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When Adolf Hitler became Chancellor on 30 January 1933, Germany was still in the depths of the Great Depression. Unemployment stood at roughly six million — a third of the workforce. Industrial production was barely half its 1929 level. Banks had collapsed in 1931; the currency was nominally stable but confidence was not. Within six years, Nazi Germany's official statistics reported almost no unemployment, the autobahn network under construction, a rebuilt army and air force, and a population whose leisure was organised by the state. How that transformation was achieved, at what economic cost, and how far ordinary workers benefited, are among the most contested questions in the historiography of the Third Reich. This lesson examines the economic policies of Schacht and Göring, the Strength Through Joy movement, the German Labour Front, the claimed collapse in unemployment, and the debate on living standards.
The key figure in early Nazi economic policy was Hjalmar Schacht, a conservative banker rather than a Nazi ideologue. Schacht was appointed President of the Reichsbank in March 1933 and Minister of Economics in July 1934. His task was to finance rearmament and public works without provoking another inflation crisis.
His method was deficit spending funded by a device he invented called Mefo bills (Mefo-Wechsel). The Metallurgical Research Company (Metallurgische Forschungsgesellschaft, "Mefo") was a paper company with no real business; it issued promissory notes, guaranteed by the government, which armaments manufacturers accepted as payment. The Mefo bills could be exchanged at the Reichsbank. This off-the-books borrowing disguised the scale of rearmament from both the Reichstag and foreign observers. Between 1934 and 1938 Mefo bills financed around 12 billion Reichsmarks of rearmament spending.
Schacht's broader programme, the New Plan of September 1934, addressed Germany's chronic balance-of-payments problem. Rearmament required imported raw materials (iron ore, rubber, oil), but Germany lacked foreign currency to pay for them. The New Plan therefore:
| Policy | Year | Key feature |
|---|---|---|
| Reichsbank presidency | March 1933 | Schacht appointed |
| Mefo bills | 1934–38 | Disguised rearmament funding |
| Minister of Economics | July 1934 | Schacht given economic portfolio |
| New Plan | September 1934 | Exchange controls, bilateral trade, autarky goal |
By 1936 Schacht was warning Hitler that continued rearmament at the existing pace would produce a balance-of-payments crisis. Hitler's response was not to slow down but to push harder. In a secret memorandum of August 1936 he set two goals: the German army was to be "operational" within four years, and the economy "fit for war" within four years.
The Four Year Plan was launched in September 1936 under Hermann Göring, who had no economic training but was given sweeping powers over raw materials, labour allocation and industrial priorities. The plan pursued autarky more aggressively than Schacht's New Plan:
Schacht, marginalised by Göring, resigned as Minister of Economics in November 1937 and from the Reichsbank in January 1939. The economy was now being run explicitly to prepare for war.
The plan's success was partial. Synthetic rubber production reached only around 20% of needs by 1939; synthetic oil reached roughly 40%. Germany remained dependent on imports for oil (mostly from Romania) and iron ore (from Sweden). But the plan did prepare the economy for early-war conditions and produced the industrial structures — IG Farben's Buna plants, the Göring Works steel mills — that sustained the war effort until 1944.
With independent trade unions dissolved on 2 May 1933, workers were enrolled in the German Labour Front (Deutsche Arbeitsfront, DAF), run by Robert Ley. The DAF was not a union; it had no right to negotiate wages and no right to call strikes. Wage levels were set by regional "Trustees of Labour" appointed by the government.
The DAF took over the property and funds of the dissolved unions, together with that of the confiscated SPD — giving it enormous resources. Within two years it was the largest Nazi mass organisation, with around 22 million members. Its two flagship programmes were Strength Through Joy and Beauty of Labour.
The Kraft durch Freude programme, launched in November 1933, provided subsidised leisure activities to DAF members. Historians estimate that by 1939 more than 50 million Germans had taken part in some KdF activity.
| KdF activity | Scale |
|---|---|
| Evening classes, concerts, theatre | ~20 million tickets p.a. by 1938 |
| Domestic holidays (Bavaria, Harz, Black Forest) | ~7 million participants 1934–38 |
| Cruises (Madeira, Norway, Italy) | ~690,000 participants 1934–39 |
| KdF-Wagen savings scheme | ~336,000 savers by 1939 |
The KdF-Wagen — the "Strength Through Joy car", later known as the Volkswagen Beetle — was designed by Ferdinand Porsche on Hitler's instructions to be a family car affordable on a worker's savings. The scheme required savers to pay 5 Reichsmarks per week into a dedicated account; at 990 RM the car would be delivered. A new factory was built at Wolfsburg. Not a single KdF-Wagen was ever delivered to a civilian customer: the factory converted to military production in 1939, and the savings were absorbed into the war budget.
The Beauty of Labour programme, launched in 1934, was intended to improve working environments. It pushed employers to install washing facilities, canteens, better lighting, sports facilities and green space. Factories competed for annual prizes. Critics noted that much of the work was done by employees in unpaid overtime — ideological goodwill presented as workplace improvement. Nevertheless, the programme did raise conditions at many workplaces, and the SS Security Service (SD) regularly reported that workers welcomed it.
For all its leisure programmes, the DAF enforced a strict regime on the shop floor. Wages in 1933–38 on average rose less than the cost of living. The average working week lengthened from 42.9 hours in 1933 to 47 hours in 1939. The right to strike had disappeared. Workbooks introduced in 1935 tied workers to particular workplaces; leaving without permission was made illegal in 1938. In 1939 wage freezes were formalised.
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