The Rise of the German Reich


In the second half of the nineteen century, Prussian Chancellor Otto von Bismarck entered into a close alliance with the House of Rothschild and the armament Krupp company, which helped him to defeat Austria and France, and unify German lands under Prussia's leadership. Then, following the example of the British Empire, he emancipated Jews in order to utilise their intellect and capital in the service of the new state. In 1869, by the Order in Council of the King of Prussia, the Jews were granted all legal rights. This completed the long process of emancipation started by Karl von Dalberg, the Grand Duke of Frankfurt in 1811 and by Prussia's first prime minister, Karl August von Hardenberg in 1812, both of whom were acting on the instigation of Mayer Amschel Rothschild. In result of the emancipation laws, many Jews returned from the exile following the 1848 abortive revolutions, beginning to assimilate into the German society, entering the military service and playing influential role as bankers, parliamentarians, journalists, entrepreneurs, theatre directors, doctors, lawyers and scientists. Bismarck advocated marriages between the German nobility and Jews in order to tie the Jewish capital with the German economy.181 He also wanted to end the country's dependency on the Rothschilds and other banks associated with the Rothschilds. Thus, he decided to create new banking institution to finance German industry and facilitate German expansion overseas. In 1870, Jewish financier associated with Bismarck, Ludwig Bamberger, created in collaboration with Georg von Siemens, the nephew of the industrialist Werner von Simens, and Adelbert Delbrück, German lawyer and businessman, a commercial and investment bank called Deutsche Bank. Its purpose was “to transact banking business of all kinds, in particular to promote and facilitate trade relations between Germany, other European countries and overseas markets.”182 Soon, Deutsche Bank became one of the four major banks in the German Reich alongside Disconto-Gesellschaft (1851), Darmstätter (1853), Dresdner (1872), which were founded or run by Jewish directors.183 From 1872-1874, Deutsche Bank spread its tentacles worldwide by establishing branches in London, Paris, New York City, Shanghai, followed sometime by South America. Bamberger had also advised Bismarck on the formation of the Deutsche Reichsbank, the first central bank of the German Reich, pegging Deutsche mark - which had been the currency of the German Reich since 1871 - to Gold and making it a stable currency. Another important banking house, M.M. Warburg & Co, was operating in port city of Hamburg since 1798. It was founded by two Jewish brothers, Moses and Gerson Warburg. Like the Rothschilds, the Warburg family intermarried with other Jewish banking families, building a web of interrelated finance and interlocking directorships. After emigrating to America, Felix Warburg, who previously went to learn the pearl and diamond business from Nathan Oppenheim in Frankfurt, married Frieda Schiff, daughter of Jacob Schiff, a banker who grew up in Frankfurt alongside the Rothschilds. Jacob Schiff became head of an investment bank, Kuhn, Loeb & Co., founded in the United States 1867 by two Jewish immigrants, Solomon Loeb and Abraham Kuhn. The partners of Kuhn, Loeb were in turn closely related by blood and marriage to other prominent German-Jewish firms, including the partners of J & W Seligman, Speyer & Co, Goldman, Sachs & Co, and Lehman Brothers. Max Warburg, who spent some time at N.M. Rothschild & Sons in the City of London was the director of the prominent M.M. Warburg & Co in Hamburg and was the main advisor of Kaiser Wilhelm II. Max's brother Paul Warburg, also trained his financial skills in the City of London, at Samuel Montagu, before becoming an adviser to U.S. President Woodrow Wilson and then co-founding the U.S. Federal Reserve – the private banking cartel. The Warburgs helped to form Commerz-und Disconto Bank in Hamburg and introduced American securities to the German market. They constituted the crucial link between the German Reich and the American corporate and banking elites.184

The German-Jewish banks played central role in the financing of the rapidly growing German industry - steel and armaments, railroads, shipping, chemicals, automobile industry - helping to transfer the family enterprises into new joint-stock corporation limited by shares, Aktiengesellschaft (AG), by merging the existing companies, facilitating take-overs and financing the expansion of the existing companies. With support of these banking institutions, various German companies formed cartels, associations of legally independent firms with the intent of influencing the market by means of regulation of price or quantity produced. For example, the coal mines entrusted the sale of their coal to the Rheinisches Westfaelishes Kohlensyndicate, who became the only buyer of the mined products and the only seller to the public. No sales to anyone else were permitted.185 Such and similar cartels soon began to define the economic and political structure of the entire country. By 1901, four hundred fifty cartels of similar structure existed in the German Reich, mostly in the field of coal, iron, electrical, chemical, textile or rubber industries.186 Whilst other countries introduced anti-trust legislation, German Reich supported formation of CARTELS. Furthermore, it formulated the patent law to enable the corporations to block patent applications or the government to use the patent in the interest of the state, refusing to compensate the inventor. The amendment to the patent statute of June 6, 1911, Reichgesetzblatt 243 provided, “If the owner of a patent refuses to permit someone else to use his invention in spite of the offer of reasonable fee and guarantee for the payment of the fee, the other person can be granted the permission to use the invention, if such grant is necessary in the public interest [compulsory license] and the permission may be granted with certain limitations or may be granted under certain conditions.”187 Many of the raw materials needed in the German industry came from new German colonies. In 1885, Chancellor Bismarck hosted a Conference in Berlin, which was attended by his private German-Jewish banker, Gerson von Bleichröder, Jewish prime minister of Great Britain, Benjamin Disraeli and representatives of France, Germany, Portugal and Belgium. The purpose of the meeting was to divide the African continent between the major European powers. In result of the agreements reached in Berlin, German Reich established colonies in Cameroon, Togoland and East and Southwest Africa and recognized Congo basin as a free-trade zone. These arrangements gave Germans access to various raw materials, such as rubber for example, which was needed for Germany's nascent industry.

Thus, in the next few decades after German unification, German companies grew rapidly supported by bank credits, state subsidies, protective tariffs and cartels, importing raw materials from the colonies and drawing from foreign inventions, often perverting the patent law. In the steel industry two firms rivalled Krupp: „Gutehoffnungshütte“ (GHH) and Thyssen AG, both of which started with manufacturing ironworks. In the electrics, Werner Siemens, in partnership with German master mechanic Johann Georg Halske, founded in 1847 the Siemens & Halske Telegraph Construction Company which specialised in manufacturing electrical telegraphs according to Charles Wheatstone's patent of 1837. The firm constructed one of the first European telegraph lines from Berlin to Frankfurt am Main, quickly expanding to other countries, and Werner was ennobled in 1888, becoming Werner von Siemen. One of Siemens & Halske' employees, a German Jew, Siegfried Marcus, an enormously versatile man, went on to live in Vienna where he made numerous inventions, including first automobile car. In 1870, he put an internal combustion engine on a cart, making it the first gasoline-powered vehicle, the “First Marcus Car”. Marcus was the holder of 131 patents in 16 countries but he never applied for a patent for the car, and never claimed inventing the car.188 It was Karl Benz and Gottlieb Daimler who brought the first car to the market. In 1886, Karl Benz patented his three-wheeled vehicle, with an internal combustion engine and electric ignition. He began to sell the vehicle advertising it as "Benz Patent Motorwagen" in the late summer of 1888, making it the first commercially available automobile in history. During the last years of the nineteenth century, Benz was the largest automobile company in the world with 572 units produced in 1899. Independently from Benz, in Stuttgart, Gottlieb Daimler, and his co-worker Wilhelm Maybach, used in 1885 their early gasoline engines on a bicycle, in 1886 on a fourwheeled (originally horse-drawn) carriage driven by a one-cylinder engine and a year later on a boat, which efforts culminated in construction of a four-wheeled vehicle in 1889. In 1890, they founded the motor company Daimler-Motoren-Gesellschaft but the company did not prosper that well until an Austrian diplomat, Emil Jellinek, the son of Hungarian-Czech Rabbi, who liked racing cars in Niece, convinced Maybach to design a new engine, to be called Mercedes, after his daughter Mercedes Jellinek. The first unit, the 35-hp racing model, arrived at the Nice train station on December 22, 1900, and was delivered to its purchaser, Baron Henri de Rothschild. The Mercedes quickly shattered all records, going 60 km/h and easily winning the competitive Nice races. With these inventions, German motor companies had become leaders in automobile industry, concluding licence agreements in France, Britain and the United States.189

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181 Emil Ludwig, Bismarck, 5th edition (Boston: Little Brown & Company Boston, 1928), p. 320 »

182 Statut der Deutchen Bank Aktien-Gessellschaft, Berlin 1870, pp. 3-4 »

183 Elon, The Pity Of It All, p. 265 »

184 Further reading: Ron Czernow, The Warburgs (An Apollo Book, 1993) »

185 Heinrich Kronstein, “The Dynamics of German Cartels and Patents”, The University of Chicago Law Review, p. 647 »

186 Ibid. »

187 Ibid., p. 653 »

188 Duncan J..D. Smith, “The Forgotten Inventor Of The Motor Car”, Vienna Review, 14 June 2011 »

189 David B. Green, “This Day in Jewish History//1889: A Luxury Car's Namesake Is Born”, Haaretz, 16 September 2013 »