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7/28/2019 Germany Essay FINAL

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How Effective was Nazi Managementof the German Economy in the Second

World War?

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MO5603: Themes and Debates in War and History Course Convener: Professor DeGroot

June 27, 2013



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How Effective was Nazi Management of the German Economy in the

Second World War?

Introduction

“…from the start of my work as Minister of Armaments I discovered blunder after blunder, in all departments of the economy.” 1 (Albert

Speer, Minister of Armaments)

By the end of 1941 Nazi Germany looked unbeatable. Using pioneering

Blitzkrieg tactics the Wehrmacht, spearheaded by Panzer divisions, had swept

aside Poland and France, Britain was forced off the continent and Moscow was

just 30 kilometres from the frontline. The Nazi regime appeared to provide theleadership that could supply a „Grossdeutschland‟; an Empire that many

Germans felt they deserved 2. Yet victory in the Second World War would

require more than astute battlefield leadership; the battle of production was

equally important, and the Nazi regime proved itself inadequate to the task

both prior to and during the conflict.

Immediate Post- War commentators originated the idea of a German „Blitzkrieg

economy‟; a finely tuned economy that would produce „Gu ns and Butter‟3. More

recent analysis, notably by Overy, has argued that Hitler was preparing for a

long, drawn- out, „total war‟; his Darwinian struggle of the races would last

years. 4 Tooze has asserted that war in 1939 was not planned, but became

necessa ry, given Germany‟s strategic position and an impending economic

meltdown, he argues there was nothing to be gained by waiting 5.

This essay does not seek to pass judgement on the validity of these differing

interpretations, but instead will use their findings to demonstrate that the Nazi

dictatorship, despite warnings from high ranking administrative officials,

fundamentally mismanaged the German economy and that this was a direct

result of National Socialist ideology and political structure. The regime believed

they had rejected „liberal democratic‟ mass -production economics that by the

1 Speer, Inside the Third Reich , trans. R & C Winston, (New York, 1970), p2292 Mazower, M., Hitler’s Empire: How the Nazis Ruled Europe , (London, 2008)3 Milward, A, The German Economy At War , (London, 1965)4 Overy, R., War and Economy in the Third Reich , (Oxford, 1994), p2345 Tooze, A., Wages of Destruction, (London, 2006)



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mid-twentieth century were a precondition for economic and, by extension,

military success. Mythical conceptions of „German‟ economic structures were

championed - the landholding peasant, the family-owned workshop - but these

structures were the antithesis to the requirements of mid-twentieth century

warfare. 6 Attitudes such as these meant Germany would never be, and couldnever be, an „arsenal of Fascism‟.

The German war economy, certainly until 1942, was extremely inefficient

despite years of preparation for a war Nazi doctrine believed to be inevitable.

This was not simply a result of a dearth in strategic resources, but because of

structural inefficiencies that had been created and exacerbated by Nazi ideology

and policy since rearmament began in earnest in 1936.

I will conclude that Hitler‟s demand for „Lebensraum‟ was a misguided attempt

to address Germany‟s resource limitations. This expansion itself triggered a

„Total War‟, one which Germany was incapable of winning. The liberal

democracies were able to out-manage and out-produce their totalitarian Nazi

rivals, not simply because of a superiority of resources, but because they were

not constrained by Nazi racism or Nazi politics. Nazism, rather than galvanising

the nation and leading the „master race‟ to victory, succeeded only in running

an inefficient and mismanaged economy entirely incapable of achieving a „final

victory‟. With no certainty over what „Nazi economics‟ encompassed, economic

management under National Socialism was, unsurprisingly, disorganised and

confused and „Total Wars‟ cannot be won in this manner.

Economic Preparation: a Lack of Foresight

“If these ideas [ of increased trade] are not translated immediately

into action, then every sacrifice of blood in the next war will not

protect us against the bitter end, to which a lack of foresight and

decisiveness has condemned us once before.” 7 (Carl Krauch,

Plenipotentiary of Special Issues in Chemical Production, 1939)

6 In 1933, 32.7% of the German population lived in rural communities of less than 2,000 inhabitants.Tooze, Wages of Destruction , p1677 Carl Krauch, quoted in Tooze, Wages Of Destruction , p308



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The German economy in the 1930s, as now, relied on export markets and raw

material imports. Hitler fervently believed that Germany should not have to

depend on the international community for its own economic viability; the

British, as a consequence of their Empire, did not have to, and the Americans,

following their westward expansion throughout the nineteenth century, did nothave to either. 8 The Nazis highlighted this fundamental strategic dilemma as

one of the reasons for defeat in the First World War and made their ultimate

goal became the amendment of this situation via the establishment of a German

Empire to the East. Hitler saw his priority as “…securing for [the] nation the

strength…necessary to secure living space.” 9

Restrictive Ve rsailles treaty limitations meant this German „strength‟ wouldstart from a base of just a 100,000 strong army. Economic recovery, especially

from 1936, would thus be spear-headed by rearmament. Unemployment fell to

negligible levels, and the 1933 promise of „work and bread‟ was seemingly

achieved. 10 The extent of this recovery is, however, debatable. Economic

mismanagement meant that not only was recovery unbalanced and haphazard,

but that the German economy at the outbreak of war was barely capable of

waging a short war, let alone winning a lengthy one. National Socialist

economic policy was a major reason for the repeat of this strategic failure of the

First World War in the Second. An Army High Command note in early 1939

stated; “Today the army is being refused the quantities of steel necessary to

equip it with modern offensive weapons. The results could be the same as in

1914.”11

The requirements of the rearmament programme had indeed led to full

employment, but this was certainly no „ economic miracle‟ and nor had the

economy in any long-term sense „recovered‟. Growth in industry was real

enough, as was the decline in the unemployment rate, however both „recovery

8 The yearly German Current Account movement (negative movement implies borrowing) in 1913 was+939m RM, in 1938, -566m RM, this figure was positive only five times between these dates. In Tooze,Wages of Destruction , p6799 Hitler, quoted in, Diest, W., The Wehrmacht and German Rearmament , (London, 1981), p10310 Registered unemployed had fallen from 6,041,900 in January 1932, to 21,900 in September 1940Table 1.1, Registered unemployed, 1929-1940, in Overy, W ar and Economy in the Third Reich , p3911 Wilhelm, The Wehrmacht and German Rearmament , p88



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indicators‟ are misleading. 12 For example, conscription withdrew able men from

the economy which may have contributed to the reduction of unemployment

but did not lead to a corresponding increase in output. 13 These working aged

men could have been productively employed but were instead marching up and

down the parade ground; removal from the workforce cannot be consideredrecovery.

The military industries attracted heavy investment from the government, and

had thus „recovered‟. Indeed, between 1936 and 1939, two thirds of all

industrial investment went into war and war related industries. 14 Military

productive capacity was expanded at the expense of both capital and consumer

goods; consumer spending, for example, was suppressed through wagecontrols. 15 Real wage rates (with 1913 as an index) had been at 119 in 1933, but

this fell to 112 by 1939. 16 In 1935, with recovery supposedly underway, private

investment was 22% lower and private consumption 7% lower than pre-

Depression levels. 17 Headline projects were mounted – the auto industry; the

Volkswagen factory in Wolfsburg, for example – but there is no question that

military industry was the focal point of Nazi economic policy, as expenditure

statistics show. 18 Thus the German economy did not simply fail to recover;

balanced recovery was actively prevented as a direct result of Nazi policy .

This is important because growth in exclusively military productive potential

can never be a basis for long term stability. Rearmament was never intended to

resemble a Keynesian spending programme with the intention of sparking a

wider „multiplier effect‟. Rearmament and the expansion of military industrial

capacity, deliberately made at the expense of general economic recovery, was

itself the goal of Nazi spending.

12 German real NNP (Net National Product) was 45% larger in 1938 than in 1928. Temin, „Soviet and Nazi Economic Planning in the 1930s‟, The Economic History Review 44 , (1991), p58413 Hitler intended to raise the size of the army from 100,000 men to 36 divisions. Tooze, Wages of

Destruction , p20814 Bessel, R., Nazism and War , (London, 2004), p5715 Barkai, Nazi Economic Theory: Ideology, Theory and Policy , (Oxford, 1990), p13516 Table 7.1, Wages, earnings, and cost of living, 1929-1940, in Overy, War and Economy in the Third

Reich , p21617 Tooze, Wages of Destruction , p6518 Military spending rose from 750m RM in fiscal 1933/4, to 17,247m RM in 1938/9. Table 6.2 MilitaryExpenditure, 1933/4 – 1938/9, in Overy, War and Economy in the Third Reich , p203



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Emphasising the military sectors over all others - effectively running a war

economy in peacetime - meant that, as Milward explains, “…Germany had a

considerable lead over other powers in the development of a full war

economy.” 19 But what Milward does not consider is that more than a

„developed‟ war industry is necessary to prevail in a conflict. German military sectors were, in isolation from the wider economy, better prepared for war than

the Allies in 1939. However, the Allied economies had based not recovery on

their military sectors. 20 When the Allies began their preparations for war they

were able to draw on a larger, more balanced, economic base that would better

support a prolonged conflict. Total war requires the totality of all economic

resources, of which military industries are just one component. The needs of

the home front must be met in order for it to meet the requirements of war; which Goebbels himself understood. 21

Hitler waited too long to address the precarious state of this structural

economic imbalance. In 1938 large investments were planned to implement

factory modernisation, and to create new naval dockyards. 22 The continued

priority of rearmament also meant that new processes for synthetic oil,

pioneered by IG Farben, and, more importantly, track and rolling stock under

the Reichsbahn, were left underfunded for years. 23 This highlights the central

contradiction of Nazi war aims; Germany aimed to acquire the means to be able

to win a protracted war, but was insufficiently endowed to enter the „total war‟

such an attempt would trigger. To prepare for war, infrastructural investments

should have been the very foundation of 1930‟s recovery, not panicked after -

thoughts in preparation for the large scale, multi-year war Hitler deemed

inevitable.

Overy suggests that in light of these investment programmes we can conclude

that “Hitler‟s intention had been to create this necessary industrial substructure

first before developing the superstructure of actual arms production.” 24 He

19 Milward, The German Economy At War , p.120 British military spending as a percentage of GDP was 7% until 1939, the US figure less than 1% until1941. Harrison, M., „ Resource Mobilization for World War II: The U.S.A., U.K., U.S.S.R., andGermany, 1938-1945 ‟, The Economic History Review 41, (1988), p17421 Hancock, E., National Socialist Leadership and Total War, 1941-45 , (New York, 1991), p222 Tooze, Wages of Destruction , p294 & p30823 Tooze, Wages of Destruction , p258 & p30824 Overy, War and Economy in the Third Reich , p245



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concludes that war came earlier than Hitler intended. However, the problem

with this interpretation is that the Nazi regime recognised its military

advantage was diminishing over time; the Allies were rearming, and relatively

faster. In explaining the start of war, Hitler wrote to Mussolini in March 1940

that “In the light of Britain‟s intended armaments effort, as well as consideringEngland‟s intention of mobilising all conceivable auxiliaries...a significant shift

in the balance of forces was barely conceivable.” 25 The chance to better prepare

economic infrastructure, as well as the armed forces, for war was gone by

1938/9. Germany would have to enter war sooner rather than later to maintain

the current balance of forces. The mismanagement of economic recovery meant

that when war arrived , areas of the economy outside of direct military use were

underdeveloped and as a result Germany was not ready for the prolonged warthat followed.

Hitler did not understand the implications of his economic decision making

during the 1930‟s. Hitler may have ordered both rearmament and large,

expensive, infrastructural projects, but finances meant it was not possible to

conduct both policies concurrently. 26 The dictator, however, did recognise the

German predicament this mismanagement led to; on 22 August, 1939 Hitler

announced, “We have nothing to lose; we have everything to gain. Because of

our restrictions our economic situation is such that we can only hold out for a

few more years...” 27 Hitler had to hope he could win the war before the Allies

could bring their economic superiority to bear. This was a monumental gamble;

Nazi economic failures meant Germany would enter the war without long-term

economic viability.

This vulnerability is highlighted by the chronic munitions shortages amid

preparations for the Polish invasion in late summer 1939. 28 Rather than being

poised to enter a decisive war, the German armaments programme had stalled.

375 million rounds of infantry ammunition were requested, but raw material

25 Hitler, quoted in Tooze, Wages of Destruction , p31726 In November 1938 the government had funded projects through the desperate measure of utilising thecredit facilities of the Reichsbahn and the Reich Postal Service. 400m RM of bank notes was also

printed. Tooze, Wages of Destruction , p29727 Speech by the Fuehrer to the Commanders in Chief on August 22, 1939 ,<http://germanhistorydocs.ghi-dc.org/pdf/eng/English56.pdf> [26/11/09]28 In addition to an ammunition crisis, the Nazy also faced a „Torpedo Crisis‟ in early 1939. Deist, TheWehrmacht and German Rearmament , p91



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allocation in July 1939 meant that just 37 million would be produced.

Production of 450,000 shells per month was planned but just 56,300 were

delivered. 29 The scale of Nazi economic ineptitude in entering the war was

initially shielded by the Polish success and the unexpectedly swift French

capitulation after just six weeks of fighting. Germany needed swift victory orelse its war economy would be under severe pressure. Nazi war preparation was

precarious.

To conclude this section; the Nazi administration of the German economy from

1933 had taken its toll on economic performance. Given that the Nazi

worldview called for territorial expansion and predicted an inevitable struggle

between peoples, adequate economic preparations, aside from a directly military build up, should have been made for this conflict. But the Nazi regime

failed to prepare for the war that they themselves envisaged and started, thus in

August 1939 the army faced a munitions crisis even though preparations for

war had begun in 1936. Despite these inherent economic disadvantages, further

exacerbated by poor Nazi stewardship, Hitler still thought Germany capable of

victory based on assessments through the warped lens of Nazi ideology. This is

the subject of the next section.

Nazi Ideology and Economics: Wasteful and Irrational

“Such drivel...made any rational planning impossible.” 30 (Michael

Kitchen)

We have seen that Hitler aimed to establish a German Empire to solve

economic weakness, but aside from this economic imperative there was also an

adherence to a doctrine of „Social Darwinism‟. War between peoples/races was

seen as inevitable. Hitler was clear in stating his belief that “[Life] is an eternal

struggle…what is valid for individuals is also valid for nations.” 31 Hitler foresaw

that in order to secure mastery over Europe , Germany would have to „test‟ itself

in an epic struggle against its rivals. Speer explains; “...if the war were not won,

that would mean that Germany had not stood the test of strength; in that case

29 Tooze, Wages of Destruction , p31330 Kitchen, M., Nazi Germany at War , (Harlow, 1995), p5431 Hitler, quoted in Deist, The Werhmacht and German Rearmament , p103



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she would deserve to be and would be doomed.” 32 Thus there was a clear

ideological commitment to war; it was not simply a question of perceived

economic need. This ideology, in which racism was a central part, convinced

Nazis of „final‟ victory but in actual fact prevented the German war economy

from reaching its potential and instead served to hasten defeat.

Given the economic inferiority of Germany relative to the Allies, an economic

relationship with South-Eastern European countries would have guaranteed a

number of important resources; most notably oil and grain. The German-

Romanian Trade Treaty, securing oil imports, was signed on 23 March, 1939,

but the Romanians were able to secure vital late-model Messerschmitt fighter

aircraft in return. 33 Likewise, Hungarian oil deliveries were dependent on thereceipt of reciprocal German deliveries, not upon any notion of alliance or

„friendship‟. Nazi ideology had no currency in foreign relations; only bribery

and coercion could guarantee cooperation. By 1939 the Oberkommando der

Wehrmacht (OKW) had concluded that these territories would need to be

occupied to guarantee German needs. 34 The Nazis held no influence other than

military power under their command as a result of the „German -centric‟ and

racist policies, and the economic viability of the German war economy suffered

as a consequence.

The launch of Operation Barbarossa on the 22 nd of June 1941 signalled the end

of the Nazi-Soviet Pact which had been a vital source of war materials. 35 Swift

victory and economic integration was required to make good the loss of

imported supplies. This was certainly a possibility; as Germany swept through

the towns and villages of the Western Soviet Union there was opportunity to

exploit local grievances against Stalin‟s tyrannical rule and integrate economic

resources. 36 Yet Nazi racism precluded the incorporation of these disaffected

peoples into the „new‟ Germany. Little effort was to gain the support of the

population in conquered territories, but an adroit manipulation of local anti-

Soviet sentiment might have led to local support. Actively choosing to „invade‟

32 Speer, Inside the Third Reich , p16633 Tooze, Wages of Destruction , 30934 Oil was a constant worry for the Germans, whose reserves never topped 2 million tons. Evans, R., TheThird Reich at War , (London, 2008), p34135 In 1940 the Soviets supplied 74% of German phosphates, 65% of Chrome Ore, 40% of nickel imports,and 34% of imported oil. From Tooze, Wages of Destruction , p32136 Overy, R., Russia’s War , (London, 1997), p127



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rather than to „liberate‟ is a puzzling strategy, one only comprehensible when

the racism endemic to Nazi thinking is considered. Soviet imports would not be

easily replaced.

The Nazi ideological framework simply did not exist to allow the addition of these peoples to the German war effort. Hitler‟s Eastern Empire was not to be a

„colony‟; its indigenous population would be cleared for German settlement.

Hitler proposed “The conquest and ruthless Germanization of new living space

in the east”. 37 Herbert Backe, Permanent Secretary in the Agricultural Ministry

planned for, he said, “[the]...reconstitution of the German peasantry in

conquered Europe...” 38 Nazi propaganda had portrayed peoples in the east as

barbarians and savages; subhuman and barely worthy of life. There was literally no space within the Nazi conception of Lebensraum for the incorporation of

Eastern Europeans in Grossdeutschland.

Nazi ideolo gy could offer nothing in response to the Allies‟ Atlantic Charter,

which promised (among other things) self-determination, freedom from want

and fear, and global economic cooperation. 39 Nazism was an expressly German

dogma; other than ethnic Germans abroad, it is hard to see who would support

Nazism over the self-determination as offered by the Allies. For example, the

western occupied territories contained the cream of European productive

potential, but could not be persuaded to provide for Germany. Germany

intended to make use of the resources under its control, but was unable to tap

the full economic potential; the Germans were invaders to be resisted. Hancock

may well argue that “The period from 1940 to 1941 was not long enough to

incorporate European p roduction into the German war effort.” 40 But Nazi

attitudes meant it was conceptually difficult to economically integrate rather

than to exploit. The Reich Economics Ministry had to stress to superiors that

“...we are not alone in Europe and we cannot run a n economy with subjugated

nations.” 41 But 7.7 billion Reichsmarks were taken from France during the

37 Hitler, quoted in Deist, The Wehrmacht and German Rearmament , p10538 Backe, quoted in Bessel, Nazism and War , p5939 The Atlantic Charter , <http://www.archives.gov/education/lessons/fdr-churchill/images/atlantic-charter.gif> [26/11/09]40 Hancock, National Socialist Leadership and Total War , p2641 Evans, The Third Reich At War , p337



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occupation; this was a direct transfer, not an integration of economies. 42 When

French infrastructure was pillaged (including confiscation of rolling stock), it

was no surprise when its harvest fell by half between 1938 and 1940. 43 The

„New Order‟, based on Nazi ideological doctrine, could not constitute an

effective integration of European economies. 44 As a result „Grossdeutschland‟ was completely unable to match the economic might of the Allied nations.

The Nazi ideological commitment to a programme of heinous war crimes,

particularly those perpetrated by the Eizengruppen in the East, as well as the

forced immigration and then deportation of Jews within the Reich itself, led to

economic dislocation. 45 Aside from the obvious human tragedy of such

programmes, persecution, deportation and murder could not be economically rational; the required framework diverted valuable materials and equipment,

and a large potential labour force was literally put to death. In addition, such

crimes undoubtedly galvanized Germany‟s enemies; there was no doubt what

was being fought for.

Apart from precluding pan-European economic cooperation and alienating,

exiling and murdering a skilled workforce within the new Reich, Nazi racism

also led to the embarrassing underestimation of the economic prowess of the

Allies. The Russian soldier, for example, was portrayed as „bestial‟ a nd

„animalistic‟ in Nazi propaganda. 46 The Soviet Union was thought to be an easy

target for German conquest; its economic and military power was simply

dismissed. Hitler believed “You have only to kick the door down and the whole

rotten structure would com e crashing down.” 47 The war on the Eastern front

was a „racial‟ war. Fritz Saukel, General Plenipotentiary for Labour, mounted a

vast forced labour programme, and attempted to utilise Russian prisoners in

Germany, but his efforts were hampered by the Nazi inspired SS and

Wehrmacht attitudes to Slavs. Germany was suffering an acute labour shortage

but at the same time its soldiers were murdering the potential solution to this

42 Evans, The Third Reich At War , p33443 Evans, The Third Reich At War , p34144 The occupied western territories produced just 2,600 airplanes for the Luftwaffe over the war. Evans,The Third Reich At War , p34045 For example, Jews who emigrated between January 1933 and June 1935 took 124.8m RM with them,not to mention economic and scientific expertise. Tooze, Wages of Destruction , p7546 Goebbels wrote this in his propaganda paper Das Reich on 19 July 1942.http://www.calvin.edu/academic/cas/gpa/goeb11.htm47 Hitler, quoted in Hancock, National Socialist Leadership and Total War , p27



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problem; it was calculated that the economy was short of over a million

workers. 48 However, 60% of the 3.35 million Soviet prisoners of war captured

by the end of 1941 died in captivity as did 3.3m out of 5.7m Soviet citizens who

were imprisoned. 49 Nazi racism once again impeded clear economic rationale.

Unbelievably, American economic pro wess was also dismissed. Goebbels‟ only

concern of US entry to war was the effect on German morale, Hitler declared

projections of US economic capacity as „nonsense‟ and Goering joked that all

America could produce was „razor blades‟. 50 But the Wehrmacht‟s Chief

Economist, Major-General Thomas recognised the overwhelming industrial

capacity of the US, British and Soviet alliance. Contemporary national income

statistics, with the United States average 1924-35 as an index of 100, showedhow a US/UK/Soviet alliance had a national income of 168 between them. The

entire German „New Order‟ (including the economies of Germany, Italy, France,

Bulgaria, Poland, Romania, and Czechoslovakia) had a comparative figure of

just 89. 51 This is obviously a crude indicator, but in simple terms such statistics

convinced Thomas that a war was unwinnable. He also calculated that in 1939

Germany planned to devote 23% of national income to the military, Britain 12%

and the US only 2%. 52 The German disadvantage, with the failure of swift

victory and advent of a multiyear war, would be overwhelming. Thomas‟

warnings were ignored.

Hancock claims that “Those who knew of the United States‟ superiority in raw

materials and volume of production were comforted by the superior quality of

German armaments.” 53 Did the Nazi leadership really believe that their

economic disadvantages would be overcome by „quality‟? One of the enduring

lessons of the First World War was that mechanized warfare meant a disturbing

efficiency of killing. An „inferior‟ Am erican weapon spat out bullets just like

„quality‟ German weapons. A „racially superior‟ German soldier was just as likely

48 Kitchen, Nazi Germany at War , p16349 Kitchen, Nazi Germany at War , p16350 Hancock, National Socialist Leadership and Total War , pp28-9 AND Overy, Why the Allies Won ,(London, 1995), p20251 Table 3. Germany in the World Economy in the 1930‟s (averages 1924 -35), Tooze, Wages of

Destruction , p13652 Tooze, Wages of Destruction , p31053 Hancock, National Socialist Leadership and Total War , p35



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to be hit as any other soldier. 54 Again, Nazi ideology of „racial superiority‟

clouded perceptions of the dire German economic position after the failures of

1942.

Nazi racism clearly convinced Hitler that the probability of the success of his„gamble‟ of swift victory – that Russia would be defeated in five months - was

much higher than we, today, can assess. The futility of the racist Nazi world

analysis was hidden behind the spectacular collapse of the French and swift

early victories on the Eastern Front.

Dictatorship and Economic Leadership: Infighting and Amateurism

“…Hitler’s own arbitrary, impulsive and dilettante intervention scould sabotage any rational formation of armaments policy.” 55

(Wilhelm Diest)

This section will focus on the impact of „Nazi style‟ politics on economic

management of the war economy. As a dictatorship, Nazi Germany had a very

strict hierarchical structure centred on the Fuehrer. Aside from the ideological

constraints outline above, economic management was hampered by the very

configuration of Nazi government. Hitler‟s closed circle would vie for favour

from their leader, often at the expense of the German war effort. Furthermore,

Hitler‟s position as undisputed supreme leader meant that his decisions could

not be questioned and were final; whether right or wrong. His complete lack of

specialist training in any area left all policy making, economic decisions being

one, in the hands of an amateur. These factors, all resulting from the Nazi

leadership structure, would result in the impediment of the German war effort.

There was no Soviet style „central planning‟ in Nazi Germany. Instead,

government planners were to allow the economy, according to Minister of

Economics Walter Funk, to “...develop naturally from the given state of affairs...

[and not be an] artificial construction...” 56 Overy contends that this imprecision

of Nazi economic aims suggests a preparation for war in „width‟ rather than

54 Interestingly, Hitler‟s „racially superior‟ soldiers were actually provided with rations of amphetaminesto assist them in combat. The Nazi Death Machine: Hitler’s Drugged Soldiers,<http://www.spiegel.de/international/0,1518,354606,00.html> [26/11/09]55 Diest, The Wehrmacht and German Rearmament , p17156 Kitchen, Nazi Germany at War , p44



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„depth‟ in the future, not as early as 1939. “The absence of precise economic

planning confirmed that the intention was not to wage a short, careful

calculated war in the near future, but a big war at a later dat e.”57 But Germany

would have to pounce when political conditions were favourable in order to

attain its empire, and this was likely to be sooner rather than later. As Britainand France were drawn into the 1930s arms race the relative position of

German for ces deteriorated. The lack of „precise planning‟ was not the result of

a broad economic „vision‟ for a war effort in the future. It was simply a measure

of the extent of Nazi mismanagement, in particular Hitler‟s own economic

delusions. The Four Year Plan was imprecise, vast and unattainable, but Hitler

expected that its targets be met. “The more I demand, the more I receive.” 58

National Socialists believed they had rejected the „liberal democratic‟ economic

principles. Himmler, especially, assisted in the creation of a mythology of

Germanic economic principles. 59 The military procurement staff preferred

small workshops, employing skilled labour, to produce weapons systems; they

assumed mass production methods would lead to lower standards. 60 This

coincided wi th Nazi views on the imperative of the „Germanic‟ economy ,

emphasising “…the importance of a healthy peasantry as a mainstay for the

state.” 61 This vision was obviously irreconcilable with the imperatives of a

modern industrial war economy. There is no doubt that this kind of thinking

retarded the introduction of mass production.

Despite the totalitarian and militaristic nature of the Third Reich, war material

planning was not coordinated by one administrator working from Hitler‟s

decrees. In total, four ministries ran various aspects of the German war

economy until 1942. Walter Funk was Economic Minister, Hermann Goering

headed the „Four Year Plan‟, Major -General Thomas was Chief Economist of the

Wehrmacht, and Fritz Todt ran the Armaments Ministry. Unsurprisingly there

was significant overlap between these departments and consequently

administrative inefficiency resulted. It was only after terrific losses began to

mount on the Eastern Front during and after 1942 that it became clear that the

57 Overy, War and Economy in the Third Reich , p24058 Speer, Inside the Third Reich , p23559 Mazower, Hitler’s Empire , p20560 Overy, Why the Allies Won , p20261 Speer, Inside the Third Reich , p15



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current approach to war production was insufficient and outmoded. Todt had

begun the long overdue drive for efficiency under the auspices of the

Armaments Ministry and following his death in an air accident Albert Speer

took over. Hitler finally conceded that economic management would be

consolidated under him. But even at this potentially vital juncture of the war,committed Nazis emphasised doctrinal orthodoxy over economic efficiency;

“Funk...complained that Speer was only worried about efficiency, not with

National So cialist policy.” 62 Even if we concede that Funk was desperately

trying to defend his own position as Economics Minister such actions

undoubtedly impeded Speer‟s own efforts to turn around the inefficient

German economy. Funk made his objections on the basis of Nazism; Nazism

was obstructing, not helping the war effort.

Todt and later Speer faced opposition not only from government rivals, but also

directly from the Armed Forces. In war it is unsurprising that the Armed Forces

were afforded primacy in economic decision making; their needs were clearly

the priority of the Nazi state. 63 Ironically, however, the extent of this

supremacy, in contrast to the Allied command structure, would ultimately harm

the German war effort. Roosevelt and Churchill orchestrated their war

economies on the basis of what their advisors, the Armed Forces, politicians,

but also business , suggested. 64 In Germany, however, the Armed Forces had

been able to prevent the rise of a consolidated civilian Arms Minister for the 18

months running up to consolidation under Speer. 65 As a result his policies to

promote efficiency had been put on hold; meanwhile the Allied war machine

was increasing production at a ferocious pace. The US, for example, increased

munitions production from the value of $1.5 billion in 1940, to $20 billion two

years later. 66 An industrialist pleaded to government; “...business is not in the

least bit concerned whether it is ruled by a tin helmet or top hat, but it is about

time that it was decided which headgear will be wo rn.” 67

62 Kitchen, Nazi Germany at War , p5663 Hitler in a speech on 3 February 1933, days after becoming Chancellor, made the army‟s prioritizationclear, “We still stand at the side of the army and work for the army.” Bessel, Nazism and War , p3664In America, for example, Sears-Roebuck director Donald Nelson headed the War Production Board.Overy, Why the Allies Won , P19365 Hancock, National Socialist Leadership and Total War , p3266 Harrison, M., „ Resource Mobilization for World War II: The U.S.A., U.K., U.S.S.R., and Germany,1938-1945 ‟, The Economic History Review 41, (1988), p17267 Industrialist, quoted in Kitchen, Nazi Germany at War , p42



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Furthermore, the Army‟s influence in government decision making meant

limited standardisation of weapons during the war. At one point in the war,

Germany operated 425 different aircraft models, 151 makes of lorry, and 150

different variants of motorcycles. 68 Continuous alterations to weapons systems

meant Germany was undoubtedly the best equipped force in the war, yet therealities of modern warfare made the rate of replacement was as important as

the rate of fire. In this measure - due to the Nazi sponsored over-militarisation

of government - Germany was well beaten by its adversaries.

Aside from the emphasis Nazis placed on the inclusion of the military within

economic management, and the resulting ill-effects the war effort suffered, the

Nazi political structure itself stifled German economic decision-making andthus its war time performance. The top of the National Socialist hierarchy was

dogged by infighting. The immediate entourage of the Fuehrer vied for favour

and influence over their leader, often to the detriment of the German war effort

as a whole. Albert Speer remembers that, “The top leadership... [was] torn by

dissension and filled with envy and jealousy” 69 Speer‟s own proposal to

reorganise the war production to increase efficiency “. ..was thwarted by an alert

Bormann, who feared an increase in power on the part of his rival.” 70 Goebbels

wrote in his diary in 1943 of a „Leader Crisis‟; Hitler was too distracted in his

role of military commander to lead the nation at home. Different factions

attempted to formulate their goals by that stating they were a “…expression of

the will of the Fuehrer…” 71 Factional rivalry meant government was pulling in

many directions and the war effort suffered as a result.

Rather than simply structural Nazi incompetence, these constant power

struggles among the Nazi elite may have actually been encouraged by Hitler;

they consolidated his position as supreme leader, as no one individual would

become too powerful, and meant each individual sought the dictator‟s a pproval

to lend credence to their ideas. The Nazi inner-circle was fearful of censure and

the resulting fall in status; no one was willing to risk this fate by standing up to

Hitler and telling him he was wrong. Speer assesses that it was “...almost

68 Overy, Why the Allies Won , p20169 Speer, Inside the Third Reich , p25170 Speer, Inside the Third Reich , p25671 Kershaw, Hitler: Profiles in Power , (London, 1991), p168



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imposs ible to oppose Hitler on important questions...” 72 When, in November

1941, for example, Todt told Hitler that the war had already been lost militarily

and in terms of production, no-one else was willing back him and stand up to

the leader. 73

All this was crucial because Hitler, as supreme leader, was ultimately

responsible for all government decision making. Speer again remembers of his

leader, “Amateurishness was one of Hitler‟s dominant traits...he had no idea

what real specialized knowledge meant.” 74 At a practical level this meant that

Hitler was unable to grasp the innumerable components of a war economy. It

was extremely damaging that when a decision was made by him, however bad,

it was unquestionably final. Field Marshal Wilhelm Keitel remembers Hitler‟ sdecision making process; “Discussions took place only when he asked for them.

When he decided…he would appear and say: „I have come to this decision and

no more discussion will follow.‟” 75 In production terms this led to some wasteful

outcomes; Hitler‟s preoccupation with the „new production‟ of tanks meant that

he refused a request that production drop to allow spare parts be fashioned

even though this would greatly improve effective tank strength in the field. 76

The Nazi system of governance, Hitler‟s position as „ultimate leader‟ , and the

incessant power struggles that resulted, all prevent the smoothing running of

German government as a whole and, in particular, the management of the war

effort. Nazism, through its system of governance, limited the effectiveness of

the German war economy and thus contributed to defeat.

Conclusion

This essay has made clear that the nature and beliefs of Nazism meant that the

German economy both before and during the Second World War was poorly

managed and adversely affected the German war effort.

72 Speer, Inside the Third Reich , p24373 Hancock, National Socialist Leadership and Total War , p3174 Speer, Inside the Third Reich , p23075 Wilhelm Keitel, quoted in Overy, Interrogations: The Nazi Elite in Allied Hands, 1945 , (London,2001), p34176 Speer, Inside the Third Reich , p234



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Economic preparation for war was badly handled. Hitler had predicted war for

years, yet by the time war had started the war economy was inefficiently run

and based on precarious infrastructural foundations. Overinvestment in the

war industries, coupled with poor fiscal management, meant Germany was

unable to secure the quick „final victor y‟ it needed for the success of Hitler‟s„Grand Strategy‟.

Hitler undertook his war plans because Nazi ideology convinced him of the

superiority of the German people against the inferiority of all others. This

meant a catastrophic misreading of the balance of forces in 1939. Nazi inspired

racism also meant other peoples could not be rallied to the German anti-

communist cause. Racism led to genocide that, horrific criminality aside, wasted a large, and in many cases, highly skilled labour force.

The Nazi political structure itself precluded the smooth running of a war

economy. Infighting at the highest level meant policy was constantly shifting.

Administrators promoted Nazi ideals over economic rationality; Todt and Speer

had to overcome Nazism before they could rationalise the German war

economy. The militarisation of politics also meant the Army was too involved in

decision-making, standardisation was held back, as was consolidation under a

single ministry.

It has been made clear, therefore, that the war effort as conducted under Nazi

rule was severely compromised. The structure of Nazi rule, its racism and lack

of understanding of economic planning meant that the German economy was

not in capable hands. Early rearmament (and early Allied incompetence) led to

swift tactical victory, but once the Allies organised themselves and their

economies, unconstrained by restrictive Nazi ideology, Hitler‟s delusional plans

were doomed to failure. Economic decision-making in Germany could not be

rational under a racist Nazi government headed by an amateur supreme leader

who was supported by a squabbling, power hungry, entourage.

WORD COUNT: 5320 words in addition to footnotes of 977 words.



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