Inflation and Morality

Without German inflation in the 1920's, Hitler's political rise would not have been so huge and the anti-Jewish sentiment would likewise not have been so prevalent in the German middle class. That experience transformed the thought and life of Germans, professional and working class alike, many of whom lost their savings, wealth, and any direction in life, until the Nazi phenomenon came along. Inflation is not like any other economic crisis because it effects every facet of life, every generation, every line of work, and ultimately changes both national and personal lives.

Theodore Dalrymple, in his article Inflation's Moral Hazard that appears in City Journal magazine, penetrates to a great degree the effects of monetary inflation on the human psyche and human conduct. Below is the most important segment of the piece:

But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance.

Except in one circumstance, that is: the possession of a salary and a pension that the government promises, implicitly or explicitly, to index against inflation. This is the situation of public-sector workers and is a pyramid scheme, too, perhaps the biggest of the lot, since events may require the government to renege on its obligations. But meantime, such employment will seem a safe haven, and the temptation will be for government to expand it, with the happy consequence—for itself—of increasing dependence. And dependence, too, undermines character.

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