EP 05 - Trading with the Enemy

Trading with the Nazis

- Episode 06-

Kill Nazism with kindness?

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Kill Nazism with kindness?

7 February 2024

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NEW SERIES Trading with the Enemy

[photo] Morgenthau (left) and President-elect Franklin D. Roosevelt (centre) were neighbouring farmers in up state New York. Pictured at FDR's country retreat, Warm Springs, November 30, 1932, when FDR was still Governor of New York

Henry Morgenthau, FDR’s conscience

Economists laugh at Henry Morgenthau, who was appointed US Secretary of State for the Treasury by his farming neighbour, President Roosevelt, in January 1934. They sneer at him for being a ‘gentleman apple farmer’ who ‘knew nothing about economics.’

But Morgenthau was a shrewd, tough operator. Plus… given his German-Jewish background, he showed a far greater grasp of what was happening in the Third Reich than anyone else in Washington. Eleanor Roosevelt called him her husband’s conscience.

Morgenthau saw through the German Reichsminister for Economics, Hjalmar Schacht, and his tortuous attempts to play Britain, France and America off against each other. In 1936 he successfully forced Schacht to back down from his latest attempt to manipulate Gemany’s currency and subsidize its exports.

[cartoon] Uncle Sam giving money to Morgenthau. Anti-Jewish poster issued in German occupied Serbia in the fall of 1941 for the Grand Anti-Masonic Exhibition in Belgrade from October 22, 1941, to January 19, 1942.

[photo] Cordell Hull, Secretary of State at the Foreign Office, in Washington D.C. In 1939, the year before this photograph was taken, Hull had advised Roosevelt to reject the SS St. Louis, a German ocean liner carrying 936 Jews seeking asylum from Germany. Hull's decision sent the Jews back to Europe on the eve of the Holocaust. Some historians estimate that 254 of the passengers were ultimately murdered by the Nazis.

Cordell Hull believed ‘unhampered trade dovetailed with peace’

The problem for Morgenthau (US Secretary of State for the Treasury) was that his policy of getting tough on Hitler was openly opposed by the Secretary of State at the Foreign Office, Cordell Hull. Hull was obsessed with the notion that the key to world peace was trade agreements.

Hull believed that free trade with Germany would undermine Nazi extremism and make Hitler’s ambitions for conquest look pointless. Trade deals would spell an end to the economic nationalism that was tearing Europe apart. It would be, he said, ‘economic disarmament.’ You could kill Nazism with kindness. And this suited the American businesses by now heavily invested in Germany, under Hitler, very well indeed.

At every turn Hull undermined Morgenthau’s attempts to stifle Germany’s re-armament programme. And this meant that the Germans were able to go on purchasing the important American raw materials they lacked for their military, including cotton, petrol and copper.

#87 Kill Nazism with kindness? - Ep 6 Trading with the Enemy

If the German economy collapsed, the British bankers would lose everything

[photo] Sir Robert Vansittart, 1934, National Portrait Gallery

British Bureaucratic Chaos

In Britain, the American 'Morgenthau-Hull rivalry' was played out within the Foreign Office between Sir Robert Vansittart, the head of the Foreign Office, and his assistant ostensibly responsible for Germany, Orme Sargent.

Now Vansittart is our goody. Like Morgenthau in the US he was convinced that tough action was necessary to contain Germany ‘even at a cost to certain people here’ - by which he meant British banks which had exploited Germany’s economic difficulties between the wars. For example they’d borrowed in Paris and New York at 2% and lent in Germany at 8%.

BUT he was hampered by Orme Sargent - the loudest voice arguing that Germany needed protecting, treating with kid gloves, for fear of provoking it into a war. And by the rest of his lazy staff of mainly Etonians who were more focused on the imminent disintegration of the Empire.

As if that wasn’t enough to contend with the powerful Prime Ministers Ramsay MacDonald and Neville Chamberlain fancied themselves as world statesmen. Consequently they ignored all advice but their own gut feelings.

[cartoon] Vansittart as a big cat, 1935

[cartoon] Montagu Collet Norman, Governor of the Bank of England, September 1935, National Portrait Gallery. After the Nazi invasion of Czechoslovakia in 1938 he transferred all Czech gold deposits to the German Reichsbank.

Norman and his friend Schacht in Germany, alone could save the world

At the centre of Britain’s complicity in Nazi rearmament we must place the governor of the Bank of England from 1920-44, Montagu Norman, who had a very soft spot for the Germans.

From at least 1923 he had been a close friend of the banker and later Reich Economics minister Hjalmar Schacht. Indeed, he confided to the US Ambassador in February 1939 [a certain Joe Kennedy], that up till then, all of his information on Germany had come from Schacht. All of his information?

In 1931 alone seven British banks were technically insolvent, because of their German liabilities. These British banks were now being propped up by Montagu Norman at the Bank of England. The result was an Anglo-German agreement on 19 September 1931 which basically allowed Schacht to get them in an arm lock. If the German economy collapsed, the British bankers would lose everything. So they had better go on lending. And paying for Germany to prepare itself for war.

And alone among the nations trading with Germany, the right-wing British governments of the 1930s did nothing about it.

#87 Kill Nazism with kindness? - Ep 6 Trading with the Enemy

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