The Nazis inherited a very tempestuous and poor economy. The high unemployment rates and consequences of the previous hyperinflation problems meant that Hitler needed to instigate a policy of recovery. He also wanted to begin preparing the economy for a subsequent war. However, Hitler dodged making definite decisions about the economic policy, stating that the government should “avoid all detailed statements”1 concerning it. This meant that policy of the 1930s was often vague, as not only did the party did not want to alienate economic groups, but they also had little idea of their plans themselves.
This led to a generally pragmatic and responsive economic policy. This style of policy eventually benefited the economy and helped the war effort, as it enabled the government to transfer from the Four Year Plan to the War Economy quickly and effectively. Despite this, from the beginning of the decade the Nazi party realised that it would be problematic to improve the state of the economy drastically in such a short space of time. Therefore, Hitler decided to concentrate the economic policies of the time, to differing extents, on war. This can be seen through elements of both the New Plan and the Four Year Plan.
However, it is important to consider whether the negative points of these plans outweigh their positive ones, if their actions helped or hindered the war effort, and whether a different economic policy throughout the 1930s would to led to a Nazi victory in World War II. The appointment of Hjalmar Schacht in 1933 let to the New Plan of September 1934. This represented a radical extension of trade policy already begun before 1933. The systems of autarky, deficit spending and ‘wehrwirtschaft’2 all clearly had elements which later helped the war effort. For example, the policy of autarky was a push for self-sufficiency within Germany.
Germany no longer wanted to rely on loans and trade from other countries, as such reliance on other powers could lead to problems with their later war orientated foreign policy. Deficit spending increased government investment in projects such as the “Works Creation Scheme” or Arbeitdienst. Projects such as the autobahns would help the infrastructure of Germany and aid military mobility later. They also increased disposable income for consumers by using deficit spending to create jobs. The “Battle for Work,” as this became known, meant that if you were between 19-25 years of age, it was compulsory to be involved in one of these schemes.
This also meant that the unemployment problem (Overy estimates that over eight million were unemployed in 19333) would be solved. This was important because as with an unstable economy it would be impossible to enter a war or initiate a holocaust. The Nazi party also realised that the only way to prevent German defeat in the future was to prepare in peacetime to mobilise the whole society and economy for war and create close links between the economic development of the state and its military requirements. The policy of ‘wehrwirtschaft’ is most clearly reflected by a monetary scheme called Mefo Bills4.
The government increased its spending by 70%, and between 1932 and 1935, public investment tripled5. This was financed The important consequence of such funding was that it increased the amount available for public expenditure in industries connected with rearmament from 0. 7RM in 1932 to 10. 2RM in 19366. Therefore, this policy clearly helped the war effort. However, these schemes also caused problems for Germany’s balance of payments account. The increase of demand from German consumers was not met by a corresponding increase in demand for German goods.
This created a deficit of 284 million RM in 19347. Supervisory Offices and import permits, supplied by the government, were introduced to combat this problem. However, this led to certain industries suffering. For example, in 1934, the import of raw cotton and wool were substantially cut in order to satisfy the import demands of heavy industry. This was clearly a political decision, as Hitler realised heavy industry would benefit the country more during a war. Indeed, Bracher8 states that political goals were of primary importance in determining economic policy during this time.
Another example of these political motivations was the introduction of bilateral trading to try and remedy the balance of payments problems. Germany traded with less politically influential countries such as the Balkans by terms of barter. This alleviated the balance of payments deficit and meant that with the onset of war, Hitler would not have to break down trade relationships with important countries he wanted to invade. The “Battle for Production” helped the war effort, as it meant that there was no need to import other food. Initially, these policies was introduced to benefit the economy.
However, it became clear later that their work aided the economy in preparation for war. This can be seen through their successes. The New Plan tackled most of the economic problems faced by the Nazi government at their accession. Germany decreased her dependency on international financial markets by a virtual default on her debts. This would be vital for the war effort later. The reduction of unemployment to just under one million in 19379 was extremely important to Hitler, as he saw it as an essential factor before his other military and foreign policy ambitions could be fulfilled.
It also gained the Nazi regime admirers both home and abroad. They could later use this favour to their advantage when instigating an aggressive foreign policy. However, the deficit spending which was used to fund these programmes resulted in large financial debts. The work creation projects also had appalling conditions and have been labelled as “slave labour” by historians such as Overy. Despite this, by the end of 1935 there was actually a trade surplus in the balance of payments, the unemployment rate was still falling and industrial production had increased by 49. % since 193310.
The New Plan appeared to be successful on two levels. First, it stabilised the German economy, and second it began to prepare them for war. However, historians such as Layton argue that all of Schacht’s successes masked fundamental structural weaknesses in the German economy. The balance of payments problem had really only been hidden by a number of clever financial disguises, and although unemployment had been reduced, it has been noted that the statistics of the time were liable to fixing. For example, they took married women off the unemployment count.
Overy has also highlighted that although public investment increased, it was only in specific sectors of the economy. For example, the motor and construction industries, despite neither of these directly benefiting the German public. However, The New Plan of the 1930s provided a strong base for the economy to grow from, without which, Germany would never have been stable enough to start rearmament later. By the end of this period, there was a clear turning point in Nazi economics, as for the first time the economy was stable enough to pursue their war interests directly.
Overy supports this view as he believes Hitler always wanted a great conflict for world power and was preparing the economy for this. The New Plan therefore helped the war effort as it prepared the economy for the Four Year Plan, which was more blatantly directed towards rearmament and war. Hitler knew in the summer of 1936 that higher military preparedness could only come if the state extended its control further over the economy, and if Germany became more self-sufficient in the supplies needed to withstand a war.
Therefore, the Four Year Plan was introduced to “co-ordinate all the economic preparations for Hitler’s great war. “11 The idea to push for rearmament and raw materials to help with the war effort introduced by Goering was supported by Hitler, and therefore pursued by the government. Ian Kershaw explains that the move to prioritise rearmament at the expense of consumer industries marked a turning point in the decision making structure of the Nazi Party12. By encouraging autarky and introducing a fundamentally synthetic market, Goering aimed to prepare the Germany economy and armed forces for war within four years.
The main priorities were therefore to build up domestic production of materials like oil and synthetic rubber, to make Germany free from the threat of blockade, to control German trade so that strategic imports and exports took priority, to re-train the labour force for tasks essential for war and to oversee the modernisation of German agriculture so that it could provide the food in case of war. It is clear that all of these policies were aimed towards the future, and fulfilled Hitler’s request of “preparing the German economy for total war. “13
This had profound effects on the nature of the economy, as almost all the extra growth in it after 1933 was diverted towards the needs of war. Wage controls were put into place, designed to shift resources away from consumption and towards heavy industry and war preparation. The ‘segmentation’ of the work force encouraged workers to compete against one another, which increased efficiency in German industries. Goering made it clear that the economy “must be completely converted for war. “14 To enable this it was necessary to restrict the growth of private consumption in favour of state expenditure for military and economic preparations.
By 1939 military expenditure had increased to 17% of total GNP, and over a quarter of Germany’s industrial workforce was working on orders for the armed forces15. It was also crucial to regulate imports and exports to Germany to promote autarky within the country. These policies were clearly more aimed towards war than the policies of the New Plan. However, their relative success in comparison is widely debated. It is clear that by 1940 Germany was much more economically prepared for war than in 1914.
However, they did not meet some of their targets, for example in oil production, Germany only managed to produce 18% of the demanded amount required for war16. Arms production also never reached the levels desired by the armed forces and Hitler. However, many of these industrial targets have now been labelled ‘unrealistic’ by historians such as Overy. Finances were a problem, as during 1938 the money supply grew much faster than output – 22% funding compared to just 4% growth in industrial output17. This contributed to the growing Reich debt and a subsequent diversion of resources from the consumer sector.
A major problem related to this was the long time taken by the construction of the factories, which only began to benefit the economy during the war. The Nazi party increased the marginal propensity to save and discouraged consumption. This led to a slow down in economic growth after 1936. Although standards of living for ordinary Germans rose as many got jobs, they had a smaller variety of products to choose from and conditions did not recover to the relatively high standards enjoyed during Weimar Germany. Carroll has argued that it was administrative inefficiency that made rearmament industrially difficult.
Other historians have highlighted the structural difficulties, such as confused planning, and poor factory organisation. However, despite these shortcomings there was certainly no sharp down turn in the business cycle. Although the economy could have grown faster if trade and consumer demand had been allowed to develop themselves, at the time these ideas were not publicly expressed. Despite this, most economists and historians both agree that in general the Four Year Plan was successful in preparing Germany for blitzkreig, or short wars. It was not, however, prepared for an international conflict.
The problem was, as Tim Mason has concluded, the regime “was trying to have its cake and eat it. “19 It wanted to rearm as fast as possible and at the same time protect the consumer. It can therefore be concluded that despite its successes, it was too focussed and did not address many of the other problems of the time It is clear that both Plans helped the war effort. However, they did so in different ways. The New Plan managed to stabilise the economy, therefore paving the way for the more war focussed Four Year Plan. The latter evidently directly benefited the war more.
However, the work of Schacht cannot be overlooked, as without this the Four Year Plan would not have been possible. Also, during the Four Year Plan the limits of the German economic recovery were shown. The achievements in the economy of the 1930s were only just above the level reached some twenty five years before, and from 1936 onwards all the indices of growth started to slow down20. The main difference between the New Plan and the Four Year Plan can be seen through the spending on armaments, and the move away from consumer spending, to the encouragement to save.
This did not benefit the economy of the time, but provided a strong economic base for the later war effort. Both Plans promoted autarky, however, it was the Four Year Plan that arguably was more successful in this field, as it ultimately led Germany to be more prepared than any Allied country at the beginning of World War II in 1939. Schacht had requested that Hitler allowed him more time to remedy the balance of payments problem. If he had been granted this, it is likely that the German economy would have been more stable going into the Four Year Plan.
This could have resulted in the economy being totally ready for war in 1939, instead of only “partially mobilised. “21 Many historians debate whether the economy in 1939 was prepared for a total war, as Germany experienced, and whether Hitler was planning for this kind of war, or the economy forced him into it. Shortages of skilled labour and foreign currency essential for the heavy growing industries resulted in significant strains on the German economy in 1937. In addition, full employment was creating inflationary pressures.
This has led Burton Klein and Timothy Mason to suggest that Germany decided to enter smaller conflicts, such as the Anschluss with Austria in 1938, to relieve these pressures. Many of the investments had been made for short term rather than long term projects and as many of the policies merely disguised deep rooted economic issues, it would have been difficult for the Nazis to continue a prolonged war. Therefore, it is likely Hitler was aiming for blitzkreig, or shorter “lightening” wars as a deliberate military strategy. This theory has been extended by historians such as Milward.
He accepts that Blitzkreig was meant to avoid total war, but he also pointed out that ‘no nation had ever previously spent so vast a sum on preparations for war. ’22 However, Overy argues that between 1936 and 1939 the Germany economy restructured to prepare for total war. The war that took place in 1939 was not the result of a crisis in the economy, but because of foreign policy decisions. The economic and political policies in 1939 were aimed at providing the means by which sustained total war could be fought. Therefore, “the drive for total war became instead Blitzkrieg by default.
Overy believes that the Nazis predicted the economy would be ready for war by 1943, quoting Hitler’s proclamation, “the idea of getting out cheaply is dangerous, there is no such possibility. ” The declaration of war in 1939 was therefore earlier than expected and the economy was not fully prepared. Despite this, the work of both the New Plan and the Four Year Plan, enabled Germany to enter any kind of war in 1939. Without the reduction of unemployment and the drive to produce more arms, the German armed forces would have not been able to consider blitzkreig, let alone prolonged war.
Therefore, it can be concluded that regardless of the type of war Hitler was aiming for, the economic plans of the 1930s helped, rather than hindered, Germany’s efforts. Both the New Plan and the Four Year Plan helped the war effort to an extent, as they met most of their original aims and therefore contributed positively to the economy. Although overall the New Plan would seem to have made more of an impact on the economy, the Four Year Plan was arguably more important for the Nazis, as it helped them achieve their political aims.
As Overy argues, “… the Third Reich … et about reducing the autonomy of the economic elite and subordinating it to the interests of the Nazi state. “24 Both plans can be viewed as a product of this kind of political outlook from the Nazi party. However, neither plan made a lasting impact on German society. The chaotic War Economy, run by Speer from 1939, is a useful indicator of how thorough the work of the previous two plans had been. This economy used similar policies to the Four Year Plan. However, it introduced systems of rationalisation and tried to control imports and exports even more rigidly.
Ultimately, however, this too failed, as the Allies bombed the munitions factories and the country could no longer support their armies. Therefore, overall the policies throughout the 1930s did not help the war effort, as they did not achieve Hitler’s aim of an international military victory for Germany. However, it is difficult to assess whether this was ever possible considering they were trying to introduce a war economy in a peace time, the short amount of time and the lack of planning involved.
It is understandable that neither plan had a lasting impact as the Army and SS involvement meant that attention was drawn away from the economy even before 1937 when Goering replaced Schacht. Given this factor, and the state of the economy that the Nazis inherited, the respective efforts of both plans were quite significant. Although the Nazi party lost the war, the New Plan and Four Year Plan definitely helped rather than hindered the war effort.