Compare to all of the above-mentioned massive economic remedy and restructuring policies, the government expenditure on armament and military was relatively small. In fact, there was no vast military program proclaimed by the government from 1933 to 1936. Braun summarized the government expenditure on military and rearmament in his book, “The Germany Economy in the Twentieth Century” and pointed out that “it was only in 1936 Germany’s expenditure on military exceeded 10% of GNP” and “it was only from the year 1936 “military investment alone… exceeded civilian investment”. While Klein made the observation that in 1935 the Group I (Armament Factories and Military Facilities) investment by the Nazi government was 7%, which, when compared to 50% of Group III investment (Civilian and Government non-war), was very trivial. Therefore he argued, “before 1936 plans for the speedy creation of a large offensive army did not exist”. Undoubtedly, it is true that there was already a gradual increase in military expenditure between 1933 and 1936. However, from the above data, one cannot make a crude conclusion that Hitler started directly converting Germany’s economy for war purpose starting from the year of 1933.
When examining the policies carried out by the National Socialist leaders in the first 3 years, it is obvious that recovery and reformation of the economic structure were highly stressed. These economic remedies gave a good foundation for Hitler to give out more ambitious war-oriented economic policies. For instance, the Labor Service Act was to prepare the German people ready for future conscription; and the Food Estate allowed the state to administer the agricultural market and prime for upcoming self-sufficiency program. It was in late 1936, when “the success of the First Four-Year Plan was no longer in doubt” – the unemployment declined from 3.7 million in 1933 to 1.1 million in 1936; and the total production surpassed the pre-depression level, did Hitler “embark on a program of self-sufficiency and independence from outside markets” – the Second Four-Year Plan.
The Second Four-Year Plan had a number of objectives. In the first place it was to make German independent of all essential foodstuffs and raw materials (i.e. Autarky). Secondly, it was to control and distribute foreign exchange so that German economy would soon be isolated from all the external economic fluctuations. Lastly, it was to mobilize labor and raw materials in favor of military progress and rearmament. Evidently, this Second Four-Year Plan had a clear military purpose, as Hitler had stated his aim to his supervisors very clearly that,
I. Within four years the German army must be ready for action.
II. Within four years the German economy must be ready for war.
At any rate, the first task is to obtain adequate supplies of raw materials. The Nazi leaders did stress a lot on increasing foodstuffs and industrial material productions, especially on steel, oil, and rubber. For oil, the plan involved the construction of synthetic plants. It was hoped that by 1940 the total supplies would be 5.0 million tons annually, sufficient for wartime level of consumption. For steel, in order to speed up the steel production, the Hermann Goering Ore and Foundry Company (Reichswerke Aktiengeseelschaft fur Erzbergbau and Eisenhutten “Herman Goering”) was found in 1937. It was hoped that in four years the plant would have an annual capacity of four million tons of pig iron, and a similar amount of steel. While for rubber, the Four-Year Plan called for the construction of three additional plants, each with a 25,000 ton capacity. Also, a high tariff was placed on rubber. Besides these three, some other government-financed expansion programs were applied on the production of textile raw material, aluminum, and almost all of the agricultural goods. The second task was to assign the production and distribution of various recourses. The government imposed wage increase restriction to control public consumption and alternatively, granted tariff, loans and subsidies to promote production. For some scarce materials, like steel, the government even initiated an allocation system to channel them into war output.
The third task was to achieve full employment but the Nazi leaders did not carry out any brand-new plans. Rather, they strengthened the existing plans and mobilized more people to serve the military and related activities, since there were already several plans in operation, like the German Labor Front (Deutsche Arbeitsfront), Regulation of National Labor Law and “Strength through Joy” (Kraft durch Fredude). In March 1935, Hitler transformed the Labor Service into a compulsory military service. Also, the Nazis leaders employed a more forceful propaganda against the gainful employment of women. As Hitler gave out more and more rearmament and construction programs in order to achieve Autarky, more jobs were created. Besides increasing job opportunities, emphasis was put in both controlling the labor market and improving working condition and the working class status too.
Some people might rise up this question – How could Nazi government sponsor that many constructions and programs when the government was still in deficit? The answer is through issuing the government loan. There were different kinds of long-term and short-team loans, such as “Supplier Treasury Bills” (Lieferschatzanweisungen) and “Reich Loans” (Li-An-liehen). One of the very famous examples is the “Mefo-Bills”, which were “three-monthly papers, could be extended to six months, drawn by firms with limited capital supplying material to the Armed Forces, ‘accepted’ by the Mefo and then discounted at the Reichsbank or sold to the capital market”. This bill met about one-fifth of all expenditure for the armed forces in the years from 1933 until the outbreak of war.
The last task to complete the Autarky mission was to balance the foreign trade and exchange. In 1934 the Nazi leaders carried out the “New Plan”, in which the basic idea was – “do not buy more than you can pay for and buy only really necessary goods”. As expected, the implied aim of this plan was “to become independent of imports and develop raw materials production … at home”. This plan became dominant after 1936. Tight exchange control was applied in foreign trade and Germany established foreign trade with other countries by signing bilateral clearing agreements. Gradually, Hitler had created an economic around Germany (a cordon economique), which consisted of a number of friendly or neutral states – mainly, Southern and Eastern Europe, to be made dependent on Germany.
In the three fiscal years ending March 31, 1939, Germany spent a total of 32 billion RM for rearmament. Solely in 1938/39, the government spent about 15% of the German GNP. This amount was really substantial. As a result, what we can see is that there was a tremendous success but not yet a complete Autarky. The first achievement is full employment. By 1938/1939 there was only 0.4 million unemployment. Concerning raw material synthesis, though by 1939 only the production of rubber and aluminum reached the requirement of the Four-Year Plan, there was a great increase in production rate in every industrial sector. For instance, the textile raw material total output increased more than fivefold from 1933 to 1938. At the outbreak of the war, Germany was virtually “self-sufficient in bread, potatoes, sugar, meat, milk and coarse vegetables”. The production of motorcars and commercial vehicles in 1938 was remarkable – it doubled the production level in 1928. National income also rose for more than 50% than the pre-depression level. While for the foreign trade, by 1938 the balance of trade is + 0.5. Moreover, as Hardach said, “Germany showed significantly faster growth than those in the west”. For example, Germany was able to expand its exports in finished goods by 23.3%, while Britain could only have 19.3%. Although we cannot say that Germany was very successful in achieving Autarky, nor was very successful in isolating herself from foreign flux, it was successful in prospering German’s economy within a short period of time.
Some might claim that these accomplishments were still insufficient because Hitler aimed at a full Autarky and he wanted a major war. However, this claim is an incorrect one. First, though Hitler did call for an absolute Autarky in his propaganda, he, as Carroll revealed, “never intended to embark upon a program of Autarky for Germany alone; he envisioned the Four-Year Plan as a stop-gap for bridging the time until Germany could achieve her ‘definitive solution’, conquest of territory of Eastern Europe”. Therefore, this Autarky, in other word, meant the preparation to annex other countries and their resources to achieve a “fuller Autarky”. However, even though Hitler did not want to launch a total war, a World War like the one happened in 1914. This statement could easily be proved by some of the earlier memoirs. For example, in General Georg Thomas’s memoir “Gedanken und Ereignisse”, it is said that, “Keitel interrupted me… and declared that Hitler would never bring about a world war”. Also, many historians believed that Hitler was supportive of “Blitzkrieg”. Hardach said that Hitler “had no desire to engage in a protracted war of attrition with strategic bombing and a sea blockade. Making a realistic assessment of his country’s limited economic resources, he was intended rather on a rapid campaign”. Also Stolper agreed with the point that “Hitler never contemplated a long drawn-out war”. Therefore, the World War that Hitler had mistakenly launched was not what he was planning for. It happened because of his own miscalculation – he infuriated Britain and France to intervene when he invaded Poland.
Although the economic aspect of the Third Reich was not well analyzed when compared to other aspects like the Holocaust, there was still a great historical debate among historians about the issue of economic recovery and rearmament in pre-war Germany. Historians chiefly debated this topic with the following three different approaches – 1) the starting point of rearmament programs, 2) the effectiveness of these policies and, 3) the real intention of Hitler when the word “war” is used.
For the first part, historians generally agreed with the point that Hitler only began putting rearmament programs into operation from the late 1936, after Hitler withdrew Germany from the Disarmament Conference and reintroduced conscription in 1935. However, there were a few extreme schools of thought. One of them is led by Erbe, he held the point that “war preparation had been the intention of the government all along and war expenditures represented the bulk of government investment”. Schulz supported his view and added, “in place of many individual economic goals [the state] substituted the single one of ‘total mobilization’ of the entire nation for ‘total war’”. These statements are not very convincing because Hitler did not carry out any generous military plan until late 1936. Other historians, like Overy, asserted that, “the key years of economic recovery from 1932 – 1935 were years of relatively low military expenditure”. Also, Carroll further proposed that, “beginning in 1936, Germany economy was ‘dominated’ in certain key respects… by armaments, but still should not be called a ‘war economy’”.
Subsequently, historians’ points of view started to vary when they came to discuss the second item. Some argued that Hitler was unsuccessful because of his personality cult, that he was “untrained in economics, unsophisticated in its technicalities, and completely impatient of its administrative problems”. The Nazis economic leaders, like Goering, also “knew nothing about economics, [moreover] the responsible professionals had no executive powers”. They supported their theory with statistical data, showing that Germany was not self-sufficient and still largely dependent on external supply by 1939. Hardach critically pointed out that, “Germany was still painfully dependent on essential imports in 1939”. They even concluded that Hitler’s “economic miracle” was just an illusion. It is because by the end of 1938/1939 the government had a total debt of 40.7 RM thousand million, meaning that the government was technically bankrupt. However, some historians had a totally opposite standpoint. They argued that, other than the “fat-gap”, the agricultural production could overall meet the local demand within a short period of time. Also, Germany succeeded in producing sufficient rubber and aluminum, meeting and even surpassing the goals set by the Second Four-Year Plan by 1939.
While for the last point, the historical dispute became more intense when historians discussed the second and last points simultaneously. Early historians assumed “that for years Hitler had geared the German economy for total war”, therefore concluded that Hitler did not achieve his goals in any way since Germany was definitely not ready for a general war in 1939. However, Hardach’s point is agreeable that “[Hitler] was intended rather on a rapid program, a Blitzkrieg”. Klein also agreed with Hardach’s proposition that Hitler only “planned to solve Germany’s living-space problem in piecemeal fashion – by a series of small wars”. Therefore, Hitler did accomplish his economic goal – he made Germany strong enough for a chain of short wars with rapid victory, though apparently he called for total Autarky for propaganda purpose.
Nevertheless, some other historians, like Sohn-Rethel and Guillebaud, tried to eliminate their political bias and investigated Nazis economic policies in a pure economic manner, illustrated the problems and unfairness of the economic policies.
In conclusion, if considering the word “success” in terms of “achieving the goal set by the planner”, Hitler did succeed in making Germany ready for war by 1939 when he invaded Poland. It is because, firstly, Hitler was only given three years to do so. He had to and did spend time to deal with the economic problems at the beginning of his regime. Secondly, Germany did achieve Autarky to quite a large extent by 1939. Moreover, Hitler personally was in favor of “Blitzkrieg” and never planned to trigger a major war. On the whole, Hitler did want an Autarky and a war, but never a total Autarky and a total war. Hence he was very successful in making Germany ready for “Blitzkrieg” war.
Reference and Bibliographies:
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Braun Hans-Joachim, The Germany Economy in the Twentieth Century, Routledge, Champan & Hall Inc.: London, 1990
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Carroll Berenice A., Design for Total War: Arms and Economics in the Third Reich, Mouton & Co.: Netherlands, 1968
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Guillebaud C. W., The Economic Recovery of Germany: From 1933 to the Incorporation of Austria in March 1938, Macmillan & Co., Ltd: London, 1939
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Hardach Karl, The Political Economy of Germany in the Twentieth Century, University of California Press: Berkeley, 1980
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Klein Burton H., Germany’s Economic Preparations for War, Harvard University Press: Massachusetts, 1959
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Overy R. J., The Nazi Economic Recovery 1932 – 1938, 2nd Edition, Cambridge University Press: Cambridge, 1996
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Sohn-Rethel Alfred, The Economy and Class Structure of German Fascism, Free Association Books: London, 1987
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Stolper Gustav, The German Economy – 1870 to the present, Harcourt, Brace& World Inc.; New York, 1967
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Sweezy Maxine Y., The Structure of the Nazi Economy, Harvard University Press: Cambridge, 1941
Klein Burton H., Germany’s Economic Preparations for War, Harvard University Press: Massachusetts, 1959, Pg. 4
Overy R. J., The Nazi Economic Recovery 1932 – 1938, 2nd Edition, Cambridge University Press: Cambridge, 1996, Pg. 37
Stopler Gustav, The German Economy – 1870 to the present, Harcourt, Brace& World Inc.; New York, 1967, Pg. 133
Guillebaud C. W., The Economic Recovery of Germany: From 1933 to the Incorporation of Austria in March 1938, Macmillan & Co., Ltd: London, 1939, Pg. 42
Stopler Gustav, op.cit, Pg. 133
Sweezy Maxine Y., The Structure of the Nazi Economy, Harvard University Press: Cambridge, 1941, Pg. 183
Hardach Karl, The Political Economy of Germany in the Twentieth Century, University of California Press: Berkeley, 1980, Pg. 54
Sweezy Maxine Y., op.cit, Pg. 180
Braun Hans-Joachim, The Germany Economy in the Twentieth Century, Routledge, Champan & Hall Inc.: London, 1990, Pg. 98
Sweezy Maxine Y., op.cit,Pg. 181
Sohn-Rethel Alfred, The Economy and Class Structure of German Fascism, Free Association Books: London, 1987, Pg. 72
Braun Hans-Joachim, op.cit, Pg. 85
Klein Burton H., op.cit, Pg. 14
Guillebaud C. W., op.cit, Pg. 101
Stopler Gustav, op.cit, Pg. 133 & Pg. 142
Carroll Berenice A., Design for Total War: Arms and Economics in the Third Reich, Mouton & Co.: Netherlands, 1968, Pg. 129
Klein Burton H., op. cit, Pg. 39
Braun Hans-Joachim, op.cit, Pg. 91
Hardach Karl,, op.cit, Pg. 63
Braun Hans-Joachim, op.cit, Pg. 101
Klein Burton H., op. cit, Pg. 19
Braun Hans-Joachim, op.cit, Pg. 92
Klein Burton H., op.cit, Pg. 48
R. J. Overy, op.cit, Pg. 53
Braun Hans-Joachim, op.cit, Pg. 103
Hardach Karl, op.cit, Pg. 70
Guillebaud C. W., op. cit, Pg. 148
Carroll Berenice A., op. cit, Pg. 128
Stopler Gustav, op.cit, Pg. 160
R. J. Overy, op.cit, Pg. 44
Carroll Berenice A., op. cit, Pg. 182
R. J. Overy, op.cit, Pg. 44
Carroll Berenice A., op. cit, Pg. 189 – 190
Hardach Karl, op.cit, Pg. 77
Braun Hans-Joachim, op.cit, Pg. 90
Hardach Karl, op.cit, Pg 75
Klein Burton H., op.cit, Pg. 26