Foreign Affairs: 100 Years
A New Americanism
Why a Nation Needs a National Story
IF the economic relations between nations were normal and rational, the position of Germany would be primarily that of a converter of foreign raw materials into manufactured goods for the world market. But since the First World War these relations have not been normal, and they have become even less so since the National Socialist régime put Germany's economy on a permanent wartime basis. A necessary part of Hitler's Wehrwirtschaft has been the attempt to make Germany as self-sufficient as possible of foreign, more particularly non-European, sources of supply. Yet despite the gains achieved by autarchy, through such devices as the intensification of agriculture and the development of Ersatz industries, the fundamental composition of Germany's foreign trade had changed comparatively little before the outbreak of the war. There was, however, a definite trend toward Latin America as a source of supply in order to counteract the exchange difficulties involved in trade with certain European countries and the United States. At the same time, the Germans were making a strong effort to develop their trade with Southeastern Europe, even though this region could meet only a relatively small part of their needs.
Taking Germany's imports as a basis for calculating the degree of her dependence on outside sources of supply, we find that for the first six months of 1939 (after April 1 these figures included Austria and Sudetenland) they were valued at about 2,750,000,000 marks. Of this amount foodstuffs accounted for a little over 1,056,000,000 marks; the remainder consisted of industrial products, predominantly raw materials and semi-manufactures. Among the industrial raw materials -- of particular interest to us here -- we must distinguish between those used for satisfying the consumption needs of the population, of only secondary importance in the Nazi economy, and those intended primarily for industries essential to war. Thus, the fact that cotton came almost entirely from territories now practically inaccessible to Germany is not particularly important, since for some years a large part of her gradually curtailed demand for textile raw materials has been satisfied by synthetic fibers made from domestic or European raw materials. On the other hand, Germany before the war had to obtain many important industrial raw materials wholly or largely from overseas. Among these might be included cotton, jute, wool, hides and skins, rubber, petroleum and petroleum products (including lubricating oil), copper and copper ore, nickel, lead, tin, gums, mica, antimony and tungsten ore. In the case of many of these items originating in the colonies of other European Powers, the degree of dependence on overseas sources was considerably greater than would appear from the German import statistics, since they reached Germany by way of the mother countries in Europe.
In evaluating the increased resources that Germany is deriving from her territorial expansion over the Continent, we must remember that as a whole the countries now under German control are not large-scale producers of raw materials and that in some cases, such as that of the iron ore of Lorraine, what is involved is merely a shift from one European source to another rather than the replacement of an overseas product. Some of these countries are among the most industrialized in the world, and the addition of their industrial facilities to those possessed by Germany must be of considerable assistance, both direct and indirect, in carrying on the war as well as in supplying some of the underdeveloped countries of Europe with manufactured products in exchange for the foodstuffs and raw materials they are sending to Germany.
We must also keep in mind that Germany has control of the raw materials and production facilities not only of those countries under her military occupation but of those others over which by political and economic pressure she is able to exercise effective domination. It is only fair to add that in some of these countries certain important industries have been maintaining close economic relations with corresponding industries or organizations in Germany for a number of years and are, therefore, inclined to assume a "realistic" attitude toward German overtures for economic coöperation.
In order to obtain an approximately correct idea of the productive capacities of the German-controlled countries we must resort, in the absence of current statistics, to a survey of their economic status prior to the outbreak of the war. In so doing we should, of course, make allowance for whatever modifying factors the German occupation has effected. On the whole, however, we can assume that the German Government has not yet had time to take any radical steps towards adapting the economies of these countries to its own war needs aside from diverting their trade and commandeering their raw materials, foodstuffs and industrial machinery to German uses. Let us take up these countries in the order of their conquest or occupation.
Austria's contribution to the economy of the Reich consists largely of iron ore, timber and magnesite. The famous iron-ore deposits of the Erzberg in Styria produced, before the Anschluss, about 2,000,000 tons a year; since then the Germans claim to have increased this figure. The ore is taken from an open-cut mine and contains a higher iron content than the Brunswick deposits which the Germans have been developing to supply the Hermann Goering Werke. The comparatively limited output and their distance from coal supplies make the Austrian deposits of relatively slight importance to the German iron and steel industry, especially now that the Lorraine deposits have been annexed and the accessibility of the far richer Swedish ores has been assured. Austria's facilities for iron and steel production at the time of the annexation were rather small and not very efficient, and the construction of the plant of the Hermann Goering Werke at Linz might be regarded primarily as an attempt to increase employment in the newly acquired country rather than to add to Germany's iron and steel supplies.
The timber resources of Austria are important, especially in view of the increased demand for wood pulp as a raw material for the German textile industry. It is estimated that about 38 percent of the area of Austria is in forests; before annexation the country exported timber, much of it going to Germany. According to latest reports, the extensive Swedish wood-pulp industry, the output of which is now at the disposal of Germany, is not only working at low capacity, but is even compelled to store a considerable part of its product, which Germany evidently is not in a position to absorb either for her own use or for that of the occupied countries. This would seem to justify the conclusion that the wood-pulp resources of Austria are not at present of prime importance.
Austria's magnesite deposits, famous throughout the world, yielded a considerable surplus for export before the Anschluss. Among the countries taking Austrian magnesite the United States was second only to Germany. The annexation has therefore affected the American rather than the German position.
As for industrial facilities, Austria cannot be regarded as making a substantial contribution to those of Germany. The most important Austrian industries were those engaged primarily in the production of articles of consumption, such as textiles, small metal articles, leather goods and articles of fashion. Many of them worked with imported raw materials which are now unavailable, and they depended to some extent on the tourist trade which has now virtually disappeared. Furthermore, the heavy industries, particularly the iron and steel plants, were not working very efficiently, and had a high cost of production. It should be remembered that in the old Austro-Hungarian Empire, Bohemia and Moravia -- and not Austria itself--constituted the industrial center, and that the economic conditions prevailing in Austria during the interval between the two world wars were not very conducive to large-scale industrial development.
THE SUDETENLAND AND THE CZECH AND SLOVAK AREAS
From the standpoint of industrial facilities, especially those available for the production of military supplies, the Sudetenland and the "Protectorate" of Bohemia and Moravia probably constitute the most important addition to Germany's resources among all the conquered territories. Taken together, the two areas form a large industrial region which under normal conditions depended to a very large extent on imported raw materials, the principal exception being lignite -- of which Germany, however, has very large deposits. Among the industries, the iron and steel plants are the most important, although the highly developed chemical industry centering in Aussig is also of considerable military value. Most famous of these plants is, of course, the Skoda works, one of the largest of its kind in Europe. As a matter of fact, a German-dominated consortium had acquired a majority control of the Skoda works before the declaration of the Protectorate. In addition to being a highly integrated concern, with its own deposits of coal, ore and limestone, Skoda produces a very wide range of manufactures including not only arms and munitions but heavy industrial machinery, automotive products, aviation equipment, railroad material, special steels, tubes, etc. Skoda has its export organization and branches in a number of countries, some of them overseas. The Aussig chemical combine -- now, of course, under German control -- maintains close relations with the German I. G. and is reported to be producing chemicals for war purposes. There are a number of other large concerns engaged in the metal industries, as well as the extensive textile industry and large glass and china factories in the Sudetenland.
While some of these formerly Czech industries are of secondary importance, since they produce consumption goods and therefore represent a non-essential addition to Germany's extensive facilities, their output is nevertheless useful to Germany because she uses it directly or indirectly, to supply other European countries with manufactured products in exchange for the raw materials and foodstuffs which are essential to her. The German Government naturally publishes very little about the present volume of production in the industries of the Sudetenland and the Protectorate, or about the extent to which their facilities are used; but enough is known to indicate that very considerable progress has been made towards incorporating them into the German economy. In 1937, about 23 percent of Czechoslovakia's total exports went to Germany and Austria, while a very large proportion of their specialties -- like textiles, leather gloves, glassware and articles of fashion -- went overseas, especially to the United States. Though it is safe to assume that some of the industries in former Czechoslovakia have had to curtail their production for lack of raw materials, it is quite obvious that the heavy industries, working primarily with raw materials which Germany or the occupied countries can supply, represent an extremely important addition to the productive facilities at German command.
The chief industrial value of Western Poland to Germany lies in its mineral resources, particularly coal, and in the extensive metal-working industries of Silesia. The coal-mining industry is of special importance at present. During the postwar period Poland had developed a very considerable coal-export trade to Italy and the Scandinavian countries; at present this trade constitutes one of the chief factors in the political and economic relations between Germany and those countries. Poland is also one of the large timber exporting countries in Europe. Furthermore, it has been a large exporter of pork products, particularly hams. Under normal conditions these went primarily to the United States; now however they are absorbed almost entirely by Germany. Poland's extensive textile industry will now be of chiefly local importance, unless Germany should succeed in utilizing it in her trade with the Soviet Union.
BELGIUM AND LUXEMBOURG
As in the case of Bohemia, Belgium's importance to the Reich lies primarily in her heavy industries, particularly iron and steel. This is the most important industry in Belgium and is practically the only one in Luxembourg. For many years the iron and steel industry of both countries has been closely connected with that of Germany, partly because it has participated in an international cartel in which the Germans have been very active, and partly because it has been to a certain extent dependent on German coal. The iron ore used in Belgium is obtained primarily from Lorraine, now under German control. Also, though Belgium is an important producer of coal, she must import additional quantities from Germany. In 1939, Belgium produced about 3,000,000 tons of pig iron and an equal amount of steel. The annual output of Luxembourg is somewhat over 2,500,000 tons. In both countries a very large part of the iron and steel output is used, directly or indirectly, for export purposes.
Since the German occupation, the iron and steel industries of the two countries have been concentrated into two organizations, primarily in order to assure closer coöperation with the German iron and steel industry. The new Belgian organization, Sybelac (Syndicat Belge de l'Acier), which came into existence on June 24, 1940, has replaced the Cosibel and exercises far greater control over the industry than the latter did. The new organization now controls the purchase of raw materials for its members, the distribution of the finished product and the fixing of prices; and it is expected to perform all those functions in closest understanding with the occupation authorities and the German iron and steel industry. The more important Belgian producers may express their wishes through an advisory committee.
The Luxembourg iron and steel industry was also coördinated after negotiations between the German iron and steel interests and the Groupement des Industries Sidérurgiques Luxembourgeoises. Under the new agreement the Groupement, representing the Arbed, Hadir and Rodingen -- which means practically the whole Luxembourg iron and steel industry -- is to work in close agreement with the German Stahlwerksverband. It should be added that the most important Belgian iron and steel combination, the Ougrée Marihaye, which owns the Rodingen in Luxembourg as well as plants in the Longwy Basin in France, has recently established a joint selling organization with the important German firm of Otto Wolff under the name of Eisenausfuhr Otto Wolff-Ougrée, with headquarters in Cologne and Brussels.
Belgium also has an important heavy chemical industry with international affiliations, and is an extensive producer of heavy industrial equipment and railway supplies. These industries are now working for Germany, not only directly but also indirectly as a supplier of iron and steel manufactures to those countries from which Germany is obtaining raw materials and foodstuffs. Among the other important industries in Belgium, the extensive textile and glass plants, of little importance to Germany at present, are understood not to be very active. Belgium has also been for many years one of the largest producers and exporters of cement. While Germany is a very large consumer of this material, she has a very extensive cement industry of her own, and it is quite possible that, with the slowing down in the construction of fortifications, she is in small need of the Belgian product.
The chief importance of the Netherlands to Germany is as a source of foodstuffs, particularly vegetables and dairy products. Nevertheless, the country has a number of industries which under normal conditions of international trade are of considerable value. However, these industries depended primarily on imported raw materials, which, because of Holland's liberal tariff policy and importance as a colonial Power, they were able to obtain at low and, in some cases, dumping prices. An abundance of capital and cheap labor, and an active merchant marine, have built up a number of industries, such as tin smelting, textiles and cement, which naturally have been disastrously affected by the war. The highly developed textile industry, having been used primarily to supply the colonial market, is naturally not very active at present. AKU, the important rayon holding company in which German capital was considerably interested before the war, is understood to be under even greater German influence since the occupation. The important Philips concern, with its very large production of radios, electric bulbs and its extensive distribution facilities all over the world, is probably regarded by the Germans as of greater value to them after the war than during it. Very little, of course, is known about the German utilization of the aeroplane production facilities of the Netherlands.
By occupying the most industrialized part of France, Germany not only regained the important iron-ore deposits of Lorraine, but also those of the Briey and Longwy Basins which together form one of the largest sources of iron ore in the world. In 1937, France produced nearly 38,000,000 tons of iron ore, of which half was exported. But, though France was more than self-sufficient in iron ore, she was dependent on German or Belgian coke for the production of a substantial part of her iron and steel: under normal conditions the exchange of iron ore for coal was a very important factor in Franco-German trade. According to German reports, comparatively little damage has been suffered by the iron mines during the war, and the only obstacle to a full resumption of operations is the shortage of transportation and labor. A large proportion of the labor employed in the iron-ore mines of France has been foreign, mostly Poles and Italians. With the abundant iron ore of France now available to Germany, the plans of the Hermann Goering Werke will undoubtedly have to be modified for they were based primarily on the necessity of utilizing the relatively low-grade ore of Brunswick. But the solution of this problem, like that of the German and the Continental iron and steel industry as a whole, will probably have to await the outcome of the war.
The French output of iron and steel increased considerably after the First World War, and in 1937 reached about 8,000,000 tons each of pig iron and steel. In the occupied part of France there are in addition to the large iron and steel plants, the famous Schneider-Creusot armament works, large automotive and railway equipment plants, a highly developed agricultural implement industry, including branch plants of a prominent American concern, very extensive factories for the production of cast iron pipe and a machinery industry turning out a wide variety of products. The German press has claimed that the metal industry of France has not been greatly damaged; however, no precise information is available on this point under present circumstances.
The French aluminum industry, one of the pioneers in that field, is supported by large domestic bauxite deposits and abundant water power. While its output is not very great in comparison with that of Germany and the United States, it will furnish a welcome addition to the German aluminum supply in view of the increased war demand for that metal. The same is probably true of the highly developed French chemical industry. On the other hand, the acquisition of the Alsatian potash deposits is merely of academic interest at present, due to the inaccessibility of Germany's largest market -- the United States -- as well as to the development of the potash resources of Spain, Palestine and the United States itself.
Of relatively slight direct value to the Germans at present will be the well-known Michelin rubber-tire works with its world-wide distribution system. In view of the unavailability of natural rubber and the insufficient production of synthetic rubber, Germany's greatest benefit from the French industry so far has probably been the acquisition of whatever reserves of natural rubber were on hand at the time of the armistice. The same applies to the woolen industry, which probably had considerable stocks on hand since France is normally not only an important producer of finished woolen fabrics, but also has an extensive wool-processing industry.
The textile industry -- in peacetimes one of the most important in France, especially because of its connection with the highly developed fashion trade -- is located largely in the occupied part of the country. This industry has not only lost its important overseas markets but its raw materials, most of which like silk and cotton come from outside of Europe. The industry is now said to be turning its facilities to rayon and staple fiber. This means that for the present the Germans will control the industry's raw material by virtue of their control over the Scandinavian supply of wood pulp. Since Germany is already a large producer of textiles, and because of the shortage of natural raw materials, we may doubt whether the French textile industry is of immediate value to the Reich except perhaps as a source of supply for certain European countries in which Germany is particularly interested.
THE SCANDINAVIAN COUNTRIES
Of the two Scandinavian countries occupied by Germany, Denmark is important primarily for its food resources: mostly meat, dairy products and eggs. Though Denmark also has a number of industries, particularly shipbuilding and machinery, they depend on imported raw materials, semi-manufactures and fuel, and are therefore unable to operate on the same scale as before the war.
The industrial resources of Norway are of a wider range and thus of greater value to Germany. Norway produces a number of important minerals and metals, like aluminum, saltpeter, pyrites and molybdenum. It also has a very extensive electro-chemical industry engaged primarily in producing ferro-alloys, based on abundant water power, metals and ores that for the most part are imported. Most of the Norwegian metal industries are geared primarily for the export market: before the German invasion a large proportion of the ferro-alloys went to England. In 1939 the aluminum industry, in which there is considerable American capital, yielded about 25,000 tons for export. The forest-products industries also worked primarily for export, largely to British markets, and turned out large quantities of lumber, newsprint paper and wood pulp. Norway also has a highly developed electro-chemical industry and produces large quantities of carbide. The large shipbuilding plants, likewise largely dependent on imported materials, normally provided not only for the very extensive Norwegian merchant marine but also for export.
Hungary, Rumania and Bulgaria cannot be regarded as "conquered" countries in the same sense as Poland or Belgium. Yet at the moment of writing they are under effective German military occupation. The fact that they submitted to German domination without fighting and have nominally become "allies" of Germany does not mean that their economic resources will be appreciably less under her control than are those of the countries which fought before losing their freedom. Even before the war, and particularly after the annexation of Austria and the Sudetenland, Germany had been taking an ever growing share of the trade of Southeastern Europe. At present she holds an almost monopolistic position in the countries mentioned, as well as in Jugoslavia, whose political and military fate is still, as these lines are written, uncertain.
While the resources of the Southeast European countries are primarily agricultural, they also include a few minerals of considerable importance to Germany, notably the petroleum of Rumania, the bauxites of Hungary and Jugoslavia, and the copper and other non-ferrous metals, including chrome ore, of Jugoslavia. The latter's production of copper, lead and zinc, largely financed by French and British capital, is now being turned over to Germany. The same, of course, is true of Rumanian petroleum production, except that Germany has to share a small part of this with Italy and some of the Southeast European countries themselves. No information is available as to the actual mineral production of those countries, but the 1941 agreement between Germany and Rumania calls for the delivery of 3,000,000 tons of petroleum. In 1939 Jugoslavia exported about $16,000,000 worth of mineral products, of which crude copper was valued at a little over $10,000,000 and lead ore at over $3,000,000; the remainder consisted of iron ore, bauxite, zinc, lead and chrome ores, as well as crude lead. In 1939 Rumania exported a little over 4,000,000 tons of petroleum products.
SWEDEN AND SWITZERLAND
In addition to the countries occupied by Germany, either as defeated enemies or as compulsory allies, there are two others -- Switzerland and Sweden -- which are almost entirely cut off from trading with the non-European world and have therefore been obliged to confine their economic intercourse to the Axis Powers. Both are highly developed industrial countries, and each possesses a large metal industry. Sweden has supplied Germany for many years with much of her iron ore. Sweden's large forest resources provided the basis for her extensive wood-pulp production. In manufacturing, she is particularly renowned for fine steels, machinery of all kinds, ball bearings, armament and explosives. One of the specialties of the famous Bofors works is antiaircraft guns. Switzerland also has a highly developed machinery industry and is well-known for her precision tools. She also has a relatively large aluminum production, with exports of over 30,000 tons in 1939. Her chemical industry has specialized along coal-tar lines and has for some time maintained more or less close relations with the German chemical industry.
In view of Italy's high degree of dependence on Germany for some of the most essential commodities in carrying on military operations -- especially coal and the heavier products of the iron and steel industry -- we need not include her among the European countries of industrial value to Germany. But even Italy can contribute to Germany's war effort. She can send her fruits and vegetable products that are undoubtedly appreciated as adding variety to the present German diet. She also can furnish the mercury her ally needs, for Italy is one of the world's largest producers of that mineral. Italy probably does not have a surplus of aluminum. Her chemical industry, however, is probably of considerable use to Germany.
To summarize, then, what has been the net increase in German industrial capacity since the outbreak of the war? In striking such a balance we shall have to confine ourselves to the really important items and must naturally leave out of account whatever damage the R.A.F. has done to industry within Germany.
The most substantial increase is that which has taken place in the iron and steel industry as a result of its large acquisition of ore, and facilities for producing raw metals and finished products, particularly armaments and machinery, in the various occupied or dominated countries. According to a recent German calculation, the steel production capacity of what is now regarded as the German customs area (Austria, Upper Silesia, the Protectorate of Bohemia and Moravia, Luxembourg and Lorraine) is from 35,000,000 to 37,000,000 tons. By including the capacity of the Belgian plants and those in France outside of Lorraine, another 9,000,000 tons is added. This means that the capacity under German control is now half of that possessed by the United States, and is thus second in the world. In facilities for producing armament the German bloc would probably occupy first place, and a very high rank in the production of machinery. Incidentally, industries of this type possess a large equipment of machine tools. The German press has reported that a considerable proportion of the metal industries in the occupied and dominated countries is now being utilized by the Reich.
Germany has also acquired control over large coal supplies in Poland, Belgium and France. As some German writers have pointed out, coal is now Germany's best substitute for free exchange -- in fact, it is even superior, since free exchange would not make it possible for a neutral country like Sweden or Switzerland to obtain British coal under present conditions. What the German economists do not mention, however, is that coal also enables Germany to bring pressure on her neutral neighbors and constitutes an extremely important factor in the economic subordination of her Axis partner, Italy. Before the war Poland exported one third of her annual production of 40,000,000 tons. As far as increasing her coal exports is concerned, Germany's greatest gain has therefore been the acquisition of the Upper Silesian coal fields. Under present conditions Germany has a virtual monopoly over the coal supply of every continental country that must rely in whole or in part on imports, and she is making good use of this position when negotiating clearing agreements and in carrying out other aspects of her policy.
The facilities of France, Norway, Sweden and Switzerland for aluminum production are of considerable value to Germany in spite of the fact that she claims to be the largest aluminum producer in the world, with an output of over 200,000 metric tons in 1939. In the same year the combined production of Norway and Switzerland was 59,000 metric tons. The importance of aluminum for the aviation industry and as a substitute for copper and other non-ferrous metals is obvious. The rich bauxite deposits of France are undoubtedly also welcome to Germany, although she also has at her disposal the deposits of Southeastern Europe.
The zinc resources of Poland are next in importance to its contribution of coal. Jugoslavia's output of copper and other nonferrous metals constitutes only a small proportion of Germany's demand, yet it cannot be left out of consideration. Official German statements attach much importance to the petroleum resources of Rumania; we nevertheless lack any exact information as to how much oil the Germans are obtaining in that country.
The shift in the textile industry of Germany and Italy toward a synthetic base, as a part of the totalitarian policy of self-sufficiency, has given wood pulp an important position as a raw material. Germany has now at her disposal the abundant wood-pulp production facilities of the Scandinavian countries, with the exception of Finland which is still able to make some overseas shipments. Before the war Scandinavian wood pulp went largely to England and the United States. Through her control of the Continent's wood-pulp production Germany has become a large exporter of staple fiber to the various European countries now cut off from their former supplies of natural fibers and this gives her an added means for dominating their textile industries. Furthermore, the large timber supply and the saw-mill facilities of the Scandinavian countries are naturally of great value to Germany for construction purposes and in mining.
The consumption goods industries of the occupied and controlled countries, while of secondary importance, are not altogether without value. In the first place, they are very useful in supplying the demands of other countries from which Germany is obtaining materials essential to the conduct of the war. In the second place, by using these consumption goods to supply the German market, German labor and industrial equipment are released for more important production.
German industry and agriculture have acquired a considerable addition to their labor supply in the form of prisoners of war, of whom the number is estimated at over 3,000,000. While a large proportion of the war prisoners is used for agriculture, an effort is now being made to divert the skilled workers among them to industry -- where they will, of course, be paid only nominal wages. In addition to this prison labor there are the skilled workers recruited in the occupied countries where the shortage of raw materials and the destruction caused by the war have produced widespread unemployment.
In conclusion, it should be said, in order to prevent any misunderstanding as to the industrial resources gained by Germany through her territorial expansion, that valuable as they are, they do not -- with the exception of petroleum from Rumania and some copper from Jugoslavia -- include important quantities of any of the strategic raw materials that normally figure so prominently in Germany's imports from overseas, such as raw cotton, jute, rubber, nickel, tin, mica, antimony and tungsten. The Germans doubtless have seized a certain quantity of each of these in the countries they have occupied. But, however large or small these quantities may have been, sooner or later Germany will have used them up.