Washington was furious. President Woodrow Wilson believed—as did many of his fellow citizens—that America’s interests were best served by staying well clear of any dangerous adventures in the Old World. Neutrality would allow the United States to play the part of impartial mediator when Europe finally regained its senses. Until that time, America would do business with whomsoever it pleased. Trade with the Central Powers was worth almost $170 million a year in 1914, and the United States was hardly about to abandon it to suit the British and the French.
But the Royal Navy, charged with stopping vital war supplies from getting to the enemy, continued its operations despite outraged cables from the State Department. Diplomatic relations between London and Washington cooled to their lowest point in years. The situation improved only when Britain and France’s own increased demand for American exports began absorbing and even surpassing the spare capacity caused by the loss of German business. Nonetheless, it took many months to repair the damage.
Meanwhile, the blockade was causing other problems. The United States was now cut off from hundreds of important commodities, including many medicines, dyes, and intermediate chemicals that had hitherto been available only from Germany. Although the American chemical industry had made great strides since 1903, when Carl Duisberg had dismissed it as second-rate, it was still in its infancy compared with its German counterpart, which, of course, had done all it could to keep things that way. Hoechst, BASF, Bayer, and the rest had been no more willing to relinquish their lucrative patents and monopolies in the United States than they had been in Britain or France before the war. A few factories had been built to make pharmaceuticals and other dyestuff products, but more for tariff-busting reasons than anything else; and while the profits they earned had been sent back across the Atlantic, the knowledge flowing toward the United States had always been strictly controlled lest potential American competitors somehow gain access to important trade secrets. These factories had consistently used German know-how and raw materials and even, when it was available, immigrant German-speaking labor—all in the interests of keeping vital techniques and procedures within the family. As a result, America’s reliance on German chemical products had been carefully nurtured to a state of dependency, while its own local industry was still struggling to get out of the development stage. When the war interrupted this one-sided relationship, the scientific expertise and technological infrastructure to replace German goods didn’t immediately exist in the United States and many important chemicals quickly became unavailable.*
Ironically, given its fiercely protectionist attitude, Bayer was among the worst hit. Its best-selling product in America was aspirin, protected by a patent until 1917 and now being manufactured at the company’s sparkling new plant at Rensselaer in upstate New York. But the mass production of aspirin required specific raw materials and one of the most important of those, the chemical phenol (used to make synthetic salicylic acid), was in desperately short supply. The problem arose because phenol was also used in the manufacture of certain kinds of high explosives and the British, who needed it for themselves on the Western Front, had made it a particular target of their transatlantic embargo. Before the war, the U.S. branch of Chemische Fabrik von Heyden—Bayer’s principal supplier of raw synthetic salicylic acid in America—had followed standard practice and imported all it needed for its Rensselaer contract directly from Germany. Now those shipments had stopped and existing stocks elsewhere in the United States were drying up because America’s chemical industry wasn’t yet capable of making enough of it on its own. By the spring of 1915 phenol prices were going through the roof and Bayer’s U.S. production lines were on the verge of shutting down.
In the normal course of events, the executives at Bayer and Company (the firm’s U.S. subsidiary) would have turned immediately to their head office in Leverkusen for guidance, but the war and the blockade had made nongovernmental transatlantic communication difficult. Effectively cut off from Duisberg’s advice yet determined to keep their production lines going, the managers sought help elsewhere and became embroiled in a deeply embarrassing scandal.
The affair that eventually became known as the Great Phenol Plot involved a conspiracy to corner the market in the only available supply of the chemical left in the United States, the excess capacity of a factory set up by the inventor Thomas Edison, who had just started making phenol for use in the production of gramophone records. With Bayer’s encouragement, a plan was put together by a naturalized German American called Hugo Schweitzer, who was using his various public personae—wealthy socialite, chemical industry consultant, and high-profile propagandist for the kaiser’s cause—as cover for a role as an agent of the German government.* Relying on front companies and secret funds supplied by the German embassy, Schweitzer bought the phenol from the unwitting Edison, gave Bayer what it needed, and then kept the rest to sell later—happy in the knowledge that he would both make a great personal profit out of the deal and keep the chemical out of the hands of the British, who wanted it for their own armaments purpose. Unfortunately, his contact at the German embassy—who was being followed by the U.S. Secret Service—left a briefcase containing details of the operation on a train in New York. Within days, the details were leaked to the newspapers. The timing could hardly have been worse. A few months earlier, on May 7, 1915, a German U-boat had sunk the British transatlantic liner Lusitania with the loss of around twelve hundred—mainly American—lives, plunging diplomatic relations between the United States and Germany into crisis and bringing the prospect of war ever closer. When, on August 15, 1915, the New York World accused the phenol plotters of undermining American interests by conspiring to deprive the country of strategically important materials, Schweitzer was hastily abandoned by his German embassy friends and left twisting in the spotlight of public opprobrium, his usefulness as an agent blown.
Bayer and Company, which the press had rightly identified as the ultimate recipient of the phenol, was also tainted by the scandal. But as no one could prove that it had ever done anything more than ask for Schweitzer’s help, the public embarrassment didn’t last long. The firm’s managers moved quickly to disassociate themselves from direct knowledge of the German embassy’s machinations and said their only aim had been to continue making an important drug. Privately, they congratulated one another on stockpiling enough phenol in the weeks before the scandal broke to keep production ticking over into the following year. Even when a mortified Thomas Edison announced that from then on he would sell his surplus only to the military, the damage was seen as minor. For all its indignation, the American government didn’t ask Bayer to return the phenol (possibly because it was just as keen as the company to see aspirin supplies maintained), and it was fair to assume that by the time Bayer ran out again others in the American chemical industry would have risen to the challenge of producing it in bulk.
Nonetheless, the company had attracted Washington’s attention in a most undesirable manner. The authorities were now bound to keep an eye on a foreign-owned business that had benefited from a conspiracy to corner the market in a chemical crucial to the country’s military arsenal—particularly as relations between Germany and the United States continued to deteriorate. In early 1917, in an attempt to increase pressure on Britain and France and to gain some relief from the stranglehold of the enemy’s blockade, the German high command ordered an all-out U-boat campaign in the Atlantic. Several Allied ships were sunk as a consequence, but so were some American vessels. Extraordinarily, Germany then became embroiled in a half-baked, and embarrassing, attempt to persuade Mexico to attack the United States. As the public mood in the United States soured, Bayer’s panic-stricken New York–based executives realized that any day they might be considered enemy citizens running an enemy business. They began a frantic last-minute attempt to disguise the company’s American assets and dealings in dummy corporations in the hope that these would appear to any outsiders to be owned by U.S. citizens.*
It was
all too late. On April 6, 1917, the United States declared war on Germany. Shortly thereafter Congress passed the Trading with the Enemy Act and created a body to confiscate all enemy assets. The Office of the Alien Property Custodian, as it was called, was to be run by A. Mitchell Palmer, a former congressman from Pennsylvania. Dogmatic, single-minded, and stridently anti-German, Palmer enlisted a former New York district attorney called Francis Garvan to lead an aggressive investigation arm, and together they went hunting. All told, German holdings and property in the United States were worth around $950 million, much of it hidden away in a deliberately confusing mass of shell companies and trusts. The two officials were determined to get their hands on the whole lot and made no secret of the fact that their first targets would be those businesses they believed had an explicitly anti-American pedigree. Bayer and Company, complicit in the Great Phenol Plot and besmirched by its association with the notorious Hugo Schweitzer, was right at the top of the list. In a move that carried more than a whiff of official retribution for past sins, Palmer announced he was seizing all the company’s property, patents, and trademarks and replacing most of its German executives with Americans. Rensselaer, Bayer’s lavish New York offices, and the company’s best-selling product lines were gone. Back in Leverkusen the news was greeted with dismay. If Germany was to lose the war now, Bayer’s property might never be returned.
* * *
THEY CALLED IT the “turnip winter,” a bleak interlude when the Allied blockade really began to bite and when that hardy but uninteresting vegetable was one of the few foodstuffs in plentiful supply. But for many of the ordinary Germans who survived the long, cold winter months of 1916-17, it was also the start of a brief period of comparative optimism, a time when, for a while at least, the tide of war appeared to be flowing their way. The U-boat campaign, to take one example, seemed to be going especially well. In April 1917 alone, 852,000 tons of Allied shipping were sunk and coming on the back of similar losses in the preceding two months it was easy to believe the claims of government propagandists who said that the enemy was close to economic collapse. The news from the Western Front was reassuring, too. Strong new defenses, dubbed the Hindenburg Line in honor of the man who had organized them, had been built in time to repel the summer’s Anglo-French assaults. The enemy had hurled hundreds of thousands of its troops against the concrete bunkers, barbed wire, and machine gun fire of the German defenses and had paid a dreadful price in dead and wounded. When rumors began to circulate that these extraordinary casualties had provoked large sections of the French army to mutiny, there were plenty on the German side who thought that a successful conclusion to all the nation’s trials was only a few months away. Even the shocking announcement that America had declared war on Germany was counterbalanced by the encouraging news coming from the Eastern Front. In March 1917, czarist Russia had collapsed as a viable state and the desperate last-ditch summer offensive launched by the Provisional Government was so heavily defeated that Russia’s troops were forced to retreat back across its borders. By the beginning of November, the Bolshevik Revolution had taken place, and a few weeks later the new Soviet authorities began suing for peace at Brest-Litovsk. Given that the Italian army had also suffered a shattering defeat that year, when German divisions under Ludendorff came to the assistance of their Austrian allies at Caporetto (a victory that for a while looked likely to knock Italy out of the war), there definitely seemed much to cheer about.
But amid all the good news there was plenty for the pessimists to point to as well. Yes, the British and Canadian armies had lost almost a quarter of a million men in a grotesquely wasteful effort to take the ruined Flanders village of Passchendaele, but Germany had lost almost 200,000 in the same encounter. Casualties of that magnitude might be sustainable for a time because the German divisions that had once faced Russia could now be shifted to the Western Front, but obviously once America’s huge resources were fully deployed on the Allied side the added weight of the extra matériel and troops would tip the balance in the enemy’s favor. Anyone who doubted the seriousness of the manpower crisis only had to take note of the German army’s announcement in September 1917 that it was seeking fifteen-year-old volunteers to swell its ranks. In any case, cracks were appearing elsewhere, too. By the late autumn of 1917, the U-boat campaign, which had once promised so much, had begun to falter. There had simply been too few vessels and too few crews to press home the momentary advantage, and in the interim the British had managed to beef up their convoy system and reduce losses to an acceptable level. Meanwhile, the blockade on German trade continued, placing impossible strains on the country’s ability to prosecute the war and feed its people.
For those running German industry, the strains had always been most evident in the manpower shortages they had to endure. Now these shortages were compounded by a growing sense of discontent among the labor force. War weariness and the never-ending lack of food and fuel were taking their toll, and, as Carl Duisberg had predicted, workers were beginning to demand better terms and conditions. In December 1916, the government had bowed to this pressure and introduced the Patriotic Auxiliary Service Law, which forced companies to recognize organized trade unions rather than the tame in-house workplace associations they had once been able to intimidate. For a time this had brought a degree of industrial harmony, but the atmosphere soon soured again as employees began to turn against the war. In August 1917 workers at BASF’s new ammonia factory at Leuna went on strike as part of a national antiwar stoppage organized by the radical Independent Social Democratic Party. Similar walkouts took place at Bayer’s Leverkusen facility and at the other IG plants. The police managed to keep an uneasy calm but, even so, managers were forced to call upon the military authorities to threaten the workers with mass conscription in order to get them to go back to work. Of course, the unspoken fear at the back of every employer’s mind was that Bolshevik revolutionary fervor would prove infectious and that the volatile truce between labor and capital that had sustained the war effort for the past three and a half years would collapse. But even if this didn’t happen, something would have to give soon. The nation was exhausted and hungry; it had sacrificed too much.
In March 1918, General Ludendorff gambled everything on one last assault on the Somme. Sixty-two divisions attacked on a front of about fifty miles in an attempt to split the Allies and drive the British back to the Channel. At first the campaign appeared to be the most successful German offensive since 1914. By eschewing the customary preliminary artillery bombardment (by now a wearisomely familiar warning that a battle was imminent) and by using the novel tactic of moving small groups of troops forward behind smoke screens and mustard gas, the German forces made remarkable progress, advancing forty miles in less than ten days, capturing over eighty thousand prisoners and a thousand guns, and even beginning to threaten Paris again. But attempts to capitalize on this success in the following weeks failed as the Germans encountered fierce resistance from French and American troops near the River Marne. Slowly but surely, as the Allies counterattacked repeatedly in the late spring and early summer of 1918, the last great German offensive began to peter out. By the middle of August, the high command realized that it was becoming futile to fight on. General Ludendorff even pleaded with Carl Duisberg to say as much to the kaiser. The deeply patriotic Bayer boss refused the request, but his demurral made little difference to the outcome. When the Allies launched their own offensive that autumn, Germany’s exhausted armies collapsed, mutiny spread through the imperial navy, strikes broke out on the streets of Berlin, and the Social Democrats in the governing coalition persuaded the kaiser to abdicate. By the beginning of November the war was all but over. For Germany—and its remarkable chemical industry—things would never be quite the same.
4
THE BIRTH OF A COLOSSUS
On the afternoon of November 13, 1924, the leaders of the German chemical industry gathered at Carl Duisberg’s palatial Leverkusen home to settle, once and for all, the questi
on that had preoccupied them time and again: should their companies merge? The discussions began positively enough; those with strong reservations about an amalgamation seemed prepared to listen to those who felt passionately about a merger’s potential benefits. But as the meeting ground on into the evening, the gap between the opposing factions had not been bridged. The mood turned quarrelsome, voices were raised, and tempers frayed.
At least the pleasant setting provided some respite. Guests needing a diversion or just a few moments on their own in which to calm down could walk outside onto the grand terrace and down some steps into elaborate formal gardens. Yet as they strolled around the grounds, perhaps puffing contemplatively on an after-dinner cigar, they would have found it difficult to let their thoughts stray too far from the matter in hand. The surroundings were against it, for one thing. The bucolic scene extended only as far as the gate at the end of the drive; beyond it, poking up from behind some trees, a jarring array of factory chimneys dominated the skyline. A glance the other way, back toward their host’s brilliantly lit house, would have brought an equally forceful reminder: there was something about its opulence that suggested grandiloquent projects. The place was massive, all verandas and domes and pillars, a monument to one man’s drive, achievements, and ambition. Some might have thought it vulgar, others downright ugly, but few would have denied its presence.
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