Saturday, March 18, 2006

Review of "War and Reconstruction 1940-1950" in European Economy 1914-2000 by Derek H. Aldcroft

Review of "War and Reconstruction 1940-1950" in
European Economy 1914-2000 by Derek H. Aldcroft
Economic Orders Without...Order
According to Aldcroft by the later portion of 1942, virtual control of the larger part of Europe had been established and drawn under, to be considered ipso facto as the economic constituency of Greater Germany. He establishes that the nations of Portugal, Spain, Eire, Switzerland, Sweden, and Turkey, while considered semi-autonomous or of neutral-like qualities politically, were all in reality economic fealties, quasi-motos, all in virtual-alliance with Greater Germany simply through economic trade concordances and defacto dependencies. These velvet curtains and chains were attached to several regional economic tethers which existed in bilateral or trade financing arrangements. Full autonomies or "neutralities of chocolate" were therefore considered an unobtainable option. It was this collective nationalist movement following tariff barriers of 1929 which virtually guaranteed Germany its position as a principal international trade aggressor .
Among these economic vassals, Italy is described in greater detail as a virtual German satellite in the new order. However in its waffling style of alignment, it best exemplified the lack of real economic order overall in this perceived grand, new political order. The old economic order of course was completely dead with the end of the mercantile approaches to gold standards and trade financing, which effectively stunned itself with several unsustainable shocks, including those leading to World War One, as well as those delivered through under-regulated reparations payments options. The pyramid schemes of debts financing was finally supported or guaranteed with weak monitoring and market research into consumption and process capacities or sustainable growth internationally, where neither cycle trade policies applied to scales of production nor finance trading measures agreed to by national governments or corporate entities were considered sustainable or desirable options leading up to 1929.
Economically, the Germans had seemingly little to contribute to sustainable economic market trade principles either. Simply, Germany installed itself as a national fascist and forced resolution through military offences which guaranteed an industrial hub for itself which then meticulously vacuumed all available valuable commodities into itself; first in bilateral trade agreements with its less endowed neighbours, and later simply through massive state sponsored expropriation of capital, assets, financing instruments, labour, and commodities from its greater European conquests which included most of its former trading neighbours. Economically these former independent nations were already according to the accounting books indentured debtors.
So certain regions of Europe profited through concentration of especially incorporated manufacturing zones such as the Alsace-Lorraine, Luxembourg, or Polish Upper Silesia. These already were the jewels in Germany's mature industrial crowns, rich, efficient manufacturing assets which had for decades already served the purposes of German military expansion, as well as sale and purchase of developed production methods and assembly standards probably better than any produced elsewhere in the world up to that date. Aldcroft notes these direct bricks and mortar assets were industrially enormous plants and operations networks, all serving military aims. Previously indirect control of the rest of European industry excluding the UK was maintained through bilateral trade ties and colonial enterprises in regions of Poland and Russia. Military offensives drove German Divisions out to claim not only new territory but also old investment capacities and trade financing. This new order had few if any plans as to the administrative direction for its quickly gained domains once it had them within its cruel claws.
Aldcroft notes with detailed analysis the failures of German Economic Order.
First, no clear economic vision secured the economic affairs of Greater Germany. The only seemingly attractive economic concept to come out of German expansionism was the currency insurance plan forwarded by Walter Funk. His concept of a trade bank which could insure national currencies against crises and speculation fluctuations was the first step towards what would late be taken on as the World Bank by Keynes and White. Aldcroft does not note this in this section, but other sources confirm Keynes read Funk's currency insurance scheme and approved of it in principle as a solution to war reconstruction. However, Keynes made use of the plan as it included national currencies insurance schemes which would be self-administered, without oversight of larger economic creditor nations.
Next, German oversight in formulating a clear economic vision for its quickly acquired empire was also attributable to its exceedingly efficient territorial gains being made at a pace which out-stripped its ability to administrate effectively. Aldcroft notes that the Reich only had the capacities to begin planning its economic affairs at about the same time as it began losing its ill-gotten gains. Its economic capacity for growth had exceeded its economic ability to plan for it. So the conglomeration began to crumble for lack of internal cohesiveness. As world powers such as the United States and Russia began to redirect their economies, such was the period of German growth. The stable doors had been left open. However when these global powerhouses were ready to contribute to an Allied effort in removing Germany from the rest of Europe at full capacity, their goals were simply unstoppable. German economic and military blitzkrieg had then the advantage of short, easily won targets, in the right places, at the right times. With a long, drawn out battle for the continent, German economic and military capacities were vastly ill-prepared and under-resourced. The Germans had no long-term dynamics available other than Funk's economic rebuilding plans for acquired states.
Aldcroft notes that Germany's initial successes in Europe were not singulary due to its own efforts. He reflects and maturely evaluates that European nations themselves helped create the power vacuum which existed through the various peace treaties and appeasement policies enacted and maintained especially in Eastern and Central Europe. Following 1928-29, he notes that regional overdependence on German trade among a large number of weak and small states included massive trade deficits which were comparatively increasing when contrasted to western European trade with Germany. Quite simply, this guaranteed that Germany dominated these nations first and fastest in any early economic competition with other European powers.
In the cases of Britain and France, these were unprepared for Germany's economic growth, vacillating between appeasement and rearmarment strategies for neary two decades up to 1939. As for the United States, it was on an isolationist bent since the 1920s. In any case, it appears to hover there on occasion (as yet again perhaps?) and was unprepared for economic or military attack. These nations through their collective lack of resolve certainly underlined the successes of Germany's blitzkrieg strategies. Specific but limited objectives marked Germany's territorial and economic victories. Its political threats were backed with sufficient force. This strategy served well up until 1942.
In evaluation of Germany's rate of expenditures Aldcroft most clearly defines the successes of its blitzkrieg measures. Thus German economic furnaces were not excessively large, but exceedingly hot. He notes that Germany and Italy in 1934 were registering annual increases of armorments production at twice the rate of increases found in the USA, the USSR, and France combined. This was the root of its economic and military competitive advantage. Its sustainable economic and military victories were easily based on a predator-prey economic relationship. As of 1938, German military production represented 52% of the combined outputs of the world's richest thirty nations. Comparatively it had only held 35% of that output in 1934. This increase in comparative rate of output of seventeen percent in four years, or an annual increase of 4.25 % in contemporary comparison to 1-1.5% annual growth being considered a stable rate of growth, was simply explosive.
In evaluation of German budgeting, the developed world at the onset of World War Two was little more than a third prepared to fight the battle. All nations in opposition had only a third of the necessary opposing economic or military forces ready. The rest of the world was not only a third prepared, it was only increasing its ability to combat Germany at a third the annual rate of increase required to equal Germany's preparedness. The Allied world then, was a collection of ill organized slow-pokes. So from 1929 or thereabouts, Germany was virtually four times ahead of the rest of the world in a fight for a global war. The balance of economic and military outputs determined its successes. The world in response took three to four years to tip the scales of production and capacities in its own favour. Germany had seen its victories through rate of increases of economic output, not through potential scales of future growth of production. As the shif took place in 1942, it took the world an actual twelve years to meet Germany's growth rte with its own comparable balancing of output.
Speed had sustained Germany's growth through economic blitzkrieg. The world was slow to respond, but when it did, the war entered an entrenched phase, strategic redundancies and failures on Germany's part were only delayed until that point. The shift was dynamic, German economic and military strategies were not. As the Allied efforts were taken into effect, the outlook and flexibility of resources, victory and limitless supplies ensured Germany's defeat. Germany's economic and military goals were short-term and implicated nearly 99.9% certainty of victory prior to 1942. As battles and forces grew in frequency and size of opposition, it became clear that diminished rates of success could be directly proportional to opposing strengths and falling probabilities of success. The dynamics of a continental war fought on two infinite fronts requiring infinite resources simply doubled probabilities of German failure. So thus 100% chance of failure multiplied by two was what the Germany military economy now faced as of 1942.
Furthermore, where German successes had once been supported by capacities of production and supply, manpower and supportive aligned trade pacts, conversely as its territory was retracted, the dynamics which effected its failures were again failures in production capacities, manpower, distribution, and collapsing networks of industrial output. Thus the success of German military economics was fully tied to the speed or rate of increase of its production rather than actual scale of output. This is also the paradox of German victories and defeats. Nearly every conquered nation was a formerly vassal trading partner. Not only were thier economic futures tied to German output and trade, but the strengths and weaknesses of each nation were well calculated. Such conquests almost appear needless considering the economic ties which existed, which already supported the German economic recovery from 1929.
The chief flaw according to Aldcroft, aside from creating a war with nations which were already clearly economic vassals, was the second front opening on Russia. The attack on Russia was not of great economic need, but more out of distrust and lack of cooperation. However this new front was expensive and vastly a failure. However within five months of its opening an area nearly five times the size of Germany was conquered. This area was mostly agricultural and contributed little to the German economy, especially with the scorched earth policy making it non-productive. In addition, the needless slaughter of millions of Russians and peasant farmers simply steeled Russians to repel these new invaders.
Aldcroft also blames the Pearl Harbour attack of 1941 for bringing the USA out of isolation and into a full-frontal push into German territorial gains. In effect, from the point the USA declared war on Japan and Germany, it now became a war Germany had no chance of winning. The focal advantages of a full-swing of US production capacities now being directed to defeating the axis powers would make their obliteration only a matter of time. Aldcroft notes that as of the period 1936-1938 the USA, the UK, and the USSR represented sixty percent of global productive capacities versus Axis Powers holding a slim 17% percent. An Allied build up in capacity on armorments, manpower, and mobilization took time, but would prove far superior to German capacities. These dynamics were fairly well know among axis powers. But actually knowing that surrender would be more prudent has never been a strong point among militaristic leaderships.
Allied production capacities began growing and peaked in 1944. In contrast, German growth had come and gone far earlier and cutbacks in military production had occurred as early as 1941 as it appeared to the Germans that the war in Europe was largely won at that time. Thus it can be determined that German economic and military flaws, prematurity among them, were mostly linked to an inability to plan for unforseen events, in fact, for years provocatively insisting that the world should unequivocally deliver them. Germany's most fatal flaw appears then to have been an ill-prepared and unaccounted for lack of strategic and global intelligence. The perception that blitzkrieg-type production increases and strategic victories were enough to repel infinite resistance to fascism would undermine such positions.
In the end, the belief that blitzkrieg economics was superior became an unreasonable assumption.

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