Carroll Quigley - Tragedy and Hope - A History of the World in Our Time

While I. G. Farben was the greatest example of concentrated control in German monopoly capitalism, it was by no means untypical. The process of concentration by 1939 had been carried to a degree which can hardly be overemphasized. The Kilgore Committee of the United States Senate in 1945 decided, after a study of captured German records, that I. G. Farben and United Steel Works together could dominate the whole German industrial system. Since so much of this domination was based on personal friendships and relationships, on secret agreements and contracts, on economic pressures and duress as well as on property and other obvious control rights, it is not something which can be demonstrated by statistics. But even the statistics give evidence of a concentration of economic power. In Germany in 1936 there were about 40,000 limited-liability companies, with total nominal capitalization of about 20,000 million Reichsmarks. I. G. Farben and United Steel Works had 1,344 million Reichsmarks of this capital. A mere 18 companies out of the 40,000 had one-sixth of the total working capital of all companies.

While monopolistic organization of economic life reached its peak in Germany, the differences in this respect between Germany and other countries have been overemphasized. It was a difference of degree only, and, even in degree, Britain, Japan, and a number of smaller countries were not so far behind the German development as one might believe at first glance. The error arose from two causes. On the one hand, German cartels and monopolies were well publicized, while similar organizations in other countries remained in hiding. As the British Committee on Trusts reported in 1929, “What is notable among British consolidations and associations is not their rarity or weakness so much as their unobtrusiveness.” It is possible that the British vegetable-oil monopoly around Unilever was as powerful as the German chemical-monopoly around I. G. Farben, but, while much has been heard about the latter, very little is heard about the former. After an effort to study the former, Fortune magazine wrote, “No other industry, perhaps, is quite so exasperatingly secretive as the soap and shortening industries.”

On the other hand, Germany monopolistic organizations have built up disfavor because of their readiness to be used for nationalistic purposes. German cartel managers were patriotic Germans first and businessmen seeking profits and power second. In most other countries (especially the United States), monopoly capitalists are businessmen first and patriots later. As a result, the goals of German cartels were as frequently political as economic. I. G. Farben and others were constantly working to help Germany in its struggle for power, by espionage, by gaining economic advantages for Germany, and by seeking to cripple the ability of other countries to mobilize their resources or to wage war.

This difference in attitude between German and other capitalists became increasingly evident in the 1930’s. In that decade the German found his economic and his patriotic motives impelling him in the same direction (to build up the power and wealth of Germany against Russia and the West). The capitalists of France, Britain, and the United States, on the other hand, frequently experienced conflicting motives. Bolshevism presented itself as an economic threat to themselves at the same time that Nazism presented itself as a political threat to their countries. Many persons were willing to neglect or even increase the latter threat in order to use it against the former danger.

This difference in attitude between German and other capitalists arose from many causes. Among these were (a) the contrast between the German tradition of a national economy and the Western tradition of laissez-faire, (b) the fact that world depression caused the threat of social revolution to appear before Nazism rose as a political danger to the West, (c) the fact that cosmopolitan financial capitalism was replaced more rapidly by nationalist monopoly capitalism in Germany than in the West, and (d) the fact that many wealthy and influential persons like Montagu Norman, Ivar Kreuger, Basil Zaharoff, and Henri Deterding directed public attention to the danger of Bolshevism while maintaining a neutral, or favorable, attitude toward Nazism.

The impact of the war on Germany was quite different from its effects on most other countries. In France, Britain, and the United States, the war played a significant role in demonstrating conclusively that economic stagnation and underemployment of resources were not necessary and could be avoided if the financial system were subordinated to the economic system. In Germany this was not necessary, since the Nazis had already made this discovery in the 1930’s. On the other hand, the destruction of the war left Germany with a large task to do, the rebuilding of the German industrial plant. But, since Germany could not get to that task until it had its own government, the masses of Germans suffered great hardships in the five years 1945-1950, so that, by the time the proper political conditions arrived to allow the task of rebuilding, these masses of German labor were eager for almost any job and were more concerned with making a living wage than they were with seeking to raise their standards of living. This readiness to accept low wages, which is one of the essential features of the German economic revival, was increased by the influx of surging millions of poverty-stricken refugees from the Soviet-occupied East. Thus a surplus of labor, low wages, experience in unorthodox financial operations, and an immense task to be done all contributed to the German revival.

The signal for this to begin was given by the West German currency reform of 1950, which encouraged investment and offered entrepreneurs the possibility of large profits from the state’s tax policies. The whole developed into a great boom when the establishment of the European Common Market of seven western European states offered Germany a mass market for mass production just as the rebuilding of German industry was well organized. The combination of low wages, a docile labor force, new equipment, and a system of low taxes on producers, plus the absence of any need for several years to assume the expense of defense expenditures, all contributed to make German production costs low on the world’s markets and allowed Germany to build up a flourishing and profitable export trade. The German example was copied in Japan and in Italy, and, on a different basis, in France, with the result that the Common Market area enjoyed a burst of economic expansion and prosperity which began to transform western European life and to raise most of its countries to a new level of mobility and affluence such as they had never known before. One result of this was the development of what had been backward areas within these countries, most notably in southern Italy, where the boom caught on by 1960. The only area within the Common Market where this did not occur was in Belgium, which was hampered by obsolescent equipment and domestic social animosities, while in France the boom was delayed for several years by the acute political problems associated with the death of the Fourth Republic (1958).

France

Financial capitalism lasted longer in France than in any other major country. The roots of financial capitalism there, like Holland but unlike Germany, go back to the period of commercial capitalism which preceded the Industrial Revolution. These roots grew rapidly in the last half of the eighteenth century and were well established with the founding of the Bank of France in 1800. At that date, financial power was in the hands of about ten or fifteen private banking houses whose founders, in most cases, had come from Switzerland in the second half of the eighteenth century. These bankers, all Protestant, were deeply involved in the agitations leading up to the French Revolution. When the revolutionary violence got out of hand, they were the chief forces behind the rise of Napoleon, whom they regarded as the restorer of order. As a reward for this support, Napoleon in 1800 gave these bankers a monopoly over French financial life by giving them control of the new Bank of France. By 1811 most of these bankers had gone over to the opposition to Napoleon because they objected to his continuation of a warlike policy. France at that time was still in the stage of commercial capitalism, and constant war was injurious to commercial activity. As a result, this group shifted its allegiance from Bonaparte to Bourbon, and survived the change in regime in 1815. This established a pattern of political agility which was repeated with varying success in subsequent changes of regime. As a result, the Protestant bankers, who had controlled financial life under the First Empire, were still the main figures on the board of regents of the Bank of France until the reform of 1936. Among these figures the chief bore the names Mirabaud, Mallet, Neuflize, and Hottinguer.