Nazi Germany was a totalitarian regime (1933-1945) in which the dictator Adolf Hitler ruled the country backed by the political apparatus of the National Socialist Party.
After the First World War, Germany was plunged into misery. The country was facing the economic abyss and had been condemned to pay the high cost of the war.
The context of hyperinflation, unemployment and poverty was one of the key factors driving the rise of a totalitarian ideology like Nazism. In 1933, the dictator and genocidal Adolf Hitler rose to power in Germany.
To carry out his expansionist plans, Hitler needed a strong German economy. The economy had to be subordinated to the interests of the State, at the same time that a strong industrialization was affected. Thus, an extensive program of public works was implemented and a drastic reduction in unemployment was established as an objective.
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A difficult starting point of Nazi Germany
The German defeat in the First World War was a human, social and economic drama. The Treaty of Versailles forced Germany to pay the economic cost caused by the conflict. To pay such astronomical penalties, the German government chose to issue massive amounts of German marks and hyperinflation ravaged the country between 1921 and 1923.
The exorbitant prices punished the working classes, civil servants, pensioners and savers with special rigor. All this had an impact on the producers who, faced with such costs, were unable to continue their economic activity.
Although the problems subsided in 1924, the crash of 29 and the subsequent Great Depression hit the world economy hard. Discontent and unemployment were omnipresent in German society.
In the midst of a troubled Germany, Nazism proliferated and in 1933 Hitler and the National Socialist German Workers’ Party rose to power. Taking advantage of social discontent, Hitler had promised to carry out a series of economic measures that would solve the problems that Germany suffered.
What kind of economic system did the Third Reich have?
As in the Soviet Union, the state ran the economy. However, unlike the Soviets, the Nazis allowed private property and did not nationalize the means of production.
Thus, landowners retained their vast properties, banking continued to be private, and industrial companies such as Krupp, Siemens, and Porsche, among many others, were key in German rearmament. Furthermore, during the Third Reich, the great entrepreneurs of German industry increased their wealth and benefited from slave labor.
For German rearmament, a large industry capable of producing huge quantities of war material was necessary. In this way, the State became the first client of the German industry. All this was financed through a strong debt policy.
It should be noted that, with a view to war, in 1936 Germany put into operation a four-year plan. This plan implied preparing Germany and its economy for war, for which the country had to be able to subsist in autarchy.
The German economic “miracle” of the 1930s
Interestingly, Germany’s unemployment rate fell from 43.8% in 1932 to 12% in 1936. Many wonder how the Third Reich achieved such a reduction in unemployment.
To this end, Hitler appointed Hjalmar Schacht, who had presided over the Central Bank of Germany between 1923 and 1930, as Minister of Economy. Immediately, the Nazis implemented measures of strong economic significance.
In this sense, Germany stopped paying the heavy sanctions imposed by the Treaty of Versailles and carried out the so-called Reinhard Program. Such measures involved the development of an ambitious program of public works and the strengthening and development of the military industry.
To finance such an amount of public spending, the German state opted for debt. Thus, the State gave credits to companies in exchange for generating profits.
However, not all were conventional economic measures. As a totalitarian country, Nazi Germany resorted to looting. The great victims were the Jews, who saw how the Nazis usurped their properties. On the other hand, the territorial expansion of the Third Reich through annexations and invasions also allowed Germany to provide itself with vast economic resources.
The welfare state in Nazi Germany
To win the social support of the Germans, the Nazis were aware that they needed to generate economic and social prosperity. For this reason, stable employment, decent housing, a car of one’s own and vacations became key elements in the policy of the welfare state.
For the Nazis, women should remain at home, dedicating themselves to raising children. Thus, the responsibility for employment fell on the man. To sustain these ideas, economic support was necessary for families, who could benefit from family loans under very favorable conditions.
In order to reduce unemployment, an organization called the Reich Labor Service was created in 1934. This organization provided the necessary labor for the construction of public works, as well as for projects to support the army and agriculture.
However, from the labor point of view, unions and strikes were prohibited, the German Labor Front being the only union allowed. But the real objective of the German Labor Front was not the defense of the interests of the workers, but the increase in production.