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In his lifetime, my grandfather, Frank Munk, published three books and numerous articles on the intersection of economics and political science. The Legacy of Nazism, published in 1943, was the second of those books. It was written just four years after the Munk family left Europe and arrived in the United States. In addition to the preface, I have published four chapters from this book in order to capture the gist of his ideas as they relate to my grandfather's experience of the times.

These books are all out of print today so, for reference, I have transcribed a few chapters from each book that have elements relevant to our family history. The other two books were:

The Legacy of Nazism

Chapter 1: The Impact Of Totalitarian Economy

Capitalism - Real And Imaginary

At the present moment, we are so concerned with the day-to-day progress of the war on the Russian front, in the Mediterranean, and in the Far East that we tend to forget the basic conflicts which lie behind these specific battles. Actually, they are only the brutal, tangible evidence of world-wide antagonisms in ideas, in economic and political systems. Two, if not three, ways of organizing society are engaged in a struggle of life and death. The democratic capitalism of America and Great Britain has joined with the socialistic commonwealth of Russia in a gigantic effort to destroy, and escape destruction by, the ideological, political, and economic system of the Axis nations. The war from the point of view of the economist or sociologist is but the second phase of an inevitable conflict between two patterns of society which began the moment the total state was born.

The democratic state which the totalitarians have attacked is, of course, very different from the liberal state which they pretend to war against. The very structure of the capitalism which they vilify underwent obvious change during the two decades which followed World War I. Government intervention became the rule rather than the exception, competition was largely giving way to internal and external protectionism, the price system lost its fluidity and was becoming ever more rigid. One country after another went over into the camp of what is called the "social welfare states." In Russia the change was almost complete. But New Deals were very systematically adopted elsewhere: in the Scandinavian countries; in Republican Germany and Austria; in Czechoslovakia; rather belatedly in France; in Great Britain, to some extent; and in America. Perhaps this change represented a natural process. Perhaps its causes were more obscure. At any rate, the democratic state was certainly not the Plutocratic, money-ruled, mechanistic devil that enemy propaganda suggested. Indeed, Fascism will ultimately go down in defeat because it is fighting demons of its own creation, not its real enemies.

The totalitarian state, which is opposed to the social welfare state in its various stages of development, is "total" in that it dominates and engulfs every aspect of social organization and of individual life. It is authoritarian because it does not believe in government of the people, by the people -- though it claims to govern "for" the people. It is completely centralized. It is hierarchical, since it rejects equality in any form. It is warlike and expansionist, and despises peace except "as a means to new war." It commands and rests upon mass support and sways the masses by effective use of propaganda. It is, in Professor Hayes' words, "a revolt against the moderation and proportion of classical Greece, against the order and legality of ancient Rome, against the righteousness and justice of the Jewish prophets, against the charity and mercy and peace of Christ, against the whole vast cultural heritage of the Christian Church in middle ages and modern times, against the enlightenment, the reason, and the humanitarianism of the eighteenth century, against the liberal democracy of the nineteenth."'

It is not the purpose of this book to sit in judgment upon the totalitarian despots, to condemn their unspeakable outrages committed against free peoples, their ruthless enslavement of literally hundreds of millions of human beings. Rather we propose to study the impact of their economic organization and institutions on social welfare states, and the effects which have followed. More than a dozen of these social welfare states, beginning with Germany, were subjected by the totalitarian dictators. At first, a new economic organization was merely superimposed on the old one. Later, the actual, functioning institutions of the conquered countries were more and more replaced by new ones. Pro­found changes have already occurred: physical changes in the location of industries and the structure of farming; changes in the distribution of peoples, nations, classes, races; changes mores and habits of action and thought; changes in types of business enterprise‑indeed, in the very nature of private business.

Today we face a new and unknown continent: "Blackest Europe." And when the wave of Nazism has spent itself, the inundated continent will not look as it did before the flood. It is in the nature of social change that it cannot reverse itself. Our economic order was in the midst of unprecedented change before the conflict started. Nazism and Fascism act as catalysts. The product will be different from both the old system and totalitarian rule. The old structure is destroyed. Every month, every year of war makes the return more impossible. Change marches on.

Revolution Began Earlier

As a preliminary to an examination of the effects of Nazi control of Europe, we ought to recognize that war ranks second to the totalitarian counter-revolution as a cause of the present economic dissolution of occupied Europe. Many forces of change rested in the womb of our economic society. Many of our problems were brought to a head prior to the outbreak of war. It was totalitarian economy, and not war economy, which created some of the unbridgeable chasms that are facing us. Economic warfare, for example, preceded armed warfare. The war itself has had a curiously paradoxical effect: it has mercilessly revealed weaknesses and flaws of social organization (most obviously in France, but to some extent elsewhere); it has also tended to conceal under problems of war economy many cracks, splits, divisions in our society (class warfare, industrial monopoly, technological unemployment) either by preventing them from appearing on the surface or by making us attribute them to wartime circumstances. We know, of course, that totalitarian economy always will and must lead to war. However, there must be few optimists of sufficient courage "to believe that, had we not been plunged into the present war by the frenzy of two desperate men, world trade would have been quietly pursuing a steady upward course towards the goal of universal prosperity and peace."

Many changes have been planned by the Nazis or carried out by their satellites. Many more will follow because of the discontent, opposition, and hatred they have engendered. Whichever proves to be of greater consequence -- the force of Fascism and Nazism, or the volcanic eruption of revolt that must follow -- their combined effect will be still more and different change.

The purpose of this study is twofold. It is to find the direction and, if possible, the extent of changes already wrought; it is also to detect the open or hidden forms which shape the emerging economic and social structure of the future. This is surely not a mere intellectual preoccupation. It ought to be recognized as an important part of the global war. The war is not being fought on land, on sea, and in the air alone. It is fought within each social system, by social systems, and through social systems. War is not a thing detached from economic and political organization. It is the physical expression or this. Whenever it is separate from such organization. It cannot be fought successfully. It is still true that war is too serious a business to be left to generals. Neither can it be left to engineers. It is a social phenomenon and not a mechanical job. Our economic system is fighting too. So is that of our enemy. To study what is going on in the enemy's camp is therefore of essential importance for the prosecution of war.

A study of social and economic change is even more directly relevant to the building of a new world after the deluge. Many discussions of postwar reconstruction are wholly unrealistic because they envisage the reconstitution of an economic order which had virtually disappeared even before the Great War. They completely overlook the fact that, for several years now, world economy has been exposed to the impact of a system utterly opposed to rationalism, liberalism, individualism, and all the other fundamentals of a business economy. In occupied countries, at least, the very institutions of the older orders have been destroyed, deflected, and remodeled to suit the dictates of the Totalitarian Superstate. Finally, those discussions forget that both the impact of totalitarianism and the tremendous pressure of opposition to it -- military, conspiratory, and spiritual -- create an atmosphere in which nothing is more improbable than a return to the structure of the 1920's and 1930's. Our planning for postwar upbuilding must be mobile, based on something like moving averages of the trends generated continuously by the dynamic forces and counter­ forces of this age of transition. It must take into account that the "usages and arrangements, formal and informal, consciously contrived or adventitious" which constitute economic organization have undergone a sequence of shocks from which many cannot recover. Dynamic planning, based upon research and facts instead of wishful thinking, is essential.

Charisma – Medieval And Modern

The totalitarian economy which has accelerated normal social mutations and brought about arbitrary changes of its own, has many faces. It is, among other things, a huge experiment in using the outward forms and institutions of a previous business economy as elements of a new planned economic order. Outward forms remain, the inner content changes. The totalitarian system encountered capitalism at all stages of development, from the highly developed, concentrated economy of Germany to the initial stages of capitalistic production in some Balkan countries. Yet one of the inner incongruities of Nazism is the fact that its philosophy, which has forced this reordering of society, is essentially pre-capitalistic romantic and charismatic, based on leadership, relying on supernatural, magic power.

Charisma is, of course, the alleged capacity of a human being to perform miraculous deeds, because he possesses supernatural, mysterious, rationally unexplainable powers. Unbelievers may smile at the religious zeal and devotion of his followers, but to millions of Germans Hitler's charisma is as real as that of any founder of a new church was in his time. Indeed, it is for the Germans the supreme reality of their world. The core of Nazism is thus directly polar to anything rational, and since capitalism is the economic expression of rationality, it is opposed to it just as it is opposed to any other form of rationality. Charisma may be utterly subjective, but its existence and spread are objective facts, and "magical thinking also is thinking."

Consequently, Nazism can and will exist as long as people recognize Hitler's supernatural endowment. It precludes any lasting compromise with the rational philosophy of democracy, which derives its power from the people upwards, instead of from the Fuhrer downwards. It must bring Nazism into conflict with the churches, whose charismatic claims stand in direct conflict with those of Hitler. Nazism is, as has been pointed out, a new religion and a new church, which subordinates its economy exactly as it was subjected to the authority of the church in the Middle Ages.

It is this combination of efficient, modern technology with a medieval philosophy that makes Nazism so difficult to understand for anyone not familiar with the uneasy mysticism of the Germans. It represents a spirit utterly foreign to the Western world and therefore hostile to the individualistic and utilitarian roots of a business economy. The very concept of economics, as understood by the Nazis, is an antithesis to the Western concept. To the National Socialist economists "all economy is race economy -- it can be understood only as an expression of vitality and creative power of a folk race and not from the point of view of the individual or from the point of view of purely economic facts or motives." The clash of economic systems is, thus, first and foremost a conflict of philosophies, which in no way precludes certain very practical applications. The clash of the "non‑economic economy" of Germany with the economic systems at every degree of maturity ranging from feudalism to late capitalism is apt to produce some very interesting and unforeseen results.

Three Sectors of Totalitarian Economy

The long-term effects of totalitarian rule will differ in every country. The countries affected may be conveniently classified into three major groups:

In the first group will be those in which the total virus originated and from which it spread abroad. It, therefore, comprises Germany, Italy, and Japan. It is not only conceivable but highly probable that the effect of years of totalitarianism in these states will be very different from that in the other groups. In the first place, the mental make-up, tradition, and economic history of these states must have prepared them for the infection. Their capitalism must have arrived at an impasse which made a totalitarian economy acceptable to the businessmen, the intellectuals, and the unemployed, while other groups and classes were at least immobilized and did not offer active opposition. They were carriers of infection a long time before it broke out into the open.

The second group is composed of countries on which the deadly disease was forced from the outside by countries belonging to the first group. They did not develop a totalitarian economy from the inside. They were subjected to it by invasion, occupation, betrayal, and other weapons from the arsenal of the Axis. It remained an alien system maintained by terror, "enforced, commanded, imposed, extorted by threats." A totalitarian economy can function here only in face of a bitter and relentless opposition. This did not prevent its spread. It is being, extended continuously and reaches into every nook of the system. It is in no way less integral than in countries of group one.

All other countries belong to the third group. Some of them are engaged in the war against the Axis. A few maintain a fragile neutrality. None has been spared the effects of total economy. In order to defend themselves, they have had to organize for total war. In many ways, the economy of total War is a total economy. But there remain fundamental differences. At the present time, the United States and Great Britain have given up their former business economy and have embraced at least for the duration an economy of force without which no modern war can be won. There remains, though, the basic difference that, while the Western democracies regard a totalitarian war economy as a temporary even if a necessary evil, the totalitarian countries consider it as a superior type of economic organization to be retained during intervals of "Peace."

Here the question of the lasting effects of the struggle against the economy of force will remain unanswered for the time being. It may be assumed, however, that these effects will be much more pronounced in countries falling in the first and second categories than in those that fall in the third. It may also be assumed that the impact of totalitarian economy will differ in "active countries" and "passive nazified, fascisized countries." The main effect in the latter class may indeed consist in the generation of counterforces on the part of people that have become objects of totalitarian exploitation. No nation that has undergone the intense pressures of a totalitarian economy for a period of years will ever again be the same, even if the change is preeminently due to radical reaction against totalitarianism.

The Two “Ebullient Fringes”

The countries on which totalitarian economy has been imposed from outside comprise very roughly the two small‑state belts of Europe. One lies between Western and Central Europe (Norway, Denmark, Holland, Belgium, Luxembourg and Switzerland -- the last as yet free); the other, between the Center and the East (mainly the Baltic States, Poland, Czechoslovakia, Austria, Hungary, Rumania, Yugoslavia, Bulgaria, Albania and Greece). The latter coincides with what Haushofer terms Zwischeneuropa and other authors call Border Europe. Thrown in by the Nazis were large sections of France, of Russia, and to a lesser degree Fascist satellite states on the confines of Europe. The two small-state belts now under totalitarian domination have an aggregate population of about 150,000,000, or more than the United States; and, in addition, occupied Russia and occupied France total in the neighborhood of 100,000,000. Deacon describes the Eastern belt as an agrarian zone bounded by Germany on the west and Soviet Russia on the east and extending from the Baltic to the Peloponnesus. This is, to a degree, misleading because of the importance of industry in both Czechoslovakia and Austria. Other countries have been industrialized recently. He is right, however, when he maintains that the Eastern belt of Europe now exposed to "Nazism is "the key to continental war and peace."

The "ebullient Eastern fringe" of Europe, with its more than 100,000,000 inhabitants, and more than thirty nationalities -- some small, some larger, but none absolutely predominant -- is the real political weather pole of the world. It also represents the only remaining economic frontier of the continent with immense potentialities of development. Little known to Britain or to the United States, it contains great promises of cultural achievement. A study of the effect of totalitarianism on this sphere will furnish the key to postwar tasks. The nationalities inhabiting this belt before the Fascist invasion and its depopulation attempts were listed as follows in a recent book:

Interspersed with them are 6,000,000 Germans (plus the same number of Austrians who speak German) and various smaller ethnic groups. The number of Jews in this region is given by the same source as 5,500,000. The numbers given refer to pre-Hitler Europe. Since then many national groups have been decimated by war, extermination, oppression, hunger, and deportation.

The long-run structural changes in the countries of all three categories, taking place at different levels, could roughly be divided as follows: (1) structural changes of physical nature, such as the destruction of certain industries, the construction of others, industrialization or agrarianization or shifts in the industrial and agricultural set‑up of the country; (2) organizational changes, such as rearrangement of economic power, shifts of controlling groups, centralization or decentralization, and capital intensification or slackening certain types of rationalization; (3) changes in the economic system, such as shifts in basic relationships between private enterprise and government (local governments or German supergovernment), socialization of control or of ownership, and changes in the institution of property; and (4) ideational changes, changes of social psychology and popular attitudes towards ordering and developmental forces of the economic order.

Any attempt at a fuller discussion not only would have to include the direct impacts or totalitarianism on the pattern of production, distribution, and control, but also would require an analysis of complex social changes. In many countries, certain classes of the population -- such as the intelligentsia, the indigenous business class, or at least the leaders of labor movements or of military organization -- will be wiped out. As, after the Thirty Years War, which left the Czech people without their former leading class, so with the present war whole peoples will present an altered composition after it is over. Many of the former social balances will be destroyed; new balances will have to be set up.

Irretrievable Change

It is encouraging that at least some leaders of the New Europe, which is being born in the furnace of war and revolution, are aware of the alterations taking place. A consciousness in this group of the realities of the situation is borne out in a statement by President Benes: "The fact is that both Fascism and Nazism have fundamentally altered the social and economic structure of their States. And even if they have not solved their social and economic problems, they talk and lie about them extensively, and thus prepare for democracy a heritage which it must control, if it is not to fall again."

By now Nazi-Fascism has changed the social and economic structure not only of the countries in which it arose, but also of the whole continent and even beyond.

The peoples subject to Nazi control are aware of the changes in the midst of which it is their lot to live, even if all the Allied leaders are not. In overwhelming majority, they reject totalitarianism. They are, however, conscious that return to prewar conditions is blocked, and they would be opposed to any wholesale attempts at mechanical reconstruction of many former relationships and institutions. They have ceased to regard a business economy based upon exchange, freedom of contract, and private allocation of factors of production as the only possible type of economic organization. While they reject the Nazi economy of force, they do not desire a return to the prewar type of mixed economy that was neither free, flexible, nor sufficiently planned. They tend toward more conscious social control. Whatever their sympathies, and however vague their aspirations at present, it is inconceivable that their modern, delicately balanced and interdependent economies could have been subjected to the economy of force without undergoing fundamental change.

In the future, economic analysis and theory will have to be implemented. As a result of the contemporary experiment in imposing totalitarian economy, such concepts as equilibrium are inapplicable to a society which has substituted for the idea of natural equilibrium a continuous, deliberate, arbitrary dynamism. The familiar exchange economy of pre-Nazi Europe and America is only one of several possible economic systems, whether we approve or disapprove. Historically, an autonomous exchange economy is an exception rather than a norm; in its modern form of organization (based upon money, credit, and the corporation device), it is even more recent.

Thus, if we are to have an attempt at a generally valid economic analysis, we have to admit that the use of power in all its forms -- physical and psychological -- is just as much a part of human economy as the presumed dominance of individual economic motives. "Economic aims can be, and often are, promoted by any device by which men manipulate one another." Economic methods, too, are only one of many types of domination over men, and by no means always the most stringent. This was recognized more than two decade ago by Max Weber. He defined domination is "the possibility to force upon other persons one's own will." He recognized two polar types of domination: domination by constellation of interests (particularly by monopoly), and domination by authority (i.e., by force of command and obedience)."

Goals Of The Garrison State

We must distinguish between domination as a method and domination as a goal. Domination may be a goal per se, or it may be a method, e.g., of acquiring wealth or markets or sinecures or any other economic advantage. To the German, National Socialist domination (Herrschaft) is both method and goal. It is a value in itself, the highest value of all -- an idea unacceptable to an Englishman or an American. The goal may thus be either economic or meta‑economic. Capitalism is an economic system, National Socialism a "meta‑economic" system, i.e., a system that goes beyond things economic. The former stands for "economy for economy's sake,” the latter for "economy -- and every other human activity -- for the sake of military power and ultimate domination.” National Socialism is the economy of battle potential.

Our business economy is based on pressures, too -- even if they are indirect and milder -- such as property rights, contracts, combinations, associations. But totalitarian economy, as we know it today, uses what we call "business economy” merely as one of the instruments for attaining domination. It has retained some of their familiar pressures, but it has also replaced some of them by intensive pressures of a non-economic nature: party discipline, military government, concentration camps, to give a few examples. Economy is an instrument of domination and direct domination over men as a method of economic administration; economy as a means and economy as an aim (both permeated by the use of force of every degree and of every description) characterize the order to which the majority of the white race has been subjected.

As Lasswell puts it in his "developmental construct" of a "Garrison State": "The trend of the times is away from the dominance of the specialist on bargaining, who is the businessman, and towards the supremacy of the specialist on violence, the soldier… The distinctive frame of reference in a fighting society is fighting potential. "

Totalitarian economy may be regarded as a system of intensive exploitation compared with the capitalistic system of extensive exploitation. The use of social force is present even in a capitalistic society. However, almost without exception, the use of force is milder, more indirect, and less conspicuous than when it is elevated to the center of social control of the total state.

Many people have wondered why National Socialist economy has been so consistently misjudged: overrated by some, underrated by most. The explanation is that it cannot be properly understood if regarded as a phase or an aberration of capitalism. It is not capitalism. It is much more brutal than even the most rugged capitalistic society, which cloaks and dilutes power relationships and accepts numerous checks and restraints on the exercise of force. It is force naked and unashamed. It may be an interlude between two developmental phases of capitalist evolution, but while it lasts it constitutes the most radical departure from existing modes of production -- far more radical than Russian communism, which in its present form resembles state capitalism.

In some ways National Socialist economy may be compared with the "primitive accumulation" which, according, to Marx, ushered in modern capitalism. The birth of capitalism was ascribed by Marx to: "the spoliation of the church's property, the fraudulent alienation of the State domains, the robbery of the common lands, the usurpation of feudal and clan property, and its transformation into modern private property under circumstances of reckless terrorism." It is at least conceivable that there may be more than one such period or primitive accumulation, that society may return to more ordered and less crude methods of exploitation after a bloody interval of direct appropriation by physical violence. In the meantime, physical force once more dominates economic power. He who controls tanks and airplanes, in the totalitarian countries, also controls economic processes. Society is composed of two classes again, but their essence has changed. Possessors of control over weapons of physical and mental violence are the dominant class. All others, including those, in nominal control of means of production, are dominated by a minority that possesses munitions and microphones. The unfortunate people of the conquered countries are doubly subjected: they are dominated by an alien people dominated by a wicked and unmerciful group inspired by lust for power and conquest.

It is only natural that every society should try to explain other societies by having recourse to its own particular frame of reference. Predominantly capitalistic societies of the West seek to find a rational explanation of that primeval eruption of barbaric brutality known as Nazism. They refuse to believe that Hitler's ideal man is but Nietzsche's "magnificent blond beast, roaming wantonly in search of prey and victory… requiring from time to time the discharge of this hidden source of its nature. The animal must again show itself must again go back into the wilderness." They cannot believe Nazi glorification of the "age of cruelty." The follower of Marx also attempts to explain total economy in terms of his special theories. He regards the economy of Nazism as one that has reached the limit of monopolization and cartelization (which is correct), as a defensive mechanism against socialization, as a hoax imposed on the masses with a view to perpetuating capitalist exploitation.

Further, an understanding of the brown-black-yellow flood will not come from calling it "middle-class revolt," or "reactionary conservatism," or the "triumph of bureaucracy." It contains elements of all three, including the belief of many capitalists that Hitler would save them. But all are equally wide of the mark. It is not surprising that so many observers in remote countries fail to see the essentials of Nazism. Thousands of Marxists and non-Marxists in Germany or Italy were equally blind. Just as an explanation of capitalism by one who stands outside its frame would be meaningless, so any valid explanation of Nazism must be stated in Nazi terms. Nazism is based on unbridled use of every conceivable method of force -- physical, mental, economic, social -- and has as its ultimate goal complete monopoly of power on a worldwide scale. It has no other principles, restraints, philosophy, economic basis, or religious conviction: "Power, power, and again power," according to Spengler, is the only value worth fighting for in this world. No wonder so many people refuse even to look into the abyss on the verge of which Western civilization is tottering.

Footnotes

Many of these books are out of print but they can usually be found at used bookstores throughout the United States via Alibris.com .

1. Carlton J. H. Hayes, "The Novelty of Totalitarianism in the History of Western Civilization," Proceedings of the American Philosophical Society, 82, 101 (1940).

2. R. G. Glenday, "Economic Reconstruction After the War," Journal of the Royal Statistical Society, Vol. CV, Pt. 1 (1942), P. 17.

3. Walton H. Hamilton, "Organization, Economic," in Encyclopaedia of the Social Sciences, Vol. XL P. 484 (Double Vol. VI).

4. See the brilliant analysis of "charismatic domination" by Max Weber, "Wirtschaft und Gesellschaft" in Grundriss der Sozialokonomik (Tubingen, 1922), pp. 140ff.

5. Theodor Putz, "Karl Knies also Vorbereiter einer politischen Volkswirtschaftstheorie," Schmollers Jahrbuch, Vol. LX, Heft 1, 60 (Feb 1936), P. 9.

6. Karl Haushofer, Grenzen in ihrer geographischen und politischen Bedeutung (Leipzig, 1937), P. 40.

7. Kenneth J. Deacon, "Regional Divisions of Industry and Agriculture' in Problems of Post-War Reconstruction, ed. H. P. Jordan (Washington., 1942), P. 43.

8. Josef Hanc, Eastern Europe and the United States (Boston, 1942), p. 14. Also, by the same author, Tornado Across Eastern Europe (New York, 1942).

9. Czechoslovakia in Post-War Europe, Problem of Reconstruction (London, 1942), P. 27.

10. Melchior Palyi, "Economic Foundations of the German Totalitarian State," American Journal of Sociology, XLVI, 471 (Jan., 1941).

11. Weber, op. cit., p. 604. It is characteristic that there is no equivalent for the German term Herrschaft, used by Weber, in English. 

12. Harold D. Lasswell, "The Garrison State," American Journal of Sociology, XLVI, 455 ff (Jan., 1941).

13. Capital (Chicago, 1906), I, 805.

14. The ablest attempt in this direction is probably Franz Neumann, Behemoth (New York, 1942).

Read these other chapters from this book:

Frank published three books in addition to his unpublished memoirs. These three books can often be found at used bookstores throughout the United States via Alibris.com .

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