Abstract

For decades, historians have debated why Germany’s Chancellor Heinrich Brüning resorted to policies worsening the economic crisis in the early 1930s. Some scholars, first and foremost Knut Borchardt, have argued that for various reasons the Chancellor had no choice but to depress the economy. In particular, Borchardt has pointed out that Brüning was reluctant to devalue the currency because he feared a return of hyperinflation. Borchardt’s critics, by contrast, have rejected this argument on the grounds that Brüning’s fear of devaluation was not shared by all German policy-makers and the public in general. This article tries to make a contribution to this debate by assessing Brüning’s fear of devaluation from a comparative perspective. Narrative evidence from Britain, the Netherlands, the Scandinavian countries and Switzerland strongly suggests that Borchardt’s argument is well grounded. Across Europe, politicians and central bankers, as well as business and union leaders, were convinced that devaluation would lead to inflation and do more harm than good. The evidence also shows that, because of this widespread fear of inflation, not a single European country deliberately devalued its currency in the 1930s.