In a recent post, I listed a bunch of myths that we teach to our students. One of them was specifically applicable to the German population—the myth that hyperinflation put the Nazis in power. In fact, it was deflation (and unemployment) that transformed the Nazis from a small political party in 1929 to a major party in 1932.
I don’t know if anyone at Bloomberg reads my posts, but just a couple of days later they did a story on this myth. They pointed out that the more educated the German, the more likely they are to believe the myth:
There was hyperinflation during the Weimar era, and it did contribute to a general sense of chaos that undermined the fledgling republic. But that peaked in 1923, the year Hitler botched a putsch and went to jail — a full decade before he seized power. By contrast, the monetary and economic event that contributed directly to the Nazi takeover was the crisis of the early 1930s, and in particular the deflation, or general fall in prices, that caused mass unemployment (see chart).
That’s not how Germans “remember” history, however. Haffert, Redeker and Rommel did surveys in which they asked participants to estimate inflation in 1923 and 1932. Most thought that prices were also soaring in 1932. Almost nobody knew that prices fell that year. The biggest surprise as that the more educated respondents were, the more likely they were to be wrong.
As I pointed out in my previous post, the people putting out these myths have an agenda:
There are at least two reasons why Germans and non-Germans alike should care about this backstory. The first is that the truth is always better than a myth. The second is that the myth in this case has for many years been a political power tool wielded by German conservatives against the ECB, which is a short taxi ride from the Bundesbank on which it was modelled.
This myth partly explains why the Eurozone double-dip recession of 2008-13 was far deeper than the US recession, despite the supposed “cause” (subprime mortgage defaults and banking stress) occurring in the US. Of course, the actual cause of both recessions was tight money—and money was much tighter in the Eurozone.
READER COMMENTS
marcus nunes
Sep 18 2021 at 6:04pm
Trichet, a Frenchman head of the ECB at the time of the GR, liked to boast that he was better at controlling inflation than the Bundesbank! So, when oil prices went bac up in 201o-11, he just couldn´t “control” himself!
https://thefaintofheart.wordpress.com/2015/01/16/trichet-is-faultless/
Frank
Sep 18 2021 at 6:23pm
The hyperinflation of 1923 destroyed the German middle class. The grandchildren of those would be the more educated today and largely be cognizant of what destroyed their families’ fortunes. Those middle class voters no longer had anything to lose when deflation came.
The myth has a lot of truth to it.
Scott Sumner
Sep 18 2021 at 9:08pm
I strongly disagree. There was no evidence the Nazis were going anywhere until the deflation of 1929-33 caused mass unemployment and made their party highly popular. By 1929, the hyperinflation was not a political issue–the issue was jobs.
mark
Sep 22 2021 at 10:37pm
I kinda agree with both views: The (classical) liberal party DDP crushed from 18,6% in 1919 to 5,7 in 1924 – to disappear in 1932 at 1%. Inflation did not help them nor the other two non-extreme parties in Weimar: SPD and Zentrum. 1919 the three parties had 76% of the vote – 1924 barely 40% (I over-simplify, same my history-teacher did). That resulted directly in highly unstable government: 16 Kanzlers in just 14 years! (The last 16 years Germany had one: Dr. A. Merkel). 17th was Hitler. – True: Brüning’s Deflations-Politik was fatal. But as a German school-student, you would remember the pics of 1 Million Mark-stamps and whellbarrows full of notes – and next thing the swastikas. – Anyways, inflation as elder living Germans experienced it was in the 70s: stagflation. Nothing nice about that. Nowadays I do not see Germans in panic about inflation of 4%. As long as the salaries rise too.
Matthias
Sep 19 2021 at 2:12am
Perhaps great grand children?
It’s weird, because I remember German school teaching about the hyperinflation and the deflation as very separate events.
But different states in Germany have different curricula, and even ‘educated’ people don’t pay that much attention to most of the busy work school puts you through.
Thomas Lee Hutcheson
Sep 19 2021 at 7:03am
There is something similar in that the US inflation of the ’70’s is remembered as quite bad even though income per capita was rising compared to the 2008-2020 long decade of hypo-inflation.
Monte
Sep 19 2021 at 10:29am
Deflation and unemployment, combined, may have been the catalyst that facilitated the rise of the Nazi party, but it was hyper-inflation that brought about the collapse of the German economy in 1923 as a result of the reparations enumerated in the Treaty of Versailles. Keynes spoke presciently about this in his Economic Consequences of the Peace. My understanding of history is that Hitler was able to successfully exploit the bitterness and hatred that remained from the devastating effects of the treaty, which led to a build up of German militarism and the subsequent outbreak of WWII.
Scott Sumner
Sep 19 2021 at 3:37pm
I don’t know of any evidence for that claim. The German economy was in pretty good shape in 1929, and the Nazi party was not very popular. Whatever political impact the hyperinflation had in 1923, it was mostly gone by 1929. The impact of deflation was an order of magnitude more severe than the hyperinflation.
Monte
Sep 19 2021 at 4:52pm
A high-level summary of the Treaty of Versailles, resulting hyper-inflation, and events leading up to the ushering in of the Nazi party and WWII.
Monte
Sep 19 2021 at 5:05pm
A high level summary of the Treaty of Versailles, hyper-inflation, and events leading up to the ushering in of the Nazi party and WWII.
Knut P. Heen
Sep 21 2021 at 11:35am
I thought the Germans got in trouble after the introduction of the Smooth-Hawley tariffs. They needed to export goods to pay for the Versailles-treaty and food imports. The Nazis gained popularity for wanting to renege on the Versailles-treaty (which had become impossible to pay without exports) and to increase the German Lebensraum (land to produce food).
Mark Z
Sep 19 2021 at 8:15pm
The Dawes plan in 1924 and Locarno treaties in 1925 ameliorated some of the issues with the Versailles Treaty and helped Germany deal with the reparations, which took some wind out of the ultranationalists’ sails and also probably helped the economy. Then when the depression hit, the other western countries became less accommodating about reparations (and other issues) and also everyone became much more protectionist, so I think at least what happened was by no means inevitable as a result of the economic crisis of the early 20s. Things got better for they got worse again.
Mark Z
Sep 19 2021 at 8:07pm
You’ve read Adam Tooze’s book on the economic history of Nazi Germany right? Doesn’t he argue that German economy wasn’t hurt as bad by the Great Depression as as other western countries? Contemporary Germans may have been more bothered by the hyperinflation of the early 20s than the Great Depression, I’m not sure.
The standard narrative in diplomatic history does seem consistent with what your take. At least what I was taught in college history classes was that political extremism peaked first in the early 20s, then subsided around and after the Locarno Treaties in 1925. From 1925-1929 it was said that the ‘spirit of Locarno’ set the mood of politics, extremism was on the wane, and reconciliation seemed increasingly plausible, and 1929 basically dashed all that.
Scott Sumner
Sep 20 2021 at 1:40pm
I have not read that book, but I can tell you that Germany was hit harder by the 1929-33 slump than most other countries. It did recover more strongly however; perhaps that is what Tooze was referring to.
nobody.really
Sep 20 2021 at 4:57pm
Speaking of spreading myths: Why does Mark Twain/Samuel Clemens appear at the top of this post? True, many people attribute the quote “It’s not what you don’t know; it’s what you know that ain’t so” to him; others attribute it to Will Rogers. Yet I know of no evidence that either men ever said it.
The Oxford Dictionary of Quotations, 3d ed., p. 491 (1979) attributes this quote to Josh Billings (the pen name of Henry Wheeler Shaw): “The trouble with people is not that they don’t know but that they know so much that ain’t so.” But the editors provide no citation documenting that he said it.
However, in 1874 Henry Wheeler Shaw published Everybody’s Friend, or Josh Billing’s Encyclopedia and Proverbial Philosophy of Wit and Humor, written in a rural vernacular, which included the following adages:
These citations seem to provide the earliest known versions of the quote.
nobody.really
Sep 20 2021 at 5:10pm
Ha–Quote Investigator found an even earlier version, dating to 1747.
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