The Free Market 19, no. 9 (September 2001)
By the standards of the Left, Adolf Hitler would have been deemed a "great statesman," had he died before he started the war (or if he had won it). That's because the left tends to measure greatness by the amount of land and number of people under one man's thumb. By that standard, Hitler was a great socialist-which is precisely what he and his part aspired to become.
The problem began in the Weimar Republic. In order to counterbalance the Reichstag, the president of Germany was given broad powers: he was directly elected, could make treaties and alliances, was supreme commander of the armed forces, could dissolve the Reichstag and submit any of its laws to a referendum, and, under the infamous Article 48, had the power to suspend civil and political liberties "in case of emergency."
This was done in 1933 and remained the basis of Hitler's "legality" throughout the Nazi period when he succeeded Hindenburg as president in 1934. Hitler occupied both the presidency and the chancellorship, and their powers were combined into the "office" of führer. The Reichstag passed the Enabling Act, which transferred to the cabinet the Reichstag's legislative functions.
Decrees abolished the states' parliaments or diets, abolished their flags and symbols, and reduced them to provincial status and mere administrative divisions of the central government. With the stabilization of the regime came the sprawling tentacles of the state octopus- an alphabet-soup of executive administrative agencies, forty-two in all (which, by the way, as of 1992, the United States government has fifty-two such executive agencies). And in addition to these forty-two agencies were the regular Cabinet, the Secret Cabinet Council, the Reich Defense Council and its many working committees, the Ministry of Education, the Office of the Deputy Führer, the Office of the Plenipotentiary of War Economy, the Office of the Plenipotentiary of Administration, the Office of the Delegate for the Four Year Plan, the Ministry of Finance, the Ministry of Economics, and so on.
In 1933 Germany had an estimated six million unemployed. Like his contemporaries in the capitals and governments of the world-and like so many politicians today-Hitler had little interest in economics and, in fact, was totally ignorant of economic theory. Although economic centralization had to wait until political opponents and organized opposition was suppressed or liquidated, the Nazis' "new deal" began almost immediately.
For instance, in October 1933, Hitler declared that "the ruin of the German peasant will be the ruin of the German people." New farm programs were instated, along with propaganda about Blut und Bloden. Hitler appointed as head of the Ministry of Food and Agriculture Walther Darre, who in 1929 published a book, The Peasantry as the Life Source of the Nordic Race.
Darre wished to "reform" the production and marketing of food and to raise prices for farmers. Darre's entire program was designed with one objective in mind: to insulate the peasant farmer from the market. To this end, Darre issued the Hereditary Farm Law in 1933, which had the purpose of preventing foreclosure on or the sale of farmland-at the expense of the peasant farmers` liberty. This "law" established that only Aryan Germans who could prove the purity of their bloodline back to 1800 could own a farm.
Every farm up to 308 acres was declared a hereditary estate-it could not be sold, divided, mortgaged or foreclosed on for debt. With the death of its owner, it would pass to his nearest male relative, who in turn was obligated to provide an income and education for his relatives. The peasant farmer was called a bauer or peasant, an "honored title" that he forfeited if he broke the "peasant honor code"-that is, if he stopped farming.
To compliment this the Reich Food Estate was established to regulate the conditions and production of the farmers. Its vast bureaucracy enforced regulations that touched all areas of the farmer's life and his food production, processing, and marketing. It was headed by Darre himself as "Reich Peasant Leader."
The Reich Food Estate had two goals: to jack up agricultural prices, and to make Germany "self-sufficient in food." Darre arbitrarily fixed the prices of agricultural products: within the first two years of the regime, wholesale prices rose 20 percent, and for cattle, vegetables, and dairy products, the rise was even steeper. But the farming sector was not exempt; the additional costs of these artificial prices were passed on to all consumers.
For its first year, the regime concentrated on a program of government grants of loan credit; stimulus bills for public works, such as road-building and forestation; and it "targeted tax cuts" to enterprises that increased capital expenditure and increased their number of employees. But from 1934 onward, the implementation of the Wehrwirtschaft, or war economy, became the model to which business and labor were subordinated and which was designed to function, not just in time of war, but in the period before war began.
The economy of total war was based on rearmament-the construction and maintenance of an enormous war machine to which all of society was subordinated. To do this the regime resorted to inflation. Hjalmar Schacht, the minister of economics, printed Reichmarks, and manipulated their official exchange value so that, at one time, they were estimated to have 237 different official values. He arranged barter deals with foreign governments and invented financial instruments that were issued by the central bank and "guaranteed" by the government, and that were kept "off-budget" to pay for rearmament. German banks were required to accept them, and they were discounted by the central bank. The minister of finance explained to Hitler that these were "merely a way of printing money."
In 1936, Göring's Four Year Plan was inaugurated. This made Göring, who was almost as ignorant about economics as Hitler, Germany's economic dictator. In the drive for a total war economy, protectionism was decreed and autarchy the desire-the so-called "Battle of Production." Consumer imports were nearly eliminated, price and wage controls were enacted, and vast state projects were built to manufacture raw materials.
The bureaucratization of the economy necessarily followed suit. Walther Funk, who replaced Walther Schacht as minister of economics in 1937, admitted that "official communications now make up more than one half of a German Manufacturer's entire correspondence" and that "Germany's export trade involves 40,000 separate transactions daily; yet for a single transaction as many as forty different forms must be filled out."
Businessmen and entrepreneurs were smothered by red tape, were told by the state what they could produce and how much and at what price, burdened by taxation, and were forced to make "special contributions" to the party. Corporations below a capitalization of $40,000 were dissolved and the founding of any below a capitalization of $2,000,000 was forbidden, which wiped out a fifth of all German businesses.
The cartelization of industry-which began before the Nazi regime-was made compulsory, and the Ministry of Economics was empowered to form new compulsory cartels or to force firms to join existing ones. The maze of business and trade associations created to lobby the Weimar Republic for various considerations in the law were nationalized and made compulsory for all businesses.
The Reich Economic Chamber was established on top of all these associations. It consisted of seven national economic groups, twenty-three economic chambers, seventy chambers of handicrafts, and one hundred chambers of industry and commerce. From these bureaucracies and the numerous offices and agencies of the Ministry of Economics and the Office of the Four Year Plan rained down a flood of decrees and laws, which in turn created for businesses the need on the one hand for lawyers and a legal department to understand these rules, and on the other, for a systematic regime of bribing officials.
Then, in February 1935 all employment came under the exclusive control of government employment offices which determined who would work where and for how much. And on June 22, 1938, the Office of the Four Year Plan instituted guaranteed employment by conscripting labor. Every German worker was assigned a position from which he could not be released by the employer, nor could he switch jobs, without permission of the government employment office. Worker absenteeism was met with fines or imprisonment-all in the name of job security. A popular Nazi slogan at the time was "the Common Interest before Self"!
And in his foreword to the 1936 German language edition of his General Theory of Employment, Interest and Money, John Maynard Keynes wrote: "The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution put forth under conditions of free competition and a large degree of laissez-faire."
Social life too, was centralized by the Reich. Under the organization "Strength through Joy," the leisure time of the people was regimented. No organized social, sport or recreational groups-from chess and soccer clubs to bird-watching, to adult education, to the theatre, opera, and music concerts-were allowed to function without the oversight of the state. Besides the social costs of not trusting people to be able to look after themselves, there were the enormous costs of this vast bureaucracy that policed the private activities of the citizens.
Local traditions were attacked and eliminated, private firearms were outlawed and confiscated, and the amalgamation of the various Christian churches and the elimination of Christian symbols from public places and schools was attempted. Education, too, came under central control under the Reich Minister of Education, which designed the curriculum, rewrote textbooks, and licensed teachers.
Last but not least, and perhaps the Nazis' true unspoken legacy, is their doctrine of collective guilt which is now so fashionable to deploy not only against the Germans themselves, but also against Catholics, Palestinians, Jews, Muslims, and so many others; which is the basis for the claim of reparations for black slavery; and which has been most recently used against the Serbs as well as the Chinese. Collective guilt has returned as central-state policy in relation to official victims' groups and their alleged victimizers and has become the central feature of political ethics debates today.
In Germany, Britain, France, and the United States, among so many others, we still hear the same old calls for protectionism, for national development and "national policies," for price controls and wage and farm subsidies, for greater central control over and funding for education, for wealth redistributionism schemes and moral justifications, and for the resolute maintenance of a war economy in peacetime. We see that all these so_called progressive causes lead to is social waste, grief and mounting anger.
Ludwig von Mises reminded us in Human Action that the Nazis used "Jewish" as a synonym for "capitalist." What these 46 percent of Germans-and, indeed, vast majorities in all nations-don't see is that these very same so-called good policies inevitably result in the drive to war and total control. The latter necessitates the former as the inevitable proposed remedy for economic decline and impending collapse. It is unfortunate that so many who believe that it is necessary to learn from the past have not learned the true lessons.
Adam Young is studying computer science in Ontario, Canada (adam_young@hotmail.com). Further Reading: William L. Shirer, The Rise and Fall of the Third Reich: A History of Nazi Germany, vol. 2: Triumph and Consolidation, chap. 8: "Life in the Third Reich: 1933-1937.
