Hitler vs. Bernanke


Why was Adolph Hitler able to lift Germany out of the Great Depression, when policymakers in the US–particularly the Fed–have failed so miserably?

Let’s look at the facts: When Hitler came to power in 1933, the German economy was in a shambles. Millions of people were out of work, a number of large banks had collapsed, the market for German exports had dried up overnight, and a US-led lending freeze (withdrawal of credits under the Young Plan) had thrust German industry and finance into a severe slump. By 1932, German industrial production was nearly half of what it had been a year earlier. Unemployment soared from 1.5 million in 1929 to more than 6 million in 1933.

Enter Hitler, who had been sworn in as chancellor under President Paul von Hindenburg in January, 1933. Hitler appointed German economist and banker, Hjalmar Schacht, as President of the Reichsbank and Minister of Economics. Schacht, in turn, launched a groundbreaking fiscal stimulus program that rebuilt the nation’s worn infrastructure and put millions of people back to work. At the same time, Schacht took steps to strengthen the currency, jettison the gold standard, and impose capital controls, all of which served to reinforce Germany’s economic independence. Here’s a little background from C.K.Liu’s Asia Times article “Nazism and the German Economic Miracle”:

“The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.” (“Nazism and the German Economic Miracle,” Henry C. K. Liu, Asia Times)

Clearly, “Depression expert” Bernanke’s performance pales in comparison to Schacht’s and for obvious reasons. While zero rates and bond purchases (QE) have been good for risk assets, (Stocks are up more than 140 percent since their March 2009 lows.) unemployment is still above 7 percent, real wages are trending lower, GDP has shriveled to below 2 percent, 47 million people are on food stamps, and inequality is greater than anytime since the Gilded Era. The facts speak for themselves; Bernanke’s policies have only benefited the investor class. The real economy is still flat on its back.

That’s not to say that Hitler was not a murderous psychopath. He was, but there’s also reason why his policies have been applauded by leftist intellectuals, like Counterpunch co-editor Alexander Cockburn, who spoke admiringly of Hitler’s “progressive economic policies.” Here’s a quote from Cockburn:

“Hitler, genocidal monster that he was, was also the first practicing Keynesian leader. … There were vast public works, such as the autobahns. He paid little attention to the deficit or to the protests of the bankers about his policies. … By 1936, unemployment had sunk to 1 percent.” (Alexander Cockburn)

Cockburn is not alone in his admiration for Hitler’s (or should we say Schacht’s) fiscal policies. Keynes himself praised the policies although he despised Hitler and Nazism. Writing in the foreword of the German edition his magnum opus The General Theory of Employment, Interest and Money, Keynes said: “The theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire.”

This doesn’t mean that Keynes supported autocratic government. He didn’t. He was merely acknowledging that “demand management” (which is essential for minimizing the negative effects of the business cycle) is more easily achieved with a strong central government, since government spending is required to take up the slack in aggregate demand during a slump. Government has an important role to play when demand is weak and the economy slumps. The government can (and should) use deficit spending to increase activity, put idle resources to work, boost output, lower unemployment, and put the economy back on a solid growth-path. Hitler may not have grasped this, but surely Schacht did. Here’s more from Liu’s article:

“From the very outset of his rule, Hitler, whose main short-term goal was the economic revival of Germany with the help of German nationalist bankers and industrialists, won popular support of the nation. Hitler adopted an aggressive full-employment campaign. Between January 1933 and July 1935 the number of employed Germans rose by a half, from 11.7 million to 16.9 million. More than 5 million new jobs paying living wages were created. Unemployment was banished from the German economy and the entire nation was productively engaged in reconstruction. Inflation was brought under control by wage freeze and price control. Besides this, taking into account the lessons learned during 1914-18, Hitler aimed at creating an economy that would be independent from foreign capital and supply, and be well protected from another blockade and economic war. For Germans, all of the above was proof that Hitler was the one who had not only brought Germany out of economic depression but would take it directly to prosperity with new pride. German popular trust in the Fuehrer rose dramatically.” (“Nazism and the German Economic Miracle,” Henry C. K. Liu, Asia Times)

Hitler was no friend of labor, but he knew that full employment would widen his base of popular support. In contrast, Bernanke and his colleagues at the Fed could care less about popularity or jobs. What they want is to slash critical safetynet programs that protect the old, the sick and the needy. That’s what QE is really all about; it’s a way of redistributing wealth upwards (through rising stock prices) while Congress and the Obama administration “starve the beast” via budget cuts. Reactionary elites have created a bogus deficit crisis so they can impose their neoliberal agenda of deregulation, privatization, low taxes, and austerity on working people.

Hitler garnered support for militarization through labor intensive public works projects that transformed the nation in an economic powerhouse. Schacht played a crucial role in the recovery. Along with strict capital controls and other protectionist policies, Schacht stopped the private issuance of money and “launched a new land-backed currency”. Here’s how author Ellen Brown sums it up in a passage from her masterpiece Web of Debt:

“Hitler began his national credit program by devising a plan of public works. Projects earmarked for funding included flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills of exchange, called Labor Treasury Certificates, were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. This government-issued money wasn’t backed by gold, but it was backed by something of real value. It was essentially a receipt for labor and materials delivered to the government.

Hitler said, “for every mark that was issued we required the equivalent of a mark’s worth of work done or goods produced.” The workers then spent the Certificates on other goods and services, creating more jobs for more people…

Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, no debt, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare.” (“Thinking Outside the Box: How a bankrupt Germany solved its Infrastructure Problems”, Ellen Brown, Web of Debt, Third Millennium Press)

This is the largely unknown story of Hitler’s rise to power, an ascent that depended on “an independent monetary policy of sovereign credit” rather than the issuance of loans by privately-owned banks. (Public money vs private money) Hitler took the bankers out of the equation and rebuilt Germany in just four years.

Why doesn’t Bernanke do the same thing? Why doesn’t Bernanke purchase Infrastructure bonds or Education bonds instead of Mortgage Backed Securities (MBS) which only benefit the bankers. Why doesn’t Bernanke practice what he preached to the bigwigs at the Japan Society of Monetary Economics, in May 2003 when he outlined steps for monetizing tax cuts. Here’s what he said:

“The Bank of Japan should consider increasing still further its purchases of government debt, preferably in explicit conjunction with a program of tax cuts or other fiscal stimulus… Consider for example a tax cut for households and businesses that is explicitly coupled with incremental BOJ purchases of government debt–so that the tax cut is in effect financed by money creation.”

Now there’s a novel idea; printing money to help the average working stiff. That ought to increase activity and boost growth, don’t you think? So why is Bernanke still dumping $85 billion per month into a black-hole financial system instead of following his own advice and using his power to put people back to work and get the economy back on track?


The economy is in the doldrums because that’s where Bernanke and Co. want it to be.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on declining wages for working class Americans appears in the June issue of CounterPunch magazine. He can be reached at fergiewhitney@msn.com.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

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