3. impact of hyperinflation
TRANSCRIPT
Hyperinflation: social, economic and
political impact
Early Weimar Germany faced a series of economic challenges, but the hyperinflation crisis of 1923 almost brought down the
government.
Inflation is the process of prices increasing gradually
over time; hyperinflation is when this happens in a very
short period of time.
From 1919 onwards, the Weimar government faced a
growing budget deficit (difference between the money a government has against what
it spends). This was partly linked to social welfare costs.
As a result the government started printing more bank
notes to pay for this.
The result of doing this is that German marks became worth
less. As prices rose, the government in turn had to
print more money.
At the same time, the German government was struggling to pay the cost of reparations, meaning more money was
printed.
In January 1923, angry at Germany’s failure to meet their
Versailles commitments, French and Belgian forces
invaded the Ruhr, Germany’s industrial zone.
They did so to gain control of industries and railways, and
take German resources in lieu of reparation payments.
There were strikes by Germans in response to France and
Belgium’s actions – resulting in 140 German deaths.
The German government encouraged these revolts, and
made payments to striking workers. This involved printing
even more money, hugely increasing wages and prices too.
Price inflation soon turned to hyperinflation as Germany fell
into a financial disaster.
In January 1919, one US dollar ($1) had been worth 8.9 German marks. By November 1923, $1 was worth 200 billion marks.
Money became worthless – stories existed of people stealing
baskets but leaving money.
Prices rose so much that workers would rush to spend
their wages as soon as they got them. Restaurant prices would
change from the time a meal was ordered until it was eaten.
The government had 300 paper mills and 2000 printing
companies working 24-hour shifts to produce banknotes.
The effects on most Germans were devastating.
Huge queues existed for food, and there was a food shortage
as farmers would not sell for worthless money.
A barter economy developed, with people swapping items or
services in exchange for essential items.
People on fixed incomes (such as pensioners) were
particularly hurt as they could not afford the hugely
increasing prices.
Many members of the middle class who had savings saw
the value of their investments wiped out overnight, forcing
them into poverty.
At first, many workers were given compensatory wage rises, however eventually
their incomes fell below the speed of hyperinflation.
Some businesses struggled to cope, and as a result went
bust or laid off workers, causing a large increase in
unemployment.
Hyperinflation had an associated impact on health in
Germany too.
The rise of extreme poverty and food shortages meant that
many people became ill and undernourished; this was
especially true for pensioners.
Many of these people blamed the government for their plight.
However, some Germans did profit from hyperinflation.
People who had previously been in debt – mortgage
holders, for example – easily paid off their loans.
Others benefitted too; people on fixed rents or investors
that could get cheap credit and increase their holdings.
Unsurprisingly, the German government faced public anger.
At first they tried to compensate by printing more
money, but ultimately this made the problem worse.
Many Germans became attracted to extreme political messages, and began to lose
their faith in democracy.
Historians’ views
• Alan Bullock: Believes that the inflation was to undermine German society in a way which neither the war, nor the revolution of 1918, nor the Treaty of Versailles had ever done.
• David Evans and Jane Jenkins: Take the view that those people who lost out were attracted to extremist parties.
• Detlev Peukert: Takes the view hyperinflation left a long-lasting psychological scar that undermined faith in democracy, although not entirely easy to assess as people in the same class were often very differently affected.