Quantification of the contribution of foreign work during WW2

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Pods
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Quantification of the contribution of foreign work during WW2

Post by Pods » 22 Sep 2021 18:29

It is generally claimed that slave labor had really negligible impact on the German effort.

Modern quantifications indicate that foreign work contributed 4% of German GNP:
Equipped with this output benchmark, the previously attained relative productivity figures and skilled and unskilled civilian wages I then arrive at a range for the monetary contribution of POW labour. The POWs contributed between 1% and 1.5% to GNP every year from 1940 to 1944 and almost 2% per year for three consecutive years from 1942 up until 1944. The contribution of the 7 million foreign and POW workers overall was even greater. Not only was every tenth worker in the Reich foreign or a POW between 1939 and 1944, but the foreign and POW workforce also at peak produced 6% and 7.5% of GNP in 1943 and 1944 respectively and accounted for an average contribution of 4% from 1939 to 1944.
Source:
https://voxeu.org/article/exploiting-en ... zi-germany


However, many argue that forced labor had an impact on the German mobilization, is it possible that its real contribution was higher than its strictly economic contribution?

Another point is that slave labor simply avoided restrictions on German consumption but did not affect mobilization. This also makes sense since Nazi Germany did not mobilize much further than Imperial Germany.

And finally, are there estimates on Japanese forced labor?

Peter89
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Re: Quantification of the contribution of foreign work during WW2

Post by Peter89 » 23 Sep 2021 08:09

Pods wrote:
22 Sep 2021 18:29
It is generally claimed that slave labor had really negligible impact on the German effort.

Modern quantifications indicate that foreign work contributed 4% of German GNP:
Equipped with this output benchmark, the previously attained relative productivity figures and skilled and unskilled civilian wages I then arrive at a range for the monetary contribution of POW labour. The POWs contributed between 1% and 1.5% to GNP every year from 1940 to 1944 and almost 2% per year for three consecutive years from 1942 up until 1944. The contribution of the 7 million foreign and POW workers overall was even greater. Not only was every tenth worker in the Reich foreign or a POW between 1939 and 1944, but the foreign and POW workforce also at peak produced 6% and 7.5% of GNP in 1943 and 1944 respectively and accounted for an average contribution of 4% from 1939 to 1944.
Source:
https://voxeu.org/article/exploiting-en ... zi-germany


However, many argue that forced labor had an impact on the German mobilization, is it possible that its real contribution was higher than its strictly economic contribution?

Another point is that slave labor simply avoided restrictions on German consumption but did not affect mobilization. This also makes sense since Nazi Germany did not mobilize much further than Imperial Germany.

And finally, are there estimates on Japanese forced labor?
I think it was a dynamic event, because the share and productivity of unskilled labour rose steadily from 1941 to 1944, at least in the aircraft industry.

Not that the Germans would capture droves of POWs in 1943/1944, so I assume that these are the same POWs as before.

We also face the definition problem here, like what is exactly the definition of forced labour? Germany "invited" a lot of foreign labour as well, and also outsourced production into occupied countries.
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TheMarcksPlan
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Re: Quantification of the contribution of foreign work during WW2

Post by TheMarcksPlan » 27 Oct 2021 07:02

Pods wrote:
22 Sep 2021 18:29
It is generally claimed that slave labor had really negligible impact on the German effort.

Modern quantifications indicate that foreign work contributed 4% of German GNP:
Equipped with this output benchmark, the previously attained relative productivity figures and skilled and unskilled civilian wages I then arrive at a range for the monetary contribution of POW labour. The POWs contributed between 1% and 1.5% to GNP every year from 1940 to 1944 and almost 2% per year for three consecutive years from 1942 up until 1944. The contribution of the 7 million foreign and POW workers overall was even greater. Not only was every tenth worker in the Reich foreign or a POW between 1939 and 1944, but the foreign and POW workforce also at peak produced 6% and 7.5% of GNP in 1943 and 1944 respectively and accounted for an average contribution of 4% from 1939 to 1944.
Source:
https://voxeu.org/article/exploiting-en ... zi-germany


However, many argue that forced labor had an impact on the German mobilization, is it possible that its real contribution was higher than its strictly economic contribution?

Another point is that slave labor simply avoided restrictions on German consumption but did not affect mobilization. This also makes sense since Nazi Germany did not mobilize much further than Imperial Germany.

And finally, are there estimates on Japanese forced labor?
I meant to respond to this a while back and it somehow fell off my plate.

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TL;DR: The article incorrectly equates worker income with worker output, thereby vastly under-rating what workers (especially forced workers) actually produce in war-relevant physical terms.
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The author, Johann Custodis, refers in the linked article to scholarly work, which appears as Chapter 3 ("Employing the Enemy") in the compendium Paying for Hitler's War: The Consequences of Nazi Hegemony for Europe, Scherner and White eds.

In that chapter Custodis estimates POW and foreign-worker contributions by:
  • 1. Taking average German industrial wages and equating them with output per German worker.
  • 2. Reducing foreign/POW output per worker (or worker man-day) by foreign/POW productivity, relative to German productivity.
  • 3. Multiplying foreign/POW man-days times worker "output" to get toal foreign/POW worker output.
  • 4. Dividing foreign/POW output by German GDP/GNP to arrive at his foreign/POW worker percentage contribution.
#1 is a fundamental economics error that would cause Marxists heart-attacks and that even neoclassical economists would reject. WORKER WAGES ARE ALWAYS LOWER THAN WORKER OUTPUT. Marxists call this exploitation; capitalists call this profit. No economist disagrees, whatever their politics. As I'll show, Custodis' analysis vastly underrates foreign/POW contributions due to this foundational error.

To his credit, Custodis partially acknowledges the flaw, mostly via footnote. Discussion reproduced below:
The contribution of POWs to the German war economy appears small
at first glance because the monetary value of POW labor was not proportionate
to the presence of the prisoners in the labor force. In 1944, at
the peak use of POW labor, POWs represented 5 percent of the aggregate
German labor force or, on a productivity-adjusted basis, 3 percent,
but they contributed on average only 1.5 percent to aggregate German
output during that year.86

Footnote 86:
Without estimating a production function, the exact relationship between labor and
output cannot be specified but if labor’s contribution to production was 50% and
capital was 50%, then a 3% increase in labor would have led to a 1.5% increase in
output.
...so Custodis tries to reconcile an obvious paradox by imputing 50% of output to "capital" rather than to labor. The 50% assumption neatly aligns with his narrative so far. He's referencing the capital/labor share of income, a subject whose historical trends mainstream economists extensively model (e.g. here). But again, that's a model for income, not for outputs. There are so many reasons that Custodis' income=output move is wrong, even within neoclassical free-market economics, that I'll just cut through the theory:

Just intuitively, does anyone really believe that capitalists (think the few guys - mostly - in the corner offices) actually create 50% of the physical output of, say, an industrial concern like Ford or GM? One must spend too much time at "elite" economic brainwashing institutions (as I once did, as Custodis still does) to believe this fantasy (as I once did). Contemporary capitalist economists have a story for why the capitalists deserve 50% of the income, regardless of whether they made 50% of the physical output: absent the innovators in suits, the factory wouldn't exist, technology would ossify, etc. But the income story - whether you buy it or not - is entirely irrelevant to the central issue of a wartime economy, which regards physical output rather than income distribution.

That's not to deny, however, that capital - physical plant - plays a role alongside labor in war production. Workers are obviously useless without tools... So what was the real physical contribution of physical plant to wartime production? We might look at how much Germany spent on capital, as a proportion of GDP. Luckily Jonas Scherner (one of Custodis' editors in this work) gives us figures in this article, which estimates total German investment at 7-9% of GDP during 1943-44:

Image

If we attribute 8% of worker output to capital rather than 50%, that implies an 84% upward adjustment of Custodis' estimate. Even that's suspect, as the baseline "aggregate German labor force" was also producing capital. It's double-counting to reduce foreign/POW worker output by capital's contribution while also counting workers producing capital in the numerator of the "output share" calculation. But for now, let's keep the double-counting because Germany's investment level fell off in 1943-44 so production was probably consuming more capital than was being created. Plus we need a few % for the useful activities of the few guys in the corner offices.

I don't understand how Jonas Scherner, an excellent economic historian of WW2, could allow Custodis to make this mistake in a volume Scherner edited. (actually I think I do understand but that's a very long meta-discussion regarding the economics of war)

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If we revise Custodis' figures upwards by 84% then we get a peak POW production share of 3.6% in 1944 and a peak foreign/POW share of 15.3% (also in 1944).

15.3% of German output is enormously important. Germany spent ~60% of GDP on military items in 1943 but probably less than half of that on armaments (most of military budget went to soldier pay, food, basic equipment, transport, etc.). Absent foreign/POW workers, Germany could not have produced half as much armament as it did in 1943-44.

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Custodis's Vox article undersells even his own conclusions in Paying for Hitler's War by averaging foreign/POW output share over the war rather than foregrounding its 1943-44 peak. As Custodis himself acknowledges in his scholarly chapter, Germany recruited at least twice as many foreign workers from early 1942 as it had recruited in 1939-41.
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