Carl Krauch, the head of Sparte I and one of the combine’s most ambitious and influential figures, was to be the principal architect of this new partnership. A visiting professor of chemistry at Heidelberg University and a leading figure at the Kaiser Wilhelm Institute (like several other IG executives, Krauch maintained close links with the academic community), he had originally been another of Bosch’s protégés back at BASF. He had first shown his energy and organizational skills in 1921 when he had managed to get the explosion-torn Oppau works back on line in less than four months. Subsequently he had played a key part in helping his chief persuade the Interessen Gemeinschaft companies to join together and, as head of Sparte I, had responsibility for all the cartel’s activities involving hydrogenation, a process he understood as well as, if not better than, anyone else in the company. Understandably, he had always been a staunch supporter of Bosch’s determined efforts to keep Leuna alive and he had been delighted when his paper on the German fuel economy had led to the IG’s synthetic gasoline contract with the government. Now he was to follow that deal to its logical conclusion and become one of the most important men in Nazi Germany.
Given his contacts with the Air Ministry over the Benzinvertrag it is perhaps not surprising that Krauch appreciated the real significance of the regime’s drive to self-sufficiency long before anyone else in the IG: General Erhard Milch’s inquiries in the run-up to that deal had clearly stemmed from Hermann Göring’s desire to find a secure source of aviation fuel for the new Luftwaffe and implied that the government was preparing for armed conflict in the near future. The question of when and how the cartel was explicitly informed of this objective would later be the subject of much debate, but Krauch evidently knew enough in 1934 to begin planning an office to coordinate the IG’s relations with the military. The Vermittlungstelle Wehrmacht, or Army Liaison Office, was not formally established until September 1935 but by then, as a memo from Krauch to his colleagues in Sparte I demonstrated, its purpose was unambiguous.
The newly founded Vermittlungstelle Wehrmacht has as its task the simplifying and building up of a tight organization for armament within the IG.… In case of war, the IG will be treated by the authorities concerned with armament questions as one big plant, which in its task for armament, as far as it is possible to do so, will regulate itself without any organizational influence from outside.
The Verm. W., as it was known, was housed in a small suite of rooms at the rear of the Berlin NW7 offices. Its six staff members worked under Krauch’s supervision and were responsible for monitoring and coordinating the relationship between the IG’s various Sparten and the armed forces. Judging from Krauch’s memo, the concern seems to have hoped that by creating its own liaison infrastructure it could avoid government interference that might one day threaten its commercial independence. But years later the timing of the move would lay the IG open to charges that it had helped initiate a process that could only have had an aggressive intent. Its executives would claim at Nuremberg that the IG of 1935 was just an ordinary private company: large, powerful, and strategically important, to be sure, but no better informed of the government’s intentions that any other business. Prosecutors would suggest otherwise. To them, a decision to set up a department tasked with ensuring the company’s effective contribution to a future war economy—at a time when the vast majority of people in Germany were ignorant of any need for a war economy—could be interpreted in only two ways. Either the concern’s executives had displayed a truly remarkable degree of prescience or, more likely, they had had inside knowledge of what was to come and were early and willing participants in bringing it about. The defendants’ case was not helped by the fact that within its first few months the Verm. W. prepared a Mob-Kalendar, a planning document for mobilization that addressed such issues as how to ensure adequate energy supplies for the IG’s factories in wartime, enforce transportation and workforce requirements, and organize air raid protection procedures. Sensible defensive precautions though these may have been, they seemed to have almost nothing to do with the state of the country at that moment. Hitler was still six months away from marching troops in to the Rhineland (a move that surprised most of his countrymen as much as it did the rest of the world) while the Anschluss with Austria, the annexation of the Sudetenland, and the invasion of Poland were some years in the future.
Suspiciously prescient or not, having set this process in motion Carl Krauch soon went one step further. He went to work directly for the government, joining a newly formed commission for coordinating government policy on raw materials and foreign exchange. The commission was a consequence of an ongoing conflict between Hitler’s two economic experts, Hjalmar Schacht and Wilhelm Keppler, about the cost of the rapidly accelerating rearmament program. The German harvests of 1934 and 1935 had been poor and Schacht wanted to use some of the country’s limited foreign exchange reserves for importing vital foodstuffs. Keppler, in line with the Führer’s wishes, wanted to use those reserves to buy and stockpile strategic raw materials. With neither adviser willing to give way, the dispute dragged on until March 7, 1936, when, in flagrant violation of the Treaty of Versailles and the subsequent Locarno Pact, Hitler sent troops into the Rhineland to reclaim the territory for the Reich. The incursion was a huge gamble because had France and Britain retaliated (as they were legally entitled to do), the Wehrmacht, still unprepared for war, would have been quickly overwhelmed. In the event, neither nation was willing to accept the challenge, but the Soviet Union and Romania responded by limiting oil exports to Germany, which led to a supply shortage and dramatic price rises. Hitler asked Göring to deal with the fuel problem and also to mediate between his bickering economic advisers.
Convinced that the former air ace knew nothing about financial matters and would therefore be easily manipulated, Schacht then approached Göring with a proposal that he should lead a commission for coordinating government policy on raw materials and foreign exchange. The economics minister had intended that he himself would retain control of this organization, but the move backfired badly on April 27 when Hitler’s official communiqué put Göring in charge, effectively sidelining Schacht. With that the economy was firmly yoked to the government’s military ambitions.
After appointing Colonel Fritz Löb, one of his Air Ministry aides, to run the commission’s administrative staff, Göring went looking for a pool of technical specialists to provide expert advice. His first call was to Carl Bosch and Hermann Schmitz at IG Farben to see if he could obtain the services of Carl Krauch as his head of research and development. Though uneasy about the request, Bosch and Schmitz were worried that, if they didn’t accede, others in the regime might seize on their refusal as an excuse to set up a rival state-owned synthetic fuel operation. So they agreed.
Krauch was delighted. A fiercely ambitious man—whose hopes of succeeding Bosch as chairman of the Vorstand had been dashed by the appointment of Schmitz—he was now about to enter into the highest circles in the land. Moreover, there was no suggestion that he should give up any of his key positions or privileges at the IG. He would continue as head of the newly formed Vermittlungstelle Wehrmacht and as chief of Sparte I, with its all-important hydrogenation production. He was also allowed to keep drawing his comfortable IG salary, to retain his place on the Vorstand, and to take two of his closest associates at the Verm. W., Johannes Eckell and Gerhard Ritter, with him onto Göring’s team. He was aware, of course, that retaining his connections with the IG would attract some adverse comment from other companies (something that also concerned influential Vorstand members such as Georg von Schnitzler), but if his move helped cement the concern’s relations with the government that would be a price worth paying. For one thing, he’d be able to see to it that the Reich’s plans for fuel and rubber self-sufficiency continued to complement the IG’s interests.
As Krauch settled into his work, he quickly realized that the poisonous internal politics of the Third Reich added layers of complication to his job. Göring p
roved to be even more intent than Keppler on spending the Reich’s hard-pressed resources on rearmament and synthetic strategic raw materials, and just as unconcerned about the effect it would have on the economy. “If war comes tomorrow we will have to rely on substitutes,” he said. “Then money won’t play any role at all.” Inevitably, Göring clashed with Schacht. The economics minister had nothing against synthetics in principle but he continued to voice his concern that they were significantly more expensive than natural products. At a meeting of ministers at the end of May 1936, he cited buna as an example. Natural rubber could be obtained cheaply on the open market, he declared. What was the point of wasting money on a substitute that cost several times as much? He also furiously protested against a plan to adapt the blast furnaces of all Germany’s steel factories (by means of a procedure called the Renn process) to allow them to use domestic low-grade iron ore rather than premium imported materials from Sweden and elsewhere. Schacht insisted that the investment required would greatly increase production costs, making it impossible to sell German steel overseas. Millions of marks worth of vital foreign exchange would be lost as a result.
The rows eventually grew so heated they began appearing in the foreign press. That summer the New York Times twice reported that the minister of defense, General Werner von Blomberg, had been called in to mediate and calm things down. But the two sides proved intractable. Göring wanted to dramatically increase public borrowing to finance Germany’s push to rearmament and strategic self-sufficiency; Schacht held to his insistence that doing so to subsidize the production of expensive substitutes—instead of importing more affordable natural materials from abroad—could lead to an overheated German economy and a return to the hyperinflation of 1923.
Schacht had failed to take account of his opponent’s well-honed political skills. Even as the country was preparing to give itself up to celebrating the Berlin Olympics that August—an event that was carefully stage-managed by Joseph Goebbels to present an acceptable face of Germany to the world—Göring’s team of economic experts was working away on a set of proposals to confound his rival. After throwing a number of lavish welcoming parties for foreign dignitaries in his capacities as president of the Reichstag, air minister, and minister-president of Prussia (each one a glorious opportunity to parade in an elaborately gold-braided full dress uniform), he set off to brief the Führer at his mountain retreat on the Obersalzberg.
As might have been expected, Hitler needed little persuasion to come down on Göring’s side of the argument. Drawing heavily on his minister’s ideas, he dictated a confidential memorandum setting out his reasons for initiating a four-year plan to prepare Germany for war by achieving strategic self-sufficiency. In the long term, he said, the Reich’s need for raw materials would be answered by increasing its Lebensraum, or living space, through military conquest. In the short term, a solution had to be found within its existing borders. Rearmament had to take precedence over everything else and that meant aggressively pursuing a program of developing synthetics—whatever the cost. Stockpiling was not an alternative because no country could possibly accumulate enough raw materials for more than a year of conflict. Even maintaining strong foreign currency reserves was little more than a distraction. Germany had enjoyed substantial currency assets in World War I, after all, but had been unable to buy sufficient fuel, rubber, copper, and tin.
Hitler also made it perfectly plain that the only purpose of industry—and indeed of his stubborn minister of economics—was to serve the needs of the Reich. Both had to understand that concerns about costs and production difficulties were secondary to the greater requirements of the state: “The minister of economics has only to set the tasks of the national economy; private industry has to fulfill them. But if private industry considers itself unable to do this, then the National Socialist state will know by itself how to resolve the problem.”
Although Schacht was not sent an advance copy of Hitler’s memo, he was informed that Hitler was planning to use the Nazi Party’s annual rally that September as the launching pad for a vast new program for national self-sufficiency. Realizing that such a public declaration would effectively make the policy irreversible and fearing that the economic consequences would be atrocious, Schacht tried desperately to get General Blomberg to warn their leader that he was about to make a grave mistake.
If the Führer emphasizes this in front of the masses in Nuremberg he will receive a great amount of applause from the audience, but he will bring failure to the entire commercial policy. There is only one thing in our present needy position: the promotion of exports. Every threat against foreign countries, however, will bring about contrary results. We have had reverses in the field of fuels.… There will not be large amounts of rubber. The Renn process in the field of ores is meeting great difficulties. If we shout our decision to make ourselves economically independent, then we cut our own throats because we can no longer survive the necessary transition period.… If the people’s food supply is not to be endangered, the Führer must refrain from his plan.
But Blomberg, sensing which way the wind was blowing, declined to get involved. The following day Göring appeared at an economic cabinet meeting, triumphantly waving a copy of Hitler’s memo and insisting that the matter was now settled beyond doubt. If the economics minister still had any qualms, he said sarcastically, he could console himself with the thought that Frederick the Great had been a strong inflationist. A few weeks later, as expected, Hitler announced the Four-Year Plan at Nuremberg, and he followed it up on October 18 with an announcement designating Göring as its plenipotentiary, with authority to issue decrees for the “strict coordination of all competent authorities in party and state.”*
Of course, all of these developments had significant implications for IG Farben and Carl Krauch. One of Göring’s first acts was to transfer his entire staff at the raw materials and foreign exchange commission to the newly formed Office of the Four-Year Plan, with Krauch continuing in his role as head of research and development and one of his Verm. W. subordinates, Johannes Eckell, taking specific responsibility for rubber.* It quickly became apparent just how important Krauch’s role was to be. Strategic self-sufficiency had to cover three main areas of industrial activity—coal, steel, and chemicals (including synthetic fuel, buna, nitrogen for explosives, plastics, and synthetic fibers). Coal production was going smoothly; the Ruhr could provide as much as the country required. The steel industry needed some attention because manufacturers were proving resistant to the idea that they should work with low-grade domestic iron ore.† But for the moment, the only area requiring large-scale investment was the chemical industry, making it the principal beneficiary of the Four-Year Plan’s largesse. Around one billion reichsmarks had been earmarked for industrial investment in the first six months of the program and the German chemical industry was to receive over 90 percent of it. The IG’s share of this money (reflecting its total dominance of the sector) came to around 72 percent—almost two-thirds of a billion reichsmarks for just one company and its products. Even if the Four-Year Plan had not been set up—as was later suggested—purely for the benefit of IG Farben, with the cartel’s very own Carl Krauch now in a position to influence the allocation of these funds, it would soon begin to look that way. Having already profited hugely from the overall expansion in domestic and international trade that had followed since the end of the Depression, one of the world’s most prosperous businesses was about to get a great deal richer.
That this increasing wealth was a result of the Nazi regime’s determination to use military might must by now have been blatantly obvious to even the most blinkered IG Farben executive. On December 17, 1936, during a secret speech at the Preussenhaus in Berlin, Hermann Göring left an audience of industrialists and government officials—including the IG’s Carl Bosch, Hermann Schmitz, Georg von Schnitzler, and Carl Krauch—in little doubt of what the Nazis expected from them.
The struggle we are approaching demands a colossal m
easure of production capacity. No limit on rearmament can be visualized. The only alternatives are victory or destruction. If we win, business will be sufficiently compensated.… We live in a time when the final battle is in sight. We are already on the threshold of mobilization and we are already at war. All that is lacking is the actual shooting.
9
PREPARING FOR WAR
The three years running up to World War II were to prove the most commercially successful that IG Farben had yet experienced. As a consequence of its dominant role in Hermann Göring’s Four-Year Plan, the company enjoyed a period of unprecedented growth and prosperity, selling more products, employing more people, making more money (and paying more tax) than ever before. By 1939 turnover had reached almost RM 2 billion, with gross profits rising by 50 percent (to RM 377 million) and net profits increasing by 71 percent (to RM 240 million). Well before Adolf Hitler finalized his secret plans for the invasion of Poland, the IG labor force had doubled in size, with over 230,000 workers striving in an expanding network of factories, offices, laboratories, and mines to meet the regime’s voracious appetite for strategic raw materials.
Not all of this growth came from sales to the military. The IG was able to exploit the fact that many of the new synthetic chemicals it was making for the Wehrmacht had potential for civilian use as well. When Germany’s worsening foreign relations adversely affected export markets and the cartel had to look for domestic customers instead, its adaptable range of ersatz products helped make up the shortfall. Indeed, by 1939 the company was addressing these new opportunities so effectively that a citizen of the Third Reich, had he so wished, could have risen each morning to the chimes from a plastic IG alarm clock, washed and shaved using IG soaps, and then sat down at a table covered with an IG synthetic cloth to eat a breakfast cooked in IG synthetic fats and drink coffee sweetened with IG saccharine. As he left for work, aboard a bus fitted with IG buna tires and powered by IG synthetic gasoline, his wife (Nazi ideology having scant sympathy for the notion that a married woman should ever be employed outside the home) could have cleaned the floors with an IG polish, treated the dog’s fleas with an IG pesticide, and then perhaps have taken an IG aspirin to relieve the headache brought on by her tedious life as a hausfrau. It mattered little that some of these synthetic substitutes were not as good as the real thing, because for many patriotic Germans they were symbols of the Reich’s scientific prowess. That every one of them had been made from materials originating from within the fatherland represented a remarkable turnaround for a country that had always been woefully deficient in natural resources—a triumph that Nazi propagandists were keen to celebrate.
Hell's Cartel Page 24
