Economic policies

Key Specification Focus
How successful were Nazi economic policies in achieving recovery and preparing Germany for war?

Specified Content
Nazi economic aims; the New Plan (Schacht); the Four-Year Plan (Goering); unemployment and rearmament; workers’ organisations – DAF, Strength Through Joy (KdF), and Beauty of Labour; overall success in achieving Nazi ideological aims.

Nazi Economic Aims

When Hitler came to power in 1933, Germany was suffering from the effects of the Great Depression: high unemployment, industrial stagnation, and political instability. The Nazis aimed to rebuild Germany’s economy and use it to strengthen their control and prepare for war.

Aim One: A Strong Germany

Hitler wanted to restore national pride, overturn the Treaty of Versailles, and rebuild a powerful military and economy.
Economic recovery was essential to restore prosperity and reduce unemployment.
A strong economy would allow for rearmament and preparation for future expansion.

Aim Two: An Aryan Germany

The Nazis believed economic problems were caused by “undesirable” groups, particularly Jews.
Policy sought to remove minorities from the economy and prioritise “racially pure” Germans.
Jews, women, and political opponents were excluded from employment statistics and opportunities.

Aim Three: A People’s Community (Volksgemeinschaft)

The Nazi ideal was that all Aryan Germans would put the nation’s needs above individual gain.
Class, regional, and religious divisions were to be erased through national unity and shared work.
Slogan: “Collective need before individual greed.”
Economic and social policies aimed to bind people into a unified, obedient workforce.

The Nazi Economy: Economic Plans

When the Nazis took power, they faced major challenges:

Aims

Reduce unemployment (6 million in 1933).
Build up the armaments industry.
Achieve autarky (economic self-sufficiency).

Problems

World trade had collapsed due to the Great Depression.
Germany lacked key raw materials such as oil and rubber.
Versailles Treaty limited military development.
Rising population and low consumer demand complicated recovery.

The New Plan (1933–1936)

Introduced by Dr Hjalmar Schacht, Minister for the Economy (1934–1936), a respected banker who had previously helped stabilise the economy during the 1923 crisis.

Main Features of the New Plan

State investment: Massive government spending on public projects and businesses to stimulate growth.
Work creation schemes: Projects like the autobahn network (creating around 80,000 jobs) reduced unemployment.
Cut welfare spending: To reduce government costs and encourage employment.
Import controls: Banned imports of goods that could be made in Germany to save foreign currency.
Bilateral trade deals: Agreements with Hungary, the USSR, and South American countries to exchange German goods for raw materials without using foreign currency.
Suppression of workers’ rights: Trade unions banned, strikes illegal, wages controlled through the German Labour Front (DAF).

Assessment of Success and Failures of the New Plan
Successes:

Unemployment fell dramatically from 6 million (1933) to 1.5 million (1936).
Government-funded projects improved infrastructure and boosted morale.
Germany developed substitute technologies, becoming less reliant on imports.
Economy recovered rapidly from the Great Depression; GDP rose by 8%.
Increased military spending (1% → 10% of GDP by 1935).

Failures:

Focus on public works caused shortages of consumer goods and higher prices.
Workers lost freedom; unrest grew as Gestapo reported rising dissatisfaction.
Imports could not be entirely stopped; Germany still lacked key materials like oil.
Government ran a large deficit—spending exceeded income.
Jews and women excluded from employment statistics exaggerated success.

Overall, Schacht stabilised the economy and reduced unemployment, but his cautious approach clashed with Hitler’s desire for rapid rearmament and autarky.

The Four-Year Plan (1936–1939)

By 1936, Hitler grew impatient with Schacht’s economic caution. Schacht wanted to reduce military spending; Hitler demanded an economy ready for war within four years.

Leadership and Aims

Hermann Goering replaced Schacht as Minister for the Economy.
Aim: Prepare Germany for war and achieve autarky (self-sufficiency).
Goering had little economic experience but absolute loyalty to Hitler.
Granted powers to pass laws by decree.

Main Measures of the Four-Year Plan

Reich Food Estate: Regulated what farmers could produce, fixed prices, and provided subsidies to increase food production.
Tighter import controls: Further restrictions on foreign goods.
Synthetic substitutes: Developed artificial materials (ersatz goods) to replace imports.
- Coal → oil and rubber
- Acorns → coffee substitute
- Paper pulp → fabric
- Flour → make-up
Expansion of heavy industry: Massive industrial complexes like the Hermann Goering Works built to increase steel and mining production.
Forced labour: Use of concentration camp inmates and, later, foreign workers to support production.

Assessment of Success and Failures of the Four-Year Plan
Successes:

Industrial output rose sharply; by 1939, higher than before the Wall Street Crash.
Unemployment reduced to just 0.5 million by 1939.
Government income rose from 10 to 15 billion Reichsmarks.
Rearmament accelerated; factories increasingly focused on military production.

Failures:

Autarky not achieved; by 1939 Germany still imported 33% of raw materials.
Workers’ real wages dropped; people had less spending power in 1938 than in 1928.
Poor quality of raw materials (low-grade iron) reduced efficiency.
Unrealistic production targets rarely met.
Growing government debt—40 billion Reichsmarks by 1939.
Decline in food consumption and living standards for ordinary Germans.

Overall, Goering’s plan expanded industry and rearmament but was unsustainable and left Germany heavily in debt.

Worker Organisations and Nazi Control of Labour

The Nazis viewed workers as vital to economic recovery and control. The aim was to ensure loyalty and increase productivity, while removing class-based divisions.

The German Labour Front (DAF)

Created after the abolition of trade unions in 1933.
Led by Robert Ley. Membership was technically voluntary but practically compulsory.
Aimed to build a “social and productive community.”

Features of the DAF:

Workers lost the right to strike.
Minimum working standards introduced.
Job security increased, but workers could not easily change jobs.
Working hours increased (from 60 to 72 per week).
Wages frozen in 1933 despite rising costs of living.
Work-booklets issued (1935); carried at all times, used for surveillance.
Employers also disciplined; businesses seized for exploitation (13 in 1934).
Provided training, legal aid, and health care.

Impact:

Gave the regime full control over workers’ economic life.
Increased productivity but reduced freedom.
Described as “a gigantic state prison from which workers had no escape.”

Strength Through Joy (KdF)

A division of the DAF designed to control leisure time and gain workers’ loyalty.

Aims:

Prevent opposition by occupying workers’ free time.
Promote gratitude to the Nazi regime through organised leisure.

Activities:

Theatre trips, sports, cruises, holidays, and cultural events.
By 1936: 30 million members; 9.6 million participated in events by 1937.
Cheap holidays in Italy (Alps and Riviera).
Organised physical education and sports training.
In 1935, arranged 10,000 Germans to watch football in London.

Limitations:

Majority did not benefit directly; only a fraction enjoyed holidays or cruises.
Events often tightly controlled and surveilled by Nazi officials.
Propaganda tool more than genuine welfare scheme.

Volkswagen Scheme (“People’s Car”)

Introduced 1935 by Hitler; designed by Ferdinand Porsche.
Workers paid 5 marks a week through the DAF’s KdF savings plan.
Once 750 marks were paid, they would receive a car.
330,000 workers applied.
Production halted in 1939 for military purposes; no cars delivered.
Became a symbol of Nazi propaganda deception.

Beauty of Labour (SdA)

Subdivision of DAF promoting better working conditions.
Campaigns: “Fight against Noise,” “Good Ventilation,” “Better Hygiene.”
Encouraged cleaner, more efficient workplaces to raise morale and productivity.
Created the illusion that the Nazis cared for workers’ well-being.

Unemployment and the National Labour Service (RAD)

Unemployment Relief Act (1933):

Created the RAD (Reichsarbeitsdienst) – National Labour Service.
Aimed to reduce unemployment and instil discipline in youth.

RAD Requirements:

Compulsory for men aged 18–25 (from 1935).
Six months’ training.
Lived in camps, wore uniforms, and received pocket money only.
Conducted military-style drills and manual labour.
Projects included land reclamation, forest planting, and autobahn construction.

Impact:

125,000 men employed on public works by 1935.
Improved infrastructure and prepared men for army life.
Reduced unemployment figures, though often through low-paid or unpaid labour.

Invisible Employment:

Full employment by 1939 was misleading:
- 1.4 million in the army were excluded from statistics.
- Women and Jews removed from jobs and data.
- Part-time and state workers counted as fully employed.

Rearmament and Economic Growth

Rearmament was the driving force behind Nazi economic recovery.

Key Developments:

1933: Secret orders to triple the army to 300,000 men and build 1,000 aircraft.
1935: Public reintroduction of conscription; army increased to 550,000.
1939: Army reached 1 million men; Luftwaffe expanded to over 8,000 planes.
Rearmament accounted for the majority of economic growth (1933–1938).
Major industrial profits: managers’ incomes rose 50% (1933–1939).

Consequences:

Boosted industry and employment.
Shifted production away from consumer goods, reducing living standards.
Created massive national debt; unsustainable without war.

Assessment: How did Nazi Economic Policies Help Hitler’s Aims?

Aim	Success?	Explanation
1. A Strong Germany	Partly achieved	Economy recovered; unemployment fell; rearmament restored military strength. But unsustainable debt and reliance on war spending created instability.
2. An Aryan Germany	Achieved ideologically	Jews, women, and minorities excluded; Aryans given preference; economy used to promote racial ideology.
3. A People’s Community	Partly achieved	Workers organised into state-run bodies (DAF, KdF, SdA); propaganda fostered unity. Yet inequality remained—business owners gained most.

Timeline Summary: Nazi Economic Policies (1933–1939)

1933 January: Hitler becomes Chancellor; 6 million unemployed.
1933 June: Unemployment Relief Act creates National Labour Service (RAD).
1933–1934: Schacht begins New Plan; public works and rearmament expand.
1934: Trade unions banned; German Labour Front (DAF) established.
1935: Autobahn construction peaks; conscription reintroduced.
1935–1936: Volkswagen scheme launched; Strength Through Joy expands.
1936: Four-Year Plan announced under Goering.
1937: Economy focused on synthetic materials; autarky drive intensifies.
1938: Consumer goods decline; wages stagnate.
1939: Full employment claimed; rearmament dominates economy; Germany prepared for war.