When scholars and academics analyzeNazi Germany and the rise of the Third Reich, historical context is often citedfirst.
Because of the significant impact that World War II had on the 20th century, it is understandable why mostpeople understand the political, social, and military aspects of this time-period. However, what are not commonly examined arethe economic precursors,factors,and outcomes of Nazi Germany. In any subject, we often find that economics createan outward sphere of influence that affect political and social climates. In this paper, we will examine an in-depthanalysis on the many components, contributing factors, and outcomes of Adolf Hitler’sGerman economy of the 1930’s and early 1940’s. Was war intentionally a part ofAdolf Hitler’s economic model and plans for economic expansion or was it just aside-effect? How did military expansion, land & resource expansion, slave labor, technological advances, the eradication of Jewish businesses, outside business, and certain political pressuresplay 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 stateof the German economy when the Nazi Socialist German Workers’ Party came intopower,the pre-war economic policies Adolf Hitler enacted, the German economy structure duringWorld War II,and the outcome of said policies and conflicts.
Beginning in 1933 and spanningthrough mid-1945,Nazi Germany was under control of Adolf Hitler and the National GermanSocialist Workers’ Party. A sole referendum in August of 1934confirmed Hitler as sole leader of Germany; all authority was bestowed uponHitler and his word became the supreme law. During the Great Depression, the National German SocialistWorkers’ Party ensured a speedy economic recovery and reduced 30% unemploymentto less than 5% using increased military spending and an economic growth planthat was stimulated almost entirely by the government with very littlecontribution by investment from private savings of the German people. From 1932 to 1936, the German government focusedprimarily on the welfare of the German people. Social welfare initiatives wereexpanded to include mandatory healthcare, interest-free loans to marriedcouples,unemployment and disability benefits, and retirement plans for elderlycitizens.The aim of Hitler’s domestic and monetary policies were to continuously developthese comprehensive social welfare programs to combat the effects of the GreatDepression and create a “socially just state.” Between 1934 and 1936, German citizens paid 15-35% oftheir 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 40billion Reichsmark difference yearly. Although Germany’s economy showed much promise andprosperity,we must analyze the idea of Blitzkrieg economics and take a deeper look intothe ways that this concept does not align with economic realities of the Nazieconomy between 1933 and 1945. We must also look at the short-term and long-term plans of Hitler andhow Germany reacted to the rapid inclination towards a total-war economy. In order to find the major fault inHitler’s plans for economic and geographical expansion, we must first acknowledge thatGermany’s economic conditions, foreign policy, and domestic policies, were not suited for a mass Europeanconquest in such a limited scope of time. Hitler built his economy into thelate 1930’s with the intention of prosperity, but also with broader expansionthat was only possible with severe militant consequence.
One of his greatest accomplishmentswas entrusting Hjalmar Schacht with the opportunity to accomplish the prior, but his most significant economicdownfall was granting Hermann Goring the power to pursue the ladder. In 1933, Hjalmar Schact was appointed headof the Reichsbank and in 1934 the Minister of Economies, where he instituted a massivepublic works program to stimulate the economy and reduce unemployment. These capital projects were paidfor using Mefo Bills,which were essentially promissory notes that were used to hide a paper trailfrom foreign governments. When these promissory notes werepresented for payment,the Reichsbank printed money and the national debt soared. The Nazi’s replaced existing tradeunions with the German Labour Front; its goal was not to protect workers, but to increase output. Wages, working hours, and business practices for smallbusiness were determined by worker councils and industries were allowed todeduct taxes for money spent on new production equipment. Women were removed from theworkforce entirely. Forced labor proved to be a key instrument of the Germanwar effort.
“Undesirables” such as the Jews, homosexuals, communists, homeless,and political defectors were imprisoned and placed into work camps. In Nazi-occupiedterritory, German industries such as Volkswagen, Siemens, Thyssen, and Philipsall utilized the slave labor of hundreds of thousands of people. The GLF andChamber of Economics was created to centralize economic activity and foolworkers into believing the government represented them. While the welfare of the people andthe social prosperity of Germany fell to the wayside, issues of malignant nationalism, prejudice, and irresponsible economic decisionmaking became overwhelmingly prevalent. Sound economic policy becamesecondary and subject to larger military prerogatives.
Prior to 1936, this “Blitzkrieg” approach to theeconomy was not apparently detectable in Hitler’s decision making. German economists provided nocontext in which a total-war economy would be feasible, in terms of both resource and laborallocation: shifting tenor from consumer-based goods to full militaryproduction was not calculable. Hitler proclaimed that “theextent of the military development of our resources cannot be too large, nor its pace too swift,” placing heavy pressure on thelimited resources of the Germany. It was only towards this laterperiod of the 1930’s that the German economy was repurposed for a “war of tento 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 reachinto the 1950’s.To fulfill such ambitious goals would require an allotment of resources, technology, and labor that would not have beenavailable in a short-term timeline. In 1938, the Office for Economic Developmentperformed studies to determine the amount of resources and raw materialsnecessary to efficiently prepare Germany’s military. The study measured the reliance ofboth 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 importapproximately 200,000 tons from their allies.To function properly, the German war machine wouldrequire approximately five-hundred thousand tons of oil per month and anothertwo-hundred thousand tons for the civil economy. However, Germany’s constrained productioncapacity and oil reserves were only capable of supporting several months ofcivilian commerce-based activity. In comparison to Allied forces, Great Britain almost doubled theseoutputs,while the United States produced almost 80 times the amount of crude oil. By 1942, Hitler proclaimed to German generalFreidrich 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 airforce) required vasts amount of refined oil, whilst the navy, artillery forces, and ground vehicles were dependanton petrol and diesel.Logic and history both dictate that the faction with the ability to devote thelargest quantity of economic resources to their military front is often thesuccessful party.
By 1942, the United States was spending morethan twice that of Germany on combat munitions production and nearly thrice by1944. Hitler’s rapid quest for a global dominancepaired with economic boom is a clear indication of his narrow understanding ofeconomics.The juxtaposition of an economy entirely devoted to war-time production withunprecedented amounts of infrastructure development and expensive technologicaladvances could only be consummated in the unlikely scenario that Germany hadwon the war; warships and automobiles could not be produced at the same time.
How could this radical shift fromsocially-oriented government decision making to conflict-based policy occurwithout the expectation that there wouldn’t be severe economic consequence andintervention from foreign parties? The answer: it did not occur to Hitler thatthe invasion of Poland would invoke a response from global powers. Germany did not forecast that aninvasion of a relatively small, Eastern European nation wouldextend beyond a localized concern, let alone be the catalyst for asecond world war so rapidly. German war strategists had alreadyconcluded at this point that no major military power in Europe (England andFrance) was willing or capable of initiating a mass-conflict. In terms of Hitler’s grand schemefor expansion,World War II was sprung prematurely. However, when it became axiomatic thattotal-war would indeed occur, Hitler strongly believed thatGerman ingenuity,supply of resources,and the will of the people could be stretched far beyond the power of allAllied forces.Immediately,the whole of Germany was thrust into the previously envisioned manifest ofAdolf Hitler.Initially, the structure of Hitler’s economicand military strategy was on significantly more micro scale.
Nazi Germany’s design for anautarkic,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 createsubstantial defense fortifications to protect themselves from the Russians andthe Allied forces.With these advantages,Nazi Germany could create a healthy atmosphere for balanced growth, a surge in manufacturing, and economically sound militaryproduction in preparation for a later conflict. Hitler’s envisioned timelineincluded: a fully-developed navy by 1945, an interlinked railway systemthroughout German controlled territory by 1944, the world’s largest and mosttechnologically advanced air force by 1943, and an exceptionally trainedmilitary by 1945.In 1939, Hitler received resistance frommuch of Germany’s industrial entities; these privatized industries were therecipients of much support and assistance from the Nazi’s in previous years andsought 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 thatHitler shift his attention towards the market and further private investment. The government’s response to thisopposition was to nationalize certain industries and restructure them intostate-owned companies that would be optimized to produce at increasedcapacities for war-based necessities. A prime example of this was thenationalization of Germany’s iron ore industry.
Hermann Goring seized control ofall private steelwork production facilities under the name “Hermann GoringWorks” and repurposed them for the sole objective of contributing to Hitler’swar machine.In one of Hiter’s speeches, he proclaimed:”To put it quite clearly: we have aneconomic program. Point No. 13 in that program demands the nationalization ofall public companies, in other words socialization, or what is known here associalism. The basic principle of my Party’s economic program should be madeperfectly clear and that is the principle of authority; the good of thecommunity takes priority over that of the individual.
But the State shouldretain control; every owner should feel himself to be an agent of the State; itis his duty not to misuse his possessions to the detriment of the State or theinterests of his fellow countrymen. That is the overriding point. The ThirdReich will always retain the right to control property owners. If you say thatthe bourgeoisie is tearing its hair over the question of private property, thatdoes not affect me in the least. Does the bourgeoisie expect some considerationfrom 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. Thebourgeois press does me damage too and would like to consign me and my movementto the devil.”The unity of the government and German business from 1933had been torn apart; where Nazism placed its important on racialism and war, the private sector in Germanyinstead wished to pursue capitalistic gain. By 1938, the vast majority of aircraftproduction was state-funded and mass-engineering factories were producing morethan a thousand per month.
These investments in industrialproduction facilities were designed to be long-term and cater to Hitler’s plansfor imperialism.The massive size of Hitler’s endeavors and poor return in terms of finalmilitary production are easily correlated to the large scale of Hitler’s plans. From 1939 to 1941, the percentage of Germany’s laborforce increased from 20% to 60%. Military expenditure showed no signof slowing down from 1939 through 1944, as displayed below:This data further exhibits Hitler’s neglect of the domesticeconomy and private sector with a penchant for war, even at the expense of his ownpeople. Further examination of private industries -private housing,construction,and automobile production – reveal massive cuts leading into the war.
By 1942, eight times the number ofautomobiles were produced than that of 1938, with 80% of those produced beingdedicated to military efforts. A third of housing units weredeveloped,in the same timeframe,most of which were designated to military housing. Construction investment fell from13 million dollars to 6 million; nearly half of its value in a three-year span. Although drastically morefoodstuffs were produced during this time, the German people were forced toration food to accommodate for the armed forces. By 1943, the military utilized nearly 50% ofall textile production in Germany. Germany was spreading itself fartoo thin.State Secretary Neumann stated:”Not only almost all articles ofdaily use but also practically all other goods have become increasingly scarcein recent years – even prior to the outbreak of war – a higher standard ofliving is the ultimate goal, not the immediate objective of theFour Years Plan.
Whatever was available by the way of labor, materials, and machines had to be invested inthe production of military-economic importance according to an explicit Fuhrerorder.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 effectiveallocation of them in a way that benefited the people.
What createdsuch a disparity between Hitler’s envisioned plan and what Germany was capableof producing? Aside from the inopportune timing of the Allied forces to enterthe war,Germany’s economy faced many structural issues leading into the 1940’s. Both a restrictive timeline and theamount of money spent on rebuilding military infrastructure played a role inthis gap.Germany decided against the mass-production of many of its military assets andinstead opted for a small-scale approach of production methods, insisting that a high level ofskillfulness be applied to weapons design and vehicle assembly. This proved to be expensive andinefficient.While Germany spent more than twice the amount of money on the weapons developmentthan England,the UK was still able to produce a larger air force, nearly twice the amount of militarygrade automobiles,and an equal number of tanks. Misinformationand poor analytics also played a significant role in the poor allocation of time, resources, and planning. Hitler’s delusion of a short-termpositive outcome,coupled with an advisory committee who feared presenting realistic expectationsto him,often lead to important intelligence being swept-under-the-rug in favorinitiatives with low success rate.
Much of this blame falls in thehands of Hermann Goring,whose yearning to remain in Hitler’s good graces often painted unrealisticforecasts.Small victories like the invasions of Poland, Austria, and Czechoslovakia created acurtain for which economic realities could hide. The full armament of Germany’s armyfailed to replicate that of private German industry. For good reason, large German businesses despisedthe autarkic approach Hitler took towards the economy and instead wanted to devotetheir time,money,and effort towards profits and trade, rather than a losing war that woulddrain them of their resources and labor. Another important aspect to noteare the regulatory methods the government placed on the means of production. These same industries that wereable to prosper in the mid-1930’s now had an administration enforcinginefficient production practices. It was not until too late into thewar that Albert Speer directed a more effective means of production, using existing resources in a farmore productive manner.
In 1942,factories were able to produce almost 50% more planes than the previous yearwith only a small increase in labor and less metal. By this point, however, this was not enough to successfullywage war with the Allied forces and the USSR. The downfallof Germany’s military efforts and economy are vastly correlated.
The inability to minimize the costsof production,grow a balanced economy with healthy levels of civilian production andconsumption,and fluently transition from a market-based economy to a war-time economy alltranslate to failure.Preparing for a long-term result without the proper economic steps necessary tosustain a war economy was Hitler’s most destructive mistake. Nazi Germany prepared itself for awar that came too soon and their autarkic approach was only suitable, given enough time to develop. Hitler’s elementary knowledge ofproduction methods and economic growth strategy clouded his expectations forwhich the military he envisioned could be built. While others were concerned withthe production means to develop cost efficient engines, Hitler was more concerned with thenumber of airplanes for his Luftwaffe. Quickly, the German economy was forced totake reactive approaches to their obstacles instead of taking preemptivemeasures before World War II began.
Misjudging the response of Alliedforces to his invasions of Poland, Austria, and Czechoslovakia narrowed histimeline and did not allow a balanced growth of both his economy and militarythat would’ve been strong enough to emerge victorious in a war of that caliber. An economy forced to hastily divertfrom a stage of steady growth to a total-war identity is bound to fail, as was the case in Germany in1936-1937.Reluctance from private industry and Hitler’s naivety to the efficiency oflong-term production created a friction between the economy and the militaryambitions that could not be remedied in time to adapt and defeat Germany’senemies.
Had Hitler continued his advancementof social welfare programs, whilst promoting free-marketeconomic policies,rather than taking an autarkic approach (closed and self-sufficient), the Germans would have not neededto invade foreign countries and incite a World War to combat their scarcity ofresources.However,this approach may not have been feasible to Hitler, whose racial, nationalistic, and egotistical approach to foreignpolicy,domestic policy,and economics resulted in the decline of the Third Reich. I believe it is reasonable toconclude that war had always been a key component to Hitler’s envisionedeconomy,but became a down-fall to it rather than a side-effect. Nazi Germany underestimated theresponse of allied forces to their invasion of Poland. Had the Germans been given enoughtime to simultaneously grow their domestic economy at the same pace as theirmilitary or shifted their focus to short-term production prior to 1942, it is not illogical to believe thatthe Nazis could have been successful in their quest to conquer Europe.
The inefficiency of Nazi Germany toproperly marshal its military was ultimately a result of the disparity betweenunrealistic expectations and economic realities.