The Nazis and capitalism: the reign of the unorthodox

If the idea of the Nazis being socialists is crude propaganda that still leaves the question of how to correctly categorize them economically and politically. There is doubtless a brand of deterministic Marxism that will assert that between 1933 and 1945 capitalism had to take the genocidal and apocalyptic form it actually did in Germany in those years. But I don’t think that’s true. Economically, National Socialism was profoundly irrational – nihilistically dedicated to total war against enemies (the US and the Soviet Union) that it had no real chance of defeating. And it was even more manically dedicated towards the extermination of the European Jews. As is well known, deportations of Jewish people to the extermination camps took precedence over military necessities even in the time of looming defeat. If ‘capital’ was secretly in the saddle in the Third Reich years, it evidently had a death wish.

But at the same time, as remarked upon in part one, capital accumulation and profit-making were inserted into the very fibre of the Nazi economy. The death camps were privately insured, Zyklon B was supplied by a subsidiary of I.G. Farben and famous, brand-name firms ran slave labour factories in the vicinity of the death camps.

The only conclusion, I think, is that capitalism, given the chance, will happily operate under a variety of political cultures – and unapologetically assert its interests – but the nature of those cultures is not something exclusively determined by capitalists or their acolytes. As noted by David Schweickart in After Capitalism, there have been many different kinds of capitalism – Keynesian liberal, state developmental (as practiced by Japan and South Korea), third world “comprador capitalism”, our neoliberal version and, of course, the current Chinese model where the state retains a great deal of control through ‘state owned enterprises’ and rules out any complications resulting from multi-party elections. The original Marxist concept of a capitalist base determining the superstructure of culture is far too simplistic.

So the Nazis – and Hitler in particular – were quite aware of the existing power structure and the social role they had to play in order to get into power – eliminating organised labour and the Marxist threat. But they were not bound by economic orthodoxy – they needed to tap into and channel mass desires and discontents. This can be clearly seen in their rise to power.

Their increase in popularity was astoundingly rapid – the Nazis gained 2.6% of the vote in 1928 but by the summer of 1932 they were the largest party in the German Parliament, gaining close to a 38% vote share. Traditionally, this has been ascribed to the Great Depression and the mass unemployment it generated – nearly 18% of the workforce was without a job in 1932. But this is only a partial explanation.

The response of the German government to the depression was to institute crushing austerity. Under Heinrich Brüning of the Catholic Centre party, who was known as the “hunger Chancellor”, public spending was cut by 15% between 1930 and 1932. The largest falls in were in housing and healthcare spending and there were also significant reductions in unemployment benefit, payments to pensioners and support for the disabled and war veterans.

 Heinrich Brüning, the "Hunger Chancellor"

The Nazis campaigned on an anti-austerity platform, saying they wanted to preserve the social insurance system, demanding “generous expansion of support for the aged” and advocating building highways. Researchers who have analysed the NSDAP’s route to power found a strong correlation between austerity and both increased votes for the Nazis and people joining the party. Conversely, the socialist SPD – though outside government – passively supported austerity, and the Communists benefited mainly from increases in unemployment.

In power, the Nazis similarly went against the economic grain. They instituted massive state funded public work schemes in housing, land reclamation and highway construction (the famous autobahns).Tax reliefs were given to companies that created jobs and increased investment and unemployment was reduced from six million in 1932 to less than a million four years later. Of course, the main reason unemployment so successfully conquered and economic depression warded off was that the economy became wholeheartedly dedicated to rearmament and war (wehrwirtschaft or ‘war economy’ in Nazi parlance). War was not just a result of Nazi foreign policy; the entire economy was geared towards it happening.

Nazi economic policy – cutting taxes, spending money and instituting public works schemes – could in fact be described as Keynesian except that it was before Keynes. He most certainly existed at the time but his most important work – The General Theory of Employment, Interest and Money – wasn’t published until 1936. As economist Joan Robinson put it, “Hitler had already found how to cure unemployment before Keynes had finished explaining why it occurred”.

Except that Hitler didn’t cure anything. He had no interest in economics and outsourced economic policy to a banker called Dr Hjalmar Schacht, who had enthusiastically backed the NSDAP as they neared power but never actually joined the party. Among Schacht’s many departures from orthodox economics was a money printing scheme which created 12 billion marks out of thin air between 1935 and 1938. The money was used to pay armaments manufacturers and didn’t appear in the government’s budget. Any resemblance to quantitative easing is purely coincidental. But let’s just say it didn’t end well.

Why is this relevant, beyond historical debates about what National Socialism actually was? Well, over the past decade the Left has been confronted with an apparently ultra-orthodox and unyielding economic approach that demands cuts in public spending – austerity – to deal with an economic downturn. Past over-indulgence putatively makes this medicine thoroughly deserved – witness the UK general election campaigns in 2010 and 2015.

It has escaped attention that 21^st century austerity is only half orthodox. It insisted on massive cuts to public spending – cuts that caused destitution and death – but responded to the threat of private sector bankruptcies with ultra-low interest rates, bail-outs and unconventional money creation schemes (quantitative easing again). Stern, unbending austerity for the public and endless indulgence for the ‘wealth creators’.

Austerity is now fraying at the edges – the Conservatives in the UK are trying to claim it’s over even though it plainly isn’t. However, this is only partly because it’s gone on so long without achieving its supposed aims – the deficit in the UK was meant to be erased by 2015, remember. It’s also because a new, ‘natavist’ Right has little patience with it. Donald Trump in the US is many things – misogynist, racist, serial liar, idiot – but he’s not a purveyor of austerity. This was former Greek finance minister, Yanis Varoufakis, talking about Trump in the Guardian newspaper in June:

The Trump administration is building up a substantial economic momentum domestically. First, he passed income and corporate tax cuts that the establishment Republicans could not have imagined even in their wildest dreams a few years ago. But this was not all. Behind the scenes, Trump astonished Nancy Pelosi, the Democrat’s leader in the House of Representatives, by approving every single social program that she asked of him. As a result, the federal government is running the largest budget deficit in America’s history when the rate of unemployment is less than 4%.

I’m old enough to remember when record, civilisation-endangering budget deficits were what the Left was bound to bring into being if it got anywhere near power. When way back in 2012 Niall Ferguson evinced that young people should “welcome austerity” and that “if young Americans knew what was good for them, they’d all be in the Tea Party”. But Trump’s record deficit has not put off enthusiastic former Tea Party members in the slightest. His “dedicated supporters”, says one article, “are many of the same folks who made the Tea Party the dominant force in American politics in 2010”. Ferguson meanwhile says Trump’s tax-cut fuelled, deficit building “is not something I can enthusiastically condone”. Maybe we should all join the Tea Party … oh wait.

But it’s not just Trump. The Italian government currently engaged in a face-off with the European Commission over its budget plans to introduce a €780 a month ‘basic income’ for unemployed Italians and to decrease the pension age is not of the Left. It is a coalition between the anti-establishment Five Star Movement and the far-right Lega. The government’s deputy Prime Minister is Matteo Salvini who has promised to deport 500,000 ‘illegal immigrants’ and been compared to Trump. But this is a government that insists it wants to “abolish poverty”.

I’m not suggesting there has been a Damascene conversion of the Right to anti-austerity. There are still many fiscally orthodox right-wingers around, such as the Austrian Freedom Party and Bolsonaro in Brazil. But as patience with never-ending austerity grows thinner and thinner, we can expect a much more flexible attitude towards it on the Right. And as the Nazis showed, there are clear historical precedents.

What means is that policies cannot be judged as being Left or Right merely in terms of whether they alleviate poverty and redistribute resources. To be classed as Left they also have to tilt the balance of power away from capital and the elite in favour organised labour and the citizenry. This is something the nationalist Right will never do.