The Volokh Conspiracy - Putting the Socialism Back Into National Socialism:

The idea that Nazism was an extreme form of "capitalism" and Hitler primarily a tool serving the interests of "big business" is a longstanding myth that even now retains a measure of popularity in some quarters. This, despite the fact that the full name of the Nazi Party was the National Socialist German Workers' Party, and that Nazi political strategy was explicitly based on combining the appeal of socialism with that of nationalism (thus the choice of name). Once in power, the Nazis even went so far as to institute a Four Year Plan for running the German economy, modeled in large part on the Soviet Union's Five Year Plans.

I. The Socialist Elements of Nazism.

Two recent books further explain the socialist elements of Nazi economic policy, and will hopefully put the final nails in the coffin of the myth that the Nazis were "capitalists" or free marketeers. In The Wages of Destruction: The Making and Breaking of the Nazi Economy, historian Adam Tooze describes the statist nature of Nazi economic policy in great detail, and concludes that the Nazis imposed greater government control over the economy than any other noncommunist regime in modern history. (pp. 658-60). Tooze notes that, even before the outbreak of World War II, government military spending accounted for some 20% of the GDP, while much of the rest of the economy came under government control as a result of the Four Year Plan and other similar measures.

In Hitler's Beneficiaries: : Plunder, Racial War, and the Nazi Welfare State, Gotz Aly argues on the basis of extensive evidence, that German support for Nazi rule was maintained by the creation of a massive welfare state funded in large part by plunder captured in Hitler's foreign conquests, but also partly by means of "soak the rich" taxation within Germany itself.

Some nonetheless persist in viewing the Nazi economic system as "capitalist" because 1) some big businessmen (such as the Krupps) supported the Nazi regime, and 2) most of the means of production remained under private rather than state ownership. It is certainly true that much industrial capital remained formally under private ownership under the Nazis. However, under the Four Year Plan and other similar policies, it was primarily the government that determined what goods would be produced, what prices would be charged, and (in many cases) who would be the consumers. "Capitalist" private firms in Nazi Germany played a role far more similar to that of socialist managers of enterprises in the Soviet Union than that of actual capitalists in a market system. The Krupps and others certainly profited greatly under the Nazis, but so too did high-ranking Communist Party enterprise managers in the Soviet Union. Neither, however, detracted from the state's ultimate control over economic production. All of this is described by Tooze in much greater detail than I can do here.

These two new books are useful complements to Avraham Barkai's 1990 work Nazi Economics, which explored the ideological origins of Nazi economic policy and showed how Nazi economic theorists explicitly advocated statism, while rejecting free markets. Like some modern opponents of globalization and free trade, the Nazis viewed economics as a zero-sum game between nations, where increasing wealth for one country could, in the long run, only be achieved by impoverishing or conquering others.

II. Why it Mattters Today.

Why does any of this matter today? The fact that the Nazis pursued socialist policies does not in and of itself discredit socialism, any more than Hitler's apparent commitment to vegetarianism discredits the case against eating meat.

Nonetheless, the socialist element of National Socialism matters for three reasons. First, as noted above, some still claim that Nazism was a form of "capitalism" and try to use this association to discredit free markets. Second, and far more important, Tooze and Aly show that far-reaching state control over the economy was an essential element in Nazi policy, without which Hitler could not have carried out his plans for conquest and mass murder. It also helped quiesce potential German opposition to Nazi policies; both by imposing state control on economic resources that any opposition movement would need to support itself, and by "buying off" potential opponents through welfare state handouts (as Aly emphasizes).

The concentration of economic power in the hands of the state does not always lead to atrocities as extreme as Hitler's. But it does significantly increase the risk that these types of abuses will occur - not to mention numerous lesser (though still severe) atrocities. In the twentieth century, both left-wing (communist) and right-wing (Nazi) forms of state domination of the ecoomy paved the way for war, repression, and mass murder. There is little reason to expect better results from similar policies in the future. This is an important point, given the recent renewed popularity of socialist ideas in some parts of the Third World, such as parts of Latin American.

Finally, Barkai's discussion of Hitler's view of the world economy bears a remarkable similarity to the analysis put forward by many of today's opponents of free trade and globalization. Both view the world economy as a zero sum game; both reject the possibility that free international trade can provide for a growing population and lead to the development of "have not" nations; and both claim that the wealthy nations of the West had "rigged" the rules of the international economic game in their favor. Japanese nationalists of the 1930s held similar views. In another important recent book, Ian Kershaw shows that the Nazis and their Japanese allies embarked on a policy of conquest in large part because they believed it was the only road to longterm prosperity for their growing populations, prosperity that they thought could never be achieved through integration into the international capitalist system.

While today's antiglobalists propose global regulation and trade restriction rather than conquest as cures, their diagnosis of the disease is strikingly similar to that put forward by the Nazis and Japanese nationalists 70 years ago. Today, most would agree that the Nazi view of the world economy was disastrously wrong. The postwar prosperity of Germany and Japan - achieved by pursuing the very sorts of growth and trade-oriented policies that the Nazis condemned as ineffectual - is strong proof of that.

It is theoretically possible that the Nazis were simply ahead of their time. Perhaps their view of the world economy was unsound in the 1930s, but - with marginal modifications - an accurate portrayal of today's world. But we should also consider the far more likely possibility that the Nazi critique of world capitalism is just as wrong today as it was in Hitler's time.

UPDATE: To avoid possible misunderstanding, I should mention that, in my view, Aly's book is the weakest of the ones I discuss in the post, and I have some reservations about his thesis. To briefly summarize, I think that Aly overstates the role of plunder-financed welfare state benefits in strengthening popular support for Nazism, and understates the role of other factors (such as ideological indoctrination and repression of opposition groups). Nonetheless, the causal mechanism emphasized by Aly surely did play a major role.

	[Ilya Somin, July 24, 2007 at 1:26am] Trackbacks Putting the Socialism Back Into National Socialism: The idea that Nazism was an extreme form of "capitalism" and Hitler primarily a tool serving the interests of "big business" is a longstanding myth that even now retains a measure of popularity in some quarters. This, despite the fact that the full name of the Nazi Party was the National Socialist German Workers' Party, and that Nazi political strategy was explicitly based on combining the appeal of socialism with that of nationalism (thus the choice of name). Once in power, the Nazis even went so far as to institute a Four Year Plan for running the German economy, modeled in large part on the Soviet Union's Five Year Plans. I. The Socialist Elements of Nazism. Two recent books further explain the socialist elements of Nazi economic policy, and will hopefully put the final nails in the coffin of the myth that the Nazis were "capitalists" or free marketeers. In The Wages of Destruction: The Making and Breaking of the Nazi Economy, historian Adam Tooze describes the statist nature of Nazi economic policy in great detail, and concludes that the Nazis imposed greater government control over the economy than any other noncommunist regime in modern history. (pp. 658-60). Tooze notes that, even before the outbreak of World War II, government military spending accounted for some 20% of the GDP, while much of the rest of the economy came under government control as a result of the Four Year Plan and other similar measures. In Hitler's Beneficiaries: : Plunder, Racial War, and the Nazi Welfare State, Gotz Aly argues on the basis of extensive evidence, that German support for Nazi rule was maintained by the creation of a massive welfare state funded in large part by plunder captured in Hitler's foreign conquests, but also partly by means of "soak the rich" taxation within Germany itself. Some nonetheless persist in viewing the Nazi economic system as "capitalist" because 1) some big businessmen (such as the Krupps) supported the Nazi regime, and 2) most of the means of production remained under private rather than state ownership. It is certainly true that much industrial capital remained formally under private ownership under the Nazis. However, under the Four Year Plan and other similar policies, it was primarily the government that determined what goods would be produced, what prices would be charged, and (in many cases) who would be the consumers. "Capitalist" private firms in Nazi Germany played a role far more similar to that of socialist managers of enterprises in the Soviet Union than that of actual capitalists in a market system. The Krupps and others certainly profited greatly under the Nazis, but so too did high-ranking Communist Party enterprise managers in the Soviet Union. Neither, however, detracted from the state's ultimate control over economic production. All of this is described by Tooze in much greater detail than I can do here. These two new books are useful complements to Avraham Barkai's 1990 work Nazi Economics, which explored the ideological origins of Nazi economic policy and showed how Nazi economic theorists explicitly advocated statism, while rejecting free markets. Like some modern opponents of globalization and free trade, the Nazis viewed economics as a zero-sum game between nations, where increasing wealth for one country could, in the long run, only be achieved by impoverishing or conquering others. II. Why it Mattters Today. Why does any of this matter today? The fact that the Nazis pursued socialist policies does not in and of itself discredit socialism, any more than Hitler's apparent commitment to vegetarianism discredits the case against eating meat. Nonetheless, the socialist element of National Socialism matters for three reasons. First, as noted above, some still claim that Nazism was a form of "capitalism" and try to use this association to discredit free markets. Second, and far more important, Tooze and Aly show that far-reaching state control over the economy was an essential element in Nazi policy, without which Hitler could not have carried out his plans for conquest and mass murder. It also helped quiesce potential German opposition to Nazi policies; both by imposing state control on economic resources that any opposition movement would need to support itself, and by "buying off" potential opponents through welfare state handouts (as Aly emphasizes). The concentration of economic power in the hands of the state does not always lead to atrocities as extreme as Hitler's. But it does significantly increase the risk that these types of abuses will occur - not to mention numerous lesser (though still severe) atrocities. In the twentieth century, both left-wing (communist) and right-wing (Nazi) forms of state domination of the ecoomy paved the way for war, repression, and mass murder. There is little reason to expect better results from similar policies in the future. This is an important point, given the recent renewed popularity of socialist ideas in some parts of the Third World, such as parts of Latin American. Finally, Barkai's discussion of Hitler's view of the world economy bears a remarkable similarity to the analysis put forward by many of today's opponents of free trade and globalization. Both view the world economy as a zero sum game; both reject the possibility that free international trade can provide for a growing population and lead to the development of "have not" nations; and both claim that the wealthy nations of the West had "rigged" the rules of the international economic game in their favor. Japanese nationalists of the 1930s held similar views. In another important recent book, Ian Kershaw shows that the Nazis and their Japanese allies embarked on a policy of conquest in large part because they believed it was the only road to longterm prosperity for their growing populations, prosperity that they thought could never be achieved through integration into the international capitalist system. While today's antiglobalists propose global regulation and trade restriction rather than conquest as cures, their diagnosis of the disease is strikingly similar to that put forward by the Nazis and Japanese nationalists 70 years ago. Today, most would agree that the Nazi view of the world economy was disastrously wrong. The postwar prosperity of Germany and Japan - achieved by pursuing the very sorts of growth and trade-oriented policies that the Nazis condemned as ineffectual - is strong proof of that. It is theoretically possible that the Nazis were simply ahead of their time. Perhaps their view of the world economy was unsound in the 1930s, but - with marginal modifications - an accurate portrayal of today's world. But we should also consider the far more likely possibility that the Nazi critique of world capitalism is just as wrong today as it was in Hitler's time. UPDATE: To avoid possible misunderstanding, I should mention that, in my view, Aly's book is the weakest of the ones I discuss in the post, and I have some reservations about his thesis. To briefly summarize, I think that Aly overstates the role of plunder-financed welfare state benefits in strengthening popular support for Nazism, and understates the role of other factors (such as ideological indoctrination and repression of opposition groups). Nonetheless, the causal mechanism emphasized by Aly surely did play a major role.