THE ARMS MAKERSAND THE THIRD REICH

The world economic depression of the 1930s, beginning with the Wall St crash in the autumn of 1929, struck German capitalism with special severity. It plunged it into a social and political crisis which culminated in the defeat of the highly-organized work. ing-class movement and the coming to power of Hitler. This series of articles deals with the economic aspects of the victery of Nazism, and goes on to examine the connection between the Nazi regime and monopoly capitalism and will conclude with an analysis of Nazi Germany's war economy. Part 3 by Tom Kemp Nazi economic policy was fully in line with the requirement of German capitalism. It smashed the trade unions, held down wages and living standards, opened up new opportunities for the middle class and, above all, enabled the big capitalist firms and banks to make vast profits.

As industrial production climbed up to and beyond its 1929 level and the pronts rolling. in again, there doubt that German big business was grateful to its Fuehrer.

The role which armaments played in the Nazi economy before 1939 has caused some troversy. Sometimes the extent of the preparations for war are exaggerated and it is important to see what Hitler's programme was.

First, the armaments industry was at a low level in 1933 as a result of the at least nominal adherence to the Treaty of Versailles. This severely limited the armed forces which Germany was permitted to maintain.

Until about 1936 the first phase of rearmament consisted of establishing the basis of mechanized army, an air force and a larger navy, including submarines. This required an expansion of heavy industry - - highly approved by the Ruhr steel magnates- the development of machine-tool production and the widening of the raw material by the establishment substitute industries (oil from coal, synthetic rubber, man-made fibres).

War preparations do not sist only of producing munitions and weapons of war. They require a strong, industrial base, a capacity for production and administrative machinery to gear production to war.

Once a certain level of armaments had been reached, there was no point in increasing the proportion of production which went directly on arms. In any case, Hitler's strategy assumed a series of lightning wars-blitzkriegs — waged against enemies singly, not a lengthy, total war against coalition of powers such as actually occurred after 1939.

So it was sufficient to have mobile striking force of welltrained and heavily-armed divisions with supporting aircraft. Once this had been achieved, there was a definite disadvantage in further arms spending.

Already in the 1930s, arms were going out of date rapidly, especially armoured fighting vehicles, aircraft and anti-tank and anti-aircraft guns. Beyond a certain point it would have been senseless for Germany to prepare for war by piling up. weapons likely to become obsolete within à few years.

Nevertheless, the first phase of rearmament undoubtedly made a vital contribution to German recovery which was well advanced by 1936 when a new stage of war preparation began. In the next four years the economy was ordered to be placed on a war footing.

Even sO, the proportion of national product going on armaments was not much greater than that in Britain, which also began rearming 1936-1937. British Intelligence consistently overestimated German redness tor strength and preparedness war in these years.

The feeling that Hitler was taking • excessive risks with inadequate fighting forces and a still vulnerable industrial base was responsible for opposition to his policy inside the General Staff. This appeared at the time of Munich and resulted in an army plot to overthrow him in of high ofers including Cumeal This was led by a number Beck, Chief of Staff. Beck was executed for his part in the other ill-fated plot in July 1944.

"It has to be stressed that there was a close connection between the nature of German economic preparations for war and Hitler's confidence that a lengthy war against number of enemies could be avoided.

Germany did not prepare for the kind of war which took place.

Had she done so. armament tually dismissed, his influence in production before 1939 would the 1930s was considerable. have had to be on a much Indeed, throughout, the represenlarger scale, or the war would tatives of finance capital and have had to be postponed. heavy industry showed that they There is no doubt, of course, were the masters by opposing that the Nazi economy prepared Hitler's more dangerous economic for war and that its inevitability as 'the continuation of politics other means' was to directly influence political and accepted by the class There were differences about the This was part of the bargain kind angl about the struck between Germar CaDIwisdom of Hitler's strategy. Most talism and the Nazi leadership. doubts were removed when it appeared to be brilliantly suc- the armaments sector before 1939 cessful against Poland in - 1939 indicate the predominance and in the W in 1940. cap alist aims: raise profits Whatever the generals may have thought. Hitler's type of internally and abroad while keepwar preparation was approved by ing costs and wages down. big business. It had the advantage of giving them an assured market to be financed either T210119 for armaments by the state taxation or by increased borrowcontracts were on a cost-plus ing. German capitalists opposed basis which meant big profits- both. They did so with considerwhile leaving the way clear for able success even after war had the expansion of civilian produc- broken out. They wanted as well. 'business as usual' while backing In the years after 1933. govern- Hitler and supporting the war. ment spending public works and armaments gave a powerful upward thrust to the economy. tion between the regime and the Profits rose, investment went banks-a co-operation which was ahead and unemployment fell. not always smooth, but in which, It would have been possible to after all. the bankers had the increase the scale of armaments output considerably either by increasing total production or civilian market had reached or by reducing the proportion of surpassed the boom levels of the total output going on civilian late 1920s and unemployment production. Neither of these were had fallen below 1 million. Profits done: the primary reason seems were more than double the 1933 to have been fear of inflation level and the giant firms which and the sound money policies dominated German industry had upheld by Dr Schacht, Minister expanded and modernized their of Economics until August 1937 and the President of the Reichs- reserve. The counterpart of this bank until January 1939. was an enormous increase in the LALA Although Schacht was even- national debt. The . state got poorer, private business got richer: so much for the new, non-capitalist structure!

The main weakness of the German economy from the point of view of war preparations and maintaining expansion was its dependence on the world Of course, they were not able market. Germany was short of crucial raw materials for industry, including iron ore, rubber, petroleum, non-ferrous metals and textile fibres. Recovery and reamament increased this The very limitations imposed on dependence.

Imports had to be paid for: hence 'export or die' became the watchword. The question was how to export in a world market still afflicted by depression?

Nazi foreign economic policy, Government expenditure had like its home policy, was designed to serve the interests of big First it ensured that German industry had command of its own home market by a policy of protective tarifis and quotas on imports.

Secondly, encouragement was The financing of the armament given by the state to exporters boom required close collabora- War II. with the main aim of increasing business profits.

Thirdly, the national territory was extended by conquest, enabling German firms to move in last word. and its critics in the General and take over the assets of their By 1937 production for the rivals.

Nazi trade policy methods fully recognized the predominance of private business interests. Foreign trade was conducted by private firms and banks. Policy was designed to make this trade as profitable as possible and to give German capital an advantage in world market competition. plants and put large sums to weakness.

Because of the addiction of German finance capital to 'sound' monetary policies, the mark not devalued. Instead there was rigorous exchange control intended to protect the mark and mate The best use of scarce foreign currency.

This meant that German trade was conducted to a large extent balance off imports and exports with individual countries and to advantage of German firms.

This was donA with great success in the Balkans.

Germany acquired vital raw materialc while her trading were obliged to take German products whether they this was a period of acute economic crisis, the alternative was not being able to sell their goods at all. By 1939 German economic domination of the Balkans had turned the countries in that area Into virtual colonies of finance capiespite the limited successes scored by Nazi Germany in the trade war, crucial weaknesses remained on the eve of World Dependence on imported raw materials had not diminished and war preparations had tended to increase it. The Nazi leadership Staff were agreed that Germany could not carry on a long war.

Hitler gambled on short, sharp and successful wars.

His opponents in the army believed that Germany would become involved in a major war in which the raw material deficiencies would prove a fatal CONTINUED TOMORROW