Economic policy

Who was Hjalmar Schacht?

President of the Reichsbank

What was the main policy of Schacht?

Deficit financing

Why did Schacht use deficit financing?

To bring about recovery, he followed a policy of public investment, largely by the state which spent heavily.

What did the policy of deficit financing include?

- Setting interest rates at a low level

- Rescheduling the debts of local authorities

- Giving assistance to farmers and small businesses

- Introducing public works, such as public building, motorways, land reclamation and reforestation

Was deficit financing a success?

As a result, government expenditure rose by 70% from 1933-36. Unemployment fell and although fears of inflation did not materialise, a balance of trade deficit did occur, as Germany imported more raw materials and failed to increase its exports, which meant the country was short of money.

When was Schacht's New Plan?

September 1934

What was Schacht's new plan?

- Gave government control over all trade

- Government decided which imports were allowed, with priority given to heavy industry

- Bilateral trade treaties were signed

- Mefo bills were introduced

What were mefo bills?

Government paid for military equipment with them which could be exchanged for money or they could get 4% interest per annum if they waited 5 years

Was Schacht's 'new plan' successful?

The plan only hid the balance of payment problem, and by 1936 this was getting worse. Schacht wanted to reduce arms expenditure and increase the production of industrial goods to sell. This resulted in the 'guns or butter' debate

What solved the 'guns or butter' problem?

The four year plan

When did the Four Year Plan brought in?

1936

Who brought in the Four Year Plan?

Hermann Goring

What were the aims of the four year plan?

- Increased agricultural production

- Increase the production of raw materials

- Develop ersatz products

- Control the labour force to control inflation

- Regulate imports and exports in favour of rearmament at the expense of agriculture

When did Schacht resign as economic minister?

1937

Was the Four Year Plan a success?

Although production rose in some industries, such as aluminium, it did not reach the targets for oil or rubber, and failed to meet the levels required by the armed forces. When war broke out, Germany still relied on foreign supplied for one third of its raw materials.

What was the unemployment figure after Schacht's policies?

1.6 million in 1936

Why did unemployment fall so drastically?

Through job creation schemes as well as the introduction of conscription in May 1935

Why did workers lose rights?

Independent unions were banned and replaced by the German Labour Front, which was under Nazi control and the only option available to workers. Worker also lost the right to negotiate wages and conditions of work, which were arranged through the DAF, which supervised conditions and dealt harshly with unrest

What was the Strength through Joy movement?

Offered workers sports facilities, cultural visits and holidays, but in practise these were only available to loyal workers

Why did workers not always benefit from Nazi policies?

- Real wages only surpassed 1929 levels in 1938

- Working hours rose from 43 hours in 1933 to 47 in 1939

- Those working in consumer industries struggled