How far can it be said that Nazi policies in Germany were more successful in reducing the effects of the Great Depression than the approaches taken by other European countries?
How far can it be said that Nazi policies in Germany were more successful in reducing the effects of the Great Depression than the approaches taken by other European countries?
Throughout 1929 and even some way into the 1930 few people appreciated that the world was on the point of experiencing one of the worst depressions in history (1914-1990 The European Economy pg63). The Great Depression began in 1929 in the United States and spread, affecting almost all of the countries in the world. It was a depression combining duration and great severity and it had a tremendous effect on Europe. By the mid-1930's most countries were in the midst of a deep depression. John Maynard Keynes called it "The Greatest catastrophe".
Most countries initially continued in their 'laissez-faire' approach until literally forced to intervene and once they did intervene with one or two notable expectations, the intervention was orthodox. For example Britain's attempt at a recovery was remarkably orthodox. The economic crisis did not give rise to big public works project. Fiscal policy was very orthodox. The government were reluctant to deficit finance, the aim was to balance the budget. Apart from a small increase in public expenditure between 1929 and 1931, government spending (both at central and local levels) remained remarkably stable until the late 1930's when rearmament began to take effect, and in practically every year the central government's account showed a surplus (European Economic History pg 81). There was no marked increase in government intervention. However the government did introduce some protectionist policies, such as the introduction of tariffs. However tariffs were also like a double-edged sword as some industries suffered from negative protection such as ship - building which had to import some raw materials. Britain had also left the gold standard, however these effects were short-lived once rival countries followed suit. Apart from exports most indices of economic activity rose sharply after 1932. Unemployment was still a problem in the latter part of the 1930's, but this was more structural rather than cyclical. The domestic market provided the main stimulus for recovery, rising demand, which led to growth in the housing sector and consumer durables industries. In time it became more broadly based on exports and even some of the old staple industries began a revival, particularly in the 1930's when rearmament became important. Looking at this it looks as if Britain's policy had limited effect on recovery. The recovery owed more to changes in the business cycle than government policy.
If Britain's policy had little effect, France's policy was nothing short of disastrous. The French economy stagnated in this period. France pursued an independent policy because of the fact that it had accumulated large gold stock in the 20's and 30's. France maintained the gold standard and because of the fear of inflation it intended to stick with it. This angered the recession, since France had to get its prices down in-line with world prices, given the general devaluation of currencies, it was necessary to resort to deflation. Government expenditure dropped, wages were cut by as much as ...
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If Britain's policy had little effect, France's policy was nothing short of disastrous. The French economy stagnated in this period. France pursued an independent policy because of the fact that it had accumulated large gold stock in the 20's and 30's. France maintained the gold standard and because of the fear of inflation it intended to stick with it. This angered the recession, since France had to get its prices down in-line with world prices, given the general devaluation of currencies, it was necessary to resort to deflation. Government expenditure dropped, wages were cut by as much as 12 per cent. Sweden also followed this route for a while, imposing some deflationary policies like wage cuts. Trade restrictions were also introduced to protect the external account. These policies were had the opposite effect to what was required. Up until 1936 production and employment continued to decline. The French showed how disastrous government policy can-be. Even by the late 1930's output and production were still below pre-depression levels, unemployment had only been reduced by the artificial manipulation of working hours. Only in 1936-37 when the Blum government gained power did he introduce the kind of policies necessary, he introduced public work programmes. So France went into the recession as one of the strongest countries to combat it, but it came out of the depression as one of the weakest.
However the German economy had two unique features. The first was the strength of the recovery and the second was the amount of state intervention, during a period when other European government's apart from Sweden were continuing 'lassiez faire' policies. As stated before, the British government was very reluctant to intervene in the economy. Germany suffered more from the slump than other countries, but it pulled out of it the strongest after 1932. Whilst other countries like Britain and France continued with their liberal economic policies and also Sweden to some point, the German economy travelled in the opposite direction moving from a sceptical introduction of states policies in 1933 to a command economy. Without such a 'package' the economy might not have recovered to the extent that it did in the way that Hitler's future war plans dictated (The Nazi Economic Recovery 1932-1938 p41).
The central feature of Nazi policy was, nevertheless, a programme of government spending and public investment designed to stimulate and demand and expand income. Hitler argued that economic recovery would only occur 'if measures are taken again and again with energetic attacks and fanatical tenacity against unemployment". The Third Reich was originally piece orientated, concentrating on the eradication of unemployment. Germany again had one of the worst records, between 1929 and 1930 unemployment had doubled to reach a figure of 4.5 million, two years later it had crept up to 6 million. This was seen as crucial to electoral success. As soon as the Nazi party gained power they extended the relief policy by launching a massive public works programme, some 6 billion reichsmarks were spent. This after a period of time soon cleaned up a good deal of the unemployment. Public investment doubled between 1933 and 1934 and increased by almost 60 per cent again during 1935. In 1929 public investment was 35 per cent of gross investment, in 1935 it was 55 per cent. As this shows the Nazi party clearly took a different route from Britain and France to economic recovery. Total government expenditure increased in real terms by almost 300 per cent between 1933 and 1938. The 'motorization' of the German economy, namely thee widespread use of motor vehicles and the road-building programme, was very important in this period and played a significant part in sustaining if not initiating the German upswing. The German government deliberately used the motor industry to boost the economy. This was for two reason, first was the building of roads and construction in work-creation programmes, and the second was special incentives for car buyers. This boosted car sales immediately. From November 1934 onwards priority was given to rearmament and preparation for war. By 1936 military spending was beginning to dominate certain sectors of the economy. This shift in policy had many implications, it led to extreme economic planning. Wages and prices, foreign trade and exchange and the money and the capital markets were regulated. Higher taxes and devaluation of the mark was designed to shift resources from the consumer to producer good industries. A policy initiative, which leant towards rearmament obviously emphasises the importance of public sector spending rather than private sector spending. The Third Reich was taking increasing sector of the economy under control, this is in contrast to the other European countries. In Britain as said there was no marked increase in government intervention. The same was also in France, who pursued policies of deflation for a while and cut public expenditure to reduce the money supply. The network of control was completed by extensive regulation on trade and exchange payments. The chief aim of these was to restrict inessential imports and where possible boost exports and secure the benefits of favourable trade terms. The import policy was more successful, with essential raw materials comprising an increasing share of the total import bill. Also in 1935 Conscription and in 1936 increased re-armament played their part in bringing down unemployment.
The only other country to undertake a similar style of Nazi public works programmes for getting out of the depression was Sweden. Although at the beginning it did introduce deflationary policies, a large programme of public works was implemented resulting in budget deficits. Currency devaluation gave exports a boost mid 1933.
From 1932/33 to 1937/38 there was a 122 per cent increase in industrial production, GDP was up 67 per cent in Germany. These were the highest figures in Europe showing tremendous growth. France only managed 20 per cent and 8 per cent increase and Britain 53 per cent increase and 26 per cent increase in GDP. The second best performing economy was the Swedish economy. Industrial production was up 72 per cent and GDP was up 40 per cent. As stated the Swedes also embarked like the Third Reich on big public works programmes and high public spending. So were the policies of the Nazi party the most successful, well looking at the statistics it certainly was. Sweden the country that had undertook a similar sort of line to the Nazi policy of large public spending was the second best performing economy in the recovery period. Germany was the only country to eliminate unemployment and her record in aggregate output was impressive. Germany's policy differed from Britain's, where are Britain argued money was better spent in the private sector, Hitler re-directed funds from the private to the public sector. Forced saving and price fixing kept demand for consumer good under control.
So if the Nazi party were more successful in pulling Germany out of the recession, why did they succeed? Some people point to the authoritarian government. This style of government allowed them to push through whatever they liked and since there was no effective opposition as they was so much dislike for the Weimar government, it allowed the Nazi party to do what it liked.
However given the high priority accorded to investment by the government it is not surprising that the productive performance of the economy was not higher (Nazi Economic Recovery 1932-1938 pg 55). R.J. Overy also states that because the state had taken control over large sections of the economy and areas of investment, market pressures were missing from increasing efficiency. Also since the economy had been geared towards capital goods, there was a lack of consumer goods and services, shops were running out of food.
