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The New International, August 1940


D.L. Robbins

Nature of German Economy


From New International, Vol. VI No. 7, August 1940, pp. 140–143.
Transcribed and Marked up by Damon Maxwell for ETOL.


Stating the Question

THE Nazi juggernaut has rolled up a series of impressive victories in the past seven years. It revived a moribund economy, and whipped it into shape for a new bid for world hegemony. It conquered the most powerful, most hopeful labor movement in the post-war capitalist world. In foreign spheres it grabbed markets and areas of influence out from under the noses of the bourgeois democracies. It took the Saar by plebescite, Austria and Memel by annexation, Czechoslovakia by agreement, and Poland, Denmark, Norway, Holland, Belgium and France without too much effort.

The “success” of the German National Socialist Labor Party (its name an epitome of semantic obfuscation) has generated a welter of ideological confusion over the nature of the German state, clamours for a revision and restatement of the Marxist position on Fascism, and a bewildering (and somewhat colorful) array of original theoretical deductions. Such confusion is quite natural, for nothing is so formidable as success or a simulacrum of it. And nothing is quite so conducive to theoretical revision as the appearance of military might.

The new interest in Fascism will be salutary if it promotes clarification of established Marxist doctrine, or shows substantial reason for its revision or dismissal. Unfortunately such discussion is rather belated, for the basic analysis of Fascism was supposed to have been made almost a decade ago.

Germany’s Economic Potential

In analyzing German Fascism it must be noted immediately that Germany is the second greatest capitalist nation in the world. In industrial plant, technology, labor force and general economic potential (with the notable exception of empire, of course), it surpasses France, the British Isles and all but the United States. Operating in any kind of milieu except the stifling atmosphere of Versailles, it might have moved quickly to the front ranks of world capitalism. It was the Fascist mission, as Hitler has said in one of his rare accurate pronouncements, to remove the yoke imposed after 1918, and, further, to complete the unification of the German state which Bismarck had begun.

Germany’s late appearance in the world arena imposed special requirements upon the economy. It could not afford to spend centuries, as Britain did, or generations, in the case of France, developing an industrial plant with imperial ramifications. Nor could it afford the luxury of laissez-faire and free, international trade. Ten years after the German empire was formally established, the first modern cartel in the world was organized. In 1880 the Bavarian pottery industry organized for what the Classicists tearfully call the restraint of trade. The cartel, as a manifestation of monopoly capitalism, has been legal in Germany for the past 50 years. [1] In order to compete on the world market, industry was assisted directly by the state. Its rapid development to a major power is proof of the efficacy of centralization.

Scheidemann to Hitler

Despite the Draconian restrictions imposed by the peace treaty following the first World War, Germany made substantial gains. The 1923 inflation repudiated the huge internal indebtedness, and cleared the course for development on a new level: that of subordination to the Allies. The inflation brought terrible privation to the working class and disaster to the middle class, but it was a windfall to the industrialists who found themselves with huge sums to rebuild their plants. Virtually all major sectors of the industrial plant were rationalized, the process financed with worthless marks. Although the enormous output of these new factories did not find a ready market, it was prevented from drying up by the payment of reparations in kind and by the subsidizing of foreign trade with the high profits from domestic commerce.

Throughout the post-war era the state intervened further in the economic process, and promoted industrial centralization. Some 2500 cartels controlled prices, markets, production and throttled what was left of competition. At the beginning of 1933 there was one railroad system (owned by the state), one telephone and telegraph system, one chemical company which dominated the industry. One cartel controlled the entire output of potash, another controlled all coal and lignite production. There were only two steel companies and two oceanic shipping companies. The Federation of German Machine Builders dominated nine-tenths of the machine industry. And the National Federation of German Industry supervised the entire capitalist process.

Germany could not permit the relatively automatic forces at work in a free economy to strike an equilibrium. They were too slow, too cumbersome, too inefficient to restore stability. And the stability thus restored would have reduced it to the status of a Balkan country. It should be remembered that monopoly capitalism reached its highest bourgeois-democratic form under the Social Democracy. The very instruments of control devised by the Second International, ostensibly as catalysts in the transformation of capitalism into socialism, strengthened the economy and prepared it for Fascism and further regimentation. Hitler dotted the i’s and crossed the t’s.

Totalitarian Economics

To say that Fascism did not render any basic change in the economic structure is almost a truism – almost, because this view is now challenged. It intensified the controls placed over the economy by previous regimes. It presented nothing new, nothing radical, certainly nothing to challenge capitalism, in its economic program. Its innovations were in the political sphere, (these had economic stimuli, of course, as all things do.) Fascism postponed the political collapse of the German state with its consequent economic disintegration by destroying the remaining democratic rights and instituting a new proletarian slavery. This power to enslave is the most potent aspect of the Nazi program. It has had far-reaching economic effects in stimulating German capitalism. This power, combined with the centralization of the economic process, has established German superiority over Britain and France.

It has not, however, altered the nature of capitalism. The basic contradictions within the system are not resolved by reverting to a kind of finance-barbarism. German capitalism is still plagued with the falling rate of profit, with an expanding economy driven to seek hegemony in a world market that is contracting, with the objective socialization of the means of production clashing with private (or state) property relations. The frenzied efforts of Schacht and his economic specialists can no more remove the curse than can the incantations of a Hopi witch doctor change meteorological conditions.

The most significant trend in Nazi Germany is the inexorable force of collectivization. That it takes perverted forms in regimentation does not diminish its reality. This tendency recurs again and again in all branches of industry.

“Blood and Soil” Agriculture

Agriculture, which possessed the least specific weight, was the first point of concentration. This paradox found its rationalization in the necessity for attaining a measure of self-sufficiency in foodstuffs, for seeking to extract whatever raw materials that could be produced, and, finally, in the necessity for pampering the farmers whose political atavism was the state’s great forte.

The first four year plan invigorated agriculture which had never completely recovered from the effects of the first World War. The interest on farm indebtedness was reduced one-third. Through high tariffs on agricultural commodities, farm prices were pegged far above world prices. Scientific agriculture was introduced on a more extensive scale than before with the state subsidizing the process. Marshlands and moors were reclaimed. But this rationalization of farm production flew in the face of extant property relations, since 53 per cent of all arable land was in parcels of 50 acres or less, mechanized farming was economically impossible. Therefore, the state forced a kind of collectivization of land to make large scale, scientific cultivation feasible. The direction of this collectivization was not towards the Kolkhoz of early Soviet Russia, but back to the medieval commune.

Concomitant with this, the German word for farmer (Landmann) was prohibited as a “Jewish, liberalistic” term, and in its place was substituted peasant (Bauer). (Those who find social significance in semantics can have a field day going over the Fascist revisions of the German language.) The “blood and soil” ideology evolved through assigning farms in perpetuity to certain Bauern of undisputed Aryan ancestry. At the end of the first four year plan, about 35 per cent of the farms were held in this manner. Although it is not known what became of this property, it can be fairly safely assumed that the exigencies of economics and war forced its collectivization.

Indicative of the contradictions at the end of the program to rehabilitate agriculture were two facts: all land reclaimed for tillage was more than balanced by the withdrawal of naturally arable land for airdromes, military reservations and roads, and the thousands of workers who were driven on to the land were driven back to the city when heavy industry began to boom under the second four year plan.

The Second Four Year Plan

In 1937, the emphasis was shifted to heavy industry, which financed Hitler’s struggle for power. The state began to pay its debt to the capital goods industrialists – and not on the depreciated terms it offered the farmers. The major objectives of the second plan were an increase in the production of raw materials and munitions, and a heavy increase in the production of goods tor export. Simultaneously the exploitation of labor was intensified in an effort to overcome the falling rate of profit.

From the spring of 1933 to the summer of 1939, more than 90 billion marks were spent on armament. In addition to girding the nation for war and a “permanent” escape from its dilemma, this expenditure tended to minimize the antagonism between production and consumption which gives rise to recurrent cyclical movements. Because employment always lags behind production and wages behind prices, “overproduction” arises, followed by a contraction of economic activity, unemployment, falling prices and a deflationary process continuing until a new equilibrium has been struck. This is the general tendency under unfettered capitalism, and it is especially acute if the consumers goods industries are particularly important. The workers in this branch of industry can never absorb their product. Labor in the capital goods industries spends its wages on the commodities produced by the former. But as soon as the means of production turn out more commodities than either group can purchase or that can be exported, there arises the anomaly of overproduction in an undersupplied world.

Armaments production, however, circumvents this problem, because it creates purchasing power without also creating goods to be purchased. (It is historically significant that the greatest periods of capitalist expansion were coeval with periods of heavy armaments expenditure, which had an important ancillary, if not fundamental, effect on sustaining the capitalist process.) The minor difficulty in such a business is paying the bill for the war goods.

Here the power of the state to exploit was wielded. Not only was the rate of surplus value increased, but consumption was deliberately reduced by stifling the consumers’ goods industries through price control, and ultimately by rationing. Not only this, but the nation was literally impressed into barracks, as will be shown later.

In 1939, capital goods production increased 43 per cent over that in 1928, a relatively prosperous year. This includes, of course, armaments. Consumers’ goods production fell 33 per cent. The latest figures, issued since the war began, indicate that these figures have approximately doubled.

To recapitulate, heavy industry thoroughly dominates the economy. And heavy industry is dominated by a small caste of finance capitalists centering around the Krupp corporation. Their dominance is implemented by the plethora of controls imposed on production by the state. This centralization reduces the avoidable waste involved in capitalist production, and enhances efficiency and productivity. It is a perverted manifestation of the Marxist maxim that competition, including imperfect competition, is inherently wasteful. In this process of centralization, the state plays a major role, if only before the curtain. Naturally a new force is set into motion – the Nazi bureaucracy. Its expense, as executive committee for the ruling class, is enormous, but it is questionable whether it is any more expensive than the pre-Fascist rulers. Under the multi-party system, bribery, corruption, etc, was dispersed over a number of forces. Under Fascism, it is much more efficient.

Autarchy and Ersatz

In the evolution of the Fascist economic program, certain expedients were developed which gained notoriety far out of proportion to their importance. Perhaps the most notorious of these is autarchy, which has been considered something new. It is, in reality, a modern adaptation of Mercantilism without the latter’s historical importance. Autarchy, or self-sufficiency, purported to make the German economy independent of the world market. Such a claim should be recognized at once as absurd. Anything which purports to make a capitalist nation independent of imperialism is either a miracle, a lie, or a highly temporary expedient. Autarchy is the last. With German resources depleted and war in the offing, it was necessary to exhaust all domestic production possibilities for rearming the nation. This has been done. It should be noted, also, that while autarchy was being practiced, there was a furious struggle to recapture foreign trade by various other expedients, such as barter.

Part of the program of self-sufficiency included the development of substitutes, or ersatz. Factories were built at enormous cost to utilize indigenous raw materials. The net result of this has been to increase costs tremendously to obtain goods that are so inferior that their production is stopped as soon as they can be imported. It is significant that the most intense drives tor raw materials were made for those which ersatz had ostensibly replaced. And it is in this area that the state has come into sharpest conflict with the industrialists. When the steel trust balked at transforming their plants to utilize native, low grade, iron ore, the Hermann Göring Werke were built. This was a typical example of the politicians showing more perspicacity than the businessmen – for the latter’s own good.

Germany in the War

The spectacular successes of the German army in the second World War are partly attributable to its high economic potential, which exceeds that of Britain and France. With the accession of territory this potential has been enhanced. The national income of the new Reich is larger than that of the British Isles (not the empire, of course).

It now produces 22.4 per cent of world pig-iron production, more than any other nation. Steel ingot production in the old Reich was 23,240,000 tons; now it is 30,950,000 tons. It produces 30 per cent of the total world output of aluminum. Machinery production has increased from RM 4,500 million in 1937 to RM 6,750 million. In the new territories it has gained a wealth of raw materials and manufactures. For the impressionable, these figures should mean more than the terrifying accounts of military successes.

However, the other side of the medal is not so bright. There is an acute shortage of consumers’ goods, which the acquisition of new territory only aggravates. During the past Winter the most serious deficiencies were in coal and fats, both edible and industrial; this was made worse by the severe cold. As a result of dissatisfaction, the state was forced to postpone the imposition of new taxes.

Foodstuffs are perennially scarce – before the war because of high prices and now because of high prices and rationing. About 80 per cent of the food of the average workingman’s family is rationed. The population shifts due to industrial concentration and evacuation have increased the housing problem. (Despite this, there were 128,000 unemployed building trades workers last winter.)

Although prices are rigorously controlled and have increased negligibly since the outbreak of war, there are certain inflationary trends discernible which may sweep past the artificial barrier. Note circulation has increased steadily since last September. From January to March, 1940, it increased from RM 11,505 million to RM 12,176 million. The bill portfolio of the Reichsbank increased from RM 11,142 million to RM 12,242 million in the same period. The national debt now stands at RM 45,876,300,000, an increase of RM 18,520,900,000 over last year.

How does the Fascist power maintain itself in the face of these antagonistic economical forces?

The answer is that it does not, and cannot seek economic solutions to its problems. Such measures as it has taken, as important as they are, are highly delimited. The most important of these is an intensification of the exploitation of labor, a process which tends to slow down the precipitate decline of capitalism and which also makes possible the huge war expenditures. Before the war the average annual wage of the industrial worker was the equivalent of $800. (For the peasant it was $300, exclusive presumably of food consumed on the farm.) Upon this was imposed a cost of living virtually as high as that in the United States. Since the war, real wages have fallen, because the work-week has been lengthened, because the cost of living has increased somewhat, and because money wages have been reduced indirectly by heavier taxation, forced loans and contributions.

However, the worker whose earnings place him in the above category is relatively “fortunate”. According to Commerce Reports, millions of German workers have been conscripted, placed under martial law, live in barracks, receive army food and clothing rations. They work 60 and 70 hours weekly, for which they receive soldiers’ pay, a few pfennigs daily.

Here is exploitation with a vengeance! The exact proportion of the labor force working under such conditions is not known, but it is safe to say that it is increasing.

The Fascist state has, at the moment, the police power to enforce such slavery. And it is the envy of the bourgeois world. No wonder the French bourgeoisie place the blame for their military defeat on the working class. No wonder Britain is moving toward that goal. No wonder the resurgence of anti-labor forces in the United States, parading under the banner of “preparedness.”

The Fascist power in Germany does not seek an economic solution to its dilemma. It strives to stifle its explosive potentialities with an all-pervasive political dictatorship. The base of this dictatorship is constantly shrinking. Witness the progressively greater reliance on police measures as exemplified by Himmler’s inner guard, as compared to the previous reliance on the S.A. and S.S. mass. Thus, even the political strength of German Fascism is declining.



1. Compare this to the anachronistic demagogy of Thurman Arnold, who announces, while the temple is crumbling, that he is going to solve the crisis in capitalism by abolishing the monopolies, i.e., by abolishing capitalism.

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