The Downfall of Money: Germanys Hyperinflation and the Destruction of the Middle Class
Page 21
Although Germany’s politicians might have private reservations about Rapallo – even President Ebert had his doubts – the public’s reaction had been by and large positive. Germany had acquired a friend to the east and had shown that she would not be bullied by the Allies. The treaty was accepted by the Reichstag against only a few dissenting votes from the nationalist-conservative and virulently anti-Bolshevik German National People’s Party. The still small but increasingly vocal German Communist Party was, naturally enough, noisy in its approval.
Count Harry Kessler thought the whole thing a success, at least from Germany’s point of view:
Germany . . . had regained her status as a great power. Besides this, she was bringing home, in the teeth of French opposition, her treaty with Russia; and Rathenau had prepared the ground for a further advance on the path of negotiation and understanding by establishing relations of mutual confidence with some at least of the Allied statesmen.8
The strange economic ‘boom’, which still seemed, during the first months of 1922, to be carrying Germany through this difficult period, had done nothing to prevent both the far left and the far right from ceaseless agitation – in the case of the far left, against the capitalist, ‘national’ world of Stinnes and Rathenau, and of the far right against the socialistic, ‘anti-national’ world of Ebert, Chancellor Wirth – and Rathenau.
As a patriot and as heir to a major business empire, it was clear that Walther Rathenau, for all his evident intelligence and desperately needed political imagination, would always be a figure of suspicion for socialists and Communists. But for those at the other political extreme, the antipathy functioned on an altogether more violent level. As a Jew and supporter of the German Republic, the new Foreign Minister would never be able to avoid the sheer, toxic and ultimately irrational hatred of the nationalist right.
In the aftermath of Rapallo, a German National People’s Party deputy, Wilhelm Henning, published an article in which he poured pure poison over the reputation of his country’s Foreign Minister. Henning dredged up the assassination of the German ambassador, Count Mirbach, in Moscow in July 1918, exploiting that murky episode (which actually was carried out not by the Bolsheviks but by disaffected members of the rival Social Revolutionary Party) as a vehicle for abuse and anti-Semitic myth-peddling. The ‘honour’ of Germany had been trampled in the dust by a minister who would make pacts with the murderers of Mirbach, so Henning claimed:
Scarcely does the international Jew Rathenau have Germany’s honour in his hands than it is no longer spoken of . . . German honour is not some object for international Jewry to haggle over! . . . German honour will be avenged. You, however, Herr Rathenau, and those who stand behind you, will be brought to account by the German people . . .9
A nationalist drinking song of the time lumped Foreign Minister Rathenau, the Jew, and Chancellor Wirth, the Catholic, together as outcasts in language of sickening violence:
If just the Kaiser would come back,
Wirth to a cripple we would hack.
The guns would rattle, tack-tack-tack
Against the black* and the red pack.
Whack that Wirth like no tomorrow,
Whack his skull until it’s hollow!
Shoot down that Walther Rathenau,
The God-accursed Jewish sow . . .10
The Spartacist Rosa Luxemburg, the Bavarian Prime Minister Kurt Eisner, the Independent Socialist Hugo Haase, had all been Jewish, and all been murdered. On the other hand, so had Erzberger, a Catholic Swabian, and the Bavarian Socialist Karl Gareis, who came from middle-class local stock, both of whom had fallen to the assassin’s pistol in the summer of 1921. On Whit Sunday, 4 June 1922, another ‘Aryan’ politician, the first Chancellor of the Republic, Philipp Scheidemann, had been the victim of an attempted assassination by a group of right-wing plotters. Like Erzberger’s murderers, they were young fanatics associated with the shadowy ‘Organisation Consul’ terror gang.
Scheidemann, now in political semi-retirement as High Burgomaster of his native Kassel, had been out for a Sunday stroll in the city’s Wilhelmshöhe park with his daughter and small grandson. One of the conspirators approached him, carrying a syringe device used in enemas, whose rubber balloon was filled with liquid cyanide. The would-be killer lunged towards Scheidemann, attempting to hold the syringe close to his victim and to squirt the poison into his mouth and nose at close range.
As it happened, Scheidemann had been subjected to numerous death threats, especially since Erzberger’s assassination, and so carried a pistol with him whenever he left the house. He staggered but managed to fire off two shots, forcing his assailant to flee, before collapsing to the ground. He was unconscious for some minutes before a passing doctor, correctly diagnosing the substance that had been used in the attack, managed to revive him. The ostensibly bizarre attack could, it seemed, have been fatal if a jet of the poison had been inhaled. Scheidemann, it seems, had not breathed in at the key moment.11 Fortunately he made a complete recovery.
As a Jew, an intellectual, a supporter of the Republic and yet once as close to the old imperial regime as his racial heritage allowed, Rathenau was the perfect target for nationalist extremists. He knew the personal risks involved in serving the German Republic. Even before he joined Chancellor Wirth’s administration in May 1921, as Reconstruction Minister, he had been subject to a steady undertow of anti-Semitic abuse and innuendo. The story goes that when the bachelor Rathenau accepted that ministerial post, he couldn’t bring himself to break the news to his formidable mother, who lived with him at his villa in Grunewald. Lunching with her as usual the next day, the atmosphere between them was uncomfortable. Finally, she broke the silence.
‘Walther,’ the matriarch said, ‘why have you done this to me?’
She had clearly read the newspaper.
The newly appointed minister could only reply, ‘I really had to, Mama, because they couldn’t find anyone else.’12
After he entered the cabinet, the tidal pull of anti-Semitism burgeoned into a wave.
Although everyone had been impressed with Rathenau’s performance there, the Genoa conference ended in almost total failure.
Hopes nevertheless persisted on the German side that the Bankers’ Committee appointed by the Allied Reparations Commission would come up with a scheme for the longed-for loan. This would give Germany the ‘breathing space’ that would enable the country to stabilise her finances while at the same time (supposedly) meeting her reparations commitments. On 2 June 1922 that hope, too, was disappointed, largely because of French opposition. Poincaré had been prepared to consider a loan for Germany, which according to the Bankers’ Committee should go along with a reduced reparations bill, only if America agreed to an equivalent reduction in France’s share of inter-Allied debt. This, as was affirmed by the mighty New York banker J. P. Morgan, she would not.13
There had been some progress, all the same. Although the Reichstag had still not levied the 60 billion marks’ worth of new taxes the Allies had demanded and was showing few signs of doing so, Germany had agreed to the Allies’ demand to release the Reichsbank from its control by the government. The deputies duly passed a Reichsbank Autonomy Law on 26 May, making the bank no longer directly answerable to the Reich Chancellor and absolving it from its automatic obligation to discount Reich Treasury bills issued to cover the government’s budget.*
To the Allies, this was a useful step towards Germany’s ‘getting her house in order’. It was considered a sufficient indication of progress for a 31 May deadline to pass without the penalties for Germany that had been threatened by the reparations commission, urged on by the ever-suspicious Poincaré. As it turned out, the Reichsbank’s President Havenstein would carry on printing money merrily of his own accord for a long time to come, but no one knew this yet (in any case, the law did not come into force until July 1922).
Meanwhile, from across the Atlantic came some slightly more hopeful news. The idea of a loan was still ‘in pla
y’. Americans had taken a big hit from the continued depreciation of the mark. However, with their own economy now beginning to recover from the brief but savage post-war depression, they were looking to sell to and invest in Europe. But first they needed Europe to recover properly. For that to happen, it was now generally agreed on Wall Street and in Washington, the problems with Germany needed to be dealt with on a level-headed, businesslike basis.
J. P. Morgan, Jr, one of America’s most famous (or infamous) bankers, had been sent over as Washington’s representative on the Bankers’ Committee. It was in this capacity that he had delivered the bad news to the French about the loan forgiveness, or lack of it. Even after the announcement that the loan for Germany had been indefinitely postponed, he and other American financiers were concerned that something be done.
Morgan’s views were interesting. Well-known as an Anglophile and an enthusiastic organiser of transatlantic loans for Britain and France during the war, Morgan harboured strong anti-German sentiments, asserting that his firm would never do business with the Reich and even refusing to buy paintings for his collection from German sources.14 Nevertheless, he was nothing if not a hard-headed operator. At a high-level meeting in London on 19 June 1922, with the French Prime Minister Poincaré present as well as the British Chancellor of the Exchequer, Sir Robert Horne, Morgan put his views forward frankly, as the account of the meeting recorded:
Broadly speaking, Mr Morgan appeared to think that the Allies must make up their minds as to whether they wanted a weak Germany who could not pay, or a strong Germany who could pay. If they wanted a weak Germany, they must keep her economically weak; but if they wanted her to pay they must allow Germany to exist in a condition of cheerfulness, which would lead to successful business. This meant, however, that you would get a strong Germany, and a Germany that was strong economically would, in a sense, be strong from a military point of view also.15
On the British side, Horne largely agreed:
The difficulty was that they were in a vicious circle. Germany said she could not stop the emission of paper money and repay her obligations unless she was able to raise a foreign loan, and she could not raise a foreign loan until she could pay her obligations. This was the vicious circle they were in.16
So both the Americans and the British were convinced that Germany must be given some leeway. Poincaré, on the other hand, remained of the opinion that the Germans were deliberately using inflation to avoid their commitments under the Treaty of Versailles. There was truth in this. Stinnes had told the Reichstag Foreign Affairs Committee in May 1922 with his usual startling, even brutal, frankness:
Insofar as the presently demanded shutting down of our note printing presses is concerned, we must not overlook the fact that in our printing of notes lies a kind of emergency weapon against the exaggerated demands of the Versailles Treaty. The French have the threat of further occupation as their sole means of pressure to push through these demands. But such an occupation will hardly bring them any advantage.
All the same, the obvious divisions among the Allies, and the stalemate that resulted, did nothing to help the German economy. So far as the immediate situation was concerned, Stinnes thought the French were bluffing. M. Poincaré thought the German government was lying.17 This mutual distrust, fuelled by mutual incomprehension, did not bode well.
It was with these ominous aspects of the situation in mind that Foreign Minister Rathenau agreed to have dinner with the American ambassador, Alanson B. Houghton, on the evening of 23 June 1922. Also invited was Colonel James A. Logan, an American observer to the Allied Reparations Commission.
Over dinner, the subject came up of the coal supply crisis, which had grown painfully complicated in the last weeks. Germany was bound to deliver high-quality coal to the French and Belgians as part of the Versailles reparations in kind. This left Germany short of fuel for the urgent requirements of her own booming industries. In fact, she had lately found herself, even after being forced to import coal from Britain at world market prices, close to a partial shutdown of her steel and smelting plants.
Rathenau wanted to ensure that the Americans understood the full extent of the crisis. He also knew that Stinnes was in Berlin as part of a delegation of industrialists lobbying the government for concessions on the coal problem. So, at around 10.30, Rathenau suggested that the ‘King of the Ruhr’ be called over from his hotel to explain the problem from his expert point of view. This was done.
With this powerful additional guest present, the subject of their talk soon broadened out from that of the coal question alone. Thus, late in the evening, the high-minded Rathenau and the hard-headed Stinnes found themselves ensconced with their American hosts in easy chairs, talking reparations and inflation. This went on for three more hours. The two Germans found themselves defending their country’s policies. Both, interestingly, defended inflation, for all its economic and social disruption, as a ‘political necessity’. Stinnes explained it as a matter of ‘your money or your life’, adding that ‘when compelled to choose between the two, he always gave up his money’. They both insisted that inflation could only be tackled once Germany had a stabilising loan and a more reasonable reparations deal.18
Characteristically, Rathenau was less brusquely definite in his approach than Stinnes. The Foreign Minister thought the inflation had gone too far, and especially regretted the damage it had done to the educated middle class, in which as an intellectual he – unlike Stinnes – had many friends and acquaintances. But he also admitted that inflation was a ‘necessary transfer of capital from one class to another’, as befitted Germany’s impoverished post-war position. After all, ‘a people that had become as poor as the German people could no longer sustain broad classes of the population living off wealth and pensions’. In effect, Germany could no longer afford Ernst Troeltsch and his privileged academic ilk.
As Logan would later report, Rathenau was also depressed by the incessant political violence in Germany, which was not only bad in itself but was undermining national morale. For the Americans’ benefit, he compared Germany’s situation to that ‘of a sane man taken and confined against his will in an insane asylum during a long period with the result that he gradually assimilates the mental traits of his associates’.
At half past one in the morning, Rathenau accompanied Stinnes back to his hotel, the very grand Esplanade on the Potsdamer Platz. They continued talking, just the two of them, until 4 a.m.
Stinnes would claim later that by this time the old differences between himself and Rathenau, so generally unalike in temperament and in their views of the world, and often strongly opposed on key issues, no longer existed. This, he maintained, their discussion that evening had proved. The truth of his claim could not be verified by his guest because this was, in fact, the last night of Walther Rathenau’s life.
The Foreign Minister understandably slept late on the morning of Saturday 24 June, not emerging from his villa in suburban Grunewald – No. 65 Königsallee – until after 10.30. His car, a relatively modest NAG cabriolet, was waiting to take him the ten or so kilometres into the Foreign Office, where he was due for a routine meeting with consular staff.
Rathenau sat in the back seat of the open-topped car, completely exposed to the public view. Despite a constant stream of threats to his life, he travelled with neither bodyguard nor security detail. His chauffeur eased the car out of the drive and set off at a leisurely pace down the wide expanse of the Königsallee. After a few hundred metres they began to slow down, ready to negotiate the sharp double curve that the Königsallee took shortly before joining the famous Kurfürstendamm at Halensee and continuing on into the city.
Opposite this turn in the road, a gang of builders were working on a building site. One of them described to a journalist what happened next:
Coming up to 10.45 two automobiles came down the Königsallee from the direction of Hundekehle.* In the front car, which was travelling more slowly and was sticking around the middle of the ro
ad, sat a gentleman on the left side rear seat, you could recognise him exactly, since the car was absolutely open, without even a sun awning. In the car behind, also quite open, a big, six-seater dark-field-grey powerful touring car, sat two gentlemen in long, brand-new grey leather coats with the kind of leather caps that just left the oval of the face visible. You could see they were quite clean-shaven, and they didn’t wear driving goggles.
The Königsallee in Grunewald is a very busy highway, so that you don’t pay attention to every car that comes along. But we all looked at this big automobile, though, because the fine leather clothing of the passengers caught our eye. The big car moved out on to the right-hand side of the road and overtook the smaller car, which was travelling more slowly almost on the tram lines, probably because it was getting ready to move out on to the big S-curve of the Königsallee, forcing it strongly to the left, almost on to our side of the street. When the big car was maybe half a vehicle’s length in front, and the solitary passenger of the other car looked over to his right, probably worrying there was going to be a collision, one of the gentlemen in the fine leather coats leaned forward and picked up a long pistol, cradled it in his armpit, and pointed it at the gentleman in the other car. He didn’t really need to aim, he was so close, I looked so to speak right in his eyes, and he had this healthy, open face, as people like us say, sort of an officer’s face. I took cover, because the shots could have hit us. And then the shots went crack-crack, quick as a machine gun.
When the one man was finished shooting, the other stood up, pulled the pin on an oval hand-grenade and threw it into the other car, which they were travelling very close to. Before this the gentleman had already collapsed back into his seat, really all slumped together, and was lying on his side. Now the chauffeur stopped, right on the Erdener Strasse, where there was a pile of rubble, and was shouting, ‘Help – Help’. The strange big car suddenly took off at full speed and roared off through the Wallotstrasse, which goes in a big curve past several new buildings which have got piles of stones right by the road and then gives out back on to the Königsallee. None of us could see a number plate on the big car, and there was no rear light to it either.