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Nazi economic system.

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Introduction

The Nazi economic system developed unintentionally. The initial objective in 1932-33 of its economic policy was just to reduce the high unemployment associated with the Great Depression. This involved public works, expansion of credit, easy monetary policy and manipulation of exchange rates. Generally Centrally Administered Economies (CAE's) have little trouble eliminating unemployment because they can create large public works projects and people are put to work regardless of whether or not their productivity exceeds their wage cost. Nazi Germany was successful in solving the unemployment problem, but after a few years the expansion of the money supply was threatening to create inflation. The Nazi Government reacted to the threat of inflation by declaring a general price freeze in 1936. From that action the Nazi Government was driven to expand the role of the government in directing the economy and reducing the role played by market forces. Although private property was not nationalized, its use was more and more determined by the government rather than the owners. Germany's economy was in a mess when Hitler was elected Chancellor in January 1933. Hitler and Nazi propaganda had played on the population's fear of no hope. Unemployment peaked at 6 million during the final days of the Weimar Republic - near enough 50% of the nation's working population. Now Hitler decreed that all should work in Nazi Germany and he constantly played on the economic miracle Nazi Germany achieved. This "economic miracle" was based on unemployment all but disappearing by 1939. Unemployment in Germany Total January 1933 6 million January 1934 3.3 million January 1935 2.9 million January 1936 2.5 million January 1937 1.8 million January 1938 1.0 million January 1939 302,000 But was this true or did the Nazi propaganda machine move into overdrive to persuade the nation and Europe that she had achieved something that other European nations had not during the time of economic depression? ...read more.

Middle

Nazi propaganda glorifying the "dignity of work" masked the brutal reality of Hitler's "economic miracle." The general view that Germany's shattered economy surged to life in the first few years of the Nazi regime is typified by Sebastian Haffner, a German writer whose short book The Meaning of Hitler (1979) received extravagant praise in John Lukacs' recent The Hitler of History. As Haffner put it, "Among these positive achievements of Hitler the one outshining all others was his economic miracle....In January 1933, when Hitler became Reich Chancellor, there were six million unemployed in Germany. A mere three years later, in 1936, there was full employment. Crying need and mass hardship had generally turned into modest but comfortable prosperity. Kershaw's version of things more accurately reflects what was really happening in Germany from 1933 through 1935. Hitler's economic policies were systematically wrecking the German economy and were rapidly painting him into a corner where his only choices were war or a loss of power. Hitler, argues Kershaw, was deathly afraid of inflation and a repetition of the early 1920s. Nevertheless, he had to reduce unemployment or he wasn't going to last long enough to begin rearming Germany, a public goal of his since the '20s. Increasing exports was not a possibility since, unless the German government devalued the mark (as Britain had done with the pound and the United States with the dollar), German exports couldn't compete in a way that would add new jobs or bring needed foreign exchange. Hitler nixed devaluation because he thought it was a step on the road to inflation. Tax cuts were also out of the question because he believed they led to less revenue not more growth. Hitler's solution for both the rearmament and unemployment problems was the same: massive deficit spending. In fact, by Kershaw's account, the Nazi government guaranteed some 35 billion ReichMarks to the German armed forces alone over an eight-year period, along with massive road building, subsidies to the auto industry, lots more bureaucrats to enforce all the new controls and regulations, and bribes to women to get married and stop working. ...read more.

Conclusion

That is, the problem is not my fault and the answer is war, not economic reform. Nazi economic policy was a tremendous success, and more than any other single factor, the 'economic recovery' of the 1930s allowed the Nazis to implement their policies with popular support. The Great Depression of 1929-32 impacted heavily on the German economy because a significant part of the recovery from 1923 hyperinflation had been funded by American money through short-term loans that could easily be removed if necessary. The Wall Street Crash of 1929, which lead to a depression within the United States, resulted in the withdrawal of much of this money from the German economy. The impact of this situation on the German economy was horrific: at least a third of the population were out of work by 1932 and there was a feeling of mass panic among the population. As a result of this 'mass panic', not only were the Nazis brought to power, as they offered a 'quick-fix' for a public that had completely lost confidence in democracy and the free market system, but any minor improvements were hailed as great successes and the regime was credited with achieving an 'economic miracle'. This was obviously reinforced by propaganda, which portrayed Adolf Hitler as a national hero who had pulled Germany out of the economic crisis, and offset any realisation that only marginal economic improvements had occurred by the late 1930s for many German workers or small business owners. However for the majority of the German population there was economic improvement, unemployment fell from over six million at the height of the depression to 1.6 million by 1936 (although official reports claimed full employment), which contrasted with 24% unemployment in the USA at the same time. Giant public works projects, such as the building of the Autobahn network and rearmament as the 1930s progressed, provided Germans with a source of national pride, as well as supplying thousands of jobs for those who had been unemployed during the Great Depression. ...read more.

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