Nazi Economic Policies, 1933–1939 (AQA A Level History: Component 2: Depth study): Revision Note

Summary

• The economy was key for the Nazis both in terms of its popularity with the German people and in preparing for war

  • They aimed to end the mass unemployment that had helped get the Nazis voted into power

  • They also intended to make Germany self-sufficient in terms of raw materials

    • This would protect its factories from being cut off from supplies as had happened during the First World War

• The New Plan was launched by the financial expert, Dr Schacht, and involved large government spending on job creation schemes

  • It also involved tax cuts to encourage more spending

• Schacht was gradually sidelined from 1936, and Hermann Goering was given responsibility for the economy

  • This led to the Four Year Plan, which had an increased focus on rearmament in preparation for the anticipated war

  • It involved increased state controls of industry, increased production of essential materials such as iron and steel and the use of slave labour

• Although unemployment was all but wiped out, historians have questioned whether this was due to young men joining the armed forces and young women leaving the workforce to become mothers

• Germany never achieved self-sufficiency

The aims of Nazi economic policy

• To end the disastrous unemployment caused by the Great Depression

• To achieve autarky

  • Autarky would mean a blockade would not destroy Germany’s economy or food supply

    • This happened during the First World War

• To increase farming output

• To increase rearmament

• To implement more government control on the industry

Schacht and the 'New Plan'

• Hitler appointed Dr Schacht, who was President of the Reichsbank, as Minister of the Economy

  • He was a well-respected banker and a financial expert

  • He had helped to resolve the hyperinflation crisis in 1923

• Schacht's 'New Plan' involved a range of policies designed to stimulate the economy

• These included:

  • Spending large amounts of government money building motorways (autobahns), hospitals and homes

  • Cutting tax to encourage people to spend more in the shops to create more jobs

  • Paying companies subsidies to employ more workers

  • Signing trade deals with other countries to increase the exports of German-made goods abroad

  • Strictly controlling imports into Germany to protect German jobs

  • The Reich Labour Service, which forced unemployed young men to work for six months on building or agricultural projects

  • He also secretly began a policy of rearmament

    • This involved instructing companies to make weapons and vehicles but paying them in Mefo Bills

    • These were essentially credit notes and meant that the companies would not get any money for five years

• Hitler grew frustrated with Schacht, who was increasingly sidelined from 1936, despite his policies improving the economy

  • Instead, Hermann Goering was effectively given control over the German economy

    • Goering had no economic experience

    • Hitler wanted a more radical economic policy

Like the military and political rearmament and mobilisation of our people, there must also be an economic one, and this must be effected in the same tempo, with the same determination, and, if need be, with the same ruthlessness as well.

In future the interests of individual gentlemen can no longer be allowed to play any part in these matters. There is only one interest, and that is the interest of the nation, and only one single view, which is that Germany must be brought politically and economically into a state of self-sufficiency.

II. For this purpose, in every sphere where it is possible to satisfy our needs through German production, foreign exchange must be saved in order that it can be applied to those requirements which can be supplied in no other way except by imports.

An extract from a confidential memo by Adolf Hitler to key industrialists on the importance of autarky in August 1936

Goering and the Four-Year Plan, 1936

• Launched in 1936 and intended to run to 1940, though overtaken by the outbreak of war

• Built on the Reich Food Estate established in 1933 under Walther Darre which guaranteed prices for farmers

• Increased ersatz goods. The Nazis used:

  • Coal to make rubber

  • Acorns to make coffee

• The government set production targets for industry 

  • The government controlled the production of iron ore, coal mining, steel and armament factories

• Used enslaved labour from

  • People in concentration camps

  • People from newly-occupied German territories (Austria and the Sudetenland from 1938)

• Production of commodities that were essential for rearmament, such as chemicals, iron and steel, were increased

How successful was the Four-Year Plan?

• Many business leaders did not support the plan

  • Excessive rearmament decreased Germany’s standard of living

    • This is called a ‘guns, not butter’ economic approach as the Nazis chose rearmament over social welfare

• Germany had not achieved autarky

  • By 1939, Germany still imported one-third of its raw materials

"I am intentionally leaving on one side the question of how far the iron industrialists can manage to do it on their own and how far they will have to be assisted. In the case of vital plants, where the State cannot put so many demands that the firms might go bust, then the State will have to step in and help since these measures must under all circumstances be prepared. The same is true of the production of explosives or field guns, where one also cannot require these projects to be economic. The same is valid for low-grade iron ores. For provision must be made so that in the event of Germany being cut off from foreign supplies of iron ore the defence program can still be carried through in total."

Extract from the minutes of a meeting between Hermann Göring and the leaders of Germany's iron industry in 1937 in which he discusses government intervention.

The role of the industrial elites

• The arrival of the Nazis in power was welcomed by most of the industrial elites

  • They knew that rearmament would lead to an enormous increase in orders from their factories

  • This would lead to a huge increase in their profits

• The industrial elites also welcomed the Nazis' crushing of the trade unions

  • Without the threat of widespread strikes, the business owners were free to pay their workers less and work longer hours

  • This would also lead to an increase in profits for them

• However, they did not welcome the increased state control, production targets or government setting of prices

The Mittelstand

• The Mittelstand is the name given to Germany's large number of independent small and medium-sized business owners

• Many of them welcomed the Nazi's Law for the Protection of the Retail Trade, which was passed in 1933

  • This was meant to restrict the spread of large department stores and protect independent retailers against large chain stores

• However, many became disappointed that Hitler did not close the big department stores as he had promised to do

  • In fact, the Nazis began to favour the big businesses as they kept prices lower and were major employers

• Similarly, the owners of small farms welcomed the Reich Entailed Farm Law that was passed in 1933

  • This was intended to prevent families from having to sell their farms to clear debts

  • However, many grew to resent the law as it prevented them from selling their own property

  • They felt the government increasingly controlled them and their farms

How successful was Nazi economic policy by 1939?

• In some ways, the Nazi Economic policies had proved to be highly successful by 1939:

  • Unemployment fell below one million by 1937 and by 1939 Germany had a labour shortage, this was due to:

    • Job creation schemes such as the Schlacht um Arbeit ('Battle for Work')

    • Rearmament, two thirds of industrial investment went into war-related sectors by 1939

    • Companies being subsidised to employ more people

    • The reintroduction of military conscription

    • The Reich Labour Service (RAD)

• Many businesses experienced an increase in their profits

• Many workers took home more wages, although they were often working longer hours

• However, the dramatic reduction in the number of unemployed was not only due to the creation of new jobs

  • Many women were convinced to give up their jobs by the offer of free loans if they had children

  • Women were banned from working in the legal and medical professions from 1936

  • Many young men were taken out of the labour market by joining the enormously expanded armed forces

• Despite higher wages, the standard of living did not increase and may have even declined due to increases in prices

• Germany failed to become self-sufficient and was still importing a large percentage of its raw materials

  • This left it open to blockade as had occurred during the First World War