The Vampire Economy

Chapter VII

INDUSTRIAL GROUP LEADERS

“Official communications now make up over half of a German manufacturer’s entire correspondence.”

WALTER FUNK, Reich Minister of Economics

IF THE State were to socialize industry, the businessman would at least know, for better or worse, what his position is. Many manufacturers utterly dislike the idea of becoming State officials or agents. But there are also many managers who are tired of the risks of competitive struggle, of being dependent on the favors of the State bureaucrats. These businessmen see no chance of improving their personal position through competition. They would like to be freed from these uncertainties by becoming a part of the State machine, with a fixed salary and a pension. The State offers no economic security to the scared businessman who prefers security to the risks of business under totalitarian rule.

The only plan for complete socialization of all industries and trade branches has been prepared by the War Economic Council of the General Staff, a plan which provides for the introduction, overnight, of complete state socialism—or state capitalism—in case of war.

Measures for the immediate execution of such a plan have been carefully organized. The purpose of this plan to regulate economic life is clear: maximum production of war materials for huge mass armies and subordination of all economic activities to the specific needs of war.

The main purposes of the Four-Year Plan were: (1) extension of State control over raw materials; (2) subsidizing German production of raw materials on a mass scale in order to make the country independent of imports and to strengthen the war industries.

New bureaus were established to survey Germany’s raw-material needs in peace and in war, to find the weak spots in the economic structure, to encourage national production, to replace imported goods, especially those necessary to a war economy. The chiefs of the new offices were military experts and reliable Nazi economists. Dr. Keppler was transferred from his position as head of the Economic Research Office and Economic Adviser of the Party, in which capacity he had come into conflict with Schacht; he was put in charge, under Goering, of developing German mineral resources in order to make Germany self-sufficient.

The planning work in Goering’s ministry was largely work on paper, of little immediate practical importance. In fact, many activities in which the State is engaged at present are superfluous today, but necessary in anticipation of a totalitarian State during war. Millions of questionnaires, for instance, filled out by thousands of manufacturers and artisans, have been collected and filed. These statistical data are registered without any practical use being made of them. For handling these statistics, a huge staff of clerks is required; it seems to be a job intended only to keep the bureaucracy busy. But such statistics and surveys are basic materials necessary to launch “war socialism,” should war be declared.

Activities which are directly concerned with preparations for war do not alter the status of the private capitalist. They are like a tax which is a burden on him but which does not interfere with the control he exercises over his business. An example of such activities is the construction of dugouts or bombproof shelters for use during air attacks.

Other types of State interference which alter or vitiate the functions of the private manufacturer are: price fixing, distribution of raw materials, regulations as to what and how much shall be produced (not applied in most industries), restrictions upon the issuance of stocks and bonds, general control of investments, etc. All of these measures encroach directly on essential functions of the entrepreneur, as does the transfer of factories from frontier districts into central parts of Germany.

This second type of State interference creates the impression that “war socialism” is already in existence in peacetime. But these acts of State interference are not part of a general economic plan; they are merely emergency measures, introduced to overcome unforeseen critical situations or weak spots in the economic system. They are largely concomitants of the armament policy, though they are not a part of the armament program. Rather are they the result of its shortcomings and deficiencies. This is confirmed by a statement in Der Vierjahresplan, the organ of Goering’s Four-Year Plan Commission:

“The National-Socialist economic policy soon had to face bottlenecks and deficiencies.… It is typical of the present stage of State economic management that the great tasks of reconstruction and social order are temporarily superseded by measures destined to overcome deficiencies and which, as such, are to remain in effect only for a short period, as the economic leadership may determine.…

“A logically minded person might easily conclude that this kind of State interference leads to a system of State economic planning, that such a planning system will and must become more and more stringent and complete, and that increased planning narrows the economic field where competition exists.… Such measures [of State planning] are transitional and temporary.… They should not be ideal or permanent, nor should they be regarded as the goal of State economic leadership … as a system of total planning which replaces self-administration by State interference.… The National-Socialist economic leadership is not inclined to free the private entrepreneur from his responsibility for economic development, still less from his personal responsibility for his factory.”1

Army representatives are working in the offices of many companies and trusts, watching the execution of orders for war materials. Private enterprise has to take this superintending in order to comply with the wishes of the army and to back demands for preferential supply of materials without which production could not continue.

A whole army of Wehrwirtschaftsfuehrer—Leaders of Defense Economy—has been appointed. Most of them are army officers who have taken special courses in economics and industrial relations. Although lacking in practical industrial experience, they are clothed with supreme authority upon their appointment as leaders. They are ignorant of the conditions peculiar to the industries over which they are to have control; neither can they estimate the importance of urgent requests for preferential treatment. They therefore have to rely on the judgment of minor bureaucrats and decide questions arbitrarily—which makes matters worse—or they have to rely on personal friendship with businessmen who are willing to give them unofficial information in return for special privileges.

The more economic difficulties threaten the prompt execution of armament orders, the more army leaders are appointed to make sure that military interests are given first place in industry. This interference of the military authorities in industry, which was not a part of the original armament plan, was necessitated by the decline in private economy which endangered important war preparations. This forced the military to take a hand in private industry, although the army had regarded the existence of a “sound private economy” as an essential element for the preparation of a sound wartime economy.

There are many State institutions which issue orders and instructions to the businessman, telling him how he should conduct his business, what is allowed or forbidden, and what he should, may, and must not do. He receives orders from and has to send his appeals and representatives to:

Ministry of Economics, and its subdivisions:

Four-Year Plan Commission

Foreign Exchange Board

One or more of 25 Import Control Boards

Price Control Commissar

Reich Administration for Economic Expansion

Reich Administration for Soil Exploration

Reich Administration for Usage of Scrap Materials

Administration for Renovation

Administration Labor Service

Special Commissars (Building Trade, Automobile Industry, Machine Industry, Power Industry)

Food Ministry and Reich Nutrition Estate, and their subdivisions:

Various Monopoly Marketing Boards

Various Compulsory Cartels of Processing Industries

Labor Ministry, and its subdivisions:

Labor Front

Labor Exchange

Regional Labor Trustees

Reichsbank, and its subdivisions:

Bank Control Board

Foreign Currency Department

Reich Economic Chamber, and its subdivisions:

Economic Groups

Occupational Groups

Regional Groups

Regional Economic Chambers

Leaders of Defense Economy (War Economic Council)

Administration for Self-Help of German Industry (in connection with the Export Subsidy Fund)

All these organizations are huge bureaucracies with headquarters in Berlin, in many cases organized independently of each other, interfering with private business and with the national economy.

The businessman has to adapt his business to the State bureaucratic system by building up a huge private bureaucracy too. Clerical work in companies and trusts and even in small enterprises has increased tremendously.

To quote from a report of Mr. A. Parker, published in Lloyds Bank Monthly for July, 1937:

“The bureaucracy is inevitably more bureaucratic than before.… Bureaucratic work occupies the semiofficialdom of numerous ‘estates’ and public corporations (Nutrition Estates, Organization of German Business, German Labor Front, etc.), the staffs of business undertakings which have to observe State requirements and individual citizens. It has been said that one commercial bank maintains 500 officials alone for dealing with foreign exchange regulations. The manufacturer can get raw materials (and then only a ration) only on application, which must be documented by presentation of data on past consumption, present stocks, proofs of orders, etc. The importer cannot ever, and the exporter hardly ever, initiate a simple deal without innumerable formalities. The industrial workman must take out and keep in order a work-book, and the farmer, under a recent decree, must keep certain otherwise unnecessary records for official inspection. The regulations about shop competition, which are but one branch of much wider retail trade regulation, fill 700 closely printed pages. The householder must now, as in time of war, keep margarine, bacon, and fat cards. The government has no other means of enforcing its system of vetoes, permits and restrictions than by punishing transgressors; and in fact nearly all industrial, commercial and financial transactions for which official permission has not been obtained are criminal offenses.”

Since this report was published, bureaucracy in Germany has become even more top-heavy.

The greater part of every day is taken up with official conferences and correspondence with State boards, control commissions, etc. Walter Funk, Reich Minister of Economics, admitted at a meeting of economic leaders of Pomerania, a province of Prussia, that “official communications now make up over half of a German manufacturer’s entire correspondence.”2

The growth of the State agencies under the first Four-Year Plan finally resulted in such an anarchic state of affairs that the economic dictator, Marshal Goering, had to appoint special Reich Commissars in an attempt to enforce co-ordination among the manifold State authorities. According to an official statement, the functions of these new Commissars are as follows:

“He deals with factory regulations and technical problems, the process of work and its regulation, the organized employment of human beings and the retraining tasks, as well as with the distribution of materials, the flow of investments, the control of the capital market, the correct division between State finance and private financing, the elimination of superfluous offices and unnecessary regimentation, the establishment of sound relations between production of capital goods and consumers’ goods, and the necessary participation of exportation.”3

The result of the appointment of the new commissars has been a general poisoning of the atmosphere, since criticism and differences of opinion fester beneath the surface instead of being expressed openly. Antagonistic groups are neither reconciled nor satisfied.

Such commissars were appointed for the building, automobile, machine-tool, and power industries.

These new supercommissars receive direct from Goering their orders as to the tasks of the particular industry which they control. To carry them out they must disregard the interests of particular groups and the decisions of minor Party leaders. But for the manufacturer, the result of this reform is: more decrees and instructions and more uncertainty as to what is allowed or forbidden.

Mention must be made of still another bureaucratic machine, the “corporation,” “group,” or “estate organization.” These had lain dormant but have now been revived in order to facilitate collaboration between the bureaucrats and the businessmen.

Neither the “group organizations” in Germany nor the “corporations” in Italy have developed according to official theories. After the solemn introduction of “corporations” at the Congress of Corporations in Rome, in 1929, corporations either did not exist or were unimportant for several years. In Germany, manufacturers and small producers thought that the “group organization” (or “estate”) might be used to build up an entrepreneurial system of self-administration. They expected to control their “group organizations” and they thought that these organizations would safeguard their specific interests, as the former trade associations had done. They were disappointed. The application of the principle of “authoritarian leadership” in these “group organizations” transformed them into tools of the Party bureaucracy, although in some groups—especially those of big industrialists—the members still exerted a certain influence upon their leaders.

During the first period of existence of the “corporate” or “group” organizations, they were mainly concerned with collecting data, etc., for a wartime economy having no practical influence on the existing economy. However, the situation has changed, as a result of unexpected trends which have upset the original national schemes for economic State interference. “Group” organizations began to function as important links between the State and private enterprise, although they were not intended to function in such a way in a peacetime economy.

The group or corporate organizations have become the go-betweens of private enterprise and the State organizations which distribute raw materials, decide price policies, etc. The manager of a factory who wants to protest against curtailment of his allotment of raw materials, or who wants to obtain a permit for a price increase, acts wisely in not going directly to the proper State office, but in going first to the leader of his group organization, from whom he demands a certificate backing the firm’s request and certifying that it should be granted in the interest of military preparations or in the interest of the Party.

The secretariats of these group organizations have also become a kind of legal information office. This is of great importance, especially for small manufacturers who cannot maintain a legal department of their own to study all decrees and the legal aspect of business affairs. Each business move has become very complicated and is full of legal traps which the average businessman cannot determine because there are so many new decrees. The group organization has a large legal department and can advise a manufacturer as to what he is allowed to do and what is illegal or inadvisable.

This development has turned the leaders of the group organizations into important personalities who are held in high respect by the manufacturer, especially by small and medium-sized industrialists who are much more dependent on their “group leader” than is a big concern or trust.

The group leader today is a contact man between firms of a given trade and the State authorities. He is no longer the mere representative of one specific trade; he is appointed by the State and has to act according to Government instructions. His task as a Party member and State representative is to maintain “national discipline” among the businessmen of his group—in addition to collecting data, questionnaires, etc., about technical conditions, raw material demands, productive possibilities of all group enterprises and statistics.

The group leader is “authoritarian,” appointed by the State, yet he is supposed to let the membership vote each year as to whether they want him to continue as their group leader. This vote is merely a test of the sentiment of the members; the State does not necessarily comply with the result of the vote.

Such a leader is often in a difficult position. On one hand he is the representative of the State, watching the individual entrepreneur for any lapse in fulfilling his “national duties”; on the other hand, he must be willing to sponsor or advocate the special interests of his group in so far as they do not conflict with the policies of higher authorities. Generally a group leader will at least try to demonstrate his good will, aiding group interests, as well as exercising his authoritarian power against firms which behave too independently or do not conform to Party interests.