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Rolf Wagenführ on the Inflation Boom (1932)

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That forced saving also began steadily to lose significance at this time was particularly disadvantageous for production. In 1920 and 1921 it had been possible to refinance continually industrial-commodity production through the effects of income fluctuations. To the extent, however, that all cost elements necessarily conformed to the currency devaluation (the transition to the gold standard), inflation no longer had a stimulating effect on commodity production. The stimulus was definitively lost as the workers then succeeded in bringing wage increases into conformity with the progressive currency devaluation. “From this moment on, there was no longer anyone onto whom the burden of the inflation, that is, the substantive loss it caused, could be transferred.”

From autumn 1922 industrial unemployment, which had steadily declined up to that point began to rise again. Opportunities for temporary work also began to shrink considerably.

In the context of the rise in production costs, the cost advantage relative to other national economies slowly but surely eroded.

Up until autumn 1922 exports, compared to the corresponding periods of the previous year, rose steadily. Beginning in August 1922, however, a contraction began; by the summer of 1923, exports amounted to only slightly more than a third of the previous high point.

[ . . . ]

Given the general regression—which necessarily accompanied inflationary developments—the results of the Ruhr invasion could only be catastrophic. One of the most highly-developed industrial sectors was removed from the overall structure of the national economy; exchange among the individual regions came to a complete stop. A portion of Ruhr industrial production was shut down entirely so that supplies of important raw materials (coal, iron, chemical products) to unoccupied Germany were threatened; conversely, goods otherwise sold in the Ruhr district (construction materials, wood, consumer goods, and agricultural products) encountered the predictable sales blockages.

As a whole the volume of production from 1922 to 1923 declined by a good third, returning it to a level below that of 1920. The production-goods industries were especially hard hit, with the decline in some areas amounting to as much as fifty percent. At the same time the production of consumer goods contracted by twenty-seven percent. The inflation boom had turned into a crisis.

[ . . . ]

Source of English translation: Rolf Wagenführ, “The Inflation Boom,” in The Weimar Republic Sourcebook, edited by Anton Kaes, Martin Jay, and Edward Dimendberg. © 1994 Regents of the University of California. Published by the University of California Press, pp. 78-80. Reprinted with permission of the University of California Press.

Source of original German text: Rolf Wagenführ, “Die Industriewirtschaft: Entwicklungstendenzen der deutschen und internationalen Industrieproduktion 1860-1932,” Vierteljahreshefte zur Konjunkturforschung, Special edition 31. Berlin: Rainer Hobbing Verlag (1932), pp. 25-27.

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