This book has related a story that is by and large one of great prosperity and fortune. In 1913, Germany stood at the vanguard of science, technology, and industry. The country had progressed from an economically and politically “backward” patchwork of states to become one of the world's great powers. In the spring of 1914, it would have been hard to imagine that Germany was about to endure more than three decades of upheaval, crisis, tyranny, and war. And it is doubtful that anyone could have predicted the profound and lasting changes that would take place in the structure of Germany's economy and financial system.

THE FIRST WORLD WAR AND THE EARLY WEIMAR REPUBLIC

The Economic, Political, and Legal Environment

When war broke out in August 1914, German politicians figured on a short engagement and planned accordingly. As it turned out, they had miscalculated, and the unexpectedly high war demands strained the German productive capacity. The difficulties stemmed largely from domestic supply shortages, compounded by the British blockade starting in November 1914. Export volume declined by half in the first two years of the war and by 1918 fell to 15 percent of the 1913 level. Private consumption and investments fell, and many imports were blocked by embargo. While a trickle of imports continued, Germany fell into near autarky. At the same time, as farmers were conscripted, agricultural production contracted, essential supplies ran short, and food prices increased.