The Online Library of Liberty

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• The Liberty Fund Library of the Works of Ludwig Von Mises
• Foreword to the Liberty Fund Edition
• Preface
• Omnipotent Government
• Introduction
• Part I: The Collapse of German Liberalism
• I: German Liberalism
• 1.: The Ancien Régime and Liberalism
• 2.: The Weakness of German Liberalism
• 3.: The Prussian Army
• 4.: The Constitutional Conflict In Prussia
• 5.: The “little German” Program
• 6.: The Lassalle Episode
• II: The Triumph of Militarism
• 1.: The Prussian Army In the New German Empire
• 2.: German Militarism
• 3.: The Liberals and Militarism
• 4.: The Current Explanation of the Success of Militarism
• Part II: Nationalism
• III: Etatism
• 1.: The New Mentality
• 2.: The State
• 3.: The Political and Social Doctrines of Liberalism
• 4.: Socialism
• 5.: Socialism In Russia and In Germany
• 6.: Interventionism
• 7.: Etatism and Protectionism
• 8.: Economic Nationalism and Domestic Monopoly Prices
• 9.: Autarky
• 10.: German Protectionism
• IV: Etatism and Nationalism
• 1.: The Principle of Nationality
• 2.: The Linguistic Group
• 3.: Liberalism and the Principle of Nationality
• 4.: Aggressive Nationalism
• 5.: Colonial Imperialism
• 6.: Foreign Investment and Foreign Loans
• 7.: Total War
• 8.: Socialism and War
• V: Refutation of Some Fallacious Explanations
• 1.: The Shortcomings of Current Explanations
• 2.: The Alleged Irrationality of Nationalism
• 3.: The Aristocratic Doctrine
• 4.: Misapprehended Darwinism
• 5.: The Role of Chauvinism
• 6.: The Role of Myths
• Part III: German Nazism
• VI: The Peculiar Characteristics of German Nationalism
• 1.: The Awakening
• 2.: The Ascendancy of Pan-germanism
• 3.: German Nationalism Within an Etatist World
• 4.: A Critique of German Nationalism
• 5.: Nazism and German Philosophy
• 6.: Polylogism
• 7.: Pan-germanism and Nazism
• VII: The Social Democrats In Imperial Germany
• 1.: The Legend
• 2.: Marxism and the Labor Movement
• 3.: The German Workers and the German State
• 4.: The Social Democrats Within the German Caste System
• 5.: The Social Democrats and War
• VIII: Anti-semitism and Racism
• 1.: The Role of Racism
• 2.: The Struggle Against the Jewish Mind
• 3.: Interventionism and Legal Discrimination Against Jews
• 4.: The “stab In the Back”
• 5.: Anti-semitism As a Factor In International Politics
• IX: The Weimar Republic and Its Collapse
• 1.: The Weimar Constitution
• 2.: The Abortive Socialization
• 3.: The Armed Parties
• 4.: The Treaty of Versailles
• 5.: The Economic Depression
• 6.: Nazism and German Labor
• 7.: The Foreign Critics of Nazism
• X: Nazism As a World Problem
• 1.: The Scope and Limitations of History
• 2.: The Fallacy of the Concept of “national Character”
• 3.: Germany’s Rubicon
• 4.: The Alternative
• Part IV: The Future of Western Civilization
• XI: The Delusions of World Planning
• 1.: The Term “planning”
• 2.: The Dictatorship Complex
• 3.: A World Government
• 4.: Planned Production
• 5.: Foreign Trade Agreements
• 6.: Monet Ary Planning
• 7.: Planning International Capital Transactions
• XII: Peace Schemes
• 1.: Armament Control
• 2.: A Critique of Some Other Schemes Proposed
• 3.: The Union of the Western Democracies
• 4.: Peace In Eastern Europe
• 5.: The Problems of Asia
• 6.: The Role of the League of Nations
• Conclusion

IX

The Weimar Republic and Its Collapse

1.

The Weimar Constitution

The main argument brought forward in favor of the Hohenzollern militarism was its alleged efficiency. Democracy, said the nationalist professors, may be a form of government adequate to small countries, whose independence is safeguarded by the mutual rivalries of the great powers, or to nations like England and the United States sheltered by their geographical situation; but it is different with Germany. Germany is surrounded by hostile nations; it stands alone in the world; its borders are not protected by natural barriers; its security is founded on its army, that unique achievement of the house of Hohenzollern. It would be foolish to hand over this invincible instrument to a parliament, to a body of talkative and incompetent civilians.

But now the first World War had resulted in a smashing defeat and had destroyed the old prestige of the royal family, of the Junkers, the officers, and the civil servants. The parliamentary system of the West had given evidence of its military superiority. The war to which President Wilson had assigned the aim of making the world safe for democracy appeared as an ordeal by fire for democracy. The Germans began to revise their political creeds. They turned toward democracy. The term democracy, almost forgotten for half a century, became popular again in the last weeks of the war. Democracy meant in the minds of the Germans the return to the civil liberties, the rights of man, suspended in the course of the war, and above all the substitution of parliamentary government for monarchical half-despotism. These points were, as every German knew, implied in the official program of the most numerous parliamentary party, the Social Democrats. Men expected that the Social Democrats would now realize the democratic principles of their program, and were ready to back this party in its endeavors for political reconstruction.

But from the ranks of the Marxians came an answer which nobody outside the small group of professional Marx experts could have foreseen. We class-conscious proletarians, the Marxians proclaimed, have nothing to do with your bourgeois concepts of freedom, parliamentarism, and democracy. We do not want democracy but the dictatorship of the proletariat, i.e., our dictatorship. We are not prepared to grant you bourgeois parasites the rights of men, to give you the franchise and parliamentary representation. Only Marxians and proletarians shall henceforth rule. If you misinterpreted our stand on democracy, that is your mistake. Had you studied the writings of Marx more carefully, you would have been better informed.

On the second day of the [1918] revolution the Social Democrats in Berlin appointed a new government for the Reich, the Mandataries of the People. This government was a dictatorship of the Social Democrats. It was formed by the delegates of that party only, and it was not planned to give the other parties a share in the government.*

At the end of the war the old Social Democratic party was split into three groups: the majority socialists, the independent socialists, and the communists. One half of the government members belonged to the majority socialists, the other half to the independent socialists. The most radical of the three groups did not participate in the establishment of the government. They abhorred coöperation with the moderate majority socialists, whom they denounced as social traitors. These radicals, the Spartacus group or Communist party, immediately demanded the extermination of the bourgeoisie. Their condensed program was: all power must be in the hands of the Soviets of workers and soldiers. They vigorously rejected every plan to grant political rights to people who were not members of their own party, and they fanatically opposed the parliamentary system. They wanted to organize Germany according to the Soviet pattern and to “liquidate” the bourgeoisie in the Russian manner. They were convinced that the whole world was on the eve of the great proletarian revolution which was to destroy capitalism and establish the everlasting communist paradise, and they were eager to contribute their share to this glorious undertaking. The independent socialists sympathized with the views of the communists but they were less outspoken. This very reserve made them dependent on the communists, whose radical expression struck the keynote. The majority socialists had neither opinions of their own nor a clear idea what policy they ought to adopt. Their irresolution was not due to a change of mind with regard to their socialist convictions but to a realization that a great part of the German socialist workers had taken seriously the democratic points in the Social Democratic program and were opposed to the abandonment of parliamentarism. They still believed that socialism and democracy are compatible, indeed that socialism can only be realized within a democratic community. They neither recognized the incompatibility of socialism and democracy nor understood why Germany should prefer the Russian method of dictatorship to the Western principle of democracy.

The communists were eager to seize power through violence. They trusted to Russian aid but they felt themselves strong enough to conquer even without this foreign assistance. For they were fully convinced that the overwhelming majority of the German nation backed them. They deemed it therefore needless to make special preparations for the extermination of the bourgeoisie. As long as the adversaries kept quiet, it was unnecessary to strike the first blow. If the bourgeoisie were to start something, it would be easy to beat them down. And the first events confirmed this view. At Christmas time, 1918, a conflict broke out in Berlin between the new government and a pugnacious communist troop, the people’s sailors’ division. The sailors resisted the government. The People’s Mandataries, in a panic, called to their aid a not-yet-disbanded body of the old army garrisoned in the environs of Berlin, a troop of dismounted cavalrymen of the former Royal Guards, commanded by an aristocratic general. A skirmish took place; then the government ordered the guardsmen to retreat. They had gained a slight tactical success, but the government withdrew its forces because it lacked confidence in its own cause; it did not want to fight the “comrades.” This unimportant combat convinced the independent socialists that the victorious advance of communism could not be stopped. In order not to lose their popularity and not to come too late to participate in the prospective communist government they withdrew their representatives from the body of the People’s Mandataries. The majority socialists were now alone in the government, alone responsible for everything that happened in the Reich, for the growing anarchy, for the unsatisfactory supply of food and other necessities, for the rapid spread of unemployment. In the eyes of the radicals they were the defenders of reaction and injustice.

There could be no doubt about the plans of these radicals. They would occupy the government buildings and imprison, probably even kill, the members of the government. In vain Noske, whom the government had appointed commander in chief, tried to organize a troop of majority socialists. No Social Democrat was willing to fight against the communists. The government’s situation seemed hopeless when on January 5, 1919, the communists and independent socialists opened the battle in the streets of Berlin and got control of the main part of the capital. But in this utmost danger unexpected aid appeared.

The Marxians report the events that followed in this way: The masses were unanimous in their support of the radical Marxian leaders and in their desire for the realization of socialism. But unfortunately they were trusting enough to believe that the government, composed solely of old Social Democratic chiefs, would not hinder them in these endeavors. Yet Ebert, Noske, and Scheidemann betrayed them. These traitors, eager to save capitalism, plotted with the remnants of the old army and with the gangs hired by the capitalists, the free corps. The troops of reaction rushed in upon the unsuspecting communist leaders, assassinated them, and dispersed the masses which had lost their leaders. Thus started a policy of reaction which finally culminated in the fall of the Weimar Republic and in the ascendancy of Nazism.

This statement of the facts ignores the radical change which took place in the last weeks of 1918 in the political mentality of the German nation. In October and early November, 1918, the great majority of the nation was sincerely prepared to back a democratic government. As the Social Democrats were considered a democratic party, as they were the most numerous parliamentary party, there was almost unanimity in the readiness to entrust to them the leading role in forming the future system of popular government. But then came the shock. Outstanding men of the Marxian party rejected democracy and declared themselves for the dictatorship of the proletariat. All that they had professed for fifty years, in short, consisted of lies. All this talk had had but one end in view, to put Rosa Luxemburg, a foreigner, in the place of the Hohenzollerns. The eyes of the Germans had been opened. How could they have let themselves be deluded by the slogans of the Democrats? Democracy, they learned, was evidently a term invented for the deception of fools. In fact, as the conservatives had always asserted, the advocates of democracy wished to establish the rule of the mob and the dictatorship of demagogues.

The communists had grossly underrated the intellectual capacity of the German nation. They did not realize that it was impossible to deal with the Germans by the same methods that had succeeded in Russia. When they boasted that in fifty years of pro-democratic agitation they had never been sincere in advocating democracy; when they told the Germans: “You dupes, how clever we were in gulling you! Now we have caught you!” it was too much not only for the rest of the nation but even for the majority of the old members of the Social Democratic party. Within a few weeks Marxism and Marxian socialism—not socialism as an economic system—had lost all their former prestige. The idea of democracy itself became hopelessly suspect. From that time on the term democracy was for many Germans synonymous with fraud. At the beginning of 1919 the communists were already much less numerous than their leaders believed. And the great majority of organized labor was also solidly against them.

The nationalists were quick to comprehend this change in mentality. They seized their opportunity. A few weeks before they had been in a state of desperation. Now they learned how to stage a comeback. The “stab in the back” legend had already restored their lost self-confidence. And now they saw what their future policy must be. First they must thwart the establishment of a red dictatorship and prevent the communists from exterminating the nonproletarians wholesale.

The former conservative party [the Social Democrats] and some affiliated groups had in November changed their party name to German Nationalist People’s Party (Deutsch-nationale Volkspartei). In their first manifesto, issued on November 24, they asked “for a return from the dictatorship of one class only to parliamentary government as the only appropriate system in the light of recent events.” They asked further for freedom of the individual and of conscience, for freedom of speech and science, and for equality of franchise. For the second time in German history a party which was essentially antidemocratic presented to the electorate for purely tactical reasons a program of liberalism and democracy. The Marxian methods found adepts; the nationalists had profited from reading Lenin and Bukharin. They had now elaborated a precise plan for their future operations for the seizure of power. They decided to support the cause of parliamentary government, freedom, and democracy for the immediate future in order to be able to overthrow them at a later time. They were ready to coöperate for the execution of the first part of this program not only with the Catholics but also with the majority socialists and their old leaders, who sat trembling in the government palaces of the Wilhelmstrasse.

In order to keep out Bolshevism and to save parliamentarism and freedom for the intermediate period, it was necessary to defeat the armed forces of the communists and of the independent socialists. The available remnants of the old army, when led by able commanders, were strong enough to intervene successfully against the communists.

But such commanders could not be found in the ranks of the generals. Hindenburg was an old man; his role in the war had consisted simply in giving a free hand to Ludendorff; now, without Ludendorff, he was helpless. The other generals were waiting for Hindenburg’s orders; they lacked initiative. But the disintegration of army discipline had already progressed so far that this apathy of the generals could no longer hinder the army’s actions. Younger officers, sometimes even lieutenants, filled the gap. Out of demobilized soldiers, who were not too eager to go back to honest jobs and preferred the adventurous life of troopers to regular work, some of these officers formed free corps, at the head of which they fought on their own account. Other officers pushed aside the more scrupulous officers of the General Staff and, sometimes without proper respect, forced the generals to take part in the civil war.

The People’s Mandataries had already lost all hope of salvation when suddenly help appeared. Troops invaded Berlin and suppressed the communist revolt. Karl Liebknecht and Rosa Luxemburg were taken prisoner and then assassinated. This victory did not end the civil war. It continued for months in the provinces, and time and again broke out afresh in Berlin. However, the victory reported by the troops in January, 1919, in Berlin safeguarded the elections for the Constituent Assembly, the session of this Parliament, and the promulgation of the Weimar Constitution. William II used to say: “Where my guards set foot, there is no further question of democracy.” The Weimar democracy was of a peculiar sort. The horsemen of the Kaiser’s guards had fought for it and won it. The Constitution of Weimar could be deliberated and voted only because the nationalist adversaries of democracy preferred it to the dictatorship of the communists. The German nation obtained parliamentary government as a gift from the hands of deadly foes of freedom, who waited for an opportunity to take back their present.

It was in vain that the majority socialists and their affiliate, the Democratic party, invented one legend more, in order to obfuscate these sad facts. In the first months following the November Revolution, they said, the Marxians discussed in their party circles the question of what form of government would serve best the interests of German labor. The disputations were sometimes very violent, because some radicals tried to disturb them. But finally, after careful deliberation, the workers resolved that parliamentary democracy would be the most appropriate form of government. This magnanimous renunciation of dictatorship was the outcome of a voluntary decision and gave new evidence of the political maturity of German labor.

This interpretation of events cautiously evades dealing with the main problem. In early January, 1919, there was but one political problem in Germany: the choice between Bolshevist totalitarianism under the joint dictatorship of Rosa Luxemburg and Karl Liebknecht, on the one hand, and parliamentarism on the other. This struggle could not be decided by the peaceful methods of democracy. The communists were not prepared to yield to the majority. They were an armed troop; they had gained control of the greater part of the capital and of a good many other places. But for the nationalist gangs and troops and for the remnants of the old army, they could have seized power throughout the Reich and established Bolshevism in Germany. There was but one factor that could stop their assault and that really did stop it: the armed forces of the Right.

The moderate Marxians are correct in asserting that not only the bourgeoisie and the farmers but also the greater part of organized labor was opposed to dictatorship and preferred parliamentary government. But at that time it was no longer a question of whether a man was ready to vote for a party ticket but of whether he was ready to stake his life for his conviction. The communists were only a small minority, but there was just one means left to combat them: by deadly weapons. Whoever wanted democracy—whether from the point of view of his Weltanschauung or simply as the lesser evil—had to attack the strongholds of communism, to rout its armed bands, and to put the government in control of the capital and of the rest of the country. Everyone knew that this was the state of affairs. Every member of the majority socialists was fully aware that not to fight the communists by force of arms was equivalent to yielding to communism. But only a few functionaries of the government made even a lame attempt to organize resistance; and their endeavors failed as all their political friends refused coöperation.

It is very important to understand the ideas which in those fateful days shaped the attitudes of the majority socialists. For these ideas sprang out of the very essence of Marxian thought. They reappear whenever and wherever in the world people imbued with Marxian doctrines have to face similar situations. We encounter in them one of the main reasons why Marxism—leaving its economic failure out of the question—even in the field of political action was and is the most conspicuous failure of history.

The German Marxians—remember, not the communists, but those sincerely rejecting dictatorship—argued this way: It is indispensable to smash the communists in order to pave the way for democratic socialism. (In those days of December, 1918, and January, 1919, the German noncommunist Marxians were still wrapped in the illusion that the majority of the people backed their socialist program.) It is necessary to defeat the communist revolt by armed resistance. But that is not our business. Nobody can expect us, Marxians and proletarians as we are, to rise in arms against our class and party comrades. A dirty job has to be done but it is not our task to do it. Our tenets are contrary to such a policy. We must cling to the principle of class and party solidarity. Besides, it would hurt our popularity and imperil our success at the impending election. We are, indeed, in a very unfortunate position. For the communists do not feel themselves bound by the same idea. They can fight us, because they have the enormous advantage of denouncing us as social traitors and reactionaries. We cannot pay them back in their own coin. They are revolutionaries in fighting us, but we would appear as reactionaries in fighting them. In the realm of Marxian thought the more radical are always right in despising and attacking the more prudent party members. Nobody would believe us if we were to call them traitors and renegades. As Marxians, in this situation we cannot help adopting an attitude of nonresistance.

These oversophisticated Marxians did not see what the German people—among them millions of old party members—realized very well: that this policy meant the abdication of German Marxism. If a ruling party has to admit: This has to be done now; this is the necessity of the hour; but we cannot do it because it does not comply with our creed; somebody else has to fill the gap—it renounces once and for all its claims to political leadership.

The noncommunist Marxians severely blame Ebert, Noske, and others of their leaders for their coöperation with the nationalist vanquishers of the communist forces. But this coöperation consisted in nothing more than some consultations. It is likely that the frightened Mandataries of the People and their aides did not conceal in these talks with the nationalist commanders that they were frightened and powerless and would be glad to be saved. But in the eyes of the adamant supporters of the principle of class solidarity this already meant treason.

The outstanding fact in all this is that German communism was defeated by the Right alone, while the noncommunist Marxians were eager to stay neutral. But for the nationalist armed intervention, Germany would have turned to Bolshevism in 1919. The outcome of the events of January, 1919, was an enormous increase in the prestige of the nationalists; theirs was the glory of having saved the nation, while the Social Democrats became despicable. Every new communist upheaval repeated the same experience. The nationalists fought the communists single-handed, while the Social Democrats hesitated to oppose their “communist comrades.” The Social Democrats ruled Prussia, the paramount state, and some of the smaller states of the Reich; but they ruled only thanks to the support they got from the nationalists of the Reichswehr and of the free corps. From that time on the Social Democrats were at the mercy of the Right.

The Weimar Republic was regarded both by the nationalists and by the communists only as a battleground in their struggle for dictatorship. Both armed for civil war; both tried several times to open the attack and had to be beaten back by force. But the nationalists daily grew more powerful, while the communists gradually became paralyzed. It was not a question of votes and number of members in Parliament. The centers of gravity of these parties lay outside parliamentary affairs. The nationalists could act freely. They were supported by the majority of the intellectuals, salaried people, entrepreneurs, farmers, and by a part of skilled labor. They were familiar with the problems of German life. They could adjust their actions to the changing political and economic conditions of the nation and of each of its provinces. The communists, on the other hand, had to obey orders issued by ignorant Russian chiefs who were not familiar with Germany, and they were forced to change their policies over night whenever the central committee of Moscow ordered them to do so. No intelligent or honest man could endure such slavery. The intellectual and moral quality of the German communist leaders was consequently far below the average level of German politicians. They were no match for the nationalists. The communists played the role in German politics only of saboteurs and conspirators. After January, 1919, they no longer had any chance of success. Of course, the ten years of Nazi misrule have revived German communism; on the day of Hitler’s collapse they will be the strongest party in Germany.

The Germans would have decided in 1918 in favor of democracy, if they had had the choice. But as things were, they had only the choice between the two dictatorships, of the communists and of the nationalists. Between these two dictatorial parties there was no third group ready to support capitalism and its political corollary, democracy. Neither the majority socialists and their affiliates, the Democratic party, nor the Catholic Center party was fitted for the adoption of “pluto-cratic” democracy and of “bourgeois” republicanism. Their past and their ideologies were strongly opposed to such an attitude. The Hohenzollerns lost their throne because they rejected British parliamentarism. The Weimar Republic failed because it rejected French republicanism as realized from 1875 to 1930 in the Third Republic. The Weimar Republic had no program but to steer a middle course between two groups aiming at dictatorship. For the supporters of the government parliamentarism was not the best system of government. It was only an emergency measure, an expedient. The majority socialists wanted to be moderate Marxians and moderate nationalists, nationalist Marxians and Marxian nationalists. The Catholics wanted to combine nationalism and socialism with Catholicism and yet to maintain democracy. Such eclecticism is doomed. It does not appeal to youth. It succumbs in every conflict with resolute adversaries.

There was only one alternative to nationalism left: the adoption of unrestricted free trade. Nobody in Germany considered such a reversion. It would have required an abandonment of all measures of Sozialpolitik, government control and trade-union pressure. Those parties that believed they were fighting radical nationalism—the Social Democrats and their satellites, then the communists, the Center, and some farmer groups—were, on the contrary, fanatical supporters of etatism and hyper-protectionism. But they were too narrow-minded to see that these policies presented Germany with the tremendous problem of autarky. They simply shut their eyes. We should not overrate the intellectual capacities of the German masses. But they were not too dull to see that autarky was the focal problem of Germany and that only the nationalist parties had an idea (although a spurious one) of how to deal with it. While the other parties shunned a discussion of its dangers, the nationalists offered a plan for a solution. As this plan of world conquest was the only one offered to the Germans, they endorsed it. No one told them that there was another way out. The Marxians and the Catholics were not even keen enough to point out that the Nazi plan of world domination was doomed to military failure; they were anxious not to hurt the vanity of the people, firmly assured of their own invincibility. But even if the adversaries of aggression had adequately exposed the dangers and the risks of a new war, the plain citizen would still have given preference to the Nazis. For the more cautious and subtle Nazis said: We have a precise plan for the salvation of Germany; it is a very risky plan and we cannot guarantee success. But anyhow it gives us a chance, while no one else has any idea how to deal with our serious condition. If you drift your fate is sealed; if you follow us there is at least a prospect of success.

The conduct of the German Left was no less an ostrich policy than that of the Left in Great Britain and in France. On the one hand, the Left advocated state omnipotence and consequently hyper-protectionism; on the other hand, it gave no thought to the fact that within a world of autarky Germany was doomed to starvation. The German Marxian refugees boast that their parties made some—very lame and timid, indeed—endeavors to prevent German rearmament. But this was only a proof of their inconsistency and their inability to see reality as it was. Whoever wanted to maintain peace had to fight etatism. Yet the Left was no less fanatical in its support of etatism than the Right. The whole German nation favored a policy of government interference with business which must result in Zwangswirtschaft. But only the Nazis grasped the fact that while Russia could live in autarky Germany could not. Therefore the Nazis succeeded, for they did not encounter any party advocating laissez faire, i.e., a market economy.

2.

The Abortive Socialization

The Social Democrats had put at the top of their party programs the demand for the socialization (Vergesellschaftung) of the means of production. This would have been clear and unambiguous if people had been ready to interpret it as forcible expropriation of the means of production by the state, and consequently as government management of all branches of economic activity. But the Social Democrats emphatically asserted that this was not at all the meaning of their basic claim. Nationalization (Verstaatlichung) and socialization, they insisted, were two entirely different things. The measures of nationalization and municipalization (Verstadtlichung) of various plants and enterprises, which the Reich and its member states had considered since the ’eighties of the past century an essential part of their socio-economic policies, were, they maintained, neither socialization nor the first steps toward it. They were on the contrary the outcome of a capitalist policy extremely detrimental to the interests of labor. The unfavorable experience with these nationalized and municipalized concerns, therefore, had no bearing on the socialist demand for socialization. However, the Marxians did not explain what socialization really means and how it differs from nationalization. They made some clumsy attempts but very soon they retired from the discussion of this awkward problem. The subject was tabooed. No decent German was rash enough to break this ban by raising the question.

The first World War brought about a trend toward war socialism. One branch of business after the other was centralized, i.e., forcibly placed under the management of a committee whose members—the entrepreneurs of the branch concerned—were nothing but an advisory board of the government’s commissary. Thus the government obtained full control of all vital branches of business. The Hindenburg program advocated an all-round application of this system for all branches of German trade and production. Its execution would have transformed Germany into a purely socialist commonwealth of the Zwangswirtschaft pattern. But the Hindenburg program was not yet completely realized when the German Empire collapsed.

War socialism was extremely unpopular in Germany. People even blamed it for what was not its fault. It was not exclusively to blame for German starvation. The blockade, the absence of millions of workers serving in the armed forces, and the fact that a good deal of the productive effort had to be directed to the production of armament and munitions contributed to the distress even more than the inadequacy of socialist methods of production. The Social Democrats should have pointed out these things as well. But they did not want to miss any opportunity which could be exploited for demagogic distortion of facts. They attacked the Zwangswirtschaft as such. The Zwangswirtschaft was the worst kind of capitalist exploitation and abuse, they contended; and it had demonstrated the urgent need for the substitution of socialism for capitalism.

The end of the war brought military defeat, revolution, civil war, famine, and desolation. Millions of demobilized soldiers, many of whom had retained their arms, flowed back to their homes. They robbed the military magazines. They stopped trains to search them for food. In company with workers, dismissed by plants which had been forced overnight to discontinue the production of munitions, they raided the open country for bread and potatoes. The villagers organized armed resistance. Conditions were chaotic. The inexperienced and ignorant socialists who had seized the government were helpless. They had no idea how to cope with the situation. Their orders and counterorders disintegrated the apparatus of administration. The starving masses called for food and were fed bombastic speeches.

In this emergency capitalism gave proof of its adaptability and efficiency. The entrepreneurs, at last defying the innumerable laws and decrees of the Zwangswirtschaft, tried to make their plants run again. The most urgent need was to resume production for export in order to buy food and raw materials in the neutral countries and in the Balkans. Without such imports Germany would have been doomed. The entrepreneurs succeeded in their efforts and thus saved Germany. People called them profiteers but scrambled for the goods brought to the market and were happy to acquire these badly needed necessities. The unemployed found jobs again. Germany began to return to normal.

The socialists did not worry much about the slackening of the Zwangswirtschaft. In their opinion this system, far from being socialist, was a capitalist evil that had to be abolished as soon as possible. Now real socialization had to start.

But what did socialization mean? It was, said the Marxians, neither the kind of thing represented by the nationalization of state railroads, state mines, and so on, nor the war socialism of Zwangswirtschaft. But what else could it be? Marxians of all groups had to admit that they did not know. For more than fifty years they had advocated socialization as the focal point of their party program. Now that they had seized power they must start to execute their program. Now they had to socialize. But at once it became apparent that they did not know what socialization meant. It was really rather awkward.

Fortunately the socialist leaders remembered that there is a class of men whose business it is to know everything—the omniscient professors. The government appointed a socialization committee. The majority of its members were Social Democrats; yet it was not from these that the solution of the riddle was expected but from the professors. The professors whom the government nominated were not Social Democrats. They were advocates of that Sozialpolitik which in earlier years had favored the nationalization and municipalization of various enterprises, and in recent years had supported the planned economy, the Zwangswirtschaft. They had always backed precisely the reformism that the orthodox Marxians denounced as capitalist humbug, detrimental to the interests of the proletarians.

The socialization committee deliberated many years, splitting hairs, distilling oversophisticated definitions, drafting spurious plans, and selling very bad economics. Its minutes and reports, collected in shelves of thick volumes, rest in the libraries for the edification of future generations. They are a token of the intellectual decay brought about by Marxism and etatism. But they failed to answer the question of what else socialization could mean besides nationalization (Verstaatlichung) or planning (Zwangswirtschaft).

There are only two methods of socialization, both of which had been applied by the German Imperial Government. There is on the one hand outright nationalization, today the method of Soviet Russia; and there is on the other hand central planning, the Zwangswirtschaft of the Hindenburg program and the method of the Nazis. The German Marxians had barred both ways to themselves through their hypocritical demagogy. The Marxians of the Weimar Republic not only did not further the trend toward socialization; they tolerated the virtual abandonment of the most effective socialization measures inaugurated by the imperial government. Their adversaries, foremost among them the regime of the Catholic Chancellor Bruening, later resumed the policy of planning, and the Nazis perfected these endeavors by establishing all-round planning, the German socialism of the Zwangswirtschaft type.

The German workers, both Social Democrats and communists, were not much concerned about socialization. For them, as Kautsky remarked, the revolution meant only an opportunity to raise wages. Higher wages, higher unemployment doles, and shorter hours of work meant more to them than socialization.

This situation was not the result of treason on the part of the socialist leaders but of the inherent contradictions in the Social Democratic creed. The Marxians advocated a program whose realization was bound to render the state omnipotent and totalitarian; but they also talked indefatigably about shaking off “this state rubbish in its entirety,” about “the withering away of the state.” They advocated socialization but rejected the only two methods available for its achievement. They talked of the frustration of trade unionism as a means of improving the conditions of the workers; but they made trade-union policies the focal point of their political action. They taught that socialism could not be attained before capitalism had reached its full maturity, and disparaged as petty bourgeois all measures designed to check or delay the evolution of capitalism. But they themselves vehemently and fanatically demanded such measures. These contradictions and inconsistencies, not machinations of capitalists or entrepreneurs, caused the downfall of German Marxism.

True, the leaders of the Social Democrats were incompetent; some were corrupt and insincere. But this was no accident. No intelligent man could fail to see the essential shortcomings of Marxian doctrine. Corruption is an evil inherent in every government not controlled by a watchful public opinion. Those who were prepared to take the demand for socialization seriously deserted the ranks of Marxism for those of Nazism. For the Nazis, although still more corrupt morally, aimed unambiguously at the realization of central planning.

3.

The Armed Parties

The November Revolution brought a resurgence of a phenomenon that had long before disappeared from German history. Military adventurers formed armed bands or Freikorps and acted on their own behalf. The communist revolutionaries had inaugurated this method, but soon the nationalists adopted and perfected it. Dismissed officers of the old army called together demobilized soldiers and maladjusted boys and offered their protection to the peasants menaced by raids of starving townsfolk and to the population of the eastern frontiers suffering from Polish and Lithuanian guerrilla invasions. The landlords and the farmers provided them in return for their services with food and shelter. When the condition which had made their interference appear useful changed these gangs began to blackmail and to extort money from landowners, businessmen, and other wealthy people. They became a public calamity.

The government did not dare to dissolve them. Some of the bands had fought bravely against the communists. Others had successfully defended the eastern provinces against the Poles and Lithuanians. They boasted of these achievements, and the nationalist youth did not conceal their sympathy for them. The old leaders of the nationalist party were profoundly hostile to these unmanageable gang leaders, who defied their advice and whose heedless actions came into collision with their considered plans. The extortions of the free corps were a heavy burden for the landowners and peasants. The bands were no longer needed as a safeguard against communist uprisings. The Reichswehr, the new army reorganized according to the provisions of the Treaty of Versailles, was now strong enough for this task. The nationalist champions were quite right in suspecting that the young men who formed these corps hoped to displace them in the leadership of the nationalist movement. They devised a clever scheme for their suppression. The Reichswehr was to incorporate them and thus render them innocuous. As it became more difficult from day to day for the captains of the free corps to provide funds for the sustenance of their men, they were ready to accept this offer and to obey the orders of the army officers.

This solution, however, was a breach of the Treaty of Versailles, which had limited the size of the Reichswehr to a hundred thousand men. Hence conflicts arose with the French and the British representatives. The Allied Powers demanded the total disbandment of the so-called black Reichswehr. When the government, complying, decided to dissolve the most important black troop, the sailors’ Ehrhardt brigade, it hastened the outbreak of the Kapp insurrection.

War and civil war, and the revolutionary mentality of the Marxians and of the nationalists, had created such a spirit of brutality that the political parties gave their organizations a military character. Both the nationalist Right and the Marxian Left had their armed forces. These party troops were, of course, entirely different from the free corps formed by nationalist hotspurs and by communist radicals. Their members were people who had their regular jobs and were busy from Monday to Saturday noon. On week ends they would don their uniforms and parade with brass bands, flags, and often with their firearms. They were proud of their membership in these associations but they were not eager to fight; they were not animated by a spirit of aggression. Their existence, their parades, their boasting, and the challenging speeches of their chiefs were a nuisance but not a serious menace to domestic peace.

After the failure of the revolutionary attempts of Kapp1 in March, 1920, that of Hitler and Ludendorff in November, 1923, and of various communist uprisings, of which the most important was the Holz riot in March, 1921, Germany was on the way back to normal conditions. The free corps and the communist gangs began slowly to disappear from the political stage. They still waged some guerrilla warfare with each other and against the police. But these fights degenerated more and more into gangsterism and rowdyism. Such riots and the plots of a few adventurers could not endanger the stability of the social order.

But the Social Democratic party and press made the blunder of repeatedly denouncing the few still operating nationalist free corps and vehemently insisting on their dissolution. This attitude was a challenge to the nationalist parties who disliked the adventurers no less than the Social Democrats did but did not dare to abandon them openly. They retorted by calling for the dissolution of the communist formations as well. But the Social Democrats were in a similar position with regard to the communist bands. They hated and feared them yet did not want to combat them openly.

As in the Bismarck Reich, so in the Weimar Republic, the main powers of civil administration were not assigned to the government of the Reich but to the governments of the member states. Prussia was the largest and richest member state; its population was the most numerous; it was the Reich’s center of gravity, or, properly speaking, the Reich. The fact that the conservative party had dominated Prussia had given the conservatives hegemony over imperial Germany. The fact that the Social Democrats ruled Prussia under the Weimar Republic made them paramount in the republican Reich. When Chancellor Papen’s coup d’état of July 20, 1932, overthrew the socialist regime in Prussia, the struggle for the Reich was virtually decided.

The Bavarian Government was reluctant to disband the nationalist bands on its territory. It was not sympathy with the nationalists but provincial particularism that determined this attitude. To disobey the central authority was for it a matter of principle. The Government of the Reich was helpless because it had but one means to impose its will on a disobedient member state, namely, civil war. In this plight the Social Democratic Prussian Government took recourse to a fateful measure. On February 22, 1924, in Magdeburg, it founded the Reichsbanner Schwarz-Rot-Gold. This was not a private troop like the other armed party forces. It was an army of Prussia’s ruling party and had the full support of the Prussian Government. An outstanding Prussian functionary, the governor of the province of Saxony, was appointed its chief. The Reichsbanner was to be a nonpartisan association of all men loyal to the republican system of government and the Constitution of Weimar. Virtually, however, it was a Social Democratic institution. Its leaders insisted that members of other loyal parties were welcome in its ranks. But the immense majority of the members were Social Democrats who up to that time had been members of the various local and provincial Social Democratic armed party forces. Thus the foundation of the Reichsbanner did not strengthen the military forces of the Social Democrats; it only gave them a new, more centralized organization and the sanction of the Prussian state. Members of the Catholic Center party were never very numerous in the Reichsbanner and soon disappeared completely from its ranks. The third loyal party, the Democrats, were merely an insignificant affiliate of the Social Democrats.

The Social Democrats have tried to justify the foundation of the Reichsbanner by referring to the nationalist bias of the Reichswehr, the one hundred thousand soldiers who formed the Reich’s army. But the Kapp revolt had demonstrated that the socialists had a very efficacious weapon available to defeat the nationalists in the general strike. The only serious menace for the Weimar Republic was the nationalist sympathies within the ranks of organized labor. The Social Democratic chiefs were unable to work successfully against these tendencies; many secretly sympathized with them.

The ominous import of the foundation of the Reichsbanner was that it provided Hitler with a good start. His Munich putsch of November, 1923, had resulted in complete failure. When he left prison in December, 1924, his political prospects looked black. The foundation of the Reichsbanner was just what he wanted. All the non-Marxians, i.e., the majority of the population, were terrified by the defiant speeches of its chiefs and the fact that at the end of the first year of its existence its membership was three millions—more than the membership of all the Wehrverbände2 of the Right together.* Like the Social Democrats, they overrated the strength of the Reichsbanner and its readiness to fight. Thus a good many people were prepared to aid the Nazi Storm Troopers.

But these Storm Troopers were very different from the other armed party forces both of the Left and of the Right. Their members were not elderly men who had fought in the first World War and who now were eager to hold their jobs in order to support their families. The Nazi Storm Troopers were, as the free corps had been, jobless boys who made a living from their fighting. They were available at every hour of every day, not merely on week ends and holidays. It was doubtful whether the party forces—either of the Left or the Right—would be ready to fight when seriously attacked. It was certain that they would never be ready to wage a campaign of aggression. But Hitler’s troops were pugnacious; they were professional brawlers. They would have fought for their Führer in a bloody civil war if the opponents of Nazism had not yielded without resistance in 1933.

Hitler got subsidies from big business in the first period of his career. He extorted much greater sums from it in the second period of his struggle for supremacy. Thyssen and the rest paid him but they did not bribe him. Hitler took their money as a king takes the tribute of his subjects. If they had refused to give him what he asked, he would have sabotaged their plants or even murdered them. Such drastic measures were needless. The entrepreneurs preferred to be reduced by Nazism to the status of shop managers than to be liquidated by communism in the Russian way. As conditions were in Germany, there was no third course open to them.

Both force and money are impotent against ideas. The Nazis did not owe their conquest of Germany either to their getting a few million Reichsmarks from big business or to their being ruthless fighters. The great majority of the German nation had been both socialist and nationalist for many years. The Social Democratic trade-union members sympathized as much with nationalist radicalism as did the peasants, the Catholics, and the shopkeepers. The communists owed their votes in great part to the idea that communism was the best means to establish German hegemony in Europe and defeat Western capitalism. The German entrepreneurs and businessmen contributed their share to the triumph of Nazism, but so did all other strata of the nation. Even the churches, both Catholic and Protestant, were no exception.

Great ideological changes are scarcely explained by saying that somebody’s money was spent in their behalf. The popularity of communism in present-day America, whatever else it may be, is not the result either of the lavish subventions of the Russian Government or of the fact that some millionaires subsidize the newspapers and periodicals of the Left. And though it is true that some Jewish bankers, frightened by Nazi anti-Semitism, contributed to socialist party funds, and that far the richest endowment ever made for the study of the social sciences in Germany was that of a Jewish grain dealer for the foundation of a Marxian institute at the University of Frankfurt, German Marxism nevertheless was not, as the Nazis contend, the product of Jewish jobbers.

The slogan “national solidarity” (Volksgemeinschaft) had got such a hold on the German mentality that nobody dared to resist the Nazis when they struck their final blow. The Nazis crushed the hopes of many groups who once supported them. Big business, the landowners and the farmers, the artisans and the shopkeepers, the churches, all were disappointed. But the prestige of the main items of the Nazi creed—nationalism and socialism—was so overwhelming that this dissatisfaction had no important consequences.

Only one thing could put an end to Nazi rule: a military defeat. The blockade and the bombing of German cities by British and American planes will finally convince the Germans that Nazism is not the best means to make their nation prosperous.

4.

The Treaty of Versailles

The four peace treaties of Versailles, Saint Germain, Trianon, and Sèvres together form the most clumsy diplomatic settlement ever carried out. They will be remembered as outstanding examples of political failure. Their aim was to bring lasting peace; the result was a series of minor wars and finally a new and more terrible World War. They were intended to safeguard the independence of small states; the results were the disappearance of Austria, Abyssinia, Albania, Czechoslovakia. They were designed to make the world safe for democracy; the results were Stalin, Hitler, Mussolini, Franco, Horthy.

However, one reproach generally cast upon the Treaty of Versailles is entirely unfounded. German propaganda succeeded in convincing public opinion in the Anglo-Saxon countries that the terms of the treaty were extremely unfair to Germany, that the hardships they inflicted upon the Germans drove them to despair, and that Nazism and the present war are the outcome of the mistreatment of Germany. This is wholly untrue. The political order given to Europe by the four treaties was very unsatisfactory. The settlement of East European problems was done with such disregard of the real conditions that chaos resulted. But the Treaty of Versailles was not unfair to Germany and it did not plunge the German people into misery. If the provisions of the treaty had been enforced, it would have been impossible for Germany to rearm and to attack again. The mischief was not that the treaty was bad so far as Germany was concerned, but that the victorious powers permitted Germany to defy some of its most important clauses.

The treaty obliged Germany to cede non-German territories that Prussia had conquered, and whose mainly non-German-speaking population was decidedly opposed to German rule. Germany’s only title to these countries was previous conquest. It was not—as the German propagandists used to say—the most scandalous robbery ever committed that the Reich was forced to give back what the Hohenzollerns had seized in earlier years. The favorite subject of German propaganda was the Polish Corridor. What, shouted the Nazi speakers and their foreign friends, would the British or the French have said if a piece of land had been cut out from their country, dividing it into two disconnected parts, in order to give a passage way to some other nation? Such utterances impressed public opinion all over the world. The Poles themselves threw little light upon this subject. In all those years they were ruled by an incompetent and corrupt oligarchy, and this ruling clique lacked the intellectual power to combat the German propaganda.

The true facts are these. In the Middle Ages the Teutonic Knights conquered the country which is today known as the Prussian province of East Prussia. But they did not succeed in their attempts to conquer the territory which in 1914 was the Prussian province of West Prussia. Thus East Prussia did not adjoin the German Empire. Between the western boundaries of East Prussia and the eastern borders of the Holy Empire there lay a piece of land ruled by the Kings of Poland, forming a part of Poland, and inhabited by Poles. This piece of land, namely, West Prussia, was in 1772 annexed by Prussia at the first partition of Poland. It is important to realize that West Prussia (and the same is true for the Prussian province of Posen) was annexed by Prussia, not by the German Empire. These provinces belonged neither to the Holy Empire, which disintegrated in 1806, nor to the German Confederation, which from 1815 to 1866 was the political organization of the German nation. They were the “private property,” as it were, of the kings of Prussia. The fact that the King of Prussia in his capacity as Elector-marquis of Brandenburg and as Duke of Pomerania was a member of the Holy Empire and of the German Confederation had legally and constitutionally no more significance for these eastern provinces than the fact once had for Great Britain that the King of England was in his capacity as Elector (and later as King) of Hanover a prince of the Holy Empire and later a member of the German Confederation. Until 1866 the relation of these provinces to Germany was like the relation of Virginia or Massachusetts to Germany between 1714 and 1776 and of Scotland from 1714 to 1837. They were foreign countries ruled by a prince who happened at the same time to rule a German country.

It was only in 1866 that the King of Prussia incorporated these provinces by his own sovereign decision into the Norddeutscher Bund and in 1871 into the Deutsches Reich. The people living in these countries were not asked whether they agreed or not. In fact they did not agree. They returned Polish members to the German Reichstag and they were anxious to preserve their Polish idiom and their allegiance to Polish traditions. For fifty years they resisted every endeavor of the Prussian Government to germanize them.

When the Treaty of Versailles renewed Poland’s independence and restored the provinces of Posen and of West Prussia to Poland, it did not give a corridor to Poland. It simply undid the effects of earlier Prussian (not German) conquests. It was not the fault of the peacemakers or of the Poles that the Teutonic Knights had conquered a country not adjoining the Reich.

The Treaty of Versailles returned Alsace-Lorraine to France and northern Schleswig to Denmark. It did not rob Germany in these cases either. The population of these countries violently opposed German rule and longed to be freed from its yoke. Germany had but one title to oppress these people—conquest. The logical outcome of defeat was ceding the spoils of earlier conquest.

The second provision of the treaty which used to be criticized severely concerned reparations. The Germans had devastated a great part of Belgium and of northeastern France. Who was to pay for the reconstruction of these areas? France and Belgium, the assailed, or Germany, the aggressor? The victorious or the defeated? The treaty decided that Germany ought to pay.

We need not enter into a detailed discussion of the reparations problem. It is sufficient here to determine whether the reparations really meant misery and starvation for Germany. Let us see what Germany’s income and reparation payments were in the period from 1925 to 1930.

It is a grotesque misrepresentation of the facts to assert that these payments made Germany poor and condemned the Germans to starvation. They would not have seriously affected the German standard of living even if the Germans had paid these sums out of their own pockets and not, as they did in fact, out of money borrowed from abroad.

For the years 1925–29 there are figures available concerning the increase of German capital. These increases are, in millions of Reichsmarks:†

From September, 1924, until July, 1931, Germany paid as reparations under the Dawes and Young plans 10,821 million Reichsmarks. Then the payments stopped altogether. Against this outflow Germany’s private and public indebtedness abroad, most of which originated in the same period, amounted to something over 20,500 million Reichsmarks. To this may be added approximately 5,000 million Reichsmarks of direct foreign investments in Germany. It is obvious that Germany did not suffer from lack of capital. If any more proof were needed it may be found in the fact that Germany invested in the same period approximately 10,000 million Reichsmarks abroad.*

The reparations were not responsible for Germany’s economic distress. But if the Allies had insisted on their payment, they would have seriously hampered Germany’s rearmament.

The antireparations campaign resulted in a complete fiasco for the Allies and in the full success of Germany’s refusal to pay. What the Germans did pay they paid out of foreign borrowings which they later repudiated. Thus the whole burden in fact fell on foreigners.

With regard to possible future reparations it is extremely important to know the basic causes of this previous failure. The Allies were from the very beginning of the negotiations handicapped by their adherence to the spurious monetary doctrines of present-day etatist economics. They were convinced that the payments represented a danger to the maintenance of monetary stability in Germany, and that Germany could not pay unless its balance of trade were “favorable.” They were concerned by a spurious “transfer” problem. They were disposed to accept the German thesis that “political” payments have effects radically different from payments originating from commercial transactions. This entanglement in mercantilist fallacies led them not to fix the total amount due in the Peace Treaty itself but to defer the decision to later negotiations. In addition it induced them to stipulate deliveries in kind, to insert the “transfer protection” clause, and finally to agree to the Hoover moratorium of July, 1931, and the cancellation of all reparation payments.

The truth is that the maintenance of monetary stability and of a sound currency system has nothing whatever to do with the balance of payments or of trade. There is only one thing that endangers monetary stability—inflation. If a country neither issues additional quantities of paper money nor expands credit, it will not have any monetary troubles. An excess of exports is not a prerequisite for the payment of reparations. The causation, rather, is the other way round. The fact that a nation makes such payments has the tendency to create such an excess of exports. There is no such thing as a “transfer” problem. If the German Government collects the amount needed for the payments (in Reichsmarks) by taxing its citizens, every German taxpayer must correspondingly reduce his consumption either of German or of imported products. In the second case the amount of foreign exchange which otherwise would have been used for the purchase of these imported goods becomes available. In the first case the prices of domestic products drop, and this tends to increase exports and thereby the amount of foreign exchange available. Thus collecting at home the amount of Reichsmarks required for the payment automatically provides the quantity of foreign exchange needed for the transfer. None of this, of course, depends in any way on whether the payments are “political” or commercial.

The payment of reparations, it is true, would have hurt the German taxpayer. It would have forced him to restrict his consumption. Under any circumstances, somebody had to pay for the damage inflicted. What the aggressors did not pay had to be paid by the victims of the aggression. But nobody pitied the victims, while hundreds of writers and politicians all over the world wept both crocodile and real tears over the Germans.

Perhaps it would have been politically wiser to choose another method for fixing the amount to be paid every year by Germany. For instance, the annual payment could have been brought into some fixed relation to the sums spent in future for Germany’s armed forces. For every Reichsmark spent on the German Army and Navy a multiple might have had to be paid as an installment. But all schemes would have proved ineffective as long as the Allies were under the spell of mercantilist fallacies.

The inflow of Germany’s payments necessarily rendered the receiving countries’ balance of trade “unfavorable.” Their imports exceeded their exports because they collected the reparations. From the viewpoint of mercantilist fallacies this effect seemed alarming. The Allies were at once eager to make Germany pay and not to get the payments. They simply did not know what they wanted. But the Germans knew very well what they wanted. They did not want to pay.

Germany complained that the trade barriers of the other nations rendered its payments more burdensome. This grievance was well founded. The Germans would have been right, if they had really attempted to provide the means required for cash payments by an increase of exports. But what they paid in cash was provided for them by foreign loans.

The Allies were mistaken to the extent that they blamed the Germans for the failure of the treaty’s reparation clauses. They should rather have indicted their own mercantilist prejudices. These clauses would not have failed if there had been in the Allied countries a sufficient number of influential spokesmen who knew how to refute the objections raised by the German nationalists.

Foreign observers have entirely misunderstood the role played by the Treaty of Versailles in the agitation of the Nazis. The nucleus of their propaganda was not the unfairness of the treaty; it was the “stab in the back” legend. We are, they used to say, the most powerful nation in Europe, even in the world. The war has evidenced anew our invincibility. We can, if we want to, put to rout all other nations. But the Jews have stabbed us in the back. The Nazis mentioned the treaty only in order to demonstrate the full villainy of the Jews.

“We, the victorious nation,” they said, “have been forced to surrender by the November crime. Our government pays reparations, although nobody is strong enough to force us to do that. Our Jewish and Marxian rulers abide by the disarmament clauses of the treaty, because they want us to pay this money to World Jewry.” Hitler did not fight the treaty. He fought those Germans who had voted in the German Parliament for its acceptance and who objected to its unilateral breach. For that Germany was powerful enough to annul the treaty the nationalists considered already proved by the “stab in the back” legend.

Many Allied and neutral critics of the Treaty of Versailles used to assert that it was a mistake to leave Germany any cause for grievance. This view was erroneous. Even if the treaty had left Germany’s European territory untouched, if it had not forced it to cede its colonies, if it had not imposed reparation payments and limitation of armaments, a new war would not have been averted. The German nationalists were determined to conquer more dwelling space. They were eager to obtain autarky. They were convinced that their military prospects for victory were excellent. Their aggressive nationalism was not a consequence of the Treaty of Versailles. The grievances of the Nazis had little to do with the treaty. They concerned Lebensraum.

There have been frequent comparisons of the Treaty of Versailles with the settlements of 1814 and 1815. The system of Vienna succeeded in safeguarding European peace for many years. Its generous treatment of the vanquished French allegedly prevented France from planning wars of revenge. If the Allies had treated Germany in a similar way, it is contended, they would have had better results.

A century and a half ago France was the paramount power in continental Europe. Its population, its wealth, its civilization, and its military efficiency eclipsed those of the other nations. If the French of those days had been nationalists in the modern sense, they would have had the opportunity to attain and hold hegemony on the continent for some time. But nationalism was foreign to the French of the revolutionary period. They were, it is true, chauvinists. They considered themselves (perhaps on better grounds than some other peoples) the flower of mankind. They were proud of their newly acquired liberty. They believed that it was their duty to assist other nations in their struggle against tyranny. They were chauvinists, patriots, and revolutionaries. But they were not nationalists. They were not eager for conquest. They did not start the war; foreign monarchs attacked them. They defeated the invaders. It was then that ambitious generals, foremost among them Napoleon, pushed them toward territorial expansion. The French certainly connived at the beginning; but they grew more and more reluctant as they began to realize that they were bleeding for the sake of the Bonaparte family. After Waterloo they were relieved. Now they no longer had to worry about the fate of their sons. Few Frenchmen complained about the loss of the Rhineland, the Netherlands, or Italy. No Frenchman wept because Joseph was no longer King of Spain or Jerome no longer King of Westphalia. Austerlitz and Jena became historical reminiscences; the citizen’s conceit derived edification from the poetry praising the late Emperor and his battles, but no one was now eager to subdue Europe.

Again, later, the events of June, 1848, directed attention to the Emperor’s nephew. Many expected him to overcome the new domestic troubles in the same way his uncle had dealt with the first revolution. There is no doubt that the third Napoleon owed his popularity solely to the glory of his uncle. Nobody knew him in France, and he knew nobody; he had seen the country only through prison bars and he spoke French with a German accent. He was only the nephew, the heir of a great name; nothing more. Certainly the French did not choose him because they wanted new wars. He brought them to his side by persuading them that his rule would safeguard peace. The empire means peace, was the slogan of his propaganda. Sevastopol and Solferino did not advance his popularity; they rather injured it. Victor Hugo, the literary champion of the first Napoleon’s glory, unswervingly vilified his successor.

The work of the Congress of Vienna could endure, in short, because Europe was peaceloving and considered war an evil. The work of Versailles was doomed to fail in this age of aggressive nationalism.

What the Treaty of Versailles really tried to achieve was contained in its military clauses. The restriction of German armaments and the demilitarization of the Rhineland did not harm Germany, because no nation ventured to attack it. But they would have enabled France and Great Britain to prevent a new German aggression if they had been earnestly resolved to prevent it. It is not the fault of the treaty that the victorious nations did not attempt to enforce its provisions.

5.

The Economic Depression

The great German inflation was the result of the monetary doctrines of the socialists of the chair. It had little to do with the course of military and political events. The present writer forecast it in 1912. The American economist B. M. Anderson confirmed this forecast in 1917. But most of those men who between 1914 and 1923 were in a position to influence Germany’s monetary and banking policies and all journalists, writers, and politicians who dealt with these problems labored under the delusion that an increase in the quantity of bank notes does not affect commodity prices and foreign exchange rates. They blamed the blockade or profiteering for the rise of commodity prices, and the unfavorable balance of payments for the rise of foreign exchange rates. They did not lift a finger to stop inflation. Like all pro-inflation parties, they wanted to combat merely the undesirable but inevitable consequences of inflation, i.e., the rise of commodity prices. Their ignorance of economic problems pushed them toward price control and foreign exchange restrictions. They could never understand why these attempts were doomed to fail. The inflation was neither an act of God nor a consequence of the Treaty of Versailles. It was the practical application of the same etatist ideas that had begotten nationalism. All the German political parties shared responsibility for the inflation. They all clung to the error that it was not the increase of bank credits but the unfavorable balance of payments that was devaluing the currency.

The inflation had pauperized the middle classes. The victims joined Hitler. But they did not do so because they had suffered but because they believed that Nazism would relieve them. That a man suffers from bad digestion does not explain why he consults a quack. He consults the quack because he thinks that the man will cure him. If he had other opinions, he would consult a doctor. That there was economic distress in Germany does not account for Nazism’s success. Other parties also, e.g., the Social Democrats and the communists, recommended their patent medicines.

Germany was struck by the great depression from 1929 on, but not to a greater extent than other nations. On the contrary. In the years of this depression the prices of foodstuffs and raw materials that Germany imports decreased more than the prices of manufactures that it exports.

The depression would have resulted in a fall in wage rates. But as the trade unions would not permit wage cuts, unemployment increased. Both the Social Democrats and the communists were confident that the increase of unemployment would strengthen their forces. But it worked for Nazism.

The great depression was international. Only in Germany, however, did it result in the victory of a party recommending armaments and war as a panacea.

6.

Nazism and German Labor

A riddle that has puzzled nearly all writers dealing with the problems of Nazism is this: There were in Germany many millions organized in the parties of the Social Democrats, of the communists, and of the Catholic Center; they were members of the trade unions affiliated with these parties. How could the Nazis succeed in overthrowing these masses of resolute adversaries and in establishing their totalitarian system? Did these millions change their minds overnight? Or were they cowards, yielding to the terror of the Storm Troopers and waiting for the day of redemption? Are the German workers still Marxians? Or are they sincere supporters of the Nazi system?

There is a fundamental error in posing the problem in this way. People take it for granted that the members of the various party clubs and trade-unions were convinced Social Democrats, communists, or Catholics, and that they fully endorsed the creeds and programs of their leaders. It is not generally realized that party allegiance and trade-union membership were virtually obligatory. Although the closed shop system was not carried to the extreme in Weimar Germany that it is today in Nazi Germany and in some branches of foreign industry, it had gone far enough. In the greater part of Germany and in most of the branches of German production it was practically impossible for a worker to stay outside of all the big trade-union groups. If he wanted a job or did not want to be dismissed, or if he wanted the unemployment dole, he had to join one of these unions. They exercised an economic and political pressure to which every individual had to yield. To join the union became practically a matter of routine for the worker. He did so because everybody did and because it was risky not to. It was not for him to inquire into the Weltanschauung of his union. Nor did the union bureaucrats trouble themselves about the tenets or feelings of the members. Their first aim was to herd as many workers as possible into the ranks of their unions.

These millions of organized workers were forced to pay lip service to the creeds of their parties, to vote for their candidates at the elections for Parliament and for union offices, to subscribe to the party newspapers, and to avoid open criticism of the party’s policy. But daily experience nonetheless brought them the evidence that something was wrong with their parties. Every day they learned about new trade barriers established by foreign nations against German manufactures—that is, against the products of their own toil and trouble. As the trade unions, with few exceptions, were not prepared to agree to wage cuts, every new trade barrier immediately resulted in increased unemployment. The workers lost confidence in the Marxians and in the Center. They became aware that these men did not know how to deal with their problems and that all they did was to indict capitalism. German labor was radically hostile to capitalism, but it found denunciation of capitalism unsatisfactory in this instance. The workers could not expect production to keep up if export sales dropped. They therefore became interested in the Nazi arguments. Such happenings, said the Nazis, are the drawbacks of our unfortunate dependence on foreign markets and the whims of foreign governments. Germany is doomed if it does not succeed in conquering more space and in attaining self-sufficiency. All endeavors to improve the conditions of labor are vain as long as we are compelled to serve as wage slaves for foreign capitalists. Such words impressed the workers. They did not abandon either the trade unions or the party clubs since this would have had very serious consequences for them. They still voted the Social Democrat, the communist, or the Catholic ticket out of fear and inertia. But they became indifferent both to Marxian and to Catholic socialism and began to sympathize with national socialism. Years before 1933 the ranks of German trade-unions were already full of people secretly sympathizing with Nazism. Thus German labor was not greatly disturbed when the Nazis finally forcibly incorporated all trade-union members into their Labor Front. They turned toward Nazism because the Nazis had a program dealing with their most urgent problem—foreign trade barriers. The other parties lacked such a program.

The removal of the unpopular trade-union bureaucrats pleased the workers no less than the humiliations inflicted by the Nazis on the entrepreneurs and executives. The bosses were reduced to the rank of shop managers. They had to bow to the almighty party chiefs. The workers exulted over the misfortunes of their employers. It was their triumph when their boss, foaming with rage, was forced to march in their ranks on state holiday parades. It was balm for their hearts.

Then came the rearmament boom. There were no more unemployed. Very soon there was a shortage of labor. The Nazis succeeded in solving a problem that the Social Democrats had been unable to master. Labor became enthusiastic.

It is highly probable that the workers are now fully aware of the dark side of the picture. They are disillusioned.* The Nazis have not led them into the land of milk and honey. In the desert of the ration cards the seeds of communism are thriving. On the day of the defeat the Labor Front will collapse as the Marxian and the Catholic trade unions did in 1933.

7.

The Foreign Critics of Nazism

Hitler and his clique conquered Germany by brutal violence, by murder and crime. But the doctrines of Nazism had got hold of the German mind long before then. Persuasion, not violence, had converted the immense majority of the nation to the tenets of militant nationalism. If Hitler had not succeeded in winning the race for dictatorship, somebody else would have won it. There were plenty of candidates whom he had to eclipse: Kapp, General Ludendorff, Captain Ehrhardt, Major Papst, Forstrat Escherich, Strasser, and many more. Hitler had no inhibitions and thus he defeated his better instructed or more scrupulous competitors.

Nazism conquered Germany because it never encountered any adequate intellectual resistance. It would have conquered the whole world if, after the fall of France, Great Britain and the United States had not begun to fight it seriously.

The contemporary criticism of the Nazi program failed to serve the purpose. People were busy dealing with the mere accessories of the Nazi doctrine. They never entered into a full discussion of the essence of National Socialist teachings. The reason is obvious. The fundamental tenets of the Nazi ideology do not differ from the generally accepted social and economic ideologies. The difference concerns only the application of these ideologies to the special problems of Germany.

These are the dogmas of present-day “unorthodox” orthodoxy:

1. Capitalism is an unfair system of exploitation. It injures the immense majority for the benefit of a small minority. Private ownership of the means of production hinders the full utilization of natural resources and of technical improvements. Profits and interest are tributes which the masses are forced to pay to a class of idle parasites. Capitalism is the cause of poverty and must result in war.

2. It is therefore the foremost duty of popular government to substitute government control of business for the management of capitalists and entrepreneurs.

3. Price ceilings and minimum wage rates, whether directly enforced by the administration or indirectly by giving a free hand to trade unions, are an adequate means for improving the lot of the consumers and permanently raising the standard of living of all wage earners. They are steps on the way toward entirely emancipating the masses (by the final establishment of socialism) from the yoke of capital. (We may note incidentally that Marx in his later years violently opposed these propositions. Present-day Marxism, however, endorses them fully.)

4. Easy money policy, i.e., credit expansion, is a useful method of lightening the burdens imposed by capital upon the masses and making a country more prosperous. It has nothing to do with the periodical recurrence of economic depression. Economic crises are an evil inherent in unhampered capitalism.

5. All those who deny the foregoing statements and assert that capitalism best serves the masses and that the only effective method of permanently improving the economic conditions of all strata of society is progressive accumulation of new capital are ill-intentioned and narrow-minded apologists of the selfish class interests of the exploiters. A return to laissez faire, free trade, the gold standard, and economic freedom is out of the question. Mankind will fortunately never go back to the ideas and policies of the nineteenth century and the Victorian age. (Let us note incidentally that both Marxism and trade-unionism have the fairest claim to the epithets “nineteenth-century” and “Victorian.”)

6. The advantage derived from foreign trade lies exclusively in exporting. Imports are bad and should be prevented as much as possible. The happiest situation in which a nation can find itself is where it need not depend on any imports from abroad. (The “progressives,” it is true, are not enthusiastic about this dogma and sometimes even reject it as a nationalist error; however, their political acts are thoroughly dictated by it.)

With regard to these dogmas there is no difference between present-day British liberals and the British labor party on the one hand and the Nazis on the other. It does not matter that the British call these principles an outgrowth of liberalism and economic democracy while the Germans, on better grounds, call them antiliberal and antidemocratic. It is not much more important that in Germany nobody is free to utter dissenting views, while in Great Britain a dissenter is only laughed at as a fool and slighted.

We do not need to deal here with the refutation of the fallacies in these six dogmas. This is the task of treatises expounding the basic problems of economic theory. It is a task that has already been fulfilled. We need only emphasize that whoever lacks the courage or the insight to attack these premises is not in a position to find fault with the conclusions drawn from them by the Nazis. The Nazis also desire government control of business. They also seek autarky for their own nation. The distinctive mark of their policies is that they refuse to acquiesce in the disadvantages which the acceptance of the same system by other nations would impose upon them. They are not prepared to be forever “imprisoned,” as they say, within a comparatively overpopulated area in which the productivity of labor is lower than in other countries.

Both the German and foreign adversaries of Nazism were defeated in the intellectual battle against it because they were enmeshed in the same intransigent and intolerant dogmatism. The British Left and the American progressives want all-round control of business for their own countries. They admire the Soviet methods of economic management. In rejecting German totalitarianism they contradict themselves. The German intellectuals saw in Great Britain’s abandonment of free trade and of the gold standard a proof of the superiority of German doctrines and methods. Now they see that the Anglo-Saxons imitate their own system of economic management in nearly every respect. They hear eminent citizens of these countries declare that their nations will cling to these policies in the postwar period. Why should not the Nazis be convinced, in the face of all this, that they were the pioneers of a new and better economic and social order?

The chiefs of the Nazi party and their Storm Troopers are sadistic gangsters. But the German intellectuals and German labor tolerated their rule because they agreed with the basic social, economic, and political doctrines of Nazism. Whoever wanted to fight Nazism as such, before the outbreak of the present war and in order to avoid it (and not merely to oust the scum which happens to hold office in present-day Germany), would have had to change the minds of the German people. This was beyond the power of the supporters of etatism.

It is useless to search the Nazi doctrines for contradictions and inconsistencies. They are indeed self-contradictory and inconsistent; but their basic faults are those common to all brands of present-day etatism.

One of the most common objections raised against the Nazis concerned the alleged inconsistency of their population policy. It is contradictory, people used to say, to complain, on the one hand, of the comparative overpopulation of Germany and ask for more Lebensraum and to try, on the other hand, to increase the birth rate. Yet there was in the eyes of the Nazis no inconsistency in these attitudes. The only remedy for the evil of overpopulation that they knew was provided by the fact that the Germans were numerous enough to wage a war for more space, while the small nations laboring under the same evil of comparative overpopulation were too weak to save themselves. The more soldiers Germany could levy, the easier it would be to free the nation from the curse of overpopulation. The underlying doctrine was faulty; but one who did not attack the whole doctrine could not convincingly find fault with the endeavors to rear as much cannon fodder as possible.

One reason why the objections raised to the despotism of the Nazis and the atrocities they committed had so little effect is that many of the critics themselves were inclined to excuse the Soviet methods. Hence the German nationalists could claim that their adversaries—both German and foreign—were being unfair to the Nazis in denouncing them for practices which they judged more mildly in the Russians. And they called it cant and hypocrisy when the Anglo-Saxons attacked their racial doctrines. Do the British and the Americans themselves, they retorted, observe the principle of equality of all races?

The foreign critics condemn the Nazi system as capitalist. In this age of fanatical anticapitalism and enthusiastic support of socialism no reproach seems to discredit a government more thoroughly in the eyes of fashionable opinion than the qualification pro-capitalistic. But this is one charge against the Nazis that is unfounded. We have seen in a previous chapter that the Zwangswirtschaft is a socialist system of all-round government control of business.

It is true that there are still profits in Germany. Some enterprises even make much higher profits than in the last years of the Weimar regime. But the significance of this fact is quite different from what the critics believe. There is strict control of private spending. No German capitalist or entrepreneur (shop manager) or any one else is free to spend more money on his consumption than the government considers adequate to his rank and position in the service of the nation. The surplus must be deposited with the banks or invested in domestic bonds or in the stock of German corporations wholly controlled by the government. Hoarding of money or banknotes is strictly forbidden and punished as high treason. Even before the war there were no imports of luxury goods from abroad, and their domestic production has long since been discontinued. Nobody is free to buy more food and clothing than the allotted ration. Rents are frozen; furniture and all other goods are unattainable. Travel abroad is permitted only on government errands. Until a short time ago a limited amount of foreign exchange was allotted to tourists who wanted to spend a holiday in Switzerland or Italy. The Nazi government was anxious not to arouse the anger of its then Italian friends by preventing its citizens from visiting Italy. The case with Switzerland was different. The Swiss Government, yielding to the demands of one of the most important branches of its economic system, insisted that a part of the payment for German exports to Switzerland should be balanced by the outlays of German tourists. As the total amount of German exports to Switzerland and of Swiss exports to Germany was fixed by a bilateral exchange agreement, it was of no concern to Germany how the Swiss distributed the surplus. The sum allotted to German tourists traveling in Switzerland was deducted from that destined for the repayment of German debts to Swiss banks. Thus the stockholders of the Swiss banks paid the expenses incurred by German tourists.

German corporations are not free to distribute their profits to the shareholders. The amount of the dividends is strictly limited according to a highly complicated legal technique. It has been asserted that this does not constitute a serious check, as the corporations are free to water the stock. This is an error. They are free to increase their nominal stock only out of profits made and declared and taxed as such in previous years but not distributed to the shareholders.

As all private consumption is strictly limited and controlled by the government, and as all unconsumed income must be invested, which means virtually lent to the government, high profits are nothing but a subtle method of taxation. The consumer has to pay high prices and business is nominally profitable. But the greater the profits are, the more the government funds are swelled. The government gets the money either as taxes or as loans. And everybody must be aware that these loans will one day be repudiated. For many years German business has not been in a position to replace its equipment. At the end of the war the assets of corporations and private firms will consist mainly of worn-out machinery and various doubtful claims against the government. Warring Germany lives on its capital stock, i.e., on the capital nominally and seemingly owned by its capitalists.

The Nazis interpret the attitudes of other nations with regard to the problem of raw materials as an acknowledgment of the fairness of their own claims. The League of Nations has established that the present state of affairs is unsatisfactory and hurts the interests of those nations calling themselves have-nots. The fourth point of the Atlantic Declaration of August 14, 1941, in which the chiefs of the governments of the United Kingdom and of the United States made known “certain common principles in the national policies of their respective countries on which they base their hope for a better future of the world,” reads as follows: “They will endeavor, with due respect for their existing obligations, to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity.”

The Roman Catholic Church is, in a world war, above the fighting parties. There are Catholics in both camps. The Pope is in a position to view the conflict with impartiality. It was, therefore, in the eyes of the Nazis very significant when the Pope discovered the root causes of the war in “that cold and calculating egoism which tends to hoard the economic resources and materials destined for the use of all to such an extent that the nations less favored by nature are not permitted access to them,” and further declared that he saw “admitted the necessity of a participation of all in the natural riches of the earth even on the part of those nations which in the fulfillment of this principle belong to the category of givers and not to that of receivers.”*

Well, say the Nazis, everybody admits that our grievances are reasonable. And, they add, in this world which seeks autarky of totalitarian nations, the only way to redress them is to redistribute territorial sovereignty.

It was often contended that the dangers of autarky which the Nazis feared were still far away, that Germany could still expand its export trade, and that its per capita income continued to increase. Such objections did not impress the Germans. They wanted to realize economic equality, i.e., a productivity of German labor as high as that of any other nation. The wage earners of the Anglo-Saxon countries too, they objected, enjoy today a much higher standard of living than in the past. Nevertheless, the “progressives” do not consider this fact a justification of capitalism, but approve of labor’s claims for higher wages and the abolition of the wage system. It is unfair, said the Nazis, to object to the German claims when nobody objects to those of Anglo-Saxon labor.

The weakest argument brought forward against the Nazi doctrine was the pacifist slogan: War does not settle anything. For it cannot be denied that the present state of territorial sovereignty and political organization is the outcome of wars fought in the past. The sword freed France from the rule of the English kings and made it an independent nation, converted America and Australia into white men’s countries, and secured the autonomy of the American republics. Bloody battles made France and Belgium predominantly Catholic and Northern Germany and the Netherlands predominantly Protestant. Civil wars safeguarded the unity of the United States and of Switzerland.

Two efficacious and irrefutable objections could well have been raised against the plans of German aggression. One is that the Germans themselves had contributed as much as they could to the state of affairs that they considered so deplorable. The other is that war is incompatible with the international division of labor. But “progressives” and nationalists were not in a position to challenge Nazism on these grounds. They were not themselves concerned with the maintenance of the international division of labor; they advocated government control of business which must necessarily lead toward protectionism and finally toward autarky.

The fallacious doctrines of Nazism cannot withstand the criticism of sound economics, today disparaged as orthodox. But whoever clings to the dogmas of popular neo-Mercantilism and advocates government control of business is impotent to refute them. Fabian and Keynesian “unorthodoxy” resulted in a confused acceptance of the tenets of Nazism. Its application in practical policies frustrated all endeavors to form a common front of all nations menaced by the aspirations of Nazism.

[* ]It is important to realize that the Social Democrats, although the largest single group in the Reichstag of monarchical Germany, were far outnumbered by the other parties combined. They never got the support of the majority of the voters. Never during the Weimar Republic did all the Marxian parties together succeed in polling an absolute majority of votes or winning an absolute majority in the Reichstag.

[1. ][Wolfgang Kapp (1858–1922) German revolutionary. Founder of the German Fatherland Party (1917). He was a leader of the March 1920 coup attempt in Berlin known as the Kapp Putsch, which failed because of the socialist general strike. Kapp fled to Sweden, returned to Germany in 1922, and died awaiting trial.—Ed.]

[2. ][Defense alliances.—Ed.]

[* ]Stampfer, Die vierzehn Jahre der ersten Deutschen Republik (Karlsbad, 1936), p. 365.

[† ]“Zuwachs an bereitgestelltem Geldkapital,” Vierteljahrshefte zur Konjunkturforschung, Special number 22 (Berlin, 1931), p. 29.

[* ]Stolper, German Economy 1870–1940 (New York, 1940), p. 179.

[* ]However, the London Times as late as October 6, 1942, reported from Moscow that interrogation of German prisoners of war by the Russian authorities showed that a majority of the skilled workers were still strong supporters of the Nazis; particularly men in the age groups between 25 and 35, and those from the Ruhr and other older industrial centers.

[* ]Christmas Eve broadcast. New York Times, December 25, 1941.