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Kindle Notes & Highlights
by
Adam Tooze
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September 7 - September 15, 2020
Altogether, textiles and clothing accounted for just under 20 per cent of industrial employment and a share of output that was not much smaller.
In 1934 imports of raw materials for textile and leather production accounted for no less than 26 per cent of the total import bill. If the Reichsbank and the RWM were serious about restricting Germany’s imports whilst maintaining the rearmament drive, the textile industry was bound to be a principal victim.
To prevent a major reverse to the work creation drive, the textile sector was restricted by decree to operating its mills no more than thirty-six hours per week. At the same time, a blanket ban was imposed on new investment in textile plant. Any expansion in the industry’s capacity was made dependent on permission from the RWM. Not surprisingly, the impact of these measures was to cause panic buying by both merchants and consumers.
However, given the need to restrict consumption of imported cotton and wool it was not in the regime’s interest to keep the price of clothing permanently low. After 1934, the textile industry stands out, even in the official statistics, as the sector of the German economy in which prices were allowed to rise most conspicuously.
All the evidence we have on public opinion, mainly from confidential reports by the regional offices of the Gestapo, confirms that in the summer of 1934 the German population was unsettled far more by the economic problems resulting from the foreign exchange crisis than by the violence of the Night of the Long Knives.
The economic recovery, rapid as it was, was incomplete, even in the first half of 1935. There were still millions of unemployed, many of whom had known nothing other than poverty for years. Their best hope in the first three winters of the Third Reich was the new National Socialist Winter Charity, which distributed hundreds of millions of Reichsmarks’ worth of free food to the poorer Volksgenossen.
Millions of people who depended for their livelihoods on the consumer goods industries faced an outlook of short time and shortened wages. For entire regions of Germany, such as Saxony and Baden, that were disproportionately dependent on exports and consumer goods production, the recovery was partial at best.
The apparent inability of the regime to guarantee either stable prices or a regular supply of daily necessities, including food and clothing, was deeply disconcerting. According to Gestapo reports, the popular mood in the autumn of 1934 was apathetic and gloomy.
Wherever crowds gathered in the autumn of 1934–in the queues at the labour exchanges, at bus stops–there was more or less open agitation against the regime. The work camps on the autobahn building sites, where conditions were notoriously grim, were particularly worrying trouble spots.
In Dortmund, workers took to replacing the official ‘Hitler Gruss’, with ironic expressions such as ‘Heil 3.50 Reichsmarks!’ to which the response was ‘Kartoffeln 3.75 Reichmarks’.
The national campaign against ‘critics and rubbishers’, which he had launched with his anti-Semitic tirade of May 1934, had not gone well. In many parts of the country, meetings were so ill-attended that the whole programme had had to be quietly shelved.
The dramas of June and July, reflected in the surges in the price of imported goods, only confirmed the public’s fears about the insubstantial nature of the Nazi economic recovery.
Goebbels himself wanted no more reports on the gloomy state of public opinion. ‘I want to hear nothing, I want to see nothing, I want to know nothing .
Oh. Oh wow.
The experience of the last fourteen years had shown that ‘private enterprise cannot be maintained in the age of democracy’.
Hitler had not come to negotiate. He had come to inform them of his intentions. And his audience can have been left in no doubt. Germany’s new Chancellor planned to put an end to parliamentary democracy.
At least according to the surviving record, the conflict between left and right was the central theme of the speeches by both Hitler and Goering on 20 February. There was no mention either of anti-Jewish policy or a campaign of foreign conquest.
Since German business had a major stake in the struggle against the left, it should make an appropriate financial contribution. ‘The sacrifice[s]’, Goering pointed out, ‘would be so much easier . . . to bear if it [industry] realized that the election of 5 March will surely be the last one for the next ten years, probably even for the next hundred years.’
After this exchange of nationalist platitudes, Hitler and Goering departed and Hjalmar Schacht got down to business. He proposed an election fund of 3 million Reichsmarks, to be shared between the Nazis and their nationalist coalition partners. Over the following three weeks Schacht received contributions from seventeen different business groups.
In the years that followed, the Adolf Hitler Spende was to become institutionalized as a regular contribution to the maintenance of Hitler’s personal expenses. In practical terms, however, it was the donations in February and March 1933 that really made the difference. They provided a large cash injection at a moment when the party was severely short of funds and faced, as Goering had predicted, the last competitive election in its history.
The meeting of 20 February and its aftermath are the most notorious instances of the willingness of German big business to assist Hitler in establishing his dictatorial regime.
Nothing suggests that the leaders of German big business were filled with ideological ardour for National Socialism, before or after February 1933. Nor did Hitler ask Krupp & Co. to sign up to an agenda of violent anti-Semitism or a war of conquest. The speech he gave to the businessmen in Goering’s villa was not the speech he had given to the generals a few weeks earlier, in which he had spoken openly about rearmament and the need for territorial expansion. But what Hitler and his government did promise was an end to parliamentary democracy and the destruction of the German left and for this
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Krupp and his colleagues were willing partners in the destruction of political pluralism in Germany.
The labour movement was destroyed. But so too, after the Night of the Long Knives, was the autonomous paramilitary potential of the right. Power shifted decisively upwards.
what was clear was that legitimate authority in the Third Reich proceeded from the top down, ideally from the very top down. And what was also clear was that many leaders of German business thrived in this authoritarian atmosphere.
Owners and managers alike bought enthusiastically into the rhetoric of Fuehrertum. It meshed all too neatly with the concept of Unternehmertum (entrepreneurial leadership) that had become increasingly fashionable in business circles, as an ideological counterpoint to the interventionist tendencies of trade unions and the Weimar welfare state.
In effect, the new regime froze wages and salaries at the level they had reached by the summer of 1933 and placed any future adjustment in the hands of regional trustees of labour (Treuhaender der Arbeit) whose powers were defined by the Law for the Regulation of National Labour (Gesetz zur Ordnung der nationalen Arbeit) issued on 20 January 1934.
Though wages had fallen relative to 1929, so had prices. In practice, the Depression brought very little relief to real wage costs.9 In so far as wage bills had been reduced it was not by cutting real wages but by firing workers and placing the rest on short time.
when the wage freeze of 1933 was combined with the destruction of the trade unions and a highly permissive attitude towards business cartelization, a point to which we shall return, the outlook for profits was certainly very favourable.
Hitler’s regime promised to free German firms to manage their own internal affairs, releasing them from the oversight of independent trade unions. In future, it seemed, wages would be determined by the productivity objectives of employers, not the dictates of collective bargaining.
for those businessmen who operated in a small, national or local compass, the years after 1933 were clearly a golden age of authoritarian ‘normality’. However, to stop the analysis at this point would result in a highly partial account.
To simplify for the sake of clarity, the peacetime agenda of the more politically minded elements in German business consisted of at least two distinct elements, the one domestic, the other international.
The domestic agenda was one of authoritarian conservatism, with a pronounced distaste for parliamentary politics, high taxes, welfare spending and trade unions. The international outlook of German business, on the other hand, was far more ‘liberal’ in flavour. Though German industry was by no means averse to tariffs, the Reich industrial association strongly favoured a system of uninhibited capital movement and multilateralism underpinned by Most Favoured Nation principles.
Siemens and AEG divided up the global market for electrical engineering through understandings with their main American competitors.
It was this contrast between domestic authoritarianism and international ‘liberalism’ that defined the ambiguous position in which German business found itself in 1933.
By the end of 1934 the Third Reich had imposed a state of popular pacification that had not existed in Germany since the beginning of the industrial era in the nineteenth century. On the other hand, the disintegration of the world economy and the increasingly protectionist drift of German politics was profoundly at odds with the commercial interests of much of the German business community.
Given the extraordinary arrogance, ambition and nationalism of some of Germany’s most important heavy industrialists, Stresemann was taking serious risks.
What the German business lobby, along with most other observers schooled in conventional economic experience, did not understand was the severity of the domestic and international crisis this would unleash. By 1932 many of the bastions of economic strength on which Stresemann had counted so confidently had been shaken to their foundations.
In 1932 Friedrich Flick only escaped financial disaster by persuading the Reich to purchase his stake in the coal wing of the Vereinigte Stahlwerke at a hugely inflated price.25 As a result, the Reich came into possession of what was potentially a controlling stake not only in banking but in heavy industry as well.
Powell should remember this.
The collapse of the gold standard and the disastrous proliferation of protectionism fractured the bedrock of economic liberalism.
Hitler was not addressing a constituency that he knew to be in full support of his government; on the contrary.27 Some of Germany’s leading businessmen, perhaps most notably Carl Friedrich von Siemens, had actually declined Goering’s invitation.28 And Krupp was naive if he expected that Hitler would allow himself to be drawn into a full discussion of economic policy.
capitalism’s deepest crisis left German business powerless to resist a state interventionism that came not from the left but the right.
the New Plan, which effectively regulated the access of each and every German firm to foreign raw materials, created a substantial new bureaucracy, which controlled the vital functions of a large slice of German industry.
the export subsidy in turn was financed by a severe redistributive tax levied on all of German industry. Managing this burdensome system of controls was the primary function of a new framework of compulsory business organizations imposed by Schacht between the autumn of 1934 and the spring of 1935.
On the basis of emergency decrees first issued during the latter stages of World War I, the Business Groups were also empowered to collect compulsory reports from their members, establishing an unprecedented system of industrial statistics.34 After 1936 they were authorized to penetrate even further into the internal workings of their members, with the introduction of standardized book-keeping systems.
Since this entire apparatus of control was designed to limit German imports, it had the effect of virtually eliminating foreign competition from German markets. Nothing was imported that could be produced domestically and that meant virtually all manufactured goods.
After years of deflation, the consumer price index rose by almost 6 per cent between the spring of 1933 and August 1934, enough to spark fears of inflation.
Ironically, given Goerdeler’s liberal proclivities, the result by the end of 1935 was the creation of a comprehensive system of state supervised price-setting.
In July 1933 the RWM equipped itself with the authority to impose compulsory cartels. The same decree also gave the RWM the right to oversee the actions of existing cartels, to issue regulations governing their members’ activities and to regulate their price-setting.
Even large and highly fragmented industries such as printing, an industry with a turnover in excess of one billion Reichsmarks per annum divided between literally thousands of small firms, could now be formed into organized units with clearly established minimum prices.
The second cartel law of the summer of 1933 removed the legal protection provided by the Weimar Republic for firms that were not members of cartels to carry on their business as they chose.
