6. Stabilisation

THE 1923 DEFEAT in Germany had profound consequences. The defeat provided the political premise for the stablisation of capitalism. Within the USSR, it dashed the hopes of the Russian masses, who closely followed the revolutionary events in Germany. The demoralisation strengthened the grip of the growing bureaucracy, which had developed out of the isolation of the Russian Revolution under conditions of economic and cultural backwardness. The death of Lenin in January 1924 provided a further setback for the soviet working class. These events sharpened the struggle between Stalin, the figurehead of the bureaucracy (who had formed an unprincipled block with Zinoviev and Kamenev), and the newly formed Left Opposition headed by Leon Trotsky (which fought for Party democracy and a plan to co-ordinate industry and agriculture). It was on the basis of these setbacks that Stalin came forward in the autumn of 1924 with the anti-Bolshevik theory of 'Socialism in one country', which reflected the desire of the bureaucracy for a stable existence.

By the beginning of 1924, the KPD had been banned, the eight-hour day abolished, and the government embarked on a programme of economic recovery based on the introduction of a new and stable currency, the Reutenmark.


The imperialist powers, alarmed by the revolutionary events of 1923, were terrified by the perspective of 'Bolshevism' sweeping through Germany and Europe. As a result, their attitude towards the Weimar Republic turned 180 degrees with the acceptance of the United States' government's Dawes Plan. This financial agreement secured the withdrawal of French troops, and instead of bleeding Germany white, American imperialism poured in colossal sums to rebuild German industry. The payment of reparations was drastically reduced, while German big business received a loan of 5000 million dollars to rebuild the economy. By 1929 she had paid 8000 million Reutenmarks in reparations, and in return had received 13,000 million Reutenmarks in loans of various types. These quasi-'Keynesian' methods had a stimulating effect on the German economy.

Output in 1923 was 55 per cent of 1913 levels (the peak of pre-war production); by 1927 it was 122 per cent of the 1913 levels. By 1927 the average monthly production of iron ore and steel amounted to 1136 million tonnes and 1395 million tonnes respectively, as against 1397 million tonnes and 1429 million tonnes in 1913. This economic upturn, based on international credit and loans, resulted in a period of falling inflation and economic stability. By this time, foreign indebtedness increased to one half of the national income. It was a period of 'borrowed prosperity'.

With trade and industry returning to 'normality' the number of industrial disputes rose sharply. In 1924 there were more working days lost as a result of strikes and lock-outs than in any other year between the two world wars: 13.2 million days were lost through strikes, and 22.6 million days due to lock-outs. Despite this increase in trade union activity after the October defeat, membership of the trade union federations declined from 7.8 million in 1922 to around 4.6 million in 1924. In the period after 1924, strike figures fell rapidly as state arbitration was increasingly used to settle disputes.

Germany's economic revival, and the relative stability that went with it, coincided with the considerable increase in support for the Social Democratic Party. And although it was out of office until 1928, it still remained the single largest party within the Reichstag. Almost without interruption, the SPD ran the government of Germany's most important state, Prussia, which included the capital, Berlin, and two-thirds of the country's population.

On the other hand, the KPD, which had experienced its biggest defeat in October, had been declared illegal by General von Seekt. After the October debacle, Brandler was removed from the KPD leadership by the Comintern and the party was now led by the ultra-lefts, Ruth Fischer and Arkadi Maslow. Despite everything that Lenin had written, the new leadership introduced an adventurous policy of creating separate 'red' trade unions which completely isolated them from the offical labour movement and resulted in the loss of over one million votes at the election in December 1924. The proportion of trade unionists in the Berlin branch of the KPD fell to less than 30 per cent in 1924.

The degree to which the party's influence had declined in the official organisations was shown by the decline in KPD delegates to the Trade Union Congress: in 1922 they had 88 delegates, but by 1925 it was reduced dramatically to four. The ultra-left leaders were a complete disaster; and, once again, at the behest of the Stalinist Comintern, they were expelled and replaced by leaders more in tune and more pliant to Moscow. Within a year, with a more opportunist policy being pursued by the Communist International and with the creation of the Anglo Soviet Trade Union Committee, the KPD began to push for trade union unity.

The 1925 Presidential Election

The death of President Ebert in 1925 resulted in a new election being called in which seven candidates took part. The right parties had put up a joint candidate, Doctor Jarres the Burgomaster of Duisburg, who won the first ballot. Next to him came the Social Democrat, Otto Braun (the then Prime Minister of Prussia), who had received the second largest vote. He had every chance of gaining the additional three million votes to win outright. Yet out of the blue the Social Democrats decided to withdraw their candidate in support of the Catholic Centre Party's Doctor Wilhelm Marx. He had headed a government in early 1924 which introduced severe deflationary measures against the working class and ruled by emergency decree. Far from being a front runner, Wilhelm Marx had only received half as many votes as Braun!

In the final ballot the right had also changed their candidate to Field Marshall von Hindenburg (advertised as 'the Saviour'). The Social Democrats had justified their support for the reactionary Dr Marx as a policy of the 'lesser evil'. This shallow policy was to have dire consequences for the German working class. The Communist Party put up Ernst Thaelmann as their candidate. By a very small margin, the militarist Hindenburg was elected President of the Republic.

A further consequence of the economic revival was the demand by the old Hohenzollern monarchy for compensation for the 1918 revolution! This had been raised to one degree or another over the previous five years, so the SPD and KPD agreed to join forces to end this scandal once and for all through a referendum. They campaigned boldly for the complete expropriation of the property of the old nobility, no compensation, and the establishment of a fund for war invalids, old age pensioners and the unemployed out of these proceeds. The campaign was one of the most successful ever mounted by the workers' parties. Despite not achieving an overwhelming majority, the combined left forces won 14.5 million votes, which compared extremely favourably to the 10.5 million they had both recorded in the December 1924 general election. It was the most successful joint action since the Kapp putch of 1920.

The period 1925 to 1929 were years of maximum stability for the Weimar Republic. Unemployment had fallen to 65,000 by 1928, and retail sales were up 20 per cent over their 1925 level. Prosperity began to return to Germany.

The 1928 General Election

By the general election of 1928, the boom was reaching its peak. It gave rise to feelings of increased social and political stability, which resulted, after a four year interval, in the return of the 'Grand Coalition' headed by the Social Democrats under Herman Mueller.

Without exception, the bourgeois parties faced a decline in support. Hitler's Nazi Party gained only 12 seats (out of 474), with 810,000 votes, reflecting the doldrums that the fascists were in. The Nationalist vote fell by one third to four million. On the other hand, the KPD increased its vote to 3.2 million, and the SPD to over nine million.

Despite the SPD and KPD having gained a total of 42 per cent of the seats in Reichstag, the liberal-social democratic coalition, true to its past performance, pursued pro-capitalist policies on all questions, which were to give rise to wide-spread disillusionment.

By this time, the Communist International had become transformed into a foreign policy tool of the Stalinist bureaucracy. The defeat of the British general strike, and the Chinese Revolution from 1925 to 1927, due to the false policies of Stalin and Co, further reinforced the position of the parasitic bureaucracy. After a decade of colossal sacrifices and international defeats, the Russian masses were in a state of severe exhaustion. Each international set-back strengthened the Stalinist bureaucracy, which raised itself above the working class as an independent arbiter. By late 1927, the Left Opposition had been expelled and within a few months, Trotsky deported to Siberia. Stalin, as the figurehead of the bureaucracy, then began a purge of all opposition elements, including Bukharin's Right Opposition.

In a similar fashion, the Stalinists carried though a purge in all sections of the Comintern, appointing loyal, pliant, obedient stooges in their place.

The 'Third Period'

In August 1928, after the Comintern had burnt its fingers pursuing opportunist policies in Britain and China, the Sixth World Congress ushered in a new ultra-left turn in international policy. A key resolution was passed stating that the period of capitalist stability had ended and a new 'third' period had opened. To the schema of the Comintern leaders, the so-called 'first period' was the revolutionary years of the immediate post-war, the 'second' was one of relative stability, and now the 'third' was one of wars and revolutions. The reality, however, was very different, as capitalism was still experiencing an economic upswing and continued political stability. In fact, it was not until April 1929 that the boom in Germany reached its peak - the Stalinists had no inkling of the future stock market crash of October 1929. This erroneous 'Third Period' policy was to prepare the way for an absolute catastrophe internationally and particularly in Germany.

The Stalinists stated that the main danger now emmanated from the left! Parties were ordered to break with the official trade unions and reestablish 'Red' unions wherever possible. Collaboration with social democracy became the worst possible crime, and the social democrats internationally were denounced as 'social fascists' and therefore the main enemy! In the words of Stalin: 'Fascism and social democracy are not opposites, but twins.'

In Germany the KPD issued a pamphlet entitled: What is Social Fascism?, which stated that workers had to concentrate on 'the struggle against fascism in its present most dangerous form ie its social democratic form.' Thaelmann, the Party's leading theoretician, stated that with the election of the Social Democrat Mueller administration, fascism had triumphed!

The seasonal unemployment in the severe winter of 1928-9 added to the growing number of sackings resulting from the increasing rationalisation of industry. In February 1929 the unemployed totals rapidly began to climb upwards. For different reasons, up to half a million were excluded from state benefit. Increasing bitterness swept throughout Germany, which the KPD attempted to capitalise on by organising hunger marches and demonstrations. Due to their insane ultra-leftism the KPD were isolated from the broad labour movement and soon under these conditions became a party of the unemployed.

Social tensions were growing rapidly. On the spurious pretext of preventing outbreaks of violence, the SPD police president of Berlin, Karl Zorgiebel, issued a banning order on the 1929 traditional May Day demonstrations. The KPD called on the workers to defy this instruction and defend their rights as they had done previously under Bismarck and the Kaiser. There was a big response, as thousands streamed out of the working-class districts and flooded the squares, paralysing all traffic. The police waded in brutally, firing on unarmed demonstrators. By 3 May, 25 workers had been killed, 36 severely wounded and hundreds more injured. This repressive action caused many Social Democratic supporters to desert to the Communists. Zorgiebel became a symbol of hatred for the workers as Noske had been in the early years of the revolution.

The Crash of 1929

The rebuilding of German capitalism through massive foreign loans had by 1929 produced an industry that was the most advanced in the world. Huge combines were built up for which the internal German market was completely insufficient. 'We need markets, but the markets of the world are closed to us', grumbled Krupp. 'Great Britain has erected tariff walls. In France, Italy, Sweden, the Balkans, in fact everywhere, German trade is up against barriers which little by little are becoming insurmountable.' The Wall Street crash of October 1929 and the following slump in world production proved a catastrophe for German capitalism. In 1929 German exports amounted to 13,000 million marks, but by 1933 they had slumped by more than half to 5000 million marks. Banks failed, foreign credit evaporated and Germany lurched into crisis.

The introduction of a new revised policy by the Allies, the Young Plan, seemed to compound the problems of German capitalism. On the basis of the projected recovery, Germany would now pay higher reparations in cash until 1988. The Crash forced the great powers to abandon this utopian scheme. The German bourgeois responded to the crisis with mass sackings. In the first fortnight of January 1930, 40,000 were thrown out of work; Krupp had reduced his staff from 100,000 to 50,000; the Gutehoffnungs-Hutte from 80,000 to 36,000. Within six months unemployment had increased from just over one million to three million. In the words of one historian, 'Germany became once more a country of beggars'.

By March the 'Grand Coalition' of Mueller had collapsed, torn apart by economic policy differences. It was the last Weimar government to rest on a parliamentary majority. Germany now faced a catastrophe. Within a few years unemployment would spiral upwards to over six million - on official figures. A decisive section of the German bourgeoisie now began to recognise that the only possible solution to the crisis was fascist reaction. Their attitude was summed up by Krupp, when he said 'we want only loyal workers who are grateful from the bottom of their hearts for the bread we let them earn'. In 1918 the German capitalists had been forced to give big concessions: the eight-hour day, trade union recognition, unemployment insurance, universal suffrage and other reforms, in order to prevent revolution. They gave these concessions whilst grinding their teeth and biding their time for revenge.