In WW2, the Axis powers created numerous puppet states out of the nations they conquered, such as Vichy France, Free India, and the Lokot Republic. Now, the Axis powers were not the only ones to create these puppet states during the war. Britain forcibly set up pro-Allies regimes in Iran and Iraq, and the Soviet Union carved out over a dozen new socialist republic from the areas they "liberated." However, the bulk of the puppet states created in the war were made by the Axis.
My question is, why did the Axis build up so many puppet states rather than just officially absorbing the conquered land into their territory? Additionally, what did the Axis powers plan to do with the puppet states after the war? Would they be dependently "independent" indefinitely, or were their plans to absorb these puppets into the German/Japanese/Italian governments after the war?
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I assume this question is somewhat inspired by playing games like Hearts of Iron or similar where it is comparatively easy to just swallow up territory. While some games have some kind of mechanic in place to simulate the actual problems that arise from outright annexation, one problem that few that seem to capture are the very real difficulties associated with such a policy, foremost among them manpower, both military and – even more importantly – in administration.
Because annexation means the incorporation of territory into another state, it is preceded by the dissolution of political and administrative institutions in the territory in question and the introduction of and change over to institutions of the annexing state. This more often than not comes with a rather sweeping change of personnel in those institutions because the natives of the annexed territory either resist annexation or are not trained in the administration of the annexing state. This represents a very labor and personnel heavy intensive process.
Examples for this from WWII are German policies in Poland wherein the Western part of Poland was annexed to become part of the Reich while the rest of Poland was transformed into the General Government. Both in the annexed parts as well as in the GG, Poles were barred from serving in administrative offices beyond a certain station. In the GG there still were some Polish police under the supervision of German officers and – as in the occupied USSR – there existed village headmen taking care of the administration of villages on the lowest administrative rung. Everything else necessary for the administration of a modern state, from the labor office to health administration to civil registration offices were taken over by Germany and run by German administrators.
A sate can't just conjure up trained bureaucrats from thin air, so the people running the labor office, the health agencies, civil registration and so forth had to come from somewhere and often times, they were transferred either from their home institutions in the Reich or sent because whatever role they had filled in the Reich had vanished or was purposefully dissolved. To give a concrete example: Before the Anschluss of Austria, Vienna was both a municipality and a federal state divided into several districts, each with their own major and administration. This basic structure was kept intact through the re-conceptualization as a Gau of the Third Reich. But in September 1939 with the invasion of Poland, the leadership of Nazi Germany saw themselves forced to order the dissolution of the districts of Vienna as administrative units because the bureaucrats with expertise with running them were needed in Poland. And so, thousands of Viennese district bureaucrats together with those from other cities of the Reich were sent to occupied Poland in order to run Polish cities and agencies.
A similar policy was pursued in the occupied Soviet Union and it soon became clear that this policy together with drawing experienced officials from Reich agencies was to become a problem in light of the labor shortage within the Reich itself. For the leadership, it was paramount in their policy to maintain a working administration within the Reich and this became very difficult with lots of new territories to administer, ever hungry for new people to run stuff there. Even in the Protectorate of Bohemia and Moravia or the Netherlands where swaths of the administration remained in the hands of Czech and Dutch officials, German supervisors were needed to oversee their work and implement German policy.
So, among the most important reasons, why it was easier to afford satellite governments to stay in place in Slovakia or Croatia was that these territories could be administered with a comparatively small German administrative staff.
The same goes for the military. With a previously unseen number of troops engaged fighting the Soviets, occupying territory and policing became a balancing act. Serbia, which was placed under German military administration in 1941 saw the first major uprising against Axis rule the same year with Partisans and Chetniks liberating large swaths of the country. Among the major reasons, this was successful was the troops situation. The Wehrmacht in Serbia initially fielded only three occupational divisions of not much worth, comprised of men over thirty deemed not fit enough to fight in the East. These troops had little experience with Partisan warfare and thus did not perform very well. It became necessary to transfer troops from France, which in light of the German fear of partisan activity there was seen as a major problem.
Other territories which were part of satellite states were left to police themselves or with only minimal German help, so this provided another advantage of not annexing new territories.
Pinning down the Nazis' plans for a post-war Europe for the long-term future is a bit generally difficult outside of the cases of Poland and the Soviet Union, where a comprhensive plan in form of the Generalplan Ost, which laid out concrete visions for how Eastern Europe would be settled and treated in the future, existed.
For Western Europe, it is all a bit more hazy but we do have some ideas for potential future plans based upon how occupation and control was organized and what kinds of different form of occupation and control were implemented in Western Europe. While the ideas of a Lebensraum in the East, including Poland and the USSR had been present virtually from the beginning of the Nazi project, countries that were not traditionally seen within this scheme presented an initial problem; like Czechoslovakia for example, when Nazi Germany for the first time occupied a country where they couldn't argue that they were just revising Versailles or bringing Germans "home into the Reich". In this case, they settled on what can be accurately termed a colonial policy. The idea of the protectorate with the upper echelons of both policy and administration comprised of Germans while the lower echelons of administration especially being comprised of Czech people was both a pragmatic as well as a on-the-spot solution for the problem the occupation of the CSR represented in 1939.
The same event and the ideological problems that came with it, prompted influential political and legal theorist Carl Schmitt to formulate an important theory for how the Nazis would later organize Western Europe: The idea of the "völkische Großraumordnung" was born.
Schmitt's original political theory was one inspired by the American Monroe doctrine. He held that the policy of forbidding any kind of intervention by other powers in their sphere of influence they proved that the world was organized in empires who each had their allotted larger space in which they were free to do as they want. Continental Europe was Germany's space in that calculation and the vision Schmitt laid out consisted of Germany ruling Europe, Britain ruling its empire, the US ruling the American continent, and Japan ruling Asia; with none of them interfering in another power's "Großraum".
Schmitt's theory was the final version of this. Rather, it was Werner Best who furthered the theory, gave it a more "völkisch" spin, and – most importantly in this context – proposed a way of how Germany would rule in its Großraum; a way which was pretty closely adopted in further years.
Best, while often overlooked these days in terms of importance outside of academia, was really a figure who had massive influence on shaping the Third Reich as we ex-post know it. A lawyer who during his studies had been very active in the conflict between Germany and France over the Ruhr area in the early 1920s, he was part of the right-wing intellectuals circles in the Weimar Republic (including that around Ernst Jünger) and joined the NSDAP in 1930. He also joined the SS and after the Nazis' take over of power rose through the ranks of the SS and Himmler's SD by, among other things, taking part in the night of the long knives in 1934.
His first really important contribution however, came in the form of writing the new Gestapo law and thereby transforming virtually all of German policing and the role of the Gestapo: According to Best, the police was to be the doctor of an ailing racial body and thus has to take part in what he called "preventive racial crime fighting". In practice this meant that the Gestapo was from 1936 able to do basically whatever they wanted, including using Concentration Camp imprisonment as a preventive measure. It also transformed the understanding of what police men did for themselves. Not merely policing a country but being the avant garde, the spearhead of a racial ideology in the fight against all its enemies, criminal and racial. The villainous Gestapo both from media as well as from historical research of the later years of Nazi rule – that all was Werner Best's doing.
More important in this context however was his contribution to the Nazis' system of occupation in Europe. After the start of the war in 1939 and with Poland not doing too well in the fight against Germany, the question arose again on how to organize Nazi rule and Nazi occupation in Europe. While in the case of Poland, it was pretty clear what would happen, it also made the Nazis realize the problems they would face: A total and centralized control of all of Europe would be impossible. By November 1939 already around 70-80.000 German officials had been posted to govern and administer Poland alone. Germany didn't have the trained manpower to implement such a system in all of Europe but had to limit it to the East, where it was important for the Lebensraum plans, and had to find alternatives for the West.