Figure 1.--The Germany people widely believed that Hitler had brought about an economic miracle in ending the Depression. Less well understood was the impact on real wages under the NAZIs who significantly reduced the availability of consumer goods and by reducing quality prevented price increases. The German Labor Front (DAF) restricted wages, but sought to develop alternatives to rewaediung workers rather than higher wages. Even less well understood was the level of defecit spending and the the economic crisis approaching at the time Hitler launched the War. The level of devbt became moot once the War began because with the early economic the NAZIs could finance the war by looting the economies of the captive nations. Contrary to expectations, this policy proved effective in the West dather than the East.

It was very common before World War II to read about an a Gernman economic miracle. Many in the 1930s lauded the NAZI achievement in ending the Deopression. Other of course envied the Soviet Union. This is perhaps understandable in the 1930s when it was not entirely clear what was going on in those countries. Wha is surprising is that we still see some authors blinkered by ideology and often adding outriht falsehoods still talking about the NAZI achievement. Here is a typical example, "The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began. In fact, German economic recovery preceded and later enabled German rearmament, in contrast to the US economy, where constitutional roadblocks placed by the US Supreme Court on the New Deal delayed economic recovery until US entry to World War Two put the US market economy on a war footing." [Liu] The author is wrong that the NAZIs did not begin to re-militarize at an early point. He is also wrong that reparations were a major problem. In fact te Germans payed very little in the way of repsarations. Most of the payments they made were funds borrowed from America and at the oriinal reparations required in the Versailles Treaty were postponed. It is true thst Hitler put erman workers to work. It is also true that the real wages (purchasing power) of German weorkers declined. And by the time that Hitler launched the War that the NAZI state was near bankruptsy. The German people had after the War lived under NAZI price controls and subsequently rationing when the War began. The NAZIs first imposed price controls (1936). This allowed the Goivernent to re-militarize with materials purchased at prices below market levels. Hitler placed Reichmarshal Hermann Goering incharge of the war ecnomy (1939). He imposed rationing. NAZI rationing was at first limited because the food of production of the occupied countries could be looted. Draconian punishments faced Germans violating the police control regulations.

Depression

The Depression played an important role in the NAZI sizure of power and in the image that Hitler built in Germany once he seized power. Tragically for Germany, the most serious period of the depression followed the New York Stock Market crash (1929) through Hitler's seizure of power (1933). The impact that the Depression had on Germany folded neatly into Hitler's political drive for power. Apparent economic improvements in Germany were an important element in Hitler's real popularity after seizing power. The view of the Hitler and the NAZIs in Europe was substantially different in Europe during the 1930s before Hitler launched World War II than it is today. It should be remembered that until Kristallnacht (November 1938) that NAZI actions against the Jews were not greatly different fom how Blacks were treated in the American South. In fact many NAZI racial laws were based on laws enacted against Blacks by Southern state legislatures. There were prominent Americans (Lindberg, Ford, and others) before World War II who were impressed with the NAZIs. Hitler was seen by many as the most dynamic leader in Europe. One reason for this was that NAZI policies essentially ended the depression by 1935. Many Germans had turned to the NAZIs in the early 1930s because of the Depression. The NAZIs expanded German labor programs, creating a National Labor Service must like the American CCC. The NAZIs seized control of the economy. German industrialists benefitted and soon learned that it was very dangerous to defy the Government. It might be argued that Germany under the NAZIs had the most controlled economy in Europe. Their major project was the construction of the Autobauns. The massive new armaments program was a major factor in putting Germans back to work. The German GNP was back to pre-Depression levels by 1935. NAZI policies made sure there was no longer wide-spread unemployment and destitution in Germany. The German people, however, were not better off. The benefits of the expanding economy was not brought to them in terms of more consumer goods, but rather a rearmed military. Many Germans, however, were convinced that they were better off. This was in part due to declinging product standards. It was also a result if the effectiveness of NAZI propaganda which emphasized the increased international respect with which Germany had achieved. [Hanby]

NAZI Economic Miracle

It was very common before World War II to read about an a Gernman economic miracle. Many in the 1930s lauded the NAZI achievement in ending the Deopression. Other of course envied the Soviet Union. This is perhaps understandable in the 1930s when it was not entirely clear what was going on in those countries. Wha is surprising is that we still see some authors blinkered by ideology and often adding outriht falsehoods still talking about the NAZI achievement. Here is a typical example, "The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began. In fact, German economic recovery preceded and later enabled German rearmament, in contrast to the US economy, where constitutional roadblocks placed by the US Supreme Court on the New Deal delayed economic recovery until US entry to World War Two put the US market economy on a war footing." [Liu] The author is wrong about most of his facts.

Reparations

Reparations were a major problem. In fact the Germans payed very little in the way of reparations. Most of the payments they made were funds borrowed from America. In addition, the original reparations required in the Versailles Treaty were postponed.

Unemployment

It is true that Hitler put German workers to work. The NAZIs as other European governments in the early 1930s were confronted with the enormous difficulties of the Great Depression, the same Depression that had helped bring them to power. Hitler and Nazi propaganda focused on the fears of the German people. Unemployment reached 6 million people before Hitler and the NAZIs seized control. This was approximately 50 percent of the country's working population. Hitler decreed that all should work in the new Germany. Here he was talking about male Germans. Hitler used their success at putting Germans to work as a major achievement and used it to legitimize the NAZI regime. The primary indicator used by the NAZIs to substantiate their economic achievements was the unemployment rate. It is also true that the real wages (purchasing power) of German weorkers declined. The Government projects that would have the greaest impact on production and employment was spending related to motor vehicles, transportation infrastructure, and construction. The construction of the Autobahns was the largest single project. Here the NAZI German Labor Service, Reichsarbietsdienst (RAD), played an important role in providing employment. This was a uniformed labor service, some what similar to the American Civilian Conservation Corps (CCC). NAZI economic policy was to combine increases in government investment with increases in private investment, and to manage the ecoonomy to maximize investment and resulting employment increases.

Fiscal Policy

NAZI economic policies were primarily dominated by three men: Hjalmar Schacht, Herman Göring, and Walther Funk. All thee men weretried at the theNurremberg MT after vthe War. Hitler took power during the Depression and thus faced enormous econonoic problem. The economic problems required defecit spending as did his determination to remilitarize Germany. He needed a financial technocrat expert to manage these and other ecomomic matters. The level of defecit spending contemplated by Hitler could have well cauded another round of runaway infation. He turned to Hjalmar Schacht, financial expert who served in Weimar governments. Schacht was not a NAZI Party member, but he agreed with Hitler's desire to undo the Versailles Treaty and make Germany a great power again. Schacht saw Hitler as a fervet natioinalist and helped convince industrialists to support him. Hitler appointed him president of the Reichsbank (1933-39) and Minister of Economics (1934-37). He master-mined economic policies to support redevelopment, reindustrialization and rearmament. He managed to support the NAZI defecit spending in seceral ways. He conceived the 'New Plan'--an autarkic economic plan which did nor require foreign financing. Second, he negotiated trade agreements with Balkan and Latin Amercan countries supplying raw materials. As payment was in Eich Marks, they did not add to the balamce of trade derficit. Third, he his the level of Government defecit spending through the use of The other mechsanism was MEFO bills. Evenually Schacht fell out of favor with Hitler, both because he wanted to reduce deficit spending (which would have neant curtailing rearmament) and because he spoke out against NAZI attacks on Jews. Schacht as early as 1935 was speaking publically aganst "unlawful activities" employed against Jews. The economic crisis of 1935-36 caused Schacht and Price Commissioner Dr. Carl Friedrich Goerdeler to reconsider the mounting defecits. They urged a return to free-market economics, cuts in military spending, a shift away from autarkic and protectionist policies, and stopping the drift toward a statist economy. Reich Marshall Hermann Göring oposed those steps and was generally suppoted by Hitler. The implementation of the Four Year Plan managed by Göring meant that he had won the debate (1936). Schacht resigned as Ecomomic Minister (1937), although Hitler kept him own as President of the Reichsbank for 2 more years so as not to disturb the financial community. Göring became the major foirce in the economy. As a result, when Hitler ordered the invasion of Poland, Germany was deeply endebited and would have had trouble maintaining the level of defiti spending. Hitler replaced Schacht as Minister of Economy with Walther Funk, a loyal NAZI. He became president of the Reichsbank (1939). Funk served during World War II, but was much less important than Schacht. Hitler placed Reichmarshal Hermann Goering in charge of the war economy (1939). And because the NAZIs financed the War by exploiting the occupied countries, the post of Minister of Economics lodt much of its importance. Funk unlike Schacht did not question NAZI actions against the Jews and others. Funk accepred gold deliveries from Himmler's SS as deposits in the Reichbank. As this include gold teeth and rings, the source was obvious. Sacks of gold teeth and rings were foiund by the Allies after the War. Funk pointedly told subordinates not to ask questions about the SS deposits. At Nuremberg he said, "I should have listened to my wife at the end. She said we'd be better off dropping the whole minister business and moving into a three-bedroom flat."

Price Controls

The German people lived under NAZI price controls. The NAZIs first imposed price controls (1936). This allowed the Governent to re-militarize with materials purchased at prices below market levels.

Rearmament

Hitler and the NAZIs planned from the beginning a massive rearmament program. NAZI propaganda promoted the idea that Germany must rearm. [Riegler] The NAZIs did not, however, begin a massive rearmament program immediately upon seizing power in 1933. The Weimar Republic Goverment itself has spomsored secret armanents programs in violation of the Versailles Treaty. The NAZIs did sharply expand weapon reseearch. The German military expanded in secret during 1933-34. Hitler by March 1935, felt suffucently secure to publicize his military. The NAZIs announced that they expansion - which broke the terms of the Versailles Treaty. Europe learned that the Nazis had a modern 2,500 plane Luftwaffe and a Wehrmacht with 300,000 men. Hitler publicly announced that he was insituting a compulsory military conscription and planned to expand the Wehrmacht to 550,000 men. Actual araments production began in earnest in 1936. The NAZIs in 1936 doubled armamets spending over 1935 levels. It was in 1936 that NAZI arms spending first exceeeded the combined total for transportation and construction spending. The nature of arms spending also increased. NAZI arms spending initially focused on research, development, and capital investment. The NAZIs in 1936 began concentrating on producing actual military equipment. This is one of the least economically beneficial types of government spending.

German Labor Front (DAF)

The German Labor Fron (DAF) restricted wages, but sought to develop alternatives to rewarding workers rather than higher wages. The DAF led by Robert Ley was the second largest of the NAZI mass organizations. A major DAF effort was the Strength through Joy Movement.

War Economics

Economics played a central role in World War II. Hitler's rearament program was bankrupting NAZI Germany. It is questionable how long Hitler could have continued his rearament program if he had not taken Germany to war in September 1939. Germany proceeded to loot the national banks of the conquered nations. The persecuution of the Jews and the Holcaust was also used in part to finance the War. The NAZIs very effectively integrated the economiy of Czecheslovakia into the German arms industry. Germany did not go to a full war footing until late in the War. Nor did Germany effectively cooperate in war production with its Axis allies. Germany also did not effectively use the economies and industries of the captive nations, especially the countries occupied in Western Europe. The Germans did use the conquered countries as a source of slave labor. German ineffiency in coordinating with Allies stands in sharp contrast to the close copperation between Britain and America. President Roosevelt began mobilizing the Arsenal of democracy, the vast American economy well before America went to war. Very extensive cooperation in weapons development and production also began between Britain and American before American ntered the War. Hitler avoided putting Germany on a full war footing, because he thought the War had been won and he did not want shortages and rationing to deminish domestic support for the War. Only after the setbacks in Russia, especially Stalingrad, did Hitler turn to Speer and give him the authority to fully convert the German economy for war. Fortunally for the world, by then it was to late to stop the expanding force of the Soviet Union in the East and the Western allies in the West.

Rationing

Subsequently rationing was introduced when the War began. Hitler placed Reichmarshal Hermann Goering in charge of the war economy (1939). He imposed rationing. NAZI rationing was at first limited because the food and consumer goods produced in the occupied countries could be looted. Draconian punishments faced Germans violating the porice control regulations.

Sources

Hanby, Alonzo. For the Survival of Democracy.

Liu, Henry C. K. "Nazism and the German Economic Miracle," Asia Times Online (May 24, 2005).

Created: 2:55 AM 8/6/2008
Last updated: 2:55 AM 8/6/2008