Market Crash

Hermann Müller, a competent and experienced SPD Politician with a willingness to bridge divides. Naturally this means he will die in 1931 of medical complications, weakening the SPD leadership further. Photo Credit:

More prominent than the Blutmai schism was the 1929 Stock Market Crash and the start of the Great Depression. The speculative booms of the 20s had set up the global economy for a hard crash, and in a month long period from September 20th to October 24th first the British and then the American stock markets took a long sharp fall off a cliff. On the 28th and the 29th alone, 30 billion dollars in market value were lost. No one took this plunge down a fiscal staircase well, least of all in Germany. Already unstable, Germany was abruptly hammered as the cycle of loans envisioned in the Young Plan were abruptly closed off. Back in a similar cycle where every cash starved bank and country were calling in debts that could not be repaid, German businesses and government spiraled badly.

While there were options for managing the crisis, the coalition government was fighting through the psychological scars of Germany’s last bout of hyperinflation and also deeply divided about which choices to make. The conservative wing and Catholic Zentrum placed all the blame on Versailles, and hoped that a mix of austerity and further renegotiations on the Young Plan would do the trick. The SPD under Müller advocated for the Keynesian option of increased spending to soften the blow, even though the government had no savings to do so. Never an easy alliance to begin with, the tension between the SPD and the capitalist parties began to tear apart the cabinet. Other compounding issues, like the still inflamed issue of Poland, didn’t help matters.

The fatal split for the coalition hit over unemployment benefits. Given that over three million Germans were already on unemployment and the number was shooting up rapidly, the conservatives saw this as a major drain on the treasury. While Müller eventually conceded to a compromise brokered by Zentrum, the SPD’s membership argued that this was severing the last financial lifeline at a time when more people than ever needed one. They were done conceding ground to the capitalists. When Müller turned to President Hindenburg for support, he found a closed door. Never a fan of the SPD and surrounded by advisers who liked them even less, Hindenburg dissolved the government. It was the first in a series of political missteps on the road to Hitler.

The replacement was a minority center right coalition under Heinrich Brüning, a Catholic Zentrum. Well aware that he could face a vote of no confidence at any time, Brüning opted to bypass the Reichstag as much as possible. This effectively meant relying on Hindenburg’s Article 48 powers in the state of an emergency, which was so ambiguously worded that Brüning began to push the legislative equivalent of freight trains through this loophole. One of these was a call for a snap election on September 14th, 1930. Well on his way to our second tactical misstep, Brüning expected the SPD to take the lion’s share of the blame for the coalition’s collapse. Instead,

“the government was severely  attacked  by the Social Democrats for its use of Article 48; by the Nationalists  because  of  its  support  of  the Young Plan; by the Communists on general  principles; and last, but not least, by the National Socialists led by Adolf Hitler, not on general principles, but without any principles at all!”[1]

Heinrich Brüning
Heinrich Brüning. Not exactly a power grabber, but hardly the champion Weimar Democracy needed. Photo Credit: Bundesarchiv.

The Nazis especially startled observers like Pollock. “Amply financed, apparently by certain business circles which thought that the National Socialists would be the best checkmate to the Social Democrats, the party put its propaganda across most effectively. Its campaign talk was the sheerest drivel.  Never-even at home-have I heard such blithering nonsense.”[2]

The Nazis were making certain that their particular brand of blithering nonsense was as pervasive as possible. After spending the 20’s parroting what they could from the socialist and communist dogmas, the Nazis easily incorporated elements of a pro-business conservative party. Not that Hitler would have reflected this in his popular speeches. The money flooded in, and Goebbels put it to work in flyers, posters, radio ads, and a full speaking schedule for Hitler and other prominent Nazis. When Goebbels himself was banned from speaking, he prerecorded his speeches and broadcast them in public spaces. When a KPD member put a bullet through a prominent SA man named Horst Wessel in February, Goebbels turned both the murder and Wessel’s subsequent funeral into a political bonanza. The Horst Wessel Song[3], sung to a tune Wessel had penned himself, became the fight song of the SA. The funeral itself became a political bonanza.

unemployed alpha history
Workers in an unemployment line in 1929. Photo Credit: Alpha History.

Notably the Nazis themselves were not in perfect goose step at this time, and some of the SA chafed at the discipline being imposed on them for the sake of longer term political goals. In August and September 1930 a growing rift between the comparatively left leaning and militant SA and Hitler’s faction spilled into the open. Led by Berlin SA leader Walter Stennes, much of the SA had kept a revolutionary attitude that called on them to take their fight directly to the Communists and Jews, and the economic crisis had only stoked them further. Goebbels, favoring the more politically oriented and disciplined Schutzstaffel had been withholding their funding. For now the revolt simmered, and the Nazis managed to keep enough of their forces in line to pay major dividends in the 1930 election.

German voters were already furious and hurting. They were not interested in living in the house Brüning seemed to be building, and were tossing their votes to the arsonists. The KPD leapt up to 77 seats in the Reichstag, while the Nazis jumped from 12 seats to a staggering 107. Effectively this put almost 2/5 of the Reichstag in the hands of parties that were openly opposed to the Weimar Constitution, and out to destroy it. This was not exactly a sustainable set of circumstances.

[1] Pollock, J.K. (1930). The German Elections of 1930. American Political Science Review

[2] Pollock 1930

[3] Which remains banned in Germany since 1991.


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