Finance from Kaiser to Feuhrer: Budget Politics in Germany, 1912-1934

Finance from Kaiser to Feuhrer: Budget Politics in Germany, 1912-1934

Finance from Kaiser to Feuhrer: Budget Politics in Germany, 1912-1934

Finance from Kaiser to Feuhrer: Budget Politics in Germany, 1912-1934


Germany's ability to support its war machine financially has long puzzled scholars. The young nation had exhausted itself paying for its loss in the First World War, had suffered a hyperinflation in the early 1920s, and had ended the 1920s with a terrible economic depression. This is the first book in any language to examine the budget policies of the middle years of the Weimar Republic and to look at how these policies changed the politics of the time. It is also the first work to support the government's aggressive use of deficit spending and fiscal stimuli to promote economic growth. Some findings even indicate that the German government could have used creative financial solutions to avoid the worst of the Depression and to avert the Nazi regime.

Clingan explores the changes and continuities in fiscal policy and budget-making politics, beginning in the last years of the Wilhelmine Empire and continuing into the 1930s. Although this is a story about money, it is also a story about men. Very few in Nazi Germany understood the intricacies of fiscal policy and budget making, and political parties tended to follow the lead of those who did. Clingan combines their personal stories with the tale of a country still growing into its economic power and still trying to learn both its limits and its strengths.


On June 14, 1934, the government of Adolf Hitler announced that it was suspending payment on all foreign debts, including bonds from happier times. In 1924 the Reichstag had passed the Dawes Plan, which featured a loan from American bankers. The Dawes Plan had marked a key point in the stabilization of the Weimar Republic because it settled a longstanding international crisis, and its passage began the stable period when many members of the German National People’s Party (DNVP) grudgingly supported the Republic. Another set of bonds dated from the 1930 Young Plan. The state of Prussia had taken two other loans in 1926 and 1927 to pay for infrastructure improvements such as streets and canals. The two countries holding most of these bonds, the United States and Great Britain, made face-saving agreements that delayed repayment until 1945. Under a 1953 treaty, the Federal Republic of Germany would pay the principal while the interest would accumulate until Germany was united. In the postwar years, negotiation settled most of the outstanding debts of the German Reich, but the Dawes, Young, and Prussian loans remained in limbo.

In 1945 the issue of how the Nazis paid for their war seemed fairly clear to the Allies. They indicted Hjalmar Schacht, the President of the Reichsbank. “Through Schacht’s financial genius, monetary measures were devised to restore Germany to full production; and through the control of

1. Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (New York, 1990), pp. 395–396. John Weitz, Hitler’s Banker: Hjalmar Horace Greeley Schacht (Boston, 1997), p. 162. Preußische Geheime Staatsarchiv(PrStA), Berlin-Dahlem, Rep. 151, Prussian Finance Ministry, 1074/4. New York Times, January 6, 1995. Harold James, The German Slump: Politics and Economics 1924–1936 (Oxford, 1986), p. 407.

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