Otto Nathan

English

Research Papers in Economics

This PDF is a selection from an out-of-print volume from the National
Bureau of Economic Research
Volume Title: Nazi War Finance and Banking
Volume Author/Editor: Otto Nathan
Volume Publisher: NBER
Volume ISBN: 0-87014-335-2
Volume URL: http://www.nber.org/books/nath44-1
Publication Date: April 1944
Chapter Title: The Scope of the German War Effort
Chapter Author: Otto Nathan
Chapter URL: http://www.nber.org/chapters/c9475
Chapter pages in book: (p. 1 - 2)I
Nazi War Finance and Banking
THE SCOPE OF THE GERMAN WAR EFFORT
Germany's mobilization for war started in On the day of Ger-
many's invasion of Poland, Hitler boasted that from 1933 to 1939,
the Nazi government had spent 90 billion reichsmarks in preparing
for war. The magnitude of this peacetime expenditure for war pur-
poses becomes clear when it is realizedthat in 1932, the last pre-
Nazi year, the total national income in Germany amounted to about
4 billionreichsinarks, and in 1938, the last year before the outbreak
of war, it had risen to about 8o billion reichsmarks. Hence, allthe
income of the entire German people in 1938 - with practicallyfull
employment and long hours in some industries - would nothave
sufficed to produce the material that went into German prewarmili-
tary preparations. Moreover, all the menand women who were em-
ployed in Germany in 1932 would have had to work about twofull
years to satisfy the requirementsof the German war machine built
up in times of peace. Althoughthis outlay for military purposes was
very large and absorbed anincreasing share of the total national
product, it was relatively small compared to Germany's military ex-
penditure after the actual start of hostilitiesFor the calendar year
1941, German war cost is estimated at over8o billion reichsmarks1 -
more than three times as much as in thefiscal year 1938 (April 1938
to March iand about equal to the entire national income in the
last prewar year. The tremendous increase in war expenditurewould
obviously not have been possible without exploitation of the man-
power and resources of many other Europeancountries. Germany
alone could not possibly have increased war production to alevel
equivalent to the whole national income of the last prewar year, a
year in which there was virtually fullemployment.2
1 Wochenbericht des Deutschen Instituis für Wirtschaftsforschung (1942) p. 59.
2 The comparison between war expenditure and national income is notintended
to assess the significance of Nazi war expenditure forthe German economy, but is
merely meant to emphasize the magnitudes involved. For this puspose,it did not seem
necessary to analyze the underlying concept of'national income" or to adjust the
figures for reported price changes which, however, were not veryconsiderable in the
years under review.
1*
In preparing for war, Germany proceeded methodically andsys.
tematically. Nothing was left to accident or haphazard experimen-
tation. The Nazi leaders had realized even before taking office that
their militant objectives, which might ultimately lead towar, could
not be accomplished within the framework of traditional capitalism
and political democracy. They were determinedto make any change
that was considered necessary to the attainment of their militaryde-
signs. By the time hostilities actually began in1939,a novel eco-
nomic system had been erected which constituteda coordinated or-
ganism of government planning, integratingevery aspect of German
life within the framework ofa skillfully developed military economy.
In two important respects, therefore, thewar effort in Germany dif-
fers from that in the United States and GreatBritain: the war econ-
omy was fully developed in time of peace, and itwas evolved within
the structure of a plannedeconomy. An analysis of the financial
aspects of the German war effort hencemust start with 1933 and
must be based upon a critical description of theNazi economic system
and particularly of its financial institutions.After a brief discussion
of the organization of theeconomy as it evolved during the years of
Nazi rule, we shall analyze thestructural changes in the banking
system and the methods used by the Germangovernment in raising
the funds needed for its hugewar expenditure.
At the end of the studya more detailed statistical survey of the
financial implications of theGerman war effort will bepresented.
We shall then emphasize theinadequacy of the statistical material
and the unreliability of availableNazi information. Our studyhas
been made within limitationsimposed by the necessity ofworking
from outside thecountry, without opportunity forpersonal obser-
vation, and withoutaccess to the detailed informationavailable to
those functioning in the Nazibureaucracy itself. Hence it isquite
possible that the total expenditureof Germany for thewar was larger or smaller in theyears mentioned than the figuresgiven above. But that is ofno great significance ina study of this kind.
What matters is not whetherGermany spenta few billion more
or less during a certain period, but the financialtechniques, methods, and devices thatwere applied in raising and spendingthese funds.
2

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