The Vampire Economy

PREFACE

THIS book may be helpful as an answer to these burning questions: Why did Hitler start another war? How did it become possible that the “Fuehrer” could lead millions of intelligent and cultured people, who hate senseless slaughter, into a war which must have devastating effects upon Germany as well as upon the whole of mankind?

We cannot be satisfied with the answer that Hitler is a madman and that the German people are fools and slaves willing to go to war to satisfy a madman’s dreams. Most people in Germany are like people in other countries, hard working and decent, with human qualities as good and as bad as those of other people throughout the world. But a system has been built up which has enabled one man to decide about war or peace; a system which held and still holds a whole nation in its iron grip and does not allow any individual German to escape the inherent fatalities of this regime.

The fatalism which was typical of the spirit of the German businessman before Europe was plunged into this war was not due to economic difficulties alone, but far more to a feeling that he had become part of a machine inexorably leading him to disaster. German businessmen once believed that the Fuehrer would lead them into a world of happiness and prosperity. They were willing to accept the first measures of regimentation as necessary but temporary emergency acts. They thought of the raids against the Jews and the sadistic brutalities of the Brownshirts as the excesses of “uncontrollable elements” which would soon disappear. These hopes had vanished before the start of the war. Those who hated bureaucracy and regimentation had been compelled to participate in the construction of a system which could end only in war and destruction. They had been made part of a monster-machine steered by a Fuehrer who was responsible to nobody.

This totalitarian Frankenstein could not exist peacefully. It could not transform armaments production into production of consumption goods, thus ending the war scare and creating another era of prosperity. Nor could it wait for the peaceful exploitation of new conquests which, as a matter of fact, were not sufficient to correct the shortage of basic raw materials. Any attempt to create a new era of peace would have precipitated a major crisis, economically and politically, for the totalitarian regime, and this would have meant the end of all far-reaching imperialist plans. Sacrifices and investments made in preparation for imperialist expansion and for world rule would have been in vain. The gradual decay of the totalitarian regime would have been inevitable had the Fuehrer chosen peace instead of war.

History is revengeful. Dictators are also dictated to by the necessities of their own regime. “The logic of the machine crushes the constructor and turns him into its slave,” says Emil Ludwig.

We do not know what Adolf Hitler thought about Germany’s capacity for waging totalitarian warfare when he decided to march into Poland and thus begin a new world war. It may be that he was convinced he would get another Munich without a large-scale war, or that he could conclude a “peace with honor,” i. e., with Poland as a Nazi protectorate, a few weeks after the outbreak of a war with the Western Powers. Yet he must have realized that this war might become a major conflict, lasting many months, perhaps even years. How long can the Nazi economy stand the strain of such a war?

During the last pre-war years tremendous economic preparations were made for this conflict. German Army experts had worked out two schemes, one in preparation for a short “Blitzkrieg” or “lightning war,” the second for a longer totalitarian war of attrition. The first plan was completed during the first Four-Year Plan. Then preparations for the longer totalitarian war were pushed through.

In accordance with these plans of the German General Staff, the Third Reich was getting ready for a two-year totalitarian war. But what such a war meant in practice depended on who was to be the enemy and who the ally. It is impossible to have on hand sufficient stocks of all essential materials needed for a totalitarian war of even a single year’s duration. According to all estimates, Nazi Germany’s fuel reserves during the Munich crisis would have been sufficient for a totalitarian war of not more than four months. But these same reserves might be quite sufficient if Rumanian and Russian oil is available in large quantities. Furthermore, the consumption of materials in a totalitarian war depends also on whether an aggressive or a defensive war is being contemplated. If, for instance, the war becomes purely defensive on all fronts and no large-scale offensives are carried out, consumption of war materials will be considerably less than in an offensive war, and the economic reserves of German militarism will last longer. But a defensive war cannot last forever and Germany’s economic reserves will be exhausted earlier than those of the Western Powers if the latter are able to import materials from overseas.

The whole aspect of Germany’s wartime economy seems to have changed as a result of the Stalin-Hitler pact. This pact assures the Third Reich that the Soviet Union will not stop exports to Germany even in wartime. Russian oil, manganese, foodstuffs and necessary materials will be available during the war, according to the terms of the Treaty signed on the eve of the war’s outbreak. This pact is helpful to Hitler in overcoming economic deficiencies and in enabling him to avoid an early collapse of the military machine. Yet the economic significance of this pact may be overestimated. Stalin and Hitler did not decide to pool their economic and military forces. They are unlikely to do that because they do not sufficiently trust each other. Stalin will, however, sell Russia’s products to the German militarists if he gets cash or other goods he needs in exchange. The size of this wartime trade will depend on the capacity of the Third Reich to pay for imports. Reserves of foreign currency or gold are negligible. Exports of German manufactured goods are restricted by the urgent demands of the army for arms and ammunition. The financial plight of the Third Reich makes it impossible to finance imports in unlimited quantities. Therefore, the pact with Stalin may enable Hitler to put up a more stubborn and longer fight, but will not necessarily solve his raw material difficulties.

Germany’s military strategists would have preferred a “lightning war.” For only a quick victory would be a real victory. A long-drawn out war, threatening economic collapse, would inevitably spell defeat whatever the military result. Hitler could not have expected a quick victory against the Western Powers when he decided to march into Poland, with Great Britain and France fully mobilized. The armaments race had put a much heavier strain upon the economy of the Third Reich than upon other countries. In no other industrial country were raw materials so scarce and the replacement of vital parts of the industrial machine so neglected as in Germany. The extent of the economic decay which preceded this war will be indicated in this book. True, the German War Economic Council has kept in store vast quantities of raw materials and other products essential for a wartime economy. But even if all storage possibilities were fully used, such preparations would have been sufficient at best only for a “lightning war” lasting no longer than a couple of months.

The deficiencies of a wartime economy are important and eventually decisive in a totalitarian war. Yet it is impossible to foretell when a military system will collapse as a result of a deficiency in foodstuffs, raw materials or other economic factors. As long as the state machine is in order, it has the power to cut down the consumption of the general public and to reduce—almost to eliminate—expenditures for the renewal of the industrial machine. The proportion of the national income or of industrial production spent for armaments is elastic. It is possible to increase production of arms and ammunition even with reduced supplies of raw materials. This can be done by drastically limiting production of consumption goods, by putting the population on starvation rations, and by letting vast sectors of the economy decay. How far this can be done is not merely an economic question, but also a question of morale and of the effectiveness of the totalitarian police forces. Therefore, especially in a totalitarian war, the factor of morale is as important as the supply of war materials.

This becomes clear as we examine the manifold experiences of businessmen under fascism as well as the peculiar developments of business practices in a totalitarian state.

We might and must assume that Hitler is well aware of the dangers to which he has exposed himself and his system by beginning this war. His economic and political experts will have carefully considered any conceivable crisis. They will have organized the State power in such a way that they may hope to keep it intact even during the most perilous times. They are prepared to crush all internal opposition even in the case of the severest wartime difficulties. They will suppress all but a few “friendly” private interests, compelling all other individuals to sacrifice everything for their monstrous system. The “conservative” forces—all those who still own private property and who are not closely related to the supreme Leadership—will be expropriated and their property rights will be wiped out. The businessman who is an isolated individual in the gigantic and reckless totalitarian state is the helpless prey of his fascist masters.

The totalitarian dictatorship will become more ruthless in its attitude toward businessmen as well as toward the workers and middle classes. The so-called radicals among the Party bureaucrats will claim that their program has been fulfilled after the expropriation of most private property holders, while simultaneously the ruin of the middle classes will be completed and the workers will be exploited on an unprecedented scale.

This development is not unwelcome to Nazi Party leaders. These leaders were extremely unpopular before the war broke out. Germans were beginning to place upon them the responsibility for the growth of a corrupt bureaucracy. The Party Leaders would have had to endure a “purge” had peace been preserved. They had reason to fear that during a peacetime depression the Fuehrer might, while renouncing his world imperialist dreams, throw them overboard to increase his own prestige. Instead of such a development, it is the turn of the Party Leaders and Nazi Storm Troopers to dictate. The author is reminded of a discussion, at the beginning of Mussolini’s Abyssinian campaign, with an Italian friend who held an important post in the fascist State despite his secret anti-fascist sympathies. The author asked: “Why is Mussolini so mad as to start this Abyssinian adventure when he must realize that his gains will never equal what he must spend for the conquest? From the military point of view the war in Abyssinia will weaken rather than strengthen him.” “The so-called radicals in the fascist Party bureaucracy,” the Italian friend replied, “are jubilant about this war. They expect the economic difficulties in wartime to strengthen their authoritarian control of the so-called conservative forces. These will be weakened by further measures of expropriation. Those who still have privileges and property rights will live in fear that they may lose everything and that they will perish too if the dictatorship should break down.”

Similarly, Nazi leaders in Germany do not fear possible national economic ruin in wartime. They feel that, whatever happens, they will remain on top, that the worse matters become, the more dependent on them will be the propertied classes. And if the worst comes to the worst, they are prepared to sacrifice all other interests to maintain their hold on the State. If they themselves must go, they are ready to pull the temple down with them.

G. R.

New York,

September 8, 1939.