The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (17 page)

On the other side of table from Legien on 15 November 1918 was the most prominent – and in his way most mysterious – industrialist in post-war Germany, forty-eight-year-old Hugo Stinnes. Offspring of a middling prosperous Rhenish-Westphalian merchant family, the young Hugo did not go to university, instead dabbling briefly in retail and at one time working for some months as a coal miner before spending a year at the School of Mines in Berlin. After a brief spell in the family firm, while still only twenty-two he branched out on his own, founding a trading company, Hugo Stinnes Ltd.

Dealing initially in coal, but then in just about anything else as well, was an activity for which Hugo Stinnes showed a near-preternatural talent. He gained control of several pits, began manufacturing briquettes, and then went into iron and steel. Within a few years, he owned thirteen steamers, trading in coal, wood, iron ore and grain, through the Mediterranean, the Black Sea, the North Sea and the Baltic. His imports included British coal as well, imported from his depot in Newcastle to Hamburg and Rotterdam. He played a major role over a period of more than twenty years in the growth of the future electricity and energy giant, RWE
*
(
Rheinisch-Westfälisches Elektrizitätswerk
).

Above all, Stinnes proved himself a master of the leveraged merger and the synergistic amalgamation. By 1914 he was not just an industrial magnate and shipowner; he also sat on the boards of many industrial companies and was involved in all the great German coal and iron syndicates, which wielded enormous economic and political power in the Kaiser’s Germany. He was influential, respected for his brilliant organising skills and feared for his ambition. Stinnes, still in early middle age, was reckoned to be worth 40 million gold marks. His operating capital in 1914, however, was said to be still the same 50,000 marks with which he had started out in 1893. ‘That was before the war,’ wrote a shrewd contemporary observer some years later. ‘The lion held an important section of the German business world under his soft paws but had not yet thrust out his claws.’

Do not get a false impression of him. He remained in appearance, in demeanour, in assuming manners, the simple superintendent of his original mine. Thickset but not tall; erect but not military, a heavy featured man with close-cropped hair, a school-teacher’s well-trimmed beard, an unimpressive countenance of yellowish complexion. His eyes are somewhat oblique, sly, shifting, not deep, but fixing attention. At the same time, a hail fellow well met. Not much of a talker, but a keen observer. When he does speak, no superfluous words. Nothing but facts. A calculating machine. When he speaks he is calm, cool, has command of data, imposes, though he expresses himself in a sort of weary whisper, a mere murmur.
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Although many of his foreign interests and some of his ships were sequestered by the enemy during the war, Stinnes just kept on expanding inside Germany itself, buying up or buying into ever more iron and steel and coal businesses, riding the runaway beast of ever-increasing war production. He became a fixture as adviser and secret string-puller at High Command Headquarters in Spa. He acquired shipping businesses in anticipation of a post-war resurgence in trade, at a time when the maritime sector languished. He ordered more ships from the Kiel yards, planning a fleet so big that it would make him entirely independent of fluctuating international charter rates. He bought up vast East Prussian forested estates to ensure he had security of supply for the pine pit props needed for his coal mines. By the end of the war, he and his associates controlled large numbers of lignite (brown coal) mines, enabling the cheap generation of electricity in the huge modern power stations that they had built. He had also started to buy newspapers, hinting at post-war political ambitions.

Stinnes was already well on his way to becoming the richest businessman in Germany. ‘How much money did he have deposited in neutral banks?’ asked the contemporary biographer. ‘How much did he have seeking new investments? The time came when he could not place all his funds through ordinary banking channels. His capital kept madly multiplying.’

This was the man who sat down opposite Legien on 15 November 1918 in Berlin, heading a delegation of employers primed to meet a delegation of trade union leaders. These latter included officials representing the much smaller Christian and liberal workers’ organisations as well as Legien’s left-affiliated General Commission of Trade Unions, but essentially this was a socialist–capitalist agreement. The revolution of 9 November had brought to power two parties – the Majority and Independent Social Democrats – which were both committed to the socialisation of the German economy, whether immediate (in the case of the far left) or eventual (in the case of the moderates). Non-socialists had, essentially, no executive function in Germany in mid-November 1919. Legien’s political comrades were, for now, the power in the land.

Regular meetings between capital and labour had, in fact, taken place throughout the war under the auspices of the government and the military, as part of the drive for wartime industrial peace and continuity of production. Throughout that last wartime autumn, with the country clearly entering a new, more unstable phase, there had been more pointed bilateral talks between the unions and employers, with the unions probing for the settlement of longstanding demands and the employers seeing how much they would have to give in order to maintain what they perceived as ‘order in the house’.

The revolution pushed the employers into seeking a deal with the new powers that be. In effect, any deal.
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As a leading representative of the steel industry’s employers had said on 14 November: ‘It is not a question of money now . . . right now we must see that we survive the chaos.’
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Thus it was that some of Germany’s most diehard captains of industry affixed their names to the historic treaty between organised labour and capital in Germany that became known as the ‘Stinnes-Legien Agreement’.

The agreement gave workers an eight-hour working day with no reduction in pay – a long-standing demand of organised labour – compulsory union recognition, mandatory collective bargaining and wage contracts, and the right to be represented in companies with more than fifty employees through ‘workers’ committees’. It also guaranteed that industry would re-employ every one of the millions of German men who would soon be demobilised. To ensure that these improvements would work in practice, trade union and employer representatives set up a ‘Central Working Group of Industrial and Commercial Employer and Employee Organisations of Germany’. Any agreements arrived at by this Central Working Group would be enforced by both sides.
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Clearly, though some more enlightened employers found such an agreement more or less acceptable, this amounted to a U-turn for some of Germany’s toughest, hitherto most anti-union employers. These last were represented particularly strongly in the heavy industrial sector and tended to be closely connected with the conservative, nationalist political camp. However, as a group the country’s industrialists had evidently decided that it was better to make concessions, however painful in some cases, than to risk losing everything to the wave of socialistic fervour that was sweeping the Reich during November 1918. The more optimistic of them even hoped, by involving the workers in decision-making, to induce more realistic attitudes (from the employers’ point of view), in particular to ‘give them the opportunity to have the insight into the economic situation, the economic perspectives, the economic interconnections, which are the foundation of all social and wage demands . . . in order . . . to convince them that there is a limit to where social and economic policy are compatible’.
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Legien and the unions appeared, like Ebert in his dealings with General Groener, to be giving away a lot in return for relatively little. The agreement was basically a recognition on the unions’ part that the existing economic and social system would not be abolished in the near future, but simply subjected to improvement.

Many workers expected the revolution to lead to a socialist state in Germany, in which the capitalists would be expropriated and become irrelevant. That was still, officially at least, the policy even of the moderate Social Democrats. But Legien was a dealmaker, not a utopian radical. This, he could tell his union members, was what Social Democrats had always wanted. Workers and their union representatives were now on the inside instead of, as for so long, the outside of the decision-making process in industry. This was a crucial step-up for the working class, part of the process of learning how to run things and thereby building a new future for a democratic Germany under difficult post-war circumstances. The capitalists had been tamed, and their undoubted managerial skills could now be pushed in socially useful directions. Total and immediate socialisation would risk throwing the babies of efficiency and full employment out with the capitalist bathwater. Or so the story went.
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The Stinnes-Legien deal certainly contributed, alongside Ebert’s bargain with the military, to stemming the tide of extreme radicalism, of turning the movement of 9 November 1918 into the ‘reined-in revolution’ (
gebremste Revolution
). The employers got to save their businesses, and the trade unionists got better hours, better pay and the employers’ promise to give returning soldiers their jobs back.

Business decided to forget about the money, as the man from the steel industry had put it, and therefore, so employers hoped, to ‘survive the chaos’. And, broadly speaking, it did survive and even prosper. There was, however, a price to be paid for all this sweetness and compromise, and in the long term not just for the capitalists.

There had been more than four years of hard work and sacrifice, on the home front and in the trenches. It soon became clear, in the aftermath of peace, that many Germans felt disinclined to take just any job that came up, or, if they did, to devote themselves to it in the conspicuously committed fashion that had become almost a stereotypical national trait in pre-war times. Employers and officials bemoaned this work-shy attitude (
Arbeitsunlust
).

Workers were also liable to be choosy about which industries they wanted to work in. No one, it seemed, wanted a job on the land, or in forestry, or in mining – all areas of the economy that were physically demanding and required a high tolerance threshold for discomfort, but were nevertheless vital to any post-war recovery. This applied especially to returning soldiers. Those demobilised in time for Christmas 1918 preferred, it seemed, to use up any savings they had, and sometimes to claim unemployment benefit, which under pressure from local workers’ and soldiers’ councils had now become more generous, and to wait for a decently paid, more comfortable job to present itself.
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Welfare fraud became a serious problem especially in Berlin, where one trade union observer estimated that 25 per cent of all claims were illegitimate. Members of the Republican Guard, for instance – one of the relatively small number of government-organised militias – apparently made a regular practice of claiming unemployment benefit as well as collecting their pay. Extra family members were invented. Another trick was to claim for welfare in two different areas of Berlin, knowing that district offices rarely cross-checked with others.
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The war had seen a great growth in the black market, and the threshold for general dishonesty had also clearly been lowered over the past four years. In any case, there was a widespread sense of entitlement, given the sacrifices that these men and their families had made during the war years. This was understandable, but unhealthy from the point of view of the challenges facing the wider German economy.

The situation was further complicated by the fact that unemployment pay, which during the immediate post-war period was the responsibility of municipal authorities, varied fairly radically from one area of Germany to another. In conservative rural districts it might be three marks per day, while in socialistic Berlin in early 1919 it was four marks, and in Dresden as high as six – rates which increased rapidly over the next few months under pressure from the unemployed and the revolutionary councils.
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Proposals were made to set a national minimum and maximum for unemployment pay, but without success. After all, three or four marks a day might be completely inadequate to keep body and soul together in a big city, while in the remoter parts of the countryside it was probably more than the average labourer could expect for a hard day’s work. One thing was for certain: these were arrangements not calculated to discourage returned soldiers from flocking to the cities. They were also not calculated to bring down the price of labour and therefore the price of what labour produced.

As 1919 wore on, the authorities, concerned at the numbers of returned soldiers still unemployed, tried to put pressure on the unemployed to accept available work, however unsatisfactory the pay. Success in that direction was limited. These were turbulent times, where the writ of the bureaucrat did not run as strong as it had once done and the power of the crowd was hard to challenge. The white-collar staff at the labour exchanges faced, as one official observation put it, ‘the mistrust of the worker for the academically trained and better clothed person’. In Leipzig, officials who tried to enforce the rules were ‘cursed in the crudest manner, insulted, and even threatened’. There were cases of officials being assaulted by groups of the unemployed.
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