This is what I've expanded on the polemic. I wonder if I should avoid numbers like I did, it's kc tier enough without them but their absence may make it seem vague, though I'm certain I'll include a few graphs, specifically "Ammunition and steel allocation", "Labour input and armaments output" and steel production.
Armaments production in the Third Reich on its first years of war was not that much lower than it could have been: its leadership did the most it could with its limited resources, leaving not too much untapped economic potential. This is a controversial impression one could have from reading Adam Tooze’s Wages of Destruction. This article summarizes what this book has to say on the topic.
Germany entered the war without the resources to satisfy its military production targets, and arms output did not really take off until February 1940, from which it rose until July and stabilized. In ’42 it entered an exponential growth, the classic phase of the ”Speer miracle”, until the middle of 1943, followed by much slower growth (stagnation in some sectors), a final burst in the first half of 1944 and a slide into oblivion.
It is a common assessment that the early war results, mainly the France-Barbarossa interval, were the result of a wastage of productive potential. Already in 1945 John Kenneth Galbraith wrote on Fortune magazine that “Germany should never have lost the war”; it had not mobilized as much of its economic potential to arm itself for its attack on the USSR as it could have. Galbraith was given this line of thought by Albert Speer and his staff. Today this is a common interpretation and can be seen in Wikipedia, the Paradox Interactive forums, /k/ and elsewhere.
This thesis goes along two lines. The first is of late rationalization: the war economy inefficiently employed its resources until 1942 and Speer’s reforms. The second is of undermobilization: too many resources were wasted on the civilian sector prior to the total war drive of 1943.
Late rationalization
The paper trail shows bureaucratic infighting through the France-Barbarossa interval, with economic institutions accusing each other of incompetence. This corroborates older data on production and workforce which shows the former not catching up with the latter’s growth, suggesting a decline in productivity. The concluding picture is of early war Germany “squandering its armaments advantage” through ”egotism and incompetence”. But to truly grasp war production in anticipation for Barbarossa it is necessary to know what its ends and wheter it achieved them.
Barbarossa was an answer to the conundrum of a long war with the economically stronger Anglo-American alliance, by acquiring the resources to survive this drawn-out conflict in a quick land campaign. The time horizon was further away: unlike the Poland-France period the long-term viability of the war economy would not be sacrificed for immediate production (through e.g. burning through raw material stocks) but rather some of the effort was directed to build for the future, with the military-industrial complex undergoing a massive investment boom (already begun in ’39 and continuing to ’42), all of this premised on a brief land campaign and a long war with the Western powers. Thus there would briefly be a priority on arming the Heer, not forgetting the other branches, followed by an air and naval focus in the long war. And it was not any land production but a focus on its mobile component.
This would make possible the operational plans for encirclement-based campaigns, which in turn would achieve the grand strategic goal of an immediate victory. There was thus a “strategic synthesis” with arms production, operational planning and grand strategy working in unison.