Book Review: Wages of Destruction: The Making and Breaking of the Nazi Economy

Brad Forrest

Book Review: Wages of Destruction: The Making and Breaking of the Nazi Economy
By Adam Roose

Reviewed Brad Forrest

The World is divided, it must be redivided.
Leon Trotsky

A book about the economic history of the Nazi regime is essential for three reasons. First, the class nature of fascism is clearly revealed: fascism is a tool of big business that uses the middle class to crush the workers’ movement. Second, the world is still divided into nation-states, each with growing economies that constantly produce frictions and antagonisms. Third, we are undergoing a crisis at the present moment every bit as precipitous as the original Great Depression! How each government responded in the 1930s was in part conditioned by their economic position when the crisis of overproduction hit. Germany and Italy were nations that were deeply in debt, and were without colonies after World War I. They were the losers. America was the big winner, coming out as a creditor to all and sundry. Britain and France were debtors, but had colonies.

The contradiction between the development of the productive forces and the existence of the nation-state gave major headaches to the would-be warriors. As Mr. Tooze repeatedly reminds us, the Nazis needed exports to service the debt and pay for imports. Even the Nazis had to pay lip service to the needs of the working class with the advent of a Work Creation scheme designed, as in so many other countries, to get all those unemployed back to work! Such a simple thing as the balance of payments deficit that the regime constantly struggled with required Germany to stop work-creation programs after December 1933 to focus all spare money on rearmament. They truly faced a guns before butter situation, and opted for guns. Their desperation for cash pushed the Nazis into major contradictions, for instance, with their policy of forced emigration for the Jews. The Reich flight tax and the raising of the discount rate (the cost of money lending) at the Golddiskontbank actually discouraged Jews from emigrating, dwindling to 21,000 for the year 1935!

Mr. Tooze begins his economic history of Nazi Germany with a quote from none other than Karl Marx, who, in his Eighteen Brumaire of Louis Bonaparte, famously said, “People make their own history, but they do not make it just as they please; they do not make it under circumstances chosen by themselves, but under circumstances directly encountered, given and transmitted from the past.” This is a succinct exposition of historical materialism: living people struggling for what they believe to be their interests in a given situation that points them in a given direction. Understanding the economic foundation on which the contestants act out the drama of world politics is absolutely essential for any scholar in general, and Marxists in particular. In the short run politics is decisive, in the long run it is the economy. This is a contradiction that is resolved through constant struggle of social classes and parties.

At first Tooze asks the big question, “How was this possible? In 1938 the Third Reich embarked on Germany’s second campaign of conquest and destruction in less than a generation.” (xix). For an answer to this big question we need to broaden our perspective. We need to take account of the Soviet Union. The world’s first workers state was created in Russia amidst massive economic poverty after World War I, the Civil War against the twenty-one armies of foreign intervention, and with a working class only ten percent of the population. The Bolsheviks won because they best expressed the interests of the Russian and world working class. For example, the Bolsheviks succeeded in withdrawing Russia from the war and of course they were armed with a farsighted strategy. The Bolsheviks saw themselves as merely the initiators of the western European revolution that, they hoped, would result in economic aid to the Soviet Union. However, the expected revolutions in Europe failed to materialize. Revolution in China in 1925-27 failed. The British General Strike of 1926 failed. These failures plus the poverty and illiteracy of Russia led to the rise of Stalin as the leader of the notorious bureaucracy. And Stalin was the reason for Hitler’s climbing into power.

Stalin turned the German Communist Party, the KPD, into a pliant tool of Kremlin foreign policy. And this tool, the only tool that could have saved Germany from a fascist victory, perpetuated a split in the working class movement with the theory of social-fascism. It was asserted that the reformist workers’ party, the German Social Democratic Party (SPD), was the left-wing of fascism and must be fought, not united with. Stalin said the Social Democrats and the fascists were twins. To which Trotsky replied that twins were born at the same time, suggesting that they were not twins at all since their origin deviated not only in time but the two were based on entirely different classes. Trotsky had reiterated for years on end in many pamphlets that the KPD must form a workers’ united front with the reformist workers’ party, the SPD. The whole idea was to concentrate the united workers’ fire on the main danger, the fascists. It was essential to save the germs of workers’ democracy, the workers’ parties and the trade unions, while still existing within the capitalist state.

It could be argued that the fascists weren’t a capitalist reaction because they ran roughshod over small capitalists and the workers alike. The fascist state might be some kind of entity hovering above the antagonistic classes, something new for which new theories are needed. On February 27,1933 the Communists and Socialists got 30.6 percent of the vote in elections. Other parties besides the National Socialists got 26.2 percent. And the NSDAP (Nazis) got 43.9 percent. So the electoral statistics alone show that workers stuck doggedly to their old parties. What we’re dealing with here is a fluctuation in the middle class as it started to gravitate around the NSDAP because of their failure to combine the forces of the workers’ parties.

When one looks at the very heights of the economy, big business with names like IG Farben and Krupp and AEG placed their money bets on the NSDAP. The “Night of the Long Knives,” where Hitler repressed the leadership of his own storm troopers (SA) in order to protect Big Business, showed that Big Business ultimately ruled the roost in Nazi Germany. President Paul von Hindenburg and Defense Minister Werner von Bloomberg gave Hitler the ultimatum that he get rid of the fanatical revolutionaries in the SA, the paramilitary force, or face the end of the ‘Hitler experiment’ through a declaration of martial law. Ultimately the real power was held firmly by the army, which was the obedient tool of the representatives of Big Business.

Now we have to go into a digression about pure political economy. The Great Depression hit Germany very hard, and like all other governments at the time, the Nazis had to find a way of pulling the economy out of a deep organic crisis. According to Marxist theory the split of society into classes where one part takes the unpaid labor from the other (workers don’t get the full value of their work) and the competition between firms will, over time, create a crisis of overproduction. This is what happened in the 1930s and is happening today, we might add.

Mr. Tooze gives one the impression that he’s a Keynesian economist, so it is interesting to follow him through the complexities of the ultimate managed economy. “Taxes simply transferred purchasing power from private hands to the state. . . state borrowing would ‘crowd out’ private investment. The only way to finance work creation that was guaranteed not to squeeze private economic activity was through the creation of ‘new credit.’” (42). In other words, they hauled out the printing press and pumped out some new currency notes to finance their “New Deal.” As Marxists have always explained, you can only get taxes from workers and capitalists. If you take from the workers they can’t buy, if you take from the capitalists they don’t invest. If the state takes out loans, the capitalists get crowded out. And as the 1970s so eloquently demonstrated, when you run the printing press without the new notes being backed by goods or gold, you get inflation through a debasement of the currency. Tooze makes the rather important point that, “Make work schemes at their peak thus directly accounted for 30 percent of the reduction in registered unemployment . . . The conclusion is inescapable: despite the propaganda fanfare that accompanied the renewed Battle for Work in 1934, it in fact made little if any contribution to the ongoing reduction in unemployment.” (62). The public works projects of the Nazis failed to get the economy running. Of far greater import as far as charging up the economy is concerned was the massive increase in the rate of return (profit) of capital in German industry, which by 1936 had pole-vaulted to approximately 16 percent rate of profit as opposed to about 0 percent in 1933! Hitler smashed the working class to raise the rate of exploitation by an astounding amount for the German capitalists. The “democratic” countries never had to engage in such behavior because they had enough accumulated wealth to dole out reforms. Thus we witnessed the American “New Deal.” In parentheses, the America of today has a completely different descending economy compared to the America of World War II, which at that time was the world’s wealthiest and rising economy.

We must speak briefly of Germany’s invasion of the Soviet Union. Operation Barbarossa hit the Stalinist regime full force in 1941. Germany had most of Europe at its disposal, and the Soviet Union had a planned economy. This was most of World War II in a nutshell. The world witnessed the success of the planned economy in a backward country being hit by the most aggressive of capitalist imperialisms. Tooze has this to say, “Rather than succumbing to its supposed lack of sophistication, the Soviet Union punched several classes above its weight.” In December 1941 Marshal Georgi Zhukov on the Western Front had 1.1 million men, 7,652 guns and mortars, 774 tanks and 1,370 aircraft. And the Soviet Union kept pumping out the weapons. The astonishing thing about the war in the East was that Stalin had purged a good many of the Red Army’s general staff in the frame-up trials of 1937-38 during the Spanish Civil War. He had to release some generals from jail to conduct the war! Even then, he conducted it in wretched fashion for an erstwhile Marxist. The German army was composed of conscripts who were cold and exhausted. An appeal to their class instincts would have split the army and saved Russia many millions of casualties. Yet, despite all this, the Soviet army won. They won despite the hopelessly un-Marxist leadership of Stalin. That shows definitively the superiority of the planned economy.

What lessons does this 676 page epic economic history of Nazi Germany reveal? Several lessons concerning the inclinations of Big Business and its direction of imperialist state policy, the limitations in the theories espoused by John Maynard Keynes, and the absolute necessity of the planning principle on socialist lines for economic growth are dealt with in detail. Mr. Tooze perhaps says it most succinctly so we’ll leave the last word with him: “The aggression of Hitler’s regime can thus be rationalized as an intelligible response to the tensions stirred up by the uneven development of global capitalism, tensions that are still with us today.”

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