Germany’s roaring ’30s

The 1930s were a time of economic peril and misery for most nations globally. In the US, the period came to be the ‘Great Depression’ as living standards plummeted following the sharp decline in the money supply that started the decade. The same was true of the UK, as harsh austerity measures put in place by the National government led to mass unemployment and widespread poverty. With this said, the German economy experienced record economic growth and prosperity during the 1930s, following the reforms undertaken by the Nazi government. The country started the decade as a broken nation – faced with bankruptcy for the second time in under ten years and with a severe lack of foreign investment; Germany finished the 1930s with full employment and the strongest economy in Europe.

Work programs

One of Hitler’s first major reforms was the introduction of work programs across various sectors of the economy. The most notable of such was the construction of the Autobahn. This infrastructure project involved the creation of a complex network of roads across the nation. Through this program, millions of jobs were created in a multiplier effect. Whilst the Autobahn program itself required human capital, the establishment of new roads stimulated the German Car industry through increased demand for cars. This promoted further employment opportunities throughout the German economy.

The Nazi government founded Volkswagen in 1937 to promote the automobile industry. At the start of the decade, cars were a luxury for most; only one in fifty Germans owned a car. Hitler wanted the car to be accessible for the German population – a car that every German family could afford. As a result, Volkswagen (‘People’s car’) was established. However, the initial Volkswagen models were still far too expensive for the average working German. As a result, the Nazi government established a saving scheme known as ‘Sparkarte’. Through this program, Germans were encouraged to deposit 5 or more Reichmarks per week into this savings account and earned a stamp for every 5 Reichmarks deposited. Volkswagens could be paid for using these government-backed stamps. The cheapest Volkswagen, the KdF-Wagen cost 990 Reichmarks (198 stamps). Hundreds of thousands of Germans opted into this scheme, thereby promoting car ownership throughout the nation. As these cars had to be manufactured, this promoted long-run economic growth through increased employment.

The militarism and rearmament that took place under the Nazi government also promoted economic growth. Following his ascension to the chancellorship, Hitler swiftly reintroduced conscription. As such, Germany’s infantry quickly increased from 100,000 to 300,000 between 1933 and 1937. At the same time, new submarines and battleships were commissioned, as well as military equipment for the army. Military spending quickly rose from 1% to 10% of GDP between 1933 and 1935. Schacht, Minister of Economics, approved a 35 billion Reichmark eight-year military spending package in 1933. By comparison, the national income in Germany in 1933 was 43 billion Reichmarks. Through these large investments into the German military, the German manufacturing industry boomed.

“German economic salvation has been brought about solely through the efforts of the German people and the experience they have gained. Countries abroad have contributed nothing to this”

Adolf Hitler

With this said, growing concerns about the deficit became apparent. Between 1933 and 1939, total tax revenue amounted to 62 billion Reichmarks; at the same time, government expenditure grew to over 102 billion over the same period. Military spending comprised 60% of total government spending between 1933 and 1939, and as such, German financial experts became concerned over whether the large military buildup was sustainable in the long run. This is because the rising national debt (which reached 39 billion Reichmarks in 1939) was thought to eventually lead to higher interest rates on government bonds to be demanded by investors due to growing concerns over whether Germany could repay its debt. This would lead to higher borrowing costs for private firms, thereby reducing long-run investment into the German economy.

However, these speculative claims never came to fruition as interest rates remained low and the money supply grew from 1933 onwards. This was largely due to the Nazi’s strong ties to businesses and wealthy individuals, which ensured that interest rates remained low so that the Nazis could fund their large spending projects and militarisation. In return, the Nazis implemented policies that suppressed small businesses to the benefit of the wealthy business owners that funded the Nazi party. In 1937, a new law was passed that stipulated all businesses with under $40,000 in capital to be abolished, with at least $200,000 was required to establish new firms. This eliminated one-fifth of German businesses in less than a year. There is little doubt that the German economy would have grown faster if the government hadn’t been so hostile towards small businesses; however, given the Nazis’ main aim of remilitarisation and imperialism, appeasing big business and wealthy individuals at the expense of even greater economic prosperity was of little surprise.


The privatisation of many inefficient state-owned firms also contributed to the robust economic growth of Germany. In most developed economies, the Great Depression and the subsequent economic downturn led to the mass nationalisation of private firms. This phenomenon was too witnessed in Weimar Germany, before the election of the Nazis. However, after the Nazis took power, many banks, railways and welfare programs were handed over to the private sector. Initially, this was done to raise capital for Nazi military spending. However, the privatisation of banks such as Deutsche Bank contributed greatly to the economic success experienced by the nation. This is because previously inefficient state-run firms were forced to compete with other German banks. As a result, cost-cutting measures and efficiencies were made within these firms, thereby eliminating waste and unnecessary spending. This increased productivity, leading to long-run economic growth within the economy. At the same time, German taxpayers were no longer required to pay for state-provided services that they didn’t use. With the expansion of the Autobahn and the increasing prevalence of cars, it is unsurprising that railway usage plummeted during the 1930s. As a result, the privatisation of the railways ensured that Germans had the choice of travelling by car or train, instead of being forced to fund rail travel via taxes.

“Hitler’s economic revolution in Germany had reduced financial considerations to a point where they played no role in economic or political decisions”

Carroll Quigley – Historian

Ultimately, Nazi economic policy gave birth to the war machine that culminated in WW2. Strong economic growth can be attributed to the large spending programs instituted by the Nazis, thanks to the support of wealthy investors and large businesses, who provided the Nazi regime with capital and kept borrowing costs low. The large infrastructure projects with the expansion of the Autobahn propelled the growth of the car industry, thereby driving employment numbers through the roof. The privatisation of most state firms also ensured that inefficiencies within the public sector were eliminated. With this said, the suppression of small businesses hindered economic activity; no doubt limiting competition within the market left economic growth lower than what could’ve been achieved.