*** NAZI government - NAZI economics

NAZI Germany: Economy (1933-45)

NAZI World war II economy
Figure 1.--The Germany people widely believed that Hitler had brought about an economic miracle in ending the Depression. Less well understood was the impact on real wages under the NAZIs who significantly reduced the availability of consumer goods and by reducing quality prevented price increases. The German Labor Front (DAF) restricted wages, but sought to develop alternatives to rewaediung workers rather than higher wages. Even less well understood was the level of defecit spending and the the economic crisis approaching at the time Hitler launched the War. The level of devbt became moot once the War began because with the early economic the NAZIs could finance the war by looting the economies of the captive nations. Contrary to expectations, this policy proved effective in the West rather than the East.

It was very common before World War II to read about an a German economic miracle. Many in the 1930s lauded the NAZI achievement in ending the Depression. Other of course envied the Soviet Union. This is perhaps understandable in the 1930s when it was not entirely clear what was going on in those countries. What is surprising is that we still see some authors blinkered by ideology and often adding outright falsehoods still talking about the NAZI achievement. Here is a typical example, "The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began. In fact, German economic recovery preceded and later enabled German rearmament, in contrast to the US economy, where constitutional roadblocks placed by the US Supreme Court on the New Deal delayed economic recovery until US entry to World War Two put the US market economy on a war footing." [Liu] The author is wrong that the NAZIs did not begin to re-militarize at an early point. He is also wrong that reparations were a major problem. In fact the Germans payed very little in the way of reparations. Most of the payments they made were funds borrowed from America and at the original reparations required in the Versailles Treaty were postponed. It is true that Hitler put German workers to work. It is also true that the real wages (purchasing power) of German workers declined. And by the time that Hitler launched the War that the NAZI state was near bankruptcy. The German people had after the War lived under NAZI price controls and subsequently rationing when the War began. The NAZIs first imposed price controls (1936). This allowed the Government to re-militarize with materials purchased at prices below market levels. Hitler placed Reich-marshal Hermann Goering in charge of the war economy (1939). He imposed rationing. NAZI rationing was at first limited because the food of production of the occupied countries could be looted. Draconian punishments faced Germans violating the police control regulations.

NAZI Party: Weimar Politics (1920-33)

Several economic issues concern the NAZI Party as it struggled for power in the Weimar Republic. We need to consider the economic policies that Hitler and other NAZIs articulated. And the respose of different economic groups to the NAZIs. Also important is how the NAZI Pary finaced its ctivities.

Depression (1929-35)

The Depression played an important role in the NAZI sizure of power and in the image that Hitler built in Germany once he seized power. Tragically for Germany, the most serious period of the depression followed the New York Stock Market crash (1929) through Hitler's seizure of power (1933). The impact that the Depression had on Germany folded neatly into Hitler's political drive for power. Apparent economic improvements in Germany were an important element in Hitler's real popularity after seizing power. The view of the Hitler and the NAZIs in Europe was substantially different in Europe during the 1930s before Hitler launched World War II than it is today. It should be remembered that until Kristallnacht (November 1938) that NAZI actions against the Jews were not greatly different fom how Blacks were treated in the American South. In fact many NAZI racial laws were based on laws enacted against Blacks by Southern state legislatures. There were prominent Americans (Lindberg, Ford, and others) before World War II who were impressed with the NAZIs. Hitler was seen by many as the most dynamic leader in Europe. One reason for this was that NAZI policies essentially ended the depression by 1935. Many Germans had turned to the NAZIs in the early 1930s because of the Depression. The NAZIs expanded German labor programs, creating a National Labor Service must like the American CCC. The NAZIs seized control of the economy. German industrialists benefitted and soon learned that it was very dangerous to defy the Government. It might be argued that Germany under the NAZIs had the most controlled economy in Europe. Their major project was the construction of the Autobauns. The massive new armaments program was a major factor in putting Germans back to work. The German GNP was back to pre-Depression levels by 1935. NAZI policies made sure there was no longer wide-spread unemployment and destitution in Germany. The German people, however, were not better off. The benefits of the expanding economy was not brought to them in terms of more consumer goods, but rather a rearmed military. Many Germans, however, were convinced that they were better off. This was in part due to declinging product standards. It was also a result if the effectiveness of NAZI propaganda which emphasized the increased international respect with which Germany had achieved. [Hanby]

NAZI Government Pre-War Economic Policies (1933-39)

There is a tendency to think that NAZI Germany had a capitalist economy. Nothing could be further from the truth, it had a state controlled command economy just like the Soviet Union. The capitalist view of the NAZI economy basically comes from a desire of Socialists to avoid responsibility for the horrors of the NAZI regime. In fact except for Hitler's NAZI mania, the horroes of NAZI rule were just the same as the horrors of Communist rule. And the institutions such as the ecret police, concentration camps, no rule of law, press censorship, mass graves, supression of free trade unions, etc. are virtual mirror images. And the NAZI economy was controlled by the state/party not by the market in both totalitarian dictatorships. This should not be so surprising. You can not not have a totalitarian dictatorship unless the state controls the economy. Just like Stalin's Five Year PLans, Hitler set up the Four Year Plan and put Göring in charge. One reason that this is misunderstood is the term 'capitalism'. It is not a term Adam Smoth used, but a term Karl Marx popularized because it made a free market economy easier to attack. It is true that that unlike Stalin, Hitler did not shoot or end capitalists off to the Gulag. What Hitler did was to ue the mangerial talent of capitaliss by turning them into manages, following NAZI dictates from Göring's Four Year Plan. And all this was done BEFORE the War emergency.

Economic Miracle

It was very common before World War II to read about an a Gernman economic miracle. Many in the 1930s lauded the NAZI achievement in ending the Deopression. Other of course envied the Soviet Union. This is perhaps understandable in the 1930s when it was not entirely clear what was going on in those countries. Wha is surprising is that we still see some authors blinkered by ideology and often adding outriht falsehoods still talking about the NAZI achievement. Here is a typical example, "The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began. In fact, German economic recovery preceded and later enabled German rearmament, in contrast to the US economy, where constitutional roadblocks placed by the US Supreme Court on the New Deal delayed economic recovery until US entry to World War Two put the US market economy on a war footing." [Liu] The author is wrong about most of his facts.

Ending Reparations

Germany's World War reparations reuired under the terms of the Versailles Treaty are often posed as a major problem for the Weimar Government leading to the rie of the NAZIs. This has become a matter of debate among historians and economists. It is clear that Hitler certainly used the reparations and the Versailles Treaty in general to descredit the Weimar Republic. It isalso clear tht Germany paid very little of the required payments. Most of the money paid was borrowed from American banks. In fact the Germans payed very little in the way of reparations. Most of the payments they made were funds borrowed from America. This did, however, weaken Weimar finances because of the debt burden. In addition, the original reparations required in the Versailles Treaty were postponed. What seems more imprtant than the actual finances was the policy of Weimar politicans to use the reparations as aedge issue to force revisuon in the Versailles Treaty. This led to foreign interbention and the even more destabiling hyper inflation which essentially impoverished and thus radivalizing important elements of the middle class. Hitler upon seizing power (1933) was determined to end the repartions, but asthis was his moderate period adopted to preclude foreogn intervention before rearmament had created a new formidable. Deutsche Wehrmacht. Obne historian writes, "When the conference agreed to Germany's demand that only a token payment of 3,000 marks be made, Churchill [out of Government at the time] was angered by Hitler's comment the money 'would be worth only a few marks in a few months'. Churchill also pointed out that Germay had not suffered so muvh from reparations as was generally believed, as she had received massive loans from the United States with which she had compltely modernized her indistry. The British Government, nevous of upsetting those who still wanted to 'make Germany pay,' hesitated to publish full details of what had been agreed." [Gilbert]


At the time Hitler seized power, German had a florishing and highly politicized trade union movement. The NAZIs for the most part hade little influence in the trde unions. The unions were mostly associated with the Socialists and Communists. This was an intolerable situation for Hitler as he began to consolidate power. He wanted worker support, but he did not want them to remain annterest able to resist the NAZI Party and his policies. As a result, the trade unions were seen as a challenge that had to be dealt with. As a result, he moved on the trade unions only one day after allowing them to celebrate Labor Day for the first time (May 1, 1933). The police and SA units the next day seized the offices of the trade unins and arrested trade union leaders (May 2). This was a dangerous step, the fearsome NAZI police sate was not yet well established. An organized labor response could have threatened the regime. But the earlier arrest of Communist Party leaders and the new arrest of the unionleaders in effect decapitated potential resisance. Hitler then proceeded to win over German workers. He would never fully win them over entirely, but he did achieve considerable and any rcalcitrant idvuduals would be dealt wth by the police state he was consructed. Hitler announced with considerable fanfare that a new Deutsche Arbeitsfron (German Labor Feront--DAF) led by Robert Ley, would combine and replace the former trade unions. The DAF would from now on look after German worker and their families. The DAF like all NAZI organisation was cloaked in patriotism. It was now a national entity. Ley's job was to convince workers that they were better under the care of the NAZI Party and the DAF. This was not an easy task. Hitler's primary objective from the day he became chancellor was to remilarize Germany. This was hugely expensive and could only be done through massive borrowing. Thus wages hdd to be held down to limit cots. Other ways had to be found to placate the workers. The ininital effort was to reduce unemployment. Other methods including programs roviding recreation, housing, social services, price controls, and even the chance to own a car. Some of this was rel. Part of it ws largely propaganda. In the end, the workers and thei sons would become grist for Hitler's military machine.

Small Businessmen

Small businessmen may have been attracted to the NAZIS for a range of issues, including economic isues. Some may have welcomed the proscept of actions against Jewish competitors. his is difficult to assess. What is more clear is NZI economic policies that advrsely affected small operators. Soon after taking office, NAZI officials begn issuing reams of regulations that small businessmen had to contende with. The regulations restrictd commrce and affected how small business were able to conduct their affairs. Both tax collection and other financial matters were according to one author 'ruthlessy monitored'. Authorities began requiring even very small shops to keep and present accounts. NAZI economic planners were not sympathetic to the needs of small business. A primary problem was ghat they were much more difficult to manage than large corporations which could be more easily managed. NAZI ideology was based on the Führer pribciple, butthe difuse nature of small business made it difficult to control and streamline. The NAZI answer was just what small businesmen did not want -- surrendeing their independence and control. Many were forced into a number of cartels. Many shops like radio retailers ceased to become independent. The number of raduo retailers fell by 50 percnt during 1933-39. Some 168,000 shops were forced to close (1936-40. And new regulations and needed authorizations made it very difficult for entrpreneurs to open new shops. Prmissions from local governments were especilly difficult and time consuming to obrain. [Seligmann, Davison, and McDonald]

Public Perceptions

A reder summarizies how many Germans viewed the New Germanhy. "Even though 49 percent of the public did not vote for HItler, most were impressed that he took a country in short time with a national 42 percent unemployment rate, with World War I vets homeless, and in the streets begging for assistance, people collecting tin cans to hock for change to be able to buy anything, and gave them employment. He put anyone willing to work back to work and making a decent wage to support their families in clean and modern apartments that were affordable and stopped the enormous rates of inflation that had plagued the city and most of the country prior to 1933 when he overturned the Weimar Democratic Consitution and replaced it with a 10-minute pen stroke suspending all civil liberties and rights under the ERMACHTIGUNGSGESETZ LAWS of 1933." [Carr] Of course, the public was unaware of his plans for war and the extent to which the economic level was unsustaninable as a result of massive deficit spending.

Fiscal Policy: Deficit Spending

NAZI economic policies were primarily dominated by three men: Hjalmar Schacht, Herman Göring, and Walther Funk. All three men were tried at the Nuremberg IMT after the War. Hitler took power during the Depression and thus faced enormous economic problem. The economic problems required defecit spending as did his determination to re-militarize Germany. He needed a financial technocrat expert to manage these and other economic matters. The level of deficit spending contemplated by Hitler could have well caused another round of runaway inflation. He turned to Hjalmar Schacht, financial expert who served in Weimar governments. Schacht was not a NAZI Party member, but he agreed with Hitler's desire to undo the Versailles Treaty and make Germany a great power again. Schacht saw Hitler as a fervent nationalist and helped convince industrialists to support him. Hitler appointed him president of the Reichsbank (1933-39) and Minister of Economics (1934-37). He master-mined economic policies to support redevelopment, re industrialization and rearmament. He managed to support the NAZI deficit spending in several ways. He conceived the 'New Plan'--an autarkic economic plan which did nor require foreign financing. Second, he negotiated trade agreements with Balkan and Latin American countries supplying raw materials. As payment was in Reich Marks, they did not add to the balance of trade deficit. Third, is the level of Government deficit spending through the use of The other mechanism was MEFO bills. Eventually Schacht fell out of favor with Hitler, both because he wanted to reduce deficit spending (which would have neant curtailing rearmament) and because he spoke out against NAZI attacks on Jews. Schacht as early as 1935 was speaking publicly against "unlawful activities" employed against Jews. The economic crisis of 1935-36 caused Schacht and Price Commissioner Dr. Carl Friedrich Goerdeler to reconsider the mounting deficits. They urged a return to free-market economics, cuts in military spending, a shift away from autarkic and protectionist policies, and stopping the drift toward a statist economy. Reich Marshall Hermann Göring opposed those steps and was generally supported by Hitler. The implementation of the Four Year Plan managed by Göring meant that he had won the debate (1936). Schacht resigned as Economic Minister (1937), although Hitler kept him own as President of the Reichsbank for 2 more years so as not to disturb the financial community. Göring became the major force in the economy. As a result, when Hitler ordered the invasion of Poland, Germany was deeply indebted and would have had trouble maintaining the level of deficit spending. Hitler replaced Schacht as Minister of Economy with Walther Funk, a loyal NAZI. He became president of the Reichsbank (1939). Funk served during World War II, but was much less important than Schacht. Hitler placed Reichmarshal Hermann Göring in charge of the war economy (1939). And because the NAZIs financed the War by exploiting the occupied countries, the post of Minister of Economics lost much of its importance. Funk unlike Schacht did not question NAZI actions against the Jews and others. Funk accepted gold deliveries from Himmler's SS as deposits in the Reichbank. As this include gold teeth and rings, the source was obvious. Sacks of gold teeth and rings were found by the Allies after the War. Funk pointedly told subordinates not to ask questions about the SS deposits. At Nuremberg he said, "I should have listened to my wife at the end. She said we'd be better off dropping the whole minister business and moving into a three-bedroom flat."

Price Controls

The German people lived under NAZI price controls. The NAZIs first imposed price controls (1936). This allowed the Governent to re-militarize with materials purchased at prices below market levels. Price controls also kept the inflation numbers down, but of course distorted economic activity. Companies whose profits are limited do not hire additioinal people and expnd. This in the long term saps the vitality of the economy. As Germany was no longger attempting to export nd instead financing its economy through borriowing/defecit spending, the consequences were not immediately apparen, but eventually oulkd have been hd Germny not lunched the War.


Hitler and the NAZIs planned from the beginning a massive rearmament program. NAZI propaganda promoted the idea that Germany must rearm. [Riegler] The NAZIs did not, however, begin a massive rearmament program immediately upon seizing power in 1933. The Weimar Republic Goverment itself has spomsored secret armanents programs in violation of the Versailles Treaty. The NAZIs did sharply expand weapon reseearch. The German military expanded in secret during 1933-34. Hitler by March 1935, felt suffucently secure to publicize his military. The NAZIs announced that they expansion - which broke the terms of the Versailles Treaty. Europe learned that the Nazis had a modern 2,500 plane Luftwaffe and a Wehrmacht with 300,000 men. Hitler publicly announced that he was insituting a compulsory military conscription and planned to expand the Wehrmacht to 550,000 men. Actual araments production began in earnest in 1936. The NAZIs in 1936 doubled armamets spending over 1935 levels. It was in 1936 that NAZI arms spending first exceeeded the combined total for transportation and construction spending. The nature of arms spending also increased. NAZI arms spending initially focused on research, development, and capital investment. The NAZIs in 1936 began concentrating on producing actual military equipment. This is one of the least economically beneficial types of government spending.

Jewish employment and property

The first NAZI economic action aimed at Jewswas a nation-wide boycott ofJewish doctors, shops, lawyers and stores (April 1, 1933). The first Jews who lost their jobs under NAZI rule were government employees--civil servants. This was done with the Law for the Restoration of the Professional Civil Service" (April 7, 1933).. It excluded Jewish and 'politically unreliable' civil servants and employees from state service. The Law included the first formulation of the Aryan Paragraph, a regulation that would be used to exclude Jews (and other 'non-Aryans') from organizations, professions, and other aspects of national life. Next came educational institutions. A new degre restricted the number of Jewish students at German schools and universities (April 1933). Days later new degrees curtailed 'Jewish activity' in the medical and legal professions. Soon after, decrees restricted the payment of Jewish doctors with funds from public (state) health insurance programs. Next was the dismissal of teachhers at all levels. These actions began the removal of Jews fron well paying jobs and positions of aithority over Aryans. It mean that Jews had to seek employment in manual labor or menial positions. It waa a little more complicated firing the many Jewish employees of provate concerns. The Deutsche Arbeitsfront (German Labor Front, DAF) changed tht. The DAF issued work-books to all members with details on each worker's employment record. Workers could not obtain jobs without a DAF work book. And Jews were excluded from the DAF. Thus very quickly in NAZI Germany, Jews at all levels of society found it increasingly difficult to make a living and support their families. With the Nuremberg Laws (1935), the NAZI Government began even more draconial economic measures aginst Jews. Authorities banned Jews from all professional jobs, effectively preventing them from engaging in education, politics, higher education and industry. NAZI officials initiated the process of 'Aryanizing' Jewish businesses. THis meant the dismissal of Jewish workers and managers of a company and/or the seizure of Jewish-owned businesses by Aryan Germans who were able to buy assetts at bargain-basement prices set by government or Nazi party officials. Jews had to accept what ever they wee offered. Authorities finally launched measures to steal the remaining property of the increasingly iolated Jewish community. Jews had to register their property (1937). The government was prohibited fom awarding contracts to Jewish businesses (March 1, 1938). The government forbade Jewish doctors to treat non-Jews, and revoked the licenses of Jewish lawyers to practice law (Sptember 30). With Kristallnacht, NAZI authorities abandoned all pretense at civilized behavor (November 9-10, 1938). The NAZI pogrom was an opportunity to speed up Aryanization efforts. Most Jewish men were arrested and incarcerated in concentration camps where they were brutalized and often forced to sign over assetts. Further decress physically isolated Jews from their other Germans and national life. The children were barred from public schools. New regulations prohibited Jews from from cinemas, theaters, and sports facilities. Municipal authorities prohibited Jews from entering designated Aryan zones. German decrees and ordinances expanded the ban on Jews in professional life. Even before Hitler launched the War, almost all Jewish concerns had either gone bnkrupt under financial pressure or closed because of declining profits. Those not closed had been forced to sell out to the Nazi German government or to inf;uential individual NAZIs.

Four Year Plan (1936-40)

The Four Year Plan was the second NAZI economic recovery plan. Hjalmar Schacht was Hitler's President of the Reichsbank and Minister of Economics. He this oversaw the first NAZI economic recovery program. This involved borrowing large sums, much of which was used to finance rearmament. The level of borrowing was hidden to the public and international lenders. Schacht had the skills needed to do this. Schacht was actually aware that if the level of debt became know that Germany would have to declare bankruptcy with disastrous economic consequences. He tried to convince Hitler to scale back military spending. Hitler would not hear of it. Thus a year after resuming conscription and announcing the creation of the Luftwaffe, he put the second NAZI economic program in the hands of Reich Marshal Herman Göring. He was given enormous power, including the authority to: 1) acquire property and businesses, 2) issue orders to industrial concerns, 3) rechannel financing, and 4) direct policy. Hitler replaced Schacht with Walter Funk. Hitler no longer needed a man with skills and ideas, but only someone to follow his orders. The second NAZI economic recovery program became known as the Four Year Plan. It was a series of economic reforms with the purpose making Germany self-sufficient (1936-40). Unannounced was that the reason self-sufficiency was so important was that Hitler planned to go to War and wanted Germany to be less vulnerable to a naval blockade that so weakened the World War I effort. The NAZIs also believed that making Germany self sufficient and less dependent on imports would reduce unemployment. A high priority was building up the nation's military capability and rearming the military forces. It was the beginning of placing the German economy on a war footing. This meant violating Versailles Treaty ending World War I. Other goals included increasing synthetic fiber production, increasing automobile production; initiating building and architectural projects, and developing the Autobahn system. Public works projects under the direction of Fritz Todt, a Hitler intimate. Göring used the Four Year Plan to enrich himself personally. He directed enormous sums toward military preparations. Göring was a heavy handed, if somewhat chaotic, administrator. He make huge demands of his staff. He fired civil servants with no explntion. He created and absolutely controlled a General Council. He determined allocations of foreign exchange, raw materials, and labor. He had his hand on the foot levers of economic policy: controlling agricultural policy, setting price controls, determing industrial investment, and managing foreign trade. The decesions he made were often based on personal whim and benefit rather than informed assessments. While heavy handd, he did not involve himself in detail or devote the time to the many tasks that such enormous responsibility demanded. More importantly, however, what he did not do was to prepare Germany for total war. He did not address the diversion of resources for the pet projects of local NAZIs. And he often made appointment based on Party loyalty and not competence. These and other inefficiencies would not be addressed until Hitler appointed Albert Speer armaments minister (1942). Göring created the Reichwerke to increase pressure on industry to cooperate with the Four Year Plan and to operate the industrial assets of countries seized by the NAZIS, beginning in Austria (1937). Schacht resigned and largely withdrew from public service.

German Großraum

A fundamental principle of geopolitics is the principle of the Großraum (Great Area). [Schmitt] The idea was formulated by a strategic German thinker in the 19th century. He saw the Großraum as the foundation of the science of international law and international relations. A Grossraum is an area dominated by a central power representing a distinct political idea. This idea appears to have always been formulated with a specific opponent in mind. Hitler had several enemies in mind, some of which had not yet formulated, a Großraum. Hitler like President Putin today was heavily influenced by the idea of a Großraum. Hitler knew very well that the Germany he comtrolled in 1939 was not an over-powering Großraum. That is why he pressed for an early militay action while Germany still had the advantage achieved by his rapid rermamet program. The victory in the West provided Hitler what he had longed for in Mein Kampf, a strategic base approaching a Großraum. As a result of his victory in the West, Hitler not only conquered France along with the Netherlands and Belgium, but now was able to force much of the rest of Europe to throw in their lot with him. The Finns out of fear of the Soviets made common cause. The Swedes and Swiss remained neutral, but guaranteed to the Germans that they would maintain trade contacs and were esentially absorbed within the economic sphere of the German Großraum. Swedish iron ore was vital. The Romanians uderstanding the Germans were now the masters of Europe reoritened their trade with Germany, especially their vital oil exports. The Großraum which Hiter had constucted by 1941 was one of the great powers, in sharp contrast to the Germany he seized controlof in 1933. It had a larger population than Britain (even with the Dominions), the United States, Japan, or the Soviet Union and it now had a larger econony with which to conduct the War. [Tooze, p.384.] There were, however, serios weaknesses in Hitler's new Großraum. It was not self-sufficient in iron ore and mamy other strategic raw materials including cobalt, copper, titanium and other metals. By far, however, the most serious problem was energy (oil and coal). And while seizing French stocks brought a temoprary respite, German sucesses actually worsened the German energy situation (coal and oil) It might be thought that the Germans could just seize the energy from the occupied countrues, which they did to an extent. But this was woyld have brought the occupied economies to a standstill which would have meant there would have been been nothing to exploit. The problem for the Germans as that the occupied and associated countries (Italy, Sweden, and Switzerland) were net energy importers (both coal and oil). Coal at the time was the primary industrial and home heating fuel. Sweden wihout the coal which had been obtained from Britain would have no way of transporing iron ore to Germany unless the Germans furnished the coal. France produced coal, but 40 percent of its coal supply had to be imported, mostly from Britain before the war. And we are not talking about small amounts. Austria, Denmark, Italy, Normay, Sweden, and Switzerland all imported over half of their coal, in some cases 100 percent. [Lewis, p. 116.] And most of that imported coal came from Britain. So if the economies of these nations were to function, the Germans had to supply coal from their already tight supplies. Limited energy supplies meant that the ecinomies of the occupied countries declined preciptously. As a result, the Germans could not exploit the productive potential of the occupied countries as they had hoped. Hitler used the French to support his war effort, but to so so, he had to supply the French with coal. His policies and attitudes toward Vichy and the French as well as limited energy supplies prevented the NAZIs from fully harnessing the French economy.) There was an even more serious defecit in oil. So rather than solving the Reich's serious enrgy probelm, the great successes in the West actully made the situation worse. The Germans were forced to actually increase energy exports. This is in sharp contrast to the Anglo-American situation which some authors describe as sailing to victory on a sea of oil. And while the economy of the NAZI Großraum declined, the Anglo-American economies boomed. And Hitler's energy it explains why Hitler was so dependent on Soviet shipments and why he decided to take the momentous step of invading the Soviet Union. There is considerable evidence that Hitler assumed that the campaign in the East would be another short summer campaign after which he could begin what he called the 'War against continents'. It would be the German Großraum bustressed by the resources of the East against the Anglo-American Großraum.

NAZI World War II Economic Policies

Hitler launched World War II with the world's third largest ecomomy. The German numbers are somewhat misleading. Germany (($18 billion) had some of the leading world corporations with cutting edge technology. The Germans also had a very substantial research and devlopment capability. This can be seen in the number of Germans winning Nobel prizes. Ironically, the German anti-Semetic campaign would drive many leding scientists (espcilly phsicists) to Britain and America which would eventually aid the Allied war effort. The Germans despite their industrial and scientific prowess had not, however, developed American mass production techniques especially in the autimotive industry, in part because of the relatively small size of the domestic market. German war production would be affected by this. The Germans produced some of the fimest wepons of the War. They were often beautifully engineered, but complicated to produce and maintain in the field. American abd Soviet weapons and vehicles were often less technically refied, but easier to mass pioduce and maintain in the field. The most productive German automobile manufacturer was Opel, asubsiduary of General Motors. And whole the Germans had many advanced corporations, a sizeable part of the manufactured output was produced by small or medium-sized companies operating what might be called workshops. Armaments Minister Speer immeduately upon his appointment (1942), launched an effort to ratiinalizae this compicated system of s,all companies to increase production. Germany also had a relatively inefficent agricultural sector. Despite its vaunted reputation, the average American had an income and life-style beyond the imagination of the average German. And that economic difference affected the military power that the two ecomnomies were capable of generating.

War Economics--Decade Trends

Economics played a central role in World War II. Hitler's rearament program was bankrupting NAZI Germany. It is questionable how long Hitler could have continued his rearament program if he had not taken Germany to war in September 1939. Germany proceeded to loot the national banks of the conquered nations. The persecuution of the Jews and the Holcaust was also used in part to finance the War. The NAZIs very effectively integrated the economiy of Czecheslovakia into the German arms industry. Germany did not go to a full war footing until late in the War. Nor did Germany effectively cooperate in war production with its Axis allies. Germany also did not effectively use the economies and industries of the captive nations, especially the countries occupied in Western Europe. The Germans did use the conquered countries as a source of slave labor. German ineffiency in coordinating with Allies stands in sharp contrast to the close copperation between Britain and America. President Roosevelt began mobilizing the Arsenal of democracy, the vast American economy well before America went to war. Very extensive cooperation in weapons development and production also began between Britain and American before American ntered the War. Hitler avoided putting Germany on a full war footing, because he thought the War had been won and he did not want shortages and rationing to deminish domestic support for the War. Only after the setbacks in Russia, especially Stalingrad, did Hitler turn to Speer and give him the authority to fully convert the German economy for war. Fortunally for the world, by then it was to late to stop the expanding force of the Soviet Union in the East and the Western allies in the West.


Germsny' greastest source of power was uits large industrial economy, second only to that iof the United States. And its larger single component was heavy industry, just the industries needed to produce military weaponry. At the center if this was Germany's large steel industry. There were other metal industries, including copper. A weak point in World War I was the aluminum industry and NAZI planners gave some prority to expanding it. The NAZI Four-year plan technically expired in 1940. By this time, the "Office of the Four-year plan which ranked as a cabinet-level agency had grown into a huge state beauracracy. And with Göring at its head exercized enormous power. Thus Hitler decided to simply extend it indefinitely. The Office essentially controlled German industry. The Government did not nationalize industry, but it controlled industry not only through direct orders, but by controlling the allocation of basic resources and raw materials. The Reichwerke which had been created to operate industries in occupied countries was the largest industrial enterprise in Europe, if not the world. The Reichwerke was huge, but not efficent. Göring Office did direct production into the military, but it did not signifucantly expand production or introduce efficent methods into tradition-bound German comoanies. And the mamouth Reichwerke was woefully inefficent opratging undr none of the competive pressures thtat brought effiency to private concerns. There was no real pressure to so his because the German victories in the first 2 years of the War werre so overwealming, that Hitler and Göring believed that they had won the War. Te Four Year Plan Rearmament plans were extensive but because of the ealy vuctories, Hitler and Göring they did not fully appreaciate that they did not have the production needed for Total War. Actually this may have been a factor in Hitler advamcing the planned date for war. [Kershaw] There were early warnings. The Wehrmacht had to begin the War with only enough ammunition and shells for 6 weeks of warfare. The ensuing victories gained the Germans contro of foreign industry. This helped to postpone needed reforms. In particular, Hitler desired to continue manufacture of consumer goods to maintain home front morale. Hitler even ordered production curtailed, especially projects not likely to be completed in tome to be used in the War which he yjough would be over in about a year. One of the projcts postponed was jets. Germany was by no means reached the point of indepenence when Hitler launched the War. The Germans acquired additional resources as a result of the War--but significantly not the all imprtant petroleum. Only after setback in the Soviet Union (December 1941), did Hitler begin to see the need to substantially increase production. He chose Albert Speer to oversee increases in producrtion (February 1942). Speer oversaw the reforms and production increases vital to the War effort, but by this time it was aleady too late. Even with Speer's efficencies, there was no way that Germany could match the nustria output of the Inited States, let alone when it was combined withb Britih ans Soviet out put.


One of the reasons Germany was defeated in World War I is that support for the War and the imperial government collapsed on the home front. The Allies also cracked the Western Front, but the German Aemy could have continued the War for another year. The Rhine would have been a formidable natural barrier. It was the collapse of the home front tht ended the War in November. A major reason for the collapse of the home front was the substantial decline in agricultural production. It is interesting that Hitler after the War focused on the collapse of the home front and not the battlefield defeat of the German Army on the Western Front. (This was accomplished with an American Army of only about 1 million in France. (The United States was building an army of over 4 million at the time of the German requested Armistice.) As a result, the NAZIs in World War II gave considerable attention to supplying the home front with food. This was accomplished in a variety of ways. First, the Germans looted occupied countries of food. This was done rutlessy in the East and in a more civolized, but none the less efficent matter in the West. Little consideration was given to the civilians in the occupied countries. There was , for example, a dreadful famine in Greece. Second, the NAZIs used POWs as agricultural labor. Many Polish and Soviet POWs were essentiallu y killed by exposure and starvation. The French POWs were treated more correctly. Third, the HJ was used as a source of agricultural labor. This was done in a variety of ways. The children were set up in camps for this purpose. Some of the KLV camps were also used. Fourth, an effective rationing program was established. The efforts worked to supply both the military and civilians with food. Food began to become more scarce as German military defeats began to reduce the area in the East that could be pillaged. The system, however, began to collapse in late 1944 as the Allied air offensive began to destroy the German tranportation network.

Raw Materials

Germany lacked many vital materials needed to fight a war, especially an extended war with other major powers with better access to raw materials. Germany lacked access to a substantil number of raw materials, at least in the quantities needed for war. It even needed to import iron ore. By far the most seriouys shortage was oil. Hitler's assessment was that he could dominae or invade neigboring countries with a series of quick campaigns to obtain the resources he needed. Here his major goal was to acquire the vast resources of the East by invading the Soviet Union. With the resources of the East, Germany would be invulnerable from the Royal Navy blockade that crippled Germany in World War I. With the resources of the East, Germany would be able to fight war in perpetuity.


The primary method of transport in Germany before and during the War was the rail system. Grman had pne of the finest, if not the best rail system in the world. The German economy was dependent of the rail system and the Whermacht depended on the system for both the movement of men and equipment. A great deal of attention has been given to Germany's new Autobahns, but they actually carried little traffic. Most photographs of the Autobahns show thm largely empty with not cars and trucks or even a few. ctually the highly mechanized American Army would make more use of them in the final months of the war than the poorly mechanized, gsoline-starved Wehrmacht. River barges were of some importance, but it was the rail system that knit Germany together and crried the great bulk of industril production, raw material, and agricultural products as well s passenger traffic. The rail system was state owned and managed by a German Government agency -- the Deutsche Reichsbahn Gesellschaft (DRG often DR for short). It was a civilian/commercial ebtrprise, only operated by the Government. This did not change with the onset of the War. Germany's economy still had to function and the economy was a primary support for the war effort. The need to move men and equipmen, however, became of primary importance. As a result the DR was placed under the guidance of the German Army General Staff (OKH) and a Transportation Division was established which issued aide range of regulations governing the operation of the DR. The whrmacht was not a fully mechanized military force and thus the railways were essential. But even the motorized units had to rely on the rail system. You did not drive tanks and atilley to the battlefield as ll as other equipment and spolies, you transpprted thm by rail. The Wehrmacht establishd its own rail arm. Despite the military's control of the DR during the war, the DR also continued to operate to fullfill needs of the German civilian economy. As the War progressed and German conquered one country after another, the DR began supervising rail operations in these countries, as well as in countries like Romania which adhered to the Axis. The DR became deply involved in German war crimes, moving Jews to the ghettoes and death camps in Poland. The killing oprtions could not be effctively run without the support of the DR and laarg numbers of DR personnel were thus fully aware of just whazt they were doing. And the FR alo moved slve and other forced laborers. The DR also played a central role in the explottion and looting of occupied countries. Given its importance to the German war economy, the DR becme a primary target of the the Allid trategic bombing campaign. Bomving rail lines was difficult and the damage easily repaired. This rail marhlling centers were the primary target and they of course were located in or near cities. Severe damage to the R did not, howver, occur until 1944. During 1942-43, the Luftwaffe effectively defended the Reich. Once the long-range P-51 escorts, the Luftwaffe was essentially destroyed (February-March 1944). The 8th Air Force bombing campaign was not pursued intensly, as Gem Eisenhower was given controlld over air forces and the primary effort was focused on France and the support of the D-Day landings. ThrAllied Trnsportation Plan was a key part of the D-Day planning designed to cut off and isolateGerman forces in France, especially units on or near the landing beaches. Finally, control of the 8th Air Force was returned to the air commanders (September 1944). This is when the destruction of the German war economy and the DR began in earnest. The bombr's not only hammered Grmany's industrial ciries and with them every rail marshelling yard of importance, but th P-51s and other aircraft came down on the deck and litteraly destroyed everything that moved throughout the Reich. By the end of the War the once extenive DR rail netwok no longer existed.

World War II Rationing

Subsequently rationing was introduced when the War began. Hitler placed Reichmarshal Hermann Goering in charge of the war economy (1939). He imposed rationing. NAZI rationing was at first limited because the food and consumer goods produced in the occupied countries could be looted. Draconian punishments faced Germans violating the porice control regulations. The NAZIs were so successful in the early years of the War that domestic rationing at first was not introduced. Hitler was at first convinced that it would affect public support of the War if a austere rationing program was to be introduced. NAZI popularity was in fact partially due to the fact that Germany under the NAZIs was relatively prosperous. This was in part due to extensive deficit spending for military production. If Hitler had not launched the War in 1939, the impact of the large and growing NAZI budget and trade eficits would have begun to affect the German economy. Once the War began, however, Hitler wanted to main domestic consumption. He felt that food and other shortages had been a major factor in destroying civilian morale during World War I which of course led to overthrow of the Kaiser and other German monarchies at the end of the War. This was a part of the reason that the Germans were so brutal in occupied countries. One of their tasks was to seize food and ship it back to Germany. I am not sure just when rationing was first introduced. Of course when the War began to go against the Germans in Russia and the Allied bombing effort began to affect domestic production, this changed and a very severe rationing program had to be introduced. The system gave extra rations for men involved in heavy industry. Lower rations were accorded to Jews and Poles in the areas annexed to Germany, but apparently not to the Rhineland Poles. The German ration cupons pictured here is called a Reichseierkarte or Government egg card (figure 1). It was issued in Strassburg during November 1944. Strassburg was a French city, but as it was in Alsace, it had been annexed to the Reich.

Exploiting Occupied Countries

A major question that has not been asequately addressed in the copius scholarship in World War II is how effectively the NAZIs exploited the resources and economic potential of the occupied nations. Germany proceeded to loot the national banks of the conquered nations. Obtaining the gold from the treasuries was critical for the NAZI war effort. The NAZIs oriented the economy toward war production and meeting domestic demand, not internation commerce. Thus critical raw materials from countries they did not conquer (Spain, Portugal, Sweden, Switzerland, and Turkey) had to be purchased with gold. The NAZI success in exploiting the economies is a complicated question. Of course the policies they pursued wee morally reperhensible. This virtually goes without saying. But a very different question is the effectiueness of NAZI policies. Here the record is mixed and the comclusioin dependent on what indices the reader estanlishes. It is undeniable that the NAZIs finnces Hitler's War on the backs of the peoples of the occupied countries. They managed to keep the privations felt in other countries until the last full year of the War, 1944. It was in that year that the Germsan people began to experience the consequences of the War their leadership launched pn their behalf. By this time the stratehic bobing campign reached its intensitiy and the advancing Allied armies meant that the despoiling of the wealth of the occupied countries was no longer possible. For the NAZIs, their whole plan of conquest backfired on them. Hitler's war plan was to seize the resources of the East (essetially the Soviet Union) and use those resources to turn Germany into an unassailable continental power. But this did not occur. Stalin was shipping greater quantities of oil and other critical msaterials to Germany before the NAZI invasion than the Germans were able to obtain after the invasion. The Germans were never able to bring Soviet mine and factory production back on line to any great extent. And most of the agricultural resources of the East were used to feed the Whermacht rather than returned to feed Germany. Germany did nore effectively utilize the resources of occupied Western Europe--especially France. But here too the picture is mixed. While the Germns did exploit the wealth of the capotive nations in the West, what they exploited was the existing wealth and producive csapacity at the samne time that America, Britain, and the Soviet Union were massvely expanding arms production. Germany also did not effectively used the economies and industries of the captive nations, especially the countries occupied in Western Europe. Germany did use the captive nations as a source of raw materials. Romania in particular was a critical source of petroleum. (Romania was a NAZI ally, but coersion was an important factor in forming alliances with coutries like Romania.) Germany did not, however, prove very effective in fully utilizing the indutries of captive nations. France in particular had a large, sophisticated armaments industry. This industry was not converted to support the German armed forces. The economies of France and the Low Countries could have made a major contribution to the NAZI-war effort. The NAZIs in 1940 seemed more concerned in making sure that France would never again be a threat in the West. As a result, therwas not effort to gear up French armaments production. By the time the NAZIs realized that the War was not already won, it was to late to take full advantage of French industrial capacity. Thus planes, tanks, artillery, and other key weapons were not constructed in France for the Germans. Given the industrial forces being marshalled against Germany in America, Britain, and the Soviet Union, the Germans needed tofully utilize the industrial capoacity of the conquered nations. They failed to do so. In part this was because a goal of the NAZIs was to turn neighboiring countries into subservient agricultural countries that would feed agricultural harvests and raw materials to Germany. In the end the criminality of the NAZI world view sewed the seeds of its own production.

Slave and forced labor

Nuremberg procedutor Thomas Dodd declared, "The NAZI foreign labor policy was a policy of mass deportation and mass enslavement ... of underfeeding and overworking foreign laborers, of sibjecting to every form of degradation, brutality, and inhumanity ... a policy which constituted a flagarant violation of the laws of war and the laws of humanity." The NAZIs during World War II implemented a slave and forced labor program to supply needed labor to the German war industry. This program was approved by Hitler months before the 1939 invasion of Poland. The German program as it evolved during the War had two purposes, The primary purpose was two provide workers for German factories and farms as German manpower was to be directed into the armed forces. This was especially important as NAZI idelopgy resisted imploying married women in factories. Allied countries dealt with this problem by bring women into the work force, the proverable Rosie the Rivetor in America. (British and Soviet women were even more significantly brought into the workforce.) NAZI idelogy was involved here. The German Housefrau, however, was to stay home amd produce Aryan babies for future German armies. The other factor was the phenomenal German success at the beginning of the War which left the impression that there was no needed for women to enter the workforce. The secondary purpose was mass deportation and mass enslavement combined with underfeeding and overworking foreign laborers could be used to reduce populations of countries which posed a threat to NAZI Germany, Not only could the labors of these workers be used against their country, but the mistreatment could help reduce both the population of other countries and other ethnic groups, especially the slavs of Eastern Europe.

Food as a Weapon: The Hunger Plan

The German Hunger Plan (der Hungerplan) also called der Backe-Plan or Starvation Plan was a NAZI World War II food management plan. It is sometine called the Backe Plan because he plaed such an important role in planning and implementing the plan. Herbert Backe was an official in the Ministy of Food and evenually appointed to that post. The Ministry was responsible for the German rationing program. Actually there was no single centrally coordinated plan, but several separate if some times related operations. Germany's World War I experience encouraged the idea of using food as a weapon. Hitler was not the first in this rea. Stalin preceeded him by about a decade with the Ukranian famine (1932-33). We are not sure to what extent NAZI officials were aware of this. The NKVD did an efficent job of preventing details from leaking out to the West. And Western Socialists and Communists, including those in Germany did not want to believe the rumors. The desire to use food as a weapon. This combined with the NAZI regime's rush to acceptance eugenics theories as scientific fact resulted in a genocidal brew of genocidal policies. NAZI food policies were different than the Allied blockade policies which were designed to win the War. Part of Hitler's war objectives were the murder of millions of people which sometimes were given a priority over the war effort. The Hunger Plan was not a policy designed to help win the War, although sometimes presented as that. Many of the individuals killed were working in war indistries supporting the German war effort. This actually impeeded the war effort as a labor shortage developed in Germany requiring the introduction of forced labor to man German war industries. Rather the killing of millions Jews and Slavs was a primary German war goal. Hitler asked officials in the Ministry of Food, the agency responsible for rationing, to develop a Starvation Plan, sometimes referred to as the Hunger Plan. The Minister was one of the chief advocates for eugenics in the NAZI heirarchy. The largest elements of the Hunger Plan were: 1) Occupation policies in Poland, 2) Ghetto policies, 3) Starvation of Polish and Soviet POWs, 4) Generalplan Ost. Scholars studying the Hunger Plan provide a somewhat varried list of its elements, lrgely because there was no single, well coordinated NAZI effiort, but rather the work of various officials with similar objectives and values. These include besides Backe, Reicharshall Göring, Reichführer SS Himmler, SS Obergruppenführer Heydrich, and Minister of Food Darré.

Holocaust Economics

The destruction of the Jews was a major NAZI war aim. As the War turned against the NAZIs, it became the only war goal that Hitler was able to achieve. The Holocaust is usally approached understandably on moral grounds. But there are other dimensions to the Holocaust. And one of those dimensions is economics. What were the economics of the Holocaust to the NAZI war effort? There wre some economic benefits to the NAZIs. One step in the Holocaust was to enpoverish Jews. This was not only a lucrative undetaking, but once destitute the Jews were made even more vulnerable. Confiscating the property of Jews provided valuables that could be used to reward the party faithful or German soldiers and officials during the War. The money and valuables sttollen from the Jews was suposed to go to the Government. Golden and other valuables collected by the SS was deposited in the Reich Bank. Often SA, SS, and other NAZis kept valuables for their own personal use. Some SS men were wen proceuted for this during the war. We have never seen an accounting as to how much loot taken from the Jews was actually used to finance the NAZI war effort. We are not sure if such a calcilation has ever been made. It is clear that the NAZIs desperately needed gold and hard currency. This was not necessary countries they occupied, even austensible allies like Romania where they simply seized the oil and other resouces. This was not possible for unoccupied countries (Portugal, Spain, Sweden, and Switzerland). Critical materials like wolfram and iron ore had to be purchased from those countries. And as German industry was fully committed to the war, goods were not available for export. The NAZIs needed gold or cash. There was, however, a major economic downside to killing Jews. The Germans needed labor for the war effort. As the War went against Germany, every resoinably healthy German male of military age was conscripted. This and the expansion of production required labor. The NAZIs killed about 6 million Jews. This meant roughly about 4 million productive workers (discounting children and the elderly), many with skills that could have been productively utilized. This was an enormously valuable resource and some NAZI officials wanted to utilize it. The Jews trapped in NAZI ghettos were hopeful that the usefulness of their labor would save them. Only Hitler could have resolved the competing proposals among his subordinates and made the decesion for murder. The murder of 4 million productive workers was a major detriment to the NAZI war effort. Germany began the War with an industrial capacity far below that of its adversaris. The murder of 6 million Jews, in addition to the barbarity of the act, is one of the ways in which the NAZIs failed to capitalize on the polential industrial strength of the occupied countries.


Carr, Craig. E-mail message, July 23, 2012.

Gilbert, Martin. Winston Churchill: The Wilderness Years (2011).

Hanby, Alonzo. For the Survival of Democracy.

Liu, Henry C. K. "Nazism and the German Economic Miracle," Asia Times Online (May 24, 2005).

Kershaw, Ian.

Lewis, C. Nazi Europe and World Trade (Washington: 1941).

Schmitt, Carl. Völkerrechtlishe Grossraumordnung mit Interventionsverbot für Raumfremde Mächte.

Seligmann, Matthew S., John Davison, and John McDonald. Daily Life in Hitler's Germany.

Tooze, Adam. The Wages if Destruction: The Making and Breaking of th Nai Economy (Penguin Group: New York, 2007), 800p. Tooze provis a detiled table compiled fro various sources.


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Created: 2:55 AM 8/6/2008
Last updated: 1:45 AM 8/5/2019