Short note 1

Nazi state and economic policy

Germany’s economy was in turmoil when Hitler was elected Chancellor in January 1933.
Hitler and Nazi propaganda had played on the population’s fear of no hope. Unemployment
peaked at 6 million during the final days of the Weimar Republic near enough 33% of the
nation’s working population. Now Hitler decreed that all should work in Nazi Germany and
he constantly played on the economic miracle Nazi Germany achieved. In the years before
his appointment as chancellor, Hitler had been careful not to become tied down to the
problems of an economic policy; he even told his cabinet in February 1933 to ‘avoid all
detail statements concerning an economic programme of the government’. However, Hitler
was also politically astute enough to realize that his position depended on bringing Germany
out of depression and so, during 1932, the Nazi leadership had begun to consider a number
of possible approaches to the management of the economy: 
 
First were the socio-economic aspects of the Nazi Party’s original aims, as outlined in the
anti-capitalist sentiments of the 25 points programme of the Nazi party of 1920 such as: 
Profit sharing in large industrial enterprises, The extensive development of insurance for old
age . The nationalisation of all businesses Hitler accepted these points in the early years
because he recognized their popular appeal but he himself never demonstrated a real sense
of commitment to such ideas. As a result, they created important differences within the
Party, as a faction within it still demanded the following: - Secondly, attention was given to
the emerging idea of deficit financing. By spending money on public works, deficit financing
was intended to create jobs, which would then act as an artificial stimulus to demand within
the economy. Indeed, the work schemes were actually started in Germany by Chancellors
Papen and Schleicher.

Finally, there was the idea of the Wehrwirtschaft (defence economy), whereby Germany’s 
peacetime economy was geared to the demands of total war. This was to avoid a repetition
of the problems faced during the First World War when a long, drawn out conflict on two
fronts eventually caused economic collapse. Related to this was the policy of autarky. This
envisaged a scheme for the creation of a large trading area in Europe under the dominating
influence of Germany, which could be developed to rival the other great economic powers.
It played on the idea of German power and harked back to the expansionist view of First
World War nationalists. Of these three economic approaches, Hitler identified his long-term
political and military aims most clearly with the defence economy. However, there were
important differences within the Party over economic planning so, despite the consideration
given to such policies by Nazi leaders no coherent plan had emerged by January 1933. Hitler
had no real understanding of economics and to a large extent the implementation of
economic policy was initially left to bankers and civil servants. From the start, then, there
was a lack of real direction and elements of all three approaches can be detected in the
economic history of the Third Reich. This suggests that economic policy tended to be
pragmatic. It evolved out of the demands of the situation rather 
than being the result of careful planning. As the leading historian A. Schweitzer stated, “no
single unified economic system prevailed throughout the entire period of the Nazi regime”
In the early years Nazi economic policy was under the control of Hjalmar Schacht, President
of the Reichsbank (1933 -1939) and Minister of Economics (1924 -1947). This reflected the
need of the Nazi leadership to work with the powerful forces of big business. Schacht was
already a respected international financier because of his leading role in the creation of the
new currency in the wake of the 1923 hyperinflation. It is evident that the economic
depression reached its low-point in the winter of 1932 -1933 and that afterwards the trade
cycle began to improve. This undoubtedly worked to the political and economic advantage 
of the Nazis. Nevertheless, there was no single, easy ‘quick fix’ solution. 
The heart of economic recovery lay in the major revival of public investment led, for the
most part, by the state itself, which embarked on a large-scale increase in its own spending
in an effort to stimulate demand and raise national income. So, under Schacht’s guidance
and influence, deficit financing was adopted through a range of economic measures. 
Banking and the control of capital: 
Initially, because the German banking system had been so fundamentally weakened, the
state increasingly assumed greater responsibility for the control of capital within the
economy. It then proceeded to set interest rates at a lower level and to reschedule the
large-scale debts to local authorities. 
Assistance for farming and small businesses: 
Particular financial benefits were given to groups such as farmers and small businesses. This
not only stimulated economic growth, but also rewarded some of the most sympathetic
supporters of the Nazis in the 1930-1933. Measures inc: - Maintaining tariffs on imported
produce in order to protect German farmers - The Reich Food Estate giving subsidies as part
of a nationally planned agricultural system - The Reich Entailed Farm Law reducing debts by
tax concessions and lower interest rates in an attempt to offer more security of land
ownership to small farmers - Giving allowances to encourage the rehiring of domestic
servants - Allocating grants for house repairs State investment  public works: 
However, of the greatest significance was the direct spending by the state on a range of
investment projects. In June 1933, the Law to Reduce Unemployment was renewed and
expanded (from a scheme which had originally been started by Papen in 1932) and the RAD
(Reichsarbeitsdienst, Reich Labour Service) was expanded to employ 19 , 25 year olds. For a
long time most historians assumed that rearmament was the main focus of investment, but
the figures for public expenditure show that this was initially spread among rearmament,
construction and transportation. So the investment in the immediate three years was
directed towards creation schemes such as: 
reforestation , land reclamation , Motorisat the policy of developing the vehicle industry and
the building of improved roads, e.g. the autobahns (motorways) building especially the
expansion of the housing sector and public buildings The cumulative effect of these policies
was to triple public investment between 1933 and 1936 and to increase government
expenditure by nearly 70% over the same period. By early 1936, the economic recovery was
well advanced and emphasis began to further turn towards rearmament. As a result of
these strategies, there was a dramatic growth in jobs. From the registered peak of 5.6
million unemployed in 1932, the official figure of 1936 showed that it had declined to
1.6 million. For those Germans who had been desperately out of work, it seemed as if the
Nazi economic policy was to be welcomed. Even in other democratic countries scarred by
mass unemployment, observes abroad admired Germany’s achievement of job creation. 
Yet, even in 1936, the government public deficit certainly did not run out of control, since
Schacht maintained taxes at a relatively high level and encouraged private savings in state
savings banks. It must be remember that all this took place as the world economy began to
recover and Schacht was aided by the natural upturn in the business cycle after its low-point
in winter 1932. Nevertheless, it is difficult to believe that such a marked turnaround in
investment and employment could have been achieved without Nazi economic policies.

Bibliography :

1. Gordan Martel, a compound to Europe 1900-1945, Chapter 23 ,the nazi new society
2. R. J. Overy: Introduction: The Nazi Economy in Peace and War

Name: Beenish zehra

Subject: History of modern Europe
Course : history hons , 3rd year
Roll no. : 171393