Nazi Economy 1933-36

For Hitler, the overarching goal of the economy was to serve the destiny of the Aryan race. He wanted to:

• ensure reasonable living standards to guarantee public support,
• provide resources necessary for rearmament,
• move towards autarky to ensure the economy would be less vulnerable in times of war,
• provide sufficient resources for major architectual projects

Hitler believed in the 'primacy of politics', that economic policy should serve political objectives e.g. rearmament took priority over Germany's balance of payments.

Hitler knew his gov would not last long unless he problem of unemployment was solved so his priority in 1933 was job creation (he also approached the problem as a propaganda opportunity.) He delegated economic policy mostly to Schacht.

The Nazis' policies tried to main methods; indirect and direct stimulus. Examples of indirect were cutting tax in 3 key economic areas; farming, small business and heavy industry. This would result in businesses having more money to spend so could employ more workers/buy goods, creating employment opportunities. Also, they introduced government grants.

An example of a direct measure was the gov financing construction and industrial developments to create jobs. The Reinhardt Programme (June 1933) committed 1,000 million reintenmarks to public work schemes such as road building and bridge repairs. Created jobs in postal service also, allowed employment for unskilled and semi-skilled workers.

The Nazis' work creation programmes succeeded in reducing unemployment - between 1933 and 1934, 2.8 million jobs were created (20% of which directly through gov schemes.) Unemployment hit a peak of around 6 million in 1932 which then fell steadily to a level similar to that of the late 1920's in 1936 (1.6 million unemployed.)

This allowed the Nazis to claim they had created an economic miracle - however this was a significant overstatement. Germany benefited from a general economic recovery in Europe and the USA in this period, they were merely building on economic policies between 1930-32 and the RAD schemes (designed to provide work for young people betweeen the ages of 19 and 25) kept down the unemployment figures without actually increasing the number of jobs.

Rearmament was another of Hitlers key priorities from 1933 but it would be difficult for two reasons; it had been banned by the TOV and would be expensive (the gov was already in debt and funding an expensive work creation scheme. 

One solution to this was creation of Mefo bills which were essentially IOUs which allowed the gov to buy armaments and delay payment until the late 1930s. They financed around one-fifth of all military spending between 1933 and 1939. 

Reducing unemployment led to a growing trade crisis. Creating more jobs meant that German people had more money to spend. As they bought more they tended to buy foreign goods - at the same time, there were no additional goods to export. This also had consequences for rearmament as Germany needed to import raw materials and high-tech goods from abroad; however, this would lead to a greater trade deficit. 

Hitler finally dealt with Germany's growing trade problems in 1934. Schact developed a new approach to international trade known as the New Plan.

Import Quotas - allowed the gov to limit consumer imports while ensuring there were sufficient funds to continue importing goods that were crucial to rearmament. Strict import quotas on wool, cotton, leather, fur and precious metals. No restriction on steel and other goods that had clear military applications. System was effective and German trade came back into balance in the middle of 1935.

Trade Agreements - Schacht sought ways to stimulate trade with developing countries in Eastern Europe and Latin America (Peru, Brazil, Ecuador, Yugoslavia etc.) Had 2 advantages over trading with nations such as Britain and the USA: could get more favourable deals as it had a more powerful and developed economy than its trading partners, and Schacht could negotiate barter deals so Germany could trade without money leaving them (in some cases.)

Success? - remarkaby successful; Germany economy could grow, solved balance of payments problem and allowed continuation of rearming. Success was partly due to recovery of global economy but Schacht was equally as fortunate that neither Britain/USA responded to the import controls limiting their trade with Germany.

However, living standards dropped for most Germans and negative impact on textiles industry. Price of clothing rose much faster than other goods in 1930's.

Problems in German agriculture led to an economic crisis. Poor harvests in 1934-35 led to a shortage of food. Schacht refused a significant rise in food imports - butter was rationed in 1935 and the price of pork and ham rose by 30% from 1934 to 36. Hitler and Schacht were under pressure from both sides ('Guns and Butter') - Darre insisted more money should be spent on agriculture, whereas Goering and Blomberg argued that resources should be devoted to the military.

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