III

Among the groups widely regarded as winners in the economic upheavals of the early 1920s were the big industrialists and financiers, a fact that caused widespread resentment against ‘capitalists’ and ‘profiteers’ in many quarters of German society. But German businessmen were not so sure they had gained so much. Many of them looked back to the Wilhelmine Reich with nostalgia, a time when the state, the police and the courts had kept the labour movement at bay and business itself had bent the ear of government in key matters of economic and social policy. Misconceived though this rose-tinted retrovision might have been, the fact remained that big business had indeed held a privileged position before the war despite occasional irritations with state interference in the economy.⁹⁵ The rapidity and scale of Germany’s industrialization had not only made the country into mainland Europe’s major economic power by 1914, it had also created a business sector that was remarkable for the scale of its enterprises and the public prominence of its managers and entrepreneurs. Men like the arms manufacturer Krupp, the iron and steel magnates Stumm and Thyssen, the shipowner Ballin, the electricity company bosses Rathenau and Siemens, and many more, were household names, rich, powerful and politically influential.

Such men tended, with varying emphases, to resist unionization and reject the idea of collective bargaining. During the war, however, they had softened their antagonism under the impact of growing state interference in labour relations, and on 15 November 1918 business and the unions, represented respectively by Hugo Stinnes and Carl Legien, signed a pact establishing a new framework of collective bargaining, including recognition of the eight-hour day. Both sides had an interest in warding off the threat of sweeping socialization from the extreme left, and the agreement preserved the existing structure of big business while giving the unions equal representation on a nationwide network of joint bargaining committees. Like other elements of the Wilhelmine establishment, big business accepted the Republic because it seemed the most likely way of warding off something worse.⁹⁶

Things did not, then, seem too bad for business during the early years of the Republic. Once they had cottoned on to the fact that the inflation was going to continue, many industrialists purchased large quantities of machinery with borrowed money that had lost its value by the time they came to pay it back. But this did not mean, as some have claimed, that they drove on the inflation because they saw its advantages for themselves. On the contrary, many of them were confused about what to do, above all during the hyperinflation of 1923, and the gains they made from the whole process were not as spectacular as has often been alleged.⁹⁷ Moreover, the sharp deflation that was the inevitable outcome of currency stabilization brought serious problems for industry, which had in many cases invested in more plant than it needed. Bankruptcies multiplied, the huge industrial and financial empire of Hugo Stinnes collapsed, and major companies sought refuge in a wave of mergers and cartels, most notably the United Steelworks, formed in 1924 from a number of heavy industrial companies, and the massive I.G. Farben, the German Dye Trust, created the same year from the chemical firms of Agfa, BASF, Bayer, Griesheim, Hoechst and Weiler-ter-Meer, to form the largest corporation in Europe and the fourth largest in the world after General Motors, United States Steel and Standard Oil.⁹⁸

Mergers and cartels were designed not only to achieve market dominance but also to cut costs and increase efficiency. The new enterprises set great store by rationalizing their production along the lines of the super-efficient Ford Motor Company in the United States. ‘Fordism’, as it was known, automated and mechanized production wherever possible in the interests of efficiency. It was accompanied by a drive to reorganize work in accordance with new American time-and-motion studies, known as ‘Taylorism’, much debated in Germany during the second half of the 1920s.⁹⁹ Changes along these lines were achieved to a spectacular degree in the coal-mining industry in the Ruhr, where 98 per cent of coal was extracted by manual labour before the war, but only 13 per cent by 1929. The use of pneumatic drills to dig out the coal, and of mechanized conveyor belts to take it to the loading point, combined with a reorganization of working practices to bring about an increase of the annual output of coal per miner from 255 tons in 1925 to 386 tons by 1932. Such efficiency gains enabled the mining companies to reduce the size of their labour force very quickly, from 545,000 in 1922 to 409,000 in 1925 and 353,000 in 1929. Similar processes of rationalization and mechanization happened in other areas of the economy, notably in the rapidly growing automobile industry.¹⁰⁰ Yet in other areas, such as iron and steel production, efficiency gains were achieved not so much by mechanization and modernization as by mergers and monopolies. For all the discussions and debates about ‘Fordism’, ‘Taylorism’ and the like, much of German industry still had a very traditional look to it at the end of the 1920s.¹⁰¹

Adjusting to the new economic situation after stabilization in any case meant retrenchment, cost-cutting and job losses. The situation was made worse by the fact that the relatively large birth-cohorts born in the prewar years were now coming onto the job market, more than replacing those killed in the war or by the devastating influenza epidemic that swept the world immediately afterwards. The labour census of 1925 revealed that there were five million more people in the available workforce than in 1907; the next census, held in 1931, showed an additional million or more. By the end of 1925, under the twin impacts of rationalization and generational population growth, unemployment had reached a million; in March 1926, it topped three million.¹⁰² In the new circumstances, business lost its willingness to compromise with the labour unions. Stabilization meant that employers were no longer able to pass on the costs of wage raises by raising their prices. The organized structure of collective bargaining that had been agreed between employers and unions during the First World War fell apart. It was replaced by increasingly acrimonious relations between business and labour, in which labour’s room for manoeuvre became ever more restricted. Yet employers continued to feel frustrated in their drive to cut costs and improve productivity by the strength of the unions and the legal and institutional obstacles placed in their way by the state. The system of arbitration put in place by the Weimar Republic loaded the dice in favour of the unions during labour disputes, or so the employers felt. When a bitter dispute over wages in the iron and steel industry in the Ruhr was settled by compulsory arbitration in 1928, the employers refused to pay the small wage increase that had been awarded, and locked over 200,000 metalworkers out of their plants for four weeks. The workers were not only backed by the Reich government, led by the Social Democrats in a Grand Coalition formed earlier in the year, but also got paid relief by the state. To the employers it began to seem as if the whole structure of the Weimar Republic was ranged against them.¹⁰³

Things were made worse from their point of view by the financial obligations that the state placed on them. In order to try and alleviate the worst consequences of the stabilization for workers, and to prevent the recurrence of the near-collapse of welfare provision that had occurred during the hyperinflation, the government introduced an elaborate scheme of unemployment insurance in stages in the years 1926 and 1927. Designed to cushion some 17 million workers against the effects of job losses, the most substantial of these laws, passed in 1927, required the same contributions from employers as employees, and set up a state fund to cope with major crises when the number of unemployed exceeded the figure with which it was designed to cope. Since this was only 800,000, it was obvious that the scheme would get into serious trouble should numbers go any higher. In fact, they had exceeded the limit even before the scheme came into effect.¹⁰⁴ Not surprisingly, this welfare system represented a growing state intervention in the economy which business disliked. It piled on extra costs by enforcing employers’ contributions to workers’ benefit schemes, and it imposed an increasing tax burden on business enterprise and indeed on well-off businessmen themselves. Most hostile of all were the heavy industrialists of the Ruhr. Legal restrictions on hours of work prevented them in many cases from utilizing their plant round the clock. Contributions to the unemployment benefit scheme launched in 1927 were seen as crippling. In 1929 the industrialists’ national organization announced its view that the country could no longer afford this kind of thing and called for swingeing cuts in state expenditure accompanied by the formal ending of the bargain with labour that had preserved big business at the time of the 1918 Revolution. Claims that it was the welfare system rather than the state of the international economy that was causing their problems were exaggerated, to say the least; but the new mood of hostility towards the unions and the Social Democrats among many employers in the second half of the 1920s was unmistakeable none the less.¹⁰⁵

Big business was thus already disillusioned with the Weimar Republic by the late 1920s. The influence it had enjoyed before 1914, still more during the war and the postwar era of inflation, now seemed to be drastically diminished. Moreover, its public standing, once so high, had suffered badly as a result of financial and other scandals that had surfaced during the inflation. People who lost their fortunes in dubious investments searched for someone to blame. Such scapegoating focused in 1924-5 on the figure of Julius Barmat, a Russian-Jewish entrepreneur who had collaborated with leading Social Democrats in importing food supplies immediately after the war, then invested the credits he obtained from the Prussian State Bank and the Post Office in financial speculation during the inflation. When his business collapsed towards the end of 1924, leaving 10 million Reichsmarks of debts, the far right took the opportunity to run a scurrilous press campaign accusing leading Social Democrats such as the former Chancellor Gustav Bauer of taking bribes. Financial scandals of this kind were exploited more generally by the far right to back up claims that Jewish corruption was exerting undue influence on the Weimar state and causing financial ruin to many ordinary middle-class Germans.¹⁰⁶

What could business do to remedy this situation? Its room for political manoeuvre was limited. From the beginning of the Republic, business sought both to insulate industry from political interference, and to secure political influence, or at least good will, through financial donations to the ‘bourgeois’ parties, notably the Nationalists and the People’s Party. Large concerns often had a financial hold on major newspapers through their investments, but this seldom translated into a direct political input. Where the owner did intervene frequently in editorial policy, as in the case of Alfred Hugenberg (whose press and media empire expanded rapidly during the Weimar Republic), this often had little to do with the specific interests of business itself. By the early 1930s, indeed, leading businessmen were so irritated by Hugenberg’s right-wing radicalism that they were plotting to oust him from the leadership of the Nationalist Party. Far from speaking with one voice on the issues that affected it, business was split from top to bottom not only by politics, as the example of Hugenberg suggests, but by economic interest, too. Thus, while the Ruhr iron, steel and mining companies were furiously opposed to the Weimar welfare state and the Weimar system of collective bargaining, companies like Siemens or I.G. Farben, the giants of the more modern sectors of the economy, were more willing to compromise. Some conflict of interest also existed between export-oriented industries, which did relatively well during the years of stabilization and retrenchment, and industries producing mainly for the home market, which included, once again, the Ruhr iron and steel magnates. Even among the latter, however, there were serious differences of opinion, with Krupp actually opposing the hard-line stance taken by the employers in the 1928 lock-out.¹⁰⁷ By the end of the 1920s, business was divided in its politics and hemmed in by the restrictions placed on it by the Weimar state. It had lost much of the political influence it had enjoyed during the inflation. Its frustration with the Republic was soon to erupt into open hostility on the part of some of its most influential representatives.