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DID ECONOMICS CAUSE WORLD WAR II? Robert J. Gordon Working Paper 14560 http://www.nber.org/papers/w14560

NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 December 2008

This paper is a review article of Tooze (2006) and related literature on the same topic and will appear in the Journal of Economic History in March, 2009. I am grateful to Joel Mokyr for helpful suggestions. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. 2008 by Robert J. Gordon. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including notice, is given to the source.

Did Economics Cause World War II? Robert J. Gordon NBER Working Paper No. 14560 December 2008 JEL No. H56,N14,N24,N54,N64,N70,N74,N80,N84 ABSTRACT Historians have long recognized the role of economic resources and organization in determining the outcome of World War II: the Nazi economy lacked the economic resources and organization to oppose the combined might of the U.S., U.K., and U.S.S.R. A minority view is that the Germans were defeated not by economics, but by Hitler's many strategic and tactical mistakes, of which the most important was the invasion of the Soviet Union. Compared to this debate about the outcome of the war, there has been less attention to economics as the cause of World War II. This is a review article of a new economic history of the Nazi economy by Adam Tooze which cuts through the debate between economics and Hitler's mistakes as fundamental causes of the outcome. Instead, Tooze argues that the invasion of the Soviet Union was the inevitable result of Hitler's paranoia about the land-starved backwardness of German agriculture as contrasted with the raw material and land resources of America's continent and Britain's empire. The American frontier expansion that obliterated the native Indians provided Hitler with a explicit precedent, which he often cited, for pushing aside the native populations in the east to provide land for German Aryan farmers. Germany's agricultural weakness is summarized by its low land-labor ratio, but Poland and the Ukraine had even less land per person. Thus simply acquiring the land to the east could not solve Germany's problem of low agricultural productivity without removing the native farming populations. Far better than other histories of the Third Reich, Tooze reveals the shocking details of General Plan Ost, the uber-holocaust which would have removed, largely through murder, as many as 45 million people from eastern agricultural land. Tooze, like the Nazis before him, fails to emphasize that the solution to Germany's agricultural problem was not acquiring more land for the existing German farm population, but rather by raising the land-labor ratio by making the existing German land more efficient, mechanizing agriculture and encouraging rural-to-urban migration within Germany.

Robert J. Gordon Department of Economics Northwestern University Evanston, IL 60208-2600 and NBER rjg@northwestern.edu

Introduction
Historianshavelongrecognizedtheroleofeconomicresourcesand organizationindeterminingtheoutcomeofWorldWarII.Therewasneverany doubtthattheeconomicresourcesoftheU.S.overwhelmedthoseofJapan,and regardingthewaragainstGermanyapowerfulcaseassembledbyHarrison (1998),Overy(1994),andmanyothershasarguedthattheNazieconomylacked theeconomicresourcesandorganizationtoopposethecombinedmightofthe U.S.,U.K.,andU.S.S.R. Aminorityviewdisputestheprimacyofeconomicsindefeatingthe GermansbypointingtoHitlersmanystrategicandtacticalmistakes,ofwhich themostimportantwasinvadingtheU.S.S.R.Amongthemorepersuasive counterfactualscenariosabouttheGermanwarasawholearethosedeveloped byAlexander(2000)andTsouras(2006),whilemanyotherbooksexamine alternativeoutcomesofparticularphasesofthewar,e.g.,ahypotheticalGerman invasionoftheU.K.ordefeatoftheAlliesatDDay.Astrongcaseforthe legitimacyofcounterfactualhistoryismadebyFerguson(1999). WhiletheroleofeconomicsandofHitlersmistakesindeterminingthe warsoutcomehasbeenexaminedextensively,lessattentionhasbeenpaidto economicsasacauseofGermanaggression.ThisreviewarticleofAdamToozes (2006)ambitiouseconomichistoryoftheNaziregimefindstheauthorsmost significantcontributiontolieinhisintricateaccountoftheprewarweaknessof theGermanagriculturalsectorasamotivationforHitlersdeterminationto expandtotheeast.Hitlerwasparanoidaboutthelandstarvedbackwardnessof Germanagricultureascontrastedwiththerawmaterialandlandresourcesof AmericascontinentandBritainsempire.Landhungerwasone,ifnotthe mostimportantimpulse(p.166).TheAmericanfrontierexpansionthat

obliteratedthenativeIndiansprovidedHitlerwithaexplicitprecedent,whichhe oftencited,forpushingasidethenativepopulationsintheeasttoprovideland forGermanAryanfarmers.Itwasthelastgreatlandgrabinthelongand bloodyhistoryofEuropeancolonialism(p.462).Toozedevotesfarmore attentionthanotherrecenthistoriesoftheThirdReichtotheultimatelogical conclusionofHitlerseasternlandhunger,thesocalledGeneralPlanOstthat wouldhavedisplacedandperhapsultimatelykilledasmanyas40million easternEuropeanstoprovidetheGermanswiththelandthatHitlercoveted. Toozesprefaceproclaimsagrandambitionforthebook,tobringtothe understandingofNazieconomicsthesamemajorleapforwardthatheclaims hasbeenachievedinpoliticalhistoryoverthelasttwodecades.Butthebooks achievementsaccomplishonlypartofthisambition.Mostofwhatwelearn abouttheprewaryears(193339)repeatswhatwealreadyknewbutnowinmore detail.Toozestreatmentofthewaritself,193945,ismoresuccessfuland containsafascinatingsetofanalysesthatenrichourpreviousideasaboutthe conductandoutcomeofthewar.However,Toozeisnotthefirsttofocuson Germanyslandshortageasabasiccauseofwar.Barkaimakesexactlythesame point:HitlerprojectedintotheutopicdistanceavastagrarianGrossraumthat wastobeconqueredbythesword,avisionthatcouldnotberealizedwithin Germansfrontiersuntil1939(1990,p.157).

ThePrewarYears,193339
Whatwealreadyknewabouttheprewar1930scomesfromBarkai(1990) andAbelshauser(1998),amongothers,andonthebigquestions,Toozereaches thesameconclusions.TheGermanrecoveryfrom25percentunemploymentin 1932tolessthan5percentby1936/7wasachievedbyamoneyfinancedfiscal

expansion.TheseauthorsaskhowandwhentheNazisbecameKeynesians beforeKeynes,whenduringthesameperiodtheRooseveltNewDealwas failingtobringtheUSunemploymentratedowntosingledigits.Allthree authorstracetheideaforcreditfinancedexpansionbacktothepreviousWeimar governmentandtotheNaziSofortprogrammcontainedina1932political manifestothatwaswidelycirculatedinpamphletform...duringthecampaign fortheJuly1932Reichstagelection(Abelshauser,p.129). Toozeconfirmspreviousfindingsthatrelativelylittleoftheexpansionin publicexpenditurestooktheformofpublicworksliketheautobahns,whileover 80percentconsistedofspendingforrearmament.Abelshauser(1998,p.169) callsthismilitaryKeynesianismonalargescale.Thecentralresource constraintinthe1930swasforeignexchange,andthisshortageledtoabyzantine systemofexportsubsidiesandimportcontrols.Whydidtheregimerefuseto devaluetheReichsmark,particularlyin1936whenmostofitsneighbors devalued?TheanswerssuggestedbyToozeandhispredecessorsmakelittle sense.AccordingtoTooze,theNaziregimefearedtheconsequencesof devaluationforservicingitslargeforeigndebt,butwhycouldtheNazisnothave devaluedin193334andrepudiatedthatforeigndebt(afterall,theyimposeda moratoriumonforeigndebtrepaymentasearlyasJune,1934)?Didtherefusal todevaluerepresentafearofinflation?Whilethisexplanationmightseem plausibleafterthetraumaof192223,itbecomeslessconvincingwiththepassage oftimeastheGermaneconomyexpandedtowardfullemploymentduring1933 36withoutanysignificantinflation. Didprivateconsumptionriseinthe1930sorwasitsqueezedbythe shortageofforeignexchangeandthedemandsoftherearmamentprogram?The readersearchesinvainamongToozesmanyfiguresandtablesforananswer. Thereareonlyscatteredcommentsaboutparticularshorttimeintervals,e.g. 3

therewasnogrowthinconsumergoodsproductionbetween1934and1936and aflatleveloftextilesproductionbetweenearly1934andlate1935.Butwhat aboutthepost1933periodasawhole?WemustturntoBarkai(AppendixTable 1,textp.232)tolearnthatpercapitarealconsumptionexpressedasanindex numberwas88in1933,100in1936,108in1939,andfellbackto100in1942. Abelshausers(1998,Table4.2)timeseriesofindustrialproductionofconsumer goodsisquitesimilar(100in1936,110in1939,and95in1942).Boththese authorscontradicttheimpressionprovidedbyToozethatconsumption stagnatedinthe1930sandhighlightbytheirexamplethefrustratingtendencyof Toozetopresentdataoveronlyafractionoftherelevantnumberofyears. EvidentlytheNazieconomysucceededatleastuntil1939inexpandingthe productionofbothgunsandbutter,orinAbelshauserspithyphrase(1998,p. 148)asmuchbutterasnecessary,asmanygunsaspossible.Thisresidual increaseinconsumptionishardlysurprisinginviewoftheenormousamountof initialeconomicslackin1933. ThepreviousliteraturehasemphasizedtheNazipolicyofholdingdown realwagesasacontributiontotherapidexpansionofemployment,theopposite oftheperversewageincreasingpoliciesofRooseveltsNRA.Indeed,Barkai showsthattheshareofGermanwageincomeinnationalproductdeclinedfrom 64to59percentbetween1932and1936,whiletheincreaseinprofitswasquite spectacular(p.196).Likewise,Abelshauser(p.148)reportsthattheincome shareofthebottomhalfoftheincomedistributionfellfrom25to18percent between1928and1936.ButToozehasnothingtosayaboutthechangeinthereal wage,onlyaboutthelowleveloftheGermanstandardoflivingasmeasuredby howmanyminutesoflaborwerenecessarytopurchaseeverydayitemslike cigarettesorcoffee(pp.1413).TheseindicatorsofrelativeGermanpovertyare usedbyToozetosuggestthatGermanworkershadastandardoflivingonly 4

onefourththelevelofAmericans.Hemakesnoattempttoachievea reconciliationwithMaddisonsestimatesthattheratioofGermantoUSreal GNPpercapita,afterdecliningfrom72percentin1913to65percentin1928, jumpedto84percentin1938(seeHarrison,1998,Tables1.1and1.2).Granted thatGNPincludesmorethanconsumption,particularlyinviewofrearmament expenditure,butthegulfbetweenToozesonefourthestimateandMaddisons muchhigherimplicitestimateseemstoolargetobridge. AmajorshareofToozesprewaranalysisisdevotedtoGerman agriculture,inordertosupporthiscentralpointthateconomicscreatedthe motivationforwar.TheNazisonlyperceivedsolutiontoinadequatefood productionwasaneastwardexpansiontoobtainlebensraumbyforce.The1933 censusrevealedthatfully29percentofGermanemploymentwasinthe agriculturalsector,andthattherewasgreatinequalityinlandholdings.Inan attempttosqueezemoreproductionoutoftheseresources,asetofdraconian priceandproductioncontrolswasputinplacein1933thatendedthefreemarket inagricultureandextendedbureaucraticcontrolintoeveryfield,barnyard,and milkingshedinthecountry(p.187). TheNazisfocusonlebensraumwasdrivenbyaperceivedlandshortage. Germanyhadonly2.1hectaresperfarmworker,comparedto12.8intheUS,3.8 intheUK,and2.8inFrance(p.176).YetboththeNazisandToozelookatthese factsupsidedown.Theproblemwasnottoolittlelandbutrathertoomanyfarm workers.GermanyhadfourtimesasmuchagriculturallandasBritainthatwas cultivatedbyseventimesasmanyfarmworkers.Akeyaspectofeconomic developmentisthemovementoffarmworkerstoindustrialandservicejobsin thecities.TheNazisfailedtoseetheobvioussolution,programstoencourage themovementofpeasantswithsmalllandholdingstoindustrialjobs,which wereplentifulinthefullemploymenteconomyachievedafter1936.And 5

Toozesfactsonlandlaborratiospreviewedtherequiredbrutalityoflebensraum; prewarPolishfarmershadonly1.8hectaresperfarmworker,lessthanGermany (p.176).SimplymergingPolandintoGermanywouldnothelp.Onlyby expellingorexterminatingeveryoneofthe10millionPolishfarmersandthen replacingthemwithlandlessGermanpeasantswouldthecombined German/PolishlandlaborratiobebroughtuptotheBritishlevel.Thelow land/laborratioandtheoveralllevelofpovertyintheUkrainecompoundsthe Polishexample.

The193945War,theOccupiedCountries,andGeneralPlanOst
Thestoryofthe193945warisfamiliar,butToozemakessignificant contributionsbyprobingdeeplyintothesourcesofGermanysresource constraintsandtheirstrategicconsequences.Byearly1941theGermanshad becomedependentonrawmaterialsimportedfromtheUSSR,andToozeposes theircentralstrategicdilemma.ShouldGermanycontinuetorelyonthose importsorratherinvadetheUSSR,ineffectgrabbingtheresourcesratherthan payingforthem?OncetheUSSRwasconquered,Germanywouldbereadyfora battleofthecontinents,startingwiththeoilsuppliesoftheMiddleEast.One mustask,asToozedoesnot,whythedrivetotheMiddleEastforoilsupplies didnottakeprecedenceovertheinvasionoftheUSSR?Rommelwasstarved forsuppliesinNorthAfricain194142,andadiversiontohimofonlyafewof thepanzerdivisionsallocatedtotheRussianfrontwouldhaveallowedthe GermanstopushpastSuezintotheoilrichMiddleEastbymid1942. ThestandardinterpretationbyOvery(1995)andothersisthatthe Germanslackedsufficientresourcestowinthewar,andthattheybungledthe managementoftheresourcesthattheypossessed.WhydidtheAmericansand

RussiansproducesomuchandtheGermansproducesolittle?InOverys version,theGermansfailedtoappreciatetheAmericantechniqueofmass productionandproducedtoomanyvariantsofweaponsatanunnecessarily highlevelofquality.ProductionstagnateduntilAlbertSpeercametotherescue inhistemporary194244economicmiraclethatachievedquantumleapsin armamentsproductionuntilthatmiraclewascutshortbyAlliedbombing. Indeed,ToozeconfirmstheconventionalwisdomthattheRussianproduction miraclewaslargelyachievedatasafedistancebehindtheUrals(p.588). Toozealterstheemphasisfrommismanagementtothemanydimensions ofresourceshortages,andhisindictmentofGermanmismanagementshiftsfrom domesticarmamentsproductiontothebungledtreatmentoftheresources availableinthewesternnationsconqueredinthe1940Blitz.TheGermanshad greathopesthattheirownresourceshortageswouldberelievedfromthe conquerednations,particularlyFrance.Buttheyforgotthatincentivesmatter. FrenchfarmersweredemoralizedbyGermanconfiscationoffoodandbythe neardisappearanceofenergy,bothpetrolandcoal.TheFrenchharvestdeclined byhalfbetween1938and1941.Withoutfood,Frenchcoalminersreducedtheir workeffortandatonepointwereinopenrebellion,andToozearguesthatin nootheroccupationisproductionsorelatedtothefoodintakeofworkersasin thecoalindustry.AndwithoutcoalGermanysongoingshortageofsteelwas exacerbated.Strippingtheconquerednationsofrailroadwagonsmadematters worse,asdidthecruelandabysmalconditionsinwhichslavelaborersfrom France,Poland,andelsewherewereforcedtoworkinGermanysarmaments factories.InfactToozecomesupwiththestunningfigureof7millionslave workers,includingUSSRprisonersofwar,whodiedfrombarbaricconditions whowouldotherwisehavebeenavailabletosupplementtheacutelabor shortagesoftheReich. 7

Toozessearchforthesourcesofunderproductionintheconquered territoriesextendstothelackofimportedgrainsandoffertilizerduetothe Britishblockade.SincetheconventionalwisdomisthatBritaincamecloseto losingthewarasaresultoftheUboatattacks,Toozedeservescreditfor pointingouttheconverse,thatcontinentalagriculturesufferedirreparablyasthe resultoftheBritishblockade,apartialrepeatofthefooddeprivationthat GermanyexperiencedduringWorldWarI(Offer,1989). ToozereinforcesthesepointsbyshowinghowmuchmoreBritaingained fromitsalliancewithAmericathanGermanygainedfromitsconquered millions.TheinitialCongressionalLendLeaseappropriationinMarch,1941(at aplausibleexchangerate)equaledtwofullyearsofdomesticGerman armamentsproduction.Bytheendof1941theUKhadreceivednolessthan 5000aircraftfromtheUS,whileGermanyhadobtainedamere78aircraftfrom FranceandtheNetherlands.Inadditiontosteel,oilwasthebindingconstraint onGermanmilitaryadvances,andoneofthemoststrikingofToozesmany novelcomparisonsisthatin1942Britain(despitetheuboatsinkings)imported morethanfivetimesasmuchoilfromtheUSasGermanyimportedfrom Romania.BritishplannersdisplayedincredulitythatHitlerwouldhave invadedtheUSSRwithlessthanathirdofthepetrolstocksthattheBritish consideredtheminimumtolerablelimit. Toozereturnstothisthemewithevenmorestartlingcomparisonsabout theyear1943,whentotalUSarmamentsproductionwas30timeshigherthanthe contributionoftheconqueredterritoriestotheReich,andUSshipmentstothe UKwerefourtimeshigher.AcriticalLendLeasecontributionwasthefleetof 400,000Dodgetrucks,whichcarriedtheRedArmytovictorywhiletheGermans wereretreatingwiththeirarchaichorsedrawntransport.Resourceconstraints alsounderminedtheentirerationaleoflebensraum.Yes,theUkrainehadagrain 8

surplus,butitcouldhavebeenharvestedaftertheSovietsscorchedtheearth onlybyamassivemovementoffarmmachineryfromGermanytotheUkraine, whichwasbeyondtherealmoffeasibilityduetoshortagesofpetrol,notto mentionofthemachinesthemselves. ToozesmostoriginalcontributiontotheeconomicsofWorldWarIIishis

detailedaccountofGermanysplannedberholocaust,GeneralPlanOst(GPO), whichcontinuesToozescentralthemethatGermanywasdriventowarbya shortageofagriculturalland.Barelymentionedinpreviouslargescalehistories oftheThirdReich,e.g.Burleigh(2000),GPOwastheplantodisplacemostofthe nonGermanicresidentsofPoland,Belorussia,andtheUkrainebyGerman ethnicswhowouldbeinvited(orforced)tooccupyhundredsofthousandsof squaremilesoffertilelandfromwhichthepreviousoccupantshadbeen removed.Andhowwouldtheyberemoved?Theplanimplicitlyassumed forcedmarchestonowherealongwhichmostofthedisplacedpeoplewoulddie throughnaturalwastage(p.476).Toozeestimatesthatthetotalnumberof peopleforcedoutwouldhaveamountedtoanunbelievable45million,more thanseventimesthenumberofrecordedvictimsoftheholocaust. FortunatelyforthefutureofEurope,GPOprovedtobebothstrategically andtacticallyimpossible.TheGermanfailuretocaptureMoscowinDecember, 1941,andthesubsequentSovietcounterattackconvertedtheGermaninvasion fromatriumphantmarchintoadesperatestruggleforsurvival.Thetactical failurewasdemonstratedinanexperimentalprojectinJuly,1942,todeportthe entirePolishpopulationoftheZamoregion.ThenumberofGermantroops perdisplacedinhabitantturnedouttobeaninfeasiblylargenumber,andtensof thousandsoftheinhabitantslearnedwhatwashappeningandfledinadvanceto thewoods,escapingtheroundupsquadsofGermanpolice,troops,and auxiliaries. 9

ThetraditionaldebateaboutWorldWarIIisbetweeneconomicresources andHitlersmistakesastheultimatesourceofAlliedvictory.Forabookon economichistory,Toozeadmirablydevotessubstantialattentiontomilitary strategyandtacticsandtheirinterplaywitheconomicresources.Perhapshis mostimportantinsightisthattheGermanlogisticalsystemwasnotequippedto penetratebeyond500kmintotheUSSR,andthatHitlercountedonthecollapse oftheRedArmybeforethatpointwasreached.ButtheRedArmy,despite losingmorethan3millionmentoprisonercampsandultimatedeathinthefirst twomonths,didnotcollapse. ToozeattributestheGermanfailuretocaptureMoscownottoHitlers mistakeofdivertingGuderianspanzerdivisionssouthtoKievinAugust,1941, butrathertofundamentallimitationsofsupply.Germanfueltrucksconsumed asmuchfuelintraversingamere500kilometersastheamountoffueltheycould deliver(similarly,forthesamereason,Pattonsarmyranoutoffuelineastern Franceinthefallof1944).ToozerightlydismissesplanningforBarbarossaas wishfulthinking,andwhentheGermansfailedtotakeMoscowin1941,the entireGermaneconomicplanningapparatuswasthrownintoastateofcrisis. PartoftheoutcomewaspredeterminedontheinvasiondateofJune,1941; Germanyhadmobilizedallofitsyoungmenfortheinvasion,withvirtuallyno oneinreserve.TheUSSR,withdoublethepopulation,hadvasthordesbeyond theUralswhocould,andultimatelydid,cometotherescueofMotherRussia, initiallyintheMoscowcounterattackoflate1941andintheencirclementofthe GermanSixthArmyatStalingradinlate1942. WhenToozereviewsthepeacetimeyearsofthe1930s,hetellsusmostly whatwealreadyknow.Buthisbookdeserveshighpraiseforwhatheteachesus aboutthewartimeyears193945themselves.Theshortageswereendemic;the harshtreatmentoftheoccupiedterritoriesstarvedthemwhiledeprivingthe 10

Reichoftheexpectedresources;theBritishblockadehadteeth;andthelogistical planningofthe1941invasionoftheUSSRwasbasedonabsurdlyunrealistic assumptions.Further,lebensraumwasnosolutiontoGermanysinefficient agriculturaleconomywithoutatacticallyinfeasibleberholocaust.Germany marchedintoRussiawith3millionmen,2000tanks,and700,000horses.All thosehorsesremainasymboloftheeconomicbackwardnessthatmotivated Germanytogotowarandultimatelycauseditsdefeat.

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REFERENCES
Abelshauser, Werner (1998). Germany: guns, butter, and economic miracles, inHarrison(1998),pp.12276. Alexander, Bevin (2000). How Hitler Could Have Won World War II: The Fatal ErrorsthatLedtoNaziDefeat.NewYork:ThreeRiversPress. Barkai, Avraham (1990). Nazi Economics: Ideology, Theory, and Policy. New Haven:YaleUniversityPress. Burleigh, Michael (2000). The Third Reich: A New History. New York: Hill and Wang. Ferguson,Niall(1999).VirtualHistory:TowardsaChaoticTheoryofthePast, inNiallFerguson,ed.,VirtualHistory.NewYork:BasicBooks,pp.190. Harrison, Mark (1998). The Economics of World War II. Cambridge and New York:CambridgeUniversityPress, Offer, Avner (1989). The First World War: An Agrarian Interpretation, Clarendon Press/Oxford. Overy,Richard(1995).WhytheAlliesWon.NewYork:Norton. Tooze,Adam(2006).TheWagesofDestruction:TheMakingandBreakingofthe NaziEconomy.LondonandNewYork,AllenLaneforPenguin. Tsouras, Peter G., ed. (2006). Hitler Triumphant: Alternate Decisions of World War II.London:GreenhillBooks.

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