1931: Debt, Crisis, and the Rise of Hitler
Jan 2019 · Oxford University Press
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232
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About this ebook
Germany's financial collapse in the summer of 1931 was one of the biggest economic catastrophes of modern history. It led to a global panic, brought down the international monetary system, and turned a worldwide recession into a prolonged depression. The crisis also contributed decisively to the rise of Hitler. Within little more than a year of its onset, the Nazis were Germany's largest political party at both the regional and national level, paving the way for Hitler's eventual seizure of power in January 1933. The origins of the collapse lay in Germany's large pile of foreign debt denominated in gold-backed currencies, which condemned the German government to cut spending, raise taxes, and lower wages in the middle of a worldwide recession. As political resistance to this policy of austerity grew, the German government began to question its debt obligations, prompting foreign investors to panic and sell their German assets. The resulting currency crisis led to the failure of the already weakened banking system and a partial sovereign default. Hitler managed to profit from the crisis because he had been the most vocal critic of the reparation regime responsible for the lion's share of German debts. As the financial system collapsed, his relentless attacks against foreign creditors and the alleged complicity of the German government resonated more than ever with the electorate. The ruling parties that were responsible for the situation lost their credibility and became defenceless in the face of his onslaught against an establishment allegedly selling the country out to her foreign creditors. Meanwhile, these creditors hesitated too long to take the wind out of Hitler's sails by offering debt relief. In this way, a financial crisis soon developed into a political catastrophe for both Europe and the world.
About the author
Tobias Straumann is an Associate Professor of Economic History at the University of Zurich. He is a member of the European Historical Economics Society and the academic council of the European Association for Banking and Financial History. Straumann has widely published in the area of twentieth-century European financial and monetary history, and is the author of Fixed Ideas of Money: Small States and Exchange Rate Regimes in Twentieth-Century Europe, and the co-author of The Value of Risk: Swiss Re and the History of Reinsurance.
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