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Hitler’s Economy, part 2.

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Link to part 1: https://smilingdavesblog.wordpress.com/2013/12/20/an-austrian-analysis-of-hitlers-economy/

A reminder to everyone. My source for all the factual content is Richard Evans’s The Third Reich In Power. And we are going to bring his book to life here, creating an imaginary character named Richard Evans, whose speech will consist only of quotes from that book.

Richard Evans: Glad to be here, Dave.

Smiling Dave: Shh! That’s not in the book.

RE: Sorry.

As we were saying there, Hitler promised to end unemployment in four years, and he more or less did just that.

Devil’s Advocate: Achtung, Smiling Dave. Hitler was right. His policies worked. And here you are saying that AE claims they will fail.

SD: Devil, let’s not confuse correlation and causation. He did X, and unemployment ended. But that’s not why it ended.

DA: And what, pray tell, did the trick.

SD: Austrian Economics claims that in a free market, four years is plenty of time to end unemployment. What keep unemployment dragging on is govt interference in the economy, in the form of laws and police inactions to give unions unfair advantage over business. The laws of supply and demand dictate that when there is unemployment, wages will fall until anyone who wants a job can get one. Exactly like any other commodity, labor follows the same laws.

DA: But what about the whole sticky wages thing?

SD: In a free market, there are no sticky wages. It’s laws and illegal police actions protecting unions, and free money given to unemployed people, that create the sticky wages. Why settle for a lower wage when you can get free money for not working? Why settle for a lower wage when the union has the muscle to force the employer to grant the higher wage? Of course, the union can’t force him to hire you, so you will stay unemployed because of that forced high wage you won’t get, but hey, nobody’s perfect.

DA: OK, so it’s unions that cause unemployment. Weren’t there unions in Nazi Germany?

SD: Let’s ask Richard Evans, in his book The Third Reich In Power.

Richard Evans: In 1933, even before Hitler took over the govt…stormtroopers all over Germany raided trade union and Social Democratic offices and premises, looted them, carried off the funds, and closed them down. Within a few weeks, mass arrests of union officials and Social Democratic leaders, many of whom were beaten up and tortured in makeshift concentration camps, had broken the spirit of the labour movement.

DA: Dave, are you advocating doing the same to the unions here in the USA? Are you mad?

SD: No, Devil, not at all. All we need is for unions to be treated like everyone else. No special laws protecting them, no police looking away when the unions use violence. Just treat everyone the same, and that piece of the unemployment puzzle will be resolved.

DA: You realize you will be taken out of context by the haters.

SD: I do my job, and what more can I do?

Evans also understood that increased employment in the Third Reich is directly related to the powerlessness of the unions. Funny how the unions always make it sound they are helping the worker, when in reality they are hurting him like no one else.

DA: You said that chronic unemployment has two sources, union laws [and other mad labor laws, like Obamacare], and welfare. Hitler crushed the unions, but he still handed out welfare. So by your logic, there should still be some unemployment.

SD: As indeed there was. Hitler cooked the books to make it seem like everyone had a job. But in reality there were still four million unemployed in 1935. And those who did have jobs were not exactly the happiest, either. Many of them got lower wages than the welfare checks they got as unemployed, but were forced to work or be sent to Dachau.

DA: What does this tell us about Keynesian Economics?

RE: Me! Me! I know that one.  The classical Keynesian theory of job creation, adopted at least in theory by the Papen government, envisaged a kick-start to the economy as state loans and job-creation schemes put money into workers’ pockets and fuelled consumer demand, thus stimulating production, leading to more employment, and so on, until the process of recovery became self-sustaining. Two and a half years after Hitler had come to power, there was still little sign of this happening.

DA: Why didn’t it work, John Maynard?

Keynes: Beats me. Nazi Germany is the ideal place for my theories to bear fruit, as I wrote in my intro to the German edition of General Theory in 1936. The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.

SD: Well, guys, thank you all for dropping by. This ends the section on unemployment. People say Hitler’s centrally planned govt ended the recession in Germany, that maybe he wasn’t a nice man, but he was a great central planner, and we have a lot to learn from his economic methods. Austrian Theory says Hitler’s schemes will not succeed. And we have shown that they haven’t.

RE: You forgot to mention all the ways he lied and distorted the statistics that I mention in my book.

SD: You don’t want me to plagiarize, do you?

RE: In the next section, I talk about his real intentions, to prepare the country for war. I’m interested in an Austrian perspective on that.

SD: Stay tuned, my son. Here’s Part Three


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