The Propagander™ FAQ: Did Hitler's Leadership Save the German Economy?

Only temporarily.

The essence of Hitler's 'economic miracle' was secret funding of massive rearmament and public works programs, financed by shady monetary subterfuge worthy of America's Wall Street tycoons of recent vintage. This economy could only be viable for a limited time and would eventually have had be to be replaced with a traditional export economy. Instead of taking this step into the mainstream, Hitler fired the fellow who had made rearmament possible. He then embarked on a series of military conquests designed to seize captive markets and raw materials, thus doing away with the need for a normal trade economy. This worked for as long as the easy conquests continued, and was then further extended by seizing the assets of those territories under his command and utilizing the conquered peoples for slave labor. This 'system' lasted until the Germans lost the war.

The full answer is quite involved, and revolves around the financial genius of a certain banker by the name of Hjalmar Horace Greely Schacht. Schacht was Hitler's Reich Minister of Economics, and it was his invention of financial instruments, such as so-called 'Mefo bills,' that made Hitler's 'miracle' a temporary reality. Appointed in 1933 to the Reichsbank, and in 1934 as Minister, Schacht kept the financial maneuvering going full-speed for a good three years before he began pressing Hitler to bring Germany around to a more traditional economic structure. Hitler would have none of it.

From Inside the Third Reich by Albert Speer:

Some time around 1936 Schacht had come to the salon of the Berghof to report. We guests were seated on the adjacent terrace and the large window of the salon was wide open. Hitler was shouting at his Finance Minister, evidently in extreme excitement. We heard Schacht replying firmly in a loud voice. The dialogue grew increasingly heated on both sides and then ceased abruptly. Furious, Hitler came out on the terrace and ranted on about this disobliging, limited minister who was holding up the rearmament program."

Hitler countered Schacht's incessant demands to reduce rearmament by giving increasing control of the German economy to Hermann Goering, a personage Schacht was ill-equipped to oppose.

From The Devil's Disciples by Anthony Read:

Schacht and his Ministry of Economics had been told six months earlier to start making secret economic preparations for war, and he had used considerable sleight of hand to find the necessary funds so far. Along with a number of decidedly dodgy financial maneuvers, he had been forced to create a siege economy, banning virtually all consumer imports and severely restricting foreign currency transactions. But he believed there were limits beyond which he dared not push the long-suffering German public. "They are being starved of oil to cook with, butter for their bread, meat for a Sunday dinner," he told Goering. "Soon there will be a black market, and then we will have to start shooting people. I simply cannot spare you any more money."

Schacht might have been one of the worlds most brilliant economists, but he was no politician and knew little about ordinary people. Goering, on the other hand, knew nothing about economics, but everything about what the German people really wanted. For three weeks he worked with Pilli Koerner on a major speech, which he then delivered with great panache to a mass rally in Hamburg, the city where the loudest complaints about austerity rations had been made.

Wearing his Luftwaffe uniform and looking quite drawn after his latest bout of slimming, he began by outlining the tremendous progress that had already been made in restoring German pride through rearmament. He then moved on to remind his audience of the shaming restrictions still imposed on their country by Versailles. Only through strength, he told them, could Germany regain her rightful place in the sun. Having softened the meeting up, he delivered the killer punch. "I must speak clearly," he cried. "Some people in international life are very hard of hearing. They can only be made to listen if they hear guns go off. We are getting those guns. We have no butter, comrades, but I ask you: would you rather have butter or guns? Shall we bring in lard, or iron ores? I tell you, being prepared makes us powerful. Butter only makes us fat!" He slapped his hollow belly to emphasize his point, and the meeting erupted into roars of approval. Radio listeners all over Germany joined in.

Hitler sent him a telegram of congratulations. Schacht came up with the money for the Luftwaffe. The speech was reported around the world. The defining phrase, 'guns or butter' entered the international vocabulary. Goering, of course, never had to make the choice for himself--he could always have both. But no one ever mentioned that.

Schacht was only one of many to be defeated by the Hitler-Goering combination, but it was this defeat that symbolically put Germany on the inevitable path toward war. Eventually, not only was Schacht dismissed from all his positions in Hitler's government, but he ended up in a concentration camp. When his camp was liberated by the Allies, Schacht was named as a Defendant at the first Nuremberg Trial, but was subsequently acquitted of all charges and released.

Hitler's economic program was not to provide his people with a strong economy capable of future growth, but instead he created a war economy completely dependent on conquest, and thus tied to military achievement, not GNP. As such, it was a sham policy that led to total disaster for Germany and Europe, and led directly to the ascendancy of the USSR and the USA as world military and economic superpowers.

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