The period between World War I (WW I) and World War II (WW II) is known as an important time for the world; at this time, new powers emerged in Europe. At this time, the world, especially the European continent, was experiencing a severe economic crisis due to World War I, which caused the destruction of the facilities and infrastructure that support development. This enormous loss was due to the fact that most of the wars that took place in World War I occurred in Europe. Apart from the destroyed facilities and infrastructure, this war resulted in many casualties and caused a moral and spiritual shock to European society. The losses experienced by Europe are proof of how big the impact of the split between the big powers in Europe was on various aspects of life.

The end of World War I was marked by the Treaty of Versailles. The Treaty of Versailles served as a forum for disputes between the war's victorious countries. The parties who lost the war, especially Germany, saw the Treaty of Versailles as a very painful agreement. This is because this agreement is an agreement dictated by the war-winning countries and not the result of negotiations.

Germany entered the interwar period humiliated.This embarrassing condition was not only due to Germany's military defeat in World War I but also to the government's weakness in dealing with various crises after the war. Recklessly, this government issued policies that led to hyperinflation in the early 1920s. In November 1923, inflation reached its peak, with one US dollar being able to buy 4 trillion Marks.

After the crisis of 1923 had not been completely resolved, a world economic crisis emerged that became known as the "Great Depression" and hit almost all nations in Europe (except the Soviet Union) and the United States. This crisis initially hit the stock market in New York. In order to support its own economy, the United States changed its foreign borrowing policy and began to take back various loans and debts from other countries. Germany is a country that has directly felt the impact of this crisis. The recall of foreign loans and debts comes at a time when Germany is in dire need of new loans in the face of its struggling economy.

The impact of this crisis on Germany does not only affect the economic aspect but also affects the social and political situation. This crisis paved the way for the Nationalsozialistische Deutsche Arbeiterpartei (NSDAP), otherwise known as the NAZI, led by Hitler.

Hitler, as one of the major power holders in Germany, wanted Germany to bounce back from the economic downturn due to the crisis that had hit since World War I ended. Hitler's economic idea was to emphasize the government's responsibility to ensure the welfare of the people in fulfilling their lives, with one main point being the availability of food. 

In rebuilding the German economy, which had been destroyed by the war, Hitler appointed Hjalmar Schacht as Minister of Economy to overcome this. So far, Germany's success in dealing with various economic crises that occurred after World War I has been attributed to Hitler as the country's ruler.Even though Hitler himself was unconcerned about Germany's economic processes, and the general public was unaware that someone played a significant role in Germany's success in overcoming the economic problems that arose.

Schacht is someone whose role has been very important in the German economy since Hitler emerged as ruler. Apart from his role in tackling the economic problems that arose after World War I and his support for the Nazis, Schacht's presence also greatly determined the economic policies that would be implemented in the early days of Hitler's leadership in Germany.


Keynesian economic theory influenced Schacht's rationale for overcoming German economic improvement
Hjalmar Schacht's involvement in the German economy cannot be separated from the European condition, which was devastated by World War I (WWI). The impact caused by World War I became the starting point for changes in various aspects of European society.

Material and non-material losses are the main problems that have arisen since the end of the war. The nation's long-developed wealth had been wiped out; debts had skyrocketed; industrial and agricultural production had plummeted; large parts of France and Belgium had been destroyed; foreign investment had been drastically reduced; and trade had been shattered. 

Keynesian economic theory influenced Schacht's rationale for overcoming German economic improvement. Giatrakis (2012, page 259) revealed the link between German and Keynesian economic improvements, stating that historically Schacht's thinking was influenced by the two main pillars of Keynesian theory regarding the problem of reparations and the problem of unemployment. Grein II further stated that in overcoming economic problems, the role of the government is very much needed, especially in issuing deficit budget policies. This deficit budget policy is aimed at creating jobs and is expected to increase people's purchasing power. Grein II further stated that Schacht was also influenced by the New Deal policies promoted by Roosevelt and the conception of building a country through mass construction projects and public works. So, with the implementation of this deficit budget, it aims to create jobs and be able to overcome the problems of reparations and unemployment after the economic crisis that has hit since the end of World War I.

The similarity of the policies issued in overcoming the economic depression demonstrates the influence of New Deal policies on Schacht. According to Garraty, in order to overcome emerging economic problems, the Nazis and New Deal policymakers implemented a very intensive strategy that prioritized the economic well-being of their people rather than waiting for the global economy to stabilize and having an optimistic view of what the government could do. Both countries severely limit individual freedom in obtaining economic benefits. In addition, the Nazis and proponents of the New Deal policy insisted that economic improvement could not be carried out without efforts to reorganize the social structure and, furthermore, without creating a conflict between classes. To avoid this conflict, the two countries arrange in such a way as to achieve their economic and social goals in order to achieve their political goals.

One of Schacht's policies in rebuilding the German economy was to reduce the high unemployment rate. The high unemployment rate is none other than the impact of the economic crisis in the 1930s that hit the world. The occurrence of the Wall Street Crash in 1929 made the United States withdraw investment and repay foreign debts that had been issued, especially to Europe. The dependence of the German economy on foreign investment from the United States has made Germany one of the countries worst affected by this crisis. This crisis began to affect Germany and other countries, one of which was the skyrocketing unemployment rate. This crisis further exacerbated the sustainability of the German economy, which had not yet recovered from the economic crisis it experienced after the war ended.

In March 1932, the unemployment rate in Germany reached its peak. Based on statistics, there are more than 6 million unemployed people. In September 1933, a program was initiated to build the autobahn, or highway. The construction of this highway is at the same time a military necessity, and with the increasing public confidence in economic growth from the previous economic crisis, the rise of business optimism, and the low average level of wages earned, it can be considered an effort to reduce the number of unemployed. At the end of the year, there were only 4 million unemployed people left compared to January of the same year. The problem of unemployment can be overcome in Germany.

Then, in order to meet the military's need for raw materials for the war industry, Schacht issued a new policy, as follows:

First, he issued a policy to permanently stop debt payments to stop the flow of valuable trading commodities in lieu of debt.

Second, he introduced the New Plan policy, which expanded and strengthened state control over foreign trade and imports. In this New Plan policy, there are three main features planned by Schacht, including;

Keynesian economic theory influenced Schacht's rationale for overcoming German economic improvement

Prohibition of foreign trade that is contrary to the goals of Germany's military development program,

(2) increased supplies of imported goods that are essential or needed in foreign trade;

(3) The abolition of agreements that could jeopardize bilateral trade relations. Under the New Plan policy, economic transactions between Germany and other countries were no longer governed by the price mechanism but were determined by the many government agencies aimed at meeting Germany's military economic needs.


The policies issued by Hjalmar Schacht were not solely aimed at improving the economy, but it had been previously planned that the economic aspect must also be developed in tandem with Germany's political and military developments. The resulting impact on the German economy was the overcoming of the unemployment problem and the implementation of the New Plan policy, which changed the trade system between countries to a bilateral system in order to meet the needs for food and raw materials for war.

With the implementation of The New Plan in 1934, international trade by Germany shifted to countries whose industrial development was slower than other European countries, such as countries in Eastern Europe, the Balkans, and Latin America. Apart from the economic, social, and regional impacts, Schacht's policies also, of course, had an influence on Germany's political and military developments. These Schacht policies were designed to lay the groundwork for Germany to develop its military, which had been limited by the Treaty of Versailles.