Public choice and the Nazis

On average, family members of German soldiers had 72.8 percent of peacetime household income at their disposal.  That is nearly double what families of American (36.7) and British soldiers (38.1) received.

Götz Aly’s new and noteworthy Hitler’s Beneficiaries: Plunder, Racial War, and the Nazi Welfare State tells us how.  The sad answer is that the Nazi regime lived off the resources it stole from conquered nations, forced labor, Jews, and refugees. 

The magnitude of the theft was much larger than I had thought.  In the fiscal year 1938-9, "Aryanization" increased government revenue by 9 percent.  At its peak, Nazi theft was able to finance 70 percent of war revenues, noting that "war revenues" is a flow but the concept does not measure the real resource costs of fighting the war.  See the book’s appendix for a response to some not totally unjustified criticisms of the author and his methods (the author’s claims seem to be correct as worded but the wording has narrower meaning than might strike an ordinary reader at first glance). 

The good news, if you could call it that, is simply that the wartime Nazi regime was less stable than believed and it would have encountered very serious economic and military difficulties once the full plunder was extracted from abroad.  If you are looking for a context where the long-run Laffer Curve holds, you’ll find it here.