Friday, 8 January 2010

The economy of the Third Reich

Earlier I posted on an essay by Steven Horwitz on The fascist economy. Horwitz made the point that under fascism there was a large degree of distrust of the unplanned order of free markets and that the power of the state was used to set economic goals. Both these points suggest that the fascist economy should be considered as a form of socialism or planning.

Writing in the current issue of The Freeman historian Steve Davies briefly discusses the success of the fascist approach to the economy using the example of the Third Reich:
In the case of the Third Reich, the widely held perception even now is that whatever else may be said about his regime, Hitler managed to bring about a dramatic revival of the German economy. After 1933 Hitler and his finance minister Hjalmar Schacht stabilized the economy and managed to solve the huge unemployment crisis that had destroyed the Weimar Republic’s legitimacy. This was partly due to Schacht’s imaginative monetary policy and partly to massive public works programs, such as the autobahnen. There was a sharp move away from free markets to a much more interventionist economy that worked better than what had gone before. During World War II this economy was able to achieve great success in terms of war production, notably under Hitler’s armaments minister, Albert Speer.

Obviously there is some truth in this account, or else it would not be credible. There was indeed a sharp move in the direction of a more state-controlled economy. In fact few people realize just how interventionist—even socialist—the policies of the Nazi state were (although the full name of the party should give some indication of this). However, the picture overall is mostly wrong. Adam Tooze conclusively debunked this account in his masterful work, The Wages of Destruction: The Making and Breaking of the Nazi Economy. Tooze shows that the public works programs had little effect on unemployment and wasted resources; that the 1930s saw constant financial and foreign-exchange crises for the Reich; that by 1939 the condition of the German economy was desperate and that this was in fact a major factor in Hitler’s increasingly aggressive policy; that the supposed success of Speer simply did not happen; and that overall the regime was so crippled by its economic incompetence that it is nothing short of a miracle that it had as much military success as it did.
Thus the Nazi planning based approach to economic policy was unsuccessful. An outcome that would not have surprised economists like von Mises and Hayek.

1 comment:

Anonymous said...

Mr. Toonze is incorrect. The Austrian school folks always condemn the Third Reich's economic practices, and it is not a secret as to their motive. The National Socialists did indeed solve the unemployment problem in just one or two years, and did eventually break free from interest debt currency, which became a motive for Britain to declare war FIRST, after the border war with Poland had commenced. (The military dictatorship in Poland was complicit in the murders of ethnic Germans in Poland, causing a large refugee crisis along the frontier...also, Danzig should have been allowed to vote to return or not return to the Reich. Poland, abetted by secret military assurances from Britain and France, triggered the war).

Watch YT video "Were the Germans really so stupid"