There is a very good reason why Wages of Destruction: The Making and Breaking of the Nazi Economy by Adam Tooze has clearly become the most popular and quoted book on the economics of the Nazi regime during WW2. Tooze's book is both an impressive, coherent, and yet readable analysis of the German WW2 war economy, and yet also a great political economic perspective which demonstrates the reason for the choices made by the Nazis and the basis of their economic ideology in the context of early 20th century history and economic thought. It makes for a book which is notably interesting and pertinent reading, and which is relevant not just for the topic of the German military in WW2, but also for understanding the contours of economic development in the first half of the 20th century.
Tooze's work starts with his introduction which stresses putting the economic side of Nazi Germany's logic and development back in the spotlight, after a long focus on the cultural side of Nazism, one which better incorporate the period into the narrative of German economic development and history. Tooze stresses that the history of Nazi Germany must be understood in the context of the rise of the United States and its economic dominance, which threatened to overwhelm old Europe in the new world-industrial order. WW2 was a gamble by Nazism to overthrow the world economic order and to gain Germany the resources and scale to compete in an economy of closed systems, as its own independent block, one which would free Germany from a perceived encirclement by international Jewish capitalism. This logic is what inspires the rest of the book.
The first part concerns the German pre-war economy as the Nazis put their economic plan into effect and dealt with the Great Depression, showing the preeminence attached to massive military build-up, with only 1933 seeing any vigorous public work jobs programs, and the following years massively siphoning off money to military development. While propaganda focused on the public work programs, military expansion was pursued at breakneck speed, paid for by Weimar allocated funds and cancelling interest payments. These policies led to the crisis of 1934 when Germany started to reach the end of its foreign currency reserves, driven by its overvalued currency which it was difficult to devalue due to extensive foreign debts and the risk of inflation. Meeting it required a complicated scheme of financial and trade manipulation and export subsidies, carried out by Hjalmar Schacht, central banker and economic minister, trade controls, and clever economic negotiations to achieve favorable foreign trade agreements, while delinking the German economy from the United States. This had the effect of squeezing light industry in Germany as imports went to heavy industry - for military production. German business cooperated with this, big business accepting unwanted protectionism and autarchy in exchange for crushing German leftism, and medium and small business benefitting from reduced opposition and the end of foreign imports. Huge profits were reaped by German industry, which were designed to be spent on investment. Big businesses was able to invest massively in technology for internal self-sufficiency, such as IG-Farben's development of synthetic oil. Massive state intervention in aircraft production exponentially expanded the industry to stunning heights, entirely for war production, financed by government investment. German business was not nationalized, but as Hitler declared, the population was.
Nazism aimed to create economies of scale to achieve living standards that matched economies like the United States or United Kingdom, in contrast to Germany's relatively poverty. A host of new "Volkproducts," from radios to cars (only the radio really being successful) would carry forth the goal of mass-production and lower prices. But Germany's own limited encouragement for consumer spending and high import costs for things such as gasoline meant that many of these products would be uncompetitive and expensive. Their failure was a further justification for the drive for war to seize the land, resources, and economic scale required to make them work. The same logic applied to agriculture, where a significant fraction of the German population continued its work as farmers, and Nazism idolized the role of German peasant farmers and viewed Germany's constrained size and dependence on food imports as racial suicide. To solve the problem of rural over-population and poor living standards, amplified by a lack of real land reform, Nazism created a category of hereditary farms which could not be alienated from the peasants nor sold by them, with a collective debt reduction scheme. While the Erbhof laws failed to satisfy all the peasants, unhappy at its interferences in their traditional customs and rights engendered by it, and many were left out, it quickly dominated the middle swath of peasant farms. Agricultural price supports was the other policy, helping to secure a real rise in peasant living standards - but self-sufficiency was just as impossible as always, and the need for new land would drive Germany to war to conquer the East.
Part 2 is the Nazi economy in build up to and then during the Second World War. First, it shows that there were options to step away from the brink, but the choice was unhesitatingly made for armaments, at any cost. A ruthless 4 year plan for war-preparation and economic self-sufficiency was put in place by Goering, and the stage was set for war. Germany's economy however, still continued to be troubled by raw material import concerns, ones which the Four Year Plan would take years to deal with. Annexing Austria gave a vital shot of foreign currency reserves and unemployed laborers, a short-term boost with long term negatives for the balance of payment situation. Furthermore, it enhanced Germany's grip over Southeastern Europe. As other powers armed for war, Germany's window of opportunity would be closing, and it had to strike soon if it was to have the advantage: from this point on, any resources available would be thrown into armaments and civilian needs ruthlessly cut. This reduction of consumer demand alongside labor shortages started to drive severe inflation. But Germany would once again be given a lifeline by seizing the Sudetenland from Czechoslovakia, narrowly avoiding war as key advisors argued for accepting Czechoslovak surrender instead of starting the conflict outright. Instead, the Jews were victimized in the Kristallnacht, and their money and property expropriated, a windfall for the Nazi government that helped tide it over again. But despite all of the triumphs, the increasingly unsteady situation of Germany's economy meant that it would either go to war or never have such a window of opportunity again. Already, foreign exchange and resource limitations were forcing cut backs to ambitious armament schemes. Germany's final salvation was the diplomatic triumph the weakening of American aid to Britain and France and of an arrangement with the Soviet Union: the time had come for war.
Germany's first year of war was marked by Germany's economy switching even more radically to self-reliance and complete military mobilization and workforce mobilization for both men and women (proving wrong the idea that Germany did not mobilize for total war, and the vast spending from pent-up civilian demand provided for war financing), its focus on ammunition production, the transport crises as the railroad system reached its breaking point, and its planning for an air war against the United Kingdom after seizing the Low Countries - and only later even the idea of attempting to knock France out of the war visualized. The consistent theme, and one which would pop up throughout the years to come, was that the German war economy was dictated, just as before the war, in resource inputs, and that these determined production levels. This extended to labor and food, with massive conscription of slave labor from occupied Poland, and rationing limitations which would drive genocidal famine in Poland. Victory in France granted the Germans massive resource stockpiles and territory, and was a triumph of Nazi propaganda which stressed the superhuman victory of German soldiers (as opposed simply to the idea of Blitzkrieg), and cemented German influence over Southern and Southeastern Europe, while action in Denmark and Norway secured control of iron supplies. Huge German looting and imports (through clearing deals) would hook these regions into the German war effort, with major occupation costs paying for the purchases. But Britain refused to bow out of the war, and so the possibility of consolidating this new-found empire would have to wait for peace.
This victory was approached through a major U-Boat effort to blockade Britain, and the Luftwaffe's Battle of Britain - but both failed, even if the first would take much longer to see. The United States massively mobilized its military potential, and the Germans poured resources into their own industrial mobilization to match this threat. In oil and military production the Germans were dwarfed by the Americans, and much of its new European empire required coal imports which Germany simply could not give. Europe was not self-sufficient, and thus to win the war of attrition against the Anglo-Americans, only the Soviet Union could give the necessary resources - and a real alliance with the Soviet Union both ran headlong against Nazi ideology and would place the Germans into a position of dependence. And thus the decision was made for war with the USSR.
Part 3, World War, launches with the German war production for preparation for invading the Soviet Union, and the general planning of the German war economy for the long term struggle against the United States and Britain, on the basis of massive investment in productive capacity. All of this was predicated on quickly knocking the Soviet Union out of the war: but the contradictions of both securing Soviet resources and knocking them out of the war immediately and the sheer difficulty of the campaign against the Soviets would pose huge problems to this. The war on the Soviet Union also marked a further elevation in the genocidal policies of Germany, with the beginning of the Holocaust - and even more bloodily, the massive murder of Slavic peoples of the USSR, to enable a colonization of the land by Germans in Generalplan Ost. A massive campaign of starvation, with forced requisition of food, the "Hunger Plan," would provide for Germany's food supplies - which would have the benefit too of reducing logistics burdens. Germany's failure to knock the USSR out of the war however, for unprecedented Soviet resolve and resources, and total war mobilization saved the USSR from defeat, meant that the internal contradictions of Germany's war economy were exposed, and that it had to prepare for a long war against both the USSR and the Anglo-Americans, which it could not do, shown as severe shortages began to wrack the economy.
This was clear in regards to food supplies, where the problem of insufficient calories for workers would lead to a spiral of diminishing production. To solve this, the solution was massive reductions in food supplies to non-German populations, labor management which ruthlessly prioritized calories for "efficient' workers and which culled off the weak, and the genocide of the Jews to remove hungry mouths. Labor was another bottleneck, which was dealt with through massive usage of slave labor from across Europe.
Speer is the focus of the book's analysis of the late-war German war economy, showing that so-called "miracle" was nothing of the sort, but rather that the massive increases in German production were driven by previous industrial investment, and that Speer's triumph was their propagandization which helped provide continued popular will for the continuation of the war and hope for victory. As always, the limitations of resources, labor, and massive demands combined to mean that these programs never were able to fulfill needs, as shown particularly by the critical shortages of steel. Rationalization did play its role, particularly in the air industry, but for aircraft this also led to a gradual technological obsolescence of the Luftwaffe fleet, as stress was put on quantity of production over quality. This would come to deadly results with the British Battle of the Ruhr, with waves of heavy bombers disrupting vital steel and industrial production, and crippling German armaments increases. While repression kept the home front from collapse, the writing was on the wall. Once more, Speer would peg hopes on American-style mass production of experimental weapons, like the Mark XXI U-Boat, the V-2 rocket, and jet fighters - but all of these failed to have a decisive effect on the war, and their hasty production processes generally were failures too.
Shattering Soviet attacks in the East, devastating Anglo-American air raids in the West - the Reich was ground down to the bone, despite desperate further industrial mobilization. The overwhelming material concentration against Germany revealed itself with D-Day and Operation Bagration, annihilating German armies and pushing it to the brink. On the inside, disintegration at last set in, with massive inflation and the collapse of the German currency which increasingly destroyed the logic behind the German war economy. But with the German economy collapsing under massive aerial bombardment which annihilated factories, transport, and cities, this was largely academic anyway.
The conclusion recaps the arguments and themes expressed in the rest of the book, before it goes on to describe the catastrophic and devastating ruins of Germany at the end of the war, and discusses how the Nazi experience was both an aberration and a companion to the Weimar Republic, the state which modern day Germany follows.
To start with, Tooze's analysis of economic thought is one of the best parts of the book, which makes it into far more than simply another WW2 history book. The economic thought of the early 20th century was quite different from today: it had for many a Marxist ring to it, which assumed that the contradictions of economic growth in a world of limited resources, and most important certain countries deprived of these resources while others like the United Kingdom (via its colonial empire) or the United States and USSR (via their massive continental expanses), were well provided for both resources for their economy, outlets for their goods, and economy of scale. By contrast, Germany, and to an extent Europe as a whole, faced resource deprivation and insufficient outlets for production. In a world marked by the crises of WW1 and then the Great Depression, it was entirely logical to come to the conclusion that dependence on the international market would lead to economic competition, war, and leave a country such as Germany squashed. It was thus a reasonable corollary that only an economy of great spaces, as the Germans called it, could survive - and this would mean that territorial expansion to secure it was necessary. This in no way justifies what the Nazis did of course, but Tooze shows the logic behind Nazi aggression and expansion. rather than an insane expression of mindless aggression, Nazi Germany's wars of territorial expansion and drive for living room were driven by real concerns in the German political economy - both the macroeconomics expressed above and the inefficient agricultural sector of small peasant farmers, craving land.
From this initial logical construction, Tooze's genius is being able to synthesize a comprehensive view of the logic and direction of the Germany economy, which links together Nazi ideology, international relations, propaganda, military plans, objectives, construction, and priorities. This leads to fascinating, little explored quirks, such as the huge ammunition production in preparation for a battle plan for the Battle of France and Battle of Britain which stressed aerial bombardment of Britain with the new wunderwaffen, the Ju88 bomber, or the shifting of resource production to the navy and air force to prepare for fighting the United States, even before the Battle of Moscow, and the resultant first real crisis of the war economy. Or Speer's "production miracle," a vital way to keep up hope of military victory and thus civilian morale, and the way it was achieved, via release of emergency resources for a hail mary of industrial production on the back of massive investments in production capacity from years before finally bearing fruit, and not, as has often been claimed and advanced by self-serving Speer post-war, due to administrative genius. This links back to the original construct of the book: that the Germans were inspired massively by the American model of industrial economy of scale, and thus Speer, who pursued a program of economy of scale, American style assembly of prefabricated components, and mass-production, in their last desperate attempts to squeeze out enough war production to win the war. This failed, and Tooze shows the natural limitations of this emergency program in the final years.
There are plenty of other great details: industrial relations, banking, finance, the Holocaust's perverse logic, food consumption, labor, living standards. Bureaucratic infighting is something which is brilliantly covered: plumbing the byzantine networks of Nazi officialdom is a difficult task, but Tooze carries it out with aplomb. Again, the genius of Tooze's work is being able to link it all together: that a relatively poor (compared to the United States), resource-starved economy would pursue strategies and development notably different than what would make sense in today's economy. Thus the Holocaust had a certain horrific economic logic behind it, in addition to the sheer evil of the people who planned and carried it out for their ideology: that without sufficient food reserves, that it made sense to eliminate the Jews, to reduce the number of mouths to feed, and that every last drop of labor would be squeezed out of the Jews in concentration camps for slave labor before they were exterminated. German living standards are a great element of the book and closely linked, showing the food, housing, and transport situation of the German people, and how it was impacted by the Great Depression and the Nazis.
If there is one element where the book overstates its case, it is in a sector which it must view as one of the most important ones of all: strategic bombing. Certainly, Tooze manages an effective volte-face for some of the claims about the complete ineffectiveness of strategic bombing: he shows that strategic bombing did manage to have significant impacts upon the German war economy starting in at least 1943, and that the massive expenditures that the Germans invested to deal with or were a stunningly large part of their war effort. But at the same time he seems to attach too much importance to it: after all, German industrial production continued to rise up until nearly the very end of the war, in early 1945.
Whether one is reading about the German WW2 economy as a stereotypical WW2 history buff, mostly interested in the military side of things, or has greater interest in the political economy of WW2 Germany for why the Nazi state formed, its logic, and how it led to such terrible atrocities such as the Holocaust, Tooze's book is a momentous chef d'œuvre which deserves a star role in books on the subject.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2021 Ryan C Thomas