“It may perhaps be pointed out here that it has, of course, never been denied that employment can be rapidly increased, and a position of ‘full employment’ achieved in the shortest possible time by means of monetary expansion–least of all by those economists whose outlook has been influenced by the experience of a major inflation. All that has been contended is that the kind of full employment which can be created in this way is inherently unstable, and that to create employment by these means is to perpetuate fluctuations.Of course, monetary and fiscal interventions are not “desperate means,” despite Hayek’s nonsense derived from his equally nonsensical trade cycle theory.
There may be desperate situations in which it may indeed be necessary to increase employment at all costs, even if it be only for a short period–perhaps the situation in which Dr. Brüning found himself in Germany in 1932 was such a situation in which desperate means would have been justified. But the economist should not conceal the fact that to aim at the maximum of employment which can be achieved in the short run by means of monetary policy is essentially the policy of the desperado who has nothing to lose and everything to gain from a short breathing space.” (Hayek 1975 : 64, n. 1).
But this is at least a frank statement of what many Rothbardian Austrians these days cannot even bring themselves to admit: that the lack of government monetary and fiscal stability in early 1930s Germany was the primary cause of the surge in the popularity and electoral success of the Nazi party. It was deflationary depression, not hyperinflation, that destroyed democracy in Germany.
This can be seen in the Nazi party share of the vote in federal elections in the Weimar Republic from 1924 to 1933:
Date | % of Vote | Reichstag SeatsBy 1928, during the economic boom in Germany, the Nazi party vote looked like it was almost dead and was only 2.6%. Remarkably, even in the aftermath of the Weimar hyperinflation in 1924 it was only 3%.
May 1924 | 6.5% | 32
Dec. 1924 | 3.0% | 14
May 1928 | 2.6% | 12
Sep. 1930 | 18.3% | 107
July 1932 | 37.3% | 230
Nov. 1932 | 33.1% | 196
March 1933 | 43.9% | 288
When the deflationary depression struck Germany from 1929–1932, it soared to 18.3% (September 1930), then 37.3% (July 1932), and finally to 43.9% in March 1933 in the aftermath of the Great Depression.
Hayek, F.A. 1975 . Profits, Interest and Employment. Augustus M. Kelley, Clifton.