I will examine them below.
I. Austria
The real GDP figures are below with data extending to the Great Depression as well:
Real GDP in Austria, 1919–1938Austrian’s hyperinflation lasted from October 1921 to September 1922. Curiously, the annual figures show no real output decline in either 1921 or 1922, but there was a real GDP loss of 0.99% in 1923. I assume that this was in some way the consequence of the hyperinflation.
* in millions of international Geary-Khamis dollars
1919 | 14 503
1920 | 15 571 | 7.36%
1921 | 17 236 | 10.69%
1922 | 18 784 | 8.98%
1923 | 18 597 | -0.99%
1924 | 20 754 | 11.59%
1925 | 22 161 | 6.77%
1926 | 22 536 | 1.69%
1927 | 23 216 | 3.01%
1928 | 24 295 | 4.64%
1929 | 24 647 | 1.44%
1930 | 23 967 | -2.75%
1931 | 22 044 | -8.02%
1932 | 19 769 | -10.32%
1933 | 19 113 | -3.31%
1934 | 19 277 | 0.85%
1935 | 19 652 | 1.94%
1936 | 20 238 | 2.98%
1937 | 21 317 | 5.33%
1938 | 24 037 | 12.75%
(Maddison 2003: 50).
By contrast, in Austria’s deflationary depression from 1929 to 1933, real output fell by 22.45%. The output loss under the hyperinflation looks very mild by comparison.
II. Germany
Again, real GDP data is below with data extending to the Great Depression:
Real GDP in Germany, 1919-1938Germany’s hyperinflation lasted from August 1922 to November 1923.
* in millions of international Geary-Khamis dollars
1919 | 156 591
1920 | 170 235 | 8.71%
1921 | 189 511 | 11.32%
1922 | 206 188 | 8.80%
1923 | 171 318 | -16.91%
1924 | 200 557 | 17.06%
1925 | 223 082 | 11.23%
1926 | 229 363 | 2.81%
1927 | 252 321 | 10.00%
1928 | 263 367 | 4.37%
1929 | 262 284 | -0.41%
1930 | 258 602 | -1.40%
1931 | 238 893 | -7.62%
1932 | 220 916 | -7.52%
1933 | 234 778 | 6.27%
1934 | 256 220 | 9.13%
1935 | 275 496 | 7.52%
1936 | 299 753 | 8.80%
1937 | 317 783 | 6.01%
1938 | 342 351 | 7.73%
(Maddison 2003: 50).
Germany’s real output loss was 16.91% in 1923, a very severe loss, and in one year. Curiously, the real output loss from 1929 to 1932 was 16.11%, slightly lower, but extended over four years of depression.
Why was there such a gulf between Germany and Austria in terms of real output loss during their hyperinflations?
Possibly, the reason was that the Austrian inflation rates were lower. However, with an inflation rate of 1426% in 1922 in Austria, it still seems surprising that the GDP fall was only 0.99%.
BIBLIOGRAPHY
Maddison, Angus. 2003. The World Economy: Historical Statistics. OECD Publishing, Paris.
Not surprising. You don't get a hyper-inflationary depression after all. And it was in 1933 that Hitler was rose to power, not 1922.
ReplyDeleteUnder the conditions of the debt repayments being extracted by the allies it is quite obvious that hyperinflation was the correct response. I've never understood why this is controversial. I think its just that people who discuss economics are generally primitive and irrational and they fetishise the value of money like a tribes-person fetishises a fertility statue. Hyperinflation makes a good story, devastating depression that leads to genocide not so much. And so the idiots form their opinions on the former rather than the latter.
Well, the German hyperinflation in 1923 did lead to a real output loss on the scale of a depression (greater than 10%), but your other points are well taken.
DeleteIt was a one-off loss that was more than made up for the next year. A bit like the sacred 1920-21 recession that the Austrians worship. It was a readjustment and the German economy bounced back and the government initiated the Dawes plan.
DeleteThe Germans were willing to accept the output loss and high unemployment provided that there was some hope on the horizon. After 1929 that situation very much changed:
http://ftalphaville.ft.com/2011/11/21/755211/the-risks-of-sticking-to-uber-harte-wahrung-strategy/
Of course, this was tossed down the collective memory hole. Especially by the Austrians. But then, I think I know why this was the case:
http://www.nakedcapitalism.com/2013/01/philip-pilkington-the-origins-of-neoliberalism-part-i-hayeks-delusion.html
Surely the occupation of the Ruhr in January 1923 played some significant part?
ReplyDeletehttp://en.wikipedia.org/wiki/Occupation_of_the_Ruhr
I imagines also that inflation rates of 1000%+ make RGDP (which is normally nominal GDP - inflation) very hard to calculate accurately. A small error in calculating the inflation rate would have a large effect on RGDP
ReplyDeleteInteresting point. I wonder if the same is true for other countries that went through hyperinflations, such as post-Communist Bulgaria and Yugoslavia or (most famously) Zimbabwe.
ReplyDeleteIt is certainly not a coincidence that hyperinflations usually follow regime collapses. There is clearly a case to be made that hyperinflation is as much a political as an economic phenomenon. And where it is an economic phenomenon, it is almost invariably related to other factors (ie. enormous real output collapses in Zimbabwe, or foreign denominated debts in Weimar, etc).
Delete