Hell's Cartel

by Diarmuid Jeffreys

  The administrative structure of IG Farben from 1933 to 1945. (Illustration by Neil Gower)

  IG Farben’s Aufsichtsrat (supervisory board) and the Vorstand (managing board) still sat above this labyrinthine structure and were theoretically responsible for all final decisions. But both were overlarge and unwieldy. On the IG’s creation, the Aufsichtsrat was composed of all the members of the supervisory boards of Farben’s constituent firms, some fifty-five people, whereas the Vorstand had eighty-three full and deputy members drawn from the individual companies’ managing boards. Though these numbers had shrunk slightly by 1931, Duisberg and Bosch, as the board’s respective chairmen, struggled to find ways of making them function efficiently. The solution seemed to lie in confining their role to formalities and delegating much of their work to yet another layer of committees. Thus the Aufsichtsrat’s administrative council, the Verwaltungsrat, with only eleven members as opposed to its parent’s fifty-plus, took over most of its duties, meeting about four times a year and leaving the full supervisory board with little more than honorary responsibilities. The Vorstand had to operate through two subordinate bodies. The first was the Arbeitsausschuss, or Working Committee. It had around two dozen members at any given moment, drawn from the Sparte bosses, the ranks of plant managers, the heads of the sales combines, a few lawyers and accountants, and occasional representatives from elsewhere in the business. This body quickly came to be regarded throughout the IG as the principal management group, responsible for formulating and implementing general policy and making decisions on such matters as acquisitions, relationships with other cartels, plant openings and closures, political contributions, and so on. For Bosch, though, the Working Committee was still too clumsy and whenever he could he preferred to operate through an even smaller body, the Zentralausschuss, or Central Committee. Usually gathering a day before the Working Committee, its half a dozen members (including Carl Duisberg in an advisory role) worked with Bosch on advance tactics and formulating a common line on matters scheduled for discussion in the larger meeting.

  This extraordinary plethora of boards, committees and subcommittees, commissions, and working groups had one very obvious drawback—the onerous workload they placed on the shoulders of the IG’s most senior executives. Because operations at many of the larger plants and sales combines cut across neat divisional structures, managers’ functions and responsibilities frequently overlapped and they often had to sit on several bodies as once.* Understandably unwilling to add to their burdens, managers were reluctant to interfere too much in one another’s principal areas of business and jealously guarded their own fiefdoms. The unfortunate consequence was that unless they seriously blotted their copybooks, managers were largely unaccountable for their actions (certainly to the Aufsichtsrat, whose function was increasingly ceremonial) and often went unchallenged. Nor was there any meaningful outside scrutiny. The IG controlled all its own preference shares and therefore a clear majority of stockholder votes. No other individual investor or institutional shareholder had a big enough stake to demand changes, and annual general meetings were generally rubber-stamping affairs. For the most part, whenever the combine needed additional capital it usually either turned to the Deutsche Länderbank, in which it had a large stake, or raised cash through debenture and rights issues, sales revenue, and reserves. As a result, the IG was insulated from unwarranted external interference, a state of affairs that pleased its managers but did nothing to provide effective oversight of the company’s dealings. In principle, Carl Bosch, as chairman of the Vorstand, could use his authority to intervene in or overturn the decisions of those below him. But the larger IG Farben grew, and the more complex its expanding network of divisions, committees, holdings, and subsidiaries became, the harder it was for one man, no matter how driven or scrupulous, to keep an eye on everything. With his own interests in the field of high-pressure chemistry occupying more and more of his attention, Bosch had no choice but to hope that his equally overburdened subordinates were doing their jobs properly.

  So who were those men? Insofar as it’s possible to generalize, the average IG Farben senior executive (as exemplified by members of the Vorstand in the mid-1930s) was in his late forties or early fifties and was married with children. More likely than not, he came from western or southwestern Germany, had received a doctorate—usually in chemistry, though other sciences, mathematics, and engineering were represented, too—and had risen to his present position through one of the IG’s constituent businesses. Usually Protestant and from a bourgeois background, he would have had all the conventional middle-class attributes and aspirations of the time; he was hardworking, law-abiding, respectable, community-minded, patriotic (around half the IG’s senior executives had fought in World War I), and conservative in both politics and social outlook.

  But this rather bland overview conceals a number of intriguing exceptions and powerful personalities, people such as Fritz Gajewski, the chief of Sparte III, who as one of eleven children born to a humble elementary schoolteacher had to scrimp and save and work part-time in a suburban drugstore to raise the money to get to the University of Leipzig. Or Hermann Schmitz, the IG’s chief financial officer and one of Bosch’s principal assistants in the concern’s creation, who came from a very poor working-class family in Essen and had received only the most basic schooling. At his first job, as a lowly clerk in the Frankfurt offices of the Metallgesellschaft (a nonferrous metals business), Schmitz’s extraordinary intelligence had quickly brought him to the attention of William Merton, the firm’s owner, and within five years he had been put in charge of all the company’s foreign operations. Commissioned into the army on the outbreak of war, he was badly wounded in the first few weeks of fighting. Rather than return directly to his old job, he accepted a post at Walter Rathenau’s War Raw Materials Office and it was there that he met Carl Bosch. Their friendship began in the aftermath of the first Allied air attacks on Ludwigshafen and Oppau when Schmitz helped Bosch successfully lobby the government for subsidies for a new nitrate plant at Leuna, and it continued at Versailles, where Schmitz was one of two Metallgesellschaft representatives in the German delegation. When Bosch finally persuaded him to come over to BASF as its top financial officer in 1919, he kept his seat on the metal firm’s board and thus cemented a close link between the two companies that would continue for many years.*

  Baron Georg von Schnitzler, the IG’s commercial chief (and chairman of its influential Dyes Committee), came from the other end of the social scale. He was related to the vom Raths (ennobled by Wilhelm II for their services to industry) and had married Lily von Mallinckdrodt, a noted society hostess. Cosmopolitan and urbane, habitually attired in English tweeds, he collected fine art and enjoyed fine wines and divided his time between his industrial responsibilities and his extensive private estates. As far removed from the median at one extreme as Hermann Schmitz and Fritz Gajewski were at the other, he was one of the Vorstand’s two aristocrats. The other (from less distinguished lineage) was August von Knieriem, the IG’s clever legal counsel and patents expert, whose dueling scar and stiffly formal manners hinted at his Prussian background. When on the run from Ludwigshafen’s French occupiers in 1923, he had taken up residence in the same Heidelberg hotel as Carl Bosch.

  A number of the executives had a particular genius for scientific innovation or for motivating others, men such as the bullish and bespectacled Nobel Prize–winning Heinrich Hörlein, who had followed Arthur Eichengrün as chief of Bayer’s pharmaceutical research laboratories and who went on to invent a whole new class of antiepilepsy drugs. Or Fritz ter Meer, the rather snooty scion of the Weiler-ter-Meer family business and head of the influential Sparte II, who was convinced that IG Farben’s future lay in manufacturing synthetic rubber and spent his spare time hiking energetically through the Swiss Alps. And then there was Carl Krauch, who by force of sheer personality and will had overseen the reconstruction of Oppau in the aftermath of the devastating explosion a few years earlier. His re
ward was the chairmanship of Sparte I, where he could use his privileged status as one of Bosch’s key lieutenants to push through Farben’s interests in high-pressure chemistry.

  Even those among the IG’s senior executives who were well connected via family had largely earned their places in the upper ranks through merit and determination. Wilhelm R. Mann, for example, had dyestuffs running through his veins. His father, Rudolf, had headed Bayer’s pharmaceutical department and had been instrumental in arranging the first difficult meetings between Carl Duisberg and Sterling Products in the early twenties. Young Wilhelm had been just another company chemist at the time, quietly recovering from his experiences in the trenches of the Western Front while he learned the ropes, but on his father’s retirement his profound grasp of the intricacies of the international drugs and medicines scene and a capacity for clever deal making had sent him shooting up the ladder. Now he was chairman of the IG’s powerful Pharmaceuticals Committee and chief guardian of the combine’s hugely profitable aspirin business.

  There were plenty of others—scientists, engineers, production chiefs, sales specialists—each commanding a little bit of the IG Farben empire and all eager to flex their muscles in the new regime. Carl Bosch, thoughtful, academic, and prone to savage bouts of melancholic introspection, had the difficult task of fostering their often conflicting ambitions while, at the same time, maintaining the combine’s coherence. In the early years, when the founding families of the constituent businesses still exercised a significant degree of influence (if not active management), that juggling act was relatively straightforward.* As time went by and the IG began to expand, the balance became harder and harder to maintain. “Decentralized centralism,” as the company’s organizational ideology was known, was fine so long as everyone remained focused on the IG’s principal mission of maximizing efficiency and profits. Any deviation from that mission, and the empire threatened to fall apart.

  Perhaps had Bosch devoted more of his time at the outset to resolving the IG’s structural contradictions, to keeping a firmer hand on the management tiller, as it were, the company might have proved less vulnerable to some of these weaknesses later on. But throughout the venture’s early years much of his attention was elsewhere—fixed on a venture so gargantuan in its implications and potential that the day-to-day running of the business must sometimes have seemed like a distraction. That project had been one of the principal reasons behind Bosch’s desire to bring the concern into being and he was prepared to gamble everything on its success. The world was about to run out of one of its most important commodities, and if Bosch had his way IG Farben was going to provide the solution.

  * * *

  WHEN FUTURE HISTORIANS come to look back at the late twentieth and early twenty-first centuries the search for oil is sure to be seen as one of the defining political and economic motifs of our age. Many wars have been fought over it, calamitous consequences for the planet are expected because of our addiction to it, even more dire catastrophes are predicted for when we finally run out of it. After the air we breathe and the food and water we consume, oil has become the most important and sought-after commodity on the planet. Who controls its supply now and who will control it tomorrow are questions of the greatest strategic significance. But one thing is certain: the world’s oil reserves are finite and irreplaceable. When they eventually dry up—and some believe we are already well past the point where this has started to happen—it is not too difficult to imagine some of the possible consequences: rationing, the shutting down of vital industries, and the gradual collapse of those economic infrastructures on which modern societies depend.

  But remarkably we’ve faced this prospect before. Back in 1926 the world was told it was running out of oil. Of course, economic reliance on it then was nowhere near as absolute as it is now and people would have been better able to cope with its sudden disappearance, but the shock and the concern were profound nonetheless. The crisis was a consequence of society’s growing love affair with the car. The automobile boom was just getting under way, yet already the internal combustion engine had begun to exert its terrible logic; there couldn’t be more cars on the roads without the fuel to drive them and that fuel had to come from somewhere. Unfortunately, those resources were very limited. By the early 1920s governments had begun to get nervous about whether oil discoveries could keep pace with this accelerating demand and sought reassurances from the petroleum industry. The answers they received were alarmingly contradictory, so vague in fact that America’s president Calvin Coolidge was forced to set up a special body, the Federal Oil Conservation Board, to determine the exact level of global oil reserves. Its report, delivered on September 6, 1926, sent jitters around the world. “Total present reserves in pumping and flowing wells … are estimated at about four and half billion barrels, which is theoretically but six years’ supply.” Sometime in 1932, the experts warned, the ground would yield its very last drops.

  In these circumstances, anyone with a solution stood to gain a great deal, which was where IG Farben and its technically brilliant boss came in. Carl Bosch had a plan that promised to resolve the looming oil crisis and provide a much-needed alternative focus for one of the IG’s core businesses. The scheme had grown out of his concern that Germany’s domination of global synthetic nitrate production was coming to an end. Despite his efforts at Versailles and during the French occupation of the Ruhr, he had been unable to keep the Haber-Bosch process out of the hands of foreign competitors. Now the largest of those rivals, Britain’s recently formed Imperial Chemical Industries and America’s DuPont and Allied Chemicals, were beginning to make synthetic nitrogen in bulk, and it wouldn’t be long before the world was awash with it.* Bosch knew that this glut could spell the end for the IG’s plants at Leuna and Oppau, unless an alternate use for their expensive high-pressure equipment was found.

  Bosch may have had his failings as a manager but no one could accuse him of shortsightedness where business opportunities were concerned. In the early 1920s he had realized that the world’s dependence on oil was about to become critical and that German expertise in hydrogenation chemistry might provide the answer. Of all the leading industrialized nations, Germany was the most deficient in key natural resources. It had a few things in abundance—coal especially—but for the most part the country had had to import raw materials from abroad or learn how to develop them synthetically. Oil was at the top of that list and naturally German chemists had long sought a way of making the fuel themselves. One of those scientists, Friedrich Bergius, had come up with a promising laboratory procedure and Carl Bosch was eager to exploit it industrially.

  Like many of his contemporaries, Bergius was fascinated by coal, or, more precisely, by the possibility of obtaining synthetic fuel from it, using the high-pressure processes so much in vogue in Germany. In 1909, while on staff at Hanover University, he began by experimenting with artificial coal developed from cellulose and then, as his skills and experience grew, he went on to use the ordinary brown and bituminous varieties. It was a complicated procedure but in essence he was looking for a way of liquefying coal and increasing its hydrogen content under pressure so that its properties would be close to that of oil. He would certainly have been mindful of the fact that Germany was about to go to war and that the country was woefully short of this vital commodity. He was therefore especially pleased to be able to announce in 1913 that he had cracked the problem and was filing a patent for his invention. Two years later, he set up a plant in Rheinau, near Mannheim, to develop the process industrially.

  Translating laboratory techniques into industrial-scale production proved much harder and more expensive than Bergius had envisaged. As the months went by and the project began to flag, his financial backers became restless and began drifting away. Then Germany captured oil fields in Romania, removing some of the immediate necessity for a synthetic product and draining his work of some of its urgency. Meanwhile, other scientists had begun making progress in the same area. In 1
914 Franz Fischer and Hans Tropsch at the Kaiser Wilhelm Institute for Coal Research came up with a procedure that involved passing a mixture of carbon monoxide and hydrogen over a hot catalyst to produce liquid hydrocarbons. BASF scientists were on the same track and had even filed their own patent for a process around the same time as Bergius in 1913. All of these procedures, however, suffered from much the same problems—the difficulties of finding effective catalysts and of converting theoretical principles into viable, cost-effective factory production.