The Case Against Direct Emulation of Nazism
This seems like a silly case to need to make, but Tyler Cowen steps up to the plate with an argument that Adolf Hitler’s fiscal policies did not serve the public interest. Shocking, I know. The conclusion:
In other words, Nazi fiscal policy boosted measured gdp rather than driving a recovery with higher real standards of living.
He wants us to draw the broader conclusion that this should make us skeptical about the ability of spending-side fiscal stimulus to improve living standards. But the puzzle can be solved in this brief excerpt included in his post from a Robert J. Gordon paper:
Tooze confirms previous findings that relatively little of the expansion in public expenditures took the form of public works like the autobahns, while over 80 percent consisted of spending for rearmament. Abelshauser (1998, p. 169) calls this “military Keynesianism on a large scale.”
But of course I don’t think anyone ever thought that armaments expenditures increases living standards. When a country produces more HDTVs, more people have HDTVs and living standards go up. When a country produces more tanks and military explosives, none of the tanks or military explosives go into private hands (we hope!) so living standards are unchanged. But producing HDTVs doesn’t increase your ability to conquer France, whereas tanks and explosives are useful for conquering France. Hitler’s policy objective was to prepare for conquering France. And his policies worked quite well (though Ernest May reminds us not to neglect the importance of French intelligence failures), they just served Nazi objectives. But I don’t see why Hitler couldn’t have spent the money on something else.
If we use fiscal policy to raise measured GDP primarily through building tanks, we’ll have higher GDP and more tanks. But if we use fiscal policy to raise measured GDP primarily through repairing existing roads and building new mass transit and high-speed rail lines, then we’ll have higher GDP, better roads, and more mass transit and HSR systems. It seems to me that living standards would therefore be higher.
Cowen’s post does illustrate a point that often goes missing in American discussions, namely the fact that our habit of spending a much bigger share of GDP on the Pentagon than do our rich democracy peers has a substantial negative impact on American living standards. If that money were either spend on public sector programs that people could use, or invested by the private sector in creating goods and services that people want, most people would be better off. We’re used to thinking of ourselves as the most prosperous people on the planet, but between our massive expenditures on military hardware and medical waste and the highly inegalitarian distribution of our income, that’s increasingly not the case.
49 Responses to “The Case Against Direct Emulation of Nazism”
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December 17th, 2008 at 1:27 pm
Isn’t Cowen just doing the economic variation on “Hitler was a vegetarian; ergo, liberal vegetarians are Nazis”?
December 17th, 2008 at 1:41 pm
When a country produces more HDTVs, more people have HDTVs and living standards go up. When a country produces more tanks and military explosives, none of the tanks or military explosives go into private hands (we hope!) so living standards are unchanged.
Wait, but you have to pay a large number of people relatively high wage jobs to design and build tanks, air forces etc. Producing military goods may not be the most efficient way to increase living standards but your statement doesn’t seem correct.
December 17th, 2008 at 1:43 pm
But of course I don’t think anyone ever thought that armaments expenditures increases living standards.
Right. I doubt living standards increased for most Americans during the war years, but nonetheless GDP was rapidly expanding. The economic growth was sufficiently robust (explosive, really) to finally jolt the country out of depression. Once the war was over, living standards could resume their ascent, as money for guns was channeled into money for butter. We don’t have the luxury at the present time to agonize over slumping living standards. The task is to save the economy, and avoid deflation. Once things have returned to normal — a non-deflationary economy characterized by growth — we can hopefully get back to increasing living standards. FWIW I expect that, for a while at least, such increases will be modest, given the need to increase savings over the long term, pay back debt (ie higher taxes) and put the economy on a long-term, sustainable path. Still, “modest” need not mean “none.” Ideally, we can increase savings and (modestly) increase consumption over the long term by limiting growth in consumption to a number slightly lower than GDP growth. Of course, we can (and should!) also try and extract some gains in this regard for the vast majority of the population by tackling the income inequality issue.
December 17th, 2008 at 1:50 pm
I don’t know, if those HDTV’s were really big and heavy you might stand a decent chance at conquering France with them.
December 17th, 2008 at 1:50 pm
…namely the fact that our habit of spending a much bigger share of GDP on the Pentagon than do our rich democracy peers has a substantial negative impact on American living standards.
This is absurd. America very well may be spending too much (or too little) on defense but simply comparing spending to other rich countries is meaningless. It is like if you live on a private road and one big neighbour decides to pave the road. He does it because it makes him better off. The fact that you pay nothing and still benefit represents a free rider problem not that the big neighbour should spend less.
December 17th, 2008 at 1:55 pm
Dudes, Cowen only talks about a miniscule part of the argument in Tooze’s book…which is fucking awesome.
One thing that’s absent, but a crucial part of a discussion like this is that the Nazis did not believe that normal Keynesian work projects could work for them because of a paralyzing foreign debt problem. That one of the chief aspects of the change from Weimar policy that Nazi policy-makers criticised was that the kind of war of peace that the Weimarites were prosecuting was inherently flawed because they were trying to bluff war-debt holders in the long term with a pair of 3’s in hand (and everybody knew it). So, if that was the case, then the only way to change the leverage was to seriously invest in the military and change the leverage by force.
Why build modern apartment complexes to relieve serious overcrowding in German cities when all that’s going to happen when Germany will not be able create enough jobs for them because Germany lacks access to markets that the other powers jealously guard? Would it not be a better idea to grab some lebensraum and send all those people east to lands that highly underutilized (in the German imagination at least). After all, the Americans did it! Capturing the crucial material resources in central and southeastern Europe would ease the perenial issues with foreign exchange.
Thing was, the Nazis were wrong. The original Weimar foreign policy and domestic priorities were by and large correct, and the post-war West Germans were successfully able to wage that war of peace in order to improve Germany’s economic and geopolitical security. It comes out of the fact that Germany’s economic position was weak. Economy makes for the strength of war, especially in the long run, and not the other way around. There was no beating out of the net post WWI Germany was in, only careful picking itself out.
and with the title?
The Nazis were enthusiastic emulators of the Americans, so seeing the thread title seems really circular.
December 17th, 2008 at 2:01 pm
2 points to Shah8 for a more nuanced and insightful parsing of interwar Germany than the post’s author.
December 17th, 2008 at 2:08 pm
oh, and about wages…
The Nazis were fucking terrified of wage inflation, and they did their best to remove purchasing power from the masses. Part of the reason was because this sort of inflation threatened the ability of the state to even make sure there was enough *food*! Germany imported most of its calories–and that comes directly out of its exports. Ensuring that none of their export dollars were wasted was a constant focus of the regime. So it’s not surprising that the wage income share declined.
Later on, in the last years of peace and war, the Nazis used a system of permitted “leftover” profits to drive industrial policy to create the weapons needed for the war effort. This, along with slave labor and cheap immigrant labor, had the effect of bosses underpaying people so they can get a bigger share of government payments.
Also, one thing that’s really important to note was that the Germans were chronically short of experienced and trained specialist. It prevented them from doing any more of a Keynesian program that they already weren’t really inclined to do. So only simple things like roads were built, and very little stimulus was created. This is liable to be a serious problem in the US’s stimulus plan as well.
December 17th, 2008 at 2:11 pm
DTM,
Yes I agree with multilateralism and making everyone pay their fair share but Matt’s point is America is paying too much simply because other rich countries pay less. How does this make any sense? Unless some other country (countries) decides to spend more than what America would spend unilaterally (i.e. we become a free rider) we should continue to determine our spending levels without regard to say how much France spends on defense relative to its GDP.
December 17th, 2008 at 2:13 pm
What about civilian applications of technology that was originally developed for the military (ahem ahem the Internet). True, while buying 100 more F-22’s probably won’t improve our living standards, some of the technology that was developed specifically for the F-22 certainly will. Heck, even investment into manufacturing better explosives can probably be applied to your infrastructure projects.
December 17th, 2008 at 2:17 pm
The takeovers/invasions of Austria, Czechoslovakia, Poland, France, and other countries were useful because the German government was constantly running out of money, and they needed to loot the other countries.
I’m glad Matt mentioned the Mays book, it’s very good.
December 17th, 2008 at 2:25 pm
Does the United States produce any HDTVs?
December 17th, 2008 at 2:35 pm
I don’t know, if those HDTV’s were really big and heavy you might stand a decent chance at conquering France with them.
You would ship them to France so that the population was too fat and lazy to get off its ass and defend itself, preferring instead to watch HDTVs instead.
… hmmm, who’s sending us our HDTVs? China? Uh-oh!
December 17th, 2008 at 2:51 pm
DTM,
This goes back to my first analogy. If you live on a private road and no one by themselves is willing to pave it except you, do you pave it? Your answer is no because paving it makes you relatively worse off (i.e. their benefit is more than yours because you have to pay for it). My answer is yes because it makes you better off. I wonder what the American people would choose.
December 17th, 2008 at 2:55 pm
Also, one thing that’s really important to note was that the Germans were chronically short of experienced and trained specialist. It prevented them from doing any more of a Keynesian program that they already weren’t really inclined to do.
Didn’t a lot of scientists flee Nazi Germany and Europe to England and America? Especially of the Jewish variety.
from Wheeler’s obituary this year
“Dr. Wheeler was a young, impressionable professor in 1939 when Bohr, the Danish physicist and his mentor, arrived in the United States aboard a ship from Denmark and confided to him that German scientists had succeeded in splitting uranium atoms.”
Talk about a buzz kill. But as I understood it the German economy was wrecked after WWI and the Great Depression and inflation was so bad people were pushing around piles of money in wheelbarrows, then the Nazi war machine brought them out of it, temporarily. The National “Socialists” didn’t counterfeit a worthless currency.
December 17th, 2008 at 3:02 pm
This free rider argument is nonsense. If the US would slash their defense budget by 66%, no European countries would raise defense expenditures.
December 17th, 2008 at 3:29 pm
The problem with this analogy is that everybody is willing to pave the road a little bit, we just want the capacity to pave over everything else whenever we choose to do so.
December 17th, 2008 at 3:59 pm
The American defense establishment is a transfer of wealth from taxpayers to defense workers and holders of defense company stock. (This doesn’t count its use in exporting).
Insofar as we have progressive taxation and defense company stock is widely held, it acts as a means of income redistribution. Insofar as we have regressive taxation and only a few rich people hold defense company stock, it acts as a means of wealth aggregation. I.E, if we didn’t buy all those tanks and planes the taxpayers would have more money and the defense workers and stockholders would have less. Whether that’s a good idea or not depends on whose interests you value more.
December 17th, 2008 at 4:04 pm
Gekko is not actually arguing with anyone here, just being a pain in the ass. Of course, when you believe what Gekko does, admitting that our military spending detracts from our quality of life is scary, because then people might start to question that spending. So he tries to circumvent that investigation by accusing people of missing the (according to him) obvious point that we *need* that spending and the Europeans are the free riders. But this is not really an argument, just an obnoxious rhetorical ploy.
December 17th, 2008 at 6:56 pm
Godwin’s Law. You all lose.
December 17th, 2008 at 7:10 pm
Fuck Godwin –and the donkey he rode in on.
December 17th, 2008 at 7:15 pm
You are all wrong.
Crystal meth-driven sex was the engine behind the Nazis. “Strength Through Joy”. No benefit from being part of the Elite if you can’t have great parties. That’s been the rule since the Greeks.
http://en.wikipedia.org/wiki/Methamphetamine#World_War_II
This is also where the custom of giving chocolate as a romantic gift kinda picked up steam.
December 17th, 2008 at 7:19 pm
See also
http://en.wikipedia.org/wiki/Methamphetamine#Sexual_behaviour
December 18th, 2008 at 10:16 am
To Peter K,
The imfamous hyperinflation that hit Germany was brought to a halt in 1924 through the Dawes Plan for War reparations repayments, which allowed the Germans to borrow money from American banks. Between 1924 and 1929 the German economy did pretty well, but the 1929 crisis ended the supply of money coming from the U.S . With no more money coming from the U.S to bolster the German economy it went south. (This is a bit of an oversimplification, but gets at a key problem of why Germany was hit so badly by the depression.) Meanwhile, unlike our current crisis, which was driven in part by increasing lack of wide-spread memory with the Great Depression and the reasons regulations were implemented, Germans memory of the previous crisis was almost universal.
Regarding military spending and the civilian applications mentioned by John, the Nazis tended to do the opposite: justify initiatives on the basis of civilian utility, when in fact they were really aimed at enhancing the military. The building of the Autobahns is the best example of this, but so too was the Volkswagen project, which only built about 50 early Beetles before the plant was shifted to the military Kuebelwagen.
In addition, I’m a bit puzzled by the notion in the original post that Hitler’s primary policy objective was to conquer France. Yes that was deemed a military necessity and drove the build up of modern military equipment to an extent, but that was because France supported Poland and Czechoslovakia, the conquest of which were more important to the Nazis long-term social and economic planning than was France. Of course the irony here is that the conquest of France, Belgium, and the Netherlands was actually far more valuable for maintaining standard of livings on the home front. ( See Gotz Aly’s book Hitler’s Beneficiaries I might add that without the German military’s emphasis on mechanized war machinery the conquest of Poland would have proven far more difficult, and blizkreig wouldn’t have existed.
December 18th, 2008 at 11:41 am
Yawn. Embarrassing Jonah Goldberg level tripe.
December 20th, 2008 at 9:45 pm
“our habit of spending a much bigger share of GDP on the Pentagon than do our rich democracy peers has a substantial negative impact on American living standards. If that money were either spend on public sector programs that people could use, or invested by the private sector in creating goods and services that people want, most people would be better off”
Not so fast. Unproductive spending is unproductive spending. Canada and Europe spend their non-military spending bonus on health care. Now, health care advocates will claim all sorts of societal benefits because of that, but military spending advocates can probably come up with similar benefits.
Longevity on the one hand and the luxury of living to enjoy longevity on the other. Both types of expenditures can be made to seem to increase GDP — both actually decrease the common wealth.
December 21st, 2008 at 12:28 am
1. Please compare the infrastructure of the US in either 1930 or 1950 to the present day and then make the argument that this massive spending bill represents some dramatic improvement in capabilities for the nation. That is, what business will you be able to transact after hundreds of billions are spent on roads and bridges that you cannot do today.
2. Obama just named Arne Duncan as Education Secretary. During his tenure in Chicago, Arne saw in increase in his annual budget of about $1.7B from FY03 to FY08. Reading test scores went from 249 to 250. The national average is 263.
a. Please describe what this tells you about the price elasticity of performance for public education.
b. Please describe the crisis in public education facilities that requires us to spend tens of billions of dollars building schools in places like Chicago when said places have seen massive budget increases already. That is, what have we gotten for our money so far?
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