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What does an Nazi economic collapse look like?

Creekmench

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There's a thing in alternate history circles and among economists that if the Nazis did not go to war in 1939 their economy was going to implode. It was because of the extreme military overspending and the fact that the pre-war economic growth was sustained on MEFOs which were glorified IOUs handed out by the Reichsbank. The military spending was so alarming to some German magnates that a team of Financial officials, economists and captains of industry tried to convince Hitler to slow down on rearmament and switch back to more rational economics. Hitler shot it down because he wanted a war as soon as possible. Let's say Hitler dies between the Fall of 1938 and the Summer of 1939, and let's say whoever succeeds Hitler demures from war long enough that the Arms bubble can blow up in their face. What does that collapse look like, does it look like a stereotypical Eastern Bloc thing where there are shortages of everything or does it turn into a Greece like situation. I would assume the worldwide effects of such a collapse will cause a recession in the early 40s since one of the largest economies in Europe has collapsed like a Jenga Tower.
 

The Red

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I'm not much of an economist but as far as I know the initial impact would be a harshly negative shock spanning from the emerging liquidity crisis. In the short term this will likely not to be fatal to the regime, as prices go down for the German consumer but a full blown financial crsis will develop shortly after were Germany will no longer be able to trade. The Nazis will finally get their autarky and the German people will be facing a return to the turnip winter. It's at this point that the outbreak of social unrest will likely begin. As you mention, this will also cause a severe recession in Europe and America may also lapse back into recession. If the Nazis are overthrown then it's possible you might see a concerted global effort to try and bring the German economy afloat, if only in the name of European recovery, but if they endure the crisis (probably through even greater totalitarian measures) then Germany will likely be left to wither on the vine.
 

Artaxerxes

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I'm not much of an economist but as far as I know the initial impact would be a harshly negative shock spanning from the emerging liquidity crisis. In the short term this will likely not to be fatal to the regime, as prices go down for the German consumer but a full blown financial crsis will develop shortly after were Germany will no longer be able to trade. The Nazis will finally get their autarky and the German people will be facing a return to the turnip winter. It's at this point that the outbreak of social unrest will likely begin. As you mention, this will also cause a severe recession in Europe and America may also lapse back into recession. If the Nazis are overthrown then it's possible you might see a concerted global effort to try and bring the German economy afloat, if only in the name of European recovery, but if they endure the crisis (probably through even greater totalitarian measures) then Germany will likely be left to wither on the vine.
German North Korea would be amusing, presuming both Russia and France are willing to have the standing army to ensure they don't get excited and try and launch anything.
 

The Red

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German North Korea would be amusing, presuming both Russia and France are willing to have the standing army to ensure they don't get excited and try and launch anything.
I suppose it would depend on how much the Nazi regime would be willing to double down on the militarisation after the crisis has struck. Despite North Korea's 'Military First' policy its armed forces are in a dreadful shape with equipment that's already largely obsolete falling into permanent disrepair due to a lack of maintenance. Nazi Germany in 1939 is naturally far better disposed to go down a Songun route and make it viable but I'm a bit sceptical as to what extent it could keep it up. The Soviet Union wasn't spending as much as it theoretically could on defence in the early eighties but it was still self destructively high and yet they were falling behind NATO regardless. By the time that Panzer IV's are rusting away on the border whilst French and Soviet MBTs sit waiting for them on the other side it might not be so necessary to keep large standing armies to contain the Nazi threat.
 

Creekmench

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I'm not much of an economist but as far as I know the initial impact would be a harshly negative shock spanning from the emerging liquidity crisis. In the short term this will likely not to be fatal to the regime, as prices go down for the German consumer but a full blown financial crsis will develop shortly after were Germany will no longer be able to trade. The Nazis will finally get their autarky and the German people will be facing a return to the turnip winter. It's at this point that the outbreak of social unrest will likely begin. As you mention, this will also cause a severe recession in Europe and America may also lapse back into recession. If the Nazis are overthrown then it's possible you might see a concerted global effort to try and bring the German economy afloat, if only in the name of European recovery, but if they endure the crisis (probably through even greater totalitarian measures) then Germany will likely be left to wither on the vine.
Quick question, like when Nazi Germany suffers that economic collapse and they take a repressive measures approach what carrots can they give the German people or would it be all stick? I pity the remaining Jewish population in the Reich at best they would be deported. Granted, a Wehrmacht junta would be interesting to play with, but a Nazi Reich that lingers on until the 70s until everything goes to shit would be a plausible dystopia. Who would be their patron though since the DPRK kind of has the PRC to subsidize them? I know the former is not a Chinese vassal or puppet. Also, what timeframe are we talking about for the economic collapse to happen from the bubble bursting?
 
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The Red

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Quick question, like when Nazi Germany suffers that economic collapse and they take a repressive measures approach what carrots can they give the German people or would it be all stick? I pity the remaining Jewish population in the Reich at best they would be deported.
Tangibly it would be mostly stick but there would be other methods of distracting the population now that consumerism was no longer an option. It wouldn't be the first time that Jews have been used as scapegoats during times of crisis in Europe and the Nazis will likely instigate further pogroms in a way of trying to get the population on their side against a "common enemy". They might try to deport the Jews, potentially for some financial or otherwise material gain in a similar way to Himmler's attempts to exchange Hungarian Jews for trucks in 1944. Given the Nazi laws that forbade Jews from leaving the country with anything more than ten marks and a world that was largely unsympathetic to their plight its hard to see where all of those people would actually go even if the Nazis did choose to simply deport all Jews. The warped Nazi logic that led to the industrialised genocide of OTL is likely to happen again here.

a Nazi Reich that lingers on until the 70s until everything goes to shit would be a plausible dystopia. Who would be their patron though since the DPRK kind of has the PRC to subsidize them?
It's hard to say, in 1939 Germany's economy was larger than that of Italy and Japan put together and both were allies or convenience to varying degrees. Although as I mentioned the North Korea analogue shouldn't be taken too literally as we're starting out with a great power with a large economy rather than a small hermit kingdom that's regularly threatened with famine.

Also, what timeframe are we talking about for the economic collapse to happen from the bubble bursting?
The initial shock would potentially as early as late 1940 but probably sometime in 1941, with the bubble finally bursting either the same year or in 1942/43. A major economic crisis in occupied Europe was developing IOTL in the early months of 1941, although its effects have largely been masked by the general chaos of the war and the difficulty in attributing genuine issues with the Nazis deliberately stripping Europe bare and the almost uniform incompetence of their puppets when trying to make "alliance"/occupation bearable.
 

Creekmench

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Tangibly it would be mostly stick but there would be other methods of distracting the population now that consumerism was no longer an option. It wouldn't be the first time that Jews have been used as scapegoats during times of crisis in Europe and the Nazis will likely instigate further pogroms in a way of trying to get the population on their side against a "common enemy". They might try to deport the Jews, potentially for some financial or otherwise material gain in a similar way to Himmler's attempts to exchange Hungarian Jews for trucks in 1944. Given the Nazi laws that forbade Jews from leaving the country with anything more than ten marks and a world that was largely unsympathetic to their plight its hard to see where all of those people would actually go even if the Nazis did choose to simply deport all Jews. The warped Nazi logic that led to the industrialised genocide of OTL is likely to happen again here.



It's hard to say, in 1939 Germany's economy was larger than that of Italy and Japan put together and both were allies or convenience to varying degrees. Although as I mentioned the North Korea analogue shouldn't be taken too literally as we're starting out with a great power with a large economy rather than a small hermit kingdom that's regularly threatened with famine.



The initial shock would potentially as early as late 1940 but probably sometime in 1941, with the bubble finally bursting either the same year or in 1942/43. A major economic crisis in occupied Europe was developing IOTL in the early months of 1941, although its effects have largely been masked by the general chaos of the war and the difficulty in attributing genuine issues with the Nazis deliberately stripping Europe bare and the almost uniform incompetence of their puppets when trying to make "alliance"/occupation bearable.
Ah, a Kleinendloesung of the German Jewish population, I'm not surprised by this and I can see pogroms occuring escalating to "deportation" centers or after a pogrom putting into "protection" camps then "deportation" camps. I can see that in the TTL future saying that the politicos of the day should've accepted the German Jews as refugees I think with the size of the German Economy they can stagger on to the present day. I was wondering if Germany could get into a war to distract the populace but, IIRC only Hitler wanted a war in 1939 or 40 while the Wehrmacht wanted to wait until 42 or 43 to start a war in that case the economy is fucked and the Anglo-French along with the USSR will be rearmed and beat down the Wehrmacht like Silly Putty. It would be darkly ironic if the Third Reich rather than gaining its empire to the Urals slowly rots away in Grossdeutschland. Dear God, I wonder how fucked up 2 or 3 generations of Nazi Brainwashing would be. I can see crappy German consumer goods used to tame the populace and people would make a lot of money smuggling imported goods to the 3rd Reich. Again I believe that a Valkyrie esque coup will happen like OTL. Will it succeed, it could go either way to be honest.
 

Mumby

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Ah, a Kleinendloesung of the German Jewish population, I'm not surprised by this and I can see pogroms occuring escalating to "deportation" centers or after a pogrom putting into "protection" camps then "deportation" camps. I can see that in the TTL future saying that the politicos of the day should've accepted the German Jews as refugees I think with the size of the German Economy they can stagger on to the present day. I was wondering if Germany could get into a war to distract the populace but, IIRC only Hitler wanted a war in 1939 or 40 while the Wehrmacht wanted to wait until 42 or 43 to start a war in that case the economy is fucked and the Anglo-French along with the USSR will be rearmed and beat down the Wehrmacht like Silly Putty. It would be darkly ironic if the Third Reich rather than gaining its empire to the Urals slowly rots away in Grossdeutschland. Dear God, I wonder how fucked up 2 or 3 generations of Nazi Brainwashing would be. I can see crappy German consumer goods used to tame the populace and people would make a lot of money smuggling imported goods to the 3rd Reich. Again I believe that a Valkyrie esque coup will happen like OTL. Will it succeed, it could go either way to be honest.
A German Self-Liberation would be interesting to see, especially considering the proposals for the New German Constitution made by the OTL Kreisau Circle that never really saw the light of day due to the circumstances of OTL.
 

Earling

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Never really been convinced by the idea of a crash. I mean the USSR was doing the same - why didn't their economy liquidate in the face of hyper inflation? I am not sure the wonders of glorious socialism is the answer.

Obviously the later they do so the more damaging it would be - but Germany can transition to "butter, not guns" relatively easily. They have a market, they have the skills and they have the capital. Doing so would at a stroke improve the domestic economy, the balance of trade, and the government deficit. They benefits are all going to compound, so while there must be an uptick in unemployment under any transition I do not see why it should be huge, lead to a renewed great depression or prompt major civil unrest. If anything the Nazi's popularity likely reaches ever greater heights - after 10 years of austerity the Germans are finally getting the good life they were promised.

Moreover if Germany is abandoning her military spending and adopting more conventional economic activity she is likely to improve her diplomatic and commercial relationships with her neighbours.

Now I guess you can go the other way and have the German government insist on military spending but when she can't borrow, or import necessary commodities, its not obvious that works. Something will have to give.
 

Creekmench

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A German Self-Liberation would be interesting to see, especially considering the proposals for the New German Constitution made by the OTL Kreisau Circle that never really saw the light of day due to the circumstances of OTL.
I'm curious about what the Kreisau Circle was proposing for a new consitution.
 

Mumby

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I'm curious about what the Kreisau Circle was proposing for a new consitution.
It was going to be very Indirect Democracy, with the people only directly voting for their representatives at the municipal level, then their municipal representatives voting for state politicians and so on and so on up to the Reichstag electing the President.
 

Creekmench

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It was going to be very Indirect Democracy, with the people only directly voting for their representatives at the municipal level, then their municipal representatives voting for state politicians and so on and so on up to the Reichstag electing the President.
Isn't there a church with that exact voting mechanism? That's interesting I would see it justified as a way to stop demagogues, and apparently it was designed with no political parties in mind. The vote would be flitered a lot and I can see certain groups complaining that it dilutes the voice of the People.
 

Alex Richards

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It was going to be very Indirect Democracy, with the people only directly voting for their representatives at the municipal level, then their municipal representatives voting for state politicians and so on and so on up to the Reichstag electing the President.
This seems like a good mechanism for ossification of political machines.
 

Mumby

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Isn't there a church with that exact voting mechanism? That's interesting I would see it justified as a way to stop demagogues, and apparently it was designed with no political parties in mind. The vote would be flitered a lot and I can see certain groups complaining that it dilutes the voice of the People.
This seems like a good mechanism for ossification of political machines.
I think that was exactly the intent to be honest. The Kreisau Circle had a pretty fatalistic view of the German people's capacity to work a democracy, given that People Voted For Hitler.

And indeed, it was intended to be non-partisan but those who were considering this were distinctly, ahem, Christian Democratic or Christian Socialist and at the same time that they debated over what the shape of the post-war economy was to be, they wanted to see the restoration of Christian values which they believed had facilitated Hitler's rise to power. They were no fans of Weimar, in other words.

I think an important point about them is that their leading figures were Prussian aristocratic intellectuals, who believed that Germany required order and strong leadership to function.
 

Creekmench

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I think that was exactly the intent to be honest. The Kreisau Circle had a pretty fatalistic view of the German people's capacity to work a democracy, given that People Voted For Hitler.

And indeed, it was intended to be non-partisan but those who were considering this were distinctly, ahem, Christian Democratic or Christian Socialist and at the same time that they debated over what the shape of the post-war economy was to be, they wanted to see the restoration of Christian values which they believed had facilitated Hitler's rise to power. They were no fans of Weimar, in other words.

I think an important point about them is that their leading figures were Prussian aristocratic intellectuals, who believed that Germany required order and strong leadership to function.
So a Guided Christian Democracy, I can see the left still repressed and GRSM people repressed. I can see a few opposition parties being set up or all the other parties being variants on Christian democracy or Christian Socialists.
 

Mumby

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So a Guided Christian Democracy, I can see the left still repressed and GRSM people repressed. I can see a few opposition parties being set up or all the other parties being variants on Christian democracy or Christian Socialists.
I can imagine it looking superficially similar to post-war Italy, albeit one in which all of Christian Democracy's wildest dreams come to pass.
 
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