Nazi Economy 1933-45

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  • Created on: 13-02-18 18:34

Nazi economic policy

Hitler wasn't actually committed to any plan for the economy at the start of his rule in 1933. Despite this, he did had 4 key aims in relation to the German economy; 

1. Ensure a reasonable standard of living in order to maintain public support

2. Provide resources for rearmament to ensure German military might

3. Move towards Autarky (economic self sufficiency) to guarantee strength and independence 

4. Provide resources for major civic and architectural projects 

Hitler had little care or understanding of economics himself, and often had people to sort out the 1933 mess for him. He believed his will and determination could solve Germany's problems - not economic forces such as supply and demand. 

Fundamentally, Hitler believed in the primacy of politics - economic policy should serve political objectives (eg goal of rearmament took priority over economic issues). Nazis were citical of capitalist ad communist economics - should serve the good of the country as a whole. 

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1933 economy

Problems; - erman economy practically bankrupt (lots of debt)

- Unemployment rate over 6 million 

- Industrial production down to 1890 levels 

- Volume of German trade sunk by 90%

Advantages;  - Grat depression easing so economy beginning to recover 

- Hitler could build on Schleicher's plans to create work by building houses and roads and improving agriculture

- More money injected into economy as reparations scrapped in 1932 and the Reichsmark no longer tied to Gold standard

- The Voluntary Reich Labour Service (RAD) set up for the unemployed 

- Power of labour movement to demand higher wages had been depleted and wages now set at lower levels, enabling companies to invest more money into production. 

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Economic recovery KEY POLICIES

- Indirect stimulus: policies such as tax cuts and government grants were designed to boost spending (directed at the economy)

- Direct stimulus: the government set up schemes that employed people to work on government projects (directly intervening in people's lives eg. autobahn jobs)

1. Grants and Tax cuts (indirect) in 3 major areas - farming, small business and heavy industry. Assumed that as taxes fell, businesses would have more money to spend and employ more workers, which would stimulate employment. 

2. Motorway building projects (direct) - Reinhardt Programme (june 1933) was one of the biggest new economic initiatives. Essentially, these job schemes were just continuations or expansions of existing programmes. They allowed the employment of unskilled or semi-skilled workers. 

3. Rearmament using mefo bills - IOUs that allowed the government to buy the armaments and delay payment until the late 1930s, once the economy had built up. The system essentially allowed the government to hide what it was doing and delay payments. The rearmament drive also contributed to the creation of jobs. 

4. New Plan (spring of 1934) - Import quotas and controls (limit consumer imports while insuring sufficient funds to import goods for rearmament). Introduced protectionist trade policies and new trade agreements with eurpoean countries (Germany was stronger than these places and so could get better trade than it could with the USA/Britain). 

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Economic recovery successes/failures


- Fall in unemployment

- Improved trade and production (esp. heavy industry)

- New Plan mostly solved the balance of payments problem (in the longer term) HOWEVER these successes are partly due to the recovery of the global economy, which meant that there was a greater demand for German goods in Britain and USA. Essentially, German economy was improving along with the rest of the world and so it looked to be succeeding at a faster rate than it would have been had this not been a factor. 


- consequence of prioritising rearmament is that standard of living decrased 

- Balance of payments deficit until 1935

- Textiles industry in decline (reliance on foreign imports) - employed around 20% of countrys industrial work force. 

- High cost of consumer goods as a result of import controls

- Apparent success reliant on European recovery, rearmament and the RAD ( Labour Service)  

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The crisis 1935-36

Poor harvests in 1934-35 led to a shprtage of food. Darre, the Nazi agriculture minister, wanted bigger imports of grain in order to keep food prices down. He argued that rising food prices would lead to a fall in the popularity of the regime; therefore, it was essential to import food, but Schacht refused to allow a rise in food imports. The situation became so desperate that at one point rationing bread was considered. The crisis exposed the fundamental problems pf the Nazi economy: it was not strong enough to produce both 'guns and butter'. 

Goering and von Blamberg wanted to invest and protect military spending and rearmament, whereas Darre insisted that money be spent on agriculture and food improvments. 

Hitler responded with a short term and a long term solution - In the short term, he authorised more food imports in order to keep prices low and avoid rationing; in the long term, he began the process of creating a command economy. 

----command economy----

Another term for planned economy; an economy in which production, investment, prices and incomes are determined centrally by the government. 

This required radicalisation og German policies, gaining Lebensraum (territory) in other countries, and military expansion, which required greater spending on rearmament, thus threatening the SoL of the German people once again. To combat this, Hitlr devised his Four Year Plan. 

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The Four Year Plan

The Four Year Plan was designed to ensure that; 

- Germany's armed forces would be ready for war in four years and Germany's economy would achieve autarky in a similar period 

Successes in the following areas; (((not many)))

Raw materials::: Coal production, which increased from 320 million tonnes in 1936 to 380 million tonnes in 1938, was clearly a success for the plan. Germany also became self sufficient in terms of bread, sugar and potatoes. The plan also led to a small increase in steel production. They did this by nationalising the country's biggest steel companies and combining them to make one huge company, Reichwerke Hermann Goring, which began mining iron ore. As a result, steel production went up from 19.2 mill tonnes to 22.6 million tonnes in a 2 year space. However, working with uneconomical deposits meant that the steel was more expensive than imported steel. The plan organisation was also consistently unable to deliver the quantities of steel that the military demanded by less than half.

Leadership and control::: The plan extended government control significantly.

Rearmament::: The German economy was able to build up their airforce and navy. 

Ersatz materials::: Using these successfully increased the production of ersatz rubber by 500% between 1936-38, despite the process being expensive. 

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The four year plan

Failures in the following areas;

Leadership and control::: Hitler appointed Goering as plenipotentiary (having full power to take independent action) for the Four year plan, which made him head of it and gave him supreme economic authority. However, Schacht remained minister of economics and, as a result, caused conflict between the two's policies. The four year plan caused more faction fighting/overlapping roles within Hitler's government. 

Raw materials::: Turning coal into ersatz oil, one of the goals of the plan, required more coal miners (would need another 20,000-30,000 miners to produce necessary coal). However, by 1938, all areas of German industry were facing labour shortages and therefore producing the extra coal would be impossible. This resulted in Germany only being able to produce 20% of the artificial oil that was required in 1939. 

Ersatz materials::: although the increase in ersatz rubber by 500%, the process was expensive and it wouldve been more efficient for the governemnt to import natural rubber. 

Rearmament::: The massive amounts of money being spent on rearmament meant that by 1939 the country was on the brink of another inflation crisis. The rearmament programme caused inflation because in order to pay for the arms the governemnt pumped massive amounts of money into the economy. As no consumer goods were being produced, the new money simply pushed up prices. 

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Aims by 1936 (and beyond)

Successes by 36' :  Public work schemes had improved unemployment, propaganda successes, Harvest festival - very happy, supportive time for farmers. The government had told them that they were doing great and wanted to celebrate them during this festival. 

 Partial successes ; Rearament priority; ie caused debt but the gov. had limited consumer imports and gained an increased in weapons that they needed. However, this wasn't happening as fast as Goering would've liked. The gov. also banned trade unions which led to better production for the businessmen, but took away people's rights. Doing this also prevented opposition from that specific sphere. 

 No success ; Standard of living decreased; ie shortages in food from 1934-35. The standard of living also failed to rise above 1920s levels and wages didn't rise. Instead, the shortages of consumer goods actually made prices rise, and so limits its impact as a partial success. 

Key stats::: From the peak of 6 million unemployed in 1932, 1836 showed it had declined to 1.6 million (more than half). Industrial production had increased by 60% by 1936 since 1933. 1938 spent 13 billion marks on military production. There was a significant increase in steel production by 1936, but the economy only reached half of their oil production needs by 1942. 

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Living standards

Due to the huge amount of money being spent on rearmament by 1939 Germany was on the brink of an inflationary crisis due to the governemnt pumping masisve amounts of money into the economy. As no new consumer goods were being produced, the new moeny simply pushed up prices. Schacht warned that the government must stop rearmament and reduce spending or face an economic crisis. However Hitler was planning for war - which would require a threefold increase in spending. 

Between 1933 and 1939 the Nazi economy lurched from one crisis to the next due to the constant drive for rearmament. Fundamentally, Germany was only able to rearm by keeping the living standards for the majority of Germans low. 

Industrial Workers::: The working class lost out considerably between 1933-39 due to destruction of trade union movements. They also had little influence over their pay and working conditions, which seemed to deteriorate for most workers. The average working week rose from 43 to 47 hours between 33-39. The average hourly wages in 33' were 3% lower than in 32', and the average hourly wages in 39' were still 2% below the 1932 level. The DAF set up strength through joy (KDF), an organisation designed to bring the benefits of culture and leisure to working people. 

It was a popular movement which developed into a business company. Through the KdF the state was able to control the individual, got everyone to conform and managed their leisure time. It was a way of removing social barriers s in the past, only the rich could afford a holiday, for example. It was set up to support and thank the Fuhrer and to cover the discontent over the abolishment of trade unions. 

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Living standards

Women Workers::: The number of women in the workforce increased to 14.8 million by 1939. The government were willing to tolerate women in the workforce as war became a likely factor - specifically clerical jobs. The average wage of women was below half that of the average wage of a man doing the same jobs, but this was considered normal and no one really knew any different. For some women, their wages were so low that they were forced into prostitution in order to supply for themselves/their families, but this was disregarded and shamed upon by the Nazis. 

Middle Class::: Goods were restricted and the mood surrounding them was strained. Some Nazis advocated policies to protect the interests of the middle classes, and many middle class people supported the law in 1933 that placed taxes on large stroes and companies. Many small businesses benefitted from the economic recovery and its policies. However, eventually tight credit and big businesses went bankrupt. 

Farmers::: During Weimar farmers werent doing very well at all, so in comparison to the previous 14 years they were benefitting hugely during the Nazi era. Although the Nazis loved farmers and saw them as the perfect 'blood and soil' citizen, they put price controls on food and passed the Reich entail law which made it illegal to sell medium to large farms, meaning many farmers could not profit from their farmland. Banks also refused to give loans to farmers. 

Industrialists::: They were able to lower wages and get a longer day due to destruction of trade unions and weakness of DAF. This led to greater industrialist output and less expenditures. They also benefitted from contracts to produce materials, uniforms and munitions for the wartime effort. If they were willing to collaborate, then relations between industry was good. 

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Impact of the War

Impossible Plans - Hitler's targets for arms production were simply impossible to reach. He wanted to increase the size of the luftwaffe to 21,000 planes but, infact, could only make up 5,000; insufficiencies in aircraft production throughout germany. Specifically, the invasion at Stalingrad in 1942 failed as the luftwaffe was too small. The economy over estimated the ease with which they could extract foreign resources; shortage of skilled labour and machinery. The German economy was simply not rich enough to meet Hitler's aims and expectations. 

Priorities - Wanted to ensure war production met Germany's needs. Wanted to also ensure essential food and fuel supplies were adequate in order to stop living standards from decreasing too much. The development of new weapons was also a top priority of Hitler's. He also wanted to fund key Nazi policies (eg the final solution, culture issues such as wartime classical concerts throughout germany etc). Needed to maintain high morale throughout the country (eg produce cosmetics, keep people happy). 

Administrative chaos - Overlapping powers (Hitler's infamous style of government) led to chaos and inefficiency within the government. 4 centres of economic powers in Germany; 4 year plan aided raw materials, labour, munitions. The ministry of munitions aided munitions, labour and power. The ministry of economics aided economic resources. The ** and labour camps dealt with labour, munitions and raw materials. In addition, there was often conflict between senior Nazis, business owners (who resisted Goering's unrealistsic orders) and military leaders. 

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Albert speer and war economy

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How far were Nazis to blame for economic failures

Were to blame::: - Weren't prepared for the war - their military expenditure was lower than B's in 40 and 41 in terms of GNP

- Didn't have enough tanks; their mobilisation was marred by inefficiency and poor coordination

- Confusion between short nd long term plans of Nazi leadership

- Not facing reality  or having their priorities straight (still producing things like coat hangers whilst low on metal) 

- Failed to reasses their plans, carried on with failed plans

Weren't to blame;;; - Factors they had no control over - allied bombing, can't be blamed for things they cant produce (coal, fuel) as these resources have always had to be imported

- Fighting three most powerful countries in the world (42-45)

- Speer had loads of successes - implemented total war, increased ammunition, increased labour and women labour, so can't wholly be blamed as the prime reason for failure

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