The Economy & Class Structure of German Fascism: Chapter 9

The Industrialists and the Agrarian Cartellisation

The practical outcome of agrarian cartelisation entirely depended upon by whom, and in whose interests, it was carried through. For it could just as easily be used either for blocking off foreign imports or for increasing them, depending on how the production and import quotas were handled. For this reason the industrialists had insisted, from the very start, on controlling the arrangements for cartelisation themselves. For them the real significance of the project consisted in divesting peasant farmers of their economic independence; the big landowners were ear-marked as next in the firing line. The industrialists intended that both parts of agriculture should be directly subjected to their rule. The question of who should pull the strings was the vital point upon which the subsequent struggle turned. In those first articles in ‘Rhein and Ruhr’ the wolf advisedly appeared in sheep’s clothing: it was stated that in the interests of both parties ‘industry should place its invaluable experience in the difficult field of cartelisation at the service of agriculture’.

It was Krupp’s brother-in-law, the Berlin representative of the firm, Baron von Wilmowski who assumed the leading role in the negotiations. He was, indeed, the ideal figure for this purpose. As a retired District Magistrate — ‘Landrat’ — he was on excellent footing with the landed gentry, and most suited to convey the impression of impartiality to the farmers. At the same time he could advance the interests of his own firm, Krupp, by using his role as President of the Reich Institute for Technology in Agriculture for forging the link between the Steelworks Association, which produced agricultural machinery, and the agrarian domestic market. The firm of Krupp maintained essential contact with the General Army Staff, which was especially concerned that the agrarian cartelisation project should preserve the large estates. The army remembered the dire bread shortage of 1916 in the large towns, and therefore welcomed the self-sufficiency programme in bread grain production side-by-side with the proposed role of the Danubian countries in supplying animal fodder and oil seed. They also favoured ‘healthy peasant settlements’ as they called them in the thinly populated areas of East Prussia and Posen in order to ‘fortify the German population buttress against the Slavs’.

Both the Army Staff and Krupp kept their distance from the Harzburg Front until the last possible moment. This was not because Krupp had less enthusiasm for re-armament than had, for instance, Herr Thyssen, but because at that time the firm was financially less desperate for it. Thyssen would have gladly accepted inflation, Germany’s isolation, or every possible risk if only he could at last secure his first orders for cannon; Hitler too, if he could only gain access to the state’s coffers. So felt the many candidates of despair who faced economic disaster at the time. Krupp, on the other hand, could afford to hold out and had no inclination to put hopes for the future at risk by playing with irresponsible policies. Krupp and the Army chiefs were clear­ headed enough to know just what would be at stake by embarking on massive rearmament in the teeth of international opposition. Nevertheless they had secretly begun such a policy, for the Reichs budget of 1932/33 was in fact not 6.7 billion Reichsmarks as was announced, but over 8 billion of which armament expenditure took up two and a half billion rather than one billion marks.

I have already referred to the far more comprehensive production and interest structure of the Krupp works compared with those factories dealing only with heavy industry. It was incomparably more complex than the industries which were concerned solely with their cartel quotas for a few hundred varieties of rolled and semi-finished products. Krupps were turning out a whole gamut of products ranging from locomotives, agricultural machinery down to sewing machines and type-writers and at that time five-sixth of their production capacity was designed for civilian consumption. All this, together with Krupp’s unparalleled financial independence, predestined the firm to act as mediator between the heavy industrialists of the Harzburg Front and their fiercest opponents in the financial and market spheres: competitors such as I.G. Farben with its Rhine Steel Works and the rivalry between synthetic and mining chemistry, or that of electricity from lignite as against from ordinary coal, or electrical engineering, as the most advanced major export industry.

The case of I.G. Farben requires special consideration. To have any understanding of its policy the enormous variety of its production as well as its vast marketing system must be taken into account. It is worth comparing, for example, the wide fields of experience of its two consecutive Chairmen during the relevant time span: Carl Duisberg until September 1932 and afterwards his successor Carl Bosch. Its predominantly pharmaceutical sphere of Bayer, at Leverkusen, of which Duisberg was the main proprietor and in which he held more than 350 patents in his own name, marketed consumer goods which were distributed through agencies throughout the world to wholesalers for retail chemists, hospitals and doctors. It was the typical market one would expect of capitalist free-trade competition and the liberal mode of thinking. Agfa’s business sphere was similar in its photographic interests. Both were most severely affected when lack of foreign exchange due to rearmament forced them in 1935/36 to close their market agencies in South America and the Far East. ‘We shall never re-conquer these markets with the cut-throat competition these days!’ was the way they argued. These branches of I.G. Farben had a broad front of common interests with such firms as Siemens and many electrical engineering, machine building and other highly qualified manufacturing industries, with whom they formed political alliances supporting the Brüning philosophy.

Carl Bosch, the succeeding Chairman to Duisberg, was the man from Oppau, the site of the nitrogen industry, producing mainly explosives and artificial fertilizers and dependent for the most part on sales to state-run enterprises. This particularly applied to the fertilizers delivered during the 1930’s in huge quantities to the agriculturally backward countries whose governments distributed them to the needy peasants by way of state subsidies. These Danubian, South American or Asian governments could not pay directly for the fertilisers but needed long or medium term loans. All these requirements were negotiated large-scale and at governmental level; naturally they were affected by all manner of political circumstances. Obviously Carl Bosch was more inclined to think in terms of agricultural cartelisation than was his predecessor.

The oil interests of I.G. Farben constituted another aspect which played a decisive role in the crucial years of 1931/32. In November 1929 the firm had negotiated with Standard Oil of New Jersey, commonly known as the Rockefeller Trust, a unique cartel agreement in which they recognised each other’s rights to the world market: I.G. Farben for all synthetic products, the Rockefeller Trust for all natural ones. The Germans had hoodwinked the Americans into believing that their petrol and artificial rubber synthesis had progressed to the point where they could immediately threaten the American and British world monopolies. This cartel agreement was one of the most astonishing of its kind, not only for its content and scope but because its obscurest recesses were revealed to the harsh light of public scrutiny in the monster trial that the American Government brought against the Rockefeller Trust in 1943. For it had become apparent, after the Japanese conquest of all the South East Asian rubber plantations, that the Trust had sabotaged the synthetic production of rubber which was so urgently required for the national warfare and in so doing had in fact seriously damaged the American conduct of war. The Rockefeller Trust had considered its cartel agreement as more sacred than its patriotic duties to its own country.

But no less surprising and embarrassing was the effect which the same agreement had for the Germans. What the Americans had been told was certainly true: after many years of repeated experiments, petrol synthesis by the Bergius — a chemical process — as well as by the carbonization process had been proved possible. A pilot plant had been built to try out its industrial production and here too the synthesis seemed to have confirmed its reliability, albeit at an unexpectedly high cost. Every German car driver contributed through high petrol taxes to the financing of this I.G. Farben project. At last, in 1931/32, the Leunaworks, the new large-scale petrol synthesis plant, was ready; it had cost around 500 million marks. But when the plant was operated at its full capacity a product was forthcoming which bore no resemblance whatsoever to petrol and which possessed no other recognisable uses. Dialectics seemed to have thrown its magic spanner in the works; quantity had given rise to a transformed quality. It was later found that the nightmare had occurred because, although the experiment was sound on the laboratory level, the full-scale petrol synthesis produced quite a different result due to the scale-up conditions which were then not understood. In 1932 this event knocked the bottom out of I.G. Farben’s far-flung calculations and plans. It was, to my knowledge, the first time that the specific problems and risks of ‘research and development’ had emerged on a large scale. Since the Second World War they have become more familiar. But the solution of this first case was the same as it has been in all subsequent ones of large scale dimensions. The cost of the risk incurred has been pitched over to the State, that is on to the taxpayers. When the difficulties are overcome the State hands back the guaranteed result to the private firm so that it can reap enormous profits. In effect, I.G. Farben’s experience in the Leunawork’s catastrophe prompted the firm to participate in the formation of the Hitler dictatorship in order to make good their enormous loss.

One morning in early December 1932, Max Hahn came into the MWT office triumphant. ‘Dr. Sohn,’ he exclaimed ‘I.G. Farben has accepted the project of agrarian cartelisation!’ Such information had come to light in a speech by Carl Bosch to his Board of directors. This change of position affected the last pre-Hitler government formed only fourteen days before by General von Schleicher. He had previously counted on the support of I.G. Farben and although he remained in power until Hitler’s nominaion his government was greatly weakened. The winning of I.G. Farben for the policy of the MWT completed the industrial programme of reuniting the vital sections of German monopoly capital on to a common imperialist programme. Now the precondition was given for lifting a dictatorial Government into power, and this was established on January 30, 1933, under the Chancellorship of Hitler.