Trading with the Nazis
How on earth did Hitler’s Nazi Third Reich ever find the resources to build a vast army and airforce and launch a war in 1939? Germany was supposed to be financially crippled after the First World War. And in the 1930s Europe was meant to be in the middle of the greatest depression in modern times. So how Hitler’s regime could afford to re-arm itself with the latest technology, and then hurl the world into war on an enormous scale, is a fundamental mystery. Or is it?
Carl Siemens, chair of Siemens the German electronics business, complained in 1929, ‘the whole world belongs to the Americans.’ If you want to understand how it was that American businesses ended up investing so heavily in Germany in the 1920s and 30s – so heavily that eventually they enabled Hitler to arm the fascist Third Reich - then you have to start by going back to the First World War. It starts with asking why the Americans declared war on Germany on 6 April 1917 but mysteriously did not ally with either Britain or France.
The US had a paradoxical strategy to ensure repayment of its WW1 loans. It would make Germany economically prosperous to ensure Germany was in a position to pay reparations to France and Britain (as per the Treaty of Versailles). This would mean that impoverished Britain and France could keep repaying the interest on their wartime loans to the Americans.
Economist Maynard Keynes, aware that Britain and France would never recover from endless interest repayments, proposed cancelling all war debts. Everyone would end up better off in the long run, as was later proved. But the US government refused and American companies, including Ford, General Motors, and Standard Oil, began to invest in Germany, exploiting its economic collapse and setting the stage for the rise of the Nazis.
The Americans insisted on extracting every cent from war-torn Britain and France in the aftermath of World War I. They made them repay the money they had borrowed, at increasingly high interest rates, to buy American weapons to fight Germany. It led to economic depression. The 1929 Wall Street Crash was part of a global financial meltdown which led to economic nationalism – survival of the fittest, everyone for himself. And that was before Hjalmar Schacht Reichsminister for Economics in Germany, trapped American companies in a series of clever regulations. It enabled Hitler to rearm. [We get to the British next!]
For all the complaints about the difficulties of doing business in Hitler’s Germany, the Americans seemed strikingly settled there. Now we get to the nub of why, when Germany occupied Austria, Czechoslovakia and then part of Poland in 1938-39, its military rolled out in General Motors and Ford cars and trucks, and its planes were using General Motors and Ford parts. They were also burning American fuel. And using American research to justify forcibly sterilising those they considered mentally unfit.
In 1936 the US Ambassador in Berlin, William Dodd, wrote to President Roosevelt warning of a pro-Nazi clique of US industrialists ‘hell-bent to bring a fascist state to supplant our democratic government.’ We look at the notorious Liberty League and the dinner in New York’s Astoria to celebrate the fall of Paris to the Nazis. We showcase the businessmen who believed they were above democracy and could achieve world peace (under fascism) through world trade.
A perfect storm created the conditions for the Nazi’s march to war. The naïve belief that you could kill Nazism with kindness (aka trade agreements from which bankers and businessmen personally hoped to profit) was held simultaneously by the US Secretary of State, Cordell Hull, the Governor of the Bank of England, Montagu Norman, and the second in command at the British Foreign Office, Orme Sargent. Their opponents in government argued that tough action was necessary to contain Germany ‘even at a cost’ to those who had invested. They were consistently undermined.
Horrified by the implications of aiding German rearmament, a few British and American companies made serious attempts to get out of Germany in the 1930s. Particularly after Kristallnacht, 10 November 1938, when Nazi thugs attacked Jewish businesses. But the British Establishment saw Hitler as ‘a man who could be relied upon’. The Bank of England argued as late as March 1939, four days after Hitler had marched into Prague, that the British couldn’t just pull out of Germany, without bringing down the whole London banking sector.
In 1935 the Etonians in the British Cabinet and Foreign Office rejected all calls from the USSR to unite with France and Eastern Europe against the rise of the Third Reich. They were far too terrified of Communism. Instead, Britain agreed a treaty allowing the Germans to expand their navy. When supporters of the elected left-wing government in Spain faced annihilation by Franco’s fascists in 1936-7 the Tory Foreign Secretary, Lord Halifax, openly welcomed the carnage in Spain. It would, he declared, make the British public understand that Nazi Germany would be ‘an ally of ours and of all order-loving folk.’
In 1937, the new British Prime Minister, Neville Chamberlain, believed he single-handedly could ensure world peace. He told the King, George VI, that he would do this by pursuing his objective of Germany and England being ‘the two pillars of European peace and buttresses against Communism.’
During the war US and British bankers continued to send cash to Germany, while American companies in Germany were drawn down a slippery slope of collaboration. American bosses may have kept in touch with German subsidiaries via neutral hang-outs (like the fictional Rick’s Bar in the 1942 film Casablanca). Some made use of prisoners of war for slave labour. The five-figure tattoo on every death camp inmate began as an IBM-Dehomag punch card number. Nobody was going to be called to account for trading with the Nazis
![[from left] Eden, Stalin, Molotov, Maisky 22 March 1935 Kremlin](https://images.squarespace-cdn.com/content/v1/5ea171867e4ab45cee2387af/1694613003818-JB3GJ4527REZ84PRTUFT/%255Bfrom%2Bleft%255D%2BEden%252C%2BStalin%252C%2BMolotov%252C%2BMaisky%2B22%2BMarch%2B1935%2BKremlin.jpg)
The Trading with the Enemy Act was passed by the US government in 1917, when it entered the first World War. But I suppose it’s fair to admit that we have borrowed the title from Charles Higham’s Trading with the Enemy (New York 1983). Higham was a British journalist writing back in the days when many journalists still undertook investigative research. It’s an entertaining, arresting read, outspoken, zinging with extraordinary stories, notably few of which have been seriously contested. Read it on holiday. Better still, quarry it. Higham’s focus is mainly on the war years, which we only get to at the very end of the series. As you’ll discover, we don’t go with the high conspiratorial gloss Higham gives his material, and we go way beyond him in investigating the big picture of the 1920s and 1930s. For what it’s worth, academics disregard the book because the references are in a bibliography, not in footnotes, and can be difficult to verify. More important, Higham didn’t have an academic address he could strut. We’ve stuck to what we judge we can trust.
This is a truly vast subject and, even in ten parts, we have barely been able to sketch outlines and propose provisional conclusions. There are too many tentacles we could not pursue. For a glimpse of how deep you could dive, see the US National Archive’s bibliography on trade with the Third Reich here. And that’s just that the NA holds.
If you want to understand some of the basic conceptual issues, then you need to wrestle with Adam Tooze’s work. Your way in is ‘The Economics of the war with Nazi Germany’ in Michael Geyer and Adam Tooze, The Cambridge History of the Second World War volume 3 (Cambridge 2015), pp 27-55. Anything by Tooze is worth the (not inconsiderable) effort to read. Move on to The Deluge. The Great War and the Remaking of Global Order 1916-1931 (London 2014). And then read Tooze’s account of Nazi economics in The Wages of Destruction (London 2006).
Pair Tooze with Christopher Kobrak and Per J Hansen (eds.), European Business, Dictatorship, and Political Risk 1920-1945 (New York and Oxford 2004) which explores the complex of relationships between politics and business. Mira Wilkins is always worth reading, and her chapter on multinationals and dictatorship cuts to the heart of many of the issues we consider. See, at much greater length the book that made her name, The Maturing of Multinational Enterprise. American Business Abroad from 1914 to 1970 (Harvard Studies in Business History 1974).
You then have to plunge into Neil Forbes, Doing Business with the Nazis. Britain’s Economic and Financial Relations with Germany 1931-39 (London, Portland OR 2000), which is as detailed an examination of Anglo-Germany international financial issues, and the sorcery of Hjalmar Schacht, as you will ever want to read (unless you are an economist). For the non-specialist Forbes does a great job of making the impenetrable just dauntingly opaque. Hold your breath and keep going and you will surface with a gasp, and a grasp, of the outlines if not the minutiae. The economic revolution of 1931 is, in particular, a spectacularly under-reported and crucially important moment that Forbes at last explains.
Pair Forbes with Scott Newton’s more controversial, Profits of Peace: The Political Economy of Anglo-German Appeasement (Oxford: Oxford University Press, 1996). Newton argues that the British Treasury set most of the rules under which diplomacy with the Third Reich operated. It suggests there was a characteristically inane set of mis-priorities coming from the British civil service. Newton tries to revive the old chestnut that Chamberlain was buying time for re-armament. As we argue, nobody who had grown up and made his money in the arms trade – as Chamberlain had – could possibly have believed such nonsense.
If graphs and equations are your thing, consult at Era Dabla-Norris (ed.), Debt and Entanglements between the Wars (IMF 2019) which is a series of clear chapters on each of the European economies. EH.net, which is operated by the Economic History Association, has many more technical articles – for example Gene Smiley’s ‘The US Economy in the 1920s’ here.
For one account of the view that Germany could have repaid its reparations and chose not to, see Stephen Schuker’s American “Reparations” to Germany 1919-33: implications for the Third-World debt crisis, (Princeton Studies in International Finance 61, 1988). Leaving aside the argument about more recent debt, Schuker gives us a detailed analysis of the accumulating complexities of Anglo-European debt after the First War.
The Wall Street Crash is another hornet’s nest. Maury Klein reviewed the inconclusive studies to date in ‘The Stock Market Crash of 1929’ in The Business History Review 75 (2001), pp. 325-51. For a recent go at explaining it, try Jean-Laurent Cadorel, ‘An International Monetary Explanation of the 1929 Crash of the New York Stock Exchange’ paper for the Economic History Association annual meeting 2020 (and other conferences), available here. It represents at least one persuasive line through what seems to remain beyond current economic theory to explain.
For light relief you could then reread David D. Dilks, ‘The British Foreign Office between the Wars’, in Opinion publique et politique extérieure en Europe. II. 1915-1940. Actes du Colloque de Rome (16-20 février 1981) (Rome 1984) pp. 165-186, which reveals the British foreign office to be as ludicrously inept as we imagine it to be. Robert Manne’s now elderly paper, ‘The Foreign Office and the failure of Anglo-Soviet rapprochement’, Journal of Contemporary History 16 (1981), pp. 725-55 piles on the comedy by exposing the Foreign Office’s complete failure to understand the importance of the Soviet Union in containing Hitler.
That’s a subject taken on with damning clarity by Jonathan Haslam in his The Spectre of War. International Communism and the Origins of World War II (Princeton and Oxford 2021). Haslam relentlessly exposes the grim contortions into which British (especially) terror of Soviet Communism (or what they imagined to be Communism) led those sadly responsible for making British foreign policy. It is an extended study in the power of discourse over reality. Read this book. It’s important and accessible. Back it up if you feel you need to with Zara Steiner, The Triumph of the Dark. European International History 1933-39 (Oxford 2013) from a doyenne of diplomacy. Chapter 8 is on the Soviet Union and the way it was (dis)regarded 1936-38.
For as good a defence of appeasement as it is possible to mount (which is, in our opinion, not much – it was never what it was proclaimed to be) consult BJC McKercher’s work, for example, ‘National Security and Imperial Defence: British Grand Strategy and Appeasement, 1930–1939’, in Diplomacy and Statecraft 19 (2008), pp. 391-442. For an acute reassessment, see Keith Neilson, ‘Orme Sargent, Appeasement and British Policy in Europe, 1933-39’, Twentieth Century British History 21 (2010), pp. 1-28.
A deft way into Roosevelt’s policy (if you belong to a library or an e-book site) is Tony McCulloch’s Tacit Alliance (Edinburgh University Press 2021) which is a steady introduction published at a laughably inflated price. (A case of a University Press abandoning any vocation to educate. Sixth formers will be denied what would have been a helpful narrative.) A more enjoyable way in is anyway John Morton Blum’s now aged biography of Henry Morgenthau, Roosevelt and Morgenthau (Boston MA, 1970) derived from Blum’s edition of Morgenthau’s vast journals. Find it on archive.org (unless the publishers have at last succeeded in their efforts to close down one of the world’s best open access libraries.)
Put that alongside Douglas A Irwin, ‘Trade Liberalization: Cordell Hull and the Case for Optimism’, A Maurice R. Greenberg Center for Geoeconomic Studies Working Paper, Council on Foreign Relations 2008, for a summary of the policy pushed by Morgenthau’s bête noire at the State Department. You could also look at Julius Pratt’s now antique ‘The Ordeal of Cordell Hull’, The Review of Politics, 28 (1966), pp. 76-98. Kathleen Burk, ‘The Lineaments of Foreign Policy: the United States and a “New World Order”, 1919-39, Journal of American Studies 26 (1992), pp. 377-91 deftly shows how private American finance ended up dictating foreign policy and explores the idea that there was a sense of a self-governing elite among big American corporates.
The central role of J. Foster Dulles is still apparently looking for its historian. We have to make do with Nancy Lisagor and Frank Lipsius’s old, popular history of Dulles’s law firm, A Law Unto Itself. The Untold Story of the Law Firm Sullivan and Cromwell (New York 1988). I suppose Brian A. Smith’s God’s Cold Warrior: the life and faith of John Foster Dulles (Grand Rapids Michigan 2021) is some kind of counter-weight, insofar as Wilsey’s Dulles is a Christian Nationalist warrior against the evils of Communism, rather than an unscrupulous, exploitative and overpaid New York lawyer. For Maynard Keynes in this period – another big and controversial subject, if much less influential than he should have been - start with Arthur Turner, ‘Keynes, the Treasury and French War Debts in the 1920s’ European History Quarterly 27 (1997), pp.505-30. Discover William Dodd, the eccentric American ambassador to Berlin, in Fred Arthur Baily, ‘A Virginia Scholar in Chancellor Hitler’s Court: the tragic ambassadorship of William Edward Dodd.’ The Virginia Magazine of History and Biography, 100 (1992), pp. 323-42.
One perhaps rather understudied footnote to all of this is the Americans’ Latin American policy. Business connections here would be absolutely key to American trade with the Nazis during the war. Perhaps go to Jonathan Ruano de la Haza, ‘The Good Neighbor Policy in a Geopolitical Context: 1934-1941’ which is a helpful and as yet unpublished MA thesis from the University of Ottawa, 2007, available online here.
Another perspective is just how aware British and Americans were of the true nature of Nazism. Andrew Chandler, British Christians and the Third Reich. Church, State, and the Judgement of Nations (Cambridge 2022) is a useful recent addition, showing beyond doubt that the British – and others, like Foster Dulles who attended a conference in Britain in 1937 – were completely aware of the atrocities being committed by the Nazis long before the war. It’s a point made also by Stephen H Norwood, Ordinary American and British Jews Challenge the Third Reich (University of Indiana 2021), which finds lectures and books that cited appalling cases of rape, torture and incarceration, going back to at least 1934.
It would be pleasant to recommend Michael Hudson’s provocative Super Imperialism. The Economic Strategy of American Empire (3rd ed., Dresden 2021). Hudson argues that American policy after the First War was cynically and systematically predicated on achieving economic superiority. There appears to be truth in that argument. It’s just a shame that every time we checked Hudson’s facts, they were never quite as advertised. We gave up.
Once you engage in the history of individual companies that invested in mid-war Germany, you discover that you’ve fallen into a minefield. One reason is the dense network of deliberate concealment that connected them. ‘Cloaking,’ the murky underworld of multinational companies, shielding each other from taxes and any other obligations, is prized apart by Gerard Aalders and Cees Wiebes, ‘Stockholms Enskilda Bank, German Bosch and IG Farben. A short history of cloaking’ Scandinavian Economic History Review, 33 (1985), pp. 25-50. If you ever thought multinationals were by nature untrustworthy, you were correct.
Until the last two decades, the study of American companies in this period was largely ‘yes they did’/‘no they didn’t’, and the answer depended on who paid the author. Henry Ashby Turner, for example, was a Yale professor who wrote a defence of General Motors, pretty much clearing them of all blame. Some academics treat Ashby with respect. Read more closely and you discover not only that Turner had privileged access to GM’s archives, but also that he had an unsettling habit of ranting about what he regarded as a conspiracy among left wing historians to blame capitalism for all evil. David Abraham effectively took Turner’s work to pieces in European History Quarterly 17 (1987), pp. 235-45. See what I mean about a minefield?
Charles Cheape’s study of Norton Company is an early example of a more modern, balanced approach. His ‘Not Politicians but Sound Businessmen: Norton Company and the Third Reich,’ The Business History Review, 62 (1988), pp. 444-66, is a cool look at the real dilemmas businesses faced. Simon Ball, ‘The German Octopus. The British Metal Corporation and the Next War, 1914-1939,’ Enterprise and Society 5 (2004), pp. 451-89 takes a similar look at one very significant British conglomerate.
Reinhold Billstein, Karola Fings, Anita Kugler and Nicholas Levis, Working for the Enemy. Ford, General Motors, and forced labour in Germany during the Second World War (NY and Oxford 2000) puts beyond any discussion that Ford and General Motors used slave labour during the war. It was written at the time when class action by the few remaining survivors was threatening these companies’ reputation. The car giants bought their way out of the courts. Using both written and oral sources, Billstein et al. carefully condemn them anyway.
On the other hand Martin Horn and Talbot Imlay, The Politics of Industrial Collaboration during World War II (Cambridge 2014) shows how, in France at least, Ford’s management seems to have tried to walk a narrow line between passive and active resistance. For us, the story of wartime France proved too much for what’s already a long series. Another time.
If ball bearings raise your pulse, go to Martin Fritz, ‘Swedish ball-bearings and The German war economy’, Scandinavian Economic History Review, 23 (1975), pp. 15-35 and Eric B Golson, ‘Did Swedish Ball Bearings Keep the Second World War Going? Re‐evaluating Neutral Sweden’s Role,’ paper read to the Economic History Society (2011).
Which brings us finally to Edwin Black’s work on IBM. Let us state, for the avoidance of any allegation, that we regard antisemitism, without any reservation, as an evil. Black sets out to prove that the American company knowingly collaborated with the Nazis in organising the Holocaust. As we explain in the series, citing Lars Heide’s research in Kobrak and Hansen’s book, collaboration is particularly difficult to establish in IBM’s case because of its uniquely thorny relationship with its German subsidiary. And the extent to which individuals were or were not in fact intentionally antisemitic is more complicated still. Gerald D Feldman and Wolfgang Seibel (eds.), Networks of Nazi Persecution. Bureaucracy, Business and the Organisation of the Holocaust (NY, Oxford, 2005) explores the moral complexities. As Seibel puts it in his chapter on cooperation and collaboration, written with Gerhard Hirschfield, many opted for la politique du moindre mal – choosing the least worst option. Feldman, for example, shows that the German insurance industry – backed by re-insurance from Britain and elsewhere – abandoned Jewish businesses after Kristallnacht but also did what they could to distance themselves from the Third Reich. They emerge with shame. We might come away relieved that we are not faced with the choices they had.
Perhaps the conclusion here is that Black’s various books raise very serious issues but tend to conspiracy rather than complexity. Read them once you already know the field. Then stop before you tumble into the ragbag of volumes by other popular writers claiming that Wall Street was behind the Russian Revolution, the rise of Hitler, the Second World War and goodness knows what else. Beguiling and wrong.