Hitler’s predecessor, General Schleicher, had already planned a work creation drive of his own and had earmarked 600 million credit-financed Reichsmarks for it. Why credit-financed?
Contemporary economists debated the feasibility of state-conducted work creation and economic stimulus. One consensus was that it couldn’t be funded by raising new taxes, as that would offset any gain in demand. So debt was the alternative for funding such programs; they were financed from unspent household savings, whereas taxes just transferred circulating money from private hands to the state. But the government couldn’t simply borrow from the banks, as that could make it harder for private investors to get loans; instead, it’d need “new credit”.
Stimulus spending in Germany was paid not directly in Reichsmarks but in IOUs, with the promise that ultimately the Reichsbank would later repay them with loans or the increased tax revenue of a recovered economy.
To Hitler’s joy, none of this money had been spent. His government thus spent a third of it on the military, a third to local government and a third on agricultural land amelioration.
His own spending was began with the 1 billion Reichsmark Reinhardt programme of June 1933. A further 800 million Reichsmarks were designated in September. Those were substantial sums given the size of the German economy, but the funding stopped there. Programs continued with the resources still available and the state focused on its true priorities, chiefly rearmament. Even of this sum, 230 million were siphoned off to military ‘special measures’ –airfields, barracks and so on.
Initially this stimulus took the form of a work creation drive, the Battle for Work. Its first target was East Prussia, where by July nearly all unemployed had been put to work on improving rural land and infrastructure. Behind this spectacular success, intensely covered in public media, lay two facts: the province received disproportionately high funds given its population and its agrarian society made it easy to employ idle hands in simple earth-moving work.
Once the program moved into more industrialized regions, it found clerks, secretaries, metalworkers and even bricklayers and plumbers demanded more complex work that was harder to set up.
Nonetheless, unemployment was steadily decreasing. It only lingered on within export-oriented industries, as the problem of the uncompetitively high Reichsmark had still not been solved. At their peak work creation initiatives were only directly responsible for 30% of the reduction in unemployment, so they were merely part of a wider recovery.
Though poor Germans could finally find work, their living standards were still stagnant and private consumption shrank in 1933. For this reason the government’s initiatives against unemployment gradually shifted towards indirect methods, such as financing mortgages.
The Battle for Work received disproportionate attention in propaganda given its relative importance within economic recovery and priorities in Berlin, where critical decisions on debt and rearmament were being made.
A famous achievement of this period is the Autobahn network. It was the responsibility of Fritz Todt, a capable civil engineer deeply loyal to Hitler, who was now general inspector for German roads. The highways were conceived firstly as a military asset for rapid movement of troops (Tooze doesn’t mention it, but their actual military usefulness would prove limited during the war). Todt did a competent job with them, particularly given he didn’t receive the budget he expected –and prestige projects like Autobahns were severely constrained by the raw materials rationing enforced some years later-, but they didn’t employ a lot of workers.
A curious fact about German infrastructure was that railways were underinvested on due to the focus on highways and other projects. Few freight cars were bought and those in service were in a bad condition. By 1938 the rail system was in crisis, with bottlenecks, jams, and, funnily enough, delays.