The Economy of Nazi Germany Part 2: Nazi Economic Policy
In the first part of this series, we went
through various quotes and passages from Hitler, discerning as best we can his
exact economic views and beliefs. To quickly sum up the confused positions of
Hitler, he believed that the state should try to ensure the public welfare at
all costs. He was fine with private property, but as soon as private property
got in the way of his own machinations, he had no scruples over violating
property rights. Economics was a means to his ends.
The economic policy apple did not fall far from
the economic theory tree in the case of Nazi Germany. Hitler’s regime,
especially from 1936 onward, was a constantly intervening force in the economy.
Hitler was not a man of empty words in his speeches and writings, and followed
through on his promises to use the state to bring about the “common good” for
all.
When Hitler first came to power in 1933, he
inherited a country that was still recovering from the hyperinflation of the
late 1920s, and had still not completely recovered from the destruction of the
First World War. The Weimar Republic, the post-Kaiser but pre-Nazi government,
had initiated public works programs to try and boost the sinking economy.
Unemployment was one of the biggest problems facing Germany, with little relief
in sight given the state of the economy. The Nazis believed that public works,
among other methods such as forcing women out of jobs, could alleviate the
situation. However, Fortune magazine stated:
“By mid-1934 it had become apparent that little if any long-term
benefit was being accomplished, and that the same problems remained as before.
The recovery ideas of Schacht and other moderates were thereupon abandoned, and
in their place was substituted secret military rearmament.” (“Germany. I. ‘We
Are Living in a Fortress.’” Fortune, October, 1939. p. 126.)
The economic focus of the nation started to turn
towards military rearmament. Tooze states that between 1933 and 1935, military
spending rose from 1% of national income to 10% of national income. Rearmament
was on its way, and the expenditures would only grow over time. Each year from
1933-39, government receipts increased by 27% each year on average.
In September, 1936, Hitler enacted the Four-Year
Plan. Shirer says that this was a “total war economy” and the purpose of this
plan was to make Germany completely self-sufficient in four years. Germany
itself lacks several key resources needed to wage modern war, such as rubber
and oil, leading to the necessity of making sure a naval blockade would not cripple
the German war economy. This led to an effective takeover of the economy.
Shirer states that “businessmen, though their
profits soared, became mere cogs in a war machine…”
Business Under the Nazis
Even before the economic coup of 1936, the Nazis
had their eye on business. In 1933, the existing cartels of businesses that had
existed under the Weimar Republic were made compulsory and under the control of
the Ministry of Economics through an amendment to the 1923 Cartel Act.
In 1934, businessmen were required to streamline
their business and trade associations through the state. This gave birth to a
sprawling bureaucracy in the Nazi government, with over 100 chambers of
industry. At the top of the multi-leveled system was the Reich Economic
Chamber.
The culmination of these steps toward control
came in 1936 with the Four-Year Plan. Temin states that:
“The Nazis also set quotas for many industrial goods, including
pig iron, steel, aluminium, magnesium, gunpowder, explosives, synthetic rubber,
all kinds of fuel, and electricity.”
Shirer gives us a picture of the attitude of
businessmen at this point, saying that they were:
“Buried under mountains of red tape, directed by the State as to
what to produce, how much and at what price, burdened by increasing taxation…”
Shirer also states:
“Amidst this labyrinthine organization and all the multitude of
offices and agencies of the Ministry of Economics and the Four-Year plan and
the Niagara of thousands of special decrees and laws even the most astute
businessman was often lost, and special lawyers had to be employed to enable a
firm to function.”
The Nazi government had slowly but surely taken control over
German businesses, and by extension, the economy itself. Rather than
businessmen deciding themselves how best to conduct their trade, the orders
came from the top.
None of these new controls eliminated the entrepreneur or their
ownership over their property per se. All that changed was that the entrepreneurs
were only allowed to use it in ways the government had approved. I hope the
reader will see the lack of distinction between the two.
The Vampire Economy
One of the best sources concerning life under the economic
bureaucracy is Gunter Reimann and his book, “The Vampire Economy.” Reimann
himself was a Communist who had been part of the underground anti-Nazi
resistence. He wrote “The Vampire Economy” in London in 1939, inspired by what
he had seen in his time in Nazi Germany.
Reimann had a hatred for what the Nazis had done to the economy,
seeing it as a corruption of the individual and his spirit. He said of the
businessman:
“The life of the German businessman is full of contradictions. He
cordially dislikes the gigantic, top-heavy,bureaucratic State machine which is
strangling his economic independence. Yet he needs the aid of these despised
bureaucrats more and more, and is forced to run after them, begging for
concessions, privileges, grants,in fear that his competitor will gain the
advantage.”
One of the most prevalent aspects of the Four-Year Plan and
economic controls were the price and wage controls. Reimann despised them, as
is evident in his writing. The question when instituting price controls is
always, “What should the price be?” There is never any satisfactory way to
answer this question and the Nazis weren’t any different. Reimann states:
“There were a number of official definitions of the "justified"
price. At first the definition was that the price should be
"reasonable," then that it should represent the cost of production
plus a "reasonable" profit. But there was no effective control of
production costs and what might constitute a "reasonable profit"
remained a mystery. However, all this was soon forgotten when manufacturers
started complaining about the tremendous increase in the cost of raw materials
and other expenses. A new definition had to be found: the price must be
"justified from the point of view of national economy." This was
still more mysterious and vague. In reality it meant that the price level of
any given commodity no longer depended merely on economic conditions, but also
on political factors.”
As ubiquitous as these price controls may be, the German people
simply found ways around them. One way was a “combination deal”. Essentially,
instead of selling one good at a determined price, you would bundle it with
another good and sell them both together. The second good might be something
relatively worthless, but because it was a bundle, you could get around the
price controls.
Reimann records an example of this bundling of goods. A seller
would be selling pigs, but would also have his dog with him. The seller could
only sell his pigs at a maximum, state-mandated price. So instead of selling
his pigs, he would sell a customer his dog and throw in a pig for free. After
receiving his pig, the buyer would simply let the dog go free and it would
return back to the seller!
These deals were technically illegal, as the government saw that
it was little more than a roundabout way of charging higher prices, but Reimann
says that:
“Combination deals
are forbidden in Germany,
but they will be common
practice as long as the
price of articles that
are scarce is not allowed
to rise and as long as
sales of these
articles are less profitable
than sales of other articles.” (pg. 71)
I will leave this section on Reimann with one final quote:
“In Nazi Germany there is no field of business activity in which
the State does not interfere. In more or less detailed form it prescribes how
the businessman may use capital which is still presumably his private property.
And because of this, the German businessman has become a fatalist; he does not
believe that the new rules will work out well, yet he knows that he cannot
alter the course of events. He has been made the tool of a gigantic machine
which he cannot direct. He looks at the rest of the capitalist world, hoping
for help in winning back from the State his lost rights and freedom” (pg. 305)
Hitler’s Economic Legacy
As you are probably aware, Nazi Germany invaded Poland in 1939,
effectively launching the Second World War, which would eventually destroy
their country and economy. Germany was divided into two halves, and remained
that way until the fall of the Soviet Union. History has not at all been kind
to Hitler or the Nazi party, being damned and hated by nearly everyone. Despite
all of this, the economic ideas that he held are still alive today.
Hitler was not the originator of his socialistic economic ideas
and policies, but he embraced them wholeheartedly. His judgements of placing
private property as subservient to public need were not new, but it was his
mantra. He didn’t invent the idea of forcing the individual to serve a
collective, but he injected it into German society.
The same ideas that Hitler and the Nazis held about economics are
still alive and well today. With a new brand of “Democratic Socialism” on the
rise, these ideas are more popular than at any time in recent years. The
sentiments and slogans of Hitler’s speeches have returned, only the speakers
have been swapped. The Nazi Swastika is a taboo image, but the economic ideas
that it represented still loom over us today.
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