10-23-2011, 05:02 PM
Unlike the other responsible -- or irresponsible -- politicians of twentieth-century Europe, Hitler did not believe that fighting for his country's economic health meant having to impassively accept one setback after another, stand idly by while industries died, or look on as millions of unemployed workers tramped the streets.
In those days, the only solution to these problems that was accepted by politicians and economists in the democracies was to drastically cut spending, both governmental and private. Belt-tightening was the agreed-upon remedy.
Thus, Germany's leaders prior to Hitler had cut salaries by 25 percent, limited payment of unemployment benefits to six months, and reduced total private investment by five sixths. The country's standard of living had collapsed like a deflated balloon. At the end of six months the unemployed obviously had not found new jobs. To the contrary, they were joined by long lines of new unemployed. Deprived of all means of subsistence, they gravitated to the welfare offices.
People spent less and less, with the inevitable consequence that industries producing consumer goods closed their doors, one after another, for lack of orders, thereby sending thousands more unemployed into the streets. In 1932, Germany's industries were languishing, their production reduced by half.
Yearly private investment had fallen from three billion marks to barely 500 million. No new blood had been injected into the industrial system, no workplaces modernized. The economy stagnated.
The government not only lacked any new initiatives, it was almost bankrupt. Fiscal receipts had fallen to ten billion marks, of which the meager and short-term unemployment benefits alone absorbed two thirds.
Germany couldn't wait for a business upswing to get the economy moving again. As Hitler had long understood, the government had to bring economic renewal by bold action and imaginative enterprise.
Unemployment could be combated and eliminated only by giving industry the financial means to start up anew, to modernize, thus creating millions of new jobs.
The normal rate of consumption would not be restored, let alone increased, unless one first raised the starvation-level allowances that were making purchases of any kind a virtual impossibility. On the contrary, production and sales would have to be restored before the six million unemployed could once again become purchasers.
The great economic depression could be overcome only by restimulating industry, by bringing industry into step with the times, and by promoting the development of new products.
Because Germany had no petroleum, for example, the production of synthetic gasoline (from coal) should be encouraged as much as possible. The technique was already known, but it needed to be applied. Similarly, Germany was able to produce an artificial substitute for rubber, "Buna." But the plans for its development and production were still stored away in file cabinets. Only a small percentage of practical new inventions ever left the records files.
Great public works projects were another way to create new jobs, stimulate industrial activity, and revive the economy. For one thing, Germany's mediocre roads needed vast improvement. Moreover, the demands of the time called for the construction of a national network of modern highways. Radiating thousands of kilometers, these great concrete lifelines would encourage increased commerce and communiccation among the Reich's many regions.
New highways would also encourage increased automobile production. Considering the potential, Germany was still quite backward in automobile production. It manufactured only one-fifth as many cars as France.
Nearly ten years earlier, while in his prison cell, Hitler had already envisioned a formidable system of national highways. He had also conceived of a small, easily affordable automobile (later known as the "Volkswagen"), and had even suggested its outline. It should have the shape of a June bug, he proposed. Nature itself suggested the car's aerodynamic line.
Until Hitler came to power, a car was the privilege of the rich. It was not financially within the reach of the middle class, much less of the worker. The "Volkswagen," costing one-tenth as much as the standard automobile of earlier years, would eventually become a popular work vehicle and a source of pleasure after work: a way to unwind and get some fresh air, and of discovering, thanks to the new Autobahn highway network, a magnificent country that then, in its totality, was virtually unknown to the German worker.
From the beginning, Hitler wanted this economical new car to be built for the millions. The production works would also become one of Germany's most important industrial centers and employers.
During his imprisonment, Hitler had also drawn up plans for the construction of popular housing developments and majestic public buildings.
Some of Hitler's rough sketches still survive. They include groups of individual worker's houses with their own gardens (which were to be built in the hundreds of thousands), a plan for the covered stadium in Berlin, and a vast congress hall, unlike any other in the world, that would symbolize the grandeur of the National Socialist revolution.
"A building with a monumental dome," historian Werner Maser has explained, "the plan of which he drew while he was writing Mein Kampf, would have a span of 46 meters, and a capacity of 150 to 190 thousand people standing. The interior of the building would have been 17 times larger than Saint Peter's Cathedral in Rome." "That hall," architect Albert Speer has pointed out, "was not just an idle dream impossible of achievement."
Hitler's imagination, therefore, had long been teeming with a number of ambitious projects, many of which would eventually be realized.
Fortunately, the needed entrepreneurs, managers and technicians were on hand. Hitler would not have to improvise.
Historian Werner Maser, although quite anti-Hitler -- like nearly all of his colleagues (how else would they have found publishers?) -- has acknowledged: "From the beginning of his political career, he [Hitler] took great pains systematically to arrange for whatever he was going to need in order to carry out his plans."
"Hitler was distinguished," Maser has also noted, "by an exceptional intelligence in technical matters." Hitler had acquired his knowledge by devoting many thousands of hours to technical studies from the time of his youth.
"Hitler read an endless number of books," explained Dr. Schacht. "He acquired a very considerable amount of knowledge and made masterful use of it in discussions and speeches. In certain respects he was a man endowed with genius. He had ideas that no one else would ever have thought of, ideas that resulted in the ending of great difficulties, sometimes by measures of astonishing simplicity or brutality."
Many billions of marks would be needed to begin the great socioeconomic revolution that was destined, as Hitler has always intended, to make Germany once again the European leader in industry and commerce and, most urgently, to rapidly wipe out unemployment in Germany. Where would the money be found? And, once obtained, how would these funds be allotted to ensure maximum effectiveness in their investment?
Hitler was by no means a dictator in matters of the economy. He was, rather, a stimulator. His government would undertake to do only that which private initiative could not.
Hitler believed in the importance of individual creative imagination and dynamism, in the need for every person of superior ability and skill to assume responsibility.
He also recognized the importance of the profit motive. Deprived of the prospect of having his efforts rewarded, the person of ability often refrains from running risks. The economic failure of Communism has demonstrated this. In the absence of personal incentives and the opportunity for real individual initiative, the Soviet "command economy" lagged in all but a few fields, its industry years behind its competitors.
State monopoly tolls the death of all initiative, and hence of all progress.
For all men selflessly to pool their wealth might be marvelous, but it is also contrary to human nature. Nearly every man desires that his labor shall improve his own condition and that of his family, and feels that his brain, creative imagination, and persistence well deserve their reward.
Because it disregarded these basic psychological truths, Soviet Communism, right to the end, wallowed in economic mediocrity, in spite of its immense reservoir of manpower, its technical expertise, and its abundant natural resources, all of which ought to have made it an industrial and technological giant.
Hitler was always adverse to the idea of state management of the economy. He believed in elites. "A single idea of genius," he used to say, "has more value than a lifetime of conscientious labor in an office."
Just as there are political or intellectual elites, so also is there an industrial elite. A manufacturer of great ability should not be restrained, hunted down by the internal revenue services like a criminal, or be unappreciated by the public. On the contrary, it is important for economic development that the industrialist be encouraged morally and materially, as much as possible.
The most fruitful initiatives Hitler would take from 1933 on would be on behalf of private enterprise. He would keep an eye on the quality of their directors, to be sure, and would shunt aside incompetents, quite a few of them at times, but he also supported the best ones, those with the keenest minds, the most imaginative and bold, even if their political opinions did not always agree with his own.
"There is no question," he stated very firmly, "of dismissing a factory owner or directory under the pretext that he is not a National Socialist."
Hitler would exercise the same moderation, the same pragmatism, in the administrative as well as in the industrial sphere.
What he demanded of his co-workers, above all, was competence and effectiveness. The great majority of Third Reich functionaries -- some 80 percent -- were never enrolled in the National Socialist party. Several of Hitler's ministers, like Konstantin von Neurath and Schwerin von Krosigk, and ambassadors to such key posts as Prague, Vienna and Ankara, were not members of the party. But they were capable.
While Hitler kept a close eye on opportunists (such as Franz von Papen, who was both intelligent and clever) he knew how to make the best use of such men, and to honor them and recognize their achievements.
Similarly, he did not hestitate to keep on competent bureaucrats chosen by his predecessors. A good example was Dr. Otto Meissner, who had headed the presidential chancellery under the socialist Ebert and the conservative von Hindenburg, and who had done everyting in his power, up to the last minute, to torpedo Hitler's accession to power. But Meissner knew his work, and Hitler wisely kept him on the job. Hitler treated him with respect and confidence, and Meissner served the Fuhrer faithfully and efficiently for twelve years.
Perhaps the most remarkable such case is that of Dr. Hjalmar Schacht, the most discerning and competent of Germany's financiers in 1933. A Hitler supporter? By no means! Schacht never was and never would be a supporter of anyone but himself. But he was the best in the business: for getting the Reich's economy moving again, he had no equal. Ten years earlier, at the end of 1923, Schacht had financially rescued the Weimar Republic by helping to invent the "Rentenmark." He was shrewd and imaginative, and thus capable of understanding and implementing the boldest of Hitler's plans.
Schacht's personal ambition was immense, but this was yet another reason for Hitler to give him every possibility to rise as high as he could. Within weeks of taking power, Hitler appointed him President of the Reichsbank, and then, a year later, as Economics Minister as well. Schacht couldn't be happier.
Dangerous? Of course! Doubly so, inasmuch as Schacht was a capitalist to the core, with close ties to major foreign banking interests, not excluding Jewish financiers in London and New York. Moreover, Schacht cared little for Hitler's revolutionary program, which regarded labor as the true source of national wealth.
Hitler called on the brilliant Dr. Schacht to devise new ways of acquiring the funds necessary for what he intended to accomplish. That was a great deal, but it was all. The collaboration went no further: Schacht was never permitted to intervene in political matters. When Schacht's financial formulas had served their purpose, the collaboration would end. Until he was dismissed as Reichsbank president in 1939, Hitler made good use of his extraordinary talents. But Schacht never forgave his dismissal, and would nurse a seething resentment.
Determined to conjure up billions of marks as quickly as possible, and by any means available, in early February 1933 Hitler summoned Schacht's predecessor as Reichsbank president, Dr. Hans Luther, to his office. Luther, who had been appointed to his post in 1930 by a previous administration, had old-fashioned views of extreme prudence in the management of state funds. Since the state's coffers were nearly empty, he was all the more prudent. His detachable collar, stiff as a colling card, proclaimed the rigidity of his principles. He belonged to the old school of accountants who spend a dollar only when they have a dollar.
Hitler was well aware that this capable man was not happy to be presiding over a central bank that lacked funds. It was not, however, to have Luther empty the state treasury that Hitler had summoned him, but to ask him to devise new means of financing Germany's recovery.
It was a question of imagination, but Luther's brain was not a volcano of new ideas; it was a calculator.
"How much money," Hitler asked him, "can you put at my disposal for creating jobs?" Luther hesitated to respond immediately; his mental calculator began functioning. After working out the calculations in his mind, he responded as though speaking to the director of a large financial firm: "One hundred and fifty million."
An eloquent answer, it showed just how completely Hitler's predecessors and their colleagues were lacking in their understanding of the scope of the resources that would be needed to save the Reich. One hundred and fifty million, at a time when the German government was pouring a billion marks every three months into unemployment benefits alone!
With a budget of 150 million marks, the German treasury would have been hard put to spare even thre or four marks a day to the five or six or seven million unemployed over one short week.
Clearly, this question had never been put to Dr. Luther, and no Reich leader before Hitler had ever troubled to learn how to go about raising the funds that would be indispensable for carrying out a serious program to put Germany back to work.
Obviously, then, Dr. Luther was not the person to put Hitler's program into effect. The new Chancellor then thought of Schacht, the sly old fox. He was always good for a trick, and now Hitler needed some of his magic.
"Herr Schacht," he said, "we are assuredly in agreement on one point: no other single task facing the government at the moment can be so truly urgent as conquering unemployment. That will take a lot of money. Do you see any possibility of finding it apart from the Reichsbank?" And after a moment, he added: "How much would it take? Do you have any idea?"
Wishing to win Schacht over by appealing to his ambition, Hitler smiled and then asked: "Would you be willing to once again assume presidency of the Reichsbank?" Schacht let on that he had a sentimental concern for Dr. Luther, and did not want to hurt the incumbent's feelings. Playing along, Hitler reassured Schacht that he would find an appropriate new job elsewhere for Luther.
Schacht then pricked up his ears, drew himself up, and focused his big round eyes on Hitler: "Well, if that's the way it is," he said, "then I am ready to assume the presidency of the Reichsbank again."
His great dream was being realized. Schacht had been president of the Reichsbank between 1923 and 1930, but had been dismissed. Now he would return in triumph. He felt vindicated. Within weeks, the ingenious solution to Germany's pressing financial woes would burst forth from his inventive brain.
"It was necessary," Schacht later explained, "to discover a method that would avoid inflating the investment holdings of the Reichsbank immoderately and consequently increasing the circulation of money excessively."
"Therefore," he went on, "I had to find some means of getting the sums that were lying idle in pockets and banks, without meaning for it to be long term and without having it undergo the risk of depreciation. That was the reasoning behind the Mefo bonds."
What were these "Mefo" bonds? Mefo was a contraction of the Metallurgische Forschungs-GmbH (Metallurgic Research Company). With a startup capitalization of one billion marks -- which Hitler and Schacht arranged to be provided by the four giant firms of Krupp, Siemens, Deutsche Werke and Rheinmetall -- this company would eventually promote many billions of marks worth of investment.
Enterprises, old and new, that filled government orders had only to draw drafts on Mefo for the amounts due. These drafts, when presented to the Reichsbank, were immediately convertible into cash. The success of the Mefo program depended entirely on public acceptance of the Mefo bonds. But the wily Schacht had planned well. Since Mefo bonds were short-term bonds that could be cashed in at any time, there was no real risk in buying, accepting or holding them. They bore an interest of four percent -- a quite acceptable figure in those days -- whereas banknotes hidden under the mattress earned nothing. The public quickly took all this into consideration and eagerly accepted the bonds.
While the Reichsbank was able to offer from its own treasury a relatively insignificant 150 million marks for Hitler's war on unemployment, in just four years the German public subscribed more than 12 billion marks worth of Mefo bonds!
These billions, the fruit of the combined imagination, ingenuity and astuteness of Hitler and Schacht, swept away the temporizing and fearful conservatism of the bankers. Over the next four years, this enormous credit reserve would make miracles possible.
Soon after the initial billion-mark credit, Schacht added another credit of 600 million in order to finance the start of Hitler's grand program for highway construction. This Autobahn program provided immediate work for 100,000 of the unemployed, and eventually assured wages for some 500,000 workers.
As large as this outlay was, it was immediately offset by a corresponding cutback in government unemployment benefits, and by the additional tax revenue generated as a result of the increase in living standard (spending) of the newly employed.
Within a few months, thanks to the credit created by the Mefo bonds, private industry once again dared to assume risks and expand. Germans returned to work by the hundreds of thousands.
Was Schacht solely responsible for this extraordinary turnaround? After the war, he answered for himself as a Nuremberg Tribunal defendant, where he was charged with having made possible the Reich's economic revival:
I don't think Hitler was reduced to begging for my help. If I had not served him, he would have found other methods, other means. He was not a man to give up. It's easy enough for you to say, Mr. Prosecutor, that I should have watched Hitler die and not lifted a finger. But the entire working class would have died with him!
Even Marxists recognized Hitler's success, and their own failure. In the June 1934 issue of the Zeitschrift fur Sozialismus, the journal of the German Social Democrats in exile, this acknowledgement appears: "Faced with the despair of proletarians reduced to joblessness, of young people with diplomas and no future, of the middle classes of merchants and artisans condemned to bankruptcy, and of farmers terribly threatened by the collapse in agricultural prices, we all failed. We weren't capable of offering the masses anything but speeches about the glory of socialism."
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