Hitler's Beneficiaries: Plunder, Racial War, and the Nazi Welfare State (12 page)

Supplemental benefit payments for rent, insurance, coal, potatoes, and other daily needs were paid out with minimal bureaucratic delay. The state offered household assistance to families wih large numbers of children. It also provided money for special expenditures such as dental bills or children’s education costs. In daily practice, civil servants did their best “to compensate for special circumstances and treat [recipients] as individuals.”
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As a matter of course, family maintenance payments were tax-free, and recipients were exempt from consultation charges under their health insurance.
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As a result of these handouts, working-class women could suddenly afford to give up their factory jobs.

In fact, the government soon had to impose a cap to prevent maintenance payments from exceeding the prewar net income levels of family breadwinners called to fight at the front.
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The limit was set at 15 percent less than what a soldier had earned, after taxes, on his last monthly paycheck, but the cap meant that most women still received 85 percent of their normal household income. For the first time, many of them were able to keep house without being subjected to the moods and whims of their husbands. Thus, although average household income levels were somewhat lower than in peacetime, stable prices, a freeze on rents, and an exemption from asset seizure made it possible to live in material comfort.
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If one factors into the equation soldiers’ wages and their food rations, many German families actually had more disposable income in war than in peacetime.
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An academic study of the family maintenance program conducted in 1943 defined its purpose as “shoring up the popular mood and, in particular, the morale among the broad masses.”
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The program’s generosity sometimes worked against its aims, however, by creating envy among neighbors, an appetite for additional benefits, and the desire to take the state for whatever one could get. Some recipients expressed frustration at the increasing scarcity of goods available for purchase. Nonetheless, by and large, the program achieved its goal of neutralizing potential political opposition on the home front, which consisted primarily of women.

In total, the Third Reich spent 27.5 billion marks, an astonishing sum for the time, on family maintenance benefits during World War II.
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On average, family members of German soldiers had 72.8 percent of peacetime household income at their disposal. That is nearly double what families of American (36.7) and British soldiers (38.1) received.
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As part of this massive handout, the government increased subsidies to families under the rubric “population policy measures” from 250 to 500 million reichsmarks between 1939 and 1941. In 1942, the turning point of the war, the total doubled again, and by the end of the war, it still hovered around one billion marks annually. These figures reflect increases in child support and family household subsidies of 25 percent in 1939, 28 percent in 1940, 56 percent in 1941, and 96 percent in 1942.
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The basis for domestic stability in Hitler’s
Volksstaat
was its continual bribery of the populace via the social welfare system.

In 1943, determined to bolster the Third Reich’s war chest, Nazi economics minister Walther Funk suggested that “the current tax exemption for family maintenance payments and other such compensation payments should be abolished.” His proposal was shot down by the triumvirate of Hitler, Göring, and Goebbels, who saw themselves, together with the party gauleiters, as the ultimate guarantors of popular morale on the home front. “We’ve been too lavish in our wartime budgeting,” Funk remarked dryly in a letter to a colleague. “It will be difficult to break out of the spiral.”
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A basic problem for the wartime Nazi
Volksstaat
was the balance between supply and demand. In the years before the war, the arms buildup, together with zero unemployment, had led to a dramatic rise in both wages and business profits. The Reich’s tax revenues rose to unprecedented levels, but so did private citizens’ spending power. Once the war began, despite price and wage controls, both profits and spending power increased further still because of overtime labor and expansion of the workforce. In addition, as we have seen, the sums allocated to soldiers and their families in lieu of regular wages were anything but stingy.

With production increasingly geared to the needs of the military, however, the supply of goods for the civilian populace decreased. At first the drop was moderate, but it became ever more dramatic, opening a gap between consumer spending power and available goods that created not only discontent but black markets, inflationary pressure, and a tendency among investors to seek refuge in tangible assets. By the fall of 1939, the first signs of an economy of scarcity were already evident, and people began to buy up whatever they could get their hands on. Sales figures for linens and bedclothes increased by 45 percent over the previous year, while sales of furniture rose by 30 percent and porcelain and glassware by 35 percent.
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With the supply of durable consumer items soon exhausted, excess domestic spending power could no longer be converted into goods or services.

Broadly targeted taxes were ruled out on political grounds, although personal incomes rose by 21 percent between 1939 and 1941, largely because of extended workdays. Disposable income more than doubled as a result, rising from 14 to 31 billion reichsmarks.
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Germany’s primary solution to the impasse—a way of both curbing excess spending power and increasing state revenues—was to exploit foreign countries. “If there has to be inflation, better there than here in Germany,” said one member of the Finance Ministry, whose sentiments were shared by civil servants in the Reichsbank, the Foreign Office, and the Economics Ministry and by the Führer himself.
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Exploiting foreign economies was not just a way of keeping German consumers well supplied. It also brought huge sums of money into Germany’s war chest. Both the political leadership and the civil service were constantly upbraiding German administrators who tried to stabilize or treat occupied countries with a modicum of fairness. “You are aware of our fundamental standpoint,” read one reprimand, “that the costs of occupying a given area are to be borne by the area itself.”
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The need to ensure that payments would be met led the Reich to intervene in the running of occupi countries’ economies. In Serbia, a close intimate of Göring’s expressed his gratitude “that the Reichsbank has put such excellent experts at my disposal.”
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In their first few weeks of work, these experts established a new Serbian national bank and issued a new currency, the Serbian dinar.
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By simply banning most currency exchanges, they succeeded in funneling money held by Serbian citizens to the banks, where it was booked in the new currency. In this way the experts could temporarily put the brakes on the circulation of money and keep the danger of inflation under control so that Serbia would be able to fulfill its obligations to the Reich.

As in every other nation defeated by Germany, the General Government of occupied Poland was forced to pay what was euphemistically termed a “contribution for military protection.”
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The amount was raised annually. In 1942, displeased with the revenues taken in the previous year, Schwerin von Krosigk retroactively increased the compulsory tribute from 150 to 500 million zlotys and set a target of 1.3 billion for the rest of the year. In 1943, the finance minister demanded 3 billion.
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His deputy, Fritz Reinhardt, attempted to rally civil servants frustrated by the General Government’s stalling tactics, exhorting them: “We can’t let up the pressure!”
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On top of the contribution, the Wehrmacht also presented occupied Poland with a monthly bill of around 100 million zlotys for the services of 400,000 soldiers—although only 80,000 were still stationed in the country.
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The fivefold surplus was used “to cover soldiers’ needs for foodstuffs and other goods,” with the result that the local populace endured acute shortages of grain, potatoes, meat, and other necessities.
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In its financial ledgers, the Reich duly credited the General Government for some of its payments. But the balance was credited in name only, and one leading figure at the Reichsbank remarked nonchalantly: “The final settling of accounts with the General Government can be postponed until the conclusion of the war.”
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OVER THE course of World War II, Germany mandated unprecedented contributions, along with compulsory loans and population-based “quotas,” on the defeated countries of Europe. These financial tributes soon exceeded the total peacetime budgets of the countries in question, usually by more than 100 percent and in the second half of the war by more than 200 percent. In January 1943, for example, the finance minister demanded that “two-thirds of the General Government’s budget be transferred to the Reich.” German administrators in occupied Poland promptly protested, complaining that tributes on such a scale “would render any progress, even in more orderly times, completely impossible.” The Finance Ministry remained firm, insisting that the level of contribution to the Wehrmacht was “completely appropriate for the time being.”
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In spring 1944, as the Allies stepped up their bombardment of German factories, occupied Poland was forced to bear the entire cost of transferring military production facilities there. The finance minister was unwilling to give up his “previous guiding principle” that “all the costs incurred by the GG must be covered there.”
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German financial experts duly took note of “the increasing financial-economic yields” from the pied countries “in the wake of local economic stimulation and the application of new tax-policy methods.”
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Procurements by German arms suppliers and food importers consumed a quarter of the money the Reich was supposedly spending on the occupation of France. In June 1943 the governing military intendant of Paris estimated that private purchases by soldiers made up a further quarter. Among the techniques used to drive up putative costs were a host of petty regulations—for instance, a decree by the general intendant of the Wehrmacht that occupied countries bear the costs of dental work (including gold crowns and bridges) for German members of the armed forces.
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All in all, such measures yielded considerable sums of money. The German occupiers also manipulated France’s currency, paid for aerial attacks on Britain wherever possible in francs, and used French money to build submarine ports and gigantic bunkers on the Atlantic coast. These expenditures were unrelated to the actual military control of France, as indeed were 75 percent of the so-called occupation costs.
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In late 1941, the chief French negotiator complained, in vain, to the occupation authorities: “The sums paid under the agreement concerning occupation costs are very frequently used to cover expenditures that have nothing to do with maintenance of the troops.”
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The situation was similar in Denmark. For the first six months of 1944, occupation costs there were calculated at some 86 million reichsmarks—more than three times what they had been in 1941.
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A quarter of this sum was earmarked for personnel costs, while the rest went toward material expenditures, especially “construction projects and food procurement in that country.”
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Denmark was the base from which the Wehrmacht supplied food for its soldiers in Norway as well as in parts of Germany itself. In 1942, some 22,000 cows, 17,500 pigs, 2,870 tons of butter, 500 tons of marmalade, 80,000 eggs, and 3,000 tons of fruit and vegetables were delivered to army headquarters in Norway. According to operational reports from the occupation authority in Denmark, in addition to “provisions for German troops stationed in the country, significant quantities of livestock (cows, pigs), butter, cheese, eggs, and saltwater fish” were also “transferred to Germany.”
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As was surely the case elsewhere as well, occupied Denmark had to use funds from its own operating budget to pay support for children born to German soldiers and local women.
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Between 1940 and 1941, the Dutch government was also required to meet the Third Reich’s obligations under the German-Soviet economic pact to provide the Soviet Union with finished goods in return for raw materials. The total value of those commitments was 60 million reichsmarks, in return for which Germany received 350,000 tons of grain from Ukraine. Because the costs were paid from the operating budget of occupied Holland, the finance minister was able to shift an extra 60 million reichsmarks into the war budget. The money could be used to buy new tanks, artillery, and planes.
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The central bank in occupied Poland was required to transfer all its available gold to the Reichsbank in Berlin in return for a pro forma credit. All outstanding debts owed to the Polish government were likewise handed over.
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Tcover its payments to the Reich, the occupying authority in Cracow increased the real estate tax, introduced a head tax, raised the income tax rate, and sold off material assets confiscated from Jews and Poles who had been declared enemies of the state. The tax hikes applied only to Poles. Germans residing in Poland paid no taxes at all on annual incomes of up to 8,400 zlotys.
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From a tax perspective, it was more advantageous for a German to live in Poland than within the Reich.

THE HAGUE Conventions of 1899 and 1907, to which Germany was a signatory, allowed victorious nations to recover occupation costs from their defeated enemies. But the level of contributions sought by Nazi Germany was completely out of proportion to the principles laid out in article 52 of the Conventions, which Berlin rejected as “too restrictive and outdated.”
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Contributions from occupied enemies were supplemented by subsidies from Germany’s allies, the “war-cost contributions” paid by Bulgaria, Slovakia, and Romania. Budget officials in the Third Reich did not hesitate to record these revenues as “occupation costs.”
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By 1943 the majority of the Reich’s additional war-related revenues came from abroad, from foreign slave laborers in Germany, and from the dispossession of Jews and “enemies of the state.” These sources of income underwrote a significant portion of Germany’s military efforts. As noted above, until the summer of 1944 the Reich was able to cover 50 percent of its running war costs from its current budget, whereas in World War I Germany had been forced to borrow 87 percent of those outlays. German financial administrators achieved this “substantial improvement in balance of payments” at other people’s expense.