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Section: Life in Nazi-controlled Europe

Economic policy

This map was published by the Nazi newspaper Westfälische Landeszeitung in January 1939. It compares the economic situation in 1918 with that in 1933. The map was propaganda to show that the Nazi Party had broken the chains constricting Germany in 1918, and allowed the country to economically thrive.

This map was published by the Nazi newspaper Westfälische Landeszeitung in January 1939. It compares the economic situation in 1918 with that in 1933. The map was propaganda to show that the Nazi Party had broken the chains constricting Germany in 1918, and allowed the country to economically thrive.

Courtesy of The Wiener Library.

This section explores how the Nazis achieved economic recovery in Germany, which was to prove so vital to their ability to carry out their plans, such as remilitarisation and territorial expansion.

Economic recovery: the role of Hjalmar Schacht

The Nazis viewed economics as a foundation to their future Ideological goals. The Nazis entered government in 1933 with a set of outcomes that they wanted to achieve through economics, but not a clear policy to achieve this. The outcomes they wanted to achieve were economic stability, an end to unemployment, and autarky.

In the first few years following their election, the Nazis tried to calm fears within the business community that they would radically reform the economy. The Nazis instead made it clear that they first sought to achieve economic stability. Their first actions towards this were to ban trade unions and freeze workers wage rates. Both of these moves greatly benefitted business interests, as they could no longer be lobbied for fairer conditions or have to compete with others wages.

On the 17 March 1933, the Nazis further appeased the business community by appointing respected banker Hjalmar Schacht as President of the Reichsbank. Schacht had previously helped to bring Germany out of crisis in 1923. In 1934, Schacht was also made the Minister for Economics. The appointment of a banker and economist who had previously had success in reviving Germany following the crisis of 1923 helped to create a sense of continuity, and reassure the business community that no radical changes were imminent.

State investment

The Nazis expanded and refined the Weimar Republic’s policies of state investment – spending government money on public projects or businesses – which had been started in 1931. State investment, it was hoped, would stimulate demand for goods and expand income, and lift Germany out of economic recession. This policy was one of the defining features of the Nazis economics, as it allowed the Nazi State to slowly take control of industry.

This policy of increasing state investment and control was applied across a variety of high-employment areas, from agriculture, to small businesses.

Work-creation schemes

One set of projects which received a large amount of state investment in the first few years after 1933 were work-creation schemes. When elected, the Nazis had promised an end to unemployment, which stood at six million in 1933. To do this they heavily invested in projects that would require large amounts of labour, such as the construction of schools, hospitals, and roads. The first of these programs, Operation Reinhardt, was announced on 1 June 1933 and secured one billion Reichsmark for large scale public works. This programme was followed by hundreds more over the following years. One of the most famous of these projects was the construction of the Autobahn system, which created work for over 80,000 men.

These work creation schemes were largely successful in reducing the number of unemployed, although they were not the only factor contributing to the reduction. Furthermore, whilst the number of unemployed was reduced, those ‘employed’ had little choice over what they did, what they got paid, and where they worked.

Autarky

Schacht set out his ‘New Plan’ to achieve economic stability in September 1934. This plan promoted autarky. Autarky is the concept of economic self-sufficiency, and removing dependence on foreign investment, imports and trade. It means being able to produce all that you need within your own country.

The idea that was that by achieving economic self-sufficiency Germany would be less vulnerable to fluctuations in the world’s economic situation, and more able to sustain a long war. In the First World War, Germany suffered from all kinds of shortages due to the Allies blocking the flow of goods into the country. Achieving autarky would mean that this situation could be avoided.

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The role of big businesses

There is considerable debate between historians regarding the role of big businesses under the Nazis.

Control

Determinist historians claim that the Nazi rise to power and policies in power was a reflection of the agenda of big businesses. Big businesses supported Hitler because they wanted to use his power to control the masses to increase support for their own interests. Once in power, they hoped that Hitler would destroy the political left and suppress the trade union movement, giving them freedom to operate how they liked. Historians such as Allan Merson support this view.

The view that big businesses controlled the Nazis is opposed by other historians such as Karl Bracher and Henry Turner. These historians primarily argue that whilst big businesses were certainly not enthusiastic about the Weimar Republic, this did not necessarily translate into support for Hitler. Many big businesses only supported the Nazis as an alternative to communism, and would have preferred a more moderate conservative government.

Compliant

The other primary view put forward by historians in this debate is that big businesses were in fact compliant to the will of the Nazis. The Nazis focus on autarky meant that they were increasingly isolated in Europe. This created huge problems for some export-based industries, removing their ability to trade.

Where big business interests and the Nazis political goals clashed, the Nazis prioritise their own political achievements. One example of this was the creation of the company Reichswerke Hermann Göring-Werke in 1937 to process low grade steel ore, deemed uneconomic by private companies. Historians such as Alan Milward support this view.

Steps towards war: the role of Hermann Göring

By 1936, Germany had reached a turning point. Unemployment had been dramatically reduced and the economy was well into its recovery under the leadership of Minister of Economics, Hjalmar Schacht. The Nazis had also consolidated their power.

Having achieved economic stability, Hitler could now push for one of his key ideological goals – Lebensraum, or living space for the German people, to be gained through a war to take control of lands in the east.

Hitler set out how he planned to achieve this ideological aim and prepare for war in a secret memorandum, issued in late August 1936 to senior Nazi officials. The memorandum identified four key priorities. The priorities were: regulation on imports and exports of goods, achievement of economic self-sufficiency specifically in raw materials needed for rearmament, and retraining the labour force with industrial skills.

Hitler’s memorandum formed the basis of the Four-Year Plan, which started in 1936 and aimed to be completed in 1940. The Four-Year Plan aimed to re-orientate the German economy towards rearmament and preparing for war. On the 18 October 1936, Göring was made Commissioner of the Four Year Plan, with ultimate authority to oversee its implementation.

The appointment of Göring undermined the authority of Schacht, who was opposed to rearmament. Schacht believed that the economic revival should have been continued in order to improve living standards and Germany’s international position. Schacht opposed Hitler using the stability of the economy to launch into a full-scale rearmament programme, as he was concerned that Hitler’s policies would undermine his economic achievements.

As the economy was on its way to recovery, however, Hitler no longer needed Schacht’s economic skills.

Schacht was sidelined by Göring, who enthusiastically set about implementing the Four-Year Plan. The appointment of Göring to this powerful position freed Hitler from his reliance on non-Nazi economists to stabilise and recover the economy since 1933.

Between 1936 and 1939, two thirds of industrial development came from war preparation, with 6.4 billion Reichsmark invested in this by both the state and private companies. This burst of investment demanded employment, and by 1938 unemployment was almost completely eradicated, with the exception of those excluded from work by the Nazis’ discriminatory policies (such as Jews and political prisoners, although many of these still completed forced labour in concentration camps).

Rearmament was to be prioritised above all else – even ideological ideals. One example of this was how the Nazis advocated that women should be in the home, producing children, yet by 1939 37.3% of the German workforce were women (in comparison to 26.4% in the same year in England).

Limitations of economic policy

Germany’s rearmament and aggressive foreign policy were widely discussed internationally. This excerpt is from a speech made by the British Prime Minister Stanley Baldwin during a House of Commons debate on the 28 November 1934. Baldwin highlights the secrecy surrounding the German foreign and economic policy at that stage, and makes a plea for German diplomacy.

Germany’s rearmament and aggressive foreign policy were widely discussed internationally. This excerpt is from a speech made by the British Prime Minister Stanley Baldwin during a House of Commons debate on the 28 November 1934. Baldwin highlights the secrecy surrounding the German foreign and economic policy at that stage, and makes a plea for German diplomacy.

Courtesy of The Wiener Library.

Whilst the regime did partially succeed in preparing for war and reviving the economy between 1933 and 1939, there were limitations to its economic success.

The Four-Year plan was not achieved in its entirety. Autarky, the policy of self-sufficiency, was not achieved. There was a shortage of raw materials and, from 1938, a shortage of labour needed to increase the amount of raw materials being produced.

Despite the promises of the ‘Strength Through Joy’ programme, conditions for workers did not improve under the Nazis. As a whole, workers total income never reached the levels that it had been prior to the Wall Street Crash.

Workers’ experiences also greatly varied depending on which industry they worked in. Those in industries directly connected to the war effort worked longer hours, for similar pay. Those in industries not directly connected to the war struggled to thrive, often placing their workers on short time contracts. This meant that almost all workers experienced a drop in dispensable income, and in turn, in the ability to buy food, which became more scarce and more expensive as the war went on.

However, the success of Hitler’s economic policies and plans were primarily limited by its own aggressive foreign policy, which brought a major war earlier than had been intended.

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