Why the Nazis Weren't Socialists - ‘The Good Hitler Years' | BETWEEN 2 WARS I 1937 Part 2 of 2 - YouTube (1)
Pyramid schemes, systematic robbery, extortion, rackets, security money, sham unions, cartels,
price fixing, drug dealing, and sweat shops. No, I'm not talking about the mafia, I'm
talking about Nazi German economic practices of the 1930s. Not socialist, not capitalist, simply criminal.
Welcome to Between-2-Wars a chronological summary of the interwar years, covering all
facets of life, the uncertainty, hedonism, and euphoria, and ultimately humanity's
descent into the darkness of the Second World War. I'm Indy Neidell.
The so called ‘good Hitler years' in the mid to late 1930s still persist as a myth,
but upon closer scrutiny the myth falls apart. There's also a more recent myth, or political
fallacy, that the Nazis were fiscally left wing, even socialists - which is based on
what some of them said, but never actually did. In extremely simplified terms, Hitler's
economic ideology is based on the idea of growth through conquest, 'Lebensraum'
for the German nation. To perform this conquest, however, he needs strong economic growth and
increased resources, which can only be won by conquest. That's a circular self-referencing
system that cannot work. More than anything, though, the Nazi economy is structured like
a gigantic organized crime syndicate created to enrich not the state, or the race, but
the Nazi leaders and their capos. In essence, the German economy of the 1930s is built to
fail, and it will have far reaching consequences if Germany should go to war.
Now, we have looked at the German economy in episodes of this going back 20 years. To
say that it has been a roller coaster ride would be an understatement at best. More like
a wild boom and bust ride through several perfect storms. The long and short of it is
that by 1936, Germany has been on and over the brink of economic catastrophe twice since
the end of The Great War. The first crisis is the self inflicted hyperinflation of 1923,
but the recovery form that crisis is equally self made, and it creates the golden years
of asymmetric recovery that last almost up to the Wall Street Crash of 1929. The most
recent crisis in 1930 and 1931 isn't purely self inflicted as the world global financial
crisis strikes, but Chancellor Heinrich Brüning manages to make it much worse as he more or
less single handedly destroys any capacity to deal with the world crisis in order to
get the Nazis to shut up about reparations.
But then came the Nazis and fixed it, right?
Well, no. What really happened is that despite the gridlock of the Reichstag, the chaos of
the financial world falling apart, unclarity about wartime reparations, and more or less
no mandate to govern, the cabinet of Chancellor Franz von Papen, for all his shortcomings,
manages to turn Germany back onto the path to recovery a whole year before the Nazis
seize power. It's not rocket science - they simply repeal the Brüning austerity measures,
they lower taxes, they reinstitute unemployment protections, and they start public works back
up again.
But Papen doesn't get much credit for this as it's happening - in July 1932 he renegotiates
the payment schedules of reparations, and although it indefinitely extends a moratorium,
it does contain a remainder of 3 billion Dollars to be paid at some point. The public is outraged
and the recovery measures go unnoticed just then, but by the end of 1932 the recovery
is felt in the wallets of the public. Unemployment is finally dropping and GDP is rising again.
According to some analysis this contributes to the decline in votes the Nazis capture
in the November elections. But as we know, Papen's next move is to help Hitler seize
power. So contrary to popular belief, Hitler does not inherit an economy in free fall.
And at his side he has one of the architects of German economic success in the 1920s, who
has now become the banker of the Nazis.
He is Hjalmar Schacht, a well connected financier with a colorful past. During the great War
he went from deputy director of the big national bank Dresdner Bank to Banking Commissioner
of occupied Belgium- a position from which he is fired when it becomes clear that he
has been channeling state money destined for purchase in Belgium through Dresdner Bank
to profit from the transfer fees. Despite this, he becomes part of the Weimar administration
after the war. In 1923 during hyperinflation he is one of the architects of the recovery
plan and the new gold standard currency, the Rentenmark and starts serving as President
of the Reichsbank in November that year. He has connections to international businessmen,
politicians and financiers like US banker J.P Morgan, and Governor of the Bank of England,
Montagu Norman, a close personal friend. He is instrumental in negotiating the changes
to reparation plans and manages German monetary policy into the Golden Twenties. He is also
instrumental in financing for big corporations like IG Farben, and a proponent of capital
cartel building to concentrate financial power for growth.
His political views are fairly mainstream and initially liberal democratic. In 1918
he cofounds the center right German Democratic Party the DDP. He is not an anti-Semite and
will in fact become one of the only vocal critics of the Nazi persecution of the Jews
who does not lose his position or end up in the concentration camps. Well, okay, he will
end up there in 1944, but for being a passive supporter in the July 19 assassination attempt
on Hitler. Anyway, by 1926 he has growing concerns about the inclusion of Socialists
in the Weimar Republic administration, and about increased public spending. He is also
becoming convinced that he only way for Germany to regain position on the international stage
is aggressive financial growth by slashing interest rates below sustainability, and rearmament
to boost industry and regain respect, both of which require actions forbidden under the
Versailles Treaty. He leaves the DDP and becomes an independent.
In September 1930, he resigns as President of the Reichsbank in protest against modification
by the administration to the renegotiated reparations under the new Young Plan, which
he has co-created. The global economy is now in crisis and Schacht sees this as an opportunity
for Germany to take action. Historian Amos E Simpson and Schacht biographer puts it this
way: ”as the powers became more involved in their own economic problems in 1931 and
1932 ... a strong government based on a broad national movement could use the existing conditions
to regain Germany's sovereignty and equality as a world power.” Although Schacht does
not go through a real shift of ideology, he is now ready to back Hitler, whom he has come
to believe fulfills those criteria. It is Schacht that rounds up the support of industrialists
and financiers that Hitler needs to seize power, by introducing Hitler to the business
world. Hitler impresses leading German capitalists by reassuring them that no Socialist measures
will come with from a government of the National Socialist Party. During the December 1932
/ January 1933 political gridlock it is Schacht that puts together the broad petition from
top businessmen to President Hindenburg to appoint Hitler as Chancellor. He now becomes
Hitler main financial advisor and will be the architect of the Nazi Economy. Schacht
doesn't join the Nazi Party, but still, in March 1933 he is again made President of
the Reichsbank, and in August 1934 he is made Reich Minister of Economics.
Hitler and Schacht is a match made in heaven, or hell depending on how you look at it.
The vision they share is of a German economy let loose to prosper. Hitler, because he has
a magical belief in that there is some natural destiny for success of the German race, and
if you just get rid of all the things that he believes that stands in its way - the Jews,
liberalism, and Bolshevism - success is inevitable, no matter what. Schacht, a bit more astute,
believes that in a deregulated, finance friendly market, the power of big corporations can
prosper and strengthen the economy as a whole.
They have a problem though. Germany has since the 1880s been a Social Market Economy. Which
is like a Free Market Economy with an addition of a moderate amount of labor laws, union
rights and social security, as well as strong anti-trust legislation to stop cartel building,
price fixing etc. This is a construction created by the Conservative Chancellor Bismarck back
then in order to make some concessions to liberals and socialists, and stop a drift
to the left. It has been largely successful. The socialist tendencies of left-wing components
of the Weimar administrations, and the need to prop up business during the years of crisis
has also resulted in an increase in the number of nationalized businesses, though. That all
needs to go.
In May 1933 all unions are abolished and replaced with the Deutsche Arbeitsfront DAF, a sham
single union within the Nazi Party that is meant to give workers a feeling that the party
works and cares for them. In reality Schacht is repealing labor protection laws en masse
like limits on part time work, limits on overtime, sectional minimum wages, furlough protection,
notice times, and so on. They mask it by upholding unemployment benefits and with cosmetic programs
like DAF travels, that only really benefit very few. Although wages will go up under
the Nazis, they will never return to pre-Nazi levels as share of GDP. Unemployment will
also continue to decrease, but that is partly due to more part time employment, eliminating
swaths of the public, like Women, political dissidents and Jews form the unemployment
statistics. The number of women in the German workforce will not return to 1927 levels until
the 1950s, not even during the coming war years.
Next, they get rid of almost all anti-trust laws and encourage big businesses to form
cartels to protect their market position inland and abroad. This is basically a carte blanche
for a small group of capital holders to print money for themselves without having to care
about fair business practices. In exchange, the corporations subjugate themselves to ideological
oversight so that no ‘un-German' aspects creep into their business practices. Things
like trading with Jewish businesses, allowing liberal politically minded employees, employing
married women and so on. The ideological oversight also inserts political education into corporate
culture so that workers are kept in line with Nazi doctrine.
They also slash taxes for big business in the cartels. To offset this loss they increase
corporate gains taxes for small to medium enterprises, and companies that don't join
the cartels. In industries that they don't consider valuable to the Nazi ideology, or
don't contribute to the aggressive growth towards an international position of respect,
they even tax gross revenue instead of profits. And then they start a massive privatization
program. The constant sale of government owned business provides between one and three percent
of the entire annual budget. And they need the money to invest in massive public works
to create better infrastructure and more than anything - rearmament.
This does keep the economic wheels of recovery spinning, but it also has another effect.
Coupled with the decentralized, extreme freedom of local party leaders to define the law,
the liberalization of all legal regulation opens up the economy to be robbed by the party.
Party executives like Göring, Hitler, and Goebbels enrich themselves by paying out extraordinary
salaries and bonuses, seizing business for themselves and simply stealing expropriated
goods. On the regional and local levels, Gauleiters and party functionaries extort, blackmail
and steal land, money and valuables as they like. Criminals from outside of the party
are, on the other hand, harshly punished, creating the false feeling that crime is going
down.
Schacht and Hitler are also running a criminal scam to circumvent the limitations on financing
rearmament. The MEFO Bills are government bonds that have no real backing in the economy.
Basically, they are selling junk bonds at a high price to the German people. But it
