IB History Economic Policies Including Schacht's New Plan and Goring's Four-year Plan Notes

Nazi Economic Recovery Was Real, But It Was Built for War, Not Prosperity

Schacht's New Plan: Recovery Through Controlled Rearmament

1. When Hitler became Chancellor in January 1933, Germany had over 6 million unemployed. By 1938, official unemployment had fallen to under 500,000. This dramatic recovery was the most important source of popular support for the regime in its early years. But the methods used to achieve it, and the direction of the economy after 1936, reveal that Nazi economic policy was not a coherent program for prosperity but a preparation for war.
2. The New Plan (1934): Hjalmar Schacht, the conservative banker who served as President of the Reichsbank and Economics Minister, introduced the New Plan in 1934, imposing strict controls on imports and foreign exchange to stop Germany running out of currency while rearmament accelerated.
   1. MEFO bills: Schacht's most ingenious device was the MEFO bill, a promissory note issued by a fictitious company (Metallurgische Forschungsgesellschaft) used to pay arms manufacturers. Since MEFO bills were not officially government debt, they kept rearmament costs off the public balance sheet for several years.

The Destruction of Independent Labour

1. Recovery came with a price for organised workers. Independent trade unions were dissolved on 2 May 1933 and replaced by the German Labour Front, which abolished free collective bargaining and the legal right to strike.
   1. State-appointed Trustees of Labour set wages and working conditions region by region, and later, as labour shortages emerged, the regime restricted workers' freedom to move between jobs.
2. Public works such as road building, housing, and land improvement created some of the recovery's early jobs, though the propaganda-heavy Autobahn programme accounted for only a modest share of total employment gains.
   1. The reintroduction of conscription in 1935 removed young men from the unemployment count, and official figures excluded women and Jews from some employment measures, flattering the regime's headline statistics.

The Four-Year Plan and the Turn Toward War

1. By 1936, Schacht was becoming alarmed by the pace of rearmament and its inflationary pressures. Hitler resolved the debate by issuing a secret memorandum in August 1936 declaring that the German army and economy must be "ready for war within four years." He placed Hermann Goering in charge of a new Four-Year Plan with sweeping authority over the economy.

1. Autarky: the Four-Year Plan pursued economic self-sufficiency, reducing Germany's dependence on imported raw materials by developing synthetic substitutes. Germany produced synthetic rubber (Buna), synthetic fuel, and aluminum at uneconomic cost.

1. The Hermann Goering Works: Goering oversaw the construction of this massive state-owned steel complex as a flagship of the drive for self-sufficiency.

1. Rearmament reshaped German industry. Krupp, IG Farben, Siemens, and Daimler-Benz all won lucrative state armaments contracts across steel, chemicals, engineering, vehicles, and aircraft.
   1. Private ownership survived, but state contracts and controls increasingly dictated what large firms produced, while smaller businesses, denied comparable orders, struggled against shortages and larger competitors.
   2. Real wages recovered more slowly than employment, and working hours lengthened in several sectors even as headline unemployment fell to near zero.
2. Schacht's resignation (1937): Schacht resigned as Economics Minister when he concluded that the pace of rearmament made sustainable civilian prosperity impossible.
3. The results by 1939: unemployment was effectively eliminated, and the armed forces had been rebuilt from near-zero in 1933 to a war machine capable of conquering most of Europe.
   1. The costs: living standards for ordinary workers remained below their 1928 levels, consumer goods were scarce, and the debt burden was enormous. The economy had been built not for German prosperity but for German conquest.
   2. The regime's own slogan, "guns before butter", made the priority explicit: import controls limited access to food, textiles, and consumer goods, and price controls held down official prices even as shortages reduced choice and quality.
   3. The Labour Front's Strength Through Joy programme offered subsidised holidays, sport, and concerts to compensate workers for lost union rights. Its Volkswagen savings scheme collected weekly payments from hundreds of thousands of workers, almost none of whom received a car before the war.

1. Peasants received price protection through the Reich Food Estate, but this did not resolve rural labour shortages, rising debt, or Germany's continued dependence on food imports.

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