Modern history

THE GREAT INFLATION

I

Even the most diehard reactionary might eventually have learned to tolerate the Republic if it had provided a reasonable level of economic stability and a decent, solid income for its citizens. But from the start it was beset by economic failures of a dimension unprecedented in German history. As soon as the First World War had begun, the Reich government had started to borrow money to pay for it. From 1916 onwards, expenditure had far exceeded the revenue that the government had been able to raise from loans or indeed from any other source. Naturally enough, it had expected to recoup its losses by annexing rich industrial areas to the west and east, by forcing the defeated nations to pay large financial reparations, and by imposing a new German-dominated economic order on a conquered Europe.59 But these expectations were dashed. In the event, it was Germany that was the defeated nation and Germany that had to foot the bill. This made things far worse than before. The government had been printing money without the economic resources to back it. Before the war, the dollar had been worth just over 4 paper marks on the exchange in Berlin. By December 1918 it took nearly twice as many marks to buy a US dollar. The rate continued to decline to just over 12 marks to the dollar in April 1919 and 47 by the end of the year.60

Successive governments of the Weimar Republic were caught in a political trap that was at least partly of their own making. The need to export government revenue to other countries in the form of reparations payments meant an additional drain on resources at a time when wartime debts still had to be paid and Germany’s economic resources and domestic market had shrunk. Heavily populated industrial areas in Lorraine and Silesia had been removed under the terms of the Treaty. Industrial production was only 42 per cent in 1919 of what it had been in 1913, and the country was producing less than half the grain it had produced before the war. Massive expenditure was required to fund the adjustment to a peacetime economy, and to provide welfare measures for ex-soldiers seeking jobs, or unable to find them because of war disability. Yet if any government sought to bridge the gap by raising taxes by any more than a small amount, it would immediately be accused by its enemies on the nationalist right of imposing taxes in order to meet Allied reparations bills. It seemed politically more astute to most governments to tell foreign powers instead that Germany’s currency problems would only be solved by the abolition of reparations, or at least by rescheduling them to what would be a more acceptable level. The energy and aggressiveness with which various German governments pursued this dangerous policy varied, and during 1920 and 1921 the slide of the mark against the dollar was arrested more than once. Still, by November 1921 Germans who wanted to buy a US dollar had to pay 263 marks for it, and by July 1922 the cost had almost doubled again, to 493 marks.61

Inflation on this scale had different effects on different players in the economic game. The ability to borrow money to purchase goods, equipment, industrial plant and the like, and pay it back when it was worth a fraction of its original value, helped stimulate industrial recovery after the war. In the period up to the middle of 1922, economic growth rates in Germany were high, and unemployment low. Without this background of virtually full employment, a general strike, such as the one which frustrated the Kapp putsch in March 1920, would have been far more difficult to mount. Real taxation rates were also low enough to stimulate demand. The German economy managed the transition to a peacetime basis more effectively than some European economies where inflation was less marked.62

But the recovery was built on sand. For, despite a few temporary respites in the process, the inflation proved to be unstoppable. It took over 1,000 marks to buy a US dollar in August 1922, 3,000 in October, and 7,000 in December. The process of monetary depreciation was taking on a life of its own. The political consequences were catastrophic. The German government could not make the required reparations payments any longer, since they had to be tendered in gold, whose price on the international market it could no longer afford to meet. Moreover, by the end of 1922 it had fallen seriously behind in its deliveries of coal to the French, another part of the reparations programme. So French and Belgian troops occupied Germany’s leading industrial district, the Ruhr, in January 1923 in order to seize the missing coal and force the Germans to fulfil their obligations under the Treaty. The government in Berlin almost immediately proclaimed a policy of passive resistance and non-cooperation with the French in order to deny the occupiers facilities to garner the fruits of Ruhr industrial production for themselves. The struggle was only called off towards the end of September. Passive resistance made the economic situation worse. Anyone who wanted to buy a dollar in January 1923 had to pay over 17,000 marks for it; in April 24,000; in July 353,000. This was hyperinflation on a truly staggering scale, and the dollar rate in marks for the rest of the year is best expressed in numbers that soon became longer than anything found even in a telephone directory: 4,621,000 in August; 98,860,000 in September; 25,260,000,000 in October; 2,193,600,000,000 in November ; 4,200,000,000,000 in December.63 Newspapers soon began informing their readers about the nomenclature of big numbers, which varied confusingly from one country to another. The French, one columnist noted, called a million million a trillion, while ‘for us on the other hand, a trillion is equal to a million billion (1,000,000,000,000,000,000), and we must only hope to God that we don’t get into these or even higher numerical values with our everyday currency, merely because of the overcrowding of the lunatic asylums that it would cause.’64

At its height, the hyperinflation seemed terrifying. Money lost its meaning almost completely. Printing presses were unable to keep up with the need to produce banknotes of ever more astronomical denominations, and municipalities began to print their own emergency money, using one side of the paper only. Employees collected their wages in shopping baskets or wheelbarrows, so numerous were the banknotes needed to make up their pay packets; and immediately rushed to the shops to buy supplies before the continuing plunge in the value of money put them out of reach. The school student Raimund Pretzel later remembered how at the end of every month his father, a senior civil servant, would collect his salary, rush off to buy a season ticket for the railway so that he could get to work for the next month, send off cheques for regular outgoings, take the entire family for a haircut, then hand over what was left to his wife, who would go with the children to the local wholesale market and buy heaps of non-perishable foodstuffs off which they had to live until the next pay-packet came in. For the rest of the month the family had no money at all. Letters had to be mailed with the latest denomination banknotes stapled to the envelope, since postage stamps of the right value could not be printed fast enough to keep pace with the price rise. The German correspondent of the British Daily Mail reported on 29 July 1923: ‘In the shops the prices are typewritten and posted hourly. For instance, a gramophone at 10 a.m. was 5,000,000 marks but at 3 p.m. it was 12,000,000 marks. A copy of the Daily Mail purchased on the street yesterday cost 35,000 marks but today it cost 60,000 marks.’65

The most dramatic and serious effects were on the price of food. A woman sitting down in a café might order a cup of coffee for 5,000 marks and be asked to give the waiter 8,000 for it when she got up to pay an hour later. A kilo of rye bread, that staple of the German daily diet, cost 163 marks on 3 January 1923, more than ten times that amount in July, 9 million marks on I October, 78 billion marks on 5 November and 233 billion marks a fortnight later, on 19 November.66 At the height of the hyperinflation, over 90 per cent of the expenditure of an average family went on food.67 Families on fixed incomes started selling their possessions so that they could have something to eat. Shops began hoarding food in anticipation of immediate price rises.68 Unable to afford the most basic necessities, crowds began to riot and to loot food shops. Gunfights broke out between gangs of miners, who sallied forth into the countryside to strip the fields bare, and the farmers who were trying to protect their crops and were at the same time unwilling to sell them for worthless banknotes. The collapse of the mark made it difficult if not impossible to import supplies from abroad. The threat of starvation, particularly in the area occupied by the French, where passive resistance was crippling the transport networks, was very real.69 Malnutrition caused an immediate rise in deaths from tuberculosis.70

Not untypical was the experience of the academic Victor Klemperer, whose diaries offer a personal insight into the larger sweep of German history in this period. Living very much from hand to mouth on temporary teaching contracts, Klemperer, a war veteran, was pleased to receive a small additional war gratuity in February 1920, but, as he complained, ‘what was earlier a small income is now just a tip’.71 Over the following months, Klemperer’s diary was increasingly filled with financial calculations as inflation gathered pace. Already in March 1920 he was encountering ‘foragers, little people with rucksacks’ on the train outside Munich.72 As time went on, Klemperer paid increasingly fantastic bills ’with a kind of dull fatalism‘.73 In 1920 he at last gained a permanent appointment at Dresden Technical University. But it did not bring financial security. Each month he received an increasingly astronomical salary with back payments to make up for inflation since the last payment. Despite receiving nearly a million marks’ salary at the end of May 1923, he was still unable to pay his gas and tax bills. Everyone he knew was working out how to make money speculating on the Stock Exchange. Even Klemperer had a try, but his first gain, 230,000 marks, paled into insignificance in comparison with that of his colleague Professor Förster, ‘one of the worst antisemites, Teutonic agitators and patriots in the university’, who was said to be making half a million marks a day playing the markets.74

An habitué of cafés, Klemperer paid 12,000 marks for a coffee and cake on 24 July; on 3 August he noted that a coffee and three cakes cost him 104,000 marks.75 On Monday, 28 August Klemperer reported that a few weeks previously he had obtained ten tickets for the cinema, one of his main pleasures in life, for 100,000 marks. ‘Immediately after that, the price increased immeasurably, and most recently our 10,000-mark seat has already cost 200,000. Yesterday afternoon,’ he went on, ‘I wanted to buy a new stock. The middle rows of the stalls already cost 300,000 marks’, and these were the second cheapest seats in the house; a further price increase had already been announced for the following Thursday, three days later.76 By 9 October he was reporting: ‘Our visit to the cinema yesterday cost 104 million, including the money for the fare.’77 The situation brought him, like many others, to the brink of despair:

Germany is collapsing in an eerie, step-by-step manner ... The dollar stands at over 800 million, it stands every day at 300 million more than the previous day. All that’s not just what you read in the paper, but has an immediate impact on one’s own life. How long will we still have something to eat? Where will we next have to tighten our belts?78

Klemperer spent more and more of his time scrambling about for money, writing on 2 November:

Yesterday I waited for money in the university cashier’s office the whole morning up to almost 2. o’clock and in the end I didn’t get a penny, not even what was left from the October payment, since the dollar rose yesterday from 65 to 130 billion, so today I will have to pay my gas bill and other things at twice yesterday’s price. In the case of gas that is likely to make a difference of a good 150 billion.79

Food riots were breaking out in Dresden, he reported, some of them with an antisemitic tinge, and Klemperer began to fear that his house would be broken into in the frantic search for supplies. Work was impossible. ‘Money matters take up a very great deal of time and frazzle one’s nerves.’80

Germany was grinding to a halt. Businesses and municipalities could no longer afford to pay their workers or buy supplies for public utilities. By 7 September sixty out of the ninety tram routes in Berlin had stopped running.81 The situation clearly could not continue any longer. The country was brought back from the brink by a combination of astute political moves and clever financial reforms. Beginning his long period of service as Foreign Minister in August 1923, Gustav Stresemann, who combined the office with the Reich Chancellorship for the first few months, initiated a policy of ‘fulfilment’, negotiating the withdrawal of the French from the Ruhr in September in return for a guarantee that Germany would meet its reparations payments, come what might. As a result, the international community agreed to look again at the reparations system, and a plan drawn up by a committee under the chairmanship of the American financial expert Charles Dawes was negotiated and accepted the following year.

The Dawes Plan did not hold out any prospect of an end to the payments, but at least it put in place a series of arrangements to ensure that paying them was a practical proposition, and for the next five years they were indeed paid without too many problems.82Stresemann’s policy did not earn him any plaudits from the nationalist right, who resisted any concession to the principle of reparations. But the extent of the hyperinflation by this time convinced most people that this was the only realistic policy, a view they would most probably not have taken a year or so earlier.83 On the financial front, the Stresemann government appointed Hjalmar Schacht, an astute financier with strong political connections, to head the central state bank, the Reichsbank, on 22 December 1923. A new currency had already been issued on 15 November, the Rentenmark, whose value was tied to the price of gold.84 Schacht put a number of measures in place to defend the Rentenmark from speculation, and as the new currency, soon renamed the Reichsmark, became more widely available, it replaced the old one and achieved general acceptance.85 The hyperinflation was over.

Other countries were affected by postwar inflation, but none so badly as Germany. At the height of the hyperinflation, which varied from country to country, prices stood at 14,000 times their prewar level in Austria, 23,000 times in Hungary, 2,500,000 times in Poland and 4,000 million times in Russia, although the inflation here was not strictly comparable to its counterparts elsewhere since the Bolsheviks had largely withdrawn the Soviet economy from the world market. These rates were bad enough. But in Germany, prices had reached a billion times their prewar level, a decline that has entered the annals of economic history as the greatest hyperinflation ever. It was noticeable that all these countries had not fought on the winning side in the war. Each country eventually stabilized its currency, but without much reference to the others. No viable new international financial system emerged in the 1920s to compare with the elaborate set of institutions and agreements that was to govern international finance after the Second World War.86

II

The consequences both of the hyperinflation and of the way it came to an end were momentous. Yet its long-term effects on the economic situation of Germany’s population are hard to measure. It used to be thought that it destroyed the economic prosperity of the middle class. But the middle class was a very diverse group in economic and financial terms. Anyone who had invested money in war bonds or other loans to the state lost it, but anyone who had borrowed a large sum of money as a mortgage for a house or flat was likely to end up acquiring the property for virtually nothing. Often these two situations were united to one degree or another in the same person. But for those who depended on a fixed income, the. results were ruinous. Creditors were embittered. The economic and social cohesion of the middle class was shattered, as winners and losers confronted one another across new social divides. The result was a growing fragmentation of the middle-class political parties in the second half of the 19 20S, rendering them helpless in the face of demagogic assaults from the far right. And, crucially, as the deflationary effects of the stabilization began to bite, all social groups felt the pinch. Popular memory conflated the effects of the inflation, the hyperinflation and the stabilization into a single economic catastrophe in which virtually every group in German society was a loser.87 Victor Klemperer was a typical figure in this process. When the stabilization came, the ‘fear of sudden monetary devaluation, the mad rush of having to shop’ were over, but ‘destitution’ came in their place, for in the new currency Klemperer had virtually nothing of any value and hardly any money at all. After all his speculation, he concluded gloomily, ‘my shares have a value of scarcely 100 marks, my cash reserves at home about the same, and that’s all - my life insurance is utterly and completely lost. 150 paper millions are = 0.015 pfennigs.’88

As money lost its value, goods became the only thing worth having, and a huge crime wave swept the country. Convictions for theft, which had numbered 115,000 in 1913, peaked at 365,000 in 1923. Seven times more offenders were convicted of handling stolen goods in 1923 than in 1913. So desperate were the poor even in 1921 that a Social Democratic newspaper reported that out of 100 men sent to. Berlin’s Plötzensee prison, 80 had no socks on, 60 were without shoes and 50 did not even have a shirt on their back.89Pilfering in the Hamburg docks, where workers had traditionally helped themselves to a portion of the cargoes they were paid to load and unload, reached unprecedented levels. Workers were said to be refusing to load some goods on the grounds that they could not use any of them. Trade unions reported that many workers only went to the quayside in order to steal, and that anyone who tried to stop them was beaten up. Coffee, flour, bacon and sugar were favoured booty. In effect, workers were increasingly enforcing payment in kind as money wages declined in value. So widespread did the phenomenon become that some foreign shipping firms began unloading goods elsewhere in 1922-3.90 A similar economy of theft and barter began to replace money transactions in other trades and other centres as well.

Violence, or the threat of violence, sometimes made itself evident in spectacular ways. Gangs of up to two hundred heavily armed youths were seen storming barns in the countryside and carrying off the produce. Yet, despite this atmosphere of barely controllable criminality, convictions for wounding fell from 113,000 in 1913 to a mere 3 5,000 in 1923, and there was a comparable fall in other categories of crime not directly related to theft. Almost everybody seemed to be concentrating on stealing small amounts of food and supplies in order to stay alive. There were reports of girls selling themselves for packets of butter. Bitterness and resentment at this situation were increased by the feeling that some people were making huge profits from it, through illicit currency dealing, cross-border smuggling, profiteering and the illegal moving of goods. The black marketeer and the profiteer had become objects of denunciation by populist demagogues even before galloping inflation became hyperinflation. Now they became popular hate-figures. There was a widespread feeling that profiteers were partying the night away while honest shopkeepers and artisans were having to sell their household furniture to buy a loaf of bread. Traditional moral values appeared to many to be in decline along with traditional monetary values.91 The descent into chaos - economic, social, political, moral - seemed to be total.92

Money, income, financial solidity, economic order, regularity and predictability had been at the heart of bourgeois values and bourgeois existence before the war. Now all this seemed to have been swept away along with the equally solid-seeming political system of the Wilhelmine Reich. A widespread cynicism began to make itself apparent in Weimar culture, from films like Dr Mabuse the Gambler to Thomas Mann’s The Confessions of the Swindler Felix Krull (written in 1922 though put aside and not completed until more than thirty years later). It was not least as a consequence of the inflation that Weimar culture developed its fascination with criminals, embezzlers, gamblers, manipulators, thieves and crooks of all kinds. Life seemed to be a game of chance, survival a matter of the arbitrary impact of incomprehensible economic forces. In such an atmosphere, conspiracy theories began to abound. Gambling, whether at the card table or on the Stock Exchange, became a metaphor for life. Much of the cynicism that gave Weimar culture its edge in the mid-1920s and made many people eventually long for the return of idealism, self-sacrifice and patriotic dedication, derived from the disorienting effects of the hyperinflation.93 Hyperinflation became a trauma whose influence affected the behaviour of Germans of all classes long afterwards. It added to the feeling in the more conservative sections of the population of a world turned upside down, first by defeat, then by revolution, and now by economics. It destroyed faith in the neutrality of the law as a social regulator, between debtors and creditors, rich and poor, and undermined notions of the fairness and equity that the law was supposed to maintain. It debased the language of politics, already driven to hyperbolic overemphasis by the events of 1918-19. It lent new power to stock fantasy-images of evil, not just the criminal and the gambler, but also the speculator and, fatefully, the financially manipulative Jew.94

III

Among the groups widely regarded as winners in the economic upheavals of the early 1920s were the big industrialists and financiers, a fact that caused widespread resentment against ‘capitalists’ and ‘profiteers’ in many quarters of German society. But German businessmen were not so sure they had gained so much. Many of them looked back to the Wilhelmine Reich with nostalgia, a time when the state, the police and the courts had kept the labour movement at bay and business itself had bent the ear of government in key matters of economic and social policy. Misconceived though this rose-tinted retrovision might have been, the fact remained that big business had indeed held a privileged position before the war despite occasional irritations with state interference in the economy.95 The rapidity and scale of Germany’s industrialization had not only made the country into mainland Europe’s major economic power by 1914, it had also created a business sector that was remarkable for the scale of its enterprises and the public prominence of its managers and entrepreneurs. Men like the arms manufacturer Krupp, the iron and steel magnates Stumm and Thyssen, the shipowner Ballin, the electricity company bosses Rathenau and Siemens, and many more, were household names, rich, powerful and politically influential.

Such men tended, with varying emphases, to resist unionization and reject the idea of collective bargaining. During the war, however, they had softened their antagonism under the impact of growing state interference in labour relations, and on 15 November 1918 business and the unions, represented respectively by Hugo Stinnes and Carl Legien, signed a pact establishing a new framework of collective bargaining, including recognition of the eight-hour day. Both sides had an interest in warding off the threat of sweeping socialization from the extreme left, and the agreement preserved the existing structure of big business while giving the unions equal representation on a nationwide network of joint bargaining committees. Like other elements of the Wilhelmine establishment, big business accepted the Republic because it seemed the most likely way of warding off something worse.96

Things did not, then, seem too bad for business during the early years of the Republic. Once they had cottoned on to the fact that the inflation was going to continue, many industrialists purchased large quantities of machinery with borrowed money that had lost its value by the time they came to pay it back. But this did not mean, as some have claimed, that they drove on the inflation because they saw its advantages for themselves. On the contrary, many of them were confused about what to do, above all during the hyperinflation of 1923, and the gains they made from the whole process were not as spectacular as has often been alleged.97 Moreover, the sharp deflation that was the inevitable outcome of currency stabilization brought serious problems for industry, which had in many cases invested in more plant than it needed. Bankruptcies multiplied, the huge industrial and financial empire of Hugo Stinnes collapsed, and major companies sought refuge in a wave of mergers and cartels, most notably the United Steelworks, formed in 1924 from a number of heavy industrial companies, and the massive I.G. Farben, the German Dye Trust, created the same year from the chemical firms of Agfa, BASF, Bayer, Griesheim, Hoechst and Weiler-ter-Meer, to form the largest corporation in Europe and the fourth largest in the world after General Motors, United States Steel and Standard Oil.98

Mergers and cartels were designed not only to achieve market dominance but also to cut costs and increase efficiency. The new enterprises set great store by rationalizing their production along the lines of the super-efficient Ford Motor Company in the United States. ‘Fordism’, as it was known, automated and mechanized production wherever possible in the interests of efficiency. It was accompanied by a drive to reorganize work in accordance with new American time-and-motion studies, known as ‘Taylorism’, much debated in Germany during the second half of the 1920s.99 Changes along these lines were achieved to a spectacular degree in the coal-mining industry in the Ruhr, where 98 per cent of coal was extracted by manual labour before the war, but only 13 per cent by 1929. The use of pneumatic drills to dig out the coal, and of mechanized conveyor belts to take it to the loading point, combined with a reorganization of working practices to bring about an increase of the annual output of coal per miner from 255 tons in 1925 to 386 tons by 1932. Such efficiency gains enabled the mining companies to reduce the size of their labour force very quickly, from 545,000 in 1922 to 409,000 in 1925 and 353,000 in 1929. Similar processes of rationalization and mechanization happened in other areas of the economy, notably in the rapidly growing automobile industry.100 Yet in other areas, such as iron and steel production, efficiency gains were achieved not so much by mechanization and modernization as by mergers and monopolies. For all the discussions and debates about ‘Fordism’, ‘Taylorism’ and the like, much of German industry still had a very traditional look to it at the end of the 1920s.101

Adjusting to the new economic situation after stabilization in any case meant retrenchment, cost-cutting and job losses. The situation was made worse by the fact that the relatively large birth-cohorts born in the prewar years were now coming onto the job market, more than replacing those killed in the war or by the devastating influenza epidemic that swept the world immediately afterwards. The labour census of 1925 revealed that there were five million more people in the available workforce than in 1907; the next census, held in 1931, showed an additional million or more. By the end of 1925, under the twin impacts of rationalization and generational population growth, unemployment had reached a million; in March 1926, it topped three million.102 In the new circumstances, business lost its willingness to compromise with the labour unions. Stabilization meant that employers were no longer able to pass on the costs of wage raises by raising their prices. The organized structure of collective bargaining that had been agreed between employers and unions during the First World War fell apart. It was replaced by increasingly acrimonious relations between business and labour, in which labour’s room for manoeuvre became ever more restricted. Yet employers continued to feel frustrated in their drive to cut costs and improve productivity by the strength of the unions and the legal and institutional obstacles placed in their way by the state. The system of arbitration put in place by the Weimar Republic loaded the dice in favour of the unions during labour disputes, or so the employers felt. When a bitter dispute over wages in the iron and steel industry in the Ruhr was settled by compulsory arbitration in 1928, the employers refused to pay the small wage increase that had been awarded, and locked over 200,000 metalworkers out of their plants for four weeks. The workers were not only backed by the Reich government, led by the Social Democrats in a Grand Coalition formed earlier in the year, but also got paid relief by the state. To the employers it began to seem as if the whole structure of the Weimar Republic was ranged against them.103

Things were made worse from their point of view by the financial obligations that the state placed on them. In order to try and alleviate the worst consequences of the stabilization for workers, and to prevent the recurrence of the near-collapse of welfare provision that had occurred during the hyperinflation, the government introduced an elaborate scheme of unemployment insurance in stages in the years 1926 and 1927. Designed to cushion some 17 million workers against the effects of job losses, the most substantial of these laws, passed in 1927, required the same contributions from employers as employees, and set up a state fund to cope with major crises when the number of unemployed exceeded the figure with which it was designed to cope. Since this was only 800,000, it was obvious that the scheme would get into serious trouble should numbers go any higher. In fact, they had exceeded the limit even before the scheme came into effect.104 Not surprisingly, this welfare system represented a growing state intervention in the economy which business disliked. It piled on extra costs by enforcing employers’ contributions to workers’ benefit schemes, and it imposed an increasing tax burden on business enterprise and indeed on well-off businessmen themselves. Most hostile of all were the heavy industrialists of the Ruhr. Legal restrictions on hours of work prevented them in many cases from utilizing their plant round the clock. Contributions to the unemployment benefit scheme launched in 1927 were seen as crippling. In 1929 the industrialists’ national organization announced its view that the country could no longer afford this kind of thing and called for swingeing cuts in state expenditure accompanied by the formal ending of the bargain with labour that had preserved big business at the time of the 1918 Revolution. Claims that it was the welfare system rather than the state of the international economy that was causing their problems were exaggerated, to say the least; but the new mood of hostility towards the unions and the Social Democrats among many employers in the second half of the 1920s was unmistakeable none the less.105

Big business was thus already disillusioned with the Weimar Republic by the late 1920s. The influence it had enjoyed before 1914, still more during the war and the postwar era of inflation, now seemed to be drastically diminished. Moreover, its public standing, once so high, had suffered badly as a result of financial and other scandals that had surfaced during the inflation. People who lost their fortunes in dubious investments searched for someone to blame. Such scapegoating focused in 1924-5 on the figure of Julius Barmat, a Russian-Jewish entrepreneur who had collaborated with leading Social Democrats in importing food supplies immediately after the war, then invested the credits he obtained from the Prussian State Bank and the Post Office in financial speculation during the inflation. When his business collapsed towards the end of 1924, leaving 10 million Reichsmarks of debts, the far right took the opportunity to run a scurrilous press campaign accusing leading Social Democrats such as the former Chancellor Gustav Bauer of taking bribes. Financial scandals of this kind were exploited more generally by the far right to back up claims that Jewish corruption was exerting undue influence on the Weimar state and causing financial ruin to many ordinary middle-class Germans.106

What could business do to remedy this situation? Its room for political manoeuvre was limited. From the beginning of the Republic, business sought both to insulate industry from political interference, and to secure political influence, or at least good will, through financial donations to the ‘bourgeois’ parties, notably the Nationalists and the People’s Party. Large concerns often had a financial hold on major newspapers through their investments, but this seldom translated into a direct political input. Where the owner did intervene frequently in editorial policy, as in the case of Alfred Hugenberg (whose press and media empire expanded rapidly during the Weimar Republic), this often had little to do with the specific interests of business itself. By the early 1930s, indeed, leading businessmen were so irritated by Hugenberg’s right-wing radicalism that they were plotting to oust him from the leadership of the Nationalist Party. Far from speaking with one voice on the issues that affected it, business was split from top to bottom not only by politics, as the example of Hugenberg suggests, but by economic interest, too. Thus, while the Ruhr iron, steel and mining companies were furiously opposed to the Weimar welfare state and the Weimar system of collective bargaining, companies like Siemens or I.G. Farben, the giants of the more modern sectors of the economy, were more willing to compromise. Some conflict of interest also existed between export-oriented industries, which did relatively well during the years of stabilization and retrenchment, and industries producing mainly for the home market, which included, once again, the Ruhr iron and steel magnates. Even among the latter, however, there were serious differences of opinion, with Krupp actually opposing the hard-line stance taken by the employers in the 1928 lock-out.107 By the end of the 1920s, business was divided in its politics and hemmed in by the restrictions placed on it by the Weimar state. It had lost much of the political influence it had enjoyed during the inflation. Its frustration with the Republic was soon to erupt into open hostility on the part of some of its most influential representatives.

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