Financial wizard of both Weimar Republic and Nazi
Germany, Hjalmar Schacht was an unorthodox economist in the sense that he used
a set of geoeconomics manoeuvres that would raise the eyebrows of his critics, yet
performed well during those tough times. Let me revisit his strategy:
1. Adopting the concept of shadow deficit spending
is number one in my list. Normally government spending in excess of revenue where
funds are sourced from increasing the borrowing limits rather than increasing
taxation slabs is termed as deficit public spending. In strategy it becomes a shadow
operation when neither the amount spent nor the amount of debt raised are
disclosed to the public. Schacht cunningly plotted that the treasury be kept in
the dark throughout while he played with these funds for a solo purpose: interest of the then Weimar state
and with the ascendancy of Hitler the Nazi admin.
2. Keeping the general level of prices & wages
under control at one and the same time. This geoeconomics manoeuvre was so
craftily thought over by Schacht. There were two impelling strategic statements
by him on this subject:
a) Schacht famously said: “It has been shown that,
in contrast to everything which classical national economy has hitherto taught,
not the producer but the
consumer is the ruling factor in economic life”.
b) He also cited: “Since our economy is closely allied with that of foreign countries, not one of us can be indifferent to what consequences these disturbances can have at home and/or abroad”.
Since Germany had to import a lot and service the war
reparation imposed earlier by the allies after First World War simultaneously, forex
was a scarce commodity. Keeping wages unchanged and at the same time enhancing demand
for products coming out of German factories was a daunting task because there is less liquidity in
the market. He managed this task ingenuously by opting for selective
distribution of import and export quotas to a coterie of Nazi supporters/sympathisers
so that they would keep the ex-factory prices down to the lowest possible.
3. Schacht also implemented geoeconomics manoeuvres
such as selective debt defaults
especially for the ones sourced from less powerful European states such
as Netherlands and pay debts promptly to England & France.
4. Yet another strategy manoeuvre was granting export subsidies to manufacturers
who are not competing with powerful countries such as England & France but lesser
powered countries in the European landmass.
5. However, Schacht understood that none of these
manoeuvres would succeed unless it is backed by central authority in Berlin. Hence Schacht declared his allegiance
to the Fuehrer thus:
“Instead of a weak and vacillating Government, a
single, purposeful, energetic personality is ruling Germany today. German
future lies in the hands of our Fuehrer”.
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
