Economic Recovery 1933-36

  • Created by: chart859
  • Created on: 13-05-19 21:58

Role of Schacht- 'Hitler's Banker'

  • Shrewd banker who was the Economic Minister (1934) and President of the Reichsbank
  • His prescence in government reassured the elites
  • He intended to rebuild the economy after the Great Depression
  • The heart of economic recovery lay in the major revival of public investment.

This was led, by the most part, by the state, who increasingly assumed the greater responsibility for control of capital in an effort to simulate demand and raise national income.

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Economic problems when Hitler came to power

  • 6 million unemployed
  • Shortage of foreign currency, which was needed to pay for imports- Germany wasn't self-sufficient
  • Huge slump in world trade; exports and imports fell by 2/3
  • Shortage of essential raw materials e.g. Iron ore had to be imported from Sweden
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Factors that helped the Naxis in 1933 regarding Ge

  • Hitler came to power at the right time when the worst of the Depression had passed and the economy was on the up
  • Bruning had laid the foundations for economic recovery but Hitler received the credit
  • Enabling Act had allowed Hitler to take decisive action on all matters including the economy
  • Reparation payments had been ended due to the depression
  • Germany, potentially, had the strongest economy in Europe.
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Factors that hindered the Nazis in 1933 regarding

  • Hitler was very inexperienced regarding the economy.  His rise to power had relied on simplistic economic promises; 'bread and work', full employment and autarky.  These would be very difficult to deliver
  • Hitler was a lazy bureaucrat
  • SA calling for a 'second revolution' and demanded fulfilment of some aspects of the 25 point programme; eg profit sharing in large industrial enterprises, extensive developments of insurance for old age and nationalism of all businesses.
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Main Aims of Schacht's economic strategy

Banking and control of Capital

  • German banking system had been fundamentally weakened
  • State assumed greater responsibility for the control of capital within the economy
  • Set interest rates at a lower level to reschedule the large-scale debts of the local authorities

Assistance for farming and small businesses

  • Simulate economic growth and reward some of the most sympathetic Nazi supporters

Measures included:

  • Tariffs on imported produce to protect German farmers
  • Subsidies given by Reich Food Estate
  • Reich entailed farm law, which tried to offer more security of land ownership to small farmers; debts were reduced by tax concessions and lower interest rates
  • Allowances to encourage the rehiring of domestic servants
  • Allocation of grants on house repairs
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Main Aims of Schacht's economic strategy

Core objectives

  • Full employment
  • Avoid inflation
  • Economic Recovery
  • Rearmament
  • Autarky
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Main Aims of Schacht's economic strategy

State investment and public works

  • In 1933, a law to reduce unemployment was renewed and expanded.  The RAD (Reich Labour Service) employed 19-25 year old men.  They weren't paidand schemes of RAD included: reforestation, motorisation, land reclamation - development of vehicle industry and improved roads, building -expansion of hosuing sector.
  • Effect of these policies tripled public investment and increase gov't expenditure by nearly 70%
  • As a result of these strategies, there was a dramatic growth in jobs
  • By 1936 industrial production was above 1928
  • Schacht and Nazi economic policy were aided by a natural upturn in the business cycle but the marked turn around would not have been achieved without their decisive action
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Main Aims of Schacht's economic strategy

The Balance of payments problem

  • Germany's economic recovery 1933-36 was impressive but still had two underlying worries:

> rapid increase in demand would rekindle inflation

> a rapid increase in demand would lead to the emergence of balance of trade deficit

  • Inflation never materialised but the regime had established strict controls over prices and wages
  • Abolition of trade unions in May 1933 was very beneficial
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Impact of Schacht's New Plan

  • Given dictatorial powers of the economy (SEPT 1934)
  • Provided for a comprehensive control by the gov't of all aspects of trade, tariffs, capital and currency exchange in an attempt to prevent excessive imports
  • Economic priorities were set by a series of measures;

> Trade treaties= Schacht tried to promote trade and save foreign exchange by signing bilateral trade treaties.  Germany from this began to exert powerful economic influence over the Balkans.

> Reichsbank currency= G agreed to purchase raw materials from all countries it traded with provided the Reichmark only be used to buy German goods

> Mefo Bills= credit issued by the Reichsbank and guaranteed by the gov't as payment for goods.  Used to disguise gov't spending

  • Conscription introduced in 1935
  • Schacht saw women pushed into lower paid jobs or unemployment to make room for men.  Women along with Jews and other sectors of society weren't considered as unemployed
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Impact of Schacht's New Plan

By 1936:

  • Industrial production increased by 60%
  • GNP had grown by 40%
  • Unemployment had fallen to 1.5 million
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