The German economy between the wars

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The German economy between the wars

• Lecture 5
• Depression, recovery, and rearmament (1930 1939)
  
• Dr. Cristiano Ristuccia
• car37_at_cam.ac.uk

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Hitlers first Radio message to the Nation 30
January 1933 Rescue of the German worker by a
gigantic and comprehensive attack on
unemployment Unemployment In February 1933 6
million In February 1934 3.772 million By 1935
2.77 million By the summer of 1936 Germany had
reached full employment.
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German unemployment 1925-1935
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• This was spectacular, but in what sense can this
  economic recovery really be attributed to
  Hitlers regime?
• Did the Nazi manipulate the statistics to show a
  massive fall in unemployment when in fact
  millions were still without work? No evidence to
  this effect. Unemployment definitions and
  categories were indeed changed but this was no
  secret?
• 2. The recovery was not due to government
  policies rebound from the recession started in
  the in the summer of 1932 and accelerated in
  1933
• 3. Rather than accelerating the pace of the
  recovery the policies of the National Socialist
  government changed the nature of the recovery and
  redirect the rebound towards priorities
  determined by the political leadership. ?

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Hitler had inherited Schleichers Reichs
Work-Creation Programme with a budget of 600
million Reichsmark. The money of this programme
had not been allocated or spent when the Nazi
took office. The initial work-creation policy of
Hitlers government, therefore, consisted of
spending Schleichers money. Election of March
1933 a turning point. Disappointing for Hitler
and Goebbels. National Socialist vote remained
well below the absolute majority hoped by the
Nazi leadership. And this notwithstanding 1.
Large sums from German business 2. Physical
violence and intimidation of political opponents.
Enabling Law of 23 March 1933. The Government
can rule by decree. ? 2 May 1933, SA thugs occupy
all of the offices of the free German Trade
Unions and shut them down. Substantial welfare
and strike funds were impounded and transferred
to the new German Labour Front or DAF.
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(No Transcript)
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• Reinhardt programme approved 28 May 1933
• 1 billion marks (total Reichs expenditure on
  goods and services in the fiscal year 1932/33 was
  1.95 billion marks)
• Intended to fund settlements, road works, and
  improvements to housing
• 250 million Reichsmark (or 25 of the entire
  package), was siphoned off for special
  measures
• Autobahnen built primarily for military purposes
  (yet imposed to an unconvinced army). effect of
  the Autobahn programme on German unemployment was
  negligible. 1,000 in 1933. Into the second year
  of the programme employment was only 38,000.

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Employed on all forms of work-creation
schemes 289,000 in February 1933 1,075,000 in
March 1934 (an increase of almost 800,000). In
the same period unemployment fell by more than
2.6 million. So at best around 30 of the fall in
unemployment is explained by work-creation
schemes. After the Spring of 1934 employment in
work-creation schemes fell to 700,000, to
disappear entirely during 1935.
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• 1. Work creation schemes
• 2. Natural recovery
• 3 Regime change expectations.

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• Employment or unemployment? No statistical
  tricks but emphasis on a more malleable
  aggregate.
• Policies intended to reduce the size of the
  workforce (rather than to increase the number of
  workers employed).
• Youth (labour camps) - conscription?
• Overy calculates that between 230,000 and
  420,000 youths were involved in voluntary labour
  service, and therefore removed from the
  unemployed lists, at any given time in the period
  1933 -1935. 160,000 of these were in excess of
  the levels registered before 1933 and they were
  largely to do with the introduction of the
  Landhilfe.
• Women (subsidies for newly married) furniture
• Marriage loan RM1,000. By the end of 1934 365,000
  of these loans were paid out.
• Policies intended to increase employment proper
• Subsidies and tax breaks to agriculture and other
  labour intensive sectors
• Work-creation programmes labour intensive
  sectors
• Low wages (but these would also lower labour
  force by reducing participation rates).

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Big question could it have been done before
January 1933?

• Decomposes into
• 1. Was there an alternative policy? (Or as
  Borchardt put it the question of technical
  availability).
• 2. Was Hitlers recipe viable to be applied by
  the Weimars governments? (Or as Borchardt put
  the question of political availability)
• 3. A question that is not for us here to answer
  (although it remains in the background) Would
  more pro-active economic policies by the Weimar
  governments have saved Germany (and the world)
  from Nazism?

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• Economic chronology of the German Great
  Depression
• The Cabinet of Herman Müller (SPD) resigns in
  March 1930
• 14 September 1930 the NSDAP (the national
  socialists of Adolf Hitler) increases its
  parliamentary representation from 12 to 107
  seats
• iii. Grand Coalition government headed by
  Brüning
• iv. May 1931 Crash of the Creditanstalt
• v. June 1931 The Brüning government barely
  survives a vote of no confidence (run on banks)
• vi. July 1931 Crash of the DANAT Bank
• vii. September 1931 Britain leaves the Gold
  Standard
• viii. May 1932 Gregor Strasser (National
  Socialist) made his famous speech to the
  Reichstag demanding deficit spending on
  work-creation programmes
• ix. Summer 1932 Von Papens Government announces
  programme to stimulate the economy
• x. 30 January 1933 Adolf Hitler becomes German
  Chancellor (prime Minister)
• March 1933 new elections confirm the National
  Socialists in power
• Enabling Law of 23 March 1933
• xii. June 1st 1933 new work-creation programme.