Economic policies

Economic policies

  • In January 1933, the German economy was in the depths of depression with nearly 6 million people out of work. Previous governments had failed to make any significant impact on the problem of unemployment. Many people had voted for the Nazis becuase they promised economic recovery and to get people back to work.
  • By 1935, official figures showed that unemployment had fallen to 2 million. Then, by 1939, figures showed there was a labour shortage in some key industries. Nazi propagandists hailed this as an 'economic miracle'.
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Nazi economic policies

  • When Hitler was appointed Chancellor in 1933, it is clear that the Nazis didn't have a coherent or decisive economic plan - they had not expected to gain power so quickly.
  • But, Hitler did have some clear short-term aims:
    1. Economic recovery from the depression
    2. Solve the issue of unemployment
  • These aims were very important to the Nazis because if they managed to achieve these aims, this would boost the Party's popularity and aid consolidaton of power.
  • In the long-term, the Nazis wanted an economy which could sustain a major rearmament programme geared towards the need for future wars. In order to do this, the Nazis would have to achieve 'economic autarky' - being self-sufficient in the producton of food nad vital raw materials. 
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The role of Schacht in implimenting policies

Recovery from the depression

  • During the years of 1933-36, Hjalmar Schacht, President of the Reichsbank and Economics Minister, was the key figure in policy making and implementation. 
  • Under his shrewd direction, the regime attained recovery by:
    • Pumping money into the economy by building homes and autobahns
    • Increasing consumer demand by giving tax concessions and grants to Aryans
    • Giving subsidies to private firms to encourage them to employ workers
    • Putting controls on wages and prices to control inflation
    • Introducing the 'New Plan' of 1934 to control Germany's foreign trade and improve the country's balance of payments
    • Taking steps towards rearmament through the use of Mefo bills
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The role of Schacht in implimenting policies

The battle for work

  • The Nazis' main priority in 1933 was to reduce unemployment and they labelled this project as 'The Battle for Work'. 
  • Large sums of money were spent on the building of roads and public buildings - this would create instant jobs for workers. They also increased industrial production by implimenting tax reliefs and loans for private companies - this would encourage these businesses to employ more people.
  • This all helped to boost economic recovery but historians are also mindful that the economy was already starting to recover when the Nazis came to power in 1933. Though, historians agree that these policies helped to reduce unemployment more quickly and sped up recovery.
  • In 1935, a Reich Labour Service was introduced under which unemployed young men were compelled to do six months labour in farming or construction - this meant young men would be skilled in industry or agriculture.
  • Later in 1935, military conscription was reintroduced for young men - this meant that young men would also be skilled soldiers.
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The role of Schacht in implimenting policies

The 'New Plan' of 1934

  • As the economy began to revive in 1933 and 1934, foreign trade increased and this led to imports growing faster than exports - this went against autarky in which Gemany would need to export more than they import.
  • This led to shortages in foreign currencies which were needed to purchase importorted goods.
  • Under the New Plan, Schacht placed controls on imports and on access to foreign currency to monitor more closely what and how much they were importing.
  • He also established a series of trade agreements with foreign countries, like states in the Balkans and South America. Germany would be supplied with food and raw materials and this would be paid for in German Reichsmarks - this meant they didn't need to import foreign currency. These countries could then only use this money to buy German goods.
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The role of Schacht in implimenting policies

Schacht and the use of Mefo bills

  • To finance rearmament, the Nazis needed to borrow money whilst at the same time, avoid the dangers of runaway inflation, which the German people remembered.
  • Schacht devised a scheme whereby the government paid for its military equipment using credit notes or Mefo bills. 
  • These bills could be exchanged for cash at the Reichsbank - this ensured private companies had confidence that they would get their money back. But, if everyone cashes in the Mefo bills at the same time, this would cause inflation. So, the government gave these companies an incentive to defer asking for payment by offering them a 4% per annum interest on the bills if they kept them for a full 5 year term.
  • Therefore, the rearmament programme could be started in 1935 without the government having the funds to finance it. Also, the rearmament programme could be kept secret as the expenditure didn't appear in the government's account. 
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The role of Goering in implimenting policies

Rearmament and the creation of a war economy

  • Schacht's measures succeeded in reviving the German economy and reducing unemployment but this revival created a new set of problems. 
  • As well as the balance of payments problem and a shortage in foreign exhange, there were also food shortages, rising prices and lower living standards for ordinary Germans in 1935 and 1936. 
  • Reports from this time show that there was growing disillusionment with the regime. 
  • This raised an important question about the regime's priorities: food shortages could be solved through foreign imports but this would use up valuable reserves of foreign currency also needed for raw materials for the rearmament programme. This choice is often referred to as 'guns or butter'. 
  • This was resolved through the decision to become economically self-sufficient. Expanding home production of food and raw materials would reduce Germany's dependence on imports and the need for large amounts of foreign currency. This policy of economic autarky was the basis of the new Four Year Plan. Schacht, who had opposed the move towards autarky, was marginalised and responsibility for the Four Year Plan was given to Hermann Goering.
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The role of Goering in implimenting policies

The Four Year Plan

  • The aim of this plan was to make Germany ready for war within four years.
  • Future war was implicit to 'Lebensraum' in the east - people knew that in the future there was going to be war. But, the gearing of the German economy to war in the Four Year Plan was the first obvious sign the regime was preparing for war - showed the people that Nazis were preparing for wa far soon than was expected.
  • The priorities of this plan was rearmament and economic autarky. This would be acheved through:
    • creating a managed economy with controls over labour supply, prices, raw materials and foreign exchange
    • setting production targets for private companies
    • establishing new state-owned industrial plants, like the 'Goering Steelworks'
    • increasing production of key materials, such as iron and steel
    • encouraging research and investment of substitute products, such as artificial rubber
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The role of Goering in implimenting policies

Economic autarky

  • The Four Year Plan aimed to achieve autarky in food production and vital raw materials to prepare Germany for war.
  • Autarky embodied national pride and this is another reason it was an economic must for the Nazi regime; independence fitted well with Nazi ideology. It would 'free Germany from the chains of international capital'. 
  • The effort to increase production was presented as a battle in which the whole 'people's community' had to participate. Propaganda campaigns were set up to persuade people to buy only German goods - it was their patriotic duty.
  • The results of the Four Year Plan did not match its propaganda claims. German industry, despite massive investment, did not meet the targets set by the regime e.g. in 1939, Germany still imported one third of its raw materials. So, Germany had not been able to achieve autarky.
  • In food production, there were similar failings. The reality was that the German economy did not have the resources to achieve all of the regime's aims. In order to maintain levels of consumption and avoid alienating people, labour and capital had to be diverted from war industries. It became clear that Germany couldn't achieve autarky and continue with the rearmament programme. By 1939, the German economy was under severe strain. 
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Policy towards management and industrial elites

  • Many, but not all, business leaders welcomed the Nazi takeover in 1933. Fritz Thyssen and Alfred Hugenberg had helped Hitler in taking power. Hitler was careful to offer reassurance to business leaders that they should not be alarmed by the more socialist elements of the Nazi Party programme e.g. state-controlled industries.
  • In the early months of the Nazi regime, many of their policies benefitted businesses: the suppression of free trade unions, the establishment of political stability and the revival of the economy.
  • But, as Nazi economic policies started to develop, many business leaders did not welcome the greater state intervention in the economy through its controls on the supply of labour, raw materials and price controls. This meant that business owners could no longer do as they wished so they had less freedom.
  • In general, the Nazi regime had the cooperation and expertise of big business and management in the implementation of its economic policies. When the Four Year Plan was introduced, there were many opportunities for businesses to make profits through their involvement in the rearmament programme. E.g. a firm that benefitted from the rearmament programme was I.G. Farben which was heavily involved in the research and production of synthetic materials. 
  • But, some companies were sceptical about the plan e.g. many Ruhr iron and steel firms didn't want to produce steel from the poor quality and expensive German iron ore but they instead wanted to use the cheaper and superior foreign ores. The regime bypassed these firms altogether and established a large state-owned steelworks - 'The Goering Steelworks'. 
  • Essentially, if the industrial elites supported the regime, they would stay in favour and any businesses that don't get left behind.
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The degree of economic recovery by 1939

  • Goebells and Nazi propaganda tried to protect an image of success of Nazi economic policy. Speeches and radio broadcasts repeatedly claimed that the 'Battle for Work' had been won by 1936. After 1936, the 'Battle for Work' was not even mentioned, showing the success of propaganda in convincing people that unemployment was no longer a problem. 
  • Advertsing campaigns for products, such as the 'people's receiver' (radio) and the 'people's car' (Volkswagen) gave the impression that the German people were experiencing an unprecedented rise in living standards.
  • Military campaigns showed off the latest equipment.
  • Only German goods went on show - they were trying to prove that they had achieved autarky. 
  • In each case, there was a small element of truth (subterfuge) in their claims but propaganda exaggerated the successes and covered up the failures of Nazi economic policies.
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The degree of economic recovery by 1939

The reduction of unemployment

Official unemployment figures show a dramatic reduction in the no. of unemployed and these figures were continually falling after 1934. But, there are several flaws in the claim that the 'Battle for Work' was won due to Nazi economic policies:

1. Economic recovery started before the Nazis came to power. Many of the job creation schemes used by the regime were actually created by Heinrich Bruning in the early 1930s.

2. Part of the reduction figures were actually achieved by persuading married women to give up work and stay at home i.e. KKK - Kinder Kuche Kirche.

3. The reintroduction of conscription in 1935 for young men aged 18-25 took young men out of the labour market and so they weren't included as part of unemployment figures.

4. Official figures also showed a dramatic increase in the numbers of Germans in employment. This was partly achieved through various statistical devices to inflate the figures.

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