19. Germany Will Crack This Winter

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TIME was what the Reich needed. When the Reich could no longer pay its obligations, Germany would be bankrupt. That moment had been technically postponed for years by rationing foreign exchange to only the most important transactions. But with Reichsbank reserves hit so hard by both the boycott and the Depression, there would soon be nothing left to ration.

In fact, in early June 1933, the German government was forced to permit the American Jewish Congress and other groups to send a multimillion-dollar Jewish relief fund to Berlin. The decision was of such importance that final approval could be granted only by Hitler himself. It was a difficult approval, because accepting relief funds was an admission that German Jews were being economically destroyed—something the Reich continued to deny. But the dollars were too badly needed to prop up the foreign-exchange scarcity. Moreover, when recalcitrant NSDAP activists tried to seize the funds from Berlin banks, claiming that the Congress money belonged to a hostile organization, the government quickly intervened and cash distribution to Jews resumed. The threat that future relief dollars would not be sent to Germany was too perilous a possibility to allow any interference.¹

But relief funds were mere drops of water to the cash-thirsty Reich. In plain English, they were already broke. Only Schacht's clever acts of desperation were postponing a mass shutdown of German industry.

For example, shortly after Sam Cohen's deal was concluded, the Reich Economics Ministry realized the potential of using blocked marks and merchandise to pay desperate creditors. A similar arrangement was set up with a new American syndicate managed by the Harriman Company Harriman would purchase German merchandise for about 150 American individuals and companies owning blocked accounts in Germany. It worked this way: American importers would pay only 75 percent of their merchandise invoices in actual U.S. currency. But these dollars would never reach the German manufacturer; they would go into the Reichsbank reserve. The Reichsbank would then pay the German exporter in blocked marks. The remaining 25 percent of the invoices would be paid to a U.S. escrow account in dollars. To consummate the transaction, the U.S. creditor would take over the dollar escrow account in America and the German manufacturer would take over the creditor's blocked account in Germany. The Economics Ministry expected to promote about RM 25 million in exports by this technique.² The U.S. creditors were so desperate they were willing to traffic in German exports to slowly regain part of their assets frozen in Germany. In the process, Germany earned foreign currency and kept industry working a little longer.

Another trick for time was the proliferation of bilateral bartering. With little or no cash to pay for raw materials and semifinished goods needed for industry, Germany could resort to the barter system, a straight exchange of goods or commodities. For instance, Germany could swap its coal for another country's cotton, or German pharmaceuticals for another country's metal ore. In this way, a bankrupt Germany could keep manufacturing components flowing to German industry, and the population would remain working.

But such tricks were dependent upon one essential factor: the inherent value of German goods. Once German merchandise did become essentially valueless, Germany could gain yet a little more time with domestic tricks, charades, and outright thefts. For instance, the Reich could offer subsidies to stave off an industry's disintegration. By early June, such subsidies were frequent. For example, on June 6, Goebbels granted a RM 10 million subvention to the German film industry.³ But crippled by cinema boycotts, the German film industry would take many months, perhaps years to rebuild.⁴ How long could such subsidies continue?

Or the Reich could broaden its artificial protection of domestic industries. Such protection already existed for numerous commodities such as eggs and wheat. But whenever the government banned competitive supplies from neighboring countries, those countries always retaliated with similar restrictions on German products. So one German economic sector would flourish for a moment, while several others paid the price. For example, trade with Rumania was almost nonexistent by June 1933 because Germany's protectionist ban on many Rumanian farm products provoked a reciprocal ban on most German wares.⁵ How long could the Reich protect selected economic sectors at the expense of others?

Or the Reich could expand its rigid wage and price controls. But that creates shortages, black markets, and even bankruptcies. In fact, such bankruptcies were regularly occurring. Defunct companies were simply absorbed into ever larger cartels to keep the employees working. But how long could unprofitable businesses continue federating before they created one prodigious industrial failure? How many such failures could the Reich prop up with subsidies? And how many shortages could the Reich endure before work was forced to a halt for lack of materials?

Or the Reich could fool the millions of unemployed Germans into believing they were actually gainfully employed. With over 5 million still jobless, employment schemes were an obsession of the Third Reich. For example, in May, Hitler announced "compulsory volunteerism" as a substitute for actual employment. Most of these schemes simply relocated the worker. Heavily reliant on Nazi jingos and fatally underfinanced, the substitute work programs were aptly summed up in a mid-May report by British commercial attaché F. Thelwell: "Schemes for [re]settlement and for the provision of work ... are being dealt with together, and ... such a state of confusion exists and such obviously fantastic plans are being discussed, that it is quite impossible to form any rational or coherent picture of what will ultimately be done."⁶ How long could such schemes continue to fail before the populace saw them as placebos?

Or the Reich could continue squeezing its own citizens and companies. This it was already doing to the Jews, with the overwhelming approval of the anti-Semitic population of Germany. Jewish assets in Germany probably exceeded RM10 billion.⁷ But the Nazi business usurpers were so inept that Aryanized businesses frequently failed, creating even more unemployment. Moreover, by spring 1933, the company takeovers began extending into the non-Jewish sector as any suspect business was subject to confiscation by party kommissars (locally appointed party controllers). The situation became so precarious that Nazi leaders such as Hugenberg, Goebbels, and even Hitler were incessantly chastising NSDAP kommissars to stop their takeovers. On May 20, for example, Goebbels warned kommissars, "We will not permit the country's business to be destroyed by dilettantes."⁸ How long could productive businesses be neutralized before the collective loss created an insurmountable crisis?

The Nazis knew the answer to all these questions. If exports fell too low, Germany as a nation would again be faced with starvation. It had happened just fourteen years earlier; it was still fresh in many minds. In the winter of 1919, a besieged Germany was blockaded into submission, starved into defeat. To the Nazis, the anti-German boycott of 1933 was in many ways a reminiscent tactic. There were no enemy ships in the seaways, no hostile divisions at the bridgeheads. But as effective as any blockading frigate or infantryman was this boycott that blocked German goods from being sold, blocked foreign exchange from being earned, and blocked the means of survival from entering Germany.

How many months could Germany survive once the boycott became global, once commerce was rerouted around Germany? The boycotters adopted a slogan: "Germany will crack this winter." In Berlin many believed those words. On June 14, Britain's Ambassador Sir Horace Rumbold reported to British Foreign Secretary John Simon on an hourlong conversation with former German Chancellor Heinrich Bruning. The meeting was held in great anxiety because Brüning was convinced his phones and mail were monitored. Rumbold conveyed Brüning's belief "that economic conditions might deteriorate to such an extent in the autumn or winter as to produce a very serious situation in this country." Rumbold added his own validation: "I have heard from a direct source that the Chancellor [Hitler] himself is very apprehensive of the economic conditions which are likely to obtain towards the end of the year."⁹

Two weeks later, on June 30, Rumbold sent Simon another report, this one describing the unparalleled political and economic chaos dwelling in Nazi Germany. Rumbold's report closed with a flat assertion: "The Chancellor is concentrating his attention on the problem of reducing unemployment in the realization that his stay in office depends to a great extent on the economic situation next winter."¹⁰

Germany's economic viability had indeed become a phantasm of lies, tricks, and facades. And then came the very thing the Reich was dreading: boycott consolidation. Since the spring, both the Jewish War Veterans in New York and the Polish boycott committees in Warsaw had talked of joining forces. On June 3, Lord Melchett and the British Trade Unions Congress took the initiative and issued formal invitations to the independent boycott committees of the world to assemble in London on June 25 to establish an international boycott council.¹¹

Melchett titled the boycott convention the World Jewish Economic Conference. The name was a wordplay on the intergovernmental meeting then under way in London, the World Economic Conference, convened to stimulate trade, especially with Germany. As it turned out, Germany's hopes for increased trade evaporated. So threatening were the World Economic Conference delegates that Schacht's plan of default had to be suspended for fear of provoking extraordinary retaliation, such as the liquidation of German property abroad as promised by John Foster Dulles. A Reich cabinet meeting called on June 23, shortly after the World Economic Conference, reported: "Pessimistic as were the expectations with which the [German] delegation went to London, they were outdistanced by far. Germany found among all states an attitude that hardly could be worse."¹² Melchett's Conference planned to finish the job.

The Jewish War Veterans and the American League for the Defense of Jewish Rights—America's two vanguard boycott groups—accepted Lord Melchett's invitation at once through ALDJR president Samuel Untermyer, one of American Jewry's most respected champions. He was renowned as the man who broke the "money trusts," as the former law partner of Committee leader Louis Marshall, as a major figure in the victory over Henry Ford, and as a regular crusader against civil rights injustice. His leadership was all the more meaningful to the boycott movement since he was a popular rival of Stephen Wise, who had yet to declare a boycott. However, in accepting Melchett's invitation, Untermyer asked if the conference could be postponed two weeks, giving Untermyer and his associates time to wrap up affairs in America. Melchett quickly agreed and a new date was set: July 15.¹³

Preparations began in earnest. Boycott groups from Holland, France, Poland, England, America, Latvia, and from thirty other nations would attend. Successful boycott ideas would be exchanged. Inefficient methods would be analyzed and improved. Separate committees would focus on techniques for organizing trade unions, manufacturers, and consumers. Most important, all the groups would bring long lists of manufacturers and sellers seeking alternatives to German goods.¹⁴ These lists would be put together, making the international boycott group a commercial clearinghouse first and foremost. In the meantime, those anxious to replace German goods continued their haphazard struggle to find one another via advertisements in a boycott publication, The Jewish Economic Forum, published by Lord Melchett.

Egyptian importers of silk stockings want supplies "similar to the Chemnitz products." British ornament distributers invite carved wood from any non-German sources. Poland's leading importer of cleaned graphite seeks non-German alternative supply. British cap manufacturers need cap fasteners produced anywhere but Germany. Hungarian, Yugoslavian, Swiss, and Czech firms want gloves, hats, glues, and foodstuffs to replace German products. The French State Railways offers special discount freight rates for shippers seeking to avoid German trucks and rail lines.¹⁵

Such inefficient methods would be short-lived. At the July 15 World Jewish Economic Conference all the emotionalism, anger, and resentment of the boycotters would be transduced into pure business. The mercantile expertise of centuries would be but a rehearsal for the biggest and most important commercial brokerage network in Jewish history. If the deals were right, German Jewry could be saved.

Once the global boycott became a reality, the slogan "Germany will crack this winter" could well become a prophecy.

Mr. Sam Cohen, on June 24, 1933, concluded a fruitful meeting with German Consul Wolff in Jerusalem. A number of boycott-breaking ideas were discussed, and Consul Wolff was eager to notify Berlin. In a memo marked "URGENT," sent that day to the Reich Foreign Ministry, Wolff reported, "Mr. Sam Cohen ... had informed me today that he will most likely ... attend a Jewish congress in London, planned for the middle of July, which is to make decisions concerning the Jewish boycott against Germany ... throughout the most important countries of the world." Wolff predicted "that the boycott resolution will be passed" since Jews everywhere believe "the boycott is the only weapon which can do appreciable damage [to Germany]."¹⁶

It went on: "If Mr. Sam Cohen is now going to attend what I might call the 'boycott congress,' he is doing so ... in his capacity with Zionism here and with the Jewish Agency; [and] to put the brakes on the congress by working behind the scenes. . . . He will try . . . to sell his anti-boycott plans to influential attendees of the London congress. This includes if possible, Stephen Wise and attorney [Samuel] Untermyer, both of whom are arriving from America to attend the congress."¹⁷

Consul Wolff added that Cohen's tireless anti-boycott efforts were being continuously subverted by Jewish and Zionist groups who maintained that Hanotaiah's I-million reichmark permission was too small a concession to trade for the politically volatile act of abandoning boycott. Playing right into the Nazi mentality, Wolff labeled the RM I million license as "insignificant in view of the magnitude of [Jewish] economic problems and the wealth in Jewish hands .... The only successful measure to counteract increasing Jewish hate and hostility for Germany would be a more generous accommodation on the part of the German government. It is of course understood that such an accommodation would be in the economic rather than in the political area."¹⁸

Consul Wolff's letter was another lobbying effort to expand Sam Cohen's deal to several million and broaden it to cover future as well as present Jewish emigrants. In the Nazi party's view, "future" emigrants included every Jew in Germany. In allying with Consul Wolff, Cohen found his most effective advocate. Even as Wolff was mailing his June 24 letter, the Economics Ministry in Berlin was notified of the Foreign Ministry's full endorsement of the consul's recommendations.¹⁹ Consul Wolff was after all Germany's man in Jerusalem. Berlin relied upon him. So did Sam Cohen.

Consul Wolff would not fail him. In yet another fortifying effort, sent three days later, Wolff sent a personal note to his colleague Kurt Prufer, who supervised the Foreign Ministry's Eastern Department. "I have become more and more convinced that Mr. Sam Cohen's way is the only one which will enable us to overcome the Jewish anti-German boycott movement," Wolff wrote. "Mr. Sam Cohen has been successful in not only provoking the interest of all appropriate local authorities and individuals for his plans, but also in obtaining the most extensive authority for implementation under [Jewish] national supervision .... This is the only way ... something can be done about the wave of boycotts." To drill home the perception of Cohen's validity, Consul Wolff added assurances that there would be no subsequent opposition to Cohen or Hanotaiah, "not from the orchard growers, or the big Zionist funds, or worker groups or from any other party."²⁰

For the moment, such assurances were essentially correct. Leading Zionist institutions, desperate for fast action in the face of the growing boycott, had indeed endorsed Cohen. On July 2, the ad hoc Conference of lnstitutions convened a meeting attended by representatives of the Histadrut labor conglomerate, the Manufacturers Association, the Organization of German Immigrants, and other official entities. These men -indeed represented official Jewish Palestine, and they reiterated their belief that breaking the boycott was the only way to save the Jewish wealth of Germany. But the men also verbalized their fear of a popular backlash. By now, the Third Reich's hot-and-cold pogrom was so heinous, and the public cries for boycott so vehement, that few could envision public acceptance of any economic liaison with Germany. The Chamber of Commerce representative reminded the gathering that in a previous session on June 6, they had voted to take no stand for or against the boycott, functionally defeating any boycott plan. The June 6 resolution had been withheld from public view following the Arlosoroff murder. But the representatives now felt they could no longer delay if German immigrants were to successfully transfer their assets to Palestine. The representatives voted to encourage a merchandise arrangement with the Reich.²¹

The next day Consul Wolff resumed his campaign. On July 3, he dispatched a letter marked "VERY URGENT" to the Reich Foreign Ministry relating the various tactics boycotters would try and credited Cohen with providing inside information. "Mr. Sam Cohen, . . . who because of his intimate knowledge of local conditions, called some other matters to my attention, ... for example ... the British and French, to exploit the difficulties experienced by German export efforts in Palestine, . . . intend to establish a clearinghouse which with the help oflocal Jewish firms would list present German suppliers and then be in a position to offer British and French substitute merchandise at lower prices. Mr. Sam Cohen informs me that Jewish [Zionist] circles to date do not favor such an enterprise, and I believe him, because Sam Cohen and his friends are strong Zionists who want to facilitate the immigration of German Jews to Palestine by way of Hanotaiah's imports .... [But] they must demonstrate that by organizing this German Palestine trade they can make a special contribution to Palestine [outweighing the value of the boycott]."²²

Wolff's July 3 letter warned Berlin how advanced the Palestine boycott was. "What is happening in Tel Aviv ... is that young men are inspecting every store, demanding to see company orders and invoices to determine the origin of merchandise."²³ The consul urged approval of his earlier request to expand Hanotaiah's transfer permission in both cash limit and in the type of merchandise allowed.

When Wolff first requested the expansion in late June, he enticed the Reich with assurances that Cohen's deal was broadly supported through port £500,000 worth of machinery, paying mostly with foreign currency. But Wolff now advised the Reich that Cohen's role as a boycott breaker was so crucial that Berlin should circumvent "national supervision" and grant Hanotaiah an outright monopoly on all German imports to Palestine.²⁴ Cohen had originally agreed to "share" his commercial ventures with publicly responsible companies such as Yakhin to avoid profiteering and engender public control. But now Cohen would share the profits and the decisions with no one.

In his July 3 letter, Consul Wolff also indicated that Cohen was no longer willing to pay any foreign currency for the special orders of machinery. The consul acknowledged that Berlin would not like this retreat, but stressed that if Germany expected to break the boycott, it should cooperate with Cohen. Wolff suggested all outstanding questions be resolved at a meeting with Cohen in Berlin on July 13.²⁵ Then expansion of the original deal, separate arrangements for machinery imports, and exact foreign-currency requirements could be settled.

"Immediately afterwards," Wolff wrote, "he plans to go to the [July 15] 'boycott congress' in London."²⁶ The implication was clear. Mr. Sam Cohen's work at Melchett's July 15 boycott conference would hinge on the deals he could arrange in Berlin on July 13.

The protest situation in England was almost a mirror image of America. The general British population was shocked and angered by Germany's anti-Jewish regime. Christian and Jewish lay and religious leaders favored strong punitive measures. His Majesty's Government preferred to remain silent, but frequently acceded to the wishes of the people and Parliament to lodge formal objections with the Reich. Yet in England, as in America, the biggest obstacle to a united protest and boycott movement was the coterie of leaders standing at the helm of the Jewish community.²⁷

As in New York, London's Jewish community was divided into an East European class congregated in the East End, and the more gentried West European, heavily Germanic families of the West End. These two groups often looked upon each other with reproach. The East Enders—working people and struggling merchants—were accustomed to noisy protests to secure their rights. West Enders preferred dignified methods of coping with injustice toward Jews.²⁸

The British counterpart of the American Jewish Committee was a small group of self-appointed gentlemen called the Anglo-Jewish Association. The seeming counterpart of the American Jewish Congress was an elected representative body called the Board of Deputies of British Jews. However, the Deputies pursued defense missions in their own sedate manner. And unlike the Congress, the Deputies were known for being either anti-Zionist or non-Zionist So, while they were indeed elected, they often did not represent popular Anglo-Jewish desires.²⁹ Therefore, in their custodial approach to Jewish affairs, the Deputies found a greater kinship with the conservatives of the Committee than with the rabblerousers of the Congress.

In the protest and boycott vacuum created by the Anglo-Jewish Association and the Deputies, there arose many grass-roots Jewish and interfaith groups determined to boycott. Such ad hoc entities as the World Alliance to Combat Anti-Semitism, Captain Webber's Organization, and Lord Melchett's Anglo-Jewish Trades Council generated a militancy directly threatening Anglo-Jewry's established leadership.

The disunity came to a climax during July 1933, when Lord Melchett's circle was determined to stage massive protest and boycott actions in London. Among the most important was the July 15 World Economic Jewish Conference. The custodial mentality of Anglo-Jewry's leaders caused them to issue statements claiming the planned World Jewish Economic Conference—and its constituent groups from thirty—five nations--was an "unauthorized" gathering of Jews to be ignored.³⁰ At first, conference organizers refused to be intimidated. They enjoyed mass support, buoyed each time they vowed publicly to hold the boycott conference with or without the sanction of traditional Anglo-Jewish leaders. But as the barrage of discrediting statements by established Anglo-Jewish leaders mounted, it became clear to Lord Melchett that British Jewry was not ready to wage economic battle with Hitler. By July 7, he was forced to announce a postponement of the conference until autumn. The official explanation cited a need for several national boycott committees to coordinate further.³¹

But Lord Melchett correctly understood that Jews alone could not execute a successful boycott. They were dependent upon winning Christian cooperation. That would be impossible as long as official Jewish organizations denounced the boycott and the boycott conference as illegitimate. It was therefore time for a showdown.

In a surprise move on July 12, Lord Melchett's representatives attended a meeting of the Joint Foreign Committee, the foreign policy arm of the Board of Deputies and the Anglo-Jewish Association. All policies on the German crisis were technically formulated through this bilateral deliberative body and reflected the decisions of the Deputies and the Anglo-Jewish Association.³² The JFC's approbation was therefore imperative.

During the meeting, Lord Melchett's advocates presented an eight-point memorandum requesting the JFC step aside and acknowledge that reaction to the Hitler crisis was solely within the purview of a special ad hoc committee to include Lord Melchett and other boycott notables.³³ If they did not wish to join the boycott, at least they could be silent while others took up battle.

Abdicating authority on the greatest emergency facing twentieth-century Jewry would not be an easy act for the Joint Foreign Committee. Zionist mittee because it promised boycott as an official policy, thus derailing hopes for a transfer to Palestine. Many of the regular Jewish leaders fought the abdication for all the known reasons of fear and caution and because it was an admission that their leadership was bankrupt.

But enough JFC members either buckled under Lord Melchett's pressure, chose to be relieved of the responsibility, or secretly backed the popular movement. After a bitter debate, a majority ratified Melchett's memorandum—six in favor, three against.³⁴ Thus, an ad hoc committee now super-ceded the established Anglo-Jewish authorities on all questions regarding Nazi Germany. The boycotters could approach the Christian community and British government as the designated and legitimate voice of Jewry, thus ending months of public disunity.

Neville Laski, president of the Deputies, and Leonard Montefiore, president of the Anglo-Jewish Association, saw Lord Melchett's coup as virtual insurrection. Indeed, the London-based Jewish Chronicle described the Joint Foreign Committee unheaval as a "Palace Revolution." And the New York-based Jewish Daily Bulletin described the confrontation as "the possible overthrow of the present leaders of British Jewry."³⁵ The boycotters accepted these descriptions and lost no time in wielding their new power. They quickly called for the Deputies to ratify Melchett's takeover of the JFC and adopt a formal boycott resolution at the Deputies' next meeting, July 16.³⁶

Neville Laski immediately swore in a press interview that if the Deputies passed Melchett's boycott resolution, he would resign at once.³⁷ But conference organizers disregarded Laski's threat. If on July I6 the Deputies ratified the JFC takeover and a boycott resoluton, it would segue perfectly into London's mass protest and boycott march planned for July 20. These formal and popular mandates would then set the dramatic and authoritative foundation for a World Jewish Economic Conference that fall to rally the world in a coordinated boycott.

At the end of the day on July 12, the Reich realized that its future might indeed soon be decided by Jews—unless somehow Lord Melchett's deeds could be undone. In this climate, German officials prepared for the next day's meeting in Berlin with Mr. Sam Cohen.