How a Healthy Society Falls Apart

My parents spent most of their lives waiting for another economic collapse like the Great Depression. They had survived the last one—but just barely. And the privations of their childhood left them fearful.

One of the recurring topics of dinner time conversation was whether the next collapse would be inflationary or deflationary. I felt like I was watching the debate about fire and ice in a Robert Frost poem—both would suffice, but you still wanted to know which would kill you.

(I refrained from pointing out that we could have both simultaneously. This ghastly scenario happens when the value of your home, 401K, and other assets fall, while prices of what you need to buy every week—gas, food, etc.—keep spiraling up. In fact, we had a taste of that in 2008, and may get a second helping some day soon.)

So Mom and Dad kept buying books with ominous titles like How to Prepare for the Coming Crash or The Economic Time Bomb. But my parents weren’t alone. Their whole generation had come of age during tough times and World War. Optimism was not in their DNA. They didn’t see themselves as winners—just survivors.

As a carefree teen, I didn’t pay much attention to these worries. But guess what? I now read books on collapsing societies—proving that, sooner or later, you turn into your own parents.

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But the books I read aren’t populist scaremongering. I stick to real history and actual case studies. I find wisdom in Tacitus, Cicero, and Suetonius—and others who lived through the collapse of the Roman Republic. I study Huizinga’s observations of the waning of the Middle Ages. I know my Gibbon and Spengler and Carlyle.

My most recent find is Stefan Zweig’s account of how Vienna went from nineteenth century elegance, prosperity and cultural flourishing to warmongering and hyperinflation. His book The World of Yesterday may be the single best memoir from a survivor of societal collapse from the 20th century—and deserves to be far better known.

I call Zweig a survivor, but that’s not entirely true. He somehow managed to stay alive during World War I (not an easy task for a young man in Central Europe), and the subsequent economic crisis. But World War II forced him into exile, and he committed suicide in Brazil in 1942.

He was a broken man by then—and he feared Hitler was too powerful to stop. So Zweig, one of the greatest writers and thinkers of his generation, ended it all with an overdose of pills.

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Just a few years earlier, Zweig had gained renown as the most widely translated contemporary author in Europe. In Germany, his books sold 20,000 copies on the first day—even before a single advertisement had appeared. But that now changed.

“Not a single one [of my books] is available in Germany today,” he lamented at the end of his life. “Those who still possess a copy keep it carefully hidden.” And the same was true in France, Italy and other countries under Hitler’s power.

Zweig is best known today as the inspiration behind Wes Anderson’s film The Grand Budapest Hotel. “It’s basically plagiarism,” the director has admitted. But Zweig ought to be remembered more for his writings, especially this final work from his pen.

His fiction is sadly under-appreciated. And it’s very readable—Zweig was a specialist in short novels with fast-paced plots. I highly recommend 24 Hours in the Life of a Woman, and Chess as starting points. Zweig also had a knack for mini-biographies (see, for example, his stellar book on Montaigne).

The day before he died, he mailed his manuscript of The World of Yesterday to a publisher. It was released posthumously, and is now recognized as a defining document in how things go bad. Over the course of 500 pages, Zweig starts with the peace, prosperity, and cultural flourishing of the final years of the Habsburg Empire, and then shows, step by step, how a healthy, vital society self-destructed.

The entire book is well worth reading. I will only discuss a small part of it here—covering the hyperinflation following World War I. But this book is so rich in observations and telling details, I could easily devote several articles to it without coming close to exhausting its riches.

Zweig lived through the currency collapse twice—first in Austria (where he lived across the road from an odd young man named Adolf Hitler), when the crown devalued rapidly. Then he moved to Germany, where hyperinflation was even worse.

“A shoelace cost more than before a shoe—no, more than a luxury store with two thousand pairs of shoes.”

The stories he tells are so fanciful, you might think he was writing a fable in the style of Jorge Luis Borges. Consider his story of beer-swilling tourists.

The story starts when the Austrian currency collapses in value. Germans quickly learn how to take advantage of this, by crossing the border to buy up cheap merchandise—but with unforeseen consequences:

Finally, at the instigation of the German government, a border guard was appointed to prevent all consumer goods from being bought in the cheaper Salzburg instead of in the home stores….But one article remained free, which could not be confiscated: the beer that one had in the body.And the beer-drinking Bavarians calculated from day to day on the exchange rate slip whether, as a result of the devaluation of the crown, they could drink five or six or ten liters of beer in Salzburg for the same price they had to pay at home for a single liter. A more splendid lure could not be imagined, and so crowds of women and children moved over from neighboring Freilassing and Reichenhall to afford the luxury of swilling as much beer as their stomachs could hold. Every evening the station was a veritable pandemonium of drunken, bawling, spitting hordes of people; some who overloaded themselves had to be carrier to the carriages on the trolleys usually used to transport suitcases….Of course the happy Bavarians had no idea that were in for a terrible revenge. For when the crown stabilized and the mark, on the other hand, plummeted in astronomical proportions, the Austrians crossed over from the same station to get cheaply drunk in their turn, and the same spectacle began a second time, but in the opposite direction.

This imbalance between currencies created other surreal scenes.

Incredible as the fact may seem, I can corroborate it as a witness that the famous luxury Hotel de l’Europe in Salzburg was for a long time rented out entirely to English unemployed people who, thanks to the abundant English unemployment benefits, lived here more cheaply than in their slums at home.

But Zweig’s experience of German hyperinflation was even more extreme than what he had witnessed in Austria—enacting a kind of absurdist economics.

• “I have experienced days when I had to pay fifty thousand marks for a newspaper in the morning, and a hundred thousand in the evening.”
• “Those who had to change foreign money spread the charge over hours, because at four o’clock they got several times what they had gotten at three, and at five o’clock again several times what they would have gotten sixty minutes before.”
• “I sent my publisher a manuscript I had been working on for a year and thought I had secured myself by demanding immediate advance payment for ten thousand copies; by the time the check was remitted, it barely covered what it had cost to frank the package a week ago”
• “One found hundred thousand mark bills in the gutter: a beggar had scornfully thrown them away.”
• “A shoelace cost more than before a shoe, no, more than a luxury store with two thousand pairs of shoes.”
• “For a hundred dollars you could rows of six story houses on Kurfürstendamm [the Champs-Élysées of Berlin].”

But the worst results were hidden from view. In these calamitous times, the ruthless and the rule-breakers got richer, while the honest and trusting found themselves impoverished.

He tells the tale of Hugo Stinnes, who took advantage of the collapse to buy up factories, mines, ships, castles, etc.—all with cash that would quickly lose its value to the seller. “Soon a quarter of Germany was in his hands, and perversely the people, who in Germany are always intoxicated by visible success, cheered him like a genius.”

Later Stinnes bought up newspapers—in order to control public opinion. After his death, this media empire helped consolidate power and influence for Hitler. Stinnes didn’t live long enough to see that happen. He died in 1924, the proud owner of 4,500 companies and 3,000 factories.

Zweig wants to make clear, in this final book before he took his life, that this currency collapse was the main reason why the German public embraced Nazi ideology.

Nothing has made the German people—this must be recalled again and again—so bitter, so hateful, so ripe for Hitler as inflation. For [World War I], as murderous as it had been, had at least given hours of jubilation with bells ringing and victory fanfares. And as an incurably military nation, Germany felt its pride increased by temporary victories, while inflation made it feel only soiled, cheated and humiliated.

Instead of blaming the leaders who had started World War I, the Germans focused their anger on the politicians who subsequently brought them democracy and peace. Against all logic, they demand a return of the brutal butchers who solved every problem with escalating violence.

One of the reasons why many historical cycles seem to recur every hundred years, more or less, is that the people who learned the lessons of this mostly forgotten past are dead and gone. We can’t hear their warnings, or benefit from their experience. So we are doomed to repeat their mistakes.

That’s why I’m always fascinated by things that happened almost exactly a century ago. They typically represent a comparable point in the cycle as the one we are currently living through. Yet those earlier events exist just beyond the horizon of our living memory—and thus tell us painful truths that we can only learn from history books.

If we hope to avoid the worst excesses of the cycle, we must pay close attention to case studies from these bygone eras. Stefan Zweig’s The World of Yesterday is one of the most valuable of these documents. I’ve only provided the briefest sketch of its wisdom in the passages above. You would do well to read it in its entirety.