The Economy of Nazi Germany

Peacetime Economy

How far did the Nazi Government manage to create full employment?

Problems with 1933 economy

German economy practically bankrupt.

Unemployment rate over 6 million.

Industrial production down to 1890s levels.

Volume of German trade sunk by 90%.

Internationally uncompetitive agriculture was burdened with debt.

Advantages of 1933 economy The Great Depression was easing so the economy was beginning to recover. Hitler could build on von Schleicher’s plans to create work by building houses and roads and improving agriculture. More money could be injected into the economy as reparations were scrapped in 1932 and the Reichsmark was no longer tied to the gold standard. The Voluntary Reich Labour Service set up work for the unemployed. The power of the labour movement to demand higher wages had been depleted. Wages could now be set at lower levels thus enabling companies to invest more money in production.

Rapid revival was produced by:

·         Unemployed young people being removed from the labour market and then temporarily employed by organisations such as the Voluntary Reich Labour Service. (1/2 million by 1935).

·         Armed services and industry engaged most of the unemployed. 

o   Conscription made compulsory and the Luftwaffe were formed in 1935.

·         Law for the Reduction of Unemployment squeezed women out of the labour market by offering an interest-free loan of up to 1000 Reichsmarks for young couples to get married.

o   The loans were issued as vouchers for goods in order to encourage production.

·         A billion Reichsmarks were invested in infrastructure work schemes.

·         The motor industry was aided by tax concessions which improved sales and helped the components industries. Employment in the motor industry rose by 40%.

·         Working week shortened so that more people were needed to work.

How did Hitler assist the Mittelstand and the farmers economically?

Mittelstand (German lower-middle class)

The Nazis had directed much of their electoral propaganda at the Mittelstand.

·         Small shopkeepers hated big department stores that could sell cheaper goods. Artisans with small workshops and peasants with small holdings were undermined by large competitors such as factories and agricultural estates.

·         The Law of the Protection of Individual Trade prevented chain stores from opening new branches or maintaining self-contained departments.

·         The purchase of marriage loans for furniture or household equipment could not be spent in the department stores.

Despite this, big businesses were needed to kick-start the economy:

·         Hjalmar Schacht, head of the Reichsbank, was responsible for ensuring that job creation schemes did not lead to inflation.

·         Big businesses continued to expand at the expense of smaller enterprises.

·         Department stores were supported rather than closed down to prevent huge job losses.

Farmers

Farmers received more support from the Nazis:

·         Food shortages had greatly contributed to Germany’s defeat in the Great War. Therefore a special department was set up in 1936, as part of the Four Year Plan…