00:02:57.540I have a passing interest in some of these things.
00:03:00.760But I was also keenly aware of how much I didn't know.
00:03:03.580And so the big question, of course, for 1933 and the economy is like, well, this is the beginning of a recovery, right?
00:03:11.740And so you do want to tell that part of the story because that's surely something like I didn't have a job, now I have a job is one of those fundamental human experiences in modernity that sort of gives you a sense of how the country might be going, et cetera, et cetera.
00:03:24.840So it feels like we need to talk about it.
00:03:26.600At the same time, your main witnesses for, hey, we made this great recovery are literally the worst people ever to walk this planet.
00:03:34.380So you want to treat that with a grain of salt.
00:03:37.220Luckily, there's a really, there's a lot of very, very good historical research on this, and I'll cite a lot of it later.
00:03:44.180This is one of those episodes where I literally just emailed a bunch of experts and was like, talk me through this.
00:03:50.580It's still shocking to me after now, like well over a decade as a journalist, that you can just email the smart person and like a shocking proportion of the time, they will in fact write you back and be very, very helpful.
00:04:04.500One of them, I believe Richard actually sent me back a slideshow that he had.
00:05:00.160We're going to have special guests Sarah Marshall of You're Wrong About and Matt Bernstein of A Bit Fruity, who I think are just so, so good, both of them, at being podcasters and are also just such fucking sweeties that I'm really just looking forward to seeing them and to seeing all of you.
00:05:23.140That would be really fucking funny if you just sat here with a bunch of like slide decks and we're like, and then you see the line goes up.
00:05:30.160You know, you guys thought you were going to have a fun night.0.96
00:06:00.160You know, one of the aspects of Trumpism that I think most persistently confounds its observers are these head fakes towards economic populism, right?
00:06:11.220No matter how little comes of Trump's promises, the media seems super ready to frame even the most threadbare invocation of like the dignity of the American worker as somehow like a departure from political orthodoxy, right?
00:06:25.420Yeah, like every election year, like whether it's a midterm or a presidential election year, there is a credulous series of journalists who all declare that the Republican Party is a workers party now.
00:06:39.960And then the Republican Party actually gets into power and in fact like decimates, you know, wages and union rights and just upwardly redistributes wealth like over and over and over again.
00:06:49.780It's like this Lucy with the football thing that we do in the media.
00:07:57.980You heard it here from Adrian Dow.0.83
00:07:59.160Under any circumstances, revising an earlier statement of mine from 30 seconds ago, under no circumstances do you have to hand it to the Nazis.
00:08:06.760But I will say that unlike in 2017 or 2025, where diagnoses of economic crisis have to kind of rely on, well, it's underneath all this.
00:08:18.220People are really fearing for their economic survival, right?
00:08:27.900There is a rot in the economy and it's not serving everyone equally, et cetera, et cetera.
00:08:31.480But the situation in Germany in 1933 was, by all objective measures, super dire, right?
00:08:37.600You have, I believe, six million unemployed people, a central government that really couldn't borrow, but was holding huge foreign debts that it needed to service, right?
00:08:45.300Still part of the after effects of World War I and the Treaty of Versailles and the reparations and parts of the country basically demilitarized.
00:08:54.980Wait, why is demilitarization a part of the economy?
00:08:58.520Can you explain that to me? Because I'm a little unclear, frankly, on how the military relates to the domestic economy at this point.
00:09:06.880Yeah, it's a good question, right? Part of Germany being demilitarized gave foreign creditors a certain kind of leverage over economic policy, right?
00:09:16.620The Ruhr area, the large industrial heartland of West Germany, had been occupied by French forces earlier in the 20s.0.72
00:09:24.080Notably including black men from French colonized parts of Africa, much to the national humiliation of the Nazi Aryans.0.78
00:09:32.600That's right. So basically there is this kind of fear that the allies might intervene in some small measure, right?0.63
00:09:40.080A is part of economic policy, right? Like you need to service these debts.
00:09:44.700Otherwise, this could be in the offing.
00:09:47.260And B is clearly what the anti-Nazis are sort of hoping for, right?
00:09:51.540We've come across several times among our diarists and anti-Nazi letter writers that they're like, well, maybe the Allies will intervene.
00:10:00.060And I think once or twice you've sort of said, like, gee, would the Allies really risk another war?
00:10:05.000What people, I think, were picturing was something like the French army occupies the Tsarland and, like, everything west of the Rhine basically being like, until Hitler resigns, we're going to hold this, right?
00:10:16.440So economics and military are sort of intertwined anyway.
00:10:22.200And of course, for Germany in 1933, the economy, at least on the debt side, was tied to the last war, right?
00:10:28.300And was tied up in some measure with the question of whether it was over, right?
00:10:33.120France and the UK tend to use the debt payments as a measure to make sure that Germany didn't rearm, right?
00:10:40.640And so in the heyday of the Weimar Republic, there was this kind of economic boom that the Weimar Republic had, kind of the age of Gatsby, basically, but in Berlin, less green light, more Babylon Berlin.0.79
00:10:53.020Yeah, there were transvestites and a lot of lingerie and like bowler hats.0.59
00:11:01.760And that's all, right, a lot of that has to do with one particular way of squaring that circle, which is to say, we'll trade on the fact that people don't want us to rearm and we use that to reintegrate ourselves into a system of creditors above all the United States, right?
00:11:15.360Isn't that also kind of what they did after the war?
00:11:17.600It is indeed exactly what they did after the war. Gustav Stresemann is the main guy here. And like essentially like post-45 that becomes, right? We become very not scary to you. And in return, you finance our rebuilding efforts. But there's always like the thing like, well, if you stop doing that, we might start rearming. I have to start rearming again. It's like, well, we don't want that. Whereas Hitler nuances this the opposite way.
00:11:43.240We'll talk about his economic outlook in a second.0.79
00:11:45.920But he basically thinks, well, no, the only way to do this is for them to be afraid of us enough to basically let go of these financial instruments.
00:11:55.360And so both sides of this are basically taking military threat and financial leverage as kind of being interchangeable in this odd way.
00:12:05.920It is this kind of hangover from World War I, essentially, right?
00:12:11.160And famously, Schlesemann's answer was like, well, we're done with it and we have to sort of figure out a way to like win what we were trying to do in that war.
00:12:27.140And you ally yourself with the United States to do it.0.81
00:12:29.980And Hitler thought like, no, you use the economy to basically do a rematch.0.90
00:12:35.600Right. And that's that's what we got, at least in his mind.0.93
00:12:38.660So our story today is about the economy. And we have to make a couple of important distinctions here. In sort of synoptic big picture histories of the Third Reich, which after all, you know, lasted only 12 years, you kind of get that story that the economy went from like 6 million unemployed people to full employment in three to four years.
00:12:56.880Yeah. This is the received wisdom I have as a boorish, ignorant American about the economy of the Third Reich. Like basically, yeah, fascism was great for the economy. The war economy in Germany was, you know, very robust. De-democratization yielded much better economic results and standards of living. And some of that was from, you know, like good old fashioned sort of stimulus. And some of it was a byproduct.0.90
00:13:25.320I think this is how, like, market capitalists in the West now depict this kind of thing.
00:13:31.300It's like, yeah, you know, fewer democratic freedoms leads to a more robust economic sphere.
00:13:36.440Yeah, yeah. Peter DeGille's wet dream.
00:13:39.020Yeah, yeah, kind of. This is kind of how it gets pitched in American public school, right?
00:13:43.880And I'm imagining that you're going to complicate that picture a little bit today.
00:13:47.600Exactly. I'm not going to tell you it's totally wrong, but it is more complicated, right?
00:13:50.880In fact, the war economy itself in the Third Reich is a shambles.
00:15:23.860So, again, like I'm not going to say, oh, it's all a lie.
00:15:26.280There was sort of research in the 1970s and 80s, I think, that I was trying to figure out was any of this real.
00:15:31.320And I think people came away with the sense like, yeah, it was like this is a recovery.
00:15:34.920On the other hand, remember, this is also the great moment of recovery for a lot of economies across the world, including some like the United States that, you know, were anything but fascist or anti-fascist, right?
00:15:45.580So let me talk about my sources for today's episode, which are more complicated than usual.
00:15:51.860I looked at Adam Tuse's wonderful book, Wages of Destruction, massive book on the Nazi economy, the making and the breaking of the Nazi economy.
00:16:00.000I also looked at a controversial book by the historian Gƶtz Ali, Hitler's Beneficiaries.
00:16:06.920Well, because it basically suggests that Hitler successfully set up a welfare state for quote-unquote Aryan Germans at the expense of everyone else, right?0.95
00:16:17.620Like it's a war, it's a racial extractivist regime and that most everyday Germans likely supported the Nazis, not because they agreed with their policies, but because they were getting a bunch of shit out of it.0.95
00:16:30.060So it's like socialism, but nationalist. It's a racially exclusive version of social. I mean, I think like it's like tricky to identify parts of Hitler's economic program is like recognizably socialist or recognizably like welfare forward because that gets, you know, weaponized against the American left in such sort of like reductive, stupid ways. But it's not like total horseshit. Is that what you're saying?0.97
00:16:54.660Well, so the book was very controversial when it came out. If I had to sum up the critiques, I think they all accuse Ali of engaging in a form of the Mott and Bailey fallacy, right, where you have a pretty broad but not particularly counterintuitive claim, but then you make a sharper version of that claim.
00:17:14.220And whenever you're called upon to defend the sharper version of the claim, you fall back to the general claim, right?
00:17:19.740The fact that, like, yes, the Nazis were very keen on keeping the home audience happy and that racialized plunder, as Ta-Nehisi Coates would call it, was part of that seems pretty uncontroversial.
00:17:33.680The bigger question of whether or not people signed on to the Nazi state because of that, I think, is more difficult to say.
00:17:42.200I didn't see this argument made, but my own sense, I went into the episode kind of liking Ali's thesis, to be quite honest.
00:17:49.600What bothered me about it after reading all this other stuff and talking to these other economists and economic historians was that the timing, I think, doesn't work out, right?
00:17:59.200The big time we have to explain, like, how did people become Nazis?
00:18:02.240How did Germans become party to this state?
00:18:06.280Is late 1933, 1934 at the latest, right?0.93
00:18:11.260Right. The mechanisms that Ali is talking about, which do exist, really kick in with the kind of expropriative laws against Jews in 1936, 37, and then really with the French campaign in 39, meaning it's an elegant explanation as far as it goes, but it doesn't explain the thing when it needs to explain it.
00:18:30.800Right. Like for me, it's a problem of sequence.
00:18:32.620Oh, my God. Are you saying that Ali's assertion that Nazism got its buy-in among the German public primarily from its material benefits to them might overlook the notion that like the psychic wage of discrimination, supremacy was its true appeal?
00:18:54.580Yeah, I mean, I think that's the thing. And Tuz is very good at this, to say, look, a lot of Nazi economic policy was rational in a certain very narrow sense. It used financial instruments the way they were meant to be used. This was not Pol Pot or something like that, where it's like, that's not how the economy works at all. I need you to stop doing this.0.58
00:19:15.460But it was all in the service of a deeper irrationality, right? And like, it's reasonable to say that a lot of people who signed on to that agenda within Germany were doing it for that broader framework, right? Partly because some of the instruments that would allow for this kind of extractivism that Ali's talking about were secret in 1933 and 34, right? Like, you couldn't win elections with it. You couldn't win anyone over with it because they didn't know, right? Like, it gives you a sense of like how the Nazis thought about the state.
00:19:42.240But I do think, for me, there was a real problem of sequence emerging here.
00:20:35.700Well, she does a very, very good job, Kula does, in showing that the finance ministry was in fact fully integrated into the Nazi state.0.63
00:20:45.440That was an interesting read to me because it was a very helpful counterweight to the Ali in the sense that it makes clear the finance ministry really starts setting in motion the extractive processes to basically take money away from emigres, to start stripping funds away from Jewish families, etc., etc.
00:21:05.700in 33, but the real mechanisms kick in kind of later, right?
00:21:10.560So you get the policymaking, and she makes a very good case that basically the finance
00:21:14.180ministry was in on this from the word go.
00:21:18.600These were almost entirely done through laws.
00:21:20.900It's not just the SA standing in front of your house, like, shaking you down.
00:21:24.620Like, they were there with a court order.0.98
00:21:26.460Like, it was there, someone had written a fucking law and passed it and had conferences0.98
00:21:31.600at the ministry to figure out how to enforce this correctly, right?0.83
00:21:34.520Like, it showed up with this imprimatur of legality, and that's, I think, really, really important, which also, again, for this year 1933 creates this kind of delay, right?0.62
00:21:44.960That even if you're a horrible Nazi dictatorship, these things take time.0.64
00:21:49.820Someone in the ministry has to go through it and be like, that's actually not enforceable, you guys.0.69
00:21:53.220Or, like, we don't have the manpower for this.
00:21:55.060Or, wait, do we have an account where this all goes, right?
00:21:58.160Like, no one was saying, like, oh, we shouldn't do this.
00:22:04.580And then the other people I want to shout out here is I ended up interviewing an economist and an economic historian who know a lot about the period and about the mechanisms at work here.
00:22:14.520My friend RĆ¼diger Bachmann, who's at the University of Michigan, and Albrecht Ritsche, who's at University College London and who is the, I think, the absolute authority on sort of Nazi monetary policy and who immediately wrote back to me and was like, I'm alarmed at some of your questions because they reflect a conventional wisdom that's wrong.
00:23:03.760Be like, in minute 35, Adrian says, that is bullshit.0.68
00:23:08.980It's the nice thing about being a podcaster is that whenever anybody gets mad at you, you can just be like, come on the pod, let's discuss it.0.97
00:23:21.660Well, I'll mark clearly for our listeners what I don't know or what my understanding is.
00:23:25.980And at the moment you hear me say something about financial instruments, like just assume it comes with an asterisk, which is like.
00:23:32.020Trying to understand these things, you know, so much of my understanding of these comes from a world that was economically restructured in the wake of the crisis that Germany is living through as we're talking, right, in 1933, meaning there's still the gold standard kind of kicking around, right?
00:23:48.460There was recent experiences of hyperinflation, right?
00:23:51.060Like, we're dealing in the United States and Germany today with governments that don't borrow, though they easily could, right?
00:23:57.920Like, in the 1930s in Germany, you're dealing with a government that really has lost a lot of credibility by very deliberately allowing for hyperinflation in order to, like, water down its debts.
00:24:07.780You know, so it's more like, you know, the situation in Argentina is probably more comparable to Germany in 1933 than, you know, the United States in 2025 in that regard.
00:24:16.200So, but I'll try to use myself sort of as a vessel for everyone else's ignorance.
00:24:20.240And again, also our listeners, if they're economists among them, feel free to reach out and enlighten me more.
00:24:25.200But I'll sort of just give you the sense of what I think I've learned over the last six to eight weeks.
00:24:29.960And I thought that maybe the easiest path into this is actually with our good friend Viktor Klemperer, another literary scholar.
00:24:36.720So not a guy who thinks a lot about the economy either.
00:24:39.880No, but a guy who grounds us in the texture of life all the time.
00:24:44.420Because he was just such a valuable diarist.0.88
00:24:47.060And I come to love this crank, this grumpy guy who's always telling us about how much it sucks to live through Nazi Germany.
00:24:55.660I come to identify with Viktor every time we do this a little bit more.0.78
00:24:59.880Yeah, no. And one of the great things about him also is that he's a huge gossip.
00:25:03.640So like a lot of his friends are not famous and you have to look in the index to the diaries to find out who these people actually were.
00:25:12.380And so you can almost sort of search for them and like watch their fates throughout 1933.
00:25:18.400Luckily, most of them make it out, it seems, from the names that I've been able to follow through the next, you know, eight years of his diary or the 12 years of his diary.
00:25:27.140But in October, you do get a disproportionate number of sort of economics-related entries from Victor.
00:25:33.860And there I thought I'd briefly mention a family, the Gerstle family, that he appears to be friends with and who show up, I think, three or four times in October.
00:25:41.540Their story occupied the Klemperers quite a bit.
00:25:53.860The money will be gone in eight, nine months' time.
00:25:56.540Industry will break down because it has been squeezed dry.0.84
00:25:59.620Gerstel, the director of the lucrative Fig Coffee Company, brother-in-law, by the way, of the emigrated Jules Seba, says Hitler is a genius.0.91
00:26:07.720And if only the foreign buyout of Germany ceases, then one will be able to live.0.74
00:26:13.220Blumfield thinks one must not, quote, live in illusions and, quote, face facts.
00:26:18.360Right. So these are two friends of Klemperer's who work in private industry, who are themselves entrepreneurs and who are starting to do two things.
00:26:27.380Some people say, well, the Nazis are going to ruin the economy.
00:26:31.840There's either going to be a revolt or the allies will intercede.0.99
00:26:34.720Right. So this can't last much longer.
00:26:36.800It'll be squeezed dry. And people who have lived through 2025 so far will hear some version of this, right?
00:26:42.960Like, and we're hearing it again with the government shutdown, which is ongoing as we record this, right?
00:26:47.520Oh, it'll immiserate people to such an extent that, like, the pressure on the regime will get too great, right?
00:26:53.620So you get that. But on the other hand, you get these entrepreneurs who are starting to kind of arrange themselves with this regime and are saying, really, the problem are the foreign boycotts.
00:27:05.980The reason the foreign boycotts are such a topic, on the one hand, I explained them in June, I think,
00:27:11.660as a kind of anti-Semitic trope that the Nazis would use to sort of frame things as conspiratorial,
00:27:17.620like basically to frame as a conspiracy reports of what the Nazis were in fact doing, right?
00:27:22.700They were like, oh, you're just trying to make us look bad.
00:27:24.160But of course, what I didn't mention then is the reason why people were so afraid of foreign boycotts
00:27:29.360was that Germany as a country that had to service foreign debts in foreign currency
00:27:34.900was extremely dependent on exports, right?
00:27:39.000And especially exports to countries with strong currencies.
00:27:42.680And of course, this was the thing that had kind of broken away after 1929, right?
00:27:47.500The famous Smoot-Hawley tariffs in the United States.
00:29:47.060This is about the fact that the Nazis start, like, creating contingents, basically, or certain tranches of foreign currency that you had to apply for.
00:29:58.740Apparently, I looked around, this was not a totally unheard of instrument in 1933.
00:30:05.120It was a way to prevent, I think, your own foreign currency reserves from getting depleted.
00:30:11.060At the same time, I think Klemper is implying that, like, well, they're now playing favorites, right?
00:30:16.060and a Jewish coffee importer is not going to be high on their list.
00:30:21.340So I guess he found out how that worked.0.96
00:30:23.860And then he's like, well, yeah, I wonder whether the genius Hitler0.98
00:30:26.100is going to let you keep your business now, bucko,0.94
00:33:38.900Yeah, and that is literally true of the Nazis for that first year.
00:33:41.460It's a lot of standing in front of work sites that you had voted against or had just not showed up because you were too busy brawling with communists or whatever, right?
00:33:49.640The third myth, finally, isāand that's the most complicated one.
00:33:52.720This is the one thatāI'm trying to be a little bit of an economist myself, so, like, brace yourselves.
00:33:57.380But, like, this idea that Hitler came to power and was able to mitigate the unemployment crisis.0.84
00:34:02.400My sense, after reading a bunch about this, is that that's kind of true, but only if you squint.0.90
00:34:08.160And the squinting has a lot to do with gender.0.85
00:34:10.280So that's where we end up in true and bed with the right territory.0.98
00:34:13.420So basically, my thesis today is that the economy is another place where there's actually a good deal of continuity between the practices of the late Weimar governments and the Nazis' first year in power.
00:34:23.980And one reason for that is because the constraints are the same.
00:34:28.840in June of 1933 as they were in June of 1932, right?
00:34:33.960Your country owes a ton of money to foreign debtors.
00:34:36.220You had hyperinflation less than 10 years ago.
00:34:38.520A lot of economic policy basically has to be monetary policy.
00:34:42.340And the Reichsbank, the central bank of the German Reich,
00:34:45.500was unusual in several respects within the German state
00:34:57.080So this isn't sort of a particular German or Nazi party elite taking over and everyone else being like, what the fuck are you guys doing, right?0.79
00:35:05.600These are often people who have a great deal of continuity with the old people and many of them just stick around.0.81
00:35:11.160Second, the Reichsbank before 1933 had resembled a normal bank, like a commercial bank, a lot more than, you know, your average Berlin ministry or a government-run office, right?0.98
00:35:22.520And what I didn't know is that the Reichsbank wasn't truly synchronized in that sense of Gleichschaltung, right?
00:35:30.520Of like throwing people out and replacing them with Nazi party adherents until 1937.
00:35:37.280And even then it retained a certain degree of independence.
00:35:39.640Part of that is that Hitler had a central banker, Hjalmar Schacht, whom he put into the job in 1933, who was pretty unique in the crop of people being put in place in 1933 in that he'd had the job before.
00:35:55.360He had been the president of the Reichsbank until 1930.
00:35:59.120And then after or while leaving office, he sort of tacked hard to the right.
00:37:13.780And very early on in the Weimar Republic, economic nationalists start trying to figure out, well, how can we get something like this, right?
00:37:23.120And you do get the people like Stresemann who go out of their way to say, like, well, we can do that in economic means.
00:37:28.480And again, if that sounds to you like the Federal Republic of Germany after 1945, like, bingo, right?0.97
00:37:33.880We use our currency, we use our just sheer number of exports, and we use political tools to basically get people to buy our fucking dryers, right?0.77
00:37:45.420And then there were the nationalists like Schacht, like Hitler, who were like, no, we need, in fact, we need a market that we can control, right?0.98
00:37:53.640We need people to buy our shit who we have political control over.0.97
00:37:57.020And in the case of Hitler, he didn't even think like, I want Poles to buy my stuff.0.99
00:38:01.140He wanted German people to live there and sell stuff to them.0.54
00:38:04.660Like he already had sort of an eliminatory bent, which economic nationalists of the Weimar Republic largely didn't.0.99
00:38:11.820They were like, we would like control over them so that they can then buy our shit, right?0.69
00:38:15.520I think that's important that like they both agree that doing U.S. style capitalism really requires a kind of a hinterland.0.98
00:38:29.760And so the big question is not the various mechanisms you use for monetary policy, but the interlocking really between international finance and politics, namely the question of rearmament, right?
00:38:42.340I didn't realize this, but apparently the first time the Weimar government started reaching for work creation programs after 1929, right, with tons of unemployment, it makes sense.
00:38:52.620Wasn't actually to get unemployment down, but they did it in order to start stealth rearmament, right?
00:40:04.860I don't want you to build tanks, right?
00:40:06.500And it seems to me the answer is a little bit of both.
00:40:08.540There was this idea that like some of these, the famous instrument here is the Miforwechsel.
00:40:13.140It's a debt bond, essentially, I think.
00:40:15.440There is in the literature this claim that it's almost like a second currency, right?
00:40:19.100Like the Nazis would issue these in order not to have to devalue the Reismag by just pumping a bunch of money into the monetary supply.
00:40:26.780Ritschel's research says that's absolutely not true.
00:40:29.360These things were very hard to trade and they were super secret, so it doesn't make any sense.
00:40:33.540But it still has the effect of being secret in two ways at once.
00:40:37.760It's secret because of what it's allowing the German government to do and because it hides the true extent of just how much of this debt was being taken on in order to allow for rearmament.
00:40:49.660And so a couple of things that I think are worth talking about is the first thing we have to say about these myths about recovery is that the German economy was recovering in late 1932.
00:41:10.200But overall, it looked like Germany was out of the woods.
00:41:13.520And if you think about the way the vote for the Nazi party actually declined in late 1932, historians sort of point to that and say like, well, the economic argument seems to have lost some force.
00:41:25.120People felt their lives improving, possibly.
00:41:29.080And then, of course, by 1933, the influence of Hitler on the economy is still quite limited, right?
00:41:36.160But the question is, like, is the recovery after 1933 real?
00:41:39.320And the answer seems to be there are some discrepancies, but yes.
00:41:42.820But a lot of this is about optics, right?
00:41:46.440So we mentioned the question of the Audubon, right?0.57
00:41:50.380The Nazis built a ton more Audubons than the Weimar Republic ever did.
00:41:54.880But according to a book by Dan Silverman, Hitler's Economy, 1933 to 1936,
00:42:00.580does kind of give you a really nice rundown of just how small those really were.
00:42:05.900I think it's something like it's measured in the tens of thousands of people who work in these at the heyday, right?
00:42:10.840And with six million unemployed, like that's really not going to make that much of a dent.
00:42:15.360And in 1933, that number is more like 10,000 or something like that.0.91
00:42:19.240So it looks cool and Hitler has a lot of good photo ops with it.0.82
00:42:22.740But these kinds of public works programs are unlikely to explain the recovery between 1933 and 1936.0.85
00:42:30.220What you get instead is weird sort of symbolic stuff.
00:42:33.980So, October 1st, 1933, Germany celebrates its first soup sundae, Eintopfsonntag.0.70
00:42:41.600Restaurants and households have to serve simple stews and donate the money they save in the process to a charitable organization that the Nazis had created, right?
00:42:52.140So, like, instead of making your sundae roast, make something a lot cheaper.0.81
00:43:20.280In practice, much of the ballyhooed sort of economic planning of the first year of Nazi rule was either a continuation of much older projects or attention-grabbing schemes like this with little real-life impact.
00:43:33.980The big work creation program, which had started, I believe, in July, the Reinhardt program, was basically an extension of ideas and in some cases of the actual practices that the last governments of the Weimar Republic had developed and in some cases even implemented.
00:43:47.700So this is money allocated to very basic work creation policies of the kinds you see, I think, at the very beginnings of the New Deal in the United States.
00:43:56.040So it just doesn't sound like they're that serious. I don't know. It sounds like they're kind of coasting on stuff that the last regime did, the Weimar, like, Autobahn public works projects. They're doing this, like, weird, marginal, cutesy shit, like, oh, make us soup. It doesn't sound like they're that invested from what you've said so far in, like, the economic development of Germany.
00:44:19.120Yeah, there's something to that. On the other hand, Hitler was pretty invested in the economy as an engine of national strength and German superiority, right? Like, he didn't just want to lie about this. He's not a tin pot dictator in that sense, right? He, in the end, real tanks need to roll for him to be happy, meaning he can't just be like an Erdogan who's like, oh, there's no such thing as inflation, right? Like, this needs to be real dividends down the line.
00:44:46.180His unpublished second book is all about this.
00:44:48.640But there are a couple of reasons why the Nazis turned to these kinds of theatrics, and I've already alluded to a few of them.0.76
00:44:54.780One is the real shit that was happening behind the scenes couldn't be discussed openly, right?0.80
00:45:00.840And so basically you had to do Soup Sunday in order to sort of not have to talk aboutālike if people are like, oh, what are you doing about the economy?0.98
00:45:11.200Because Hitler was in some ways caught in the same trap as his predecessors, right?0.81
00:45:15.620can't really borrow, foreign trade deficits, et cetera, et cetera.0.92
00:45:19.300And he had added one of his own making, namely he wanted to rearm,
00:45:22.880which he couldn't do legally according to various agreements, right?
00:45:26.560So the solution had to be these kind of off-the-books shadow debts
00:45:30.360like the MIFO bills, but you can't have a press release about that
00:45:34.540because the allies would be like, say, what?
00:45:36.880And your creditors, like your two least favorite people in the world,
00:45:40.520the people who can reoccupy you and the people who hold your debt, right?0.67
00:45:44.760And so basically, until there was major move towards debt default, which the Nazis did eventually do, there really was nothing that Hitler could sort of like point to there.0.55
00:45:56.180Connected to this, the thing that would eventually goose employment past the recovery that had already started in late 1932, and which, as I said, was mirrored in other countries, was rearmament.0.69
00:46:08.660The Young Plan had bound Germany to don't devalue your currency, don't default, right?
00:46:15.960And Schacht was sort of curious, apparently, about default.
00:46:19.560He was a little default curious, but even the Nazi Party was, like, a little afraid of it, right?
00:46:25.200And while the Nazis did not make payments on Dawes and Young bonds, so the bonds that kept Germany afloat in 1931, 32, 33, they paid interest on them.
00:46:39.100They were careful not to sort of opt out of that system bit by bit by bit.0.60
00:46:45.060And so basically, that was the other thing.
00:46:47.620You couldn't communicate that to German audiences without saying two things.
00:46:52.960One is we're looking to rearm and probably we're looking to go to war with the Western allies, right?
00:47:00.800And I think our letter writers and our diarists are unanimous in the fact that, like, this is a country with very recent memories of war.
00:47:09.880This would not have gone over super well, right?
00:47:12.000Like, you have to ease people into this.0.57
00:47:13.700The third thing that I think makes for this kind of theatrical economic policy is that the Nazis were still trying to placate and to play to various constituencies and to keep them happy, right?0.55
00:47:25.400They were still people they were nervous about or sort of interest groups they wanted to please.0.67
00:47:30.120So on their face, measures like the Reinhardt program were big public works projects like the ones that we tend to associate with the New Deal.
00:47:37.560But Adam Tues in his book points out that they were actually super selective, right?
00:47:42.700Germany's unemployment problem was greatest in its industrial and urban centers.
00:47:48.200And yet Reinhardt funds seem to mostly go to rural areas, right?
00:47:52.680Tuz cites the example of East Prussia.
00:47:55.280Do you know where East Prussia is by any chance?
00:47:58.380No, gone to my head, I couldn't find it on a map.
00:48:38.880The landed elite there had swung pretty seriously towards the Nazis.
00:48:42.440They had been sort of like more monarchist conservatives.1.00
00:48:45.600And then they're like, yeah, fuck it, we'll do Hitler.0.99
00:48:47.940And farmers, much more than industrialists, and I didn't realize this,0.99
00:48:51.080had become sort of the base of the Nazis in parts of the transition to 1933.
00:48:55.580So like the farm community really had swung very seriously to the Nazis.
00:49:00.400In the election in March, where the Nazis garnered, I don't have the exact numbers,
00:49:04.520but something like just shy of 40%, the Nazis got 55% of the vote in East Prussia, right?0.92
00:49:10.320Their best results in any part of Germany.0.82
00:49:12.560So it's really odd that they then go and try to make their big splash here.
00:49:19.040Part of this, Tuz points out, is that their Gauleiter, Erich Koch,
00:49:24.500so the local Nazi grandee there, sort of pitches his province
00:49:29.400as being an easy lift for the Reinhardt program.
00:49:34.520This is what the Nazis call the battle for work, the Arbeitsschlacht, is quite winnable here in the sense that there were 130,000 unemployed people here, and I'm taking this from the wages of destruction, and they were able to basically eradicate unemployment within half a year.
00:49:49.700And, you know, they frame it as this like, you know, the heroic battle against unemployment, the cleansing of the German landscape from the blight of unemployment already has this like really creepy language all around it.
00:50:00.640At the same time, it's very interesting to think about the kind of work that was happening.
00:50:06.480Tuz writes, the agricultural economy of East Prussia was ideally suited for fast-acting but primitive work creation measures.
00:50:13.620There was a lot of ditch digging, homestead restoration.
00:50:17.980Later on, I think, like, rebuilding historic downtowns.
00:50:22.340People were just digging trenches, basically, right?
00:50:25.240Meaning, like, it was a lot simpler than, like, getting people back to work on a factory floor that had to produce something that had to be integrated into international markets, right?
00:50:34.720Where, like, tariffs or unfavorable exchange rates might make that impossible.
00:50:40.320Here, you're just like, well, Germany is a net importer of food.
00:50:43.740You're always going to get rid of this food.
00:50:47.040It's this very kind of showy and ideologically driven work creation.0.94
00:50:51.860And also like from my like idiot non-economist point of view, it seems like an underdeveloped area might be ripe for a lot of kind of like easy, like slow, low over the plate kind of economic development.0.89
00:51:04.080It's like, well, you know, the major industrial centers in this region still all have dirt roads.0.97
00:51:09.900So we're going to like pay some locals to pave the roads.
00:51:12.860And suddenly we have much more robust infrastructure and business can be ducted much more easily.
00:51:16.640Like that kind of thing seems easy, right?
00:51:19.400It seems easy to do a lot with fairly little in a place like that.
00:51:22.880Something I'm wondering is, was this thought of by like the Hitler regime as like a favor to their base?
00:51:30.500Like we're going to reward these people for their support the way that like Donald Trump tries to tailor his like attacks on the welfare state, for instance, in a way that he clearly imagines will like only impact like Democratic voters or will like invade Democratic cities.
00:51:44.860Is this like trying to target his political enemies for retribution and his supporters for largesse?
00:51:51.600Or is it just kind of simpler than that?
00:51:53.720I mean, Tews doesn't say, but my suspicion is there is an element of Trumpism in this, in that they needed the easy propaganda get.
00:52:04.640And East Prussia was the easy propaganda get.
00:52:07.120They had economists telling them, look, you could probably eradicate this.
00:52:11.060Let's imagine you instead try to do the opposite and you say, we want to win over people who didn't vote for us.
00:52:16.360Let's go to Hamburg, let's say, right?
00:52:18.540Well, industrial unemployment is a lot harder to address in 1933.
00:52:22.520Again, it's like it's about world markets, about things beyond your control.
00:52:26.300And then the picture is likely going to be a lot more ambiguous.0.98
00:52:30.620So why not show a bunch of happy farmers and their pigs and like restoring like beautiful old like German churches or some shit?0.98
00:52:40.560Right. Right. It also has the kind of like return aesthetic. Right. It's like you can get a lot of I'm sure good propaganda photos of healthy white families probably wearing Lederhosen and like doing.1.00
00:53:02.240But, like, those things are meantāthey draw on databases full of Nazi propaganda, and they're meant to look like Nazi propaganda, but they also evoke this idea of, like, a noble and betrayed agrarian past to which we can return.0.99
00:53:17.340I'm sure they really liked that shit.0.51
00:53:19.140Yeah, and I mean, I think, you know, this is why I brought up the concept of folk economics, because like when we say propaganda is propaganda for whom? My suspicion, and again, I'm just kind of guessing here, my suspicion is this isn't just propaganda for working people, right?0.99
00:53:35.640Because, like, if you're unemployed and you're like, oh, this farmer in a place I've never been to, like, is doing better, you might be like, well, great, la di fucking da, right?
00:53:43.720But I'm guessing this is also appealing to the folk economics that prevails among conservative but non-Nazi elites, right?0.60
00:53:51.500Like, oh, the healthy farmer with his, well, I don't think they would be wearing lederhosen, that's very much a Bavarian thing, but, like, wearing traditional outfits.0.75
00:53:58.940Like, if you were a conservative who was not yet a convinced Nazi, like, you're going to like that a lot more than a bunch of scary looking proletarians with Polish last names in the Ruhr area going happily back to work, right?0.53
00:54:12.960So I do think that this is both about sort of appealing to the German people.0.73
00:55:29.240We should have life space in the East and the West, blah, blah, blah, blah, blah, right?
00:55:33.280Like in order to thrive as a people, right?
00:55:36.700There is this kind of eugenicist edge to it.
00:55:38.660But on the other hand, I think it's supposed to be kind of a reminder of scarcity, right?
00:55:45.360Poster after poster, speaker after speaker at this Thanksgiving day was not very thankful,
00:55:50.840but was reminding Germans of the fact that their country was allegedly surrounded by
00:55:55.020enemy neighbors who were withholding food from the Germans, right?
00:55:59.420Food became a way to get Germans to sort of think conspiratorially about other countries,
00:56:05.500which is a real kind of shift from even the most conservative governments of the Weimar Republic.
00:56:11.260This is something that Tuz talks about in his book.
00:56:14.000He says that basically someone like Strezemann was an economic nationalist, but for him that meant you hitched your wagon to other actors on the world stage against others, right?
00:56:25.760In this case, mostly the United States against the Western allies, right, against France and England.
00:56:31.760I forget how he puts this, but he sort of says Hitler thinks about these things in deeply conspiratorial and kind of siege mentality terms, right?
00:57:02.960Right. Anti-Semitism requires a kind of paranoia that can inhibit the pure rationality that I think like a market economist would aspire to. Right.
00:57:12.500Yeah. And so I think also this fixation on farms and food is to create a full us versus them kind of folk economy.0.75
00:57:19.400It's supposed to sort of say, have you experienced hunger in the last three years? A lot of people had.
00:57:24.580It's like, well, you can blame everyone outside of our borders for that. Right.
00:57:29.020Like as opposed to like, you know, the evil communists, but not the nice Americans or the evil Americans and not the nice Soviet communists or whatever.
00:57:38.840This really is about us versus them, about self-reliance and being dependent for your very sustenance, for your very livelihood, for your lifeblood as a people on these shadowy, uncaring external forces.
00:57:52.640who have forced Germany first into military surrender,0.53
00:58:20.780It's also it's useful on a few fronts for him.
00:58:24.020Yeah. And so the other thing I wanted to point to is that like October is also the month when Germany finally officially exits disarmament talks with the French and the English.
00:58:36.720They pretend that that's somehow like the English delegation's fault.
00:58:40.180It's not. It's long planned by the Nazis.0.96
00:58:42.900And they exit the League of Nations.0.95
00:58:44.520Right. So they are using economics to sort of send the first signals that they are disentangling themselves from an international system partly set up to control German rearmament and signaling something that it takes Neville Chamberlain way too long to realize that, like, you know, they are they're looking for a rematch.
00:59:04.780Right. At the same time, what I didn't know is that the Nazis are fairly nervous about both these steps.
00:59:10.080They sort of try and drag them out and then just kind of do it.0.60
00:59:13.440Schacht is actually among the people who kind of pushes for this more than anyone else.
00:59:16.720And so, like, I think we can do it, you guys.
00:59:18.240But, like, the Nazis are keenly aware that it might just mean that the Polish army moves in or whatever, or that the French army moves in.0.94
00:59:26.380And they're very lucky that it doesn't happen, that everyone's busy with their own shit in late 1933.0.68
00:59:31.940But, like, they think, like, are we pushing too far too fast in the event, unfortunately, they were not.0.90
00:59:43.140Now we've talked about the first of these three claims, these three myths I want to talk about,
00:59:57.320which is that Hitler came to power and instituted these huge public works programs, right?
01:00:01.840And as we've been pointing out, like, that's not true.
01:00:05.140These works programs are short-lived, they're small, they're very, very specific to specific areas.
01:00:11.500They're theater more than anything else.
01:00:14.380But that gets us to the second point, which is the one where I'm drawing on Albrecht Ritschel's work.0.74
01:00:18.980The idea that massive deficit spending is behind the Nazis' success in fixing the economy.
01:00:26.740This we can do a little bit shorter because the story here is more complicated too,
01:00:30.960which is that the massive deficit spending really comes later and it is never in the service of
01:00:40.700goosing the economy. It is in the service of rearmament, right? The moment the Nazis start
01:00:46.460with these things like the MEFO bills, they are there in order to finance secret rearmament0.84
01:00:53.980throughout the German Reich. Do you want me to briefly explain how this thing worked?
01:00:58.480Yeah, please do, because you kind of breezed through this and I was a little like, wait a minute.
01:02:33.960Well, there's only a limited number of possibilities, but they couldn't have said, like, this is how this was done, likely, and please stop.
01:02:39.980So we go from 10% in 1933 to 102% in 1936.
01:02:45.800I understand that to mean that MEFO bills exceeded the totality of all government borrowing and exceeded the public sector borrowing by 278%.
01:02:59.100So this becomes a huge bubble, basically, which will eventually bring down Schacht, I believe.0.55
01:03:05.260Essentially, he thinks they have to deflate this thing somehow, and Hitler fires him.
01:03:10.360But like that gives you a sense that like when we're talking about these kind of instruments and this massive deficit spending, not only was it not used for public works, it also doesn't really start happening until 1934 and really starts getting going as rearmament heats up.
01:03:25.440Again, to me, as not an economist, it kind of makes sense, right?
01:03:29.440This is something we saw with the Inflation Reduction Act.
01:03:32.260Restarting a scuppered factory is hard, especially with rearmament, right?
01:03:36.620Like a factory that the allies told you 12 years ago you can't operate anymore takes even more time.0.78
01:03:44.240Like by the time you have the first tank roll off the line is even later than that, right?0.72
01:03:49.660So the outlays in the beginning would have been kind of small and your options were kind of limited.
01:03:54.660The other reason, of course, why people in East Prussia were digging trenches was that digging trenches takes no starting capital and has very little overhead and takes no prep time, right?
01:04:05.340A lot of this stuff did take prep time.
01:04:07.660And so, you know, you do get this absolute garden hose of cash eventually, but not yet in 1933.
01:04:13.860And people wouldn't have been aware of it, except that, you know, Germany was producing tons of weapons until much, much later than that.
01:04:21.220One interesting thing that I learned from Tuze that I had never thought about is,
01:04:25.220if you remember our June episode about the Night of the Long Knives,
01:04:29.180Tuze seems to suggest that in a weird way,
01:04:31.880this garden hose of cash may have brought about the conflicts of June 1934,
01:04:36.220which is to say, as with all kinds of public money, different people want it.
01:04:43.400And the question in the Nazi party was like, okay, we're printing illegal money.
01:04:47.500We're going to just start throwing it around.
01:07:01.200And I think the suggestion, this is where Ali might have a point.0.95
01:07:04.020The suggestion is, well, not if the arms are then used to conquer a bunch of people and you can take their central bank holdings and all that shit and bring it to Berlin.0.63
01:07:14.120That makes these debts eminently serviceable.0.69
01:07:17.040Yeah, that's the thing about this whole episode is that you're painting a picture of how the economic conditions and choices of the early Hitler regime made a war inevitable.0.74
01:07:27.420Yeah, or I would go further and say that kind of sounds to me like we're premised on the fact that there would be a war, at least a limited war, right?
01:07:35.800In July 1933, and certainly in 1934, it does appear that the way this weird house of cards works is if you're planning to be in Paris before long, right?
01:07:47.280Like, you're not planning on an independent France, right?
01:07:52.120And, like, Kjalmar Schacht, who will be at Nuremberg and will, I think, be cleared of most charges, like, very clearly must have seen that, like, the way out from under this mountain of debt is to wage a second world war, right?
01:08:06.120So, it's important to sort of mention that, like, it's not that they kind of paint themselves into a corner.
01:08:11.500My impression is that this instrument only makes sense if you know that you're planning to go to war six months after taking office.
01:08:20.940So there is massive deficit spending, but later and only to rearm, really.
01:08:26.100And then the third, this is my trying to blunder into some economic history myself, this idea that Hitler came to power and was able to mitigate the unemployment crisis, right?0.98
01:08:35.840So I think some of this is true. As a measure, real unemployment in Germany goes from 6 million to 4 million by the end of 33 and then is essentially, at least by official reckonings, eradicated by 1936.0.98
01:08:53.940Now, you and I, having embarked on this journey through 1933, might have a rejoinder to this.
01:09:01.840Right. I mean, something I'm thinking of is over the course of our time together, we've seen a lot of people get kicked out of their jobs. Right. Right. And not be able to like go back on the job market looking for work and then be counted as the unemployed.
01:09:16.640what he's doing, at least in part, is excluding large swaths of his population from the freedom
01:09:24.120to participate in public life as like wage earning persons. Right. And then when the nice
01:09:31.120Aryan men get to take those jobs, they are technically out of the unemployment line and1.00
01:09:37.280technically your unemployment numbers go down. But what you've actually done is just hoisted all the1.00
01:09:42.220of economic immiseration onto, like, a racially identified group of people.
01:09:46.500Yeah, that was exactly my cognitive dissonance in researching this, right?
01:09:50.360Like, the Nazis keep talking about we've gotten unemployment under control.
01:09:53.560And as you say, we've spent this entire series chronicling people very manifestly getting
01:10:11.220And to some extent, I think transportation, right, meaning who knows how many people lost their jobs in those fields.
01:10:17.760So, like, maybe we're looking at a kind of selective picture.
01:10:21.060On the other hand, if you think about the fact that, like, there were half a million German Jews in 1933, right, like, you can sort of see, like, it's not enough to explain the decline.
01:10:31.660But, like, as you say, pushing more and more people out of the workforce must have had an impact.0.62
01:10:51.360And so if you think about that, if you think about people leaving the country, people not being able, as you say, to fully participate in civic life, including, I think, not being able to really apply for unemployment benefits.
01:11:04.820But now we get to something even more interesting, which is the gender part of this.
01:11:09.300There is also another group that we have talked about before on this podcast, I'm told, that drops out of the labor force in large-ish numbers in 1933, and that is women.
01:11:20.540I mean, this is something that a lot of people are trying to do globally at this time.
01:11:26.500But is it that married women are prohibited from working and sort of like forced into dependence on their husbands?
01:11:35.160it. This is the rare place where the Reinhard program puts real money into its carrots.
01:11:40.740There are what's called Ehestandsdarlehen. So they're essentially marriage subsidies.
01:11:45.160The idea was that a newlywed couple could apply for a thousand marks loan at extremely
01:11:52.400favorable rates. I think it was you had to pay one percent interest every month, which
01:11:56.620is really near nothing. But the woman had to commit to dropping out of the workforce.1.00
01:12:01.680So it's not even like a, it's a loan. You do have to pay back that principal, even if the interest rate is low. And how does this 1,000 Reichmark loan, how does that compare to like a lower middle class salary? Because I'm like wondering how enticing this is.
01:12:20.160Like right now, one of the critiques that kind of annoys me a little bit because I think it misses the forest for the trees of, you know, our contemporary push in America to get women out of the workforce is this thing you'll hear from people who esteem themselves on the left to be like, well, of course I want to be a housewife, but I can't afford it.
01:12:37.480Right. You know, to like concede that this is aspirational for women to be, you know, socially like cloistered dependents of men in a state of permanent childhood in the domestic sphere.
01:12:51.120But then like instead of contesting the desirability of like women's segregation out of public life, they point to it as an unreachable aim. Right.0.87
01:13:02.000And I'm guessing that if this Nazi program was more effective as a subsidy in achieving its goal of driving women out of the workforce and making paid work the like sole space of Aryan men, I'm guessing it must have been a little more comparatively generous than things like what we get now, like, you know, paid family leave or like even proposals for universal basic income, which are aimed at this outcome.0.85
01:13:29.960Right. It's got it's got to be a little better.0.86
01:13:32.160Yeah. I mean, counterpoint. This is a dictatorship. Right.