Revisiting geoeconomics manoeuvres of Hjalmar Schacht

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

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser