Hitler's Beneficiaries: Plunder, Racial War, and the Nazi Welfare State (13 page)

Bernhard Benning of the Reichsbank attached considerable importance to revenues raised to compensate Germany for its putative occupation costs. In 1944, he cited income from conquered states as the “truly dynamic factor” in Germany’s financing of the war. “In addition to tax revenues,” Benning enthused, “ever increasing and ever more significant amounts are coming in from so-called other revenues.” Although “no running annual figures” were kept, Benning added, “the missing numbers can be estimated.” Certainly “the latest figure of 26 billion reichsmarks,” which had been communicated to him by Deputy Finance Minister Reinhardt, was “sensational.”

Benning also specified the types of revenue that had been included under the category “other”:

(a) so-called administrative revenues

, which Reinhardt puts at 5 billion reichsmarks for 1942 and which come from a variety of sources, including the national railroad, the postal service, the Reichsbank, repayment on old loans, and revenues from the Worker Mobilization Fund (previously unemployment insurance); (b). . . the war contribution of local communities, which, according to the initial estimate, brought in approximately 1.5 billion marks but which can be currently assessed at 2.5 to 3 billion marks. The vast majority of the remainder (i.e., 18 billion marks) comes in from abroad: defense contributions from the General Government, the population-based contribution from the Protectorate [of Bohemia and Moravia], and especially [payments toward] occupation costs from the conquered countries. The individual totals are not known, but an interesting figure has been communicated for France. In 1943, France had obligations of around 190 billion francs, which converts to 9.5 billion reichsmarill(One can see that via occupation and the transference of obligations we’ve succeeded to a large extent in tying the French economy to our own.)

Although the costs of war increased dramatically in 1943,
Bankwirtschaft
magazine summed up with satisfaction at the beginning of the following year: “Thanks to the major increase in ‘other’ revenues, the proportion of credit financing within total Reich expenditures has not risen. We’ve been able to keep it, again and again, under the target of 50 percent.”
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From the very beginning, a major element in Germany’s successful exploitation of occupied countries was the manipulation of official exchange rates. In France, German occupiers lowered the exchange rate for 100 francs from 6.6 to 5 reichsmarks—a devaluation of just under 25 percent. This automatically raised soldiers’ salaries, which were paid in francs but calculated in reichsmarks. (The franc would, of course, have inevitably become softer under German occupation, but even in late 1942 the exchange rate in Zurich was 16 percent higher than the one set by German occupiers.) Similar action was taken with the establishment of the Protectorate of Bohemia and Moravia. The Czech crown remained the official currency but was devalued by a third.
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In 1939 the Reich also intervened in Poland and in 1943 in Nazi-occupied northern Italy, where the exchange rate between the lira and the mark was lowered from 100 to 13.1 to 100 to 10. But even that is dwarfed by the 470 percent devaluation of the Russian ruble in 1941.
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Those responsible for the new exchange rates knew exactly what they were doing. Privately, they acknowledged that the reichsmark was “greatly overvalued in comparison with [other] European currencies.”
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Currency manipulation benefited both the German economy and individual Wehrmacht soldiers in their role as consumers in the occupied countries. At the same time, exports from Germany, which these countries had often come to rely on as a result of the war, became more expensive, while imports to Germany were made cheaper. Because Germany was forced to import increasing amounts of both raw materials and finished products in the course of the war, balance of trade became a problem—but only theoretically. A significant portion of the goods occupied countries were required to export to Germany were paid for, in direct contravention of the Hague Conventions, out of those countries’ own budgets for occupation costs. The remainder were purchased with notes of credit drawn on a state “clearing account”—in other words, they weren’t purchased at all.

Clearing accounts were central bank accounts set up by states in the 1930s for clearing their balances of imports and exports. Under the system, exporters received payment in their native currencies from a state bank, while purchasers paid in their own currency to a state institution in their home country. Such transactions, usually between private exporters and importers, were then entered into clearing accounts, which were settled at regular intervals between the states in question. In World War II, the German government exploited this established system to acquire billions in interest-free loans from creditor nations. Financial experts at the time described the transactions matter-of-factly as “coerced one-sided loans” to Germany’s advantage.
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According to a declaration by the Reich Credit Bank (Reichkred-itkasse) on July 10, 1944, Germany had amassed almost 29 billion marks in debts to occupied, allied, friendly, and neutral states as of June 30 of that year. Of this amount, 14 billion marks were owed to France, Belgium, and Denmark alone. Holland, the General Government of Poland, and the Protectorate of Bohemia and Moravia had been forced to buy German war bonds worth almost 13 billion marks. The declaration also addressed the scope of other revenues:

According to estimates from the “Research Group for Military Economics,” which [Reichsbank] vice president Pohl discussed in greater detail at the meeting on July 10, 1944, the total contribution of goods and services from the occupied territories during the first four years of the war amounted to some 70 to 80 billion reichsmarks. The amount for the first five years of the war can therefore be set at between 90 and 100 billion. Contributions brought in via clearing transactions account for almost a third of the total. It is plain from this how important it is in the final phase of the war for us to preserve, as best we can, the willingness of the occupied countries to make contributions.

By that point, Germany was no longer in a military position to loot the Soviet Union to repay its war debts, as a plan drawn up in 1941 had envisioned. So the directors of the Reichsbank set out to devise ways to foist Germany’s foreign debts onto its creditors. To this end, they drew up a list of “substantial, still unfulfilled demands” that the Reich would present “to the occupied territories” upon the signing of peace treaties, for occupation costs Germany claimed to have paid in advance.
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The Finance Ministry’s proposals for eradicating Germany’s foreign debt ran along similar lines. According to Finance Ministry documents, war costs that Germany had incurred, such as “wages, family support payments, and expenditures for train cars, vehicles, uniforms, weapons, etc.,” were to be “reckoned up” with the defeated nations of Europe.
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In an effort to placate his creditors, Reichsbank president Funk characterized Germany’s exorbitant foreign debts as “an investment that will retain its value.”
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GERMAN SOLDIERS were paid in the currency of the country where they were stationed, and they were instructed to spend their wages there to reduce inflationary pressure at home. For the same reason, soldiers’ families were encouraged to send or wire them money to buy available goods, many of which were then sent back to Germany. What was available for purchase varied from country to country.

Many units on the Russian front had limited opportunities to spend their paychecks. They transferred the surplus back to the Reich, much to the dismay of the top administrators at the Reichsbank, who condemned the practice in the strongest terms. “When such monies are transferred home,” wrote one administrator, “the unused spending power of soldiers in the East manifests itself as increased consumer spending power in the Reich.”
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But civil servants responsible for war finances soon came up with a remedy. Under the pretense that war-weary troops needed rest and relaxation, soldiers on the Eastern Front were assigned at regular intervals to Western Europe, especially to France. There, the troops were given the opportunity “to live somewhat more luxuriously in compensation for the hardships they had endured.”
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Military pasters ensured that the soldiers were able to exchange surplus rubles for Western currencies. A high-ranking medical officer reported from France in the fall of 1942 that the troops arriving from the East, as well as members of the navy, “have spent an unimaginable amount of money frequenting bordellos and streetwalkers.” A second Wehrmacht medical officer remarked somewhat more prudishly in January 1943 that “the copious savings” that the eastern divisions had at their disposal were leading to “the frequent introduction of harlots from the immediate and general vicinity into the [soldiers’] accommodations area.”
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In this way, the surplus spending power of soldiers in Eastern Europe was diverted not to Germany but to France. German war financiers also manipulated the exchange of rubles into francs so that France ultimately paid for German soldiers’ bordello visits, while the exchanged rubles flowed into the Reich’s war chest.

As a rule when German troops occupied a country, they initially procured what they needed with Reich Credit Bank (RKK) certificates, switching over only later to the invaded country’s native currency. RKK certificates looked like paper money and were issued in denominations ranging from 50 reichspfennigs to 50 reichsmarks. Thanks to this military-issued surrogate money, German troops did not have to directly confiscate goods from citizens of occupied countries and spared themselves the time-consuming task of issuing requisition receipts, as required by the Hague Convention. This arrangement offered several advantages: German troops remained mobile, and the profit motive was preserved among the population. It also avoided the “humiliating and emasculating effects of requisition [upon subjugated peoples].”
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RKK certificates were issued and printed by the Reichsbank, but they were not legal tender in Germany.
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They were, as Reichsbank vice president Emil Puhl put it, “requisition receipts disguised as money.”
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This may have been true for the Germans, but for the recipients they functioned as currency. Therein lay their greatest advantage.

Occupied France was a case in point. Businesses and private citizens had no objection to accepting RKK certificates because a decree had been issued compelling French banks to exchange them for francs.
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Individual banks swapped the certificates for hard currency from the Banque de France. That institution was then required to turn them over to the Reich Credit Bank in Paris, the hastily established German financial center in occupied France. But since the French national bank received nothing in return, it had no option but to print more francs or join with the French financial administration to procure funds elsewhere. The RKK certificates allowed Germany to plunder occupied Europe—and set in motion a succession of problems associated with Germany’s conscious decision to export wartime inflation.

After passing through the Banque de France, the RKK certificates returned to the paymasters of the Wehrmacht and could be used to procure more goods and services for occupying troops. They were continually in circu export wa but left no paper trail, in contrast to traditional requisition receipts for confiscated goods.
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The beauty of this procedure, from the Reich’s point of view, was that it meant minimal bureaucracy for German military administrators. French citizens, from whom the Wehrmacht requisitioned horses, foodstuffs, and fuel, received a form of currency they trusted as soon as they turned in the certificates. As a result, they suffered no direct personal losses, since the wartime dispossession of individuals was coupled to the general circulation of money. The currency strategists in the Reichsbank thereby achieved their goal of distributing the burden of requisitions “to the general public by introducing Reich Credit Bank certificates into the circulation of money within the country.”
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German bayonets forced the defeated enemy to accept ultimately worthless pieces of paper as a de facto equivalent of their own currency. The damage to the French economy was scarcely noticeable at first, while the German economy earned a tidy profit.

Normally, German occupation authorities took RKK certificates out of circulation shortly after the formal cessation of hostilities. This was true, for example, in Denmark, where once peace had been declared the occupied country’s own currency became the sole legal tender again. But the Reich chose a different strategy in France, in defiance of “the understandable wish” of the Banque de France that “the Reich Credit Banks, which operate like central banks with their own currencies, be dissolved in the none-too-distant future.”
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The explanation for this exception was the German desire to purchase the great variety of French consumer products.