(Notes) The Vampire Economy: Doing Business under Fascism, by Günter Reimann

Here is a study of the actual workings of business under national socialism. Written in 1939, Reimann discusses the effects of heavy regulation, inflation, price controls, trade interference, national economic planning, and attacks on private property, and what consequences they had for human rights and economic development.

I. What Happened to the Businessman

The figures do not show what happens to the profits , how large a proportion of them are absorbed by taxes , nor what the businessman is permitted to do with the portion that is left to him. They give little hint of the extent to which the government intervenes in every business transaction. They do not reveal whether the individual businessman is permitted to raise his prices if his costs advance nor whether he is allowed to shut down a department or even an entire factory , the operation of which is proving unprofitable.

Business friends of mine are convinced that it will be the turn of the “ white Jews ” ( which means us , Aryan businessmen ) after the Jews have been expropriated.

The difference between this and the Russian system is much less than you think , despite the fact that officially we are still independent businessmen. You have no idea how far State control goes and how much power the Nazi representatives have over our work. The worst of it is that they are so ignorant. In this respect they certainly differ from the former Social — Democratic officials. These Nazi radicals think of nothing except “ distributing the wealth .”

How can we possibly manage a firm according to business principles if it is impossible to make any predictions as to the prices at which goods are to be bought and sold? We are completely dependent on arbitrary Government decisions concerning quantity , quality and prices for foreign raw materials.

There is no elasticity of prices, sorely needed though it be by businessmen. While State representatives are busily engaged in investigating and interfering, our agents and salesmen are handicapped , because they never know whether or not a sale at a higher price will mean denunciation as a “profiteer ” or “saboteur ,” followed by a prison sentence.

You cannot imagine how taxation has increased. Yet everyone is afraid to complain about it. The new State loans are nothing but confiscation of private property , because no one believes that the Government will ever make repayment , nor even pay interest after the first few years.

You will find it hard to understand that , although from the financial point of view we ought not to complain , no one enjoys life any more. Everywhere there is a growing undercurrent of bitterness. This feeling is worse now than it has ever been. Everyone has his doubts about the system , unless he is very young , very stupid or is bound to it by the privileges he enjoys.

The totalitarian state has fundamentally changed conditions of business life. In this book an attempt has been made to describe the experiences and to explain the anxieties of a businessman in a totalitarian State.

The old type of capitalist who adheres to the traditional concepts of property rights is doomed to failure under fascism.

II. Destruction of the Sanctity of Private Property

As an ardent German nationalist he felt certain , when Hitler came to power , that the country had been “ saved from the Bolshevists and the Jews.”

The banker was compelled to inform his landowner friend that there was no such way out. The State would not allow him to leave Germany with more than ten marks. South — West Africa was closed to him ; he would have to stay where he was.

Manufacturers in Germany were panic — stricken when they heard of the experiences of some industrialists who were more or less expropriated by the State. These industrialists were visited by State auditors who had strict orders to “examine” the balance sheets and all bookkeeping entries of the company (or individual businessman) for the preceding two, three, or more years until some error or false entry was found. The slightest formal mistake was punished with tremendous penalties. A fine of millions of marks was imposed for a single bookkeeping error. Obviously , the examination of the books was simply a pretext for partial expropriation of the private capitalist with a view to complete expropriation and seizure of the desired property later. The owner of the property was helpless , since under fascism there is no longer an independent judiciary that protects the property rights of private citizens against the State. The authoritarian State has made it a principle that private property is no longer sacred.

The conception of property has experienced a fundamental change. The individualistic conception of the State — a result of the liberal spirit — must give way to the concept that communal welfare precedes individual welfare.

The government of a totalitarian State would not be “ authoritarian ” if the courts still functioned independently , as they do under liberal capitalism.

The totalitarian State , in abolishing this separation of power , abolishes the sanctity of private property , which thereupon ceases to be a basic principle of society fundamental to State morality. Constitutionally the businessman still enjoys guarantees of property rights. But what is the value of such constitutional guarantees without courts that dare to defy the omnipotent bureaucracy or to enforce laws that are “ out of date “? The judge who had the temerity to attempt this would land not in a concentration camp but in a lunatic asylum. A totalitarian State does not tolerate any “ second government , ” any challenge to the power of the all — wise dictator.

“There exists no law which binds the State . The State can do what it regards as necessary , because it has the authority . ” “ The next stage of National — Socialist economic policy consists of replacing capitalist laws by policy . ”

This Nazi doctrine has nothing to do with Communism or Socialism. It is offered as a new justification for the State’s use of private capital and it is a means of placing drastic limitations upon private property rights in the “national interest.” “ National interests ” are not determined by laws , courts , or any legislative body. The decision is made mainly by the Nazi party , or , rather , by its leaders , that is , by the State bureaucracy. It is a principle that only Party members shall occupy key positions in the government and in all organizations where the State influences the distribution of jobs. They must be engaged whenever there is a choice between a Party member and non — Party member. The carrying out of this essential part of the unwritten constitution is assured by the fact that Party members , devoted to the leader and to the maintenance of the Party’s authority , occupy all key positions and appoint all new officials.

This does not mean that there are only Party members in the government. Even important branches have many non — Party members. But they are technical experts without freedom of decision rather than independent administrators.

To a great extent a person’s status depends upon the personal opinions and impressions of the Party secretary.

In the administrative apparatus and the State police force all key positions are occupied by individuals whose devotion has met the acid test.

The Party is the whip with which the leaders control the administration as well as the behavior of the citizen , be he the manager of the steel trust , a small shopkeeper or a worker. The Party has its own courts and judiciary because Party members are not bound by official laws in their activities ; they are permitted and indeed required to violate the laws in order to defend the prestige and authority of the Party leaders.

“ No one is to be appointed unless in addition to the qualifications which fit him for his post he gives a guarantee that he will always defend the National Socialist State without reservation.”

In a totalitarian land where the “ will of the Party ” is in effect the unwritten constitution …

“ The Elite Guards [ S.S . men ] and the Brownshirts [ S.A . men ] do no productive work. They do not work for the State. They work solely and exclusively for the leader.”

The existence of a state within the State — the Party and the bureaucracy — is a phenomenon of the post — War world.

…court action has been very rare because most businessmen fear arousing the anger of Nazi officials who on some later occasion might have opportunity to take revenge.

…a kind of self — help organization for businessmen . The Party — controlled official courts are replaced by courts made up of businessmen. No businessman is officially compelled to submit his case to the “ Court of Honor ” or to accept its judgment , but the official trade organization urges its members to stick to certain rules which the group organization has established , except in cases where members have close relations with influential Party functionaries who show little respect for the businessmen’s courts. On the whole , there is a definite trend toward substituting for the centralized State jurisdiction courts composed of businessmen representing different trades.

…independent and individualistic businessmen , not only economically , but politically and psychologically.

The capitalist under fascism has to be not merely a law — abiding citizen , he must be servile to the representatives of the State. He must not insist on “rights” and must not behave as if his private property rights were still sacred. He should be grateful to the Fuehrer that he still has private property. This state of affairs must lead to the final collapse of business morale , and sound the death knell of the self — respect and self — reliance which marked the independent businessman under liberal capitalism.

III. Corruption: Money Power against Absolute Power

As for myself, my knowledge as a technical expert would not have been sufficient to enable me to struggle along during the past five years , were it not for the fact that our firm has the backing of a prominent Party man who comes to our assistance when we need certificates for foreign currency, raw materials, and so on. No firm in our trade can exist without such a “collaborator.” As it is , we have to spend considerable money for “juridical advice.”

Everywhere you will find new bonds of “ friendship ” between businessmen , “ contact men ” and “ Party men ” who are tied to each other by complicity in violations of laws and decrees . It is a kind of community of interest based on common risks …

“I can answer in one word — corruption , ” he declared .“ The businessman in Italy has as much influence as he has money to bribe the bureaucrats. Without cash you are a helpless subject of the State.”

Under fascism, it is not primarily the power of money which corrupts, but rather does corruption spring from the power of the State.

Whereas in democratic countries the businessman may use his money to influence legislation and public opinion and thus operate as a source of power and corruption , in fascist countries he can exist only as the subject upon whom State power operates. The corruption in fascist countries arises inevitably from the reversal of the roles of the capitalist and the State as wielders of economic power.

…many companies have found it too expensive to keep an executive who does not get along sufficiently well with Party authorities or whose political record makes him suspect in the eyes of a Party secretary . It is economical to replace such a man by a “ reliable Party member ” even though the latter may know nothing of the business.

A superficial observer might easily claim that such a regime does not differ fundamentally from liberal capitalism ; some governmental forms have changed perhaps , but the role and position of the capitalist or businessman have remained what they were before . Money still rules the world — democratic or fascist . Such a conclusion would be just as false or incomplete as the opposite one , suggested in recent literature , that fascism is a new brand of feudalism in which the private capitalist has become merely a tool of the State — where absolute power has entirely taken the place of money power . This estimate overlooks new features in Nazi society and the unique position of the capitalist under fascism .

Fascist society still relies on a money economy , and is driven by money spending and the passion to earn more money . But there is a novel feature which does violence to the essence of liberal capitalism under which money must be earned through work or the use of capital . Sources of money in the fascist State are open to those who have power , simply by virtue of their power .

This power is not illegal but grows naturally out of the system and is organized and made legitimate by the State . It is exercised by State organizations representing naked power — the S.S . ( Elite Guard ) , the regular police forces under the command of Party leaders , the fanatics of the Hitler Youth organization , the Gestapo — all led by Party members who are personally tied up with one leader or another . The leaders of these groups operate without the restriction of a constitution or of courts , and they wield a tremendous influence upon the economic and business life of the nation .

But in his hands he now holds naked power — and the capitalist must share his funds with very many State officials if he wishes to share their political power , to win their favor and , thereby , provide for his own necessities .

Despite the great centralization of power in the hands of the highest leaders of the Party , there is wide variety in the role played by the provincial or municipal bureaucrats in their relations with private capital .

Of all businessmen the small shopkeeper is the one most under control and most at the mercy of the Party . The Party man , whose good will he must have , does not live in faraway Berlin ; he lives right next door or just around the corner . This local Hitler gets a report every day on what is discussed in Herr Schultz’s bakery and Herr Schmidt’s butcher shop . He would regard these men as “ enemies of the State ” if they complained too much . That would mean , at the very least , the cutting of their quota of scarce and hence highly desirable goods , and it might mean the loss of their business licenses .

A dual power exists under fascism : the indirect power of money and the direct power of the Party leader . The minor Party leader of the district is dominated by the power of big money , but he is able to exercise his power over the smaller businessman and to extort from him contributions to funds under his control . However , in certain situations , this minor Party official might also become a threat to the big businessman by virtue of his position as a functionary in the State apparatus who takes his orders directly from the Fuehrer .

When the industrialist pays money to a Party official to obtain privileges , that is indirect power — corruption as we know it . But when the Party official extorts tribute as a result of the capitalist’s outright fear , without guaranteeing the latter an equivalent in return , that is an example of direct power and is the distinct contribution of fascism to corruption as such .

The preceding chapter described the decline and ruin of the genuinely independent businessman , who was the master of his enterprise , and exercised his property rights . This type of capitalist is disappearing but another type is prospering . He enriches himself through his Party ties ; he himself is a Party member devoted to the Fuehrer , favored by the bureaucracy , entrenched because of family connections and political affiliations . In a number of cases , the wealth of these Party capitalists has been created through the Party’s exercise of naked power .

The life of the German businessman is full of contradictions . He cordially dislikes the gigantic , top — heavy , bureaucratic State machine which is strangling his economic independence . Yet he needs the aid of these despised bureaucrats more and more , and is forced to run after them , begging for concessions , privileges , grants , in fear that his competitor will gain the advantage .

The logical outcome of a fascist system is that all newspapers , news services , and magazines become more or less direct organs of the fascist party and State . They are governmental institutions over which individual capitalists have no control and very little influence except as they are loyal supporters or members of the all — powerful party .

Under fascism or any totalitarian regime an editor no longer can act independently . Opinions are dangerous . He must be willing to print any “ news ” issued by State propaganda agencies , even when he knows it to be completely at variance with the facts , and he must suppress real news which reflects upon the wisdom of the leader . His editorials can differ from another newspaper’s only in so far as he expresses the same idea in different language . He has no choice between truth and falsehood , for he is merely a State official for whom “ truth ” and “ honesty ” do not exist as a moral problem but are identical with the interests of the Party . The fascist dictator cannot be defeated in elections . He tolerates no criticism or opposition , inside or outside his party . The civil liberties which make it possible for a political opposition to get rid of unpopular rulers have been destroyed .

Such a system also changes the psychology of businessmen .

Their experiences teach them that the old right of property no longer exists . They find themselves compelled to respect the “ national interest ” or the “ welfare of the community . ” On the other hand , they also learn that the privileges and advantages which a businessman might obtain from the State depend largely on “ good connections ” with State officials . Those who do not play the game but who still abide by the old rules of fair play cannot survive in this new kind of economic struggle . Businessmen must claim that everything they do , any new business for which they want a certificate , any preferment in the supply of raw materials , etc . , is “ in the interest of the national community . ”

Inevitably , every businessman endeavors to identify his personal and private interests with the “ national interest , ” and it depends largely on political “ connections ” and influence whether and how far that claim will be regarded as justified by the State . Under such conditions , corruption is not merely a vice but an economic necessity . Laws and decrees are issued by the State according to immediate needs and , emergencies .

The novel feature of corruption under fascism is that despite the magnitude it has assumed , no businessman can be sure that he will get the expected results , nor can he foretell what the party leader whom he has treated “ generously ” will do next . The party member is merely a cog in a gigantic machine . The authoritarian rule of the party relies upon a top stratum of old party members , an “ old guard ” closely connected with the executives on top through many personal ties , common interests and experiences . Nothing is so zealously watched by authoritarian leaders as the first signs of any new group arising which may endanger their supremacy . This makes it impossible for even the most important industrialist to secure for himself and his corporation the control of the Party machine , to become the “ power behind the throne . ” Apparently , the businessman has no way out of this plight .

IV. The Contact Man

Today the emphasis has shifted and a curious new business aide , a sort of combination “ go — between ” and public relations counsel , is now all — important . His job — not the least interesting outgrowth of the Nazi economic system — is to maintain good personal relations with officials in the Economic Ministry , where he is an almost daily caller ; he studies all the new regulations and decrees , knows how to interpret them in relation to his particular firm and is able to guess at what may be permitted or forbidden . In other words , it is his business to know how far one can go without being caught . He also develops special knowledge on how to camouflage private interests so that they appear to be “ interests of the community ” or of the State .

Any firm wishing to remain in business must have such a contact man , who , if possible , should be personally acquainted with some high official .

V. Raw Material Distribution

AT LEAST half the time of a German manufacturer is spent on the problem of how to get scarce raw materials . These cannot be obtained without a certificate from one of the supervisory boards which distribute the available raw materials , domestic as well as foreign . Usually a manufacturer needs dozens of different materials . He cannot work without any one of them . For each one there is a special supervisory board with a different procedure , with all of which the businessman must be familiar .

The greater part of these raw material imports is needed for armaments .

There are certain categories of demand which are always privileged : for example , demands for the construction of army , State and Party buildings , for fortification work and war supplies , and for export requirements . In the next category are usually to be found buildings sponsored or recommended by the Four — Year Plan Commission and by other State authorities . There are general rules as to the priority of other demands . Decisions as to the distribution of raw materials are often subject to later changes dictated by new policies or unforeseen conditions . An identical general trend , however , prevails in all fields of raw material distribution .

Theory and practice , however , are far apart , especially under a system where a huge bureaucracy exists and “ private initiative ” tries to make official rules conform to personal and business interests . Realities have a way of peeping out from behind the façade of rules and regulations . There are many loopholes in the bureaucratic system through which private and individual interests can modify the distribution of raw materials .

Questionnaires and statistical reports of thousands of firms are collected and catalogued . A vast number of office workers labors over them in order to calculate normal requirements , the volume of demand , and other figures necessary for getting a picture of the market situation . And what has been the result of all this tremendous bureaucratic work ? The “ urgent ” demands do not correspond to the real needs and render it impossible to ascertain which cases are truly urgent and which requests should be granted first .

“ organized disorder . ”

This internal barter system has attained considerable proportions . To a certain extent , it has even been legalized and encouraged . The Reich Association of the German Textile Industry , for example , organized an “ exchange service for raw materials . ”

Reserve tires are needed so badly that firms have resorted to buying entire new trucks just to obtain new tires . These tires were then removed and the new trucks sold without the tires as scrap iron . Business ingenuity in circumventing the State bureaucracy thus results in fantastic waste of materials , all in the name of preventing waste .

With the growth of this control system , bureaucratic requirements have grown tremendously . Even the smallest artisan must fill out dozens of questionnaires and must read long circulars .

VI. Price Dictatorship and Private Initiative

In order to discuss illegal business transactions in a manner that makes them seem legal , businessmen in fascist countries learn to speak the language of experienced underground adversaries of the regime . They are often uncertain as to whether a prospective buyer is “ reliable ” and therefore talk in terms which are innocent and the meaning of which can be interpreted in different ways .

Numerous clashes between private enterprise and the State occur as a result of price restrictions , which represent the State’s most far — reaching attempt to control private economy , but effective price restrictions are impossible without complete control over supply and demand .

A member of the “ old guard , ” Joseph Wagner , was appointed Price Commissar . He has a huge administrative staff at his disposal and keeps in close touch with the police to insure the effectiveness of his decisions . His job is to fix both wholesale and retail prices for raw materials as well as for finished goods . It is the duty of the Price Commissar to see that a stable price level is maintained . Price increases are forbidden and in many cases reductions are not allowed . Theoretically , at least , the authoritarian state does not allow any price changes without permission . There are , however , plenty of exceptions and much circumvention , an amusing contrast between theory and practice .

he thought an order issued by a Party leader could suspend economic laws . He soon discovered that he did not have enough power to cope with the problem .

The Price Commissar’s power increased greatly when he was given the right to investigate costs of production . Pressure occasionally necessitated his making exceptions to his strict rule of stable prices . But he insisted on the right to check upon the rate of profit and on costs . Often such an investigation would fail to influence his decision in any way . By a stroke of the pen he would decree a reduction in the rate of profit for an entire category of articles . There were a number of official definitions of the “ justified ” price .

“ Under National — Socialist economic policy , the State determines to what extent the increased profits of industry , resulting largely , directly or indirectly , from State orders , should be used for increase of wages or dividends . ” 3

According to reliable estimates the quality of consumption goods sold in Germany has declined about 30 to 40 per cent since 1933 , while the price has remained “ stable . ”

We draw your attention to the fact that under the new powers given to the State Commissar of Prices he is empowered to detain or sentence to prison evildoers or saboteurs and hoarders and that he can close down concerns entirely . This is the last warning . We have shown you how to mend your behavior immediately . You are betraying the interests of the community .

In most cases it is impossible to know whether an indirect price increase is allowed or forbidden . It largely depends on the businessman’s ingenuity , on his political influence or on the changeable opinions and policies of the Price Commissar .

The most repressed and restricted businessman in Germany will not be found in the ranks of big businessmen . He is the retailer , more especially the small shop — owner ; the man whose income has shrunk as the result of the steadily rising cost of raw materials and production , and the rigidly governed retail price level dictated by political exigency ; the man who supported Adolf Hitler most staunchly in his fight for power and hoped to gain the most by his triumph , but instead has been the most bitterly disappointed in the development of Nazi economy .

The Government fulfilled its promise to eliminate Jewish competition , but this no longer impresses “ Aryan ” shopkeepers . They are caught in the net of price restrictions which specifically forbid increases in retail prices , although the shopkeepers themselves have to pay higher prices and higher taxes than before .

They were badly off when National Socialism came to power ; they are in a desperate situation today . Although theoretically still in business for themselves , they have become nothing more than distribution agents for the State , without a fixed salary or even a guaranteed minimum income . Often they survive only by illegally selling scarce articles to customers who are willing to pay higher prices or buy “ luxury ” articles .

These conflicts demonstrate the financial plight of the State . They also show that price is no longer merely an economic , but also a highly political , factor . Under the totalitarian State , price control has become a matter of governmental policy .

Under such circumstances nearly every businessman necessarily becomes a potential criminal in the eyes of the Government .

There is scarcely a manufacturer or shopkeeper who , intentionally or unintentionally , has not violated one of the price decrees .

The consumers have similar experiences .

The cost of living increases although prices remain “ stable . ”

It is difficult to realize the full implications of such price control . Calculations of cost in thousands of different trades , industries and enterprises , correspondence concerning thousands of disputes over the real costs of production and “ nationally justified ” prices are piled up in the offices of the Price Commissar and the bureaus under his control . Instructions issued by them on comparative costs of production and distribution are a mine of information . They lay bare the workings of economic law , especially as reflected in the productivity of labor and the interdependence of a nation’s industries . The Price Commissar collects data and reports which are essential for a planned society , but he does not use them for that purpose . He is interested only in proving that some industrialist or merchant is charging too high a price and can be accused of “ sabotaging ” government policies .

As long as industry remains under the management of individual capitalists whose interest is profits , the businessman will be in conflict with the Price Commissar , since he forbids sales at a price which is justified by market conditions but not by “ national interests . ” The struggle of the businessman against the Price Commissar becomes a matter of life and death if and when the latter insists on a price which is unprofitable or would even result in a loss .

VII. Industrial Group Leaders

Other types of State interference which alter or vitiate the functions of the private manufacturer are : price fixing , distribution of raw materials , regulations as to what and how much shall be produced ( not applied in most industries ) , restrictions upon the issuance of stocks and bonds , general control of investments , etc .

Army representatives are working in the offices of many companies and trusts , watching the execution of orders for war materials . Private enterprise has to take this superintending in order to comply with the wishes of the army and to back demands for preferential supply of materials without which production could not continue . A whole army of Wehrwirtschaftsfuehrer — Leaders of Defense Economy — has been appointed . Most of them are army officers who have taken special courses in economics and industrial relations . Although lacking in practical industrial experience , they are clothed with supreme authority upon their appointment as leaders .

There are many State institutions which issue orders and instructions to the businessman , telling him how he should conduct his business , what is allowed or forbidden , and what he should , may , and must not do .

He receives orders from and has to send his appeals and representatives to : Ministry of Economics , and its subdivisions : Four — Year Plan Commission Foreign Exchange Board One or more of 25 Import Control Boards Price Control Commissar Reich Administration for Economic Expansion Reich Administration for Soil Exploration Reich Administration for Usage of Scrap Materials Administration for Renovation Administration Labor Service Special Commissars ( Building Trade , Automobile Industry , Machine Industry , Power Industry ) Food Ministry and Reich Nutrition Estate , and their subdivisions : Various Monopoly Marketing Boards Various Compulsory Cartels of Processing Industries Labor Ministry , and its subdivisions : Labor Front Labor Exchange Regional Labor Trustees Reichsbank , and its subdivisions : Bank Control Board Foreign Currency Department Reich Economic Chamber , and its subdivisions : Economic Groups Occupational Groups Regional Groups Regional Economic Chambers Leaders of Defense Economy ( War Economic Council ) Administration for Self — Help of German Industry ( in connection with the Export Subsidy Fund )

The businessman has to adapt his business to the State bureaucratic system by building up a huge private bureaucracy too .

The greater part of every day is taken up with official conferences and correspondence with State boards , control commissions , etc . Walter Funk , Reich Minister of Economics , admitted at a meeting of economic leaders of Pomerania , a province of Prussia , that “ official communications now make up over half of a German manufacturer’s entire correspondence . ” 2

VIII. The “Factory Leader” and his Followers

In principle I stuck to the rule that if a worker was efficient and knew his job he had a permanent position in my factory . Certainly I never asked what party he belonged to ; that was his business . Today I cannot apply this rule . “ There are no longer factory councils elected by the workers , or trade — union secretaries who can interfere . I have to appoint my own ‘ Confidential Board . ’ The idea is not so bad , but I would like to be able to appoint workers who can influence their colleagues and with whom I can talk frankly , as I did with you . Unfortunately , all the workers who are efficient and who can readily influence their fellow workers are either former tradeunionists or otherwise not in good standing with the Party people . “ The secretary of the Party cell is a former clerk in my office . It was he who told me what men were ‘ reliable ’ from the Party point of view . These people were to become my ‘ Confidential Board . ’ Mostly they were workers with no special skill or ability to recommend them . Of course they had Party cards . I tried to appoint one other man . The Party secretary told me that he was a former socialist and made me understand that such an appointment would be regarded as secret support of ‘ Marxist elements . ’ He suggested that I might be on better terms with the Labor Front secretary if I appointed someone they trusted . Naturally , there was nothing for me to do except follow this advice . These Party people are very unpopular ; they are feared as spies , and the workers feel that they are responsible for the dismissal of former trade — unionists .

“ On the other hand , when I need new workers and apply for them , the Labor Exchange is always sending me workers wanting jobs , all of them either S.A . men or Party members . I am really put to it to invent excuses for not hiring them . Naturally , I suspect them of being in the Party just because they are inefficient and need Party backing in order to make a living . They themselves know this , so , if I give them jobs , they will spend a great deal of their time making themselves indispensable to the Party secretary by sending him reports on gossip and grumblers . One of them is enough to poison the entire atmosphere in the factory . And I should have to be more careful than ever so that I won’t be denounced for an incautious remark .

“ I am opposed to mass meetings artificially staged to show how harmonious things are in the ‘ work community . ’ Neither do I care for all the demonstrations my workers and I must attend , where we must march for hours , shouting ‘ Heil Hitler . ’

“ Really , I would prefer to grant a wage increase — certainly rather than get into such difficulties . After all , the cost of living has gone up . And besides , it does not matter . I need efficient workers and can’t keep them in the long run unless I make some concessions . In all probability I could get higher prices from the Army authorities if I had to pay higher wages . Once I tried to attract efficient workmen by offering them higher wages . The Labor Trustee sent me a threatening letter which read : Without my special permission it is forbidden to pay wages to newly — employed followers which are higher than wage rates for other workers doing similar work … The reason for this decision is that it is impossible to agree on higher wages ( and salaries ) with newly employed workers …

“ As difficulties mount , the activities and organizations of the Labor Front multiply . In every German factory there are Labor Front secretaries , committees , and auxiliaries , sections of a huge , top — heavy , bureaucratic machine . We , the factory leaders , are responsible for the following committees , deputies , etc : “ The Council of Trusted Men , appointed by the factory leader ; the National — Socialist Party cell with a secretary and a representative in each department ; a Hitler Youth committee ; special boards for National — Socialist education , for sports , women , ‘ Strength through Joy ’ activities , and professional training ; a ‘ work guard ’ which is armed for emergency situations ; and several other committees .

“ Don’t think that the Labor Front and the ‘ work community ’ are my main worries . The greater part of the week I don’t see my factory at all . All this time I spend in visiting dozens of government commissions and offices in order to get the raw materials I need . Then there are various tax problems to settle and I must have continual conferences and negotiations with the Price Commissar . Besides which , I have considerable traveling to do ; in fact , it sometimes seems as if I do nothing but that , and everywhere I go there are more leaders , Party secretaries and commissars to see . All of this just to settle day — to — day problems .

At that time , fascist labor policy did two things : first , it deprived the worker of his means of self — defense , and then it offered him fascist labor organizations as a weapon against excessive exploitation . But Mussolini later had to follow the example of Hitler’s labor policy — against any kind of trade — union .

Few German manufacturers have much respect for the Labor Front bureaucracy and its work . Like their workers , they are compelled to make large contributions to the Labor Front and its auxiliary organizations . They feel that this money is wasted . Neither the workers nor their employers dare protest , however . A strange situation has arisen in which the majority of the workers as well as many , if not most , employers regard the Labor Front as a parasitic bureaucracy . It must be endured silently because it is backed by the Nazi party and its orders reinforced by the Secret State Police .

The factory leader is compelled to be an agent and propagandist of the Party in his own factory . The State makes it a rule that those factory leaders who excel in work for the Party shall be privileged in the distribution of State orders and subsidies .

The factory which wants the prize has to prove by its unfailing support of National Socialism that it has identified itself with the aims of the Fuehrer and his movement … ”

The position of the manager or “ factory leader ” is contradictory in theory and in practice . On one hand , he has more authority than before within his factory ; he can rule his business by issuing orders which must be obeyed by all his “ followers . ” On the other hand , he himself is only an infinitesimal part of a gigantic State and military machine . Party and military authorities will interfere with his management , while at the same time making him responsible for difficulties in fulfilling his production program and for dealing with labor troubles , should they arise . He may even be declared unfit for “ leadership ” if he is not on good terms with Party authorities .

“ The manager has been promoted … to the rank of leader by the racial State order which has equipped him with a power previously attributed only to State institutions . … The State leadership leaves it to the leader of the factory to establish discipline among the workers … He is no longer merely the business leader and responsible for the technical process of production , but is , to a great extent , the representative of the State . ” 1

Many factory leaders are already complaining that it does not pay to let the workers work more than eight hours a day . It is much more profitable to work with fresh labor forces than with workers who are worn out by overtime . The result is a considerable rise of accidents and of waste of materials .

The Nazis attempted to create a new scheme of labor discipline by destroying trade — unions and substituting the Labor Front , a gigantic propaganda machine promising everything to all classes in the “ work community . ” This scheme could have been successful only if these promises had been fulfilled .

Under a fascist system , labor discipline and “ social peace ” in industry cannot be maintained without the eternal , overt interference of State authorities , to such an extent that they often supersede the manager . He himself is “ authoritarian , ” but he is rarely master in his own house .

A new type of fascist entrepreneur is emerging and prospering — the capitalist who is a trusted Party member . He contributes generously to Party funds , carries out orders faithfully , and has an increased authority which his American or British colleague might envy . He has more power than the old German businessmen and bankers ever enjoyed . He is not the rather liberalminded , cultured businessman who believed in fair treatment for his employees or in paternalism , nor is he the conservative capitalist accustomed to give , not take , orders in the conduct of his business . He is more nearly like the old Prussian official , a man who likes to be part of a military , authoritarian regime , an officer who can take , and give , orders .

IX. Industrial Investment Policies

BACKED by the General Staff of the army , Nazi bureaucrats have been able to embark upon schemes which compel the most powerful leaders of business and finance to undertake projects which they consider both risky and unprofitable .

Krupp’s firm profited more from the armament boom than any other industrial enterprise in Germany . Yet even Herr Krupp is grumbling because he is no longer the absolute master he used to be .

In such a clash between the totalitarian State and private business , Krupp was bound to lose , in spite of his name and political connections .

Even Krupp can no longer insist on his formerly unchallenged independence when the all — powerful Party “ requests ” sacrifices in the “ interests of the community . ”

A number of factories in Ostmark — formerly Austria — Were incorporated into the Hermann Goering Reich Iron Works . These factories — for the mass production of automobiles , machinery , freight cars , etc . — had been expropriated from “ non — Aryans ” and are of considerable military importance . There are other enterprises where investments are too risky or undesirable for private capital . Consequently , State institutions , having large liquid funds at their disposal , helped to finance such undertakings . The projected plant for the mass production of a cheap “ people’s automobile ” ( Volkswagen ) is such an undertaking . The idea of the new automobile plant is supposed to have originated with Adolf Hitler himself , who has a penchant for spectacular , monumental projects .

In 1935 , at a time when butter and meat rations were at a low level , Hitler promised every citizen an automobile .

This and other such projects of the Four — Year Plan Commission do not reveal the full scope of State interference in industrial investments . In many other industries , State and Army commissars have insisted upon rapid extension of plant capacity and increased production , the construction of dugouts as shelters in case of air raids , etc . At the insistence of the commissars , out — of — date machinery , discarded in order to reduce production costs , has been put back in operation in industries producing scarce products .

“ In several branches of industry , subject to emergency State orders , industrial firms have no choice but to adapt their productive capacity accordingly , unless they wish to run the risk that new independent factories — backed by authoritative State customers — will arise . They will become uncomfortable competitors when demand declines . If new factories must be erected for emergencies to meet the present increase in demand , it will mean that expenditures will be much greater in the long run . If the methods of planned economy are to be applied anywhere at all , they must be applied in this industry . ”

A considerable part of the liquid funds of all companies is requisitioned by the State either for the financing of State — sponsored industrial projects , or as tax payments . The latter have risen to such an extent that many industrial enterprises have had to reduce their reinvestments . At the end of the first Four — Year Plan period the tax bill of German business had increased enormously .

“ The additional tax payment has completely wiped out the additional gross income .

The tax bill of this company rose 578 per cent within three years ( 1935–38 ) , the number of employees , 35 per cent . The State received 180 per cent more than was distributed to the shareholders in dividends .

Private business in Germany still has its own investment plans . Whether they can be put into practice or will be profitable depends much more on decisions of the Government than on circumstances under the control of the capitalist .

The investment plans of the industrialists must not conflict with Government decisions and policies . But what the next decisions of the Government will be is largely unpredictable . There is no plan which prescribes what a manufacturer should produce and invest .

There are two general principles which guide the State offices in making decisions on investments : military interests and the “ interests of the Party . ”

The absence of hard and fast rules has its advantages . It serves to avoid schematic generalizations and additional bureaucracy . However , the laws of competition are no longer in effect . There are so many institutions and offices , representing group or particular Party interests , interfering and planning , that confusion concerning the plans of the various State agencies is the inevitable result , and an ever — recurring doubt as to what is allowed or forbidden whenever a new investment is to be made.

The flow of capital is no longer regulated by a capital market which directs it into industries that are particularly profitable . The State has supplanted the capital market . It compels private capitalists to make investments in a future wartime economy and creates economic conditions which cause old investments to decline in value . Thus the State makes drastic preparation for a still greater scarcity of raw materials and labor supply — all this in the expectation that wartime economy is not far off .

The new factories do not signify a genuine development of the country’s productive forces , but an intensified one — sided growth of certain branches of production at the expense of other industries . Thus heavy industry — important for wartime economy — continues to increase disproportionately within the economy as a whole .

The Government is unable to create conditions which make the investment policies of the State sufficiently attractive to capitalists . A few concerns may obtain such extensive privileges that they feel the totalitarian State has brought them prosperity — largely at the expense of other industries and enterprises . However , even they must modify their investment plans in accordance with the decisions of government agencies , because the absolute power of the State exacts compliance . Private initiative has not been completely suppressed , but it impels industrialists and investors in directions which run counter to the desires of the State .

X. Bankers as State Officials

The German banker is often accompanied by somebody else — a Party man — who has to see that no private business is arranged without the knowledge of the Party .

Within Germany itself , the banker’s activities are likewise circumscribed . He plays a dual role , a fact which creates many unpleasant and even risky situations for him . He is the head of a “ private enterprise , ” yet he must always act like a representative of the State .

The advice he would get now would consist only of the instructions the banker gets from the Government . The banker must urge his customer to buy State bonds or bonds of Four — Year Plan enterprises , and he must always pretend to hold the most optimistic views about the financial situation of the State ,

Under fascism , big bankers , formerly independent — except , of course , “ non — Aryans ” — have become State officials in everything but name .

They are often in high and influential positions , but they are all members of the compact , centralized State machine . Their independence , their individual initiative , their free competitive position , all the principles for which they once fought fervently , are gone .

For under fascism “ private banks ” are as much under State control and are as co — ordinated as ordinary State banks .

The totalitarian State reverses the former relationship between the State and the banks . Previously , their political influence increased when the State needed financial help . Now the opposite holds true . The more urgent the financial demands of the State become , the stricter measures are taken by the State in order to compel these institutions to invest their funds as the State may wish .

The totalitarian State will not have an empty treasury so long as private companies or individuals still have ample cash or liquid assets . For the State has the power to solve its financial difficulties at their expense . The private banks themselves , the financial institutions which previously dictated the terms on which they were willing to lend money , have built up the system of siphoning off liquid funds . This financial system is now utilized by the totalitarian State for its own purposes . The State has the supreme claim on anything private citizens or private firms own . These would have to go bankrupt first , before the State goes bankrupt . This , however , is not possible either . For the State can always free itself

XVI. Bureaucracy in Control

THE capitalist in Germany is confused . The fascist State has , it is true , saved many private concerns from bankruptcy . Under the totalitarian regime , business has been freed from trade — unionism and strikes , and has therefore been able to depress wages and lengthen working hours at will while huge investments in armaments have resulted in prosperity for many enterprises . Nevertheless , most German businessmen insist that they have lost more under Nazism than have the workers . The subservience of businessmen to the Party , the devious dealings and precarious existence which they suffer at the hands of the State , the complete loss of that independence which characterizes capitalist ventures in a non — totalitarian economy have proved a special disappointment to those who helped to finance the Nazi party before it came to power .

Co — operation of the businessmen , big and small , with the State and Party bureaucracy is being enforced by those who now have political power , while those who command mere money power are forced to “ co — operate ” with the new government at the risk of their very existence . This co — operation entails generous spending and the greasing of official palms , but it does not in any way increase the businessman’s chance of regaining economic independence and freedom .

The bureaucracy of the totalitarian State is much more bureaucratic and top — heavy than was the bureaucracy of private cartels , concerns and trusts in pre — Hitler Germany . Yet these corporations had already violated the laws of free competition under liberal capitalism and had , therefore , paved the way for further suppression of the rights of the independent entrepreneur . This development did not originate in the minds of a few men who were especially unscrupulous . It was a development which grew out of a certain stage of the competitive struggle .

Paradoxically , those entrepreneurs who did not attain a monopolistic position and who had to compete with each other in the open market , often , under the Weimar regime , asked State help or interference against “ free , ” that is , ruinous competition . Such a policy leads to a state of affairs where the State becomes a superpower , restricting and reducing the rights of all businessmen , granting privileges to a few concerns and trusts which are closely connected with the State bureaucracy and with the armament business and transforming private monopolies into State — protected monopolies .

The State dictates to the individual businessman how he must act in order that his activities may best serve the “ national interest . ”

The fascist State does not merely grant the private entrepreneur the right to produce for the market , but insists on production as a duty which must be fulfilled even though there be no profit . The businessman cannot close down his factory or shop because he finds it unprofitable . To do this requires a special permit issued by the authorities .

The Party leaders , on the contrary , insisted that the main function of private business is to serve the interests of the State — the individual exists for the State , not the State for the individual .

The Nazi regime maintains that private property is a basic principle of society , but in practice it controls and regulates the use of such property . This was not what the capitalist who favored the Nazi party during the 1931–32 depression had wanted . He merely wanted the State to find a way out for him . He felt he could no longer survive under the old competitive conditions . On one hand , his reserves were shrinking ; on the other , he was the target of the labor movement . But the Fuehrer whom he then acclaimed as his savior has become the leader of an authoritarian State and Party bureaucracy . This bureaucracy regulates and controls the struggle for survival of private enterprise .

Such conditions strengthen the independent power of the State bureaucracy so that it can become — and to a certain extent already has become — a . dictatorship which defends its own selfish interests at the expense of all classes , not excepting the private capitalists . The selfish interests of the State bureaucracy are of an economic as well as of a political nature .

The authoritarian State breeds irresponsibility on the part of this ever — growing and legally privileged group . Their position is secure — unless they are purged by their own friends , often as a result of rivalries — whereas the general economy is insecure . They do no work which adds goods or social services to the market . Their job is : to hold their job . The rest of the community finds itself serving as the hardworking host upon which the bureaucratic clique is feeding and fattening .

But the fact is that the fascist State bureaucracy has steadily gained strength as the internal economy has weakened , and it now operates as a sprawling parasitic agency , identifying its own narrow bureaucratic interests with the general interests of society .

This development has fundamentally changed the social position of the businessman . He no longer belongs to the top stratum of society even if he is a big businessman . His social position is beneath that of the leading members of the State bureaucracy or of the Army . This is reflected in his steady fear of the State bureaucracy . He is no longer a law — abiding citizen who sticks to the letter of the law because he believes the law is good and court decisions usually just . He fears the power of the State bureaucrats and he knows all too well their contempt for the ideas which he has cherished . He no longer believes that the sacredness of private property will be respected , for he has experienced too often the arbitrary curtailment of property rights . He knows too intimately that State bureaucrats use their absolute power to enrich themselves at the expense of other less powerful citizens . There may be less likelihood of losing his capital through “ ruinous competition , ” but this has been more than offset by new business risks . Previously , when he failed in a competitive struggle , he inclined to blame himself for his failure , but not the system . If he fails under the totalitarian State , he blames the system — and his inability to win the favor of an influential State bureaucrat .

“ How has the spirit of the businessman changed under the Nazi regime ? ” The laconic answer was : “ The German businessman riecht nach Angstschweiss ( sweats with fear ) .

The totalitarian regime has annihilated the most important conservative force of capitalism , the belief that private property ought to be a sacred right of every citizen and that the private property of every citizen ought to be protected . Respect for private property has penetrated the spirit of the people in all capitalist countries . It is the strongest bulwark of capitalism . Fascism has succeeded in destroying this conservative force — without having created a new and better social principle . For it still relies on private property and on private production . People still have to work for money and have to live on money incomes . Possession of capital still provides income . But this income is largely at the mercy of State bureaucrats and Party officials .

XVII. A World of Absurdities

IN NAZI GERMANY there is no field of business activity in which the State does not interfere . In more or less detailed form it prescribes how the businessman may use capital which is still presumably his private property .

The new penal code in Germany provides the death penalty for any person caught trying to take money out of the country .

“ Under Bolshevism all your cows will be taken away from you because you are a kulak . Under National Socialism you are allowed to keep the cows ; but the State takes all the milk , and you have the expense and labor of feeding them.”

In order that a capitalist may exercise his proper function , it is essential that he use his capital freely for his own personal advantage . But this principle is no longer valid in Germany . The State bureaucracy “ directs ” the use of capital “ in the interests of the State . ”

Nevertheless the State refuses to become the owner of industrial or distribution enterprises ; it prefers to leave the difficulties of production to the private entrepreneur . But markets with price movements dependent mainly on the business cycle have been supplanted by markets dependent on State policies and on the whims of the commissars who carry them out . The markets as such , however , still exist . Private enterprises do not buy or sell goods as agents of the State ; they still act on private calculation . The system thus is a strange mixture of State interference and planning combined with private management — an economic system which is neither competitive capitalism , nor the planned economy of state socialism nor state capitalism . It is so bewildering in its complexity that the capitalist no longer knows whether he is a capitalist or whether he has become a mere agent of the State .

Many German capitalists who demonstratively show their devotion to the Fuehrer , secretly believe that fascism or National Socialism is “ almost the same ” or “ just the same ” as Bolshevism . Under both regimes the State bureaucracy is independent of any democratic institution ; it is under the sole command of an authoritarian leadership .

The fascist State bureaucracy appears as a super — capitalist power , which takes a heavy toll from all private enterprises , treating them as subsidiaries of one big State trust , from which the supreme leadership requisitions the greater part of the aggregate profit . But the leaders of the subsidiaries , the private capitalists , are bound to the trust — or the system — unless they wish to lose what the State has left them .

a very interesting social phenomenon can be observed both in the U.S.S.R . and in Nazi Germany — an authoritarian Party dictatorship which is strong because it can suppress antagonistic forces from the right as well as from the left .

regime — “ The State is everything — the individual nothing . ” ( Mussolini . )