Germany Public Finance
The National Socialist program in its 25th article called for the creation of social and professional chambers to carry out the fundamental laws of the Reich in the various federated states; it was this claim that, immediately after the coming to power, gave the pretext to a wave of cartelization, tending in fact to raise prices and translated into a serious disorder of economic life. To remedy this worrying situation and to give an organic basis to the German economy, while leaving private companies freedom of action within the limits of fair competition, the Minister of National Economy (Schmitt) was authorized by law of February 27, 1934 to recognize the exclusive representation of some associations of entrepreneurs and workers and to merge, dissolve, modify existing associations accordingly. The implementation of this program initiated by Kessler and carried out by Schacht, which happened in July 1934 in Schmitt and in fact also in Kessler, resulted in the creation of a compulsory official organization, both professional and regional, mainly responsible for informing the central power of the situation. economic and to transmit government decisions to businesses. Following the fundamental ordinance of November 27, 1934, the German economy is in fact divided into 12 branches of activity o mainly in charge of informing the central power of the economic situation and of transmitting government decisions to companies. Following the fundamental ordinance of November 27, 1934, the German economy is in fact divided into 12 branches of activity o mainly in charge of informing the central power of the economic situation and of transmitting government decisions to companies. Following the fundamental ordinance of November 27, 1934, the German economy is in fact divided into 12 branches of activity o Reichsgruppen (for industry, which in turn includes 7 Hauptguppen, crafts, trade, credit, insurance and electricity) with heads appointed by the Minister of National Economy, and in 13 territorial districts, corresponding to 13 districts into which, following the law of 20 January 1934 on the organization of national labor (see corporatism, App.), The Labor Front (the former and the latter divided in turn into smaller regional economic centers and the Reichswirtschaftskammer in the center(whose president is also nominated by the government and whose directives are mandatory) ensure the link between the so-called corporate and regional organization. Only agriculture, already belonging to the food corporation, a hierarchical and regional organization subject to vigorous control by the Minister of Agriculture (the Reichsnährstandwas however authorized to be represented in the aforementioned chambers to participate in general economic deliberations) and the liberal professions are excluded. organized since November 1933 in a Reichskulturkammer.
Then with the merger of the Reichswirtschaftskammer and the Reichsarbeitrat and consequent submission of the Labor Front to the control of the Minister of National Economy (Leipzig agreement, 21-26 March 1935), with the incorporation in the same RWK of the general assembly of Industries – und – Handelskammer (July 24, 1935) and with the creation of a 13th professional organization, that of transport (September 25, 1935), the building can be said to be completed and such as to allow effective direct and indirect action by the state on the economic organization, exclusion of price regulation, reserved for cartels (but which can also be prohibited or imposed), and on employment relationships. A further rehash then took place in July 1937 for which the functions of the organization, essentially of study, representation and consultation, were even more precise.
At the same time, while maintaining a clear separation between the state and the banks, with the law of 5 December 1934 the state control on credit institutions was strengthened and made systematic and uniform. The banking crisis of July 1931 had in fact made necessary a large intervention by the state in favor of the credit system and the developments of the economic situation, especially the contraction of short-term foreign credits (reduced to 10 March 1934, after 3 years of the moratorium regime, from 8 to 2.6 billion marks) had hindered the repayment of the credits provisionally granted by the state to the banks, causing them to abandon the reprivatization program of Deutsches Finanzierungs – Institut and Tilgungskasse für gewerbliche Kredite, both from the end of 1932). A reorganization was necessary to make possible a unitary monetary and credit policy, as the investigation begun in 1933 and carried out by Schacht at the end of 1934 clearly highlighted, and the aforementioned reform, subjecting all banks (except for the Reichsbank, of Golddiskontobank and savings banks and housing construction finance companies) under the strict control of a supervisory board chaired by the president of the Reichsbank and a special commissioner of the Reich, established various rules aimed at ensuring greater bank liquidity, a clear separation of deposits according to their nature and short and long-term transactions and a limitation of speculative credits. Finally (February 12, 1937) the Reichsbank, which became the only issuing institution with the expiry at the end of 1935 of the privileges granted to the Banks of Bavaria, Saxony, Württenberg and Baden, was placed under the exclusive sovereignty of the state; but already from the end of 1933, the general council was suppressed, the direction was appointed by the head of state.
Conditioned by the technical difficulties of obtaining credits abroad and by the general economic and political situation, the desire for autarky was meanwhile increasingly affirming and contributing to strengthening state intervention and control, since autarky and programmatic economics are naturally terms connected. Since September 1934, with the entry into force of the so-called “new plan” designed to discriminate between necessary and renounceable imports to proportion purchases to foreign currency holdings and to develop exports to increase the monetary reserve and accelerate the payment of international debts, virtually the state assumed a monopoly on foreign trade. The need to intensify exchanges then increased, Golddiskonto and various industries in proportion to the orders received from the state), which in fact resulted in a new dumping of German industry, and resorted to ever new means of payment, such as German bonds leveled in foreign currency, various categories of frozen assets, foreign special accounts (” Aski “). Naturally, an increasingly drastic legislation on uniforms followed (supreme coordinating body, the Reichstelle für Devisenbewirtschaftung, created on January 10, 1934) and the control of bills, vigorously adopted since July 1931 and reinforced by the fundamental law of February 4, 1935, was gradually completed and partially modified with increasingly severe measures (especially the ban on the importation of tickets bank and German divisional coins respectively sanctioned by decrees of December 1935 and May 1936) up to the prescription of the death penalty and confiscation of assets for foreign exchange fraud and acts of economic sabotage (December 1936). Thus there was an almost complete suspension of capital movements with foreign countries and the Reichsmark ceased, it can be said, entirely from its function as an international currency.
However, this did not affect the internal stability of the mark, an indispensable premise for the success of the fight against unemployment on which National Socialist economic policy was based from the beginning adopted by Brüning after the 1935 crisis). To finance the gigantic public works program connected to the Arbeitbeschaffung and, from 1935, also to face the enormous rearmament costs, it was in fact necessary to determine the formation of forced savings through a gradual process of monetary and credit expansion but it was equally necessary to compress the consequent upward trend in prices which translating into an aggravation of costs would not fail to adversely affect employment and exports. And only since October 1936, with the appointment of a Preisbildungkommissar reporting directly to General Göring, in charge of the direction of the four-year plan, that the problem of prices was dealt with in a general way in connection with that of all economic activity and control partially and occasionally in force since December 1931 (only in the sector agrarian was always rigorously maintained as part of the official regulation plan of Minister Darré) was made systematic and also extended to costs.
The figures relating to budget expenditures in recent years and to the overall changes in floating debt are not known, but it is certain that in order to obtain the necessary funds for job creation for the unemployed and military strengthening, the state has mobilized all the available savings of the nation (we are talking about over 30 billion paper marks issued by the state under different titles) both by resorting to the direct issuance of drafts and discounted vouchers (Sonderwechsel) in various ways according to the nature of the expenses, and by having financial paper issued for the same purpose by special credit institutions, of a parastate nature (especially the ” Offa ” or Deutsche Gesellschaft für öffentliche Arbeiten, and around this the Deutsche Verkehrs B. The B. für deutsche Industrie – Obligationen, the Deutsche Rentenbank – Creditanstalt ; the Deutsche Bodenkultur – Aktiengesellschaft, etc.) specifically created to take risks they might not burdened with ordinary banks. In concrete terms, the burden of this complex financing came to weigh on the large banks, purchasers of the securities issued by the aforementioned institutions, on the Reichsbank, authorized since 1933 to carry out open market operations, and therefore, following the intervention in 1935 of the Golddiskontobank in order to lift the Reichsbank, again on private banks, whose reprivatization was definitively abandoned. More or less forced loans were also imposed on private industry, savings banks and insurance companies, and this while the possibilities for private investment were in various ways restricted (limitation of emissions and dividends in 1934; removal from the stock exchanges of foreign values, in February 1937; reform of 30 January 1937 of the legislation on limited companies which practically removed small savings from the share market) and the basic position assumed by the state in economic life spontaneously determined a growing interest of the private portfolio towards issues state, which explains the large placement of consolidation loans in recent years.
On the other hand, it is to this official impulse that the German economy owes its activity above all, especially after the four-year plan for self-sufficient development came into force in 1936, whose thousands of measures can be grouped into five fundamental categories: increase in the production of raw materials for which Germany is foreign tax, and exploitation of natural resources; restrictions and control of the use of raw materials with which it is insufficiently provided; waste recovery; manufacture of substitutes and new products; fight against waste of all kinds. In connection with the plan, as already mentioned, price control was entrusted to a high commissioner employed by Göring, to whom the supreme power in matters of foreign exchange had already been deferred in April,
There is no complete and detailed information on the results achieved but on the whole the government is satisfied as shown by the official speeches held on the occasion of the five-year anniversary of the National Socialist regime.
From these and from the accredited publications of a semi-official nature it can in fact be deduced that the gross value of industrial production in 1937 was 75 billion marks compared to 38 in 1932 (it was above all the production of capital goods that grew strongly, while the increase in consumer goods was slower) and that of agricultural production by 12 billion versus 8.7 in the same years. The investment curve continued to rise, from 4.2 billion in 1932, the year of the greatest depression, to 16 in 1937: overall between 1933 and 1937, 54-55 billion were invested in industry, of which 24 in new plants (which are subject, of course, to official approval).
In connection with the depression of costs (made possible by the development of production) and of interest (due to the decrease in all rates and liquidity which occurred following the reduction of debts) and with the stability of wages, companies were able to realize growing profits which in part were used to finance the enlargements and renovations imposed by the plan and in part were absorbed by the state. The number of unemployed, which had peaked in January 1933 (7 million) fell to 995,000 at the end of 1937 and 423,000 in April 1938. Wholesale prices remained stable overall (105.5 in November 1937 compared to 1913 = 100) and their increase since 1933 can be said to be around 10%. The cost of living has risen slightly, However, consumption is strictly regulated and limited (in July 1937 it was also established the obligation to deliver the entire harvest of bread-making cereals with the exception of what is necessary for the food of producers and for sowing). Foreign trade, now fully regulated by agreements of clearing, thanks above all to the favorable world economic situation, also achieved a certain improvement in 1937 (5.5 and 5.9 billion in imports and exports against 4.2 and 4.9 billion in 1933). National income went from 45.2 billion in 1932 to 68 (of which 39 is the part corresponding to wages) and thanks to this increase in taxable matter, in addition to the accentuated pressure, the tax revenue, which was 6.6 billions in 1932-33, it is believed it could give, in 1937-38.14 billions which can be raised to 18, if we take into account the income of the provinces and municipalities. On the other hand, budget expenditures have not been published since 1935 and are only partially known for previous years.
The money market is very liquid and the official discount rate is 4%, while the free one fluctuates between 2.5% and 3%. The banks’ portfolios (largely made up of Treasury bills) grew by about 8 billion between 1932 and 1937; the securities portfolio then increased from 3.6 milliard at the end of 1932 to 8.6 milliard in October 1937, which demonstrates the essential part played by the banks in the work of financial consolidation. Deposits in commercial banks and savings banks rose from 21 billion at the end of 1922 to 32 at the end of 1937. Note circulation went from Rm 3.6 billion. at the end of 1932 to 5.9 at the end of 1937 and the total circulation (including the tickets of the Rentenbank and divisional coins) at 7.5; this increase, however, only partially reveals the actual expansion of circulation, due to the continuous expansion of the payments for checks which, since December 1934, have been subjected to the control of the Reichsbank. The gold reserve of the Reichsbank, which fell from 806 million marks at the end of 1932 to 79 at the end of 1934 and 66 at the end of 1936 and climbed back to 70 at the end of 1937; that in foreign exchange at the end of 1937 was 188 million. However, it should be noted that large and unspecified quantities of gold are held by the Golddiskontobank.
The internal public debt as of March 31, 1938 reached 16.3 billion (in the last three years more than 8 billion of new loans), taking into account only the consolidated and the officially known floating debt; the valuations of the latter fluctuate between 25 and 30 billion. However, the burden of post-war foreign debt has meanwhile decreased considerably, both as a result of the devaluation of the pound and the dollar, and as a result of the subsequent extensions of the truce agreement signed on March 1, 1931 for frozen short-term debts, which provided for their partial and gradual repayment in registered assets (Registermarkguthaben) to be used in long-term employment in Germany or for tourism purposes or for additional exports (as of September 30, 1937, these debts had therefore contracted to 1 billion by September 30, 1933), as well as to the extension (July 1, 1933) of the moratorium on long-term bonds (excluding Dawes and Young international loans); while on the other hand the debt service for reparations (reduced to only 3 billion by the Lausanne agreement) has not been resumed.