The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (20 page)

The question had been, in the summer of 1919, whether to reject the treaty and dare the Allies to do their worst, or to formally accede to it and then somehow find ways to nullify the worst of its provisions. The division was not so clear cut as it would come to appear in retrospect. During that fateful week following the formation of a new government on 21 June 1919, it had often seemed that, even under the new circumstances, a majority would not be found in the Assembly for acceptance. It was only when General Groener advised the politicians of the impossibility of a resumption of hostilities that the Catholic Centre Party’s deputies – united by their religion but ranging in other respects from right-wing nationalists to near-socialist radicals - swung behind the dictated treaty.
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In a last faint echo of the 1914-18
Burgfrieden
, during the negotiations the nationalist right in the Assembly, while still opposing peace on the Allies’ terms, conceded that those who voted for acceptance, though wrong, might have honourable
vaterländisch
(patriotic) motives. Tragically, this outbreak of reasonableness (or perhaps hypocrisy, for the last thing the nationalist right wanted at this point was to take charge of the country’s fate) would prove short-lived.

So, Foreign Minister Müller and Labour Minister Bell took the train to Versailles – carefully routed by their French hosts to trundle slowly through the devastated regions of what had been German-occupied France
8
– and they signed the treaty that they, like the vast majority of their fellow countrymen, hated with a passion.

The government’s policy now became known as ‘fulfilment’: that is, the German government formally accepted the treaty, even though doing so under duress, and would not show itself openly in breach of its provisions. But in its apparent compliance with the agreement, while attempting to ‘fulfil’ its terms, the German government would consistently aim to show the impossibility of any such thing. To do so, it would use every weapon in its political, propaganda and economic armoury.

Including manipulation of the currency.

One of the things that had given the deputies of the Weimar National Assembly pause during their final deliberations on the Versailles Treaty had been an announcement by General Maercker of Freikorps fame. The general had been put in charge of security arrangements for the Assembly. In case of acceptance of the peace terms, Maercker declared, his forces would no longer stand behind the government. Fortunately, his warning had been trumped by the telegram from General Groener that followed. Though couched in Groener’s usual somewhat ambiguous style, this had seemed to confirm the army’s support for the Army Minister, Noske, and thereby the government.

All the same, the outrage in the armed forces and on the nationalist right against the signing of the Versailles Treaty was widespread and passionate. The treaty stipulated that the army would have to be reduced to a force of no more than 100,000 enlisted men and officers, to be known, along with a 15,000-strong navy, as the Reichswehr (Reich Defence). Germany would have no air force. Under the terms of the treaty, the High Command and the General Staff were declared abolished. On 25 June 1919, Field Marshal von Hindenburg therefore resigned as Commander-in-Chief, and Groener as his deputy.

Gustav Noske became officially Reichswehr Minister. Immediately beneath him, as head of the so-called
Truppenamt
(Troop Office) stood Major General Hans von Seeckt, and, beneath Seeckt, the commander of Reichswehr forces in Prussia, Colonel (soon promoted to General) Walther Reinhardt. As it turned out, the
Truppenamt
would embody the restoration of the High Command in all but name. As in so many other aspects of apparent ‘fulfilment’ of the Versailles Treaty, the reorganisation of the German army barely obeyed the letter, and certainly not the spirit, of the agreement.

Kessler had predicted, when he wrote his morose lines about the ratification of the Versailles Treaty on 10 January, that it would fuel the fires of nationalism in Germany. He was right, but the situation was complex and became more so during the early months of 1920.

One crucial event of the post-ratification era was the publication of John Maynard Keynes’s
The
Economic Consequences of the Peace
, which appeared at the end of 1919 in Britain, in early 1920 in the USA and very shortly after in German translation.
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Keynes had resigned in despair from the British negotiating team at Versailles shortly before the draft treaty was presented in June 1919, retreating to Charleston, the country house in Sussex that he shared with his bohemian Bloomsbury friends. It was there, mostly during July and August 1919, that he wrote with some haste what turned out to be a passionate, concise but stingingly comprehensive, root-and-branch attack on the peace settlement.
The Economic Consequences
quickly became a sensation, a highly influential international bestseller that brought Keynes world fame.

From the German point of view, the beauty of Keynes’s book was that it confirmed most of the Berlin government’s objections to Versailles. Keynes, the brilliant economist and British government insider, also considered the terms of the treaty impossible! Delighted to find support from such a quarter, a committee including leading German bankers (some of whom were personally close to Keynes) began drawing up new proposals to modify the treaty, specifically encouraged by the success of his polemic.
10

During the first part of that new year, there were also more hopeful signs for Germany’s economy, and, committees of bankers apart, for her fight to chip away at the restrictions and penalties contained in the treaty. Agreements with France began to close the so-called ‘hole in the west’, the areas under French occupation where the writ of German customs did not run. As a consequence, illegal importation and smuggling were rife, as well as illegal capital flight on a massive scale (although Switzerland and Holland remained notorious safe havens for dubious German money, despite Erzberger’s attempts to limit such losses to the national wealth). The Allies had dropped their demand for German ‘war criminals’ to be surrendered to them for trial, permitting these individuals to be tried at home in Germany, which they eventually would be, with predictably farcical results. Though no direct international loans to the German government were as yet available, a group of smaller American finance houses had started to lend money to German companies and municipalities. Americans were, furthermore, buying in expectation of a rise in the value of the mark, when they would be able to sell bonds and securities back to the Germans at a tidy profit.
11

After another stomach-churning tumble in the new year, to 75 marks per dollar at the end of January 1920, to 93.5 on 22 February, by the end of the first week of March the mark had started to firm at a level of around 90 to the dollar, with a strong pull towards an improved value.
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On 11 March 1920, there was a meeting in Berlin of experts, including the Independent Socialist theoretician and future Finance Minister, Rudolf Hilferding. During these discussions, serious thought was given to curtailing the Reichsbank’s printing of money, introducing some correlations between domestic and international pricing, and in the longer term preparing a return to a gold-backed currency.
13

Then came the realisation of Harry Kessler’s fears regarding the nationalist right. On 26 January 1920, Matthias Erzberger had been shot at twice by a young army ensign, Oltwig von Hirschfeld, recently subjected to compulsory demobilisation and determined to ‘deal with’ the most prominent of the ‘Versailles traitors’. The young would-be assassin’s first bullet inflicted a shoulder wound, while the second was deflected by the minister’s watch chain. It was a warning of things to come. Hirschfeld was convicted not of attempted murder but of ‘dangerous bodily harm’ (
gefährliche Körperverletzung
) and sentenced to a mere eighteen months in prison, then paroled after four months on ‘health grounds’.
14

Following the ratification of the treaty, it had become clear that most of the personnel of the new Reichswehr and the still-existent Freikorps, between which there were naturally enough many personal connections, were hardening in their hostility against the German Republic. After all, with the treaty in force, dramatic reductions in Germany’s armed forces had become imminent. And, despite the fact that the Allies had ‘conceded’ that the 900 or so alleged ‘war criminals’ could be tried in Germany, the very notion that a German government could agree to such a thing outraged the vast majority of the officer corps and thereby brought the legitimacy of the republican government even more drastically into question.

Though technically an official of the Reichswehr Ministry, directly responsible to Noske, the Social Democratic Defence Minister, General Seeckt, kept a cool distance in his political relations. General Reinhardt, the next in line, was one of a minority of pro-Republic senior officers, a fact with which the government could console itself. However, the commander of the Reichswehr forces in Berlin itself, General Freiherr von Lüttwitz, was an arch-reactionary. Lüttwitz had long been in contact with right-wing extremists in parliament and elsewhere, as well as with ultra-nationalist Freikorps leaders, discussing plans to force new Reichstag elections and impose a more authoritarian constitution on Germany.

The crisis began to come to a head towards the end of February. Noske, acceding in part to the demands of the Allies that the German armed forces be reduced, decreed the dissolution of one of perhaps the most effective (and fiercely political) of the Freikorps units, the 5,000-strong so-called ‘Marine Brigade Erhardt’, named after its leader, naval captain Hermann Erhardt.

Erhardt, a torpedo boat commander in the war, had organised a group of anti-revolutionary sailors and soldiers to defeat a Communist coup in his home port of Wilhelmshaven in January 1919. He had then proceeded to build up a private army that took part in the suppression of various far-left uprisings in northern and central Germany, before playing a prominent role in the brutal extinction of the short-lived ‘Soviet Republic’ in Bavaria. Later in the year, the brigade had intervened to crush a Polish uprising in the disputed territory of Upper Silesia.

By the winter of 1919-20, the Erhardt Brigade, battle-hardened and armed to the teeth, was stationed at Döberitz, near Berlin, in close contact with Lüttwitz’s regular forces. Its commander, now thirty-eight, fizzing with ambition and afire with loathing for the post-war government, had begun planning to use his force to overthrow the young German democracy in favour of a radical-nationalist dictatorship which would, the fantasy ran, restore Germany to its pre-war position of power.

Barely more than a year after the revolution had seemed to vanquish the old system, Germany now faced a new, violent threat. From the right.

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Putsch

When Minister Noske finally issued his order for Erhardt’s Brigade to be disbanded, it was the signal for a showdown.

On 10 March 1920, General Lüttwitz was granted an audience with Minister Noske and President Ebert, in which the General demanded an end to reductions in the armed forces and the abandonment of any of the Allied-imposed ‘war crimes’ trials. He also called for the immediate dissolution of the National Assembly, direct elections for the presidency (Ebert had been chosen by a simple majority of the National Assembly), the appointment of ‘expert’ (i.e. conservative) ministers at Foreign Affairs and the Economics and Finance Ministries, and the sacking of the pro-republican commander, General Reinhardt. Last but not least, he, Lüttwitz, would be promoted to the post of Commander-in-Chief of the Reichswehr. Oh, and Noske would have to withdraw the order disbanding the ‘naval brigades’ commanded by Captain Erhardt.
1

This extraordinary shopping list from a would-be military dictator could hardly be approved by a Social Democratic president and a Social Democratic (if pro-military) minister, and, sure enough, it wasn’t. The next day, Noske announced Lüttwitz’s dismissal. During the night of Friday 12 to Saturday 13 March 1920, Erhardt’s Freikorps left its barracks on the western outskirts of Berlin in full combat array and began its advance into the heart of the capital, aiming for the government district. The men’s helmets bore a white-painted symbol that was rapidly becoming the badge of the post-war far right: the Swastika.

Meanwhile, the putative civilian leader of the coup had been in hiding. Wolfgang Kapp, a senior Prussian civil servant who had co-founded the rabidly nationalist and imperialist Fatherland Party in 1917, was lying low in a fashionable part of Berlin, at the apartment of an admirer, the wife of a former German ambassador to the Ottoman Empire.
2
After the Freikorps forces occupied the Reich Chancellery, at around 7 a.m. on 13 March, the sixty-one-year-old Kapp was proclaimed Chancellor, and Lüttwitz, the would-be regime’s military strongman, his Defence Minister.

It all seemed remarkably easy. One major reason for this was that the government had fled Berlin. As had been the case at the beginning of the left-wing Spartacist uprising a little over a year earlier, ministers were forced to face the uncomfortable truth that they had no military force they could rely on to protect them. The reasons for this were, however, very different from what they had been back in January 1919 when the Spartacists had tried to march on the Reichstag.