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

by Adam Tooze

Drafting conscript workers was one thing. But unless they were adequately fed they were useless. There was no industry in the 1940s in which the correlation between labour productivity and calorific input was more direct than in mining.91 But after 1939 the food supply in Western Europe was no less constrained than the supply of coal.92 As was true of Germany, the high-intensity dairy farms of France, the Netherlands and Denmark were dependent on imported animal feed. Grain imports in the late 1930s had run at the rate of more than 7 million tons per annum mostly from Argentina and Canada. These sources of supply were closed off by the British blockade.

Of course, France was a major producer of grain in its own right. But French grain yields depended, as they did in Germany, on large quantities of nitrogen-based fertilizer, which could be supplied only at the expense of the production of explosives. And like German agriculture, the farms of Western Europe depended on huge herds of draught animals and on the daily labour of millions of farm workers. The removal of horses, manpower, fertilizer and animal feed that followed the outbreak of war set off a disastrous chain reaction in the delicate ecology of European peasant farming.

In 1938 the Western European countries now dominated by Germany had been a formidable economic force, with a combined GDP greater than that of Britain. The combined effect of the British blockade and the German occupation was to reduce them to a shadow of their former selves.99 Whilst output in both Germany and Britain increased substantially over the course of the war and whilst output in the United States rocketed, Germany’s European empire was a basket case.

no Western European country occupied in 1940 experienced any economic growth over the next five years.

Despite the extraordinary extent of the Wehrmacht’s victories, the space under Germany’s control in the autumn of 1940 was not, therefore, the self-sufficient Lebensraum of which Hitler had dreamed. Nor did Western Europe provide a promising platform from which to fight the long war of attrition that Britain and its backers in the United States were clearly determined to force on Germany. In economic terms, the Wehrmacht’s victories in 1940 did not release Germany from the dependence on the Soviet Union into which it had entered a year earlier.100 In fact, in the short term the only way to sustain Germany’s Western European Grossraum at anything like its pre-war level of economic activity was to secure a vast increase in fuel and raw material deliveries from the Soviet Union.

Only in the Soviet Union were there the coal, iron and metal ores needed to sustain the military-industrial complex. Only in the Caucasus was there the oil necessary to make Europe independent of overseas supply. Only with access to these resources could Germany face a long war against Britain and America with any confidence.

But if the Tripartite alliance was intended as a deterrent, it had the opposite effect. In Washington it was seen as confirming the aggressive intentions of the Axis powers and it served only to reinforce Roosevelt’s growing commitment to Britain, as the key bastion both against Germany in Europe and Japan in Asia.

The chronic shortage of oil, the debility of the European coal mines and the fragility of the food chain, made it seem unlikely that Germany would in fact be able to ‘consolidate’ its conquests of 1940 without falling into excessive dependence on the Soviet Union. Even if this were possible, the combined manufacturing capacity of Britain and America vastly exceeded the industrial capacity currently under German control and this, in turn, spelled disaster in a protracted air war. The German army, on the other hand, had proved its ability to achieve decisive victory against what were thought to be the strongest armies in Europe. When we bear this range of factors in mind it is easier to appreciate why a defensive strategy seemed like a second-best in the autumn of 1940.

It was only after the defeat of France that the possibility of decisive battlefield success within the space of a few months began to be taken for granted as an integral component of Hitler’s war strategy.

By the summer of 1941, the Wehrmacht was already scraping the manpower barrel.

Of those aged between 20 and 30, who were physically fit for military service, 85 per cent were already in the Wehrmacht in the summer of 1941. Only 640,000 men in this prime age group were granted exemptions on grounds of their importance to the war economy.

Hitler sketched a future of boundless possibilities, in which Germany would wage a ‘battle of the continents’, by which he clearly meant a war with the United States.37 To secure this future of global power, German armaments strategy in 1941 needed to be directed as much towards investment in future capacity as towards current production.

Despite the enormous scale of operation Barbarossa, the German army shared the view that the ultimate military enemies of the Third Reich were Britain and the United States.

The year 1941 also saw an important shift in technological terms. Germany finally abandoned large-scale production of obsolete light tanks and concentrated all available energies on the medium tank designs that were to see the Wehrmacht through to the summer of 1943.

Driven upwards by the Schnellplan of 1938 and Hitler’s demands of early 1940, explosives accounted for 70–80 per cent of the army’s investment in industrial capacity during the war.

The final budget for the Auschwitz plant was 776 million Reichsmarks, making it the largest single investment in the entire portfolio of the Four Year Plan.

In terms of sheer scale, the chemicals plant dwarfed the expanding extermination centre that the SS established just a mile to the west. Nor was Auschwitz an isolated investment.

However, thanks largely to its absurd specifications, which called for dive-bombing capability, the He 177 was a disaster. Its wings were prone to falling off and its peculiar back-to-back engine configuration resulted in frequent self-combustion.

Fundamentally, the Wehrmacht was a ‘poor army’.82 The fast-striking motorized element of the German army in 1941 consisted of only 33 divisions out of 130. Three-quarters of the German army continued to rely on more traditional means of traction: foot and horse. The German army in 1941 invaded the Soviet Union with somewhere between 600,000 and 750,000 horses.

The vast majority of Germany’s soldiers marched into Russia, as they had into France, on foot.

The Anglo-American invasion force of 1944 was the only military force in World War II to fully conform to the modern model of a motorized army.

But the basic constraint on the use of motor vehicles in wartime Europe was not the supply of vehicles, but the chronic shortage of fuel and rubber. As we have seen, the fuel shortage by the end of 1941 was expected to be so severe that the Wehrmacht was seriously considering demotorization as a way of reducing its dependence on scarce oil.

The assumption was clearly that the Communist regime was weaker and that the initial blow struck by the Wehrmacht would be far more dramatic. The racist assumptions built into this axiom of German planning are obvious. It was not, however, devoid of all rationality. Expressed most succinctly in terms of per capita GDP, there was a major developmental difference between Germany and the Soviet Union. According to the best modern estimates, German per capita GDP was two and a half times that in the Soviet Union in 1940. On this basis there was good reason to think that the huge quantitative advantage apparently enjoyed by the Red Army would turn out to be illusory.

Surveying this remarkable collection of rationalizations three things, at least, are clear. First of all, Hitler’s authority was too great, following the success in France, for anyone to mount a serious challenge to his decision to invade the Soviet Union.

It was the frustration of Barbarossa as a military project that determined that the victims of the Holocaust numbered almost 6 million, not the 11.3 million enumerated by Heydrich.

By early 1942, it would not be the Russian mud but the exhaustion of Germany’s petrol supplies that would ensure the ‘complete paralysis of the army’.

Stalin’s failure to concentrate all his forces against the weakest point in the German line was a terrible mistake, enabling the Army Group Centre to stabilize its position at a distance of 100–150 kilometres from Moscow.

When the figures were totalled up in the first week of December 1941, this programme called for the expenditure of no less than $150 billion (in excess of 500 billion Reichsmarks) over the next two years alone.78 This was more than the Third Reich was to spend on armaments in the entire war and the United States had not yet even actively entered the conflict.

Without prior knowledge of the Japanese timetable for a surprise attack on Pearl Harbor, Hitler pledged himself to following Japan in a declaration of war on the United States.

He made no mention of the fact that his indices were calculated with reference to well-chosen periods in 1941 when production had been particularly low, and he ignored altogether the fact that Germany’s production records were entirely eclipsed by the overwhelming mass of material being thrown against Germany by its enemies.

The increase in armaments output was real enough. But given the highly political function of the ‘armaments miracle’ the historical record of the Speer Ministry must be approached with a very wary eye.

cold-eyed examination of the statistics suggests that the increases achieved after February 1942 were far less exceptional than is commonly believed. The sudden upsurge in German armaments production was far from miraculous. It was due to perfectly natural causes: reorganization and rationalization efforts begun long before Speer acceded to power; the ruthless mobilization of factors of production; the coming on stream of investments made earlier in the war; and a deliberate sacrifice of quality for an immediate increase in quantity.

If there was a true ‘armaments miracle’ in 1942 it occurred, not in Germany, but in the armaments factories in the Urals. Despite having suffered territorial losses and disruption that resulted in a 25 per cent fall in total national product, the Soviet Union in 1942 managed to out-produce Germany in virtually every category of weapons. The margin for small arms and artillery was 3:1. For tanks it was a staggering 4:1,

The exceptional performer was the Soviet Union, which in 1942 produced twice as many infantry weapons, as many artillery pieces and almost as many combat aircraft and tanks as the United States, the undisputed manufacturing champion of the world. The Soviet miracle was not due to Western assistance. Lend-lease did not begin to affect the balance on the Eastern Front until 1943.

But what is also clear is that the production miracle came at the expense of enormous sacrifice on the Soviet home front, where hundreds of thousands if not millions of people starved to death for the sake of the war effort.

By the same token, the extraordinary pitch of mobilization achieved by the Soviet Union in 1942 and early 1943 was not sustainable. By 1944 Germany had clawed back the Soviet advantage in every category. By then, however, it no longer mattered. As Albert Speer and Erhard Milch well knew, 1942 was the pivotal year in the war.

Reading contemporary sources, there can be no doubt that the Battle of the Ruhr marked a turning point in the history of the German war economy, which has been grossly underestimated by post-war accounts.29 As Speer himself acknowledged, the RAF was hitting the right target.30 The Ruhr was not only Europe’s most important producer of coking coal and steel, it was also a crucial source of intermediate components of all kinds. Disrupting production in the Ruhr had the capacity to halt assembly lines across Germany.

Following the onset of heavy air raids in the first quarter of 1943, steel production fell by 200,000 tons. Having anticipated an increase in total steel production to more than 2.8 million tons per month and allocated steel accordingly, the Zentrale Planung now faced a shortfall of almost 400,000 tons.

As Speer himself acknowledged, Allied bombing had negated all plans for a further increase in production.37 Bomber Command had stopped Speer’s armaments miracle in its tracks.

But contrary to legend, all the evidence, in fact, suggests that the Reich Air Ministry seized the opportunity of jet power with every possible speed. What prevented the Me 262 from exercising a decisive influence on the air war was not incompetence and conservatism, but the debilitating material limitations of the German war economy.

Over the first five months of 1944 the Luftwaffe’s entire complement of fighter pilots was either killed or disabled. A few German aces survived long enough to notch up extraordinary tallies but the working life of the average Luftwaffe pilot was now measured in weeks.

The first key to increased production was clearly an increased work-rate. Across the aircraft and aero-engine facilities, a seventy-two-hour week was the norm from the spring of 1944 onwards.

In fact, by 1944 what could no longer be obscured was that the German war economy was disintegrating from within. Barring truly drastic countermeasures, it was clear by the summer of 1944 that Germany would soon face an inflation no less severe than that which had dissolved the structure of the Wilhelmine state between 1914 and 1923.

As we have seen, as a result of enormous military spending the German economy had been suffering from substantial excess demand at least since 1938. But until 1943 the symptoms of inflationary dysfunction were relatively well controlled.

The RAF’s last major night-time raid was against Potsdam on 14/15 April 1945, a sortie by 500 bombers which killed at least 3,500 people and incinerated the historical records of the Prussian army.

The defeats of 1944 had cost the Germans 1.8 million men killed.103 In the first five months of 1945, whilst Speer was encouraging his Fuehrer to one last show of resistance, 1.4 million German soldiers met their deaths, 450,000 in January alone.