CHAPTER ONE
Wall Street Paves the Way for Hitler
The Dawes Plan, adopted in August 1924,
fitted perfectly into the plans of the German General Staffs military
economists. (Testimony before United States Senate, Committee on Military
Affairs, 1946.)
The post-World War II Kilgore Committee of the United States Senate heard detailed evidence from government officials to the effect that,
...when the Nazis came to power in
1933, they found that long strides had been made since 1918 in preparing
Germany for war from an economic and industrial point of view.1
This build-up for European war both
before and after 1933 was in great part due to Wall
Street financial assistance
in the 1920s to create the German cartel system, and to technical assistance
from well-known American firms which will be identified later, to build the
German Wehrmacht. Whereas this financial and technical assistance is referred
to as "accidental" or due to the "short-sightedness" of
American businessmen, the evidence presented below strongly suggests some
degree of premeditation on the part of these American financiers. Similar and
unacceptable pleas of "accident" were made on behalf of American
financiers and industrialists in the parallel example of building the military
power of the Soviet Union from 1917 onwards. Yet these American capitalists
were willing to finance and subsidize the Soviet Union while the Vietnam war
was underway, knowing that the Soviets were supplying the other side.
The contribution made by American
capitalism to German war preparations before 1940 can only be described as
phenomenal. It was certainly crucial to German military capabilities. For
instance, in 1934 Germany produced domestically only 300,000 tons of natural
petroleum products and less than 800,000 tons of synthetic gasoline; the
balance was imported. Yet, ten years later in World War II, after transfer of
the Standard Oil of New Jersey hydrogenation patents and technology to I. G.
Farben (used to produce synthetic gasoline from coal), Germany produced about 6
1/2 million tons of oil — of which 85 percent (5 1/2 million tons) was
synthetic oil using the Standard Oil hydrogenation process. Moreover, the
control of synthetic oil output in Germany was held by the I. G. Farben
subsidiary, Braunkohle-Benzin A. G., and this Farben cartel itself was created
in 1926 with Wall Street financial assistance.
On the other hand, the general
impression left with the reader by modern historians is that this American
technical assistance was accidental and that American industrialists were
innocent of wrongdoing. For example, the Kilgore Committee stated:
The United States accidentally played
an important role in the technical arming of Germany. Although the German
military planners had ordered and persuaded manufacturing corporations to
install modern equipment for mass production, neither the military economists
nor the corporations seem to have realized to the full extent what that meant.
Their eyes were opened when two of the chief American automobile companies
built plants in Germany in order to sell in the European market, without the
handicap of ocean freight charges and high German tariffs. Germans were brought
to Detroit to learn the techniques of specialized production of components, and
of straight-line assembly. What they saw caused further reorganization and
refitting of other key German war plants. The techniques learned in Detroit
were eventually used to construct the dive-bombing Stukas .... At a later
period I. G. Farben representatives in this country enabled a stream of German
engineers to visit not only plane plants but others of military importance, in
which they learned a great deal that was eventually used against the United
States.2
Following these observations, which
emphasize the "accidental" nature of the assistance, it has been
concluded by such academic writers as Gabriel Kolko, who is not usually a
supporter of big business, that:
It is almost superfluous to point out
that the motives of the American firms bound to contracts with German concerns
Were not pro. Nazi, whatever else they may have been.3
Yet, Kolko to the contrary, analyses of
the contemporary American business press confirm that business journals and
newspapers were fully aware of the Nazi threat and its nature, while warning
their business readers of German war preparations. And even Kolko admits that:
The business press
[in the United States] was aware, from 1935 on, that German prosperity was
based on war preparations. More important, it was conscious of the fact that
German industry was under the control of the Nazis and was being directed to
serve Germany's rearmament, and the firm mentioned most frequently in this
context was the giant chemical empire, I. G. Farben.4
Further, the evidence presented below
suggests that not only was an influential sector of American business aware of
the nature of Nazism, but for its own purposes aided Nazism wherever possible
(and profitable) —with full knowledge
that the probable outcome would be war involving Europe and the United States. As
we shall see, the pleas of innocence do not accord with the facts.
The Treaty of Versailles after World
War I imposed a heavy reparations burden on defeated Germany. This financial
burden — a real cause of the German discontent that led to acceptance of
Hitlerism — was utilized by the international bankers for their own benefit.
The opportunity to float profitable loans for German cartels in the United
States was presented by the Dawes Plan and later the Young Plan. Both plans were
engineered by these central bankers, who manned the committees for their own
pecuniary advantages, and although technically the committees were not
appointed by the U.S. Government, the plans were in fact approved and sponsored
by the Government.
Post-war haggling by financiers and
politicians fixed German reparations at an annual fee of 132 billion gold
marks. This was about one quarter of Germany's total 1921 exports. When Germany
was unable to make these crushing payments, France and Belgium occupied the
Ruhr to take by force what could not
be obtained voluntarily. In 1924 the Allies appointed a committee of bankers
(headed by American banker Charles G. Dawes) to develop a program of
reparations payments. The resulting Dawes Plan was, according to Georgetown
University Professor of International Relations Carroll Quigley, "largely
a J.P. Morgan production."5
The Dawes Plan arranged a series of foreign loans totaling $800 million with their
proceeds flowing to Germany. These loans are important for our story because
the proceeds, raised for the greater part in the United States from dollar
investors, were utilized in the mid-1920s to create and consolidate the
gigantic chemical and steel combinations of I. G. Farben and Vereinigte
Stahlwerke, respectively. These cartels not only helped Hitler to power in
1933; they also produced the bulk of key German war materials used in World War
II.
Between 1924 and 1931, under the Dawes
Plan and the Young Plan, Germany paid out to the Allies about 86 billion marks
in reparations. At the same time Germany borrowed abroad, mainly in the U.S.,
about 138 billion marks — thus making a net German payment of only three
billion marks for reparations. Consequently, the burden of German monetary
reparations to the Allies was actually carried by foreign subscribers to German
bonds issued by Wall Street financial houses — at significant profits for
themselves, of course. And, let it be noted, these firms were owned by the same
financiers who periodically took off their banker hats and donned new ones to
become "statesmen." As "statesmen" they formulated the
Dawes and Young Plans to "solve" the "problem" of
reparations. As bankers, they floated the loans. As Carroll Quigley points out,
It is worthy of note that this system
was set up by the inter. national bankers and that the subsequent lending of
other people's money to Germany was very profitable to these bankers.6
Who were the New York international
bankers who formed these reparations commissions?
The 1924 Dawes Plan experts from the
United States were banker Charles Dawes and Morgan representative Owen Young,
who was president of the General Electric Company. Dawes was chairman of the
Allied Committee of Experts in 1924. In 1929 Owen Young became chairman of the
Committee of Experts, supported by J.P. Morgan himself, with alternates T. W.
Lamont, a Morgan partner, and T. N. Perkins, a banker with Morgan associations.
In other words, the U.S. delegations were purely and simply, as Quigley has
pointed out, J. P. Morgan delegations using the authority and seal of the
United States to promote financial plans for their own pecuniary advantage. As
a result, as Quigley puts it, the "international bankers sat in heaven,
under a rain of fees and commissions."7
The German members of the Committee of
Experts were equally interesting. In 1924 Hjalmar Schacht was president of the
Reichsbank and had taken a prominent role in organization work for the Dawes
Plan; so did German banker Carl Melchior. One of the 1928 German delegates was
A. Voegler of the German steel cartel Stahlwerke Vereinigte. In brief, the two
significant countries involved — the United States and Germany —were
represented by the Morgan bankers on one side and Schacht and Voegler on the
other, both of whom were key characters in the rise of Hitler's Germany and
subsequent German rearmament.
Finally, the members and advisors of
the Dawes and Young Commissions were not only associated with New York
financial houses but, as we shall later see, were directors of firms within the
German cartels which aided Hitler to power.
According to Hitler's financial genie,
Hjalmar Horace Greeley Schacht, and Nazi industrialist Fritz Thyssen, it was
the 1928 Young Plan (the successor to the Dawes Plan), formulated by Morgan
agent Owen D. Young, that brought Hitler to power in 1933.
Fritz Thyssen claims that,
I turned to the National Socialist
Party only after I became convinced that the fight against the Young Plan was
unavoidable if complete collapse of Germany was to be prevented.8
The difference between the Young Plan
and the Dawes Plan was that, while the Young Plan required payments in goods
produced in Germany financed by foreign loans, the Young Plan required monetary
payments and "In my judgment [wrote Thyssen] the financial debt thus
created was bound to disrupt the entire economy of the Reich."
The Young Plan was assertedly a device
to occupy Germany with American capital and pledge German real assets for a
gigantic mortgage held in the United States. It is noteworthy that German firms
with U.S. affiliations evaded the Plan by the device of temporary foreign
ownership. For instance, A.E.G. (German General Electric), affiliated with
General Electric in the U.S., was sold to a Franco-Belgian holding company and
evaded the conditions of the Young Plan. It should be noted in passing that
Owen Young was the major financial backer for Franklin D. Roosevelt in the
United European venture when FDR, as a budding Wall Street financier,
endeavoured to take advantage of Germany's 1925 hyperinflation. The United
European venture was a vehicle to speculate and to profit upon the imposition
of the Dawes Plan, and is clear evidence of private financiers (including
Franklin D. Roosevelt) using the power of the state to advance their own
interests by manipulating foreign policy.
Schacht's parallel charge that Owen
Young was responsible for the rise of Hitler, while obviously self-serving, is
recorded in a U.S. Government Intelligence report relating the interrogation of
Dr. Fritz Thyssen in September, 1945:
The acceptance of the Young Plan and
its financial principles increased unemployment more and more, until about one
million were unemployed. People were desperate. Hitler said he would do away
with unemployment. The government in power at that time was very bad, and the
situation of the people was getting worse. That really was the reason of the
enormous success Hitler had in the election. When the last election came, he
got about 40%.9
However, it was Schacht, not Owen
Young, who conceived the idea which later became the Bank for International
Settlements. The actual details were worked out at a conference presided over
by Jackson Reynolds, "one of the leading New York bankers," together
with Melvin Traylor of the First National Bank of Chicago, Sir Charles Addis,
formerly of the Hong Kong and Shanghai Banking Corporation, and various French
and German bankers.10 The B.I.S. was essential under the Young
Plan as a means to afford a ready instrument for promoting international
financial relations. According to his own statements, Schacht also gave Owen
Young the idea that later became the post-World War II International Bank for
Reconstruction and Development:
"A bank of this kind will demand
financial co-operation between vanquished and victors that will lead to
community of interests which in turn will give rise to mutual confidence and
understanding and thus promote and ensure peace."
I can still vividly recall the setting
in which this conversation took place. Owen Young was seated in his armchair
puffing away at his pipe, his legs outstretched, his keen eyes fixed
unswervingly on me. As is my habit when propounding such arguments I was doing
a quiet steady "quarter-deck" up and down the room. When I had
finished there was a brief pause. Then his whole face lighted up and his
resolve found utterance in the words:
"Dr. Schacht, you gave me a wonderful
idea and I am going to sell it to the world.11
This interplay of ideas and cooperation
between Hjalmar Sehacht in Germany and, through Owen Young, the J.P. Morgan
interests in New York, was only one facet of a vast and ambitious system of
cooperation and international alliance for world control. As described by
Carroll Quigley, this system was "... nothing less than to create a world
system of financial control, in private hands, able to dominate the political
system of each country and the economy of the world as a whole.12
This feudal system worked in the 1920s,
as it works today, through the medium of the private central bankers in each
country who control the national money supply of individual economies. In the
1920s and 1930s, the New York Federal Reserve System, the Bank of England, the
Reichs-bank in Germany, and the Banque de France also more or less influenced
the political apparatus of their respective countries indirectly through
control of the money supply and creation of the monetary environment. More
direct influence was realized by supplying political funds to, or withdrawing
support from, politicians and political parties. In the United States, for
example, President Herbert Hoover blamed his 1932 defeat on withdrawal of
support by Wall Street and the switch of Wall Street finance and influence to
Franklin D. Roosevelt.
Politicians amenable to the objectives
of financial capitalism, and academies prolific with ideas for world control
useful to the international bankers, are kept in line with a system of rewards
and penalties. In the early 1930s the guiding vehicle for this international
system of financial and political control, called by Quigley the "apex of
the system," was the Bank for International Settlements in Basle,
Switzerland. The B.I.S. apex continued its work during World War II as the
medium through which the bankers — who apparently were not at war with each
other — continued a mutually beneficial exchange of ideas, information, and
planning for the post-war world. As one writer has observed, war made no
difference to the international bankers:
The fact that the Bank possessed a
truly international staff did, of course, present a highly anomalous situation
in time of war. An American President was transacting the daily business of the
Bank through a French General Manager, who had a German Assistant General Manager,
while the Secretary-General was an Italian subject. Other nationals occupied
other posts. These men were, of course, in daily personal contact with each
other. Except for Mr. McKittrick [see infra] theft were of course situated
permanently in Switzerland during this period and were not supposed to be
subject to orders of their government at any time. However, the directors of
the Bank remained, of course, in their respective countries and had no direct
contact with the personnel of the Bank. It is alleged, however, that H.
Schacht, president of the Reichsbank, kept a personal representative in Basle
during most of this time.13
It was such secret meetings, "... meetings more secret than any ever held by Royal Ark Masons or by any
Rosicrucian Order..."14
between the central bankers at the "apex" of control that so
intrigued contemporary journalists, although they only rarely and briefly
penetrated behind the mask of secrecy.
A practical example of international
finance operating behind the scenes to build and manipulate politico-economic
systems is found in the German cartel system. The three largest loans handled
by the Wall Street international bankers for German borrowers in the 1920s
under the Dawes Plan were for the benefit of three German cartels which a few
years later aided Hitler and the Nazis to power. American financiers were directly
represented on the boards of two of
these three German cartels. This American assistance to German cartels has been
described by James Martin as follows: "These loans for reconstruction
became a vehicle for arrangements that did more to promote World War II than to
establish peace after World War I.15
The three dominant cartels, the amounts
borrowed and the Wall Street floating syndicate were as follows:
German Cartel
|
Wall Street Syndicate
|
Amount Issued
|
Allgemeine
Elektrizitats- Gesellschaft (A.E.G.) (German General Electric) |
National City
Co. |
$35,000,000
|
Vereinigte Stahlwerke
(United Steelworks) |
Dillon, Read &
Co. |
$70,225,000
|
American I.G.
Chemical (I.G. Farben) |
National City
Co. |
$30,000,000
|
Looking at all the loans issued, it
appears that only a handful of New York financial houses handled the German
reparations financing. Three houses — Dillon, Read Co.; Harris, Forbes &
Co.; and National City Company — issued almost three-quarters of the total face
amount of the loans and reaped most of the profits:
|
|||
Wall Street Syndicate Manager
|
Participation
in
German industrial issues in U.S. capital market |
Profits
on
German loans* |
Percent
of total |
Dillon, Read & Co.
|
$241,325,000
|
$2.7 million
|
29.2
|
Harris, Forbes & Co.
|
186,500,000
|
1.4 million
|
22.6
|
National City Co.
|
173,000,000
|
5.0 million
|
20.9
|
Speyer & Co.
|
59,500,000
|
0.6 million
|
7.2
|
Lee, Higginson & Co.
|
53,000,000
|
n.a
|
6.4
|
Guaranty Co. of N.Y.
|
41,575,000
|
0.2 million
|
5.0
|
Kuhn, Loeb & Co.
|
37,500,000
|
0.2 million
|
4.5
|
Equitable Trust Co.
|
34,000,000
|
0.3 million
|
4.1
|
|
___________
|
___________
|
_________
|
TOTAL
|
$826,400,000
|
$10.4
million
|
99.9
|
Source:
See Appendix A
*Robert R. Kuczynski, Bankers Profits from German Loans
*Robert R. Kuczynski, Bankers Profits from German Loans
(Washington, D.C.: Brookings
Institution, 1932), p. 127.
After the mid-1920s the two major
German combines of I.G. Farben and Vereinigte Stahlwerke dominated the chemical
and steel cartel system created by these loans. Although these firms. had a
voting majority in the cartels for only two or three basic products, they were
able — through control of these basics — to enforce their will throughout the
cartel. I.G. Farben was the main producer of basic chemicals used by other
combines making chemicals, so its economic power position cannot be measured
only by its capacity to produce a few basic chemicals. Similarly, Vereinigte
Stahlwerke, with a pig-iron capacity greater than that of all other German iron
and steel producers combined, was able to exercise far more influence in the
semi-finished iron and steel products cartel than its capacity for pig-iron
production suggests. Even so the percentage output of these cartels for all
products was significant:
Vereinigte
Stahlwerke
products |
Percent
of German total
production in 1938 |
|||
Pig iron
|
50.8
|
|||
Pipes and tubes
|
45.5
|
|||
Heavy plate
|
36.0
|
|||
Explosives
|
35.0
|
|||
Coal tar
|
33.3
|
|||
Bar steel
|
37.1
|
|||
I.G.
Farben
|
Percent
of German total
production in 1937 |
|||
Synthetic methanol
|
100.0
|
|||
Magnesium
|
100.0
|
|||
Chemical nitrogen
|
70.0
|
|||
Explosives
|
60.0
|
|||
Synthetic gasoline
(high octane) |
46.0 (1945)
|
|||
Brown coal
|
20.0
|
|||
Among the products that brought I.G.
Farben and Vereinigte Stahlwerke into mutual collaboration were coal tar and
chemical nitrogen, both of prime importance for the manufacture of explosives.
I. G. Farben had a cartel position that assured dominance in the manufacture
and sale of chemical nitrogen, but had only about one percent of the cok-ing
capacity of Germany. Hence an agreement was made under which Farben explosives
subsidiaries obtained their benzol, toluol, and other primary coal-tar products
on terms dictated by Vereinigte Stahlwerke, while Vereinigte Stahlwerke's
explosives subsidiary was dependent for its nitrates on terms set by Farben.
Under this system of mutual collaboration and inter-dependence, the two
cartels, I.G. Farben and Vereinigte Stahlwerke, produced 95 percent of German
.explosives in 1957-8 on the eve of World War II. This production was from capacity built by American loans and to some
extent by American technology.
The I. G. Farben-Standard Oil
cooperation for production of synthetic oil from coal gave the I. G. Farben
cartel a monopoly of German gasoline production during World War II. Just under
one half of German high octane gasoline in 1945 was produced directly by I. G.
Farben and most of the balance by its affiliated companies.
In brief, in synthetic gasoline and
explosives (two of the very basic elements of modern warfare), the control of
German World War II output was in the hands of two German combines created by
Wall Street loans under the Dawes Plan.
Moreover, American assistance to Nazi
war efforts extended into other areas.17
The two largest tank producers in Hitler's Germany were Opel, a wholly owned
subsidiary of General Motors (controlled by the J.P. Morgan firm), and the Ford
A. G. subsidiary of the Ford Motor Company of Detroit. The Nazis granted
tax-exempt status to Opel in 1936, to enable General Motors to expand its
production facilities. General Motors obligingly reinvested the resulting
profits into German industry. Henry Ford was decorated by the Nazis for his services to Nazism. (See p. 93.)
Alcoa and Dow Chemical worked closely with Nazi industry with numerous
transfers of their domestic U.S. technology. Bendix Aviation, in which the J.P.
Morgan-controlled General Motors firm had a major stock interest, supplied
Siemens & Halske A. G. in Germany with data on automatic pilots and
aircraft instruments. As late as 1940, in the "unofficial war,"
Bendix Aviation supplied complete technical data to Robert Bosch for aircraft
and diesel engine starters and received royalty payments in return.
In brief, American companies associated
with the Morgan-Rockefeller international investment bankers — not, it should
be noted, the vast bulk of independent American industrialists — were
intimately related to the growth of Nazi industry. It is important to note as
we develop our story that General Motors, Ford, General Electric, DuPont and
the handful of U.S. companies intimately involved with the development of Nazi
Germany were — except for the Ford Motor Company — controlled by the Wall
Street elite — the J.P. Morgan firm, the Rockefeller Chase Bank and to a lesser
extent the Warburg Manhattan bank.18
This book is not an indictment of all American
industry and finance. It is an indictment of the "apex" — those firms
controlled through the handful of financial houses, the Federal Reserve Bank
system, the Bank for International Settlements, and their continuing
international cooperative arrangements and cartels which attempt to control the
course of world politics and economics.
Footnotes:
1United States Congress. Senate.
Hearings before a Subcommittee of the Committee on Military Affairs. Elimination of German Resources for War. Report
pursuant to S. Res. 107 and 146, July 2, 1945, Part 7, (78th Congress and 79th
Congress), (Washington: Government Printing Office, 1945), hereafter cited as Elimination of German Resources.
3Gabriel Kolko, "American Business
and Germany, 1930-1941," The Western
Political Quarterly, Volume XV, 1962.
4Ibid, p. 715.
5Carroll Quigley, op. cit.
6Ibid, p. 308.
7Carroll Quigley, op. cit., p. 309.
8Fritz Thyssen, I Paid Hitler, (New York: Farrar & Rinehart, Inc., n.d.), p.
88.
9U.S. Group Control Council (Germany),
Office of the Director of Intelligence, Intelligence Report No. EF/ME/1, 4
September 1945. Also see Hjalmar Schacht, Confessions
of "the old Wizard", (Boston: Houghton Mifflin, 1956)
10Hjalmar Schacht, op cit., p. 18. Fritz Thyssen adds, "Even at the time Mr,
Dillon, a New York Banker of Jewish origin whom I much admire told me 'In your
place I would not sign the plan.'"
11Ibid, p. 282.
12Carroll Quigley, op. cit., p. 324.
13Henry H. Schloss, The Bank for International Settlements (Amsterdam,: North Holland
Publishing Company, 1958)
14John Hargrave, Montagu Norman, (New York: The Greystone Press, n.d.). p. 108.
15James Stewart Martin, op. cit., p. 70.
16See Chapter Seven for more details of
Wall Street loans to German industry.
17See Gabriel Kolko, op. cit., for numerous examples.
18In 1956 the Chase and Manhattan banks
merged to become Chase Manhattan.
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