|Author(s):||Tooze, J. Adam|
Published by EH.NET (April 2003)
J. Adam Tooze, Statistics and the German State, 1900-1945: The Making of
Modern Economic Knowledge. Cambridge and New York: Cambridge University
Press, 2001. xviii + 314 pp. $65 (hardcover), ISBN: 0-521-80318-7.
Reviewed for EH.NET by Mark Perlman, Department of Economics, Emeritus,
University of Pittsburgh.
I. General introduction
It has been years since I last read a book that opened up such neglected
vistas. However assessed, the first half of this book, particularly, should be
mandatory reading for everyone interested in the history of economic thought if
only because there is virtually no other easily-available description detailing
the generally-unknown story of how truly brilliant advances in the empirical
approach to macroeconomics, national accounts, and economic planning can be
found in Inter-War and World War II Germany.
Tooze, a Fellow in Economic History of Jesus College (Cambridge), details how
the economic system generally attributed to the imaginative mind of Maynard
Keynes had actually been designed and then successfully engineered a good ten
years earlier during the Weimar Republic. Why was it unknown? Largely because
the genius who designed it had character flaws that led him not only to embrace
Nazism but also to play his cards badly in that party’s game.
A. The dearth of information about the history of empirical economics
Professional economists by and large are totally unaware of the fascinating
literature describing the development of the empirical approach to their
subject, a literature comprising both a variety of attempts to quantify
economic activities and the use of generalized economic episodes to
characterize economic growth and the evolution of economic organization. I need
only cite a general ignorance of the wealth of material found in the nineteen
carefully-edited professionally-executed volumes of the Report of the United
States Industrial Commission, 1898-1901, surveying how modern industrial
capitalism was reshaping the American economy to make my point — a point
further sharpened by recalling that it was their work on this Commission which
sharpened both the knowledge and awareness of the lacunae of information that
eventually surfaced in the original and analytically important approaches
pioneered by Thorstein Veblen and John R. Commons (cf. North, 1899; Lindsay,
1901; and Perlman, 1958).
The experts working for the Commission focused on the growth of industrial
gigantism, not only in the United States but in several European countries as
well. In Germany, in particular, there was also an emerging literature by such
worthies as Eduard Bernstein, Max Weber, Lujo Brentano, and Werner Sombart, all
of whom characterized the then emerging capitalism as a shift from artisan- or
shop-capitalism to High or Finance Capitalism — the kind of thing which in
America led to the formation of the United States Steel Corporation and in
Germany to similarly large conglomerates, including cartels.
Yet, the American statistical efforts, such as those of the Harvard Economic
Research Committee (remembered these days by so few even though it was
responsible for founding the Review of Economic Statistics, later
retitled Review of Economics and Statistics), and even the 1933 efforts
at national income determination by the U.S. Department of Commerce with the
help of the National Bureau of Economic Research pale by comparison with what
was undertaken and to an amazing degree realized by a group of German
statistical entrepreneurs. Immediately after World War I, throughout the 1920s,
and carrying through the worst years of the Great Depression, the German
efforts in the end resulted in titanic technocratic power struggles during the
several phases of the Third Reich (1933-1936, 1936-1939, 1939-1942, 1942-45).
B. Studenski, the background of national accounts, and his ignoring the Weimar
The standard historical treatment of the evolution of national account systems,
country by country, is Paul Studenski’s 1958 The Income of Nations,
corrected and expanded in 1961 into two volumes, one historical and the other
analytical. Presumably because of the absence of ready access to the data,
Studenski’s study is silent on German developments during the Nazi period. His
silence regarding the brilliant developments during the Weimar Republic may
possibly be ascribed to the unfortunate condition that Ernest Wagemann, the
brilliant architect of the system, became a willing convert to Nazism — with
the celebration of his achievements being consequently muted to such a point of
silence that he is not mentioned either in the New Palgrave nor in Mark Blaug’s
Who’s Who in Economics (third edition). Indeed, the only popularly known
“key” to the true situation may have been Maynard Keynes’s articulated
enthusiasm for what the German empirical macroeconomic system had achieved as
expressed in the German translation of his 1937 Introduction to the General
Theory. Here one should defer to Bertram Schefold’s frustration at not
being able to find the original English version of that Introduction — as
Keynes was apparently not fluent in German, it could be that the translator
took liberties with what appeared over Keynes’s signature. What the Royal
Economic Society published as this Introduction, Schefold reports, bears
significant differences from what was originally printed in German (Schefold,
II. The Layout of Tooze’s Study
The organization of this study is essentially chronological with seven chapters
plus an intriguing introduction and a conclusion that deals with the loose ends
after the 1945 surrender and advances the author’s view of the critical role of
centralized statistical collection and analysis in giving the Nazis such total
control over the Germany economy.
As Tooze reports the story of German macroeconomic planning, it is based on the
insights of a series of quasi-geniuses whose capacities to envision the
importance of national accounts in national economic programming were immense;
their propensity to engage in careers of bureaucratic piracy was no less
impressive. While it is a replay of the old story of intellectuals and their
need for patrons, what makes the book so fascinating to this reviewer is the
surfeit of talent that was wasted because it was the Nazi Party rather than the
German state that virtually all of them came to serve.
Tooze starts by reviewing the industrial statistics of the Hohenzollern state,
an approach based on a concept of the small business as the principal
economic-output unit. Only during World War I was it realized that the German
economy had been transformed into High Capitalism — that is, large industrial
firms dominating the national capacity to produce — a realization really to be
credited to Walter Rathenau, an industrial genius from the electrical industry
who became the organizer of German wartime production. Rathenau was the Weimar
Republic’s foreign minister and was assassinated by a Nazi for the double sins
of having negotiated the post-war Reparations program and being a Jew.
After that war the development of what we would, ourselves, term a modern
analytical approach, but one based on empiricism as well as diagrammatic
conceptualization, was largely the work of Ernst Wagemann, a Chilean-born
German whose flamboyant dress, personal behavior, and propensity for
politicking took him through numerous political fights first within the Weimar
governments and then through the first years of the Third Reich. Reading
Tooze’s account of Wagemann’s self-education, his recognition that a total and
continuous national accounting system had to replace business-cycle indicators
from specific industry data, his capacity for predicting the need for
reflation, and his insights into the roles of public investment and
demand-management becomes increasingly fascinating. As head of the Weimar
government’s Statistical Office in Berlin he created a semi-independent
institute on business cycles. Seemingly as professional as the afore-mentioned
Harvard Committee and the National Bureau of Economic Research, that institute
managed to gain the effective cooperation of both the trade unions and the
employers’ federations largely as the result of Wagemann’s adroit political
III. Macroeconomic controls and the rise of Nazi power
All went well until the Great Crash hit Germany; Wagemann clearly understood
(earlier and more thoroughly than Maynard Keynes) that what was needed was
reflation, something solidly opposed by the banks and by the leadership of the
Weimar government under Heinrich Br?ning. Chancellor Br?ning, like many
political leaders then (and now), thought that the way out of the Depression
involved simply a reduction of industrial production costs (first wages and
then prices). This course put him in head-on collision with the trade unions,
who referred constantly to Wagemann’s monthly Real Price Index to show that the
industrial workers were the ones clearly bearing the brunt of Br?ning’s program
– particularly since Br?ning was committed to keeping agricultural prices
high. The result was the time-honored practice of shooting at the messenger
carrying the bad news. Br?ning’s fury at Wagemann (the messenger) became
Wagemann (a technocrat through and through) was indifferent to who his
supporters were and had few or no qualms about joining the Nazi Party — a
group whose economic game was quite consistent with his own ideas that the
economy should be fine-tuned.
True, others in the statistical establishment played the same political game,
and the influence of Wagemann, whose only real ties were with Goering, proved
over time to be even less than tenuous. Early on he lost out to Wilhelm Leisse
(who was even closer to Goering). Later both lost out to Walter Gr?vell. And
eventually Gr?vell’s star was eclipsed by Albert Speer’s man, Hans Kehrl, the
only one who was not professionally a statistician. Speer ended up running the
German economy until the end of the Third Reich largely along the lines that
Wagemann had originally drawn.
IV. Efficiency, totalitarianism, and individual liberty
Tooze’s account of the odyssey of German national accounts includes a broader
perspective on the role of organized data analysis in individual liberty or
oppression. Tooze opposes the argument of G?tz Aly and Karl-Heinz Roth, two
German scholars who concluded in their 1984 Die Restlose Erfassung:
Volksz?hlen, Indentifizieren, Aussondern in Nationalsozialismus that it was
the excellence of data-reporting (comprehensiveness as well as speedy
availability) that gave the Nazis their complete control over the German
economy and thus enabled them to sharpen it so well that it engaged Europe for
more than ten years on a totally destructive course.
Tooze’s alternative thought is that a will to totalitarian control is not so
much a technocratic but a philosophical problem. This difference could well
lead to another reconsideration of the pros and cons of Ned Ludd’s true place
in history (or even Robert Oppenheimer’s purported second thoughts just after
that the Trinity explosion on July 16, 1945).
More to the point, however, in this reviewer’s judgment is the question of the
purpose of national accounts, a topic well worth considering and one which led
Simon Kuznets to denounce what his quondam student, Milton Gilbert, and others
at the Bureau of Economic Analysis had produced (Kuznets, 1947; but also see
Perlman, 1987 and Kapuria-Foreman and Perlman, 1995). In the 1920s Wagemann
seems to have had the idea of using National Accounts to construct
contracyclical government investment programs. But by the Nazi period his
purpose was to increase military output — incidentally, the same that James
Meade and Richard Stone had when the British War Cabinet assigned them a
similar problem in 1940.
Kapuria-Foreman, Vibha and Mark Perlman, “An Economic Historian’s Economist:
Remembering Simon Kuznets,” Economic Journal, 105 (Nov. 1995): 1524-47.
Kuznets, Simon (1948). “Discussion of the New Department of Commerce Income
Series,” Review of Economics and Statistics, 30 (August), 151-79.
Lindsay, Samuel M. (1901). “A Colossal Inquiry Completed: The Three-Years- Work
of the United States Industrial Commission,” American Monthly Review of
Reviews, XXIV, 711-18.
North, S.N.D. (1899). “The Industrial Commission,” North American
Review, CLXVIII, 708-19.
Perlman, Mark (, 1976). Labor Union Theories in America: Background
and Development. Westport, CT: Greenwood Press.
Perlman, Mark (, 1996). “Political Purpose and the National Accounts,” in
The Character of Economic Thought, Economic Characters, and Economic
Institutions: Selected Essays. Ann Arbor: University of Michigan Press, pp.
Schefold, Bertram (1980). “The General Theory for a Totalitarian State? A Note
on Keynes’s Preface to the German Edition of 1936.” Cambridge Journal of
Economics, Vol. 4, pp. 175-76.
Studenski, Paul ( 1961). The Income of Nations, part one,
History (with corrections and emendations), part two, Theory and
Mark Perlman is University Professor of Economics (Emeritus) at the University
of Pittsburgh. His The Character of Economic Thought, Economic Characters,
and Economic Institutions: Selected Essays was published by the University
of Michigan Press in 1996.
|Subject(s):||History of Economic Thought; Methodology|
|Time Period(s):||20th Century: Pre WWII|