Wednesday, March 4, 2009

The Wages of Destruction

Adam Tooze’s book The Wages of Destruction: The Making and Breaking of the Nazi Economy is a superb example of how revealing and clarifying economic history can be.

It is a study of the economics behind the politics, and the politics behind the economics, that led to the rise of Hitler, the creation of the Nazi economy and its eventual destruction. Tooze brings out the sheer malign purposiveness of Hitler’s policy.

The book is blessedly free of economic jargon while the statistics—though plentiful—are made accessible and never get in the way of the narrative. The book could have done with an explanation of the ins and outs of the balance of payments, since shortage of foreign exchange was such a central problem for the regime.

Part I, Recovery, covers Hitler’s rise to power and the early years of the Nazi regime. Owing massive war reparations and largely disarmed, Germany’s choices were between Gustav Streseman’s policy of coordination of the US or one of breaking the Versailles system and achieving national goals by violence or threat of violence.

Tooze spells out the disastrous international effects of the Hoover and of the early Roosevelt Administrations—particularly the failure of coordination between the Western Powers of US, UK and France. The world has had the experience of a US significantly disengaged from world affairs, of a US not seriously committed to maintaining a liberal international economic order: indeed of a deeply illiberal international economic order. That experience was between the World Wars, particularly from 1929 onwards. It was a disastrous one.

The post-1945 structure of GATT-cum-WTO and an actively engaged US has been far better.

Between the death of Stresseman and the rise of Hitler, German policy drifted. The Bruning Government in particular engaged in a foreign policy which irritated and annoyed the Western powers and an economic policy that required their support: a disjunct that undermined both policies.

Once Hitler achieved power, the Nazi regime’s overwhelming focus from the beginning was on re-armament. The results involved real achievements, particularly due to the organising abilities of Hjalmar Schacht. Yet economic recovery never achieved the economic growth rate of Weimar Republic when it recovered from the 1923-24 downturn. (Just as Roosevelt presided over a poor recovery from a major economic downturn and the Soviet Union never achieved the overall economic growth rates of Tsarist Russia: though Stalin did achieve extraordinary growth rates in specific sectors.)

Tooze is very good at putting actions in their context: such as the recent German experience of great hungers (the result of war and bad policy). And the very uneven nature of the German economy Hitler inherited. Tooze is at pains to both show the rationality of Nazi policy—the genuine domestic and international basis for land-hunger, for example—and the Nazi regime’s fundamental commitment to military conquest. He also brings out how pragmatism dominated Nazi-business relations. Though the regime increasingly dominated the relationship.

A policy brutal all the way down
Nazi policy was one of economic ambition—the conquest of a vast new empire which would enable Germany to compete with the US—warring with economic constraints. The most immediate, recurring, constraint being the shortage of foreign exchange. (One chilling passage is where Hermann Goring, as economic czar, complaining about the loss of precious foreign exchange to pay for the windows broken in Krystallnacht.) A more profound constraint was that Germany was still significantly a peasant society. Nowhere as pervaded by technological and economic efficiency as the US or even, in many ways, the UK.

What Tooze brings out, again and again, is how much the spectre of American power haunted the Nazi strategic vision. The only way to make Germany as economically powerful as the US was to create a Greater Germany. The paradox of lebensraum was that, in the end, it pitted Germany against countries with far greater lebensraum than Germany possessed. But this gamble was understood, and was understood to be a gamble.

Tooze also makes it clear how central to Hitler’s worldview was his anti-Semitism. He really did see them as the enemy of all things Aryan: and a powerful enemy at that. To him, Roosevelt’s clear hostility to his regime was proof that Roosevelt was a tool of Jewish interests. Which, of course, made American power seem even more threatening. Even though, apart from the US Navy, that power was—in military terms—far more one of potentiality than reality. (In 1939, Rumania had a bigger army than the US.)

There was a sense in which the Nazi’s were running a loot economy. Each asset or land grab—dispossession of Jews, Austria, the Czech lands—netted economic booty for the Nazi state: especially foreign exchange.

With the defection of Stalin from the ranks of Hitler’s enemies—made possible by the Franco-British guarantee to Poland, which essentially meant the Western Allies were throwing themselves in front of the Soviet Union—there was, to Hitler’s mind, no economic or technological advantage to waiting. So on to war, the subject of Part II, War in Europe.

Which looked like an incredibly dangerous gamble—the French and British had more troops, more planes, far more ships, greater population, more economic power. The longer the war went, the better for them. Especially after the Kriegsmarine’s surface fleet was gutted in the Norwegian campaign. Hence the Franco-British strategic passivity early in the war: time was on their side.

Then came the stunning success of the May 1940 offensive that knocked France out of the war. Hitler’s gamble had paid off hugely.

More or less. The problem was that, although Britain was expelled from the continent of Europe, Germany lacked the naval and air power to defeat the British Empire. One is so used to looking at the “Britain alone” period from June 1940 to June 1941 from the series-of-defeats British perspective it is quite bracing to look at it from the German. The British Empire was a vast store of potential power that was unreachable and in ever-tighter connection to the even vaster store of power of the US, which was frantically rearming. Yes, Germany now dominated the continent of Europe but it was still crucially dependent on imports from the Soviet Union. In the longer term, it would be an economic dependent of the Soviet Union.

Clearly this was unacceptable. So the even greater gamble was launched of Operation Barbarossa, the attack on the Soviet Union. So we come to the third and last Part, World War.

Tooze’s analysis makes clear something that was a revelation to me, despite much reading on the history of the Second World War. This was Operation Hunger. German military planning for Barbarossa, throughout the Wehrmacht, took it for granted that the needed food supplies for Germany and its armies could not be garnered from the Ukrainian “breadbasket” if the existing population of the Ukraine (and Eastern Europe more generally) was also to be fed. The German battle plan presumed the systematic starvation of millions of people to ensure Germans did not go hungry.

This was the ultimate loot economy.

Failed analogy
Tooze argues that the lebensraum was essentially the last great colonial and grab: an anachronistic last hurrah of Edwardian imperialism. Yet, that is precisely what it was not. European colonialism came in two forms: thin layer of administrators over populations that remained overwhelmingly non-European (Asia—particularly India—most of Africa, Oceania) and settler societies (North America and the Antipodes) with some mixed cases (Latin America, Southern Africa). In no case did it involve the primary military effort of the European power and in no case did it involve sweeping away of industrialised populations. Indeed, it infrequently involved displacement of farming populations. Typically, European settlement was farmers displacing hunter-gatherers; a process that has been going on since farming was invented 10,000 years ago and which is still going on around the planet.

The pattern of farmers displacing hunter-gatherers was what made the neo-Europes happen, since the process was relatively low cost. And, in the New World and Antipodes, greatly aided by the effects of disease. In Alfred Crosby’s phrase, the Europeans brought with them a portmanteau biota, and where that biota “took”, people of European descent became the majority population: where it didn’t, they didn’t.

In the US and New Zealand, military action against the indigenous inhabitants involved, at most, battalion-sized actions. In Australia and Canada, it did not even require that. Local farmers supplemented by police could manage. What made the Anglo-settler societies so successful was, in part, precisely the ease of their occupation of land.

The conquest of lebensraum in Eastern Europe was bound to be an exercise orders of magnitude more costly and more risky. The use of the North American analogy may have been in the mind of the Nazi leadership but, if so, they fundamentally misunderstood the case they were using as a model. A misunderstanding Tooze (uncharacteristically) continues.

The closest historical analogy for the Nazi ambition is the Central Asian “range wars” where conquering pastoralists would sweep peasants (by fear and murder) off grazing land. Millions died in these “population displacements”. Leo Tolstoy’s fear (Genghis Khan with a telephone) that Trotsky said Stalin was, Hitler fitted even more precisely. But that analogy undermines Tooze’s analysis of the Nazi aim as anachronistic, not atavistic. Yet it was an analogy that Hitler apparently embraced: as in a reported speech at Obersalzberg, 22 August 1939, recorded at the Holocaust museum:
Our strength consists in our speed and in our brutality. Genghis Khan led millions of women and children to slaughter, with premeditation and a happy heart. History sees in him solely the founder of a state. It’s a matter of indifference to me what a weak western European civilization will say about me. I have issued the command, and I’ll have anybody who utters but one word of criticism executed by a firing squad, that our war aim does not consist in reaching certain lines, but in the physical destruction of the enemy. Accordingly, I have placed my death's-head formation in readiness, for the present only in the East, with orders to them to send to death mercilessly and without compassion, men, women, and children of Polish derivation and language. Only thus shall we gain the living space (Lebensraum) which we need. Who, after all, speaks today of the annihilation of the Armenians?
But this misplaced analogy with Edwardian imperialism—even though Tooze periodically returns to it—is a minor blemish on a splendid work.

Grinding down to defeat
The Nazi attack on the Soviet Union ultimately failed. The distances were too great, the Wehrmacht was not prepared for a Russian Winter, Stalin was sufficiently ruthless and the mobilisation of Soviet industry behind the Urals sufficiently effective to frustrate the German attack. The 1942 offensive failed in the Stalingrad disaster. But, Tooze argues, an economic turning point had already been reached in December 1941, indicated by the inability of the Wehrmacht to mount an offensive in 1942 anywhere near the size of Barbarossa.

After that, it was the slow grinding away at the Nazi Empire by greatly superior economic power. Tooze takes us through the ebbs and flows. He makes it clear that Albert Speer was no neutral technocrat, but clearly a committed Nazi, deeply involved in the use of slave labour. Tooze cuts Speer’s “armaments miracle” down to size, showing that many of the key decisions were made before Speer’s appointment as Armaments Minister.

He also shows that Germany employed women at a higher rate than Britian. But it simply did not have enough people, hence the importing of forced labour. The grim competing calculi of expropriating labour and exterminating "race enemies" is spelled out.

Severe resource constraints pervaded German choices. They simply did not have the resources to mount an effective version of the Manhattan Project, for example.

Tooze argues that strategic bombing was more economically effective than it is often given credit. Indeed, he argues that if British Bomber Command had kept pounding the Ruhr—at one stage, they had effectively cut it off from the rest of the Reich as a functioning economic unit—they could have greatly reduced German economic power. As it was, they switched to Berlin as prime target, a major strategic error.

Eventually, the Allies had reconquered sufficient territory that, apart from the last, futile gasp of the Ardennes Offensive—which presumed getting the necessary petrol from their opponents—the Nazi economy spiralled down to collapse.

Which left a devastated Germany and the triumph of the “flanking Powers”—the US and the Soviet Union. Britain was victorious but exhausted. In the aftermath of defeat and division, (West) German politics became all about economic recovery. Tooze concludes (p.676):
The most explosive issues of Weimar politics – the question of territorial integrity and the question of military parity – were removed, it seemed, for ever from the political agenda … Sixty years later, what else there might be to politics in Europe beyond the tiresome squabbles of discontented affluence remains an open question.
Tooze’s book is genuinely revelatory. The purposiveness of Nazi policy, the fears and aspirations that drove it, the limitations it laboured under are all made clear. Hitler was, from first to last, a wilful gambler who knew himself to be such. He was also a consummate political game player who attracted and used people of genuine talent for a purpose that was horrific. That the Nazi economy was a loot economy was not happenstance but the nature of the beast. Genghis Khan with a telephone indeed.


  1. The best thing FDR ever did was to refuse to collaborate with the European powers that wanted him to stay on gold. Gold was the problem and FDR solved it.

    1. Yes. Too bad he then screwed things up with NIRA.