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Albert Gates

Current Economic Developments in Germany

(October 1942)

From The New International, Vol. VIII No. 9, October 1942, pp. 268–272.
Transcribed & marked up by Einde O’Callaghan for ETOL.

It used to be the custom of many social “theorists” during the peace years of Hitler’s reign in Germany to describe that fascist-totalitarian state as a new society based on new economic and political principles and upon new class relations. We were told that the bourgeoisie no longer ruled socially; that the position of the proletariat in German society was altered to that of a slave class and that the government bureaucracy, in the guise of the National Socialist Workers Party, was the new social ruling class. The successive stages of the war economy which began even before Hitler became Chancellor were described as a “new economy” by professionals who apparently forgot all the economic lessons of the First World War and, having forgotten them, were unable to understand the demands which would be made on economy in the present war.

Germany’s efforts to break through the Anglo-American monopoly of the world market by the production of cheap goods, the employment of “unorthodox” financial practices, and her militant war-threatening seizures of European territories, were described as a “Brown World Revolution.” No real efforts were made to study the all-impelling economic reasons which drove Germany to “fight the whole world” in the interest of her monopolist capitalist class ‘because the “democratic” theorists, reflecting the mood of the “democratic” empires were slovenly-minded, contented and alarmed, bellicose and meek, strong and weak, and above all bewildered and confused. That Hitler would dare to carry out the program of Mein Kampf seemed unjust, unworthy and, above all, unreal. Living in nations content in their domination of the colonial areas of the world and the international market, they could not conceive why Germany would go to any limit to bring about a new “redivision of the earth.” Hitler’s cry, “We export or we die,” was regarded in many circles as a rhetorical pacifier of Germany’s financial and industrial ruling class, whom Hitler was supposed to have destroyed and made his servant.

When the war came and the overwhelmingly superior German war machine began its series of astounding victories culminating in the fall of France, a veritable hysteria was recorded in the Allied nations. The social “theorists” above referred to were then certain that the easy German victories could only result from the fact that a new social order prevailed in that country and, more than that, a superior social order. We learned, among other things, that the basis for the German victories was to be found, not in its military preponderance, but in the superiority of its “managerial society.” The blitzkrieg was explained on the basis of this superior social order, and in some quarters we learned that it was due to the liquidation of the profit system, the internal market and, above all, by the liquidation by Hitler of the world market! No more, no less!

After three years of a war which has engulfed the entire world, the conjunctural phenomenon of the blitzkrieg disappeared and has been replaced by a war of position and attrition. But it had already become clear after the first year of the war, or to be more exact, when Great Britain routed the Luftwaffe in the air over England, that this war was really not so strange and that it exhibited, despite new means and weapons of warfare, the same fundamental strategies which prevailed in the First World War. The war is no longer “startling” and saner analyses get a better hearing these days. The truth about German society under Hitler has become clearer: Hitler is the agent of a small group of the most powerful financial-industrial overlords of German economy; German economy in the war has reached the highest development of monopolist-capitalism. No fundamental class changes have taken place; the bourgeoisie has become a more concentrated class accumulating greater wealth; the middle classes are being wiped out, the proletariat is more intensely exploited.

The war has solidified the main economic tendency within Germany and the conquests of the German armies now enable us to see how this tendency takes effect in the conquered countries. The main tendency within the country is toward a greater concentration and rationalization of industry to meet the ever-increasing needs of the new phase of the war. Definite material is now available to demonstrably prove that, in the conquered areas, the bourgeoisie follows the path cut for them by the military victories to gain control and ownership over the whole of European economy. It is these two aspects of economy development which we wish to deal with now.

In the June 20 issue of the Foreign Commerce Weekly there appeared the third installment of a study on German wartime economic policies. The title of this particular review is Concentration and Rationalization of Industries in Germany. It proceeds to an elaborate analysis of a German economy which it described throughout as a private property-profit economy dominated by a group of monopolists. Nowhere in the entire review can one find a single allusion to a collectivized property under state control. Thus at the very outset we learn that ...

One of the outstanding economic results of the National Socialist régime in Germany has been a sharp acceleration in the trend toward economic concentration. The rearmament policy, with its definite emphasis on substitute materials which could be produced only by the financially strong concerns, the rationing of raw materials, labor and transportation and, finally, the tremendous economic demands of the war, have compelled the government to concentrate a very large part of the country’s production in the large and efficient plants.

It should not be difficult to understand this tendency, which is deep-going in Germany, because we observe the same development in the United States. The great demands of the war make it inevitable that the heavy industries, the highly concentrated and centralized combines will benefit from the war orders of the government. In the interest of military victory, the effect of this process on the small manufacturer, i.e., the large middle classes, is unimportant. If the German rulers are more callous than the Americans when they prepare the doom of these elements in the economic structure, the result is all the same. The longer the war lasts, the more intensified becomes this tendency toward concentration and rationalization.

The article in question quotes from a résumé on this particular problem contained in the German press which we believe is instructive. The résumé says in part;

The year 1942 will be characterized by a higher degree of concentrated utilization of all production means to further the conduct of the war. Since the beginning of the new year, the placing of the national economy on a total war basis is in the process of being realized. The intent is to give maximum industrial support to the Army at a minimum loss of production capacity and with a minimum use of manpower ... This can be attained by two methods – rationalization and concentration ... It may be necessary to that end to eliminate smaller and medium-size plants and concentrate production in a few larger ones, which could be particularly adapted to manufacture rationally. It is, however, not the intention to sacrifice unnecessarily small and medium concerns if they are able to cooperate economically ... As stated, in the new phase of economic war development, a further restriction in the production of consumer goods cannot be avoided, or the immobilization of those concerns which are of no direct value to national war economy ...

Where will this begin and whom will it eliminate? Concentration begins among the already highly concentrated mass industries and elimination continues among the small enterprises where liquidation of enterprise has been going on for a long time or where subsidized idleness has been the rule since the war began. The firms to be retained are naturally the most efficient in the employment of labor, machinery, fuel and raw materials, those “capable of sufficient standardization of output to produce articles whose manufacture is worth while only if they are produced on a large scale.” They will be the large monopolies, firms with the most modern machinery. For example, in a field where sixty-five firms exist the three largest and most efficient will be maintained, the rest either to be swallowed up by the three, or eliminated entirely. Thereby, the process of consolidation, an inherent tendency of monopoly capitalism, is intensified by the demands of the war and aided by a state régime completely in accord with the dominant steel, coal and chemical monopolies. The new combinations will further the merger of finished goods producers and those making and trading in raw materials and semi-finished goods. In each instance, the big monopolies will be the winner and that is why “the large concerns are apparently only too ready to cooperate with the state in achieving this concentration ...”

Near the close of 1941 the following combinations took place: An agreement between Siemens & Holske (AG) and the Allgemeine Elektrizitätsgesellschaft (AEG) involving the redistribution of certain subsidiaries; the formation of Phrix-Zellwollkonzerns; the establishment of Francolor, allying the German chemical trust (IG) with the French dyestuff industry. At the beginning of this year “the Metallgesellschaft and the Ver. Aluminium-Werke exchanged their participation in the Ver. Dt. Metallwerken and the Ver-Leichtmetall-Werken.” And now we have had the amalgamation of Hoesch (AG) and Machinenbau und Bahnbedarf (AG). The Allegemeine Elektizitätsgesellschaft (AEG) has absorbed the Gesellschaft für Elektrische Unternehmungen. The magnitude of this merger is demonstrated in the fact that GEU in assigning its holdings to AEG received shares amounting to 100,000,000 marks.

The State Society for Mutual Aid (another body allocating government aid to business) which has already been helping closed factories, will be called upon to further aid defunct institutions. This organization “undertakes to maintain the buildings and machinery of a factory which is closed down, pay the rent and interest on debts and in some circumstances provide for the subsistence of the owners of the factory if there are no possibilities of reemploying them.” The society, which was founded in February 1940, paid out until May 1941 benefits to business men totalling 8,000,000 marks. This subsidy was henceforth increased to roughly 20,000,000 marks, and an enlarged subsidy is expected in view of the new prospects of concentration and the elimination of thousands of other small enterprises.

The Relation of the State to Business

In all of these developments, the state plays an inordinately integral part. The state passes the legislation; it has set up the bodies for effecting its decisions. Thus the process of continued and accelerated concentration and rationalization in industry will be carried through with the aid of such governmental bodies as the Reich Industrial Group, commissioned by the Ministry of Economics, the Office of Economic Direction, the Agricultural and Labor Offices, jointly with the Ministry of Economics, the Ministry of War Economics and the Ministry of Munitions. The article in question goes on to say:

It is intended that private business shall be coordinated to an extent never before undertaken. Private economy, insofar as it still remains a part of the “civil section,” will be drawn, it is stated, to even a greater degree under the control of the state, and private interests will be subordinated more than ever to public welfare.

One might conclude from the above that there is truly something fundamentally new in German state-industrial relations. Only a superficial observation permits such a conclusion. For, in fact, what exists in Germany is a situation similar to that in all the warring countries. By their direction of the war, the national states conduct the most colossal venture in all history. Economy is completely subordinated to the needs of war; the market is the state and all production takes place on the basis of the requirements of that market: production of war goods, consumer goods consonant with the maintenance of the national population upon whom war production is dependent, and the production of all necessary auxiliary goods. Public welfare means doing everything necessary for a successful prosecution of the war. But in none of the bourgeois states, especially Germany, has any fundamental change taken place in property relations and, therefore, production for the profit of the dominant economic class, the bourgeoisie. This is why the above review comments:

The whole process, it is maintained, however, cannot be achieved entirely by government decrees. It is contended that it must primarily have the full support of industry. Emphasis is placed on the execution of the plan through the application of the self-government policy of industry. Not orders from above, it is stated, but only the initiative of responsible entrepreneurs can achieve a further real increase in output. Those who are placing the armament orders, namely, the officials of the German government, it is pointed out, must also show the ability to accommodate themselves.

If we were to accept the theories of the champions of the new social order in Germany, we could never understand why a state which has presumably liquidated all classes, or at least reduced them to impotence, is unable to proceed with its managerial prerogatives other than by asking the indulgence of big business. Why, for example, would not a decree be sufficient? It is in the Soviet Union. But in Germany we find that it is necessary for the state to issue its decrees and then depend upon the competing sections of the ruling class to adjust themselves to such decrees and to carry them out as independent financiers, industrialists, or, as the article says, entrepreneurs.

The truth is that in Germany you have the classic development of fascism as the final form of monopolist-capitalist rule. It is being acknowledged by an ever-widening group of observers that Hitler is merely the tool of the dominant monopolistic combines, the steel, coal, iron and chemical groups.

which, through the fascist state they helped to create, have finally eliminated or weakened rival capitalist groups They sit in the council chambers of all the important state ministries. They initiate the main economic decrees. They receive the essential benefits of Hitler’s victories in concrete economic gains, as we shall shortly prove.

The problem of the dominant monopolist groups in German economy is to bring about the elimination of competitive and small industries, to control labor, raw materials and prices. There is no need to control the market, because through the state they dominate the market too. But the fascist state is the instrument through which the other classes and strata are controlled and cajoled into accepting the economic rule of the dominant group of the bourgeoisie.

The point to be remembered is that this singular process is followed in Great Britain and America without, as yet, the need of such a totalitarian regime. The bourgeois need for a fascist state in Germany is to be explained entirely by the pre-war position of that country in world economy and inner-class relations. In Germany the state is truly the servant of the dominant economic class. Observe in the following how the various aspects of economic conduct have served the interests of the top layer of the German bourgeoisie.

Some Inner Features

Cartelization in Germany, which preceded other countries, has developed intensely under the Nazi regime, resulting in even greater power for the large monopolists. This cartelization is the antithesis of state nationalization, or collectivization. The “anti-capitalist” elements of the Nazi Party have long been liquidated. Germany’s war, as we pointed out in our dispute with Dwight Macdonald in 1941, is the war of the German monopolists fighting to win world economic hegemony.

Just as in the United States, most contracts are with big business, and these are “ruled mainly by the ‘cost-plus’ principle,” a system by which the bourgeoisie profits enormously.

In the pre-war years of Hitler’s reign, production in Germany (essentially for war) nearly doubled. In this same period, wages and salaries increased 66 per cent, but other incomes increased 146 per cent. The figures in Maxine Sweezey’s The Structure of Nazi Economy show that profits of corporate industry has not only been recovered but approximates the high years of the pre-Hitler era. As compared to a more than 10 per cent loss in 1931, profits rose in 1937 to 6 per cent. Almost immediately after Hitler’s rise to power, i.e., with the destruction of the proletarian organizations, their resistive strength and, consequently, their already impoverished standard of living, profits reappeared for the bourgeoisie. Profits have again increased during the war, but this increase is to be recorded almost entirely for the heavy industries. This, however, is not atypical a monopoly capitalism, finally, inequality in income and wealth, as a fundamental feature of capitalism, has been intensified.

The continental aim of the German bourgeoisie (sensationalized in Booktab’s Sequel to Apocalypse, a study written to prove that Hitler is the agent of Farben, Krupp et al.) is to reduce Europe to a colony of German industry, to agrarianize the other countries, expropriate their industries and enormously expand German industry on the basis of an all-European market. Thus, just prior to the outbreak of the war, general production increased to 135 (taking the year 1929 at 100). Of this increase, consumption goods rose from 76 to 120, while investment goods (principally armaments) jumped from 34 to 147. The monopolist concerns profit from these increases. The “Aryanization” of business was merely another form of capital accumulation through the elimination of Jewish concerns. Private capitalists and Nazi Party leaders took over these firms. In both cases, friendliness for the fascists and “heroic” party deeds were rewarded. In each instance, the maintenance of private property was guaranteed by the state.

The Hermann Goering Works began as a state institution to engage in the costly manufacture of low grade ores. The reason for this governmental venture was to socialize the losses attendant upon such production – to make the masses pay for it. But when the German armies began to march and the Goering Works took over the profitable heavy industries of other countries, almost immediately the private monopolists sat on its directorates and increased the specific weight of private capital in this enterprise. The Nazi marauders found them indispensable to aid the organization and conduct of a business now purported to be the world’s largest monopoly.

In an examination of what has happened to Germany’s middle classes we see another aspect of the monopolist-capitalist character of German economy. There was a “large-scale massacre of small businesses” (The Economics of Barbarism, by Kuczynski and Witt), a process now taking place in the United States also. Taxation and the curtailment of raw materials, a product of the war economy, served to destroy the small producers. The state enacted measures for the liquidation of these concerns. In 1937, over 10,000 independent retail business were liquidated in the Brandenburg Province alone. In two years, from April 1936 to March 1938, “one hundred and four thousand small independent craftsmen had to close their businesses,” Just prior to the outbreak of the war, this figure rose to 200,000 and we are reasonably certain that in the past three years this figure has been left far behind. The disappearance of these businesses served the interest of big business, which absorbed the labor, raw materials and contracts of these concerns.

Basic Class Relations

The condition of the German proletariat is well known. The standard of living of these masses is maintained only at a point which permits continued labor and reproduction of the race. There is only the limit of physical endurance which decides the length of hours which the industrial proletariat labors and the conditions of this labor. Food and clothing are of poor quality and they are rationed. The sixty-four hour week is the rule, although large numbers of workers labor seventy-two or eighty-four hours a week. In one particular locality, a 104-hour week was provided for through a “collective agreement.” In general, physical, moral and spiritual degeneration of the German people follows.

Another phenomenon produced by the war, more precisely, by German victories, has been the forced mass movement of conquered peoples. Hitler plays a game of checkers with these peoples. The main purpose behind these shifts is to meet the economic requirements of Germany’s war production. The number of foreign workers employed by Germany is an indication of what has taken place on the continent. The German bureaucrats, by their own admission earlier in the year, have transported more than two and a quarter million workers to work in German industries and farms. This figure has been enormously increased in recent months.

In sharp contrast to the conditions of the German masses and the conquered peoples is the position of the German bourgeoisie. It is not necessary to measure the wide gulf between these classes in terms of loaves of bread. One can deduce it from empirical evidence present in bourgeois society as it exists in the “democratic” United Nations.

The German monopolists are not awaiting the conclusions of a victorious war to gain their spoils. They have enriched themselves now, in the very midst of a war which has not approached a conclusion and where victory is terribly uncertain. But we are in a position to demonstrably prove by the following, how intimate is the relationship of the German state to the German bourgeoisie and how slavishly it serves the latter.

The German rulers, i.e., the dominant bourgeoisie and their state bureaucracy, have employed several methods in dealing with the economy of conquered countries. They have either taken over the most important sectors of these economies, obtained controlling interest, or destroyed them entirely. In each case, however, the fundamental aim of the victors has been to subordinate everything to German requirements.

How Big Business Is Enriched

The Hermann Goering Works, the one important government business and the basis upon which many “theorists” based their analysis of the new social order, has been altered by the German victories. It is no longer a state institution for the production of iron and steel from low grade ores. It has become a colossal monopoly whose capital has increased from 5,000,000 marks in 1937 to 400,000,000. The capital increase of this concern was accompanied by an invasion from the private monopolistic interests, principally Ruhr industrialists, who were enamored of the new sources of wealth of this enterprise.

With the invasion of Austria, the Goering Works obtained control of the Alpine Montangesellschaft, the Veitsche Magnesitwerke, an oil-distributing agency, Fanto AG, and “numerous iron and steel concerns.” Upon the occupation of Czechoslovakia, it obtained control of the great Skoda works, the Brno armaments concern, and other iron and steel companies.

French capital in these Czech organizations, mainly the Schneider-Cruzot interests, “sold out to the German monopolists, who paid them off with Czech gold held by the Bank of International Settlements.” But, in turn, the same German monopolists have obtained control of the Schneider-Cruzot combine. The Goering Works also took over the Koenig and Laurahuette mines of Poland.

Sudeten German mines were unified either by expropriation or the buying out of the large shareholders. German industrialists then organized the Sudetenländische Bergbau AF, which in turn organized the Sudetenländische Treibstoffwerke AG, one of the largest producers of synthetic oil.

The German monopolists really went to work on Poland. The policy there was simply to destroy the national economy or to Germanize it. Through their organization, the Haupttreuhandstelle Ost, they expropriated within one year 294 big industrial works, 9,000 medium-sized industrial works, 76,000 small industrial enterprises, 9,120 big mercantile companies and 112,000 small ones. The iron works of Koenigs-and Laurahuette were given to the German Roechling company. Krupp was given the Bismarckhuette coal and iron business. The Fuerstengrube concern was given to I.G. Farben.

The great landed estates of the Wirek Kopalnie were split three ways and given to three great estate owners of Eastern Germany: Herr Schaffigotsch received 50 per cent, Herr Ballestrem 30 per cent, and Herr Donnersmark 20 per cent. The combined wealth of “these three estate owners and industrialists is estimated to be ... over 100,000,000 marks. (Quoted from Die Zeitung, in The Economics of Barbarism)

The Kattowitzer Lokomotivfabrik of Chrzanow, Poland, was given to the German locomotive manufacturers, Henschel & Co., AG.

German policy in Poland is one of confiscation. Former owners receive no compensation. In this way the German industrialists have been enormously enriched to the extent of hundreds of millions of dollars in capital wealth (mines, factories and machinery). This, then, is the fruit of the Polish conquest. And it is for this that the German youth have sacrificed their lives – for the enrichment of the top layer of the German capitalist class.

The methods pursued in other countries, France, Belgium and Holland, are different. In these countries, “the factories and concerns belonging to one industry are grouped together into one economic unit – a syndicate, a holding company, a ring, and so on.” For this type of arrangement, the Germans usually place a collaborationist at the head of the new organization (usually one who has had dose relations with German big business prior to the war and one who is usually a fascist or near-fascist). These organizations function as native combinations in name only. They really serve their German masters. Thus, the National Committee of Economic Collaboration in Holland, headed by the fascist Rost Van Tonnigen and Dr. Fentener Van Flissingen, former president of the International Chamber of Commerce (!), is actually engaged in solidifying the control of the German monopolists over Dutch economy.

The German Vereinigte Stahlwerke, through the above set-up, took over the iron and steel works of Ymuiden Co. and Van Leersche Iron Works. These companies were amalgamated under the ostensible head of the above Van Flissingen. But the real power is the Ruhr industrialist, Ernst Poensgen, who, together with four other German industrialists, make up the majority of the directorate. Dutch power stations are now being technically linked to German stations in the Ruhr. German banks have taken over the Dutch Koopmans Bank, Amsterdam, N.V. Rijnsche Handelsmanschappij, Handelstrust West N.V., retaining only their names.

In France, the German policy is rather well known. There, many comités d’organization have been formed of native fascists, collaborationists and profit seekers, to facilitate German control of French industry, or to link French concerns to German. The Germans seek to recoup their losses of 1918, and more. The ore resources of Lorraine and the de Wendel companies in Lorraine are now part of the Goering Works. A combined administrative committee of the Hermann Goering Works, the Vereinigte Stahlwerke and Kloeckner Works act as a trust for other plants in this region. In return, German coal and coke is to be supplied to these “French” organizations.

German banks play a similar rôle to that of the large industrial combines with which they are intimately associated and which they in large part already control. Thus, German influence in the French banks of Lazard Frères, Crédit Lyonnais, Banque de 1’Union Parisienne and others is very strong. Through these banks the Germans manage to influence or control other French industrial organizations. (The precise extent of German banking influence and control in France is not yet entirely clear.)

The French automobile industry has been reorganized and has established an “understanding” with German and Italian concerns. At present these companies work almost entirely for Germany. The Cuttat machine-tool company of Paris is now under control of the Leipziger Machinenfabrik Pittler AG. The French chemical and dye industry, reorganized into Francolor, a single monopoly, is controlled by the German dye trust, which owns 51 per cent of its shares.

The same situation holds for Belgium. The Otto Wolff AG, heavy industrial “promoters,” have obtained large shares in the iron concern of d’Ougree Marihay. The Vereingte Stahlwerke “acquired” shares in the John Cockerill Co. Kloeckner and Stinnes have also invaded the Belgian field, as have German banks. This “pattern of economic conquest” extends to the Scandinavian countries and in the Balkans. Everywhere, the Germans seek the expulsion of British and American economic interests and thus corral the whole of European economy. So far, their military victories have made possible unbelievable economic gains, all of which go into the hands of the German bourgeoisie.

We have touched only briefly on some of the main developments of German economy since the war began. But even such a cursory examination is sufficient to demonstrate the unmistakable imperialist-capitalist nature of the war and of German society in particular. The presence, for example, of state officials on some of the new monopolies, is no evidence of a new social order as it is a living proof of the fact that the fascist state is the best servant of the monopolists. These officials do not represent the state in their industrial positions as much as they insure the rights of big business. They become, in fact, business men themselves. Therein lies the main attractiveness of a state career under fascism. It rewards the loyal and “capable” party men with pecuniary gains – they become industrialists!

How soon the whole story of German society will be available, we cannot tell. But the historians of the future will be able to record how the victory of Hitler in Germany marked the triumph of monopoly capitalism over the German working class, middle class and rival capitalist elements and how it enabled this same group to enrich itself through the early victories of the German war machine. It will be a tale so simple and lurid in its description of plunder and self-enrichment that one will regard people as queer who overlooked the actual simplicity of this primitive accumulation and called it a new society and an anti-capitalist society at that.

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