The Coming of the Third Reich, page 31
In the course of 1928, all leading industrialized countries began to impose monetary restrictions in the face of a looming recession. The United States began cutting its foreign lending. Such measures were necessary to preserve gold reserves, the basis of financial stability in the era of the Gold Standard, when currency values everywhere were tied to the value of gold, as they had been in Germany since the stabilization had come into effect. As individual countries started drawing up the monetary drawbridges, industry began to suffer. There was virtually no growth in industrial production in Germany in 1928-9 and by the end of that winter unemployment had already reached nearly two and a half million. Investment slowed down sharply, possibly because companies were spending too much on wages and welfare payments, but more likely because there was simply a shortage of capital. The German government found it difficult to raise money by issuing bonds because investors knew what inflation had done to the bonds issued during the war. International markets had very little confidence in the German state to deal with the economic problems of the day. It soon became clear that their lack of faith was entirely justified.7
On 24 October 1929, ‘Black Thursday’, the unmistakeable signs of a business crisis in the United States caused a sudden outburst of panic selling on the New York Stock Exchange. Share prices, already overvalued in the eyes of some, began to plummet. Early the following week, on 29 October, ‘Black Tuesday’, panic selling set in again, worse by far than before; 16.4 million shares were sold, a record unsurpassed for the next four decades.8 As frantic traders scrambled to sell before stocks fell even further in value, there were scenes of pandemonium on the floor of the New York Stock Exchange. But these dramatic days of disaster were only the most visible aspects of what turned out to be a prolonged and seemingly inexorable decline over the next three years. The New York Times index fell from a high of 452 points in September 1929 to 58 points by July 1932. On 29 October, ten billion dollars were wiped off the value of the major American companies, twice the amount of all money in circulation in the United States at the time and almost as much as America had spent on financing its part in the Great War. Company after company went bust. American demand for imports collapsed. Banks plunged into crisis as their investments disappeared. And as American banks saw their losses mount, they started calling in the short-term loans with which so much of German industry had been financing itself for the past five years.9
American banks began withdrawing their funds from Germany at the worst possible moment, precisely when the already flagging German economy needed a sharp stimulus to revive it. As they lost funds, German banks and businesses tried to redress the balance by taking out more short-term loans. The faster this happened, the less stable the economy began to look, and the more foreign and domestic asset-holders began to transfer capital outside the country.10 Unable to finance production, firms began to cut back drastically. Industrial production, already stagnant, now began to fall with breathtaking speed. By 1932, it had dropped in value by 40 per cent of its 1929 level, a collapse matched only by Austria and Poland among European economies in its severity. Elsewhere, the fall was no more than a quarter; in Britain it was 11 per cent. With the withdrawal of funds and the collapse of businesses, banks began to get into difficulties. After a number of small banks failed in 1929-30, the two biggest Austrian banks went under and then, in July 1931, the big German banks began to come under pressure.11 Business failures multiplied. An attempt to create a larger internal market by forging a customs union between Germany and Austria was squashed by international intervention, for the political motivation behind it - a step in the direction of the political union between the two countries that had been banned by the Treaty of Versailles - was obvious to everyone. Thrown back onto its own resources, the German economy plunged into deep depression. Unemployment rates now rose almost exponentially. With millions of people in the great cities unemployed, less money was available to spend on food, the already severe agricultural crisis deepened dramatically, and farmers were unable to escape foreclosure and bankruptcy as the banks called in the loans on which so many of them depended. Agricultural workers were thrown out of work as farms and estates went under, spreading unemployment to the countryside as well as the towns.12
By 1932, roughly one worker in three in Germany was registered as unemployed, with rates even higher in some heavy industrial areas such as Silesia or the Ruhr. This dwarfed all previous unemployment rates, even during the worst period of the stabilization cutbacks. Between 1928 and 1932, unemployment rose from 133,000 to 600,000 in Germany’s biggest industrial centre, Berlin, from 32,000 to 135,000 in the trading city and seaport of Hamburg, and from 12,000 to 65,000 in the industrial town of Dortmund, in the Rhine-Ruhr area. Industry was obviously hardest hit; but white-collar workers lost their jobs, too, with over half a million out of work by 1932.13 The rise was frighteningly swift. By the winter of 1930-31 there were already over five million unemployed, little more than a year after the onset of the Depression; the number rose to six million a year later. At the beginning of 1932, it was reported that the unemployed and their dependants made up about a fifth of the entire population of Germany, nearly thirteen million people, all told.14 The true figure may have been even higher, since women who lost their jobs often failed to register themselves as unemployed.15
These terrifying figures told only part of the story. To begin with, many millions more workers only stayed in their jobs at a reduced rate, since employers cut hours and introduced short-time work in an attempt to adjust to the collapse in demand. Then many trained workers or apprentices had to accept menial and unskilled jobs because the jobs they were qualified for had disappeared. These were still the lucky ones. For what caused the real misery and desperation was the lengthy duration of the crisis, starting - at a time when unemployment was already fairly high - in October 1929 and showing no signs of abating for the next three years. Yet the benefits system, introduced a few years before, was designed only to cope with a far lower level of unemployment - a maximum of 800,000 compared to the six million who were without a job by 1932 - and provided relief only for a few months at most, not for three whole years and more. Things were made worse by the fact that the drastic fall in people’s income caused a collapse in tax revenues. Many local authorities had also got into trouble because they had financed their own welfare and other schemes by taking out American loans themselves, and these were now being called in, too. Yet under the unemployment benefit system, the burden of supporting the long-term jobless after their period of insurance cover had run out shifted first to central government in the form of ‘crisis benefits’ then, after a further period of time, devolved onto local authorities in the form of ‘welfare unemployment support’. Central government was unwilling to take the unpopular measures that would be required to bridge the gap. Employers felt that they could not increase contributions when their businesses were in trouble. Unions and workers did not want to see benefits cut. The problem seemed insoluble. And those who suffered were the unemployed, who saw their benefits repeatedly cut, or terminated altogether.16
II
As the Depression bit deeper, groups of men and gangs of boys could be seen haunting the streets, squares and parks of German towns and cities, lounging (so it seemed to the bourgeois man or woman unaccustomed to such a sight) threateningly about, a hint of potential violence and criminality always in the air. Even more menacing were the attempts, often successful, by the Communists to mobilize the unemployed for their own political ends. Communism was the party of the unemployed par excellence. Communist agitators recruited the young semi-criminals of the ‘wild cliques’; they organized rent strikes in working-class districts where people were barely able to pay the rent anyway; they proclaimed ‘red districts’ like the Berlin proletarian quarter of Wedding, inspiring fear into non-Communists who dared to venture there, sometimes beating them up or threatening them with guns if they knew them to be associated with the brownshirts; they marked down certain pubs and bars as their own; they proselytized among children in working-class schools, politicized parents’ associations and aroused the alarm of middle-class teachers, even those with left-wing convictions. For the Communists, the class struggle passed from the workplace to the street and the neighbourhood as more and more people lost their jobs. Defending a proletarian stronghold, by violent means if necessary, became a high priority of the Communist paramilitary organization, the Red Front-Fighters’ League.17
The Communists were frightening to the middle classes, not merely because they made politically explicit the social threat posed by the unemployed on the streets, but also because they grew rapidly in numbers throughout the early 1930s. Their national membership shot up from 117,000 in 1929 to 360,000 in 1932 and their voting strength increased from election to election. By 1932, in an area such as the north-west German littoral, including Hamburg and its adjacent Prussian port of Altona, fewer than 10 per cent of party members had a job. Roughly three-quarters of the people who joined the party in October 1932 were jobless.18 Founding ‘committees of the unemployed’, the party staged parades, demonstrations, ‘hunger marches’ and other street-based events on an almost daily basis, often ending in prolonged clashes with the police. No opportunity was lost to raise the political temperature in what the party leaders increasingly thought was a terminal crisis of the capitalist system.19
These developments drove an ever-deeper cleft between the Communists and the Social Democrats in the final years of the Republic. There was already a legacy of bitterness and hatred bequeathed by the events of 1918-19, when members of the Free Corps in the service of the Social Democratic minister Gustav Noske had murdered prominent Communist leaders, most notably Karl Liebknecht and Rosa Luxemburg. The murders were publicly recalled at every ceremony that the Communist Party staged in their memory. To this was now added the divisive influence of unemployment, as jobless Communists railed against Social Democrats and trade unionists still in work, and Social Democrats grew increasingly alarmed at the violent and disorderly elements who seemed to be flocking to join the Communists. Further resentment was added by the habit of Social Democratic union bosses of identifying Communists to employers for redundancy, and the practice of employers sacking young, unmarried workers before older, married ones, which again in many cases meant members of the Communist Party losing their jobs. Rank-and-file Communists’ ambivalence about the Social Democratic roots of the labour movement led to a love-hate relationship with the party’s ‘older brother’, in which it was always desirable to make common cause, but only on the Communists’ own terms.20
The roots of Communist extremism ran deep. Radical young workers, especially, felt betrayed by the Social Democrats, their hopes for a thoroughgoing revolution - stoked up by the older generation of Social Democratic activists - dashed just when they seemed on the point of being realized. The growing influence of the Russian model of a close-knit, conspiratorial organization helped cement a spirit of solidarity and ceaseless activity amongst the most committed. A graphic account of the life of the committed Communist activist during the Weimar Republic was later provided by the memoirs of Richard Krebs, a sailor born in Bremen in 1904 into the family of a Social Democratic seafaring man. Krebs was present as an adolescent in the 1918-19 Revolution in his home town and witnessed the brutality of its suppression by the Free Corps. In Hamburg, Krebs fought in food riots and fell into the company of some Communists on the waterfront. Clashes with the police strengthened his hatred of them, and their bosses, the Social Democratic rulers of the city. Krebs later described how committed Communists would attend street demonstrations with pieces of lead piping in their belts and stones in their pockets, ready to pelt the police with. When mounted police charged, young activists in the Red Front-Fighters’ League plunged their knives into the horses’ legs, causing them to bolt. In this atmosphere of conflict and violence, a young tough like Krebs could feel himself at home, and he joined the Communist Party in May 1923, leafleting sailors on the waterfront during the day and attending basic political education courses in the evenings.21
His grasp of Marxist-Leninist theory was minimal, however:
I was class-conscious because class-consciousness had been a family tradition. I was proud to be a worker and I despised the bourgeois. My attitude to conventional respectability was a derisive one. I had a keen one-sided sense of justice which carried me away into an insane hatred of those I thought responsible for mass suffering and oppression. Policemen were enemies. God was a lie, invented by the rich to make the poor be content with their yoke, and only cowards resorted to prayer. Every employer was a hyena in human form, malevolent, eternally gluttonous, disloyal and pitiless. I believed that a man who fought alone could never win; men must stand together and fight together and make life better for all engaged in useful work. They must struggle with every means at their disposal, shying at no lawless deed as long as it would further the cause, giving no quarter until the revolution had triumphed.22
Imbued with this spirit of fiery commitment, Krebs led an armed detachment of Red Front-Fighters in the abortive Hamburg Revolution of October 1923, as Communists stormed a police station and erected barricades.23 Not surprisingly, he felt it necessary to flee the scene after the failure of the uprising, and resumed his seafaring life. Escaping to Holland, then Belgium, he made contact with the local Communists. In no time his knowledge of English had led him to be commissioned by one of the Soviet secret agents who were present in many branches of the party - though probably not in so many as he later claimed - to spread Communist propaganda in California. Here he was ordered by the local party agents to kill a renegade who they believed had betrayed the party. Botching the attempt - deliberately, he claimed - Krebs was arrested and imprisoned in St Quentin. When he was released in the early 1930s, Krebs became a paid official of the seamen’s section of the Comintern, the international organization of Communist parties across the world, directed from Moscow, and began acting as a courier for the party, taking money, leaflets and much else from one country to another, and then from one part of Germany to another.24
Richard Krebs’s memoirs, which read like a thriller, portrayed a Communist Party bound together by iron ties of discipline and commitment, its every move dictated by the Soviet secret police agents from the GPU, successor to the Cheka, who ran every national organization from behind the scenes. The feeling that the Comintern was behind strikes, demonstrations and attempts at revolution in many parts of the world struck fear into many middle-class Germans, even though these activities were almost uniformly unsuccessful. The conspiratorial structure of the Comintern, and the undoubted presence of Soviet agents in the German party from the days of Karl Radek onwards, undoubtedly fuelled bourgeois anxieties. Yet Krebs painted too smooth a picture of the workings of the Comintern. In reality, strikes, labour unrest, even fights and riots often owed more to the temper of the ‘Red Front-Fighters’ on the ground than to any plans laid by Moscow and its agents. And men like Krebs were unusual. The turnover in Communist Party membership was more than 50 per cent in 1932 alone, meaning that hundreds of thousands of the unemployed had been close enough to the party to belong, at least for a while, but also that the party was often unable to hold the allegiance of most of its members for more than a few months at a time. Long-term members like Krebs constituted a hard and disciplined but relatively small core of activists, and the Red Front-Fighters’ League became an increasingly professionalized force.25 Words counted for a lot in such circumstances. Communist rhetoric had become a good deal more violent since the inauguration of the ‘third period’ by the Comintern leadership in Moscow in 1928. From this point onwards, the party directed its venom principally against the Social Democrats. Every German government in its eyes was ‘fascist’; fascism was the political expression of capitalism; and the Social Democrats were ‘social fascists’ because they were the main supporters of capitalism, taking workers away from revolutionary commitment and reconciling them to Weimar’s ‘fascist’ political system. Anyone in the leadership who tried to question this line was dismissed from his party post. Anything that would help overthrow the ‘fascist’ state and its Social Democratic supporters was welcome.26
The leader of the Communist Party of Germany at this time was the Hamburg trade union functionary Ernst Thälmann. There could be no doubt about his working-class credentials. Born in 1886, he had taken a variety of short-term jobs, including working in a fishmeal plant and driving wagons for a laundry, before being called up and serving on the Western Front in the First World War. A Social Democrat since 1903, Thälmann gravitated to the left wing of the party during the war and threw himself into political activity during the revolution of 1918, joining the ‘revolutionary shop stewards’ and becoming the leader of the Independent Social Democrats in Hamburg in 1919. Elected to the city parliament the same year, he joined the Communists when the Independents split up in 1922, and became a member of the national Central Committee. During this time he continued to work as a manual labourer, in tough trades such as ship-breaking. Uneducated, brawny, an instinctive revolutionary, Thälmann incorporated the Communist ideal of the revolutionary worker. He was anything but an intellectual; he won the sympathy of his proletarian audiences not least through his obvious struggles with complicated Marxist terminology; his speeches were passionate rather than carefully argued, but his audiences felt this showed his honesty and his sincerity. As a party leader and a professional politician in the mid- and late 1920s and early 1930s, Thälmann was often obliged to dress in collar and tie; but it became a set feature of his speeches that at some point he would take them off, to general and enthusiastic applause, and become a simple worker once more. His hatred of the generals and the bosses was palpable, his distrust of the Social Democrats obvious.
