The year 1923 was probably the most revolutionary situation in the entire period. The hyperinflation is what most people know about, but the hyperinflation has to be understood as a product of the class struggle.
Starting in the summer of 1922, J.P. Morgan recalled foreign loans to Germany. As the recession was ending, Western competitors were recovering, and that eliminated Germany’s export advantage. That triggered a critical situation of industrial overcapacity in Germany, and immediately raised the stabilization question that had been put off since 1921 through the continued rise in inflation.
Here are the stakes of the inflation question: Everybody knew that somebody was going to have to pay for the social and economic burdens of the settlement and the end of inflation. Either German capital would have to be socialized and expropriated, or the workers would have to pay by increasing productivity and lengthening their working day. It was a question of control over the workplace, the economy, and the state.
In November 1922, the prominent industrialist Hugo Stinnes, who was the nearest thing to a leader of the industrialists, publicly denounced the failure of the Center-led government to adequately serve capital. In response, a few days later, the government resigned, to be replaced by a new administration under the technocrat-businessman Wilhelm Cuno, who the industrialists hoped would be more likely to finish the job of breaking workers’ resistance. That change in government happened toward the end of the year 1922.
Suddenly, in January 1923, the French entered the Ruhr in search of reparations payments. Their occupation temporarily suspended this conflict between the government and heavy industry. The two sides united in favor of passive resistance that prioritized civil peace or labor peace while they resisted the French demands.
Throughout that spring of 1923, government credits bankrolled firms in the occupied Ruhr territory, until the mark collapsed again in mid-April. By early summer, a number of things had happened as a result: price controls were abandoned, union-sponsored wage stabilization efforts broke down, and the blast furnaces and steel mills in the Ruhr ground to a halt. Labor peace disintegrated, giving way to a massive wildcat strike wave that enveloped the Ruhr and started to bubble over into an open challenge to state authority, both French and German.
This was the beginning of galloping hyperinflation. The authorities saw printing money and wildly rising prices as preferable to state intervention against the revolutionary movement. That revived movement was also made possible by the emergence of new, improvised institutions of the class struggle, which we can describe as more or less united front organs.
They consisted primarily of the factory councils, refounded on a new basis since the fall of 1922. But they also included consumer control committees, councils of the unemployed, and, importantly, a paramilitary organization that was created through the factory councils in November called the Proletarian Hundreds. Communists were often in leadership positions throughout all these bodies, but those bodies also encompassed members of all the workers’ parties and unions. They continued to grow throughout this unrest.
At this time, the new Cuno government was paralyzed during the summer between three forces: Allied demands for reparations, the intransigence of the industrialists, and this new revolutionary wave, not only in the Ruhr, but now rapidly spreading into Central Germany in Saxony and Thuringia. Meanwhile, fascist battalions were mobilizing around the country, in conjunction with an illegal, privately funded army known as the Black Reichswehr. This was a question of the state organizing the German Army illegally, contrary to the Versailles Treaty, but funded privately.
In the early summer, KPD rank-and-file leaders were instrumental in coordinating the movement through their positions in the factory and unemployed councils. But as the events reached new heights of radicalization in the Ruhr, the KPD leaders were worried that there was going to be an isolated upsurge that wouldn’t get the support of the rest of the country and could easily be put down. They used their positions in the united front organs to rein in large sections of the spontaneous movement.
That began a turn in party policy, away from a reliance on their regional cadres and toward what they described as a “refusal to be the driving element” in a bid for power, even while the revolutionary movements continued to explode. By the last week of July, there were rolling wildcat strikes and occupations of factories and mines proliferating in the industrial West, directed by the councils and demanding the overthrow of the Cuno government.
Dissatisfaction with the government had now spilled over into large sections of the middle classes, as well as a lot of the ruling-class people around leading members of Cuno’s party. This was also the period in which workers occupying mines in the Ruhr were erecting gallows to haunt their German managers.
In mid-August, the factory council headquarters called a general strike. That brought 3 million workers out in Berlin, toppling the Cuno government within twenty-four hours. Cuno was replaced by a grand coalition, one that included the SPD, under the National Liberal Party leader, Gustav Stresemann, who promised to finally stabilize the economy at the expense of workers. But the strikes didn’t end. The next day, sweeping political strikes expanded to all of Saxony and Thuringia, demanding the overthrow of the government and the creation of a workers’ government.
Where were the Communists in all of this? At this point, they belatedly recognized what was going on. This was a revolutionary situation, and they decided to prepare for an insurrection by withdrawing from all united front organs and going underground at the beginning of fall 1923. The KPD was now a mass party again, with just shy of three hundred thousand organized members and over 3,300 local groups. These KPD supporters were not just voters. They were active Communists — people ready to go to the barricades.
Over September, they made underground preparations for an armed uprising in October — what everybody was calling the German October. But in the process, they lost contact with the ongoing rebellions around the country orchestrated through the united front organs. The result was the demobilization of those movements, which ended up dissipating into scattered economic protests and hunger riots as the Communists disappeared from the joint institutions.
On October 10, the KPD leader, Heinrich Brandler, and other members of the party leadership joined the government in Saxony and Thuringia, hoping to use those positions to gather arms and organize the insurrection. The final hour came on October 21, at a meeting of the factory councils in Saxony. Brandler put forward a proposal to their coalition partners, who were probably the SPD members furthest to the left in any government, to call a general strike, which would likely lead to an armed insurrection.
The SPD leaders were pretty solidly on the Left, but the evaporation of the mass movement left no real extra-parliamentary basis for a workers’ government, which was particularly alarming in the face of an impending invasion by the Reichswehr. In that context, it was quite rational of the SPD left in Saxony to shrink from that initiative, which they did. The KPD slunk out of the meeting, and the German October was aborted.
At the end of September, Stresemann’s government cooperated with iron and steel industrialists to stabilize prices. They ended the hyperinflation, bringing the class conflicts that were underlying all of this out into the open. Government credits and wage supports for industry were withdrawn.
Large-scale layoffs ensued, creating a sudden spike in unemployment, just as the leaders of the coal industry unilaterally declared the end of the eight-hour day at the beginning of October, in contravention of the institutional partnership between the unions and the employers. Shortly afterward, the SPD was forced out of the national government, and troops were sent into Saxony to put down the insurrectionary movement and stabilize the business climate by dissolving the key gains of the German Revolution.