Unemployment and economic recovery
Unemployment fell from 6 million to under 1 million between 1933 and 1938 through public works, rearmament, and selective removal of workers from counts — a real but partly engineered achievement.
The starting point: the 1933 economy. When Hitler became Chancellor on 30 January 1933, Germany was in the depths of the Great Depression:
- 6 million officially unemployed (around 33% of the labour force).
- Industrial production halved from 1929 levels.
- Banks had collapsed in the 1931 crisis.
- Brüning's deflation had ruined the middle class.
- Wages and prices had collapsed.
Reducing unemployment was the regime's first economic priority — both because it had promised to do so and because it was politically essential. Workers who had hated the Weimar Republic for failing them had to be won over.
The dramatic recovery. Between 1933 and 1939 unemployment fell dramatically:
- 6 million (January 1933).
- 3 million (1934).
- 1.6 million (1936).
- Under 1 million (1938).
- By 1939 effective full employment.
How was this achieved?
1. Public works programmes. The regime expanded the existing emergency public-works schemes and added new ones:
- Reich Labour Service (Reichsarbeitsdienst — RAD): compulsory 6-month labour service for young men aged 18-25 (initially from 1933 voluntary, compulsory from 1935). About 350,000 men in RAD by 1935. Workers built drainage, road, forest and farm projects, paid pocket-money wages.
- Autobahns (motorways): the most famous public-works programme, planned under Weimar but vastly expanded by Hitler. About 3,400 km of autobahn built by 1938. Director: the engineer Fritz Todt (later Minister of Armaments). Employed up to ~125,000 workers at peak.
- Civilian construction: housing, government buildings, sports stadia, Olympic facilities (1936).
- Land reclamation, drainage and forestry projects.
Public works absorbed several hundred thousand workers and were heavily publicised as Nazi achievements.
2. Rearmament. The regime's largest job creator was rearmament, beginning gradually from 1933 and accelerating after the announcement of conscription (March 1935):
- Armed forces grew from 100,000 in 1933 to 1.4 million by 1939.
- Armaments industries (tanks, aircraft, ships, weapons) hired hundreds of thousands of workers.
- Conscription itself removed young men from the unemployment count.
- Forced labour of communists, social democrats, Jews and others reduced the count too.
By 1939 about half of all government spending went to armaments — a vast Keynesian stimulus.
3. Statistical adjustments. The unemployment fall was partly statistical rather than purely real:
- Women were removed from unemployment counts on marriage (under the marriage-loan scheme, wives left work; their unemployment was not counted).
- Jews were removed from civil service and (progressively) other professions; their unemployment was not officially counted after a point.
- 'Asocials' in concentration camps were not counted as unemployed.
- Conscripts in the army and RAD were not counted as unemployed.
Modern historians estimate that 'real' unemployment in 1938 was perhaps 1.5-2 million, not 1 million — still a large fall but not as complete as the headline figure suggested.
4. Conscription and labour service. Compulsory military service (announced March 1935) and compulsory Reich Labour Service (1935) removed young men from the labour market. By 1939 about 1.4 million were in the armed forces and ~350,000 in RAD — substantially reducing the labour pool.
5. Hjalmar Schacht's financial management. Hjalmar Schacht as Reichsbank President (1933-39) and Economics Minister (1934-37) used clever financial techniques to fund the recovery:
- 'Mefo bills' (Metallurgische Forschungsgesellschaft) — disguised government credits that funded rearmament without showing up in budgets, sidestepping international restrictions.
- Bilateral trade agreements with smaller countries to avoid hard-currency shortages.
- Tight import controls to preserve foreign exchange.
Schacht's management was sophisticated and partly successful; he was eventually dismissed in 1937-39 as the regime moved towards autarky and Göring's Four-Year Plan.
6. The Four-Year Plan (1936). In August 1936 Hitler appointed Hermann Göring to head a Four-Year Plan to prepare the German economy for war within four years. Goals:
- Self-sufficiency (autarky) — reducing imports.
- Synthetic substitutes for raw materials (synthetic oil, synthetic rubber, synthetic textiles).
- Massive expansion of armaments production.
- Conversion to a war economy.
The Plan accelerated rearmament and absorbed more workers. By 1939 Germany had achieved partial autarky and significant rearmament — though still importing many crucial raw materials.
The visible achievement. For ordinary Germans, the visible result was striking:
- Jobs: workers who had been unemployed for years were back at work.
- New infrastructure: autobahns, public buildings, housing.
- A 'mood of recovery': economic confidence after the collapse of 1929-33.
- National pride: the regime delivered while Weimar had failed.
Many workers who had hated the Republic in 1932 approved of Hitler in 1938. The recovery was the regime's single biggest source of legitimacy with ordinary Germans.
The hidden costs. But the recovery had hidden costs:
- Rearmament-led recovery was unsustainable without war — the economy needed an enemy to consume what it produced.
- Wages were tightly controlled and rose only modestly.
- Workers lost independence: no unions, no strikes, no free movement between jobs (workbook from 1935).
- Consumer goods were scarce: 'guns before butter' meant ordinary consumption was suppressed.
- Inflation pressure was managed through price controls but never fully resolved.
- Foreign debt and balance-of-payments problems were severe.
- Forced labour (later wartime) and Aryanisation of Jewish wealth subsidised the recovery.
The Nazi economy in 1939 was militarily geared, internally constrained, externally fragile — a Keynesian war-stimulus that worked because the war it was preparing for would (the regime hoped) provide the resources to repay the debt.
The verdict on the recovery. Was the Nazi recovery a real achievement? Yes and no:
- Yes: unemployment really did fall; real jobs were created; new infrastructure was built; workers experienced genuine improvement in employment.
- No: the recovery was partly statistical; it depended on rearmament that required war; wages were controlled; consumer goods were scarce; workers' independence was destroyed.
For most ordinary Germans, the perceived achievement outweighed the hidden costs — at least until the war came. The recovery was the regime's most important domestic success.
- Unemployment fell from 6m (Jan 1933) to under 1m (1938) — real but partly statistical and engineered.
- Public works (autobahns under Fritz Todt — 3,400 km by 1938; RAD compulsory from 1935 — ~350,000 men).
- Rearmament from 1933, accelerated by conscription (March 1935) — armed forces 100,000 (1933) → 1.4m (1939).
- Schacht's clever finance (Mefo bills, bilateral trade); Göring's Four-Year Plan (Aug 1936) toward autarky and war economy.
- Hidden costs: wages controlled, consumer goods scarce, no independent unions, rearmament-led recovery unsustainable without war.