When scholars and academics analyze
Nazi Germany and the rise of the Third Reich, historical context is often cited
first.
Because of the significant impact that World War II had on the 20th century, it is understandable why most
people understand the political, social, and military aspects of this time-period. However, what are not commonly examined are
the economic precursors,
factors,
and outcomes of Nazi Germany. In any subject, we often find that economics create
an outward sphere of influence that affect political and social climates. In this paper, we will examine an in-depth
analysis on the many components, contributing factors, and outcomes of Adolf Hitler’s
German economy of the 1930’s and early 1940’s. Was war intentionally a part of
Adolf Hitler’s economic model and plans for economic expansion or was it just a
side-effect? How did military expansion, land & resource expansion, slave labor, technological advances, the eradication of Jewish businesses, outside business, and certain political pressures
play into the rise of the German economy? Was Germany socialist, and if so, was it economically successful, at least for some period-of-time?
To answer these questions, we must carefully look at the state
of the German economy when the Nazi Socialist German Workers’ Party came into
power,
the pre-war economic policies Adolf Hitler enacted, the German economy structure during
World War II,
and the outcome of said policies and conflicts.

Beginning in 1933 and spanning
through mid-1945,
Nazi Germany was under control of Adolf Hitler and the National German
Socialist Workers’ Party. A sole referendum in August of 1934
confirmed Hitler as sole leader of Germany; all authority was bestowed upon
Hitler and his word became the supreme law. During the Great Depression, the National German Socialist
Workers’ Party ensured a speedy economic recovery and reduced 30% unemployment
to less than 5% using increased military spending and an economic growth plan
that was stimulated almost entirely by the government with very little
contribution by investment from private savings of the German people.

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From 1932 to 1936, the German government focused
primarily on the welfare of the German people. Social welfare initiatives were
expanded to include mandatory healthcare, interest-free loans to married
couples,
unemployment and disability benefits, and retirement plans for elderly
citizens.
The aim of Hitler’s domestic and monetary policies were to continuously develop
these comprehensive social welfare programs to combat the effects of the Great
Depression and create a “socially just state.” Between 1934 and 1936, German citizens paid 15-35% of
their income to charities, taxes, and social programs. In turn, production took a dramatic upturn;
GNP rose by 10 % between the years of 1932 and 1938. This represents an almost 40
billion Reichsmark difference yearly.

Although Germany’s economy showed much promise and
prosperity,
we must analyze the idea of Blitzkrieg economics and take a deeper look into
the ways that this concept does not align with economic realities of the Nazi
economy between 1933 and 1945. We must also look at the  short-term and long-term plans of Hitler and
how Germany reacted to the rapid inclination towards a total-war economy. In order to find the major fault in
Hitler’s plans for economic and geographical expansion, we must first acknowledge that
Germany’s economic conditions, foreign policy, and domestic policies, were not suited for a mass European
conquest in such a limited scope of time. Hitler built his economy into the
late 1930’s with the intention of prosperity, but also with broader expansion
that was only possible with severe militant consequence. One of his greatest accomplishments
was entrusting Hjalmar Schacht with the opportunity to accomplish the prior, but his most significant economic
downfall was granting Hermann Goring the power to pursue the ladder. In 1933, Hjalmar Schact was appointed head
of the Reichsbank and in 1934 the Minister of Economies, where he instituted a massive
public works program to stimulate the economy and reduce unemployment. These capital projects were paid
for using Mefo Bills,
which were essentially promissory notes that were used to hide a paper trail
from foreign governments. When these promissory notes were
presented for payment,
the Reichsbank printed money and the national debt soared. The Nazi’s replaced existing trade
unions with the German Labour Front; its goal was not to protect workers, but to increase output. Wages, working hours, and business practices for small
business were determined by worker councils and industries were allowed to
deduct taxes for money spent on new production equipment. Women were removed from the
workforce entirely. Forced labor proved to be a key instrument of the German
war effort. “Undesirables” such as the Jews, homosexuals, communists, homeless,
and political defectors were imprisoned and placed into work camps. In Nazi-occupied
territory, German industries such as Volkswagen, Siemens, Thyssen, and Philips
all utilized the slave labor of hundreds of thousands of people. The GLF and
Chamber of Economics was created to centralize economic activity and fool
workers into believing the government represented them. While the welfare of the people and
the social prosperity of Germany fell to the wayside, issues of malignant nationalism, prejudice, and irresponsible economic decision
making became overwhelmingly prevalent. Sound economic policy became
secondary and subject to larger military prerogatives.

Prior to 1936, this “Blitzkrieg” approach to the
economy was not apparently detectable in Hitler’s decision making. German economists provided no
context in which a total-war economy would be feasible, in terms of both resource and labor
allocation: shifting tenor from consumer-based goods to full military
production was not calculable. Hitler proclaimed that “the
extent of the military development of our resources cannot be too large, nor its pace too swift,” placing heavy pressure on the
limited resources of the Germany. It was only towards this later
period of the 1930’s that the German economy was repurposed for a “war of ten
to fifteen years’ duration,” as Hitler stated. To further emphasize this point, it is abundantly clear that the
“Four Year Plan,”
designed by Hermann Goring, was ultimately fashioned to reach
into the 1950’s.
To fulfill such ambitious goals would require an allotment of resources, technology, and labor that would not have been
available in a short-term timeline. In 1938, the Office for Economic Development
performed studies to determine the amount of resources and raw materials
necessary to efficiently prepare Germany’s military. The study measured the reliance of
both the war-effort and the civilian economy on oil-based products. Domestically,
Germany was able to produce about 275,000 tons of oil, and was able to import
approximately 200,000 tons from their allies.

To function properly, the German war machine would
require approximately five-hundred thousand tons of oil per month and another
two-hundred thousand tons for the civil economy. However, Germany’s constrained production
capacity and oil reserves were only capable of supporting several months of
civilian commerce-based activity.

In comparison to Allied forces, Great Britain almost doubled these
outputs,
while the United States produced almost 80 times the amount of crude oil. By 1942, Hitler proclaimed to German general
Freidrich Paulus,
“if I do not get the oil of Maykop and Grozny present day Georgia and Ukraine, then I must end this war.” The Luftwaffe (Germany’s air
force) required vasts amount of refined oil, whilst the navy, artillery forces, and ground vehicles were dependant
on petrol and diesel.
Logic and history both dictate that the faction with the ability to devote the
largest quantity of economic resources to their military front is often the
successful party.

By 1942, the United States was spending more
than twice that of Germany on combat munitions production and nearly thrice by
1944.  Hitler’s rapid quest for a global dominance
paired with economic boom is a clear indication of his narrow understanding of
economics.
The juxtaposition of an economy entirely devoted to war-time production with
unprecedented amounts of infrastructure development and expensive technological
advances could only be consummated in the unlikely scenario that Germany had
won the war; warships and automobiles could not be produced at the same time.

How could this radical shift from
socially-oriented government decision making to conflict-based policy occur
without the expectation that there wouldn’t be severe economic consequence and
intervention from foreign parties? The answer: it did not occur to Hitler that
the invasion of Poland would invoke a response from global powers. Germany did not forecast that an
invasion of a relatively small, Eastern European nation would
extend beyond a localized concern, let alone be the catalyst for a
second world war so rapidly. German war strategists had already
concluded at this point that no major military power in Europe (England and
France) was willing or capable of initiating a mass-conflict. In terms of Hitler’s grand scheme
for expansion,
World War II was sprung prematurely. However, when it became axiomatic that
total-war would indeed occur, Hitler strongly believed that
German ingenuity,
supply of resources,
and the will of the people could be stretched far beyond the power of all
Allied forces.
Immediately,
the whole of Germany was thrust into the previously envisioned manifest of
Adolf Hitler.

Initially, the structure of Hitler’s economic
and military strategy was on significantly more micro scale. Nazi Germany’s design for an
autarkic,
self-sufficient,
closed economy only consisted of few countries: Poland, Austria, and Czechoslovakia. With the resources, increased labor force, and additional land mass, the Germans could create
substantial defense fortifications to protect themselves from the Russians and
the Allied forces.
With these advantages,
Nazi Germany could create a healthy atmosphere for balanced growth, a surge in manufacturing, and economically sound military
production in preparation for a later conflict. Hitler’s envisioned timeline
included: a fully-developed navy by 1945, an interlinked railway system
throughout German controlled territory by 1944, the world’s largest and most
technologically advanced air force by 1943, and an exceptionally trained
military by 1945.

In 1939, Hitler received resistance from
much of Germany’s industrial entities; these privatized industries were the
recipients of much support and assistance from the Nazi’s in previous years and
sought to continue down the path of prosperity, a more modernized economy, and even the idea of more open
& free trade.
These industrialists were less concerned with war and instead insisted that
Hitler shift his attention towards the market and further private investment. The government’s response to this
opposition was to nationalize certain industries and restructure them into
state-owned companies that would be optimized to produce at increased
capacities for war-based necessities. A prime example of this was the
nationalization of Germany’s iron ore industry. Hermann Goring seized control of
all private steelwork production facilities under the name “Hermann Goring
Works” and repurposed them for the sole objective of contributing to Hitler’s
war machine.
In one of Hiter’s speeches, he proclaimed:

“To put it quite clearly: we have an
economic program. Point No. 13 in that program demands the nationalization of
all public companies, in other words socialization, or what is known here as
socialism. The basic principle of my Party’s economic program should be made
perfectly clear and that is the principle of authority; the good of the
community takes priority over that of the individual. But the State should
retain control; every owner should feel himself to be an agent of the State; it
is his duty not to misuse his possessions to the detriment of the State or the
interests of his fellow countrymen. That is the overriding point. The Third
Reich will always retain the right to control property owners. If you say that
the bourgeoisie is tearing its hair over the question of private property, that
does not affect me in the least. Does the bourgeoisie expect some consideration
from me? Today’s bourgeoisie is rotten to the core; it has no ideals anymore;
all it wants to do is earn money and so it does me what damage it can. The
bourgeois press does me damage too and would like to consign me and my movement
to the devil.”

The unity of the government and German business from 1933
had been torn apart; where Nazism placed its important on racialism and war, the private sector in Germany
instead wished to pursue capitalistic gain.

By 1938, the vast majority of aircraft
production was state-funded and mass-engineering factories were producing more
than a thousand per month. These investments in industrial
production facilities were designed to be long-term and cater to Hitler’s plans
for imperialism.
The massive size of Hitler’s endeavors and poor return in terms of final
military production are easily correlated to the large scale of Hitler’s plans. From 1939 to 1941, the percentage of Germany’s labor
force increased from 20% to 60%. Military expenditure showed no sign
of slowing down from 1939 through 1944, as displayed below:

This data further exhibits Hitler’s neglect of the domestic
economy and private sector with a penchant for war, even at the expense of his own
people.  Further examination of private industries –
private housing,
construction,
and automobile production – reveal massive cuts leading into the war. By 1942, eight times the number of
automobiles were produced than that of 1938, with 80% of those produced being
dedicated to military efforts. A third of housing units were
developed,
in the same timeframe,
most of which were designated to military housing. Construction investment fell from
13 million dollars to 6 million; nearly half of its value in a three-year span. Although drastically more
foodstuffs were produced during this time, the German people were forced to
ration food to accommodate for the armed forces. By 1943, the military utilized nearly 50% of
all textile production in Germany. Germany was spreading itself far
too thin.
State Secretary Neumann stated:

“Not only almost all articles of
daily use but also practically all other goods have become increasingly scarce
in recent years – even prior to the outbreak of war – a higher standard of
living is the ultimate goal, not the immediate objective of the
Four Years Plan.
Whatever was available by the way of labor, materials, and machines had to be invested in
the production of military-economic importance according to an explicit Fuhrer
order.
The fact that consumer interests had to be put second is regrettable, but cannot be helped.”

Germany mildly succeeded in utilizing its limited resources, but failed in finding effective
allocation of them in a way that benefited the people.

           What created
such a disparity between Hitler’s envisioned plan and what Germany was capable
of producing? Aside from the inopportune timing of the Allied forces to enter
the war,
Germany’s economy faced many structural issues leading into the 1940’s. Both a restrictive timeline and the
amount of money spent on rebuilding military infrastructure played a role in
this gap.
Germany decided against the mass-production of many of its military assets and
instead opted for a small-scale approach of production methods, insisting that a high level of
skillfulness be applied to weapons design and vehicle assembly. This proved to be expensive and
inefficient.
While Germany spent more than twice the amount of money on the weapons development
than England,
the UK was still able to produce a larger air force, nearly twice the amount of military
grade automobiles,
and an equal number of tanks.

           Misinformation
and poor analytics also played a significant role in the poor allocation of time, resources, and planning. Hitler’s delusion of a short-term
positive outcome,
coupled with an advisory committee who feared presenting realistic expectations
to him,
often lead to important intelligence being swept-under-the-rug in favor
initiatives with low success rate. Much of this blame falls in the
hands of Hermann Goring,
whose yearning to remain in Hitler’s good graces often painted unrealistic
forecasts.
Small victories like the invasions of Poland, Austria, and Czechoslovakia created a
curtain for which economic realities could hide. The full armament of Germany’s army
failed to replicate that of private German industry. For good reason, large German businesses despised
the autarkic approach Hitler took towards the economy and instead wanted to devote
their time,
money,
and effort towards profits and trade, rather than a losing war that would
drain them of their resources and labor. Another important aspect to note
are the regulatory methods the government placed on the means of production. These same industries that were
able to prosper in the mid-1930’s now had an administration enforcing
inefficient production practices. It was not until too late into the
war that Albert Speer directed a more effective means of production, using existing resources in a far
more productive manner.
In 1942,
factories were able to produce almost 50% more planes than the previous year
with only a small increase in labor and less metal. By this point, however, this was not enough to successfully
wage war with the Allied forces and the USSR.

           The downfall
of Germany’s military efforts and economy are vastly correlated. The inability to minimize the costs
of production,
grow a balanced economy with healthy levels of civilian production and
consumption,
and fluently transition from a market-based economy to a war-time economy all
translate to failure.
Preparing for a long-term result without the proper economic steps necessary to
sustain a war economy was Hitler’s most destructive mistake. Nazi Germany prepared itself for a
war that came too soon and their autarkic approach was only suitable, given enough time to develop. Hitler’s elementary knowledge of
production methods and economic growth strategy clouded his expectations for
which the military he envisioned could be built. While others were concerned with
the production means to develop cost efficient engines, Hitler was more concerned with the
number of airplanes for his Luftwaffe. Quickly, the German economy was forced to
take reactive approaches to their obstacles instead of taking preemptive
measures before World War II began. Misjudging the response of Allied
forces to his invasions of Poland, Austria, and Czechoslovakia narrowed his
timeline and did not allow a balanced growth of both his economy and military
that would’ve been strong enough to emerge victorious in a war of that caliber. An economy forced to hastily divert
from a stage of steady growth to a total-war identity is bound to fail, as was the case in Germany in
1936-1937.
Reluctance from private industry and Hitler’s naivety to the efficiency of
long-term production created a friction between the economy and the military
ambitions that could not be remedied in time to adapt and defeat Germany’s
enemies.

Had Hitler continued his advancement
of social welfare programs, whilst promoting free-market
economic policies,
rather than taking an autarkic approach (closed and self-sufficient), the Germans would have not needed
to invade foreign countries and incite a World War to combat their scarcity of
resources.
However,
this approach may not have been feasible to Hitler, whose racial, nationalistic, and egotistical approach to foreign
policy,
domestic policy,
and economics resulted in the decline of the Third Reich. I believe it is reasonable to
conclude that war had always been a key component to Hitler’s envisioned
economy,
but became a down-fall to it rather than a side-effect. Nazi Germany underestimated the
response of allied forces to their invasion of Poland. Had the Germans been given enough
time to simultaneously grow their domestic economy at the same pace as their
military or shifted their focus to short-term production prior to 1942, it is not illogical to believe that
the Nazis could have been successful in their quest to conquer Europe. The inefficiency of Nazi Germany to
properly marshal its military was ultimately a result of the disparity between
unrealistic expectations and economic realities.