Allow me to start at the end.
After the end of World War II and Hitler's death, Germany was split. The people in both parts had to decide how to explain what had just happened to them, and how to ensure it never happened again. The basic question was then and is now, "Consent or coercion?" Did we let this happen or was it done to us? In the GDR (the East), the ruling SED (Socialist Unity Party) stressed the role of its predecessor, the Communist Party in Germany (KPD), in resisting the Nazi terror. They in fact derived their legitimacy as rulers from it. Meanwhile, in the West, the historiography took a mirror image - conservative bourgeois elements had resisted the Nazis. These two interpretations agreed on one main thing - that the Nazi police state had been, simply, overwhelmingly powerful. The Gestapo had been omnipresent, omniscient and omnipotent.
This is just what the regime told people when it was in power. One commentator estimated that there was one Gestapo agent for every thirteen workers in a mine. The 1950s saw the emergence of a huge swath of books on totalitarianism, and how it ruled society by atomising individuals and setting them against one another. As the Cold War got hot, Stalinism and Nazism were put in the same category and portrayed as being imposed from above rather than by social forces. The all-powerful state terror apparatus got what it wanted by force and no-one was ever safe. The Gestapo had all been dedicated Nazis who would kill you as soon as hear you make a joke about the Fuhrer's sexuality.
It was not until the 1970s that this view began to be fundamentally challenged. Research on the Nazi state began to reveal something even more disturbing than the prospect of such a powerful terror apparatus existing: it didn't exist. The Gestapo had been woefully understaffed and lacking resources for the pre-war stage, and had almost entirely relied on denunciations from the normal population when going after people for political crimes. 40,000 people had been punished for crimes of a political nature by 1939, and 12,000 convicted of high treason. The following is about how German society interacted with the terror apparatus of the regime.
Why the intentions of the Nazis were totalitarian, but the reality wasn't
The Nazi attempt to reshape society was based on "interpretive social reality" rather than making objective changes to its structure. As the goal was primarily a psychological one which aimed to make people think in a certain way, the Nazis attempted to take control of the entire cultural sphere so they could co-ordinate it with their own movement. The aim was to make their definition of "Germanness" and German culture the only valid one. Furthermore, they extended their authority deeply into the personal realm, declaring anti-regime thought technically illegal along with banal things such as telling jokes about the Fuhrer. They had a "total claim" on the actions and thoughts of their citizens. But by politicising all spheres of life they created more problems for themselves, because they lacked the coercive apparatus to spy on and control every single citizen. In reality the terror apparatus of the Hitler regime was mainly reactive in relation to ordinary German citizens who were not members of a specifically targeted group of the population.
People could go about their lives in relative normality and break some of the rules of the regime so long as they were outwardly good citizens and did not arouse the suspicions of the authorities. The Gestapo's deficiency in resources and personnel meant that they had to rely on denunciations for their enquiries, and even then they received more denunciations than they could process. Although the Nazis ensured that no organised oppositional group could ever emerge with a mass backing, they failed in their attempt to control every aspect of every citizen’s life. They could not neutralise non-Nazi influences on people's thinking, nor effectively remedy the "ills" this produced.
Nazi totalitarianism was most effective in the traditional political sphere, in which the Fuhrer was established as the sole source of authority. The executive of the government was in legal terms the embodiment of the Fuhrer’s will. Propaganda in creating and maintaining a positive image of Hitler among the population was the most effective, helped along by his alleged aloofness from political wrangling. Organised resistance was mostly liquidated after the first few years of the regime and the population’s generally favourable attitude towards Hitler meant that a high-level coup couldn’t be assured mass backing. The government was not in thrall to any particular class – it felt free to dismiss the wishes of the disparate petty bourgeoisie when these were not in line with the wishes of the regime, and squeezed both the peasantry and the working class. But there were still certain limitations on what the regime could and could not do. The regime had an apparatus in place to probe popular opinion so that it might direct propaganda more effectively. Well aware of the role of hunger in revolutions and social upheaval, the thing they feared most was a serious drop in morale and disillusionment with the National Socialist cause. And although the "Final Solution" and foreign policy were the two things most central to Hitler’s worldview – in which he would brook no compromise – he was aware of the need for secrecy in carrying out the Holocaust. Beyond this the only real possible base of political opposition was the Church, which was emasculated by terror directed at pastors and priests who opposed Reichkristallnacht and the banning of Catholic youth organisations. From then on the only protest from priests came in the form of ineffective letters to local officials.
The Nazis did manage to achieve a virtual monopoly in the cultural sphere, and flooded society with artwork and architecture that they considered appropriate. For the Nazis politics was largely aesthetic, and so it became necessary to politicise the cultural realm. The process of Gleichschaltung sought to Nazify German society and remove all traces of Weimar cosmopolitanism. There was no oppositional literature and the most cultural deviancy that the regime would tolerate was that of a non-political nature. The 'Swing movement', while viewed as dangerously cosmopolitan, was tolerated until into the war because it was not of a political nature. Even this degree of cultural pluralism was not permitted once the war had started, and neither was the homosexual subculture. However, because of the limited resources of the Gestapo they were not always able to enforce their will, and had to rely on sporadic raids. The fact remains that minor, local subcultures had little chance of seriously challenging the regime's official interpretation of what "German" culture was. The youth subculture that grew up around hiking and camping was of a non-political nature, and very few of the youths involved went on to be active in organised resistance. The Nazis had achieved a monopoly on national culture and mass media, but what they could not so easily control was how people responded to this culture and to what degree they accepted it and endorsed it.
Regulating the everyday lives of Germans is where the Nazis failed the most to implement their "total claim" to control the lives of their citizens. They could relentlessly bombard people with propaganda about the Fuhrer, but they had difficulty stopping someone telling a joke about him. These minor acts of defiance were impossible to regulate or know about unless an individual was denounced by someone who knew them. And because of the impossibility of proving many of these acts, coupled with the propensity of people to make false denunciations for selfish reasons, it was hard to punish people in relation to them. Furthermore, if the Gestapo had thousands of people executed for telling anti-state jokes, they would have turned passive acceptance into active opposition.
It was thus not even desirable to enforce this sort of law thoroughly, although the laws could be used against someone who was genuinely believed to be an active opponent of the regime. It was against these opponents that Nazi terror was mostly directed, before being transferred to the Jews once most opposition had been liquidated. Resources were better used here than in terrorising ordinary, working Germans who vented their spleen. Because denunciation was not a particularly formidable weapon against Communists and Social Democrats, most of the Gestapo's spying apparatus had to be directed against these groups. Possessing only a finite number of agents and paid informers, there was certainly not a Gestapo agent on every street corner. Nor were all Gestapo members ideologically dedicated to their government – many had been police in the time of Weimar, and in 1939 only 3,000 of the 20,000 members held an SS rank.
This inability to enforce acceptance of National Socialism and to change people’s "interpretive social reality" meant that the Nazis had to rely on active acceptance or on passivity. Maintaining at least an outward façade of National Socialist ideology must have been very hard to resist. The Gestapo were believed to be much more numerous and powerful than they in fact were, and social relations were strained by mutual suspicion because of the possibility that anyone could be a secret police agent, or at the least denounce you. By maintaining an atmosphere of fear the Nazi regime managed to keep the population in line, however sullen and resentful people were about it. The Nazi’s "total claim" had been satisfied insofar as no-one was able to seriously oppose them. There remained no mass institution apart from the Church which could have been oppositional, and so the only effective base of opposition would have been the SS or the Wehrmacht. But even though they controlled society to such a large extent, they could not control the thoughts and actions of every citizen when they were outside the purview of the police. The nature of their laws seemed to aim to do this, but there were practical obstacles to realising this goal.
Because of the practical difficulties of brainwashing people to a sufficient degree to make them "good" National Socialists, it was too much to expect everyone to respond positively to Nazi propaganda. Furthermore, serious repressive measures against people who were perceived to be ordinary Germans would have had a disastrous effect on morale among the working population. Hence the Nazis in reality were never able to implement a state that was truly totalitarianism, instead relying on passive, sullen acceptance and conformity. As some aspects of their policy were appealing to Germans who felt their country had been emasculated and who had personally suffered during the economic crisis, this level of support was easier to obtain. Furthermore, popular opinion was split into component parts and opposing a particular Nazi policy did not necessarily mean disillusionment with the entire regime.
This is not at all to suggest the Nazis endorsed any sort of political pluralism. They merely lacked the resources and ability to control every aspect of every citizen’s lives and to arrest everyone who badmouthed a Nazi official. This provided a degree of free space in which people could express themselves in ways the regime might not have liked if it knew about it. But outwardly people played the game, and the regime was happy enough unless there was the threat of a serious drop in morale. Hence during the war the Gestapo became harsher on "defeatist" talk and the minor offences which before had gone unnoticed. In peacetime, their mostly symbolic presence had been enough to inspire fear into citizens and make them conform. The Nazis never enforced their "total claim" on people’s lives, but they didn’t have to.
Ian Kershaw, The Nazi Dictatorship
Ian Kershaw, Popular Opinion and Public Dissent in the Third Reich
Thomas Childers and Jane Caplan (eds.), Re-evaluating the Third Reich
Eric A. Johnson, Nazi Terror
R. Burns (ed.), German Cultural Studies
R.J. Overy, The Nazi Economic Recovery 1932 – 38
K.M. Mallmann and Gerhard Paul, 'Omniscient, Omnipotent, Omnipresent? Gestapo, Society and Resistance' in David F. Crew (ed.) Nazism and German Society