15- Economic policies

Question 1

What was the economic situation in January 1933?

Answer 1

Economy was in the depths of depression:
- nearly 6 million unemployed- previous regimes had failed to make any significant impact on this problem and many had voted for Nazis during depression years of 1930-32 bc Hitler promised to get people back to work.

Question 2

What was the basis on which Nazi propagandists hailed the success of regime’s policies and called it an ‘economic miracle’?

Answer 2

By 1935 official figures showed unemployment fall to 2 million

By 1939 there were labour shortages in key industries.

Question 3

What were Nazi’s economic policy aims?

Answer 3

When Hitler was appointed Chancellor, party didn’t have a coherent and carefully thought-out economic policy.

In short term, priority was:

 - econ rec from depression and
 - reduction of unemployment.

In longer term, Nazis aimed to create:

 - econ capable of sustaining a major rearmament programme geared towards the needs of a future war. 
      - it would need to be self- sufficient in production of food and raw materials- referred to as 'ECONOMIC AUTARKY'

Question 4

Who was a key figure in Nazi economic policy between 1933-36?

Answer 4

Hjalmar Schacht

Question 5

How did regime stimulate econ rec under Schacht?

Answer 5

1. Pumping money into econ to build homes and Autobahns (Autopistas)
2. Stimulating consumer demand by giving tax concessions (reduction in amount of tax paid) to particular groups
3. Giving subsidies to private firms to encourage them to take on more workers
4. Putting controls on wages and prices
5. Introducing ‘New Plan’ in 1934 to control foreign trade
6. Taking 1st steps towards rearmament using ingenious method for financing the expenditure- Mefo Bills

Question 6

What were the 4 main policies did Schacht implement for econ rec?

Answer 6

1. Autobahns
2. Battle for Work
3. New Plan
4. Mefo Bills

Question 7

Explain the importance of Autobahns

Answer 7

• Decribed by Richard Evans as ‘1 of the most durable propaganda exercises mounted by the Third Reich’
• Photos from construction showed thousands of workers employed on the project
• Posters showed strikingly modern bridges and viaducts.
• Visible sign of econ revival achieved by Hitler’s gov.
• In reality, construction of Autobahns employed relatively few people- at peak only 125,000 thousand
  
  • Construction slowed after 1938 and stopped altogether in 1942.
• Since few Germans could own/afford cars, Autobahns were underused.

Question 8

Explain the importance of the ‘Battle for Work’

Answer 8

• Project to reduce unemployment
• Large sums of $ spent on building of roads and public buildings.
• Increased industrial production stimulated through loans and tax relief to private companies.
• Nazi Party fortunate that when they came to power, econ had already begun to revive
  
  • Nevertheless, their measures undoubtedly helped to reduce unemployment faster
• 1935: REICH LABOUR SERVICE introduced under which unemployed young men had to do 6 months of labour in farming or construction.
  
  • Later that year military conscription was reintroduced for young men.

Question 9

Explain the importance of the ‘New Plan’ of 1934

Answer 9

• As econ began to revive in 1933-34, foreign trade increased and imports grew faster than exports.
  
  • Led to shortage of foreign currencies needed to purchase imported goods.
• Under New Plan, Schacht placed controls on imports and access to foreign currency.
• He initiated a series of agreements with foreign countries, especially those in the Balkans and South America, whereby Germany was supplied with food and raw materials which were paid for in German Reichsmarks.
  
  • Supplying countries could then only use this money to buy German goods.

Question 10

Explain the importance of Mefo Bills

Answer 10

• To finance rearmament, needed to borrow money without leading to hyperinflation
• Schacht devised a scheme whereby gov paid for its military equipment using credit notes (Mefo Bills)
• These could be exchanged for cash at Reichsbank , ensuring that private companies had confidence they would get their money.
• However, companies were given the incentive to not ask for payment by offering 4% per annum interest on the bills if they kept them for a full 5-year term.
• This way, rearmament programme could be started in 1935 without gov having the funds to finance it.
• Also gave the advantage that rearmament programme could be kept secret since expenditure didn’t appear in gov’s accounts.

Question 11

Despite Schacht’s success in reviving the econ and reducing unemployment, what new set of problems was created?

Answer 11

There were also:
- food shortages
- rising prices
- lower living standards
for ordinary Germans in 1935-36. This led to:
- growing disillusionment with regime- raised questions about regime’s priorities bc:
- food shortages could be solved through imports, but this would use up valuable reserves of foreign currency needed for the import of armament industry materials.

• Conflict of priorities known as a choice between ‘guns or butter’

Question 12

What is ‘guns or butter’?

Answer 12

Debate regarding the regime’s conflict of priorities in the mid-1930s. The issue was whether the regime should gear the economy towards war or towards solving social problems.

Question 13

How was the ‘guns or butter’ conflict resolved?

Answer 13

Gov decided to strive for econ self-sufficiency.

• Expanding home production of both food and raw materials would reduce dependence on imports and large reserves of foreign currency.
• Policy referred by Nazis as economic autarky was the basis of a new Four Year Plan introduced in 1936.

Question 14

Who was in control of the 4-year-plan and why?

Answer 14

Schacht opposed the move towards autarky was marginalised and responsibility was transferred to Hermann Goering.

Question 15

What were Hitler’s aims for the 4-year-plan, set out in a memorandum given to Goering in 1936?

Answer 15

• To attain 100% self-sufficiency in raw materials so as to save foreign currency

To achieve this, he set out 2 ‘tasks’:

1. German army must be operational within 4 years
2. German econ must be fit for war within 4 years

Question 16

What is the aim of the 4-year-plan based on Hitler’s thoughts? What are its priorities?

Answer 16

To make Germany fit for war within 4 years

Although implicit in Nazi quest for Lebensraum (living space) gearing Germany towards war was 1st explicit indication that Germany was preparing for war

Priorities:

 - rearmament
 - econ autarky

Question 17

How were the main priorities of the 4-year-plan achieved?

Answer 17

Rearmament and autarky achieved by:

1. controls on labour supply, prices, raw materials and foreign exchange
2. setting production targets for private companies
3. establishing new State-owned industrial plants such as the Hermann Goering Steelworks
4. increasing production of key commodities such as iron, steel and chemicals
5. encouraging research and investment in production of substitute products such as artificial rubber and extracting oil from coal-reducing German dependence on imports

Question 18

What role did propaganda play in the achievement of econ autarky?

Answer 18

• Effort to increase production presented as a battle in which the whole ‘people’s community’ had to participate
• Propaganda campaigns to persuade people to buy only German goods, eat only German foods and use only German raw materials in their work presented these targets as a patriotic duty of all Germans.
• Also propaganda campaigns to persuade Germans to save more, since savings would help to fund investment in new production facilities.
• In 1937 regime launched campaign to collect scrap metal from people’s homes and gardens and public spaces to make up for serious shortages in raw materials
  
  • Garden fences, park railings and iron lampposts removed to melt down.
  • Pots and pans collected from people’s homes by the Hitler Youth.

Question 19

What were the results of the Four Year Plan?

Answer 19

• They didn’t match the propaganda claims
  
  • German industry didn’t meet the targets set by the regime and in 1939 Germany still imported 1/3 of its raw materials
  • Similar failings in food production
  • German econ didn’t have the resources to achieve all of the aims
  • In order to maintain the levels of consumption and avoid the risk of alienating the people, labour and capital had to be diverted from war industries.
  • By 1939 German economy was under severe strain

Question 20

Did business leaders welcome the Nazi takeover of power in 1933?

Answer 20

Though not all, many did. Hitler had offered reassurance that they need not be alarmed by the more socialist aspects of the regime.

Question 21

Which Nazi policies were of benefit to businesses?

Answer 21

In the early months of the regime:

1. suppression of free trade unions
2. establishment of political stability
3. revival of the economy

Question 22

Which Nazi policies were not beneficial to businesses?

Answer 22

As Nazi policies began to develop, many business leaders didn’t welcome the greater state intervention in the economy with its controls on the:

 - supply of labour
 - raw materials
 - prices

Question 23

What did the Four Year Plan mean to businesses?

Answer 23

• Many opportunities to make profits through involvement in the rearmament programme.
• 1 firm that benefited enormously was the chemicals company I.G. Farben, involved in research and production of synthetic materials
  
  • profits increased from 71 million to 240 million Reichsmarks
• On the other hand, some companies were scaptical about the plan. Many of Ruhr iron and steel firms were reluctant to invest in new steelworks to produce steel from poor quality and expensive German iron, rather than use cheaper and more superior imported one,

Question 24

What was the regime’s response to iron and steel firms who refused to involve themselves in the rearmament programme?

Answer 24

Established a very large state-owned steelworks: Herann Goering Steelworks

 - Company given priority over private companies in the allocation of materials and labour. 
 - By 1939 had become largest industrial enterprise in Europe
 - Obvious value to regime's propaganda
 - Expanded its operations into coal mining and manufacture of heavy machinery and synthetic fuels
 - As Germany expanded after 1938, Steelworks expanded to Austria, Poland and France

Question 25

What was the GENERAL extent of economic recovery achieved by 1939?

Answer 25

• Goebbels and Nazi propaganda machine used to project an image of the success of econ policies:
  • In speeches and radio broadcasts Hitler repeatedly claimed that the battle for work had been won by 1936.
    
    • In fact, battle for work not even mentioned after 1936, reflecting success of propaganda in convincing people that unemployment was no longer a problem.
  • Advertising campaigns for products such as the ‘people’s car’ gave the impression that German living standards were rising as a result of the policies.
  • Military parades showing off latest equipment an patriotic campaigns to persuade Germans to buy only German goods designed to show that Germany was achieving econ autarky and was ready for war.
• There was always an element of truth in the claims, but propaganda exaggerated the successes and covered up the failures in Nazi economic policies.

Question 26

What was the extent of the reduction in unemployment by 1939?

Answer 26

• Dramatic reduction in nº of unemployed by 1934 and continuing to fall after that.
  
  • This was the basis of the claim that the ‘battle for work’ had been won due to Nazi economic policies.
    Several flaws in this claim:
    1. Econ rec actually began before Nazis took power in Jan 1933. Many of the job creation schemes used by the regime to reduce unemp were based on policies introduced by Chancellor Heinrich Brüning in early 1930s
  2. Part of reduction in unemp figures achieved by persuading married women to give up their jobs, through granting them marriage loans, thereby releasing jobs for unemployed male workers.
  3. Reintroduction of conscription in 1935 for young men aged 18-25 took a large proportion of young males out of the labour market.
  4. Official figures also showed a dramatic increase i employment. Partly achieved through various statistical devices to inflate the figures.
     - Those who only had occasional employment, for ex, were counted as permanently employed while those doing unpaid work in agriculture were also counted as employed.

Question 27

What did historian Richard Evans estimate about employment?

Answer 27

He estimated that ‘invisible unemployment’ (those out of work not counted in official figures) was as high as 1.5 million.

By this estimate, the figure of 1.6 million out of work in 1936 should in fact be increased to over 3 million.

Question 28

What led to expansion of employment after 1936?

Answer 28

Rearmament- led to labour shortages by 1939

Question 29

What was the extent of the rise in living standards by 1939?

Answer 29

• Nazi propaganda emphasised duty of all German citizens to make sacrifices on behalf of the ‘people’s community’ by working harder for longer hours and accepting a squeeze on wages.
• At the same time, propaganda also stressed the benefits that the Nazi regime had brought to workers through improved work conditions, better social and welfare provision, and access to goods and services previously available only to the privileged.
• Despite official attempts to hold down money wages, incomes of many workers increased during the years 1933-39, as some employers were prepared to bay bonuses and other benefits to attract more skilled workers.
• Pay increased due to longer working hours but at the same time workers’ wages were subject to increase deductions bc of the compulsory contributions they had to make to the German Labour Front and welfare organisations.
• Those in key industries such as armaments were undoubtedly better off than before, while those producing consumer goods were not.

Question 30

What happened to prices that affected the extent of the rise in living standards by 1939?

Answer 30

Living standards depend as much on prices as they do on incomes.

• Prices rose during the 30s and there were shortages of some key commodities.
  
  • Germans could feed their families but could afford few luxuries
• Consumption of higher value foods such as meat, fruit and eggs declined while cheaper foods such as potatoes or bread increased.
• Pressure on living standards evident in Sopade reports that show discontent with the regime.
• On the other hand, the fact that the regime succeeded in persuading the population to shoulder the burden of the rearmament programme without triggering a wages explosion or mass opposition indicates the success of propaganda campaigns.
• Aims of rearmament and econ autarky placed strains on German people. Price controls and rationing of some key commodities helped alleviate the pressure.

Question 31

What is the importance of the ‘people’s car’ as a form of propaganda?

Answer 31

The Volkswagen (people’s car) was a pet project of Hitler’s.

Successfully persuaded workers to save money to purchase one.

One of the great successes of Nazi propaganda, since cars didn’t go into full production during the Nazi regime and only the Nazi elite were able to acquire the few models that were actually made.

Question 32

Summary chapter 15

Answer 32

• Mixed success of Nazi economic policy
• Unemployment reduced and by 1939 labour shortages
• Demands of Four Year Plan placed the economy under severe strain and its targets were not achieved.
• In 1939: shortages of food and other necessities
• Progress achieved came at the cost of a decrease in the living standards of the majority of Germans

Question 33

Key dates chapter 15

Answer 33

1934
1935
1936

Question 34

What is autarky?

Answer 34

Economic self-sufficiency

Question 35

What is a mefo bill?

Answer 35

Scheme whereby German gov paid by credit notes