14: Unemployment in Germany

Description

We end our series on the Great Depression by taking a deeper dive into how the German government chose to interact with rampant unemployment. We end our series on the Great Depression by taking a deeper dive into how Germany chose to interacted with rampant unemployment.

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Sources

China During the Great Depression: Market, State, and the World Economy, 1929-1937 by Tomoko Shiroyama
Germany and the Great Depression by Dieter Petzina
The Global Impact of the Great Depression: 1929-1939 by Dietmar Rothermund
Japan and World Depression: Then and Now Edited By Ronald Dore and Radha Sinha
The Failure of Economic Diplomacy: Britain, Germany, France and the United States 1931-36 by Patricia Clavin
The Forgotten Man by Amity Shales
The Great Crash of 1929 by John Kenneth Galbraith
The Great Depression in Europe, 1929-1939 by Patricia Clavin
The Politics of Depression in France 1923-1936 by Julian Jackson
The Slump: Britain and the Great Depression by John Stevenson and Chris Cook
The World in Depression 1929-1939 by Charles Kindleberger
Unemployment and the Great Depression in Weimar Germany Edited By Peter D. Stachura
The Gold Standard and the Great Depression by Barry Eichengreen and Peter Temin
Life Expectancy during the Great Depression in Eleven European Countries by Tim A. Bruckner, Andrew Noymer, and Ralph A. Catalano
The Origins and Nature of the Great Slump Revisited by Barry Eichengreen
Socialism and Wages in the Recovery from the Great Depression in the United States and Germany by Peter Temin

Transcript

In most of the nations that we have discussed during these Great Depression episodes, there were economic problems caused by the global economic crisis known as the Great Depression. There were monetary shortages, deflation, unemployment, and other issues, but for the most part these problems did not spool out into drastic changes within the make up of society. Changes did occur, and they were changes that we will continue to bump up against for the remainder of the episodes discussing events in the 1930s, but in most cases these changes were a matter of small shifts in how nations viewed and interacted with both their domestic and international economies. This was, however, not the case in all nations and in some there would be complete shifts in the political landscape which were not always directly caused by the Great Depression but the challenges presented by the Depression would influence those changes. That was true in the nation we will focus on today, Germany. Now, before we go any further I am going to say that this episode will be tightly focused on just one area of the German economy, unemployment, and how the German government reacted to the problem of unemployment during the Weimar period. This episode will not really touch on some of the wider political and social events that would occur during this period which culminated in the events of 1933. We will be spending plenty of time on those events starting next episode. A good introduction to the problem of unemployment in Germany is this quote from Dietmar Petzina from The Extent and Causes of Unemployment in the Weimar Republic “Although the problem of unemployment was not peculiar to Germany, in no other country was such an explosive combination of social collapse and political instability produced, which was to influence the course of history in such a fateful way.” Part of the reason that Germany was ripe for an unemployment crisis was related to how the economy had been structured after the First World War. The war itself had ravaged the German economy as more and more time, effort, and materials were poured into trying to win a war that would eventually be lost. These issues were exacerbated by the Allied blockade which caused some goods to simply vanish from the German market and those of other central European nations. Then after the war the nation was for many months shut off from establishing new economic relations with any Western nations, and in the east the turmoil of the Russian Civil War and Polish-Soviet conflict made any economic activity difficult. Once these economies then restarted, the inflation began, and before it was over Germany would not just experience inflation but also hyper inflation. This resulted in an economy in which all money became essentially worthless within a matter of days, or even within hours. There are stories of German workers being forced to spend all of their salary immediately because if they waited even a few days it might have drastically less purchasing power. Inflation would eventually slow, but not before Germany was irrevocably changed by its effects. One thing that did not change was that Germany was heavily dependent on foreign investments and loans in trying to grow the economy. By the late 1920s, the economic situation in Germany had improved, and was at least stable. There were many signs of growth, which then encouraged more foreign money to come into the country which helped to cause more growth. Things were going well, as long as everybody that was investing in Germany believed that things would continue to go well. But the entire structure of the German economy was susceptible to disruption and not just domestic disruption, but also anything that would inhibit the flow of foreign capital, like say a global economic crisis. As soon as the crisis began hitting other nations it would then hit Germany, and the German economy would spiral out of control. By the middle of 1931 the government was forced to call for mandatory bank holidays to prevent waves of bank defaults. In terms of unemployment, it seemed to increase almost without end.

When discussing unemployment statistics throughout history, even up to the start of the First World War, there is always a challenge. Part of the problem was the lack of general desire by governments to collect and determine statistics, but in direct relation to unemployment part of it was due to how unemployed workers were viewed. Up until the industrial revolution there was a general feeling that the people who were unemployed and could not fid work were in some way just doing it wrong, that it was in fact there fault that they were stuck in such a state. Because of this there was a general pressure upon those who were unemployed to hide that fact, and on the government to be generally less concerned about whatever happened to those individuals. This mindset did slowly change, with a more modern approach to unemployment being found after it was generally realized that in a modern capitalistic society there was often very little that an individual could due to escape unemployment in many circumstances. However, this change in mindset, and the eventual changes in public policy that it would cause, would not be fully cemented until decades later when many workers who became unemployed started to become more politically active. By the time that you get to the revolutionary years of 1917-1920 there was a strong correlation in the minds of many more conservative parties and politicians between the condition of unemployment and the development of political radicalism. This would contribute to two changes that would occur. The first was that there was a wave of changes to the unemployment legislation in many nations as the moderate and left wing political groups gained enough control to push through some level of reform, if only to placate those individuals who were unable to find employment and to prevent them from feeling forced to turn to political radicalism. The second was that many nations started to become far more concerned with determining exactly who and how many people were unemployed.

Even in the relatively good periods during the mid and late 1920s there were still many Germans who were not employed. The economic issues that were experienced in the post war period had caused many progressive changes that had been made both during and after the war to begin to come under fire. Then when the depression hit there was growing pressure to turn back the clock on some of these shifts, like a move of more women into the workplace. Working women in Germany were already experiencing discrimination in the workplace, they received less pay, had less job security, and they also faced hiring discrimination. On top of these issues there was also a growing feeling among some Germans that working women were in some way stealing jobs away from other workers, of course male workers. These feelings were not just privately held beliefs but would instead be discussed openly in public all over Germany. This mindset was rooted in traditional gender roles, that a woman should be a mother and should be responsible for taking care of the home, the man should be the one to go out and get a job to support his family. However, just like in every other nation the modern economy made no such distinctions as it sought workers. These feelings were rooted both in a general misogynism but also just a search for anything that was different than what were seen as the “good old days” when the economy had been much healthier. The general discrimination against women also extended into unemployment statistics, with the primary way of gathering statistics being through information gathered from the Trade Unions. Working women were heavily under represented in the Trade Unions, which were almost entirely populated by men, and this meant that it is very difficult to know exactly how many women who were seeking jobs could not find them, or who had lost jobs and were out of work during the Weimar period. This means that the official number of unemployed workers in Germany, which were 1.6 million in October 1929, then 3 million in early 1930, before peaking at 6 million in early 1932, which was roughly a third of the total working age population of Germany, a number that makes it from a statistical unemployment perspective makes Germany one of the hardest hit economies in the world, was probably underrepresenting both women who were out of the workforce as well as agricultural workers. Agricultural workers, and any other seasonal workers, have for the last century been the thorn in the side of unemployment statistics and attempts at providing unemployment benefits. This was because in a seasonal role it was possible that when the seasonal job naturally ended, there were expectations that the next season the job would be available. Then after several expected months of being off the job, only then would the worker actually find out that their job would not be returning for the next season. In these cases the workers were often outside the window in which they would be eligible for unemployment benefits from the German government, which caused some serious issues for these seasonal and agricultural workers.

In a time of mass unemployment like what was experienced during these years there were demands for action from the government, but just like with every other government the path that the German government should take was unclear. During the worst years of the depression Germany would be led by Chancellor Heinrich Bruning, a member of the Centre party and Chancellor from 1930 to 1932. Bruning believed that the best way to bring Germany out of the depression was through a policy of deflation. He wanted to get the cost of goods reduced so that they were cheaper to both individuals and businesses, he wanted to get wages down so that businesses could better compete in the export market and he wanted to make surer that through all of this the government’s budget was balanced. Bruning also believed that a government financed work creation program would do more harm than good for the overall German economy. He also believed that such a work creation program would result in inflation, and perhaps drastic inflation, which was something that many in Germany greatly feared given their experiences with the hyper inflation that occurred during the 1920s. There was also the general understanding that such a program would have to be financed through and increase in government debt and likely an ongoing budget deficit, both of which Bruning wanted to avoid. I do want to be clear that just because I am focusing on Bruning here does not mean that these ideas and programs were not favored by large groups within both the German government and among the German citizens. He was put in the position of Chancellor, and he remained in that position for two years for a reason. Many of the strategies that Bruning pushed for were also mirrored in other nations that we have already discussed. The British government also rejected a public work creation program, for many of the same reasons as the German government, they both believed that it would not solve the economic issues that caused the unemployment in the first place and would instead just balloon government debt for no gain. The French government strongly embraced a deflationary strategy during the depression, for many of the same reasons that Bruning did. However, what Bruning failed to properly realize was the drastic chasm between what the German government could afford and what the German people would accept. This chasm existed in other nations, but the difference was far less. The only way for the German government to balance its budget was to drastically cut social welfare programs like those that provided unemployment benefits. Then as more people became unemployed tax revenues fell, and more cuts had to be made. This left many Germans unable to support themselves or their families, which would eventually push them into desperate positions. Bruning’s decisions would have many consequences, and millions of Germans would feel that they had been abandoned by the government in Berlin.

As always, the lower classes would bear the brunt of these problems, and among them younger workers were the hardest hit, at least in terms of mindset and morale if not monetarily. After about 1929 the job prospects for young Germans who were exiting school every year was incredibly grim. There were also many more people who fell into this group than at any other point in German history because the years before the First World War had seen a massive increase in the birthrate throughout Germany. This could be considered one of the causes of the First World War, but that is a long conversation that is not fit for this episode. These individuals from the pre-war cohorts were entering the work force during this period of economic hardship. One example of the problems that they were experiencing can be seen in the traditional apprenticeship driven trades. Many apprenticeships had evaporated due to the difficulties of supporting the industries that had previously provided them. Even those individuals who were able to find and complete an apprenticeship during this period quickly found that there was not enough work for them and instead industries were shifting to a greater utilization of unskilled labor. The situation was even worse among industrial workers. The drastic reduction in industrial employment, and then the reduction of wages that was forced upon the workers by deflation, caused many families dependent on industrial employment to slip into poverty. The problems that these situations caused were not limited just to the workers themselves but also effected their whole families as children who were in school lost many opportunities for further education and education budgets around the country were slashed to the lowest possible amounts. While these issues caused important physical and concrete issues for these groups, it also caused a serious drop in confidence and belief in the future. For parents this was driven by their inability to provide for their families, something the inability to make sure they had the barest necessities of life. For their children it was driven by living in a world where everyone around them was in poverty and there was seemingly no hope of an exit from that poverty. The story of Germany in the early 1930s is one of increasing political radicalization, and these desperate economic circumstances for millions of Germans was one of the core reasons for that radicalization.

This radicalization would eventually lead to the events of 1933, but before those events occurred it would first lead to a splintering of the political landscape. After the First World War German politics consisted of small parties on the left and right and then a very large concentration of support for parties that were in the center. These parties, with the Centre and Social Democrat parties being the largest, were the key coalition that had brought Germany out of the very challenging time immediately after the war, and it was their concentration of support that had prevented a larger German revolution from occurring. However, as the Weimar coalition continued to be in power and then the overall situation in Germany did not greatly improve the support for the more moderate parties began to wane. As Germans sought more radical solutions in more radical parties they did not all come to the same conclusion about which version of radical was the correct one. This resulted in more radical parties on both ends of the political spectrum gaining in support with both the Communists and the National Socialists both seeing drastic increases in support during the depression. Here is Conan J. Fischer from Unemployment and Left-Wing Radicalism in Weimar Germany, 1930–1933 “Calamitous economic collapse, a sharp rise in the level of unemployment, and an upsurge in political radicalism occurred simultaneously in Germany during the early 1930s. On the political Right the splinter parties, small liberal parties and, to a large degree, the conservative DNVP saw their voters switch to the NSDAP. On the political Left the republican Social Democratic Party (SPD) vote declined whilst the revolutionary German Communist Party (KPD) vote increased.” I should be clear that unemployment was just one of many contributing factors to this shift in political support. It was a very complicated movement to which there were a whole host of reasons, but unemployment was one of them. As with many other nations the Great Depression, and the unemployment that it caused, would simply amplify and accelerate pre-existing movements and emotions within Germany, it did not cause the genesis of those movements and emotions.

When looking at the effects of the depression on a global scale there are several worldwide themes that become clear. The first is that it would cause many nations to retreat into economic isolationism as they sought to insulate their domestic economy. The second was that it caused massive waves of unemployment and economic distress as each nation would attempt to weather the economic storm in the best possible way. The third is that it caused a whole generation of people all over the world to question the status quo, and in some areas of the world this questioning would have wider consequences, especially in areas where there were already serious doubts about the direction of the nation. But as Patricia Clavin says in their article The Great Depression in Europe, 1929-1939 “It is important not to oversimplify the relationship between economic misery and political radicalism. […] However, in much of central and eastern Europe the coming of the depression seemed to validate all of the criticisms made of the democratic system by those on the right and the extreme left.” In retrospect there are certainly things that we know today which could have done much to ease the crisis. One example of this is that we know that the deflationary tactics used by nations like France and Germany were not going to have the successful outcome that they hoped. They of course did not know this outcome and so in a period of great economic distress they retreated back into the economic orthodoxy which had served them so well for decades. Unfortunately instead of fixing the problem the deflationary tactics just caused more deflation as everybody became incredibly paranoid about investing in anything, which caused economies to further slow. Another example of these incorrect decisions is the failure of many governments to confront the banking crisis which was happening around the world. Banks failed everywhere, and this caused consumer and business confidence to greatly diminish, which caused bank runs and defaults, all events that would cause economies to further grind to a halt. There were things that governments could have done to shore up the banks, there was the possibly of international actions to try and make sure that national and regional banks did not fail, the capital was available, just not in the right places. However, this would have required some nations, probably the United States, Great Britain, and France, to put aside national differences and economic disagreements to instead come together and provide a unified front of action, a unification of purpose that simply was not possible. There are also some items that often get mentioned as effects of the Depression that did not really happen. For example there is a pretty widespread belief that mortality rates increased during the depression. The statistics during this period are not perfect, but there is not really any recognizable increase in mortality rate and overall life expectancy around the globe. There were certainly specific groups of people who experienced hardship and perhaps an increased mortality, but it was not an overall trend. It is however possible that other trends hide any increase in Depression related deaths. Here is an excerpt from Life Expectancy during the Great Depression in Eleven European Countries by Tim A. Bruckner, Andrew Noymer, and Ralph A. Catalano “[It is] Possible that constraints on risk-taking during economic recessions probably reduced mortality among individuals who did not lose jobs or suffer severe economic shock. These averted deaths may have counterbalanced any increase in mortality attributable to job loss and impoverishment.”

While the story of the Great Depression was a story that encompassed the entire world, for our purposes the story from here continues into detail on the events inside just one nation in the middle of the Depression, and that nation is Germany. The events that occurred in Germany in the early 1930s are a complex and weaving story and their outcome was in no way inevitable, and while they were not caused by the Great Depression, they were certainly effected by it. I hope you will join me next episode as probably the most famous, or infamous, individual of the entire story of the Second World War finally enters the podcast.