The Warburgs

by Ron Chernow

  In June 1918, Max made a speech on postwar economic policy before 175 Reichstag deputies visiting Hamburg and thus established himself as an expert on the mark’s postwar value and German foreign debt. At breakfast afterward, he sat beside the chairman of the Social Democratic party, Friedrich Ebert, whom he found charming, smart, and resourceful in tough situations.

  The kaiser spent the summer of 1918 shut up in a fool’s paradise, insisting upon total victory over England, while the public was likewise deceived about Germany’s real prospects. Max had seen Wilhelm II only once during the war, when he came to the Hamburg Rathaus and asked Max about the proposed University of Hamburg. When Max said that he’d had other cares during the war, the kaiser took offence. In early September, General Ludendorff asked Ballin if he would go to Kassel and impress upon His Majesty the gravity of the situation. Like Max, Ballin was haunted by visions of doom and foresaw a bloody, possibly Bolshevik, revolution in Germany following defeat. Berlin’s uncompromising attitude toward a negotiated peace guaranteed harsh exactions from the victorious Allies. Ballin thought the kaiserin and Wilhelm’s advisers were screening the leader from unpleasant facts to protect his fragile nerves. Unfortunately, Ballin’s power had waned at court. When he arrived, he didn’t see Wilhelm alone, much less get to issue his warning.

  Max emerged as a pallbearer in the funeral for the German Empire, an involvement that came through Prince Max von Baden, a friend and frequent Kösterberg visitor, whom Max had met through Red Cross work. A genial, humane man who traveled with Ralph Waldo Emerson’s essays in his pocket, the prince was a progressive figure for his time. During the war, he proposed military reforms and constitutional changes that would have reduced the kaiser to a figurehead and augmented Reichstag powers. Max and the prince agreed on the futility of U-boat warfare and both men wanted to renounce postwar designs on Belgium.

  Prince Max replaced Hertling as chancellor. Before this happened, however, the prince asked Max Warburg to meet with Friedrich Ebert and sound out the Social Democrats’ position. Max invited Ebert to his room at the Hotel Adlon and told him that Hertling’s credit was destroyed at home and abroad. He asked whether Ebert would support Prince Max as chancellor. Ebert fidgeted at the idea of having a prince occupy that position. Max then asked whether he and his party would assume the difficult task of governing Germany. When Ebert balked, Max stressed the value of a peaceful transition under Prince Max.17 No less than Max, Ebert feared a revolution that might lurch in an unforeseeable direction and he agreed to support Prince Max to achieve a safe, gradual transition. The next day, Ebert told the Reichstag, “I spoke yesterday with one of the Hamburg businessmen, who told me that Hertling no longer enjoys any trust here or abroad.”18

  The hobgoblins of hatred were manifestly abroad when Prince Max consulted Max Warburg at Dessau on September 23, 1918. Early war euphoria had turned to a severe and punitive disenchantment with German leaders. The overwhelming rage threatened to unleash pent-up anti-Semitism amid a clamorous public search for scapegoats. Asked to form a government, Prince Max offered Max the job of finance minister. Ordinarily, this would have represented a dreamlike culmination of his career, but Max spurned the offer at this perilous moment. “In my answer I said without hesitation that I had gladly placed myself at his disposal, but that I knew the Germans and knew that they would never, ever, accept a Jewish finance minister.”19 Max explained that he had an extra liability, for the Social Democrats would dismiss him as a front man for the capitalist bosses. He would serve instead as an adviser.

  The two men had a melancholy chat that Max felt was more an end than a beginning. For all his admiration of the prince, Max thought he had come too late and was too weak and inexperienced for this extremely precarious moment. When Max said that he would have to persuade the kaiser to abdicate, the prince, a liberal monarchist, grew flustered. “But that is just what I mean to avoid,” he said.20 Max Warburg knew that Germany would demand a martyr in defeat and that the kaiser couldn’t escape popular retribution.

  Gradually the full dimensions of the debacle dawned upon a shocked, disabused German populace. Although Max and the prince had scoffed at Germany’s military boasts and bluffs, they now found it necessary to combat a military pessimism so ingrained that it bordered on panic. Von Hindenburg and his exhausted, frightened comrades wanted to petition for an immediate armistice. Even though this initiative came from the High Command, Max presciently warned Prince Max that he and the civil government would later be blamed for such a hasty step. Believing that Germany’s bargaining position would be weakened by precipitate surrender, Max grimly joked that it was better to send the generals across with a white flag.21

  Contrary to the later Nazi legend that the German Army was “stabbed in the back” by Jews and spineless politicians, both Prince Max and Max Warburg favored holding out for a few weeks to strengthen Germany’s hand. The prince’s private secretary, Kurt Hahn, even thought that peaceful impulses might break out in England if Germany held fast. To combat the military’s insistence that President Wilson would respond leniently to an armistice request, Prince Max “decided to call Max Warburg to my aid in order to combat the illusion that America would show itself conciliatory if only we humiliated ourselves. Warburg, as one of our best experts on America, had often been consulted by military and political authorities.”22

  During a Crown Council meeting on October 2, Prince Max and Hindenburg presented contradictory prognoses to the emperor. Hindenburg said the army couldn’t withstand even another forty-eight hours of combat. Prince Max deplored this self-destructive haste, which the Americans would only construe as weakness. He cited his recent talk with Max Warburg. “The best Americans,” Max had said, “were gentlemen, but there were all the self-opinioned individuals who knew nothing of Europe. If Germany humiliated herself now, not the good type, but the bad, would be masters of the situation.”23

  The next day, Max Warburg met General Erich Ludendorff at the Hotel Adlon. Highly agitated, Ludendorff insisted that Germany immediately declare bankruptcy. Max thought Ludendorff had lost his nerve. Prince Max arranged another meeting at the hotel between Max and Colonel Hans von Haeften, Ludendorff’s deputy in Berlin. Max told him, “I know it seems strange that I, as a civilian, should be relying on the military, urging them to fight on, when my only son is being trained and is ready to fight in the trenches, but I beseech you not to give up now!”24 Coincidentally Eric was then bathing in his father’s hotel suite. Marching with his company back to their barracks and passing the Brandenburg Gate, Eric had managed to secure a two-hour leave to see his father. When Colonel von Haeften asked Max if he could wash up, he startled Eric in the bathtub. Dripping, Eric sprang from the tub and, stark naked, saluted the colonel with correct military form.

  The military ignored calls for delay. On October 5, Prince Max signed an armistice request, which Max Warburg considered a fatal blunder. On October 23, the United States issued a note, stating its refusal to deal with “military masters and the monarchical autocrats of Germany” and warning that, if necessary, it would demand surrender instead of peace negotiations. Enraged, Max Warburg pleaded with Prince Max for a tough, defiant response to Wilson’s note. “I am absolutely sure of the American mentality,” he told the prince. “We ought to turn upon them, and not at any price allow ourselves to be trodden on any longer. There must be something included in the note, which warns the enemy against the resolution of a people driven to despair.”25 The tone prefigured the assertive nationalism that Max would exhibit at Versailles.

  Despite the prospect of certain defeat in late October, the admirals prepared to send the Kiel fleet into a suicidal naval engagement. On November 3, 1918, this inhuman order sparked a sailor uprising that soon spread to the army and workers, then emerged as a full-blown revolution. The first news of the Kiel uprising appeared in the Hamburg newspapers on the morning of November 5th and to instant effect. The harbor workers, always a radical, disaffected group, were ripe for
insurrection. Exempt from military service, they had been browbeaten, overworked, and threatened with being packed off to the trenches if they protested. By noon, a wildcat strike in one shipyard gave way to more strikes and calls for a general strike. Workers seized a torpedo boat in the harbor, mounting a heavy gun in its bow, then occupied the train station and the Elbe tunnel. Hamburg had always been a labor and Socialist stronghold, albeit firmly controlled by local merchants. On November 6, the power structure was suddenly inverted, as the Workers’ and Soldiers’ Council took control. In the ensuing general strike, political prisoners were freed and workers surged through the streets, bearing red strips on their arms and streaming bright red flags from their cars. The first glimmers of counterrevolution appeared as anonymous sniper fire killed several workers.

  As adviser to the Senate finance committee, Max Warburg would play a central role in this unfolding drama. However sympathetic to reform, he dreaded the radical upheaval that now overwhelmed the city. In the momentary chaos, Hamburg found itself with two clashing governments. At the Chamber of Commerce, Max argued for contacts between the old guard and the rebel government to discuss city-state finances. Hamburg Treasury notes held by M. M. Warburg and other banks would soon expire and had to be renewed, giving the creditors immediate leverage. When Hamburg ran short of cash, the policemen couldn’t be paid. Soon Max and two other businessmen were summoned by the chieftain of the Workers’ and Soldiers’ Council, Dr. Heinrich Laufenburg.

  When Laufenburg brought up the Treasury bills, Max said the bankers would roll them over only at the behest of the Senate finance committee and after closely auditing Hamburg’s expenses. Laufenburg read the riot act to Max. “You still don’t seem to be clear as to who it is who will decide the matter,” he said. Max retorted, “I’m aware of existing conditions. It lies within your power not to pay off the Treasury bills. If nevertheless you would like them renewed, then you must allow me to name the conditions under which my friends and I will undertake that renewal.”26 Growing hot under the collar, Laufenburg told Max to take twenty-four hours to reflect. When Max said he didn’t need more time, he was unceremoniously dismissed on the spot.

  —

  Albert Ballin and his mighty HAPAG fleet were prime revolutionary targets. A convinced monarchist, Ballin loathed leftists of every stripe but saw the need of reform to salvage remnants of the ancien régime. He had quaintly pictured a new postwar order overseen by reasonable businessmen, not by these ragged, shouting masses who poured through the streets hoisting banners. On November 8, members of the Workers’ and Soldiers’ Council stormed the HAPAG bastion facing the Inner Alster and took over the company boardroom. Although Ballin refused to budge from his desk, he couldn’t dislodge the protesters and told one visitor, with his wry, cynical humor, “The people should for once have a decent room to hold a meeting.”27

  After a generation of near omnipotence in global shipping, Ballin saw his world rapidly disintegrating. The victorious Allies were certain to plunder his company. Hoping to cripple Germany’s military potential, they would demand any ships not already sunk or seized. The busy port of Hamburg would fall silent. Ballin feared that only a short step would separate liberal democracy from outright socialism. The HAPAG seamen and their Social Democratic champions would now be at the helm.

  As the war approached its end, the morose Ballin was in an uneasy, overwrought state. Nervous, bad tempered, he saw the world refracted through a dark prism. As he wrote a friend, “How terribly stupid is this life in normal times, and how insupportable it becomes in this murderous war.”28 That autumn, when Ballin saw Eric in uniform striding down the street before HAPAG headquarters, he burst into tears, fearing his class would prove the last sacrificial lambs of war. A chronic insomniac, Ballin sedated himself with ever larger quantities of veronal and opiates to sleep and tried to soothe his nerves with long country weekends or stays at a sanatorium in Bad Kissingen.

  The final indignity came on the afternoon of November 8, when the revolutionaries in the HAPAG boardroom threatened to arrest or beat him. That afternoon, Ballin also learned the kaiser would abdicate the next day. The destruction of the political and economic underpinnings of his world was now complete. He left the building and walked home through the dusk only to be received at the gate by his upset wife, who had received menacing telephone calls that her husband would soon be jailed.

  Overcome, Ballin took a large dose of sleeping pills—whether to calm or kill himself remains a mystery. When he collapsed, his doctor was immediately called. He and a servant carried the comatose Ballin to a Mittelweg clinic where they tried to pump his stomach, but the drugs produced a bleeding ulcer and Ballin’s heart gave way from the hemorrhaging. Max phoned the clinic, but didn’t get there before Ballin died at one o’clock in the afternoon on November 9, 1918—the day the Empire ended.

  For Max Warburg, it would always be an article of unquestioned faith that Ballin had not committed suicide. He told people that Ballin’s doctor had personally assured him that his friend had died of a stroke. This begged the obvious question of whether he had purposely taken pills that triggered the stroke. Perhaps Max found it too frightening to think that his mentor, who had tutored him so loyally and filled him with such manly confidence, could have succumbed to despair. He had drawn strength from Ballin’s example as a Jewish businessman who had risen to the summit of German society. Historians, though, would almost universally lean to the suicide theory of Ballin’s death.

  The final scene of Germany’s wartime drama played itself out swiftly. After Wilhelm II fled to Holland aboard the royal train, a republic was proclaimed from the Reichstag balcony, with Friedrich Ebert its leader. Max Warburg felt that, in some small measure, he had helped to nudge Ebert forward. On November 11, France dictated peace terms to Germany in the Forest of Compiègne, and battlefields fell silent after four years of carnage.

  After the frenzied cheering and ritual assurances of victory, Germans felt dazed by sudden defeat. For a nation schooled in almost reflexive obedience to authority, the humiliation shook a fundamental public faith in military, industrial, and political leaders. A wide vacuum of belief thus opened, providing room for radical new ideologies of left and right to take root. They would have a potent allure to those battered, crippled, tattered veterans who now began drifting back into cities short of jobs, food, and coal.

  German Jews watched the kaiser’s abdication with profoundly mixed feelings. Although full acceptance had eluded them, they had been favored children of the Empire. On the other hand, the war had defeated their hopes for major gains and revealed the hidden limits of Christian trust. The end of the Empire left a deep residue of uncertainty, for the kaiser’s rejection was far more decisive than affirmation of the new Republic. As Max later told Colonel House, “The revolution in Germany too was a collapse of the old order after nearly five years’ war exhaustion, rather than the conscious pursuance of new thoughts. Only after the collapse people began to conscientiously work for the new era.”29

  In retrospect, it is clear that the crumbling edifice of Empire released a deadly effluvium that would smother and finally choke the Jews. Max still retained access to many politicians, but his instincts told him to move gingerly now and he didn’t try to convert influence into real power. Max and Alice refused invitations from Ebert, as Max explained, “because I didn’t want to create the reputation for Ebert that he was dependent on the Jewish side.”30

  When Ballin’s funeral was held in a Hamburg suburb on November 13, the revolutionary ardor briefly ceased and the old order enjoyed a last moment of pageantry. Hundreds of mourners strode gravely behind Ballin’s coffin, which was wrapped in a blue-and-white HAPAG insignia. In an oration extolling Ballin, Max said it was hard to imagine German expansion of the past thirty years without him. Max had counted on Ballin’s support in the reconstruction ahead. In his last diary entry, Ballin had written, “From Stinnes came word that both Centre Party and Social Democrats had agreed that I
should conduct the peace negotiations. I replied that I would not shirk it, but that I would gladly see somebody else doing it.”31 Max and Carl Melchior would succeed Ballin in that role.

  The day before the funeral, the Workers’ and Soldiers’ Council voted to dissolve the Hamburg Senate and City Council. The old regime decamped and the new regime moved into the Rathaus, running up the red flag. The city’s fiscal situation deteriorated, with foreign creditors balking at lending more money. On November 16, Dr. Laufenburg, chairman of the Council Government, invited Max and other business dignitaries to lunch at City Hall. They ate at a long table lined with heavily armed revolutionary sailors, taking turns drinking from a communal soup tureen. As a heavy rain fell, Max heard chants rising up from an angry crowd outside. Before negotiations began, he stood at the window beside Senator Werner von Melle, the tireless champion of a Hamburg university. Though Max was assisting him in the project, he had found von Melle a monomaniacal bore on the subject. Now as Max pondered the momentous breakdown of German society, von Melle whispered, “I think that this new turn of events isn’t at all a bad thing for the university.”32 When Max burst out laughing it snapped some of the gathering tension.

  In the end, Max and other bankers preserved the Senate finance committee’s role as custodian of Hamburg’s credit.33 The big Hamburg, Berlin, and Frankfurt banks were about to secure a large American credit and Max pointed out that if the Workers’ and Soldiers’ Council sent their own representatives to the negotiations, Hamburg might be excluded. Taking the hint, the Revolutionary Council announced two days later that it would temporarily revive the Senate and City Council. There would also be a new business-dominated Economic Advisory Council to oversee Hamburg finances along with the militant council. This subtle counterrevolution signaled the quiet persistence of traditional forces amid all the left-wing posturing and sloganeering. The revolutionaries made little headway with the food and fuel shortages and the growing ranks of jobless workers. On March 26, 1919, the City Council—henceforth to be elected in free, secret elections—regained its old powers from the revolutionary Council. The red flag of revolution was lowered from the Rathaus as if it had all been a brief holiday of make-believe.