The Wages of Destruction: The Making and Breaking of the Nazi Economy

by Adam Tooze

Though this was clearly good news, it also carried with it an acknowledgement of Germany’s relative backwardness. In the aftermath of World War I, hyperinflation and the imposition of a punitive reparations regime, it was merely common sense that Germany’s economic development had been thrown back by decades. So firm was

this conviction that statistical evidence to the contrary was greeted with howls of anger and disbelief.17 It was widely believed that British workers enjoyed a higher standard of living than their German counterparts, a fact to which many attributed the chronic underemployment of British industry in the 1920s. The remarkable affluence of the British middle classes in the inter-war period had no counterpart in Germany. Added to this, the impression of British economic power was multiplied by its Imperial possessions. To Germans it seemed that Britain and the other colonial powers, along with America, exercised a stranglehold over the raw materials of the world.

Only the most highly paid workers such as skilled machinists or typesetters earned more than one Reichsmark per hour. At the other end of the scale, the lowest-paid male workers in sawmills and textile factories were on hourly rates of 59 Pfennigs.19 Unskilled women workers in textiles or the food industries could expect no more than 42–5 Pfennigs. In 1936, with the German economy at full employment, 14.5 million people, 62 per cent of all German taxpayers, reported annual incomes of less than 1,500 Reichsmarks, corresponding to weekly earnings of just over 30 Reichsmarks and hourly rates of about 60 Pfennigs.20 A further 21 per cent, or 5 million white-collar and blue-collar workers, reported annual incomes of between 1,500 and 2,400 Reichsmarks (weekly earnings of between 30 and 50 Reichsmarks). Only 17 per cent of all taxpayers recorded incomes of more than 2,400 Reichsmarks, or 50 Reichsmarks per week.

All in all, expenditure on food, drink and tobacco accounted in working-class households for between 43 and 50 per cent of average household budgets.22 Rent accounted for another 12 per cent, implying average housing expenses for German working-class households of only 24 Reichsmarks per month.

Clearly, in Hitler’s Germany only a small minority of the population lived in circumstances which we today would describe as comfortable.

Even the worst paid workers in Detroit took for granted an apartment of four and a half rooms. This caused the investigators in Frankfurt and Berlin some embarrassment since such spacious accommodation was ‘not usually occupied by working men’. Annual rent for a basic four-and-a-half-room apartment would come to at least 1,020 Reichsmarks. If it were provided with the facilities taken for granted in the United States, such as separate bathroom

and kitchen, indoor toilet and running water, the rent might be as much as 1,380 Reichsmarks. That was roughly four times the amount that the equivalent working-class family in Germany actually spent on housing. In total, to have matched the standard of living of Detroit in either Frankfurt or Berlin in the early 1930s would have required an income of between 5,380 and 6,055 Reichsmarks, sums that were beyond the wildest dreams of the majority of the German workforce.

By the early 1940s, as we shall see, German industry was benefiting from an investment boom like no other in its history. The Nazi regime also paid concerted attention to its ‘human capital’. Improvements to the system of industrial training had been discussed intensively in the 1920s. And from 1933 onwards apprenticeships and on-the-job training were given massive state support. Amongst other requirements, an entirely new workforce of skilled metalworkers had to be created for the factories serving the Luftwaffe. In line with its rhetorical revalorization of German labour, the Third Reich established the norm that every German youth should aspire, at the very least, to the status of a semi-skilled worker.27 And these were not mere words. In 1939 only 30,000 male school leavers entered the workforce as unskilled labourers, as compared to 200,000 in 1934. For many working-class families, the 1930s and 1940s were a period of real social mobility, not in the sense of an ascent into the middle class, but within the blue-collar skill hierarchy, prompting one author to speak of the ‘deproletarianization’ of the German working class.

Germans had always worked hard. They had saved and invested diligently. Their industrial technology was second to none, certainly in Europe. Yet Germany was not a rich country. In light of this experience, what reason was there to believe that Germany could soon return to the path of steady progress that it had appeared to be on in the happy years before 1914?

Economic growth could not be taken for granted and Hitler was by no means the only person to say so. As we have seen, the doctrine of economic life as a field of struggle was already fully formed in Mein Kampf and Hitler’s ‘Second Book’. And this Darwinian outlook was only encouraged by the subsequent Depression. Given the density of Germany’s population and Hitler’s insistence on the inevitability of conflict arising from export-led growth, the conquest of new Lebensraum was certainly one means of raising Germany’s per capita income level. Hitler could hardly have been more emphatic or consistent in his advocacy of this position. As we have seen, he made a point of reiterating this belief in the very first days of his new government in 1933. An aggressive foreign policy based on military strength was the only real foundation of economic prosperity.

Hitler and his acolytes were firmly convinced that the development of the German standard of living had been held back since 1918 by an unholy alliance formed between selfish bourgeois liberals and primitivist socialists.33 This conspiracy of low expectations had benefited only the German bourgeoisie, whilst robbing the majority of the German population of the full benefits of the new technologies of mass-production. Ford had had the entrepreneurial vision to break with the past and to turn what had once been a luxury product into a popular commodity. In Germany, what was required to break the deadlock was an act of decisive political will. The Third Reich made it its mission to use the authority of the state to coordinate efforts within industry to devise standardized and simplified versions of key consumer commodities. These would then be produced at the lowest possible price, enabling the German population to achieve an immediate breakthrough to a higher standard of living.

At that point, however, there were only 4.3 million licensed radio receivers in Germany for a population of 66 million. Only a quarter of German households could hear the Fuehrer speak.36 If radio was to fulfil its promise as a propaganda tool, this clearly had to change. The chief obstacle to the wider diffusion of radios was their price. The cheapest radios on the market in the early 1930s were priced at over 100 Reichsmarks, which in light of the income figures we have just discussed was clearly excessive. If radio was ever to reach the mass of the population, something had to be done to design and produce a cheaper receiver. In May 1933 the Propaganda Ministry took the initiative by coming to an agreement with a group of radio manufacturers to push through the large-scale production of a new standard radio.

So to increase the attractiveness of the sets a number of utility companies offered part-payment deals whereby a customer could acquire a set for an initial payment of as little as 7.25 Reichsmarks, followed by eighteen monthly instalments of 4.40 Reichsmarks.

Thereafter, with leadership from Telefunken, the dominant producer, progress was more steady and by 1937 economies of scale were such that the price for the standard VE 301 could be reduced to as little as 59 Reichsmarks. By 1938, the penetration of radios in the big cities of Germany had reached 70 per cent. In the countryside, however, radios remained a luxury.

A year later a major breakthrough was achieved with the introduction of a new entry-level model, the Deutscher Kleinempfaenger (DKE), priced at as little as 35 Reichsmarks.

The Volksempfaenger, by contrast, was completely uncompetitive on world markets with only tiny numbers finding buyers abroad. It is entirely conceivable, therefore, that in a Germany freed from the corset of Schacht’s exchange controls and open to the full benefits of international trade, the diffusion of radios might have been even more rapid. Nevertheless, the association of the Volksempfaenger with the radio boom made it the model for subsequent Volk products.

If one imagines a modern city street with 29 out of every 30 cars removed from the scene, one gets an impression of how exclusive motor vehicles were in Nazi Germany.45 Placed in relation to the number of households, there was one car for every 37 households in 1933.

In April 1933, the regime also announced the elimination of car tax on all newly acquired vehicles. Prior to 1933 these taxes were amongst the highest in Europe and at least ten times higher than those prevailing in the average State in the United States.47 Not surprisingly, the result was a considerable surge in car production and ownership. From a total of 486,001 in 1932 the number of registered cars more than doubled to reach 1.271 million by 1938. As these figures suggest, however, the expansion in motorization had clear limits. Germany in the late 1930s was still a society in which car ownership was the preserve of a small minority.

In the 1930s the cost of petrol produced at IG Farben’s Leuna plant was 15–17 Pfennigs per litre, implying a price of at least 30 Pfennigs per litre at the petrol pump. A tax on imported fuel was therefore indispensable to sustaining the momentum of the synthetic fuel programme. But, as the pressure on the Reich’s finances mounted in the course of the 1930s, this strategic imperative was combined with the more obvious needs of the Reich Finance Ministry. Taxes on imported oil were a significant source of revenue, bringing in 421 million Reichsmarks in 1936, a third of the total customs revenue of the German

In general, the housing policy of the Third Reich in its early years consisted of shifting responsibility back towards private sources of funding. Whereas under the Weimar Republic 42.4 per cent of all housing finance had been provided by the public authorities, by 1936 this had fallen to 8 per cent. The most effective new mechanism of housing policy devised by Hitler’s regime was the Reichsbuergschaft, a public guarantee for mortgages raised by private landlords. Though this required the Reich to provide no funds, the willingness of the Reich to guarantee lenders against default helped to reduce the cost of borrowing.

At a strategic level, guns were ultimately viewed as a means to obtaining more butter, quite literally through the conquest of Denmark, France and the rich agricultural territories of Eastern Europe. In this sense, rearmament was an investment in future prosperity. But though this may accurately summarize the thinking of Hitler, Goering and others in the German political-military leadership, it implies a degree of insight into the ultimate purposes of rearmament that was surely not shared

by the average German in the 1930s.70 This, however, begs the question of what rearmament did mean to Germans in the 1930s. Is it really right to see rearmament simply as a drag on the standard of living, as one more obstacle to the realization of dreams of mass-consumption? Or might it in fact be more appropriate to reverse this train of logic and to think of rearmament as a particular form of collective mass-consumption?

From an economic point of view again, the reintroduction of conscription in 1935 amounted to an enormous collective holiday for millions of young men, who were fed and clothed at public expense whilst not engaged in productive labour. It is hard to deny, furthermore, that there is a degree of parallelism between the various mass youth organizations of the Nazi party, the organized collective activity of the military and the organized mass leisure activities of the KdF (Kraft durch Freude).

By the late 1930s the Luftwaffe and its associated industries had enrolled the labour power of hundreds of thousands of men. Even if only a few thousand were trained as aircrew, hundreds of thousands more were engaged in the infrastructure necessary to sustain the fliers, and for millions more the Luftwaffe provided a point of imaginary identification, making a reality of a decade-old dream of national air power.78 In this sense at least, the idea of an affluent Volksgemeinschaft was more than mere rhetoric. If Germany could not match the United States in terms of private consumption, in the number of cars, radios or refrigerators per household, it did at least boast a vastly greater national stock of combat aircraft and tanks.

It is this epic of globalization that we should have in mind when we turn to the analysis of National Socialism and in particular its agrarian politics. Too often the preoccupation of Hitler and his followers with problems of Lebensraum, food and agriculture is seen as prima facie evidence of their atavism and backwardness. This could not be more wrong. The search for greater territory and natural resources was not the outlandish obsession of racist ideologues. These had been common European preoccupations for at least the last two hundred years. Of course, the European process of expansion had largely come to a halt by 1914.

But the important exception to this rule was in Eurasia, with the ongoing Russian effort to populate and develop the vast territory east of the Urals. And it was to the east that Hitler looked to direct the expansive drive of the German people. The question of how European societies and their rural populations should respond to the new global economy in food was not a marginal issue. It was one of the fundamental questions facing European societies in the twentieth century.

The census of 1933 counted no less than 9.342 million people as working in agriculture, almost 29 per cent of the total workforce. And apart from full-time farmers, many millions of other Germans produced at least some of their own

food from small allotments or from home-reared pigs and chickens.5 According to the census of 1933, 32.7 per cent of the population lived in rural communities of less than 2,000 inhabitants. If we add to that the number living in small market towns of between 2,000 and 20,000, the share comes to 56.8 per cent. And what these statistics cannot convey is the sheer backwardness of much of German rural life even as late as the 1930s.

Nazi agrarianism, with its florid and racist rhetoric of blood and soil and its high-flown ideas about the future of the German peasant, was not an atavistic gloss on a modern industrial regime. Nazism, both as an ideology and as a mass political movement, was the product of a society still in transition. Similarly, Hitler’s obsessive preoccupation with food was rooted in contemporary reality. Though famine had been banished from Western Europe in the second half of the nineteenth century, in large part due to Europe’s ability to tap huge new sources of overseas supply, World War I had forced the question of food supply back onto the agenda of European politics.9 The British and French blockade, though it failed to produce outright famine, did succeed in producing an epidemic of chronic malnutrition in Germany and Austria that was widely blamed for killing at least 600,000 people.10 Depression and mass unemployment brought a return of serious deprivation.11 And even in good times, at the bottom of the social scale chronic malnutrition was widespread in Germany as it was in every other European society in the early twentieth century.

With their complete domination of the sea-lanes it was hardly surprising that they were happy to see German agriculture declining and its urban population slipping into dependence on imported food. By refusing to accept this state of affairs as inevitable, Nazi Germany was not seeking to turn back the clock. It was simply refusing to accept that the distribution of land, resources and population, which had resulted from the Imperial wars of the eighteenth and nineteenth centuries, should be accepted as final. It was refusing to accept that Germany’s place in the world was that of a medium-sized

workshop economy, entirely dependent on imported food. This, as Hitler saw it, was a recipe for ‘race death’. Faced with overcrowding and low wages in the cities, urban families would do their best to reduce the birth rate. The best and the brightest would emigrate to new territories that offered more scope for advancement. For lack of natural resources, the German economy would never be able to match the affluence on show in the United States. And if Germany were ever to emerge as a serious trade competitor, it would be at the mercy of the British and the Jewish propagandists of global liberalism, who would not hesitate to unleash a second, ruinous world war, whilst crippling the German home front by means of blockade.

Whilst Hugenberg dragged his feet over work

creation, he set to work diligently, reinforcing the protectionist walls that insulated German agriculture from the world market.13 To consolidate the protection of the grain-growing interest he established a central purchasing agency that would guarantee minimum prices to all producers. In June 1933 German farm debtors were effectively removed from the ordinary credit system, being provided with complete protection against their creditors. Imports were subject to quotas, as the agricultural lobby had long demanded. It was Hugenberg’s no-holds-barred approach to agricultural protection that gave the international community its first taste of the open aggression that was to be expected from Hitler’s government.

The annual harvest festival celebrations, first staged in October 1933 on the Bueckeberg in Lower Saxony, were awesome displays of Darré’s political power. Larger than the annual party rallies in Nuremberg, they were unmissable events for the new regime’s political elite.

Bearing in mind this intimate connection between the agrarians and the SS is crucial if we are to understand how the twin problems of fostering the German peasantry and managing the national food supply were capable of generating some of the most extreme and murderous policies of the Third Reich.

In the name of freedom, nineteenth-century liberals had broken the fundamental bond that connected the German people to the soil. They had uprooted millions of peasants and turned land itself into a commodity, to be freely bought and sold. It was this capitalistic expropriation that had set in motion the disastrous process of migration and degeneration that had depleted the German countryside. Since unification in 1871, each national census had recorded a lower share of the population employed in farming. For Darré, the dire consequences of this development were most starkly evident in the birth rate. Starting from the 1870s, when fertility rates had been identical in town and country at 40 per thousand inhabitants, the birth rate in Germany’s cities had fallen sharply. By the 1920s births were down to no more than 17 per thousand population. And since the war, the countryside as well had

begun to follow this disastrous trend. By 1930 the birth rate in the countryside was as low as 20 per thousand. For Darré this confirmed the most basic tenets of his theory. The German race, born out of a deeply rooted connection to the soil, was simply not capable of sustaining itself in a society dominated by an urban culture propagated by the Jewish agents of commerce and free trade. Confined to the cities, the German race was doomed to extinction.

What gave Darré’s thinking its particularly impractical, archaic feel was his inability to articulate a clearer vision of how the ‘eternal characteristics of the German race’, defined by their archaeological and biological origins, were related to the historical process of modernization that had had such a transformative impact on German society since the early nineteenth century. It was this inability to provide a convincing historical narrative of modernization that created the impression that Darré intended to bring about a wholesale return to the past. But in fact this characteristic lacuna in his thought had few if any practical implications for policy. Darré’s ahistorical or transhistorical vision was only one strand in Nazi agrarianism.

Backe bridged the gap between Darré’s eternal truths and the historical reality of the early twentieth century, with a conventional, stage view of history.22 Much like Hitler, Backe saw National Socialism as having been assigned the role of overcoming the contradictions of nineteenth-century capitalism and achieving a reconciliation between the German people and the economy that sustained them.

For all its ills, Backe saw the modernization of the German economy and German society in the nineteenth century as an inevitable and necessary preliminary to the possibilities of the twentieth century. As Hitler put it in February 1933, the new Reich would be built not only on the eternal foundations of Germany’s voelkisch existence. It would also make use of all the ‘accomplishments and traditions developed in the course of recent history’.

Across the world, diversified peasant production was displaced by plantation monocultures. The new global market in food may have banished famine in the industrial metropole. But, as Backe pointed out, the monocultures of capitalist agriculture had spread food insecurity to vast tracts of the globe. In recorded history there had never been famines so severe or so frequent as in the nineteenth century.24 The agricultural crises of the 1920s and 1930s were simply the latest phase in liberalism’s disastrous campaign of conquest. In Backe’s vision, Darré’s racial agrarianism melded with a more conventional critique of capitalism as a transformative historical force. Drawing on a populist anti-capitalist canon, beloved of both right and left, Nazi ideologists conjured up images of grain being burned and tipped into the sea, thousands of hectares of land lying uncultivated, whilst at the same time armies of unemployed Europeans and Americans went hungry. Like Hitler, Backe saw the mission of National Socialism as being the supersession of the rotten rule of the bourgeoisie. Far from being impractical, Backe’s ideology provided a grand historical rationale for the extreme protectionism already implemented by the nationalist agrarians. Far from being backward looking, Backe’s vision assigned to National Socialism the mission of achieving a

reconciliation of the unresolved contradictions of nineteenth-century liberalism. It was not National Socialism but the Victorian ideology of the free market that was the outdated relic of a bygone era.25 After the economic disasters of the early 1930s there was no good reason to cling to such a dangerous, archaic doctrine. The future belonged to a new system of economic organization capable of ensuring both the security of the national food supply and the maintenance of a healthy farming community as the source of racial vitality.

When compared to the richer Western European countries, let alone the fabulously well-endowed North American settlements, Germany was indeed land-poor. Compared to Britain, Germany had more land to devote to agriculture, but its rural population was disproportionately larger. Compared to France, the German agricultural population was smaller in relative terms, but France was far more favourably endowed with land. Though comparing itself in terms of per capita GDP to countries like Britain and the United States, in terms of land per farmer Germany had far more in common with backward ‘peasant nations’ such as Ireland, Bulgaria or Romania. Amongst the large Western European states only Italy had a higher ratio of rural population to land endowment.

In 1933, 7,000 estates of more than 500 hectares, just over 0.2 per cent of all farms, controlled almost 25 per cent of German farmland. By contrast, 74 per cent of all farms in Germany–2.26 million in total–farmed only 19 per cent of the land, in often widely dispersed holdings of between 0.5 and 10 hectares. In the middle were the substantial peasant farms of between 10 and 100 hectares, accounting for 25 per cent of all farms and 43 per cent of farmland.

Simple arithmetic suggested that even a wholesale programme of land reform could not satisfy the ambition of the German agrarians, to bring about a fundamental change in the balance between rural and urban society. If all the land held by farms over 500 hectares in 1933 had been comprehensively expropriated and used to create family farms of 20 hectares, the total number of new homesteads created would have been no more than 500,000. This would have enabled the consolidation of the most precarious peasant population on holdings of below 10 hectares. However, it would not have halted the long-term decline of the agricultural population. Indeed, even if the entire farmland of Germany had been available for redistribution, it would have been sufficient to provide each of Germany’s 3 million farming families with an average of only 13 hectares. The conclusion was inescapable. Even under the most favourable assumptions, the

territory of Germany was not sufficient to support an agricultural population substantially larger than that to which Germany had been reduced by 1933, at standards of living that were acceptable in relation to those prevailing in the cities. This conclusion was not lost on the Nazi ideologues. In fact, it was precisely their scepticism about settlement as a remedy for Germany’s problems that set the Nazi agrarians apart.

Only through the conquest of new Lebensraum could Germany really prosper and the direction of this settlement drive was obvious. The Third Reich would start where the Germanic tribes had left off ‘. . . six hundred years ago. We will stop the eternal Germanic migration to the south and west and direct our vision towards the land in the east.’33 At the Nuremberg trials Darré tried to present himself as a harmless advocate of the peasantry.34 But there can in fact be no serious doubt that he and Backe were from the start fully complicit in Hitler’s dreams of conquest.

As hard as it may be for us to credit, agrarian ideology is crucial if we are to understand, not the archaism of Hitler’s regime, but its extraordinary militancy.

production. Lowering a price in relative terms served to divert production into other lines. But the prices themselves were no longer freely determined by the balance of supply and demand. They were set centrally by the officers of the RNS. Furthermore, to ensure that production developed as efficiently as possible, the RNS extended its control and supervision into every field, barnyard and milking shed in the country.

In any given year, the value of the grain harvest alone was equal to the annual output of German heavy industry–coal mining, iron and steel. And yet the difference in the organizational effort devoted to the two operations was spectacular. The backwardness of much of German agriculture betokened a chronic lack of expert management and supervision, a deficit which the RNS sought to put right with an endless stream of lectures, educational material and courses as well as more direct interventions into peasant farming practice. From an economic point of view, one of the most significant innovations of the RNS was that it extended not only to the farms but to all associated industries. The RNS included in its remit the credit cooperatives from which the farmers obtained funds to buy their annual stock of seed grain, the cooperatives and merchants to whom the farmers delivered their produce. It also included the dairies, mills and factories that processed food for consumption in