Military history





In the small hours of February 1942, Hitler’s favourite architect and close friend Albert Speer was going over his plans for the rebuilding of Berlin with Hitler in his field headquarters at Rastenburg in East Prussia. The conversation, he recalled later, visibly cheered up the tired Leader, who had spent the previous hours in a dispiriting conference with the Minister of Armaments, Fritz Todt. The Armaments Minister had already concluded during the Battle of Moscow in November - December 1941 that the war could not be won. Not only were British and American industrial resources stronger than Germany’s, but Soviet industry was producing better equipment on a larger scale, better adapted to fighting in the depths of winter. German supplies were running short. Industrialists were advising Todt that they would not be able to match the military production of Germany’s enemies. But Hitler would not listen. The Japanese attack on Pearl Harbor seemed to him to defer American involvement in the European theatre and give Germany a new chance of victory. On 3 December 1941 he had issued an order for ‘simplification and increased efficiency in armaments production’ intended to bring about ‘mass production on modern principles’. At Hitler’s behest, Todt had reorganized the system of arms production administration into five Principal Committees, respectively for ammunition, weapons, tanks, engineering and equipment, and set up a new advisory committee with industrialists and air force representatives. His visit to Hitler on 7-8 February 1942 is likely to have involved discussions of these new structures and of the benefits they could bring. Despite all these changes, Todt most probably cautioned Hitler during his visit to Rastenburg on 7-8 February 1942 that the situation remained serious if not critical; hence the Leader’s air of despondency when he emerged from their meeting.1

Chatting briefly with Speer over a glass of wine, Todt offered him a seat on the plane that was to take him back to Berlin at 8 a.m. on 8 February. The architect was only in Rastenburg by chance, having been prevented by heavy snow from returning to Berlin from Dnepropetrovsk by rail. He had accepted instead a lift by air to Hitler’s field headquarters, which at least got him closer to his destination. So he was looking for transport, and Todt’s offer was therefore a tempting one. But by the time Hitler and Speer went to bed it was 3 a.m., and Speer sent word that he wanted to sleep in and would not be travelling with the Armaments Minister. Speer was still asleep when the phone beside his bed rang shortly after eight in the morning. Todt’s plane, a converted twin-engined Heinkel 111, had taken off normally but then crashed into the ground, where it had burst into flames. It had been completely destroyed. Everyone on board was killed.2 A later commission of inquiry suggested that the pilot had pulled a self-destruct mechanism in error; but in fact this particular plane did not carry such a mechanism, nor was there any reliable evidence of a mid-air explosion. Nicolaus von Below, Hitler’s air force adjutant, later remembered that Hitler had banned the use of such small twin-engined planes by his senior staff and had been sufficiently concerned about the Heinkel’s airworthiness that he had ordered the pilot to take it up for a trial spin before Todt embarked. Below thought that the poor weather conditions in which the plane had taken off meant that the inexperienced pilot had been unable to see properly and had flown it into the ground. The mystery was never satisfactorily solved. Had Speer planted a bomb on board? It seems unlikely, for while the account of the crash he gave in his memoirs was full of inaccuracies, there is no reason to doubt his story that he was in Rastenburg entirely by chance, and so would not have had the time to plan Todt’s death. Nor, despite a certain strain in the relationship between the two men, was there any obvious reason why he should want him dead. Had Hitler, then, decided to kill his Armaments Minister because he could not stand the constant pessimism of his reports? Had he, perhaps, privately told Speer not to travel on the plane? This speculation too is implausible; this was not the way Hitler dealt with uncomfortable or inconvenient subordinates, and had he wanted to get rid of Todt, he would have been far more likely simply to have dismissed him, or, in an extreme case, had him arrested and shot.3

Todt was an engineer and a committed Nazi who had come to prominence as the builder of Germany’s famous motorways in the 1930s. Hitler respected and admired him and had put him in charge not only of weapons and munitions production but also of energy and waterways and some aspect of the organization of forced labour during the war. Todt had headed the construction industry under the aegis of G̈ring’s Second Four-Year Plan administration. He had run his own outfit, the Todt Organization, building roads across all the occupied territories, continuing with the creation of the West Wall defences and constructing U-boat bases on the Atlantic coast. Within the Party, Todt was in charge of the Head Office for Technology, controlling voluntary associations of many kinds in the field. In the spring of 1940, Hitler had created a new Ministry of Armaments and appointed Todt to run it. This accumulation of offices had given Todt considerable power over the economic management of the war, though he had had to contend with a range of rivals, especially Hermann G̈ring.4 He would be a difficult man to replace.

Over breakfast at the Leader’s headquarters on 8 February 1942, the talk was all of who should be his successor. Speer realized that he would be asked to take over at least some of Todt’s functions, since as General Building Inspector for Berlin he already had some responsibilities in this area, including the repair of bomb damage and the provision of air-raid shelters. Todt had assigned him the task of improving the transport system in the Ukraine, which is indeed why he had been in Dnepropetrovsk. Hitler had told him more than once that he wanted to entrust him with some of Todt’s existing tasks. But Speer was unprepared when, as he later remembered, he was ‘summoned to Hitler as the first caller of the day at the usual late hour, around one o’clock in the afternoon’ and told that he was being appointed to succeed Todt in all his capacities, not just that of construction overlord. Although ‘thunderstruck’, Speer had the presence of mind to ask Hitler to issue a formal command, which he would be able to use to impose his authority on his new sphere of operations. There was, however, one last obstacle to overcome. Just as he was leaving, G̈ring ‘bustled in’. He had boarded his special train at his hunting lodge 60 miles away as soon as he had learned of Todt’s death. ‘Best if I take over Dr Todt’s assignments within the framework of the Four-Year Plan,’ he said. But it was too late. Hitler repeated his formal appointment of Speer to all of Todt’s jobs. And G̈ring’s authority over the economy was further downgraded when Speer persuaded Hitler to sign a decree on 21 March 1942 ordering that all other aspects of the economy had to be subordinated to arms production, run by himself.5

In his memoirs, written many years after these events, Speer, not without a dash of sincerity, professed to have been amazed by the ‘recklessness and frivolity’ of his appointment. After all, he had no military experience and no background in industry. It was, he wrote,

in keeping with Hitler’s dilettantism that he preferred to choose nonspecialists as his associates. After all, he had already appointed a wine salesman as his Foreign Minister, his party philosopher as his Minister for Eastern Affairs, and an erstwhile fighter pilot as overseer of the entire economy. Now he was picking an architect of all people to be his Minister of Armaments. Undoubtedly Hitler preferred to fill positions of leadership with laymen. All his life he respected but distrusted professionals such as, for example, Schacht.6

But the choice was not as irrational as Speer claimed later on. As an architect, he was not so much a lone artist sitting at his drawing-board making sketches of buildings, as a manager of a large and complex office engaged in major, indeed gargantuan, projects of construction and design.7 As General Building Inspector for Berlin, he was already familiar with the havoc bombing could wreak and, as the man responsible for restoring the roads and railways in the Ukraine, he knew all about the problems posed by poor communications and the need to organize an adequate supply of labour. He had worked closely with Todt in a number of areas. His duties had already acquainted him with the power-plays of men like G̈ring, and his initial reaction to his appointment showed quite clearly that he was fully able to cope with them. Above all, however, he was Hitler’s own man. He was Hitler’s personal friend, perhaps his only one. Together they continued even after his appointment to pore over models of the new Berlin, and dream of the transformation of German cities they would achieve together after the war was over. Long before his appointment, Speer had on his own admission fallen totally under his Leader’s spell. He would do unquestioningly anything he wanted.8

In contrast to Speer’s unquenchable optimism, others besides Fritz Todt had begun by this time to have serious doubts about the German capacity to continue the war to victory. A few months before his appointment, Speer had visited the General Manager of the Junkers factory at Dessau, Heinrich Koppenberg, to discuss the buildings needed to house the gigantic new aircraft factory he was planning in the east. Speer later recalled that Koppenberg had led him ‘into a locked room and showed me a graph comparing American bomber production for the next several years with ours. I asked him,’ Speer went on, ‘what our leaders had to say about these depressing figures. “That’s just it, they won’t believe it,” he said. Whereupon he broke into uncontrollable tears.’9 General Georg Thomas, chief of procurement at the Combined Armed Forces Supreme Command, had become increasingly pessimistic from the summer of 1941 onwards. By January 1942 he was more worried about whom to blame for the disastrous supply situation facing the army in the east than how to rescue the situation, ‘since’, as he said, ‘some day somebody will be held responsible’.10 General Friedrich Fromm, who commanded the reserve army at home and had responsibility for the army’s armaments supplies, told Chief of the Army General Staff Franz Halder on 24 November 1941 that the arms economy was on a ‘descending curve. He thinks,’ Halder noted in his diary, ‘of the necessities of making peace!’11 Manpower reserves were being exhausted, and oil supplies were running short, and Fromm advised Hitler to send all available new troops to Army Group South, so that it could make a dash for the oilfields of the Caucasus. The despair of some ran even deeper. On 17 November 1941 the head of the procurement organization for the air force, Ernst Udet, a former flying ace, shot himself after failing repeatedly to convince Hitler and G̈ring that aircraft production in Britain and America was growing so fast that the German planes would face overwhelming, impossible odds within a few months.12 In January 1942 Walter Borbet, the head of the Bochum Association, a major arms manufacturing concern where he had pioneered new methods of production, also shot himself, convinced both that the war could not be won and that Germany’s leadership would never be persuaded to make peace.13

These men had good cause for concern. Despite all the Germans’ efforts, the British were continuing to out-produce them in tanks and other weapons. The armed forces procurement officials insisted on technological sophistication at the expense of mass production, and there was constant bickering between the army, the navy and the air force, each with its very plausible rival claims for priority in the allocation of resources. Focusing on complex weaponry brought higher profits to business than cheap mass production. All this slowed down production and reduced the quantities of armaments and equipment available to the armed forces. At the same time, Hitler continued to demand ever-greater efforts from industry as the military situation failed to deliver the anticipated breakthrough. In July 1941 he ordered the construction of a new high seas battle fleet, at the same time as a fourfold increase in the air force and the expansion of the number of motorized divisions in the army to thirty-six. He was all too aware of the rapidly increasing quantities of American arms and equipment that were managing to reach Britain. Already by the time America formally became a combatant nation, in December 1941, it was churning out quantities of armaments that Germany had so far shown no signs that it would be able to match. Army officers early in 1942 began to notice an improvement in Soviet military equipment and weaponry as well. To demand that German arms production match all this seemed completely unrealistic.14

Unlike Todt and the other economic managers who thought that the war was already lost in economic and therefore also in military terms, Speer believed, with Hitler, that it could still be won. He had a blind faith in Hitler’s powers. At every stage, Hitler’s will had triumphed over adversity, and it would do so again. Speer was not a technocrat; he was a true believer.15 Speer was not so blind, of course, that he failed to realize that this was a major reason for his appointment. Hitler, indeed, confided in him more than once that the death of Todt at a moment when Speer was visiting his headquarters was providential. As Speer wrote later,

In contrast to the troublesome Dr. Todt, Hitler must have found me a rather willing tool at first. To that extent, this shift in personnel obeyed the principle of negative selection which governed the composition of Hitler’s entourage. Since he regularly responded to opposition by choosing someone more amenable, over the years he assembled around himself a group of associates who more and more surrendered to his arguments and translated them into action more and more unscru pulously.16

This principle had already been at work in the changes Hitler had made in the senior ranks of the army after the Moscow debacle. Now it was at work in the management of the war economy too. But Speer was no amateur in one respect at least. In the following weeks, he warded off one attempt after another by G̈ring to restrict his powers. He repeatedly called on Hitler to back him and even to transfer the armaments functions of the Four-Year-Plan to the Armaments Ministry. In all this, he showed that his instinct for power was as strong as that of anyone in the Nazi hierarchy.17


Speer had several major advantages in his mission to galvanize German war production into greater efficiency. He had the support of Hitler, which he used whenever he ran into serious opposition, and he had good relations with key figures in the Nazi hierarchy. As General Buildings Inspector, for instance, Speer had worked closely with Himmler and the SS, and depended for his grandiose schemes on the supply of stone quarried by the inmates of the concentration camps at Flossenb̈rg and Mauthausen.18 He also had good contacts in the armaments management hierarchy (especially the State Secretary in the Air Ministry, Field Marshal Erhard Milch, nominally G̈ring’s man but in practice much more willing to work with Speer). Speer also came into office when the drive to rationalize had already begun, spurred on by Hitler’s insistent criticisms of inefficiency and facilitated by the changes in economic management inaugurated by Todt in December 1941. He worked hard to eliminate overlaps in arms production between the three armed services. He subordinated the leading industrial producers directly to himself and gave them a degree of delegated responsibility in improving their production methods. He fought against excessive bureaucracy and introduced streamlined methods of mass production. The result, he claimed later, was a significant increase in production in every area within six months. ‘Total productivity in armaments increased by 59.6 per cent . . . After two and a half years, in spite of the beginning of heavy bombing, we had raised our entire armaments production from an average index figure of 98 for the year 1941 - admittedly a low point - to a summit of 322 in July 1944.’19

In taking over the management of armaments production, Speer trumpeted the virtues of rationalization. He brought in a number of industrialists to man the new committee structure set up by Todt. A typical example of Speer’s use of industrialists to increase efficiency could be found in the production of submarines, where he appointed a car manufacturer to reorganize the assembly process in 1943. The new submarine supremo broke down the production of each vessel into eight sections, got a different firm to make each section with standard parts to a timetable co-ordinated with the others, assembled the final product at a central plant, and thereby reduced the time it took to make each U-boat from forty-two weeks to sixteen. Speer also implemented a new system of fixed-price contracts introduced by Todt in January 1941, which forced prices down and offered exemption from corporation tax for those who reduced costs and therefore prices by a significant amount. Speer demanded that companies exploit their workers more effectively, with double shifts being introduced, and tried to reduce costs by using existing plant more intensively instead of constructing new factories. No fewer than 1.8 million men were employed in setting up new plant, but much of the extra capacity could not be used because of shortages of energy and lack of machine tools; Speer terminated contracts for new industrial facilities costing 3,000 million Reichsmarks. And he introduced a drastic concentration and simplification of the production of arms and arms-related products across the economy. The number of mostly small firms engaged in producing prismatic glass for use in viewfinders, telescopes, binoculars, periscopes and the like was reduced from twenty-three to seven, and the variety of different types of glass from a staggering 300 to a mere fourteen. Speer found that no fewer than 334 factories were making firefighting equipment for the air force; by early 1944 he had reduced this to sixty-four, which was reckoned to have saved 360,000 man-hours per month. The number of companies producing machine-tools was cut from 900 in early 1942 to 369 by October the following year. Speer even extended the rationalization principle to consumer goods industries. When he found that five out of the 117 carpet manufacturers in Germany were producing 90 per cent of the carpets made, he had the other 112 closed down, and their factories and labour put to use in the war economy. In the competition for resources, the different armed forces and their associated manufacturers had exaggerated their needs, so that, for example, aircraft factories had demanded four times the amount of aluminium per aircraft than was actually needed. The metal was being stockpiled or put to non-essential uses such as making ladders or greenhouses. Speer made the companies surrender their stockpiles, and tied the allocation of raw materials to production targets.20

Arms production required massive quantities of steel, which Hitler ordered to be directed above all towards the army, rather than the navy or the air force. Introducing greater efficiency into the organization of steel production was not least the achievement of the Reich Economics Ministry and its leading official Hans Kehrl. He set up a new system of ordering and production at a meeting on 15 May 1942 of the new central planning body he had established with Milch to co-ordinate arms production. At the same time, Speer appointed savings engineers to advise firms on how to use steel and other raw materials more efficiently. Better machines and more automation reduced wastage. By May 1943 Speer could claim that less than half the iron and steel was used to produce an average ton of armaments than had been used in 1941. By the end of the war, each ton of steel was being used to produce four times the quantity of munitions than had been the case in 1941. However, steel production needed large quantities of coking coal, and this proved impossible to obtain, given the difficulties facing the railway system and the low productivity of forced labour in the mines. Moreover, the mines were still short of more than 100,000 workers, while the railways needed another 9,000 men to load and operate the trains transporting the coal. Told of these problems on 11 August 1942, Hitler declared bluntly: ‘If, due to the shortage of coking coal, the output of the steel industry cannot be raised as planned, then the war is lost.’21

More coal was obtained by cutting allocations to domestic consumers by 10 per cent. Steel output was boosted to 2.7 million tons a month in early 1943 in the Greater German Reich. With the increase in steel allocations to ammunition factories, and the introduction of fresh incentives to industrialists, Speer was able to boast that arms production as a whole doubled in his first year of office. At the same time, Erhard Milch and the Air Ministry were able to double the monthly output of aircraft, not least by concentrating production in a small number of mammoth factories. Bringing the main producers into line by forcing them to make changes in their senior management, Milch pushed through a rationalization programme in which the development of new, more advanced fighters and bombers was sacrificed to the mass-production of huge numbers of existing models, thus achieving significant economies of scale. An advanced fighter plane, the Messerschmitt Me210, was already being manufactured, but the Air Ministry had pushed on too fast, leaving crucial problems of design and development unsolved. The aircraft was unstable, and yet hundreds were being produced. Milch cancelled the project and focused resources on producing planes such as the twin-engined Heinkel 111. This medium bomber had first flown in 1934 and had proved ineffective in the Blitz, so it was redeployed as a night interceptor over Germany, where it met with some success. Similarly, Milch directed resources towards bringing more Me109 fighter planes off the production lines. The number of factories making the fighter was reduced from seven to three, and production boosted from 180 a month to 1,000. These changes meant that twice as many aircraft were being produced per month in the summer of 1943 than had been the case a year and a half before.22

The air force had repeatedly demanded modifications and improvements to existing aircraft, thus slowing down production; by the end of 1942, indeed, the number of design changes recommended for the Junkers Ju88 bomber had reached 18,000, while the specifications for changes to the Heinkel He177 heavy bomber stored in Heinkel’s design offices filled no fewer than fifty-six stout files. Working together with Milch, Speer did his best to ward off new demands for design changes, but it was not until early 1944 that he managed to reduce the number of models of combat aircraft in production from forty-two to thirty, then to nine, and eventually to five. The number of different types of tanks and armoured vehicles was slashed in January 1944, with the reluctant and much-delayed agreement of the army, from eighteen to seven, and a single type of anti-tank weapon replaced the existing twelve. Speer found a total of 151 different types of lorry being manufactured for military use; in 1942 he cut this down to twenty-three. This simplification process extended to coal-mining and machine-tools too, where a total of 440 different types of mechanical and hydraulic presses was reduced to thirty-six. Components were a particular problem, complicating and slowing down the production process; the Ju88 for example used more than 4,000 different types of bolt and screw. Its eventual replacement, the Ju288, used only 200. Here, and where possible in other areas too, automatic riveting machines replaced manual labour, and the simplification process also meant that workers required shorter and more elementary training than they had previously needed. All of this boosted productivity, which in the arms industries was more than 50 per cent higher in 1944 than it had been two years previously.23

Speer also rationalized the production of tanks. Early in the war the German army had relied on two medium tanks, the Mark III and the Mark IV, and a Czech-designed tank, the T-38, all of which proved their worth in the invasion of Poland and Western Europe in 1939-40. But in 1941 they encountered the superior Soviet T-34, which was fast, manoeuvrable and at the same time better armoured and equipped with more effective guns. This led to a major rethink, resulting in the production of two new tanks, the 56-ton Tiger and 45-ton Panther. These were formidable weapons, much more than a match for the T-34, and far more heavily gunned than their American counterparts. Speer managed to have them rolling off the production lines in considerable quantities by 1943. But almost as soon as they began to be built in any numbers, Allied bombing began to destroy the factories where they were made, so they could never be turned out in sufficient numbers. By contrast Soviet industry was turning out four tanks to every one manufactured by the Germans by the beginning of 1943. The relocation of Soviet industry to the Urals had finally paid off.24 The German economy might have been able in some areas at least to produce better weapons than the economies of its enemies, but it was quite unable to match them for quantity. The move to standardized mass production came later in Germany than elsewhere; in the end, indeed, it came too late.25

The difference in other areas of armaments production was similarly striking, if not quite so dramatic. Even the United States was only producing half as many infantry weapons as the Soviet Union in 1942, and hardly any more combat aircraft and tanks. The American rationalization method was the same as the German, concentrating production in a limited variety of gigantic plants turning out a small number of standardized armaments. Yet German rationalization in some areas was achieved at the cost of quality. The Me109 fighter plane, for example, was too slow to cope with its more manoeuvrable Soviet counterparts. The Junkers bombers were also too slow, and too small to carry a really devastating payload. The new Tiger and Panther tanks were superior products, but, as so often, they were rushed into battle before all the design problems had been ironed out. They had a worrying tendency to break down. And all too often they ran out of fuel and could not be resupplied.26 At the same time, the Soviet people paid dearly for their Herculean production efforts: hundreds of thousands of workers, in a manner that had already become familiar in Stalin’s drive to industrialize during the 1930s, were drafted in from the farms, agricultural production suffered, and there was widespread malnutrition and even starvation. The fever-pitch of Soviet economic mobilization evident in 1942 could not be kept up for very long. But American lend-lease arrangements provided the Soviet armies with large quantities of food, raw materials and communications equipment, especially radios and field telephones, and were making a huge difference to British equipment and supplies as well. Soon the Americans would enter the war in Europe and North Africa directly. Speer’s efforts at rationalization, Todt’s efficiency drive, Milch’s organizational reforms, Kehrl’s administrative changes, all were insufficient in the end.27

By the middle of the war, the American economy was producing quantities of weapons, aircraft, warships, ammunition and military equipment that the Third Reich could not hope to match. In 1942, US factories produced nearly 48,000 aircraft; the following year saw nearly 86,000 roll off the production lines and in 1944 more than 114,000. Of course, a large proportion of these went to fight the Japanese in the Pacific. But this still left huge numbers to be deployed in the European theatre of war. Moreover, both the Soviet Union and the United Kingdom were out-producing Germany as well. Thus in 1940 the Soviet Union produced more than 21,000 aircraft, in 1943 nearly 37,000. The British Empire produced, in 1940, 15,000 aircraft, in 1941, just over 20,000, in 1942, more than 23,000, in 1943, around 35,000, and in 1944, roughly 47,000: the overwhelming majority of these were produced in the UK itself. This compared to 10,000 new aircraft built in Germany in 1940, 11,000 in 1941, and getting on for 15,000 in 1942. The rationalization measures taken by Speer and Milch and the increasing concentration of resources on aircraft production only had an effect from 1943, when more than 26,000 rolled off the production lines, and 1944, where the figure reached nearly 40,000. This was still fewer than Britain and the Dominions produced, and less than a fifth of the combined production of the three main Allied powers.28

It was the same in other areas. According to the German Combined Armed Forces Supreme Command, for instance, Germany managed to manufacture between 5,000 and 6,000 tanks a year from 1942 to 1944, thus failing significantly to increase output. This compared to Britain and the Dominions, where some 6,000 to 8,000 tanks were produced a year. The Soviet Union, however, produced around 19,000 tanks a year during this period, and US tank production rose from 17,000 in 1942 to more than 29,000 in 1944. In 1943 the combined Allied production of machine-guns came to 1,110,000, compared to 165,527 in Germany. Not all of the Allied military hardware was deployed against the Germans, of course: in particular, the British and Americans were waging hard-fought wars in Asia and the Pacific. Nevertheless, large quantities of American arms and equipment did find their way to Britain and the Soviet Union, to bolster what was already a massive Soviet superiority in tanks and aircraft. The writing was already on the wall in 1942, as Todt had realized.29 By 1944, it was clear for all to read.


The strain on the German economy could be gauged from the fact that, by 1944, 75 per cent of GDP was being devoted to the war, in comparison to 60 per cent in the Soviet Union and 55 per cent in Britain.30 Yet Germany could also benefit from the annexation or occupation of a large part of Europe in the first half of the war. As we have already seen, the takeover of Poland offered opportunities for enrichment that few were able to withstand. More importantly perhaps, the conquest of affluent countries in Western Europe, with their advanced industrial and prosperous agricultural sectors, held out the promise of making a major difference from 1940 onwards. Altogether, it has been estimated, the German sphere of influence in Europe in 1940 had a population of 290 million, with a prewar GDP greater than that of the USA. Among the conquered countries, France, Belgium and the Netherlands also had extensive overseas empires that added further potential to the Third Reich’s economic power. The German authorities began to set about exploiting the resources of the conquered countries with an abandon that did not augur well for the future well-being of the subject economies. In the initial euphoria of victory, looting and plunder were the order of the day. After the defeat of France, the German armies sequestered for their own use over 300,000 French rifles, more than 5,000 pieces of French artillery, nearly 4 million French shells and 2,170 French tanks, many of which were still being used by the German army in the later phases of the war. All of this constituted no more than a third of the total booty seized from the French by the Germans. Another third was supplied by the seizure of thousands of railway engines and vast quantities of rolling stock. The German railway system had been starved of investment in the years before the war, leading to severe delays in moving bulk supplies such as coal around the country. Now, however, it was able to replenish its depleted stocks with 4,260 locomotives and 140,000 freight cars and wagons from the French, Dutch and Belgian railways. Finally, the German armed forces confiscated massive quantities of raw materials for the arms industry back home, including 81,000 tons of copper, a year’s supply of tin and nickel and considerable quantities of petrol and oil. Altogether, the French estimated that 7.7 billion Reichsmarks’ worth of goods was taken from them during the occupation.31

It was not only the German government and German armed forces that took advantage of the conquest of other countries: ordinary German soldiers, as we have already seen, did so as well. The scale of their depredations in Poland, the Soviet Union and Western and Southern Europe was considerable. The letters written by German soldiers are full of reports and promises of goods, looted or purchased with their German Reichsmarks, being sent to their families in Germany. Heinrich B̈ll, later to become famous as a Nobel prize-winning novelist, sent packets of butter, writing-paper, eggs, ladies’ shoes, onions and much more besides. ‘I’ve got half a suckling pig for you,’ he announced triumphantly to his family just before coming home on leave in 1940. Mothers and wives sent money in the post to their sons in France and Belgium, Latvia and Greece, intended for them to buy supplies to take or send home. Soldiers seldom returned to Germany without carrying bags and suitcases of presents, purchased or purloined. After the regime lifted restrictions on how much could be taken or sent home in this way, the number of packages sent from France to Germany by military post soon ran at more than three million a month. Soldiers’ pay was increased towards the end of 1940 explicitly in order to help them pay for foreign goods for their families. Still more important were the massive quantities of goods, equipment and above all foodstuffs officially requisitioned and sequestered by the German army and civilian authorities in occupied Eastern Europe.32

The Third Reich also began to exploit the economies in subtler, less obvious ways. The exchange rate with the French and Belgian franc, the Dutch guilder and other currencies in occupied Western Europe was set at a level extremely favourable to the German Reichsmark. It has been estimated, for example, that the purchasing power of the Reichsmark in France was more than 60 per cent above what it would have been had the exchange rate been allowed to find its own level on the markets instead of being artificially fixed by decree.33 Germany imported huge quantities of goods legitimately from the conquered countries as well as simply looting them, but it did not pay for them by increasing its own exports commensurately. Instead, French, Dutch and Belgian firms exporting goods to Germany were paid by their own central banks in francs or guilders, and the sums paid marked up as debts to the Reichsbank in Berlin. The debts, of course, were never paid, so that by the end of 1944, the Reichsbank owed 8.5 billion Reichsmarks to the French, nearly 6 billion to the Dutch, and 5 billion to the Belgians and Luxembourgers.34 Altogether French payments to Germany amounted to nearly half of all French public expenditure in 1940, 1941 and 1942, and as much as 60 per cent in 1943.35 Germany, it has been estimated, was using 40 per cent of French resources by this time.36 Altogether, well over 30 per cent of the wartime net production of the occupied countries in the west was extracted by the Germans.37 The effects of these exactions on the domestic economies of the occupied countries were significant. German control over central banks in the occupied countries led to the end of restrictions on the issuing of banknotes, so that ‘occupation costs’ were paid not least by simply printing money, leading to serious inflation, made worse by the shortages of goods to purchase because they were being taken to Germany.38

German companies were able to use the overvalued Reichsmark to gain control of rival firms in France, Belgium and other parts of Western Europe. They could be helped by German government regulation of trade and raw materials distribution, which generally worked to their advantage. Yet the enormous deficit Germany ran up through the non-repayment of debts to the central banks of the occupied countries obviously made it more difficult to export the capital needed to buy up companies in the conquered countries. I. G. Farben, the German Dye Trust, did manage to seize control of much of the French chemical industry, and German firms, above all the state-sponsored Hermann G̈ring Reich Works, snapped up much of the mining and iron and steel industries in Alsace-Lorraine. German state sponsorship of the Hermann G̈ring Reich Works gave it an obvious advantage over private enterprise in the acquisition of foreign firms. Many of the enterprises taken over were state-controlled or foreign-owned; the Aryanization of Jewish firms also played a role here, though in overall terms they did not amount to very much. Many of the biggest private enterprises, however, escaped takeovers, including major Dutch multinationals like Philips, Shell and Unilever, or the huge steel combine that went under the name of Arbed. Of course, the German occupiers supervised the activities of these firms in many ways, but in most cases they were unable to exert direct control or reap direct financial benefits.39

This was not least because in the occupied countries in Western Europe, national governments remained in existence, however limited their powers might be, and property laws and rights continued to apply as before. From the point of view of Berlin, therefore, economic cooperation, however unequal the terms on which it was based, was what was required, not total subjugation or expropriation along the lines followed in Poland. The occupation authorities, civil and military, set the overall conditions, and opened up opportunities for German firms, for instance through Aryanization (though not in France, where Jewish property was controlled by the French authorities). All that German companies looking to expand their influence and reap the profits of the occupation could do, therefore, was to ingratiate themselves with the occupying authorities in the attempt to steal a march on their rivals.40 The policy of co-operation dictated from Berlin limited the freedom of action of such companies. It was born not simply of expediency - the desire to win the co-operation of France and other Western European countries in the continuing struggle against Britain - but also of a grander vision: the concept of a ‘New Order’ in Europe, a large-scale, pan-European economy that would mobilize the Continent as a single block to pit against the giant economies of the USA and the British Empire. On 24 May 1940 representatives of the Foreign Office, the Four-Year Plan, the Reichsbank, the Economics Ministry and other interested parties held a meeting to discuss how this New Order was going to be established. It was clear that it had to be presented not as a vehicle of German expansionism but as a proposal for European co-operation. Germany’s policy of trying to wage war with its own resources was clearly not working. The resources of other countries had to be harnessed as well. As Hitler himself told Todt on 20 June 1940: ‘The course of the war shows that we have gone too far in our efforts to achieve autarky.’41 The New Order was intended to reconstitute autarky, self-sufficiency, on a Europe-wide basis.42

What was required, therefore, as Hermann G̈ring, head of the Four-Year Plan, put it on 17 August 1940, was ‘a mutual integration and linkage of interests between the German economy and those of Holland, Belgium, Norway and Denmark’, as well as intensified economic cooperation with France. Companies such as I. G. Farben leaped in with their own suggestions as to how their own particular industrial needs could be met, as a memo from the company put it on 3 August 1940, by the creation of ‘a large economic sphere organized in terms of self-sufficiency and planned in relation to all the other economic spheres of the world’.43 Here too, as a representative of the Reich Economics Ministry explained on 3 October 1940, circumspection was necessary;

One can take the view that we can simply dictate what is to happen in the economic field in Europe, i.e. that we simply regard matters from a one-sided standpoint of German interests. This is the criterion which is sometimes adopted by private business circles when they are dealing with the questions of the future structure of the European economy from the point of view of their own particular sphere of operations. However, such a view would be wrong because in the final analysis we are not alone in Europe and we cannot run an economy with subjugated nations. It is quite obvious that we must avoid falling into either of two extremes: on the one hand, that we should swallow up everything and take everything away from the others, and, on the other, that we say: we are not like that, we don’t want anything.44

Steering such a middle course was roughly the line taken by the visionary economic imperialists who had developed thinking about a German sphere of economic interest - sometimes known as Mitteleuropa, ‘Central Europe’ - before the First World War. It would, economic planners thought, involve the creation of Europe-wide cartels, investments and acquisitions. It might require government intervention to abolish customs barriers and regulate currencies. But from the point of view of German industry, the New Order had to be created above all by private enterprise. European economic integration under the banner of the New Order was to be based not on state regulations and government controls, but on the restructuring of the European market economy.45

Pursuing such a goal meant avoiding as far as possible giving the impression that the conquest of Western European countries amounted to nothing more than their economic subjugation and exploitation. At the same time, however, German economic planners were clear that the New Order would be set up above all to serve German economic interests. This involved a sleight of hand that could sometimes be quite sophisticated. Mindful, for example, of the bad name that had clung to the concept of reparations since 1919, the Third Reich did not demand financial compensation from the defeated countries; how could it anyway, since the reparations Germany had had to pay from 1919 to 1932 had been to compensate for the damage done to France and Belgium by the German invasion of these two countries in 1914, and nobody had invaded Germany in 1940. So instead the victorious Germans imposed what were called ‘occupation costs’ on the defeated nations. These were ostensibly meant to pay for the upkeep of German troops, military and naval bases, airfields and defensive emplacements in the conquered territories. In fact, the sums extracted under this heading exceeded the costs of occupation many times over, amounting in the case of France to some 20 million Reichsmarks a day, enough, according to one French calculation, to support an army of 18 million men. By the end of 1943, nearly 25 billion Reichsmarks had found their way into the German coffers under this heading. So enormous were these sums that the Germans encouraged the French to contribute to their payment by transferring shares, and, before long, majority control over vital French-owned enterprises in the Romanian oil industry and Yugoslavia’s huge copper mines had passed to Party-dominated enterprises in Germany such as the ubiquitous Hermann G̈ring Reich Works and the newly established ‘multinational’, Continental Oil.46

12. The New Order in Europe, 1942


What this all reflected was the fact that from the point at which serious preparations began to be made for the invasion of the Soviet Union, ideas of economic co-operation began to take second place to the imperatives of economic exploitation. Some, like Speer, took these ideas relatively seriously.47 But as far as Hitler was concerned, they were little more than a smokescreen. On 16 July 1941, for example, he devoted some attention to a declaration in a Vichy French newspaper that the war against the Soviet Union was a European war and therefore should benefit all European states. ‘What we told the world about the motives for our measures,’ he said, ‘ought . . . to be conditioned by tactical reasons.’48 Saying that the invasion was a European enterprise was such a tactic. The reality was that it would be in Germany’s interests. This had long been clear to the Nazi leaders. As Goebbels declared on 5 April 1940: ‘We are carrying out the same revolution in Europe as we carried out on a smaller scale in Germany. If anyone asks,’ he went on, ‘how do you conceive the new Europe, we have to reply that we don’t know. Of course we have some ideas about it, but if we were to put them into words, it would immediately create more enemies for us.’49 On 26 October 1940 he made it brutally obvious what these ideas boiled down to: ‘When this war is over, we want to be masters of Europe.’50

By 1941, therefore, the conquered countries of Western Europe were being exploited by the Germans for all they were worth. Most of them had advanced industrial sectors that were intended to contribute to the German war effort. Yet it soon became clear that the French contribution was falling far short of what German economic and military leaders hoped for. Attempts to get French factories to produce 3,000 aircraft for the German war effort repeatedly stalled before an agreement was signed on 12 February 1941. Even after this, production was slowed down by shortages of aluminium and difficulties in obtaining coal to provide power. Only 78 planes were delivered by factories in France and the Netherlands by the end of the year, while at the same time the British had purchased over 5,000 from the USA. The following year, things improved somewhat, with 753 planes delivered to the German air force; but this was only a tenth of the quantity the British got from the Americans. Low morale, poor health and nutrition among workers, and probably considerable ideological reluctance as well, ensured that labour productivity in French aircraft factories was only a quarter of what it was in Germany. Altogether the occupied western territories managed to produce only just over 2,600 airplanes for German military use during the whole of the war.51

Even with the addition of the substantial natural resources of the conquered areas of Western Europe, the economy of the Third Reich remained woefully short of fuel during the war. Particularly serious was the lack of petroleum oil. Attempts to find a substitute were unsuccessful. Synthetic fuel production only rose to 6.5 million tons in 1943, from 4 million in four years before. The Western European economies occupied in 1940 were massive consumers of imported oil, producing not a drop themselves, and so they merely added to Germany’s fuel problems as they were abruptly cut off from their former sources of supply. Romania supplied 1.5 million tons of oil a year, and Hungary almost as much, but this was by no means enough. French and other fuel reserves were seized by the occupying forces, reducing the supply of petroleum in France to only 8 per cent of pre-war levels. Germany’s Italian ally consumed further quantities of German and Romanian oil, since it too was cut off from other sources. German oil reserves never exceeded 2 million tons during the entire war. By contrast, the British Empire and the USA provided Britain with over 10 million tons of oil imports in 1942, and twice as much in 1944. The Germans failed to seize other sources of oil in the Caucasus and the Middle East.52

Coal, which still provided the basic fuel for electricity generation, industrial power and domestic use, was present in Western and Central Europe in huge quantities, but production in occupied countries plummeted as workers slowed down. Some even went on strike in protest against impossibly low food rations and deteriorating conditions. In 1943-4, about 30 per cent of the coal used in Germany came from occupied areas, particularly Upper Silesia, but far more could have been obtained, particularly from the rich coal seams of northern France and Belgium. The British blockade cut off imports of grain, fertilizer and animal fodder from overseas, while German confiscations of these materials from French, Dutch and Belgian farms, together with the drafting of farmworkers into forced labour schemes in Germany, had a disastrous effect on agriculture. Farmers had to slaughter pigs, chickens and other animals in vast quantities because there was nothing to feed them with. The grain harvest in France fell by more than half in the two years from 1938 to 1940. The German occupiers introduced food rationing. By 1941, official rations in Norway were down to 1,600 calories a day, in France and Belgium a mere 1,300. This was not enough for anybody to live off, and, as in occupied Eastern Europe, a black market rapidly emerged, as people began to break the law in order to stay alive.53 All this meant that the addition of the economies of Western Europe did far less than had been hoped to strengthen the German war effort. Not only did productivity in the coalmines decline, but the confiscation of French, Belgian and Dutch rolling stock and railway engines also severely disrupted the movement of coal supplies across the country, hampering industrial production. As coal supplies fell, steelworks, starved of the coke essential for smelting, began to get into trouble as well. Not only was the German economy unable to take much advantage of the acquisition of coalmines in France and Belgium, but conditions in the German mines began to deteriorate too. Matters were not helped by the drafting of many key workers into the armed forces, and attempts to induce men to go down the mines by raising wages were undermined by already long hours, including Sunday working, dangerous conditions and above all the poor food rations on which miners had to subsist.54 All in all, therefore, the German war economy gained far less from the conquest of other European countries than might have been expected.

All of this reflected, in the end, the primacy of ruthless exploitation dictated by the state. Some economists, such as Otto Br̈utigam, a senior official in Rosenberg’s Ministry for the Eastern Territories, considered that Germany could have extracted far more from the economies of the countries it had conquered, above all in Eastern Europe, if its leadership had followed the ideas of a collaborative economic New Order in Europe rather than policies of racial subjugation, oppression and mass murder.55 Some businessmen and capitalists may have thought along similar lines, but on the whole they took the regime’s policies towards its subject peoples as a given, and tried to gain what they could out of them. This was clearly, as the exiled political scientist Franz Neumann put it during the war, a command economy, a capitalist market economy increasingly subjected to direction and control from above.56 Was it any more than that? Was the Nazi economy moving away from free enterprise capitalism altogether? There is no doubt that, in the course of the war, the regime intervened ever more intrusively in the economy, to an extent that amounted to far more than merely steering it in certain directions, or forcing it to work within the political context of a global war. Price and exchange controls, the regulation of labour and raw materials distribution, the capping of dividends, forced rationalization, the setting and resetting of production targets and much more besides constituted a drastic deformation of the market. The state’s vast and precipitous increase in armaments expenditure distorted the market by pulling resources away from consumer goods production and towards arms-related and heavy industries. Industry thus came increasingly to serve the purposes and interests of an ideologically driven political regime.57

Moreover, as time went on, state and Party interests owned a growing proportion of the economy. Practically the whole newspaper and magazine industry had already fallen into Nazi ownership before the war, for instance, and other media, including film studios and book publishers, were similarly largely owned by branches of the Nazi Party organization. In some regions like Thuringia, regional Party bosses had been able to lay their hands on key industries. After 1939, state or Party agencies were able to take over companies with foreign owners whose countries were at war with Germany, and the Aryanization of Jewish firms in occupied countries provided still further opportunities. The state-run Hermann G̈ring Works spread its tentacles ever further in this way. The SS Economy and Administration Head Office under Oswald Pohl mushroomed into a complex network of businesses covering an astonishing variety of fields. The holding company set up by Pohl in 1940, the so-called German Economic Enterprise (Deutscher Wirtschaftsbetrieb), owned or leased and effectively controlled housing corporations, furniture, ceramics and cement manufacturers, a quarry and stone business, munitions works, woodworks, textile factories, book publishers and much more besides. Often these reflected Himmler’s own particular, sometimes rather eccentric personal interests. Thus, for example, Himmler was concerned to reduce alcohol consumption in Germany and particularly in the SS, so he arranged for the Apollinaris mineral water company at Bad Neuenahr, which was British-owned before the war, to be leased from its German trustees to the SS holding company, rewarding it with a large contract to supply mineral water to the SS. The existing manager could not be ousted, but he was forced to work with a deputy appointed by the SS, giving it a large measure of control. Other companies fell under direct ownership. The SS economic empire expanded very quickly as a result of such developments.58 At the same time, however, it had no clear overall conception of what it wanted its role to be. It simply grew by accretion, in a haphazard way, as the example of the Apollinaris mineral water company suggests. Nor was the eventual domination of the German economy a significant aim of the SS; this always took second place to security and racial policy.59 In the last two years of the war, indeed, these latter aims pushed the economic ambitions of the SS into the background.60

Striking though these developments were, however, they did not do much to alter the fact that Germany was still a capitalist economy, dominated by private enterprise. Regulation was widespread and intrusive, but it was carried out by many different, often competing institutions and organizations.61 Industrial managers and company executives managed to preserve at least some freedom of action, but they were acutely aware that their autonomy was being increasingly restricted during the war along with the operation of a free market economy, and they were deeply worried that the regime would go over to a fully ‘socialist’, state-run economy; Joseph Goebbels, widely regarded as a ‘socialist’, was a particular bogey-man in this respect, but the growing economic empires of the SS and the Hermann G̈ring Works, among others, were a cause of anxiety as well. Such concerns drove many businessmen and industrialists to co-operate with the regime as much as they could, in order to ward off, as they thought, even more drastic encroachments on their decision-making powers.62

Thus managers, executives and company chairmen were more than willing to take advantage of the many inducements the state had to offer, most notably of course the provision of lucrative arms contracts. German businesses benefited from the activities of the SS as well. The Dresdner Bank, for example, issued credits to the SS, and senior executives were rewarded by being made officers in the organization. Its services to the SS included providing loans for construction works in Sachsenhausen and finance for the building of Crematorium II in Auschwitz. 63 Huta, the small firm that built the gas vans used to kill Jews at Chelmno and elsewhere, the engineering company of Topf and Sons, who built the gas chambers at Auschwitz, and many other firms were only too happy to profit from the business of death. Some, such as the company that supplied Zyklon-B to Auschwitz, may possibly have been unaware of the use to which their products were being put, but in most cases it was only too obvious. Those who processed the gold from the dental fillings extracted from the corpses of Jews killed at Auschwitz and other death camps can have had few doubts as to the provenance. After collection at the camps, the fillings were sent to a refinery operated by the Frankfurt-based Degussa firm, Germany’s leading company for the processing of precious metals. The gold was melted down and made into bars, along with other gold materials, jewellery and the like, taken from Jews and others in the conquered areas of Europe. Altogether, it has been estimated, Degussa earned about 2 million Reichsmarks from the plundering of the Jews between 1939 and 1945; 95 per cent of the firm’s gold intake between 1940 and 1944 came from loot.64 Degussa earned such profits by selling the gold on via the Reichsbank to finance houses such as the Deutsche Bank.65 The origin of much of this gold was clear enough to those who processed it on the factory floor. The fillings arrived at the Degussa factory for processing, as one worker recalled long after the war, in a condition that made it all too clear where they had come from: ‘The crowns and the bridges, there were those where the teeth were still attached . . . That was the most depressing, the fact that everything was still there. It was probably just like it had been when broken out of a mouth. The teeth were still there and sometimes still bloody and with pieces of gum on them.’66

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