The Nazi Economic System: Recovery, Autarky and the Road to War

Rearmament was an important part of Nazi economic recovery, but its importance grew over time: it mattered less in the very first stage (1933-34), when ending unemployment was the urgent priority, and became the dominant driver from 1936. Its importance is best judged by how much of the recovery it actually explains.

The case for its importance. Rearmament became central to the recovery, especially from the mid-1930s. Goering's Four Year Plan (1936) made war-readiness the overriding aim and poured resources into key war industries — steel, chemicals, synthetic oil and rubber, and armaments — creating large numbers of jobs and driving heavy industry. Even before this, military spending was rising, hidden behind Schacht's Mefo Bills so that its true scale was concealed. Rearmament therefore explains much of the boom in industrial output and a great deal of the later fall in unemployment, as men were drawn into arms factories or conscripted into the growing army.

The case for other factors. However, the EARLY recovery owed more to other measures. In 1933-34 the most urgent task was cutting the roughly six million unemployed, and this was tackled chiefly through public works such as the autobahn network, the Reich Labour Service (RAD), and the Law for the Reduction of Unemployment (1933). These were not primarily military. Schacht's deficit financing stimulated demand generally, and confidence returned partly because the new regime looked decisive. So in the first phase the recovery was driven by job-creation schemes more than by rearmament.

Judgement. Rearmament was important — indeed it became the most important single driver of the economy from 1936, shaping the Four Year Plan and absorbing ever more resources. But it was not the whole story of the recovery: the early, decisive fall in unemployment came mainly from public works, the RAD and deficit financing, with rearmament taking over later. Its importance therefore grew across the period, and judged over the whole of 1933-39 it was the leading factor, but not the only one — and not the one that started the recovery.

Hjalmar Schacht was of major importance to the recovery of the German economy in the early years, but his importance declined after 1936 as Goering's war economy overrode his cautious approach. His role is best judged by how far the recovery depended on his policies and how long his influence lasted.

The case for his importance. Schacht, as President of the Reichsbank and from 1934 Economics Minister, engineered the financial basis of the recovery. He used deficit financing to stimulate demand and, crucially, devised the Mefo Bills — secret credit notes that allowed the government to fund public works and rearmament while hiding the true scale of spending from foreign observers and from Germany's own books. His New Plan (1934) gave the state tight control over trade, imports and foreign currency, steering scarce resources towards essentials and rearmament and steering trade towards bilateral deals. Without his financial ingenuity, the early recovery and the funding of public works such as the autobahns would have been far harder.

The case that his importance was limited. Yet Schacht did not act alone, and his influence did not last. The fall in unemployment also depended on the RAD, the Law for the Reduction of Unemployment (1933) and the public works programmes, which were broader government policy. More importantly, Schacht grew alarmed that rearmament was being pushed faster than the economy could safely afford. When Hitler chose all-out rearmament through Goering's Four Year Plan (1936), Schacht was sidelined and resigned as Economics Minister in 1937. The later, war-focused phase of the economy was Goering's, not Schacht's.

Judgement. Schacht was of great importance to the recovery in 1933-36: his deficit financing, the Mefo Bills and the New Plan provided the financial machinery that funded the jobs recovery and early rearmament. But his importance was confined to that period; once the war economy took priority he lost influence and resigned in 1937. He was therefore the key figure of the EARLY recovery, but not of the militarised economy that followed — important, but for a limited phase.

Whether the Nazis 'solved' Germany's unemployment problem depends on what we mean by 'solved'. Measured by the raw registered figures, they appear to have done so spectacularly; but measured by whether they created genuine, productive and sustainable employment, the view is only partly valid. This answer argues that the Nazis dramatically REDUCED registered unemployment but did not 'solve' the problem in any sound or lasting sense.

The case that they solved it. The headline achievement is undeniable: registered unemployment fell from about six million in early 1933 to near zero by 1939. This was achieved through a battery of measures — large public works such as the autobahn network, the Reich Labour Service (RAD), which put young men into compulsory manual labour, and the Law for the Reduction of Unemployment (1933), which funded job creation. From 1936 the Four Year Plan and rearmament created huge demand for labour in heavy industry and armaments. For the millions who had been jobless in 1933, the return of work was real and transformed their lives. By the raw-numbers criterion, this looks like a solution.

The case that they did not truly solve it. However, the figures conceal as much as they reveal. Part of the fall was statistical rather than real: women were pushed out of the workforce (and removed from the count), Jews were excluded, and young men in the RAD or conscripted into the expanding army were simply taken off the register. More fundamentally, the jobs that were created rested on shaky foundations — they were financed by concealed Mefo-Bill debt and increasingly tied to rearmament, not to a self-sustaining, productive economy. By the late 1930s there was even a labour SHORTAGE in some sectors, while consumer industries were squeezed by the 'guns over butter' choice. A recovery built on hidden debt and war preparation was not a durable solution to the underlying problem.

Judgement. The view is therefore partly valid but overstated. The Nazis genuinely and dramatically REDUCED unemployment, and this was one of their most popular achievements. But they did not 'solve' it in the full sense: the success was inflated by statistical removals, financed by concealed debt, and dependent on rearmament rather than on a balanced, sustainable economy. The most accurate verdict is that the Nazis created the APPEARANCE of solving unemployment, and achieved a real reduction, but the foundations were militarised and unstable rather than secure.

The Nazi drive for autarky (self-sufficiency) was only partly successful: it made real progress in some areas and reshaped the economy towards war, but it failed to free Germany from dependence on imports. Its success must be judged by its own aim — making Germany able to fight a war without relying on imported raw materials.

The case that it was successful. Autarky was pursued with determination, especially after Schacht's New Plan (1934) and Goering's Four Year Plan (1936). The New Plan controlled imports and foreign currency, limiting purchases to essentials and rearmament materials and steering trade towards bilateral deals with countries (in south-eastern Europe and Latin America) that did not require scarce foreign currency. The Four Year Plan then pushed home production of substitutes hard: synthetic oil and rubber were developed, and iron was extracted from low-grade German ore through huge state enterprises such as the Reichswerke Hermann Goering. The drive succeeded in reorienting the whole economy towards war-readiness and in reducing dependence on certain imports, so by its own military logic it made real headway.

The case that it failed. Yet the central goal — genuine self-sufficiency — was not reached. Synthetic production never matched Germany's needs: the country still could not produce enough oil and rubber, and it remained dependent on imports of key raw materials right up to 1939. Substitutes were often expensive and of poorer quality, and the policy distorted the economy by diverting resources into costly home production. Agriculture, despite the Reich Food Estate and 'Blood and Soil', could not make Germany self-sufficient in food either. The persistence of these import dependencies is one reason rearmament strained the economy and helps explain the pressure towards war and conquest to secure resources.

Judgement. Judged against its aim of making Germany able to wage war without relying on imports, the drive for autarky was a partial success: it reshaped the economy, expanded key war industries and reduced some dependencies, but it never achieved true self-sufficiency in oil, rubber, raw materials or food. Autarky was therefore successful as a DIRECTION of policy and as preparation for war, but a failure as an ACHIEVEMENT — Germany went to war in 1939 still dependent on imports it could not replace.

The claim that German workers benefited from Nazi economic policy is partly true but too one-sided. Workers gained the single thing they most needed in 1933 — jobs — and some welfare and leisure provision, but they lost their unions, the right to strike, and the chance to raise their real wages. The right verdict depends on the criterion of 'benefit': measured by employment, workers gained; measured by pay, freedom and bargaining power, they lost. On balance, the gains were real but narrow and came at a heavy price.

The case that workers benefited. The most powerful argument is employment. Mass unemployment had blighted millions of working-class lives by 1933, and the Nazi recovery brought work back: public works, the RAD, the Law for the Reduction of Unemployment (1933) and then rearmament under the Four Year Plan (1936) cut registered unemployment from about six million to near zero by 1939. A regular wage transformed the security of many families. Beyond jobs, the regime offered welfare and leisure through the German Labour Front (DAF) — most famously Strength through Joy (KdF), which provided subsidised holidays, cruises, sports and cultural events, and Beauty of Work, which improved some workplaces. To a worker comparing 1939 with the despair of 1933, these were genuine benefits.

The case that workers did not benefit. Against this, workers paid a steep price that the propaganda concealed. Independent trade unions were abolished in May 1933, their funds seized and leaders arrested, and they were replaced by the state-controlled DAF, which could neither bargain for higher pay nor call strikes (strikes were banned). Stripped of their collective power, workers could not resist as real wages STAGNATED — barely returning to pre-Depression levels despite the boom — while WORKING HOURS LENGTHENED to meet rearmament demands. The leisure schemes were as much about control as welfare: most workers could afford only the cheaper KdF activities, and the much-advertised Volkswagen was never delivered to the savers, whose money went to rearmament. So workers lost their freedoms and saw little real improvement in pay.

Establishing the criterion and judging. The two cases can be reconciled by separating two questions. Measured by EMPLOYMENT and basic security, workers clearly benefited — a job is a real and major gain after mass unemployment. But measured by PAY, FREEDOM and bargaining power, they did not: real wages stagnated, hours rose, and the loss of unions and the right to strike left them defenceless. The benefit was therefore real but lop-sided — a return of work without a return of prosperity or rights.

Judgement. The view that workers benefited is valid in the limited sense that mattered most in 1933 — they got their jobs back, and some welfare and leisure with them. But it understates the cost: they lost their unions, the right to strike, and any means of raising their real wages, while working longer for little more pay. The most precise verdict is that German workers benefited as PRODUCERS who needed work, but lost out as CITIZENS and WAGE-EARNERS who needed freedom and fair pay — and because the regime deliberately suppressed wages and unions to fund rearmament, the gains were narrow and the losses fundamental.

Whether Nazi economic policy was a success depends entirely on the criterion used to judge it. Measured against the regime's OWN aims — ending mass unemployment and preparing Germany for war — it was strikingly successful. Measured against the test of a SOUND, SUSTAINABLE economy and rising living standards, it was a war-bound bubble rather than a genuine miracle. This answer argues that the policy was a real success by the regime's military and employment aims but a failure as durable economics.

The case that it was a success. By its own aims, the record is impressive. Registered unemployment fell from about six million in 1933 to near zero by 1939 — through public works such as the autobahns, the Reich Labour Service (RAD), the Law for the Reduction of Unemployment (1933) and, later, rearmament. Hjalmar Schacht's deficit financing and the ingenious Mefo Bills funded recovery while hiding its scale, and his New Plan (1934) controlled trade in Germany's favour. From 1936 Goering's Four Year Plan reorganised the economy for war, expanding key war industries (synthetic oil and rubber, steel, armaments), so that by 1939 Germany was able to launch a major war. Agriculture, through tariffs, the Reich Food Estate and the Reich Entailed Farm Law, secured a loyal peasantry. Judged by ending unemployment and achieving war-readiness, these are genuine achievements.

The case that it was not a success. Measured by sound economics and welfare, however, the policy was deeply flawed. The recovery rested on concealed Mefo-Bill DEBT and on rearmament rather than self-sustaining demand, so it was financed on credit and tied to continued military spending — even pushing the regime towards war and conquest to escape its debts. Autarky was never achieved: Germany still depended on imported oil and raw materials in 1939. Farm policy preserved the peasantry but at the cost of efficiency and modernisation under the Reich Entailed Farm Law, and Germany could not feed itself. For workers, the gains were narrow: real wages stagnated, hours rose, and independent unions were abolished in 1933 and replaced by the DAF, while KdF and Beauty of Work polished an image that masked the loss of freedom and the lack of real prosperity.

Establishing the criterion and weighing. The two cases can be reconciled by separating the regime's aims from the test of lasting economic health. By the criterion of ENDING UNEMPLOYMENT and achieving WAR-READINESS, the policy succeeded: the jobs returned and Germany rearmed. By the criterion of a SUSTAINABLE, PROSPEROUS economy, it failed: it was built on hidden debt and suppressed consumption, autarky fell short, and living standards did not genuinely rise. The genuine successes (the jobs recovery, rearmament) were real but came at the price of debt, distortion and lost freedoms — they were a success bought on credit and on the backs of workers.

Judgement. The view that Nazi economic policy was a success is therefore valid by the regime's OWN aims and largely invalid by the test of durable economics. The Nazis cut unemployment dramatically and rearmed Germany for war — real achievements that explain their popularity. But the recovery was a militarised, state-directed bubble resting on concealed Mefo-Bill debt, incomplete autarky, stagnant wages and the destruction of free trade unions. The most precise verdict is that Nazi economic policy succeeded as PREPARATION FOR WAR and as a cure for unemployment, but failed as a sustainable economic system — an 'economic miracle' in propaganda, but in substance a war-bound bubble, because it was designed for conflict and financed by hidden debt rather than for the lasting prosperity of the German people.