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Britain’s Grand Strategy of Restrained Punishment

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door for Germany’s absolute control of the commerce of Hungary, Czecho- slovakia, Jugoslavia, and Italy” (Foerster 1931, 619). He forewarns, “The creation of a Central European national block would inevitably give rise to a Germanic hegemony on the European continent” (622). Germany was negotiating other tariff preference treaties with Romania and Bulgaria (Stambrook 1972, 116). Britain’s concern was that Hitler and the National Socialist Party, which advocated economic self-suf‹ciency and autarky (as well as both Anschluss and Mitteleuropa), made substantial gains in the 1930 and 1932 Reichstag elections (Kaiser 1990, 371–72). In related events, during May 1932, the Germans announced their intention to leave the League of Nations World Disarmament Conference, and in 1933, Hitler became chancellor, withdrawing from the League of Nations and accelerating German rearmament.9

German economic policy challenged liberal trade principles. Under the direction of Hjalmar Schacht at the Reichsbank, the Germans introduced a complex system of controls and the use of foreign exchange (Newton 1991, 183–84). Trade policy was founded on barter agreements with neighboring and Latin American countries, which provided food and raw materials in exchange for manufactured goods (any difference was made up in inconvertible marks eligible for use only in Germany). By 1936, Hitler supported a policy of economic autarky. Hitler’s Four Year Plan was intended to reduce German dependence on foreign suppliers and to con- serve available foreign exchange for the importation and stockpiling of strategic materials and food imports (foreign exchange was needed to pay for raw-material imports for rearmament) (Carroll 1968, 122–39). It was urgent to prepare the army and the economy for war in four years. To achieve self-suf‹ciency, the Plan created rudimentary synthetic oil and rubber industries, as well as increased home production of certain raw materials, such as iron and light metals, which could be substituted for unavailable metals (Weinberg 1980, 23–25). The problem with such a plan was that German dependence on overseas raw materials would always require substantial German participation in world trade (Murray 1984, 5–6, charts 1 and 2).

Neither a policy of participation in the global trading order nor eco- nomic autarky could satisfy Germany’s economic needs (Craig 1978, 698). For Hitler, the ultimate solution lay only in the conquest of Lebensraum (Calleo 1978, 94, 97, 105–7; Deist 1994, 381–82). Hitler proposed to solve Germany’s economic problems by conquering Austria and Czechoslovakia in order to clear land for German colonization (Kaiser 1990, 371). A dom-

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