So strongly did Stinnes feel on this issue, and had felt for some time, that he even approached the American ambassador, Alanson B. Houghton, in mid-September, seeking his support or at least tolerance for such a solution to Germany’s problems. Stinnes told the American that he expected 3 to 4 million unemployed in Germany by the next month and that the Communists would exploit this situation to launch a general strike, followed by a nationwide uprising. In response – and Stinnes thought it was important not to strike the first blow, for fear of losing international sympathy – parliamentary democracy would have to be suspended and a Bavarian-style authoritarian regime introduced that would use ruthless force to defeat the Communists. A dictator would have to be found, Stinnes insisted, according to Houghton’s subsequent dispatch to Washington:
. . . equipped with the power to do everything necessary. Such a man must speak the language of the people and be himself of bourgeois origins, and such a man stood ready. A great movement, originating from Bavaria, determined to restore the monarchy, was near.16
So, who was this unnamed man of destiny who would come out of Bavaria and clean up Germany? Was Stinnes referring to Hitler? It has often been claimed that Stinnes was among the supporters of Hitler in these critical days.17 Stinnes’s daughter, Clärenore, thought that he had met Hitler through General Ludendorff, whom Stinnes knew well (and admired) from his wartime relations with the High Command. Stinnes’s sons Edmund and Hugo Jr, however, both stated later in life that their father had turned down a meeting with the Führer. What both Clärenore and Hugo Jr both definitely recalled (using exactly the same phrase) was that the hard-headed inflation king had dismissed Hitler privately as a ‘fantasist’ (Fantast), and for all his faults Stinnes did not waste time with fantasists. It seems more likely that the Bavarian ‘messiah’ Stinnes alluded to as one possible leader for Germany was, in fact, the wartime strongman, Ludendorff. The restless General had settled in Munich and had for some time been plotting, with Hitler and others, to set up exactly the dictatorship that the right and many of the major industrialists longed for.18
Key to Stinnes’s thoughts in September was the prospect of a Communist uprising, which would give a decent pretext for a right-wing dictatorship. A month later, it seemed that this moment might have come.
Trotsky, with an eye for drama, had initially proposed 9 November, the fifth anniversary of the proclamation of the German Republic, for the date of the Communist revolution, the so-called ‘German October’. However, the local leadership had other plans. General Müller, the commander of the Reichswehr troops in Saxony, had been granted full executive powers in the state by the Berlin government, and after the Communists joined the government he lost no time in putting a formal ban on the ‘proletarian hundreds’ in Saxony. When the units failed to disband, a confrontation was clearly on the cards, and if the Communists were, in fact, to mount a coup, it had to be soon.
Chemnitz, an important industrial city between Dresden and Leipzig, with a population of around 320,000, had become a Communist stronghold. It was here that the Communists summoned a conference of factory councils for 21 October 1923. Heinrich Brandler, chair of the Communist Party, and for a week since also head of the Cabinet Office in Dresden, travelled there to address the delegates. His speech was supposed to inspire the workers to declare a general strike against the tyranny of the Reichswehr, thus providing the trigger for nationwide armed revolution.
The Chemnitz conference turned into a fiasco, at least for Brandler and his comrades. His clarion call met with an almost complete lack of response from the workers’ representatives. Despite the rocketing unemployment, the food shortages and the threat from the Reichswehr, the conference refused to vote for a general strike. Humiliating defeat in communism’s Saxon stronghold could mean only one thing: the German working class was not interested in violent change. For Brandler and his hopes of revolution, it amounted – as one of his colleagues drily remarked – to a ‘third-class funeral’.19
The plans for revolution were duly abandoned in Saxony and Thuringia. Only in that other great radical heartland (and unemployment black spot), Hamburg, did some hotheads around Ernst Thälman dare to hope that they could succeed where Brandler had failed. Between 23 and 25 October, after armed militants had seized public buildings, including police stations, there followed street fighting that left twenty-four Communists and seventeen police dead. However, in Hamburg, too, the mass of the workers refused to answer the activists’ call. Again, the German Communist Party revealed itself to be isolated.
In the meantime, the Berlin government had moved against the Communist-socialist coalition in Saxony. The Reichswehr in Saxony was reinforced from outside the state, including troops from Berlin, and quickly occupied most major towns. Berlin then demanded that Erich Zeigner, the left-socialist Premier of Saxony, dissolve the coalition with the Communists. On 28 October, Zeigner issued a formal refusal. Within less than twenty-four hours, Stresemann invoked a further set of emergency powers, allowing his government to remove from office any ministers or officials deemed to be acting illegally. A Reich Commissioner was given full authority until a new government could be formed. Finally, the Reichswehr, in full military order, complete with a marching band, occupied the ministries in Dresden and forcibly removed the ministers and officials, including the Premier. Though technically compliant with orders from the democratic government in Berlin, the action was a pretty brutal display of old-fashioned militaristic arrogance.20
The affair was not quite bloodless. There was shooting in Chemnitz. In the mining town of Freiberg the troops fired on a crowd that refused to disperse, killing twenty-three and injuring thirty-one civilians. All the same, in the end the so-called ‘Reich Enforcement’ (Reichsexekution) action in Saxony was a much less drastic operation than had been feared. This was partly because Stresemann had refused to allow his Defence Minister to appoint a Reich Commissioner with indefinite powers for an indefinite period, as the minister had suggested. The man sent to Dresden from Berlin had executive powers, but for a specific mission that would end when its goal was achieved: to enable the formation of new government that did not include Communists. He achieved this within two days, after which executive power was handed back to the Social Democratic politician, Alfred Fellisch, who had been elected by his party to take the post.
There can be no question that the fall of the radical left coalition in Dresden came as a great relief to many, both inside and outside Saxony. As the US consul in Dresden, Louis Dreyfus, reported after the ‘Reich Enforcement’ operation:
The Saxon bourgeois population greeted this development. The entire life in the towns suddenly took on another aspect. The shops which had previously closed their show-windows throughout the day, opening, if at all, merely the entrance door in order to be able to shut down at once in case of a repetition of the daily riots of the unemployed, again displayed their goods. The cafés and restaurants in the cities whose guests had repeatedly been forced to leave were again opened. In Dresden . . . the public spirit seemed entirely changed. Instead of the dead impression, which the closed shops had given the city, the streets once more became full of life, more cheerful and crowded, quite in contrast with the situation where everyone hurried away from the centre of town in order not to be molested by occasional riots.21
The threat of a Communist uprising removed, the question remained: what would the Berlin government do about the Bavarians? After all, the Saxon and Thuringian governments, even at their most defiant, had not been guilty of the kind of extreme disobedience that had become routine for the Munich government, especially since Kahr had taken power. On 20 October, for instance, Seeckt had formally sacked the disobedient Reichswehr commander in Munich, General Lossow. The Bavarian government promptly declared the Reichswehr in Bavaria directly subordinate to its orders and reinstated Lossow as commander of what was now essentially a separate Bavarian army. Repeated appeals to dissolve paramilitary nationalist units were ignored. During the
second half of October, the Bavarian government began to carry out openly anti-Semitic policies, expelling Jews of Polish origin whom it accused of profiteering and currency offences. These actions were obviously intended to garner support among the restive battalions of the far right, many of whom, including the Nazis, were demanding nothing less than the death penalty for such offenders. It turned out that many of these alleged criminals were in fact Munich residents of long standing and apparent respectability. It was a fateful precedent, a pre-echo of much worse horrors to come in following decades.22
The Berlin government’s troubles were not by any means over. On 20 October, government aid for the Ruhr had ceased. There were food riots in the larger towns. Local political leaders in the Rhine and Ruhr, including the Mayor of Cologne, Konrad Adenauer, demanded the right to conduct independent negotiations with the French, raising the spectre of separatism in the west as well as the south of Germany. Stresemann, struggling to deal with several different crises at once, persuaded the Finance Minister, Luther, to maintain a slightly more favourable dole for the unemployed in the Ruhr, as a lingering recognition of their special sacrifice, but this could only be a temporary measure. It was only possible while the Reich continued to print paper money. Once the reform of the mark (and the reform of the Reich’s finances required to make it stick) was completed, such payouts would have to be discontinued. Leaders in the occupied west were, of course, also perfectly aware of this fact, which again led to fears that they would make an agreement, any agreement at all, with the French – even involving a separate currency for the west – in order to survive. The new currency was not necessarily good news for everyone.23
On 2 November, subjected to huge pressure from their party’s grass roots, which were outraged by the differences between the forceful suppression of the ‘left-unity’ governments in Saxony and Thuringia and the continuing failure to dare a similar confrontation with the far right in Bavaria, the Social Democratic ministers resigned from the cabinet. Stresemann was now Chancellor of a minority administration, and with the Social Democrats’ exit from the government had automatically lost his special powers under the enabling act of 13 October.
Moreover, easily forgotten among the drama of the confrontations with far left and far right, the central issue of the currency remained as yet unresolved. Until the mark could be stabilised, almost anything the government in Berlin might do offered little prospect of restoring a real measure of order to the country.
24
Breaking the Fever
Stresemann had accepted the post of Chancellor on 13 August 1923, and he had also, following a habit of overwork that was probably to shorten his life, simultaneously become Foreign Minister. Hilferding’s jest that the best financial policy was a good foreign policy had been even more pointed than it seemed.
Two months after gaining office, Stresemann found himself in a distinctly improving international situation. On 12 October, the British decided to take up the ten-month-old offer by Hughes, the American Secretary of State, to convene a new conference, which would re-examine the reparations problem within an economic context. Two weeks later, Poincaré, though still holding on tight to the Ruhr and Rhine, agreed, under certain conditions and subject to a thorough investigation of Germany’s actual foreign exchange and investment holdings, to a reassessment of the Reich’s treaty liabilities. The fact that Poincaré was losing political clout at home – the Ruhr occupation was not universally popular, and becoming less so – was an important factor. However, so was the Americans’ promise to link the reparations question with the still-stalemated problem of repayment of inter-Allied loans. For the last five years, Washington had stubbornly insisted on full repayment of the billions she was owed by her erstwhile allies. Now, for the first time, the implication from Washington to Paris was: if you go easier on the Germans, maybe we’ll go easy on you.1
The Rentenbank had finally been established on 17 October 1923, though the formal document recording this was dated the fifteenth of the month. The head of its administrative council was a deputy of the nationalist German National People’s Party and former Prussian Finance Minister, August Lentze. Other members were also representative of the conservative elements in society, from landowners to industrialists and bankers. As one Finance Ministry official said at the time, ‘they belong to that class whom the policy of inflation has enriched and whom the ineptitude of Division III of the Treasury (Tax Revenue) has allowed to escape the payment of their just dues to the state’.2
Nonetheless, since the world was being asked to accept that the holders of Germany’s true national wealth were behind the scheme, it was understandable that the Rentenbank’s upper echelons were stuffed with such worthies. The existence of the Rentenbank, and its ability to issue currency notes, was then approved by the Reichstag on 27 October.
The currency would be issued on 15 November in strictly limited quantities. The limited amount of the money to be put into circulation was to act as a straitjacket on inflation. Where for five years the Reichsbank had been printing money as needed for industry, the central government, states and municipalities, thus increasing the amount in circulation to a dizzying degree, all these bodies would now have to cut their cloth according to the amount of money available, which would not be much. In effect, it was also a tool in the process of reducing government spending.
The plan was that, beginning in November, a good proportion of the salaries of state and municipal employees would be paid in Rentenmarks. On the other hand, half of the pool of Rentenmarks would be going automatically to industry and commerce. With the printing of the old paper marks ceasing on 15 November at the same time as the new currency was introduced, the states and municipalities were going to have to cut their expenditure and their payrolls in order to ensure they could cover salaries with the limited amounts of Rentenmarks available.3
By the beginning of November, the issuing of the new currency was just over two weeks away. On the second day of the month, the Reichsbank issued a 100-trillion mark note. Everyone round the cabinet table agreed that after fifteen years at the helm it was time for Reichsbank Director Havenstein, now sixty-six, to go. Havenstein refused, pointing to the bank autonomy law. The Chancellor and his Finance Minister, Hans Luther, began casting around for someone they planned to call a ‘Currency Commissioner’, with ministerial rank, who, given the stand-off with Havenstein, could run the reform process and also, incidentally, be used to bypass the Reichsbank where necessary during the transition period. A youngish banker of some brilliance, Director of the Darmstädter and National Bank, with good relations to the British and the Americans, came under consideration. He did not think much of Helfferich’s suggested solution to the currency crisis, but was ambitious and patriotic, and a member of the German Democratic Party. That ambition would take him a long way, in some cases to places he would regret having gone, but for now it seemed a wholly positive influence. His name was Horace Greeley Hjalmar Schacht.
In everyday dealings, preference was meanwhile being given, everywhere, to those with foreign currency, or face-value certificates based on the domestic dollar loan. Yet another exchange law, passed on 23 October, firmly stated that foreign currency was to be exchanged only at the officially published rate, on pain of up to three years’ imprisonment and a fine up to ten times the value of the sum involved.4
Industry was vocal in its protests at the new fixed-exchange-rate law, which in practice deliberately overvalued the paper mark. It was claimed that this would seriously affect the cost of doing business, and would also – because in recent weeks almost all everyday transactions were conducted in gold values translated according to a daily rate into paper marks – raise prices for consumers. In practice, the millions of ordinary people who had become used to these calculations simply ignored the new law.
How much (or, rather, how little) attention ordinary Germans paid to such government regulations was clear to all but the blindest bureaucrat. An Englishwoman long
resident in Germany, and married into a German family, described shopping in an unnamed provincial city in November 1923 for a basic piece of household equipment (a smoothing iron). Having been lent a dollar note by her nephew, and bearing a bundle of high-denomination paper marks on her own account, she described visiting an ironmonger whose ‘windows are covered with a stout iron grating as a protection against a possible rush of Communists attracted by aluminium saucepans in the window’:
I have a friend at the ironmonger’s to whom I was very kind during the war. What ages ago! I brought her pears and tomatoes from my garden. Once I gave her a fresh egg. She is the head shop assistant. It is quite early and she is at liberty. She says she ought not to do it, but she will chance it and let me have the iron at yesterday’s price. It is really 150 billions.* Because of the pears and the tomatoes I am to have it at 80. Discreetly, in a corner behind the counter, I produce the dollar bill, and mention with an air of finality that it is worth 55 billions today. Bank rate. She replies without a moment’s hesitation that dollars are only to be accepted as representing 40 billions today . . . I make up the 80 billions and flee away with my iron. But I feel convinced that the dollar note will be changed for at least 75 billions tomorrow.5
In this no-man’s-land between the extreme hyperinflation and the currency reform, ‘articles in shops are now often ticketed with “gold prices” . . . [which] require fresh calculation every day’. The Englishwoman described another occasion when she bought a small packet of black dye:
The Downfall of Money: Germanys Hyperinflation and the Destruction of the Middle Class Page 34