The Coming of the Third Reich (42 page)

None of this could disguise the fact, however, that in the autumn of 1929, the Nazi Party was still very much on the fringes of politics. With only a handful of deputies in the Reichstag, it had to compete with a number of other fringe organizations of the right, some of which, for example the self-styled Economy Party, were larger and better supported than it was itself; and all of these still paled into insignificance in comparison to mainstream organizations of the right such as the Nationalist Party and the Steel Helmets. Moreover, although they did not command the support of a majority of the electorate any more, the three parties that were the mainstay of Weimar democracy, the Social Democrats, the Centre Party and the Democrats, were still in government, in a ‘Grand Coalition’ that also included the party of Germany’s long-serving, moderate and highly successful Foreign Minister, Gustav Stresemann. The Republic seemed to have weathered the storms of the early 1920s—the inflation, the French occupation, the armed conflicts, the social dislocation - and to have entered calmer waters. It would need a catastrophe of major dimensions if an extremist party like the Nazis was to gain mass support. In 1929, with the sudden collapse of the economy in the wake of the Stock Exchange crash in New York, it came.

4

TOWARDS THE SEIZURE OF POWER

THE GREAT DEPRESSION

I

‘After long, planless wanderings from city to city,’ an unemployed 21-year-old printer from Essen wrote in the autumn of 1932, ‘my path took me to the port of Hamburg. But what a disappointment! Here was yet more misery, more unemployment than I had expected, and my hopes of getting work here were dashed. What should I do? Without relatives here, I had no desire to become a vagabond.’ The young man was not in the end forced to join the ever-growing hordes of homeless men living on the streets and roads of Germany’s towns and cities - anything between 200,000 and half a million of them, according to official estimates; he eventually found support in a voluntary labour scheme run by the Church.
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But many more had no such luck. Unemployment destroyed people’s self-respect and undermined their status, especially that of men, in a society where men’s prestige, recognition, even identity itself derived above all from the job they did. Throughout the early 1930s, men could be seen on street corners, with placards round their necks: ‘Looking for work of any kind’. Schoolchildren, when asked for their opinion on the matter by sociologists, often replied that the unemployed became socially degraded,

for the longer they are without work, the lazier they get, and they feel more and more humiliated, because they are always seeing other people who are decently dressed and they get annoyed because they want that too, and they become criminals ... They still want to live! Older people often don’t want that any more at all.
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Children were observed playing ‘signing on’ games, and when some of them were asked by an investigator in December 1932 to write short autobiographical essays, unemployment featured here too: ‘My father has now been unemployed for over three years,’ wrote one 14-year-old schoolgirl: ‘We still used to believe earlier on that father would get a job again some time, but now even we children have abandoned all hope.’
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Prolonged unemployment varied in its impact on the individual. The young could be more optimistic about finding a job than the middle-aged. Despondency got worse the longer people went without a job. Interviews carried out in the summer of 1932 revealed far gloomier attitudes than surveys conducted eighteen months before. People put off marriage plans, married couples put off having children. Young men roamed the streets aimlessly, sat listlessly at home, spent the day playing cards, wandering through public parks, or riding endlessly round and round on the electric trains of Berlin’s Circle Line.
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In this situation, action often seemed better than inaction; boredom turned to frustration. Many unemployed men, even young boys and girls, tried to make a meagre living by hawking, busking, house-cleaning, street trading or any one of a number of traditional makeshifts of the economically marginal. Groups of children haunted Berlin’s fashionable nightspots offering to ‘look after’ wealthy people’s cars, a primitive form of protection racket practised in other, less innocuous forms by grown-ups, too. Informal hiking clubs and working-class youth groups easily became so-called ‘wild cliques’, gangs of young people who met in disused buildings, scavenged food, stole to make a living, fought with rival gangs, and frequently clashed with the police. Crime rates as such did not climb as spectacularly as they had done during the inflation, but there was a 24 per cent increase in arrests for theft in Berlin between 1929 and 1932 none the less. Prostitution, male and female, became more noticeable and more widespread, the product of Weimar’s sexual tolerance as much as of its economic failure, shocking the respectable classes by its openness. At its lower end, hawking and street-selling shaded off into begging.
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German society seemed to be descending into a morass of misery and criminality. In this situation, people began to grasp at political straws: anything, however extreme, seemed better than the hopeless mess they appeared to be in now.

How had this situation come about? Unemployment had already been high following the economic reforms that had brought the great inflation to an end in 1923. But by the early 1930s the situation had worsened immeasurably. The German economy’s recovery after the inflation had been financed not least by heavy investment from the world’s largest economy, the United States. German interest rates were high, and capital flowed in; but, crucially, reinvestment mainly took the form of short-term loans. German industry came to depend heavily on such funds in its drive to rationalize and mechanize. Firms such as Krupps and the United Steelworks borrowed very large sums of money. American enterprises invested directly in Germany, with Ford automobiles owning factories in Berlin and Cologne, and General Motors buying up the Opel car factory in Rüsselsheim, near Frankfurt, in 1929. German banks took out foreign loans to finance their own investments in German business.
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This was an inherently precarious situation for German industry and banking, and at the end of the decade it turned to catastrophe.

In the course of 1928, all leading industrialized countries began to impose monetary restrictions in the face of a looming recession. The United States began cutting its foreign lending. Such measures were necessary to preserve gold reserves, the basis of financial stability in the era of the Gold Standard, when currency values everywhere were tied to the value of gold, as they had been in Germany since the stabilization had come into effect. As individual countries started drawing up the monetary drawbridges, industry began to suffer. There was virtually no growth in industrial production in Germany in 1928-9 and by the end of that winter unemployment had already reached nearly two and a half million. Investment slowed down sharply, possibly because companies were spending too much on wages and welfare payments, but more likely because there was simply a shortage of capital. The German government found it difficult to raise money by issuing bonds because investors knew what inflation had done to the bonds issued during the war. International markets had very little confidence in the German state to deal with the economic problems of the day. It soon became clear that their lack of faith was entirely justified.
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On 24 October 1929, ‘Black Thursday’, the unmistakeable signs of a business crisis in the United States caused a sudden outburst of panic selling on the New York Stock Exchange. Share prices, already overvalued in the eyes of some, began to plummet. Early the following week, on 29 October, ‘Black Tuesday’, panic selling set in again, worse by far than before; 16.4 million shares were sold, a record unsurpassed for the next four decades.
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As frantic traders scrambled to sell before stocks fell even further in value, there were scenes of pandemonium on the floor of the New York Stock Exchange. But these dramatic days of disaster were only the most visible aspects of what turned out to be a prolonged and seemingly inexorable decline over the next three years. The
New York Times
index fell from a high of 452 points in September 1929 to 58 points by July 1932. On 29 October, ten billion dollars were wiped off the value of the major American companies, twice the amount of all money in circulation in the United States at the time and almost as much as America had spent on financing its part in the Great War. Company after company went bust. American demand for imports collapsed. Banks plunged into crisis as their investments disappeared. And as American banks saw their losses mount, they started calling in the short-term loans with which so much of German industry had been financing itself for the past five years.
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American banks began withdrawing their funds from Germany at the worst possible moment, precisely when the already flagging German economy needed a sharp stimulus to revive it. As they lost funds, German banks and businesses tried to redress the balance by taking out more short-term loans. The faster this happened, the less stable the economy began to look, and the more foreign and domestic asset-holders began to transfer capital outside the country.
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Unable to finance production, firms began to cut back drastically. Industrial production, already stagnant, now began to fall with breathtaking speed. By 1932, it had dropped in value by 40 per cent of its 1929 level, a collapse matched only by Austria and Poland among European economies in its severity. Elsewhere, the fall was no more than a quarter; in Britain it was 11 per cent. With the withdrawal of funds and the collapse of businesses, banks began to get into difficulties. After a number of small banks failed in 1929-30, the two biggest Austrian banks went under and then, in July 1931, the big German banks began to come under pressure.
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Business failures multiplied. An attempt to create a larger internal market by forging a customs union between Germany and Austria was squashed by international intervention, for the political motivation behind it - a step in the direction of the political union between the two countries that had been banned by the Treaty of Versailles - was obvious to everyone. Thrown back onto its own resources, the German economy plunged into deep depression. Unemployment rates now rose almost exponentially. With millions of people in the great cities unemployed, less money was available to spend on food, the already severe agricultural crisis deepened dramatically, and farmers were unable to escape foreclosure and bankruptcy as the banks called in the loans on which so many of them depended. Agricultural workers were thrown out of work as farms and estates went under, spreading unemployment to the countryside as well as the towns.
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By 1932, roughly one worker in three in Germany was registered as unemployed, with rates even higher in some heavy industrial areas such as Silesia or the Ruhr. This dwarfed all previous unemployment rates, even during the worst period of the stabilization cutbacks. Between 1928 and 1932, unemployment rose from 133,000 to 600,000 in Germany’s biggest industrial centre, Berlin, from 32,000 to 135,000 in the trading city and seaport of Hamburg, and from 12,000 to 65,000 in the industrial town of Dortmund, in the Rhine-Ruhr area. Industry was obviously hardest hit; but white-collar workers lost their jobs, too, with over half a million out of work by 1932.
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The rise was frighteningly swift. By the winter of 1930-31 there were already over five million unemployed, little more than a year after the onset of the Depression; the number rose to six million a year later. At the beginning of 1932, it was reported that the unemployed and their dependants made up about a fifth of the entire population of Germany, nearly thirteen million people, all told.
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The true figure may have been even higher, since women who lost their jobs often failed to register themselves as unemployed.
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These terrifying figures told only part of the story. To begin with, many millions more workers only stayed in their jobs at a reduced rate, since employers cut hours and introduced short-time work in an attempt to adjust to the collapse in demand. Then many trained workers or apprentices had to accept menial and unskilled jobs because the jobs they were qualified for had disappeared. These were still the lucky ones. For what caused the real misery and desperation was the lengthy duration of the crisis, starting - at a time when unemployment was already fairly high - in October 1929 and showing no signs of abating for the next three years. Yet the benefits system, introduced a few years before, was designed only to cope with a far lower level of unemployment - a maximum of 800,000 compared to the six million who were without a job by 1932 - and provided relief only for a few months at most, not for three whole years and more. Things were made worse by the fact that the drastic fall in people’s income caused a collapse in tax revenues. Many local authorities had also got into trouble because they had financed their own welfare and other schemes by taking out American loans themselves, and these were now being called in, too. Yet under the unemployment benefit system, the burden of supporting the long-term jobless after their period of insurance cover had run out shifted first to central government in the form of ‘crisis benefits’ then, after a further period of time, devolved onto local authorities in the form of ‘welfare unemployment support’. Central government was unwilling to take the unpopular measures that would be required to bridge the gap. Employers felt that they could not increase contributions when their businesses were in trouble. Unions and workers did not want to see benefits cut. The problem seemed insoluble. And those who suffered were the unemployed, who saw their benefits repeatedly cut, or terminated altogether.
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