
In the early 1920s, the German Economy was reeling from the heavy impositions forced upon it by the Treaty of Versailles, 1919. Through this treaty, the countries that emerged victorious from World War I forced Germany to repay them for all damages they had suffered during the war. It further included a War Guilt Clause, blaming Germany for causing and sustaining the entire war.
Germany had, actually, emerged from the war with its industrial power intact, healthy economy and a geopolitical position to become a dominant force in Europe; save this expensive and humiliating treaty.
In 1921, Germany was issued the ‘London Ultimatum’, demanding reparations in gold or foreign currency to be paid in large amounts through annual instalments. Germany thus began printing money to finance this. That was the beginning of an increasingly rapid devaluation of the Mark. Germany became desperate to buy foreign currencies at any price, which only exacerbated the situation.
Through internal price control measures and external aid in the form of Dawes Plan, 1924, Germany began to see its currency stabilise slowly. In fact, during the years that followed, Germany experienced a ‘Golden Age’. Through American loans and international agreements, it was able to rebuild its place amongst the leading nations of the world.
Later, in 1928, a Young Plan too was initiated. This aimed to further ease the war reparation burden on Germany. This plan, however, clashed with the onset of the Great Depression.
In 1929, when the US financial markets collapsed, US investors and bankers lost confidence and tried to reduce their risk by pulling out their US dollars from Europe. With Germany’s biggest creditor being the US, a majority of its foreign debts were financed by US dollars.
To quickly balance its fiscal deficit, Germany began raising taxes and cutting wages and social security expenditures. The unemployment and poverty in Germany at this time was only aggravated by this action.
In 1931, the German banks began to fail and the government defaulted on its debts. This situation, that later came to be called the German Crisis of 1931, was where the Nazis gained political ground, promising their fellow Germans an end to their abject poverty.
It’s quite interesting to note here that this distressing condition of the German economy is what actually motivated people to join the Nazis and trust their propaganda that painted the Jews as a menace.
The Nazis viewed economics as the foundation to their ideological goals. These goals included economic stability for their country, an end to unemployment, and Autarky. Autarky refers to self-sufficiency, which meant that the Nazis aimed to remove dependence on foreign investment, imports and trade.
In 1933, the Nazis rose to power on these promises, with Adolf Hitler becoming their all powerful dictator. They began by banning trade unions and fixing wage rates, thus disallowing workers from being lobbied for fairer conditions or better pay. They then reinstated the banker Hjalmer Schacht, who had helped Germany stabilise after its hyperinflation in the early 1920s. Both of these moves appeased to the business community.
To address unemployment, they heavily invested in infrastructure projects that demanded large amounts of labour and would simultaneously promote social welfare, like schools, hospitals and roads. One prominent system set up at this time was the Autobahn system or the German motorway.
Acting on their political ideologies, they lured the German people through simple and effective propaganda.The propaganda aimed to exploit people’s fear of uncertainty and instability. These messages varied from ‘Bread and Work’, aimed at the working class and the fear of unemployment, to a ‘Mother and Child’ poster portraying the Nazi ideals regarding women. Jews and Communists also featured heavily in the Nazi propaganda as enemies of the German people.
Eventually, they began setting up concentration camps to annihilate the Jewish people. They mobilised support for this by blaming the Jews for the poor economic conditions of the German people, for most of the wealthy bankers of Germany at that time were Jewish.
Fast forward to 1936, Germany had achieved economic stability. Hitler saw this situation as the perfect opportunity to push for his ideological goal of Lebensraum; an expansion of living space for the German people to be acquired by taking control of lands in the east. He issued a secret memorandum to his senior most officials, which would later form the basis of the Four Year Plan.
The Four Year Plan, that was implemented from 1936-’40, aimed to re-orientate the German economy towards rearmament and preparing for war. To carry this operation out, Hitler appointed Herman Göring as its Commissioner. This appointment undermined the authority of Hjalmer Schacht, who opposed the use of German resources to finance a second war.
By 1938, the entire German economy was under military control. The expansion began with the annexation of Austria, an action that is often referred to as the Anschluss. After this Hitler demanded Sudetenland, which was the northern region of Czechoslovakia, for he believed most of its people to be ‘ethnically’ German.
Desperate to avoid conflict, the Axis powers conceded Sudetenland in exchange for peace through the Munich Pact. Less than half a year after signing this agreement, Hitler broke this pact by taking over the rest of Czechoslovakia.
Post this, the Nazi Germany aimed to take over Poland. However, the British and the French pledged military support to Poland. History took an interesting turn at this point where the Nazi Germany reached a Nazi-Soviet pact with its ideological enemy, the Soviet Union. Hitler, a far right totalitarian leader who blamed communism for Germany’s problems, formed an alliance with the communist leader Stalin, in what went down as the most intense overlap of ideologies in history. Under this pact, the two leaders agreed to peace for a term of ten years. Further, the two nations also divided Poland amongst themselves.
In an uproar, Britain and France issued an ultimatum to Germany: to withdraw troops from Poland or to face a declaration of war. Germany never replied to this threat. On 3 September 1939, unwilling to accept further German expansion, Britain and France declared war on Germany.
The Second World War had thus begun.
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