Bibliography: Joseph Borkin and Charles Welsh. Germany’s Master Plan. Duell, Sloan, and Pearce: NY. 1943

Biography: Joseph Borkin was the chief economic advisor of the Anti-trust Division of the Department of Justice and was responsible for the wartime investigation of the IG Farben dominated cartels. Charles Welsh was an authority on international trade and cartel finance in the Office of Price Administration.

Research question/hypothesis: Borkin and Welsh argue that the international cartels formed and dominated by IG Farben were used as part of Germany’s “industrial offensive” during WWI and WWII. Borkin and Welsh claim that the international agreements formed by IG with industries in Europe and the US hindered the military ability of these countries while enabling Germany to wage war. Borkin analyzes the strength and position of the principle companies of IG Farben at the end of WWII, and based on their continued strength and position in the international market suggests that Germany may not have lost the war.

Data: The majority of information in Germany’s Master Plan comes from records of business negotiations between the parent firm of IG Farben and US and European industries. Testimonials and correspondences of officials involved in business agreements are cited in addition to historical records.

Findings:

In 1926 German companies discovered that oil could be obtained from coal and that rubber could be obtained from oil. This discovery paved the way for a German army independent of materials supplied by foreign sources. (p.9)

German cartels launched a discrete ‘industrial offensive’ that enabled the inter-war rearmament of Germany and weakened the military potential of enemies through control of the production and export of materials and patents. (p.14)

Karl von Clausewitz, a reputed political science scholar, is considered the father of modern German militarism. (p.16)

“The record of IG in the 20^th century is a recital of Germany’s attempt to use scientific achievement to control the world.” Profit was not the motivating force for IG who consistently subordinated it to nationalistic aims. (p.19)

In 1856 William Henry Perkins transformed coal tar into a synthetic aniline dye. This discovery led to the establishment of the coal tar chemical industry. German chemists seized upon Perkins discovery and in 1856 the parent firms of IG were established. In 1880 the companies expended huge sums of money on research and construction of chemical facilities. The establishment of the German Patent system of 1877 protected the chemists’ industry. (p.21-2)

The parent firms of IG Farben, known as the ‘big 6’, were responsible for the growth of the German chemical and metallurgic industry. These companies were Badische Aniline & Soda Fabrik, Farbenfabriken vorm Friedrich Bayer & Co., Farbwerke vorm Meister Lucius and Bruenings of Hoescht am Main, Aktiengesellschaft fur Anilinfabrikasen, Leopold Cassela & Co., Kalle & Co. In 1904 Dr. Carl Duisberg, future chairman of the Board of Directors of IG Farben suggested the unification the ‘big 6’. 2 years later the companies joined in the IG Farbenindustrie cartel. (p.22-6)

It was reported as early as 1914 that the Kaiser Wilhelm Institute and the physico-chemical institute were conducting experiments with poisonous gas such as cacodyl oxide and phosgene and chlorine and chlorine compounds for use in warfare. (p.27)

Dyestuff plants require no conversion to produce and manufacture gases and explosives for use in warfare. The basic and intermediary dyes themselves are direct sources of military products. (p.28)

IG control of patents prevented England and the US from constructing chemical plants for many years. (p.29)

IG conducted in-depth industrial intelligence that included geographic surveys, plant blueprints, working methods, and every other conceivable relevant fact about the operation of foreign industries. It was analyzed by both the German Government and the Central Industry Bureau-mass of data. The IG Sekretariat acted as a clearinghouse of the information collected. (p.29)

In 1925 the ‘big 6’ reorganized their cartel into the entity officially named IG Farbenindustrie. This reorganization unified control of the German Economy, penetrated pharmaceutical, chemical, and metallurgic markets and industries internationally, and extended IG distributing outposts to nearly every territory in the world. “It was stated before the Temporary National Economic Committee that the ‘colossal ramifications’ of IG’s interests can not be exhaustively indicated. It is probably that even after the protracted investigations by students and Governments that have been undertaken in recent years not all of IG’s links to American industries and S. American markets have been brought to light. It is even more certain that all of its relationships outside this hemisphere have not been disclosed… The terms ‘monopoly’ and ‘cartel’ are inadequate when applied to IG. It is an agglomeration of monopolies and an aggregation of cartels… It is estimated that IG is a party to or the promoter of several hundred international cartel”. (p.33-4)

IG, during the interwar period, further secured their control of international markets by applying for and obtaining massive number of patents in every country with a patent system; particularly Germany, US and England. (p.43)

The combined production of alloys, light metals, and rubbers by the German cartels of IG Farben, Krupp, and Siemens-Halske, allowed for the speed and scale of German rearmament. (p.44)

IG Farben was the principle sponsor of the Japanese chemical industry. (p.47-8)

IG executives held cabinet posts in the Weimar Republic 1919-33. The Government made no effort to halt rearmament activity carried out by IG in violation Versailles Treaty. IG was involved in training troops in secret, exporting arms to Argentina, and constructing munitions plants in Spain, Argentina, Mexico and elsewhere. (p. 53-4)

In 1926 the German Army formed an economic high command to study the deficiencies of the German economy and lay planes for transforming it into a war machine. The Economic High Command maintained direct and indirect relations with IG and was responsible for training troops in secret. (p. 55)

IG Farben, Krupp, and Theissen were huge contributors to the campaign of Hitler. (p.58)

Before 1914 IG produced 4/5 of the world’s total output of synthetic dyes and provided more than 90% of dyestuffs the US consumed. The German embargo during WWI resulted in the unemployment of 4,000,000 Americans. (p.63)

Dr. Hugo Schweitzer, President of Bayer Co. in the US, was the head of German espionage services in America during WWI and managed to prevent the transshipment of crucial material to the Allies. ‘The Chemists War’ was a book confiscated from Schweitzer’s office that recorded German plans of self-sufficiency as a strategy for conquest. (p.69)

Before 1914 over 80% of surgical instruments used in the US were imported from Germany. (p.72)

E.I. duPont de Nemours & Co. is the oldest and largest of the 4 big American chemical companies that include Allied Chemical, Union Carbide & Carbon, and American Cyanamid. The duPont Co. has served as a chemical arsenal in the US since in 1802 and during WWI duPont supplied 40% of Allied explosives. (p.79-80)

DuPont activity centered on heavy and light chemical research and production but by the 1900s it had a major interest in nearly every branch of commerce in the US including banking, insurance, automobiles, mining, railroads, aviation, and communications. From 1802-1872 Dupont Co. operated as a partnership and in 1872 it entered into a Trust called the Powder Trust that combined the interests of the 6 largest gunpowder manufacturers in the US. Dupont is organized as specialized departments and subsidiaries that operate as autonomous units. Over-all ownership and authority is concentrated at the top of the corporate structure in a single holding and operating company. (p.82-5)

The invention of dynamite by the Nobel Co. of London revolutionized the explosives industry and resulted in the formation of the European dynamite cartel with Nobel and German Dynamite Trust. In 1897 the foreign cartel tried to penetrate the US market through construction of a plant in NJ. Dupont held a series of conferences with representatives of the cartel that resulted in the signing of the International Agreement.

In the contract the European companies agreed to build no factories or powder mills in the US and Dupont agreed to not build in Europe. The world market for high explosives was divided into 4 districts. The European companies and Dupont were each granted a protected national market and other areas like S. America to be exploited jointly. The contract also provided for an exchange of technical information used in the manufacture of military explosives and duPont agreed to inform the European cartel of all production of their powder mills and sales to the US. (p.85-6)

In 1910 the Department of Justice indicted duPont for violation of anti-trust laws. DuPont was dissolved into 3 companies: Atlas Powder Co, DuPont, and Hercules Powder Co. Atlas and Hercules Powder had close ties to duPont through patent agreements and cartel arrangements. (p.87)

Between 1914 and 1918 duPont grossed over a billion dollars. Some of their profits were used to buy 10 million shares of General Motors Corp. giving duPont the largest unified interest in it. (p.87-8)

In 1919 duPont sought an alliance with IG Farben. IG, Imperial Chemical Industry (ICI), and duPont were all minority shareholders of DAG, the successor of German Nobel Co., and duPont had a direct $3 mill investment in IG. (p.89)

In 1926 duPont, VKR, an IG subsidiary, and DAG signed a contract that once again divided the world market for military powder and cross-licensed patents and exchanged technical information. DuPont agreed to become the sales agent for the German companies so they could overcome the restrictions of the Versailles Treaty. (p.90)

ICI and duPont jointly owned and operated a subsidiary in S. America, Duperial, and in Canada, Canadian Industries Limited. Both companies also had agreements with IG and the Mitsui interest of Japan. (p.90-1)

IG Farbenindustrie literally translates as the dye industry. (p.93)

A few basic coal tar and organic compounds can be used to make hundreds of products or be used as the intermediary for products. Identical compounds could be used for purposes of healing or destruction. (p.93-4)

The Alien Property Custodian legislation of post WWI was passed in an effort to break German control of industry through reform of the tariff system and confiscated patents in an effort to establish American industry in areas previously dominated by Germany. (p.94-5)

In 1919 the Alien Property Custodian auctioned Bayer dyestuff and pharmaceutical interests and patents to the Sterling Products Co. of W. Virginia. Sterling took over pharmaceuticals but for the 1^st time divorced the research and manufacture of dyestuffs and pharmaceuticals by selling its dyestuff interests to the Grasselli Chemical Co. The splitting of the dyestuff and pharmaceutical industries is important because it disguised the shared interest and mutual benefit from research. (p.96-7)

Before WWI Germany supplied 85% of the world’s dyes and nearly all the intermediaries necessary to make a variety of products. (p.97)

Many German personnel connected to IG were reemployed by Sterling and Grasselli including Rudolph Hutz, former manager of the US Bayer Dyestuff Co. who became the General Manager the Grasselli Chemical Co.’s Dyestuff Division. (p.99)

IG sought to regain control of interests lost at the end of WWII through 2 tactics: by entering into agreements with American industry that divided world territory, and by repurchasing as many former assets as could be bought. (p.100)

In 1924 the German Bayer Co. regained control of chemical interests lost to Grasselli by purchasing a major interest in it. Grasselli Co. owned 51% of stock with the remainder owned by Bayer. While the new Grasselli Dyestuff Co. still appeared to be under American control Germany was able to protect its dominance of market by limiting Grasselli sales to the US and Canada and prohibiting the production of heavy chemicals and the format. A series of agreements and reorganizations within Grasselli further increased German control. On March 23 1925 Hoechst Co. entered into an agreement with Grasselli that split stock 30% Hoechst with Bayer and Grasselli each retaining 35%. At the same time a supplemental agreement was signed that established IG as the parent company. On Oct 20 1928 Grasselli sold the remainder of its dyestuff interest to IG. 3 days later Grasselli was acquired by duPont. (p.100-2)

In 1926 Imperial Chemical Industries (ICI) was formed through the negotiations and mergers of IG, the British Dyestuffs Co., duPont, and Allied Chemical & Dye. (p.104)

IG used Hutz & Joslin in NYC to license its patents. (p.107)

The market of china was split between the National Aniline Corp., an Allied Chemical & Dye subsidiary, duPont, ICI, and the European cartel based on the ‘China 6 party agreement’. Control of the market was threatened by the Mitsui interest of Japan. (p.111)

In 1929 American IG was formed to consolidate IG interests in the US including General Aniline Works, Agfa-Ansco Corp., a photographic manufacturer, a 50% interest of Winthrop Chemical Co., a 50% interest in Magnesium Development Co., and large investments in Standard Oil and Ford. Edsel Ford and Walter Teegan, the president of Standard Oil, both served on the board of directors of American IG. In 1928 IG organized IG Chemie in Switzerland and transferred its US holdings to it. American IG was publicly proclaimed to be Swiss owned with no connection to IG, however, until 1940 the president of IG Chemie and the directorate of American IG were controlled by former IG Farben officials. (p.114-5)

In 1939 American IG changed its name to General Aniline & Film Co. General Aniline & Film was instructed to supply to export to IG controlled agencies in Britain and Latin America throughout the war. The protection and utilization of IG distribution outlets in Latin America had serious military consequences. (p.116-8)

In 1903 Dr. Otto Rohm and Mr. Otto Haas formed a partnership to manufacture Oropon, a substance used in the tanning of hides. Otto Haas immigrated to the US and formed Rohm & Haas in Philadelphia in partnership with Rohm &Hass Darmstadt. Both partners received 50% stock in each other’s company. During WWI Rohm patents were licensed to Rohm & Hass in Philadelphia for plastic. In 1934 when Plexiglas became profitable the 2 firms divided the world market with Rohm & Haas Philadelphia taking control of the US and Canadian markets and Rohm & Haas Darmstadt taking control of the rest of the world. (p.121-2)

In 1934 IG signed a contract with Rohm & Haas that prohibited the Philadelphia corporation from engaging in research and exploitation of photography, dyestuffs, artificial rubber, pharmaceuticals, abrasives, and celluloid like masses and limiting Rohm & Haas Darmstadt to only solid plastic. Through these contracts IG maintained control of the chemical fields from which plastic is derived. (p.124-5)

DuPont, ICI, and Rohm & Haas were involved in a series of cross-licensing and territory agreements for plastic. On Aug 10 1942 duPont and Rohm & Haas Philly were indicted by a Grand Jury for its relationship with German companies. (p.132-3)

On Oct. 28 1920 Sterling and Bayer signed an agreement that divided the pharmaceutical market in S. America. The company with the cheapest costs would supply the market and profits would be divided 75% Germans and 25% Sterling. In 1923 the 2 companies signed another agreement that further divided the pharmaceutical market. (p.140-1)

Schering Corp. NJ, a subsidiary of Schering AG Berlin, was used to build an export system to enlarge Germany’s foreign trade and ‘colonial settlements’ in the form of distributing outlets for Schering products. (p.143-4)

The Mitsui Partnership Co., Mitsubishi, Sumitomo, and Yasuda are the 4 largest monopoly combines in Japan and account for over 70% of Japanese industry. Mitsui businessmen carried on trade with foreign merchants when Japan was isolationist and after Japan opened its borders Mitsui was responsible for ½ of total imports and exports. The Mitsui banking house was used historically as a private treasury by Emperors and still is still one of the most important private banks in the East. The Mitsui Partnership Holding Company operates as a general headquarters from which all the company’s interests are administered. Membership is restricted to the heads of the 11 Mitsui families and the president is selected by feudal succession in accordance to a family constitution drafted in 1900. Mitsui & Co. Limited is responsible for representing Mitsui’s interests outside of Japan. (p.160-3)

In 1929 Standard Oil and IG entered into a ‘full marriage’ with 4 document agreements: the Division of Field Agreement, the 4-Party Agreement, the Coordination Agreement, and the German Sales Agreement. These agreements eliminated competition between the 2 companies by respecting each other’s position in the oil and chemical industry. (p. 181)

Hydrocarbons are a compound of hydrogen and carbon and are the basis of many petroleum based and hydrogenated coal-based products. (p.182)

Britain companies had a monopoly on rubber. In an effort to become self-sufficient IG undertook the study of synthetic rubber. The agreements between Standard and IG called for shared research and cross licensing. IG refused to grant licenses to US rubber companies trying to enter into the industry and although IG violated numerous contracts by not granting licenses and refusing to share information on Buna rubber processing Standard shared its information on Butyl rubber processes with IG. (p.191-3)

In 1889 a patent for aluminum processing was issued and the Pittsburgh Reduction Co. was formed. In 1907 the Pittsburgh Reduction Co. changed its name to Aluminum Co. of America (Alcoa) that was owned by the directors and families of such prestigious institutions as the Davis group, the Mellon group, and the Hunt group. Alcoa tried to maintain its monopoly on aluminum after patent expiration through obtaining control of the raw materials needed for production such as bauxitin. Alcoa was a member of every aluminum cartel until 1915 and while it was not an official member thereafter no cartel could operate without Alcoa’s support. (p.206-7)

In 1928 Alcoa formed Aluminum Co. ltd (Alted) as a fully independent entity to enter into cartel agreements with European and German producers including IG. In 1930 Alted was a part of the Zurich Agreement that divided the Japanese market. Alted received 52% of the market and was to act as the exclusive sales agent in Japan and the remaining 48% divided between the European producers; the agreement lasted until Pearl Harbor. Between 1928 and 1931 Alted was involved in a series of agreements concerning the markets of Russia and India in which it received a major interest. In 1931 Alted and the European producers signed the Foundation Agreement, a cartel arrangement that incorporated the Alliance Aluminum Compagnie in Switzerland to control its interest. The Alliance issued 1,400 shares of ‘A’ stock to cartel member in a ration of 1 share of stock to 100 metric tons of annual capacity to govern price and output. (p.210-4)

In 1930 the German aluminum companies announced that they needed to violate the parameters of the cartel agreement and produce more and expand capacity. Other members of the cartel permitted this so long as Germany didn’t export. The cartel lasted until 1938 when war demands made it obsolete although it still legally exists. (p.218-20)

Magnesium, a substance incredibly important for the production of many military products, was 1^st produced commercially in Germany early WWI. In 1915 the General Electric Co. began production of magnesium in the US. Between 1915 and 1918 8 US companies entered the field of magnesium, however, after the war only 2 companies were able to remain in the industry: the Dow Chemical Company and the Alcoa subsidiary, American Magnesium Company (AMC). In 1927 Alcoa permitted AMC to cease production and sign a sales and cross-licensing agreement with Dow Chemical that gave AMC preference as a Dow customer and access to fabrication patents. (p.224-6)

Between 1927 and 1928 IG sought to gain a controlling interest in the magnesium industry in the US through negotiations with Alcoa. In 1931 IG and Alcoa signed the Alig Agreement that became the charter for the magnesium industry in the US. It formed the Magnesium Development Co. (MDC) that was jointly owned by Alcoa and IG. MDC became a patent holding organization for IG and many patents were transferred to it. IG also received 50% stock in the American Magnesium Co. through the sale of stock to General Aniline & Film. (p.227-8)

Dow reluctant enter agreement IG but pre-war yrs output restricted never rose above 2,200 tons-Dow forced into agreement with IG through Alcoa and in 1934 Dow entered into a patent-pooling agreement with MDC cross-licensing patents (p.228-9)

In 1934 IG offered to purchase 350 tons of magnesium from Dow and offered to buy 600 tons in 1935 with similar purchases prospected for 1936 and 1937. The magnesium was sold to IG at a 33 1/3% discount. By this agreement IG controlled 60% of Dow’s output preventing them from filling contracts to other countries. (p.232-3)

The Army and Navy Munitions Board include tin on a list of 14 materials necessary to national defense. Other metals on the list are antimony, chromium, coconut shell char, manganese, manila fiber, mercury, mica, nickel, quartz crystal, quinine, rubber, silk, and tungsten. (p.235)

Seimens & Halske Co., one of world’s largest producers light and heavy electrical machinery and equipment, discover by 1929 how to manufacture bronze through use of beryllium reducing German dependence on tin. Seimens & Halske is one of Germany’s largest corporation and member of as many international cartels as IG. (p.235-6)

Tin controlled by British dominated cartel Intl. Tin Committee. (p.237)

Siemens & Halske beryllium patents were owned by the Metal & Thermit Co., a NY company that acted as a front to conceal German identity and prevent their use by US companies. Andrew Gahagan was prevented from entering into beryllium production in the US through run-arounds with Metal & Thermit until 1933 when Gahagan’s Beryllium Corp. of America entered into a contractual agreement with Siemens & Halske that cross-licensed patents, shared research, and divided the world market. (p.239-42)

Krupp was founded by Friedrich Krupp in 1811 for the production of heavy iron and steel casting and by the time of its incorporation in 1903 was a household name. In 1867 Wilhelm the 1^st was the largest shareholder of Krupp. Krupp was incorporated with an authorized capital stock of 160,000,000 gold marks. Its corporate assets include railroads, shipyards, coal and iron mines, foundries, blast furnaces, and all things involving heavy metals. Krupp developed relationships with steel and arms makers outside of Germany through the procurement of patents. In 1904 it was the dominant member of the German steel cartel that divided the world steel market with US corporations through negotiating the International Steel Beam Pool. (p. 250-4)

The Treaty of Versailles prevented Krupp from manufacturing arms in Germany so many of the Krupp factories and foundries within Germany were transformed to manufacture domestic and armament operations were transferred to territory outside of Germany but controlled by Krupp through cartel arrangements. (p.255)

Krupp had ties to every other heavy industry group in Germany including Siemens & Halske and IG Dyeworks. It is thought that IG Dyeworks owned a controlling share of Krupp. (p.257)

Tungsten carbide is a key to industrial production especially for military purposes. In 1928 Krupp and General Electric reached its 1^st agreement on tungsten carbide. GE was allowed to set prices for tungsten carbide in the US and Krupp would abstain from production in the US in return for a percentage of the profits. In 1936 the agreement was modified and GE and Krupp officially divided the world market for tungsten carbide. (p.264-6)

All military, naval, and aeronautics operations depend on the optical glass industry for the products that control aiming. The Carl Zeiss factories of Jena in the 19^th century held a virtual monopoly on the production of optical glass with some minor contributions from France and the UK. Dr. Otto Schott merged his Schott Glass Work with Carl Zeiss’ factories at Jena and in 1891 they formed the Zeiss Foundation, a trustee foundation to oversee the interests of the corporations. (p.271-4)

In 1853 Henry Lomb and John Jacob Bausch, German émigrés, established the optical glass firm Bausch & Lomb in Rochester NY. In 1888 they obtained patent licenses from Zeiss. In 1904, under the direction of Zeiss, Bausch & Lomb merged with the competing optical firm Fauth Instrument Co. In 1907 Bausch & Lomb signed a contract with Zeiss in which they agreed to become the exclusive sales agent for Zeiss in the US and Zeiss bought 1/5 Bausch & Lomb stock. Relations were suspended between Zeiss and Bausch & Lomb during WWI, resulting in severe shortages in optical equipment for the allies, but in 1921 relations resumed. The world market for optical goods was divided between Bausch & Lomb and Zeiss, Bausch & Lomb, received patent rights from Zeiss, and Zeiss received a 7% royalty on all military goods sold. (p.279-82)

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