Chapter 5 Germany in World War I
The German wartime commercial policy for the start of World War I was constructed on the assumption that Britain would completely disregard neutral rights, severing Germany from world trade for the duration of the war. This assumption of a world with no neutral rights does not match theoretical expectations as Britain had respected neutral rights in its previous wars and the United States, a powerful neutral, was well known for enforcing neutrality when belligerents strayed too far from neutral rights. However, Germany’s initial wartime commercial policy did match theoretical expectations for a policy designed for a world without neutral rights. German leaders turned their attention toward the aggregation of domestic stocks in necessary foodstuffs and raw materials to last the nation through the expected short war, focusing the wartime commercial policy on preventing the export of products required for domestic survival.
Once the war started, German leaders were surprised to discover that trade through neutral countries remained a possibility, and they had to resolve the fundamental problem of trade with the enemy. With initial expectations of a short but high-stakes war, Germany created a wartime commercial policy that matched the predictions of the wartime trade theory. Germany prohibited trade mostly in products with short conversion times. But at the same time, they did not make special allowances to protect trade required for domestic industry, focusing on surviving the current war over the needs of long-term security. The German priorities were on resupplying the military and feeding the domestic population, even at the cost of sacrificing trade necessary for domestic industry. As the expectations of the length of war increased, prohibitions on trade expanded considerably.
The assessment of German wartime commercial policy also demonstrates how a state reacts to a sudden change to short war expectations after years of fighting. At the start of 1917, Germany was facing considerable foreign-currency shortages and domestic unrest due to food shortages, but the introduction of unrestricted submarine warfare convinced decision-makers that the war could be won within six months. As the wartime trade theory would suggest, the return to an expectation of a short but high-stakes war after several years of fighting led Germany to permit some carefully controlled wartime trade. They introduced a daring scheme: carefully controlled direct sales of militarily significant products to enemy states at hugely exaggerated prices. The additional foreign reserves helped Germany prosecute the war, while the short war expectation reassured leaders that the enemy could not benefit militarily from this scheme.
This chapter addresses the formation of Germany’s initial wartime commercial policy, zeroing in on the expectations of the British violation of maritime neutral rights and the resultant total naval and land blockade of German trade. It also shows a plausible alternative wartime commercial policy Germany might have adopted if it expected world trade to be possible during the coming war; this policy looks incredibly similar to Britain’s. The chapter then traces the changes in war expectations during the course of the war before focusing on the corresponding changes in the German wartime commercial policy, with a specific spotlight on the dye works industry as an illustrative example of the effect changing expectations had on permission to trade with the enemy.
Formation of Initial Wartime Commercial Policy
While German leaders did not prepare a general wartime commercial policy template that could be adopted as need arose, they did expect the policy to change based on their expectations of the coming war. Their expectations of the coming European war practically absolved them of the need to determine such a policy. German war planning was based on the unwavering belief that Britain would not only blockade all their ports but also break international law by disregarding neutral rights. Combining the expected British actions with anticipated land blockades by Russia and France, Germany predicted that it would not be able to trade with the rest of the world during the war. It prepared for a war of complete isolation. However, even amid these starting assumptions and conclusions, German leaders still wrestled with how to balance economic and security imperatives during the war. Moments of political crisis before World War I demonstrate how Germany would have approached trade with the enemy if they had expected there to be any possibility of it.
war expectations determine the wartime commercial policy
Preparing for the economic aspects of the coming European war, German leaders started with the premise that their wartime commercial policy would have to match the expected type of war. Problematically, they did not believe that the coming war would be like any other Germany had fought.1 During the Napoleonic Wars, Prussia was a mostly agricultural nation and could withstand the suffering of war because it could feed itself. An industrial state, like the German Empire, could not endure the same pressure.2 The Austro-Prussian War of 1866 was fought so quickly that the working life of the nation was not affected to any great extent. The Franco-Prussian War of 1870–71 was fought on French territory, and Germany itself was not under threat of enemy troops after the first few weeks.3 In both wars, German access to food and raw materials was unencumbered either by land or by sea.4 All of these factors—the length of the war, the stakes of the war, and the importance of industry to the economy—affected the wartime commercial policy Germany would need to create for the coming European war.
The exact nature of the enemy would necessarily affect wartime commercial policy. For example, a war against a European power meant an immediate German export ban on grain.5 A war against a European power was much more likely to carry high stakes, and Germany would need to ensure its population’s access to food. Similar precautions would not be necessary in a war against a state that was not a great power.
Moreover, given Germany’s location in Europe, the composition of the enemy coalition and the states that would maintain neutrality were of paramount importance.6 Neutral states provide indirect routes for commerce with both friendly and, when desirable, hostile states. In the absence of nearby neutral states, such avenues would be cut off. Considering the possibility of an industrial state entirely shut out of world markets, Germany expected that large enough strategic stockpiles would allow them to prosecute a short war. At the same time, it was understood that a long war would have catastrophic effects on the German economy.7 In the event of a major European war, the question of whether exports from Germany would be possible would condition the scope of a wartime commercial policy: without exports, there would be no new foreign currency, which would mean no new imports.8
Unlike their British counterparts, German leaders did not create a general template for a wartime commercial policy, instead designing only the specific plan for the war they expected to fight. And their expected scenario was rather grim. At the November 1912 meeting of the Economic Mobilization Committee, the military representatives indicated that in the event of war, the most unfavorable conditions would have to be reckoned with.9 Their assumed war conditions saw the Triple Entente opposed by the Triple Alliance, complemented by a blockade of the North Sea and a blockade of the entrance to the Baltic Sea. They assumed that a passage through the Baltic Sea to Denmark and Sweden would remain open.10 After this meeting, all economic planning was based on the expectation of a war between the Triple Alliance and the Triple Entente.11
Furthermore, Britain was expected to impose a full blockade against Germany. The German chief of the General Staff, Helmuth von Moltke the Younger, in a February 1914 assessment, pointed out that the majority of German sea imports passed through the Strait of Gibraltar and the English Channel, both of which Britain could easily close to traffic headed to Germany.12 Indeed, the coming European war was frequently referred to as a three-front war—France on one side, Russia on another, and a British blockade on the third.13
Worse, from the point of view of wartime trade, Germany expected Britain to disregard international law and ignore neutral rights. Ships flying neutral colors would not be safe transporting German products. Germany even expected that neutral products—they were most concerned about grain—transported on neutral ships to neutral ports would automatically be suspected of potentially ending up in Germany and thereby would be confiscated by the British navy.14 Under the dominant standard of international law at the time, based on the Declaration of London, both types of transfers were protected from enemy capture. Yet Germany had no expectation that Britain would respect such neutral rights.15 Interestingly, German leaders did not hold similar views about other European belligerents. In a proposed scenario where Germany faced only France and Russia, and not a British blockade, Germany expected to be able to continue with its world trade. Even the most problematic issue of grain imports was said to depend on how France and Russia chose to position themselves on the question of contraband.16 Only Britain was expected to disrespect neutral rights.
Germany, on the other hand, was not prepared to break international law, even to make wartime resupply more plausible. It rejected a proposal to have German merchant ships conduct trade under a US flag.17 The London Declaration concerning Laws of Naval War (1908–9) required that a ship switch flags at least sixty days before the outbreak of a war for the new flag to cover the merchandise on board.18 Unless Germany could somehow predict exactly when war would break out, its merchant ships could not legally sail under the flag of a different nation. Even if German ships were to make the switch in time, Germany doubted that Britain would adhere to these provisions of international law.19 The expected outcome of an attempted switch was the destruction of the German merchant marine by the British navy.20
Amid these expectations about maritime neutral rights, Germany was preparing for a short but high-stakes war where it would be entirely cut off from world trade.21 Seaborne trade, which accounted for around three-quarters of the German imports,22 would be severed by the British blockade and would not be allowed to continue through neutral states. Trade by land routes was also expected to cease because of the large number of belligerents. Russia and France would be inaccessible because of the battlefronts, though it was assumed that these countries would sever wartime trade with Germany.23 Austria-Hungary, also facing increased wartime demand, would absorb the war matériel of its neutral neighbors, leaving little available for Germany. Switzerland and Italy would face the closure of supply channels through the Mediterranean and would be unlikely to have matériel to offer Germany.24 The remaining states, if they maintained neutrality during the war, would have to focus on managing their own needs and would have little supply left over to help with the German wartime demand.25 German exports were also expected to stop, once again because of the anticipated British violation of neutral rights.26 In a war fought against three fronts, “the supply of raw materials and semifinished products as well as the export of manufactured goods would be almost completely paralyzed.”27
The only expected possibility for engaging in world trade of any kind during the coming war was imports from the United States, through an indirect route. It was the only state that could defend its neutrality against Britain. Consequently, Germany expected the United States to be the only state to actually have the maritime rights of neutrals to trade with all belligerents.28 If the Netherlands remained neutral during the war, there was the possibility of using it to import US goods—again Germany was most concerned about grain at this point.29 This plan was not without its problems. Most of the Netherlands’ peacetime trade was conducted on British merchant ships, which would not be amenable to smuggling US grain to Germany.30 There were too few Dutch and US ships to allow for Germany to rely on imports from the US.31 Additionally, England and France could claim the right of first refusal on food carried in US ships, preventing it from reaching the Netherlands and therefore Germany.32 In case the Netherlands did not remain neutral during the war, the military administration made plans with individual suppliers in Sweden to attempt importing US grain through that route. However, these arrangements could not extend to feeding the German population.33
no neutral rights = no world trade = stockpiles
Expecting to be severed from world trade and dependent entirely on its own supplies for the duration of the war, Germany had only one solution: the accumulation of strategic stockpiles. Summarizing this approach, a report from the Ministry of Finance stated, “If foreign trade fails as a result of enemy measure, nothing can be achieved with money or weapons alone. The blockade can only be countered with the accumulation of supplies.”34 The goal of a wartime commercial policy, under the expectation that no global trade would occur during the war, was to prepare the country to withstand the autarky that would be imposed on it. Practically, this meant supplying the military with food and ammunition, feeding the civilian population, and ensuring that the domestic industry had access to raw materials. These three goals were treated in the following order: military needs were prioritized, civilian nutrition took second priority, and industrial concerns were largely avoided until and unless there was time to address them. Acknowledging domestic industry as a significant concern yet placing it third on the priority list is not inconsistent with the wartime trade theory. As Germany expected to lose access to global markets for the duration of a short war, and as state coffers are not endless, supplying the military and preventing the population from rebelling because of starvation were shorter-term necessities compared to industry’s use of raw materials.
The accumulation of strategic stockpiles was acknowledged as a short-term solution fit for a quick war. The stockpiles of products not produced domestically or lacking sufficient domestic supply to cover national demand set a hard limit to how long a country could survive autarky. Purchasing enough supplies for a whole country to last a significant amount of time came with an astronomical price tag. When asked to consider such a strategy to be enacted in times of political crisis, the Reich Finance Administration refused for reasons of infeasibility.35 Other adopted solutions for an increased domestic supply came with long-term consequences. For example, Germany expected to make up the shortfall in meat stocks during a war with increased animal slaughter.36 In the short term, this presented an excellent solution to two problems. The animals competed with the human population for grain, so fewer animals meant not only more meat for civilians but also more grain. However, in the long term, the decreased domestic livestock created all sorts of food shortages.37 A certain amount of required products were expected to be kept in the country through export bans.38 While doing so increased the country’s resilience to a complete blockade in the short term, it also meant sacrificing lucrative foreign trade and limiting access to foreign currency, which would be problematic in the long term.
Even as a short-term solution, for the government to be ready to implement it, they needed an accurate picture of the level of domestic stocks in the necessary products. In lieu of an economic assessment of peacetime trade with expected enemy countries, Germany focused on an assessment of its stockpiles. The Economic Mobilization Committee immediately ran into a problem: the lack of aggregated national statistics with which to make reliable policy. Because of the federal nature of the German government, special laws had to be introduced to enact statistical inventories of the national grain supply and consumption.39 The annual census was relied on for livestock numbers.
Information on the level of stocks of industrial raw materials was not available, and considerations for gathering this information tended to fall by the wayside.40 Given the short war expectations, the government’s primary focus was on feeding the population. While the needs of industry were acknowledged, they were frequently relegated to later discussions. When the military representatives at the Economic Mobilization Committee pointed out that organizing industry for the war effort was an important question for economic mobilization, the chair of the committee waved the concerns aside to be dealt with after the more important food question was discussed.41 Likewise, industry actors were not allowed to interfere in the formation of the wartime commercial policy, which remained the prerogative of the state. When representatives of industry suggested putting together a permanent advisory council of experts, the secretary of the interior, Clemens von Delbrück, decided that there would be no practical value to such an initiative and that the Economic Mobilization Committee would be better able to address all relevant questions.42
Ultimately, though, the government relied on a self-assessment from representatives of different industries to determine the available level of domestic stockpiles. Most industries could survive for about three weeks on stockpiled raw materials. The fortunate exception was the mining industry, which expected necessary stocks to last anywhere from six weeks to a couple of months. The textile industry expected raw cotton to last three weeks and wool for three to four months, but English yarn would disappear in two to three weeks. The chemical industry expected raw materials to last them no more than three weeks.43 To some extent, the government expected industrial raw materials to last longer than the industry suggested; production would decline because of the loss of labor to the war, and sales would decline because of the foreign-imposed loss of exports.44 However, the overall conclusion was much more brutal: “It will not be possible to avoid the fact that individual weak companies will not be able to withstand the stress test of a severe foreign war.”45 Preparing for a war that would sever the country from all world trade and facing the need to strategically allocate national spending, Germany decided to prioritize security concerns and hope that the war would be short enough not to disrupt the economy too greatly. In a world without neutral rights, domestic industry was expected to be severed from foreign suppliers and markets no matter what commercial policy Germany chose.
The wartime commercial policy, designed for the start of the European war, thus consisted of one goal: increasing the number of necessary products within the borders of the state before the war removed all commercial contacts with the rest of the world. The main instrument for accomplishing this goal would be the export ban. At the start of the war, six categories of products would be prohibited from leaving the territory of the German Empire; even trade with neutral and friendly states would be prohibited. However, the chancellor would be given the authority to make exceptions and permit trade as necessary.46 The six categories were (1) provisions and animal feed; (2) animals and animal by-products; (3) weapons, ammunitions, and articles of war; (4) railroad equipment and radiotelegraphy for airships and motor vehicles; (5) bandages and medicine; and (6) important industrial raw materials.47
But not all products covered by these categories would face prohibitions. The wartime commercial policy was more nuanced and was set at the product level. Separate lists of specific products prohibited from export under each category would be announced at the start of the war. For example, the industrial raw materials were expected to include cotton, wool, flax, copper, coal, coke, petroleum, iron ore, wood pulp, tar oils, rubber, and jute.48 Other metals or fibers would not face similar prohibitions. In further consideration of the economic impacts of the policy, it was agreed that the export bans would not be used unless mobilization was announced, that is in times of political crisis potentially preceding war.49 Such an interruption to commercial traffic was judged too great to be justified, even to prepare for a European war.
To supplement the export bans, changes to the tariff schedule to make imports of necessary food items cheaper were considered but largely dismissed as ineffective. German leaders did not believe Britain would permit any state—neutral or otherwise—to import anything into German ports.50 Additionally, the outbreak of war was expected to cause prices on all necessary products to increase substantially, so much so that import tariffs would not be seen as an impediment to trade.51 Thus, removing import tariffs would not produce much of an effect except in the event of a long war, after prices had a chance to stabilize.52
The final aspect of the wartime commercial policy was preparing to smuggle US grain past the British blockade and into Germany through trusted vendors in either the Netherlands or Sweden, whichever remained neutral during the war.
minimal concerns about “wartime” trade with the enemy
While discussions of wartime trade with enemy states were not a prominent feature of Germany’s preparation of a wartime commercial policy, at least one part of the proposed policy—export bans on war-related materials—was directly related to concerns of supplying the enemy. Moments of political instability short of war illuminate how German leaders approached the fundamental problem of trade with the enemy.
The First Balkan War (October 1912–May 1913) was cautiously observed by the European powers because of its potential to escalate into a wider European conflict. In this period of heightened political tension, the Army Administration requested continuous and rapid information on the exports of rye, wheat, barley, oats, rye flour, bran, edible beans, peas, lentils, beef cattle, sheep, pigs, and hard coal to all of its neighboring countries, except Austria-Hungary.53 They wanted to know if anyone was stockpiling food and coal for their troops in preparation for war. But more importantly, they wanted to be informed of any large consignments on behalf of the French or Russian governments, keeping track of who was to receive the products, which German suppliers were tasked with the delivery, and who in Germany was to act as an intermediary for the foreign governments, if such information could be discreetly gathered.54
For these potential enemy states, the Army Administration requested that, in addition to the grain, fodder, animals, and coal, trade in specific war materials be monitored. This list included forty product descriptions: six product descriptions under the category of weapons and ammunitions, including both land and naval weaponry; ten product descriptions of articles for the manufacture of weapons, focusing on semifinished parts of weapons and ammunition like raw stock wood for handguns and metal cases for cartridges; nineteen product descriptions of war-related chemicals; and finally mobile ladders, automobiles, telescopes, and two different types of compasses.55 Basically, the concern was with potential enemy states receiving finished or nearly finished products of immediate battlefield utility.
The Imperial Statistical Office did find that France, Russia, and England were purchasing military supplies in Germany. Russia was particularly interested in acquiring automobiles, searchlights, and field railroads. England was purchasing shrapnel shells.56 And France absorbed all the hard coal and hard coal coke it could get.57 When discussing what to do about these purchases, German leaders ran into the fundamental problem of trade with the enemy. On the one hand, the General Staff stressed the urgency of preventing such shipments in times of heightened political tensions.58 If a war with France and Russia was about to break out, increasing the enemy’s military arsenal was a bad idea. Representatives of the War Department, however, pointed out that the Army Administration “had a great interest in promoting the industry of war materials by supplying them to foreign countries.”59 As industries related to war production were essential to the security of the state, maintaining their exports contributed to the domestic growth of the industry (ensuring that Germany would be well supplied in wartime), increasing state income, and potentially provided the state with some political leverage over the customers. The economic and security imperatives pulled in opposite directions.
The ultimate decision was not to impose export bans even on highly sensitive products in situations short of war because doing so would damage the industry and could alarm the public.60 With the legal method of forcing nondelivery of war material to potential enemy states sidelined, it was agreed that in very select cases—the Treasury would not agree to more—the government would purchase the war materials meant for enemy states, preventing delivery to the enemy and sparing the industry.61 This plan was of dubious legality, as the commercial contract with the original consignee would still have to be violated. The official statement of policy for how to handle incidents of prewar trade with the potential enemy was equally noncommittal: “When the Reich Chancellor declares in times of political tension that a war is to be expected in the near future into which Germany will probably be drawn, it is in the interest of national defense that ways and means be found to deprive our probable adversaries of the war material ordered by them in Germany.”62
Interestingly, when the First Balkan War ended and the political situation calmed down, the General Staff decided that they no longer needed to be kept informed about sales of war-related materials to foreign states.63
The German experience during this moment of political crisis provides a window into what their wartime commercial policy might have been if they expected a different type of war. If German leaders were planning for a war where world trade would continue and questions of wartime trade regained relevance, their main focus would be on preventing the enemy from receiving food, military equipment of immediate use on the battlefield, and supplies that increased the mobility of the army. Trade with the enemy in other products would not have caused much consternation. In essence, with the exception of food, the policy would be similar to the one adopted by Britain for the beginning of World War I.
adopted wartime commercial policy for the start of the war
The wartime commercial policy adopted by the German Empire at the start of World War I largely reflected what was discussed in the planning process. On July 31, 1914, export and transit bans were announced across seven categories of products.64 The planned railroad equipment category was split into two: (1) railroad materials, including telegraphs, airships, and vehicles, and (2) motor vehicles and petroleum. However, no actual products were prohibited under the motor vehicle category at the start of the war, and by August 31, the category was again merged with railroad materials.65 The second difference was the change of the planned “industrial raw materials category” to “raw materials used in the manufacture of war supplies.” The focus of the prohibitions was more narrowly applied to the development of military capabilities.
The first product prohibited from export from the German Empire was pigeons.66 Beyond that, the initial prohibitions covered fourteen product descriptions under the category of animals and animal by-products; seven under food and animal feed; forty-five under weapons and ammunition (closely resembling the list the Army Administration drew up for additional information in times of political tension); fifteen under railway materials; thirteen under raw materials used in the manufacture of war supplies; and eighteen under bandages and pharmaceuticals.67 The specific products prohibited from export were selected “by reasons of military security and preservation of raw materials and goods necessary for warfare, as well as care for the protection of the stock of food and fodder.”68 Additionally, some thought was spared for the raw materials necessary for the preservation of economic activity under blockade. Fifty more product descriptions were added in the first week of the war, most of them under the weapons and ammunition category.69 While all of these prohibitions prevented the export and transit of products across the German Empire, on August 1 transport on the Rhine from Basel to the open sea was permitted.70
On August 4, 1914, the day Britain declared war on Germany, the Bundesrat was authorized, for the duration of the war, to exempt food products from customs duties. Although this measure was not expected to significantly increase domestic stocks, on the same day, the import facilitation of many food products was announced, and for some reason, petroleum was included.71 The sources—friendly, hostile, or neutral—of the food products that could be imported into Germany were not differentiated.
At the same time, all enemy states lost their most-favored-nation status in relation to the German Empire.72 Enemy products imported into Germany would be subject to higher general tariff rates and would thus be more expensive than substitutes. However, this change came with many exceptions, the largest of which was that enemy products imported from a country with most-favored-nation status—through indirect trade—would still be subject to the most-favored-nation tariff rates.73 The practical effect of this change was to increase the transportation time of all enemy products to Germany by directing them through a neutral state first. And, on the off chance someone chose to import enemy products into Germany directly, the German government would receive higher revenue.
Perhaps most significant, however, were the prohibitions absent at the start of the war. No prohibitions were made on direct or indirect payments to enemy states or on direct or indirect trade with enemy states. Such a free-trade approach to wartime commercial policy is not the expected one for a world with no neutral rights. Perhaps this signifies that the conventional wisdom regarding wartime trade has exceptions even in a world without neutral rights, where it is expected to hold most strongly.
This policy decision may be explained by Germany’s expectation that it would be severed from world trade on all sides. Since no trade would be physically possible, they did not need to trouble themselves with definitively prohibiting wartime trade. However, this same reasoning would make the export and transit bans, not to mention the import facilitation, likewise pointless. Why prohibit the export of some products and facilitate the import of others if world trade was completely cut off? Why make the effort to draft those laws but leave wartime trade untouched?
In a similar vein, the absence of prohibitions on wartime trade could plausibly be explained by the infrastructural challenges that accompany large-scale mobilization. German train timetables were strictly regulated to move the army to the battlefront. After the military necessity for rail traffic relaxed a bit, the trains were to be dedicated to supplying food to urban centers.74 Thus, at least for the first period of the war, commerce would not be possible for lack of transportation. This explanation suffers from the same problem as the first: Why would German leaders bother to impose export bans and import facilitation if no trade could take place? It could be that German monadic preferences for a wartime commercial policy, generated on the basis of their own expected adherence to neutral rights, helped shape a free-trade policy, which German leaders did not expect to yield practical results because of the expected British violation of international law.
While there are no deliberations to explain why Germany adopted a mostly free-trade approach at the start of the war, their initial wartime commercial policy does look very similar to the one used by Britain. Products that were quickly convertible into military capabilities were prohibited from wartime trade, while everything else was allowed.
Changes in War Expectations
Germany expected a high-stakes but short conflict, for which they were largely prepared with their initial wartime commercial policy of domestic stock aggregation. After the first six weeks of the war, German leaders realized that the war would be longer than expected. They also realized that world trade was, indeed, still available to them. The only prewar expectation that served them well was the expectation of a high stakes war. Throughout World War I, German expectations were not as turbulent as British ones. After the initial expectation of a short war dissipated, Germany came to expect a long conflict, with one expectation in 1917 for the introduction of unrestricted submarine warfare.
expected length of war
Like the rest of the belligerents in World War I, German leaders expected the coming European war to be short.75 For Germany, specifically, a short war was perceived to be necessary, else it would face an encircling coalition of a two-front war against two great powers backed by the might of the British navy. To address this, the adopted Schlieffen Plan called for a swift defeat of France while Russia was still mobilizing its troops, after which the German armies could turn on Russia. Moltke expected to finish the French part of the strategy within six weeks.76 The goal would then change to destroying the Russian field army and forcing Russia to request peace negotiations.77 Combined, the war was expected to last no longer than three to four months.78
Matching this expectation, at the start of the war, the Reichstag passed war credits to fund the effort for only a few months, when victory was expected.79 The army drafted about 28 percent of the male workforce, on the basis of industry assessments indicating that, in the short term, such reductions in labor would not greatly affect industrial efforts.80 Most telling of the German expectation of a quick victory, when the German Admiralty confidently proposed interdicting the transfer of British troops to the Continent by sea, Moltke rejected the idea, preferring to defeat the British army on the ground along with the French forces.81
The First Battle of the Marne (September 6–10, 1914) was meant to be the decisive battle of the war.82 When the Allies managed to stop the German advance, they prevented Germany from claiming a quick victory.83 Losing the battle indicated the failure of the Schlieffen Plan.84 Knocking one opponent out of the war to ensure ample time to focus on the other was no longer an option. At the same time, the recent success against the Russian Second Army, commanded by Alexander Samsonov, at the Battle of Tannenberg (August 26–30) did not prove greatly influential, as the Russian forces continued to make advances on the eastern front that required greater German reinforcements.85 As early as mid-September 1914, Germany found itself embroiled in a two-front war, which no one knew how to win quickly or easily.
As for their opponents on the other side of the trenches, the expectations of a short war died completely with the end of the Race to the Sea (September 17–October 19).86 With both sides digging in for the long haul, November brought stalemate and exhaustion.87 Erich von Falkenhayn, who replaced Moltke as the chief of General Staff, presented the government with two options: make peace on either one of the two fronts or prepare for a very long conflict.88 In a meeting on November 18, Falkenhayn and Theobald von Bethmann Hollweg, the imperial chancellor, agreed on the idea that would dominate the rest of the war: Britain was Germany’s main adversary, and as long as Britain’s alliance with France and Russia held, there could be no victory.89 A two-front war would be long and more likely to lead to German exhaustion than to success. Falkenhayn proposed, and Bethmann Hollweg agreed, to attempt peace negotiations with Russia, in the hope that this would place greater pressure on France to follow suit.90
By the end of January 1915, Falkenhayn ordered the western front fortified to hold with smaller numbers for a long period of time, to shift greater efforts to the East.91 The German commander on the eastern front, Paul von Hindenburg, insisted that given enough men, he could win in the East, though even Hindenburg did not make optimistic predictions of how this would affect the western front.92 Falkenhayn believed that the Russian front was too large for a quick victory, but he was in favor of imposing costs to drive Russia to negotiation—an inherently long-term strategy.93
Even successful offensives in the East did not change the expected length of war. In the Gorlice-Tarnów offensive (May 2–June 22, 1915), Germany and Austria-Hungary destroyed Russia’s Third Army and made quick advances into Russian territory.94 However, Russia was not out of the fight, and it was well understood that chasing its army deeper into Russia was not a viable solution.95 Farther in, the Russian determination to resist would strengthen and its supply logistics become easier, while the invading army would face the exact opposite conditions.96 By the end of 1915, the German General Staff came to the conclusion that a breakthrough in the East was impossible.97
The one glimmer of hope in 1915 came in February, when Germany introduced unrestricted submarine warfare.98 The state was initially optimistic that the policy would end British participation in the war within six weeks.99 However, the efforts failed to do much damage to British shipping and adversely affected the German relationship with the United States. The program was halted in September to avoid drawing the United States into the war.
The expectations of 1916 were much the same as the previous year, except this time France was singled out for attrition.100 The goal of the Battle of Verdun was to impose such costs on France that Paris would have no choice but to sue for peace, which was predicted to occur by the summer of 1916.101 However, by that summer, casualties had piled up on both sides, yet France was no closer to calling for peace talks. On the eastern front, in the meantime, Russia’s Brusilov offensive (June 4–Sept 20, 1916) retook territory.102 Additionally, the Allies convinced Romania to join the war effort against Germany. Both were unwelcome developments for Germany.103
At the end of August, Falkenhayn was replaced by Hindenburg as the chief of the General Staff. On the day of his promotion, Hindenburg wrote to the minister of war insisting on trebling the production of machine guns and artillery and doubling the production of munitions for the spring of 1917.104 He did not expect to engineer a quick victory. Indeed, the German army was in an unenviable position. Moving troops from either front to strengthen the other meant creating a very real probability of breakthrough.105 By the fall of 1916, offensive operations in the West for 1917 were ruled out, and the focus was reoriented to defense.106 Hindenburg wanted to straighten out the defensive line so it could be held with fewer forces.107 The proposed work would take considerable time and effort, with the ultimate outcome of easier defense, not a war-winning offensive. The new Hindenburg Line, which began construction in September 1916, was not fully occupied until March 18, 1917.108
Given the lasting stalemate, the German High Command started pinning their hopes on unrestricted submarine warfare.109 Despite the 1915 failure of such a campaign to yield desired results, the Admiralty slowly convinced major decision-makers that Britain could be starved into surrender within six months.110 As it would take the United States longer than that to come to the Allies’ defense, it did not matter if the unrestricted submarine warfare angered the neutral state.111 This time, unlike the decision made at the start of the war to let British troops reach the Continent unmolested, the Admiralty fully expected the submarines to prevent American troops from reaching Europe.112 Somehow the question of France and Russia seemed irrelevant to the expectations of the end of the war.
The crucial meeting to convince the kaiser to support this new approach was held on January 9, 1917.113 Hindenburg arrived at the meeting having just inspected the western front and carrying expectations of a continued stalemate through 1917.114 Unrestricted submarine warfare was restarted on February 1, and the countdown of six months began. It is hard to say whether this was a real expectation of a short war or desperation, since the alternative was a slow German defeat through lack of troops and material. The Admiralty, at least, seemed truly confident, as it did not place any major orders for new submarines until June.115
But by July, with the predicted six months up, Britain still refused to surrender. German leaders knew that they did not have the manpower for a war-winning offensive.116 And with the United States declaring war on April 6, 1917, they were expecting US troops to take the field by the summer of 1918.117 It seemed that the only thing that would make the war short at this point was a German defeat.
The Russian Revolution and the subsequent negotiations for Russian withdrawal from the war released considerable German forces for the western front and provided Germany with a substantial new source of food and raw materials. The possibility of victory in the West was revived.118 Germany had a small window of opportunity between Russia’s exit from the war and the coming influx of American troops. A final push for a war-winning offensive in 1918 was their last and only chance to attempt a satisfactory end to the war.119 If they did not win before the Americans arrived, there would not be a chance at victory again—troop numbers and industrial capacity were against them.
In principle, German leaders had more a desperate hope than a real expectation of a short war at this point. The spring offensive (March 21–July 18, 1918) had initial success against France. But it was not enough. By July, the Allied counteroffensives had dashed all hopes of victory.120 By August, American forces had started arriving en masse; Germany could not keep up with the influx of fresh troops.121 By mid-August, German leaders conceded that the war must end with a German defeat.122
Time period | Expectation |
|---|---|
8/14 – 10/14 | Short |
11/14 – 1/17 | Long |
2/17 – 6/17 | Short |
7/17 – 2/18 | Long |
3/18 – 6/18 | Short (?) |
7/18 – 10/18 | War is lost |
expected stakes of war
While the German leaders expected a short war, they also acknowledged that it would most likely be a difficult, high-stakes war. There was a distinct possibility that at least some of the fighting would take place on German territory; defense of the homeland raised the expected stakes of the war. Moreover, anticipating a British blockade that interfered with neutral rights, Germany planned on fighting the war entirely severed from world trade. The war effort would have to be maintained with existing stockpiles of food and ammunition.123 The expectation of a high-stakes war never lessened during the conflict.
When the war started, there were considerable fears that some portion of the war might end up being fought on German territory. The German armies in the West pushed quickly into France to avoid this possibility. Though the Battle of Mulhouse (August 7, 1914) was fought in Alsace, which at the time was German territory, Germans pushed the French back to the French side of the border in a matter of days.124
The troops on the eastern front were forced to defend Germany on German soil. The Battle of Gumbinnen (August 20, 1914) and the Battle of Tannenberg (August 26–30, 1914) took place in East Prussia.125 Not until mid-September did the Germans push the Russian troops from German territory. However, the threat of Russian advances remained. Additionally, the Austrian collapse on the Carpathian front opened up the possibility of a Russian drive into Silesia.126 Not until mid-1915 did the eastern front move comfortably away from the German homeland.
In addition to the fears of invasion, the German home front faced food shortages almost as soon as the war began. Late autumn revealed shortages in cooking oil, crucial raw materials needed for explosives, and fertilizers.127 The expected shortages in grain led the government to prescribe that potato flour be added to regular bread recipes, creating war bread.128 Shortages in animal fodder in the first winter of the war caused considerable decreases in the weight of cattle and pigs.129 When farmers tried to circumvent government policy prohibiting the use of potatoes as animal feed, Reich officials ordered farmers to slaughter their livestock in high numbers. Even this decrease in competition for food did not provide a lasting solution.130
The end of 1914 saw the introduction of bread rationing in Berlin.131 January brought flour rationing; February, meat rationing.132 By March 1915, the whole nation was on bread rations.133 Despite the government attempts to distribute the food to all, severe shortages affected all urban areas in 1915.134 People spent hours waiting in line for goods that frequently ran out before they had a chance to use their ration cards. Correspondingly, the bread rations were reduced to half a pound per day from the prewar average of three-quarters of a pound per day.135 At the same time, the government attempted to control inflation in food by introducing maximum prices on many food products—meat, fish, sugar, milk, butter, cheese, cooking oil, and more.136 The food situation was greatly exacerbated by the conscription of farmers—and more importantly, farm horses—to the war effort.137 In 1916, the government implemented a full-fledged rationing system covering most of the staple foods as well as other necessary commodities.138
The declining food situation in Germany is reflected in the strengthening government monopoly over food production and distribution. In November 1914, the government created the War Grain Corporation to oversee the grain supply.139 At the end of January 1915, the government had taken possession of all national grain production by creating the Imperial Distribution Center, which had the sole authority to buy grain and distribute it to millers.140 These new organizations were blended together into the Imperial Grains Office, which later evolved into the Food Controls Office. Ultimately, the War Food Office was established in May 1916 to address the growing supply problem and ensure that workers in crucial war industries received adequate nutrition. The government controlled which crops farmers had to plant, at which prices these crops could be sold, and to whom they could be sold.141
Food shortages also led to food riots and worker strikes. In February and October 1915, food riots broke out in Berlin and several other large cities in Germany.142 By 1916, the riots spread across the whole country.143 Women marched on town halls demanding better food supplies. Much worse—for the German war effort—were the worker strikes, similarly based on demands for better nutrition, beginning largely in 1916 and increasing in number in subsequent years. The government solution was to warn the workers that if they did not return to work, they would be drafted and forced to work for the much lower soldier’s pay.144
On the home front, the war never stopped interfering with the everyday lives of the German citizens. The effects of the war grew more and more severe, and the government demanded continually greater efforts from the population. The comforts of the domestic population were largely ignored; only the bare minimum was provided for, and that was mostly to focus the population on supporting and producing for the war effort. The high stakes of the war forced the government to focus on the immediate requirements of the war effort in lieu of other considerations.
Wartime Changes in Commercial Policy
Once the war started, German leaders discovered that world trade was not as out of reach as they had assumed it would be. The Reich chancellor wrote on August 30, 1914, “The purchase of raw materials from neutral countries does not seem impossible, especially via Holland, Denmark, Sweden, and perhaps also via Italy.”145 Indeed, Germany continued to receive shipments of English foundry coke and bunker coal through Stockholm.146 Britain did not prohibit the export of these products to the enemy until May 13, 1915. British colonial wool could also be imported by surprised German merchants (the earliest British prohibitions of raw wool started on October 6, 1914).147 Likewise, food continued to come through the Netherlands and Italy; however, this import was complicated by Britain declaring foodstuffs as conditional contraband. Much of the US grain imported on German account into the Netherlands was confiscated by the British.148 On the other hand, rice, corn, and meat could be imported much more freely.149
Despite these more fortunate conditions at the start of the war, German leaders continued to complain about British violations of international law. German property on British ships was confiscated. German conscripts were captured on a neutral Dutch ship. Britain applied the rules of continuous voyage to conditional contraband in contradiction to the Declaration of London. Delbrück planned on raising these concerns with the Americans in the political battle over the good opinion of the most important neutral in the war.150
Retaliation for British wartime commercial policy measures against Germany was the official reason provided for the prohibition of payment to England introduced on September 30, 1914.151 After this point, no direct imports from England were allowed—or rather, Germany would gladly accept the products, but no payment would be made.152 Indirect imports through neutral states, however, could continue. Additional exceptions to the payment prohibition remained: for example, permission to pay for life insurance policies in England was frequently granted.153 While the stated reason for the payment ban was the British prohibition on payments to Germany, this seems like a political justification for the international audience. The British prohibition on payments was part of their August 5, 1914, prohibition on wartime trade with the enemy.154 This law was clarified on August 14 and September 9, without major changes to the policy.155 The only other change was a September 29 addendum permitting payment to Germany of fees associated with applications for or renewals of patents.156 It does not quite line up that Germany had to wait until the end of September to retaliate for a policy implemented at the start of August.
On the other hand, by the end of September, Germany had lost the Battle of the Marne and had to face the fact that the Schlieffen Plan had failed and France would not fall within the allotted six weeks. German leaders started updating their expectations about the length of war. As the war was going to last longer than initial assessments, it made sense to implement a policy that extended the conversion time of the British gains from trade by requiring that trade with the enemy become indirect.
German leaders extended the payment prohibition to France on October 20.157 Again, the official reason was retaliation against French policy targeting German private property on French territory.158 However, the timing of the payment prohibition against France coincides with the end of the Race to the Sea. While German leaders understood in September that their expected six-week campaign against France was a nonstarter, it was not until October and the settling of the trenches that the expectation of defeating France that season was over. Showing that wartime commercial policy was target specific, Germany did not prohibit payments to Russia until November 19, 1914.159
Further prohibitions on imports from enemy states occurred in February 1915. On February 11, the chancellor was given the authority—suggesting that he did not have it previously—to ban imports from enemy nations.160 This new power was immediately used to prohibit the import of luxury goods from France, Great Britain, and their colonies. The prohibitions targeted mostly food items like mushrooms, lobsters, wine, and sparkling wine but also included perfumes, goods made of silk, spices, photograph equipment, and goods of spun gold or silver. It is likely that this measure was instituted to preserve foreign currency for imports more important to the Germany economy. Two weeks later, the chancellor was also authorized to apply customs tariff rates in existence before the war—which were lower than the general rates imposed on products of enemy origin on August 10, 1914—to products imported by the army or navy administration or nonprofit organizations from France, Russia, or Belgium, as long as the products were used exclusively to supply the German economy during the war.161 This change coincided with the first German experiment with unrestricted submarine warfare and the corresponding optimism that the war would soon end. Indeed, the government was allowed to make trade with the enemy easier when the enemy was willing to provide Germany with necessary products.
While the number of export prohibitions grew steadily during the war, Germany was not cutting itself off from world trade. The high stakes of the war led the government to place export trade under strict oversight. To maintain export trade, thereby reaching a favorable level of foreign currency, and to give industry dependent on foreign sales a chance to survive the war, licenses were granted for the export of specific goods to specific destinations.162 Licensed trade of prohibited products, as opposed to free trade, provided the government with a greater level of control over commercial policy. The export bans prompted numerous complaints from industry representatives and letters advocating the removal of interference with foreign trade. For a large portion of these lobbying efforts, the response was an explanation that national security required the prohibitions. In specific cases, licenses were granted maintaining “a balance between the demands of the army and the country and the interests of the circles involved in the export trade, which is in the general interest.”163 Deciding precisely how much of a specific product was allowed to leave the country and varying the risk of that product reaching enemy states helped Germany balance the security imperative of making the current war easier to fight with the economic imperative of ensuring that Germany would be prepared to fight future wars.
Indeed, the German leaders were thinking explicitly about this intertemporal trade-off. In a meeting on July 10, 1915, to discuss the financing of the war, the German Treasury secretary, Karl Helfferich, explained that the war burden was already huge and that if the war lasted until March 31, 1916, it would exceed all earmarked provisions of the regular budget. Repaying such a burden would further hinder German development and cause Germany to fall behind the rest of the world.164 Helfferich suggested the need to extract reparations from the losing nations in the war “so that [Germans] would not have to take up arms weighed down by this enormous burden in the event of a new war.”165 While not specifically focused on wartime trade, this position shows that German leaders were concerned about the implications the decisions made to ensure their success in the current war would have for the future security of the state. Only a year into the war, the German assessment was that with the decreasing customs revenue and the shutdown of businesses necessitated by redirecting raw materials to war industries, the German economy would have a hard time recovering from the war without reparation payments.166 The situation, of course, grew only worse. The high stakes of the war were making themselves felt, refocusing German leaders on actions required for immediate survival at the expense of longer-term security. The war profit tax, which the participants of this meeting decided to implement at the end of the war, was enforced in July 1916.167
the curious case of the dye works industry
A closer examination of the dye works industry indicates how the German wartime commercial policy changed during the war. In the midst of a high-stakes war, under a sudden change toward expectations of a short war, German leaders permitted highly controlled, direct wartime trade with the enemy. This trade was of great importance to maintaining the domestic dye works industry and therefore generating significant foreign reserves for the state. At the same time, the short war expectations allowed the state to discount the security externalities of the enemy receiving war-adjacent products.
At the start of the twentieth century, Germany dominated the manufacture of dyestuff and had mostly conquered this portion of the world market.168 All the countries that engaged in the textile industry were to some extent dependent on the supply of dyes from German factories.169 Germany’s comparative advantage was helped by the high barriers of entry into the business. Even when competitors attempted to start domestic industries and raised high tariffs against German products, they were faced with the problem that supplying a small market increased manufacturing costs tremendously.170 Germany was able to produce at a huge scale because it was supplying the world and thus could keep its manufacturing costs fairly low.
Among all the others, enemy states—England, France, and Russia—were likewise dependent on German dyes. At the start of the war, Germany worked to prevent dyes from reaching the enemy, especially focusing on aniline and tar dyes, which could be used in the making of explosives. On August 1, 1914, the export of all dyestuffs was prohibited under the category of weapons and ammunition.171 On August 31, the export of dyestuff was again permitted, but the intermediate products used in their creation were prohibited.172 On September 14, 1914, both dyestuff and intermediate products used in the manufacture of tar dyes were prohibited.173 The main purpose of the prohibition was to prevent enemy states from increasing the production of army supplies.174 In the case of aniline and tar dyes the concern centered on the manufacture of explosives, but in cases of other dyes on the manufacture of military cloth or painting of vehicles and ships.175
While appreciating the military benefits of the export ban, German leaders also understood that this industry was heavily dependent on exports. Domestic demand accounted for 10–15 percent of total production.176 According to an industry assessment in January 1915, if foreign sales were prohibited completely, the already existing stocks of dyestuff in Germany would cover domestic demand for twenty-eight months.177 Naturally, this would drive the dye-manufacturing factories out of business. While the industry was forced to give up exports to enemy states and many countries likely to resell their supplies to enemy states—Portugal, the Netherlands, China, South American states, East Asia—the government permitted very carefully controlled licensed trade with other neutral states.178 Indeed, they took the opportunity to leverage other states’ dependence on German products. Negotiations with the United States exchanged German dyes for raw cotton.179 The export of aniline and tar dyes to Italy was conditional on Italy supplying Germany with a greater amount of raw materials required to produce the dyes than the quantity that went into the exported products.180
Exports to neutral states were permitted only under the guarantee that the recipient would not resell the products to the enemy.181 This did not stop the United States from buying dyes and exporting freshly dyed military cloth to England.182 Neutrals were, thus, rationed to three-quarters of their prewar demand for dyestuff to ensure that they could only produce enough for their domestic market and would not be able to export to enemy states.183 When representatives from Norway inquired in November 1914 about an unlimited quota license for the import of German dyestuffs, they received a polite reply informing them that three-quarters of their prewar demand would service their domestic market just fine.184
Also in November 1914, Sweden attempted to negotiate for the purchase of German intermediate products for the manufacture of dyes. They indicated a willingness to make many and varied concessions to get German products—guaranteeing that they would not sell products of German origin to England (“if requested, not to countries at war with Germany”), would not sell finished products made with German resources to England, and would even provide bonds to ensure their good behavior.185 None of it was enough, and with good reason. Germany expected that Sweden planned to keep all of their promises and use German products to supply their domestic market. This would free up the domestic materials already available to Sweden to service the English market.186 At this point in the war, German leaders had to accept that the war could not be won quickly, and expectations turned toward a long war. Thus, Germany countered with a proposal that Sweden sever all exports of dye to England and France.187 No deal was made in 1914.
Fast-forward to December 22, 1916. Sweden was working as a middleman, selling German products to other states, on commission from the German Empire.188 Sweden imported German dyes for domestic consumption at lower than market prices; at the same time, it exported dyes as directed by the German Embassy, but only if it could guarantee a purchase price at least 60 percent above market. Overseeing this process, the head of the Central Office for the Chemical Industry, Dr. Horney, had a crazy idea. Russia was desperate to buy dyestuff. Germany was in desperate need of foreign currency. The price for dyes in Russia was exorbitantly high, at least compared to the prices offered on the same goods in France and Italy.189 Horney, working with the German Embassy in Stockholm, proposed to the German government that sales of dyes to Russia could solve both countries’ problems.190
In the meantime, the German High Command expected that restarting unrestricted submarine warfare would turn the tides of the war and lead to a quick victory within six months. Expectations momentarily turned toward a high-stakes but possibly short war. Responding to Horney’s proposal for direct wartime trade, the secretary of the Imperial Naval Office pointed out that the indiscriminate sale of dyes to the enemy could be problematic. Some dyes contained linseed oil and resin, in which there were domestic shortages; other dyes contained copper preparations and mercury, in which there were shortages in England. Finally, antifouling paint for ships would directly support enemy warfare.191 The Reich commissioner for import and export permits, considering the security externalities of this very sensitive trade, assured the Naval Office that deliveries would be made “in view of German requirements and military interest.”192 Concurrently, he received instructions from the finance minister to sell with the greatest possible speed.193 Since the enemy was not expected to have time to benefit from this exchange before unrestricted submarine warfare brought the war to an end, Germany should make all haste to extract as much economic gain as possible from this wartime trade with the enemy. Negotiations with Russia were concluded by the end of February 1917, and direct export of dyes to Russia ensued.194
It does not seem that this case was unique. On June 25, 1917, an enterprising merchant wrote to the minister of the interior suggesting a similar scheme in Switzerland, as “enormous prices [were] paid for dyes by Entente buyers lurking there from France, England, Italy and especially America.”195 After forwarding the suggestion to the Reich commissioner for import and export permits, the minister of the interior replied that Germany had been doing this for weeks already and in a much more sophisticated manner than the merchant’s crude proposals.196
Given the high stakes of the war, the German need for foreign currency overshadowed even security concerns about providing products of military utility to the enemy states. Of course, Germany was still discerning; it would sell only to the enemy that offered the highest price, ignoring the possibility that states in an alliance could share. Notwithstanding, these deals sprang up when German leaders were convinced that the war could end fairly quickly with the introduction of unrestricted submarine warfare. If the war was expected to come to a speedy end, it was not as dangerous to export to the enemy raw materials that could eventually become military capabilities.
the role of domestic politics
The formation of wartime commercial policy in Germany largely reflected the state’s need to balance the economic and security considerations of wartime trade. In the planning phases, to the extent a wartime commercial policy was being prepared, German leaders sought to marginalize industry participation. Secretary of the Interior Delbrück summarily sidelined industry representatives’ suggestion of setting up a permanent advisory council of exports to examine questions relating to the effect of war on trade.197 When Moltke conceded the need for industry input to determine how to structure train schedules during mobilization to ensure food supplies reached urban centers, he specifically indicated that the participation of industry voices should be kept to a minimum to prevent the individual interests of their professions from affecting policy.198
After the war began and the government imposed prohibitions on exports, lobbying efforts to allow firms to export prohibited products flooded the Ministry of the Interior. Delbrück’s response to most such inquiries was to instruct the firms in the necessities of war, pointing out that sacrifice was necessary for the security of the nation.199 The same attitude is seen in the army requisitions of raw materials for the specific production programs necessary for national defense. Such confiscation caused many firms considerable hardship in sourcing raw materials to work with.200 When industry representatives complained, they received this response: “It goes without saying that the interests of the military administration must take precedence over all other interests and that the release of requisitioned raw materials can only be requested to the extent that there is no reason to fear that the interests of the military administration will be harmed.”201 Ultimately, the priority of the government was to ensure national security, not to cater to industry interests.
The dye works industry provides an example of how the government handled attempted industry interference in their wartime commercial policy. At the end of December 1914, after the government had started to license the export of dyes to neutral countries, a collective of representatives of the textile industry submitted a petition to the Ministry of the Interior asking that exports of dyestuff to neutral countries, and even to Austria-Hungary, be stopped.202 They presented two reasons. First, the provision of dyes to neutral countries, especially the United States, would help those countries supply the enemy. Second, there was not enough domestic supply of dyes and raw materials to create more dyes to satisfy domestic demand.203 In essence, the representatives incorporated as best they could the German government’s two main arguments for export prohibitions.
The Ministry of the Interior solicited feedback from dye works businesses to answer these two charges. The replies explained that Germany had enough domestic stockpiles of dyestuffs to last the textile industry for more than two years. Also, it would be very difficult for neutral states who received German exports of dyestuffs to supply enemy states because they were being rationed at three-quarters of their prewar supply. But mostly the replies pointed to the real motivation for the textile industry petition: because of the rising prices of raw materials, the dyes had recently experienced an increase in price.204 The representatives of the textile industry assumed that a prohibition on export to neutral and friendly states would depress the price once more. As exports of dyes were a significant source of foreign reserves for the state, the prohibition on trade was not approved. This episode does not suggest, however, that the dye works industry was treated in a preferential manner. Their sales were severely restricted and meticulously controlled. Indeed, because of security considerations, they lost their prewar clients in Portugal, the Netherlands, China, South American states, and East Asia.205 Ultimately, the wartime commercial policy decisions were guided by a careful balance between the security and economic interests of the state, not industry preferences.
While industry interests were not allowed to drive the formation of the wartime commercial policy, German leaders did rely on industry experts to help administer the wartime commercial policy. To simplify and speed up the application for export licenses, the government collaborated with industry groups to set up central offices for the preparation of export license applications. Such organizations existed for the chemical, paper, sugar, iron and steel, machine, and leather and leather goods industries, among others.206
This analysis of German wartime commercial policy in World War I exemplified how integral neutral rights are to decisions about wartime trade. Expecting Britain to break international law and disregard maritime neutral rights fundamentally altered Germany’s wartime trade policy. Its behavior in crisis before the outbreak of war suggests that in a world with neutral rights, Germany would have adopted a policy very similar to Britain’s. Yet as its leaders expected a complete blockade without neutral commerce, Germany instead focused on the aggregation of domestic stocks to ensure its survival under imposed autarky. At the same time, the state’s behavior showcases that neutral rights were treated as an important institution. Even the expectation of British violations of neutral rights did not cause Germany to abandon neutral rights before the start of the war. German leaders refused to countenance a plan to have their merchants fly US flags to engage in highly necessary wartime trade, as such a practice was illegal under the Declaration of London.
Furthermore, this chapter showed how individually constructed wartime commercial policies of two belligerents can overlap to allow for bilateral wartime trade. Both Britain and Germany expected a short war at the start of World War I. Both states initially prohibited trade in products of immediate use on the battlefield and allowed trade in most other goods. Germany was pleasantly surprised to continue to receive shipments of British coke and bunker coal, as well as British colonial wool. While Britain prohibited direct trade with the enemy and, after initial setbacks on the battlefield, Germany prohibited direct payments to Britain, these measures only artificially increased the conversion time of traded products by forcing trade to take an indirect route to reach the enemy. With both states restricting their wartime commercial policies as the war grew longer and longer, room for exchange still remained through licensed trade.
Finally, the German case illustrated how unexpected short war expectations after many years of fighting allow for some controlled easing of the wartime commercial policy. At the start of 1917, German military leaders convinced the kaiser to restart unrestricted submarine warfare, with the expectation that this action would bring victory within six months. Desperate for foreign reserves to funnel into the war effort but reassured with new expectations of a coming victory, German leaders undertook a daring scheme—exporting dyes directly to the enemy for exorbitant prices. The exported dyes were necessary for the enemy’s domestic industries and had some applications for military production, of which Germany was keenly aware. But the wartime exchanges brought Germany a huge profit, which made its own war effort easier to bear for that last expected push toward victory. And the expected victory made the trade seem less dangerous to the decision-makers, as the enemy should not have had time to convert the gains from trade into military capabilities. With the one fatal flaw of a faulty expectation of the length of war, it was a brilliant idea.