The New Plan tackled most of the economic problems faced by the Nazi government at their accession. Germany decreased her dependency on international financial markets by a virtual default on her debts. This would be vital for the war effort later. The reduction of unemployment to just under one million in 1937 was extremely important to Hitler, as he saw it as an essential factor before his other military and foreign policy ambitions could be fulfilled. It also gained the Nazi regime admirers both home and abroad. They could later use this favour to their advantage when instigating an aggressive foreign policy. However, the deficit spending which was used to fund these programmes resulted in large financial debts. The work creation projects also had appalling conditions and have been labelled as “slave labour” by historians such as Overy. Despite this, by the end of 1935 there was actually a trade surplus in the balance of payments, the unemployment rate was still falling and industrial production had increased by 49.5% since 1933. The New Plan appeared to be successful on two levels. First, it stabilised the German economy, and second it began to prepare them for war. However, historians such as Layton argue that all of Schacht’s successes masked fundamental structural weaknesses in the German economy.
The balance of payments problem had really only been hidden by a number of clever financial disguises, and although unemployment had been reduced, it has been noted that the statistics of the time were liable to fixing. For example, they took married women off the unemployment count. Overy has also highlighted that although public investment increased, it was only in specific sectors of the economy. For example, the motor and construction industries, despite neither of these directly benefiting the German public. However, The New Plan of the 1930s provided a strong base for the economy to grow from, without which, Germany would never have been stable enough to start rearmament later. By the end of this period, there was a clear turning point in Nazi economics, as for the first time the economy was stable enough to pursue their war interests directly. Overy supports this view as he believes Hitler always wanted a great conflict for world power and was preparing the economy for this. The New Plan therefore helped the war effort as it prepared the economy for the Four Year Plan, which was more blatantly directed towards rearmament and war.
Hitler knew in the summer of 1936 that higher military preparedness could only come if the state extended its control further over the economy, and if Germany became more self-sufficient in the supplies needed to withstand a war. Therefore, the Four Year Plan was introduced to “co-ordinate all the economic preparations for Hitler’s great war.” The idea to push for rearmament and raw materials to help with the war effort introduced by Goering was supported by Hitler, and therefore pursued by the government. Ian Kershaw explains that the move to prioritise rearmament at the expense of consumer industries marked a turning point in the decision making structure of the Nazi Party. By encouraging autarky and introducing a fundamentally synthetic market, Goering aimed to prepare the Germany economy and armed forces for war within four years. The main priorities were therefore to build up domestic production of materials like oil and synthetic rubber, to make Germany free from the threat of blockade, to control German trade so that strategic imports and exports took priority, to re-train the labour force for tasks essential for war and to oversee the modernisation of German agriculture so that it could provide the food in case of war. It is clear that all of these policies were aimed towards the future, and fulfilled Hitler’s request of “preparing the German economy for total war.”
This had profound effects on the nature of the economy, as almost all the extra growth in it after 1933 was diverted towards the needs of war. Wage controls were put into place, designed to shift resources away from consumption and towards heavy industry and war preparation. The ‘segmentation’ of the work force encouraged workers to compete against one another, which increased efficiency in German industries. Goering made it clear that the economy “must be completely converted for war.” To enable this it was necessary to restrict the growth of private consumption in favour of state expenditure for military and economic preparations. By 1939 military expenditure had increased to 17% of total GNP, and over a quarter of Germany’s industrial workforce was working on orders for the armed forces. It was also crucial to regulate imports and exports to Germany to promote autarky within the country. These policies were clearly more aimed towards war than the policies of the New Plan. However, their relative success in comparison is widely debated.
It is clear that by 1940 Germany was much more economically prepared for war than in 1914. However, they did not meet some of their targets, for example in oil production, Germany only managed to produce 18% of the demanded amount required for war. Arms production also never reached the levels desired by the armed forces and Hitler. However, many of these industrial targets have now been labelled ‘unrealistic’ by historians such as Overy. Finances were a problem, as during 1938 the money supply grew much faster than output – 22% funding compared to just 4% growth in industrial output. This contributed to the growing Reich debt and a subsequent diversion of resources from the consumer sector. A major problem related to this was the long time taken by the construction of the factories, which only began to benefit the economy during the war. The Nazi party increased the marginal propensity to save and discouraged consumption. This led to a slow down in economic growth after 1936. Although standards of living for ordinary Germans rose as many got jobs, they had a smaller variety of products to choose from and conditions did not recover to the relatively high standards enjoyed during Weimar Germany.
Carroll has argued that it was administrative inefficiency that made rearmament industrially difficult. Other historians have highlighted the structural difficulties, such as confused planning, and poor factory organisation. However, despite these shortcomings there was certainly no sharp down turn in the business cycle. Although the economy could have grown faster if trade and consumer demand had been allowed to develop themselves, at the time these ideas were not publicly expressed. Despite this, most economists and historians both agree that in general the Four Year Plan was successful in preparing Germany for blitzkreig, or short wars. It was not, however, prepared for an international conflict. The problem was, as Tim Mason has concluded, the regime “was trying to have its cake and eat it.” It wanted to rearm as fast as possible and at the same time protect the consumer. It can therefore be concluded that despite its successes, it was too focussed and did not address many of the other problems of the time
It is clear that both Plans helped the war effort. However, they did so in different ways. The New Plan managed to stabilise the economy, therefore paving the way for the more war focussed Four Year Plan. The latter evidently directly benefited the war more. However, the work of Schacht cannot be overlooked, as without this the Four Year Plan would not have been possible. Also, during the Four Year Plan the limits of the German economic recovery were shown. The achievements in the economy of the 1930s were only just above the level reached some twenty five years before, and from 1936 onwards all the indices of growth started to slow down. The main difference between the New Plan and the Four Year Plan can be seen through the spending on armaments, and the move away from consumer spending, to the encouragement to save. This did not benefit the economy of the time, but provided a strong economic base for the later war effort. Both Plans promoted autarky, however, it was the Four Year Plan that arguably was more successful in this field, as it ultimately led Germany to be more prepared than any Allied country at the beginning of World War II in 1939. Schacht had requested that Hitler allowed him more time to remedy the balance of payments problem. If he had been granted this, it is likely that the German economy would have been more stable going into the Four Year Plan. This could have resulted in the economy being totally ready for war in 1939, instead of only “partially mobilised.” Many historians debate whether the economy in 1939 was prepared for a total war, as Germany experienced, and whether Hitler was planning for this kind of war, or the economy forced him into it.
Shortages of skilled labour and foreign currency essential for the heavy growing industries resulted in significant strains on the German economy in 1937. In addition, full employment was creating inflationary pressures. This has led Burton Klein and Timothy Mason to suggest that Germany decided to enter smaller conflicts, such as the Anschluss with Austria in 1938, to relieve these pressures. Many of the investments had been made for short term rather than long term projects and as many of the policies merely disguised deep rooted economic issues, it would have been difficult for the Nazis to continue a prolonged war. Therefore, it is likely Hitler was aiming for blitzkreig, or shorter “lightening” wars as a deliberate military strategy. This theory has been extended by historians such as Milward. He accepts that Blitzkreig was meant to avoid total war, but he also pointed out that ‘no nation had ever previously spent so vast a sum on preparations for war.’ However, Overy argues that between 1936 and 1939 the Germany economy restructured to prepare for total war. The war that took place in 1939 was not the result of a crisis in the economy, but because of foreign policy decisions. The economic and political policies in 1939 were aimed at providing the means by which sustained total war could be fought. Therefore, “the drive for total war became instead Blitzkrieg by default.” Overy believes that the Nazis predicted the economy would be ready for war by 1943, quoting Hitler’s proclamation, “the idea of getting out cheaply is dangerous, there is no such possibility.” The declaration of war in 1939 was therefore earlier than expected and the economy was not fully prepared. Despite this, the work of both the New Plan and the Four Year Plan, enabled Germany to enter any kind of war in 1939. Without the reduction of unemployment and the drive to produce more arms, the German armed forces would have not been able to consider blitzkreig, let alone prolonged war. Therefore, it can be concluded that regardless of the type of war Hitler was aiming for, the economic plans of the 1930s helped, rather than hindered, Germany’s efforts.
Both the New Plan and the Four Year Plan helped the war effort to an extent, as they met most of their original aims and therefore contributed positively to the economy. Although overall the New Plan would seem to have made more of an impact on the economy, the Four Year Plan was arguably more important for the Nazis, as it helped them achieve their political aims. As Overy argues, “… the Third Reich … set about reducing the autonomy of the economic elite and subordinating it to the interests of the Nazi state.” Both plans can be viewed as a product of this kind of political outlook from the Nazi party. However, neither plan made a lasting impact on German society. The chaotic War Economy, run by Speer from 1939, is a useful indicator of how thorough the work of the previous two plans had been. This economy used similar policies to the Four Year Plan. However, it introduced systems of rationalisation and tried to control imports and exports even more rigidly. Ultimately, however, this too failed, as the Allies bombed the munitions factories and the country could no longer support their armies. Therefore, overall the policies throughout the 1930s did not help the war effort, as they did not achieve Hitler’s aim of an international military victory for Germany. However, it is difficult to assess whether this was ever possible considering they were trying to introduce a war economy in a peace time, the short amount of time and the lack of planning involved. It is understandable that neither plan had a lasting impact as the Army and SS involvement meant that attention was drawn away from the economy even before 1937 when Goering replaced Schacht. Given this factor, and the state of the economy that the Nazis inherited, the respective efforts of both plans were quite significant. Although the Nazi party lost the war, the New Plan and Four Year Plan definitely helped rather than hindered the war effort.
Resources List
Books:
War and Economy in the Third Reich – R.J Overy
The Nazi Economic Recovery 1932-38 – Second Edition – R.J Overy
The Penguin Atlas of the Third Reich – R.J Overy
Nazism 1919-45 – State, Economy and Society – J. Noakes and G. Pridham (Chapters 11-14)
Germany 1919-45 (A2 Section – Section 3 – The Nazi Economy) – M. Collier and P. Pedley
The Nazi Dictatorship – Ian Kershaw (Chapter 3)
Germany: The Third Reich 1933-45 – G. Layton (Chapter 5, Section 4)
The Primacy of Politics – Politics and Economics in Nazi Germany – T. Mason
Papers:
Did Hitler Want Total War? – Richard Overy (King’s College London)
The Nazi Economy – Success or Failure – Richard Overy (Modern History Review)
Economic Miracle? – Jane Jenkins
Websites:
– ‘Hitler and the Economic Recovery in Germany’
– Highlights problems and solutions of Nazi Economic Policies
– Notes on: “The Theory of the Centrally Administered Economy: An Analysis of the German Experiment” by Walter Eucken.
Nazism 1919-1945, State, Economy and Society. J. Noakes and G. Pridham. Chapter 12 – The Policies of Schacht Quoting Hitler (8th February 1933)
‘Wehrwirtschaft’ – Defence economy
War and Economy in the Third Reich. R. Overy. Chapter 1 – Unemployment in the Third Reich.
During 1934-36 Mefo Bills accounted for 50% of arms expenditure.
Germany 1919-45 (A2 Section: Section 3). M. Collier and P. Pedley. Public investment figure table.
Germany 1919-45 (A2 Section: Section 3). M. Collier and P. Pedley.. Public expenditure figure table.
Nazism 1919-1945, State, Economy and Society. J. Noakes and G. Pridham. Chapter 12 – The Policies of Schacht
The German Dictatorship. Karl Bracher. 1973.
War and Economy in the Third Reich. R. Overy. Chapter 1 – Unemployment in the Third Reich. Table 1.1 – Registered unemployed 1929-1940
Germany: The Third Reich 1933-45. G. Layton. Chapter 4 – The Economics of the Third Reich
“Did Hitler Want Total War?” – Richard Overy. History paper. Quoting Bundesarchiv-Militararchiv. Goring conference 1938.
The Nazi Dictatorship – Ian Kershaw 1985. Chapter 3 – Politics and Economics in the Nazi State
“Did Hitler Want Total War?” – Richard Overy. History paper. Quoting Bundesarchiv-Militararchiv. Goring conference 1938.
The Nazi Economic Recovery 1932-38. R. Overy. Chapter 6 – Full employment and the coming of war.
The Nazi Economic Recovery 1932-38. R. Overy. Chapter 6– Full employment and the coming of war.
Germany 1919-45 (A2 Section: Section 3). M. Collier and P. Pedley. “Failures of the Four Year Plan”
The Nazi Economic Recovery 1932-38. R. Overy. Chapter 6– Full employment and the coming of war.
The Nazi Economic Recovery 1932-38. R. Overy. Chapter 6– Full employment and the coming of war.
Nazism 1919-1945, State, Economy and Society. J. Noakes and G. Pridham. Chapter 13 – The Four Year Plan.
The Nazi Economic Recovery 1932-38. R. Overy. Chapter 6– Full employment and the coming of war.
Germany: The Third Reich 1933-45. G. Layton. Chapter 5 – The Economics of the Third Reich. Quoting BH Klein.
Germany: The Third Reich 1933-45. G. Layton. Chapter 5 – The Economics of the Third Reich. Quoting Milward.
Germany: The Third Reich 1933-45. G. Layton. Chapter 5 – The Economics of the Third Reich. Quoting R. Overy.
The Nazi Economic Recovery 1932-38. R. Overy. Chapter 4 – Government and recovery.