The economic situation in Germany in the early 1930's was very grim. Unemployment was high (8. 5 million in1931) and businesses collapsed alongside consumer confidence. Peasants were also desperate as agricultural prices collapsed between 1929 and 1933.
The domestic economy was very weak before the Wall Street Crash, already in 1928 3 million were unemployed, and the depression made the situation worse. As the desperate situation of the economy was one of the reasons for the Nazis getting to power in the first place they knew that they would have to do something about it.Also one of their objectives was to create an economy with enough strength to sustain rearmament. The most important challenge facing the Nazis was reducing unemployment. Within their first year, legislation and initiatives were introduced which dealt effectively with the numbers of Germans out of work.
The work schemes (Arbeitdienst) first used by Papen and Schleicher in 1932 and 33 were extended by the law to reduce unemployment (June 1933). These Arbeitdienst were part of an overall job creation plan which included the building of the Autobahnen.The so-called 'battle for work' was also extended by the government lending money to large companies so that they could create more jobs. Some 5 billion RM was invested into these Arbeitdienst.
These schemes showed to be highly successful, between 1933 and 1936 unemployment fell from 25. 9% to 7. 4%. This fall was partly helped by an improvement in world economy as a whole however this is not as an important factor as the growth in state investment in explaining why unemployment fell.
However this was not the only problem facing the Nazis, there was the desperate state of peasantry, who had suffered from the collapse of agricultural prices. The Nazis dealt with this in two ways. Firstly (in September 1933) the Reich Food Estate was created to take control of overall planning and organization of agriculture and then later the same month the Reich Entailed Farm Law attempted to enhance the security of peasant ownership of land. Because Germany did not have much foreign currency to pay for imports of food, the regime launched a 'battle for production' to increase production of grain.This drive was not so successful because of a lack in new machinery and labour, and poor harvests. In 1933 Hitler appointed Hjalmar Schact as president of the Reichsbank.
One of the reasons for the depth of Germany's depression was her over- reliance on foreign capital so one of the first things Schact did was to increase state control of foreign trade. In 1934 Schact was made minister of economics. He soon introduced the New Plan (September 1934) which gave the government extensive powers to regulate trade and currency transactions.As Germanys economy had collapsed on the back of world depression the aim of the New Plan was to make it independent of that system. Schact then proceeded to negotiate a series of trade agreements with countries in South America and South East Europe.
Those countries involved would be paid for their goods in mefo bills. The Nazis objective was to create an economy which could sustain rearmament. By 1936 the economy had recovered enough to make this possible however there was the problem of 'Guns v Butter' (rearmament or consumption).Germany was still importing large amounts of food stuffs. The 'battle for production' began in 1934 aimed to increase the production of food stuffs in Germany however agriculture suffered from a lack of machinery and man power. The head of the Reich Food Estate, Walther Darre, asked Schact for foreign currency to import food stuffs but Germany needed to improve raw materials to sustain rearmament and they could not import both.
The crisis grew worse by 1936 as Germany had used up all its raw material reserves up and was now forced to buy items from the open market for cash.The only politically acceptable answer to this problem was to cut imports and embark on a policy of greater self efficiency. Goerring was appointed commissioner of raw material in April 1936. This gave him responsibility for making the economy self sufficient. This was partly achieved through manufacturing rubber and oil synthetically. The problem was that the process of producing synthetic oil was expensive.
However this was secondary to Goerring who was head of the Luftwaffe and he welcomed any possibility of producing fuel in Germany for his planes.In 1937 Schact resigned because he was worried by the pace of rearmament and bitter at his loss of influence. He was replaced by Walther Funk. In 1937 money spent on the military rose to 10 billion RM. By 1938 Germanys balance of trade deficit rose to 432 million RM.
The Nazi party had come to power partly because of the depression and Hitler knew how unpopular the regime might become if basic consumer goods became unavailable. Although consumer spending power did not rise significantly neither did it recline.This was because full employment meant Germans were prepared to spend money despite wage and price conditions. In 1940 there became a shortage of workers as many workers had now joined the armed forces. A compulsory labour decree was issued in all occupied countries and by 1942 6 million foreign workers worked for the Reich. By 1943 the situation was so desperate that all women 17-45 had to sign up for work.
By 1944 41. 5% of workforce was women. In January 1943 the German army surrendered at Stalingrad and the tide of the war changed.In September Speer was appointed Reich Minister for Armaments and Production. This gave him responsibility for all industrial output and raw materials and into these areas of the economy he introduced reorganization and rationalization.
In the same year the Armaments Commission was set up to improve the co-operation and co-ordination between the design and manufacturing processes in munition. Productivity then began to increase. 1944 was a bad year for Germany because in the east, by the summer months the Russian army had pushed the German army back to the polish border.Also the allies continued to make progress in Italy and forces were landed in Normandy in France in June and in July there was an almost successful assassination plot against Hitler. It was apparent that defeat was inevitable and Hitler ordered the evacuation of all the path of the advancing armies.
From January 1945 the German economy was in a state of collapse, partly as a consequence of invasion but also due to exhaust and the effects of the allied bombing campaign. The bombing campaign had reduced production of essential war materials by up to 40% in 1944.The use of foreign labour became of even greater importance as all able bodied German men were called to the front line. In an attempt to increase their productivity, marginal improvements were made in the living conditions and pay of the foreign labour force. In March 1944 all eastern workers were given the same pay and benefits as other foreign workers.
This is all comparative since conditions for the vast majority of foreigners working for the Nazis were appalling and deteriorated even further during 1945. In many ways the Nazi economic policy was very successful.They restored full employment in Germany and built up its strength which allowed them to dominate Europe by 1941. This success helped Hitler to become the most popular German leader ever.
However the extent to which the Nazis were responsible for the economic miracle is debatable. Also Hitler's priorities meant that the majority of the German people failed to benefit greatly from the economic growth. The most impressive achievement was the recovery from the depression. Autarky (self sufficiency) was never achieved and rearmament was wasteful as the war was ultimately a failure for Germany.
