Saturday, July 14, 2012

Hitler's and the NSDAP's employment programs during the Great Depression

Charles Kindleberger in his classic, The World in Depression 1929-1939 (1973) described the measures taken by Hitler and his NSDAP (Nazi Party) to combat unemployment after he took power in January 1933.

Kindleberger's description is deficient in two respects that are worth mentioning before getting to his text. The NSDAP was interested in creating jobs for so-called Aryan Germans, i.e., non-Jews. Jews were increasingly restricted in their employment and progressively pushed out of the civil service, the professions and eventually from the whole country. Most Jews who lived in Germany in January 1933 had passed away or emigrated by 1940, when Jews were completely banned from leaving the country. Those who did emigrate had most of their money and property confiscated by the Reich government. Both the restriction of employment by German Jews and the confiscations were significant factors in providing employment to "Aryan" Germans. Kindleberger's book omits discussions of the racial policy aspect of the NSDAP recovery program.

Kindleberger also makes the mistake that is still too common of assuming that the famous Autobahn highway project was primarily a civilian program. Originally planned under the Weimar Republic, the Autobahn construction was seen by Hitler first and foremost in its military aspect. Hitler's primary jobs program was war, and the Autobahn was part of that. In his very first cabinet meeting as Chancellor, he instructed his ministers to consider all such projects primarily with reference to their usefulness in rebuilding Germany's war capacity. The official record of the meeting relates the Führer's direction, "Dieser Gedanke müsee immer und überall im Voerdergrund stehen." ("This thought must always and everywhere stand in the forefront.") The Autobahn project was specifically discussed in that context at the same meeting. The transportation advantages offered by a good national highway system to a war economy was the priority reason for Hitler in building the Autobahn. (The ministerial meeting protocol is quoted by Hans-Henning Scharsach in Haiders Clan. Wie Gewalt entsteht, 1995)

Despite those two significant omissions, Kindleberger's description does a good job of showing how Hitler's employment policies were embedded in a system of coercion and far-reaching denial of rights to German workers, "Aryan" or otherwise. On the first International Workers Day that Hitler was in power, May 1, 1933, the Nazi government banned all independent trade unions and required workers to join a nationwide company union directed by the regime.

Kindleberger refers in the following to "socialist" aspect of the program of the NSDAP, the "S" standing for "socialist". The Nazis never took the "S" more seriously than a superficial, and failed, attempt to appeal to industrial workers. The working-class vote was largely divided between the two parties that understood themselves as distinctively representative of the working class, the Social Democratic (SPD) and Communist (KPD) Parties. The Röhm-Strasser wing of the NSDAP did call for more drastic curbing of the powers of the German capitalist class to be taken over by the German national state and the Nazi Party, which presented itself as the party of the Aryan race, not of the working class. Given the almost exclusively polemical usage of "socialist" in contemporary American politics, understanding the "socialist" rhetoric as used by the NSDAP is no doubt puzzling to most Americans who first encounter it.

Kindleberger refers to the purge of Ernst Röhm, the head of the SA (Brownshirts) paramilitary group, a purge that came in 1934 and became known as the Night of the Long Knives:

Hitler's accession to full power in March 1933 was a forecast of far-reaching changes in the German economic system. In Munich, in 1920, the National Socialist party had laid down a list of twenty-five points, largely economic and social, directed against capitalism, 'interest slavery', and the like, and in favour of colonies, land reform, pensions for old people and the development of the middle class through assistance to shopkeepers.
Those 1920 program demands were long retained but offer little actual guide to the policies the NSDAP pursued. The Party had allied throughout the twenties with other rightwing parties. And made a deal with German conservatives to get Hitler appointed as Reichskanzler in January 1933:

A four-year plan announced in the spring of 1933 promised the rescue of the peasant and the worker, the latter by an attack on unemployment. Agriculture was to be reformed through the establishment of the Reichsnährstand (Food Estate), which controlled prices and then production. Unemployment was attacked through conscription (in March 1935), the development of parastatal bodies, such as the storm troopers and the S.A., and especially in spending on public works and armaments. But the anti-capitalism of the initial stages did not survive for long. The purge of 30 June 1934 was not economic in origin, but it none the less had the effect of moving party doctrine in a more conservative direction in respect of income distribution, if not of control of industry. Control was provided by the law of 27 February 1934, 'Gesetz zur Vorbereitung des organischen Aufbaus der deutsche Wirtschaft' (Law for the Preparation of the Organic Constitution of the German Economy), which laid out a criss-crossed pattern of industrial and regional Überwachungsstellen (Control Offices). Initially, these Control Offices regulated imports on the basis of goods quantities, but this task was eventually turned over to the Reichsbank and operated through foreign-exchange controls. [my emphasis in bold]
The mechanisms used by the NSDAP government were not always in themselves dictatorial or distinct to the German regime. But, as Kindleberger notes there, public employment was provided to a major extent through military and paramilitary organizations, which Hitler planned to use for war, and much of the public spending was for armaments.

On 2 May 1933, the S.S. seized all offices of trade unions in Germany; officials were arrested, and union property was confiscated. The property was incorporated into the Nazi-controlled Deutsche Arbeitsfront (German Labour Front), which included entrepreneurs and professional men as well as workers. Wages and working conditions were regulated'by Treuhänder der Arbeit (Labour Trustees), appointed for each district. The German Labour Front included Social Honour Courts to deal with abuses by employers or agitation by workers; and Kraft durch Freude ('Strength through Joy'), which organized workers and youth in holidays through taxes on workers' salaries. In particular, workers were required to carry a work book by which both their jobs and movements were controlled.
A great deal of historical works has been done in recent years on institutions like those acted as mechanisms of political and social control under the direction of the Nazi government, e.g., Götz Aly, Hitler Volksstaat. Raub Rassenkrieg und nationaler Sozialismus (2005) and Götz Aly (ed), Volkes Stimme. Skepsis und Führervertrauen im Nationalsozailismus (2006). But the topic had received excellent treatment in much earlier studies as well, like Franz Neumann's Behemoth: The Structure and Function of National Socialism 1933-1944 (1942/1944).

Continuing with Kindleberger; he refers here to Hjalmar Schacht (1877-1970), former German central banker who later served as Economics Minister under Hitler and as director of the office to develop a war economy:

Since an early task was to eliminate unemployment, the National Labour Service was established for a variety of projects ranging from agriculture, reclamation, road construction and,ultimately, military installations. It was made compulsory in June 1935. Workers with agricultural training were dismissed and sent back to farms. All labour was frozen in its jobs in 1934. A campaign was undertaken to drive women from gainful employment and back to the hearth. These efforts, it was later thought, prevented Germany from undertaking full mobilization after 1938 and during the Second World War.

Hjalmar Schacht fought hard to prevent deficit financing rising above a dangerous level until 1938,when he resigned. But spending for public works, including Autobahnen, was undertaken through special paper discounted by banks. The effect was rapidly to reduce unemployment from 6 million in October 1933 to 4·1 million a year later, 2·8 million in February 1935, 2·5 million in February 1936, and 1·2 million in February 1937. At the time when the Second Four-Year Plan was introduced, by Hitler in a speech at Nuremberg in September 1936, and formally in October of that year by Herman Goring, anti-depression policy was a thing of the past. Women who had received marriage loans were allowed to take jobs. The forty-hour week was ignored, although the forty-eight-hour week did not come in until August 1938. In June 1938,the Compulsory Labour Decree (Dienstverpflichtverordnung) provided that any inhabitant of the Reich had to accept any work or vocational training assigned to him or her by the Labour Front.

The Second Four-Year Plan also turned policy definitely away from unemployment towards preparation for war. It still [sic] contained schemes for public buildings and Autobahnen, but the emphasis was on providing synthetic industries in rubber, oil, fats, etc., to protect Germany against blockade in time of war. [my emphasis in bold]

John Kenneth Galbraith approached the German actions to combat the Great Depression from a different angle in The Age of Uncertainty (1977). Even Galbraith overstates the civilian nature of the Autobahn construction. But he points out how some of the technical levers used by the German government produced useful results in generating employment:

The Nazis were not given to books. Their reaction was to circumstance, and this served them better than the sound economists served Britain and the United States. From 1933, Hitler borrowed money and spent - and he did it liberally as Keynes would have advised. It seemed the obvious thing to do, given the unemployment. At first, the spending was mostly for civilian works - railroads, canals, public buildings, the Autobahnen. Exchange control then kept frightened Germans from sending their money abroad and those with rising incomes from spending too much of it on imports.
The Nazis weren't aiming at a "socialism" that would have put the means of production under the control of a workers' state, a definition that the SPD and KPD could presumably have agreed upon at the proverbial 30,000-ft. level in 1933. But the Nazis also weren't willing to confine themselves to the conventional advice that had been followed faithfully by the Weimar government from 1930 and whose results had brought the NSDAP to power.


The results were all a Keynesian could have wished. By late 1935, unemployment was at an end in Germany. By 1936, high income was pulling up prices or making it possible to raise them. Likewise wages were beginning to rise. So a ceiling was put over both prices and wages, and this too worked. Germany, by the late thirties, had full employment at stable prices. It was, in the industrial world, an absolutely unique achievement.
Again, restrictions on non-"Aryan" workers and professionals and confiscation of money and property from emigrating Jews played a part in that result.

Galbraith suggests that a less doctrinaire examination of the German experience by foreign observers in the 1930s could have provided some useful empirical lessons.l :

The German example was instructive but not persuasive. British and American conservatives looked at the Nazi financial heresies - the borrowing and spending - and uniformly predicted a breakdown. Only Schacht, the banker, they said, was keeping things patched together. (They did not know that Schacht, so far as he was aware of what was happening, was opposed.) And American liberals and British socialists looked at the repression, the destruction of the unions, the Brownshirts [SA], the Blackshirts [the SS], the concentration camps, the screaming oratory, and ignored the economics. Nothing good, not even full employment, could come from Hitler. It was the American case that was influential.
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