PDF Summary:The Wages of Destruction, by Adam Tooze

Many assume Nazi Germany was an economic powerhouse, but in The Wages of Destruction, historian Adam Tooze challenges this view. He argues that Germany's economy was weaker than its neighbors and couldn't support Hitler's military ambitions. Despite remarkable mobilization efforts, fundamental economic constraints limited the Nazi war machine. Hitler's decisions were driven less by rational strategy and more by ideology—particularly his fears of American power and a perceived Jewish conspiracy.

Tooze examines how the Nazis tried to manage these limitations through price controls, resource rationing, and forced labor. He shows how their grand promises of prosperity—like affordable cars and housing—failed to materialize because German purchasing power was too low. The regime prioritized military spending over civilian needs, diverting resources to rearmament. This guide explores Nazi economic policy, the gap between propaganda and reality, and how economic pressures contributed to the escalation toward exploitation and genocide.

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(Shortform note: The DAF’s cost-cutting plans for the Volkswagen and Volkswohnungen are significant because they reveal how the regime sought to naturalize its dictatorship through the intimate sphere of everyday life. In Hitler at Home, Despina Stratigakos shows how the careful staging of Hitler’s residences as tasteful, orderly, and comfortingly bourgeois homes transformed the dictator into a familiar domestic figure and helped to normalize his rule, binding ideas of private happiness, familial intimacy, and modern comfort to the apparent success and stability of the National Socialist state. The DAF’s vision of standardized, subsidized homes for the masses was part of this broader strategy to make the regime’s power seem natural and inevitable by embedding it in the most private aspects of daily life.)

Judged by their aspirations, the Volksprodukte were unsuccessful. However, we can't just end the analysis there. We should explore what significance the regime might have given these failures. Once we consider this, it's clear that disappointment with the Volksprodukte didn't challenge any of the core ideological principles of National Socialism. This wasn't because elevating living standards was a less important goal; it wasn't. Hitler consistently emphasized that lifting Germans from their comparative financial hardship to a living standard that suited their Aryan status was a key goal of his political agenda.

(Shortform note: Other historians have also noted Hitler’s insistence on raising Germans’ material conditions as a core political objective. For example, Richard J. Evans traces the Nazi regime’s efforts to win the loyalty of the German people through mass tourism and welfare schemes. He explains that the regime’s efforts to provide affordable vacations and leisure activities for the working class were part of a broader strategy to create a sense of national community and to demonstrate the regime’s commitment to improving the lives of ordinary Germans.)

Hitler and his fervent followers weren't shocked that Germans' buying power was limited. While Germans were restricted to living in an insufficient Lebensraum encircled by antagonistic forces, spurred in their hostility to Germany by the worldwide Jewish plot, it was no wonder that Germans couldn't afford cars. German working families were expected to have difficulty paying rent for just 40 square meters of insufficient housing. The Volksprodukt initiatives were precursors to a different future. Still, it would be incredibly naive to think they could achieve it alone. As Hitler stated in his follow-up to Mein Kampf, if Germany failed to acquire enough Lebensraum for its people, "all social hopes" would be "utopian promises without the least real value." The path to achieving consumer prosperity like America's was the recently established Wehrmacht, which would secure living space akin to America's for Germany.

The Limits of Economic Growth

Hitler's belief that the Wehrmacht was the only way to overcome Germans' limited buying power is interesting because it suggests that he understood that the Volksprodukt initiatives were insufficient to achieve the consumer prosperity he wanted for Germany. In Social Limits to Growth, economist Fred Hirsch argues that even if Hitler had succeeded in expanding Germany's Lebensraum, he still wouldn't have been able to provide every German with the consumer prosperity he wanted. Hirsch explains that many of the goods that people desire are inherently scarce, and that no amount of economic growth can make them available to everyone. For example, the value of a luxury car is not just in its utility, but in the status it confers on its owner. If everyone had a luxury car, they would no longer be a status symbol.

Tooze argues that the administration prioritized military preparations over civilian economic goals. Beginning in 1934, Schacht’s New Plan focused on importing industrial raw materials to build up the military rather than for civilian use. Taxes and private savings were diverted by the government to fund rearmament, amounting to nearly 60 billion Reichsmarks. Without these expenses, personal spending and private investments would likely have been significantly higher. By 1938, military expenditures rose to comprise 20 percent of national revenue.

(Shortform note: Historians have been able to confirm this massive fiscal shift toward rearmament by examining internal company accounts and files from the Finance Ministry. These records show that the fastest-growing profits and capital stocks in the 1930s were tied to state armaments contracts rather than to sales to private consumers. This evidence supports Tooze’s argument that Nazi fiscal policy heavily favored rearmament over civilian uses.)

Hitler was committed to increasing German Lebensraum, and he anticipated that doing so would result in military conflict around 1940–1941. He was resolved to improve Germany’s likelihood of success by getting ready economically and militarily, as well as through diplomacy. Between 1935 and 1938, the Reich's military expenditure accounted for nearly 47% of the rise in Germany's total economic output. Including investment, the proportion increases to 67 percent. Over this same period, only 25 percent of the growth was due to personal consumption, although in 1935 it made up 70 percent of the entire economy. In 1935, the Wehrmacht made up 70% of what the Reich acquired, and this rose to 80% by 1938. Conversations about all elements of economic strategy centered around rearmament. The economic outlook for Germany depended on whether peace or war prevailed.

How Do Historians Know How Much of the Economic Growth Was Due to Rearmament?

The economic historian Albrecht Ritschl explains how historians can determine the proportion of economic growth that was due to rearmament. By reconstructing the national accounts and budget series from archival sources, they can identify the share of the increase in demand that was generated by the armed forces and their supply administration, as opposed to civilian demand. This allows them to estimate the extent to which the upswing in output was driven by military procurement rather than by private consumption or investment.

Ideological Underpinnings

Tooze explains that Nazi agricultural policy was rooted in the Blut und Boden (Blood and Soil) ideology, an extreme version of agrarian racism that combined animal genetics with anti-Semitism. Formulated by Richard Darré and Herbert Backe, who led the Food and Agriculture Ministry, this ideology was enshrined in the Erbhof law. This measure established a novel type of agricultural property: hereditary farms (Erbhofe), shielded from debt and market dynamics, and handed down through generations within ethnically pure farming families.

(Shortform note: In The Green and the Brown, Frank Uekötter argues that the Nazi “green” vision of the German nation as an organic community rooted in the soil emerged from a broader völkisch milieu. In the Kaiserreich and Weimar Republic, nature protection was closely linked to Lebensreform (life reform) movements that rejected urban modernity in favor of a return to nature. Agrarian intellectuals like Darré and Backe fused this anti-urbanism with a romanticized vision of hereditary peasant smallholdings, creating a quasi-environmentalist ideology that saw the protection of soil, forest, and countryside as inseparable from the protection of the national body.)

The law applied to all farms large enough to give a German household a suitable quality of life (at least 7.5 hectares) but no larger than 125 hectares. Anyone who owned such a farm was mandated to seek inclusion in the Erbhofrolle. The word 'peasant' (Bauer) became a title of honor for those who were entered in the Role. Those not entered in the Erbhofrolle were referred to merely as 'farmers' (Landwirte). Entry in the Rolle shielded the Erbhof from repossession but also imposed constraints.

(Shortform note: The Erbhofrolle was a special land register kept by local courts. It listed which rural properties were subject to the 1933 Reichserbhof law, so that all future dealings with them would have to follow its rules. The law required that the Erbhofrolle be kept separate from the regular land register. This was to prevent confusion between properties subject to the Reichserbhof law and those that weren’t. The Erbhofrolle was a public document, so anyone could check if a property was an Erbhof. This transparency was meant to protect the integrity of the system and prevent illegal sales or mortgages of Erbhöfe.)

Erbhofe were prohibited from being sold, and they also couldn't be mortgaged, restricting the ability of their current owners to manage them freely. Despite whatever the spousal arrangements were, an Erbhof was supposed to be owned by a sole proprietor, ideally a man, who had to prove his ancestry dating back to 1800, a rule that also applied to civil servants. 'Peasants' were to be of German or 'similar stock' (Stammesgleich), a provision that excluded Jews or anyone of partial Jewish descent. Additionally, Erbhof peasants were expected to be of good character and physically fit, a sweeping requirement that barred those who married Jews, as well as the physically disabled or infertile.

(Shortform note: In Blood and Soil, Anna Bramwell argues that the völkisch agrarian movement had already fused traditional north and east German one-heir peasant customs with a modern cult of ancestry. By the late Weimar years, thinkers such as Walther Darré had elaborated concrete programmes to make access to land and to the peasant estate conditional on such genealogical proof. Thus, the later National Socialist agrarian legislation largely implemented ideas first worked out within these pre-1933 völkisch agrarian circles.)

In reality, there were few Jewish people who owned farmland or peasant properties, and there probably weren't many German farmers with Jewish ancestry either. Still, the symbolic impact of codifying race-based policy in land ownership legislation was significant.

(Shortform note: This law may have had little practical effect, but it was a crucial step in training the legal system to link property rights to racial classification. By requiring judges and land registrars to check ancestry in routine farm cases, the law normalized the idea that property rights depended on racial purity. This made it easier for the legal system to participate in mass expropriations later on.)

The law also established inheritance rules. The whole Hof would be passed down to one male inheritor, typically the eldest or youngest son, or otherwise the father or brothers of the deceased. Whenever feasible, women were denied inheritance rights. Surviving widows could only claim maintenance. Other potential claimants to the inheritance were excluded altogether. Siblings excluded from inheriting the farm were solely eligible for vocational training that matched the family's social standing. If they faced difficulties later on, they could seek the farm's support.

(Shortform note: The inheritance rules for the Hof are significant because they reflect the “stem family” structure, which, according to anthropologist Emmanuel Todd, is a key factor in the development of authoritarian societies. In The Explanation of Ideology, Todd argues that the stem family—where one child inherits the family estate while siblings receive vocational training—creates a hierarchical family dynamic that mirrors and reinforces authoritarian political systems. He explains that this family structure, prevalent in regions like Germany, fosters a culture of obedience and respect for authority, as children grow up in an environment where one sibling is clearly favored over others. This dynamic, Todd suggests, lays the groundwork for the acceptance of hierarchical and authoritarian political systems.)

Coupled with this radical change to German peasants' property ownership was an equally dramatic debt-reduction plan. Backe and Darré suggested that Erbhof farmers should take on one another's debts collectively. The debts of every Erbhof, which were estimated to be 6 to 9 billion Reichsmarks, were to be moved to the Rentenbank Kreditanstalt, a mortgage bank backed by the state. The Rentenbank was to repay the initial creditors with interest varying from 2 to 4 percent, based on how secure the initial loan was.

(Shortform note: The Rentenbank Kreditanstalt was the institution that issued the Rentenmark, the currency that ended Germany’s hyperinflation in 1923. In The Economics of Inflation, Costantino Bresciani-Turroni explains that the Rentenmark was backed by mortgages on land and charges on industrial and commercial assets. The Rentenmark was not convertible into gold, but the legal limitation of its volume and the real guarantees behind it inspired sufficient confidence for the Rentenmark to be accepted as stable money.)

Every Erbhof, regardless of whether they owed money, would henceforth annually pay the Rentenbank a fee of 1.5 percent of their property's value (Einheitswert). This clearly placed a significant burden on debt-free Erbhofe. As a result, to compensate those Erbhoefe with minor debts, they would get vouchers giving their sons preferential treatment in the East Prussian settlement drive. Backe wanted to foster unity among the Erbhofe and link the decrease of debt with a sped-up settlement initiative. The Erbhof law focused on the stable middle segment of German agriculture, affecting about one million farms overall. It was meant to exclude both minor peasant landholdings and small parcels owned by worker-peasants. It also notably did not focus on large estates, which were the conventional recipients of agricultural subsidies. The Junkers disliked Darré.

The Erbhof Law and the Junkers

Richard J. Evans, a historian who has written extensively on Nazi Germany, offers a different perspective on the Erbhof law and its impact on the Junkers. He argues that the law was more symbolic than substantive, serving as a piece of peasantist theater that did little to challenge the economic dominance of the Junkers. Evans suggests that the law was designed to appease the peasantry without actually redistributing land or wealth in a way that would threaten the Junkers' interests. He also notes that the Junkers were not uniformly opposed to the law, as some saw it as a way to maintain their social status and influence within the Nazi regime.

Mechanisms and Constraints of Nazi Economic Policy

Tooze argues that Nazi economic policy relied on governmental controls and rationing to manage scarcity. The Nazis refused to devalue the Reichsmark, which would have made German exports cheaper and imports more expensive. Instead, they imposed bureaucratic controls to oversee the economy. They rationed incoming raw materials and imposed price controls to prevent inflation. They also rationed resources like steel, allocating them based on national priorities. This system of bureaucratic regulation and rationing characterized the Nazi approach to economic management.

Scarcity as a Tool of Social Control

Understanding the Nazi approach to economic management is important because it shows how authoritarian regimes can use economic policy as a tool of social control. The Nazis’ reliance on rationing and price controls, rather than devaluing the Reichsmark, reflects a broader strategy of using scarcity to discipline society and direct resources toward regime priorities. In The Socialist System, János Kornai argues that chronic shortages in planned economies aren’t just technical failures but deliberate mechanisms of control. By maintaining a permanent excess of demand over supply, the state can reward loyal supporters and punish dissenters through access to scarce goods.

Next, we will explore how Germany used financial engineering to boost exports and how Germany’s military-industrial preparations didn't align with the battles they actually fought.

Financial Engineering & Control

Tooze explains that Germany used financial engineering to boost exports without devaluing the Reichsmark, which had made its exports uncompetitive. The Reichsbank found methods to financially support German exporters to the detriment of creditors. A mechanism allowed German exporters to utilize their international profits to purchase German bonds at substantial markdowns in London and New York. The Reichsbank then repurchased these bonds at rates more aligned with face value, effectively halving the Reichsmark's value and enabling exporters to set competitive prices in dollars for their goods. Germany's overseas lenders bore the cost, offloading their bonds in Germany at a small percentage of their nominal value.

(Shortform note: Economic historian Barry Eichengreen offers a different interpretation of these measures. In Golden Fetters, he argues that Germany’s resort to exchange control, standstill agreements on foreign debts, and the administrative rationing of foreign exchange marked a decisive stage in the collapse of the interwar gold-standard system. Eichengreen sees these policies not primarily as financial engineering to support exports, but as a transformation of international capital markets from a relatively integrated, rules-based, and market-mediated structure into a segmented and overtly politicized regime. In this new system, states controlled cross-border payments, allocated scarce foreign exchange according to domestic policy priorities, and converted foreign investors’ claims into objects of international negotiation rather than sacrosanct contracts to be honored according to pre-crisis terms.)

Additionally, the Reichsbank introduced a tax that increased with turnover to generate the money needed to keep German exports competitive. Earnings from the boom in domestic arms production were repurposed to support the struggling export sector. In its initial year, the levy generated 700 million Reichsmarks. By late 1935, the funds from the industrial levy allowed for an average subsidy of nearly 30% on every overseas order for German exporters.

(Shortform note: A tax that increases with turnover is a tax that is based on the total sales revenue of a company, rather than its profits. This means that the more a company sells, the more tax it has to pay, regardless of how much profit it makes. Turnover is the total amount of money that a company receives from its customers for the goods or services it sells. It is different from profit, which is the amount of money that a company has left after deducting all its costs and expenses from its revenue.)

Resource Allocation & Practicalities

Tooze argues that Germany's defense industry readiness was not aligned with the actual battles they fought. Germany's victory in France didn't come from a well-planned strategy, but from a high-risk improvisation. The German military that entered France in May of 1940 wasn't a precisely refined instrument of contemporary armored combat.

(Shortform note: Some military historians disagree with Tooze’s assessment of the German military’s effectiveness in 1940. In The Blitzkrieg Legend, German military historian Karl-Heinz Frieser argues that the German army’s victory in France was not a stroke of good luck, but the result of a carefully cultivated operational method and a highly trained army.)

Out of Germany's 93 divisions that were prepared for battle, just 9 were Panzer divisions, with a total of 2,439 tanks among them. The units confronted a French military that had greater motorization, possessing 3,254 tanks. The tank forces of Belgium, the Netherlands, Britain, and France comprised 4,200 vehicles, significantly outmatching the Wehrmacht. Most German tanks used in the 1940 campaign were not as advanced as those from France, Britain, or even Belgium. By May 1940, the Luftwaffe's fleet included 3,578 combat planes, while the Allies had a total air power of 4,469 combat planes. In May 1940, French capabilities had been significantly enhanced with the arrival of over 500 American planes, among them high-quality fighters.

(Shortform note: Some historians, such as Robert A. Doughty in The Breaking Point, argue that the overall imbalance in tank and aircraft numbers and models is less important than the French army's failure to concentrate and employ its armored and air forces in an operationally decisive way. Doughty contends that the collapse of the French army in 1940 must be understood primarily in terms of French doctrine and command, for it was the rigid, methodical-conduct mentality of the high command, the slowness and confusion of its decision-making, and the failure to concentrate and employ armored and air forces in an operationally decisive way that proved decisive, rather than any straightforward inferiority in matériel or numbers. He explains that the French army's collapse was due to its inability to adapt to the fast-paced, combined-arms warfare employed by the Germans, rather than any straightforward inferiority in matériel or numbers.)

The massive 1936 and 1938 armament programs weren't founded on a prescient forecast of the Blitzkrieg. They focused on providing resources and instruction to a sizable but only somewhat mechanized military, a tactical fleet of aircraft, and a major naval fleet. During the initial months of 1939, the Reich's serious financial imbalance disrupted these programs. During the procurement crisis in summer 1939, the strategy lacked coherence. The onset of war jump-started military expansion. Yet, as late as this point, nothing suggests that a unified idea of Blitzkrieg was guiding the German weapons program.

(Shortform note: Adam Tooze isn’t the first historian to question the idea that German rearmament was shaped by a coherent Blitzkrieg doctrine. In 1995, Karl-Heinz Frieser argued that the concept of Blitzkrieg was a product of British wartime journalism and postwar myth-making, rather than a formal German military doctrine. Frieser contends that the German military’s successes in 1939-1940 were the result of operational improvisation and tactical innovation rather than a pre-existing strategic plan.)

The focus was on ammunition, a decision influenced more by remembering 1914 than by predicting what would occur in 1940. The substantial commitment to the Junkers 88 bomber was driven by a belief in the efficacy of bombing to quickly secure victory. But this facet of the Blitzkrieg concept quickly proved completely unreal. Before September 1939, the German army didn't plan an offensive against France. The initial plan, hastily developed in October 1939, involved a quick advance north to the Channel coast, succeeded by an air campaign against Britain. It seems German arms production was oriented toward this plan by December 1939.

(Shortform note: The Battle of Britain, which began in July 1940, was a pivotal moment in World War II, marking the first major military campaign fought entirely by air forces. The German Luftwaffe, under the command of Hermann Göring, launched a sustained bombing campaign against Britain, aiming to destroy the Royal Air Force (RAF) and pave the way for a German invasion. However, the campaign failed to achieve its objectives, as the RAF successfully defended British airspace and inflicted significant losses on the Luftwaffe. The battle demonstrated the limitations of air power in achieving strategic objectives and highlighted the importance of effective air defense systems. The failure of the Luftwaffe to gain air superiority over Britain marked a turning point in the war and shattered the myth of German invincibility.)

The plan's limited aims clashed with Hitler's goal to conclude the western war with one definitive strike. The plan was still active in mid-February 1940, when two negligent officers were shot down in France with a briefcase of staff maps. This accident made way for the daring alternative idea of encircling through the Ardennes forest, first created by General Erich von Manstein, the Chief of Staff of Army Group A. In December 1939, the army leadership dismissed Manstein's idea, considering it too risky. By late February, after considerable persuasion by Hitler, they agreed to devote the majority of Germany's forces to Manstein's plan.

(Shortform note: This is a reference to the Mechelen Incident, which occurred on 10 January 1940, not mid-February. The aircraft made a forced landing in Belgium, not France. The two officers were not shot down but rather forced to land due to poor weather and navigation errors. The incident did lead to the Allies discovering German plans, prompting a change in German strategy, but the timing and location details in the summary are inaccurate.)

By then, it was too late to alter the armaments program. The win in France wasn't a well-planned strategic conclusion, but a high-stakes, military improvisation that addressed the strategic issues that Hitler and the German military leaders hadn't solved by February 1940.

(Shortform note: In Strange Victory, historian Ernest R. May argues that the German victory in France in 1940 was not merely a result of military improvisation, but rather a consequence of strategic preparation. May contends that German leaders entered the campaign in the West with a clear understanding of French and British weaknesses, both politically and militarily.)

Escalation to Exploitation and Widespread Killing

Tooze argues that the Nazis escalated from exploitation to genocide, driven by ideological goals and economic factors. The SS, backed by Hitler and Himmler, carried out the extermination of Jews and other groups. The SS’s effective hiring of European non-Jewish laborers made Jewish workers appear dispensable.

(Shortform note: In Nazi Germany and the Jews, 1939–1945, Saul Friedländer argues that the shift from exploitation to genocide was driven by a radical “redemptive antisemitism” that saw the extermination of Jews as a necessary act of purification and salvation for the German people. This perspective downplays economic factors like the SS’s effective hiring of European non-Jewish laborers, instead emphasizing the ideological conviction that the destruction of Jews was an end in itself.)

In this section, we will explore how the Nazis planned and implemented exploitation in areas under their control, along with the consequences of these plans.

Planning and Implementation of Resource Extraction

Tooze explains that the Nazis planned and implemented the extraction of labor and resources in occupied territories. This included using forced labor from concentration camps for industrial production. For example, at least 30,000 prisoners died building the IG Farben facility in Monowitz. They also planned to starve the local populations in the territories they occupied to feed Germans and the army. In 1942–43, over 20% of Germany's grain, 25% of its fats, and close to 30% of its meat came from territories under occupation in Europe. Most of these provisions went directly to the military, and the rest went to the German population. Additionally, the Nazis planned to eliminate Jewish people and other groups they considered undesirable.

(Shortform note: In The Destruction of the European Jews, Raul Hilberg explains that the Nazis implemented their plans for resource extraction, hunger, and elimination of Jewish people and other groups through bureaucratic means. They used ration cards, work assignments, and transport lists to control access to food and work, leaving those marked for elimination to die. This administrative approach allowed the Nazis to systematically implement their policies of exploitation and extermination across occupied territories.)

In 1942, they decided to kill all Jews in Poland who were not needed for work by the end of the year. They also planned to clear the Lublin-Zamość area of its population to allow for German settlers.

(Shortform note: The decision to kill all Jews in Poland who were not needed for work and to clear the Lublin-Zamość area of its population for German settlers is a key example of the radicalization of Nazi policy during the war. In The Origins of the Final Solution, historian Christopher Browning argues that the Nazis’ policy toward the Jews evolved over time, becoming more radical as the war progressed.)

Consequences and Systemic Breakdown

Tooze argues that Germany's military economy faced systemic breakdown due to territorial losses and intense Allied bombing. In 1944, Germany lost access to Ukrainian ore mines and Romanian oil fields, which limited steel production and cut off fuel supplies. The Allies bombed German cities and production sites, destroying factories and infrastructure. This campaign targeted transportation networks, severing the railway connections and water routes between the Ruhr and the remainder of Germany. This prevented the delivery of coal and raw materials, causing a collapse in industrial production. Germany's economy was also suffering from inflation due to the burden of defense expenditures. By 1944, the financial burden from the war was unsustainable, and the economy was collapsing.

The Industrial Web and the Transportation Plan

In Rhetoric and Reality in Air Warfare, Tami Davis Biddle explores the intellectual and strategic debates that shaped Allied bombing priorities in 1943-1944. She explains that interwar British and American air theorists developed the “industrial web” concept, which identified transportation, power, and oil as critical nodes whose disruption would have cascading effects across an enemy war economy. This framework influenced Anglo-American target selection, particularly during the prolonged debates preceding the Normandy invasion. Biddle details how planners like Tedder, Spaatz, and Leigh-Mallory argued for a Transportation Plan that would concentrate bombing on rail junctions, marshalling yards, repair facilities, bridges, and inland waterways in France and western Germany.