Allied and Axis GDP

Ralph Zuljan

A well established predictor of military victory in great power warfare is GDP (Gross Domestic Product). When someone suggests that the Axis could not hope to defeat the Allies, the underlying assumption is that the relative material potential of the sides made an Axis victory impossible. Scholars readily accept and promulgate a caution against economic determinism, yet some still tend to accept it in practice. Consider, for example, the comments of Mark Harrison who asserts that "the Allies translated their economic superiority into overwhelming advantage on the battlefield."

On the surface, a look at the numbers Harrison provides confirm the belief that the Axis did not stand a chance of winning the Second World War. Consider the ratio of Allied to Axis GDP presented in the following table:

Wartime GDP of the Great Powers
1938 to 1945 in International Dollars and 1990 Prices (billions)*
Country 1938 1939 1940 1941 1942 1943 1944 1945
USA 800 869 943 1094 1235 1399 1499 1474
UK 284 287 316 344 353 361 346 331
France 186 199 164 130 116 110 93 101
Italy 141 151 147 144 145 137 117 92
USSR 359 366 417 359 274 305 362 343
Germany 351 384 387 412 417 426 437 310
Austria 24 27 27 29 27 28 29 12
Japan 169 184 192 196 197 194 189 144
Allied/Axis GDP 2.4 2.3 2.1 2.0 2.1 2.3 3.1 5.0

*Based on Table 1 found in Mark Harrison, The USSR and Total War: Why Didn't the Soviet Economy Collapse in 1942? from Mark Harrison, "The Economics of World War II: an Overview," in Mark Harrison, ed., The Economics of World War II: Six Great Powers in International Comparison, Cambridge University Press (1998), 10.

Harrison arrives at the annual ratios with the following equations. In 1938-9, the Allied GDP consists of USA + UK + France + USSR; Axis GDP consists of Germany + Austria + Italy + Japan. In 1940, half of the French GDP is allotted to the Allies and half is given to the Axis. In 1941-3, Allied GDP consists of USA + UK + USSR; Axis GDP consists of Germany + France + Austria + Italy + Japan. For 1944, Italian GDP is allotted to the Allies. In 1945, the GDP of Italy and France are added to the Allied total.

The GDP story of World War II is richer than such analysis suggests. GDP is a rough measure of economic power and decision makers probably make their determinations based on the results of the previous year. From this assumption the following statements may be derived from the estimates of GDP during the war years.

In 1939, France and the UK confronted Germany (which included Austria) over Poland. The ratio of Anglo-French GDP to that of Germany/Austria was 1.25 for 1938. Allied GDP was superior to that of Germany/Austria. However, on the eve of war, Nazi Germany announced a treaty with the USSR. The Nazi-Soviet Pact certainly neutralized the economic weight of the USSR and it may have been interpreted as a German/Austrian alliance with the Soviet Union. In the latter case, the ratio of Allied/Axis GDP shifts to 0.64 and the Allied expectation is to lose. This rationalizes both the motivation of Hitler's solicitation of Stalin's blessing for the division of Poland and Hitler's expectation that the Anglo-French alliance would not declare war over the German/Austrian invasion of Poland, in terms of GDP. The willingness of France and the UK to engage Germany/Austria suggests that the former interpretation held sway with Allied decision makers.

During the battle of France, in 1940, Italy joined the war on the side of Germany/Austria. In terms of 1939 GDP, the Allies to Axis ratio now stood at 0.86 because of the addition of Italian GDP to the Axis. In a matter of weeks, France then agreed to an armistice because of Axis success on the battlefield. With the loss of France to the Allies, the Allies to Axis ratio dropped to 0.51 as the UK stood alone against the combined economic power of Germany/Austria and Italy. With the addition of French GDP, the Allies to Axis ratio plummets to 0.38 and an Axis victory seems economically certain. British intransigence, epitomized by Churchill's poignant bluster hid the hopelessness of the Allied cause from the public. Realistically, only the hope of a Soviet or American entry into the war on the Allied side provided any solace.

The fact that a majority of great power GDP remained neutral at the beginning of 1941 gave the Allies hope and threatened the Axis. Hitler altered that with the Axis invasion of the USSR. Adding the 1940 GDP of the USSR to that of the UK shifted the Allies to Axis great power GDP ratio to 1.31, giving the Allies the economic advantage lost with the entry of Italy in 1940. However, with French GDP included in the Axis tally, the ratio was 1.01. Hitler said of the war with the Soviet Union that "the world will hold its breath."

Only two great powers were neutral in the latter half of 1941, the USA and Japan. In the fall, when defeat of the USSR seemed very possible, the Japanese were considering war with the Americans. Japanese decision makers may have been able to reconcile themselves to a war with the US, regardless of the incredible disparity in GDP, because of the global balance of great power GDP. By siding with the Axis and assuming the swift defeat and incorporation of the USSR by the Axis in Europe, Japan would provide enough GDP to the Axis side for an advantage in the ratio of Allied to Axis GDP. With the addition of Soviet GDP to the Axis, Japan engaged on the Axis side and the United States on Allied side, the ratio would be at 0.94.

At the end of 1941, the Axis had every reason to believe the war against the Allies was economically winnable. The reality of an undefeated USSR, however, gave Churchill every reason to say "we will win after all," after the attack on Pearl Harbor. For the first time, the Allies had a commanding GDP advantage of 1.83 in the Allies to Axis ratio of great power GDP. From this time onwards, the Allies retained a substantial economic advantage over the Axis.

This analysis shows that while by 1942 there was a substantial Allied economic advantage, measured in GDP, this did not exist at the beginning of the war in 1939. In fact for a period of time the Axis commanded greater GDP than the Allies. Suggesting that the Allies had a GDP superiority from the start is wrong and misses the dynamics of World War II. It is worth noting that from a lead of 1.25 in 1939, the Allies were reduced to a miserable 0.38 by 1941. There was nothing preordained about the recovery of GDP that followed. It is unreasonable to believe that Allied decision makers were particularly confident of economic dominance until well into 1942, regardless of their public pronouncements.

Originally published in "World War II" at Suite101.com on February 1, 2003.
Revised edition published in "Articles On War" at OnWar.com on July 1, 2003.

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