The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (5 page)

Some indication of how a victorious Germany might have treated the Entente in the war’s aftermath came with the Treaty of Brest-Litovsk, signed early in 1918.

Imperial Russia’s huge but mediocre and often poorly led army had been slowly pushed back out of Poland and most of the Baltic lands and into what is now Ukraine and Belarus. There had been some temporary Russian successes. The so-called Brusilov Offensive in the summer of 1916, named after the general who planned and launched it, had at great cost forced the Austro-Hungarian forces to abandon their early gains. Nevertheless, the story of Russia’s participation in the war became one of ineffectuality at the front and increasing political and social chaos at home.

By February 1917, the British Military Attaché to the Russian army, Colonel Knox, sent his superiors in London a message on the situation there that augured disaster. More than a million Russian soldiers had been counted killed, and a further 2 million missing or taken prisoner. Another million had deserted. ‘These men,’ Knox wrote, ‘were living quietly in their villages, unmolested by the authorities, their presence concealed by the village communes, who profited by their labour.’
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In the course of February and March, sections of the Tsar’s army began to disobey orders and in Russia’s cities there were huge demonstrations against the war and the regime, followed by strikes in key industries. On 12 March, the soldiers of the 17,000-strong garrison in the capital, Petrograd,
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joined the demonstrators and the old regime’s days were numbered.

The overthrow of the Tsar led to the establishment of a weak provisional government dominated by the moderate left. Committed to a democratic system, it nevertheless did little to change the situation at home or at the front, except perhaps for the worse. The radical ‘street’ and the newly established soldiers’ committees wielded just as much power as the bureaucracy and its new reformist masters. Both the new republican government and the military command were forced to share power with unofficial, hastily elected ‘Soviets’ and their appointed commissars. The death penalty for offences against military discipline was abolished.

In July 1917, an attempted assault by this hastily democratised Russian army on the German/Austro-Hungarian defences (named the ‘Kerensky Offensive’ after the socialist firebrand who had been appointed Defence Minister in March) collapsed within a couple of weeks, turning into a full-scale rout accompanied once more by massive desertions. The catastrophe brought German forces deep into Russia proper, their capacity to advance at will hindered by little except problems of transport and supply.

By early November (October under the old calendar still used in Russia, and hence always celebrated as the ‘October Revolution’), a coup in Petrograd brought to power the far-left Bolshevik party. It was led by the brilliant Marxist theorist and agitator Vladimir Ilyich Lenin, whose passage from Swiss exile back to Russia during the summer had been arranged by the German authorities precisely in order to facilitate Russia’s exit from the war.

Sure enough, negotiations between the Bolsheviks – committed to ending the war and desperate to consolidate their uncertain grip on power – and the representatives of the triumphant Central Powers led in December to an armistice on the Eastern Front. Further negotiations soon stalled, however. The recently appointed Bolshevik Commissar for Foreign Affairs, Leon Trotsky, defied Lenin’s wishes and held out against the tough German and Austro-Hungarian demands – possibly in the hope that, if the war dragged on, discontent in the enemy countries, like that in Russia during the earlier part of the year, might yet bring about revolutions in Berlin, Vienna and Budapest. Finally, in February 1918, talks broke down. The Germans and their allies resumed their all but unopposed advance into Russia, within just a couple of weeks of taking control of further huge areas of Ukraine and Belarus. At one point, they managed to push forward 150 miles in a little over five days.
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On 3 March 1918, with the advancing Germans drawing close to Petrograd, the Bolshevik leadership at last agreed terms. A treaty was signed at a ceremony in the imposing early nineteenth-century tsarist fortress of Brest-Litovsk, on the border between historic Poland and Russia, which had been in German hands since August 1915. Leading the Bolshevik delegation was Trotsky’s deputy, Georgi Chicherin, a close ally of Lenin.

So what price was the revolutionary clique in control of Petrograd prepared to pay? The cost of peace was, in fact, a lot worse than the one the Bolsheviks had rejected earlier in the winter. The new Marxist Russia was forced to acknowledge the loss of Poland, the Baltic lands, plus Finland, Ukraine and Belarus. Georgia became independent, and strategic parts of the Caucasus were ceded to Turkish control.

The areas forfeited contained a third of the former Russian Empire’s population, a third of its arable land and nine-tenths of its coal mines. At a stroke, the Bolsheviks abandoned virtually all the territory Russia had gained since the eighteenth century, and their domain was reduced almost entirely to the ancestral Russian-speaking lands. Huge swathes of the Tsars’ Russia became effectively a German protectorate. Although technically both sides renounced any claim on conventional war reparations, after further negotiations the Bolsheviks also agreed to pay a sum of 6 billion gold marks. This supposedly represented restitution for German property and businesses confiscated as a result of war and revolution, as well as the Bolsheviks’ default on pre-war tsarist bonds bought by German investors.

With the Germans so uncomfortably close to Petrograd, a little more than a week after signing the treaty the Bolsheviks moved their capital back to the relative safety of Moscow, which had been the seat of the Tsars until the time of Peter the Great. The centre of gravity of the new revolutionary republic switched therefore almost 400 miles inland and south-eastwards, away from the Baltic and the occidental influences to which Peter the Great, Petrograd’s builder, had been so eager to expose his subjects.

As to how the Treaty of Brest-Litovsk was received in Germany itself, there was celebration among the extreme nationalists, who were delighted by the dramatic extension of German occupation and control into territories long seen in such circles as ripe for incorporation into the Reich.
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Even those who understood the treaty for the brutal thing it was experienced a certain weary relief that, on one front at least, the war had been brought to a victorious conclusion. Almost everyone hoped that triumph in the east might presage the breaking of the bloody stalemate in the west, to Germany’s advantage.

There was universal hope that the commitment of the new, independent Ukraine, which had signed a separate treaty with Germany, to supply the Reich with wheat would alleviate the now desperate shortage of bread. The treaty was popularly known as the ‘bread peace’, even though, as things turned out, disappointingly little of the grain from the fertile Ukrainian steppes ever found its way to the German civilian population before the fortunes of war and revolution made the treaty redundant.
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Romania was also brought to its knees that spring. At the Treaty of Bucharest, signed in June 1918, Germany claimed Romania’s agricultural output and virtual ownership of the country’s crucial oil industry. This, too, was not a treaty to impress the world, and especially Germany’s vengeful enemies, with the Reich elite’s benign intentions.

Footnotes

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Formerly St Petersburg, later Leningrad, now once again St Petersburg.

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From Triumph to Disaster

Then, as now, the international financial world respected power. By the time of the Bolshevik Revolution, the mark had depreciated in the currency markets to a rate of 7.29 marks to the US dollar, as opposed to 4.20 on the outbreak of war in 1914. Five months later, in March 1918, with the victorious conclusion of the war on the Eastern Front giving apparent grounds for optimism, it had climbed to 5.11, the strongest level for almost three years.

It may be that the firming up of the mark’s official value (to be distinguished from its informal or black market rate, and, more importantly, from its actual domestic purchasing power) was the result of renewed optimism in Germany and elsewhere about the country’s prospects in the war. If so, what it did not take into account was the fact that in other, perhaps less obvious, regards Germany’s situation had actually become decidedly worse.

A little less than two weeks before the Treaty of Brest-Litovsk was signed, American troops saw their first real action on the Western Front. Two dozen of them joined a French raid on enemy trenches near Chevregny in Picardy. German prisoners were taken.
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It was an unremarkable event in itself, but the point was that these troops were among the million Americans who would join the Allied forces in France by July 1918. Moreover, even after July they were still arriving at the rate of 10,000 a day.

As Winston Churchill later wrote:

The impression made . . . by this seemingly inexhaustible flood of gleaming youth in its first maturity of health and vigour was prodigious. None were under twenty, and few over thirty. As crammed in their lorries they clattered along the roads, singing the songs of a new world at the tops of their voices, burning to reach the bloody field, the French Headquarters were thrilled with the impulse of new life . . .
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The contrast with the state of Germany’s population, soldiers and civilians alike, could not have been more stark.

The spring of 1918 saw a rise in popular hopes that the war would finally turn in Germany’s favour. However, the situation for most of the Reich’s hard-working and long-suffering population remained in almost all other ways dire.

Although conditions were not quite as appalling as they had been during the ‘turnip winter’ of 1916-17, food prices were moving ever higher – where food was available. Rationing for basic foodstuffs had begun in 1915 and was extended as the war went on, though even this did not guarantee a decent diet for the population. A ration system could hope to distribute food more fairly; it could not of itself increase the amount available.

The authorities, later acting in tandem with a network of ‘price examination agencies’ set up under government decree, tried to enforce their own, varying interpretations of fair pricing in their own districts, and to combat profiteering and black marketeering. This led to widespread withholding of supplies by hard-pressed farmers, who resented the restrictions, and in turn to large-scale requisitions by the military authorities. Towards the end of the war, the army even organised searches of farms suspected of hoarding produce.
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Some military districts were less stringent in their enforcement of price controls, and, like water running downhill, produce tended to find its way to those areas.
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It was clear that Germany was turning into two countries: an urban Germany, dependent on food imported from abroad or the countryside; and a rural Germany, which was self-sufficient and reluctant to release what it grew or reared unless the price was right. The division would continue well into the unhappy peace.

Germany’s cities were not just suffering a crisis over food. Amid desperate government attempts to control rents, the housing shortage in the cities worsened steadily as the war went on. The flood of labour into areas containing large numbers of war factories put accommodation there at a particular premium. Ordinary Germans were also suffering from disastrous shortages of shoes, clothing, coal and soap. The last problem affected miners and heavy-industrial workers especially seriously. This led, shamefully for a people that took pride in its cleanliness, to an epidemic of lice.
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In fact, arguably it was mostly the renewed hope of military victory that kept the lid, for the moment, on popular discontent. As the liberal German journalist and writer Sebastian Haffner (b. 1907), then a schoolboy in Berlin and keen fan of the war, wrote twenty years later in a memoir of the time:

Bad food – OK. Later also too little food, clacking wooden soles on my shoes, threadbare suits, collecting bones and cherry stones
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in school, and, curiously, frequent illness. But I have to admit that all this made no deep impression on me . . . I thought as little about food as the football enthusiast at the cup final thinks of food. The daily Army Reports interested me much more than the dinner menu.
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Young Haffner was the son of a senior Prussian civil servant and at that time an enthusiastic, not to say excitable, nationalist. Unlike him, not everyone found patriotic fervour, or the thrill of the daily Army Reports, to be acceptable substitutes for a square meal. Towards the end of January 1918, the pot threatened to boil over. Four hundred thousand workers in Berlin had downed tools, partly in protest at reductions in bread rations for heavy work, but more importantly also in support of a peace without annexations, an end to the militarisation of the factories, and democratic political reforms. These political strikes spread quickly to Kiel, Hamburg, Halle and Magdeburg before being suppressed with the aid of harsh measures that included conscription of many strikers into the military, and long prison sentences for ringleaders.

The major industrial stoppages were over by the second week of February. Between March and July, after the Treaty of Brest-Litovsk and while the drama on the Western Front was still being played out with some prospect of success, there ensued a period of relative political and social calm.