Nazi economic policy 1933 to 1939, including the work-creation programmes under Schacht, the Mefo bills, the Four-Year Plan of 1936 under Goering, rearmament, autarky, and the limits of the economy by 1939

What this dot point is asking

NESA expects you to explain how the Nazi regime transformed the German economy between 1933 and 1939 from a depressed market system to a directed war economy. Strong answers cover Schacht's recovery measures, the Four-Year Plan, rearmament, autarky, and the limits exposed by 1939. The Tooze-Overy debate is the current historiographical frame.

The answer

Hjalmar Schacht and the New Plan

Schacht was appointed President of the Reichsbank in March 1933 and Minister of Economics in August 1934. He had served Bruning and was a conservative monetary expert, not a Nazi true believer.

His tools:

• Mefo bills: off-balance-sheet credit issued by the Metallurgische Forschungsgesellschaft, a shell company. Mefo bills funded rearmament without immediate inflationary pressure. Around 12 billion marks were issued between 1934 and 1938.
• The New Plan (September 1934): exchange controls and bilateral clearing agreements directed imports towards strategic raw materials. Bilateral deals with Brazil, Argentina, Hungary, Yugoslavia, Bulgaria, and Romania supplied food and raw materials in return for German manufactures.
• Public works: the Autobahn programme began on 23 June 1933; around 3,000 km were built by 1939. Reichsarbeitsdienst (Labour Service, compulsory from 1935) absorbed young workers.

Unemployment and recovery

Unemployment was the regime's most visible challenge.

Some of the fall was statistical (women removed from the register from 1933; Jews removed in stages; the Labour Service and military service moved young men out of the figure). Most was real: public works, rearmament, and the labour-intensive substitution industries put millions back to work.

The Four-Year Plan

By 1936 the regime faced a choice: continue Schacht's cautious approach or accelerate towards rearmament. Hitler chose acceleration. His secret memorandum to Goering (August 1936) declared that "the German army must be ready for war within four years; the German economy must be capable of war within four years."

The Four-Year Plan was instituted by decree on 18 October 1936 under Goering as Plenipotentiary. Schacht's Ministry of Economics was sidelined. Key features:

• Synthetic petrol (Leuna): around 18 per cent of German consumption by 1939.
• Synthetic rubber (Buna): around a quarter of consumption by 1939.
• Domestic low-grade iron ore: the Reichswerke Hermann Goering was founded on 15 July 1937 to exploit low-grade Salzgitter ores private industry refused to mine.
• Synthetic textiles and substitute foodstuffs.

Schacht resigned as Minister of Economics in November 1937 (replaced by Walther Funk) and was dismissed from the Reichsbank in January 1939.

Rearmament

Military spending rose from around 1 per cent of GNP (1933) to around 5 per cent (1935), to 13 per cent (1937), to around 23 per cent (1939). Germany was the most militarised economy in Europe by 1938.

The Reichswehr expanded from 100,000 (the Versailles limit) to 800,000 (1939). The Luftwaffe was created openly on 9 March 1935. Conscription was reintroduced on 16 March 1935. The Wehrmacht entered the Rhineland on 7 March 1936 without Allied response.

Volksgemeinschaft, KdF, and the workers

The German Labour Front (Deutsche Arbeitsfront, DAF) under Robert Ley replaced trade unions from May 1933. Strikes were illegal. Wages were set by Reich Trustees of Labour. Real wages stayed around 1928 levels through the period.

Strength Through Joy (Kraft durch Freude, KdF), founded November 1933 within DAF, offered subsidised leisure: holiday cruises (around 10 million participants between 1934 and 1939), concerts, theatre, and the Volkswagen savings scheme (around 336,000 savers contributed, but no cars were delivered before the war). Beauty of Labour (Schonheit der Arbeit) improved factory conditions.

Tim Mason argued that working-class discontent (high turnover, absenteeism, working-to-rule) constrained Nazi planning. The argument is controversial; Adam Tooze rejects it. Mason's thesis nonetheless drew attention to the limits of consent within the labour force.

The Anschluss, the Sudetenland, and the economy

The Anschluss (12 March 1938) added Austria's gold reserves (around 80 million dollars), Austrian foreign exchange, and around 100,000 unemployed workers. The Sudetenland annexation (October 1938) added Czech industrial capacity. The occupation of Prague (15 March 1939) seized Czech gold reserves, the Skoda armaments works, and trained Czech divisions' equipment. Adam Tooze argues these seizures bought time for an economy approaching its sustainable limits.

Limits by 1939

By 1939 the German economy was running into constraints:

• Balance of payments: rearmament required imports of iron ore (Sweden), oil (Romania, Soviet Union), and bauxite that could not be paid for without exports.
• Labour: full employment from 1937 created shortages that were filled in 1939 by drawing women back into work and from 1940 by foreign forced labour.
• Consumption: civilian goods were rationed informally from 1937 (butter, fats, coffee).
• Public debt: from 12 billion marks (1932) to 41 billion (1939).

Adam Tooze (Wages of Destruction, 2006) argues the regime faced a strategic dilemma: continue rearmament and exhaust the economy, or pause and lose the lead over Britain and France. War in 1939 was a way out.

Historiography

Adam Tooze (The Wages of Destruction, 2006) is the modern standard: rearmament was effective but approaching its sustainable limits by 1939; war was a strategic necessity.

Richard Overy (The Nazi Economic Recovery 1932-1938, 1996; War and Economy in the Third Reich, 1994) is more positive about Schacht's New Plan and the recovery, but agrees on the trajectory to war.

Tim Mason ("Internal Crisis and War of Aggression, 1938-1939," 1981) argued working-class constraint pushed the regime towards war. The thesis is contested.

Christopher Browning's later work on the Reichswerke and forced labour completes the picture of an economy that integrated terror and production by 1939.

How to read a source on this topic

Sources on Nazi economic policy typically include unemployment graphs, Schacht's memoirs, the Four-Year Plan memorandum (released after the war), KdF propaganda, autobahn photographs, and Volkswagen advertisements. Three reading habits.

First, read the unemployment data against its construction. The 6 million to 0.3 million figure is real, but partly produced by re-categorisation (women, Jews, Labour Service, military). Both the recovery and the statistical practice are evidence.

Second, separate Schacht's stated and unstated aims at his Nuremberg trial. His 1946 testimony minimised his complicity. The 1934 New Plan documents and the Mefo bills show full early commitment to rearmament. The Tooze account integrates the documents.

Third, weigh autarky claims against trade data. KdF posters and Four-Year Plan propaganda projected self-sufficiency; the import figures from 1937 to 1939 show continuing dependence on Swedish iron ore (around 60 per cent of supply) and Romanian oil.

Common exam traps

Crediting Schacht with the Four-Year Plan. The Plan (1936) was Goering's; Schacht resigned over it in 1937.

Treating autarky as achieved. Synthetic petrol and rubber covered only a fraction of consumption; Sweden and Romania remained essential.

Forgetting Mefo bills. Off-balance-sheet credit through 1938 hid the scale of rearmament from foreign observers. Around 12 billion marks were issued.

Misdating the Volkswagen. Announced 1937, KdF model 1938; not a single car was delivered to civilian customers before the war.

In one sentence

Nazi economic policy between 1933 and 1939 combined Schacht's cautious recovery tools (Mefo bills, the New Plan, public works) with the radical rearmament drive of the Four-Year Plan from October 1936 under Goering to end mass unemployment, prepare for war, and pursue autarky, but as Tooze argues the economy had reached its sustainable limits by 1939, making the war Hitler had always intended a strategic necessity rather than a choice.