Socialism, Nazis, and Keynesian Economics

The Nazi era in Germany is an extremely interesting bit of history, and one that deserves a large amount of study as the Nazi’s present a bit of a conundrum to orthodox political and economic thinkers.

1. The Nazi era is the premier historical example of the success of Keynesian stimulus, that is government spending to get the economy back on track. This is interesting because Keynes theories about government spending can only work to stimulate a free market.

2. The Nazi era is also the premier historical example of a brand of socialism that did work, in terms of nationalization of industries (including banking). However, this success came at the same price as other Socialist countries, by confiscating private wealth and killing people to keep it. The Nazi’s did NOT have a free market.

This “free market/not free market” problem is one every political power struggles with, how to allow enough freedom that the market is healthy, while at the same time commanding the market to do the bidding of the political party. The Nazi’s did it, the Chinese are doing it now. The Russians are getting much better at it. However, there is hardly a lineup of people trying to get into China that don’t also come from even more repressive countries (such as North Korea, where China must seem like a glittering beacon of freedom by comparison).

What we should take away from the history of the Nazis, and their control over the economy, is that it IS POSSIBLE for a central government to create economic gains and stimulus. And that should scare the living hell out of you, because the steps necessary to do that left millions dead in Germany (and occupied countries), and Tens of Millions in Russia and China. Socialism is always one purge away from true success, and the Nazis showed that it’s completely doable if you can scapegoat the people you are purging.

However, Donald Trump is not the literal reincarnation of Hitler. Hitler rose to power on the promise of restoring German greatness as a result of the loss of World War One and the shame of the resulting Treaty of Versailles. Trump ran on a slogan of “Make America Great Again” which is a blatant appeal to nostalgia (even a nostalgia for an America that might never have been). Trump does not have the star power that Hitler did, and his “divisive” personality ensures he will never enjoy Hitler’s record 98% approval ratings. Additionally, Trump is much more likely to have a positive impact on the economy by minimizing rather than increasing government interference.

If you want to look to the 1930s for a comparison, the FDR to Obama comparison is much more apt. Very similar government intervention into the private sector, with the same overall results on the economy.

The take away? When the government seeks to control the economy, to make it work there must be sacrifices. For the Nazis it was the Jews, and for the modern left it is supposedly “the rich” or “the 1%” but in reality it is the middle class.

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