Adolf Hitler's Economic Protectionist Policies Helped Fuel the Second World War
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We need to understand Hitler's failed economic policies
In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that "Hitler found a cure against unemployment before Keynes was finished explaining it."
What were those economic policies? He suspended the gold standard, embarked on huge public-works programs like autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national healthcare and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime's rejection of the market economy and its embrace of socialism in one country.Such programs remain widely praised today, even given their failures. They are features of every "capitalist" democracy. Keynes himself admired the Nazi economic program, writing in the foreword to the German edition to the General Theory: "[T]he theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire."Keynes's comment, which may shock many, did not come out of the blue. Hitler's economists rejected laissez-faire, and admired Keynes, even foreshadowing him in many ways. Similarly, the Keynesians admired Hitler (see George Garvy, "Keynes and the Economic Activists of Pre-Hitler Germany," The Journal of Political Economy, Volume 83, Issue 2, April 1975, pp. 391–405).Even as late as 1962, in a report written for President Kennedy, Paul Samuelson had implicit praise for Hitler: "History reminds us that even in the worst days of the great depression there was never a shortage of experts to warn against all curative public actions.… Had this counsel prevailed here, as it did in the pre-Hitler Germany, the existence of our form of government could be at stake. No modern government will make that mistake again."On one level, this is not surprising. Hitler instituted a New Deal for Germany, different from FDR and Mussolini only in the details. And it worked only on paper in the sense that the GDP figures from the era reflect a growth path. Unemployment stayed low because Hitler, though he intervened in labor markets, never attempted to boost wages beyond their market level. But underneath it all, grave distortions were taking place, just as they occur in any non-market economy. They may boost GDP in the short run (see how government spending boosted the US Q2 2003 growth rate from 0.7 to 2.4 percent), but they do not work in the long run."To write of Hitler without the context of the millions of innocents brutally murdered and the tens of millions who died fighting against him is an insult to all of their memories," wrote the ADL in protest of the analysis published by the Glenview State Bank. Indeed it is.But being cavalier about the moral implications of economic policies is the stock-in-trade of the profession. When economists call for boosting "aggregate demand," they do not spell out what this really means. It means forcibly overriding the voluntary decisions of consumers and savers, violating their property rights and their freedom of association in order to realize the national government's economic ambitions. Even if such programs worked in some technical economic sense, they should be rejected on grounds that they are incompatible with liberty.So it is with protectionism. It was the major ambition of Hitler's economic program to expand the borders of Germany to make autarky viable, which meant building huge protectionist barriers to imports. The goal was to make Germany a self-sufficient producer so that it did not have to risk foreign influence and would not have the fate of its economy bound up with the goings-on in other countries. It was a classic case of economically counterproductive xenophobia.And yet even in the United States today, protectionist policies are making a tragic comeback. Under the Bush administration alone, a huge range of products from lumber to microchips are being protected from low-priced foreign competition. These policies are being combined with attempts to stimulate supply and demand through large-scale military expenditure, foreign-policy adventurism, welfare, deficits, and the promotion of nationalist fervor. Such policies can create the illusion of growing prosperity, but the reality is that they divert scarce resources away from productive employment.
It's not enough to talk about the Jewish Holocaust. It's not enough to talk about Hitler as that small but terrible evil mastermind. Hitler's economic policies are also worth talking about. I decided to do some readings on Hitler himself. Hitler was known to have his anti-capitalist streak as he often hated the Jewish businessmen. I heard he was jealous of the Jews for simply being "better than him". Hitler was a man consumed by bitter jealousy until it defined him throughout his reign. Nazi Germany's oppressive regime was also characterized by bad economic decisions. Just reading the article on Hitler's economics makes my skin crawl. It makes me think of how financially disastrous Hitler's decisions are from shutting down Jewish businesses to murdering Jews, and wasting ammunition on his insane dreams of conquest while Germany starved.
Economic protectionism and the Second World War
Did you know economic protectionism was also a root cause of the Second World War? Sure, it's very easy to Hitler this and Hitler that. Hitler is no doubt a very wicked man. Meanwhile, the Investopedia also talks about the economic conditions that led to the Second World War:
Deterioration of International Trade
The onset of the Great Depression would serve to undermine any attempts at creating a more open, cooperative and peaceful post-war world. The American stock market crash in 1929 caused not just a cessation of loans provided to Germany under the Dawes Plan, but a complete recall of previous loans. The tightening of money and credit eventually led to the collapse of Austria’s largest bank in 1931, the Kreditanstalt, which kicked off a wave of bank failures throughout Central Europe, including the complete disintegration of Germany’s banking system.
Deteriorating economic conditions in Germany helped the Nazi party grow from being a relatively small fringe group to being the nation’s largest political party. Nazi propaganda that put blame on the Treaty of Versailles for much of Germany’s economic hardships fueled Hitler’s rise in popularity with voters, who would make him German chancellor in 1933.
More globally, the Great Depression would have the effect of motivating individual nations to adopt more beggar-thy-neighbor trade policies in order to protect domestic industries from foreign competition. While such trade policies can be beneficial on an individual level, if every country turns to protectionism it serves to reduce international trade and the economic benefits that come with it. Indeed, countries without access to important raw materials will be especially burdened by the lack of free trade.
From Imperialism to World War
While the British, French, Soviets, and Americans had large colonial empires to which they could turn turn for access to much needed raw materials, countries such as Germany, Italy and Japan did not. The deterioration of international trade led to the formation of more regional trade blocs with the ‘have’ nations forming blocs along colonial lines, like Great Britain’s Imperial Preference system.
While "have-not" nations looked to form their own regional trade blocs, they found it increasingly necessary to use military force to annex territories with the much-needed resources. Such military force required extensive rearmament and thus, in the case of Germany, meant a direct violation of the Versailles Treaty. But, rearmament also reinforced the need for more raw materials and consequently the need for territorial expansion.
Such imperialist conquests like Japan’s invasion of Manchuria in the early 1930s, Italy’s invasion of Ethiopia in 1935 and Germany’s annexation of most of Austria and parts of Czechoslovakia in 1938, were all manifestations of the need to expand territories. But these conquests would soon draw the ire of two of Europe’s major powers, and following Germany’s invasion of Poland, both Britain and France would declare war on Germany on September 3rd, 1939, thus commencing the Second World War.
The Bottom Line
Despite noble aspirations for peace, the outcome of the Paris Peace Conference did more to reinforce hostility by singling out Germany as the sole instigator of the First World War. The Great Depression and the economic protectionism it engendered would then serve as the catalyst for the hostility to manifest itself in the rise of the Nazi Party and increasing imperialist ambitions among world nations. It was then only a matter of time before small imperialist conquests would lead to the breakout of World War II.
The rise of Nazi Germany and its faulty policies can be traced to protectionism. Hitler's policies just worsened the bad state Germany was already in. Hitler was barking at the wrong tree by blaming the Jews for his problems. Hitler's economic policies where he protected the local industry from foreign investments and bullied the private sectors regarding prices and production were both detrimental to the German economy. Hitler wasn't able to keep his promise because he had very failed policies. The Great Depression was caused by worldwide economic protectionism. Hitler should've learned from that. However, a lack of digital media back then made it way easier for Hitler to manipulate the truth for his and the Nazi Party's benefit.
Since Hitler's national industry economy couldn't sustain his economic plan--imperialism was the solution. Hitler was often caricatured with a globe in his hand symbolizing world conquest. I guess all the money he seized from the Jewish businessmen was now consumed by reckless spending which may include government subsidies. A parody of Hitler's invasion was mentioned in the movie To Be or Not to Be which had a 1942 and a 1983 remake. One of the songs in the 1983 movie is was "All I Want is Piece". The song itself was meant to reflect on Hitler's conquests. I guess Hitler decided to start invading other countries since his protectionist policies were failing him. Hitler's invasion of Poland was the start. Hitler decided to conquer Europe presumably to use their resources, confiscate the businesses he's conquered, and use it to finance whatever wicked schemes he had in his head. It seems that imperialism isn't linked with free-market economics (in which traders respect the country's sovereignty or simply rent each other's countries for expansion) but with protectionism. When a dictator runs out of resources because of their protectionist policies--invasion becomes the solution!
In short, foreign investment has never been foreign imperialism. That's what the likes of Adolf Hitler probably taught to his people. Hitler had the thinkers-doers mentality with what he did. I believe Hitler protected the local businesses from foreign competition thinking they were imperialists. However, Hitler was the real imperialist when he decided to the conquest of Europe to expand his territory. The result of economic protectionism made countries decide to seize resources than trade them with other countries. Tariffs or import taxes were just one to discourage foreign investors. Hitler probably told the people that only foreign investors will get rich after he demonized the Jews. Hitler's quest for a self-sufficient Germany only made invasion necessary if he wanted to keep with it. For Germany to be self-sufficient--it had to invade other countries.
Nazism may be obsolete but some of its economic ideals persisted even after the end of the Second World War
The Nazi Party was finally destroyed and made obsolete. However, their ideas haven't just as much as Karl Marx's ideas haven't been extinguished. Hitler's ideas concerning the national industry of making a "self-sufficient state" managed by protectionism. This makes me wonder why do some people think protectionism is good? Why were there still economists who believe in the same nonsense? Joseph Goebbels said that if you tell a lie many times then there will be some people who will believe you. Besides, Germany still had to deal with the Berlin Wall problem when Germany was divided into East Germany and West Germany. On November 8, 1989, the Communist-controlled, East Germany fell and reunification took place creating the economic miracle that's Germany today.
The late Lee Kuan Yew even described his problem concerning Singapore in his book From Third World to First with the following words found on Page 59:
The accepted wisdom of development economists at the time was that MNCs were exploiters of cheap land, labor, and raw materials. This "dependency school" of economists argued that MNCs continued the colonial pattern of exploitation that left the developing countries selling raw materials to and buying consumer goods from the advanced countries. MNCs controlled technology and consumer preferences and formed alliances with their host governments to exploit the people and keep them down. Third World leaders believed this theory of neocolonialist exploitation, but Keng Swee and I were not impressed. We had a real-life problem to solve and could not afford to be conscribed by any theory or dogma. Anyway, Singapore had no natural resources for MNCs to exploit. All it had were hard-working people, good basic infrastructure, and a government that was determined to be honest and competent. Our duty was to create a livelihood for 2 million Singaporeans. If MNCs could give our workers employment and teach them technical and engineering skills and management know-how, we should bring in the MNCs.
Comparing MNCs to colonialism or imperialism is just stupid. It was because Hitler blocked foreign competition from Germany that he soon saw the need to invade other countries. Hitler could've accepted investments from the countries he invaded. Instead, Hitler foolishly decided to invade them. I guess in Hitler's mind (or in the mind of people who followed him) was that only the investors will get rich if they invested in Germany. I guess Hitler's lie that MNCs are "imperialists" continued to spread even after his death as Communists (such as Mao Zedong) even propagated the lie. You also have Filipino economists who propagate the idea. No surprise there since Lee himself also faced development economists at that time who said MNCs are imperialists. The lie was spread again when outgoing President Rodrigo R. Duterte signed the Public Service Act of 2022. Organizations such as the League of Filipino Students and Kabataan Partylist renounced it. Teodoro Acevedo Casino and Neri Javier Colmenares of Bayan Muna also propagate the same idea when they defend the 60-40 measures.
The idea that first-world countries used protectionism before accepting MNCs is wrong. In fact, Lee Kuan Yew even said this on Page 66 of From Third World to First:
Our job was to plan the broad economic objectives and the target periods within which to achieve them. We reviewed these plans regularly and adjusted them as new realities changed the outlook. Infrastructure and the training and education of workers to meet the needs of employers had to be planned years in advance. We did not have a group of readymade entrepreneurs such as Hong Kong gained in the Chinese industrialists and bankers who came fleeing from Shanghai, Canton, and other cities when the communists took over. Had we waited for our traders to learn to be industrialists we would have starved. It is absurd for critics to suggest in the 1990s that had we grown our own entrepreneurs, we would have been less at the mercy of the rootless MNCs. Even with the experienced talent Hong Kong received in Chinese refugees, its manufacturing technology level is not in the same class as that of the MNCs in Singapore.
In short, Singapore didn't wait until its traders became industrialists. Instead, Lee already invited the MNCs to invest while Singapore was in shambles. It was all about getting badly-needed money to fix Singapore. If Singapore didn't get any money from businesses to tax then where will it get money to pay back foreign debts and to spend on its rehabilitation? That's what Lee emphasized when he invited MNCs. Kishore Mahbubani of the Lee Kuan Yew School of Public Relations even emphasized that foreign investors teach new skills, provide jobs, and provide income. Why am I going to believe people who say only MNCs get rich when such people can't even learn to budget money or have solutions? They only propose solutions that made Hitler's regime a colossal failure. In fact, Hitler was losing the war because most of the allied forces were from free-market enterprise countries. Japan's opening up to the world after the Second World War made it a better country after its defeat. The Empire of Japan fell down and modern-day Japan was built by the free-market enterprise.
It would be important to emphasize more than the Nazi Regime's brutal crackdowns. The reason behind it was also economic jealousy (such as hatred for the Jews and foreign investments) to how protectionism failed it. Economic protectionism really is nothing more than a fool's paradise. Hitler lived it and perished for it. Many who still want to adhere to it might as well support the Nazis one way or another. If you hate Nazism and condemn their evils--remember economic protectionism was one of those many evils that they did that also helped feed their motivations for imperialist conquests.
