Student ID: 1440207

Student ID: 1440207

The Economics of War (24705)

How and why did the German war economy fail to

mobilise in World War II?

Word Count (Footnotes): 4052

Word Count (Without Footnotes): 3766
Student ID: 1440207

How and why did the German war economy fail to mobilise in World War II?

In September 1939, the Allied powers supposed that Germany held a considerable advantage in
regards to wartime preparation. Specifically there was a belief that Germany had a substantial lead
in terms of the development of an efficient full war economy.1 Nevertheless the Allied imagined
image of the German war effort has been discovered to be a false one.2 In truth Germany failed to
unleash its full economic potential in regards to the war economy. Mobilisation can be defined as
the readying of troops, supplies and the economy in suitable preparation for war. The type of war
which is undertook dramatically effects the economic organisation. The Second World War was a
‘Total War,’ meaning that a nation’s war effort utilises all aspects of society in order to achieve an
ultimate victory. In terms of economic utilisation “Germany did not fight a total war.”3 When
assessing the reasoning behind this failure to meet its economic potential there are several factors
which have to be addressed. Firstly was the German failure to foresee a European War in 1939.
Instead the German high command were preparing for a war to breakout in the 1940’s. Another
factor was the disorganisation of the economy itself, specifically its polycratic model of distribution
of power and resources.4 This created a constant competition between economic institutions for
resources. As well as this Hitler supposedly desired for civilian life to be largely unaffected by military
campaigns, however to what extent it did remain unaffected is still debated. Nevertheless from 1942
onwards, it can be assessed that Germany began the transition towards a total war economy. This
was due to the heavy economic burden that was the war against the Soviet Union. This transition to
a total war economy was too late to be of any consequence.5

The first area as to why Germany failed to successfully mobilise its war economy was that the
economy was simply not sufficiently prepared for a total war. Hitler’s aggressive foreign policy
moved too quickly for the German economy to mobilise. Hitler did not anticipate that a full scale
European war would break out in 1939.6 Evidence showing this belief is a conversation between the
Fuhrer and Italian Foreign Minister Galeazzo Ciano in which Hitler stated: “the conflict will be
localised” and that the concept of military activity in Poland would lead to war was “out of the

1
A, Milward. The German Economy at War (London, 1965) p. 1.
2
N, Kaldor. The German War Economy. The Review of Economic Studies, Vol. 13 (1946) p. 33.
URL: http://www.jstor.org/stable/2296114 (Accessed 27/11/17)
3
Ibid.
4
W, Abelshauser. ‘Guns, Butter, and Economic Miracles’ in M, Harrison. (ed) The Economics of World War II:
Six Great Powers in International Comparison (Cambridge, 1998) p.156.
5
Kaldor, German War Economy p.33.
6
R. J, Overy. War Economy in the Third Reich (Oxford, 1994) p. 237.
Student ID: 1440207

question.”7 The war against the western power had not been anticipated and thus there was no set
plan as to how the economy was to be structured in order to deal with this new threat. Economic
Historian Adam Tooze highlighted that there was no prior economic plan for a war with the western
powers. Therefore Germany had extremely limited options of how to economically conduct the war.
The First World War had caused major economic devastation for Germany. This memory haunted
the staff of the major military-economic bodies; the OKW, the Ministry of Economic affairs, and the
National Agricultural Organization. Due to the attrition of World War One, staff members deemed
that the only safe economic measure was to “harden its economy to sustain a long, drawn out
struggle.”8 General Georg Thomas was a huge advocator for the economy to be transformed, in
order carry out a long term strategy. Thomas estimated that if the Wehrmacht abstained from any
offensive operations, Germany’s raw materials could stretch over three years.9 However if any
offensive action took place, it would be a major gamble. If a swift military victory was not achieved
then raw materials and fuel supplies would be critically low, too low to mount any form of defence
against the Allied powers. Nevertheless the adoption of a long term strategy would have been “self-
defeating.”10 The Allied powers were confident in their economic superiority, believing that the
backing from the United States would be a decisive factor in a long term conflict, a view shared by
Thomas.11 The German war economy was still in development when war broke out in September
1939. Hitler’s aggressive foreign policy had created the need for a mass reorientation of the German
economy. The belief that the Western Powers were not willing to go to war over the invasion of
Poland meant that the Germany had to rapidly transition the basis of its economy. In November
1939, General Thomas stated that the structure of the economy was neither a peacetime nor a
wartime economy. Instead it was a “transitional economy.”12 The transition of this economy was
bound both a lengthy and clumsy process, greatly hindering the Third Reich’s ability to meet its full
war potential form the outbreak of war.13

Though Hitler had not anticipated the break out of war in 1939, this is not to be interpreted that
Hitler wished to completely avoid a war. The German economy from 1936 was always gearing
towards conflict. The combination of economic reconstruction through the Four Year Plan and the
increasing aggressiveness of Hitler’s foreign policy imply that the ultimate end would be a global
conflict. Germany was unable to initially mobilise its economy for war, because it was instead

7
Ciano’s Papers, 301 – 302 ‘First Conversation with the Fuhrer, 12th Aug. 1939 cited, ibid.
8
A, Tooze. The Wages of Destruction: The Making and Breaking of the Nazi war Economy (London, 2006) p.
335.
9
Ibid. p. 336.
10
Ibid.
11
Ibid.
12
Overy, War Economy p. 240.
13
K, N, Frieser The Blitzkireg Legend (Maryland, 2005) p. 25.
Student ID: 1440207

preparing for war for a later date.14 Herman Göring was charged with the preparation of the war
economy through the Four Year Plan. Göring was unsuccessful at achieving a sufficient war economy
by 1939. Historian Richard Overy gives two reasons for this; the first being that Göring was an
“inappropriate choice as plenipotentiary,” but more importantly that Göring believed he had more
time to complete his task.15 The German industry was unprepared for war at this early stage. There
were several gigantic projects which divert both capital and labour from key areas needed for war,
specifically munitions.16 In order to make up for low stock piles of raw materials these huge projects
involved the production of synthetic oil, rubber programs, chemical facilities and steelworks in order
to efficiently use domestic ores.17 These projects were massive long-term economic commitments.
The Hydrogenation plant at Brüx alone cost RM 250million, more than all investments in the aircraft
industry in 1939/40.18 When war came these projects were far from completion, as the German
High command was preparing for war to occur in the mid 1940’s and not in 1939. As a consequence
of these projects, munition production was harmed between 1939 and 1941, historical known as the
‘Blitzkrieg Period’.19 Labour productivity in the munition sector fell by a quarter.20 However
munitions production was already under significant restrictions as early as 1937. This was due to the
lack of raw materials, the German stock piles were far from the levels needed in order to carry out
an offensive campaign.21 This failure to sufficiently supply raw materials led to an ammunition crisis
only after a few weeks of military operations. This was a major indicator of the short comings of the
supposed German war machine; it was in no position to comfortably mobilise in order to wage war.
In September 1939, the monthly consumption of munitions during the Polish campaign greatly
exceeded industrial production.22
There is further evidence which suggests that the reason Germany failed to mobilise its economy
because it planned for war for a future date is the dramatic rearmament programs launching in
1939, specifically the growth of the Kriegsmarine and Luftwaffe. In January 1939 the Kriegsmarine
launched ‘Plan Z’ a huge industrial program in order to strengthen the navy in order to rival
Britain’s’. Nevertheless this project had only just begun when war broke out; meaning labour forces
and raw materials had to be redirected into other fields.23 The Luftwaffe also suffered from the

14
Overy. War Economy p. 241.
15
Ibid.
16
Abelshauser. Guns, Butter p. 154.
17
Ibid.
18
Overy, War Economy p. 245

19
Ibid. p. 155
20
Abelshauser. Guns, Butter p. 155
21
Tooze. Wages of Destruction p. 328
22
Ibid.
23
Overy, War Economy p. 245
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interruption of war. The last peacetime policy in 1938 was to see aircraft production tripled by 1941
at 14,000 aircraft per year. This was expected to rise to 20,000 in the first year of war; however the
actual production was around 10,000.24 These rearmaments projects were halted due to the
outbreak of war. The German industry was thrown into a mass confusion. The German high
command were preparing long-term economic investments in both scientific and military fields.
These industrial and military developments were worked on with a total-war contingency. The
economy failed to mobilise as it was preparing for a war at a future date, instead these projects and
industrial developments were interrupted by the early outbreak of war.

Another reason as to why Germany failed to successfully mobilise their war economy was due to the
internal model in which the economy operated. The German model of disruption was that of a
polycratic nature. At the head of this economic prioritisation, was Hitler. Between September and
November 1939, Hitler made several decisions regarding military economic programs.25 Within
German’s political regime there was a number of competing groups for political influence. This
divisional rivalry was then placed into the economic sphere.26 At the outbreak of the war there was
no systematic distribution of power between institutions, instead there was a competition for
resources.27 The economic rivalry came from three main institutions: Walther Funk’s Ministry of
Economics, General Georg Thomas’s War Economy Office, and Hermann Göring’s Four Year Plan
programs.28 Below these top level institutions, there were also twenty-seven national offices, all
competing for economic resources. The lack of economic centralization and the competitive anarchy
made it extremely difficult for Germany to direct its resources to each institution. On top of this
there was also a great of rivalry between the different branches of the military. Economic priority
was given to armament officers from all different branches of the military. Private manufacturers
directly negotiated with all three military branches. There was attempt by the OKW to regulate and
control production, however each branch service was only concerned with their own private
factories. The result of this economic military influence, meant that in there was a great deal of
military primacy. Military needs and production often overruled limitations of costs and caused
tension between the branches themselves. An example of military branch tension was the U-boat
program. This program called for the production of 25 submarines per month. However both raw
material and labour were diverted to other programs, meaning production was derisory.29
Nevertheless there were steps made in order both centralise the economy and limit the amount of

24
Ibid.
25
Tooze. Wages of Destruction p. 338
26
Abelshauser. Guns, Butter p. 156
27
Ibid
28
Ibid.
29
Tooze. Wages of Destruction p. 339.
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military influence involved. One such example was the establishment of the Ministry of Armaments
and Ammunition in March 1940, headed by Fritz Todt.30 The establishment of this institution was in
order to improve coordination of German military industry as a whole. Nevertheless the institutional
rivalry which dominated economic production meant that Todt’s reforms suffered from several
limitations and setbacks.31 Furthermore the compromising approach which Todt undertook meant
that the reforms would take a great deal of time to be put into place. Whilst also creating a great
deal of tension between the political and military bodies. This program of centralisation was then
carried on by Albert Speer from 1942 onwards.
The lack of centralisation was a major hindrance to German in terms of mobilising its economy
during the early years of the war. The polycratic make up of economic distribution system created
anarchy. Thus when war did break out, time and effort had to be taken to rearrange the structure of
the armament economy. The divides between each of the military branches and their respected
factories also inhibited any form of development in terms of a fuller war economy.32 Instead military
production saw sudden spurts of economic effort towards each military branch. Vastly hindering any
form of full economic mobilisation.

A domestic factor which greatly hindered German economic mobilisation was Hitler’s own
reluctance to transform the economy into a planned total war economy. This was in order to
maintain positive public opinion by having the war have as little effect on the public as possible.
There was still the memory of the First World War, in which saw the dependency on loans, high
levels of inflation and rise of the black market undermined German’s ability to wage war whilst also
provoking civil unrest. This were the past mistakes the German command wished to avoid. The main
source for this assessment is the writings done by Rolf Wagenführ. Wagenführ claimed that the main
characteristic of the German war economy, specifically 1939 to 1940 was to be “business as usual,”
becoming a peace-like economy at war.33 This view was then later strengthened by economist
Nicholas Kaldor in 1946, stating that “there is no evidence of ruthless sacrifices having been imposed
upon her own people for the sake of victory.”34 Due to the lack of full economic mobilisation it is
believed by some that the Nazi government was able to maintain a “prosperous civilian economy.”35
The lack of civilian mobilisation was in order to maintain a limit war economy. The reluctance to
mobilise its own resources would be countered by rapid territorial gain; “war was to be nourished by

30
Militärgeschichtliches Forschungsamt MF (ed.) Germany and the Second World War vol. 5 (Oxford, 2000) p
540
31
Ibid.
32
Milward. Economy at War p. 52
33
Wagenführ, R. Die deutsche Industrie im Kriege 1939-1945 (Berlin, 1963) pp. 6 – 8.
34
Kaldor. German War Economy.
35
B, Klein. Germany’s Economic Preparations for War (Cambridge, 1959) p. 27
Student ID: 1440207

war.”36 Evidence which support these claim are the figures for industry group outputs. Industrial
output for specialised military industry was 16 percent in 1940 and stagnated in 1941. In contrast,
consumer goods industries shares were at a stable 30 percent. The German industry in 1941 was run
on a one shift basis. This can be used as further evidence that Germany was not attempting to fully
mobilise as it was fully mobilising its labour force for round the clock production. However, more
recent historical studies have shown this representation as being historically misleading. Once war
had broken out the impact on German consumers was in fact a substantial one between 1939 and
1941.37 Industrial labour was diverted towards war tasks during the early period of the war. By the
summer of 1941 almost two thirds of the workforce was producing military supplies.38 Historian
Richard Overy highlights that there was a general agreement amongst German ministers that “public
consumption would have to be cut back sharply.”39 In February 1940 the ministry of finance ran a
report which came to the conclusion that in order to limit consumption of materials, consumption of
private goods was to be at the very lowest level. Rationing was introduced in the first week of the
conflict. Both food and clothing were rationed as they were seen as the biggest areas of household
expenditure.40 There was also an increase in the level of taxation from the very start of the war. A
surtax (Kriegszuschlag) was enforced onto all German taxpayers. From January 1940 taxations were
placed on luxury activities, such as cinemas, travel and theatre going.41 In total domestic tax revenue
doubled from 1939 and 1941.
This is a clear indicator that the original assessment that the civilian economy remain largely
unaffected was a false one. Although there was a desire to avoid full mobilisation, the attempts
made to limit the impact from the war were failures. No area of the economy remained untouched
by the demands of war.42 Essential the German economy was being pulled in separate directions.
There was the desire to limit the effect on the population, with major public projects aiming to be
completed, but simultaneously producing military goods in order to wage war. Domestic factors thus
prevented the mobilisation of the German war economy. Although the reasoning behind lack of
mobilisation seem logical from a societal viewpoint, the German economy would not become a total
war economy until 1942 onwards.

Another factor which highlights the reluctance to fully mobilise into a war economy was the refusal
to mobilise the female population into industrial employment. The role of women in the eyes of the

36
MF Germany and the Second World War p. 408
37
Overy, War Economy p. 261
38
Ibid.
39
Ibid. p. 69
40
Tooze. Wages of Destruction p. 356
41
Overy, War Economy p. 270
42
Ibid. p. 192
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Nazi ideology was that of a traditional maternal role. The National Socialist state rewarded women
whom fulfilled this role with honours and privileges. This meant there was an ideological reluctance
to use female factory workers as it was viewed as a symbol of “economic recession.”43 In fact during
the second half of 1939, the number of women in employment decreased by nearly 300,000.44
Military conscription policies had led to a manpower shortage in industrial production in early 1941.
However women were still not utilised into industrial roles as it was deemed “impractical on political
grounds.”45 Estimates were made by the Four Year Plan and OKW that between 3.5 million and 5
million women could have been recruited into the work force.46 It is widely believed that Germany
failed to utilise its female population. If it had done so then greater production rates would have
been achieved. Nevertheless Richard Overy highlights that this viewpoint is a “distortion of reality.”47
Towards the end of the late 1930’s, Germany had a high level of female employment, the outbreak
of the war saw these female workers redistributed away from the civilian sector in order to work on
war tasks.48 An example of this high level of women workers is in the iron, steel and engineering
which roughly 13 to 19 percent of the workforce was female. The amount of women in industry
remained stagnate throughout the war. Although the levels of female workers were higher than
most other nations, Hitler still refused to order a general conscription of all German women into the
workforce. Hitler believed that by forcing women into full-time work would be damaging for the
health of those women. In the eyes of the Fuhrer women were to be fully fit in order to “raise
further sons for the fatherland.”49
The conclusion that Germany failed to mobilise its women as a reason for failed economic
mobilisation cannot be drawn. Women were in fact mobilised in production, both industrial and
agricultural. However there were factors which slowed down production and work willingness of
female workers. Declining health standards, exhaustion of working shifts whilst maintaining a family,
increased absenteeism and the social unrest regarding differential pay. The extension of work hours
to ten or twelve hours in 1940/41 took also took its toll on production.50 However German still
suffered from Labour shortages, resulting in low productivity in the military sectors. The reluctance
to force women into work shows the lack of desire to mobilise to a full war economy. The needs and
demands of warfare were not enough for Hitler to sacrifice his ideological beliefs.

43
MF Germany and the Second World War p. 881
44
Ibid. p. 882
45
Ibid. p. 883
46
Overy, War Economy p. 308
47
Ibid. p. 304
48
Ibid.
49
Ibid. p. 309
50
Ibid.
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The statement that Germany failed to mobilise its economy for war could be considered false in the
later stages of the war. The increasingly high level of military demand for increased production rates
and efficiency made it vital that the economy was converted to wage total war. The breakaway point
in which the Nazi command abandoned the limited ‘Blitzkrieg economics’ was in January 1942
through the Fuhrer-Command ‘Armament 1942’51 Frizt Todt set in motion the process of creating a
new structure for the economy. This was in order to increase and better coordinate military
production from February 1942. Todt’s successor Albert Speer carried this process further; the
establishment of the Central Planning Office saw the rise of industrial output due to greater
centralisation and control from the state. Speer brought in several industrial reforms such as the
specialisation of the heads of industrial departments, bringing in a specific age range (40-55) in order
to maintain quality production. The reorganisation of the German economy was completed only in
September 1943.52 The result of Speers work was an industrial boom in which output rose. For
example by 1943 the armaments index exceeded twice the level it achieved in 1941.53 By this time
over 70% of GNP was being spent of military production. The complete mobilisation in both material
and psychological sense were finally achieved by 1943.54 However this full mobilisation came too
little, too late. The allies were out producing Germany in all areas with a general ratio of 5:2.55 The
allied bombing campaign was in full effect, further hindering German industry. The ministry of
armaments estimated that the bombing campaign caused production to fall by 42 percent in 1944.56
By the time Germany can be considered to have mobilised its economy, the Allied economic might,
largely from the US, simply overwhelmed Germany.

To conclude, the German economy never fully mobilised in order to wage a total war for the
majority of the Second World War. There was a number of contributing factors which resulted in the
hindering process of mobilisation. Firstly was the fact that Hitler had not anticipated the breakout of
major conflict in 1939. Hitler’s aggressive foreign policy through the late 1930’s. Appeasement
policies had given Hitler the belief that the Allies would have avoided a European war at all costs.
The consequence of this action was that the economy had to be hastily mobilise in order to conduct
war. The hastily assembled war machine hindered Germany’s ability to fully meet their economic
war potential. There was also a major indecisiveness regarding the strategic element which greatly
hindered the economic effort. Some in the German high command believed that a European war

51
Milward Economy at War p. 68
52
Abelshauser. Guns, Butter p. 156
53
Tooze. Wages of Destruction p. 575
54
Overy, War Economy p. 311
55
Harrison. Economies of World War II p. 6
56
Overy, War Economy p. 374
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would be a long conflict as had been the case in 1914. Meaning that the economy should have been
hardened in order to carry out a defensive strategy against the Allies. The transitional period for the
economy was a lengthy process in the early stages of the conflict, meaning industrial output was not
sufficient for war. Hitler did not envision war breaking out as early as 1939. Instead Hitler and his
economic intuitions were gearing for a total war to start in the mid 1940’s. Uncompleted projects
were diverting materials and manpower away from military production. The constant diversion of
industrial effort between military projects also hindered the German economic effort. The economic
focus on production had an improvisational composition. The polycratic structure of economic
distribution also had an anarchic aspect. During the first period of the war, there was little
centralisation and sufficient allocation of resources. This greatly hindered mobilisation as the
competing political and military bodies were in direct competition for resources. The biggest factor
as to why Germany failed to mobilise was the mind set in which Hitler desired to avoid total
mobilisation to wage total war. The lack of willingness to commit to a total war disallowed full
economic mobilisation. The memory of the devastation of the First World War plagued the German
High command; there was a constant desire to avoid a war of that scale in the early stages of the
conflict. Although there was total mobilisation from 1943 onwards, it came too little, too late. The
economic superiority of the combined Allied powers dwarfed that of Germany. Through the
bombing campaign and gradual advance, the German economy collapsed.
Student ID: 1440207

Bibliography

A, Milward. The German Economy at War (London, 1965)

A, Tooze. The Wages of Destruction: The Making and Breaking of the Nazi war Economy (London,
2006)

B, Klein. Germany’s Economic Preparations for War (Cambridge, 1959)

Ciano’s Papers, 301 – 302 ‘First Conversation with the Fuhrer, 12th Aug. 1939

K, N, Frieser The Blitzkireg Legend (Maryland, 2005)

Militärgeschichtliches Forschungsamt MF (ed.) Germany and the Second World War vol. 5 (Oxford,
2000)

N, Kaldor. The German War Economy. The Review of Economic Studies, Vol. 13 (1946)
URL: http://www.jstor.org/stable/2296114 (Accessed 27/11/17)

R. J, Overy. War Economy In The Third Reich (Oxford, 1994)

W, Abelshauser. ‘Guns, Butter, and Economic Miracles’ in M, Harrison. (ed) The Economics of World
War II: Six Great Powers in International Comparison (Cambridge, 1998)

Wagenführ, R. Die deutsche Industrie im Kriege 1939-1945 (Berlin, 1963)