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Introduction

Nazi economic policy: Were the people better off?

Key Questions:

  1. How successful was Nazi economic policy?
  2. Were the people better off?

Aims of Nazi economic policy:

  1. To maintain the support of the population. (i.e. feeding the population, providing basic needs)
  2. To make Germany a global military and industrial superpower.

Resources devoted to either aim varied over time.

Foundations:

The most important aspect of Nazi economic policy was that there was no genuine planning or theory guiding it.  By Nazi viewpoint, the economy was not as pressing an issue as genetics or militarism, despite the fact that the latter was intrinsically linked to the strength of the economy; Hitler was firmly rooted in his ‘herrenvolk’ ideas, believing that the Aryan people would triumph no matter what, and himself often proclaimed that “the economy is something of secondary importance”.

Regardless, the economy was not completely set loose and uncared for.  Hjalmar Schacht, Reich finance minister from 1933 – 1936, based the recovery of the German economy in Keynesian economic theory, part of which theorises that consistently high government spending could act as a stimulant to the economy when unemployment is similarly high and business confidence/optimism is low, especially in areas such as physical infrastructure and long-lasting projects.

Later on moved on to a more specific sect of Keynesian economic theory, specifically ‘Military Keynesianism’, the policy being that of a government devoting large amounts of money to the military in order to stimulate economic growth, as opposed to other sectors.

Time periods of Nazi economic policies:

Nazi economic priorities changed over the course of the Third Reich: split into four periods.

  1. 1933 – 1936: ‘Partial Fascism’
  2. 1936 – 1939: ‘Four Year Plan’
  3. 1939 – 1942: ‘Blitzkrieg’
  4. 1942 – 1945: ‘Total War’

Nazi Germany had no definite or consistent economic theory; policies changed drastically as time progressed.  Therefore, there is no ‘success’ or ‘failure’ of Nazi economic policy as a whole; rather, there is the success or failure of individual periods in Nazi economic policy.

 

1933 to 1936

1933 – 1936, Partial Fascism: Hjalmar Schacht and the New Plan

Period defined by several state measures and objectives:

  1. Job creation – the end of the Weimar republic left Hitler with 11 million unemployed Germans on his hands, and something had to be done about them rapidly.
  2. Wage control -
  3. Elimination of trade union powers
  4. Autarky
  5. Wehrwirtschaft

Job creation achieved through massive government-led construction projects, (such as the Autobahn), the removal of women from the ‘working population’ in line with Nazi ideology that women belonged to the home, and mass conscription of unemployed into the military.

Nazi economic policy at this time aimed to make Germany economically self-sufficient in order to make the country a superpower (autarky), primarily through cutting German imports and devoting research into the making of synthetic materials (such as rubber, petroleum and textiles).

Influenced by Hitler’s vision of Lebensraum and the inevitable conflict this would cause with other nations, Germany also adopted the policy of Wehrwirtschaft; the preparation of the German economy for total war in the long term by increasing industrial production and prior autarky measures of production of synthetic materials.

Schacht, the then-Reich finance minister, developed the New Plan in response to the requirements of social and military improvement: signing of trade agreements with underdeveloped countries in South America and the Balkans (Southern/Eastern Europe), providing German capital and investment in exchange for raw materials in order to supply the massive government public works and finance military development.

In terms of preparations for war, the Nazi economy was not yet successful in this aspect as it was other equally pressing concerns -such as unemployment, and the need to improve the average German’s life- which took centre stage in early Nazi economic policies.  Therefore, military rearmament was slower and spending lesser in the initial years of the Nazi government comparative to later years.

In general, the quality of people’s lives improved during the first few years of Nazi government.  This was primarily because of the extremely poor standard of living the people already were in (needing to burn the worthless monetary notes for fuel as opposed to buying coal, food and water shortages, lack of purchasing power, etc.), as opposed to improvement from pre-Depression levels.

 

1936 to 1939

1936 – 1939, Four Year Plan: Military and political rearmament and the plunder economy

This period was defined by a major economic crisis faced by the Nazi government in 1936: demands of military production meant that quantities of raw materials that Germany had were falling dangerously low, and the German economy was heading for a trade deficit; between 1933 – 1936, German export prices dropped by 9%, while import prices increased by 9%, leading to a major financial crisis by 1936.

In response to this new crisis, the Nazi party envisioned a ‘Four Year Plan’, a series of economic reforms which would theoretically continue Germany’s path to becoming a superpower via the following means:

1. Reduction of employment – although this had been quite successful earlier on with Schacht’s New Plan (German unemployment was reduced to one million by 1937), it still had to be prioritised.

2. Increased synthetic fibre production – this included such materials as nylon and rubber.  The dual purpose of this was to improve Germany’s technology to be on par with other great powers and to pursue the ideal of autarky, and also to ensure that Germany would not have to suffer from the effects of blockade of resources as had happened in World War One by the Royal Navy.

3. Continue public works projects – the mainstay of this aim was the Autobahn still in development at the time; the necessary number of workers were essentially drafted into service, as all unemployed men from the ages of 16 – 25 were made to work on the Autobahn.  Side projects included various sports stadiums scattered around the country, flak towers (military fortifications) and statues and monuments dedicated to Hitler and the Nazi state.

4. Increase automobile production – Hitler loved cars, even though he could not drive himself.  While the official reason was for the ‘betterment of the people’, the real driving force behind this was the hope that more men would learn how to drive and therefore enter the military with basic vehicular skills, thus cutting down training time when it came to driving trucks and the like.

5. Begin open re-armament.  While military production had been de facto beginning ever since Hitler came to power in 1933, the Four Year Plan increased production drastically and made it ‘official’ government policy, in defiance of the Treaty of Versailles and the Allies.

As one can see from the five points, the Four Year Plan was very much one that was intended to put Germany on a war course; self sufficiency for war, building of military fortifications, military skills training and rearmament.  This is in stark contrast to the New Plan, which emphasised stablity, peace and the betterment of the German people as a whole.

Hjalmar Schacht, who was not involved with the creation of the Four Year Plan, disliked the entire Plan as a whole but was vehemently opposed to Point 5, believing that it was in contradiction with attempts to stabilise the German economy and that antagonising the world powers would threaten Germany more than ever.  Hitler, however, who was by then impatient with Schacht’s cautious trading measures and ‘consorting’ with ‘inferior’ states, dismissed Schacht’s concerns and placed Goering (with the benefit of hindsight, the ‘yes man’ of Hitler) in control of the Four Year Plan, who was far more supportive of Hitler’s rearmament policies.  Schacht, who saw that he had essentially no more power in government, thus resigned his post as Reich Finance minister.

In summary for the two ‘peace’ periods, Schacht’s New Plan created some financial problems for Nazi Germany.  Goering’s Four Year Plan which followed tried to improve on every single aspect of the Nazi state despite those problems, thus aggravating the entire situation as detailed below.

1939 to 1942

1939 – 1942, Blitzkrieg: Armed conflict and Lightning War as an economic policy

In this period, Germany was facing major economic problems once again. The rearmament was having hugely detrimental effects on the German economy, as it was much too fast paced and appropriately placed great stress on the Reich’s finances, as detailed below:

1.    Reduction of exports – because so much of the German economy was dedicated to it’s military, exports to other nations were drastically reduced as more and more sectors of the economy were rededicated to arms production.

2.    Not enough labor in other parts of economy – while areas such as ammunition and military machinery had production numbers boosted alongside military research and development, other parts of the consumer economy were drastically reduced in scale.

3.    Shortage of raw materials – The immediate solution to this, of course, was for Germany to import more and more raw materials from its trading partners established via the New Plan described earlier.  However, increased imports and decreased exports as covered in point 1 meant that government debt was building up rapidly. Later on, Germany further improved the situation by using goods from conquered countries.

4.    Reduced foreign currency earnings – with stringent government control of the value of the Reichsmark, it was clear to all that its exchange value was intended to give Germany benefits.  Therefore, very few foreign nations dealt business with the Reichsmark, and this lack of usage meant that its real value fell significantly, despite government claims.

These economic problems left Goering (economic minster of Germany at that time) with two choices:

1.    Re-integration into the world economy as the effects of the rearmament was overwhelming German economy.  However, this would go against Nazi ideals of autarky and self-sufficiency, and thus not politically viable even if it was the most reasonable economic solution.

2.    To effectively turn German economy into a ‘plunder economy’.  This would mean that the German economy would be fulled  by taking other nations’ resources and wealth by force of arms; this was politically viable as it was in-line with Hitler’s vision of ‘herrenvolk’; since the Aryan race was ‘superior’ to all other races, especially the Eastern European people and the ‘Bolsheviks’ of Soviet Russia, Germany therefore had a natural right to requisition their resources.

Hitler’s choice was point 2, using the justifications listed above. However, Goering and other generals realised that Germany could not, at that stage in time, sustain a long and drawn out war of attrition; therefore, they developed Blitzkrieg, or lightning war, in which the military would attempt to win a war as fast as possible, using as little resources to actually fight the enemy as possible as opposed to charging for key zones, such as resource-rich areas and politically viable locations, such as capital cities.

Germany needed to fight its war as swiftly as possible because neither industry nor military had the means to fight for extensive periods of time, and that would only come when it had the necessary resources to fuel a war of that scale. Goering believed that a successful Blitzkrieg would speed up the transition period into a total-war capable economy by utilising the resources of other nations and diverting them into the German war machine.

The economic objectives of the Blitzkrieg period were as thus:

1.    To treat resource-rich areas as priority targets; the siphoning of resources would have begun as soon as possible, even if the invasion were not yet over.  This was first exemplified in Austria following the Anschluss and Czechoslovakia after the invasion both before 1939, when mass amounts of raw materials were shipped to Germany; note that Blitzkrieg as a military strategy was not carried out here, but rather Blitzkrieg as an economic policy.  Later on, this was repeated in France (where the first actual success with Blitzkrieg as a military policy was utilised); by 1941, 2/3 of French trains were comissioned to carry materials back to Germany to fuel the war.

2.    Make Germany able to sustain a long-term war, via the resources gained through point 1.

With the resources and wealth gained, more money would have been spent on the armaments and military hardware/research industries.  Military expenditure rose up to astronomical numbers. From 17% of GNP in 1938 to 38% in 1940, and 55% in 1942.

Evaluating their success in fulfilling their aims:

1.    Did they support the army with enough resources to win the war?

German economy during 1939-41 was not well organized. Despite the increased efforts of increasing the firearms output, Germany military still had shortages of supplies. As early as 1939 December, Germany was already unable to replace planes lost in the battle of Britain.  But early shortages didn’t hinder German success in the war.

The German economy supported the German army with sufficient weapons to have success in their early conquests. But by winter 1941, one third of the German soldiers didn’t have adequate equipment. Germany’s goal of destroying the Soviets failed and was eventually defeated in the battle of Moscow.  Germany ran out of resources and couldn’t continue with their lightning war. They reevaluated their war plan and decided to enter total war to defeat USSR.

2.    Did they succeed in preparing for a long war?

Some historians argue that German economy was not even prepared for the Blitzkrieg. And their success in the lighting war only relied on the temporary boosts gained from their victories. They only had enough resources because they exploited the economies that they conquered.  Therefore, German economy by the end of 1942 was certainly not prepared for a total war.

By this time, making the German people ‘better off’ was of secondary nature as the Nazi party made increasing calls for people to take part in supporting the war effort, even if at personal loss.  As such, this aim was not achieved as much as it was in pre-war years and, as will be explore later, to be pushed to the side.

 

1942 to 1945

1942 – 1945, Total War: Completely militarized economy and a reaction to disaster

The transition into a total-war economy was initiated out of the annihilation of an entire German army at Stalingrad, completely reversing the tides of the war. Germany was finally forced to enter a total-war mode, as the loss of six million men, nearly a thousand tanks and several hundred aircraft was far too great for a partial-war economy to recover from. Goebbels gave his now-infamous ‘Total War’ speech, calling for a war ‘more total and radical than anyone could imagine’.  Now, the sole economic policy of the Nazi party was for war, with personal gain and improvement cast aside completely.

In 1942 Albert Speer took over as the “Minister of Armaments” as the influences of Goering faltered after the failure of his Luftwaffe (air force) in 1939 and his empty promises of how the air force would save the entire Germany army trapped in the USSR at Stalingrad in 1942 (3 out of 4 men were killed, showing the success the Luftwaffe had in saving the army). Historians argue that Germany didn’t have an effective economy to cope with war until 1942 and regarded Speer as the key player in allowing for Germany to remain capable in war for as long as it did. These were Speer’s strategies in militarizing Germany’s economy.

1.    Establishing a central planning board with representatives from all branches of German industry. Major decisions were being made in the board and Speer had a more concentrated control over the entire German industry. This was responsible for a great increase in output because nearly all factories now worked under the government. They could complete tasks more effectively they cooperated under clear instructions. This was also an act where Speer consolidated his power as an economic dictator in Germany.

2.    Setting several industrial laws. Only elites and specialists that were within the age of 40-55 could become industrial department heads. Speer claimed that the people 55+ were too arrogant and people under 40 were not experienced enough. Through this, Speer hoped to maintain the quality and success of war production.

3.    Use of forced labor. As mentioned in point 1, not only were the civilian factories forced to work under the government, but over 6.5 million workers were imported from other parts of Europe.  Speer also called for more humane treatment of the labourers, both for easing his own conscience and for the simple, pragmatic fact that workers needed training and all that training would be wasted if the worker ended up dying from starvation.

Speer’s policies proved to be very successful. Despite the heaving bombing of major German cities by the Allies in 1942-44, production of tanks doubled and aircraft production increased by 80% in 1943. It continued to increase until late 1944s where the armaments were enough to support the double of Germany’s army size. This showed the ineffectiveness of Allied air attacks; attempts to annihilate the German economy only succeeded to a certain extent. This was also an indication of how successful was Speer’s policies and his role as the economic minster. In crucial times of WW2, Germany could still supply its army with enough armaments. In comparison to the supply of armaments for the army in Blitzkrieg and for the disastrous failure in the invasion of the USSR, Speer was very successful.

Eventually, Germany still lost war due to out-production by enemies.  The Allies, in particular the UK, had been gearing for total war ever since 1939 and other Allied nations followed suit within the year, while Germany only initiated the change in 1942.  Although it was able to struggle on, the German economy was completely overshadowed by its opponents and would not have saved Nazi Germany regardless of how many armaments or military hardware was produced, even without the Allied air raids.

Ironically enough, Speer, who would direct the Reich’s total war effort, was the one who saved Germany from being reduced to all but a third-world nation.  Hitler, realising that the war was lost, was determined to take Germany down with him in death; as such, he issued the Nero decree, ordering a scorched-earth policy (destruction of anything and everything usable in a territory) in all Germany.  Speer despaired at Hitler’s insanity and, via political maneuvering, convinced Hitler to put him in charge of exercising the decree, and thereafter ordered most of the military commanders not to undertake this suicidal act, followed by his own attempts to redirect the German economy to production of tools which would aid in recovery, such as agricultural implements, fertiliser and textiles in order to sustain Germany come the inevitable occupation by foreign powers.  This would be the last successful ‘Nazi’ economic policy (or lack thereof) as it, if undertaken in its original form, would have reduced Germany’s territory to literally barren wasteland, and Speer’s final attempts to aid Germany post-war greatly supported its ability to provide basic needs such as food and water to its people.

Conclusion

Conclusion
In conclusion, the Nazi economy was and still is an extremely controversial subject with regards to its role in the success and failure of the Nazi state.  It’s successes are listed as below:
1. Allowed people to survive in more comfortable conditions than during the Great Depression.
2. Succeeded in re-militarising Germany for its initial wars against Czechoslovakia, Poland and France.

However, there were major issues that plagued the Nazi state since its inception that caused major failures in its economy:
1. The people were not ‘better off’ in the sense that their lives were much improved; rather, they were simply better off by not having to live in Depression conditions, and not lives superior as compared to when in the Weimar republic.  For example, the purchasing power and real wages of people remained at 1928 levels and not higher throughout the years of Nazi government.
2. The critical failure of the Nazi party was the constant and often drastic changes made to economic policy.  While Schacht’s New Plan was headed in the ‘right’ direction per se (stabilisation, reduction of unemployment, trade), the Four Year Plan overturned some of the improvements that the New Plan had made, such as the ideologically-driven measure of limiting contact with ‘inferior’ states in Eastern Europe and drafting of many potentially workers into the military.

Following this, Hitler launched Germany into war even before the aims of the Four Year Plan were realised, and many of the public works and automobile projects were slowed down significantly as Great Britain and France declared war on Germany, promising a long, drawn out war.  With synthetics production not even out of research stage, Germany suffered just as much from blockade as it did in World War One.

 

While the transition into a full-time war economy definitely helped Germany survive longer than it should have when its army was defeated at Stalingrad, it was a case of ‘too little, too late’.  Other nations’ economies were fully militarised by the start of World War Two in 1939, whereas’ Germany’s change came only in 1942.

 

With regards to its original aims of improving the lives of the people and re-militarising Germany, it can be said that the lives of the people were bettered to some extent; however, this improvement was all but halted by the outbreak of war.  The militarising of Germany was successful in that it allowed Germany to conduct successful military operations to begin with, but failed to sustain it for long-term war, never mind total war.

 

As such, it can be said that Nazi economic policy failed in both aims and attempts to achieve those aims.  However, it should be noted that the failure cannot be attributed to any single policy, but rather the constant changing of policies by the Nazi party, which did not give any of them the chance to fully develop or succeed in the long run.

 

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