Chapter II: Part VIII
Chapter II: The Gambit of the West
Part VIII
March 15, 1936
Around a long table in a sunlit ground floor room in the Reichschancellery, a dozen of the most powerful men in Nazi Germany sat, talking quietly with one another.
Eight of them represented industry, labor and various governmental organizations -- Lutz Graf Schwerin von Krosigk, Minister of Finance; Joseph Goebbels, Minister of Propaganda; Franz Seldte, Minister of Labor; Walther Darré, Minister of Food and Agriculture; Konstantin Hierl, Reich Labor Leader; Baldur von Schirach, Hitler Youth Leader; Dr. Robert Ley, Leader of the German Labor Front; Gustav Krupp, Chairman of the Association of German Industrialists.
The remaining four represented the Armed Forces -- Field Marshal von Blomberg, Minister of War; General von Fritsch, Commander-in-Chief, OKH; General Göring, Commander-in-Chief of the Luftwaffe; Admiral Raeder, Commander-in-Chief of the Kriegsmarine.
Standing at the head of the table was Hjalmar Horace Greeley Schacht, Minister of Economics, Reichsbank President and Plenipotentiary-General for Wehrwirtschaft. In addition to overseeing the national economy, the Reichsbank and Wehrwirtschaft -- the War Economy -- Schacht had now been named head of Germany’s most ambitious developmental undertaking to date. As Plenipotentiary for the Four Year Plan, he had been given near-absolute control over every aspect of the German economy. He was charged with bringing Germany in four years to meet the ambitious “12 Benchmarks” set forth by Hitler in a series of orders promulgated March fourth.
Not by character a man interested in the grandiose titles now accorded him, Hjalmar Schacht was known for his fiscal genius, administrative brilliance and disarming modesty. Partly named in honor of the famed American journalist by parents who had lived in America, Schacht had always been transatlantic in his outlook. He had a wide understanding of global markets, and was one of the few members of Hitler’s government with genuine expertise in his field. It was widely believed in Germany that had he set his mind to Wall Street he could have become one of the richest men in the world. Instead, he had devoted himself not to personal wealth but to the wealth of Germany, holding numerous important economic positions in the years following the Great War.
After averting an utter collapse of the currency thirteen years earlier, he had been hailed as “The Savior of the Mark” -- earning wide praise from economists across the globe. In the years since, he had managed the German economy with such astounding skill as to earn another nickname: “The Wizard”.
Hjalmar Horace Greeley Schacht, Plenipotentiary for the Four Year Plan.
Now, Hitler had given him the unenviable task of explaining the current economic situation to a conclave of Reich leaders whose activities would be affected by the Four Year Plan. The Führer himself, assured of his own mastery of economics, was not present.
Schacht now called for attention. Introductions were quickly carried out, and the room was soon quiet.
“The Four Year Plan is a national effort to meet twelve benchmarks by April, 1940. The folders provided to each of you contain a more comprehensive treatment of these benchmarks. My task this afternoon is to express to you the general aims of the Four Year Plan, and to bring about cooperation between your own organizations and ministries for the furtherance of this national goal.
“The Führer has mandated that the Four Year Plan achieve total self-sufficiency for Germany. At the same time, he stresses the importance of importing as many resources as possible during the interim, so that no matter when war might come, the War Economy will have the strongest reserves possible.
“In the past eight months, we have doubled imports of strategic materials -- coming in from every corner of the world, though imports from America have increased most dramatically. U.S. Steel has contracted to ultimately sell five million tonnes of steel to German industry, and Goodyear Tire and Rubber Company now devotes ten percent of its total production to orders that eventually make their way into Germany.”
Stooping, Schacht picked up a large chart from the floor, and placed it on the easel that stood behind him.
“Increased trade with South America has provided the Reich with a substantial influx of grains, cotton, sugar, coffee and other foodstuffs. As you can see, gentlemen, Brazil accounts for forty-one percent of South American imports; Argentina twenty-nine percent; other nations the remaining thirty percent.
“The most pressing resource demand at present is oil. The War Ministry estimates that during wartime, the Wehrmacht will require in excess of seven million tonnes per year. We have now negotiated the import of five million tonnes of Venezuelan oil between next month and the end of 1938. Dr. Harold Krause has been appointed to lead the Office of Fuel Production, which aims to increase German oil availability to fifteen million tonnes per year by 1940.
Automotive production surged through a massive increase in governmental subsidies.
“It is primarily these resources -- steel, rubber and oil -- upon which our rearmament depends. Among these, the need for oil can be delayed the longest, as only war would give rise to the truly staggering fuel demands of the rapidly modernizing Wehrmacht.”
Schacht placed a second chart on the easel.
“This is a graph showing arms production through the past three years. The dashed line represents government spending on rearmament. As you can see, the dashed line veers up sharply. The solid line depicts production efficiency -- expressed as total output in a number of arms sectors, divided by total man-hours of labor. As you can also see, the solid line proceeds upward through the first half of the chart, but has now reached a plateau. Efficiency must be dramatically increased over the course of the Four Year Plan.
“In furtherance of this goal, thirteen months ago, special Workbooks were issued to each German worker. This book records skills and performance, and allows the Reichsarbeitsdienst -- now under the auspices of the Reich Labor Office and thence the Office of the Four Year Plan -- to keep precise track of the entirety of the national labor force, down to the individual worker. The Reicharbeitsdienst, under Herr Hierl, shall place updated information at our disposal each month, so as to fully maximize productivity. This is pursuant to the new laws authorizing the Reich Labor Office, empowering it to compel any worker in the nation to whichever job requires him most.
“For a number of its projects, the Reicharbeitsdienst will pay in various forms of alternative currency. An aggregate sixty percent of wages for canal-builders, road-builders, factory-builders and land-clearers will take the form of certificates redeemable for many common consumables which the government can procure cheaply in bulk. In this way, approximately 96,000,000 Reichsmarks in value can be directed towards rearmament.”
A 5 RM note issued for the Winter Relief Collection.
A loud snore distracted Schacht’s attention. Göring sat with his arms folded, head slumped forward, quite unaware of everything that The Wizard had just said. Schacht stared at the overweight Luftwaffe chief in silence for several seconds. When he did not wake, Schacht continued on, doing his best to appear unperturbed.
“Beginning this December, the one third of national spending on social programs will be diverted to rearmament. The Winter Relief Collection will be used to supplement this shortfall, along with separate donations collected by the Hitler Youth throughout the summer. Salaries of postal workers, firefighters and several other classes of civil servants will be reduced by an aggregate twenty-five percent next year. The shortfall will be made up through the issue of certificates similar to those issued to RAD project workers. These measures are estimated to save the equivalent of 380,500,000 Reichsmarks by the end of next year.
“Another critical concern of the Four Year Plan is that of agriculture. Agricultural production is now only thirteen percent behind that of 1914. Aggregate industrial output is now actually twenty percent above pre-War levels, but much of that is still dedicated to uses other than rearmament.
“Reich Minister Darré has been tasked with restructuring German agriculture to allow greater self-sufficiency and surplus. As Minister of Food and Agriculture, he has been empowered by an order from the Führer -- dated March fifth -- to buy or seize Old Junker estates totaling some four million acres of arable land. Through scientific agriculture, this land can be reorganized and improved to yield fully double its present output by the end of the Four Year Plan.
“A second order -- dated March seventh -- provides for the immediate restoration of citizenship and privileges to any Jew or non-Aryan excluded from such under the Nuremberg Laws, upon payment of a Citizenship Fee. This Staatsbürgerschaftpreis has been fixed at one thousand Reichsmarks per head. The Citizenship Fees are projected to bring in somewhere between 200,000,000 and 550,000,000 Reichsmarks in revenue.
“Since last year, our government has financed internal rearmament exclusively with the so-called ‘Mefo bill’ credit notes to the sum of 5,800,000,000 Reichsmarks. Very simply, gentlemen, we have created a notional company called Metallurgische Forschungsgesellschaft. This company has issued six-month bills of exchange which allow us to circumvent interest rate restrictions, as well as conceal the scale of rearmament, by drawing the bills not upon the Treasury, but upon a private company.
“Dr. Schacht,” asked Goebbels, “what are the profits of the Metallurgische Forschungsgesellschaft?”
“Zero Reichsmarks.”
Goebbels looked puzzled. “How many skilled workers does it employ?”
“Zero again.”
“Perhaps I misunderstand you, Dr. Schacht. Where is this corporation physically located?”
Schacht only smiled and tapped his temple with one finger.
“The economic advantages of these programs -- namely the accumulation of capital -- are what will ultimately lead the Four Year Plan to success. I… I…” Schacht’s voice trailed off. Seeing that he was fast losing his audience, he reached into his wallet and waved a wad of Reichsmarks in front of them. Dr. Ley jabbed the dozing Luftwaffe chief with an elbow.
“Within Germany itself, money is not a serious problem. We can print all the money we like, or even issue alternative exchange notes to pay German companies for the rearmament. Where we have trouble is in buying goods from other nations that Germany cannot produce -- for if we simply run new money from our presses to pay other nations, the Reichsmark will no longer be considered valuable.
“This is why we are attempting to accumulate currency, which is backed by gold. The value of that currency is particularly high, given the effects of the Depression. Other nations see the value in our money, and are willing to sell us the strategic materials and machined products that are essential to Germany’s defense.
“Finally, the Four Year Plan calls for a massive system of public works. The RAD will be responsible for much of these. By the end of the year, the system of autobahns will be greatly enlarged, three canals completed, seventeen munitions factories erected, and more than a million acres cleared for more productive uses. The March fourth decrees provide for the Hitler Youth’s large-scale participation in these projects, which will reduce unemployment in Germany to negligible levels by winter.
The railways of the Reich were running at capacity by 1936. Locomotives such as this DRG Class 44 hauled freight quickly and cheaply.
“Thus, the Office of the Four Year Plan will oversee the entirety of this great effort. The Führer has personally asked me to convey to you his insistence on complete cooperation amongst yourselves for the good of the Reich. Are there any final questions?”
Baldur von Schirach, the boyish round-faced leader of the Hitler Youth, held up a hand.
“Yes?”
“Dr. Schacht, could you tell me where to find the nearest bathroom?”
Schacht sighed. A wizard he might be, he mused to himself, but only a true sorcerer could deal with these men. As Schacht pointed von Shirach in the right direction, the others slowly filed out, looking a little dazed.
Facts and numbers… some people simply have no stomach for them.