Nazi Economic policy: recovery and rearmerment

When Hitler was appointed chancellor in 1933, there was no clear Nazi economic programme.

During the Weimar Rebpublic, the Nazis had exploited the Depression to gain support and had promised 'Bread and Work'.

• From 1928 to 1930 the Nazis had targeted the German Mittelstand (lower middle class)
• they espically targeted farmers, cruical to the Nazi ideology as the pure 'Blood and Soil' of the true German Volk.
• The Nazis had promised to protect these potentially weak groups againsit the threat of a powerful working class and big capitalists.

Hitler's intial priority was to revive the Geman economy but to achive this he realised he needed the support of the business community.

• Intial aim was to tackle the depression and restore Germany to Full employment- this would improve conditions for millions of Germans abd create a feeling of optimisism.
• Economic recovery would also allow more resouces to be devoted to rebuliding and restoring Germany's miltary might- Miltary expansion, war was inevitable, self-sufficeny.
• Wished to create a Wehrwirtschaft or defence economy, which would be geared to the needs of future war.

• Recovery 1933-6: Schacht was the dominate figure.
• Rearmament 1936-9: Goering was the Dominat figure.

Conquering unemployment- The new government took action on a broad front front to create jobs. It increased public expenditure and investment and tried to stimulate consumer demand.

• Hitler extended the Public work schemes started in 1932, espically the buliding of homes and motorways, reforestation; and developing the vechile industry.
• The creation of the Youth Labour Service(RAD) which took 400,000 young people off the unemployment register in 1934.
• Men in RAD had to wear military uniforms and live in camps. only given pocket money as wages and meals were provided for them.
• Conscription was introduced in 1935- all 18-25 year olds were required to do 2 years military sevice (100,000 1933-1,400,000 1939).
• Massive public investment- Between 1933 and 1936 gov expenditure increased by 70%.
• Pressure to remove jews and marrried women from the unemployment register.
• Subsides were provided to employers if they hired more workers.

Jan 1933= 6 million   1936= 2,520,000    1939= 302,000

Schacht was appointed President of the Reichbank in March 1933, then in August 1934 we has appointed economics minister.

These appoinments reassured the business community with whom he had close links. His particular skill was developing ingenious ways of meeting Germanys economic needs.

• as president of the Reichbank he used a policy known as Deficit Finance to boost the economy- this involed spending more money than the government had in order to expand the economy.
• The resulting expansion would improve the governments tax revenue which inturn would help to restore gov finaces.
• In particular he pioneered the use of MEFO bills to finace public expenditure without causing inflation.
• Inflation was controlled by the governments control on wages and prices and he also benifted from ending reparation payments arranged by Bruning.
• Schact also suspened debt repayments and the effect of these polices on unemployment figures was striking and welcomed by most germans.

• By 1934, the revial of the ecomnoy was creating a balence of payments problem.
• Germany was importing more than it was exporting , and its gold and currency reserves were running low.

Schacht devised the new plan in 1934 to tackle the problem.

• The government was given the power to regulate imports through controlling the allocation of foregein exchange.
• Imports had to be approved by the government.
• A series of bilaterial trade agreements were also made with some Balkan states where raw materials were exchanged fro goods (barter) so that the use of foregein currency was eliminated.

The New Plan did deal with the immediate problem.

Increased demand still sucked into imports, esecially as the pace of rearmerment grew.

 Schacht in particular was concerned about the distortion in the economy as a result of rearmerment.Problems relating to the balence of payment were causing concern.

• Schanct wanted to slow the increase in arms expenditure.
• Goering in particular wnated to speed up the pace of Militarisation, a policy which became known as 'Butter or Guns'. 

Hitler became impainet with Schachts caution, and in October 1936 put Goering in charge of the Four Year Plan. 

• The aim of this plan was to make Germany ready for war within 4 years.
• Priorty was given to rearmerment, and to make Germany as self sufficent as possible in food and industrial production. (Autarky)
• The main emphaises was placed on the production of raw materials and machinery to provide a base for arms production. 
• The gov set targets that private industry had to meet and a high level of state manament but it did not own industry. 

Schancht resighned in 1937 leaving Goering as the most important economic figure in Germany. 

Hitler considered it crucial for a country geared to war to be self sufficent in order to aviod the damage inflicted by economic blockade. 

Total Autarky was very difficult to achive, and was not planned that Germany would be entirely free from foregein imports. 

It was Certainly hoped it would lose its dependance on other countries for key commodities. 

• Increasing Germanys own production of key commoditites, such as Iron ore, coal and food. 
• Developing Ersatz (subsitute) products, eg artifical rubber (Buna) from acetylene to replace rubber imports, and producing oil from coal. 

However..

• It took 6 tons of coal to produce 1 ton of oil. 
• By 1939 Germany still depended on forgien imports for one third of its raw materials (espically iron ore, oil and rubber).

Gradually another method of self sufficency became important, namely conquering other countries to use their resources. (soviet grain and oil, Austrian iron ore)

The government took some early measures to help peasents with higher prices and cancellation of some debts.   However, it was more concerned with the larger, more efficent esates, whose food production was vital for autarky and the waging of war. 

It also wanted to aviod excessively high food prices so as to help maintain steady wage rates.      Initally, protetion and controlled prices helped farmers, but later they served to keep prices below market levels and were increasingly resented.

Arable farmers benifited from subsidies but livestock farmers were hit by shortages and the high cost of fodder, much of it is imported.

Reich food estate= All involed in agriculture had to join as it regulated production, distrobution, imports and wages. It also gave subsidies.

Reich Entailed Farm Law (1933)- To protect medium and small sized farmers=early tax concessions, lower interest rates, aimed to give security to peasents and small farmers.

Four year plan= reduced fertiller prices, grants for cultivation land, subsudies for mechanisation

Between 1928 and 1938 production did increse by 20% and imports went down. 

Problems

• Shift from arable to dairy farming, but still 'fats' crisis- by 1938 57% of fats produced in GER. 
• Small farms continued to decline, despite Reich Farm Law.

Limited agricultural growth because of:

• Labour shortages, since unable t compete with industry for labour- (rural pop fell from 21% of pop to 18% by 1939)
• Lack of captial investment, limited mechanisation.
• Priority for miltary not agriculture machinery.
• Production failed to meet growing demand- (shortfall made up by conquered land)
• The Reich Entailed farm law (1933)- hindered the development of large scale modern farming units and tied peasents to the land. 

Industry was brought under state supervison in the interest of national unity. 

All firms were members of the Reichsgruppe for Industry, part of the Reich Economic chamber. 

The state controlled most resources but industry remained privately owned. 

• Large firms had to join cartels- union of manufactures allows for fixing prices etc. 
• They expanded to meet government requirements. 

However, despite Nazi rhetoric about the mittlestand small bussiness were unable to compete.

• 30,000 small business went bankrupt. 

The greatest Nazi effort went into a massive autobahn creation scheme that symbolised th e new Germany. (typically confusion and overlap in the railway partically during the war)

Roads:  Supreme Reich Authority under Todt

• great sucess 2,000 miles by 1938
• new autobahns boosted employment and stimulated car production and miltary value. 

Railway: Disorganised and compartive neglect. 

• Competing demands of- transportation of troops, transportation of Jews and transportation of resources and supplies. 

Planes: Nazis invested in planes, they were seen as modern and representing a new Germany. 

Foregien Trade: There was no major growth in foregien trade during the 1930s. 

• schants series of bilaterial trade agreements was replaced with more stress on Autarky.
• Less importance was given to external trade- the government looked towards domestic production and forgein conquests to obtain the nesscary resources. 

The government needed to spend large amounts of money to revive the economy and prepare Germany for war. 

Finace was raised through incresed taxes, and by various forms of credit such as MEFO bills. 

Genral confindance in the expanding economy and strong government allowed the government to attarct loans nessary to maintain a growing budget deficit. 

Income:

• MEFO bills
• increased taxes
• increased welfare controbutions
• borrowing
• Economic growth leads to increased income. 

Expenditure:

• Public investment and Public works.
• Growing welfare provison 
• Expanding cost of military

German Labour Front (DAF)

Set up on the 6th May 1933 after indenpendant trade unions were banned. It took over union assets and workers were now represented in one national union. Largest organisation in the Third Reich and headed by Robert Ley. The DAF intended to restore social peace, win workers over to Nazism and increase production.

Kraft durch Freude (KDF- Strength through Joy)

• Created in November 1933 to improve workers lesuire oppertunties, with subsidised activites such as holidays, hikes, sports theatre and cinema visits.
• In 1938, over 10 million took KDF holidays, most within Germany.

Schonheit der Arbeit (Beauty of Work)= subdivison of KDF which improved work facillites.

Volkswagen (people's car) scheme=(no worker actually recived a car, 39 production for milt)

• organised by DAF in 1938 which gave workers the oppertunity to subscribe 5 marks a week to a fund eventually allowing them to aquire a car.
• In practice, the schemes cheif impact was to reduce the impact of inflation by boosting savings and cut down on domestic expenditure.

• It was successful.
• Certain aspects were successful.
• Economy was not that successful, growth was realtively low, an over emphasis on re-armament and the economy only looked successful as the 1929-33 perios was so bad.