The Transfer Agreement (42 page)

By I933, commerce had become so international a complex that only a global organization could fundamentally shift commercial traffic over and around the well-entrenched German export system. And the boycott organizers understood this from the beginning.

These organizers knew that boycotts become successful not by asking people to stop buying and selling what they have traditionally bought and sold, but by asking people to
switch
their buying and selling loyalties. New loyalties, once rooted, would become equally difficult to dislodge. Without high-quality, price-competitive alternative sources of supply, the anti-Hitler boycott would be no more than an emotional, briefly punitive commercial reprisal. But with an international clearinghouse to reroute the rivers of commerce, Germany would be left deserted and destitute—not for just a few months, as she weathered the attack, but in a systematic fashion that would remain in force until Germany collapsed from within.

The major boycotters of America, Holland, England, France, and Poland, looking forward to the moment of international consolidation, almost universally adopted the same slogan: "Germany will crack this winter!"

T
IME
was what the Reich needed. When the Reich could no longer pay
its obligations, Germany would be bankrupt. That moment had been technically postponed for years by rationing foreign exchange to only the most important transactions. But with Reichsbank reserves hit so hard by both the boycott and the Depression, there would soon be nothing left to ration.

In fact, in early June 1933, the German government was forced to permit the American Jewish Congress and other groups to send a multimillion-dollar Jewish relief fund to Berlin. The decision was of such importance that final approval could be granted only by Hitler himself. It was a difficult approval, because accepting relief funds was an admission that German Jews were being economically destroyed—something the Reich continued to deny. But the dollars were too badly needed to prop up the foreign-exchange scarcity. Moreover, when recalcitrant NSDAP activists tried to seize the funds from Berlin banks, claiming that the Congress money belonged to a hostile organization, the government quickly intervened and cash distribution to Jews resumed. The threat that future relief dollars would not be sent to Germany was too perilous a possibility to allow any interference.
¹

But relief funds were mere drops of water to the cash-thirsty Reich. In plain English, they were already broke. Only Schacht's clever acts of desperation were postponing a mass shutdown of German industry.

For example, shortly after Sam Cohen's deal was concluded, the Reich Economics Ministry realized the potential of using blocked marks and merchandise to pay desperate creditors. A similar arrangement was set up with a new American syndicate managed by the Harriman Company Harriman would purchase German merchandise for about 150
American individuals
and companies owning blocked accounts in Germany. It worked this way: American importers would pay only 75 percent of their merchandise invoices in actual U.S. currency. But these dollars would never reach the German manufacturer; they would go into the Reichsbank reserve. The Reichsbank would then pay the German exporter in blocked marks. The remaining
25
percent of the invoices would be paid to a U.S. escrow account in dollars. To consummate the transaction, the U.S. creditor would take over the dollar escrow account in America and the German manufacturer would take over the creditor's blocked account in Germany. The Economics Ministry expected to promote about RM
25
million in exports by this technique.
²
The U.S. creditors were so desperate they were willing to traffic in German exports to slowly regain part of their assets frozen in Germany. In the process, Germany earned foreign currency and kept industry working a little longer.

Another trick for time was the proliferation of bilateral bartering. With little or no cash to pay for raw materials and semifinished goods needed for industry, Germany could resort to the barter system, a straight exchange of goods or commodities. For instance, Germany could swap its coal for another country's cotton, or German pharmaceuticals for another country's metal ore. In this way, a bankrupt Germany could keep manufacturing components flowing to German industry, and the population would remain working.

But such tricks were dependent upon one essential factor: the inherent value of German goods. Once German merchandise did become essentially valueless, Germany could gain yet a little more time with domestic tricks, charades, and outright thefts. For instance, the Reich could offer subsidies to stave off an industry's disintegration. By early June, such subsidies were frequent. For example, on June 6, Goebbels granted a RM 10
million subvention to the German film industry.
³
But crippled by cinema boycotts, the German film industry would take many months, perhaps years to rebuild.
⁴
How long could such subsidies continue?

Or the Reich could broaden its artificial protection of domestic industries. Such protection already existed for numerous commodities such as eggs and wheat. But whenever the government banned competitive supplies from neighboring countries, those countries always retaliated with similar restrictions on German products. So one German economic sector would flourish for a moment, while several others paid the price. For example, trade with Rumania was almost nonexistent by June 1933 because Germany's protectionist ban on many Rumanian farm products provoked a reciprocal ban on most German wares.
⁵
How
long could the Reich protect selected economic sectors at the expense of others?

Or the Reich could expand its rigid wage and price controls. But that creates shortages, black markets, and even bankruptcies. In fact, such bankruptcies were regularly occurring. Defunct companies were simply absorbed
into ever larger cartels to keep the employees working. But how long could unprofitable businesses continue federating before they created one prodigious industrial failure? How many such failures could the Reich prop up with subsidies? And how many shortages could the Reich endure before work was forced to a halt for lack of materials?

Or the Reich could fool the millions of unemployed Germans into believing they were actually gainfully employed. With over 5 million still jobless, employment schemes were an obsession of the Third Reich. For example, in May, Hitler announced "compulsory volunteerism" as a substitute for actual employment. Most of these schemes simply relocated the worker. Heavily reliant on Nazi jingos and fatally underfinanced, the substitute work programs were aptly summed up in a mid-May report by British commercial attaché F. Thelwell: "Schemes for [re]settlement and for the provision of work ... are being dealt with together, and ... such a state of confusion exists and such obviously fantastic plans are being discussed, that it is quite impossible to form any rational or coherent picture of what will ultimately be done."
⁶
How long could such schemes continue to fail before the populace saw them as placebos?

Or
the Reich could continue squeezing its own citizens and companies. This it was already doing to the Jews, with the overwhelming approval of the anti-Semitic population of Germany. Jewish assets in Germany probably exceeded RM
10
billion.
⁷
But the Nazi business usurpers were so inept that Aryanized businesses frequently failed, creating even more unemployment. Moreover, by spring
1933,
the company takeovers began extending into the non-Jewish sector as any suspect business was subject to confiscation by party kommissars (locally appointed party controllers). The situation became so precarious that Nazi leaders such as Hugenberg, Goebbels, and even Hitler were incessantly chastising NSDAP kommissars to
stop
their takeovers. On May
20,
for example, Goebbels warned kommissars, "We will not permit the country's business to be destroyed by dilettantes."
⁸
How long could productive businesses be neutralized before the collective loss created an insurmountable crisis?

The Nazis knew the answer to all these questions.
If
exports fell too low, Germany as a nation would again be faced with starvation. It had happened just fourteen years earlier; it was still fresh in many minds. In the winter of
1919,
a besieged Germany was blockaded into submission, starved into defeat. To the Nazis, the anti-German boycott of
1933
was in many ways a reminiscent tactic. There were no enemy ships in the seaways, no hostile divisions at the bridgeheads. But as effective as any blockading frigate or infantryman was this boycott that blocked German goods from being sold, blocked foreign exchange from being earned, and blocked the means of survival from entering Germany.

How many months could Germany survive once the boycott became
global, once commerce was rerouted around Germany? The boycotters adopted a slogan: "Germany will crack this winter." In Berlin many believed those words. On June 14, Britain's Ambassador Sir Horace Rumbold reported to British Foreign Secretary John Simon on an hourlong conversation with former German Chancellor Heinrich Bruning. The meeting was held in great anxiety because Brüning was convinced his phones and mail were monitored. Rumbold conveyed Brüning's belief "that economic conditions might deteriorate to such an extent in the autumn or winter as to produce a very serious situation in this country." Rumbold added his own validation: "I have heard from a direct source that the Chancellor [Hitler] himself is very apprehensive of the economic conditions which are likely to obtain towards the end of the year."
⁹

Two weeks later, on June 30, Rumbold sent Simon another report, this one describing the unparalleled political and economic chaos dwelling in Nazi Germany. Rumbold's report closed with a flat assertion: "The Chancellor is concentrating his attention on the problem of reducing unemployment in the realization that his stay in office depends to a great extent on the economic situation next winter."
¹⁰

Germany's economic viability had indeed become a phantasm of lies, tricks, and facades. And then came the very thing the Reich was dreading: boycott consolidation. Since the spring, both the Jewish War Veterans in New York and the Polish boycott committees in Warsaw had talked of joining forces. On June 3, Lord Melchett and the British Trade Unions Congress took the initiative and issued formal invitations to the independent boycott committees of the world to assemble in London on June 25 to establish an international boycott council.
¹¹

Melchett titled the boycott convention the World Jewish Economic Conference. The name was a wordplay on the intergovernmental meeting then under way in London, the World Economic Conference, convened to stimulate trade, especially with Germany. As it turned out, Germany's hopes for increased trade evaporated. So threatening were the World Economic Conference delegates that Schacht's plan of default had to be suspended for fear of provoking extraordinary retaliation, such as the liquidation of German property abroad as promised by John Foster Dulles. A Reich cabinet meeting called on June 23, shortly after the World Economic Conference, reported: "Pessimistic as were the expectations with which the [German] delegation went to London, they were outdistanced by far. Germany found among all states an attitude that hardly could be worse."
¹²
Melchett's Conference planned to finish the job.

The Jewish War Veterans and the American League for the Defense of Jewish Rights—America's two vanguard boycott groups—accepted Lord Melchett's invitation at once through ALDJR president Samuel Untermyer,
one of American Jewry's most respected champions. He was renowned as the man who broke the "money trusts," as the former law partner of Committee leader Louis Marshall, as a major figure in the victory over Henry Ford, and as a regular crusader against civil rights injustice. His leadership was all the more meaningful to the boycott movement since he was a popular rival of Stephen Wise, who had yet to declare a boycott. However, in accepting Melchett's invitation, Untermyer asked if the conference could be postponed two weeks, giving Untermyer and his associates time to wrap up affairs in America. Melchett quickly agreed and a new date was set: July
15.
¹³

Preparations began in earnest. Boycott groups from Holland, France, Poland, England, America, Latvia, and from thirty other nations would attend. Successful boycott ideas would be exchanged. Inefficient methods would be analyzed and improved. Separate committees would focus on techniques for organizing trade unions, manufacturers, and consumers. Most important, all the groups would bring long lists of manufacturers and sellers seeking alternatives to German goods.
¹⁴
These lists would be put together, making the international boycott group a commercial clearinghouse first and foremost. In the meantime, those anxious to replace German goods continued their haphazard struggle to find one another via advertisements in a boycott publication,
The
J
ewish Economic Forum,
published by Lord Melchett.

Egyptian importers of silk stockings want supplies "similar to the Chemnitz products." British ornament distributers invite carved wood from any non-German sources. Poland's leading importer of cleaned graphite seeks non-German alternative supply. British cap manufacturers need cap fasteners produced anywhere but Germany. Hungarian, Yugoslavian, Swiss, and Czech firms want gloves, hats, glues, and foodstuffs to replace German products. The French State Railways offers special discount freight rates for shippers seeking to avoid German trucks and rail lines.
¹⁵