German WW2 Economy - Wages of Destruction

[undead reindeer cavalry]

i recommend Adam Tooze's "The Wages of Destruction: The Making and Breaking of the Nazi Economy" for anyone interested in German WW2 economy. while i haven't read the whole book yet (it's around 800 pages), it seems like he doesn't really present any new data (if compared to modern papers about the subject by e.g. Overy), but what makes the book stand out is the way he articulates the implications of the data.

as for the previous discussions about the subject in this forum, he joins Overy in debunking the myth about Speer causing an increase in industrial output.

[Philippe]

There's a lot of discussion in Tooze about the synthetic oil production program. Do you happen to know why those methods aren't being used now? With oil staring at $100/barrel, the coal-to-synthetic oil process must be economical again. Does it cause too much pollution?

[Other Means]

Interesting about Speer - do you have time to elucidate?

[thewood]

elucidate! Holy Crap! I come to these forums so I don't have to think. Now look what you've done.

[Philippe]

I haven't gotten to that part of the book yet, but I glanced far enough ahead to know that you are asking him to summarize a lot of pages and footnotes. When he answers I hope he remembers that he's dealing in ***spoilers***.

[bitchen frizzy]

Originally posted by undead reindeer cavalry:

as for the previous discussions about the subject in this forum, he joins Overy in debunking the myth about Speer causing an increase in industrial output.

I'd also be interested in some elucidation. Does he present a fundamentally new explanation for the increase, or is he quibbling over how much credit should go to Speer?

[JasonC]

Phillipe - synthetic oil production the German way consumes large quantities of coal, which can produce more electric power used in power plants, than it can provide energy as oil. The reason to convert it to oil is to have a more readily transported fuel for vehicles. Germany had abundant coal during the war, and basically ran its industry on coal power, including the basic transportation system, which was rail based using coal fired locomotives. Germany needed oil (or gasoline) for aviation fuel and motor fuels for army transport, but as a modest portion of its overall energy budget.

All that said, yes it is possible to do the same today, and the cost per barrel would only come to something like $60 if the scale were sufficient. But oil prices aren't $90 plus because the cost of production is $90 plus. In fact the Saudis, e.g., can produce more oil at a marginal cost around $2 or $3 a barrel.

That being so, who is going to lay out extensive amounts of fixed capital to convert coal from profitable electric power use, to directly competing with a cartel that can drop the price at will?

The other modern consideration is CO2 emissions, which many (notably the EU) are trying to control. In the EU CO2 emission is actually monetized. Coal emits lots and the conversion process is not efficient in CO2 emission terms. Governments are subsidizing alternate fuels with a preference for lower emission technologies. (They also tend to favor "renewables" including e.g. ethanol, even when they involve no real change in emissions per unit of energy - on the perhaps dubious theory that it tends to keep fossil CO2 stored as fossil).

Economically speaking and green pieties aside, the sensible thing to do with coal is to burn more of it (as cleanly as possible, certainly) for electric power, and thereby displace some natural gas production that would otherwise be needed for electricity. Some of that gas can then be used for home heating, a use for which it is vastly more efficient (and cleaner) than the alternatives. In turn that can displace remaining use of heavy heating oil, which is the least economic use of very high priced oil currently going on, on a mass scale (notably in the US northeast, which has a quite old installed base of home heating tech).

Freeing a gallon of heating oil with coal by that indirect substitution process is easily 10 times as efficient as trying to directly turn the coal into oil and then use it in cars or what-not. The only bottleneck is the modest capital cost of installing more gas home heat lines and replacing aging oil burners.

Despite significant subsidies for this by both governments and natural gas companies, actual adoption has been very slow, since it relies on hundreds of thousands of property owners laying out to replace working oil furnaces in apartment and office buildings etc. Not something a centralized and well funded body can just organize and get done.

Of course, there is also political opposition to using more coal for anything, and sometimes it is manifest commercially (e.g. a Texas utility planning to build dozens of new coal plants was bought by a green-minded investment group which instantly scrapped such plans, and instead will just rely on lobbying the rate commissions etc).

For what it is worth...

[dieseltaylor]

South Africa - SASOL kmows lots about coal to oil. Something to do with the threat of being embargoed : )

web page

[undead reindeer cavalry]

basicly he argues that Speer's rethoric was just propaganda aimed to boost morale. pre-Speer war economy was not inefficient and economy was already fully mobilized. Speer's increase is most of all statistical illusion caused by shifting of raw materials.

[JasonC]

Since it long predates any concern with anything remotely like embargo, I rather think not. They were working on it before WW II, and built plant for it in the 1950s. Nobody was even lobbying for embargos of South Africa until the 1970s, and it wasn't economically serious until the 1980s.

It was a way to make use of abundant low grade coal in the region, which was too low grade for most direct uses. It has since remained economical only by deriving lots of other specialty chemicals as process byproducts - until quite recently that is. At current prices there is wider interest in their gas to liquids tech (more so than in coal gasification or complete conversion to liquids, actually).

[JasonC]

URD - sorry, that strikes me as revisionist buncomb. Armaments output rises 2.5 fold in 1944. Any way you slice it, that is tons more war material through to final use form, from actually smaller input resources (as terrain was lost and other allied interference, direct and by pressure on external suppliers, increased). When anybody else more than doubles final output of the relevant category of goods, it is acknowledged as an achievement.

[Andreas]

But it had nothing to do with Speer. He only came in to reap the reward of decisions that others (Milch) made before him.

Also, a lot of the miracle apparently had to do with steel allocations, which went into production instead of fortification after 43. Or sumfink.

In any case, Murray has made that argument 30 years ago. 'Strategy for Defeat' is a free download today on the Air University webpage.

One thing Speer was doing well on was self-propaganda.

All the best

Andreas

[costard]

off topic a bit, but

JasonC, do you know if the production of bucky balls / nano-tubes can ameliorate the costs of the coal-to-fuel process?

I know the demand for these isotopes is small so far, and industrial scale production of them non-existant; I was wondering if coal might be a better stock feed for the process?

cheers

[JasonC]

Andreas,

I just utterly deny it as flat propaganda. Especially when coupled with the nonsense claim that Germany was already fully mobilized for war and exerting to the utmost, which is clearly false. I regard it all as an attempt to shift historical blame. The gross external record of the economy belies it.

Economic efficiency and mobilization are a middle term between total input resources and desired outputs. In war economy, the desired outputs are narrowly focused and easily measured - finished armaments. The resources are mixed enough that they are somewhat harder to gauge, values being somewhat make-believe in wartime, but when all the signs of their changes are in one direction the role of the production function between input and output can be readily seen.

Compare the period 1941 and 1942 to the period 1943 and 1944. Both are over a year after the outbreak of the war, sufficient time to adopt basic mobilization, as a comparison with Russia or the US makes plain. Both are after Germany had made the decision to attack Russia. It was already in a long war and could clearly see a bigger one looming. The leadership was well aware of this, as e.g. Hitler's explanation to Mussolini of his reasons for attacking Russia make plain (he already saw the difficulty of the US, which he considered practically in already in industrial terms, etc).

In the earlier of the 2 periods, Germans controlled Europe essentially unmolested and its territory was expanding. It has trade access through Spain and Sweden to world supplies and the allied blockade of strategic materials was porous. It rapidly took European Russia, had unmolested access to southeast Europe oil and metals. Millions of men later mobilized into the armed forces were still in the labor force, the cities were essentially untouched. Germany had numerous continental allies in the war, and was extracting significant resources from western Europe by efficient monetary and managed trade means.

In the later period Germany was losing all of those advantages. It was under heavy round the clock bombing of increasing weight, tech and aim. It was suffering millions of casualties. The allied trade blockade was tightened significantly and neutrals induced or coerced, one by one, not to deal with the Axis. The minor powers were stripped away and territory lost outright in the second half of the period. Stocks of scarce materials were being depleted, and new ones seized in conquest were no longer available to supplement them.

By every measure, then, the raw inputs to the production function were declining. It would have been a significant production achievement, in terms of using resources more efficiently and focusing them on the most needed items, just to have maintained armament output at previous levels, *if* Germany had already been working flat-out and fully mobilized.

Instead, we see - fighter production is 3 times higher in the second period than in the first. AFV production is 3 times higher in the second than in the first. Bomber and attack aircraft production is 2 times higher. Tube arty production is 2.5 times higher. Arty ammo production is almost 3 times higher. What is the supposed cause of this sea-change in armaments output, if not fuller mobilization and focus on armaments? Magic beans?

The only item of major war equipment that was already fully mobilized by later production standards was U-boat launchings, which ramped as early as 1941 to a rate of 200 sailings per year. U-boat production peaked in 1943, though it stayed at a high level after that and the overall number launched was marginally higher in the 1943-4 period than in 1941-2. But both were 4 times the 1940 level. There, and only there, Germany mobilized early rather than late. But this was a quite small portion of her total war output - 1000 vessels over 4 years, compared to 70,000 aircraft, 40,000 tanks, 110,000 artillery pieces, and 134 million rounds of artillery ammunition.

Whatever the managers were doing earlier that was allegedly so sufficient and brilliant and focused, it utterly failed to deliver the actual goods despite vastly better conditions. The reason is obvious - they were not in fact focused exclusively enough on armaments output, nor was the overall direction of the war economy rational or infused with sufficient urgency. You can ascribe the seachange to growing danger and a clearer sense they could lose, rather than better management - but that much more was achieved with less is hopelessly beyond the ability of revisionist spin to dispute.

[undead reindeer cavalry]

JasonC,

haven't we been thru this already a couple of times? basicly you argue Milward's dated take on the issue and he has been debunked ages ago by further study of the data. Milward simply draws erroneus conclusions from statistical 'illusion'.

Nazis never aimed for or practiced 'blitzkrieg economy'. they aimed for full mobilization right from the start at early 1930ies. what ever problems they had achieving it, were caused by economical realities (e.g. lack of iron, coal and foreign currencies), not lack of will or intention. in any case mobilization peaked before 1942, not after it. there is no change in how industrial output correlates with raw material input after Speer takes over. there is no change in the percentage of raw material, manufacturing industry production or labour working on direct military orders. again, the peak is before 1942, not after it.

like Andreas already pointed out, if you want rationalization you'd be better off looking at work done by Milch on airplane production.

you really should read modern studies on the subject. not just because you are currently fighting an imaginary battle and your argument needs refinement, but because i can guarantee you that you will gain fascinating insights into the strategical level of WW2. the realities revealed by modern studies are far more intellectually stimulating than the naivistic picture painted by Milward.

[Andreas]

It's hard, but I have to say I agree with URC.

Here is one more recent paper on the matter, discussing the issues with Speer's index:

Prof. Streb's Conference Paper - PDF

Part of Tooze's argument can be read in his article here:

Tooze on the production miracle - PDF

All the best

Andreas

[undead reindeer cavalry]

it's a sign. the end is nigh.

thanks about the conference paper, wasn't aware of it. got any other links in store?

[Andreas]

Afraid not. But you may want to check in here - particularly the latter half:

http://forum.axishistory.com/viewtopic.php?t=78524

and here:

http://forum.axishistory.com/viewtopic.php?t=58571

Long review of WoD:

http://fistfulofeuros.net/afoe/the-european-union/review-the-wages-of-destruction-adam-tooze

List of reviews:

http://www.complete-review.com/reviews/economic/toozea.htm

FT review:

http://www.ft.com/cms/s/0/b5ef2df2-22b3-11db-91c7-0000779e2340.html?nclick_check=1

Sunday Torygraph review:

http://www.telegraph.co.uk/arts/main.jhtml;?xml=/arts/2006/07/23/botoo09.xml

All the best

Andreas

[ November 30, 2007, 05:57 AM: Message edited by: Andreas ]

[Andreas]

I take it you know where to find Murray as a free legal download?

All the best

Andreas

[JasonC]

Sorry, but I am not arguing Milward's case, nor are my claims based on any authority or opinion. There is simply less input going to the economy (43-44 vs 41-42) and more war material coming out of it. You can scream until you are blue and it won't change that fact, and it already spells "more mobilized, better organized, and more efficient", any way it is spun.

[JasonC]

I'll start with Streb's hopeless spin.

The very first claim made against the tripled production point specifically in aircraft is demonstrably false - the claim that it merely reflects a low baseline in a couple of months. In fact, fighter production in the entire 2 year period 43-44 is three times that of the previous full 2 year period 41-42, while bomber and attack plane production is two times higher.

The very next claim, that Speer allegedly conceals prior production increases, is also false. It is a mere fact, inconvenient for the revisionist thesis but there, that going from 20000 planes in 2 years to 50000 planes in 2 years (under worse conditions) is a much more massive accomplishment than anything that happened earlier.

The next, that it is based on including axis minors, is also false, since the German only production is in the ratio I give above. This claim carries the astounding qualifier "might" in an insinuation of overstatement - they simply did not bother to check the German only production. Had they done so, they would have found it higher in the ratio I give and their claim would evaporate.

A footnote insinuates that the claim is distorted by using aircraft number rather than price, but the mix improves, and the improvement in production I cite above has nothing to do with wartime prices or their errors. The absolute quantity of major war material increases 2.5 fold, 3 times in the key categories, while improving markedly in weight and mix.

Next they argue against a ridiculous strawman, saying that unnamed others allegedly "implicitly" ascribe the entire production increase to labor productivity increases, when greater mobilization and focus on armaments is exactly what was wanted, needed, and achieved. Germany's aggregate economic inputs were not rising, they were falling, for the reasons I explain above. That the inputs to key sectors like final aircraft assembly rose anyway, and thereby alleviated bottlenecks, is the definition of the "economic" in "economic management". Economy consists of getting more from less by putting more resources where they are needed, not in magical beans creating more from less without moving anything around.

Next they imply the achievements only related to price and that price was not relevant under the specific forms of accounting being used, but this is belied by the price-free measured used on both input and output sides to measure the achievement. Next they allege that the aircraft industry was atypical (to prepare a "just using more resources" argument), when exactly the same production increase ratios are seen in AFVs and artillery ammunition as in fighter aircraft, and the same in tube artillery as in overall aircraft.

You can increase production in one sector at the expense of another critical one without it being a real production achievement, and if aircraft were atypical and increased only because they scarfed all the resources from other areas, this might be plausible. But all the other key areas went up by equal amounts. You can't get more of everything critical by shifting from one critical to another, but only by shifting from inessentials to criticals, which is exactly what mobilization and rationalization is.

But this is the basis of their entire conclusion that Speer is a minor factor in the result. They simply note that the key sectors had more labor and capital later in the war than earlier, and conclude that therefore it wasn't any achievement to produce more. Um, Germany's total inputs were falling - but all the key sectors resource endowments expanded and production expanded as a result. That is the definition of rational allocation and efficient economic management. Who do they think is deciding which sectors get larger shares of the dwindling stock of inputs, the tooth fairy?

The entire argument is a lawyer's brief and not an economic assessment. It systematically argues against only a straw man "magic bean", efficiency without altered allocation, counterargument - that nobody is making.

Then it is how lead times increase efficiency of aircraft production automatically, as it were. In reality this is an accomplishment of the firms doing the work, and there is nothing automatic about it (see Italy). Moreover, rationalizing types clearly furthers this, and the totals seen for Me-109s and Fw-190s clearly show this sort of benefit (and are scads more relevant than their chosen Ju-88 example). Moreover, those shop organization gains had to be achieved under systematic bombing and plant dispersal programs meant to address it, which was again an organizational "miracle", one that moreover frustrated the allied bombing planners no end.

My favorite, though, is noticing that part of the higher achievement can be ascribed to higher capacity utilization (in other words, actually running 2 or 3 shifts at each plant), and thinking this *reduces* the argument for an achievement specifically accomplished by greater mobilization and urgency. In 1940 the workers are making more per hour while there aren't enough of them and they are working single shifts per plant, in 1944 they are working round the clock and the plant produces 3 times as many planes, and we aren't supposed to call this a production achievement through greater mobilization.

This is revisionist horsefeathers, ideologically motivated and spun in lawyer-advocacy fashion, not economic analysis.

[Der Alte Fritz]

I must admit to not having read Tooze's book yet as it sits with the rest of the pile on my desk. But here are some comparative figures produced at Yale between the various combatabts in WW2

Volume of combat munitions produced ($ x 10 to power 6 in 1944 prices)

1935-9

US: 1.5 UK: 2.5 USSR: 8.0 Ger: 12.0

1940

US: 1.5 UK: 3.5 USSR: 5.0 Ger: 6.0

1941

US: 4.5 UK: 6.5 USSR: 8.5 GER: 6.0

1942

US: 20.0 UK: 9.0 USSR: 11.5 GER: 8.5

1943

US: 38.0 UK: 11.0 USSR: 14.0 GER: 13.5

1944

US: 42.0 UK: 11.0 USSR: 16.0 GER: 17.0

which clearly shows the traditional view that UK USSR and US production lept forward in 1942 and that German production lept forward in 1943. Do the new interpretations show a different pattern to this output pattern?

[ December 01, 2007, 06:44 AM: Message edited by: Der Alte Fritz ]

[undead reindeer cavalry]

JasonC,

yawn.

obviously you simply do not know the basic figures.

input of core resources goes up well into 1944.

[Guest Guest]

deleted per user request

[undead reindeer cavalry]

yeah, it's a bit summarily written, thought it's already 800 pages. as i see it, the book's main merit is the way Tooze explains the logic behind the Nazi madness and the grand economical realities.

many of the reviewers agree with you about the way bombing campaigns are covered.

you might want to check Overy's works.

regarding that table, it gives a bit wrong idea since it only gives annual totals.

coke production keeps going up till about mid 1944. catastrophical second half "distorts" 1944 totals. the same with for example ingot steel production - keeps going up still in early 1944 but catastrophical second half.