The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (6 page)

The ‘peace bonus’ from victory in the east, such as it was, had been meant to manifest itself in more (and more successful) war in the west. The formal end of the war against Russia meant that a large proportion of the German forces hitherto tied up there could be sent into action in the west. In a matter of weeks, hundreds of thousands of German troops and their equipment – including many guns captured from the Russians during the final German advance - were transferred from one front to the other.

The Army High Command (OHL), and in particular its head, seventy-year-old Field Marshal Hindenburg, and his deputy, Quartermaster-General and
de facto
commander-in-chief, General Erich Ludendorff, had begun to exercise a virtual dictatorship over the country from 1916 onwards, albeit one disguised by a veneer of law and a not entirely compliant Reichstag. With hundreds of thousands of fresh American ‘doughboys’ pouring into France, and the USA mobilising its finances and its industries for war, the High Command knew that Germany would soon face a far stronger enemy than before. Best to strike the decisive blow now. A great offensive in France had therefore been in preparation for some months.

On 21 March 1918, the High Command launched a massive attack on the British 5th Army. The German planners had chosen a perceived weak point of the enemy front, the hinge between the British and French forces, near St Quentin on the Somme. Preceded by the most massive artillery bombardment of the war – involving 6,000 heavy guns and 3,000 mortars – and assisted by extremely foggy conditions on the ground, elite German ‘storm-troop’ units punched holes in the enemy lines and forced the British back.

The German offensive gained four and a half miles in a day and took 21,000 British prisoners. Within two days, they had reached the key barrier of the Somme River, and by dawn on 23 March three giant guns specially manufactured by Krupp were in position and bombarding Paris, which was now only seventy-four miles distant. Two hundred and fifty-six Parisians were killed in a single morning. The Kaiser declared ‘the battle won, the English totally defeated’. The next day, the Germans crossed the Somme and began to advance on Paris itself.
7

There were further gains over the following weeks, here and elsewhere on the long front line, and on a map the bulge created by the German offensive looked impressive. But the ‘English’ were not defeated. Nor were the French or the Americans. As spring turned to summer, there were no more quick, dramatic advances. The German army found itself short of reserves and having to man a much longer, less easily defensible line than the one they had occupied in March, before the offensive began.
8
In fact, the strength of the German field army fell between March and July from 5.1 million to 4.2 million – many of the casualties its best, most experienced soldiers
9
– just at the same time as the Entente forces were being strengthened by a total of 2 million fresh Americans. Certain categories of light artillery and flame-throwers had their production quotas reduced because there were simply not enough trained fighting men at the front available to use the quantities being shipped from Germany’s factories.
10

The German thrust was eventually held in mid-July 1918, sixty miles or so north-east of Paris. For the first time, American troops, fighting around Château-Thierry, played a decisive role. Within a matter of weeks, the enemy had begun to advance once more, and German troops were forced into a retreat that would end only with the Reich’s plea for an armistice little more than a hundred days later.

The collapse of the final, desperate German offensive in the west accentuated the growing social and political polarisation in the Reich. In 1914, almost the entire German political spectrum (with a few exceptions on the far left) had united in a so-called
Burgfrieden
(literally ‘fortress peace’), or wartime truce. Something similar occurred in France, where the Prime Minister of the time dubbed it the
union sacrée
(‘sacred union’).

Immediately following the outbreak of the war, only one Social Democrat Reichstag deputy, Karl Liebknecht, had voted against war credits. By the next year, Liebknecht was no longer alone. Within two years the Social Democratic Party (SPD) had split down the middle, and the anti-war left mushroomed as the bloody struggle continued, seemingly without sense or end. By the third and fourth years of the war, although the large majority of Germans of all classes remained committed to victory, a substantial proportion of the population, including socialist, Catholic and liberal Reichstag deputies, had turned in favour of either a negotiated compromise peace or even peace at any price. In July 1917 a majority of the Reichstag, in a telling act of defiance which showed how far the split within the nation had widened, ignored pleas from the government and the High Command and passed a resolution calling, albeit in ringing patriotic phrases, for just such a negotiated peace without annexations on either side.

In reaction to the Peace Resolution, on 2 September 1917 the nationalist and radical right, supported behind the scenes by the political soldiers within the High Command, created an organisation devoted to uniting all groups and individuals in Germany committed to conquest, annexations and a fight to the bitter end. Called the ‘Fatherland Party’ (
Vaterlandspartei
), by July 1918 it could claim a million and a quarter members.
11
This figure, if accurate, gave it a bigger membership than the Social Democratic Party, hitherto the largest political grouping in the country. However, it is questionable whether the Fatherland Party was really a ‘party’ at all – any more than, under the Obama administration of the present century, America’s ‘Tea Party’ is a political party – but actually a pressure group, albeit a very impressive one during its heyday.
12

The war had been a disaster for most of the population in Germany, as it had in every country involved except America. The polarisation within the Reich reflected the different situations of different sections of society. Those industrialists involved in supplying arms and equipment for the war effort had done well – in some cases spectacularly so, with some large firms achieving dramatic growth. Others, especially in consumer goods and services, had suffered disastrous declines in production and profits. By 1918, for instance, the number of males employed in the textile industry was only a quarter of what it had been in 1913, with even the female workforce only three-fifths of its pre-war strength. Numbers in the building industry had more than halved.
13

Overall, taken throughout the war years, industrial production in Germany had declined by between a quarter and a third, more than that of any of the Entente powers.

Indices of industrial production (1914 = 100)
14

Increases in the production of weapons and other materiel of war contrasted with a related decline in consumer manufacturing and non-war-related services. This became especially pronounced after the ‘Hindenburg Programme’ was inaugurated in late 1916, a greatly, in fact almost grotesquely, accelerated armaments production programme that threw all consideration of Germany’s actual material and human resources to the wind. It resulted in an even more distorted economy by war’s end.
15

The wine and tobacco harvests proved bumper ones, but other food products suffered badly. Production of beer in Germany, for instance, was reduced by two-thirds in the course of the war. Agriculture in general was hit by severe manpower shortages (the army took no account of the crucial nature of food production when scouring the countryside for recruits) and shortages of imported fertilisers due to the British blockade. Production of wheat was halved.
16
The shipping industry, hit by the slump in trade and the Entente blockade, with many of its vessels either marooned in neutral ports or seized by the enemy, virtually collapsed. Forty-four per cent of the pre-war merchant fleet had been either sunk or confiscated.
17

Like the owners of defence-related companies, many workers in the war industries had done relatively well, and a few splendidly. Between 1914 and 1918, the daily wages of male workers in war-related industries increased by 152 per cent, and those of females – with millions of men at the front, a group whose participation in the labour market increased dramatically during the war years – by 186 per cent, while the figures for the non-war sector were 82 and 102 per cent respectively. Skilled workers in high demand within certain sectors of war production experienced even higher increases. There was discontent among less well-paid workers at the ability of these privileged labour groups – especially if the husband and wife were both employed – to buy scarce goods on the black and grey markets, to invest in war bonds and maintain bank accounts and live a life resembling in some ways that of the pre-war middle class.
18
This type of worker, certain to attract snobbish disapproval, was not, however, typical, any more than was the blatant war-profiteering capitalist. The problem was that both groups existed in sufficient numbers to cause a generalised resentment among their fellow Germans.

Most industrial workers – especially those in the non-essential service and consumer sectors – saw their real earnings eroded by price inflation during the war. Calculations of price inflation are complicated, but, all in all, the cost of living seems to have roughly trebled during the course of the war.
19
So, while the external exchange rate of the German mark might have recovered quite a lot in 1918, its actual internal purchasing power – reflecting the real inflation of prices, on the ground, for ordinary people – had declined much more drastically. In Hanover in the summer of 1918, a woman’s weekly wage bought two kilos of butter.
20
By the end of that year, the mark had lost around three-quarters of its 1913 value. ‘In other words,’ as one historian of the First World War put it, ‘most of the deterioration of pre-war money savings had already occurred by the Armistice, well before billions of marks were needed to post a letter or buy an egg.’
21

All the same, those producing in factories and workshops for the war effort were on the whole better placed to minimise the damage to their living standards. Labour shortages and the essential nature of their work meant that the authorities, eager to maximise war production at all costs, were prepared to indulge their demands for better wages.

The old middle classes found themselves in a very different situation. Widely seen as the pillars of society before 1914, these were the Germans who suffered most from the war and its economic pressures. The differences in earnings between working- and middle-class Germans were reduced during the war, not so much because the industrial workers became dramatically richer – a common myth based on a few exceptional cases – but because their ‘betters’ became, with few exceptions, altogether poorer.

The lower ranks of officialdom, previously used to relatively modest rates of pay, with their real compensation taking the form of social status and job security, also felt themselves under wartime conditions to be – and they were – underpaid and overworked. There were cost-of-living adjustments in their salaries from time to time, but these never covered the constant, unpredictable real price increases. Their standard of living fell sharply during the war years and their resentment became palpable. In 1914, a civil servant’s income in real terms had been on average five times that of a manual worker. By 1918, it was only three times greater, a drastic, not to say traumatic, drop in comparative living standards in a very short time.

The Deputy Commander of the Frankfurt military district painted a gloomy picture of these white-collar workers’ plight in a report filed in October 1917:

. . . all those living on fixed salaries are facing a change of social position; they are slipping from the level upon which they have stood and are approaching the level of those who find it necessary to live from hand to mouth. This social decline of the officialdom contains a not-to-be-underestimated danger to the state and society. Previously the officials could be counted among those who stood for the regulation of working conditions without great economic conflicts. The state and the communities must guard against letting the officials feel that they are being given up to the storms of economic developments without protection.

The same went for white-collar staff in industry, who, unlike their manual co-workers, were unwilling to compromise their hard-won and precious social standing by going on strike for higher wages. As for small businessmen and craftsmen, the backbone of the much-admired German
Mittelstand
, many found their businesses shut down as inessential to the war effort, starved of raw materials diverted to more vital sectors or simply bereft of customers.
22
They represented millions more Germans subjected to dramatically reduced incomes and loss of status – and accordingly ripe to blame those seen as profiteering.