Autarchic States: Nazi Germany

Facism

Simply put, fascism is a political philosophy, movement, or regime that exalts nation above the individual and that stands for a centralized autocratic government headed by an dictatorial leader, strong economic and social regimentation, and forcible suppression of opposition. {1} It is generally opposed to liberalism, communism and traditional conservatism, and became important in the first part of the twentieth century in Germany, Italy and Spain. In Germany, the movement grew out of the W.W.I, out of the social unrest and ineffective governments that followed defeat, and out of total war itself, where civilian and combatant became largely indistinguishable. Socialism's class conflict was replaced by conflict between nations and races, with a mixed economy aiming to secure national self-sufficiency (autarky) through protectionism and, if necessary, military invasion. {2}

Germany

When the Nazis came to power in Germany in 1933, the economy had largely collapsed, unemployment was high, there were no colonies to exploit, still ruinous war-reparations to pay, and no prospects of either attracting foreign investment or of obtaining credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich turned a bankrupt Germany into the strongest economy in Europe within four years. In contrast to the USA, economic recovery preceded rearmament, and indeed enabled it. In contrast to Russia, the Nazi planners did not work with revolutionary zeal but moulded the existing form of decentralized capitalism into a more effective centralized system with large combines that supported national aims. Germany formally recognised Soviet Russia at the Treaty of Rapallo, which also cancelled war debts and allowed Germany to produce and perfect in the USSR weapons forbidden by the Treaty of Versailles.

Central to Nazi success was the Work Creation Program of 1933-6 that between January 1933 and July 1935 increased the number of employed Germans from 11.7 million to 16.9 million. By propaganda, removal of dissent and brutal coercion of the work-shy, unemployment was banished from the German economy and (unlike current austerity programs) the entire nation was productively engaged in constructive work. Inflation was brought under control by wage freezes and price control. Financing drew upon sovereign credit creation techniques already experimented with prior to Hitler's appointment as Chancellor. From 1933 the government created massive short-term sovereign credit, backed with a firm commitment to retire in full the debt created. Under the scheme of ‘pre-financing’ with work-creation bills, the Reich Finance Ministry distributed these WCBs (three months, renewable up to five years) to participating credit institutions and public agencies. Contractors and suppliers who required cash to participate in work-creation projects drew bills against the agency ordering the work or the appropriate credit institutions. These credit institutions then assumed liability for payment of the bills, which, now treated as commercial paper, could rediscount the bills at the central Reichsbank. The entire process of drawing, accepting and discounting WCBs provided the cash necessary to pay the contractors and suppliers. The experience of successful rollover every three months quickly established credit worthiness. The Reich Treasury undertook to redeem these bills, one-fifth of the total every year, between 1934 and 1938, as the economy and tax receipts recovered. As security for the bills, the Reich Treasury deposited with the credit institutions a corresponding amount of tax vouchers (Steuergutscheine) or other securities. As the Treasury redeemed WCBs, the tax vouchers were to be returned to the Treasury. {3}

Nazi economists understood that sovereign credit creation for purposes of job creation posed no inflationary threat and that it would be a far more responsible policy than the conservative approach of tax increases and welfare cuts to balance government budgets. {3}

In 1933, Hitler sought to reassure Germany's business leadership that Nazi rule was consistent with the preservation of the free-market system, because he needed the support of the industrialists. He could buy that support by keeping wages down during the recovery, but any rigorous effort to curb prices and profits would have alienated the business community and slowed down economic recovery. Instead, Hitler therefore sought to restore profitability to German business through reduced unit cost achieved by increasing output and sales volume. Adoption of "performance wage" (Leistungslohn — payment on a price-rate basis) increased labour productivity, thereby driving costs down and profits up. Some upward price movements were permitted to adjust price relationships between agricultural and manufactured products and between goods with elastic and inelastic demands, measures that also prevented price wars and below-cost dumping. The difference between German economic recovery under Hitler and US economic stagnation under Roosevelt in the 1930s was the degree of uncertainty for new orders for goods. Hitler made it clear that after 1936, a major rearmament program would make heavy demand on German durable-goods and capital goods industries without the need to export. With that assurance, German industry could plan expansion with confidence. Roosevelt, in contrast was unable to provide such "confidence" to industry and had to rely on anaemic market forces until after the Japanese attack on Pearl Harbor, Hawaii. {4}

America

With its close ties to big business, military adventurism and erosion of individual freedoms, {5} the America government is often termed fascist by the left-wing press. {6} Yet America is not an autarchic state, but the centre of the world's interlinked economies. Nor is the press muzzled, or dissidents sent to concentration camps. Black Americans are still disadvantaged, certainly, but there is not the wholesale deprivation of rights the Jews faced as the holocaust approached.

Clearly, America and the western democracies are very far from the horrors of communist Russia or China. {7}

Nonetheless, through surveillance, a compliant media, increasing complex legislation and a militarised police force, America now has the means to enforce a police state far more effective than was the Stasi of East Germany: all the mechanisms are in place. Many look to China and Russia to check western ambitions, but history does not suggest these will be any less controlling. Most terrorist plots in America since 9/11 have been FBI 'stings', weakening belief in accountable and principled government. Much more disturbing are the many improbabilities the alternative press has unearthed in the official accounts of Oklahoma, 9/11, the London bombings, Moscow bombings, Ottawa shootings, Charlie Hebdo incident and the Beijing Games event, suggesting that most or all were false flag operations — a decidedly unwelcome conclusion that is naturally derided as lunacy in the mainstream press but does unfortunately explain many aspects of contemporary governments.

The key event is 9/11. Others can be ascribed to cover-ups by government agencies of events beyond their control. Or to actions of rogue elements in the security services. Or to 'protected assets' used to foment trouble abroad that have escaped their handlers and run amok at home. But 9/11 was only possible with government complicity at the highest levels, and raises serious questions about the democratic and beneficent nature of post-industrial states. 9/11 was used to curtail civil liberties in America and wage costly wars abroad — wars which have destabilised large parts of the Middle East and threaten conflict with Russia. {8}

Few would advocate a return to repressive Nazi government, but their full employment approach (i.e. putting people before finance, which is also urged by Modern Money Theory) does remain a viable alternative to austerity programs that have largely benefited the rich. {9}

References and Further Reading

Need the 38 references? Please consider the inexpensive ebook.