Friday, January 15, 2016

Keynesianism could probably have prevented World War II

Let us look at the simple facts relating to the rise of the Nazi party in the 1930s.

This is the Nazi party share of the vote in federal elections in the Weimar Republic from 1924 to 1933:
Date | % of Vote | Reichstag Seats
May 1924 | 6.5% | 32
Dec. 1924 | 3.0% | 14
May 1928 | 2.6% | 12
Sep. 1930 | 18.3% | 107
July 1932 | 37.3% | 230
Nov. 1932 | 33.1% | 196
March 1933 | 43.9% | 288

http://en.wikipedia.org/wiki/Nazi_Party#Federal_election_results
By 1928, during the economic boom in Germany, the Nazi party vote looked like it was almost dead and was only 2.6%. Remarkably, even in the aftermath of the Weimar hyperinflation in 1924 it was only 3%.

When the deflationary depression struck Germany from 1929–1932, it soared to 18.3% (September 1930), then 37.3% (July 1932), and finally to 43.9% in March 1933 in the aftermath of the Great Depression. Hitler became Chancellor on 30 January, 1933, admittedly after some political jockeying.

It was the depression that essentially made the Nazi party and made Hitler chancellor.

Had the Weimar Republic government intervened in 1930 and 1931 onwards with policies to stabilise the financial system, provide massive fiscal stimulus, and employment programs, then the Great Depression in Germany would have been quickly reversed and prevented and the Nazi share of the vote would very probably have stayed relatively low. Hitler would never have been a plausible candidate for chancellor in 1933 and crucially the threat from communism would also have been much weaker.

Without the Nazis, it seems very difficult to see how the Second World War would have happened.

7 comments:

  1. Very very convincing argument, but...

    There was a general rise in "fascistic" parties all over Europe at the time.

    In Greece, in Italy, in Austria, in the Balkans, you name it. Even if the fascists in Greece were anti-Nazi, f.e., it does seem there was a general rise in militaristic, nationalistic, authoritarian regimes.

    Because of the general tendency towards this trend, it seems someone would have begun building arms and dragging all of Europe into a war at some point.

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  2. It is true that Nazis would have been a mere historical footnote if not for the Great Depression. That said, it's debatable whether Keynesianism would have turned the tide.

    The rise of the party was always fueled not by popular initiative, but by businesses and wealthy tycoons. Leaders of heavy industries with vast outlays of fixed capital that required protectionism bankrolled the NSDAP, enabling them to spread propaganda as never before. Keynesian policies, in their most admirable form, tend to be focused more on popular need than corporate welfare, but the cry for the latter is what fundamentally drove the movement.

    I'm not sure what Keynesianism could have accomplished regarding Weimar's onerous debts denominated in foreign currencies. They did famously try addressing it with fiscal policy. Defaulting was also not an option, considering the imperial aspirations of the creditors; when they tried, France and Belgium occupied the Ruhr region.

    If we're looking for the single decisions with the biggest impact, surely a prime contender must be this: Social Democratic leaders refused the Communist party's proposal to form a coalition against Nazism during the presidential election of December 1932. Though the KPD insisted that "a vote for Hindenburg is a vote for Hitler; a vote for Hitler is a vote for war," the SPD backed Hindenburg, who then appointed Hitler chancellor. (And of course, not long after, the KPD was banned and its leadership jailed; "first they came for the Communists...")

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    Replies
    1. (1) Your grasp of history is bad.

      On June 20, 1931, Herbert Hoover announced the Hoover Moratorium: a 1 year moratorium on German debt payments, approved by Congress and, after some initial resistance by France, by 15 other nations.

      Under the Lausanne Conference in 1932, the Western nations actually agreed to suspend German reparations payments. Even though it was rejected by Congress, the pre-Nazi German government still had enough power to refuse to make any more debt repayments.

      So by the early 1930s a forceful enough German government did have the clout to renegotiate the World War I reparations, especially since Herbert Hoover proved to be quite reasonable in understanding how bad conditions were in Germany.

      (2) “The rise of the party was always fueled not by popular initiative, but by businesses and wealthy tycoons. Leaders of heavy industries with vast outlays of fixed capital that required protectionism bankrolled the NSDAP, enabling them to spread propaganda as never before.”

      And what is your evidence for that statement?

      If business was funding the Nazi party in the 1920s or even late 1920s it was remarkably unsuccessful:

      May 1924 | 6.5% | 32
      Dec. 1924 | 3.0% | 14
      May 1928 | 2.6% | 12

      Sep. 1930 | 18.3% | 107
      July 1932 | 37.3% | 230
      Nov. 1932 | 33.1% | 196
      March 1933 | 43.9% | 288
      http://en.wikipedia.org/wiki/Nazi_Party#Federal_election_results

      The critical factor was the effect of Great Depression.

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    2. The BBC TV series The Nazis: a Warning from History came to the same conclusion as you based on voting data.

      No surprise that some Marxist would turn up saying that the Nazis were a creation of 'big business'. Albert Speer's memoirs indicate that Hitler was agnostic on whether private enterprise worked better than a state-controlled economy, and he certainly wasn't a pawn of big business.

      https://en.wikipedia.org/wiki/The_Nazis:_A_Warning_from_History

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  3. "Remarkably, even in the aftermath of the Weimar hyperinflation in 1924 it was only 3%."

    -Well, that's because of sticky wages, isn't it? When wages become totally unsticky, it's easy to get jobs in market economies (just not necessarily good ones). Yes, even during depressions.

    How effective is massive fiscal stimulus (without monetary stimulus), anyway? A little bit (or a lot of) monetary stimulus couldn't have hurt in Germany during the Great Depression, of course.

    "Without the Nazis, it seems very difficult to see how the Second World War would have happened."

    -Well, there was Japan, which had wages far less sticky than those of Germany.

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  4. Don't you think some sort of large war would have started anyway? Imperial Japan would've probably provoked something.

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  5. I agree with the analysis that The Great Depression helped Nazis to gain power and Keynesian policies could have prevented them to capture power but the argument that there wouldn't have been WW2 with Nazis is difficult to determine . According to some theories internal behavior of state cannot determine its external once.
    While explaining the virtue and limits of his theory of offensive realism John Mersheimer noted ["Offensive Realism assumes that the International System strongly shapes the behavior of states.Structural factors such as anarchy and distribution of power, I argue , what matter most for explaining international politics. The theory pays little attention to individuals or domestic political considerations such as ideology . It tends to treat states like black boxes or billiard balls. For example, it does not matter for the theory whether Germany in 1905 was led by Bismarck, Kaiser Wilhelm or Adolf Hitler or whether Germany was democratic or autocratic .What matters for the theory is how much relative power Germany possessed at the time. These omitted factors occasionally dominate a states decision making process ; under these circumstances offensive realism is not going to perform well. In short , there is price to pay for simplifying reality....- John Mersheimer, The Tragedy of Great Power Politics]. Although it is difficult to say what would have happened without Hitler , but if the International conditions were same ( Germany with strong army and economy , , other great powers engaging in buck passing, etc ) like what had been with Hitler ,I argue there would have been a war.

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