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.