For the past six months at the LSE’s United States Centre, I have been working under the guidance of Professor James Morrison on helping augment his research manuscript on “The Decline and Fall of the Gold Standard”. The project itself tracks the attempts at the restoration of a cooperative international financial system in the interwar period, the Great Depression and failure of these attempts, and the ensuing policy departures from the Gold Standard tradition of the pre- and inter-war years. For my part in contributing to the project, I had to carry out research and develop certain ideas in the direction of two different fronts relating to German involvement in the international financial system. The first of these was to explore the interlinkages between hyperinflation and the subsequent introduction of the Rentenmark between 1923 and 1926 and the role of the then Reichsbank President and Monetary Commissioner Hjalmar Schacht’s relationship with Montagu Norman, the governor of the Bank of England. The second of these was to explore Hjalmar Schacht as a person in more depth & understand his policy perspective evolution until his trial for war crimes in Nuremberg in 1946.
Methodology
With regards to the research directionality, I have been mainly focusing my research around Hjalmar Schacht as a person and his interactions, or rather, his significance towards setting the context of significant developments in international financial history, in both the initial 1923-26 period as well as after Hitler’s rise and consolidation of power. Therefore, a significant proportion of the research was conducted through archival investigation into the German national archives, with much of the Weimar Republic and Nazi Germany data and official documents typed up on their online website. As these documents are originally in German, their content needed to be contextualised and translated for it to be useful to the research directionality. Additionally, I made use of the library’s archive stores and secondary literature in German to provide a native’s understanding of Schacht’s role within governmental operations during the interwar era.
The significance of Schacht to the research project specifically, it must be elucidated, lies in his complicity in shaping and directing Hitler’s wartime political economy towards an ideologically mercantilist directionality. In the initial period, I explored Schacht’s set up of the Rentenmark, in assessing the loan commitments that the new currency bank should have under the present plans to the Reich. Schacht pointed out that the “Neumark” the Reichsbank had originally aimed to set up would from the outset have a disagreement with foreign currency, and argued for a parallelism between Goldmark and the Paper mark. Therefore, in reforming the basis of the currency and the fundamental operational mechanism, he directed the focus towards monetary policy and debt coverage through gold ensigns. Additionally, he claimed that if instead of the Neumark one set a gold standard alongside the paper currency, then hope for an improvement in the hyperinflationary pressure should most certainly increase. Additionally, his close relationship with Montagu Norman and other financial ministries and banks around the world helped him consolidate a position to the Weimar Government that the international community was fundamentally invested in helping German financial recovery during hyperinflation, leading to his heavy involvement in both the Dawes and Young Plan recovery mechanisms.
Schacht’s strength as an individual however, lay in being able to convince his superiors and his co-workers that regardless of the job, he was the right man for it. Such was the case with the Weimar President Friedrich Ebert, who overruled any opposition to Schacht’s appointment as the President of the Reichsbank; such was the case with Hitler, who reappointed Schacht to the Reichsbank Presidency in 1933 after having left the position in 1929. During his stint within the National Socialist government, many authors have claimed his presence as being the cultivated “economic dictator” of the country. However, as was elucidated at his trial in 1946, "Schacht, with his intimate knowledge of German finance, was in a peculiarly good position to understand the true significance of Hitler's frantic rearmament”. As the judgement against Schacht explicates, whilst Schacht’s economic policy was unquestionably geared towards rearmament, “to be a crime against peace (…) it must be shown that Schacht carried out this rearmament as part of the Nazi plans to wage aggressive wars.” There additionally was some literary debate as to whether Schacht actually had sworn the oath of allegiance to Hitler, where he argued there was a difference between the oath taken to the Head of State and that taken to Hitler the individual. This fundamentally seems to be a questionable distinction to make, however worked in his favour in his acquittal.
Results and some Conclusions
The governance of international political economy is fundamentally shaped, if not driven, by a historical analysis of political economy & international growth in order to extrapolate data and policy frameworks into the future. For example, some of Schacht’s mercantilist policy discourse leading towards an autarkic economy, or his restructuring of the currency can be linked into similar analyses of fixed or pegged currencies around the world in the 21st century. The importance of financial operation in directing political economy in a productive and/or counterproductive direction is also something where such subject-area discourse is fundamentally relevant to explore today. Individuals governing with the vast power to control and steer monetary policy have a far greater power in determining the outcome of political economy than ever before. Analysing patterns of the past to drive economic policy in a productive direction conclusively has a demonstrable contribution towards contemporary discourses in fiscal and monetary policy.
Please note that this report gives the views and findings of the Undergraduate Research Assistant, and may not necessarily reflect those of their faculty supervisor, the US Centre or the London School of Economics.