Transcription
[Music] Poland, Denmark, Norway, Belgium, the Netherlands, and France. From September 1st, 1939, Hitler started launching his troops across Europe. Inside their tons of armored steel was an instruction manual for the crew of the [Music] Panzers. This small, illustrated guide stated on the last page: "For every shell that you fire, your father has paid 100 Reich Marks in taxes, your mother has worked a week in the factory, and the trains have traveled 10,000 km." The tank's total cost was 800,000 Reich Marks and 300,000 hours of work. 30,000 people will have given a week's salary. 6,000 people will have worked a whole week so that you could have an armored combat vehicle. Everyone has been working for you, the tank crew. Think about what you have in your hands. At the heart of this German war machine, a symbol of a powerful, organized, and invincible nation.
The Nazi regime was obsessed with money, working hours, and taxes. The National Socialist policy had a certain cost. Throughout the history of Nazism, the themes of money, industry, and economic organization recurred. For 12 years, between industrial rationalization, monetary manipulation, and ideological obsession, the Nazis invented its own economic system. Hitler's regime fought and struggled to finance the war, to invent a modern economy, and to manufacture arms, whatever the [Applause] cost.
Hitler arrived in power on January 30th, 1933. On February 3rd, he made his warmongering intentions clear to the military chief of staff: "Our aim is to defy the Treaty of Versailles, to destroy the international monetary system, and to expand in Eastern [Applause] Europe." Hitler wanted to go to war ever since he'd written *Mein Kampf* in prison in 1925. He was totally obsessed by war: war waged by the strong against the weak, by the supposed Aryans against the Jews. War wasn't just an option; it was the sole reason for the Nazis' existence.
[Music] To go to war, you need an army. In 1933, Germany didn't have one. The Treaty of Versailles had put a limit on Germany's ground forces to 100,000 men. It had forbidden the country to have an air force or a navy. The military apparatus was very basic, and the Reichswehr was forced to use pretend tanks made out of wood and canvas in order to [Music] train.
One of Hitler's first decisions was to rebuild the army, and that needed money. Germany had been ruined by years of crisis and was broke. 1930s Germany had a standard of living comparable, perhaps, to South Africa or Iran today. So, a lower middle-income country where you would expect to see a combination of cars and motorways, perhaps, and modern industry on the one hand, and then peasants pulling wooden wheel carts with horses on the other. It was poor in the sense that it was suffering from the effects of the Great Depression, which were worse in Germany than anywhere else in the world, except possibly the United States. It was a comprehensive crisis of the German economy: agriculture, banking, industry were all suffering. Six million people were unemployed. It was heavily indebted to the outside world, particularly to the United States, debts that they couldn't repay. Obliged to pay reparations to the Allies, which they couldn't any longer pay. Foreign currency and gold had almost disappeared. Um, 40% of the workforce was unemployed. Much of the rest of the workforce was on short time. Um, trade had collapsed more than half between 1929 and 1933. Um, industrial production was down to the levels of the 1890s. It was a country that had been bled dry, which the Nazis dreamed of setting back onto the path of war.
In order to make war, steel was needed. Steel required iron ore and coal. Rearmament depended also on petrol, rubber, and chemicals. A workforce was needed, as were engineers, technicians, and researchers to design and make arms. German industries had all this know-how, but where was the money going to come from? Money was the crucial issue, since the Nazis had none. They invented it. A little-known but providential man was in charge of this magic trick: the minister of the economy and president of the Reichsbank, the German Central Bank, Hjalmar Schacht. He invented the MEFO bills.
So, at the time, Hjalmar Schacht was often discussed as the wizard of German finance, the man who could kind of create money out of thin air. And he'd first earned this reputation in fighting the hyperinflation of the 1920s. But in 1934, Schacht says, "Okay, if you want to rearm, um, we have to find a special device for doing it." Uh, because rearming was still illegal under the Versailles treaty. They were not supposed to rearm. So Schacht had the idea that you would, uh, supply these bills from a basically fake company. The so-called MEFO bills came from, uh, a fake company, um, which was a basically a mask so that the outside world could not see what was what was going on. And those bills were actually given to companies that began to produce weapons as a, as a kind of currency, which could then be cashed at a later date, when the government was able to pay them [Music] back.
The MEFO bills were created by Schacht. The MEFO was a dummy company who had a capital of 1 million Reich Marks, provided by Krupp, Siemens, and other big names of the German metal and steel industries. Nothing was produced by the MEFO. No employees were taken on, and no factories were opened. The only thing the MEFO did produce were debts, which would help to finance the major part of the German expenditure on rearmament from 1934.
[Music] In practical terms, any firm contracted by the Nazi regime to provide goods required for rearmament was not paid in Reichs Marks, the official currency, but in bills of exchange issued by the MEFO. The bills were guaranteed by the state. They were trusted and used as currency between arms manufacturers in order to finance their production. The MEFO bills became a parallel currency, reserved only for the rearmament sector. It was a very clever device because it first of all restored confidence, secondly it veiled rearmament from the outside world so they couldn't see, uh, what was going on. And it meant that the government didn't have to pay for this until some years later. It avoided the risk of, uh, of of currency inflation. It avoided, um, the problems that Germany had faced in the years after the First World War. But because Schacht at the Reichsbank promises to exchange its debts for cash at a tiny discount, effectively, is issuing the equivalent of cash. And that, of course, is a very effective way of providing the armament industry with the liquidity, with the cash that it needs to start the process of production.
Again, in 1933 and then onwards from [Music] there, Schacht's conjuring trick worked like a charm. In 1934, out of the 4 billion Reich Marks invested in rearmament, less than half was entered into the Reich's official [Music] budget. It was the beginning of an incredible upturn. Rearmament kickstarted the economy and freed the Germans from a long period of crisis and self-doubt.
[Music] Metal and steel work industries were the big beneficiaries. Krupp's order books were full. Thyssen's blast furnaces were at full [Music] capacity. IG Farben started working on a new synthetic fuel. Engineers at Porsche, Mercedes, and BMW invented new engines to drive the tanks built by Krupp, the planes that would be built by Messerschmitt, and the ships and submarines built by Blohm & [Music] Voss.
We would probably assume, I think, that German industrialists were very happy. Rearmament, it suddenly meant there were orders coming in. Um, they could start re-employing people again. Uh, this might be a real boom. But actually, many industrialists in Germany were very cautious about this. They didn't want to do anything that upset the Allies or which put Germany at risk. Um, so there was some hesitation in the early years. When German industrialists, Hitler was not actually the puppet of the big German industrialists.
[Music] Krupp, Thyssen, IG Farben, the great industrial families belonged to a different world than that of the Nazi dignitaries. Even though Gustav Krupp, huge steel and cannon maker, distributed copies of *Mein Kampf* to the deserving workers in his Essen factories, he nevertheless remained wary of the Nazi party, whose full name was the National Socialist German Workers' Party.
The industrialists were distrustful of the regime's social dimension, but they were soon reassured that Hitler wasn't a pinko. Rearmament guaranteed growth, and the profits piled up in the coffers. Dachau and Oranienburg were the first camps to open on March 20th, 1933, and the first political prisoners were locked up there the following day. For the leading German industrialists, the arrival in power of the Nazis was a safeguard against the Communist threat. It's fair to say that indoctrination started in 1933-34. The strongest measure was the outlawing of trade unions in May 1933. Then, specifically in factories, the Führerprinzip was introduced. The leadership principle was one of command by and obedience to the boss, with a very clear sense of hierarchy within the factories. This meant that the employer authority took precedence over the corporate councils, which had been one of the social advances of the Weimar [Music] Republic. The Nazi order prevailed. Strikes were made illegal, salaries were frozen, and trade unions banned. They were replaced by the German Labour Front, a single organization encompassing all workers. Big business's wishes had come true.
[Applause] And this was the propaganda in Germany. Motorways, bridges, and housing are being built by pick and [Music] shovel. Away from the munitions factories, which ensured a huge majority of jobs. The Führer took the unemployed off the streets and gave them work on building sites and motorways. This was the Nazis' economic [Music] miracle. They led people to believe that a society of leisure and consumerism, based on the American model, was possible. The regime was social. It built houses for the German families and cruise ships for their holidays.
[Music] Goods manufactured for the people were given priority. The People's Radio was mass-produced, as was the famous People's Car, the Volkswagen. The economic miracle of the Nazi regime is an attractive idea, obviously, for the regime itself, and in fact, it has admirers around the world. There is a real sense in which contemporaries feel that they have found ways to control, master the economy, and make the economy subject to human will and politics. But the element of it which is deceptive, if you like, is the balance and the costs and the benefits. Right? Is this a miracle in the sense that it's a completely free lunch? And it is not a completely free lunch, in the case of Nazi Germany any more than it is in the case of the New Deal or the Soviet Union. Because in the process of economic growth, more economic activity is created. People are, on the whole, on average, definitely better off by 1938 than they were in 1932. But the balance of the economy has shifted dramatically towards the armament sector. It is the largest single shift in economic resource, economic production by any non-socialist state in peacetime in the historical record. Defense goes from essentially 1% to 0% of German GDP to 20% by 1938, in the space of five years. Two million unemployed went back to work. Five years after Hitler's accession to power, full employment was achieved.
[Music] But prosperity was not widespread. In 1934, a working-class household spent around 50% of its budget on food, drink, and tobacco. Wages were cut back, but it didn't seem to matter. German workers had newfound hope. They were encouraged to scrimp and save so that one day they could afford a People's Car.
[Music] An illusion. No German started driving a VW until the [Music] 1950s. It's common in thinking about the Nazi regime to juxtapose guns and butter, and the idea is, if you like, that the German population did without consumption because the political priorities of the regime dictated rearmament. This is true from the point of view of economic statistics. What it doesn't capture is the extent to which the German population at large, in fact, gained, if you like, psychic satisfaction from the process of rearmament. The real People's Product was, in fact, the [Music] army.
On the 16th [of March], 1935, Hitler reintroduced military service. Rearmament became official and was in plain view. So, there are a few things that the Nazi regime did over its entire history that were more popular than the reintroduction of conscription in 1935. There is a huge sense that Nazi Germany is restoring to the German nation, to the German public, something which they have been deprived of since World War I, since the onerous terms of the Versailles peace treaty. The pleasure, the very genuine pleasure in seeing the nation in arms, seeing your young men being drilled into real soldiers, into real men, in other words. Now, this costs money, sure, but it's, you know, a price well worth paying for this collective pleasure. To put it very concretely, when you're drafted into the army, they might train you to drive, they're going to give you a fancy new machine gun to practice with, they're going to show you how the radio works, and you will go on maneuvers, and there will be dive bombers flying overhead. It's a high-tech experience that you cannot have in provincial Germany in the 1920s. The militarization is a process of modernization of a collective kind.
[Applause] War started to enter public consciousness. Rearmament parades became popular. Huge parties were organized every year, and mock battles were put on. The army's assault tanks and fighter bombers were on display for all to see. Nazism reorganized the whole economy and all of society around its vision of war.
[Music] War became mass entertainment. In 1936, the new Reich's Army, the Wehrmacht, reoccupied the Rhineland, a major industrial steelworking area which had been demilitarized since the Treaty of Versailles.
[Applause] [Music] To continue the march towards war, industry needed more and more raw materials. Germany had little or none. They had to buy them from abroad and pay in gold or in currencies such as dollars, francs, or pounds, none of which Germany had either. Schacht started to worry. The MEFOs had certainly helped kickstart the economy, but now they had to be paid back. Continuing at this pace was impossible. This overheated economy needed to be slowed down, which meant holding back rearmament and gradually paying back the MEFO debts. This is what he told Hitler. And Schacht says, "You can't sustain rearmament much beyond this level. I'm happy with what we've achieved so far, but if you rearm more heavily and more heavily, it's going to create all kinds of problems for the German economy."
Violent argument breaks out within the Nazi regime between Schacht, on the one hand, who advocates nationalism and the rebuilding of German strength and a politics of power towards Germany's neighbors, but is concerned about the balance of the German economy and is not interested in a full-on confrontation with the major powers of the world, which are Britain and France, still at this moment. And the figures, notably around Göring, who basically wants to push rearmament to the maximum extent. So Hitler thinks about this, and he decides that he's going to shift control of the economy away from Schacht and the experts to somebody in the party. Who does he choose? He chooses the most unlikely person. He chooses Hermann Göring.
Göring, a Nazi from the early days and senior official of the regime, was put in charge of the German economy in order to force through continued rearmament. The MEFO bills could wait. And so he makes Göring head of the Second Four-Year Plan. The first Four-Year Plan was a four-year plan for re-employment after '33. The second Four-Year Plan begins in October '36 and it transforms the German economy. Um, Göring assumes responsibility over trade, foreign currency, um, price control, uh, investment. And under Göring's, um, direction, um, a major program of so-called self-sufficiency is [Music] undertaken.
[Laughter] [Music] For Germany only had its own strength to rely on. Göring brought in a policy of economic autonomy, beginning by creating factories in his name. The Hermann Göring Works were founded in 1937 to enable the mining and transformation of Salzgitter's poor quality and unprofitable iron ore. It also enabled the development program for synthetic rubber called Buna, made by the giant firm IG Farben, whose profits soared by 90%. Germany needed to become free from all its petrol imports as quickly as possible. Enormous public investment sped up the program of the production of synthetic fuel. But it had its price. One ton of steel from Göring's factories was three times more expensive than one ton of imported steel from Romania or the Soviet Union. The difference was paid by the state, who handed out staggering subsidies. Nothing was spared for autonomy. From a strictly economic point of view, it was not a rational decision. The Nazi economy closed in on itself in order to prepare for war. On the economic level, war had already been declared. They're not unrealistic enough to imagine that Germany can never really be self-sufficient. The aim of the game is to harden Germany for the war that is to come. Is to make it more resilient than it had been in World War I. This is, of course, at the same time that the Nazi regime escalates foreign policy tension. There was the Anschluss with Austria early in 1938, and then the very deliberate push to dismember Czechoslovakia by way of the Sudetenland. And this raises the international tension in a way that the regime was not really prepared for.
[Applause] With the Anschluss, the annexation of Austria in March 1938, and then with the *Kristallnacht* pogrom in the same year, the outlines of a specifically Nazi economy were drawn. An economy which incorporated systematic anti-Semitism into the regime. The vision of the enemy is not the big industrialist, the cigar-smoking steel baron. The vision of the enemy for the Nazis is quite specifically money capital. It is the banker, it is the financier. And of course, that figure is indelibly associated all the way back to the Middle Ages in European anti-Semitism with the Jew. And so Nazi anti-Semitism is directly linked to an economic ideology which is hostile to commerce, which is hostile to finance, which is hostile to money, which regards these things as footloose, as indeterminate, as not rooted in the soil of the nation, as belonging to a race which is the sworn, historic, trans-historic enemy of the German race.
Jews were often considered as parasites, belonging to the "golden clique" of global financial capitalism, symbolized by gold and money. On the other hand, there was the world of blood and soil, of loyalty and honor, associated with Germany in the National Socialist vision. Money and race were incompatible because monetary exchange implied mediation and trade between people. The Nazis were hostile to money, and yet needed it to finance their economy. In this new economic paradigm which the Nazis were trying to put in place, Aryans were not supposed to buy; they could just take. They shouldn't pay; they should steal, and steal principally from the Jewish population. The plundering of the Jews and the violence against Jews went hand in hand. It happened in Austria from March 1938. It happened with the pogrom in Germany, sometimes called the Night of Broken Glass, on November 9th, 1938. Firstly, their belongings were confiscated. Secondly, communities were attacked, both synagogues and individuals. It created an atmosphere which was supposed to provoke Jews to leave the country. And on a more practical level, it brought in a great deal of wealth, of money, to the Reich.
In the summer of 1938, an office was set up in Vienna specifically to deal with the immigration of Jews. This office was set up by Eichmann. Its aim was to tax the Jews heavily on their departure, to force them to pay this tax and leave behind all their possessions. In Austria, the same setup was copied in Berlin in January 1939. So it was clear from the outset that spoliation was linked to a mechanism of exclusion. In order to pay for the damage of Kristallnacht, the Nazis imposed huge fines on the Jewish community. The shop windows had to be replaced urgently, requiring imported glass from Belgium, which would cost the Reichsbank 3 billion marks in precious foreign currency. Göring was furious. Even senior Nazi officials were obliged to follow the rules of market forces for just a while.
[Music] [Music] Longer. Despite the money stolen from the Jews, the annexation of the Austrian steel mines and factories, the requisition of Czech tanks, and despite the intense mobilization of German factories, the Führer still didn't have the army which he needed to conquer [Music] Europe. The Wehrmacht, which paraded for Hitler's 50th birthday in Berlin in 1939, was only partially motorized. The army mostly paraded on horseback and on bicycles.
[Music] Krupp's armored vehicles were on parade, but still technically inferior to French [Music] tanks. The Navy only had five battleships, and the Air Force didn't have a single heavy bomber. The question of whether Germany was ready for war in 1939 has haunted all debate since then, because it bears on the question of how we think the war started. Um, those who believe that Germany was ready have an intentionalist view, if you like. They view the war as the product of Hitler's, of Hitler's, decision-making in a straightforward and linear fashion. Those who think the German economy was not ready for war in 1939 tend to think of it as, it were, the war resulted from a miscalculation. My own view is that the realization on Germany's part that the German economy was not ready for war produced, perversely, a decision to go to war. Hitler is often accused of not having a very good grip of the economics, not following the details. I don't think this does him any justice. He understands what they are, and he just concludes that from a grand strategic point of view, if you are committed to war, if you know there must be war, and you know there must be war because your broader ideology tells you, if you don't wage war, the Jews will wage war on you some other way, in other words, you must move to the open phase of war. If Germany is to have any hope at all of surviving, the German race of surviving, then now is a better moment than two or three years from now, even if the tidy military bureaucrats would rather have their projects finished by then. Hitler told his military chiefs, "We've got nothing to lose and everything to gain. Thanks to the restrictions, our economic situation is such that we cannot hold out. Göring will tell you, we have to [Music] act."
To everyone's surprise, Germany and the Soviet Union signed a non-aggression pact. The German-Soviet Pact was signed on August 23rd, 1939. The most important decision by Germany is, of course, the alliance with the Soviet Union, the Hitler-Stalin Pact, of the fall of 1939, which cements the Soviet Union both as a strategic partner in the destruction of Poland, but also as a fundamental source of key economic supplies for the German war effort, crucially oil, some grain as well, key, uh, iron ore, metal, metal ores for steel production. So this secures, if you like, the hinterland of the German, of the German war [Music] effort.
On September 1st, 1939, German troops invaded Poland. Victory was quickly and resoundingly won, but munitions were in short supply, and a quarter of the assault tanks were decommissioned. This put a damper on things, for despite the massive rearmament program that had had been forcibly imposed since 1933, the economy was still not responding. The invasion of Poland drew France and the United Kingdom into the conflict. The Phoney War began. French and German troops observed each other from behind their casemates on the Maginot and Siegfried [Music] lines. This respite enabled the Nazi war economy to carry out a thorough [Music] reorganization.
One of the things that became clear as soon as the war had broken out was that nobody was really controlling the war economy. Hitler decided that the time had come to appoint a minister responsible for the production of munitions and weapons, and he appointed Fritz Todt, um, Nazi Party engineer, who had been the man responsible for building the motorways in the 1930s, building the fortifications in 1938, '39, '40, and so on. A man that Hitler trusted. And he was made minister of munitions, and the idea was that he would now supervise what was going on to make sure that some kind of order could be brought into the war economy. The military didn't like being bossed around by a civilian, and the problem was that aircraft production was not under his control. He had no control over labor, uh, he couldn't control prices, um, he couldn't control the allocation of raw materials, and, um, so that he was operating all the time against other parts of the economy, uh, but had their own interests to, uh, to pursue. Göring, for example, wanted to carry on with the big investment programs in raw material production, etcetera, etcetera, even though those resources were needed to produce armaments.
Hitler made some drastic choices. He sacrificed the Navy, maintained the tank building programs, but made munitions and the Air Force his two main priorities.
[Music] The Luftwaffe was allocated 40% of military expenditure, and above all, the production of arms, shells, and ordnance was multiplied by [Music] eight. The armaments minister, Todt, managed to focus the war industry on specific and short-term achievable aims. The only thing that counted was immediate war, and nothing but war. The goal was achieved. Between January and July 1940, arms production doubled, the most spectacular increase during the whole [Music] war.
In May 1940, Denmark and Norway were invaded, followed by Belgium, the Netherlands, Luxembourg, and France, all within the space of a few weeks. A feeling of euphoria broke out in the Reich. In the propaganda films, against a typical backdrop of Stukas and invincible Panzers, the regime celebrated the triumph of mind over matter. Germany, a poor country trapped within a territory that was too small, had found its soul again thanks to Nazism. The nation was able to surpass itself and surmount the lack of money and shortages of raw materials. The Nazi economy succeeded in freeing itself from material considerations. In reality, the German people were hungry. The tanks needed fuel, and so the war economy claimed what it was owed. The National Socialist regime was waging the war on credit: credit hidden by the MEFO bills, which the regime began to pay back by printing money, and credit based on the collateral of goods plundered and pillaged in the occupied [Music] countries.
The Nazi economy had to feed off war. Military equipment, materials, supplies of petrol, tin, copper, nickel, locomotives, and cannons were systematically confiscated and stockpiled in a huge wartime [Music] booty. One way of doing the course was also to take money from the occupied areas. France, for example, had to supply Germany with a very large quantity of money to fund the German war effort. Uh, same as true of other parts of Europe. France was the richest part of occupied Europe. In the end, about a third of the expenses of the German war effort were met by finances taken from the occupied areas. Silver, gold, coal from Poland, coals from France. The Nazis stole from all over Europe. Its economy needed this spoliation in order to function. German soldiers had to steal for food. Corruption became commonplace, and everyone helped themselves where they [Music] could.
It's before 1933, in particular, Nazi propaganda constantly repeated that militant National Socialists were all victims of the system, victims of democracy, and victims of the Jews. So after 1933, when the Nazis attained political power, not only did they have no moral inhibitions, but they weren't even conscious of acting illegally when they got rich at the expense of the victims. For example, many of them thought that it was perfectly normal and that it was what they were entitled to. The particular entitlement of the strongest implies that they didn't feel obliged to take into consideration the rights of the weakest. And by definition, this ideology encouraged corruption. When victims are denied their human rights and their ownership rights, then it is totally justified, so to speak, from an ideological point of view, to dispossess the victim. Hitler and Göring were particularly adept at corruption. They were by far the greatest art thieves in history. Hermann Göring alone stole more than 1,375 paintings, 250 sculptures, and 168 tapestries, whose present-day value has been estimated at several billion euros. To put it another way, there was an outrageous conflation between the economy, the state, the party, and the private sphere, which were clearly inseparable from one another.
Germany was short of everything: food, raw materials, money, and military equipment. In the defeated and occupied countries, there was organized pillage. Stealing became legal and commonplace. In mixing improvisation and theft, the German war economy was a huge [Music] shambles. The resounding victories of the Blitzkrieg were the result of an unprecedented mobilization of German industry. They were also won by a financially beleaguered regime. The true colors of the Nazis' economic miracle, which had won over the whole nation and the majority of German industrialists since 1933, were now plain to see. Germany was short of everything: food, raw materials, money, and military equipment. In the defeated and occupied countries, there was organized pillage. The eagerness with which Germany drew on the resources of occupied territories is testimony to the degree to which domestic consumption had already been squeezed before the war and continued to be squeezed after the war broke out. It's true that foodstuffs were rationed in National Socialist Germany. Meat, butter, or any other items could only be bought in limited quantities. But these rations were nevertheless largely sufficient, even for hard laborers. During the war, Germans never went hungry, mainly because huge quantities of foodstuffs were brought into the Reich from occupied territories. So, materially speaking, it was clear that the German population living at the expense of the occupied theft and pillage consolidated the political stability of the regime. Nazism fed its people. It was food that enabled Hitler to maintain the support of the Germans. In fact, during the war, wages were at a very acceptable level. Nevertheless, all sorts of products were impossible to get hold of, even for money. Many consumer goods were just not being produced. As a result, Germans could do nothing else with their money apart from put it in the bank, where they theoretically accumulated large sums, but in the end, they could sell them, buy anything with this money for.
[Music] One way of thinking of the cycle of finance in the Nazi war economy is that war workers are paid for production in armament factories. Soldiers are paid, their widows are paid. There is a very considerable flow of money from the state, new printed purchasing power, to the German economy. Now, if all of that money was spent on the limited supply of goods that were available during the war, when up to 40% of GDP is being transferred to the war effort, it would have produced inflation. So the crucial thing to do is to stabilize, to freeze that purchasing power. They are issuing currency to pay war workers, but if you prevent people from spending their purchasing power, you don't get the price effect. But to do that, you have to maintain their confidence in the system.
[Applause] While the Germans were saving money, money printing was at full capacity. It helped reimburse the MEFO bills, it paid wages, and it paid the industrialists' bills. And so then you have a closed loop in which money generated in the first round generates wages, generates savings, and generates a flow of money back to the state. The crucial advantage of that is that it operates without propagandistic hullabaloo. It operates continuously, and if it works, it generates price stability, it generates, uh, uh, uh, in, uh, zero inflation. And if you have price stability, then people will also be willing to continue with this flow. The Nazi economy was voracious. The German savings, the plundering and spoliations in the occupied territories were not enough to support the war [Music] effort. The regime was in need of new places to conquer, new areas from which it could obtain the necessary resources. Hitler decided to invade the Soviet Union on June 22nd, 1941. General announced the start of Operation Barbarossa.
[Music] Germany broke the non-aggression pact, and German troops entered the Soviet Union. The initial military successes against the Red Army were emphatic. I think for Hitler, the key thing was he'd had always wanted to have an empire that matched the British Empire, for example. Maybe you could do it, you could defeat the Red Army quickly, and then you would have this large area which could then be populated by Germans and where you could draw raw materials and food and so on. In the spring of 1941, the Third Reich was waging three wars: one against the Soviets, one against the United Kingdom supported by the US, and a racial war. Nazi genocidal violence was unleashed on the Jewish populations of the invaded territories to the East in Poland and [Music] Ukraine. People were shot in mass executions, and the building of extermination camps began. In February 1941, the chemical giant IG Farben agreed to hand over an industrial zone to the SS, an area of 24 square kilometers to the east of Auschwitz, which had only been a prisoner of war camp at the time. Genocidal obsession began to converge with economic necessity. Between June and December 1941, the Third Reich was in its heyday.
[Music] There, the point to which Hitler really thought that this imagined empire of his would actually become a reality. And so he asked Himmler, um, and a group of SS academics around him to plan a vast new German empire. Himmler draws up a plan, Generalplan Ost. Generalplan Ost, and the object is to find a way of changing the geography of this area completely. You're going to drive all the Slavs out, or a great many Slavs out. Those who remain are going to be kind of forced labor force, like a, like a colony, really. And you're going to get German businesses to go in and start using Soviet raw material resources. So into this space of colonial settlement and struggle, the Nazis very specifically imagine moving millions of German settlers from the overpopulated regions of Southern Germany, where you have tiny little farms eking out a miserable living in the Rhineland, for instance, but also resettling German ethnic groups that were scattered around Eastern Europe and finding new farms for them there.
[Music] By laying claim to this living space for settlement, it meant that the millions of people who were already living there would lose the right to live there, as well as lose their possessions. The concept of Lebensraum, at the heart of Nazi ideology, was unavoidably linked with theft. The two things went hand in hand. In the propaganda films, German settlers were shown arriving in the occupied territories and settling into their new homeland.
[Music] For [Music] the last great European colonial project, the master plan for the East was only implemented in Poland. A more urgent issue for the Reich was to feed its population and its army. Over 3 million troops, 600,000 horses, all of these have to be fed. And so the extraordinary implication that dawns on the German planners in the spring of 1941 with more and more clarity is that the urban population of the Soviet Union will have to be starved to death so that the German armies can be fed from the territory of the Soviet Union.
[Music] At the heart of Generalplan Ost is the so-called Hunger Plan. The idea that the area that Germany's conquered is full of so-called useless eaters. They don't contribute anything, they eat food, and you don't need them. And so already in 1941, you're beginning to impose on the Soviet population almost a level of starvation. Supplies, for example, for the city of Kiev are deliberately withheld. Food is instead used by the armed forces or sent back to Germany. Um, at the heart of the Hunger Plan is the idea that 30 million people will probably perish of starvation, perhaps even more. So it's shocking because this is 12 months before the famous Wannsee Conference. This is 12 months before even euphemistic talk of the total annihilation of the Jewish population begins in planning documents. And this is being talked about openly across the entire German military. We're talking about 20 to 30 million people who are going to be starved to death in the cities of the Soviet Union. The two things are nested together because the Jewish population predominantly lives in the cities. It doesn't farm. And so when you occupy a Soviet town, you have the problem of how you feed the Jewish population, and they are the first people who will be cut out of any supply. And I have seen in the planning bureaucracy of the Reich agency that deals with grain, a spreadsheet in which they spell out the allocation of grain to the different populations within Germany itself, from the highest, um, uh, ration allocations to mine workers, all the way down to the inmates of concentration camps, based on this calculus of preferential feeding. This does not at any moment mean that the ultimate reason for the destruction of the, uh, Jewish population of Poland is economic. That's not the point. The point is that if you have the plan to kill the Polish, the Jewish population of Poland, and you have a food shortage, and you've got to decide who's going to starve, you move from deciding that you're going to starve the urban population of the Soviet Union to an accelerated, deliberately accelerated. This is the other telltale sign. We can see how the Nazi planners accelerate the Polish Holocaust in '42. Why are they doing that? Why are they increasing the pace? Because they know that the harvest is critical, and the rations in Germany being cut, and they need to reallocate it. It was Herbert Backe who was chiefly responsible for the Hunger Plan. The minister of agriculture was a technocrat and a radical Nazi. Led by people such as Backe, modern economic methods were put to use to serve the regime's genocidal obsessions. Human beings were objectified and turned into commodities. They would be added to the Nazi economy's equations. Racial accounting was created, where people were calculated, measured, added up, planned for, rationed, starved. It was all written down. Food became a war weapon, as did the slide rule.
The Red Army was starting to fight back by the autumn of 1941, and after the Japanese attacked Pearl Harbor, the US entered the war. Germany was therefore forced to fight a much longer war. Equipment that had been destroyed had to be replaced, and new tanks built with supplies of munitions. The army's needs were never-ending. Industrialists fought over raw materials which were in short supply. Thousands of orders were left unclaimed. The military engineers, planners, and civil servants were all confused as to which way to turn. The German economy was unable to keep up. German industry, because of military intervention, has become extremely, uh, inefficient. Productivity falls between 1939 and 1941, largely really because of, of military intervention. The military want the best, the highest quality. They want this, and they want that. You stop producing this, you start producing that. They literally, in December 1941, decide that rather than continuing to muddle through, it would be better simply to shut all the factories in Germany and reboot in 1942. They literally power down. They say, "We can't make any of our planned allocations work. We'll declare a holiday in 1941, right at the very end, and then restart again in '42 on a new basis, rethinking the whole priority set, bringing in foreign labor, morphing the Hunger Plan, and they're going to all plan Ost, rejigging those around the new drive in 1942." For one week in the middle of a World War, the arms industry shut down. Plan after plan of extravagant aims, constant ideological incitements, improvisation and constraint, corruption and spoliation had turned the German war economy into total chaos. By the time that you're fighting not just the British Empire and the Soviet Union, but the United States as well, it's obvious to anyone that Germany is massively inferior in terms of its economic resources. So you need some answer, you need some plausible answer, and the answer comes in the form of rationalization: "We will make more with the same amount."
In December 1941, Hitler passed a so-called rationalization decree in which he says that everything has to be simplified. You must stop demanding the best weapons. Uh, we need to move towards mass production like the Americans and the [Applause] [Music] Russians.
The Nazis believed in the miracle of technology and the strength of their ideas. Short of money and trade, and permeated with racial ideology, the engineers and laborers were forced to ignore reality and the laws of economics. This kickstart, both ideological and technological, was initiated by Albert Speer. In February 1942, he was a rapid replacement for Fritz Todt, who had died in a plane crash. Hitler said to Speer, "Look, you succeed Todt, and you will have my complete backing. Anything you want to do in the war economy, you will have my complete authority." Now Speer doesn't really know how to run a war economy, so he takes all the plans that Todt developed and he begins to put them into practice. That means reorganizing German industry in a series of so-called main committees and rings. Uh, so the industrialists are involved in planning mass production and how to achieve it, rather than the military. He introduces, uh, a central planning agency, which again is basically a civilian agency, in order to be able to redirect raw materials, everything from coal to iron and steel to aluminum, to where it is needed immediately. Focus is put on mass production. You cut back the number of models that are being produced. Through time and motion studies, you find ways of improving labor productivity, you prevent wastage. All of this means that by 1944, Germany is producing roughly three times as many weapons, but it's only using say 20 or 30% more materials and labor. There's been an extraordinary revolution in the productivity of the German war economy between 1942 and in [Music] 1944.
From 1942, prices were fixed by the authorities. The market had [Music] vanished. High-ranking Nazis reached out directly to engineers such as Ferdinand Porsche, famous designer of car engines, and put him in charge of the construction of new assault [Music] tanks. General Erhard Milch, in charge of rationalization in the aviation sector, forced the major companies Junkers, Messerschmitt, and Heinkel to design simpler and easier-to-produce planes. Between the beginning of 1942 and 1943, Milch succeeded in doubling the monthly production of planes without increasing the use of aluminum. His secret: rationalizing and exploiting thousands of forced laborers. At the end of May 1943, the production of arms had increased by 120% compared with February 1942.
[Music] So the huge surge in armaments production that we see after 1942, which Albert Speer will claim as his armaments miracle, is in fact anything but. I mean, it's basically relying on investments that were made early on in the war in long-term productive capacity in armaments factories, and on the other hand, the massive mobilization of forced labor. And with the expansion of the war economy and the recruitment of very large numbers of people into the armed forces, and in the end, some 17 million people are drafted into the German armed forces, where are you going to get the labor? Who's going to run the farms? Who's going to work in the armament factories? Um, and so forced labor is the, is the only answer. And between 1940 and 1945, around about 13 million people from outside Germany are brought back to the Reich to perform some kind of forced labor. In France, Belgium, and Denmark, recruitment campaigns operated initially on a voluntary basis, but then made obligatory by the forced labor [Music] service. Fritz Kalt, General Plenipotentiary for Labor Deployment, was in charge of a severe recruitment program across Europe. Civilians of both sexes, prisoners of war, Poles, and then Russians were all encouraged to work for the Reich voluntarily or [Music] forcibly. The Slavic populations were the most badly treated. There was a civil administration in the occupied territories, particularly in Ukraine, with regional commissioners who sent recruitment gangs into the small towns and villages. These recruitment teams enforced and compelled, sometimes entire age groups, to be sent to Germany to work. It was vital to enable the war economy to function, but it also explains the radicalization of the occupation of these territories. It was based on the idea that the Slavs were in any case inferior to the Germans, and that they were obliged to work for the Reich. Prisoners of war, civilian conscripts, men and women drafted from the Ukraine, volunteers from Italy, volunteers from the Benelux countries, and volunteers from France, sucked into the German industrial apparatus, such that by 1944-45, the ethnic, cultural, national complexion of a major German industrial city is much as it is today. In other words, at that point, Germany's labor force is in fact more cosmopolitan than it is today.
While Speer was working day and night to select and transport the slave labor, Heinrich Himmler and the SS were murdering millions of Jews, thus depriving the Reich's factories of a precious workforce. In the second half of 1942, 2.4 million workers, laborers, and crafts people were killed in the extermination camps simply because they were Jews. The destruction of 6 million people, many of whom were highly productive workers, is an extraordinary waste of human potential. There's no way around that. Um, and it would be absurd and obscene to deny that. But the question, of course, is what kind of logic, what kind of rationality does the regime impose on this project? And we're talking at that moment about the Holocaust in its purest form, if one can speak in those terms. This is not the Holocaust by proxy. This is not the executions in the killing fields of Eastern Europe. This is Treblinka, Sobibor, and then Auschwitz. These are the industrialized killing centers of the Holocaust. And they are being fed with people at an accelerated pace in '42-'43 with a view to clearing out the Polish food balance, such that Poland moves from being an area that takes food from Germany, which is what it had been in the early stages of the occupation, to being an area that.
Can deliver food, and the reason why that problem is so urgent is that there are reports coming in from the Reich of valuable Ukrainian workers falling down effectively dead at their workstations across, uh, the factories of Germany because Germany cannot deliver the food that's necessary. So, you see a direct linkage there between the imperatives of the Armament economy, the imperatives of forced labor, and the imperatives of food. The needs of the economy and the genocidal obsessions revolved around the issue of food. Killing the Jews enabled the slave workers who were exhausted in the Reich's factories to be fed. Death became the engine which drove the Nazi economy. Industrialists saw starving and mistreated forced laborers arriving in their factories.
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The management of the Mitteldeutsche Motoren Werke, the M M W, a company which built airplane engines for Junkers and Messerschmitt, expressed their worries in a sober report to the Reich's Aviation Ministry. "If, in the case of earth-moving work, we employ 2,000 Russians and due to insufficient supplies we lose several hundred of them each quarter, it's easy, easy to replace the missing workers by new ones. However, in the process of building an arms factory, it is simply impossible to replace a man who works on special machinery quickly."
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Enough forced labor was a solution as brutal as it was beneficial to the war economy. In factories, it was impossible to spot the boundary between racial ideology and cynical managerial organization. The death of workers was just part of the Nazi industrial equation. The efforts to rationalize, however, could not save the Reich. On February 2nd, 1943, the Red Army inflicted a resounding defeat on the Wehrmacht at Stalingrad, and Allied bombing brought the battleground to German factories and towns. If you look inside the apparatus of the Speer Ministry in the spring of 1943, as the Allied bombers, above all the RAF, begin sustained bombing of the Ruhr in the northwest of Germany, which is the heavy industrial heartland of Germany, there can be no doubt that it, in fact, sabotaged all of their efforts to increase armaments production in 1943. They're completely explicit about it, and you can see in the statistics of the armaments ministry, there is no sugar coating this, that armaments production flatlines. It doesn't collapse, but it stops going up, which is, of course, the promise of the Speer Ministry that it will go on up endlessly. Hitler's dictatorship was characterized by continuous upheaval. Faced with military defeats, with a disorganization and slowdown of its economic machine, the regime could only respond by upping the stakes. In 1943, Total War was decreed.
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In the factories, as well as on the battlefields, war just had to go on. Behind the superlatives and provocative language of Total War, an unwavering alliance was forged between Speer and Himmler. The extreme violence of the SS became a tool of management and organization. "Speer will get on in the meantime with fighting for the end, and for the promise of final victory, come what may, against whatever the odds, and what he needs for that is the promise of technology, this voluntarist vision of rationalization, and he needs the means of coercion. He needs to be able to threaten everyone in Germany, and that actually centers on the demand to discipline German factories and German workers and German businesses into surrendering to the demands of the total war effort. And that's where Heinrich Himmler comes in, because Heinrich Himmler provides you with the muscle and the informant network and the spies to go into every factory in Germany." Speer told the aeronautical engineers and factory managers, "Strike down whoever gets in your way, we will back you up." He traveled up and down the country in a train which served as a peripatetic court, in which factory managers were put on trial for not meeting their objectives. German bosses learned to use violence to keep productivity going. By '42-'43, memos are circulating about the best practice of using foreign labor, which include the new idea of performance feeding. So, one way, it turns out, you can get the best out of your workforce. If you've got, um, 4,500 calories to allocate, you can allocate 1,500 to three workers. Each one of them, uh, will be basically malnourished and incapable of sustaining hard physical labor. Or you can run a competition between the foreign workers, and as one of them declines relative to the other two, strip his or her rations away and reallocate it to the high-performing workers. And by the time you're feeding one of them 3,000 calories and the other down to 750 each, you've got at least one high-productive worker. There's a knowledge process that goes on here. The German employers and managers learn about human nutrition. They learn about base metabolism. They begin to understand that it's important not just to feed them great big, you know, cauldrons of soup consisting largely of sugar beet and potato. You actually have to find some scraps of meat to provide them with protein, otherwise productivity declines over time. You have a highly cynical process of learning that goes on, an optimization that is documented throughout the managerial apparatus of industrial Germany.
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The ideological ranting of Total War and the radical accounting and management systems of Speer were unable to fully hide the reality of the economic figures. However hard propaganda heralded the new Tiger tanks, which were heavier and more powerful than the American Lee tanks, the statistical reality of industrial production was incontrovertible. In 1943, 18,300 assault tanks left German factories against a total of 54,000 produced by the Allies. The US, the Soviet Union, and the UK produced four times more planes than the Nazi regime. The game was up for Germany by 1943-44, when it was already clear that Germany was unlikely to win the war. Many industrialists kept going, but they also began to make plans for what would happen afterwards. You know, they wanted to find some way, you know, in which they might be able to integrate themselves again into the world market. So, in some cases, they began to hide away machinery. They hide it in bunkers and things like this so that the military couldn't see it. We see companies shifting their IP, their intellectual property, to branches they might have in Stockholm or a branch they might have in Zurich. You just do a little, very below-the-surface kind of accounting transfer where we say, we know we're not going to be able to save our factory, but what we'll do is we'll transfer the engineering blueprints to the office in Stockholm. So you see those kinds of moves beginning to take place where companies are not explicitly opting out of the war effort, but preparing the basis for some kind of recovery after the end of the war.
After the Normandy Landings on June 6th, 1944, Nazi Germany, despite a last effort, started to implode. Nazism sought salvation once again in technology. Speer, a consummate organizer, coordinated the production of miracle weapons: electric and diesel-powered submarines, which were faster and quieter; the V1 ballistic missiles and V2 rockets; the Messerschmitt Me 262 jet fighters; and human torpedoes. All these miracle weapons were meant to bring about victory.
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The combination of the ideology of the fighting German spirit with the technical know-how of engineers was implausible. The miracle arms were too expensive, unreliable, and failed to change the course of the war. A war that was never ending because the collusion between Speer, Himmler, and the major industrialists ensured that the regime held on resolutely until the final defeat. And then, in '44, as the regime really hits the buffers and is facing the end, um, there is the widespread dispersal of concentration camp inmates, and even Jewish concentration camp inmates, to high-status armaments production. The most notorious and the most famous of which are the underground project factories for the V1 and the V2 rockets. If you ask about the logic of this system, I think it has two basic drivers: one from the point of view of the SS is the ultimate annihilation of this population, and then the other is the maintenance of production in the Third Reich under increasingly impossible conditions until the very end. And so it's out of that that you that emerge these extraordinarily inefficient, irrational production lines buried deep into the mountains of Thuringia, where you're producing weapons which can have no more than a symbolic effect on the outcome of the war, with humans who can barely stand. There is a real imbrication at that point between the final stages of the final solution and the final last-ditch efforts to maintain armaments production. In the summer of '44, there is a hotline, a telephone line, between the RSHA and the command centers of Albert Speer's Ministry, in which they daily discuss the level of deliveries of human material that the RSHA is receiving from Hungary and how many of those have been judged on the ramp fit for immediate deployment to high-priority armaments factories. And they're going overwhelmingly to Luboard production and to Felten & Guile, to V1 and V2 production. The contract with the SS for concentration camp labor, and especially Jewish concentration camp labor, isn't a contract for individual workers. It's a contract for a flow of labor. And so, if somebody is used up and no longer usable, you just simply expect the SS to replace them with another body. Right up until the end, the Nazis were obsessive in their pursuit of their number one priority: the mass killing of European Jews. This objective was taken up by the factories of the Reich, turning them into instruments of death by work. Under Speer's leadership, death was just another variable which production had to deal with. And then fundamental questions begin to arise about, do we conceive of a future for the German population beyond the end of the war? The truly crucial decision is taken, however, to allocate all of the available chemical raw materials to the production of ammunition, which has a disastrous impact for Germany because it means that none is left for fertilizer production. And so Germany faces, from the summer of 1945, a year of agriculture with no fertilizer. So they're planning the collapse of food supply beyond beyond the summer of '45. This is an explicit decision taken by the Speer Ministry, weighing up, as it were, the costs and benefits of continuing the war or providing the basis for the continued production of food. The ultimate victims of Nazism were the Germans themselves. In December 1944, Göring exhorted workers of the necessity of continuing production in a factory without electricity. For over 12 years, the scramble to go to war had been built on credit, a huge amount of credit, at first hidden by the Mefo bills, offset by spoliation and confiscation, fueled by the recourse to unlimited money printing, producing cash that just stagnated in savings accounts. In this headlong rush, the regime had enlisted business leaders, engineers, managers, and accountants. On May 8th, 1945, Germany capitulated.
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National Socialism had invented nothing new. Anti-Semitism, eugenics, racism, colonialism, and forced labor were all ideas that had existed in European culture for centuries and were just recycled by the Nazis and radicalized. Nevertheless, Hitler's regime was capable of inventing an economy, a system of production and finance built built around plundering, theft, and death. In Allied-occupied Germany, hundreds of billions of Reichsmarks printed by the Nazi regime during the war were released from savings accounts and flooded the partly freed economy. Inflation soared. The Germans understood that it was better to spend a fortune on food on the black market than to hang on to cash that would have no value the following day. And some things had a real currency, to cigarettes, for example. You know, people were desperate for cigarettes, real cigarettes, because they'd had fake tobacco for a lot of time. Real cigarettes, and you know, this could be used as a bargaining tool. You would change 20 cigarettes if you had them for a loaf of bread. The real German currency in 1945 was cigarettes. It's a truth that's I think quite difficult to swallow, but there's no doubt at all that, um, in terms of brute capital accumulation, the Nazi regime increased the productive capacity of the German economy, or the territories that were German in 1938 and then become Polish, for instance, after 1945. If you look at the estimates of installed capital, machine tools, industrial plant that we have for 1938, then still in 1948, so 10 years later, after reparations, after dismantling, after bombing, the total quantity of capital available is larger than it was at the beginning of the war. Large parts of the gigantic chemical industrial zone which the German, the Nazis built in Silesia because it was out of the range of Allied bombers early in the war, ends up as the core, the kernel of the heavy industrial complex of the new Polish state after 1945. Auschwitz is part of that complex. The Auschwitz rubber plant continues to function all the way down to the present day. It's one of the largest synthetic rubber plants in Europe. Industrial capitalism had adapted itself to Nazism. It had managed to integrate the genocidal obsessions of the regime into its means of production. It had survived bombing and, like a phoenix from the ashes, rose again to carry on doing what it knew best: productivity, come what may.