In the 1930S, There Were 2 Types of Economy in Europe

Nazi Economy

In the 1930s, there were 2 types of economy in Europe:

l Socialist-protecting workers (Russia), nationalized business, aim for equal distribution of wealth

l Capitalist- private business, hierarchy of wealth, about “controlling” the workers

Nazi Germany was a “HYBRID” economy (Franz Newmann) It had:

l Private business (capitalist)

l Government increasingly starts to control industry- what to make etc, especially during the run up to the war (socialist)

l Mixture of controlling the workers and “Strength through joy” campaign-leisure activities and holidays and discounted/free for workers (socialist) “carrot and stick”

l Volkesgemeinshaft- class equality (social harmony) but still hierachical (racial-ie. Jews)

For Hitler, economics was “a means to an end” for him. It was the “primacy of politics” (politics more important than economics). This means that he can change and adapt and contradict his own economic policy.

Germany’s Economic Problems

l Unemployment-officially 6 million (in reality over 8 million)- shows output is not at its optimum

l Over-reliance on foreign business and investment- “Wall Street Crash” (1929) caused Germany’s economy to fall apart. Some evidence to suggest that the depression had bottomed out by January 1933. The recession of 1929-32 made Germany so poor that it could not afford imports.

l German currency-(Mark) very weak so foreign trade was undesirable

Other Problems in Germany

l Food-German farmers were not efficient enough to feed the nation

l Raw materials- like copper, aluminium and rubber and oil products like petrol were not available in Germany.

This meant that Germany had to import a lot (more than it exported) leading to mounting national debt.

Ways the Nazis reduced unemployment

l Conscription- (1935) 2 year compulsory conscription for 18-25 year old men

l Women and Jews not allowed to work- after 1933. They also didn’t qualify for benefits

l RAD (youth service)- Comes in on 1934- 6 months’ labour work for German government-factory work, making motorways (autobahnen), 400,000 youths off register in 1934

l Rearmament meant that more factories opened up creating more jobs

l Subsidies for businesses to employ more people

Overall Nazi aims

l More Lebensraum-(living space) Hitler wanted to conquer the Ukraine and use this to make Germany self sufficient in food and most raw materials. The Nazis hoped to pull the small nations of Eastern Europe into a kind of common market centred on. Germany. This was called “Mitteleuropa”

l Autarky-(self sufficiency). Ideologically and politically attractive economic policy as it would ease Germany’s balance of payments situation. However, would cause higher food prices-similarly many industrialists disliked the obligation to develop expensive German raw materials rather than maximize their profits using cheap imports. Also accelerated the development of synthetic (ertsatz) materials like buna (synthetic rubber) thus accelerating the growth of Germany’s chemical firms such as Bayer and IG Farben.

l Recovery-following the Wall Street Crash, it was key that Germany tried to return to normality as soon as possible in order to piece back the economy and to gain popularity

CONTRADICTION!- Factories needed to produce armaments to conquer new territories which were the same ones necessary to increase the production of other goods.

l Wehrwirtschaft- (Rearmament/defence economy) Created thousands of jobs, but distorted the economy by reducing the amount of conventional consumer goods and by running up big debts with the industrial financiers who would only be paid when the policy had (hopefully) reaped its reward i.e. victory in war and the absorption of the economies of the conquered states

l Keynesian deficit financing- government poured lots of money into industry (even though it didn’t have it) 101.5 billion RM in 1933-9 only get 82 billion RM. This caused inflation but Schacht manages to control this by introducing MEFO bills- an alternative payment for government contractors-hold for 5 years before cashed with much interest.

Policies of Schacht (1933-36)

l Reduce unemployment-this was his priority by using:

-Arbeitsdienst such as the creation of autobahnen

-A marriage loan scheme

-Indirectly via rearmament

l Full scale shift from rearmament to autarky

l Shared many of Hitler’s ambitions, in particular the creation of a strong German economy of full rearmament

How to fund the public works

· Trade and currency exchange control (the New Plan 1934) where it was illegal to make any transactions in foreign currency without government permission

· MEFO bills

· Conversion fund for foreign debts

· Barter trade agreements-trading in ways that didn’t use up much of Germany’s foreign exchange, (exchanging commodities as opposed to using money)

Results (1933-36)

· Unemployment decreased

· Industrial production increased

· BUT growing balance of paymnts crisis which peaks in 1936 (Guns V Butter crisis)

Why was Germany’s trade unbalanced and why is this bad for the economy?

Germany needed to import:

· Food (German farmers not efficient enough)

· Raw materials like copper and oil (because these weren’t produced in Germany)

This resulted in national debt.

Goering and the Four Year Plan

The Four Year Plan was a series economic reforms created by the Nazi Party. The Four Year Plan included: increased synthetic fibre production; public works projects, headed by Fritz Todt; called for increased automobile production; initiated numerous building and architectural projects; and further developed the Autobahn system. The plan also placed an emphasis on building up the nation's military defenses, which was a direct violation of the terms set up by the Allies of World War I at the Treaty of Versailles, which stated:

The German army was to be restricted to 100,000 men, there was to be no conscription, no tanks or heavy artillery and no general staff. The German navy was restricted to 15,000 men and no submarines while the fleet was limited to six battleships (of less than 10,000 tonnes), six cruisers and 12 destroyers. Germany was not permitted an air force. Finally, Germany was explicitly required to retain all enlisted men for 12 years and all officers for 25 years, so that only a limited number of men would have military training.

The Four Year Plan favoured both the protection of agriculture and economic independence. Hermann Göring was put in charge of the Four Year Plan on October 18, 1936 and was given extraordinary powers for an extraordinary situation. In short, Goering had complete control over the economy including the private sector, especially after the Minister of Economics, Hjalmar Schacht, began to lose favour with Hitler because of his opposition to growing military expenditures. During the following years, Germany began building refineries, aluminium plants, and factories for the development of synthetic-materials. The four year plan technically expired in 1940, but the "Office of the Four Year Plan" (considered a cabinet level agency) had grown to such a power base that the Four year plan was extended indefinitely. Indeed, much of the Four Year Plan's goals relating to economic production were accomplished between 1941 and 1944.

To summarise:

· Full scale shift from rearmament to autarky

· Office of the Four Year plan superimposed on the existing economic commandstructure

· Increased state control and intervention but in a spirit of “mutual cooperation”

Consider:

WHAT WERE THE MAIN AIMS OF THE NAZI ECONOMIC POLICY (1933-39)?

WERE NAZI ECONOMIC POLICIES IN THE YEARS 1933-39 AIMED PRIMARILY AT PREPARING GERMANY FOR WAR?

Policy towards agriculture and farmers +impact

Benefits

l Portrayed farmers as purist element of German people

l During the Nazi’s time in power-farm debts written off, food prices between 1933-36 rose

l 1933-majority of farmers bankrupt so Nazi government brought in emergency relief-write off debts and give them money

l ￡60 billion taxation removed from peasants

l Reich food estate-was for protection and regulated wages and prices and the setup of Reich food estate meant 20 000 jobs were created (also had controlling element to it) It fixed agricultural prices, set production quotas, dictated crop rotation and allocated scarce resources

l By 1937, wages were equivalent to what they were in pre 1929 levels

Drawbacks

l Reich entailed farm law in 1933 meant that farms between 7.5-10 hectares couldn’t sell off their land

l Could only allow 1st child to inherit land because of this

Policy towards workers+impact

· Schonheit der Arbeit (beauty of Labour) set up to persuade employers to improve working conditions in factories. This was done through promoting schemes highlighting the benefits of giving workers wholesome meals and better working environments

· Kraft durch Freude (Strength through Joy) offered to reward loyal workers with evening classes, recitals and art exhibitions

· Winter help programme offered food and support to the old and poor in winter months

· The DAF- Hitler wanted a disciplined workforce which would not challenge his dictatorship or threaten his plans for rearmament with excessive wage demands. On the day after the May Day holiday in 1933, the offices of the trade unions were ransacked. Independent unions were abolished to be replaced on the 10th May 1933 with the DAF, led by Robert Ley. In many factories radical Nazi organisations such as the National Socialist Factory cells or the NSBO were set up. Their main objective was to spread Nazi propaganda in the workplace. At its peak in the 1930s, the DAF had around 20 million members

Benefits

· Most workers earning 20% more by 1939 in real terms compared to 1933

· Improved working environments: Factories and offices better heated, illuminated and decorated

· More leisure: By 1938, 180,000 had been on a cruise and 10 million (a third) of the workforce had enjoyed a state financed holiday

· Raised morale and distracted workers from the monotony of work with organisations such as “Strength through joy” and “ The Beauty of Labour” (Nazi paternalism)

· SPD reports: “ strength through joy is very popular, recognising the yearning of little men…it is a clever appeal to the petty bourgeois inclinations of the unpolitical workers”

· Training schemes for the unskilled and apprenticeships for working class significantly expanded

· Workers offered more activities such as evening classes, musical recitals and concerts, art exhibition visits and package holidays

Drawbacks

· Working hours increased, wages stagnated, regimentation increased

· Strikes in 1936 in Russelheim and Berlin

· Industrial accident, illness and absenteeism doubled between 1936 and 1939

· Working class demoralized by the impact of mass unemployment after 1929 and were emasculated by the abolition of their trade unions and arrest of their leaders

Other notes

Communist party was banned in Feb 1933

Trade Unions abolished on 2nd May 1933

Cheap housing promoted and the availability of mass produced consumer goods such as a “people’s radio” and a “people’s car” (Volkswagen) to try and embrace all social classes

However, in spite of all this, the Nazis failed to stop workers supporting the Communist and Social Democratic parties in the 1932 elections

Policy towards the middle class+impact

· Comprised of groups such as small business owners, traders, craft workers, clerks and shopkeepers.

· Were Hitler’s most committed group of supporters

· The establishment of new department stores was banned on 12th May 1933

· Half the consumer cooperatives were forced to close by 1935

· Competition in craft trades was curbed by the introduction of new regulations

· Cut price competition between businesses was banned

· State and party agencies gave preferential treatment to small businesses

· The state made available low interest loans and a share of confiscated Jewish trade

Benefits

· Benefited from the return of business confidence after 1933

Drawbacks

· Status was not significantly raised as Hitler’s first priority was the creation of jobs and the maintenance of low prices, which were more effectively provided by larger firms

· Small traders continued to be out priced by department stores and were squeezed between the Reich food estate which controlled agricultural prices, and price freezes in shops

· By 1943 0.25 million small shops had gone out of business

· The number of self employed craft workers fell by half a million between 1936 and 39

Policy towards Big business +impact

· Business was set production targets

· Taxed more heavily

· Compelled to invest in state projects-Krupp forced to finance the production of Buna

·

Benefits

l Major landowners benefit from growing demand for food

l Industrialists benefited from rearmament

l Trade unions banned which favoured the managers

l Private ownership protected (except Jews)

l Chemical companies e.g I.G Farben

l Much profit if they would collaborate with Nazis

l Profits quadrupled between 1933-37

l Drive for autarky meant more need for business

l Subsidies to employ more people (MEFO bills)

l Policy of rearmament favoured big business

Drawbacks

l Businesses charged with sabotage if they opposed autarky

l Loss of political influence

l Heavier tax

l More control over industry-set high production targets

Conclusion

Business as a partner of the Nazis but only when it suited the Nazis

Hitler’s alliance with business was pragmatic rather than ideological:

-Industrialists were cultivated because they served the needs of the regime and growing tensions illustrate that it was the state that triumphed over ever-powerful economic interests. Some industrialists resented excessive state interference and feared the drive for self-sufficiency and an expansionist foreign policy

Historical interpretations

Ian Kernshaw: “The Nazi Dictatorship” (1985)

· Argues that German business neither dictated economic policy nor was policy dictated to it.

· Instead, big business was an important factor in the creation of policy. Kernshaw insists that business was more influential before 1936 when its interests were fully served by the job creating policies of Schacht.

· However, it is wrong to argue hat after 1936 the influence of business disappeared. The drive for autarky was supported by many sections of the business community and many of their needs were incorporated into Nazi policy.

· This line taken by Ian Kernshaw was in response to Tim Mason’s argument:

Tim Mason: “The Primacy of Politics-Politics and Economics in Nazi Germany” (1972)

· Argues that after 1936 economic policy becomes subject to Nazi ideology.

· To him, the interests of big business became swamped for the drive for autarky. As the state dominates, so it manipulates the markets, damages trade and reduces standards of living. Therefore one sees the primacy of politics

· His view has been backed by historians such as P. Hayes:

P. Hayes: “Industry and Ideology” (1989)

· Argues that even though companies such as IG Farben (and individuals from these companies such as Karl Krouch) participate in the creation of the Four Year Plan, their interests were secondary when the plan was implemented

Karl Bracher: ”The German Dicatorship”

· Argues that political goals were of primary importance in determining economic policy. This view is shared by Richard Overy

Richard Overy: “The Nazi economic Recovery” (1982)