Economy of Nazi Germany

From Wikipedia, the free encyclopedia
Jump to: navigation, search
Hitler notably revived the German economy by launching a vast program of construction of highways.

World War I (1914-1918) caused economic and manpower losses in Germany which led to a decade of economic woes, including hyperinflation in the mid-1920s. Following the Wall Street Crash of 1929, the German economy, like those of many other western nations, suffered the effects of the Great Depression, with unemployment soaring. When Hitler became Chancellor in 1933 he introduced new policies to improve Germany's economy, including autarky and the development of German agriculture by imposing tariffs on agricultural imports.[1]

These changes—including autarky and nationalization of key industries—had a mixed record. By 1938 unemployment was practically extinct.[2] Wages increased by 10.9% in real terms during this period.[3] However, nationalization and a cutting off of trade meant rationing in key resources like poultry, fruit, and clothing for many Germans.[4]

In 1934 Hjalmar Schacht, the Reich Minister of Economics, introduced the Mefo bills, allowing Germany to rearm without spending Reichsmarks but instead paying industry with Reichsmarks and with Mefo bills (Government IOU's) which they could trade with each other.[5] Between 1933 and 1939 the total revenue amounted to 62 billion marks, whereas expenditure (at times comprising up to 60% rearmament costs) exceeded 101 billion, thus causing a huge deficit and national debt (reaching 38 billion marks in 1939 and coinciding with Kristallnacht (November 1938) and with intensified persecutions of Jews and the outbreak of World War II.)[6][7]

Political economy of Nazi Germany[edit]

20 Reichsmark note

Early in his political career, Adolf Hitler regarded economic issues as relatively unimportant. In 1922, Hitler proclaimed that "world history teaches us that no person has become great through its economy but that a person can very well perish thereby", and later concluded that "the economy is something of secondary importance".[8] Hitler and the Nazis held a very strong idealist conception of history, which held that human events are guided by small numbers of exceptional individuals following a higher ideal. They believed that all economic concerns, being purely material, were unworthy of their consideration. Hitler went as far as to blame all previous German governments since Bismarck of having "subjugated the nation to materialism" by relying more on peaceful economic development than on expansion through war.[9]

For these reasons, the Nazis never had a clearly defined economic programme. The original "Twenty-Five Point Programme" of the party, adopted in 1920, listed several economic demands (including "the abolition of all incomes unearned by work," "the ruthless confiscation of all war profits," "the nationalization of all businesses which have been formed into corporations," "profit-sharing in large enterprises," "extensive development of insurance for old-age," and "land reform suitable to our national requirements"),[10] but the degree to which the Nazis supported this programme in later years has been questioned. Several attempts were made in the 1920s to change some of the program or replace it entirely. For instance, in 1924, Gottfried Feder proposed a new 39-point program that kept some of the old planks, replaced others and added many completely new ones.[11] Hitler refused to allow any discussion of the party programme after 1925, ostensibly on the grounds that no discussion was necessary because the programme was "inviolable" and did not need any changes. At the same time, however, Hitler never voiced public support for the programme and many historians argue that he was in fact privately opposed to it. Hitler did not mention any of the planks of the programme in his book, Mein Kampf, and only talked about it in passing as "the so-called programme of the movement".[12]

Hitler's views on economics[edit]

Hitler's views on economics, beyond his early belief that the economy was of secondary importance, are a matter of debate. On the one hand, he proclaimed in one of his speeches that "we are socialists, we are enemies of today's capitalistic economic system",[13] but he was clear to point out that his interpretation of socialism "has nothing to do with Marxian Socialism," saying that "Marxism is anti-property; true Socialism is not."[14] At a later time, Hitler said: "Socialism! That is an unfortunate word altogether... What does socialism really mean? If people have something to eat and their pleasures, then they have their socialism."[12] In private, Hitler also said that "I absolutely insist on protecting private property... we must encourage private initiative".[15] On yet another occasion he qualified that statement by saying that the government should have the power to regulate the use of private property for the good of the nation.[16] Shortly after coming to power, Hitler told a confidant: "There is no license any more, no private sphere where the individual belongs to himself. That is socialism, not such trivial matters as the possibility of privately owning the means of production. Such things mean nothing if I subject people to a kind of discipline they can't escape...What need have we to socialize banks and factories? We socialize human beings".[17] He clearly believed that the lack of a precise economic programme was one of the Nazi Party's strengths, saying: "The basic feature of our economic theory is that we have no theory at all."[18] While not espousing a specific economic philosophy, Hitler employed anti-semitic themes to attack economic systems in other countries, associating ethnic Jews with both communism ("Jewish Bolsheviks") and capitalism, both of which he opposed.[19][20] Hitler also believed that individuals within a nation battled with each other for survival, and that such ruthless competition was good for the health of the nation, because it promoted "superior individuals" to higher positions in society.[21] At Berchtesgaden Hitler held his final speech, drafted by Albert Speer, in front of an audience. He emphasised the "self-responsibility of industry". After the won war "private initiative of German business will experience its greatest moment", and Hitler expressed his belief in "the further development of humanity through the promotion of private initiative, in which alone I see the precondition for all real progress."[22]

Pre-war economy: 1933–1939[edit]

Gross national product and GNP deflator, year on year change in %, 1926 to 1939,in Germany. Source: From data of Statistisches Bundesamt publication Pdf-file of German publication.

The Nazis came to power in the midst of the Great Depression. The most pressing issue at that point was an unemployment rate of close to 30%.[23] Before World War II, Hitler appointed Hjalmar Schacht, a former member of the German Democratic Party, as President of the Reichsbank in 1933 and Minister of Economics in 1934.[23]

At first, Schacht continued the economic policies introduced by the government of Kurt von Schleicher in 1932 to combat the effects of the Great Depression. The inherited policies included a large public works programs supported by deficit spending – such as the construction of the Autobahn network – to stimulate the economy and reduce unemployment.[24] There was major reduction in unemployment over the following years, while price controls prevented the recurrence of inflation. However, price controls in agriculture also squeezed out small farmers.[25] Similarly, while unemployment decreased, standards of living languished: rationing of key goods like food and clothing, and long lines became common.[26]

The Great Depression had spurred state ownership in most Western capitalist countries. This also took place in Germany in the years prior to the Nazi political takeover. The Nazi election programs also supported nationalization of major industries, though the government of the Nazi Party included a few actual policy of privatization in the 1930s.[27] Between the fiscal years 1934/35 and 1937/38, privatization was a small source of revenue for Germany’s Treasury, representing only 1.4 percent of total fiscal revenues.[28]

Among companies that were privatized, were the four major commercial banks in Germany that had all come under public ownership during the prior years; Commerz– und Privatbank, Deutsche Bank und Disconto-Gesellschaft, Golddiskontbank and Dresdner Bank. Instead of making important investment decisions, and determining the use to which their funds were to be put, the private banks merely had to provide the technical facilities for covering government expenditure or financing new investment—the volume and composition of which had been previously settled by the government.[29] Also privatized were the Deutsche Reichsbahn (German Railways), at the time the largest single public enterprise in the world, the Vereinigte Stahlwerke A.G. (United Steelworks), the second largest joint-stock company in Germany (the largest was Farben Industrie A.G.) and Vereinigte Oberschlesische Hüttenwerke AG, a company controlling all of the metal production in the Upper Silesian coal and steel industry. The government also sold a number of shipbuilding companies, and enhanced private utilities at the expense of municipally owned utilities companies.[30]

The economic policies of the Third Reich were in the beginning the brainchildren of Schacht, who assumed office as president of the central bank under Hitler in 1933, and became finance minister in the following year. Schacht was one of the few finance ministers to take advantage of the freedom provided by the end of the gold standard to keep interest rates low and government budget deficits high, with massive public works funded by large budget deficits.[23] The consequence was an extremely rapid decline in unemployment – the most rapid decline in unemployment in any country during the Great Depression.[23] But whether this helped the average German is a matter of debate—while more Germans had jobs, a focus on rearmament meant rationing in food, clothing, metal, and wood [31] for most citizens. Rationing eventually extended to use of fuel and production of cars, leaving many Germans unable to drive. Goering nationalized the steel industry of industrialists who fell from political favor (such as Fritz Thyssen in 1939) and formed the Hermann Goering Works in 1937 with the goal of producing steel from low grade German iron at rates unprofitable to other steel companies.[32] However, production fell short of rearmament demand. When production in the nationalized iron ore industry declined, “brown shirts” seized private stores from factories, churches, and cemeteries.[33]

Meanwhile, the Nazis replaced the Weimar trade unions with what many Germans saw as the new and improved unions called the German Labour Front and banned strikes, sacks and lockouts. The Chamber of Economics (whose president was appointed by the Reich minister of economics) was set up, which integrated all chambers of commerce the same way the Labour Front had absorbed the trade unions. By 1934 these two groups merged somewhat when the Chamber of Economics also became the economics department of the Labour Front. To aid this, a board of trustees run by representatives of the party, Labour Front and Chamber of Economics was set up to centralize economic activity - many viewed this as corporatist, despite differences between Italian Fascism and German Nazism.[34]

When it came to retail and small business, in order to coordinate and encourage National Socialist principles among workers and small businessmen, shop councils and Courts of Honour were set up to monitor retail. Unlike Italian Fascism, Nazism perceived workers and employers in each enterprise as families; each with different roles. In real terms this meant that wages, working hours and general business practices were determined by worker councils (whose members ranged from 2 - 10) and employers, seeking a compromise.[35] In 1934 alone, several hundred cases of "mismanagement" and "exploitation" were brought to the Court: Numerous warnings, fines and other penalties were given out. In total, over 50 workers were replaced and 13 employers had their businesses confiscated.[36] The Nazis were determined to eliminate the presence of large department stores (many of which were owned by Jews), and began to implement policies to curb their influence and expansion. Strict licensing requirements and temporary bans (all of which became permanent even after their expiry date) were passed which had an immediate effect on retail.[36]

Schacht was encouraged to place more emphasis on military production and rearmament. A number of economists, starting with Michal Kalecki, have seen this as an example of military Keynesianism. However, while Germany was successful at rearmament, production of agriculture and consumer goods stagnated, and standards of living fell. Production of agriculture, particularly, rarely exceeded 1913 levels.[4] Rather than sparking an economic boost, Schacht’s form of military Keynesianism created a powerful army and what Professor Richard Evans in his history, “The Third Reich In Power” called, “grotesque consequences for the everyday life of ordinary Germans".[33]

In June 1933, the "Reinhardt Program" for infrastructure development was introduced. It combined indirect incentives, such as tax reductions, with direct public investment in waterways, railroads and highways.[37] It was followed by similar initiatives resulting in great expansion of the German construction industry. Between 1933 and 1936, employment in construction rose from only 666,000 to over 2,000,000.[38]

Cars and other forms of motorized transport became increasingly attractive to the population, and the German motor industry boomed.[39] However, the government in Berlin banned many types of vehicles and allowed the production of only 19 different models of cars and trucks.[40] This decreased consumer choice and profits, and combined with rubber shortages to create what an American observer called, “drastic restrictions on the use of motor vehicles”.[33]

In 1936, military spending in Germany exceeded 10% of GNP, higher than any other European country at the time, after years of limitations imposed by the Versailles Treaty. Military investment also exceeded civilian investment from 1936 onwards.[41]

The German balance of payments went strongly negative. In 1933-36 exports declined by 9% in value while imports rose by 9%.[42] In the spring and summer of 1936, the reduced availability of foreign currency constrained imports of raw materials, with some key stockpiles falling to only two months' production.[43] Dr. Schacht informed the War Minister, Field Marshal Werner von Blomberg that lack of lead and copper prevented fulfilling his requests for increased military production.[44]

Hitler faced the choice between conflicting recommendations. On one side a "free market" technocratic faction within the government, centered around Reichsbank President Hjalmar Schacht, Minister of Economics Walther Funk and Price Commissioner Dr. Carl Friedrich Goerdeler calling for decreased military spending, free trade, and a moderation in state intervention in the economy. This faction was supported by some of Germany's leading business executives, most notably Hermann Duecher of AEG, Robert Bosch of Robert Bosch GmbH, and Albert Voegeler of Vereinigte Stahlwerke AG.[45] On the other side the more politicized faction favored autarkic policies and sustained military spending.[46] Characteristically, Hitler hesitated before siding with the latter, and in August issued the "Four-Year Plan Memorandum" ordering Hermann Göring to have the German economy ready for war within four years.[47][48] The “Four-Year Plan” increased state intervention in the economy and siphoned off resources from the private sector for rearmament. Rearmament fell short of Goering’s goals, and the plan resulted in shortages and rationing for most German citizens.

Historians such as Richard Overy have argued that the importance of the memo, which was written personally by Hitler, can be gauged by the fact that Hitler, who had something of a phobia about writing, hardly ever wrote anything down, which indicates that Hitler had something especially important to say.[49] The "Four-Year Plan Memorandum" predicated an imminent all-out, apocalyptic struggle between "Judeo-Bolshevism" and German National Socialism, which necessitated a total effort at rearmament regardless of the economic costs.[50]

In the memo, Hitler wrote:

Since the outbreak of the French Revolution, the world has been moving with ever increasing speed toward a new conflict, the most extreme solution of which is called Bolshevism, whose essence and aim, however, are solely the elimination of those strata of mankind which have hitherto provided the leadership and their replacement by worldwide Jewry. No state will be able to withdraw or even remain at a distance from this historical conflict...It is not the aim of this memorandum to prophesy the time when the untenable situation in Europe will become an open crisis. I only want, in these lines, to set down my conviction that this crisis cannot and will not fail to arrive and that it is Germany's duty to secure her own existence by every means in face of this catastrophe, and to protect herself against it, and that from this compulsion there arises a series of conclusions relating to the most important tasks that our people have ever been set. For a victory of Bolshevism over Germany would not lead to a Versailles treaty, but to the final destruction, indeed the annihilation of the German people...I consider it necessary for the Reichstag to pass the following two laws: 1) A law providing the death penalty for economic sabotage and 2) A law making the whole of Jewry liable for all damage inflicted by individual specimens of this community of criminals upon the German economy, and thus upon the German people.[51]

Hitler called for Germany to have the world's "first army" in terms of fighting power within the next four years and that "the extent of the military development of our resources cannot be too large, nor its pace too swift" [italics in the original] and the role of the economy was simply to support "Germany's self-assertion and the extension of her Lebensraum".[52][53] Hitler went on to write that given the magnitude of the coming struggle that the concerns expressed by members of the "free market" faction like Schacht and Goerdeler that the current level of military spending was bankrupting Germany were irrelevant. Hitler wrote that: "However well balanced the general pattern of a nation's life ought to be, there must at particular times be certain disturbances of the balance at the expense of other less vital tasks. If we do not succeed in bringing the German army as rapidly as possible to the rank of premier army in the world...then Germany will be lost!"[54] and "The nation does not live for the economy, for economic leaders, or for economic or financial theories; on the contrary, it is finance and the economy, economic leaders and theories, which all owe unqualified service in this struggle for the self-assertion of our nation".[54]

Documents such as the Four Year Plan Memo have often been used by historians such as Henry Ashby Turner and Karl Dietrich Bracher who argue for a "primacy of politics" approach (that Hitler was not subordinate to German business, but rather the contrary was the case) against the "primacy of economics" approach championed by Marxist historians (that Hitler was a "agent" of and subordinate to German business).[55]

The British Marxist historian Timothy Mason, who was a leading expert on the economic history of Nazi Germany argued that after the 1936 economic crisis, a "primacy of politics" prevailed with business interests being subordinated to the Nazi regime. In a 1966 essay, Mason wrote "that both the domestic and foreign policy of the National Socialist government became, from 1936 onward, increasing independent of the influence of the economic ruling classes, and even in some essential aspects ran contrary to their collective interests" and that "it became possible for the National Socialist state to assume a fully independent role, for the "primacy of politics" to assert itself".[56] Mason used the following to support his thesis:

  • that after the 1936 economic crisis, German industrialists were increasingly excluded from the decision-making process[57]
  • that after 1936, the German state came to play an increasing dominant role in the German economy both through state-owned companies and by placing increasing larger orders[57]
  • that the expansion of armament-related production supported by a highly economically interventionist state led to those capitalist enterprises not related to armaments to go into decline[57]
  • the decline in effectiveness in economic lobbying groups in the Third Reich[57]
  • that though every major German industrialist called for a reduction of working class living standards from 1933 onwards, before 1942 the Nazi regime always ignored such calls, and sought instead to raise working class living standards[57]

Mason's "primacy of politics" approach against the traditional Marxist "primacy of economics" approach involved him in the 1960s with a vigorous debate with the East German historians' Eberhard Czichon, Dietrich Eichholtz and Kurt Gossweiler.[57] The latter two historians wrote if Mason was correct, then this would amount to "a complete refutation of Marxist social analysis".[57]

The year 1936 also represented a turning point for German trade policy. Hjalmar Schacht was replaced in September 1936 by Hitler's lieutenant Hermann Göring, with a mandate to make Germany self-sufficient to fight a war within four years.[23] Under Göring imports were slashed. Wages and prices were controlled – under penalty of being sent to the concentration camp. Dividends were restricted to six percent on book capital. And strategic goals to be reached at all costs were declared: the construction of synthetic rubber plants, more steel plants, automatic textile factories.[23]

World prices for raw materials (which constituted the bulk of German imports) were on the rise. At the same time, world prices for manufactured goods (Germany's chief exports) were falling. The result was that Germany found it increasingly difficult to maintain a balance of payments. A large trade deficit seemed almost inevitable. But Hitler found this prospect unacceptable. Thus Germany, following Italy's lead, began to move away from partially free trade in the direction of economic self-sufficiency.[58]

Unlike Italy, however, Germany did not strive to achieve full autarky. Hitler was aware of the fact that Germany lacked reserves of raw materials, and full autarky was therefore impossible. Thus he chose a different approach. The Nazi government tried to limit the number of its trade partners, and, when possible, only trade with countries within the German sphere of influence. A number of bilateral trade agreements were signed between Germany and other European countries (mostly countries located in Southern and South-Eastern Europe) during the 1930s. The German government strongly encouraged trade with these countries but strongly discouraged trade with any others.[59]

By the late 1930s, the aims of German trade policy were to use economic and political power to make the countries of Southern Europe and the Balkans dependent on Germany. The German economy would draw its raw materials from that region, and the countries in question would receive German manufactured goods in exchange.[60] Germany would also leverage productive trade relationships with Spain, Switzerland and Sweden in areas as diverse as iron ore imports and clearing and payment services.[61] Throughout the 1930s, German businesses were also encouraged to form cartels, monopolies and oligopolies, whose interests were then protected by the state.[62]

While the strict state intervention into the economy, and the massive rearmament policy, led to full employment during the 1930s, real wages in Germany dropped by roughly 25% between 1933 and 1938.[23] Labour books were introduced in 1935, and required the consent of the previous employer in order to be hired for another job.[23] In place of ordinary profit incentive to guide investment, investment was guided through regulation to accord with needs of the State. Government financing eventually came to dominate the investment process, with the proportion of private securities issued falling from over half of the total in 1933 and 1934 to approximately 10 percent in 1935–1938. Gargantuan tax rates – at times reaching levels such as 98% – on profits limited self-financing of firms.[6] The largest corporations were mostly exempt from taxes on profits, but government control of these were extensive enough to leave "only the shell of private ownership."[63]

A major historiographical debate about the relationship between the German economy and foreign policy decision-making was prompted in the late 1980s, when the British Marxist historian Timothy Mason claimed that an economic crisis had caused a "flight into war" in 1939. Mason’s arguments were that the German working-class was always opposed to the Nazi dictatorship; that in the over-heated German economy of the late 1930s, German workers could force employers to grant higher wages by leaving for another firm that would grant the desired wage increases; that this was a form of political resistance and this resistance forced Adolf Hitler to go to war in 1939.[64] Thus, the outbreak of the Second World War was caused by structural economic problems, a "flight into war" imposed by a domestic crisis.[64] The key aspects of the crisis were according to Mason, a shaky economic recovery was threatened by a rearmament program that was overwhelming the economy and in which the Nazi regime's nationalist bluster limited its options.[64] In this way, Mason articulated a Primat der Innenpolitik ("primacy of domestic politics") view of World War II’s origins through the concept of social imperialism[65] Mason's Primat der Innenpolitik thesis was in marked contrast to the Primat der Außenpolitik ("primacy of foreign politics) usually used to explain World War II.[64] In Mason’s opinion, German foreign policy was driven by domestic political considerations, and the launch of World War II in 1939 was best understood as a "barbaric variant of social imperialism".[66]

Mason argued that "Nazi Germany was always bent at some time upon a major war of expansion".[67] However, Mason argued that the timing of a such a war was determined by domestic political pressures, especially as relating to a failing economy, and had nothing to do with what Hitler wanted[67] In Mason's view in the period between 1936–41, it was the state of the German economy, and not Hitler's "will" or "intentions" that was the most important determinate on German decision-making on foreign policy.[68] Mason argued that the Nazi leaders were deeply haunted by the November Revolution of 1918, and was most unwilling to see any fall in working class living standards out of the fear that it might provoke another November Revolution.[68] According to Mason, by 1939, the "overheating" of the German economy caused by rearmament, the failure of various rearmament plans produced by the shortages of skilled workers, industrial unrest caused by the breakdown of German social policies, and the sharp drop in living standards for the German working class forced Hitler into going to war at a time and place not of his choosing.[69] Mason contended that when faced with the deep socio-economic crisis the Nazi leadership had decided to embark upon a ruthless "smash and grab" foreign policy of seizing territory in Eastern Europe which could be pitilessly plundered to support living standards in Germany.[70] Mason described German foreign policy as driven by an opportunistic "next victim" syndrome after the Anschluss, in which the "promiscuity of aggressive intentions" was nurtured by every successful foreign policy move.[71] In Mason’s opinion, the decision to sign the German-Soviet Non-Aggression Pact with the Soviet Union and to attack Poland and the running of the risk of a war with Britain and France were the abandonment by Hitler of his foreign policy programme outlined in Mein Kampf forced on him by his need to stop a collapsing German economy by seizing territory abroad to be plundered.[69]

Mason’s leading critic was the British economic historian Richard Overy. Overy argued against Mason's thesis, maintaining that, although Germany was faced with economic problems in 1939, the extent of these problems cannot explain aggression against Poland and that the reasons for the outbreak of war were due to the choices made by the Nazi leadership. For Overy, the problem with Mason's thesis was that it rested on the assumption that in a way not shown by records, information was passed on to Hitler about the Reich's economic problems.[72] Overy argued that there was a difference between economic pressures induced by the problems of the Four Year Plan and economic motives to seize raw materials, industry and foreign reserves of neighboring states as a way of accelerating the Four Year Plan.[73] Overy asserted that the repressive capacity of the German state as a way of dealing with domestic unhappiness was somewhat downplayed by Mason.[74] Finally, Overy argued that there is considerable evidence that the German state felt they could master the economic problems of rearmament; as one civil servant put it in January 1940 "we have already mastered so many difficulties in the past, that here too, if one or other raw material became extremely scarce, ways and means will always yet be found to get out of a fix".[75] Adam Tooze argues that from 1939 onwards, in spite of the military successes in the West, the German economy became dependent on vital imports from the Soviet Union.[76] Tooze sees in this a reason for Hitler to start war with the Soviet Union, because "[t]he Third Reich had no intention of slipping into that kind of humbling dependence that Britain now occupied in relation to the United States, mortgaging its assets and selling its secrets, simply to sustain its war effort".[77] Up to Operation Barbarossa the German economy could not "do without Soviet deliveries of oil, grain, and alloy metals."[78]

Another part of the new German economy was massive rearmament, with the goal being to expand the Versailles 100,000-strong German Army into a force of millions. The Four-Year Plan was discussed in the controversial Hossbach Memorandum, which provides the "minutes" from one of Hitler's briefings.

The war came and although the Four-Year Plan technically expired in 1940, Hermann Göring had built up a power base in the "Office of the Four-Year Plan" that effectively controlled all German economic and production matters by this point in time. In 1942 the growing burdens of the war and the death of Fritz Todt in 1942 saw the economy move to a full war economy under the efficient[79] leadership of Albert Speer.

Due to state control, business had little entrepreneurial freedom[40] in a regime that has been described as "command-capitalism".[80] In place of ordinary profit incentives guiding the economy, financial investment was regulated as per the needs of the state. The profit incentive for businessmen remained, but was greatly modified; Nazi agencies replaced the profit motive that automatically allocated investment, and the course of the economy.[81] Nazi government financing eventually dominated private financial investment and heavy business taxes limited self-financing of firms.[citation needed] The largest firms were mostly exempt from taxes on profits,[82] however, government control was extensive.[83]

Wartime policies: 1939–1945[edit]

Cherkashchyna Ukrainians being deported to Germany to serve as slave labor (OST-Arbeiter), 1942

Initially, the outbreak of World War II did not bring about any large changes in the German economy. Germany had spent six years preparing for war, and a large portion of the economy was already devoted to military production.[citation needed] However, rationing was introduced immediately in 1939. Britain immediately put their economy on a war footing, Germany resisted equivalent measures until later in the war. They were ideologically opposed to women participating in the work force. Unlike most other governments, the Nazis did not increase direct and personal taxes by any significant amount in order to fund the war.[citation needed] The top personal income tax rate in 1941 was 13.7% in Germany as opposed to 23.7% in Great Britain.[84]

The beginning of the war initiated a British blockade, and seriously restricted German access to world markets. Petroleum, sugar, coffee, chocolate, cotton were all extremely scarce. Germany used coal gasification to replace petroleum imports to a limited extent, and relied on Romanian oilfields at Ploiesti. Germany was dependent on Sweden for the majority of their iron ore production, and relied on Spain and Portugal to provide tungsten. Switzerland continued to trade with Germany, and was very useful as a friendly neutral to Germany. Until the declaration of war of the Soviet Union, the Third Reich received massive supplies of grain and raw materials from the USSR, which they paid for with industrial machinery, weapons and they even sold German designs for a battleship. This economic dependence on the Soviet Union was exemplified when in spring 1940 the Soviet Union asked for two chemical plants as compensation for raw materials. The Germans declined after intervention of the military.[77]

During the war, as Germany acquired new territories (either by direct annexation or by installing puppet governments in defeated countries), these new territories were forced to sell raw materials and agricultural products to German buyers at extremely low prices. Hitler's policy of lebensraum strongly emphasized the conquest of new lands in the East, and the exploitation of these lands to provide cheap goods to Germany. In practice, however, the intensity of the fighting on the Eastern Front and the Soviet scorched earth policy, meant that the Germans found little they could use and, on the other hand, a large quantity of goods flowed into Germany from conquered lands in the West. For example, two-thirds of all French trains in 1941 were used to carry goods to Germany. Norway lost 20% of its national income in 1940 and 40% in 1943.[85]

Fiscal policy was also directed towards exploitation of conquered countries, from which capital was to be gathered for German investments. Banks, such as Bank Emisyjny w Polsce, were created to manage local economies.[86]

Forced labour[edit]

Polish-forced-workers' badge

Even before the war, Nazi Germany maintained a supply of slave labour. "Undesirables" (German: unzuverlässige Elemente), such as the homeless, homosexuals, and criminals as well as political dissidents, communists, Jews, and anyone else that the regime wanted out of the way were imprisoned in labour camps. After the outbreak of war, prisoners of war and civilian "undesirables" were initially brought into Germany from occupied territories, but most of the slave and forced labor camps were established in occupied Poland immediately after the German invasion. According to the 1946 "Biuletyn Badania Zbrodni Niemieckich w Polsce," the official government body for the investigation of German Crimes in Poland (see NUKAT, Poland's academic database), there was a network of 435 slave labor camps in German-occupied Poland, with some consisting of dozens of subsidiary camps. Stutthof concentration camp, for example, which began operations September 2, 1939, was a network of 105 separate camps, one as far as Kopernik's Torun. The prisoners were mostly Poles, often rounded up for small infractions or just because new bodies were needed for expanding industries, or Jews, who were predominantly contained in urban ghettos. Around 85% of Polish Jews, who followed traditional cultural and religious restrictions and spoke little Polish, led very isolated, albeit parallel lives in pre-war Poland. They overwhelmingly constituted the ghetto population, while those who were "polonized" constituted the forced labor population. When the ghettos were "liquidated" between 1942–43, the more able bodied Polish Jews were sent to forced labor camps. This is evident in KL Stutthof's archives, where Jewish prisoner numbers spiked after 1942.

Hundreds of thousands of people in occupied territories were used as slave labourers by German corporations such as Thyssen, Krupp, IG Farben and even Fordwerke, which had formerly been a subsidiary of the Ford Motor Company.[87] By 1944, slave labour made up one quarter of Germany's entire work force, and the majority of German factories had a contingent of prisoners.[88] In rural areas the shortage of agricultural labour was filled by Slavs, many young women, from the occupied territories of Poland, Russia, and Ukraine. The children of these workers were unwanted in Germany.[89]

The war effort[edit]

The proportion of military spending in the German economy began growing rapidly after 1942, as the Nazi government was forced to dedicate more of the country's economic resources to fight a losing war. Civilian factories were converted to military use and placed under military administration. From mid 1943 on, Germany switched to a full war economy overseen by Albert Speer. By late 1944, almost the entire German economy was dedicated to military production. The result was a dramatic rise in military production, with an increase by 2 to 3 times of vital goods like tanks and aircraft, despite the intensifying Allied air campaign and the loss of territory and factories. Restaurants and other services were closed to focus the German economy on military needs. The increase in production was insufficient to match the Allies in any category of production. Some production was moved underground in an attempt to put it out of reach of Allied bombers.

From late 1944 on, Allied bombings were destroying German factories and cities at a rapid pace, leading to the final collapse of the German war economy in 1945 (Stunde Null). Food became drastically scarce. Synthetic fuel production dropped by 86% in eight months, explosive output was reduced by 42% and the loss of tank output was 35%.[90] The Allied bombing campaign also tied up valuable manpower, with Albert Speer (Germany's Minister of Armaments) estimating that in the summer of 1944 between 200,000 and 300,000 men were permanently employed in repairing oil installations and placing oil production underground.[91]

See also[edit]


  1. ^ Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi Economy (2008)
  2. ^ Lee, Stephen (1996). Weimar and Nazi Germany. Oxford: Heinemann. p. 85. ISBN 043530920X. 
  3. ^ Lee, Stephen (1996). Weimar and Nazi Germany. Oxford: Heinemann. p. 86. ISBN 043530920X. 
  4. ^ a b Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 392. Print
  5. ^ Overy, prepared by R.J. (1996). The Nazi economic recovery 1932-1938 (2. ed.). Cambridge [u.a.]: Cambridge Univ. Press. p. 42. ISBN 0521557674. 
  6. ^ a b
  7. ^ H .P. Willmott World War II, p. 18
  8. ^ Henry A. Turner, Hitler's Einstellung, 1976, p. 90–91
  9. ^ Turner 1985, p. 73.
  10. ^ Lee, Stephen J. (1996), Weimar and Nazi Germany, Harcourt Heinemann, page 28
  11. ^ Turner 1985, p. 62.
  12. ^ a b Turner 1985, p. 77.
  13. ^ Hitler's speech on May 1, 1927. Cited in Toland, J. (1976) Adolf Hitler Garden City, N.Y. : Doubleday Speech. May 1, 1927. p. 224
  14. ^ Francis Ludwig Carsten, The Rise of Fascism, University of California Press, 1982, p. 137. Hitler quote from Sunday Express.
  15. ^ A private statement made by Hitler on March 24, 1942. Cited in Hitler's Secret Conversations. Translated by Norman Cameron and R.H. Stevens. Farrar, Straus and Young, Inc. 1953. p. 294
  16. ^ Richard Allen Epstein, Principles for a Free Society: Reconciling Individual Liberty With the Common Good, De Capo Press 2002, p. 168
  17. ^ Turner 1985, p. 78.
  18. ^ Braun 1990, p. 78.
  19. ^ Lee, Stephen J. and Paul Shuter, Weimar and Nazi Germany, Heinemann, 1996, ISBN 0-435-30920-X, page 33
  20. ^ Bendersky, Joseph W., A History of Nazi Germany: 1919-1945, Rowman & Littlefield, 2000, ISBN 0-8304-1567-X, page 159
  21. ^ Turner 1985, p. 76.
  22. ^ Tooze 2006, p. 635f..
  23. ^ a b c d e f g h DeLong 1997.
  24. ^ Tooze, "The Wages of Destruction," 2007. Print.
  25. ^ Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 391. Print
  26. ^ Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 395. Print
  27. ^ Bel, Germà. "Against the mainstream: Nazi privatization in 1930s Germany" p 1.
  28. ^ Bel, Germà. "Against the mainstream: Nazi privatization in 1930s Germany". p 11.
  29. ^ Otto Nathan "Nazi War Finance and Banking (1944)". p 5 - 26
  30. ^ Bel, Germà. "Against the mainstream: Nazi privatization in 1930s Germany". p 7.
  31. ^ Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 412. Print
  32. ^ Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 419. Print
  33. ^ a b c Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 411. Print
  34. ^ Fascism and National Socialism: A Study of the Economic and Social Policies of the Totalitarian State, Michael T. Florinsky, 1936
  35. ^ Florinsky 1936
  36. ^ a b Florinsky, 1936
  37. ^ Braun 1990, p. 83.
  38. ^ Braun 1990, p. 84.
  39. ^ Braun 1990, pp. 83–84.
  40. ^ a b Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 424. Print
  41. ^ Braun 1990, p. 85.
  42. ^ Carr 1972, p. 53.
  43. ^ Kershaw, Ian Hitler Nemesis W.W. Norton: New York, New York, United States of America, 2000 page 9
  44. ^ Carr 1972, p. 54.
  45. ^ Tooze 2006, p. 217.
  46. ^ Carr 1972, p. 49-52.
  47. ^ Overy, Richard "Misjudging Hitler" pages 93–115 from The Origins of the Second World War Reconsidered edited by Gordon Martel Routledge: London, United Kingdom, 1999 pages 98–99.
  48. ^ Kershaw, Ian Hitler Nemesis W.W. Norton: New York, New York, United States of America, 2000 pages 18-20
  49. ^ Overy, Richard "Misjudging Hitler" pages 93–115 from The Origins of the Second World War Reconsidered edited by Gordon Martel Routledge: London, United Kingdom, 1999 page 98.
  50. ^ Carr 1972, pp. 56–57.
  51. ^ Dawidowicz 1976, p. 32.
  52. ^ Messerschmidt, Manfred "Foreign Policy and Preparation for War" from Germany and the Second World War Oxford: Oxford University Press, 1990 pages 623–624
  53. ^ Overy, Richard "Misjudging Hitler" from The Origins of the Second World War Reconsidered edited by Gordon Martel Routledge: London, United Kingdom, 1999 page 103
  54. ^ a b Tooze 2006, p. 220.
  55. ^ Kershaw, Ian The Nazi Dictatorship : Problems and Perspectives of Interpretation, London : Arnold ; New York page 51
  56. ^ Kershaw, Ian The Nazi Dictatorship London : Arnold 2000 pages 49-50.
  57. ^ a b c d e f g Kershaw, Ian The Nazi Dictatorship London : Arnold 2000 page 50.
  58. ^ Braun 1990, p. 86.
  59. ^ Braun 1990, p. 101.
  60. ^ Braun 1990, p. 102.
  61. ^ Golson, Eric. "The Economics of Neutrality".  External link in |website= (help);
  62. ^ Schweitzer 1964, p. 265.
  63. ^ Peter Temin, The Economic History Review, New Series, Vol. 44, No. 4 (Nov. 1991), pp. 573–593
  64. ^ a b c d Perry, Matt "Mason, Timothy" pages 780-781 from The Encyclopedia of Historians and Historical Writing edited by Kelly Boyd, Volume 2, London: Fitzroy Dearborn Publishing, 1999 page 780
  65. ^ Kaillis 2000, pp. 6-7.
  66. ^ Kaillis 2000, p. 7.
  67. ^ a b Kaillis 2000, p. 165.
  68. ^ a b Kershaw, Ian The Nazi Dictatorship London : Arnold 2000 page 88.
  69. ^ a b Kaillis 2000, p. 165-166.
  70. ^ Kaillis 2000, p. 166.
  71. ^ Kaillis 2000, p. 151.
  72. ^ Mason, Tim & Overy, R.J. "Debate: Germany, `domestic crisis’ and the war in 1939" from The Origins of The Second World War edited by Patrick Finney, Edward Arnold: London, United Kingdom, 1997 p102
  73. ^ Overy, Richard "Germany, ‘Domestic Crisis’ and War in 1939" from The Third Reich edited by Christian Leitz Blackwell: Oxford, 1999 p117-118
  74. ^ Mason, Tim & Overy, R.J. "Debate: Germany, `domestic crisis’ and the war in 1939" from The Origins of The Second World War edited by Patrick Finney, Edward Arnold: London, United Kingdom, 1997, p102
  75. ^ Overy, Richard "Germany, ‘Domestic Crisis’ and War in 1939" from The Third Reich edited by Christian Leitz Blackwell: Oxford, 1999 page 108
  76. ^ Tooze 2006, p. 420.
  77. ^ a b Tooze 2006, p. 422.
  78. ^ Tooze 2006, p. 423.
  79. ^ for a critical assessment of Speer's performance see, however, Tooze 2006, 552ff.
  80. ^ Christoph Buchheim (27 Jun 2006). "The Role of Private Property in the Nazi Economy: The Case of Industry". The Journal of Economic History: 390–416. 
  81. ^ Arthur Scheweitzer (Nov 1946). "Profits Under Nazi Planning". The Quarterly Journal of Economics 61 (1): 5. doi:10.2307/1882401. 
  82. ^ Peter Temin, The Economic History Review, New Series, Vol. 44, No. 4 (Nov. 1991), pp. 580
  83. ^ Von, Mises Ludwig. Omnipotent Government. New Haven: Yale UP, 1944. 225. Print.
  84. ^ Braun 1990, p. 114.
  85. ^ Braun 1990, p. 121.
  86. ^ Gójski, Andrzej (August 2004). "Etapy i cele niemieckiej polityki bankowej w GG. Plany niemieckie wobec Generalnego Gubernatorstwa w latach 1939-1945" (PDF) (in Polish). Bank i Kredyt. Archived from the original (PDF) on 2009-03-05. 
  87. ^ Sohn-Rethel, Alfred Economy and Class Structure of German Fascism, CSE Books, 1978 ISBN 0-906336-01-5
  88. ^ Michael Thad Allen, The Business of Genocide, The University of North Carolina Press, 2002. p. 1
  89. ^ Anna Elisabeth Rosmus (2004). "Mass Murder of the "Offspring of Alien Descent"". Wintergreen: Suppressed Murders (hardcover) (in English and translated from German by Imogen von Tannenberg). University of South Carolina Press. pp. 1 to 34. ISBN 1-57003-509-1. 
  90. ^ Webster and Frankland,The Strategic Air Offensive against Germany 1939-1945, Volume IV page 516
  91. ^ Rich Overy in Modern History Review April 1999, The Bombing of germany – A Reappraisal page 30


  • Braun, Hans-Joachim (1990). The German Economy in the Twentieth Century. Routledge. 
  • Carr, William (1972). Arms, Autarky and Aggression. London: Edward Arnold. 
  • Dawidowicz, Lucy (1976). A Holocaust Reader. New York: Behrman House. ISBN 978-0-87441-219-2. 
  • DeLong, J. Bradford (February 1997). "Slouching Towards Utopia?: The Economic History of the Twentieth Century. XV. Nazis and Soviets". University of California at Berkeley. Archived from the original on 11 May 2008. Retrieved 21 April 2013. 
  • Kaillis, Aristotle (2000). Fascist Ideology. London: Routledge. 
  • Schweitzer, Arthur (1964). Big Business in the Third Reich. Bloomington: Indiana University Press. 
  • Tooze, Adam (2006). The Wages of Destruction: The Making and the Breaking of the Nazi Economy. New York: Viking. ISBN 978-0-670-03826-8. 
  • Turner, Henry A. (1985). German Big Business and the Rise of Hitler. Oxford University Press. 

Further reading[edit]

  • Dean, Martin: Robbing the Jews – The Confiscation of Jewish Property in the Holocaust, 1935 – 1945, Cambridge University Press, 2008.
  • Timothy Mason & Richard Overy "Debate: Germany, 'Domestic Crisis' and War in 1939" pages 200-240 from Past and Present, Number 122, February 1989 reprinted as "Debate: Germany, `domestic crisis’ and the War in 1939" from The Origins of The Second World War edited by Patrick Finney, Edward Arnold: London, United Kingdom, 1997, ISBN 0-340-67640-X.