The objective of this paper is to approach the origins of the Great Depression in Germany, to know the role played by imported capital from abroad, and how the crisis was fought by the National Socialist regime from 1933. In this last aspect, it has been to expose that he used interventionist policies that reflected, as in the United States, the end and bankruptcy of the solution that, until then and due to the influence of the classic gold standard, had been the vanguard of the most orthodox economic thought to combat economic crises: the deflation.
For this, it has been considered appropriate to divide the writing into three parts: the first deals with the reason for the stoppage of the flow of American loans to Germany; the second describes the particular characteristics of the German crisis, whose origins would go back beyond the causes of the Great Depression; and, finally, the third part, refers to the interventionist praxis of the Nazi state, where the public works and social policies undertaken are reminiscent, ─although with very different singularities and influenced by the theories of social Darwinism─, to the economic and social program applied by Franklin Roosevelt in the United States, which, under the name of “New Deal”, served to combat unemployment and revitalize the economy.
Introduction: the causes of the crisis of 1929
After the end of the First World War, the United States, and later the European countries, experienced a stage of relative stability that was accompanied by a greater access of the population to the innovations that the Second Industrial Revolution incorporated. Indeed, many families acquired and enjoyed elements and services that were previously out of their reach: radio, telephone, automobile, cinema, vacations, trips, etc.; the eight-hour working day was extended and, albeit in a very primitive way, social security. Broadly speaking, this resulted in the emergence of what has come to be called a consumer society.
But the so-called “roaring twenties” were not only characterized by a boost from material culture, but also from other novel aspects such as the appearance of “jazz” or “charlestone”, as well as a great cult of youth, which predicted a society in which the individual could emancipate himself from the prevailing precepts and family rules up to that time. In general, fashions emerged led by a middle class that was establishing itself in the United States, and that through radio and cinema expanded towards the European continent.
However, it must be taken into account that these phenomena were limited to urban environments and that not everything was a generalized atmosphere of happiness. We cannot forget the rise of intolerant attitudes in all aspects of life: the prohibition of alcohol in the United States, as well as the increasingly notorious impulse of ultra-nationalist, anti-capitalist and anti-Marxist forces and movements such as fascism and Nazism in countries like Italy and Germany. These were welcomed as an alternative to the traditional parties, which were discredited by a large part of their societies due to their inefficiency in managing the problems arising from the Great War, and, above all, from the economic crisis of 1929.
The causes of the 1929 crisis cannot be understood if the parameters from which they come are not analyzed, that is, the economic situation in which the United States found itself during the twenties, which would allow, in turn, to explain in that sustained the feeling of infinite prosperity that was breathed during that same period. José Morilla Critz warns that one should not generalize regarding the economic expansion experienced during the twenties, and that, furthermore, it would be difficult to speak of “expansion”, especially if we take into account that there was an average annual growth of no more than 3 per 100 for more than five years. Furthermore, he adds that «all the industrial countries experienced more or less long periods of decline in production and an increase in the number of unemployed».
The noted growth came from the manufacturing sector and from industry in general, since agriculture did not have such a pronounced development. In fact, there has been talk of “depression of agriculture in all these years.” Why did this happen? Due to the maintenance of an excessively high production due to the difficulty of adapting it to times of peace. In this sense, the overproduction that occurred between 1918 and 1925 was not only produced as a consequence of the demand for primary products by the belligerents of the First World War in Europe, but also due to other factors such as the putting into cultivation of virgin lands and the increasing mechanization pronounced in the agricultural sector to alleviate the demand of a Europe plunged into crisis after the war. Likewise, it should be taken into account that the population stagnated during this period, which made it more difficult to find demand, and that the world stock of primary products began to rise as a result of the recovery of agricultural production in the countries that had previously suffered the consequences of the war.
Whether due to ignorance or because the primary sector had great difficulty adapting its production to the changes produced in the market, the fact is that many farmers resorted to increase in production in response to a drop in prices, hoping in this way to sell more so as not to reduce their purchasing power, mainly with regard to the acquisition of manufactured products. However, this had the opposite effect, that is, it pushed prices even lower and the purchasing power of farmers was greatly affected. According to Maurice Niveau, “between 1925 and 1929 agricultural prices fell by 9% while the cost of living for peasants decreased by only 6% and production costs remained unchanged.” This clearly translated into a loss of purchasing power for farmers, who at that time represented 28% of the total US population, and, in turn, affected the industry, as it lost consumers.
But overproduction is not only observable from the primary sector, but in the industrial fabric we also find a disparity between production and consumption. Many industries in Eastern Europe, including in Great Britain, had clung to or were latecomers to the industrialization process, focusing on the production of traditional products based on the use of raw materials such as coal, iron, steel, cotton or wool. However, as already mentioned, the new consumer society will demand new products such as automobiles, which will require new raw materials such as oil or rubber, which caused two events: the first, that traditional products did not find demand in these countries; and the second, that the new products were produced excessively, which caused a constant drop in prices due to the inability of the domestic markets to absorb the high supply.
In the case of the United States, Galbraith describes to us that the industrial production index increased considerably in those years and illustrates us with the example of the number of automobiles manufactured. Taking his own words:
Between 1925 and 1929, the number of manufacturing companies increased from 183,000 to 206,700; the value of its total production rose from 60.8 to 68 billion dollars. The Federal Reserve index of industrial production, estimated at only 67 in 1921 (1923-1925 = 100), had risen to 110 in July 1928, reaching 126 in June 1929. In 1926 automobile production reached figure of 4,301,000 units. Three years later, in 1929, this figure was increased by approximately one million (5,358,000), a level that decently resists comparison with the 5,700,000 new cars manufactured in the opulent year 1953.
On the other hand, the offer could not be absorbed in the international market either due to various circumstances. One of the reasons was that consumer goods industries had adapted to domestic markets and did not focus on the foreign marketIn fact, between 1913 and 1929 industrial production had grown by 49% and only 15% of this was destined for foreign trade.
In fact, The main cause lay in the protectionism that the States had adopted as a consequence of their traditional production structure that did not meet the new demands of the consumer society. In this sense, the “group of products in decline”, which were exported in international trade, did not fall below 50% of the total between 1913 and 1929. These products in decline, made up of textiles and manufactures made from raw materials such as cotton, iron or coal, were on which countries like France, Italy, Switzerland (80% of their exports) and Great Britain or Belgium (62% of their exports) depended.
Evidently, new products in expansion, automobiles, among others, for having become the ideal model of stable life and well-being in the North American country, they began to threaten the traditional productions of these nations and raised tariff barriers throughout the world. Of course, this fact meant the entry of overproduction in a more pronounced way, since both imports and exports were restricted.
In the same order of ideas, the workers and employees, although they improved their standard of living,The growth rates of wages were always lower, except in the case of Germany, than the growth of the industrial product between 1925 and 1929. Therefore, it was a factor that, added to the orientation of production towards domestic markets, further favored the development of a trend towards overproduction (see table 1).
To this must also be added that, according to Galbraith, only 5% of the US population owned a third of the total national income. It is evident that this wealth was destined for investments in capital goods and the acquisition of luxury goods, since it would be remarkable that, normally, a member of that percentage was not interested in buying 25 cars or, as Galbraith points out, a lot of bread, for what the production did not find demand. However, the Canadian defends that It was not a reduction in terms of mass consumption goods, such as clothing or food, which only grew 2.8% per year, but rather it occurred in capital goods, where most of the investments had actually been allocated. . In the economist’s words:
During the twenties the production of capital goods increased at an annual rate of 6.4 percent; non-durable consumer goods increased by only 2.8 percent annually. The increase in the lines of housing, domestic furniture, cars and the like was 5.9 percent. In other words, the shape…