A History of the German Republic, Arthur Rosenberg 1936
At the close of the World War the United States of America had become both financially and militarily, in productive capacity and in political influence, the first power in the world. President Wilson desired America to use its power in the form of a world dominion to be attained by America’s assuming the control of the League of Nations and enforcing its will through the agency of the League itself. The great majority of the American nation refused its support for Wilson’s plan. The Americans were content with their enormous political and economic power, and did not wish to assume the responsibility for the direction of European affairs. Hence the United States did not join the League of Nations, and after the year 1919 at first pursued a policy of non-intervention in European politics.
A change of opinion nevertheless gradually became apparent in influential American financial and political circles in regard to the continued pursuit of this policy of non-intervention. The Americans sought opportunities for the investment of their vast capital resources. Their attention was drawn to Germany, whose want of capital and great industrial possibilities seemed attractive despite chaotic political and economic conditions. If it should prove possible to restore Germany to a healthy political and economic condition, and to make her once more capable of being a trustworthy debtor, the prospects that would then be opened of profitable financial investment would be limitless. These considerations induced the United States government to express its willingness to assist in the solution of the reparations problem. At the same time it persisted in its refusal to join the League of Nations. The American Ambassador in Berlin – Mr Houghton – proved himself to be a clever and successful exponent of his government’s policy in communicating its views to the German Foreign Minister. Houghton found a willing and able supporter for his views in the British Ambassador, Lord D'Abernon. Anglo-French collaboration in European affairs had been detrimentally affected by Poincaré’s policy and the French occupation of the Ruhr. The British government was compelled in 1923 helplessly to watch the progress of the Franco-German conflict. Now England wished to make its influence felt once more in Central European affairs. For this purpose mediation between France and Germany offered the best opportunity. Hence it came about that towards the end of 1923 the British and American governments found themselves collaborating in an attempt to end the Franco-German dispute and to provide a solution to the reparations problem. The endeavours of the Anglo-Saxon powers met with a favourable reception in French circles.
After the breakdown of the German passive resistance the French army of occupation in the Ruhr was complete master of the situation, and the industrialists in western Germany were forced to obey French orders. Nevertheless French public opinion began to display a marked lack of enthusiasm for the French government’s Ruhr policy. Nobody any longer thought of annexing German territory. All attempts to achieve the separation of the occupied districts from Germany had failed in consequence of the opposition of the overwhelming majority of the Rhineland population. The majority of the French nation wished to see the Ruhr occupation brought to an end as soon as France could rely upon the fulfilment of its financial demands. The broad masses of the French working classes, peasantry and lower middle classes did not want another war, and were opposed to the forcible occupation of German territory. The French government accordingly adjusted its policy to correspond to the state of public opinion and gave its assent to the setting up of a commission composed of economists and financial experts to investigate Germany’s capacity to pay. The French elections in May 1924 resulted in the triumph of the left block composed of Socialists and lower middle-class Radicals. The new government led by Herriot was sincerely desirous of an understanding with Germany.
The Expert Commission under the chairmanship of the American financier Dawes published its report in April 1924 and after lengthy and difficult negotiations its conclusions met with the acceptance of all interested states, including Germany. Acting under the influence of Houghton and D'Abernon, Stresemann brought all his energies into play to secure the acceptance of the Dawes Report by Germany. In Stresemann’s eyes its conclusions seemed to mark the decisive turn in the road followed by the postwar development of Germany. An opportunity was at last afforded Germany to strengthen its international position, to reconstruct its industry and finance, and thereby to establish stable conditions in its domestic politics. [1]
The basic idea behind the Dawes Plan was the transformation of the reparations question from an instrument of French expansionist and power policy into a vast international, and especially American, financial undertaking. Germany was at once to receive a foreign loan totalling 800 million gold marks. The loan was to be devoted to the strengthening of the gold and foreign currency reserves of the Reichsbank, in order to enable Germany to abandon the unstable rentenmark and return to a legitimate and securely stabilised gold currency. It was hoped that the solution of the reparations problem would liberate Germany from the continual crises that had hitherto marked her foreign relations, and afford German industry the feeling of peace and security that had for so long been lacking to it. It would then be possible for German firms, municipalities, local governments, etc, to obtain the foreign loans necessary to enable them to resume their former activities.
Once German economy had been reconstructed in this fashion the taxes that Germany required to pay reparations would become available. The Dawes Commission did not fix the total sum payable by Germany on account of reparations, and contented itself with laying down the annual payments to be made in the immediate future. In the first year that the Dawes Plan came into operation Germany was to pay a milliard gold marks in reparations. After this initial payment, the annual amounts were increased until in 1928-29 they reached the total of two and a half milliard gold marks. Until the economic crisis overwhelmed the world in 1929 Germany actually made these annual payments punctually, without any apparent injury to the German standard of living. On the contrary, these years saw an increase in the wages and salaries of German workmen and civil servants. The Dawes Commission proved in the event to have been a true prophet, and its estimate of Germany’s capacity to pay in normal conditions was accurate.
The foreign loans gave such an impetus to German trade that between 1924 and 1929 it was found possible to collect the enormous taxes that were imposed, and also to pay reparations. Nevertheless German industry could not yet be regarded as having a solid foundation. Its prosperity was only possible with the assistance of foreign money, and nobody could foresee a time when it should once more stand on its own feet. If a crisis were to supervene, and foreign money become no longer available, then revenues would also be less, and it would no longer be possible to continue reparations payments.
The Dawes Plan was put into operation to the accompaniment of a number of guarantees and supervisory measures that were in many cases very galling to German pride. The railways were removed from the control of the Reich and placed under that of an independent company founded for the purpose, over whose affairs representatives of the creditor states exercised a decisive influence. The intention was to make the railways the first security for the payment of reparations; an aim that was only attained by placing the whole organisation under the greatest possible strain, by heavy sacrifices on the part of the railwaymen, and by endangering the personal safety of passengers and railwaymen to some extent. The Reichsbank was also transformed into an institution independent of the German government and under foreign control. It was hoped in this way to prevent the German government from again borrowing gold from the Reichsbank, and thereby to avert the danger of another inflation. The Dawes Plan also contained other guarantees and measures of control. Its operation was entrusted to an American financier named Parker Gilbert, who resided in Berlin and was the official representative of Germany’s creditors. Although Parker Gilbert was not armed with any direct powers over the German government, he was one of the most influential men in Berlin, for the simple reason that the existence of Germany depended upon the execution of the Dawes Plan and the securing of foreign loans; and both Dawes Plan and foreign loans were wholly in the hands of Parker Gilbert himself.
The system of foreign control and inspection was copied with greater or less accuracy from the methods employed by foreign creditors to oversee the finances of the perennial ‘sick men’ among the nations – Turkey and China. In similar fashion Germany had now become a sort of colonial appanage of the New York Stock Exchange. Stresemann was prepared to bear the responsibility for all these unpleasant happenings as long as the end achieved accorded with his plans. After 1924 Germany enjoyed peace in regard to her reparation payments. Definite payments had to be made that were within the capacity of Germany to pay, and as long as Germany paid punctually foreign supervisors could not interfere in German affairs.
As soon as the Dawes Plan came into operation, and France received her reparation payments regularly, the French army was withdrawn from the Ruhr. Stresemann then devoted his energies to securing the evacuation of the left bank of the Rhine by the Allied forces. The task was one of exceptional difficulty. Influential military circles in France looked upon the presence of French troops on the Rhine as the sole real security against another German attack. Stresemann believed that it was necessary for him to offer France another and better substitute for the occupation of the left bank of the Rhine, and out of this idea was born the Locarno Pact and Germany’s entry into the League of Nations. In the negotiations leading up to these events Lord D'Abernon played an important part and was responsible in conjunction with Stresemann’s chief assistant, the Under-Secretary of State for Foreign Affairs, von Schubert, for the draft of the German proposals that were laid before the French and British governments at the beginning of the year 1925. In his diary, Lord D'Abernon wrote under the date 14 January 1925 as follows: ‘Today I discussed the question of security with Schubert.’ Further details of this conversation follow. In a footnote to this passage by the editor of the diary, it is stated that:
The above conversation was held six days before the Note of 20 January to London, which was practically identical with the Note to Paris of 9 February. Schubert and Lord D'Abernon often talked of the Pact of Security as ‘Das Kind’ (the child), regarding it more or less as a joint production, and watching over its early life with quasi-parental care.
Seldom can an ambassador have exercised so great an influence over the government to which he was accredited.
The basic idea of the Locarno Pact is that Germany, France and Belgium mutually bind themselves to guarantee their existing frontiers, and to refrain from any attempts to alter them by force of arms – an obligation that involved the final renunciation by Germany of all claim to Alsace-Lorraine. This renunciation did not involve Germany in any great sacrifice, since after 1919 no serious German politician entertained notions of regaining Alsace-Lorraine. Furthermore, Germany agreed to make no further attempt to regain by force the districts of Eupen and Malmedy that had been ceded to Belgium in 1919 – a renunciation that naturally did not stand in the way of Stresemann’s attempting by peaceable means to secure the surrender of these two districts by Belgium. On the other hand, France by the Locarno Treaty agreed to make no attempt to extend her frontiers to the Rhineland by force. England and Italy guaranteed the existing German-French-Belgian frontiers. These two powers bound themselves in event of an armed violation of the Franco-German frontier to come to the assistance of the attacked power with their military forces. Stresemann was not to be moved from his firm conviction that a direct rapprochement between France and Germany was incapable of achievement without the aid of Anglo-American mediation. It is easy to understand that Stresemann’s views met with ready acceptance by the English government and suited its policy. At first France was also pacified by this important new addition to her security. The Locarno Pact also foresaw Germany’s entry into the League of Nations and therefore the application of the terms of the Covenant to Franco-German relations. After many difficulties had been surmounted Germany became a member of the League of Nations in 1926 and was given a permanent seat on the Council. Germany was thereby formally recognised as a great power once more. After the conclusion of the Locarno Pact the Allied troops evacuated the northern Cologne zone of the occupied territory, and hopes were entertained that the remainder of the occupied area of the Rhineland would also shortly be freed from foreign troops.
On the subject of Locarno, Lord D'Abernon wrote in his diary in October 1926 as follows:
It may be confidently said that the animosity between England and Germany has been in large measure appeased, the proof being that England is now brought in as an arbitrator, and as a guarantor of the territorial integrity, not only of France, but also of Germany. Moreover, it is mainly through English influence that Germany has obtained at Geneva a position acceptable to her national dignity.
As regards England, I hold that our new position as arbiter and guarantor is not only the more dignified and disinterested, but the more prudent... With effective measures taken to protect the French frontier against Germany, and the German frontier against France, the worst danger-spot in Europe has been dealt with, and the menace of a new conflagration reduced, if not exorcised.
From an English standpoint Lord D'Abernon’s observations are unquestionably correct. The situation nevertheless appears in another guise if viewed from a German standpoint. Two individuals can no more than two nations achieve a real friendship if a third person must always be present to see that they do not attack one another. The French Foreign Minister, Briand, who was a realist in politics despite his pacifist utterances, was quite obviously dissatisfied with this state of affairs. On the occasion of Stresemann’s ceremonial reception in Geneva as the first representative of Germany to take his seat at the Council table of the League of Nations, Briand delivered a sensational speech on the subject of the coming Franco-German friendship. Afterwards Stresemann met Briand in the tiny village of Thoiry, near Geneva, for the purpose of achieving a direct understanding between the two powers in all controversial questions. The practical results attained at the interview in Thoiry were small. Stresemann subsequently continued to pursue his traditional line of policy.
Nobody saw more clearly than Lord D'Abernon that the interview at Thoiry was incompatible with the fundamental principles of the Locarno Pact. He wrote ill-humouredly on this subject in his diary under the date 30 September 1926 as follows:
Schubert, just back from Geneva, is no more pleased than I am with the Thoiry conversation. He considers a close association of the three Western powers the essential spirit of Locarno; any departure from this, like the recent ‘fugue à deux’ in the mountains, is a deviation from the basic conception.
We agreed in regretting that Chamberlain had to leave Geneva so soon; there was then no Lampson in support. Cecil and Hurst were fully occupied on technical questions, and had not the general command of the political position, which was required to discuss matters effectively, and keep the ship straight.
Stresemann’s original intention was to take Schubert with him to the famous luncheon at Thoiry, but this idea was abandoned. There is little doubt that in a burst of convivial cordiality, both Briand and Stresemann promised one another a good deal which it may be difficult to perform, and discussed finance, a subject on which their knowledge is more imaginative than precise.
The entry of Germany into the League of Nations confronted Stresemann with a new difficulty in the form of a possible rupture of Russo-German friendship. In those days Soviet Russia and England had entered upon a period of acute rivalry in Asia, and especially in China. Moreover, the Soviet government was involved in difficulties in its relations with Poland, Rumania, etc. Russia feared that the League of Nations would organise a punitive expedition against her on some pretext or another. The entry of Germany into the League of Nations appeared to indicate that power’s adhesion to an anti-Russian group. Stresemann was successful in dissipating Russia’s fears. Simultaneously with the Locarno Pact Stresemann concluded the Berlin Treaty with Russia which guaranteed the continuance of the policy that had found its outward expression in the Treaty of Rapallo. Moreover, Germany on entering the League of Nations reserved her right to refuse to join in any military undertaking of the League that did not meet with her approval. The Soviet government saw that it had nothing to fear from Stresemann’s side, and therefore Russo-German friendship continued unabated.
Stresemann was the first German statesman since Bismarck who had a comprehensive foreign policy and who really carried out his policy in a determined fashion. Hence Stresemann gained the confidence of foreign powers to an extent unparalleled by any German statesman since Bismarck resigned in 1890, and the conferment upon him of the Nobel Peace Prize in his capacity as the statesman responsible for German foreign policy showed how greatly international feeling had altered since 1919. In his foreign policy Stresemann relied primarily upon the friendship of England and America. Moreover – and this was no easy task in those years – Stresemann simultaneously preserved good relations with Russia and, although Thoiry remained an episode only, correct and even at times friendly relations with France. It says much for Stresemann’s ability that he could not only work with Briand, but also with Poincaré on his resumption of the French premiership. As long as Stresemann remained Foreign Minister there were no further conflicts over reparations. The Ruhr and the northern territory of the occupied area in the Rhineland were evacuated. Negotiations that showed some prospect of success were in progress over the evacuation of the remainder of the occupied area and the return of Eupen and Malmedy to Germany. In Stresemann’s lifetime it was also a foregone conclusion that the future plebiscite in the Saar Territory would result in a 99 per cent vote of its inhabitants in favour of their return to Germany. Although the peace treaty forbade the formal union of Austria with Germany, it was looked upon as only natural that in every question Austria should align itself closely with Germany. Thus Stresemann envisaged the paths along which German policy could pursue the solution of the problems confronting it on the western and southern frontiers of Germany. The most difficult problem remained, as always, that of the German-Polish frontier in the east.
Stresemann never accepted the existing German-Polish frontier as final even though in the Locarno Pact he undertook that Germany would not seek to alter her eastern frontier by force of arms. He championed the interests of the German minority in Poland and of Danzig before the League of Nations with great firmness. Stresemann was convinced that a solution of the eastern problem could only be found as a consequence of a steady improvement in Franco-German relations together with a simultaneous preservation of good relations between Germany and England and Germany and Russia. The greater and more powerful the international position of Germany, the weaker would become that of Poland. The moment would then come when Poland would accept a compromise that restored Danzig and the Corridor to Germany, and thereby joined East Prussia once more to the rest of the Reich, in return for concessions in other spheres.
There can be no very serious objections to Stresemann’s political notions in themselves. It is otherwise if the international political and economic situation is examined in which Stresemann had to conduct his foreign policy. All Stresemann’s successes were bought at a price. The price was the subjection of Germany to Western European financiers and more especially to New York Stock Exchange magnates. The humiliating supervision exercised over Germany by foreign creditors was one result of this financial slavery. Another was that the fate of Germany depended upon every fluctuation in American prosperity. Germany’s ability to pay reparations depended upon her acquisition of foreign loans. If Germany were to cease payment on a single occasion, her international credit would collapse; and with it the whole political system which Stresemann had laboriously built up.
It cannot be argued that Stresemann was blind to this danger. Thus at a meeting of German press men in November 1928 he said:
In considering the economic situation of Germany and allied problems, I must ask you always to remember that during the past years we have been living on borrowed money. If a crisis were to arise and the Americans were to call in their short-term loans, we should be faced with bankruptcy. The amount we are raising by taxation is the utmost possible to any state. I do not know where we could raise another penny. Statistics show how much has been absorbed by the municipalities, how much has gone into industry, how much foreign gold we have been obliged one way and another to borrow in order to keep us on our feet. We are disarmed not only in a military sense but also financially. We have absolutely no further resources.
In August 1928 Stresemann had an important conversation with M Poincaré in Paris. According to Stresemann’s own notes, he said to the French Prime Minister:
Our industries have borrowed millions of gold marks, mainly from America. We have not only long-term but also short-term credits. The moment the world came to know that Germany was not fulfilling her international obligations, these debts would be called in by America. And that would mean that Germany could no longer feed her 64 million people. Trade would collapse. Do you think that Germany dares face such a prospect? Germany’s need to maintain her international credit – and we shall require still further funds – is a much more valuable pledge to you as French Minister of Finance than is the occupation of the Rhineland.
Germany’s national revenue during the stabilisation period amounted to some fifty milliards of gold marks annually. Direct reparations came eventually to two and a half milliards. The real danger to German industry lay not in the fact that the country was obliged to forfeit five per cent of its revenue, but in the fact that Germany owed some twenty-five milliards abroad, some of it in short-term debts that might be called in at any moment; and further, that German industry depended upon a continuous supply of foreign capital to maintain the position that it had gained since 1924. Herein lay the real danger to the political and economic system that is associated with the name of Stresemann.
The course of events since 1930 has very largely justified those who from 1924 onwards condemned Stresemann’s entire policy beginning with the Dawes Plan and ending with his death. Nevertheless it is only fair to remember that Stresemann was no longer alive to defend his policy in 1930 and afterwards. The wealth of international confidence which Stresemann painfully accumulated for Germany was recklessly and swiftly flung away by his successors, and notably by Brüning. It is always possible that Stresemann would have been able to utilise his own unrivalled prestige in international financial and political circles to prevent the terrible economic collapse of Germany from 1930 onwards. Under the resuscitating influence of foreign loans, economic life quickly recovered from the crisis that developed in Germany during the first months in which the stable currency was put into circulation. In April 1924 the number of state-aided unemployed had already sunk to 700,000, and in July 1925 it reached the extraordinarily low level of 195,000. It is true that a fresh crisis overwhelmed the labour market during the early months of the succeeding year. In March 1926 there were two million unemployed in receipt of state assistance. Then the situation improved again, and throughout the greater part of 1927 the number of state-aided unemployed remained below one million. In August 1928 it had fallen to 650,000. Ever since the change-over to the gold mark in 1924 the German currency had remained stable. Since 1926 the gold and foreign currency reserves of the Reichsbank remained in the neighbourhood of a total figure of two and a half milliards of marks in comparison with a monetary circulation of some six milliards of marks. Hence the stability of the German mark was beyond question.
All branches of German industry and finance eagerly availed themselves of the foreign money that was so eagerly offered to them. The chief borrowers were the industrialists and the municipalities. Nevertheless agriculturalists who had taken advantage of the inflation to pay off their old debts now gladly availed themselves of the opportunity to contract new ones. Since 1914 German economic life had never proceeded along normal and regular paths. At the outset there were the four years of war, which were followed in their turn by four years of wild speculation during the inflation (1923), and after 1924 came the period of foreign loans.
After the revolution the civil service had swollen to extraordinary proportions. The republican parties did not consider it to be their duty to dissolve the former Imperial civil service, and instead conferred posts in it upon their own supporters. The many new tasks, especially in the domain of social welfare and philanthropy, with which the Reich, states and municipalities burdened themselves invariably resulted in the creation of fresh official posts. After 1924 the officials lost all sense of the value of money, and seemed to believe that money would always be available at any time and in the quantity that was needed for any particular purpose. Thus it came about that all possible kinds of new buildings and undertakings were embarked upon that were useful and defensible in themselves, but were out of keeping with the true economic situation of Germany. In consequence of the general prosperity the Reich government largely increased the salaries of its officials, and the state governments and municipalities naturally could not lag behind.
The consequence of all this expenditure was that after 1924 the Reich, state and municipal budgets attained to fantastic proportions. At the beginning of 1928 the Reich reckoned upon a revenue of practically nine milliards gold marks from which the states and municipalities were to receive three milliards in the form of contributions from the Reich treasury. To this must be added another four milliard marks in the form of individual state and municipal taxes. The officials had, therefore, thirteen milliard gold marks at their disposal. If, however, industry and the people themselves were to be able to pay such a sum in taxes, it was obvious that they must have correspondingly high incomes. Industry was therefore organised into a rigid system of cartels in order to maintain prices at a high level. A high customs tariff enabled both the industrialists and the agriculturalists to exclude all undesirable competition from the home market. It is easy to understand that in such conditions prices for commodities remained high, and that on the world market German exports encountered far greater competition than during the inflation period.
Industrialists and manufacturers endeavoured as far as possible to participate in international cartels in order to enforce the principle of high prices beyond the German frontiers. Among these combines prominence must be given here to the Central European Steel Cartel. International agreements were also concluded in the potash industry, chemical industry, motor trade, shipbuilding, electrical industry, etc, etc. The commercial treaties concluded by Germany in these years contained cleverly drafted provisions binding Germany to admit definite quantities of foreign goods in return for the admission of similar quantities of German goods into the other contracting states. These years also saw the development of an extensive trade in manufactured goods with Russia and other countries, that was financed through the medium of a special credit system which included all possible forms of export credits, subventions, etc, covered by the Reich’s guarantee. It is obvious that in such conditions German export trade after 1924 took on a restricted and artificial character. The principal market was and remained the home market. Hence Germany’s trade balance remained heavily adverse, and her balance of payments became more and more unfavourable since reparation payments also made their influence felt here.
A careful calculation gives the deficit in 1924 as totalling two and a half milliards, in 1925 four milliards, and in 1927 as much as four and a half milliards of gold marks. The deficits were covered entirely by borrowed foreign capital. The greater portion of this vast borrowing was in the nature of short-term credits of every kind, and only a small portion was covered by long-term loans. The unhealthy and abnormal condition of German economy in these years was shown by the predominance of financial over legitimate business operations. It is true that this state of affairs is characteristic of the latest phase of capitalism. Nevertheless it assumed fantastic proportions in Germany after 1924 and during the succeeding years. In normal conditions a brewery is a business established for the purpose of brewing beer and selling it at a profit. A restaurant is intended to show a profit by serving meals, and a theatre to fill its auditorium by means of attractive performances. In these years in Germany, breweries, theatres and restaurants ceased to perform their usual business functions and became principally the objects of speculation. Shares changed hands incessantly; businesses developed subsidiary concerns; daring speculators invested their winnings in new businesses; and, finally, some fool was left with a business that was sound in itself and nevertheless could never bring in sufficient money to pay the interest on the debts with which it had been burdened by former speculative and temporary owners.
Workmen and clerks could generally find employment in these years. Brain workers, artisans and the peasants were able to earn a livelihood as a result of the millions of foreign capital that came streaming into Germany. Nevertheless the profits of speculation remained in the pockets of a small minority of the nation. Hence there once again arose an intense bitterness in the nation against speculation and profiteering. Yet when the collapse finally came this bitterness could not be utilised in the interests of socialism, and instead served the aims of other and wholly different movements. A comparison may be made between Germany after 1924 and Germany after 1871. The foreign money that flowed into Germany in the years that followed the Franco-Prussian War of 1870-71 came in the guise of war indemnities, whereas after 1924 it came in the form of loans. The fact that Germany had lost the World War was thus lost sight of, and in a sense reversed by these financial operations. The true distinction between the two periods consists in the fact that the French millions that poured into Germany after 1871 entered a country whose productive capacity and export trade were steadily increasing: whereas the American millions that flowed into Germany after 1924 entered a land whose factories were indeed abreast of modern technical requirements and undoubtedly capable of mass production on an immense scale, but whose export trade was hemmed in by all manner of restrictions and whose industry in general lived upon its debts and an artificially stimulated home consumption.
As accredited representative of American finance, Parker Gilbert, the Reparations Agent, could not have had any objection in principle to foreign loans. Nevertheless, as he continued to observe the situation in Germany, he felt increasingly that things were going too far. He wondered especially whether the German municipalities would ever be able to discharge their obligations to their foreign creditors. Schacht, the President of the Reichsbank, also vehemently opposed the financial policy pursued by the state as well as the municipalities. Much of his criticism was sound in detail. But the underlying reason for his attitude was the fanatical hatred of the big private capitalist for any form of public undertaking and for the democratic elements in municipal self-government. Schacht was silent on the subject of the misdemeanours of private capitalists. Stresemann also had his doubts on this subject. On 24 November 1927 he wrote to Dr Jarres, the Chief Burgomaster of Duisburg:
I make no secret of the fact that it is above all the policy of the individual states and the municipalities that causes me grave anxiety in the field of foreign affairs. Time and again I have said in my public speeches that it is necessary to distinguish more clearly between reality and appearance. I have no doubt that the will to work in a proper fashion does exist. Nevertheless certain measures have given rise to impressions that do us incalculable harm. The fact that the Prussian state has granted 14 million marks for the rebuilding of the Berlin Opera House, and will perhaps make a grant of more than twenty millions in all, creates the impression in the world at large that we are rolling in money. Not a single one of the victorious states has embarked upon such an undertaking. That Herr Adenauer (Chief Burgomaster of Cologne) has built a marvellous hall, and boasts that it contains the greatest organ in the world, produces the same effect... The Press Exhibition in Cologne was regarded as the most luxurious affair of its kind that had ever been organised. Frankfurt-on-the-Main was left with a deficit of two and a half million marks as a result of its Music Exhibition. Dresden builds a Museum of Hygiene with the help of a Reich subsidy... Please tell me what I am to say to the representatives of foreign powers when they tell me that all these things awaken the impression that Germany won rather than lost the war. I have no longer any answer to give to these reproaches... I think that Dr Schacht is wrong in his incessant criticism, and I am prepared to take an opportunity to tell him so. Moreover, Dr Schacht exaggerates in his polemics. At the same time I will not attempt to conceal the fact that I share the views of Mr Gilbert in many respects.
Although Stresemann was conscious of what was happening in German economic life, his criticism was confined to outward appearances; and in any case he was not in a position to eradicate the evil root and branch.
The Reich government that turned a deaf ear to the complaints of Dr Schacht and Mr Parker Gilbert in 1927 did not contain a single Social Democrat. It was composed of members of the middle-class block and the predominant influence was exercised by the German Nationalists. Moreover, Social Democrats in the state governments and the municipalities cannot be absolved from a share in the responsibility inasmuch as they wished to use the seemingly plentiful supply of money in the interests of the people. It is obvious that the whole unsound development of German economic life after 1924 was the work of the capitalists and not of the working classes. A resolutely carried-out state-controlled and planned economy could alone have been of real assistance in those days: state monopoly of export trade and state control of banking and finance, which would have prevented private profit-making. For as long as the capitalists wanted to speculate and make limitless profits with the help of foreign money no capitalist government was capable of offering them any serious opposition. Moreover, the municipalities and communal organisations followed the example of private businesses in this matter of speculation and expenditure.
The phenomena that had characterised German life during Cuno’s chancellorship reappeared under Stresemann in another form. Once again egotistical private capitalism rendered the pursuit of a national policy impossible. Dependent as he was upon a middle-class majority in the Reichstag and upon the great industrialists and bankers, Stresemann was unable to introduce into Germany either a state export monopoly or nationalisation of the banks. As the champion of capitalism, Stresemann could hardly open the door to socialism. Consequently Stresemann had perforce to content himself with criticising outward appearances and leaving the root of the evil untouched. The same is also true of Dr Schacht. The millions of foreign money procured for Germany a few years of illusory economic prosperity. The catastrophe that followed was in consequence all the more terrible.
The American sun that rose over Germany in 1924 at first brought with it an astonishing consolidation of the republican form of government. The New York Stock Exchange would hardly have thought a land in which civil war, terrorism and dictatorship ruled openly fit to receive financial credits. Hence the capitalists in Germany were compelled in the spring of 1924, and at the time of the publication of the Dawes Report, to abolish the Enabling Act and martial law. Even the generals were forced to capitulate before the dollar. Once again the Reichstag wielded the powers conferred upon it in the Weimar Constitution. The two great capitalist parties – the People’s Party and the Nationalists – adjusted themselves to the altered conditions. The change-over was effected without difficulty by the People’s Party, whilst in the case of the Nationalists it gave rise to serious troubles.
These two great parties of the right had been in agreement ever since 1919 over their principal aims. Nevertheless their history and their social composition was dissimilar. The People’s Party was the offspring of the former National Liberals and was the political representative of big industry and finance. If the party had not had many supporters belonging to the lower middle classes it would have been unable under universal suffrage to have returned a single deputy. These middle-class supporters nevertheless exercised no influence over party policy. The party was and continued to remain a united political expression of big business. Businessmen were disposed to make use of the democratic republic for so long as it remained serviceable to them. They would have been equally ready to abandon it at the moment it ceased to have any utilitarian value for them. In 1924 and the succeeding years the People’s Party enthusiastically supported the Dawes Plan with all its consequences. It was prepared to tolerate the so-called democratic republic as long as the republic allowed itself to be ruled by the great capitalists.
The Nationalist People’s Party was the offspring of the Conservatives of Imperial days. It also included in its membership a strong and influential group of big businessmen. As a counterpoise to these, however, its membership also comprised great landowners, Protestant peasantry, urban middle classes, intellectuals, clerks, civil servants, etc. The Nationalists were the party of the middle-class counter-revolution. The Racist middle classes and intellectuals were not so readily convinced that the day had now come in which to recognise the republic, to respect the Weimar Constitution, and to pay reparations and to show courtesy to France. The party leaders certainly acted under the influence of the great capitalists and landowners in their support of the Dawes Plan and their readiness to participate in the government of the Reich. At the same time they were forced to conciliate the Racist opposition among their electors with words and gestures. At the party meetings also sometimes in their parliamentary speeches there were to be heard the old cries of nationalist irreconcilability and of a day of reckoning with the November republic. Nevertheless Stresemann’s victory in the Reichstag in the summer of 1924, at the time of the decisive vote over the Dawes Plan, was obtained with the aid of the Nationalists, and a few months later Nationalists became members of the Reich government for the first time.
During the years 1924-28 the middle classes, as also the clerks and civil servants, who were members of the middle-class parties, in general showed themselves to be prepared to tolerate the continued existence of the republic. As long as peace and order reigned in Germany, and it was possible for a man to earn a living, these classes in the population had no quarrel with the republican form of government. The parliamentary representatives of both parties largely retained the confidence of their electors even when they supported the coalition government and the Dawes Plan. Nevertheless the middle classes like the capitalists were very far from being convinced supporters of democracy and republicanism. They were always ready to desert the democratic republic on the occurrence of a serious crisis.
The great majority of the thinkers and academicians were not even prepared to conclude a truce with the republican form of government along the lines of that entered into by the capitalists, agrarians and middle classes between the years 1924-28. The typical intellectual remained a racialist and anti-Jewish in his sympathies. He was an enemy of the republic, and refused his support for any participation in a democratic government as well as for a policy of fulfilment of obligations and of conciliation in international relations. The officers’ associations held firmly to their old traditions. The Free Corps had fallen upon evil days since peace and order reigned, and the wealthy classes no longer needed their armed support. The ruling classes in the years of stabilisation were indeed convinced that the day of the Free Corps was over. German justice found its courage again. Vehm murderers even found themselves brought to trial as if they were common criminals, and lengthy terms of imprisonment were awarded to members of the Black Reichswehr. Although the sentences were subsequently commuted, some men were condemned to death.
Among the armed associations only the Stahlhelm retained its importance. Although it maintained close relations with the Nationalists, the Stahlhelm refused to abandon its objection to a republican form of government and to the policy of fulfilling Germany’s reparation obligations. It was also successful in these years in either absorbing or suppressing the other armed associations. Even Captain Ehrhardt advised his followers to join the Stahlhelm. Resolute supporters of a counter-revolution placed their chief hopes in the Stahlhelm during those years in the belief that this organisation, in alliance with the Reichswehr and supported by the masses of former front-line soldiers, would prove successful in bringing about a Racist dictatorship. The Stahlhelm supported the opposition within the Nationalists who refused to have anything to do with the Dawes Plan or Stresemann.
The section of the Nationalists who refused to make any compromise with the Weimar Republic was led by Hugenberg. In his capacity as the owner of a vast newspaper and film combine, Hugenberg was a representative of capitalism. Nevertheless he had not supported the policy pursued since 1924 by other members of his class. In those days capitalism in Germany favoured the Dawes Plan. Hugenberg absolutely declined to countenance either the Dawes Plan or Stresemann’s policy. His aim was the overthrow of the Weimar Constitution, the establishment of a Nationalist dictatorship or – better still – a Hohenzollern restoration, and the complete destruction of all socialist influence in German affairs. Since 1924 Hugenberg had been swimming against the stream. Although he had the support of the Stahlhelm and the sympathy of a section of the Nationalist intellectuals and middle classes, Hugenberg was unable to alter the party policy.
The Reichstag elections in May 1924 were largely influenced by the recent inflation and the feelings to which it had given rise, because large numbers of the electorate did not yet understand the change that had taken place in the international and economic situation. The various Racist parties received over two million votes; an achievement worthy of respect. The succeeding elections in December 1924 nevertheless showed that the great majority of the electorate supported Stresemann’s policy. The Racist parties lost the half of their supporters at the previous election. In the following years the Racist Party in northern Germany gradually disappeared from the political scene. Hitler contrived to keep the National Socialist Party alive in Bavaria. Nevertheless it did not amount to much more than an unimportant political faction. Nevertheless the downfall of the Racist parties in so far as they fought as independent political parties against the then popular Dawes Plan, did not mean the destruction of the Racist idea. It was thought in those days that the resurgence of the Racist movement would come from the Stahlhelm and its supporters. In other words, from a reorganised and more radical Nationalist Party.
The middle-class coalition in the Reichstag was composed of the Nationalist leaders who refused to allow themselves to be influenced by Hugenberg and his followers, by the People’s Party, by the Centre Party that had meanwhile grown conservative, and by various smaller groups. The coalition or block constituted an impregnable majority in the Reichstag. At the beginning of 1924 Germany was ruled by the Marx government in which the People’s Party and the Centre possessed the predominant influence. When, however, the Nationalists voted for the acceptance of the Dawes Plan in August of that year, they demanded to be included in the government. The government dissolved the Reichstag. The subsequent elections in December resulted in the defeat of the Racist parties and the Communists and in the victory of all the parties that had supported the acceptance of the Dawes Plan. A new government was formed, with Luther as Chancellor and Stresemann as Foreign Minister that fully represented the middle-class block in its composition. The Nationalists obtained the Ministries of the Interior, Finance and National Economy. When in the autumn of 1925 discussions were opened over the Locarno Pact and Germany’s entry into the League of Nations, the Nationalist Party leaders began to retreat before the opposition within their own ranks. The Nationalist ministers resigned in October. Luther carried on the government at the head of a Cabinet representative of the central middle-class parties. In 1926 Luther gave place to Marx. After Germany had signed the Locarno Treaty and entered the League of Nations, the Nationalists returned to the Cabinet in January 1927 and were given four portfolios. Marx, nevertheless, remained Chancellor. The conduct of the Nationalist Party leaders in these years was certainly not such as to earn them respect. On the one hand, the chief men in the Nationalist Party wanted to serve industrial and economic interests by supporting Stresemann’s policy and exercising a decisive influence over the Reich government. On the other hand, they were afraid of Hugenberg, the Stahlhelm and the Racist elements. Hence party policy followed an astonishingly zigzag course. In consequence, the confidence of the electorate in the Nationalist Party diminished, as was subsequently shown at elections from 1928 onwards.
At the beginning of 1924 Social Democracy was completely weak and incapable of action. But the change in foreign policy inaugurated by Stresemann afforded the Social Democrats a new opportunity of strengthening themselves. The SPD accepted the Dawes Plan and discovered that even the middle-class parties of the right were now forced to pursue the formerly much-abused policy of fulfilment of obligations. The SPD welcomed the foreign loans as a means by which the workpeople would once more be ensured a tolerable existence. Naturally the SPD could only welcome the return to constitutional conditions in the government of the country. Moreover, the stabilisation of the currency rendered possible the reconstruction of the independent trade unions. Nevertheless these never regained the membership they had possessed in the first years of the republic. In conjunction with the independent trade unions the SPD sought to raise the standard of life of the workers from the low level to which it had sunk during the inflation and the first months of stabilisation. Up to 1928 this practical side of the SPD’s activities was on the whole successful. The middle-class-block government was not nearly so reactionary in social questions as might perhaps have been expected. Under the influence of the general prosperity the middle-class parties and the employers were willing to accord the workpeople a modest share in the wellbeing induced by the dollar. The Christian trade unions were anxious to show that they held the key position within the block. They influenced the Centre, and through the Centre the other parties composing the government. The Reich Minister for Labour was a Centre deputy named Brauns, and he endeavoured to maintain good relations with all the trade unions. Although the SPD was not represented in the Reich government, it was able by its opposition and by bringing forward definite proposals, to exert an important influence upon social legislation during the years 1924-28.
It was this same middle-class-block government that introduced the first unemployment insurance act which, even if it did not meet all the justifiable demands of the proletariat, did at least afford the unemployed some guarantee of a bare existence. At the same time, the system of state arbitration in industry was extended to confer upon the state the right to intervene as arbitrator in conflicts between employers’ associations and trade unions. On the whole the wages scale showed an upward tendency. Thus the weekly wages of a trained metalworker rose from 28.5 marks in January 1924 to 50.5 marks in July 1928. The wages of a skilled builders’ labourer rose in the same period from 27 to 62 marks weekly, and those of a trained compositor from 26 to 54 marks weekly. In this connexion it is necessary to recall that at the beginning of 1924 wages in Germany were excessively low. The length of the working day remained unfavourable to the worker. Any attempt to restore the eight-hour day encountered fierce opposition on the part of employers.
The progress of Germany since the stabilisation of the mark appeared to indicate Social Democratic policy. In Germany’s international relations economic common sense had triumphed over the nationalist policy of the mailed fist. Within the country itself the vast majority of the nation had been forced to recognise that the Weimar Constitution was the best means towards the reconstruction of Germany. It had also been proved possible to raise the standard of life of the working classes without resort to armed revolts.
The elections in May 1924 turned out unfavourably for the SPD, which received six million votes as compared with four million given for the KPD. In December 1928 the SPD received nearly eight million votes in comparison with the KPD’s 2.7 million. Ever since the unfortunate experiment of the great coalition in the autumn of 1923 the SPD had remained outside the Reich government. Now, however, when the electorate was returning to the SPD in ever-increasing numbers, the notion arose among the party leaders whether or not the time had come to regain influence in the government of the country in order to continue the work of 1918-19 with greater prospects of success. Prussia constituted the bridge over which the SPD might return to the Reich government. The years 1924-28 saw a remarkable distinction between Prussian and Reich policy. The difference arose out of the dissimilar policies pursued by the Centre Party in Prussian and German politics. Since it had turned conservative the Centre had been a principal support of the middle-class block in the Reichstag. In the Prussian Diet, on the contrary, it held firmly to its coalition with the Social Democrats. Thus it came about that the parties that had formerly supported the Weimar Constitution held the reins of government in Prussia, and the Nationalists and the People’s Party constituted the opposition. The difference in the policy pursued by the Centre Party in the Reichstag and in the Prussian Diet cannot be explained simply by saying that the right wing of the party led in the Reichstag and the left wing in the Prussian Diet. On the contrary, it was identical party organisations with identical party policies that sent the supporters of the middle-class block into the Reichstag and the supporters of the left coalition into the Prussian Diet. The solution of the mystery is to be found in the problems presented by the Prussian administration. Under the monarchy, Prussia was governed by East Elbian Protestants. And even Catholic Westphalia and the Rhineland were forced to permit themselves to be governed by East Elbian civil servants. Moreover, the great municipalities of the Rhineland were ruled by National Liberals. All this was changed after the revolution. As the leading republican party, the Centre now held the entire administration of the Catholic Rhineland, Westphalia and Upper Silesia in its hands. The SPD unquestioningly accorded the precedence to the Centre in these districts. The Centre naturally did not wish to forgo this new position of power and influence enjoyed by the Catholic populace. In matters of Reich foreign policy and economy, the Centre made common cause with the great middle-class parties after its change-over to a more conservative attitude. In Prussia, on the contrary, the Centre was determined not to enter any coalition of the middle-class parties without adequate guarantees. For in that state the Nationalists would have been far less pleasant allies of the Centre than the Social Democrats. It was always possible that a Nationalist Minister of the Interior in Prussia might attempt to send Pomeranian officials back to the Rhineland! Hence the Centre was firmly resolved to obtain guarantees for the political trustworthiness of the Nationalists before entering into any coalition with them in Prussian politics. The weakness displayed by the Nationalist Party leaders towards the Racist opposition as well as the zigzag course followed by their policy in the years 1925-27 did not contribute to arouse confidence in them in the hearts of the Centre Party leaders. The Centre, therefore, continued for the present to remain faithful to its old and well-tried allies.
Ever since 1920, with few interruptions, Prussia had been governed by the Social Democratic Premier, Braun, and the Social Democratic Minister of the Interior, Severing, as a result of the support afforded them by the Centre. A condition of real political stability thus obtained in Prussia that contrasted starkly with the continual Cabinet crises in the Reich and in the other German states. Braun and Severing endeavoured to create a republican and Socialist administrative tradition in Prussia by conferring the most important posts in the civil service upon trustworthy republicans and by seeking to educate the Prussian administration in a republican sense. Those who demanded that Social Democracy and the working classes in general should pursue a realist power-policy could only agree that the SPD must fight hard to retain its hold in Prussia upon such influential governmental instruments as the police and the administration. The improvement in the general position of the SPD after 1924 also contributed to strengthen its position in Prussia.
Outside the frontiers of Prussia the SPD exercised a decisive influence over the governments of Baden, Hesse and Hamburg. Social Democratic burgomasters and town councillors also controlled the affairs of thousands of municipalities and communes throughout Germany from Berlin outwards. Thus the SPD had a decisive voice in the governance of the Reich under and alongside the middle-class-block government. Should it not have been possible, therefore, to induce the Centre to return to the support of the democratic republic? The Christian working men naturally belonged to the ranks of the republicans. Should it not also have been possible to achieve a compromise with middle-class politicians like Stresemann, whose foreign policy was invariably supported by the SPD?
The answer to these questions depended upon the individual attitude to the future development of Germany. If the revolutionary period had come to a final end in Germany, and a peaceful democratic development free from serious crises were possible, the SPD was in a position to regain the influence it had enjoyed in 1919 by the help of electoral victories and political combinations. If, however, this was not the case, and the appearance of stability in Germany was only illusory, the SPD policy in Prussia was extremely dangerous, while its return to the Reich government might prove fateful. For the resuscitation of the democratic constitution at the beginning of 1924 was not the work of the working classes, but of world capitalism. The successes gained by the SPD since 1924 had not been due to that party’s having opposed the capitalist order of society with socialism. On the contrary, these successes had been won because the party accepted the existing form of capitalist society, and was content to procure advantages for the working class within its limits.
Nevertheless the Socialist Party that is compelled to assume responsibility for a capitalist order in critical times finds itself eventually in a perilous cul-de-sac. As long as all went well in Germany the electors voted for the Dawes Plan and the SPD. But if a new crisis overwhelmed the country, would the SPD be able to execute a swift volte-face and resume the struggle with capitalism? The very fact that the SPD held the Prussian police and administration in the hollow of its hand was capable of exercising an injurious psychological influence over the masses. The decisive power in Germany since the revolution had passed to the Reich itself. There was the Reich President with his power of governing by decrees. There was the Reichswehr. There was the Reich government that took all decisions in foreign policy and national economy. In comparison with the Reich the individual states were only executive organs.
But the man in the street lacking in a knowledge of constitutional law and practice regards the executive authority as the real power in the state. The inspectors of taxes who demanded their money from the peasants were Reich and not Prussian officials. The Reich and not Prussia determined the limits of taxation and of the dole. Nevertheless, when the peasants or the unemployed took part in demonstrations, it was the Prussian police under the command of Prussian administrative officials who forced the demonstrators to disperse. Notwithstanding all the efforts of Severing and his closest collaborators, it proved impossible to democratise the Prussian police thoroughly. During Wolfgang Heine’s tenure of power the Prussian police force had been organised as an army for use against the revolutionary workmen and the so-called ‘Spartacus’ movement. Ever since those unfortunate days the criminal police who waged war upon crime, the police on point duty in the streets, and the police officials who sat in the police offices and discharged the multitudinous tasks arising out of ordinary routine happenings, had ceased to be typical members of the Prussian police force. Their place as the embodiment of the Prussian police in the eyes of the public had been taken by companies of policemen armed with every form of modern weapon, highly organised and disciplined on a military model, who remained in barracks awaiting the order to quell disturbances.
It is beyond human capacity to introduce democratic ideas and traditions into a body of men trained to shoot down rebellious workmen. The officers of the police force imitated the officers of the Reichswehr in their manner and their opinions. They were frequently a cause of embarrassment to the republican government of Prussia. The so-called ‘Defence Police’ (Schutzpolizei) were disposed to shoot on the least provocation – a tendency that was responsible for deaths among the working classes even in peaceful days. Nevertheless any real reform of the Prussian police was impossible before the working classes had possessed themselves of the supreme governing authority throughout the Reich. As a consequence of the very restricted powers possessed by the Prussian Minister of the Interior since 1923, it only proved possible to abolish the worst evils and to secure that at least the police obeyed the constitutional authorities in normal times. In critical days, or in event of a conflict between Prussia and the Reich, no reliance could be placed upon the Schutzpolizei. A remarkable phenomenon was thus to be seen in the greater part of Germany during the years 1924-28 in the form of a division of responsibility that gave the middle-class parties the control of economic and social policy and left the police forces in the hands of the Social Democrats. Throughout the period of stabilisation the SPD incurred little injury through its responsibility for the conduct of the Prussian police. Nevertheless it was obvious that in event of the occurrence of a new economic and political crisis an utterly impossible state of affairs might easily arise.
Through its representation in the municipalities and communes Social Democracy incurred a similar and in certain circumstances equally dangerous responsibility. The great majority of the Socialist Party officials depended for their livelihood upon a slender income from their regular employment as organising secretaries, editors, etc. The Socialist civil servants from the ministers downwards were also conspicuous by their simple manner of living. In comparison with these Socialist Party officials and civil servants, the municipalities in the days of stabilisation imitated some evil customs of private capitalism. Burgomasters, town councillors entrusted with administrative duties and, above all, the directors of civic industrial and other undertakings were often in receipt of salaries that far exceeded the limits of common sense. Nor was there any distinction between Social Democratic and middle-class town councillors and municipal officials in this matter of remuneration. From a moral and personal standpoint there can be no objection to the Social Democratic director of a municipal tramway system receiving the same salary as his middle-class colleagues. Nevertheless it was a grave tactical error from a political standpoint to allow former workmen, or even educated men, to receive annual salaries amounting to 50,000 gold marks in posts which they owed to the party influence and which did not require the exercise of any special abilities. In times of order and prosperity there would have been less cause for objection to these proceedings from a purely political standpoint. In event of the occurrence of a fresh crisis, however, these conditions could only result in making the SPD appear in a false guise in the eyes of the masses. The millions of the hard-working proletariat and the thousands of party officials leading sober and simple lives would be forgotten, and their place in the eyes of the populace as the outward and visible manifestation of Social Democracy would be taken by the armoured cars of the Schutzpolizei and the enormous salaries of the municipal officials. To the end of its days the SPD was truly proletarian and honourable. Nevertheless its unnecessary assumption of responsibilities and its failure to avoid errors of taste led to the emergence of the notion of a ‘Marxism’ that had ruled in Germany since 9 November 1918, and that was nothing more than an oppression of the poverty-stricken masses in the interests of capitalist profiteers.
In order to strengthen its influence outside parliamentary life the SPD founded in 1924 the republican mass organisation known as the Reichsbanner ('Reich Flag’) with the support of small sections of the Centre and the Democrats. This association of republican storm troops was intended to serve as a counterpoise to the Stahlhelm and the Racist organisations seeking to bring about a coup d'état. The Reichsbanner soon came to have hundreds of thousands of members and supporters, and undoubtedly increased the self-confidence of the Socialist working classes by means of its meetings and processions as well as by a skilful use of flags, music and military marches. As so often in the history of the German republic, an indispensable action was once again undertaken when it was too late. If the Reichsbanner of 1924 had already been in existence in 1919, the Free Corps could have been dispensed with and the long agony of the German republic could have been avoided. As it was, the Reichsbanner only came into existence when the counter-revolution had already secured powerful defences for itself in the army and the administration of justice and when the capitalist parties were already in control of the government of the Reich. The Reichsbanner provided a suitable means of defence for a constitutional republican government threatened by a Racist putsch. If an attempt had been made to repeat the Kapp Putsch of 1920 or Hitler’s putsch of 1923, the Reichsbanner would have lent the constitutional government the support of many thousands of reliable fighting men. The ideology of the Reichsbanner was nevertheless unable to comprehend the situation in which the counter-revolution achieved power by pseudo-legal means. The Reichsbanner fought for the democratic republic by constitutional means. When, however, the enemies of the republic made themselves the legal masters of the state machinery, the Reichsbanner became inspired with grave conscientious misgivings.
At the time when the SPD was regaining its former strength and influence, the KPD was rent in twain by severe internal dissensions. The failure of Brandler’s policy during the year 1923 had aroused great bitterness in the Communist working class. The left wing of the party, which had opposed the policy pursued by the Central Committee under the influence of Moscow, was now supported by the majority of the members. At the end of 1923 the moment came in which the KPD could have been liberated from Russian influences and transformed into an independent German Socialist Party. The left were nevertheless not united as to the aims to be pursued. The so-called extreme left recognised that the failure of the labour movement was due not to Brandler but to Russian state policy. The remaining members of the left did not go so far, and hoped that a change of policy would render it possible to resume collaboration with the Communist International. It was at this juncture that the price had to be paid for the failure of the Communist left to speak out its mind to the masses on the subject of Russia and to dispel vigorously the Bolshevist illusion under which so many of them were labouring.
The revolutionary elements in the working classes nevertheless wished to be fed by the ideals of the Russian Revolution as a consolation for the disappointments brought them by everyday life. Moreover, the majority of the left-wing KPD leaders were affrighted by the thought of a life-and-death struggle with Russia. A miserable compromise was therefore achieved in 1924, by which the Russian Soviet leaders sacrificed Brandler, and cast upon him all the responsibility for the events of 1923, in return for the abandonment by the left-wing KPD of its criticism of them and the conferment upon it of a majority representation in the Central Committee. During these years Russian policy sought to pursue a path of compromise both in internal and foreign affairs. Nobody in Moscow any longer looked upon the world revolution as a serious possibility, and therefore friendly relations were deemed desirable between the Communist Parties and the Social Democrats. The majority of the Communists in Germany in the years 1924-28 were as much infected by the prevailing atmosphere of constitutionalism and stabilisation as the working-class membership of the SPD. The working-class Communists, especially when they had work, wanted to live at peace and did not entertain any notions of revolution. Revolutionary speeches and Soviet Russian films provided them with excitement without placing them under any revolutionary obligation whatsoever.
Stalin made use of this curious mixture of pacifism and enthusiasm for the Soviet ideal. The left-wing party leadership of the KPD was still mistrusted in Moscow, and was finally removed from office in 1925 and 1926 by the clever tactics of the Bolshevist leaders. A number of these left-wing Communists, who refused to abandon their own independence of thought, were expelled from the party. The remainder under Thälmann made their submission to Moscow and were entrusted with the party leadership. From that time onwards all independence of thought and action was stifled within the KPD, and the Central Committee and party officials obediently executed the orders given to them by Bolshevist leaders. There was no longer any trace in the KPD of a carefully planned revolutionary policy. Although middle-class justice now wrongfully pursues Thälmann and his closest collaborators as traitors to their country, it is undeniable that their actions are deserving of severe criticism from the standpoint of the working classes.
Under a revolutionary left-wing leadership the KPD had in 1924 bitterly opposed the Dawes Plan and Stresemann’s policy. The KPD thus came into conflict with general public opinion in the country and sustained a defeat at the elections in December 1924 when the number of votes cast for the Communist candidates fell from 3.7 million (May 1924) to 2.7 million. It is an irony of history that the KPD under the leadership of Stalin’s henchmen augmented its membership after 1925, though at the rate far below that of the SPD; for in those years the party lacked any real political programme that went beyond the confines of the existing capitalist order, and it was indeed itself a factor in the stabilisation of Germany from which it was even able to derive some little profit.
If it is remembered that the SPD refused to extend its activities beyond the limits set to them by law, it is clear that a second Socialist Party with its eyes fixed firmly upon a revolutionary future would have enjoyed great possibilities of development. It might have been possible to found such a party at the close of 1923 when the left wing of the KPD separated itself from Russian influences. A party of this kind would have had to renounce any adventurous policy and any attempts at a coup d'état during the years of stabilisation. Nevertheless it could have kept up a relentless criticism of the domestic and foreign policy pursued by a capitalist Germany, and could have laid its plans for a socialist revolution on the occurrence of the next great crisis. A party organised on this model would undoubtedly have encountered defeats and set-backs at elections. Such defeats would have been of little importance if the party only remained faithful to its fundamental principles, and could have been alluded to subsequently at times of crisis with the result that the masses would have joined its ranks in their millions. The years 1924-28 saw a steady decline in the numerical strength of the National Socialist Party. After 1929, however, the Nazis triumphed because they had never relaxed their opposition, and had always held up in contrast to the existing governmental system the ideal of a new and better state of the future. Although the KPD also criticised existing conditions, its criticism under Stalin’s inspiration lacked the positive aim that would have won the sympathy of the masses. Since 1925 the KPD was no more than the shadow of the constitutional German republic – a shadow that disappeared when the body fell into decay.
The death of President Ebert in 1925 afforded the political parties an opportunity for a vast demonstration and placed the various classes in the nation under a severe test of their several powers. The first presidential election in March 1925 took place amid innumerable divisions of political opinion. Jarres, the candidate of the middle-class parties of the right, received 10.5 million votes; the Social Democratic candidate, Braun, nearly eight million; Marx, the leader of the Centre, nearly four million, Thälmann, the Communist candidate – barely two million; and General Ludendorff, who had been nominated by the Nazis, less than 300,000 votes. This election marks the low level reached by the Nazi Party under the influence of stabilisation. The Democrats and the Bavarian People’s Party also put forward candidates who received respectively 1.5 and one million votes.
A decision was thus delayed until a second election had taken place. It was clear that the choice lay between the candidates of the middle-class block and the Social Democrats. Nevertheless the power policy pursued by the Centre prevented any such simple solution to the problem. The Centre wanted to make use of its key position in politics in order to obtain the first post in the Reich for itself. After having polled 10.5 million votes at the first election the right parties were little disposed to withdraw their candidate in favour of Marx. The Social Democrats, on the contrary, resolved to withdraw their candidate and to give their support to Marx. The party committee believed that its candidate had no prospect of success at the second election and therefore resolved to choose the lesser of two evils. If the Centre candidate had been a sincere champion of the democratic republic like Erzberger, the party committee’s decision would be comprehensible; but it would be impossible to conceive of a more conservative member of the Centre than Marx. He had been the dictatorial Chancellor of the winter of 1923-24, and, subsequently, the Chancellor who owed his office to the support of the middle-class block. Marx was in no way a ‘lesser evil’ as compared with any other possible presidential candidate of the right parties even though that candidate were Jarres or Hindenburg. If Marx had become President, he would have obeyed the instructions of the generals and the great industrialists in every crisis. The SPD leaders doubtless believed that if they gave their support to Marx’s candidature the Centre would be prepared to re-establish the Weimar coalition in event of his victory. Hence their withdrawal of their own candidate despite the fact that he had received eight million votes at the first election.
At the second election Marx was supported by the Centre, the Social Democrats and the Democrats. The right parties concluded that their candidate – Jarres – was not sufficiently popular to hold his own in such a contest. Jarres therefore withdrew, and was succeeded as the candidate of the right block by Field-Marshal von Hindenburg. Hindenburg was then seventy-eight years of age. Nevertheless he was extraordinarily active both physically and mentally, and was perfectly fit to assume the onerous office of President of the Reich. The great victories won in the World War under the joint generalship of Hindenburg and Ludendorff were in reality the work of Ludendorff alone. Hindenburg could nevertheless claim the merit that he left his great Chief of Staff to work undisturbed. After the conclusion of peace, and the dissolution of the High Command, Hindenburg retired into private life and took no part in the political struggles of the day. Ludendorff, on the contrary, appeared as a champion of the Racist cause, and thus incurred the hatred of the great majority of the republicans and the Socialists.
Ludendorff was almost alone among the generals and politicians of the former Imperial Germany in recognising from his experiences after 1919 that a national reconstruction of the country could never be the work of the propertied upper classes, but only of the workmen and peasants. He subsequently resigned from the National Socialist Party when he saw that its policy did not accord with his ideals. A sincere and honourable man, General Ludendorff was nevertheless completely ignorant of history and politics. He allowed himself to become the victim of the most absurd delusions on the subject of Jews, Freemasons, etc, and when he subsequently aired his naive opinions publicly he not only made himself hated but also became a laughing-stock. At the same time, Ludendorff was ignored by the official German nationalism. The more Ludendorff’s reputation sank, the greater became the glorification of Hindenburg. The support of both left and right parties made him into a national hero. When the right parties put forward his name as candidate for the Presidency, the National Socialists and the Bavarian People’s Party gave him their support. It is noteworthy that the Bavarian People’s Party – an organisation of convinced Catholics embracing the entire priesthood in Bavaria – voted for Hindenburg and against Marx: for the Lutheran Junker and against the outstanding Catholic leader. The moment that Marx – though helpless to do otherwise – allowed the SPD to support his candidature, he immediately fell into disfavour with the Bavarian counter-revolution. It is easy to understand that the Communists under the influence of their left-wing leaders looked upon Hindenburg as no less an evil than Marx, and therefore upheld the candidature of Thälmann at the second election. At the same time, it is interesting to note that the Moscow leaders disapproved of the KPD’s policy because they wished the Communists to support Marx, and by so doing once more to come officially into line with the SPD.
At the first election the Hindenburg parties had polled about 12 million votes. At the second election in April the Field-Marshal received 14.5 million votes and emerged the victor. The name of Hindenburg had therefore availed to mobilise 2.5 million voters from among those members of the electorate customarily indifferent to politics. Marx received 13.7 million votes and Thälmann barely two million. Hindenburg was an old-style monarchical Conservative and a fierce opponent of any form of democracy or socialism. His first desire as Reich President was for a middle-class-block government assured of the active cooperation of the Nationalists. Hindenburg was the symbol of the counter-revolution that had achieved power in the republic by constitutional methods.
A second great plebiscite was held in the succeeding year over the question of the expropriation of the former ruling houses. It has already been observed above that the German republic, among many other unsolved problems, had also left untouched the question of the property of the former reigning dynasties. After the stabilisation of the mark the princely houses also wanted their share in the prosperity brought by the dollar. They put forward claims for large indemnities and subventions. If the states did not pay with a good grace, the princely families brought actions against them, and the judges, who were loyal to monarchy in their hearts, invariably delivered judgement in favour of the claimants. It might have been thought that the former Emperor William II and his sons would have scorned to receive money from republican hands. But the Hohenzollerns have never been noted for their delicacy of feeling. Nevertheless the monarchical cause suffered severely when the Imperial family embarked on a furious quarrel with its former subjects over the payment of some millions of money. It is only necessary to compare the conduct of the Hohenzollerns with the logical and dignified bearing maintained by the House of Hapsburg since 1918 towards the governments of the countries over which it formerly ruled.
The stabilised conditions in Germany after 1924 brought about a revival and strengthening of republicanism that at first manifested itself in the successes achieved by the SPD and the Reichsbanner. The conduct of the former dynasties also aroused great anger among the working classes. The idea was mooted of the complete expropriation of their estates as an answer to their continual demands for money. The SPD and the KPD joined in introducing the draft of a bill into the Reichstag for this purpose, which occasioned the holding of a plebiscite in accordance with the provisions of the Weimar Constitution. The plebiscite was held in June 1926 when 14.5 million votes were cast in favour of expropriation at a time when the SPD and the KPD together could hardly have brought 11 million voters to the poll at a parliamentary election. All the middle-class parties declared themselves opposed to the expropriation bill out of respect for the sanctity of private property. Nevertheless millions of voters who would not have troubled to cast their votes in a purely political issue had been brought to the polls to register their views in a matter that aroused their feelings. The clauses of the Weimar Constitution governing the holding of plebiscites were nevertheless so complicated that even the extremely large number of votes cast in favour of expropriation were insufficient to enable the draft bill to become a legislative measure. The whole proceeding was a powerful republican demonstration that failed of any practical result. It was, therefore, a faithful reflection of the age.
The Reichswehr generals were in the main agreed with Stresemann’s policy and that of the middle-class-block government. For the generals remained masters in their own house and no civilian dared to interfere with their plans. The dangerous experiment of organising a ‘Black’ Reichswehr after the pattern of 1923 was never repeated. On the other hand, the Reichswehr maintained relations with the Stahlhelm as well as with other sporting and patriotic associations in order to have the necessary reserves in event of an emergency. Arms, the manufacture of which was forbidden in Germany by the peace treaty, were obtained from abroad – including Soviet Russia – under all sorts of disguises. Stresemann was successful in securing the removal of the Allied Military Control Commission from Germany, and its disappearance enabled the Reichswehr to carry on its work with little fear of interruption. The generals did not interfere in the foreign policy of the Reich in these years; nor had they any warlike plans that they wished to put into operation in the immediate future. Instead, they contented themselves with promoting and strengthening the German armed forces in every possible way – an occupation that is perfectly comprehensible if viewed from their standpoint.
The election of Field-Marshal von Hindenburg to the Presidency of the Reich still further increased military influence in German affairs. Hindenburg looked upon himself as the real Commander-in-Chief of the Reichswehr. He insisted that all important military questions should be reserved for his personal decision, and he offered a determined resistance to all attempts on the part of politicians to interfere in military issues. Hence it is not difficult to understand that Hindenburg’s election to the Presidency diminished the authority of the Chief of the Reichswehr, General von Seeckt, who until 1925 had been the most outstanding among the generals. Under President Hindenburg he was relegated to the second place and rendered impotent to undertake anything against Hindenburg’s wishes. A sharp conflict had already broken out in the course of the World War between Hindenburg and Ludendorff on the one hand, and Mackensen and Seeckt on the other. As early as 1926 Seeckt was dismissed by Hindenburg. The outward occasion for his dismissal was given by a clumsy monarchical demonstration on the part of the army chiefs. The eldest son of the former Crown Prince William had attained the age at which it became his duty to enter ‘his’ army. General von Seeckt enrolled the young prince in the Reichswehr as a matter of course and as if there had never been any 9 November. Not even the Reichswehr Minister, Gessler, was aware of Seeckt’s action. Gessler complained to Hindenburg. The President, who had certainly no reason to support Seeckt of all people, promptly relieved him of his post. Only complete outsiders could imagine that Seeckt’s fall denoted a triumph of the civilian or the republican forces over the military power. In reality the whole affair was a private quarrel among the generals. Seeckt’s successor, General von Heye, was completely subservient to Hindenburg, and the most important political brain in the Reichswehr Ministry remained that of General von Schleicher. He was the right hand of the minister and enjoyed Hindenburg’s favour.
At the beginning of 1928 a miracle occurred when the ‘permanent’ Reichswehr Minister, Gessler, was at last forced to hand in his resignation. The Reichswehr disposed over innumerable secret funds for all possible purposes in addition to its official budgetary income. During the stabilisation and the days of dollar loans, officers of the Reichswehr became infected with the fever of speculation. They established businesses like ordinary civilians. Their object was indeed not personal enrichment, but the strengthening of the secret funds of the Reichswehr by means of profitable investments. Among other ventures a film company entitled Phoebus was floated with the aid of ‘black’ Reichswehr money. Since the officers knew nothing whatever about business, the venture failed, to the accompaniment of a great scandal. The subsequent bankruptcy investigation brought to light the secrets of the Reichswehr finances. Gessler was so badly compromised that his resignation was unavoidable. The independence of the Reichswehr within the state was nevertheless unaffected by the affair. Hindenburg appointed his former wartime chief of staff, General Groener, as Gessler’s successor.
Thus Hindenburg and Groener – the heads of the Supreme Command on 9 November – having outlived Ebert, were once again in control of the German republic. In the same years in which Social Democracy regained its influence and numerical strength the military power in Germany was also consolidating its position. A conflict between these two forces became inevitable.
1. America and the Dawes Plan: in February 1924 the Dawes Commission visited Berlin. Lord D'Abernon (D'Abernon: An Ambassador of Peace, Volume 3, p 46) says on this subject in his diary on 7 February: ‘The American President, Dawes, knows nothing of the detail and takes no interest in it, but he possesses a mysterious power of swinging American opinion... Young, the second delegate, a youth of forty, has already made himself the head of the General Electric Company, and is said to outclass humanity intellectually. In conversation he is deliberate and reticent. The Americans, with their mania for booming everything, talk about his mind as being the most perfect of instruments. Some of his colleagues naturally say this is nonsense, but he has money and prestige behind him and the reputation for prescience in business.’ The effect produced by the visit of the Dawes Commission on the American Ambassador in Berlin is shown by d'Abernon’s entry on 20 March 1924 (pp 59-60): ‘Berlin, 20 March – The American Ambassador (Houghton) came round to see me last night to discuss the position. Since the visit of the Reparation Sub-Commissioners he has rather altered his line. Previously he was strongly opposed to any excessive demands on Germany and extremely critical of French action. Now he takes the line that Germany has got to accept whatever terms the Sub-Commission puts forward, since the only alternative to acceptance is complete disruption and permanent occupation of the Ruhr by France. He is inclined to adopt wholesale the proposals of the Sub-Commission, believing them to have been inspired by Young, who, in his turn, he believes to be verbally inspired by Providence... I am myself strongly in favour of falling in with American conceptions, provided that these conceptions possess any chance of workability. The desirability of working with America is dominant. Apart from the political side, the advantage of it can be measured by the amount of financial assistance America can give towards the restoration of business in Europe. If this assistance is large, Europe will put up with a good many erroneous conceptions. The question is: Will it be large?’ In July and August 1924 Hughes, the American Secretary of State, actually came to Europe himself. On an ostensibly unofficial trip he visited London, Paris, Brussels and Berlin, and everywhere urged the adoption of the Dawes Plan (cf Lord d'Abernon’s diary on 8 August 1924). Stresemann himself wrote to Houghton on 4 June 1925: ‘It must be nearly a year since, chiefly at your instigation and on your recommendation, I pressed for the adoption in principle of the Dawes Plan. Doctor Luther and I swept the Cabinet with us at that time.’ Dawes Plan and Foreign Loans: The Dawes Commission in the introduction to its report describes the great possibilities of expansion in German trade, and then continues (Dawes Report, Part I, paragraph v, p 13): ‘(i) Germany is therefore well equipped with resources; she possesses the means for exploiting them on a large scale; when the present credit shortage has been overcome, she will be able to resume a favoured position in the activity of a world where normal conditions of exchange are gradually being restored.’ Further, the Dawes Report says (paragraph viii (a), pp 16-17): ‘More important still is the fact that the success of our proposals to attain financial stabilisation depends essentially upon the return of confidence. Without this the return of German capital invested abroad, the attraction of foreign capital for the purposes mentioned in the scheme and of foreign credits for the current conduct of business, and even the proper collection of taxes, will alike be impossible. Such confidence cannot be attained unless a settlement is now made which both Germany and the outside world believe will give an assurance that for a considerable period neither its finances nor its foreign relations will be endangered by renewed disputes. Such an assurance, as we shall see, does not mean making the charge on Germany a uniform one over a period of years, nor even deciding beforehand what the charge shall be in each of these years. But it does mean settling beforehand the method by which increases shall be determined. When we speak of the adoption of such a method for “a considerable period,” we are thinking primarily of the period which lenders and investors whose money is required as a part of our scheme will have in mind.’ The Reparations Agent, Parker Gilbert, in his report of 10 December 1927 also quotes the above extract from the Dawes Report as proof that the experts themselves were reckoning with an influx of foreign credits to Germany as a consequence of the adoption of their plan. In reference to this, Parker Gilbert points out that the progress already made in Germany would not have been possible without foreign credits. He then continues (Report of the Agent-General for Reparation Payments, 10 December 1927, p 235): ‘But the question at present is not what foreign funds have done in the past for the benefit of Germany, but how far they can be usefully absorbed in the future and to what extent they might even prevent, if they continue to flow in in their recent volume, the consolidation of the advancement already made.’