The Wages of Destruction: The Making and Breaking of the Nazi Economy

by Adam Tooze

The system did its job in stopping the haemorrhage of foreign exchange. In the months following the announcement of the New Plan, imports were squeezed dramatically. By the third quarter of 1935, the volume of imports was almost exactly equal to that at the trough of the recession three years earlier. But, by comparison with 1932, industrial production was up almost 100 per cent.75 Such a dramatic squeeze on foreign inputs to the German economy was clearly not sustainable. It was only possible in the short term because producers were able to draw on accumulated stocks of raw materials. Once these were exhausted, the economic recovery would be cut short. Any substantial increase in imports depended on achieving a recovery in exports. This, however, failed to arrive. By the summer of 1934, the optimism that had surrounded the export subsidy schemes a few months earlier was largely dispelled. The Reichsbank was so desperate for hard currency that it could no longer afford the bond repurchase mechanism as its main means of subsidy, since this left a substantial fraction of Germany’s export earnings in foreign hands. And the other schemes that operated at the expense of Germany’s foreign creditors were no longer sufficient to provide the necessary rate of support. The Reichsbank estimated that to offset Germany’s crippling competitive disadvantage it needed to provide more than two-thirds of Germany’s exports (240 million of 340 million