Well, it's definitely still a point of some dispute, that's for sure. I'll focus on Germany primarily, and I'll leave old Benito to someone else.

First of all, it's important to remember one of the primary rules of free market capitalism: Recessions come and go. It is the natural assumption that any depression, recession and economic slump will eventually lead to recovery, making it very difficult for historians, economists and economic historians (the most thrilling of professions) to evaluate how much any particular policy or set of policies helps or hinders any given economic structure.

#Germany

####The failure of liberal economic approaches, 1929-1933

That said, let's jump into it. The fantastic Germany and the Second World War by a set of Germany's and Hungary's most renowned historians sponsored by the German military (the modern one, that is) dedicated its entire first volume to the, to quote the title, "Buildup of German aggression". The chapter "From International Economy to Large-area Economy: The World Depression in Germany as a Crisis of the Liberal Economic System" is a good entry-level read on the Great Depression.

It had its origin in the United States, where, after a prolonged phase of prosperity combined with an irrationally optimistic belief in the continuation of the boom, the first depression phenomena began to appear in 1929 as a result of a widening gap between production and demand, leading to ever greater uncertainty in the economic sphere. A hitherto well-nigh unbridled readiness for speculation succumbed, in October of that year, to an alarmed sobering-up at the New York Stock Exchange and led to its crash. The consequences were a decline in production, a slump in prices, and mass unemployment; because of the interlinked nature of international trade and capital, these consequences did not remain confined to the United States.

Even though they hit Germany with full force, their overall effect was certainly no worse than in other industrialized countries, albeit differentiated in detail and degree. Austria, for example, experienced a deeper slump of its economy; in Britain the depression was of longer duration; the United States had, proportionately, a larger number of unemployed, and especially of unprovided-for unemployed. What made the great depression different in Germany was not so much its purely economic as its political effect and dimension.

In Germany it acted as the acid test of democracy, just when the middle strata, which were particularly affected by the depression, were beginning to lose faith in purely economic solutions to economic problems and were falling victim to National Socialist propaganda.

[Deist et al.: p. 159]

Okay, so this is late 1929, some three and a half years before Hitler becomes Chancellor in January of 1933 to even be able to initiate any sort of policy to affect economic outlook. This might imply that Hitler didn't have anything to do with it after all, but it's worth remembering that economic crises almost always get worse after their beginning as the runaway effects of unemployment, panicking investors and price and wage instability chase each other to maximize havoc.

And the world-wide depression resulted in a shrinkage of the world market in practically every field. The longer the depression continued, the more the conviction gained ground in economic circles that this was not a transient but a more permanent phenomenon. From this conviction there arose a readiness to call the long-term validity of the existing international economic system into question; the wish to replace it by some other system, e.g. a national one, was increasingly voiced.

[Deist et al. p. 160]

It should be noted here that the increasingly worsening economy and the related diminishing of the prestige of international capitalism, national revanchism in Germany became more pronounced as a feeling: With the territorial losses enforced on Germany after World War 1, the German state had lost 75% of its iron ore, 26% of its lead, 7% of its industrial base, 18% of its potato yield, 17% of rye and barley, 13% of wheat and 11% of oat [see Deist et al., p. 160], along with millions of ethnic Germans that could have been part of Germany's workforce - thus significantly hindering any attempt at German production autarky. This stung the German public, particularly in those areas where the supposed western democracies had not allowed ethnic German majorities to determine their own fates - like Austria, the Sudetenland and the Danzig Corridor. I wonder if those territories in this order will come up at some other point in history.

But regardless, Hitler was still far away from power, giving the possibilities to several governments (Müller, Brüning, Papen, Schleicher) to perhaps get something done. Well, they failed, typically because of the rivalling influences of Laissez-Faire capitalists and those that opposed them.

• Müller, a social democrat and the last democratically majority-backed Chancellor in Germany before Konrad Adenauer in 1949, wanted to initiate common-sense budgetary reform in tandem with the conservatives, but his own social democratic faction, fearing any further monetary disadvantages for the working class, didn't take the bait. Müller's government broke apart and no further democratic majorities could be found, so that the ailing President Paul von Hindenburg had to jump into the breach and assist all further chancellors with his autocratic decrees, as was granted to him by the Weimar Republic's constitution. Three Präsidialkabinette, 'presidial cabinets', followed this decision by Hindenburg, none of which had consistent parliamentary majorities and all of which relied on presidential decrees.

• Brüning as a Chancellor was an unmitigated disaster. Instead of adopting socialist policies and stimulating public growth by domestic government spending, he followed the classical liberal ("libertarian" for our American friends) model of driving down wages and prices in the hopes of getting capitalistic investments back up and running. Sadly, there were no magical capitalists with disposable capital that suddenly showed up. And why would they? It was the midst of an economic crisis. If the government restricts spending, it also restricts the demand of everything the government previously spent money on, further kicking several industries into the ground. Brüning did try, through protectionism, to save agricultural workers and farmers, already disadvantaged by the German climate and the nature of German farming structures against the more powerful agricultural structures in, say, the United States. However, no less than 177,000 hectares of agricultural lands [see Diest et al, p. 161] were subjected to forced public auction in the year 1931 alone.

• Papen and Schleicher (with Schleicher's very short tenure in office, the two are usually counted as one and the same in most regards) "deviated from Bruning's line in economic policy by endeavouring to lead the economy rapidly out of depression into an upturn phase" [see Deist et al., p. 162]. Whereas Brüning had put his hopes in the rehabilitation of the banking system in the eyes of the German public, Papen tried to incentivize private economic initiative and sponsored job-creation programs. However, he too failed to increase domestic government spending and take on government debt to stimulate the private economy. Papen's intentions, no matter how good, failed to produce any significant results because he was unwilling to change the actual steps from what Brüning did. Papen and Schleicher thus too remained ineffective. However, it must be pointed that unemployment fell slightly, by about 160,000 persons between August and October of 1932. We are however still talking at a scale of around five million unemployed. It should however be pointed out that Papen achieved this token victory by, among other measures, allowing employers to withhold up to 50% of the pay of newly employed individuals. Now you have a bunch of low-wage people that are, de jure, "employed", but you also have the problem that they don't have money to actually spend in the private economy for several months because their employers are withholding half of their wages. Prices won't recover and stabilize with reemployment alone, you need to actually increase consumer spending as well. That said, the economy overall saw some noteworthy improvements. Output of both capital goods and consumer goods rose from early to late 1932 (although they stayed below the numbers of 1931). Furthermore, stock exchange quotations increased temporarily, in great parts thanks to psychological effects of the Papen government's efforts, which reassured at least parts of the investors. This improvement from early to late 1932 is the big point of conflict in the evaluation of the Hitler government's efforts. Would this improvement within the year 1932 translated into 1933 even without the Nazis? That's the big question.