During the era of German unification, Otto von Bismarck famously rem-arked that the great questions of his age would be decided not by speeches and resolutions, but by blood and iron. In Paper and Iron, Niall Ferguson makes a compelling case that the state of Bismarck's successors suffered from a deficiency not of iron, but of paper.

Ferguson's focus on the inflationary period in Hamburg is well-chosen. On the one hand, the city was a typical centre of the German bourgeois life which was so devastated by inflation. On the other hand, it was sensitive to questions of finance: "Ultimately," Ferguson writes, "all values in Hamburg rested on money values."

Paper and Iron challenges the current historiographical consensus that the inflation was "good" for Germany because it wiped out industrial debts, stimulated investment, and benefited the working class, whose labour unions ensured that wages remained in step with prices. In fact, Ferguson argues, the inflation was an almost unrelieved economic catastrophe: it encouraged investment mainly in inefficient and highly subsidised industries such as ship building; it wrecked middle-class confidence in the political system; it did not boost exports, nor reduce imports; and far from being politically consensual, the inflationary period saw unprecedented labour militancy and political extremism on right and left. To make matters worse, the German government was encouraged by Keynes and his Hamburg friends to prolong the inflation in the futile struggle for the revision of the reparations burden imposed by the Versailles treaty.

Instead, Ferguson argues, the Reich government would have been well advised to follow an alternative deflationary policy involving new taxes, a reduction in social welfare payments, a devalued mark and a liberal trade policy. Such a programme - a kind of "contract with Germany" - would have restored confidence in the mark and revived the economy. It would also have enabled Germany to make a genuine attempt to pay at least some reparations. Of course, this would have necessitated some form of authoritarian subversion of the Weimar constitution along the lines of the central and eastern European norm established by Poland, Lithuania and many other states during the inter-war period.

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For one of the central arguments of this book is that the German state was not powerful enough. The Reich, Ferguson argues, suffered from "underlying structural problems . . . in particular of its monetary and fiscal systems". Thanks to the strength of federalism and the weakness of the Reichsbank, central government was severely hamstrung. After 1918, this "political defectiveness" meant that central government was unable to control the huge public sector deficit spawned partly by its own social and industrial subsidies and partly by the enormous spending undertaken by local social democrat, liberal and catholic authorities - the "loony centre" of the Weimar Republic. It was this fiscal laxity as much as war costs and reparations which led to inflation.

Yet as Ferguson shows, thoroughgoing reform threatened too many corporatist and regionalist pieties. Even Chancellor Wilhelm Cuno, who as a Hamburg shipping magnate was supposed to epitomise government by the economy (Wirtschaft), was unable to make any headway. Indeed, rather than reassert sound business principles, Cuno printed more money to finance passive resistance in the Ruhr. The result was a further erosion of central power as Bavarian separatism and communist revolts reduced the Reich to a state of disintegration. Businessmen in Hamburg even created their own currency. The lesson Ferguson argues, is that a state that loses control of its currency loses its sovereignty; the contemporary resonances are obvious (and intended).

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In 1924 the mark was stabilised, but the legacy of the inflation endured. It led to what Ferguson calls a "crisis of bourgeois culture": a decline in religious faith, in family values, confidence in the law, and in the traditional virtues of thrift and hard work. As such, the inflation amounted to an "anti-bourgeois revolution" which alienated the middle classes from Weimar. In the end Hitler "solved" the political defectiveness of Weimar by curbing the power of corporate interests, crushing the unions, limiting public expenditure and regulating the capital markets.

Critics of Paper and Iron may question whether all inflationary states necessarily experience centrifugal tendencies; the admittedly rather different South American examples would tend to suggest that inflationary bedlam need not threaten territorial integrity. Others may doubt whether it is possible to construct a general argument about Germany as a whole on the basis of what some might regard as essentially a regional study.

But these objections would not alter the fact that Niall Ferguson has written one of the most important interpretative works on understanding of the interplay between society, economy and political will. It is sensitive to businessmen's desire to control politics, but sceptical of their ability to do so. As Paper and Iron shows, it was politics which triumphed over and distorted economics, not the other way around.

This primacy of politics is in many ways redolent of the work of Tim Mason, whose selected articles have now been edited and splendidly introduced by Jane Caplan. Although he died in early middle age, Mason left behind an incredibly diverse oeuvre on such subjects as women's history, the Italian working class under Mussolini, the theory of fascism and many other subjects. But Mason was best known for his work on the working class and the "primacy of politics" during the Third Reich. Indeed, he increasingly came to resemble his model E. P. Thompson as an independent-minded, irascible, Marxist empiricist determined to rescue workers under national socialism from the enormous condescension of posterity. For while there was never any mass challenge to the regime, Mason argued that the working class never fell for Hitler's notion of a Volksgemeinschaft - a "national community" - but rather harassed the Nazi leadership with a combination of sabotage, go-slows and minor strikes.

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At the same time, Mason was an innovative historian of high politics. He rejected the standard Marxist view that the Nazi leadership was merely the executive committee of big business and bourgeoisie. Instead, Mason argued for a "primacy of politics" in which once-powerful economic interest groups found themselves marginalised: the business lobby dissolved into the special interests of individual firms with "virtually no influence" over government policy.

None of this meant that Mason was returning to the traditional models of political history - especially the "primacy of foreign policy" - which he explicitly rejected. Indeed, Mason suggested that the roots of the second world war were to be sought in the failure of Nazi domestic policy. An increasing sense of socioeconomic crisis, the argument ran, coupled with fear of a restive proletariat, stampeded the Nazi leadership into attacking Poland; the war was thus a particularly barbaric form of social imperialism designed to escape a domestic-political impasse.

Mason's work, however, suffered from serious internal contradictions. Scarcely had he put politics, ideology and foreign policy at the centre of "the primacy of politics" than he reverted to socioeconomic determinism to explain the outbreak of war in 1939. Mason denied that "international relations are . . . largely autonomous from other spheres of politics". Yet elsewhere he wrote that "The political leadership constructed for itself a position of supremacy which in institutional terms was autonomous and unshakeable and which through its control of foreign policy determined the direction of the system as a whole" - that was pure primacy of foreign policy. Mason denied that National Socialism could have had any "genuinely modernising effects", but he also said that National Socialism had "brought about a tremendous acceleration in the process of concentration in industry and trade and intensified the drift of population away from the countryside into the towns". What were these if not "genuinely modernising effects"?

Unsurprisingly, Mason's work inspired much, often bitter criticism. In particular, many were unpersuaded by his evidence for a "domestic crisis" in 1938-39. During the resulting debate Mason was brutal and sometimes unfair to his adversaries; unlike his compatriot R. H. Tawney, Mason believed that an erring colleague was an Amalekite to be smitten hand and hip. Yet, he inspired not only fierce personal loyalty among friends, but also enduring intellectual respect, even among enemies. This volume is a fitting memorial to his work.

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Brendan Simms is director of history studies, Peterhouse, University of Cambridge.