Ferguson on German Fiscal Policy

Ferguson argues the Weimar Government’s fiscal policy and reluctance to pursue “stabilization” of the currency were responsible for the hyperinflation crisis. He claims these policies were pursued based on exaggerated political benefits of low unemployment, and an attempt to make reparations cheaper, while making exports more competitive.

                                                                      Niall Ferguson

Holtfrerich in contrast, contends that Germany’s inflationary boom in 1920/21 was an overwhelming positive, as they received capital inflows of $1.8bn from abroad, which they repaid with devalued marks. Ferguson contended that this capital inflow, made recovery easier for Weimar politicians as it was in excess of what West Germany received in Marshall Aid post WW2, but gives policymakers no credit for Germany avoiding the deflationary slump faced by the UK and USA in this period. While Holtfrerich (boldly) asserts that Weimar policy helped the world avoid a depression at this time.

Ferguson’s claim that 82 billion marks of reparations were “purely notional” can only be made with hindsight. Had Germany followed Ferguson’s suggestions, the government’s reward would have been to pay considerably more in reparations. Payments on the initial 50 billion marks accounted for 2/3 of Germany’s 1921 deficit, displaying that they were unsustainable.

                                                  Erzberger in a cartoon of the "stab in the back" myth

Ferguson’s most flawed arguments surround the exaggerated risk of revolution, caused by socially unpopular policies. Finance Minister Erzberger, responsible for raising taxes, was murdered by far-right terrorists. Fears of Bolshevism were placated with excessive numbers of public sector jobs, while food and housing subsidies were implemented by the SPD. Stinnes described this as “Inflation or Revolution”. Unemployed, hungry Germans would later turn to Nazism in droves, buoyed on by the slogan “Bread and Work”, clearly showing the value of Weimar policies.

Trachtenberg’s point that Woodrow Wilson wanted German integration to the liberal capitalist world order, would’ve been a goal shared by Weimar politicians of the time, to do so they needed to overcome revolutionary socialism and traditional imperialism. Ferguson’s conclusion that Germany should have adopted an authoritarian government in 1920, while referring to the Weimar period as “13 luckless years” sells short the efforts of politicians who bridged the gap between regimes responsible for both World Wars.

Nazi propaganda poster