I'm going to answer your question pertaining to Germany since I am more familiar with their economic situation in the 1930's. Essentially the reason they were able to do this, while the country being in a terrible economic state, was through unsustainable means. In Germany they had the production dilemma of "butter or guns" in the late thirties, essentially whether to produce military goods or domestic goods. They decided to do both(failing their goals for both),along with the major projects you mentioned, such as the autobahn. The issue here being that the economy wasn't really doing well, the government was funding it by hemorrhaging money. First they did this through loans, and later through loot from the conquest of nations such as Poland, France, or later the USSR. The national deficit rose as high as 38 Billion marks, but while Schacht, the minister of economics, worried about it, Hitler was relatively unconcerned except for the necessity. Historians such as Overy argue that this in discussing his famous memo regarding the 4/year plan to prepare for war, where Hitler essentially said economics don't matter unless we win this war. To summarize the economy was still in the toilet, but by deficit spending, and ignoring long term consequences, along with looting occupied regions, Hitler was able to keep up the appearance of a healthy economy while completing projects.

Tooze (alluded to by u/tim_mcdaniel) explains the extreme measures Hitler went to to mask economic failure: emasures that could only have been undertaken by an authoritarian regime.

He seized assets for the state, firstly union assets and later Jewish assets, and those of anybody who fled the country. Certain industrialists were legally pursued for the same ends. There was rigorous control of capital exchange: a citizen or company could not take gold or foreign currency out of Germany. The VW program saw thousands of German workers contribute a wage levy so they could have a car, and of course these cars were never delivered by the money was kept.

A final method was 'mefo bills', credit notes underwritten by major German companies, which they had to issue in exchange for raw materials and general government favour.

Despite these measures, the German economy went from crisis to crisis in the 1930s, but the outward appearance of strength and unity was always maintained and certainly fooled Western observers. As long as German citizens accepted that it was okay for their personal situation to deteriorate, as long as Hitler was expanding, invading, and building wonderful machines, it more of less worked.

Good answers below. It's worth emphasizing r/Edsman1's point that war itself became something of an investment for the Nazi regime. In 38/39, the foreign currency and gold reserves of Austria and Czechoslovakia were crucial to sustaining German rearmament and economic expansion.

It's worth pointing out too that this was essentially the same gambit of German leadership in the First World War - ignore the deficit, ignore declining living standards, if the generals can deliver victory the wealth will flow from occupied countries. That was the logic behind the brutal annexations of Brest-Litovsk.

I'll try to add something relative to Italy. I need to preface my answer observing that: following the spirit of the question I will not offer a complete picture of the economics of the period but rather focus on the "great works" and the relative funding, I will not address therefore - if not very briefly - some major relevant events in the development of such policies.

I hope you will find the answer useful anyway.

 

At the time of Mussolini's rise to power, the Fascist Movement had a confuse economical program painted in broad strokes. In it corporativism and working class issues coexisted with the idea of the greatness of the nations. The soon to become Duce was aware that no realistic economical policy could be built on such a basis. He focused therefore for the first years (1922-24) in strenghtening his hold on the country and gradually demolishing the old ploitical opponents.

The ecomomy matters were left in the hands of Alberto de Stefani, a conservative liberist; and were therefore handled as one could expect with limited intervention and aimed to a weak budget balance. No great works were therefore undertaken at the beginning of Mussolini's rule over Italy.

Things started to change when the decline in value of the italian Lira prompted Mussolini to replace de Stefani with Giuseppe Volpi and to start the Battle for the Lira with the explicit aim of bringing back the ante war exchange rate of around 90 Lira for a Pound Sterling from the 150:1 of early 1926. This clearly marked an increased activism of the regime in the ecomomical matters and an attempt to bring the great industry closer to the regime (Volpi was a big industry owner and later to become president of the Confindustria).

Without following the issue, many of the leading ideas of the fascist economical policy stemmed from this moment:

• A strong currency, even if that meant reduced export
• A policy of power, including direct intervention in strategic sectors (much increased after the '29 crisis and the start of foreign politics adventurism)
• Enforcing of budget balance
• Compensation towards the great industry for the increased export prices through salary control
• Reduction of unemployement through state jobs
• Self sufficiency concerning food genres (and later - albeit hopless - industrial raw materials)

The "long term plan" of the regime to address these issues, together with its ambition to a - moderate at least - reshaping of italian society and his need for some propaganda success took the form of an ambitious program wich involved clearing marshlands to be made available for agriculture and - contestually - creating new settlements (later in the '30s new industrial settlements would be founded as well, with even smaller success).

While this checked many of the aforementioned boxes, the issue remained of how to reconcile the increased expences needed with the strict balance policy that seemed necessary to avoid inflation. Alltogether the italian economics in the 1926-29 period was not in terrible shape, despite the hard times of the deflation battle.

The balance had been active from the year 1924-25 to 1929-30. At the same time the real salary index^1 had recovered a bit

Year	Salary
1919	163
1924	124.2
1925	121.4
1926	113.5
1927	122.0
1928	122.7
1929	119.5
1930	119.2

 

The crisis of 1929 hit Italy right after the beginning of the major phase of Mussolini's public works had been announced. While these works offered a way of controlling unemployement, they needed financing in an economical conjuncture much different from that in which they had been designed.

In 1927 Mussolini had stated:

With these five years the policy in favour of the city ends, which [recieved from the regime everything they needed]. The policy in favour of the "village" needs now to be intensified. ... But for this policy ... more resources are needed

The following year (december 1928) the Mussolini law (actually shaped by Arrigo Serpieri) for land clearing was passed and introduced in July 1929. It included major works entirely financed by the state and others where private works were heavily subsided for a total amount exceding 7 billions Lire.

Despite the unfavourable situation the first following years saw the almost exact execution of the planned works. The expenses passed in the balance^2 (authorized - not necessarily executed works) were 1,122 millions Lire in 1929-30, 912 in 1930-31 and 824.0 in 1931-32.

The strong will of Mussolini to not go back on his plan - both for propaganda reasons and fear of an increase in unemployement - compelled him to take every measure possible to keep the money running. Including renouncing to perfect balance^3.

Year	Income	Expenses	Balance
1929-30	19,837	19,667	170
1930-31	20,387	20,891	- 504
1931-32	19,324	23,191	- 3,867
1932-33	18,217	21,766	- 3,549
1933-34	18,056	24,434	- 6,377
1934-35	18,817	20,847	- 2,030

Fiscal pressure was increased where possible, salaries were reduced while measures were put in place to reduce the living costs.

In the face of the crisis defence expenses were reduced while public works were increased in percentage^4:

         | 1924-27 | 1928-31 | 1932-35

----------|----------|----------|----------- Defence | 31.60 | 31.81 | 25.03 Public Works | 12.18 | 14.16 | 24.56

Despite these moderate successes, the strain on Italy's already weak economy was becoming unbearable. The gold reserves had reduced in the years from 1930 to 1934 from 10,341 millions to 5,883 millions).

At the same time the private initiatives which were supposed to carry a part of the burden of the public works planned were pulling back leaving many enterprises without full economical coverage.

The original plan of the works had to be reduced, even at the cost of giving up on works already partially paid for. The overall result was therefore unsatisfactory: the regime managed to muster the over 7 billions required but only if we consider the entire period of 1922-38. Despite the propaganda success of the founding of Littoria (1932) and Sabaudia (1933) in the former Pontine marshes; of the 2,600,000 hectars completely cleared, only 250,000 were productively employed in 1938.

 

To summarize: fascism did not cheat much in its economical policy of power, neither was looking forward to war as a cop out. But the combined effects of currency reevaluation, international crisis, economical self-sufficiency put the regime in an extremely dire situation concerning salary policies, raw materials availability and industrial development wich contributed significantly to its weakness at the coming of WW2.

 

Great works did not end in 1938 but the "clearing of the land" was followed by some effort to boost industry through the creation of raw materials production centres. I feel that addressing these is beyond the scope of the original question.

 

Source as usual is De Felice's byography of Mussolini. For the ones interested I have Banca d'Italia's historical series for balance and such.

1 - Vannutelli; Les conditions de vie des travailleurs italiens as quoted in De Felice

edit: These are not ISTAT data but the ones given by the National Fascist Agrarian Trade Union.

2 - Atti della Presidenza del Consiglio dei Ministri as quoted in De Felice

3 - Repaci; La finanza pubblica italiana as quoted in De Felice

4 - Repaci; La finanza pubblica italiana as quoted in De Felice

 

Edited for spelling and phrasing.