On Politics

Party leaders tie the U.S. stock drop to domestic woes, making a potent case to German voters.

By Bruno Henschel and Leah Rosenberg
Nov. 1, 1929

BERLIN — Immediately after the U.S. stock market plunged, the political debate in the Reichstag was a free-for-all. The governing Social Democrats and their coalition allies — the conservative People’s Party and the Centre Party — aligned behind Chancellor Hermann Müller, exhibiting what was once considered a traditional show of unity in a crisis. But from the left and right, Communist and Nazi lawmakers portrayed Mr. Müller as weak and indecisive. In perhaps the strangest twist, the Nazi leader seemed to exult over the Wall Street crash, saying it foretold the coming collapse of global elites.

Now, Nazi leaders are fine-tuning their message.

The party leader, Adolf Hitler, will declare Friday that “Jews and Bolsheviks are to blame for America’s stock market crash, and Germany must free itself from both,” according to excerpts from a speech that the war veteran will deliver at a party retreat today in Munich.

Other Nazis have urged Mr. Hitler to keep his focus on criticism of Mr. Müller, tying the new economic turmoil to longstanding mismanagement of inflation and unemployment.

Twelve Nazi members of the Reichstag — all elected last year — have hammered the chancellor all week.

“We can only protect our economy by rebuilding the German military,” Nazi lawmakers from Prussia and Bavaria said in a statement. “People in our states cannot afford another bout of inflation, and cannot afford to be held hostage by Jewish bankers in New York and London and Communist agitators in Hamburg and St. Petersburg.”

Although some aspects of the Nazi critique crumble upon closer inspection, the newly coordinated message is unifying the far right after a fractious intramural debate over how to handle America and, to a lesser extent, Britain and France. And with inflation and joblessness already high, linking Mr. Müller’s handling of the stock market crash to his domestic woes could prove to be a potent argument with voters.

The danger, foreign policy experts say, is that a depression in the United States, given its vast wealth and industrial might, could have a contagion effect, taking down many other economies with it, including those of Western Europe and Japan, and unsettling a world that is still slowly recovering from the Great War of 1914-18.

“It’s like foreign policy is a blank screen on which we project all our internal divides,” said Hans-Georg Miller, co-editor of The Liberal Patriot, a website focused on the politics of national security. “As if the Americans are just props in our own political story.”

A fragile coalition

In focusing on American capitalism — and, in their view, its Jewish sponsors — the Nazis are aggravating divisions in Mr. Müller’s coalition that have emerged since the death last month of Gustav Stresemann, the widely admired centrist statesman who was very close to Mr. Müller, despite their political differences.

The Social Democrats recognize how fragile their Reichstag coalition is. They have to manage anger from their working-class base over painful budget cuts. The party’s left flank is demanding nationwide unemployment insurance, accident insurance for workers in dangerous jobs, and pensions for unemployed Germans starting at 60 — and is threatening to defect to the Communists if its demands aren’t met. Meanwhile, the Social Democrats’ coalition partners have wildly diverging agendas: the People’s Party wants to restore the power of Prussian elites, while the Centre Party’s priority is defending the prerogatives of the Catholic Church.

Senior Social Democrats in the Reichstag support legislation to prop up the Reichsmark, restrict stock speculation, issue new government bonds, and increase taxes on industrialists. Coalition partners, however, oppose such measures, noting that the Reichsbank has been formally independent from the government since 1925 and arguing that Germany cannot afford to take on any more debt. They are threatening to block any economic relief package the chancellor sends to the Reichstag unless unemployment benefits are reduced first.

Mr. Müller may have to relent. Other influential Social Democrats have signaled their support. “It just infuriates me to think that our economy is dependent on the American stock market,” a senior Social Democrat told the ring-wing paper Der Stürmer.

The case for ultra-nationalism

The Nazis say that Germany’s still-young democratic republic is already near the brink of collapse, and that political pluralism is a sign of cultural decadence and governmental dysfunction. Riding a wave of support from voters sympathetic to their populist message of restoring national greatness, the Nazis entered the Reichstag for the first time last year.

They are now pushing for even more aggressive moves, such as resuming military spending, remilitarizing the Rhineland, and even asserting territorial claims in Central Europe, although scholars say such actions could violate international law. And they are calling for a few-holds-barred crackdown on Jews, Communists and homosexuals, even as the Müller government argues that those groups are a punching bag and a distraction from Germany’s deep-seated economic and governance problems.

The Müller defense

The chancellor’s team says they’ve been aggressive — and they point to an unprecedented series of steps Germany has taken in a matter of days.

Right after the Wall Street crash, the Reichsbank opened new lines of liquidity, regulators suspended trading in volatile assets, and industrialists began building up their inventory. German banks have pulled Reichsmarks out of the United States. They’re even seizing financial assets held in Germany by associates of President Herbert Hoover.

“We are ensuring that the Wall Street crash does not jump across the Atlantic,” said a chancellery official who wasn’t authorized to speak on the record.

Mr. Müller’s officials liken their actions to gradually building a moat around the American economy.

“They’re not intended to max out at the beginning,” said the chancellery’s secretary. “They’re long-lasting and sustainable, and they’re intended to buffer the German economy.”

The problem Germany faces, current and former officials say, is one of timing. How long can Mr. Müller’s fragile coalition keep the economy stable in the face of a potential economic downturn? Can the economy be stabilized quickly enough — if at all — to insulate Germany from the aftershocks of the Wall Street crash? And how can the chancellery juggle all this without triggering another no-confidence vote in a Reichstag that is already deeply divided over foreign policy and high inflation and that is losing faith in democracy?

“Look, conceivably the Nazis win power as early as 1932, begin a genocidal campaign against vulnerable minorities, and then declare war on Britain and France and, later, the Soviet Union,” said a former Finance Ministry official. “But that’s highly speculative and world war wouldn’t possibly come as fast as an economic depression.”