How successful was it?

• Schacht, president of the Reichsbank and respected international financier was in charge.

• Position already helped out by the economic depression recovering from its very low point in the winter of 1932-3. Trade cycle then began to improve and the Nazis got the benefit of this- although there was still a long way to go.

Major revival of public investment

State led public investment-large scale

increase in own spending.

Designed to stimulate demand and raise national income

Paid for by deficit

financing... But under Schacht’s

guidance and influence.

• Look at your exciting graphs and tables to see if you can work out how successful it was.

• (page 214-215 of the SHP textbook).

What do you notice about the

pace of production goods

and consumer goods?

The employment figures are good,

aren’t they?Are they great?

Are the unemployment figures giving us the full picture?

What’s happening to wages, what about in real

terms?

What problems can you see for the economy?

•Banking and the control of capital: state assumed greater responsibility for the control of capital and set interest rates at a lower level. Rescheduled the large scale debts of local authorities.

• Particular financial benefits given to these groups- who were also big Nazi supporters.• Tariffs on imported produce to protect

German farmers.• Subsidies from the Reich Food Estate as part

of a nationally planned agricultural system.• More security of land ownership to small

farmers through the Reich Entailed Farm Law; debts reduced by tax concessions and lower interest rates.

• Allowances to encourage rehiring of domestic servants.

• Allocation of grants for house repairs.

• June 1933: The Law to Reduce Unemployment- renewed and expanded from Papen’s initial scheme. Provided an interest free marriage loan for newlyweds if the wife left her job/ remained unemployed.

• Labour Service started to employ 18-25 year olds. Voluntary.

• 1935: Reich Labour Service established- when compulsory military conscription introduced. 6 months of unpaid work- mainly military construction before joining the forces for military service.

•Reforestation

• Land reclamation

•Motorisation; vehicles and autobahns.

•Building: especially expansion of housing sector and public buildings.

• This tripled public investment between 1933-1936 and increased government expenditure by nearly 70%

German people were very happy.

Other countries admired

Germany’s achievements.

Schacht maintained taxes at a relatively high level, encouraging private savings in state savings banks in order to keep the government public deficit under control.

Economic upturn anyway- world economy

began to recover and business had already

begun to recover. Still, this level of improvement could not have happened

without these policies.

• Fear a rapid increase in demand would rekindle inflation.

• Fear that rapid increase in demand would cause a balance of trade deficit.

Turned out to be fine- economy lacked demand and the regime had abolished trade unions and taken strict control over both

prices and wages.

Germany short of foreign currency to import foreign goods which were necessary for many different industries; e.g. textiles.

Meanwhile, armed forces and big business were starting to demand resources for major programmes- e.g. rearmament.

•Dictatorial powers over the economy.

•Government could now control all aspects of trade, tariffs, capital and currency exchange to prevent excessive imports.

• E.g. raw cotton and wool were cut, and but metals permitted- so consumer goods lost out to heavy industry.

• Bilateral trade treaties: promoting trade and saving foreign currency through barter agreements- this also gave Germany powerful influence over the Balkans before they took it over.• Agreements where Germany purchased

raw materials and the Reichsmarks earned could only be used to buy back German goods (giving it 237 different values at one point).• Mefo Bills...

• Special government money bills (like a credit note) designed by Schacht.

• Issued by the Reichsbank and guaranteed by the government as payment for goods.

• Held for up to five years earning 4% interest a year.

• Successfully disguised government spending... Especially in areas like rearmament where they were being naughty...

•Unemployment fallen to 1.5 million.

• Industrial production increased by 60% since 1933.

•GNP grown by 40% since 1933.

•But- still structural weaknesses in the economy.

• Schacht knew that the balance of payments problems and the deficit financing was not going to work forever.• In early 1936, it became clear that (as the

import demands for rearmament and consumption of goods increased) the German balance of payments would go deeply into the red.• His solution- to reduce arms expenditure,

increasing the production of industrial goods which could be exported to earn foreign exchange.

• Coal, iron, steel, toolmaking and textiles were all really happy with this plan but the armed forces and Nazi leadership were not happy that it would come at the expense of rearmament.

• By the mid 1930s- ‘should the economy concentrate on producing guns or butter?’

• One of the few things that Hitler wrote down in instructions was a secret memorandum Goering received in August 1936, which concluded:

FROM THE DESK OF HITLER

“There has been time enough in four years to find out what we cannot do. Now we have to carry out what we can do. I thus set the following tasks.i) The German armed forces

must be operational within four years.

ii) The German economy must be fit for war within four years”.

Love Hitler xxx

• IT MUST: expand rearmament and autarky.• Regulate imports and exports- prioritising

chemicals and metals over agriculture.• Control key sectors of the labour force, so as to

prevent price inflation.• Increase production of raw materials- reducing cost

of importing things like steel, iron and aluminium.• Develop ersatz products e.g. oil and rubber (buna).• To increase agricultural production, so as to avoid

imported foodstuffs- grants for fertilisers and machinery...

• Schacht resigned, seeing he had no real power in the economy any more- Walther Funk became the economic minister, but Goering was really in charge.

• Success was mixed- key materials such as aluminium and explosives expanded greatly, or at least reasonably, but rubber and oil fell a long way short and arms production never reached the levels desired by the armed forces and Hitler.

• Germany’s reliance on imports didn’t increase (which was good) but they were still reliant when war broke out (which was bad).

• The chemical and electrical industries gained influence as they were crucial for rearmament.

• IG Farben led the way with its development of synthetic substitues for products such as rubber and oil.

• Daimler-Benz was crucial for production of trucks and aircraft.

• Electrical industry dominated by Siemens.• The ‘Ruhr barons’ of coal, oil and steel refused to

cooperate with the state- Goering nationalised the iron ore deposit and created a new state firm-Reichswerke Herman Goering.

• Big business dominated by political decisions.

• Private property remained private, but the free market and economy were controlled by state regulation.

• Industrial elites accepted this control because they were concerned that resistance to state interference would weaken their situation further- also profits generally continued to grow until the last phase of the war and so they were willing to put up with it.

German business can be likened to the conductor of a runaway bus, who has no control over the actions of the driver, but keeps collecting the passengers’ fares right up to

the final crash.

• Growing shortages of raw materials, food, and consumer goods.

• Labour shortages, particularly of skilled workers, increasing wages.

• Balance of trade going further into thered and becoming difficult to finance.

• Government expenditure and deficit wereexpanding.

• Social discontent starting among the working class.

This means that it expands too quickly, meaning that there will come a point where it can’t expand any more because of shortages of materials, labour, capital...

• Hitler clearly wanted war preparation- but total war wasn’t supposed to happen until 1943. War with Poland was supposed to be a local issue that wouldn’t include Britain and France.

• The economy was clearly into war related projects:• Full employment was achieved- ¼ of the workforce

involved in rearmament.• Levels of government expenditure more than doubled

in the same period- and government debt increased accordingly.

• In the last full year of peace 17% of Germany’s GNP went on military expenditure (8% in GB, 1% in the USA).

• So, the economy is dominated by war preparations, but it was not the full scale mobilisation that total war would demand.

War! What is it good for? Is it actually good for the economy?

•Germany took over much territory very quickly- winning popular support and giving the impression of an economy not overstrained by the demands of war (because they could nick stuff).

•However, Hitler was determined to expand the economy for a major and extended conflict.

• Vast decrees in December 1939 for submarines and aircraft and every other possible aspect of war production.

• Doubled military expenditure (although Britain trebled- which was starting from behind...)

• Food rationing from the very start.• 55% of the workforce in war-related projects

(61% by 1944).• First two years of war gave Germany a 20%

decline in civilian consumption of goods.

•Farmer, you are a soldier in the battle for production!

•(smashing the blockade)

•Results disappointingly low- marked increase in a number of submarines but air-force only increased from 8290 aircraft in 1939 to 10,780 in 1941 (Britain trebled theirs to 20,100).

•When preparing for Operation Barbarossa- only had 3500 tanks (fewer than the USSR).

• Inefficiency and poor coordination.•Pressures resulting from premature

outbreak of war created problems, since many of the major projects weren’t supposed to be ready until 1942-3.•No authoritative central control

established- a host of different agencies but them against each other.

• Ministry of Armaments under Fritz Todt• Ministry of Economics• Ministry of Finance• Ministry of Labour• The Office of the Four Year Plan• The SS bodies• Different branches of the Wehrmacht• The Gauleiters trying to control local areas at the

expense of the state and the party.• Financial corruption.

All after quality over quantity- best specifications.

•Germany at war with Britain, the USSR and the USA and its armaments production were less than that of Britain.•New approach ‘industrialisation decree’

to eliminate the waste of labour and materials.• Speer replaces Todt (who dies) as

minster of armaments.

• Hitler’s architect.• Turning point. • Speer used Hitler’s authority to cut through

the mass of interests and to implement his programme of industrial self responsibility to provide mass production.

• Controls and constraints previously placed on business were relaxed.

• Central Planning Board established in April 1942, with a number of committees supporting it, and each represented one vital sector of the economy.

• Industrialists were given the freedom to do what they needed to.

• Speer encouraged industrialists and engineers to join the ministerial team.

•Whenever possible, he excluded military personnel from the production process.

Speer was technocrat- co-ordinated and rationalised the process of war production to more effectively exploit the potential of Germany’s resources and used his skills and

friendship with Hitler to do this...

•Women in the arms factories.

• Forced labour used efficiently.

• Stopped skilled workers being lost to military conscription.

• Ammunition production increased by 97%, tank production rose by 25%, total arms production rose by 59% within Speer’s first six months.

• Second half of 1944-more than three-fold increase in tank production since early 1942.

• But, Germany had the capacity to produce even more.

• Speer couldn’t always stop the Gauleiters.

• SS were always a law unto themselves-especially in conquered lands.

• Territories were plundered but not exploited with economic efficiency.

• Foreign workers became an increasingly growing element of the labour force.

• By 1944, there were 6.5 million foreign workers making up nearly 25% of the whole force (that’s ¼!).

• 1.1 million French

• 1.4 million Poles

• 2.1 million Russians

• 0.3 million Czechs.

Hierarchy of the foreign labour-

French at the top, Slavic and Jewish

Untermenschen at the bottom.

• They became key to the war effort.

• Living conditions varied.

•Women often victims of sexual harassment.

•Did not solve economic problems-appalling treatment and poor diet led to them being quite unproductive.

• 1940-2: effects of bombing were very limited- Allied aircraft only had the technology to launch “nuisance raids”- like this one on Bristol.

• Blanket (or carpet) bombing was supposed to be more effective-although Speer’s production figures were proof that the strategy failed to break the German War Economy..

• Speer did better than expected by some.• German arms production peaked in August

1944 at a level well below its full potential.• In the last nine months of the war, the

Allies had free rein to bomb Germany with limited resistance.• Nazi economy proved incapable of rising to

demands of total war- didn’t exploit either foreign labour or resources well enough and actually were diverting resources away to the Holocaust.

• How successful were Hitler’s economic policies to 1945?• ‘Hitler’s economic policies failed to prepare

Germany for war’. To what extent was this true?• How effective was Hitler’s government in

overcoming the economic problems it faced in the 1930s?• ‘Economic recovery was the main reason

why the Nazis stayed in power after 1933’. How far do you agree?