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

by Adam Tooze

The originality of National Socialism was that, rather than meekly accepting a place for Germany within a global economic order dominated by the affluent English-speaking countries, Hitler sought to mobilize the pent-up frustrations of his population to mount an epic challenge to this order. Repeating what Europeans had done across the globe over the previous three centuries, Germany would carve out its own imperial hinterland; by one last great land grab in the East it would create the self-sufficient basis both for domestic affluence and the platform necessary to prevail in the coming superpower competition with the United States.

In 1932 the German aircraft industry employed 3,2 00 people and had the capacity to produce no more than a hundred aircraft per year. Less than ten years later, the regime had created a multi-billion Reichsmark aircraft and aero-engine industry. It employed at least a quarter of a million people and was capable of turning out every year more than 10,000 of the most sophisticated combat aircraft in the world.

In terms of per capita income, Clark estimated that Germany enjoyed a standard of living that was half that of the United States and at least a third lower than that prevailing in Britain. Drawing on work done in the last thirty years we can make these figures comparable not only across space but also across time.5 In late-twentieth-century terms, German per capita national income in 1935 came to roughly $4,500, as compared to the current per capita income of Germany of around $20,000. In today’s league table of economic development, the Third Reich would rank alongside South Africa, Iran and Tunisia. Of course, this comparison is strained because early twenty-first-century Iran and South Africa can import the high technology of more advanced societies, whether it be nuclear reactors, computers or jet aircraft, on terms that were not available to Hitler’s Germany. The comparison is therefore flattering to Germany’s situation.

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.

For years the rates at which goods were exchanged with each other had not been determined by the anonymous and continuous workings of the market system, but by a series of ad hoc and inconsistent political decisions. The consequence was that for foreign trade purposes the Reichsmark now lacked any well-defined value. The purchasing power of the Reichsmark in foreign transactions depended entirely on which commodity it was measured in terms of and from where those goods were sourced.

For conventional strategic minds such as Ludwig Beck or General Thomas the convergence between Britain, France and the United States was in no way surprising. In light of their experience in World War I, the trans-Atlantic alliance seemed a natural counter-weight to German power in Europe. For Hitler, by contrast, it was profoundly counter-intuitive. In particular, it ran counter to his deeply held belief, expressed clearly in his ‘Second Book’, that British and American interests were fundamentally antagonistic.140 What, therefore, explained the emerging Anglo-American alliance was the malevolent force of world Jewry personified by its ‘chosen one’, President Roosevelt.

The reason why Hitler gambled everything on a massive attack in 1940 was not because he was worried about making excessive demands on the German population, but simply because he thought that this was the only way that Germany could win the war. Regardless of how intensively its home front was mobilized, Germany would lose a protracted war, because the combined economic might of its enemies was simply overwhelming.

The lightning victory in France thus emerged not as the logical endpoint of a carefully devised strategic synthesis, but as an inspired, high-risk improvisation, a ‘quick, military fix’ to the strategic dilemmas, which Hitler and the German military leadership had failed to resolve up to February 1940.10 In retrospect, it suited neither the Allies nor the Germans to expose the amazingly haphazard course through which the Wehrmacht had arrived at its most brilliant military success. The myth of the Blitzkrieg suited the British and French because it provided an explanation other than military incompetence for their pitiful defeat.

The premise of British strategy was therefore, as Churchill put it to Roosevelt, that Britain would pay for as much as it could, but that ‘when we can pay no more you will give us the stuff all the same’. Perhaps not surprisingly, Roosevelt did not reply to this bold statement of British dependence. The tortured politics of World War I war debts were still fresh in the memory.31 Britain was to be driven to the point of financial exhaustion before Congress opened the floodgates of lend-lease in the spring of 1941. London, therefore, had every reason to be nervous. But Churchill’s gamble was clearly based on a fundamentally correct strategic assessment.

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. Despite the voracious demands of the German war effort, no Western European country occupied in 1940 experienced any economic growth over the next five years.

By the summer of 1941, the Wehrmacht was already scraping the manpower barrel. Due to the small number of children born during World War I, Germany had no option but to send virtually all its young men into battle.25 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.

Here was the perverse logic of Barbarossa in a nutshell. The conquest of the oilfields of the Caucasus, 2,000 kilometres deep in the Soviet Union, was not treated as the awesome military-industrial undertaking that it was. It was inserted as a precondition into another gargantuan industrial plan designed to allow the Luftwaffe to fight an air war, not against the Soviet Union, but against the looming air fleet of Britain and the United States.

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. The German army was not poor in motor transport because it had neglected to prepare properly. It was poor because of the incomplete industrial and economic development of Germany itself. Most German freight transport in the 1940s was accomplished by rail. For short distances, the horse was still essential in both town and countryside. Of course, the German motor vehicle industry might have been coaxed into producing more trucks. 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.

The destruction and human misery in Germany in 1945 is barely describable in its scale.2 As the Third Reich collapsed, quite apart from the millionfold murder that Germany had committed across Europe, more than one-third of the boys born to German families between 1915 and 1924 were either dead or missing. Amongst those born between 1920 and 1925 losses amounted to 40 per cent. The rest of the German population was subject to uprooting and displacement on a truly epic scale.

It is one of the most persistent myths in post-war history that the Allies learned the lesson from World War I not to extract reparations from Germany. In fact, both halves of Germany paid substantially higher reparations after 1945 than the Weimar Republic ever did. Not surprisingly, the Soviets were most determined in their pursuit of compensation. What was to become the German Democratic Republic suffered the dismantling of at least 30 per cent of its industrial capital stock and paid occupation costs and reparations to the Soviet Union which even in 1953 still totalled almost 13 per cent of its national income.8 The Federal Republic for its part was more leniently treated. But it too made payments between 1953 and 1992 totalling in excess of 90 billion Deutschmarks.

The drama of twenty-five years of unprecedented economic growth moved ‘politics’, in the classic sense, to the sidelines. Even the remarkable project of European integration resolved itself into an endless process of bartering over milk quotas and national rebates. The catastrophe of the Third Reich had not brought about the extinction of Germany, but what it had done was to draw the curtain on the classic era of European politics. Sixty years later, what else there might be to politics in Europe beyond the tiresome squabbles of discontented affluence remains an open question.