposed. It was in many ways a second blockade of Germany.

Mine owners and managers, initially at least, worked with the unions and labour force in carrying out the non-collaboration policy. Trade union leaders and their members – Catholics, socialists, even Communists – resisted enemy provocation and for many weeks held out against relentless and increasing intimidation by the occupiers. Although in later decades it was the violent sabotage by the far right which tended to be remembered, the less dramatic, more workaday courage of the labour force, mostly determined supporters of the post-war Republic and its welfare policies, in fact made up the backbone of the resistance.
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The
Manchester Guardian
’s man in the Ruhr, Morgan Philips Price, a decent reporter though something of a Bolshevik fellow-traveller, believed that the early violent resistance against the French was being carried out by ‘thugs imported from Munich’. He wrote in mid-February 1923:

The latter are terrorising shopkeepers to make them refuse to sell anything to the French. The wretched tradesmen are in grave difficulties, threatened with ruin from both sides. At night these German Nationalist bands smash windows and wreck the shop of anyone who displeases them. Against these bands the workmen in a number of mines and metal factories have formed themselves into guards, armed with rubber batons and wire coils, to defend themselves from their own Nationalists, as they have no confidence in the police . . .
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It was certainly true that the core of the active, violent resistance movement consisted largely of former and serving Freikorps members, many of whom had been involved just over a year earlier in the armed resistance to the Poles in Upper Silesia. Since, by 1923, Bavaria, and more especially Munich, served as the ‘safe’ centre of the Freikorps movement, Philips Price’s reference to ‘thugs . . . from Munich’ bore an element of truth; but the fact was that the nationalist underground had been organising in the French-occupied areas since 1920 and that the Ruhr operation was in many ways merely an extension of their previous activities.
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The flip side of ‘passive resistance’ was that the Berlin government compensated employers and workers alike for various forms of economic sabotage of the French efforts at exploiting the Ruhr, including deliberate inactivity, strikes and shutting down of plants and mines. Industrialists were compensated for the ‘unproductive wages’ paid to their inactive workers by the central government, first at a rate of 60 per cent, then 100 per cent. They were also granted financial credits for lost production and profits owing to inaction or seizure of their production by the occupiers. The ever-vigilant Morgan Philips Price would comment sardonically on this development, which, as the year went on, became an open scandal:

Seventy per cent of the heavy industry is lying still, large part of the coking ovens and smelting furnaces have gone cold and most of them are not worth rebuilding. There is reason to believe that the German trusts are not shedding tears at this development. The coking and smelting plants in the Ruhr are more than are needed to cover any possible consumption in the German and world markets, which have been reduced since the war. The trusts are getting paid for the furnaces cooled down by the Reich in gold values, which they immediately invest abroad, thus further assisting the collapse of the mark.
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The state also paid the wages of railway employees and civil servants who had either been expelled from the occupied zone and were often homeless over the border in the Reich proper. It also compensated men who were left unemployed by their refusal to cooperate with the French and Belgian railway administration, the so-called
Régie des Chemins de Fer des Territoires Occupe?s
.

Many who lost their homes and were displaced experienced grave suffering as a result, while to others the state aid was a generous dole, affectionately known to its sometimes slightly abashed recipients as the ‘Cuno Pension’.
17
‘Cuno pensioners’ were, in fact, considered so well off by the (admittedly miserable) standards of the times that there were widespread rumours of fraudulent claims.
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