The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class

by Taylor, Frederick

  In Germany the foreigner is swindled - it is well to call the thing by its real name – wherever the salesman sees a chance. There is not in the average intercourse in hotels and shops the vaguest glimmer of ordinary commercial morality. The surcharge can occasionally be easily defeated by employing a German acquaintance or even a German on commission; it can more easily be avoided by not completing the transaction when the price is manifestly excessive.

  One cannot altogether blame the German tradesman for wanting a share in the swindle when Governments set him the example. Bavaria, for instance, has announced that for admission to performances at any of the State theatres or opera houses British subjects are to be charged five times the prices charged to Germans; the inquisition is to be controlled by inspectors authorised to demand passports with all the attendant chicanery. The result is that the merry game of ‘swindling the foreigner’ has taken a firm hold in the Munich hotels and shops, on the assumption that what is right in the State cannot be wrong in the subject.6

  Northcliffe would be dead three months later at the age of fifty-seven, suddenly taken ill at the French spa resort of Evian. There were contemporary rumours that the press magnate died from the effects of tertiary syphilis. The usually accepted explanation is that he succumbed to septic endocarditis, a bacterial infection of the heart valves, which might account for the fevered quality of his last weeks and days. Clearly unhinged at the time of his death, the never exactly temperate press magnate wrote numerous telegrams that, on medical advice, were never sent by his staff. One, to the editor of The Times, Wickham Steed, said: ‘POISONED BY GERMANS BY ICE CREAM’.7

  As the mark depreciated at an ever more precipitous rate during the early weeks of 1923, the currency situation became bewildering for the average foreigner. On a day when the mark was running at 22,800 to the dollar, or around 107,000 to the pound sterling,8 a correspondent for the Manchester Guardian reported: ‘There is a current story in Berlin of a woman who went shopping with a basket to carry her paper money. She put it down for a minute, and on looking round found that the basket had been stolen – but the paper money left behind!’

  One puzzling thing for the inexperienced visitor was that officially set prices such as those of tram or railway tickets, or tickets for state-run theatres and opera houses, remained relatively low, since, unlike the manufacturer or the shopkeeper, the state or municipality employee was in no position to raise or lower public tariffs on some kind of daily indexed basis. The Manchester Guardian’s correspondent continued:

  For instance, in buying . . . a ticket for the opera, or in taking a tram ride, you remain among the hundreds [of marks]. That is why the high cost of living, while making it impossible for a German intellectual to carry on research or buy books, does not deprive the people of all intelligent enjoyment. ‘I am hungry anyhow, so why not be a little hungrier and go to the opera!’ said one young girl, philosophically, when asked for the reason of the packed opera-houses one found everywhere in Germany, even during the present crisis. ‘The price of the ticket would not in any case buy a loaf of bread.’

  Such, however, is the anomaly of prices in German today, that directly you get away from theatres and trams and begin to buy unrationed bread, on which most people subsist, or margarine, or Ersatz-Kaffee (coffee substitute), or, of course, sausage and meat and butter, you soon jump into the thousands.9

  . . . So, it was possible to travel by train from Berlin to Dresden (200 kilometres) for the price of a pound of margarine. But how much to tip the porter at the station? And what about having the temerity to call a taxi when you get to your destination station? Then you find it costs more than the train trip for a three-minute ride.

  Finally, when you have mastered, roughly, the incongruities of these different tariffs, there is always the chance that you may mix them all up again and offer somebody tens of thousands instead of thousands. Fortunately, in the case I have in mind, the kind waiter (a prisoner-of-war in England), who for three days concealed the fact that he spoke perfect English lest it should be thought a reflection on his client’s German, gently returned them and saved her from paying 50,000 instead of 5,000 marks for an evening meal – an economy of about half-a-crown* at the rate of exchange then obtaining.

  No German would, or for the sake of their survival could, make such a mistake. One of the many anomalies was, in fact, the situation of performers in Germany’s theatres and opera houses. The relatively cheap theatre tickets celebrated by both foreigners and culture-hungry locals naturally left the managements of these places, unless they enjoyed state subsidies that were constantly adjusted to allow for inflation, hard pressed to pay their performers decently, or provide them with some job security, and still make a profit. Extra resentment was caused by the fact that the craftsmen and technicians, such as scene carpenters or electricians, being unionised, generally remained further ahead of the inflationary game than the ‘creatives’. There was also resentment against the supposed vulgarisation of the theatres’ programmes to suit the tastes of the inflation profiteers. By this, critics meant plays by Frank Wedekind (Pandora’s Box – famous in the English-speaking world as the main component of the drama Lulu) and Arthur Schnitzler (Der Reige, known outside Germany as La Ronde). Such dramas were alleged to suit the new, nouveau riche theatre-goers who, due to the impoverishment of the educated classes, now made up the audiences and even, in some cases, controlled the boards of the commercial theatres. All this led at the end of November 1922 to an actors’ strike in Berlin’s privately owned theatres.10

  The ‘star’ actors were better off than the mass, especially as they could also command high (and often, by negotiation, inflation-adjusted) salaries in the booming German film industry. All the same, outside the immediate realm of the day-to-day theatre, there was limited public sympathy for the strike. And, as things turned out, though begun in great passion, it was fairly short-lived, ending in some disarray just before Christmas.

  Siegfried Jacobsohn, who had started out as a drama critic and had originally called his magazine Die Schaubühne (‘The Stage’) before broadening its content to include politics, economics and world affairs and changing its name to Die Weltbühne (‘The World Stage’), criticised the actors for failing to see that their fate was similar to that of many thousands of other intellectual workers. He presented his argument playfully as an imaginary conversation between an actor, a theatre director and a drama critic, with the critic pointing out coolly:

  What will become of the countless journalists, painters, lecturers, doctors? If 682 of the 2300 lawyers in Berlin do not have an income of more than 18,000 marks, then they have the choice of starving or changing their hopeless professions, and when they are forced to, they make their choice one by one. They, and whatever no longer has a function, cannot expect to be kept going by a pathetically impoverished people for their own sake, for the sake of their beautiful eyes, beautiful voices, beautiful legs.11

  Jacobsohn also pointed out that, with less than a third of Berlin’s theatres still open, because of the strike, the city was witnessing ten full theatres instead of thirty-five half-full ones as hitherto. Elementary, and pretty ominous, economics for actors, directors and theatre owners alike.

  Writers, composers and painters were also presented with serious problems by the inflation. Even before the inflation, in fact before the war, the argument between creative producers of various descriptions and the publishers or purchasers of their works had been a passionate one, in Germany as elsewhere, as it naturally still is. Authors producing literary and scholarly works had always found themselves at a disadvantage when pitted against the economic power of the publisher, and without the popular writer’s ability to use his or her high sales as a bargaining chip.

  Even at a relatively early stage in the currency’s decay, this situation got appreciably worse. Publishers, themselves struggling to adjust to a time of uncertain costs and even more uncertain profits, and with the educated class that represented a large ch
unk of their market in desperate financial straits, began driving a very hard bargain and demanding subsidies for scholarly books, with the possible exception of textbooks and reference works.12 When in 1921 writers’ and artists’ organisations managed to get some political support for the idea of a 5 or 10 per cent tax on books, sheet music and concert performances – to be used to support distressed artists, composers and writers – the publishers struck back without mercy:

  The entire nation is in distress. We find ourselves in a ‘shrinking economic basis for a highly cultured people.’ No one has enough any more. Certainly one cannot disregard the fact that the material compensation for intellectual work has remained behind that of manual labour during and after the Revolution . . . But whoever places himself and his fate upon so uncertain a foundation cannot complain if the ground gives way when his creative powers fail or because he lives in a time of crisis.13

  A bitter exchange followed over the next two years in the pages of Die Weltbühne. Low fees apart, with the depreciation of the mark accelerating, what had appeared to be a reasonable schedule of payments at time of contract might, months or even years later when the work was delivered, be more or less worthless. Publishers would insist on a ‘mark-for-mark’ policy (which was, in fact, official Reichsbank policy), making no allowance for changes in the purchasing power of the sum agreed and therefore allowing no inflationary indexing of payments. A writer might accept an advance payment involving a royalty based on a percentage fixed cover price for a print run of his/her book, only to find, every time he or she went past a bookshop where the work was displayed, the price ticket inexorably rising. Any author with the temerity to demand recompense for increasing bookshop prices did not get far. All the same, the publisher Kurt Wolff admitted to the author Herbert Eulenberg, with whom he and other publishers were involved in this fierce, continuing battle in the columns of Die Weltbühne:

  In the end the author in general stands at the coffin of the paper mark in a more weakened state than an economic enterprise such as a publishing house, for the publisher has had the possibility of using certain business techniques to create equivalents which, if they did not fully compensate for the mark depreciation, at least prevented the complete ruin of his operation. I am thinking of the inflation profits made through the possibility of being sometimes able to pay with bills of acceptance for new stocks of paper and printing and binding bills and then paying off the commercial bills of acceptance with currency that was worth less than on the day the bills were issued. Without such crutches the German publishing business would have shut down long ago.14

  In effect, the publisher was the mini-Stinnes, producing print and paper rather than coal and steel, and able to pay off their bills and loans with devalued marks.

  Elsewhere, the flight into ‘material assets’ continued.

  The importation of food to Germany had always placed a burden on the country’s balance of payments. This was so even before the war, and the surrender of around 15 per cent of German agricultural land to Poland and France in 1919 had made the situation worse.15 Moreover, due to territorial losses in both east and west, a great many raw materials needed for German industry (especially coal and zinc from Upper Silesia, now Polish, and iron ore from Lorraine, now returned to France) had to be imported. The German government could therefore rightly complain in the post-war period that gold and foreign currency required for the importing of foodstuffs was either being diverted to other imports that before the war had been sourced within German territory, or was being demanded by the Allies as reparations, leaving the German people to go hungry.

  The time of relative stabilisation in 1920-21, combined with the industrial recovery that followed the end of the blockade, had enabled Germany to import more food. The ‘Goldilocks’ policy of the government – the mark weak enough to subsidise exports, but strong enough to enable vital imports – had led to an improvement in the availability of food and, as a consequence, in the general level of public health (though not to the levels enjoyed before 1914).

  The renewed depreciation of the mark after June 1921, accelerating through 1922 to hyperinflation, once more led to enormous problems with the importation of food. Foreign currency had to be released by the Reichsbank, which in turn, during the weeks following the Ruhr occupation, was forced to devote large proportions of its valuta reserves to supporting the mark as best it could. Shipments of food from abroad could get stuck in consignment at their German ports of arrival, waiting for the necessary foreign exchange to make its way through the system.16

  German farmers were in no better position to make up this shortfall than they had been during the latter part of the war. Even allowing for the areas lost to Poland, the productivity of German agriculture had still not recovered to anything like the level reached before the war. Shortages of fertilisers, both natural and artificial, many of which had to be imported, remained serious. Nitrates had been systematically diverted from use as fertilisers to their other function, in explosives production, during the war. The neglected land had still not recovered. In any case, the authorities were having serious problems making the nation’s farmers supply food to the population – particularly the urban population – at reasonable prices in exchange for paper money. In 1922-3, the agricultural interest was able, if it was not too finicky – which it mostly wasn’t – to name its price when it came to selling either to individuals or to the wholesale merchants, honest or otherwise, who flocked from the urban areas to knock on its collective door seeking to buy up its produce.

  A Bavarian official of the nationwide ‘Price Examination Agency’, whose job was to investigate, and if necessary prosecute, cases of blatant profiteering, wrote shortly before the hyperinflation took hold:

  The concern about one’s daily bread is increasing not only among the workers, employees and civil servants, but also among a large number of those who are self-employed, not to speak of the military and social pensioners and the small rentiers. In the cities and in the better-off agricultural districts, the antagonisms are particularly pronounced. On the one side are the various wholesale and other merchants and the better-off farmers, on the other side there are the consumers who are struggling with necessity. It is obvious that under such circumstances the political antagonisms should also become more severe. The discontent of the labouring people is directed chiefly against the Jews and the peasants, as one can hear daily in the conversations which are conducted in the railway trains. The National Socialists appear to find increasing membership. If they do not always show the necessary self-restraint, on the other hand they form a not to be underestimated check for the left radicals for whom the creation of a dictatorship of the proletariat appears as the ideal.17

  Clearly, Berlin was (and, for that matter, is) not Germany. The exotic tales of decadence and high living on the one hand, tuberculoid poverty on the other, that are told about life in the capital, do not reflect life elsewhere in Germany at the height of the inflation. In rural areas, there was some always food of some sort, either to be bought, especially if one had ‘contacts’, to be bartered, or to be grown.

  In the early 1920s, farmers or peasants of various sorts still made up a considerable proportion of the nation. More than 2 million individuals (not counting their families) earned a living exclusively from farming, a figure not much reduced over the past fifteen or twenty years.18 Added to that, there were more than 3 million Parzellisten, owners of small plots of less than two hectares (approximately five acres). To make ends meet, many of these also worked in industry, or mines, or in a variety of other rural jobs. A third of all economically active Germans, making about thirteen million at this time, were dependent on the land in some way for their existence. The country dweller, even if he or she were not a proper farmer, usually had a garden, where vegetables could be grown, or a pig or some chickens kept. Even the least well-landed Parzellist might have to do without everyday luxuries, but he or she would not starve, no matter what happened to the paper
mark or the mainstream economy.

  August Heinrich von der Ohe, an assistant school headmaster and choirmaster in his fifties, was one of those Germans fortunate enough to live in a rural area, near Lüneburg on the north German plain. With some land to grow vegetables and keep animals, as well as possibly running a tavern or inn on the side, perhaps staffed by members of his family,* Herr von der Ohe seems to have struggled at times, but got by and, reading between the lines, even experienced a modest prosperity, certainly compared with millions of other Germans. He kept a diary which contained mostly lists of prices of food, clothing, livestock – we know that he had been born the son of a farmer, and as the inflation crisis went on, clearly depended more and more on what he could grow or rear. He also included occasional comments on his income from teaching duties. His salary was increased from time to time, but for the most part not nearly enough to cope with the rise in prices:

  1 November 1921:

  (Conversation with a music teacher) He was of the opinion that if we now went bankrupt, we could start from the beginning again. But if that were to be so, one would not know what one ought to do. If he had some money, he would buy pictures or some such. I advised him to buy stocks. He was of the opinion that this was also insecure.