The Economics of War

Interesting light on the economic causes of the Second World War is revealed in an article by C. A. MacDonald in the August 1972 issue of Past and Present entitled “Economic Appeasement and the German ‘Moderates’ 1937-1939”.

 

The Hitler regime pursued an economic policy of autarky. This was essentially a response to the domination of the world market, sources of raw material and gold (the international trading currency) by Britain, France and America. It involved keeping imports to a minimum and encouraging exports with subsidies and, to overcome lack of gold, a foreign trade policy based on barter arrangements and bi-lateral trade agreements with credits that had to be spent on buying German goods.

 

None of these measures were to the liking of the capitalist class of Britain: they suffered from the dumping export subsidies represented; the barter and bi-lateral trade agreements threatened London’s rôle as the world’s financial centre; and these agreements, together with the German policy of trying to rely on internal substitutes, threatened London’s position also as the centre of dealings in raw materials.

 

Basing himself on recently released official government papers, MacDonald examines Chamberlain’s policy towards this threat. Chamberlain apparently believed that the German policy of autarky was sooner or later bound to fail and that, if this happened, Hitler was likely to resort to war in a bid to solve Germany’s economic problems. He also believed that this danger was realised by certain elements in the Hitler régime. His policy therefore was based on winning over these “moderates” so that they could persuade Hitler to abandon autarky and re-integrate Germany into the world liberal/capitalist system. To achieve this the British government was prepared to make various economic and financial concessions to Germany. MacDonald points out that this policy of “economic appeasement” was dictated not only by political but just as much by economic considerations. For in the autumn of 1937, after some recovery from the Depression, there was another downturn in production and trade and a rise in unemployment. Britain needed the extra market for its exports Germany’s abandoning of autarky would bring. And also, be it noted, in 1937 and 1938 both sides were militarily unprepared for an all-out war, Britain’s air position being particularly weak.

 

Hitler and his government, however, continued their policy of autarky and began to construct, by military as well as commercial means, an autarkic bloc in central and eastern Europe (Mitteleuropa), spreading into the Balkans and dominated by Germany. In the end, the possible removal of this whole area from the competitive world market was too much of a threat to British and French capitalist interests. When Germany invaded Poland in September 1939, Britain and France declared war in a bid to protect and regain access to their markets and sources of raw materials by military means. So began the Second World War.

 

MacDonald himself doesn’t go this far. He explains the failure of Chamberlain’s policy by reference to Hitlerism as “an essentially irrational system”. But from the point of view of German capitalism was it really irrational to refuse to be re-integrated into the liberal/capitalist world market with its trading and financial system dominated by Britain and France? For some German capitalists maybe it was, but it is by no means certain that this was so for German capitalism as a whole. The creation of a “Mitteleuropa” autarkic bloc, even by military means, was just as much a “rational” choice from its point of view. Wars are not caused by irrational politicians, but by real conflicts of broad economic interest which cannot be resolved any other way. Such was the case in Europe in 1937-1939.

 

Hitler’s well-known “we must trade or die” speech, by the way, was delivered to the Reichstag on 30 January 1938. Chamberlain took it to be a positive response to his policy of economic appeasement. To him, evidently, this was a reasonable statement because he knew it to be true of Britain too! And it’s still true today of all capitalist states, including state-capitalist Russia and China.

 

Adam Buick