Hitler's Beneficiaries: Plunder, Racial War, and the Nazi Welfare State (11 page)

The process of deciding this matter is a good example of what the historian Hans Mommsen calls the cumulative radicalization of the Nazi state. Mommsen sees the character of the Third Reich as being shaped by competition among officials in various government bureaucracies. Civil servants, in effect, pushed one another to become more radical. The Nazi leadership exploited this dynamic by defining only what they did
not
want and putting pressure on their subordinates to achieve maximum results in the shortest possible time. Civil servants were encouraged to use their administrative imagination—they neither needed nor were given concrete instructions. In the case at hand, the Nazi leadership at no point even considered legislation that would have placed a comparable burden on working people. On the contrary, discussions of the property tax were framed by the general principle that materially better-off Germans were to bear a considerably larger share of the burden of war than poor ones. In this, the decision makers were following the lead of Göring, who as early as November 1938 had suggested financing the arms buildup with the help “of a one-time contribution from the wealth” of affluent German citizens.
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A SIMILAR hostility toward the wealthy can be seen in the Nazis’ stance on stock market profits. As of January 1, 1941, earnings from stock transactions were subject to a windfall profits tax.
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A short time later annual dividends together with all other forms of payments to shareholders, were limited to 6 percent. The limit was adopted, above all, for its “propagandis-tic significance.”
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Stock values had appreciated on average by around 50 percent during the first two years of the war, with some performing far better. Decision makers within the Nazi Party, including the Führer, had voiced repeated opposition to this form of “effortless” income.
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On December 4, 1941, the economics minister was empowered to require investors to report any stocks they owned. He was also given authority to issue regulations restricting sales of stocks and the reinvestment of profits from such sales. The immediate purpose of this measure was to force Aryan, as well as Jewish, investors to exchange their stocks for government bonds, which in the short term could not be traded. The long-term goal was to prevent a possible decline of investor confidence in the state and party leadership from becoming visible and depressing the securities market.

An official decree followed promptly on January 2, 1942. Investors were required to report all stocks, as well as shares in mining companies and colonial enterprises, purchased after September 1, 1939, to their local tax offices by April 30. The decree also applied to all stocks that had been transferred to relatives, fiancés, in-laws, business associates, and employees in the preceding six months, the period in which the regulation was being discussed and prepared. The aim was clearly to soak the rich and “neutralize big spenders.”
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Investments valued at less than 100,000 reichsmarks were exempt. Lastly, the Reich Credit Monitoring Commission set limits, varying from bank to bank, on the total value of stocks that individual financial institutions were allowed to keep on deposit.

The Nazi leadership acted again on June 9, 1942. A second implementation decree prohibited transactions with the reported stocks and allowed the economics minister to order compulsory sell-offs. A consortium of the Reichsbank and the Prussian State Bank was empowered to purchase the assets, and within a few weeks it took in stocks valued at 150 million reichsmarks. (The total value of reported securities was around one billion reichsmarks.) State intervention was only partial, aimed at disciplining, not dispossessing, individual investors. The Finance Ministry wanted to retain the possibility of “extracting further concessions to put the brakes on” future stock runs.
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(An additional regulation requiring local communities to keep 75 percent of their reserve funds in various forms of government bonds also served to chill the securities market.)
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Over the course of 1943, a further 140 million reichsmarks in stocks were handed over to the state. But since the consortium was bound to pay the price at which stocks were listed on December 31, 1941, when share values were at their peak, many securities were considered overvalued, making their purchase impractical. Economists at the Reichsbank and the Finance and Economics Ministries reacted by declaring the (lower) original purchase price valid for compulsory stock sales.
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In late 1943, records indicate a flurry of forced sales, with the government “compensating” gentile investors, like their Jewish counterparts before them, with non-negotiable government bonds.

The government initially conceived of these mandatory controls as temporary, but they were repeatedly extended as the war dragged on. In early 1943, the Economics Ministry halved the exemption for stocks acquired since 1939 to a total value of 50,000 reichsmarks. The change was intended to hit large-scale investors and speculators who, with good reason, wanted as few war bonds as possible in their portfolios. Economics Minister Funk lamented a “growing obsession with material assets,” which he deemed “psychologically dangerous.” His goal was “to keep stock values in check, to force investment-oriented money off the stock exchange, and to divert it into treasury bills.” The growth in the number of tradable stocks on the market therefore had to be stopped. Stocks acquired by the government as a result of compulsory sales served as “funds for intervening in and protecting market values,” which could be introduced to prevent bull markets. “Jewish securities,” which were still being held by the state, were explicitly allocated to this fund. In the Protectorate of Bohemia and Moravia, they were confiscated specifically “for the purpose of regulating values on the [German] stock market and being transferred to the Prussian State Bank.”
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Companies, of course, spent considerable energy trying to obtain exemptions allowing them to sell state bonds they had unwillingly acquired, but most of their efforts were in vain.
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Nonetheless, state intervention could only temporarily slow stock market growth, not prevent it in the long term. The means with which Germany financed the war created excess demand that inevitably pushed its way onto the market. The Reichsbank was under no illusions that, aside from certain cosmetic measures, it had the power to “eradicate the causes for this growing trend.”
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Unquestionably, hopes for a quick German victory in the war had fueled early rises in stock values. That optimism was over by the fall of 1941. On the surface, the change in mood had no effect. Investors’ appetites for stocks continued unabated. But their motivations had changed. People were now buying stocks to avoid investing their money in the increasingly dubious alternative of war bonds. Skepticism toward Germany’s political leadership led investors to hang on to their stocks—observers spoke of “a shortage of inventory on the market”—while demand for securities grew daily. The reason was that, although stock values were increasing, few investors wanted to cash in their profits.
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Despite the risk posed by war, industrial stocks and bonds appeared to be a vastly more secure option than state-issued securities.

Germans held on tightly to real estate as well. In 1941, the Security Service issued a report entitled “Unfortunate Conditions in the Real Estate Market,” which noted that investors were seeking refuge in material assets and warned that there was “no supply worth mentioning” to serve the growing demand for developed and undeveloped real estate.
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In April of that year, Reinhardt acted to prevent investors from acquiring tangible assets and to channel cash into state bonds by freezing the sale of properties that had been confiscated from Jews.
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The Reich followed up in early 1943 by capping stock prices, after markets generally failed to react to “repeated warnings.”
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The stock market remained open, but it no longer served its true purpose. “In the absence of anything else on offer,” stock brokers were now “concentrating on government securities.”134

IN 1943, guided by Hitler’s tax priorities, the finance minister targeted the uppermost 4 percent of earners for a rate hike. He ran into immediate opposition. In his commentary on the draft legislation, the economics minister objected that the new regulations would humiliate the wealthy and lead to “untenable hostility, considering the proportional burden [already placed] on this segment of the populace versus the rest of the country.”
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Economist Günter Schmölders retorted that the new rate would promote “social equity.” But even he acknowledged that the drastic curtailing of profit opportunities might “reward entrepreneurial lethargy, while punishing rationalization, cost cutting, and success.”
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Having significantly reduced corporate revenues with a battery of business taxes and increasingly lagging behind in paying its debts to private companies, the state levied a 65 percent tax on whatever profits remained. One company was compelled in 1942–43 to exchange the stocks it had acquired since 1939 for nonnegotiable government bonds. That year, it earned nominal profits of 120,000 reichsmarks. Its liability amounted to “55 percent corporate tax plus 30 percent commercial-profit tax and 13 percent excise tax,” which added up to 98 percent of total profits.
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By 1945, the regime was also planning a drastic increase in the wealth tax, which would have been retroactive to 1943.
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Industrialists complained that some 80 to 90 percent of business profits were being siphoned off by the state.
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This figure is clearly exaggerated, but it speaks volumes about the Nazi government’s basic tax-policy orientation.

During World War I, the German government scandalously neglected the welfare of soldiers’ families. Indeed, civil servants in Wilhelmine Germany seemed intent on reducing them to poverty. Millions of working-class women and children who had been scraping by on their own suddenly faced deprivation when their breadwinners were called to the front. While the men were shedding their blood on the front lines, their dependents were forced to do without basic necessities at home. The state provided just enough to live on, but not a scrap more. The existing legislation to provide for support for soldiers’ families during wartime dated back to 1888, and although it had been amended many times, it utterly failed to meet the requirements of modern mass warfare.
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The obliviousness of the Wilhelmine government to the needs of military families was a sign of its inability to empathize with the economic situation of the working classes. Decision makers under Kaiser Wilhelm II had sufficient funds at their disposal, but they lacked the social and political imagination to allocate them properly. The idea that mass warfare, for psychological reasons, required equity in the distribution of resources was alien to Wilhelmine elites. As a result, an outmoded system of class rule condemned itself to extinction, squandering what remained of its popular support through indifference—if not actual malice—toward the welfare of the population at large. It was not until September 1918, far too late, that the press secretary to the Reich chancellor finally realized that “homelessness, lack of clothing, and above all starvation canot be overcome with indoctrination.”
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The experience of 1914 to 1918 still resonated among the majority of Germans twenty-one years later. When the Nazi leadership drafted the Compensation for Military Deployment Law on August 28, 1939, one key paragraph stipulated: “Previous standards of living and peacetime income levels are to be taken into account when calculating degrees of family support for members of the Wehrmacht.” The law aimed at “maintaining [families’] level of personal assets” and “prior economic standing,” pledging to help recipients “fulfill existing obligations.” Those included newspaper subscriptions, life insurance policies, payments on goods bought on the installment plan, and mortgages.
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In general, the state supplements strove “to maintain fighting spirit and will and to secure home-front morale.”

The vast majority of Germans were much better off than they had been in World War I. The paternal state no longer demeaned ordinary people. It distributed material goods that improved the popular mood. The political leadership unambiguously directed civil servants “to act, in light of their special responsibility toward all the people, with corresponding understanding of the concerns and needs of family members of frontline soldiers.”
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“The greatest possible speed and facility in the delivery of mandatory family support payments” was to be treated as a “duty and point of honor for every branch of the civil service.”
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In disputed cases, decisions were to be made to the benefit of claimants. Without exception, the administrative directives that followed the outbreak of military hostilities strengthened the rights of beneficiaries.
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In October 1939, German newspapers reported that, at Göring’s behest, family support measures had been expanded: “The National Socialist state leadership has freed the frontline German soldier from all worries about the maintenance of his family.” From then on, rents were paid in full, and extra benefits of all kinds were handed out.
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The goal of these generous initiatives was to win over “the heart of the soldier” through demonstrations of “abiding concern.”
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The immediate response was overwhelmingly positive, and in the euphoria following Germany’s victory over France, the state combined the various individual benefit payments under the Law on Deployed Family Maintenance, or EFUG (
Einsatz-Familienunterhaltsgesetz
).
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Significantly, at the same time, tax exemptions for overtime, night, Sunday, and holiday wages were being introduced. According to EFUG, family maintenance was not considered a kind of welfare payment but rather “an honor-bound duty of the ethnic community
[Volksgemeinschaft]
carried out by the state.” There was no suggestion that state supplements and subsidies should be paid back, nor was there any means of testing for eligibility. A major difference for millions of Germans was that, in contrast to normal wages, family maintenance payments were exempt from garnishment to settle unpaid debts. This regulation cost the state nothing; the burden was transferred to creditors.