Fairbairn's advice of using the chin jab to defend against the bearhug is vaguely valid. Creating space is key to not getting taken down, and pushing the head away in conjunction with separating your hips is pretty effective.
That's assuming the Nazi in the illustration was trying to perform a takedown. I think most authors of self-defense books assume bearhugs are used to crush people's spines, like Pumola did in Bloodsport.
Here's a video of Bas using straight palms.
In regards to both the knife hand and the chin jab, I'm reading about how clubs, knuckledusters, and knuckle-knives were popular in the US and British armies during both World Wars.
^Teh real combatives?