How a Great Power Falls Apart
Decline Is Invisible From the Inside
SINCE Munich the German trade drive in Southeastern Europe has entered upon an entirely new phase. This change became especially marked after Schacht's dismissal from the Reichsbank last January. It was Schacht who had developed the plan by which Germany imported enormous amounts of raw materials and foodstuffs from Danubian and Balkan countries, and forced them to take in payment, usually much deferred, whatever goods she chose to send them. Though this scheme led to a considerable increase in the volume of commerce between Germany and those countries, the latter were far from satisfied. They felt that they were not being treated fairly and they objected to the unnatural use to which Germany was putting her economic relationship with them. However, the Schacht system has served its purpose. The time has now come, the Germans believe, for even more aggressive tactics. Ever since last September they have therefore been making it increasingly plain that they are aiming at nothing less than the economic conquest of Southeastern Europe.
The new trend was inaugurated by Dr. Funk's much-publicized journey to the Balkans last October. Since then, Germany has been making three closely related demands on the countries in that area. She is insisting (1) that they enter into long-term agreements with her; (2) that they push the development of their resources -- with German help; and (3) that they allow Germany to monopolize their foreign trade. Obviously, this third demand is of the most far-reaching importance. If it were granted, Germany would have free access to the foodstuffs, the petroleum and certain other of the basic raw materials that she needs so badly. She would also obtain control over commodities she herself does not require but which she could resell in the world market in order to acquire gold or foreign exchange -- of which she is also very short. Germany is urging these countries, especially Hungary, to reduce their industrial activities in favor of agricultural production. In this way Germany will obtain a wider market for her manufactured goods as well as insure an adequate and accessible source of cheap foodstuffs and raw materials. In the case of Hungary, the new anti-Jewish legislation is likely to accomplish this result whether the Hungarian Government intends it or not.
Munich gave the Nazis the occasion for making these all-embracing demands; but it required the events of March 15, 1939 -- the "peaceful conquest" of Czechoslovakia -- to bring them close to realization. For it would be inaccurate to suggest that Germany had everything her own way during the first months immediately following the September crisis. With Hungary she was on the worst of terms, due to the Hungarian invasion of Slovakia and Ruthenia. As for Rumania, the shooting of the "Iron Guard" leader, Codreanu -- "while trying to escape" -- was interpreted in Germany as an act of defiance. Only Jugoslavia, with Stoyadinović as Prime Minister, seemed complacent towards German expansion. Therefore, when in February 1939 Stoyadinović was driven from power by public hostility and the Prince Regent's dislike for his dictatorial ambitions, the Germans felt that the time had come to proceed from the emasculation of Czechoslovakia to her obliteration. The Nazis expected two results to flow from this action. In the first place, they believed that Germany's economic resources would be greatly augmented by the incorporation of Czechoslovakia into the Greater Reich. Secondly, the extinction of the Czechoslovak state would, the Nazis thought, teach the other small nations to respect German might. The Germans soon discovered, however, that their newly-won control over Czech and Slovak agricultural production went only a small way towards relieving their ever-growing food shortage. Nevertheless, subsequent events were to show that the establishment of German "protection" over Czechoslovakia was to accelerate the long-run solution of this problem.
Czechoslovakia, scenting danger, had from the moment Hitler came to power sought to intensify economic coöperation between the members of the Little Entente, hoping in this way to offset the revival of the old German Mitteleuropa scheme. Rumania and Jugoslavia were largely agricultural nations with small capital resources and hence they attracted Czech investments. The Prague Government naturally encouraged this movement of capital to countries with which it was politically allied. Thus, Bata and Skoda factories were started in Jugoslavia and Rumania. Nor did the Czechs overlook the tactical advantage gained by arming their allies with the same type of weapon that they themselves used. In proportion as Germany forced an ever accelerating pace of rearmament upon Europe, this military consideration increased in importance.
Vienna, which before the World War had been the financial and industrial headquarters for Southeastern Europe, was only a shadow of her former self after the fall of the Hapsburg Monarchy. Nevertheless, Austrians continued to hold important investments in the Successor States. In the twenties, Austrian and Sudeten German industrialists opened factories in Hungary, Rumania and Jugoslavia in order to evade the high tariff walls erected by those states. The annexation of Austria and the Sudeten areas, and finally the occupation of Czechoslovakia -- all within the space of a single year -- placed this vast wealth in Hitler's hands. Above all, these events gave him possession of the Skoda works, one of Europe's largest arms plants.
In the case of Rumania, the effect of these successive coups seems to have been decisive. Rumanian rearmament had been proceeding in a dilatory fashion. Consequently, when the Germans threatened to prevent the Skoda works from shipping any more arms to Rumania, King Carol had no alternative but to capitulate -- in particular, since this threat was made at the very moment when he wanted to counter-mobilize against Hungary. Therefore, exactly eight days after the German troops entered Prague, Rumania accepted a five-year commercial agreement with Germany. Though the Rumanians managed to evade the German demand for a trade monopoly, they had to accept a plan by which German experts, under the nominal control of joint German-Rumanian companies, were to be given facilities for developing all forms of Rumanian production.
Jugoslavia had distributed her armament orders more diffusely than Rumania, and was thus not tied so closely to Skoda. But Jugoslavia was much more dependent upon Czech capital -- invested, for example, in her textile and sugar industries. Now that Czech and Austrian capital is under Nazi control, Germany's position as an investor in Jugoslavia has completely altered: at the beginning of 1938 she controlled only 55 million dinars in Jugoslavia, or less than one percent of the total foreign capital in that country; today she controls 1,500 million dinars, or 19 percent -- and instead of coming fourteenth on the list, she now comes first. Jugoslavia has also relied more upon Greater Germany to absorb her exports: in 1938 only 36.1 percent of Rumania's total exports went to Germany, Austria and Czechoslovakia, while 50 percent of Jugoslavia's foreign sales went to them.
There is another aspect of Germany's economic drive which, if less conspicuous, is possibly the most important of all -- her currency policy towards her small neighbors. The effects of this policy have probably been most evident in Jugoslavia. The Germans have tempted the Jugoslav farmer with preferential prices in his own currency; but at the same time they have increased the value of the Reichsmark in relation to the dinar in order to keep the price of Jugoslav produce, in terms of Reichsmarks, as low as possible. The results of this manipulation have been various. In the first place, prices within Jugoslavia have been pushed up and the value of the dinar has been depressed. Secondly, trade between Jugoslavia and other countries besides Germany has been made more difficult. Inasmuch as the currencies of those countries, unlike the Reichsmark, have not been artificially increased in value, non-German purchasers can no longer buy Jugoslav products on favorable terms. Furthermore, Jugoslavia's capacity to pay for non-German imports has been cut by the decline in the value of the dinar. Thirdly, the increasingly large rôle of Germany in Jugoslavia's foreign trade has reduced the latter's supply of free exchange, and this has had the further effect of driving foreign capital, which fears for its dividends, out of the country, thereby depressing the dinar still more. Meanwhile, wages lag badly behind prices, and this augments social unrest. The Germans have pursued a similar currency policy towards Rumania and Hungary, though not as yet with the same results. The deliberate intention of these policies is to detach those countries from the world market and, by aligning their prices with those in Germany, to tie them to the economic life of the Reich.
Hungary was not affected by the Nazification of the Skoda works. Nevertheless, she is now sending nearly 70 percent of all her exports, including 90 percent of her agricultural produce, to Greater Germany. In other words, the Germans have a virtual monopoly over Hungary's foreign trade. The events of March 1939 included Hungary's seizure of Czechoslovak Ruthenia. This seems to have been undertaken originally at the instigation of Poland and against Germany's wishes. However, Germany abruptly acquiesced in order to liquidate her quarrel with the Magyars by posing as the restorer of Hungarian rights. Hitler decided that this concession was worth making in order to get Hungary to join the Anti-Comintern Pact (which she did in February 1939) and to obtain unimpeded access to her grain supply. At the same time, Hitler had to permit the suppression of the Hungarian Nazis and the liquidation, temporarily at least, of the pro-German Ukrainian movement in Ruthenia. (A rather strange incident occurred in connection with this last affair -- a number of officers in the Ukrainian National Guard who were shot by the Hungarians turned out to have been Germans.) Later, when the Hungarians also appropriated a corner of the new Slovak state, which had just been taken under German "protection," the Nazis redoubled their efforts to bring Budapest into line with German policy. An obedient Hungary can be used by Berlin as a stick with which to beat Rumania; while the Hungarian minorities in both Rumania and Jugoslavia can be used to advance Axis policies.
Since Munich, the German drive towards the southeast has been characterized by direct political and economic pressure plus an incredibly versatile propagandistic activity, unrestrained by any ethical or logical considerations. This technique has been particularly successful among the German minorities in Hungary, Rumania and Jugoslavia, where there are 500,000, 750,000 and 500,000 German inhabitants respectively. But Nazi propaganda, showered on them in growing quantities ever since 1933, has met obstacles, especially in Hungary.
The Hungarian ruling class has always insisted on the Magyarization of the national minorities within the country and it is entirely opposed to granting even the smallest of the German demands for a special status. It therefore strongly objected to the program of concessions to the German minority which Imrédy, then Prime Minister, promulgated last December. The rights of the German-speaking inhabitants in Hungary are therefore still very much restricted. Dr. Franz Basch, the local Fuehrer, complains very loudly of the lack of German schools and in his Deutscher Volksbote expatiates in the shrill tones which characterized Henlein's newspaper Die Zeit on such themes as the "brutality" of Hungarian gendarmes towards the Germans. The height at which feeling runs is illustrated by incidents such as that at Pécs last February: on this occasion, when some Magyars turned up at a local German meeting, they were greeted with cries of "Out with the Hungarian dogs!" and were compelled to leave. This action caused bitter Hungarian resentment.
In Rumania and Jugoslavia the situation is somewhat different. In those countries there has never been much question of trying to assimilate the Germans; in the early years following Hitler's accession to power their so-called cultural organizations were therefore freer to receive propagandist visitors from the Reich. Consequently the younger German generation in both countries warmly embraced the tenets of National Socialism in order to expel the older generation from its position of leadership. This naturally led to some very serious quarrels. Only after Munich were the young people able to carry all before them and to insist upon the complete Nazification of the German minorities in each country.
The Germans in Rumania and Jugoslavia are taught to feel superior to the local non-German populations and to regard themselves as outposts of the Nazi Empire. It should not be forgotten that these German minorities, though largely under Magyar rule, were subjects of the Hapsburgs until 1918, and it seems natural and desirable to them that Hitler should succeed to that dynasty and thereby -- so they hope -- bring back the "good old days."
In Rumania there are two main groups of Germans: the 250,000 so-called Saxons whose ancestors settled in Transylvania in the early Middle Ages, and the 300,000 Swabians who descend from eighteenth century colonists; the former are Protestant, the latter Catholic. The Saxons are among the most bellicose Nazis in the world; there are Swabians, however, who still voice opposition to Hitlerism. Since the German Legations in these countries have now become Nazi Party centers, they concern themselves very closely with the affairs of the German minorities. For instance, a Reich German named Konradi is now attached to the Legation at Bucharest in some commercial capacity, though in fact he serves as a liaison officer for all Germans in Rumania, whether they are Reich citizens or not. Following the conclusion of the German-Rumanian commercial treaty on March 23, German technicians have been crowding into Rumania. The local Saxons are prominent in Rumanian industry and will probably help the Nazis to gain control of it, little by little. A Rumanian law of 1934 provided that 80 percent of the people employed in each category in every factory must be Rumanian citizens; the number of Saxon and Swabian Rumanians who can be hired is therefore legally unrestricted. In the past, the Rumanian authorities have not let the minorities exercise their rights under this law; in the future, Nazi pressure may oblige them to give the local Germans even more than their due.
In Jugoslavia the events of 1938 have had the same general effect upon the German minority as in Rumania. When the Sudeten Germans demanded that they be released from the ordinary obligations of Czech citizenship, they received the warm approbation of the Germans in Slavonia and Voivodina. Within a short time the latter were putting forward similar claims. In 1934 an important group of young pro-Nazi Germans in Jugoslavia, who had broken away from the conservative Kulturbund, had formed a new body, the Kultur-und-Wohlfahrtsvereinigung des deutschen Slawoniens. Its leader was a retired officer named Altgayer, who suddenly found it desirable to change his Christian name from the Croatian Branimir to Siegfried. In May 1938, Altgayer's newspaper published a five-point program on the Henlein model which culminated in a demand for the right to "organize our people in a racial community inspired by the National Socialist ideology, which is our own." After Munich the Germans in Jugoslavia accepted complete Nazification and the old conservative Kulturbund agreed (November 1938) to embrace Altgayer's program and incorporate his followers.
In Jugoslavia, as in Rumania, the German minority includes several important industrialists whose capital may be reckoned as an asset to the Reich. The most striking example is the industrialist Westen, who owns the foundries at Jesenice and Celje in Slovenia. Westen is a Jugoslav citizen of German origin and is in close touch with Neuhausen, the ubiquitous German Consul-General at Belgrade and head of the German Tourist Agency in Jugoslavia. The German minority also owns considerable land in Jugoslavia, and this fact is being exploited by the Nazis in their "Drang nach Osten." One of the tenets of the old Austrian Pan German movement was that Germans should acquire land in non-German or disputed districts -- "He who has land has power." Under the impulse of this program, "Defense Societies" were organized; these helped their members to buy land, which then magically turned into "sacred German soil." This activity has been revived in recent years, in particular through the initiative of Neuhausen. In 1936 Germans began to buy up land both in Slovenia and along the Danube in Slavonia and Voivodina. These holdings were acquired in such a way as to indicate that the Germans were planning to possess a compact area along both banks of the Danube. The Jugoslav Government therefore decreed that transfers of land in frontier districts must have official approval; but so long as Stoyadinović was in power it was widely felt that the Germans continued their purchases in the Danubian districts much too easily.
In Slovenia the authorities have fairly effectively put a stop to the buying of land by Germans. Some anxiety is still felt about the Austrian family of Auersperg which, in spite of agrarian reform, continues to own large estates. But Slovenia is a special case, and in spite of its small German population (only about 40,000) its position and history make it particularly susceptible to pressure from Germany. Before the war Slovenia was under the direct rule of Austria, and its northeastern area was actually a part of the Austrian province of Styria. The Nazis believe that Slovenia will soon belong to Austria again. The German Consulate at Ljubljana, which has a huge staff, recently established a branch at Maribor near the German frontier. It is perhaps even worth recording that some of Henlein's close collaborators at Eger in the pre-Munich days have had business at Maribor lately. Soon after the German occupation of Prague there were particularly fervent white-stockinged[i] demonstrations -- without police interference -- in a small town northeast of Maribor largely inhabited by Germans. However, at a similar manifestation a week later, mysterious counter-demonstrators appeared, apparently from nowhere, and the police looked on while the pro-Nazi crowds were rather roughly handled.
Many of the younger Slovenes are much opposed to the Nazi campaign. Yet it would be inaccurate to overlook the fact that a number of the older generation still respond to the glamour of German imperialism; before the war it was customary for Slovenes, especially those in the towns, to accept Germanization rather willingly. German propagandists are now busily trying to reclaim these people, who in many cases resent union with the "primitive" Serbs. This is one reason why Germany insisted last April on being permitted to start about thirty new Kulturverbände in Slovenia. The wealth and vigor with which these bodies are endowed make them important centers for Nazi propaganda.
Nazi agitation in the Danubian countries also seeks to stimulate the discontent of non-German minorities. The one and a half million Hungarians in Transylvania, given to Rumania at the Peace Conference, provide the Nazis with some excellent material for this purpose. The Hungarians do not form a majority in this region, for the Rumanians alone constitute 58 percent of the total population.[ii] It would be impossible to exaggerate the sentimental importance attached by these Rumanians to Transylvania's remaining an integral part of the Kingdom. But this deep feeling collides with the equally strong determination on the part of the Hungarians in Hungary to see that Transylvania is reincorporated into the Hungarian fatherland. Minority conditions in Rumania have always compared unfavorably with those in pre-Munich Czechoslovakia, and during the last few years the Bucharest authorities have allowed the status of the Hungarian minority to deteriorate. Nor has the Minority Statute issued last summer improved matters noticeably. The extensive mobilization of the Rumanian army, ordered this spring in response to Hungary's seizure of Ruthenia and to her massing of troops along the Rumanian frontier, inevitably led to the further embitterment of feeling in Transylvania. Firearms and wireless sets owned by Hungarians were confiscated by the Rumanian police, and there was an obvious, though quite natural, distrust of the Hungarians who were called to the Rumanian colors.
German agitators have worked in close collaboration with young Rumanian Iron Guardists. Yet the Iron Guard continues to profess harsh intolerance towards all talk of revising the treaties or of acceding to the demands of the minorities. The fact of the matter is that the question of Transylvania cannot be solved along ethnic lines, since the various nationalities do not live in homogeneous blocs but are inextricably mixed up with each other. Furthermore, the Magyars in Transylvania are not accustomed to the same feudal conditions that prevail in Hungary proper and they look askance at any proposal for their complete subordination to Budapest. The Transylvanian Germans, for their part, are certainly far from being Magyarphils, while many of the Rumanians in Transylvania dislike what they regard as the "Balkan" characteristics of the Bucharest régime. For the moment, Transylvanian sentiment is important chiefly because it is susceptible to the Nazi-inspired suggestion that Transylvania's present ills would disappear if only it could regain its autonomy -- under German "protection."
In appraising this situation we should bear in mind that in Rumania, Jugoslavia and Hungary the press is forbidden to cast any aspersions on Germany or Italy, though it is free to abuse the Western Powers. The humiliation of the Western Powers at Munich made it easy for Nazi propaganda to paint them as decadent. Yet, if those Powers succeed in arriving at a modus agendi with Russia, there are indications that the Balkan peoples may still seek to resist the "Drang nach Osten." Even the Magyars are not sure where they will stand.
[i] In the small countries bordering Germany the Nazis make use of the white stocking as the Party emblem, particularly where they are forbidden by the local authorities to display the swastika or to wear distinctive uniforms.
[ii] This figure, taken from the 1930 census, applies to Transylvania together with the additional Hungarian territory given to Rumania in 1919: Crişana, Maramureş and much of the Banat.