World War II: National Economies

Nazi industry
Figure 1.--The Germans loved photography. We thus have enumeravle snapshots of Hitler Youth boys during the 1930s lining up marching down German streets. What we do not see on German streets is many cars and trucks. And in small towns and villages wer commonlysee more horse-drown carts than trucks. Even in Berlin and other large German cities, the streets are rarely crowded wuith motor vehicles. The reason for this that there were not all that mny cars in Germany. Berlin was Germany's largest city with 4 million people, yet there were only a little more than 50,000 cars in Berlin. (Today there are 1.2 million cars.) This was because few Germans could aford cars, for many a bicycle was a major purchase. And this impacted Germany's industrial development. Hitler launched the war with an economy that had aimited capability of producuing motor vehicles and a Wehrmach that still relied heavily on draft amimals.

The Axis allied with the Soviet Union at the time of World War II had succeeded in gaining the balance of military power in the world. After the fall of France, if the NAZIs and Soviets had been able to coexist, the Allies would have not had the military power to reenter the Continent. This is in sharp contrat to the economies of the the Axis countries. The two largesteconomies of the world were the United States ($66 billion annual output) and Britain ($21 billion). Britain and France ($12 billion) had a national output nearly double that of Germany ($18 billion). The Soviet Union ($15 billion) has a national output roughly comparble to Germany. Italy had an especially weak economy for a country preparing for war. [Clark and Maddison] Data on Japan was not included in the studies we consulted, but would be a fraction of the major world powers. The German numbers are somewhat misleading. Germany had some of the leading world corporations with cutting edge technology. The Germans had not, however, developed American mass production techniques especially in the autimotive indusyry, in part because of the relatively small size of the domestic market. The most productive German automobile manufacturer was Opel, asubsiduary of General Motors. And whole the Germans had many advanced corporations, a sizeable part of the manufactured output was produced by small or medium-sized companies operationg what might be called workshops. Germany also had a relatively inefficent agricultural sector. Despite its vaunted reputation, the average American had an income and life-style beyond the imagination of the average German. And that economic difference affected the military power that the two ecomnomies were capable of generating. The same economic situation also described Britain and France to varying degrees, but both had more efficent agricultural sectors as well as empires with access to raw materials. The Soviet Union was much less economically developed than Western Europe, but as aresult of Stalin's policies had expnded heavy industry. American companies had helped expand Soviet production of cars and trucks. And the Soviet Union like the Germans had concentrated on military production. Unlike the Germans, the Soviets had vast deposits of natural resources, especially oil. The German military successes before (especially the occupation of Czechoslovakia) and in the early phase of the War (especially the Low Countries and France) significantly expanded Germany's economic power base.

World Economy

World economic data gives us the ability to compare the economies of the belligerant nations. This gives us a rough idea of the ability of each country to wage war. The data has to be treated with some cution. The American and most of the European data seems reasonably straight forward, especiually the countries with freely convertable currencies. These countries had statistical systems tht were not contrilled by totalitarian political parties determined to generate propaganda and economic performance was part of their legitimacy. So impressive economic data was a proaganda tool. In addition, how to evlauate the value of output so as to compare the value of output when the currency is not freely convertable. This means that the Soviet and the German data has to be treated with some caution. another problem in using value data is labor cost. Soviet and Japanese labor costs, for example, were minima while American labor costs were substantial. Assessing the economic contribution of occupied countries is also a problem-although Italy and France are accounted for. Even so, the availble data is probably good enough to make rough comparisons and is more or less born out by living stndards nd production data like steel tinnage and numbrs of actual weaons (artillery, olnes ships, tanks, etc.). Several countries had a desire to go to War and fundamentally alter the interntional system (Germany, Italy, Japan, and the Soviet Union). None of these countries, however, had the ability to wage a world war, especially a prolonged war of attrition. The only country that had that capability was the United States. America had an economy twice the size of even a 1939 enlarged Germany and about six times larger than Japan (1939). And that differentil was even greater as the War pogressed, despite German increases as a result of their stunning military conquests (1940). In addition to gross production, America had within its border or through trade access to all the strategic materials and a unparalled industril capacity to produce the implements of war. In particular it was the world's major producer of petroleum. In addition its had an agricultural capacity to not only feed itself, but its Allies as well. Thus it had the capability to not only wage a two-front war, but war on world-wide basis on multiple battlefields. And once American production was combined with Bitish technology as well as and Soviet production, Hitler and his evil empire were doomed. Germany might have won a short war if Britain nd the siviets capitulated, but once he failed to defeat the RAF (September 1940) and the Red Army (December 1941), the war was lost for the NAZIs just as the stnd of the French Army on the Marne doomed the Germans in World War I. It would take over 3 years and the tragedy of millions of lives, but inevitably the massive industrial power of the enemies he made would leave German cities masive piles of rubble and Hitler dead and unmourned in his dank, dreary bunker.

Individual Countries

We are developing information on each of the World war II belligrant nations. For the most part the major European belligerants (Britain, France, Germany, and the Soviers were rouhly evenly matched and had the economy and technology to build formidble militaries. German victoris erly inthe war was because of the mssive pending Hitler authorized when seizing power as well as a higly professionl military. Germany did not have a larger economy than Britain and France, but it began massive spending in 1933 which gve them a huge advantage byb1939. The Germans were aided by Italy, Hyngary, and Romania as well as exploiting the occupied countries after launching the war. Britain was aided by its Empire. The major outlayers were Japan and the United States. Japan was the only industrial power in Asia, but was not in the same league the Europeans let alone the United stes. The country only becme a formidable power becuse it poured huge amounts of money into arms (1920s-30s) which America and Britain were limiting defense spending. Once the NAZIs and Soviets became locked in a life and death struggle in the east nd the red army syrbived theunitial NAZI blow, the War would be settled by the United States nd it massive economy. The only question becme how rapidly the united states could convert its formidable industrial power to War abd beung theresult floot of weapons abd equipmnt to bear in the NAZI War Machine. Even while neutral American began aidinn Britain and the soviets, but it was only the Japanese attack onnPearl Hrbor tht gave President Roosevelt the ability to fully convert the the economy for war. And the first call he mase was to General Motors Pressident William Knudsen, one of the 'Economic Royalists' he had been criticising for 8 years as part of his New Deal effort to end the Depression.

Reason for Disparity

We find that all too often that the disparities between countries is all too often a given. It is imprtant to note why America had such a large economy, despite the fact that a ventury earlier, the United States was an agricultural society with vurtually no industry. actually this disparity only developed in theclate 19th century. britain had an entire Empire toassis it. The Soviets had all the resources availavle to America as well as theBread Basket of Europe, some of the most productive agricultural land in the world. And even in comparison to the major Euopean countries, not only was american industry more efficent than the Europeans, but its workers better paid. This is why the Europeans came to America n such numbers. The answer is freeom. No where in the world did people enjoy political (democracy) and economic (capitalism) freedom so abudently. It is why freedom ultimately destroyed the great toralitarian powers of the 20th century, although it wuld take the Cold war to destroy the Soviet Union. Of course Britain and France were democratic and capitalstic, but there were greater limits on both than in America. We are working on a History of Freedom to address these nd other issues.


Clark, Colin. Clark's economic work in the 1930s was reassessed by Angus Madison. The data he compiled had differences, but essentially made the same point. Namely that Germany launched World War II with a relatively small economy not prepared for global war. A. Madison, "Quantifying and interpreting world development: Macromeasurement before and after Colin Clark," Australian Economic History Review Vol. 44 (2004). Another good source on World War II economics is Madison, The World Economy: A Millennial Perspective (Paris, 2001).

Chow, Gregory C. China's Economic Transformation (2007), 2nd ed.


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Created: 6:42 AM 12/8/2012
Last updated: 10:53 PM 1/9/2018+