To ‘protect’ those in work, the German Labour Front was set up. This was lead by Robert Ley. The GLF took the role of trade unions which had been banned. To an extent, the GLF did this. Ley ordered that workers could not be sacked on the spot but he also ordered that a worker could not leave his job without the government’s permission. Only government labour exchanges could arrange for a new job if someone did leave his employment.
However, the GLF increased the number of hours worked from 60 to 72 per week (including overtime) by 1939. Strikes were outlawed. The average factory worker was earning 10 times more than those on dole money and few complained – though to do so was fraught with potential difficulties.
The leisure time of the workers was also taken care of. An organisation called "Kraft durch Freude" (KdF) took care of this. Ley and the KdF worked out that each worker had 3,740 hours per year free for pursuing leisure activities - which the state would provide. The activities provided by the state were carefully and systematically recorded. For the Berlin area (1933-38) :
Cheap holidays and the offer of them was a good way to win the support of the average person in the street. A cruise to the Canary Islands cost 62 marks - easily affordable to many though most cruises were taken up by Nazi Party officials. Walking and skiing holidays in the Bavarian Alps cost 28 marks. A two-week tour of Italy cost 155 marks.
The KdF also involved itself in introducing a scheme whereby the workers could get a car. The Volkswagen - People's Car - was designed so that most could afford it. The Beetle, designed by Ferdinand Porsche, cost 990 marks. This was about 35 weeks wages for the average worker. To pay for one, workers went on a hire purchase scheme. They paid 5 marks a week into an account.
Hitler inspects a model of the Volkswagen Beetle
Theoretically, when the account had reached 750 marks the worker would be given an order number which would lead to them receiving a car. In fact, no-one received a car. The millions of marks invested into the scheme were re-directed into the rapidly expanding weapons factories. This accelerated as approached. No-one complained as to do so could lead to serious trouble with the .
Did the Nazis produce an economic miracle for Germany?
The Minister of the Economy was Hjalmar Schacht. He introduced his "New Plan". This plan intended to reduce imports, reduce unemployment, channel government spending into a wide range of industries and make trade agreements with other nations. Hermann Goering also wanted Germany to become self-sufficient in all industries so that as a nation she could survive a war. Were these plans successful ?
- by 1939, Germany still imported 33% of its required raw materials
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government income had been 10 billion Reichsmarks in 1928. In 1939, it stood at 15 billion. However, government spending had increased from 12 billion Reichsmarks in 1928 to over 30 billion in 1939 - a difference of 15 billion Reichsmarks. From 1933 to 1939, the government always spent more than it earned so that by 1939, government debt stood at over 40 billion Resichsmarks.
- balance of trade figures had gone into the red by 1939 by 0.1 billion Reichsmarks.
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unemployment had fallen from 6 million in 1933 to 300,000 by 1939 and industrial production in 1939 was above the figure for before the 1929 Wall Street Crash.
- annual food consumption in 1937 had fallen for wheat bread, meat, bacon, milk, eggs, fish vegetables, sugar, tropical fruit and beer compared to the 1927 figures. The only increase was in rye bread, cheese and potatoes.
- real earnings in 1938 were all but the same as the 1928 figure. Real earnings are wages adjusted to allow for inflation.
Silverman concludes that the recovery in Germany between 1933 and 1936 was real, not simply the product of statistical trickery and the stimulus of rearmament, and that Nazi work creation programs played a significant role. However, he argues, it was ultimately the workers themselves, toiling under inhumane conditions in labor camps, who paid the price for this recovery. 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.
Did such policies reduce unemployment from 6 million in 1933 to 1 million three years later? Not exactly. Statistics from Dan Silverman's Hitler's Economy (1998) show that unemployment was reduced in Germany from 34 percent or about 6 million people, in January 1933, to 14 percent, or 2.5 million people, in January 1936. That's a dramatic reduction, to be sure, but hardly full employment. Even the 2.5 million number is extremely unreliable, as Stephen Roberts, an economic historian at Australia's University of Sydney who lived in Germany in the mid-'30s, explained in his 1937 work, The House That Hitler Built.
The "official statistics naturally tell only part of the story," wrote Roberts. "They do not take into account the Marxians, Socialists, Jews and pacifists who have lost their jobs and are cut off from relief; such persons do not appear in the official figures of unemployment. The refugees are ignored. In addition, at least a million people have been absorbed in the army, the labour-service camps, the Nazi organizations, and various partly-paid forms of labour on public works. Half a million women have been taken off the labour market in the last four years by means of the marriage allowance paid by the Government to entice them away....What they have done has been to introduce a series of emergency steps which have drastically reduced the number of unemployed; but such steps, by their very nature, are in many cases temporary. On the other hand, the reduction [in unemployment], however artificially it may have been achieved, has had a tremendous propaganda value for the Government, and there is the fixed belief of most Germans today that Hitler has achieved wonders in providing employment."
Kershaw makes the same point and suggests that it was this fear of social unrest, heightened by serious food shortages in Germany during the fall of 1935--themselves largely the result of government policies--that played the major role in Hitler's decision to reoccupy the Rhineland in March 1936. Keep in mind that Hitler's reoccupation of the Rhineland was considered one of his "brilliant" strokes precisely because it was so unexpected--Germany was unprepared militarily or economically to carry out any extended effort in support of what even Hitler conceded to intimates was nothing more than a bold bluff.
Contrary to A.J.P. Taylor, by late 1935 Germany was experiencing anything but the "happy effects of mild inflation" and "freedom from orthodox principles of economics." As Kershaw writes, "A summary of price and wage levels prepared for Hitler on 4 September 1935 showed almost half of the German work-force earning gross wages of 18 ReichMarks or less per week. This was substantially below the poverty line...Wages, then, remained at the 1932 level--substantially lower than the last pre-Depression year of 1928 in the much-maligned Weimar Republic. Food prices, on the other hand, had risen officially by 8 per cent since 1933. Overall living costs were higher by 5.4 per cent. Official rates did not, however, tell the whole tale. Increases of 33, 50, and even 150 per cent had been reported for some foodstuffs. By late summer, the terms `food crisis' and `provisions crisis' were in common use."
These facts were well known at the time, both within and without Germany. Roberts and others had written about them, attributing the food shortages to Hitler's centralized agricultural policy, which had virtually eliminated food imports while implementing government controls. The predictable result: Germany produced less food, causing both shortages and price increases. According to Roberts, wheat went up 15 percent, eggs 50 percent, butter 40 percent, potatoes 75 percent, and most meat 50 percent--all despite "official" and ineffectual price controls which Hitler for appearances' sake refused to lift. Well into Hitler's "miracle," Kershaw notes, "poor living-standards, falling real wages, and steep price increases in some necessities...[were] the dismal reality behind the `fine facade of the Third Reich.'"
As Kershaw sees it, Hitler gave priority to food imports because the "immediate prime need was to avoid the damaging psychological effects of the only alternative: food rationing." But this decision, in turn, adversely affected German rearmament. "By early 1936," says Kershaw, "available supplies of raw materials for rearmament had shrunk to a precariously low level. Only one to two month supplies were left. Schacht demanded a slow down in the pace of rearmament....As Hitler entered his fourth year as Chancellor, the economic situation posed a real threat to rearmament plans. At the very time when international developments encouraged the most rapid expansion possible, the food crisis--and the social unrest in its turn--was sharply applying the brakes to it....Any slow down in rearmament...would inevitably bring increased unemployment in its train...[Hitler] saw this as all the more reason to hasten expansion to gain `living-space.'"
In other words, if Hitler had to spend foreign exchange reserves for food to keep the people happy, he would have to get the raw materials for armaments by taking them. Otherwise, there would be more unemployment when the arms workers were laid off due to a lack of raw materials. Hitler knew he couldn't survive both food shortages and a resurgence of unemployment.
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It's not that Hitler lacked contrary advice. Kershaw tells us that in October 1935 Price Commissioner Carl Goerdeler sent Hitler in October, 1935, "a devastating analysis of Germany's economic position." According to Kershaw, Goerdeler "favored a return to market economy, a renewed emphasis upon exports, and a corresponding reduction in the rearmament drive--in his view at the root of the economic problems....If things carried on as they were, only a hand-to-mouth existence would be possible after January 1936." But Goerdeler was ignored and later dismissed. Instead, Germany reoccupied the Rhineland, to widespread popular acclaim, and Göring unveiled his Four Year Plan, putting the economy firmly on a war footing.
Hitler himself apparently never had a clue that the economic policies he had followed for the first three years of his regime were responsible for his production problems. By 1936, Kershaw makes clear, Hitler believed his own press clippings regarding his economic acumen. Thus, for Hitler, the food crisis only confirmed his preconceptions. In the secret memorandum on which Göring's Four Year Plan was based, Hitler wrote, "We are overpopulated and cannot feed ourselves from our own resources. The solution ultimately lies in extending the living space of our people, that is, in extending the sources of its raw materials and foodstuffs." 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.
