The Misesian

Hyperinflation and the Destruction of Human Personality

The Link between Economic Calculation and Human Personality

Economists and historians have clearly shown that the destruction of the value and function of money by hyperinflation makes economic calculation impossible and leads to economic and social disintegration and widespread poverty. What is not so clearly understood, even by many economists, is that during periods of rapid inflation, the inability to economically calculate undermines the very nature of property and causes a withering of the human personality, which is intimately connected with property ownership. By eliminating the means of appraising and rationally allocating one’s property, hyperinflation eliminates the very basis of independent human existence and personality under a system of social cooperation. The inevitable result is the dissolution of the society of voluntary contract and its replacement by a hegemonic order in which property and personality are collectivized.

The central role of money and property in the formation of the individual human personality under the division of labor has yet to be investigated in any depth, and I will not attempt to do this here. However, I will note that in speaking of the human personality, I am referring to what has been called, usually derisively, the “bourgeois personality.”1 This is the common state of thinking and being that characterizes the modern individual operating in a private-property social order. The bourgeois person is goal oriented, self-interested (but not necessarily selfish), thrifty, and uses time as a scarce resource to improve his productivity and enhance his future well-being. In pursuing his own interests, this person must consciously and repeatedly act socially. That is, he must specialize in producing goods and services that are valued by people whom he most likely does not know. By producing for and exchanging with these unknown persons, he integrates himself into what Ludwig von Mises calls the social division of labor. Specialized production and voluntary exchange are the essence of social action and are necessarily guided by market prices. They involve the deliberate choice of concrete means and ends and the monetary calculation of costs and benefits. Human personality, as the term is used here, therefore, does not refer to a cluster of psychological attributes and qualities; rather, it is a mode of being and becoming someone that is based on economic calculation and the ownership of property. Software engineer, Uber driver, restaurateur—none could have become what they are in the absence of money and private property.

The Destruction of Property and Personality during Hyperinflation 

As the general medium of exchange, money is the tool for appraising one’s property, estimating one’s wealth, and judging one’s prospects of future well-being. Once the future value of money becomes impossible to reliably forecast, ordinary people lose the ability to rationally use their property and preserve their wealth and thus become incapable of planning for the future. This leaves them little choice but to dissipate their wealth and energy in striving after immediate gratification. This rise in time preference— that is, in the premium on present satisfaction relative to satisfactions in the future—nullifies the value of productive work, thrift, and sober investment. It brings about a social revolution in which the productive middle class, entrepreneurs, capitalists, and inventors are destroyed and replaced by gamblers, con artists, and swindlers at the top of the social structure.

Inflation does not just wipe out the savings of the productive classes and divert their energies into sterile and corrupt pursuits, however; it also deforms and attenuates their personalities. Whether we like it or not, men and women exist in a world where they cannot live and flourish physically or spiritually without property. As the founder of the Austrian School, Carl Menger, pointed out, “Property is not . . . an arbitrarily combined quantity of goods but a direct reflection of [a person’s] needs, an integrated whole, no essential part of which can be diminished or increased without affecting realization of the end it serves.” Thus property is the foundation of human personality—no meaningful motion, activity, or expression of thought is possible without it, for human personality is not the spontaneous projection into the external world of random inner urges that characterizes the unreflective behavior of a human infant. Personality is the external projection of a deliberately planned mode of individual being and becoming. As such, it involves a conscious arrangement of activities whose pursuit requires a carefully chosen structure of means; that is, property. Property therefore is not a haphazard collection of things that can be completely described in physical terms but rather the coherent, objective embodiment of the yearnings and aspirations of the human spirit.

In a real sense, then, property defines and delimits an individual’s personality. A person cannot be whatever he wants to be; he is rigidly limited by the means at his disposal. One is not truly a novelist unless he possesses a room, a desk, a computer, and word-processing software; a restaurateur must have access to a kitchen stocked with food. A person cannot even pursue leisure or vocational activities without possessing specific concrete means. One is not a fisherman without fishing tackle and access to a boat and body of water; one cannot be a golfer without the possession of, or the means of acquiring, golfing equipment.

Furthermore, in an exchange economy, it is economic calculation based on money prices that gives meaning to a collection of different kinds of concrete goods and enables the actor to transform these goods into an integrated structure of property suited to his system of ends. Without money prices to guide him in his calculations, a person acts with blinders when entering a profession or business because he can never know whether these activities will generate sufficient income to help sustain his existence. Furthermore, a person does not know the degree of his success or his position in the social structure unless he can calculate the monetary value of his possessions. Has he achieved eminence or suffered crushing disappointment? Is he prince or pauper?

People cannot even know what or who they will be in the future without knowing the monetary value of their accumulated savings and assets. All their plans for themselves and their children are shaped by this knowledge. Will a person likely retire to a gated community with a plush golf course at the age of sixty; or will he be greeting customers at the local Walmart as a septuagenarian?

Money and property are thus essential elements in the socioeconomic process conditioning what a human being is and can become. Without economic calculation based on sound money, not only is it impossible for entrepreneurs and businesses to reasonably calculate the possible outcome of alternative investment decisions, but it also becomes impossible for a person to even know who he is or to reasonably assess what he can become. During the German hyperinflation, for example, university professors and high-ranking civil servants on relatively fixed salaries could no longer support themselves and their families and, overnight, they became taxi drivers and waiters, with all that this implied for their professional and personal relationships, social position, and retirement prospects.

The German Hyperinflation

The concrete effects of the destruction of money and property on human personality are demonstrated most vividly in the historical episode of the German hyperinflation of 1923.

In the extreme case of hyperinflation, as the value of money hurtles toward zero, property loses its meaning, human personality withers, and society disintegrates. This all-important connection between money and property on the one hand and human personality on the other was dramatically expressed by the German historian and sociologist Konrad Heiden, a shrewd observer of the great German hyperinflation. Wrote Heiden: “The German people was one of the first to witness the decay of those material values which a whole century had taken as the highest of all values. The German nation was one of the first to experience the death of the unlimited free property which had lent such a royal pride to modern humanity; money had lost its value—what, then, could have any value? Of course, many were accustomed to having no money; but that even with money you had nothing—that was a twilight of the gods. . . . A cynical frivolity penetrated men’s souls; no one knew what he really possessed and some men wondered what they really were.”2

Heiden’s insights are illustrated in the statements of a woman who lived through the German hyperinflation. Erna von Pustau was a middle-class resident of Hamburg who was interviewed by the eminent American writer Pearl Buck. Pustau’s reminiscences reveal how the German people lost their intellectual and spiritual moorings amid the calculational chaos of hyperinflation. The inability to perform simple accounting calculations that were a matter of routine in the past caused confusion of thought and language. As Pustau recalled, “We could hardly say that our mark was falling, since, in figures, it was constantly going up and up and up, and so did the prices, and this was much more visible than the realization that the value of our money was going down. It sounds confusing, doesn’t it? But this confusion belongs to inflation, is inseparably connected with it, and was one of the reasons why the people gave up thinking things out. It all seemed just madness and it made the people mad.”

Pustau quoted the following line from a popular song of the day that alluded to the destruction of wealth caused by the unrestrained lust for immediate gratification: “We are drinking up our grandma’s little hut and the first and second mortgage, too.” Pustau then remarked, “Saving is the very source of wealth and health of a sound nation. But, we have no longer a sound nation. We are on our way to become a crazy, a neurotic, a mad nation.” Pustau also commented on the spiritual trauma inflicted by the sudden collapse of the social structure, lamenting, “It was a sad world, a world in which none was better than the other and all was a matter of chance and degree. A sad world, and a sad conception for a girl who still remembered the good old times of Grandmother! Our times made us cynical.”

A music lover, Pustau related an ordeal in which she and her suddenly impoverished middle-class friends were forced to wait for hours in line to purchase standing-room tickets to see Wagner’s Twilight of the Gods. Most of the seats in the theater had been bought by people who chose to attend not because they were genuine music lovers but because they had gained a windfall from the inflation. This incident impressed on Pustau that the malfunctioning of money penetrated to the very core of one’s self-identity, and it radically reshaped her most cherished goals and beliefs about the world. Thus she stated, “[Wagner’s gods] set fire to the entire world, yet they did it for great things, for heroic deeds, for love—for this beautiful thing love. And how is it with us? We fight for tickets, we fight for pennies. It is these ugly little things that break us down. . . . It was all so mixed up with money. We used to consider money as nothing and we said, ‘Money is dirty,’ and ‘One doesn’t speak about money.’ And here everything was mixed up with money and with small sums only and small things.”

Pustau summed up her recollections of the hyperinflation by comparing the cultural and moral effects of hyperinflation to those of war: “For a battle it was this inflation, fought out with financial means. The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self assurance; their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency.”

The sociologist Heiden vividly summarized the general lesson of the experiences of the millions of Germans like Erna Pustau who were caught up in the hyperinflation: “Man had measured himself by money; his worth had been measured by money; through money he was someone or at least hoped to become someone. Men had come and gone, risen and fallen, but money had been permanent and immortal. Now the State had managed to kill this immortal thing. The State was the conqueror and successor of money. And thus the State was everything. Man looked down at himself and saw that he was nothing.”

Thus, as Heiden keenly perceived, in Germany the abolition of money through hyperinflation rendered property meaningless and thereby obliterated the basis of human personality. Social and economic institutions long taken for granted disintegrated and disappeared, and the social structure itself began to dissolve, causing human existence to become atomized and aimless. Thought, language, values, culture—all were deformed as the interior life of the individual was drained of meaning and purpose and, to a great extent, extinguished.

Heiden concisely summed it up: “The state wiped out property, livelihood, personality, squeezed and pared down the individual, destroyed his faith in himself by destroying his property—or worse, his faith and hope in property. Minds were ripe for the great destruction. The state broke the economic man beginning with the weakest.” Heiden is here not referring to the abstract “economic man” but to the flesh-and-blood bourgeois man, the social being whose existence is rooted in private property and the market economy.

The State as the Molder of Personality

There was nothing definite but the state left to fill the economic and spiritual vacuum created by the German hyperinflation. But a shrewd and cunning German politician named Adolf Hitler understood the nature of inflation as a gigantic material and spiritual swindle and recognized the deforming of German souls and personalities and the corresponding disintegration of German society. Hitler taunted the German people for tolerating the swindle and at the same time promised them material relief and spiritual regeneration in the state, the successor of money.

Heiden reported that Hitler told the following story at a meeting in the summer of 1923: “We have just had a big gymnastic festival in Munich. Three hundred thousand athletes from all over the country assembled here. That must have brought our city lots of business, you think. . . . There was an old woman who sold picture postcards. She was glad because the festival would bring her plenty of customers. She was beside herself with joy when sales far exceeded her expectations. Business had really been good—or so she thought. But now the old woman is sitting in front of an empty shop, crying her eyes out. For with the miserable paper money she took in for her cards, she can’t buy a hundredth of her old stock. Her business is ruined, her livelihood absolutely destroyed. She can go begging. And the same despair is seizing the whole people. We are facing a revolution.”

Hitler perceptively noted that once the government had begun to run the printing presses “full time,” it was doomed to continue the “swindle” until the bitter end of a hyperinflationary breakdown. Stopping the monetary expansion would reveal to workers that their real income was substantially less than they realized and that much was being siphoned off to pay reparations to foreign powers as mandated by the Treaty of Versailles. This revelation would spell the downfall of the government. In the meantime, people’s confidence in the established moral and social order associated with capitalism would be shattered, as the vicious would replace the virtuous at the top of the socioeconomic structure. As Hitler wrote in his daily newspaper in 1923: “The government goes on calmly printing these scraps, because, if it stopped, that would mean the end of the government, because once the printing presses stopped . . . the swindle would at once be brought to light. For then the worker would realize that he is only making a third of what he made in peacetime. . . . Believe me, our misery will increase. The scoundrel will get by. But the decent, solid businessman who doesn’t speculate will be utterly crushed; first the little fellow on the bottom, but in the end the big fellow on top too. But the scoundrel and swindler will remain, top and bottom. The reason: because the state itself has become the biggest swindler and crook. A robbers’ state.”

Now, although Hitler spoke more truthfully about the nature and effects of inflation than our current central bankers and academic economists, his intent was not to present a program for abolishing the “robbers’ state” and restoring sound money, private property, and the moral and social order of capitalism. Rather Hitler sought to frighten and shame the propertyless, demoralized, and atomized German masses into abandoning the corrupt and shortsighted social democratic politicians of the Weimar Republic and seeking salvation in a dictatorial state run by his National Socialist movement. Accordingly, Hitler forewarned that people who were earning billions of marks would literally starve to death. The farmer would stop selling his products for the worthless billions which he can only use to “paper his outhouse on the manure heap.” What Hitler hoped to bring about was what he called the “revolt of the starving billionaires.” According to Hitler, “If the horrified people can starve on billions, they must arrive at this conclusion; we will no longer submit to a state which is built on the swindling idea of the majority, we want dictatorship!”

Hitler, however, used more than fear to motivate his listeners. He capitalized on the self-contempt of those who had been swindled out of their property and moral values, and whose sense of self had been shattered. He saw that people like these had regressed to the immature state of adolescence and were ready to follow a leader—to reconstruct their own moral codes and personalities according to the artificial collectivist and nationalist ideal of the leader’s twisted vision. Hitler addressed and chastised them accordingly: “The German people [is] made up of children, for only a childish people will accept million-mark bills.”

Heiden insightfully connected Hitler’s aim in his speeches on hyperinflation with the derangement of his own personality as a product of the same moral, economic, and social catastrophe of hyperinflation: “It was the artificial building of a new national character, an ersatz character, an attitude created in accordance with an artificial plan. The people dream and the soothsayer tells them what they are dreaming. This continuous, domineering yet intimate conversation with the people could only be carried on by a man who was people and enemy of the people in one; a torn personality who felt himself a trampled fragment of the people in his own downtrodden miserable nonentity, and rebelled with the people against this destiny; but who at the same time was convinced of the absolute necessity of trampling, coercing and shaking the master’s fist.”

Hitler not only utilized this theme of the degeneration and reconstruction of personality as a rhetorical device. He developed it into one of the fundamental principles of the National Socialist philosophy. In a chapter in Mein Kampf entitled “Personality and the Conception of the Folkish State,” Hitler elaborated his vision of the National Socialist state, whose “chief task” he saw as “educating and preserving the bearer of the state.” Underlying this state would be a philosophy that “builds not upon the idea of the majority, but upon the idea of personality.”

For Hitler, personality emerges from the inventive ideas and creative actions of especially able individuals, but only reaches its full realization in the organized state, and especially the leadership of that state. Individuals do not possess personality but are possessed and molded by it; their very being does not emanate from within but penetrates from without. For Hitler, personality originates solely in the leader and permeates and animates the entire nation, turning it into a living thing. Hitler’s warped principle of personality pervades and organizes all fields of human endeavor, including thought, art, and economic life. Indeed, Hitler argued, “the idea of personality is everywhere dominant—its authority downward and its responsibility toward the higher personality.” However, it is stifled and incompletely realized because it is prevented from entering political life by the antithetical principle of majority. Hence, Hitler concluded, “The best state constitution and state form is that which . . . raises the best minds in the national community to leading position and leading influence.” Within a decade of the publication of these words, Hitler was to have his ideal state, which would displace money and private property as the shaper of human personality and society.


The German hyperinflation is a concrete historical example of how the destruction of property affects human personality formation. It illustrates a link between property and personality that is based on the universal principles established by praxeology, the same science of human action that encompasses sound economics. In contrast, the mechanistic, compartmentalized, and hypermathematical discipline that is contemporary macroeconomics can never begin to grasp the full moral and social enormity of hyperinflation. Its narrowly specialized practitioners are not even conversant with all the branches of economic science, let alone the closely related disciplines of history, sociology, psychology, and political philosophy. A working knowledge of the main conclusions of these disciplines is necessary for an economist who seeks to fully explain the causes and consequences of a complex economic event such as the German hyperinflation of 1923 or the Great Depression of the 1930s. As Friedrich Hayek pointed out, “Nobody can be a great economist who is only an economist—and I am even tempted to add that the economist who is only an economist is likely to become a nuisance if not a positive danger.”

  • 1

    I am indebted to David Gordon for this insight.

  • 2

    Heiden was the leader of a small democratic organization in 1923, when he came into conflict with Adolf Hitler and his rising movement by sponsoring anti-Nazi parades, mass protests, and large posters. See Konrad Heiden, Der Fuehrer: Hitler’s Rise to Power, trans. Ralph Manheim (Boston: Houghton Mifflin, 1944), excerpted in The German Inflation of 1923, ed. Fritz K. Ringer (New York: Oxford University Press, 1969), 164–218.

Image Source: Adobe Stock
Note: The views expressed on are not necessarily those of the Mises Institute.
What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. 

Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

Become a Member
Mises Institute