The Past - Hitlers 4 Year Plan
Looking at several situations across history, it is fascinating to imagine how events would have changed if a given faction had understood the true intentions of another. Perhaps this would have led to different courses of action which may well have prevented multiple conflicts. One prime example of this is the lead up to World War Two from 1936 onwards. This was a critical time in Hitlers' expansionary plans where the demilitarised Rhineland was reoccupied, something I explore in further detail in Lessons From French Failures in 1936 Applied-To China Today. From that point onwards Hitler determined that France and Britain, the major continental powers that he believed would oppose him, were weak and would fall Germany expansion. Arguably, this was directly as a result of their lack of opposition to Hitler's expansion into the Rhineland. Following this mindset Hitler commissioned the Four Year Plan. This simultaneously accelerated Germany's rearmament and prepared the country for self-sufficiency to prevent economic strangulation at the hands of a foreign navy.
The Four Year Plan greatly helped revitalize the German economy and significantly reduced the 30% mass unemployment. Germany also took advantage of low interest rates by borrowing large sums to fund it's national expansion. Initially it was led by Hjalmar Schacht, president of the central bank under Hitler who became finance minister in 1936. Schacht was replaced in 1937 by Hermann Goering. Under Goering, imports were slashed. Wages and prices were controlled and enforced under a penalty of being sent to a concentration camp. While state intervention led to full employment, real wages dropped by roughly 25%. Government financing became the predominant investment process and private securities fell by over half from 1933-1934 to 10% in 1935-1938. Thus, Germany's economy had been transformed into a state-controlled war economy where the main output was weaponry. Therein lay the catch; unless they then used their output (weapons) to fuel further expansion, Germany would have gone bust. This is something that happened to the USSR in 1990.
After examining this evidence, I believe that from the moment Hitler committed Germany to the Four Year Plan war was inevitable as the alternative was a financial crash.
If Chamberlin had known there was such a critical economic imperative, there is little doubt that his concept of "Peace in our time" could ever have existed. Instead, Britain may well have accelerated her war preparations along with France. Following this course of action, the result could have been an intimidated and deterred Germany.
The Present - Chinas Five Year Plan
Looking at China today, it has similar expansionist energy related to the Second Phase of it's Empire Cycle. Like Germany in the post-1929 Wall Street Crash, it is also in a similar state of economic contraction. Having noted this, I do not expect a regime change as the CCP is firmly in control. The pandemic has accelerated the shift from a manufacturing, export driven economy to one that will become more self-contained in parallel to the Third Reich. I believe the obvious consumption gap will be compensated for by a Chinese Five Year Plan that will utilise surplus manufacturing to fuel an arms race and prepare for a global war by 2025.
As part of this process I expect to see the Yuan appreciate considerably as a reflection of the relative power of China versus America. America will be happy to weaken its currency to stimulate exports and manufacturing as it fills the void left by China. As this occurs the Chinese will be happy to increase their currency's buying power to acquire raw materials for their economy. Internally, I would expect the CCP to do all it can to reinflate the housing bubble as it is the main source of value for households in China (real estate represents 75% of household wealth in China compared to 28% in the US). This means China will seek to integrate its state owned companies with its innovative private sector to maximise economic growth. However, without external investment China will ultimately become a militarised, state-controlled economy just as the Third Reich once did.
If there is one lesson history teaches about states in their Second Phase of expansion (as China now is) it is that the greater the internal economic pressures, the higher the probability of aggressive expansionary behaviour to solve the problem. Japan in 1931 is an excellent example. Like Germany, the depression in Japan was so severe that the country went bust. It was forced to abandon the gold standard and float its currency which consequently depreciated so that Japanese buying power dried up. The terrible economic conditions and large wealth gaps led to fighting between the left and the right. By 1932 this had resulted in a massive upsurge in right wing nationalism and militarism to forcefully restore order and bring back economic stability. This only reinforced the path that propelled Japanese expansion in 1931 with the invasion of Manchuria to acquire both natural and human resources.
The lessons from history are very clear where China is concerned. It has initiated it's own Five Year Plan that, like Nazi Germany's, will then force it to use its newly acquired military power to expand and pay back the investment. With such internal dynamics in play, Western politicians must understand that the only way to deter what is now an almost inevitable World War Three is to match China in the current arms race and deter aggression. While this is being accomplished, China’s natural resource chains must be constricted as soon as possible to limit growth before it possesses the military capability to protect them.
If Chamberlin were alive today, what would he advise Western leaders to do? Follow the same path of appeasement that led to war?