The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (33 page)

The lost war had created 525,000 widows, 1.3 million orphans and 1.5 million disabled war veterans, all of whom had to be supported by the state and the municipalities from a much diminished national product. Their pensions amounted to a large proportion of public expenditure. Figures for the early 1920s are hard to pin down, but by the middle of the decade, these costs certainly totalled 20 per cent of the government’s budget as opposed to 7 per cent in the United Kingdom.
16
This was in addition to those Germans who had reached retirement age and routinely qualified for pensions under the pioneering social insurance system established in the 1880s. Bismarck’s famous scheme had based itself on low-risk investment vehicles that had provided a stable income for the pension schemes in times of currency stability. Now, as the mark slid further following the year of stabilisation, they brought (vanishingly) low returns.
17

The war widows, orphans and war-disabled veterans, meanwhile, were paid out of municipal funds, which from 1920 were mostly provided on a percentage basis by the central government under the tax-centralising stipulations of the late Herr Erzberger’s tax law. Even by 1919, the municipalities were hugely in debt, in good part because of their welfare commitments to war casualties and their families - and habituated to going beyond these basic tax revenues and touting bond issues on the financial markets. Come the end of 1921, German cities were finding it even harder to raise the money to care for their needy. Foreign bonds markets, since 1919 a happy hunting ground for the high-spending municipalities, had dried up as in New York, Amsterdam, London, Buenos Aires and elsewhere investors began to avoid anything giving a return in German marks. And so the Reich government was forced to take on at least part of the huge cost of war pensions, yet another reason to print more money – and even then, providing far from adequate support for the war wounded, and for the war dead’s wives and families.

Government agencies began introducing strict, complicated and sometimes arbitrary seeming eligibility tests, and insisting that, for instance, war widows should if possible find work. A proportion of state jobs were set aside for the male war disabled, but there was no such provision for women. Once the inflation really began to take off, the dependent poor fell further behind. The ‘natural’ solution was remarriage, but with two million German males killed in the war, creating an exaggerated gender imbalance, this was not an option for many widows.

What must always be kept in mind, however, is that these bizarre arrangements were still being made in the context of an economy operating at a very hectic pace and suffering from very minimal unemployment. While an underclass of pensioners, widows, orphans and disabled persons was being kept more or less alive through inadequate welfare and varieties of poor relief, these people did not share the company of any substantial number of unemployed.
18

The contrast between the salaries of the civil servants empowered to grant or withhold these benefits and the standard of living of the recipients caused special bitterness. In January 1922, to take a snapshot, with the so-called ‘minimum income index’ standing at 1,600 marks, a fully disabled veteran (i.e. completely unable to work) received 1,034 marks and a war widow 716 marks. The average civil servant’s salary was 1,965 marks.

The Weimar state’s best intentions, its founders’ declared aim of building the world’s most progressive welfare system as well as its most complete democracy, were falling ever further short, the more the inflation, while seeming to keep the country working and prospering, tore at the government’s budgetary plans.

As for prices, they began to rocket. The cost of living, including clothing, increased by 71.5 per cent between August and September 1922 alone.
19
‘The unprecedented fall of the mark in the last few days differs from the previous falls,’ wrote Morgan Philips Price of the
Manchester Guardian
from Berlin on 4 August 1922.‘This time it is a general psychological panic wave . . .’
20

The panic was well founded. In May 1922, the government had been able to announce that the previous financial year’s tax income was around 30 per cent above the projected take, but since this was expressed in paper marks that had been dramatically devalued since the projection was made, the figure was worse than meaningless. The real tax take had continued to slump and the deficit, therefore, to grow. Meanwhile, in that same month only 20.87 per cent of the government’s income came from taxes, the rest - bar a few fractions of a per cent representing mail and rail charges - from borrowing via Treasury bills discounted by the Reichsbank. And as expectations that the government would manage to run a surplus and thereby cut the deficit any time soon diminished to near-nothingness after June 1922, institutions and individuals both in Germany and abroad became less and less willing to acquire government debt through Treasury bills and other bonds.
21

The government tightened its welfare policies quite ruthlessly as its own financial crisis became more acute. The living standards of those disadvantaged Germans who should have been taken care of continued to lag drastically behind the ever-steeper increases in the cost of living. This condemned them – even disabled soldiers, and their fallen comrades’ widows and orphans, who had sacrificed all for their country and should have been granted a modest sufficiency by the state – to struggle, to beg, or worse.

The good news – what there was of it – for German families during and immediately after the First World War was that private rents were strictly controlled by the government. So long as a tenant held an existing rental agreement, and stayed where he or she was, the proportion of a family’s outgoings required to keep a roof over its head constantly decreased as the inflation continued, gradually tending towards zero. A sample of working-class families’ living costs, for instance, reveals that rent made up 19.7 per cent of expenditure in 1907, 8 per cent in 1917, 7.3 per cent in 1919, and, at the climax of the inflation, a mere 0.3 per cent!
22

This was, of course, bad news for landlords. While it might be that they were able to pay off mortgages quickly because of the inflation, the financial return on their properties was miserable. Landlords, often not wealthy people but simply once-prosperous members of the
Mittelstand
– skilled artisans, shopkeepers, small tradesmen – who had invested in rental property as a form of saving and supplementary income, made up yet another aggrieved class in Weimar Germany.

Given the virtual cessation of residential construction during the war, and the lack of incentive to build for rent after peace came, the housing shortages, particularly in the big cities, became even more chronic. This caused serious overcrowding, with all the consequent damage to physical and mental health. Louis Lochner, later Associated Press’s bureau chief in Berlin, arrived in the German capital during this time. He got the usual foreign visitor’s impression of ‘cafés crowded with stylishly garbed ladies’, but then began to explore the side streets and alleys away from the haunts of the well-to-do:

I visited a typical Youth Welfare Station. Children who looked as though they were eight or nine years old proved to be thirteen. I learned that there were then 15,000 tubercular children in Berlin; that 23 per cent of the children examined by the city health authorities were badly undernourished.
23

The problems were not confined to Berlin. A survey of large working-class families in Düsseldorf published in 1923 reported an average of 3.7 persons per bedroom, and 1.9 per bed. In a low-income area of Mannheim, where the social services were especially active, of 220 families inspected, 96 failed to have what was thought to be a basic provision of beds – one bed per adult and one per two children. In a few cases, they had beds (presumably of the folding type) but not enough space to open them out. Drunkenness, incest and violence were endemic.
24

In the big tenement blocks that housed ordinary families in the industrial cities, most notoriously Berlin, the courtyards and inner tenements (the infamous
Hinterhöfe
) were arranged like Chinese boxes, with the most expensive flats on the outside, where there was light and air, and the cheapest, darkest and dampest making up the gloomy heart of the building. Combined with post-war shortages of affordable good quality food, and real wages that rarely rose up near the pre-war level and were usually much less, deteriorating living conditions also meant that diseases associated with deprivation and poverty rose sharply in the post-war inflation even during conditions of apparently full employment.

The incidence in infants of rickets, caused by lack of vitamin D, a result of dietary insufficiencies but also of simple lack of access to sunlight, was estimated in 1921 for those under six months at 27.8 per cent, between six months and a year at 41.1 per cent, between a year and eighteen months at 40.2 per cent, for those between eighteen months and two at 32.4 per cent, and for those infants over two years old at 59 per cent. The two-year-olds counted had been born immediately after the war, when the continuing blockade was causing shortages of basic foods. In the port city of Lübeck on the Baltic coast, evidence of tuberculosis in two-year-olds had doubled from 12 per cent before the war to 23 per cent, and in five- to six-year-olds from 33 to 50 per cent. In Stuttgart in 1922, 40 per cent of female students at a vocational school had thyroid problems, attributable to a lack of iodine in their diets.
25

Nor was the problem confined to children. One working-class boy from Hanover, born in 1913, lost two adult older brothers to tuberculosis at this time. Both had been conscripted towards the end of the war, and had caught TB while at the front.

It was only later that I realised the almost inhuman mental and physical burdens my mother was forced to endure during the time that both her eldest sons were dying. Even today I can scarcely grasp that she visited my brothers, who lay sick in the Nordstadt Hospital, every other day, and on the day in between would take me to the Polyclinic in the same hospital – on foot, of course, more than an hour’s walk, because there was not enough money for the tram. I still think with gratitude of the solidarity from friends and comrades, who took turns inviting us boys to eat with them, although their material situation was no better than ours.
26

The significant and surprising thing to keep in mind is that while some of these people were unemployed, or on pensions of one sort or the other, many, perhaps most, were in work. One unhappy couple, both factory workers (city not identified), crammed into a small flat with children from various relationships, provide an example. Since the case, along with others, was published in 1924, we can reasonably assume the details are from 1922–3.

The extended family’s residence was a two-room flat with a kitchen. There were six of them in it: a man, a woman, two boys aged eight and six, a little girl aged five, and a twelve-year-old girl from the woman’s previous attachment. The couple had been legally separated for some time. The man had been convicted and sentenced to ten months in prison for molesting the stepdaughter. When he came out of jail, he returned to the flat. He had nowhere to live and wanted, so he said, to see his biological children. The woman gained an injunction against him to leave, but he refused. The next step, hiring a bailiff to evict him, would cost more than she had at her disposal. So the man stayed. The social worker’s report continued:

The cohabitation of the separated parents in one flat seems to amount to an endless mutual torment.

At the moment the step-daughter, who earlier had been subjected to the sex crime, is still on holiday with the grandmother for ten days. The little girl is for this reason alone for the entire night with the father.

Neither of the couple makes a good impression. The man was and probably remains today a heavy drinker. Neither of them will vacate the flat of their own free will. The mother, who for a while looked after the children well, has now become totally indifferent. The separation, the injunction for him to leave, nothing changes anything about the actual situation, and the long-term placement of these children, who can look forward only to neglect, in homes run by the city authorities will in the end fail because these are so crowded.
27

It seems that this was not an exceptional case. The odd detail apart, the example was just one plucked from many on the social workers’ books.

The government, realising that there was no incentive for anyone to become a landlord, or for anyone to build new accommodation that might help alleviate the shortage, passed a law early in 1922 to allow a tripling of rent levels over the rates frozen since the outbreak of war in 1914. By the end of the year, of course, the cost of living had more than trebled, and the advantage was once more lost.

The idea of investing in bricks and mortar, if such could be afforded, was tempting all the same. For those who, unlike the pensioners and the impoverished middle class, and the hand-to-mouth working class, had spare money over and above what was needed for subsistence, acquiring ‘things’, material assets, was the key to surviving and even prospering in these uncertain times. More important than anything was to get rid of your cash, which might tomorrow be worthless. The relaxation of the rent control laws was a signal for a new wave of investment, as the
Manchester Guardian
reported: