Did Germany Exploit Its Small Trading Partners? The Nature of the German Interwar and Wartime Trade Policies Revisited from the Swedish Experience

Abstract

In this article, the conventional wisdom on German trade policies during the interwar and the wartime years are examined from the Swedish experience. The conventional view, represented by, for instance, Hirschman, Child and Ellis, is that Germany adopted exploitative trade policies during the 1930s. By forcing bilateral agreements onto its smaller trading partners, the bargaining power was biased towards Germany's advantage – that is, Germany gained the market position of a monopolist-monopsonist. According to the conventional view, this was reflected in the cash flows, export and import prices and the commodity structure of the trade. In this article, German trade policies are analyzed with respect to the design and practice of the Swedish-German bilateral exchange clearing agreement; the commodity structure of the trade; and the price trends in Swedish-German bilateral trade. In the analyses, no evidence was found that would suffice to confirm the conventional view on German trade policies. Instead, it seems more likely that the Germans aimed for long-term cooperation, as has been claimed by, for instance, Milward, Neal and Ritschl. This does not mean that German trade policies were not exploitative, but since bilateral arrangement leveled the asymmetric power relations, Germany could not make use of its relatively stronger position.

Keywords:

• Swedish trade policies
• bilaterol exchange
• Interwar period
• Nazi Germany
• World War Two

Acknowledgements

Grateful acknowledgements are made to Handelsbanken's research foundation for funding our research; to professor Sven-Olof Olsson of Halmstad University for inviting us to session 91 of the XIV International Economic History Congress; to Professor Harm Schröter, the University of Bergen and our anonymous referees for valuable comments and suggestions, which certainly helped to improve the article; to Associate Professor Erik Lindberg at the Department of History for helping out with processing of data and presentation of analyses; and finally to Lynn Karlsson at the Department of Economic History, Uppsala University, for reading and correcting drafts.

Notes

¹Kenwood, A. G. & Lougheed, A. L., The Growth of the International Economy, 1820–2000. London/New York: Routledge 2002, 213.

²Einzig, Paul, Bloodless Invasion: German Economic Penetration into the Danubian States and the Balkans. London: Duckworth 1938; Ellis, Howard S., Exchange Control in Central Europe (Harvard Economic Studies 69). Cambridge, MA: Harvard University Press 1941; Schweitzer, A., The Role of Foreign Trade in the Nazi War Economy, Journal of Political Economy, vol. 51, 1943: 4.

³Hirschman, Albert O., National Power and the Structure of Foreign Trade, expanded edn. Berkeley, CA: University of California Press 1980, viii. Today a vast literature concurs with the basic idea that country size and level of economic development are important determinants of leverage in international affairs (see, e.g., Richardson, N. R. & Kegly, C. W. Jr., Trade Dependence and Foreign Policy Compliance: A Longitudinal Analysis, International Studies Quarterly, vol. 24, 1980: 2; Santos, Theotonio dos, The Structure of Dependence, American Economic Review, vol. 60, 1970: 2, 221–236.

⁴Fritz, Martin, The Adaptable Nation: Essays in Swedish Economy during the Second World War. Göteborg/Stockholm: Ekonomisk-historiska inst. Univ./Almqvist & Wiksell 1982, 10.

⁵Child, Frank C., The Theory and Practice of Exchange Control in Germany: A Study of Monopolistic Exploitation in International Markets. Paper presented at the Tenth International Scholars Forum, The Hague, 1958. Guillebaud argued that German monopoly pricing was necessary in order to circumvent either a deficit in trade or a significant reduction in the volume of trade due to the ‘overvalued’ Reichsmark (Guillebaud, C. W., The Economic Recovery of Germany from 1933 to the Incorporation of Austria in March 1938. London:1939, 158). Ellis claimed that Germany first boosted its exports to the countries in the South East of Europe by offering sales at low prices. Eventually, however, the prices of German goods increased. As German export industries could not risk losing their market shares, German trade authorities maintained the low prices. This strengthened the German dominance in the region (Ellis, Exchange Control in Central Europe, Cambridge, Massachusetts: Harvard University Press, 1941, 264–265). In this respect, export subsidises became of strategic importance, which was recently demonstrated by Michael Ebi (Export Um Jeden Preis: Die Deutsche Exportförderung Von 1932–1938; Hervorgegangen Aus Dem Mannheimer Projekt Zur Wirtschaftsgeschichte Des Dritten Reiches, Vswg = Vierteljahrschrift Fur Sozial- Und Wirtschaftsgeschichte. Beihefte, 174:2. Stuttgart: Steiner 2004).

⁶Hirschman, National Power and the Structure of Foreign Trade, 26–33.

⁷Blattmann, Christopher, Hwang, Jason & Williamson, Jeffrey G., Winners and Losers in the Commodity Lottery: The Impact of Terms of Trade Growth and Volatility in the Periphery, 1870–1939, Journal of Development Economics, vol. 82, 2007: 160–161; Prebisch, Raul, The Economic Development of Latin America and Its Principal Problems. New York: United Nations Department of Economic Affairs, 1950, 1–22; Singer, H. W, The Distribution of Gains between Investing and Borrowing Countries, American Economic Review, vol. 40, 1997: 473–485. According to Blattman et al. (Winners and Losers, 7) and Bleaney, Michael & Greenaway, David (Long-run Trends in the Relative Price of Primary Commodities and in the Terms of Trade of Developing Countries, Oxford Economic Papers, vol. 45, 1993: 3, 491–500) there is still no consensus, let alone a really well-articulated theory, on the macroeconomic effects of changes in the terms of trade.

⁸Ritschl, A. O, Nazi Economic Imperialism and the Exploitation of the Small: Evidence from Germany's Secret Foreign Exchange Balances, 1938–1940, Economic History Review, vol. 54, 2001: 2, 332–333. See also the seminal work on German plans for autarchy by Dieter Petzina (Autarkiepolitik Im Dritten Reich: Der Nationalsozialistische Vierjahresplan. Stuttgart: Schriftenreihe Der Vierteljahrshefte Für Zeitgeschichte 1968).

⁹Child, Theory and Practice of Exchange Control, 168–184; Ritschl, Nazi Economic Imperialism, 327.

¹⁰Neal, Larry, The Economics and Finance of Bilateral Clearing Agreements: Germany, 1934–8, Economic History Review, vol. 32, 1979: 3.

¹¹Milward, Alan S, The Reichsmark Bloc and the International Economy, Der ‘Führerstaat’: Mythos Und Realität: Studien Zur Struktur Und Politik Des Dritten Reiches, Eds. Gerhard Hirschfeld & Lothar Kettenacker. Stuttgart: Klett-Cotta 1981, 401. It is well known that the German government considered the export industries to be key to financing the foreign debt and, in particular, to resolving unemployment (Tooze, Adam, The Wages of Destruction: The Making and Breaking of the Nazi Economy. London: Allen Lane 2006, 91–95; see also Overy, Richard James, The Nazi Economic Recovery, 1932–1938, 2nd rev. edn (New Studies in Economic and Social History 27). Cambridge: Cambridge University Press 1996, 61–65).

¹²Schröter, Harm, Risk and Control in Multinational Enterprise: German Businesses in Scandinavia, 1918–1939, Business History Review vol. 62, 1988: 3.

¹³Roll, Erik, Bytte eller utbytte. Den norsk-tyske bilateraliseringen og clearingavtalene 1931–1935. Trondheim: NTNU 2004, 122–124.

¹⁴Baker Fox, Annette, The Power of Small States: Diplomacy in World War II. Chicago, IL: University of Chicago Press 1959, 1–9.

¹⁵Ritschl, Nazi Economic Imperialism, 327, 332–333; see also, Kaiser, David E., Economic Diplomacy and the Origins of the Second World War: Germany, Britain, France and Eastern Europe, 1930–1939. Princeton, NJ: Princeton University Press 1980, 138.

¹⁶Child, Theory and Practice of Exchange Control, Chapters VI–IX; Wittmann, Klaus, Schwedens Wirtschaftsbeziehungen Zum Dritten Reich 1933–1945, 1. Aufl. ed. (Studien Zur Modernen Geschichte 23). München: Oldenbourg 1978, Chapters 2–3; Hirschman, National Power and the Structure of Foreign Trade, 34–40; Nilson, Bengt, Handelspolitik under skärpt konkurrens: England och Sverige 1929–39 (Bibliotheca Historica Lundensis 58). Lund: LiberFörlag/Gleerup 1983, 64.

¹⁷Tooze, Wages of Destruction, 230.

¹⁸Fritz, The Adaptable Nation, 10–11.

¹⁹Wittmann, Schwedens Wirtschaftsbeziehungen Zum Dritten Reich, 110–111.

²⁰Fritz, The Adaptable Nation, 14–15.

²¹Tooze, Wages of Destruction, 243.

²²Nilson, Handelspolitik under skärpt konkurrens, 61–62.

²³Prebisch, Economic Development of Latin America, 1–22; Singer, Distribution of Gains, 473–485.

²⁴Ritschl, Nazi Economic Imperialism, 340–342.

²⁵Neal, The Economics and Finance of Bilateral Clearing Agreements, 392–394.

²⁶Hedberg, Peter, Handeln och betalningarna mellan Sverige och Tyskland 1934–1945: den svensk-tyska clearingepoken ur ett kontraktsekonomiskt perspektiv. Uppsala: Acta Universitatis Upsaliensis 2003, Part I.

²⁷Ritschl, Nazi Economic Imperialism, 327.

²⁸National Archives (NA.) Clearingnämndens arkiv (CLN), Fk, Vol. 15. Supplement to Protokoll vom 20 Juni bis 10 Juli 1935.

²⁹Hedberg, Handeln och betalningarna mellan Sverige och Tyskland, 47, 78–79. The Norwegian-German bilateral exchange showed a similar course of events (see Roll, Bytte eller utbytte, 115–124).

³⁰Nilson, Handelspolitik under skärpt konkurrens, 102–104.

³¹The Swedish negotiators threatened to freeze and expropriate German assets to compensate the deficit with an old loan issued in 1878 and granted by German banks to Sveriges Allmänna Hypoteksbank. In 1935 the loan was estimated to be 4.8 million SEK (NA. CLN. FIIb 17, Vol. 486. Memo. 12 June 1935).

³²See, e.g., Ebi's analysis of the German attempts to promote the German exports by subsidies (Ebi, Export um jeden Preis).

³³Hedberg, Handeln och betalningarna mellan Sverige och Tyskland, 85–92.

³⁴Hedberg, Handeln och betalningarna mellan Sverige och Tyskland, Chapter 5.

³⁵Hedberg, Handeln och betalningarna mellan Sverige och Tyskland, 203.

³⁶Tooze, Wages of Destruction, Chapter 7; Timothy Mason and Jane Coplan, Social Policy in the Third Reich: The Working Class and The “National Community”, Providence, R.I.; Oxford: Berg, 1993. 300–301.

³⁷NA. UD. HP 64 Ct, Vol. 2334. Memo by Hägglöf, 5 November 1937.

³⁸NA. CLN. Fk, Vol. 15. Memo from the Swedish embassy in Berlin, 4 February 1938.

³⁹Fritz, The Adaptable Nation, 177–186.

⁴⁰Hedberg, Handeln och betalningarna mellan Sverige och Tyskland, 139–141.

⁴¹NA. UD. HP 64 Ct, Vol. 2334. PM av Hägglöf angående vissa handelspolitiska frågor i förhållande till Tyskland, 5 November 1937.

⁴²Blattmann et al., Winners and Losers.

⁴³Ingvar Svennilson, Strukturella inslag i de senare årens ekonomiska utveckling: Översikt (Meddelanden från Konjunkturinstitutet. Serie B 1). Stockholm:, 1939.

⁴⁴Hirschman, National Power and the Structure of Foreign Trade, 98–101; ‘Värdet av Sveriges varuutbyte med främmande länder’, Table C Hela omsättningen. Kommerskollegium, Sveriges Officiella Statistik (SOS Handel). Berättelse för år 1929, 1938 and 1944 av Kommerskollegium (1936).

⁴⁵Jan Bohlin, Bo Franzén, Johan Söderberg and Rodney Edvinsson have compiled and computed data on the Swedish exchange rates. The data have been made available online at: http://www.riksbank.com/templates/Page.aspx?id=27403/.

⁴⁶Kindleberger, Charles P., Tak, Herman G. van der & Vanek, Jaroslav, The Terms of Trade: A European Case Study. New York: Wiley 1956. P(price)/Q(quantity) = X, X = 100 (The unit price in kilo grams or litres). It should be noted that no considerations have been made with regard to the possibilities of an inferior goods problem. Olsson has pointed out that the quality of German coal and coke deteriorated during the war (Olsson, Sven-Olof, German Coal and Swedish Fuel, 1939–1945 (Meddelanden från Ekonomisk-historiska institutionen vid Göteborgs universitet 36). Uppsala: Almqvist & Wiksell 1975, Chapter 6). However, there is no information at hand that could help to check the goods traded or, more importantly, to adjust the price analysis for such a problem.

⁴⁷Stassfurterkalisalts 20/40 is a fertilizer produced in Stassfurter, Germany.

⁴⁸Olsson, German Coal and Swedish Fuel, Chapter 2.

⁴⁹Olsson, German Coal and Swedish Fuel, 36–38.

⁵⁰Hedberg, Handeln och betalningarna mellan Sverige och Tyskland, 140.

⁵¹Olsson, German Coal and Swedish Fuel, 16.

⁵²Unfortunately, no prices were recorded after the outbreak of the war in 1939.

⁵³Olsson, German Coal and Swedish Fuel.

⁵⁴Olsson, German Coal and Swedish Fuel, 32.

⁵⁵Olsson, German Coal and Swedish Fuel.