1923, 1933 and all that

Via Paul Krugman I read about this post on David Glasner's 'Uneasy money' blog. The first part is about currency wars in Asia and as such related to my last posts. But most interesting is perhaps the last paragraph where Glasner's hair is rightly raised by Irwin Stelzer's argument that Hitler was brought to power by run-away inflation in Germany in the 1930s. Here's Glasner + Stelzer:

OMG! Something has gone very, very wrong here. I repeat the critical passage to make sure it sinks all the way in.

Angela Merkel has made it clear that the long unpleasantness that followed Germany’s decision to run the money presses overtime in the 1930s is still etched in Germans’ minds

I can’t tell if Stelzer’s memory has failed him, and he is misrepresenting what Mrs. Merkel believes, or if — and this is an even more frightening thought — Mrs. Merkel actually believes that Hitler came to power, because Germany ran the money presses overtime in the 1930s.

I don't have a smoking-gun quote to hand, but the argument that inflation led to the collapse of the Weimar Republic is frequently used public debates in Germany and beyond. In this sense, Stelzer is actually right. This is unfortunate since, as Glasner points out, Hitler came to power thanks to deflation not inflation. See my earlier Brüning posts here, here and here. We should not forget that economic history does not tell the full story of Hitler's ascent. But to the extent that economics mattered it was unemployment and falling wages in the 1930s that did it. Remember that Hitler's first attempt to seize power, which came in 1923 in the middle of high inflation, failed and led to his imprisonment. If, in 1933, he was more successful, this was to no small extent due to the deflationary policies of Brüning and others in the preceding years.