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ecoelt at hofstra.edu from Hempstead, New York , October 3, 1998 Another Nazi Myth Bites the Dust
According to conventional wisdom, as a result of military expenditures, Hitler's economy went from 34% unemployment when he entered office in early 1933 to virtually full employment by 1936. Professor Silverman argues, as a result of impressive research in Nazi archives, that it was work creation programs that account for this "miracle" and it was the 4-year Plan announced in 1936 that represented an emphasis on autarky and arms and a seller's market.
It is surprising how conservative Hitler's initial plans were since they relied on the expertise of Hjalmar Schacht, who was replaced by Walther Funk after the announcement of the 4-year plan by Goebbles. The early years represented continuity with the Bruning policy, particularly the Todt plans for motorization and the famous autobahns, one of the positive legacies of Hitler.
Silverman's account of sharp regional differences is also interesting with East Prussia getting back to full employment at an early dater and Aachen lagging.
It is natural to compare Hitler's achievements with FDR's New Deal which initially had to deal with only 25% unemployment. Generally speaking, Hitler was the more successful, particularly in view of FDR's attempt to balance the budget in 1937 thereby producing the Roosevelt recession and the rise of unemployment from 14% to 19%. While Currie and Eccles managed to achieve the Keynesian euthanasia of the rentier in the late thirties, Roosevelt was overall a timid Keynesian until World War II and was plagued by double-digit unemployment until 1941. FDR devalued the dollar in 1933 by about the same percentage as Britain in 1931 but Hitler and Schacht ruled out currency devaluation because of fears that it would be inflationary.
Policies under Bruning had been brutally deflationary with workers taking a 10% wage cut, but the 1923 hyperinflation (and Schacht's role in stopping it) was still fresh in policy-makers' minds. Workers in voluntary labor camps which absorbed unemployment were paid very low wages and lost their unemployment compensation which helped maintain price stability.
Strangely Silverman hardly mentions the USSR as a source of ideas in the Hitler years though the 4-year Plan itself was inspired by the Soviet FYP, the second of which was being completed by the time Goebbels began administering the German equivalent. Earlier (February,1935) Soviet-type "work books" necessary for employment were introduced. The Russian economy today would seem to have more to learn from the German experience after 7 years of Yeltsin's brutally deflationary monetarist policy than from FDR's fiscal bungling. The non-payment of wage and pension arrears is a historic low in the application of the neo-classical notion that attributes recessionary unemployment to exorbitant wages.
Bill