#59 The Nazi Economy in the 1930s
Ideology alone was of course not enough for Hitler to rise to power. The question remains: how was Hitler able to revive the German economy sufficiently to fight a global war in a mere six years? Hitler had taken political power in Germany in 1933. Once this question has been asked, the direction of the answer is obvious: the German economy would have to be supported by the great powers, France, Britain or America; there was no other way.
This question sits awkwardly in the 21st century, given the vitriol against Hitler. Germany had needed support from the international financial community after 1918, and even more so after 1923, when the economy collapsed through massive inflation. This then takes us back to our discussion of the Gold Standard and to Montague Norman who was head of the Bank of England continuously from 1918 through to the 1940s.
Germany was mired in war debt after the Versailles treaty in 1919 – a debt that was twice as large as the country's income – to pay reparations. The economy was in a corner. Germany faced capital flight, depreciation of the mark, inflationary meltdown. Norman found a suitable country to bail out German debt through massive loans: the USA. Norman had cultivated his relationships with J.P.Morgan and Co, (the same J. P. Morgan by the way who promised to finance the football super league in Europe in 2021!) alongside the governor of the Federal Reserve Bank of New York, Benjamin Strong; and Kuhn Loeb and Company had supported Strong.
The USA experienced a boom after 1918 through orders of massive foodstuffs and other supplies from Europe. Given that she had massive gold supplies, the banks were supplied with finance to carry out the export orders from Europe. The British treasury wanted the gold after 1918 and, ignoring the need for employment and the resuscitation of the economy, had valued obtaining gold as more important. Accordingly, she had raised her interest rates to 7% and had at the same time reduced the silver interest rate in India so that the precious metal would flow to London.
Norman in London and Strong in the USA worked hand in hand. They had created a money famine in India and monetary abundance in the USA while helping London to return to the Gold Standard. Together they had created the situation for US investment in Germany.
In 1923, the Reich was purged of its debt and the Weimar Republic looked forward to five more years of US investments, and a scheme named the Dawes Plan was launched in 1924 to provide Germany with credit from across European nations. Under the plan, reparations were realigned so that they might be temporarily suspended if the strain against the German mark was too strong. The German money supply was internationalised; Germany lived off International loans that had been the brainchild of Montague Norman. The German government borrowed £200 million in gold from Britain, France, and the USA, at rates of around 9%. Reparation bonds were sold in the USA. By 1930, $28 billion had flowed into Germany, much of it in short term credits. Germany had been turned into a colony of Wall Street.
When politically awkward questions were asked like, "Why is Germany being boosted?”, back came the answer: “She is our ally against communism." This hid the dilemma faced by Britain in particular, between the threat of socialism in the USSR and the paradox of a Russian/German alliance.
It should come as no surprise that once the German economy in the middle 1920s was being propped up by US dollars, then US companies were not far behind. There is substantial evidence that USA companies began supporting the Germans in the 1920s, and Hitler and the Nazi Party in the 1930s. For example, the US ambassador in Germany, William Dodd, wrote to Roosevelt in 1936:
" ... At the present moment, more than a hundred American corporations have subsidiaries here or co-relative understandings. The duPonts have three allies here in Germany that are aiding the armament business. Their Chiefs ally is the I.G. Farben Company, a part of the government which gives 200,000 marks a year to one propaganda organisation operating on American opinion. Standard Oil Company (New York sub. Company) sent $2,000,000 here in December 1933 and has made €500,000 a year helping Germans make Ersatz gas for war purposes..."
- Quoted from Antony Sutton, Wall Street and the Rise of Hitler, page 15
The quotation continues at length, including making the point that profits were not sent back to the USA as that was not allowed.
Sutton’s work goes on to illustrate that those companies associated with Morgan and Rockefeller international investment banks were closely related to the growth of the Nazi industries and that the American government was fully conversant with these developments.
Furthermore, evidence about the role of the largest American companies has recently been provided by Nathan Feldman, writing a doctorate at the Hebrew University and reported by then the newspaper Haaretz:
"IG Farben received some of its expertise thanks to technology sharing not agreement with Delaware based Du Pont... Giving IG Farben critical knowledge for war production, enabling Nazi Germany to start the war... That in addition to business interests the connection between the two companies was ideological. .... Such connections included huge loans, large investments, cartel arrangements...massive amounts of war materials. The corporations included Standard Oil, General Motors, IBM and Union Banking which provided large loans for buying equipment"
Whether Germany could have developed without these supports, and why the elite in Wall Street wished to support Hitler and the Nazi party, are other questions. At that time in the 1930s, the ruling cadres in both the USA and Britain were split on their attitude to the rise of Hitler. Some were for and there were those against. In the 1930s, racism was still in full flow, and horror at the anti-Semitism of the Nazi party was nothing like it is in the 21st century. Many saw the rise of Hitler as the antidote to the USSR.
John Foster Dulles (aka JFD) and Allen Dulles - one the Secretary of State and the other head of the CIA during the Cold War from the early 1950s - were both personally deeply involved in the resuscitation of the German economy in the 1920s.[1] In the case of Foster Dulles, this was throughout the 1930s. Both were senior directors in Sullivan and Cromwell, the largest law firm in the USA at the time. Both men worked in Germany, alongside the major US banks, Brown Brothers, Lazard and Freres, Goldman and Sachs and other banks, helping them provide the conditions for lending on a mega scale in Germany. JFD met Hitler in 1933 and was impressed by the dynamic qualities of Hitler’s and Germany's growth in the 1930s. JFD approved of Hitler’s anti-Bolshevism. Sullivan and Cromwell in particular was a strategic nexus for operating internationally, through a core of relationships led by the Dulles brothers.
There is little doubt that extensive US banking, financial, and Wall Street companies supported the rise of the Nazi economy in the 1930s. British and American capital was an essential part of the rise of Hitler and the German economy in the 1930s.
Recommended Reading
The following list of books cover many aspects of the last few blogs on the rise of Nazism from 1914 to 1945.
J.M Keynes, The Economic Consequences of the Peace
Guido Preparata, Conjuring Hitler How Britain and America Made the Third Reich
Musa W. Dube, Post-colonial Feminist Interpretation of the Bible, St Louis Chalice Press 2000
Christian Ingrao, Belief and Destroy: Intellectuals in the SS War Machine and his Promise of the East, also Nazi Hopes and Genocide, 1914-1943, both translated by Andrew Brown, Polity 2009
Michael Walzer’s book Exodus and Revolution, Basic Books 1985
Edward Said’s long review of Michael Walzer, Quad Street Journal vol 5 No 2 1986 pp86-106
Antony Sutton, Wall Street and the Rise of Hitler: the Astonishing True Story of the American financiers who Bankrolled the Nazis.
On this same subject read:
Stephen Kinzer, The Brothers: John Foster Dulles, Allen Dulles and their secret World War, St Martin’s Press 2013
Carroll Quigley, Tragedy and Hope
Hannah Arendt, A German, Eichmann in Jerusalem: a Report on the Banality of Evil, and The Origins of Totalitarianism
Franz Werfel, The Forty Days of Musa Dagh, translated from German by Geoffrey Dunlop
[1] See Antony Sutton, Wall Street and the Rise of Hitler: the astonishing true story of the American financiers who bankrolled the Nazis. Anthony Sutton had an interesting academic career. His various books documents the role of the USA in Germany. For this he was side-lined but never forced out as some other academic in parallel areas of study.
Copyright Notice. This blog is published under the Creative Commons licence. If anyone wishes to use any of the writing for scholarly or educational purposes they may do so as long as they correctly attribute the author and the blog. If anyone wishes to use the material for commercial purpose of any kind, permission must be granted from the author.
Ideology alone was of course not enough for Hitler to rise to power. The question remains: how was Hitler able to revive the German economy sufficiently to fight a global war in a mere six years? Hitler had taken political power in Germany in 1933. Once this question has been asked, the direction of the answer is obvious: the German economy would have to be supported by the great powers, France, Britain or America; there was no other way.