Part Five of my diary series on the history of the corporation. This series is a draft book I am working on, "World Incorporated: The History of the Supra-National Corporation and its Global Stranglehold on Freedom and Democracy." I am posting the entire manuscript piece by piece as it is written.
Part One, if you missed it, can be read here:
http://www.dailykos.com/...
Part Two can be read here:
http://www.dailykos.com/...
Part Three can be read here:
http://www.dailykos.com/...
Part Four can be read here:
http://www.dailykos.com/...
Part Five covers the New Deal and World War 2.
As usual, I welcome all helpful comments and criticisms.
(c) 2010 by Lenny Flank, all rights reserved, blah blah blah.
Six: Depression and New Deal
By 1929, the United States had already undergone a number of “financial panics” or recessions—in 1893, 1907 and 1920. All of these, however, were utterly insignificant compared to the Great Depression of 1929. While the others were mere speedbumps on a road of steadily-climbing wealth and economic growth, the Great Depression threatened the very existence of the entire social order.
During the heady days of the Roaring Twenties, it appeared as if the American economy would bring prosperity forever. New technologies and rising incomes convinced many that the US market would expand indefinitely, allowing profits to continuously increase. The booming stock market meant that corporations had a ready supply of capital to invest in new production. And the virtual end of the labor movement meant that profits didn’t need to be shared with workers. The corporations were in heaven.
The super-rich were, however, creating the means of their own self-destruction. Years of unlimited monopolism and lax oversight had created several dangerous conditions in the economy. While the US had become an incredibly wealthy nation, the distribution of that wealth was grossly lopsided. The richest 1% of the American population held over six times as much wealth as the lowest 10%; the richest one-tenth of one percent held more than the bottom 40%. Productivity went up by 32%, while average wages went up by only 8%. As a result, corporate profits shot up an incredible 62%.
The corporations themselves were heavily concentrated and centralized; just 200 huge corporations owned or controlled 50% of the nation’s wealth—and a crisis or collapse of any one of them would have lethal repercussions on all the rest. By 1929, the corporations that were most vulnerable were the banks. Largely unregulated, the banks assumed that the new Federal Reserve system had made financial panics impossible, and blithely pursued high-risk investments in the booming stock market.
It was, moreover, not only the American economy that was now vulnerable. In Germany, the vindictive terms of the Versailles Peace Treaty that had ended World War One imposed huge “reparations” payments on Germany, crippling the already-war-torn economy and leading to high unemployment and runaway inflation—fertile ground for political extremists. England and France, meanwhile, had borrowed huge amounts of money from the US to finance their war efforts, and the United States insisted on repayment in gold; as a result, by 1929 the US held most of the world’s gold reserves. The US had, in addition, imposed higher tariffs on imported products to protect the American corporations from competition by British or French companies. But this in turn left the European corporations with no opportunity to enter the huge American market, and therefore limited the British and French governments’ opportunity to bring in enough money to both pay off their American debts and finance their own economies. The whole interlocking international system of loans and finances was vulnerable to the collapse of any part of it. In previous years, there had always been a single dominating world power, like the British Empire, that exercised de facto control over everyone else, and who could therefore move resources as needed to solve imbalances. In the 1920’s, however, Europe was no longer the dominant power—it was the United States that now held the real economic power, but it had retreated into isolationism.
Most of the American economic expansion, moreover, was based on debt. Henry Ford’s system of “installment buying” was quickly taken up by other industries, and soon everything from refrigerators to farm tractors were being purchased on credit. By 1929, credit debt totaled over $3 billion.
It was the same old problem of “overproduction”. While the American corporations were producing more and more things, they were also taking more and more of the resulting wealth, which inevitably left the rest of the population without enough money to continue to buy the products that the corporations kept churning out. The problem is best illustrated by a story (perhaps apocryphal) that was later told about Walter Reuther, the president of the United Auto Workers union. One day, it was said, Henry Ford took Reuther on a tour of a brand-new Ford plant in which the assembly line had been completely automated and all the workers replaced by robotic machines. As the machines whirred and whizzed and churned out automobiles, Ford turned to Reuther and triumphantly asked, “Well, Walter, how do you plan on getting these robots to go out on strike?” Reuther, in turn, shot back, “Well, Henry, how do you plan on getting these robots to buy Fords?”
While the enormous levels of debt that were accumulated in the 1920’s helped hold off the overproduction crisis, it also increased the vulnerability of the entire system to an interruption. The entire financial edifice was based on the assumption that there would always be even more money next year, allowing everybody to pay off their obligations and allowing the cycle of debt to continue forever. It was a false assumption.
The stock market crash in 1929 set the whole snowball rolling. As the economy continued to grow year after year, dividends on stocks grew enormously, and investors, convinced that the boom would last forever, poured money into the stock market, especially in such growth industries as automobiles, radio, and electricity. As the nation’s prosperity expanded, the number of people who could afford to “play the market” grew—it was joked that the captains of industry and the chauffeurs who drove them were both buying the same stocks. By 1929, rampant speculation had driven the price of stocks absurdly above their real value, and a collapse was inevitable.
The bubble burst on October 29, 1929. By the end of the day, the stock market had lost ten percent of its entire value. Over the next four months, some $40 billion in stock value disappeared.
The industry that was hit hardest by the stock crash were the banks. Awash with money from the expanding economy, the banks had found, early in the 1920’s, that they could make more money by investing in corporate stocks and securities than they could by traditional bank lending. When stock values collapsed, however, the banks lost huge fortunes, and had no reserves to cover the losses. Many didn’t survive. People who had money in the bank rushed frantically to withdraw it, fearing that their bank, too, might go bust, and they would lose all their life savings.
The reaction of the Hoover Administration, based largely on the advice of Treasury Secretary Andrew Mellon (of the Pittsburgh Mellon financial empire) was to do nothing. It was, they assumed, just another financial recession that would work itself out. “It will,” Mellon announced, “purge the rottenness out of the system.”
Instead, the economy continued to fall into a bottomless spiral. As finances dried up, businesses cut back production and laid off workers. The lost wages meant lower purchasing power, leading to yet more production cuts and more layoffs. Even people who still had jobs, stopped buying on credit for fear that they might soon lose their jobs. The economy spiraled lower and lower. Five million were unemployed in 1930; thirteen million by 1932.
Hoover became one of the most hated Presidents in history. Large numbers of unemployed people, evicted from their homes, crowded together in shantytowns that they called ”Hoovervilles”. In the closing days of Hoover’s term of office, during the spring of 1932, a movement called the “Bonus Army” appeared. In 1925, all the discharged veterans from the First World War had been given a government bond that matured in 20 years, as a “bonus”. Although the bonds didn’t come due until 1945, the veterans, many of them now unemployed and homeless, demanded that they be given their bonuses immediately. As “Coxey’s Army” had done before it, the “Bonus Expeditionary Force”, made up of groups from all over the country, began to converge on Washington DC. By July, over 25,000 World War One veterans had formed semi-permanent camps all over the capitol.
Hoover, fearing that the “Bonus Army” was controlled by communists, ordered in the Army. Under the command of General Douglas MacArthur, US Army infantry, cavalry and tanks overran the Bonus Army encampments and drove everyone out using adamsite, a military tear gas.
The New Deal
In the 1932 election, Hoover faced off against Franklin Delano Roosevelt. “This campaign,” Hoover announced, “is more than a contest between two men. It is more than a contest between two parties. It is a contest between two philosophies of government.” The problem for Hoover was, of course, that his philosophy of government—laissez-faire economics—had just failed catastrophically. Roosevelt blamed the corporations, pointing out: “If the process of concentration goes on at the same rate, at the end of another century we shall have all American industry controlled by a dozen corporations, and run by perhaps a hundred men. Put plainly, we are steering a steady course toward economic oligarchy, if we are not there already.”
Roosevelt won with 58% of the vote, and pledged a “New Deal” for the American people. A pragmatic politician, Roosevelt’s approach was a simple one—he assembled a group of economics experts that he called his “Brain Trust”, then tried everything they could think of, dropped the things that didn’t work, and expanded the things that did.
One of Roosevelt’s first acts upon taking office was to declare a “bank holiday”, closing down the banks for ten days and thereby ending the panic-stricken withdrawals that were continuing to weaken the financial system.
FDR’s next priority was to produce jobs quickly to reduce unemployment, and the best way to this, he decided, was to set up huge government-funded public-works projects. One New Deal program was the Civilian Conservation Corps, which put unemployed people to work building national parks, clearing roads, repairing infrastructure, and other necessary tasks. Another public-works project was the Tennessee Valley Authority, which used government resources to build a huge electrical power center, big enough to provide electricity to seven states in the Appalachians.
Then, Roosevelt moved to help farmers. This was done with the Agricultural Adjustment Act, which stabilized prices by controlling production. Production levels were set at a level which would guarantee a good price for farmers. To keep production levels low enough, Roosevelt began using government payments, called “price supports”, to pay farmers to leave large areas un-planted, allowing the farmers to continue making a living while limiting production enough to keep prices stable. The Supreme Court shortly later ruled the Act unconstitutional.
Roosevelt’s next step was the National Industrial Recovery Act (NIRA), which regulated prices and production levels, guaranteed the right of workers to form unions, and imposed a set of fair practice standards that industry had to follow. In exchange, anti-trust laws were to be suspended, allowing corporations to work together to form cartels that would restrict production and bring a rise in profitability. This Act too was overturned by the Supreme Court.
Roosevelt responded to the over-ruling of his recovery efforts by threatening to pack the Court by appointing a number of new members, but the subsequent cooperation of the existing Justices made the threat unnecessary.
The next New Deal program to appear was the Works Progress Administration, a public-works project that built and repaired roads and bridges, and carried out electrification projects in rural areas. Then came the National Labor Relations Act, which forced businesses to recognize and negotiate with labor unions. After that came the Social Security Act, which set up a government-adminstrated old-age pension for people over 65. All of these programs, which would cripple corporate power, make the US a social democratic welfare state, and dominate the American political and social framework for the next fifty years, were later upheld by the Supreme Court.
The Supreme Court, however, was not the only opposition that FDR faced.
Opposition
No American President was as hated by the corporations as Franklin Delano Roosevelt. Their hatred was compounded by their feelings of betrayal—Roosevelt himself was a blue-blood, a country-club member from a rich New York family. Yet one of the first things Roosevelt did was increase the tax rate on the wealthiest Americans and force them to accept the legitimacy of labor unions. His country club expelled him as a member.
The Chamber of Commerce and the National Association of Manufacturers attacked him at every turn. In 1934, the American Liberty League was formed as an opposition group to the New Deal. It was organized by two former Democratic Presidential nominees and a former Democratic Party Chairman, along with members of the DuPont family and Alfred P Sloane, the president of General Motors. It received funding from US Steel, General Foods, the Goodyear Company, the Chase Bank, and other corporations. The League made speeches against New Deal programs (calling Social Security “the end of democracy” and the Wagner Act, which protected labor unions, “communistic”). Postmaster-General Jim Farley publicly referred to it as the “American Cellophane League”, because, as he put it, it was a DuPont product that could be easily seen through.
According to one story, never verified, the League approached a US Army General to see if he would be interested in joining a military coup to overthrow Roosevelt. The so-called “Business Plot” may or may not have been a serious plan, but there was no doubt about the depth of resentment that the corporations had. In one of his speeches, Roosevelt pointed out that the wealthy hated him, concluding, “I welcome their hatred.” It has always been debated whether Roosevelt was really a social crusader who wanted justice for ordinary working-class Americans, or if he was simply a pragmatist who recognized that if the existing social order were not reformed the radicals would grow in power and destroy it completely, and who therefore forced reform onto a resisting corporate class for its own good. In either case, he was vilified and demonized by the corporados—and still is today.
Roosevelt’s most effective opponent was the Supreme Court. Eleven of FDR’s first sixteen New Deal programs were declared unconstitutional. He responded with a proposed plan to appoint a new addition to the Supreme Court every time a Justice reached the age of 70 without retiring. Although thinly disguised as a way to “lighten the work load” for each, it was aimed squarely at the conservative Justices who were voting against his New Deal plans, and everyone knew it. The plan to pack the Court cost Roosevelt political support among his own party, but in the end, the Court did begin approving more and more of FDR’s program, either because they had been successfully intimidated, or because they had at last recognized the need for social reform if outright revolution was to be avoided. Several Justices soon retired and one died in office, allowing Roosevelt to appoint friendly Justices. He soon stopped receiving opposition from the Court.
The most public opponent of the New Deal, meanwhile, was Father Charles Coughlin, an arch-conservative Catholic priest who laced his weekly religious radio show with political messages. Coughlin preached a mixture of free market capitalism, anti-Semitism and anti-Communism. He sometimes quoted Nazi propaganda favorably in his broadcasts, and published the “Christian Index”, which listed non-Jewish businesses in New York. At one point, Coughlin averaged 30 million listeners per week.
Despite the label of “socialist” and “communist” that the right-wing threw at him, Roosevelt was often criticized from the left. Socialist Party spokesman Norman Thomas considered him to be a mere reformer who was trying to patch up the old system to try to save it. The Communist Party contemptuously referred to Roosevelt as a “Social Fascist” and considered him a dictator.
Perhaps the most colorful critic of the New Deal was Louisiana Senator Huey Long, known as “The Kingfish”, who ran his state with an iron fist through bribery and fixed elections, but who preached an old-fashioned populist platform that he called “Share the Wealth”. Long advocated confiscating the fortunes of the rich and using the money to provide unemployment insurance, old-age pensions, and free education for the poor. It was he who famously proclaimed, “A chicken in every pot.” Long was rumored to have been planning a run against Roosevelt in 1936, but was shot and killed by the son of a ruined political opponent first.
A California doctor named Francis Townsend also started a populist movement, with the goal of government old-age pensions. Soon “Townsend Clubs” appeared across the country to lobby for the idea. Like many of Long’s populist proposals, Townsend’s idea was co-opted by the New Dealers, and emerged as Social Security.
The Last of the Labor Wars
The Depression, with its falling wages and rising unemployment, caused a dramatic resurgence in the all-but-dead labor movement. This was largely the result of the rapid growth of the American Communist Party. To many American workers, it seemed as though the entire capitalist system were collapsing around him, and the communist program of worker-control and equitable distribution of wealth was very appealing. In the 1932 elections, Communist Party candidate William Z Foster (the former steel union organizer) polled 103,000 votes. It was estimated that the CP had over 15,000 members and many more sympathizers. Many of these gravitated towards the labor movement.
The National Industrial Recovery Act had guaranteed workers the right to form unions, and when that Act was declared unconstitutional, the New Dealers quickly passed the National Labor Relations Act, which protected the right to form unions and set up mechanisms for workplace elections to force recognition of the union by business owners. The new law was virtually ignored by the corporations, however, and unions still depended on their own strength to force owners to recognize them.
In 1934, a series of strikes led by communist organizers won victories with Minneapolis Teamsters, Toledo auto-parts workers, and West Coast longshoremen. In 1935, United Mine Workers president John L Lewis, who had been stung several times by the timidity and conservatism of the American Federation of Labor’s leadership, formed the Committee of Industrial Organizations inside the AFL (by 1938, the CIO disaffiliated completely from the AFL, and renamed itself the Congress of Industrial Organizations). Although the CIO shared the “pure and simple unionism” goals of the AFL, it was more militant and more eager to fight (many of its organizers were communists and former IWWs), and, by organizing along industrial lines instead of crafts, it aimed itself directly at the two largest industries in the nation, both of which depended on large numbers of relatively unskilled workers—the auto industry and the steel industry.
The Sit-Down Strikes
The CIO’s planned strategy was to organize the steel industry first, then focus on the auto companies. But the United Auto Workers were a fiercely independent union, and decided not to wait. Less than a year old, the UAW already had 25,000 members, and rather than dealing one at a time with the smaller auto-parts and assembly plants, the UAW boldly struck right at the heart of the auto industry, General Motors.
Despite its huge size, the General Motors operation had a weakness which the union planned to take advantage of—all of its assembly plants were fed car body panels that came from just two plants, one in Flint and one in Cleveland, and strikes there would shut down GM’s entire production process. The strike was planned for January 1937. Just days before the plan was to go into effect, however, the Cleveland workers unexpectedly waked off the job on December 30. The UAW announced that it would not settle the strike unless it obtained an agreement recognizing the union in all of GM’s plants. A short time later, the union discovered that GM was planning on moving the vital car-body stamping dies from the Flint plant and installing them elsewhere so they could ride out the strike. The Flint workers voted to prevent the dies from being taken, and, in a “sit-down strike”, they seized the plant, locked the doors, and occupied it. The entire GM operation ground to a sudden halt. The strikers elected a Mayor, organized housekeeping activities, continued to maintain and protect the machinery, and coordinated food deliveries from outside sympathizers.
GM management was reluctant to seize the plant from the strikers by force, because they were afraid the expensive machinery might be damaged. But after twelve days, when the strikers showed no signs of giving up, GM decided to make a move. A large force of Flint police moved in with tear gas, while the strikers inside turned high-velocity fire hoses onto the police. After six hours and several failed attempts, the police (who the strikers referred to as “bulls”) withdrew. According to legend, one striker remarked gleefully, “Look at those bulls run!”—and it became known afterwards as the “Battle of Bulls Run”. After ignoring two Federal Court injunctions, the UAW upped the ante by seizing and occupying a second plant. When the sit-down entered its 44th day, General Motors gave in. The managers refused to be in the same room as the union leaders, so Michigan Governor Frank Murphy acted as the go-between, but in the end, GM signed a simple one-page settlement agreement recognizing the UAW as the representative for all its employees. It was the biggest victory ever for the American labor movement. Within months, many smaller companies and plants were also organized, and the UAW had grown to over 500,000 members.
The next target was Ford Motor Company, where Henry Ford had declared “The UAW will organize Ford over my dead body”. In one incident, Ford security agents attacked and beat union organizers as they were being photographed by a news photographer. But by 1941, Ford too was forced to give in.
The Steel Workers Organizing Committee
The AFL had tried several times before to unionize the steel industry, including the Homestead Strike and the 1919 Strike. All those attempts failed. But in 1936, the CIO planned another campaign to try again, and set up the Steel Workers Organizing Committee (SWOC) to run the effort.
The original plan was for SWOC to organize the steel industry first, then use that strength to allow the CIO to plan a campaign on the auto companies. The UAW, however, went off on its own, and beat GM and Ford without help from SWOC. Indeed, as it turned out, UAW had done SWOC a favor, since, when the campaign to unionize US Steel began in March 1937, US Steel’s management, who had watched General Motors lose millions of dollars in its unsuccessful fight against the UAW, gave in virtually without a fight. SWOC won union recognition, a raise, and a grievance procedure.
The “Little Steel” companies, however, which included Bethlehem Steel and Republic Steel, did not cave in so easily. Strikers were met with armed security forces; in the Memorial Day Massacre in 1937, ten unarmed strikers were killed in front of the Republic Steel Plant. In 1936, a division of Republic Steel fired over 100 union members, and SWOC filed charges under the new National Labor Relations Act with the National Labor Relations Board. The case reached the Supreme Court where, in a reversal of its previous anti-New Deal stance, a ruling was issued declaring the law valid. By 1941, all the Little Steel companies were forced by NLRB elections to recognize SWOC.
In 1942, SWOC was reorganized as the United Steel Workers of America.
Labor is Tamed
While the Federal government’s support for the labor movement, and particularly the passage of the National Labor Relations Act, was an enormous help in organizing the large industrial corporations and making Big Labor a force in American politics, its ultimate effect was to tame the union movement. Unions were now dependent upon government protection and the political process for their influence—and that was an arena where the corporations wrote all the rules.
The rank-and-file workers, meanwhile became increasingly more separated from their union leadership and its goals; rather than being an organic entity that drew its life from the solidarity of the workplace, union representatives now became mere outsiders who were paid to perform a service, no different than calling a plumber to fix a leaky pipe. Even strikes now became orderly genteel affairs, where union members simply walked in circles carrying signs while the union leadership did the real negotiating work in closed rooms with the bosses. Owing to pressure from both business and government, the unions expelled all of the communists, socialists, leftists and other undesirables from their ranks, thereby losing all their most effective organizers and fighters. Even the CIO became tame over time, re-affiliated with the AFL, and the new AFL-CIO promptly jumped into a partnership with corporate management to protect their “mutual interests” in the company. Unions, now no longer fighting organizations, turned into bloated bureaucracies, and union presidents and company presidents now often played golf at the same country clubs.
There would never be a militant labor movement in the US again, and the unions would, for the next 75 years, remain utterly unable to assert their own interests against those of the corporations.
The Second World War
In a very real sense, it was not Franklin D Roosevelt who got the US out of the Great Depression—it was Adolf Hitler and the Japanese Empire. The enormous production necessary for the Second World War finally brought economic recovery, in the process making the United States the pre-eminent world power.
Japan
For centuries, Japan had been ruled by the Shoguns, who isolated the country from any foreign influence. The Japanese lived in a time warp, and the world went by without them.
In 1868, the figurehead Emperor Meiji seized power from the Shogun Tokugawa and became head of government. Under the Meiji Restoration, Japan not only ended her isolation from the rest of the world, but now made every possible effort to catch up. Meiji realized that the European states preyed on defenseless countries like his, and that if Japan did not quickly build herself into a position of military and economic strength, the British or French would dominate Japan like they did the rest of the world. Japan’s policy therefore became one of Fukoku kyohei, “Enrich the country, strengthen the military”. The Imperial government took the leading role in building up a modern Navy and a large well-equipped Army. This was done under the active direction of the Japanese state by joining with the Japanese industries, adopting European technologies, and sending large numbers of Japanese to study abroad to learn Western techniques. When Meiji died in 1911, his son Hirohito continued the same policies.
At first, the Japanese military was intended only as a defense from European and American domination. As the Japanese economic network expanded, however, the Emperor realized that, as an island with few natural resources, Japan would need to control outside supplies of essentials such as oil, coal and ore. Military power therefore became an economic necessity. In 1905, the Japanese Navy beat the Russians, announcing Japan’s entry as a world power. By 1930, militarists dominated Hirohito’s government, and maintained their power by assassinating critics and rivals. Japanese military forces invaded the Chinese province of Manchuria and turned it into the puppet state of Manchukuo, which provided Japanese industry with vital raw materials.
Japanese industry was dominated by a handful of huge companies, which were a melding of privately-owned corporation and the Japanese government. These conglomerates were known as zaibatsu. By 1940, the largest zaibatsu were Mitsubishi, Mitsui, Nissan, Suzuki, Fujita, Nakajima, Asano, Nomura, Yasuda, Furukawa and Sumimoto. In addition to industrial and consumer products, the zaibatsu produced weapons for the Japanese military machine—the most famous being the Mitsubishi Zero fighter, the finest combat aircraft in the world in 1941.
Conversely, the zaibatsu had enormous political influence. The Mitsui bank had its own political faction, the Rikken Seiyukai, which had extensive ties to the Japanese Army. Throughout the Great Depression, the zaibatsu grew rich on military production.
Japanese military expansion, however, particularly its invasion of China, provoked opposition from Europe and especially the United States. China was becoming an important market for international corporations; Chinese imports reached a billion dollars in 1927 and were doubling every three years. When Japan refused to withdraw from China, declaring that its colonial aspirations were no different than Britain’s, the US responded by cutting off oil shipments. The US was the Empire’s primary source of oil, and by 1941 the situation became critical, with Japanese oil reserves falling to just a six-month’s supply.
In desperation, the Japanese militarists laid out a plan of action. They would seize the rich oil fields in the Dutch East Indies, including the Socony (Mobil) and Standard Oil of New Jersey (Exxon) refineries in Indonesia. This, they knew, would bring action from the United States, and it therefore became necessary to eliminate the ability of the US Navy to interfere—if they could delay American action for just a few months, the Japanese assumed, they could build up a ring of defenses and negotiate a settlement that would allow them to keep their possessions.
The plan to cripple the US Navy consisted of a massive air strike on Pearl Harbor, Hawaii.
Germany
In Germany, the harsh terms of the peace treaty that ended the First World War created economic collapse and widespread resentment against the Allied Powers. German nationalism, often mixed with anti-Semitism, ran rampant. In 1923, a minor political figure named Adolf Hitler led a failed putsch to overthrow the local government, and was jailed. In his cell he wrote a political manifesto entitled Mein Kampf (“My Fight”). In 1933, Hitler and his Nazi Party were masters of Germany, and in 1939 he plunged the world into war.
Like Japan, Germany was a small country without many natural resources. A particular problem was that Germany had very little arable land, and had always depended heavily on imported food. And so, like Japan, Germany was led inexorably to a militaristic program of expansion through conquest. The Nazis mixed their German nationalist platform with a heavy dose of anti-Communism and anti-Semitism.
The Nazi program appealed to the German corporations, and the Nazi Party began receiving money from German industrialists as early as 1923. One of the earliest was Emil Kirdorf, the German financier who had earlier sent money to Lenin’s Bolshevik Party in the hopes that the revolutionaries would take Russia out of the war. Kirdorf later recalled, “In 1923 I came into contact for the first time with the National-Socialist movement . . . Since then I have placed myself completely at the disposition of his movement. . . . A number of meetings took place between the Fuehrer and leading personalities in the field of industry. For the last time before the taking of power, the leaders of industry met in my house together with Adolf Hitler, Rudolf Hess, Herman Goering and other leading personalities in the party.”
Another financial backer was Fritz Thyssen, a German steel company executive, who was approached by Kirdorf and, after meeting Hess, arranged for a line of credit for the Nazi Party in a Dutch bank, totaling a quarter-million marks.
Gustav Krupp, head of the enormous weapons manufacturer, had backed Hitler since 1932. After taking power in 1933, Hitler named Krupp as head of the Reich Federation of German Industry. The Krupp company was an extensive user of slave labor from concentration camps, and had a fuse factory in Auschwitz. Other German companies that benefited from use of slave labor (leased from the SS at the rate of four marks a day) were BMW and Siemens.
In 1945, Krupp was indicted at the Nuremburg trials (and thus became the only person to be charged with war crimes in both the First and Second World War), but was never tried due to his advanced age and loss of mental capacity. He had already turned control of the company over to his heirs.
Many of the German industrialists who financed the Nazis had business and financial ties to American corporations, and several of them were managers of German divisions of American corporations.
One of the Nazi party’s most lucrative deals came in 1932, when a meeting between Hess and representatives of the giant German chemical company IG Farben, the German manager of the American subsidiary of IG Farben, the Hamburg-America Shipping Line, and the Potash Trust, resulted in a half-million mark line of credit in Hess’s bank account.
The biggest push by the Nazis for funding, though, came on the eve of the 1933 Reichstag elections. On February 20, Goering meet with representatives from the Association of German Industry, IG Farben, the Vereinigte Steel Works, and the August-Victoria mine. Hitler himself spoke to the industrialists—mostly about the dangers of communism—and they responded with a campaign fund of three million marks, from industrialists and companies including Telefunken, German General Electric, Hoesch, Bosch, and Brikett. Over three-fourths of the money came from IG Farben, and much of that came from Farben’s American subsidiary. Three German members of American IG Farben’s board of directors were later imprisoned for war crimes, for financing Hitler’s rise to power.
There was no evidence that any American members of IG Farben funneled money to Hitler, but it is a fact that Hitler had many admirers in the world of American corporations, due largely to his anti-communist attitude and his effective crushing of the German labor movement.
Trading With the Enemy
When Adolf Hitler declared war on the US after the Pearl Harbor attack, several American corporations held large investments in Germany: Esso (Exxon) had $120 million, General Motors had $35 million, Ford had $17.5 million. General Electric, International Telephone and Telegraph (ITT), and International Business Machines (IBM) also had financial ties to Germany. Ford had large automobile plants at Cologne and Berlin. GM owned the controlling interest in the Opal Company. General Electric had an agreement with the IG Farben corporation to control the world supply of tungsten carbide, a metal which was important for manufacturing. IBM manufactured the Hollerith tabulating machines (early computers that used punched paper cards) which enabled the Nazis to carry out the massive record-keeping that was necessary to enforce the racial categories imposed by the Nuremburg laws. (Not long afterwards, history repeated itself, as IBM provided the computers that allowed the South African government to track millions of people through the racial categories imposed by the apartheid system).
In 1939, at the outbreak of war, the overseas assets of all these American corporations were placed into German holding companies, ostensibly to be returned at the end of the war. The Nazis converted the GM and Ford plants to war production, and after conquering France in 1940, also confiscated the French Ford and GM plants. They were all used to produce tanks, trucks, and aircraft engines for the Wehrmacht. In 1941, after Germany declared war on the US, all these assets were seized by the Nazis.
The American corporations later denied that they had any control of their German subsidiaries, or received any of the profits, after 1939. The Nazis had laws which required all the profits of foreign companies operating in Germany to stay in the country, and outlawed repatriating the money back to their home country. Nevertheless, there are indications that some American companies, including GM and Ford, did manage to obtain at least some of this money between 1939 and 1941, through bookkeeping tricks such as “fees” charged to the subsidiary and “repayments” of nonexistent loans. And documents uncovered after the war indicated that at least some companies, including GM, did retain some direct authority over their German subsidiaries between 1939 and 1941, but decided to go along with Hitler’s orders so as to not have their assets seized. After the war, the American corporations received compensation from the US government for the damages inflicted on their German and French factories by Allied bombing raids.
Of all the American corporate barons, Henry Ford in particular seemed to have a mutual relationship with Hitler that beyond pure economic interests. In 1922, Ford wrote an anti-Semitic book titled The International Jew, which blamed the Jews for everything including world communism. Hitler liked the book so much that he reprinted it in Germany. In 1938, Hitler presented Ford with the Cross of the German Eagle, and he reportedly kept a photo of Ford on his desk.
Ford was not the only prominent American to get a medal from Hitler. In 1936, aviation hero Charles Lindbergh, at the request of the US Army Air Corps, accepted an invitation to visit Germany, where he was shown all the Luftwaffe’s newest aircraft, including the Messerschmitt Bf-109 fighter. Hitler awarded Lindbergh the Cross of the German Eagle, the same medal he had given to Henry Ford. When he returned to the US, Lindbergh apparently decided that the British and Americans should let Hitler go to war with Russia, and encouraged this point of view in a memo he sent to the British government at the request of Joseph Kennedy, the American Ambassador to Britain—who apparently shared Lindberg’s anti-communist argument.
When England declared war on Germany in September 1939, Lindbergh resigned from the Army Air Corps and became a speaker for the America First Committee, an isolationist group that had numerous ties to Nazi propagandists. In his speeches, Lindbergh blamed the American war preparations on the British, the New Dealers, and the Jews. Roosevelt once remarked to a cabinet member, “I am absolutely convinced Lindbergh is a Nazi.” After the United States entered the war in 1941, the America First Committee disbanded.
Postwar
In the aftermath of the Second World War, the Allies drew up plans to disarm the Axis powers, to disband the German industrial corporations and the Japanese zaibatsu, and to prosecute their leading figures for war crimes. It never happened. Even before this war had ended, a new undeclared war had already begun. For the next 40 years, the Cold War would rage between the United States and the Soviet Union, and the defeated nations of Japan and Germany were instead reindustrialized and re-armed to take their place in the new war. America and its corporations would now assume the mantle of world leadership.