In some anti-Fed, pro-fiat money circles (yes, they exist) you will actually hear defenses of Adolf Hitler’s economic policy, on the grounds that it yielded a super economy for Germany. Germany was engaged in military Keynesianism. These writers mistake this for prosperity. It’s the error people make when they think World War II was a prosperous time for the United States.
Writes economist Albrecht Ritschl:
A critical reassessment of deficit spending during the Nazi recovery reveals a surprisingly small role for macroeconomic policy. Both the descriptive evidence and the results from multivariate time series forecasts suggest that recovery from the Great Depression was mainly driven by a rebound effect that was visible in the data already by late 1932. Up to around 1936, the German recovery was no more advanced than that of Britain or the United States, where far less expansionary fiscal policies were followed. However, even in Germany the fiscal impulse generated by the budget deficit was too small to be consistent with Keynesian demand stimulation under an income/expenditure mechanism. In order to explain the very high, at times two-digit growth rates of GNP during the recovery, deficits would have had to be two to five times higher than they actually were. Apparently, recovery was due to forces other than fiscal and monetary policy, just as in the cases of Britain and the United States. . . .
Nazi recovery appears less spectacular than was hitherto believed. Our results also indicate that government spending was dominated by war preparation already in a very early phase of the Nazi recovery. I find little justification for the popular interpretation that recovery was sparked off by non-military work-creation and the construction of the autobahn network. Investment in the autobahn reached sizable magnitudes only in 1936. All these projects pale in comparison with the rapid build-up of military expenditure, except for the year of 1933 when rearmament had not yet really begun. To secure the desired high speed of war preparation, the Nazi administration took early, often draconian steps to crowd out private demand. The growth in consumer spending fell short of the increase in national product, and the contribution of private investment to the recovery remained unimpressive.
Strict control of private expenditure was partly achieved by maintaining taxation at the high levels reached during the depression years. [Deficit Spending in the Nazi Recovery, 1933-1938: A Critical Reassessment, Institute for Empirical Research in Economics, University of Zurich, pp. 16-17.]
Thanks to Gary North.