The Third Reich in Power

by Evans, Richard J.

  What was striking about this process was not so much the way that it was pushed forward by the Party’s economic officials, but the extent to which agencies of the state were involved as well; and the latter were, if anything, even more unscrupulous than the former. Here too, as in the legal system, the idea of a ‘dual state’, in which legal norms were being upheld by the traditional institutions of the ‘normative’ state and undermined by the new, only quasi-legal apparatus of Hitler’s ‘prerogative state’, must be heavily qualified if not altogether abandoned.152 A whole range of state offices was involved in driving Jews out of economic life. This was hardly surprising, in a sense, because those civil servants who staffed them had participated in the dismissal of Jews from their own departments in 1933-4. A tax reform on 16 October 1936, for instance, required all tax laws to reflect the National Socialist world-view and to use National Socialist principles in assessing individual cases. The result was that Jewish companies were now frequently faced with new demands for supposedly unpaid back-taxes, as tax regulations were freely interpreted to disadvantage them. This process of Aryanization had thus begun already in 1933; it did not commence simply when, less still because, Schacht was ousted from his position as economic supremo in 1936. Schacht himself signed an order on 26 November 1935 banning Jewish stockbrokers from plying their trade, and he pressed repeatedly for the promulgation of laws restricting Jewish economic activity in the last two months of 1935. The foreign currency restrictions that were so important in the case of Jewish firms in Hamburg were largely Schacht’s own doing, and the Reichsbank ordered its branches on 14 October 1936 to inaugurate investigations of foreign currency dealings if others failed to do so.153 Aryanization was thus a continuous process, sometimes creeping, sometimes galloping, but always on the go.154

  III

  From 1936, the Four-Year Plan undoubtedly accelerated the whole process. Hitler’s own memorandum setting up the Plan identified in his usual fashion ‘international Jewry’ as the hidden force behind the Bolshevik menace and demanded laws making all Jews in Germany financially responsible for any damage caused by any Jew to the German economy, for example by accumulating currency reserves abroad, an offence for which Hitler demanded the death penalty.155 The foreign currency investigation apparatus which played such a baleful role in Hamburg was a creation of the forerunner of the Plan, Göring’s Raw Materials and Currency Staff established in the spring of 1936. Ministerial discussions on further anti-Jewish economic measures continued through 1936, leading to laws passed at the end of the year making the transfer of Jewish-owned funds abroad illegal. A number of prosecutions followed, leading to numerous prison sentences, though not to execution. The mere suspicion that someone was about to transfer funds was enough under these laws to cause their confiscation. It provided the legal pretext for a growing number of expropriations over the following months and years. The powers that accompanied the Plan, notably the rationing of key raw materials, were deliberately used to disadvantage Jewish firms. The government now amended an emergency decree first passed under Heinrich Brüning to prevent the flight of large amounts of capital from Germany by lowering the sum at which the decree became operative from 200,000 Reichsmarks to 50,000 and basing it on the estimated taxable value of the property rather than on the sum it realized on sale. As a consequence, Jews who emigrated were subject in practice to the loss of far more than the 25 per cent tax provided for by the Brüning decree. In 1932-3 this tax had brought in less than a million marks in revenue to the state; by 1935-6 this income had risen to just under 45 million; in 1937-8, more than 80 million; in 1938-9, 342 million. In addition, transfers of capital abroad were subject to a fee of 20 per cent levied by the German Gold Discount Bank, through which the transfers had to be handled; in June 1935 this fee was raised to 68 per cent, in October 1936, 81 per cent, and in June 1938, 90 per cent. Thus Jewish companies and individuals were being systematically plundered not just by other businesses and by the Nazi Party, but also by the state and its dependent institutions as well.156

  At the same time, sporadic local boycotts and attacks continued, most notably in the run-up to Christmas, while laws and regulations promulgated from Berlin made life progressively more difficult for Jewish businesses. Increasingly, forced sales were made at well below the market price and under threat of arrest and imprisonment on trumped-up charges that had nothing to do with the conduct of the business itself. In the town of Suhl, for example, Regional Party Leader Fritz Sauckel arrested the Jewish owner of the arms manufacturing company Simson and put him in prison in 1935 after he had refused to sell his company at a knockdown price; citing Hitler’s explicit authorization, he then transferred ownership to a specially created foundation, in the alleged interests of national defence. Supposed debts were given as the reason for denying the owner compensation of any kind.157 By 1 January 1936, many Jewish bankers had been squeezed out of business, or decided that enough was enough and closed down in order to emigrate. About a quarter of Germany’s 1,300 private bankers had given up banking; the great majority of the 300 private banks closed had been Jewish-owned.158 Only a few major banks, like M. M. Warburg of Hamburg, clung on stubbornly until 1938, not least out of a sense of duty to the Jewish community and to the company tradition.159 Banking was in no way exceptional. A quarter of all Jewish enterprises of all kinds had been Aryanized or closed down by this point.160 By July 1938, only 9,000 Jewish-owned shops were left in Germany out of an estimated 50,000 in existence in 1933. At the beginning of the Third Reich there had been about 100,000 Jewish-owned firms in Germany all told; by July 1938 about 70 per cent of these had been Aryanized or closed down.161 Regulations of various kinds put even the humblest Jewish private enterprises out of business. In the summer of 1936, for instance, the introduction of an official registration system for rag-and-bone men led to between 2,000 and 3,000 Jewish dealers being banned from carrying out this trade.162

  Aryanization had been more or less continuous since 1933 in most localities. In Marburg, for example, eleven out of the town’s sixty-four Jewish-owned businesses had already been Aryanized or gone into liquidation in 1933; seven in 1934; eight in 1935; nine in 1936; six in 1937; and five in the first three quarters of 1938. In Göttingen, fifty-four of the ninety-eight Jewish-owned businesses operating in the town in 1933 had been Aryanized or gone into liquidation by the beginning of 1938.163 At this point, it was clear to everyone involved that the final stage was now commencing. To expedite matters, Goring and the Interior Ministry issued a decree on 26 April 1938 forcing every Jew or non-Jewish spouse of a Jew to declare all assets held at home and abroad over the value of 5,000 Reichsmarks, following this up with internal discussions on the ultimate exclusion of the Jews from the economy altogether. Further orders barred Jews from acting as auctioneers, from possessing or selling arms, and - a particularly serious blow - from signing legal contracts. By this time, pressures on Jewish-owned companies had become well-nigh irresistible. Since the autumn of 1937, local authorities had been ordering the erection of signs outside Jewish businesses designating them publicly as such - a clear invitation to harassment, boycott and attack. There were nearly 800 Aryanizations in January-October 1938, including 340 factories and twenty-two private banks. The pace was now increasing. In February 1938 there were still 1,680 independent Jewish tradesmen in Munich, for example; by 4 October this number had fallen to 666, and two-thirds of these were in possession of a foreign passport. The final removal of the Jews from the German economy was clearly within sight, and many German businesses and individuals were ready to reap the rewards.164

  DIVISION OF THE SPOILS

  I

  On 16 April 1938, a Munich businessman who had been working as an expert consultant in Aryanization cases wrote a strongly worded letter to the local Chamber of Commerce and Industry. He was, he noted, a ‘National Socialist, member of the SA, and admirer of Hitler’. Nevertheless, he went on, he was

  so disgusted by the brutal . . . and extortionate met
hods employed against the Jews that, from now on, I refuse to be involved in any way with Aryanizations, even though this means losing a handsome consultancy fee . . . As an experienced, honest, and upstanding businessman, I [can] no longer stand idly by and countenance the way many Aryan businessmen, entrepreneurs and the like . . . are shamelessly attempting to grab up Jewish shops and factories etc. as cheaply as possible and for a ludicrous price. These people are like vultures, swarming down with bleary eyes, their tongues hanging out with greed, to feed upon the Jewish carcass.165

  Aryanization did indeed offer many opportunities to non-Jewish businesses and businessmen to enrich themselves. Many eagerly grasped them. At the very least, when Jewish businesses went into liquidation, non-Jewish businesses in the same branch of the economy could congratulate themselves on losing some of the competition. This was true at all levels. In January 1939, for instance, 2,000 shops were said to be standing empty in Hamburg as a result of the Aryanization process, a fact singled out for favourable mention by the leader of the Nazi Traders’ Association in the city. Since the majority of Jewish business enterprises were small-scale, it was predominantly modest-sized non-Jewish enterprises that benefited from their closure. Indeed, to a degree the regime actually tried to ensure that this was so, as when Jewish chain stores in Hamburg like Bottina shoes or Feidler’s stocking shops were broken up and the individual shops sold off separately.166

  To be sure, this was not widely recognized at the time. Particular resentment was caused among small shopkeepers by the regime’s failure to keep its promise to close down the department stores and break up the big chains. ‘Department stores,’ complained one in 1938, ‘whether they are Jewish or Aryan, are still firms that compete unfairly against small businesses.’167 A Berlin businessman, writing to the exiled Social Democratic leadership while on a trip outside Germany in 1939, claimed indeed that it was overwhelmingly large companies that were snapping up Jewish businesses. ‘This process has led to an enormous concentration of industrial and financial power in every branch of the economy, a power that is wielded without compunction by the leaders of the big concerns.’168 But large firms initially hesitated before moving in too aggressively. Large-scale Jewish enterprises and conglomerates were less susceptible to local boycotts and attacks than smaller, independent businesses and shops were, and at least in the early years of the Third Reich, the regime was careful not to put too much pressure on them because it needed them for economic recovery and rearmament, and many of them were internationally well known.169

  Thus, Jews remained on the boards of firms such as Mannesmann and I.G. Farben for some time after 1933. The Deutsche Bank still had a Jewish member of the supervisory board as late as July 1938, though he had been abroad since the previous year. Nevertheless, these were exceptions. Most firms bowed earlier to pressure to dismiss Jewish directors, board members and employees. In the Dresdner Bank, internal Aryanization continued a policy of slimming down the workforce begun when the bank took over the Danat Bank in 1931 after it had crashed; the difference now was that it was mainly directed against Jewish employees. The Dresdner Bank was obliged to do this because on 9 May 1933 the Law of 7 April was extended to ‘legally recognized public bodies and equivalent institutions and undertakings’, which covered a very wide range of institutions indeed. The bank’s employees now had to fill out forms detailing their religious and racial background, their war service and other relevant factors. The regulations allowed institutions to claim ‘urgent need’ as a reason for retaining employees, so the bank was able to avoid the chaos that would have resulted from mass, simultaneous dismissals; but after 30 June 1934 no more such permits were issued by the Economics Ministry. By the end of the year, all Jews had left the bank’s supervisory board; 80 per cent of unprotected Jews had left the bank’s service by October 1935, and all remaining Jewish employees were gone a year later. These measures were no doubt welcome to the younger non-Jewish men who worked for the bank since they cleared paths to promotion that would probably have stayed blocked for some time. The seven top managers who were forced to resign in 1933-4 because they were Jewish were replaced by men in their thirties and early forties who might not otherwise have been promoted. Those who took over showed little compassion for those who had left. Only in some instances, such as, notably, I.G. Farben, were Jewish employees transferred to positions in foreign subsidiaries instead of having to lose their livelihoods altogether.170 Whatever their fate, the removal of Jewish managers from German businesses assisted the rise of a new, young managerial elite that was already beginning to take over from the older generation by the time the war came.171

  The Allianz insurance company, whose chief Kurt Schmitt had been Schacht’s predecessor as Economics Minister, was another firm that did not actively pursue a policy of dismissal. It treated its two Jewish directors well when they were forced to resign. On the other hand, the firm offered no serious resistance when it came under pressure from the Nazi press and the Reich Supervisory Office for Insurance to dismiss Jewish employees and sever connections with Jewish salespeople and agents. In 1933, for instance, the company extended the contract of its agent Hans Grünebaum, who had worked for its Stuttgart branch since 1929, for five years, then in 1936 extended it again until 1941. However, this attracted hostile comment from the local press and then a threatening letter from the Nazi Party Regional Leader’s office. The company riposted by arguing that Jewish agents were needed to deal with Jewish customers. But this cut no ice with the Nazis. Grünebaum’s contract was terminated at the beginning of June 1938; the company agreed to pay him his full annual commission of 35,000 Reichsmarks, covering the period to the end of 1939, though how much of this he was able to take with him when he emigrated to America is uncertain. By this time, government bans on Jews acting as travelling salesmen, estate agents and the like had effectively put an end to this particular kind of business relationship in any case.172

  In a number of instances, large firms seem to have offered fair prices for Jewish businesses in the early years of the Third Reich, as in the case of the acquisition of the Jewish-owned North German Hop Industry Company by the Henkel Company.173 Reflecting this, the Regional Economic Consultants’ Offices of the Party frequently sent contracts back even when they had assured themselves that the purchasers had the necessary money, were expert in the area concerned, and were racially and politically acceptable. In southern Westphalia, indeed, the great majority of contracts were referred back for renegotiation because the price offered was considered too high.174 However, as Aryanization gathered pace, big business, especially where it was relatively recent in origin, began to drop any scruples it might have had to begin with, and to join in the profiteering.175 As in the case of the Wertheim department stores, it could in some cases be managed internally, with Jewish directors making way for non-Jewish ones; of the 260 large firms that had passed from Jewish into non-Jewish hands by the end of 1936, indeed, relatively few had done so through a takeover by another company.176 From 1936 onwards, however, given the number of Jewish enterprises now coming onto the market, large firms began to keep a look-out for business opportunities. By 1937 many were seizing them with alacrity. Thus the engineering firm Mannesmann took over the Wolf, Netter and Jacobi company in the metal industry, with a turnover of more than 40 million Reichsmarks in 1936-7; it also participated in a consortium that absorbed the Stern scrap metal company in Essen, which had been forced to sell up after the cancellation of contracts.177 In some cases, Aryanization offered a way out of economic difficulties brought on by the policies of the regime, particularly in the consumer industries. The Salamander shoe company, for instance, which had Aryanized itself in 1933, came under heavy pressure under the Four-Year Plan to export leather shoes for much-needed foreign currency, and use leather substitutes for the shoes it sold on the home market. Leather itself, however, was strictly rationed as early as 1934. It made sense for Salamander to create a series of vertically integrated combines by buying up Jewi
sh-owned leather companies and tanneries like Mayer and Son in Offenbach, which it purchased in 1936; working in the opposite direction, the leather processing company of Carl Freudenberg bought up the Jewish-owned shoe firm Tack, which was already suffering from boycotts and attacks by the local Nazis in 1933.178