The Rise and Fall of the Great Powers (62 page)

While all this looked impressive from the outside, it was decidedly
shaky within. The blows the German economy had received from the Versailles territorial arrangements, the great inflation of 1923, the payment of reparations, and the difficulty of reentering pre-1914 foreign markets meant that it was only in 1927–1928 that Germany’s output equaled that achieved prior to the First World War. But this recovery was promptly ruined by the great economic crisis of the following few years, which hit Germany more severely than most other countries; by 1932, industrial production was only 58 percent that of 1928, exports and imports had been more than halved, the gross national product had fallen from 89 billion to 57 billion reichsmarks, and unemployment had swollen from 1.4 to 5.6 million people.
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Much of Hitler’s early popularity stemmed from the fact that the widespread programs of roadbuilding, electrification, and industrial investment greatly reduced the unemployment totals even before conscription did the rest.
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By 1936, however, the economic recovery was being increasingly affected by the fantastic expenditure upon armaments. In the short term, this spending was yet another quasi-Keynesian government boost to capital investment and industrial growth. In the medium, let alone the long, term, the economic consequences were frightening. Probably only the U.S. economy could, without major difficulty, have withstood the strain placed upon it by this level of arms spending; the German economy certainly could not.

The first serious problem, little perceived by foreign observers at the time, was the quite chaotic structure of National Socialist decisionmaking, something which Hitler seems to have encouraged in order to retain ultimate authority. Despite the pronouncements of the Four-Year Plan, there was no coherent national program to relate the arms buildup to Germany’s economic capacity and to allocate priorities between the services; Goering, nominally in charge of the plan, was a hopeless administrator. Instead, each branch pursued its own breakneck expansion, setting new (often preposterous) targets and then competing for the necessary allocations of capital investment and, especially, raw materials. To be sure, the situation would have been even more chaotic had the government not imposed strict controls upon labor, compelled private industry to reinvest its profits into manufactures approved of by the state and, through high taxation, deficit borrowing, checking wages and personal consumption, also forced an increasing amount of the national product into capital investment for the arms industry. But even when government expenditure soared to 33 percent of GNP by 1938 (and much “private” investment was by then really done at the state’s request), there were insufficient resources to meet the overlapping and sometimes megalomaniacal demands of the armed services. The Z-Plan fleet being built for the German navy would have needed 6 million tons of fuel oil (equal to Germany’s entire consumption in 1938); the Luftwaffe’s plan
to have 19,000 (!) front-line and reserve aircraft by 1942 would require “85 percent of the existing
world
production of oil.”
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In the meantime, each service struggled to get a larger share of skilled manpower, steel, ball bearings, petroleum, and other vital strategic materials.

Finally, this frantic arms buildup clashed with Germany’s acute dependence upon imported raw materials. Rich only in coal, the Reich required vast amounts of iron ore, copper, bauxite, nickel, petroleum, rubber, and many other items upon which modern industry—and modern weapons systems—relied.
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By contrast, the United States, the British Empire, and the Soviet Union were well endowed in all those respects. Before 1914, Germany had paid for such imports by its booming export of manufactures: in the 1930s, this was no longer possible, since German industry was now being redirected into the production of tanks, guns, and aircraft for the Wehrmacht’s consumption. Furthermore, the costs of the First World War and of later reparations, together with the collapse in the traditional export trades, had drained Germany of virtually all foreign currency; in 1938, it possessed only 1 percent of the world’s gold and financial reserves, compared with the United States’ 54 percent and France’s and Britain’s 11 percent each.
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Hence the strict regime of currency controls, barter arrangements, and other special “deals” instituted by Reich agencies in order to pay for vital imports without transferring gold or currency. Hence, too, the much proclaimed efforts to escape from such dependence by the production of synthetic substitutes (oil, fertilizer, etc.) under the Four-Year Plan. Each of these devices helped; none of them, or even all of them together, could balance the demands made by the arms buildup. This explains the recurrent crises within the German armaments industry, as the national stockpiles of raw materials were exhausted and funds ran out to pay for fresh supplies. In 1937, Raeder warned that the entire naval construction would have to be halted unless more materials were secured. And in January 1939, Hitler himself ordered massive reductions in allocations to the Wehrmacht of steel, copper, rubber, and other materials while the economy waged an “export battle” to raise foreign currency.
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There were three related consequences of the above for German power and policies. The first was that Germany was not as strong, militarily, by 1938–1939 as Hitler liked to boast and the western democracies feared. The field army, claiming a strength of 2.75 million men at the outset of war, contained a small number of mobile, well-armed divisions and a very long tail of underequipped reserve divisions; experienced officers and NCOs were almost overwhelmed by the need to train such a mass of raw soldiery. Munitions stocks were slim. Even the famed panzer units had fewer tanks than the Anglo-French totals at the onset of hostilities. The navy, which was planning for a war in the mid-1940s, described itself as “completely inadequately
armed for the great conflict with Britain”
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—a fair summary in respect to surface warships, even if the U-boats were going to help redress the balance. As for the Luftwaffe, it was strong chiefly because its foes were so chronically weak—but it always suffered from a lack of reserves and supporting services. In the international crises of the late 1930s, it had never been as powerful as its opponents had imagined—and both its aircraft industry and its aircrews had found it very difficult to adjust to the “second generation” of planes. For example, the number of aircraft crews “fully operational” was far fewer than those defined as “front-line” during the Munich crisis—and the very idea of bombing London to a cinder was absurd.
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Still, it may be unwise to go all the way with recent revisionist literature about Germany’s unreadiness for war in 1939. At the end of the day, military effectiveness is relative. Few, if any, armed services claim that all their needs are satisfied; and the German weaknesses have to be measured against those of their foes. When that is done, the picture seems far more favorable to Berlin, especially because of the efficiency of its armed services
in operational doctrine:
its army was prepared to concentrate its tank forces, and then to allow them initiative on the battlefield, keeping in touch by radio; its air force, despite tendencies toward “strategic” missions, was trained to give assistance to the army’s thrusts; its U-boat arm, though small, was flexible as to tactics. All this was important compensation for, say, meager stocks of rubber.
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This brings us to the second consequence. Because the German armed forces had rearmed so rapidly that they severely strained the economy, there was a massive temptation on Hitler’s part to resort to war in order to obviate such economic difficulties. As he well knew, the acquisition of Austria brought with it not only another five divisions of troops, some iron ore and oil fields, and a considerable metal industry, but also $200 million in gold and foreign-exchange reserves.
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The Sudetenland was less useful economically (though it did have coal deposits), and by early 1939 the Reich’s foreign currency position was critical. It was scarcely surprising, therefore, that Hitler was greedily eyeing the rest of Czechoslovakia and rushed to Prague in March 1939 to examine the booty once the occupation occurred. Apart from the gold and currency assets held by the Czech national bank, the Germans also seized large stocks of ores and metals, which were swiftly used to aid German industry; while the large and profitable Czech arms industry could now be exploited to earn currency for Germany by selling (or bartering) its products to clients in the Balkans. The aircraft, tanks, and weapons of the substantial Czech army were also taken, partly to equip new German divisions, and partly to be sold for foreign currency. All this, together with Czechoslovakia’s industrial production, was a great boost to German power in Europe, and permitted Hitler’s
hectic (if somewhat hand-to-mouth) rearmament program to continue—until the next crisis. As Tim Mason has pointed out, “the only ‘solution’ open to this regime of the structural tensions and crises produced by dictatorship and rearmament was more dictatorship and rearmament A war for the plunder of manpower and materials lay square in the dreadful logic of German economic development under National Socialism.”
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The third consequence—and problem—was this: just how far could Germany maintain such a policy of conquest and plunder without overextending itself? Once the initial German rearmament was under way, and its armed services were equipped with modern weapons, the pattern of overcoming weak neighbors and gaining fresh territories, raw materials, and currency seemed self-fulfilling; by April/May 1939, it was clear that Poland was the next stage. But even if that country could be swiftly conquered, was Germany capable of facing France and Britain—that is, engaging in a war which would be much more challenging to a Greater German economy still heavily dependent upon imported raw materials? The evidence suggests that while he was willing to take the risk of fighting the western democracies in 1939, Hitler hoped that they would once again back down and allow him another limited war of plunder, against Poland alone; and this in turn would help the German economy to prepare its first Great Power war, somewhere in the mid-1940s.
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Given the weakened economic and strategic power of France and Britain, and the hesitancy of their political leaderships by 1939, even a premature struggle with those powers may have seemed worth the risk—although if the military operations were stalemated on the lines of the 1914–1918 war, Germany’s initial lead in modern armaments would probably be slowly eroded. Victory for the Führer and his regime would, however, be much more problematical if the United States should lend its aid to the Allies; or if operations were extended into Russia, where the sheer size of the country implied lengthy, drawn-out fighting which placed a premium on economic stamina.

On the other hand, since the Nazi regime lived upon conquest, and Hitler was driven forward from one acquisition to the next, how and where could a halt be called? The full logic of his megalomania implied that no other state should be a challenge to Germany in Europe, and possibly in the world. Only by this means would his foes be crushed, the “Jewish problem” solved, and the Thousand-Year Reich established on a firm footing.
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Despite all the lines of continuity, the German Führer was quite different from his Frederickian and Bismarckian forebears in his fantastic schemes for world power and his ultimate disregard for all the obstacles which stood in the way of this design. Impelled as much by these manic, long-term ambitions as by the need
to escape from short-term crises, Hitler, like the Japanese, was committed to altering the international order as soon as possible.

The position of both France and Britain in the face of this gathering storm was one of acute and increasing difficulty. Although there were many important differences between them, both were liberal-capitalist democracies which had been badly hurt by the war, which were unable (despite their best efforts) to recover in any sustained way the rosy Edwardian political economy of their memories, which felt under large and growing pressure from the labor movement at home, and which possessed a public opinion eager to avoid another conflict and overwhelmingly concerned with domestic, “social” issues rather than foreign affairs. This is by no means to say that the diplomacy of London and Paris was identical; because of their quite different geographical-strategical positions, and the varying pressures brought to bear upon their respective governments, the two democracies frequently differed about how to handle the “German problem.”
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But while they quarreled as to the means, both were unanimous over the end; in the troubled post-1919 years, France and Britain were unquestionably status quo powers.

At the beginning of the 1930s, it was France which seemed the stronger and the more influential, at least on the all-important European scene. Throughout these years it possessed the second-largest army among the Great Powers (after the Soviet Union) and also the second-largest air force (again, the Russian totals were larger). Diplomatically, it was immensely influential, especially at Geneva and in eastern Europe. It had suffered severe economic turbulence in the years immediately following 1919, when the franc had to readjust to the awkward facts that it could no longer rely upon Anglo-American subsidies and that German reparations would be far less than expected. But Poincaré’s 1926 stabilization of the currency found French industry in the middle of a remarkable boom; pig-iron production soared from 3.4 million tons in 1920 to 10.3 million tons in 1929, steel output from 3 to 9.7 million, automobiles from 40,000 to 254,000; while chemicals, dyestuffs, and electrical products had all escaped from the pre-war German domination. The favorable fixing of the franc helped French trade, and the Bank of France’s large stockpile of gold gave it an influence throughout central and eastern Europe. Even when the “Great Crash” came, France seemed the least affected—partly because of its gold holdings and advantageously placed currency, partly because the French economy was much less dependent upon the international market than, say, Britain’s.
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