Since people are starting to draw comparisons to the Weimar Republic, I thought that I would post a couple old diaries (in one essay) that might fill in some historical blanks.

The Kapp-Lüttwitz Putsch

  The forerunner of the Nazi brownshirts was known as the Freikorps, a volunteer paramilitary created during WWI to bolster the Army. They were unreliable, but had fascist tendencies by nature. Some even wore the swastika as a symbol of resistence to the "red pack". They continued to fight for a "Greater Germany" (in the new Baltic Nations) nearly a full year after the end of WWI. They were also instrumental in crushing the communist Spartacist League revolt in January 1919. Hundreds of german communists and union members were executed by the Freikorps following the revolt, their bodies dumped into a nearby river.

The question today is not democracy or dictatorship. The question that history has put on the agenda reads: bourgeois democracy or socialist democracy. For the dictatorship of the proletariat does not mean bombs, putsches, riots and anarchy, as the agents of capitalist profits deliberately and falsely claim. Rather, it means using all instruments of political power to achieve socialism, to expropriate the capitalist class, through and in accordance with the will of the revolutionary majority of the proletariat.
 - Spartacist Manifesto

 The Freikorps had 250,000 registered in early 1919 (not counting 350,000 in the regular military), but under the terms of the Versailles Treaty Germany was supposed to reduce its military to just 100,000. The Freikorps had to be dissolved, and in March 1920 the order was issued.

  The Freikorps were not happy about the way Germany surrendered in 1918, and how the leftists of their homeland had overthrown the monarchy. They were especially unhappy about how the German government had failed to support them in the Baltics when victory was within their grasp. And now they were being asked by a government they didn't like to lay down their arms.

Members of the Freikorps during the putsch

 Its leaders were determined to resist dissolution and appealed to General Lüttwitz, commander of the Berlin Reichswehr, for support. Lüttwitz, an organiser of Freikorps units in 1918-19 and a fervent monarchist, responded by calling on President Ebert and Defence Minister Noske to stop the disbandment. When Ebert refused, Lüttwitz ordered the Brigade to march on Berlin.

 The Freikorps marched unopposed into Berlin on the morning of March 13, 1920. The new royalist government immediately declared the Versailles peace agreement annulled, much to the concern of the allied powers, and dissolved the parliament.

 Defense Minister Noske had ordered the regular army to stop the Freikorps, and had been flatly refused. General Hans von Seeckt, a senior Reichswehr's commander, told him: "Reichswehr does not shoot on Reichswehr". The German government was forced to abandon the capital and a proto-Nazi government took over.

  Dr. Wolfgang Kapp, president of the German Fatherland Party, assumed the Chancellorship. Major General Baron von Luttwitz, formally military governor during the Rape of Belgium, was named Commander in Chief.

"This government is not capable of warding off Bolshevism, which is threatening from the East. Germany can only escape external and internal collapse by the re-establishment of a strong State power...any opposition to the new order will be unsparingly put down."
  - statement issued by the Kapp-led government, March 14, 1920

 

  This development could be considered very ironic because Friedrich Ebert and the rest of the German government fully supported the Freikorps during the German Revolution, betraying their most active supporters to their deaths.

  Now the same murderers that Ebert had turned to a year earlier, had now deposed him. So who did Ebert turn to for help? Why the same labor unions he betrayed the previous year.

  The unions no longer trusted Ebert, but they were damned if they were going to tolerate their murderers to remain in power without a fight. The labor unions of Germany called for a general strike and the workers answered.

"We won't knuckle down to the Socialists and workmen who think they can run the country."
 - Kapp government spokesman, March 16, 1920

 The Freikorps quickly learned that they did not have the support of the populace. They didn't even have strong support in the military. For instance, the troops in Munich never joined with the Freikorps putsch.

  The workers in Hamburg walked out first. Cologne, Dusseldorf and Essen workers followed the next day. Gas and electricity was shut off in Berlin by strikers. Fighting broke out in Frankfurt. The March 17th NY Times reported that in Kiel the cruiser Eckernforde fired into the city, intentionally targeting unarmed striking workers, killing and wounding hundreds.

  Street fighting broke out in Dresden when Kapp's troops stormed a government building that strikers were holding. Dozens were killed and wounded. Troops fired into protesters in Leipsic. Street fighting reached the suburbs of Berlin.

 

 By the 16th, only three days after taking Berlin, the Kapp government was already trying to negotiate with the Ebert government. One of proposals that the Kapp government sent to the Ebert government was:

 "The new and old Governments shall issue a joint declaration that under present conditions a general strike is a crime against the German people."

 Herein lies the explanation of why the Kapp government was failing so quickly.

Spartacides Rise, Attack Soldiers
   Workers Win Battles
 - NY Times headline, March 18, 1920

 With the Kapp government losing power, and the Ebert government unable to regain it, the communists of the Spartacist League began declaring Soviets in various regions. The Kapp government was forced to rush troops around the country to crush the Soviets, which was increasingly difficult because of the railroad strike. The resistance put up by the communists became increasingly bold, as many of the workers were also veterans of WWI.

    Workmen's Councils, the same groups that led the 1918 general strike, began to take control of the contested regions.

"In the eastern parts of the industrial region at Bochum, Dortmund, Gelsenkirchen and Unna, the proletariat is in charge. Armed laborers are speeding to various places to assist their comrades engaged in fighting."
 - NY Times, March 18, 1920

 By the 18th troops were beginning to refuse orders from the Kapp government. At this point even Kapp's colleagues began to urge him to step down before the country descended into anarchy, or worse, the workers took over.

"All those present urged Kapp to sign his resignation, as military reports from all over Berlin made it quite apparent order could not be maintained if the masses were not pacified. Danger that the Bolsheviki would gain the lead was imminent."
 - NY Times, March 19, 1920

   Kapp and Lüttwitz fled to Sweden.

 As the Freikorps marched out of town defeated, workers turned out to "hoot and jeer" them. The troops turned their guns on them and open fired, wounding many. As they passed the Brandenburg Gate they opened fire again, hurting many more.

  Kapp's coup did the most damage to the Conservatives, who were left discredited and distrusted. The workers of Germany turned further to the left.

  When back in Berlin, the Ebert government issued this announcement: "Traitors to the people who forced you to resort to the general strike will be most severely punished by the Government."

 But in fact the Ebert government had no intention to fulfilling that promise. The fact is that few who took part in the coup were even arrested. Fewer still were thrown in jail.
  This inexplicable lack of accountability was to doom the Wiemar government to chronic instability, and eventually to failure.

Germany's Hyperinflation-Phobia

The only thing worse than forgetting history is misremembering it.
Getting your history wrong can cause important mistakes.

  For instance, people wonder why Germany is so insistent on austerity measures in Europe despite the continent sinking into deflation.
  The reason given usually looks like this.

 have a look at Germany, 1933.
In that year, Germany's democratic Weimar republic was foundering under economic depression, mass unemployment and raging hyper-inflation.

 Actually that isn't what happened at all. Germany's hyperinflation and the rise of Hitler were two different issues and two different time periods. Nevertheless, the Hyperinflation = Hitler myth still exists in Germany.

 Present discomfort within Germany with policies designed to reflate the euro-zone economy has been stoked by the assertion of a linkage between hyperinflation and the rise to power of the Nazis in the early-1930s. For example, in 2009, at the nadir of the global recession, Der Spiegel published a special issue focusing on the history of money, which explicitly linked the disaster of the early 1920s to Nazism

 The hyperinflation of 1923 had both winners and losers. The losers were anyone with a savings or pension.
  The winners were anyone with debts, like home mortgages.

 The reality is that what ushered in Nazism wasn't inflation, but deflation. The economic measure that rose with Hitler's prospects wasn't the CPI, but 30% unemployment and economic depression.

  The Nazis only won 32 Reichstag seats in the election of May 1924, and just 12 in 1928. Five years after the hyperinflation the Nazis were a political party without a future.
  They were circling the drain of history, polling at less than 3%. They were an afterthought.

 So what happened?
Germany embraced a conservative economic policy of austerity through the finance expert Heinrich Brüning.
   Brüning's austerity policies were repeatedly opposed and defeated in parliament by the socialists and communists (an event that was considered a "failure of parliament" by conservatives), which led to pushing the austerity measures through by presidential decrees (Brüning called it "authoritative democracy").

  These austerity measures included:
* rolling back salaries to 1927 levels
* hiking interest rates
* dramatically increasing taxes on labor
* gutting unemployment and pension benefits

 Except for interest rates, this is a list of what Germany has currently imposed on southern Europe.

 Most German capitalists and landowners originally supported the conservative experiment more from the belief that conservatives would best serve their interests rather than any particular liking for Brüning. As more of the working and middle classes turned against Brüning, however, more of the capitalists and landowners declared themselves in favour of his opponents Hitler and Hugenberg. By late 1931, the conservative movement was dead and Hindenburg and the Reichswehr had begun to contemplate dropping Brüning in favour of accommodating Hugenberg and Hitler.

      What happened was center-right and center-left parties backed austerity measures that crushed the life out of the middle class. The Social Democrats in particular undermined their own supporters.
   When workers turned to any extremist party who could stop them, one that also hated communists and socialists, the conservatives jumped on board.

 As Paul Krugman has pointed out, “the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation” of the early-1930s.

 But the story doesn't end there.
   What brought Germany's economy back from the brink under the Nazis? Government spending.

 In the 1930s, Germany had high unemployment, but Germans’ memories of that, and especially of how they exited from it – via a classic Keynesian fiscal expansion – is largely forgotten, as the fiscal injection was Hitler’s rearmament.

 In other words, the exact opposite of the conservative economic agenda was what allowed Nazi Germany to recover from the Depression. It's also what could have stopped the Nazis from ever taking over in the first place.