The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (22 page)

So it was that on 16 March 1920, when the coup was still in progress, a military aircraft from Munich landed at Tempelhof in Berlin, a landing strip attached to what had been the Prussian army’s old training area and parade ground. Two men, one in his fifties and one just thirty years old, climbed out and demanded to be led to the headquarters of the Kapp–Lüttwitz rebels. Carrying an introduction from a Reichswehr intelligence officer in Munich by the name of Captain Karl Mayr, they were to inform the insurrectionist ‘government’ of events in Bavaria and while doing so sound out the Berlin situation. Unfortunately, their mission proved in vain. The Kapp rebellion was, it turned out, teetering on the brink of failure. They never met the ‘Chancellor’, who was already preparing to make himself scarce. The men flew back to Munich with little to show for their trouble, except perhaps a lesson in how not to carry out a successful
coup d’état
.

The elder visitor went by the name of Dietrich Eckart, a nationalist writer, poet and gadfly on the Munich literary scene. The younger was a protégé of Mayr and, according to the officer’s account to his Berlin co-conspirators, ‘a good German man, if also something of a wanton anti-Semite’.
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Captain Mayr’s favourite was not yet quite thirty-one years old and, though already very active in far-right politics, until his formal demobilisation on 1 April 1920 would still hold the rank of corporal in the army. His name was Adolf Hitler.

Captain Mayr kept in touch with Wolfgang Kapp, despite the abject failure of the first fully-fledged nationalist attempt to overthrow the Republic. He wrote six months later to his political friend, now exiled in Sweden:

The national workers’ party must provide the basis for the strong assault-force (
Stoßtrupp
) that we are hoping for. The programme is still somewhat clumsy and also, perhaps, incomplete. We’ll have to supplement it. Only one thing is certain: that under this banner we’ve already won a good number of supporters. Since July of last year I’ve been looking . . . to strengthen the movement . . . I’ve set up very capable young people. A Herr Hitler, for instance, has become a motive force, a popular speaker of the first rank. In the Munich branch we have over 2,000 members, compared with under 100 in summer 1919.
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The Rally

For now, despite the far-left uprisings in the Ruhr and elsewhere that followed the Kapp–Lüttwitz fiasco, the return of the legitimate government to Berlin restored something of the feeling of progress that had been cautiously present before 13 March.

The trade unions, having saved the government, now demanded political changes as their price. They kept the strike going for a day or two just to make their point absolutely clear, and the changes came.

Bauer, the colourless trade unionist, who had proved a weak chancellor, resigned after 219 days in office, continuing a pattern of short-lived administrations that would prove the rule in the first German democracy. Gustav Noske lost his post as Reichswehr Minister, having clearly not lived up to his promise of keeping the army on the government’s side. The rangy former basket weaver from the Prussian heartland of Brandenburg had trusted the generals and his trust had been betrayed.

Noske would tell Harry Kessler, when they met by chance three months later on a train journey, that ‘Lüttwitz had been represented to him as a deeply religious man who, having sworn an oath of loyalty, would keep it. His dismissal would moreover have upset the officer corps.’ Kessler continued, with his characteristic mix of humanitarian concern and crashing snobbery:

Noske is manifestly a perfectly sincere and dyed-in-the-wool militarist, whom the officer corps, with the help of his prejudices and their catchwords, has led by the nose . . . Though unemployed, he looks prosperous enough, travels first class, wears brand new yellow boots, and consumed during the journey large quantities of ham rolls and beer. Were there not so much innocent blood on his hands, he would be a slightly comic, almost likeable figure.
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The replacement for Bauer as Chancellor was the Foreign Minister, Hermann Müller, another Social Democrat, but of an altogether tougher and smarter sort. There was little for Müller to do, however, other than to hold the government together until new elections could be organised. It was certainly high time the German people were consulted afresh. The government’s critics on the right and left were correct in declaring that the National Assembly, elected to give Germany a constitution, had outlived its function and needed to be replaced by a proper parliament. Elections were eventually fixed for June 1920. The omens for the governing parties’ popularity with the voters were not good.

During the Kapp putsch, with a general strike paralysing Berlin, the exchanges and telegraph offices were closed and no official rates had been quoted for the mark. Not so in London and New York and the other world financial centres. Before the coup there had been signs of improvement in the mark/dollar rate. The German currency had firmed dramatically from 91.40 marks to the dollar on 7 March to 68.90 on 11 March.
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‘Exchange Rallying’ read the headline in
The Times
of London, reporting on the New York markets’ performance on 11 March.
The Times
especially noted the German mark’s strong showing, 50 per cent up on the week, citing eager purchasing by American investors of German municipal debt at a million dollars-worth a day, improvements in the Reich’s balance of trade and rumours that the Allies might ease restrictions on Germany’s overseas borrowing.
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Then, on the same day as this enthusiastic report, came the Kapp putsch.

Three days into the crisis,
The Times
reported that the mark had suffered a precipitous fall from 267.5 marks per pound sterling the previous Wednesday (10 March) to a low of 370 on Tuesday, 16 March, before recovering slightly to close at 337.5. With the dollar running at approximately $3.65 to the pound, this gives a rough rate of 92.50 on the dollar reckoning, in other words a loss of around a third on its value of a few days earlier.
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The day before the Berlin exchanges were due to open again on Thursday, 25 March, after the putsch had been defeated and the general strike called off, the mark was reported to be trading at around 75 marks to the dollar. There it remained for the rest of the week. By the following Wednesday, preceding the Easter break, it was at 71. It then opened on 6 April at 66.90, before on 9 April reaching 57.60 – the sort of exchange rate not seen since early January. It remained at around 60 for the rest of the month.
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The mark seemed to be holding at a manageable value. Violent challenges from the reactionary right and the revolutionary left had been beaten off. There would soon be new elections and a new government. Employment and trade numbers alike were looking more positive.

None of this was happening before time. During the rapid inflation of the previous winter, Morgan Philips Price of the
Manchester Guardian
had written of the distress even of the employed German working class:

I have just received the following figures of the monthly budget of a Berlin tram driver who has a wife and a daughter of twelve. His monthly wage is 400 marks, which is equivalent in English money at present rates to £4. The weekly wage of a Berlin tram driver, in English money, is therefore £1 a week. Against this there are the following expenses monthly.

The 180 marks (36 shillings) for food has to last three persons for one month. The other day I went into the restaurant of the Adlon Hotel and found that a luncheon there costs 30 marks without wine. It is impossible to get through the day there without paying 60 marks for food alone. In other words, in a day in a fashionable Berlin restaurant one person spends on food as much as a member of a working-class family spends in a month . . . The food of the family whose budget I quote above consists on most days of black bread, potatoes and vegetables. Occasionally a pound of butter is bought at speculative prices [i.e. on the black market] for 28 marks a pound. That has to last for six weeks or two months.
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In April 1920, after the Kapp putsch, a further report in the London Sunday newspaper the
Observer
described how the German lower middle classes were becoming ‘compulsory vegetarians’:

They taste no meat from the beginning of the year to the end. An egg is a rare luxury . . . To the Englishman travelling in Rhineland it does not seem particularly extravagant to pay 350 marks for a lunch for two people. But this amount represents a German workman’s wages for three weeks’ toil.
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Nor was such misery – it is hard not see these British reporters, however well intentioned, as what a later, more cynical age would call ‘misery tourists’ – confined to the working and lower middle classes. Quite grand members of Germany’s intellectual elite, if they were on a fixed salary, could find themselves subjected to a humiliating drop in their standard of living. The same correspondent added:

An English businessman, who found it imperatively necessary to travel from Berlin to Cologne during the recent general strike, had to pay 40,000 marks for the single journey, in addition to a guarantee to indemnify the garage proprietor in case of anything happening to the car. 40,000 marks! - and the yearly salary of the Director of one of the greatest museums in Germany is 30,000 marks, not allowing for heavy taxation. This Director, notwithstanding his keen desire to entertain an English visitor, who could in many ways be helpful to him, was unable to offer him a sandwich or a biscuit in his almost palatial home. There was practically no food in the house.

All the same, it seemed in the early summer of 1920, though much in Germany was still confusion and deprivation, that an era of stability might at last be beginning.

Inflation had been held, and perhaps now it could be defeated.

Inflation afflicted every nation involved in the First World War, not just the losers. In Britain, prices more than doubled between 1913 and 1919; in France they were multiplied by around 3.5 per cent, directly comparable with Germany. Even America suffered a doubling of pre-war prices. As was the case in Germany, this trend continued into the early post-war era. In Great Britain, between May 1919 and May 1920, prices jumped further by 40 per cent from 246 to 325 (1913 = 100); in America, in 1919-20 prices rose by another quarter. In France, the victor country with the most serious economic and financial problems, the rise between April 1919 and 1920 was a spectacular 77 per cent.
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Every one of the belligerent nations had spent vast amounts on things that didn’t count as items of human consumption, and borrowed or printed money to do so. Then came peace, and, accompanying the relief at the end of violence, the gnawing anxiety of how to pay the bill for it.

A latecomer to the war and by 1918 the only major power with a surplus to invest rather than a deficit to finance, only America came through the conflict without serious damage to its economy, or to its financial and fiscal structures. Even Britain, which at the beginning of the war was in spectacularly good financial shape, with the lowest debt-to-income ratio of any European country,
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had by the third spring of the war drained its once-burgeoning imperial economy near enough dry.

America’s entry into the war on the Allied side in April 1917 was the
deus ex machina
that saved a financially exhausted Britain from running out of the cash it needed to pay for the American goods – food, raw materials and munitions – that were by now vital to the Allied war effort. In a splendid irony, Germany’s high-stakes switch to unlimited submarine warfare, pushed through by Ludendorff and the ultra-nationalists against the advice of cooler heads among the Reich’s elite, served as the
casus belli
. It was thus arguably the British Empire’s bitterest enemies in Berlin whose blunder, by tipping the USA into the Allied camp, managed to arrange Britain’s (and the Entente’s) salvation. As the German banker Max Warburg, a consistent opponent of unrestricted submarine warfare, had remarked in 1916: ‘If America is cut off from Germany, this means a fifty percent reduction in Germany’s financial strength for the war and an increase of a hundred percent for England and France’s.’
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