Workers remove sign from Krupp factory in Ukraine 1944 (colourisation by Klimbim)
In December 1941, the nature of the Second World War was changed irrevocably by the German defeat at the Battle of Moscow. Up to this point Germany had been able to win each of her individual wars in a single campaign, utilising the Heer's military expertise to overcome Germany's enemies one by one and using a fixed stock of military personnel and materiel. However the Soviet Union had managed to bend before the German storm and although her pre-war army had been destroyed, had created new armies and divisions in sufficient time to halt the German advance outside the capital, so forcing the need for a second campaign. This fact changed the nature of the war from one of single military operations to one of a series of campaigns utilising national economic output to equip and sustain multiple operations continuously over a period of years. From this point onwards, the level of mobilisation of a country's economy would be a significant factor in winning or losing the war.
Which poses the question what were the relative sizes of the German and Soviet economies? After all Germany could call on the resources of an occupied Europe while the USSR had lost large amounts of territory, around 60-80 million people and 40% of its economic base. By contrast one in every three 'German' soldiers fighting on the Eastern Front was not a German national.
In 1938, the two economies had been of broadly similar size although Germany had a population of 67 million [Maddison] and the USSR one of 198 million. Since then Germany had occupied Czechoslovakia, Poland, France, Belgium, Netherlands, Norway, Denmark, much of the Balkans and Greece and had trading links with Switzerland, Sweden, Finland, Italy, Rumania, Bulgaria and Turkey. Furthermore since June Germany had occupied the Baltic States, Belorussia, most of Ukraine and a large part of western Russia. Complicating the calculations is that the Reich had grown in size with the annexation of Austria, Alsace-Lorraine, Luxembourg, Sudetenland, Danzig- West Prussia and the Wartegau.
The most current estimates that I can find are given in Table 1. which show Germany's Gross National Product (GNP) and the contribution from the various occupied territories. What is missing from this scheme is international trade and some of the annexed territories, relatively small contributions.
The scheme can be illustrated as in Graph 1. As can be seen here, occupation of most of Continental Europe added between 10 and 15% to the German economy in any one of the war years. Estimates put the amount gained in direct looting at 1 billion RM over the course of the war and further benefits accrue from forced labour from populations of Occupied countries.
Antecedents
In order to place these estimates within context, it would be best to understand the history behind them.
In March 1944 the Reich Ministry of Finance gave a press conference to announce the fact that wartime Germany had achieved a balance of trade with both its trading partners and the countries under occupation [Hunscha 1]. Further work was done of these figures at the end of the war by Dr. Kurt Hunscha , Head of the Economics Department at Dresdner Bank and a member of the Reichsbank [Hunscha 2] and these appear in the Nuremberg Trial Records for Albert Speer where defence council tried to minimise German occupation policies [Nuremberg].
These figures have managed quite a long period of acceptance appearing in the Militärgeschichtliches Forschungsamt (MGFA) official German history of the war Band V/II Table I.II.5 p.223 [MGFA 2] in 1999, in the English language edition "Germany and the Second World War" Volume 5/II as seen here:
and again in Tamás Vonyó's "The Economic Consequences of the War West Germany's Growth Miracle after 1945" Cambridge University Press 2018 as Table 4.1 p.154
This would give net trade figures as shown below.
Which looks impressive, however when compared to the overall German GNP, which in 1942 was RM 128,000,000,000, even Western Europe contribution is 1% and pales into insignificance. Modern commentators have pointed out that these figures have three major flaws, they use fixed exchange rates set at rates beneficial to the occupiers, that Wehrmacht trade was tariff free and so unrecorded and that much occupation traffic never passed through Germany at all, French companies pouring concrete for the Atlantic Wall or Polish companies sending munitions to the Eastern Front or Russian farmers feeding the Ostheer and again is not covered by these figures.
Modern estimates of Occupied Countries contribution to the German war effort
Within a decade of Hunscha's research coming out, researchers in individual country studies, such as Alexander Dallin for Russia were showing that occupation had provided far greater amounts than show in the above tables. Alan Milward's "Blitzkrieg Theory" and the later "Inefficiency Theory" both tried to explain the German economy and in particular its feature of a lack of early mobilisation of the German population. This indicated extensive exploitation of occupied countries in preference to mobilisation at home but solid estimates were difficult to formulate.
By 1986 Christophe Buchheim had raised the estimate of Occupied countries contribution to 80 million RM [Buchheim] up from Hunscha's total imports of 36 billion RM however in 1988 Harrison gave the contribution of Occupied territories as 1/6th of the overall German war effort [Harrison 2] drawing on earlier work by Maddison. By and large this estimate has remained to the present day with further work mainly adding detail to the picture.
This estimate was given additional weight in 2006 with the publication of Adam Tooze's book on the Germany economy, "The wages of destruction" which suggested a replacement theory to the earlier Blitzkrieg and Inefficiency theories. Tooze posited that the need to export and earn foreign currency to buy strategic imports accounted for the lack of an early mobilisation of the Germany economy. Similarly re-armament was sequential with early spending on the Heer to fight continental wars, followed by spending on the Luftwaffe and the Kriegsmarine to fight the USA. This book did not address Occupied territories contribution directly but did fit into the overall picture [Tooze].
Six years later in 2012 Klemann & Kudryashov's book " Occupied economies: an economic history of Nazi-occupied Europe, 1939-1945" gave greater detail on individual countries contribution to Germany's war effort [Klemann] and a detailed balance of their contribution which is very close to the picture that I gave at the top of this article. While further work by Scherner and others added and expanded this viewpoint finally ending with Scherner & White's "Paying for Hitler's War" in 2016, while it did not attempt to come to an overall conclusion, nonetheless added much information on individual countries.
In this view the German economy gained around 1 billion RM in tribute and forced clearing credits [Scherner Paying p43] and the Occupied territories contributed an additional 20% a year on its domestic GNP. The latest estimates seem to be Kilian's work of 2017 which I have used in my table at the top of this article.
Scale of contribution from Occupied territories
In order to understand how effective Germany was at harnessing the economies of the Occupied territories, it is necessary to understand their relative size before the war and then adjust this potential by a number of outside factors that were beyond Germany's control.
Germany at the start of the war in 1939 had a population of 69 million with an economic output of Int $ 7557 GDP per capita [Madisson][Harrison 1]. In 1940 Germany conquers Western Europe adding France, Belgium, Netherlands, Denmark and Norway which have a combined population of 66 million with GDP per capita around Int $ 6000 mark. Adding in the earlier conquests of 1939 of Czechoslovakia and Poland increases the population to 112 million or just under double Germany's however these countries have much lower GDP per capita under 3000 which makes the potential GDP of the German sphere of occupation about the same as Germany's. This is due to the idea of classic economic theory which states that countries have a baseline economic activity devoted to keeping their citizens, fed, clothed and housed and it is only the proportion above this that is freely available for activities such as making war. Rich countries have a higher proportion of their economy above this baseline and so are able to generate greater amounts of potential military activity.
The potential of the Occupied territories is not realised due to several factors:
Firstly the moment these countries become occupied states they immediately lose access to their colonies, international trade and international finance. For instance, local trade between France and Spain continues but British denial of sea lanes cuts access to the rest of the world. This is not recovered over time and disruption was considerable as the French example shows.
Secondly these economies suffer an element of wartime disruption due to war damage, population movement and their own mobilisation efforts which will recover over time. Disruption to French coal mining which crippled transport and sent waves throughout the French economy is an example of this.
Thirdly there is another round of lost potential due to active and passive resistance by the occupied state which cause extraction problems for the occupier. This situation will tend to deteriorate over time.
Finally there is the efficiency of the occupiers administration in managing the occupied economy and mitigating the above factors to some degree and this of course varies from country to country. An element of German inefficiency comes from its own organisation and structures but another element comes from the fact that it is fighting a war and cannot devote manpower and resources to managing the occupied state and has to rely on indigenous personnel.
So what could Germany expect to extract from any given economy when typically the home economy provided 60% of its GNP towards military effort?
Given that these factors would have reduced the potential economic activity of the Occupied territories well below pre-war levels and that extraction rates would have been well below Germany's peak of 60%, looked at from this perspective, the 20% that Germany extracted from the occupied countries looks pretty successful especially as almost all these countries had lower pre-war GDP per capita than Germany's.
Another piece of evidence to support this, is discussed in Klemann & Kudryashov regarding attempts in 1941 and 1942 to get French and Dutch companies supplying the Wehrmacht. These attempts failed once local stocks of materials and spares had been used up since the wider economies could not provide transport or materials and sub-contractors failed to deliver semi-finished components. So Germany found it easier to move the machines and labour into Germany rather than attempt to restart the occupied economies.
German-Soviet comparison
With an idea of the provenance of our figures, it is possible to convert the German Reich Marks into International Dollars (for simplicity I have used 1940 exchange rate of RM2.5 = $1 and then US CPI for 1985 prices see https://liberalarts.oregonstate.edu/spp/polisci/research/inflation-conversion-factors-convert-dollars-1774-estimated-2024-dollars-recent-year) which can then be compared to Harrison's Soviet figures in "Accounting for war" [Harrison 3] in Table 5.17.
This graph is essentially a copy of the one at the top of this article showing Germany's GNP in grey with the contribution from the Occupied territories shown as cumulative lines stacked on top of this. The figures for the USSR are show in the red dotted line and as a comparison and as a check I have added Harrison's original assessment for German GNP in 1996 as a dotted blue line.
What this shows is that in 1939 and 1940, German and USSR economies were of comparable size however in 1941-2 the USSR economy shrinks by a third while the German one grows as extraction from Western Europe gathers pace and by 1942 German has twice the GNP compared to the USSR. For the remaining war years, the USSR slowly closes this gap despite growth in the German economy as the rate of extraction increase slows in Occupied Europe after 1942.
Conclusion
As illustrated, the latest figures on the German economy and the contribution of the Occupied Europe show a slightly larger German economy than in the 1996 estimates and the Occupied component has remained broadly the same since 2012. However continuing research has provided a more detailed estimate than before with a greater level of detail for individual countries.
The author would like to thank Stiltzkin and TheMarcksPlan of the Axis History Forum for providing sources and information used in the writing of this article. For further details see https://forum.axishistory.com/viewtopic.php?f=66&t=245879
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