Western Political Science Association
University of Utah
American Business and Germany, 1930-1941
Author(s): Gabriel Kolko
Source: The Western Political Quarterly, Vol. 15, No. 4 (Dec., 1962), pp. 713-728
Published by: University of Utah on behalf of the Western Political Science Association
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AMERICAN BUSINESS AND GERMANY, 1930-1941
GABRIEL KOLKO
Harvard University
HE QUESTION of the relationship of business to war has become a relatively settled one for most students of recent American history. Even critical historians of the topic have made it abundantly clear that the once acceptable deductions from John Hobson, Rosa Luxemburg, or Lenin on the purpor-
tedly inexorable relationship between capitalism and war will not accomodate our
knowledge of actual business behavior. Less critical historians have gone so far as
to assert that the business position on foreign affairs has not been significantly distinguishable from that of a majority of the public at any time, save when it has
been anti-war and anti-imperialist.
Julius W. Pratt's discussion in 1936 of business' generally anti-imperialist and
anti-war attitude before the Spanish-American War was the first important critique of the then widely held opinion that recent United States wars were the result of business cupidity, economic expansion, and desire for arms profits. Indeed,
Pratt's thesis was advocated at a time when even many businessmen accepted the
common public beliefs on the relationship of business to war and supported the
concrete expression of that sentiment in the form of Neutrality Laws. Harold C.
Syrett's more critical study of the business press in 1914-17 also reveals that although business decisions were made primarily on the basis of self-interest, busi-
nessmen were no more jingoist than the American population in general. Roland
N. Stromberg, in his study of business and the approach of World War II concludes, "In the drift toward unneutrality and then war, business played no independent role.... It was dragged along in the wake of circumstances, like everyone
else."' It is important to note that all of these studies depend almost wholly on
business publications, and that no attempt has been made to evaluate the correlation between words and actions.
The notion that business behavior is merely an undistinctive reflection of the
norms and actions of the larger society has been reinforced by the functionalist
theory of "entrepreneurial historians" who have specialized in business history.
The actions of businessmen, according to the entrepreneurial historians, "needs to
be placed in the context of their culture and society, and more specifically in the
context of the social situations in which they played special roles."2 These roles
determine the limits on the businessman's behavior and sanction certain types of
action. What is of importance is that the businessman does not determine these
criteria for his actions, but reflects the larger "basic overriding implicit themes, as1Roland N. Stromberg, "American Business and the Approach of War, 1935-1941," Journal of
Economic History, 13 (Winter 1953), 78; Julius W. Pratt, Expansionists of 1898 (Baltimore:
Johns Hopkins Press, 1936), chap. 7; Harold C. Syrett, "The Business Press and American
Neutrality, 1914-1917," Mississippi Valley Historical Review, 32 (September 1945), 215-30.
2 Leland H. Jenks, "The Role Structure of Entrepreneurial Personality," in Harvard University Research Center in Entrepreneurial History, Change and the Entrepreneur: Postulates and Patterns for Entrepreneurial History (Cambridge: Harvard University Press 1949), p. 132.
713
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714 THE WESTERN POLITICAL QUARTERLY
sumptions, valuations of the culture of that society."3 His position
tions and all other vital matters will therefore be similar to that of
In this paper I will deal with an instance - the period prece
world war - for which there is an extensive record both of American business'
words and actions. Business journals and public statements are of obvious importance, but they are not a sufficient source for an examination of the topic. I will
briefly outline the role of the business press, partially as a needed supplement to
Roland N. Stromberg's survey of the business press from 1935 through 1941. But
I will also consider the concrete activities of large and important segments of business during this period, primarily in the form of a descriptive survey of the various
links between strategic major American firms and German industry. Even if this
single but important exception is not disproof of recent generalizations on the relation of American business to foreign affairs, at least it suggests the need for a more
comprehensive approach to the problem in the future.
Irrespective of their stand on specific foreign policy issues during 1930-41, the
American business press was overwhelmingly opposed to fascism and nazism.
Above all, business publications after 1934 described the economic nature of these
movements in a fairly sophisticated manner which could hardly have enhanced
totalitarianism's attractiveness to most businessmen. It is true, as James W. Prothro
shows in The Dollar Decade, that in the 1920's a number of articulate leaders of
the Chamber of Commerce and National Association of Manufacturers thought
fascist Italy "the most creditable development in human history" and Mussolini
"a fine type of business executive," but few such sentiments were publicly expressed in the business press in the 1930's.4
When the Nazis took over Germany in 1933 their initial economic program
was kept deliberately vague in order to maintain internal party unity and appeal
to all classes of Germans. This vagueness was reported as a fact in the American
business press, and greeted with skepticism. Hitler was a political and economic
nonconformist, and this alone evoked caution from the business press.5 It took
little time for business journals to discover that nazism was alien to their interests.
At no point did any significant business journal attempt to glorify Hitler or even
to mitigate its critical view of him by explaining his assets as opposed to his liabilities or the conditions which might have suggested reasons for the rise of Hitler and
our consequent need to understand rather than condemn him.
Roland N. Stromberg has suggested that "there was no basis for a crusade
against Hitlerism in the business mind prior to 1940" and that some business journals saw no difference between Hitler and Roosevelt until 1940.6 American business journals, however, were generally much more aware of the nature of Hitler-
ism than many congressmen and certainly most isolationists, and their analogies
aIbid., 131; for a summary and critique of this entire viewpoint, see Gabriel Kolko, "The Premises
of Business Revisionism," Business History Review, 33 (Autumn 1959), 330-44.
4 Quoted in James W. Prothro, The Dollar Decade: Business Ideas in the 1920's (Baton Rouge:
Louisiana State University Press, 1954), pp. 204-5.
SSee "Hitler's Program is Vague," Business Week, May 10, 1933, p. 24, and "Germany," ibid., July
28, 1934, p. 29.
' "American Business and Approach of War," Journal of Economic History, 13 (Winter 1953), 76.
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AMERICAN BUSINESS AND GERMANY, 1930-1941 715
between Hitler and Roosevelt must be taken with a grain of salt. Althoug
may have conformed to dominant opinions in other respects, business jo
were by no means misinformed, no matter what their stand on intervention
Neutrality Laws, or Lend-Lease. By 1935, nearly every one of the frequent re
on German economic affairs in Business Week, for example, was critical.
economic activity, it reported, "is greatest in the so-called war industries
free press had been eliminated and this alone created a grim dread of naz
The business press was aware, from 1935 on, that German prosperi
based on war preparations. More important, it was conscious of the fact that
man industry was under the control of the Nazis and was being directed
Germany's rearmament, and the firm mentioned most frequently in this con
was the giant chemical empire, I.G. Farben. The establishment of the Fo
Plan in late 1936, with its goal of complete German self-sufficiency, and
creasingly bellicose speeches of Hitler only strengthened the hostility of the
ness press toward nazism. "Foreign trade is on a controlled basis," declare
ness Week in September 1936. "Industry accepts the bidding of the gover
... German industry is going to be circumscribed by government almost as ri
and as completely as in the country which it hates most - the Soviet Uni
As the war drew closer, and more and more business publications re
contingencies from their earlier noninterventionist sentiments, they still fa
examine the larger political and social issues facing democracy or capit
There was an occasional but isolated suggestion that war would result in t
chaos of hunger and revolution that followed World War I, but the po
never seriously explored.9 Some business publications were so convinced t
origins of war were to be found mechanically in pure and simple econom
flicts that they effectively advocated a position of implicit moral neutrality
political strains that have grown up between the nations have originated
from the depression of world business and trade," stated the National Ci
Monthly Letter in May 1939.10 The solution to the crisis, it suggested, w
an economic revival at home which would allow America to purchase mo
eign goods. In advocating that Americans sell to belligerents for cash on
tory Management and Maintenance declared: "But America's eyes are ope
time, to the fact that war loans lead to war itself, costly in lives and dollars
Far more significant was the reaction of a large section of the business p
1939 to an aspect of the war which obscured their many differences on Neut
Laws and similar divisive issues. Regardless of their editorial statements, man
the general business journals began giving their readers advice and backgroun
7 "Ups and Downs in Germany," Business Week, September 7, 1935, p. 37.
8 "Germany," Business Week, September 19, 1936, p. 54; also see Max Lekus, "Financia
of German Re-arming," Barron's, 15 (April 15, 1935), 17; Editorial, "German Pol
World Peace," The Commercial and Financial Chronicle, 143 (September 19, 1936
Bert H. White, "Self-Sufficiency Through Industrial Magic," Barron's, 17 (Septem
1936), 6, for the Nazi military threat and I.G.
' Walter M. Gardner, "If War Comes," Magazine of Wall Street, 64 (April 22, 1939), 12.
10 "General Business Conditions," National City Bank Monthly Letter, May 1939, p. 51.
" Editorial, "If Europe Goes to War," Factory Management and Maintenance, 97 (Sep
1939), special supplement.
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716 THE WESTERN POLITICAL QUARTERLY
making profits in a new situation - war. "Naturally, in thinking
concern of a majority of the readers of this publication is the p
effects upon the security markets," blandly commented a w
pro-Ally Magazine of Wall Street, whose tacit assumption wa
industry had a unique interest to follow.12 The generally
echoed the same theme:
War is hell, as General Sherman once remarked, not only for the belligerents but also for in-
vestors in neutral countries.
All that can be done at this early stage is to hedge commitments on the basis of our World
War experience, with allowance for known differences, and await the unfolding pattern of future
events."1
This policy of advice and aid in the making of war profits was not the result
of conformity by default, but was carried on with enthusiasm. James H. McGraw,
who was an isolationist at this time, wrote in his chain of business publications in
October 1939: "To say that Industry and Business want war or will encourage,
directly or indirectly, our participation in the present war, is a vicious and deliberate lie."14 But the strength of his denial did not change the policy of his publi-
cations. As early as February 1938, Business Week was writing, "Activity in the
armaments business is going to soar to new heights, with everyone feeling a little
more confident now than a few weeks ago that there is another opportunity for
profitable business before the conflagration breaks out."'5 "Smart businessmen
will be on the qui vive when Congress opens hearings on the Presidential [armaments] program," wrote Business Week a year later. "Once the questions start,
the answers will throw light on specific types of products the Army and Navy will
be in the market for. And manufacturers, primed with this information, can get
set to supply that market.""6 In the most self-effacing statement of all, Business
Week wrote, "Business, after all, thrives on profits, or the prospects of profits; and
war orders, like any other orders, produce a favorable state of confidence."'7 Thus
temptation overcame virtue!
The approach of war resulted in an abandonment of Roosevelt's short-lived
Temporary National Economic Committee and trust-busting phase, and despite
initial fears in the business press that war might lead to the "conscription of
wealth," economic controls, and the like, these anxieties were soon laid to rest.
The major reason for the disappearance of business fears was the continued assurance of the Administration, even during the T.N.E.C. period, that business appre-
hension was unwarranted. As early as April 1938, Assistant Secretary of War
Louis Johnson declared in an interview in Nation's Business that business should
" Gardner, op. cit., p. 13.
* L. C. Duncan, "Your Investments in War," Barron's, 19 (September 11, 1939), 3; also see "What
Happens in War Markets," ibid., 19 (August 28, 1939), 10; Edward N. Chapman, "Suppose
There is War," ibid., 19 (February 6, 1939), 6; John C. Cresswell, "What World Armament
Means to Our Domestic Economy," Magazine of Wall Street, 64 (July 15, 1939), 332; New
York Journal of Commerce, September 1, 1939, p. 1.
4 James H. McGraw, Jr., "Business Stands Against War," Business Week, October 7, 1939, p. 52.
1 "War's Delay Helps Business," ibid., February 26, 1938, p. 14.
" "Arms and the Business Man," ibid., January 21, 1939, p. 14.
7 "Crises and Confidence," ibid., February 4, 1939, p. 48; also see "Britain's Needs Set the Pace,"
ibid., June 17, 1939, p. 52.
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AMERICAN BUSINESS AND GERMANY, 1930-1941 717
have no fear of conscription of capital or limitations on fair profits in the
war.'8 In his first major speech as Secretary of Commerce in February 1939,
Hopkins assured businessmen of the realism of the Administration and i
not to alienate them.19 The formation of the War Resources Board in
1939, composed entirely of top capitalists who soon became dubbed the "
Du Pont" group, also gave business added security. The short life of tha
was due as much to its own inept sense of public relations, which gave stron
munition to unhappy liberals and labor, as to any other factor. Louis J
foreword to a book on Adjusting Your Business to War, despite the Adm
tion's disavowal of official responsibility for it, only added to business'
mind.20 When war finally began in Europe, dominant sentiment in the
press was far less filled with an apocalyptic vision than a frank concern wit
consequences to business. And the business press' estimate of the situa
flected the assurances of Washington - "it is likely that government m
with business will be less of a burden from now on," declared Printer's I
As war orders poured in and the business press in general became less isol
ist, such cautious optimism turned into unqualified optimism. As the d
year men poured into Washington to administer the war agencies, as cost-pl
tracts were introduced, the five-year amortization plan established in what
ed out to be partial government gifts of new plants to industry, and as an e
profits tax was organized in such a way as to balance business gains again
for the guarantee of longer-term high profits, business enthusiasm turned in
tancy.22 When the War Department let it be known in June 1940 that it op
on general principle, the Walsh amendment to the Shipbuilding bill li
profits to 7 per cent, business received its final assurance of security.23
time the National Association of Manufacturers, Junior Chamber of Com
and most business publications were strongly pro-English and in favor of m
rearmament. In this respect, at least, they did not differ from the commun
general, but the reasons for their position were not merely those of the no
ness public, but rooted in unique business needs and interests as well.
Business, like most institutions, is not given to serious thought on its ro
society or the disparities between its actions and its professions of faith. W
rise of public relations as a formal aspect of business life, the number of su
ments of faith in publicly esteemed values, virtues, and ideals has increa
the compatibility, if not identity, between the functions of business and th
and needs of the larger society has been continuously reiterated. Unfort
18 Louis Johnson, "Your Job in the Next War," Nation's Business, 26 (April 1938), 2
editorial, "Conscription of Wealth," Business Week, May 13, 1939, p. 60.
19 Robert E. Sherwood, Roosevelt and Hopkins, An Intimate History (New York: Harper
pp. 111ff.
20 See Eliot Janeway, The Struggle for Survival: A Chronicle of Economic Mobilization in World
War II (New Haven: Yale University Press, 1951), pp. 59-70.
2 L. D. H. Weld, "Business As Usual! War in Europe Means U.S. Economic Upturn," Printer's
Ink, 188 (September 8, 1939), 16.
22 See Janeway, op. cit., pp. 163-65, and Walter Adams and Horace M. Gray, Monopoly in Amer.
ica: The Government as Promoter (New York: Macmillan, 1955), chap. 4, for federal economic policy.
" New York Times, June 20, 1940, p. 15.
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718 THE WESTERN POLITICAL QUARTERLY
for historians such professions often have little to do with the rea
behavior, and in reference to the problem of business and foreign
serve to confuse. Equally unfortunate is the fact that the busin
who direct, who, in short, make business history "as it really w
about it either privately or for the business press, and the historia
where to understand business' actual role in foreign affairs.
American business' functional role in world affairs in the de
ceding the war found expression in cartel and contractual agreemen
American firms and German industry. The economic significanc
companies is much greater than their numbers. Although only twe
could be found among the top one hundred industrial corporat
gether these twenty-six accounted for over 60 per cent of the t
hundred.24 More important, these corporations generally were the
respective industries, and as such were price and policy leaders.
The relationship of American business to German cartels pr
of nazism, and in this respect later developments merely strengthe
which had been created in the 1920's. Indeed, American banke
crucial lubricant - capital - for the formation of some of the
cartels. The average yield on German bonds in the 1920's was 7 t
attracted by such returns Americans purchased $1,239,000,000 i
issues from 1924 through 1930. Encouraged by American ban
pecially Dillon, Read, and Co., because of the greater ease of s
and bonds of cartels, the United Steel Works was formed in Ger
a number of independent steel companies on a quasi-cartel basis
man industrial firms floated $214,419,000 of their bonds in the Un
largest segment of which was handled by Dillon, Read, and mo
went to a very small number of German corporations. In return fo
zational aid American bankers earned $50 million in profits o
many of which were never repaid, from 1924-30.25
The existence of both the Nazi party and I.G. Farben was, fr
view of the expansionist goals of both, a fortuitous coincidence
Works had a strong Nazi group among its top executives, cen
Thyssen, from its inception. German industry was naturally extrem
and alarmed by the growing strength of the Social Democrats
By 1931, Hitler was glossing over his party's past radical econo
order to obtain the support of industry, which was increasingly lo
to work with the rising tide of nazism. A number of meetings bet
and industrialists in 1932 strengthened the alliance. In Novembe
2" Calculated from Temporary National Economic Committee, Investigation
Economic Power (43 vols.; Washington, D.C., 1940-41), XXIX, 346-47ff.
25 Robert R. Kuczynski, Bankers' Profits from German Loans (Washington, D
5, 27, 127, 141, 150-55; Rationalization of German Industry (New York: N
Conference Board, 1931), 82-85; testimony of Philip C. Newman, House C
Judiciary, Study of Monopoly Power, Hearings Before the Subcommittee
opoly Power (H. Docs., 81 Cong., 1st Sess.; 3 parts, Washington, D.C., 195
can be no doubt that the cartel movement in the last analysis was the out
socio-economic trends, and found American capital only a convenience
Schumpeter, Business Cycles (New York: McGraw-Hill, 1939), II, 759-67
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AMERICAN BUSINESS AND GERMANY, 1930-1941 719
Nazis lost two million votes, many industrialists signed a petition asking
burg to appoint Hitler Chancellor.26 The unification of I.G. Farben and
tels with the Nazis was not forced by any means. When the Nazis came t
the essential cartel structure was maintained as the economy was divid
eight major national units, continued under the same leadership, and guid
insofar as unified national production and price policies were concerned.27
In 1933 I.G. set up a Political-Economic Policy Department to coordin
activities with the government, and in 1935 "a central office for liaison" wit
German military was organized to deal with mobilization plans, counter
gence, military security, secret patents, etc.28 Collaboration was complete in
detail. As Judge Hebert declared at the Nuremberg Trials, "Farben was
grated in the governmental planning and preparation for war and becam
Hitler's greatest assets."29 I.G. donated 400,000 marks of over two million con
buted to the Nazis by the big industrialists for the critical election of March
and subsequently aided the Nazis in every way, from conventional indust
technical aid to operating in the international Nazi propaganda machine,
lection of information for military intelligence, and finally, the organization
tories at Auschwitz so destructive of human life that even the S.S. criticized th
"Farben collaborated in the economic regimentation without reserve. It is
clear that in return it expected the support of, and rewards from, the regim
This is received in the form of war orders which made it, by far, the larges
plier of the German military machine, and in its accession of a major part of
industrial plant of conquered Europe.
American business was conscious of the subservience of the German cartels
the Nazis and the remilitarization of Germany, if only because it often read
it in the business press. Fifty-three American companies were in some
connected with I.G. alone, and the assertion of Josiah E. DuBois, Jr., a l
lawyer in the Nuremburg cases, that "Farben scheming. . had victimized
of them" is hardly sustained by the evidence.31 This is so not only because o
business press' coverage of German affairs, but because there is ample e
that many of the major American industries knew directly of the relationsh
the cartels to the Nazis from at least 1933 on. In July 1933, for example, a m
ing between Homer H. Ewing, of Du Pont's London office, Jasper Crane,
vice-president, and I.G. officials was reported to Wendell R. Swint, dire
Du Pont's foreign relations department:
2 Fritz Thyssen, I Paid Hitler (New York: Farrer & Rinehart, 1941), pp. 90-92, 98, 100
ward N. Peterson, Hjalmar Schacht: A Political-Economic Study of Germany, 19
(Boston: Christopher, 1954), pp. 26ff, 119.
27 George W. Stocking and Myron W. Watkins, Cartels or Competition? The Economics
national Controls by Business and Government (New York: Twentieth Century
1948), pp. 49-50; Maxine Y. Sweezy, The Structure of the Nazi Economy (Cambrid
vard University Press, 1941), p. 91.
28 International Military Tribunal, Trials of War Criminals Before the Nuremberg Mili
bunals Under Control Council Law No. 10 (15 vols., Washington, D.C., 1949-1953
1244. (Cited hereafter as Trials of War Criminals.)
29 Ibid., VIII, 1215.
30 Ibid.,VIII, 1298; also see VIII, 1172-90, 1213-16, 1272, 1280-86.
1 Josiah E. DuBois, Jr., The Devil's Chemists: 24 Conspirators of the International Farbe
Who Manufacture Wars (Boston: Beacon Press, 1952), p. 81.
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720 THE WESTERN POLITICAL QUARTERLY
The German gentlemen discussed the political situation in Germany, with parti
the positive position of the Government against the Jews. They also explained
had developed a scheme whereby industry could contribute to the [Nazi] p
funds . . . Interviews in general with I. G. Farbenindustrie were of a very plea
indicated the closer cooperation which is manifest between Du Pont and that co
Similar information was available to most of the major American
with I.G.
American companies not only knew of I.G.'s relationship to the Nazis, but to
other American concerns as well. This was inevitable, for I.G. made a large number of exclusive agreements with American firms which bound companies not for-
mal partners to their restrictions. Du Pont, to cite one case, was forced to recognize the agreements of I.G. and Union Carbide and Carbon in certain fields and to
keep out of them. By making innumerable similar arrangements I.G. was able to
prevent many major American chemical and metal firms from following independent commercial and development policies and building the productive facilities which were later to become vital to the prosecution of the war. In effect, I.G.
worked American firms off against each other because its myriad contracts allowed
its obligations to remain unclear and undefined, save to I.G.33 The success of
these and other cartel activities was reflected in the American list of scarce and
strategic and critical materials issued for June 1940. Of the twenty major items
vital to national defense, fourteen were produced by companies involved in major
cartel and other arrangements with German concerns, of which the most important was I.G. Farben.34
It is almost superfluous to point out that the motives of the American firms
bound to contracts with German concerns were not pro-Nazi, whatever else they
may have been. The arrangements with German firms were stimulated by a fear
of international price and market competition and a desire for predictable economic conditions as a basis for business planning. Many American companies entered into cartel structures with firms in nations other than Germany, but these
nations were not members of the Axis or the object of continued embargoes, moral
and otherwise. Unlike the business press, American firms in cartel arrangements
with German industry did not respond to the pressures of public opinion and sanc-
tions. Once they became committed to cartel agreements they loyally respected
them, in part because their actions were not subject to public review and it was
profitable or advantageous to do so. Their consciousness of the world crisis was
not that of the business press', and to the extent that they were aware of the political implications of the German cartels they could not or chose not to see the di2 Senate Committee Investigating the Munitions Industry, Munitions Industry, Hearings Before
the Special Committee Investigating the Munitions Industry (S. Docs., 73 Cong., 2nd Sess.;
40 parts, Washington, D.C., 1934-1943), XII, 2889-90. (Cited hereafter as Munitions
Industry.)
" Corwin D. Edwards, Economic and Political Aspects of International Cartels (Washington,
D.C.: G.P.O., 1946), 4-7; George W. Stocking and others, Cartels in Action: Case Studies
in International Business Diplomacy (New York: Twentieth Century Fund, 1947), pp. 500ff.
" Calculated from data in Senate Committee on Military Affairs, Strategic and Critical Materials,
Hearings Before a Subcommittee of the Committee on Military Affairs (S. Docs., 77 Cong.,
1st Sess.; Washington, D.C., 1941), p. 7.
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AMERICAN BUSINESS AND GERMANY, 1930-1941 721
rect relevance of their own actions to larger patterns and relationships. The
ness press, in effect, was not a barometer of the actions of major corporatio
these corporations were far less concerned with market expansion in the
ialist sense than they were with predictable market stability.
The most significant agreement made by I.G. in the United States w
the Standard Oil Company of New Jersey. In March 1926, Frank Howa
Standard visited the I.G. laboratories at Mannheim and was shown a revolutio
hydrogenation process which would allow I.G. to make high quality mot
from abundant supplies of lignite and low-grade coals. Howard was du
pressed: "I think this matter is the most important which has ever faced th
pany since the dissolution. ... This means absolutely the independence o
on the matter of gasoline supply. Straight price competition is all that is lef
In November 1929, as a result of Standard's fear of I.G.'s ability to upset the
oil market, an agreement was consummated between the two companies
remained secret until the Department of Justice intervened in 1941. Un
terms I.G. was to stay out of the oil business, save in Germany, and Standar
to stay out of the world chemical industry, including the United States. Ove
ping fields were to be developed jointly, although patents and research c
the other's field would be freely traded. In return for its goodwill I.G.
546,000 shares of Standard's stock, or 2.2 per cent of the total, with a
value of $35 million.36 The agreement was executed with full consciousness o
possibility of government intervention. Under its terms, if "the beneficial
of either party be alienated to a substantial degree by operation of law or g
mental authority, the parties should enter into new negotiations . . . to adap
relations to the changed conditions.... Both parties agree that in the eve
attack by a third party.., they will cooperate loyally in defense of such atta
As will be seen, Standard respected this agreement literally despite I.G.'
disregard and Standard's later knowledge of the purposes to which the N
ernment was using it.
On March 9, 1934, I.G. wrote its New York subsidiary that in its "
ments about technical collaboration ... we should... not allow foreign i
to gain the impression that in this respect we are not free to negotiate."38
theless, I.G. did not entirely conceal this information from Standard, becaus
ing the prior January I.G. had written Standard, in reference to another pr
that "another complication is the present policy of the German Govern
" Quoted in Wendell Berge, Cartels: Challenge to a Free World (Washington, D.
Affairs Press, 1944), pp. 210-11. Berge was Assistant Attorney General during the c
vestigations.
*" Senate Committee on Military Affairs, Scientific and Technical Mobilization, Hearings Before a
Subcommittee of the Committee on Military Affairs (S. Docs., 78 Cong., 1st Sess.; 16 parts,
Washington, D.C., 1943-1944), IV, 616-74. (Cited hereafter as Scientific and Technical
Mobilization.) Stocking and others, op. cit., pp. 92-94; Stocking and Watkins, op. cit., pp.
87-88.
I3 Senate Committee Investigating the National Defense Program, Investigation of the National
Defense Program, Hearings Before a Special Committee Investigating the National Defense
Program (S. Docs., 77 Cong., 1st Sess.; 31 parts, Washington, D.C., 1941-1946), XI, 4310.
(Cited hereafter as Investigation of the National Defense Program.)
3 Trials of War Criminals, VIII, 1274.
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722 THE WESTERN POLITICAL QUARTERLY
requiring examination and approval of foreign contracts."39 Standa
situation, in July 1936 wrote I.G., in reference to its $35 millio
I.G.'s goodwill, that "the arrangement is one which necessarily r
on both sides."40
I.G.'s sincerity in its relationship to Standard was shown o
items of military importance. In the fields of synthetic rubber, w
Judge Hebert in his concurring opinion at Nuremberg, "made it
Reich to carry on the war independently of foreign supplies," both
ard were active in development.41 Early in 1938 Standard gav
technical data for the manufacture of butyl rubber, which was
tain purposes, in return for I.G.'s promise to obtain permission fro
give Standard its information on buna rubber, which was bein
large scale in Germany from 1934 on. During 1938 the information
coming, and I.G. also exercised its contract right by preventin
licensing its butyl discoveries in the United States. In April 193
a potential butyl customer that "the only thing we can do is to
for authority to act, but in the meantime loyally preserve the restr
put on us."'42 At the same time that I.G. was telling Standard that
get buna released were "rather difficult" and would take time, i
Reich Economic Ministry in March 1938: "We, therefore, trea
quests of the American firms in a dilatory way ... the possibili
in detail, through strict reserve on our part to put the breaks
opments in the United States.""43
Several American rubber companies, as well as Du Pont, be
their own synthetics with considerable success, and goaded by
April 1939 sent small experimental buna samples, all the while prom
the indefinite future. In September 1939 Standard finally obta
rights for buna, but still did not obtain all the needed technic
until June 1940, two years after I.G. had received it, did Standard
butyl to American companies and begin moderate production
Firestone and U.S. Rubber, which had no alternate synthetic
war would cut off their supply of natural rubber, agreed to S
for 3 to 7 per cent royalties on the sale price of synthetic product
licensing of their improvements in the field. By this time rubber
most crucial material for the stockpile fund of $100 million m
Congress in July 1939, and Goodrich and Goodyear merely bega
of buna without a license. In October 1941 Standard sued Goodrich
on its patents, threatened to do the same to Goodyear, and cabl
on the matter. Only a consent decree by the Department of Justice
Standard to grant unrestricted licenses without royalties during th
3 Scientific and Technical Mobilization, IV, 461.
4* Trials of War Criminals, VIII, 1275.
41 Ibid., VIII, 1265.
4 Scientific and Technical Mobilization, I, 13.
3 Trials of War Criminals, VIII, 1277-78.
44Edwards, op. ct., pp. 58-60; Scientific and Technical Mobilization, IV,
op. cit., p. 81.
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AMERICAN BUSINESS AND GERMANY, 1930-1941 723
Standard's connections with I.G. extended into other areas as well. Ostensi-
bly to respect its agreements with Union Carbide and Carbon, in 1935, I.G. had
Standard discontinue its production of acetylene, a basic chemical for synthetic
textiles and drugs. Standard also assigned I.G. control of its patents for the
methane steam process for ammonia synthesis, a superior method for making ex-
plosives, and from 1933 to early 1940, when it could no longer stop production,
I.G. refused to issue licenses to eager American firms.45
In the field of 100 octane aviation fuel Standard initially refused to develop
the product for the United States Army because under its 1929 agreement it was
obliged to give full technical reports to I.G., which the Army would not allow.
Howard of Standard explained to W. S. Farish, president of Standard, that "to
meet the very proper desires of the Air Corps as expressed to us we shall have to
violate our agreements and perhaps forfeit the confidence of our associates, both
American and foreign."46 Standard did not, however, show the same qualms when
it came to building 100 octane refineries in Germany and Japan. Standard feared
that its 50 per cent-owned German subsidiary, D.A.P.G., would be left out of the
Four Year Plan and eventually would be forced to invest its large accumulated
profits in projects "less sound economically" than aviation gas.47 It was elated
when, in late 1938, the German government agreed to allow the D.A.P.G. to
build a plant with a capacity of 150,000 tons per annum.48 In June 1939 Standard's affiliate, International Hydrogenation Patents, which it owned together with
I.G., licensed Japanese Gasoline K.K. to produce iso-octane, the basis of 100 octane gas, in return for which I.H.P. was to receive royalties.49 By the time the
State Department in August 1939 called for "no further delivery to certain countries of plans, patents, manufacturing rights or technical information required for
the production of high quality aviation gas," the fact was accomplished.50
The outbreak of the war in September 1939 created obvious difficulties for
Standard's partnership with I.G., despite the fact that in January 1939 Standard
reassured I.G. that it still felt obligated to the 1929 pact. In late September 1939,
F. A. Howard met with officials of I.G. at The Hague and, according to Howard's
report to the Standard Board, "They delivered to me assignments of some 2,000
foreign patents and we did our best to work out complete plans for a modus
vivendi which would operate through the term of the war, whether or not the
U.S. came in."'1 No attempt to make the new agreement legally binding was
made, for "an attempt to put this provision in a form which would be fully legally
enforceable might result in many difficulties."52 In fact, however, neither Standard
nor I.G. paid any serious attention to the new gentlemen's agreement, for I.G. con45
46
47
48
Scientific and Technical Mobilization, IV, 446-64, 500ff.
Investigation of the National Defense Program, XI, 4827.
Ibid., XI, 4664.
Ibid., XI, 4667.
49Ibid., XI, 4824.
50 Quoted in Edwin Borchard, Neutrality for the United States (New Haven: Yale University
Press, 1940), p. 387.
51 Investigation of the National Defense Program, XI, 4585; Scientific and Technical Mobilization,
IV, 636.
52 Quoted in Edwards, op. cit., p. 69.
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724 THE WESTERN POLITICAL QUARTERLY
tinued to control the assignment of certain licenses in the United S
tember 25, 1939. The Hague agreements, in reality, declared a
court in 1947, were "sham transactions designed to create an appear
ownership of property interests which, nevertheless, continued to
the parties as I.G. owned."'53
The relationship between I.G. and Standard grew even more
war continued. In March and April 1940, Standard fulfilled an
Standard to file assignments for I.G. patents in France and the
to prevent their confiscation and possible free utilization for
effort.54 In late 1940 I.G. offered to pay Standard $24 million in g
garian property, a sum far in excess of its value and which me
Farish, that Standard was "getting something for nothing."55 T
ment refused to allow the bargain to be consummated, despite
pressure, on the grounds it would have aided Germany's progr
omic domination of Europe. That program had already been aid
for over a decade.
Business aid to I.G. and the German war machine went far beyond contractual obligations. Standard and General Motors, for example, each owned 50 per
cent by the Ethyl Gasoline Corporation and exerted a controlling interest in its
direction. In December 1934 a Du Pont executive warned E. B. Webb, president
of Ethyl, that its projected German plant would not be commercially valuable and
would only provide the German war machine with hitherto secret technical
knowledge.56 Webb ignored this warning and in January 1935 wrote the Chief
of the Army Air Corps for permission to supply a new German plant with 50 per
cent of the capital and complete production information. Webb declared that
all production would be for civilian use, which he knew was not true, and that
Germany would build the plant whether Ethyl cooperated or not, although he
granted it would be more difficult without American aid. In fact, however, since
the Nazis refused to allow foreign companies to withdraw profits, the real reason
for Ethyl's action must be explained differently. "General Motors has important
investments in Germany, producing there in excess of fifty per cent of the motor
cars," wrote Webb. "Standard Oil ... has large investments in all phases of the
petroleum business in Germany and sells more than thirty per cent of the motor
fuel .., it would be extremely unfortunate for all concerned if we do not proceed
to carry out the agreement with I.G."' 7 Not only did Ethyl build facilities for the
Germans, but it also built an Italian plant together with Montecatini Chemicals.
Since the new German plant was not in a position to meet Nazi needs immed" Standard Oil Co. v. Clark, 163 F. (2nd) 917 (Circuit Court of Appeals, 2nd Circuit, September
22, 1947), quoted in Trials of War Criminals, VIII, 1290. The revelation that The Hague
agreement was really a subterfuge, and the Circuit Court action that followed, is detailed in
James Stewart Martin, All Honorable Men (Boston: Little, Brown, 1950), pp. 78-81. Mr.
Martin was head of the Decartelization Branch of the U.S. Military Government in Germany.
54 Investigation of the National Defense Program, XI, 4829.
* Ibid., XI, 4828; also 4668-71. In June 1941 Farish denied at a stockholders' meeting that the offer
had been made; see, "The Annual Meeting," The Lamp, 24 (June 1941), special supplement.
Scientific and Technical Mobilization, VI, 939.
5 Ibid., VI, 942.
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AMERICAN BUSINESS AND GERMANY, 1930-1941 725
iately, "at the request of the Air Ministry and on direct order of Goer
Farben procured in 1938, 500 tons of tetraethyl lead from the Ethyl
Corporation."5s
Standard accommodated I.G. in other ways as well. In 1936, the Ge
Ministry of Economics provided I.G. with $20 million to buy aviation
stockpiling purposes through Standard. This item did not show up in De
of Commerce export data and was unknown to the United States Gover
The significance of these and other favors was not lost on I.G., and in a rep
the Gestapo in 1944 it noted that "since the beginning of the war we have b
a position to produce lead tetraethyl solely because, a short time before
break of the war, the Americans had established plants for us ready fo
tion and supplied us with all available experience."59 Concerning the st
of $20 million in gas, it wrote: "The fact we actually succeeded after t
difficult negotiations in buying these quantities demanded by the German
ment from the Standard Oil Company and the Royal Dutch Shell group
porting them into Germany was only because of the support of the Sta
Company."60 In the field of lubricants I.G. could report that "we were com
prepared from a technical point of view. In this way we obtained stan
only from our own experience but also from those of General Motors a
big American motorcar manufacturers."61
General Motors' involvement in Germany's military preparations
logical outcome of its forthright export philosophy of seeking profits whe
however they might be made, irrespective of political circumstances.
1939, Alfred Sloan, Jr., chairman of the G.M. Board, summarized this philo
in a letter to a stockholder:
. . to put the proposition rather bluntly, such matters should not be considered the b
the management of General Motors.
According to my belief, it should subscribe to that philosophy, or else it should no
export business at all. I will go so far as to say, if it did not subscribe to that philisoph
not do any export business, or any to amount to anything....
... an international business operating throughout the world, should conduct its o
in strictly business terms, without regard to the political beliefs of its management, or th
beliefs of the country in which it is operating.82
By April 1939, G.M. had applied its credo to its fullest limits, for O
wholly owned subsidiary, was (along with Ford) Germany's largest tank
er.61 Prior to that time Opel had been the chief beneficiary of Hitler's atte
endear himself to the German people with a cheap, 1,000 mark car. T
granted Opel a tax-exempt status, and in 1936 Opel was Germany's lowe
car. Opel's share of the German car market expanded from 35 per cent in 1
over 50 per cent in 1935, and under these circumstances, despite the fact it
58 Trials of War Criminals, VIII, 1272.
59 Quoted in New York Times, October 19, 1945, 9; also see Trials of War Criminals, V
"o Ibid.
1 Ibid.
62 Quoted in Edwards, op. cit., pp. 43-44.
8 Scientific and Technical Mobilization, IV, 443.
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726 THE WESTERN POLITICAL QUARTERLY
not take out its profits, G.M. had nothing to complain of.64 G
vested its profits in the German economy, expecting someday to r
The details of additional American business involvement with German in-
dustry fill dozens of volumes of government hearings. Four basic types of relationships should be briefly outlined, however. American business' participation
in them was motivated by a fear of international economic competition and unpredictability. Germany's involvement, especially after 1933, was primarily political in purpose. When American industry was not motivated by a dislike of instability, its connections with Axis industry were stimulated by a desire for profit.
As a Dow Chemical Company spokesman put it, "we do not inquire into the uses
of the products. We are interested in selling them."65
One major type of agreement was designed to restrict output and maintain
high prices. From 1931 to 1934, for example, the Aluminum Company of America and I.G., working together in a patent pool, managed to draw Dow Chemical,
the nation's sole producer of magnesium, into an agreement which gave I.G. the
right to control Dow's European exports and veto all output in excess of 4,000
tons a year, thereby also ending the threat to Alcoa's aluminum market.66 Alcoa,
following the same policy of high prices and low output, from 1923 on respected
world cartel quotas which were disregarded by the Germans after 1933. As a result, German magnesium output in 1939 was over five times that of the United
States, and its aluminum output grew from 80 million pounds in 1929 to 500 million pounds in 1939, while American output grew from 226 million to 430 million
pounds over the same period.67 A similar type of agreement between Krupp Steel
Works and General Electric in 1928 on tungsten carbide resulted in that crucial
machine tool metal being sold in the United States for $453 a pound from 1928 to
1936, and $225 from 1936 to 1941, although it cost G.E. only $12 to $23 a pound
to produce. The result was a technologically superior German machine tool industry which in 1934 consumed 22 times more tungsten carbide per unit of produced steel than the United States.68
American firms also established strong ties with Germany through licensing
agreements. Bendix Aviation, in which General Motors had a controlling stock
interest, in 1936 arranged with Siemens and Halske A.G. to freely exchange data
on automatic pilots, present and future aircraft instruments, and divide the world
sales areas. In its agreements with Robert Bosch, G.m.b.H., Bendix as late as 1940
provided complete data on aircraft and deisel engine starters in return for royal-
ties, even though it had to circumvent the British blockade to do so.69 Du Pont,
on the other hand, not only continued to recognize its earlier licenses to I.G. in
acrylates, nitrogenous products, and many other fields, but in 1938 gave I.G. im64 See "Germany," Business Week, February 2, 1935, 34-35; "Ups and Downs in Germany," ibid.,
September 7, 1935, 37; "Germany," ibid., September 19, 1936, 54.
5 Investigation of the National Defense Program, XXIV, 10349.
66 For the magnesium cartel, see ibid., III, 736-38; Stocking and others, op. cit., chap. 7; Edwards,
op. cit., p. 31; Berge, op. cit., pp. 221-25.
7 Stocking and Watkins, op. cit., pp. 272ff.
8 Ibid., 132-34; Scientific and Technical Mobilization, IV, 328-65.
* Scientific and Technical Mobilization, XVI, 2102-3.
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AMERICAN BUSINESS AND GERMANY, 1930-1941 727
portant processes for making chemicals used in buna, and in 1939 assign
nylon rights.70
Through export quotas assigned by the international steel cartel, U.S.
Bethlehem Steel, and most other major American producers, especially after
restricted the growth of their productive facilities while Germany's expande
September 1939, the German steel-makers arranged with American carte
bers to break the British blockade on its South American market, and conser
steel for military purposes, by shipping American steel to German distributo
A parallel German-American business connection was developed
division of world markets. A typical example of this was the division of the
American explosives market from 1926 until the war between Du Pont, I
Chemical Industries, and an I.G. Farben subsidiary, Dynamit-Actien-Gesel
Through this alliance Du Pont acquired 8 per cent of D.A.G.'s stock, wh
held until November 1940.72 General Electric, to cite another instance,
the South American lamp market with Osram in 1929, and in 1930 assig
Dutch Empire and European diesel engine market to a German firm.73
and similar arrangements were generally respected literally, and in January
Du Pont, honoring a 1933 agreement not to sell military ammunition in the B
Empire, refused to sell tetracene to the British Purchasing Commission.74
It would be difficult to suggest unqualifiedly that business was anti-
war, isolationist or interventionist, or fell into any other neat category prec
World War II. Business' role was complex - far more than historians of
topic have appreciated - but complexities do not eliminate our ability to
alize, but merely add contingencies to the generalizations we make. Th
plexity is inherent in the fact that there was a significant and hitherto igno
tinction between the business press, upon which most historical accoun
based, and business behavior. Within the press itself this disparity between w
and action appeared when, as war became imminent and then broke out,
editorial policies often clashed with their interest in war contracts and in
business power vis-it-vis the government. On the basis of deductions from e
preneurial theory we would expect actual business behavior and opinion
fairly consistent with that of the public. Yet the basic fallacy of this vie
other than its theoretical assumption that the social structure is a monolith
out conflict and classes that have unique interests, is that it is irrelevan
understanding of this period. The non-business public, after all, was in agree
on one fundamental question of foreign policy: they did not approve of
and nazism, and although they were divided on the tactical matter of what c
tuted a correct foreign policy, they nevertheless did not propose a policy of
70 Stocking and Watkins, op. cit., pp. 88-90.
"1 Scientific and Technical Mobilization, XVI, 2040; Ervin Hexner, The International Ste
(Chapel Hill: University of North Carolina Press, 1943), pp. 200ff.
72Munition Industry, V, 1230-39; Stocking and others, op. cit., 442-43, 474ff, 488; Scien
Technical Mobilization, IV, 377.
7 Edwards, op. cit., p. 22.
4 Stocking and Watkins, op. cit., pp. 88-90; Technical Disarmament Committee, German
pation in International Cartels (Washington, D.C., 1945), pp. 15-19.
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728 THE WESTERN POLITICAL QUARTERLY
tial collaboration. Indeed, aid to the Axis powers was considered
undesirable by virtually all isolationists and interventionists alike.
In their public relations roles the large American corporation
bound to German industry declared their sympathy for the pub
to strategic aid to Germany after 1936, but in their actual behav
pursued a course whose dominant objective was to satisfy their p
The export philosophy of General Motors, the agreements for po
lishment of cartel arrangements, the conscious disinterest in the pol
tions of strategic materials sales by Dow, Standard Oil, and other
the guiding values of business were distinctly class values. Such conf
the business community's actions and the business press indicate
fulness of considering only the business press and corporation press
tempting to evaluate the historic relationship of American busin
affairs. Equally important, the basic policies of large corporations on
tional scene in the 1930's were motivated less by the attraction of ne
tiers and markets than by their desire for the economic stabilization
bility which only cartels and market agreements could create. Th
"anti-imperialism" by American business was not altruism, but its re
its aim of profits with stability could best be attained by intern
solidarity.
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