![20 Deutschmark note 3rd Reich](https://upload.wikimedia.org/wikipedia/commons/c/cd/20_Deutschmark_note_3rd_Reich.jpg)
Like many other Western nations at the time, Germany suffered the economic effects of the
Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
with unemployment soaring around the
Wall Street Crash of 1929
The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange colla ...
. When
Adolf Hitler
Adolf Hitler (; 20 April 188930 April 1945) was an Austrian-born German politician who was dictator of Nazi Germany, Germany from 1933 until Death of Adolf Hitler, his death in 1945. Adolf Hitler's rise to power, He rose to power as the le ...
became
Chancellor of Germany
The chancellor of Germany, officially the federal chancellor of the Federal Republic of Germany,; often shortened to ''Bundeskanzler''/''Bundeskanzlerin'', / is the head of the federal government of Germany and the commander in chief of the Ge ...
in 1933, he introduced policies aimed at improving the economy. The changes included
privatization
Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...
of state industries,
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...
s on imports, and an attempt to achieve
autarky
Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems.
Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especially ...
(national economic self-sufficiency). Weekly earnings increased by 19% in real terms from 1933 to 1939, but this was largely due to employees working longer hours, while the hourly wage rates remained close to the lowest levels reached during the Great Depression. In addition, reduced foreign trade meant rationing of consumer goods like poultry, fruit, and clothing for many Germans.
[Evans, Richard J. "Business, Politics, and War." The Third Reich in Power. New York: Penguin, 2006. 392. Print]
The
Nazis
Nazism ( ; german: Nazismus), the common name in English for National Socialism (german: Nationalsozialismus, ), is the far-right totalitarian political ideology and practices associated with Adolf Hitler and the Nazi Party (NSDAP) in Na ...
believed in
war
War is an intense armed conflict between states, governments, societies, or paramilitary groups such as mercenaries, insurgents, and militias. It is generally characterized by extreme violence, destruction, and mortality, using regular o ...
as the primary engine of human progress, and argued that the purpose of a country's economy should be to enable that country to fight and win wars of expansion. As such, almost immediately after coming to power, they embarked on a vast program of
military rearmament, which quickly dwarfed civilian investment. During the 1930s, Nazi Germany increased its military spending faster than any other state in peacetime, and the military eventually came to represent the majority of the German economy in the 1940s.
[Evans, Richard J., ''The Third Reich at War'' (New York: Penguin, 2008), p. 333.] This was funded mainly through deficit financing before the war, and the Nazis expected to cover their debt by plundering the wealth of conquered nations during and after the war. Such plunder did occur, but its results fell far short of Nazi expectations. Overall, according to historian
Richard Overy, the Nazi
war economy
A war economy or wartime economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilizing and allocating resources t ...
was a
mixed economy
A mixed economy is variously defined as an economic system blending elements of a market economy with elements of a planned economy, markets with state interventionism, or private enterprise with public enterprise. Common to all mixed economi ...
that combined
free market
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any o ...
s with
central planning
A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, pa ...
; Overy describes it as being somewhere in between the
command economy of the Soviet Union
The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen national ...
and the
capitalist system of the United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
.
The Nazi government developed a partnership with leading German business interests, who supported the goals of the regime and its war effort in exchange for advantageous contracts, subsidies, and the suppression of the trade union movement.
Cartel
A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals. Mos ...
s and monopolies were encouraged at the expense of small businesses, even though the Nazis had received considerable electoral support from small business owners.
Nazi Germany
Nazi Germany (lit. "National Socialist State"), ' (lit. "Nazi State") for short; also ' (lit. "National Socialist Germany") (officially known as the German Reich from 1933 until 1943, and the Greater German Reich from 1943 to 1945) was ...
maintained a supply of
slave labor
Slavery and enslavement are both the state and the condition of being a slave—someone forbidden to quit one's service for an enslaver, and who is treated by the enslaver as property. Slavery typically involves slaves being made to perf ...
, composed of prisoners and
concentration camp
Internment is the imprisonment of people, commonly in large groups, without charges or intent to file charges. The term is especially used for the confinement "of enemy citizens in wartime or of terrorism suspects". Thus, while it can simply ...
inmates, which was greatly expanded after the beginning of
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
. In Poland alone, some five million people (including Polish Jews) were used as slave labor throughout the war.
Among the slave laborers in the occupied territories, hundreds of thousands were used by leading German corporations including
Thyssen,
Krupp
The Krupp family (see pronunciation), a prominent 400-year-old German dynasty from Essen, is notable for its production of steel, artillery, ammunition and other armaments. The family business, known as Friedrich Krupp AG (Friedrich Krup ...
,
IG Farben
Interessengemeinschaft Farbenindustrie AG (), commonly known as IG Farben (German for 'IG Dyestuffs'), was a German chemical and pharmaceutical conglomerate (company), conglomerate. Formed in 1925 from a merger of six chemical companies—BASF, ...
,
Bosch,
Blaupunkt
Blaupunkt GmbH () was a German manufacturer of mostly car audio equipment. It was owned by Robert Bosch GmbH from 1933 until 1 March 2009, when it was sold to Aurelius AG of Germany. It filed for bankruptcy in late 2015 with liquidation proceed ...
,
Daimler-Benz
The Mercedes-Benz Group Aktiengesellschaft, AG (previously named Daimler-Benz, DaimlerChrysler and Daimler) is a German Multinational corporation, multinational automotive corporation headquartered in Stuttgart, Baden-Württemberg, Germany. It ...
,
Demag
Demag Cranes AG is a German heavy equipment manufacturer now controlled by Japan-based Tadano via a $215 million deal. The roots of Demag date back prior to its formation, but became Märkische Maschinenbau-Anstalt, Ludwig A.-G in 1906 as the ...
,
Henschel
Henschel & Son (german: Henschel und Sohn) was a German company, located in Kassel, best known during the 20th century as a maker of transportation equipment, including locomotives, trucks, buses and trolleybuses, and armoured fighting vehicle ...
,
Junkers
Junkers Flugzeug- und Motorenwerke AG (JFM, earlier JCO or JKO in World War I, English: Junkers Aircraft and Motor Works) more commonly Junkers , was a major German aircraft and aircraft engine manufacturer. It was founded there in Dessau, Germ ...
,
Messerschmitt
Messerschmitt AG () was a German share-ownership limited, aircraft manufacturing corporation named after its chief designer Willy Messerschmitt from mid-July 1938 onwards, and known primarily for its World War II fighter aircraft, in partic ...
,
Siemens
Siemens AG ( ) is a German multinational conglomerate corporation and the largest industrial manufacturing company in Europe headquartered in Munich with branch offices abroad.
The principal divisions of the corporation are ''Industry'', '' ...
, and
Volkswagen
Volkswagen (),English: , . abbreviated as VW (), is a German Automotive industry, motor vehicle manufacturer headquartered in Wolfsburg, Lower Saxony, Germany. Founded in 1937 by the German Labour Front under the Nazi Party and revived into a ...
, as well as the Dutch corporation
Philips
Koninklijke Philips N.V. (), commonly shortened to Philips, is a Dutch multinational conglomerate corporation that was founded in Eindhoven in 1891. Since 1997, it has been mostly headquartered in Amsterdam, though the Benelux headquarters i ...
.
By 1944, slave labor made up one-quarter of Germany's entire civilian work force, and the majority of German factories had a contingent of prisoners.
Pre-war: 1933–1939
Recovery and rearmament
![Bruttosozialprodukt im dt](https://upload.wikimedia.org/wikipedia/commons/4/44/Bruttosozialprodukt_im_dt._Reich_1925-1939.svg)
The Nazis came to power in the midst of the
Great Depression
The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
. The
unemployment
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...
rate at that point in time was close to 30%. At first, the new Nazi government continued the economic policies introduced by the government of
Kurt von Schleicher
Kurt Ferdinand Friedrich Hermann von Schleicher (; 7 April 1882 – 30 June 1934) was a German general and the last chancellor of Germany (before Adolf Hitler) during the Weimar Republic. A rival for power with Hitler, Schleicher was murdered by ...
in 1932 to combat the effects of the Depression. Hitler appointed
Hjalmar Schacht
Hjalmar Schacht (born Horace Greeley Hjalmar Schacht; 22 January 1877 – 3 June 1970, ) was a German economist, banker, centre-right politician, and co-founder in 1918 of the German Democratic Party. He served as the Currency Commissioner ...
, a former member of the
German Democratic Party
The German Democratic Party (, or DDP) was a center-left liberal party in the Weimar Republic. Along with the German People's Party (, or DVP), it represented political liberalism in Germany between 1918 and 1933. It was formed in 1918 from the ...
, as President of the
Reichsbank
The ''Reichsbank'' (; 'Bank of the Reich, Bank of the Realm') was the central bank of the German Reich from 1876 until 1945.
History until 1933
The Reichsbank was founded on 1 January 1876, shortly after the establishment of the German Empi ...
in 1933 and Minister of Economics in 1934. The policies he inherited included a large
public works
Public works are a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community. They include public buildings ( municipal buildings, sc ...
programs supported by
deficit spending
Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...
—such as the construction of the
Autobahn
The (; German plural ) is the federal controlled-access highway system in Germany. The official German term is (abbreviated ''BAB''), which translates as 'federal motorway'. The literal meaning of the word is 'Federal Auto(mobile) Track'. ...
network—to stimulate the economy and reduce unemployment. These were programs that were planned to be undertaken by the
Weimar Republic
The Weimar Republic (german: link=no, Weimarer Republik ), officially named the German Reich, was the government of Germany from 1918 to 1933, during which it was a constitutional federal republic for the first time in history; hence it is al ...
during conservative
Paul von Hindenburg
Paul Ludwig Hans Anton von Beneckendorff und von Hindenburg (; abbreviated ; 2 October 1847 – 2 August 1934) was a German field marshal and statesman who led the Imperial German Army during World War I and later became President of Germany fro ...
's presidency, and which the Nazis appropriated as their own after coming to power. Hjalmar Schacht created a scheme for deficit financing, in which capital projects were paid for with the issuance of promissory notes called
Mefo bills
MEFO was the more common abbreviation for (german: MEtallurgische FOrschungsgesellschaft m.b.H., en, Society for Metallurgical Research LLC), a dummy company set up by the Nazi German government to finance the German re-armament effort in the y ...
, which could be traded by companies with each other. Schacht was one of the few finance ministers at the time to take advantage of the end of the gold standard to increase deficit spending. This was particularly useful in allowing Germany to rearm because the Mefo bills were not
Reichsmark
The (; sign: ℛℳ; abbreviation: RM) was the currency of Germany from 1924 until 20 June 1948 in West Germany, where it was replaced with the , and until 23 June 1948 in East Germany, where it was replaced by the East German mark. The Reich ...
s and did not appear in the federal budget, so they helped conceal rearmament. When the notes were presented for payment, the Reichsbank printed money. This proved inadequate in 1938, when a large share of Mefo's five-year promissory notes fell due, so the government employed "highly dubious methods" where "banks were forced to buy government bonds, and the government took money from savings accounts and insurance companies" in order to pay the holders of Mefo bills, due mainly to a serious government cash shortage. Meanwhile, Schacht's administration achieved a rapid decline in the unemployment rate, the largest of any country during the Great Depression. By 1938, unemployment was practically extinct. Price controls kept inflation in check but also squeezed out small farmers.
The main economic priority of the Nazi government, which set it apart from previous German governments, was to rearm and rebuild Germany's military in preparation for an eventual war to conquer ''
Lebensraum
(, ''living space'') is a German concept of settler colonialism, the philosophy and policies of which were common to German politics from the 1890s to the 1940s. First popularized around 1901, '' lso in:' became a geopolitical goal of Imperi ...
'' ("living space") in the East. Thus, at the beginning of his rule, Hitler said that "the future of Germany depends exclusively and only on the reconstruction of the
Wehrmacht
The ''Wehrmacht'' (, ) were the unified armed forces of Nazi Germany from 1935 to 1945. It consisted of the ''Heer'' (army), the ''Kriegsmarine'' (navy) and the ''Luftwaffe'' (air force). The designation "''Wehrmacht''" replaced the previous ...
. All other tasks must cede precedence to the task of rearmament" and "in case of conflict between the demands of the Wehrmacht and demands for other purposes, the interests of the Wehrmacht must in every case have priority." This policy was implemented immediately, with military expenditures quickly growing far larger than the civilian work-creation programs. As early as June 1933, military spending for the year was budgeted to be three times larger than the spending on all civilian work-creation measures in 1932 and 1933 combined. Nazi Germany increased its military spending faster than any other state in peacetime, with the share of military spending rising from 1 percent to 10 percent of national income in the first two years of the regime alone. Eventually, it reached as high as 75 percent by 1944.
The first financial package for rearmament was adopted by the Nazi government in June 1933, and it was extremely ambitious. Schacht approved a figure of to be spent on military buildup over eight years. By comparison, the entire national income of Germany in 1933 was , so the government was not merely proposing to increase military spending, but to make military production the primary focus of the national economy. Earlier in April, the cabinet had already agreed to release the military from the normal processes of budgetary oversight. Germany's international treaty obligations would not allow such extensive rearmament, so Hitler withdrew from the Geneva disarmament talks and from the
League of Nations
The League of Nations (french: link=no, Société des Nations ) was the first worldwide intergovernmental organisation whose principal mission was to maintain world peace. It was founded on 10 January 1920 by the Paris Peace Conference that ...
in October 1933. The German government feared that this might provoke immediate war with France at the time, but it did not. Still, the fear that war might come before Germany was prepared for it served to create a sense of urgency and reinforced the rearmament program. The army and the navy prepared to quickly expand their capacity and manpower. Plans were made to secretly build an air force (forbidden by the
Treaty of Versailles
The Treaty of Versailles (french: Traité de Versailles; german: Versailler Vertrag, ) was the most important of the peace treaties of World War I. It ended the state of war between Germany and the Allied Powers. It was signed on 28 June ...
), and the army prepared to introduce conscription within two years and grow to 300,000 soldiers by 1937 (also in violation of the Treaty of Versailles). At first, the navy did not benefit much from these rearmament plans, because Hitler wished to fight a land war in Europe and even hoped to make an alliance with the British Empire whereby the British would retain control of the seas. However, at the insistence of Admiral
Erich Raeder
Erich Johann Albert Raeder (24 April 1876 – 6 November 1960) was a German admiral who played a major role in the naval history of World War II. Raeder attained the highest possible naval rank, that of grand admiral, in 1939, becoming the f ...
, an expansion of the navy was also approved in 1934. This included the projected construction of 8 battleships (Versailles allowed a maximum of 6), 3 aircraft carriers, 8 cruisers (Versailles permitted 6), 48 destroyers (Versailles permitted 12), and 72 submarines (completely banned by the treaty). The unprecedented size of the military budget was impossible to hide from foreign observers. When Hitler was asked for an explanation, he claimed that Germany was "engaged only in essential maintenance and renewal expenditure."
The enormous military buildup was financed to a large extent through deficit spending, including Mefo bills. Between 1933 and 1939 the total revenue of the German government amounted to , whereas government expenditure (up to 60% of which consisted of rearmament costs) exceeded , thus causing a huge deficit and rising national debt (reaching in 1939).
[VarldensHistoria.se: "Frihet, jämlikhet och NAZISM"](_blank)
(PDF). Joseph Goebbels
Paul Joseph Goebbels (; 29 October 1897 – 1 May 1945) was a German Nazi politician who was the ''Gauleiter'' (district leader) of Berlin, chief propagandist for the Nazi Party, and then Reich Minister of Propaganda from 1933 to 19 ...
, who otherwise mocked the government's financial experts as narrow-minded misers, expressed concern in his diary about the exploding deficit. Hitler and his economic team expected that the upcoming territorial expansion would provide the means of repaying the soaring national debt, by using the wealth and manpower of conquered nations.
An elaborate bureaucracy was created to regulate imports of raw materials and finished goods with the intention of eliminating foreign competition in the German marketplace and improving the nation's
balance of payments
In international economics, the balance of payments (also known as balance of international payments and abbreviated BOP or BoP) of a country is the difference between all money flowing into the country in a particular period of time (e.g., a ...
. The Nazis encouraged the development of synthetic replacements for materials such as oil and textiles. As the market was experiencing a glut and prices for petroleum were low, the Nazi government made a profit-sharing agreement with
IG Farben
Interessengemeinschaft Farbenindustrie AG (), commonly known as IG Farben (German for 'IG Dyestuffs'), was a German chemical and pharmaceutical conglomerate (company), conglomerate. Formed in 1925 from a merger of six chemical companies—BASF, ...
in 1933, guaranteeing them a 5 percent return on capital invested in their synthetic oil plant at
Leuna
Leuna is a town in Saxony-Anhalt, eastern Germany, south of Merseburg and Halle, on the river Saale.
The town is known for the ''Leunawerke'', at 13 km2 one of the biggest chemical industrial complexes in Germany, where a very wide range of ...
. Any profits in excess of that amount would be turned over to the Reich. By 1936, Farben regretted making the deal, as the excess profits by then being generated had to be given to the government.
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. 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. Cars and other forms of motorized transport became increasingly attractive to the population, and the German motor industry boomed. However, Germany's attempt to achieve
autarky
Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems.
Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especially ...
meant imposing restrictions on foreign currency, which caused a shortage of rubber and fuel for civilian use by 1939 and resulted in "drastic restrictions on the use of motor vehicles".
Privatization and business ties
The Great Depression had spurred increased state ownership in most Western capitalist countries. This also took place in Germany during the last years of the Weimar Republic. However, after the Nazis took power, industries were privatized ''en masse''. Several banks, shipyards, railway lines, shipping lines, welfare organizations, and more were privatized. The Nazi government took the stance that enterprises should be in private hands wherever possible.
State ownership was to be avoided unless it was absolutely necessary for rearmament or the war effort, and even in those cases "the Reich often insisted on the inclusion in the contract of an option clause according to which the private firm operating the plant was entitled to purchase it."
However, the privatization was "applied within a framework of increasing control of the state over the whole economy through regulation and political interference," as laid out in the 1933 Act for the Formation of Compulsory Cartels, which gave the government a role in regulating and controlling the cartels that had been earlier formed in the Weimar Republic under the Cartel Act of 1923. These had mostly regulated themselves from 1923 to 1933.
Companies privatized by the Nazis included the four major commercial banks in Germany, which had all come under public ownership during the prior years: ''Commerz– und Privatbank'', ''Deutsche Bank und Disconto-Gesellschaft'', ''Golddiskontbank'' and ''Dresdner Bank''.
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
IG Farben
Interessengemeinschaft Farbenindustrie AG (), commonly known as IG Farben (German for 'IG Dyestuffs'), was a German chemical and pharmaceutical conglomerate (company), conglomerate. Formed in 1925 from a merger of six chemical companies—BASF, ...
) 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. Additionally, the Nazis privatized some public services which had been previously provided by the government, especially social and labor-related services, and these were mainly taken over by organizations affiliated with the Nazi Party that could be trusted to apply Nazi racial policies.
One of the reasons for the Nazi privatization policy was to cement the partnership between the government and business interests. Hitler 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". Another reason was financial. As the Nazi government faced budget deficits due to its military spending, privatization was one of the methods it used to raise more funds. Between the fiscal years 1934–35 and 1937–38, privatization represented 1.4 percent of the German government's revenues. There was also an ideological motivation. Nazi ideology held
entrepreneurship
Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values th ...
in high regard, and "private property was considered a precondition to developing the creativity of members of the German race in the best interest of the people."
The Nazi leadership believed that "private property itself provided important incentives to achieve greater cost consciousness, efficiency gains, and technical progress."
Adolf Hitler used
Social Darwinist
Social Darwinism refers to various theories and societal practices that purport to apply biological concepts of natural selection and survival of the fittest to sociology, economics and politics, and which were largely defined by scholars in W ...
arguments to support this stance, cautioning against "bureaucratic managing of the economy" that would preserve the weak and "represent a burden to the higher ability, industry and value."
The month after being appointed Chancellor, Hitler made a personal appeal to German business leaders to help fund the Nazi Party for the crucial months that were to follow. He argued that the experience of Weimar Republic had shown that "'private enterprise cannot be maintained in the age of democracy.' Business was founded above all on the principles of personality and individual leadership. Democracy and liberalism led inevitably to Social Democracy and Communism." In the following weeks, the Nazi Party received contributions from seventeen different business groups, with the largest coming from
IG Farben
Interessengemeinschaft Farbenindustrie AG (), commonly known as IG Farben (German for 'IG Dyestuffs'), was a German chemical and pharmaceutical conglomerate (company), conglomerate. Formed in 1925 from a merger of six chemical companies—BASF, ...
and
Deutsche Bank
Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...
. Many of these businesses continued to support Hitler even during the war and even profited from persecution of the Jews. The most infamous being firms like Krupp, IG Farben, and some large automobile manufacturers.
[Wiesen, Jonathan. “German Industry and the Third Reich.” Anti-Defamation League, 1 Jan. 2000, www.adl.org/news/op-ed/german-businesses-and-nazis.] Historian Adam Tooze writes that the leaders of German business were therefore "willing partners in the destruction of political pluralism in Germany." In exchange, owners and managers of German businesses were granted unprecedented powers to control their workforce,
collective bargaining
Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The i ...
was abolished and wages were frozen at a relatively low level. Business profits also rose very rapidly, as did corporate investment.
The Nazis granted millions of marks in credits to private businesses. Many businessmen had friendly relations to the Nazis,
most notably with
Heinrich Himmler
Heinrich Luitpold Himmler (; 7 October 1900 – 23 May 1945) was of the (Protection Squadron; SS), and a leading member of the Nazi Party of Germany. Himmler was one of the most powerful men in Nazi Germany and a main architect of th ...
and his
Freundeskreis der Wirtschaft
The Freundeskreis der Wirtschaft, or ''Circle of Friends of the Economy'' (which became known as "Freundeskreis Reichsführer SS", "Freundeskreis Himmler" or " Keppler Circle") was a group of German industrialists whose aim was to strengthen the t ...
. Hitler's administration decreed an October 1937 policy that "dissolved all corporations with a capital under $40,000 and forbade the establishment of new ones with a capital less than $200,000," which swiftly effected the collapse of one-fifth of all small corporations.
William L. Shirer
William Lawrence Shirer (; February 23, 1904 – December 28, 1993) was an American journalist and war correspondent. He wrote ''The Rise and Fall of the Third Reich'', a history of Nazi Germany that has been read by many and cited in scholarly w ...
, ''The Rise and Fall of the Third Reich: A History of Nazi Germany'', New York: Simon & Schuster, 1960, p. 262 On July 15, 1933 a law was enacted that imposed compulsory membership in cartels, while by 1934 the Third Reich had mandated a reorganization of all companies and trade associations and formed an alliance with the Nazi regime.
Nonetheless, the Nazi regime was able to close most of Germany's stock exchanges, reducing them "from twenty-one to nine in 1935," and "limited the distribution of dividends to 6 percent." By 1936 Germany decreed laws to completely block foreign stock trades by citizens. These moves showed signs of Antisemitism and a move toward a war economy, with the belief that the stock market was being operated by Jews.
The rhetoric of the Nazi regime stated that German private companies would be protected and privileged as long as they supported the economic goals of the government—mainly by participating in government contracts for military production—but that they could face severe penalties if they went against the national interest. However, such threats were rarely carried out in practice, and historians Christoph Buccheim and Jonas Scherner state that "companies normally could refuse to engage in an investment project designed by the state without any consequences." Private firms refused government contracts and directions on many occasions. In 1937, ''de Wendel'', a coal mining enterprise, refused to build a
hydrogenation
Hydrogenation is a chemical reaction between molecular hydrogen (H2) and another compound or element, usually in the presence of a Catalysis, catalyst such as nickel, palladium or platinum. The process is commonly employed to redox, reduce or S ...
plant. In 1939, ''IG Farben'' denied a government request to increase its production of
rayon
Rayon is a semi-synthetic fiber, made from natural sources of regenerated cellulose, such as wood and related agricultural products. It has the same molecular structure as cellulose. It is also called viscose. Many types and grades of viscose f ...
and refused to invest in a synthetic rubber factory despite this being an important project for the regime. ''Froriep GmbH'', a company producing machines for the armaments industry, successfully demanded cheap credit from the Nazi government under a threat of cutting back investment if its demand was not met. The regime generally used monetary incentives, such as guaranteed profits, to persuade businesses to support its goals, and freedom of contract was generally respected even in projects important for the war. According to Buccheim and Scherner, the reason why businesses sometimes refused these incentives was out of long-term profitability considerations. The government usually tried to persuade them to join military projects, but firms were worried about overcapacity in case the armaments boom would end. They did not want to commit themselves too much to war-related production for the future.
Other historians dispute the Buccheim and Scherner thesis that the general absence of state coercion means there was no real threat of it. They believe that many industrialists feared direct state intervention in private industries if the Nazi government's goals were not fulfilled, and that their choices were affected by this concern. Peter Hayes argues that although the Nazi regime "wished to harness business's energy and expertise" and "generally displayed flexibility in order to obtain them, usually by offering financing options that reduced the risk of producing what the regime desired", the government was nevertheless also willing to resort to direct state intervention as a "Plan B" in some cases, and these cases "left an impression on the corporate world, all the more so as government spokesmen repeatedly referred to them as replicable precedents." Thus, the Nazi state did not resort to "blunt-instrument forms of coercion" because it did not need to, not because it was unwilling to do so. After 1938, "examples had been made, fear inspired, and the lessons internalized, on both sides of the business-state divide." Hayes describes Nazi economic policies as a "'carrot-and-stick' or 'Skinner Box' economy" in which corporate decisions "were increasingly channeled in directions the regime desired" through a combination of "government funding and state-guaranteed profit margins" on the one hand, and a series of regulations, penalties, "the possibility of government compulsion, and the danger that refusal to cooperate could open opportunities to competitors," on the other hand. As such, he argues that "the Third Reich both bridled and spurred the profit motive." Hayes concludes that "Nazi economic policies structured opportunities and thus corporate executives' choices. Did businessmen retain free will? Of course, they did. Was their autonomy intact? I think not."
Social policies
The Nazis were hostile to the idea of
social welfare
Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
in principle, upholding instead the Social Darwinist concept that the weak and feeble should perish. They condemned the welfare system of the Weimar Republic as well as private charity, accusing them of supporting people regarded as racially inferior and weak, who should have been weeded out in the process of natural selection. Nevertheless, faced with the mass unemployment and poverty of the Great Depression, the Nazis found it necessary to set up charitable institutions to help those they deemed to be racially-pure Germans in order to maintain popular support, while arguing that this represented "racial self-help" and not indiscriminate charity or universal social welfare. Thus, Nazi programs such as the
Winter Relief of the German People and the broader
National Socialist People's Welfare
The National Socialist People's Welfare (german: Nationalsozialistische Volkswohlfahrt, NSV) was a social welfare organization during the Third Reich. The NSV was originally established in 1931 as a small Nazi Party-affiliated charity active loca ...
(NSV) were organized as quasi-private institutions, officially relying on private donations from Germans to help others of their race—although in practice those who refused to donate could face severe consequences. Unlike the social welfare institutions of the Weimar Republic and the Christian charities, the NSV distributed assistance on explicitly racial grounds. It provided support only to those who were "racially sound, capable of and willing to work, politically reliable, and willing and able to reproduce." Non-Aryans were excluded, as well as the "work-shy", "asocials" and the "hereditarily ill." Successful efforts were made to get middle-class women involved in social work assisting large families, and the Winter Relief campaigns acted as a ritual to generate public sympathy.
[Richard Grunberger, ''The 12-Year Reich'', p. 79, ] Meanwhile, in addition to being excluded from receiving aid under these programs, the physically disabled and homeless were actively persecuted, being labeled "life unworthy of life" or "useless eaters."
The Nazis banned all
trade union
A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ( ...
s that existed before their rise to power, and replaced them with the
German Labour Front
The German Labour Front (german: Deutsche Arbeitsfront, ; DAF) was the labour organisation under the Nazi Party which replaced the various independent trade unions in Germany during Adolf Hitler's rise to power.
History
As early as March 1933, ...
(DAF), controlled by the Nazi Party. They also outlawed
strikes and
lockout
Lockout may refer to:
* Lockout (industry), a type of work stoppage
**Dublin Lockout, a major industrial dispute between approximately 20,000 workers and 300 employers 1913 - 1914
* Lockout (sports), lockout in sports leagues
**MLB lockout, lock ...
s. The stated goal of the German Labour Front was not to protect workers, but to increase output, and it brought in employers as well as workers.
[William L. Shirer, ''The Rise and Fall of the Third Reich: A History of Nazi Germany'', New York: Simon & Schuster, 2011, p. 263] Journalist and historian
William L. Shirer
William Lawrence Shirer (; February 23, 1904 – December 28, 1993) was an American journalist and war correspondent. He wrote ''The Rise and Fall of the Third Reich'', a history of Nazi Germany that has been read by many and cited in scholarly w ...
wrote that it was "a vast propaganda organization ... a gigantic fraud."
Meanwhile, the Chamber of Economics (whose president was appointed by the Reich minister of economics) absorbed all existing chambers of commerce. By 1934 these two groups merged somewhat when the Chamber of Economics also became the economics department of the DAF. To aid this, a board of trustees run by representatives of the Nazi Party, the DAF and the Chamber of Economics was set up to centralize their economic activity.
[Michael T. Florinsky, ''Fascism and National Socialism: A Study of the Economic and Social Policies of the Totalitarian State'' (1936) pp. 102–105]
online
/ref>
When it came to retail and small business, in order to coordinate workers and small businessmen, shop councils and the so-called Courts of Honour were set up to monitor retail units. Unlike Italian Fascism, Nazism perceived workers and employers in each enterprise as families; each with different roles. This was shown in their tax structure. The Nazis allowed industries to deduct from their taxable income all sums used to purchase new equipment. Rich families employing a maid were allowed to count the maid as a dependent child and reap the tax benefit.
Real wages in Germany dropped by roughly 25% between 1933 and 1938. Along with the abolition of the right to strike, workers were also in large part rendered unable to quit their jobs. Labor books were introduced in 1935, and the consent of the previous employer was required in order to be hired for another job.
Foreign trade relations
In the 1930s, 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. Germany began to move away from partially free trade in the direction of economic self-sufficiency. Hitler was aware of the fact that Germany lacked reserves of raw materials, and full autarky
Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems.
Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especially ...
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.
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. Germany would also leverage productive trade relationships with Spain, Switzerland and Sweden in areas ranging from iron ore imports and clearing and payment services. Throughout the 1930s, German businesses were also encouraged to form cartels, monopolies and oligopolies, whose interests were then protected by the state.
Preparations for war
In 1936, after years of limitations imposed by the Versailles Treaty
The Treaty of Versailles (french: Traité de Versailles; german: Versailler Vertrag, ) was the most important of the peace treaties of World War I. It ended the state of war between Germany and the Allied Powers. It was signed on 28 June ...
, military spending in Germany rose to 10% of GNP
The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...
, higher than any other European country at the time, and, from 1936 onward, even higher than civilian investments. Hitler faced a choice between conflicting recommendations. On one side a "free market" technocratic faction within the government, centered around ''Reichsbank'' President Hjalmar Schacht
Hjalmar Schacht (born Horace Greeley Hjalmar Schacht; 22 January 1877 – 3 June 1970, ) was a German economist, banker, centre-right politician, and co-founder in 1918 of the German Democratic Party. He served as the Currency Commissioner ...
, Minister of Economics Walther Funk
Walther Funk (18 August 1890 – 31 May 1960) was a German economist and Nazi official who served as Reich Minister for Economic Affairs (1938–1945) and president of Reichsbank (1939–1945). During his incumbency, he oversaw the mobi ...
and Price Commissioner Dr. Carl Friedrich Goerdeler
Carl Friedrich Goerdeler (; 31 July 1884 – 2 February 1945) was a monarchist conservative German politician, executive, economist, civil servant and opponent of the Nazi regime. He opposed some anti-Jewish policies while he held office and was ...
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
Allgemeine Elektricitäts-Gesellschaft AG (AEG; ) was a German producer of electrical equipment founded in Berlin as the ''Deutsche Edison-Gesellschaft für angewandte Elektricität'' in 1883 by Emil Rathenau. During the Second World War, AEG ...
, Robert Bosch
Robert Bosch (23 September 1861 – 12 March 1942) was a German industrialist, engineer and inventor, founder of Robert Bosch GmbH.
Biography
Bosch was born in Albeck, a village to the northeast of Ulm in southern Germany as the eleventh of ...
of Robert Bosch GmbH
Robert Bosch GmbH (; ), commonly known as Bosch and stylized as BOSCH, is a German multinational engineering and technology company headquartered in Gerlingen, Germany. The company was founded by Robert Bosch in Stuttgart in 1886. Bosch is 9 ...
, and Albert Voegeler of Vereinigte Stahlwerke
The Vereinigte Stahlwerke AG (VSt or Vestag, ''United Steelworks'') was a German industrial conglomerate producing coal, iron, and steel in the interbellum and during World War II.
Founded in 1926, economic pressures (decreasing prices and exces ...
. On the other side the more politicized faction favored autarkic
Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems.
Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especiall ...
policies and sustained military spending. Hitler hesitated before siding with the latter, which was much in line with his fundamental ideological tenets: social darwinism and ''Lebensraums aggressive policies. So in August 1936, Hitler issued his "Memorandum" requesting from Hermann Göring
Hermann Wilhelm Göring (or Goering; ; 12 January 1893 – 15 October 1946) was a German politician, military leader and convicted war criminal. He was one of the most powerful figures in the Nazi Party, which ruled Germany from 1933 to 1 ...
a series of Year's Plans (the term "Four-Year Plan" was coined only later, in September) in order to mobilize the entire economy, within the next four years, and make it ready for war: maximizing autarchic policies, even at a cost for the German people, and having the armed forces fully operational and ready at the end of the four years period.
The year 1936 also represented a turning point for German trade policy. In September, Hjalmar Schacht was replaced by Hermann Göring, who was given the task to make Germany self-sufficient and able to wage war within four years. Measures enacted under Göring included slashing imports, instituting wage and price controls (with violations punishable by internment in a concentration camp), and restricting dividends to six percent on book capital. New strategic goals were introduced for the purpose of making Germany ready for war, including the construction of synthetic rubber plants, more steel plants, and automatic textile factories.
Richard Overy has argued for the importance of the August 1936 Memorandum by stressing that it was written personally by Hitler, who hardly ever wrote anything down. The "Four-Year Plan Memorandum" predicated an imminent all-out, apocalyptic struggle between "Judeo-Bolshevism
Jewish Bolshevism, also Judeo–Bolshevism, is an anti-communist and antisemitic canard, which alleges that the Jews were the originators of the Russian Revolution in 1917, and that they held primary power among the Bolsheviks who led the r ...
" and German National Socialism, which necessitated a total effort at rearmament regardless of the economic costs.
In the memo, Hitler wrote: 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''" talics in the originaland the role of the economy was simply to support "Germany's self-assertion and the extension of her ''Lebensraum''". 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!" 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".
Germany had already been rapidly rearming and militarizing before 1936. However, it was in his memorandum of 1936 that Hitler made it clear he expected war to be imminent. He argued that the German economy "must be fit for war within four years." Autarky
Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems.
Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especially ...
was to be pursued more aggressively, and the German people would have to begin making sacrifices in their consumption habits in order to enable food supplies and raw materials to be diverted toward military uses. Despite Nazi propaganda frequently depicting German families as well-dressed and driving new Volkswagen cars, consumption stagnated in the pre-war economy, with few people being able to afford cars. Speaking to a meeting of his main economic advisers in 1937, Hitler insisted that Germany's population had grown to the point where the nation would soon become unable to feed itself, so war for the conquest of ''Lebensraum
(, ''living space'') is a German concept of settler colonialism, the philosophy and policies of which were common to German politics from the 1890s to the 1940s. First popularized around 1901, '' lso in:' became a geopolitical goal of Imperi ...
'' in Eastern Europe was necessary as soon as possible. Therefore, if the rearmament drive caused economic problems, the response would have to entail pushing even harder in order to be ready for war faster, rather than scaling back military spending. Seeing that Hitler had taken this stance, Schacht resigned as Minister of Economics in November 1937, and the management of the economy effectively passed to Hermann Göring.
In July 1937, the Reichswerke Hermann Göring
Reichswerke Hermann Göring was an industrial conglomerate in Nazi Germany from 1937 until 1945. It was established to extract and process domestic iron ores from Salzgitter that were deemed uneconomical by the privately held steel mills. The sta ...
was established as a new industrial conglomerate to extract and process domestic iron ore
Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, or deep purple to rusty red. The iron is usually found in the fo ...
s from Salzgitter
Salzgitter (; Eastphalian: ''Soltgitter'') is an independent city in southeast Lower Saxony, Germany, located between Hildesheim and Braunschweig. Together with Wolfsburg and Braunschweig, Salzgitter is one of the seven ''Oberzentren'' of Lower ...
, as the first step in a general effort to increase German steel production in preparation for war. It produced steel from low grade iron at rates unprofitable to other steel companies. At first, the ''Reichswerke'' began as one of the smaller German iron and steel corporations, but it was able to expand rapidly after the German annexation of Austria in 1938, by acquiring large sections of Austrian heavy industry ranging from raw material production, to armaments manufacture, to sales and distribution. A number of the Austrian firms acquired by the ''Reichswerke'' had owned stock in smaller foreign businesses as well, so the ''Reichswerke'' became the owner or co-owner of various coal, iron, and steel companies across Central Europe even before the outbreak of war. In spite of this, production of iron and steel continued to fall short of the demands of the growing military buildup, so "it became people's patriotic duty to surrender any old or unused metal objects to the authorities", and scrap metal
Scrap consists of recyclable materials, usually metals, left over from product manufacturing and consumption, such as parts of vehicles, building supplies, and surplus materials. Unlike waste, scrap has monetary value, especially recovered me ...
was also collected from factories, churches, and cemeteries. The German occupation of Czechoslovakia
German(s) may refer to:
* Germany (of or related to)
** Germania (historical use)
* Germans, citizens of Germany, people of German ancestry, or native speakers of the German language
** For citizens of Germany, see also German nationality law
**Ge ...
in 1938-39 enabled the ''Reichswerke'' to undergo another major expansion immediately prior to the war, by acquiring shares in Czech coal mines, armaments firms, and iron and steel manufacturers. Initially these were not necessarily majority shares, as French and British shareholders also held significant stock in Czech companies, and the ''Reichswerke'' had to negotiate with them until war was declared. Later, during the war, the ''Reichswerke'' would expand by incorporating over 500 companies in key German industries and much of the heavy industry of occupied nations, including between 50 and 60 per cent of Czech heavy industries and slightly less in Austria. By the end of 1941, the ''Reichswerke'' had become the largest company in Europe, after absorbing most of the industry captured by Germany from the Soviet Union.
War: 1939–1945
Early conditions
The beginning of the war resulted in a British blockade which seriously restricted German access to world markets. Petroleum, sugar, coffee, chocolate and cotton were all extremely scarce. Germany used coal gasification to replace petroleum imports to a limited extent, and relied on Romanian oilfields at Ploiești
Ploiești ( , , ), formerly spelled Ploești, is a city and county seat in Prahova County, Romania. Part of the historical region of Muntenia, it is located north of Bucharest.
The area of Ploiești is around , and it borders the Blejoi commu ...
. 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 neutral country friendly to Germany. Until the declaration of war on the Soviet Union, the Third Reich received large supplies of grain and raw materials from the USSR
The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...
, which they paid for with industrial machinery, weapons, and even German designs for a battleship. In the spring of 1940, the Soviet Union asked for two chemical plants as compensation for raw materials. The German government declined, at the insistence of the military.
Rationing
Rationing is the controlled distribution of scarce resources, goods, services, or an artificial restriction of demand. Rationing controls the size of the ration, which is one's allowed portion of the resources being distributed on a particular ...
was introduced for German consumers in 1939. However, while Britain immediately put their economy on a war footing as soon as the conflict began, Germany resisted equivalent measures until later in the war. For instance, the Nazis were reluctant to increase taxes on individual German citizens to pay for the war, so the top personal income tax
An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Ta ...
rate in 1941 was 13.7% in Germany, as opposed to 23.7% in Great Britain. The German government instead funded much of its military effort through plunder, especially plundering the wealth of Jewish citizens and the like, both at home and in the conquered territories.
Conquered territories
During the war, as Germany acquired control of new territories (by direct annexation, by military administration, or by installing puppet governments in defeated countries), these new territories were forced by the Nazi administration to sell raw materials and agricultural products to German buyers at extremely low prices. Hitler's policy of lebensraum
(, ''living space'') is a German concept of settler colonialism, the philosophy and policies of which were common to German politics from the 1890s to the 1940s. First popularized around 1901, '' lso in:' became a geopolitical goal of Imperi ...
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
A scorched-earth policy is a military strategy that aims to destroy anything that might be useful to the enemy. Any assets that could be used by the enemy may be targeted, which usually includes obvious weapons, transport vehicles, communi ...
policy meant that the Germans found little they could use in the Soviet Union, and, on the other hand, a large quantity of goods flowed into Germany from conquered lands in Western Europe. 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.
Fiscal policy
In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables ...
also emphasized the exploitation of conquered countries, from which capital
Capital may refer to:
Common uses
* Capital city, a municipality of primary status
** List of national capital cities
* Capital letter, an upper-case letter Economics and social sciences
* Capital (economics), the durable produced goods used f ...
was to be gathered for German investments. German-run banks, such as the Bank of Issue in Poland
Bank of Issue in Poland ( pl, Bank Emisyjny w Polsce, german: Emissionbank in Polen, also translated into English variously as the ''Bank of Issue'', ''Issue Bank'', ''Issuing Bank'' or ''Emitting Bank in Poland'') was a bank created by Nazi German ...
( pl , Bank Emisyjny w Polsce), were established to manage local economies.
The destruction caused by the war, however, meant that the conquered territories never operated as productively as Germany had hoped. Agricultural supply-chains collapsed, partly due to wartime destruction and partly due to the British blockade that prevented the import of fertilizer and other raw materials from outside of Europe. The grain harvest in France in 1940 was less than half what it had been in 1938. Grain yields also fell (compared to their pre-war levels) in Germany itself, as well as in Hungary and in the occupied Netherlands and Yugoslavia. German grain imports from Yugoslavia and Hungary fell by almost 3 million tons, and this could only be partially offset by increased deliveries from Romania. Coal and oil were also in short supply, again because Germany could not access sources outside of Europe. Germany's oil supplies, crucial for the war effort, depended largely on annual imports of 1.5 million tons of oil, mainly from Romania. Although Germany seized the oil supplies/reserves of conquered states—for example reducing France to a mere 8 percent of its pre-war oil consumption – this was still not enough for the needs of the war. Acute fuel-shortages forced the German military to cut back on training for its drivers and pilots, because training would waste fuel. The Soviets and the Americans had accurate reports of Germany's oil supplies, but refused to believe that the Nazi government would take the risk of starting a war with so little fuel security, so they assumed that Germany must have had vast amounts of well-hidden supplies that they were not able to detect. Germany also had a problem with coal, although in this case the issue was not a lack of quantity, but an inability to extract it and transport it where it was needed fast enough. Railways had been badly damaged by the war, and coal miners in occupied territories drastically reduced their productivity compared to pre-war levels. This was, in part, caused deliberately as sabotage on the part of the miners, who wished to harm the German war-effort. But it was also in part due to lack of adequate nutrition for those miners, as food from their countries was redirected to Germany.
In 1942, after the death of Armaments Minister Fritz Todt
Fritz Todt (; 4 September 1891 – 8 February 1942) was a German construction engineer and senior Nazi who rose from the position of Inspector General for German Roadways, in which he directed the construction of the German autobahns (''Reichsa ...
, Hitler appointed Albert Speer
Berthold Konrad Hermann Albert Speer (; ; 19 March 1905 – 1 September 1981) was a German architect who served as the Minister of Armaments and War Production in Nazi Germany during most of World War II. A close ally of Adolf Hitler, he ...
as his replacement. Historians have long contended that the growing burdens of the war saw Germany move to a full war-economy under the efficient leadership
Leadership, both as a research area and as a practical skill, encompasses the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations. The word "leadership" often gets view ...
of Speer. However, historian Richard Overy contends this is a myth based on the flimsy conclusions of the Strategic Bombing Survey
The United States Strategic Bombing Survey (USSBS) was a written report created by a board of experts assembled to produce an impartial assessment of the effects of the Anglo-American strategic bombing of Nazi Germany during the European theatre o ...
, which relied on the views of one German official from the German Statistical Office, Rolf Wagenführ. Wagenführ was not senior enough to be aware of decision-making at higher levels. Overy shows that the military and Nazi leadership were particular about preparing the German economy for total war
Total war is a type of warfare that includes any and all civilian-associated resources and infrastructure as legitimate military targets, mobilizes all of the resources of society to fight the war, and gives priority to warfare over non-combata ...
, as they felt that Germany had lost World War I
World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fightin ...
on the Home front
Home front is an English language term with analogues in other languages. It is commonly used to describe the full participation of the British public in World War I who suffered Zeppelin#During World War I, Zeppelin raids and endured Rationin ...
.
Forced labor
Even before the war, Nazi Germany maintained a supply of slave labor
Slavery and enslavement are both the state and the condition of being a slave—someone forbidden to quit one's service for an enslaver, and who is treated by the enslaver as property. Slavery typically involves slaves being made to perf ...
. "Undesirables" (german: unzuverlässige Elemente), such as the homeless, homosexuals, and alleged criminals as well as political dissident
A dissident is a person who actively challenges an established political or religious system, doctrine, belief, policy, or institution. In a religious context, the word has been used since the 18th century, and in the political sense since the 20th ...
s, communists
Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, a so ...
, Jew
Jews ( he, יְהוּדִים, , ) or Jewish people are an ethnoreligious group and nation originating from the Israelites Israelite origins and kingdom: "The first act in the long drama of Jewish history is the age of the Israelites""Th ...
s, and anyone else that the regime wanted out of the way were imprisoned in labor camps
A labor camp (or labour camp, see spelling differences) or work camp is a detention facility where inmates are forced to engage in penal labor as a form of punishment. Labor camps have many common aspects with slavery and with prisons (espec ...
. Prisoners of war
A prisoner of war (POW) is a person who is held Captivity, captive by a belligerent power during or immediately after an armed conflict. The earliest recorded usage of the phrase "prisoner of war" dates back to 1610.
Belligerents hold priso ...
and civilians were brought into Germany from occupied territories after the German invasion of Poland
The invasion of Poland (1 September – 6 October 1939) was a joint attack on the Republic of Poland by Nazi Germany and the Soviet Union which marked the beginning of World War II. The German invasion began on 1 September 1939, one week aft ...
. The necessary labor for the German war economy was provided by the new camp system, serving as one of the key instruments of terror. Historians estimate that some 5 million Polish citizens (including Polish Jews) went through them.
A network of slave-labour camps—457 complexes with dozens of subsidiary camps, scattered over a broad area of German-occupied Poland—exploited to the fullest the labor of their prisoners, in many cases working inmates to their death. At the Gross-Rosen concentration camp (to which Polish nationals were brought in from the annexed part of Poland) the number of subcamps was 97. Under Auschwitz
Auschwitz concentration camp ( (); also or ) was a complex of over 40 concentration and extermination camps operated by Nazi Germany in occupied Poland (in a portion annexed into Germany in 1939) during World War II and the Holocaust. It con ...
, Birkenau
Auschwitz concentration camp ( (); also or ) was a complex of over 40 concentration and extermination camps operated by Nazi Germany in occupied Poland (in a portion annexed into Germany in 1939) during World War II and the Holocaust. It con ...
, and Auschwitz III
Monowitz (also known as Monowitz-Buna, Buna and Auschwitz III) was a Nazi concentration camp and labor camp (''Arbeitslager'') run by Nazi Germany in Occupation of Poland (1939–1945), occupied Poland from 1942–1945, during World War II and t ...
(Monowitz
Monowitz (also known as Monowitz-Buna, Buna and Auschwitz III) was a Nazi concentration camp and labor camp (''Arbeitslager'') run by Nazi Germany in occupied Poland from 1942–1945, during World War II and the Holocaust. For most of its exis ...
) with thousands of prisoners each, the number of satellite camps was 48.[List of Subcamps of KL Auschwitz (Podobozy KL Auschwitz).](_blank)
The Auschwitz-Birkenau State Museum
The Auschwitz-Birkenau State Museum ( pl, Państwowe Muzeum Auschwitz-Birkenau) is a museum on the site of the Auschwitz concentration camp in Oświęcim (German: ''Auschwitz''), Poland.
The site includes the main concentration camp at Auschwi ...
in Oświęcim
Oświęcim (; german: Auschwitz ; yi, אָשפּיצין, Oshpitzin) is a city in the Lesser Poland ( pl, Małopolska) province of southern Poland, situated southeast of Katowice, near the confluence of the Vistula (''Wisła'') and Soła rive ...
, Poland
Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populous ...
(Państwowe Muzeum Auschwitz-Birkenau w Oświęcimiu), 1999–2010 Stutthof concentration camp
Stutthof was a Nazi concentration camp established by Nazi Germany in a secluded, marshy, and wooded area near the village of Stutthof (now Sztutowo) 34 km (21 mi) east of the city of Danzig (Gdańsk) in the territory of the German-a ...
had 40 subcamps officially and as many as 105 subcamps in operation, some as far as Elbląg
Elbląg (; german: Elbing, Old Prussian: ''Elbings'') is a city in the Warmian-Masurian Voivodeship, Poland, located in the eastern edge of the Żuławy region with 117,390 inhabitants, as of December 2021. It is the capital of Elbląg County.
...
, Bydgoszcz
Bydgoszcz ( , , ; german: Bromberg) is a city in northern Poland, straddling the meeting of the River Vistula with its left-bank tributary, the Brda. With a city population of 339,053 as of December 2021 and an urban agglomeration with more ...
and Toruń
)''
, image_skyline =
, image_caption =
, image_flag = POL Toruń flag.svg
, image_shield = POL Toruń COA.svg
, nickname = City of Angels, Gingerbread city, Copernicus Town
, pushpin_map = Kuyavian-Pom ...
, from the main camp. The ''Deutsche Reichsbahn
The ''Deutsche Reichsbahn'', also known as the German National Railway, the German State Railway, German Reich Railway, and the German Imperial Railway, was the German national railway system created after the end of World War I from the regiona ...
'' acquired new infrastructure in Poland worth in excess of 8,278,600,000 zł., including some of the largest locomotive factories in Europe, the H. Cegielski – Poznań renamed DWM, and Fablok
Fablok is a Polish manufacturer of locomotives, based in Chrzanów. Until 1947 the official name was ''First Factory of Locomotives in Poland Ltd.'' ( pl, Pierwsza Fabryka Lokomotyw w Polsce Sp. Akc.), Fablok being a widely used syllabic abbreviat ...
in Chrzanów
Chrzanów () is a town in southern Poland with 35,651 inhabitants as of December 2021. It is situated in the Lesser Poland Voivodeship (since 1999) and is the seat of Chrzanów County.
History
History to 1809
It is impossible to establish ...
renamed ''Oberschlesische Lokomotivwerke Krenau'' as well as the locomotive parts factory Babcock-Zieleniewski in Sosnowiec
Sosnowiec is an industrial city county in the Dąbrowa Basin of southern Poland, in the Silesian Voivodeship, which is also part of the Silesian Metropolis municipal association.—— Located in the eastern part of the Upper Silesian Industria ...
renamed Ferrum AG later tasked with making parts to V-1 V1, V01 or V-1 can refer to version one (for anything) (e.g., see version control)
V1, V01 or V-1 may also refer to:
In aircraft
* V-1 flying bomb, a World War II German weapon
* V1 speed, the maximum speed at which an aircraft pilot may abort ...
and V-2 rocket
The V-2 (german: Vergeltungswaffe 2, lit=Retaliation Weapon 2), with the technical name ''Aggregat 4'' (A-4), was the world’s first long-range guided ballistic missile. The missile, powered by a liquid-propellant rocket engine, was developed ...
s also. Under the new management, formerly Polish companies began producing German engines BR44, BR50 and BR86 as early as 1940 with the use of slave labor.
Hundreds of thousands of people in occupied territories were used as slave labor by leading German corporations including Thyssen, Krupp
The Krupp family (see pronunciation), a prominent 400-year-old German dynasty from Essen, is notable for its production of steel, artillery, ammunition and other armaments. The family business, known as Friedrich Krupp AG (Friedrich Krup ...
, IG Farben
Interessengemeinschaft Farbenindustrie AG (), commonly known as IG Farben (German for 'IG Dyestuffs'), was a German chemical and pharmaceutical conglomerate (company), conglomerate. Formed in 1925 from a merger of six chemical companies—BASF, ...
, Bosch, Blaupunkt
Blaupunkt GmbH () was a German manufacturer of mostly car audio equipment. It was owned by Robert Bosch GmbH from 1933 until 1 March 2009, when it was sold to Aurelius AG of Germany. It filed for bankruptcy in late 2015 with liquidation proceed ...
, Daimler-Benz
The Mercedes-Benz Group Aktiengesellschaft, AG (previously named Daimler-Benz, DaimlerChrysler and Daimler) is a German Multinational corporation, multinational automotive corporation headquartered in Stuttgart, Baden-Württemberg, Germany. It ...
, Demag
Demag Cranes AG is a German heavy equipment manufacturer now controlled by Japan-based Tadano via a $215 million deal. The roots of Demag date back prior to its formation, but became Märkische Maschinenbau-Anstalt, Ludwig A.-G in 1906 as the ...
, Henschel
Henschel & Son (german: Henschel und Sohn) was a German company, located in Kassel, best known during the 20th century as a maker of transportation equipment, including locomotives, trucks, buses and trolleybuses, and armoured fighting vehicle ...
, Junkers
Junkers Flugzeug- und Motorenwerke AG (JFM, earlier JCO or JKO in World War I, English: Junkers Aircraft and Motor Works) more commonly Junkers , was a major German aircraft and aircraft engine manufacturer. It was founded there in Dessau, Germ ...
, Messerschmitt
Messerschmitt AG () was a German share-ownership limited, aircraft manufacturing corporation named after its chief designer Willy Messerschmitt from mid-July 1938 onwards, and known primarily for its World War II fighter aircraft, in partic ...
, Philips
Koninklijke Philips N.V. (), commonly shortened to Philips, is a Dutch multinational conglomerate corporation that was founded in Eindhoven in 1891. Since 1997, it has been mostly headquartered in Amsterdam, though the Benelux headquarters i ...
, Siemens
Siemens AG ( ) is a German multinational conglomerate corporation and the largest industrial manufacturing company in Europe headquartered in Munich with branch offices abroad.
The principal divisions of the corporation are ''Industry'', '' ...
, Walther
Walther is a masculine given name and a surname. It is a German form of Walter, which is derived from the Old High German ''Walthari'', containing the elements ''wald'' -"power", "brightness" or "forest" and ''hari'' -"warrior".
The name was fir ...
, and Volkswagen
Volkswagen (),English: , . abbreviated as VW (), is a German Automotive industry, motor vehicle manufacturer headquartered in Wolfsburg, Lower Saxony, Germany. Founded in 1937 by the German Labour Front under the Nazi Party and revived into a ...
, on top of Nazi German startups which ballooned during this period, and all German subsidiaries of foreign firms including ''Fordwerke'' (Ford Motor Company
Ford Motor Company (commonly known as Ford) is an American multinational automobile manufacturer headquartered in Dearborn, Michigan, United States. It was founded by Henry Ford and incorporated on June 16, 1903. The company sells automobi ...
) and Adam Opel AG
Opel Automobile GmbH (), usually shortened to Opel, is a German automobile manufacturer which has been a subsidiary of Stellantis since 16 January 2021. It was owned by the American automaker General Motors from 1929 until 2017 and the PSA G ...
(a subsidiary of General Motors
The General Motors Company (GM) is an American Multinational corporation, multinational Automotive industry, automotive manufacturing company headquartered in Detroit, Michigan, United States. It is the largest automaker in the United States and ...
). By 1944, slave labor made up one-quarter of Germany's entire work force, and the majority of German factories had a contingent of prisoners.[Michael Thad Allen, ''The Business of Genocide'', The University of North Carolina Press, 2002. p. 1] In rural areas the shortage of agricultural labor was filled by forced laborers from the occupied territories of Poland and the Soviet Union. The children of these workers were unwanted in Germany, and usually murdered inside special centers known as ''Ausländerkinder-Pflegestätte
During World War II, Nazi birthing centres for foreign workers, known in German as ' (literally "foreign children nurseries"), ' ("eastern worker children nurseries"), or ''Säuglingsheim'' ("baby home") were German institutions used as stations ...
''.
Military production
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
Berthold Konrad Hermann Albert Speer (; ; 19 March 1905 – 1 September 1981) was a German architect who served as the Minister of Armaments and War Production in Nazi Germany during most of World War II. A close ally of Adolf Hitler, he ...
. 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. With the exception of ammunition for the army, 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%. The Allied bombing campaign also tied up valuable manpower, with Albert Speer
Berthold Konrad Hermann Albert Speer (; ; 19 March 1905 – 1 September 1981) was a German architect who served as the Minister of Armaments and War Production in Nazi Germany during most of World War II. A close ally of Adolf Hitler, he ...
(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.
Historiography
A major historiographical debate about the relationship between the German prewar economy and foreign policy decision-making was prompted in the late 1980s, when historian Timothy Mason
Timothy Wright Mason (2 March 1940 – 5 March 1990) was an English Marxist historian of Nazi Germany. He was one of the founders of the ''History Workshop Journal'' and specialised in the social history of the Third Reich. He argued for the " ...
claimed that an economic crisis had caused a "flight into war" in 1939. Mason argued that the German working-class was opposed to the Nazi dictatorship in the over-heated German economy of the late 1930s.[Perry, Matt "Mason, Timothy" pp. 780–781 from ''The Encyclopedia of Historians and Historical Writing'' edited by Kelly Boyd, Volume 2, London: Fitzroy Dearborn Publishing, 1999 p. 780] However, Mason's thesis was opposed by historian Richard Overy who wrote that Germany's economic problems could not explain aggression against Poland
Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populous ...
and that the reasons for the outbreak of war were due to the ideological choices made by the Nazi leadership. For Overy, the problem with Mason's thesis was that it rested on the assumptions not shown by records. Overy argued that there was a difference between economic pressures induced by the problems of the Four Year Plan
The Four Year Plan was a series of economic measures initiated by Adolf Hitler in Nazi Germany in 1936. Hitler placed Hermann Göring in charge of these measures, making him a Reich Plenipotentiary (Reichsbevollmächtigter) whose jurisdiction cut a ...
, and economic motives to seize foreign industry, materials and reserves of neighboring states. Meanwhile, Adam Tooze
John Adam Tooze (born 1967) is an English historian who is a professor at Columbia University, Director of the European Institute and nonresident scholar at Carnegie Europe. Previously, he was Reader in Twentieth-Century History at the Universi ...
argued that from 1939 onward, in spite of the military successes in the West, the German economy became dependent on vital imports from the East. Tooze saw this as a reason for Hitler to attack the Soviet Union, because " e 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". Up to Operation Barbarossa
Operation Barbarossa (german: link=no, Unternehmen Barbarossa; ) was the invasion of the Soviet Union by Nazi Germany and many of its Axis allies, starting on Sunday, 22 June 1941, during the Second World War. The operation, code-named after ...
the German economy could not "do without Soviet deliveries of oil, grain, and alloy metals."[Ericson, Edward E. (1999), Feeding the German Eagle: Soviet Economic Aid to Nazi Germany, 1933–1941, Greenwood Publishing Group, , pp. 202–205] The Four-Year Plan was discussed in the controversial Hossbach Memorandum The Hossbach Memorandum is a summary of a meeting in Berlin on 5 November 1937 attended by German dictator Adolf Hitler and his military and foreign policy leadership in which Hitler outlined his expansionist policies. The meeting marked the beginni ...
, which provides the "minutes" from one of Hitler's briefings. The Four-Year Plan technically expired in 1940.
See also
* Behemoth: The Structure and Practice of National Socialism
* Economics of fascism
Historians and other scholars disagree on the question of whether a specifically fascist type of economic policy can be said to exist. David Baker argues that there is an identifiable economic system in fascism that is distinct from those advoca ...
* Extermination through labor
Extermination through labour (or "extermination through work", german: Vernichtung durch Arbeit) is a term that was adopted to describe forced labor in Nazi concentration camps in light of the high mortality rate and poor conditions; in some ...
* Forced labor in Germany during World War II
The use of slave and forced labour in Nazi Germany (german: Zwangsarbeit) and throughout German-occupied Europe during World War II took place on an unprecedented scale. It was a vital part of the German economic exploitation of conquered t ...
* German–Soviet Credit Agreement (1939)
The German–Soviet Credit Agreement (also referred to as the German–Soviet Trade and Credit Agreement) was an economic arrangement between Nazi Germany and the Soviet Union whereby the latter received an acceptance credit of over 7 years with ...
* German–Soviet Commercial Agreement (1940)
The 1940 German–Soviet Commercial Agreement (also known as Economic Agreement of 11 February 1940 Between the German Reich and the Union of Soviet Socialist Republics) was an economic arrangement between the Soviet Union and Nazi Germany sig ...
* German–Soviet Border and Commercial Agreement
* International Trade and Investment Agency
* List of German companies by employees in 1938
This is a list of the largest companies of Nazi Germany by employees in 1938.
Companies by employees
The list is based on Fiedler (1999a, 1999b), who compiled data from a variety of sources. Given the shortage of historical employment data some ...
* Nazi–Soviet economic relations
References
Notes
Bibliography
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Further reading
*
Abstract
* Dean, Martin: ''Robbing the Jews: The Confiscation of Jewish Property in the Holocaust, 1935–1945'', Cambridge University Press, 2008.
* Kaillis, Aristotle: ''Fascist Ideology'', Routledge London, 2000.
* Lewkowicz, Nicolas (2010). ''The German Question and the International Order, 1943-1948'', Palgrave Macmillan, Basingstoke and New York.
* Mason, Timothy and Overy, Richard "Debate: Germany, 'Domestic Crisis' and War in 1939" pp. 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, .
{{DEFAULTSORT:Economy Of Nazi Germany
Economic history of World War II
Corporatism