The following is a summary of chapter nine of Adam Tooze's The Wages of Destruction: The Making and Breaking of the Nazi Economy. The title of that chapter is 1939: Nothing to Gain by Waiting.
An Anti-Western Alliance: September, 1938
By September of 1938 Hitler and the Nazis had managed two major annexations. The first was the "Anschluss", or the annexation of Austria in March, 1938. And later that year, in the infamous Munich Agreement, Germany was granted the Czech Sudetenland.
Tooze writes that "Hitler could barely contain his frustration at the outcome of the Munich conference." (287) From British and French resistance to German expansion he drew the lesson that "Germany would have to fight in the West before it could pursue any large-scale campaign of military conquest in the East." A target date of 1942 was set for war with France and Britain. (288) An anti-Western alliance was envisioned which would include Poland, Italy and Japan.
In anticipation of a major confrontation with the West, Hitler ordered armaments production to be tripled. (290) Perhaps Germany's most significant vulnerability was its dependence on imports: "The German economy could not live without imports." (50) This must have been the primary motivation for the regime's "Z Plan". Under the plan, made effective in January 1939, the German navy was assigned the regime's top priority with an eye to competitiveness with the Royal Navy. (288-9)
In the anticipated conflict with the West, Japan would provide a deterrent to involvement by the Soviet Union, and Italy could provide troops for an invasion of France. (293) But it was their naval power that would be crucial in a confrontation with the West. Britain, along with France, dominated the sea. A combination of the naval capabilities of the future Axis powers was "Germany's only hope of countering Britain and France's overwhelming naval superiority." (319) Indeed, the Royal Navy feared such a combination: "A 'triple threat' from an Axis coalition in the Atlantic, Mediterranean and Pacific was the real nightmare of Royal Navy strategists." (319, 323)
The tripling of armaments production would require increased control over the economy and increased coherency to economic planning. "If the Third Reich was to have any hope of actually realizing [the new rearmament goals], the existing ramshackle system of planning and control would have to be coherently directed towards repressing civilian economic activity in favour of the Wehrmacht." (289) This seems to have been achieved on some level. Tooze refers to "the usual presumptions about the internal politics of the Third Reich", alluding apparently to a widespread interpretation of Nazi planning to have been perhaps contradictory or haphazard. (293) But he continues: "...if there ever was a period in the 1930s when Hitler's Germany had the makings of a coherent, medium-term strategy this was it--the few weeks of calm that followed the Sudeten crisis."
Financial Crises: November, 1938
"The aim of tripling the total armaments effort from its already high level in 1938 was simply unrealistic." (293-4) However, as a result of the financial crises that struck in November, "the gigantic rearmament plans of late 1938 never had the chance to unfold their inherent absurdity." (295)
Before Munich, the market uncertainty created by the crisis prevented the floating of new loans by the Reich Finance Ministry. In the wake of Munich however, markets expected that German expansionism was sated and the government was able to borrow again. The government borrowed massively until a 1.5 billion Reichsmark loan failed in November. The failure of this loan "revealed...the overburdening of the German economy." (295-6) There was no more money to borrow.
The sudden inability to borrow meant that Germany faced a critical choice. In Tooze's words, "If the Reich could no longer raise funds through safe long-term borrowing, then there was no alternative but to engage either in more or less open inflation or to make painful cuts to government spending and to further raise taxes." (295) It seems that the former course was adopted, and "By the outbreak of war, the volume of money in circulation had doubled relative to the level prevailing only two years earlier." (300) Inflation was implicitly accepted as an inevitable consequence of maximal rearmament.
On the other hand, rearmament would still not proceed at the desired pace. This was because of the balance of payments problem. German exports were falling and the consequence was a scarcity of foreign exchange currency, required for purchasing goods abroad. It seems that in anticipation of occupying the Sudetenland the Nazis had spent their foreign exchange without regard to future needs and had used the raw materials thus procured to increase armaments production as opposed to production of exportable goods. (300-1) This, I believe, is what Tooze refers to as "the financial after-effects of the Sudeten emergency." (295, 300-1) The Nazis were forced to reorder their priorities. "In early November the Wehrmacht was informed that export orders would now have priority over all other contracts, including military orders." (301)
The air force and the army both experienced significant cuts in the allocation of resources by January 1939. On the other hand, Hitler would not abandon his desire to build a navy that could rival that of Great Britain until the end of the year. (303-4)
"The Nightmare of German Strategy": Spring, 1939
The Nazis occupied Prague on March 15, 1939. This seems to me a vital link--though merely one of many--in the chain of events leading up to the invasion of Poland because its consequences altered the dynamics of international politics by definitively ruling out some possibilities for the Nazis while creating new ones.
Poland did not demonstrate interest in an alliance with Germany against the West prior to the occupation of Prague. But it seems that the occupation of Prague had the consequence of steeling Poland's position. It was then that "Warsaw definitively rejected any possibility of an alliance with Germany." (306, my emphasis.)
As a consequence of the invasion of Prague Britain took "the unprecedented step of issuing a public guarantee of Poland's territorial integrity." (306; it appears France did as well, 308-9) And both France and Britain began negotiating with the Soviet Union "over the possibility of concluding a security agreement that would protect the rest of Eastern Europe against any further German aggression." Thus, "in the spring of 1939 the formation of a triple alliance of France, Britain and the Soviet Union against Hitler seemed inevitable." (306) In addition, the United States' developing opposition to Nazi expansion reached a turning point. "After the horror of Kristallnacht, only the intervention of Cordell Hull had prevented Treasury Secretary Henry Morgenthau from taking severe action. Following the occupation of Czechoslovakia in March 1939, there was no longer any restraint. Roosevelt imposed a 25 per cent punitive tariff on German imports, a measure viewed in Berlin as tantamount to a declaration of economic war." (306-7)
The occupation of Prague "conjured up against the Third Reich the nightmare of German strategy, an encirclement from both East and West...". (307) Precisely why is not made clear, but Hitler's "immediate response" was the decision to invade Poland.
The Urgency of War: Late Summer and Autumn, 1939
"...in the summer of 1939...the Third Reich had assembled both the largest and most combat-ready army in Europe, as well as the best air force." At this juncture, "the German army was ready for a short war." (315) On the other hand, this position of air and land military superiority was not likely to last. "...due to the renewed onset of severe balance of payments problems, Germany now faced losing its head start in the arms race much more quickly" than previously anticipated--faster than anticipated in the aftermath of Munich. (322)
In addition, the anti-Western coalition the Nazis had hoped to assemble had not proved possible. Poland had obstinately refused participation "and even had the temerity to improve its relations with the Soviet Union." (304) At the end of May, Italy let it be known that it would not be ready for war until 1943. Japan had apparently been ambivalent about such a coalition and by July 1939 "the hope of a military pact with Japan was finally disappointed...". (304, 319) By the summer of 1939, Germany faced "the complete frustration of the medium-term strategic vision that had taken shape in the aftermath of Munich." (322)
Opportunities presented themselves too, however. Though US industrial might was massive and its armaments production promised to ultimately dwarf that of the other powers, "what was clear in the summer of 1939 was that, in case of a war in Europe, it would take months, if not years, before America's military and industrial might could be fully brought to bear." (318) Also, "by the end of August 1939 Hitler and Ribbentrop had prised apart the trans-Continental coalition that had seemed to threaten the Third Reich after the occupation of Prague." (318) As the Japanese "pulled back from a firm military commitment to Germany and Italy, the Soviets drifted towards Hitler." (319) This was because "an alliance with Germany offered the Soviet Union the best chance of profiting from a war between the major capitalist powers." For Germany, an alliance with the Soviet Union had the potential to deter the British and French from resisting a German invasion of Poland. (319) And at any rate, "The absolute imperative was to avoid a two-front war." If Germany was forced to confront Britain "then a temporary arrangement with Russia was a strategic necessity." (320)
For Hitler, "the emerging Western coalition against Germany" (France and Britain buttressed by US industrial might) was symptomatic of the "'world Jewish conspiracy'". The forces coalescing posed an "existential threat...to Germany" and "Hitler believed...war was inevitable...". (317, 324-5) Given these factors, "Hitler could see no alternative but to take the offensive." (325) Furthermore, "over the summer of 1939 Germany's strategic situation suddenly took a turn for the better." Given these factors, Germany had nothing to gain by waiting: "If the future outlook was bleak, then in 1939 at least Germany was in a position to mount a limited offensive war with some prospect of success." (322)
An Anti-Western Alliance: September, 1938
By September of 1938 Hitler and the Nazis had managed two major annexations. The first was the "Anschluss", or the annexation of Austria in March, 1938. And later that year, in the infamous Munich Agreement, Germany was granted the Czech Sudetenland.
Tooze writes that "Hitler could barely contain his frustration at the outcome of the Munich conference." (287) From British and French resistance to German expansion he drew the lesson that "Germany would have to fight in the West before it could pursue any large-scale campaign of military conquest in the East." A target date of 1942 was set for war with France and Britain. (288) An anti-Western alliance was envisioned which would include Poland, Italy and Japan.
In anticipation of a major confrontation with the West, Hitler ordered armaments production to be tripled. (290) Perhaps Germany's most significant vulnerability was its dependence on imports: "The German economy could not live without imports." (50) This must have been the primary motivation for the regime's "Z Plan". Under the plan, made effective in January 1939, the German navy was assigned the regime's top priority with an eye to competitiveness with the Royal Navy. (288-9)
In the anticipated conflict with the West, Japan would provide a deterrent to involvement by the Soviet Union, and Italy could provide troops for an invasion of France. (293) But it was their naval power that would be crucial in a confrontation with the West. Britain, along with France, dominated the sea. A combination of the naval capabilities of the future Axis powers was "Germany's only hope of countering Britain and France's overwhelming naval superiority." (319) Indeed, the Royal Navy feared such a combination: "A 'triple threat' from an Axis coalition in the Atlantic, Mediterranean and Pacific was the real nightmare of Royal Navy strategists." (319, 323)
The tripling of armaments production would require increased control over the economy and increased coherency to economic planning. "If the Third Reich was to have any hope of actually realizing [the new rearmament goals], the existing ramshackle system of planning and control would have to be coherently directed towards repressing civilian economic activity in favour of the Wehrmacht." (289) This seems to have been achieved on some level. Tooze refers to "the usual presumptions about the internal politics of the Third Reich", alluding apparently to a widespread interpretation of Nazi planning to have been perhaps contradictory or haphazard. (293) But he continues: "...if there ever was a period in the 1930s when Hitler's Germany had the makings of a coherent, medium-term strategy this was it--the few weeks of calm that followed the Sudeten crisis."
Financial Crises: November, 1938
"The aim of tripling the total armaments effort from its already high level in 1938 was simply unrealistic." (293-4) However, as a result of the financial crises that struck in November, "the gigantic rearmament plans of late 1938 never had the chance to unfold their inherent absurdity." (295)
Before Munich, the market uncertainty created by the crisis prevented the floating of new loans by the Reich Finance Ministry. In the wake of Munich however, markets expected that German expansionism was sated and the government was able to borrow again. The government borrowed massively until a 1.5 billion Reichsmark loan failed in November. The failure of this loan "revealed...the overburdening of the German economy." (295-6) There was no more money to borrow.
The sudden inability to borrow meant that Germany faced a critical choice. In Tooze's words, "If the Reich could no longer raise funds through safe long-term borrowing, then there was no alternative but to engage either in more or less open inflation or to make painful cuts to government spending and to further raise taxes." (295) It seems that the former course was adopted, and "By the outbreak of war, the volume of money in circulation had doubled relative to the level prevailing only two years earlier." (300) Inflation was implicitly accepted as an inevitable consequence of maximal rearmament.
On the other hand, rearmament would still not proceed at the desired pace. This was because of the balance of payments problem. German exports were falling and the consequence was a scarcity of foreign exchange currency, required for purchasing goods abroad. It seems that in anticipation of occupying the Sudetenland the Nazis had spent their foreign exchange without regard to future needs and had used the raw materials thus procured to increase armaments production as opposed to production of exportable goods. (300-1) This, I believe, is what Tooze refers to as "the financial after-effects of the Sudeten emergency." (295, 300-1) The Nazis were forced to reorder their priorities. "In early November the Wehrmacht was informed that export orders would now have priority over all other contracts, including military orders." (301)
The air force and the army both experienced significant cuts in the allocation of resources by January 1939. On the other hand, Hitler would not abandon his desire to build a navy that could rival that of Great Britain until the end of the year. (303-4)
"The Nightmare of German Strategy": Spring, 1939
The Nazis occupied Prague on March 15, 1939. This seems to me a vital link--though merely one of many--in the chain of events leading up to the invasion of Poland because its consequences altered the dynamics of international politics by definitively ruling out some possibilities for the Nazis while creating new ones.
Poland did not demonstrate interest in an alliance with Germany against the West prior to the occupation of Prague. But it seems that the occupation of Prague had the consequence of steeling Poland's position. It was then that "Warsaw definitively rejected any possibility of an alliance with Germany." (306, my emphasis.)
As a consequence of the invasion of Prague Britain took "the unprecedented step of issuing a public guarantee of Poland's territorial integrity." (306; it appears France did as well, 308-9) And both France and Britain began negotiating with the Soviet Union "over the possibility of concluding a security agreement that would protect the rest of Eastern Europe against any further German aggression." Thus, "in the spring of 1939 the formation of a triple alliance of France, Britain and the Soviet Union against Hitler seemed inevitable." (306) In addition, the United States' developing opposition to Nazi expansion reached a turning point. "After the horror of Kristallnacht, only the intervention of Cordell Hull had prevented Treasury Secretary Henry Morgenthau from taking severe action. Following the occupation of Czechoslovakia in March 1939, there was no longer any restraint. Roosevelt imposed a 25 per cent punitive tariff on German imports, a measure viewed in Berlin as tantamount to a declaration of economic war." (306-7)
The occupation of Prague "conjured up against the Third Reich the nightmare of German strategy, an encirclement from both East and West...". (307) Precisely why is not made clear, but Hitler's "immediate response" was the decision to invade Poland.
The Urgency of War: Late Summer and Autumn, 1939
"...in the summer of 1939...the Third Reich had assembled both the largest and most combat-ready army in Europe, as well as the best air force." At this juncture, "the German army was ready for a short war." (315) On the other hand, this position of air and land military superiority was not likely to last. "...due to the renewed onset of severe balance of payments problems, Germany now faced losing its head start in the arms race much more quickly" than previously anticipated--faster than anticipated in the aftermath of Munich. (322)
In addition, the anti-Western coalition the Nazis had hoped to assemble had not proved possible. Poland had obstinately refused participation "and even had the temerity to improve its relations with the Soviet Union." (304) At the end of May, Italy let it be known that it would not be ready for war until 1943. Japan had apparently been ambivalent about such a coalition and by July 1939 "the hope of a military pact with Japan was finally disappointed...". (304, 319) By the summer of 1939, Germany faced "the complete frustration of the medium-term strategic vision that had taken shape in the aftermath of Munich." (322)
Opportunities presented themselves too, however. Though US industrial might was massive and its armaments production promised to ultimately dwarf that of the other powers, "what was clear in the summer of 1939 was that, in case of a war in Europe, it would take months, if not years, before America's military and industrial might could be fully brought to bear." (318) Also, "by the end of August 1939 Hitler and Ribbentrop had prised apart the trans-Continental coalition that had seemed to threaten the Third Reich after the occupation of Prague." (318) As the Japanese "pulled back from a firm military commitment to Germany and Italy, the Soviets drifted towards Hitler." (319) This was because "an alliance with Germany offered the Soviet Union the best chance of profiting from a war between the major capitalist powers." For Germany, an alliance with the Soviet Union had the potential to deter the British and French from resisting a German invasion of Poland. (319) And at any rate, "The absolute imperative was to avoid a two-front war." If Germany was forced to confront Britain "then a temporary arrangement with Russia was a strategic necessity." (320)
For Hitler, "the emerging Western coalition against Germany" (France and Britain buttressed by US industrial might) was symptomatic of the "'world Jewish conspiracy'". The forces coalescing posed an "existential threat...to Germany" and "Hitler believed...war was inevitable...". (317, 324-5) Given these factors, "Hitler could see no alternative but to take the offensive." (325) Furthermore, "over the summer of 1939 Germany's strategic situation suddenly took a turn for the better." Given these factors, Germany had nothing to gain by waiting: "If the future outlook was bleak, then in 1939 at least Germany was in a position to mount a limited offensive war with some prospect of success." (322)
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