I just finished The Wages of Destruction, an economic history of Nazi Germany. It’s a fascinating read, though occasionally tough – both because of how technical it gets sometimes and because of how depressing the time period is.

This book is a work of art. It’s really enlightening to see how economic constraints shaped not just production but also grand strategy and even genocide.

Here are my notes on the book:

• Germany was a middle income economy, so it faced more restrictions than its future foes. It feels a weird to read this, since Germany still was a major player. But the gap in per capita wealth was significant (about 50% of the US and about 66% of the UK in 1933).
• The job creation programme was very limited in actual scope, more propagandistic than anything else.
• The economic priorities in 1933 were three: rearmament; protecting agriculture; and autarky.
• In 1933, Germany had a lot of unemployment, so there was room for recovery without inflation.
• Agricultural protection became a system of control through the RNS, where the market mechanisms were completely replaced by price controls and quotas everywhere. Also through efficiency improvements which were significant. Still, bad harvests in 1934 through 1936 made things difficult.
• Balance of payments issue: Germany depended on imports for food, iron ores, oil, rubber and fabrics. Enormous synthetic programs were set in place but they couldn’t provide full autarky.
• During 1934-6, the mark was kept at a high value; exports were subsidized by a heavy import tax. Exports were critical because they brought in foreign currency; although exports also used a lot of steel.
• Germany needed about 25% more farmland than it currently had to be able to feed itself at the current levels of productivity.
• After a few years, the Reich defaulted on foreign debts. It established bilateral deals with different countries. Over time, the system of prices became very disjoint and inconsistent.
• Interesting experiment with risky strategic investments, like synthetic oil: ensure a rate of profit by the state, but any excess profits are also captured by the state. The state provides room for innovation but the payoff is bounded, so that the innovation happens but the excess energy is captured by the overall system.
• Increasingly, the Reich relied on soaking up the savings of the private sector.
• In 1938, the Anschluss provided a significant amount of foreign currency, which gave a few months of breathing room.
• Kristallnacht and the expropriation of Jews gave some internal financial breathing space to the government but not that much.
• In 1938, there was a spending spree in arms (about 20% of the GDP). Germany briefly overtook the US as the major producer of steel (around 20M tons per year). A breaking point was reached with finances and at the end of the year the government finally started printing money to cover the deficit.
• Until 1938, the government managed to shift the economy towards rearmament and full employment without significant inflation, though the cost of living crept up.
• The allocation of steel was so important that Hitler personally controlled big changes to it. Steel was still dependent on imported ores.
• The autarky programs received heavy investment early on and would eventually become significant.
• In 1939, Hitler correctly assessed that time would only erode Germany’s advantage, so rationally, the moment to strike was now. The Poles rejected a nonagression treaty. And the Soviets agreed on a treaty, pursued aggressively by the Germans after an alliance with the Japanese was not forthcoming.
• By early 1940, the Soviet Union became Germany’s main provider for imported animal feed, phosphates, also a third of its imported oil.
• Hitler’s insistence of an attack against France and the Britain in November 1939 almost brought a coup d’etat.
• When war with Poland broke out, Germany lost 80% of its imports.
• In early 1939, there was a strong reallocation of military budgets, with the Navy being scaled down mostly to U boats, the luftwaffe given primacy, and then a very strong drive towards ammunition. The Navy ended up using no more than 15% of the resources over the war. The luftwaffe, a whopping 40%. The rest went to the army. The doubling of ammunition production was the greatest increase of any war production programme in the entire war.
• The strategic calculus during 1939 was bet on a complete one-off of quick total victory in the West. Production followed, by working at unsustainably high levels.
• Women were already highly integrated in the German workforce even before the war. Germany started resorting to forcefully conscripted Polish workers.
• The food shortage was strong, particularly given Germany’s unproductive agriculture. This set in motion a policy of starvation of the Polish, and particularly the Polish-Jewish population.
• “In retrospect, it suited neither the Allies nor the Germans to expose the amagingly haphazard course through which the Wehrmacht had arrived at its most brilliant military success.”
• “In so far as there is a single explanation for Gerany’s stunning victory in France, it is the brilliant conception of Manstein’s plan of attack. (…) It was a synthesis, in other words, of crude materialism and military art. Since Germany had no overall material superiority (it had a total of 135 divisoins to the Allies’ 151), local superiority could only be achieved through the greatest possible concentration and by the greatest possible surprise.”
• After victory in 1940, the German sphere of influence was (if economic activity at pre-war levels) the greatest economy in the world: 290 million people, over a territory only slightly smaller than the US.
• Roosevelt’s goal: 50k planes produced per year. It hit 85k in 1943.
• The Grossraum had a big shortage of both oil and food. And for coal to be properly distributed, the logistics and organization were not there. The Western European economies collapsed under the combination of blockade and German occupation.
• Allies and Soviets properly estimated German oil stocks in 1940-1, but they considered it so low that they decided to double their estimate.
• Germany maintained exports during 1940 and the first half of 1941, to be able to stock up on food and raw materials.
• Against a lot of the historiography, Tooze maintains that Germany didn’t “fall asleep” while preparing for war with the Soviet Union.
• The foundations of armaments production of 1942-3 were set in 1941. Massive investment boom in chemicals and the Luftwaffe. Auschwitz started as a massive chemical works plant, the extermination camp was built very close by soon after.
• The German economy was fully mobilized already in 1941 and needs for manpower were clashing between draft and production.
• The Soviet Union had around 170m people in 1941, compared to about half that in Germany. The Soviet Union had about 40% the per capita income of Germany, but it had multiplied its industrial output by 2.6x from 1928 to 1940.
• The entire German strategy not only relied on blitzkrieg against the Soviet Union, but essentially assumed it a foregone conclusion in order to support the strategy of fighting the UK and the US. Everything hinged on destroying the Soviet Army in a range of 500km.
• Division between those who wanted to concentrate in Moscow to destroy political and organizational unity vs conquest for economic purposes (Ukraine, Caucasus, other parts of Western Russia).
• Germany was committed to not one but two programs of genocide: that of the Jewish population, and that of most of the Slavic population (the plan was to kill between 60 and 80% of the population of Ukraine, Belarus and Western Russia).
• The US’s conquest of the West was the model that Hitler sought to implement in the East.
• The Jewish population and Soviet prisoners of war suffered the brunt of imposed starvation.
• The quick blow of 1941 against Soviet Russia failed and threw the leadership of the Reich under crisis. Towards the end of the year there were severe shortages of oil and coal, and therefore also great shortages of steel.
• Todt’s death opened the road for Speer.
• Germany deprioritized the atomic bomb program at the same time that the Allies went forward with it.
• Saucker’s drive for forced labor brought the level of foreign workers to up to 20% of all workers in the Reich in 1944.
• Concentration camp labor wasn’t a stock, but a flow.
• The Holocaust started in H2 1941, peaked in 1942 and ended in 1943, except for the Hungarian Jews.
• Historiography considers the Nazi approach to forced labor as a struggle between genocide and rational economic utilization of non-German peoples. How can you otherwise explain the murder of 7-8 million potential workers during the war? Tooze’s contribution is to factor in the food scarcity as a way to rationally explain part of the systematic murder of possible workers.
• The moment where Germany lost the war was December 1941, when it failed to take Moscow. Many in the leadersip already thought in these terms.
• Between February and May 1942, the entire war economy leadership changed: Backe replaced Darre in agriculture, Sauckel started the drive to find forced labor and Speer replaced the recently deceased Todt as armaments minister.
• The concept of Speer’s armaments miracle functioned mainly as a rationale for continuing the war despite the war being lost.
• Speer joined the Nazi party early, in 1931, and built his career around his contacts in the party.
• The “miracle” of Speer in 1942 was chiefly already set in place by previous investments in 1941.
• If the 1942 harvest hadn’t been a good one in both Germany and Poland, millions of Poles would have been forced to starve. The harvests of 1940 and 1941 were considerably worse.
• Hitler’s order to use the tanks of Army Group Center to attack South towards the Ukraine brought the greatest victory of Germany in the Eastern Front.
• The Zentrale Planung, also established in 1942, became an official economic war council. It was chaired by Speer. Half of its meetings were about steel, another 25% were about coal or labor assigned to coal production, and coal was a major factor in steel production.
• The steel crisis was handled by rationalizing the order system (so that orders could not go beyond 90% of actual production), and then by raising the amount of steel. But the weak point of the plan was coal production and distribution, which faltered through 1942 and 1943.
• A big shift in productivity happened in airplane production. The government took control of all the major aircraft producers. They decided to focus on a few older models and thus achieved great economies of scale; but quantity was offset by quality. Most of the new aircraft were significantly inferior compared to their Allied and Soviet counterparts.
• If there was an armaments miracle, it was Soviet. Despite losing Belarus, Ukraine and most of Western Russia, the Soviet Union could still outproduce Germany through gigantic factories and total economic mobilization.
• The German surface navy stopped operation at the end of 1942 for lack of fuel. The submarines were pulled back from the Atlantic around May 1943, because Allied sonar and air superiority were decimating them.
• The Panzer program of 1943 was significant, but compared to the increase in aircraft production, it was more modest.
• The landing in Sicily happened only three days after the Kursk battle.
• The bombing of the Ruhr broke the increase in armaments production and made it essentially flatline during 1943. But instead of keeping at it, they focused on firebombing Hamburg and later trying to unsuccessfully firebomb Berlin. According to Tooze, this distraction was a major strategic error, because the Ruhr was irreplaceable for German industry.
• Speer allied with HImmler to use violence to clamp down on all manner of civilian production.
• Germany had great technological developments during the second half of the war: the first jet plane, the first “true” submarine (the Mark XXI) and the Panther tank, which was the model for post WWII general tanks. And also the V2 rockets. But the rushing of the technology and the lack of resources made these successes strategically irrelevant.
• The Mittelbau, a huge underground factory built with slave labour, was Nazi Germany’s purest expression of trying to achieve American-level production scale.
• Bagration was launched exactly three years after the invasion of the Soviet Union.
• German armaments production peaked between mid to end 1944; planes about 35k a year. The Allies and Soviets peaked at 1943.
• The push for further production in Germany was successful within the inherent limitations of the German economy. But they didn’t alter the strategic balance at all.
• Germany lost Ukrainian coal in February 44, Romanian oil in April 44.
• Further Allied bombing peaked in March 1945.
• The last German offensive tried to imitate what was done in 1940.
• In 1944, there were 1.7m German soliders killed; in 1945, about 1.3m.
• After the war, there were about 12m German refugees from the East, at least of which 1.3m died in transit.
• The vast majority of the German big business closely collaborated with the regime, throughout its time in power.