How the Economy of Nazi Germany Created

Like many other Western nations at the time, Germany suffered the economic effects of the Great Depression with unemployment soaring around the Wall Street Crash of 1929.[1] When Adolf Hitler became Chancellor of Germany in 1933, he introduced policies aimed at improving the economy. The changes included privatization of state industries, tariffs on imports, and an attempt to achieve autarky (national economic self-sufficiency). Weekly earnings increased by 19% in real terms from 1933 to 1939,[2] 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.[3] In addition, reduced foreign trade meant rationing of consumer goods like poultry, fruit, and clothing for many Germans.[4]

The Nazis believed in war 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.[5] As such, almost immediately after coming to power, they embarked on a vast program of military rearmament, which quickly dwarfed civilian investment.[6] During the 1930s, Nazi Germany increased its military spending faster than any other state in peacetime,[7] and the military eventually came to represent the majority of the German economy in the 1940s.[8] 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.[9] Such plunder did occur, but its results fell far short of Nazi expectations.[10] The Nazi economy has been described as dirigiste by several scholars.[11][12] Overall, according to historian Richard Overy, the Nazi war economy was a mixed economy that combined free markets with central planning; Overy describes it as being somewhere in between the command economy of the Soviet Union and the capitalist system of the United States.[13]

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.[14] Cartels and monopolies were encouraged at the expense of small businesses, even though the Nazis had received considerable electoral support from small business owners.[15]

Nazi Germany maintained a supply of slave labor, composed of prisoners and concentration camp inmates, which was greatly expanded after the beginning of World War II. In Poland alone, some five million people (including Polish Jews) were used as slave labor throughout the war.[16] Among the slave laborers in the occupied territories, hundreds of thousands were used by leading German corporations including Thyssen, Krupp, IG Farben, Bosch, Blaupunkt, Daimler-Benz, Demag, Henschel, Junkers, Messerschmitt, Siemens, and Volkswagen, as well as the Dutch corporation Philips.[17] 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.[18]