Hell's Cartel

by Diarmuid Jeffreys

  DuPont was forced to resort to subterfuge. One of its executives, a Dr. Kunze, was sent to Germany on a secret recruiting mission. He arrived in Cologne in October 1920 and quietly set about suborning Bayer’s dyestuff scientists with the promise of lucrative contracts. Four of them took the bait: Max Engelmann, Joseph Flachslaender, Heinrich Jordan, and Otto Runge, a descendant of the famous Friedlieb Runge, the first scientist to isolate aniline from coal tar back in 1834. They signed deals that guaranteed each of them an annual salary of $25,000 for the next five years. This was an extraordinary sum at the time (about ten times what they were getting paid at Bayer) and perhaps helps explain why they were also persuaded to load up a crate with stolen blueprints, formulas, and other sensitive material. Thus equipped, Kunze and the four chemists took off for the Netherlands. Dutch customs officials weren’t in on the plan, however, and when they opened up the party’s baggage and found the incriminating technical data they tipped off the police in Cologne. German prosecutors immediately issued an arrest warrant and asked that the four men be held in Holland on suspicion of industrial espionage, pending extradition proceedings. Legal technicalities allowed two of the chemists, Flachslaender and Runge, to be released on bail and Kunze managed to get them out of the country and back to America. The other two were less fortunate: ignominiously deported back to Germany, they were kept under police surveillance while awaiting trial.

  As might be imagined, the German press had a field day, accusing the men of treason and the United States of espionage, which in turn led the new Weimar government to refuse passports to all German scientists. But DuPont would not be denied. A few months later, with the active help of American army agents, Engelmann and Jordan were spirited out from under the noses of the German police and smuggled into the United States. By the middle of July 1921 all four chemists were hard at work in DuPont’s Delaware laboratories.

  The British watched all this with interest. The UK chemical industry was a little more advanced than America’s at this stage (the country had been at war with Germany for longer than the United States, and the UK government had invested more heavily in research for poison gases and other war materials), and its businesses were initially more successful in unraveling confiscated German technical data. But the BASF patents for synthetic nitrate foxed them completely. A firm called Brunner Mond and Company had bought the license to use them from the Board of Trade but, like DuPont, Brunner found the specifications impenetrable. So the British firm, too, went looking for German expertise and eventually bribed two Alsatian engineers who had worked in the IG during the war to bring their know-how to the UK. Not every such effort was successful. An Italian attempt to smuggle two scientists formerly employed at Cassella into Switzerland in May 1919 was foiled when one of them fell ill and had to be taken to the hospital en route. The German police were notified and the men were “persuaded” to return home.

  * * *

  ON THE MORNING of September 21, 1921, the great fury aroused by the Germany chemical industry’s involuntary brain drain was temporarily forgotten in the face of a much more immediate disaster—a massive explosion at BASF’s plant at Oppau on the Rhine. The blast, which was felt and heard as far away as Munich and Paris, occurred in a silo used to store ammonium sulphate saltpeter. Over six hundred people were killed and another two thousand were injured, many seriously. The structural damage was immense. A crater, a hundred meters wide and twenty meters deep, was torn into the earth at the heart of the works and many of the factory buildings around it were irreparably damaged. The nearby village of Oppau was also largely destroyed, with over 80 percent of dwellings rendered uninhabitable and many bigger civic buildings, such as the school, church, and town hall, completely flattened. For miles in every direction windows had been smashed, doors blown in, and tiles ripped from roofs. One witness, over five miles from ground zero, described seeing a flock of geese blown clean out of the sky by the shock wave.

  The explosion was devastating for BASF. Financially the losses were colossal; the cost of plant and equipment alone was estimated at nearly 600 million marks. There was also a strong chance that the company would have to cover an estimated 200 million marks’ worth of structural damage to local communities. Then there was the matter of financial compensation for victims and their families, which was bound to be high. One of the advantages of belonging to a coalition of businesses now became abundantly clear. Almost a third of the plant and equipment costs would be covered by an insurance fund set up jointly by all the Interessen Gemeinschaft companies, and its constituent firms now agreed to raise additional funding by issuing an emergency rights offer of shares onto the German stock market. Although this extra cash could not cover all of BASF’s liabilities, it helped the company through a very difficult patch.

  Carl Bosch was enormously grateful for this assistance, but no amount of money could ease his personal anguish. Oppau had been his grand project, the place where he had made his reputation during the war, where the Haber-Bosch process had been perfected to provide the all-important nitrates for the German military, and where fertilizer was produced that helped feed the whole nation. He had only just managed to save the facility from destruction by the Allies. Now the explosion had shattered his achievements and left him facing the possibility that his famous process had in some way been responsible for one of the worst industrial accidents in history. On September 25, the day the funerals began, he gave a moving speech in Oppau and aired his private fears: “The very material that was destined to create nourishment and bring life to millions … has suddenly proven to be a savage foe, for reasons we do not yet know.” He promised to do everything he could to establish the reasons for the blast, to provide assistance for the survivors, and to rebuild the works as soon as was humanly possible.

  Inevitably, there were rumors: a clandestine store of German munitions had become unstable; the Allies, frustrated in their efforts to dismantle the German chemical industry, had sent in an undercover team to bring down one of its most famous landmarks; BASF had been secretly testing new and deadly weapons and the project had gone horribly wrong. An opinion piece in the New York Times was typical of the speculation: “When the fact is well known that there is an unrepentant and revengeful military party in Germany that looks to another war to restore her baleful power, and when the world believes that these dangerous reactionaries would welcome the discovery by their chemists of annihilating gases of enormous power, it is not inconceivable that the disaster at Oppau may have been due to covert experimenting by those chemists.” One British newspaper, the Daily Mirror, even suggested fancifully that BASF’s scientists had been trying to manufacture an atomic bomb.

  Although the absolute cause was never fully established (it was impossible to be definitive because all the workers and technicians in the silo that day were killed in the explosion and nothing remained of the storage facility itself), the truth was almost certainly much more prosaic. BASF’s own investigators concluded that the disaster was probably due to poor quantity-control procedures: apparently, incorrect concentrations of ammonium nitrate and ammonium sulphate had been brought together in the wrong place and at the wrong time (in the right combination the two ingredients produced a nonexplosive fertilizer). Exactly why this had happened no one knew but the company moved quickly to ensure that the movement and storage of potentially dangerous materials was monitored more effectively in the future. There was one bright spot, though. One of the few buildings still standing at Oppau was the main ammonia plant, proof that, whatever else was the cause, the Haber-Bosch process was not responsible.

  As BASF’s lawyers began haggling with the authorities and with victims over compensation, this latter news at least was very welcome. Carl Bosch breathed a deep sigh of relief and felt able to start thinking about the plant’s reconstruction. Clearly it was a massive task and needed an energetic and bold executive in charge, not least because a huge construction workforce would somehow have to be pulled together from all over Germ
any. He chose Carl Krauch, one of the company’s rising stars and the man who had been responsible for building BASF’s second nitrate plant, at Leuna on the Saale River, in the last year of the war. Money was no object, Bosch told him. Although the explosion was going to cost the company dearly, without Oppau the firm’s very future was in doubt. With foreign competitors already breathing down its neck, and a need to manufacture goods for use in reparations payments, the critical thing was to get the plant back into profitable production as quickly as possible.

  Krauch rose to the challenge. He cajoled, bullied, and persuaded all the other Interessen Gemeinschaft companies (and several other German manufacturers) to suspend parts of their own operations and to lend workers to the project. Some of them were assigned to rebuilding parts of the town but most were dedicated to the factory itself. In an extraordinary demonstration of hard work, ingenuity, and cross-industry cooperation, ten thousand workers labored day and night to get the plant back on line. A mere three and a half months after it was blown apart, Oppau was back in business. Unfortunately, its reopening was almost immediately overshadowed by another national crisis.

  * * *

  AT THE END of the war, most of Europe was on the verge of bankruptcy. To meet the cost of their mushrooming military commitments, the combatant nations had been forced to raise huge loans, levy increasingly burdensome taxes, and print money. But all this extra cash in circulation had dramatically increased inflation—both of domestic prices and of national currencies. When peace returned, harsh measures were deemed necessary to restore long-term economic stability. One of the principal methods followed by the Allied governments was managed deflation, that is, taking money out of circulation, which theoretically at least was supposed to gradually reduce prices and restore the value of currencies.

  But economics is an imprecise science, and achieving exactly the right effect proved an elusive goal. Instead of a slow and careful return to economic normality the world was plunged into a depression. Industrial output, no longer stimulated by military demands, fell dramatically in Britain, France, and the United States, with a consequent and dramatic rise in unemployment. Of course, prices fell, too, and things eventually corrected themselves as demand recovered, but during 1920–21 the economic contraction was very severe.

  Germany, though, had followed another route. Its economy had been just as dreadfully battered as those of its enemies and, of course, it faced the additional burden of an impossibly large reparations bill. But the Weimar government, grappling with political anarchy on the streets, was unwilling to take any measures that would increase unemployment or otherwise jeopardize social peace. Rather than managed deflation, Weimar sought instead to stimulate the economy. In a desperate attempt to get German businesses back on their feet and generate enough revenue to meet the Allies’ demands, it printed money, staggering amounts of it, that the central bank pushed out into the economy. In the short term, demand increased, productivity recovered, and unemployment fell, but inflation, fueled by all this extra cash, began to spiral upwards. By January 1922, the cost of living was twenty times what it had been in 1914. By that autumn it was out of control, a runaway train of hyperinflation that was saw prices rise to absurd levels month by month. Still the German central bank continued to pump out cash, until the mark lost any realistic value and the economy began to self-destruct.

  Over Christmas 1922 Germany twice defaulted on reparations obligations, missing scheduled deliveries of telegraph poles and coal to France and Belgium. Previously, both countries had complained that Germany’s currency depreciations were being deliberately engineered to minimize its obligations; now they decided enough was enough. In January, seventy thousand French and Belgian troops were sent across the border into the Ruhr, ostensibly to lay their hands on the missing commodities and protect some of their nationals but in reality to establish by force and occupation the full economic control they had sought and failed to gain at Versailles. The German government responded by suspending reparations entirely and ordering the Ruhr’s inhabitants to engage in a campaign of passive resistance. The move enraged the French. Cutting the region off from the rest of Germany, they imprisoned or deported over forty thousand civil servants, police, railway men, and other local officials for supposed infractions of occupation regulations or for their refusal to cooperate. When things began to turn nastier, with low-level sabotage and minor acts of terrorism, the French retaliated with shootings, hostage taking, and massive fines.

  The German chemical industry’s plants on the banks of the Rhine, deep in the heart of the occupied territory, ceased operations during these months. One by one their managers stopped production, and the factories were seized by foreign troops in search of dyestuffs and fertilizers—much as they had been back in December 1918. In early May 1923, Carl Bosch found out from an informant that the French army was planning to enter BASF’s Ludwigshafen and Oppau works. He just had time to oversee the dismantling of his Haber-Bosch equipment and its shipment to Leuna, in unoccupied Germany, before he and the rest of BASF’s managing board fled to safety in Heidelberg. In August a French military court in Landau convicted them in absentia for impeding the delivery of reparations goods. Bosch and his finance director, Hermann Schmitz, were sentenced to eight years in prison and fined 150 million marks, but the longest sentence went to August von Knieriem, the company’s chief legal counsel. He was given a ten-year term for signing the orders that forbade the company’s workers from cooperating with the enemy. Of course, all these men were well out of the reach of the occupying authorities and had no intention of returning until the coast was clear, but in their absence it was difficult, if not impossible, to keep the factories going. Furthermore, one thing was now plain: Carl Bosch’s personal concord with the French government was well and truly over.

  The wider financial consequences of the occupation were catastrophic. As companies that had been manufacturing goods for reparations closed plants, laid off workers, and ceased trading, unemployment rose to 23 percent and tax revenues fell so low that they no longer covered even the costs of the national postal system. Meanwhile state expenditures were on the rise as the Weimar government was forced to import expensive coal from Britain and Poland and to pay dramatically higher social security benefits. To fill the hole in the government’s coffers, even more money was printed—in increasingly absurd denominations—and inflation exploded into the stratosphere. By the summer of 1923, the mark was worth one five-hundred-billionth of its value in 1918, workers were famously using wheelbarrows to cart their daily wages to the bank, middle-class women were taking up prostitution in exchange for a bowl of soup, and householders were paying off their mortgages for less than the price of a bottle of aspirin.* That autumn, the first 1-trillion-mark note was issued, followed days later by the first 100-trillion-mark note. Money—or at least the official German version of it—had ceased to have any meaning. People got by either through bartering their possessions, their labor, or their bodies or, if they were very lucky, by getting hold of unofficial scrip—promissory notes issued by companies such as BASF and Hoechst and backed by foreign bank deposits and corporate bonds—that had gone into general circulation.

  It couldn’t continue. In late September 1923, the government (led by a new chancellor, Gustav Stresemann) abandoned passive resistance to the occupation of the Ruhr. Shortly thereafter, Hjalmar Schacht, the head of a new central bank, the Reichsbank, stopped printing the now worthless mark. It was replaced briefly by an interim currency, the rentenmark, and then in early 1924 by the reichsmark. Slowly, businesses began to recover, people went back to work, and the economy showed signs of settling down.

  But it was an uneasy calm. Stresemann was a member of the liberal German People’s Party, which had formed a “Grand Coalition” with the Social Democrats (SPD). His government, like the previous SPD–led administration, was forced to devote much of its time to addressing various paramilitary conspiracies aimed at undermining the new republic’s fragile d
emocracy. Threats from the left, such as the Communist-led siege of Hamburg’s police stations in October 1923, were relatively easy to deal with because the government could generally call on the enthusiastic support of the army. But right-wing plots were more difficult to put down: the Reichswehr (the predecessor of the Wehrmacht) could not always be relied upon to forget its political predisposition for the old order.

  In November, a loose consortium of these volkisch putschists, under the nominal leadership of General Ludendorff, planned another coup, a “March on Berlin” from Munich, in the hope of enlisting the support of Gustav von Kahr, an extremist Bavarian politician.* Kahr, already something of a local dictator and an advocate of regional secession, was willing to help but he wanted first to secure the backing of the Black Reichswehr, paramilitary groups set up with the connivance of the army to circumvent Allied restrictions on German military strength. For the conspirators, Kahr’s vacillation was too much and on November 8 one of Ludendorff’s leading associates, a former army corporal, took matters into his own hands. His name was Adolf Hitler and his small political cadre, the National Socialist Party, would one day invest the comic opera events that followed with the status of grand mythology. Hitler hijacked a meeting that Kahr was addressing in the Bürgerbräukeller in Munich, bursting through the doors with a group of armed men in brown shirts and shouting that the national revolution had begun. Unfortunately for the conspirators, Kahr had decided against lending his support, and his allies in the army were even less inclined to get involved. The putsch collapsed the next day when a march of two thousand supporters, led by Hitler and Ludendorff, was met by a volley of gunfire from the Bavarian state police. Hitler, lightly wounded, slunk away and was later arrested and put on trial with Ludendorff.