The Theory of Monopolistic Terms of Trade

Abstract

It will be argued in this study that, from 1934 to 1939, Nazi Germany utilized exchange control as a monopolistic pricing device. The exchange control mechanism, the elements of bilateralism, and the special exchange procedures which had been developed under the Weimar Republic were adapted to use as instruments of aggressive commercial policy. The thesis is that German monetary authorities purposefully maintained an overvalued currency on the foreign exchange markets and manipulated the terms of trade through various exchange control devices in order to improve the German position in world trade vis a vis her trading partners. German exchange control exemplified the monopoly aspects of international pricing. Not only did her exchange control set a monopoly price for the Mark (and hence for German goods), it also discriminated between countries and goods, making monopolistic exploitation more perfect. It may be doubted that Germany achieved an “optimum” level of the terms of trade. Nonetheless, it is the opinion of this writer that the primary purpose of exchange control in Germany during this period was to improve the economic welfare of the German state (as German leaders conceived of it) at the expense of those countries which dealt with Germany in foreign trade.