Why the Nazis Weren’t Socialists – ‘The Good Hitler Years’ | BETWEEN 2 WARS I 1937 Part 2 of 2

Why the Nazis Weren’t Socialists – ‘The Good Hitler Years’ | BETWEEN 2 WARS I 1937 Part 2 of 2

February 20, 2020 44 By William Hollis


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 is here that a rift starts forming between
Schacht and Hitler. Schacht support rearmament, but only to the point that it is affordable.
Hitler doesn’t care about the economy – he wants to go to war, and believes that future
conquests will compensate for the deficits war creates. When Schacht protests in 1936,
Hitler answers by appointing Herman Göring as a second economic minister. Schacht resigns
as Minister of Economy in 1937, partly as a protest, but also because the MEFO Bill
scam is threatening to unravel by this time. So only three years after starting what was
supposed to be an economic miracle, the Nazis have now drifted into heavy overspending for
ideological reasons. They are now on a path that will, for financial reasons alone, lead
to war. When you add it all up, the effects on the German economy is not great. Hitler
and Schacht didn’t create growth in GDP that was any higher than a previous ‘normal
year’ post WWI like 1927. Before 1927 reparations were still impacting the German economy and
from 1929 the depression pulled it down. There’s a big rally in 1933, though, the year Hitler
seizes power, but that year the whole world economy was moving towards recovery, so this
was pretty much average growth that cannot be attributable to any special economic policy.
More importantly, as economic policy takes time to have any measurable effect on the
economy, any growth in 1933 is from von Papen’s programs and cannot be attributed to Schacht
and the Nazis. In parallel, though, they face increasing
sanctions and restrictions on trade by the democratic western powers. To fix this, at
least temporarily, they create a kind of extended isolationism by reducing their trading
partners to friendly states in order to avoid the impact of the sanctions, and falling resource
and goods prices in the world. They also artificially push up national income by inflating prices
within that closed trade system. The resulting international trade system is not sustainable
though, especially as it requires these limited ‘trade partners’ to be extended at some
point and this in turn again leaves them with no other way than conquest. The only way you can see it all as being great
is if you compare it to the dismal years of hyperinflation in the twenties, and the dip
of the after the 1929 crash. Moreover, as growth was starting from a heavily contracted
economy after the crash, growth in real numbers was not as impressive as the percentile growth
should indicate. And this was growth created artificially in preparation for conquest of
resources and economic might. It is specifically here that the catch 22 of needing growth to
conquer to create growth negates any possible positive effects. You really see it in the numbers for 1937
and 1938. Technically these years should automatically be higher growth years as the economy grows
through Anschluss of Austria and the annexation of parts of Czechoslovakia. Instead we see
a slowing GDP growth, which indicates that without annexation the picture would be grimmer.
So already before a war breaks out the Nazi economic bubble is set to burst under the
weight of waging a war they can’t really afford. But where does the myth of the good Hitler
years come from? Well part of it is probably post fact cognitive
dissonance to self-justify why you supported the Nazis, Another part is the perception
of things getting better, because they were even worse before. But what about all the
money they stole? Couldn’t that be the reason for the ‘good Hitler years’ at least for
those who weren’t robbed? Well no, because although the Nazis systematically plundered
people they prosecuted and murdered – in Germany alone they confiscated more than a
year worth of GDP from the German Jews (120 Billion Reichsmark) – this is redistribution
of wealth in a very nasty way and redistribution doesn’t create growth, it just moves money
around. Moreover, incarcerating these people, or murdering
them, takes them out of the productive economy so that any effect redistribution could have
had is nullified. As they start gobbling up nations, they use slavery and forced labor
to offset this effect, but this too is short sighted and fairly uneconomic- here, we must
not forget that the reason for persecution and murder of ‘undesirables’ is not financial,
but ideological. And let’s not forget, most of what they steal doesn’t go into the system,
the party leaders and Gauleiters keep it for themselves. Self-enrichment and ideological fanaticism,
two concepts that maybe are not the best basis on which to run a nation. Hjalmar Schacht certainly didn’t think so
– by 1938 he is even a passive supporter of the resistance and secretly advocating for
a coup. And yet he is the very man that has created this mess by enabling the Nazis. Hitler
has once again outsmarted those that think they can use him to gain political advantage
while controlling his fanaticism. Germany is now an economic steam train headed at full
speed into a tunnel, and no one knows where that tunnel ends. There’s no engineer to
hit the brakes, and the train just keeps on picking up speed. Hitler and Göring have
created a system of growth that will leave them no option for armistice. They must fight
and win all the way to the oil fields of the Caucasus, the steel in the north, the factories
in the west, and the grain in the East. That’s what they hope is at the end of that tunnel,
fuel for their train. But as long as they are still in the tunnel, they will resort
to burning the only fuel they have on board – the passengers. If you’d like to see our video on how the
Treaty of Versailles did not cause the Nazi rise to power, you can click right here for
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and… It’s not the economy stupid, it’s the
stupid economy. Get it? May you be prosperous, cheers Whilst