nazi economy

schacht

hjalmar schacht, economic minister until 1937, was the key figure in nazi economic policy. he was never a nazi but his proven economic skills earned him respect inside and outside the party.

the battle for work: methods

• their first priority was reducing unemployment which they labelled the battle for work.

• in june 1933 the law to reduce unemployment was renewed and expanded (began under papen)

• large sums of money (one billion RM) were spent on the building of roads (autobahns) and public buildings and increased industrial production was stimulated through loans and tax relief to private companies.

• the car industry was encouraged by tax concessions which resulted in a 40% increase in production.

• public investment was tripled between 1933-36 and government expenditure increased by 70%.

battle for work 2

• the RAD - reich labour service was extended to employ 19-25 year olds. this removed young men from the labour market and by 1935 employed some 500k

• conscription was introduced in 1935 which also reduced employment figures - the armed forces increased from 100k in 1935 to 1.4 million in 1939.

• loans were provided to women who gave up their jobs to get married.

• from the registered peak of 6 million unemployed in january 1933, the offical figures for 1936 show it had reduced to 2.1 million. for unemployed germans nazi economic policy was to be welcomed.

how successful was the reduction of employment

speeches and broadcasts by hitler repeatedly claimed the battle for work had been won. By 1936, unemployment fell to 1.6 million and by 1939 it was under 300k.

• however, economic recovery had actually began before the nazis and many job creation schemes used by the regime were actually based on policies introduced by bruning in the early 1930s.

• part of the reduction was due to persuading married women to give up employment by granting them marriage loans and releasing their jobs for male workers.

• reintroducing conscription took a large amount of men out of the labour market.

• inflating figures such as occasional occupation counted as permanent and those drafted into unpaid agricultural work were counted as employed.

• after 1936 rearmament led to a rapid expansion of employment and resulted in labour shortages reappearing by 1939.

deficit financing

in order to bring about recovery schacht encouraged heavy state spending following a policy of deficit financing which resulted in government spending rising by 70% between 1933-36.

deficit financing is when a government spends more than the revenue it collects during a certain period

the new plan sept 1934

• by the 3rd july, schacht was given dictatorial powers over the economy which he then used to introduce the new plan of september 1924.

• this provided for a comprehensive government control of all aspects of trade, tariffs, capital and currency exchange in an attempt to prevent excessive imports.

• germany suffered from a trade deficit - this meant germany was importing raw materials whilst failing to increase it’s exports. its gold and foreign currency reserves were also low.

trade treaties and currency

• schacht tried to promote trade and save foreign exchange by signing bilateral trade treaties, especially with the countries of south east europe, like romania and yugoslavia. these often took the form of straightforward barter agreements.

• in this way germany exerted economic influence in the balkans long before it obtained military and political control.

• the reichsmark currency: germany purchased raw materials from countries it traded with on the condition that the reichsmark would only be used to buy back german goods.

mefo bills

• a special government money bill similar to a credit note. they were used to pay manufacturers of military equipment.

• these were used to raise funds by offering them at a 4% interest rate on the money market.

• these were issued by the reichbank and guaranteed by the govt as payment for goods, deferred for up to five years, and companies were encouraged to defer for the full term.

• in this way, the rearmament programme could begin in 1935 without the funds to finance it. the rearmament could also be kept secret since the expenditure didn’t appear in govt accounts.

evidence for recovery

investment was spread between rearmament, construction and transportation and in the first three years was directed towards work creation schemes such as reforestation, land reclamation and road improvement.

the regime saw economic recovery as the top priority for political stabilisation and social peace.

• rearmament wasn’t the answer for recovery as the problems facing the german economy in 1933 would’ve been exacerbated by high levels of military spending. when it reached higher levels in 1936 it began to impose new strains on the economy.

• hitler was aware of the powers hostility to rearmament and was wary of intervention if the versailles clauses were torn up too obviously.

• the armed forces were anxious to rebuilt military powers.

• militarization happened but at a low level, by early 1936 the economic recovery was well advanced and then emphasis was placed towards rearmament.

evidence for rearmament

• hitler from the start made it clear he wanted germany to be a major military power again and in the long run economic revival was vital to its military revival.

• in preparation for war military expenditure was around 1.3% of germany gnp.

• the use of mefo bills concealed govt military contracts

• conscription was introduced in 1935 and increased the size of the army

• between 1934-38 some 58% of aircraft production programmes were devoted to building trainer aircrafts and only 18% combat planes.

guns or butter

• schacht suggested a reduction in arms expenditure to increase production of industrial goods that could be exported to earn foreign exchange

• this was unacceptable to nazi leadership as hitler wanted to expand rearmament to achieve his foreign policy objectives. therefore he had to intervene through goring.

• the choice between consumer goods and rearmament was called guns v butter.

• goring replaced schacht who was put in charge of the office of the four year plan

aims and objectives of four year plan

• german armed forces must be operational within four years

• the german economy must be fit for war within four years

• he stated the direction he wanted the economy to go in, in a secret memorandum presented to goring in august 1936 seen as one of the most significant documents of nazi history.

how to achieve autarky

• increase industrial production of key commodities such as food and iron

• develop ersatz (substitute) products e.g buna (artificial rubber) to replace rubber imports.

• gradually another method of self-sufficiency was given more stress conquering other countries to use their resources

how to achieve rearmament

• 6.4 billion marks invested by state authorities and private companies in big industrial ventures.

• rearmament dominated germany’s economy between 36-39 in 38-39 the military budget took up 52% of state spending and 17% of national product.

• 2/3 of industrial investment in germany between 1936-39 went directly to war preparation, chemical industry, aviation, aluminium engineering.

• by 1939 1/3 of germany’s industrial workforce worked on armed forces orders, apart from all those workers busy building brand new chemical plants and aluminium works.

schacht to goring

he had no respect for him, could see he no longer had influence and resigned in november 1937 and replaced by walter funk although goring became the real economic dictator.

how successful was autarky?

in april 1936 goring was appointed commissioner of raw materials.

• although they wanted substitute products, it took 6 tons of coal to produce one ton of oil so autarky was uneconomical.

• by 1939 germany was still dependent on foreign imports for 1/3 of raw materials especially iron ore, oil and rubber. nazi efforts fell short for commodities such as rubber and oil.

• by 1938 germany’s balance of trade deficit had risen to 432 million reichsmarks.

successes/limits to four year plan

• in 1938 the german economy was almost 40% larger than in 1928

• national production rose 102% from 32-37 and national income doubled.

• key materials such as aluminium and explosives production expanded.

• successful in sense that germany’s reliance on imports didn’t increase.

• fell short in rubber, oil and arms production

• in 1939 germany still imported 20% of food and 33% raw materials.

• in 1939 still imported 66% oil, 70% copper, 85% rubber and most of its aluminium.

• one ton of oil took 6 tons of coal

• most capital projects before 1936 couldn’t be completed before 1942.

• by 1938 germany’s trade defecit rose to 432 million

• armed forces and state intervention led to unnecessarily high standards of workmanship, constant technical refinements meant expensive and slow moving production programmes.

• by 1939 17% gnp devoted to military expenditure. germany wasn’t ready for war when it broke out in 1939.