The under-performance of the early-war German economy

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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 04 Mar 2022 06:18

historygeek2021 wrote:
04 Mar 2022 04:21
I actually think Tooze would agree that there was room for Germany to increase its mobilization in the early years of the war. He never says that Germany was maximally mobilized. He uses weasel words to indicate that Germany was significantly mobilized, but stops short of saying that there was no room for further mobilization early on in the war.
In his article "No Room for Miracles" Tooze states:
we must reject not only the Blitzkrieg thesis. We should also reject any talk of a "lost economic opportunity" for Nazi Germany early in the war
I suspect it was his ambition more thoroughly to prove this thesis in WoD. Tooze is very clear on how he views the early war mobilization:
Hitler repeatedly stressed his desire for an all-out production drive,
regardless of the consequences either for the civilian population or the
long-run viability of the German war effort. Given the constellation of
1939, even with the support of the Soviet trade deal, Hitler had no
interest in fighting a protracted war. Everything depended on achieving
a decisive victory in the West at the earliest possible opportunity.

The absolute priority of the war effort in 1939-40 is worth stressing
because it has often been suggested that Hitler's concern for the home
front was a limiting factor in the Nazi war effort.35 Some have even
suggested that Hitler's desire to achieve a swift victory in the West was
motivated principally by his desire to minimize the impact of the war
on the German population. This, however, is a serious misreading of
Hitler's strategic calculation in 1939...
To Hitler, all that mattered was winning the war...
If this meant temporarily sacrificing
the needs of civilian consumption, so be it. As Hitler commented to the
chief of army procurement, General Karl Becker, in early November
1939: 'One cannot win the war against England with cookers and
washing-machines.'39
...I have my critiques of Tooze here (see upthread) but I don't see how one can say he didn't view Germany as maximally mobilized. I agree he weasels out of directly addressing - let alone proving - the thesis explicitly stated in "No Room for Miracles."

On the question I posed last - would Tooze agree that German civilian sacrifices were "moderate" compared to Britain? - can we agree that the answer is "no"?
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Re: The under-performance of the early-war German economy

Post by historygeek2021 » 04 Mar 2022 08:14

No Room for Miracles focuses on the Overy/Müller inefficiency hypothesis (or at least what Tooze claims is their inefficiency hypothesis). It doesn't address the question of the extent to which the German economy was mobilized for war in the early years of the war, other than to use typical Tooze weasel words: "German resources were in fact heavily committed to the war from the outset."

In Wages of Destruction, Tooze clearly rejects the notion that the German early war economy was "under-mobilized", but he stops short of saying that the German early war economy had achieved "total mobilization", a phrase he only uses for the period beginning in 1943. Chapter 10 contains an extensive discussion of the reductions in civilian consumption and investment that were imposed in the early years of the war, but he does not address whether Germany could have cut civilian consumption and investment even further. Some examples:
  • Civilian apartment construction fell by about 50% from 1939 to 1940. Could it have been reduced still further? Tooze doesn't say.
  • The Wehrmacht received 55% of total steel production early in the war. Could it have received more? Tooze doesn't say.
  • Steel allocations to party buildings and autobahns were slashed to 6% of their pre-war level. Could they have been cut more? Tooze doesn't say.
  • Iron for household consumption was cut to 25% of its pre-war level. Could it have been cut more? Tooze doesn't say.
  • The attempt to close small businesses that could not contribute to the war effort failed because it was "unpopular" and a "waste of administrative effort". Could Germany have achieved greater armaments production by ruthlessly enforcing this effort? Tooze doesn't say.
  • The number of men working in consumer industries on civilian contracts fell from 1.3 million in May 1939 to 750,000 in the summer of 1940. Could the number have been reduced still further? Tooze doesn't say.
In short, Tooze doesn't address the question you're asking. He is content to dispel the myth that German civilians enjoyed a high level of consumption early in the war. He does not address whether Germany could have achieved total mobilization of the economy faster than it did. Nevertheless, he strongly implies, like Despres, that it would not have affected the outcome of the war.

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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 04 Mar 2022 08:49

historygeek2021 wrote:Tooze doesn't address the question you're asking.
We agree that Tooze weasels out of the mobilization issue, at least directly. I've already pointed out upthread some ways that Tooze does this.

You're avoiding the question I'm posing to you: Would Tooze agree with Despres that German civilian sacrifices were "moderate" and lower than her enemies'? Isn't the answer obviously "no"? Set aside the mobilization issue for now, despite its analytical relationship to civilian sacrifice.

There's a double weasel problem here: Tooze avoids saying anything directly about Germany's absolute mobilization levels, while Despres avoids rejecting or critiquing USSBS's "peacelike war economy" thesis via his "if" hedge. So I don't see how we can credit Despres with stating Tooze's thesis decades earlier.

I'll grant that I didn't give Despres full credit for his "if," as I'm reluctant to credit analytical evasion.
historygeek2021 wrote:[Tooze] strongly implies, like Despres, that it would not have affected the outcome of the war.
Is "Germany could never have won" the Tooze thesis you're saying Despres found first?
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Re: The under-performance of the early-war German economy

Post by historygeek2021 » 04 Mar 2022 16:38

TheMarcksPlan wrote:
04 Mar 2022 08:49
Would Tooze agree with Despres that German civilian sacrifices were "moderate" and lower than her enemies'?
Despres writes the following regarding the German economy in the early years of the war:

"Her civilian sacrifices were moderate in comparison with what the Russians and even the British later had to bear."

I cannot find any place where Tooze compares reductions in German civilian consumption with reductions in Russian or British civilian consumption. I think we would all agree that German early war civilian sacrifices were moderate in comparison with what the Russians later had to bear. As for the British, Harrison's Table 1-8 indicates that British war outlays peaked at 53% of national income in 1943, while for Germany it was only 40% in 1940. So a case can be made that Despres is correct in his comparison with the British, but this is largely a factual question and Despres, as a book reviewer writing one year after the war rather than an author such as Tooze publishing his own research decades later, is analyzing the facts as presented in USSBS. Despres' only other source of facts is the information he received during the war, which he notes was contradictory to USSBS: all the information available to the Allies during the war indicated that German civilian consumption had been cut "to the bone." Other than his own personal experience of this information during the war, Despres' contribution is his analysis of the facts, which hits on the big points made by Tooze and Overy decades later, but I've never seen Despres credited with these insights before this thread.

TheMarcksPlan wrote:
04 Mar 2022 08:49
Is "Germany could never have won" the Tooze thesis you're saying Despres found first?
No. The Tooze thesis is that German armaments output increased at a continuous, gradual pace due to the massive investment that Germany made in the war economy before and during the war, and that the late war surge in armaments production is primarily the result of this investment rather than changes in efficiency brought about by Speer. As far as I can tell, Despres is the first author to identify this massive investment in the German war economy both before and during the war, but Tooze never credits him. Despres, in the second half of the sentence I quoted above, writes a statement that is almost identical to what Tooze wrote 60 years later:

"the Nazis, during the years of preparation from 1933 to 1939, went farther in mobilizing resources for war purposes than any other country had ever done in peacetime."

Compare that with Tooze in Wages of Destruction Chapter 20: "The Third Reich shifted more resources in peacetime into military uses than any other capitalist regime in history."

Tooze does seem to think that this is his own novel insight, because he never credits anyone with having previously come to a similar conclusion.

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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 05 Mar 2022 02:53

historygeek2021 wrote:Despres' contribution is his analysis of the facts, which hits on the big points made by Tooze and Overy decades later, but I've never seen Despres credited with these insights before this thread
Your first response read as if limited to the excerpt provided, which doesn't contain on its face anything unique except taking at face value the German generals' grand strategic conclusions. You didn't mention or describe Despres' non-excerpted analysis, so I assumed the excerpted bit is what you were attributing to Tooze/Overy.

Having clarified things, I don't disagree that Despres identifies things in the rest of his book review that were missed in the following few decades.

I think our remaining disagreements regard what is the "real thesis" of Tooze. In that domain I'm inclined to attribute to Tooze what he strongly implies and what most readers take away, whereas you're inclined to read only what is strictly logically entailed. My inclination is, IMO, appropriate for responding to the general thrust of those citing Tooze - that the German was a poor one that couldn't have served Hitler better in the war. I have some additional arguments for why my inclination is the proper one (e.g. Tooze's propagation of the term "voluntarist" for Overy/Mueller/Milward interpretations) but I'm not inclined to find this disagreement very important here in this thread. We agree that Tooze - strictly read - doesn't logically rule out a missed German mobilization opportunity, AFAICS.
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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 11 Mar 2022 08:43

I somehow missed a very important article by Jonas Scherner and Jochen Streb, "The Mirage of the German Armament Miracle
in World War II", which is buried as a chapter in The Economics of Warfare and State Formation.

The article recapitulates much work by these scholars that I've cited upthread. But it contains a newly-translated quantitative insight: it (roughly) quantifies the time-series impact of occupied-countries' (OC) production in German armaments output:

Image


From this OC-output metric, one can infer domestically-produced armaments output:

Image

What's surprising is that this data establishes that German domestic armaments output did indeed decline during 1941, versus 1940. Absent this data, it only appears to stagnate (still a ridiculous condition while invading the world's largest country).

Caveat: As the authors concede, their methodology for estimating OC armaments production is impaired by data unavailability and must be considered approximate (at best).

Now let me pivot to criticizing the paper...

-----------------------------------------------------------------

These findings make it even harder for Scherner/Streb to support their central thesis of unhorsing what is now the well-flogged strawman of Speer's "Armament's Miracle." To their credit, they recognize this fact and are ready to address it.

Their main explanation has been referenced upthread. It seems intuitively valid and surely explains some of the productivity dip during 1941. The authors note the expansion of the aircraft industry around this time, substantiated by high growth rates in the number of armaments-producing firms and of their capital stock. They then explain:
The investment in newly founded armament
firms combined with the hiring of a large, new, and inexperienced workforce
certainly decreased overall labor productivity in 1941. The long-term effect was the
opposite: As the ratio between experienced and inexperienced companies, workers,
and managers increased after 1941, labor productivity growth again accelerated
because of learning effects. Hence, it was not necessarily Speer’s remaining reforms
(such as administrative rationalization) that explain the productivity growth of the
second half of the war but rather the fact that the many armament firms that had been
established at the beginning of the war almost naturally moved down their learning
curves from 1942 onwards.
To their argument, the authors could/should have added points made by KDF33 upthread:
KDF33 wrote:
18 Apr 2021 04:18
1941 creates a statistical illusion, given that it saw (1) the re-tooling of the fighter aircraft plants, (2) the artificially-deflated production of ammunition and (3) the shutdown of army weapons production in the 2nd half of the year.
Nonetheless, the authors don't even attempt to quantify an expected productivity dip from their proposed causes. Without claiming to debunk the argument conclusively (productivity dip isn't necessary to any the counterfactuals to which I'm committed), there are plausible objections:
  • 1. If it were true that massive increases in firms/capital causes short-run, industry-wide productivity decline then we'd see similar effects in the US and UK at around this time. I have seen no evidence that we do. The UK, in particular, zooms ahead of Germany in output of both aircraft and total armaments in 1941. The US rapidly closes the gap. To make the author's argument stick, they'd have to show that UK/US made their relevant investments earlier than Germany, such that in 1941 they were more advanced along the productivity curve. Is there any evidence this is so?
  • 2. The authors casually slide from their (excellent) work on the aircraft industry to generalizations about the German economy at large. But despite its size, aviation was never even half of German armaments output. The authors completely ignore that German tank/weapons/ammo output and productivity soared in later war years.
#2 is a persistent annoyance I have with Scherner's generally good scholarship. He's constantly telling us that the LW dropped fixed-price contracts in the '30's but never bothers to ask how non-aviation contracts were structured throughout the Nazi period. It wasn't a lack of airpower that hamstrung Germany in 1941-42; the Ostheer's failure is what decided the war.
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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 11 Mar 2022 12:02

I'm adding some tables I photo'd from Burton H. Klein's 1959 Germany's Economic Preparations for War. These relate to topline stats on the German economy, and derive from the USSBS reports The Gross National Product of Germany, 1936-1944 and Industrial Sales, Output and Productivity, Prewar Area of Germany 1939-1944 - copies of which I have not found online or in print (can anyone share them?).

Image

Image

Image


One thing I'd like to highlight: Table 23 gives an implied figure for "non-munitions" industrial sales to Wehrmacht. These sales aren't defined by Klein and, again, the USSBS source is not available to me. The implied series is:

.......Non-munition........munition
1939: 6bn RM ...............8bn
1940: 7bn....................12bn
1941: 12bn...................12bn
1942: 12bn...................16bn

Note that in 1941, German industrial sales to the Wehrmacht matched German munitions production. Elsewhere we've discussed that the German workforce on "Army basic equipment" matched that on Army weapons programs. That initially shocking statistic makes sense given these output figures. As army munitions were only ~half the munitions picture, however, even that massive basic equipment workforce/output doesn't explain the non-munitions industrial sales figures. The remainder likely comes from the autarky programs, which are listed under the OKW budget and steel allotments, IIRC.

What constitutes the remainder of the massive "other" military spending items? Again I don't have the sources but I can guess: Food, transport (paid mainly to DRB), construction (of bases, airfields - assuming not included under "industrial sales").
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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 11 Mar 2022 13:40

TheMarcksPlan wrote:
17 Jun 2021 10:02
A quick spreadsheet to illustrate the impact of earlier German mobilization of foreign labor on armaments production:
Here I'm going to reconcile my earlier projection with an analysis based on output per worker.

To recap: I projected that adding 2mil workers by mid-42 would enable a ~50% ATL delta to armaments production over OTL (56.9% to be exact).

Does this square with output per worker? A very rough tally:

Output per German industrial worker

I'm going to differentiate the agriculture vs. non-ag sectors because ag. productivity was ~50% of non-ag in Germany (Harrison Econ of WW2).

German GDP in current prices, 1942: 143bn RM
German civil workforce, 1942: 35.5mil
German agriculture workforce: 11.2mil

Using basic arithmetic, the average non-ag worker in Germany produced ~RM 4,200 of output.

Penalty for lower foreign worker productivity

Foreign worker productivity estimates vary; ~70% is a good estimate for 1942. Part of that penalty is already baked into the average I'm using because foreigners were already 12% of German workforce in mid-'42.

Estimate: ~RM 3,000 per foreign worker.

ATL delta measured against OTL

2mil more foreign workers at RM 3k per worker = RM 6bn ATL production delta.

Given RM 16bn armaments output in 1942, that's an ATL delta of 38%.

...which is less than my projection but still enormous.

A Big Missing Factor

Industrial workers were more productive than the average non-ag worker in the middle of last century. Given that armaments productivity increased significantly during the war, while in other industrial sectors it declined, armaments workers were probably the most productive in the entire economy.

Eichholtz states in Deutsche Kriegswirtschaft that armaments output was 16% of industrial output in 1941, which means total industrial output was worth RM 75bn in 1942. Dividing by 9.8mil industrial workers, we get average output of ~RM 7,600 per worker or ~RM 5,500 per foreign worker.

...which would give us RM 11bn ATL delta from 2mil additional foreign workers, or a 69% delta to OTL armaments output.

Any way we slice it, had Germany pulled in 2mil more foreign workers by mid-1942, it's easy to see that, as happened later, its armaments output would have been massively higher.

For Germany, this effect is dramatic because armaments output was, in early war, a residual category after enormous and essential outlays on basic equipment and investments (particularly in autarky).
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Re: The under-performance of the early-war German economy

Post by Nyanko » 01 May 2022 20:26

Well, if total Wehrmacht expenditures were only 39 and 45 billion in 1941 and 1942 respectively, given the gross national product of 137 and 143 billion, then Germany was certainly under-mobilized during those two years, spending 30% of GNP on the armed forces.

This is apparent when we consider that the US achieved military expenditures of 40-45% of gross national product in 1943 and 1944, without drawing on any foreign resources, while Germany had tens of billions of RM taxed from occupied countries during these critical years, which presumably would allow even higher levels of expenditures in proportion to national product.

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Re: The under-performance of the early-war German economy

Post by pugsville » 01 May 2022 23:19

Nyanko wrote:
01 May 2022 20:26
Well, if total Wehrmacht expenditures were only 39 and 45 billion in 1941 and 1942 respectively, given the gross national product of 137 and 143 billion, then Germany was certainly under-mobilized during those two years, spending 30% of GNP on the armed forces.

This is apparent when we consider that the US achieved military expenditures of 40-45% of gross national product in 1943 and 1944, without drawing on any foreign resources, while Germany had tens of billions of RM taxed from occupied countries during these critical years, which presumably would allow even higher levels of expenditures in proportion to national product.
No. The augment does not follow,. just because greater mobilization was achieved in 1942 than 1941 does NOT logically mean that Germany was under mobilized in 1941.

Mobilized is a process not a switch. Workers can not be seamlessly and instantly switched from one area to another, it takes time and organization.

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Re: The under-performance of the early-war German economy

Post by TheMarcksPlan » 02 May 2022 03:55

Nyanko wrote:
01 May 2022 20:26
Well, if total Wehrmacht expenditures were only 39 and 45 billion in 1941 and 1942 respectively, given the gross national product of 137 and 143 billion, then Germany was certainly under-mobilized during those two years, spending 30% of GNP on the armed forces.

This is apparent when we consider that the US achieved military expenditures of 40-45% of gross national product in 1943 and 1944, without drawing on any foreign resources, while Germany had tens of billions of RM taxed from occupied countries during these critical years, which presumably would allow even higher levels of expenditures in proportion to national product.
Not sure where you're getting 39-45bn RM Wehrmacht expenditures from. Are you looking only at "industrial sales to WM"? This table shows 52% of 1941 GDP in government war expenditure (not all from domestic sources, however). That's including soldier pay and non-industrial sales to WM (food, transport would be biggest items).
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Re: The under-performance of the early-war German economy

Post by Nyanko » 03 May 2022 20:50

TheMarcksPlan wrote:
02 May 2022 03:55
Nyanko wrote:
01 May 2022 20:26
Well, if total Wehrmacht expenditures were only 39 and 45 billion in 1941 and 1942 respectively, given the gross national product of 137 and 143 billion, then Germany was certainly under-mobilized during those two years, spending 30% of GNP on the armed forces.

This is apparent when we consider that the US achieved military expenditures of 40-45% of gross national product in 1943 and 1944, without drawing on any foreign resources, while Germany had tens of billions of RM taxed from occupied countries during these critical years, which presumably would allow even higher levels of expenditures in proportion to national product.
Not sure where you're getting 39-45bn RM Wehrmacht expenditures from. Are you looking only at "industrial sales to WM"? This table shows 52% of 1941 GDP in government war expenditure (not all from domestic sources, however). That's including soldier pay and non-industrial sales to WM (food, transport would be biggest items).
I am looking at Total Wehrmacht expenditures part of the table compared to Gross National Product. Its really weird that in 1942, German "war expenditures" were 91 billion RM but only 45 billion went to the Wermacht. This shows there are issues with accounting for "military expenditures" in the case of Germany.

The fact only half of "war expenditures" were directly for the Wehrmacht in terms of sales for the armed forces and military pay explains why munitions sales were such a small fraction of German National Product: munitions sales were around 10% of GNP in 1940-1942, for comparison in the US in 1942-44 munitions sales were around 20 to 25% of GNP. Of course, that doesn't prove the German economy was not mobilized since the German armed forces were focused on the army while the US had a much higher proportion of expenditures on the airforce and the navy, which consume munitions disproportionally to their personnel size.

I note that US expenditures in terms of pay+industrial military sales were ca. 80 billion dollars in 1943-44: 50-55 billion for munitions and 25-30 billion dollars in military pay, compared to a GNP of 187-200 billion US dollars (https://archive.org/details/worldeconom ... e/2up?q=us). However, the fact that total expenditures for the Wehrmacht in pay+industrial military sales from 1940 to 1942 were much smaller in proportion to German GNP than US expenditures for the US armed forces in pay+industrial military sales for 1943-1944.

Thus, the low levels of expenditures for military pay plus munitions show that Germany certainly under-mobilized its domestic resources during the whole period from 1940 to 1942.

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Re: The under-performance of the early-war German economy

Post by historygeek2021 » 03 May 2022 22:51

Nyanko wrote:
03 May 2022 20:50
I am looking at Total Wehrmacht expenditures part of the table compared to Gross National Product. Its really weird that in 1942, German "war expenditures" were 91 billion RM but only 45 billion went to the Wermacht. This shows there are issues with accounting for "military expenditures" in the case of Germany.

The fact only half of "war expenditures" were directly for the Wehrmacht in terms of sales for the armed forces and military pay explains why munitions sales were such a small fraction of German National Product: munitions sales were around 10% of GNP in 1940-1942, for comparison in the US in 1942-44 munitions sales were around 20 to 25% of GNP. Of course, that doesn't prove the German economy was not mobilized since the German armed forces were focused on the army while the US had a much higher proportion of expenditures on the airforce and the navy, which consume munitions disproportionally to their personnel size.

I note that US expenditures in terms of pay+industrial military sales were ca. 80 billion dollars in 1943-44: 50-55 billion for munitions and 25-30 billion dollars in military pay, compared to a GNP of 187-200 billion US dollars (https://archive.org/details/worldeconom ... e/2up?q=us). However, the fact that total expenditures for the Wehrmacht in pay+industrial military sales from 1940 to 1942 were much smaller in proportion to German GNP than US expenditures for the US armed forces in pay+industrial military sales for 1943-1944.

Thus, the low levels of expenditures for military pay plus munitions show that Germany certainly under-mobilized its domestic resources during the whole period from 1940 to 1942.
It's because Germany was still heavily investing in plant and equipment early in the war, both for the production of munitions and for other essential products: trains, agricultural equipment and synthetic materials.

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Re: The under-performance of the early-war German economy

Post by ljadw » 04 May 2022 06:16

Nyanko wrote:
03 May 2022 20:50
TheMarcksPlan wrote:
02 May 2022 03:55
Nyanko wrote:
01 May 2022 20:26
Well, if total Wehrmacht expenditures were only 39 and 45 billion in 1941 and 1942 respectively, given the gross national product of 137 and 143 billion, then Germany was certainly under-mobilized during those two years, spending 30% of GNP on the armed forces.

This is apparent when we consider that the US achieved military expenditures of 40-45% of gross national product in 1943 and 1944, without drawing on any foreign resources, while Germany had tens of billions of RM taxed from occupied countries during these critical years, which presumably would allow even higher levels of expenditures in proportion to national product.
Not sure where you're getting 39-45bn RM Wehrmacht expenditures from. Are you looking only at "industrial sales to WM"? This table shows 52% of 1941 GDP in government war expenditure (not all from domestic sources, however). That's including soldier pay and non-industrial sales to WM (food, transport would be biggest items).
I am looking at Total Wehrmacht expenditures part of the table compared to Gross National Product. Its really weird that in 1942, German "war expenditures" were 91 billion RM but only 45 billion went to the Wermacht. This shows there are issues with accounting for "military expenditures" in the case of Germany.

The fact only half of "war expenditures" were directly for the Wehrmacht in terms of sales for the armed forces and military pay explains why munitions sales were such a small fraction of German National Product: munitions sales were around 10% of GNP in 1940-1942, for comparison in the US in 1942-44 munitions sales were around 20 to 25% of GNP. Of course, that doesn't prove the German economy was not mobilized since the German armed forces were focused on the army while the US had a much higher proportion of expenditures on the airforce and the navy, which consume munitions disproportionally to their personnel size.

I note that US expenditures in terms of pay+industrial military sales were ca. 80 billion dollars in 1943-44: 50-55 billion for munitions and 25-30 billion dollars in military pay, compared to a GNP of 187-200 billion US dollars (https://archive.org/details/worldeconom ... e/2up?q=us). However, the fact that total expenditures for the Wehrmacht in pay+industrial military sales from 1940 to 1942 were much smaller in proportion to German GNP than US expenditures for the US armed forces in pay+industrial military sales for 1943-1944.

Thus, the low levels of expenditures for military pay plus munitions show that Germany certainly under-mobilized its domestic resources during the whole period from 1940 to 1942.
It is very questionable to use '' Wehrmacht expenditures ',especially military pay , to prove the performance of the German economy in WW 2.
Money proves nothing .

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