How Successful Was Nazi Economic Policy

When the Nazi Party came to power in 1933 it had two main aims – to solve unemployment, and to make Germany as strong an economic and military power as possible, so that the humiliating and devastating defeat of the First World War could never happen again. In order to do this, several areas had to be tackled. Firstly, unemployment was huge and rising steadily – in 1933 six million people were unemployed. Secondly, the party had promised better conditions for workers, and this had to be balanced with continuing the good relationship that the Nazis had with businesses.

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In order to build up Germany’s military strength after the under-funding and downsizing that Versailles imposed, large amounts of funding were needed for the armaments industry and the armed forces. Lastly, the Nazis wanted to create autarky – making Germany self-sufficient, so that if another war came it would not be dependent on outside goods. By 1938 it appeared that, due to the policies that the Nazis followed, Germany had solved most of her economic problems. In reality, however, Germany had begun to plunge into yet another economic crisis. Unemployment was tackled first, in a variety of different ways.

Public expenditure and investments were increased in order to renew an industrial and business confidence in the economy, and propaganda campaigns were set up to stimulate consumer demand – both of which increased production, thereby creating jobs. The public works scheme was extended, employing vast numbers of people to build houses, schools, roads and railways, including the huge new autobahn network. Tax concessions and special grants for some companies were introduced, and many businesses were given subsidies for employing more workers than they really needed.

The Government also controlled the price of many goods, ensuring that smaller businesses were not forced out of the market. As a result of these measures, unemployment fell dramatically, from six million in 1933 to two million in 1935, to a mere 0. 1 million in 1939. However, this came at a substantial price for many people. One of the measures taken was the destruction of independent trade unions and making strikes illegal, which boosted manufacturers’ confidence to expand and employ more workers.

For the workers, though, it meant that there was no way of complaining about conditions or pay, and nothing to use as a threat to inhumane employers. The figures themselves were also distorted, as they did not include the large numbers of people forced out of work – Jews, political opponents and some women – and youth unemployment was moved to other registers. The army was also hugely expanded, against the terms of the Versailles Treaty, which helped to absorb thousands of unemployed people. Part-time workers were also counted as full-time.

Improved welfare and conditions for workers was something that the Nazis had promised before they won power, and on the surface they appeared to stick to their promises. Money was spent on improving the superficial living and working conditions of many workers, with benefits such as more paid holidays, a minimum wage, and the Strength Through Joy program that enabled poorer workers to be part of holiday and car schemes. At the same time there was a general increase in wages, up from 70% in 1933 of wages in 1928, to 85% in 1939 of wages in 1928.

However, wages were still significantly lower than they were in 1928, while the price of consumer goods rose to 90% of its 1928 level in 1939. The new minimum wage also had its problems, as many workers had their wages cut to the lowest level now provided, even though the average working week had been increased by seven hours. The abolition of the unions and banning of strikes meant that there was no legal way of complaining about pay or conditions should they worsen. The Nazis were keen to keep good relations with businesses and industrialists and these measures were welcomed by them.

They did not, however, benefit the workers. Hjalmar Schacht was made economics minister in 1934, and he came up the ingenious idea of using credit notes, or Mefo bills, which were given to companies instead of money, with the promise that they would be repaid with interest after five years. The introduction of Mefo bills meant that many more contracts were given to companies that otherwise would not have had the funding to complete projects or pay their workers. This meant that many more people were employed, resulting in greater tax revenue.

By using Mefo bills, the Government was effectively paying wages without actually spending any real money. These measures also helped to induce a rapid rise in production levels, with the renewed confidence in the economy. Schacht suspended debt repayments and reparations, leaving more money to be put into industry. By 1938 production had risen by 100% from 1933, and by 1935 exports exceeded imports. Mefo bills meant that investment could be made without any real money being spent, which prevented inflation.

The national income was raised from 44 million marks in 1933 to 80 billion marks in 1938, and some consumer goods, helped by government-led advertising campaigns – such as cars and radio sets – also took off. However, Germany’s main reason for raising production levels so massively was to eventually achieve autarky, but this never materialised. Despite huge increases in production from 1933, production was still lower than it had been in the 1920s, and had been helped as much by an overall increase in world trade as by Nazi policies. In 1939 Germany was still dependent on foreign imports for a third of its raw materials.

The Nazis realised that the only way Germany could become completely self-sufficient would be to conquer countries that could provide the raw materials they needed. In 1936 Hermann Goering became Economics Minister, and there was a shift in emphasis from tackling domestic problems to preparing for global ones. The Government was determined to reverse the effects that the Treaty of Versailles had had on the German military, and Goering was put in charge of the Four Year Plan, a massive rearmament program which aimed to make Germany ready for war within four years.

Under this plan military expenditure more than doubled between 1936 and 1938, with 14% of Germany’s GNP being pumped into the military in 1938, compared with 6% in 1946. Despite the policy of rearmament creating almost full employment and a more stable economy at first, it also resulted in major food and fuel shortages. With such a large proportion of Germany’s GNP being pumped into the rearmament program, the remainder was spread very thinly across essentials such as food and health.

Between 1933 and1938 the amount of industrial goods produced increased by 389% – during the same period consumer goods rose by just 69%. Responding to the calls from the public for an increase in food production, Goering said at one point that “guns make us powerful; butter only makes us fat”, and so the food shortages continued. Between 1933 and 1939 neither of the Nazi party’s initial aims had been fulfilled, and therefore their policy was not successful.

Although on the surface the figures for levels of unemployment look very impressive, in reality they were fiddled and changed and came nowhere near representing the actual number of unemployed people in Germany. The policy of rearmament, although successful in that it resulted in a hugely funded and expanded army, resulted in food and fuel shortages, and thus the average worker in Germany suffered. Autarky was also never established, despite again a large proportion of Germany’s GNP being siphoned off to help.

Many policies to help the economy also backfired – Mefo bills worked extremely well as a way of boosting GNP without spending money, but when business began to cash them in in 1939 they found that there was no real capital behind them, plunging the Government and businesses into debt. Although figures for wage and production increases look impressive when compared to 1933, they were nowhere near those of the 1920s, and there is an argument that the economy had already begun to recover before the Nazis’ rise to power.

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