Despite being a fascist, dystopian state that was built on racist and ultranationalist views, how come Nazi Germany was still able to thrive economically before the war? How was Nazi Germany able to sustain itself economically during the war?

by sammyjamez

There is a common trope that Germany was transformed from a very poor state after WW1 because of the Treaty of Versailles, to a vibrant empire when the Nazi Party came into power.

Although, I am not sure if this portrayal is accurate.

At the same time, while Nazi Germany was growing in its influence, with its use of propaganda, and change in laws that limits certain freedoms (especially towards the Jews) and conditioned its citizens to obey the laws and ideals of Nazism to the letter, there are images of Nazi Germany still being vibrant and almost like a very functional nation before the second World War and not as a dystopian power as one would imagine as a dystopian nation would be like.

How come Nazi Germany was able to strive or even thrive economically before the war and how come it was still able to sustain itself economically during the war?

Where was it getting all its resources and trade since some countries prohibited trading with Germany during the war?

It is quite ironic that Nazi Germany, a culture that we know that was built on ultra-nationalism and racism, and fascist bureaucracy that probably made anyone feel afraid if they said anything wrong against Hitler and the Nazi Party, especially if that person was a Jew, and yet, when we see images of Nazi Germany (especially before the war), we see a nation that was quite ... well, functional, almost prosperous even which is strange to me

Manofthedecade

How come Nazi Germany was able to strive or even thrive economically before the war and how come it was still able to sustain itself economically during the war?

Mostly because it was deeply in debt. Starting in 1933, Hitler wanted to rearm Germany - except the treaty of Versailles would have none of that. So, they got this idea called the MeFo bills. Basically they setup a dummy corporation (MEtallurgische FOrschungsgesellschaft) that issued these bills to other private companies to pay for military expenditures. It was like a government issued bond, except it wasn't the government issuing it, it was the dummy corporation secretly run by the government. But this way, Germany could hide its rearmament and the expenditures weren't on the books. The MeFo bills were meant to be able to be cashed in by the private companies at the central bank for cash. Except the government extended the repayment period on them repeatedly until 1938. If they were cashed, basically the central bank would be printing money to cover them - and that would lead to massive inflation.

Domestically it was dealing with the Great Depression, so much like the US, it invested in many domestic infrastructure projects like the Autobahn. It also abolished labor unions and wages stagnated despite unemployment dropping. It used propaganda to show a vibrant German worker, but behind the scenes wages were low and goods were rationed. In 1936, the "four year plan" was a program that was designed to increase German self-sufficiency. It invested heavily in industry designed for war - refineries, steel works, factories, aluminum plants, etc.

Other policies helped as well. It didn't nationalize businesses so much as provide "incentives" for businesses to contribute to the nation's rearmament. Basically heavy taxation and regulation and caps on profits and dividends. It also had slave labor available for businesses to use and appropriated wealth from people that it imprisoned - like the Jews. The government heavily regulated the stock market and banking as well.

By 1939 the debt situation was becoming precarious as businesses didn't want to keep taking the MeFo bills and weren't falling for other government scams. Hitler didn't see the debt as a problem - the debt would be covered by conquering and appropriating wealth from the conquered.

And that answers the second part of the question, how did they keep the economy running during the war? By conquering Poland, France, the Netherlands, Belgium, etc. Pilfering helped keep them afloat. Personal taxes remained low early in the war, but gradually rose through 1944.

Basically Germany's economic prosperity wasn't real and wasn't sustainable - eventually that was going to come crashing down.

Where was it getting all its resources and trade since some countries prohibited trading with Germany during the war?

Prior to the war, Germany's goal was to achieve "autarky" - or self-sufficiency. It expanded mining operations and coal liquidation to be as self-sufficient as possible. It stockpiled oil for fuel. As it conquered, it took resources from the places it conquered. It still relied on places like Spain, Portugal, Sweden, Romania, and Turkey for raw materials however. Prior to 1941, the USSR was also a supplier to Germany. Shell corporations were used to hide raw materials heading into Germany from otherwise neutral territories.