Chapter Ten

The Trust-Savers

The best-documented example of sabotaging four-power relations and hoodwinking the general public by the British and American representatives on the Control Council, was the handling of the decartelisation project. Fortunately, in this instance, we have a record of exactly what happened from what must be regarded as an impartial source – a United States Senate Committee of Investigation and the evidence of a Mr. Russell Nixon, a U.S. official in charge of breaking up the German trusts.

The record states, in the clearest language, that from the earliest days of four-power government it was the aim of some of the most highly-placed American and British officials to betray allied agreements and to preserve as much as possible of the German heavy industry and the great industrial and financial trusts. There were honest men on the American side who tried to carry out agreed policies, but one after another they were either dismissed or they resigned, disgusted and frustrated. The last one to fight for a strong law to break up the German trusts was James Stewart Martin, Chief of the Decartelisation Branch, who threw in his job in 1948.

The Potsdam Agreement laid down a clear directive as to policy on the question of German trusts: "At the earliest practicable date, the German economy shall be decentralised for the purpose of eliminating the present excessive concentration of economic power as exemplified in particular by cartels, syndicates, trusts and other monopolistic arrangements."

The Potsdam Agreement named German heavy industry as the chief villain in modern German history, the strategic base for German aggression in three major wars. The part played by the top-hatted, frock-coated Ruhr industrialists in financing the Nazis, the rich rewards of plunder they received for their early support of Hitler, were clearly enough revealed at the Nuremberg trials.

The belching chimney-stacks of the Ruhr have spelt more ill than good for Europe over the past 70 years. The monolithic industrial combines, fomented crises, directed foreign policies, made and broke governments, not only in Germany, but in neighbouring countries wherever the tentacles of their investments and trusts reached. Through tie-ups with other industrial trusts, they controlled supplies and prices of basic raw materials, of chemicals. They suppressed alternative or cheaper supplies. The German trusts were more than a state within a state, they were a state within the whole European continent, and could make governments jump when the top-hatted directors pulled the strings.

Public opinion throughout the world demanded that an end be put to the German industrial trusts, and public opinion was given legal sanction in the clauses of the Potsdam Agreement, signed by the chiefs of government of the Soviet Union, Britain and America.

The very names of the great combines were internationally known and detested, so closely were they linked with war and aggression. Krupps, I. G. Farben, Thyssen and Henschel, to mention but a few, are names which have aroused a feeling of horror in at least two generations of Europeans. They were symbols only of the vast complex of undertakings which the signatories to the Potsdam Agreement were pledged to destroy. That some of the highest officials entrusted with carrying out this agreement were pledged to save these great combines is clear from the following testimony of Mr. Nixon before the "Sub-Committee of the Committee of Military Affairs, United States Senate." The enquiry lasted from February 25 to March 6, 1946.

The date is important. Less than a year after Germany surrendered, and long before there was any talk of Allied disagreement or the possibility of splitting Germany.

I am quoting extensively from Mr. Nixon’s evidence because in this one facet of Control Council activity one has the general pattern of how completely four-power unity was sabotaged. It is a picture presented by a highly-placed official who took an intimate part in day-to-day proceedings. The pattern he discloses in his particular branch applies equally well to every other important phase of four-power discussions. The first blame in this case is laid at the door of the British, but as the story develops one sees how valiantly the Americans, too, came to the rescue of German heavy industry.

"After months of discussion and negotiations," stated Nixon, "there is still no law which would diffuse the gigantic concentrations of economic power in Germany, curb their activities or prohibit their multiplication. In fairness to our own representation on the Allied Control Council and that of the Russians and French, it should be stated as of November 27, 1945, the United states, Soviet and French representatives on the Co-ordinating Committee (of the Control Council) did reach agreement on a draft law conforming generally with United States policy and with specific directives received from Washington. The matter was tabled, however, because of British opposition.

“This stalemate cannot be attributed entirely to British resistance. The history of the efforts to draft a law eliminating cartels and excessive concentrations of economic power in Germany, indicates that the United States representation on the quadripartite levels in the Directorate of Economics was vacillating and unsympathetic to the basic objectives of the law."

The U.S. representative was Brigadier-General William H. Draper, Jun., of the investment banking firm of Dillon Read, who, we must never forget, gave the German heavy industrialists their first big start after World War I, with a hundred million dollar loan to Fritz Thyssen's United Steel Co.

"Our representatives," continues Nixon, "by failing to assert the very vigorous and definitive United States policy with respect to cartels and monopolies, encouraged the British pre-disposition to resist and discouraged the proffered Soviet support for a strong law. Instead they followed a policy which was reflected by (1) excessive regard for what would or would not be acceptable to the British rather than the execution of United States policy; (2) refusal to define issues; (3) advocacy of emasculating compromises such as the elimination of mandatory provisions."

(The term "mandatory" was the purposely vague name given to the very precise and concrete Russian proposals for an exact description of what constituted an "excessive concentration of economic power in terms of personnel employed, annual turnover, etc.")

Nixon at this stage proceeded to give a short history of the negotiations, to support the general charges he was making.

"Shortly after the organisation of the Control Council, the U.S. representative, at the first meeting of the Council's Co-ordinating Committee on August 19, 1945, filed a draft law providing for the establishment of a commission to carry out decentralisation of the economy and elimination of cartels and excessive concentrations of economic power. In the Economic Directorate to which this proposal had been referred, the Russians on September 12, 1945, offered a counter-proposal in the form of a simpler law, which defined cartels and excessive concentrations of economic power, prohibited them outright under specified penalties for violations, and provided the Economic Directorate should make specific exemptions in particular cases. It was agreed unanimously to use the Russian draft as a basis for subsequent discussions.

"At the risk of repetition, I should like to make clear the essential difference between our draft and the Russian draft, because, despite the unanimous agreement to use the Russian draft as a basis for discussion, our draft was continually being projected and it constituted one source of much of the confusion. Under the Russian draft, cartels and excessive concentrations of economic power were explicitly labelled and made illegal. Excessive concentrations of power were defined to be enterprises with more than 3,000 employees or more than 25,000,000 reichsmarks turnover. In the months following this definition came to be known as the mandatory approach. Our initial proposal provided for the establishment of an administrative agency without setting forth any rules for the guidance of that agency..." (This was a favourite method used by the Americans and British to gain time, to await the day when world tempers had died down again and the demand for the destruction of the trusts would be forgotten.)

"In the immediate period following," Nixon continued to testify, "United States representatives, without openly challenging the mandatory approach, continued to press for the adoption of their own views. Major Petroff, a General Motors attorney, reported he had negotiated a compromise version with the Russians. This turned out to be a short version of the original law proposed by the' United States representative at the Control Council which at best merely provided for administrative machinery. There were no prohibitions in the law. At the September 27 meeting of the Economic Directorate it was apparent that nobody has agreed to any compromise.

"The British representative was obviously opposed to the law; though he recorded his government's agreement with the purpose of the law 'in principle' and its eagerness to expedite its issuance. As evidence of this desire to expedite matters, he proposed referring the draft to a working group, offering to name his representatives immediately." (This was a favourite time-wasting trick. Once matters had been passed down the line to working parties, they became bogged down for months and were often never heard of again. It was a method usually adopted when one party or another wanted to avoid passing a law but did not want to take public responsibility for having wrecked agreement.)

"General Shabalin, the Soviet representative, said there had been sufficient time for technical consideration and that the Directorate members were competent to act in the matter."

There follows a clear example of how the men on the spot wrecked every possibility of four-power agreement even on those few issues where the governments themselves seemed agreed. Here is the classic example of how highly-placed officials sabotaged their own government's policy. By repeated cables of explanation of "Soviet difficulties," by deliberate defeatism, they brought their governments to believe that agreement was impossible; and the wedge between Russia and the West was driven a little deeper. A discussion was forced to a stage where a Russian refusal to go further was inevitable, and this was immediately cabled back as "Soviet lack of cooperation." The reactionary representative of a British Socialist Government, Sir Percy Mills, representative of British heavy industry, director of W. & T. Avery & Co., president of the Birmingham Chamber of Commerce, set out by his own acts to prove to. the British Government that its policy was impossible, due to Soviet "obstructionism," and gave it the opportunity of taking an even stronger anti-Soviet line. If that is not conspiracy and treachery, what is?

"Sir Percy then stated," continues Mr. Nixon, "that he could not consider the draft law, because only the Legal Directorate could draft a law. He then proceeded to discuss for ten minutes the exact import of the word 'stock ownership' in the draft. General Draper suggested that the same kind of question could be raised over the word 'concern,' and Sir Percy observed that was going to be his second point. It developed that the German word 'concern,' and the French and Russian as well, means the largest combination possible of business enterprise, that is the largest concentration of economic power situated within a country, such as I. G. Farben. But this term carried no significance for Sir Percy. After much discussion, General Shabalin proposed to substitute our word 'combination' and add in parenthesis the equivalent of the German word 'concern.' This suggestion, however, was rejected by Sir Percy as meaningless.

"It should be noticed that, in the course of the discussion, General Draper introduced the so-called compromise draft by proposing that one of its sections be substituted for the Soviet section defining excessive concentrations of economic power. The effect of this one substitution, which was promptly rejected by the Russians, would have been to transform the mandatory provisions of the law into mere reporting requirements.

"After hours of discussion of this character, a working party was appointed and instructed to file a draft within five days for consideration by the Economic Directorate. At General Shabalin's insistence, however, the working party was directed to use the Soviet draft as a basis. At Sir Percy's insistence, a long list of principles was referred to the working party for consideration. These principles, summarised, were that size alone may carry advantages, and that no elimination should be made because of natural advantage of size. General Draper also submitted his so-called compromise draft, for the consideration of the working party. In other words, everything was thrown into the 'hopper’ all over again.

"I have described this early meeting in detail, not so much because these details are interesting or even important in themselves, but because that meeting is typical of all subsequent negotiations."

Mr. Nixon might well have added here, that if his colleagues in other divisions were as honest as himself, they could have told similar stories of chicanery and sabotage in every phase of Control Council activities. The same tactics were applied in discussions on demilitarisation, denazification, coal production, every other important matter that came up. When the British or Americans wanted to sabotage some particular provision of the Potsdam Agreement, they did not oppose it openly because this would have exposed their governments. They always agreed "in principle," and proceeded mercilessly to drown the proposal in a sea of artificial difficulties. Mr. Nixon follows the intrigues in this case right through to the bitter end.

"At the working party meetings, the British representatives continued to raise technical considerations at every point, and ever the debate over the German word 'concern' recurred. The Soviet and British representatives engaged in protracted debate over the objectives of the law. The Soviet representative argued emphatically for a law that would explicitly prohibit specifically defined concentrations of economic power in Germany and German participation in international cartel arrangements. The British representative continued to insist that the working party could not draft a law because that was the function of the Legal Directorate; that only general standards and not specific prohibitions could be considered; that it was impossible to define excessive concentrations of economic power; and that German participation in international cartels could not be prohibited, because Germany had to export to live.

"These debates continued for four of the five days allotted to the working party to finish a draft. Mr. Bell (Draper's deputy, a Chicago Corporation lawyer and author) saw merit on both sides. Mr. Bell definitely supported the British insistence on including in the final draft the principles that size alone and the natural advantages of size alone should not be prohibitive. When Mr. Bell agreed with the Soviet representative that the working draft must contain specific prohibitions, Colonel Bowrie, of General Clay's, staff, supported the British representative, claiming that he did not know what constituted a cartel, that Potsdam was not clear on this subject. The upshot was a working party draft which merely enumerated a long list of criteria for eliminating excessive concentrations of economic power in Germany, with no mandatory prohibitions, except for outright prohibitions of cartel agreements.

"On October 15, the document arrived at by the working committee was forwarded by the Economic Directorate to the Co-ordinating Committee, where it was discussed on October 20. The Soviet representative, while approving the principles laid down by the paper, observed that they were too general and should be in a form more easily implementable. He suggested that the advisability of stating in the text the number of employees, the annual turnover and the percentage of an industry that would constitute an excessive concentration of economic power. The British representative said he was not opposed to that in principle, but that it would be difficult to determine the number of workmen an enterprise may employ. General Clay (who in those days had his own reasons for carrying out his government's directives, as we shall see in the next chapter – Author) proposed the following specific numbers: 3,000 employees, 25,000,000 reichsmarks annual turnover, and 10 per, cent. of production or other activity in any one field of enterprise. By agreement the whole record was then referred to the Legal Directorate for embodiment in a law."

On the face of it, it looked as if the matter was settled. In the end, General Clay had come back to the original Soviet proposal – even improved on it by adding the 10 per cent. clause. If the law had been accepted, German heavy industry would have been really broken up into controllable units. I. G. Farben could never have existed again. But it would be under-estimating the ingenuity of the wreckers if one thought the matter was settled there. The open representatives of American big business, Draper and Co., then started deliberate trickery. Cables were sent behind the backs of their chiefs; to Washington, seeking to confuse the issue; and by promoting contradictory cables from a completely bewildered Washington, provided themselves with enough ammunition to wreck the law again. In some instances they resorted to deliberate lying.

"Shortly afterwards," the melancholy narrative of Nixon continues, "we were advised by Colonel Bernstein (Chief of Decartelisation Branch. – Author), who was then in Washington, that the working party report had been unfavorably received in Washington because it fell far short of our established policy. A Washington T.W.X. (teleprint. Author) conference was arranged for October 24, and representatives of D.I.C.E.A. (Decartelisation Branch) were invited to participate in Berlin. As a result of this conference, U.S. representatives in Berlin were instructed to support a draft law which would include mandatory provisions prohibiting domestic monopolies."

At this stage Washington, in fact, accepted the first Soviet draft as being in line with what they wanted. Washington objected, at this point, to any watering down of the strong law originally provided for in the Potsdam agreement. Subsequently, of course, this view was altered.

"In the Legal Directorate, the new U.S. draft law complying with the instructions received during the T.W.X. conference was accepted on October 30 by all powers. There apparently remained only the need for the Economic Directorate to fill in the blank spaces in the mandatory provisions for (a) the percentage of the industry; (b) the annual turnover, and (c) the number of persons employed. Figures for the last two of these had been in the original Soviet draft, had not been objected to by anybody in any stage of the proceedings, and had been reaffirmed by General Clay when he proposed figures for all three standards on October 20, at the Co-ordinating Committee.

"Despite this, however, our representatives persisted in raising questions about the instructions from Washington. This was done by eliciting alternative instructions from Washington.

"For example, on November 1, 1945, a cable came in from the State Department to Ambassador Murphy. It was in answer to a cable Ambassador Murphy had sent to Washington which we had never seen. This cable twice referred to the mandatory provision proposed, and merely offered an alternative mandatory standard, apparently on the premise that the turnover standard would cause difficulties. Despite this, representations were made by people in the Economics Division to the effect that Washington had withdrawn the mandatory approach..."

Nixon describes more and more confusing cables sent to Washington, meetings and intrigues by Draper & Co. behind the backs of the Decartelisation officials, more and more people becoming involved, and Nixon himself being reprimanded because he sent a cable to his chief in Washington presenting a true picture of the situation. In the end Washington again stuck to the Potsdam position and issued instructions that the original draft should be followed. Once again one would think that nothing could stop the law from going through.

But the wreckers were determined men, fighting for heavy stakes. They were fighting a life and death struggle for German heavy industry, and for present and future American and British investments in that industry. They were not bothered about moral or legal scruples. They were worthy representatives of their masters who traded in death.

"Finally the Economic Directorate submitted the law to the Co-ordinating Committee on November 17, indicating that the Directorate could not arrive at a unanimous decision. Thereafter General Draper reported to General Clay's meeting ofdivision directors that the vote in the Economic Directorate had been 3 to 1 against the law as approved by the Legal Directorate. It was claimed by the Economic Division that the Russians had changed their position. As a matter of fact the Russians had not changed their position but were confused on our position.

"'They were deliberately misled by such people as Major Petroff, who boasted that he had been instrumental in getting the Russians to change their position and that Ambassador Murphy had specifically asked him to do so. When asked how he explained the apparent change in the Soviet position, since they had been the first to propose a mandatory law, he replied, smilingly, that he probably had something to do with that too. When subsequently we asked a Soviet representative why the Russians no longer took an aggressive position in the Economic Directorate on the issue of a mandatory as opposed to a discretionary law, he replied that if we wanted that kind of a law we could count on their support any time we showed them that we meant business. He made it clear to me that the Russians were led to believe that we were going to throw in the sponge and they had decided they were not going to fight for our law if we ourselves would not. As a matter of fact, General Clay told me he was particularly gratified by General Sokolovsky's support of our law at the Coordinating Committee – he told me this less than 10 minutes after members of the Economics Division had told me that the Russians had opposed the United States position in the Co-ordinating Committee and that we had been outvoted 3 to 1. The Co-ordinating Committee meeting minutes of November 27 clearly show the opposite to be true. The British stood alone in opposing the law. In face of this unilateral opposition the Co-ordinating Committee agreed to drop the matter with leave for anyone to bring it up again.

"On December 8, the State Department informed Berlin that if the British representatives on the Control Council were unwilling to accept a law with mandatory provisions, the State Department would take the matter up at governmental level. On December 11, General Clay replied that the British were opposed to the law and that he would not bring it up again until he received instructions to do so. There the matter rested, so far as I know, when I left Berlin a month later, and I have heard of nothing since that changes the situation."

Nixon concludes this first part of his testimony with the following words: "It is my conviction that Germany can never be economically disarmed until her internal monopolies, industrial trusts and her external cartel arrangements are destroyed. A thorough-going program to achieve this must be instituted immediately. And its execution should be entrusted only to officials who are interested in carrying out the Potsdam Agreement and the policy directives of their government rather than in preserving their old business connections and their own economic position."

Just what the trusts meant to Germany can best be illustrated by a brief review of I. G. Farben (German Dye Co.) and its ramifications. I. G. Farben directors and their associates abroad, including key men in the Standard Oil Co., did their best to cover up the activities of this mammoth combine. At the end of the war some records were destroyed, but many others were hidden away in the homes of I. G. Farben employees, in monasteries, mines, beer halls, caves, anywhere where it was thought the infamous record of I. G. Farben would be buried from the public gaze and the prying eyes of Allied research teams. That most of the records were hidden, rather than destroyed, shows the hopes of I. G. Farben heads that the Allied occupation of Germany would represent only a short armistice, after which the trusts and industrialists could come out of their hide-outs again. Their conjectures were only too well-founded.

With a total value of at least £300,000,000, I. G. Farben represented the greatest chemical combine in the, world. Thirteen per cent of its capital is held in foreign hands, mainly by Du Pont Nemours of America, Imperial Chemical Industries of England, and Francolor of France. Its holdings outside Germany amounted to at least another £50,000,000, representing five hundred firms, totally or partly owned. In Germany, I. G. Farben owned its own mineral deposits, mines, coke-ovens and power-stations, as well as its purely industrial and chemical plants. Abroad it maintained a complex espionage organisation, which was placed 100 per cent. at the service of the Nazis.

Its enormous importance to the German war potential enabled it to have favours in its dealings abroad that no other German firm had. It was kept informed of the time-table for German conquest so that the planners could arrange for the absorption of the chemical industries of Austria, Czechoslovakia, Poland, France, Russia, and eventually England, into the vast combine. And by the attitude of the French directors of Francolor and certain executives of Standard Oil in America, it seems the international industrial fraternity would have been nothing loath to play their parts in helping along the absorption process.

I. G. Farben's role in the war machine can be gauged from the following percentage figures of I. G. Farben's production in various important fields:

A dramatic illustration of how the cartel arrangement with other chemical and industrial groups abroad worked to control prices, divide up markets and exchange trade secrets, was provided in the U.S. Department of Justice Enquiry in 1941-2 into the activities of Standard Oil of America with regard to the development of synthetic rubber in the United states. One had thought that, after the scandals of World War I, such things had come to an end. The enquiry illustrated the big business conception of "patriotism" when national and private business interests collide.

Standard Oil had an arrangement for an exchange of research developments with I. G. Farben. Under this, Standard loyally provided I. G. Farben with the secrets of tetra-ethyl lead, without which the production of modern, high-octane aviation gasoline is impossible. Standard indeed were so obliging that when Germany's war preparations were almost complete, after she had swallowed Czechoslovakia and was preparing the blitz-krieg into Poland but was short of the lead from which tetra-ethyl is extracted, Standard shipped in 500 tons of this lead. An I. G. Farben report gratefully acknowledges the help it received from the Standard Oil contributions, which, as the report says, "are just now, during the war, extremely useful to us."

When it was a question of the United States getting important secrets, however, it was another matter. When the world rubber situation became acute after war broke out in 1939 and Britain no longer had shipping resources to distribute her supplies from Malaya, rubber companies in the United States began to agitate for the production of synthetic rubber. It was known the Germans were producing large quantities of buna rubber. Standard Oil prevented other American companies starting research into means for making buna, by stating that under their cartel agreement with I. G. Farben they already had the secret. When the rubber companies clamored for the processes to be made known, Standard said they were investigating the best means for licensing the process.

It took a governmental investigation by then Senator Truman, with Senators Kilgore and Bone, to pry out the true facts. Standard did not have the secret process for buna. They deliberately held up American research and war preparations to defend German interests. They deliberately lied to the American rubber companies. Even after the Germans invaded Poland, Standard still held up American research into buna rubber, at the same time assuring the rubber companies that the process would be released to them in good time.

Eventually, in October, 1939, a Standard representative, Mr. Howard, met I. G. Farben representatives in Berne, Switzerland, and told them he could no longer resist the clamor for the processes, and Standard would be glad of some reasonable excuse from Farben to explain away the situation. The Farben representatives agreed to cable New York that the German government would not allow them to divulge the processes. Mr. Howard was most grateful.

There were plenty of other instances in which the American and to a lesser extent the British war effort was weakened by American firms "loyally" abiding by their cartel agreements with I. G. Farben. There was an agreement between the U.S. Aluminium Corp. and I. G. Farben to restrict magnesium production in the United States, and an agreement on smokeless powder between Remington Small Arms and I. G. Farben which held up supplies to Great Britain to as late as 1941.

By some miraculous chance – and one day this may form a profitable theme for an investigation commission – most of I. G. Farben plants were spared during the war.

If one starts with the enormous I. G. Farben headquarters building in Frankfurt – now the headquarters of Anglo-American occupation authorities – one would think a magic circle had been drawn around I. G. Farben establishments to save them from Allied bombers. The I. G. Farben building in Frankfurt, covering several acres of ground, stands out as a flourishing oasis of concrete, steel, marble and glass, in a desert of rubble and destruction. By its size, shape and location on top of a small hill, it stands out as Number 1 target in Frankfurt, whether for high or low level bombing. But it survived without a scratch – a nerve and research centre for the German war effort till the end.

The best information based on Allied economic intelligence reports is that the total damage to I. G. Farben plants at the end of the war was 15 per cent. I. G. Farben technicians estimated that within three months they could have the whole industry working on a 95 per cent. basis again, given raw materials. And they were given the raw materials.

The position of I. G. Farben as of September, 1949, was that no plants had been dismantled or destroyed in the Western Zones. In the American Zone, where Farben had its headquarters and one quarter of all its plants, the enterprises were grouped into seventeen large units and were under the control of German trustees. It represents the only case of an enterprise having been broken up at all in the United States Zone, and action was taken only because I. G. Farben was placed from the beginning under a special four-power control board. It was the only enterprise handled in this fashion, so it hardly came within the scope of the decartelisation law we have been discussing.

Despite strict allied directives to the contrary, I. G. Farben plants in the American Zone received priorities for supply of raw materials, and are producing more now than before the war. The infamous Gensdorf poison-gas plant, marked down on the list of war plants to be destroyed, is working at full pressure again. The Americans changed its name to Anorgana, and it is operated by the Bavarian government. It is officially manufacturing anti-freeze agents, raw material for lacquers and various other chemicals. It employs 300 persons and production is going up by leaps and bounds.

The British complain that the I. G. Farben plants are tending to coagulate again, and they oppose American proposals to sell the seventeen units to the present trustees.

The British have their own reasons, in that early promises of the elimination of I. G. Farben and Potsdam decisions not to allow the Germans to have a chemical industry had given great hopes to the British chemical industry. Expansion had already started on the basis that I. G. Farben would be eliminated. Now, with American benevolent protection, I. G. Farben under new names, is already competing in a big way with the British chemical industry.

It was doubtless with the experience of the I. G. Farben cartel arrangements and their effect on the American war effort fresh in their minds that Washington officials took a strong and clear line in the early phases of decartelisation. The Truman-Kilgore wartime commission had deeply stirred public opinion at the time, and the American man-in-the-street was strongly anti-trust. Roosevelt had done much to expose the machinations of American trusts and to curb their activities. Several of the Roosevelt "trust-busters" still held high jobs in Washington and took a deep interest in the developments in Berlin. Washington, too, in this case was kept informed as towhat was going on, by frequent reports from Nixon to his chief, Bernstein. In most cases decisions in Berlin were taken or not taken, and Washington was laconically informed afterwards of another failure due to "Russian obstruction.”

Needless to say, the press was thoroughly hoodwinked over the whole matter. If highest officials lied to each other and to their governments, if departmental chiefs kept back information from their colleagues, one can imagine how much chance the press and public had of learning the truth. My interest in decartelisation led me to interview many British and American officials on the subject. The reply was always a variation of the old familiar theme: "Can't get anywhere with it, old, man. You know what the Russians are!" It was only later, when armed with the report from which I have quoted so extensively above, that I was able to press more searching questions, and eventually got conformation of the picture as presented by Nixon. By that time excuses given for non-decartelisation had been developed in another direction. But more of that later.

Before leaving Mr. Nixon's evidence, there are a few more valuable contributions from him when he was being cross-questioned by the Chairman of the Committee, Senator Harry Kilgore, from West Virginia. In reply to a question as to who was chiefly responsible for the impasse, Nixon replied:

"Let me say at the outset that it is my judgment that General Clay did agree with the tough policy. (The explanation for this tough line of General Clay becomes clear in the next chapter. – Author)... But below him his officials were sabotaging his policy. How were they doing it? Perhaps I had better say who they were. First of all, of course, is General Draper, the head of the Economics Division, former Dillon Read official; Mr. Laird Bell, a corporation lawyer from Chicago, of the Liberty League (club frequented by wealthy financiers and bankers. – Author), who was deputy chief of the Economics Division... who since he came home has made it very clear that he disagrees with Potsdam... a Major Petroff, Russian-speaking U.S. Major, former lawyer with General Motors Corp.; Lieut.-Col. Bowie, of General Clay's staff, and a member of Mr. Murphy's staff...

"Generally speaking, they took the attitude that to apply the really tough mandatory law was being too tough with Germany... They misrepresented the U.S. position to other powers and attempted to change the Soviet position of support for the mandatory law. They specifically went to them and indicated: 'We didn't really mean it when we referred to our support for the mandatory law...' In addition they created confusion. There were incorrect minutes written... these same forces attempted to get Washington to relax the policy by expressing excessive defeatism, telling them it was impossible to get a tough law and trying to get them to give permission for a weaker position."

The position, then, at the end of 1945 was that the British stood out alone against the law banning cartels and trusts, but highly-placed American officials had lent strongest support to the British. This was the position throughout the next 12 months, carefully concealed from the press. Then the British began to develop a diabolically clever line, one sure to bring about a "volte-face" in Washington.

"What's going to happen to these enterprises if you do decartelise them?" the British began asking,       "Of course," they added, "in our zone we will socialise them." And the very mention of socialisation sent cold shivers up any good free-enterprise American back. It was a piece of beautifully calculated blackmail. General Clay had anticipated something like this, but not quite in that form. The British government probably did have the intention at one time to socialise part of German heavy industry. In fact, Mr. Bevin had made some very emphatic statements about it, but his men on the spot had no intention of allowing anything like that to happen. The merest mention of the word, however, was enough to make Washington scurry away from putting the final pressure on Britain, at governmental level, to agree to a tough decartelisation project.

Discussions from which, of course, the Russians were excluded, took place to discuss the future of industries once they were broken up. The Americans said they should be put up in small lots and auctioned. The British said they should be socialised. There was the question of compensation for foreign investors – mainly British and American. Their profits had piled up since the Nazis blocked the export of foreign capital in 1933. Much of it had been re-invested in the industries which poured out the tanks and planes, the big guns and submarines, the secret weapons and gas chambers which destroyed millions of Allied lives. One would have thought that foreign investors, having put their money into an enterprise which had gone bankrupt, would not have the nerve to press their claims. But in the Economics Divisions of both American and British military government another view was taken.

One could not trample on the rights of private enterprise and break up vast industrial concerns in which foreign money was invested, without making adequate provision for compensation. Some firms with large amounts of foreign capital were even allowed to draw from their frozen bank-accounts part of their accumulated profits to start rebuilding and re-equipping their plants. The Singer Sewing Machine Company was an early example of this.

The main battle for the German trusts was won. Actually a law on decartelisation was passed for the British and American Zones on February 12, 1947, after Bizonia had been set up. This law, passed more than a year before the alleged crisis when Marshal Sokolovsky withdrew from the Control Council meeting on March 20, 1948, was a typical example of the legislation passed for the two zones behind the back of the Control Council.

The date on which the law was published is important in view of the findings of the Ferguson Commission of enquiry in 1949 – dealt with later in this book – that the law was so complicated that it would take at least two years before it could be implemented. The two years would take General Clay beyond the U.S. elections in November, 1948, when it was certain there would be a change of government in the U.S.A., with a softer attitude on decartelisation. Negotiations were actually in progress between industrialists and republicans on the eve of the elections to "drastically" revise even the modest provisions of the Anglo-American decartelisation law.

Law 56 in the U.S. Zone and Ordinance 78 in the British Zone were almost identical. They start off with a pompous phrase providing for the "prohibition and elimination of restrictive and monopolistic enterprises." Enterprises employing more than 10,000 people were to be examined as "primae facie" cases of excessive concentrations, and could be dealt with at the discretion of the military governors.

The precise application of the western version of "trust-busting" is dealt with in the chapter which follows.

Having won a breathing spell in the matter of decartelisation, the Control Council wreckers concentrated their activities on the next task of salvaging as much as possible of foreign profits and getting them defrozen for re-investment in the German heavy industry, whose future they had now assured.

To carry out this plan, Germany had to be split in two. Russia must be kept away from the conference tables. Potsdam must be thrown overboard once and for all and the decks cleared for Big Business to have a clear field.

The preliminary moves were made almost before Allied blood had dried in German fields, and their results were apparent in the first few months of the Control Council's activities.

In his evidence on the disposal of Germany's external assets, before the same Kilgore Committee, Mr. Nixon brings to light some of the behind the scenes skulduggery aimed at ending four-power unity. Treachery is an ugly word, but it seems the only one to apply to the intrigues between Britain and America towards the end of 1945, to ensure that Russia should have no voice in prying out the secrets of German investments in Spain, Switzerland, Sweden and South America.

Marshals Zhukov and Montgomery, Generals Eisenhower and Koenig, signed an Allied Control Council Law, No. 5, on October 30, 1945, setting up a German external property commission composed of representatives of each of the Allied powers. This commission should take over all German property outside the country. Nixon was appointed U.S. representative. He prepared a memorandum to General Clay, setting out his ideas for an immediate four-power approach to the neutral countries for recognition and enforcement of the Commission's power.

"It was necessary," stated Nixon in his evidence, "that a strong and immediate unified approach be made in order to prevent further dissipation of German assets and to overcome the resistance of the neutrals to giving up German assets which legally and morally belong to the Allies.

"However, the idea of a strong four-powered approach was soon discarded by a cable from the State Department to the Division of Investigation of Cartels and External Assets (D.I.C.E.A.) immediately following the first meeting of the German External Property Commission on November 27, 1945. This cable directed that the United States representative make the following proposal to the Control Council:

"(1) The G.E.P.C. should be organised into two separate operating units. In the one unit, the Soviet Union would be the sole voting member and the other three powers would act as observers. This unit would deal with Germany's external assets, in Bulgaria, Hungary, Rumania, Finland and Eastern Austria. In the second unit the voting members would be the United States, France, and Great Britain, with. The U.S.S.R. represented as an observer. This unit would take care of the German assets in all other countries.

"(2) It was requested that the Control Council and the G.E.P.C. should agree to exempt all the Latin-American republics from coverage of the vesting decree 'upon representations from the United States member that these countries have satisfactorily carried out their replacement and reparations program'."

Nixon reacted sharply to this, and protested that it would undermine the only effective basis for action on a four-power basis and would put the United States in. the position of having initiated the first break in four-power unity. The Soviet representative, Mr. Denisov, meanwhile made it clear that the Soviet Union was interested in the application of Law 5 in all countries, and knew of no agreement under which the Soviet Union had renounced its interest in the full implementation of the Law.

The three Western powers meanwhile had meetings behind the backs of the Russians to work out a policy tender enough not to offend Switzerland and the other neutral countries where the Nazis had salted away most of their assets to finance a future war.

Nixon summarises the Western policy in a specific charge that "The United States State Department together with the British and French Foreign Offices have manoeuvred to split the Quadripartite German External Property Commission into eastern and western units and are proceeding to crystallise this split among the four powers in regard to the external assets problem.

"This unwarranted action in my judgement stems from the concern on the part of certain influential and apparently dominating influences in these offices to avoid having the Soviet Union, through genuine quadripartite actions, involved in the external assets question in countries such as Spain, Portugal, Switzerland and Argentina.... We are applying ineffectually a 'would you be so kind' approach in the drive for the camouflaged assets of the Germans in such Fascist countries as Spain, Portugal and Argentina."

The British were even more concerned than the U.S. State Department to keep the Russians from prying into German assets. They felt the original State Department memo did not go far enough. A week after the U.S. memo, the British cabled that the United States and France "would presumably agree" in the Washington discussions that nothing should be said which "might conceivably lead to a Russian claim to have a say in this particular matter."

One must remember that this first attempt to split the Control Council was taking place only four months after the end of the war, long before there was any talk of bi-zonal fusion or breakdown of four-power machinery. To be sure, there was much dust-throwing going on in the Western press at the time about the "merciless" Russian policy of stripping Eastern Germany "bare" of its industry. Whenever the Western powers were putting over some particularly disreputable piece of chicanery, they whipped up an anti-Soviet propaganda campaign to divert attention.

In a teletype conference between General Clay and Nixon on the one hand and Washington on the other, the State Department explained that their desire to avoid four-power operation of Law 5 was due to "the strong feeling in the State Department that complete quadripartite operation of Law 5 in such countries as Spain might breed conflicts with respect to foreign policy which it is strongly desired to avoid."

Nixon continues, "The French state their position is to prevent the Soviet Union from 'having an eye into' certain situations such as Spain and Switzerland. The British most blatantly assert their overwhelming concern to avoid joint operation with the Soviet Union in the neutral countries. This unwarranted and diligent effort to disunify the four powers leads to a profound suspicion that it is being sought by at least some forces in the U.S. State Department and in the British and French Foreign offices who are sympathetic to the creation of a Western block versus the East." And this, mark you, still in 1945.

Behind the high moral reasons for setting Western Germany "on its feet," giving "liberty, freedom and real democracy" to the Western Germans, one begins to see the real reasons for excluding Russia from any voice in affairs west of the Elbe. That Russian voice might denounce the intrigues of the agents of international finance, the men who manage the trusts and cartels, and who guard the financial reserves of the Nazis.

Nixon puts his finger on the very heart and soul of this anxiety to shield the Western world from Russian influence when he says: "Furthermore, I charge elements in the United States, British and French Foreign Offices with consciously manoeuvering to prevent all four powers from being involved in the search for external assets in the neutral countries because that would lay bare the Fascist or reactionary regimes in such countries as Spain, Portugal, Switzerland, Sweden and Argentina, and would reveal all the elements of collaboration of certain interests in the Allied countries with these regimes. Such genuine quadripartite action would completely upset the applecart for plans of compromise regarding Germany's external assets in the interests of trade and commercial advantages and in the interest of avoiding the creation of too radical regimes in the future."

The results of the weak-kneed, cap-in-hand, gentlemanly approach to the neutrals, of course, amounted to nothing. The Swiss shrugged their shoulders but allowed the Western allies to touch neither German State property nor any other assets. In Sweden subsidiaries of German enterprises were allowed to continue operating and pile up funds which could later be made available to the mother-firms.

It was well known that the Nazis had salted away vast sums of gold in Switzerland. A few weeks before the end of the war, a German mission to Switzerland, headed by Emil Puhl, vice-president of the Deutsche Reichsbank, was sent to arrange for the salting away of German assets, including gold looted from the occupied countries. Puhl's correspondence with war-criminal Walther Funk, Nazi Minister of Economics, showed clearly the collaboration between the German Reichsbank, Swiss bankers and Swiss government officials. Copies of this correspondence were in the hands of the Western Allies. But the guilt of the Swiss government in helping the Nazis to bury their loot – until they had a chance to use it again – must be hidden at all costs from the Soviet Union and world public opinion.

A few extracts from Puhl's last letters to Funk tell all that is necessary in this respect.

"At my insistence we negotiated until yesterday afternoon,” writes Puhl on March 30, 1945. "I might say that the Swiss did not lack in paying me personal attentions, such as arranging a large breakfast in my honour yesterday. Of course this fact became immediately known to our enemies. It is remarkable further that Swiss bankers and industrialists again and again called on me despite the fact that the enemy observed everything."

In his final letter, dated April 6, just one month before the German capitulation, Puhl sums up the results of his visit – with justifiable self-satisfaction.

"In the gold question," he writes, "the National Bank has kept its independence, which is a good thing. I succeeded in concluding a gold deal transaction involving about three tons, in spite of the fact that this is certainly very disagreeable to our opponents... The results of my drawn-out endeavors can be summarised in stating that it is quite a considerable achievement, which is thought to be impossible by many sides, that under the present general political and military conditions, we have come to a written agreement with a Swiss institution (Swiss National Bank – Author). Herein lies the significance going far beyond the various regulations. It has become possible to avoid a breakdown of the thin thread of German-Swiss economic relations... Every day, I could say almost every hour, I was able to convince myself of how many Swiss connections exist which will not stop now after it has been possible to find a basis for the continuation of certain payments... The fact that President Weber (President of Swiss National Bank – Author) repeatedly and strongly advised me to continue my endeavours made a forceful impression. He pointed out that under the present-day conditions an agreement between the National Bank and the Reichsbank would be of far-reaching importance beyond the present day... Whatever form events will take, such connections will always exist between our countries, and the fact that there exists a contract agreement may be of considerable importance for the future... In the last analysis I have found much understanding from the Swiss side. The personal relations are now as before of greatest cordiality, and are playing a decisive role in all negotiations... It is pleasing to note again and again in all these events how strong the cultural ties are that connect our two countries, even if the political opinion of the broad masses is not in our favour to-day.

"For my return trip, the organisation of which is not, quite simple, the Swiss Government has obligingly put two seats in their own courier automobile at my disposal."

It was not only a handful of Swiss Nazis, but leading Swiss bankers, industrialists and government officials, who were helpful in salting away German loot in the very last days of the war. It was not surprising, therefore, that the Western powers – always tender where international finance is concerned – wanted to keep the Soviet Union out of these matters, and to shelter from public opinion the intrigues of Swiss bankers.

By his questioning of witness Nixon, Chairman Senator Harry Kilgore painted in black and white a clear picture of the results of this first split in four-power administration in Germany.

Chairman: "As it now stands we still don't have Law 5 implemented?"

Nixon: "That is right, sir."

Chairman: "We are still holding one member of the quadripartite agreement at arm's length in certain sections and putting him in control in others?"

Nixon: "That is right."

Chairman: "So the criticism levelled at Russia's action in certain sections is caused by this action here in which she is put in charge of sections with merely observers from the other three nations; is that right?"

Nixon: "I would say that contributes to it... Again as recently as at the end of January (1946) the British came in to the German External Property Commission and made the proposal to split the commission which the State Department had originally urged that we make. Curiously enough, the first proposal to this effect was made by the British and they asked that they have U.S. support. Instead of that, the State Department evidently decided to carry the ball itself, and gave us instructions to make the split."

Chairman: "In effect the whole theory ofUnited Nations is starting to split into two grand subdivisions, Russians and Middle Europe; and the United States, England, France and the rest ofthe world. In other words, if we exclude Russia as an observer, they have the right to exclude the United States, England and France as observers under this theory that has been approved, and then what we have again is a question ofbalance ofpower which might lead to another war."

Mr. Nixon: "The point is this: we fought the war on a united basis. In onesense, a very important sense, this is still an aspect offighting the war. We are trying to disarm Germany's hidden assets. Our top representatives, General Eisenhower and General Clay, for example, felt that we had to do this on a four-power basis, that we had more power if the four ofus were united and going in together for these assets... This operation is now being undermined on a three-power basis by secret cables, by an exchange ofplans and schemes to put it on a three-power basis and to exclude the genuine four-power operation."

Chairman: "No. I disagree with you on that. Isn't it in the furtherance ofthat policy which was quite prevalent in Europe immediately after V.E. Day that England and France and the United States would line up against Russia...?"

Mr. Nixon: "Of course it was."

Chairman: "That is all oneheard, that they must get together. Isn't that the dividing line, immediately set up in that division ofexternal assets? That is the first division that you get into. The other steps follow on naturally."

Nixon: "This unwarranted and diligent effort to disunify the four powers leads to a profound suspicion that it is being sought by at least some forces in the United States State Department and in the British and French Foreign Offices who are sympathetic to the creation of a Western bloc versus the East."

Chairman: "The thing that worries me about this is that you started this on a four-power basis and it looks to me as if this is the first step to divide it into two opposing camps."

Nixon: "I don't know whether it is the first step. It certainly is a step."

Chairman:"It is a step in that direction."

Nixon: "Yes, sir."

Chairman: “Which disunites the United Nations."

Nixon: "That is my judgement."

Chairman: "It would make the United Nations an impotent organisation.”

Nixon: "It is in that direction; yes, sir."

If Chairman Kilgore seems to have laboured the point in this investigation about the results ofsplitting the External Assets organisation, he should at least get full marks for his foresight in judging the trend ofevents from this one incident. His predictions were onehundred per cent. correct. He has got on the record for all to see (who care to look up these reports in Washington) the genesis ofthe split in Germany and the disruption within the United Nations as early as 1945.

There were scores ofGeneral Drapers and Sir Percy Mills scattered in strategic posts throughout the British and American control commissions. If the disruptive activities were not originated in Washington and London, their every action and interest lay in splitting the Allies and preserving German heavy industry intact as a safe field forinternational investment and a strategic reserve in a future war against the Soviet Union.

Some day the minutes ofControl Council and other four-power meetings will be published, and a shocked world will see how lightly and cynically the hopes for unity and co-operation were destroyed by the industrialists and bankers who were made the guardians of ourpost-war hopes.

For a socialist British government to place a Birmingham industrialist in charge ofa key division to co-operate with the Russians to destroy German trusts, root out their buried gold and carry through the socialisation ofkey industries in many ofwhich good Birmingham capital was involved – was a gross betrayal ofthe British electors. Sir Percy Mills went back to England to become Chairman ofthe Birmingham Chamber of Commerce.

Sir Percy was succeeded by Sir Cecil Weir, former president ofthe Glasgow Chamber ofCommerce, director of Schroeder, Weir and Co., a firm ofGlasgow Shipbuilders. He followed faithfully in the paths laid down by his predecessor.

The Dillon Read team of Forrestal and Draper was later removed from influencing German affairs, when Forrestal, as Secretary for Defence, went mad and committed suicide, and his assistant Draper went back to work for his firm in its own offices, instead of acting as its agent in the U.S. War Department.

Forrestal was replaced by Mr. Louis Johnson, who also has interesting commercial ties with Germany. At the time he was appointed Defence Secretary in 1949, Johnson held two directorships in I. G. Farben subsidiaries in the United States, as well as a directorship in the Consolidated Vultee Aircraft company. Vultee produced the billion dollar B.36 super-bomber, designed to deliver atom bombs to Russia from any point in the world. Johnson, in other words, had a direct financial interest in the preservation of the German trusts and a direct financial interest in World War III.

A glance at Johnson's record shows he did well enough out of World War II. Johnson was involved with the J. Henry Schroeder Banking Corp., the international banking firm which helped finance German heavy industry, particularly the steel industry and I. G. Farben, in the 1920's. The London branch of Schroeders bought into American aviation companies in 1937, through a U.S. finance broker, Henry Emanuel. For some time the Aviation Corp., in which Schroeders invested, showed no dividends, and the London office became impatient.

In 1939, according to correspondence since published, the New York branch of Schroeders sent a comforting report to London, as follows:

"I certainly hope that they (Henry Emanuel. – Author) have as good an 'in' with Assistant Secretary of War Johnson as they seem to have, because if they do, he will certainly find a means of giving them some share of the armament orders.. ."

Emanuel had a good "in" with Johnson, apparently, because the orders soon began to pile up. Vultee, one of the subsidiaries of Aviation Corp., netted eighteen million pounds' worth of contracts within 18 months of the New York report to London. The Vultee plant payroll jumped by 600 per cent. in 1940 alone. When Johnson left the War Department in 1943, Emanuel appointed him as director of Consolidated Vultee and helped him to two more directorates in General Aniline and Film and a sister company, both subsidiaries of Germany's I. G. Farben. A few months after he left the War Department, Johnson in his new job at Consolidated Vultee received the first orders for the billion dollar B.36 from his replacement at the War Department, Patterson. Patterson later had to face a Congressional Committee called to enquire into the scandalous waste of money in building the B.36. He admitted to irregularities and violations of procedures in placing the contract with Consolidated. Patterson was well rewarded, however, by a directorship in the New York branch of Henry Schroeder and Co.'s banking house when he too left the War Department.

Back at the Defence Department again, Johnson now has almost unlimited powers in spending U.S. public moneys, allotting munitions contracts.

It only remains to add that the British economic adviser, Sir Cecil Weir, is a partner and director of Schroeder and Weir's Glasgow Shipbuilding Co., an affiliate of the Schroeder banking house, which represents German governmental and heavy industry interests in London, to complete the alliance between British, American and German capitalism – an alliance with its agents in key postsin Washington, London, and Berlin. Allen, brother of John Foster Dulles, is also the legal adviser and a director of the New York branch of Schroeder and Co. With John Foster Dulles scheduled to take over as Secretary of State after the expected defeat of the Truman administration, the alliance would continue its activities to save the German trusts, no matter what administration was in power.

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