An international free market in military hardware during WW2

[TheMarcksPlan]

Suppose that in WW2, two powers - one aligned with Axis and one with Allies, both neutral - had sold weapons. The Axis-aligned sells only to Axis and vice versa. [explanation and modification below]

To make the thought experiment work, further suppose that each seller ships its products in its own ships and that neither side is willing to interfere with these shipments (East and West Antarctica are neutral superpowers, say).

Each seller produces all the major weapons of every belligerent country. Each is so strong that they have industrial capacity to satisfy any order that any country can feasibly place.

To purchase weapons, a country's offer of payment is denominated in cash but - because the sellers don't want to finance belligerents who might lose a war and not be able to pay later - they must trade goods of value equal to their cash-denominated offers. So as U.S. steel was $40/ton in 1940, if the US wants to buy $1mil worth of bombers from West Antarctica, it has to deliver 25,000 tons of steel to West Antarctica's ships (or an equivalent value of coal, agricultural goods, etc.). By this "pay now in real goods" stipulation, this trade/market arrangement doesn't expand any country's total productive potential. I.e. there's no Antarctic Lend-Lease.

With that setup, we can now ask what the market value (as opposed to production price) of different WW2 weapons would have been.

How much is Germany willing to pay for P-51's?

How much would US pay for Tiger tanks?

My point in the exercise isn't to see which weapon is "best." Rather, it's to see whether the "market" price of common weapons would have been higher or lower than the historical production price.

Germany would probably, for example, pay more for P-51's than its production price for Me-109's. But the production price of an Me-109 was as low as 1/3 of the P-51 and Germany won't pay 3x the cost. What would have been the real value of P-51's for Germany? (or Romania or Thailand)

Likewise for U.S. All but the most partisan posters will probably agree that, on a one-one basis, the US Army would have preferred to replace at least some (not all) of its Shermans with Tigers (or IS-2's). But at what price in resources? Tiger was ~3x as expensive to build; is it 3x as valuable?

Spare parts can be purchased on the market as well.

Naval purchases could throw a big wrench into the calculus. The U.S., for example, could probably buy 100 aircraft carriers and their fleet trains on December 8, 1941, which changes the war's course a bit (though trained crews and bases can't be purchased). This shows that immediate purchase of long-lead-time items pushes up its demand and/or market price. To avoid that bit of unrealism, we can stipulate that orders from Antarctica are fulfilled on typical industrial lead times.

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I added the Axis/Allied separate markets because, absent his restriction, market price will be determined partially - maybe primarily - by trying to crowd out your enemy. If the Antarctic neutrals are big enough that's not a practical issue, however - maybe that's the better stipulation. In a war between Monaco and Lichtenstein, neither side would be able to crowd the other out of armaments markets - they're too relatively small. Our countries relate similarly to Antarctic superpowers in this scenario.

[Kingfish]

Japan would be on the losing end from the get go. Lacking much in the way of natural resources, she would be hard pressed to offer up anything of value that would be equal to a military force required to achieve her strategic goals. Italy likewise would suffer the same restrictions. That leaves Germany against the world.

[TheMarcksPlan]

Japan would be on the losing end from the get go. Lacking much in the way of natural resources, she would be hard pressed to offer up anything of value that would be equal to a military force required to achieve her strategic goals. Italy likewise would suffer the same restrictions. That leaves Germany against the world.

Yeah you don't "win" or "lose" anything by having Antarctica sell - or not - models of your military hardware. (I guess bragging rights)

To the extent that weaker nations' weapons were lower-quality and expensive (seemingly true of Italy, for example), the market actually helps them most. They can buy better US/German/UK weapons on the market for lower resource expenditure than for their own weapons.

The market is least helpful to countries that produced valuable weapons cheaply.

[TheMarcksPlan]

I edited the title from "weapons" to "military hardware" to reflect the full gamut of war stuff.

One member, for example, argues that Germany should have spent lavishly, America-style, on logistics/engineering equipment like bulldozers and excavators. This thought experiment allows to "test" the argument by gauging whether Germany should have traded the resource equivalent of, say, thousands of tanks to do so (don't know the data oj bulldozer costs, which seems important to making the argument).

[TheMarcksPlan]

I don't want to think of the market in purely international comparisons either. A country can effectively trade for its own weapons as well.

If US decides, for example, that P-47's costing ~1.5x more than P-51's should be replaced, they can effectively trade Tbolts for Mustangs by shutting down P-47 production and trading the freed resources to Antarctica for Mustangs.

[TheMarcksPlan]

3 Iowa's ($100mil each) or 10 King George V's (7.4mil pounds - $30mil)?

Maybe the US battle fleet is all British-designed?

Germany definitely should sub KGV's for Bismarck (250 mil RM or ~$65mil).

(British shipyards were extremely efficient so this market highly endangers its naval standing - but hey they get bragging rights).

(Of course nobody should be buying battleships...)

[TheMarcksPlan]

I edited the title from "weapons" to "military hardware" to reflect the full gamut of war stuff.

This could include raw materials, btw.

Germany needed more oil. Take the international oil price and consider how much of her military production Germany would rationally have traded for barrels of oil. 5%? 10? 15?

This thought experiment replicates market conditions in that Germany will stop paying non-oil resources for oil when the marginal value of non-oil, traded for oil, equals the marginal value of the next barrel of oil. I.e. when the cost of oil equals the international price.

Obviously the marginal value of Speer's 4,000th monthly fighter was nearly zero when Germany lacked fuel to train someone to fly it. Equally obviously, the marginal value of the billionth barrel of oil is zero if Germany has traded all her vehicles for oil. Somewhere in between is equilibrium.

[TheMarcksPlan]

Japan would be on the losing end from the get go. Lacking much in the way of natural resources, she would be hard pressed to offer up anything of value

On reflection I misunderstood your objection. You've read the market as requiring payment in raw materials only. That's partially my fault, as I only listed raw materials as examples.

Countries can trade anything of value. So Japan can trade origami, Germany lederhosen, Britain Monty Python recordings, USA advice on deceptive financial practices.

[Kingfish]

Japan would be on the losing end from the get go. Lacking much in the way of natural resources, she would be hard pressed to offer up anything of value

On reflection I misunderstood your objection. You've read the market as requiring payment in raw materials only. That's partially my fault, as I only listed raw materials as examples.

Countries can trade anything of value. So Japan can trade origami, Germany lederhosen, Britain Monty Python recordings, USA advice on deceptive financial practices.

Hardly matters. What could Japan possibly offer as up front payment for a naval force (including transports) of similar size to what she started out the war with? Now add the air force, Army and Naval troops, logistics, etc.

[TheMarcksPlan]

Japan would be on the losing end from the get go. Lacking much in the way of natural resources, she would be hard pressed to offer up anything of value

On reflection I misunderstood your objection. You've read the market as requiring payment in raw materials only. That's partially my fault, as I only listed raw materials as examples.

Countries can trade anything of value. So Japan can trade origami, Germany lederhosen, Britain Monty Python recordings, USA advice on deceptive financial practices.

Hardly matters. What could Japan possibly offer as up front payment for a naval force (including transports) of similar size to what she started out the war with? Now add the air force, Army and Naval troops, logistics, etc.

I don't think you're following the counterfactual, maybe I haven't explained it well.

Japan can keep whatever she had/produced.

OR

If Japan would rather have foreign weapons she can trade for them.

She can trade origami, weapons, coal, or sushi.

She will still have less than richer countries regardless.

Try not to make this about your views on Japan or whoever.

I have no idea yet which side this market would favor, that'snot the point.

[Kingfish]

I don't think you're following the counterfactual, maybe I haven't explained it well.

Japan can keep whatever she had/produced.

OR

If Japan would rather have foreign weapons she can trade for them.

She can trade origami, weapons, coal, or sushi.

She will still have less than richer countries regardless.

Try not to make this about your views on Japan or whoever.

I have no idea yet which side this market would favor, that'snot the point.

Then what exactly is the point?

[TheMarcksPlan]

Then what exactly is the point?

To analyze, using the logic of tradeoffs and marginal utility, the value of specific war goods, compared to their price or cost.

Under a wartime command economy, there is a more imperfect goods consumer and therefore more distance between price and value. A market uses diffuse information to better-align price and value.*

We can, I posit, gain some of the market mechanism's usefulness by reflecting on what tradeoffs would have been made between various war goods. By then comparing "market" tradeoffs with resource expenditure (cost), we can better gauge which war goods were efficient.

*I am not making the same mistake that most economists make (including Marx) - that of equating price and value. That this hypothetical market tells us more about value than does mere cost/price does not imply it is perfect.

[historygeek2021]

Germany would probably, for example, pay more for P-51's than its production price for Me-109's. But the production price of an Me-109 was as low as 1/3 of the P-51 and Germany won't pay 3x the cost. What would have been the real value of P-51's for Germany? (or Romania or Thailand)

I think this illustrates that different weapons were of different value to different combatants. Part of the P-51's value was its incredibly long range. Germany was fighting a defensive air war and therefore had no need for a super long range single engine fighter.

Also, what sources are you using for prices?

[TheMarcksPlan]

different weapons were of different value to different combatants.

Absolutely. And different goods have different values to different people but we all pay market price (usually); it contains some information about value (more than production cost). Like I said there's no such price as equals value - but don't follow me too far left.

Also, what sources are you using for prices?

Memory right now, tbh. Out and about, typing on my phone. All American plane prices are given in AAF statistical digest. Me109 figures come from many sources, offhand I recall quoting prices in Arming the Luftwaffe by Uziel on this forum.

[Kingfish]

To analyze, using the logic of tradeoffs and marginal utility, the value of specific war goods, compared to their price or cost.

How do you arrive arrive at the value if each nation has the choice of opting out of the hypothetical scenario you laid out?

The 'pay up front' requirement would be a non-starter for many nations.
How then could the value of Akagi be gauged if Japan decided to build her at Kure?