Some politicians in the United States and Britain began to realize that the terms of the Versailles Treaty had been too harsh and in April 1924 Charles Dawes presented a report on German economic problems to the Allied Reparations Committee. The report proposed a plan for regulating annual payments of reparations and the reorganizing the German State Bank so as to stabilize the currency. Promises were also made to provide Germany with foreign loans.
These policies were successful and by the end of 1924 inflation had been brought under control and the economy began to improve. By 1928 unemployment had fallen to 8.4 per cent of the workforce. The German people gradually gained a new faith in their democratic system and began to find the extremist solutions proposed by people such as Adolf Hitler unattractive.
The fortunes of the National Socialist German Workers Party changed with the Wall Street Crash in October 1929. Desperate for capital, the United States began to recall loans from Europe. One of the consequences of this was a rapid increase in unemployment. Germany, whose economy relied heavily on investment from the United States, suffered more than any other country in Europe.
Before the crash, 1.25 million people were unemployed in Germany. By the end of 1930 the figure had reached nearly 4 million, 15.3 per cent of the population. Even those in work suffered as many were only working part-time. With the drop in demand for labour, wages also fell and those with full-time work had to survive on lower incomes. Hitler, who was considered a fool in 1928 when he predicted economic disaster, was now seen in a different light. People began to say that if he was clever enough to predict the depression maybe he also knew how to solve it.
By 1932 over 30 per cent of the German workforce was unemployed. In the 1933 Election campaign, Adolf Hitler promised that if he gained power he would abolish unemployment. He was lucky in that the German economy was just beginning to recover when he came into office. However, the policies that Hitler introduced did help to reduce the number of people unemployed in Germany.
These policies often involved taking away certain freedoms from employers. The government banned the introduction of some labour-saving machinery. Employers also had to get government permission before reducing their labour force. The government also tended to give work contracts to those companies that relied on manual labour rather than machines. This was especially true of the government's massive motorway programme. As a result of this scheme Germany developed the most efficient road system in Europe.
Adolf Hitler also abolished taxation on new cars. A great lover of cars himself, and influenced by the ideas of Henry Ford, Hitler wanted every family in Germany to own a car. He even became involved in designing the Volkswagen (The People's Car).
Hitler also encouraged the mass production of radios. In this case he was not only concerned with reducing unemployment but saw them as a means of supplying a steady stream of Nazi propaganda to the German people.
Youth unemployment was dealt with by the forming of the Voluntary Labour Service (VLS) and the Voluntary Youth Service (VYS), a scheme similar to the Civilian Conservation Corps introduced by Franklin D. Roosevelt in the United States. The VYS planted forests, repaired river banks and helped reclaim wasteland.
Adolf Hitler also reduced unemployment by introducing measures that would encourage women to leave the labour market. Women in certain professions such as doctors and civil servants were dismissed, while other married women were paid a lump sum of 1000 marks to stay at home.
By 1937 German unemployment had fallen from six million to one million. However, the standard of living for those in employment did not improve in the same way that it had done during the 1920s. With the Nazis controlling the trade unions, wage-rates did not increase with productivity, and after a few years of Hitler's rule workers began to privately question his economic policies.