How did the Nazis finance World War II

Hitler's Debt Dictation: How Hitler's War Economy Really Worked

Salzburg Festival, August 9, 1939. Adolf Hitler appeared, surprisingly, to Mozart's “Don Giovanni”; the curtain only rose after a long ovation for the “Führer”. The people of Salzburg gathered in front of the Festspielhaus to “watch Hitler”. He had praised the Games as “altars” of edification, “especially in a time of economic hardship and worries” - and left quickly. Because in his summer residence on the nearby Obersalzberg, remedy for the economic hardship of the German Reich was being prepared: the conquest of Poland on September 1st, which triggered the Second World War.

The economic policy of the National Socialists is shrouded in myths to this day. Hitler liked to portray himself as the one who led the people out of the misery of the Great Depression of the 1930s. Wrongly. Because the supposedly decent employment policy and the much-cited highway construction are chimeras. The National Socialists did not have an economic master plan. Their approach was more improvisation than strategy; their economic policy is that of a racist regime that strives for power and war. While the Nazi leadership boasted that they would lay the foundations for a millennial empire, they did not know how to pay the bills the next day long before the war began. 1) Propaganda Minister Joseph Goebbels personally known color. As early as 1938 he wrote in his diary that the financial gap in the Reich treasury was "worse than I thought". In a multi-part series, profil will be devoted to a side of the Third Reich that has hitherto been neglected in public debate: Nazi economic policy.

Hitler's festival appearance in white dress uniform was staged - to distract from rumors about the impending war. In the meantime, a man was recovering in Paris who had been locked up for months as a hostage in a Vienna Gestapo cell by the Nazi leadership: Louis Rothschild. The 56-year-old scion of the Viennese branch of the Jewish banking dynasty was undoubtedly the richest man in Austria at the time - and he had important industries at his disposal. This is precisely why the regime was after him: In what was probably the most spectacular ransom extortion of the time, no less was demanded for his release than the transfer of all of his property and that of his brothers Eugène and Alphonse, who had already fled to Paris and London.

But the baron proved tough:
After his arrest on March 12, 1938, he withstood the pressure in the Gestapo cellar on Morzinplatz in Vienna for more than a year. Celebrities were also sitting in the neighboring cells: Communists, ex-Chancellor Kurt Schuschnigg and the Christian Socialist Leopold Kunschak. “We quickly agreed that this was the most classless cellar in the world,” Rothschild later recalled from conversations (see photo). But in the end he had to give in. The Nazis are said to have raised around 35 million Reichsmarks from the sale of the art treasures, company holdings and lands of the three brothers, the Viennese bank S. M. v. Rothschild went to the Munich finance house Merck, Finck & Co, the valuable stake in the Czech ironworks Witkowitz was added to the Hermann Göring works. Before his arrest, Rothschild had transferred this stake to an English holding company in order to protect it from access by the Nazis. But in the end that didn't help either. He had to agree to a sale for just under three million British pounds. When he was released on May 4, 1939, the baron had a surprise in store for his blackmailers: Since it was now after 8 p.m., he no longer wanted to disturb his servant - could he spend another night in the cellar? The National Socialists did not pose as gentlemen to Rothschild until the end: The purchase price was never paid under the pretext of the outbreak of war.
The case is an example of the kleptocratic character of the National Socialist economy, which was ultimately designed to plunder and exploit the conquered countries and people. Jews have always been the primary target of fundraising, as their expropriation has met the least resistance. In the financial year 1938/39, the German Reich received almost ten percent of the income from “Aryanized” assets at one stroke.

Enormous profits followed from the countries occupied by the Wehrmacht: France, which was conquered in 1940, had to pay 35 billion Reichsmarks (according to today's value approximately 150 billion euros) as occupation costs. Denmark covered 90 percent of the fish and 20 percent of the meat requirements of the German Reich during the Second World War. “And in most of Eastern Europe, the Germans looted everything they saw,” said Mark Marzower of Columbia University, New York. In 1901, the Carinthian SS leader Odilo Globocnik had wagons taken from occupied Poland, stolen by the murdered Jews, of textiles.

The Nazi economy would not have functioned without the exploitation of people. Just before the end of the war, the number of forced laborers in the German Reich was more than nine million: that was one in four. The approximately 1.6 million concentration camp inmates and prisoners of war among them were deployed under the most catastrophic circumstances.

Politically and economically, the Great Depression of the 1930s prepared the ground for National Socialism (see box on page 38). Otto Bauer, the spokesman for the Austrian Socialists, had a premonition of where the strict austerity policy, with which both Germany and Austria reacted at the time, would lead: “In the turmoil of this time, those who give the people a way out of their misery will ultimately win show and have the courage and determination to lead it on this path. "

The Nazis came to power in Germany in 1933, but it is a myth that they were the first to invest in combating the crisis. The Swiss economic analyst René Erbe attributes the “real break” with the tough austerity policy to the Weimar Republic under Franz von Papen, which was replaced by Hitler. “The National Socialists took over these measures and continued them on a much larger scale, but did not add anything new to them in principle in the first few years,” said Erbe. The National Socialists proceeded in a very similar way with the “Anschluss” of Austria in 1938: “They implemented the concept that had been worked out in the last few months of the Schuschnigg government and benefited from the economic recovery that had already begun,” says economic historian Fritz Weber.

Hitler encountered excellent conditions in Germany in 1933:
The Depression made wages low and the crisis bottomed out in 1932. Since economic stimulus programs have a time lag, the reduction in unemployment at the beginning of the Nazi regime can be attributed to his predecessors, argues historian Christoph Buchheim. And he goes even further: "Initially, the Nazi regime tended to hinder rather than support the economic upswing."

This should particularly apply to the "Anschluss" of Austria in 1938: Since the exchange rate from the Schilling to the Reichsmark on Hitler's Bestemm was set completely excessive (one Reichsmark for 1.5 Schilling), Austria's companies produced comparatively expensive, the companies had to lay off workers. Unemployment fell in 1938 only because hundreds of thousands of Austrians were poached to the "Old Reich" and completely new armaments companies were built up out of the ground.

The Nazi regime by no means had a coherent economic concept on which to rely. Hitler himself did not understand much about economic issues. He saw in the economy "only a necessary servant in the life of a people's body". Although Reich Organization Leader Gregor Strasser worked out an “immediate economic program of the NSDAP” in 1932, a few weeks after its publication Hitler had it crushed and replaced by a more moderate “development program”. The resistance was too fierce in business circles, with whom Hitler apparently did not want to mess with. This immediate program did not come from an economically savvy person from within his own ranks: Strasser had rather copied the basic features from the Austrian economist of Jewish origin, Robert Friedländer-Prechtl. Some of this should point the way: the postulated independence from abroad, “productive credit creation” and price controls.

From the beginning, the regime financed itself with a drastic increase in national debt. In the first two years, the aristocratic Reich Finance Minister Lutz Graf Schwerin von Krosigk took out a loan of ten billion Reichsmarks (around 43 billion euros based on today's value). Until the beginning of the war, the new indebtedness of Hitler's Germany totaled around 40 billion Reichsmarks (RM). Because his policy was always in anticipation of the future, Adolf Hitler forbade Hitler in the first year of his Chancellorship in 1933 to announce the figures of the next budget. It remained that way for the twelve years until the end of the regime.

The famous Reichsbank President and Minister of Economics Hjalmar Schacht became the father of “productive credit creation”. He had the notorious "Mefo bills" issued through the front company "Metallurgische Forschungsgemeinschaft" (Mefo), which was backed by Krupp and Siemens, among others. The Reichsbank took over the guarantee, but the Reich did not appear to be the debtor. Between 1934 and 1936, half of all Wehrmacht contracts were financed “covertly”.

The Nazi “economic miracle” on credit was trimmed for large-scale industrial armaments from the start, and SME policy was neglected. Of the billions borrowed, only six went to civilian job creation programs. In one of his first cabinet meetings, Hitler had ordered that employment measures should only be supported from public funds if they also served to “make the German people defensive”. All too offensively operated rearmament, however, was initially prohibited by the Treaty of Versailles. That is why investments were made in the Reichsautobahn, which is ideal for propaganda purposes, in public buildings - such as the gigantic Nazi party rally grounds in Nuremberg - and in residential construction.

How much the Nazi economy was geared towards war is demonstrated by the share of spending on the military and rearmament: it was pushed from four percent in 1933 to an exorbitant 39 percent in 1936. There was already a labor shortage in the armaments industry: 4.5 million of the originally six million unemployed had found employment. The introduction of the Reich Labor Service and compulsory military service in 1935 benefited the “employment miracle”: By 1939, one million Germans had become soldiers.

The central escalation of Nazi economic policy to its actual goal took place in 1936: Hermann Göring, the most powerful man after Hitler, became a de facto economic dictator. As the representative of the “four-year plan”, he was supposed to make Germany militarily and economically fit for war in four years.
This decision at the latest makes it clear that the Nazi economic policy did not follow the dogma of active economic policy of the most important economist of the 20th century, John Maynard Keynes. From 1936 there was full employment in the empire - the expansive government spending on credit was therefore rather detrimental to economic development.

The improvisational character of Nazi economic policy now came to the fore more and more clearly. Reichsbank President Schacht warned early on of the massive use of the banknote press: "You can neither bake bread nor pour cannons from paper." In order to combat the symptoms of inflation, price and wage freezes were issued. Schacht's warnings that the economic system would inevitably hit the wall went unheeded by Hitler. In 1937 Schacht resigned from his position as Minister of Economics, and in January 1939 Hitler finally dismissed him as President of the Reichsbank. The “Führer” did not want to let a “misgivings” put a brake on his mania for rearmament. His goal was to conquer living space for the “Aryan” race, which the ethnic movements had already promoted in the German Empire. Looting was a given. Hitler: “We cannot feed ourselves on our own basis. The final solution lies in an expansion of the living space or the raw material and nutritional basis of our people. "

Austria had long been targeted by the Nazi regime as an expansion destination. Chancellor Engelbert Dollfuss, however, had opposed Germany in line with Italy's fascist leader Benito Mussolini. In order to exert pressure, the 1,000-mark ban was imposed in May 1933: Germans had to pay this sum (almost 4,000 euros today) before traveling to Austria. In 1936, Chancellor Schuschnigg concluded the "July Agreement" with Hitler, which prepared the Anschluss.

At the beginning of 1938 the German Reich was on the verge of insolvency. Propaganda Minister Joseph Goebbels wrote in his diary: "After that it looks worse than I thought. But a people has never perished from debts. But probably because of the lack of weapons. "Two weeks after the invasion of the German Wehrmacht in March, he was greatly relieved:" We have a significant shortfall. But Austria ”(Goebbels' diary, March 27, 1938).

“Ultimately, the Anschluss in 1938 was essentially justified economically,” says economic historian Peter Eigner. The “home in the empire” phrases were only added to it.

The most important prey at the moment was the gold and foreign exchange reserves accumulated by the authoritarian Dollfuss system of currency stability. The Austrian National Bank had 78,267 kilograms of fine gold. Some of it was stored in the vaults of the Bank of England and was handed over to the Reichsbank without any problems. With the stocks that intimidated Austrians sold to the Germans, gold and foreign currency worth 1.3 billion Reichsmarks were probably transferred from Austria to Berlin in 1938. That was about 18 times more than the Reichsbank itself had. The “Hitler gave us work” embedded in the Austrian consciousness is therefore simply wrong. Because not Hitler, but Austria itself financed the upswing.

The "Ostmark" also had rich mineral resources of magnesite, iron ore and crude oil, which the Nazi armaments urgently needed: in 1939 one fifth each of crude oil production and one fifth of iron ore in the Reich came from Austria. The construction of power plants began in the Alps (Kaprun) and on the Danube (Ybbs-Persenbeug). However, the course of the war forced the Nazi strategists to constantly change their projects: the two construction sites were soon closed.

The Steyr Group was to become a prime example of the transformation of a large Austrian industrial company into a veritable armaments empire of the Nazi era - in all aspects. In 1938 he was majority owned by Creditanstalt. The bank was forced to sell Steyr to the armaments company Hermann-Göring-Werke. The Jewish director Paul Goetzl had to leave, the general director was Georg Meindl, who was born in Mondsee and, as an SS member, had excellent contacts with both Göring and SS chief Heinrich Himmler.

Modernization and construction took place under immense pressure.
In 1938 the company had sales of 57 million Reichsmarks, and in 1943 it was eight times as much. The number of employees exploded in a similar way: from 7,000 in 1938 to 50,000 in 1944. Every second of them was a concentration camp prisoner or forced laborer. The new “Nibelungenwerk” in St. Valentin, Upper Austria, became the largest tank factory in the Third Reich alongside Krupp.
Steyr General Director Meindl achieved the dubious honor of being a “pioneer” in the use of concentration camp prisoners in armaments throughout the German Reich. At the beginning of 1942, the SS set up a separate concentration camp sub-camp for Steyr, and 15,000 concentration camp prisoners were deployed in the gigantic tunnel construction for underground relocation near Melk. After the end of the war, Meindl's charred body was found. The historian report “Austrian Banks and Savings Banks under National Socialism” judges one of the most important corporate managers in National Socialist Austria: If one could even speak of Meindl's industrial legacy, one should not hide the fact that it was “also steeped in extreme crime”.

Next episode:
How the Nazis turned Austria's economy upside down and how the SS group did business.