The European Legacy of the German Hyperinflation

In today’s digital age, social media platforms like Twitter play a significant role in shaping public discourse. Understanding the narratives surrounding important historical events is crucial for developing a joint European policy agenda. A newly published analysis of Twitter discourse examines the extent to which the German hyperinflation of 1923 has influenced public opinion in the country, using innovative natural language processing (NLP) techniques. Comparisons with French and Italian Twitter data about the same topic reveal crucial national variations in this discourse. By analysing the underlying tweets, one can shed light on the persistence and significance of the alleged ‘hyperinflation trauma’ in the German collective memory that seems to haunt Europe to this day.

The impact of the German hyperinflation is controversial

The German hyperinflation of 1923 was a significant event in the country’s history, leading to economic, social, and political upheavals. It profoundly impacted German thinkers and policymakers, with some interpreting it as evidence of the need for a new economic paradigm. Today, the trauma of hyperinflation is often cited as a driving force behind Germany’s emphasis on price stability and an independent central bank. This narrative gained attention during the Eurozone crisis, as it is believed to have influenced political decision-making both within Germany and in other European countries.

An alternative view is that popular references to hyperinflation in Germany simply serve as a rhetorical tool for legitimising or delegitimising current policy measures – instead of reflecting a specific way of thinking. Critics argue that the German aversion to certain monetary policies, such as those implemented by the European Central Bank (ECB) during the Eurozone crisis, rather stems from pragmatic factors, such as the national housing market or the high saving rates of households. Surveys also suggest that there is no significant difference in inflation aversion between Northern and Southern European countries. These observations raise questions about whether the widely discussed ‘fear of inflation’ in the German discourse is merely a popular narrative.

Going viral – analysing ideational varieties on Twitter

To examine the German discourse on hyperinflation, the above-mentioned study collected 20,158 tweets related to hyperinflation from the social media platform Twitter between 2012 and October 2022, comprising 565,723 words. The data show that there was a strong upward trend since the onset of the Covid pandemic in March 2022 (Figure 1). Some of the peaks in the German Twitter discourse can be attributed to criticisms of prominent ECB figures such as Christine Lagarde. In addition to these German tweets, the study also collected French and Italian tweets, totalling around two million words, to gain a comparative perspective.

Based on inflation rates and this tweet data, it seems that German commentators on social media are more sensitive to price developments compared to their European counterparts. In the paper, several regression models are estimated to statistically test this hypothesis, modelling the logarithmic monthly count of hyperinflation tweets against the change in monthly inflation rate. The results indicate a positive and statistically significant relationship between these two variables, with a one percent increase in the inflation rate leading to an average of 58% more tweets about hyperinflation per month. The inclusion of dummy variables for France and Italy relative to Germany does not alter this relationship. However, there are distinct differences in the content of tweets between French, German, and Italian users in response to inflation rate changes – can this be explained with the role of ordoliberalism?

All roads lead to Freiburg?

The impact of hyperinflation on German post-war discourse and the influence of ordoliberals in shaping this narrative have been subjects of heavy debate. While some researchers credit the Freiburg School, led by Walter Eucken, for popularising the German monetary ‘security syndrome,’ others question their central role in prescribing a strong inflation aversion in German public opinion. Eucken had attributed hyperinflation to budget deficits and a misguided monetary policy by the Reichsbank. This interpretation resonated with other ordoliberal thinkers such as Wilhelm Röpke and Walter Rüstow, who had their own experiences with inflation during their exile in Turkey.

The writings of Eucken and his ordoliberal fellows influenced German monetary policymakers in the post-war period. For instance, Otto Veit, who served as President of the State Central Bank of Hesse, advocated for prosecuting monetary policymakers who endangered the currency. Additionally, later members of the ECB’s Executive Board, such as Otmar Issing and Jürgen Stark, acknowledged the impact of Eucken’s analysis and principles of economic policy on their own views. They emphasised the importance of price stability and sound public finances, aligning with the ordoliberal approach.

A hundred years on, 1923 is still remembered

To gain insights into the prevalence of ordoliberal perspectives on hyperinflation beyond elite circles, one can look again at the collected tweets, their number of likes and their most frequent words. The frequent use of words such as ‘money,’ ‘1923,’ and ‘Bitcoin’ by German users on Twitter, which significantly differs from the vocabulary used by French and Italian users, suggests that the experience of hyperinflation and the lesson of strict money supply control are still effective a hundred years later (Figure 2). Similar to the ordoliberal language of the interwar period, many German tweets are ideologically charged and use a strong emotional vocabulary.

At the same time, the qualitative analysis reveals that ordoliberal teachings are only selectively reflected in influential tweets. Namely, the focus of the German Twitter discourse is primarily on monetary stability as a goal, rather than emphasising automation, formalisation, or rule-based approaches as methods to achieve this goal. Furthermore, the affinity for the gold standard expressed in many German Bitcoin-related tweets, which use the hashtag ‘#hyperinflation’, cannot be attributed to the ordoliberal tradition. The influence of the Freiburg School, including notable figures like Eucken, Böhm, and Erhard, is not explicitly observable in the corpus of tweets.

The legacy lives on

The German experience of hyperinflation has been remarkably present in the German-speaking Twitter discourse for many years, especially when compared to other national discourses. While inflation-related comments on French and Italian Twitter are usually linked to current external phenomena such as the hyperinflation period in Venezuela between 2016 and 2020 or the rising gas and food prices following Russia’s invasion of Ukraine, the year 1923 remains a relevant reference point for German commentators. It is instrumentalised with sometimes drastic language to emphasise the goal of strict price stability and to criticise the ECB. Overall, the selective references to the ordoliberal teachings of 1923 suggest that hyperinflation is more rhetorically referenced and politically instrumentalised than truly remembered.

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