Keeping Germany Fat

1.

If it can be said that Germany was a world power before it began to act like one, this was largely because of its banks. In the remarkable extension of German interests around the globe in the nineteenth century the chief agents were the great banking institutions, particularly the so-called D-Banks, the Deutsche Bank, the Dresdner Bank, the Darmstädter-und-Nationalbank (Danatbank), and the Disconto Gesellschaft. These organizations, which controlled about 40 percent of Germany’s commercial deposits, had been founded in part to promote industrial growth, but it was their purpose also, as stated by one of their publications, “to foster commercial relations between Germany and other countries.” They did this by investing in foreign banks and sharing in their operations or by estab-lishing branches of their own and using their capital to support commercial operations. Their success in the 1890s was remarkable, as is illustrated by their creation of the Deutsche-Asiatische Bank in China and subsidiaries of the Dresdner and Deutsche banks throughout Latin America and by their capital investments and railway concessions in South Africa and the Ottoman Empire.

The First World War and its aftermath brought changes in the struc-ture and activities of these organizations. The Deutsche Bank became a truly multibranch bank with 173 branches throughout Germany by 1926, and in 1929, in the biggest amalgamation of the period, it merged with the Disconto-Gesellschaft. Greater changes portended after January 1933, for Hitler’s new ruling party was suspicious of all banks as “plutocratic” and “Jewish,” and soon gave tangible form to its feelings by carrying through a de facto nationalization of the Dresdner Bank and then forcing it to merge with the Danatbank. As for the Deutsche Bank, it had long been criticized by the Nazis for its concentration on large-scale industrial finance and international trade and its neglect of small business customers, and it was soon the object of other pressures.

Harold James, one of five historians who were invited by the Deutsche Bank to examine the bank’s behavior during the Nazi era and to write an unexpurgated account of it, describes where these pressures led. The bank, he points out, had no desire to become involved in party business:

The history of Deutsche Bank in the Third Reich is the story of the clash of two fundamentally contrary strategies of adaptation: on the one hand, self-defense against the intrusions of party and state; on the other, accommodation and compromise.

The management of the bank might have tried to retreat into purely economic activities had it not become clear very quickly that the Nazi Party regarded all such activities to be political. When Hitler launched his campaign to purge business of Jewish influence, the bank found itself automatically involved in individual cases in which it had to choose “Aryans” over Jews—a process of “Aryanization”—because of its extensive business contacts and its representation on the supervisory boards of other corporations. It was easily drawn into the search for new owners or other aspects of the liquidation of Jewish interest. The most dramatic example of this was the transfer of the holdings of the prominent publishing house Ullstein, owner of such journals as the Vossische Zeitung, BZ am Mittag, and the Berliner Morgenblatt, to the National Socialist Franz Eher Verlag. Josef Goebbels, who was intent, it was rumored, on “finishing off the Jewish press,” wanted the transfer to be brokered by the Deutsche Bank because this would give an air of respectability to the deal. The bank’s incentive was not so much financial as the hope that it would, at least for a time, be spared from attacks by the party press.

James points out that some of the initiatives for Aryanization were taken for “legitimate and even decent motives,” helping the victims to rescue part of their assets, and he instances the involvement of the Deutsche Bank in the liquidation of the Bankhaus Mendelssohn and Co. of Berlin, Germany’s largest private bank, which was consummated without the imposition of Nazi partners or the disappearance of the firm’s name. The Jewish owners obtained considerable settlements. Another example was the transfer of the famous S. Fischer Verlag to Peter Suhrkamp after skillful diplomacy by Hermann Abs, the future star of the Deutsche Bank, who defeated party attempts to take over the press.

But as time passed, such cases became rarer. In April 1933, Georg Solmssen, spokesman for the bank’s managing board, had written in a letter to a colleague,

I fear we are only at the beginning of a development that is deliberately aimed…at the economic and moral extermination of all members of the Jewish race living in Germany—quite indiscriminately. The total passivity of those classes not belonging to the National Socialist Party, the manifest lack of any feeling of solidarity on the part of everyone who…formerly worked side by side with Jewish colleagues, the ever-clearer readiness to take personal advantage of the fact that jobs are now falling vacant, and the dead silence that greets the ignominy and shame irremediably inflicted on those who, albeit innocent, find the foundations of their honor and livelihood undermined from one day to the next—all this points to a situation so hopeless that it would be wrong not to look matters in the face without applying any makeup, as it were.

This was prophetic. Even in the first years after 1933, when the party’s attacks upon Jewish firms were still relatively restrained, banks like the Deutsche Bank were under pressure from their junior employees or from Nazi work councils to institute Aryanization processes of their own in their branches and associated firms. After Germany had occupied Austria and Czechoslovakia in 1938 and 1939 it was often the junior staff and managers who instituted radical measures against Jews in the occupied countries.

By 1938, moreover, the big banks had abandoned their early attempts to defend themselves against party and state intrusion and, when the German push into Eastern Europe began in earnest, they became agents of the state in a real sense. The government wanted the Deutsche and Dresdner banks to involve themselves in the takeover of the Czech banks because the German banks’ foreign contacts were essential to financing the transactions and because they could handle the extensive Aryanizations involved in such a way, James writes, “as to win the confidence and cooperation of greedy and hungry German and Czech industrialists, who might in this way be firmly bound into the military economy of the ‘Protectorate of Bohemia-Moravia.'” The banks had no reservations. A Deutsche Bank official went to Prague to negotiate about the future of Czech banking in March 1939, just two days before the German invasion, and began to carry out the Aryanization process immediately thereafter.

Spokesmen for the bank have sometimes said that, while it made some profits on the transactions involved, these were not excessive, and that the operation as a whole was simply business as usual. Given the fact, however, that the expropriation of Jewish property took place in the setting of a radical mobilization of anti-Semitic resentment, and then of a racial war, this is not a very persuasive excuse.

2.

In the frequent postwar debates over the question of ultimate responsibility for bringing the sins of Nazism down upon the world, the note of self-reproach ran strongest perhaps in Great Britain. It was impossible to deny that Britain’s role in the Great Depression had been selfish and destructive. Sir Frederick Phillips, under-secretary of the Treasury, was making an unanswerable point when he wrote in 1934:

No country ever administered a more severe shock to international trade than we did when we both (1) depreciated the [British pound] (2) almost simultaneously turned from free trade to protection. Overwhelming reasons can be given why we were compelled to do these things but the point is we ought not to be too touchy at developments abroad which interfere with us.

The shock of these British actions was reflected in the economic convulsions of the Weimar Republic in its last phase. On January 30, 1933, it collapsed, and Adolf Hitler became chancellor of Germany.

What that signified was the subject of the wildest speculation in the West. For a time it was fashionable to believe that Hitler might be a stabilizing influence, since it was realized that if he were allowed to fall, the country might succumb to deeper economic depression and worse. But these ideas were soon discovered to be based on nothing but underestimation of the new chancellor’s political skills and of the seductive force of the Nazi ideology. Similarly, Britain’s confident belief that resumption of trade between the two countries would pose no serious problems became questionable when it was discovered that the Führer valued economic activity only for what it could contribute to his expansionist political goals. With the disclosure of his intention to push for all-out rearmament, the trade question became as much a moral as an economic question.

Neil Forbes’s new book is concerned with how British financial and economic policy toward Germany was made, how it was executed, and what it achieved. More particularly it deals, the author writes, “with the wider question of how well British institutions responded to the challenge posed by the Third Reich and whether the use of the term ‘economic appeasement’ aids or hinders historical understanding.”

In the 1930s, the British Foreign Office lost the dominant position it had once held in determining foreign policy, and economic advisers began to receive a more attentive hearing than professional diplomats like Sir Horace Rumbold in Berlin, whose predictions about Hitler’s future policy were among the most prescient, and the most unheeded, of the period. The Treasury, the Board of Trade, and the Bank of England became increasingly vocal in policy matters, and the pressure of employers’ organizations and trade unions was also felt on many issues. This made for a divided and sometimes contentious policy-making process. When Neville Chamberlain was chancellor of the exchequer and felt compelled, in a dispute with Germany, to answer the German finance minister’s bullying with a retort in kind, his action, he wrote to his sister,

put the City in a blue funk, and the Chairmen of 5 banks with other magnates proposed to come and tell me of the awful disasters that might follow. But before they could come we had a brilliant triumph. The Germans surrendered on both points.

During another dispute, Sir Orme Sargent, assistant undersecretary of the Foreign Office, complained that

In spite of all our efforts Mr. Montagu Norman [the governor of the Bank of England] continues to carry on his own foreign policy, certainly without consulting the Foreign Office and without, I suspect, taking even the Treasury very much into consideration. The present dispute with the German Government affords indeed a glaring instance of this independent action by the Bank of England, for the settlement…was almost wrecked not so very long ago by the sudden intervention of Mr. Norman.

The Foreign Office supposed that Montagu Norman was under the influence of Hjalmar Schacht, the president of the German Reichsbank, who was said to have persuaded him that the Foreign Office was anti-German and that opposition to Hitler on important issues ran the risk of bringing communism down upon the country.

To Sir Robert Vansittart, the permanent undersecretary in the foreign office, Norman was “a pleasant but misguided person” who persistently refused to recognize the important political issues that were involved in financial relations with Germany. Vansittart argued that it was vital that this “short view” be abandoned and that Britain begin to talk the only language the Germans would understand, and in economic negotiations to be canny and ungenerous and, as far as possible, to “keep Germany lean.” But Vansittart was never able to win his foreign secretary, Sir John Simon, a persistent follower of the line of least resistance, over to his harder position, and he was opposed in his own department by economic appeasers like Frank Ashton Gwatkin and Gladwyn Jebb, who argued that Germany had to be provided with opportunities to expand its trade and secure new markets lest it go bankrupt and start a European war.

Elsewhere in the government, and particularly in business and banking circles, it was argued cheerfully that keeping Germany fat rather than lean was in everyone’s interest and would increase the ability of German moderates to oppose Hitler’s dangerous policies, although all evidence from Germany indicated that the Führer was going from strength to strength and that moderates were in increasingly short supply.

In this atmosphere of doubt and division, credit arrangements were negotiated between the two countries, with increasing difficulties on the British side, as Mr. Forbes shows, and trade also continued. In the short run, both countries benefited from this, for, if the German military continued to import vital war mater-ials from British sources, Britain imported machinery for manufacturing shells and bombs from Germany. But even so, Vansittart, whose constant nagging about the peril of overlooking the political cost of small economic surrenders had finally resulted in his being kicked upstairs as a nuisance, had been right all along. Forbes concludes his excellent analysis by writing:

In the face of economic nationalism at home leading figures in British commercial and political life struggled to prevent a complete breakdown in economic relations with Germany—by far the most important trading partner in Europe…. Ultimately, in trying to confront the growing menace of the Third Reich, Britain failed to devise a mechanism which could reconcile a panoply of political, financial, economic and strategic considerations.

Tragically, it was to take the all-out effort of a world war to teach the British establishment to overcome its divisions of policy and purpose.

3.

Dealing as it does to a considerable extent with commercial and financial negotiations like those that led to the Anglo-German Transfer Agreement of July 1934 and the Payments Agreement of that November, Forbes’s book does not make for easy reading, but his sober and precise style suits the material and is likely to inspire the reader’s confidence. The same cannot always be said of Edwin Black, who is given to overstatement and an almost reckless rhetoric. When at a loss for the mot juste, he invariably chooses the one that gives the reader the impression that a lot is going on, or is about to. Religious undercurrents “ripple” and occasionally “explode.” IBM makes its first appearance in his book as “solipsistic and dazzled by its own swirling universe of technical possibility” and “self-gripped by a special amoral corporate mantra.” Later we are told ominously:

IBM did not invent Germany’s anti-Semitism, but when it volunteered solutions, the company virtually braided with Nazism. Like any technologic evolution, each new solution powered a new level of sinister expectation and cruel capability.

Black is always alert to the dramatic possibilities of his story and tries to make the most of them. Typical is his account of the meeting of the International Chamber of Commerce in Berlin in June 1937, when IBM’s chief, Thomas J. Watson, who was the chamber’s president, had a meeting with Hitler and was presented with the Merit Cross of the German Eagle by Hjalmar Schacht. To Black this was the “crowning moment” of the international meeting, and he writes:

The magic and fantasy of Berlin 1937 swept Watson and IBM into an ever more entangled alliance—now not only in Germany, but in every country in Europe….

Through it all the songs never stopped. Swaying with exuberance, all dressed in one color, lyrics shouted in almost hypnotic fervor, the songs never stopped. Endicott reverberated with the prospects as followers sang out.

That’s the spirit that has brought us fame!
We’re big, but bigger we will be.
We can’t fail
for all can see.
…
We fought our way through—and new
Fields we’re sure to conquer too.
For the ever upward IBM.

This clumsy lyric is an excerpt from the “IBM Anthem,” often sung by uniformly blue-suited employees at rallies in Endicott, New York, the seat of the IBM Country Club. Black suggests it is connected to the “Horst Wessel Lied,” the song of the uniformed SA, and that this was clearly meant as an intimation of the spiritual bond between IBM and the Nazi Party. Black does not show that the employees who sang the song were aware of the Horst Wessel song. But he implies that there is a hidden connection between the two songs in order to strengthen the charge, made in the subtitle of the book and in an early chapter called “The IBM Intersection,” that Hitler and Thomas Watson, “one an extreme capitalist, the other an extreme fascist,” formed a “technologic and commercial alliance that would ultimately facilitate the murder of six million Jews and an equal number of other Europeans.”

This is a charge that Black repeats several times, writing for example that IBM “designed, executed and supplied the indispensable technologic assistance Hitler’s Third Reich needed to accomplish what had never been done before—the automation of human destruction.” Yet one searches his pages in vain to discover any evidence that the company and its leader ever acknowledged that the destruction of the Jews was an objective for which they were striving. And without that, what becomes of all the talk about alliances and joint strategy? Black himself seems shocked by the thought that he might attract readers who could think that there would have been no Holocaust without IBM. If you believe that, he writes,

you are more than wrong. The Holocaust would have proceeded—and often did proceed—with simple bullets, death marches, and massacres based on pen and paper persecution.

The true reason for IBM’s involvement in German affairs is quite simple, and Black acknowledges it in the end, although it weakens his principal argument. He writes:

IBM’s business was never about Nazism. It was never about anti-Semitism. It was always about the money. Before even one Jew was encased in a hard-coded… identity, it was only the money that mattered. And the money did accrue.

In an age before the computer, IBM possessed a machine, the Hollerith, named for its German inventor, that was capable of sorting and tabulating data on punch cards specially designed for the task at hand and doing so faster and more efficiently than was possible by human hand. When it was used by the Nazis for the Prussian census of 1933 it enabled the regime to obtain up-to-date information identifying Jews. The Hollerith machine was in hot demand for this and other uses, and for that reason IBM elected to lease rather than sell it and to supply the punch cards, the special paper needed for their replication, and spare parts when they were needed. From the beginning, it was a profitable business, particularly in Germany, where Hollerith machines found many uses, apart from the censuses, whether in rail transport or the process of rearmament.

Trading with Germany became a delicate business as the years passed, and after Germany went to war IBM was subject to complicated political and moral pressures from the US government. Indeed, Black’s book is most interesting when he is dealing with Watson’s stubborn, and successful, determination to continue in control of IBM’s German operation without appearing to be doing so. He was able to cut off direct relations between IBM in the US and the Germans while continuing to deal with them indirectly. He was a master of subterfuge and made a fine art of being in a position to deny collaboration with the Nazis while operating through subsidiaries who were responsive to his every wish. Black writes that Watson never asked those subsidiaries to stop trading with the Hitler regime, the war machine, or any German occupying authority, and he never forbade them to supply the IBM machines that were used in sending people to camps, which they did. “Watson,” Black writes, “only asked his companies to stop informing the New York office about their activities.”