1. Introduction

For students beginning their exploration of Nazi Germany, it is essential to understand the significance of economic history, as it provides valuable insights into the inner workings and motivations of the regime. The period between 1934 and 1939 saw a dramatic transformation of the German economy under the Nazi Party, with a focus on rearmament and self-sufficiency. A thorough examination of Nazi economic policies and their outcomes sheds light on how the regime sought to consolidate power, address domestic issues, and prepare the nation for war. This article offers an introductory overview of the key events and developments of this crucial phase in German history.

This article follows on from The Consolidation of Nazi Power and the Establishment of the Third Reich

2. The goals of Nazi economic policy

The Nazi economic policy aimed to achieve two main objectives: reduce unemployment and prepare Germany for self-sufficiency (autarky) and war. The Nazis sought to alleviate the economic hardships faced by the German people during the Great DepressionGreat Depression The global economic collapse that began with the US stock market crash of October 1929 and deepened through bank failures, trade collapse, and mass unemployment to produce the worst economic crisis of the twentieth century. By 1932, a quarter of American workers were unemployed; industrial production had fallen by half. The Great Depression began not with a single event but with a series of interconnected collapses. The October 1929 stock market crash wiped out speculative fortunes but would not, alone, have produced a decade-long depression; the depression was deepened by bank failures that wiped out the savings of ordinary Americans, by the Federal Reserve’s contractionary monetary policy that reduced the money supply, by the Smoot-Hawley Tariff of 1930 that triggered retaliatory trade barriers worldwide, and by the gold standard constraints that prevented governments from expanding their monetary supplies in response to the crisis. By 1932–33, a quarter of American workers were unemployed, industrial production had fallen by fifty percent, and the banking system had effectively ceased to function. The international dimension was crucial: Germany’s reparations obligations and war debt structure, financed by American loans, made the German economy uniquely vulnerable to the credit contraction. The Depression contributed directly to Hitler’s electoral rise — the Nazi Party gained over 37% of the vote in July 1932 in conditions of mass unemployment and national humiliation. The policy responses — Roosevelt’s New Deal, Britain’s abandonment of the gold standard, the various autarkic nationalisms of the 1930s — produced partial recovery in some countries while deepening the crisis in others. Full recovery required the Second World War’s military spending to restore full employment. The Great Depression was not a natural disaster but a political-economic failure: decisions made by governments, central banks, and financial institutions that could have been made differently. Keynes’s analysis — that the depression reflected a collapse of effective demand that markets could not self-correct without government intervention — was substantially correct, but politically unacceptable to the orthodoxies of the 1930s. The lasting significance of the Depression is not economic but political: it demonstrated that sustained mass unemployment was politically uncontainable, that democracies unable to provide economic security were vulnerable to authoritarian alternatives, and that the international economic system required political management that pure market mechanisms could not supply. The post-war Bretton Woods system — managed exchange rates, capital controls, the IMF and World Bank — was designed precisely to prevent a recurrence by building the international economic management mechanisms that had been absent in the 1930s., while simultaneously strengthening the nation for their expansionist ambitions.

3. The role of Hjalmar Schacht and the New Plan

Hjalmar Schacht, appointed as Minister of Economics in 1934, played a pivotal role in shaping Nazi economic policy. Under Schacht’s direction, the New Plan was introduced to regulate foreign trade, manage currency, and ensure the efficient allocation of resources for rearmament. Schacht negotiated trade agreements with other countries, aiming to acquire essential raw materials for Germany’s industrial and military needs.

4. Public works projects and employment

The Nazis implemented large-scale public works projects, such as the construction of the autobahn network and infrastructure development, to reduce unemployment and stimulate economic growth. In addition, initiatives such as the “Strength Through Joy” (Kraft durch Freude) program aimed to improve the living standards of German workers and boost consumer demand for German-made goods.

5. The Four-Year Plan and the push for autarky

In 1936, Hitler introduced the Four-Year Plan under the direction of Hermann Göring, with the goal of achieving self-sufficiency and accelerating rearmament. The plan focused on developing synthetic substitutes for scarce resources, increasing agricultural production, and expanding key industries, such as steel, chemicals, and armaments. While the Four-Year Plan did not achieve complete autarky, it significantly bolstered Germany’s economic and military capabilities.

6. Rearmament and military expansion

During this period, Germany pursued an aggressive rearmament program, in violation of the Treaty of VersaillesTreaty of Versailles Full Description The peace settlement signed on 28 June 1919 that ended the state of war between Germany and the Allied powers. Its most controversial provisions included the “war guilt clause” (Article 231), which assigned responsibility for the war to Germany and formed the legal basis for reparations; the transfer of German territories including Alsace-Lorraine, Posen, and parts of Silesia; and strict limits on the German military. Germany received no negotiating role and signed under protest. Critical Perspective The Versailles settlement has been blamed for causing the Second World War, but this is an oversimplification that owes more to Nazi propaganda than historical analysis. Margaret MacMillan and others have argued that the treaty was harsh but not crippling — Germany retained its industrial capacity and its borders with major powers remained intact. The real failure was in implementation: reparations were inconsistently enforced, and no Allied power was willing to use force to uphold the settlement when Germany began to rearm.. The Nazi regime expanded the military, invested in advanced weaponry, and increased arms production. By 1939, Germany had become one of the world’s most powerful military forces, paving the way for the territorial expansion that would ultimately lead to World War II.

In conclusion, Nazi economic policy and rearmament from 1934 to 1939 were characterized by a dual focus on reducing unemployment and preparing Germany for war. The various economic plans and initiatives implemented during this period contributed to Germany’s rapid industrial and military expansion, setting the stage for the events of World War II. This article serves as an introductory overview, with the understanding that there is much more to discover about the intricacies of Nazi economic policy and its long-term consequences.