Hitler’s Beneficiaries

February 19th, 2009 at 11:21 pm David Frum | No Comments |

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In this weekend’s National Post, I reviewed a book that offers a profound and disturbing new insight into the origins and outcome of World War II:

Gotz Aly’s Hitler’s Beneficiaries doesn’t look like an explosive book. Written in a dry, unsensational style, it studies that driest and least sensational of subjects: public finance.

Aly devotes little attention to generals and commandants. The leading figures in his pages are central bankers and revenue administrators. After the Second World War, many of these men presented themselves as apolitical technicians; many remained in government to serve the democratic Federal Republic. And yet, as Aly tells it, these public financiers in the security of their offices committed crimes as black and terrible as any committed by the black-coated murderers of the SS.

Aly’s first great message is that the Nazi regime was a popular one. There was little resistance to HitlerÑand comparatively little repression against non-Jewish Germans. In 1936, the Nazi concentration camps contained only 4,700 prisoners, and not all of these were political. In 1937, the Gestapo employed only 7,000 officers and men to police a population of 80 million. (By contrast, the East Germans would employ 190,000 Stasi to monitor a population of 17 million.)

The secret of Nazi popularity was notÑrepeat notÑthe allegedly fanatical anti-Semitism of the German people. Rather, Hitler and the Nazis built a welfare state that delivered real benefits to German families. This welfare state was paid for by plundering first Germany’s Jews and then the conquered nations of Europe.

Hitler often gets credit for pulling Germany out of the Depression. This claim is false: Germany in 1938 remained a poorer country than the

Germany of 1928. Hitler launched a military buildup and created major social programs that Germany could not afford. By 1939, the Nazis were spending 20.5-billion marks on the military and 16.3-billion marks on civilian programsÑall supported by only 17-billion marks in tax revenue.

Protective of his popularity, Hitler refused to tax ordinary Germans to pay these bills. (Throughout the Second World War, democratic Britain accepted much higher taxes than Hitler dared impose on totalitarian Germany.)

Instead, Hitler plunged Germany into debt. To get some idea of the burden of this debt, try this comparison: The United States emerged from the Second World War in 1945 with a public debt equal to about 110% of national income. The Germans had already accumulated a public debt equal to almost 200% of national income by September, 1939.

Overwhelmed by debt, the Nazis kept ruin at bay by confiscation and robbery. In the fall of 1938, Hitler’s finance ministry panicked: 2-billion marks of short-term debt was coming due with no means to pay.

That debt crisis prodded Hitler to launch the Kristallnacht pogrom in November, 1938. After the pogrom, he demanded a 1-billion mark “atonement” payment from Germany’s Jews. Confiscated Jewish wealth averted a Nazi debt default.

The methods first used against the Jews would soon be deployed against all Europe.

When the Germans invaded Russia in 1941, the Ukrainians welcomed them as liberators. Why did not the Germans make allies of the Ukrainians? Aly’s answer: Only by stripping Ukraine of all available food could the Nazis keep fighting without reducing standards of living at home. It was not only Hitler’s demented ideology that condemned the Slavs as subhuman. It was the imperatives of Nazi war finance.

Why did Hitler not mobilize Germany’s women for war work? Women workers would have had to be paidÑincreasing the stock of reichsmarks chasing Germany’s dwindling supply of consumer goods. Hitler believed women belonged at home. His central bankers’ fears of inflation compelled him to keep them there.

By losing the war, the Germans lost the power to plunder. The reichsmark collapsed into worthlessness. The economy stopped. Germans faced for the first time the same hunger they had inflicted on their neighbours. Only American aid saved the German population from starvation.

And yet, even after all this, the Germans ended the war much better off than their victimsÑnot just the murdered Jews and the massacred Ukrainians, but than the Dutch, Italians and Belgians. Many individual Germans retained the spoils of war as treasured family possessions: a summer home that had once belonged to a Jewish family, silver and linen brought home from France, art works taken from who knows where.

Aly acknowledges that he himself owns a fine antique desk that had come into his family in the 1940s. To whom did it belong before? How exactly did it become his property? What guilt still attaches to it? These questions haunt Gotz AlyÑand will haunt every reader of his difficult, challenging and profound work, now at last available in English.

Two subsidiary points might be added here:

The first is that Aly offers an important corrective to Daniel Goldhagen’s Hitler’s Willing Executioners. In Aly’s telling, relatively few Germans felt the psycopathic anti-Jewish hatred that drove Hitler and his associates. Millions and millions of them, however, were prepared to share in the spoils from the Nazi persecution program. For example: German families who lost their apartments to Allied air bombing were compensated with furnishings stolen from deported Jews.

Second, Aly suggests something important about the war-fighting potential of democracies. Germany, Britain, and the United States shared related problems of war finance: How to pay for the war without over-inflating their economies. Societies at war reduce their production of civilian goods while increasing their emission of money: an obvious inflation risk.

The British solved the problem by raising taxes, compulsorily removing excess liquidity from their economy. The United States achieved the same end through a more or less voluntary method, the mass sale of war bonds, by which citizens sacrificed consumption today in return for promises of a better return tomorrow.

Neither option was available to the Nazis. Lacking consent, they did not dare tax the German population very onerously – lacking credibility, they could not sell long-term bonds to their people. Nazi borrowing was almost always coerced borrowing.

World War II proved a hypothesis that Alexis de Tocqueville advanced a century before: the war-fighting potential of a democracy is at its greatest when war is most intense; at its weakest when war is most limited. This is a lesson with enduring relevance to our own times – and our own wars.

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