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The Nazi experiment: Economic developments - Coggle Diagram
The Nazi experiment: Economic developments
Economic developments under the final republican governments
By the end of 1929 the governments deficit had reached 1700 million marks
Brunning responded to the crisis by introducing a policy of austerity, trying to balance outgoings with income.
However unemployment continued to worsen and he was forced to implement unpopular policies such as cutting wages for public sector employees and benefits.
However one of the few success of his government was that he was able to get a moratorium of reparations under Hoover, however it was Papen who was able to cancel them.
He did towards the end of his term draw up some reflaitionairy measures, such as borrowing to fund public works and breaking up the bankrupt eastern estates of the Junkers
However he was never able to put this into force as it was forced to resign by Hindenburg, partly due to his "agrarian bolshevism"
Another crisis of his government was that he was unable to prevent to 1931 July Banking crisis
By 1932 unemployment had reached 6 million and german exports had fallen from 600 million in value to 230 million.
however after this the crisis began to ease as global trade picked up. However this had nothing to do with the republican chancellors.
When Papen took over in May 1932 he did begin some reflationairy
Economic developments under the Nazis before the war
When the Nazis came to power they did carry out a few "socialist" economic policies that worked to improve economic conditions somewhat
The Debts of all peasants(totally around 12 billion reichsmarks) were cancelled.This was vital for the Nazis as the peasant represented 26% of the German population and were a key support base for them.
Rural farmers were further helped when a law passed in october 1933 forbid the confiscation, division or mortgaging of any farm between 7.5 to 10 hectares that belonged to an Aryan, this gave peasants a greater degree of stability
In May 1933 a law was passed which made it illegal to set up a department store, something which was designed to help smaller urban shopkeepers.
In July 1933 the Reich food estate was created which served as a ministry to control agricultural prices. It brought in guarantee prices for agricultural produce, moreover huge tariffs were put on imports
However helping those who brought him to power was of secondary interest to Hitler who wanted to create an economy that could fight a world war.
To achieve this Hjalmar Schacht was made president of the Reichsbank in 1933 and Minister of economics in 1934
Work of the Nazis to end the depression
improve the balance of payments and erode debt
The impact of the great depression meant that germany was very short on foreign currency to buy materials
Schacht introduced a plan in 1934 in order to solve both the high debt and balance of payments
there was a slew of trade agreements passed with south american, and balkan states
this was accompanied by the greater utilisation of the deutschmark in trade with less developed countries
Imports came under much greater regulation in order to reduce the outflow of foreign currency used for consumer goods
Schacht immediately took action to reduce the outflow of german currency by pushing through a law that demanded that all foreign debts be payed in Deustchmarks
The high spending of the government meant that debt had risen massively
In 1934 the government replaced all of its debts with bonds, which could be left unpaid indefinitely with low interest
This was apposed by the countries that had loaned to germany but these nations failed to cooperate to put pressure on germany so the move went ahead
Reduce unemployment
In June 1933 a law was passed with the aim of reducing unemployment
There was a huge expansion in public works
Private companies were given subsidies for renovation and construction
Income tax rebates and loans to encourage industrial activity
The Reich Labour service, (RAD) was expanded from the voluntary pre Nazi organisation into a compulsory programme for those between the ages of 18 and 25, as well as any other unemployed
people who joined it were part of a certain district and were armed with a bicycle and spade
The end of employment for women made employment figures look much better than they actually were
In september 1933 a law was passed for the construction of 7000 km of motorways across the country with specific regulations for their construction that would maximize the use of labour
In 1935 conscription was re-introduced which reduced the size of the labour force making statistics look much more favourable
Grow the economy
Nazis offered tax concessions to business that would invest
Through the raising of Mefo bills the government would mirror the amount of investment in key industries
These Mefo bills were credit notes that were issued from a fake company and payed back in five years with interest, using the tax revenue that they had helped to generate
In 1934-35 the repayments on these MEFO bills accounted for 50% of government expenditure
This secrecy allowed the Nazis to fund re-armament without causing suspicion from the allied by overloading standard government bonds
This investment was key for industries like cars, roads and re-armament, however re-armament did not become the main industry until 1936
However it was not just the work of the Nazis that ensured that the German economy improved
The crack downs on unions meant that there were no days lost to strike action. This was facilitated by the creation of the DAF
The use of propaganda meant that economic problems could be hushed over, helping to improve confidence in the economy
By the time that the Nazis came to power worldwide trade was already starting to pick up again.
Government could bolster its finances from confiscated jewish property
Continued problems
There continued to be a lack of foreign currency which grew worse after rearmament started in proper after 1936
Re-armament continued to put a strain on the economy and there were persistent shortages of key goods
Food prices rose dramatically much to the detriment of urban and rural workers
Hitler grew impatient of Schacht orthodoxy who wanted to curb imports to improve the balance of payments as well as reduce the deficit.
Rearmament and the 4 year plan
In a note written by Hitler himself the four year plan was announced in 1936 to be led by Herman goering
Pushed for the development of greater self sufficiency and autarky, with materials like synthetic rubber.
Improvements in the fuel industry, in particular the creation of oil from coal.
Development of steelworks which could use the lower grade ores that were found in germany, the Herman-Goering steelworks are an example of this
Greater investment in heavy machinery
aim of this was to get the economy ready for war within 4 years and create a managed economy
Prices were controlled and target for industries were set, the failure to reach these could lead to factories being seized
While the plan did have some success the goals laid out at the start were never met
Production of key materials such as rubber, fats, fuel and light metals were never able to reach targets.
By 1939 germany was still importing a third of all its raw materials, many of which would be key for the war effort
Also continued to be shortages of foreign currency needed to buy the imports to fund its programmes and re-armament
This all meant that by 1939 Hitler was not ready for a drawn out war, expecting only a "Blitzkrieg" war
the operation was dominated by infighting and bureaucratic rivalry, with Herman Goering himself knowing very little about economics
Economic developments during the war
When the war did break out the German economic infrastructure was not ready and management was very poor
The army were able to conscript workers regardless of their skill, prisoner labour was not fully utilised and women were encouraged to remain out of the workforce
By 1942 only 40% of the captives in Nazi germany are being used for Labour
These problems were exacerbated by the invasion of the USSR in June 1941. This created a war which the economy could not deal with.
to solve these issues the Nazi engineer Fritz Todt was made minister of armaments and munitions in 1940.
He began setting up a series of committees in order to rationalize production, however he would die in a plane crash in 1942, possibly due to an assassination of him by Hitler after he had warned him that the german economy would not be able to win a drawn out war against the soviets
Work of albert speer
Speer was appointed in 1942 and worked extremely hard in order to rationalise the german economy
He created a new central planning board in april 1942 to organise the allocation of raw resources. This planning board also carried out many other reforms
Nationwide blueprints were introduced in order to standardise production and prevent duplication of parts
Further investment was put into the creation of substitute raw materials
Led to a general increase in industrial capacity
Other factors or production such as labour, machinery and power were organised more efficiently
Speers reforms were highly effective and he was able to massivley increase production
Production of planes was able to increase from 3744 in 1940 to 25,000 in 1944, even in the last months of the war Speer was still able to produce around 500 planes
Armament production rose by 50%
Production of Guns rose by27%
Production of tanks rose by 25%
Production of ammunition rose by 97%
This was all despite the fact that germany by the end of 1944 was having 111,000 tonnes of bombs dropped on it each 3 months
Despite all of his success he often came into conflict with others in the Nazi government
Local gautleirs often impeded his work
Hitler was extremely reluctant to push women back into the workplace, with female conscription only starting in 1943
hitler was generally unrealistic and did not understand the economic position germany was in, moreover for political reasons he was reluctant to cut consumer production, which was only 3% below the peacetime level in 1942
However Speer was only able to do this as he used more than 7 million foreign workers who had been forced to work, which would lead to him getting 20 years in jail after the war.
Economic developments during occuptation
Despite the refusal of Speer to execute the Nero decree the damage done to the German economy by the end of the war was immense, the different countries that occupied germany would deal with the German economy in different ways.
The soviet zone
The soviets wanted to be as harsh as possible in terms of reperations
The eastern zone had not suffered as much damage as the rest of the country, with a reduction in capacity of around 15%, compared to 21% across the rest of the country.
They quickly sought to take as much as possible, believing that germany would be quickly reunified, they dismantled so much industry that its capacity was reduced to 50% of that in 1939
This did cause tensions with the allies as it went against the terms of the potsdam agreement
As soon as the soviets had consolidated their control they began to expand the control over the state.
In 1945 all the private banks were nationalised and a central system of finance set up,with the insurance industry being consolidated into 5 firms
In 1945 Factories and mines also began
In 1946 the soviets created 25 state owned joint stock companies (SAGs) by amalgamating 213 firms.
Soviets also worked to break up the estates of the prussian junkers in the east
More than 7000 farms that were larger than 100 hectares were seized and distributed to peasants and refugees.
In 1948 the soviets turned the Nazi controlled business into VEBs, which were run by a director together with the secretary of the SEDs party organisation in the factory and the chairman of the factory trade union
These would go onto represent around 60% of the easts industrial capacity, the private sector continued to be pushed out by extreme taxation.
In 1947 a central planning board was set up in order to coordinate economic policy and supervise all of the states companies. The board was made up of trade unionists, ministers and the heads of farmers association.
The western zones
Initially the western occupiers were quite harsh to the germans, following the level of industry plan that had been set up in 1946
The standard of living for germans should be kept to the level that it had been in 1932
Any armament related industries were banned
Coal production alone was expanded in order to allow for re-construction
Limits were placed on the output of industry
1546 industrial plants were dismantled
Industrial capacity would be reduced to 50% of its 1939 level.
However in the west it was agreed that germany would only pay reparations after it had become economically self supporting.
Due to tensions with the east the American secretary of state James Byrnes to announce that heavy industry would no longer be dismantled if it were useful for the peacetime economy.
US also began to lobby for a reunification of the western zones in order to act as a buffer against the east
Bizonia
The Bizonia of the british and french zones were able to grew with efficient use of american marshal plan.
Production targets were raised and rationalisation of the german economy took place
The joining with the french zone to form the trizonia which was able to grow by 30% between March and August and the marshal plan aid was used to improve vital infrastructure.