The Third Reich

1. The Third Reich Nazi Economy 1933-39

2. Germany’s economic condition in 1933 TRADE – The demand for German goods had fallen, and so the value of exports dropped. INDUSTRY -Industrial production was cut, or worse collapsed. 50,000 businesses went bankrupt. AGRICULTURE - In the countryside there was widespread poverty, farmers wages and incomes fell sharply. FINANCE – Due to war debts, reparations and inflation, foreign investment disappeared. 5 major banks collapsed. EMPLOYMENT -Unemployment soared – 5.6 million by 1932.

3. ECONOMIC RECOVERY 1933-36 DEFICIT FINANCING SCHACHT President of Reichsbank (1933-39) Minister of Economics (1934-7) The heart of economic recovery lay in the revival of public investment, led mostly by the state itself. Hence the state embarked on a large-scale increase in its own spending so as to stimulate demand and raise national income. This policy was known as DEFICIT FINANCING – SPENDING TO BOOST THE ECONOMY.

4. Schacht – Deficit Financing in action Measures taken by the state to boost the economy included: • The state assuming greater responsibility for the control of capital within the economy • Financial benefits were given to farmers and small businesses • However the greatest significance was the direct spending by the state on a range of investment projects such as: EXPANSION OF HOUSES & BUILDINGS These policies tripled public investment between 1933- 36 and increased government expenditure by nearly 70%. By 1936 economic recovery was well advanced, emphasis now turned to rearmament REFORESTATION LAND RECLAMATION MOTORISATION

5. Deficit Financing – Success? There was dramatic growth in jobs, by 1936 unemployment declined to 1.6 million. Industrial production in creased by 60% since 1933 and GNP had grown by 40%. Confidence was restored however, two underlying worries remained: FEAR OF INFLATION BALANCE OF TRADE DEFICIT There was a fear that increased public expenditure would cause inflation. However to prevent inflation Schacht pioneered the use of MEFO BILLS. These were credit notes, issued by the government, which could be cashed into the Reichsbank. Inflation was also avoided by strict controls on prices and wages. By 1934 the revival of the economy was causing a Balance of trade Deficit – this means Germany was exporting more than it was importing, and its gold and foreign currency reserves were running low. To deal with this Schacht devised the ‘NEW PLAN OF 1934’. This involved the regulation of imports and bilateral trade agreements for raw material imports, including some by barter.

6. Goring's Four Year Plan 1936 GUNS OR BUTTER? AIMS: To expand rearmament and make Germany ready for war in f our years, and to make Germany as self-sufficient as possible in food and industrial production, a policy known as autarky. To increase production of raw materials PLANS OBJECTIVES To control sectors of the Labour force To regulate exports and imports To increase agricultural production

7. GUNS or BUTTER? • "Guns will make us powerful; butter will only make us fat.“ (Goring) • The implementation of the Four Year Plan sparked this debate in Germany in the mid 1930s. • Critics of the regime felt that it was more interested in rearmament than in encouraging peace and trade. • "We can do without butter, but, despite all our love of peace, not without arms. One cannot shoot with butter, but with guns." (Goebbels)

8. The Effects of the Four Year Plan • The decision to implement the Four Year Plan marked an important turning point in the Nazi regime – Nazi control over the German economy became much tighter. • The German economy was not close to collapse in 1939, but it was not in a healthy condition either. • The economy was in danger of overheating as there were major labour and raw material shortages, combined with an increase in consumer goods prices. • Hence it could be argued that the decision to wage war was a disaster.

9. Rearmament/Autarky –Success? • The economic system had not been fully transformed into a war economy. Arms production did not reach the desired levels by the armed forces. • The Four Year Plan did not produce economic self-sufficiency. Germany was still importing 20% of its food needs and 33% of raw materials. • Germany never did reach the goal of Wehrwirtschaft (defence economy), as Hitler was never prepared to allow for a major cut in German living standards, which was essential for a total mobilisation of the economy for war. • By 1939-40 Nazi Germany was only capable of waging a series of short wars. It was not until 1943 that the German economy was brought under central planning and control to meet the needs of total war.