Reich economics

[JLEES]

Basically, you are saying in Nazi-Germany there was no overall economic plan and when there was people wouldn’t cooperate with it. Those with the right political connections could get around it. Yes, there were many economic controls; however, they mostly focused upon the German worker’s relationship with his employer and not the overall macroeconomic activity of the company. There was also conflicting government policies. German workers could not belong to unions after 1933 and the German Labor Front controlled wages and working conditions. While in the USA their economy functioned more efficiently during the war, because there was a more firmly established overall plan and government regulations in place to enforce compliance. There was also a massive amount of US Government funds pumped into the economy to build war materials and peace time items were curtailed through regulations. We agree. Keynesian Economics worked! WWII was the biggest government spending program in US history and it pulled the country completely out of the depression. I’m glad we now agree.

[CWMarshall66]

Yes, there were many economic controls; however, they mostly focused upon the German worker’s relationship with his employer and not the overall macroeconomic activity of the company.

Not so, the regulatory machine reached into every part of the economy, up to the point of comprehensive price and wage controls, and rationing of civilian consumption. You really should read "The Vampire Economy" (I linked to where you could get it for free)

While in the USA their economy functioned more efficiently during the war, because there was a more firmly established overall plan and government regulations in place to enforce compliance.

Since regulation was a common factor, it can't explain why the US war economy functioned well, and the German didn't. The difference is that their government worked largely as a team. In contrast, Germany's cabinet hardly met after 1938. Ministers worked independently.

You seem to be treating Nazi Germany as a normal state. It was not, it was the state-manifestation of Hitler's lunacy.

Keynesian Economics worked!

No it didn't.

WWII was the biggest government spending program in US history and it pulled the country completely out of the depression.

I think you've demonstrated your lack of understanding of economics. You can invoke a name, and use it to push an idea of massive government spending. What you can't do is explain how it worked. Having the unemployed sent overseas to be shot, and producing massive amounts of material with the aim of blowing it up shortly after can't create prosperity.

The post-war economic boom was truly post-war. It resulted from uniquely high demand for US manufactured goods (most of the Free World's other industrial economies had been destroyed), and a vast pool of savings (wartime rationing meant that money was saved rather than spent). These savings funded the conversion of plant from war production to peacetime production.

[JLEES]

I believe that we agree on much of the subject. However, National Socialist oversight into the economy primarily focused upon controlling worker activity through their German Labor Front and its accompanying racial regulations. Yes, I've just simplified something that was more complex and far reaching; however, Nazi-Germany did not control economic activity to the extent of the Soviet Union either. Meanwhile, WWII was the biggest US Government spending program in US History and government controls and regulations over the economy were huge. This is a fact. This government spending lifted the US economy completely out of the depression. Roosevelt’s New Deal programs helped lower unemployment from 25+% to roughly 12% by 1937. So the negative argument that some have launched about the merits of Roosevelt’s New Deal is not supported by facts. This is also a fact. However, WWII lifted the country completely out of the depression. I suggest you read a little about these events. Everything you have said about US postwar activity is also true; however, it does not negate the earlier historical facts and events. I also suggest you read Albert Speer’s books.

[JLEES]

There is great deal of information about National Socialistic economic policies on the internet that is readily available for viewing. Here is a short blurb about how it worked and its results:

“Schacht continued the economic policies introduced by the government of Kurt von Schleicher in 1932 to combat the effects of the Great Depression. These policies were mostly Keynesian, relying on large public works programs supported by deficit spending – such as the construction of the Autobahn network – to stimulate the economy and reduce unemployment. There was major reduction in unemployment over the following years, while price controls prevented the recurrence of inflation. The economic policies of the Third Reich were in the beginning the brainchildren of Schacht, who assumed office as president of the central bank under Hitler in 1933, and became finance minister in the following year. Schacht was one of the few finance ministers to take advantage of the freedom provided by the end of the gold standard to keep interest rates low and government budget deficits high, with massive public works funded by large budget deficits. The consequence was an extremely rapid decline in unemployment – the most rapid decline in unemployment in any country during the Great Depression. Eventually this Keynesian economic policy was supplemented by the boost to demand provided by rearmament and swelling military spending. Meanwhile, the Nazis replaced the Weimar trade unions with what many Germans saw as the new and improved unions called the German Labour Front and banned strikes, sacks and lockouts. They also directed Schacht to place more emphasis on military production and rearmament – an example of military Keynesianism.

In June 1933, the "Reinhardt Program" for infrastructure development was introduced. It combined indirect incentives, such as tax reductions, with direct public investment in waterways, railroads and highways. It was followed by similar initiatives resulting in great expansion of the German construction industry. Between 1933 and 1936, employment in construction rose from only 666,000 to over 2,000,000. Cars and other forms of motorized transport became increasingly attractive to the population, and the German motor industry boomed.

After 1936, the German state came to play an increasing dominant role in the German economy both through state-owned companies and by placing increasing larger orders. In September 1936 by Hitler's lieutenant Hermann Göring, with a Four Year Plan mandate to make Germany self-sufficient to fight a war within four years. As big business became increasingly organized, it developed an increasingly close partnership with the Nazi government. The government pursued economic policies that maximized the profits of its business allies, and, in exchange, business leaders supported the government's political and military goals. While the strict state intervention into the economy, and the massive rearmament policy, led to full employment during the 1930s, real wages in Germany dropped by roughly 25% between 1933 and 1938. Despite state control, business had much production and investment planning freedom in a regime that has been described as "command-capitalism". The largest firms were mostly exempt from taxes on profits.”

There is nothing in there that has changed my views of Kaynesian Economics or how the economy worked in Nazi-Germany.

[CWMarshall66]

I believe that we agree on much of the subject. However, National Socialist oversight into the economy primarily focused upon controlling worker activity through their German Labor Front and its accompanying racial regulations.

I don't think we do. You're determined to push (for partisan political reasons) this idea that only government control can guarantee prosperity. To support this argument, you've decided to minimise the scope of Nazi economic regulation to labour. That is simply not the case. As I've stated repeatedly, German economic regulations covered the entire range of economic activities. Through their various institutions, the Nazis controlled who received raw materials, how labour was allocated, prices (at all levels of the economy), wages and working conditions, and capital markets. In some cases, government bodies even took steps to halt sell orders for certain securities. Governmental power was used to concentrate ownership. Pages 68 and 69 of "The Vampire Economy" show the change in the composition of the companies listed on the Berlin Stock Exchange, and Chapter 11 of "The Vampire Economy" tells the story of the decline of the Berlin Stock Exchange as the place in which the allocation of German capital was decided.

This government spending lifted the US economy completely out of the depression. Roosevelt’s New Deal programs helped lower unemployment from 25+% to roughly 12% by 1937.

This conclusion is not supported by the facts. Arguing by assertion is generally weak. You cannot support your conclusion that it was government spending during the war that pulled the US out of the Depression. Britain's government spent proportionally more than the US, and ended the war weak and impoverished. The main difference between Britain and the US was capital accumulation. The US economy had accumulated capital during the war, Britain had spent virtually its entire capital stock on the war.

I also note you've fallen into two Keynesian fallacies. You talk about the economy, but refer to employment as the only important measure. You've also mistake nominal GDP for prosperity. "The economy" is in fact the total of the millions upon millions of decisions and transactions we take every day. As I said earlier, aggregates are convenient statistical fictions. They help is conceptualise our world. When one talk about the aggregate as though it is a single entity (as you and Keynes do), you become unable to form cogent conclusions.

Everything you have said about US postwar activity is also true; however, it does not negate the earlier historical facts and events.

If what I've said about the US economic recovery is true, then your line about the war pulling the US out of the Depression cannot be true. In this instance, my argument and yours directly contradict each other. You claim the economic recovery happened as a result of war, I argue that the economic recovery came from the conditions of the peace. Incidentally, after World War 2, the British took the simplistic view that what worked in war could work in peace, and retained heavy state intervention in the economy. The result was decades of stagnation in living standards, and constant inflation.

Here's the challenge: explain how an economy is saved by having its workers build military goods and having the unemployed sent overseas and shot.

I've become convinced that you don't really understand economics in any sense, and are simply parroting things people have told you.

[CWMarshall66]

There is great deal of information about National Socialistic economic policies on the internet that is readily available for viewing. Here is a short blurb about how it worked and its results:

“redacted material pasted from wikipedia”

There is nothing in there that has changed my views of Kaynesian Economics or how the economy worked in Nazi-Germany.

That is surprising, since some of it contradicts your theory that labour was the major area of regulation. It is a short, and very superficial "blurb" on the Nazi economy. It doesn't describe the consequences of these policies well enough. It also fails to mention that the economic purpose of the German military build up wasn't economic stimulus, as Keynes would have understood it, but the acquisition of land, wealth, and slaves.

I've read a great deal about the way in which the Nazi economy worked. I've recommended "The Vampire Economy" several times. Speer's books necessarily take things from his perspective, while "The Vampire Economy" focuses on the German businessman. It examines the types of things he had to do in order to operate his business.

[JLEES]

I think the important thing to understand that makes it confusing all the way around is that there is no pure economic system. The are shades of capitalism and socialism in all economic systems and it changed over time, due to internal and external pressures and changing strategic considerations/goals.

[LWD]

... The Third Reich on the other hand had few controls and oversight at the beginning of the war, resulting in massive inefficiency until Albert Speer's appointment. I would suggest you read Speer's book it may enlighten you about this period.

If you read Tooze's Wages of Destruction you get a somewhat different picture. From what I've read recently many consider Speer's work one of self promotion to a considerable extent.

[JLEES]

Yes, I've also read the same stuff and personnaly believe much of it is true. Although I don't think he was self promoting his involvement, but instead white-washing and/or downplaying his activities in relation to the Holocaust. About 10-years ago I also read another book on this subject.

[Marcus]

A post on the claim that "The Third Reich was a Socialist state" was moved to a new thread.

/Marcus