Key facts and dates

Hjalmar Schacht played a pivotal role in shaping Nazi Germany's economy during the 1930s, focusing on recovery from the Great Depression and preparing for war. His policies achieved significant reductions in unemployment but prioritised rearmament over long-term stability, leading to debates about their sustainability.

Timeline of key events

• 1933 – Schacht appointed President of the Reichsbank; unemployment at 6 million.
• 1934 – Schacht becomes Economics Minister; introduces the 'New Plan' for foreign exchange and import control.
• 1933-1937 – Unemployment falls to under 1 million, though figures are manipulated.
• 1934-1937 – Public works projects like Autobahns and military spending drive economic growth.
• 1937 – Schacht resigns as Economics Minister, replaced by Göring's Four Year Plan.

Hjalmar Schacht's role in Nazi economic policy

Hjalmar Schacht was a central figure in Nazi Germany's economic strategy during the early years of Hitler's regime. As President of the Reichsbank from 1933 to 1939 and Economics Minister from 1934 to 1937, he wielded significant influence over policies aimed at reviving the economy after the Great Depression while aligning it with the regime's militaristic goals. His expertise as a banker and economist made him a key architect of recovery, though his methods and priorities often sparked tension with other Nazi leaders.

Schacht's positions and objectives

• President of the Reichsbank (1933-1939) - In this role, Schacht controlled monetary policy, influencing currency stability and government financing.
• Economics Minister (1934-1937) - As minister, he oversaw broader economic planning, focusing on unemployment reduction and resource allocation for industrial and military growth.
• Dual focus - His primary goals were to stimulate economic recovery through job creation and public investment while steering resources towards rearmament to prepare Germany for war.

Key policies for economic recovery and job creation

Schacht introduced a range of measures to combat the severe unemployment and economic stagnation that plagued Germany in 1933. These policies aimed to kickstart growth through state intervention and infrastructure development, providing immediate relief to millions of Germans.

Major initiatives for recovery

• Job creation schemes - Large-scale programmes were launched to employ the jobless, particularly targeting men in labour-intensive roles.
• Public works projects - Construction of infrastructure, most notably the Autobahns (motorways), provided jobs and improved transport links, symbolising Nazi efficiency and modernisation.
• Deficit spending - Schacht endorsed government borrowing to fund these projects, accepting short-term debt to stimulate economic activity, despite the risk of future financial strain.
• Bilateral trade agreements - Deals with other countries, especially in Eastern Europe and Latin America, secured raw materials and markets for German goods, bypassing traditional international trade barriers.

The 'New Plan' and its focus on rearmament

In 1934, Schacht introduced the 'New Plan', a comprehensive policy to manage Germany's limited foreign currency reserves and prioritise resources for military build-up. This marked a clear shift towards preparing the economy for war, even as recovery efforts continued.

Core elements of the 'New Plan'

• Foreign exchange control - Strict regulations limited currency outflows, ensuring that scarce foreign reserves were used for essential imports.
• Import restrictions - Non-essential goods were curtailed to conserve resources, redirecting funds and materials towards domestic production, particularly for armaments.
• Rearmament prioritisation - The plan channelled economic resources into military industries, ensuring that steel, coal, and other materials supported weapons production over civilian needs.
• Autarky (self-sufficiency) - Schacht pushed for reduced dependence on imports through synthetic substitutes (like rubber and fuel), aiming to make Germany less vulnerable to international blockades in wartime.

The relationship between economic recovery and military expansion

Schacht's policies intertwined economic recovery with rearmament, as military spending became a key driver of growth. This dual focus created jobs and boosted industrial output but placed the economy on a war footing, raising questions about long-term sustainability.

How rearmament fuelled recovery

• Military spending as stimulus - Massive investment in the armed forces and weapons production acted as an economic multiplier, reviving industries like steel and engineering.
• Employment through armaments - Factories producing tanks, aircraft, and munitions employed thousands, directly reducing unemployment figures.
• Military expansion - The growth of the Wehrmacht (armed forces) absorbed large numbers of young men, further lowering jobless rates through conscription and related roles.
• Hidden financing - Schacht used Mefo bills, a form of off-budget credit issued by a shell company, to secretly fund rearmament without openly inflating the national debt, masking the true scale of military expenditure.

Successes and limitations of Schacht's policies

Schacht's economic strategies achieved striking results in reducing unemployment and rebuilding industrial capacity, but they came with significant caveats. The recovery's reliance on military priorities and manipulated data obscured underlying weaknesses.

Achievements under Schacht

• Unemployment reduction - From 6 million unemployed in 1933, the figure dropped to under 1 million by 1937, a dramatic turnaround credited to public works and military expansion.
• Industrial growth - Key sectors like construction and manufacturing saw rapid revival, with production levels surpassing pre-Depression figures in many areas.
• Wage and price controls - Schacht implemented strict controls to prevent inflation, stabilising the cost of living and maintaining purchasing power for workers.

Limitations and manipulations

• Statistical distortion - Unemployment figures were artificially lowered by excluding women and Jews from the workforce statistics, painting an overly optimistic picture.
• Artificial recovery - Heavy reliance on state spending and rearmament raised concerns about whether growth was genuine or merely a temporary boost driven by military needs.
• Inflation risks - Schacht himself warned against excessive deficit spending, fearing runaway inflation that could destabilise the economy if borrowing continued unchecked.
• Unsustainable focus - The prioritisation of war preparation over consumer goods and civilian infrastructure suggested the recovery might collapse without constant military investment.

Schacht's resignation and the shift to Göring's Four Year Plan

By 1937, tensions between Schacht and other Nazi leaders over the pace of rearmament led to his resignation as Economics Minister. His departure marked a shift towards more aggressive economic policies under Hermann Göring, reflecting a deeper commitment to total war preparation.

Reasons for Schacht's exit

• Moderation vs. radicalism - Schacht advocated a balanced approach, cautioning against over-spending on rearmament and pushing for economic stability over rapid militarisation.
• Conflict with leadership - His resistance to a full war economy clashed with Hitler's and Göring's ambitions for faster military build-up, creating irreconcilable differences.
• Resignation in 1937 - Schacht stepped down as Economics Minister, though he remained Reichsbank President until 1939, losing influence over broader policy.

Transition to Göring's Four Year Plan

• Göring's takeover - Hermann Göring assumed control with the Four Year Plan (introduced in 1936 but dominant after 1937), focusing on rapid rearmament and autarky at all costs.
• Shift in priorities - Unlike Schacht's cautious strategies, Göring's plan embraced massive spending and resource exploitation, accepting economic risks to achieve military readiness.
• Long-term implications - This marked a departure from recovery-focused policies to an all-out war economy, highlighting the limits of Schacht's influence and the regime's ultimate goals.

Evaluation of Schacht's economic legacy

Schacht's tenure raises critical questions about the nature of Nazi Germany's economic recovery. While his policies achieved short-term successes, historians debate whether these gains were sustainable or merely a facade built on military priorities and borrowed time.

Was the recovery genuine or artificial?

• Arguments for genuine recovery - The drastic fall in unemployment and revival of key industries suggest real economic improvement, partly due to Schacht's innovative financing and trade strategies.
• Arguments for artificial recovery - Heavy dependence on rearmament and deficit spending, coupled with manipulated statistics, indicate growth was propped up by unsustainable means rather than natural market recovery.
• Natural recovery debate - Some argue that global economic improvement after the Depression would have aided Germany regardless of Schacht's policies, though his interventions likely accelerated the process.
• Crisis-prone nature - The focus on war preparation left the economy vulnerable to collapse if military spending slowed or if international conflict disrupted trade, suggesting inherent fragility in Schacht's model.