Nazinomics

By Bill Bonner

LewRockwell.com, August 29, 2012: Adam Tooze, a British historian, has written a marvelous book on the Nazi economy, The Wages of Destruction. He shows that, far from illustrating the success of intelligent central planning, the German economy of the Third Reich was a disaster. The National Socialists – or “Nazis” – had their plans for Germany. They were determined to put them into practice, regardless of what the Germans may have wanted for themselves. They fiddled with one sector after another. When one fix failed to produce the desired results, actually bringing unintended and undesired consequences, they tried to fix the fix with a new fix. Most of these fixes involved spending money – if not on actual output, then on bureaucracies that regulated output. And most of them were directed towards a goal that only a demagogue politician or a lame economist would find attractive – making Germany self-sufficient. Imports cost money, they reasoned. Besides, trade forced a nation to behave. Neither was attractive to the Nazis.

Like America in the 2000s, by the mid-1930s Germany had already spent too much money – with the military as its biggest single expense. It faced enemies much more real and dangerous than America’s ‘terrorist’ adversaries. And under Adolph Hitler’s leadership it had decided to invest heavily in armaments. This created a sense of purpose for many people and a source of ‘demand’ that got people working again. Germany was still a relatively poor country, with a standard of living only about half the US equivalent. An autoworker in Munich, for example, could not expect anywhere near the same lifestyle as one in Detroit. Henry Ford paid his workers so well they were able to afford large houses with hot and cold running water and electricity. They could buy automobiles too…which gave a huge boost to America’s heavy industry. When war began, the US could fairly quickly convert its auto factories to production of jeeps, tanks and trucks. Germany could not.

In Germany, automobiles were still a luxury item. Few people owned them; certainly not the people who made them. Military orders made up for the lack of demand from the civilian population.

In this regard, many economists looked at Germany and labeled the rearmament program – from an economic standpoint – as a central planning success story. It ‘put people back to work.’ It ‘got the economy moving again.’ More stuff was being produced. ‘More’ worked! From all over Europe, people came to admire the revival in Germany. American Congressmen praised Hitler. So did many magazine editors and other leaders in France and Britain too. ...

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