Review: The Wages of Destruction: The Making and Breaking of the Nazi Economy, by Adam Tooze

New York, Penguin, 2006, pp. 799.

I remember that reading Paul Kennedy's The Rise and Fall of Great Powers back in college I pored over the figures for Germany's World War II-era income and production and felt that something didn't quite fit. German arms output seemed a good deal less impression than I expected given the country's image as an ultra-efficient manufacturing colossus, and the fact of its control over nearly the whole of the European continent.

The common explanation for this was political--that an irrational Nazi regime, for various reasons (its slowness to move to a total war footing out of fear of a repeat of the Revolution of 1918, a self-defeating brutality in its exploitation of occupied territories, Hitler's self-interestedly playing various interests off against each other at the expense of the war effort, etc.) failed to properly utilize its potentially overwhelming industrial capacity (at least, prior to the arrival of Albert Speer, who came along too late to accomplish very much).

By and large, I accepted this explanation.

More recently Adam Tooze's Wolfson prize winning study The Wages of Destruction: The Making and Breaking of the Nazi Economy offered a different view--that the question was not a matter of political failure of this type, but the material limitations of the German economic base. Germany was simply not big enough or rich enough to hold its own against an alliance of the United States, the British Empire and the Soviet Union--the coalescence of which Tooze contends was virtually inevitable, so that Hitler's attempt to create a continental empire in the east in the face of their opposition was simply not explicable in any rational terms. (Indeed, he holds it to be comprehensible only in terms of Hitler's bizarre, conspiratorial, apocalyptic racial theories.)

To the end of making that case Tooze devotes his book to a study of the German economy through the crucial period (1933-1945), less on the basis of new data than old and well-known data (more or less like what I saw reading Kennedy) that has simply been marginalized in a great deal of analysis of the war. As he notes Germany was the world's second-largest industrial power in the early twentieth century, well ahead of its European neighbors in manufacturing productivity and output, and "world-class" in several key heavy industrial and high-tech lines like steel, chemicals, machine tools and electrical equipment.

However, German manufacturing appears less impressive when one looks at the sector overall. While Germany still excelled its European neighbors in productivity when taken this way, its lead was slighter than might be imagined, so much so that the difference between Germany, and for example, Britain, was negligible in comparison with the difference between Germany and the much more efficient (because much more "Fordist") United States (America getting twice as much per-worker output in many lines). There were even key heavy/high-tech lines where Germany remained a relatively small producer--like motor vehicles, the volume of output of Germany's automotive industry far behind that of the U.S..

Moreover, manufacturing was just one sector of the economy--with the other sectors even worse off. The country's comparably small, densely populated and less than resource-rich territory was problematic from the standpoint of its extractive sectors, which were also less productive than they might have been. The country's agricultural sector, notably, lagged not just the U.S. but even Britain in productivity, suffering from having too many of its workers on too little land divided into too many farms. All of this contributed not only to the country's per capita and national income being less than its manufacturing successes implied, but the harsh reality that those manufacturing successes depended heavily on imports of food, energy and raw materials, to the point that the country's trade was scarcely balanced by its manufacturing exports.

The result was that not only was Germany poorer than is usually appreciated, but its resource-financial situation differing from that of the U.S. (resource-rich) or Britain (resource-poor but financially powerful, with the trading privileges empire brings) in this manner left it with less room than they to export less or import more, as a major military build-up demanded. Moreover, the attempts to alleviate this constraint by developing domestic sources of imported materials like iron, and inventing synthetic substitutes for the oil and rubber Germany could not produce locally, on top of entailing additional inefficiencies, fell far short of eliminating the problem, leaving it very vulnerable to the cut-off of essential imports, and something have to give, fairly quickly.

This reading of the history is borne out by what actually did happen, the German government actually making ruthlessly efficient use of its domestic resources almost immediately on taking power--the facts about this refuting such clichés of the historiography as the unwillingness of the German government to sacrifice its people's living standards or put women to work for the sake of its military effort. (Indeed, already in the '30s the German government's system of central control of foreign exchange and key materials was gutting the production of consumer items like clothing in favor of armaments, while Germany had more of its women in the work force than Britain did.) However, for all that, Germany's merely pre-war preparations--its drive for maximum short-term output in the key military-industrial lines--translated to severe, unsustainable economic strain before the fighting even began, in such ways as the neglect of key infrastructure like the railroads, the price distortions caused by intricate central control, and the emergence of crises of cash flow and foreign exchange in spite of all the managerial feats and painful sacrifices. The inescapable recognition that the German economy by 1938 was a house of cards forced the government to curtail its rearmament programs at a point at which it was still nowhere near to being a match for Britain at sea, and disadvantaged in the face of combined Anglo-French air and ground forces in key respects (like numbers of up-to-date tanks), with the balance already swinging away from it to its opponents.1 And then even the cutbacks still left it in an economically precarious position.

Of course, the fighting did begin in 1939, and Germany did make successful conquests during the first year that did enlarge its resource base. However, in hindsight the conquests added less than might be imagined because of the limited size, resource bases and development of the countries it overran, not just the nations of Eastern Europe, but in Western Europe (Norway and Denmark, the Low Countries, and even France) as well.2 The result was that even the conquests fell far short of putting Germany on an even footing with the combined Big Three, the disparity still so wide as to moot many of the claims about how this or that more careful use of Axis resources by the Nazi leadership might have turned the tide of the war.3 Tooze reinforces this contention by showing that, for the most part, as demonstrated by how, as he shows, the Germans generally did what could be done with what was at their disposal (puncturing the "myth" of Albert Speer).4

A few questionable analogies apart (as when Tooze compares Germany's economic development in the 1930s to that of mid-income countries like South Africa today) Tooze offers a comprehensive and convincing image of the German economy, and especially its critical weaknesses. Moreover, while he pays less detailed attention to the other side of the balance sheet (it seemed to me that he was insufficiently attentive not just to France's demographic and industrial vulnerabilities but to Britain's financial and industrial weaknesses and problems of military overstretch in the late '30s), he is quite correct to contend that Germany, and even a Germany in control of much of continental Europe, was at a grave disadvantage in a prolonged war with a U.S.-U.K.-Soviet alliance.

Nonetheless, this emphasis on the inability of Germany to hold its own against the combined Allied Big Three obscures a weakness much more important than the deficiencies of the economic analysis--namely his depiction of the anti-Nazi alliance's coming together the way it did as a virtual certainty, his case for which is superficial and conventional compared with his economic analysis.5 He slights the leeriness of the U.K. and France about allying themselves with the Soviet Union that actually did prevent their coming together in 1939, with disastrous consequences. (Even after Poland, French conservatives were much more interested in fighting the Soviets than fighting Hitler. Indeed, the response of many of them to French defeat appears to have been a George Costanza-like "restrained jubilation" at the prospect of dispensing with democracy and setting up a fascist state in William Shirer's account of the Third Republic's collapse.)

Continuing along these lines, Tooze then goes on to slight the reality that, after the shock of the Battle of France (which brought Italy into the war on Germany's side), the hard-pressed, cash-strapped U.K. might have sought a negotiated peace, or that isolationism might have won the day in the United States, depriving Britain of American support. (In its absence the country would have had to settle with Germany--and the U.S. would have had few plausible options against Germany afterward, in spite of Germany's failures in the Battle of Britain and its naval limitations.) These developments would not have changed Germany's asset base--but they would have taken Britain out of the war, and likely kept Germany from having to fight the United States as well, leaving it to focus on just the Soviet Union, which would have changed the balance between them dramatically. Equally Tooze does not acknowledge, let alone refute, the possibility that in spite of the balance of power being so heavily against it as it was different German military decisions (most obviously "the Mediterranean strategy") could have produced a different outcome.

Additionally, these oft-studied "What ifs" aside, it is worth remembering the way the war did go. After Britain decided to stick it out against Germany, American support was exceedingly slow in coming, Britain bankrupt in March 1941 before the aid spigot was turned on fully. Moreover, even with Britain still against it, even after a delay by one crucial month due to the German invasion of the Balkans, mid-course changes to the plan of attack that cost additional time, and famously inimical weather, German troops managed to come within sight of Moscow before the invasion's first really significant repulse. And even afterward a depleted Soviet Union remained vulnerable (while any Anglo-American "second front" remained a long way off), permitting Germany to continue taking the offensive through the year, up to and even after the turning point of Stalingrad--following which it was another two-and-a-half more years of fighting before V-E Day.

One should also remember the cost of this protracted effort. The Soviet Union lost some twenty-five million lives. Britain lost what remained of the foundations of its status as a world empire, a great power, and even an independent force in world affairs (in such a weak position that it had to take a $4 billion U.S. loan immediately after the war). The U.S. did not suffer anything comparable, but it is worth remembering that its extraordinary industrial effort went far beyond what even the optimists thought possible at the time--and was a thing the Allies could not have taken for granted in the earlier part of the war, even after the American entry.

Consequently, while in hindsight it appears clear that Germany's chances for attaining anything resembling its maximum war aims were never more than low (indeed, would probably be deemed delusional but for the astonishing Allied timidity and incompetence in the key September 1939-May 1940 period), the attainment of those aims became increasingly implausible again after the failures of German forces against the Soviet Union in late 1941, and virtually inconceivable after 1942 came to a close, a victory so long, horrifically costly and deeply exhausting cannot be regarded with the complacency Tooze shows. Indeed, in his failure to critically examine this side of the issue, it appears that while Tooze takes on, and debunks, one myth of World War II (of German economic might), he promotes others that have themselves already been debunked--most importantly, that of the political establishments of the future members of the wartime United Nations having been steadfast opponents of Nazism from the very beginning.6

1. The initial plans had called for an air force of 21,000 planes when Germany went to war. The Luftwaffe never had more than 5,000, however.
2. Paul Bairoch's oft-cited 1982 data set on world manufacturing output through history gives Germany 13 percent of world industrial capacity. All the rest of non-Soviet, continental Europe together was another 13 percent, widely dispersed among its various nations, not all of which Germany controlled (Sweden and Switzerland remained independent), while the productivity of Germany and occupied Europe was hampered by the cut-off from imported inputs by the Allies' control of the oceans. By contrast, Bairoch's data gives the U.S. alone 31 percent of world manufacturing output in 1938 (more than all non-Soviet Europe combined).
3. To return to Bairoch's figures, the U.S. in coalition with the U.K. (another 11 percent) and the Soviet Union (another 9 percent) possessed 51 percent of world manufacturing capacity--a 4-to-1 advantage over Germany, and a 2-to-1 advantage over all of non-Soviet, continental Europe combined (independent states that merely traded with Germany included). Moreover, even these figures understate the margin of Allied advantage, given how the U.S. economy boomed during the war years (its economy growing about three-quarters), and Britain brought its broader Empire with its additional resources into the alliance. Considering the access to the food, energy and raw materials needed to keep all that capacity humming would seem likely to widen the disparity rather than diminish it.
In fairness, this was somewhat offset by two factors: German conquest of much of the western Soviet Union, and the absorption of a portion of Allied resources by the simultaneous war in the Asia-Pacific region. However, much of the Soviet industrial base in the conquered parts was hurriedly relocated eastward ahead of their advance, and contributed to the Soviet productive effort (and more still denied the Germans). At the same time the diversion of Allied resources by the Pacific War was limited by Japan's more modest military-industrial capability (it had just 5 percent of world manufacturing in 1938), China's weight on the Allied side (much of the Japanese army and air force tied up fighting against the Chinese), and the Allies' prioritization of the war in Europe (the "Europe First" or "Germany First" policy).
4. Tooze contends that the rise of German output in the last part of the war was largely the result of decisions taken earlier in it, and Speer simply around when those decisions paid off in the form of production gains. Tooze also offers a critical view of those initiatives Speer did undertake, like the effort to mass-produce U-boats late in the war.
5. While the critique of German strategy is solid, Tooze treats Allied strategy much less critically--a particular weakness when it comes to his assessment of the Combined Bomber Offensive.
6. The body of work regarding Britain in this respect can be found distilled in Clive Ponting's impressive 1940: Myth and Reality.