[In the following review, Tooze analyzes the methodology of Paper and Iron, which he describes as “unconvincing and distasteful,” though the book's themes are “of considerable interest.”]

In recent years the Oxford historian, Niall Ferguson, has made a name for himself as a right-wing pundit in the pages of the British press. Paper and Iron is Ferguson’s first scholarly monograph and, true to form, it is a highly ambitious, politically charged and intellectually provocative work.

Ferguson’s topic is the history of inflation in Germany in the first half of the twentieth century. His main focus is, naturally, on the hyperinflation which scarred the Weimar Republic in its youth. However, as Ferguson points out, the hyperinflation of the early 1920s was merely the most dramatic episode in a half-century of inflation which stretched from the late 1890s to the aftermath of the Second World War. This, according to Ferguson, reflects a characteristic weakness of the German nation state—its inability to raise sufficient taxes to match its hypertrophic expenditure on the twentieth-century demands of warfare and welfare. The failure of the Reich to extract sufficient taxes resulted from the peculiarly decentralized structure of the German state and the well-organized resistance of German interest groups.

Thus Ferguson shares the basic premise of historians such as Gerald Feldman, who see Germany’s inflation as symptomatic of profound political and social tensions. However, despite starting from this common analytical premise, Ferguson’s book in fact mounts a frontal assault on the prevailing revisionist consensus among historians of German inflation. Since the late 1960s Keynesian economic historians have downplayed the economic and social costs of the inflation. Furthermore, it has come to be accepted that the inflationary printing of money was the only option open to a German government under pressure both from revolutionary forces at home and exorbitant reparation demands. Ferguson, by contrast, seeks to revive the more critical view of contemporary analysts who saw the hyperinflation as a disaster which fundamentally undermined the stability of the Weimar Republic.

The vehicle for Ferguson’s counter-revisionism is a study of the political and business activities of the Hamburg commercial and banking elite. This in itself constitutes a challenge to the existing historiography, which has hitherto focused on heavy industry, organized labour and agrarian interests. Ferguson’s study exposes the key role that Hamburg’s business elite played in shaping the diplomacy and economic policies of the fledgling Weimar Republic. His study of Hamburg’s shipbuilders, shipping lines and banks adds further evidence to a mounting body of recent research which stresses the long-term damage done by the inflation to the balance sheets of German business. Furthermore, as Ferguson shows, the inflation backfired as a strategy to force a revision of Germany’s reparations burden. Hamburg bankers such as Max Warburg and Carl Melchior—encouraged by John Maynard Keynes—hoped that the depreciation of the German currency and the consequent dumping of German exports would force the Allies to reduce their demands. In fact, as Ferguson shows, spiralling inflation sucked imports into Germany, providing welcome relief for the Allied economies. Finally, Ferguson challenges the idea that inflation was the price which had to be paid for the stabilization of the Weimar Republic. He contends that even in a hotbed of working-class militancy such as Hamburg, the real threat was not Bolshevik insurrection, but the upsurge in nationalist agitation. The inflation may have helped to pacify the organized working class. However, it also destroyed the flourishing social, cultural and political milieu of the Hamburg bourgeoisie and unleashed the hell-hounds of the anti-Semitic far right.

However, Ferguson is not content merely to revise the balance sheet of the inflation. He seeks to demonstrate that the slide into hyperinflation could have been avoided. In the first six months of 1920 Weimar’s political elite, according to Ferguson’s analysis, squandered an opportunity to halt the downward slide of the German currency by failing to implement a determined tax reform and to curb public expenditure ruthlessly. Ferguson does not shrink from the conclusion that such a programme of retrenchment would have required the backing of military force. However, he contends that only such a reactionary turn could have saved Weimar from the disastrous escalation of inflation and the disruption of bourgeois society which opened the path for National Socialism.

Ultimately, many readers will find Ferguson’s exercise in counterfactual history both unconvincing and distasteful. Nevertheless, what Paper and Iron has to say about the ‘real’ history of the Hamburg business community in the era of German inflation will remain of considerable interest.