World in Trance

". Schwarzschild is the subject of the book I recently published. He edited the magazine Das Tage-Buch , founded in Berlin in 1920 by my great-grandfather, Stefan Grossman. He was a very intelligent Jew from Frankfurt and, though he abandoned the Orthodox faith, he came from from a very orthodox family. He was an economist and probably the most brilliant German journalist of the inter-war period. He moved to Paris in 1933 and relaunched the magazine with the help of a wealthy Dutch lawyer. Churchill was a great admirer of his; the French and Russian foreign ministers used the magazine as a source. He wrote in the first edition of Das Neue Tage-Buch – in July 1933 – that everything about the Nazi regime was designed to produce violent conflagration. He wrote World in Trance in New York in the early 1940s. It’s a history of the inter-war period and it’s the best book on the subject. As the realities sank in over the next 50 years, his facts and arguments stood the test of time. But he’s also writing about his own life. He was writing about the destruction of his own past – the history of a class embodied in a family whose last representative was him. But he was not just a voice for an old culture. He added to it in a magnificent way. Of course, it didn’t prevent the destruction that followed. In England, the orthodox representation of the inter-war period is that the poor Germans were crushed by the nasty allies after the First World War, the reparations destroyed the economy, the inflation caused Hitler and Hitler caused the Second World War. Hence the Treaty of Versailles caused the Second World War. That’s wrong. Every reasonable person, when presented with the facts, must surely agree. The reason it’s presented like that is largely attributable to John Maynard Keynes, the leading economist, He was a young, arrogant guy at that time. In Versailles he met Carl Melchior, a Jewish banker at M. M. Warburg & Co in Hamburg, who was advising on reparation payments. Keynes was in love with Melchior. Melchior completely pulled the wool over Keynes’ eyes. Keynes consequently wrote The Economic Consequences of the Peace , one of the worst books ever written about this period of history. It’s an appalling piece of analysis and virtually everything in it turned out to be wrong. The French economist Étienne Mantoux, who was killed a week before the German surrender in May 1945, elegantly dismantled it 20 years later shortly before his death. Keynes said Germany would be destroyed by paying the reparations and it wouldn’t have enough money to buy imports. But he overlooked two things. First, German industry grew much faster than he had anticipated, creating substantial wealth and therefore the capacity to pay. Second, reparations may have been a cost to one party, but they constituted income to the recipient – and the recipient would use the money to make purchases everywhere, including Germany. That would theoretically offset or mitigate the original charge on the German economy. As it happens, the Germans didn’t pay any reparations. So there was no net transfer of resources outside Germany that would have required compensating payments to come in. The key questions are: how much did Germany actually pay and how were these payments funded? Well, they paid around 20 billion deutschmarks – about 2.5 percent of GDP – between 1920 and 1933. And this was all funded by foreign loans, none of which were ever repaid when they were scheduled to be. To say that German reparation payments crushed the German economy cannot be right. The gross payments were small and funded mainly by American loans – on which the Germans defaulted. The great strength of English politicals is getting on with people whose views you don’t share. In the House of Commons they beat each other up before meeting for a friendly drink in the bar. The English always thought that the Germans would behave like gentlemen, just like them. But nothing could have been further from the truth. Hitler came from a long history of German nationalism that was ultimately invigorated by Bismarck. Bismarck, in my view, is the beginning of the end of Central Europe. He put together a couple of disjointed German statehoods and created a very aggressive, focused machine to crush its neighbours. That’s the ultimate cause. The immediate reason for what happened in the 1920s is that the Allies didn’t do what they did after the Second World War: crush Gemany completely. Whether or not that was possible is another matter. The Germans never thought they had lost the war. If they had been made to believe they had lost it and caused it, things might have been different. The leaders of the army skilfully withdrew from signing the armistice and treaty. And the ones who did sign it were the Social Democrats, who assumed the role of government. They were later accused of stabbing the German nation in the back. There’s a wonderful quote from an English diplomat in Berlin in the 1860s, Sir Robert Morier. He wrote a letter to the Crown Prince Frederick III – Queen Victoria’s son-in-law – who was very ill and German Emperor for only a brief period. Sir Robert wrote: “The malady under which Europe at present is suffering is caused by German chauvinism, a new and far more formidable type of the disease than the French. For instead of being spasmodic and undisciplined, it is methodical, calculating, cold-blooded and self-contained.” They had 40 years to prepare and got away with it first time round. They then had 20 years to prepare again, unimpeded and uninhibited. The book is about how you got from there to Pearl Harbour. The unfortunate culprit is England. The Stanley Baldwin view of war was that we must prevent it or it will destroy everything we’ve built. Vice-Chancellor Franz von Papen announced: “War is as natural a destiny for man as giving birth to children is for woman”. So there was a cultural ravine between the German cultural view of the good life and the British view. The British couldn’t understand how anyone would want anything other than a life of peace."