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Deficit Spending in the Nazi Recovery, 1933-1938: A Critical Reassessment

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  • Albrecht Ritschl

Abstract

This paper examines the effects of deficits spending and work-creation on the Nazi recovery. Although deficits were substantial and full employment was reached within four years, archival data on public deficits suggest that their fiscal impulse was too small to account for the speed of recovery. VAR forecasts of output using fiscal and monetary policy instruments also suggest only a minor role for active policy during the recovery. Nazi policies deliberately crowded out private demand to ensure high rates of rearmament. Military spending dominated civilian work-creation already in 1934. Investment in autobahn construction was minimal during the recovery and gained momentum only in 1936 when full employment was approaching. Continued fiscal and monetary expansion after that date may have prevented the economy from sliding back into recession. We find some effects of the Four Years Plan of late 1936, which boosted government spending further and tightened public control over the economy.

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  • Albrecht Ritschl, "undated". "Deficit Spending in the Nazi Recovery, 1933-1938: A Critical Reassessment," IEW - Working Papers 068, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:068
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    Cited by:

    1. Pfeffer, Claus-Peter, 2011. "Resolving economic deadlock," MPRA Paper 32221, University Library of Munich, Germany.
    2. Albers, Thilo & Uebele, Martin, 2015. "The global impact of the great depression," LSE Research Online Documents on Economics 64491, London School of Economics and Political Science, LSE Library.
    3. David Lipka & Dan Šťastný, 2008. "John Maynard Keynes, Socialism and Economic Policy of Nazi Germany [John Maynard Keynes, socialismus a hospodářská politika nacistického Německa]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2008(1), pages 108-116.
    4. Nicolas‐Guillaume Martineau & Gregor W. Smith, 2015. "Identifying fiscal policy (in)effectiveness from the differential counter‐cyclicality of government spending in the interwar period," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(4), pages 1291-1320, November.
    5. Mitchener, Kris James & Wandschneider, Kirsten, 2015. "Capital controls and recovery from the financial crisis of the 1930s," Journal of International Economics, Elsevier, vol. 95(2), pages 188-201.

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    Keywords

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    JEL classification:

    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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