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

by Adam Tooze

February 1931 unemployment rose by 2.1 million, twice the normal seasonal increase. In the general election of September 1930, Hitler’s National Socialists achieved a stunning electoral breakthrough, raising their share of the vote from 2.5 to 18.3 per cent and gaining 107 seats, making them the second largest party in the Reichstag. The ensuing capital flight stripped the Reichsbank of one-third of its reserves and forced a further hike in interest rates.57 But at the same time, the deflation strategy was having its intended effect. A trade deficit of 2.9 billion Reichsmarks in 1928 was, by 1931, turned into a trade surplus of 2.8 billion Reichsmarks (see Appendix, Table A1). This surplus, however, resulted not from rising exports but from the fact that due to the Depression, demand for foreign imports fell even more rapidly than German sales abroad. As factories shut down, and the blight of joblessness and poverty spread across German society, demand for foreign raw materials and consumer goods plummeted. It was a brutal process of adjustment, but Germany was following the normal prescriptions of the gold standard mechanism. And Bruening was rewarded in October 1930 with a bridging credit of $125 million brokered by Lee, Higginson and Co. of New York.