The Germany Economy Under Hitler
From the prosperity of the empire during the Wilhelmine era (1890-1914), Germany plunged into World War I, a war it was to lose and one that spawned many of the economic crises that would destroy the successor Weimar Republic (1918-33). Even the British economist John Maynard Keynes denounced the 1919 Treaty of Versailles as ruinous to German and global prosperity. The war and the treaty were followed by the Great Inflation of the early 1920s that wreaked havoc on Germany's social structure and political stability. During that inflation, the value of the nation's currency, the Reichsmark, collapsed from 8.9 per US$1 in 1918 to 4.2 trillion per US$1 by November 1923. Then, after a brief period of prosperity during the mid-1920s, came the Great Depression, which destroyed what remained of the German middle class and paved the way for the dictatorship of Adolf Hitler.
Had it not been for the economic collapse that began with the Wall Street stock market crash of October 1929, Hitler probably would not have come to power. The Great Depression hit Germany hard because the German economy's well-being depended on short-term loans from the United States. Once these loans were recalled, Germany was devastated. Unemployment went from 8.5 percent in 1929 to 14 percent in 1930, to 21.9 percent in 1931, and, at its peak, to 29.9 percent in 1932. Compounding the effects of the Depression were the drastic economic measures taken by Center Party politician Heinrich Brüning, who served as chancellor from March 1930 until the end of May 1932. Brüning's budget cuts were designed to cause so much misery that the Allies would excuse Germany from making any further reparations payments. In this at least, Brüning succeeded. United States president Herbert Hoover declared a "reparations moratorium" in 1932. In the meantime, the Depression deepened, and social discontent intensified to the point that Germany seemed on the verge of civil war. In times of desperation, voters are ready for extreme solutions, and the NSDAP exploited the situation.
Hitler's rise to power in Germany was about as directly Depression-related as any historical event can be. German industrial unemployment was even worse than in the United States. The conservative regime of Chancellor Bruning was hamstrung by international financial agreements and pursued budget-balancing at all costs, while doing little to provide relief for the unemployed. One of the chief factors making for Hitler's success was the mass unemployment that occurred in Germany from 1929 onwards. 'Fhe number of able-bodied young men with nothing to do became delinquents and gangsters. The elderly honest folk were truly frightened of them, and it was easy for Hitler to raise the bogey of communism, and thus harness all these gangsters to the caterpillars of his Nazi panzers. He relieved unemployment at once by getting these Nibelung hordes to work on rearmament. By dressing his gangsters in uniforms, and thus giving them a semblance of Teutonic respectability, he was able to induce millions of Germans to revert to the regimentation of Prussian militarism.
Hitler achieved notable economic and diplomatic successes during the first five years of his rule. Hitler substantially revived the economy. Unemployment, so pivotal in bringing him to power, had dropped from 6 million to less than 1 million between 1933 and 1937, this at a time when the US was still wallowing in the Depression. National production and income doubled during the same period. This was partly owing to Hitler's rearmament policy, but also to more benign forms of public spending. The world's first major highway system, the autobahns, began snaking across the country, and there was talk of providing every citizen with a cheap, standardized car, the people's car, or Volkswagen.
Nazism took root in the world's most powerful scientific culture, boasting half of the world's Nobel Prizes and a sizable fraction of the world's patents. German science and medicine were the envy of the world, and it was to Germany — the "land of scholars and poets" — that many academic hopefuls flocked to cut their scientific teeth.
In the square in front of the University of Berlin the Nazis held their festival of the "Book Burnings" on the night of May 10, 1933. After destroying valuable collections of exhibits and research data, Berlin Nazis went on to this square where the books of the following authors — among others — were burned: Sigmund Freud, Alfred Kerr, Theodor Wolff, Emil Ludwig, Frederich Engels, Georg Bernhard, Bertha von Suttner, Vandevelde, Egon Kisch, Liepmann, Heinrich, Thomas and Klaus Mann, Lion Feuchtwanger, Theodore Plivier, Erich Maria Remarque, Arthur Schnitzler, Joseph Wasserman, Ernst Toller, Stefan Zweig, Franz Werfel, George Kaiser. The works of all these artists and many more were banned in Nazi Germany.
The Third Reich cannot be thought of as an icebound retreat into intellectual slumber: think of television, jet-propelled aircraft, guided missiles, electronic computers, the electron microscope, atomic fission, data processing, industrial murder factories, and racial research—all of which either were first developed in Nazi Germany or reached their high point at that time. There are innovations in the area of basic physics (nuclear fission, discovered by Otto Hahn and Lise Meitner in 1938), hormone and vitamin research, automotive engineering (the Volkswagen was supposed to be the "people's car"), pharmacology, and synthetic gasoline and rubber (I. G. Farben in 1942 controlled more than 90 percent of the world's synthetic rubber production). The nerve gas sarin and the chemical warfare agent tabun are both I. G. Farben inventions of Third Reich vintage — as is the opiate methadone, synthesized in 1941, and Demerol, created about this time with the name "pethidine."
There are many other examples. Nazi aeronautic engineers designed the first intercontinental ballistic missiles—never actually assembled—and it was Germans in the 1940s who built the first jet ejection seat. German engineers built the world's first autobahns, and the world's first magnetic tape recording is of a speech by Hitler. The first television broadcast strong enough to escape the planet featured Hitler's speech at the opening of the 1936 Berlin Olympics.
The new social welfare system that developed after unification in 1871 used existing decentralized structures to provide an ever increasing range of benefits. Because of this, most social welfare programs in Germany are not administered by state bureaucracies. Instead, except for the period when Germany was ruled by the regime of Adolf Hitler (1933-45) which established a state-run social welfare program, the organizations implementing social policy had been private voluntary entities, some of which dated from the Middle Ages.
In 1927 a national unemployment insurance program was established. But these gains in social insurance and assistance programs were threatened by the Great Depression of the early 1930s, however. Reduced wages meant smaller contributions to social insurance and assistance programs, all of which were soon on the brink of bankruptcy. The Hitler regime introduced major changes in individual programs and program administration. In 1934 the regime dismantled the self-governance structure of all social insurance programs and appointed directors who reported to the central authorities. The regime made many improvements in social insurance programs and benefits, but these changes were conceived to serve the regime rather than the population. In 1938 artisans came to be covered under compulsory social insurance, and in 1941 public health insurance coverage was extended to pensioners. In 1942 all wage-earners regardless of occupation were covered by accident insurance, health care became unlimited, and maternity leave was extended to twelve fully paid weeks with job protection.
During the Hitler era (1933-45), the economy developed a hothouse prosperity, supported with high government subsidies to those sectors that Hitler favored because they gave Germany military power and economic autarchy, that is, economic independence from the global economy. Hitler claimed to have achieved full employment in Germany by 1939. There were still five million Americans unemployed at the end of 1941. Hitler's Germany had long since absorbed its unemployment by building arms and German infrastructure.
Finally, the entire enterprise collapsed in the Stunde Null (Zero Hour), when Germany lay in ruins at the end of World War II in May 1945 and when every German knew that he or she had to begin life all over again. The first several years after World War II were years of bitter penury for the Germans. Their land, their homes, and their property lay in ruin. Millions were forced to flee with nothing but the clothes on their backs. Tens of millions did not have enough to eat or to wear.