II. Economic Problems
Economic problems were among the most pressing that the young republic had to face. Because of the inflationary means by which the imperial government had financed the war, the German mark in 1919 was worth less than 20 per cent of its prewar value. Despite Erzberger's energetic financial reforms, the state's revenues from taxation based on nominal values were hopelessly inadequate.
Moreover, the economic impact of the Treaty of Versailles was crushing. Germany lost 13 per cent of her territory, 10 per cent of her population, 15 per cent of arable land, 75 per cent of iron and 68 per cent of zinc ore, 26 per cent of her coal resources, the entire Alsatian potash and textile industries, and the communications system built around Alsace-Lorraine and Upper Silesia. Huge amounts of ships and shipping facilities and of railway rolling-stock were delivered to the Allies.
All this was more important than the reparations payments imposed by the treaty, although the latter attracted greater attention. This was because of the link made in the treaty between reparations and the so-called ''war-guilt'' clause. Article 231 bothered the Germans more than any other. The amount of reparations fixed in 1921 was estimated by J. M. Keynes to exceed by three times Germany's ability to pay.
But the punitive aspects of the treaty in general should be compared with the nature of the Treaty of Brest-Litovsk. The reparations question should be put in perspective by remember that the imperial government had proposed to recoup Germany's financial sacrifices in the war by imposing on the defeated Allies payments four times greater than those eventually demanded of Germany. These considerations help to explain, rather than to excuse, the follies of the Paris peacemakers.
Another reason for the prominence given to reparations is their alleged contribution to the runaway inflation of the early 1920s. In fact, however, inflation, far from being the consequence of reparations, preceded them. Successive governments then seized on it as a means of evading reparations payments, as well as for internal social purposes. No German government before 1923 made any attempt to stabilize the currency, because German industrialists worked out a system of ''inflation profiteering.'' They would obtain short-term loans from the central bank for improvement and expansion of their plant, and then repay the loans with inflated currency.
Similarly, the large agriculturists paid off their mortgages with virtually worthless currency. By contrast, everybody with a fixed income-broadly speaking, the middle class, was a victim of the inflation. Even union wages always lagged behind prices. The dislocation caused by inflation brought unemployment, despite the apparent industrial boom. The inflation was obviously deeply divisive in its social effects and contributed to lack of confidence in the fledgling republic among large groups of the population.
The industrialists, in addition to favoring inflation, which itself had the effect of undermining reparations payments, also directly opposed any genuine effort to meet these payments, because such an effort was likely to involve domestic austerity and a planned economy. The SPD, which had missed its opportunity to intervene in the economy during the period of provisional government, was by this time no longer in power. In the elections of 1920 it had lost sixty seats to the USPD, and the ''Weimar Coalition'' lost its majority in the Reichstag, never to recover it. The governments of the period of inflation were led by members of the Center Party and were open to influence from industry.
The situation changed after the French, realizing that Germany was deliberately evading reparations payments, decided to go and get them and occupied the Ruhr district in January 1923. The German government tried at first to resist and retaliate, but soon found this impossible. A new government was installed for the purpose of appeasing the French, getting the Ruhr cleared, and negotiating some revision of the reparations burden.
One essential requirement of proving German good faith to France was stabilization of the currency, which took a certain amount of technical financial skill and a lot of determination and nerve. These were supplied mainly by the new chancellor, Gustav Stresemann, the first and last member of a liberal party ever to hold that office. Before 1918 he had been on the left wing of the National Liberal party on domestic issues, but during the war had been an extreme annexationist and played a leading part in the dismissal of Bethmann Hollweg. On this account he had not been admitted to the leadership of the new Democratic Party (DDP) in 1918, whose founders professed to aim at a united bourgeois liberal party but which turned out to be not much more than the Progressive Party under a new name. Stresemann had therefore founded a party of his own, as a successor to the National Liberals, which he called the People's Party (DVP).
This failure to unite the middle class politically was not the least of the domestic consequences of the conflict over war aims. It meant that Stresemann led a small party which was to the right of center and to the right of him, instead of a large party, of which he would have been more representative and which would have given him more consistent and more powerful support. He failed, for example, to prevent his party from following in the footsteps of the National Liberals and regarding itself as the political mouthpiece of German industry. Stresemann himself was not associated with heavy industry, but came from a poor family and never forgot the miserable district of Berlin where he was born.
In this respect he differed, for example, from the millionaire Walther Rathenau, who had briefly played an important part in Weimar politics, just before Stresemann became chancellor. Rathenau, however, like Erzberger, was assassinated by right-wing nationalist fanatics, who resented his policy of moderation. These senseless acts robbed the Weimar Republic of its two strongest middle-class supporters and left middle-class leadership to men of Stresemann's political stripe. Stresemann was, after all, still a monarchist, and his party was officially a monarchist party. For all his many fine qualities-he was a talented orator, a man of charm and cosmopolitan culture, and one of the few statesmen who appealed to young people-Stresemann's appointment should therefore have raised the question of the viability of a ''Republic without republicans'' as early as 1923.
Fortunately, Stresemann was a practical man, a ''pragmatic conservative,'' which accounts not only for the not always entirely honest discrepancy between theory and practice, but also for his flowering when given office and his relative success as a statesman and politician. He needed an immediate practical problem. Without one, he tended to lose himself in romantic and irrational meandering. This dichotomy in his nature goes far to explain the contrast between the nationalist extremist of 1917 and the responsible chancellor and foreign minister of the 1920s, who even dropped his monarchism when he found it obsolete.
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