If the Nazis were neither capitalists nor socialists, then what were they?

by Bergeinstein55
Superplaner

Both, neither, take your pick.

Ideologically the nazis were neither socialists nor capitalist but at the same time Nazi germany contained elements of both socialism and capitalism. The same holds true for the economy of Nazi Germany, it is best characterized as a mixed economy with elements of both socialist planned economies and capitalist free markets. I will try to keep this somewhat brief because describing what fascism is ideologically... well it's like trying to nail water to the wall. Much the same is true but to a lesser degree for the economic system.

In the early years of the Nazi rule they largely continued the policies established during the Weimar Republic, primarily large public works funded through deficit spending. The most well known of these being the Autobahn (Yes, the Autobahn was a Weimar era idea, not a Nazi idea, the "well at least Hitler build good highways"-meme is entirely unfounded). While large scale public works to combat unemployment are ideologically a socialist concept you tend to find the same thing in a lot of places following the Great Depression. The US for example had the New Deal which was basically the same thing.

This is where the similarities end. Hjalmar Schacht and the MEFO-bills. Hjalmar Schacht was initially head of the Reichsbank and then minister of Finance and he was a man of vision. Perhaps a little too much visision. He saw the possibilities of increased deficit spending that followed the abandonment of the gold standard. There was just one problem. The budget still needed to be balanced. You can't create something out of nothing. Well. At least not for long. But you can do it for a little while and this is what Schacht discovered. The MEFO bills were basically a second, secret currency that the government could use to pay companies (or companies pay each other) but they never showed up in government budget. They could be exchanged for Reichsmark after a certain date (varied depending on which issue of MEFO-bills). Since these bills were issued by the government but never showed up in government bookkeeping, Germany could use it to fund industrial expansion, mostly military industry, without it showing up in government books. At least for a while.

It worked super well until these bills came due and had to be exchanged for Reichsmark to ensure that the system maintained faith in this secondary, secret, currency. At this point (namely from 1938 and onwards, the government engaged in some seriously shady shit. Among others, taking money out of peoples bank accounts, forcing regional banks to buy government bonds and other highly questionable moves to free up money to pay for the MEFO-bills. Shady? Sure, but it worked. Kind of. But it couldn't work forever and this was known to everyone who knew anything. It's just a very elaborate way of printing money secretly which causes inflation.

There was no way out of this situation in the long term. You can only fool the market for so long before it eventually catches on. At this point Germany was very much all in. There were two possible options, total economic collapse or an aggressive war of expansion where debts could be paid with captured gold reserves or goods from conquered nations. The annexaions of Austria and Czechoslovakia in the years prior to the war had given Germany much needed injections of hard currency but not nearly enough to pay the piper.

Now, I'm an MBA with a specialization in national economics and I can't even begin to tell you where this practice fits in with any established ideological or financial system. It's a scam on a colossal scale, the exact RM-equivalent of MEFO-bills were kept secret but the estimates I've seen are around 14 billion RM, compared to 19 billion in government bonds. Basically, they almost doubled the money supply without telling anyone. This is neither socialist planned economy, nor captialist free market practice.

Ideologically you'll find much of the same mix of things. There were strong social programs with deep roots in German society which the Nazis knew they could never touch without losing popular support but also waves of privatizations and deregulations usually asociated with market liberalism. Some companies flourished under nazi rule, others were nationalized with little if any compensation. Some companies were part of the MEFO-scam, others used vast amounts of slave labour in their workforce, some had both. Again, these are not traditionally elements of socialism or capitalism (spare me the wage slavery debate please).

So what's the TL;DR here? Well, Nazi Germany was a Fascist Autocracy with a mixed economy inflated by the dirtiest tricks ever envisioned by economists.