2015 GROSS Export Empire German Soft Power in Southeastern Europe 1890-1945

Export Empire
German imperialism in Europe evokes images of military aggression and

ethnic cleansing. Yet even under the Third Reich, Germans deployed
more subtle forms of influence that can be called soft power or infor-
mal imperialism. Stephen G. Gross examines how between 1918 and
1941 German businessmen and academics turned their nation an
economic wreck after World War I into the single largest trading
partner with the Balkan states, their primary source for development
aid, and their diplomatic patron. Building on traditions from the 1890s
and working through transnational trade fairs, chambers of commerce,
educational exchange programs, and development projects, Germans
collaborated with Croatians, Serbians, and Romanians to create a con-
tinental bloc, and to exclude Jews from commerce. By gaining access
to critical resources during a global depression, the proponents of soft
power enabled Hitler to militarize the German economy and helped
make the Third Reichs territorial conquests after 1939 economically
possible.
s t e p h e n g. g r o s s is an Assistant Professor in the Department of

History and the Center for European and Mediterranean Studies at
New York University.
new studies in european histor y
Edited by
p e t e r b a l dw i n , University of California, Los Angeles
c h r i s to p h e r c l a r k , University of Cambridge
j a m e s b. c o l l i n s , Georgetown University
m i a r o d r i g u e z - s a l g a d o , London School of Economics and
Political Science
ly n da l r o p e r , University of Oxford
t i m ot h y s n y d e r , Yale University
The aim of this series in early modern and modern European history is to
publish outstanding works of research, addressed to important themes across
a wide geographical range, from southern and central Europe, to Scandinavia
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series will comprise focused works of wide contextual range and intellectual
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A full list of titles published in the series can be found at:

www.cambridge.org/newstudiesineuropeanhistory
Export Empire
German Soft Power in Southeastern Europe,
18901945
Stephen G. Gross
New York University
University Printing House, Cambridge CB2 8BS, United Kingdom
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It furthers the Universitys mission by disseminating knowledge in the pursuit of
education, learning and research at the highest international levels of excellence.
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Information on this title: www.cambridge.org/9781107112254

C Stephen G. Gross 2015
This publication is in copyright. Subject to statutory exception

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First published 2015
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accurate or appropriate.
For my parents, Anne and Jerry
Contents
List of figures and tables page ix

Acknowledgements xi
List of abbreviations xiv
Map: Europe during the interwar period, 19191939 xv
Introduction: the foundations of soft power and informal

empire 1
Part I German power in the Wilhelmine Empire

and the Weimar Republic
1 The legacy of Wilhelmine imperialism and the First
World War, 18901920 27
2 The economics of trade: building commercial networks
in Southeastern Europe, 19251930 68
3 The culture of trade: cultural diplomacy and area
studies in Southeastern Europe, 19251930 107
4 The politics of trade: Paneuropa, Mitteleuropa, and the
Great Depression, 19291933 139
Part II Nazi imperialism

5 Stabilizing the Reichsmark bloc: commercial networks in
the Third Reich, 19331939 181
6 Economic pioneers or missionaries of the Third Reich?
Cultural diplomacy in Southeastern Europe, 19331939 220
7 Forging a hinterland: German development aid in the
Balkans, 19341940 253
vii
viii Contents
8 The Second World War: informal empire transformed,

19391945 292
Conclusion: Imperialism realized? 330
Bibliography 342
Index 372
Figures and tables
Figures
0.1 Matrix of power page 8
2.1 Yugoslavian imports by source, 19201930 104
2.2 Yugoslavian exports by destination, 19201930 105
2.3 Romanian imports by source, 19201930 105
2.4 Romanian exports by destination, 19201930 106
Tables
1.1 Romanian prewar trade 45
1.2 Serbian prewar trade 46
1.3 German exports to Southeastern Europe and other major
trade partners 55
1.4 German imports from Southeastern Europe and other
major trade partners 56
1.5 Direction of Romanian and Yugoslavian foreign trade 57
2.1 Participation of foreign merchants at Leipzig spring
trade fair 82
2.2 Yugoslavian trade with Switzerland and Germany 90
2.3 Yugoslavian imports from Germany by sector 91
2.4 Total Yugoslavian imports from all countries by sector 91
2.5 Romanian imports from Germany by sector 97
2.6 Yugoslavian trade by destination 103
2.7 Romanian trade by destination 104
4.1 German share of Central European trade, 1928 155
4.2 German trade by destination, 192933 172
5.1 German imports by region or country 192
5.2 German exports by region or country 192
5.3 German imports of raw materials vital to war, 19338 196
5.4 German domestic supply of non-ferrous metals, 19348 196
ix
x List of figures and tables
5.5 Nutritional supply estimates from Institute of Business

Cycle Research 197
5.6 Participation by country at the Leipzig spring fair 209
5.7 Export sales at Leipzig fall and spring fairs 209
5.8 Romanian imports by sector and by country, 1938 215
5.9 Yugoslavian imports by sector and by country, 1938 216
5.10 German imports from Southeastern Europe by commodity 217
5.11 Machinery as a proportion of German exports, 1938 218
5.12 German share of Southeastern Europes foreign trade 219
5.13 German machinery exports to Romania 219
7.1 Soybean cultivation in Southeastern Europe 276
7.2 German agricultural machinery exports to
Southeastern Europe 277
7.3 Romanian and Yugoslavian foreign trade as a
percentage of GDP 289
8.1 German trade with Romania and the former
Yugoslavia, 19414 327
8.2 German clearing account deficits with Southeastern
Europe, 19414 327
Acknowledgements
It is a pleasure to thank the many people who have made this book pos-
sible over the past eight years. From the start, UC Berkeley offered a
wonderful environment to design and begin this project. My initial inter-
est in Germanys economic relations with Southeastern Europe stemmed
from a paper I wrote for Gerald Feldman in the fall of 2005. He guided
me through the tangled history of German political economy and he
opened many doors, intellectually and professionally, that otherwise may
have remained closed. I am grateful to have experienced his mentorship
at Berkeley. I am deeply indebted to John Connelly, who helped me
through the difficult stages of this project after Gerald passed away. I
also owe thanks to Anthony Adamthwaite, who gave invaluable advice
on the diplomacy of the interwar decades. In his seminar on comparative
political economy, J. Nicholas Ziegler introduced me to many of the ideas
about empire and trade that inform my research. Jan de Vries pushed me
to think critically about Albert Hirschmans ideas of power, and about the
role of finance in international trade. Margaret Lavinia Anderson guided
me through the early, brainstorming stage of this project. Jonathan Zatlin,
a Berkeley alum who advised me from afar, was an outstanding resource
on economic history, and he helped me think through the sensitive issues
of anti-Semitism and Aryanization. Finally, the graduate student com-
munity at Berkeley provided a warm setting to test out my ideas before
they were fully formed. Mark Sawchuk, Joseph Bohling, Eliah Bures,
Robert Nelson, Grahame Foreman, and Mark Keck-Szajbel all waded
through early versions of my chapters.
If UC Berkeley helped launch this project, my colleagues at New York
University provided the support and the encouragement to complete it. I
am hugely thankful to Larry Wolff, who has been a mentor of sorts since
I arrived in New York, who read the manuscript on numerous occa-
sions, and who provided a stimulating intellectual setting at the Center
for European and Mediterranean Studies. Mary Nolan gave outstanding
help during the revision process, pushing me to clarify the larger ques-
tions that I address, and I have used much of her scholarship throughout
xi
xii Acknowledgements
this book. Ed Berenson and John Shovlin have all read parts of the
manuscript and given invaluable feedback. Barbara Weinstein, our chair,
was truly supportive as I finalized the book.
Outside Berkeley and NYU many other scholars have read, critiqued,
and ultimately improved my work. I want to thank Adam Tooze for invit-
ing me to present the near final product at Yales Modern European
History colloquium, and for guiding me to refine how I thought about
soft power and informal empire. David Hamlin gave crucial guidance
on foreign affairs and Weltpolitik during the Wilhelmine Empire. While
I was doing the bulk of my research, Arnd Bauerkamper warmly wel-
comed me into his seminar on European comparative history at the FU
in Berlin. Carola Sachse and Carl Freytag organized several conferences
in Vienna, which provided one of the first opportunities to present my
research. Ian Innerhofers hospitality made these conferences and my vis-
its to Vienna a joy. At the German Studies Association in 2009 Pieter Jud-
son and Jessica Gienow-Hecht offered useful insights into how German
cultural diplomacy operated and was received among the nationalities
of Central and Southeastern Europe. The German Historical Institutes
Trans-Atlantic Doctoral Seminar, organized by Roger Chickering and
David Wetzel, allowed me to discuss cultural diplomacy among gradu-
ate students from America and Germany. I also benefited from feedback
from my colleagues at the Berlin Program: Steven Chase Gummer, Mari
Webel, Karin Goihl, and others. Numerous others who have at vari-
ous stages contributed crucial and constructive criticism include Volker
Berghahn, Barry Eichengreen, Jennifer Zahrt, Brendan Karch, Mirna
Zakic, Christopher Molnar, John Conybeare, Jonathon Speed, and the
anonymous reviewers at Cambridge University Press. All of the errors in
this book are, needless to say, my own.
This book would not have been possible without funding from a variety
of organizations. The Institute for European Studies at Berkeley provided
generous financial support, both for my first years of coursework and for
a pre-dissertation grant that introduced me to the Berlin archives in 2006.
The Fulbright Program and the Berlin Program for Advanced German
and European Studies provided the financial assistance for me to conduct
the bulk of my research in 2007, 2008, and 2009. The DAAD funded a
follow-up summer research trip in the summer of 2012, when I gathered
materials for the final chapter on the Second World War.
And to all my friends and family who have helped me keep perspective
while writing this book, I want to thank you for your loving support. My
wife Rachel has been the most loving, joyful partner I could imagine.
Thank you so much for supporting me through the many weekends and
nights I spent on this project. My son Duncan, who was born early, three
Acknowledgements xiii
weeks before this manuscript was due, gave inspiration that helped me
on the final leg of the writing. Finally, my mother and father have always
encouraged me to do what I love, and they have nurtured my passion for
history from an early age. I cannot imagine having completed this project
without them. This book is dedicated to them.
Abbreviations
BA Bundesarchiv, Berlin
BAK Bundesarchiv, Koblenz
DAAD Deutscher Akademischer Austauschdienst/German
Academic Exchange Service
DAI Deutsches Auslands-Institut
DRHK Deutsch-Rumanische Handelskammer
GStPK Geheimes Staatsarchiv Preussischer Kulturbesitz, Berlin
HAS Hoover Archive, Stanford
IMSWf Institut fur Mittel- und Sudosteuropaische Wirtschafts-
forschung
LMA Leipzig Messeamt
MEI Mitteleuropa-Institut
N Nachlasse
MWT Mitteleuropaische Wirtschaftstag
PAAA Politisches Archiv des Auswartigen Amts
RDI Reichsverband der Deutschen Industrie
SEI Sudosteuropa-Institut, Leipzig
SSAD Sachsisches Staatsarchiv, Dresden
SSAL Sachsisches Staatsarchiv, Leipzig
TUD Technische Universitatsarchiv, Dresden
UAL Universitatsarchiv, Leipzig
VHA Villa Hugel Archiv, Essen
VDA Verein fur das Deutschtum im Ausland
VSI Verband Sachsischer Industrieller
xiv
0 500 1000 km
EN
FINLAND
AY
A T L A N T I C
ED
RW
0 250 500 miles
SW
NO
O C E A N ESTONIA
IRELAND DENMARK LATVIA

S O V I E T U N I O N
LITHUANIA
GREAT
NETHER-
BRITAIN LANDS El Danzig
London Hamburg b
Berlin
e
The G ERMA N Y Warsaw
BELGIUM Ruhr Dresden POLAND
Leipzig
Rh
LUXEMBURG
Prague C
ine
Paris ZE
CHO
Munich SLOVAKIA Cernauti/
FRANCE Czernowitz
Vienna C
AUSTRIA a
SWITZERLAND s
HUNGARY ROMANIA
p
Ljubljana Timisoara Transylvania
ia
Brasov/Kronstadt
Novi Sad
n
Sibiui/Hermannstadt
AL
Belgrade
I
D
YUGOS LAVI A an u b e Bucharest B l a c k S e a
Se
ANDORRA
UG
T
Bor Mines BULGARIA
a
RT
A
SPAIN Trepca Mines RhodSofia
PO
Rome ope M ts
ALB
L
Y
ANIA
T U R K E Y
M e d GREECE
i IRAN
t
e Athens
r SYRIA
r CYPRUS
TUNISI A
MO RO CCO Malta a
n IRAQ
e
a n LEBANON
A LG E R IA S e a KUWAIT
PALESTINE
TRANSJORDAN
L I BYA EG YPT SAUDI AR AB IA
Map 1 Europe during the interwar period, 19191939, including German Economic Interests in Southeastern Europe and
Greater Germany after 1938
Introduction: The foundations of soft power
and informal empire
A global economic crisis like the present one lets the problems of
Central Europe mount to a catastrophic extent. An upswing in the
world economy will certainly lead to a temporary improvement of the
situation in Central Europe, but crisis here will always be imminent as
long as conflict takes the place of cooperation, the drive for autarchy
the place of collaboration . . . and as long as commercial activity remains
restricted to small markets, which will never be an adequate basis for
an economic system.1
Throughout the twentieth and twenty-first centuries Germanys prosper-

ity and its power on the world stage have existed because of its economy
and its exports. Yet during the greatest upheaval in European history
in recent times the thirty-year crisis that lasted from 1914 to 1945
Germanys economy came under severe strain, threatening to under-
mine the very basis of German society. The twin crises of World War
I and the Great Depression spawned competing visions for new world
orders as Germans debated how to rescue their economy from chronic
unemployment and their nation from social dislocation. Some viewed the
disruption of war and depression as mere hurdles on the track back to an
integrated global market, which they hoped to pursue by deepening ties
across the Atlantic. Others, led by Adolf Hitler and the Nazi Party, saw
in these crises the chance to push Germany toward autarchy, to milita-
rize the economy, and to use hard power to conquer a formal, territorial
empire in Europe.2
1 Wilhelm Gurge and Wilhelm Grotkopp (eds.), Grossraumwirtschaft: der Weg zur
europaischen Einheit. Ein Grundriss (Berlin: Organisation Verlagsgesellschaft, 1931),
preface.
2 Adam Tooze, Wages of Destruction: The Making and Breaking of the Nazi Economy (New
York: Penguin, 2006); Theo Balderston, Economics and Politics in the Weimar Republic
(Cambridge University Press, 2002); Eric Weitz, Weimar Germany: Promise and Tragedy
(Princeton University Press, 2007), 12969; Harold James, The End of Globalization:
Lessons from the Great Depression (Cambridge, MA: Harvard University Press, 2001).
1
2 Introduction
However, a third group, of businessmen, academics, publicists, and

economists, wanted to navigate a middle path between free trade and
autarchy, between global integration and formal imperialism. They drew
on techniques and strategies a liberal Weltpolitik first developed in the
empire of Kaiser Wilhelm II during the 1890s. After 1918 they aimed
to build an informal commercial empire in the heart of Europe, and in
doing so give Germany a continental economic base to compete in an
increasingly turbulent and cutthroat global marketplace.
German imperialism evokes images of military aggression and eth-
nic cleansing. Yet even under the Third Reich, German imperialism has
also worked through more subtle processes of economic and cultural
penetration. Before Nazi Germany set Europe ablaze and brutally con-
quered a territorial empire in the Second World War, a different kind of
informal empire existed in and from Germany, without which Hitlers
violence would have been impossible. This informal German empire was
much more than just German; it involved German minorities as well as
non-German elites from across Southeastern and Central Europe. And
it gave Germany access to the markets and resources of half a conti-
nent. This empire emerged, however, not through guns fired. Instead, it
arose through the work of businessmen of all kinds who manufactured
products demanded outside Germany, through private institutions that
engineered development programs, and through professors and students
who became messengers of German ideas. It combined the export of
goods and culture. And it was built with a kind of influence that can be
called soft power.
The proponents of German soft power and informal empire differed
in their goals from Hitler, and his violent project for Lebensraum. Nev-
ertheless, by gaining access to critical resources and foreign markets
during a period of global depression, these elites and the institutions
they worked through enabled Hitler to militarize the German economy,
and they helped make the Third Reichs territorial conquest during the
Second World War economically possible. To understand Hitlers hard
power and formal empire in Europe, we must first pay careful attention
to Germanys soft power and informal economic empire.
Germany built its informal empire through foreign trade, through
exports and imports. And the geographical focus of this trade empire
was Southeastern Europe: the peninsula stretching from the plains of
Hungary, in its northernmost formulation, to the Aegean Sea at its south-
ern tip. It is a mountainous and forested region interspersed with fertile
valleys, much of it belonging to the Danube river basin. The term South-
eastern Europe was and is often used interchangeably with the Balkans,
a label that took on a pejorative meaning after the brutality of the Balkan
The foundations of soft power and informal empire 3
wars in 1912 and 1913.3 In comparison to Western Europe, before

1945 the region was agrarian and poor after decades, centuries even,
of demographic growth, parcelized farming, and economic mismanage-
ment. Since the middle of the nineteenth century the de-urbanization
of older, predominantly Muslim towns had stymied industrial develop-
ment. Agricultural productivity had actually declined in many places,
where the rapidly expanding population led to deforestation and the
cultivation of marginal land. By the turn of the twentieth century three-
quarters of Southeastern Europes population engaged in farming; the
regions GNP per capita was a third that of Britain.4
Despite these economic challenges, Germans saw Southeastern
Europe as a place of latent possibilities: the land exceptionally fertile,
the harvests rich in potential, the population ready to be educated.5 In
contrast to Poland or Russia, which many Germans viewed as a barbarous
region and the focal point for their vision of Lebensraum, German business
elites saw the Southeast as a region in embryo, a site of constant ren-
ovation that was ineluctably Europeanizing itself.6 These small, new,
and relatively fragile states offered the path of least resistance to Ger-
man economic expansion. Their raw materials and agricultural products
seemed to complement the needs of German industry. Their geographic
proximity to Germany, the presence of German minorities, and the use of
German as the commercial lingua franca gave German merchants certain
advantages. Within this region Romania and Yugoslavia held the most
value for Germany the former for its petroleum, grain, and oil seed
crops; the latter for its minerals like copper, bauxite, and manganese. As
such, they became the focal point for German soft power and informal
empire, and provide the bulk of examples for this book.
3 Maria Todorova, Imagining the Balkans (New York: Oxford University Press, 1997); for a
critique of Todorova see Holm Sundhaussen, Der Balkan: Ein Pladoyer fur Differenz,
Geschichte und Gesellschaft 29 (2003), 60824.
4 Ivan Berend and Gyorgy Ranki, Economic Development in East-Central Europe in the 19th
and 20th Centuries (New York: Columbia University Press, 1974); John R. Lampe and
Marvin R. Jackson, Balkan Economic History, 15501950: From Imperial Borderlands to
Developing Nations (Bloomington: Indiana University Press, 1982); Christopher Clark,
The Sleepwalkers: How Europe Went to War in 1914 (New York: Penguin, 2012), 313; Paul
Bairoch, Europes Gross National Product: 18001975, Journal of European Economic
History 5 (1976), 273340.
5 Quotation from Hermann von Sauter, Die wirtschaftliche Entwicklung der Balka-
nstaaten, in M. J. Bonn (ed.), Die Balkanfrage (Munich: Handelshochschule, 1914),
183202, at 199; Welimir Bajkitsch, Deutschlands Wirtschaftsinteressen am Balkan,
ibid., 20333; Willy Lochmueller, Unsere Zukunft liegt auf dem Balkan! Afrikanische oder
europaische Politik? (Leipzig: Volger, 1913), 359.
6 Special report by the Mitteleuropaischer Wirtschaftstag on Southeastern Europe com-
missioned by the Four-Year Plan in 1940, p. 148, 294B, R 63, Bundesarchiv Berlin
(BA).
4 Introduction
The story of German soft power and economic influence goes far
beyond the late nineteenth century and the interwar decades. It extends
into our own day, and involves a longstanding German tradition of trying
to shape European and global affairs. Throughout the twentieth century
Germany has relied heavily on trade to drive its economy. Today only
three countries do over one trillion dollars worth of exports a year:
China, the United States, and Germany. This is a remarkable feat for
a nation of just eighty million people. Exports have kept the German
economy stable through the euro crisis, and they have made Germany
the country that all other European states look to in order to hold the
EU together. Without paying careful attention to the ebbs and flows of
German trade, it is difficult to fully understand the Wilhelmine Empire,
the Weimar Republic, the Third Reich, or the enduring role of Germany
as a global power today.
Scholarship on German trade and imperialism in

Southeastern Europe
German trade in the Balkans first gained public attention in the tense
months preceding the Second World War, when Anglophone economists
began criticizing German policy as a tool of exploitation. The Third
Reich, they argued, was conducting a bloodless invasion whereby it
dumped useless junk like aspirin or musical instruments into South-
eastern Europe in return for valuable raw materials that could fuel its
military, like oil.7 These studies revolved around the terms-of-trade ques-
tion, and whether Germany was able to forcibly extract more imports
from the Balkans for a given amount of exports. For economists writing
in the aftermath of Munich and Appeasement, and with limited access to
German trade statistics, the answer was a resounding yes. Those who sug-
gested Germany might not be exploiting these small states were criticized
for lending credence to Nazi propaganda in a time of imminent war.8
After 1945 the terms-of-trade debate reentered the limelight in a new
context, as economic development of the Third World became a major
goal of the United Nations and the United States. Yet the new discipline
7 Paul Einzig, Bloodless Invasion: German Economic Penetration into Danubian States and the
Balkans (London: Duckworth, 1939); Guenter Reimann, The Vampire Economy: Doing
Business under Fascism (New York: Vanguard Press, 1939); Antonin Basch, The Danube
Basin and the German Economic Sphere (New York: Columbia University Press, 1943).
8 Frederic Bentham of the Royal Institute of International Affairs, for instance, made
this claim in South-Eastern Europe: A Political and Economic Survey (London: Oxford
University Press, 1939); Paul Einzig, Why Defend Nazi Trade Methods? The Banker
(May 1941), 10813; Frederic Bentham, A Reply to Dr Einzig, The Banker (June
1941), 1826.
of development economics quickly generated criticisms of existing global

economic relations. Among the earliest and most important was the argu-
ment made by the Argentinian Raul Prebisch and Hans Singer, an emigre
German Jew working at the United Nations, that over time primary prod-
uct exporters were bound to see their terms of trade deteriorate in the
face of technological advances in industrial production.9 Foreign trade,
in other words, could be a channel whereby industrial states exploited
agrarian ones. Eastern and Southeastern Europe was a natural place to
study this phenomenon, given the recent history of German trade pol-
icy, and the fact that many pioneers of development economics came
from this half of the continent and considered it to be the first under-
developed region.10 Yet when scholars revisited Nazi trade policy they
found little to support the PrebischSinger hypothesis. To the contrary,
according to many estimates Germany paid prices for Balkan imports
that were well above those of the world market, while selling exports at
competitive prices.11 This led some historians to conclude that, given
the lack of alternative trade partners, before 1939 Southeastern Europe
may have actually benefited from participating in Germanys economic
sphere.12
Diplomatic historians questioned this interpretation, and in doing so
suggested the notion of informal imperialism to understand German
trade policy. Through archival studies of trade treaty negotiations, they
claimed Germany used its economic muscle not to change the terms
of trade. Instead, it willingly paid high prices to achieve the political
goal of securing resources for rearmament. With a refurbished military
at its disposal, the Nazis intended in the future to exploit Southeast-
ern Europe and its raw materials peacefully, if possible, but through
direct military appropriation if necessary. Diplomatic historians, in
9 Hans Singer, The Distribution of Gains between Investing and Borrowing Countries,
American Economic Review 40 (1950), 47385; Raul Prebisch, The Economic Develop-
ment of Latin America and its Principal Problems (Lake Success, NY: United Nations,
Economics Commission for Latin America, 1950).
10 Paul Rosenstein-Rodan was from Krakow and Peter Bauer from Budapest. Mark
Mazower, Governing the World: The History of an Idea (New York: Penguin, 2012),
279; Joseph Love, Crafting the Third World: Theorizing Underdevelopment in Rumania and
Brazil (Stanford University Press, 1996).
11 Charles P. Kindleberger, German Terms of Trade by Commodity Classes and Areas,
Review of Economics and Statistics 36 (1954), 16774; Larry Neal, The Economics and
Finance of Bilateral Clearing Agreements: Germany, 19341938, Economic History
Review 32 (1979), 391404.
12 Alan Milward, The Reichsmark Bloc and the International Economy, in Edward N.
Peterson, Gerhard Hirschfeld, and Lothar Kettenacker (eds.), Der Fuhrerstaat: Mythos
und Realitat; Studien zur Struktur und Politik des Dritten Reich (Stuttgart: Klett-Cotta,
1981), 377413.
6 Introduction
other words, portrayed German involvement in Southeastern Europe

as imperial in nature, imperialism defined broadly by the intent to exploit
economically.13
Yet just as diplomatic historians turned to informal imperialism to
analyze German trade, studies of empire began moving beyond eco-
nomics to explore questions of race, ideology, and culture. Scholarship
on Nazi imperialism, moreover, began shifting away from the Balkans
and away from the economy, toward Eastern Europe and Russia to
explore the ideological dynamics behind the racial violence of the Second
World War.14 Over time, historians traced the emergence of a German
myth of the East, which juxtaposed German orderliness, efficiency,
and civilization with Slavic dirtiness, disorder, and barbarism.15 They
showed how this myth gained traction before the First World War among
military leaders and pan-Germanists, how it became institutionalized
among radical think-tanks in the 1920s and 1930s, and how, during
the Second World War, the Nazis harnessed this discourse to plan the
deportation of Slavic nationalities.16 More recently, historians have
compared the Third Reich with other empires to see how Germans gov-
erned the non-German nationalities of Europe, and to understand why
empires commit ethnic cleansing.17 Scholars have likewise turned to the
13 Hans-Jurgen Schroder, Sudosteuropa als Informal Empire Deutschlands 19331939:

das Beispiel Jugoslawien, Jahrbucher fur Geschichte Osteuropas 23 (1975), 6183; David
Kaiser, Economic Diplomacy and the Origins of the Second World War: Germany Britain,
France, and Eastern Europe, 193039 (Princeton University Press, 1980); quotation
from William S. Grenzebach, Germanys Informal Empire in East-Central Europe: German
Economic Policy toward Yugoslavia and Rumania 19331939 (Stuttgart: Steiner, 1988),
240.
14 For instance, Omer Bartov, The Eastern Front, 194145: German Troops and the Bar-
barisation of Warfare (Basingstoke: Macmillan, 1985); Woodruff D. Smith, The Ideolog-
ical Origins of Nazi Imperialism (New York: Oxford University Press, 1986); Michael
Burleigh, Germany Turns Eastwards: A Study of Ostforschung in the Third Reich (New
York: Cambridge University Press, 1988).
15 Wolfgang Wippermann, Die Deutschen und der Osten: Feindbild und Traumland
(Darmstadt: Primus, 2007); Vejas Gabriel Liulevicius, The German Myth of the East:
1800 to the Present (New York: Oxford University Press, 2009); Kristin Kopp, Germanys
Wild East: Constructing Poland as Colonial Space (Ann Arbor: University of Michigan
Press, 2012).
16 Ingo Haar und Michael Fahlbusch (eds.), German Scholars and Ethnic Cleansing (New
York: Berghahn Books, 2005); Michael Fahlbusch, Wissenschaft im Dienst der nation-
alsozialistischen Politik? Die Volksdeutschen Forschungsgemeinschaften von 19311945
(Baden-Baden: Nomos, 1999); Ingo Haar, Historiker im Nationalsozialismus: deutsche
Geschichtswissenschaft und der Volkstumskampf im Osten (Gottingen: Vandenhoeck &
Ruprecht, 2000); Michael Wildt, An Uncompromising Generation: The Nazi Leadership of
the Reich Security Main Office, trans. Tom Lampert (Madison: University of Wisconsin
Press, 2009).
17 Mark Mazower, Hitlers Empire: Nazi Rule in Occupied Europe (London: Penguin, 2008);
Timothy Snyder, Bloodlands: Europe between Hitler and Stalin (New York: Basic Books,
cultural and racial aspects of the Wilhelmine Empire, finding precedents

in the 1890s for attitudes about racial hierarchies, violence, and total
solutions that would reemerge in the 1930s and 1940s in more radical
forms.18
These recent shifts in scholarship have generated new ways of think-
ing about trade, international relations, and imperialism. They identi-
fied previously overlooked non-state organizations academic institutes
and think-tanks that influenced policy-making. They introduced ques-
tions of economic development and labor into imperial history. And they
broadened the chronological sweep for studying German imperialism,
highlighting provocative connections between the nineteenth and the
twentieth centuries.19
All of this has raised new questions that need answering in order to
fully grasp the multidimensional nature of German imperialism. If certain
continuities exist between nineteenth-century German attitudes toward
Eastern Europe and the ethnic violence of the Second World War, can
other ones be found to help us understand German ambitions in South-
eastern Europe? Were Serbs, Croatians, or Romanians included in the
increasingly biological racism that Germans used to justify imperialism
in Russia? How can we reconcile Germanys imperial agenda in South-
eastern Europe with the possibility that these states, or at least groups
within these states, may have benefited from economic ties with Ger-
many? By contrast, to what extent did trade or economic development
lead to dependency and exploitation? Finally, and most broadly, how
can we merge a study of economics with culture and ideology to provide
a new picture of German imperialism in the nineteenth and twentieth
centuries?
2010); Jane Burbank and Frederick Cooper, Empires in World History: Power and the
Politics of Difference (Princeton University Press, 2010); John Darwin, After Tamerlane:
The Global History of Empire since 1405 (New York: Bloomsbury, 2008); Ben Kiernan,
Blood and Soil: A World History of Genocide and Extermination from Sparta to Darfur (New
Haven, CT: Yale University Press, 2007).
18 Sebastian Conrad and Jurgen Osterhammel (eds.), Das Kaiserreich Transnational:
Deutschland in der Welt, 18711914 (Gottingen: Vandenhoeck & Ruprecht, 2004); Isabel
Hull, Absolute Destruction: Military Culture and the Practices of War in Imperial Ger-
many (Ithaca, NY: Cornell University Press, 2005); Sebastian Conrad, Deutsche Kolo-
nialgeschichte (Munich: C. H. Beck, 2008); Andrew Zimmerman, Alabama in Africa:
Booker T. Washington, the German Empire, and the Globalization of the New South (Prince-
ton University Press, 2010).
19 Dirk van Laak, Uber alles in der Welt: deutscher Imperialismus im 19. und 20. Jahrhundert
(Munich: C. H. Beck, 2005); Shelly Baranowski, Nazi Empire: German Colonialism and
Imperialism from Bismarck to Hitler (New York: Cambridge University Press, 2011); Uta
Poiger, Imperialism and Empire in Twentieth-Century Germany, special issue of
History and Memory 17, nos. 12 (2005), 11743.
8 Introduction
Informal empire Formal empire
Cultural or economic hierarchy Political hierarchy

Soft power
Networks and incentives Networks and incentives
Cultural or economic hierarchy Political hierarchy

Hard power
Threat and coercion Threat and coercion
Figure 0.1 Matrix of power
Soft power, informal empire, and the

importance of networks
To answer these questions, Export Empire uses the concepts of soft power
and informal empire to trace how Germany translated its economic
and cultural capital in Southeastern Europe into political influence
from the 1890s to the 1940s.20 These concepts fit into a matrix that
describes how one country or group can exert power over another
(see Figure 0.1). Two variables define this matrix. First, how is power
exercised through the hard power of coercion, or through soft power
that relies on networks and incentives? Second, what is the hierarchical
relationship between the two countries is it an economic or a cultural
hierarchy, or is there also an explicitly political one? As the relationship
between these two countries migrates from the top to the bottom of the
matrix, the stronger one increasingly depends on coercion to achieve
its goals. As the relationship moves from left to right from informal
to formal imperialism hierarchies of power between the two countries
become more entrenched and reinforced by political channels.
The type of power a country deploys can change with the context.
Informal empires often rely on both soft and hard power. An example
of the former would be educational exchange programs, in which elites
20 This book avoids the term hegemony, which is commonly used to describe a powerful
nation acting to preserve a liberal international economy as well as the status quo.
During the 1920s and 1930s, the German elites studied here were actively trying to
overturn the status quo, in order to establish an alternative to a liberal global economy.
Robert Gilpin, Global Political Economy: Understanding the International Economic Order
(Princeton University Press, 2001), 94; Robert Keohane, After Hegemony: Cooperation
and Discord in the World Political Economy (Princeton University Press, 2005).
from the periphery study in the universities of the core. An example of

the latter would be the gunboat diplomacy used by nineteenth-century
European states to extract debt repayments from non-Europeans. Formal
empires, likewise, use soft power to justify their rule and ease the cost of
governing their peripheries. Yet because formal empires maintain direct
political administration over other regions or countries possessing the
ability to write laws, appoint government officials, control the police
and the military, and even deport or kill their foreign subjects they
have at their disposal the greatest potential to deploy coercion or hard
power.
This matrix is not a rigid grid, but instead a set of dynamic power rela-
tions. The relationship between two countries can move between quad-
rants, and even occupy more than one at a time. Indeed, the distinction
between these terms is fluid, particularly between the two concepts most
important to this study, soft power and informal imperialism. A coun-
try can use soft power even if it has no imperial ambitions; soft power
does not necessarily lead to informal imperialism, nor must informal
imperialism always be built on soft power. But the two often develop in
tandem and they share important commonalities. According to politi-
cal scientist Joseph Nye, soft power is the ability to get what you want
through attraction rather than through coercion or payments. If hard
power is about using force to get others to accept your goals or policies,
soft power is about convincing people that they want what you want,
that they share your goals, and that your policies will benefit them as
well as you. In international relations, hard power is measured in military
strength, demography, resources, and territory. Soft power, by contrast,
is amorphous and better captured by the ability of a nation to establish
its ideas as legitimate in the eyes of others, and shape the preferences or
policies of other nations and their leaders.21
Informal empire is perhaps an even more amorphous concept than soft
power. John Gallagher and Ronald Robinson, historians of the British
Empire, first introduced the concept in the 1950s to illustrate how
Britain secured markets outside its formal colonies during the nineteenth
century. Their key contribution was conceptualizing imperialism as a
sliding scale that changes with the context, illustrated by their aphorism,
influence by informal means if possible, by formal annexation when
21 Joseph S. Nye, Soft Power: The Means to Success in World Politics (New York: Public
Affairs, 2004), quotation from preface; Jan Zielonka, Europe as Empire: The Nature of the
Enlarged European Union (Oxford University Press, 2006); Peter J. Katzenstein, A World
of Regions: Asia and Europe in the American Imperium (Ithaca, NY: Cornell University
Press, 2005); Victoria de Grazia, Irresistible Empire: Americas Advance through Twentieth
Century Europe (Cambridge, MA: Harvard University Press, 2005).
10 Introduction
necessary.22 Since then the term has been refined, debated, and applied
to numerous case studies, with a particular focus on British involvement
in China and Latin America.23 This has allowed historians to identify
characteristics of informal imperialism, which advance into view or
recede depending on the needs of the imperial power and the larger
context of what is and is not possible.
First, in informal empires the stronger state often maintains military
advisors to influence the weaker states armed forces. Second, nationals
of the stronger state might occupy a preponderant presence in the domes-
tic economy or the foreign trade of the weaker state. This approaches a
monopoly position of owning or supplying the latters most critical sec-
tors, or a monopsony position in purchasing its most strategic exports.
Third, the stronger state, or banks representing the stronger state, can
exercise control over the public finances of the weaker state. Fourth,
the weaker state is frequently a net importer of capital from financial
institutions in the stronger state, to the point of becoming dependent
on this inflow of investment. Fifth, the weaker state may develop a
group of indigenous elites who willingly collaborate and share a com-
mon cosmology with the stronger state, which often revolves around
some project of modernization or development. Through these tactics the
stronger state avoids direct political control but nevertheless exercises the
sixth and most important aspect of informal imperialism: veto power over
the domestic or foreign policies of the weaker state. These characteris-
tics of informal imperialism, in other words, create a power gradient or
hierarchy between two states that the stronger one can exploit.24
Informal imperialism is often economic in nature. Take foreign trade,
for example, which Albert Hirschman identified in 1945 as a potential
instrument of informal power, and which Germany used to great suc-
cess in the Balkans. In National Power and the Structure of Foreign Trade,
Hirschman outlined two dynamics by which trade can further the power
of coercion which one nation may bring to bear upon other nations.25
First, through the supply effect of trade, states can acquire goods that
22 John Gallagher and Ronald Robinson, The Imperialism of Free Trade, Economic
History Review 6, no. 1 (1953), 115.
23 A. G. Hopkins, Informal Empire in Argentina: An Alternative View, Journal of Latin
American Studies 26, no. 2 (1994), 46984; Peter Winn, British Informal Empire in
Uruguay in the Nineteenth Century, Past & Present 73 (1976), 10026.
24 This is a condensed account of Jurgen Osterhammels ten-part definition of infor-
mal empire in, Semi-Colonialism and Informal Empire in Twentieth Century China:
Towards a Framework of Analysis, in Wolfgang Mommsen (ed.), Imperialism and After:
Continuities and Discontinuities (London: Allen & Unwin, 1986), 291314.
25 Albert Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University
of California Press, 1945), 13.
enhance their military power. Second, through the influence effect,

Hirschman showed how the gains from trade can spell dependence of
the country that receives the gain on the country that bestows it. When
a smaller state trades with a larger one the exchange is asymmetrical, in
that it constitutes a much larger percentage of the smaller states overall
trade than it does for the larger country. In such a scenario the small
state has more at stake than the larger one. The latter can exploit this
influence effect by threatening to sever trade with the smaller state, whose
vulnerability depends on the relative ease of finding alternatives for their
exports and imports and the length and painfulness of the readjustment
period.26
The ease with which a nation can exploit trade asymmetry depends
in part on the strength of local elites who have a vested interest in com-
merce with the large state. This is one crucial area where soft power
and informal imperialism overlap. The implicit coercion outlined by
Hirschman becomes more palatable when local elites are willing to col-
laborate with the larger nation because they believe they have something
to gain in material terms. In this sense, soft power can facilitate informal
imperialism.
Soft power and informal imperialism, moreover, operate best where
networks that spread information and build trust connect the more pow-
erful with the less powerful country. Foreign trade and foreign investment
have historically been characterized by problems of information, uncer-
tainty, and high transaction costs. Merchants buying or selling goods in
foreign markets, or international investors seeking destinations for their
capital, need to cope with distance and time and operate between differ-
ent legal codes, languages, and cultures.27 Market transactions, in other
words, are embedded in social and cultural relationships.
Networks, or concrete personal relations, can help overcome these
transaction costs to foreign trade and international investment.28 Just as
importantly, networks that collect and manipulate market information
can channel commerce or investment from one place to another,
26 Ibid., vii, 1734, 923.

27 Avner Greif, Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi
Traders, Journal of Economic History 49, no. 4 (1989), 85782; Avner Greif, Con-
tract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders
Coalition, American Economic Review 83, no. 3 (1993), 52548. For the classic study
on institutions see Douglass C. North, Structure and Change in Economic History (New
York: Norton, 1981), 5, 3340; Mark Casson, Cultural Determinants of Economic
Performance, Journal of Comparative Economics 17 (1993), 41842; Michael Porter,
The Competitive Advantage of Nations (Basingstoke: Macmillan, 1998).
28 Mark Granovetter, Economic Action and Social Structure: The Problem of Embed-
dedness, American Journal of Sociology 91, no. 3 (1985), 481510.
12 Introduction
privileging some groups at the expense of others. Soft power works, in

part, by granting access to knowledge, technology, or market information
to groups who would otherwise have been left out of the material rewards
of empire, with the aim of gaining some degree of their loyalty. Privileged
access to technology or information through business networks, likewise,
can help firms or countries amass monopoly or monopsony positions
in the trade or domestic economy of other states, and it can help
international investors best their rivals in the quest to acquire ownership
of foreign assets, all of which are critical characteristics of informal
imperialism.29
The trajectory of German soft power and

informal imperialism
Although Germans did not use the specific terms soft power or infor-
mal empire, they did employ concepts that were remarkably similar in
meaning to describe their ambitions in Southeastern Europe. Foreign
cultural diplomacy (auswartige Kulturpolitik), for example, referred to
Germanys program of trying to influence the educated elite of other
nations.30 Many Germans, moreover, conceptualized their ambitions in
Southeastern Europe as a kind of imperialism without political control:
Empire Mitteleuropa being the title of one popular pamphlet from the
period.31
Germans first developed ideas for soft power and informal empire in
the 1890s. During the last decades of the Wilhelmine Empire a group
of young intellectuals began laying out a new approach to imperialism
that differed qualitatively from the overseas colonialism, navalism, and
the aggressive Weltpolitik advocated by leaders like Admiral Alfred von
Tirpitz, as well as from the pan-German drive to annex territory in East-
ern Europe. Instead, academics and publicists like Ernst Jackh and Paul
Rohrbach espoused a liberal Weltpolitik, which used cultural diplomacy
and non-state organizations to spread German ideas as well as exports
across Europe, particularly in the Ottoman Empire.32
29 Gary B. Magee and Andrew S. Thompson, Empire and Globalisation: Networks of People,
Goods, and Capital in the British World, 18501914 (New York: Cambridge University
Press, 2010).
30 For instance, Anna Selig, Auswartige Kulturpolitik / Gedanken zur Neuorientierung,
Kolnische Volkszeitung 149 (February 25, 1928), 61124, Kulturabteilung, Politisches
Archiv des Auswartiges Amt (PAAA).
31 Georg Gothein, Empire Mitteleuropa? Die Entwertung der Meistbegunsti-
gungsklausel, p. 85, 6139, R 8119F, BA.
32 Jurgen Kloosterhuis, Friedliche Imperialisten: deutsche Auslandsvereine und auswartige Kul-
turpolitik, 19061918 (Frankfurt am Main: Lang, 1994); Van Laak, Uber alles in der Welt.
Despite Germanys general economic successes, before 1914 soft

power policies were of secondary importance to leading decision-makers,
who relied primarily on traditional approaches to foreign affairs. Before
1911 a hard power Weltpolitik, which used the navy as a tool of intimi-
dation, held sway within the diplomatic circles of Wilhelmine Germany.
After 1911 German leaders worried that navalism and the aggressive
search for colonies in Africa had led to Germanys diplomatic encir-
clement. As a result, they retreated to a continental strategy of hard
power, expanding German influence by building the largest army in
Europe and reinforcing its diplomatic alliance with the Habsburg Empire.
Both strategies contributed to the First World War, where military aggres-
sion and hard power took precedence over soft power. Under the Treaty
of Brest-Litovsk, the effort of Germanys liberal imperialists to create
an informal system of client states in Eastern Europe fell by the way-
side. Instead, the more fantastic visions for territorial annexation won
the day as German troops occupied vast stretches of western Russia, and
rightwing pan-Germans and military leaders began planning the depor-
tation of Poles and Jews on a mass scale.33
The aftermath of the war, however, created the conditions in which
German elites could more effectively translate ideas for soft power
into policy. Given the restrictions imposed by the Treaty of Versailles
on Germanys military, the loss of its navy, overseas colonies, and
foreign assets, Germany had few channels left to engage in foreign
relations. Its large domestic market, its proficiency in exporting high-end
products, and to a lesser extent its cultural reputation damaged during
the war but not irreparably so were three areas where Germany
retained the trappings of a great power. For a defeated state like
Germany, which must forgo nearly all its military defenses, argued a
high-level government official in the 1920s, trade policy remains almost
the only instrument to push back the unjustified interests of foreign
countries.34
After the war Germans were divided over the geography of any new
trade drive or cultural outreach. Many hoped to rebuild Germanys rep-
utation by reintegrating their nation into the global, and above all the
33 Brendan Simms, Europe: The Struggle For Supremacy from 1453 to the Present (New York:
Basic Books, 2013), 26591; Volker Berghahn, Germany and the Approach of War in 1914
(New York: St. Martins Press, 1973). On Brest-Litovsk see Adam Tooze, The Deluge: the
Great War and the Remaking of Global Order 19161931 (London: Allen Lane/Penguin,
2014), 10840.
34 Hans Posse, Under-Secretary of the Economics Ministry, 2 Denkschrift zur Han-
delspolitik der Reichsregierung 1924/25, Hans Posse N 1303, Bundesarchiv Koblenz
(BAK).
14 Introduction
Atlantic, community.35 Others, led by an eclectic group of German elites

from Saxony and the Ruhr, looked to Southeastern Europe as a region
they could dominate and a hinterland from which they could restore
German economic power. These were Germanys most industrialized
regions, heavily dependent on foreign markets, and hard hit by post-
war economic restructuring. Elites from Saxony drew on what they saw
to be a historical connection between Leipzig or Dresden and South-
eastern Europe to stake a claim as Germanys gateway to the Balkans.
Many businessmen from the Ruhr, home to industrial conglomerates that
feared competition from American mass production, saw their future to
lie in a protected continental market.36
Yet in 1920 Germany was in no position to dictate terms to South-
eastern Europe. After World War I, France, Britain, Austria, and Italy
all claimed spheres of influence in Southeastern Europe. Western Euro-
pean capital moved rapidly into these states in the 1920s, reconstruction
loans giving France and Britain control over the central banks and state
budgets of countries like Romania and Yugoslavia. France orchestrated a
security system in the Balkans that it supported with cultural diplomacy.
Austria expanded its traditional relations with the business communi-
ties in Southeastern Europe, and Vienna functioned as a financial hub
connecting the Balkans to Western Europe.37 Compounding the compe-
tition from other European powers was the poor state of Germanys own
relationship with Yugoslavia and Romania immediately after World War
I. In 1920 Germanys network of trade representatives in Southeastern
Europe was in a shambles. Its foreign investment a traditional tool of
European imperialism38 had been confiscated during the war. And the
35 Udi Greenberg, Germanys Postwar Re-education and its Weimar Intellectual Roots,
Journal of Contemporary History 46, no. 1 (2011), 1032; Robert Boyce, The Great
Interwar Crisis and the Collapse of Globalization (Basingstoke: Palgrave Macmillan, 2009);
Tooze, Wages of Destruction, introduction.
36 James Retallack (ed.), Saxony in German History: Culture, Society, and Politics, 1830
1933 (Ann Arbor: University of Michigan Press, 2000); Benjamin Lapp, Revolution
from the Right: Politics, Class, and the Rise of Nazism in Saxony, 19181933 (Atlantic
Highlands, NJ: Humanities Press, 1997); Ulrich Hess and Michael Schaffer (eds.),
Unternehmer in Sachsen: Aufstieg Krise Untergang Neubeginn (Leipzig University
Press, 1998); Werner Bramke and Ulrich Hess (eds.), Sachsen und Mitteldeutschland:
politische, wirtschaftliche und soziale Wandlungen im 20. Jahrundert (Weimar: Bohlau,
1995).
37 Alice Teichova, Kleinstaaten im Spannungsfeld der Grossmachte, Wirtschaft und Politik in
Mittel- und Sudosteuropa in der Zwischenkriegszeit (Munich: Oldenbourg, 1988); Alice
Teichova and P. L. Cottrell (eds.), International Business and Central Europe, 19181919
(Leicester University Press, 1983).
38 John Darwin, The Empire Project: The Rise and Fall of the British World System, 18301970
(New York: Cambridge University Press, 2009), 11224; Lance E. Davis and Robert
A. Huttenback, Mammon and the Pursuit of Empire: The Economics of British Imperialism
(New York: Cambridge University Press, 1986).
legacy of German wartime occupation had left an atmosphere of distrust

among local elites.
By 1938 this situation had changed dramatically and Germany came to
possess an informal economic empire in Southeastern Europe.39 Explain-
ing how this transformation happened is a guiding question of this book.
Trade was the pivotal factor. By the end of the decade Germany was the
single largest trading partner with all of these small, agrarian economies
and it dominated the supply of strategic goods to this region.40
Trade and commercial power cannot be understood by only exam-
ining state-to-state interactions or the intentions of political leaders. At
its core, trade is about private transactions, about buyers finding sellers.
This remained the case, albeit with limitations, throughout the 1930s.
Although the state intervened in ever more extensive swaths of the econ-
omy after 1929, both in Germany and in Southeastern Europe, the basic
building blocks of trade remained private actors. By the 1930s the state
may have dictated the broader goals of the economy and even set some
prices, but firms and other private institutions gathered the information,
evaluated the price signals, and made decisions that in the aggregate
affected the shape and substance of foreign trade.41
39 In the estimation of German policy-makers, before German armies had fired a single
shot in Southeastern Europe, the region had become a secure pillar of Germanys con-
tinental economic bloc. Memo by Karl Ritter of the Foreign Office, June 1, 1940, doc.
622, in J. Noakes and G. Pridham (eds.), Nazism 19191945: A Documentary Reader,
vol. III: Foreign Policy, War and Racial Extermination (Exeter University Publications,
1988).
40 The literature on German trade in Southeastern Europe is vast. Some of the most impor-
tant studies include Holm Sundhaussen, Die Weltwirtschaftskrise im Donau-Balkan-
Raum und ihre Bedeutung fur den Wandel der deutschen Auenpolitik unter Bruning,
in W. Benz und H. Graml (eds.), Aspekte deutscher Aussenpolitik im 20. Jahrhundert
(Stuttgart: DVA, 1976), 12164; Dirk Stegmann, Mitteleuropa 19251934: zum Prob-
lem der Kontintuitat deutscher Aussenhandelpolitik von Stresemann bis Hitler, in
Bernd-Jurgen Wendt and Peter-Christian Witt (eds.), Industrielle Gesellschaft und politis-
ches System (Bonn: Verlag Neue Gesellschaft, 1978), 20321; Hans-Jurgen Schroder,
Die deutsche Sudosteuropapolitik 19291936: zur Kontinuitat deutscher Aussenpoli-
tik in der Weltwirtschaftskrise, Geschichte und Gesellschaft 2, no. 1 (1976), 532; Bernd-
Jurgen Wendt, England und der deutsche Drang nach Sudostens: Kapitalbeziehungen
und Warenverkehr in Sudosteuropa zwischen den Weltkriegen, in Immanuel Geiss and
Bernd-Jurgen Wendt (eds.), Deutschland in der Weltpolitik des 19. und 20. Jahrhunderts
(Dusseldorf: Bertelsmann Universitatsverlag, 1973), 483512.
41 This study draws on recent literature that suggests the Third Reich was not totalitarian,
insofar as private economic actors retained some autonomy throughout the 1930s. S.
Jonathan Wiesen, Creating the Nazi Marketplace: Commerce and Consumption in the Third
Reich (New York: Cambridge University Press, 2011), 121, 19; Francis R. Nicosia and
Jonathan Huener (eds.), Business and Industry in Nazi Germany (New York: Berghahn
Books, 2004). For an overview of the debate on how National Socialism changed the
incentives governing German business, see Peter Hayes, Corporate Freedom of Action
in Nazi Germany, and the response by Christoph Buchheim and Jonas Scherner, in
Bulletin of the German Historical Institute 45 (2009), 2941.
16 Introduction
When examined from this non-state perspective, different challenges

to German influence in the Balkans move to center stage, and a dif-
ferent set of actors emerge as the driving force behind German power.
Most importantly, during the 1920s and 1930s differences in language,
customs, legal practices, and the availability of information were major
barriers to trade in Southeastern Europe. Trade treaties and diplomatic
negotiations could only go so far in surmounting these cultural and
informational problems. Instead German businessmen, publicists, and
academics responded by building an elaborate network of institutions
that shared information and cultivated trust. The Leipzig trade fair, the
largest fair in the world, constructed a sprawling network of represen-
tatives throughout the Balkans, which they managed from their busi-
ness office in Belgrade. The GermanRomanian chambers of commerce
in Bucharest and Berlin worked as informational clearinghouses that
helped merchants from Transylvania and elsewhere tap into the Ger-
man market. The Mitteleuropaische Wirtschaftstag an association of
business elites, both German and non-German held conferences to
reduce trade barriers and organized educational exchange programs and
development projects in the Balkans. The Mitteleuropa-Institut (MEI)
supported a network of publicists and press agents in Yugoslavia and
Romania, through which it used cultural exchange to promote exports.
Academic institutes in Leipzig and Dresden pioneered the area studies
of Southeastern Europe, giving German government officials and busi-
nessmen detailed knowledge of the regions commercial structure and
opportunities.42 These transnational networks complemented the trade
treaties and clearing agreements that Germany arranged with Yugoslavia
and Romania in the 1930s. More importantly, they were denser than
those built by their French and British rivals, helping Germans achieve
near monopoly and monopsony positions in key economic sectors of
Southeastern Europe.
Germans used these networks and institutions not only to expand
commercial ties with the Balkans, but also to project soft power in
the region, two goals that were intimately intertwined. If examining
networks and private actors clarifies how Germany achieved its trade
42 Carl Freytag, Deutschlands Drang nach Sudosten: der Mitteleuropaische Wirtschaftstag

und der Erganzungsraum Sudosteuropa 19311945 (Vienna University Press, 2012);
Carola Sachse (ed.), Mitteleuropa und Sudosteuropa als Planungsraum: Wirtschafts-
und kulturpolitische Expertisen im Zeitalter der Weltkriege (Gottingen: Wallstein Verlag,
2010); Matthias Middell, Weltgeschichtsschreibung im Zeitalter der Verfachlichung und
Professionalisierung: das Leipziger Institut fur Kultur- und Universalgeschichte, 1890
1990 (Leipzig: Akademische Verlags-Anstalt, 2005), 496501; Johannes Irmscher,
Das Leipziger Sudosteuropa-Institut: eine Wissenschaftliche Einschatzung, Byzantine
Studies 12 (1985), 1439.
preponderance in Southeastern Europe, it can also explain why many

elites in the Balkans came to accept dependency on Germany.43 As they
grew in size and influence, German fairs and chambers of commerce
controlled access to market information, and thereby favored some
groups at the expense of others. While these organizations included
German nationals and German minorities in Romania and Yugoslavia,
they also actively incorporated ethnic Croatians, Serbians, and Roma-
nians both before and after the Nazi rise to power. The losers in
this scenario were Jews, whom Germans excluded from the regions
commercial networks after the mid 1930s. Through cultural diplomacy
programs that brought young businessmen, academics, and engineers
from the Balkans to study in German universities Germans promoted
the ideology of German business: cutting-edge technology built on a
foundation of efficiency, adaptability, and reliability. Here too German
business elites actually downplayed pan-German nationalism in order
to reach out to the non-German nationalities of Southeastern Europe,
a policy that would eventually place these organizations in tension with
the hyper-nationalistic leaders of the Nazi Party.44 And after 1935,
through development programs Germans tried to transform the Balkan
economies into more efficient producers of grain, ores, and oil. In doing
so, German organizations promoted ideas about economic develop-
ment that resonated with certain agrarian and commercial elites of
Southeastern Europe, who depended on exports for their own livelihood.
Germanys transnational networks and soft power in Southeastern
Europe helped create an informal trading empire that emerged by the
end of the 1930s through 1941. After Germany annexed Austria in
1938, it began to develop other aspects of informal imperialism beyond
trading preponderance. German capital finally penetrated the region.
German military, financial, and economic advisors gained influence in
43 The Yugoslavian ambassador to London, Joca Jovanovic: [Yugoslavia] should con-

clude not only a trade and a transportation treaty [with Germany], but also a security
agreement . . . I am convinced that Russia and the Germany of tomorrow will deter-
mine the fate of the European continent. Therefore we must have the best relations
with Germany. Report from Dr. Schmidtlein on German business in Yugoslavia, April
21, 1927, 43085, Economic relations with Yugoslavia, R 901, BA.
44 Historians have documented how Germany used cultural diplomacy to spread its
volkisch, anti-Slavic ideology abroad, and imbue German minorities with a sense of
loyalty toward the Third Reich. And this was certainly one aspect of German cultural
diplomacy during the 1920s and 1930s. But this book argues that not all Germans
saw cultural diplomacy exclusively, or even primarily, as a building block for a new
Aryan racial order in Europe. On the volksich currents of cultural diplomacy see
Haar and Fahlbusch, German Scholars; Matthias Beer and Gerhard Seewann (eds.),
Sudostforschung im Schatten des Dritten Reich Institutionen Inhalte Personen (Munich:
Oldenbourg, 2004).
18 Introduction
Romania. Through these channels the Third Reich was able to exercise
indirect coercion over Yugoslavia and Romania, prying them out of their
diplomatic alliance with France and gaining ever greater control over
their raw materials.
German imperialism compared

Germanys informal empire eventually came to aid and abet Hitlers
war machine. Yet the architects of informal imperialism in Southeastern
Europe Hjalmar Schacht, Tilo Freiherr von Wilmowsky, Max Hahn,
Georg Gothein, Raimund Kohler, Paul Voss, Hermann Gross differed
in their methods and their ultimate goals from Hitler and other leading
Nazis, who extolled violence as the best way to exert power, and who
wanted to create a racially pure, formal empire in Europe. Indeed, these
business and academic elites arguably belong to a different German
imperial tradition that stretches back to the 1890s, if not earlier.45 In
contrast to the advocates of soft power, Hitler and his closest advisors
believed Germany was in a life-or-death struggle against the other
leading races of the world, including Jews, Slavs, and, in a different
way, Anglo-Americans. In Hitlers mind this struggle was a zero-sum
game, and the crucial limitation on Germany was its lack of land and
resources. As a populous and growing nation, Germans were forced to
emigrate or move to teeming urban metropolises instead of colonizing
land to the east, where Hitler intended to subjugate or destroy the
resident nationalities and forge a racially pure Germanic Volk. Hitler
believed that only the conquest of territory, resources, and living space
through warfare formal imperialism and hard power would solve
Germanys fundamental economic challenges and allow it to become a
global power. For the Nazis foreign trade was at best a secondary tool
to achieve other ends, at worst pathological and dangerous. It was
never a permanent basis for Germanys security or power. World trade,
world economy, Hitler argued in his second, unpublished book in 1928
. . . are all transient means for securing a nations sustenance. They are
dependent upon factors which are partly beyond calculation, and which,
on the other hand, lie beyond a nations power.46
Despite these diverging views on trade, the Nazis did make use of the
commercial networks and soft power German institutions had cultivated
45 Van Laak, Uber alles in der Welt; Matthew Fitzpatrick, Liberal Imperialism in Germany:
Expansionism and Nationalism, 18481884 (New York: Berghahn Books, 2008).
46 Gerhard Weinberg, Hitlers Second Book: The Unpublished Sequel to Mein Kampf (New
York: Enigma Books, 2003), ch. 2; Konrad Jarausch and Michael Geyer, Shattered Past:
Reconstructing German Histories (Princeton University Press, 2003), 11148.
since the 1920s. This book traces the intertwining of Germanys two
imperial traditions: locating the instances where they found common
ground, as well as the places where they rubbed against one another
and came into conflict, such as the militarization of economic life,
development assistance, pan-German nationalism, and anti-Semitism.
Germanys imperial projects, however, should be examined not only
against each other, but also against the European empires of the early
twentieth century, which both Hitler and the advocates of soft power
looked to as models. Comparing German imperial techniques with other
global empires can normalize certain aspects of German power while
highlighting other practices that were unique. For one, modern empires
from Great Britain to Americas Cold War imperium have all drawn
on, or alternatively have themselves created, networks for expansion-
ary purposes. Germany was no exception. As Gary Magee, Andrew
Thompson, and others have pointed out, empires are often built by
non-state hands and imperial power rests on interlocking networks or
webs of private elites, in the center and periphery alike, who share some
common interest in upholding their imperial system.47 Anglo-Saxon set-
tlers, for instance, spread throughout the British Empire to Canada,
Australia, and South Africa, forming a web of human connections
based on a common language and culture. These settlers, in turn, trans-
ferred information, capital, technical know-how, and consumer tastes
throughout the empire, privileging their fellow Anglo-Saxons at the
expense of indigenous groups and other foreign merchants, and deep-
ening commercial ties with the imperial core in Great Britain. These
networks even extended to parts of Latin America and the United States,
which did not formally belong to the British Empire, but where British
merchants enjoyed commercial advantages that stemmed from cultural
and linguistic ties.48
Germans cultivated cultural, economic, and informational ties with
Serbs, Croats, and Romanians. Yet, as with the British Empire, one
important bridgehead for German commercial expansion was the pres-
ence of ethnic kinsmen. Since their settlement in the Middle Ages and
in the eighteenth century, the German communities of Southeastern
47 Magee and Thompson, Empire and Globalisation, 619; Ronald Hyam, Britains Imperial
Century, 18151914: A Study of Empire and Expansion (New York: Palgrave Macmillan,
2002); Charles Maier, Among Empires: American Ascendance and its Predecessors (Cam-
bridge, MA: Harvard University Press, 2006), 316, 616.
48 Quotation from Darwin, The Empire Project, 43, also 438, 14758; James Belich, Replen-
ishing the Earth: The Settler Revolution and the Rise of the Anglo World, 17831939 (New
York: Oxford University Press, 2009), 45164; Magee and Thompson, Empire and Glob-
alisation, 2244, 13748; Daniel Gorman, Imperial Citizenship: Empire and the Question
of Belonging (Manchester University Press, 2006).
20 Introduction
Europe had been locked into trading networks with merchant commu-
nities farther west. Before 1914 these German communities hardly fea-
tured in the strategies of the Wilhelmine Empire, nor did they necessarily
see themselves as ethnic Germans per se or as minorities. But with the
fragmentation of the Habsburg Empire after 1918 they slowly began to
solidify a collective identity as German minorities in non-German states,
and they became a novel foreign policy tool for the Weimar Republic and
the Third Reich.49 By the 1920s the Germans in Transylvania, Slavonia,
Vojvodina, the Banat, and elsewhere were typically more literate and sig-
nificantly more involved in industry and trade than their Serb, Croatian,
or Romanian counterparts. These minorities were well suited, in other
words, to be made into intermediaries for German products, informa-
tion, and technology, as well as political influence.50
Second, after 1900 European empires began relying on non-state orga-
nizations and international institutions to pursue foreign policy goals.
Following the First World War non-state organizations proliferated so
quickly that some historians have dated the emergence of an interna-
tional society to the 1920s.51 These institutions collaborated closely with
49 Mazower, Hitlers Empire, 358; Winson Chu, The German Minority in Interwar Poland
(New York: Cambridge University Press, 2012), 4950; Michael Fahlbusch, Wo der
deutsche . . . ist, ist Deutschland: die Stiftung fur Deutsche Volks- und Kulturbodenforschung
in Leipzig 19201933 (Bochum: Brockmeyer, 1994), 36; Glenn Penny, Ambiguities,
Fractures and Myopic Histories: Recent Work on German Minorities in Twentieth-
Century Eastern Europe, Contemporary European History 23, no. 1 (2014), 13549;
quotation from Martyn Rady, The German Settlement in Central and Eastern Europe
during the High Middle Ages, in Roger Bartlett and Karen Schonwalder (eds.), The
German Lands and Eastern Europe (New York: St. Martins Press, 1999), 1147; Roger
Bartlett and Bruce Mitchell, State-Sponsored Immigration into Eastern Europe in the
Eighteenth and Nineteenth Centuries, ibid., 91114.
50 In northern Yugoslavia, for instance, 14 percent of the German population was engaged
in agriculture, compared with an average of 70 to 80 percent for the country as a
whole. Gunter Schodl, Lange Abschiede: Die Sudostdeutschen und ihre Vaterlander,
in Gunter Schodl (ed.), Deutsche Geschichte im Osten Europas: Land an der Donau
(Berlin: Siedler, 1992), 6425; Holm Sundhaussen, Die Deutschen in Kroatien-
Slawonien und Jugoslawien, ibid., 31834; Arnold Suppan, Untersteirer, Gottscheer
und Laibacher als deutsche Minderheit zwischen Adria, Karawanken und Mur (1918
1948), in Arnold Suppan (ed.), Deutsche Geschichte im Osten Europas: Zwischen Adria
und Karawanken (Berlin: Siedler, 1992), 3689; Johann Bohm, Hitlers Vasallen: der
Deutschen Volksgruppe in Rumanien vor und nach 1945 (Frankfurt am Main: Peter Lang,
2006).
51 Akira Iriye, Global Community: The Role of International Organizations in the Making of
the Contemporary World (Berkeley: University of California Press, 2002), 926; Paul
Kennedy, The Parliament of Man: The Past, Present, and Future of the United Nations
(New York: Vintage, 2006), 350; John Boli and George M. Thomas (eds.), Constructing
World Cultures: Non-Governmental Organizations since 1875 (Stanford University Press,
1999); Daniel Gorman, The Emergence of International Society in the 1920s (New York:
Cambridge University Press, 2012), 121. On the longer trajectory of internationalist
imperial governments, and they largely subscribed to an ideology of pro-

gressive liberalism that sought to improve cooperation between states on
the basis of democratization and the freeing of global markets. Advo-
cates of internationalism hoped to accomplish their goals by forming
interpersonal networks between private citizens and midlevel officials.
Yet in important respects the internationalism of the 1920s promoted
not an egalitarian playing field among nations, but rather an Anglo-
American world order with some French interests thrown in. The League
of Nations, for instance, grew out of Woodrow Wilsons vision and British
imperialists desire to preserve their empire. During the 1920s the League
promoted free trade and investment as well as the gold standard prac-
tices that benefited American and British producers and bankers more
than anyone else. And many of the key positions in its technical bureau-
cracy went to British and French officials.52
Germany participated in the international society of the 1920s, in part
by working with American, British, or French organizations, but also by
pursuing an alternative to Anglo-American and French internationalism.
During these decades Germany, largely shut out of the high apparatus of
the League, cultivated its own internationalism in the hopes of making the
nation an alternative pole of attraction to London, Paris, or Washington.
Many of the same concerns driving the transnational turn in Britain and
America also propelled Germans in their institution-building, including
a belief in the power of interpersonal contacts to create new foreign pol-
icy opportunities. In contrast to the global liberal order promoted by
Anglo-American institutions, many Germans pursued a regional interna-
tionalism that focused on Central and Southeastern Europe in order to
overturn, not preserve, the status quo.
Third, empires have often used ethnicity and race to justify a certain
division of labor, reserving the labor-intensive, underpaid work needed
to produce export cash crops for groups deemed to be inferior. European
leaders often made these claims with the help of economic development
thought, see David Armitage, Foundations of Modern International Thought (Cambridge

University Press, 2013).
52 Paris was home to many non-state organizations, and French elites held the command-
ing heights of numerous international institutions both inside and outside the League.
Susan Pedersen, Back to the League of Nations: Review Essay, American Historical
Review 112, no. 4 (2007), 10911117; Mark Mazower, No Enchanted Palace: The End
of Empire and the Ideological Origins of the United Nations (Princeton University Press,
2009); Mark Mazower, An International Civilization? Empire, Internationalism and
the Crisis of the Mid-Twentieth Century, International Affairs 82, no. 3 (2006), 553
66; Patricia Clavin, Securing the World Economy: The Reinvention of the League of Nations
(Oxford University Press, 2013); Mary Nolan, The Transatlantic Century: Europe and
America, 18902010 (Cambridge University Press, 2012), 76103.
22 Introduction
programs, which created bonds of dependency between the imperial core

and the periphery.53 In the 1890s British and French colonial officials, for
instance, began using the language of development in the colonies to con-
solidate their empires economically. Three decades later in the Colonial
and Development Act of 1929 Britain formalized this policy, reserving
for the British Isles industrial production and financial services, while
relegating raw material and agricultural production to the non-white
colonies, where the indigenous workers were frequently characterized as
docile and particularly suited to the dull, monotonous tasks of hard
labor.54 Germans used development programs in the Balkans in simi-
lar ways to achieve similar goals. They aimed to intensify the exchange
of German machinery for raw materials, which Croatians, Serbs, and
Romanians were allegedly perfectly suited to produce.
Yet comparisons between modalities of German imperialism and other
empires can only go so far. For one, after 1933 German soft power under
the Nazis developed a darker side that was absent in other empires:
anti-Semitism. Many of Germanys private organizations came to partic-
ipate in Aryanization or the forced removal of Jews from commerce.
This pillar of Nazi ideology actually appealed to technocratic leaders and
radical rightwing parties in Southeastern Europe, particularly in Roma-
nia, where indigenous anti-Semitism had deep roots. Indeed, Germanys
drive to Aryanize commercial affairs became one important message
of German soft power.55
Second, Germanys informal imperialism helped make possible a hor-
rifically violent war in Europe itself. The war took German methods of
exploitation to new extremes, it brought colonial-style rule to the con-
tinent, and it provided the space for Nazi leaders to implement their
53 Gilbert Rist, The History of Development: From Western Origins to Global Faith (New York:
Zed Books, 2008); D. K. Fieldhouse, The West and the Third World: Trade, Colonialism,
Dependence, and Development (Oxford: Blackwell, 1999); Nils Gilman, Mandarins of
the Future: Modernization Theory in Cold War America (Baltimore, MD: Johns Hopkins
54 Stephen Constantine, The Making of British Colonial Development Policy 19141940
(London: F. S. Cass, 1984); quotation from Michael Adas, The Burma Delta: Eco-
nomic Development and Social Change on an Asian Rice Frontier, 18521941 (Madison:
University of Wisconsin Press, 2011), 10521; Alice Conklin, A Mission to Civilize: The
Republican Idea of Empire in France and West Africa, 18951930 (Stanford University
Press, 1997).
55 Ingo Kohler, Business as Usual? Aryanization in Practice, 19331938, and Con-
stantin Goschler, The Dispossession of the Jews and the Europeanization of the Holo-
caust, in Hartmut Berghoff, Jurgen Kocka, and Dieter Ziegler (eds.), Business in the Age
of Extremes: Essays in Modern German and Austrian Economic History (New York: Cam-
bridge University Press, 2013), 17288, 189204; Jean Ancel, The Economic Destruction
of Romanian Jewry (Jerusalem: Yad Vashem, 2007); Joseph Rothschild, East-Central
Europe between the Two World Wars (Seattle: University of Washington Press, 1974), 10.
principles of biological racism. With Operation Barbarossa in 1941, the

Third Reich embarked on a war of annihilation in Eastern Europe, char-
acterized as a struggle for life or death, Germans against Jews, Slavs,
and Communists. Germanys informal empire enabled Hitler and Hein-
rich Himmler to pursue their quest of reordering the ethnic landscape
of Europe in a manner that surpassed the racial typologizing of other
European empires.56
After 1942 soft power and informal empire had little place in the New
Order that Hitler aimed to create through war. In Romania, the Nazis
continued to rely in part on techniques designed by advocates of soft
power during the 1920s and 1930s. But even here, German policy dis-
rupted the economy and severely curtailed Romanias contribution to the
war. Elsewhere in Europe, Hitlers military campaigns and ethnic cleans-
ing marked the apogee of Germanys turn toward hard power and formal
empire, even more so than during the First World War. In Yugoslavia,
Hitler backed a violently racist regime and ignited a civil war that turned
the region into an economic dead zone.
Ultimately, German imperialism led to a catastrophe that defies
description. For the German economy, after 1942 German policies
in Southeastern Europe were counterproductive in comparison with
those used before 1939. For the inhabitants of the Balkans, these
policies were downright disastrous, leading to the death of millions
750,000 in Romania; over 1 million in Yugoslavia, higher according to
some estimates57 and a deep-rooted trauma for all parties involved.
The exponents of German soft power directly contributed to these
calamities by helping Nazi Germany secure the neutrality and resources
of Southeastern Europe before 1939, and rearm for war. This book tells
the story of how a vision of German influence in the world based on
exports and soft power was slowly and incrementally put in the service
of a violent, racist regime bent on territorial conquest and war.
56 Mazower, Hitlers Empire; Wendy Lower, Nazi Empire Building and the Holocaust in
Ukraine (Chapel Hill: University of North Carolina Press, 2005); Eric D. Weitz, A
Century of Genocide: Utopias of Race and Nation (Princeton University Press, 2003).
57 Keith Lowe, Savage Continent: Europe in the Aftermath of World War II (New York: St.
Martins Press, 2012), 1217; John Keegan (ed.), The Collins Atlas of World War II (New
York: Collins, 2006).
Part I
German power in the Wilhelmine Empire

and the Weimar Republic
1 The legacy of Wilhelmine imperialism and
the First World War, 18901920
The Germans excel in the sedulous adaptation of their manufactures to

local needs, high and low. They are quick to take account of differences
in climate, of taste and custom, and even superstition . . . And with equal
patience they get to know enough of the business affairs of individual
traders to be able to sell with relatively small risk on long credit, where
Englishmen sometimes demand prompt payment. In all this they are
much aided by their industry in acquiring languages of Eastern Europe,
Asia, and South America. Even in markets in which English is spoken
they push their way by taking trouble in small things to which the
Englishman will not always bend.1
Before 1914 the empires of Europe governed nearly two-thirds of the

worlds population. These empires differed vastly from one another:
Britains multifaceted imperial system with its dominions and its crown
jewel of India seemed a world apart from Portugals maritime posses-
sions or the vast Eurasian land imperium of Russia. And these empires
had changed over the course of the long nineteenth century, as Euro-
peans carried out wave after wave of territorial annexation in Africa and
Southeast Asia, and as they presided over an explosion of global trade,
international investment, and migration that connected imperial cores
and peripheries in ever denser webs of entanglement. By the early twen-
tieth century, across much of the globe imperial rule of one form or
another was the norm rather than the exception.2
Germans came late to the struggle for empire. Even after Prussia uni-
fied Germany in 1871 relatively few intellectuals or politicians displayed
serious interest in acquiring overseas colonies or expanding German ter-
ritory within Europe. Yet over the next four decades attitudes gradually
1 The British economist Alfred Marshall on Germanys trade before World War I, from
Industry and Trade, cited in Gary Herrigel, Industrial Constructions: The Sources of
German Industrial Power (Cambridge University Press, 1996), 42.
2 Jurgen Osterhammel, The Transformation of the World: A Global History of the Nineteenth
Century (Princeton University Press, 2014), 392468; Burbank and Cooper, Empires in
World History, 287369.
27
28 German power
changed, and Germans developed a variety of imperial repertoires or tra-

ditions in the hopes of acquiring the colonies, markets, raw materials, and
prestige they thought their now populous and highly industrialized nation
deserved. Between 1880 and 1918 two related traditions rose to predom-
inance, both of which aspired to formal empire and both of which relied
primarily on hard military power to achieve their goals. The first imperial
policy to emerge a hard Weltpolitik looked beyond Europe as Germany
entered the scramble to carve up Africa after 1884, as it acquired colonies
and spheres of influence in the South Pacific and China, and as it built one
of the worlds most feared navies to project influence abroad. Over time,
though, the realities of overseas expansion and naval power failed to live
up to the fantastic expectations of the 1880s and 1890s, and Germanys
imperial ambitions began turning toward Europe itself. After the turn
of the century elites in the military, in rightwing nationalist associations,
and in certain industrial circles began calling for major enlargements
to the army, and they began dreaming of formal expansion in Eastern
Europe, to give Germany new territory for its growing population. This
vision for a continental empire found concrete expression in Germanys
war aims during the First World War and in the Treaty of Brest-Litovsk
of 1918, in which Germany annexed huge tracts of the Russian Empire.3
Both traditions of formal empire-building through hard power the
hard naval Weltpolitik and the continental strategy aimed to secure for
Germany a seat among the Great Powers of the world, the entry card
for which seemed to be colonial territory that could guarantee labor,
raw materials, and status. During these same years, however, a third
incipient yet distinct tradition of imperialism was also emerging alongside
these two visions of hard power and formal expansion. This was a liberal
Weltpolitik that focused not on colonies and the navy but on commerce as
the basis of national power. The proponents of this approach publicists
and intellectuals like Ernst Jackh, Paul Rohrbach, Julius Wolff, and Karl
Lamprecht wanted to employ cultural diplomacy to enhance German
influence and prestige abroad and to promote German exports. And they
worked through new private, transnational associations that had formed
after 1900 to deepen Germanys personal connections with the elites of
other nations, both inside and outside Europe.4
It was this third imperial tradition a liberal Weltpolitik of commerce,
cultural diplomacy, and transnational networks that many business
3 Simms, Europe, 26591; Paul Kennedy, The Rise and Fall of the Great Powers (New York:
Vintage, 1987), 20915; Baranowski, Nazi Empire, 966; Berghahn, Germany and the
Approach of War.
4 One historian has called these organizations and elites who led them peaceful imperial-
ists, Kloosterhuis, Friedliche Imperialisten.
Wilhelmine imperialism and the First World War 29
elites and intellectuals would hearken back to after 1918, in order to revive
German influence in Southeastern Europe. They believed that before
Germany could project commercial and cultural influence abroad what
today we would call soft power it needed to form personal and profes-
sional networks that could gather information, build trust, and cultivate
Germanys image through face-to-face interactions. Chapter 1 traces the
slow rise of this softer tradition of Weltpolitik before 1914, its demise dur-
ing the First World War, and the emergence of conditions that convinced
Germans that they urgently needed to resurrect and expand this tradi-
tion to compete in a world of globe-spanning empires and continental
markets.
Indeed, before 1918 liberal Weltpolitik remained a minority view among
German policy-makers. Germanys hard power policies in the First World
War, moreover, destroyed the nascent institutional foundations that lay
behind this approach, including the trade contacts, the cultural initiatives,
and the transnational networks that had made Wilhelmine Germany the
largest commercial partner with Southeastern Europe before 1914, as
well as a cultural center for Balkan elites. Germanys harsh wartime
occupation in Serbia and Romania alienated local elites and business-
men. The war dismantled Germanys consular system, its network of
trade agents, and the many private associations operating in the region.
Under the postwar treaties Yugoslavia and Romania confiscated German
investment and nationalized German banks in Bucharest, Belgrade, and
Zagreb. After the war Germanys hyperinflation damaged the reputation
of its merchants and its goods abroad. Contemporaries recognized the
gravity of the situation and found little reason for optimism. Indeed,
before 1925 German trade with Southeastern Europe was tiny in com-
parison to what it had been before the war, Germany exercised little soft
power in the region, and its relations with Romania and Yugoslavia could
hardly be classified as imperial.5
Historians have pointed to several explanations for Germanys under-
whelming economic relationship with the Balkan states following the
First World War. Most generally, some see it as part of a general stag-
nation Germany experienced in its exports and imports during the first
half of the 1920s.6 More specifically, scholars have problematized the
5 In 1924 German exports and imports to Yugoslavia were just 62 million RM and 45.6
million RM, respectively. In comparison, in 1939 they were 131.5 million and 181.3
million RM. B. R. Mitchell, International Historical Statistics: Europe 17502005 (New
York: Palgrave Macmillan, 2007), 728.
6 Theo Balderston, The Origins and Course of the German Economic Crisis (Berlin: Haude &
Spener, 1993), 8697. See also Dietmar Petzina and Werner Abelshauser, Zum Prob-
lem der relativen Stagnation der deutschen Wirtschaft in den zwanziger Jahren, in Hans
30 German power
financial issues in GermanBalkan trade or the political ones trade

treaties, tariff policies, and geopolitical competition with France and
Great Britain.7 Yet few have investigated the day-to-day aspects of inter-
state commerce or questions of transnational contacts. Only by exam-
ining issues of networks, trust, information, and culture can Germanys
fraught economic relationship with the states of Southeastern Europe be
fully understood. In this region after 1918, acquiring reliable economic
information and establishing reputable business contacts would become
the main challenges facing German business elites, who would look to the
liberal Weltpolitik, the cultural diplomacy, and the transnational networks
of the prewar years for solutions.8 The state could not ameliorate these
problems through treaties or diplomatic negotiations alone. As the sub-
sequent chapters demonstrate, only a resurgence of Germanys private
institutions could restore German power in the Balkans.
Hard-power imperial traditions

of the Wilhelmine Empire
In the late 1870s and early 1880s German politicians and intellectuals
began articulating a set of global ambitions, as well as a willingness to
use hard power to achieve them. To be sure, some Germans had been
pining for colonies since the middle of the nineteenth century. The first
colonial societies formed in the 1840s to protect the rights of German
emigrants, for instance, and the upheavals of 1848 spurred a variety
of intellectuals, from Friedrich List to Carl Rodbertus, to hope a Ger-
man Weltpolitik would follow the unification of the German lands into a
single nation-state. Yet these dreams hardly translated into concrete poli-
cies. In 1871 Otto von Bismarck, the Iron Chancellor responsible for
Mommsen, Dietmar Petzina, and Bernd Weisbrod (eds.), Industrielles System und poli-
tische Entwicklung in der Weimarer Republik (Dusseldorf: Droste, 1974), 5775; Albrecht
Ritschl, Reparation Transfers, the Borchardt Hypothesis and the Great Depression in
Germany, 192932: A Guided Tour for Hard-Headed Keynesians, European Review of
Economic History 2, no. 1 (1998), 4972.
7 Gyorgy Ranki, Economy and Foreign Policy: The Struggle of the Great Powers for Hegemony
in the Danube Valley, 19191939 (New York: Columbia University Press, 1983); Hans
Tonch, Wirtschaft und Politik auf dem Balkan: Untersuchungen zu den deutsch-rumanischen
Beziehungen in der Weimarer Republik unter besonderer Berucksichtigung der Weltwirtschaft-
skrise (Frankfurt am Main: Lang, 1984); Hans-Paul Hopfner, Deutsche Sudosteuropapolitik
in der Weimarer Republik (Frankfurt am Main: Lang, 1983). For a recent work that inte-
grates the financial and the political aspects of these issues see Adam Tooze and Mar-
tin Ivanov, Disciplining the Black Sheep of the Balkans: Financial Supervision and
Sovereignty in Bulgaria 19021938, Economic History Review 2 (2011), 3051.
8 The theoretical approach to commerce used here draws on Greif, Contract Enforce-
ability; Granovetter, Economic Action and Social Structure.
German unification, famously proclaimed Germany to be a satiated

power, and he actively steered the new state away from overseas entangle-
ments. Yet as the German-speaking population of Central Europe grew at
an astonishing rate, a variety of intellectuals and publicists began calling
for formal colonies to absorb German emigrants and keep their people
or nation intact. Having no formal German political presence outside
Europe, they feared the Anglicization not only of the globe, but also
of German expatriates. With the founding of well-connected colonial
associations in 1883 and 1884, German politicians increasingly heeded
these calls to obtain colonial territory as a demographic outlet. At the
same time, balance of power considerations drove German leaders to
begin crafting a global colonial strategy to enhance German influence on
the continent. By the 1880s even Bismarck had changed his tune, and
began to worry that the colonial expansion of Great Britain and France
might threaten the delicate balance in Europe itself. Others outside the
government, such as Friedrich Fabri and Carl Peters, called even more
forcefully for colonies to supply Germany with the resources, land, and
labor it needed to maintain, an equilibrium of power with its rivals.9
In 1884 and 1885 Germany acquired its first colonial territories in
Southwest and Central Africa, and convened the Berlin Conference to
partition the rest of Africa among Europes empires. In doing so it inau-
gurated a era of hard Weltpolitik, which aimed to make Germanys influ-
ence overseas commensurate with its status as Europes fastest-growing
economy and most populous nation.10 With the acquisition of colonies,
German politicians increasingly aspired to project power outside Europe.
In the 1880s Germany was largely incapable of doing so: its navy was tiny
and its administrative presence in the new colonies limited. This changed
in the 1890s, when Kaiser Wilhelm II and his advisors began building a
world-class navy and conducting wars to extend German control over its
new colonies. In 1896 Wilhelm announced that the German Empire has
become a world empire, and a year later he authorized Admiral Alfred
von Tirpitz to commence construction on the navy so that it could rival
Great Britains fleet. Between the 1890s and 1911 Germanys hard power
9 See Fabris pamphlet, Does Germany Need Colonies? (1879), GHDI documents, Mil-
itary and International Relations, available at: http://germanhistorydocs.ghi-dc.org/
sub document.cfm/document id=1867. Quote from German historian Otto Hintze,
Imperialismus und Weltpolitik, in Die Deutsche Freiheit (Gotha: F. A. Perthes,
1907/1917), cited in Van Laak, Uber alles in der Welt, 63 and 5162; Baranowski, Nazi
Empire, 1340.
10 On the Berlin Conference see Eric D. Weitz, From the Vienna to the Paris System:
International Politics and the Entangled Histories of Human Rights, Forced Deporta-
tions, and Civilizing Missions, American Historical Review 113, no. 5 (2008), 131343;
Kennedy, Rise and Fall, 211.
32 German power
Weltpolitik reached its zenith, the Wilhelmine Empire using force to claim
territory and markets outside Europe and to intimidate its competitors
on the continent. In 1897 Germany took control of the Chinese port of
Kiautschou. Three years later a German expeditionary force spearheaded
a brutal suppression of the Chinese Boxer Rebellion. In 1898, 1901,
and 1902 Germany sent gunboats to the Philippines, the Caribbean, and
Venezuela. From 1904 to 1907 Germany waged a near genocidal military
campaign against the Herero and Nama tribes in Southwest Africa. From
1905 to 1908 Germany conducted another violent colonial campaign in
German East Africa. In 1905 Wilhelm forced a crisis with France over
Morocco that threatened to escalate into open conflict. Six years later he
sent Germanys most modern gunship to Morocco in a second attempt
to extend German influence in the Mediterranean.11
At first many nationalist-minded elites reveled in Germanys mus-
cular approach to global affairs. Before his views began to change, the
social liberal Friedrich Naumann remarked how the German race brings
it . . . It brings an army, navy, money, and power . . . Modern, gigantic
instruments of power are possible only when an active people feels the
spring-time juices in its organs. Yet following the second Moroccan Cri-
sis in 1911 many, including the new Chancellor Bethmann-Hollweg and
a growing number of critics, began to doubt the effectiveness of hard
power Weltpolitik. By 1912 it was becoming clear that the attempt to
rival Britains fleet and strong-arm London into a diplomatic arrange-
ment was failing. Despite, or more likely because of, its colonial con-
quests, its overseas military expeditions, and the frequent deployment
of its navy, Germany had only succeeded in driving its European rivals
closer together.12
After the second Moroccan Crisis in 1911, then, many German for-
eign policy elites began looking back to Europe to break free from their
growing diplomatic encirclement. Now our future lies on the conti-
nent, argued the publicist Maximilian Harden. This awareness has
returned to the German people. The German general staff spearheaded
this transition. In 1912 they began demanding more resources to improve
the army at the expense of the navy, achieve military preponderance
on the continent, and thereby expand Germanys freedom of maneuver
among the constellation of Great Powers. Several key military leaders,
11 Sebastian Conrad, German Colonialism: A Short History (New York: Cambridge Univer-
sity Press, 2012), 7987; Paul Kennedy, The Rise of Anglo-German Antagonism, 1890
1914 (London: Allen & Unwin, 1980), 41031; Simms, Europe, 26777, 283.
12 Naumann cited in Kennedy, Rise and Fall, 211; Andreas Hillgruber, Germany and the
Two World Wars (Cambridge, MA: Harvard University Press, 1981), 1519.
including chief of staff Helmut von Moltke, began considering a preven-

tative war.13
Some political, military, and industrial leaders thought a future Ger-
man continental bloc should take the form of an economic federation
extending from Borkum to Baghdad. In certain respects Germanys
hard-power policies complemented the liberal Weltpolitik ideas that were
emerging at roughly the same time: one approach could further the other.
Yet many elites saw in this continental turn a chance to directly expand
German territory eastwards. Indeed, the continental military strategy
overlapped with Germanys second imperial tradition, the quest to settle
Germans in Eastern Europe, which after 1900 increasingly became asso-
ciated with the concept of Lebensraum. The geographer Friedrich Ratzel
had popularized this term at the turn of the twentieth century, yet its roots
stretched back to Prussias participation in the partition of Poland in the
late eighteenth century. Lebensraum appealed to many political groups,
mostly on the right, and had numerous permutations. At its core lay an
agrarian ideology that sought to counteract the social ills of industrializa-
tion at home and extend German influence abroad by settling migrants
in Eastern Europe.14
Organizations like the Pan-German League and the Royal Prussian
Colonization Commission advocated the inner colonization of Prus-
sias eastern provinces to offset that regions growing Polish popula-
tion. Over time, however, these radically nationalist organizations went
beyond internal colonization to call for territorial expansion as well, in
the name of protecting Germans against a Slavic threat from the East.
According to Ratzel, successful nations would organically expand their
borders and spread their people abroad. Many intellectuals from Max
Weber and Gustav Freytag to Heinrich Treitschke and Heinrich Class
agreed, believing Germany had a historical mission to either uplift or
rule over the Slavic peoples of the Russian Empire. For such intellectu-
als settling the East would be the great colonial deed of the German
people.15 Over time these ideas came to inform the way Germanys
13 Berghahn, Germany and the Approach of War, 10444. Quotation from Simms, Europe,
285.
14 Smith, Ideological Origins, 14652, 148; Woodruff D. Smith, Friedrich Ratzel and the
Origins of Lebensraum, German Studies Review 3, no. 1 (1980), 5168; Fritz Fischer,
War of Illusions: German Policies from 1911 to 1914 (New York: W. W. Norton, 1975),
389, 20712.
15 Philipp Ther, Deutsche Geschichte als imperiale Geschichte: Polen, slawophone Min-
derheiten und das Kaiserreich als kontinentales Empire, in Conrad and Osterhammel,
Kaiserreich Transnational, quotation from 133; Wippermann, Deutschen und Osten; Liule-
vicius, German Myth, 98129.
34 German power
highest military officials, such as Moltke, and even Kaiser Wilhelm him-
self, viewed their nations relations with Russia: after 1910 they believed
any future war would be a struggle for existence between Teutons and
Slavs.16
The Wilhelmine tradition of a liberal Weltpolitik

These two imperial traditions hard Weltpolitik and the continental Leben-
sraum gave German foreign policy before 1918 a hard-power core.
Yet the animating ideas behind them differed fundamentally from those
that motivated German elites and institutions involved in Southeastern
Europe after the First World War. Those businessmen, economists, and
intellectuals drew instead on Germanys liberal tradition of Weltpolitik
that also began to emerge during this period.
Politicians and the press often used Weltpolitik to denote Germanys
general claim to be a world power, one often used in connection with
German naval armaments and overseas colonies. But for many thinkers
the term held a more specific, and more liberal meaning. Modeled after
the British Empire in the nineteenth century, this liberal Weltpolitik aimed
at expanding and modernizing Germanys industrial economy by secur-
ing export markets and raw materials abroad through commerce instead
of conquest. In the nineteenth century Germany was one of the countries
most deeply integrated in the global market, a leader of globalization
Globalisierungsvormacht in the words of one historian.17 Between 1880
and 1912 the value of Germanys imports and exports nearly quadrupled,
and as Germany became a net importer of foodstuffs, finding a secure and
stable source of food became a pressing need. Instead of annexing African
territory or expanding cultivation and colonizing the east, advocates of a
liberal Weltpolitik believed their nation would be better served paying for
food and other imports by exporting finished and semi-finished products
around the globe. The creative force behind this Weltpolitik bureaucrats
in the Foreign Office, the Colonial Office, and the large universal banks,
along with publicists and academics saw Germanys future to lie in
16 Fischer, War of Illusions, 389, 20712; Liulevicius, German Myth, ch. 5. See, for
instance, General Friedrich von Bernhardis sensational book Deutschland und der nachste
Krieg (Stuttgart: J. G. Cotta, 1912); Christopher Clark, Kaiser Wilhelm II (Harlow: Pear-
son Education, 2000), 197202.
17 Niels P. Petersson, Das Kaiserreich in Prozessen okonomischer Globalisierung, in
Conrad and Osterhammel, Kaiserreich Transnational, 4967, here 67; Sebastian Conrad,
Globalisation and the Nation in Imperial Germany (New York: Cambridge University
Press, 2010).
industry, commerce, and exports rather than formal overseas colonies or

agricultural settlements in Eastern Europe.18
Liberal Weltpolitik gained popularity under Chancellor Leo von
Caprivi, who governed from 1890 to 1894, but by the first decade of
the twentieth century a new generation came to positions of influence.
Men like Albert Ballin, Walther Rathenau, Arthur Gwinner, Karl Helf-
ferich, and Ernst Jackh rose through Germanys governmental and busi-
ness bureaucracies to become some of the strongest proponents of this
liberal Weltpolitik. These men, many of who joined the National Lib-
eral Party, cultivated extensive cooperation between business and gov-
ernment in order to promote German exports without formally annex-
ing new colonies or territory. The careers of Karl Helfferich and Ernst
Jackh, both members of this younger generation, exemplify the collab-
oration between private organizations and the state. Helfferich began
his professional life in Germanys diplomatic corps but left in 1905/6
to work with the Deutsche Bank, becoming one of the banks directors
by 1908. He made his career on the Berlin to Baghdad Railway, which
after 1900 had become the prize project of liberal Weltpolitik. Publicists
heralded the railway as peaceful penetration rather than overt colo-
nization. They hoped it would open a highway of world commerce
through the Ottoman Empire, generate contracts for German steel and
railway production, become a destination for investment, raise the pres-
tige of the empire, and ultimately open the markets of the Near East and
beyond to trade. After finishing work on the railroad, during World War
I Helfferich returned to the government as Minister of the Treasury, and
later Minister of the Interior.19
Like Helfferich, Ernst Jackh fostered state and private collaboration
to improve Germanys economic competitiveness in an increasingly cut-
throat global market. Jackh began his career as the publicist for a variety of
newspapers, and later worked with the Foreign Office cultivating contacts
with the Ottoman Empire. By the 1910s he had become one of the most
outspoken advocates for an economic alliance that would stretch from
the North Sea to the Balkans and the Ottoman Empire. The Balkan
states, he argued during several lectures in 1912, like Turkey, remain
18 Smith, Ideological Origins, 5264. For the trade statistics, see David Blackbourn, The
Long Nineteenth Century: A History of Germany 17801918 (New York: Oxford Univer-
sity Press, 1998), 3301; Conrad, German Colonialism, 1709. For an example of the
concern among contemporaries to secure a stable source of food see Werner Sombart,
Die Deutsche Volkswirtschaft im neunzehnten Jahrhundert (Berlin: Bondi, 1913), 3809.
19 On Helfferich see John G. Williamson, Karl Helfferich, 18721924: Economist, Financier,
Politician (Princeton University Press, 1971); on the Baghdad Railway see Van Laak,
Uber alles in der Welt, 924, and Boris Barth, Die deutsche Hochfinanz und die Imperialis-
men: Banken und Aussenpolitik vor 1914 (Stuttgart: Steiner, 1995).
36 German power
the next natural, neighboring development zone for German labor and
industry. Indeed, this Orient grows yearly in its developmental poten-
tial. He went on to remonstrate that while Germany still has no settler
colonies at this point it does not need them: Germanys strength lies
above all in the unity concentrated in the center of Europe. Indeed,
precisely because the new Balkan states were now free from traditional
forms of direct imperial rule, German goods could more easily penetrate
their markets. While Jackh saw the BerlinBaghdad railway as one chan-
nel for economic expansion, he also pursued other ways of promoting
German products abroad, including the German Association of Crafts-
men (Deutscher Werkbund). The Werkbund was founded in 1907 as
part of the applied arts movement, and its headquarters were initially
located in Dresden, the capital of Saxony and a center of small firms
and manufacturers. In 1912 it relocated to Berlin, where Jackh became
the new managing director. The organization brought together German
designers, producers, and traditional craftsmen to, among other things,
make sleek products that could simultaneously outcompete British and
American goods, and spread German culture abroad. With support from
the Prussian Commerce Ministry, the Interior Ministry, and the Foreign
Office contacts that Jackh helped solidify the Werkbund organized
exhibitions that displayed this new design approach to foreign visitors
and Germans alike.20
Liberal Weltpolitik and export projects like the Baghdad Railway and
the Werkbund played out in the context of competition among Europes
empires, a competition sparked in part by the pressure to secure mar-
kets and outlets for capital. Like many Germans, French and British
elites from across the political spectrum were motivated by the convic-
tion that the world was gradually being carved into quasi-economically
self-sufficient blocs, and that they needed to proactively acquire mar-
ket shares abroad. In 1890, for instance, Frances Minister of Foreign
Affairs Jules Ferry justified French colonies in North Africa and Indo-
China as an outlet for surplus investment and overproduction. At the
same time, the French and British began devoting resources to develop
the economies of their new colonial hinterlands Ernst Roumes mise
en valeur system in French West Africa, for instance and to co-opt
local elites through cultural and commercial networks. They hoped that
enhancing colonial production on the one hand, and increasing colonial
20 Quotations from Ernst Jackh, Deutschland im Orient nach dem Balkankrieg (Munich:
Martin Morikes, 1913), 1213, also 1509; David Hamlin, Wo sind wir? Germans
contextualize Romania before World War I, GSA conference paper October 2012;
Friedrich Naumann and Gustav Stresemann were also influential members of the Werk-
bund. John Maciuika, Before the Bauhaus: Architecture, Politics, and the German State,
18901920 (New York: Cambridge University Press, 2005), 422, 165, 25164.
purchasing power on the other hand, would make their empires more
lucrative to businesses back in France and Britain, and ultimately more
self-contained. Indeed, by the 1890s Ferry and Roume in France, and
Joseph Chamberlain and Robert Salisbury in Great Britain, all subscribed
to the doctrine of world empires, whereby Great Britain, France,
America, Russia, and perhaps Germany, would eventually become the
only first-class powers because only they had the resources, the markets,
and the space to expand their economies.21
Here the model par excellence was America: which for many con-
temporaries represented the future of global power even more than the
British or French Empires. By 1900 America already possessed a gigantic
domestic market that enabled its industry to develop depth and breadth
of production, and led it to become the worlds leader in many indus-
trial goods, from complex capital machinery to steel, iron, and coal. In
Germany anxiety over America led to the formation of interest groups
and associations dedicated to countering the economic power of the
United States. In 1904 Julius Wolff, for example, an economist and pro-
fessor from Breslau, founded the Mitteleuropaische Wirtschaftsverein
to encourage German politicians to think on this larger, continental
scale. His organization advocated cooperation among the states of Cen-
tral Europe in matters of tariffs and customs in order to compete with
the looming economic power of America.22
After the turn of the century, then, many Germans responded to the
doctrine of world empires by arguing that Mitteleuropa, not overseas
colonies, should be the focus of a more liberal Weltpolitik. By 191112
Jackh and influential leaders in the National Liberal and the Progres-
sive Parties including Gustav Stresemann and the now more moderate
Friedrich Naumann called not for formal empire or colonies but rather
for a Central European economic federation informally led by Germany.
Although these ideas remained unfulfilled in practice, by the early twenti-
eth century the notion of a large region, or a Grosswirtschaftsraum that
integrated industrial Germany with agricultural regions in other parts
of Europe had become one of the formative visions for a future world
order.23
21 Winfried Baumgart, Imperialism: The Idea and Reality of British and French Colonial
Expansion, 18801914 (Oxford University Press, 1982), 6973, 91134; Jennifer Pitts, A
Turn to Empire: The Rise of Imperial Liberalism in Britain and France (Princeton University
Press, 2005); Hyam, Britains Imperial Century, 204; Conklin, Mission to Civilize, 3872.
22 Prof. Julius Wolff, material concerning a Mitteleuropaischen Wirtschaftsverein, July
1903, 2254 Reichskanzlei, R 43, BA.
23 Many of these thinkers adopted the Zollverein of 1834 and the ideas of Friedrich List for
their inspiration. Volker Berghahn (ed.), Quest for Economic Empire: European Strategies
of German Big Business in the Twentieth Century (Providence, RI: Berghahn Books, 1996),
8; quotation from Van Laak, Uber alles in der Welt, 54; Henry Cord Meyer, Mitteleuropa
38 German power
Wilhelmine cultural diplomacy

In addition to a liberal Weltpolitik, after 1918 German elites would also
hearken back to Germanys nascent cultural diplomacy to pursue their
agenda in the Balkans. At the end of the nineteenth century intellectuals
and politicians of the Wilhelmine Empire began arguing that Germany
should make better use of its achievements as a world leader in science,
technology, and education to gain prestige abroad. Yet there were differ-
ent approaches to this new policy of cultural diplomacy. Organizations
like the conservative Association for Germans Abroad (Verein fur das
Deutschtum im Ausland VDA) used cultural diplomacy to support
the cultural life and linguistic traditions of German emigrants and Ger-
man transplants living in the Americas and Central Europe. By funding
schools, kindergartens, youth groups, and libraries for these communities
abroad, it aimed to safeguard their identity as Germans.24
Yet in the policy framework of liberal Weltpolitik, before 1914 the Ger-
man communities abroad were of minor importance, particularly in the
Balkans. For Paul Rohrbach, one of Germanys most widely read publi-
cists, who would go on to advise the Foreign Office during World War I,
the descendants of Germans who had emigrated to Hungary and Tran-
sylvania in the eighteenth century were as good as lost to the cause
of cultural diplomacy. Jackh likewise placed little emphasis on ethnic
Germans in the borderlands of Austria-Hungary. Their only value was
reinforcing the diplomatic ties between the Wilhelmine and the Habs-
burg Empires, a strategic aim that before 1916 trumped all other goals.
For cultural diplomacy, German minorities would only become a bridge
in the Balkans after the collapse of the Habsburg Monarchy in the First
World War.25
Instead, these liberal imperialists focused on cultivating cultural ties
with the non-German nationalities of the world. Jackh, for instance,
highlighted the importance of introducing foreign elites to Germanys
educational system, above all by building German schools abroad that
in German Thought and Action (The Hague: Nijhoff, 1955); Peter M. R. Stirk (ed.),
Mitteleuropa, History and Prospects (Edinburgh University Press, 1994), 58.
24 Originally named the General School Association (Allgemeiner Schulverein), in 1908
it changed its name to the VDA. Rudiger vom Bruch, Weltpolitik als Kulturmission:
auswartige Kulturpolitik und Bildungsburgertum in Deutschland am Vorabend des Ersten
Weltkrieges (Paderborn: Schoningh, 1982), 367; Kurt Duwell, Deutschlands auswartige
Kulturpolitik, 19181933 (Cologne: Bohlau, 1976), 5960; Chu, The German Minority
in Interwar Poland, 36.
25 Paul Rohrbach, Der deutsche Gedanke in der Welt (Leipzig: Oscar Brandstetter, 1912),
1617; Jackh, Deutschland im Orient, 1548. Even during the World War Jackh paid
almost no attention to German communities in the Habsburg Empire; Ernst Jackh, Das
grossere Mitteleuropa (Weimar: Gustav Kiepenheuer, 1916).
would attract Turkish, Bulgarian, and Serbian youth. Karl Lamprecht,

a professor at Leipzig who pioneered comparative world history and
cultural history in Germany, became one of the leading advocates of
this alternative approach to cultural diplomacy. Lamprecht argued that
an exclusive focus on German minorities was not only misplaced but
could be counterproductive. He saw cultural diplomacy as a way both
to win international sympathy for Germany and promote the mutual
understanding of peoples around the world. By working with other
civilized nations (Kulturnationen) Germany could reach out to non-
Germans and expand German influence through international scientific,
artistic, and intellectual cooperation across the world. Such goals, how-
ever, demanded a systematic and purposeful policy that had hitherto
been absent in Germany.26
After 1900 the advocates for cultural diplomacy added an economic
dimension to their arguments. In his widely read book Der deutsche
Gedanke in der Welt (1912), for example, Rohrbach called for a moral
conquest of the leaders and educated classes of other nations. But in
contrast to Lamprecht, Rohrbach suggested that promoting German cul-
ture and ideas abroad would have a mutual reinforcing, positive effect on
the growth of the German economy. Economic expansion, Rohrbach
maintained, finds its pace-setter in the export of culture. If foreign
elites began to appreciate German art, literature, architecture, and ideas,
so the theory went, they would be more inclined to purchase German
consumer exports. And this was hugely important for Germanys eco-
nomic livelihood: as a densely populated country that imported food
and raw materials, Germanys dependence on foreign trade would only
grow in the future. Rohrbach thus hoped to create a Greater Germanic
imperium based not on the closed territory of a formal empire, but rather
on a national culture that would spread across the globe through Ger-
manys exports as well as its personal contacts. In the years before 1914
Germanys press increasingly took up these ideas, replacing the phrase
trade follows the flag with trade follows the language. It was this
explicit connection between culture and economics, one that justified
cultural diplomacy in part by its economic benefits, that Germanys pri-
vate institutions would return to in the 1920s.27
26 Kloosterhuis, Friedliche Imperialisten, 35; Duwell, Deutschlands auswartige Kulturpolitik,

21; Roger Chickering, Karl Lamprecht: A German Academic Life (18561915) (Atlantic
Highlands, NJ: Humanities Press, 1993), 394430.
27 Van Laak, Uber alles in der Welt, 8992; for quote see Kloosterhuis, Friedliche Imperi-
alisten, 613; Paul Rohrbach, German World Policies (Der deutsche Gedanke in der Welt)
trans. Edmund von Mach (New York: Macmillan, 1915); Jackh, Deutschland im Orient.
40 German power
By 191213, then, Jackh, Lamprecht, and Rohrbach were beginning

to outline how Germany might project soft power abroad. And, in their
eyes, France offered the model par excellence for a cultural diplomacy
that did not focus on ethnic kinsmen. In its civilizing mission France had
a concrete ideology by which it extended citizenship to subjects of the
empire who adopted French language, culture, and republican ideals.28
France founded well-funded institutions like the Alliance Francaise, the
Amities Francaises, and the Mission Laque to teach French language
and culture beyond the borders of the empire. These institutions were
pioneers in recognizing that cultural publicity is first and foremost lan-
guage publicity, and before 1914 they far surpassed Germanys institu-
tional presence abroad in scope and funding. French universities actively
sought out foreign students and conducted academic exchanges, and the
French government firmly supported these organizations in the belief
that their cultural activities would reap concrete rewards.29
For some German politicians and bureaucrats, the desire to replace
power politics with a less aggressive expansion of German networks
and contacts abroad reached a turning point between 1906 and 1911.
The debacle of the Moroccan crises and the growing recognition that
Germanys naval race with Britain was counterproductive led some in the
government to believe that traditional power politics was bankrupt. What
followed was the most intense period of cultural diplomacy in Germany
before World War I. In 1907 the Foreign Office began allocating more
funding for German schools abroad to attract foreign elites. In 1908 it
initiated an active publicity campaign in the foreign press, particularly
in Turkey and much of South America.30 And in 1907/8 the German
parliament also began demanding a more focused cultural policy. Nearly
all of the major parties wanted to increase the number of German schools
abroad, improve Germanys reputation in the foreign press, and develop
a more effective system for universities within Germany to study specific
world regions. Through cultural diplomacy they hoped to raise German
prestige and, among other things, give Germany greater moral authority
in the new framework of international conferences and organizations that
28 Frances civilizing mission was contested in France itself, contrary to what contemporary
Germans may have thought. J. P. Daughton, An Empire Divided: Religion, Republicanism,
and the Making of French Colonialism, 18801914 (Oxford University Press, 2006).
29 Duwell, Deutschlands auswartige Kulturpolitik, 3847. For the German view of French
cultural diplomacy see K. Remme and M. Esch, Die franzosische Kulturpropaganda:
auf der Grundlage franzosischen Quellenmaterials und eigener Beobachtungen im Ausland
(Berlin: Preussischer Druckerei- und Verlag, 1927).
30 Duwell, Deutschlands auswartige Kulturpolitik, 63; Kloosterhuis, Friedliche Imperialisten,
8, 1702.
was emerging at the turn of the twentieth century.31 In the words of Kurt
Riezler, an official in the Foreign Office, later the Chancellors private
secretary, and one of the loudest proponents of this new approach: this
battle for opinion will not only be fought out through means of the press,
but with all possible measures, through books, professorial exchanges,
lectures, exhibits, and especially through schools.32
Yet the cultural diplomacy propounded by Lamprecht, Rohrbach,
Jackh, and Riezler remained firmly anchored in the chauvinistic belief that
Germany possessed a superior culture. Lamprecht himself had started
his political advocacy in the 1890s as part of the pan-German move-
ment. There he warned of the unchained Unkultur of Slavs in the
Habsburg Monarchy, and the threat that a Slavic storm posed to Ger-
man communities in Eastern Europe. Germanys cultural superiority, he
believed, legitimized the nations claim to world power. And although
Lamprecht migrated out of the Pan-German League and into the peace
movement in the early 1900s, he continued to believe in the legitimacy
of Germanys claim to cultural superiority. Germany, he maintained, had
a special role in the world, national and universal at the same time,
which corresponded to the nations achievement and special endow-
ments. Only Germany could lead the world toward the highest moral
human community.33 According to Jackh, the organization of Mitteleu-
ropa can, and must, only be accomplished by Germany.34 Rohrbach,
likewise, believed in a special Germanic mission for the world, one that
would work out moral perfection, not only for ourselves, but for all
mankind. The German nation, he maintained, is the only one which
has sufficiently developed by the side of the Anglo-Saxons, and is, more-
over, numerically and inherently strong enough to claim for its national
idea the right to participate in the shaping of the world which is to be.
According to Rohrbach, to succeed at its task Germany had to expand
its cultural influence, or it would sink into insignificance.35
31 These ranged from relatively low-profile international healthcare and sanitation confer-
ences to the more well-known Hague Conventions on the rules of warfare in 1899 and
1907. Iriye, Global Community, 1840; James Sheehan, Where Have all the Soldiers Gone?
The Transformation of Modern Europe (Boston: Mariner Books, 2009), 2331.
32 Riezler cited in Kloosterhuis, Friedliche Imperialisten, 160, see also 1069.
33 Chickering, Karl Lamprecht, 401, 405, 4078, 412.
34 Jackh, Das grossere Mitteleuropa, 6.
35 Rohrbach, German World Policies, 4, 6; Sebastian Conrad, Transnational Germany,
in James Retallack (ed.), Imperial Germany 18711918 (New York: Oxford University
Press, 2008), 238. On notions of superiority and racism in German colonial ventures,
particularly the drive to educate colonial residents into a new work ethic, see Conrad,
Globalisation and the Nation, 769, 11317; Stefan-Ludwig Hoffmann, Introduction:
Genealogies of Human Rights, in Stefan-Ludwig Hoffmann (ed.), Human Rights in
the Twentieth Century (New York: Cambridge University Press, 2011), 129.
42 German power
The institutions of civil society in the Wilhelmine Empire

Liberal Weltpolitik and cultural diplomacy would not have become influ-
ential ideas in Wilhelmine Germany without the institutions and transna-
tional networks to support them. The Foreign Office and the universal
banks were certainly important proponents of the new liberal Weltpolitik.
But in the decade before 1914 a host of private organizations formed
that melded this liberal Weltpolitik with the cultural diplomacy ideas
of Lamprecht, Riezler, Jackh, and Rohrbach. These institutions slowly
began forging the type of international contacts that would allow German
traders to acquire market information and build trust, and that would
more generally promote Germanys culture, reputation, and products
abroad. German chambers of commerce, for example, first began set-
ting up foreign branches in the 1880s and the 1890s. During the same
decades the Leipzig trade fair became one of the best channels for adver-
tising German merchandise abroad. The fair had its origins in the twelfth
century, but reinvented itself in the second half of the nineteenth century
as one of the largest annual venues where exporters and importers from
around the world could meet each other personally and see exhibition
models of Germanys latest products and technologies.
Beyond these commercial organizations, a large number of private
associations dedicated to foreign relations (Auslandsvereine) arose dur-
ing the first two decades of the twentieth century. These organizations
typically focused their work on specific countries or regions, like the
GermanBulgarian Society in Munich and Berlin or the East Asian Asso-
ciation in Hamburg. At their height nearly 200 of them existed, many
working closely with the Foreign Office to improve Germanys image,
establish personal and professional contacts beyond Germanys borders,
and gain expertise about foreign societies. The overwhelming majority of
their members came from Germanys intellectual and economic elites.36
While most of these foreign associations focused on China, the Near
East, and South America, a substantial number had Europe itself as
their object. The most influential was Julius Wolffs Mitteleuropaische
Wirtschaftsverein, which acquired a semi-official status in 1903 when
the Duke of Schleswig-Holstein assumed the presidency.37 Although its
advocacy of trade preferences among Central European states received
lukewarm support from some economists, the organization could still
count many of Germanys largest interest groups among its members.
From 1903 to 1914 it grew to include 700 hundred economists and
businessmen from Germany and the Habsburg Empire who popularized
36 Kloosterhuis, Friedliche Imperialisten, 7593, esp. 82. 37 Ibid., 497501.

their ideas through conferences, lobbying, and publications.38 The

Mitteleuropaische Wirtschaftstag, established in 19245 by a group of
Austrian economists, was the direct successor to Wolffs association,
from whence it drew many of its initial participants and its intellectual
bearings.
In addition to Central Europe, well over a dozen organizations devoted
to the Balkans formed between 1910 and 1918. For example, the
German Trade Association for the Balkans and the Orient (Deutsche
Wirtschaftsverband fur den Balkan und den Orient), founded in Dres-
den in 1911 and led by Dr. Alexander Muller, wanted to make German
businessmen and financiers more aware of the sales opportunities and
the resources of Southeastern Europe and Anatolia. One of the organi-
zations main tasks was gathering information about economic opportu-
nities in the Balkans, distributing this to interested investors, and pub-
lishing material in a German, Slavic, and French-language journal. Like
many of these interstate organizations, Mullers association believed solid
education about the culture and languages of the Balkans would enable
Germanys investors, merchants, and engineers to succeed in the region,
and they planned to organize instructional seminars about the languages
and living conditions of Southeastern Europe.39
By the eve of World War I some economists began to see Southeastern
Europe as a region of opportunity.40 But despite the numerous insti-
tutions in Wilhelmine Germany that pursued the rudiments of cultural
diplomacy in Southeastern Europe, the region remained peripheral to
many Germans. Popular knowledge of the new Balkan states, the his-
tory of their peoples, cultures, and economic life was limited, and much
of the German public saw these new countries as backwaters prone to
uncivilized atrocities.41 In the decade and a half before 1914 Germany
38 Prof. Julius Wolff, Material concerning a Mitteleuropaischen Wirtschaftsverein, July

1903, 2254 Reichskanzlei, R 43, BA; Saxon ambassador in Berlin, Vitzthum, to Min-
ister for Foreign Affairs Graf Hohenthal und Bergen, May 12, 1907, 7073, 10717
Auswartigen Angelegenheiten, Sachsische Staatsarchiv, Dresden (SSAD); Reinhard
Opitz, Europa-strategien des deutschen Kapitals, 19001945 (Bonn: Pahl-Rugenstein Ver-
lag, 1994), 14659.
39 Working program for the German Trade Association for the Balkans and the Orient,
1912, and history of the German Trade Association, October 14, 1913, p. 11, in 7081,
10717 Auswartigen Angelegenheiten, SSAD.
40 Von Sauter, Die wirtschaftliche Entwicklung der Balkanstaaten, 183202, 20333;
Andrej Mitrovic, Germanys Attitude Toward the Balkans, 19121914, in Bela K.
Kiraly and Dimitrije Djordjevic (eds.), East Central European Society and the Balkan
Wars (New York: Columbia University Press, 1987), 295316.
41 Margaret Anderson, Down in Turkey, Far Away: Human Rights, the Armenian Mas-
sacres, and Orientalism in Wilhelmine Germany, Journal of Modern History 79 (March
2007), 80111.
44 German power
became one of the largest markets for agricultural goods from South-
eastern Europe, but much of this produce flowed not through German
merchants directly, but rather reached Germany indirectly after passing
first through business intermediaries in Vienna or Antwerp, one of the
main entrepots of the international grain trade (see Tables 1.1 and 1.2).
In the circles of high finance Southeastern Europe was important pri-
marily because it would open a path to the real prize, Asia, where the
Baghdad Railway would connect Germany to the Indian Ocean. The
exception was Romania, which by the first decade of the twentieth cen-
tury had become an important destination in its own right for German
investment. In the 1860s and 1870s German entrepreneurs had helped
finance and construct Romanians railroad network. Germany expanded
its presence in this country several decades later when its financial insti-
tutions helped found two of Romanias largest banks, the Banca Gen-
erala Romana in 1897 and the Banca Marmorosch, Blank, & Co. in
1904. And after 1900 Germany banks increasingly moved into Roma-
nias new oil industry. By 1914 the Deutsche Banks second-largest des-
tination of foreign direct investment after the railroads of the Ottoman
Empire was Steaua Romana, one of Romanias most lucrative petroleum
companies.42 But elsewhere in the Balkans before 1914, German banks
pursued risk-averse strategies. In general Austrian financial institutions
had much closer connections with the regions business elites than did
German ones; they were the only ones willing to venture outside the
larger cities and invest in more local enterprises. And even more than
Austrians, French bankers provided the bulk of long-term investment to
the Balkan states, accounting for 32 percent, 45 percent, and 79 percent
of European loans to Romania, Bulgaria, and Serbia, respectively.43
World War I: dashed visions of soft power and

informal empire
While the young tradition of liberal Weltpolitik, cultural diplomacy, and
the newly formed private organizations laid the first foundations for a
softer, more informal approach to empire-building, before 1914 hard-
power politics still took precedence in German foreign policy and directly
contributed to the outbreak of the First World War. And the Balkan
42 David Hamlin, Constructing Interdependence: Grain, Capital, Petroleum (forthcoming),

2034, 459; Fritz Stern, Gold and Iron: Bismarck, Bleichroder, and the Building of the
German Empire (New York: Knopf, 1977), 35869.
43 Van Laak, Uber alles in der Welt, 54. For example, the Disconto-Gesellschaft-supported
Kreditna Banka in Bulgaria had a reputation for cautious entry into relatively risk-free
ventures. Lampe and Jackson, Balkan Economic History, 22731.
Table 1.1 Romanian prewar trade (in tons, lei, and as a percentage of total Romanian trade)
Imports Exports
Country 1911 1912 1913 1911 1912 1913
Germany Tons 187,243 331,901 336,993 237,883 239,048 279,930

Lei 183,797,449 240,435,129 237,819,146 33,008,259 42,536,432 52,407,563
Percentage 32.25% 37.69% 40.31% 4.77% 6.62% 7.81%
Austria-Hungary Tons 250,128 319,046 456,908 582,091 749,483 776,817
Lei 137,040,415 138,874,383 138,192,076 62,873,702 94,749,699 95,858,235
Percentage 24.05% 21.77% 23.42% 9.09% 14.76% 14.29%
Great Britain Tons 283,928 250,544 266,790 544,160 408,269 393,313
Lei 85,594,696 88,000,450 55,737,728 55,980,190 43,040,824 44,840,336
Percentage 15.02% 13.8% 9.45% 8.09% 6.7% 6.69%
France Tons 17,974 18,343 17,836 351,870 349,794 360,255
Lei 35,361,902 39,062,688 34,135,788 48,878,667 49,947,895 63,525,879
Percentage 6.23% 6.13% 5.79% 7.07% 7.78% 9.41%
Italy Tons 22,012 22,920 28,632 376,989 725,914 485,704
Lei 28,591,518 37,074,780 21,886,525 49,592,099 121,066,061 71,307,688
Percentage 5.02% 5.82% 3.71% 7.16% 7.78% 10.63%
Belgium Tons 48,217 38,941 31,421 1,832,133 882,444 1,162,123
Lei 28,113,768 20,150,349 16,492,788 263,467,703 152,999,085 182,027,916
Percentage 4.93% 3.16% 2.79% 38.09% 23.83% 27.14%
A large amount of the exports from Romania to Belgium continued on to Germany via the port of Antwerp. So a considerable, but unmeasurable,
portion of exports going to Belgium should be counted as exports to Germany.
Source: Jahrbuch fur Nationalokonomie und Statistik, vol. CVII, 1916.
46 German power
Table 1.2 Serbian prewar trade (in millions of dinar and as a percentage of
total Serbian trade)
Imports
19001905
Country avg. 1906 1907 1908 1909 1910
Germany Dinars 8.4 9.7 20.3 21.4 28.9 35.0

Percentage 13.24% 21.90% 28.75% 28.31% 39.32% 41.32%
Austria-Hungary Dinars 35.8 22.2 25.6 32.2 17.8 16.1
Percentage 56.45% 50.11% 36.26% 42.59% 24.22% 19.01%
Great Britain Dinars 4.6 4.6 10.2 8.8 7.6 11.4
Percentage 7.25% 10.38% 14.45% 11.64% 10.34% 13.46%
France Dinars 1.7 1.1 2.4 1.6 3.5 3.6
Percentage 2.68% 2.48% 3.40% 2.12% 4.76% 4.25%
Italy Dinars 0.9 0.9 2.3 2.3 2.3 3.6
Percentage 1.42% 2.03% 3.26% 3.04% 3.13% 4.25%
Belgium Dinars 0.4 1.4 0.8 1.6 1.6 0.9
Percentage 0.63% 3.16% 1.13% 2.12% 2.18% 1.06%
Total Dinars 63.5 44.3 70.6 75.6 73.5 84.7
Exports
Germany Dinars 3.6 19.1 32.1 14 16 21.9

Percentage 4.51% 26.68% 39.39% 18.02% 17.20% 22.26%
Austria-Hungary Dinars 68.22 30 12.9 21.5 29.1 17.8
Percentage 85.55% 41.90% 15.83% 27.67% 31.29% 18.09%
Great Britain Dinars 0.3 0.6 4.9 0.5 0.1 1.7
Percentage 0.38% 0.84% 6.01% 0.64% 0.11% 1.73%
France Dinars 0.3 3.4 2.7 3.0 2.4 1.2
Percentage 0.38% 4.75% 3.31% 3.86% 2.58% 1.22%
Italy Dinars 0.1 0.6 4.9 3.5 3.0 1.1
Percentage 0.13% 0.84% 6.01% 4.50% 3.23% 1.12%
Belgium Dinars 0.7 6.3 13.0 16.1 10.0 16.1
Percentage 0.88% 8.80% 15.95% 20.72% 10.75% 16.36%
Total Dinars 79.74 71.6 81.5 77.7 93.0 98.4
Source: Jahrbuch fur Nationalokonomie und Statistik, vol. CVII, 1916.
peninsula itself generated the spark that ignited Europes Great War in
the summer of 1914. For Germanys liberal imperialists the war offered
an opportunity to realize their wildest ambitions and secure German
commercial hegemony in Europe. Thus, to a certain extent, the hard
and soft approaches to empire-building reinforced one another. Lib-
eral parliamentary deputy Friedrich Naumann penned perhaps the most
influential work, Mitteleuropa, which offered blueprints for a federation

of Central European states. The unifying bond behind Naumanns Euro-
pean superstate was to be economic cooperation between industrial Ger-
many and agrarian Southeastern Europe. Because people now thought in
terms of continents, and because neither small nor moderate sized pow-
ers would play any large part in the future global economy, Naumann
hoped his vision would be attractive to the Balkan states and the smaller
nations of Europe.44 His ideas were popular within Germany, and the
war spawned even more foreign associations to promote economic and
cultural cooperation with Austria-Hungary and Bulgaria.45
Yet Germanys occupational policies in Eastern and Southeastern
Europe displayed a very different, harsher reality than the dreams of Nau-
mann for an informal empire. The military administration of Poland and
Lithuania after 1915 and the Treaty of Brest-Litovsk in 1918 best capture
how extreme the drive for formal imperialism on the European continent
had become among Germanys leading policy-makers, who increasingly
hailed from the military. In 1918 Germany annexed huge tracts of ter-
ritory from the Russian Empire, taking direct control of almost all its
coal mines, three-quarters of its iron ore, half its industry, and a third
of its rail system. An increasingly anti-Slavic ideology added a racial
dimension to this imperial expansion. Generals Paul von Hindenburg
and Erich Ludendorff wanted not only to control the resources of East-
ern Europe, but also to subdue the regions Slavic nationalities, settle
Germans there, and create a frontier wall of physically and mentally
healthy human beings. First in Poland then later further east, the Ger-
man army commandeered forced labor, deported thousands of Slavic
workers, and monitored the local population through registration and
identity cards.46
South of Russia the racial dimension was less extreme, yet the triumph
of this harder approach to imperialism was still evident. German mili-
tary and business leaders quickly made clear that Romania, Serbia, and
even Bulgaria were to become economic vassals of Germany, not col-
laborative partners. After a study trip through the Balkans in 1916, one
German parliamentary deputy reported that Germany was dealing with
44 Friedrich Naumann, Mitteleuropa (Berlin: G. Reimer, 1916), 4. See also Jackh, Das
grossere Mitteleuropa; Fischer, War of Illusions, 44251.
45 Kloosterhuis, Friedliche Imperialisten; Andrej Mitrovic, Serbias Great War 19141918
(West Lafayette, IN: Purdue University Press, 2007), 214.
46 Quotation from Mazower, Hitlers Empire, 257; Antony Polonsky, The German Occu-
pation of Poland during the First and Second World Wars: A Comparison, in Roy A.
Prete and A. Hamish Ion (eds.), Armies of Occupation (Waterloo, Ont.: Wilfrid Laurier
University Press, 1984), 11030; Baranowksi, Nazi Empire, 8693, 1035; Vejas Gabriel
Liulevicius, War Land on the Eastern Front: National Identity and German Occupation in
World War I (Cambridge University Press, 2000).
48 German power
the states of Southeastern Europe, including its ally Bulgaria, as if they

were conquered colonies.47 The conquest of Serbia in 1915 began a
punitive occupation and unleashed a scramble for its mines, agricultural
surplus, and railroads between the military authorities and businessmen
of Germany, Austria-Hungary, and Bulgaria. Although Austria-Hungary
and Bulgaria controlled the administration of Serbia, Germany acquired
the lions share of its valuable assets and raw materials. The German
military leadership requisitioned huge quantities of livestock and wheat.
German banks, led by the Deutsche Bank and the Disconto-Gesellschaft,
took majority control over the prized Bor copper mines, gained a near
monopoly on underwriting commercial transactions, established a host
of new financial institutions throughout the region, and made plans to
acquire and run Serbias railroad system.48 German military authori-
ties were even more rapacious in their push to control Romanias assets
and surplus production. The Treaty of Bucharest in March 1918 gave
the German government control over Romanias agricultural surplus
until 1926, established a state-run company to monopolize Romanias
oil production and mining royalties, and enforced a military treaty
between the two states. German banks opened branches in Bucharest,
and from 1917 to 1918 Germany paid for the occupation by placing paper
notes worth 1.4 billion lei into circulation through the Banca Generala
Romana.49
The Paris peace talks and the new postwar order

During the war, in other words, hard power and formal empire trumped
soft power and informal imperialism. And the political, economic, and
cultural elites of Southeastern Europe would vividly remember this in
the following decade. Yet the peace treaties of 1919 did little to heal the
wounds of the First World War in Central and Southeastern Europe.
Instead they perpetuated a hostile international and commercial envi-
ronment for much of the 1920s. The sheer destruction of the war and
its monumental cost in life and money led the Entente to impose a hard
peace on the new German Republic. Germany lost 27,000 square miles of
territory, 7 million people, and 10 percent of its prewar resources. Nearly
47 Quotation is from Gustav Stresemann cited in Mitrovic, Serbias Great War, 193244.
48 Ibid., 193244; Fritz Fischer, Germanys Aims in the First World War (New York: W. W.
Norton, 1967), 51733.
49 Tonch, Wirtschaft und Politik, 456, especially footnote 39; Fischer, Germanys Aims,
51733; David Hamlin, Dummes Geld: Money, Grain, and the Occupation of Roma-
nia in WWI, Central European History 42 (2009), 45171; Gerald D. Feldman, Ger-
man Business Interests and Rumanian Oil in the First World War, in Roland Schonfeld
(ed.), Deutschland und Sudosteuropa: Aspekte der Beziehungen im Zwanzigsten Jahrhundert
(Munich: Sudosteuropa-Gesellschaft, 1997), 2436.
10 million Germans now resided outside the boundaries of the new

Weimar Republic. In matters of foreign trade Germany lost its colonies
as well as control over its own commercial policy until 1925. German
companies lost many of their foreign financial holdings and Germanys
merchant marine had to relinquish all ships above 16,000 tons, effec-
tively making the Weimar Republic dependent on foreigner enterprises
for shipping and insurance. In matters of the domestic economy, in addi-
tion to its war debts the Weimar Republic was saddled with a massive
reparations bill to be paid out of its own industry and resources, it lost
some of its richest coal-producing regions in the Saar, Alsace-Lorraine,
and Upper Silesia, and its waterways were internationalized.50
Even more than for Germany, for Serbia and Romania the World War
represented an economic and social catastrophe of the first order. In the
former, the Bulgarian and Austro-Hungarian policies of suppressing Serb
nationalism, eradicating the intelligentsia, interning, exiling, or killing
military-aged men, and requisitioning most other able-bodied workers
led to a continual state of armed uprisings. In the latter, the occupation
itself was more lenient but the economic effects of placing nearly one and
half billion lei into circulation led to chronic inflation that persisted until
1928.51
For the leaders of Romania and Serbia, Woodrow Wilsons principle
of national self-determination and the Paris peace talks presented the
opportunity to right the wrongs inflicted during the war, and expand
their borders to incorporate co-nationals into a greater Romanian or
South Slav nation-state. The Paris committees managed to draw new
borders, however artificially conceived, and both Romania and Serbia
benefited territorially from the postwar settlement, unlike Germany.
Romania more than doubled in size by absorbing all of Transylvania
with its large Hungarian and German minorities, along with parts of the
Banat in the west and Bessarabia in the east. Serbia merged with Croa-
tia, Slovenia, and Montenegro to become the Kingdom of Serbs, Croats,
and Slovenes Yugoslavia. Yet Serbs dominated the bureaucracy and
the military of the new state. With their expansion both Romania and
Yugoslavia became multinational states with substantial German minori-
ties of 745,000 and 505,000, respectively, out of total populations of 18
million and 12 million.52
50 Zara Steiner, The Lights that Failed: European International History 19191933 (Oxford
University Press, 2005), 5470.
51 John R. Lampe, Balkans into Southeastern Europe: A Century of War and Transition (New
York: Palgrave Macmillan, 2006), 75; Teichova, Kleinstaaten im Spannungsfeld, 17.
52 Margaret MacMillan, Peacemakers: The Paris Conference of 1919 and its Attempt to End
War (London: John Murray, 2001), 11945; Steiner, Lights that Failed, 80131, quote
from 83; figures from Rothschild, East-Central Europe, 203, 284.
50 German power
Geopolitically, the peace treaties heightened the differences between

the winners and the losers of the war in Southeastern Europe. German
leaders found themselves on the wrong end of the three main postwar
settlements: reparations; the League of Nations, from which Germany
was excluded until 1925; and the borders in Eastern Europe. After 1918
Germany thus became a state that wanted to overturn the postwar order
at almost any cost. Though Weimars more internationally minded lead-
ers realized that abolishing all aspects of the Treaty of Versailles would be
impossible or might damage the Republic, they felt pressured by domestic
politics to employ revisionist and nationalistic language throughout the
1920s. Even Ernst Jackh after 1918 a liberal democrat and an advocate
for Weimars participation in the League of Nations now called atten-
tion to the German communities spread throughout Central Europe
as a result of the new borders, highlighting the challenges that ethnic
minorities could pose to a stable postwar order. Although he denied irre-
dentism as a valid political goal, Jackh nevertheless stressed Germanys
right to support cultural autonomy for German communities in other
states, thereby justifying the use of these minorities as one among many
instruments in Germanys postwar cultural diplomacy.53 In contrast to
Germany, both Romania and Yugoslavia ended up on the other end of
the postwar treaties and both states would become vigorous proponents
of the Paris peace settlement, which to them meant, above all, collective
security under the League of Nations. Their overriding foreign policy
objective in the postwar environment became the preservation of their
territorial gains and the protection of their sovereignty.54
Postwar economic competition in Southeastern Europe

The war and the peace treaties generated not only diplomatic ten-
sions in the 1920s, but also economic ones, disrupting commercial
ties across Central and Southeastern Europe. To be sure, the Treaty of
Versailles was not a Carthaginian peace as many contemporaries, most
notably John Maynard Keynes, believed. Germany was not crippled as
an economic power. It remained the most populous state in Europe, its
53 Peter Kruger, Die Aussenpolitik der Republik von Weimar (Darmstadt: Wissenschaftliche
Buchgesellschaft, 1985), 615; Gottfried Niedhardt, Die Aussenpolitik der Weimarer
Republik (Munich: Oldenbourg, 1999), 117; Niall Ferguson, The Pity of War (New
York: Penguin, 1999), 411; Ernst Jackh, The New Germany (London: Oxford Univer-
sity Press, 1927), 989.
54 Keith Hitchens, Rumania, 18661947 (Oxford: Clarendon Press, 1994), 42737; John
R. Lampe, Yugoslavia as History: Twice There Was a Country (Cambridge University
Press, 1996), 1505.
industrial potential was largely intact, and with the demise of the Habs-
burg, Ottoman, and Russian empires Eastern Europe was now populated
by small, fragile states. While on the surface reparations seemed to impose
a huge burden on Germanys public finances, Weimars inflation and the
speculation that came with it led to a substantial net flow of capital into
Germany.55
But what the war and the treaty did hasten, and here Keynes was cor-
rect, was the disintegration of Central Europe as an economic unit. Before
the war Germany had been the beating heart of the continents economy,
the largest trading partner for the Habsburg and Russian empires as well
as the Netherlands, Belgium, Switzerland, Romania, and Serbia.56 The
war and the peace cut many of those commercial ties. The multiplica-
tion of states in Central and Eastern Europe in 1919 brought new tariff
regimes and thoroughly complicated transborder commercial transac-
tions as the new states erected their own regulation over railroads, water-
ways, postal services, and communications. By 1920 sending goods or
payments from Belgrade or Warsaw to Berlin or Vienna became much
more difficult than it had been a decade earlier.
This fragmentation of economic space exacerbated the already daunt-
ing task of reconstruction in Southeastern Europe. In 1919 the economic
situation in the new Yugoslavia and the enlarged Romania was grim. Four
years of war and occupation had led to famine and left a depleted capi-
tal stock, a crumbling transportation and infrastructure system, a weak
and hungry population, and an agricultural sector decimated by requi-
sitioning, undercultivation, and poor harvests. Between 1919 and 1920
commerce in the region came virtually to a standstill, and these two states
subsisted only with the help of international aid from American organiza-
tions and food relief loans from Great Britain and Canada.57 Both states,
moreover, lacked the hard currency needed to import the finished goods
and machinery to rebuild their economies. The destruction of equip-
ment during the war, the costs of resettlement, and the burden of repay-
ing war and food loans left Romania and Yugoslavia starved of capital
55 Steiner, Lights that Failed, 1903; Stephen A. Schuker, American Reparations to Ger-
many, 19191933: Implications for the Third-World Debt Crisis (Princeton University Press,
1988). For the debates on whether the inflation was salutary for Germanys economic
recovery or not, see Gerald D. Feldman, The Great Disorder: Politics, Economics, and
Society in the German Inflation 19141924 (New York: Oxford University Press, 1993);
Carl-Ludwig Holtfrerich, The German Inflation, 19141923: Causes and Effects in Inter-
national Perspective (New York: De Gruyter, 1986); Ferguson, Pity of War, 3957.
56 John Maynard Keynes, The Economic Consequences of the Peace (London: Macmillan,
1919), chs. 1 and 2.
57 Ranki, Economy and Foreign Policy, 19; Teichova and Cottrell, International Business and
Central Europe, 312.
52 German power
throughout the 1920s. Their low level of income per person, which was
roughly one-third that of Great Britain or Germany, curtailed their ability
to accumulate such capital domestically.58
To rebuild, Romania and Yugoslavia turned to Western capital mar-
kets for investment. In the process, Southeastern Europe again became
the site of great power rivalry as it had been before 1914. Through for-
eign investment the British and French governments hoped to create a
cordon sanitaire of stable states in Southeastern Europe. Both the British
Foreign Office and its newly established Department of Overseas Trade
(DOT) wanted to prevent the return of German commercial influence in
Southeastern Europe while at the same time carving out a greater market
share for British merchants.59 If their exporters failed to gain ground,
the Foreign Office feared that trust in British power to restore order
in these countries will turn into disillusionment and bitterness, of which
Germany will reap the fruit. Thus in 192021 the DOT organized an
export credit program to finance the sale of British goods to Southeastern
Europe. And in 1920 a British bank syndicate acquired partial control
over Danube shipping from German, Austrian, and Hungarian compa-
nies. These and other initiatives aimed to build a bulwark against the
Germany of the future.60
The French government likewise aspired to block German commer-
cial influence after the war, but the sorry state of French state finances
prevented it from coordinating its financial and diplomatic policies until
the second half of the 1920s. Before 1926 French financial influence in
Southeastern Europe remained a poor mans imperialism.61 Yet the
stabilization of the franc opened a new phase of French influence. The
Banque Franco-Serbe in Belgrade, founded in 1910 by the Banque de
58 From 1920 to 1938 their rate of investment ranged between 5 and 8 percent; in compari-
son, the rates in Great Britain and America were 10 to 18 percent. Teichova, Kleinstaaten
im Spannungsfeld, 712.
59 Marie-Luise Recker, England und der Donauraum, 19191929: Probleme einer europaischen
Nachkriegsordnung (Stuttgart: Klett, 1976), 47.
60 Ranki, Economy and Foreign Policy, 1112; the first quotation, British Foreign Office
report from October 15, 1919, the second from a British memorandum from October
18, 1919, both cited in Recker, England und der Donaraum, 434; see also Teichova,
Kleinstaaten im Spannungsfeld, 768.
61 Alain Plessis and Olivier Feiertag, The Position and Role of French Finance in the
Balkans from the Late Nineteenth Century until the Second World War, in Kostas
P. Kostis (ed.), Modern Banking in the Balkans and West-European Capital in the Nine-
teenth and Twentieth Centuries (Brookfield, VT: Ashgate, 1999), 21534, at 225; G.
Soutou, Limperialisme du pauvre: la politique economique du gouvernement francais
en Europe centrale et orientale de 1918 a 1929. Essai dinterpretation, Relations inter-
nationals 7 (1976), 21939.
lUnion Parisienne (BUP), became one of Yugoslavias largest financial

institutions.62 In Romania the BUP and the Banque de Paris et des Pays-
Bas (BPP) expanded their share in several of Romanias larger banks and
French investors came to have stakes in over twenty Romanian financial
institutions. More important than private credit, between 1927 and 1929
Frances central bank stabilized the Romanian currency with a loan of
$100 million, and French advisors gained extensive regulatory powers
over the Romanian national bank. The French government tied its aid to
the purchase of military and industrial hardware, and with the conclu-
sion of treaties with Romania and Yugoslavia in 1926 and 1927, France
buttressed its financial ties with a military commitment. By the end of the
1920s, then, Yugoslavia and Romania were immersed in Frances treaty
system and key members of the Little Entente.63
The single largest source of foreign investment in Southeastern Europe,
however, came from Austria. Before the war Austrian banks had been the
largest investors in the region. The splintering of the Habsburg Empire
turned Austrian banks into multinational enterprises at a time when their
capital was under massive strain from inflation and war debts. Investors
from France, America, Great Britain, the Netherlands, Belgium, and
Switzerland saw this as an opportunity to move into Southeastern Europe
by working through Viennas weakened banks. Of the eight great Vien-
nese banks, Western investors bought two of them outright. And for
the remaining six the influx of Western capital offered them a unique
occasion to return to the Balkans.64 These six retained independent
management and hoped to become multinational institutions and finan-
cial leaders in Southeastern Europe by financing their old clients in the
new successor states.65 This was particularly so for the Credit-Anstalt,
62 Andrej Mitrovic, Foreign Banks in Serbia, 18821914, in Kostas P. Kostis (ed.),

Modern Banking in the Balkans and West-European Capital in the Nineteenth and Twentieth
Centuries (Brookfield, VT: Ashgate, 1999), 7694; Cristian Bichi, Foreign Banks in
Romania: A Historical Perspective, ibid., 3449, at 36.
63 Plessis and Feiertag, Role of French Finance, 21531, quotation from 228; Bichi,
Foreign Banks in Romania.
64 Vesna Aleksic, The History of the Allgemeiner Jugoslawischer Bankverein AG in Bel-
grade in the Context of Yugoslav Banking History after 1918, in Oliver Rathkolb,
Theodor Venus, and Ulrike Zimmerl (eds.), Bank Austria Creditanstalt: 150 Jahre
osterreichische Bankengeschichte im Zentrum Europas (Vienna: Paul Zsolnay Verlag, 2005),
22638, quotation from 226; Teichova, Kleinstaaten im Spannungsfeld, 7680, 8795;
Herbert Matis, Disintegration and Multi-National Enterprises in Central Europe dur-
ing the Post-War Years (19181923), in Teichova and Cottrell, International Business
and Central Europe, 89; Lampe and Jackson, Balkan Economic History, 395.
65 Alice Teichova, Banking and Industry in Central-East Europa in the First Decades of
the 20th Century, in Rathkolb et al., Bank Austria Creditanstalt, 14861.
54 German power
Austrias largest bank, which pursued an international strategy that

would encompass all of the Danube countries. Yet it was heavily depen-
dent on foreign capital: international creditors held a third of its common
stock in the 1920s.66
In contrast to Britain, France, and Austria, German financial muscle
in Southeastern Europe during the 1920s was virtually non-existent, the
war and the Treaty of Versailles having dismantled it almost entirely. A
Serbian decree in August 1915 and the Allied economic conference in
Paris in October 1916 laid the legal foundation for sequestering German
assets, which the Treaty of Versailles upheld.67 German investments in
Serbia were confiscated, including the holdings of the Berliner Handels-
gesellschaft in Belgrade, along with various factories, distilleries, and
processing plants.68 Germanys prewar shares in Romanian banks like
the Marmorosch Blank & Co. and the Banca Generala Romana passed
mostly into French and Romanian hands, while the Deutsche Banks
prized oil company, Steaua Romana, was taken over by Anglo-American
and French investors. Germanys only financial remnant in Southeastern
Europe was a small branch of the Dresdner Bank in Bucharest.69
Problems of information in GermanBalkan commerce

In the race to capture the markets and investment opportunities of South-
eastern Europe after 1919, then, Germany quickly fell behind. During
the 1920s Southeastern Europe Romania, Yugoslavia, Hungary, and
Bulgaria accounted for only 24 percent of Germanys total trade, most
of which was done with the United States, Great Britain, and Western
Europe (see Tables 1.3 and 1.4). Between 1920 and 1927 Germany
ranked only fourth in exports and imports to Yugoslavia, behind Italy,
Austria, and Czechoslovakia.70 Germany performed better with Roma-
nia, but in both cases its share of Yugoslavia and Romanias trade was
66 Gerald D. Feldman, Die Creditanstalt-Bankverein in der Zeit des Nationalsozial-

ismus, 19381945, in Gerald D. Feldman, Oliver Rathkolb, Theodor Venus, and
Ulrike Zimmerl, Osterreichische Banken und Sparkassen im Nationalsozialismus und in der
Nachkriegszeit (Munich: C. H. Beck, 2006), 237.
67 Bozidar Jurkovic, Auslandische Kapital in Jugoslavien (Stuttgart: W. Kohlhammer, 1938),
1345.
68 Ibid., 136; Mitrovic, Foreign Banks in Serbia, 78.
69 Bichi, Foreign Banks in Romania, 369; Plessis and Feiertag, Role of French
Finance, 225; Harald Wixforth, Die Expansion der Dresdner Bank in Europa (Munich:
Oldenbourg, 2006).
70 The latter depends on whether reparation deliveries are included in exports a
crucial point. If they are, then German exports to Yugoslavia exceeded those from
Czechoslovakia.
Table 1.3 German exports to Southeastern Europe and other major trade
partners (in millions of RM and as a percentage of total German trade)
Country 1924 1926 1927 1928 1929 1930
Romania 89.3 121.3 147.6 172.7 164.0 137.3

1.36% 1.24% 1.44% 1.43% 1.13% 1.09%
Yugoslavia 36.4 81.4 68.1 117.6 152.6 172.1
0.55% 0.83% 0.66% 0.98% 1.06% 1.37%
Bulgaria 28.0 29.4 31.0 36.0 44.7 22.9
0.43% 0.30% 0.30% 0.30% 0.31% 0.18%
Hungary 76.8 108.1 141.7 154.0 146.7 118.3
1.17% 1.10% 1.38% 1.28% 1.01% 0.94%
Southeastern 230.5 340.2 388.4 480.3 508.0 450.6
Europe
(incl. Hungary, 3.51% 3.46% 3.79% 3.98% 3.51% 3.58%
Romania
Bulgaria, and
Yugoslavia)
USA 509.1 744.1 776.2 795.9 991.1 685.2
Great Britain 611.5 1162.5 1178.8 1182.4 1305.2 1218.9
Netherlands 649.3 1126.8 1120.8 1177.3 1355.2 1205.8
France 101.8 237.2 113.3 934.5 934.5 1148.6
Total German 6,568.2 9,819.5 10,242.7 12,052.9 14,456.5 12,579.0
exports
Source: Wirtschaft und Statistik (192531)
far below what it had been before the war with Serbia and a smaller
Romania71 (see Table 1.5).
Trade, however, does not depend entirely on finance, and the develop-
ment of trade in the Balkans bears this out. For while Great Britain and
France both had extensive financial involvements in Yugoslavia, Roma-
nia, or by proxy in Vienna, their trade with Southeastern Europe also
remained limited during the 1920s. Great Britain purchased only 1
2 percent of Southeastern Europes exports; France did little better.72
Indeed, the challenges to German commercial penetration were not only,
or primarily, the absence of financial support for its merchants. Instead,
71 In 1925 exports and imports to Austria amounted to 16 percent of Romanias trade,

those to Germany slightly over 12 percent, and those to Great Britain around 9 percent.
Richard Crampton and Ben Crampton, Atlas of Eastern Europe in the Twentieth Century
(New York: Routledge, 1996), 118.
72 Ranki, Economy and Foreign Policy, 367.
56 German power
Table 1.4 German imports from Southeastern Europe and other major trade
partners (in millions of RM and as a percentage of total German trade)
Country 1924 1926 1927 1928 1929 1930
Romania 59.8 153.8 243.3 188.0 210.8 236.9

0.64% 1.45% 1.69% 1.34% 1.51% 2.18%
Yugoslavia 29.3 81.0 72.3 66.6 60.9 74.8
0.31% 0.76% 0.50% 0.47% 0.44% 0.69%
Bulgaria 21.1 35.0 48.7 49.6 51.2 58.9
0.23% 0.33% 0.34% 0.35% 0.37% 0.54%
Hungary 48.3 86.4 80.1 71.9 89.3 82.1
0.52% 0.81% 0.56% 0.51% 0.64% 0.75%
Southeastern 158.5 356.2 444.4 376.1 412.2 452.7
Europe
(incl. Hungary, 1.70% 3.36% 3.09% 2.68% 2.94% 4.16%
Romania
Bulgaria, and
Yugoslavia)
USA 1,754.4 1,602.9 2,072.9 2,026.6 1,787.8 1,306.8
Great Britain 881.0 576.4 937.8 893.2 865.4 639
Netherlands 439.0 546.9 696.9 710.3 701.0 560.8
France 220.1 297.4 595.8 577.4 642.0 518.7
Total German 9,317.3 10,616.7 14,381.2 14,045.4 13,998.4 10,884.4
imports
The figure for imports from Yugoslavia for the years 192830 might be artificially low. Wirtschaft
und Statistik claimed that many Yugoslavian goods that ended up in Germany went first
through Austria and Czechoslovakia, and therefore were not counted in the total imports
from Yugoslavia. Wirtschaft und Statistik tried to adjust for that in the years 19267, which is
why these numbers are significantly higher than the later years. However, it is not clear if they
continued this adjustment after 1927.
for most businessmen, with the destruction of their commercial networks

from the war, the most intractable issues in Southeastern Europe were
acquiring information about commercial opportunities and rebuilding
trustworthy relationships with local merchants.
Here Rudolf Eberhardt offers an emblematic example of the challenges
German exporters faced. In the spring of 1924 Eberhardt, a manufac-
turer of agricultural equipment from Ulm, took a month-long journey
through Southeastern Europe to assess the regions economic conditions.
Eberhardt returned deeply dismayed by what he saw: the creeping dom-
ination of the regions markets by Austria, Italy, Britain, and France. His
Table 1.5 Direction of Romanian and Yugoslavian foreign trade (percent of total exports or imports)
Northwestern Southeast Europe

Europe Germany Eastern Europe Italy and Turkey Other
Country Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports
Romania 191114 48.7 24.0 7.1 36.7 16.6 26.1 11.2 4.9 6.4 3.3 10.0 5.0
19215 26.5 25.0 6.3 17.4 33.8 39.4 6.6 10.4 12.4 4.2 14.4 3.6
Yugoslavia 1912 9.0 14.4 21.7 29.3 42.9 46.1 4.5 3.2 16.9 5.5 5.0 1.5
19215 11.1 14.5 8.0 7.7 39.1 46.9 27.4 18.7 8.4 6.7 6.0 5.5
Source: Lampe and Jackson, Balkan Economic History, 366, table 10.13. Data for 191114 for Romania and for 1912 for Yugoslavia are for the
old kingdoms of Romania and Serbia.
58 German power
livelihood depended on sales to Southeastern Europe, and he relied on

information provided by the Foreign Office and Germanys commercial
journals to stay abreast of the local conditions, since so few German com-
mercial agents were now based in the region. These sources, he claimed,
had left him entirely unaware of the deteriorated state of Germanys
economic reputation. Nor could he imagine that any other [German]
industrial producer interested in the Balkans could possibly be better
informed without taking a comparable study trip, since the reports by
Germanys consulates were simply filling the filing cabinets of the For-
eign Office in Berlin, without being furnished to German industrial and
commercial enterprises that could utilize them.73
The problems Eberhardt faced were not isolated. Numerous reports
from Weimars consuls in Yugoslavia and Romania confirmed that Ger-
man commerce [was] made difficult by scarce information about the
local circumstances.74 Before 1914 German merchants like Erberhardt
had acquired economic news and information about Serbia and Roma-
nia primarily from four different sources. First, larger firms had their
own agents who would keep them abreast of local opportunities. Second,
German banks owned shares in Serbian and Romanian financial institu-
tions and provided German importers and exporters with information as
well as credit. Third, German consulates supplemented these agents and
banks by answering inquiries about the regions economic conditions.
Fourth, merchants and banks based in Vienna and Budapest functioned
as information mediators for firms that could not afford their own agent
in region.75
With the exception of the latter, all of these conventional information
conduits for businessmen like Eberhardt broke down after 1918. Larger
firms such as Siemens AG, AEG Electric, or the new chemical com-
bine IG Farben took a decade to reconstitute or create anew their sales
networks in Central and Southeastern Europe.76 Meanwhile, Germanys
numerous smaller firms lacked the means to support their own agents in
the region.77 As the Foreign Office reported in 1926, because Germanys
73 Brothers Eberhardt to Berlin Foreign Office, May 10, 1924, 54160, R 901, BA.
74 German consul in Belgrade to Berlin Foreign Office, October 2, 1920, 54163/film
40724, R 901, BA.
75 Lampe and Jackson, Balkan Economic History, 2278.
76 Harm Schroter, Europe in the Strategies of Germanys Electrical Engineering and
Chemical Trusts, in Volker Berghahn, Quest for Economic Empire: European Strategies of
German Big Business in the Twentieth Century (Providence, RI: Berghahn Books, 1996),
412; Balderston, German Economic Crisis, 95; Verena Schroter, IG Farbenindustrie,
in Teichova and Cottrell, International Business and Central Europe, 13972, 1414.
77 Bericht uber die Tatigkeit des Leipziger Messe, Geschaftsjahr 15, 1931, 7844, 10717
Aussenwartigen Angelegenheiten, SSAD.
economic circles are often still not in the position to support their own
representatives abroad, they are therefore relying more than before the
war on news coverage from our foreign missions . . . Many of the sources
from which our commerce and industry could draw their information
before the war are still closed to them today.78 In 1927 the German
charge daffaires in Bucharest conducted a survey of approximately 100
firms engaged in GermanRomanian trade. The report concluded that
only the very largest firms, especially those in the metal or electrical
engineering sectors, had the means to employ their own permanent rep-
resentatives or establish local branches.79
Commercial support from financial institutions, though, mattered as
well, and this was utterly absent for German firms operating in South-
eastern Europe following the nationalizations of World War I.80 Weimars
consular officials saw this as a serious setback in Germanys quest to
reestablish commercial relations with Yugoslavia and Romania.81 Repa-
rations and hyperinflation, moreover, had severely weakened the balance
sheets of banks back in Germany, particularly the larger ones that had
financed exports. Between 1913 and 1929 the average capitalization
of German banks declined from 22 to 9 percent, and by one estimate
bank capital in 1924 was only one-third of what it had been a decade
earlier. Consequently, the market for financing trade in risky regions,
including Southeastern Europe, collapsed and only slowly recovered
after the stabilization of the currency in 1924.82 According to Johannes
Marz, director of the Association of Saxon Industrialists, as late as
1928, Germanys system of export banks, which provided excellent
information about the credit-worthiness of foreign clients, still does not
yet exist again in the postwar years and is today only beginning to be
reconstituted.83
78 Confidential parliamentary report on establishing a service for the promotion of German

foreign trade from 1926, 106582, Politische Abteilung, PAAA.
79 Survey of German sales in Romania by Gerhard Mutius, April 1, 1927, 89209, Han-
delsabteilung, PAAA.
80 Jurkovic, Auslandische Kapital, 1346; Plessis and Feiertag, Role of French Finance,
225; Mitrovic, Serbias Great War, 78; Matis, Disintegration, 89.
81 Report by Walbeck from Belgrade to Berlin, June 22, 1925, 54164/film 40725, R 901,
BA.
82 Gerd Hardach, Banking and Industry in Germany in the Interwar Period 19191939,
Journal of European Economic History 13, no. 2 (1984), special issue; Theo Balderston,
German Banking Between the Wars: The Crisis of the Credit Banks, Business History
Review 65, no. 3 (1991), 554605.
83 Johannes Marz, Die Einstellung der sachsischen Industrie auf die neuen Formen der
Weltwirtschaft, in Jahrbuch Sachsen: Politik und Wirtschaft, Kunst und Wissenschaft im
Freistaat Sachsen (Leipzig: Herlingsche Verlagsanstalt, 1928), 6471.
60 German power
While German firms and banks were slow to reconstruct their net-
works, the road was just as rocky for Germanys consular system, which
now carried a greater burden for collecting and disseminating informa-
tion about economic conditions. Before 1914 Germanys 141 full con-
sulates were supplemented by 614 consular agents, of which only half
had been reestablished by 1926. These positions were usually staffed by
honorary officials, but after the war the Foreign Office had difficulty fill-
ing them with experienced people in the formerly hostile countries since
so many of Germanys overseas agents never returned to their prewar
positions. The availability of personnel with a genuine understanding
of the local economic conditions was extremely limited, and the For-
eign Office turned increasingly to local businessmen who often did not
speak German: in 1926 nearly half of Germanys honorary consuls were
non-Germans.84 According to a confidential Foreign Office report from
1926, under such circumstances there can be no discussion at all about
reliable and objective economic news coverage and information distribu-
tion, upon which the domestic economy can build its export and import
business. The Foreign Office hoped to transform these honorary con-
sular agencies into paid representatives, yet the financial means for this
was largely absent. Until 1926 it devoted just 50,000 RM a year to its
news-collection services. As a consequence, German consuls frequently
lacked the resources to gather economic information: only the largest
missions possessed the newspapers, journals, statistical yearbooks, and
export handbooks needed to effectively promote trade.85
The problem was particularly acute in Southeastern Europe, where
Weimars consuls operated with minimal financial resources and where
they had to create a new infrastructure to collect information in these
recently formed states.86 In 1928 the Foreign Office had an annual bud-
get of only 10,900 RM to fund all its consular activities in Southeastern
Europe, including Hungary. Before 1926 the Bucharest office had no
press fund at its disposal; in 1926 it received just 600 RM.87 The situa-
tion was better in Yugoslavia, but still did not meet the expectations of
German officials there.88 Furthermore, the missions in both Bucharest
and Belgrade were too understaffed to answer the numerous inquiries
84 Confidential parliamentary report on establishing a service for the promotion of German

foreign trade from 1926, 106582, Handelspolitische Abteilung, PAAA.
85 Ibid.
86 Belgrad Presse- und Nachrichtendienst, 121018, Presseabteilung, PAAA.
87 The press fund was used for collecting and translating local news as well as disseminating
German propaganda. German mission to Berlin Foreign Office, December 20, 1926,
121023, Presseabteilung, PAAA.
88 Ibid.; Belgrade Press and News Service correspondence from 19257, 121018,
Presseabteilung, PAAA.
from German exporters and frequently had to respond inadequately or

point them toward other sources.89 The task of collecting information
was not made easier by the lack of statistical information available in
Yugoslavia, where it took several years after the war for the Ministry of
Trade to establish a functioning statistical service.90 And unlike other
regions of Europe, before 1928 no German trade journals were dedicated
specifically to economic news from the Balkans. German exporters had to
rely on the general overview provided by the Deutscher Wirtschaftsdienst,
Industrie- und Handelszeitung, and Das Nachrichtenblatt fur Ausfuhr und
Einfuhr or other local news organs like Sachsiche Industrie, and Ruhr und
Rhein, which, as many contemporaries attested, were often too general
to be of use.91
Because German merchants lacked agents, had few banks, and were
supported by an underfunded consular system in Southeastern Europe,
they relied even more on Austrian intermediaries than they did before
1914. Austrian merchants had many of the advantages that came with
personal relationships and reliable information. By the middle of the
decade Austrian bank branches existed in most major cities within the
borders of the old Habsburg Empire: Ljubljana, Zagreb, Novisad, Cer-
nowitz, and even cities outside the old frontiers such as Belgrade.92
Viennese banks and merchants held a distinct advantage over other for-
eigners, since their history as intermediaries with parts of Romania and
Yugoslavia had given them indispensable experience and lasting per-
sonal contacts with local businessmen. Such experience was necessary to
succeed in what one historian has called the complex and inaccessible
market of Southeastern Europe, a region where many Western Euro-
pean investors and businessmen, Germans included, were turned off by
the prevailing uncertainty and lack of information.93 To many contem-
poraries it seemed that in the multilingual Balkans German merchants
should enjoy an advantage over traders from other Western European
countries. German was widely used as the regions business language,
89 Bucharest charge daffaires to Birnstiel & Co. from April 9, 1926, 89278, Han-
delsabteilung, PAAA; Brothers Eberhardt to Berlin Foreign Office, June 1, 1924, 54160,
R 901, BA; Leipzig chamber of commerce to German Legation in Belgrade, August 14,
1926, 54226/film 41401, R 901, BA.
90 Marie-Janine Calic, The Socio-Economic Development of Yugoslavia during the Inter-
War Period: A Regional Point of View, in Jean Batou and Thomas David (eds.), Uneven
Development in Europe 19181939 (Geneva: Droz, 1998), 32755, at 332.
91 Business report of Aussenhandelsverband-Handelsvertragsverein (AHV) for 19267,
and report from the branch office for foreign trade, July 15, 1925, 1040 AHV, R
57/Neu, BAK.
92 Matis, Disintegration, 88.
93 Ibid., 93; Lampe and Jackson, Balkan Economic History, 395.
62 German power
and the substantial German minority communities in Transylvania,

the Banat, and the Danube river basin around Novi Sad offered a solid
foundation for business contacts. Yet these advantages meant little in the
face of competition with the Viennese, who often spoke Serbian, Hungar-
ian, Croatian, or Romanian in addition to German.94 Moreover, it was a
common grievance that despite the language advantage German traders
might have, they knew sincerely little about the pulse of the tribes
on the other side of the Drina, seeing Yugoslavia and Romania only
through the eyeglass of Austrian politics.95 Thus most German firms,
even larger ones such as Siemans AG and IG Farben, worked through
Austrian banks or Austrian firms and their subsidiaries in Yugoslavia and
Romania through much of the 1920s.96
Problems of uncertainty and trust

in GermanBalkan commerce
The need for accurate information about business opportunities in
Yugoslavia and Romania after the war was particularly pressing because
both states had cumbersome legal systems and high levels of corruption,
and because both often targeted German merchants with discriminatory
laws. Throughout the 1920s complaints about profiteering and bribery
among Yugoslavian merchants and officials abounded. Although Ger-
many and Yugoslavia negotiated a provisional trade treaty in 1921, this
regulated only the most basic aspects of interstate commerce and left
wide latitude for how customs agents dealt with importers and exporters.
In 1922 the Foreign Office estimated that bribery at the Yugoslavian
border routinely added 50 percent to the already large 30 percent toll
applied to German goods.97 As in Romania, only Yugoslavian merchants
94 Report from Dr. Schmidtlein on the condition of German business in Yugoslavia, April
21, 1927, 48035, R 901, BA. Also found in R 243085, RZ 206, AA, PAAA.
95 Fach & Schneider GmbH to Berlin Foreign Office, November 29, 1920, 54163, R 901,
BA; Gerhard Schacher, Deutschland und der Balkan Handel, February 9, 1926,
54160/film 40682, R 901, BA.
96 Report from Dr. Schmidtlein on the condition of German business in Yugoslavia, April
21, 1927, 48035, R 901, BA; German charge daffaires in Vienna to Berlin Foreign
Office, December 18, 1923, 54266/film 41406, R 901, BA; Harm Schroter, Siemens
and Central and South-East Europe between the Two World Wars, in Teichova and
Cottrell, International Business and Central Europe, 17580; Matis, Disintegration, 93;
Aleksic, Allgemeiner Jugoslawischer Bankverein AG, 22638.
97 Nuremburg Office for Foreign Trade to Berlin Foreign Office, April 20, 1922,
54160, R 901, BA; report from chamber of commerce in Munich, January 12, 1926,
54223/film 41368, R 901, BA; on the trade treaty see Hans Paul Hopfner, Deutsche
Sudosteuropapolitik in der Weimarer Republik (Frankfurt am Main: Lang, 1983).
could bring goods into their countries without risking the possibility of
being charged arbitrary fees.98
To compound this problem, for outsiders the Yugoslavian legal sys-
tem appeared complicated and riddled with corruption. Germans had
difficulty extracting payment when their Yugoslavian debtors reneged on
their contracts. The commercial treaty of 1921 permitted German mer-
chants to take their claims before Yugoslavian courts, but according to the
Zagreb consul, Gottfried Walbeck, here the legal process does not lead
to the goal. The number of Yugoslavian judges was too small and their
pay too poor for them to be either able or willing to process trials quickly.
As a rule, cases where foreigners tried to extract credit due to them lasted
at least a year, often dragging out for two or three before a verdict would
be reached.99 When a foreign creditor finally received the right of enforce-
ment, the local debtor could often delay the collection process for another
year or two. Walbeck and many German businessmen found this situ-
ation to be unbearable for trade and business development. German
exporters, moreover, rarely spoke Serbo-Croatian and were unfamiliar
with the court system.100 As the Deutscher Wirtschaftsdienst, a pillar of
economic news reporting in Germany, pointed out in 1926, Germans
new to the Yugoslavian market had frequently been burned by making
deals with local firms that were unworthy of credit. The Wirtschafts-
dienst alongside Germanys Foreign Trade Association warned German
firms to trade in Southeastern Europe at their own risk, and to request
payment in advance of making any deliveries.101
In Romania the primary obstacle to commerce was article 18 of the
Treaty of Versailles, which gave the Entente powers the right to impound
German assets in their home countries, including short-term credit
extended by German firms to finance trade. As German Economics
Minister Eduard Hamm pointed out in 1924, this prevented German
Romanian trade from reaching its natural potential. While France,
Great Britain, Italy, and Yugoslavia relinquished the right to impound
98 German consul in Belgrade to Berlin Foreign Office, October 2, 1920, pp. 63,
54163/film 40724, R 901, BA; see also the complaints about Yugoslavian tariff and
border control from 1925 and 1926, pp. 3562 in 54223/film 41368, R 901, BA.
99 Walbeck to Berlin Foreign Office, February 12, 1923, 54164/film 40725, R 901, BA.
100 Walbeck to Berlin Foreign Office, February 12, 1923 and November 6, 1925,
54164/film 40725, R 901, BA.
101 Bulletin about commercial exchange with Yugoslavia, January 9, 1926, 54226/film
41404, R 901, BA. The Foreign Office, the Foreign Trade Association, and the Asso-
ciation of Saxon Industrialists echoed these remarks in their own reports. Sachsische
Industrie, February 12, 1927; report from Dr. Schmidtlein on the condition of German
business in Yugoslavia, April 21, 1927, 48035, R 901, BA; memo from AHV circulated
by Bucharest consul to Foreign Office, May 2, 1925, 89209, Handelsabteilung, PAAA.
64 German power
assets, Romania did not. The possibility that the Romanian government
might confiscate German property or credit, Hamm lamented, hung like
the sword of Damocles over the heads of German traders.102 Article 18,
he and others argued, dramatically increased the risk and reduced the
willingness of German exporters, importers, and banks to do business in
Romania.103
Problems caused by article 18 were compounded by Germanys deci-
sion to pay for its wartime occupation of Romania by printing 1.4 billion
lei through the Banca Generala Romana.104 These notes directly con-
tributed to the inflation that plagued Romania through the 1920s. By
1923 the leus international value had depreciated to 3.5 percent of its
prewar worth and it continued to fluctuate widely until 1928.105 The
Romanian government demanded that Germany recognize its obligation
to repay this debt. In a series of negotiations in Bucharest in 1924 and
1925 the German government refused to concede it had any obligation to
redeem the notes, since the issue lay outside the Versailles framework.106
In February 1925 the situation deteriorated to the point where Romanias
press declared an economic war on Germany. The Romanian govern-
ment threatened to exercise article 18 as a weapon of confiscation and
German firms became increasingly reluctant to ship their goods to, or
maintain their property and operations in, Romania. In 1925 and 1926
GermanRomanian relations reached a nadir.107
102 Translated article from Argus, Nr. 3268, interview with German Economics Minister
Hamm, March 14, 1924, 89448, Handelsabteilung, PAAA; Hans Wilhelm Freytag,
a German diplomat in Bucharest, confirms Hamms point, arguing that the real
possibility of [Romania enforcing article 18] alone brings with it a certain insecurity
to business exchange with Romania. Freytag responding to a Munich firms inquiry,
December 11, 1922, 89209, Handelsabteilung, PAAA.
103 To circumvent this threat of impoundment, many German firms brought their wares
into Romania or sold them at local trade fairs under the guise of other countries
like Switzerland or the Netherlands. Bucharest Embassy responding to Heidenheim
chamber of commerce, July 22, 1924, and Consul Waldeck to Berlin, September 25,
1924, 89209, Handelsabteilung, PAAA; German consul in Temesvar to Berlin Foreign
Office, October 5, 1923, 89284, Handelsabteilung, PAAA.
104 The total notes put into circulation by this bank reached 2 billion lei, since the Banca
Generala Romana issued notes for Austria-Hungary, Bulgaria, and Turkey as well.
Tonch, Wirtschaft und Politik, 456.
105 Lampe and Jackson, Balkan Economic History, 37982.
106 Tonch. Wirtschaft und Politik, 44; Memo II Rum. 1000/24: Zwischen Deutschland
und Rumanien schweben zur Zeit folgende ungeloste Fragen, 1924, 89449, Han-
107 The Bucharest representative of Bayerische Lloyd recommended that all their Ger-
man ships be moved out of Romania. Bayerische Lloyd Schiffahrts AG to Berlin
Foreign Office, February 3, 1925, 89449, Handelsabteilung, PAAA; translated articles
from Romanian newspaper Adeverul (12614 v.9.2.), February 12, 1925, 89449, Han-
delsabteilung, PAAA; Bavarian economic office in Berlin to Foreign Office, March 2,
Yet the problem of uncertainty, information, and mistrust ran in the

other direction as well. Between 1919 and 1924 the hyperinflation in
Germany devastated the reputation of its merchants abroad. Inflation
introduced unpredictability into international transactions, and end-
less delays in delivery, contract annulments, and retroactively applied
surcharges became common practice among German exporters.108
These problems were particularly acute in Yugoslavia, where German
and Austrian carpetbaggers, speculators, and profiteers had been operat-
ing during the years of reconstruction immediately following the war.109
By 1923 Germanys consular officials in Yugoslavia reported that, the
former German reliability [was] disappearing, inflation having spawned
a lack of trust that had a sickening effect on the merchant commu-
nities of Germany and Yugoslavia.110
A path forward?
The war and its aftermath thus marked a deep cleavage in Germanys
geopolitical, cultural, and economic relationship with Southeastern
Europe and a setback of monumental proportions for the liberal impe-
rialists vision of an informal empire in Mitteleuropa. The hard-power
empire-building traditions Wilhelms and Tirpitzs aggressive Weltpoli-
tik, but more importantly Hindenburgs and Ludendorffs continental
imperial project had almost irreparably damaged the institutions, the
networks, and the reputation that were beginning to lay the foundations
for a German style of soft power before 1914.
Geopolitically, after 1918 Germany found itself on the opposite side of
the new international order from Yugoslavia and Romania, who wanted
to preserve the peace treaties and work through the collective security
of the League of Nations. Economically, the war liquidated Germanys
financial presence in Southeastern Europe and left its trade and consular
network in ruins. Defeat brought an end to the activities of Germanys
1925, 89450, Handelsabteilung, PAAA; Freytag in Bucharest to Berlin Foreign Office,

February 15, 1923, 89448, Handelsabteilung, PAAA.
108 Belgrade consul report to Berlin Foreign Office, October 2, 1920, 54163/film 40724,
R 901, BA.
109 Philip L. Cottrell, Aspects of Western Equity Investment in the Banking Systems
of East Central Europe, in Teichova and Cottrell, International Business and Central
Europe, 312; Feldman, Great Disorder, 393; Nuremburg Office for Foreign Trade to
Foreign Office in Berlin, April 20, 1922, 54160, R 901, BA; Sachsische Industrie, 31
January 1925.
110 Munich Office of Foreign Trade to the Berlin Foreign Office, February 4, 1922,
54232/film 41484, R 901, BA; report from Dr. Schmidtlein on the condition of German
business in Yugoslavia, April 21, 1927, 48035, R 901, BA; Belgrade consul to Berlin
Foreign Office, March 16, 1923, 54164/film 40725, R 901, BA.
66 German power
foreign chambers of commerce and foreign associations dedicated to

the Balkans. Culturally, the dispute surrounding the issue of war guilt
and atrocities, along with the closure of German schools abroad during
the war, damaged the ideas and the institutions that had underpinned
German cultural diplomacy before 1914. Gone were many of the pri-
vate organizations that Germanys liberal imperialists had hoped would
improve goodwill for their nation among foreigners. And although dis-
cussion of Mitteleuropa began again shortly after 1918, with Germanys
naked wartime economic exploitation firmly imprinted in their mem-
ory, the leaders of Romania and Yugoslavia looked on any discussion of
Mitteleuropa with deep skepticism.111
In commerce people cannot operate without people. Historically, to
overcome commercial difficulties arising from uncertainty or poor infor-
mation in long-distance trade, merchants have relied on the expertise of
local agents, business coalitions, family associates, or banks.112 This was
a particularly important issue in the Balkans, a region where local busi-
nessmen placed a high value on doing repeat business with counterparties
they knew personally.113 Empires, too, have relied on transnational net-
works of elites to exercise influence and reinforce their legitimacy. These
were precisely the institutions and connections that Germany had lost in
Southeastern Europe as a result of the war.
The war, however, did not end the imperial fantasies of Germanys
elites, nor their hopes of reestablishing their nation as an economic power.
The fear of a world evolving into large blocs, the anxiety about American
economic power, and the aspirations for a German-led Mitteleuropa did
not disappear after World War I, but instead became even more intense.
And by the middle of the 1920s German merchants had reason to hope
they could once again compete with their rivals from France, Britain, and
Austria. With the stabilization of the mark in 1924, one of the underlying
reasons for the poor reputation of German exporters was resolved. In
111 Hitchens, Rumania, 437; Jurgen Elvert, Mitteleuropa! Deutsche Plane zur europaische
Neuordnung (19181945) (Stuttgart: Steiner, 1999), 4474. If the leaders of Romania
and Yugoslavia were interested in any economic cooperation at all in the immediate
postwar years, and many were not, it was some form of Danubian confederation. Peter
Stirk, Ideas of Economic Integration in Interwar Mitteleuropa, in Stirk, Mitteleuropa,
History and Prospects; economic relations with Yugoslavia, report from Dr. Schmidtlein,
April 21, 1927, 43085, R 901, BA.
112 Citation from Greif, Reputation and Coalitions, 864.
113 According to the lawyer, Wolfgang Heine, There are a large number of Romanian
purchasing agents (most of them Romanian Jews), who are accustomed to older trade
and exchange forms and will only bargain with someone whom they know personally
as a man of confidence [Vertrauensmann]. Such people buy not from catalogues, but
rather on the basis of personal, verbal negotiation. Heine to Commissioner for Foreign
Currency, December 12, 1923, 89209, Handelsabteilung, PAAA.
Yugoslavia, many among the business elite increasingly wanted to break

away from [Austrian intermediaries] with every available means and
deal directly with Germany.114 And by the end of 1926 the cold economic
war between Germany and Romania was passing as their governments
opened negotiations for a more comprehensive trade treaty.
By the second half of the 1920s, then, informed observers from the
Economics Minister down to German consuls in Belgrade, Zagreb, and
Bucharest were beginning to argue that Germany could harbor imperial
ambitions in Southeastern Europe, but that to achieve them it would
have to revive the liberal Weltpolitik, the cultural diplomacy, and the
private organizations of the pre-1914 years. In 1925 Kurt Stahl, foreign
correspondent in Belgrade for the Association of Saxon Industrialists
and a reporter held in high regard by the Foreign Office, described a
path forward, which in retrospect could be called a policy of soft power.
The (pre)conditions for a further improvement in the present commercial rela-
tionship between [Germany and Yugoslavia] is the establishment of close per-
sonal contacts between merchants. Too few of them travel here. Germans too
often use the services of Budapest or Viennese intermediaries to handle their
business in the Balkans instead of getting into direct contact with their Yugosla-
vian customers . . . Getting to know one another personally is the key to mutual
understanding, and this is the second precondition for extending reciprocal eco-
nomic relations.115
Stahl and others understood that the German state could only do so
much. By the mid 1920s these German elites began looking elsewhere
and forging new institutions to help them exploit the commercial envi-
ronment of the Balkans to pursue their imperial visions.
114 Article from Agramer Tageblatt, sent from Belgrade to Berlin Foreign Office, October
2 1920, 54163/film 40724, R 901, BA; Walbeck to Olshausen, November 16 1925,
54232/film 41488, R 901, BA.
115 Sachsische Industrie, January 31, 1925. On the Foreign Offices estimation of Stahl, see
Belgrade charge daffaires to the Trade and Commerce Association in Halle, March
13, 1926, 54164/film 40725, R 901, BA; see also Temesvar consulate to Berlin Foreign
Office, August 23, 1926, 89448, Handelsabteilung, PAAA.
2 The economics of trade: building
commercial networks in Southeastern
Europe, 19251930
As a result of its geographic proximity, Saxonys industrial producers

have a particular interest in the economic development of the various
Balkan states and, hence, every motivation for pursuing the industrial-
ization of these important markets.1
In the fall of 1926 Paul Voss, a young director of the Leipzig trade fair,
traveled through Yugoslavia, Bulgaria, Romania, Greece, and Turkey to
find a suitable location for the fairs new business office for Southeastern
Europe. Voss was an aspiring academic who, after the war, had worked for
the Leipzig chamber of commerce and then later the Leipzig fairs adver-
tising service where he developed a talent for publicity work.2 He and the
other directors of the Leipzig fair, Europes largest during the 1920s and
1930s, hoped that an office in the Balkans would allow them to develop
and pursue more intensive and more successful publicity in a region
they thought offered great potential for future business and for future
fair visitors.3 Three sites entered their consideration Belgrade, Sofia,
and Vienna and to ascertain the best location Voss worked closely with
Weimars charge daffaires in Belgrade, Franz Olshausen, and Weimars
consul in Zagreb, Gottfried Walbeck. Olshausen lobbied against Sofia
because in Serbia, everything that comes from Bulgaria is received with
mistrust and animosity. Walbeck lobbied against Vienna. Yugoslavian
consumers, he maintained, want to do business directly with German
producers and not go through Viennese intermediaries. At the begin-
ning of 1926 Voss settled on Belgrade, with its access to the valued
markets of Croatia, Slavonia, Slovenia, and the Banat, and in doing so
he ushered in an era of improvement in GermanBalkan trade.
1 Anonymous journalist, Die Industrialisierung auf dem Balkan, Sachsische Industrie,

May 26, 1928, p. 529.
2 Personalakte Paul Voss, 1592, Geschaftsakten (GA), LMA, Sachsische Staatsarchiv,
Leipzig (SSAL).
3 Correspondence from October 23 and November 2, 7, 13, 16, and 19, 1925, pp. 17988,
54232/film 41488, R 901, BA.
68
The economics of trade 69
The fairs new office was but one of several private initiatives in the sec-
ond half of the 1920s that sought to improve trade between Germany and
Southeastern Europe. Four years after Vosss trip a GermanRomanian
chamber of commerce in Bucharest and one in Berlin were founded to
manage the commercial problems created by the uncertainty, poor infor-
mation, and dearth of personal contacts that Germanys consuls had
reported so frequently in the first half of the decade. Between 1925 and
1931 the fair and the chambers of commerce would work to remove the
obstacles that had paralyzed trade in this part of Europe since the end
of the war. Together these institutions built a network of representatives
that, while still in its infancy in the 1920s, would go on to promote
German exports, cultivate commercial contacts between Germany and
Southeastern Europe, and help German merchants compete with their
rivals from Austria, France, Great Britain and elsewhere.
Through their aggressive networking and relationship-building these
institutions were among the first private organizations to restore Ger-
manys reputation and lay the foundation for German soft power in
Southeastern Europe. The leaders of these institutions specifically tar-
geted small, specialized firms in export-dependent regions Saxony in
Germany, Transylvania in Romania, and the German minority enclaves
in Yugoslavia in the hopes that these local groups would develop a vested
interest in more extensive GermanBalkan commerce.4 They gave privi-
leged access to economic information to German nationals and German
minorities as well as to Croatian, Serb, and Romanian traders, making
it easier and more profitable for Germans to sell and purchase goods in
Yugoslavia and Romania, and vice versa for German minorities, Croa-
tians, Serbs, and Romanians operating in the markets of the Weimar
Republic. Partly as a result of their work, by 1930 a shared ideology was
beginning to take root among certain commercial elites, who believed that
German industry and Southeastern European agricultural and mineral
production complemented one another.5 Some Balkan businessmen
largely but by no means exclusively German minorities even began
arguing that Yugoslavia and Romania needed access to the German mar-
ket, German machinery, and German agricultural equipment to develop.
4 On Saxonys decentralized industrial order of small, less capital-intensive firms and

its importance as a pillar of German economic and export success, see Herrigel, Indus-
trial Constructions; Bramke and Ulrich, Sachsen und Mitteldeutschland; Werner Bramke
and Ulrich Hess (eds.), Wirtschaft und Gesellschaft in Sachsen im 20. Jahrhundert (Leipzig
University Press, 1998); Hal Hansen, Rethinking the Role of Artisans in Modern Ger-
man Development, Central European History 42 (2009), 3364.
5 Osterhammel identifies a shared cosmology between elites of the core and periphery
as one component of informal empire. Osterhammel, Semi-Colonialism and Informal
Empire.
70 German power
In building these commercial networks the Leipzig fair and the

chambers of commerce worked closely with the German minorities
in Yugoslavia, and above all in Transylvanian Romania. Before 1914
Germany had hardly included these borderland communities in its
foreign policy; supporting the Habsburg Empire trumped any attempt
to use ethnic Germans to forge a German-dominated Mitteleuropa. The
disintegration of the Habsburg Monarchy in World War I, however,
left native German speakers scattered throughout Southeastern Europe
and offered a new foreign policy tool to the Weimar Republic. While
some politicians and publicists saw ethnic Germans as levers for revising
the postwar borders of Eastern Europe in Germanys favor, by and
large, the German communities of Yugoslavia and Romania remained
unimportant for either revisionism or irredentism.6 These minorities,
though, were critically important as a commercial bridge to Germany, a
role they self-consciously adopted by the end of the 1920s in the hopes
of reaping concrete material benefits. For their part, the Leipzig fair and
the chambers of commerce used these minorities linguistic skills, their
local connections to Romanian and Yugoslavian state authorities, and
their knowledge of the regions political and legal systems to promote
German exports and imports in the region.
The fair and the GermanRomanian chambers of commerce, however,
faced serious challenges throughout the 1920s. Slow economic growth in
the Weimar Republic left the German state with little funding to support
export promotion. Germanys trade-dependent regions like Saxony
struggled to access foreign markets in the face of fierce competition from
newly industrializing states. The postwar years, furthermore, saw a prolif-
eration of trade fairs across Europe that would compete with one another
for prestige, funding, and visitors. Finally, the chambers of commerce
encountered stiff resistance at times from some of Germanys own leading
industrial organizations, like the Imperial Federation for German Indus-
try (Reichsverband der Deutschen Industrie RDI) and the German
6 Revisionists, including Gustav Stresemann, wanted to reclaim the borders of 1914, not
expand German territory southeastwards. As such, Poland was their highest priority,
not Romania or Yugoslavia. Stresemann, for instance, ranked the Germans of South-
eastern Europe third out of four in their relative importance, behind those of Poland,
Czechoslovakia, and the Baltic, and only slightly ahead of Germans in the Soviet Union.
For the irredentists hoping to unite all Germans into a single national body Max Hilde-
bert Boehm or Karl Christian von Loesch the German communities in Yugoslavia
and Romania were of secondary importance because they remained so fragmented by
religious and regional divisions. Mazower, Hitlers Empire, 358; Fahlbusch, Wo der
deutsche . . . ist, 36; Chu, German Minority in Interwar Poland; Gunter Schodl, Lange
Abschiede: Die Sudostdeutschen und ihre Vaterlander, in Schodl, Deutsche Geschichte
im Osten Europas, 6425.
Association for Chambers of Industry and Trade (Deutsche Industrie

und Handelstag DIHT). These massive, corporatist organizations saw
new private institutions as competitors, and they were not inclined to
succor the smaller, less capital-intensive firms that were the mainstay
of the Leipzig fair and the GermanRomanian chamber of commerce.
The fair and the chambers of commerces campaign to resuscitate and
expand Germanys commercial network in Southeastern Europe, then,
would only realize concrete gains after years of continuous lobbying,
organizing, and relationship-building in Romania and Yugoslavia.
Saxony and the Leipzig trade fair export or perish

Fernand Braudel has called the fairs of yesterdays world, the essential
tools of long-distance trade, and Leipzigs fair was one of the largest
in early modern Europe.7 Dating back to the twelfth century, Leipzig
ascended into the ranks of the great European fairs in 1497 upon receiv-
ing a grant of privileges from Emperor Maximilian I. Leipzig lay at the
crossroads of the Via Regiia and the Via Imperii, two of Europes main
trading routes, and its fair became a center of EastWest commerce in
the sixteenth century as merchants from France, Amsterdam, Burgundy,
and the Western German lands traveled to Leipzig to trade with ven-
dors from Eastern Europe, the Balkans, and Venice, along with Greek,
Armenian, and Jewish merchants from the Levant. By many accounts the
fair reached its heyday from 1820 to 1830, but then suffered a reversal
of fortunes in the middle of the nineteenth century as the railroad, the
steamship, improved communications technology, mass production, and
the tearing down of legal barriers to cross-border trade eroded fairs tra-
ditional commercial advantages. To reinvent itself, in the late nineteenth
century Leipzig pioneered the concept of the model trade fair as a way to
take advantage of the improvements in transportation and communica-
tion. It encouraged visiting merchants to display models of their products
at the fair, complete with informational material, rather than freighting
large stocks of the goods themselves to sell in Leipzig. Business visitors
would examine the models on display and place orders for them to be
fulfilled at a later date.8
7 Fernand Braudel, The Wheels of Commerce, trans. Sian Reynolds (London: Fontana,
1985), 81, 1569, 189.
8 Ibid., 93; Raimund Kohler, Messe und Weltwirtschaft, Vortrag am 27. April 1928,
and Paul Voss, Die Entwicklung der Leipziger Messe und ihre Bedeutung fur die
Volkswirtschaft, Druckschriften (DS) 900 and 905, LMA, SSAL; Hartmut Zwahr,
Thomas Topfstedt, and Gunter Bentele (eds.), Leipzigs Messen 14971997 (Cologne:
Bohlau, 1999).
72 German power
Although Leipzig claimed to be the first model fair in the world, its
reemergence after four years of war in Europe began in difficult cir-
cumstances. During the war other cities established model fairs of their
own, and in the immediate postwar years trade fairs flourished across
Europe. German observers characterized the first half of the 1920s as
a period of trade fair fever, where anarchic conditions reigned as
the traditional conduits of international trade and the old commercial
contacts were only slowly rebuilt in Europe.9 From 1920 onward, fairs in
London, Paris, Lyon, Milan, Utrecht, Zagreb, Ljubljana, and elsewhere
either opened for the first time or now adopted the model fair concept.
After years of wartime rationing, the postwar hunger for goods in
Central Europe proved a boon to these institutions and fair attendance
grew dramatically year after year in the early 1920s, despite the mon-
etary inflation that gripped so many countries in Europe. These fairs
attracted thousands of people, Paris and Lyon routinely bringing 7,000
and 3,000 business exhibitors to their fairs, respectively, along with tens
of thousands of casual observers.10 Leipzig drew roughly 10,000 official
business exhibitors annually to its spring fair, slightly less than that in the
fall, roughly a tenth of which were foreign merchants.11
For Leipzig the proliferation of fairs meant competition. Within Ger-
many Breslau, Konigsberg, Cologne, and Frankfurt proffered their own
claim to support international fairs that would promote exports by
attracting foreign visitors. Each of these cities received federal funding in
the immediate postwar years to advertise and to build their infrastruc-
ture. Contemporaries, however, saw this competition to be detrimental
to the German economy, complaining that it led to disputes between
fairs and arguing that fairs needed to be rationalized.12 Germanys two
largest fairs in Frankfurt and Leipzig, for instance, frequently occurred
during the same month making it impossible for exhibitors to attend
both.13 In their quest to attract foreigners each fair drew participants
away from the others in Germany. The directors of Leipzig, who prided
9 Klaus Metscher and Walter Fellmann, Lipsia und Merkur: Leipzig und seine Messen
(Leipzig: F. A. Brockhaus, 1989), 15965; article from Office of Exhibitions for German
Industry about proliferation of trade fairs, February 1, 1925, 117071, Sonderreferat
Wirtschaft, PAAA.
10 Paris Embassy to Berlin Foreign Office, August 16, 1928, 117902, Sonderreferat
Wirtschaft, PAAA.
11 In comparison, 2,500 exhibitors visited all of Germanys other fairs combined.
Messeamt reports, p. 4, DS 907 and p. 7, DS 923, LMA, SSAL.
12 Karl-Ursus Marhenke, Zwischen Konkurrenz und Innovation: die Werbung der
Leipziger Messe in den 1920er Jahren, in Harmut Zwahr, Thomas Topfstedt, and
Gunter Bentele (eds.), Leipzigs Messen, 14971997 (Cologne: Bohlau, 1999), 48396.
13 Article from the Office of Exhibitions for German Industry about proliferation of trade
fairs, February 1, 1925, 117071, Sonderreferat Wirtschaft, PAAA.
themselves on the synergy generated by attracting businessmen from

across the world, consistently opposed the international aspirations of
Frankfurt, Breslau, Konigsberg, and Cologne and argued that Germany
should concentrate its energy into a single international fair.14 In the
first half of the decade their efforts received some recognition: in 1924
Germanys President Friedrich Ebert and Economics Minister Eduard
Hamm declared that the Leipzig trade fair is accorded a special and
unique significance among Germanys fairs, which is to be maintained
by all means in the interest of Germanys overall economy.15 In 1926
Leipzig received another important endorsement from the Imperial Fed-
eration of Germany Industry, which recognized the drawbacks of the
fragmented system of fairs and declared Leipzig to be the only general
German and international great model fair for their organization. Con-
centrating their energy in Leipzig, they hoped, would enable a complete
overview of Germanys economy.16
Endorsements by leading politicians and industrial associations, while
welcome, were not enough for Leipzig to best its rivals in Frankfurt,
Cologne, Breslau, and Konigsberg. Leipzigs success stemmed more
from the support of Saxonys local business and government elites, who
believed a robust fair was critically important for their region. According
to Saxonys economics minister, because of the impoverishment of Ger-
many from war and inflation, in the postwar period foreign markets
have become increasingly important for Germany and for Saxony. The
fair could be a powerful factor of the greatest significance for Saxonys
exporters, but it desperately needed support.17 In 1917 it had received
a large federal subsidy but after 1918 it had to compete for these funds
with other German fairs. In 1920, for instance, Leipzig was allotted just
5 million RM in comparison to Konigsbergs 8 million. And after 1923
financial assistance from Berlin all but ceased due to the states chronic
budget problems, and Leipzig had to turn elsewhere for funding.18
The solution came in the form of a new institution, the Leipzig
Messeamt (Central Office of the trade fair), led by Dr. Raimund Kohler.
During World War I the city of Leipzig, the Leipzig chamber of com-
merce, and the Central Office for the Leipzig model trade fair had
14 Leipzig Messeamt to the Milan Trade Fair Congress, March 29, 1925, 117071, Son-
derreferat Wirtschaft, PAAA.
15 Letter from Ebert to Min. Pres. of Saxony, December 12, 1924, 117071, Sonderreferat
Wirtschaft, PAAA.
16 Messeamt report, pp. 1011, DS 907, LMA, SSAL.
17 Dr. Florey, Leipziger Messe und Dresdner Jahresschau im Dienste des wirtschaftlichen
Wiederaufbaues, Jahrbuch fur Sachsen 1 (1925), 5864.
18 Messeamt report, p. 12, DS 901, LMA, SSAL.
74 German power
founded the Messeamt as an organization charged with promoting the

fair in Germany and abroad.19 Raimund Kohler soon became the leading
personality in this office. Educated in law and economics at Leipzig and
Heidelberg, Kohler had gained valuable experience before the war as a
corporate counsel for the Central Association of German Industrialists
and during the war with the Commission of German Industry. In 1917
the fair called him back from military service to assume leadership of
the newly founded Messeamt.20 Kohler maintained close connections
not only with Saxonys business elites, but also with elites at the national
level like the leaders of the Imperial Federation for German Industry
and the German Association for Chambers of Industry and Trade. He
persistently lobbied the federal government and Saxonys business and
governmental elites to fund the fair. Under his guidance, in the lean
years of the 1920s annual contributions from Saxony (200,000 RM), the
city of Leipzig (200,000 RM) and the Leipzig chamber of commerce (c.
30,000 RM) sustained the Messeamts publicity services and the fairs
infrastructure.21
What made Saxonys business circles so supportive of the fair was
the structure of their regional economy, which was extremely dependent
on exports. In 1931 Paul Bramstedt, in a study commissioned by the
Association of Saxon Industrialists (Verband Sachsischer Industrieller
VSI), estimated that exports accounted for 40 percent of Saxonys over-
all GDP, well above the German average that ranged between 19 and
25 percent.22 Saxonys largest manufacturing centers were the textile fac-
tories of Leipzig and Chemnitz, which before the war had been export-
oriented, had driven the regions industrialization, and had generated
much of Saxonys employment. But after 1918 textile exports did not
return to their prewar levels as newly industrializing regions, including the
nations of Southeastern Europe, Latin America, and Japan, established
textile sectors of their own. For Saxony, Germanys most densely pop-
ulated and most heavily industrialized region, the decline of its primary
19 The Messeamt was an association composed of the municipality of Leipzig, the Leipzig
chamber of commerce, and the central office for interested parties of the Leipzig fair,
the latter having the most influence. On the founding of the Messeamt, see Jochen
Geyer, Die Selbstverwaltete Messe: der Messestandort zwischen 1916 und 1945,
in Hartmut Zwahr, Thomas Topfstedt, and Gunter Bentele (eds.), Leipzigs Messen,
14971997 (Cologne: Bohlau, 1999), 45170.
20 Personalakten Raimund Kohler, 1544, GA, LMA, SSAL.
21 The rest of the total budget, some 1.75 to 3 million RM, was made up of fees paid
by official business participants at the fair and other membership contributions. These
figures are for 19278. Memorandum about the activities of the Leipzig Messeamt
abroad, September 20, 1928, 7843, 10717 Auswartigen Angelegenheiten, SSAD; Wer
soll die Kosten der Leipziger Messe-Proaganda tragen? DS 901, LMA, SSAL.
22 Paul Bramstedt, Krises der Sachsischen Industriewirtschaft (Dresden: VSI, 1932), 13.
sector meant high unemployment and economic instability throughout

the 1920s.
The demise of textiles was characteristic of Saxonys larger economic
problems. After 1918 Saxony suffered more than any other German
region from the disruption of foreign trade following the war, proving to
be more vulnerable to international economic shocks and more suscepti-
ble to the loss of markets in Eastern Europe that followed the revolution
in Russia.23 Many observers traced these problems to the predominance
of the consumer goods industries in Saxony, which, like neighboring
Thuringia, was well known for high-quality finished products like textiles,
musical instruments, toys, clocks, glassware, ceramics, and housewares.
These were some of Germanys most exported goods with over 30 percent
of their total production going abroad.24 Bramstedt and other researchers
believed Saxonys economy was so stable before the war because foreign
demand for German consumer goods had been consistently robust dur-
ing the late nineteenth and early twentieth century.25 Yet the war had
changed this, and the export of consumer goods by most industrialized
states, including America and Great Britain as well as Germany, returned
to prewar levels much more slowly than the export of producer goods.26
The trend of stagnating consumer goods sales led many Saxon busi-
nessmen to believe their once stable industrial region had now become
vulnerable and anemic. They saw themselves as the weathervane of the
business cycle or the problem child of an ailing German economy,27
and many feared that Saxony would suffer from de-industrialization.28
Two potential paths out of Saxonys quandary soon emerged. Some
economists in the Association of Saxon Industrialists, like its chairman
and the leader of its largest firm, Wilhelm Wittke, placed the blame
squarely on Weimars new welfare state, arguing that high taxes, high
wages, and strong unions prevented businesses from operating at their full
23 Hess and Schaffer, Unternehmer in Sachsen, 1011.

24 Messeamt Report p. 15, DS 911, LMA, SSAL; Rolf Wagenfuhr, Die Bedeutung des
Aussenmarktes fur die deutsche Industriewirtschaft: die Exportquote der deutschen Industrie
von 1870 bis 1936 (Berlin: Hanseatische Verlags-Anstalt, 1936), 11.
25 Bramstedt, Sachsischen Industriewirtschaft, 34, 1213.
26 Export und Inlandabsatz, Die verarbeitende Industrie auf der Leipziger
Fruhjahrsmesse 1930, pp. 812, DS 915, LMA, SSAL; Wagenfuhr, Bedeutung des
Aussenmarktes.
27 Werner Bramke, Sachsens Industrie (Gesellschaft) in den Jahren der Weimarer Repub-
lik, in Bramke and Hess, Wirtschaft und Gesellschaft, 28. For a contemporary pessimistic
outlook, see Johannes Marz, Die Bedeutung und Entwicklung der sachsischen Ind-
sutrie nach dem Krieg, Jahrbuch fur Sachsen 1 (1925), 507.
28 Bramke, Jahren der Weimarer Republik, 41; Michael Rudloff, Die Strukturpolitik in
den Debatten des sachsischen Landtags zur Zeit der Weltwirtschaftskrise, in Bramke
and Hess, Sachsen und Mitteldeutschland, 242.
76 German power
capacity. Wittke harbored deep-seated opposition to the Weimar Repub-

lic, a common sentiment among conservative elites in Saxony. Indeed,
the region was known as the test case of reaction because its bourgeois
parties stood in such militant opposition to labor and social democracy.29
Change the domestic economic priorities of Weimar, reduce taxes, and
suppress the unions and Saxonys economy would rebound, Wittke
argued.30 Other directors of the Association for Saxon Industrialists,
however, thought a better solution could be found in a coordinated drive
to promote exports. According to Johannes Marz, the co-director of the
association and a prolific publicist, the hyperinflation had impoverished
Germanys middle class and severely damaged its domestic purchas-
ing power.31 Only a renewed foreign trade drive, not domestic reform,
would bring Saxonys economic salvation. Marz and others in Saxonys
Economics Ministry encouraged the Association of Saxon Industrial-
ists, with its 4,000 members, and the Leipzig chamber of commerce to
turn to the trade fair with new vigor because it offered their producers
access to foreign buyers and international markets. Their calls did not
go unheeded, and by the mid to late 1920s roughly one-quarter of the
9,000 exhibitors at the annual spring fair were from Saxony, while a
further 10 percent came from neighboring Thuringia and the Prussian
province of Saxony.32
The Messeamts directors responded to Marzs call for foreign trade by
expanding the fairs export promotion programs. Kohler justified these
expenses by arguing that Weimars unemployment problems, and those
of Saxony in particular, could only be solved through exports. Indeed, the
Messeamt generated a wealth of literature and data trying to document
how the state, either federal or local, could better fight unemployment
by spending money on foreign advertising rather than unemployment
benefits.33 Today, Kohler remarked, when we have become a relatively
29 Claus-Christian Szejnmann, Sachsische Unternehmer und die Weimarer Demokratie:

zur Rolle der Sachsischen Unternehmer in der Zeit der Weltwirtschaftskrise und des
Aufstiegs des Nationalsozialismus, in Hess and Schaffer,Unternehmer in Sachsen, 165
79; Benjamin Lapp, Remembering the Year 1923 in Saxon History, in Retallack,
Saxony in German History, 32235.
30 Jens Adolph, Der VSI-Vorsitzenden Wilhelm Wittke, in Hess and Schaffer,
Unternehmer in Sachsen, 18192; Jens Adolph, Die Wirtschaftspolitik des Verbandes
Sachsischer Industrieller 19281934, in Bramke and Hess, Wirtschaft und Gesellschaft,
15783.
31 Marz, Entwicklung der sachsischen Industrie.
32 Florey, Leipziger Messe und Dresdner Jahresschau; these statistics are for 1928, but
they are nearly the same for 1927 and 1929. Zahlen von der Leipziger Messe 1929,
DS 926, LMA, SSAL.
33 DS 900, LMA, SSAL. The Messeamt strongly lobbied for the German government to
use some of the 630 million RM made available for work creation in 1927 for export
capital poor country, we must try that much harder to export products
which contain a high level of wage-remuneration.34 Improving exports
would be particularly beneficial for Saxony, since many of its firms, in
particular those producing luxury items, fine mechanical equipment, or
machine tools, were labor-intensive enterprises employing skilled work-
ers. Fifty to sixty percent of the value of goods produced by these sectors,
the Messeamt estimated, consisted of wage payments.35
Parallel to the drive for exports, many of Saxonys economists believed
their region needed to shift toward the production of capital or producer
goods. Despite its heavy reliance on exporting consumer products before
the war, by the 1920s Saxony increasingly led Germanys other regions
in exporting certain types of capital goods that were in high demand
among developing countries like those in Southeastern Europe. Saxony
exported a higher percentage of its production of iron, steel, and other
metal products than any other region in Germany. Dresden was a cen-
ter of manufacturing for precision engineering, optical equipment, and
electrical instruments. And by the end of the 1920s the region as a whole
was Germanys largest producer and exporter of machine tools, employ-
ing more workers than any other German region and accounting for
20 percent of Germanys total machine tool exports. It led Weimar in the
export of textile machinery, paper working machinery, office machinery,
milling machinery, and food processing machinery and was near the top
in agricultural machinery all categories of equipment that the states of
Southeastern Europe needed to industrialize.36
Saxonys expansion of machine production was part of a more general
improvement in the competitiveness of German machine tool exports
in the 1920s. After having lost its reputation for quality production in
the years of inflation, during the second half of the decade Germany
reemerged as the main rival to America in machinery exports, and by
the late 1920s one-third of this sectors output was sold abroad. Most
machine tools, moreover, were still produced by small and medium-sized
workshops, which emphasized quality craftsmanship and which, with the
propaganda. DS 907, LMA, SSAL. See also the pamphlet sent to Germanys Economics
Ministry entitled Produktive Erwerbslosenfursorge durch Auslandspropaganda, DS
906, LMA, SSAL.
34 Raimund Kohler, Probleme der Export-Forderung, DS 903, LMA, SSAL.
35 Denkschrift zur Frage eines Reichszuschusses fur die Leipziger Messe, p. 6, DS 907,
LMA, SSAL.
36 Wagenfuhr, Bedeutung des Aussenmarktes, 16; Bramke, Jahren der Weimarer Republik,
in Bramke and Hess, Wirtschaft und Gesellschaft, 457; Kurt Mockel, Die Bedeutung
der Ausfuhr fur die sachsische Industrie, in Hans-Jurgen Seraphim, Eugen H. Sieber,
and Karl. C. Thalheim (eds.), Der sachsische Wirtschaftsraum, Leipziger Beitrage zur
Raumforschung (Leipzig: Buske, 1938), 82.
78 German power
exception of the electro-technical industry, did not turn to mass produc-

tion since adaptability and flexibility were so important to their product
lines.37 The fair tapped into this secular shift toward production goods.
Under Kohlers lead in 1918 the Messeamt organized Leipzigs first tech-
nical exhibition. Over the course of the 1920s this technical showroom
evolved into its very own fair, with new grounds on the outskirts of Leipzig
that housed some of the largest exhibition spaces in Germany. It became
the most popular attraction for foreign businessmen by showcasing the
technological innovations of large firms like AEG electric and Krupp
Metalworks as well as the equipment produced by small manufacturers
from Saxony.38
Support from Saxonys local business community and the emphasis
on productive goods at the technical fair enabled Leipzig to consolidate
its status as Germanys premier international fair and center for export
promotion by the late 1920s. In 1928 the spring fair attracted 185,000
registered business visitors annually, 29,500 of which came from abroad.
When counting both the spring and fall exhibitions, foreign business vis-
itors totaled 42,000, twenty-five times as many as all other German fairs
combined.39 According to the Institute for Economic Research (Institut
fur Konjunkturforschung IfK), roughly one-third of all sales at the fair
were export-related, a figure that far exceeded the German average.40
In 1927 the IfK estimated that between half a billion and 1 billion RM
worth of export orders were made at Leipzigs fairs annually. In com-
parison, total German exports for 1927 were 10 billion RM.41 These
figures, however, may be exaggerated. A more conservative value drawn
from studies conducted during the Depression by the IfK, the fair, and
the Institute for Economic Monitoring in Nuremburg suggests that the
total export trade connected with the fair was closer 200 million RM
annually.42
37 Mary Nolan, Visions of Modernity: American Business and the Modernization of Germany
(New York: Oxford University Press, 1994), 14953; Balderston, German Economic
Crisis, 11416.
38 Metscher and Fellmann. Lipsia und Merkur, 191201.
39 Die Entwicklung der Leipziger Messe und ihre Bedeutung fur die Volkswirtschaft,
DS 905, LMA, SSAL.
40 Quoted in Messeamt report, p. 92, DS 248, LMA, SSAL. This refers to the Viertel-
jahreshefte zur Konjunkturforschung 3, no. 3 (1928), 42.
41 Leipzig business year report for 1931, 117904, Sonderreferat Wirtschaft, PAAA.
42 From 1928 to 1930 the fair conducted regular surveys, the results of which indicate
a lower figure for its export business. These surveys concluded that in the late 1920s
total direct sales amounted to roughly 220 million RM per year in the spring and 8090
million RM in the fall. But according to a study conducted in 1930 by the Institute for
Economic Monitoring in Nuremburg, only 57 percent of the business connected with
the Leipzig fair was completed directly at the fair itself; 43 percent consisted of indirect
The trade fair abroad

The fairs success as Germanys marketing center for exports came
not only from the support of Saxonys local elites, but also because
the Messeamt developed one of Germanys most extensive networks of
foreign sales representatives across Europe and much of the world. It
was during the difficult economic conditions of the mid 1920s intense
competition between fairs, a stagnant regional economy, and slow
growth in German exports that the Messeamt constructed a well-oiled
infrastructure for foreign advertising, publicity, and information collec-
tion and dissemination. The justification for this, according to Raimund
Kohler and Paul Voss, lay in the industrial structure of Saxony: its small
and medium firms could easily adapt to foreign tastes but were unable
to support their own sales force abroad because of their small size.
The regions industry, Kohler argued, differed from the modern mass
production of America idolized by so many contemporaries in Weimar,
and therein lay its strength.
According to the last common census from 1907 Germany had approximately
ten times as many industrial firms as England did in 1901 and America in 1909.
The number of workers was, however, not yet twice as large as in the United
States. It would, of course, be totally wrong to deplore the existence of so many
intermediary and small firms, with their prodigious diversification of production,
as backwards . . . The ability of Germanys individual firms to adapt to the needs
of diverse foreign countries before the war helped German goods conquer the
world market.43
Kohler noted how Saxonys industrial order contrasted with the large,
vertically integrated, bureaucratically organized conglomerates found in
the Ruhr and Berlin. And his confidence in the viability of smaller firms
contradicted the vision held by much of Weimars managerial elite that the
future of German industry was mass production and standardization.44
sales, or orders made after the fair that were still attributable to contacts made in Leipzig.
If the fairs direct sales, spring and fall combined, averaged 300 million RM annually,
total sales attributable to the fair would have run in the neighborhood of 525 million
RM. Using the IfKs estimate that roughly one-third of all sales at the fair were exports,
then the fairs total export-related business would have been roughly 173.25 million RM.
For some discussion of the difficulty of estimating total export sales, see Messen und
Weltwirtschaft, p. 21, DS 900, LMA, SSAL; Messeamt Report DS 908, LMA, SSAL;
Saxon representative in Berlin to Dresden Foreign Office, March 3, 1931, 7843, 10717
Auswartigen Angelegenheiten, SSAD; report by Institut fur Konjunkturforschung, DS
911, LMA, SSAL.
43 Probleme der Exportforderung, DS 903, LMA, SSAL.
44 Many of Germanys larger manufacturing firms were in the throes of rationalization in
an attempt to mimic American-style mass production. Nolan, Visions of Modernity.
80 German power
Indeed, scholars have demonstrated how smaller firms, or a decen-

tralized industrial order, could compete internationally at a very high
level in production as well as consumer goods.45 Producers in many of
these industries were able to remain constantly competitive, absorb new
technologies, and bring out new generations of their specialty products,
all within their traditional backward structures.46
The problem, however, was that the small companies and family enter-
prises of Saxony were often unable to reach international customers since
they could not afford their own foreign trade agents, or because infor-
mation about sales opportunities abroad was limited.47 According to
Germanys charge daffaires in Bucharest, Gerhard Mutius, an astute
observer of Romanias economy:
it cannot be denied that the entry of Germanys export industry into the local
market is marked by certain disadvantages . . . until now small and medium Ger-
man firms have only to a relatively small extent engaged in business here. I am
thinking primarily of firms in the consumer and luxury goods industries . . . In
these fields one sees in the inventory of businesses here still only goods from
France, England, America, and the Czech Republic.48
To take full advantage of the adaptability of small firms, Kohler argued

that they needed a better method of gaining entry to foreign markets.
Weimars Economics Ministry and consular system were clearly not con-
necting small firms with foreign merchants; the Messeamt would have to
fill the breach. At a meeting with the Imperial Federation of Germany
Industry in Dresden in 1926 Kohler outlined his strategy. German mer-
chants must bypass the middlemen, go directly to the foreign market and
learn their tastes and their customs. A direct export of manufactured
goods is not only justified, it is completely necessary for maintaining, or
rather re-conquering foreign markets. That goes not only for the large
industrial firms, but analogously also for the medium and small-sized
firms.49
45 Herrigel, Industrial Constructions; Bramke, Jahren der Weimarer Republik, in Bramke

and Hess, Wirtschaft und Gesellschaft, 34.
46 Herrigal, Industrial Constructions, 1819; This point about the importance of smaller
firms was not without controversy among contemporaries. Paul Bramstedt, Kurt
Mockel, and Rolf Wagenfuhr tried to determine the amount of exports attributable
to certain German regions and to firm sizes.
47 Larger firms like IG Farben or Siemens were able to support such a network. On the
foreign network of IG Farben, see Hans Radandt, Die IG Farbenindustrie AG und
Sudosteuropa bis 1938, Jahrbuch fur Wirtschaftsgeschichte 7 (1966), 14695; and Hans
Radandt, Die IG Farbenindustrie und Sudosteuropa 1938 bis zum Ende des zweiten
Weltkrieges, Jahrbuch fur Wirtschaftsgeschichte 8 (1967), 77146.
48 Mutius to Berlin, December 28, 1929, 89210, Handelsabteilung, PAAA.
49 Probleme der Export-Forderung, DS 903, LMA, SSAL.
Kohler expanded the fairs network of representatives abroad,

increased its funding, and made it more accessible to smaller busi-
nesses. In the immediate postwar years the Messeamts network was
quite small, but by 1926 it had grown to include 199 representatives
in eighty-six countries with eleven business offices beyond Germany.50
The Messeamts annual budget by the late 1920s ranged between 3 and
5 million RM, 2 million of which were spent on overseas advertising.51
The Foreign Office, the industrial associations, and even rival export
organizations like the Hamburg chamber of commerce came to recog-
nize that the fairs overseas network was one of Germanys most useful
tools for export promotion.52 And these representatives proved a boon to
Saxonys smaller firms. By the end of the 1920s the Messeamt estimated
that nearly 95 percent of the firms participating at the fair depended
on exports for their business, the vast majority of which were small and
medium-sized.53
The fairs network of representatives, however, was not concentrated
in any one region of the world; its agents engaged in advertising and
information collection from Latin America and East Asia to Western and
Southeastern Europe. Kohler, Voss, and the other directors saw them-
selves as advocates of Germanys cosmopolitanism and its participation
in a worldwide economy and they had little to say about the economic
bloc-building ideas that would become common parlance after the Great
Depression. The number of business visitors from different parts of the
globe attest to the fairs cosmopolitanism: only 68 percent during the
1920s came from Southeastern Europe, the majority were from West-
ern and Northern Europe (see Table 2.1). In Kohlers opinion the fairs
greatest strength was its appeal to the farthest consumer circles of the
entire world. The future, he hoped, would not yield protectionism but
50 Marhenke, Zwischen Konkurrenz und Innovation, 48396; Probleme der Export-

Forderung, DS 903, LMA, SSAL.
51 In 1926 the Messeamt allocated 1,186,900 RM toward advertising abroad, a decline
from the previous year when they used approximately 3 million RM, much of which
came from the central government, which discontinued its support in 1925. The Reich-
stag reinstated funding for commercial advertising abroad in 1928, granting 1.2 million
RM for the purposes of export promotion, of which 800,000 RM went to the Leipzig
Messeamt. But this lasted for just one year; in 1929 as the world economic depression
began to affect the central governments budget, it eliminated contributions to foreign
economic publicity. Produktive Erwerbslosenfursorge durch Auslandspropaganda,
DS 906, LMA, SSAL; edict to German missions abroad, May 11, 1928, 117902,
Sonderreferat Wirtschaft, PAAA.
52 See the lecture by R. H. Petersen at the Hamburger Export-Tagung, July 25, 1929,
117902, Sonderreferat Wirtschaft, PAAA.
53 Business report for 1931, 117904, Sonderreferat Wirtschaft, PAAA; Mockel, Die
Bedeutung der Ausfuhr fur die sachsische Industrie, 116.
82 German power
Table 2.1 Participation of foreign merchants at Leipzig spring trade fair (in
number of registered merchants)
Country 1925 1926 1927 1928 1929 1931
Yugoslavia 200 280 370 460 460 498

Romania 260 320 420 730 640 466
Hungary 550 890 990 1,280 1,190 1,063
Bulgaria 120 100 110 140 150 112
Southeastern Europe (SE) 1,130 1,590 1,890 2,610 2,440 2,139
(incl. Bulgaria, Hungary,
Romania, Yugoslavia)
Czechoslovakia 3,450 3,690 4,200 5,600 4,660 4,765
Austria 2,500 2,450 2,360 2,700 2,760 2,546
Europe 16,223 17,300 20,700 2,6680 25,600 25,059
SE as a percentage of Europe 7.0% 9.2% 9.1% 9.8% 9.5% 8.5%
Total 17,200 19,610 23,130 29,590 28,660 27,486
SE as a percentage of total: 6.57% 8.1% 8.2% 8.8% 8.5% 7.8%
Source: Zahlen von der Leipziger Messe, 1927, 1928, and 1929, and Urteile, Berichte, und
Zahlen uber Messeverlauf, 1931, in Druckschriften (DS) 923, 924, 926 and 249, of the
Leipzig trade fair (LMA), Sachsisches Staatsarchiv, Leipzig (SSAL). Figures for 1930 are
missing.
rather greater international cooperation and an even deeper international

division of labor.54
The Leipzig fair and Yugoslavia

Yet despite its international orientation, the Messeamts network proved
to be particularly important for Germanys economic relations with
Southeastern Europe since here, more than elsewhere, German mer-
chants suffered from the postwar problems of uncertainty, information,
and trust. The Messeamt built a sales network in Southeastern Europe
that numbered some twenty-five representatives spread from Austria
to Bulgaria. This sales force, along with Germanys larger enterprises
like IG Farben and Siemens, grew to form the commercial backbone of
Germanys trade network in the region.
In Yugoslavia, the new business office established by Paul Voss in Bel-
grade represented one of Germanys first direct commercial engagements
in the new country. After considering Kurt Stahl, a news correspondent
for the Association of Saxon Industrialists, to lead the new office, Paul
54 Messeamt Report, p. 27, DS 900, LMA, SSAL.

Voss instead selected Hans Schuster upon the recommendation of Ger-

manys charge daffaires in Belgrade. Schuster seemed to be the perfect
fit. As a prominent businessman and member of the German national
community in Belgrade he had extensive contacts to local politicians and
business elites, as well as a solid understanding of Yugoslavias commer-
cial culture.
In 1926 Schusters office in Belgrade had a budget of 45,100 RM,
which increased to 70,600 in the coming years, to carry out the three
basic goals of the Messeamt: assisting German firms, collecting informa-
tion, and advertising.55 Schuster, along with the fairs representatives in
Skoplje, Sarajevo, Split, Zagreb, Maribor, Ljubljana, Osijek, and Novi
Sad, helped German firms operate in the uncertain business climate of
Yugoslavia. The fair itself in Leipzig offered an informal court of arbi-
tration where merchants could resolve commercial disputes. This was a
boon to German firms exporting to Yugoslavia, where the official courts
were slow and often corrupt. In addition, Schuster and his fellow agents
made it a priority to work with Germanys consulates to find experi-
enced local lawyers willing to assist German exporters with their legal
issues. With their local contacts the fairs representatives advised Weimar
merchants about prospective agents in Yugoslavia who were reliable and
eager to engage with Germans. In this manner Schuster and his col-
leagues supplemented Germanys understaffed and overworked consular
network.56
Second, Schuster coordinated the collection and analysis of informa-
tion about local market conditions in Yugoslavia.57 While Germanys for-
eign consular service engaged in a similar task, it focused on the general
structure of local economies and paid less attention to export opportuni-
ties for specific industrial branches. Voss argued that such sectoral-level
information would be better left to the fairs representatives, who had
the commercial experience and connections. The fairs business office in
Belgrade would send notice about sales opportunities to the Messeamt
in Leipzig. Here the Messeamt had established eighteen subcommit-
tees, each working with a particular branch of German industry. News
from Belgrade, and elsewhere, would flow to the subcommittees or be
55 In comparison, the Messeamts budget for their work in Italy in 1926 was 31,000 RM,
DS 906, LMA, SSAL; Messeamt to their new agent Borota, in Novisad, April 29, 1925,
GA 1000, LMA, SSAL.
56 For an example of this, see the case of Moise I. Katan, reports from December 15,
1922, January 5, 25, and 29, 1923, 54164/film 40725, R 901, BA.
57 DS 913, LMA, SSAL. See also Paul Voss on Das Problem der Exportforderung, who
saw the one of the Messeamts primary tasks to lie in finding good information about
exports and schooling for exporters. DS 902, LMA, SSAL.
84 German power
published in its weekly journal Wirtschafts- und Export Zeitung.58 In

collecting its news the Messeamt also collaborated with the Imperial
Federation of German Industry and the commercial journal Deutschen
Wirtschaftsdienst, allowing the former to use its information offices in
Belgrade to collect market data.59
Indeed, Schuster believed the key to improving economic relations
with Yugoslavia was an effective collection and distribution of economic
information. On his own initiative in the summer of 1926 he opened
negotiations with the Imperial Federation of German Industrialists along
with business circles in Belgrade and Zagreb to organize a German
Yugoslavian Committee for Industry and Trade. He hoped this institution
would evolve into a GermanYugoslavian chamber of commerce, one
that would expand the operation of his Belgrade office by collecting
economic news and statistics from the local chambers of commerce.60
Germanys charge daffaires in Belgrade, Franz Olshausen, supported
this idea because it would lighten the burden on his own office. Yet he
also wanted to ensure that German influence be guaranteed priority in
the committee and not be overwhelmed by Yugoslavian merchants.61 To
achieve this, Schuster enlisted the formal participation of the Messeamt,
the Leipzig chamber of commerce, a delegate from the German mission
in Belgrade, and the German Association for Chambers of Industry and
Trade to represent German traders. Throughout the winter and spring
of 1927 Schuster negotiated with the Central Association of Yugoslavian
Industrialists, the offices for trade (Gewerbekammer) in Belgrade, and the
chambers of commerce in Ljubljana, Osijek, Belgrade, and Zagreb. In
Zagreb he encountered difficulties, as the Croatian business elites resisted
anything that might subordinate their commercial interests to Belgrade.
Schuster, however, pressed ahead, excluded the Zagreb chamber in the
belief that their federalist inclinations were bad for business, and garnered
the participation of the remaining Yugoslavian institutions to formally
58 Paul Voss, Die Entwicklung der Leipziger Messe und ihre Bedeutung fur die Volk-
swirtschaft, p. 4, DS 905, LMA, SSAL.
59 Paul Voss, Das Problem der Exportforderung, p. 7, DS 902, LMA, SSAL; Probleme
der Export-Forderung, DS 903, LMA, SSAL; summary of meeting between Messeamt
leadership and Imperial Federation of German Industry, October 10, 1928, 117902,
Sonderreferat Wirtschaft, PAAA.
60 German charge daffaires in Belgrade to Berlin, August 21, 1926, p. 202 and March
8, 1927, p. 219, 54232/film 42488, R 901, BA. On the RDIs contract to use the
Messeamts information offices, see Probleme der Export-Forderung, DS 903, LMA,
SSAL; on the purposes of the information offices, see Aus der Praxis der Exportpro-
paganda, DS 908, LMA, SSAL.
61 Belgrade to Berlin, August 21, 1926 and March 8, 1927, 54232/film 41488, R 901,
BA; Economics Ministry to Berlin Foreign Office, April 27, 1927, 43085, R 901, BA.
establish the GermanyYugoslavian Committee for Industry and Trade

in the fall 1927.62
Finally, Schuster and his colleagues were charged with attracting busi-
ness visitors to Leipzig and advertising for German products. In contrast
to Germanys industrial associations, which focused almost exclusively
on working with the press, the Messeamt and its representatives branched
out during the 1920s to use a variety of promotional techniques.63 The
head offices in Leipzig gave their agents wide latitude to decide which
techniques best suited the local business culture, and to coordinate their
efforts they worked closely with the eighteen subcommittees in Leipzig.
These committees would keep the Messeamt and its agents abreast of
new products and technologies.64 Posters, films, brochures, ads in spe-
cialized journals, and radio increasingly became important components
of the fairs advertising. Schuster and his colleagues plastered the bul-
letin boards of local chambers of commerce, travel offices, rail stations,
hotels, and local clubs and associations with posters and photographs
of the fair. In 1928 the Messeamts representatives held over 1,750 film
viewings abroad, which showcased the fair and its special exhibitions.65
In that year the Messeamt paid for 5,603 advertisements and articles in
over one thousand newspapers within Europe, excluding Germany, and
mailed out over 8 million postcards in both German and local languages.
Although the Messeamt printed the bulk of these brochures in German,
English, French, and Spanish, roughly six thousand of them appeared
annually in Serbian or Croatian. This was in addition to the 58,000 fair
invitations that Schuster and the other agents distributed in Yugoslavia
twice a year for the fall and the spring fairs.66 The most important avenue
for attracting local businessmen, however, remained the use of personal
contacts.67 The Messeamt had a list of over 300,000 firms, two-thirds
62 The Zagreb chamber of commerce rejected his plans because of their federalist incli-
nations and their fear of being subordinated to Belgrade. Belgrade to Berlin, March 8,
1927, 54232/film 41488, R 901, BA.
63 German Association for Chambers of Commerce and Industry to its members, January
14, 1924, 118078, Sonderreferat Wirtschaft, PAAA.
64 Through the interaction between the subcommittees and the local representatives
Kohler claimed that, in each country the Messeamt was able to design its advertising
efforts according to the distinct culture, habits, and economic conditions of its target
population. Aus der Praxis der Exportpropaganda 1929, DS 908, LMA, SSAL.
65 They had over 14,900 meters of original film of the fair. The reels were in German,
French, English, Chinese, Russian, Spanish, Portuguese, and Italian. Unfortunately,
no figures for the frequency of film use in Yugoslavia exist. Aus der Praxis der Export-
propaganda, 1929, 117903, Sonderreferat Wirtschaft, PAAA.
66 Aus der Praxis der Exportpropaganda, DS 908, LMA, SSAL.
67 Die Lage der verarbeitenden Industrie im Lichte der Leipziger Fruhjahrsmesse, DS
913, LMA, SSAL.
86 German power
of which were in Europe. Schuster and his colleagues drew on this list,
personally visiting local firms and chambers of commerce to encourage
them to attend the fair.
In advertising for the fair Schuster frequently collaborated with ethnic
German organizations in Yugoslavia. The Messeamts agents in Mari-
bor and Novi Sad, for instance, worked with the Political Association of
Germans in Slovenia and the German Foundation (Deutsche Stiftung)
to organize a collective trip of Slovenian Germans to visit Leipzig in
1927.68 The Political Association aimed to maintain the economic via-
bility of the German minority in Slovenia, but according to their reports
only a small minority of them knew and valued their German moth-
erland and its business life through their own experience there. Other
accounts reinforced the observation that German firms from Slovenia
relied almost exclusively on Yugoslavian or Viennese rather than Ger-
man agents.69 To rectify this the association hoped to organize a study
trip of thirty German merchants and artisans to visit the spring fair in
1927.70 By obtaining and distributing visas, arranging group travel and
rail discounts, negotiating a reduced fair entry fee, and getting a contri-
bution from the German mission in Belgrade, the Maribor representative
reduced the financial burden of visiting the fair well below the regular
cost.71 This study trip aimed to reduce transaction costs in general for
German minority merchants, and coincided with a substantial increase in
the number of Yugoslavian participants to the spring fair (see Table 2.1).
Schuster supplemented his advertising with a lobbying campaign to
encourage Yugoslavias government to organize an official exhibition of
goods in Leipzig. The Messeamt intended such collective exhibitions to
be calling cards for the economy of a country, highlighting a nations
general economic capabilities. For Yugoslavia this meant raw materials
like tobacco, food products, and semi-finished wares.72 In the summer of
1926 Schuster opened negotiations with the Belgrade chamber of com-
merce, along with the Yugoslavian Ministries of Trade, Forestry, and
Agriculture, to arrange an official display of Yugoslavian goods at the
fall fair.73 Yet for the next two years securing official participation at the
68 Report to Dr. Voach, p. 154, GA 1000, LMA, SSAL.

69 Carl Georg Bruns to Krahmer-Mollenberg, November 2, 1926, 978, R 8043, BA.
70 Hubert Kolletnig of Marburg to Krahmer-Mollenberg, February 24, 1927 and Mathies
to the Economics Ministry, October 20, 1926, 978, R 8043, BA.
71 Although this idea for a study trip found strong vocal support from the German mission
in Belgrade, it is difficult to ascertain from the sources whether such a trip eventually
occurred or not: pp. 21720 in 978, R 8043, BA.
72 Erich Dittrich, Sudosteuropa und die Reichsmesse Leipzig (Stuttgart: Kohlhammer, 1941).
73 Belgrade to Messeamt, July 14, 1926 and July 19, 1926 and Messeamt to the Ministry
for Trade and Industry in Belgrade, June 2, 1926, GA 146, LMA, SSAL.
fair became a Sisyphean feat for Schuster. The Ministry of Trades small
exhibition in 1926 had sparked interest in the press and among govern-
ment circles in expanding Yugoslavias official presence in the future. The
press wanted to keep pace with Bulgaria, Turkey, and Greece, which had
consistently organized exhibitions for the past several years.74 The gov-
ernment ministries concurred, planning to rent space for the forest and
mining, agricultural, and textile sectors, and to organize special exhibits
for Bosnian artwork, plums, and eggs in the spring of 1927.75 Through-
out 1927 and into 1928 Schuster lobbied the Ministry of Trade and
worked with the press to soften the ground. He found a willing supporter
in the director of one of Belgrades most influential newspapers, Politika,
to expand the Messeamts presence in print.76 Frequent articles in Poli-
tika, as well as in Privredni Pregled and the Zagreber Morgenblatt, promoted
the fair as an avenue for Yugoslavian businessmen to find international
customers as well as German ones, and a venue where foreign mer-
chants could deal with one another directly and avoid intermediaries.77
Yet Schusters efforts were trumped by political events. The death of the
radical party leader in Yugoslavia, Nikola Pasic, in December 1926 and
the subsequent resignation of the government threw Yugoslavias polit-
ical life into turmoil and left the position of Minister of Trade vacant
during the crucial planning stages for the fair in early 1927. The foreign
policy conflict that erupted between Yugoslavia and Italy over Albania in
1927 further diverted attention away from the fair.78 Schuster, moreover,
had to vie for the Ministry of Trades limited funding for official exhibi-
tions with representatives from Europes other fairs like Lyon, Frankfurt,
Salonika, and Paris. For the fiscal year 19278 the ministry could only
afford a single exhibition, which it decided to send to Paris.79
Indeed, participation by the Yugoslavian Ministry of Trade in exhi-
bitions carried with it a distinct political undertone in the late 1920s.
After the stabilization of its currency in 1926 France had begun pursu-
ing a more active economic diplomacy in Southeastern Europe with
74 Article about Yugoslavian participation in fall fair, May 23, 1927, p. 121, and article
about Yugoslavian tobacco in Germany, April 11, 1930, p. 228, GA 146, LMA, SSAL.
75 Yugoslavian Ministry for Trade and Industry to Messeamts business offices in Belgrade,
September 12, 1926 and Belgrade to Messeamt, October 2, 1926, GA 146, LMA,
SSAL.
76 Belgrade to Messeamt, May 26, 1927, GA 146, LMA, SSAL.
77 Belgrade to Messeamt, May 6, 1927, p. 124, GA 146, LMA, SSAL; reports from
pp. 93100, GA 152, LMA, SSAL.
78 Belgrade to Messeamt, December 10, 1926, Messeamt to its honorary representative in
Zagreb, December 27, 1926, Belgrade to Messeamt, March 22, 1927, GA 146, LMA,
GA.
79 Belgrade to Messeamt, January 31, 1927, Belgrade to Messeamt, March 22, 1927, GA
146, LMA, SSAL.
88 German power
stabilization loans to Bulgaria and Romania in 1928 and 1929. Yet

loans alone could not solve the underlying problem of these agrarian
economies, which needed markets for their exports. The French govern-
ment made a half-hearted attempt to remove tariff obstacles to imported
raw materials and agricultural products from Southeastern Europe in
the late 1920s.80 Yugoslavias decision to display in Paris should be seen
in this context. The Ministry of Trade arguably decided on Paris over
Leipzig in 1927 in the hopes of buttressing its diplomatic and financial
ties to France with commercial ones. The Ministry also sent an exhibi-
tion to Salonika in 1928 to improve its political relations with neighboring
Greece against the background of efforts to deepen regional commercial
ties within the Balkans.81 Even after Yugoslavia and Germany negotiated
a trade treaty in the fall of 1927, Belgrade still prioritized good relations
with France over Germany.82 Schusters inability to organize anything
more than small official exhibitions before 1927, then, was less an indi-
cation of disinterest among Yugoslavian merchants in the fair and much
more a product of the politicization of trade in Southeastern Europe.
Despite the absence of a large state exhibition, the fairs directors
and Germanys charge daffaires in Belgrade were pleased with Schus-
ters work. The number of Yugoslavian participants at the Leipzig fair
rose under his tenure in Belgrade and he attracted influential Yugosla-
vian leaders to work with the Messeamt.83 Thus it came as a shock for
the Messeamt and Germanys charge daffaires to learn that throughout
1927 Schuster had been embezzling money from the Belgrade office to
pay off personal debts.84 Finding suitable people to represent the fair
abroad was one of Kohlers highest priorities, and Schuster, although
he had displayed initiative, had violated the most important principle
of upholding the fairs trust.85 The Messeamt retained him through the
end of 1928, but only to avoid disrupting business and damaging the
reputation of their Belgrade office. They kept news of this affair strictly
confidential, and discretely discarded him at the end of the year.86
80 Plessis and Feiertag, Role of French Finance, 2269.

81 Belgrade to Messeamt, August 10, 1928, p. 179, GA 146, LMA, SSAL.
82 Schusters report on his discussion with Dr. Spaho from the Yugoslavian Trade Ministry,
July 7, 1927, GA 146, LMA, SSAL.
83 These included Yugoslavias general consul in Berlin, Dr. Barckhausen, the director
of Politika Dr. Tanovic, and the Yugoslavian Trade Minister Dr. Spaho. Belgrade to
Messeamt, June 21, 1927, p. 1289, July 7, 1927, p. 138, and August 23, 1927, p. 152,
GA 146, LMA, SSAL.
84 BA, R 901, 54232, 41488, Messeamt to Belgrade Embassy, August 7, 1928, charge
daffaires in Belgrade to Berlin, August 10, 1928, pp. 2412.
85 Probleme der Exportforderung, DS 903, LMA, SSAL.
86 Messeamt to Belgrade, August 11, 1928, p. 245, 54232/film 41488, R 901, BA.
The Messeamt began searching for a new agent in August 1928, work-
ing with the Belgrade mission to screen potential candidates. The Foreign
Office strongly urged the Messeamt to select a German citizen from Bel-
grade because, within the local mercantile community the Leipzig trade
fair was gaining an ever growing significance and . . . because economic
contacts between Germany and Yugoslavia in the last few years had
been continually improving.87 Yet the Messeamt resisted the entreaties
of the Foreign Office and instead settled on Milan Lujanovitz to be
Schusters successor. Lujanovitz had been one of the Messeamts rep-
resentatives in Serbia since 1922 and was a leading figure on the newly
established GermanYugoslavian Committee for Industry and Trade.
As a Belgrade Serb with connections to the Economics Ministry, the
Yugoslavian national chamber of commerce, and as a director of one of
Belgrades largest banks, Lujanovitz was well situated within local com-
mercial circles to advocate for the Leipzig fair and to help Germans find
reliable local counterparties.88
Lujanovitz built on the lobbying, advertising, and promotional activ-
ities that Schuster had initiated and he expanded Yugoslavias presence
at the fair even further. From 1925 to 1929 the number of Yugoslavian
business visitors at the Leipzig fair more than doubled, rising faster than
the overall rate of participation for foreign visitors. This was in spite of,
rather than because of, government assistance from either Yugoslavia or
Germany. The former used its scarce resources to fund exhibits in Paris
and Salonika and the latter gave only meager and inconsistent funding to
the Messeamt in the late 1920s. GermanYugoslavian trade paralleled the
rise of Yugoslavian attendance at the fair. German exports to Yugoslavia
increased from 36.4 million RM in 1924 to 172.1 million in 1930; in
those same years imports from Yugoslavia rose from 29.3 million RM to
74.8 million (see Tables 1.3 and 1.4).
It is difficult, however, to determine the direction of causality: did
the fair drive the improvement in trade or vice versa? Several pieces of
evidence suggest that the fair was indeed a driver of commerce. German
Yugoslavian trade improved more in 1925 and 1926, when the fair opened
its Belgrade business office, than it did with the signing of the German
Yugoslavian trade treaty at the end of 1927. Furthermore, as a point
of comparison, Yugoslavias trade with Switzerland grew substantially
slower during the 1920s than it did with Germany. Switzerland had a
87 Belgrade charge daffaires to Messeamt, August 10, 1928, p. 242, Berlin Foreign
Office to Economics Ministry, August 25, 1928, p. 244, Belgrade charge daffaires
to Messeamt, August 17, 1928, p. 247, 54232/film 41488, R 901, BA.
88 Messeamt to Belgrade charge daffaires, August 7, 1928, 54232/film 41488, R 901, BA.
90 German power
Table 2.2 Yugoslavian trade with Switzerland and Germany
1920 1921 1922 1923 1924 1925 1926 1927 1928 1929
Yugoslavian exports to Switzerland and Germany (in millions of dinar and RM)
Switzerland (Yugo 48 169 281 527 389 364 296 216 199 175
estimates) dinar
Germany (Yugo 99 397 311 339 388 636 724 678 779 675
estimates) dinar
Germany (German 17.7 15.3 29.3 45.6 53.7 50.3 66.6 60.9
estimates) RM
Yugoslavian imports from Switzerland and Germany (in millions of dinar and RM)
Switzerland (Yugo 34 38 26 54 63 84 85 102 99 112
estimates) dinar
Germany (Yugo 50 174 462 724 682 866 918 898 1066 1188
estimates) dinar
Germany (German 26.3 32.6 36.4 62.0 68.1 66.5 117.6 152.6
estimates) RM
Sources: Statisticki Godisnjak: Kraljevina Jugslavija (1929); Wirtschaft und Statistik

(192530)
roughly comparable level of industrial development as Germany, and a

similar incentive to exchange manufactured goods and capital equipment
for agricultural products. Its traders commanded the German language,
the business lingua franca throughout much of Yugoslavia. And like Ger-
many its merchants were not the traditional intermediaries in the Balkans,
like those from Vienna. Swiss merchants even enjoyed the added advan-
tage of capital: their banks invested much more heavily in Yugoslavia than
did those of Germany.
The main institutional difference between Germany and Switzerland,
in this respect, was that the former had the Leipzig fair and its accom-
panying network of representatives while the latter did not. The statistics
reflect this: Yugoslavian exports to Switzerland were actually lower in
1928 than they were in 1923, while those from Germany doubled. It
is more difficult to evaluate the performance of Yugoslavian imports.
According to the figures produced by the Yugoslavian government,
imports from Switzerland and Germany both doubled between 1923 and
1928, whereas according to German figures Yugoslavian imports from
Germany more than quadrupled in the same period89 (see Table 2.2).
89 German figures drawn from Statistisches Reichsamt, Wirtschaft und Statistik; Yugosla-
vian figures drawn from Statisticki Godisnjak/Annuaire Statistique, year 1929, vol. I,
produced by the Kraljevina Jugoslavija/Royaume de Yougoslavie (Belgrade, 1932).
Table 2.3 Yugoslavian imports from Germany by sector (in millions of RM)
Type of goods 1926 1928 1929 1930 1931
Iron wares 11.3 22.2 38.3 35.7 20.2

Textiles 12.3 14.5 15.1 14.7 9.8
Dyes and chemicals 6.9 9.8 10.3 9.4 7.3
Non-electrical machinery 9.5 20.3 25.4 37.7 15.1
Electrical machinery 2.6 7.1 6.2 5.9 7.3
Non-iron metal wares 3.4 5.0 6.6 4.8 4.7
Total imports from Germany 81.4 117.6 152.6 172.1 95.1
Source: Wirtschaft und Statistik (192632). Wirtschaft und Statistik does not have figures for
1925 or 1927.
Table 2.4 Total Yugoslavian imports from all countries by sector (in millions
of RM)
Type of goods 1925 1926 1927
Metal wares 70.2 66.3 66.5

Textiles 237.6 205.6 194.2
Non-electrical machinery 26.4 28.5 25.7
Electrical machinery 7.8 9.5 10.0
Source: Wirtschaft und Statistik (192632).
Further evidence that the fair was crucial in expanding German

Yugoslavian trade was the technical exhibition, which proved to be
extremely popular among Yugoslavian merchants. It offered a venue for
them to learn about new technology that could modernize their industry,
with displays of advanced textile machinery, machine tools, agricultural
equipment, and motor vehicles. These were the very sectors iron and
steel products, non-electrical machinery, and electrical machinery
among Yugoslavias imports from Germany that expanded the most
rapidly in the 1920s (see Tables 2.3 and 2.4). Already in 1926, before
the GermanYugoslavian trade treaty, Weimar supplied Yugoslavia with
between a quarter and a third of these goods. It was in precisely these
producer goods that Saxony was a leader among Germanys regions.
Contemporary Yugoslavian commentators recognized that the technical
fair was one of their main centers of sales and supplies, and that
the fairs principle of equal opportunity for foreign merchants gave
92 German power
Yugoslavian traders one of their most effective methods of getting access

to international buyers at Leipzig.90
Romania, the Leipzig fair, and the GermanRomanian

chamber of commerce
In Romania, where the Leipzig fair had an extensive history of commer-
cial exchange, the Messeamt surprisingly did not have as large an insti-
tutional presence. Since the seventeenth century Romanian wool, horse,
and cattle traders had regularly visited the fair, and Leipzig had estab-
lished a particularly close connection with the Transylvanian German
communities in cities like Brasov/Kronstadt and Sibiu/Hermannstadt.
In Bucharest one of the main streets was named the Strada Lipscani,
or Leipzig Avenue, after the local merchants who did their wholesale
trading at the fair.91 Yet following World War I the fair lacked a central
business office for Romania, which meant less coordinated advertising
campaigns and information collection. Its network of representatives
was also smaller, consisting of agents in Bucharest, Timisoara/Temesvar,
Brasov/Kronstadt, Sibiu/Hermannstadt, and off and on again at
Cernauti/Czernowitz, Cluj/Klausenberg, Iasi/Jassy, Chisinau/Kischinev,
and Oradea-Mare.
There were good reasons for the fairs less active lobbying and pro-
motion in Romania. The Banca Generala Romana issue, the economic
cold war, the poor image of Germany in the press, and the threat of
impounding German property under article 18 all made Germans wary
of doing business in Romania into the late 1920s. According to the
Messeamts agent in Bucharest, even in 1926 it was not worth his time or
his social capital to encourage local merchants to visit the fair.92 Despite
repeated attempts to lobby the government for a collective exhibition
Romania coordinated just a single one during the 1920s a tobacco
and cigarette display in 1927 the least of any Southeastern European
state.93 And many of the Messeamts agents thought an exhibit could
90 Articles from Jutarnji List, translated from Croatian into German by Messeamts office
in Belgrade, pp. 7980, GA 146, LMA, SSAL.
91 In the nineteenth century Romanian merchants frequently educated their sons in
Leipzig, and in 1858 they established a Romanian orthodox chapel in the city. I. A.
Roceric, Leipzig als Mittler der rumanisch-deutschen Handels-Beziehungen, DS
898, LMA, SSAL; report from Mutius, February 11, 1930, 117903, Sonderreferat
Wirtschaft, PAAA.
92 Tenhof in Bucharest to Messeamt, November 2, 1926, GA 152, LMA, SSAL.
93 Kronstadt to Messeamt, September 8, 1926, p. 30, GA 152, LMA, SSAL; Dittrich,
Reichsmesse, 446.
only be organized by employing the usual system of bribery, something

they were reluctant to pursue.94
In the winter of 1928 the trade fair acquired a new agent in Bucharest,
Cornelio Fruh, who breathed fresh air into the fairs activities. Fruh was a
native of Germany and the general director of the local firm Romanil AG,
and also the representative of IG Farben in Bucharest. He employed over
twenty assistants, enjoyed a trustworthy reputation among the Bucharest
business community, and thus seemed well suited to be the fairs lead-
ing agent. The Messeamt found Fruh through the German mission in
Bucharest, which wanted to ensure that the leading Leipzig representative
would be a German national.95 Fruh was more willing that his prede-
cessor to expend his firms social capital, and with a 60,000 lei budget
for each fair he began a more vigorous campaign to promote Leipzig,
advertising in the local Bucharest Tageblatt and carrying out publicity
through posters, postcards, and individual canvassing. Fruh, moreover,
expanded the fairs publicity into new media like film and radio. In the
spring of 1930 he began collaborating with a local engineer in Bucharest
to show films, screened in some of the largest cinemas in Bucharest, of
German industrial products exhibited at the technical fair.96 In the win-
ter of 1931 Fruh moved into radio, ordering short advertisements to be
broadcast in Romanian every Sunday for the three weeks preceding the
spring fair.97
In addition to advertising, Fruh also acted as a surrogate consular offi-
cer for those German merchants connected with the fair. He kept the
fair updated about which economic sectors were underexploited, where
in Romania particular markets were not saturated, and which German
industries might have the opportunity to expand.98 He suggested local
businessmen and lawyers that German firms could use as their agents
in Bucharest, gave credit reports about local businesses, and helped
collect outstanding debts due to German merchants, something that
94 Kronstadt to Messeamt, September 8, 1926, p. 30, GA 152, LMA, SSAL.

95 German charge daffaires in Bucharest to Messeamt, February 9, 1928, p. 371,
Messeamt to Cornelius Fruh, February 23, 1928, p. 368, GA 807, LMA, SSAL.
96 Messeamt to Cornelius Fruh, March 29, 1930, p. 149, and Harry Stein to Messeamt,
March 21, 1930, pp. 1549, GA 808, LMA, SSAL.
97 The Messeamt was initially reluctant to do so; instead of short ads they suggested buying
time to air longer informative lectures. But by the fall of 1931 they agreed to support
Fruh and gave him 1,700 RM for the 1932 spring fair. Cornelius Fruh to Messeamt,
January 27, 1931, p. 290, and Messeamt to Cornelius Fruh, February 2, 1931, p. 291,
GA 808, LMA, SSAL; Messeamt to Cornelius Fruh, October 26, 1931, p. 18, and
Cornelius Fruh to Messeamt, November 9, 1931, p. 31, GA 809, LMA, SSAL.
98 See Fruhs reports on competition in Romanias ceramics sector, where he suggests
that the provinces were under-marketed. Cornelius Fruh to Messeamt, March 3, 1929,
p. 14, GA 808, LMA, SSAL.
94 German power
proved difficult for German traders to enforce in Romania during the

1920s.99
Despite Fruhs energetic publicity, his failure to negotiate a state-
sponsored exhibition meant that much of the effort to improve
Romanian involvement in the fair came from the provinces, in contrast
to Yugoslavia. Outside Bucharest the German minority in Transylvania, a
fairly urban community with a long history of commerce with Germany,
was the most important advocate for and participant in the Leipzig
fair. These Siebenburgen Saxons were one of several German groups in
Romania that had developed strong, distinct regional identities based on
religion and history, the others including the Danube Swabians and the
Hungarian Germans of the Szatmar region. Of these German groups,
the Transylvanian community had some of most commercially oriented
middle classes engaged in trade, manufacturing, and export-oriented
agriculture. After 1925 their local business organization, the German
Mercantile Board for the Siebenburgen Region (Verbandes Deutscher
Handelsgremium Siebenburgen), became one of the Messeamts
honorary representatives in Romania and drew members from across
Transylvania. From Brasov/Kronstadt and Sibiu/Hermannstadt in the
south to Cernauti/Czernowitz in the north its total membership in 1930
numbered over 600.100
Like Fruh, the Mercantile Board had lobbied the Romanian gov-
ernment to organize a collective exhibit, but this effort met with little
success.101 After meeting with Walter Lorch a professor in Brasov/
Kronstadt and an associate of the Mercantile Board in 1929 the
Messeamt agreed to place more emphasis on promoting the fair to indi-
vidual Romanian merchants. In particular, the fair hoped to attract tex-
tiles like rugs, embroidery, and other such articles that [were] generally
regarded as Romanian handicrafts.102 By the late 1920s the Mercan-
tile Board was sending over 100 Transylvanian German businessmen to
nearly every Leipzig fair, and the Siebenburgische Handelszeitung, the offi-
cial organ of the board, became one of the primary sources of publicity
for the fair and for GermanRomanian trade in general. By 1930 the
99 Germanys charge daffaires in Bucharest from 1926 to 1931, Gerhard von Mutius,
a keen observer of the Romanian economy, found Fruh to be of crucial value to
German industry in Romania. Bucharest charge daffaires to Berlin, February 11,
1930, 117903, Sonderreferat Wirtschaft, PAAA.
100 Johann Bohm, Die Deutschen in Rumanien und die Weimarer Republik, 19191933
(Ippesheim: AGK Verlag, 1993).
101 President of Siebenburgen trade committees to Messeamt, June 5, 1926, p. 11, and
Kronstadt to Messeamt, July 7, 1926, p. 15, GA 152, LMA, SSAL.
102 Messeamt to Siebenburgen trade committees, April 11, 1929, p. 118, GA 152, LMA,
SSAL.
Transylvanian German community was even entertaining ambitions of

opening their own business office for the trade fair in Brasov/Kronstadt,
like the one in Belgrade.103
The Mercantile Boards collaboration with the Leipzig fair made it
a breeding ground for economists who would go on to become leading
figures in the 1930s in Germanys area studies programs dedicated to
Southeastern Europe Sudostforschung. Walter Lorch would become the
director of the Mitteleuropa-Institut in Dresden in 1933, an organization
that was devoted to establishing a German economic bloc in Central
and Southeastern Europe. Hermann Gross, a frequent writer for the
Siebenburgische Handelszeitung, became an assistant professor with the
Institute for Central and Southeastern European Economic Research
(Institut fur Mittel- und Sudosteuropaische Wirtschaftsforschung
IMSWf) in Leipzig in 1930, a director of the Southeast Institute
(Sudost-Institut) in Leipzig after 1936, and a leader of IG Farbens
southeast research division after 1938.
Through the writing of Hermann Gross and others, the Mercantile
Board advocated export-led economic development for Romania
because they believed it would benefit their own region of Transylvania.
This ran counter to the industrial policies of Romanias governing Lib-
eral Party in Bucharest, which was pursuing domestic industrialization
through high tariffs and import-substitution. In the opinion of the Mer-
cantile Board, through the principle of development on our own the
Romanian government had scared off foreign capital, displaced skilled
foreign workers, and thereby pushed the economic life of the state into
a serious crisis . . . It is just as impossible to train an indigenous, skilled
labor force overnight as it is to create a modern working tradition. Even
less possible is the accumulation of domestic capital.104 In contrast
to import-substitution, the Mercantile Board argued that Transylvania
could lead Romania to a more organic economic development.
Transylvania, a large swath of fertile territory that Romania acquired
after World War I, contained extensive natural resources natural gas,
forestry, water power, and arable land that could be harnessed for
exports as well as for industrial development more generally. Since the
103 This paper showcased the industrial branches at the fair that were most pertinent to
Romanian exporters and importers above all capital machinery from the technical
fair and provided a complete fair schedule along with information about how to
acquire travel visas, fair passes, and special travel deals. Siebenburgische Zeitung, special
edition about the Leipzig fair, February 10, 1930.
104 Entwicklungsmoglichkeiten der deutsch-rumanischen Wirtschaftsbeziehungen,
Siebenburgische Zeitung, special edition on Leipzig trade fair, February 10, 1930,
pp. 911.
96 German power
1880s the Transylvanian German community had developed their agri-

cultural cultivation by importing modern machinery from Germany and
the industrial centers of the Habsburg Empire. After 1919 Transylvania
became one of Romanias most efficient farming regions, contributing
disproportionately to the states agricultural exports.105 Extending this
efficiency in farming to the rest of Romania, so Gross and other German
minorities argued, would boost agricultural exports Romanias largest
exports after oil raise income and employment, and allow Romania
to import machinery. The latter could be used to develop Romanias
transportation infrastructure as well as its already well-established craft
industries, which had their highest concentration in the German parts of
Transylvania. The Mercantile Board promoted this mixture of primary
product exports and small-scale domestic industry as a natural route
to industrialization in contrast to the artificial, forced one pursed by
the Bucharest government in heavy industry.106
Germany, as Europes largest producer of capital equipment, occupied
a special place in the Mercantile Boards vision of export-led develop-
ment. Romania needed capital equipment to develop its agriculture as
well as its industry, so the Board argued, and it could purchase the
most advanced farm machinery in Germany. Indeed, by the end of the
1920s Weimar had again become Romanias largest source of imports,
and machinery was a large and growing proportion of this. Of the 172.9
million RM of goods that Romanian imported from Germany in 1928,
95.5 million RM was capital equipment, machinery, or high-quality fin-
ished metal products. The largest categories were iron wares (31.6 mil-
lion RM) and non-electrical machinery (25.6 million RM).107 And, like
Yugoslavia, Romanias imports of German metal wares, non-electrical
machinery, and electrical machinery grew dramatically in the second
half of the 1920s (see Table 2.5). The Mercantile Board saw this as a
positive development: above all we must improve our primitive tech-
nical capabilities. And we can do this most effectively with the support
105 Walter Konig, Die Deutschen in Rumanien seit 1918, in Gerhard Grimm and Krista
Zach (eds.), Die Deutschen in Ostmittel- und Sudosteuropa (Munich: Sudostdeutsches
Kulturwerk, 1995), 2556; Konrad Gundisch, Siebenburgen und die Siebenburger Sachsen
(Munich: Langen Muller, 1998).
Siebenburgische Zeitung, special edition on the Leipzig trade fair, February 10, 1930,
p. 9; Die volkswirtschaftliche Bedeutung der Siebenbuerger Sachsen fur Rumanien,
Siebenburgische Zeitung, November 10, 1930, p. 6; Alfred Csallner, Zur wirtschaftlichen
und Sozialen Lage der Siebenburger Sachsen 19101950 (Cologne: Bohlau, 1989).
107 Hermann Gross, Deutschlands Guteraustausch mit Rumanien 19251929 und
die deutsche-rumanische Handelsvertragsverhandlungen, Siebenburgische Zeitung,
May 25, 1930; Hermann Gross, Mittel- und Sudost-Europaische Wirtschaftsfragen:
Wirtschaftsstruktur und Wirtschaftsbeziehungen (Leipzig: Bottger, 1931).
Table 2.5 Romanian imports from Germany by sector (in millions of RM)
Type of good 1924 1926 1928 1929 1930 1931
Iron wares 17.4 29.0 31.6 40.6 26.8 30.7

Textiles 25.1 24.8 28.2 21.7 16.7 9.7
Dyes and chemicals 6.9 8.8 12.5 10.5 10.2 9.3
Non-electrical machinery 8.6 16.5 25.6 22.6 30.5 8.8
Electrical machinery 4.0 4.4 10.7 13.2 7.8 4.7
Non-iron metal wares 4.4 5.1 8.4 7.6 6.5 4.2
Total imports from Germany 89.3 121.3 172.7 164.1 137.3 92.5
of German industry. The mechanization of Romanian agriculture and

the development in sectors like textiles and food processing, they main-
tained, would not displace German exporters, but rather would provide
new sales opportunities for German machinery, replacement parts, and
intermediary goods and lead to a gradual industrialization of Romania.108
Moreover, because they shared language and culture with Germany, the
Transylvanian German community occupied a strategic link in this trade.
The Mercantile Board touted themselves as the natural representative
for German traders and hoped that by steering commerce toward Weimar
they would benefit by becoming the new commercial intermediaries to
replace Austrian traders from Vienna, and local Jewish merchants.109
Thus in their effort to navigate a new path of economic development
for Romania, the Mercantile Board believed they had a vested inter-
est in working with Germany, and that such cooperation would benefit
their own region of Transylvania and their particular industrial order of
craftsmen and skilled farmers.
The Leipzig trade fair represented a crucial pillar in the Mercantile
Boards strategy of export-led growth because it helped the small craft
firms and merchants of Transylvania tap into the German market. Roma-
nian participation at the fair, much of which stemmed from the German
community in Transylvania, had doubled between 1925 and 1929, and
like participation from Yugoslavia it increased faster than the overall rate
(see Table 2.1). By the late 1920s, moreover, the technical exhibition
was extremely popular with the Transylvanian German merchants and

Siebenburgische Zeitung, special edition on Leipzig trade fair, February 10, 1930,
pp. 912.
109 Die Deutschen in Rumanien und die reichsdeutsche Wirtschaft, Siebenburgische
Zeitung, March 25, 1930.
98 German power
it dovetailed with the Mercantile Boards emphasis on importing capital

goods.
By 1929, however, the directors of the Mercantile Board felt that the
Messeamt was still not doing enough to promote German commerce with
Romania. In 1928 Germany and Romania had negotiated a commercial
treaty that lowered tariffs and resolved the Banca Generala Romana and
article 18 disputes, ostensibly clearing the way for an improvement in
trade. And with the new treaty German capital began its slow and ten-
tative return to Romania.110 Yet these diplomatic and financial improve-
ments coincided with the first effects of the Great Depression in Central
Europe, as agricultural prices declined and domestic credit to Romanian
business contracted. Now more than ever the Mercantile Board wanted to
attract German attention. So after failing to establish a Leipzig fair busi-
ness office in Transylvania, the directors began planning other institutions
that would provide economic information about the region and assuage
German anxiety about the creditworthiness of Romanian merchants.111
With this goal in mind business elites in the German Transylvanian
community began lobbying for a GermanRomanian chamber of
commerce. This idea dated back to the early twentieth century, when
one briefly came into existence but was extinguished during the war.112
While there had been some attempts to reestablish a bilateral chamber
of commerce in the 1920s, these came to nothing partly because
Germanys Foreign Office would not officially sanction one in Romania
lest it reawaken fears of a German drive to the East.113 Indeed,
before the Banca Generala Romana problems and article 18 issues were
resolved German merchants preferred to keep a low profile on their
German-ness to avoid calling attention to themselves.114
Once the GermanRomanian trade treaty of 1928 was signed, how-
ever, the path toward a GermanRomanian chamber of commerce
110 In connection with the stabilization loan to the Romanian state organized by France,
the Reichskreditgesellschaft and the Dresdner Bank offered credits of 125,000,000 and
20,000,000 RM respectively. Hopfner, Sudosteuropapolitik, 1516; Tonch, Wirtschaft
und Politik, 52, 69.
Siebenburgische Zeitung special edition on the Leipzig trade fair, February 10, 1930,
p. 9.
112 Helmut Klein, Die deutschen Handelskammern im Auslande, Zeitschrift des Instituts
fur Weltwirtschaft und Seeverkehr 1, no. 31 (January 1930), Bucharest Embassy 95,
PAAA.
113 Berlin Foreign Office to Belgrade Embassy, February 11, 1922, 54222/film 41336,
R 901, BA.
114 Bucharest charge daffaires to Berlin Foreign Office, January 4, 1926, 89265, Han-
delsabteilung, PAAA; Zagreb consul to Messeamt, October 23, 1925, 54232/film
41488, R 901, BA.
opened.115 In the late summer and early fall of 1929 a consortium of

ethnic Romanians, Transylvanian Germans, and German citizens gath-
ered in Bucharest to organize such an institution. The initial impulse
came from Walter Stetten and Rudolf Brandsch. The former was a
trade attache to Germanys mission in Bucharest, the latter a German
deputy from Sibiu/Hermannstadt who served in the Romanian parlia-
ment. A Siebenburgen Saxon who studied in Berlin and Jena, Brandsch
had entered politics at a young age before 1914 and collaborated with
other nationalities in the Habsburg Monarchy, including Romanians, to
fend off the Magyarization policies emanating from Budapest. After 1918
he hoped to forge a pan-GermanRomanian identity. Yet he maintained
cooperative relations with Romanian nationals through his parliamentary
work, building close ties with Prime Minister Iuliu Maniu and becoming
Under-Secretary of State for Minorities in the early 1930s. After 1933
Brandsch would become a critic of the National Socialist movement in
Romania.116
For Brandsch and Stetten, a chamber of commerce would help bring
the diverse German minorities in Romania closer together and give them
a larger stake in commerce with the Weimar Republic. Their efforts, how-
ever, ran into immediate difficulties. A German chamber of commerce
required official recognition from the German Association for Cham-
bers of Industry and Trade and the German Economics Ministry, both
of which refused to sanction a chamber in Romania unless it was able
to guarantee preponderant German influence by having a majority
membership of German citizens.117
A breakthrough in the negotiations only came when Brandsch and
Stetten gained the endorsement of Gerhard Mutius, Germanys charge
daffaires in Bucharest. After some initial hesitation, by October 1929
Mutius became convinced that the chambers goal of collecting and dis-
tributing economic information would benefit the many small German
firms that exported to Romania. Exports from Germany, he explained
in a letter to the Foreign Office, were often extremely specialized and
required detailed information that is naturally best collected here, in
Romania. Mutius thought a joint chamber would remedy these problems
115 There already existed Anglo-Romanian, Italian-Romanian, French-Romanian, Greek-

Romanian, Polish-Romanian (Warsaw), and Swiss-Romanian (Switzerland) cham-
bers of commerce, which leading Romanian economic figures like Mihail Manoilescu
judged to be a success. Monatshefte der Deutsch-Rumanischen Handelskammer 1, no. 9
(December 25, 1930).
116 Schodl, Am Rande des Reiches and Lange Abschiede in Schodl, Deutsche
Geschichte im Osten Europas, 399400, 426, 53646, 56977.
117 Economics Ministry to the Berlin Foreign Office, July 18, 1929, 89266, Han-
100 German power
by providing economic news to the smaller firms that could not support
their own agents, and help sustain their competitiveness against French,
Austrian, British, and Czechoslovakian rivals.118 With Mutiuss support,
Brandsch and Stetten overrode the resistance of Germanys Economics
Ministry and the DIHT, and founded the GermanRomanian chamber
of commerce (Deutsch-Rumanische Handelskammer DRHK) on Oct
17, 1929 to wide publicity from the Romanian, Transylvanian, and Ger-
man press.119 Although neither the DRHKs membership nor its board
of directors were dominated by Germans, there was a large German pres-
ence and the leadership was decidedly German-friendly in the figures of
Stetten and Brandsch.120
One month later, in a turn of events that was surprising to Brand-
sch and Stetten, a parallel GermanRomanian chamber of commerce
opened its doors in Berlin. It was the brainchild of Romanias ambassador
to Germany, Nicolae Petrescu-Comnen, who had opened negotiations
with German businessmen, also in the fall 1929. Like Brandsch and Stet-
tin, Petrescu-Comnen had bypassed Germanys industrial associations
and gone directly to the banks and the industrial firms of Berlin. There
he acquired the support of Friedrich Krupp, Otto Wolff, the Deutsche
Bank, the Dresdner Bank, the Darmstadter Bank, and the Reichskredit-
gesellschaft along with 120,000 RM to found a joint chamber in Berlin.121
Thus in contrast to the DRHK in Bucharest, the Berlin chamber con-
sisted of some of Germanys largest industrial and banking houses.
These two institutions, which slowly worked out a modus vivendi
of cooperation, helped both small and large German firms operate in
Romania by providing them with economic information, resolving legal
118 The DRHK in Bucharest aimed to curb the strong French influence in Romania as
well as to . . . cement the economic and political connection between Germany and
Romania, Raumer to Oscar Kaufmann, March 17, 1930, 89266, Handelsabteilung,
PAAA; Mutius to Berlin Foreign Office, December 28 1929, 89210, Handelsabteilung,
PAAA.
119 Bucharest charge daffaires to Berlin Foreign Office, August 20, 1929, 89266, Han-
120 Some of the more prominent members supporting the chamber were representatives
from IG Farbens Romanian agent, Romanil, and AEG. Report from Bucharest charge
daffaires to Berlin Foreign Office, November 11, 1929, protocol of first meeting of
DRHK, November 13, 1929, and Windel to Berlin Foreign Office, November 3, 1929,
89266, Handelsabteilung, PAAA.
121 Mutius authorized the formation of the Berlin chamber without first consulting the
Economics Ministry, causing some confusion about Germanys official stance. Eco-
nomics Ministry to the industrial associations, December 20, 1929, report from Eisen-
lohr, October 26, 1929, and Economics Minister to Min. Hamm, November 14,
1929, and DRHK to Berlin Foreign Office, January 4, 1930, 89266, Handelsabteilung,
PAAA. See also Monatshefte der Deutsch-Rumanischen Handelskammer 1, no. 1, April 25,
1930.
issues, and increasing Germanys advertising presence in Romania. The

Bucharest chamber functioned primarily as a clearing center for smaller
firms, where Germans and Romanians could use its publications for
market information. And it also helped small German firms assess the
creditworthiness of their local trading partners.122 In 1931 Stetten orga-
nized the chambers first large promotional event, a year-long exhibition
in Bucharest that quickly became a publicity and advertising center
for German products.123 The DRHK also resolved outstanding legal
and commercial disputes by presiding over a court of arbitration. Their
legal offices in Bucharest advised German and Romanian firms on inter-
state issues and maintained connections with reliable lawyers through-
out Romania.124 The Berlin chamber of commerce had a smaller range
of activities but published one of the most detailed, German-language
informational bulletins about the Romanian economy, the Monatshefte der
Deutsch Rumanische Handelskammer. Alongside articles from leading eco-
nomic thinkers like Hjalmar Schacht, the Monatshefte provided detailed
monthly information on nearly every type of macroeconomic indicator
of interest to German businessmen involved in Romania, from sectoral
analyses to Romanian state finances and the details of trade treaties.
Conclusion
Economic turmoil, never far away, reached Central Europe at the end of
1929. Thus just as Leipzigs Belgrade office acquired reliable leadership
in Milan Lujanovitz, just as the DRHK began operations in Berlin and
Bucharest, and just as Cornelio Fruh and the Mercantile Board began a
more energetic campaign in Romania, the precarious economic stability
of the late 1920s crumbled and Europe fell into depression, yet not before
these institutions had begun resolving the transaction cost problems of
trust, uncertainty, and poor information that had paralyzed German
Balkan commerce in the 1920s. This groundwork allowed German,
Yugoslavian, and Romanian traders to pick up where they left off once
their countries emerged from the Great Depression in the mid 1930s.
122 Die Grundung eines Glaubigerschutzvereines in Rumanien Gegenseitigkeit mit

den Kreditschutzorganen des Auslandes, Siebenburgsiche Zeitung, special edition on
Leipzig fair, February 10, 1930; Kurt Ullrich, Die Deutschen in Rumanien und die
reichsdeutsche Wirtschaft, Siebenburgische Zeitung, March 25, 1930.
123 Circulars from Zentralstelle fur Aussenhandel to Foreign Office and other ministries,
April 9, 1931 and April 27, 1931, 89448, Handelsabteilung, PAAA.
124 Recht und Wirtschaft, Die Pflege der Rechtsbeziehungen zwischen Deutschland und
Rumanien, Siebenburgische Zeitung, December 10, 1930; Bucharest charge daffaires
to Berlin Foreign Office, August 20, November 11, and November 13, 1929, 89266,
Handelsabteilung, PAAA.
102 German power
The trade fair and the chambers of commerce succeeded where the
German state had failed, supplementing Germanys understaffed and
underfunded consular system and providing German merchants with
crucial informational and legal services. In this sense they expanded the
involvement of privately organized, transnational institutions in German
foreign policy, a trend begun during the liberal Weltpolitik of the Wil-
helmine Empire. By 1929 the Leipzig fair, its network of agents, and the
chambers of commerce were providing valuable information about sales
opportunities in Yugoslavia and Romania, assessing the creditworthiness
of potential business partners, using innovative advertising techniques
such as film and radio, and offering a place for face-to-face exchange
through personal networking.
These organizations laid the foundation for German soft power in
Southeastern Europe by including key regional groups in the spoils of
trade. Soft power is about convincing others to want what you want,
establishing your goals as legitimate, and sharing the benefits of your
policies. And this is precisely what the Leipzig fair and the German
Romanian chambers of commerce did. Their networks gave German
nationals, German minorities, and pro-German Romanians, Serbs, and
Croatians access to some of the best trade contacts and information in
Southeastern Europe, and as a result these groups came to believe they
would benefit from the growth of GermanBalkan trade. Furthermore,
these institutions offered specific solutions to the problems facing par-
ticular economic orders in Germany, Romania, and Yugoslavia. For the
fair directors Raimund Kohler and Paul Voss exports would bring
employment and stability to Saxony. Through its technical exhibition
the Messeamt would facilitate Saxonys transition away from consumer
and toward producer goods, and through its trade network it would help
smaller firms find buyers for their products abroad. For certain merchants
in Yugoslavia and Romania Milan Lujanovitz or Cornelio Fruh the
fair and the chambers of commerce offered a way to tap into Germanys
domestic market, make their artisanal goods and raw materials available
to an international clientele, and gain access to new capital equipment
and technology. For the German minorities in Yugoslavia and Romania,
trade with Germany seemed to offer a path to economic moderniza-
tion, and one that favored their position as intermediaries. German soft
power, in other words, was slowly being built by business groups spread
across Central and Southeastern Europe who had a common interest in
deepening the commercial ties and the existing division of labor between
industrial Germany and more agrarian Yugoslavia and Romania.
The trade fair and the chambers of commerce succeeded in part
because they drew on an asset other Western European nations lacked a
Table 2.6 Yugoslavian trade by destination (in millions of dinars)
Country 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930
Yugoslavian exports by destination

Italy 358 633 1,126 2,424 2,757 2,249 1,960 1,590 1,680 1,971 1,919
Austria 563 882 884 2,328 2,333 1,652 1,610 1,449 1,154 1,238 1,199
Czechoslovakia 68 101 299 629 944 834 939 727 580 426 556
Germany 99 397 311 339 389 637 724 679 779 675 791
UK 3 18 70 172 132 86 68 84 102 107 104
USA 5 5 17 29 51 77 50 48 60 126 58
Yugoslavian imports by source country

Italy 1,271 864 1,005 1,488 1,688 1,644 1,054 940 939 823 783
Austria 714 1,161 1,861 2,238 1,626 1,604 1,533 1,424 1,355 1,324 1,171
Czechoslovakia 322 843 1,278 1,538 1,650 1,559 1,427 1,399 1,402 1,329 1,225
Germany 50 174 462 724 682 866 918 899 1,067 1,188 1,221
UK 244 246 459 823 847 713 439 511 447 426 412
USA 82 99 225 306 321 342 309 255 385 360 285
Source: Mitchell, International Historical Statistics, E2 External Trade with Main Trading
Partners, 728.
sizeable and active minority of ethnic kinsmen in the Balkans. German

minorities, especially those in Transylvania, saw themselves as the pre-
ferred representatives of the German economy. Ironically, the most out-
spoken believers in a special economic relationship between Germany
and Southeastern Europe came not from the fairs directors but from
the periphery: its agents in Southeastern Europe like Hans Schuster and
Lujanovitz, and the local German minorities on the Mercantile Board in
Transylvania. Germany is not merely a state with which Romania today
has an extensive exchange of goods, so argued the lead correspondent
for the Brasov/Kronstadt newspaper. Rather, because of the worldwide
division of labor, economic geography, and geopolitical conditions it is
the inevitable partner in Romanias economic development.125
By the onset of the Depression the Leipzig fair and the chambers of
commerce had opened the markets of Southeastern Europe to Germany
to an extent many would have thought impossible in the first half of
the decade. They enabled Germans to effectively compete in a region
where they lacked the financial muscle commanded by their rivals from
France, Britain, and Austria. By 1930 Germany had once again become
Southeastern Europes largest trading partner (see Tables 2.6 and 2.7,
and Figures 2.12.4). The amount of strategically important capital
125 Alfred Honig of the Kronstadter Zeitung quoted in Entwicklungsmoglichkeiten der

deutsch-Rumanischen Wirtschaftsbeziehungen, Siebenburgische Zeitung, 1930 special
edition on the Leipzig trade fair, February 10, 1930, pp. 1213.
104 German power
Table 2.7 Romanian trade by destination (in millions of lei)
Country 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930
Romanian exports by destination

Austria 254 392 995 2,569 3,913 4,347 4,686 5,025 3,879 2,733 2,589
Germany 41 353 822 1,788 1,615 2,462 4,779 7,096 7,550 8,005 5,364
France 138 929 1,355 2,613 1,778 1,665 1,514 1,364 1,330 1,296 1,959
Czechoslovakia 142 407 1,124 1,082 2,630 2,742 2,386 2,031 1,910 1,789 1,985
UK 224 994 332 1,174 1,645 2,369 2,300 2,232 2,049 1,867 3,230
Romanian imports by source country

Austria 770 2,050 1,968 3,057 4,421 4,948 4,724 4,500 4,107 3,715 2,679
Germany 134 1,087 2,422 4,429 5,051 4,996 6,320 7,645 7,390 7,135 5,777
France 971 1,653 728 1,292 2,123 2,333 2,475 2,618 2,129 1,641 1,707
Czechoslovakia 250 1,065 1,156 1,619 3,028 4,273 4,494 4,716 4,368 4,020 1,370
UK 1,394 1,681 1,096 1,801 2,583 3,152 2,996 2,841 2,500 2,160 1,874
The data for these years are lacking and the figures here are calculated based on trend.
Source: Mitchell, International Historical Statistics, E2 External Trade with Main Trading
Partners, 700.
Yugoslavian imports by source

2,500
2,000
Millions of dinars
1,500 Italy
Austria
Germany
1,000
UK
500
0
1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930
Year
Figure 2.1 Yugoslavian imports by source, 19201930
equipment that Southeastern Europe imported from Germany had more

than doubled tripled in some instances between 1926 and 1929. By
the end of the 1920s Yugoslavia imported roughly one-third of its metal
wares, four-fifths of its non-electrical machinery, and seven-tenths of its
electrical machinery from Germany (see Tables 2.3, 2.4, and 2.5).
Yugoslavian exports by destination

3,000
2,500
2,000
Millions of dinars
Italy
1,500 Austria
Germany
1,000 UK
500
0
1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930
Year
Figure 2.2 Yugoslavian exports by destination, 19201930
Romanian imports by source

9,000
8,000
7,000
6,000
Austria
Millions of lei
5,000
Germany
4,000 France
3,000 UK
2,000
1,000
0
1920 1921 1922 1923 1924 1925 1926* 1927 1928* 1929 1930
Year
Figure 2.3 Romanian imports by source, 19201930
The deepening economic ties with Germany had its risks, however
above all the risk of entrenching a division of labor that would hold
Yugoslavia and Romania on the low end of the value-added chain by rel-
egating them to the production of agricultural goods and raw materials.
106 German power
Romanian exports by destination

9,000
8,000
7,000
6,000
Millions of lei
5,000 Austria
Germany
4,000
France
3,000 UK
2,000
1,000
0
1920 1921 1922 1923 1924 1925 1926* 1927 1928* 1929 1930
Year
Figure 2.4 Romanian exports by destination, 19201930
These risks would become much more apparent following the Depres-
sion. But the indicators were there already in the late 1920s, and some
in Yugoslavia and Romania were raising concerns that in walking a fine
line with Germany their countries might slip into a spiral of economic
dependency.126 Yet back in Germany, before 1930 the word imperialism
was not on the lips of Kohler, Voss, or politicians like Gustav Stresemann.
Before 1930 Germany lacked the tools of hard power, and it had little
ability to exercise diplomatic coercion over Yugoslavia or Romania or to
exploit any relationship of dependency. That would only come later, well
after 1931 when German foreign policy-makers took advantage of the
Depression and turned their eyes to the Balkans as a space for imperial
expansion. They were only able to do so because the Leipzig fair and
the chambers of commerce had begun making economic collaboration
with Germany seem like a worthy goal to the German minorities, and the
business elites of Yugoslavia and Romania. The soft power cultivated by
these private institutions in the 1920s, in other words, would lubricate the
wheels of trade and facilitate the political machinations that would make
the Balkan states commercially dependent on Germany in the 1930s.
126 Mihail Manoilescu, The Theory of Protection and International Trade (London: P. S. King
& Son, 1931).
3 The culture of trade: cultural diplomacy and
area studies in Southeastern Europe,
19251930
In many cases foreign students can be cultural agents with a high eco-
nomic impact, and it is advantageous to stay in continuous contact with
foreign students who have graduated from German universities long
after they leave Germany.1
In the fall of 1927 Walther Hoffmann, a professor at the Mining

Academy of Freiburg Saxony and a member of the German Peoples
Party, embarked on a study trip through Southeastern Europe where he
hoped to learn more about the local economic conditions. After travel-
ing through Hungary, Romania, Yugoslavia, and Bulgaria, he returned
to Berlin where he spoke before the German Section of the Mitteleu-
ropaische Wirtschaftstag, a transnational organization dedicated to fur-
thering the economic integration of Central Europe. Hoffmann was
guardedly optimistic about what he had seen: German exports to South-
eastern Europe had risen since 1926 and the agricultural commodities
and raw materials of Southeastern Europe were once again finding their
way to German markets. The aspiration of many of Weimars economists,
including Hoffmann, for a central European economic market open to
German products seemed within reach.2
Hoffmann, however, expressed grave concern over two sources of com-
petition with Germany: Austria and France. In the 1920s the former
remained the predominant channel through which trade and informa-
tion flowed. Too many of Germanys economic ties with Southeastern
Europe, Hoffmann reported, and too much of its trade were still being
routed through Vienna. For German firms Vienna was now one of their
1 Report from Walther Hoffmann and the Association of Saxon Industrialists, June 4,
1929, 15675, 11125 Min. des Kultus, SSAD.
2 Confidential report from Herbert Strencioch, business director of the German Section of
the Mitteleuropaische Wirtschaftstag, on Hoffmanns study trip, October 27, 1927, 49,
Mitteleuropaische Wirtschaftstag, N 1006 Gothein, BAK; Hoffmann to Foreign Office,
October 24, 1927, 61195, Kulturabteilung, PAAA.
107
108 German power
main competitors, and no longer the desired intermediary center for

the Balkans that it had been before the war.3 But it was the latter country,
France, which represented the greatest danger to German ambitions in
Southeastern Europe. By the late 1920s France was exerting more pull
than ever over the economies and the cultures of Southeastern Europe.
Parisian financial institutions were some of the most active lenders in
the region, and the French national bank closely monitored the state
finances of Romania and Bulgaria. Even more worrisome to Hoffmann
than financial leverage was the influence of French culture in the Balkans.
French books were cheaper, French news was more widely circulated by
its wire services, the French language was more aggressively promoted,
French universities attracted more of the regions students, and French
clubs with members from the local national communities existed in every
important city across all of Southeastern Europe.4 As a consequence,
the business and cultural elites of Southeastern Europe were looking ever
more to Paris for their fashion and products.
Frances cultural networks in the Balkans were just one aspect of a
larger process that German elites like Hoffmann regarded with anxi-
ety: the emergence of an international society that threatened to leave
Germany out. After the war, non-state, transnational organizations pro-
liferated across Europe. The largest of these was the League of Nations,
founded in 1920, which soon expanded into a multiverse of suborgani-
zations to manage problems ranging from refugees to the gold standard.5
Germany only joined the League in 1926, remained outside its major
decision-making organs, and only slowly began participating in its var-
ious subsidiary units later in the 1920s. France, by contrast, was heav-
ily involved in the League from the start and French officials directed
many of its subunits Socialist leader Albert Thomas at the Inter-
national Labor Organization, philosopher Henri Bergson, chair of the
International Committee on Intellectual Cooperation. Paris, moreover,
was home to numerous transnational organizations not affiliated with
the League. All of these institutions circulated professional expertise and
knowledge, brought people and prestige to Paris or Geneva or London,
and magnified French and British power. Or so many Germans believed.6
3 Minutes from MWT board meeting, November 29, 1927, 49 Mitteleuropaische

Wirtschaftstag, N 1006 Gothein, BAK.
4 Hoffmann to the Foreign Office, January 9, 1928, 61139, Kulturabteilung, PAAA.
5 Pedersen, Back to the League of Nations?; Mazower, No Enchanted Palace,
127.
6 Germany, for instance, remained excluded from the International Research Council and
the International Union of Academics until after the Treaty of Locarno in 1925. Daniel
The culture of trade 109
To include Germany in this emerging international society, and fend

off competition in the Balkans from Paris, Hoffmann suggested a new
strategy to Germanys business circles: cultural diplomacy. In doing so
he tapped into a chorus of intellectuals who were calling on the Weimar
Republic to resurrect the Wilhelmine Empires foreign cultural policy to
overcome the lingering antagonism of the World War. Hoffmann found
willing supporters in the Mitteleuropaische Wirtschaftstag, a business
association based in Berlin, and among the commercial elites of Sax-
ony, Germanys most export-dependent region. Through his efforts and
through the initiative of other Saxon notables, two new institutions dedi-
cated to improving German economic and cultural relations with South-
eastern Europe were founded in 1928 and 1929 the IMSWf in Leipzig
and the Mitteleuropa-Institut in Dresden.
These organizations belonged to an explosion of cultural diplomacy
initiatives and area studies in Germany during the 1920s. Many of these
targeted German minorities in Eastern Europe and the Americas, aim-
ing to preserve their cultural identity. The German Foreign Institute in
Stuttgart, the German Academy in Munich, and the sprawling Associ-
ation for Germans Abroad, for example, channeled funds to German
communities ranging from Romania to the USA, and publicized the
problems these groups faced.7 Some of these organizations were radi-
cally revanchist such as the Foundation for German Regional Folk and
Cultural Research and hoped to use German minorities to undermine
the borders and the legitimacy of the new states of Eastern Europe, above
all Poland and Czechoslovakia.8 Yet other new organizations looked
beyond German minorities. The German Academic Exchange Service
(Deutscher Akademischer Austauschdienst DAAD) and the Humboldt
Foundation, founded in the 1920s, strove to improve political relations
with France, Great Britain, and America and to import democratic ideals
to Germany through student exchange. Over the long haul, they hoped
Laqua, Transnational Intellectual Cooperation, the League of Nations, and the Problem
of Order, Journal of Global History 6, no. 2 (2011), 22347; Iriye, Global Community,
2134.
7 Anthony Komjathy and Rebecca Stockwell, German Minorities and the Third Reich: Ethnic
Germans in East Central Europe between the Wars (New York: Holmes and Meier, 1980);
Ernst Ritter, Das Deutsche Ausland-Institut in Stuttgart, 19171945: ein Beispiel deutscher
Volkstumarbeit zwischen den Weltkriegen (Wiesbaden: Steiner, 1976); Stefan Wolff, German
Minorities in Europe: Ethnic Identity and Cultural Belonging (New York: Berghahn Books,
2000).
8 Fahlbusch, Wo der deutsche . . . ist; Fahlbusch, Wissenschaft im Dienst; Haar, Historiker im
Nationalsozialismus.
110 German power
to elevate Germanys political prestige and present their nation as a world

leader of culture.9
Hoffmann, however, had a different goal in mind for Saxonys organi-
zations. Instead of focusing on German minorities or trying to improve
political relations with Western Europe and America, he wanted to
use culture diplomacy to promote the economy. The directors of
the Mitteleuropa-Institut and the IMSWf saw an intimate connec-
tion between culture, scholarship, and economics. Spreading German
ideas and viewpoints, constructing a better image of Germany, estab-
lishing personal and professional networks, and studying the societies
and economies of Southeastern Europe, they thought, would open the
regions markets to German exports and eventually political influence. In
doing so, they hoped to carve out a special relationship between Saxony
and the Balkans, thereby bringing stability to their crisis-ridden regional
economy.10
This was a policy of soft power. Soft power aims to establish ones own
ideas or viewpoints as legitimate in the minds of others. Most generally,
Saxonys organizations aimed to rehabilitate German culture literature,
philosophy, music, and fashion that had been damaged during the war
in the belief that this would somehow translate into a greater interest
in German products. More specifically, they promoted the notion that
German industry was technologically sophisticated, adaptable to local
tastes, and a global leader in innovation and reliability. In addition, in
their educational programs they taught that Germany and the countries
of Southeastern Europe complemented one another economically, and
that the latters specialization in agricultural and raw materials was in
some sense natural and beneficial to the regions elites. To spread such
9 Greenberg, Germanys Postwar Re-education; Kurt Duwell, Der Grundung der

Kulturpolitischen Abteilung im Auswartigen Amt 1919/1920 als Neuansatz, in
Kurt Duwell and Werner Link (eds.), Deutsche Auswartige Kulturpolitik seit 1871
(Cologne: Bohlau, 1981), 4671; Duwell, Deutschlands auswartige Kulturpolitik;
Friedrich Dahlhaus, Moglichkeiten und Grenzen auswartiger Kultur- und Pressepolitik:
Dargestellt am Beispiel der deutsch-turkischen Beziehungen, 19141928 (Frankfurt am
Main: Lang, 1990), 2408; Hans Arnold, Auswartige Kulturpolitik: ein Uberblick aus
deutscher Sicht (Munich: Hanser, 1980), 13; Volkhard Laitenberger, Akademischer Aus-
tausch und auswartige Kulturpolitik, 19231945 (Gottingen: Musterschmidt, 1976);
Eckard Michels, Von der Deutschen Akademie zum Goethe-Institut: Sprach- und auswartige
Kulturpolitik 19231960 (Munich: Oldenbourg, 2005).
10 For a brief history of the Mitteleuropa-Institut in the context of Saxonys university sys-
tem, see Middell, Weltgeschichtsschreibung, 496501; on the IMSWf see Hermann Gross,
Zur Geschichte der wirtschaftswissenschaftliche Sudosteuropa-Forschung in Deutsch-
land, Osteuropa 24 (1974), 12330; Stephen Gross, Das Mitteleuropa-Institut in
Dresden: Verknupfung regionaler Wirtschaftsinteressen mit deutscher Auslandskul-
turpolitik in der Zwischenkriegszeit, in Sachse, Mitteleuropa und Sudosteuropa,
11540.
ideas, the Mitteleuropa-Institut and the IMSWf reached out specifically

to the non-German nationalities of the Balkans Romanians, Croatians,
Serbians, and Bulgarians and tried to incorporate elites from these
groups into German university and cultural networks.
These cultural diplomacy initiatives marked Germanys own interna-
tionalist turn in the late 1920s, which both overlapped and competed
with the emerging Franco- and Anglo-American international society.
The directors of the Mitteleuropa-Institut and the IMSWf two among
many organizations hoped to make Leipzig, Dresden, and also Berlin
and Munich into alternative poles of attraction for the elites of Southeast-
ern Europe, rivals to Paris, Geneva, or London. Yet where the interna-
tionalism of France, Britain, and America spanned the globe, Germanys
internationalist agenda aimed to forge regional connections, a regional-
ized soft power, a Grossraum based in the center of Europe. They used
cultural diplomacy, in other words, to plant the seed for a German eco-
nomic bloc and promote this to the elites of Yugoslavia and Romania,
Hungary and Bulgaria.11
Cultural diplomacy in the Weimar Republic

In the decades before 1914 many of Germanys political leaders, public
figures, and intellectuals began to see cultural diplomacy as an alterna-
tive to the power politics pursued by Kaiser Wilhelm, Admiral Tirpitz,
and the German military. These liberal imperialists Paul Rohrbach,
advisor to the Foreign Office during World War I, Ernst Jackh, publicist
and director of the Werkbund, Karl Lamprecht, historian at the Univer-
sity of Leipzig, Kurt Riezler, personal secretary to Chancellor Bethman-
Hollweg argued that a coherent cultural diplomacy would win more
prestige for Germany than any military success could. Instead of force of
arms, Germany should use its achievements as a world leader in science,
technology, and scholarship to project its culture and exercise influence
through the increasingly dense web of international conferences and orga-
nizations of the late nineteenth and early twentieth centuries. These years,
moreover, witnessed an explosion of private organizations and academic
11 For some key studies on German Grossraumwirtschaft see Hans-Erich Volkmann,

Okonomie und Expansion. Grundzuge der NS-Wirtschaftspolitik: Ausgewahlte Schriften
(Munich: Oldenbourg, 2003); Elvert, Mitteleuropa!; Bernd-Jurgen Wendt, National-
sozialistische Grossraumwirtschaft zwischen Utopie und Wirklichkeit Zum Scheitern
einer Konzeption 1938/39, in Franz Knipping and Klaus-Jurgen Muller (eds.), Macht-
bewusstsein in Deutschland am Vorabend des Zweiten Weltkrieges (Paderborn: Schoningh,
1984), 22345.
112 German power
institutes dedicated to promoting a better image of Germany abroad, like

the GermanChinese Association and the Mitteleuropaische Verein.12
The deep antagonism generated by the World War, however, repre-
sented a dramatic reversal for Germanys emerging interest in cultural
diplomacy, as both the Entente and the Central Powers aggressively
discredited the political aims and the cultural achievements of their
opponents. The acrimonious question of war guilt, compounded with
the imagery of Huns and barbarians used to demonize the Wilhelmine
Empire, left Germany a cultural pariah in the immediate postwar years.13
Despite this inauspicious foundation for Weimars cultural diplomacy,
however, Germanys other foreign policy instruments were in even worse
shape. In the words of General Wilhelm Groener, the chief deputy of
Germanys general staff, foreign policy consists of power, armies, navies,
and money; all of this we no longer have.14 Key public figures, more-
over, claimed to have learned important lessons from the war. After 1919
a group of intellectuals led by Prussian Culture Minister Carl Heinrich
Becker called for a revitalization of cultural diplomacy.15 Germanys loss
of the propaganda war over atrocities in Belgium, its inability to persuade
other nations of the justness of its war aims, and its lack of a unifying cul-
tural objective like Frances civilizing mission, they argued, had led it
to fail in generating sympathy among neutral powers. To move forward,
Becker maintained, Germany must jettison the notion developed dur-
ing the war that cultural diplomacy was mere propaganda in the press.
Rather, cultural diplomacy should be a way to enhance mutual under-
standing between nations and ease the tense postwar climate. German
scholars who had been barred from international conferences following
the war needed to be readmitted; German overseas schools that had
closed should be reopened; and British, French, and American students,
who encountered significant bureaucratic obstacles to study in Germany
after the war, should be encouraged to return to the universities of Berlin,
Munich, and Leipzig.16
12 Kloosterhuis, Friedliche Imperialisten, 35; Vom Bruch, Weltpolitik als Kulturmission, 367.
13 John Horne and Alan Kramer, German Atrocities, 1914: A History of Denial (New Haven,
CT: Yale University Press, 2001).
14 Cited in Duwell, Der Grundung der Kulturpolitischen Abteilung, 46.
15 Anna Selig, Auswartige Kulturpolitik/Gedanken zur Neuorientierung, February 25,
1928, 61124, Kulturabteilung, PAAA; Duwell, Der Grundung der Kulturpolitischen
Abteilung.
16 Immediately after the war, for foreign students to study in Germany they had to receive
approval from the German mission in their country as well as a certificate regarding
their attitude toward Germany (Deutschfreundlichkeits Bescheinigung). Volkhard Laiten-
berger, Organisations- und Strukturprobleme der Auswartigen Kulturpolitik und des
Akademischen Austauschs in den Zwanziger und Dreiiger Jahren, in Duwell and
Link, Deutsche Auswartige Kulturpolitik, 7296, at 734.
The momentum to revamp Germanys cultural diplomacy spread

beyond the confines of the Prussian Culture Ministry and the ivory tower.
Already in 191920 the Foreign Office had founded a new department
dedicated to cultural work that adopted many of Beckers ideas. This
cultural department combined the pre-1914 offices managing German
scholarship and German schools abroad with sections for art, music, the-
ater, and literature.17 And by the middle of the decade cultural diplomacy
attracted the attention of Germanys highest echelon of political leaders.
Germanys Foreign Minister in the 1920s, Gustav Stresemann, became
an avid proponent of the new cultural department, seeing it as a comple-
ment to his strategy of rapprochement with the states of Western Europe
and America. Since Germanys defeat in 1918 Stresemann had lost his
confidence that military force was an effective way for his nation to pur-
sue its national interests abroad. Instead, Stresemann hoped to rebuild
Germany as a European and a world power by making it an essential
pillar of the global economy, by forging a transatlantic partnership with
America the country upon which Germany depended for credit and
by working through international institutions and agreements to make
Germany an equal partner in a multilateral Europe.18 When the Dawes
Plan, the Treaty of Locarno, and Germanys entry into the League of
Nations opened a more conciliatory period in European relations after
1924, Stresemann and officials in the Foreign Office became increas-
ingly optimistic that an active cultural diplomacy would aid their larger
agenda for economic reconciliation, and enable them to pursue German
interests through more subtle methods.19 In a series of memos circulated
to Germanys missions, Stresemann called for cultural activities to be
given a higher priority than they had in the past. He and the director of
the new cultural department, Hans Freytag, followed this initiative up
by conducting a systematic appraisal of the cultural affairs of Germanys
individual missions, completed in 1928.20
17 Duwell, Der Grundung der Kulturpolitischen Abteilung, 52.

18 Peter Kruger, Zur europaischen Dimension der Aussenpolitik Gustav Stresemanns,
in Heinrich Karl Pohl (ed.), Politiker und Burger: Gustav Stresemann und seine
Zeit (Gottingen: Vandenhoeck & Ruprecht, 2002), 20728; Gottfried Niedhardt,
Aussenminister Stresemann und die okonomische Variante deutscher Machtpolitik,
ibid., 22941; Jonathan Wright, Stresemann: A Mind Map, in Gaynor Johnson
(ed.), Locarno Revisited: European Diplomacy 19201929 (London: Routledge, 2004),
14660.
19 Duwell, Deutschlands auswartige Kulturpolitik, 3716; Arnold, Auswartige Kulturpolitik,
1213.
20 Circular to all Missions from Stresemann from January 31, 1928, 70163, Buro
Staatssekretar, PAAA. See also Stresemanns documents in the appendix of Duwell,
Deutschlands auswartige Kulturpolitik.
114 German power
For Stresemann and Freytag, maintaining Germanys schools abroad,

and thereby the cultural life and national sentiment of German minori-
ties, was the root of their entire cultural policy.21 These schools were
particularly needed in Eastern and Southeastern Europe, where German
minorities struggled to preserve their rights in the face of nationaliza-
tion policies by the new successor states to the Habsburg and Russian
Empires.22 By funding German schools, Freytag and Stresemann hoped
to preserve the linguistic and cultural identity of Germans living in Tran-
sylvanian Romania, the Danube basin in Yugoslavia, the Sudetenland in
Czechoslovakia, the Western and Baltic regions in Poland, and Alsace-
Lorraine in France. The war had closed many of these schools, but by
the late 1920s the Cultural Department had made significant headway
in rebuilding them not just in Central Europe, but throughout the world.
To supplement its school policy, the Foreign Office also gave generous
financial support to the German Foreign Institute and the Association
for Germans Abroad, two semi-private organizations charged with main-
taining the cultural heritage of German minorities living abroad. Both
organizations had strong conservative elements within them who hoped
to use German minorities to destabilize the new states of Central Europe.
Yet during the 1920s the Foreign Office closely monitored their work to
avoid international incidents.23
For the Foreign Office and for many intellectuals the other main goal of
cultural policy was to raise Germanys standing (Weltgeltung) in the eyes
of other nations, in general terms. The German parliamentary deputy
and professor Georg Schreiber, one of Weimars most outspoken propo-
nents of cultural diplomacy, argued that Germany needed to do more
than simply secure its share on the cultural world market, rather it must
re-conquer what it has lost since 1914. Since the war, he warned, pro-
tectionism against German ideas and values had prevented Germany
from reclaiming its rightful recognition as a world leader in cultural and
intellectual production. Germany needed a proactive policy to reclaim its
21 Hans Freytag, Uber deutsche Kulturpolitik im Ausland, Deutsche Rundschau 55/11,

in 61124, Kulturabteilung, PAAA; Duwell, Der Grundung der Kulturpolitischen
Abteilung, 51; Circular to all Missions from Stresemann from January 31, 1928,
70163, Buro Staatssekretar, PAAA.
22 In Romania, for instance, financial support for German schools deteriorated after 1918
when the land reforms reduced a traditional source of communal funding. The situation
was better for Germans living in the Vojvodina and Banat regions of Yugoslavia, less
so in Slovenia. Zeljko Sevic, The Unfortunate Minority Group Yugoslavias Banat
Germans, in Wolff, German Minorities in Europe, 14364; Konig, Die Deutschen In
Rumanien seit 1918, 25163; see also Komjathy and Stockwell, German Minorities and
the Third Reich.
23 Duwell, Deutschlands auswartige Kulturpolik, 12452, 16090; Duwell, Der Grundung
der Kulturpolitischen Abteilung, 59.
lost prestige.24 Toward this end the Foreign Office funded organizations
like the Archeological Institute in Rome and various foreign branches of
the Kaiser Wilhelm Gesellschaft for science.25 And in conjunction with
Adolf Morsbach from the Prussian Ministry for Science, Art, and Edu-
cation, the Foreign Office established the German Academic Exchange
Service (DAAD) and the Humboldt Foundation to facilitate academic
exchange with the countries of Western Europe and North America.26
While these two institutions advertised themselves as agents of interna-
tional cooperation, the latter had a distinctly political undertone, seeking
out students who were friendly to Germany, and who they could expect
to be politically useful upon returning to their home country.27
What intellectuals like Becker, Schreiber, and Morsbach downplayed,
however, were the economic benefits that would accrue from cultural
diplomacy. Becker hoped to move beyond the conception that he thought
had characterized cultural diplomacy before 1914, namely, that it was
merely a graceful appendage to mercantile exchange.28 Indeed, before
the war one of the driving motivations for cultural policy had been its
economic utility. Paul Rohrbach, Ernst Jackh, and their circle of liberal
imperialists were attracted to cultural diplomacy because they believed
the spread of German culture would open new sales markets in foreign
lands. For them it was an important component of Germanys emerging
Weltpolitik: the Wilhelmine Empire would exercise global influence not
through its military prowess or the formal conquest of colonies, but
rather through the export of its culture and its products. And their ideas
contained a distinct imperial mentality: because Germany possessed a
superior culture and superior products it had the obligation to share
this with the world, particularly in Eastern Europe, and raise these less-
civilized nations up to the level of Germany. Such a mission was, in their
minds, befitting a world power.29
By the end of the 1920s a growing number of businessmen and intellec-
tuals returned to this instrumental approach to cultural diplomacy, which
found an institutional base in Saxony. This regions heavy dependence
on foreign trade made its commercial elites more open to unorthodox
24 Georg Schreiber, Internationale Kulturarbeit: Deutchlands Aufgaben, Germania 295

(June 28, 1928), in 61124, Kulturabteilung, PAAA.
25 Freytag, Uber deutsche Kulturpolitik im Ausland; Adolf Morsbach, Gliederung der
Auswartigen Kulturpolitik, Hochschule und Ausland: Monatsschrift fur Wissenschaft und
kulturelles Leben 10 (1932), 110.
26 Laitenberger, Akademischer Austausch; DAAD-Forum 7, Der Deutsche Akademische Aus-
tauschdienst 1925 bis 1975 (Bonn-Bad Godesberg: DAAD, 1975).
27 Laitenberger, Strukturprobleme der auswartigen Kulturpolitik, 77.
28 Duwell, Der Grundung der Kulturpolitischen Abteilung, 47.
29 Kloosterhuis, Friedliche Imperialisten.
116 German power
strategies of export promotion. Beginning in 1927 the Association of

Saxon Industrialists (VSI), the regions leading industrial organization,
argued that next to a strong and clever business advertising that was
adapted to foreign tastes, Germany needed an extensive cultural pub-
licity to improve sales abroad. German books, press, and especially the
new medium of film could present foreigners with a proper image of
Germany, overcome lingering hostility from the war, and ultimately make
people receptive to purchasing German products.30 They also stressed
the importance of educating future merchants and businessmen in for-
eign languages and cultures. Merchants who could thoroughly under-
stand the languages, customs, tastes, and economic conditions of their
local market were surprisingly scarce. In looking to the future, the VSI
argued that, in many cases, students studying abroad can become cul-
tural messengers of the highest economic value.31 In 1929, with the
help of Walther Hoffmann, the VSI formed an eighteen-person commit-
tee for cultural understanding that outlined concrete steps to improve
Germanys cultural diplomacy. These included holding lectures abroad
about German cultural and economic achievements; providing informa-
tion to the foreign press about German technology; organizing cultural
and artistic exhibits; facilitating more study trips between Germany and
foreign states; and supporting German cultural centers and scholarly
institutions abroad.32 In a circular in 1930 outlining the VSIs policy
ideas to Saxonys regional government, next to a reduction in taxes the
VSIs representatives demanded a more active cultural publicity as a way
to raise exports. Hoffmann himself became the public figurehead for this
movement, publishing articles in a variety of Saxon newspapers and other
regional commercial journals like Ruhr und Rhein.33
Although the VSI did not focus exclusively on any one part of the
world, again and again it highlighted the insufficient publicity and inad-
equate advertising in the Balkans.34 And for good reason: by the late
30 See, for example, the articles in Sachsische Industrie, January 1, 1927, Kultur-
propaganda und Wirtschaftspropaganda; May 19, 1928, Die weltwirtschaftliche
Durchbildung der kunftigen deutschen Wirtschaftsfuhrer; March 2, 1929, Die
Kulturpropaganda der Vereinigten Staaten; March 23, 1929, Kulturpropaganda als
Grundlage der Wirtschaftspropaganda.
31 Die weltwirtschaftliche Durchbildung der kunftigen deutschen Wirtschafts-
fuhrer, Sachsische Industrie, May 19, 1928.
32 Hoffmann to Uhlich of Min. des Kultus, June 4, 1929, 15675, 11125 Min. des Kultus,
SSAD.
33 Report of meeting between VSI and the Saxon Economics Ministry, Sachsiche Industrie,
January 4, 1930.
34 Unzureichende Werbung auf dem Balkan and Die Industrialisierung auf dem
Balkan, Sachische Industrie, November 24, 1928 and May 26, 1928.
1920s Yugoslavia and Romania were gradually becoming important des-

tinations for Saxonys capital goods and machinery. Yet with virtually no
German financial presence in the Balkans and with an underfunded con-
sular system, Saxonys exporters needed to find alternative methods to
win market shares in Southeastern Europe, hence their interest in cultural
diplomacy.35 The widespread use of German as a business language, the
large number of German minorities, and Germanys geographical prox-
imity led economists to believe this region would be inherently receptive
to German cultural publicity and advertising in general.36 But Saxon
thinkers went one step further, believing their own region possessed a
special affinity with Southeastern Europe generated by the magnetism
of the Leipzig trade fair, which attracted hundreds of merchants from
Romania, Yugoslavia, Hungary, and Bulgaria each year.
The French threat

The desire for a more coherent cultural diplomacy in Southeastern
Europe was not unique to Saxony. Since 1927 at the latest, anxiety was
mounting in the Foreign Office and among its officials in the Balkans that
France was vastly outperforming Germany in cultural work.37 Although
the Foreign Office during these years was pushing for closer economic
ties with France, in the form of a trade treaty and in discussions about
a customs union, Franco-German relations were a delicate balance and
Weimars leaders wanted to prevent France from gaining any advantage in
Southeastern Europe. Leading journalists and the directors of Germanys
industrial associations, moreover, worried that French cultural predom-
inance could undermine Germanys economic relations in the region.
Indeed, Southeastern Europe had become a zone of cultural competi-
tion as well as an economic and political one.38 More than any other
35 Bramstedt, Sachsischen Industriewirtschaft, 56, table 23.

36 Richard Mai, Sudosteuropa und die deutsche Kultur: ein Beitrag zur internationalen
Kulturpolitik, in H. Konen and J. P. Steffes (eds.), Volkstum und Kulturpolitik: eine
Sammlung von Aufsatzen Gewidmet Georg Schreiber zum Funfzigsten Geburtstage (Cologne:
Gilde-Verlag, 1932).
37 Paris Embassy to Berlin Foreign Office, April 11, 1930, 61187, Kulturabteilung, PAAA;
Koster to the Berlin Foreign Office, August 30, 1929, 61152, Kulturabteilung, PAAA;
Bulgarian ambassador to the Foreign Office from November 28, 1927, 61139, Kultur-
abteilung, PAAA.
38 Mitteleuropa-Institut to Berlin Foreign Office, January 25, 1930, 65830/film 7964, Kul-
turabteilung, PAAA; Selig, Auswartige Kulturpolitik; for a contemporary discussion
of French cultural diplomacy see Remme and Esch, Franzosische Kulturpropaganda, and
Konen and Steffes, Volkstum und Kulturpolitik; Franz Thierfelder, Der Balkan als kultur-
politisches Kraftfeld, zwischenstaatliche Propaganda und geistiger Austausch in Sudosteuropa
(Berlin: H. Stubenrauch, 1940).
118 German power
Western European power, France pursued cultural work to actively rein-

force its diplomatic and financial relations with Yugoslavia and Roma-
nia. The press, educational exchanges, and language promotion were
the three primary fields where German intellectuals and officials at the
Foreign Office feared French advances.
In the first half of the 1920s one foreign press agency controlled the
flow of most economic and political news into Yugoslavia. Avala, a sub-
sidiary of the French wire service Havas, had acquired concessions to
provide Yugoslavias official news service with almost all of its wire-fed
information.39 Although Wolffs Telegraph Bureau, the largest wire ser-
vice in Germany, made several efforts to break into this market, these and
other attempts to provide news directly from Germany remained largely
unsuccessful before 1927.40 As Germanys consul in Zagreb lamented,
the news material for Yugoslavias press comes predominantly from
French sources.41 In 1927 Yugoslavian leaders realized the disadvan-
tage of relying too heavily on a single French wire service. When Italy
signed a defensive treaty in November 1926 with Yugoslavias south-
ern neighbor, Albania, it triggered a diplomatic crisis and raised tensions
across the Adriatic. Belgrade responded slowly and only tested its military
mobilization capabilities in February 1927. Havas portrayed the conflict
in a negative light for Yugoslavia, much to the dismay of the Yugoslavian
government. In response, Belgrades press office opened space for more
news outlets and within the year ZETA, a new German-friendly wire ser-
vice, was founded. HavasAvala, though, remained Yugoslavias largest
provider.42
Press problems, however, were not confined to the wire service. In both
Romania and Yugoslavia the circulation of German newspapers in the
capital cities was quite low. A significant German-language newspaper
only became a regular feature of the press landscape in Bucharest in
39 German charge daffaires in Belgrade to Berlin Foreign Office, August 6, 1923,

Belgrade charge daffaires to Berlin Foreign Office, September 9, 1924, article clippings
from Yugoslavian paper Politika from March 29, 1923, in 73189, Politisches Abteilung,
PAAA.
40 German charge daffaires in Belgrade to Berlin Foreign Office, August 6, 1923, let-
ter from Max Kandt, founder of ZETA, to Zagreb consulate, October 11, 1927,
73189, Sonderreferat Wirtschaft, PAAA; Dieter Basse, Wolffs Telegraphisches Bureau
1849 bis 1933: Agenturpublizistik zwischen Politik und Wirtschaft (Munich: K. G. Saur,
1991).
41 Report from Zagreb consulate to Berlin, October 22, 1927, 73189, Sonderreferat
Wirtschaft, PAAA.
42 Letter from Kandt to Zagreb consulate, October 11, 1927, Zagreb consul to Berlin
Foreign Office, October 22, 1927, 73189, Sonderreferat Wirtschaft, PAAA; Michael
Brecher and Jonathan Wilkenfeld, A Study of Crisis (Ann Arbor: University of Michigan
Press, 1997), 247.
1929.43 Before that year German papers circulated by and large only
in the provinces: Transylvania in Romania and the region around Novi
Sad and Zagreb in Yugoslavia.44 And for information flowing in the other
direction, before 1929 there were no publications in Germany devoted to
economic or cultural news in Southeastern Europe. German merchants
with an interest in the Balkans had either to rely on the general economic
news outlets like Industrie- und Handelszeitung or Das Nachrichtenblatt
fur Ausfuhr und Einfuhr, which rarely covered the Balkans in depth, or
subnational newspapers from Yugoslavia and Romania, like the Zagreber
Morgenblatt or the Siebenburgische Handelszeitung.
Beyond their concerns about the press in Yugoslavia and Romania,
German diplomats and many publicists worried that Weimar was losing
its attraction for the students and academics of these two nations. Stu-
dents represented the next generation of leaders, particularly among the
developing economies of Southeastern Europe where university atten-
dance, while growing, was still quite small as a proportion of the overall
population in comparison with Western Europe.45 During the 1920s
more students studied abroad than ever before, and student exchange
was fast becoming a flagship program of cultural diplomacy among all
the Western European states and America. On the eve of the World War
nearly 30,000 academics in Europe and North America studied outside
their home country. Germany was the leading destination, attracting
some 7,500 students in 191314. France and Switzerland followed with
6,187 and 4,750 foreign students respectively.46 These figures for Ger-
many had more than tripled since 1871, and by 1914 some 200 students
from Romania and 75 from Serbia annually enrolled at German uni-
versities.47 Yet since 1918 this growth trend had stalled for Germany.
Following the stabilization of Germanys currency in 1924 the number
of foreign students in Germany stagnated, enrollment peaking in 1926
and declining thereafter as German universities became too expensive in
comparison with those of Great Britain, France, and Italy.48 By 193031
roughly 70,000 students studied abroad, more than double the prewar
43 German charge daffaires in Bucharest to Berlin, December 26, 1922 and Bucharest to
Berlin, October 22, 1929, 73670, Politisches Abteilung, PAAA. On German newspapers
in Yugoslavia see German charge daffaires in Belgrade to Berlin, April 16, 1923,
Belgrade Embassy 41/1, PAAA; Ullstein company to Belgrade Embassy, October 27,
1924, Belgrade Embassy 40/3, PAAA.
44 German Legation in Belgrade to Augsburg chamber of commerce, June 1, 1926, Bel-
grade Embassy 40/4, PAAA.
45 Lampe, Balkans into Southeastern Europe, 97104.
46 Herbert Scurla, Umfang und Richtung der zwischenstaatlichen Studentenwanderung
(Wurzburg: Triltsch, 1933), 123.
47 Ibid., 38. 48 Duwell, Deutschlands auswartige Kulturpolitik, 17080.
120 German power
figure, but now France was the primary destination with over 17,000 for-
eign students enrolled in its universities. In 1913 one in seven students in
France were foreigners; in 1928 that had risen to almost one in four.49 In
Germany there were just 8,485 foreign students, only 1,000 more than
in 1913.50 In the estimation of German contemporaries, moreover, the
French university system was more effective at inculcating an apprecia-
tion of French culture. German universities were highly competitive in
training students in specific disciplines, especially the sciences. But all too
often foreign students returned to their country, whether in Southeast-
ern Europe or Africa, drinking German beer, ranting about the Treaty
of Versailles, and blaming the war on the Jews rather than extolling the
work of Schiller, Goethe, or Humboldt.51
Germanys relative decline as a scholarly destination during the 1920s
was even more dramatic in the case of Balkan students. Indeed, the most
notable rise in foreign students attending French universities came from
the countries with which France had some form of political alliance:
Yugoslavia, Romania, Poland, and Czechoslovakia.52 While Germany
and France had comparable numbers of students from Romania and
Yugoslavia in their universities at the end of the German inflation, by
1931 the situation had shifted dramatically in Frances favor. Romanians
studying in France numbered 2,722, along with 475 Yugoslavians, up
from 645 and 423 in 1924.53 Over one-half of all Romanian students
going abroad went to France. In contrast, in 1931 only 661 Romanian
students, most of whom were ethnic Germans, and 179 Yugoslavian
students attended German universities.54
One reason for Frances success was its own inflation and the subse-
quent devaluation of the franc, which cheapened the cost to foreigners
of attending French universities. Yet in the 1920s France also devoted
more attention and funding to attract students from Eastern Europe than
did Germany. The cultural treaties signed between France and Romania
and Yugoslavia in 1919 and 1920 provided the legal framework for French
teachers to work at institutions in Southeastern Europe, and France
recognized diplomas granted in both countries.55 In conjunction with
the Yugoslavian government, France gave financial aid to roughly 400
Yugoslav students to study at French universities each year, annually
49 Paris Embassy to Berlin Foreign Office, April 30, 1930, 61187, Kulturabteilung, PAAA.
50 Scurla, Richtung der zwischenstaatlichen Studentenwanderung, 125.
51 Article in Die Literarische Welt 5/46 (November 15, 1929), 61124, Kulturabteilung,
PAAA.
52 Paris Embassy to Berlin Foreign Office, April 30, 1930, 61187, Kulturabteilung, PAAA.
54 Ibid., 125. 55 Remme and Esch, Franzosische Kulturpropaganda, 74.
spending over half a million francs on this by the mid 1920s.56 In addi-
tion, those students returning from study in France were well supported
by a network of cultural clubs that promoted their continued interest in
French culture and language.57 In contrast, Weimars charge daffaires in
Belgrade, Adolf Koster, reported only after great effort did he succeed
in raising the number of Yugoslavian fellows of the Humboldt Founda-
tion from 1 to 4.58 In Romania the situation differed, the Foreign Office
having lower expectations given the linguistic and historical connections
between France and Romania. Although more Romanian than Yugosla-
vian students came to study in Germany, the vast majority of these were
German minorities from Transylvania. As in Yugoslavia, France out-
spent Germany, giving out roughly 700,000 francs annually to finance
Romanians wishing to attend French universities.59
In the field of language promotion French institutions, especially semi-
private ones like the Alliance Francaise, were equally proactive. After
1918 language instruction had become a heated topic in Romania and
Yugoslavia, where each state was seeking to strengthen its national com-
munity against minorities with their own identities and potentially sep-
aratist inclinations. Both governments regulated language instruction in
primary schools: since 1915 French was the only foreign language made
mandatory in middle and high schools in Romania. In Yugoslavia the
degree of regulation depended on the region: in Slovenia, for instance,
it was harsher for Germans than in Vojvodina.60 The French cultural
treaties permitted France to send French teachers to schools throughout
Yugoslavia and Romania. The latter boasted Frances largest mission,
encompassing some 3040 teachers and eight professors who taught
language courses to over a thousand students in fourteen cities.61 And
instruction in French went beyond the local school systems. In 1929
the Alliance Francaise spent over 5 million francs on its programs, the
bulk of which supported their branches outside France. In Southeastern
56 Ibid., 64; Paris Embassy to Berlin Foreign Office, April 30, 1930, 61187, Kultur-
abteilung, PAAA; Ischboldins report to Paris Embassy, November 28, 1929, 61152,
Kulturpolitik, PAAA.
57 German Legation in Belgrade to Berlin, August 30, 1929, 61152, Kulturabteilung,
PAAA.
58 Koster in Belgrade to Berlin, August 30, 1929, 61152, Kulturpolitik, PAAA.
59 Remme and Esch, Franzosische Kulturpropaganda, 64; Scurla, Richtung der zwischen-
staatlichen Studentenwanderung, 88105.
60 President Jorga changed the Romanian law in 1931, adding English and German lan-
guage instruction. Lecture by Prof. Bondescu at the Congress of Romanian Germanis-
tics in Bucharest, June 19, 1934, 65831/film 7968, Kulturabteilung, PAAA; Hopfner,
Sudosteuropapolitik, 31129.
61 Remme and Esch, Franzosische Kulturpropaganda, 75.
122 German power
Europe it maintained French cultural institutes in Skoplje, Split, Bel-

grade, Zagreb, Sarajevo, Bucharest, Temesvar, Jassy, Sofia, Bourgas, and
Stara-Sagora.62
The Foreign Office and German intellectuals saw this steady advance
of French cultural work as the opening salvo in the battle for the orien-
tation of the future generation of Southeastern Europeans. In a widely
read study from 1927, Karl Remme and M. Esch maintained there was
an overt connection between French cultural and diplomatic policies:
Frances treaties explicitly sought to divest the Serbian youth from the
influence of German universities and allow the military alliance to live
on in a cultural-political understanding.63 Their views on French cul-
tural diplomacy were alarmist, and should be read accordingly, yet these
two authors were not outliers. Germanys charge daffaires in Belgrade,
Koster, feared that more and more French was displacing German
as the language of merchants as well as students, especially among
the Serbs.64 And leaders of the German Academy, an organization in
Germany that paralleled the work of the Alliance Francaise, expressed
similar anxieties: France has at its disposal state and private propaganda
organizations, the equivalent of which Germany has nothing remotely
comparable.65
Moreover, German officials and intellectuals working at the Foreign
Office feared the commercial dimension to French cultural policy. In their
work, Remme and Esch highlighted the mission statement of the Alliance
Francaise, which aspired for all of the clients of the French language to
become a client of French products.66 And by 1929 experts both within
and outside the Foreign Office believed Germanys lackluster cultural
work was hurting its exports to Southeastern Europe. The Yugoslavians
and Romanians studying in France, the proliferation of French book
stores, and the spread of the French language, they worried, fostered a
keen interest in the fashion and the finished goods of Paris.67 Culture
62 Rapports du Secretaire general et du Tresorier general sur la situation morale et

financiere, from Alliance Francaise, March 26, 1930, 61187, Kulturabteilung, PAAA.
63 Remme and Esch, Franzosische Kulturpropaganda, 3.
64 German charge daffaires in Belgrade to Berlin Foreign Office, November 23, 1928,
61195, Kulturabteilung, PAAA.
65 Comment by Major Fehn, director of the German Academy, Mittel und Wege
franzosische Kulturpropaganda, Frankfurter Kurier 112, April 3, 1929.
66 Tout client de la langue francaise devient un client des produits francais. Remme and
Esch, Franzosische Kulturpropaganda, 3.
67 Schmidtlein on economic relations with Yugoslavia, April 21, 1927, 43085, R 901,
BA. See also Boris Ischboldins report to the Prussian Ministry of Science, Art, and
Education. From his travels in France and Southeastern Europe, Ischboldin con-
cluded that, much too little cultural publicity is done by Germany. While the French
have established scholarly institutes in Warsaw, Prague, and Belgrade, and while Italy
was becoming intertwined in the quest by German business to carve out

market shares in Southeastern Europe.
Forming the Mitteleuropa-Institut and the Institut fur

Mittel- und Sudosteuropaische Wirtschaftsforschung
To catch France in the cultural race, in 1929 Koster suggested that the
Foreign Office organize a Zeppelin trip through Southeastern Europe.
Just weeks before a French pilot had completed a transatlantic flight in
the Yellow Bird, which would soon be making a triumphal tour from Paris
through the Little Entente: Yugoslavia, Czechoslovakia, and Poland. A
Zeppelin trip, Koster hoped, would not only draw publicity away from the
Yellow Bird, it would display German technology to the local populace,
most of whom had never before seen a flying hydrogen aircraft. Koster
was convinced the trip would create a considerable positive value that
we would tangibly notice in our politics and economics more than any
of the series of activities we have done up until now.68 The risk of a
flaming conflagration may have been too high, or the payoff too low.
Whatever the case, more practical minds prevailed, and instead of the
state, private organizations took the lead in promoting German culture
in Southeastern Europe.
The effort had actually begun two years earlier. Upon returning from
his study trip to Southeastern Europe, on December 3, 1927, Walther
Hoffmann met with Georg Gothein of the Mitteleuropaische Wirtschaft-
stag, the mayor of Dresden Dr. Bernhard Bluher, and representatives
from Saxonys Cultural and Economics Ministries, the Association of
Saxon Industrialists (VSI), and the Dresden chamber of commerce to
discuss the creation of an institute to study the economies of Southeast-
ern Europe.69
Interest for such an institute came from outside Saxony as well. The
directors of the Mitteleuropaische Wirtschaftstags German group in
Berlin, Gothein and Dr. Herbert Strencioch, were concerned that their
recently established an Italian institute, German scholarship remains unrepresented in

all of the Slavic states, which will cause German industry great losses. Report from
November 27, 1929, 61152, Kulturabteilung, PAAA.
68 Koster to the Berlin Foreign Office, August 30, 1929, 61152, Kulturabteilung, PAAA.
69 Dr. Georg Gothein (18571940) was the German Treasury Minister in 1919, member
of the Reichstag from 1920 to 1924 with the German Democratic Party, and presidential
member of the Foreign Trade Association; Dr. Bernhard Bluher (18641938) was a
member of the German Peoples Party and mayor of Dresden from 1915 to 1931;
meeting protocol, December 3, 1927, 42995, R 901, BA.
124 German power
own organization did not have reliable connections with the economic
elites of Southeastern Europe. The Mitteleuropaische Wirtschaftstag had
originated as a cooperative, transnational lobby group based in Vienna
but with offices in Berlin, Budapest, and elsewhere to promote the eco-
nomic integration of Central Europe. As one of their directors pointed out
at a board meeting in early 1928, though, connections with their mem-
bers from the Balkans flowed exclusively through the organizations head
offices in Vienna. Only they [Vienna] can take up direct contact with the
individual sections. The only remaining possibility . . . of direct contact
with the business community in Southeastern Europe . . . therefore, is
the foundation of the institute.70 Tensions among the national sections
of the Mitteleuropaische Wirtschaftstag, moreover, had been increasing
since 1927 when a contingent under the leadership of Elemer Hantos,
former Hungarian Secretary of Finance, began campaigning to exclude
Germany from Central European economic agreements and institutions.
Hantos hoped to define Central Europe Mitteleuropa as the successor
states to the Austro-Hungarian Empire. Toward that end he founded
Central European Institutes, first in Vienna and then later in Brunn and
Budapest, to promote his vision for economic collaboration among the
Danubian states.71 The German Section, led by Gothein, a deputy of
the liberal-leaning German Democratic Party and former minister of the
German Treasury, believed the best method to thwart Hantos would be
to found a similar institute on German soil.
Despite Gotheins connections to a variety of German industrialists
in Berlin, Breslau, and the Ruhr, and Hoffmanns contacts with Saxon
exporters, their efforts to form a Mitteleuropa-Institut in Germany at
first encountered serious obstacles. The initial design, drafted by the co-
director of the German Section Herbert Strencioch, envisioned an aca-
demic institute that would study economic problems in Central Europe.
These ranged from transportation restrictions along the Danube to
70 Memorandum from Strencioch to German Section, October 27, 1927, report from
German Section board meeting, November 29, 1927, and report from German Section
board meeting, June 22, 1928, quotation from the last document, 49 Mitteleuropaische
Wirtschaftstag, N 1006 Gothein, BAK; Hoffmann to Foreign Office, October 24, 1927,
71 Gothein and Hantos engaged in a series of published debates about who should be
included in the rubric Central Europe. Letter from German Section, May 7, 1929,
p. 63, 50 Mitteleuropaische Wirtschaftstag, N 1006 Gothein, BAK; on Hantos see
Stirk, Ideas of Economic Integration in Interwar Mitteleuropa, 927; Nils Muller,
Die Wirtschaft als Brucke der Politik: Elemer Hantoss wirtschaftspolitisches Pro-
gramm in den 1920er und 1930er Jahren, in Carola Sachse (ed.), Mitteleuropa und
Sudosteuropa als Planungsraum: Wirtschafts- und kulturpolitische Expertisen im Zeitalter
der Weltkriege (Gottingen: Wallstein Verlag, 2010), 87115.
discriminatory trade practices between states.72 The Foreign Office and

the Interior Ministry, however, were concerned that this would duplicate
work already done by the recently founded Eastern Area Studies institutes
in Breslau and Berlin. Furthermore, the Foreign Office was reluctant to
endorse private initiatives because they feared these would burden Ger-
man industry with their frequent requests for financial contributions.73
Although the Foreign Office found Hantos to be potentially danger-
ous, its Central European experts believed Germany could better con-
front him by securing a stronger presence in his newly founded Vienna
institute.74
Hoffmann and Gothein also encountered troubles from another quar-
ter. In the spring of 1928 Kurt Wiedenfeld, a professor of political econ-
omy at the University of Leipzig, began working to open his own institute
to study the economies of Central and Southeastern Europe.75 Wieden-
feld, who had trained as an economist under Gustav Schmoller, came
to Leipzig in 1923 to take the chair of political economy and he became
quite active in Saxonys local business and government circles.76 As a pro-
lific academic he enjoyed high standing among his colleagues and within
the Foreign Office, where he had served as Germanys special envoy to
Russia in 1921.77 In April 1928 Wiedenfeld wrote to Saxonys Educa-
tion Ministry detailing his plans for an institute to study the economies of
Southeastern Europe using federal funds earmarked for border regions
and border issues Grenzlandsfonds. He wanted to make Leipzig the cen-
ter of area studies for Southeastern Europe. Leipzig, he argued, with its
historical connections to the Balkans was the most suitable location for
72 From the beginning Strencioch wanted to make the results of the [institutes] research
and scholarship accessible to the government authorities and business communities.
Memorandum from Strencioch, p. 77, 42994, R 901, BA.
73 Reinhard Frommelt, Paneuropa oder Mitteleuropa? Einigungsbestrebungen im Kalkul
deutscher Wirtschaft und Politik, 19251933 (Stuttgart: DVA, 1977).
74 Lerchenfeld in Vienna to Berlin Foreign Office, March 16, 1928, Lerchenfeld to Berlin
Foreign Office, May 3, 1928, and internal Foreign Office memo from March 30, 1928,
42994, R 901, BA.
75 Wiedenfeld to Saxonys Education Ministry, April 2, 1928, 10273/34, 11125 Min. des
Kultus, SSAD; internal Foreign Office report to State Secretary and Foreign Minister,
February 13, 1929, pp. 1014, 42995, R 901, BA.
76 Personal Akten Kurt Wiedenfeld 1062, Universitatsarchiv, Leipzig (UAL); University
faculty to the Cultural Ministry, August 5, 1922, and Education Ministry to the Eco-
nomics Ministry, June 18, 1931, 10281/311, Wiedenfelds dossier, 11125 Min. des
Kultus, SSAD.
77 Report from Phil. Fakultat of Leipzig on Wiedenfeld, May 11, 1933, 10281/311, 11125
Min. des Kultus, SSAD.
126 German power
such an institute.78 Not only had the university been founded by emigres
from Prague in the early fifteenth century, as one of Germanys largest
institutions of higher education Leipzig already attracted many students
from Austria, Czechoslovakia, Hungary, and the Balkans.79
Leipzig, moreover, possessed a prior claim to Balkan studies. During
the World War a group of intellectuals, including Leipzigs own Eduard
Spranger, had started a movement to found area studies programs at uni-
versities across Germany. At the time few programs existed in Germany
that brought together a cross-disciplinary mixture of academics to study
a particular region of the globe. Spranger, Carl Heinrich Becker, and
the other academics who led this push intended to facilitate the educa-
tion of Germans in interaction with other peoples, and give Germany
an edge in the scholarly penetration of different regions of the world.
Munich would be the center for Southern Europe, Cologne for France,
Hamburg for South America, Breslau for Eastern Europe, Konigsberg
for the Baltic. Leipzig, already home to scholars of the languages and
cultures of Romania and Bulgaria, was allocated Southeastern Europe
as its focus, and in 1917 established the short-lived Sudosteuropa- und
Islam-Institut.80
The competition between Dresden and Leipzig to house a new schol-
arly institute led to tension at first, as both groups struggled to secure
financial assistance from Saxonys economics and education ministries as
well as from Germanys Foreign Office, Economics Ministry, and Interior
Ministry. Yet after several meetings, by the summer of 1929 the initial
rivalry subsided as Wiedenfeld, Hoffmann, and Gothein clarified the
goals of their respective organizations. Wiedenfeld would pursue pure
scholarly work while Gothein and Hoffmanns focus would lie in the
field of cultural publicity.81 With 150,000 RM in federal funding and
other support from Saxonys Education Ministry, Wiedenfeld purchased
a building for his institute and began constructing its library of scholarly
publications as well as statistical information about the Balkans.82 In the
78 Wiedenfeld to Saxonys Education Ministry, April 2, 1928, report sent by Wiedenfeld

to Saxonys Education Ministry, December 11, 1933, 14853, 10273/34, 11125 Min.
des Kultus, SSAD.
80 Middell, Weltgeschichtsschreibung, 496501; Hans A. Munster, Das neue Leipziger
Sudost-Institut, Leipziger Vierteljahresschrift fur Sudosteuropa 1, no. 1 (1937), 7687;
Gross, Sudosteuropa-Forschung in Deutschland.
81 Report from Ulich on meeting with Interior Ministry, July 31, 1929, report on discussion
between Wiedenfeld and Hoffmann, August 5, 1929, 15675, 11125 Min. des Kultus,
SSAD; minutes from Mitteleuropaische Wirtschaftstag meeting from October 4, 1928,
p. 21, 6139, R 8119F, BA.
82 Report from Wiedenfeld, November 18, 1930, p. 141, 10273/34, 11125 Min. des
Kultus, SSAD.
fall of 1928 the Institut fur Mittel- und Sudosteuropaische Wirtschafts-

forschung (IMSWf) opened its doors to its first class, which included a
mixture of German citizens along with German minorities and citizens
of Southeastern Europe.83
By early 1929, then, Hoffmann and Gothein had settled on founding
a publicity organization that would concentrate on economic relations
with the non-German nationalities of Southeastern Europe.84 With this
new focused agenda, Hoffmann and Gothein reinvigorated their negoti-
ations with the Foreign Office and the Economics Ministry for support.
Their new proposal fell on fertile ground among Germanys government
ministries, where the growing anxiety over French cultural influence in
the Balkans had struck a deep chord. Economics-driven cultural diplo-
macy, moreover, overlapped with Stresemanns larger project of reestab-
lishing Germanys place in Europe through economic integration and
intra-European cooperation.85 Hoffmann, in his meetings with officials
from the Foreign Office, highlighted how his study trips had generated
support for the institute in Southeastern Europe as well as in Germany.
The economic elites in the Balkan states, he argued, saw the establish-
ment of an institute that served the purposes of cultural understanding as
urgently needed and would welcome it.86 Both the VSI and the mayor
of Dresden directly lobbied Stresemann, who had personal ties to Sax-
ony from his time working as a corporate lawyer for the VSI before 1914.
With Stresemanns support Hoffmann formally established the institute
in July 1929.87 Although the Foreign Office provided only limited finan-
cial contributions, it agreed to help fund Hoffmanns periodic research
trips.88
Despite the involvement of Berlin-based economists from the German
Section, the Mitteleuropa-Institut, like Wiedenfelds in Leipzig, was pri-
marily a Saxon organization. The composition of its board of directors
and its funding sources reflected the keen interest that Saxon business
83 Wiedenfeld to Saxonys Education Ministry, April 2, 1928, 10273/34, 11125 Min des
Kultus, SSAD.
84 German Section to Windel of Foreign Office, December 21, 1928, p. 75, 42995, R 901,
BA.
85 Niedhardt, Aussenminister Stresemann; Kruger, Aussenpolitik Gustav Strese-
manns.
86 German Section to Windel of the Foreign Office, December 21, 1928, p. 75, 42995, R
901, BA.
87 Bluher received Stresemanns whole-hearted endorsement of the MEI in August 1929,
exchange of letters on July 20 and August 8, 1929, pp. 11113, and office of Dresden
state capital to Saxon Education Ministry, July 22, 1929, 15675, 11125 Min. des Kultus,
SSAD; letter from VSI to Stresemann, December 21, 1928, p. 96, 42995, R 901, BA.
88 Report on meeting between representatives of the Foreign Office and the MEI, February
23, 1929, 42995, R 901, BA.
128 German power
circles had in cultural diplomacy. The German Section held a few of the
fifteen board positions in 1929, but Saxon notables dominated. The VSI,
the director of the Leipzig trade fair Raimund Kohler, the Dresden cham-
ber of commerce, Mayor Bluher from Dresden, the University of Leipzig,
Saxonys Cultural and Economics Ministries, and even Kurt Wiedenfeld
of the IMSWf all held positions on the board and provided much of the
initial funding, which quickly grew to 4050,000 RM annually.89
The economics of cultural diplomacy and area studies

Hoffmann quickly proved to be the driving force behind the
Mitteleuropa-Instituts vision for cultural diplomacy. By the end of 1929
he laid out a theory justifying the institutes work, based on an inherent
connection between culture and economics. In a speech before the Mit-
teleuropaische Wirtschaftstag in Berlin he argued that the best method of
strengthening ties between businesses and their customers was to forge
personal and cultural connections. Only a close, intimate knowledge of
the populations in Southeastern Europe, he argued, would make fine-
tuned, effective publicity and advertising possible.90
Our economy and its revival would have been unthinkable without the develop-
ment of our culture. This forms, in a way, the foundation on which the economy
is built and can be further developed. . . . The foreign business associate already
has a certain understanding for Germany, its products, and its character. And if
we ask where he acquired this appreciation so we will find, perhaps, that he stud-
ied in Germany, perhaps, that he attended a German school abroad, perhaps,
that he reads German newspapers and books, in short, contingencies of varied
nature, but facts which are always built on a foundation that has nothing directly
to do with the economy or with economic matters.91
Hoffmann departed from the Foreign Offices focus on German minori-

ties abroad and appropriated the French method, arguing that France
achieved its success by targeting citizens of Balkan states who were not
already immersed in French culture or language. Through organizations
like the Alliance Francaise and its student exchange, French cultural
diplomacy reached out to new target groups. It appealed to the entire
population, whereas until now Weimars cultural diplomacy had focused
almost exclusively on the closed, relatively small groups of Germans
89 Saxon Education Ministry to Saxony Economics Ministry, September 22, 1928,

10273/34, 11125 Min. des Kultus, SSAD; report on meeting with Wiedenfeld,
October 3, 1929, p. 150, 15675, 11125 Min. des Kultus, SSAD.
90 Hoffmann to the Foreign Office, October 4, 1927, 61139, Kulturabteilung, PAAA.
91 German Section board meeting, February 19, 1929, pp. 13342, 42995, R 901, BA.
who had settled in the Balkans.92 In the fall of 1929 Hoffmann embarked
on a promotional trip through Romania, Bulgaria, Yugoslavia, Hungary,
and Czechoslovakia to advertise this style of cultural diplomacy and the
new institute to local government officials, journalists, professors, and
businessmen.93
Over the next two years Hoffmanns initial contacts solidified into
an institutional network that would help overcome what he saw to be
the most urgent problem affecting GermanBalkan trade: the very poor
quality and limited exchange of economic and cultural news. In this he
was responding directly to the challenges of collecting and disseminating
reliable information that had hindered GermanBalkan trade since the
early 1920s. The small number of German daily newspapers and spe-
cialized business journals in Southeastern Europe, along with the slow
and ineffective functioning of Germanys own news service, put Ger-
man merchants at a disadvantage.94 With the help of his network, in
1930 Hoffmann founded the Mitteleuropaische Pressespiegel to translate
and collect economic articles in newspapers from across the Balkans
into a single weekly German-language publication.95 The institutes rep-
resentatives in Romania, Bulgaria, Turkey, Hungary, and Yugoslavia
often editors of German-language newspapers supplied the Pressespiegel
with weekly updates.96 The institute distributed the Pressepiegel to indi-
vidual firms, industrial associations, and the Foreign Office in Berlin
92 Hoffmann: the Mitteleuropa-Institut will appeal, according to the French method,

directly to the foreigners of non-German cultural groups. Confidential memo from
MEI to Saxon ministries, November 1929, p. 199, 15675, 11125 Min. des Kultus,
SSAD; Franz Thierfelder of the German Academy also criticized the Foreign Office for
focusing too much on Germans abroad. Michels, Von der Deutschen Akademie, 50.
93 Interior Ministry report, October 3, 1929, 65830/film 7963, Kulturabteilung, PAAA;
report on Hoffmanns trip, August 17, 1929, pp. 12645, 196, 15675, 11125 Min. des
Kultus, SSAD; report from Hoffmanns study trip from September 1929, Bucharest
Embassy 179, PAAA.
94 Report on Hoffmanns study trip from September 1929, Bucharest Embassy 179,
PAAA; Hoffmann to Min. Terdenge, June 30, 1930, 65830/film 7966, Kulturabteilung,
PAAA; report on founding of the MEI, May 30, 1930, Bucharest Embassy 179,
PAAA.
95 Discussion between representatives of the MEI and Leipzig trade fair, March 11, 1930,
p. 53, 15676, 11125 Min. des Kultus, SSAD; Mitteleuropa Pressespiegel, March 13, 1930,
8871, 10717 Auswartigen Angelegenheiten, SSAD.
96 They included Dr. Wurzinger of the Bulgarian Tageblatt and foreign correspondents for
newspapers in Germany, like Otto Muller-Neudorf of the Deutsche Tageszeitung in Berlin
and Egon Heymann of the Munchner Neuesten Nachrichten and the Berliner Borsen-
Zeitung. MEI to Terdenge, November 11, 1931, 65830/film 7966, Kulturabteilung,
PAAA; MEI report about Muller Neudorf, January 28, 1930, p. 276, 15675, 11125
Min. des Kultus, SSAD; MEI to German charge daffaires in Belgrade, July 2, 1931,
Belgrade Embassy 41/2, PAAA; report from Belgrade representative of MEI, February
25, 1932, p. 20, 8870, 10717 Auswartigen Angelegenheiten, SSAD.
130 German power
along with its missions in Romania, Bulgaria, and Yugoslavia. Hoffmann

claimed it acquired and delivered its information earlier than the other
general news sources used by German industry, like the Industrie- und
Handelszeitung.97 To supplement the Pressespiegel, Hoffmann formed a
press archive containing ninety-five newspapers and specialized jour-
nals from Southeastern Europe, which firms and researchers alike could
access in Dresden.98
In addition to news reporting, the Mitteleuropa-Institut entered the
field of direct export promotion, offering to assist German merchants
and even the larger industrial associations in their advertising and their
search for reliable agents in Southeastern Europe.99 As an advertiser,
Hoffmann developed an approach he thought would be most suited to
the variety of consumers in Southeastern Europe, which ranged from
rural peasants to urban elites and workers.
Every advertisement must be adapted to suit the psychology of the target people,
to accommodate their own tendencies, and to adjust to understand their ideas
and comprehend all of their idiosyncrasies. Only precise knowledge and long
experience in the country and with the people can guarantee rigorous advertising
in this sense. Following from these general principles, advertising can be fur-
ther specialized. From here it must be ascertained which individual institutions
(press, associations, organizations, schools, etc.) suit the general tastes of the
people . . . In this way, each advertisement abroad is more valuable and effective
the more it is conducted on an individual basis, because here schematization
achieves nothing.100
His guidelines were remarkably suited to the small and medium-sized

firms of Saxonys economy. Such smaller producers could more easily
modify their production to meet the local tastes and fashions than could
mass manufacturers of the Ruhr or Berlin. As Raimund Kohler, the direc-
tor of the Leipzig trade fair and a board member of the Mitteleuropa-
Institut, pointed out, flexibility in production was the strength of Sax-
onys smaller firms. Throughout 1930 Hoffmann put these principles to
work, collaborating with a cinema company in Temesvar to show German
97 Hoffmann to Terdenge, June 30, 1930, 65830/film 7966, Kulturabteilung, PAAA;

report from German charge daffaires in Bucharest, June 18, 1930, 65830/film 7965,
Kulturabteilung, PAAA.
98 MEI to Foreign Office, July 14, 1932, 65831/film 7967, Kulturabteilung, PAAA; report
of activities of MEI, June 17, 1931, pp. 220, 226, 243, 15676, 11125 Min. des Kultus,
SSAD.
99 Hoffmann to the Society of Friends of the Mitteleuropa-Institut, August 17, 1929,
p. 126, 15675, 11125 Min. des Kultus, SSAD.
100 Report from Hoffmann, October 4, 1927, 62239, Kulturabteilung, PAAA.
cultural films and ads in theaters across Romania.101 In addition, the

institutes representatives used a variety of mediums to improve the image
of German products among the Balkan public, holding lectures about
German culture, showing films about Germanys countryside, customs,
and technology, and publishing favorable articles in local newspapers.
The institute received its warmest reception in Romania, where a
group of university professors formed a Society of Romanian Friends
for the Mitteleuropa-Institut. Dr. Valcovici, rector of the Technical Uni-
versity in Temesvar, along with Dr. Madgearu, a professor at Bucharest
and Romanias finance minister in 1929/30, became the institutes lead
contacts in Romania. They were supported by local chambers of com-
merce, including leaders from the new GermanRomanian chamber of
commerce like Walter Stetten. To market the institute to the Roma-
nian government, Hoffmann emphasized that it was dedicated to the
problems of pan-European understanding. Through this rather disin-
genuous framing, and because he explicitly disavowed a focus on Ger-
man minorities, still a hot issue in Romania, he came under the good
graces of Romanias new political leadership.102 Valcovici and Madgearu
soon formed the nucleus of the institutes international board of trustees,
which drew roughly twenty-five of its fifty members from the Balkan
states and included other high-ranking government officials like the Pres-
ident of Romania (19312), Professor Nicolas Jorga, and Bulgarias
ambassador to Germany, along with other leading businessmen and
academics.103 The board advised the institute, but it also enabled the
Mitteleuropa-Institut to uphold its claim of being a transnational insti-
tution rather than merely the German publicity organ that it actually
was.104
101 Hoffmann to Ulich of Saxonys Education Ministry, September 21, 1929, p. 139,
15675, 11125 Min. des Kultus, SSAD.
102 Report on Hoffmanns study trip, December 17, 1929, 65830/film 7963, Kultur-
abteilung, PAAA.
103 MEI circular to its members, February 12, 1932, 65830/film 7966, Kulturabteilung,
PAAA; Hoffmann to Society of Friends of the MEI, August 15 and 17, 1929, pp. 124
6, and Hoffmanns report to Ulich of Saxon Education Ministry, September 21, 1929,
pp. 139, 1969, 15675, 11125 Min. des Kultus, SSAD; MEI to German charge
daffaires in Belgrade, July 2, 1931, Belgrade Embassy 41/2, PAAA; suggestions from
Bucharest Embassy for MEI board of advisors, May 30, 1930, Bucharest Embassy 179,
PAAA.
104 Hoffmann cultivated this line outside Germany by maintaining the impression that the
institute was an academic one. Mitteleuropaische Kulturpolitik, November 1929,
pp. 1909, 15675, 11125 Min. des Kultus, SSAD; MEI to its members, February 12,
1932, 65830/film 7966, Kulturabteilung, PAAA; MEI to Foreign Office from March
11, 65830/film 7964, Kulturabteilung, PAAA; Belgrade to Foreign Office, May 30,
1930, Bucharest Embassy 179, PAAA.
132 German power
In Yugoslavia the institute received a cooler reception, largely because

the new royal dictatorship in 1929 and the accompanying political tur-
moil prevented Hoffmann from making the types of contacts that he
had in Romania. As in Romania, he emphasized that his organization
was not concerned with German minorities, yet he made little head-
way in creating similar Friendly Societies in Yugoslavia at first. While
some Croatians and Slovenians cooperated with him, like the rector of
Zagrebs business university and the president of Ljubljanas chamber of
commerce, the government in Belgrade remained aloof for the first few
years of the institute.105
Beginning with his earlier forays into the Balkans in 1927, through
his negotiations with the Foreign Office, and into the development of
the Mitteleuropa-Instituts network in 1930 Hoffmann remained con-
cerned about French competition in Southeastern Europe, particularly
in the field of educational exchange. He shared with the VSI the idea
that students could be valuable economic representatives, and that they
represented the future generation of importexport merchants.106 The
large number of Romanian and Yugoslavian students studying in France
concerned him, and he wanted to prevent study in Paris from becom-
ing even more popular than it already was. To address these concerns
the institute approached educational exchange with several different pro-
grams. In 1930 they brought a dozen Bulgarian agricultural specialists
to study at Saxonys universities.107 In the summer and fall of 1931 they
led small study trips to the Balkans composed of German professors.108
Finally, the institute tried to organize a Central European University
Week that would bring professors and teachers from Southeastern Europe
to Dresden, yet for want of funding this never transpired.109 Despite
Hoffmanns hopes, these separate efforts were never consolidated into a
coherent program for educational exchange. With the focus of the DAAD
and the Humboldt Foundation firmly anchored in Western Europe and
America, Germanys educational exchange presence in Southeastern
105 Report on Hoffmanns study trip, December 17, 1929, 65830/film 7963, Kultur-
abteilung, PAAA.
106 Hoffmann to Ulich, June 4, 1929, 15675, 11125 Min. des Kultus, SSAD; Dr.
Ernst Schultze, Die weltwirtschaftliche Durchbildung der kunftigen deutschen
Wirtschaftsfuhrer, Sachsiche Industrie, May 19, 1928, pp. 499500.
107 MEI to Terdenge, December 27, 1929, 65830/film 7963, Kulturabteilung, PAAA;
report of MEIs activities, June 17, 1931, pp. 220, 226, 243, 15676, 11125 Min. des
Kultus, SSAD.
108 Report about of MEIs activities, September 1930 to April 1931, 65830/film 7966,
109 Report on discussion of Central European University Week, November 7, 1931,
65830/film 7966, Kulturabteilung, PAAA.
Europe would have to wait until the middle of the 1930s, when new
leadership and new sources of funding enabled the Mitteleuropa-Institut
to pioneer German exchange programs devoted to the Balkans.
The scholarly study of Southeastern Europe, however, which before
1914 had not been a consolidated branch in German academia, advanced
by leaps and bounds in the late 1920s with the formation of several area
studies programs. Munich quickly became an important center with two
new institutes founded in 1925 and 1929: the German Academy and
the Southeast Institute (Institut zur Erforschung des Volksbodens im
Suden und Sudosten). Yet neither was geared toward the economies of
Southeastern Europe. The former, under Franz Thierfelders leadership,
moved into cultural diplomacy and language promotion after 1927, but
throughout the Weimar Republic it remained heavily focused on German
minorities.110 The latter, too, directed by the historian Alexander von
Muller, focused primarily on German minorities, part of its agenda being
to demonstrate that Southeastern Europe owed its cultural development
to the presence of Germans who had settled along the Danube during
the Middle Ages.111
Although Thierfelder saw an urgent need to understand the economies
of Southeastern Europe, in practice the Balkan economies became the
preserve of Wiedenfelds new IMSWf in Leipzig. As an economist trained
in the principles of free trade, Wiedenfeld believed that the study of for-
eign economies would directly benefit Germany industry.112 Saxony in
particular needed foreign trade to employ its workforce, and Wiedenfeld
hoped that a better understanding of the economic structures of Ger-
manys trade partners, like the Balkan states, would facilitate commerce.
For our supply of foodstuffs and industrial raw materials as well as
for the sale of our industrial production, Wiedenfeld pointed out in a
memorandum to Saxonys Ministry of Education, it is of lasting value
that we keep ourselves informed and updated through rigorous scholarly
research about opportunities in every country for the reciprocal exchange
of goods.113 And while Germany had academic centers that studied
110 There was something of a struggle between Thierfelder, who wanted the German
Academy to become the center for cultural diplomacy directed at non-Germans, and
Paul Rohrbach, who wanted to ensure that the study of German minorities remained
a central component of the academys work. The two compromised, although initially
in 1928 Rohrbachs focus on the academic study of German minorities received more
funding. Michels, Von der Deutschen Akademie, 4854.
111 Gerhard Seewann, Das Sudost-Institut 19301960, in Beer and Seewann,
Sudostforschung im Schatten, 4992.
112 Wiedenfelds personal dossier, 10281/311, 11125 Min. des Kultus, SSAD.
113 Wiedenfeld to Saxonys Education Ministry, April 2, 1928, 10273/34, 11125 Min. des
Kultus, SSAD.
134 German power
international commerce in general, like the World Economic Institute in

Kiel and the World Economic Archive in Hamburg, until 1928 schol-
arship devoted specifically to the economies of the Balkans was largely
neglected.
For these new, little known Southeastern European countries,
Wiedenfeld conducted research into the fundamentals of their economic
structure and their economic relations using the linguistic and country-
specific expertise that he cultivated in his researchers. In the foreground
of the IMSWfs work lay the question of how Southeastern Europe com-
plemented Germany in the exchange of goods and in investment, and
how Germany measured up in economic competition in the region with
the Western European nations.114 Under Wiedenfelds lead, the institute
began publishing studies covering Romania, Bulgaria, Yugoslavia, Alba-
nia, Turkey, Greece, and even Afghanistan and Persia.115 These appeared
regularly in several different series including Wiedenfelds own Moderne
Wirtschaftsgestaltungen. In addition to providing statistical information on
foreign and domestic investment, economic growth and employment by
sector, and natural resource endowments in these countries, the IMSWfs
publications also addressed specialized topics like agrarian cooperatives
in the German communities of Transylvania and the foreign economic
policies of the Balkan states. Wiedenfeld amassed one of Germanys
largest collection of official and semi-official statistical publications from
Southeastern Europe, along with scholarly work on this region in numer-
ous languages. Altogether the new library contained some 3,000 works
and 200 periodicals, which were open to use by all the students of Leipzig
as well as the citys business college.116
Hermann Gross, an ethnic German from Transylvania and fre-
quent writer for the Siebenburgische Handelszeitung, quickly became
Wiedenfelds star pupil with his studies on GermanRomanian trade
and his collected edition on the economic networks in Central and
114 Summary of IMSWfs activities 192933, December 11, 1933, and Wiedenfeld to
the Saxon Education Ministry, January 31, 1935, 10273/34, 11125 Min. des Kultus,
SSAD.
115 The institute also published its work regularly in a series produced by the German For-
eign Institute in Stuttgart. List of publications, November 11, 1931, p. 146, 10273/34
11125 Min. des Kultus, SSAD.
116 The figures for the library are from 1935, data for earlier years do not exist. The
IMSWf shared its collection with the sociology institute, the agricultural institute, and
the geography seminar at the University of Leipzig, along with the business school in
Leipzig, which enrolled ethnic German students from Southeastern Europe. Summary
of IMSWf activities sent to Saxonys Education Ministry, December 11, 1931, and
Wiedenfeld to Saxonys Education Ministry, January 31, 1935, 10273/34, 11125 Min.
des Kultus, SSAD.
Southeastern Europe, published in German and Turkish.117 His works

exemplified the IMSWfs underlying agenda of researching and publi-
cizing the ways in which the economies of Southeastern Europe could
be made useful to Germany. In his earlier works for the institute Gross
expanded the arguments he had first published in the Siebenburgische
Handelszeitung, namely, that the German and Romanian economies could
help one another modernize. Oil, copper, bauxite, manganese, and other
heavy elements from Southeastern Europe were needed by Germanys
growing industry, while grain and livestock from Romania and Yugoslavia
would help feed Germanys urban populations. For Romania, its export
surplus with Germany would enable it to buy the capital equipment
and machinery needed for industrialization. Gross saw this as a positive
development; in order for its labor force to develop a productive foun-
dation, Romania needs these finished goods, i.e. the high-quality capital
goods exported by Germany. Because of the dearth of capital and the
absence of a skilled workforce in the country, these goods either cannot
be produced domestically in sufficient quantities, or they are dispropor-
tionately expensive. In other words, in his publications Gross mapped
out the arguments that German scholars, publicists, and bureaucrats
would use in the coming years to justify Southeastern Europes increas-
ingly dependent relationship on Germany: namely, that the two regions
complemented one another, and that exchange would harm no one and
benefit all parties involved.118
Conclusion
Between 1929 and 1931 the IMSWf and the Mitteleuropa-Institut in
Dresden, if no longer in their infancy, were still in the first stages of
their development. In these years the former established its library, began
publishing on a regular basis, and educated its first cohort of German and
Balkan students. The latter created Germanys first journal dedicated to
economic and cultural news from Southeastern Europe. And alongside
its other export promotion efforts the institute inaugurated Germanys
first tentative efforts for academic and student exchange with Yugoslavia
and Romania.
It remains difficult to evaluate the extent to which such cultural pro-
grams and area studies improved goodwill, promoted German exports,
117 H. Gross, Deutschlands Guteraustausch mit Rumanien 19251929; see also Gross,
Mittel- und Sudost-Europaische Wirtschaftsfragen.
118 H. Gross, Deutschlands Guteraustausch mit Rumanien 19251929; H. Gross would
expand on this view in his Habilitation, Sudosteuropa: Bau und Entwicklung der Wirtschaft
(Leipzig: Noske, 1937).
136 German power
and spread German ideas or projected German soft power into the
Balkans. The Mitteleuropa-Instituts directors believed that general
exposure to German culture and contact with German business, cul-
tural, and academic leaders would indirectly induce the population, or
the elites at least, to buy more German products.119 Various Yugoslavian
newspapers in 1931 and 1932 reported a significantly higher German
cultural presence than in the 1920s, and some even expressed the opin-
ion that Yugoslavia needed to orient itself economically toward Germany
now more than ever before.120 The response in Romania, measured by
the many elites that joined the Society of Friends for the Mitteleuropa-
Institut, indicates that Hoffmanns institute enjoyed a positive reception
at the very least.
The efforts by Gothein, Hoffmann, and Wiedenfeld to fend off French
cultural influence and to make Saxony into Europes gateway to the
Balkans, however, should be judged only a limited success before 1931.
They built a foundation of soft power that would only begin yielding
concrete benefits for Germany during the following decade, as the world
slipped into depression and as Southeastern Europe became increas-
ingly important for German foreign policy, both economically and geo-
strategically. The Mitteleuropa-Instituts planned Central European Uni-
versity Week, which would have been a flagship event, never materialized.
And as Germany slid into depression after 1931, state and local fund-
ing dried up, causing budgetary problems for the Dresden institute. The
IMSWf in Leipzig never encountered the same financial difficulties, but
it remained a small endeavor for its first few years.
Walther Hoffmann and Georg Gothein, however, did change the way
cultural diplomacy was pursued in the Weimar Republic. It became
more than just outreach to German minorities or a way for Germany
to achieve political prestige, strategies espoused by Georg Schreiber or
Carl Becker.121 By the end of the 1920s cultural diplomacy had become
an economic tool. Hoffmann and Gothein drew on the ideas of the
liberal imperialists from Wilhelmine Germany, placing economic con-
siderations at the heart of cultural diplomacy. They believed trade was
119 In the planning stages of the University Week, Saxonys officials strongly urged the
institute to draw as many teachers as possible from Yugoslavia and Romania precisely
because their trade with Germany was larger than that of Bulgaria or Greece. MEI to
Berlin Foreign Office, November 7, 1931, 65830/film 7966, Kulturabteilung, PAAA.
120 Article from Novosti, June 20, 1931, 43085, R 901, BA; Belgrade Embassy to Berlin,
June 21, 1932, p. 291, 54164/film 40726, R 901, BA; article by Otto Franges, October
22, 1932, pp. 1489, 2717, R 3101, BA.
121 Duwell, Deutschlands auswartige Kulturpolitik, 2838. Guido Muller, Weltpolitische Bil-
dung und Akademische Reform: Carl Heinrich Beckers Wissenschafts- und Hochschulpolitik,
19081930 (Cologne: Bohlau, 1991).
embedded in social and cultural relationships. Any improvement in com-

merce with Southeastern Europe required better cultural exchange and
a more detailed knowledge of the region. Promoting German culture
through student exchanges, lectures, films, and books, they hoped, would
foster an appreciation for German products. By systematically studying
the cultures and tastes in the Balkans, German producers would be bet-
ter situated to find and exploit business opportunities. Finally, collecting
detailed economic news and establishing contacts with dignitaries and
businessmen in the Balkans lowered the barriers to information and
the transaction costs that had obstructed trade in the first half of the
decade. In approaching economics not from a material perspective but
from the perspective of culture and information, Gothein, Hoffmann,
and Wiedenfeld created two of Weimars most innovative organizations.
To be sure, the small transnational organizations that Germany formed
in the 1920s in no way rivaled the vastly more expansive and well-funded
ones in Paris, Geneva, or London. Germanys internationalist turn after
the World War was minor in comparison to that of France or Britain.
Nevertheless, in the 1930s the internationalism of Western Europe would
encounter near mortal problems, as first Japan, then Italy and Germany,
challenged the core tenet collective security of the most impor-
tant international organization, the League of Nations. Acute challenges
to Western internationalism would also surface in the Balkans, where
League advisors would struggle to remedy the collapse in agricultural
prices that weighed so heavily on these agrarian societies, or organize a
Balkan federation to mitigate the economic nationalism that placed these
countries at odds with one another. This more fraught economic context
of the 1930s would allow Germany to transform its incipient cultural
and economic networks into soft power. Its non-state institutions would
begin shifting the weight of economic contacts between the Balkans and
the rest of Europe to run directly through Germany, Saxony in particular,
rather than through Vienna or Paris.
Just as importantly, by focusing on the economic development
of Southeastern Europe and in outlining the regions usefulness for
Germany, the IMSWf and the Mitteleuropa-Institut promoted the view
among German and Balkan economists that these two regions com-
plemented one another economically. The researchers at the IMSWf
provided the foundation, statistically and theoretically, for a wave of
publications appearing in the 1930s that portrayed GermanBalkan
trade in a categorically positive light, and that downplayed any issues
of dependency, asymmetry, or exploitation that might arise from Ger-
manys growing dominance in the markets of Yugoslavia and Roma-
nia. Over the coming decade these two organizations, alongside others,
138 German power
would further entrench this line of thought, both in Germany and in the
Balkans.122
As Albert Hirschman made so clear in National Power and the Struc-
ture of Foreign Trade, trade is an avenue for political influence as much
as it is a strategy for growth and development.123 Weimars statesmen
would indeed harbor political ambitions in Southeastern Europe, and
trade would be the tool with which they hoped to achieve their goals.
As the Great Depression heightened competition for markets in Europe,
Weimars leading figures, from Economics Minister Hermann Dietrich
to Chancellor Heinrich Bruning, began to see Germanys relations to
the states of Eastern and Southeastern Europe as the most urgent
and perhaps the most important task of Germanys economic and trade
policy.124 They, and after them the technocrats and party officials of
the Third Reich, would draw on the networks and the soft power built
by Germanys private organizations in the 1920s to orient the Balkan
economies around the German market, expand Germanys commercial
presence in the region, and eventually exercise German leverage over
these small agrarian economies.
122 Giselher Wirsing, Zwischeneuropa und die Deutsche Zukunft (Jena: Diederichs, 1932);
Ernst Wagemann, Der neue Balkan: altes Land junge Wirtschaft (Hamburg: Hanseatis-
che Verlags-Anstalt, 1939).
123 Hirschman, National Power, introduction, chs. 2 and 6.
124 Schroder, Die deutsche Sudosteuropapolitik 19291936, 532.
4 The politics of trade: Paneuropa, Mitteleuropa,
and the Great Depression, 19291933
In the era of the global economy Europe is not large enough to be

divided into more than twenty economic regions that are closed to one
another from tariffs. What before the war was still tolerable, has now
become unbearable after the effects of war have given the United States
such an enormous economic preponderance. For Europe there is only
one salvation: to end the fragmentation of the European economy and
form a unified European economic region, in other words, to dismantle
the tariffs within Europe and create a single European customs union.1
In late October and early November 1929 the New York stock market
crashed, the Dow Jones Industrial Average losing a third of its value in
less than four weeks. During the coming months and years the panic
spread across the Atlantic, sending America and Europe tumbling into
a deep depression. The economic downturn, however, reached Central
Europe even before the fall of 1929. A steep decline in prices had afflicted
the regions large agrarian sector since 1926. In the fall of 1928 Western
capital had already started retreating from Central Europe as Ameri-
can banks slowed long-term lending to Germany and Americas Federal
Reserve raised interest rates. During 1929 capital inflows to Germany
declined by over 40 percent, and Germanys nominal national income
fell by 5 percent. Over the next four years Germanys capital imports and
national income would plummet even further and exports, the motor
of economic growth for the Weimar Republic, would decline by over
60 percent as America, the British and French Empires, and the states
of Europe retreated behind tariff walls and currency controls. The world
economy was entering a painful era of deglobalization.2
1 The German Peace Society, Paneuropa, Sachsische Industrie, October 24, 1925.
2 Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression 19191939
(New York: Oxford University Press, 1995), 226, 2413; Albrecht Ritschl, Deutschlands
Krise und Konjunktur, 19241934: Binnenkonjunktur, Auslandsverschuldung und Repara-
tionsproblem zwischen Dawes-Plan und Transfersperre (Berlin: Akademie Verlag, 2002),
table B.4; Robert Mark Spaulding, Osthandel und Ostpolitik: German Foreign Trade Poli-
cies in Eastern Europe from Bismarck to Adenauer (Providence, RI: Berghahn Books, 1997),
223. On deglobalization between the two World Wars, see Ronald Findlay and Kevin H.
139
140 German power
German policy-makers, like policy-makers everywhere, responded to

the onset of depression with a desperate application of orthodox eco-
nomic principles alongside a search for new solutions. Germanys new
Chancellor in 1930, Heinrich Bruning, infamously pursued a policy of
rigid austerity: balancing the budget, deflating the German economy, and
raising interest rates in an attempt to maintain Germanys financial cred-
ibility and attract international capital.3 Simultaneously, he and leading
officials in the Foreign Office and the Economics Ministry formulated
a new foreign economic policy after 1930 which they hoped would bol-
ster Germanys declining trade and solve Weimars economic troubles:
they turned their attention to the markets of Central and Southeastern
Europe.4
Since 1924 Weimars foreign economic policy under Gustav Strese-
mann had been oriented toward the west, designed to attract American
capital, cooperate with France in managing border issues, and cultivate
the export markets of Western Europe. At the highpoint of this western
orientation, leading German publicists and economists even began call-
ing for a pan-European federation based on a kernel of Franco-German
economic cooperation.5 But the deglobalization of the late 1920s and
early 1930s marked a geopolitical turning point in Germanys foreign
economic policy. Already at the World Economic Conference in 1927,
before the Nazis ever came to power, key players in Weimars foreign
policy establishment began rethinking Germanys economic place in
Europe. With the onset of the Depression in late 1929 and its deep-
ening in 1931 the economic context changed radically, accelerating this
ORourke, Power and Plenty: Trade, War and the World Economy in the Second Millennium
(Princeton University Press, 2007), 42973; and Jeffry Frieden, Global Capitalism: Its
Fall and Rise in the Twentieth Century (New York: W. W. Norton, 2006). For an alternative
view see Steven C. Topik and Allen Wells, Commodity Chains in a Global Economy,
in Emily S. Rosenberg (ed.), A World Connecting, 18701945 (Cambridge, MA: Harvard
3 Edmund Clingan, Finance from Kaiser to Fuhrer: Budget Politics in Germany 19121934
(Westport, CT: Greenwood Press, 2001), 167200.
4 Scholars have examined Germanys depression primarily by studying its relationship
with Western Europe and America. They illustrate how the politically charged issues of
reparations and war debts, collaboration (or lack thereof) between central banks, and
German fiscal and monetary policies exacerbated the Depression and led Germany to
adopt policies of economic nationalism. Yet they have paid less attention to how Germany
shifted focus to Southeastern Europe. For an introduction to the controversies over the
causes of the Depression, see Ritschl, Reparation Transfers, the Borchardt Hypothesis
and the Great Depression in Germany; see also Peter Temin, Lessons from the Great
Depression (Cambridge, MA: MIT Press, 1999); Eichengreen, Golden Fetters; Charles
Kindleberger, World in Depression 19291939 (Berkeley: University of California Press,
1986); Balderston, German Economic Crisis; James, End of Globalization.
5 Kruger, Aussenpolitik der Republik von Weimar; Niedhardt, Aussenminister Stresemann.
The politics of trade 141
process of rethinking, and reshaping attitudes toward intra-European

trade in two fundamental ways. On the one hand, for many Germans,
including free traders, the economic turbulence undermined their belief
in the efficacy of an integrated global market and spurred them to plan
for a new world economy based on large blocs or imperial systems. Only
massive economic conglomerations would have the ability to manage
the increasingly violent fluctuations of the world market. On the other
hand, the Depression wrought havoc in Southeastern Europe, straining
the balance of payments and public finances of its indebted governments,
and reinforcing the regions sense of being under the thumb of Western
European specifically French and British financial power. In response,
some regional leaders began looking to Germany, with its large domestic
market, to provide a way out of their economic quagmire. For Germany,
this represented a window of opportunity.
Yet German trade with Southeastern Europe, even at a relative high-
point in 1929, was quite small. Less than 4 percent of Germanys total
exports and imports went to Romania, Yugoslavia, Hungary, and Bul-
garia. Why, then, did many German elites fasten onto such a commer-
cially insignificant region like Southeastern Europe as their nations eco-
nomic salvation? Why did once liberal economists and free traders come
to desire an economic bloc that would reorient German trade away from
the global market toward the southeast?6 Indeed, the business elites favor-
ing a new foreign economic policy faced serious obstacles throughout the
late 1920s and early 1930s. For one, certain sectors most dependent on
foreign trade the electrical engineering and machine tool firms of Berlin
and the Rhineland; massive firms like IG Farben and Siemens AG; the
bankers of Berlin and Hamburg did more business in Britain, the USA,
or the Netherlands than they did with Yugoslavia or Romania. They
feared that if Germany turned too hard toward the southeast it would
incite trade tensions with Germanys Western trade partners.7 Second,
German agrarian interest groups initially opposed preferential treatment
6 For example, Wilhelm Gurges book in 1929 on Paneuropa discussed the benefits of
a European-wide customs union. Two years later his work on Grossraumwirtschaft nar-
rowed the scope to just Central and Southeast Europe. Wilhelm Gurge, Paneuropa und
Mitteleuropa (Berlin: Staar, 1929); Gurge and Grotkopp, Grossraumwirtschaft.
7 Carl Bosch, director of IG Farben, hoped for a renaissance of international trade.
Peter Hayes, Industry and Ideology: IG Farben in the Nazi Era (Cambridge University
Press, 2001), 46. On the electrical and chemical industries see Schroter, Europe in the
Strategies of Germanys Electrical Engineering and Chemicals Trusts, 3554; Verena
Schroter, Die deutsche Industrie auf dem Weltmarkt, 19291933: aussenwirtschaftliche Strate-
gien unter dem Druck der Weltwirtschaftskrise (Frankfurt am Main: Lang, 1984), 5079.
On Hamburg bankers see Niall Ferguson, Paper and Iron: Hamburg Business and German
Politics in the Era of Inflation, 18971927 (Cambridge University Press, 1995).
142 German power
for the agricultural products of Yugoslavia, Romania, or Hungary. These

tensions over the orientation of German foreign economic policy came
to a head in 1931, a pivotal year when Germany made its first bid for
more direct influence in Southeastern Europe through a customs union
with Austria and bilateral treaties with Hungary and Romania. Over the
next three years Germany would, in fits and starts, cobble together a pro-
Mitteleuropa lobby and continue its reorientation away from the markets
of Britain, France, and the USA.
This transition in Germanys foreign economic policy from west to
southeast; from global to regional was less a rupture that came with
Hitlers seizure of power in 1933 than a slow, contested transition that
unfolded from the late 1920s through 1934. And it was more than just a
geographical turn. During the Depression, Germans began going beyond
the idea of using commerce and cultural diplomacy to merely rehabilitate
their relations with Southeastern Europe soft power in the language of
today to formulate an explicitly imperial agenda.8 By 1933 the intent of
building an informal trading empire in the Balkans had crystalized among
a coterie of German political leaders, bureaucrats, and private sector
business elites. In focusing on foreign trade these men harked back to
the liberal Weltpolitik of the Wilhelmine Empire. Yet they also advanced
new ideas linking trade with empire and development. Many came to
see trade as a tool for diplomatic leverage rather than just an engine of
economic growth. Just as importantly, some began lobbying to use trade
policy to restructure the very economies of Southeastern Europe, guide
their development, and increase and entrench these states dependency
on Germany.
Germans would only begin to implement this imperial agenda after
1934, when the Nazi regime militarized the economy and created new
macroeconomic conditions that drove Germany further away from West-
ern Europe. Yet by 1934 trade already had emerged as the primary
instrument in Germanys imperial repertoire in the Balkans, which Ger-
man elites hoped to use to enhance the gradient of power between their
nation and Yugoslavia, Romania, Hungary, and Bulgaria. This paradigm
shift came about through the collaboration between the German state and
Germanys private organizations. In crafting a new economic strategy,
8 On the concept of economic imperialism during the Weimar Republic, see Joachim
Radkau, Renovation des Imperialismus im Zeichen der Rationalisierung: Wirtschaft-
simperialistische Strategien in Deutschland von den Stinnes-Projekten bis zum Versuch
der deutsch-osterreichsichen Zollunion 19221931, in Joachim Radkau and Imanuel
Geiss (eds.), Imperialismus im 20. Jahrhundert: Gedenkschrift fur George W. F. Hallgarten
(Munich: C. H. Beck, 1976), 197264.
officials from the Foreign Office and the Economics Ministry drew heav-
ily on the ideas generated by non-governmental institutions like the Mit-
teleuropaische Wirtschaftstag, a transnational organization of economists
and businessmen from across Europe that served as a think-tank, lobby
group, and publicity organ. German officials attended its conferences
and worked with it to generate a domestic consensus among interest
groups for a more aggressive economic policy in Southeastern Europe.
Through its close connections to leading government officials, the Mit-
teleuropaische Wirtschaftstag helped drive the sea shift in German eco-
nomic thinking from Western to Southeastern Europe, and kindle the
desire for an informal economic empire in the Balkans.
Early visions for European economic integration

All of Europe is sick, the sickness has only begun in Central Europe
and is now gradually spreading over the continent and from there
further . . . The underlying cause of the current European, and espe-
cially the Central European, crisis lays in the unnatural impediments
to trade.9 This, the Mitteleuropaische Wirtschtags opening statement,
described not the Great Depression but instead the commercial con-
ditions of Europe that provided the background to the organizations
inaugural conference in September 1925 in Vienna. Founded by a group
of free trade Austrians under the leadership of Julius Meinl the owner
of Austrias largest coffee, tea, and wine import house the Mitteleu-
ropaische Wirtschaftstag brought together hundreds of economists and
businessmen from across Europe. In Vienna delegates from France,
Great Britain, the Netherlands, Italy, Austria, Germany, Czechoslovakia,
Poland, Romania, Hungary, and Yugoslavia assembled to discuss ways
of removing barriers to international trade and investment, and rehabili-
tating the economies of the European continent.10
In founding the Mitteleuropaische Wirtschaftstag, Meinl and his col-
leagues hoped to create a public forum to discuss what they saw to be
the two dominant and contradictory postwar commercial trends evolving
around them. On the one hand, economic nationalism was increasingly
apparent throughout the world, above all in the newly established states of
Eastern Europe. On the other hand, advances in technology, communi-
cation, and transportation were simultaneously making it more difficult
9 Article from Neue Freie Presse about the Mitteleuropaische Wirtschaftstag conference,
July 18, 1925, 42993, R 901, BA.
10 Report from German Embassy in Vienna to Berlin Foreign Office, March 3, 1926,
42993, R 901, BA.
144 German power
for economic development to succeed within the confines of isolated

nation-states.11 For countries like Austria and Czechoslovakia, or even
larger ones like Germany and France, Meinl argued that economic logic
demanded their governments join together in creating a single, integrated
European market. Only through a large market that contained tens of mil-
lions of consumers could European industry hope to compete with the
mass production and economic strength of America.12
In promoting a European economic federation the Mitteleuropaische
Wirtschaftstag was just one organization in a crowded field. The 1920s
witnessed an explosion of interest and mobilization for pan-European
ideas.13 Associations like the European Customs Union Organization,
the German Cartel for European Rapprochement, and the Union for
European Understanding made their name lobbying the governments
of Europe to think and act on a European rather than a national scale.
Like the Mitteleuropaische Wirtschaftstag, many of them originated out-
side Germany, the most well known being the Paneuropa movement led
by the Austrian aristocrat, Richard Coudenhove-Kalergi.14 Given the
proliferation of these pro-integration groups, in the first years of its exis-
tence the Mitteleuropaische Wirtschaftstag remained a minor affair in
11 Article from Neue Freie Presse about the Mitteleuropaische Wirtschaftstag conference,
July 18, 1925, 42993, R 901, BA; Ivan Berend, Decades of Crisis: Central and Eastern
Europe before World War II (Berkeley: University of California Press, 1998), 2357.
12 The Mitteleuropaische Wirtschaftstag hoped to generate momentum for this distant
goal, but through smaller steps: consolidating national railroad lines into a single net-
work; removing restrictions on international shipping on the Danube and the Rhine;
rationalizing Europes postal and commercial visa systems. German ambassador in
Vienna to Berlin Foreign Office, July 1926, 867, 42993, R 901, BA.
13 For contemporary discussions of a customs union, see Hanns Heiman, Europaische Zol-
lunion (Berlin: Hobbing, 1926); Hans-Herbert Hohlfeld, Zur Frage einer europaischen
Zollunion (dissertation, University of Freiburg, 1927); Heinz August Wirsching, Der
Kampf um die handelspolitische Einigung Europas: eine geschichtliche Darstellung des
Gedankens der Europaischen Zollunion (dissertation: University of Erlangen, 1928);
Heinrich Blasner, Die Europaischen Zollunion: Ideengeschichtliche Studien (disser-
tation, University of Rostock, 1929). For recent historical discussion of European unity
ideas, see J. Wardhaugh, R. Leiserowitz, and C. Bailey, Intellectual Dissidents and the
Creation of European Spaces 19181989, in Martin Conway and Kiran Klaus Patel
(eds.), Europeanization in the Twentieth Century: Historical Approaches (Basingstoke: Pal-
grave Macmillan, 2010), 2143; Joseph Bohling, The American Menace: European
Unity in the French Imagination, 19251930, paper presented at the Visions of
European Unity conference, New York University, February 2013.
14 The Europaische Zollverein Organization, the Deutsches Kartell fur europaische
Annaherung, the Europaische Kulturbund, and the Verband fur Europaische
Verstandigung. Frommelt, Paneuropa oder Mitteleuropa?; Stegmann, Mitteleuropa
19251934, 208; Katiana Orluc, A Wilhelmine Legacy? Coudenhove-Kalergis Pan-
Europe and the Crisis of European Modernity, 19221932, in Geoff Eley and James
Retallack (eds.), Wilhelminism and its Legacies: German Modernities, Imperialism, and the
Meanings of Reform, 18901930 (New York: Berghahn Books, 2004), 21934.
the eyes of the Foreign Office.15 But over time it grew to become one
of the largest and most sustained movements calling for some form of
European economic cooperation, one of the only ones to gain substantial
government support and to last into the 1930s. Between 1927 and 1929
its annual meetings gained broad international publicity and the German
subsection, organized in 1926, attracted renowned members including
Reichsbank director Hjalmar Schacht, assistant secretary of the Eco-
nomics Ministry, Ernst Trendelenburg, economist Lujo Brentano, and
Julius Wolff, the founder of the Mitteleuropaische Wirtschaftsverein in
1904. By the late 1920s the German Section regularly sent policy recom-
mendations to Gustav Stresemann, Germanys Foreign Minister.16 And
by 1928 the Foreign Office had come to appreciate the Mitteleuropaische
Wirtschaftstags growing importance for generating ideas about interstate
trade and for doing publicity work.17
One of the Mitteleuropaische Wirtschaftstags strengths was the diver-
sity of its supporters, who came from Yugoslavia and Romania as well as
Austria and Germany. Yet this diversity also created friction, and a welter
of different opinions quickly emerged on how best to stimulate economic
integration, and who exactly to include in a common market. In 1925 the
organization generated almost as many viewpoints as participants, but by
end of the decade these had crystalized around two dominant positions.
The first, espoused by the former State Secretary of Hungary Elemer
Hantos and taken up by participants in Czechoslovakia, Hungary, and
Yugoslavia, called for a federation of successor states to the Habsburg
Empire. The delegates from these countries, which were in the throes of
industrial development, feared opening their domestic markets to compe-
tition from German firms. They made the classic case for infant industry:
over the long-term access to the German market might be a boon, but not
15 On the whole the organizers of the [Central European] transportation conference

(1926) evoke the figure from a novel by Thomas Mann . . . [who] stands at the train
station and raises his hand at same time as the man with the red cap and then believes
that it is he who makes the trains move. Vienna to Berlin Foreign Office, October 9,
1926, p. 122, 42993, R 901, BA.
16 Linder to Wormann, July 29, 1926, p. 75, 42993, R 901, BA. Following the confer-
ence in 1926 Gothein informed Stresemann of the organizations recommendations,
suggesting that Germany and France begin working to unify their postal system. The
proposal was well received not only by Stresemann, but also by the French delegates
to the Mitteleuropaische Wirtschaftstag. Memorandum from December 1926, p. 87,
memorandum to German Section, March 31, 1927, correspondence between Gothein,
Stresemann, and Wormann on November 9 and 27, 1926, pp. 141 and 147, and pam-
phlet by Elemer Hantos, Das Donauproblem in der Mitteleuropaischen Wirtschaft,
p. 175, all in 49, N 1006 Gothein, BAK; memorandum to German Section, March 31,
1927, p. 206, 42993, R 901, BA; report from Hantos, 1927, 42994, R 901, BA.
17 Lerchenfeld in Vienna, a former critic of the Mitteleuropaische Wirtschaftstag, to Berlin
Foreign Office, March 16, 1928, p. 141, 42994, R 901, BA.
146 German power
before their own firms had modernized sufficiently to be competitive.18

German and Austrian delegates, by contrast, offered a competing vision.
They argued that excluding Germany from European economic arrange-
ments was impossible given the centrality of its large market. Instead, the
nucleus of any commercial understanding in Europe must be found in a
Franco-German economic rapprochement, not in a Habsburg succes-
sor state confederation. German delegates hoped that the passing of the
Ruhr crisis and the regulation of reparations by the Dawes Plan in 1924
would enable the two largest economies of Europe to overcome their lin-
gering hostility and forge an economic core for Europe. Austria would
then fasten onto this Franco-German bloc. Its magnetism would then
be so great that the other Central European states would soon follow of
their own accord.19
By the middle of the 1920s Georg Gothein, the leader of the German
delegation to the Mitteleuropaische Wirtschaftstag, emerged as the
most energetic representative of this Franco-German approach. Born
in 1857 to a Silesian doctor, Gothein received his education in Breslau
and Berlin, and later made a career for himself in the mining industry
of Upper Silesia. In 1893 he turned to politics, becoming a member of
the Prussian parliament, and a year later a city councilman in Breslau.
Before the war he belonged to the Progressive Peoples Party, and his
liberal economic outlook mirrored the opinion of thinkers like Norman
Angell in England and Ivan Bloch in Poland, who believed commerce
and peace reinforced one another.20 Following the Treaty of Versailles
Gothein became a leading member of the left-leaning liberal German
Democratic Party (DDP) and in 1919 he was appointed Secretary of the
Treasury in Philipp Scheidemanns cabinet.21 As a director of Germanys
Foreign Trade Association before and after the war, Gothein was a
stalwart proponent of free international trade. And, like his Viennese
colleagues in the Mitteleuropaische Wirtschaftstag, he saw the removal
of commercial barriers within Europe as a preliminary step back to an
18 Hantos published widely on this topic. For an overview of his opinions see his exchange
with Georg Gothein published in the Hamburger Fremdenblatt, Nr. 61, 87, and 110, in
49, N 1006 Gothein, BAK; Elemer Hantos, Denkschrift uber die wirtschaftlichen Prob-
leme Mitteleuropas (Vienna: Mitteleuropaische Wirtschaftstagung, 1927); Muller, Die
Wirtschaft als Brucke.
19 German ambassador in Vienna reporting on conversation with Landwehr to Berlin,
August 20, 1926, p. 90, 42993, R 901, BA.
20 Norman Angell, The Great Illusion: A Study of the Relation of Military Power in Nations
to their Economic and Social Advantage (New York: G. P. Putnams Sons, 1910); Ivan
S. Bloch, Is War Now Impossible? Being an Abridgement of The War of the Future in its
Technical, Economic and Political Relations (London: Richards, 1899); Ferguson, The
Pity of War, 911, 213.
21 General Information, N 1006 Gothein, BAK.
interconnected, global economy like the one that had flourished before
1914.22
In Gotheins mind free trade within Europe was an urgent priority for
several reasons. In his estimation, one of the primary causes of the war
had been the creeping trade protectionism during the first decades of
the twentieth century. In the Wealth of Nations, Gothein argued, Adam
Smith had dismantled the intellectual justification for mercantilism and
laid the intellectual foundation for a century of increasingly unfettered
commerce and peace in Europe. The active exchange of goods, which
brought with it a tightening of relations between business associates and
a satisfaction of rising wealth on all sides of the border, created a pacific
sentiment among nations. The imperialism of the late nineteenth cen-
tury, Gothein believed, had shattered this pacific sentiment and revived
mercantilism or the amalgamation of power and economics as West-
ern European states vied to protect their domestic and colonial markets
with commercial barriers. This, he feared, represented one of the most
serious dangers to the peaceful and friendly existence of peoples. Ger-
man restrictions on Russian wheat and rye in 1906 had raised tensions
between these two powers. Austrias tariff war with Serbia had stoked
the latters anti-Habsburg sentiments. And doubtless did Germanys
protective tariff policies contribute fundamentally to the deterioration
of English opinion toward [Germany].23 Because modern wars have
economic as well as national causes, Gothein in the mid 1920s believed
a main goal of trade policy must be to avoid war and avoid repeating
the economic nationalism of Wilhelmine Germany.24
While Gothein hoped a pan-European customs union could achieve
peace in his day, he also saw it as the only way for German industry
to prosper in the new postwar environment. In order to produce, one
must have the chance to market ones products. Mass production and
modern industry is based on this requires mass sales.25 The appli-
cation of mass production to German industry, however, had achieved
only limited success because Weimars domestic market was too small.
Industries that rationalized through cartels, the consolidation of plants,
22 Report from the Freihandelsbund gegen Teuerung und Wirtschaftszwang,

September 25, 1924, p. 25, 49, N 1006 Gothein, BAK.
23 Georg Gothein, Die aussenpolitischen Aufgaben der Wirtschaft, pp. 50219, 76,
N 1006 Gothein, BAK.
24 Georg Gothein, Pan-Europa? in Deutsche Einheit 47 (November 1924), pp. 112634,
79, N 1006 Gothein, BAK.
25 Georg Gothein, Ist eine Paneuropaische Zollunion Durchfuhrbar? special edition
no. 22, Deutschen Liga fur Volkerbund, in 78, N 1006 Gothein, BAK.
148 German power
or the application of new machinery still suffered from serious overcapac-

ity during the 1920s, above all the iron, steel, and automobile sectors.
Their managers argued they could not follow the American model of
mass sales because Germanys market was too limited; instead they had
to raise prices to cover their costs.26 For Gothein and his colleagues in
the Mitteleuropaische Wirtschaftstag, the American model represented
a way out of this dead end. America, you have it better than Europe the
old. From the Atlantic to the Pacific, from Mexico and the Caribbean
Sea to Canada you have a single customs, travel, legal, currency, and
sales region that has made you into the country of the most unlimited
possibilities, into the richest of the world, that has made your workforce
the most productive, and that has given your 115 million inhabitants the
highest living standard.27
From Germanys chronic problem of overcapacity Gothein drew the
lesson that finding a large, stable export market would allow German
producers to spread their fixed costs across a larger volume of products.28
Indeed, he and his colleagues at the Mitteleuropaische Wirtschaftstag saw
exports as the engine driving Germanys economy. Germany had long
been dependent on foreign trade, which both before and after the war
amounted to roughly a quarter of its national product. Through a series
of studies Gothein hoped to prove this point to his critics, estimating that
36 percent of total goods produced in Germany in some way depended on
the export sector, and that one-third of Germanys employed population
earned a living directly or indirectly from exports.29
In 1925 the Treaty of Locarno ushered in a period of rapprochement
in Franco-German relations, guaranteeing the postwar borders of West-
ern Europe. Gothein saw this as a chance to cultivate a stable export
market for German producers by calling for a customs union in West-
ern Europe. The key to Paneuropa today lies with France. If France
and Germany successfully conclude a customs pact then the question
of Paneuropa will be solved. Because then the gravity of such a customs
union will be so great that the other states of continental Europe, up
to the Russian border, will in some measure inevitably follow.30 In a
26 Nolan, Visions of Modernity, 1557; Balderston, German Economic Crisis.

27 Georg Gothein, Die Gefahren der gegenwartigen Lohnbewegung, Europaische Revue
3 (July 1928), in 80/2, N 1006 Gothein, BAK; Georg Gothein, Der Weg zur Hebung
der Kaufkraft, Deutsche Handels-Warte 1 (1926), in 79/3, N 1006 Gothein, BAK.
28 Gothein, Die aussenpolitischen Aufgaben der Wirtschaft.
29 In contrast, agriculture, whose representatives were Gotheins most intractable oppo-
nents in trade policy, accounted for 24.5 percent of German employment. Georg
Gothein, Wie viel Arbeitskrafte beschaftigt die Ausfuhr, Ruhr und Rhein, April 17,
1931, in 80/1, N 1006 Gothein, BAK; Schroter, Industrie auf dem Weltmarkt, 522.
30 Gothein, Ist eine paneuropaische Zollunion Durchfuhrbar? pp. 1314.
special study commissioned by Germanys Committee for the League of

Nations, circulated through Germanys Foreign Office and Economics
Ministry, Gothein argued that both France and Germany needed such
an agreement. After incorporating the iron industries of Alsace-Lorraine
after Versailles, France needed to import capital equipment and coke,
and it now produced more iron than its domestic market could con-
sume. Not only were the coal and iron industries on both sides of the
Rhine too intertwined to prosper in the face of high tariffs and fluctu-
ating currencies, Gothein argued, both France and Germany possessed
other industries that needed to sell beyond their domestic market: wine
and luxury textiles for the former, chemicals and machine tools for the
latter. A customs union would lift the shackles limiting the economic
development of both countries.31
Gothein, moreover, hoped that keeping visions for a European feder-
ation on the economic plane would forestall American anxiety about the
emergence of a new European superpower. For while he saw America as
the great economic rival it was never an enemy. A European federation
was intended instead to be a counterweight to American power, one that
would give European nations greater bargaining weight at the table when
negotiating trade agreements.32 And because the question of Germanys
public debt, private debt, and reparations hinged on American capital,
Weimar needed America in the immediate future. Ultimately, Gothein
hoped, the United States of America [had] too great an interest in a
flourishing Europe with high purchasing power to ruin it by pursuing a
policy of Shylock.33
Paneuropa and the German Foreign Office

By the middle of the 1920s, then, Gothein was stridently calling for
a westward-oriented pan-European economic union, Franco-German
rapprochement, and deeper transatlantic ties with the United States.
These ideas would all become pillars of European unification after 1945.
In the mid 1920s they were popular among cosmopolitan business elites
and government officials in France and Germany. Indeed, the Dawes
Plan in 1924, the Treaty of Locarno and Germanys entry into the League
31 Ibid.; Georg Gothein, Deutsch-franzosische Zollunion als Vorstufe der Europaische

Zollunion, pp. 7680 in 78, N 1006 Gothein, BAK.
32 Gothein, Pan-Europa?
33 Gothein, Ist eine Paneuropaeische Zollunion durchfurhbar?
150 German power
of Nations in 1925 generated optimism among the leaders of Western

Europe that a new era of economic cooperation was dawning.34
In the Foreign Office Gustav Stresemann spearheaded Germanys
westward-leaning foreign policy. Stresemann, as one recent biographer
has argued, was a creative pragmatist. Before 1914 he had been an
ardent nationalist and a proponent of expanding the German empire.
And, like Gothein, he believed exports were the lifeblood of the econ-
omy. Germanys most dynamic sectors like steel, chemicals, electrical
engineering, and machinery were all export-oriented and were the place
where new jobs could be found. Unlike America, Great Britain, or
France, however, Germany lacked an imperial or a continental-sized
market; it was dependent on imports and consequently vulnerable to
protectionist policies, its Achilles heel.35
Following Germanys defeat in 1918, Stresemann stopped openly
advocating a German formal land empire and adapted to the new interna-
tional circumstances of American financial hegemony, German military
weakness, and European economic interdependence.36 His highest pri-
ority was working with America, France, and Britain to acquire loans,
demilitarize the Rhineland, and place Germany on an equal footing again
as a partner in Europe. Cooperation with the economies of Western
Europe through the League of Nations, the International Chamber of
Commerce, and cultural diplomacy, he hoped, would help Germany
reassert itself in Europe. An important component of his strategy would
be the creation of a more integrated market in Europe through the aboli-
tion of import duties. Like Gothein, he thought any customs union must
begin with a Franco-German commercial understanding. In 1925 when
the French representative to the League of Nations, Louis Loucheur,
unveiled plans for a European customs union, Stresemann and his clos-
est associates in the Foreign Office responded with enthusiasm. Foreign
Secretary Carl von Schubert and Karl Ritter, director of the Depart-
ment for Commercial Policy, immediately began designing a scheme to
progressively lower European trade barriers. Stresemann, Schubert, and
Ritter hoped a customs union, in conjunction with the recently signed
Locarno border agreements, would reduce French anxiety about security,
improve German exports, and make the continent interdependent and
34 John Gillingham, Coal and Steel Diplomacy in Interwar Europe, in C. A. Wurm

(ed.), International Kartelle und Aussenpolitik (Stuttgart: Steiner, 1989), 83101.
35 Wright, Mind Map, 148. See also Jonathan Wright, Gustav Stresemann: Weimars
Greatest Statesman (Oxford University Press, 2002).
36 Wright, Stresemann; and Wright, Mind Map, 152; Kruger, Zur europaischen Dimen-
sion der Aussenpolitik Gustav Stresemanns.
ultimately less prone to conflict.37 The high point of Franco-German

reconciliation came in the following two years with the transnational
iron and steel combine of 1926, the World Economic Conference of the
League of Nations in 1927, and the Franco-German commercial accord
later that year.38
The customs union itself, however, never came to fruition. Even before
the Franco-German trade accord Stresemann and his officials realized
that Loucheurs plan would raise the hackles of two powerful interest
groups in Germany: big business and agriculture.39 The German Asso-
ciation for Chambers of Industry and Commerce and the Imperial Fed-
eration of German Industry (RDI) were two of Germanys leading corpo-
ratist industrial associations, relaying the concerns of German industry to
government officials in the Foreign Office and the Economics Ministry.
They showed some support for a European economic bloc, although
both eventually came out in opposition to it albeit for different reasons.
Within the DIHT, traditionally the more export-oriented of the two, a
pan-European customs union received some support from the chemi-
cal, machinery, and electrical engineering industries. Yet because these
sectors were competitive across the globe, and not just within Europe,
many of their leaders were reluctant to focus exclusively on the mar-
kets of Europe.40 In the RDI, traditionally a more domestic-oriented
organization, Germanys iron and steel sectors opposed a customs union
because, in their estimation, French industry was better situated to dom-
inate a single European market because of its lower wages and cheaper
iron ore.41
The leaders of iron and steel found an ally in Germanys agricul-
tural sector. Declining global grain prices and competition from for-
eign producers in America encouraged Weimars agrarian groups to
demand protection. The Reichslandbund, Germanys largest and very
37 Peter Kruger, Die Ansatze zu einer europaische Wirtschaftsgemeinschaft in Deutsch-

land nach dem Ersten Weltkrieg, in Helmut Berding (ed.), Wirtschaftliche und politische
Integration (Gottingen: Vandenhoeck & Ruprecht, 1984), 14968; Peter Kruger, Euro-
pean Ideology and European Reality: European Unity and German Foreign Policy in
the 1920s, in Peter M. R. Stirk (ed.), European Unity in Context: The Interwar Period
(London: Pinter Publishers, 1989), 8498. See also Wright, Mind Map, 156.
38 Kruger, Aussenpolitik der Republik, 36872. In August of this year France, England, and
Belgium also agreed to reduce the occupation of the Rhineland by 10,000 troops.
39 Stegmann, Mitteleuropa 19251934, 205.
40 Dirk Stegmann, Deutsche Zoll- und Handelspolitik 1924/251929 unter beson-
derer Berucksichtigung agrarischer und industrieller Interessen, in Mommsen et al.,
Industrielles System, 499513, at 512; Schroter, Electrical Engineering and Chemical
Trusts, 44, 52.
41 Schroter, Electrical Engineering and Chemical Trusts; Frommelt, Paneuropa oder
Mitteleuropa? 401, 52.
152 German power
right-of-center agricultural interest group, consistently lobbied the gov-

ernment to maintain tariffs on food products, eschew a policy of export
promotion, and cultivate Germanys domestic market. Both agriculture
and heavy industry rejected a pan-European union that involved only
moderate tariffs on American goods. In 1925 this alliance was strong
enough to pressure Germanys parliament into resurrecting a more lim-
ited version of the iron and rye tariff of 1879. And it continued its
pro-tariff policy through the rest of the decade.42
Alongside resistance from Germanys agriculture and heavy industry,
the fear of alienating the American government and American investors
prevented Stresemann from moving ahead with a pan-European customs
union. Like Gothein, Stresemann understood just how much Germany
depended on private, short-term capital from the United States. Between
1924 and 1929 American private investment in Germany totaled almost
3 billion dollars, more than twice as much as the Marshall Plan of the
1940s in real terms.43 Stresemann would not countenance participation
in a European customs union that involved high external commercial
barriers, something he believed the French would demand.44 To be
sure, American bankers and government officials, like J. P. Morgan and
Secretary of Commerce Herbert Hoover, believed European security
and economic stability was a worthy goal in itself.45 But by the late
1920s the American government was becoming increasingly concerned
about maintaining its open-door trade principle in Europe. And as
Weimars federal and municipal fiscal deficits rose substantially after
1927, American loans to German businesses, municipalities, and the
federal government became heavily regulated and difficult to obtain.
For German officials at the Foreign Office and the Economics Ministry,
42 Germanys export industries, in particular the machine manufacturing association

(VDMA) and the chemical sector, fought this tariff tenaciously but were eventually
bribed when the Economics Ministry promised them export subsidies: 300 million RM
for goods shipped to the Russian market. Stegmann, Deutsche Zoll- und Handelspoli-
tik. On agriculture in the Weimar Republic see Stephanie Merkenich, Grune Front
gegen Weimar: Reichs-Landbund und agrarischer Lobbyismus, 19181933 (Dusseldorf:
Droste, 1998); and Dieter Gessner, Agrardepression und Prasidialregierungen in Deutsch-
land, 19301933: Probleme des Agrarprotektionismus am Ende der Weimarer Republik
(Dusseldorf: Droste, 1977), esp. ch. 1.
43 William C. McNeill, American Money and the Weimar Republic: Economics and Politics on
the Eve of the Great Depression (New York: Columbia University Press, 1986).
44 Wright, Stresemann, 330; Kruger, Europaische Wirtschaftsgemeinschaft.
45 Frank Costigliola, The United States and the Reconstruction of Germany in the
1920s, Business History Review 50, no. 4 (1976), 477502; Patrick O. Cohrs, The
Quest for a New Concert of Europe: British Pursuits of German Rehabilitation and
European Stability in the 1920s, in Johnson, Locarno Revisited, 3358.
remaining in the good graces of America and American finance trumped

any design for a European customs union.46
From Paneuropa to Mitteleuropa

No single event moved Germanys foreign policy away from Western
Europe, and no single moment represents the turning point when Ger-
man economists and government officials began to see foreign trade less
as a tool for peace and more as a tool of power. The death of Gustav
Stresemann and the onset of depression in late 1929 and 1930 were
critical pivot points in this transition.47 Yet the new emphasis on South-
eastern Europe and the new inclination to use foreign trade as lever-
age emerged even before 1929. During the second half of the 1920s
Gothein and the directors of the Mitteleuropaische Wirtschaftstag gen-
erated a groundswell of interest among German-speaking economists for
the Balkans that crossed the political spectrum. Liberals and conserva-
tives alike posed the question: Paneuropa or Mitteleuropa? By the end
of the 1920s their answer was increasingly the latter.48
The tipping point for Gothein and the German Section came at the
World Economic Conference in 1927, when rifts within the Mitteleu-
ropaische Wirtschaftstag came into public view. He and the other dele-
gates had co-sponsored a report suggesting strategies for interstate coop-
eration in transportation, production, trade, and currency policies. The
Hungarian Elemer Hantos authored the initial draft, and he unleashed a
rancorous debate by recommending a successor-state customs union with
preferential treaties among the states of the former Habsburg Empire. As
Hantos clarified at a press conference that April, Germany must remain
excluded.49 Its inclusion, so he maintained, would grant [Germany] a
great preponderance over the other states, which on the basis of equality
46 McNeill, American Money, 163237; Hans-Jurgen Schroder, Widerstande der USA

gegen europaischen Integrationsbestrebungen in der Weltwirtschaftskrise 19291939,
in Berding, Wirtschaftliche und politische Integration, 16984.
47 See, for example, Stegmann, Mitteleuropa 19251934; Hopfner, Sudosteuropapolitik;
and Sundhaussen, Die Weltwirtschaftskrise im Donau-Balkan-Raum.
48 Between 1925 and 1929 articles in Gustav Stolpers journal, Der Deutsche Volkswirt,
about Central Europe and the Balkans increased from three per annum to nineteen,
p. 136, 6139, R 8119F, BA; Wilhelm Grotkopp, Breaking Down the Tariff Walls: Ways
Leading to Unification of European Economics, trans. Erich Schadow (London: E. Benn,
1930); Eckart Teichert, Autarkie und Grossraumwirtschaft in Deutschland 19301939:
Aussenwirtschaftspolitische Konzeptionen Zwischen Wirtschaftskrise und Zweiten Weltkrieg
(Munich: Oldenbourg, 1984), 8492.
49 Hantos, Denkschrift uber die wirtschaftlichen Probleme Mitteleuropas, p. 11, and report
circulated by Kopke in Foreign Office, April 22, 1927, 42994, R 901, BA.
154 German power
cannot be sustained.50 Hantoss draft hit the most sensitive nerve of the
Mitteleuropaische Wirtschaftstag, creating a storm of controversy. As a
result, the organization declined to put its name on his report, which
Hantos presented at the Geneva World Economic Conference devoid of
any institutional affiliation.51 Over the next two years Hantoss deter-
mination to bar Germany from any Central European trade agreements
hardened as he formed Central European Institutes in Budapest, Vienna,
and Brunn to promote his ideas.52 Hantos had expressed these thoughts
before, but by presenting them before the World Economic Conference
he created a rift Gothein found hard to ignore. In a letter to Stresemann
immediately following Geneva, Gothein argued, it is an urgent neces-
sity for Germany to have our hands in any Central European economic
endeavor. In no case can we be absent from such deliberations, in which
otherwise the inclination would gain momentum that only the successor
states of Austria-Hungary, including Poland and Romania, should unify,
while Germany remains outside.53
Thus beginning with the World Economic Conference in 1927
Gotheins geographical priorities gradually changed as his primary goal
became preventing the countries of Central and Southeastern Europe
from falling into line behind Hantos.54 Just as importantly, following
the conference in Geneva, he also soured on his previous aspirations
for Franco-German collaboration: several years of high-flying rhetoric
from both German and French leaders had brought little concrete
improvement to commerce between the two states and only led to power
plays from both sides. In 1929, in Deutsche Wirtchafts-Zeitung, one
of Germanys most widely read trade journals, Gothein categorically
rejected his previous optimism in a Franco-German pan-European
agreement. France, he maintained, would only consent to a tariff union
with Germany when it could guarantee for itself unconditional lead-
ership. Even then it would never forgo the preferential treatment that
French producers enjoyed in their colonies. In an about-face, Gothein
now argued that the interdependence of France and Germany in iron,
coal, and steel was an exceptional rather than a typical example of their
interaction, insufficient to warrant closer cooperation. Structurally, he
50 Newspaper article about Hantoss resolution, April 12, 1927, 42994, R 901, BA.
51 German ambassador in Vienna to Berlin Foreign Office, April 4, 1927, 42994, R 901,
BA.
52 German ambassador in Budapest to Berlin Foreign Office, January 18, 1928, 42994, R
901, BA; meeting report between German Section and representatives from the Foreign
Office, May 29, 1929, 42995, R 901, BA.
53 Gothein to Berlin Foreign Office, May 14, 1927, 42994, R 901, BA.
54 Confidential memorandum, October 27, 1927 and report on German Section board of
directors meeting, July 22, 1928, 49, N 1006 Gothein, BAK.
Table 4.1 German share of Central European trade, 1928

(in percentages of total trade)
Country German share
Austria Exports 18.5

Imports 19.9
Czechoslovakia Exports 22.1
Imports 24.9
Hungary Exports 11.8
Imports 19.5
Romania Exports 18.4
Imports 23.7
Yugoslavia Exports 12.1
Imports 13.6
continued, France and Germany were more rivals than collaborators,

since both were industrial states and neither of the two would find in
the other a market for their most important export articles.55
Indeed, despite the commercial treaty of 1927, Franco-German trade
stagnated during the second half of the 1920s. Gothein began pointing
to Germanys invigorated commerce with Austria, Czechoslovakia, Hun-
gary, Romania, and Yugoslavia as grounds for relocating the initiative for
economic integration to Central and Southeastern Europe. These states,
he noted, were becoming increasingly dependent on Germany for their
exports: Czechoslovakia, Austria, Hungary, Romania, and Yugoslavia
now sent between 12 and 25 percent of their total exports to Weimar56
(see Table 4.1). The familiar argument of economic complementarity
between Germany and the states to the southeast now made its appear-
ance in Gotheins writings for the first time. Just as importantly, so too
did the idea that a unified Europe would enhance German power on the
international stage against the large, closed world economic powers of
America, France, and Great Britain.57
55 Even though France remained one of the main purchasers of German power equipment,
Gothein ignored the demand in France for German machine tools that he had previously
highlighted, claiming that their tariffs made German products prohibitively expensive
even after the Franco-German trade accord of 1927. Georg Gothein, Unmogliche und
mogliche Wege zu einem mitteleuropaischen Wirtschaftsbundnis, Deutsche Wirtschafts-
Zeitung, 26, no. 17 (April 25, 1929), 42995, R 901, BA. On power equipment see
Balderston, German Economic Crisis, 119.
56 Gothein, Unmogliche und mogliche Wege.
57 Invited lecture before the board of directors of the German Section, February 19, 1929,
p. 133, 42995, R 901, BA; Gothein, Unmogliche und mogliche Wege.
156 German power
Thus already in early 1929, before the stock market crash of October,
before the SmootHawley Tariffs of 1930, before the Ottawa Accords
of 1932, Gothein the free trader had come to see the world market
as a space contested by large, competing economic blocs. The global
division of labor of the nineteenth century would have to be replicated
within continental-sized groupings. To compete with the Anglo-Saxon
Economic Empire, which is closing itself off more and more with time,
there remains for the countries of Central Europe nothing else but to close
ranks into an economic community. By now Gothein began using the
terms empire and imperialism to describe the how Central Europe
should amalgamate to maintain its position in the world economy. Should
there be, he asked, an Empire Mitteleuropa?58
Officials in the Foreign Office were slower to reorient their attention
toward Southeastern Europe than the Mitteleuropaische Wirtschaftstag.
Yet some government officials followed Gotheins turn and believed
Germanys path to power and prosperity lay in the Balkans. Karl Ritter
of the Committee for Commercial Policy, Hans Posse of the Economics
Ministry, and German diplomats in Yugoslavia and Romania like
Gerhard Mutius, Franz Olshausen, and Adolf Koster largely designed
Weimars foreign policy in Southeastern Europe, in part because Stre-
semann devoted most of his attention to France, Britain, and America.
These bureaucrats saw Southeastern Europe as a strategic region since
it offered one of the few opportunities for Weimar to flex its economic
muscle. Unlike Poland and Czechoslovakia, Germany had no lingering
border disputes with Yugoslavia or Romania to derail a diplomatic rap-
prochement. And unlike Germanys other small neighbors Belgium,
the Netherlands, or Switzerland the agrarian economies of the Balkans
in theory, if not in practice, complemented Germany economically.
As argued by Adolph Koster, Germanys social democratic charge
daffaires in Belgrade from 1928 to 1930, Germany was better off doing
business in the Balkans which earned a 7-percent return than focusing
its energy on opportunities in less strategically important regions even if
they might yield 10 percent.59
With the restraints imposed on Germany by the Treaty of Versailles,
government officials like Hans Posse believed that for a defeated state
like Germany, which must do without practically any military protec-
tion, almost the only means remaining to force back unwarranted foreign
58 Minutes from meeting of German Section, October 4, 1928, 6139, R 8119F, BA;
Vortragstee before the board of directors of the German Section, February 19, 1929,
p. 133, 42995, R 901, BA; Georg Gothein, Empire Mitteleuropa? Die Entwertung der
Meistbegunstigungsklausel, p. 85, 6139, R 8119F, BA.
59 Hopfner, Sudosteuropapolitik, 162, 34353.
influence is our trade policy. Commercial power could pave the way to a
foreign policy with imperial horizons.60 Given Germanys postwar sit-
uation, Posse and others argued, its most effective instrument of power
can be found in trade policy because of the large size of Germanys
market. With 60 million people, the German market was the second
richest in the world after the USA, and a power factor of the highest
degree.61
By the late 1920s these officials, like Gothein, were keenly aware that
Germany had become the largest trading partner with most states in
Southeastern Europe and that they could use this to Germanys advan-
tage. Yet before 1929 the Foreign Office acted cautiously, again because
economic relations with France and the Anglo-Americans remained
Stresemanns highest priority. They eschewed overly aggressive action
and bilateral treaties and instead relied on indirect methods and pri-
vate organizations to maintain Germanys presence in Southeastern
Europe. They hoped, for instance, that reparation construction projects
and deliveries, the commercial links forged by the Leipzig trade fair,
and the publicity conducted by organizations like the Mitteleuropaische
Wirtschaftstag or the Mitteleuropa-Institut would help raise the stature
of German industry, technology, and culture in Southeastern Europe.62
For Gerhard Mutius, Germanys charge daffaires in Bucharest, the
Mitteleuropaische Wirtschaftstag and the Mitteleuropa-Institut could
improve Germanys already strong commercial appeal in Central
Europe.63
To the Southeast lies a region that is naturally dominated by Germany both

economically and culturally . . . for the successor states of the former Austro-
Hungarian Monarchy the weight of the German language, economy, and culture
carries with it the character of a geographical and historical necessity [Zwang].
Here lie colonial regions before our door; here can be found challenges and
goals for those Germans who are consolidated in the Reich. And these [goals]
will surely be easily accomplished the less any loud publicity and politics takes
60 Memorandum on Commercial Policy of the German Government 1924/25, in 2 N 1303

Posse, BAK; Teichert, Autarkie und Grossraumwirtschaft, 108.
61 Stegmann, Mitteleuropa 19251934, 204; Schroder, Die deutsche Sudosteuro-
papolitik 19291936, 8.
62 An example of reparation deliveries: German officials hoped that the Pancevo bridge
project, initiated in 1927 under the auspices of the Dresdner Bank to connect Bel-
grade with its hinterland, could serve as a model for future public relations work in
Southeastern Europe. Hopfner, Sudosteuropapolitik, 156, 1956.
63 Mutius to Berlin Foreign Office, February 14, 1928, Bucharest Embassy 179, PAAA.
Mutius expressed one point of concern, that the term Mitteleuropa represented German
war aims. He suggested changing the name of the Mitteleuropa-Institut to something
less charged, like the Institute for Economic Scholarship for the Danube Countries.
158 German power
possession of them, and the more they are presented as merely the compass
point [Richtungspunkte] for a quasi un-political policy of economic and cultural
expansion toward the Southeast.64
The Great Depression and Germanys first bid for

economic power in Southeastern Europe
If some Germans began to slowly shift their attention away from Western
toward Southeastern Europe after the World Economic Conference in
1927, a more decisive change occurred in 1930 and 1931 as new leader-
ship in the Foreign Office sought to use the Great Depression to reorient
the German economy for strategic as well as commercial reasons. The
Depression restructured the multilateral economic relationship between
Germany, Southeastern Europe, Western Europe, and America. And
although the Depression weakened Germanys economy in many ways
including massive unemployment and severe balance of payment and
exchange rate pressures it was not without benefit to Weimars foreign
policy. By strengthening Germanys position as Europes largest market,
the Depression gave Germany leverage over the Balkan states, which
were suffering their own economic crises that had been mounting since
the middle of the 1920s.
Indeed, for the relatively poor and predominantly agrarian states of
Yugoslavia and Romania the Depression generated two interconnected
problems. First, agricultural prices collapsed. During the World War the
USA, Canada, and Argentina had expanded their cultivation of grain
and other crops to meet the needs of the belligerent powers, which had
devoted their scarce manpower to the military and to industrial produc-
tion. But after 1918 European agricultural production gradually returned
to prewar levels, creating a supply glut. By 1929 prices had fallen 30 per-
cent from their level in 19235. After 1929 prices plummeted further:
demand for foreign crops in France, Great Britain, and America declined
as these states raised tariffs to protect their own agrarian sectors. The
price of corn in New York fell from 91.9 cents a bushel in early 1930 to
16.8 cents two years later. Wheat followed a similar course, and between
1930 and 1932 the average agricultural price paid to the countries of
Southeastern Europe fell by 50 percent from their already low level of
1929. For Yugoslavia and Romania, where over three-quarters of exports
64 Ibid.
consisted of agricultural products and raw materials, this represented

nothing less than a catastrophe.65
Second, the decline in prices eroded Yugoslavias and Romanias
export earnings and made it nearly impossible for them to service their
international debts. Over the previous decade both countries had accrued
massive foreign obligations to investors in France, Britain, Austria, and
the Netherlands. These foreign debts carried the stigma of Western
European financial imperialism. Since the late nineteenth century,
when Serbia and Romania had gained independence, control over their
government revenues had partially fallen to Western European creditor
representatives, often from France. In order to consolidate a large loan
in 1895, for instance, Serbia had to place revenues from its tobacco and
salt monopolies as well as its liquor and stamp taxes under the control of
the internationally administered Monopolies Administration. After the
war Western financial control expanded. France issued more loans to
Romania and Yugoslavia, which came with high interest rates and rigid
conditions, including control over monopoly and customs revenue
and requirements to purchase French military hardware. The League
of Nations, alongside France and Britain, stabilized the currencies of
Southeastern Europe with loans, but on the condition that these states
pay off their prewar foreign debts in hard currency. In 1929, for example,
France took Yugoslavia before the International Court of Justice to force
Belgrade to repay its old loans in gold francs. The year 1972 was the
expected repayment deadline. In Romania, Finance Minister Vintila
Bratianu called the terms of these stabilization loans draconian, and
fought to restrict French oversight of his nations budget to an advisory
role instead of an administrative one.66
The Depression turned these foreign debts into an economic albatross
for Yugoslavia and Romania and exacerbated their sense of falling under
the power of Western, particularly French, finance. By 1933 the export
65 Ranki, Economy and Foreign Policy, 514, 878; Kaiser, Economic Diplomacy, ch. 2;
Lampe and Jackson, Balkan Economic History, 462, 471; Lampe, Balkans into Southeast-
ern Europe, 12830.
66 Herbert Feis, Europe: The Worlds Banker, 18701914 (New York: W. W. Norton, 1965),
25893; Kenneth Moure, French Money Doctors, Central Banks and Politics in the
1920s, in Marc Flandreau (ed.), Money Doctors: The Experience of International Financial
Advising (London: Routledge, 2003), 13865; Dragana Gnjatovic, Foreign Exchange
Policy in the Kingdom of Yugoslavia during and after the Great Depression, online
proceedings of The Experience of Exchange Rate Regimes in Southeastern Europe in a
Historical and Comparative Perspective (SEEMHN), April 13, 2007, 33048, available
at: www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Workshops/2008/Workshop-
No.-13/chapters/gnjatovic_tcm16-80919.pdf; Tooze and Ivanov, Black Sheep of the
Balkans.
160 German power
earnings of Romania and Yugoslavia had fallen to roughly 40 percent of

their level in 1929 and interest payments on their foreign debts rose to
one-third of their total export returns. To earn the foreign currency to
pay interest on their foreign loans and pay for the imports necessary for
their economies everything from coal to machine tools both Romania
and Yugoslavia desperately needed to maintain a high level of exports.67
To deal with these twin crises of agriculture and foreign debt the lead-
ers of Yugoslavia, Romania, and Hungary met in Bucharest in the spring
of 1930 to recommend to the League of Nations that Europes indus-
trial states purchase Eastern European grain at preferential rates. They
raised these ideas at a second conference in Warsaw in August, and at
numerous international gatherings over the coming years. These prefer-
ence schemes assumed different forms: a Danubian federation; a regional
customs union proposed at the Balkan Economic Conference in Athens
in 1930; or preferential agreements between Austria, Czechoslovakia,
Hungary, Yugoslavia, and Romania suggested by the French Foreign
Minister, Andre Tardieu, in 1932. Britain, however, refused to violate
the most-favored-nation principle. Nor was Frances parliament willing
to subject French farmers to competition from Southeastern Europe in
the face of already rock-bottom agricultural prices.68 A hard blow to
Romanian and Yugoslavian hopes of resolving their export crisis with aid
from Western Europe came in 1932, when the Ottawa Accords effectively
closed the British imperial market and the Stresa Conference failed to
either stabilize agricultural prices in Eastern Europe or regulate interna-
tional debts.69 With no Western European rescue package in sight, the
Balkan states instead implemented currency controls and placed severe
legal restrictions on the repayment of foreign debts, both public and
private.70
Thus by 1932 many in Yugoslavia and Romania realized the necessity
of preserving what little presence their countries still had in foreign
67 Ranki, Economy and Foreign Policy, 88; Berend and Ranki, Economic Development, 248.
68 Stirk, Ideas of Economic Integration in Interwar Mitteleuropa, 133; Kaiser, Economic
Diplomacy, 1921.
69 On the agenda of the Stresa Conference, see M. Georges Bonnet, The Economic
Reconstruction of Central and Southeastern Europe, International Affairs 12, no. 1
(January 1933), 1936. The results of these various negotiations were disappointing for
Yugoslavia and Romania, partly because the new Prime Minister in France, Tardieu,
had simultaneously introduced import quotas on nearly all agricultural goods in France,
except those from their colonies. Kaiser, Economic Diplomacy, 412; report from Posse,
p. 126, 6140, R 8119F, BA.
70 Rudolf Notel, International Capital Movements and Finance in Eastern Europe 1919
1949, Vierteljahrschrift fur Sozial- und Wirtschaftsgeschichte 61, no. 1 (1974), 65112;
Nicholas Roosevelt, Salvaging the Debts of Eastern Europe, Foreign Affairs 12, no. 1
(1933), 13440.
markets, and consequently began calling for closer economic ties with
Germany. In contrast to France, Germany did not have the connotation
in Southeastern Europe of being a financial imperialist. Indeed, it
lacked this traditionally powerful instrument of imperialism because
it had no capital to export, nor would it until 1938. Yet it did have
a market that could potentially absorb the exports of these agrarian
countries. As commentators in Privredni Pregled, one of Yugoslavias
leading commercial journals, noted, if Belgrade could not reach a
trade agreement with Germany, the German import trade would be
reoriented toward other agricultural states, which would represent a
heavy blow for Yugoslavian agriculture.71 Otto Franges, professor at
the University of Zagreb and Yugoslavias future Agriculture Minister,
feared that if the Balkan states did not discard the principle of most
favored nation they would find themselves cut off from the markets of
Germany, Austria, and Czechoslovakia. Franges believed a large eco-
nomic bloc in Central Europe, one that included Germany, represented
Yugoslavias best solution to the economic crisis.72 In Romania, likewise,
the German Transylvanian community saw the Depression as a crisis of
overproduction and an opportunity to lobby for closer ties with Weimar.
The German market represented the panacea to their economic woes,
the magical market deep enough to purchase the surpluses that were
slowly destroying Romanias peasant agriculture. According to the editor
of the Siebenburgische Handelszeitung, Germany was for Southeastern
Europe,
the largest trade partner both in exports and in imports. Germany is capable of
importing the entire grain surplus of these countries, besides rye . . . Germany
is able to absorb the entire export of wood and of course all of the petroleum
produced in these countries along with a considerable portion of their livestock.
Germany is ready to do all of this; Germany wants to grant preference treaties,
it demands only that certain of its products will likewise be favored.73
71 Article from Privredni Pregled, July 12, 1932, p. 291, 54164/film 40726, R 901, BA;
Deutsche Fuhrerbriefe, August 18, 1931.
72 Otto Franges, Uberlebte Meistbegunstigung. Durchbrechung der Meistbegunstigung
oder wirtschaftliche Abkehr des Sudostens von Mitteleuropa der Bauer im sozialen
Aufbau der Agrarstaaten, Zagreber Morgenblatt, p. 153, 2717, R 3101, BA; MEI
to Dr. Terdenge from July 29, 1932, 65831/film 7967, Kulturabteilung, PAAA. See
also Memorandum 2 from the German Section from April 4, 1931, 42997, R 901,
BA. For an overview of Franges thinking in general, Ian Innerhofer, Agrarische
Ubervolkerung in Sudosteuropa: zur Konstruktion eines Problems bei Otto Franges
und Rudolf Bicanic, in Sachse, Mitteleuropa und Sudosteuropa, 26289.
73 Siebenburgische Handelszeitung, articles from March 25 and April 25, 1932. The term
Zwischeneuropa that Zillich and Franges both use was be to popularized by the con-
servative German publicist Giselher Wirsing, Zwischeneuropa und die deutsche Zukunft.
162 German power
Already in 1929 officials in Germanys Foreign Office and Economics

Ministry began to recognize that the Depression offered a chance to
shift from Mutiuss quasi un-political policy in Southeastern Europe
to more direct action. And they worked with the Mitteleuropaische
Wirtschaftstag to coordinate and publicize these new tactics. That fall
the German Section won its first chance to convene an international
conference on German soil, in Breslau. Gothein invited Stresemann,
who agreed to preside over the meeting. Stresemann, in poor health
since 1927, died of a stroke in October 1929 before he could open
the Breslau proceedings. But Julius Curtius, his successor as Foreign
Minister, took over Stresemanns commitment and used the conference
to announce a more proactive economic agenda in Southeastern Europe.
At Breslau he declared that Germany actively welcomed all efforts
aiming to integrate, by means of regional agreements, those countries
which through their geographical position and their economic structure
mutually complement one another.74 Curtius left the specific coun-
tries unnamed, but clearly implied were Germany, Austria, Hungary,
Yugoslavia, Romania, and Bulgaria.
Julius Curtius belonged to a new cohort of conservatives who took
the helm of Weimars foreign policy in 1929 and 1930. Following
Stresemanns death, Curtius and his ally Bernard von Bulow became,
respectively, Foreign Minister and Deputy Secretary of the Foreign
Office. Several months later Heinrich Bruning assumed the German
chancellorship. These men were traditional nationalists. Like Stresemann
they had come of age during the Wilhelmine Empire, yet in contrast to
Stresemann they responded to Germanys international weakness after
World War I by turning away from Western Europe. Curtius, a member
of Germans Peoples Party, was by no means set upon agreement
with the Western powers. Bruning wanted to go back to 1914 and
establish Germany as a great power based in Central Europe.75 All
three wanted to use the economic crisis in Southeastern Europe to
assert German interests more aggressively. As Bruning pointed out, the
strongest weapon that Germany has at its disposal in its foreign relations
is the fact that we are the import destination for agricultural products.
We must keep this weapon sharp.76 He translated this outlook into
policy at the Geneva Convention of the League of Nations in September
1930, when he rejected Aristide Briands plan for closer economic ties
74 Report on Breslau Conference, June 21, 1930, p. 128, 6139, R 8119F, BA.
75 Sundhaussen, Weltwirtschaftskrise, 126; Kaiser, Economic Diplomacy, 1415;
Julius Curtius, Sechs Jahre Minister der deutschen Republik (Heidelberg: C. Winter,
1948).
76 Bruning, cited in Sundhaussen, Weltwirtschaftskrise, 137.
between Germany and France.77 Bulow, too, saw the silver geopolitical
lining in the Depression: Conditions are in flux and development in
the southeast of Europe more than in any other part of Europe. German
policy must exert its leverage there because it is there that the possibilities
for Germany lie.78 For these three leaders, and their advisors in the
bureaucracy like Hans Posse, Southeastern Europe would be a first step
on the path to a large, continental economic bloc built on preferential
bilateral treaties and possibly even a customs union.79
In their effort to expand Germanys commercial presence in South-
eastern Europe, however, the new leadership faced serious opposition
from several quarters.80 As with the pan-European idea of the 1920s,
Weimars agricultural interest groups proved to be the most intractable
opponents. Since the mid 1920s German farmers had suffered similar
problems to their competitors in the Balkans: low agricultural prices
and high indebtedness. In March 1930 Martin Schiele, the president
of Germanys Reichslandbund, joined Brunings new cabinet with
the express intention of maintaining prohibitions on the import of
grain and livestock. Schiele wanted autarchy for German agriculture,
hoping it would boost employment by raising demand and prices for
Germanys food products, and he strenuously opposed preferential
treaties with Romania and Hungary.81 Germanys export-oriented
industries likewise voiced concern over preferential treaties. In February
1931 the RDI pointed out that Southeastern Europe accounted for
a mere 5 percent of German exports and argued that the long-term
prospects for these markets were limited. Any special treatment for
them should not jeopardize vital overseas markets in the United States
and Argentina, where preferences for Southeastern Europe might be
resented.82
Yet by 1930 rifts within Germanys industrial leadership appeared, and
some influential business leaders departed from the world-market orien-
tation. In 1930 Eduard Hamm, for example, the president of the DIHT,
questioned the suitability of Germanys current trade policies. Certainly,
he admitted, the German economy cannot exist without strong exports
and accordingly without strong foreign trade. A policy that is aimed
77 Schubert, Stresemanns Under-Secretary, had initially applauded Briands Plan, but his
interest was overruled by new leadership in the Foreign Office. Ranki, Economy and
Foreign Policy, 61.
78 Von Bulow cited in Kaiser, Economic Diplomacy, 16.
79 Teichert, Autarkie und Grossraumwirtschaft, 106.
80 Stegmann, Mitteleuropa 19251934, 21517.
81 Tilman P. Koops, Zielkonflikte der Agrar- und Wirtschaftspolitik in der Ara Bruning,
in Mommsen et al., Industrielles System, 85268.
82 Kaiser, Economic Diplomacy, 224.
164 German power
in any way at cutting off Germanys economy from the international

market . . . would lead to a further increase in unemployment, capital
impoverishment, and debt. Nevertheless, Hamm continued, the new
development in the world economy suggests that the creation of a large
economic region in Europe would facilitate a better balance between
industry and agriculture. Economic agreements that aim to strengthen
the European economy, which are free from the intent of political domi-
nation, and which ensure adequate protection of the domestic, especially
the agricultural, workforce should be promoted.83 The DIHTs vice
president pointed out that although trade with the Balkan states was
relatively small, there remains no doubt that this region situated at
Germanys doorstep, rich in mineral resources and development oppor-
tunities, demands the most careful attention from our economic and
trade policy.84 By the end of the year Hamm was advocating a double-
track strategy for Germany, one that did not cut off international sales
opportunities but which simultaneously developed regionally contiguous
markets like those in the Balkans. On the surface Hamm seemed to want
to have his cake and eat it too. Yet he understood the high stakes and he
hoped that a cautious and moderate application of preferential treaties
would not incur the wrath of Germanys overseas trade partners like
America.
To negotiate a path through this welter of conflicting interests Ger-
man government officials turned to the Mitteleuropaische Wirtschaft-
stag, which in 1930 and 1931 was undergoing a process of reform and
expansion. Already in the wake of the World Economic Conference in
1927 Gothein and the German Section had attracted the attention of a
new cohort of businessmen and economic thinkers. Members from the
DIHT, the International Chamber of Commerce, and the larger German
banks had joined the German Section as they realized the markets of Cen-
tral and Southeastern Europe were becoming increasingly lucrative for
German exporters.85
Much more crucial to the German Section than these groups, however,
was the Langnamverein (LNV), western Germanys most influential
83 DIHT to Ritter, Leitsatze zur Handelspolitik, October 10, 1930, 118536, Sonder-
referat Wirtschaft, PAAA.
84 Quotation from discussion of Southeastern Europe at central committee meeting of
DIHT, December 3, 1931; see also DIHT study on Vorzugszolle und Zollbundnis
als mittel zur Schaffung grossraumiger Wirtschaftsgebiete, November 1931, both in
118536, Sonderreferat Wirtschaft, PAAA; Teichert, Autarkie und Grossraumwirtschaft,
1456.
85 Mitteleuropaische Wirtschaftstag member list, November 2, 1928, pp. 2930, 6139, R
8119F, BA.
business organization. The LNV represented heavy industry in the

Rhineland and Ruhr regions and was guided in part by the publicists
Max Schlenker and Max Hahn.86 The former, as director of the
GermanAustrian Working Committee (DeutschOsterreichischen
Arbeitsgemeinschaft DOAG), had been trying to coordinate the export
of German capital and goods to Austria.87 The latter was also active in
the DOAG and quickly became a prolific advocate for shifting Germanys
commercial attention to the southeast. Described as a small, black
spider, reigning over an extensive net of filaments, nameless, invisible,
concealed, omniscient, or alternatively as the man with one arm but six
elbows for his adaptability, Max Hahn was a well-connected but elusive
figure who would come to dominate the affairs of the Mitteleuropaische
Wirtschaftstag after 1931. He had lost an arm in the First World War,
and although portrayed at the Nuremburg trials as an acrimonious
Nazi opponent, he would prove quite willing to collaborate with the
Nazi regime during the 1930s.88 Schlenker and Hahn were so interested
in Southeastern Europe because they, like Curtius and Bulow, saw there
the potential to translate German economic influence into political
power. Although the exact method by which they would do this remained
undeveloped before 1931 in Schlenker and Hahns thinking, the idea
of using Southeastern Europe as a springboard to relaunch Germanys
ambitions of Weltpolitik was clearly evident in their writings.89
With these imperial ideas in mind, Schlenker and Hahn approached
the Mitteleuropaische Wirtschaftstag in the hopes of using the German
Section to implement their agenda.90 Since 1929 the German Section
86 The full name of the organization Verein zur Wahrung der gemeinsamen
wirtschaftlichen Interessen in Rheinland und Westfalen was shortened by Bismarck
to Langnamverein. Josef Winschuh, Der Verein mit dem langen Namen: Geschichte eines
Wirtschaftsverbandes (Berlin: Dux, 1932).
87 Frommelt, Paneuropa oder Mitteleuropa? 578, 6871; Max Schlenker, Die Bedeu-
tung einer deutsch-osterreichsichen Gemeinschaftsarbeit fur den mitteleuropaischen
Wirtschaftsblock, p. 16, 42995, R 901, BA; Max Hahn, Die deutsche Handelspoli-
tik der Nachkriegsjahre. Erfahrungen, Wunsche und Ziele, Ruhr und Rhein 9, no. 33
(August 16, 1928); Stegmann, Mitteleuropa 19251934, 213.
88 On Hahns personality see the foreword to Alfred Sohn-Rethel, Industrie und National-
sozialismus: Aufzeichnungen aus dem Mitteleuropaischen Wirtschaftstags, ed. Carl Freytag
(Berlin: Wagenbach, 1992), footnotes 12, 30.
89 Max Schlenker, Vorschlag zur Grundung einer Vereinigung zur Forderung der
wirtschaftlichen Annaherung mit Zentraleuropa, cited in Stegmann, Mitteleuropa
19251934, 21415.
90 Invited lecture before the board of directors of the German Section, February 19,
1929, p. 131, 42995, R 901, BA; Georg Gothein, Briands Europa-Union und das
Mitteleuropaische Wirtschaftsbundnis: ein Problem der Politik und der Wirtschaft,
Mitteleuropaische Wirtschaft, weekly attachment to the Neuen Freien Presse 347 (June 28,
1930), p. 133, 6139, R 8119F, BA; Frommelt, Paneuropa oder Mitteleuropa? 856.
166 German power
had been experiencing financial difficulties from overextending itself with

numerous commitments.91 In the spring of 1929 Gothein opened nego-
tiations with Hahn and Schlenker to place the German Section on a more
solid financial footing.92 Over the next two years they slowly worked out
the terms of their collaboration, whereby the German Section would
incorporate new leadership and members from the LNV by stages,
in order to demonstrate continuity in its personnel and in its agenda.
The LNV, for its part, agreed to support the German Section with at
least 30,000 RM annually.93 The official reorganization of the German
Section took place on February 13, 1931. After a backdoor power strug-
gle, Gothein ceded much of his influence in the organization to rep-
resentatives of heavy industry from the Ruhr and the Rhineland, like
Hahn.94 The reorganization incorporated economic sectors that had pre-
viously shown only limited interest in Southeastern Europe: Carl Duis-
berg, director of the RDI and manager of IG Farben; Eduard Hamm,
director of the DIHT; Tilo Freiherr von Wilmowsky, director of the
Imperial Board for Technology and Agriculture; Hellmuth Poensgen,
director of the iron and steel conglomerate Vestag; and Ludwig von Win-
terfeld, board member of Siemens AG all joined the executive committee.
The German Section now became a forum where the diverse industrial
interests of Germanys economy from export sectors like electrical
engineering and chemicals to the more domestic-oriented steel and iron
91 The Breslau Conference was organized by the German Section after Hantoss Vienna
institute was formed and after Hantos organized his own conference in Budapest.
Gothein to Freymehr of the Industrie and Handelskammer Breslau, April 25, 1929,
50, N 1006 Gothein, BAK. Although the German Section had attracted new members
from the RDI, the DIHT, and several large banks, these organizations were either
unable or unwilling to fund the German Sections activities. Report on Dresdner Bank
and Commerz Bank support for Mitteleuropaische Wirtschaftstag, July 16, 1928, 49,
N 1006 Gothein, BAK; Frommelt, Paneuropa oder Mitteleuropa? 578, 6871, 85.
92 Protocol of German Section meeting, July, 5, 1929, 6139, R 8119F, BA; Entstehung,
Entwicklung, und Arbeit des Mitteleuropaische Wirtschaftstag, p. 2, 816, FAH 4E,
Villa Hugel Archiv, Essen (VHA).
93 Vorstandssitzung, November 28, 1930, 51, N 1006 Gothein, BAK; Frommelt, Paneu-
ropa oder Mitteleuropa? 856; Martin Seckendorf, Entwicklungshilfeorganisation oder
Generalstab des deutschen Kapitals? Bedeutung und Grenze des Mitteleuropaischen
Wirtschaftstages, 1999 Zeitschrift fur Sozialgeschichte des 20 und 21 Jahrhunderts 8, no. 3
(1993), 1033.
94 In August 1931 Hahn moved the headquarters of the German Section to a new location
in Berlin. Along the Schoneberg Ufer he founded the Zentralstelle fur Mitteleuropa,
which was situated in the same complex of buildings that housed the offices of influ-
ential journals such as the Deutschen Volkswirt, the Deutschen Fuhrerbriefe, and Dr. F.
Reuters Dux-Verlag. Sohn-Rethel, Industrie und Nationalsozialismus, introduction, p. 9;
Frommelt, Paneuropa oder Mitteleuropa? 859, 105; report from Gothein, pp. 11718,
52, N 1006 Gothein, BAK.
sectors could convene under a single roof to discuss German commer-

cial policy.95
In 1930 and 1931 Curtius, Bruning, and Bulow launched Germanys
first real bid since the war to flex its commercial muscle in Southeastern
Europe, and they worked with the Mitteleuropaische Wirtschaftstag to
build a coalition of domestic groups to support two concurrent initiatives.
First, in the summer of 1930 Germany opened negotiations with Roma-
nia and Hungary for bilateral preferential treaties. Posse and Curtius
energetically lobbied to ease the entry of Romanian and Hungarian grain
and livestock into the German market. By offering to lower tariffs for
Romanian and Hungarian goods they hoped to demonstrate the potential
benefits of cooperating with Germany.96 In the second, more publicized
initiative, Curtius and Bulow opened negotiations in early 1931 with
Austria to unite their countries in a customs union. They saw this as a
preliminary step in incorporating the states of Southeastern Europe into
a regional customs union.97 In connection with rapid developments
in Southeast Europe, Bulow explained, the union with Austria must
be the most urgent task of German diplomacy, for developments in
the southeast could be influenced and guided in Germanys interests
from an Austria belonging to Germany more than is now possible . . .
the solution to the problem of a union with Austria seems even more
urgent and important than the question of the Polish Corridor.98
The Mitteleuropaische Wirtschaftstag, with its now broadened base of
support, worked behind the scenes to bridge the gap separating protec-
tionist agriculture and heavy industry from Germanys export sectors, in
the hopes of bringing all parties into agreement behind a pro-Mitteleuropa
foreign policy, and to present a unified front to the states of Southeastern
Europe. With his former connections to the DOAG, Hahn worked as a
go-between with Austrian business groups and the Austrian government,
selling the customs union as a way to open wider markets to Austrian
producers.99 In the bilateral negotiations with Romania and Hungary the
95 Rundschreiben, March 31, 1931, 6140, R 8119F, BA; Teichert, Autarkie und Gross-
raumwirtschaft, 144.
96 Oscar Meyer, Die deutsche Aussenhandelspolitik, Jahrbuch fur Auswartige Poli-
tik, Internationale Wirtschaft und Kultur Weltverkehr und Volkerrecht (1931), 5563, at
57; Sundhaussen, Weltwirtschaftskrise, 12830, 136; Teichert, Autarkie und Gross-
raumwirtschaft, 1057; Kaiser, Economic Diplomacy, 201. On the veterinary restrictions
that these countries faced in getting their livestock into Germany, see Alexander Ger-
schenkron, Bread and Democracy in Germany (Berkeley: University of California Press,
1943).
97 Harro Molt, . . . Wie ein Klotz inmitten Europas: Anschlu und Mitteleuropa wahrend
der Weimarer Republik 19251931 (Frankfurt am Main: Lang, 1986).
98 Von Bulow cited in Kaiser, Economic Diplomacy, 16.
99 Frommelt, Paneuropa oder Mitteleuropa? 86.
168 German power
central player for the Mitteleuropaische Wirtschaftstag was Tilo Freiherr

von Wilmowsky, who assumed the presidency of the German Section
in late 1931. As the brother-in-law of Friedrich Krupp and a director
of the Imperial Board for Technology and Agriculture, Wilmowsky was
uniquely placed to have one foot in agriculture and one in industry. Since
1927 he had helped introduce motorized technology and new equip-
ment to German farmers, and had formed contacts with Martin Schiele
and other agrarian leaders. His travels throughout Southeastern Europe,
moreover, gave him a practical knowledge of the regions economies that
was absent among other industrialists.100 In 1931 Wilmowsky began
drawing on his connections with agrarian interest groups to work out a
compromise over admitting cereal imports from Southeastern Europe.
In meetings with the Reichslandbund and in his effort to establish a study
commission for industry and agriculture, Wilmowsky pushed the line that
Germany should manipulate rather than completely restrict its imports.
The German government, he thought, should strike a balance between
moderate protection of domestic agriculture and moderate support for
German exports, and this would further Germanys larger ambition of
asserting its influence in Central Europe.101
The Reichslandbund would eventually come to accept such a compro-
mise in principle; in comparison to vast supplies of cheap grain from
America, Canada, and Australia, imports from Southeastern Europe
were the lesser of two evils.102 Wilmowsky, however, did not succeed
in his effort to shift the Reichslandbunds policy stance soon enough. In
June and July 1931 Germany concluded bilateral treaties with Romania
and Hungary.103 Despite the best efforts of Wilmowsky and Posse, how-
ever, Germanys Agriculture Ministry never fully endorsed preferential
100 Tilo Freiherr von Wilmowsky, . . . Ruckblickend mochte ich sagen . . . (Oldenburg: G.
Stalling, 1961); memo concerning Mitteleuropaische Wirtschaftstag from Wilmowsky,
August 28, 1946, 1363, WA 40B, VHA.
101 Entstehung, Entwicklung und Arbeit des Mitteleuropaische Wirtschaftstag, Novem-
ber 22, 1938, 816, FAH 4E, VHA; Frommelt, Paneuropa oder Mitteleuropa? 789.
102 The Reichslandbund never saw preferential treaties with Southeastern Europe as a
precursor to returning to world trade, but as a step toward autarchy. Teichert, Autarkie
und Grossraumwirtschaft, 101. Dealing with the agricultural problem remained a central
concern of the new Mitteleuropaische Wirtschaftstag. In August 1932 they helped
arrange an agreement between heavy industry and large agricultural interest groups to
pursue a program of cartels for agriculture and to change the destination of German
trade. Sohn-Rethel, Industrie und Nationalsozialismus, 74; Gessner, Agrardepression und
Prasidialregierungen in Deutschland, ch. 1.
103 According to Wilmowsky, he and Hahn worked with the German government to nego-
tiate bilateral treaties that Germany concluded in the summer 1931 with Romania and
Hungary. Entstehung, Entwicklung und Arbeit des Mitteleuropaische Wirtschaftstag,
November 22, 1938, 816, FAH, 4E, VHA.
treatment for Romanian cattle and grain. Instead it restricted Germanys

concessions so much that the treaties were all but dead on arrival. The
agreement gave Romania a 50 percent preference for barley, a 40 per-
cent preference for corn, and an import quota of 6,000 head of cattle.
Yet the terms were littered with qualifications, the most important being
that the preferential rates could not be applied to abnormally large
quantities of Rumanian cereals, meaning that no sharp rise in Roma-
nian imports to Germany would ensue. Romania, for its part, lowered
tariffs on iron, steel, electrical products, textiles, chemicals, and pharma-
ceuticals, but was unable to give Germany special preferences on these
goods.104
A second, and larger setback occurred when France threw a financial
wrench into Germanys plan for a customs union with Austria. In May
1931 the Credit-Anstalt, Austrias largest bank and a massive industrial
holding company in its own right, collapsed and threatened the financial
stability of the Austrian government. The magnitude of the financial
crisis and the subsequent run on the Austrian National Bank were too
great for a German bank consortium to halt. In their efforts to save the
Credit-Anstalt, the Austrian government turned to the only place with
sufficient capital, Paris, where the Bank of France organized a bail-out
consortium on the condition that Austria renounce the customs union.
The Austrian government had no choice but to comply.105
Failure and retrenchment conceptualizing

a German economic bloc
The debacles of the GermanAustrian customs union and the bilateral
treaties represented a failure of Germanys first state-led attempt to tie
the economies of Central and Southeastern to the German economy. It
became the Fashoda of German foreign policy.106 Curtius resigned
as Foreign Minister and Bulow took effective control over the Foreign
Office where he, along with Posse in the Economics Ministry, admitted
the necessity of scaling back overt plans to organize the economies of
Central Europe into a German bloc.

105 By one estimate, between 60 and 80 percent of Austrian businesses were to some degree
dependent upon the Credit-Anstalt. Dieter Stiefel, The Reconstruction of the Credit-
Anstalt, in Teichova and Cottrell, International Business and Central Europe, 41529.
Dieter Stiefel, Finanzdiplomatie und Weltwirtschaftskrise die Krise der Credit-Anstalt und
ihre wirtschaftlich-politische Bewaltigung (Frankfurt am Main: Knapp, 1989).
106 Anonymous, Das Faschoda der deutschen Aussenpolitik, Deutsche Fuhrerbriefe,
Politisch-Wirtschaftliche Privatkorrespondenz 4, no. 69 (September 4, 1931).
170 German power
As a consequence of the failures in 1931 German officials for the time

being returned to their previous, more subtle methods of exercising influ-
ence in Southeastern Europe. In May 1932 Posse addressed the German
Section of the Mitteleuropaische Wirtschaftstag at a meeting in Berlin.
It is absolutely our most urgent quest to obstruct any plan that would
lay obstacles in front of our free economic activity in the Balkans. If any
growth possibilities still exist for the German economy, they are to be
found in the East and the Southeast. Yet, Posse admitted, with the fail-
ure of the customs union plan and the bilateral treaties Germany now
had to camouflage its political goals. The German government would
bide its time until a more favorable moment allowed it once again to
pursue a new trade regime based on bilateral, preferential treaties and,
perhaps, a customs union. Next to this more passive activity from offi-
cial Germany, there falls to an organization like the Mitteleuropaische
Wirtschaftstag the highly important duty of disrupting the dependence
of these countries on France and creating the preconditions for coopera-
tion with Germany. One such precondition was convincing the leaders
of Southeastern Europe and the leaders of Germanys interest groups
that a German-led continental economic bloc offered a mutually benefi-
cial resolution to the Depression. The Mitteleuropaische Wirtschaftstag,
Posse hoped, would do this through an objective, purely economic delin-
eation of the problems facing Central and Southeastern Europe. Posse
stressed that this task would ultimately reinforce Germanys larger goal
of politically influencing the region of Central Europe.107
Here was a mandate laid out by one of Germanys most influential
government officials calling on the German Section of the Mitteleu-
ropaische Wirtschaftstag to expand its publicity and develop a rationale
for a German-led economic bloc, because the German government was
in no position to do so. After the meeting with Posse, Hahn circulated
a memorandum to the directors of the German Section highlighting
their new special duty . . . to substantiate and corroborate with statisti-
cal material the needs of Germanys trade policy in Central Europe.108
Under Hahn and Wilmowskys leadership the German Section aggres-
sively advocated Central European economic cooperation in a variety of
German and Austrian journals. The Mitteleuropaische Wirtschaftstag
107 Minutes of the directors meeting, May 28, 1932, pp. 12538, 6140, R 8119F, BA. On
the unpolitical politics of the Mitteleuropaische Wirtschaftstag, see Carola Sachse,
Ehe von Schornstein und Pflug: utopische Elemente in den Raumvorstellungen des
Mitteleuropaischen Wirtschaftstags in der Zwischenkriegzeit, in Sachse, Mitteleu-
ropa und Sudosteuropa, 712.
108 Rundschreiben to German Section directorate, July 18, 1932, p. 141, 6140, R 8119F,
BA.
became, if not a mouthpiece for the German government, then a pub-

licity organ for the views that many government officials adhered to but
feared to actively advance in public.109
For example, in their publicity the Mitteleuropaische Wirtschaftstag
now cast the Great Depression as an opportunity Germany must use to
forge its own sphere of economic influence in Central Europe, echoing
the ideas that Posse and other officials expressed behind the closed doors
of the Foreign Office and the Economics Ministry. They pointed to
the fact that German imports from Southeastern Europe had weathered
the Depression better than imports from the USA, Great Britain, and
France (see Table 4.2).110 For Hahn the Depression was more than just
another cyclical downturn. The industrialization of many of Europes
colonies and dominions, alongside rising powers like America and Japan,
had forever destroyed the pre-1914 global order that had been based on
the unchallenged primacy and domination of industrial Europe. No
longer could Germany hope to resurrect international trade as it existed
before the World War. Instead, Hahn argued, the Depression marked
the end of an epoch, and presented his generation with an existential
question: Is it possible to further secure the existence of our people
and our economy on a foundation of the free international exchange of
goods, or are the stronger powers forcing us to resituate the focal point
of our economic and political activity to that space in which history
has placed the German people, namely, Central Europe? Hahn stoked
anxieties that the world was slowly being parceled into great economic
spaces with huge endowments of raw materials and food stuffs, against
which the fragmented Europe of today holds only the weight of a grain
of sand . . . Almost three-quarters or the earth, certainly four-fifths of the
worlds purchasing power, will soon be united into these large economic
spaces.111
To justify German influence in Central and Southeastern Europe the
Mitteleuropaische Wirtschaftstag constructed two arguments, using the
language of security and power on the one hand and the language of
109 Mitteleuropaische Wirtschaftsfragen: Schriftenreihe des Mitteleuropa-Instituts zur Forderung

der Wirtschaftlichen und Kulturellen Annaherung (Vienna); Richard Riedl, Statistische
Grundlagen innereuropaischer Handelspolitik, vol. IV of the series Central European
Economic Policies published by the MWT (Berlin: Rothschild, 1932).
110 Schroter, Industrie auf dem Weltmarkt, 5289.
111 Max Hahn, Importverlagerung als vordringliche Aufgabe der deutschen Handel-
spolitik, Der Deutsche Volkswirt 1213 (December 22, 1933), 51013, at 510. On the
positions of the RDI and the DIHT regarding world trade, see Schroter, Industrie auf
dem Weltmarkt, 17; Tooze, Wages of Destruction, 103.
172 German power
Table 4.2 German trade by destination, 192933 (in millions of RM)
Destination 1929 1930 1931 1932 1933 1933 as a

percentage
of 1929
Imports
America 1,790.4 1,306.8 791.4 591.8 482.8 27.0
Great Britain 865.4 639.0 453.3 258.5 238.4 27.5
France 642.0 518.7 341.6 189.9 134 20.9
Big Three 3,297.8 2,464.5 1,586.3 1,040.2 855.2 25.9
(US, GB,
France)
Romania 210.9 236.9 102.4 74.4 46.1 21.9
Yugoslavia 60.9 74.8 40.1 29.5 33.5 55.0
Hungary 89.3 82.1 55.2 36.4 34.2 38.3
Bulgaria 51.2 58.9 48.3 34.5 31.3 61.1
Southeastern 412.3 452.7 246 174.8 145.1 35.2
Europe
Total 13,436 10,393 6,727 4,660 4,203 31.3
Exports
America 991.9 685.2 487.5 281.2 245.9 24.8
Great Britain 1,305.5 1,218.9 1,133.6 446.0 245.9 18.8
France 934.0 1,148.6 834.1 482.5 395.0 42.3
Big Three 3,231.4 3,052.7 2,455.2 1,209.7 886.8 27.4
(US, GB,
France)
Romania 164.1 137.3 92.5 64.2 46.0 28.0
Yugoslavia 152.6 172.1 95.1 43.3 33.8 22.1
Hungary 146.7 118.3 84.4 47.4 38.1 26.0
Bulgaria 44.7 22.9 25.3 20.8 17.7 39.6
Southeastern 508.1 450.6 297.3 175.7 135.6 26.7
Europe
Total 13,482.7 12,035.6 9,598.6 5,739.1 4,871.4 36.1
development on the other. In the first, the Mitteleuropaische Wirtschaft-

stag appealed to Germanys need for security and power in an increas-
ingly unstable global economy. The Mitteleuropaische Wirtschaftstag
suggested a new imperial region would not only help Germany recover
from the Depression, it would win for Germany a better position in the
contest with the great economic powers of Western Europe.112 Hahn
112 Hahn, Importverlagerung.

used the fiasco of the GermanAustrian customs union project, which

had been thwarted by French finance, to point out just how vulnerable
Germany was to economic factors outside its own borders. Above all,
he was concerned with Germanys dependence on overseas imports, a
dependency that had grown since the end of the First World War. Before
1914, Hahn argued, this dependency was mitigated insofar as Germany
could rely on a relatively stable, multilateral exchange of goods and credit
with Great Britain and the rest of the world.113 But as Britain and France
began to retreat within their own empires, Germanys dependence on
overseas imports was becoming a major issue. Where would Germany
earn the foreign currency to pay for its imports when Britain, formerly
the crucial link in the multilateral commercial system and Germanys
largest trade partner, purchased fewer and fewer German products? Such
an unbalanced dependency on overseas suppliers, Hahn continued,
generated an overly sensitive system that reacted to every fluctuation
and crisis in international politics.114 Hahn, in other words, couched
Germanys quest for a commercial bloc as an economic necessity forced
on Germany by the turbulent structure of the world economy and the
policies of the Western powers.
Yet the Mitteleuropaische Wirtschaftstag directors also began using
the concept of development and trusteeship to justify an expanded
German presence in Southeastern Europe, an approach they would
refine over the coming decade. Here they employed the same argu-
ments economic trusteeship and a civilizing mission that British and
French colonial officials used to legitimize their new mandates in the
Middle East. The states of Southeastern Europe, Gothein suggested,
have the character of colonial countries, which through capital, through
intelligence, and through work will evolve into highly developed, civilized
nations. The security of a large sales market would deliver all of this to
them.115 As a Kultur-nation, he argued, Germany should be given the
113 As Germany industrialized before 1914 it ran a trade deficit with many non-European
countries from importing raw materials. To cover this deficit it exported finished goods
to Britain. Britain balanced this through invisible earnings, shipping, and investments
in non-European countries, many of which were its colonies. The First World War
disrupted this multilateral system, which was only precariously reconstructed in the
1920s. E. J. Hobsbawm, Industry and Empire: From 1750 to the Present Day (New York:
The New Press, 1986), 1513.
114 Hahn, Importverlagerung; Max Hahn, Deutschlands handelspolitische Beziehun-
gen zu den Landern des mitteleuropaischen Raums, special edition of Berliner Borsen-
Zeitung 589 (December 17, 1933).
115 Georg Gothein, Mitteleuropaische Zollunion: eine Entgegnung auf Professor Franz
Eulenburg, Volk und Reich 23 (1931) in 78, N 1006 Gothein, BAK.
174 German power
opportunity to lead these other, younger nations along the path of

economic and cultural development. Not only would a German-led
customs union help raise the standard of living in Southeastern Europe.
Painting an excessively rosy picture of German governance in its former
African colonies from medical research and hygiene to education
Gothein argued that Germany would draw on its colonial experience to
teach the Balkan states to exercise their newfound political freedom.116
Hahn went even further than Gothein, rethinking how Germany could
exploit its trade relationship with Southeastern Europe to deepen and
entrench the industrial/agrarian division of labor in the region, and to
refashion these economies so they would better serve German needs.
This meant redirecting more local labor and land into cash crop export
sectors and selling these crops in Germany, the only market with sufficient
demand to absorb the new production. If Germany could coordinate its
purchases of these crops through joint stateprivate cooperation it
would acquire a near monopsony position over these agricultural sectors
and thereby gain a say over what exactly Yugoslavia, Romania, Bulgaria,
or Hungary actually produced.
When we induce a country like Hungary . . . to take up or to expand a particular

type of cultivation for which Germany offers a long term and secure demand, we
have thereby achieved a positive step in interstate production policy. It no longer
suffices today to arrange the placement of such agricultural surpluses merely
through the temporary measures of trade policies. Rather the European primary
producers . . . can only be promised effective assistance and a close economic
relationship with Germany when they adjust extensively on their part in their
production, in their technology, in their investment policies, and in the management
of their price level to the needs and requirements of the German consumer
and the German producer. The redirection of our imports, which denotes the
creation of a single economic space in Central Europe, thus fundamentally means
much more than merely implementing certain trade policies like preferences or
compensation, it means above all initiating a methodical, interstate production
policy.117
Hahn, in other words, wanted to restructure the very economies of South-

eastern Europe over the long term, to guide their economic develop-
ment and make them tightly complementary with, and more intimately
dependent upon, Germany. Only such deep-rooted structural changes,
116 Georg Gothein, Der Deutsche Gedanke Brauchen wir Kolonien? Politik und
Wirtschaft (November 1927), in 79, N 1006 Gothein, BAK; Max Hahn, Mitteleuropa
als Ziel deutscher Politik, Volk und Reich 1011 (1931), 56372; Walther Hoffmann,
Sudosteuropa: Bulgarien, Jugoslavien, Romanien, ein Querschnitt durch Politik, Kultur, und
Wirtschaft (Leipzig: Linder, 1932), chs. 3, 4, and 6.
117 Hahn, Importverlagerung.
he argued, could lay the cornerstone of a new economic recovery for

the continent of Europe.118
Conclusion
In the 1920s the Weimar Republic began projecting soft power into
Southeastern Europe. It did not, however, forge an informal empire in
the region. For one, the will to create such an empire was absent: Gustav
Stresemanns Atlanticist and Western European strategy prevented him
from flexing Germanys economic muscle in the Balkans; many German
exporters still hoped to trade in the global market; and German agricul-
ture staunchly opposed preferential treatment for Southeastern European
producers. Just as importantly, the geopolitical context was not set for an
informal German empire in the 1920s: relatively free international trade
still seemed possible; the leaders of Southeastern Europe still sought
accommodation in the markets of Western Europe; and France, Britain,
and the USA were not yet debilitated by the Great Depression.
The Depression changed all of this. It gave German policy-makers the
space to assert a more direct, potentially imperial influence in Southeast-
ern Europe. Yet Germanys first bid to assert its influence in Southeastern
Europe failed in 1931, in part because France used its financial connec-
tions to torpedo the Austro-German customs union, in part from inter-
nal divisions within Germany. For Weimars agrarian interest groups an
economic bloc that included Southeastern Europe would be a threat to
German farmers. Through 1931 the Reichslandbund impeded efforts by
the Foreign Office, the Economics Ministry, and the Mitteleuropaische
Wirtschaftstag to conclude bilateral agreements with the states of South-
eastern Europe. For Germanys internationally oriented sectors, before
1931 a turn toward Southeastern Europe would not generate enough
returns for them to risk losing the export markets in Western Europe and
America to a tariff war.
Over time, however, agricultural interest groups and exporters would
slowly come to accept the logic behind a continental economic bloc.
After the debacle of 1931, German agriculture at first retrenched and
demanded even greater protection. Under the leadership of Alfred
Hugenberg a conservative nationalist who became both Agricultural
and Economics Minister once Hitler gained power in 1933 Germany
118 Hahn, Deutschlands handelspolitische Beziehungen; France and Great Britain only
purchased 3 and 1 percent, respectively, of the exports of Yugoslavia and Romania.
Kaiser, Economic Diplomacy, 326.
176 German power
pursued a policy of extreme protectionism. In 1933, for instance, Ger-

many ended its commercial treaty with Yugoslavia and raised tariffs on
many agricultural products. Yet Hugenbergs policy proved too extreme
in its autarchy for even the Nazi leadership. Hugenberg lost his positions
after he presented radical proposals for revamping Germanys colonial
empire at the World Economic Conference in June 1933. His succes-
sor, Walther Darre, proved more flexible on tariff policy and conceded
preferential treatment for certain food products exported by Southeast-
ern Europe, the first such concessions going to Yugoslavia for its plums
in the summer of 1933. By 1933, moreover, many of Germanys large,
export-oriented firms were likewise warming up to the prospect of deeper
ties with Southeastern Europe as trade with the USA and Great Britain
collapsed. That year IG Farben, for example, concluded its first trade
contract with Romania chemical products for grain and oil seeds. The
path now lay open for a comprehensive set of bilateral treaties with the
states of Southeastern Europe, which Germanys new National Socialist
economic leadership would bring to fruition in 1934.119
Thus despite the setbacks of 1931 the Great Depression marked
a watershed in the way German economists and government officials
thought about foreign trade and about Germanys economic position in
Europe. Between 1927 and 1933 a rough consensus gradually emerged
that a continental economic strategy, despite its shortcomings, was one
of the only ways for Germany to reclaim its status as a great power. The
advocates for a German bloc at first couched their arguments in terms
of economic necessity: Germany, they lamented, was merely reacting to
the loss of its colonies, to Western European and American protection-
ism, and to its need for larger and more secure markets. Yet over time
Max Hahn, Hans Posse, and former proponents of free trade like Georg
Gothein and Eduard Hamm, abandoned their conviction in interna-
tional trade as much because of political aspirations. Trade, they came
to believe, should be used as an instrument of national power. As these
elites repeated countless times, by redirecting its trade to Southeastern
Europe Germany could gain political leverage in the region. Ultimately,
Hahn, Posse, Curtius, and others hoped that by pursuing this strategy
Germany could undermine Yugoslavias and Romanias diplomatic ties
119 For Yugoslavia, the worlds largest plum exporter in the 1930s, the concessions in 1933
were no small matter. Grenzebach, Informal Empire, 2430; J. E. Farquharson, The
Agrarian Policy of National Socialist Germany, in Robert G. Moeller (ed.), Peasants
and Lords in Modern Germany: Recent Studies in Agricultural History (Boston: Allen
& Unwin, 1986), 23359, at 239; Gerhard Weinberg, The Foreign Policy of Hitlers
Germany: Diplomatic Revolution in Europe, 19331936 (University of Chicago Press,
1970), 79, 119.
to France and dismantle the collective security framework established by

the Treaty of Versailles.120
During the Depression, moreover, economic development became an
important part of Germanys strategy of using commerce for political
power. The directors of the Mitteleuropaische Wirtschaftstag Hahn,
Gothein, and Wilmowsky advocated trade with Germany as a way for
the Balkan states to survive the Depression and develop their cash crop
sectors. These ideas remained inchoate before 1934, lacking in specificity
regarding the cash crops or the countries Germany should target. But
after 1934 the Mitteleuropaische Wirtschaftstag would focus its attention
on certain sectors, and it would add mining improvements and education
of the local workforce to its developmentalist program for the Balkans.
This all served a larger political agenda, which Hahn clearly articulated
in 1931 and 1932. If Germany could restructure these export-oriented
economies to suit its own needs, the country could enhance its monop-
sony position in key sectors, cement Southeastern Europes dependence
on German markets, and translate this economic relationship into polit-
ical influence.
Before Hitler gained power in 1933, then, German economists and
government officials had conceptualized the main strategies for using
commerce as well as the soft power of cultural diplomacy to build an
informal empire in Southeastern Europe. And although this informal
empire had not yet materialized, German elites had already created the
institutions that would make it possible. After 1933 the Leipzig trade
fair and the GermanRomanian chambers of commerce would become
increasingly adept at using their networks to include key elites from
Southeastern Europe in the material rewards of GermanBalkan trade,
and exclude others. After 1934 the Mitteleuropa-Institut and the Institut
fur Mittel- und Sudosteuropaischewirtschaftsforschung would cultivate
the elites of Southeastern Europe through new programs dedicated to
cultural diplomacy and intellectual exchange. After 1935 the Mitteleu-
ropaische Wirtschaftstag would pursue development assistance projects
that introduced new crops, new farming techniques, and new mining
technology to the Balkans in the hopes of restructuring these economies.
And over the coming decades the leaders of these organizations would
collaborate in a tense relationship with the Nazi regime to turn their
imperial vision into reality.
120 Ranki, Economy and Foreign Policy, 93.

Part II
Nazi imperialism
5 Stabilizing the Reichsmark bloc: commercial
networks in the Third Reich, 19331939
The new cameralism marches forth.1

We are forced, with a certain medieval brutality, to exactly calculate the
equivalent value of exported and imported commodities and replace the
normal play of exchange and credit with an abominable bureaucracy . . .
It has something unbelievably barbaric about it, when one must barter
machines for grain, or radio equipment for tobacco, like a Negro who
swaps his ivory against any possible glassware or his rubber for cotton.
Do you really believe that this system is worthy of a cultivated and
civilized humanity?2
On January 30, 1933 the National Socialist Party came to power when
Weimars aging President, World War I general Paul von Hindenburg,
swore in Adolf Hitler as Chancellor. Over the coming months the Nazis
dismantled Weimar democracy and erected in its place a fascist regime
that ruled Germany for the next twelve years through a chaotic maze of
overlapping jurisdictions.3 Upon becoming Chancellor Hitlers first goal
was to end the Depression. Building on projects initiated by his predeces-
sors, Hitler inaugurated what would become a decade-long program of
public spending, fiscal stimulus, and government deficits. Rearmament
lay at the core of this program. Hitler aimed to bring employment back
to the German people while also preparing them for the wars needed
to make his nation a world power. By the end of the 1930s rearma-
ment accounted for over half of all public spending. And Germany, as
1 Werner Sombart, Weltanschauung, Wissenschaft und Wirtschaft, in Deutsches Institut

fur Bankwissenschaft und Bankwesen, Probleme des deutschen Wirtschaftslebens: Erstrebtes
und Erreichtes (Berlin: Walter de Gruyter, 1937), 788.
2 Hjalmar Schacht, Reichsbank director, discussing Germanys clearing system with the
editor of Le Matin, July 16, 1936. Hjalmar Schacht, Schacht in seiner Ausserungen (Berlin:
Reichsbank Druckerei, 1937), 106.
3 Franz Neumann, Behemoth: The Structure and Practice of National Socialism, 19331944
(New York: Octagon Books, 1944); Martin Broszat, The Hitler State: The Foundation and
Development of the Internal Structure of the Third Reich (London: Longman, 1981); Norbert
Frei, Martin Broszat, der Staat Hitlers und die Historisierung des Nationalsozialismus
(Gottingen: Wallstein Verlag, 2007).
181
182 Nazi imperialism
a consequence, was the first industrial state to recover from the global
depression.4
Foreign trade was an essential part of Germanys rearmament, and
here the Nazis encountered chronic problems. As the economy grew
it demanded imports to fuel its recovery iron ore, oil, grains, and
even soybeans. Yet as Hitler channeled resources into the military, fewer
products were left that Germany could export to pay for its imports.
This tension created a trade deficit that at times became so problematic
it threatened to derail Hitlers entire rearmament program. To resolve
this structural challenge the Nazis extended state control over foreign
trade and foreign currency, first with Hjalmar Schachts New Plan in
1934, then with a series of bilateral trade agreements with Southeastern
Europe, and finally with Hermann Gorings Four-Year Plan in 1936. Yet
this state-led trade system never fully resolved the underlying tension
between Germanys burgeoning demand for imports and its stagnating
exports. Instead, rearmament caused foreign currency crises at regular
intervals. Each crisis in 1934, 1936, and 1939 marked a turning
point for German leaders, a fork in the road. Nazi Party leaders, above
all Hitler, wanted to push on with militarization at all costs and with it the
conquest of a formal empire to support Germanys war machine. Others,
minority voices for the most part, wanted to free prices, free trade, and
return to the global economy.
A third group, however, advocated a path in between formal empire
and free trade: an informal empire that would moderate rearmament
and shift the economy toward Germanys traditional engine of growth,
exports, but within a continental bloc. Reichsbank director Hjalmar
Schacht, deputy director of Economic Policy in the Foreign Office
Carl Clodius, Tilo Freiherr von Wilmowsky of the Mitteleuropaische
Wirtschaftstag, and many others wanted to create a protected space for
German commerce in Europe. To do so they built a domestic alliance
of Mitteleuropa advocates and they reached out to opponents of this
strategy, above all agricultural interest groups. Between 1933 and 1938
these officials and businessmen exercised great influence over German
foreign economic policy. And they used this to turn Germanys ad hoc
trade arrangements with the states of Southeastern Europe into an
informal trading empire a Reichsmark bloc.
4 Avraham Barkai, Nazi Economics: Ideology, Theory, and Policy, trans. Ruth Hadass-
Vashitz (New Haven, CT: Yale University Press, 1990), 15870, 2602; Albrecht Ritschl,
Deficit Spending in the Nazi Recovery, 19331938: A Critical Reassessment, Journal
of the Japanese and International Economies 16, no. 4 (2002), 55982.
Stabilizing the Reichsmark bloc 183
Trade, as Albert Hirschman pointed out in 1945, can further a nations

power of coercion over other states through two dynamics: the supply
effect and the influence effect.5 Between 1933 and 1938 Nazi Germany
employed the former. The bilateral treaties that Schacht and his allies
engineered with Southeastern Europe allowed Germany to acquire raw
materials that enhanced its military power. Indeed, Hitlers rearmament
would not have been possible without the grains, minerals, and primary
products of the Balkans. Nor would Germany have been able to disen-
gage from the markets of Western Europe and the USA and stabilize the
Reichsmark bloc without capturing trade from this region. The macroe-
conomic context created by Hitlers policy of rearmament, in turn, made
a closer relationship with the Balkans possible, which the advocates of
informal empire in Mitteleuropa worked hard to capitalize on. During
these same years Germany created the conditions that would allow it to
exercise, later in the decade, the influence effect of trade as well. Bilat-
eral treaties redirected Southeastern Europes trade away from the global
market toward the Third Reich, particularly for strategic goods that were
highly prized by the regions leaders. Between 1933 and 1938 Yugoslavia
and Romania began falling into a spiral of economic dependency.
The German state orchestrated this reorientation of trade away from
Western Europe and the USA. Many Germans, in fact, saw the states
creeping control over foreign trade through contingents, tariffs, and for-
eign currency monitoring as the next evolutionary phase in the global
economy, where continental, state-directed blocs would replace the inte-
grated markets of the late nineteenth and early twentieth centuries.6 His-
torians, likewise, have emphasized the preponderance of the state over
the market in National Socialist Germany, in the domestic and the for-
eign sphere alike. After 1934 Germany resembled a wartime economy in
important ways.7 By 1938 the control measures from earlier in the decade
had evolved into a full-blown, comprehensive, and state-mandated
rationing and allocation system for every factor of production.8
Germanys foreign trade system, however, was extremely cumbersome,
weighing down business with a maze of regulations. The scarcity of
5 Hirschman, National Power, 13.

6 Carl Clodius, Neue Wege der europaischen Handelspolitik, in Walther Funk (ed.),
Wirtschaft im neuen Europa (Lubeck: Nordischen Gesellschaft, 1941), 236.
7 Dieter Ziegler, A Regulated Market Economy: New Perspectives on the Nature of
the Economic Order of the Third Reich, 19331939, in Berghoff et al., Business in the
Age of Extremes, 13952; Hans-Erich Volkmann, The National Socialist Economy in
Preparation for War, in Militargeschichtliches Forschungsamt (ed.), Germany and the
Second World War, vol. I: The Build-up of German Aggression (Oxford: Clarendon Press,
1990), 157372, at 195.
8 Quotation from Hayes, Corporate Freedom of Action, 30.
hard currency and the relentless drive to acquire inputs for Hitlers war
machine created not an efficient, state-directed economy but an illogical
system that suffered a continual string of structural problems.9 Germany
and the Balkan states manipulated their commercial agreements, adding
uncertainty to foreign trade on top of the existing problems of risk and
poor information lingering from the 1920s. The complicated treaties
placed a heavy burden on importing and exporting firms, which had to
assume the costs of acquiring licenses as well as up-to-date information
to deal with the ever changing regulations. Finally, the task of marketing
imports from Southeastern Europe to German consumers and distribu-
tors demanded an organizational effort beyond the scope of many firms.
Under these conditions private institutions became more, not less,
important for foreign trade. The task of resolving these nuts-and-bolts
problems of commerce fell to the Leipzig trade fair and the German
Romanian chambers of commerce, institutions that mediated between
the state and small business. These organizations and their networks sta-
bilized the Reichsmark bloc by negotiating the red tape of the bilateral
treaties. In doing so, they included business elites who otherwise would
have been left out of the material rewards of GermanBalkan trade.
Saxonys machine tool manufacturers, the German minority merchants
of Transylvania, the small raw material producers in the provinces of
Yugoslavia and Romania all of these groups participated in the Third
Reichs trade drive in Southeastern Europe because they received privi-
leged access to the networks, contacts, and market information provided
by the fair and the chambers of commerce. As noted by Max Hahn,
the director of the Mitteleuropaische Wirtschaftstag, an informal empire
required personal contacts, whereby the general anchoring of German
influence could be guaranteed. In each country we [Germans] must fos-
ter personal relationships with a range of local figures in order to build
trust with one another.10
The New Plan, the Four-Year Plan, and bilateral

clearing agreements
When the National Socialist Party gained power in 1933 they inherited a
moribund economy. Unemployment had soared to 30 percent, industrial
9 R. J. Overy, Hitlers War and the German Economy: A Reinterpretation, Economic

History Review 35, no. 2 (1982), 27291; Alan Milward, The German Economy at War
(London: University of London Press, 1965); and the essays by Timothy W. Mason,
Dietmar Petzina, and Alan Milward in Friedrich Forstmeier and Hans-Erich Volkmann
(eds.), Wirtschaft und Rustung am Vorabend des Zweiten Weltkrieges (Dusseldorf: Droste,
1975).
10 Report of members meeting, December 10, 1936, 6141, R 8119F, BA.
output had sunk to 61 percent of its 1929 level, and prices had dropped
by almost a quarter.11 The tipping point of the Depression had come
in the summer of 1931, when the Darmstadter Bank and the National
Bank collapsed, stoking fears of a general bank run among the German
populace and, crucially, among international investors. Since 1918
Germany had accumulated massive obligations to foreign lenders. By
one estimate, in 1930 nearly half of all German bank deposits were
held by foreigners.12 With the bank panic international investors lost
confidence and began repatriating their funds out of Germany 3 billion
RM in 1931 alone, roughly one-sixth of all foreign capital that Germany
had imported since 1924.13
As this financial contagion unfolded a parallel crisis was emerging in
foreign trade, which also strained Germanys gold and currency reserves.
As global demand declined Germanys largest trade partners like the USA
and Britain raised tariffs, abandoned the gold standard, and devalued
their currencies, and this had a huge impact on German trade. By 1933
German exports to Britain had fallen by two-thirds and to the USA by
three-quarters. In 1929 Germany exported 13.5 billion RM in current
values. By 1933 this figure had fallen to just over 7 billion RM.14 For
German leaders, this foreign trade crisis was doubly devastating because
they needed export earnings not only to pay for imports like food and
raw materials, but also to service Germanys foreign debts. As exports
collapsed Germany accumulated less hard currency, making it ever more
challenging to pay back Germanys international creditors in the USA
and Britain.
The Reichsbank was the fulcrum point that met these twin crises.
During the bank run of 1931 the Reichsbank hemorrhaged gold and
hard currency as it tried to mollify foreign investors. Yet its reserves sank
so low that in July it implemented controls to monitor the exchange
of foreign currency. While not officially taking Germany off the gold
standard or devaluing the currency, these measures effectively closed the
11 Figures from Harold James, The German Slump: Politics and Economics 19241936
(Oxford: Clarendon Press, 1984); Lothar Gall, Gerald D. Feldman, Harold James, Carl-
Ludwig Holtfrerich, and E. Buschgen (eds.), Die Deutsche Bank 18701995 (Munich:
C. H. Beck, 1995), 317, 326.
12 Eichengreen, Golden Fetters, 2709.
13 James, Lessons from the Great Depression, 5163; Howard Ellis, Exchange Control in Central
Europe (Cambridge, MA: Harvard University Press, 1941), 15889, figures from 170
and 177.
14 In the early years of the Depression Germany actually ran an export surplus. It peaked in
the third quarter of 1931, and declined precipitously thereafter. Tooze, Wages of Destruc-
tion, chs. 3, 4, and 5; Michael Ebi, Export um jeden Preis: die Deutsche Exportforderung
von 19321938 (Stuttgart: Steiner, 2004), 62; Ritschl, Deutschlands Krise und Konjunk-
tur, appendix, tables B.1 and B.7; trade figures from Mitchell, International Historical
Statistics, 664.
gold window and suspended all repayment on the massive short-term

international debt Germany had accrued since the 1920s, making it more
difficult for foreign lenders to withdraw their credits. At the same time,
in the hopes of husbanding scarce currency the Reichsbank introduced
quotas limiting the value of foreign goods that importers could bring
into the country. Despite these measures, by 1932 exports plummeted so
much that Germany began running a trade deficit importing more than
it exported which the Reichsbank only financed by further depleting its
stock of gold and hard currency reserves.15
From the beginning of their rule, then, the Nazi Party inherited a
complex, state-run system for regulating foreign investment and foreign
trade as well as a set of difficult choices about how to manage Germanys
foreign exchange problems. To chart a path forward Hitler turned to Hjal-
mar Schacht, one of Germanys most highly regarded financial experts. A
conservative and ardent nationalist, Schacht was the Reichsbank director
who had finally curbed Germanys hyperinflation in 1924. After resigning
from the central bank in 1930 in opposition to the Young Plan, he intro-
duced Hitler to his colleagues in banking and industry, and was rewarded
by being reappointed Reichsbank director in March 1933. Schacht never
joined the Nazi Party and believed many of National Socialisms core
ideas biological anti-Semitism and total autarchy, for example were
harmful to Germanys foreign economic interests. But in Hitler he saw
someone willing to pursue unorthodox policies to stimulate the German
economy, and he enthusiastically supported the regime.16
Upon taking over the Reichsbank in 1933 Schacht extended state con-
trols over foreign currency. By making it more difficult for importers to
purchase certain goods from abroad, and for foreign investors to with-
draw their capital, he hoped to prevent Germanys balance of payment
deficit from spiraling out of control. Schacht tightened the quotas on
importing that the Reichsbank had set in 1931. In June he imposed a
moratorium on long and medium-term foreign debts, effectively default-
ing on many of Germanys foreign obligations. This was an aggressive
move, but it only temporarily managed what was becoming a serious
structural problem. Over the course of 1933 Germanys trade deficit
continued to grow: in real terms the value of German imports was now
60 percent higher than the value of its exports. The Reichsbank only
15 Ebi, Export um jeden Preis; Ahamed Liaquat, The Lords of Finance: The Bankers who Broke
the World (New York: Penguin, 2009), 393421; Kindleberger, World in Depression, 153.
16 John Weitz, Hitlers Banker (Boston: Little Brown and Co., 1997), 109; Christopher
Kopper, Hjalmar Schacht: Aufstieg und Fall von Hitlers machtigstem Bankier (Munich:
Hanser, 2006).
financed this trade deficit by depleting its stock of gold and foreign cur-
rency holdings still further. Between early 1932 and the summer of 1933
these fell from 1.1 billion to just over 400 million RM.17
By the summer of 1934 Schachts schemes were exhausted, and
Germanys mounting trade deficit and sinking currency reserves mor-
phed into a crisis.18 The situation presented policy-makers with a stark
choice: either they could loosen state control over foreign currency,
devalue the Reichsmark, and scale back rearmament; or they could
push ahead with military production and give state authorities even
more direct control over what goods could enter and leave the country.
Kurt Schmitt of the Economics Ministry and Schwerin von Krosigk
of the Finance Ministry, both traditional conservatives, favored the
former course. Germany should officially abandon the gold value of
the Reichsmark and devalue its currency to promote its exports. Britain
was the first major economy to do this in 1931, followed by the USA
in 1933. Indeed, going off gold proved to be one of the best predictors
of how quickly an economy recovered from the Depression. But for
German policy-makers the choice was not clear-cut. A weaker currency
would have made Germanys substantial foreign debts more expensive
to service. Schacht, moreover, feared that devaluing the Reichsmark
might lead to inflation, or at least arouse the anxiety of inflation among
the German public, something Hitler wanted to avoid at all costs.19
Schacht favored the latter option extending state controls and mov-
ing ahead with rearmament. During the spring crisis he outmaneuvered
Schmitt and Krosigk, and on June 14 he suspended all payments on
Germanys private and public international debts and again tightened
state control over the allocation of foreign currency, monitoring it on
a daily basis. In August Schacht formalized this new, comprehensive
system of trade controls in the New Plan, which he announced to the
business community at the fall trade fair in Leipzig. The New Plan gave
Schacht vast powers as the Reichsbank director, and, after Schmitts fall
from Hitlers grace, as the acting Minister of Economics. The New Plan
eliminated the quota system that had allocated hard currency to German
importers since 1931. In its place, Schacht created twenty-five super-
visory agencies, one for each broad commodity type. These agencies
17 Tooze, Wages of Destruction, 718; Ebi, Export um jeden Preis, 245; Ritschl, Deutschlands
Krise und Konjunktur 19241934, table B.7; Ellis, Exchange Control, 198201.
18 Ebi, Export um jeden Preis, 15, 3240, 4757; Dorte Doring, Deutsche Aussen-
wirtschaftspolitik 19331935: die Gleichschaltung der Aussenwirtschaft in der
Fruhphase des nationalsozialistischen Regimes (dissertation, Berlin Freie Universitat,
1969).
19 Tooze, Wages of Destruction, 6791; Eichengreen, Golden Fetters, 287316.
distributed Germanys limited foreign currency to importers according

to how well they met national priorities, which meant, above all, rearma-
ment. Importers now had to apply for currency certificates. Favorable
treatment went to those who brought in raw materials from abroad,
especially from underdeveloped countries, instead of luxury goods. This
marked a critical turning point on the path toward the militarization of
the German Reich, as the New Plan came to regulate the economy and
foreign trade to an extent not seen since the First World War.20
As Schacht was implementing more rigorous control at the Reichs-
bank, his allies in the Foreign Office and the Economics Ministry were
busy concluding bilateral trade and clearing agreements with the smaller
countries of Europe, especially those to the east and southeast. These
bilateral treaties were not formally a part of the New Plan, but they did
complement it and work toward the same ends, namely, managing and
reducing Germanys trade deficit.
For officials in the Economics Ministry and the Foreign Office, the
moment to renew Germanys active commercial policy with South-
eastern Europe came with the foreign currency crisis in 1934.21 Since the
failure of the Austro-German customs union in 1931, German publicists
had mobilized exporters behind a continental economic strategy, portray-
ing the turn toward Southeastern Europe as an attractive alternative to the
depressed and protectionist global market. A host of organizations across
the political spectrum energetically lobbied for such a strategy. Chief
among these groups was the Mitteleuropaische Wirtschaftstag, which
since its reconstitution in 1931 had assembled an influential network of
German businessmen including representatives from the Deutsche and
Dresdner Banks, IG Farben, and Siemens AG to support an aggres-
sive trade policy in the Balkans.22 Economics Ministry officials worked
closely with the Mitteleuropaische Wirtschaftstags directors to advo-
cate a Southeastern European trade drive through their journal Volk und
Reich, their annual conferences, their newsletters, and their manipulation
of the press in Romania and Yugoslavia. By 1934 the Mitteleuropaische
Wirtschaftstag had built a coalition of elites with connections to the gov-
ernment who favored a turn toward the Southeast.23
20 For an overview of the contemporary discussion of state intervention in the German

economy, see Hans-Erich Volkmann, Aussenhandel und Aufrustung in Deutschland
1933 bis 1939, in Volkmann, Okonomie und Expansion, 157372; Volkmann, The
National Socialist Economy, 2456. On control boards priorities, see Ellis, Exchange
Control, 21113.
22 Freytag, Deutschlands Drang nach Sudosten, 87112, 16588; Elvert, Mitteleuropa!
23 On press manipulation in Romania see Grenzebach, Informal Empire, 78; on Yugoslavia
see Walther Heide to Busse, March 5, 1936, 73189, Politisches Abteilung, PAAA;
minutes of the MWTs directors meeting, May 28, 1932, pp. 12538, 6140, R 8119F,
The challenge for Schacht and the Mitteleuropaische Wirtschaftstag in

1934 was how to convince Germanys agrarian groups to open the door
to grain, oil seeds, and other agricultural products from the Balkans.
Here Schacht benefited from the new price system implemented for
food and farming in 1933. The Nazis had campaigned on a platform
of protecting the German peasant. For Nazi ideologues like Hitler and
Walther Darre, Agriculture Minister after the summer of 1933, the health
of the German nation depended on the vitality of its farmers. Blood
and soil were intertwined. To support German peasants, during the
second half of 1933 Darre effectively removed farming from the mar-
ket. His new regulations made certain categories of farms unsellable,
protected farmers from creditors, and most importantly fixed agricul-
tural prices through a new organization, the Reichsnahrstand.24 The
price levels Darre set in 1933 and 1934 for agricultural goods were
high above the world market price a point that Darre and Schacht
struggled over continually. Yet agricultural price fixing indirectly helped
those who advocated bilateral treaties with Southeastern Europe. In
effect, with Germanys food prices set at a high level, agricultural goods
coming in from Yugoslavia or Romania would have to be sold at the
German price, and would not be allowed to undercut German farm-
ers. Price fixing, in other words, removed the main bone of contention
preventing agrarian interest groups from opposing preferential treaties.
Indeed, domestic agriculture benefited more than any other sector dur-
ing the first two years of Nazi rule precisely because of this pricing
policy.25
In 1934 Schacht and officials at the Economics Ministry and the
Foreign Office exploited the window of opportunity opened by Darres
policies. That spring Germany negotiated a commercial treaty with
Hungary and one with Yugoslavia. In March the following year Germany
negotiated a similar agreement with Romania.26 These treaties closely
resembled one another despite the diversity of products demanded
and offered by the Balkan states. With Yugoslavia, German negotiators
confidentially agreed to purchase specific amounts of wheat and corn,
as well as lumber, lard, poultry, eggs, oil seeds, fruits, and vegetables,
BA; Ulrich Prehn, Die Entgrenzung des Deutschen Reiches. Europaische Raumord-
nungsentwurfe in der Zeitschrift Volk und Reich (19251944), in Sachse,Mitteleuropa
und Sudosteuropa, 16996.
24 Kiernan, Blood and Soil, 42230; on the Reichsnahrstand see Tooze, Wages of Destruction,
16990.
25 The group losing the most from this arrangement were industrial workers, who saw
their cost of living rise while their wages stagnated. Barkai, Nazi Economics, 18894,
tables on sectoral incomes, 2537; G. Corni, Hitler and the Peasants: Agrarian Policy
and the Third Reich, 19301939 (New York: Oxford University Press, 1990).
26 Lampe, Balkans into Southeastern Europe, 1378; Grenzebach, Informal Empire, 716.
granting tariff preferences on these products and effectively paying prices

for them that were above the world market price. With Romania, oil
the nations most prized asset could be easily sold on the world market
and so it remained outside the purview of the treaty. But Germany
granted preferences for Romanian timber, select minerals, soybeans and
oil seed crops, poultry, eggs, cattle, and cereal, again paying prices above
those of the world market.27
Given the chronic pressure on Germanys balance of payments, bilat-
eral clearing agreements offered several advantages over the global mar-
ket. For one, through bilateral treaties state authorities could more easily
target the goods they wanted to import. Instead of waiting for firms to
approach the currency supervisory agencies with applications, German
officials would directly negotiate with partner countries to regulate the
price, volume, and often the date of delivery of exports and imports. Ger-
man firms would then apply to fill these pre-set orders. German officials,
in other words, used the treaties to divert commerce away from coun-
tries with which Germany traditionally ran a trade deficit toward those
countries with which it ran a trade surplus, moving its current account
toward zero.28
Second, bilateral treaties and clearing agreements obviated the need
to use and exchange hard currency. Instead, German firms importing
from Yugoslavia, for example, paid the Reichsbank in Reichsmarks.
Similarly, Yugoslavian importers paid their own national bank in dinars.
At a central clearing office in Berlin the Reichsbank would monitor the
balance of imports and exports of those countries with which it had
clearing agreements. Whenever Germany bought more than Yugoslavia,
or vice versa, and a trade imbalance arose, the difference would be
stored as a credit in Berlin, ostensibly to be balanced at some point
in the future. Through such arrangements the national banks avoided
exchanging gold and currency reserves and instead saved these to buy
certain goods, such as oil, that were only available for purchase with
hard currency. In addition, such treaties gave German officials control
over the value of the Reichsmark. Instead of the market determining
currency ratios, the price of Reichsmarks in terms of dinars, for example,
would be determined by negotiations between the Reichsbank and the
Yugoslavian National Bank in Belgrade. In effect, these bilateral treaties
turned large portions of Germanys foreign trade into a barter system.29
27 Kaiser, Economic Diplomacy, 779; Grenzebach, Informal Empire, 725.

28 Ellis, Exchange Control, 261.
29 Berend and Ranki, Economic Development, 26978; and Lampe, Balkans into Southeastern
Europe, 1356.
Schachts policies in 1934 and 1935 were a blow to those who wanted
Germany to return to the global economy. With the New Plan and the
bilateral treaties he began to create a Reichsmark bloc in Southeast-
ern Europe, pulling Germany further away from the world market and
enabling Hitler to proceed with rearmament. Yet Schacht himself did
not see the New Plan as the path toward total autarchy or formal empire.
As he explained at Munichs Technical University in 1935, Germany
is a typical economy based on processing. As such it must . . . reject the
concept of autarchy. Autarchy means only poverty and it means that for
Germany now more than ever.30 He recognized Germanys continued
dependence on trade, and he hoped the bilateral treaties would stabilize
German trade within a controlled economic bloc. Instead of autarchy, he
wanted to strike a balance that would base German growth on exports as
well as military production. Schacht argued as much before the German
Labor Front, where he indirectly criticized Nazis who would have
Germany rearm without regard to economic reality. The most essential
task is augmenting our goods within the limits of the possible . . . But there
are certain commodities that we in Germany do not possess at all, or only
in very small quantities, while these commodities exist in other countries
to a great extent. Therefore we must bring in certain goods from abroad.
Out of this arises the absolute necessity that we engage in foreign trade.31
Thus despite Hitlers drive for autarchy, Germany remained as entan-
gled with foreign economies in 1936 as it was in 1933. The countries
supplying it were changing but Germany still depended on imports of
oil, iron ore, copper, bauxite, manganese, and rubber. All told, Germany
concluded bilateral treaties with twenty-five countries so that more than
half of its foreign trade went to the Reichsmark bloc.32 Although these
treaties would prove to be problematic in certain respects, they achieved
important successes at first. Most immediately, the New Plan temporar-
ily stopped Germanys hemorrhage of foreign currency. Over the next
five years these bilateral treaties would redirect German trade away from
30 Hjalmar Schacht, Deutschland und die Weltwirtschaft, in Schacht, Schacht in seiner

Ausserungen, 114.
31 Schacht, Schacht in seiner Ausserungen, 104, authors italics; other influential leaders in
the government agreed with Schachts balancing act. In a memo to German missions in
1936, Foreign Minister Konstantin von Neurath urged them to ease Germanys quest
for imports by promoting exports: the supply of indispensable foreign raw materials
[is] the most important task for German economic policy . . . No task is more important
than this one. Documents on German Foreign Policy, Series C. vol. V (Washington, DC:
Government Printing Office, 194964), July 30, 1936, no. 485, 842.
32 By the late 1930s the New Plan employed over 18,000 administrators working on
currency control issues. Tooze, Wages of Destruction, 94. For Schachts view of the
Reichsmark bloc, Hjalmar Schacht, Confessions of The Old Wizard (Boston: Houghton
Mifflin, 1956), 3028.
Table 5.1 German imports by region or country (in millions of RM)
% Change
Country/Region 1932 1935 1936 1937 19327
Southeastern Europe 175 260 318 475 171.4

USA 592 241 232 228 61.5
France 190 154 99 156 17.9
Great Britain 259 256 264 309 19.3
Table 5.2 German exports by region or country (in millions of RM)
% Change
Country/Region 1932 1935 1936 1937 19327
Southeastern Europe 175 204 312 427 144.0

USA 281 170 172 204 27.4
France 483 253 255 311 35.6
Great Britain 446 375 406 419 6.1
Southeastern Europe includes Yugoslavia, Romania, Hungary, and Bulgaria.

Source: Rudolf Eicke, Warum Aussenhandel? (Berlin: Verlag fur Sozialpolitik,
Wirtschaft und Statistik, 1937)
Britain and America and toward the continent (see Tables 5.1 and 5.2).
Likewise, the New Plan restructured German trade to favor the import
of raw materials for rearmament, and the export of finished products.
Between 1931 and 1936 raw materials as a percentage of total imports
increased from 51 to 61 percent, while the export of finished goods rose
from 75 to 83 percent.33
Schachts New Plan brought stability to the German economy for two
years. But by the spring of 1936 Germanys economic leadership again
found itself in a crisis situation, driven by similar issues as in 1934: the
Third Reich was simply not exporting enough to purchase the imports for
its rearming economy. Two developments precipitated the crisis of 1936.
For one, Germanys agricultural production began to stagnate and even
decline after 1935. The price fixing of Darres Reichsnahrstand eroded
market incentives, and the requisitioning of land for the army, fortifi-
cations, airfields, and the autobahn actually reduced cultivated land in
33 Tooze, Wages of Destruction, 912; Grenzebach, Informal Empire, 97; Teichert, Autarkie
und Grossraumwirtschaft, 354, table 5.
Germany. Crop yields fell in 1935, by 20 percent in some sectors, forc-

ing the Agriculture Ministry to implement food rationing and double its
demand for foreign currency to import food.34 It was at this moment
that Darre began calling on Schacht to import more soybean crops from
Southeastern Europe, German farmers having adopted these protein-
rich plants as animal feed to raise their livestock yield.35 As Germanys
agricultural difficulties were unfolding, however, military production was
also entering a new phase. In 1935 both France and Britain began
expanding their defense budgets in response to Germanys remilitariza-
tion. Germanys military responded by doubling its demand for ores,
oil, and rubber. By June 1936 Hitler and the German high command
planned to have a massive force of 3.6 million men, with a highly mech-
anized core, ready for combat in four years.36
These twin pressures on imports food and military supplies
generated a second round of foreign currency crises in 1936. Industrial
stockpiles fell to levels sufficient for barely a month. And Germanys pro-
jected deficit of hard currency for the second half of the year surpassed
500 million RM at a time when the Reichsbanks gold and currency
reserves were just 75 million RM.37
As a result, intense competition once again erupted over Germanys
import priorities, opening fault lines between Schachts Reichsbank, the
Nazi Party, the military, and agriculture. As in 1934 these factions strug-
gled over three alternative paths out of the foreign currency quandary. At
one extreme, Nazi Party hardliners advocated total autarchy and milita-
rization of the economy. They wanted to develop synthetic raw materials
and meet Germanys need for oil, rubber, and other materials with ersatz
domestic production. At the other extreme lay market-oriented business
elites like Carl Goerdeler, the mayor of Leipzig and Germanys former
price commissioner. In July, 1936 Goerdeler suggested that Germany
terminate the New Plan and devalue its currency. Bringing German
34 Volkmann, National Socialist Economy, 25863; Dietmar Petzina, Vierjahresplan

und Rustungspolitik, in Forstmeier and Volkmann, Wirtschaft und Rustung, 689;
Dietmar Petzina, Autarkiepolitik im Dritten Reich: der nationalsozialistische Vierjahresplan
(Stuttgart: Verlags-Anstalt 1968).
35 Walther Darre to Hjalmar Schacht, March 16, 1936, doc. 16 in Walter Steitz (ed.),
Quellen zur deutschen Wirtschafts- und Sozialgeschichte in der Zeit des Nationalsozialismus
(Darmstadt: Wissenschaftliche Buchgesellschaft, 2000), 824.
36 Tooze, Wages of Destruction, 20711; Wilhelm Deist, The Rearmament of the Wehrma-
cht, in Militargeschichtliches Forschungsamt, Germany and the Second World War,
vol. I: The Build-up of German Aggression, 375404.
37 Arthur Schweitzer, Foreign Exchange Crisis of 1936, Zeitschrift fur die gesamte
Staatswissenschaft 118, no. 2 (1962), 24377; on the Reichsbanks gold reserves see
Volkmann, Aussenhandel und Aufrustung in Deutschland 19331939, reprinted in
Volkmann, Okonomie und Expansion, 107.
prices in line with Britain and America, countries that had already deval-
ued, would allow Germany to rid itself of Schachts complicated trade
apparatus and reenter the world market. By 1936 a substantial portion of
Germanys business community would have welcomed a return to inter-
national trade, since by many estimates America, Britain, Japan, and
much of South America and Scandinavia seemed poised for economic
recovery.38
In between these two sides stood Schacht. Yet whereas in 1934 he
had sided with advocates of rearmament, in 1936 he now insisted on
increasing exports within the framework of the New Plan. By now he
believed that rearmament at the pace demanded by Hitler was unsus-
tainable. Instead, he wanted to maintain the clearing accounts and bilat-
eral treaties, wrest control of agriculture from the Party and restrict its
imports, and at the same time place strict limits on military expenditure.
Schacht hoped these measures would allow him to allocate more foreign
currency to export industries. The capstone to his agenda was expand-
ing the scope of operation for exporters by building an economic bloc
in Europe and, in his more fanciful musings, by regaining Germanys
former overseas colonies.39
In the summer of 1936 Hitler turned his attention to Germanys loom-
ing economic crisis, issuing the Four-Year Memorandum. In this docu-
ment, which he confidentially presented that August to Hermann Goring
and War Minister Werner von Blomberg, Hitler rejected Goerdelers
call to return to the global market. In the memorandum he grappled
with Germanys perennial dependence on foreign countries for food and
raw materials. He wanted a total solution, which he believed reliance
on foreign trade could never provide. Instead, Hitler demanded that
Germany be ready for war by 1940, and that foreign trade be placed
fully in the service of rearmament. The nation does not live for the
economy, for economic leaders, or for financial theories; on the con-
trary, it is finance and the economy, economic leaders and theories,
which all owe unqualified service in this struggle for the self-assertion
of our nation. Lebensraum in Eastern Europe was to be Hitlers long-
term solution. Military conquest was the only way to make Germany
fully self-sufficient.40 Here Hitler echoed ideas expressed in his earlier
38 Tooze notes that it is frustratingly difficult to make a judgment on the collective attitude
of German business. Tooze, Wages of Destruction, 205, 21419. On the potential in 1936
for a German devaluation, see Ellis, Exchange Control, 22742.
39 Schweitzer, Foreign Exchange Crisis, 2457; Richard J. Overy, Goring, the Iron
Man (London: Routledge and Kegan Paul, 1984), 43. For Schachts thoughts on
colonies, see his preface to H. W. Bauer, Kolonien oder Nicht? Die Einstellung von Partei
und Staat zum kolonialen Gedanken (Leipzig: Richard Bauer, 1935).
40 Four-Year Plan Memorandum, cited in J. Noakes and G. Pridham, Nazism 19191945:
A Documentary Reader, vol. II: State, Economy, and Society 19331939 (Exeter University
writings: the view is held that one can conquer the world by purely eco-
nomic means, but that is one of the greatest and most terrible illusions.41
To pursue rearmament at all costs Hitler appointed Goring, his second-
in-command and a relative novice in economic matters, to oversee the
Four-Year Plan. After 1936 Schachts influence in policy-making waned
and Goring, supported by technical advisors from private industry and
the military, slowly tightened the states grip on the economy.42 Yet the
expansion of military spending implemented by the Four-Year Plan did
little to resolve the limitations of Germanys economy. Gorings Four-
Year Plan office undertook measures to expand domestic production of
synthetic fuel, rubber, and fibers. But it took years for the initial invest-
ments to pay off and by 1939 Germany was little closer to autarchy than
in 1936. Meanwhile, the production of more munitions, tanks, and air-
craft only exacerbated demand for imports and with it the scarcity of
foreign currency.43 The directors of the Four-Year Plan as well as the
economic staff of the military realized as much: that Germany was poor
in resources; essentially in no sector besides coal do the developed min-
eral deposits cover our own needs.44 By 1938 imports of oil, rubber,
iron ores, and other metals like copper, zinc, bauxite, manganese, and
lead, far surpassed what had been needed just a few years earlier (see
Tables 5.3 and 5.4). And as ever more resources and manpower were
moved out of agriculture and into industry and the military, Germanys
demand for foreign grain, soybeans, and livestock grew instead of dimin-
ished. In 1938, even after Germanys annexation of Austria, the Insti-
tute for Business Cycle Research estimated that Greater Germany could
Press, 1984), doc. 185; Wilhelm Treue, Hitlers Denkschrift zum Vierjahresplan 1936,
Vierteljahrshefte fur Zeitgeschichte 3 (1955), 184203.
41 Hitlers speech to the industrial club of Dusseldorf, January 27, 1932, cited in Norman
Baynes (ed.), The Speeches of Adolf Hitler, April 1922August 1939 (New York: Oxford
University Press, 1942), 793. On Hitlers obsession with Germanys inability to feed its
own population see Weinberg, Hitlers Second Book, 103.
42 Schacht and other conservatives had earlier recommended that Goring be given a special
commission to investigate Germanys currency and raw material problems, in the hopes
that he would shield Germanys business community from the more radical arm of the
Nazi Party. If that failed, Schacht gambled that Gorings incompetence in economic
matters would prove to Hitler that the German economy needed an expert like himself
at its helm. The plan backfired. Overy, Goring, the Iron Man, 407; Overy, War and
Economy in the Third Reich (Oxford University Press, 1994), 14474; Volkmann The
National Socialist Economy, 277; Werner Abelshauser, Germany: Guns, Butter, and
Economic Miracles, in Mark Harrison (ed.), The Economics of World War II: Six Great
Powers in International Comparison (Cambridge University Press, 1998), 12276.
43 In 1938, for example, Germany produced only 6,000 tons of synthetic rubber, while it
imported 92,000 tons. Tooze, Wages of Destruction, 228; Hayes, Industry and Ideology,
175212.
44 Fritz Loeb, general staff, Aufgaben des Amtes fur deutsche Roh- und Werkstoffe, Der
Vierjahresplan: Zeitschrift fur Nationalsozialistische Wirtschaftspolitik 1 (January 1937), 2.
Table 5.3 German imports of raw materials vital to war 19338

(in 1,000 tons)
Commodity 1933 1934 1935 1936 1937 1938
Iron ores 4,572 8,265 14,061 18,469 20,621 21,928

Other ores (non-ferrous) 2,386 3,071 3,662 4,079 5,622 4,852
Metals 918 1,141 852 895 1,273 2,275
Crude oil 546 623 846 983 1,198 1,326
Source: Volkmann, The National Socialist Economy, table II.VII.5, p. 356.
Table 5.4 German domestic supply of non-ferrous metals

19348 (as percentage of total consumption)
Metal 1934 1936 1938
Copper 45 43 41
Zinc 67 70 78
Lead 64 59 68
Source: Petzina, Autarkiepolitik, table 8, p. 109.
supply just 87 percent of its own need for foodstuffs (see Table 5.5).45
Whether Nazi leaders wanted to or not, they still must be interested in
the international exchange of goods.46
Thus, as in 1934, in 1936 the Nazi leadership was forced by economic
reality to continue the middle path laid out by Schacht even after his
fall from Hitlers favor. The German state continued to regulate foreign
trade along the lines formalized by the New Plan, using import licenses,
bilateral treaties, and clearing agreements. With the implementation of
Gorings Four-Year Plan, the flow of imports into the Third Reich actu-
ally became more, not less, important and exports remained as critical
as ever for the functioning of the German economy. Without territorial
expansion through conquest, a continental economic bloc was the only
way for the Third Reich to sustain its rearming economy.47
45 Report cited in Hans-Erich Volkmann, NS-Aussenhandel im geschlossenen

Kriegswirtschaftsraum 19391941, in Volkmann, Okonomie und Expansion, 148; Volk-
mann, The National Socialist Economy, 309, 356; Petzina, Autarkiepolitik, 109.
46 Rudolf Brinkmann (State Secretary in the Economics Ministry), Aussenhandel und
Handelspolitik, Der Vierjahresplan: Zeitschrift fur Nationalsozialistische Wirtschaftspolitik
2 (July 1938), 3867.
47 For Hitlers public remarks on the importance of exports see his speech to the German
Parliament on January 30, 1937 in Baynes, Speeches of Adolf Hitler, 13367; Volkmann,
Aussenhandel und Aufrustung in Deutschland, 98, 107.
Table 5.5 Nutritional supply estimates from Institute of Business Cycle

Research
Percentage of population Surplus population able

Population supplied by domestic to be fed from domestic
Region/Country (in millions) production production (in millions)
Greater Germany 112.1 87 14.4

Scandinavia 16.7 80 1.0
Holland/Belgium 17.0 59 6.9
Baltic countries 5.6 107 0.4
Southeastern 56.9 107 4.0
Europe
Russia 185.7 101 2.5
Source: Volkmann, NS-Aussenhandel im geschlossenen Kriegswirtschaftsraum, in Volk-

mann, Okonomie und Expansion, table 2, p. 148.
Southeastern Europe and the challenges

of bilateral trade
For Hitler to achieve his long-term goal of formal empire, in the short-
term he needed the resources of a continent to support his military.
Here the states of Southeastern Europe played a critical role, for they
had the potential to supply many inputs the Third Reich so desper-
ately needed. In the early 1930s Germany imported most of its oil, cop-
per, and non-ferrous metals from regions outside Europe, and Hitler
wanted this to change.48 For the optimistic proponents of Mitteleuropa,
like Tilo Freiherr von Wilmowsky and Max Hahn, no other European
region has such a wealth of raw materials at its disposal as the coun-
tries of Yugoslavia, Bulgaria, and Romania.49 Even for those not on
the Mitteleuropa bandwagon, Southeastern Europe seemed to offer great
potential. According to Germanys Institute for Business Cycle Research,
this region offered the greatest natural surplus of food in the Third
Reichs potential sphere of influence.50 Schacht thought the bilateral
treaties would unlock the economic potential of Southeastern Europe. In
June 1936 he toured Southeastern Europe, visiting Budapest, Belgrade,
Sofia, Istanbul, Athens, and later Ankara and Tehran to promote the
48 Eicke, Warum Aussenhandel?, 201.

49 Entstehung, Entwicklung, und Arbeit des MWT, p. 337, 186, R 63, BA.
50 Report cited in Volkmann, NS-Aussenhandel im geschlossenen Kriegswirtschaft-
sraum, in Volkmann, Okonomie und Expansion, 148; Volkmann, The National Social-
ist Economy, 309, 356; Petzina, Autarkiepolitik, 109.
mutual benefit of these agreements.51 He and other government officials

involved in the negotiations saw the treaties as a way to place commer-
cial exchange on a broader foundation, and hold open for Germany the
future developmental potential of the Balkans.52
Yet from the perspective of merchants engaged in GermanBalkan
commerce such a foundation barely existed in 1934 or 1936. For
Schachts New Plan and Gorings Four-Year Plan profoundly altered
the nature of commerce in this region of Europe, generating a host of
problems that the German state proved unable to ameliorate. The bilat-
eral treaties and clearing agreements were cumbersome and frequently
ineffective in matching buyers and sellers. The byzantine regulations
imposed serious costs and created massive impediments in the flow of
information.53 And since the bilateral treaties operated on the basis
of one-to-one exchange the consumers of Southeastern Europe would
have to be willing and able to buy German products, a distinct problem
given that the purchasing power of Yugoslavia, Romania, Bulgaria, and
Hungary was among the lowest in Europe.
Problems arose immediately following the signing of the commercial
treaties with Yugoslavia in 1934 and with Romania the following year.
To begin with, Germanys chain of importers and distributors now had
to accommodate new and unfamiliar agricultural products from South-
eastern Europe, many of which were overpriced or poor in quality. In
the commercial treaties the German state assumed the responsibility for
marketing these goods: that is, when it did not resell them on the world
market. The state authorities, however, were ill suited to the task since so
few bureaucrats had the necessary expertise in the economies of South-
eastern Europe.
An even larger challenge, though, was the structural imbalances that
arose when German officials insisted on maintaining an artificially high
value for the Reichsmark. This generated substantial and unexpected
deficits on Germanys side of the clearing arrangements. Because
Germany had run an export surplus with Southeastern Europe in the
51 In retrospect Schacht remarked that, it was not Germanys purpose to tie countries
such as Yugoslavia permanently down to the level of an agrarian state . . . development
would not be detrimental to the industrial states. Schacht, Confessions of The Old
Wizard, 305.
52 Confidential memorandum from Ulrich circulated to German embassies, June 21, 1934,
106181, Handeakten Wiehl and Clodius, Handelsabteilung, PAAA.
53 As Karl Ritter, the director of the Trade Policy Department in the Foreign Office,
admitted, since the clearing system must be retained for a long time yet, it is all the
more important to diminish the defects adhering to it, and in particular to simplify
clearing and divest it of red tape. Documents on Foreign Policy, Series C. vol. 5, no. 511,
August 17, 1936.
1920s, neither the German nor the Romanian or Yugoslavian negotiators

thought an overvalued Reichsmark would seriously alter this traditional
commercial balance. But it did.54 By the end of 1936 Germanys total
clearing deficits in Reichsmark bloc countries amounted to 463 million
RM, most of this accruing from trade with Southeastern Europe.
Romania and Yugoslavia were simply not buying German exports in the
amount that German bureaucrats had expected.55
Officials on all sides recognized Germanys clearing deficit was a
serious problem. In 1934 and 1935 Yugoslavias Trade Minister, Milivoj
Pilja, and many of Germanys leading officials worried that Germanys
clearing deficits threatened to undermine the entire system.56 In trade
negotiations German negotiators repeatedly stressed to Bucharest and
Belgrade that, raising German industrial exports, which alone can be
a permanent and natural balance to the clearing debt, must be our main
concern.57
Before 1938, however, Yugoslavia and Romania tried to exploit Ger-
manys trade deficit to their own advantage, manipulating their currencies
to change the terms of trade in their favor. In Yugoslavia, when Germanys
deficit had risen to 300 million dinars (roughly 17 million RM) in 1935,
the authorities unilaterally altered their exchange rate against the Reichs-
mark. The Yugoslavian National Bank began selling German currency to
domestic importers at 13.6 dinars to the RM instead of the official rate of
17.6, effectively devaluing the Reichsmark by 25 percent. German nego-
tiators protested vigorously.58 In Romania currency manipulations came
much faster and more frequently. Since 1931 the GermanRomanian
exchange rate had remained relatively stable between 40 and 42 lei to the
Reichsmark. But in September 1935 the Romanian National Bank set its
official exchange rate at 48, which it raised to 58 when dealing with cer-
tain large German firms. This overvaluation hindered German exporters
from competing effectively in Romania. In January 1936, under pressure
from pro-German elements in the government, the Romanian National
Bank dropped its support of the leu and allowed the exchange rate to fluc-
tuate between 35 and 42. In August it set the rate for selling Reichsmark
at 37.5, for buying at 42, but then changed these rates again a month
later. In early 1938 a new round of negotiations between Germany and
Romania raised the rate again to 41 lei for a Reichsmark.59
54 Kaiser, Economic Diplomacy, 138. 55 Berend and Ranki, Economic Development, 277.
56 Grenzebach, Informal Empire, 528.
57 Sarnow to Hess in Belgrade, January 16 1935, in Grenzebach, Informal Empire, 53.
58 Kaiser, Economic Diplomacy, 142; Berend and Ranki, Economic Development, 276.
59 Basch, The Danube Basin, 177; Grenzebach, Informal Empire, 91, 83.
In addition to currency manipulation, the Yugoslavian, Romanian,

and German governments all engaged in numerous export subsidies and
import tariffs outside the purview of the commercial treaties to change
the terms of trade. In the spring of 1936 Yugoslavia agreed to pur-
chase more German coal and synthetic textiles, issuing import licenses
for these products to help reverse the clearing deficit. But in September
Belgrade unilaterally changed its policy of selling lead, zinc, wool, and
other raw materials to Germany. Against the backdrop of a general
upswing in the world economy, which increased the price of raw mate-
rials, the Yugoslavian trade delegation felt it could demand hard cur-
rency for its products. Germany responded by canceling its concessions
for Yugoslavian fruit and stopping virtually all imported cereals from
Yugoslavia as well as Romania.60 Only at the very end of the year did
both governments reach an agreement that prevented the altercation
from escalating into a trade war, granting new concessions on various
products like copper, zinc, and lead.61 Overall, between the conclusion
of Germanys commercial agreement with Yugoslavia in 1934 and the end
of 1937, the GermanYugoslavian trade commission met and changed
the rules of commerce at least seven separate times, not including alter-
ations negotiated outside the auspices of the official meetings.62
Romanian officials pursued even more aggressive policies to exploit
Germanys clearing deficit. Already in the early summer of 1935 commer-
cial relations between the two countries began to deteriorate. Romanias
pro-French Foreign Secretary, Nicolae Titulescu, and the Francophile
leaders of Romanias National Bank, in conjunction with a xenopho-
bic press, began a campaign to shift exports away from Germany. In
June, following Titulescus lead, the government imposed a 44 percent
tax on all imports from Germany. Germany responded with its own
44 percent tariff on Romanian goods. In the trade and payment protocols
of September 1935 the two governments negotiated to remove these tar-
iffs, and Romania agreed in principle to conduct a sympathetic study of
German exports. But over the course of the next two years the Romanian
government maintained a variety of trade and currency controls intended
to subsidize exports to hard currency countries instead of Germany.63
60 This was in the context of Germanys foreign currency crisis of 1936, which Schacht
hoped to solve by limiting Germanys expenditure on agricultural imports, in hard
currency and in clearing credits. Kaiser, Economic Diplomacy, 126.
61 Grenzebach, Informal Empire, 64; Kaiser, Economic Diplomacy, 143.
62 The initial treaty was signed in March 1934. Subsequent trade protocols included
Munich (March 1935); Zagreb (March 1936); Schachts tour through Yugoslavia (June
1936); Dresden (October 1936); Berlin (May 1937); Dubrovnik (October 1937).
63 Kaiser, Economic Diplomacy, 144; Grenzebach, Informal Empire, 76.
The upshot of these currency manipulations and tariff and subsidy

battles was highly unpredictable rates of exchange accompanied by an
ever changing set of incentives for exporters and importers. The com-
mercial problems of the 1920s had not entirely disappeared: it was still
difficult for German merchants to acquire up-to-date information on
business opportunities, to find reliable representatives who understood
the local business culture, and to avoid being burned by late payments.64
But state intervention into foreign trade brought a new layer to these pre-
existing issues, adding risk and unpredictability to the legal framework
for commerce instead of mitigating it.
In Romania frustration among exportimport businessmen peaked in
the summer of 1935. According to the GermanRomanian chamber of
commerce, because of the frequently changing government decrees in
the recent period a great uncertainty has set in, which even the trade
agreement with Germany will not rectify.65 This uncertainty continued
for the next two years, as the numerous grievances from the chamber of
commerce and the trade representatives of the Leipzig trade fair attest.
By 1936 the clearing agreements and the licensing needed to conduct
trade had generated a great speculative wave. The Romanian govern-
ment had issued a total of thirty-nine collective authorizations to export
or import from Germany, thirty-five of which were subsequently can-
celled, the others routinely delayed. If a firm, German or Romanian, were
fortunate enough to acquire a trade license that was not cancelled, this
was still no guarantee that the transaction would be profitable. Under
the bilateral protocols, in practice firms sending Romanian products to
Germany had to line up a matching amount of imports from Germany
in advance. Without doing so price fluctuations as well as fluctuations
in the value of the Reichsmark [would make] the export of German
commodities back to Romania impossible. And because both govern-
ments altered the terms of the commercial agreements, the goods that
64 See the complaint by Dr. Georg Acker to the Leipzig trade fair in 1933: Likewise, you
know that in the last few years German firms exporting to Romania, as a result of their
credulity [Leichtglaubigkeit] and inadequate information, have sustained huge losses,
which totally or at least partially could have been avoided if they only would have had
access to an untainted and properly functioning information service. Unfortunately, in
this regard circumstances have not improved; the information services are still stuck in
childrens shoes. Briefly put, they simply do not work. Acker to Messeamt, January 5,
1933, p. 221, GA 809, LMA, SSAL. Germanys charge daffaires in Belgrade reported
in 1935 that, through the non-observance of fixed payment terms in contracts [by
Yugoslavian merchants] such insecurity will enter into transactions that an orderly basis
of calculations will no longer be possible and the German businessman will lose his
interest in the Yugoslav market. Cited in Grenzebach, Informal Empire, 58.
65 Memo about formation of a settlement office for GermanRomanian commerce,
April 15, 1935, Bucharest Embassy 95, PAAA.
it was permissible to export and import, and the rate of exchange so

frequently, firms had to reckon that a deal would take five or six months
to conclude.66 Commerce with Germany had become cumbersome,
long-winded, and expensive.67
The weight of the bilateral trading system fell particularly hard on
small firms the core of the industrial order in Saxony, central Germany,
and the provinces of Romania and Yugoslavia for it required firms to
expend precious time, energy, and money to secure import and export
licenses. In contrast to large concerns like IG Farben, small companies
did not have the personnel to acquire trade licenses directly from the state
authorities.68 Again, the situation seems to have been worse in Romania,
where small merchants relied on intermediaries who charged between
2 and 12 percent of the total order.69 According to the Leipzig fair
agent in Brasov/Kronstadt, for firms domiciled outside of Bucharest
it is almost impossible to engage in the import trade. Apart from the
difficulty of establishing contacts with the relevant Romanian authorities,
a complete ignorance of the foreign currency and contingent regulations
is everywhere pervasive. The merchants have neither the possibility nor
the capability to deal with the contents of the treaty terms.70
Private institutions at work: the GermanRomanian

chamber of commerce
Bilateral agreements reduced foreign trade to a type of barter exchange,
and they made it more important than ever for businessmen to have
up-to-date information about the rules governing GermanBalkan com-
merce and continual contact with their counterparts in Romania and
Yugoslavia. Despite, or because of, their almost continual negotiations,
the German, Yugoslavia, and Romanian states proved incapable of creat-
ing a predictable set of commercial incentives and as a consequence non-
state organizations like the Leipzig trade fair and the GermanRomanian
66 Report from Leipzig agent Wilsdorf in Bucharest, October 17, 1936, p. 345, GA
152, LMA, SSAL. The RomanianGerman clearing agreement created an A list of
exportable goods (from Romania) and a B list of importable goods (to Romania), which
changed frequently. Robert Krugmann, Sudosteuropa und Grossdeutschland: Entwicklung
und zukunftsmoglichkeiten der Wirtschaftsbeziehungen (Breslau: Breslauer Verlags- und
Druckerei, 1939), 85.
67 Heydendorff to Leipzig, June 2, 1934, p. 54, GA 810, LMA, SSAL.
68 Even before 1934 and 1935 small firms seem to have had particular difficulty under the
more limited clearing treaties that German negotiated with Romania and Yugoslavia in
1931. Cornelio Fruh to Leipzig central offices, September 22, 1933, GA 809, LMA,
SSAL.
69 Heydendorff to Leipzig central offices, June 2, 1934, p. 54, GA 810, LMA, SSAL.
70 Report from Verband deutscher Handelsgremium, October 11, 1936, GA 810, LMA,
SSAL.
chamber of commerce had to fill the breach.71 As the German charge

daffaires in Bucharest remarked, in response to Romanias failure to
adhere to general [commercial] agreements Germany needed to use
channels here that are not often viable for an official of the Reich.72
At first glance, the GermanRomanian chamber of commerce did not
seem to be the best channel to promote German exports since it had fallen
on hard times during the Depression. Established in 1929 by Romanians,
Transylvanian Germans, and German citizens, by 1934 the chamber
was increasingly controlled by Romanians. Membership had fallen from
200 to 80 firms,73 its funding came almost exclusively from Romanian
companies and the Romanian Ministry of Commerce, and Romanians
held seven of the twelve seats on the board of directors.74
But in the fall of 1934 the chambers former director, Walter Stet-
ten, joined the German military, leaving the way open for an ambitious
National Socialist Party member, Artur Adolf Konradi, to revamp the
chamber as a German instrument.75 Konradi was born in 1880 near Kiev
to a German factory manager. Apprenticed as a mechanical engineer, he
started his own company in southern Russia and worked as an agent for
large German firms like Siemens & Halske and Otto Wolff. After being
convicted of espionage during the First World War, he was sent to cen-
tral Siberia in 1916, from whence he escaped and returned to Germany
after the outbreak of the Bolshevik revolution. During the 1920s he man-
aged a machine factory in Germany, but moved to Romania in 1930 to
start his own small business importing German machinery. Two years
later he founded the local National Socialist Party branch in Bucharest
and became its leader.76 Konradis greatest asset was his many business
contacts, both in Romania and more importantly in Germany, where
he had campaigned in the summer of 1934 to publicize the chamber
of commerce as an advisory organ for firms in Romania.77 After 1936
Konradi was paralyzed below the waist from an automobile accident, and
71 See, for example, comments from Saxonia, an importexport firm involved in Romania.
Saxonia to Messeamt offices, March 10, 1934, GA 810, LMA, SSAL.
72 Report from Bucharest mission to Berlin, May 12, 1935, Bucharest Embassy 95, PAAA.
73 Bucharest mission to DIHT, January 3, 1935, Bucharest Embassy 95, PAAA.
74 Bucharest mission to Berlin, May 25, 1932 and Bucharest mission to Herr Bosenick,
November 28, 1934, Bucharest Embassy 95, PAAA; Konradi to Schulenburg, April 14,
1934, Bucharest Embassy, 95, PAAA.
75 When Stetten left he took with him 237,000 lei of the chambers funds, which he claimed
the chamber owed him, but which the chamber, led by its vice president Cassasovici,
hotly disputed. Report, December 1, 1934, Bucharest Embassy 95, PAAA.
76 Konradi, personal history, July 8, 1936, Bucharest Embassy 6, PAAA.
77 In July Konradi visited Leipzig, Halle, Hannover, Bremen, Hamburg, and Essen, and in
August Elberfeld, Dusseldorf, Cologne, Frankfurt, Mannheim, Munich, Nuremburg,
and Stuttgart, Bucharest mission to Reichsstelle fur den Aussenhandel, July 9, 1934,
consequently conducted his affairs behind the closed doors of his home
office. Yet this furtiveness only enhanced his uncanny prestige and his
powers of intimidation.78
Some of the chambers leading businessmen worried that Konradi was
too closely associated with the Nazi regime to lead their organization,
fearing he would alienate Romanian business elites.79 Over the course
of 1934, however, Konradi outmaneuvered his naysayers. Earlier that
year he had founded his own commercial office Handels-Ausgleich-
Stelle which advised German exporters and provided Germans in
Bucharest with information about the commercial treaties.80 In Decem-
ber he offered to merge his office into the GermanRomanian chamber
of commerce in Bucharest. With support from German Foreign Office
representatives in Bucharest, Konradi was elected to be the chambers
business director in December.81
To the Romanian participants in the chamber, Konradi said he would
work next to the public authorities to promote economic relations
between both countries.82 But in reality he wanted a German cen-
ter; [providing] confidential German briefings for Germans. Stettens
most visible failure, according to Konradi, was his lack of personal and
professional contacts with German industry and German exporters. As
a consequence his ability to relay economic news was limited. For in
order to distribute information, one must live in the material . . . the self-
evident hazard at hand stems from the accuracy of information. Given
his contacts in both Germany and Romania, Konradi believed he could
provide the information and services German exporters needed.83
For the Foreign Office Konradis takeover of the GermanRomanian
chamber of commerce could not have come sooner. By late spring 1935
trade relations with Romania were souring. According to the German
charge daffaires in Bucharest, Konradis organization offered,
the only avenue . . . to exercise pressure on Romanias handling of the contingent
system, to productively organize commercial exchange, and thereby to politically
solidify our position . . . The advantages of such a clearing-center are striking
78 R. G. Waldeck, Athene Palace Bucharest: Hitlers New Order Comes to Rumania (London:
Constable, 1943), 423; Heydendorff to Messeamt, August 29, 1936, GA 810, LMA,
SSAL.
79 Dehn-Schmidt to Heimburg, November 26, 1934, Bucharest Embassy 95, PAAA.
80 Konradi to Foreign Office, February 19, 1934, 89210, Handelsabteilung, PAAA;
Bucharest mission to Foreign Office, April 16, 1934, Bucharest Embassy 95, PAAA.
81 Konradi to Casassovici, acting business director, December 15, 1934, Bucharest
Embassy 95, PAAA.
82 Konradi to mission in Bucharest, November 6, 1934, and Konradi to Casassovici,
December 15 1934, Bucharest Embassy 95, PAAA.
83 Konradi to Schulenburg, April 14, 1934, Bucharest Embassy 95, PAAA.
and, comparatively speaking, exceedingly great. We will doubtlessly obtain the

potential of making the import of German commodities from Romania easier, and
therefore of purchasing essential Romanian products without hard currency.84
Konradi proved the Foreign Office right. By 1936 he decisively shifted

the weight of power within the chamber in Germanys favor. By gaining
official recognition from Germanys industrial associations, above all the
German Association of Chambers for Industry and Trade, and govern-
ment institutions, like the Advertising Council of the German Economy,
Konradi raised the chambers annual income by roughly 60 percent.85
The following year he cemented the chambers formal links to the Ger-
man state when the Foreign Office named him their official trade attache
in Bucharest.86
In his first action as director Konradi incorporated his commercial
office into the chamber in March 1935. This new clearing center assisted
small firms in acquiring import or export licenses from the Romanian
National Bank, and helped them locate partner firms in Germany that
would send goods in the opposite direction. In addition, it published
frequent and detailed updates about the changes in the exchange rate
with Germany, the lists of goods permitted for export and import, and
the price set by the bilateral treaties. For its services the clearing center
charged only a 1 percent fee: a deal at a time when intermediaries nor-
mally demanded between 2 and 12 percent, and when acquiring import
licenses in Romania often cost 3040 percent of a shipments overall
value. Half of the proceeds, moreover, went to fund publicity for Ger-
man products and for the German economy more generally.87
In addition to acting as an information center, Konradis chamber in
Bucharest and a parallel GermanRomanian chamber of commerce in
Berlin engaged in their own importing and exporting. The latter exported
from and imported to Germany 45 million RM worth of goods in
favorable years.88 The former founded its own export business, the
84 Report from mission in Bucharest, May 12, 1935, Bucharest Embassy 95, PAAA.
85 Before Konradi took over, the Romanian Ministry of Trade had been the single largest
contributor with 150,000 lei a year a figure it frequently promised but rarely came
through on. But now the largest single contribution 3,600 RM or roughly 144,000
lei came from the Advertising Council of the German Economy. German mission in
Bucharest to Foreign Office, March 27, 1935, German Advertising Council to Foreign
Office, March 26, 1936, and report of general meeting of DRHK, June 11, 1936,
Bucharest Embassy 95, PAAA.
86 Foreign Office to Fabricius, July 2, 1936 and Bucharest mission to Foreign Office,
April 5, 1937, Bucharest Embassy 6, PAAA.
87 Report from Bucharest mission, May 12, 1935, Bucharest Embassy 95, PAAA.
88 Bucharest mission to Willhoft, August 18, 1934, Bucharest Embassy 95, PAAA.
Handels-Kontor, which exported agricultural products to Germany,

5 million RM worth in 1937.89
Private institutions at work: the Leipzig fair

By 1937 Konradi had made his chamber into one of the primary con-
duits for commercial exchange between Romania and Germany, open-
ing branches in Temesvar and Brasov/Kronstadt. One major innovation
Konradi initiated was to collaborate with the Leipzig trade fair, where the
chamber marketed goods and where he maintained permanent represen-
tatives. Konradi realized, as did other merchants, that with the bilateral
clearing system trade fairs were becoming more important than ever for
helping German exporters and importers locate counterparties from the
Reichsmark bloc. By working through the fairs, business elites could tap
into the provinces of Germany, as well as Romania and Yugoslavia, at
a time when business contacts increasingly flowed through the capital
cities in the quest for state contracts and import licenses.90
For the merchants in Saxony and the German minorities of Transylva-
nia, foreign trade remained the engine driving their regional economies
as it had in the 1920s. As Germanys most export-dependent region,
Saxony suffered more than other part of Germany from the collapse of
foreign trade during the Depression: unemployment there rose higher
and fell much more slowly than elsewhere.91 After 1933 rearmament
did little to improve matters in Saxony. The small size of its firms
made them less attractive for large military orders. And those sectors
in Saxony machine building, engineering, and chemicals that were
poised to benefit from rearmament did not possess the powerful lobbies
in the capital, like Germanys industrial giants from the Rhineland, the
Ruhr, and Berlin. Finally, Saxonys long border with Czechoslovakia
qualified almost half of it as an official border region, which placed
legal restrictions on military investment. Instead, the region depended
on foreign trade as much after the Depression as it did before; by the
late 1930s its share of total German exports rose to 40 percent, higher
even than in the 1920s.92 Transylvanian Romania experienced a similar,
albeit less drastic, economic trajectory in the wake of the Depression.93
89 Heydendorf to Messeamt, May 20, 1937, GA 811, LMA, SSAL.

90 On the fairs and provinces, see Dittrich, Reichsmesse; Krugmann, Sudosteuropa.
91 Ulrich Hess, Sachsens Industrie in der Zeit des Nationalsozialismus: Ausgangspunkte,
struktureller Wandel, Bilanz, in Bramke and Hess, Wirtschaft und Gesellschaft, 5388.
92 Bramke, Jahren der Weimarer Republik, ibid., 48; Ulrich Hess, Rustungs und
Kriegswirtschaft in Sachsen, ibid., 756; Hess, Sachsens Industrie in der Zeit des
Nationalsozialismus, 5563.
93 According to Turncock, limited statistics make it difficult to get an accurate picture of
regional economies in Romania during the 1930s. But according to social historians the
Although some Saxon commercial elites heralded National Socialisms

aggressive foreign policy as the cure-all that would revitalize
[Germanys] idle productive capacity,94 many businessmen disapproved
of it, seeing Hitlers desire for autarchy as nothing less than economic
suicide.95 The regions commercial and political elite, including Hitlers
longstanding party colleague Martin Mutschmann, governor of Saxony,
called incessantly for exports.96 But Saxonys smaller firms could rarely
afford their own advertising and distribution networks abroad, or the
expense of lobbying for trade licenses from Berlin. Instead, they used
supra-firm organizations such as Konradis chamber or the Leipzig fair to
perform functions that larger firms like IG Farben, Siemens AG, or Otto
Wolff managed internally. The overlapping, cooperative, and decentral-
ized institutions that Saxony developed in the late nineteenth century
helped its small firms adapt to the new, more information-intensive and
politically constructed structure of foreign trade of the 1930s.97
Since 1925 the Messeamt had built one of Germanys most exten-
sive commercial networks in Southeastern Europe, consisting of some
twenty-five representatives spread from Budapest to Salonika. In 1933,
recognizing that German commerce was shifting away from America and
Britain toward the continent, the Messeamt decided to expand the oper-
ations of their Belgrade office to cover the entire Balkan peninsula. They
selected Paul Voss, the original founder of the Belgrade office, for the
job. Over the past twelve years Voss had built his reputation directing
the fairs advertising both in Germany and abroad. And his relocation
to Belgrade marked a turning point for the fair, which remained com-
mitted in theory to a global economy but which now began shifting its
energy and resources to the continent.98 In addition to Voss, the fair
gained a new, competent leader in Romania in Conrad von Heyden-
dorff. Heydendorff worked as a commercial agent for German firms in
Bucharest, and as a Transylvanian German he enjoyed many contacts
with the German minority communities as well as with the Romanian
Depression was a difficult period for Transylvanian German exporters. David Turnock,
The Romanian Economy in the Twentieth Century (London: Croom Helm, 1986), 913;
Gundisch, Siebenburgen und die Siebenburger Sachsen, 18597.
94 Claus-Christian Szenjmann, Sachsische Unternehmer und die Weimarer Demokratie:
zur Rolle der Sachsischen Unternehmer in der Zeit der Weltwirtschaftskrise und des
Aufstiegs des Nationalsozialismus, in Hess and Schaffer, Unternehmer in Sachsen,
1745.
95 Rudloff, Die Strukturpolitik, in Bramke and Hess, Sachsen und Mitteldeutschland, 245.
96 Exportforderung, 6841, 10717 Aussenwartigen Angelegenheiten, SSAD.
97 Herrigel, Industrial Constructions, 3371.
98 Voss apparently experienced problems with Saxonys Economics Ministry and this was
part of the reason for his transfer to Belgrade. Voss Personalakten, pp. 212, 1556, GA
1593, LMA, SSAL.
government and business elites in Bucharest. Unlike Konradi, though,

neither Heydendorff nor Voss were National Socialist Party members.99
Under this new regional leadership the Leipzig fair began improving
its three core activities in the Balkans: attracting foreign merchants to
the fair by functioning as an entrepot; collecting and disseminating infor-
mation; and promoting German machinery abroad. First and foremost,
the Messeamt wanted to bring as many exporters and importers from
Southeastern Europe to Leipzig as possible. Before 1935 the Messeamts
agents in Southeastern Europe had been fighting an uphill battle for their
holy grail: government-sponsored exhibitions displaying the characteris-
tic wares of a given nation. While the Yugoslavian and Romanian govern-
ments had organized several of these in the 1920s, funding disappeared
during the Depression and the fairs agents encountered numerous chal-
lenges reviving them. In Yugoslavia the director of the trade museum
and the man responsible for such exhibitions, Dr. Jasa Grgacevic, was
ardently pro-French and did not speak a word of German.100 In Romania
the acrimonious deliberations over the commercial treaty with Germany
prevented Bucharest from considering official participation at Leipzig
before 1935.101
But in 1935 events began turning in Leipzigs favor as Paul Voss redou-
bled the Messeamts lobbying campaign, focusing first on Yugoslavia.
Voss and Kohler thought that securing an agreement with Yugoslavia that
displayed the countrys crops and subsoil mineral wealth would enor-
mously strengthen our negotiating position with Romania and Greece.
In early 1935 Voss convinced Grgasevic, now Yugoslavias Trade Min-
ister, to visit Leipzig and see with his own eyes the trade fairs sheer
size. The Messeamt funded Grgasevics trip and he returned impressed
by the large number of foreign and German exhibitors; in December
he authorized the Yugoslavian Trade Ministry to organize a collective
exhibition of the countrys raw materials and agricultural products. At
Vosss insistence, the Messeamt offered Yugoslavias Trade Ministry a dis-
counted price for renting exhibition space in the Ring House, Leipzigs
premier display location.102 At the spring fair of 1936 Yugoslavia showed
up in full force, as it did in 1937 when over forty firms displayed their
99 Heydendorff won out over the German consul in Ploesti, Braun, a German citizen
who was also the director of the Norddeutsche Lloyd Shipping Company in Bucharest.
DAI Stuttgart to Messeamt, September 5, 1933, Messeamt to Angerbauer, August 15,
1933, GA 809, LMA, SSAL.
100 Belgrade office to Messeamt, November 28, 1933, GA 146, LMA, SSAL.
101 Hirschmann to Westphal, July 17, 1935, GA 152, LMA, SSAL.
102 Messeamt to Voss, December 21, 1935, quotation from Belgrade Business Office to
Messeamt, December 16, 1935, GA 147, LMA, SSAL; Belgrade Business Office to
Messeamt, January 14, 1935, GA 146, LMA, SSAL.
Table 5.6 Participation by country at the Leipzig spring fair (in number of
registered business visitors)
%
change
Country 1932 1933 1934 1935 1936 1937 1938 1939 19329
Bulgaria 87 38 88 211 347 604 692 667 766.7

Yugoslavia 401 216 223 393 587 1,174 1,154 1,311 326.9
Romania 302 291 234 405 477 898 917 954 315.9
Hungary 384 388 348 676 845 982 1,203 1,216 316.7
Southeastern 1,174 933 893 1,685 2,256 3,658 3,966 4,148 353.3
Europe total
Czechoslovakia 3,320 2,524 2,196 2,792 3,314 3,924 5,316 2,558 77.0
Austria 1,021 957 751 1,442 1,686 2,536 248.4
Total Foreign 16,385 15,523 16,366 21,725 24,751 31,684 33,182 29,925 182.6
Visitors
Southeastern
Europe
as a percentage 7.2 6.0 5.5 7.8 9.1 11.5 12.0 13.9
of total
Source: Die Leipziger Messe in Zahlen, 1940; Ergebnis der Leipziger Fruhjahrsmesse, 1936,
1937, 1938, and 1939, DS 927, 932, 934, 936, and 938, LMA, SSAL.
Table 5.7 Export sales at Leipzig fall and spring fairs

(in millions of RM)
1932 1933 1934 1935 1936 1937 1938
37 29 44.5 104 144 188 193
Source: Urteile, Berichte, Zahlen uber Messeverlauf, DS 253,

pp. 25661, LMA, SSAL.
products. These ranged from small cooperatives selling agricultural prod-

ucts, tobacco, medicinal plants, and specialty crafts to large mining com-
panies like the Trepca Mines Yugoslavias largest producer of zinc and
lead.103 By 1937 Yugoslavias overall participation at the trade fair had
increased dramatically from previous years (see Tables 5.6 and 5.7).
Romanian interest in the fair began to revive in 1935 when it became
clear that Bucharest and Berlin would negotiate a commercial agree-
ment. But despite intensive lobbying by Heydendorff and Voss, Romania
refused to organize an official exhibition, preferring to spend its limited
103 Report on Yugoslavian exhibition, p. 136, GA 147, LMA, SSAL.

funding on displays in hard currency countries.104 Leipzigs breakthrough

came the following year. In the spring 1936 Kohler personally intervened,
asking Romanias Trade Ministry to present an official exhibition. The
Leipzig fair, Kohler argued,
offers Romania the opportunity to cultivate business connections with coun-

tries from around the world . . . Especially now when various trade barriers have
interfered with international exchange, trade fairs present the best chance to
develop an active commercial exchange from country to country. Personal liaisons
between producers and merchants create the opportunity for them to talk through
all the special considerations of their business and in place of a longwinded
exchange of letters conclude the transaction immediately.105
Kohlers appeal fell on fertile ground. In the summer of 1936 Romanias

Francophile Foreign Minister Titulescu fell from power. King Carol II,
jealous of Titulescus international successes, ousted him from the
Foreign Office and began slowly tilting Romanias economic policy in
favor of Germany.106 Pro-German officials in the Romanian government
argued that only the Third Reich could provide the markets Romania
needed for its agricultural products. Hitlers remilitarization of the
Rhineland that March, moreover, made even the staunchest supporters
of collective security question whether Romanias ties with France
were dependable.107 This improved diplomatic situation allowed the
Messeamt to advance their negotiations for a Romanian exhibition.
Leipzigs Berlin agent lobbied Germanys Economics Ministry to grant
the fair special contingents for Romania. In Bucharest Voss, Heyden-
dorff, Konradi, and Romanias Economics Minister Mihail Manoilescu
began organizing a collective Romanian exhibition and lobbying for
a special allotment of foreign currency to use at the fair. After some
squabbling the state authorities in Berlin gave Leipzig the right to export
104 Yet in this year fair delegates in Romania began requesting more official fair invitations.
Heydendorff to Messeamt, February 16, 1935, GA 810, LMA; Messeamt to Belgrade
Business Office, June 2, 1935, Messeamt report, September 30, 1935, and Heydendorff
to Messeamt, October 12, 1935, GA 152, LMA, SSAL; Heydendorff to Messeamt,
March 18, 1935, GA 810, LMA, SSAL; Director Voss to Messeamt, p. 387, GA 146,
LMA, SSAL.
105 Kohler to Romanian Trade Ministry, April 15, 1936, GA 152, LMA, SSAL.
106 Over the course of 1934 and 1935 Titulescu had tried to include Romania in a regional
security agreement with Czechoslovakia, France, and the Soviet Union. Titulescus
ambitions ultimately foundered in 1936, his effort at rapprochement with the Soviet
Union having made too many enemies on the Romanian right. But even before 1935
pro-German elements in the government began seeking a commercial accommoda-
tion with the Third Reich to gain access to Germanys large domestic market. Keith
Hitchins, Rumania 18661947, 4367.
107 On the shift in Romanian foreign policy in 1936, see ibid., 4378; Grenzebach, Informal
Empire, 8095; Zara Steiner, Triumph of the Dark: European International History, 1933
1939 (New York: Oxford University Press), 359414.
to Romania for 1937, but Breslau remained the only fair receiving
foreign currency to import from Romania. As a result of this awkward
agreement firms coming to Leipzig in February with the hopes of trading
in Romania would have to wait until the Breslau fair in May to have
their orders fully processed.108
This was a nonsensical trade fair policy, the polycracy of the Third
Reich creeping into the arena of trade fairs as Leipzig and Breslau
competed with one another in unconstructive ways. To remedy this the
Messeamt and the GermanRomanian chambers of commerce in Berlin
and Bucharest took matters into their own hands. First, the two chambers
arranged their own compensation agreement between themselves using
2 million RM worth of import licenses held by the chamber of com-
merce in Berlin. Second, they jointly organized a collective exhibition of
Romanian products at Leipzig, with displays of oil seeds, meats, grains,
wood and other agricultural products, as well as industrial materials
like petroleum derivatives, propane, copper, manganese, and bauxite.109
Third, the Bucharest chamber stationed Romanian officials at the fair
who provided information about exchange controls. These officials were
authorized to approve on-the-spot orders to import German goods into
Romania. This service simplified the process of acquiring import licenses,
since smaller Romanian trade agents outside Bucharest hardly ever
encountered these officials and instead depended on drawn-out corre-
spondence to have their licenses approved. In addition to Romanian offi-
cials, at the fair the Messeamt brought in representatives from Leipzigs
exchange control office and Germanys foreign trade bureaus to advise
foreign and domestic merchants about currency laws.110 Finally, Ger-
man firms in possession of export or import licenses that had gone
unfulfilled and there were a great many of these were authorized
to complete their contingents at the fair or sell them to other firms who
could use them. Likewise, large Romanian banks and firms in posses-
sion of unused import contingents sent representatives to the fair to sell
them to Romanian merchants seeking to import above their authorized
allotment.111
By 1937, then, the Leipzig fair was functioning as an entrepot for
merchants from Southeastern Europe, collecting unused import licenses
108 Report on meeting with Voss, Demetrescu, and Manoilescu, November 13, 1936,
Kohler to DRHK, January 28, 1937, GA 152, LMA, SSAL.
109 Discussion between Manoilescu, November 13, 1936, pp. 34855, Voss to
Siebenburgen Handelsgremium January 1, 1937, pp. 3723, GA 152, LMA, SSAL.
110 Ergebnis der Leipziger Fruhjarhes Messe 1939, p. 27, DS 938, LMA, SSAL.
111 Belgrade Business Office to Berlin DRHK, January 28, 1937, Belgrade Business Office
to Ernst Neer, February 4, 1937, and Kohler to DRHK Berlin, January 28, 1937, GA
152, LMA, SSAL; Messeamt to Heydendorff, February 4, 1937, GA 811, LMA,
SSAL.
issued by the Romanian and German governments and reallocating

them to those who could use licenses. Fair attendance numbers illustrate
its attractiveness to the commercial elites of Southeastern Europe, who
came in droves to purchase machinery and equipment at Leipzigs techni-
cal exhibition. Registered business visitors from Yugoslavia and Romania
surpassed their pre-depression peak in 1935 and 1937, respectively.
When counting Hungarian and Bulgarian participants alongside Roma-
nian and Yugoslavian ones, more than twice as many registered mer-
chants from Southeastern Europe attended the fair in 1939 as during the
boom year of the 1920s. And by 1939 Southeastern Europe accounted for
nearly 14 percent of all trade fair visitors (see Table 5.6).112 According to
estimates by the fair and the chamber in Berlin, the special compensation
agreement between the two GermanRomanian chambers of commerce
generated 1.5 million RM worth of contracts at the fair. But this was only
a fraction of the total GermanRomanian business going through Leipzig,
which the Messeamt estimated to be 8 million RM. German importers
primarily bought raw materials like wood, manganese, and bauxite,
along with grain, eggs, tobacco, and other agricultural products.113
The Messeamt activities, however, did not stop in Leipzig; its impact
extended beyond the actual goods exchanging hands at the fair. Here the
Messeamt expanded its second core objective in the mid 1930s: collecting
and disseminating information. As in the 1920s the Messeamts agents
were the eyes, ears, and mouth in the Balkans for German business-
men. During the Depression the fairs funding for advertising and infor-
mation dissemination had declined, but by 1935 its agents were again
receiving generous support for marketing German products. Before each
spring and fall they bombarded the commercial circles of Southeastern
Europe with current issues of the Messeamts journal, Wirtschafts- und
Export Zeitung, alongside photo advertisements of German technology
and the fair itself. After 1934 Voss, Heydendorff, and even President
Kohler made frequent promotional trips and organized press confer-
ences throughout Southeastern Europe. And throughout the 1930s the
Messeamt expanded its use of sound films as a medium for advertising,
aiming many of their short flicks at foreign audiences.114 Altogether,
112 Ergebnis der Leipziger Fruhjarhes Messe 1940, DS 940, LMA, SSAL.
113 Here the estimates came from the German Advertising Council, which conducted a
survey that for the first time asked firms to list their purchases by country, Westphal to
Messeamt, April 24, 1937, and DRHK to Messeamt, April 13, 1937, GA 152, LMA,
SSAL; Messeamt to Heydendorff, March 24, 1937, GA 811, LMA, SSAL.
114 The films themselves were typically ten- to twelve-minute portraits of the fair or a
particular industrial branch, Voss to Messeamt. April 10, 1937 and Messeamt to Voss,
December 18, 1937, GA 147, LMA, SSAL; Belgrade Business Office to Messeamt,
June 11, 1937 and Heydendorff to Messeamt, November 12, 1937, GA 811, LMA,
SSAL.
the Messeamt spent several thousand Reichsmarks on advertising in

Yugoslavia and Romania before every fall and spring fair.115
German firms trying to locate specific products to purchase in
Yugoslavia or Romania also employed the fairs agents to collect
information. As German aircraft construction grew and with it demand
for bauxite an essential ingredient for aluminum large firms like
Vereinigte Aluminium Werke AG in Berlin as well as smaller firms
turned to the fairs agents to locate untapped producers in Yugoslavia.
In addition to providing these firms with contacts, Voss and other agents
exhorted Yugoslavian bauxite producers to exhibit at Leipzig, since
few German firms knew anything at all about the supply situation in
Yugoslavia. By the end of the decade Yugoslavia became Germanys
second-largest supplier of bauxite after Hungary, exporting 379,600
tons 99.9 percent of its total production to the Third Reich in 1938.116
In addition to helping German firms locate imports, Leipzig agents
provided information about goods that were in particularly high demand
in Romania and Yugoslavia. Most inquiries came from small firms
producing electrical machinery, tools, and agricultural equipment. And
requests ran in both directions: Romanian and Yugoslavian importers
used the fairs network to locate German firms producing goods that
ranged from high-end machinery to spare parts for farm equipment.117
Through its services as an entrepot, and through its dissemination
of information the Messeamt effectively expanded its third core objec-
tive of promoting the sale of German production goods abroad.118 The
primary conduit for this was the technical exhibition, which focused
on German machinery. In 1938 the spring fair generated 543 million
RM worth of business, of which roughly a third were exports. And of
these exports, the majority were production goods: machinery exports
amounted to 124 million RM, whereas the export of consumer goods
at the fair amounted to only 50 million RM.119 By 1939 the exhibition
of capital equipment in Leipzig attracted more visitors than any other
except porcelain: machine tools (20,860 registered visitors); porcelain,
pottery, and glasswares (19,124); textile and paper machines (12,729);
and engineering equipment (12,628).120
115 Heydendorff to Messeamt, December 10, 1937, GA 811, LMA, SSAL.

116 Voss to Messeamt from December 12 and Messeamt to Voss, December 28, 1935, GA
147, LMA, SSAL; Milward, Reichsmark Bloc, 406.
117 Kronstadt agent to Messeamt, October 21, GA 152, LMA, SSAL; see the inquiries
from February 12, 1937 and September 14 and October 25, 1938, GA 811, LMA,
SSAL.
118 Raimund Kohler, Leipziger Messe im Vierjahresplan, Der Vierjahresplan: Zeitschrift
fur Nationalsozialistische Wirtschaftspolitik 1 (March 1937), 1534.
119 Report from the Werberat der deutschen Wirtschaft, p. 14, DS 258, LMA, SSAL.
120 Die Leipziger Messe in Zahlen, 1940, DS 927, LMA, SSAL.
By displaying a wide array of machinery Leipzig became a hub

of GermanBalkan commerce. The Messeamt estimated that German
exports to Yugoslavia and Romania accruing from the spring fair in
1937 totaled 6,846,000 and 7,824,000 RM, respectively. Exports going
through the spring fair to Southeastern Europe as a whole Yugoslavia,
Romania, Hungary, and Bulgaria totaled just under 23 million RM, or
roughly 5 percent of Germanys overall trade with this region (429 mil-
lion). Yet this figure underestimates the impact of the fair, since it does
not account for sales at the smaller fall fair, or sales accruing from con-
nections made via Leipzigs agents in the Balkans.121 In comparison, the
largest and most publicized German investment in Southeastern Europe,
the Zenica foundry in Bosnia constructed by Krupp AG in 19367, was
worth 9 million RM (160 million dinars).122
The fairs growing emphasis on machinery and capital equipment,
moreover, dovetailed with the needs of the Yugoslavian and Romanian
economies. Throughout the 1930s domestic industry in these two coun-
tries grew, driven largely by their textile sectors. Annual industrial growth
in both countries outpaced the European average during the 1930s.
But as their domestic industries expanded, these countries needed to
import ever more capital equipment: in Romania metals and machinery
accounted for over half of all imports.123 These strategic goods agri-
cultural equipment, machine tools, and electrical equipment were the
most popular products at the Leipzig fair and were precisely the sectors
where Germany dominated Southeastern Europes trade. By the sec-
ond half of the decade Germany became the primary supplier of capital
machinery for the Balkans textile sectors, and by the end of the decade
it also became the largest exporter of agricultural equipment to South-
eastern Europe. By 1938 Romania and Yugoslavia imported 58 and
48 percent of their machinery from Germany, 43 and 68 percent of
their vehicles, and over 50 percent of their engineering and chemical
products (see Tables 5.8 and 5.9). And many contemporaries expected
this relationship to deepen with time. In the words of Mihail Manoilescu,
Romanias Trade Ministry, supplying the agricultural sector with mod-
ern equipment will make such great demands upon German industry that
the current reciprocal exchange of goods will soon be far surpassed.124
121 Report on questionnaire, 1937, p. 91, DS 256, LMA, SSAL. For the totals for 1937
see Wolfgang Schumann, Griff nach Sudosteuropa: neue Dokumente uber die Politik des
deutschen Imperialismus und Militarismus gegenuber Sudosteuropa im zweiten Weltkrieg
(Berlin: VEB Deutscher Verlag der Wissenschaften, 1973), 24.
122 Roland Schonfeld, Deutsche Rohstoffsicherungspolitik in Jugoslawien 19341944,
Vierteljahrshefte fur Zeitgeschichte 24 (1976), 21558, here 217.
123 Lampe, Balkans into Southeastern Europe, 131; Lampe and Jackson, Balkan Economic
History, 48291.
124 Lecture by Mihail Manoilescu before the Sudosteuropa-Gesellschaft (SOEG) on
June 1, 1940. Printed as Wirtschaftliche Verflechtung und Gegenseitiges Verstandnis
Table 5.8 Romanian imports by sector and by country, 1938 (in thousands of lei)
German British French

share of share of share of American
From imports From imports From imports From share of Cz. share
Sector Germany (%) Britain (%) France (%) America imports From Cz. of imports
Machines and 1,953,823 58.5 242,815 7.3 102,706 3.1 266,976 8.0% 166,044 5.0
equipment
Iron products 1,262,712 41.8 83,802 2.8 270,829 9.0 137,828 4.6% 505,517 16.7
Textiles 553,482 19.3 375,231 13.1 100,600 3.5 29,617 1.0% 445,096 15.5
Motor vehicles 631,393 43.5 18,691 1.3 217,180 15.0 383,489 26.4% 25,311 1.7
Wool and wool 346,255 39.3 133,772 15.2 170,945 19.4 21 0.0% 28,879 3.3
products
Other metals 255,500 32.3 122,362 15.5 25,825 3.3 16,984 2.1% 12,364 1.6
Chemical 410,460 66.4 10,823 1.8 60,833 9.8 11,155 1.8% 21,764 3.5
products
Source: Report from the Vertraulichen Sonderdienst, February 23, 1939, Handelsabteilung, 112606, PAAA.
Table 5.9 Yugoslavian imports by sector and by country, 1938 (in thousands
of dinars)
German British French

share of share of share of
From imports From imports From imports From
Sector Germany (%) Britain (%) France (%) America
Iron and iron products 204,189 35.8

Machine instruments 242,026 48.7 103,294 20.8 8,369 1.7 12,953
Motor vehicles 170,139 67.9 2,896 1.2 8,064 3.2 16,642
Engineering products 99,425 55.0 3,610 2.0 2,755 1.5 2,499
Source: Statisticki Godisnjak/Annuaire Statistique (19389).
Conclusion
In January 1939 Hjalmar Schacht, the man most responsible for guiding
Germanys economy since 1933, was dismissed from the Reichsbank. Yet
ironically, in foreign economic policy it was Schachts vision of an infor-
mal continental bloc that the Third Reich actually pursued through much
of the 1930s. Neither total autarchy, as advocated by leading National
Socialists, nor a return to global free trade, a course preferred by a
subsection of business elites, proved to be a workable solution for the
Third Reich given the hard fact of rearmament and its recurring foreign
currency crises. Instead, under Schachts direction Germany gradually
reoriented its trade away from the British Empire and America toward
less-developed economic partners on the continent.
Through a framework of bilateral treaties and currency controls
Germany gradually stabilized trade with the states of Southeastern
Europe after the turbulence of the Depression, allowing a more pre-
dictable stream of raw materials and inputs to flow into the Third Reich.
To be sure, Southeastern Europe could not provide everything Germany
needed for war, as even the proponents of Mitteleuropa conceded.125 Oil,
rubber, and iron ore simply did not exist there in the quantities Germany
demanded. But by 1938 Romania and Yugoslavia, alongside Bulgaria and
Hungary, directly buoyed German power by supplying the Third Reich
with crucial ingredients for its war machine.126 Over 80 percent of its
zwischen Deutschland und Sudosteuropa, in Sudosteuropa-Gesellschaft,

Sudosteuropa Probleme (Vienna: Sudosteuropa-Gesellschaft, 1940), 62.
125 Mitteleuropaische Wirtschaftstag report: Sudosteuropa als wirtschaftlicher Ergan-
zungsraum fur Deutschland, 294a, R 63, BA.
126 Yugoslavia, Clodius remarked in 1938, is becoming an ever more important supplier
of Germanys agricultural produce, above all in grain, livestock, and animal products
as well as industrial raw materials like bauxite, copper, and wood. On the other hand,
Table 5.10 German imports from Southeastern Europe by

commodity (as a percentage of Germanys total imports)
Commodity 1929 1937
Wheat 2.4 36.9

Barley 37.4 80.5
Corn 6.8 32.9
Meat/meat products 7.0 35.0
Pigs 0.0 21.0
Lard 0.1 31.0
Timber 24.5 35.0
Bauxite 37.2 62.1
Lead ore 2.9 28.9
Copper 3.3 5.6
Hemp and flax 1.1 11.4
Source: Basch, The Danube Basin, table 13, p. 183.
barley imports, over 60 percent of its bauxite, and roughly 30 percent of

its wheat, corn, meat, timber and lead imports came from Southeastern
Europe (see Table 5.10). The Reichsmark bloc, in other words, enabled
Hitler to proceed with rearmament despite the chronic trade imbalances
Germany ran with its commercial partners. This was Albert Hirschmans
supply effect of trade in operation.
The Third Reich only stabilized trade with the states of Southeastern
Europe because it could draw on non-state institutions that had emerged
in the 1920s. The Leipzig fair and the GermanRomanian chambers of
commerce helped stabilize Schachts dirigiste foreign trade system. By
1938 the Leipzig Messeamt and its agents had learned to manage the
most intractable short-term challenges posed by Germanys New Plan
and Four-Year Plan. By 1938 not only Romania and Yugoslavia, but
also Bulgaria, Hungary, and Greece organized collective exhibitions in
Leipzig.127 In marketing the agricultural goods of Southeastern Europe to
German consumers the fair performed a crucial service the German state
had assumed under the bilateral treaties, but which it failed to fulfill in
practice. Through its advertising and information services the Messeamt
promoted exports of capital equipment and machinery at a time when the
the importance of Yugoslavia as a sales market for German products, above all for
machines, iron wares, chemical and pharmaceutical products, as well as coal and coke,
is continually growing. Report from Clodius, January 7, 1938, 106181, Handeakten
Wiehl und Clodius, Handelsabteilung, PAAA.
127 In addition, Italy, Japan, the Netherlands, Denmark, Egypt, and Brazil organized
official displays in 1937. Messeamt to Alexander Cincar Markovic, February 13, 1937,
GA 147, LMA, SSAL.
Table 5.11 Machinery as a proportion of German exports, 1938
Percentage of
Commodity Percentage Subcategories of machinery machinery exports
Machinery 15.7 Machine tools 20.1

Chemicals 14.3 Textile machinery 10.1
Iron products 9.4 Combustion engines 6.4
Coal and coke 9.4 Locomotives 5.7
Textiles 8.3 Construction equipment 5.5
Vehicles 7.7 Agricultural machinery 5.2
Electrical equipment 6.4
Source: Kappel, Die Exportbedeutung der Werkzeugmaschinen.
Third Reich needed foreign sales more than ever to finance its gigantic
appetite for imports. By 1938 machinery, iron products, and engineer-
ing equipment all centerpieces of Leipzigs technical exhibition were
three of Germanys top seven export sectors128 (see Table 5.11). And by
functioning as an entrepot for import licenses the fair and the German
Romanian chambers of commerce enabled an otherwise neglected stra-
tum of small and medium businesses to participate in the Third Reichs
commercial drive to the southeast. Indeed, the strong upswing in Ger-
man machine exports to Southeastern Europe occurred just as the small
manufacturers of Saxony and central Germany reentered the Balkan
trade through the fair in 1936 and 1937.
By 1938, moreover, Schachts trade policies had positioned the Third
Reich as the most important destination of imports from the Balkans
as well as the most important supplier of exports to the region (see
Table 5.12). German commercial preponderance was most apparent in
the exports of capital equipment and machinery strategic goods that
were essential for the economic growth of these developing economies
(see Table 5.13). Here Germany was moving closer to having a monopoly
position. Hirschmans influence effect of trade, in other words, was also
slowly coming into play during the 1930s.
Yet some commercial elites in Southeastern Europe resented
Germanys growing involvement in their nations economy. In Belgrade,
for instance, some businessmen protested the foreign infiltration
[Uberfremdung] of the Yugoslavian economy by Germans.129 Germany,
then, still had to sell the idea of a continental economic bloc to the
128 Fritz Kappel, Die Exportbedeutung der Werkzeugmaschinen, Der Vierjahresplan:

Zeitschrift fur Nationalsozialistische Wirtschaftspolitik 3 (October 20, 1939), 11924.
129 Moller to Krahmer-Mollenberg, September 1 and September 29, 1938 and January 25,
1939, 979, R 8043, BA.
Table 5.12 German share of Southeastern Europes foreign trade (as a

percentage of total exports or imports)
Country 1932 1933 1934 1935 1936 1937 1938 1939
Yugoslavia Imports 17.9 13.4 14.2 16.0 26.8 32.7 32.6 47.6
Exports 11.3 13.9 15.5 18.7 23.7 21.7 35.9 31.8
Romania Imports 24.5 18.6 15.5 23.8 36.1 28.7 36.6 39.2
Exports 12.4 10.6 16.6 16.7 17.8 18.9 26.5 32.3
Hungary Imports 22.5 19.7 18.3 22.7 26.0 25.9 30.1 48.4
Exports 15.1 11.2 22.2 23.9 22.8 24.0 27.4 50.4
Bulgaria Imports 25.9 38.2 40.1 53.4 61.6 58.6 52.0 65.5
Exports 26.0 36.0 42.7 48.0 47.9 43.1 58.9 67.8
Source: Milward, Reichsmark Bloc, table 4, 404.
Table 5.13 German machinery exports to Romania (in thousands

of RM)
Machine type 1934 1935 1936 1937 1938
Textile/leather-working machinery 1,226 2,196 4,522 4,572 4,839

Machine tools 732 1,607 2,047 10,472 10,858
Electronic machinery and equipment 2,531 3,279 8,235 10,674 16,255
Agricultural machinery 59 100 763 1,728 2,422
Source: Krugmann, Sudosteuropa, 166.
elites of Southeastern Europe. It still needed to ply its soft power in

the region, to convince Balkan elites that they wanted what Germans
wanted, namely, deeper ties between their nations and the Third Reich.
With the Leipzig fair and the chambers of commerce Germans had built
networks that gave some Balkan elites access to the material rewards of
the Reichsmark bloc. But, as the Mitteleuropa advocates recognized, they
needed to offer still better incentives for the commercial classes of these
countries to willingly participate in Germanys informal empire. They
needed to more actively court local elites so they would collaborate with
the Third Reich around ideas of export-led economic development.
To do this, after 1935 Germanys private institutions would pursue a
reinvigorated program of cultural diplomacy and an extended campaign
of development initiatives to stifle naysayers and convince the elites of
Yugoslavia and Romania that Nazi Germany offered their nations the
best path to grow in a deglobalizing world economy.
6 Economic pioneers or missionaries of the
Third Reich? Cultural diplomacy in
Southeastern Europe, 19331939
The German propaganda machine was working night and day to sell
the Nazi New Order to the people of Europe. And there could have
been no sales talk more effective than the voluntary and unsolicited
endorsement of a country like Yugoslavia, which was still considered a
relatively independent state and a substantial military power. For this
reason, German pressure on Yugoslavia differed in character from that
which they had employed against such countries as Czechoslovakia and
Poland. In the latter they had employed the hard method. In the case
of Yugoslavia, they used the soft method.1
As the Third Reich constructed a Reichsmark bloc it faced the chal-

lenge of convincing the commercial elites of Yugoslavia and Romania
that joining it would be in their own interests. Why, in other words,
would the business or political leaders of these countries want to coop-
erate with Nazi Germany given the many pitfalls collaboration might
entail: the potential for economic dependency; alienation from Britain
and France with their deep sources of capital; increasing separation from
the global marketplace; and adherence to Nazi principles of racism and
anti-Semitism?
Indeed, the speed with which National Socialism destroyed Weimar
democracy and the intensity of the new regimes anti-Semitism initially
led many in Europe to draw back from commercial and cultural contacts
with the Third Reich. Shortly after Adolf Hitler gained power in January
1933, German consulates across Europe and America were flooded with
reports of acute anti-German sentiments, and in many cities short-
lived boycotts of German goods erupted.2 In the Balkans, although some
1 Yugoslavian resistance officer Milivoj J. Sudjic, Europe under the Nazis: Yugoslavia in Arms
(London: Lindsay Drummond, 1942), 42.
2 On March 26, 1933, for example, 250,000 people in New York City and over 1 million
throughout the US met to demonstrate against the persecution of Jews in Germany. The
boycott of German goods was used by the German Foreign Office to justify the Nazis
subsequent boycott of Jewish goods that April. Eckart Conze, Norbert Frei, Peter Hayes,
and Moshe Zimmermann, Das Amt und die Vergangenheit: Deutsche Diplomaten im Dritten
Reich und in der Bundesrepublik (Munich: Karl Blessing, 2010), 2530, quotation from
220
Cultural diplomacy in Southeastern Europe 221
elites were sympathetic to authoritarian government, public antipathy

toward Germanys new regime was initially widespread. In Romania
newspapers called the National Socialists a band of gangsters and a
danger to European peace. Hitler was seen as a fanatical pan-Germanist
with vulgar oratorical talents for the masses and a pathological megaloma-
nia. Uneducated, or what is even worse, half-educated.3 Many among
Yugoslavias commercial elite likewise at first held the Nazi takeover in
poor regard and reacted to the expansion of German commercial or
cultural ties with great mistrust.4
For German exporters, in other words, the Nazi takeover at first did
not bode well for business in Southeastern Europe. Even more aggra-
vating from their standpoint were the new circumstances surrounding
Germanys cultural diplomacy. With the establishment of the Propaganda
Ministry, the Nazi Party hoped to achieve total control over all aspects
of German culture, at home and abroad.5 Nazi leaders wanted to spread
the gospel of biological racism, Aryan superiority, and pan-Germanism
and imbue German minorities in Eastern Europe with a sense of loy-
alty toward the Third Reich.6 To do so, the regime worked closely with a
group of radical scholars who had developed a multidisciplinary approach
to the study of Eastern Europe Ostforschung. These academics portrayed
Poland, western Russia, and other areas of Eastern Europe as the dirty
Wild East, marked by chaos and disorganization, and the resident
Slavic nationalities as barbaric, degenerate, and incapable of progress.7
page 26; report from the Vertraulichen Sonderdienst, September 3, 1934, 54164/film
40726, R 901, BA; Die Greuel- und Boykottpropaganda Gegen Deutschland 1934,
DS 918, LMA, SSAL.
3 German translation of article from the Romanian newspaper Diminteata, Zwei Jahre
Hitler Regime, January 31, 1935, 73670, Politisches Abteilung, PAAA.
4 Belgrade consul to Berlin Foreign Office, November 23, 1933, 61152, Kulturabteilung,
PAAA; Tim Kirk, Working towards the Reich: The Reception of German Cultural
Politics in South-Eastern Europe, in Anthony McElligott and Tim Kirk (eds.), Working
towards the Fuhrer: Essays in Honour of Sir Ian Kershaw (Manchester University Press,
2003), 20522.
5 Jan Peter Barbian, Kulturwerte im Zeitkampfe, Die Kulturabkommen des Drit-
ten Reiches als Instrumente nationalsozialistischer Aussenpolitik, Archiv fur Kul-
turgeschichte 74, no. 2 (1992), 41559.
6 Frank-Rutger Hausmann, The Third Front: German Cultural Policy in Occupied
Europe, 19401945, in Haar and Fahlbusch, German Scholars, 21336, at 217; Fritz
von Twardowski, Anfange der deutschen Kulturpolitik zum Ausland (BonnBad Godesberg:
Inter Nationes, 1970); Otfried Dankelmann, Aus der Praxis auswartiger Kulturpolitik
des deutschen Imperialismus, 193345, Zeitschrift fur Geschichtswissenschaft 20 (1972),
71927.
7 Quotation from Liulevicius, German Myth, 12; Michael Fahlbusch, Grundlegung,
Kontext und Erfolg der Geo- und Ethnopolitik vor 1933, in Irene Diekmann, Peter
Kruger, and Julius H. Schoeps, Geopolitik: Grenzgange im Zeitgeist, Band 1.1: 1890 bis
1945 (Potsdam: Verlag fur Berlin-Brandenburg, 2000), 10346; Michael Fahlbusch,
Nazi leadership drew on this type of cultural diplomacy to justify their

quest to redraw Eastern Europes borders and build a Greater Germany.
Such ideas were hardly good for business, at least before the outbreak
of war. And historians have rightly emphasized the disruptive charac-
ter and racial agenda behind much of Germanys cultural diplomacy in
Eastern Europe. Yet not all Germans saw cultural diplomacy exclusively,
or even primarily, as a building block of pan-Germanism and Hitlers
new racial order. Instead, many thought it should be used to spread the
ideology of German business: cutting-edge technology built on a founda-
tion of efficiency, adaptability, and reliability. Despite their ambitions, the
Nazis were slow in actually attaining total control over Germanys cultural
diplomacy. The fractured nature of authority in the Third Reich allowed
Germanys business elites to pursue their own vision of cultural diplo-
macy through the early years of World War II. Their flagship programs
for deploying these ideas were educational and professional exchanges
that brought hundreds of young businessmen, engineers, doctors, and
academics from Southeastern Europe to study in Germanys prestigious
universities.
The elites who orchestrated these exchange programs the directors of
Mitteleuropaische Wirtschaftstag and the Mitteleuropa-Institut wanted
to enhance their countrys growing preponderance in the economies of
Southeastern Europe with the soft power of cultural magnetism. Soft
power, in the words of Joseph Nye, is about convincing others that your
values and goals are legitimate.8 Empires often employ soft power, cre-
ating networks of private elites in both the center and the periphery
who share some common interest in upholding their imperial system.
Recent studies of Britain and America have underscored how soft power
can reinforce the economic and geopolitical hierarchies that characterize
modern empires.9 During the 1930s Germany used this tool of imperi-
alism as well. Through exchange programs and other types of cultural
diplomacy Germany included Serbs, Croatians, Romanians, and ethnic
Germans in educational and commercial networks that offered tangible
benefits to their members, such as access to market information and busi-
ness contacts. Germans aimed to make their nations commercial policy
attractive to Yugoslavians and Romanians by claiming that these states
The Role and Impact of German Ethnopolitical Experts in the SS Reich Security
Main Office, in Haar and Fahlbusch, German Scholars, 2850; Ingo Haar, German
Ostforschung and Anti-Semitism, in Haar and Fahlbusch, German Scholars, 127; Beer
and Seewann, Sudostforschung im Schatten.
8 Nye, Soft Power, quotation from preface.
9 Maier, Among Empires, 316, 616; Hyam, Britains Imperial Century; Darwin, The Empire
Project.
had a special relationship with the Third Reich and by promoting a Ger-
manic civilizing mission. They used this message, above all the promise
of economic development, to legitimize their longstanding ambition of
enmeshing the Balkan economies more tightly in a German bloc.
German soft power benefited from the faltering of American-, British-,
and French-led internationalism. The 1920s had witnessed the birth of
dozens of new international organizations, many of which were guided by
Western Europeans and based in Paris, Brussels, Geneva, and London.
Yet by the 1930s confidence in this new internationalist society was weak-
ening. Most tellingly, that grand internationalist institution, the League
of Nations, suffered a string of fatal setbacks. The Leagues failure to
act against Japans occupation of Manchuria in 1931 or Italys invasion
of Ethiopia in 1935 undermined its promise to provide collective secu-
rity to the small states of Europe. The failure of the World Economic
Conference in 1933 to achieve a cooperative solution to international
trade and debt problems underscored the limits of Anglo-American or
French leadership in the sphere of economics. And the Leagues minor-
ity rights regime, established in 1919 to safeguard ethnic groups in the
former Ottoman, Russian, and Habsburg Empires, generated resent-
ment among the governing circles of the successor states. Beginning with
Poland, between 1934 and 1938 the states of Eastern Europe stopped
adhering to the Leagues minority treaties.10
Germanys campaign to advance a regionalist agenda through soft
power waxed as the internationalism of the USA, Britain, and France
waned. Yet even Germanys economic-oriented soft power had a darker,
racial dimension. While the leaders of Germanys private business
associations downplayed and even undermined the Nazi messages of
pan-Germanism and anti-Slavism, over time they adopted another
component of Nazi ideology that proved popular in Southeastern
Europe anti-Semitism. Germans claimed that driving Jews out of
commerce Aryanization would accelerate economic development
in the Balkans, and they held this out as a reward to the elites of Romania
and Yugoslavia, above all to radical rightwing nationalist leaders, for
joining Germanys economic bloc. German soft power would prove
effective, in other words, not only because of German technical prowess
and business savvy, but also because Germans proposed to advance the
prosperity of the many by excluding the few, namely, the Jews.
10 Mazower, No Enchanted Palace, 10710; Carole Fink, Defending the Rights of Others: The
Great Powers, the Jews, and International Minority Protection, 18781938 (Cambridge Uni-
versity Press, 2004), 33758; Emily Rosenberg, Transnational Currents in a Shrinking
World, in Rosenberg, World Connecting, 83748.
A competitive space for cultural diplomacy

On March 13, 1933 Adolf Hitler placed Joseph Goebbels at the helm of
the Ministry of Public Enlightenment and Propaganda in return for his
service in bringing the Nazi Party to power. Goebbels was one of Hitlers
closest comrades, an Old Guard who had joined the party in 1924 and
had then quickly become the movements leading propagandist. With the
powers of the newly created Propaganda Ministry at his disposal, after
1933 Goebbels aimed to turn passive Germans into active participants in
the National Socialist revolution. In addition to imposing Nazi supervi-
sion over German film, radio, broadcasting, sports, literature, and news
production at home, in one of his first moves as Propaganda Minister
he tried to acquire control over the promotion of art, film, and sports
beyond German borders. He wanted all German culture, at home and
abroad, to come under the total control of the party.11
Goebbels grasping ambitions touched off what would become a
decade-long struggle between the Propaganda Ministry, the Foreign
Office, and the Ministry of Scholarship and Education for control of
Germanys cultural diplomacy. At stake were over 200 private or semi-
public organizations that cultivated cultural relations with foreign states.
These ranged from the sprawling Institute for Germans Abroad in
Stuttgart (Deutsches Auslands-Institut DAI), the German Academic
Exchange Service in Berlin (Deutscher akademischer Austauschdienst
DAAD), and the Imperial Federation for Catholic Germans Abroad,
which all annually received hundreds of thousands of Reichsmarks
from the government, to smaller associations like the Mitteleuropaische
Wirtschaftstag or the Mitteleuropa-Institut. Because so many of these
organizations operated within the same geographical region and engaged
in overlapping activities, to many contemporaries Germanys cultural
diplomacy appeared fractured and incoherent, much like the Nazi state
itself.12
In the spring of 1935 the Propaganda Ministry launched a major bid
to take over Germanys cultural diplomacy. In a memorandum addressed
11 Richard J. Evans, The Coming of the Third Reich (New York: Penguin, 2003), 291, on
the Propaganda Ministry see 3957; David Welch, The Third Reich: Politics and Propa-
ganda (London: Routledge, 1993); Laitenberger, Strukturprobleme der auswartigen
Kulturpolitik, 8695.
12 In 1934, for example, Dr. Adolf Morsbach, a conservative bureaucrat in Prussias
Interior and Education Ministry and director of the DAAD since 1927, drew up plans
to centralize German cultural policy in a single office precisely because he thought its
present state was too disorganized. Laitenberger, Strukturprobleme der auswartigen
Kulturpolitik, 24, 8190; Michels, Von der Deutschen Akademie, 1078; DAAD-Forum
7, Der Deutsche Akademische Austauschdienst 1925 bis 1975.
to the Foreign Office and other ministries, Dr. Erich Greiner of the
Propaganda Ministry proposed a new umbrella organization to unify
Germanys cultural affairs. Greiner argued that the multiplicity of private
organizations made it difficult to oversee their financial affairs, and that
their sheer number prevented them from operating with a uniform
objective.13 More active involvement by the Nazi Party in cultural
diplomacy would mean a number of things, including a greater emphasis
on publicizing pan-Germanism and the superiority of the Germanic
race abroad. Already in 1934 the Foreign Office had come under pres-
sure from the Propaganda Ministry and Germanys new Office of Racial
Policy to integrate a racial dimension into its cultural work. The director
of the latter, Walter Gross, wanted German schools abroad to enlighten
other nations about the results of modern racial ethnology developed
by German scholars in the past several years, and make race an accept-
able category in the field of cultural diplomacy. He hoped to encourage
German speakers in Eastern and Southeastern Europe to recognize that
they belonged to the German race, that this race was superior to others,
and that they consequently had an obligation to be loyal to the German
nation even when this conflicted with their duty as citizens of other
states.14
Greiner and Grosss campaign belonged to a larger effort by the Nazi
Party to undermine the Versailles Treaty framework in Eastern Europe.
Working through intermediary organizations like the Association of
German Nationals Abroad, the Northeast Ethnic German Research
Society (Nord- und Ostdeutsche Forschungsgemeinschaft), and the
Ethnic German Liaison Agency Nazi leaders stoked the demands of
German minorities in Eastern Europe for cultural independence from
their states, and for the right to display their loyalty to Germany.15
In Romania and Yugoslavia National Socialist film and newspaper
propaganda targeted German minorities in order to instill a renewal
13 Proposal for a Central Office for Cultural Diplomacy by Dr. Greiner, March 19, 1935,
14 Memo from August 7, 1934, and article from the Volkische Beobachter, July 20, 1934,
70163, Buro Staatssekretar, PAAA. On Walter Gross and the Office of Racial Policy,
see Robert N. Proctor, Racial Hygiene: Medicine under the Nazis (Cambridge, MA: Har-
vard University Press, 1988), 879; Laitenberger, Strukturprobleme der auswartigen
Kulturpolitik, 24, 8190; Michels, Von der Deutschen Akademie, 1078.
15 Other ethnopolitical research institutes include the Foundation for Research on
German Ethnicity and Land Cultivation in Leipzig (Stiftung fur deutsche Volks- und
Kulturbodenforschung), the Eastern European Institutes at the universities of Breslau
and Konigsberg, and the Southeast Institute in Munich. Haar, German Ostforschung
and Anti-Semitism, Haar and Fahlbusch, German Scholars, 127; Fahlbusch, German
Ethnopolitical Experts, 2850.
of nationalist sentiment.16 In 1935 the Nazi Partys Foreign Policy

Office began subsidizing the rightwing press in Romania. It wanted
to unite Romanias anti-Semitic movements like the Iron Guard and
Alexander Cuzas National Christian League, and to pressure Romanias
government into pursuing a more German-friendly foreign policy.17
Officials in the Foreign Office thought these racially and nationally
charged initiatives were counterproductive. They preferred to let closer
political relations develop naturally from greater commercial and cul-
tural contacts. In 1936 when King Carol II of Romania demanded that
Germany stop interfering in the domestic politics of his country, for
instance, the Foreign Office urged the Nazi Foreign Policy Office to
scale back its subversive operations in Bucharest and Transylvania.18
And when the Party screened Leni Riefenstahls film Triumph of the Will
in 1935 in cities across Europe it ran in both Yugoslavia and Romania
for two months the Foreign Office criticized this as a crude attempt to
bludgeon foreigners with overt Nazi symbolism.19
For Friedrich Stieve, director of cultural affairs in the Foreign Office,
the National Socialists lacked finesse in foreign affairs. He feared the
relative inexperience of the Party with foreign cultures would turn more
people away from Germany than toward it. Nazi propaganda, with its
focus on the masses, was simply too coarse an instrument. By contrast,
Stieve maintained that, the cultural political activities of the Foreign
Office are not about propaganda in the traditional sense of the word.
They represent rather a methodical advertising for German culture
16 These appeals were limited, however, by the numerous religious, regional, and social
divisions among the ethnic Germans of Southeastern Europe. The Ethnic German
Liaison Agency spent much of its energy before 1939 smoothing over the tensions
between these groups in Romania and Yugoslavia in order to help them advocate for
a pro-German foreign policy to their respective governments. Zoran Janjetovic, Die
Donauschwaben in der Vojvodina und der Nationalsozialismus, in Mariana Hausleit-
ner and Harald Roth (eds.), Der Einfluss von Faschismus und Nationalsozialismus auf
Minderheiten in Ostmittel- und Sudosteuropa (Munich: IKGS Verlag, 2006), 2234; Carl
Bethke, Erweckung und Distanz: Aspekte der Nazifizierung der Volksdeutschen
in Slawonien 19351940, in ibid., 183217; Cornelia Schlarb, Konfessionsspezifis-
che Wahrnehmung des Nationalsozialismus in kirchlichen Publikationen der deutschen
Minderheit in Rumanien in den 1930er Jahren, ibid., 13361; Bohm, Die Deutschen
in Rumanien; Valdis O. Lumans, Himmlers Auxiliaries: The Volksdeutsche Mittelstelle and
the German National Minorities of Europe, 19331945 (Chapel Hill: University of North
Carolina Press, 1993), 10722.
17 Eugene Weber, The Men of the Archangel, Journal of Contemporary History 1, no. 1
(1966), 10126; Hitchins, Rumania, 438.
18 Quotation from Hitchins, Rumania, 438; see also Komjathy and Stockwell, German
Minorities and the Third Reich, 11517.
19 Minister for Propaganda to Bucharest Embassy, August 30, 1935, Bucharest Embassy
162/64, PAAA; Kirk, Cultural Politics, 209.
abroad, one that is only possible when based on a precise understanding

of foreign countries . . . We should never awaken the impression that we
want to impose our high culture on another people.20 This was particu-
larly the case with scholarship, student exchange, and presentations held
in the name of Germany. The first maxim for lectures of this type,
Germanys consul in Belgrade remarked, should be to avoid every
polemic against other ideologies and against the foreign and domestic
policy of other peoples.21
Stieve, moreover, worried that if the Propaganda Ministry gained too
much authority it would endanger the work of Germanys many private
or semi-public organizations like the DAAD and the German Academy,
which were organizing German-language classes throughout the Balkans,
or smaller organizations like the Mitteleuropa-Institut. The advantage of
such institutions, he emphasized, was that they do not convey an official
character to foreign observers, and were rather understood to be inde-
pendent associations. By placing these under Dr. Greiners planned
umbrella organization they would acquire a governmental character,
and in the eyes of foreigners be taken for nothing other than an appendage
or organ of the Propaganda Ministry.22 Stieve convinced the secretaries
of Germanys other departments that Greiners centralization would do
more harm than good to German interests. In late spring 1935 the For-
eign Office, together with the Finance Ministry, the Justice Ministry, and
the Prussian Culture Ministry torpedoed Greiners proposal to centralize
cultural diplomacy under Goebbels control.23
This bureaucratic competition between the Foreign Office, the Edu-
cation Ministry, and the Propaganda Ministry continued after 1935 and
belongs to the now familiar story of Nazi governance devolving into a
polycracy of competing jurisdictions. To be sure, the Foreign Office was
never a center of opposition to Hitler or a foreign body within the
Third Reich. Some of its highest officials, holdovers from the Weimar
Republic such as Konstantin von Neurath who served as Foreign Minis-
ter from 1932 to 1938, were sympathetic to the goals and the racism of
the Nazi Party. And the ministry imposed coordination (Gleichschaltung)
20 Memo by Stieve, April 26, 1933, originally from March 1, 1933, 60798, Kultur-
abteilung, PAAA; Laitenberger, Strukturprobleme der auswartigen Kulturpolitik, 91.
21 Von Heeren in Belgrade to Berlin, November 23, 1933, 61152, Kulturabteilung, PAAA.
22 Memo by Stieve concerning a Central Office for Cultural Propaganda, April 4, 1935,
23 Laitenberger, Strukturprobleme der auswartigen Kulturpolitik, 92; report on inter-
ministerial meeting concerning a Central Office for Cultural Propaganda, April 29,
1935, 66078, Kulturabteilung, PAAA.
on itself with little pressure from the Party. Yet as Stieves campaign illus-
trates, officials in the Foreign Office at times disagreed with the methods
Nazi leaders used to achieve their goals.24 And the ministry jealously
guarded its field of operation, using its expertise in foreign affairs and
its extensive network of consulates to preserve its own position within
the Third Reichs machinery of power. In the case of cultural diplomacy,
Foreign Office officials hoped to keep it free from direct party control,
not because they inherently opposed Nazi pan-Germanism or biological
racism, but because they believed such freedom would allow for a more
effective projection of German soft power abroad.25
Cultural diplomacy and educational exchange in

Southeastern Europe
For businessmen and economists interested in Southeastern Europe,
the struggles between the Foreign Office and the Propaganda Ministry
provided them with the space to pursue their own agenda. Yet even with
such room to maneuver they experienced initial difficulties selling their
vision of a German economic bloc abroad. The Depression had severely
reduced funding for cultural diplomacy across the board. University
budgets throughout Germany were slashed, sometimes by as much as
one-third.26 Funding for Germanys embassies and consulates to engage
in cultural activities also declined precipitously. Germanys budget
for cultural affairs in Yugoslavia fell by almost 40 percent between
1931 and 1932, and a similar though less steep pattern occurred in
24 Another example of such disagreement was the question of how Germany should defend
its concentration camp system in the court of international public opinion. Himmler
thought comparing German concentration camps to British ones established during the
Boer War was the best approach. The Foreign Office disagreed, and instead encour-
aged their foreign missions to repudiate or rationalize each individual foreign report or
complaint about German camps. Conze et al., Das Amt, 36, 79.
25 Numerous party organizations were involved in German foreign affairs, including the
NSDAPs foreign policy wing Aussenpolitisches Amt directed by Alfred Rosen-
berg and the Buro Ribbentrop, which performed special missions for Hitler. Zachary
Shore, What Hitler Knew: The Battle for Information in Nazi Foreign Policy (New York:
Oxford University Press, 2003), 1213; Eckard Michels, Deutsch als Weltsprache?
Franz Thierfelder, the Deutsche Akademie in Munich and the Promotion of the Ger-
man Language Abroad, 19231945, German History 22, no. 2 (2004), 222; Hans-Adolf
Jacobsen and Arthur L. Smith, Jr., The Nazi Party and the German Foreign Office (New
York: Routledge, 2007). On the debate surrounding the Foreign Office under the Third
Reich, see Forum: The German Foreign Office and the Nazi Past, Bulletin of the
German Historical Institute 49 (Fall 2011), 53109.
26 Michael Gruttner, German Universities under the Swastika, in John Connelly and
Michael Gruttner (eds.), Universities under Dictatorship (University Park: Pennsylvania
State University Press, 2005), 75112, at 801.
Romania.27 Despite the lack of funding, though, demand for cultural

engagements that served the German economy was as strong as
ever. Given Germanys increasingly problematic balance of payment
pressures, what had been a moderate desire to increase exports in the
1920s had by 1934 become an urgent necessity.28 German businessmen
wanted better information about business opportunities abroad, a better
understanding of foreign cultures, and above all, better education for
young exporters in the customs and languages of other countries.
At the end of the 1920s Georg Gothein and Walther Hoffmann,
directors of the Mitteleuropaische Wirtschaftstag and the Mitteleuropa-
Institut, respectively, had pioneered a movement to address these issues
and to use culture to promote German exports. By the 1930s these ideas
had percolated up to the top of Germanys economic hierarchy where
organizations like the German Association for Chambers of Industry
and Trade (Deutsche Industrie und Handelstag DIHT), Germanys
foremost association of export industries, discussed them in great detail.
At the annual meeting of the DIHTs committee for foreign trade in
September 1933, for example, the directors called for greater care and
funding to be given to reporting foreign economic information and also
to advertising for German products abroad.29 Just as important, though,
was the education of the next generation of German merchants. The
directors of the DIHT stressed the growing demand for traders who had
expertise working in foreign countries.
We need to admit that here something must be done. The progressive deteriora-
tion of foreign trade in recent years and the simultaneous insecurity in the growth
of business abroad has hampered or even completely inhibited the very expensive
education of effective, young personnel. There is no doubt that the education of
a good cohort of young merchants abroad is part of the life-blood (Lebensnerv)
of Germanys foreign trade, and that we must direct our complete attention to
find a remedy for this.30
Cultivating such expertise, they argued, was crucial to solving Germanys

export problem: better salesmanship, better marketing, and a better
27 The requested budget for official cultural work in Yugoslavia was 226,140 RM for 1931
and 141,800 RM in 1932. Budget requests, March 2, 1932, 61450, Kulturabteilung,
PAAA; budget requests, May 30, 1931, 61456, Kulturabteilung, PAAA; Freytag to all
missions, January 2, 1932, 70163 Bulow, Buro Staatsekretar, PAAA.
28 Much of the contemporary commentary on the export question in 1932 and 1933
is couched in dire terms. See, for example, the articles Export Eine nationale
Aufgabe, Sachsische Industrie, July 1, 1933, and Export tut Not! Sachsische Industrie,
September 1, 1933.
29 Report on conference for export promotion, September 2, 1933, 61126, Kultur-
abteilung, PAAA.
30 DIHT brochure, September 19, 1933, 118573, Sonderreferat Wirtschaft, PAAA.
understanding of local tastes could help reverse the decline in foreign

demand for German products.31
Yet such linguistic and cultural training for Southeastern Europe,
as well as a general understanding of this regions customs, were
still absent among Germanys business and academic community. In
reality we have never adequately understood one another, lamented
Ljubomir Kosier, a Yugoslavian scholar who spent much of his career in
Germany.
Only as an exception could one hear a word about the Balkans at [German]
universities, but that would be accidental and of little significance. The historians
certainly knew everything about ancient Greece and Byzantium, the philology of
the classical Greeks . . . and the archeology of the Pergamon . . . But one would
hear nothing about the most recent history, about the revolutions that had played
out in the Balkans, about the regions political, racial, social, and economic
relations.32
Businessmen involved in GermanBalkan trade voiced similar com-

plaints. In May 1934 a group of Yugoslavian journalists met with the
directors of the Mitteleuropaische Wirtschaftstag in Berlin. One of the
trips organizers Dr. Max Heinhold, an ethnic German and general con-
sul in Belgrade, conceded that Germany had made some progress since
the war in understanding Southeastern Europe. Vienna, he claimed, was
no longer the single gateway to the region as it had been before the war.
Yet in his opinion Germans still saw the Balkans too much through the
eye-glasses of Vienna or Budapest. Despite the improvements since the
1920s, the German public was still ignorant about Yugoslavia, German
firms and German academia still needed more experts on its economy,
and commerce was still flowing too much through business agents in
Vienna and Budapest, who Heinhold and others complained were all too
often of Jewish origin.33
Against the backdrop of these anxieties, the Mitteleuropa-Institut
revamped its efforts to improve cultural exchange and economic con-
tacts with Southeastern Europe. Like other organizations the economic
crisis had dramatically reduced the institutes public and private funding,
and in 1933 the threat of dissolution became a distinct possibility. The
founder of the institute, Walther Hoffmann, had been forced to step down
31 DIHT to Foreign Office, March 2, 1934, and report on foreign trade committees
meeting, October 24, 1933, 118573, Sonderreferat Wirtschaft, PAAA.
32 Ljubomir Kosier, Deutschland und Jugoslavien (aus der Sudslawischen Perspektive) (Berlin
and Belgrade: Mitteleuropaischer Verlag, 1939), 11.
33 Mitteleuropaischer Wirtschaftstag, Deutschland und Jugoslawien: Tagung am 2. Mai 1934
(Berlin: Deutsches Nachrichtenburo, 1934).
and the interim leader lacked Hoffmanns expertise about Southeastern

Europe.34
In 1934, however, the institute achieved a rebirth with new leadership.
In October Walter Johannes Heinrich Lorch, an honorary Professor of
German Studies at the University of Bucharest, took over the executive
directorship of the institute.35 A born Leipziger, educated in economics,
Lorch had worked with the Transylvanian German community during
the late 1920s to expand the advertising presence of Leipzigs trade fair
in Romania. Before taking the helm of the Mitteleuropa-Institut he had
made a name for himself lobbying for a GermanRomanian organiza-
tion that would promote reciprocal cultural exchange. Lorch found the
Mitteleuropa-Institut in Dresden to be a perfect match for his ambitions
since its location outside Berlin, he hoped, would lessen its association
with the Nazi Party.36
Lorchs greatest ambition was turning his native Saxony into
Germanys center for cultural diplomacy with Southeastern Europe.37
With assistance from Dresdens former mayor, Dr. Bernhard Bluher, the
Mitteleuropa-Institut opened negotiations with the Nazi Partys Foreign
Policy Office, Goebbels Propaganda Ministry, and the Advertising
Council of the German Economy to secure better financial support.38
Here the institutes success depended on the patronage of Martin
Mutschmann, one of Hitlers Old Guard. Like other organizations,
Lorchs institute needed a sponsor with personal connections within the
Nazi Party to survive in the highly competitive institutional field of the
Third Reich.39 Mutschmann suited the bill. Following the Nazi seizure
of power Mutschmann had assumed control over Saxonys regional
government. And by 1935 he had turned Saxony into the most unified
regional party apparatus in all of Germany, which he ruled like his
34 Hoffmanns subordinates questioned his ability to manage the institutes finances.

Grossmann to Saxonys Foreign Ministry, July 25, 1933, 8870, 10717 Auswartigen
Angelegenheiten, SSAD.
35 Walter Johannes Heinrich Lorch was born in 1889 and became director of the Sudost-
Institut in Regensburg after 1945. Lorch to Saxonys Minister of Economics, March 29,
1940, pp. 8990, 2419, 11168 Wirtschaftsministerium, SSAD.
36 Article by Lorch sent to Terdenge of Foreign Office, April 8, 1933, 65831/film 7967,
37 Lorch to Dr. Worner, March 25, 1936, p. 53, HHS 387, UAL; MWT/DAAD report,
July 14, 1936, Bucharest Embassy 141/3, PAAA.
38 Bluher was mayor of Dresden from 1915 to 1931. Grossman to Saxon Foreign Office,
July 25, 1933, 8870, 10717 Auswartigen Angelegenheiten, SSAD.
39 The German Academy in Munich, for example, was able first to survive and eventually
to flourish under National Socialism partly because one of its directors and former
presidents, the geographer Karl Haushofer, had personal relations with Rudolf Hess, a
close deputy of Hitler. Michels, Deutsch als Weltsprache? 2202.
own personal fiefdom. As the owner of a small business, Mutschmann

understood the plight of Saxonys exporters and actively supported the
local economy.40 Exports, Mutschmann pointed out to Hitler in 1935,
are the vital issue of Saxonys economy. Consequently, one of the most urgent
tasks is and always will be to devote special attention to export promotion. The
region of Saxony, with its exceptional economic structure will always remain a
problem child (Sorgenkind) for the German empire as long as we do not succeed
in furnishing additional work through export promotion.41
With Mutschmanns support, the Mitteleuropa-Institut acquired new

sources of funding, in part from the Advertising Council of the German
Economy.42 With these resources Lorch expanded the cultural and
economic news reporting of the institute, reorganizing its weekly news
organ, the Pressespiegel, and extending its coverage to include Austria,
Czechoslovakia, Hungary, Greece, and Turkey from its original focus
on Yugoslavia, Bulgaria, and Romania.43 The institutes representatives
in Romania and Yugoslavia continued their publicity for Germany by
holding lectures and showing films about German engineering and tech-
nology, as well as German automobiles and agricultural equipment.44
Yet support from the Nazi Party came at a cost. The party forced the
institutes board members who most clearly held a liberal economic
perspective out of their public offices, and the previous interim executive
director of the Mitteleuropa-Institut was arrested.45
40 Andreas Wagner, Machtergreifung in Sachsen: NSDAP und Staatliche Verwaltung 1930

1935 (Cologne: Bohlau Verlag, 2004), introduction, 42; Lapp, Revolution from the Right.
41 Mutschmann to Reichkanzler Hitler, July 1, 1935, 6841, 10717 Auswartigen Angele-
genheiten, SSAD.
42 Meeting between Bluher, Lorch, and Gottling, July 20, 1933, p. 84, and Lorch to
Mutschmann, July 20, 1935, p. 94, 8870, 10717, Auswartigen Angelegenheiten, SSAD.
43 Lorch to Saxonys Minister of Economics, March 29, 1940, pp. 8990, 2419, 11168,
Wirtschaftsministerium, SSAD; Lorch to Foreign Office, June 29, 1934, 65831/film
7968, Kulturabteilung, PAAA; Report Nr. 901, March 13, 1930, 8871, 10717
Auswartige Angelegenheiten, SSAD.
44 Lautz to Bucuta about Otto Mueller-Neudorf, who worked with the MEI,
November 24, 1933, Bucharest Embassy 162/1, PAAA.
45 Dr. Gottling was the executive director after Walther Hoffmann stepped down. The files
of the Foreign Office refer to the former director being arrested; however, it is unclear
from the document if this was in fact Dr. Gottling. Dr. Robert H. Ulich, Ministerialrat in
the Ministry of Culture and honorary professor at the Dresden Techniche Hochschule,
who had been one of the MEIs foremost protagonists in its struggle to convince the
Reich offices of its usefulness, left for America in 1934. Hans Julius Gehrig, Professor
of National Economy and Statistics at the TH, also a board member of the MEI,
was forced into early retirement in 1934. Report about meeting on October 16, 1936
from Ministry for Scholarship and Education to Foreign Office, November 12, 1936,
65832/film 7972, Kulturabteilung, PAAA; Hoffmann to General Massow, November
27, 1933, 65831/film 7968, Kulturabteilung, PAAA; Professoren Katalog, Technische
Universitatsarchiv, Dresden (TUD).
The lynchpin of Lorchs ambitious new agenda was a new program of

educational and professional exchange with Southeastern Europe. In the
mid 1920s the Foreign Office and the Prussian Cultural Ministry had
established the DAAD and the Alexander von Humboldt Foundation to
help university students study abroad and to bring foreign students to
Germany. Both programs focused on Western Europe and America, and
here Lorch saw an opportunity.46 With his own connections in Roma-
nia, and with the institutes network now supporting him, he was well
placed to negotiate with the governments and universities of Southeastern
Europe to attract students to Germany. Back in Dresden he tapped into a
growing interest among Saxonys business community in cultural diplo-
macy. According to the regions most influential business association,
the Association of Saxon Industrialists (VSI), Germany faced a press-
ing question of young personnel, the education of specialized export
merchants.47 To address this issue, key players in Saxonys commercial
elite decided to work with the Mitteleuropa-Institut. The director of the
Leipzig trade fair, Raimund Kohler, and the rector of the business college
in Leipzig, Gerhard Worner, both supported Lorchs exchange program
with rooms, teachers, and contacts with businessmen in Saxony who were
willing to apprentice interns from Southeastern Europe. In 1935 Lorch
opened the doors to Germanys first summer program July through
September for professional and student exchange with Romania.48
In Romania, state officials at first endorsed the Mitteleuropa-Instituts
program only reluctantly. Since the late 1920s radically conservative
German student missionaries, sponsored by the German Student
Association, had been preaching the gospel of national renewal to
German minorities in Romania and Yugoslavia, something Romanian
officials did not condone. But during the first year of his program
Lorch accompanied his students to Bucharest where he negotiated with
Romanias Education Minister, Constantin Angelescu, and the director
of middle and high school education. Lorch convinced Angelescu
that his program would benefit Romania economically.49 With the
help of Bucharest Professor Ion San-Giorgiu, a right-leaning and
46 Laitenberger, Akademischer Austausch, 335.

47 Sachsische Industrie, March 15, 1935, 143.
48 Article from Leipziger Neueste Nachrichten, May 5, 1935, p. 139 and report of meeting
with Saxon Ministry of Education, May 14, 1935, p. 145, HHS 183, UAL; Lorch to
Dr. Worner, November 5, 1934, and Summer Program, September 1935, 27, HHS
387, UAL.
49 Lorch to Dr. Worner, October 30, 1935, p. 29, HHS 387, UAL; Elizabeth Har-
vey, Mobilisierung oder Erfassung? Studentischer Aktivismus und deutsche Volks-
tumarbeit in Jugoslawien und Rumanien 19331941, in Sachse,Mitteleuropa und
Sudosteuropa, 36390.
increasingly anti-Semitic intellectual with close contacts to King Carol

II, Mihail Manoilescu, Romanias Trade Minister in the late 1930s,
and Rudolf Brandsch, a Transylvanian German parliamentary deputy,
Lorch founded the GermanRomanian Academic Association to recruit
Romanian students and young professionals to study in Germany. In
1936 Lorch expanded the program to include Yugoslavia and raised
the annual number of student and professional participants to fifty.50
Participation in his program continued to grow throughout the 1930s,
the vast majority of the students studying and interning in Germany
being Romanians, Croatians, or Serbians rather than ethnic Germans.51
In contrast to the DAAD or the Humboldt Foundation, Lorch
designed his program explicitly to help future merchants Germanys
economic and cultural pioneers acquire a practical understanding of
the Balkan economies. He and the other directors of the Mitteleuropa-
Institut believed this would be particularly beneficial to Saxony; over
half of the German participants came from institutes of higher educa-
tion in Saxony.52 Here Lorchs rationale drew on Hoffmanns belief that
Germanys economic success was unthinkable apart from a thorough
understanding of foreign cultures. Because Germanys relationship with
Southeastern Europe is predominantly of an economic nature, we must
place the main emphasis of exchange on a practical education of young
academic merchants.53 Close to three-quarters of the Romanian and
Yugoslavian participants studied business in Dresden or Leipzig, where
Lorch held a teaching position. And the majority of his students interned
with banks, oil companies, and technical or engineering firms in Romania
and Yugoslavia, the remainder being medical or veterinary students.54
50 In 1936 twenty Germans went to Romania and twenty to Yugoslavia, while twenty-five
came from these two countries to Germany, of which seventeen studied primarily busi-
ness or economics. DRAV to Romanian consul, March 27, 1937, Bucharest Embassy
141/3, PAAA; memo, September 5, 1935, 73670, Politisches Abteilung, PAAA; MEI
to Handelshochschule, August 6, 1936, p. 74, HHS 387, UAL.
51 Of the twenty-five students from Romania and Yugoslavia that participated in the pro-
gram in 1936, only four were ethnic Germans. Article Nr. 19 of the Bukarester Tageblatt,
August 30, 1936, p. 81, HHS 387, UAL. For 1935 see list of Romanian students, June
21, 1935, Bucharest Embassy 140/3, PAAA; DRAV to Romanian consul, March 27,
1937, Bucharest Embassy 141/3, PAAA.
52 MEI to Dr. Worner, March 25, 1936, p. 53, HHS 387, UAL; Dr. Bluher: The
Mitteleuropa-Institut is particularly important for Saxony, since Saxonys industry has
so many direct connections to Southeastern Europe. If the efforts of the institute are first
and foremost based in the cultural field, experience has shown that after a time this also
has a favorable effect for the economy in Dresden. Report from July 20, 1933, p. 84,
8870, 11707 Auswartige Angelegenheiten, SSAD; Laitenberger, Strukturprobleme
der auswartigen Kulturpolitik, 7680.
53 Lorch to Dr. Worner, August 6, 1936, p. 74, HHS 387, UAL.
54 Program of the Exchange, September 1935, 27, HHS 387, UAL.
Although the Mitteleuropa-Institut pioneered Germanys first pro-

gram of educational exchange with the Balkans, other organizations
soon followed, making this area of cultural diplomacy increasingly
crowded.55 Some programs complemented Lorchs ambition of con-
centrating exchange with Southeastern Europe in Saxony. In 1936, for
example, the University of Leipzig founded a new Institute for South-
eastern Europe, bringing under its umbrella existing academic organiza-
tions like Kurt Wiedenfelds Institute of Economic Research for Central
and Southeastern Europe (Institut fur Mittel- und Sudosteuropaische
Wirtschaftsforschung IMSWf).56 One of their first programs was a
summer course in Leipzig for students and doctoral candidates from the
Balkans as well as from Germany, which they organized with support
from the DAAD and Gauleiter Martin Mutschmann. The institute col-
laborated with the new Balkan Institute in Belgrade, and by 1937 it was
bringing forty students from the region each summer to study a multi-
disciplinary program in Leipzig taught by over thirty faculty members.57
Lorchs largest rival in the field of academic exchange with South-
eastern Europe, however, arose in Berlin from the Mitteleuropaische
Wirtschaftstag. Like Lorchs institute, the Mitteleuropaische Wirtschaft-
stag was pursuing multiple lines of cultural diplomacy in Southeastern
Europe: hosting Yugoslavian journalists in Berlin, financing pro-German
press in Romania, and sponsoring publicity for German agricultural
equipment across the Balkans.58 In 1933 and 1934, for example, the
Mitteleuropaische Wirtschaftstag financed Otto Schnellbachs study trip
through Yugoslavia and Romania. This young agricultural researcher
55 Minutes of MEIs directors meeting, July 7, 1933, 8870, 10717 Auswartigen Angele-
genheiten, SSAD; Lorch to Dr. Worner, November 5, 1934, p. 3, HHS 387, UAL.
56 The IMSWf was founded by Kurt Wiedenfeld in 1929. Other subsections of the new
institute included the Institut fur Kultur und Geschichte Sudosteuropas, the Institut fur
Kultur und Universalgeschichte, and the Institut fur Geologie und Palaontologie. The
leading figures in the formation of this institute included the university rector Dr. Golf,
the dean of the Philosophsichen Fakultat, Dr. Hans A. Munster, and later the professor
of history Georg Stadtmuller. Irmscher, Das Leipziger Sudosteuropa-Institut, 1439;
H. Gross, Sudosteuropa-Forschung in Deutschland; Munster, Das neue Leipziger
Sudosteuropa-Institut, 7687; article from Offenes Visier 26, no. 5 (June 15, 1937),
p. 3, SEI, Phil. Fak. B1, UAL.
57 The leaders of the institute worked out a division of labor with the Mitteleuropa-
Institut whereby the latter was allocated cultural publicity while the former remained
an institution dedicated to academic scholarship. MEI to Dr. Worner, June 24, 1936,
HHS 387, UAL.
58 With 50,000 RM the Mitteleuropaische Wirtschaftstag bought up Bucharest news out-
lets, like the large newspaper Universul, paving the way for the Romanian adminis-
tration and Germanys trade delegation to conclude the bilateral payment agreement
in September. Grenzebach, Informal Empire, 759; correspondence with the Belgrade
Embassy, November 26, 1935, and March 5 and March 12, 1936, 73189, Sonderreferat
Wirtschaft, PAAA.
gave nearly eighty presentations to a combined total of over 10,000 farm-

ers, reaching out to German minorities and non-Germans alike with his
lectures in German, Serbian, and Romanian about German agricultural
technology and equipment.59
The directors of the Mitteleuropaische Wirtschaftstag, Max Hahn and
Tilo Freiherr von Wilmowsky, realized, like Lorch, that news reporting
and study trips would only go so far; they wanted to firmly anchor South-
eastern Europe in Germanys cultural and economic orbit over the long
term.60 In the fall of 1935 Wilmowsky and Hahn met with the director of
the Trade Policy Committee of the Foreign Office, Carl Clodius, along
with representatives of the DAAD to discuss a pilot program to attract
Balkan students to German universities during the academic year. Echo-
ing the concerns expressed by Yugoslavians like Kosier and Heinhold,
they pointed out that in the last several years students with an empha-
sis on economic and technical fields are increasingly going to France
instead of to Germany. French stipends amount to several million francs
a year . . . and one finds in the Balkan states among the youth an ever
stronger and conspicuous absence of knowledge about Germany and the
German language. Whereas France provided generous financial support
for students hailing from the countries of the Little Entente, before 1935
Germany offered virtually no formal fellowships for Balkan students.61
To remain competitive Wilmowsky and Hahn proposed a vast new pro-
gram that would bring 100 Balkan students a year to German universities,
all expenses paid. When taken alongside Lorchs professional exchange,
the Mitteleuropaische Wirtschaftstags initiative marked a decisive turn-
ing point in Germanys economics-driven cultural diplomacy in South-
eastern Europe. The costs of Hahn and Wilmowskys program would be
large they estimated 135,000 RM a year but they hoped the rewards
would be even greater. They intended the program to show Balkan stu-
dents the benefit of economic cooperation with Germany. They wanted
to introduce the fellows into the praxis of Germanys economic life so
that they not only would acquire a picture of the economic reality of the
new Germany, but so that they would also learn to appreciate Germanys
economic and technical capabilities.
59 On Otto Schnellbachs study trip through Southeastern Europe see 54159/film 40673,
R 901, BA; reports from March 1 and 21, 1933, 54159/film 40673, R 901, BA.
60 Sachse, Ehe von Schornstein und Pflug, 81.
61 Between 1931 and 1933 the Humboldt Foundation and DAAD distributed a total of
just fourteen fellowships to students from Romania and Yugoslavia. MWT report on
fellowship program, November 6, 1935 and MWT/DAAD report about the German
Foundation, April 2, 1938, p. 158, 6142, R 8119F, BA; Laitenberger, Akademische Aus-
tausch, 2834; See also Herbert Scurla, Grundlagen und Methoden der franzosisichen
Kulturpropaganda, Monatshefte fur Auswartige Politik 4 (1937), 84959, at 849.
At the conclusion of his sojourn the fellow, next to his specialized education, must
have also learned to understand the entire economic situation of Germany and
its resulting economic policy. He must be ready, from his professional position,
to espouse the integration of his country into the system of economic cooperation
[with Germany].62
This was nothing less than an effort to reinforce the Mitteleuropaische

Wirtschaftstags plans for a continental economic bloc by teaching,
or indoctrinating, the future generation of commercial elites from
Yugoslavia, Romania, Bulgaria, Greece, and Hungary about the bene-
fits and necessity of trading with Germany. For the project to be effective
Hahn and Wilmowsky recognized it must not look as though it was about
pure economics and propaganda, but rather that it sprang from a desire
for intellectual and cultural exchange and from the effort to enable the
best professional segment of foreign students to receive an education
at German universities. To fund their program the Mitteleuropaische
Wirtschaftstag secured 100,000 RM from the Advertising Council of the
German Economy, and a further 35,000 from large firms like Siemens,
the Deutsche Bank, and the Dresdner Bank.63
In the fall of 1936 the German Foundation of the Mitteleuropaische
Wirtschaftstag (Deutsche Stiftung des Mitteleuropaischen Wirtschaft-
stages) sponsored its first class.64 The German Foundation began by
selecting students from the four disciplines it deemed most important for
Germanys relationship with Southeastern Europe: economics, engineer-
ing, medicine, and agricultural sciences. And the initial call for applicants
was a resounding success. In Bulgaria over 1,100 people turned up at
German consulates in response to the advertisements. So many qualified
students and professionals applied that Wilmowsky and Hahn decided to
lower the monthly stipend per person in order to admit more people.65 A
committee composed of delegates from Germanys local consulate, a Nazi
Party agent, representatives from local German schools or universities,
and a DAAD official made the first round of selections. The final decision
was left to a mixed committee in Berlin consisting of Max Hahn and
another delegate from the Mitteleuropaische Wirtschaftstag, SS Brigade
Leader and director of the DAAD Ewald von Massow, and delegates
from the Education Ministry, the Foreign Office, the Advertising Coun-
cil of the German Economy, and the Imperial Center for Study Abroad.
In their first year they accepted 137 fellows: forty-one in engineering,
thirty-three in economics and business, twenty-one in agricultural
62 MWT/DAAD report about German Foundation, April 2, 1938, 6142, R 8119F, BA.
63 Ibid. 64 Hahn to Weigelt, January 16, 1936, 6142, R 8119F, BA.
65 Memo from DAAD and MWT, August 18, 1936, 6142, R 8119F, BA.
sciences, and forty-two in medicine. Bulgaria had the largest representa-

tion of students (forty), followed by Yugoslavia (twenty-seven), Greece
(twenty-six), Romania (twenty-three), and Hungary (twenty-one).66
Economic pioneers or missionaries of the Third Reich?

Despite the claims of Lorch, Hahn, and Wilmowsky that their programs
did not mix ideological with economic education, the two were inter-
twined in important ways. Indeed, Germanys exchange programs were
not only creating economic pioneers in Southeastern Europe but also
missionaries for the Third Reich, although only for certain aspects of
Nazi ideology. On the one hand, the educational exchange programs
clearly downplayed the pan-German nationalism of the Nazis. The lead-
ers of the DAAD, for example, wanted to avoid selecting too many ethnic
Germans, since they feared this might engender ill will among ethnic
Romanians, Serbians, or Croatians who had applied and been rejected.
Wilmowsky, for his part, appreciated this logic but hoped to sidestep
the need for a concrete selection policy. Instead, the Mitteleuropaische
Wirtschaftstag and the DAAD decided to choose students on a case-
by-case basis. But like the Mitteleuropa-Institut they displayed a clear,
albeit confidential, preference for non-German nationalities. Of the forty-
five applicants under serious consideration from Romania in 1937, for
instance, only three had last names that suggest an ethnic German iden-
tity, the rest being ethnic Romanians (Blutsrumanien). The ratio was
similar in Yugoslavia.67
On the other hand, however, Germanys exchange programs gradually
came to advance an anti-Semitic agenda and made Aryanizing foreign
trade one of their goals. Since the nineteenth century Jews had been
highly represented as business agents for German firms operating in
the Balkans particularly in Romania and this continued into the
1930s.68 As Lorch remarked shortly after opening his summer program
in Dresden, Germanys export business should be the object of this
course, which will assist us in educating export specialists and our own
sales force for Southeastern Europe. This is especially important, because
so many representatives for German firms are still in the hands of Jews,
who must be eradicated (ausgemerzt).69
66 Ibid.
67 MWT/DAAD report, July 14, 1936 and memo from Bucharest consul to all consuls in
Romania, January 25, 1937, Bucharest Embassy 141/3, PAAA; Wilmowsky to Bucharest
consul, November 10, 1936, Bucharest Embassy 142/2, PAAA.
68 Report from April 29, 1935, 89210, Handelsabteilung, PAAA.
69 Lorch to Dr. Worner, August 6, 1936, p. 74, HHS 387, UAL.
The directors of the Mitteleuropaische Wirtschaftstag were slower

than Lorch in adopting Aryanization as a goal of their exchange
program. In the 1920s anti-Semitism had been largely absent within
the Mitteleuropaische Wirtschaftstag: Georg Gothein, the co-founder
of the German Section, had been a member of the Association for
Defense against Anti-Semitism. And the organization avoided explicitly
anti-Semitic language in their confidential reports until the second
half of 1939.70 Yet the Mitteleuropaische Wirtschaftstag eventually
came to embrace anti-Semitism. Already in 1935 they commissioned
two agricultural experts C. H. Dencker from the Imperial Board for
Technology and Agriculture and L. W. Ries from Bornim University to
study farm equipment sales in Yugoslavia. Dencker and Ries concluded
that German equipment firms relied too heavily on Jewish trade
representatives, who they maintained were doing their best to hinder
deliveries from the Third Reich. The contradiction between Germanys
racial policies and its reliance on Jewish merchants, they complained,
was damaging its image in the region and undermining the trust
and understanding of Yugoslavias commercial elites.71 In 1935
such anti-Semitism was still on the margins of the Mitteleuropaische
Wirtschaftstag, and neither Dencker nor Ries were important members
of the organization. But this gradually changed as the Mitteleuropaische
Wirtschaftstags leaders hewed ever closer to the party line regarding
Jews, most likely for opportunistic reasons. In 1937 Wilmowsky himself
joined the Nazi Party, along with a wave of other conservative elites.
And in 1938 the Mitteleuropaische Wirtschaftstag applied a new racist
standard to its exchange program when it requested that, applicants
of Jewish blood, in consideration of the already large number of
applications, be prevented from submitting a fellowship application.72
The anti-Semitic turn among Germanys private organizations was
partly a result of the general racialization of education and commerce
in the Third Reich, which happened at a varying pace. Foreign students
studying in Germany encountered a university environment much more
hostile to Jews under the Third Reich than they did under the Weimar
Republic. After 1933 German universities had undergone their own
coordination (Gleichschaltung) as Jewish professors and many others
70 Verein zur Abwehr des Antisemitismus e.V., 55, N 1006 Gothein, BAK. On the first
real discussion of Jews in Southeastern Europe in the Mitteleuropaische Wirtschaftstag
reports see Sachse, Ehe von Schornstein und Pflug, 78.
71 Report of study trip from Dencker and Ries, October 1935, p. 238, 6141, R 8119F,
BA.
72 MWT/DAAD report about German Foundation, April 2, 1938, 6142, R 8119F, BA;
Freytag, Deutschlands Drang nach Sudosten, 35468.
who held liberal views were dismissed, and a younger, more radical
cohort of assistant professors and lecturers gained greater influence
within the university system. The German student body, moreover,
was one of the most outspoken proponents of the National Socialist
revolution in 1933 and 1934.73 Even in their excursions outside the uni-
versity, exchange program participants from the Balkans were exposed
to National Socialist ideology in various extracurricular activities. They
were required to attend meetings at the Foreign Policy Office of the Nazi
Party and participate in the Strength through Joy program, which had
its own section for foreigners.74
In German trade with the Balkans, anti-Semitism was likewise spread-
ing after 1933, albeit in fits and starts. At the Leipzig fair, for instance,
the Nazi regime forced prominent Jewish directors to resign from the
Messeamt in 1933, and the following year Goebbels organized the first
Brown Fair to showcase National Socialism. In 1934 the Foreign
Office argued that it was indispensable for Germany to entirely reor-
ganize its trade with Southeastern Europe, in order to circumvent the
Jewish commercial representatives by establishing direct contacts in the
region.75 But the Brown Fair of 1934 was the only highly politicized
exhibition at Leipzig and the only time Hitler actually visited the fair.
Between 1934 and 1938 anti-Semitic propaganda diminished, and the
fair preserved a fair degree of autonomy over its publicity in South-
eastern Europe and its exhibitions in Leipzig.76 Throughout the 1930s,
73 National Socialisms penetration into the university system, however, should not be
overestimated. Student enthusiasm for the Nazi Party waned after 1934 and many stu-
dents had grown critical of the regime by the late 1930s. More professors remained in
their posts than were dismissed, and a large number became critical of the regime in pri-
vate. Gruttner, German Universities; Klaus Hildebrand, Universitaten im Dritten
Reich Eine historische Betrachtung, in Joachim Scholtyseck and Christoph Studt
(eds.), Universitaten und Studenten im Dritten Reich: Bejahung, Anpassung, Widerstand
(Berlin: Lit, 2008), 1321; Detlev Peukert, Inside Nazi Germany: Conformity, Oppo-
sition, and Racism in Everyday Life, trans. Richard Deveson (New Haven, CT: Yale
74 MWT/DAAD report about German Foundation, April 2, 1938 and MWT/DAAD
report September 15, 1938, 6142, R 8119F, BA.
75 The report also described how many German firms still conducted their business
through Yugoslavian and Austrian agents in Vienna, Zagreb, and Belgrade, many of
whom were Jewish. Notwendigkeit einer vollkommenen Reorganisation der deutsche
Indsutrievertretungen in Sudserbien, September 3, 1934, 54164/film 40726, R 901,
BA.
76 The Nazis quickly forced Jewish banker Hans Kroch to leave the board of directors
and Philipp Rosenthal, one of the longstanding directors, to resign his position as a
chief executive. But by 1935 the French delegates to the fair reported seeing no real
animosity toward Jews. Hitler, moreover, took a relatively cool outlook toward the
Leipzig fair, giving it little attention and instead preferring to generate publicity at the
annual automobile exhibition in Berlin. Geyer, Die selbstverwaltete Messe, quotation
moreover, many German firms operating in the Balkans retained Jewish

trade representatives, since they frequently had extensive contacts
throughout the region.77 The key turning point only came with Kristall-
nacht in November 1938, when the SA and many civilians ransacked
Jewish synagogues, homes, businesses, and property across Germany.
After the pogrom the Nazi Party issued a decree aiming to eliminate Jews
from the economic life of Germany. These November Laws forbade Jews
from operating sales agencies, from trading at fairs and exhibitions,
or from running commercial enterprises, effectively making it illegal for
Germanys private institutions like the Mitteleuropaische Wirtschaftstag
or even the Leipzig trade fair to engage with Jews from Southeastern
Europe.78 In the fraught atmosphere following Kristallnacht, for example,
the Leipzig Messeamt changed its policy toward Jewish merchants.
Today it is impractical for German firms to let themselves be represented by non-
Aryans in Romania. We have therefore disclosed to the responsible offices those
German firms made known to us that still operate with Jewish representatives in
Romania; in doing so we have pointed out that this fact [that German firms still do
business with Jewish representatives] can both shake confidence in the German
economy and furthermore cause a decline in Aryan visitors from Romania to the
Leipzig fair.79
Yet anti-Semitism in Germanys exchange programs was never just a

response to Nazi racial policies: Aryanization also served a clear and
active purpose for German soft power in Southeastern Europe. By the
mid 1930s many German economists argued that Jews were one of the
reasons for the economic backwardness of Southeastern Europe. By
proposing to eliminate this alleged retardant to growth, German cultural
diplomacy sought to appeal to certain commercial and political circles
in Yugoslavia and Romania, most importantly to those belonging to the
radical right.
In making their case, German scholars of Southeastern Europe drew
on a longstanding discussion of Jews and capitalism that predated
the Nazis by decades. In 1843 Karl Marx had famously described an
elective affinity between Jews and market activity. More important for
from 463; Krugmann, Sudosteuropa. On the French reaction to the fair, Belgrade mission
to Foreign Office, March 18, 1935, 117907, Sonderreferat Wirtschaft, PAAA.
77 The source record more clearly documents the position of Jews in GermanRomanian
trade than GermanYugoslavian trade. German consul in Czernowitz to Foreign Office
Berlin, April 13, 1937, 112606; German consul in Bucharest to Foreign Office Berlin,
October 14, 1939, 112605; German consul in Bucharest to Foreign Office Berlin,
September 14, 1937, 112662, all in Handelsabteilung, PAAA.
78 Nicosia and Huener, Business and Industry in Nazi Germany, appendix E.
79 Heydendorff to Messeamt, November 15, 1938 and Messeamt to Heydendorff, Novem-
ber 28, 1938, GA 811, LMA, SSAL.
economists in the 1930s, however, were the ideas that Werner Sombart
expounded in 1911 in The Jews and Modern Capitalism. Here Sombart,
one of Germanys most renowned social scientists, divided capitalism
into two different spirits: an active, adventurous, entrepreneurial, and
creative one; and a calculating, rational, self-interested, and abstract one.
He would later label these the heroic spirit and the merchant spirit
during the First World War, the former equated with Germans and the
latter with Jews. In doing so, Sombart blamed Jews for the destruction
that capitalism had wrought on Germanys traditional way of life, while
ascribing to German entrepreneurs such as Krupp and Siemens the great
advances in production brought by capitalism. Sombarts arguments
were not free from the criticism of contemporaries such as Max Weber
and Lujo Brentano. Nevertheless, many economists and writers took
Sombarts ideas seriously, and the notion that Jews practiced a particular
style of capitalism became widespread, if not completely mainstream, in
Germany well before 1933.80
At Leipzigs Institute for Southeastern Europe, scholars adapted
these ideas for the Balkans, differentiating between what they believed
to be the indigenous groups of the region South Slavs, Romanians,
Bulgarians and outsiders such as Jews, whom they demonized for hin-
dering the modernization of the regions native cultures and economies.
For Gerhard Gesemann and Georg Stadtmuller, leading historians of the
Balkans who taught at Leipzigs exchange program, Jews represented a
parasitic bourgeois element that had enabled the former imperial masters
of the Balkans first the Byzantines and later the Ottomans to extract
resources and keep the region underdeveloped.81 By 1939 the directors
80 Jerry Z. Muller, The Mind and the Market: Capitalism in Western Thought (New York:
Anchor Books, 2002), 2535; Jerry Z. Muller, Capitalism and the Jews (Princeton Uni-
versity Press, 2010), 5561; Jeffrey Herf, Reactionary Modernism: Technology, Culture,
and Politics in Weimar and the Third Reich (New York: Cambridge University Press,
1987), 13245, 18991; Werner Sombart, The Jews and Modern Capitalism, trans. M.
Epstein (Kitchener, Ont.: Batoche Books, 2001).
81 In 1938 Stadtmuller joined Leipzig University to teach Balkan history, assuming direc-
torship of the Institute for Southeastern Europe a year later. He joined the Nazi Party
with a wave of other academics in 1937. Stadtmuller to Sachsisches Min. fur Volksbil-
dung, February 18, 1939, 10230/43, Min. des Kultus, SSAD; Stadtmuller to Wilmanns,
May 29, 1940, Sudosteuropa-Institut, vol. I, Phil. Fak. B1, UAL; Helmut W. Schaller,
Georg Stadtmuller zum Gedachtnis, Zeitschrift fur Ostforschung: Lander und Volker im
Ostlichen Mitteleuropa, 35, no. 3 (1985), 4035; Gerhard Grimm, Georg Stadtmuller
und Fritz Valjavec, in Beer and Seewann, Sudostforschung im Schatten, 23755, at
2404; Georg Stadtmuller, Osmanische Reichsgeschichte und balkanische Volks-
geschichte, Sonderabdruck aus der Leipziger Vierteljahrsschrift fur Sudosteuropa, 3, no. 1
(April 1939), 124; Gerhard Gesemann, Zur Charakterologie der Slaven: Der para-
sitare Balkaner, in Gerhard Gesemann, Gesammelte Abhandlungen (Neuried: Hierony-
mus, 1981), 3068; Gerhard Gesemann, Volk, Landschaft, Kultur, in Gerhard
of the Mitteleuropaische Wirtschaftstag saw Jews to be representative

of Sombarts merchant spirit in Southeastern Europe, which, they
argued, had prevented the region from forming an indigenous middle
class or an entrepreneurial ethos that would have generated genuine
economic progress in the region. By this twisted logic, driving Jews out of
commerce would not only allow Germans, Romanians, or Yugoslavians
to acquire lucrative trading positions, it would also clear the way for the
economic development of Southeastern Europe.82
These ideas for Aryanization fell on fertile soil in Southeastern
Europe where they appealed, above all, to the radical right. Indeed,
one historian has called anti-Semitism the only really potent inter-
nationalistic ideology in the area.83 In Romania, since the 1920s the
radical right had come to see Jews as foreigners, not as citizens. Three
of the main nationalist parties in Romania along with the Orthodox
Church were highly anti-Semitic and wanted to drive Jews out of the
country entirely. Corneliu Codreanu, leader of Romanias native fascist
movement, brazenly (and inaccurately) claimed to have been Germanys
teacher in anti-Semitism during his time studying at the University
of Berlin. Since 1930 the Romanian government had discriminated
against Jews professionally, pushing them out of state employment,
out of their factory jobs, and out of the railroad and shipping sectors.
This climaxed in 1938 with new legislation from the government of
Octavian Goga and Alexander Cuza two of Romanias most radically
nationalistic politicians who aimed to change citizenship laws for
Jews. The Jewish problem is an old one here and it is a Rumanian
tragedy, Goga stated to the New York Times. Briefly, we have far too
many Jews.84 Lorchs Mitteleuropa-Institut directly appealed to this
Gesemann (ed.), Das Konigreich Sudslawien (Leipzig: Universitats Verlag Noske, 1935),
29; Gerhard Gesemann, Volkscharaktertypologie der Serbokroaten, Jahrbuch der
Charakterologie, 5 (1928), 20769, reprinted in Gesemann, Gesammelte Abhandlungen,
174; Gerhard Gesemann, Die Wurzeln der Jugoslavischen Politik, Volk und Reich 14
(1938), reprinted in Gesemann, Gesammlte Abhandlungen, 4237.
82 Report from August 12, 1939, p. 10, 294a, R 63, BA; Carl Freytag offers a more
generous interpretation in the case of the Mitteleuropaische Wirtschaftstag, the directors
of which, he argues, saw their exchange program as a way to overcome the damage
done to the representation of German firms in Southeastern Europe by Aryanization.
83 Rothschild, East-Central Europe, 10.
84 These parties included Alexandru Cuzas Christian Democratic National Party, Cor-
neliu Codreanus Iron Guard, and Octavian Gogas National Agrarian Party. Ancel,
The Economic Destruction of Romanian Jewry, 1234; Dean Martin, Robbing the Jews:
The Confiscation of Jewish Property in the Holocaust (New York: Cambridge University
Press, 2008), 32534; quotation from Corneliu Codreanu, For my Legionaries (Madrid:
Libertatea, 1976); on the 1938 laws see US Department of State, Foreign Relations of
the United States (FRUS) Diplomatic Papers 1938: The British Commonwealth, Europe,
local anti-Semitism. Throughout the 1930s Lorch cultivated contacts

with the Christian National Romanian Student Union, an organization
affiliated with Alexander Cuzas anti-Semitic political party.85
Aryanization also had appeal outside the radical right among South-
eastern Europes business elites, insofar as they believed that the removal
of Jews from trade would open up new commercial space for German
minorities as well as for ethnic Romanians, Croatians, and Serbians. For
Adolf Konradi, the director of the GermanRomanian chamber of com-
merce in Bucharest, kicking Jewish influence out of commerce became
one of his organizations main goals. He claimed Jewish intermediaries
were responsible for harming business with their excessive profits.86 In
their place he hoped to foster the growth of medium and small German
producers.87 As one ethnic German manufacturer in Medias remarked
to the Foreign Office,
Strengthening my business offers the possibility of extensively building up the
bicycle business, which in Romania today is still in its infancy, and transferring it
out of Jewish hands into German-Aryan ownership. This would provide hundreds
of German families here in Romania new possibilities to earn their livelihood and
thereby strengthen German influence in Southeastern Europe.88
Romanian and Yugoslavian elites voiced similar sentiments. The Roma-

nian periodical Porunca Vremii was characteristic in its complaint that
too many goods Romania imported from Germany still came through
the hands of Jewish representatives.89 Indeed, many Romanian traders
expressed a sense of embitterment because German firms, even in
the late 1930s, were still employing primarily Jewish agents to sell their
goods.90 In Yugoslavia anti-Semitism was probably less rife, but certainly
still present. In 1937, for instance, the national organization of trade rep-
resentatives asked for the removal of all non-Aryan representatives
Near East, and Africa, Rumania, pp. 67284, available at: http://digital.library.wisc
.edu/1711.dl/FRUS.FRUS1938v02; Goga quotation from Rumania: Bloodsucker of
the Villages, Time Magazine, January 31, 1938.
85 Report on GermanRomanian Student Exchange, September 5, 1935, 73670, Politis-
ches Abteilung, PAAA.
86 Kronstadt consulate to Bucharest mission, June 20, 1933 and Konradi to Bucharest
mission, September 12, 1935, Bucharest Embassy 95, PAAA; Konradi to Foreign Office,
February 19, 1934, 89210, Handelsabteilung, PAAA.
87 Konradi to Foreign Office, February 19, 1934, 89210, Handelsabteilung, PAAA.
88 This manufacturer in Medias employed 130 Volksdeutsche workers out of a total of 250.
Ideal-Werke F. Schembra AG Mediasch to Foreign Office, February 17, 1939, 112605,
Handelsabteilung, PAAA.
89 Report from Presse-Dienst Ostraum to Prussian Interior Ministry, April 29, 1935,
90 Heydendorff to Messeamt, November 15, 1938 and Messeamt to Heydendorff from
November, 28 1938, GA 811, LMA, SSAL.
from GermanYugoslavian trade.91 And according to Germanys cham-

ber of commerce for Yugoslavia, businessmen in both Belgrade and
Zagreb greeted the prospect of Aryanization with great sympathy.92
For the German, Romanian, and Yugoslavian participants in the
exchange programs, in other words, excluding Jews from commerce
was probably more a point of unity than division. Aryanization, how-
ever, was never the only message of the exchange programs organized at
Leipzig, Dresden, and Berlin. Although some students from Southeast-
ern Europe enrolled in German universities because they were attracted
to Hitlers new authoritarian and anti-Semitic order, just as many came
because Germany had maintained its reputation as the best place in
Europe to study medicine, the natural sciences, economics, and engi-
neering. Even during the 1930s foreign students observed that there
were always two Germanys, one insular and inward-looking and the
other open to exchange. For students from Southeastern Europe, study
in Germany had become almost an obligatory building block for ones
career, the new exchange programs deepening what had been a tradi-
tional migration of Serbian, Croatian, Bulgarian, and Romanian students
to Germany dating back to the nineteenth century.93
Even more than anti-Semitism, the most prominent and consistent
message conveyed in these exchange programs was the notion that South-
eastern Europe had a special relationship with Germany: namely, that
the Balkan nations would benefit from Germanys civilizing mission to
develop the region economically. This approach had emerged before
1914 but became institutionalized in the 1920s with the establishment of
organizations that began to study Southeastern Europe in a multidisci-
plinary context, such as the Institute for Economic Research on Central
and Southeastern Europe (IMSWf) in Leipzig.
German theorists believed their nation should play the role of
trustee for the states of Southeastern Europe. In their view Romanians,
Croatians, and even Serbians were adaptable, improvable, and resilient:
91 The Yugoslavian trade representative organization, however, did not include a spe-
cific Aryanization paragraph in its own bylaws. Vertraulichern Sonderdienst
der Nachrichten fur Aussenhandel, no. 127, December 15, 1937, 110649, Han-
92 Freytag, Deutschlands Drang nach Sudosten, 362.
93 Holger Impekoven, Deutsche Wissenschaft von aussen beurteilt Uberlegungen
zur Attraktivitat deutscher Universitataten und Hochschulen fur auslandische Wis-
senschaftler und Studenten (19331945), in Scholtyseck and Studt, Universitaten und
Studenten im Dritten Reich, 16180. On the history of students from Southeastern Europe
attending German universities, Richard Georg Plaschka and Karlheinz Mack, Wegenetz
europaischen Geistes II: Universitaten und Studenten: die Bedeutung studentischer Migratio-
nen in Mittel- und Sudosteuropa vom 18. bis zum 20. Jahrhundert (Munich: Oldenbourg,
1987).
perfect subjects, in other words, for a civilizing mission. In the writings

of the Leipziger Vierteljahresschrift fur Sudosteuropa, for example, the
flagship publication of the Institute for Southeastern Europe in Leipzig,
the Balkan nations appear as the younger stepbrothers to Germany.
The Balkan peninsula, according to the Vierteljahresschrifts inaugural
article, was an entirely curious, even exotic world, which through its
color and vivacity exercised a peculiar allure . . . but which had fallen
out of the community of understanding among the civilized nations of
Europe. In this historical and cultural framework, these nations had
developed certain commonalities that defined their region as a whole
a historical tension between East and West, and between European
culture and that of the Byzantines and Ottomans that made them
different from Western Europe. They were also young nations, both
in their struggle to create autonomous states and in the fact that they
were not yet encrusted with the superfluities of modern life. In this
sense they had deeply rooted, common characteristics with Germany,
which according to this interpretation was also a young, recently unified
nation-state trying to avoid the decadence of Western materialism.94
Since the late eighteenth and early nineteenth century, German scholars
believed, the Balkan nations were finally awakening from their long
period without history under Ottoman rule. Throughout this era of
awakening, so the argument went, German settlers, farmers, miners, and
traders had exercised a formative role in the Balkans by spreading better
land cultivation techniques, artisanal craftsmanship, and commercial
practices to the region. With German assistance the Balkans had
begun creating its own vital, and indeed European but still thoroughly
indigenous culture that remained true to the nation. Such guidance,
German scholars argued, could and should continue in the future.95
This was a one-sided account of the history of Southeastern Europe,
which by exaggerating German influence in the past aimed to justify
the expansion of German influence in the present. Yet in comparison
94 Hans Freyer (director of the Institut fur Kultur und Geschichte Sudosteuropas at the
Institute for Southeastern Europe), Grundsatzliches uber Verstehen, Verstandigung
und wissenschaftliches Gesprache zwischen Volkern, Leipziger Vierteljahresschrift fur
Sudosteuropa 1, no. 1 (1937), 513. Franz Thierfelder, general secretary of the German
Academy in Munich, believed the Balkans nations, once the core of the Roman
Empire, would have developed their own national identities like the nations of Western
and Central Europe had they had another century to rule themselves without becoming
vassals of the Ottoman Empire. Thierfelder, Balkan als kulturpolitisches Kraftfeld, 912.
95 First quotation from Gerhard Gesemann, Volk, Landschaft, Kultur, 601; second
quotation from Gerhard Gesemann, Neuer Balkan, Slavische Rundschau 7 (1935),
reprinted in Gesemann, Gesammelte Abhandlungen, 36972. On Gesemanns experience
in Serbia during World War I see Gerhard Gesemann, Die Flucht: aus einem serbischen
Tagebuch 1915 und 1916 (Munich: G. Muller, 1935).
with German Ostforschung and arguments about Poland, German

scholars of Southeastern Europe were more accommodating to the
local Balkan nationalities. Whereas Ostforschung admitted virtually no
indigenous developmental capacity for Poles, seeing them as degenerate
and incapable of progress, German scholars of Southeastern Europe
believed Croatians, Serbs, and Romanians had an inherent capacity for
improvement, which they had demonstrated throughout their history.96
Take Fritz Valjavec as an example. A GermanHungarian citizen who
directed Munichs Southeast Institute after 1936, Valjavec aggressively
pushed German claims of cultural superiority in the Balkans.97 At the
same time, however, he condemned scholars who looked down on the
Balkan nations. In his inaugural article of Sudostdeutsche Forschungen
one of the most widely read German-language journals of Southeastern
Europe Valjavec maintained that,
Until recently a fundamental mistake of the entire research agenda of Kulturboden
was its one-sided belief in the advancement and the cultural value of the West,
and the degradation of Southeastern Europes intellectual life . . . The proper,
and for both sides fruitful, research into German cultural impact will only be
possible when we are totally clear about the independent and inalienable values
the people of Southeastern Europe possessed.98
At the heart of Germanys allegedly special relationship with Southeast-

ern Europe was economic development, a topic the following chapter
will treat in greater detail. Scholars in Leipzig and Dresden believed
the Balkans as a whole could develop if these states pursued a strategy
of export-led growth under German guidance. On this topic Herman
Gross (19032002) authored the defining work Bau und Entwicklung.
A Transylvanian German, co-founder of the IMSWf, and later co-
director of the Institute for Southeastern Europe in Leipzig, Hermann
Gross taught courses on economics at Leipzigs exchange program.99
96 On Ostforschung see Christoph Klessman, Osteuropaforschung und Lebensraumpolitik

im Dritten Reich, in Peter Lundgreen (ed.), Wissenschaft im Dritten Reich (Frankfurt am
Main: Suhrkamp, 1985), 35083; Burleigh, Germany Turns Eastwards; Eduard Muhle,
Fur Volk und deutschen Osten: der Historiker Hermann Aubin und die deutsche Ostforschung
(Dusseldorf: Droste, 2005).
97 Norbert Spannenberger, Vom volksdeutschen Nachwuchswissenschaftler zum Pro-
tagonisten nationalsozialistischer Sudosteuropapolitik: Fritz Valjavec im Spiegel seiner
Korrespondenz 19341939, in Beer and Seewann, Sudostforschung im Schatten, 222
3; Grimm, Georg Stadtmuller und Fritz Valjavec, 2446; Karl August Fischer,
Harold Steinacker, and Hans Hartl (eds.), Gedenkschrift fur Fritz Valjavec (Munich:
Sudostdeutschen Kulturwerks, 1963).
98 Fritz Valjavec, Wege und Wandlungen deutscher Sudostforschungen, Sudostdeutsche
Forschungen 1 (1936), 12.
99 Arbeitsbericht uber das erste Semester (WS 1936/37), Leipziger Vierteljahresschrift fur
Sudosteuropa 1, no. 3 (1937), 87; Personal Akten Hermann Gross, pp. 57, UAL.
He believed the Balkan countries had great potential with their rich
endowment of natural resources, which they needed to extract, process,
and then sell abroad. As an industrial country with an insatiable demand
for a range of products, Germany could purchase en masse the primary
goods of Southeastern Europe. With a guaranteed market provided by
Germanys bilateral treaties, the Balkan states could then assume greater
risk in developing key export sectors over the long term.100 In Romania,
farmers should be encouraged to diversify outside of wheat into crops
that Germany needed to import, such as soybeans and oleaginous
plants for industrial processes. Yugoslavia, Gross maintained, had the
potential to be one of Europes greatest producers of rare minerals.
The mines at Bor and Trepca already produced copper, lead, and zinc,
but other deposits of bauxite, antimony, and manganese only needed
the capital and a guaranteed market to be developed. Hermann Gross
and other scholars argued that Germany should become Southeastern
Europes developmental mentor, providing the technology to mechanize
agriculture and mineral production, and the expertise to forge an
educated workforce in the region.101
By the middle of the 1930s this message of Germanys special
relationship with Southeastern Europe became the primary focus of
the exchange courses in Dresden, Leipzig, Berlin, and elsewhere.
Courses on Germanys cultural and economic relations with the states of
Southeastern Europe formed the bread and butter of the curriculum.102
Introducing Yugoslavians or Romanians to Germany, scholars in Leipzig
and Dresden argued, would provide these young nations with their
greatest gateway to Europe, one that could be reinforced through
trade, commerce, and the transfer of technology and know-how.103
100 H. Gross, Bau und Enwicklung, 22031; see also Hermann Gross, Die Wirtschaft-
skrafte Sudosteuropas und Deutschland, Leipziger Vierteljahresschrift fur Sudosteuropa
1, no. 4 (1938), 3041.
101 Gross, Bau und Enwicklung, 74, 148, 1624, 22031.
102 Some course titles include: On the importance of the German economy for Czechoslo-
vakia and Cultural connections between Germany and Romania. Arbeitsbericht
uber das erste Semester (WS 1936/37), Leipziger Vierteljahresschrift fur Sudosteuropa 1,
no. 3 (1937), 837; internal memo, February 24, 1934, p. 22, and Saxonys Edu-
cation Ministry to Phil. Faculty of Leipzig University, March 2, 1934, 10230/42
Sudosteuropa-Institut, 11125 Min. des Kultus, SSAD; Stimmen aus Sudosteuropa,
November 1, 1936, Bucharest Embassy 140/2, PAAA; Wissenschaft im Dienste des
Kulturaustausches, August 14, 1937, p. 7, Sudosteuropa-Institut vol. I, Phil. Fak.
B1, UAL.
103 Quote from Gerhard Gesemann, Der Sudostausschuss der Deutschen Akademie
in Munchen, Leipziger Vierteljahresschrift fur Sudosteuropa 1, no. 2 (1937), 7780;
H. Gross, Die Wirtschaftskrafte Sudosteuropas und Deutschland, 3041; Arthur
Golf, Die Beziehungen der deutschen Landwirtschaft zum Sudostraum, Leipziger
Vierteljahresschrift fur Sudosteuropa 1, no. 4 (1938), 219.
The directors of the exchange programs exposed Balkan students to

these ideas outside the classroom as well. Both the Mitteleuropa-Institut
and the German Foundation of the Mitteleuropaische Wirtschaftstag
tried to immerse their exchange students in Germanys commercial life
in order to firmly anchor the idea of a special relationship with con-
crete experiences. Both programs organized excursions to the Leipzig
trade fair and to local firms, workshops, factories, and hospitals to cul-
tivate future business contacts. They introduced their fellows to their
respective trade associations in Germany. And the German Foundation
of the Mitteleuropaische Wirtschaftstag, in its crowning event, sponsored
a journey for many of their students through Germany.104 The mixture of
economic training and ideological exposure continued once the students
returned to Romania and Yugoslavia. The German Foundation main-
tained contact with them by organizing associations for former fellows
and by sending them Germanys trade journals. Alongside this economic
follow-up work, the DAAD sent former fellows their journal Geist der
Zeit, which aimed to prepare them to actively collaborate in the promo-
tion and consolidation of cultural and intellectual relations between their
homeland and Germany.105
Conclusion
The collective impact of these privately organized exchange programs
was enormous. By 1941, 579 young professionals had participated in the
Mitteleuropa-Instituts summer exchange program.106 When counting
the programs of the Mitteleuropa-Institut, the German Foundation of
the Mitteleuropaische Wirtschaftstag, and the Institute for Southeastern
Europe altogether, direct financial support for student exchange with the
Balkans rose from a handful of annual fellowships in 1932 to roughly 200
a year by 1939.107 The success of Germanys exchange network, with its
104 MWT/DAAD report about the German Foundation, April 2, 1938, 6142, R 8119F,
BA.
105 Ibid. and MWT/DAAD report, September 15, 1938, 6142, R 8119F, BA.
106 Lorch to Handelshochschule Leipzig, December 31, 1941, p. 156, HHS 387, UAL.
107 In 1932/33 the DAAD and the Humboldt Foundation funded roughly ten students
altogether from Romania, Yugoslavia, Hungary, and Bulgaria to study in Germany. In
comparison, by 1937 the MEI brought 4050 students per year to study in Germany
from the Balkans, while the MWT supported 135 students, and the Institute for
Southeastern Europe in Leipzig attracted approximately another 45 per year. Lait-
enberger, Akademischer Austausch, 2834; DAAD report, 1932, pp. 967, 10281/60,
11125 Min. des Kultus, SSAD; MEI to Saxonys Minister of Economics, June 8,
1939, 39/1, 2419, 11168 Wirtschaftsministerium, SSAD; DRAV to Romanian officer,
March 27, 1937, Bucharest Embassy 141/3, PAAA; MWT report, pp. 16375, 6142,
focus on business and engineering students, helped shift the composition

of the educated elite in Southeastern Europe. According to the Romanian
Council of Engineers, by 1940 there were 6,945 trained engineers in their
country. Of these 1,288 or 18.5 percent had received their education
in Germany. The Third Reich attracted more Romanian engineers than
the next six foreign countries combined, dominating as the destination
for business and technical students from Southeastern Europe. By the
Second World War Germanys exchange programs had placed students
in leading governmental positions, including the economic commission
for occupied Serbia, the press bureau of the Croatian government, and
the Economics Ministry in Bucharest.108
From their inception in 1935 until the early years of the Second World
War, these programs projected German soft power into Southeastern
Europe. To the tight web of commercial ties and bilateral trade treaties
that bound Germany with the states of Southeastern Europe, these pro-
grams now added a new cohort of young elites who, after interning
with banks, mining and oil companies, and engineering firms across the
region, had the expertise as well as the incentive to deepen economic ties
between their countries and Germany.
One dimension of this soft power was the prospect of Aryanization,
which German business elites promoted both to expand their own
presence in Balkan commerce and to entice local, non-Jewish business
elites and radical rightwing politicians into closer collaboration with
the Third Reich. Germanys commercial and cultural networks gave
privileged access to German universities and German business con-
tacts to Croatians, Serbians, Romanians, and ethnic Germans while
excluding Jews. It is not clear, though, how much Germanys non-state
organizations actually advanced the removal of Jews as intermediaries in
GermanBalkan commerce before 1939. In the early 1930s many Ger-
man firms resisted replacing Jewish agents with ethnic Germans because
the latter simply had fewer business contacts.109 As late as 1937 the
Foreign Office reported that the number of German firms represented
by Jewish importers in Romania was extraordinarily large: over 200
enterprises, including brand name companies like Vereinigte Stahlwerke
R 8119F, BA; Sudosteuropaische Akademiker besuchten und bewunderten Leipzig,

p. 8, Sudosteuropa-Institut, vol. I, Phil. Fak. B1, UAL.
108 Ilsemann to Berlin Foreign Office, June 16, 1942, R 4604 Generalinspektor fur
Wasser und Energie, BA; report from Lorch, December 31, 1941, p. 156, HHS 387,
UAL.
109 Bucharest mission to Foreign Office, December 4, 1933, 89210, Handelsabteilung,
PAAA.
and IG Farben.110 Before the outbreak of World War II, in other words,
the Aryanization promoted by Germanys exchange programs was
more a dark promise offered to non-Jewish traders and radical right
leaders in Southeastern Europe than a successfully implemented policy.
More important than the anti-Semitic dimension of this soft power was
the message that Romania and Yugoslavia had a special relationship with
the Third Reich: participating in a continental bloc would bestow the
benefits of Germanys civilizing mission on these nations. Here German
views of Romanians, Croatians, or Serbians in contrast to their views
of Poles were less shaded by biological racism and the notion that
these nationalities were inherently degenerate and therefore destined for
removal or worse.111 Instead, German scholars believed these peoples
were perfect objects of a Germanic civilizing mission, and that it was
their task to contribute directly and decisively to the economic and
social-cultural development of the countries of Southeastern Europe.112
Thus the programs of the Mitteleuropaische Wirtschaftstag, the
Mitteleuropa-Institut, and Southeast Institute in Leipzig illustrate how
foreign policy under the Third Reich cannot be understood merely
as the interplay between pan-German nationalism and the quest for
Lebensraum. To be sure, the incorporation of all Germans into a single
nation-state animated Hitlers foreign policy before 1938, after which the
drive for a formal empire, living space, and ethnic cleansing in Poland
and Russia became his overriding ambition. But Nazi Germany was not
totalitarian and Hitler did not control all aspects of foreign policy: infight-
ing between government ministries shaped Germanys foreign relations
throughout the 1930s. Ironically, under the Nazis ultra-nationalistic
regime German soft power in Southeastern Europe explicitly sought to
reach out to non-German nationalities, and to highlight a supposedly
special relationship between the Third Reich and the Balkans. German
scholars and economists did not want to turn this region into an empty
condominium for German settlers as Hitler, Himmler, and many
German academics wanted to do for Poland and Western Russia.113
110 Bucharest mission to Foreign Office, September 14, 1937, 112662, Handelsabteilung,
PAAA.
111 On German scholarly and cultural attitudes toward Poles, see Eduard Muhle, The
European East on the Mental Map of German Ostforschung, in Eduard Muhle (ed.),
Germany and the European East in the Twentieth Century (New York: Berg, 2003),
10730.
112 H. Gross, Wirtschaftskraft Sudosteuropa und Deutschland, 22.
113 Hans Mommsen, Der Ostraum in Ideologie und Politik des Nationalsozialismus,
in Hans Mommsen (ed.), Von Weimar nach Auschwitz: zur Geschichte Deutschlands in
der Weltkriegsepoche. Ausgewahlte Aufsatze (Stuttgart: DVA, 1999), 28394, at 2901.
They wanted an informal empire that would bring stability and resources
to the German economy. In the late 1930s they inaugurated a multi-
faceted program of economic development for the Balkans replete with
all of the problems and contradictions that troubled Western European
and American development projects to turn their vision into reality.
7 Forging a hinterland: German development
aid in the Balkans, 19341940
A region in progress, a region of constant renovation so could you

most accurately characterize the countries of the Danube river basin.1
On the morning of March 12, 1938 German troops marched into Austria.
Hitler followed later that day, beginning a tour that ended on March 15
in Vienna, where he announced the formal annexation of Austria into
the Third Reich. With the Anschluss Hitler attained the first of his pan-
Germanic goals of uniting the Germans of Europe into a single state,
a goal that for him was rooted in race. One blood, he proclaimed,
demands one Reich.2 For German businessmen the Anschluss opened
new economic vistas in Southeastern Europe. With the annexation of
one of Yugoslavias and Romanias main trade partners in 1938, Germany
expanded its economic presence in Southeastern Europe. German banks
moved in to take command of Viennas great financial institutions, like
the Credit-Anstalt, and their holdings scattered throughout the Balkans.3
With the events of 1938 the creation of a German bloc in Europe a
Grossraumwirtschaft that could compete with the empires of France and
Britain and the continental market of the United States seemed within
reach.
Yet if Germanys economic bloc were to succeed over the long term, the
Third Reich would need developed markets to buy its exports and pro-
ductive trade partners to supply its factories, cities, and armies. In 1938
Southeastern Europe was neither of these yet. As a market for German
goods the region was still poor: its income per capita a quarter of Western
Europes, the purchasing power of its vast agrarian population a fraction
of Germanys. As a supplier of inputs for the Third Reich Southeastern
Europe likewise left much to be desired: its agricultural labor productiv-
ity was a quarter of Germanys; its mines and textile factories suffered
from chronic capital scarcity. Worst of all, contemporaries believed the
1 Report from Mitteleuropaische Wirtschaftstag for Four-Year Plan, AugustDecember

1939, p. 148, 294b, R 63, BA.
2 Mazower, Hitlers Empire, 4651. 3 Feldman et al., Osterreichische Banken.
253
region to be suffering a neo-Malthusian crisis, its cities unable to absorb

the burgeoning rural population.4
Even with the Anschluss, Germanys heralded informal empire
remained embryonic. The leaders of the Mitteleuropaische Wirtschaft-
stag realized as much. Tilo Freiherr von Wilmowsky, Max Hahn, and
their colleagues believed building a continental bloc could only succeed if
combined with a second, equally important strategy: economic develop-
ment, not just in the German core but also in the Southeastern European
periphery. Indeed, economic bloc-building and economic development
were parallel, intertwined strategies that German elites employed in the
hopes of resolving their countrys chronic crises and securing a position
in an instable global economy. For them, the Anschluss was just one step
of many on the path toward these twin goals.
Since the middle of the 1930s Wilmowsky and other Germans had
been organizing development programs in Southeastern Europe to raise
productivity in the agricultural, mining, and educational sectors, and
turn this region into an effective economic partner. This was a policy of
soft power, which complemented the cultural diplomacy and academic
exchange that was already underway. The Mitteleuropaische Wirtschaft-
stag hoped to show agrarian producers and mine owners in the Balkans
how they would benefit from throwing their hat in with Germany rather
than with France or Britain. Through development programs, the advo-
cates of Mitteleuropa worked to construct a shared cosmology5 with
key leaders in Yugoslavia and Romania elites like Milan Stojadinovic
and Rada Pasic in the former, Mihail Manoilescu in the latter in which
exporting to Germany was seen as the best way for Southeastern Europe
to modernize its economy.
At the same time, these development projects aimed to restructure the
economies of Southeastern Europe. In 1931 Hahn, Wilmowskys part-
ner at the Mitteleuropaische Wirtschaftstag, had argued that to actually
forge a German bloc, Germany would have to go beyond trade treaties to
actively guide economic modernization in the Balkans and obtain over-
sight over key sectors. A development program could achieve these loftier
ambitions. Development, in other words, did more than just lend an air
of legitimacy to Germanys growing preponderance in the economies of
4 Income per capita estimates from J. Bolt and J. L. van Zanden, The First Update of
the Maddison Project: Re-estimating Growth before 1820, Maddison Project Work-
ing Paper 4 (2013), available at: www.ggdc.net/maddison/maddison-project/home.htm;
Wilmowskys lecture to Verein fur Berliner Kaufleute, November 11, 1940, p. 66, and
special report from Hassell, January 27, 1941, 6136, R 8119F, BA.
5 Osterhammel, Informal Empire.
Forging a hinterland 255
Southeastern Europe. Development programs also magnified that very

commercial preponderance, enhancing what Albert Hirschman identi-
fied as the influence effect of trade, by which one state exercises coercion
over another.6 By redirecting labor, capital, and technology to produce
goods that only Germany had the wherewithal to purchase soybeans,
for example, or antimony development programs would make it harder
for the Balkan states to readjust and break free from their dependence
on Germany.7 Such was Hahns intent: using development to strengthen
Germanys informal empire.
In pursing the twin strategies of bloc-building and economic develop-
ment, Wilmowsky and Hahn were participating in a larger global process
that was unfolding from the 1920s through the 1940s. During these
decades all the Great Powers of Europe turned to economic develop-
ment to reinforce their imperial blocs.8 This strategy had emerged in
the 1890s when colonial officials in the British, French, and German
empires began devoting attention to developing their colonial economies
and improving labor productivity in their colonial workforce, often using
coercive measures to do so.9 Between 1929 and 1949 this impetus for
economic development became official state policy in the worlds largest
empires, through Britains Colonial Development Act in 1929, its Colo-
nial Development and Welfare Act of 1940, through Frances Fonds
dInvestissement pour le Developpement Economique et Social of 1946,
and through the USAs Point Four Program in 1949. For British and
French officials, colonial development began as a strategy to solve their
nations problems of domestic unemployment. At the same time, they
believed colonial development would help them build more insulated
imperial blocs, manage the social, economic, and ecological crises of
6 Hirschman, National Power, vii, 1734, 923.

7 As the Mitteleuropaische Wirtschaftstag noted in 1940, Southeastern Europe cannot
easily forgo the current deliveries of German industrial goods, since shifting to other
supplying countries can often be exceptionally difficult and protracted on account of
industry standards and the interplay of distribution networks. Sudosteuropa: Vorschlage
fur eine neue Deutsche Kapitalpolitik, 6135, R 8119F, BA.
8 H. W. Arndt, Economic Development: The History of an Idea (University of Chicago Press,
1987); Rist, History of Development; Joseph Hodge, Triumph of the Expert: Agrarian Doc-
trines of Development and the Legacies of British Colonialism (Athens: Ohio University Press,
2007); M. P. Cowen and R. W. Shenton, Doctrines of Development (London: Routledge,
1996).
9 Conklin, Mission to Civilize; Sebastian Conrad, Eingeborenenpolitik in Kolonie und
Metropole: Erziehung zur Arbeit in Ostafrika und Ostwestfalen, in Jurgen Osterham-
mel and Sebastian Konrad, Kaiserreich Transnational, 10728; Conrad, German Colonial-
ism, 8899; Zimmerman, Alabama in Africa; B. R. Tomlinson, Economics and Empire:
The Periphery and the Imperial Economy, in Andrew Porter (ed.), The Oxford History
of the British Empire, vol. III (Oxford University Press, 2001), 5374.
the late colonial world, and ultimately reaffirm the legitimacy of their
empires.10
Germans like Wilmowsky consciously emulated their counterparts in
Britain and France in much of their underlying rationale for economic
development. If the previous chapter illustrated how German explana-
tions for development departed, in important respects, from the Euro-
pean and American mainstream by blaming Jews for obstructing growth,
this chapter shows how German approaches to development in other ways
remained very much in sync with current, mainstream economic thought
and practice. As a comparison with Britain demonstrates, both British
and German elites saw the development of their colonies (in Britains
case) or their poorer trade partners (in Germanys case) as a replacement
for markets lost in the Great Depression. Both conceptualized devel-
opment as a solution to the perceived Malthusian population pressures
facing poorer regions of the world. Both sought to recast social ills as
problems to be dealt with through technology and applied knowledge.
Both fastened onto cash-crop exports as a way to generate growth in the
periphery. Both used racial categorization to reinforce economic hier-
archies within their economic spheres by distinguishing labor-intensive
occupations from other types of work. Doctrines of development, in other
words, worked to legitimize British as well as German influence over
poorer regions of the world and deepen existing relations of economic
dependency.
Nevertheless, important differences emerged between the British and
German experiences of bloc-building and economic development, dif-
ferences stemming in part from the geopolitical context. For one, before
the Anschluss Germany lagged behind other Western powers in a cru-
cial channel of development aid the export of capital. Second, and
just as importantly, Yugoslavia and Romania were independent nations.
Whereas the British colonial officers and governors enjoyed a large degree
of political control over their zones of development, German elites had
to rely on persuasion and publicity to sell their schemes in Southeastern
Europe. Third, in stark contrast to the British, German development
programs aimed to create a geographically contiguous economic sphere
10 Hodge, Triumph of the Expert, 25; Colin Leys, The Rise and Fall of Development The-
ory (Bloomington: Indiana University Press, 1996); Gerald Meier, From Colonial
Economics to Development Economics, in Gerald M. Meier (ed.), From Classical
Economics to Development Economics (New York: St. Martins Press, 1994), 17392;
Mazower, No Enchanted Palace, 11013; Odd Arne Westad, The Global Cold War: Third
World Interventions and the Making of our Times (Cambridge University Press, 2007),
223.
that would be resistant to a naval blockade. In this sense the develop-

ment programs of the Mitteleuropaische Wirtschaftstag helped advance
Hitlers military ambitions and prepare the Third Reich for its war of
conquest in Europe.
The origins of development economics in the

British Empire
Great Britain, possessor of the largest empire and potential commercial
bloc in the world, pioneered the modern practice of economic develop-
ment. During the last decade of the nineteenth century Joseph Cham-
berlain, Britains Colonial Secretary from 1895 to 1903, began recast-
ing the meaning of economic development from a passive to an active
notion: something that experts and law-makers could do to a country
rather than something that just happened on its own.11 For Chamberlain,
Britains colonies were the equivalent to undeveloped estates . . . estates
which never can be developed without Imperial assistance. And he
believed it was his duty to pursue development through intervention-
ist state policies.12 Under his watch the Colonial Office vastly expanded
its agricultural and medical research in the British Empire, began using
the dividends of the Suez Canal to pay for public works projects in the
Empire, and after 1899 authorized an array of development loans to the
colonies of East and West Africa.13
From the beginning Chamberlain wanted development to serve his
larger ambition of creating an insulated and integrated empire. We have
an Empire, Chamberlain remarked, which with decent organisation
and consolidation might be absolutely self-sustaining. Development of
the colonies and the consolidation of an imperial bloc, thus, were com-
plementary strategies for Chamberlain. It is only in such a policy of
development that I see any solution of these social problems by which
we are surrounded. Plenty of employment and a contented people go
11 H. W. Arndt, Economic Development: A Semantic History, Economic Development

and Social Change 29, no. 3 (April 1981), 45766; L. C. A. Knowles, The Economic
Development of the British Overseas Empire (London: George Routledge & Sons, 1924),
ix; F. D. Lugard, The Dual Mandate in British Tropical Africa (Edinburgh: William
Blackwood & Sons, 1921), 489; Cowen and Shenton, Doctrines of Development, 2545.
12 Stephen Constantine, The Making of British Colonial Development Policy, 19141940
(London: F. S. Cass, 1984), 1114; Robert V. Kubicek, The Administration of Imperi-
alism: Joseph Chamberlain at the Colonial Office (Durham, NC: Duke University Press,
1969), 6870; Hyam, Britains Imperial Century.
13 Ronald Hyam, The Colonial Office Mind, 19001914, Journal of Imperial Com-
monwealth History 8 (1979), 3055; Constantine, Development Policy, 1519; Hodge,
Triumph of the Expert, 8, 55.
together; and there is no way of securing plenty of employment for the

United Kingdom except by developing old markets and creating new
ones.14
Despite the growing interest in colonial development, however, colo-
nial affairs in general were of second or third tier importance to London
before 1914, or even 1929. The prevailing belief within government cir-
cles, above all in the Treasury, which controlled the empires pocket
book, maintained that the state should refrain from intervening in the
economy. As a result, the British Treasury spent less on colonial devel-
opment projects each year than it did on stationery and the maintenance
of public buildings. Too few colonial staff, moreover, governed too much
territory. Prior to 1935, for example, the Colonial Office had no depart-
ment for economic affairs. Instead, Britains colonial development was
decentralized, the initiative for new schemes coming from the colonial
governors not from the central offices in London.15
The Depression began to change Britains haphazard approach to colo-
nial development, as it changed Germanys economic strategy toward
Southeastern Europe. Between 1929 and 1933 British trade with tra-
ditional markets like the United States and Germany fell, while unem-
ployment at home rose. The collapse in world commerce threatened
to undermine Great Britains entire economic system. By decimat-
ing Britains shipping, financing, and insurance sectors the Depression
severely reduced the invisible earnings that traditionally enabled Britain
pay for its import surplus. Stimulating trade within the empire thus
became a matter of pressing importance.16 In response to the trade cri-
sis Britain pursued three strategies. First, after going off the gold stan-
dard Britain forged a sterling bloc to create a stable monetary basis for
intra-imperial trade. Various colonies and smaller economies around the
world pegged their currency to the pound and held large reserves of
hard currency in London. In many instances, particularly for the British
colonies, the sterling bloc resembled the Reichsmark bloc that Germany
was establishing with Southeastern Europe at the same time. By the end
14 Constantine, Development Policy, 1115; Bernard Porter, The Lions Share: A Short
History of British Imperialism, 18501995 (New York: Longman, 1984), 189; Hodge,
Triumph of the Expert, 545; Joseph Chamberlain, speech to the House of Commons,
August 22, 1895, Parliamentary Proceedings available at: http://hansard.millbanksystems
.com/commons/1895/aug/22/class-ii.
15 Fieldhouse, The West and the Third World, 736; Anthony Kirk-Greene, Britains Imperial
Administrators, 18581966 (New York: St. Martins Press, 2000), 128, 159; Constantine,
Development Policy, 27586.
16 Darwin, The Empire Project, 4314; C. Knick Harley, Trade, 18601939: From Glob-
alization to Fragmentation, in R. Floud and P. Johnson (eds.), The Cambridge Economic
History of Modern Britain (Cambridge University Press, 2004), 16189.
of the decade, and even more so by the end of the Second World War,
India, Pakistan, Burma, Iraq, and Egypt had all built up large credits
that were essentially frozen in London, as Yugoslavian, Romanian, and
Bulgarian credits were in Berlin.17 Second, at Ottawa in 1932 Britain
and the dominions agreed on an imperfect but serviceable imperial pref-
erence scheme, which ended Britains long adherence to free trade by
privileging the import of goods from within the empire.18 Britain, in
other words, responded to the Depression by trying to create a more
insulated imperial economic bloc. And to complement this it pursued a
third strategy: economic development in the colonies. In 1929 Ramsay
McDonalds Labour Party passed the Colonial Development Act, autho-
rizing large grants be made available for public works, public health, and
scientific research to improve the colonies living standards and, more
importantly, their ability to buy British goods.19
For British officials, however, colonial development had a limited
meaning before 1940; the colonies should contribute to Britain, not
the other way around.20 When Chamberlain spoke of economic devel-
opment before 1914 he had in mind an arithmetical increase in the
production of staple primary products, not a structural change in the
local economy, nor industrialisation. He and his colleagues never envi-
sioned the colonies achieving the progressively rising living standards
that Europe had been enjoying since the nineteenth century.21 Develop-
ment under the 1929 Act continued this vein of thought. British offi-
cials and entrepreneurs would build roads, harbors, and railroads in the
empire to stimulate intra-imperial trade. But they thoroughly ruled out
import-substitution industrialization (ISI) for the colonies.22 In the par-
liamentary debates of 1929 Leopold Amery, Colonial Secretary since
1924, argued it is not very probable, or, indeed, very desirable in the
interests of the [colonial] populations themselves, that industrial devel-
opment should be unduly accelerated. As the assistant Under-Secretary
of the Colonial Office later remarked, the more or less unwritten rule
[is] that any proposals . . . which give rise to any conflict of economic
17 Milward, Reichsmark Bloc; Fieldhouse, The West and the Third World, 957; L. J.
Butler, Britain and Empire: Adjusting to a Post-Imperial World (London: I. B. Taurus,
2002), 911.
18 Darwin, The Empire Project, 43643.
19 Eichengreen, Golden Fetters, 258; Fieldhouse, The West and the Third World, 80-2; Con-
stantine, Development Policy, 299303; L. S. Amery, Empire and Prosperity (London:
Faber & Faber, 1930).
20 Frederick Cooper, Writing the History of Development, Journal of Modern European
History 8 (2010), 123, quotation from 9.
21 Constantine, Development Policy, 15; Arndt, Economic Development, 23.
22 Findlay and ORourke, Power and Plenty, 438.
interest should be approached from the standpoint that the UK trade

interests must rank first, Dominion trade interests second, and those of
the Colonial Empire last.23
Instead of industrialization, Britains development work focused pri-
marily on raising agricultural productivity in the colonies with the aim
of making them better producers of cash crops for exports, and better
consumers of British-made manufactured goods. The keys to this chal-
lenge, colonial officers believed, were applied agricultural research and
technology. In the tropics, Amery maintained, we have immense unde-
veloped resources which science, and science alone, can bring to rapid
development. In 1922 the Colonial Office established the Imperial Col-
lege of Tropical Agriculture in Trinidad and later expanded the resources
available to the East African Agricultural Research Station in Tanzania,
formerly a German institute. In 1929 Amery founded the Colonial Advi-
sory Council on Agriculture and Animal Health to apply new science
and technical expertise to colonial development. The whole future of
successful agricultural development, declared one leading official, is
bound up with the work of the soil chemist, the plant breeder, the ento-
mologist, and the mycologist.24
Britains focus on agrarian development was characteristic of the 1920s
and 1930s, when food scarcity came to be seen as a major threat to welfare
and peace. In the US Herbert Hoover, the organizer of Americas relief
effort to Europe after World War I, linked food supply and population
pressure to questions of security and power. By the middle of the 1920s
the Rockefeller Foundation, an early pioneer of American development
work, began branching out from its initial focus on medicine to study
problems of food, agriculture, and demography. And in 1936 the League
of Nations formed a committee on nutrition, a forerunner to the United
Nations Food and Agricultural Organization.25
For Britain the need to improve colonial food production gained
urgency during the Depression as the economic situation in many of
its colonies deteriorated. The collapse of agricultural commodity prices
23 Quotations from Constantine, Development Policy, 2857; Frieden, Global Capitalism,

3024.
24 Hodge, Triumph of the Expert, 94101, 14851, quotations from 100 and 148; Joseph
Hodge, Science, Development, and Empire: The Colonial Advisory Council on
Agricultural and Animal Health, Journal of Imperial and Commonwealth History 30,
no. 1 (2002), 126; Michael Worboys, British Colonial Science Policy, 19181939,
in Patrick Petitjean (ed.), Les sciences hors doccident au XXe siecle, vol. II (Paris: Ostrom
Editions, 1996), 99111. On the importance of technology to European notions of
development in the 1880s, see Nick Cullather, Research Note: Development? Its His-
tory, Diplomatic History 24, no. 4 (2000), 64153; Daniel Headrick, Technology Transfer
in the Age of Imperialism, 18501940 (New York: Oxford University Press, 1988).
25 Nick Cullather, The Hungry World: Americas Cold War Battle against Poverty in Asia
(Cambridge, MA: Harvard University Press, 2010), 1432.
after 1929 hurt local farmers, increased rural migration to the cities, and
generated social unrest across the empire. In the following decade strikes
ripped through the Rhodesian copper belt, the West Indies, Mauritius,
and Nigeria. To understand these colonial economic crises, after 1929
British officials adopted a neo-Malthusian framework. Many in London
believed that overcrowding in rural regions, land fragmentation, and food
shortages underscored how the empire suffered from a surplus rural pop-
ulation. Various ecological crises reported by local officials throughout
the empire including soil erosion, deforestation, and creeping deserti-
fication only reinforced this framework. By the 1930s British colonial
officials looked at the swelling ranks of unemployed agrarian workers
across the empire especially the tropical slums of the West Indies and
India and saw overpopulation.26
Rice cultivation in Burma illustrates this dynamic and problematic
relationship between British development efforts, diagnoses of overpop-
ulation, and the introduction of new approaches to agriculture. Since
the late nineteenth century Britain had been targeting the delta region
of Burma as a center for rice production. Colonial officials transplanted
peasants from Upper Burma and India to the delta to cultivate rice, and
by the eve of World War I Burma emerged as one of the worlds great
rice-exporting regions, sending this important grain to Britain and later
to other parts of the empire. British officials believed Indian immigrants
and indigenous Burmese would benefit from the rice export boom. And
for a time they did. Yet as the frontier for rice cultivation in the delta closed
off in the 1920s, land prices rose, commodity prices declined, debt bur-
dens increased, and farmers lost their property and reverted to serving
as tenants for large landowners or fled to the cities. With the collapse in
rice prices in 1930 and 1931 the situation became a crisis. Attempts by
colonial officials to improve matters with applied agricultural research
or better technology fertilizers, modern plows, and mechanized
tractors failed in the face of the abundant supply of cheap labor. It
simply made more economic sense for landlords to employ inexpensive
laborers than to invest in new techniques or equipment. And as the num-
ber of landless, homeless cultivators exploded, so too did incidents of
rebellions and communal riots. Despite good intentions, by the 1930s
rice monoculture for export had undermined the wellbeing of many of
the agricultural workers in lower Burma.27
26 Cowen and Shenton, Doctrines of Development, 2956; Robert H. Bates, Beyond the
Miracle of the Market: The Political Economy of Agrarian Development in Kenya (New
York: Cambridge University Press, 1989), 1727; Butler, Britain and Empire, 204.
27 Topik and Wells, Commodity Chains, 7347; Adas, The Burma Delta, introduction,
12742, 185209.
By the late 1930s, then, overpopulation seemed to be over-

powering Britains efforts at colonial development and applied scien-
tific agriculture. It was becoming clear that the Development Act of
1929 and the quest for an integrated imperial bloc had not improved
the lot of the colonies, nor had they increased trade within the empire
nearly as much as their advocates had hoped. Over the course of the
1930s the empires share of Britains exports only rose from 37.2 to 41.3
percent, and its share of Britains imports grew from 32.9 to just 41.2
percent.28 Yet despite the numerous flaws and the small scale of Britains
development programs, by the end of the decade colonial officials had at
least succeeded in fashioning a new ideology to try to legitimize British
rule throughout the empire: economic development. As the Governor of
Nigeria announced to the Royal Empire Society in London in 1937, the
exploitation theory of colonialism is dead and the development theory
has taken its place.29 Three years later in the midst of a war for their
very survival, the British inaugurated a vast new scheme for the colonies
that aimed to raise living standards, diversify local food production, and
improve education and welfare services: the Colonial Development and
Welfare Act of 1940.30
German doctrines of development

German economists paid great attention to Britains effort to develop
its empire and build a cohesive economic bloc. The directors of the
Mitteleuropaische Wirtschaftstag framed Britains development projects
and the Ottawa Accords as a fundamental break with its previous
imperial strategies, an effort to hold Britains global empire together
with every means possible and weld it anew.31 And like Chamberlain
and Amery, German officials saw the development of the periphery as
an essential component in their strategy of building an economic bloc.
At international conferences and in his publicity tour of Southeastern
Europe Hjalmar Schacht, German Reichsbank Director and Economics
28 D. K. Fieldhouse, Metropolitan Economics of Empire, in Judith Brown and William

Roger Louis (eds.), Oxford History of the British Empire, vol. IV: The Twentieth Century
(Oxford University Press, 1999), 88114, at 1001; Niall Ferguson, Empire: The Rise
and Demise of the British World Order and the Lessons for Global Power (New York: Basic
Books, 2004), 321; I. M. Drummond, British Economic Policy and the Empire 19191939
(New York: Barnes and Noble, 1972), 102.
29 Quotes from Cowen and Shenton, Doctrines of Development, 2945.
30 Cooper, History of Development, 10; Hodge, Triumph of the Expert, 145, 15178,
181; M. P. Cowen and R. W. Shenton, Agrarian Doctrines of Development: Part I,
Journal of Peasant Studies 25, no. 2 (1998), 4976.
31 Mitteleuropaische Wirtschaftstag talk in Vienna, April 11, 1933, p. 239, 6140, R 8119F,
BA.
Minister before 1937, publicized Germanys desire to help the Balkans

develop by providing them capital equipment and raising their standard
of living.32 Throughout the bilateral trade discussions with Yugoslavia
and Romania in the 1930s, German negotiators repeatedly stressed that
the Third Reich wanted to raise the purchasing power of these coun-
tries population, and commercialize their economies by turning this
purchasing power into an actual willingness to buy.33
Carl Clodius, the director of the Trade Policy Committee in the For-
eign Office, was one of the main architects of Germanys development
policy in the ministerial bureaucracy during the 1930s. Clodius had been
a career diplomat in the Foreign Office since 1921, joined the Nazi Party
in 1933, and spent several years working in Vienna and Sofia where he
acquired expertise about Southeastern Europe. Described as a suave
technocrat, he became one of Hitlers economic wizards during the
late 1930s and the early war years.34 As Clodius explained to Prince
Paul of Yugoslavia and Prime Minister Milan Stojadinovic on numerous
occasions, the elevation in the living standard of [Yugoslavias] farming
population, was one of Germanys goals; Yugoslavia could achieve this
through its burgeoning agricultural sales to Germany at good prices.35
As Clodius frequently reiterated, the aim of German development
policy strengthening the purchasing power of the populace in South-
eastern Europe would help Germany achieve its ultimate goal: increas-
ing exports to Yugoslavia and Romania, and thereby easing the Third
Reichs chronic balance of payment deficits.36
In these trade negotiations, moreover, Clodius went further than the
British did for their colonies by describing a future for Southeastern
Europe that even included limited industrial development.
Although Yugoslavia retains the character of an agrarian country, as in the other

countries of Southeastern Europe industrialization is making headway. The Ger-
man economy has made an effective effort to enable this development, in partic-
ular by cooperating decisively in building up Yugoslavias heavy industry on the
basis of its own mineral endowments.37
32 Grenzebach, Informal Empire, 63; Schachts speech at the World Economic Conference
in London, October 1933, Schacht, Schacht in seinen Ausserungen, 109.
33 Bertholds report on Dubrovnik Trade Protocols, November 11, 1937, 106181, Han-
delsabteilung, PAAA; Vierjahresplan 1 (September 1937), 548, 2 (February 1938), and
2 (May 1938), 281.
34 Waldeck, Athene Palace, 27.
35 Confidential report by Carl Clodius, January 7, 1938, 106181, Handelsabteilung,
PAAA; Maria Keipert, Biographisches Handbuch des deutschen Auswartigen Dienstes 1871
1945 (Berlin: Auswartigen Amt, Historischer Dienst, 2000).
36 MWT Board of directors meeting, November 28, 1935, p. 68, 6141, R 8119F, BA.
37 Report from Clodius on GermanYugoslavian Trade, May 23, 1939, 105942, Han-
Crucially here for Clodius, though, industrialization and development

in Southeastern Europe would be restricted to those sectors where he
thought the Balkan states had an existing comparative advantage such
as agriculture, food processing, and the extraction and refinement of
minerals and ores.38 These development ideas extended beyond tech-
nocratic officials like Clodius to Nazi leaders most closely connected
with the German business community, like the director of the Adver-
tising Council Heinrich Hunke and Economics Minister Walther Funk.
Funk, a journalist and editor of the Berliner Borsenzeitung in the 1920s,
had joined the Nazi Party in 1931 and after 1933 worked in the Pro-
paganda Ministry under Goebbels. Although never the most influential
party member, Funk had considerable pull in foreign economic policy,
particularly in Southeastern Europe. In the months leading up to the
Anschluss he gained extensive powers when the Nazi Party reshuffled the
leadership of Germanys main bureaucracies. In February 1938 he took
the helm of the Economics Ministry and acquired the title of Plenipo-
tentiary for the German Economy. A year later he assumed directorship
of the Reichsbank. Funk used his new authority to push the developmen-
talist approach to Southeastern Europe. In the spring of 1939, before a
confidential meeting of the Reichsbanks central committee, he outlined
his vision for the region. Through bilateral treaties and investment the
Balkans abundant natural resources will be developed, the productive
powers of the countries and the living standard of its people will be
strengthened. And on the other hand, Germanys raw material situation
will be improved and its export possibilities augmented.39 One reason
Funk expressed such enthusiasm for developing Southeastern Europe
was geography: the region had the potential to undermine any blockade
and help equip the German army by shipping supplies via the Danube.40
While German policy-makers like Clodius and Funk advocated limited
economic development for Southeastern Europe, their ideas remained
intentionally vague. They discussed improving agricultural and mining
38 At the meeting of the Deutsche Weltwirtschaftliche Gesellschaft in Vienna in May 1939,

these ideas for economic development in Southeastern Europe were publicly reiterated
yet again by German policy-makers Hans Posse of the Economics Ministry, Carl Clodius
of the Foreign Office, Heinrich Hunke of the Advertising Council, and Werner Daitz of
the Nazi Party. Report to Wiehl, March 8, 1939, 106294, Handelsabteilung, PAAA.
39 Funks speech to the Reichsbank upon assuming its directorship, March 30, 1939,
film 348/P348, R 8119F, BA; Walther Funk, Wirtschaftsordnung im Neuen Europa: Rede
gehalten vor der Sudosteuropa-Gesellschaft (Vienna: Sudost-Echo, 1941).
40 Funk, for instance, wanted to create free ports on the Danube to aid the shipping and
financing of goods from the Balkans to Germany. Funk to Prussian Finance Minister,
May 10, 1939, Wi 7060 10/5, Finanzministerium, Geheimakten I C Nr. 9401, I. HA,
Rep. 151, Geheimes Staatsarchiv Preussischer Kulturbesitz (GStPK).
productivity in Southeastern Europe, but they rarely presented concrete

plans that went beyond purchasing grains, livestock, and oil from the
region at high prices. Instead, they left it to Germanys private organi-
zations to elaborate what development for Southeastern Europe actu-
ally meant, and how it was to proceed. Ironically, in contrast to the
British Empire, where the state drove development policy, before 1940
Germanys private organizations played a much stronger role in both
planning and orchestrating development in Germanys hinterland.
Here high-level officials like Carl Clodius worked as intermediaries
between the state and Germanys private organizations. Clodius gave
frequent lectures to the Mitteleuropaische Wirtschaftstag, advised the
organization on a regular basis, read its reports, and attended its semi-
annual meetings. More importantly, he provided the organization with
access to officials higher up in the decision-making chain, channeling the
Mitteleuropaische Wirtschaftstags ideas to the upper echelon of German
leaders like Schacht and later Funk and Erich Neumann the foreign
currency comptroller of the Four-Year Plan.41
For German economists, the main problem blocking Southeastern
Europes development was rural overpopulation, a concept they fas-
tened onto even earlier than their counterparts in Britain. During the
1920s and the 1930s the population of Southeastern Europe grew from
46 to 58 million, yet the majority of people remained working the land
and mired in poverty. According to Hermann Gross Germanys lead-
ing economic theorist of the Balkans, who helped direct the exchange
program at the Institute for Southeastern Europe in Leipzig a num-
ber of causes lay behind this rural poverty. Geographically, the rugged
and mountainous topography meant much of the land was ill suited for
cultivation. Historically, the long period of Ottoman rule had prevented
modern cultivation techniques from spreading to Romania and parts of
Yugoslavia. In terms of policy, after World War I the Balkan states had all
pursued land reforms that ended tenant farming and had broken up many
of the large estates. Yet instead of creating a self-sufficient class of small-
holding farmers, as intended, the reforms fragmented landholdings and
created dwarf plots that were economically uncompetitive. Meanwhile,
falling mortality rates after World War I had generated a rural popula-
tion boom. In both states the percentage of the population in agriculture
stayed the same at roughly 75 percent, which meant the absolute number
of people dependent on farming the land grew substantially. For contem-
porary economists, the interplay of these issues led to overpopulation:
41 Mitteleuropaische Wirtschaftstags special report for Neumann, February 27, 1940,

p. 167, 6135, R 8119F, BA.
high land prices, an expansion of subsidiary occupations alongside cul-

tivation, and declining incomes and impoverishment.42
In Hermann Grosss economic models, and in those of other Ger-
man development theorists, overpopulation was directly connected to
the problem of capital scarcity: one was the counterpart to the other.
Southeastern Europes poor and growing agrarian population tilted the
ratio of labor to capital heavily in favor of the former, making labor less
productive than in Germany. In the words of Ernst Wagemann, direc-
tor of the Institute for Business Cycle Research and one of Germanys
leading economists, the Balkans are both over-populated and under-
capitalized, or better put, if one isnt averse to the expression, under-
engineered (untertechnisiert).43 Here German economists like Gross and
Wagemann fit into a long tradition of development theory stretching from
Karl Marx in the 1850s to W. W. Rostow in the 1950s, which saw capital
accumulation as the crucial variable determining how quickly an econ-
omy could grow. But they added a twist by linking capital accumulation,
in the case of Southeastern Europe, to agrarian development.44
Wilmowsky and Hahn, the directors of the Mitteleuropaische
Wirtschaftstag, drew heavily on Hermann Grosss diagnosis of rural over-
population and capital accumulation to justify their development pro-
grams in the Balkans.45 In 1932, following one of their first study trips
through the Balkans, Wilmowsky and Hahn concluded that to improve
growth prospects for the region, the most important precondition is a
recovery in the agricultural sector, the general foundation of economic
life.46 Wilmowsky later expanded on this, explaining in a special report
42 H. Gross, Bau und Entwicklung, 44, 75, 92105; Britains leading research center, the
Royal Institute of International Affairs, came to the same conclusion as Gross, that
the fundamental economic problem of all these five countries [Hungary, Yugoslavia,
Romania, Bulgaria, and Greece] is over-population. The Information Department
of the Royal Institute of International Affairs, South-Eastern Europe: A Political and
Economic Survey (London: Oxford University Press, 1939), 184; Lampe and Jackson,
Balkan Economic History, 33040.
43 Wagemann, Der neue Balkan, 65.
44 Leszek Kolakowski, The Main Currents of Marxism (Oxford University Press, 2005),
40715; W. W. Rostow, The Stages of Economic Growth: A Non-Communist Mani-
festo (1960), in J. Timmons and Amy Bellone Hite (eds.), The Globalization and Devel-
opment Reader (Malden, MA: Blackwell, 2007), 4755; Wagemann, Der neue Balkan,
5968; H. Gross, Bau und Entwicklung, 14650.
45 Throughout the 1930s, H. Gross remained in close contact with the Mitteleuropaische
Wirtschaftstag. After 1945 Wilmowsky commissioned him to draft a report to try to
exonerate the organization of complicity with the Nazi Party during the 1930s and
1940s. Wilmowsky to Friedrich Krupp Zentralabstellung, November 8, 1965, FAH
29/70, VHA.
46 Wilmowskys report on his trip through the Balkans, November 17, 1932, 6140, R
8119F, BA.
to the Four-Year Plan authorities that, the main economic reason for the
backwardness of the southeast is the dearth of capital. For Wilmowsky
as for Hermann Gross, agrarian overpopulation and undercapitalization
were two sides of the same coin.47
By the end of the decade Wilmowsky, the vice president of the Agri-
cultural Commission for Saxony and a director of Germanys Impe-
rial Board for Technology and Agriculture, elaborated a linear model of
agrarian development for Southeastern Europe based on the past expe-
rience of Germany. According to his idiosyncratic historical narrative,
since the late nineteenth century German farming had passed through
four stages of agricultural revolution by applying ever more advanced
technology. By the late 1930s Germany had entered the most recent
stage, where the use of rubber wheels gave mechanized harvesters and
tractors greater accessibility to the land. For Wilmowsky, the dispersion
of new technology to small farms had been the critical bottleneck in
Germanys process of agricultural modernization, something Germany
overcame by establishing several hundred model villages through which
the Imperial Board of Technology in Agriculture helped introduce cool-
ing, preserving, and electrification technologies as well as mechanized
tractors to farming communities. Wilmowsky was convinced Southeast-
ern Europe lay on the cusp of a similar agricultural upheaval if only
it could emulate Germanys experience with technological innovation.
Following the land reforms after World War I the peasants of Romania,
Yugoslavia, and Bulgaria had reached the first level of self-dependence
by attaining ownership of property. Wilmowsky now wanted to give them
true economic self-dependence by raising their productivity and their
standard of living.48
In his reading of German history Wilmowsky focused excessively on
technology as the cause of development, while overlooking other possi-
ble factors driving economic change, from social relations to the sup-
ply of credit or industrial policy. In drawing lessons from Germanys
nineteenth-century experience, for example, he downplayed the fact that
his country overcame its own potential rural overpopulation through
47 Sudosteuropa als wirtschaftlicher Erganzungsraum fur Deutschland, p. 10, 294b, R

63, BA.
48 One of the Imperial Boards slogans was: The tractor must be made cheaper
than the horse. Wilmowsky, Ruckblickend, 1246; MWT Report: Sudosteuropa als
wirtschaftlicher Erganzungsraum fur Deutschland, chapter on agriculture. 294b, R
63, BA. On the commissioning of the report by State Secretary Neumann of the Four-
Year Plan, December, 22, 1939, 6135, R 8119F, BA; Wilmowskys lecture to Verein fur
Berliner Kaufleute, November 11, 1940, p. 66, 6136, R 8119F, BA; on the interest in
applying cooling and drying and other conservation techniques in Southeastern Europe,
MWT interim report, February 12, 1941, p. 241, 6143, R 8119F, BA.
breakneck industrialization and emigration to North America as much as

through any green revolution. In Southeastern Europe during the 1930s,
however, these two channels for absorbing underemployed rural workers
were largely cut off. Emigration became a casualty of the Great Depres-
sion, as America and other industrialized countries raised immigration
barriers to protect their own workers. Industrialization was slowly occur-
ring in Yugoslavia and Romania, but the small size of the industrial work-
force relative to the total population meant that even modest industrial
growth rates had almost no impact on the composition of the workforce,
which remained primarily agrarian. Urban growth rates in Romania and
Yugoslavia were marginal and actually lower than Germanys in the late
nineteenth century.49 More importantly, for Wilmowsky industrialization
was a long-term goal, something he believed Southeastern Europe could
achieve in fifty years. For the present, he believed agrarian modernization
offered more tangible rewards and would be more useful for the German
economy.50
Thus Wilmowskys prescriptions for development were skewed from
the beginning. Technology, Wilmowsky argued before the Association
of Berlin Merchants and Industrialists in November 1940, will con-
quer the countryside . . . The future development of the countryside, not
only for us but also for Southeastern Europe, depends on a much closer
cooperation with industry and technology than has been the case until
now.51 Instead of pushing for social reforms or extensive industrial aid
the Mitteleuropaische Wirtschaftstag advocated agrarian development
by applying technology, knowledge, and capital. Over the course of the
1930s they laid out a three-pillared scheme for development in South-
eastern Europe. First, they planned to increase the capital-intensity of
Balkan agriculture through mechanization, providing good, efficient,
and cheap machinery in order to increase the yield of traditional crops
like wheat. In theory, mechanization would not only enable Yugoslavia
and Romania to produce more agricultural goods for the Third Reich, it
would also generate a new market for German farm equipment and metal
manufacturers represented in the Mitteleuropaische Wirtschaftstag:
organizations and firms such as the Fachgruppe Landmaschinenbau,
49 Lampe and Jackson, Balkan Economic History, 3317; Paul Bairoch and Gary Goertz,
Factors of Urbanisation in the Nineteenth Century Developed Countries: A Descrip-
tive and Econometric Analysis, Urban Studies 23 (1986), 285305.
50 MWT Sudosteuropa: Vorschlage fur eine neue deutsche Kapitalpolitik, February
1940, 6135, R 8119F, BA.
51 Quotation from Wilmowskys lecture to Verein fur Berliner Kaufleute, Novem-
ber 11, 1940, pp. 701, 6136, R 8119F, BA; Sudosteuropa als wirtschaftlicher
Erganzungsraum fur Deutschland, chapter on agriculture, 294b, R 63, BA.
Stahlwerksverband Nordwest, Otto Wolff AG, or Schoeller-Bleckmann-

Stahlwerke.52
Second, the Mitteleuropaische Wirtschaftstag aimed to shift South-
eastern Europe into more labor-intensive cash crops for export, such
as soybeans. For nineteenth-century colonial officials as well as for
twentieth-century development theorists, cultivating export cash crops
was a favorite silver bullet for growth.53 The British had tried this with
rice cultivation in Burma; German theorists were not immune to this fix-
ation either. Wilmowsky and Hahn believed introducing labor-intensive
cash crops would simultaneously employ Southeastern Europes surplus
population and help the region diversify away from grains, which had seen
their world market prices collapse since the mid 1920s. Oil seed crops
like soybeans required a much higher ratio of workers to each hectare
cultivated than wheat or barley, and moving into soy products appealed
to the Agriculture Ministries in Romania and Bulgaria in their ongo-
ing campaigns to mitigate the effects of the agricultural price crisis.54 For
Germany, oil seeds were in high demand as ersatz products for scarce fats,
as industrial lubricants, and as a protein-rich livestock feed. Purchasing
these goods from Southeastern Europe instead of East Asia meant their
supply would never be cut off in the event of a war-related blockade.55
The Mitteleuropaische Wirtschaftstags schemes for agricultural devel-
opment, however, were fraught with the same tensions that afflicted cash
crop export programs across the colonial world. Historically, labor for
cash crops has often been organized along racial lines. State officials,
52 Bericht uber die Verhandlungen der Mitteleuropaischer Wirtschaftstagung im Breslau

am 28. Februar und 1. Marz 1930, p. 49, Mitteleuropaeischer Wirtschaftstag, Hoover
Archive, Stanford (HAS); Mitteleuropaischer Wirtschaftstag, Deutschland und Jugoslaw-
ien, 23, 34; H. Gross, Bau und Entwicklung, 224; Wilmowsky, Ruckblickend, 208; Max
Ilgner, Exportsteigerung durch Einschaltung in die Industrialisierung der Welt (Jena: Gustav
Fischer, 1938), 6. For a list of organizations and firms belonging to the MWT see
53 Topik and Wells, Commodity Chains, part 3.
54 Romanias charge daffaires in Berlin concluded that, a restructuring of Romanian
agriculture is necessary in order to be able to successfully counter the many crises
that are cropping up, and supported the Mitteleuropaische Wirtschaftstags soybean
plan. Board of directors meeting report, February 18, 1935, 6140, R 8119F, BA. On
Bulgarias interest see Mitteilungen des MWT, October 23, 1935, 6141, R 8119F,
BA; Markus Wien, Markt und Modernisierung: deutsch-bulgarische Wirtschaftsbeziehungen
19181944 in ihren konzeptionellen Grundlagen (Munich: Oldenbourg, 2007); Mitteleu-
ropaischer Wirtschaftstag, Kroatien Behorden, Wirtschafts-organisationen, Firmen: Zusam-
mengestellt vom Volkswirtscaftlichen Ausschuss des Mitteleuropaischer Wirtschaftstag (Berlin:
MWT, 1943).
55 Report to board of directors, January 18, 1935, 274, R 10/V, BA; Hayes, Industry and
Ideology, 131; Joachim Drews, Die Nazi-Bohne: Anbau, Verwendung und Auswirkung
der Sojabohne im Deutschen Reich und Sudosteuropa, 19331945 (Munster: LIT Verlag,
2004), 927.
colonial authorities, and commercial elites used race to justify why cer-
tain groups were more suited than others for the backbreaking, labor-
intensive work needed for export crops. In Burma, the British worked
the upper tier of their rice-export businesses as shippers, merchants, and
millers. Local Burmese and Indian immigrants were spread across the
middle and lower rungs of the occupational pyramid working at times
as moneylenders, but primarily as agricultural laborers and urban work-
ers. Indian immigrants in particular were seen to be docile, accus-
tomed to deprivations, and suited for the dull, monotonous tasks of
hard labor.56 In Germany itself the new cash crop par excellence after
1880 was the sugar beet, which required labor-intensive planting, cultiva-
tion, and harvesting. German landowners met these needs by importing
migrant Polish workers Sachsenganger who they saw as racially infe-
rior and therefore particularly suited to this type of arduous work.57 For
soybeans a similar racial division of labor existed in Manchuria, whence
Wilmowsky and Hahn got their inspiration to import these crops into
Southeastern Europe. In Manchuria, Chinese laborers began cultivating
soybeans as a major export crop during the late nineteenth century. Japan,
as it extended its imperial sphere in Manchuria after 1905, expanded
soybean cultivation. By the 1920s Japanese corporations were import-
ing cheap Chinese coolies to work the soy fields. Japanese colonizers
paid these Chinese workers subsistence-level wages, valued them for their
patient, eternal toil, and believed they were perfectly programmed for
slave-like work.58 In Manchuria the cultivation of soybeans developed
into the classic pattern of an extractive colonial economy based on
racial hierarchies.59
To a certain extent, although not entirely, the directors of the Mitteleu-
ropaische Wirtschaftstag used similar logic to justify the introduction of
cash crop soybeans to Southeastern Europe. Wilmowsky portrayed the
regions farmers as frugal, tough, and industrious. Hermann Gross
likewise saw Croatians, Serbians, Romanians, and Bulgarians as capable
56 Adas, The Burma Delta, 10521.

57 On how these racial stereotypes about labor relations crossed borders in the nineteenth
century see Zimmerman, Alabama in Africa, introduction, 806; on sugar beets see
Topik and Wells, Commodity Chains, 75372.
58 Quotations from Mark Driscoll, Absolute Erotic, Absolute Grotesque: The Living, Dead,
and Undead in Japans Imperialism (Durham, NC: Duke University Press, 2010), 27
9; Alexander Eckstein, Kang Chao, and John Chang, The Economic Development
of Manchuria: The Rise of the Frontier Economy, Journal of Economic History 34,
no. 1 (1974), 23964, 251; ShinIchi Yamamuro and Joshua A. Fogel, Manchuria under
Japanese Domination (Philadelphia: University of Pennsylvania Press, 2005), 169200.
59 Louise Young, Japans Total Empire: Manchuria and the Culture of Wartime Imperialism
(Berkeley: University of California Press, 1999), 323.
of bearing any burden, and possessing a modesty and resilience . . . in

the face of all kinds of deprivation60 For German development theorists
these attributes of resilience and frugality made the peoples of South-
eastern Europe perfectly suited to supply the labor-intensive goods that
Germany needed to import. As Wilmowsky argued to the Four-Year
Plan authorities in 1939, through the Mitteleuropaische Wirtschaftstags
development schemes, the import of unfinished goods produced by
cheap workers would help relieve Germanys own labor shortages at
home.61
Yet the similarities with German colonial mentalities toward Poles, or
Japanese attitudes toward Chinese, only go so far. The characteristics that
Wilmowsky and Gross ascribed to Balkan laborers were not necessarily
derogatory ones, as they were in the case of Poles, whom German intellec-
tuals frequently described as disorganized, lazy, degenerate, and inferior.
Nor did Wilmowsky or Gross explain overpopulation as a product of
racial degeneracy, as German scholars often did in the case of Poland.62
Wilmowsky, moreover, believed the Serb or Romanian peasant capable
of achieving real economic self-dependence, something German intel-
lectuals never envisioned for Polish Sachsenganger, nor the Japanese for
Chinese coolies. Hermann Gross went even further than Wilmowsky,
arguing that the work ethic and resilience of the Balkan peoples would
eventually lead them to industrialize. And although the Mitteleuropaische
Wirtschaftstag promoted soybeans for export, they envisioned this to
be one of many crops Southeastern Europe would produce to comple-
ment its existing array of traditional agrarian goods. Wilmowsky wanted
diversity of cultivation, not monoculture. Most importantly, Wilmowsky,
Hahn, and Hermann Gross genuinely believed cash crop agrarian devel-
opment would actually benefit Yugoslavia and Romania, even if their opti-
mism was misguided. As the leaders of the Mitteleuropaische Wirtschaft-
stag stated countless times, in public and behind closed doors, Germany
has a vital interest in the economic advancement of Southeastern Euro-
pean farmers . . . History has shown that it is always more advantageous
to help your neighboring country rise.63
60 Wilmowskys lecture to Verein fur Berliner Kaufleute und Industrieller, November 11,
1940, pp. 701, 6136, R 8119F, BA; H. Gross, Bau und Entwicklung, 74, 218.
61 Sudosteuropa als wirtschaftlicher Ergaenzungsraum fur Deutschland, 21 and 149,
294a, R 63, BA.
62 See, for example, Albert Brackmann, Krisis und Aufbau in Osteuropa: ein weltgeschictliches
Bild (Berlin: Ahnenerbe-Stiftung Verlag, 1939); David Blackbourn, The Conquest of
Nature: Water, Landscape and the Making of Modern Germany (London: Jonathan Cape,
2006), 24050.
63 Wilmowskys lecture to Verein fur Berliner Kaufleute und Industrieller, November 11,
1940, 6136, R 8119F, BA.
While agricultural modernization was the central pillar of the Mitteleu-

ropaische Wirtschaftstags development vision for Southeastern Europe,
Wilmowsky and Hahn pursued a third avenue of development by trying
to modernize tertiary sectors like food processing, textile manufacturing,
and above all mining. When Hahn stressed that Germany should not
fight an industrialization already underway, but rather draw economic
use out of it, he had in mind specific sectors in Southeastern Europe
that would not compete with German industry.64
Mitteleuropaische Wirtschaftstag theorists saw mining as one such
sector where Romania, Bulgaria, and above all Yugoslavia enjoyed a
comparative advantage. Yet, like agriculture, the mines and oil refiner-
ies of Southeastern Europe were deficient in capital and technologically
backward in comparison to their counterparts in more industrialized
parts of the world. Romanias oil industry lacked modern drilling equip-
ment, for example, and Yugoslavias mining sector lacked the capacity to
refine its own copper and zinc. Here the Mitteleuropaische Wirtschaftstag
included human capital in their assessment of the capital deficiency of
Southeastern Europe. The mining workforce, they claimed, was utterly
uneducated in technical matters, only marginally productive, and par-
ticularly unreliable because they would abruptly try to return to the
countryside as soon as they thought they had earned enough money for a
given period.65 To render the subsoil minerals of Southeastern Europe
useful to German firms, Wilmowsky and Hahn aimed to provide modern
technology to the mining enterprises in Southeastern Europe.66
Doctrine applied: German development assistance

in Southeastern Europe
Between 1934 and 1940 German business and government elites incre-
mentally applied their ideas for economic development in Southeastern
Europe through a series of projects. The leaders of the Mitteleuropaische
Wirtschaftstag, the Foreign Office, and the Economics Ministry, how-
ever, faced considerably greater challenges in pursuing economic devel-
opment than did their counterparts in Britains Colonial Office. For one,
Britain had formal political control over many of its colonies, whereas
64 Report on members meeting, December 10, 1936, 6141, R 8119F, BA.

65 Sudosteuropa als wirtschaftlicher Erganzungsraum fur Deutschland, pp. 79, 294a,
R 63, BA. On Yugoslavias copper industry, charge daffaires in Belgrade to Berlin
Foreign Office, June 27, 1936, 110671, Handelsabteilung, PAAA.
66 Sudosteuropa Vorschlage fur eine neue deutsche Kapitalpolitik, February 6, 1940, 6135,
R 8119F, BA.
Germany exercised no such power in Southeastern Europe. British offi-

cials could decide what projects to pursue and when, even if many of the
policies were initiated by colonial officers on the ground. German elites,
by contrast, had to persuade Yugoslavian, Romanian, or Bulgarian eco-
nomic leaders to follow their plans by selling them as mutually beneficial,
or at least better than anything on offer by the Western European pow-
ers. The Anschluss did not change this fundamental political dynamic;
that would only come with Germanys military conquest of Poland and
Western Europe in 1939 and 1940.
Second, British financial institutions were already the major investors
in their empire whereas Germany, before the Anschluss, lacked this impor-
tant tool of development and imperialism in Southeastern Europe. By far
the largest source of external investment in the British Empire came from
London, giving Britain ownership or at least oversight of the most impor-
tant colonial industries.67 In contrast, in the Balkans Western European
states, not Germany, were the primary source of foreign investment.
During the 1920s German banks suffered from a chronic undercapital-
ization. During the 1930s the Nazi Party encouraged, manipulated, and
coerced German banks into buying government bonds to finance its rear-
mament program.68 Thus before their acquisition of Austrian financial
institutions in 1938, German banks were largely unwilling or unable to
help German firms compete for the ownership of Southeastern Europes
mines. Some German firms did undertake a few highly publicized invest-
ment projects in the 1930s. The largest of these was the steel foundry
built by Krupp AG in Zenica, which cost 9 million RM and employed
three Siemens-Martin modern blast furnaces. But by and large Western
European capital, not German, dominated the region.69 In Yugoslavia
the French, British, and to a lesser extent Austrians dominated bank-
ing and insurance as well as the mining sector. Britains Selection Trust
operated the Trepca zinc and lead mines, one of the largest producers of
these minerals in Europe. A French consortium owned the prized Bor
mines of Yugoslavia, which produced 40,000 tons of copper annually.70
67 P. J. Cain and A. G. Hopkins, British Imperialism: Crisis and Deconstruction, 19141990

(London: Longman, 1993).
68 Arthur Schweitzer, Big Business in the Third Reich (Bloomington: Indiana University
Press, 1964), 21828, 4612; Harold James, Banks and Business Politics in Nazi
Germany, in Francis R. Nicosia and Jonathan Huener (eds.), Business and Industry in
Nazi Germany (New York: Berghahn Books, 2004), 447.
69 Schonfeld, Deutsche Rohstoffsicherungspolitik, 217; US Department of the Inte-
rior, Bureau of Mines, The Iron and Steel Industries of Europe, Economic Paper 19
(Washington, DC: Government Printing Office, 1939), 83.
70 Reichsstelle fur den Aussenhandel to Oberkommando der Wehrmacht, Reichsbankdi-
rektorium, and Foreign Office, November 24, 1938, 110671, Handelsabteilung, PAAA;
In Romania, British and Czechoslovakian capital had a preponderant

presence in the metallurgical sector, France held a commanding position
in the financing of state loans, and British and Dutch firms controlled
the all-important oil industry. Through Royal Dutch Shell the British
and the Dutch held majority shares in Romanias largest oil compa-
nies Astra Romana and Steaua Romana.71 The Anschluss changed this
somewhat, but before the outbreak of war many of the sectors most
important to the German war economy were owned by Western Euro-
pean investors. The real watershed came with the fall of France in 1940,
which opened new horizons for German investment after the Third Reich
coercively commandeered French and many British holdings throughout
Europe.
Thus while the Mitteleuropaische Wirtschaftstag hoped to implement
a sweeping transformation of economic life in Southeastern Europe,
before 1940 they limited their projects to schemes that were easily coor-
dinated and required little capital. The Mitteleuropaische Wirtschaft-
stags flagship development program in Southeastern Europe was such a
focused project the introduction of soybeans as a cash crop for export.
Neither Romania, nor Yugoslavia, nor Bulgaria had experience grow-
ing oil seeds. All three had imported these crops before the 1930s,
the major global exports coming from the other side of the world in
Manchuria.72 Introducing soybeans in Southeastern Europe required
specialized knowledge, first to ascertain which varieties would suit the
local climate, and, second, to teach farmers how to grow them. Already
in the late 1920s IG Farben, Germanys chemical product conglom-
erate, had begun studying the possibility of soy crops in Southeastern
Europe. In 1927 they employed an agronomist, Lene Muller, who had
been researching soybeans since the middle of the 1920s, to see if these
crops could be grown in Germany itself. In 1927 IG Farben sent Muller,
nicknamed the soybean queen, to Hungary and Yugoslavia to test
various soybean strains in the Danube basin. In 1930 she traveled to
Manchuria, China, Japan, and later Russia for further cross-breeding
experiments.73
Jurkovic, Auslandische Kapital, 45053; Sergije Dimitrijevic, Strani Kapital u Privredi

Bivse Jugoslavije (Belgrade: Nolit, 1958), 31323.
71 The Royal Institute of International Affairs, South-Eastern Europe: A Brief Survey
(London: Oxford University Press, 1940), 1236; Wendt, England und der deutsche
Drang nach Sudosten, 48991.
72 Report from Schnellbach, April 11, 1934, 54159/40673, R 901, BA. On the global
history of soybeans see Ines Predohl, A Miracle Bean: How Soy Conquered the West,
19091950, Bulletin of the German Historical Institute 46 (Spring 2010), 11129.
73 Report on board of directors meeting, February 18, 1935 6140, R 8119F, BA; Drews,
Nazi-Bohne, 257.
In 1934 Hahn and Wilmowsky learned of Mullers work with IG Far-

ben. Wilmowsky introduced Muller to Germanys Economics Minister
Hjalmar Schacht, who showed enthusiasm for the soybean scheme and
gave it his approval. Later that year the Mitteleuropaische Wirtschaft-
stag and IG Farben co-founded the new firm, SOJA AG, to market oil
seed products in Germany. SOJA AG, the Mitteleuropaische Wirtschaft-
stag, and IG Farben collaborated closely with the agricultural institutes
in Sofia and Bucharest, offering to pay 10 percent above world market
price for the soybeans produced.74 In return, the Romanian and Bul-
garian agricultural institutes agreed to help educate the local farmers
about effective cultivation practices, and they gave SOJA wide latitude to
test out their crop varieties in nine rural districts. In each district SOJA
provided a German agronomist to oversee cultivation, to work with the
local farming cooperatives, and to train village-level agents to distribute
seeds and fertilizers and supervise the planting. Through Germanys
Economics Ministry, moreover, the German state underwrote the entire
scheme by assuming much of the risk if the cultivation ran into problems,
subsidizing the purchase of soybeans with a price guarantee.75
Before the SOJA project Romania and Bulgaria cultivated virtually
none of these crops. In 1934 SOJA planted 2,500 hectares in Roma-
nia and 1,465 hectares in Bulgaria. After five years the land devoted to
soybean cultivation in these two countries grew thirty-fold, and nearly
all the oil seeds produced went directly to Germany (see Table 7.1).76
While the soybean plan may have been a side show for IG Farben in
terms of the total resources it devoted to the program, for the countries
of Southeastern Europe it was one of the most prominent components
of a larger effort to diversify their farming away from grain.77
In addition to developing new cash crops, the Mitteleuropaische
Wirtschaftstag also initiated several projects to mechanize the cultiva-
tion of traditional crops, like wheat. German businessmen had tried
once before to introduce modern equipment to the region in the mid
1920s. Yet this earlier attempt had failed: German exporters had not
trained their clients in usage techniques and had not always introduced
machines that were compatible with the needs of local farmers, nor
had they made repair parts or maintenance facilities accessible to local
74 Charge daffaires in Bucharest to Berlin Foreign Office, March, 20, 1934, 89210, Han-
delsabteilung, PAAA; Wilmowsky, Ruckblickend, 194, 204.
75 Report from German and Prussian Economics Minister to Reichshauptkasse, April 26,
1938 and May 2, 1938, 21623, R 2, BA.
76 Report on member meeting, May 27, 1940, Mitteleuropaische Wirtschaftstag, HAS.
77 Hayes, Industry and Ideology, 2978; Mitteilungen des MWT, November 23, 1935, Nr.
33, 6141, R 8119F, BA.
Table 7.1 Soybean cultivation in Southeastern Europe (in hectares and tons)
Area of soybean cultivation

(in hectares) 1934 1935 1936 1937 1938 1939
Yugoslavia 685 1,685 6,089 7,521

Romania 2,500 20,411 58,027 110,000 63,000 100,000
Bulgaria 1,465 14,314 6,286 16,283 12,000 20,000
Total 3,965 34,735 64,998 127,968 81,089 127,521
Soybean harvest yield (in 1934 1935 1936 1937 1938 1939
tons)
Yugoslavia 507 1,291 5,588 4,147

Romania 11,500 37,200 70,329 50,000 88,000
Bulgaria 17,200 5,300 11,900 7,000 14,930
Total 28,700 43,007 83,520 62,588 107,077
German soybean imports 1934 1935 1936 1937 1938 1939

from Southeast Europe (in
tons)
Yugoslavia 4,759 3,200

Romania 6,400 11,296 43,489 57,288 73,000
Bulgaria 6,900 6,668 11,629 4,307 12,916
Total 13,300 17,964 55,118 66,354 89,116
Total as percentage of total
yield in Southeast Europe 46.3% 41.8% 66.0% 106.1% 83.2%
Values over 100 percent are possible because of storage and carryover from one year to
the next.
Source: Mitglieder Versammlung des Mitteleuropaischen Wirtschaftstag, May 27, 1940, Berlin,
HAS.
cooperatives. Machine graveyards were the result, and many of the new
tractors ended up broken down or unused.78
From this earlier campaign the Mitteleuropaische Wirtschaftstag
learned that Germany needed to tailor mechanization to local needs.
In 1935 they commissioned a study trip by two professors C. H.
Dencker from the Imperial Board for Technology and Agriculture and
L. W. Ries from Bornim University to evaluate how German farm
equipment was used in Yugoslavia. Sales to German-speaking farmers in
Yugoslavia were high, these two researchers noted, as were sales of sim-
ple equipment like plows and harvesters throughout the entire country.
But Dencker and Ries noted that outside the German-speaking regions,
78 Wilmowskys lecture to Verein fur Berliner Kaufleute, November 11, 1940, 6136, R
8119F, BA; report on Vienna conference, September 2, 1940, 6135, R 8119F, BA.
Table 7.2 German agricultural machinery exports to Southeastern

Europe (in thousands of RM)
Year Yugoslavia Romania Bulgaria Hungary Greece Total
1932 42 64 41 46 38 231
1933 15 20 5 35 36 111
1934 9 59 37 31 16 152
1935 44 100 38 33 73 288
1936 217 763 384 60 214 1,638
1937 1,141 1,728 776 189 483 4,317
Source: Entstehung, Entwicklung, und Arbeit des MWT, November 22, 1938,
6142, R 8119F, BA.
German sales of more complex equipment like threshing machines as

well as hand-held tools lagged behind the leading firms from Czechoslo-
vakia and Hungary.79 The two professors made several suggestions for
improving exports, including reducing the number of brands and types
of equipment that German firms offered, unifying sales under an overar-
ching conglomerate, and speeding up the delivery of replacement parts.
More specifically, they encouraged the Mitteleuropaische Wirtschaftstag
to work with the teachers at Yugoslavias agricultural schools and coop-
eratives, and bring them to study in Germany in the belief that over time
this would give German producers an edge in the Yugoslavian market.
To a certain extent, the Mitteleuropaische Wirtschaftstags educational
exchange programs did just this.80 In the middle of the 1930s German
agricultural equipment exports to the Balkans ballooned, helping relieve
pressure on Germanys trade deficit. Much of this resulted from Ger-
man commercial treaties with Yugoslavia and Romania, although the
Mitteleuropaische Wirtschaftstag claimed partial credit from their pro-
motional work81 (see Table 7.2).
Next to soybeans and mechanized farming, the Mitteleuropaische
Wirtschaftstags largest development program was the exploitation of
minerals. In Southeastern Europe they promoted these schemes as a
way for the region to acquire modern technology, but their main goal
was changing the balance of mineral ownership in Germanys favor and
79 Report from Dencker and Ries to board of directors, November 28, 1935, p. 73, 6141,
R 8119F, BA.
80 Ibid., and summary of study trip by Dencker and Ries, 238, also in 6141, R 8119F,
BA.
81 Entstehung, Entwicklung, und Arbeit des MWT, November 22, 1938, pp. 1112, 6142,
R 8119F, BA.
developing deposits that would be particularly useful for firms belong-

ing to the Mitteleuropaische Wirtschaftstag.82 For Germany, the pres-
ence of Western investors in Southeastern Europe presented financial
problems that were quickly turning into geopolitical ones as well. Most
importantly, German firms could only purchase the ores of Southeastern
Europe from Western European mine owners for hard currency, which
was increasingly hard to acquire during Hitlers rearmament boom. Ger-
man enterprises, for example, bought the lions share of their Yugoslavian
copper, zinc, and lead from the Bor and Trepca mines. Yet they had to
purchase these in London first, and have them shipped through Antwerp
or Hamburg to the industries of Berlin and the Ruhr. Not only did this
cost Germany precious currency, it also gave Britain control over a key
bottleneck in Germanys supply chain and caused anxiety among Nazi
planning authorities. The British government could prevent Germany
from importing copper and other non-ferrous metals metals essential
to German rearmament by buying up Yugoslavias surpluses. The Mit-
teleuropaische Wirtschaftstag played on these anxieties when promoting
their mining projects to the Foreign Office and Economics Ministry,
arguing Germany needed to break the British and French monopoly on
the ownership of mineral rights in Yugoslavia.83
In the eyes of some German businessmen, however, increasing
Germanys grip over the mines of Southeastern Europe in the early 1930s
at first seemed to be a lost cause. In Yugoslavia, for instance, a multi-
tude of small enterprises worked non-ferrous mines across the country.
Yet their operations were too small for them to afford shipping ore over-
land via rail or the Danube to Germany. Furthermore, the dearth of
engineers, metallurgists, and chemists in the Balkans meant that such
specialists would have to be procured in Germany at a time of nearly full
employment.84 As a result of these barriers large firms like IG Farben
and Gutehoffnungshutte did not consider it to be worth their while to
develop mining sites in the Balkans except in a wartime scenario.85
The Mitteleuropaische Wirtschaftstag disagreed, as did some lead-
ing managers in IG Farben. Already in 1931 Max Ilgner, a member
82 Wendt, England und der deutsche Drang nach Sudostens, 4913; Freytag, Deutsch-
lands Drang nach Sudosten, 200.
83 Report by Hahn, November 23, 1938, 6142, R 8119F, BA; confidential report from
Kisovec to Berlin Foreign Office, December 13, 1936, charge daffaires in Belgrade
to Berlin Foreign Office, January 28, 1937, and Hahn to Clodius, October 30, 1936,
84 Charge daffaires in Belgrade to Berlin Foreign Office, January 28, 1937, 110671,
Handelsabteilung, PAAA; report by Hahn November 23, 1938, 6142, R 8119F, BA.
85 Hayes, Industry and Ideology, 989; report from Wiehl to Berlin Foreign Office, Novem-
ber 26, 1938, 110733, Handelsabteilung, PAAA.
of IG Farbens board of directors and a chairman of the Mitteleu-

ropaische Wirtschaftstags executive committee, had broached the sub-
ject of mineral development with Milan Stojadinovic, Yugoslavias
Finance Minister after 1934 and Prime Minister after 1935.86 Hahn,
Wilmowsky, and Ilgner saw the virgin condition of these small mines
as Germanys opportunity to acquire a reliable source of non-ferrous
metals.87 Where Wilmowsky was the creative mind behind the Mitteleu-
ropaische Wirtschaftstags agricultural programs, in mining Max Hahn
took the initiative. He worked primarily as an intermediary, deploying
his network of personal contacts to bring business elites in Southeast-
ern Europe together with German firms. As Germanys military attache
in Belgrade remarked, Hahn was an extraordinarily well-informed and
well-established authority on commercial development in the Balkans.88
Indeed, Hahns knowledge and network in the region was so deep that
War Minister Werner von Blomberg employed him as a confidential
economic consultant for mobilization because, as Blomberg himself
attested, the economic and political relations between Germany and
Southeastern Europe are increasingly extending into the field of arma-
ments policy.89
Under Hahns guidance, in 1934 the Mitteleuropaische Wirtschaftstag
began exploring Bulgaria and Yugoslavia for new copper and bauxite
deposits. Instead in Zajaca, Yugoslavia, they stumbled on antimony, an
element used for tempering metal alloys and in the production of small
arms ammunition. Until the mid 1930s Germany had imported anti-
mony almost exclusively from China and parts of the British Empire.
With the collaboration of a Yugoslavian colonel and a relative of Prince
Paul, Hahn established the Yugoslavian company Montania AG to serve
as a straw man for a consortium of German firms and gain control over
production at Zajaca.90 In 1936 Hahn located a second, potentially more
lucrative antimony deposit in Lissa, Yugoslavia, owned by a Frenchman
looking to sell his rights. The large British mining firm Cookson had its
eyes on the Lissa site because it feared its existing antimony deposits in

87 Report by Hahn, November 23, 1938, 6142, R 8119F, BA.
88 Report on Neuhausen, August 4, 1937, 110632, Handelsabteilung, PAAA.
89 War Ministry to Neurath, May 19, 1937, and War Ministry to Berlin Foreign Office,
August 5, 1937, 110632, Handelsabteilung, PAAA; Grenzebach, Informal Empire,
1335.
90 Reichskriegsminister Abwehr-Abteilung to the Economics Ministry, Dr. Reinhardt,
October 15, 1936 and report from Dr. Arlt to the GermanBulgarian Economics Com-
mittee, June 24, 1940, 110671, Handelsabteilung, PAAA; report by Hahn, November
23, 1938, 6142, R 8119F, BA; Wilmowsky, Ruckblickend, 202.
Mexico and China would run dry in several years.91 After working with
Clodius of the Foreign Office and the Economics Ministry, Hahn out-
maneuvered Cookson and secured the hard currency needed to obtain
partial ownership of the Lissa concession, again for a consortium of Ger-
man companies that included Krupp AG and IG Farben. These firms
operated through a holding company in Luxemburg, the other half of
the investment coming from Yugoslavia. Max Heinhold the Mitteleu-
ropaische Wirtschaftstags representative in Belgrade assumed leader-
ship of the new company.92 Montania AG began operating in January
1938 with some of the most modern metallurgical equipment and blast
furnaces imported from Germany, and by the end of the year it was in
full production. The Mitteleuropaische Wirtschaftstag opened the Lissa
site later that year. By the outbreak of the Second World War these two
mines were sending their entire output to Germany, and together they
covered over half of the Third Reichs import needs for antimony.93
In 1937 the Mitteleuropaische Wirtschaftstag began searching for
more minerals, above all copper and lead. Hahn organized the Soci-
ety for Research into Foreign Mineral Deposits, with an initial capital
of 500,000 RM coming from a variety of German enterprises. Through
this new society the Mitteleuropaische Wirtschaftstag made its mining
expertise available to German firms, including Reichswerke Hermann
Goring, Afrika-Bergbau, and Krupp AG. With the help of Felix Her-
mann, their lead engineer, the Mitteleuropaische Wirtschaftstag began
exploring sites in Yugoslavia and Bulgaria for lead, zinc, copper, and
chrome. Hermann was trained as a geologist and after 1945 he would
go on to advise Sukarno in Indonesia and research ore deposits through-
out the Middle East.94 In the late 1930s Hermann worked with Hahn
to locate potential mines in Srebrenica, Slatina, and Montenegro that
the Mitteleuropaische Wirtschaftstag would begin to develop after 1940.
Further to the southeast, in 1937 Hahn began researching deposits of
lead and zinc in the Rhodope Mountains of Bulgaria under the aus-
pices of a new company, Granitoid AD. After two years of drawn-out
negotiations, Hahn helped two German metallurgical firms Felten &
91 Grenzebach, Informal Empire, 136; MWT to Clodius, October 30, 1936, 110671, Han-
92 IG Farben to Hahn, March 12, 1937, Foreign Office to Albach, May 13, 1937, and
Agramer Morgenblatt, August 14, 1937, in Belgrade Embassy 53/4, PAAA; MWT to
Clodius, October 30, 1936, 110671, Handelsabteilung, PAAA.
93 Entstehung, Entwicklung, und Arbeit des MWT, November 22, 1938, p. 16, 6142,
R 8119F, BA; Mitteleuropaischer Wirtschaftag, Mitglieder Versammlung des Mitteleu-
ropaischer Wirtschaftstag: Berlin, den 27. Mai 1940, p. 12, HAS.
94 Wilmowsky to Gross, December 17, 1965, FAH 29/70, VHA; Freytag, Deutschlands
Drang nach Sudosten, 20810.
Guielleaume and Otto Wolff join a consortium of Bulgarian investors to

form Pirin AG. The German partners constructed a 42 km cable railway,
one of the longest in the world, to transport the zinc, lead, and copper
from the otherwise inaccessible site. By 1941 the Rhodope mines were
producing 60,000 tons of raw metals a year.95
In 1938 Hahn embarked on another ambitious scheme: a bid to acquire
Yugoslavias potential deposits of oil. In the 1930s Germany still ran a
coal-based economy, 90 percent of its primary energy coming from the
black rock. Most of the oil that Germany did consume it imported,
primarily from companies operating under the flags of Britain and the
United States. Germanys only geographically contiguous sources of oil
were the fields of Romania and Galicia, and Nazi leaders were seriously
concerned about their nations dependence on overseas oil. As Hitler
remarked to IG Farbens representatives in 1932, an economy without
oil is inconceivable in a Germany which wishes to remain politically inde-
pendent. With the assistance of government subsidies, IG Farben had
begun producing synthetic petroleum in 1926 through hydrogenation.
Under the Four-Year Plan Hitler aimed to expand synthetic production
six-fold. Despite improvements in the process and continuing govern-
ment subsidies, however, by the late 1930s synthetic petroleum was still
much more expensive to produce than raw oil. German technocrats and
Nazi leaders consequently saw any source of oil, however small, as strate-
gically important.96
In early 1938 Rada Pasic, son of the former leader of the Yugoslavian
Peoples Radical Party Nikola Pasic, approached Hahn to help mobilize
German investors to develop a scattered group of oil concessions near the
Hungarian border. Several weeks later Standard Oil of America opened
negotiations with the Yugoslavian government in the hopes of acquiring
oil concessions that would encircle Pasics claim and render it worth-
less. In response, Pasic founded Panonia AG to solidify his claim, but he
still needed outside capital to actually exploit the concession. Hahn put
Pasic in contact with two German firms, Wintershall AG and Gutehoff-
nungshutte, both of which initially rejected Pasics plea for investment.
But following the Anschluss, in October 1938 matters moved in Pasic
95 Entstehung, Entwicklung, und Arbeit des MWT, November 22, 1938, 6142, R 8119F,
BA; Mitglieder Versammlung, Mitteleuropaischer Wirtschaftag, HAS; Mitteleuropaische
Wirtschaftstag, Zwischenbericht uber laufende Arbeit und Aufgaben, February 1941, p. 4,
6143, R 8119F, BA.
96 Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power (New York: Free
Press, 2008), 31116; Dietrich Eichholtz, War for Oil: The Nazi Quest for an Oil Empire
(Washington DC: Potomac Books, 2012); Alison Frank, Oil Empire: Visions of Prosperity
in Austrian Galicia (Cambridge, MA: Harvard University Press, 2005), 252.
and Hahns favor when the President of Yugoslavia, Milan Stojadinovic,

waded into the concession struggle on the side of the Germans. Stojadi-
novic believed that Standard had no real interest in actually developing
Yugoslavias oil, and that it rather sought to exclude others from enter-
ing an already saturated world oil market. Stojadinovic contacted Goring
to inform him of the Mitteleuropaische WirtschaftstagPasic conces-
sion, asking for 12 to 15 percent royalties and an initial investment of
2.5 million dinars. Goring recognized the potential importance of a new
source of oil and through his envoy in the Balkans, Franz Neuhausen,
instructed Wintershall to collaborate with Panonia AG in developing
the concessions.97 Two Yugoslavian cabinet officials threatened resigna-
tion at the prospect of this wave of German investment; Hahn believed
Standard Oil to be behind this resistance. Yet their threatened resig-
nation proved to be a minor hurdle. Hahns plans moved ahead and
several German heavy industrial firms soon came to own a commanding
position in Panonia AG and controlling positions in two other Yugosla-
vian oil companies. By the middle of 1939 the delivery of German
drilling equipment was underway. The Mitteleuropaische Wirtschaft-
stags success in outmaneuvering Standard Oil soured Yugoslavias rela-
tions with America and pulled Belgrade deeper into Germanys economic
orbit.98
Hahns aggressive activities in Southeastern Europe eventually touched
off a turf war with Franz Neuhausen, Gorings personal friend
and Plenipotentiary for the Four-Year Plan in Southeastern Europe.
Neuhausen was one of several officials representing the regime in the
Balkans; others included diplomats from the Foreign Office, military
attaches from the War Ministry, operatives from the Foreign Organiza-
tion of the Nazi Party, and, of course, the business elites of the Mit-
teleuropaische Wirtschaftstag. Neuhausen hoped to become Germanys
czar for economic relations with Southeastern Europe, and Hahn stood
in his way. In 1937 he tried to undermine Hahn, claiming that Hahn, as
97 Report from Berlin Foreign Office to charge daffaires in Belgrade, November 23, 1938
and confidential report from Wiehl, November 26, 1938, 110733, Handelsabteilung,
PAAA.
98 The German firms included Elwerath, Wintershall, Preussag, and DEAG. Neuhausen
to Berlin Foreign Office, April 29, 1939, 105942, Wiehl Handelsabteilung, PAAA;
Hahn to Berlin Foreign Office, January 28, 1939, and report W III 6679/39, August
12, 1939, 110733, Handelsabteilung, PAAA; charge daffaires in Belgrade to Berlin
Foreign Office, August 12, 1939, Belgrade Embassy 53/4, PAAA. On how Standard
Oils failed bid damaged USYugoslavian trade relations, see US Department of State,
Foreign Relations of the United States, Diplomatic Papers, 1939, General, the British Com-
monwealth, Europe, 88797, available at: http://digital.library.wisc.edu/1711.dl/FRUS
.FRUS1939v02.
a private businessman, was pursuing his own personal aggrandizement.

Neuhausen complained that Hahns connections with the War Ministry,
if discovered by the foreign press, would be a public relations disas-
ter. Blomberg and Foreign Minister Konstantin von Neurath, however,
defended Hahn and demanded that Neuhausen keep Hahns connection
with the War Ministry strictly confidential. In their estimation, Hahn was
working successfully for the common good of Germany. By common
good, they meant preparing the German economy for war by improving
the flow of raw materials from continental Europe into the Third Reich.99
Neuraths and Blombergs vocal defense of Hahn illustrates just how
important the Mitteleuropaische Wirtschaftstag had become. Through
its mineral exploitation as well as its agricultural development projects,
the organization had made itself indispensable to the Nazi military and
government authorities as they mobilized Germany for war in the wake
of the Anschluss.
Conclusion
The Mitteleuropaische Wirtschaftstags activities gradually began to
transform Southeastern Europe into a more effective and, importantly,
stable supply source for the seemingly endless needs of the German mil-
itary. This stability would make Germany less vulnerable to economic
blockade. Before 1935 Germany depended entirely on oversea sources
of antimony; by 1940 over half its needs were coming from the Balkans.
Before 1934 Germany imported all of its soybeans from East Asia; by
1938 Southeastern Europe supplied nearly 10 percent of its needs. By the
end of the decade German farm equipment and machinery were reach-
ing the Balkans in larger quantities than ever before, earning Germany
the credit to import key goods from the region.100
The Mitteleuropaische Wirtschaftstags work also paid dividends in
the battle for public opinion. The Anschluss unleashed a propaganda war
as France and Britain vied with Germany to swing the Balkans states
99 War Minister to Neurath, May 19, 1937, Neuhausen to German charge daffaires
in Belgrade, May 26, 1937, Report on Neuhausen August 4, 1937, and Blomberg to
Berlin Foreign Office, August 5, 1937, 110632, Handelsabteilung, PAAA; Grenzebach,
Informal Empire, 1335; Aus der Denkschrift der Amtsgruppe Wehrwirtschaftstab
im Oberkommando der Wehrmacht uber Moglichkeiten einer Grossraumwirtschaft
unter deutscher Fuhrung, August 1939, in Wolfgang Schumann und Ludwig Nestler
(eds.), Weltherrschaft im Visier: Dokumente zu den Europa- und Weltherrschaftsplanen des
deutschen Imperialismus (Berlin: Deutscher Verlag der Wissenschaften, 1975), 256.
100 Mitglieder Versammlung des Mitteleuropaischer Wirtschaftstag. Berlin, den 27. Mai 1940,
Mitteleuropaische Wirtschaftstag, HAS.
into their respective geopolitical camps.101 But after 1938 Germany held
the upper hand. France, the only real alternative patron for Southeast-
ern Europe, remained mired in economic crisis. The Depression came
later and lasted longer in France than elsewhere. French unemploy-
ment peaked in 1935. Frances attempt to sustain a gold bloc of allied
countries collapsed in 1936, after which the devaluation of the franc
led to capital flight and the decline of central bank reserves. French
investment flows to the Balkans dried up. In 1937 the French econ-
omy suffered yet another round of industrial recession, as global mar-
kets weakened. French protectionism against foreign agrarian producers,
moreover, continued throughout the decade. By the late 1930s, in other
words, Paris offered little prospect of aiding the Yugoslavian or Romanian
economies.102
The German economy, by contrast, continued its ascent during the
late 1930s. The advocates of Mitteleuropa capitalized on this. Over the
preceding decade German businessmen and academics had built a pow-
erful foundation to project soft power in the Balkans. Students clam-
ored at German missions in Belgrade and Bucharest for the chance to
study at Europes best technical universities. Young German, Yugosla-
vian, and Romanian professionals were building connections with banks,
oil and mineral companies, and importexport houses across South-
eastern Europe. German leaders could point to numerous development
projects those planned and those already underway as evidence of
their intention to accommodate the economic needs of Southeastern
Europe, at least to a degree. As a result of German trade and develop-
ment aid, Yugoslavia and Romania saw their share of world commerce
actually expand during the 1930s, in contrast to most other primary
product exporters, and their real per capita exports returned to, or even
surpassed, pre-depression levels by 19368.103
German soft power succeeded in Southeastern Europe because it was
malleable and diverse, offering different benefits to different local elites.
If the Aryanization associated with Germanys exchange programs
appealed to the radical right in Southeastern Europe, the development
101 Johann Wuscht, Yugoslawien und das Dritte Reich: eine dokumentierte Geschichte der
deutsch-jugoslawischen Beziehungen von 19331945 (Stuttgart: Seewald, 1969), 412;
Bucharest consul to Berlin Foreign Office, December 2, 1938, January 2 and April 6,
1939, Bucharest Embassy 164, PAAA; DAAD branch office London to German
Embassy in London, July 13, 1939, Bucharest Embassy 142/5, PAAA; report from
Dietrich, December 1 and December 20, 1939, 6135, R 8119F, BA; special report on
Balkans W III 193/39, October 21, 1939, 110633, Handelsabteilung, PAAA.
102 Eichengreen, Golden Fetters, 36589; Boyce, Interwar Crisis, 36572.
103 Neal, The Economics and Finance of Bilateral Clearing Agreements; Lampe,
Balkans into Southeastern Europe, 130, 136.
projects of the Mitteleuropaische Wirtschaftstag appealed to the tech-

nocratic leaders of Romania and Yugoslavia. These economists, engi-
neers, and army officers rose to influence during the Depression in both
Yugoslavia and Romania on a platform of reversing their nations eco-
nomic backwardness. Characteristic of this milieu were Milan Stojadi-
novic and Mihail Manoilescu. The former studied budgetary theory in
Munich, and served as Yugoslavias Finance Minister, then later as Prime
Minister. The latter trained as an engineer before turning to economics,
joining King Carols camarilla during the 1930s, and working at differ-
ent points as Romanias Economics Minister and governor of Romanias
National Bank. Following the outbreak of World War II, Manoilescu
would become president of the Mitteleuropaische Wirtschaftstags eco-
nomics committee for Romania.104 Both Stojadinovic and Manoilescu
supported the idea of a single party state and sympathized with fas-
cism as a political form. More important in explaining their sympathy
for Germany, though, was the ambition each harbored to modernize
their countries. Industrialization was their highest priority. Yet they both
believed the existing structure of the global economy prevented small
economies from achieving this, and so they delineated a second tier
of priorities they hoped to achieve through economic cooperation with
the Third Reich. Stojadinovic believed his country contained an unex-
ploited natural wealth of minerals, which he aimed to extract and refine
with modern machinery. He also wanted agrarian development, which
he hoped would draw Yugoslavias peasants into his political movement.
Manoilescu likewise was highly dissatisfied with the land redistribution
and parcelization of the early 1920s, which he saw as one of the causes
behind Romanian economic backwardness, and he hoped to modernize
the countryside.105
In the short term, the Mitteleuropaische Wirtschaftstags develop-
ment programs played to the desires of leaders like Stojadinovic and
Manoilescu. German aid countered the fears among technocratic elites
in Yugoslavia and Romania that, following the Anschluss, their economies
104 Report on the founding of the Romanian Group of MWT, October 6, 1941, 186a, R
63, BA.
105 Andrew Janos, East-Central Europe in the Modern World: The Politics of the Borderlands
from Pre- to Postcommunism (Stanford University Press, 2000), 17898, quotations
from 198; Love, Crafting the Third World; Dejan Djokic, Leader or Devil? Milan
Stojadinovic, Prime Minister of Yugoslavia (19351939), and his Ideology, in Rebecca
Haynes and Martyn Rady (eds.), In the Shadow of Hitler: Personalities of the Right in Cen-
tral and Eastern Europe (New York: I. B. Tauris, 2011), 15368; Mihail Manoilescu, Die
einzige Partei als politische Institution der neuen Regime, trans. Walther Reichhold (Berlin:
Stollberg, 1941); Mihail Manoilescu, Die nationalen produktivkrafte und der Aussenhan-
del: Theorie des internationalen Warenaustausches (Berlin: Juncker & Dunnhaupt, 1937).
would be Germanized, or at least that Germanization was inherently

detrimental to their nations. In 1939 Manoilescu described Germanys
involvement in Romania as pioneering precisely because it aimed to
transform Romanias agricultural production.
Only through such methods can Central and Eastern Europe free themselves from
overseas countries and determine their own collective destiny . . . The American
farmer perennially stands in the way of solidarity and economic intimacy between
the industrialized Central Powers and the agrarian countries of Eastern Europe.
Until now he has determined the so-called world price of grain; through the
most favored nations clauses he has forced the Eastern European farmer to sell
his wheat at low prices. He has obstructed the German industrialist and the
Romanian farmer from reaching economic accord on the basis of mutually just
prices.106
The question of whether Southeastern Europe would have gained from

German development projects in the long term, however, is far from clear.
Tilo Freiherr von Wilmowsky, Max Hahn, and Hermann Gross wanted
to improve the plight of the average farmer in Southeastern Europe.
They envisioned a limited industrialization for Southeastern Europe in
sectors that sat low on the value-added chain, such as textiles and food
processing.107 In this sense, German theorists were more accommodating
than their counterparts in Britains Colonial Office, who brooked no
industrialization whatsoever in their African and Asian colonies.
Yet cash crop agriculture for export has not always been a recipe for
growth, and it is not clear that it would have worked for Southeastern
Europe. Mitteleuropaische Wirtschaftstag experts believed soybean cul-
tivation would raise the purchasing power of the local farmers. Yet with
control of these crops in the hands of large German businesses like IG
Farben, it was unlikely that profits would trickle down to the peasant
working the land. These programs had little time to mature before the
Nazis brought war to Europe. But if the experience of other peripheral
regions with cash crops is any indication of how the Balkans might have
fared under German tutelage, the future looked cloudy at best, and dis-
astrous at worst. Historically, the accumulation of land in the hands of
large landholders and agri-business was at least as likely to generate a new
group of indigent, landless laborers as it was to create the self-sufficient
class of independent farmers that Wilmowsky hoped for. British rice
106 Mihail Manoilescu, Vorgeschichte und Voraussetzungen des deutsch-rumanischen

Produktionsvertrages, Vierjahresplan 18, no. 3 (September 1939), 1077.
107 Confidential report on capital investment for Four-Year Plan, February 6 and February
27, 1940, 6135, 8119F, BA.
export cultivation in Burma, after all, had ended in poverty and turmoil
for local laborers.
It was more likely that had Southeastern Europe remained in
Germanys informal empire for an extended period the conditions of
its population would not have improved, in part because the long-term
goals of the Mitteleuropaische Wirtschaftstag clashed with those of the
Nazi leadership. Wilmowsky may have wanted to raise the living stan-
dard of the average farmer. Yet his wants mattered less than the wants
of leading Nazi Party members. Reichsbank director Walther Funk best
captures the attitude of Party leaders who were sympathetic to the Balkan
nations. Funk championed development in the region, but it always had
a clear upper limit. The economies of the other European states, Funk
explained to Hermann Goring at a closed meeting of the Third Reichs
leaders, must conform to our needs . . . It is not in our interests that
the southeast reaches the same living standard that we have here in
Germany.108
Development aid, moreover, was reinforced with racism to justify the
economic hierarchy that German elites hoped to construct across the
Balkans. The racism that leaders of the Mitteleuropaische Wirtschaftstag
displayed toward Serbians, Croatians, or Romanians was not the biolog-
ically violent variety that Nazi leaders and German intellectuals har-
bored for Poles and Jews. Instead, the attitudes of the Mitteleuropaische
Wirtschaftstags directors toward Serbians, Croatians, and Romanians
bore more resemblance to the traditional racism found in European
empires in the late nineteenth and early twentieth centuries. Wilmowsky
and those like him believed the nations of Southeastern Europe were
capable of economic progress and could eventually be raised to a Euro-
pean standard. But they saw the non-Jewish nationalities of Southeast-
ern Europe as particularly suited for the underpaid, labor-intensive work
needed for cash crops and mineral extraction. They used race to justify
a particular division of labor that underwrote Germanys labor-scarce,
capital-rich economy. In the end, development offered a way to con-
struct a hierarchy that benefited Germany while promising, only in some
distant future, a better life for the non-Jewish nations of Southeastern
Europe.
Thus in Germanys informal empire, as in Britains formal empire in
Africa and Asia, doctrines of development served the interests of the
metropole first, the periphery second. For German theorists as well
108 Minutes from closed meeting of Funk, Goring, and directors of government depart-
ments, July 22, 1940, Finanzministerium, Geheimakten I C Nr. 9401, I. HA, Rep.
151, GStPK.
as for British ones, development aid was most important as a tool for
creating stable markets for their exports and strengthening the bonds of
dependency within their respective imperial blocs.
Indeed, dependency has often accompanied aid and trade; German
involvement in Southeastern Europe was no exception.109 In the late
1930s German trade with Yugoslavia and Romania reached massive pro-
portions: by 1939 the Third Reich accounted for a third to a half of
all exports and imports to these states. As a percentage of Yugoslavias
and Romanias overall economy German trade reached enormous lev-
els, between 4.9 and 6 percent of national income by the late 1930s.
Indeed, after the Depression the growth of German trade actually out-
paced GDP growth in both these states (see Table 7.3). Meanwhile,
Yugoslavias and Romanias trade with other states was contracting. The
expansion of trade was even more intense in key strategic sectors. Ger-
man capital equipment became essential for the nascent industrial and
mineralogical sectors of the Balkans: Yugoslavia bought nearly 60 per-
cent of its new machinery from the Third Reich, Romania nearly 50
percent. Germany, moreover, became the single largest destination for
Southeastern Europes most important exports, agricultural products.
As the states of Southeastern Europe directed ever more trade toward
Germany, their economies slowly began to change. During the 1930s
Yugoslavia expanded the total acreage devoted to cereals, in part because
it found a stable market for grains in Germany. By 1938, moreover, it
was producing more industrial crops than ever before, up from 1.42 to
2.47 percent of its total cropland. These cotton, linen, and hemp crops
were turned into textiles on machinery imported from the Third Reich.110
And throughout the region soybean production skyrocketed, and nearly
all the produce from the new soy fields in Romania, Bulgaria, and
Yugoslavia went to Germany.
With few alternative trade partners or sources of development assis-
tance, Yugoslavia and Romania thus found themselves dependent on
Germany to stimulate their economic growth. And their growing depen-
dence on the Third Reich had geopolitical consequences, as Max Hahn
and others had anticipated. Before the Depression Yugoslavia and Roma-
nia had been firmly anchored in the French diplomatic orbit through the
security arrangements of the Little Entente. Yet Germanys economic
109 On development aid and dependency see Fieldhouse, The West and the Third World;
Arturo Escobar, Encountering Development: The Making and Unmaking of the Third
World (Princeton University Press, 1995).
110 Kraljevina Jugoslavija/Royaume de Yougoslavie, Statisticki Godisnjak/Annuaire Statis-
tique 19381939, vol. IX, pp. 164, 184.
Table 7.3 Romanian and Yugoslavian foreign trade as a percentage of GDP
Country 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1938
Romania Exports to Germany 2.03 1.87 1.85 1.56 1.33 0.97 0.99 1.13 1.21 1.74 2.23 2.06 2.44
Imports from Germany 2.58 2.03 2.38 n/a 0.74 1.00 0.63 1.22 1.69 1.92 3.78 2.68 3.40
Total trade with Germany 4.61 3.89 4.24 1.56 2.06 1.97 1.62 2.30 2.90 3.66 6.00 4.74 5.84
Total foreign trade 19.41 16.29 16.57 13.93 10.98 9.85 11.69 14.88 12.83 13.12 19.72 13.93 13.93
Yugoslavia Exports to Germany 0.74 0.78 0.82 0.89 0.76 0.48 0.39 0.62 0.76 1.19 1.76 1.62 1.96
Imports from Germany 0.96 0.57 0.57 n/a 0.45 0.39 0.47 0.73 1.35 1.43 2.39 1.87 2.98
total trade with Germany 1.71 1.35 1.39 0.89 1.21 0.87 0.86 1.35 2.11 2.62 4.15 3.49 4.93
Total foreign trade 11.33 10.43 10.75 10.01 7.90 5.56 6.45 9.24 9.52 9.21 11.96 9.82 9.82
Austrian figures added to estimate the effects of the Anschluss.

Source: Katherine Barbieri and Omar Keshk,Correlates of War Project, Trade Data Set, Version 3.0, 2012. Online at: http://correlatesofwar
.org. Angus Maddison, The World Economy, vol. II: Historical Statistics (OECD Publishing, 2002), table 3b, 476. Online at: www.keepeek.com/
Digital-Asset-Management/oecd/development/the-world-economy 9789264022621-en#page4.
influence fractured this agreement.111 In 1937 Stojadinovic vetoed any

attempt to place limits on German trade or development aid, arguing
they were too important to Yugoslavias economy.112 Instead, Yugoslavia
accommodated many of Germanys demands, reaching an agreement
with Hungary on minority and border issues, as Hitler desired, and sup-
plying the Third Reich with ever growing quantities of raw materials.
Even after Stojadinovics fall from power in 1939, German officials were
able to use the lure of armament deliveries and industrial aid to extract
higher quotas of bauxite, copper, zinc, lead, and timber exports from
Yugoslavia.113
Romania resisted German influence longer. But it too distanced
itself from Frances security system and the Little Entente. And when
Bucharest acceded to a new bilateral treaty in March 1939, the Third
Reich gained more power in Romania than in any other country of East-
ern Europe. The Wohlthat Accord, named after Germanys lead nego-
tiator, departed fundamentally from the economic order of the for-
mer global economy. It implemented a uniform and central economic
plan, that would, develop and steer Romanian production in all sec-
tors of their economy.114 It diverted Romanian agriculture even further
toward the cultivation of animal feed, oil seeds, and fibrous plants that
were tailored to German needs. It also called for the intensification of
Romanian forestry, the implementation of a petroleum exploitation pro-
gram by a GermanRomanian consortium, the improvement of Roma-
nias infrastructure system, and the development of Romanian minerals
by joint GermanRomanian companies. Mitteleuropaische Wirtschaft-
stag board members would become some of the key figures selected to
shape Romanias economy.115
On the eve of World War II Germany may not yet have forged the pro-
ductive economic bloc in Southeastern Europe that Wilmowsky, Hahn,
and Clodius envisioned. Nevertheless, by the time Hitler declared war
on Poland in 1939, Germanys informal empire was emerging in tan-
dem with a development program that would, in the words of the
111 Grenzebach, Informal Empire, 143.

112 Weinberg, The Foreign Policy of Hitlers Germany, 21819.
113 Ibid., 21822; Grenzebach, Informal Empire, 140; Volkmann, The National Socialist
Economy, 3478; Paul Hehn, A Low Dishonest Decade: The Great Powers, Eastern
Europe, and the Economic Origins of World War II, 19301941 (New York: Continuum,
2002), 1067.
114 Helmuth Wohlthat, Der neue deutsch-rumanische Wirtschaftsvertrag, Vierjahres-
plan, 3 (April 20, 1939), 560.
115 Volkmann, The National Socialist Economy, 346. On the planning committees see
Reichsgruppe Industrie, report from Guth, May 15, 1939, p. 4, film 394/P394, R
8119F, BA; Schumann, Griff nach Sudosteuropa, 58.
Mitteleuropaische Wirtschaftstag, transform Southeastern Europe to

conform to German needs.116 This empire would reach an apogee
between 1939 and 1941, when the Third Reich defeated France, elimi-
nating its last major rival in the Balkans. After 1941 the nature of Ger-
man power in the region would change. As the total war with the Soviet
Union placed unprecedented demands on the German economy the
Third Reich shifted from soft toward hard power, and from informal
toward formal control in an effort to extract the maximum resources
from Yugoslavia and Romania in the shortest timeframe possible. This
policy transition would end in economic misfortune for Germany, and
in economic and human catastrophe for the countries of Southeastern
Europe.
116 Sudosteuropa als wirtschaftlicher Ergaenzungsraum fur Deutschland, p. 149, 294b,

R 63, BA.
8 The Second World War: informal empire
transformed, 19391945
But it is killing all the plum blossom you like so much to see, and that
is a terrible thing, for in Bosnia and Serbia we live a little by our timber
and mines, but mostly by our pigs and our plums.1
On September 1, 1939 German troops marched into Poland, marking the

opening salvo of the Second World War in the European theater. Eight
months later Germany invaded Western Europe, the Wehrmacht striking
with surprising ease through Denmark, the Netherlands, and Belgium.
In June 1940 German armies moved on to Paris, conquering France, for
many the last bulwark protecting their continent from the Third Reich.
Hitler had hardly consolidated his conquests before turning toward his
ultimate ambition to the east, the conquest of Lebensraum in the Soviet
Union. On June 22, 1941 Germany launched Operation Barbarossa in
a risky bid to forge a continental empire that would rival Britain and
America for world power.
To the east of Germany lay Hitlers vision for empire, his terror-filled
Garden of Eden. Eastern Europe and Western Russia were the pivot
of World War II; events unfolding here shaped the course of the war
elsewhere. It was here where the great tank battles that would determine
the outcome of the war were fought, in Kharkov, Stalingrad, and Kursk. It
was here where Hitler hoped to forge a land empire that was supposed to
be autarchic, an imperium that contained within it a full division of labor
between industry and agriculture. It was here that Hitler and Heinrich
Himmler hoped to realize their longstanding goal of Lebensraum: settling
Germans on the land and purifying the Germanic Volk. And as the war
cut Nazi Europe off from the global marketplace, Western Russia became
the most important potential source of grain and calories that could feed
Germany, which since the late nineteenth century had been a food-
deficit nation. As the focus of Hitlers utopian vision of empire, this
1 Constantine, a character in Rebecca Wests Black Lamb and Grey Falcon: A Journey
through Yugoslavia (New York: Penguin, 1969), 319.
292
The Second World War 293
region bore the brunt of his war of annihilation against Jews, Slavs, and
Communists.2
Southeastern Europe was not the location of German Lebensraum.
Yet, for several reasons, neither was it a mere sideshow to World War
II. For one, from the invasion of Poland in 1939 until the middle of
1941 German soft power and informal empire reached its zenith here,
in the Balkans, which for a time became a crucial pillar in Germanys
war economy. During these two years German business and technocratic
elites and their private institutions expanded the strategies of develop-
ment work, cultural diplomacy, and economic penetration they had been
honing since the 1920s. Although this softer technique of rule did not
enjoy Hitlers favor, temporarily it proved useful to him. Before 1941
Germanys private organizations helped bind Yugoslavia and Romania
more tightly than ever to the Third Reich, supplying Germany with oil,
minerals, and food during a period when German economic and nutri-
tional mobilization hung in the balance.
Germanys deployment of hard power elsewhere in Europe created
conditions that allowed its soft power and informal empire to thrive in
Southeastern Europe more than ever. After annexing Austria, and con-
quering the Netherlands, Belgium, and France, Germany gained con-
trol over Western financial institutions that held assets throughout the
Balkans, most critically in the mining sector. Between 1939 and 1941 the
Third Reich thus added investment to its repertoire of informal imperial
power, and this helped deepen Germanys main channel of influence in
the region: trade. War in Europe, moreover, dealt a major blow to Anglo-
American and French internationalism, as the circuits of exchange that
brought continental Europeans to Paris, Brussels, or Geneva diminished.
The League of Nations, for instance, relocated its offices to Princeton
in 1940 and closed many of its sub-organizations entirely, such as the
International Institute for Intellectual Cooperation. During these years,
by contrast, German-centered regional circuits of exchange intensified
across Europe, and Berlin, Leipzig, Munich, and Dresden became alter-
native poles of attraction for Balkan elites. In Romania, German military
and technical experts replaced French and League financial advisors.
And across the continent, both east and west, Germany founded its own
academic institutes that circulated intellectuals through the capital cities
of Europe in the hopes of legitimizing the Third Reichs newfound polit-
ical power.3
2 Snyder, Bloodlands, 15562; Mazower, Hitlers Empire; Kiernan, Blood and Soil.
3 Mazower, Governing the World, 1913; Hausmann, The Third Front, 21335;
Frank-Rutger Hausmann, Auch im Krieg schweigen die Musen nicht: die Deutschen
Second, after 1941 German relations with Romania and Yugoslavia

diverged, illustrating the sheer variety of Nazi techniques of imperial
rule. This coincided with a decline in the importance of Germanys
private institutions, as state functionaries assumed greater control over
GermanBalkan economic affairs. In Romania, although the Wehrmacht
maintained a presence in the country, Germany never acquired formal
political control. Instead it exercised a supervisory method of rule that
extended many of the techniques of soft power and informal empire
Germany had developed during the 1930s, using both the carrot and the
stick to extract economic concessions. Characteristic of this approach
was Hermann Neubacher, a charismatic Austrian Nazi with connections
to the Mitteleuropaische Wirtschaftstag. Neubacher served as Germanys
special economic envoy to Romania, where he used limited development
work as well as the promise of weapon and machinery deliveries as a
negotiating chip with Romanian leaders.
In Yugoslavia, by contrast, after 1941 Germany turned away from soft
power and informal empire and instead tried to assert direct political
control over much of the country. Here, Hitler and other leading Nazis
disregarded the techniques of control that Germanys private organiza-
tions had developed over the previous two decades, and instead imposed
their vision of a formal land empire geared toward the ruthless, short-
term exploitation of non-German peoples. This marked a return to the
hard power imperial agenda pursued by Germany during World War I,
yet with a radically racist edge that led to even greater trauma for the local
population. Over the next three and a half years Nazi Germany carried
out a brutal occupation of the Yugoslav lands, which proved incredibly
counterproductive from an economic standpoint. This strategy was epit-
omized by Franz Neuhausen, the corrupt Nazi Plenipotentiary for Serbia
who amassed a personal fortune at the expense of Serbs and Jews. By
dismembering Yugoslavia, by ethnically cleansing parts of Slovenia, and
by supporting the radically racist Ustasha Party in Croatia, Nazi author-
ities precipitated a civil war that turned large swaths of the country into
economic dead zones. German military administration in Croatia and
Serbia only added fuel to the inferno of civil war and further burdened
the local economies with corvee labor and rampant inflation.
Germanys hard power imperial strategy in Yugoslavia would prove
much less effective economically than the softer, more informal method
of rule it adopted for Romania. Yet neither Yugoslavia nor Romania
Wissenschaftlichen Institute im Zweiten Weltkrieg (Gottingen: Vandenhoeck & Ruprecht,

2002).
yielded the contributions to the Third Reich that German economists

had hoped for, which is the third way a study of Southeastern Europe
sheds light on the course of World War II. German imperial policies,
whether hard or soft, proved even more counterproductive here than
in Western Europe because they interacted disastrously with the out-
standing economic feature of the Balkans: underdevelopment. Although
Romania fared better than Yugoslavia, both suffered the strains of total
war. Bottlenecks choked off production in sectors ranging from coal and
copper to wheat and cotton. Black markets and inflation became the law
of the land. The regions rural population retreated from market produc-
tion, leaving the cities and factories starved of food and labor. By 1944
the strains of total war and the shortsighted policies of the Third Reich
interacted with the relative underdevelopment of the region to create an
economic disaster, for Germany as well as for Romania and Yugoslavia.
The zenith of soft power and informal empire, 19391941

On September 1, 1939 German armies crossed the Polish border, trig-
gering the military pacts that committed France and Britain to Polands
defense. The Wehrmacht, combining the use of highly mobile, mech-
anized divisions with concentrated, tactical support from the air force,
reached the outskirts of Warsaw within a week. On September 27 they
took the capital and the Polish government fled to continue the war in
exile.4
In Southeastern Europe, Hitlers lightning victory over Poland humili-
ated Britain and France and confirmed the image of power, technological
savvy, and economic success that Germanys private institutions had been
cultivating since the 1920s. The sheer speed of the military campaign,
combined with its mechanization, led many in Southeastern Europe to
question the resolve and capabilities of the Western powers. German
emissaries took advantage of this mood, reaching out to a variety of
elite groups in the region. According to a Serbian chronicler of the war,
one could feel their penetration everywhere in Yugoslavia. British and
French influence, on the other hand, confined itself to the Regency and
its immediate entourage.5
Yet it was the fall of France the following year, in June 1940, that made
German claims to continental dominance look unstoppable. The great
4 Evan Mawdsley, World War II: A New History (New York: Cambridge University Press,
2009), 96100.
5 Sudjic, Europe under the Nazis, 29.
power that just a generation ago had stood against the armies of Wil-
helmine Germany for four years collapsed in a matter of weeks. This
seemingly removed the last obstacle preventing Hitler from building
his European imperium. Public opinion responded predictably to the
defeat of France; across Southeastern Europe the press turned blatantly
pro-Axis.6 From Bucharest, where she reported on Germanys grow-
ing influence for Newsweek, Rosie Goldschmidt Waldeck recorded the
doings of an upper class that was at best indifferent to the conflict, at
worst pro-Nazi.7 Commenting on the mood in Southeastern Europe,
Waldeck remarked how Europe, tired of herself, and doubtful of the
principles she had been living by, felt almost relieved to have everything
settled . . . Hitler, Europe felt, was a smart guy disagreeable but smart.
He had gone far in making his country strong. Why not try it his way?8
The fall of France forced government leaders across the Balkans to
pursue a more German-friendly policy. In Yugoslavia, centrifugal politi-
cal pressures had already reached a tipping point the previous year when
Croatian nationalists, following a resounding electoral success, negoti-
ated a constitutional reform with the regent Prince Paul to form a nearly
autonomous Croatia. Lacking domestic political support, Prince Paul
gradually succumbed to German pressure and gravitated ever closer to
the Axis powers throughout 1940.9 In Romania, German victories in
Western Europe had a drastic impact on King Carol, convincing him
that the Allied cause was lost. In an effort to display his loyalty to the
Third Reich he replaced his old ministers with pro-German statesmen.
Yet Carols maneuvering was too little too late. As France fell, the Soviet
Union exercised a claim it had secured from Germany in the Molotov
Ribbentrop agreement to annex Bessarabia from Romania. This ter-
ritorial debacle, alongside Romanias subsequent loss of Dobrudja to
Bulgaria and Transylvania with its large ethnic German minority to
Hungary, precipitated a political crisis that catapulted a dictatorial
general Marshall Ion Antonescu to power in a tumultuous alliance
with Romanias Fascist Party, the Iron Guard. That November Romania
joined the Axis pact.10
6 R. H. Campbell, Report from Yugoslavia, August 13, 1940, in Robert L. Jarman (ed.),
Yugoslavia: Political Diaries, 19181965, vol. III: 19381948 (Slough: Archive Editions,
1997), 143.
7 Waldeck, Athene Palace, 7.
8 Waldeck in Bucharest in 1940, cited in Mark Mazower, Dark Continent: Europes Twen-
tieth Century (New York: Vintage, 2000), 142.
9 Rothschild, East-Central Europe, 25667; Misha Glenny, The Balkans: Nationalism, War,
and the Great Powers, 18041999 (New York: Viking Press, 2000), 4737.
10 Hitchins, Rumania, 44559.
The deployment of hard power elsewhere in Europe, then, actually

enabled German soft power and informal empire in the Balkans to suc-
ceed even more effectively than in the 1930s. As German armies marched
into Poland and Western Europe, the Third Reich used its newfound
power to cajole Yugoslavian and Romanian elites into deeper commercial
collaboration. Indeed, Hitlers victory over France unleashed a euphoria
of planning as German economists at the Economics Ministry, the For-
eign Office, the Reichsbank, and the Mitteleuropaische Wirtschaftstag
crafted blueprints for a European customs union, a central clearing-
house for cross-border financial transactions, and a bank for European
payments to be based in Berlin or Vienna.11 While the technical details
stayed behind closed doors, German officials and businessmen broad-
cast the general ideas throughout the Balkans in the hopes of winning
over local elites. The largest of these promotional events took place at
the Vienna trade fair in September 1940, where Economics Minister
Walther Funk and Advertising Council Director Heinrich Hunke laid
out their vision to a whos who of German and Balkan leaders. Funk
and his entourage reiterated the conventional argument that Southeast-
ern Europe would benefit from a German bloc by experiencing limited
industrialization and an improvement in its living standards. Germany,
Funk proclaimed, would end the economic atomization of Europe
through a customs union and multilateral clearing system, improving
Southeastern Europes access not only to the German market, but to the
markets of Western Europe as well.12
At the Vienna fair the Mitteleuropaische Wirtschaftstag convened its
annual public conference, where they announced a series of new pro-
grams that expanded their ongoing campaign to incorporate Southeast-
ern Europe into Germanys Grossraumwirtschaft through softer methods.
For one, Wilmowsky and his colleagues publicized the creation of a brand
new program the Southeast Foundation to train young merchants
from the Balkans. This foundation would complement the Mitteleu-
ropaische Wirtschaftstags existing professional exchange arrangements.
In the first years of the war the Southeast Foundation annually brought
200 ethnic Germans, Romanians, Bulgarians, Greeks, Yugoslavians, and
11 Memos on Bank for European Payments, July 3 and July 6, 1940, and memo on
Zahlungsverkehr im europaischen Grosswirtschaftsraum, July 20, 1940, 6429, R 2510,
BA; Tooze, Wages of Destruction, 3869; Mazower, Dark Continent, 1502.
12 Wiener Messe, Wiener Herbstmesse 1940: ihr Verlauf und ihr Ergebnis (Vienna: Holzwarth
& Berger, 1940), 326; pamphlet from Funk, Wirtschaftliche Neuordnung Europa, July 26,
1940, 7017, R 2501, BA; Walter Funk and Heinrich Hunke, In Their Own Words: Nazi
Plans for European Union, trans. Edward Spalton (Merseyside: Democratic Publications
2002 [1942]).
Hungarians to study at the University for World Trade in Vienna. Funded

by German companies, the foundation aimed to fill the vacuum of com-
mercial representatives that had arisen once German, Romanian, and
Yugoslavian firms had violently purged Jews from the commercial life in
the region.13 Second, Wilmowsky reiterated his belief that Southeastern
Europe stood on the brink of an enormous revolution in agrarian pro-
duction, if only these countries could bring modern technology to the
land with German help. To accelerate this transformation Wilmowsky
announced the formation of a special committee for agriculture, chaired
by Professor Emil Woermann from Halle, alongside a program to bring
Balkan farmers to Deulakraft Germanys tractor driving school near
Berlin with Mitteleuropaische Wirtschaftstag funding.14 Later that fall
Wilmowsky traveled to Romania to broadcast the new initiatives. Over
the next two years the Mitteleuropaische Wirtschaftstag would go on to
found country groups for Bulgaria and Romania, create model villages
to spread modern agrarian cultivation techniques in the Balkans, and set
up agricultural machinery schools in Draganesti, Romania, and Gorna
Banja, Bulgaria.15
The Mitteleuropaische Wirtschaftstag, though, was just the spearhead
for a vast expansion of German cultural diplomacy and economic devel-
opment across Southeastern Europe in 1940 and 1941. Existing orga-
nizations like the Leipzig fair expanded their work. Germanys invasion
of Poland had initially reduced business at Leipzig. But by spring 1941
attendance recovered and the fair attracted one of its largest showings
of foreign exhibitors on record, many of who came from Southeastern
Europe.16 Other new organizations arose to support and justify the Third
Reichs imperial ambitions in Southeastern Europe. In 1940, for exam-
ple, a new Austrian organization the Sudosteuropa-Gesellschaft came
on the scene to pursue cultural diplomacy with the aim of making Vienna
into Germanys gateway to the Balkans. The Sudosteuropa-Gesellschaft
promoted lecture series, German-language programs, and cultural events
that aimed to attract Balkan elites to Vienna. In early 1941 the new insti-
tution entered the field of economic development too, with plans to
13 Roumiana Preshlenova, Elitenbildung: Die Sudost-Stiftung des Mitteleuropaischen

Wirtschaftstags Berlin an der Hochschule fur Welthandel in Wien, in Sachse, Mit-
teleuropa und Sudosteuropa, 39116; MWT Advisory Council Meeting, February 13,
1941, 6136, R 8119F, BA.
14 Wiener Messe, Wiener Herbstmesse 1940, 902.
16 Sudost-Echo Nr. 10, March 6, 1941, and Deutsche Allgemeine Zeitung, Nr. 112,
March 6, 1941, in 2536, R 2501, BA.
improve the Danube as a shipping channel linking Germany with its

neighbors to the southeast.17
In tandem with the expansion of German cultural diplomacy, after
1940 German businessmen finally acquired a commanding position over
the industry and mines of Southeastern Europe by coercively appropriat-
ing French, Belgian, Dutch, and British investments in the region. Since
losing its financial holdings in Serbia and Romania during World War I,
German firms had been secondary investors in the major industries of
the Balkans. This had begun to change in 1938, when German banks
took over Austrias major financial institutions, and thereby gained con-
trol of some enterprises in Yugoslavia. But the major turning point came
with the Third Reichs victory over France. Under the supervision of
Hermann Goring, German companies sequestered the shares of Belgian,
Dutch, and French firms that owned mining enterprises, oil facilities, and
banks in the Balkans. Two large German firms, Preussag and Mansfeld
AG, acquired effective ownership over the formerly French-owned Bor
mines. The Third Reich paid for this by deducting the costs of the capital
transfer from the occupation expenses that the French state now owed
Germany for stationing Wehrmacht divisions in France. Simultaneously,
Goring formed a massive new semi-public corporation, Sudost-Montan
AG, to acquire other mining ventures in Yugoslavia formerly owned by
Western companies.18
Similar transactions took place in Romania. Over the summer of 1940
German officials pressured Bucharest to prevent the sale of oil company
shares owned by Western European companies to Romanian front men.
This enabled the Deutsche Bank and IG Farben to acquire majority
positions in some of Romanias largest oil facilities. Later that fall Goring
and his entourage established Kontinental Ol AG, a massive enterprise
designed to take over companies belonging to enemy and neutral pow-
ers, above all in Romania. The private parties involved in Kontinental Ol
were all large German enterprises that already participated in, or hoped
to enter, the oil business, including the Deutsche Bank, the Dresdner
17 Lampe and Jackson, Balkan Economic History, 52930; Hausmann, The Third
Front, 21335; Reichsstelle fur Aussenhandel to AHST-Mannheim, April 8, 1940,
122 Heft 1/3, R 9/I, Reichsstelle fur den Aussenhandel, BA; Schirach to Rafelsberger on
improving the Danube, September 11, 1940, 1, R 63, BA; Funk and Hunke, In Their
Own Words, 9; Dietrich Orlow, The Nazis in the Balkans: A Case Study of Totalitarian
Politics (University of Pittsburgh Press, 1968), 367; Freytag, Deutschlands Drang nach
Sudosten, 326.
18 Schumann, Griff nach Sudosteuropa, docs. 7, 12, and 39; Jozo Tomasevich, War and
Revolution in Yugoslavia, 19411945: Occupation and Collaboration (Stanford University
Press, 2001), 61117; Feldman et al., Osterreichische Banken, 42460.
Bank, IG Farben, Preussag, and Wintershall. Between 1939 and 1941

Germanys share in Romanias oil industry rose from 1 to 47 percent.19
Not surprisingly, public opinion in Southeastern Europe was divided
over this new wave of German investment. Pro-German technocrats like
Mihail Manoilescu of Romania and Otto Franges of Yugoslavia greeted it
with enthusiasm, hoping that with investment would come German tech-
nology and technical know-how.20 Others accepted it grudgingly as their
nations only option. As one Romanian minister remarked, It is not out
of love for Germany, rather out of love for Romania that we are pursing a
course of neutrality and rapprochement toward Germany . . . The inter-
est of Romania demands that we lean economically on Germany.21 Still
others opposed German investment outright, seeing it as exploitative.
Romanias new Economics Minister Gheorghe Potopeanu, for example,
argued that Germanys new investments through the Hermann Goring
Werke were harmful to his nation. In 1940 and 1941 this massive Ger-
man enterprise, Gorings personal commercial empire within the Third
Reich, had leased metallurgical plants throughout Romania. By 1941
it had substantial shares in most iron and steel production facilities in
Romania. In the most prominent case, the Malaxa metallurgical firm,
German engineers constructed modern rolling mills and steel furnaces.
Yet in many other plants they did little to improve production methods.
Instead, Potopeanu argued, they were merely pursuing extractive busi-
ness: buying up Romanian steel mills to drive out competition and divert
as much production to Germany as possible.22 Over the course of the war
Potopeanus predictions would prove truer than Manoilescus. In 1940,
however, it was not yet clear how damaging German economic influence
would become.
In the short term, these new investments gave Germany more leverage
over Yugoslavia and Romania. By acquiring the commanding investment
position in the major extractive industries of Southeastern Europe oil
and minerals Germany completed the missing link for its informal
19 Eichholtz, War For Oil, 237, 3940; Dietrich Eichholtz, Ol, Krieg, Politik: Deutscher
Ol Imperialismus (19331942/43), Zeitschrift fur Geschichtswissenschaft 51 (2003), 493
510; quotation from Overy, War and Economy, 1601.
20 Mihail Manoilescu, Wirtschaftliche Verflechtung und Gegenseitiges Verstaendnis zwis-
chen Deutschland und Sudosteuropa, 5666; Milan Ristovic, Weder Souveranitat
noch Industrialisierung: die sudosteuropaische Lander in der neuen Ordnung
jugoslawische und deutsche Perspectiven (19401944), in Sachse, Mitteleuropa und
Sudosteuropa, 21940.
21 Urdareanu to Fabricius, cited in Wunscht, Jugoslawien und das Dritte Reich, 86;
Wohlthat, Der neue deutsch-rumanische Wirtschaftsvertrag, 560.
22 Potopeanu to German Economics Minister, February 16, 1941, 106223, Han-
delsabteilung, PAAA; Lampe and Jackson, Balkan Economic History, 567; Overy, War
and Economy, 15961.
empire. Before 1940 British and French firms had cooperated with their
governments to impede the delivery of raw materials from their mines
and refineries to the Third Reich. With Germanys newfound invest-
ment power it was able to bypass this hurdle.23 After the invasion of
Poland, French, British, and Dutch oil companies had been driving the
price of Romanian crude sky high, hindering German purchases. But by
1940 Germany was able to retaliate. In the spring of that year Hermann
Neubacher, Germanys economic envoy to Romania, threatened to cut
off the delivery of capital equipment unless Romania began shipping
oil to the Third Reich in massive quantities 200,000 tons a month. In
return for oil, though, he agreed to send weapons and development aid to
Romania. His tactics worked: 19401 was a bumper year for oil imports.
Germanys real fuel supply actually outstripped its expected supply by
57 percent, in large part because of its penetration of the Romanian oil
sector.24
In grain exports too, 1940 proved to be a good year for Romanian
deliveries to the Third Reich; a boon at a moment when food supplies
within Germany were beginning to tighten. As with oil, German leaders
used a mixture of incentives and planning to extract what they needed.
That fall German agricultural experts drafted a ten-year plan for Romania
that set crop production targets that would serve German needs. To
help realize these targets, they agreed to have German firms export a
significant amount of agricultural equipment to Romania the number
of tractors in the country increasing from 3,296 in 1940 to 8,250 in
1943. And a variety of joint GermanRomanian corporations SOJA,
Solagra, Sudostropa, and Semina helped coordinate cultivation. As a
result, Romanian wartime grain exports to Germany peaked in 1940 at
800,000 tons, and German trade with Romania between January and
November 1940 even surpassed its trade with the Soviet Union.25
Germanys informal empire in Southeastern Europe thus reached its
zenith in 1940 and 1941, once Germany added new levers of imperial
23 Belgrade charge daffaires to Berlin Foreign Office, August 6, 1940, 110671, Han-
delsabteilung, PAAA; Wendt, Drang nach Sudostens, 50911.
24 Eichholtz, War for Oil, 1117. For Neubachers own account of the pressure he applied
on Romania, see Hermann Neubacher, Sonderauftrag Sudost 194045: Bericht eines
fliegenden Diplomaten (Gottingen: Musterschmidt-Verlag, 1956), 402; Andreas Hill-
gruber, Hitler, Konig Carol und Marschall Antonescu: Die deutsch-rumanischen Beziehun-
gen 1938 bis 1944 (Wiesbaden: Steiner, 1954), 836; Royal Institute, Brief Survey, 95;
Glenny, Balkans, 459.
25 Lampe and Jackson, Balkan Economic History, 530; Hitchens, Rumania, 480; Hein Kle-
mann and Sergei Kudryashov, Occupied Economies: An Economic History of Nazi-Occupied
Europe, 19391945 (New York: Berg, 2012), 106; protocol of GermanRomanian eco-
nomic conference, December 5, 1940, and telegram from Neubacher to Berlin Foreign
Office, February 6, 1941, 106223, Handelsabteilung, PAAA.
influence investment and advisors to the trading preponderance it

had acquired in the preceding decade. Yet simultaneously, the private
organizations that had driven this process since the late 1920s either
began to lose influence, or accommodate themselves to the Nazi vision
of a new racial order in Europe. The decline of the Mitteleuropaische
Wirtschaftstag had already begun in 1938, when two of its powerful
patrons lost their positions of authority. Foreign Minister Konstantin
von Neurath and War Minister Werner von Blomberg had both sup-
ported Max Hahn and the Mitteleuropaische Wirtschaftstags miner-
alogical projects in Southeastern Europe, defending them against Franz
Neuhausens power grab in 1937. In early 1938, however, Hitler replaced
Neurath and Blomberg with more pliable party officials to gain firmer
control over the German state and military. With this transition the Mit-
teleuropaische Wirtschaftstag lost its major backers within the polycracy
of the Third Reich. The situation worsened in 1939 when Neuhausen
renewed his campaign against Hahn, accusing him of spreading false
rumors about threats to German investments in Yugoslavia.26 That May
Hahn died from a fever and kidney problems.27
Hahn had been a polarizing figure within the Mitteleuropaische
Wirtschaftstag, but also one of its most creative and well-connected fig-
ures, and his death was a major setback for the organization. Although the
Mitteleuropaische Wirtschaftstag managed to expand many programs at
first, it lacked a powerful patron atop the Nazi hierarchy and this proved
its undoing. Nazi leaders, for example, accused the Mitteleuropaische
Wirtschaftstag of pandering to Southeastern European elites, claiming
its subsidiary organizations in Bulgaria, Romania, and Hungary did not
sufficiently represent the interests of ethnic Germans. When the course
of the war began to turn against Germany in 1942, the Mitteleuropaische
Wirtschaftstag lost further influence, in part because it aligned itself with
the conservative resistance to the Nazi regime. One of its leading board
members, Ulrich von Hassell, aided the plot to assassinate Hitler and was
executed in September 1944. Several weeks later the Nazi regime threw
Wilmowsky into a concentration camp for his contacts with von Hassell
and Carl Goerdeler, the man who would have become Germanys new
Chancellor had the assassination attempt on Hitler succeeded.28
26 Hahn to Jagwitz, January 28, 1939, 110733, Handelsabteilung, PAAA.

27 Freytag, Sudosteuropa-Konzepte, 1489; memo about Hahns death, May 12, 1939,
6142, R 8119F, BA; Mitteleuropaischer Wirtschaftstag, Mitglieder Versammlung des Mit-
teleuropaischer Wirtschaftstag. Berlin, den 27, Mai 1940, HAS.
28 Report from Aussenhandelsamt, January 6, 1942, 170, R 63, BA; Schumann, Griff nach
Sudosteuropa, 568; Freytag, Deutschlands Drang nach Sudosten, 271342; Wilmowsky,
Ruckblickend, 2256; Gregor Schollgen, A Conservative Against Hitler: Ulrich von Hassell,
By contrast, other non-state institutions tacked with the wind and abet-
ted the Nazi drive for a new racial order in Europe. After 1939 Walter
Lorch, for instance, adeptly navigated the power constellation of Nazi
Germany, at first aligning himself with Walther Funk to expand his orga-
nizations funding. The budget of the Mitteleuropa-Institut more than
doubled in 1940 to 110,000 RM, and the number of paid employees
working in Dresden, excluding the board of directors, jumped to more
than twenty.29 With this new funding Lorchs institute began working
with the German Army High Command to draft transportation maps of
Eastern Europe, and possibly also collaborating with the Sudosteuropa-
Gesellschaft another increasingly radicalized organization in crafting
deportation plans for Slovenia.30 After the fall of France, Lorch secured
the patronage of Werner Daitz, one of Nazi Germanys leading theorists
of race and space.31 Lorch successfully lobbied to establish the Society for
European Economic Planning and Large Area Economics, Daitzs brain-
child, in Dresden instead of Berlin. Dresden thus retained its position
as a center for the study of Grossraumwirtschaft, Lorchs society produc-
ing one of the first textbooks on the new economic order of occupied
Europe.32
More generally, with the outbreak of war Germanys state officials and
Nazi technocrats assumed greater control over cultural and economic
relations with Southeastern Europe, sidelining many organizations that
had thrived before the war. In the field of cultural diplomacy, Hitler
had already called for the German state to take a more active hand in
1937.33 With the onset of war the state expanded even further into this
Diplomat in Imperial Germany, the Weimar Republic, and the Third Reich, 18811944 (New
York: St. Martins Press, 1991).
29 Report of MEI meeting on October 16, from Reichs- und Preussische Minister fur Wis-
senschaft, Erziehung und Volksbildung, November 12, 1936, 65832/film 7972, Kultur-
abteilung, PAAA; Lorch to Plodeck, August 21, 1939 and Lorch to Saxon Economics
Ministry, June 5, 1940, 2419, 11168 Wirtschaftsministerium, SSAD.
30 The archival reference to Lorchs connection to population resettlement is brief and
lacking in details. MEI to Economics Ministry, December 12, 1939, and report on
MEI activities, March 29, 1940, 2419, 11168 Wirtschaftsministerium, SSAD; Hein-
richsbauer to Dietrich, March 29 1940, 186, R 63, BA.
31 Mitteilungsblatt der Gesellschaft fur europaische Wirtschaftsplanung und Gross-
raumwirtschaft e.V., no. 34 (March/April 1941), p. 15, 15696, 11125 Min. des Kultus,
SSAD.
32 After 1945 Lorch would help found the Institute for Southeast Europe in Regensburg.
Cultural Ministry report, February 17, 1941, report from Lohde of Cultural Ministry,
February 10, 1942, Daitz to Mutschmann, February 7, 1941, 15696, 11125 Min. des
Kultus, SSAD; Wer ist wer in der SBZ? Ein biographisches Handbuch vol. XIII (Berlin:
Verlag fur Internationalen Kulturaustausch, 1953).
33 Foreign Office circular to all missions abroad, October 30, 1937, 61123, Kultur-
abteilung, PAAA.
field. Martin Bormann, the head of the German chancellery and Hitlers
private secretary, argued that Germany should no longer expect private
business to fund cultural diplomacy as it had in the past. Rather cultural
diplomacy, because of its importance, needed to be thoroughly cen-
tralized under the Party, and funding for it expanded to prepare for the
postwar era. In 1940 the Third Reich established German Cultural Insti-
tutes (Deutsche Wissenschaftliche Institute DWI) throughout occupied
Europe, first in Bucharest in April 1940, then later in Sofia, Budapest,
Belgrade, Athens, and Zagreb, as well as Western European cities like
Paris and Copenhagen. These DWIs developed into a state-organized
network that promoted academic exchange, the study of languages, and
research projects in order to legitimize the Nazi racial order in Europe.34
Likewise, in the field of economics the war gradually limited the
space for private organizations to influence Germanys relations with
Southeastern Europe, particularly after Germanys invasion of the Soviet
Union.35 Of course, the state had aggressively regulated German trade
with the Balkan nations since the Depression, through bilateral treaties
and clearing agreements. Before 1941, though, private organizations still
occupied an important place in GermanBalkan exchange. The Leipzig
fair matched buyer to seller, the Mitteleuropaische Wirtschaftstag and
the Mitteleuropa-Institut pursued development work and professional
exchange, the GermanRomanian chamber of commerce helped smaller
firms negotiate the bilateral agreements.
Yet as Nazi leaders increasingly placed the economy in the service of
war, these private organizations lost influence, a process best illustrated
by the experience of the Leipzig fair. After huge attendance numbers in
the spring of 1941, Leipzigs last major exhibition came during the fall
after Operation Barbarossa. As the Wehrmacht and Luftwaffe became
the largest purchasers in Germany, the need for a national advertising
center and entrepot evaporated. Reports about the fair concluded that
demand was outstripping supply. Following the invasion of the Soviet
Union, merchants visiting Leipzig began to realize they would never
be able to actually purchase the goods they saw on display. The fair,
in other words, was degenerating into a place for conversation about
consumer products and technology rather than an actual marketplace.
The following February, in 1942, Propaganda Minister Goebbels closed
34 Bormann to Ribbentrop, October 19, 1940, 11618, R 2, BA; Hausmann, The Third
Front, 21335.
35 Mark Harrison, The Economics of World War II: Six Great Powers in International Compar-
ison (New York: Cambridge University Press, 1998), 21; Tooze, Wages of Destruction,
353.
all trade fairs in Germany. Every ounce of German energy, he proclaimed,

must be devoted to war production.36
Theorizing Nazi rule in occupied Europe

Thus between 1939 and 1941 Germanys informal empire in Southeast-
ern Europe was transformed. Just as German soft power was reaching
its zenith, the influence and role of Germanys private organizations was
being eroded. The war increased the states demands on the economy,
and Germanys conquests catapulted state officials from the Economics
Ministry to the SS into the high reaches of power as administrators of
the occupied territories. Not surprisingly, these territorial acquisitions
unleashed a frenzy of theorizing among the most influential Nazi tech-
nocrats about how to govern Europe by formal or informal means, by
direct force and enslavement or indirect supervision.
To resolve these questions, a group within the SS began constructing a
theoretical framework to justify and organize German power in Europe.
In early 1941 they presented their work to Heinrich Himmler. These
Nazi technocrats argued that power alone was the basis for a Grossraum.
At the same time, though, they hoped to develop a practical, effective,
and rational model for German domination in Europe.37 Here Werner
Best, SS-Brigadefuhrer and legal advisor to Himmler, offered a sweeping
vision for how the Third Reich could exercise power in its new territories,
mapping out a four-tiered typology of occupation regimes based on his
study of empires throughout history. At the most lenient end of Bests
spectrum was the concept of rule by alliance-administration. Through
formal treaties Germany would exercise an informal guidance over the
dependent nation, which would retain full control over its own bureau-
cracy. Denmark was the model for this style. Next in the typology came
supervisory administration of the kind Germany exercised in France
and Belgium. Here German advisors would exert some control over the
foreign national civil service, although they would keep it mostly intact
and in the hands of local elites. Third, Germany could implement a rul-
ing administration, directly governing a territory with its own officials,
as in Bohemia. This meant remolding the national civil service to a much
larger extent, and stationing German officials in all but the most local
36 Volkische Beobachter, Nr. 66, March 7, 1941 and Berliner Borsen-Zeitung Nr. 408,
September 1, 1941, in 2536, R 2501, BA; Berliner Borsen-Zeitung Nr. 68, February
10, 1942 and Nachrichten fur Aussenhandel, Nr. 208, September 6, 1941, in 2537, R
2501, BA.
37 Ulrich Herbert, Best: Biographische Studien uber Radikalismus, Weltanschauung und Ver-
nunft, 19031989 (Bonn: Dietz Nachfolger, 2001), 279.
bureaucracies to guard against threats to German interests. Fourth, at

the most repressive end of the typology, Germany could govern through a
colonial administration as in Poland, where the local inhabitants were
considered to be inferior. Here, Best considered the alleged disorganiza-
tion of the governed to be so extreme that Germany had to assume total
control to maintain the very order and health of these societies.38
The first two categories Best outlined in his report to Himmler resem-
ble the concept of informal empire. In both, Germany would con-
trol foreign countries through advisors and other informal channels
of power, not through direct control of the local bureaucracy. And
these informal types of rule alliance administration or supervisory
administration were the ones that Best and his colleagues advocated.
As the chief civil official in occupied France, Best had direct experi-
ence in these techniques when he presided over a reduction of German
occupation forces in 1941. He hoped to extend this supervisory method
across Europe, arguing that, whoever wants to create and maintain an
ordered great space, must have the administrative goal of promoting and
preserving the peoples of the great space.39
Best and the SS technocrats were not alone in advocating an indi-
rect method of rule. The leaders of Germanys private organizations
agreed with this conclusion, although they justified it not on the grounds
of race and power, but rather by economics and power. In 1940, in a
detailed study conducted by the Mitteleuropaische Wirtschaftstag for the
Four-Year Plan authority, Wilmowsky advocated something akin to Bests
lightest approach for the Balkans, with an emphasis on informal forms of
influence such as investment. Increasing Germanys direct control would
be counterproductive, he argued, effectively extending the British block-
ade to Yugoslavia, Romania, and Bulgaria, further isolating them from
the global market, and making Germany responsible for supplying them
with coal, cotton, and other raw materials. Instead, the Mitteleuropaische
Wirtschaftstag wanted to loosen German control over these economies,
enabling them to buy goods on the world market. This should be accom-
panied by a long-term investment policy that, crucially, focused German
capital not only on the regions export sectors but also on the develop-
ment of Southeastern Europes domestic industries, including industries
that serviced the Southeasts own needs. Wilmowsky, in other words,
was suggesting that Germany continue its policy of informal empire in
38 Herbert, Best, 27589; Mazower, Hitlers Empire, 2368.

39 Quotation cited in Herbert, Best, 281; As Mazower reminds us, Best was no liberal,
being one of the first scholars to openly discuss and justify the annihilation of unwanted
peoples in Germanys sphere of influence. Mazower, Hitlers Empire, 2378.
Southeastern Europe.40 Walter Lorch, who became increasingly radical

during the war, likewise thought Germany should exercise a supervisory
role in the Balkans. As he explained to government officials in Saxony
in 1941, We can reduce the need for a security apparatus considerably
if we support our leading position through science, culture, and eco-
nomics . . . By reducing the political power apparatus, moreover, more
energy will be free to productively pursue all avenues of national and
European progress.41
Yet with Operation Barbarossa the advocates of an indirect approach
to governing Europe lost out to the hardliners who favored direct rule
with the aim of short-term exploitation, for a variety of reasons. For
one, the war against the Soviet Union dramatically increased the strain
on Germanys economy, particularly after the Wehrmacht failed to take
Moscow in the winter of 1941. By late 1941 the immediate needs of
supplying the war economy began to take higher priority than long-term
plans for a rational occupation policy or economic development. Just as
importantly, by the beginning of 1942 it was becoming clear that the
great promise of conquest in the east that Poland, Western Russia,
and Ukraine would provide the grain to feed Germany was not com-
ing true. Already in 1940 and 1941 occupied Europe was beginning
to face an agrarian crisis, despite solid grain deliveries from Romania.
Poor harvests in Germany and elsewhere, alongside the naval blockade,
reduced German stockpiles of food to frighteningly low levels. Indeed, all
of occupied Western Europe was experiencing a grain deficit. Operation
Barbarossa actually limited the flow of grain into Germany, as the disor-
ganization on the Eastern Front interrupted the harvest and distribution
there. In response, from late 1941 through early 1942 Hermann Goring
and Herbert Backe at the Agriculture Ministry inaugurated the infamous
Hunger Plan to secure food supplies at any cost, even if that meant
starving the cities of western Russia. Implementing this draconian plan
required direct control over territories, not supervisory rule.42
40 Holm Sundhaussen, Wirtschaftsgeschichte Kroatiens im nationalsozialistischen Grossraum,

19411945: das Scheitern einer Ausbeutungsstrategie (Stuttgart: DVA, 1983), 43;
Deutsche Kapitalpolitik, February 6, 1940, pp. 15 and 16, 6135, R 8119F, BA; Hein-
rich Hunke, Introduction to Nazi Lectures in 1942, in Hunke and Funk, In Their
Own Words, 67.
41 Report from Lorch to Handelshochschule, December 31, 1941, HHS 387, UAL.
42 Tooze, Wages of Destruction, 41820, 4778, 544; Snyder, Bloodlands, 1619;
Abelshauser, Germany: Guns, Butter, and Economic Miracles, 155; Rolf-Dieter
Muller, The Mobilization of the German Economy for Hitlers War Aims, in
Militargeschichtliches Forschungsamt, Germany and the Second World War, vol. V/I,
46273; Mazower, Hitlers Empire, 2438.
Romania: rule with a softer touch

In the context of these mounting pressures German policy toward Roma-
nia and Yugoslavia diverged after 1941. In the former, German leaders
continued to pursue the strategy of informal empire they had developed
in the 1930s, although now with less input from private organizations.
Their control in Romania ranged between Bests first and second cate-
gories of alliance and supervisory administration.
Romania avoided the imposition of direct German rule, in part because
it owned the most important raw material needed for war: oil. By 1939
Romania was the worlds fourth-largest producer, and the only signifi-
cant source of oil that was geographically contiguous to the Third Reich.
Leaders in Bucharest were able to use oil as a bargaining chip to prevent
the total takeover of their country. Almost as important in explaining
Germanys lighter rule, though, were personal and ideological factors.
Following the political crisis that toppled King Carol in 1940, the author-
itarian general Ion Antonescu gained power with German backing. Cru-
cially, Antonescu enjoyed the admiration of Hitler, who respected his mil-
itary credentials, and who believed that only Antonescu could maintain
stability in Romania. Through the second half of 1940 Antonescu shared
power with a radical rightwing party the Iron Guard that gained
momentum during the political crisis of 1940. Because this populist
movement was generally sympathetic to Germany, Nazi policy-makers
were convinced Romanian loyalty could be assured with a lighter political
touch. Over time the Iron Guard elicited concern among German leaders
because of their violence and unpredictability, not because of questions
about their fealty to the Third Reich.43
Informal rule, though, still required German oversight of the econ-
omy. In October 1940 the Wehrmacht marched into Romania to secure
the Ploesti oil fields, and behind it followed a second army of tech-
nical experts. Advisors from the Reichsbank settled into Bucharest to
help manage the national bank, port specialists arrived to improve trans-
portation facilities on the Danube, and legal advisors came to reform
Romanias mining laws and allow for more German investment. Their
primary aim: to have influence over the petroleum economy.44
43 Dennis Deletant, Ion Antonescu: The Paradoxes of his Regime, 19401944, in

Haynes and Rady, In the Shadow of Hitler, 27894; Hitchins, Rumania, 45571.
44 Wiehl to Neubacher, October 19 1940, 106223, Handelsabteilung, PAAA; Junker to
Berlin Foreign Office, April 23 1941, and Neubacher to Berlin Foreign Office, July 14
1941, 105992, Handelsabteilung, PAAA; quotation from a Nazi financial official cited
in Gotz Aly, Hitlers Beneficiaries: Plunder, Racial War, and the Nazi Welfare State (New
York: Metropolitan Books, 2005), 234.
The technocratic advisor par excellence was Hermann Neubacher,

who implemented Germanys supervisory approach to Romania by using
both incentives and threats. Neubacher was the former Nazi Mayor of
Vienna and a personal friend of Hitler and Goring. In early 1940, the
Foreign Office appointed Neubacher special envoy for economic affairs
in Southeastern Europe to simplify the multitude of German agencies
operating in the region. Neubacher also had ties with the directors of the
Mitteleuropaische Wirtschaftstag, which dated back to the early 1930s
when he collaborated with them to promote a GermanAustrian cus-
toms union. Wilmowsky described him as an old friend and patron,
and Neubacher shared many of Wilmowskys views about development
and cultural diplomacy. In Bucharest he earned the respect of his Roma-
nian negotiating opponents for his charisma and his command of many
languages. As one western journalist remarked after meeting Neubacher,
there should be a law against Nazis having charm.45 Neubachers inter-
est in developing Southeastern Europe, however, did not prevent him
from pursuing an anti-Semitic agenda. In 1942 he would help manage
the famine that Nazi rule caused in Greece, but while there he also accel-
erated the ghettoization, dispossession, and deportation of Greek Jews.
Neubachers approach to Southeastern Europe, in other words, resem-
bled that of Germanys economists more generally he was perfectly
willing to persecute Jews in order to gain traction with the leaders of
other nationalities in the region.46
As special envoy to Romania, Neubachers primary goal was stabilizing
the delivery of raw materials. He believed he could expedite such deliver-
ies if he offered something beneficial to Romania in return. In 1940, for
example, he devised a plan to build Europes largest hydroelectric power
plant on the Danube below the Iron Gates, a narrow channel running
along the RomanianYugoslavian border. Neubacher thought the dam
could provide seven billion kilowatt-hours of electricity a year, to power
chemical plants in Transylvania and to electrify Romania and Bulgarias
rail network. Fritz Todt, Minister for Armaments and Munitions, greeted
the project enthusiastically and broached the topic to Hitler, who likewise
responded positively to Neubachers initiative.47
45 Freytag, Deutschlands Drang nach Sudosten, 128, 165, 321; Eichholtz, War for Oil, 22;
Waldeck, Athene Palace, 4647.
46 Aly, Hitlers Beneficiaries, 24849.
47 Thomas Mayer, Hermann Neubacher: Karriere eines Sudosteuropa-Experten, in
Sachse, Mitteleuropa und Sudosteuropa, 24161; report from Wiehl to Foreign Min-
ister, August 15, 1941; report from Neubacher to Foreign Minister, October 13, 1941;
telegram from Todt to Wiehl, October 30, 1941; report from Romanian Ministry for
Public Work and Infrastructure, April 28, 1942, 106128, Handelsabteilung, PAAA.
Alongside this grand scheme to electrify the Balkans, Neubacher

designed a host of smaller development projects to deepen German
Romanian trade. In November 1940 he orchestrated a 32 million RM
low-interest rate loan to finance improvements in Romanias transporta-
tion and mining facilities. Yet the loan came with strings attached:
Bucharest had to loosen the regulations restricting German capital from
participating in domestic firms. Romania would use the credit, moreover,
to purchase German mining equipment, railroad machinery, and agri-
cultural implements.48 Over the next two years Neubacher organized the
Eisenbahn-Sofort-Programm to improve the shipment of oil via rail from
Ploesti to Germany by laying new track and building new stations.49
Neubacher also used harsher tactics to maximize the shipment of
resources out of Romania. Here he was aided by the penetration of Ger-
man investment since the fall of France. Between 1940 and 1942 German
firms gained a majority in nearly half of Romanias oil companies through
the holding company Kontinental Ol GmbH, and joint industrial com-
mittees staffed by German technocrats managed projects for drilling,
refining, oil exploration, underground storage, transportation, and anti-
aircraft defense.50 Neubacher drew on this investment presence to pres-
sure Romanian into delivering oil. He had first done this in May 1940,
strong-arming Romanias Defense Minister into signing an oil-for-arms
agreement that fixed the exchange rate between petroleum and weapons
at a price favorable to Germany. In the following years Neubacher insti-
tutionalized these oil-for-arms deals, and continued to secure petroleum
deliveries to Germany at favorable prices.51 After a disappointing year
of delivery in 1942, Neubacher tried to squeeze Romanias domestic oil
consumption in order to increase exports. The countrys abundance of
oil and dearth of coal meant that much of its economy ran on petroleum,
from rail transportation to household heating. Neubacher now demanded
that Romania transition from oil to coal-burning locomotives and he
began a campaign to improve the production of natural gas for use
48 Report from Clodius, November 21, 1940, proposed trade protocol signed by Clodius
and Dimitriuc, December 5, 1940, Neubacher to Foreign Office, Berlin, March 17,
1941, 106223, Handelsabteilung, PAAA.
49 Neubacher to Wiehl, November 14, 1940, and report from Clodius, December 13,
1940, 106223, Handelsabteilung, PAAA; report from Junker, August 5, 1941, 105993,
Handelsabteilung, PAAA; memo from Romanian Ministry for Public Works and Infras-
tructure, April 28, 1942, 106128, Handelsabteilung, PAAA.
50 Hillgruber, Hitler, Konig Carol und Marschall Antonescu, 159; Gerhard Schreiber et al.,
Germany and the Second World War, vol. III:The Mediterranean, South-East Europe, and
North Africa, 19391941 (Oxford: Clarendon Press, 1995), 461; Lampe, Balkans into
Southeastern Europe, 14546; Eichholtz, War for Oil, 27; Maurice Pearton, Oil and the
Romanian State (Oxford: Clarendon Press, 1971), 22737.
51 Eichholtz, War for Oil, 2330.
in domestic heating. He accompanied this with pressure on Romanian

authorities to ration domestic oil consumption. These efforts succeeded
for a time. By 1943 45 percent of all Romanian oil production was going
to Germany.52
Yet Germanys ability to extract resources from Romania always
remained limited. Throughout the war Antonescu preserved a great deal
of autonomy because he enjoyed Hitlers personal approval, because he
made major military contributions to the war on the Eastern Front, and
because his country was an oil-producer.53 In economic policy, officials in
Bucharest appointed ethnic Romanian commissioners to oversee impor-
tant sectors, such as mining. Bucharest had the final say over Romanias
network of railroad, pipeline, and port facilities, and with it the flow of
petroleum. Romanian officials added a further layer of bureaucracy by
forcing German distributors to acquire export licenses from local admin-
istrators. Antonescu also began to push back against German invest-
ment, nationalizing important production centers such as the Malaxa
metallurgical plant in early 1941. After 1942/43, when the military tide
began to turn against the Third Reich, Romanian officials resisted the
authorization of new oil or mineral exploration by German companies.
And in contrast to other occupied or satellite countries in Nazi Europe,
Bucharest managed to secure major shipments of gold and hard currency
from Germany to help pay for Wehrmacht troops stationed in Romania:
in June 1940; early 1942; and again in early 1943.54
Yugoslavia: rule with an iron fist

Germany pursued a different course in Yugoslavia, where it adopted
a more formal style of imperial rule after it dismembered the country,
implementing Bests third type of governmental-administration, which
at times shaded off into the colonial category. Before early 1941, however,
Yugoslavias fate would have been hard to predict. Hitler certainly had
an anti-Serbian mentality, a legacy of his days in Vienna, seeing Serbs
52 Data report E363594, August 7, 1942, 106225, Handelsabteilung, PAAA; Keitel to

Foreign Office, October 21, 1942, Neubacher to Berlin Foreign Office, October 23,
1942, and Clodius to Keitel, October 28, 1942, 106226, Handelsabteilung, PAAA;
Eichholtz, War for Oil, 30.
53 Holly Case, Between States: The Transylvanian Question and the European Idea during
World War II (Stanford University Press, 2009); Schreiber et al., Germany and the Second
World War, vol. III, 45261; Bernhard R. Kroener et al., Germany and the Second World
War, vol. V: Organization and the German Sphere of Power, Part 2: Wartime Administration,
Economy, and Manpower Resources 19421944/5 (Oxford: Clarendon Press, 2003), 569
73; Glenny, Balkans, 520.
54 Aly, Hitlers Beneficiaries, 2407; Eichholtz, War for Oil, 279; Hitchens, Rumania, 482.
as old impotent trash or rotten bodies. But he did not have any
concrete designs for territorial expansion in Yugoslavia, declaring his
absolute political disinterest in this region in the Molotov-Ribbentrop
Pact. In fact, Hitler seemed to believe that the best use could be gotten
from Yugoslavia through economic penetration. Yugoslavias experience
under Hitlers New Order, in other words, hinged more on geopolitics
and contingency than on ideology.55
From the outbreak of war through early 1941, German negotia-
tors continuously pressured Yugoslavia to align itself with the Axis.
Over the course of 1940 Germany exploited its leverage as Yugoslavias
largest market to extract greater shipments of copper, bauxite, and other
minerals.56 That fall, when thousands of German troops moved into
Romania to guard the Ploesti oil fields, Yugoslavian leaders felt the ring
of steel tightening. Nazi negotiators complemented these pressures with
diplomatic carrots, potentially offering the Aegean port of Salonika to
Yugoslavia in return for joining the Axis. On March 25, 1941 Germanys
maneuvers seemed to pay off, when the government of Dragisa Cvetkovic
and Vladko Macek joined the Axis. Two days later, however, a coup
and semi-popular uprising led by Serbian military officers toppled the
pro-Axis government. To chants of better war than the pact, better
the grave than a slave, the coup leaders established a new regime and
promised diplomatic neutrality for Yugoslavia.57
From this moment on, Yugoslavias fate diverged from Romanias.
First and most obviously, Yugoslavia had important minerals but noth-
ing as strategically crucial as oil. Thus it lacked the bargaining chip
that Antonescu had used in Romania to keep Germany at bay. Second,
Yugoslavia as a country was internally riven to a much larger degree than
Romania, particularly after the latter lost Transylvania. The Sporazum
of 1939 had reorganized Yugoslavia and given Croatia near autonomy,
fueling a long-simmering separatist movement that was increasingly tak-
ing on state-like activities by organizing its own party militia and cultural
societies. Third, Germanys Axis ally Italy had designs to expand its
own empire along the Adriatic coast, and it continually pressured Berlin
for territorial claims in Yugoslavia. Fourth, the semi-popular movement
that gained power in Belgrade in March was decidedly anti-German,
in contrast to the Iron Guard in Romania, and thus provoked Hitlers
55 Martin L. van Creveld, Hitlers Strategy 19401941: The Balkan Clue (New York:
Cambridge University Press, 2008), 110.
56 Tomasevich, War and Revolution, 61417.
57 Stevan K. Pavlowitch, Hitlers New Disorder: The Second World War in Yugoslavia (New
York: Columbia University Press, 2008), 121; Glenny, Balkans, 4736.
wrath instead of his sympathy. Indeed, Hitler saw the coup as a per-
sonal betrayal, in part because he had wanted to keep the Balkans quiet
while he prepared for Operation Barbarossa. This geopolitical mixture
the absence of a resource bargaining chip; internal divisions; compet-
ing inter-Axis imperial claims; and an anti-German popular movement
created a destructive logic where the division of Yugoslavia was not only
easy to accomplish, but also seemed to solve a number of short-term
problems for German leaders while they pursued larger ambitions in the
East.58
The coup prompted Hitler to invade and militarily annihilate
Yugoslavia as a political entity.59 Following the invasion Germany dis-
mantled Yugoslavia and in its place established nine separate territo-
rial units governed by Germany, Italy, Bulgaria, Hungary, and Alba-
nia, as well as the nominally Independent State of Croatia. The Third
Reich directly annexed northern Slovenia, which it intended to ethnically
cleanse and Germanize. Through the proxy ruler General Milan Nedic,
through the Wehrmacht, and through the Special Envoy for Economic
Affairs Franz Neuhausen, Germany effectively governed the rump of
Serbia, which contained the Bor and Trepca mines. The Independent
State of Croatia (hereafter Croatia) became a joint GermanItalian pro-
tectorate ruled by the Ustasha, a vehemently nationalistic party that had
operated out of Italy in the 1930s. Hitler promised Mussolini that Croa-
tia would fall into the Italian sphere of interest. But in practice Germany
controlled access to its most important resources, the German military
provided the raw might that kept the Ustasha in power, and Germany
shaped the organization of Croatias economy.60
Thus, after April 1941, Germany exercised more direct power over the
lands of Yugoslavia than it did in Romania. After 1941, moreover, the
anti-Slavism of Nazi officials increasingly shaped policy in Yugoslavia.
In contrast to German business elites like Wilmowsky, Hahn, or Lorch,
many German military officers stationed in Yugoslavia hailed from the
former Austrian army and displayed extreme serbophobia, in part a
legacy of their experience fighting Serbia during World War I. As one
of Germanys leading Wehrmacht commanders in Serbia remarked, I
58 Pavlowitch, Hitlers New Disorder, 121; Stevan K. Pavlowitch, A History of the Balkans
(New York: Longman, 1999), 30713.
59 Hitler cited in Hans Ulrich Wehler, Reichsfestung Belgrad: Nationalsozialistische
Raumordnung in Sudosteuropa, Vierteljahresschrift fur Zeitgeschichte 11 (1963), 723;
Slavko Odic and Slavko Komarica, Yugoslavia and the German Plans of Conquest, in
the Institute for Contemporary History (ed.), The Third Reich and Yugoslavia, 19331945
(Belgrade: ICH, 1977), 44157, at 446.
60 Pavlowitch, Hitlers New Disorder, 2172; Tomasevich, War and Revolution, 23394;
SOEG, Kroatiens Wirtschaftslage (Vienna: Schriften des SOEG, 1942), 2839.
like a dead Serb better than a live one.61 These racial prejudices, when
combined with the lack of political restraints on German rule, made
Germanys occupation particularly brutal and geared toward short-term
extraction.
Indeed, some of Germanys most economically counterproductive
policies in Yugoslavia were directly motivated by ideology. Most impor-
tantly, by selecting the radically anti-Serb and anti-Semitic Ante Pavelic
to govern Croatia, Hitler set the stage for ethnic cleansing and civil war
that would destroy the very fabric of Yugoslavias economy. Orthodox
Serbs accounted for 30 percent of Croatias population, and such inter-
mixing ran counter to Pavelics goal of forging a state of one nationality
(Croatian) and two religions (Catholicism and Islam). From its incep-
tion the Ustasha state aggressively denied civil rights to Serbs and Jews
in Croatia, sequestered their property, and deported or killed them.62
Already in May 1941 the Ustasha began driving Serbs out of Slavonia,
Dalmatia, Bosnia, and Herzegovina. German policy partly explains the
rapidity of this ethnic cleansing. Hitler himself urged Pavelic to pursue
an intolerant strategy with regard to the ethnic minorities of Croa-
tia. And in the summer of 1941 Himmler inaugurated a campaign to
cleanse Slovenia, now annexed to the Third Reich, of over 200,000
Slovenes. Through an agreement with Himmler and Hitler, Pavelic
accepted Slovenes into Croatia on the condition that he could deport an
equal number of Serbs. The Ustasha, however, overstepped the accord,
deporting five times more Serbs than Slovenes that they accepted. The
violence of the Serb expulsions was excessive even by the gruesome stan-
dards of the Third Reich.63
Ethnic cleansing quickly led to civil war in Yugoslavia, foiling Hitlers
hope of keeping the Balkans quiet and generating massive economic dislo-
cation. In the summer 1941 Serb refugees mobilized under the nationalist
leader Draza Mihailovic, who began a partisan war against the Ustasha
61 August Meyszner, former officer of the Austrian army, quoted in Tomasevich, War and
Revolution, 78; Benjamin Shepherd, Terror in the Balkans: German Armies and Partisan
Warfare (Cambridge, MA: Harvard University Press, 2012), 2525.
62 By the spring of 1942 the Nazis and the Ustasha had deported or killed over 90 percent of
the Jews in the former Yugoslavia. Walter Manoschek, Coming Along to Shoot Some
Jews?: The Destruction of the Jews in Serbia, in Hannes Heer and Heer Naumann
(eds.), War of Extermination: The Germany Military in WWII (New York: Berghahn
Books, 2000), 3954; Jovan Byford, The Collaborationist Administration and the
Treatment of the Jews in Nazi-Occupied Serbia, in Sabrina Ramet and Ola Listhaug
(eds.), Serbia and the Serbs in World War Two (New York: Palgrave Macmillan, 2011),
10928.
63 Ladislaus Hory and Martin Broszat, Der Kroatische Ustascha-Staat, 19411945
(Stuttgart: DVA, 1964), 93107; Tomasevich, War and Revolution, 380409, quote
from 398.
in eastern Croatia and northwest Serbia. Following Germanys invasion

of the Soviet Union that fall, a second, Communist resistance move-
ment arose under the command of Josef Tito. Both threatened German
power. In September the German military issued the infamous order to
execute a hundred Serbs for every German soldier killed, fifty for each
one wounded. This indiscriminate retribution proved counterproductive,
as Germanys Foreign Office admitted shortly after its implementation.64
After the Wehrmachts first wide-scale massacres at Kragujevac and Kral-
jevo that October, Serb resistors realized they would be shown no mercy
and both partisan movements began to grow in number. By 1942 Ger-
manys underequipped occupation forces found themselves fighting a
full-blown rebellion in the former Yugoslavia. By 1943, in the regions of
heaviest fighting Germany lost effective control over much of the coun-
tryside and merely occupied islands in an insurgent sea.65
The economic repercussions of the civil war were massive. The Serbian
government found it difficult to feed the refugees pouring in from Croatia.
The insurgents forced the German military to employ the regions limited
rail track and cargo space to transport troops to combat zones instead
of commodities to Germany. Both the Serb nationalist and the Com-
munist partisans targeted mining operations, railroad connections, and
grain requisitioning centers. They disrupted shipments of iron, bauxite,
and other non-ferrous metals crucial to war production, caused severe
bottlenecks in the transportation of coal and electricity, disturbed the
planting and harvest cycles, and created massive labor shortages as local
workers fled the combat zones or joined the partisan movement.66
In contrast to the ideologically motivated German policy that sparked
a destructive civil war, many German policies were counterproductive
precisely because they were motivated by economic decisions that priori-
tized short-term extraction over longer-term goals in the spheres of requi-
sitioning, labor, and food production. Franz Neuhausen, Plenipotentiary
for the Serbian Economy, epitomized this rapine approach. Neuhausen
64 Report from Benzler, October 29, 1941, 106183, Handelsabteilung, PAAA.

65 Shepherd, Terror in the Balkans, 83100.
66 Economics Ministry to the Army High Command, July 19, 1943 and June 30, 1944,
30900, R 3101, BA; Report to Economics Ministry, June 16, 1942, 30885, R 3101, BA;
Die Wirtschaftslage im Bereich des Kommandierenden Generals und Befehlshabers
in Serbien, chapters on Coal and Energy, and Transportation, January 1944, 693, R
26/VI, BA; report on anti-partisan activities, April 1943, 105322, Handelsabteilung,
PAAA; report from January 11, 1944, 105324, Handelsabteilung, PAAA; Karl-Heinz
Schlarp, Ausbeutung der Kleinen: Serbien in der deutschen Kriegswirtschaft 1941
1944, in Johannes Bahr and Ralf Banken (eds.), Das Europa des Dritten Reichs: Recht,
Wirtschaft, Besatzung (Frankfurt am Main: Vittorio Klostermann, 2005), 187217, at
202.
was a World War I pilot and a personal friend of Hermann Goring.

He had been operating in Belgrade since 1931, first as a transportation
officer, then as the head of the local NSDAP organization, and finally
as Germanys consul general and representative for the Four-Year Plan.
Throughout the late 1930s he had competed with Max Hahn to repre-
sent German business in Yugoslavia, and had only been held in check
by Blomberg and Neurath. But with Hahns death and the outbreak of
war Neuhausens fortunes rose, and continued to rise with Germanys
Balkan campaign in 1941. With Gorings backing, Neuhausen amassed a
personal fortune. When German banks and firms appropriated French-
owned assets in Yugoslavia in 1941, Neuhausen was able to place him-
self at the head of major enterprises including the Bor copper mines,
the Serbia Banking Association, and Sudost-Montan AG, a vehicle for
plundering Yugoslavias resources. This allowed Neuhausen to run the
Serbian economy like his personal satrapy.67 His zeal for exploitation at
first impressed Nazi leaders, Goring awarding him a 500-hectare estate
in the Banat. Yet his methods, which involved corruption and nepotism,
were outrageous even by Nazi standards. In 1944 Neuhausens associates
eventually accused him of corrupt administration, and had him thrown
into a concentration camp.68
Neuhausen and Germanys other economic authorities directly or indi-
rectly tried to reduce the standard of living in the Yugoslav lands in order
to ship more goods back to the Third Reich. Neuhausen promised to
secure for the Reich the best possible remuneration [from Serbia], in
the face of all obstacles, a goal he pursued ruthlessly throughout the
war. Immediately after the invasion, Neuhausens henchmen and the
Wehrmacht began stripping the assets of local factories and arsenals. By
1943 they had shipped nearly 2,000 rail carloads of machinery and equip-
ment back to the Third Reich. Of the mines that had not fallen under
the auspices of Germany before 1941, the Wehrmacht either assumed
direct control or transferred them to German firms like Krupp AG and
IG Farben.69
Neuhausen and German officials extended this counterproductive
approach to the field of labor relations. German occupation officials
67 Tomasevich, War and Revolution, 769, 61117; Kroener et al., Germany and the Second
World War, vol. V/II, 96; Freytag, Deutschlands Drang nach Sudosten, 315.
68 Tomasevich, War and Revolution, 6237, 653.
69 Quote from Schlarp, Ausbeutung der Kleinen, 197; Martin Seckendorf, Europa
unter Hakenkreuz, vol. VI: Die Okkupationspolitik des deutschen Fascismus in Jugoslawien,
Griechenland, Albanien, Italien und Ungarn, 19411945 (Berlin: Huthig Verlagsgemein-
schaft, 1992), doc. 6: Hermann Gorings directive from April 19, 1941; Schumann,
Griff nach Sudosteuropa, 449, and doc. 78; Tomasevich, War and Revolution, 6237,
653.
needed labor for the mines of Serbia and Croatia as well as for the facto-
ries of the Third Reich, which created competing claims on the Yugoslav
workforce. By April 1941 the demand for laborers in Germany far out-
stripped the supply. Relatively high wages in the Third Reich, combined
with unemployment throughout the Balkans, had brought some 120,000
laborers from Southeastern Europe to work in Germany 44,000 from
Yugoslavia alone. After April 1941 even more laborers went to Germany
seeking higher wages. Estimates vary, but between 68,000 and 100,000
civilian Croatian workers operated in Germany during the war, and
roughly another 100,000 civilian workers from other parts Yugoslavia.70
By the end of 1941 this initial culling of voluntary laborers dried up as
workers realized that conditions, rations, and overall treatment in the
Third Reich, while ostensibly favorable under the letter of the law, were
in reality quite poor. At just the same time, however, Germany descended
into a severe labor crisis. With mounting casualties on the Eastern Front,
Hitler appointed a ruthless labor czar, Fritz Sauckel, to solve Ger-
manys manpower problem through slave and forced labor. In Yugoslavia
this meant shipping prisoners of war to work in Germany. These POWs
worked mostly in agriculture, although some ended up as far north as
Norway. After 1943 Germany changed its policy for captured partisan
fighters, sending them to work in the Third Reich instead of execut-
ing them. Higher estimates put the total number of Yugoslavian POWs
working in Germany at just over 200,000; lower estimates hover around
100,000.
In Romania, where Germany did not exercise direct control over the
local labor force, the trickle of workers into the Third Reich was insignif-
icant. By contrast, Yugoslavians accounted for 2.7 percent of Germanys
foreign labor force. This drain of workers out of Yugoslavia hurt produc-
tion back in Serbia and Croatia, straining a labor market already suffering
from partisan uprisings, inflation, and declining real wages. By the mid-
dle of the war the local supply of labor had become the second most
pressing economic problem in the former Yugoslavia after the supply of
food.71
70 The estimates vary: Spoerer suggests the higher figure, Hans Umbreit the lower. Mark
Spoerer, Zwangsarbiet unter dem Hakenkreuz: Auslandische Zivilarbeiter, Kriegsgefangene
und Haftlinge im Deutschen Reich und im besetzten Europa 19431945 (Munich: DVA,
2001), 669; Hans Umbreit, German Rule in the Occupied Territories 19421945,
in Kroener et al., Germany and the Second World War, vol. V/II, 237.
71 Spoerer and Klemann suggest the lower value for Yugoslavia. Just 810,000 Roma-
nians worked in Germany over the course of the war. Schlarp, Ausbeutung der
Kleinen, 21013; Spoerer, Zwangsarbeit, 35669, 87; Klemann and Kudryashov, Occu-
pied Economies, 158; Umbreit, German Rule, 22939; Tooze, Wages of Destruction,
51617.
In food production Germany likewise pursued an extractive, short-

term policy that damaged the economies of Serbia and Croatia.
Germanys occupation began causing problems almost immediately,
when the Third Reich partitioned Yugoslavia and divided regions that had
grown economically interdependent since 1919. Before 1941 Yugoslavia
had been more than self-sufficient in grain, yet most of the surplus came
from the fertile Banat in northern Serbia. After April 1941 the Wehrma-
cht officially prevented private commerce between the Banat and other
parts of the former Yugoslavia in order to divert all potential grain sur-
pluses to Germany. The civil war raging through much of the country-
side, moreover, reduced the acreage under cultivation. German authori-
ties prioritized feeding the Wehrmacht, the domestic forces, and workers
producing for German mines. Little remained for the rest of the pop-
ulation. By 1943 food supplies to the cities had plummeted so much
that many regions of Yugoslavia Slovenia, Montenegro, Dalmatia, and
much of southern Croatia were facing near famine conditions.72
In actual grain collection, moreover, German policies frequently back-
fired. In Croatia and Serbia, Germany initially dismantled much of the
existing state apparatus after April 1941, yet they provided little to take
its place. In the former, German authorities complained that the state
is too young, it does not possess a trained bureaucracy that can firmly
control consumption in the middle of a war.73 In Serbia, Nedics pup-
pet government had an economic gendarme of only 500 officials to
monitor prices and collect goods. Neuhausens own administration for
the Serbian Economy was likewise vastly understaffed.74 As a result, by
the middle of 1942 German officials had acquired far less grain than
expected. Despite a good harvest the previous year in much of the coun-
try, they actually had to import grain from the Banat again to feed the
Wehrmacht and mining workers in Serbia. This could not have come
at a worse time for Germany, which was now facing its own food crisis
as a result of Hitlers stalled Russian campaign. Neuhausen responded
by taking control of collection out of the hands of local Serb officials,
exerting formal political control. He turned over wheat requisitioning to
72 Die Wirtschaftslage im Bereich des Kommandierenden Generals und Befehlshabers in

Serbien, January 1944, 693, R 26/VI, BA; report from Wiehl to Foreign Minister, April
22, 1943, 105322, Handelsabteilung, PAAA; Lampe and Jackson, Balkan Economic
History, 54551; Tomasevich, War and Revolution, 64653, 70714.
73 Confidential report from liaison officer Nr. 26, April 1943, 105322, Handelsabteilung,
PAAA; Sundhaussen, Wirtschaftsgeschichte Kroatiens, 342.
74 Bericht des Generalbevollmachtigten fur die Wirtschaft in Serbien, July 1941, and
Wirtschaftslage in Serbien, Allgemein, July 1942, 692, R 26/VI, BA; Wirtschaftslage
in Serbien, January 1944, 693, R 26/VI, BA; Shepperd, Terror in the Balkans, 76;
Glenny, Balkans, 487.
district commanders and German police units, authorizing them to use

force. These brutal methods generated panic in the Serbian population,
particularly once Neuhausen threatened to extend his approach to other
crops like corn, and they almost toppled Nedics regime in Belgrade.
Germanys share of the 1942 wheat harvest increased somewhat, but
corn collection remained far below the Nazi quota because of continuing
disorganization. By the 1943 harvest Neuhausen had expanded direct
control to corn requisitioning, increasing the amount of grain German
officials extracted from Serbia, again generating massive local discontent.
But the partisan movement and the destruction of transportation meant
that much of these collected crops never actually made it to the Third
Reich.75
The Banat is the exception that illustrates the ineffectiveness of
Germanys brutal, direct rule in Yugoslavia. There the local German
minority largely administered itself. German officials supplied resident
Germans with more consumer products, taxed them at a lower rate than
neighboring Serbs, and favored them with deliveries of fertilizer, seeds,
and other supplies that allowed for technical improvements in agricul-
tural cultivation. The cause of the war also worked in favor of, instead of
against, grain requisitioning in the Banat, insofar as the German minori-
ties largely supported the Nazi war effort, many joining the Prince Eugene
Waffen-SS Division in the summer of 1941. The German minority coop-
erated in restricting black markets for food products and imposing rig-
orous price controls on agricultural goods. In contrast to the rest of
Yugoslavia, over the course of the war deliveries from the Banat German
minority consistently met the expectation of Nazi administrators.76
Underdevelopment, inflation, and the strains of total war

German economic policy thus diverged in Yugoslavia and Romania, the
Third Reich governing more directly and brutally in the former, infor-
mally in the latter. Yet in one important respect German policy was sim-
ilarly counterproductive in both countries: its management of the money
supply. Germanys military presence in both Yugoslavia and Romania
caused rampant inflation that seriously impaired the functioning of these
still undeveloped economies.
75 Tomasevich, War and Revolution, 64851.

76 Wirtschaftslage in Serbien, January 1944, Preise und Lohne, 693, R 26/VI, BA; Wehler,
Reichsfestung Belgrad, 7284; Hans Ulrich Wehler, Nationalitatenspolitik in Jugoslaw-
ien: Die deutsche Minderheit 19181978 (Gottingen: Vandenhoeck & Ruprecht, 1980),
4572; Tomasevich, War and Revolution, 6489.
Both states had entered a phase of moderate inflation before the open-
ing shots of the war were ever fired. In the late 1930s their governments
had expanded military spending, which they financed through budget
deficits, short-term floating debt, and monetary expansion. But the pres-
ence of German troops in Southeastern Europe transformed a mild infla-
tion into destructive, rapid inflation as Croatia, Serbia, and Romania were
forced to bear the burdens of financing the Wehrmacht. Hitler promised
Antonescu that, the arrival of German troops and other needs of the
military would not strain Romanias finances. This could not have been
further from the truth.77
Shortly after conquering Yugoslavia, in the summer of 1941 German
negotiators forced the new Croatian government to provide enough local
currency (kuna) for the German army to meet its labor, food, transporta-
tion, and housing needs. The Third Reich repaid Croatia by granting it
credits in the Sonderkonto M a special clearing account created at
the Reichsbank in Berlin that Croatia could ostensibly use to purchase
goods from Germany. In practice, however, German authorities barred
Croatia from tapping into its growing credit at the Reichsbank. By 1944
Germanys unpaid debt to Croatia in Sonderkonto M had surpassed one
billion RM. This was no minor sum: Wehrmacht costs were roughly
half of Croatias overall state budget, though sometimes they rose even
higher. In 1943 the cost of Germanys occupation force was 18 billion
kuna; the remainder of Croatias budget totaled just 16 billion. To finance
these vast expenditures the government in Zagreb turned to the printing
press.78
The monetary situation was similar in Serbia, although less severe
according to contemporary reports. Here Germany ran up massive occu-
pation expenses that totaled two-fifths of estimated national income,
most of which went toward paying for the Wehrmacht and refurbishing
the damaged mining operations at Bor. Theoretically, Germany financed
these outlays through credits in its clearing account. In reality, as with
Croatia, the Serbian puppet state could not access its credits in Berlin,
and instead had to pay for the Wehrmacht by tapping into its limited
money market and printing money.79
77 Willi A. Boelcke, Die Kosten von Hitlers Krieg: Kriegsfinanzierung und finanzielles
Kriegserbe in Deutschland 19331948 (Paderborn: Schoningh, 1985), 112.
78 Sundhaussen, Wirtschaftsgeschichte Kroatiens, 21319; Hudeczek to Berlin Foreign
Office, August 28, 1943, 10523, Handelsabteilung, PAAA; Reinhardt to Berlin For-
eign Office, February 18, 1944, 105324, Handelsabteilung, PAAA.
79 Schlarp, Ausbeutung der Kleinen, 2056; Die Wirtschaftslage im Bereich des Kom-
mandierenden Generals und Befehlshabers in Serbien, Allgemeines, January 1944,
693, R 26/VI, BA.
In Romania, Germany likewise forced Bucharest to assume the costs

of occupation, which were credited in a Reichsbank clearing account.
In contrast to Serbia and Croatia, however, Romania was actually able
to use some of its credit to acquire gold from the Reichsbank, first in
1942 and later in the war as well. Yet the initial gold delivery covered
just one-quarter of the annual occupation costs and was too little to
stop inflation. As Romanias National Bank pointed out, shipments of
consumer goods rather than gold would have been more effective at
soaking up Romanias rapidly expanding supply of money. Yet Germany
proved unwilling to send consumer goods to the Balkans. By the end of
1942 Germanys charge daffaires in Bucharest believed Romania was
no longer in a position to manage the financial burdens of the war, and
it increasingly had to rely on the printing press to pay the wages and
supplies of the Wehrmacht.80
From an early date German technocrats recognized the Wehrmacht
occupation and clearing account deficits were shortsighted policies that
could easily degenerate into inflation. Carl Clodius, one of the archi-
tects of Germanys development policy in the 1930s, admitted as much
in spring 1941. By demanding that Romania continuously make such
great sacrifices in the field of finance, he argued, Germany and its occu-
pation were generating inflation that would become economically debil-
itating. A variety of German officials from the Finance Ministry, the
Foreign Office, and elsewhere largely agreed that these expenses were
an unbearable burden for the economies of Southeastern Europe.81
As Germanys Finance Minister pointed out, Inflation means the total
disintegration of the economic system. On the one hand, it leads to dras-
tic reductions in productivity. It also leads the populace to hold goods
and merchandise off the market, as the Romanian peasants did their
grain. It completely undermines any sort of economic planning for the
country.82
German authorities might have contained the inflationary costs of
occupation by imposing more rigid price controls in Southeastern
Europe, above all for food. During World War I Germany had used
80 Killinger to Berlin Foreign Office, September 14, 1942, 106225, Handelsabteilung,

PAAA; report from Clodius, October 2, 1942 and report from Klugkist to Berlin
Foreign Office, November 9, 1942, 106226, Handelsabteilung, PAAA; Sundhaussen,
Wirtschaftsgeschichte Kroatiens, 21415.
81 Telegram from Clodius to Berlin Foreign Office, May 22, 1941 and report from
Neubacher to Berlin Foreign Office, June 14, 1941, 105992, Handelsabteilung, PAAA;
report from Hudeczek, August 28, 1943, 105323, Handelsabteilung, PAAA; report
from Sitzung der Informationsstelle IVb, April 20, 1944, 105546, Handelsabteilung,
PAAA; Schwerin von Krosigk quoted in Schumann, Griff nach Sudosteuropa, doc. 87.
82 Schwerin von Krosigk, cited in Aly, Hitlers Beneficiaries, 247.
such controls to prevent its own expanding monetary supply from trans-
lating into overt inflation. But Germany exercised no such restraint in
the Balkans. Instead, the Wehrmacht was authorized to pay any price for
its supplies, regardless of how high, and to buy them on the black market
if necessary. Hitler refused to make the supply of his army dependent
on financial matters.83 Thus the Wehrmacht the single largest source
of demand in Croatia, Serbia, and perhaps also Romania accelerated
inflation. Officially listed prices in Croatia rose on average by 200 per-
cent a year. Black market prices there rose even more quickly, reaching
levels in 1944 that were twenty to thirty times what they were in 1940.
In Serbia official prices were roughly comparable to those in Croatia, but
black market prices had risen only fifteen-fold by 1944. In Romania,
food prices increased seven-fold by 1943, rising higher still in 1944.84
German monetary policy in the Balkans mirrored its policy in the
rest of Europe, where it exported inflation to help finance the costs of
its war. As in Romania and Croatia, the French, Belgian, and Dutch
central banks had to shoulder the burden of Nazi occupation. Yet, struc-
turally, the economies and the bureaucracies of Southeastern Europe
were underdeveloped in comparison to those in the West. Production
per capita in the region was just a third of Western Europes.85 And in
the 1940s Southeastern Europe was still an agrarian society. When agrar-
ian economies have been exposed to the strains of total war and inflation
they have often disintegrated, the peasant sector retreating into house-
hold production and ceasing to supply food to the cities and factories.
During the First World War, generally speaking, countries with larger
and more inefficient agricultural sectors more quickly suffered economic
collapses and had to exit the war, first Russia, then the Habsburg Empire,
then Germany.86
83 Report from Clodius to Berlin Foreign Office, January 16, 1941, 106223, Han-
delsabteilung, PAAA; report from Clodius to Berlin Foreign Office, May 6, 1942,
106225, Handelsabteilung, PAAA; Foreign Office report from January 15, 1944,
105324, Handelsabteilung, PAAA; Ferguson, The Pity of War, 31838.
84 Report from Kasche to Berlin Foreign Office, January 22, 1944, report from Reinhardt
to Berlin Foreign Office, February 18, 1944, 105324, Handelsabteilung, PAAA; Die
Wirtschaftslage im Bereich des Kommandierenden Generals und Befehlshabers in Ser-
bien, chapters on Prices and Wages, January 1944, 693, R 26/VI, BA; Lampe and
Jackson, Balkan Economic History, 538.
85 Calculated from figures in Klemann and Kudryashov, Occupied Economies, 63; Dietrich
Eichholtz (ed.), Krieg und Wirtschaft: Studien zur deutschen Wirtschaftsgeschichte 1939
1945 (Berlin: Metropol, 1999).
86 Stephen Broadberry and Mark Harrison, The Economics of World War I: An
Overview, in Stephen Broadberry and Mark Harrison (eds.), The Economics of World
War I (New York: Cambridge University Press, 2005), 1422; Mark Harrison, The
A similar pattern evolved during the Second World War in South-

eastern Europe, where peasant farmers seceded from the economy and
turned toward subsistence production. Many Balkan farmers occupied
small plots of land and produced only marginally for the market in the
first place. Inflation and the scarcity of consumer goods during the war
only reduced their incentive to bring food to market. In Croatia and
Serbia, German officials consistently recorded how small farmers refused
to hand their goods over to the collection authorities at listed prices. For
one, peasants felt no responsibility for supporting the newly created
Serbian and Croatian states to bring their grain to market. Second, they
preferred to sell on the black market where prices were many times
higher than those offered by the local government. Even then, however,
they saw little incentive to sell their food because the consumer products
they wanted were nearly impossible to find or too expensive. By 1942 a
massive price gap had opened up between low-priced farm products and
high-priced consumer goods. By 1943 the black market become solely
determinant.87
In Yugoslavia inflation wrecked not only the food supply but also the
labor force. Here the rise in the price of goods dramatically outpaced the
rise in wages. By 1944 real income per worker in Croatia had fallen to
between one-third and one-half of its value in 1941.88 Workers thus had
little monetary incentive to toil in the local mines. Falling real wages,
when taken alongside the partisan warfare and the labor drain to the
Third Reich, created chronic labor shortages in the mines critical to
Germanys war effort. The year 1943 marked a turning point, when the
supply of workers declined so much that the Wehrmacht began using
corvee labor on a widespread scale to staff mining operations, forcing
Serbs and Croatians in non-critical occupations to engage in several days
of war-related work each week. By 1943 175,000 Serbs were working as
forced laborers for the German authorities. After 1943 Germany increas-
ingly used prisoners of war and military personnel to operate the mines,
but to little avail. By 1944 shipments of copper, lead, and zinc from Ser-
bia to the Third Reich had fallen to between 20 and 50 percent of their
levels in 1942.89
Economics of World War II: An Overview, in Harrison (ed.), The Economics of World
War II, 1822.
87 Die Wirtschaftslage in Serbien, July 1942, 692, R 26/VI, BA; confidential report from
liaison officer Nr. 26, April 1943, report from Wiehl to Foreign Minister, April 22,
1943, 105322, Handelsabteilung, PAAA; SOEG, Kroatiens Wirtschaftslage, 723.
88 Sundhaussen, Wirtschaftsgeschichte Kroatiens, table III, pp. 370.
89 Report to Economics Ministry, June 16, 1942, report from Gen. Bevollmach. Serbien,
January 28, 1943, 30885, R 3101, BA; monthly report on mining to Economics Min-
istry, June 20, 1943, and report from Gen. Bevollmach. fur Metallerzbergbau Sudost,
In Romania the state also suffered chronic difficulties in acquiring grain

from the peasants, and state collection remained disorganized throughout
the war. Because Antonescus government enjoyed only tenuous popular
support, it purposefully left grain surpluses with the peasantry and it
proved unwilling, in the first half of the war, to employ military requisi-
tioning. What little surpluses the state did collect went to feed Romanian
troops on the Eastern Front, not to Germany.90 German experts realized
that grain stores existed in Romania but that farmers were either hoard-
ing their surpluses or feeding them to livestock, for many of the same
reasons that farmers did not market their goods in Yugoslavia. They had
little trust in the government, few consumer products were available
for them to purchase, and those that could be found were priced too high
on the black market. In 1942 Clodius admitted that, ideally, Germany
could get grain from peasants by stepping up its delivery of consumer
goods to the Balkans, so that we would be in the position to offer the
Romanian farmer for his grain not lei, but rather interesting products.
He realized, however, that this path of action was closed given the Third
Reichs own shortage of goods. By the summer of 1942 Neubacher found
the food situation in Romania so plagued by inflation and disorganization
that he pulled Germanys agrarian experts out of the country and moved
them to the Russian sector.91
Germanys wartime empire in Southeastern Europe:

an economic balance sheet
In 1939 German business, military, and political elites had held high
expectations that Southeastern Europe would contribute decisively to
German economic mobilization in the event of a war. For Wilmowsky,
Clodius, and their colleagues, Southeastern Europe was more enmeshed
in Germanys informal empire than ever before; their plans to transform
the region into a productive hinterland and market for Germany were
April 30, 1944, 30886, R 3101, BA; Wehrmacht report from January 1943, 105323,
Handelsabteilung, PAAA; report 176, February 25, 1944, 1026, R 26/VI, BA; figures
from Tomasevich, War and Revolution, 639; Spoerer, Zwangsarbeit, 68.
90 Neubacher to Berlin Foreign Office, June 19, 1942, Clodius to Adjutant of the For-
eign Minister, July 9, 1942, 106225, Handelsabteilung, PAAA; Clodius to Killinger,
November 29, 1942, Office of the Foreign Minister to Bucharest, December 2, 1942,
106226, Handelsabteilung, PAAA. For Antonescus appeal to the Romanian peasantry,
see report from April 10, 1943, 106227, Handelsabteilung, PAAA; Dennis Deletant,
Ion Antonescu and his Regime: Romania 194044 (New York: Palgrave Macmillan, 2006),
6975.
91 Neubacher to Berlin Foreign Office, June 19, 1942, Clodius to Adjutant of the Foreign
Minister, July 9, 1942, 106225, Handelsabteilung, PAAA, HA.
finally, if slowly, beginning to bear fruit. By 1939 this optimism had

spread to the military. That spring the Economic Planning Office of
the Wehrmacht evaluated Southeastern Europes potential. According
to their estimates Southeastern Europe, including Hungary, could cover
all of Germanys imports for grains and most of its needs for fat. The
region would also be a, if not the, major supplier of non-ferrous minerals:
copper, zinc, and bauxite from Yugoslavia; iron and manganese from
Greece; oil from Romania.92
With the outbreak of World War II, however, the people and the orga-
nizations promoting informal empire in Southeastern Europe lost influ-
ence, or succumbed to the allure of closer collaboration with the Nazi
regime. After 1941 their visions and ambitions were extinguished by
Hitlers ruthless bid to build a territorial empire in Europe based on race
and geared toward wartime mobilization at all costs.
A strand of their thought continued into the war in Romania, where
Hermann Neubacher, a longstanding associate of the Mitteleuropaische
Wirtschaftstag, exercised a more informal, supervisory approach to gov-
ernance. By offering carrots deliveries of gold, coal, and weapons as
well as development assistance in the early years of the war in return
for Romanian exports, Neubacher helped keep the Romanian economy
stable for a time, and ensured the continuing flow of oil to the Third
Reich. His approach proved more effective than Germanys formal rule
and rapine economic governance in Yugoslavia. Oil from Romania cov-
ered nearly a quarter of German needs. Romania exported 2.9 million
tons of oil to Germany in 1941, 2.1 million tons in 1942, and 2.4 million
tons in 1943 before deliveries began to collapse with the Allied bombing
campaigns in 1944.93
Neubacher aside, the Third Reichs inept, shortsighted management
of the economies of Southeastern Europe dashed the high expectations
that Wilmowsky, Clodius, and German army economists placed in this
region. In nearly every sector besides oil, after 1941 production declined
as a result of German occupation, economic mismanagement, inflation,
and civil war. In food products, Germanys second most critical import
after oil, Southeastern Europe proved an utter disaster as a supplier at a
time when the Third Reich was itself facing severe food shortages. Croa-
tias agricultural sector performed so poorly that it actually became a net
92 Reichsamt fur wehrwirtschaftliche Planung report, March 27, 1939, 10028, R 3102,
BA; Sundhaussen, Wirtschaftsgeschichte Kroatiens, 3742.
93 Eichholtz, Geschichte der deutschen Kriegswirtschaft, 354; Eichholtz, War for Oil, 32; Peter
W. Becker, The Role of Synthetic Fuel in World War II Germany: Implications for
Today? Air University Review (July/August 1981), available at: http://www.airpower
.maxwell.af.mil/airchronicles/aureview/1981/jul-aug/becker.htm.
importer of grain after 1943. In fact, German exports became crucial to

the very livelihood of the Croatian population, as vast stretches of the
country fell into a food deficit during the war. In the summer of 1942,
for example, Germany shipped 40,000 metric tons of potatoes, 10,000
tons of sugar, and 12,000 tons of grain to Croatia. The delivery of staples
continued, and by the end of the war food supplies from the Third Reich
covered nearly a quarter of Croatias grain consumption.94 In occupied
Serbia, Germany was able to extract grain by severely restricting the
rations of workers and forcing farmers to sell their goods at the low offi-
cial prices. But these grain deliveries never met German expectations,
frequently remained in Serbia to feed the Wehrmacht, and were inconse-
quential for the Third Reichs overall food economy. In 19423 exports
from Serbia covered a mere 0.4 percent of Germanys grain needs. Grain
deliveries from Romania likewise deteriorated after 1941 due to inflation,
the hoarding of grain by farmers, and Antonescus reluctance to coop-
erate with Germany. Romania delivered 800,000 metric tons of grain to
Germany in 1940. After occupation this fell to 20,000 tons in 1942 and
22,000 tons in 1944.95
Indeed, by the middle of the war Southeastern Europe in many ways
had become an economic burden on the Third Reich. Between 1941 and
1945 Germany actually shipped more goods to Southeastern Europe than
it extracted from the region. When looking only at the flow of physical
goods across borders the trade figures in Germanys clearing account
the Third Reich showed a surplus with Romania and Croatia in every
year of the war after 1941, and only a small deficit with Serbia (see
Table 8.1). Romanian and Croatian imports from Germany, valued in
Reichsmarks, grew steadily and peaked in 19434. Romania negotiated
substantial deliveries from Germany because it had a powerful bargaining
chip with oil. Croatia secured imports because its economy threatened to
descend into free fall and famine without them. To both Romania and the
Yugoslav lands Germany also delivered farm machinery and equipment
at the beginning of the war. But as the conflict dragged on, by volume
coal became the single largest German export to these countries, which
needed this fuel to run their domestic industries.96
94 Wiehl to Office of Foreign Minister, April 22, 1943, 105323, Handelsabteilung, PAAA;
report from Vertrauensmann, April 1943, 105322, Handelsabteilung, PAAA; Lampe
and Jackson, Balkan Economic History, 5467; Kroener et al., Germany and the Second
World War, vol. V/II, 461.
95 Tomasevich, War and Revolution, 64951, 709; Tooze, Wages of Destruction, 53842;
Klemann and Kudryashov, Occupied Economies, 106.
96 Sundhaussen, Wirtschaftsgeschichte Kroatiens, 204; Kroener et al., Germany and the Second
World War, vol. V/II, 5702; Dinu C. Giurescu, Romania in the Second World War (1939
1945) (Boulder, CO: Eastern European Monographs, 2000), 125.
Table 8.1 German trade with Romania and the former Yugoslavia, 19414
(in millions of RM)
Croatia Serbia Romania

Exports Imports Exports Imports Exports Imports
to from Trade to from Trade to from Trade
Year Croatia Croatia balance Serbia Serbia balance Romania Romania balance
1941 54.79 34.96 19.83 13.23 43.71 30.48 434.87 346.55 88.32
1942 174.96 74.72 100.24 43.96 120.80 76.84 716.09 428.68 287.40
1943 319.39 104.24 215.15 70.26 192.56 122.23 994.93 323.37 74.59
1944 490.20 48.87 441.33 52.29 90.49 38.20 442.79 172.88 269.91
Total 1,039.34 262.79 776.55 179.74 447.56 267.75 2,588.68 1,271.48 720.22
January to July.
Source: Sundhaussen, Wirtschaftsgeschichte Kroatiens, p. 368.
Table 8.2 German clearing account deficits with Southeastern

Europe, 19414 (cumulative, in millions of RM)
Year Serbia Croatia Romania

1941 52.4 23.8 360.1
1942 154.2 99.8 623.8
1943 370.2 563.2 721.8
1944 55.3 1,051.6 1,126.4
Source: Boelcke, Die Kosten von Hitlers Krieg, 10814.
Where Germany did gain economically from Southeastern Europe

after 1941, besides the delivery of oil, was by foisting the cost of its
occupation forces onto the local governments of Croatia, Serbia, and
Romania. Over the course of the war Germany stationed thousands of
men in Romania and mustered thirteen Axis divisions (German, eth-
nic German, Italian, Croatian, and Bosnian) in Yugoslavia, where they
fought an expensive counter-insurgency campaign. The massive expense
of the Wehrmacht functioned as an invisible export to Germany. And
it explains why the Third Reich accrued such large, unpaid clearing
account debts to Croatia, Serbia, and Romania despite its trade surplus
in physical goods. By 1944 Germany owed Croatia 1.051 billion RM,
Serbia 0.055 billion RM, and Romania 1.126 billion RM. The costs of
occupation that fell on the shoulders of Croatia, Serbia, and Romania,
in other words, outweighed the amount of goods that these countries
imported from Germany (see Table 8.2).97
97 Boelcke, Die Kosten von Hitlers Krieg, 11213; M. Thomas and K. Mikulan, Axis Forces
in Yugoslavia 194145 (Stanford University Press, 2001); Glenny, Balkans, 520.
Ironically, military occupation was one of the most important fac-

tors derailing the economies of Southeastern Europe. In Yugoslavia,
where Germany exercised a more direct and brutal rule, German soldiers
fought a partisan uprising largely of their own making at a time when the
Wehrmacht needed every possible man, gun, and tank on the Eastern
Front. And by bringing with it inflation, the Wehrmacht contributed to
the economic collapse of this country. Large swaths of Croatia and Serbia
descended into famine: Yugoslavias tonnage of wheat, barley, corn, and
potatoes in 1945 was less than half of what it had grown in 1939. By the
end of the war the countrys gross industrial output had shrunk to a third
of what it had produced in the late 1930s.98 Germanys informal impe-
rial approach in Romania did less damage, to be sure. Romania never
suffered the food shortages and famines experienced in Croatia and Ser-
bia. And the economic destruction Romania suffered from the war only
amounted to 29 percent of its 1938 GNP, in comparison to an astound-
ing 374 percent for Yugoslavia. Nevertheless, German occupation and
the accompanying inflation wrought havoc with Romanias agricultural
sectors, one reason why grain deliveries from Romania completely failed
to meet prewar expectations.99
With the exception of oil, after 1941 occupied Southeastern Europe
contributed less to the German war economy than did unoccupied South-
eastern Europe before 1940. In the peak war year of 1943 Romanias agri-
cultural shipments to Germany were just 17 percent of what it exported
there before the war. Despite significant investment in the Bor and Trepca
mines of Serbia, deliveries from these sites never returned to the level they
had attained on the eve of the German invasion. By 1943 Croatia was pro-
ducing just a third of the coal it had before the war.100 In 1938 Southeast-
ern Europe (Yugoslavia, Romania, Bulgaria, and Hungary) accounted for
nearly 14 percent of continental Europes total exports to Germany. Over
the course of the war this same region contributed 8.1 billion RM to the
German war economy, or just 6.8 percent of continental Europes total
contribution of 118.2 billion RM to the Third Reich.101 Although these
figures compare different things occupation expenses, clearing deficits,
98 Figures calculated from Lampe and Jackson, Balkan Economic History, tables 13.4,
13.5, and 13.11.
99 Giurescu, Romania, 1269; Berend and Ranki, Economic Development, 340.
100 Lampe and Jackson, Balkan Economic History, 532, 570; Schlarp, Ausbeutung der
Kleinen.
101 Klemann and Kudryashov, Occupied Economies, 99, 105; Wirtschaft und Statistik, 1939.
and the flow of goods versus just exports they nevertheless illustrate
how Southeastern Europe declined in economic importance to Germany
after 1941 as a result of ill-conceived, brutal, and ultimately counterpro-
ductive measures. As an economic policy, the turn toward hard power
and formal empire in the Balkans was a monumental failure.
Conclusion: Imperialism realized?
Germany as Empire. The framework of empire can help us understand

Nazi Germanys conquest, exploitation, and genocide in Eastern Europe
during World War II in new ways, as an empire rooted in Germanys
long obsession and peculiar fascination with the East, yet one that
was at the same time different from anything that had come before it.
But where does Southeastern Europe fit into this story? Can Germanys
relationship with Southeastern Europe in the 1930s be considered an
imperial one? And to what extent was the soft power Germany developed
there a stepping-stone on the path to Hitlers formal empire in Europe? Or
is it better understood as a separate project that bears more resemblance
to other European imperial programs of the 1920s and 1930s?
If empire is defined along conventional lines as direct territorial con-
trol, then no, Germanys relationship with Southeastern Europe was not
imperial during the 1920s and 1930s. The governments of Yugoslavia
and Romania both retained freedom of action in their diplomatic rela-
tionships. Before the outbreak of World War II, German negotiators were
unable to incorporate Yugoslavia or Romania into any binding diplomatic
relationship. Not until the Wohlthat Accord of March 1939 were German
leaders able to directly reshape the Romanian economy. Yet if imperial-
ism is defined in a broader sense, as a project of modernization that
involves both the center and the periphery in the creation of an economic
and cultural hierarchy, then Germanys relationship with Southeastern
Europe in the late 1930s was indeed imperial.
Scholars have recently applied this more flexible understanding of
imperialism to examine whether twentieth-century Great Powers can and
should be considered empires. Three defining attributes of twentieth-
century empires emerge from these studies.1 First, twentieth-century
1 Historians have raised this question with special attention to America and the Soviet
Union during the Cold War. See, for instance, Thomas Bender and Michael Geyer,
Empires: Might and Myopia, in Christof Mauch and Kiran Klaus Patel (eds.), The
United States and Germany during the Twentieth Century: Competition and Convergence
330
Imperialism realized? 331
imperial powers have not only aspired to manage the affairs of the world
for their own advantage, they have also had the ability to do so. As states
have reached a certain threshold of industrialization, have begun to com-
pete for overseas markets and resources, and have aspired to exercise
power on a worldwide scale, they have turned to various instruments
overseas investment, the manipulation of foreign trade, development
assistance, the construction of elite transnational networks, as well as
military force to carve out a predictable and stable space in the global
economy, and defend their position as technological and commercial
leaders.
Ironically, in Germanys case the drive for markets in Southeastern
Europe initially grew from a sense of vulnerability. The First World War
and the Depression underscored for German economic theorists how
risky Germanys reliance on overseas markets, capital, and resources
could be. Redirecting commerce to a region like Southeastern Europe
that was susceptible to manipulation enabled Germany to free itself from
global entanglements in two ways, which Albert Hirschman labeled the
supply and the influence effects of trade. Through the supply effect of
trade, Germany acquired access to valuable raw materials, enabling the
Third Reich to survive both foreign currency and food crises in its
increasingly dirigiste economy. By 1938 Southeastern Europe supplied
17 percent of German food imports, plus essential quantities of baux-
ite for its aircraft industry, copper for its engineering sector, oil for its
motor vehicles and armored divisions, and manganese and chromium
for its steel production.2 These supplies enabled Hitler to build and sus-
tain Europes most modern army even as Germany lost its traditional
sources of imports in Western Europe, America, and other regions over-
seas. While the Reichsmark bloc did not always bring a greater delivery
of resources, it did bring a more reliable one.
Through what Hirschman termed the influence effect of trade, more-
over, Germany used Romanias and Yugoslavias growing dependency for
political ends. Following the Anschluss, Germany accounted for between
a third and a half of all exports and imports into the states of Southeast-
ern Europe, or between 4.5 and 6 percent of their GDP. Yet dependency
ran deeper than these figures suggest: after 1938 the strategic imports
(New York: Cambridge University Press, 2010), 1331; De Grazia, Irresistible Empire;
Niall Ferguson, Colossus: The Price of Americas Empire (New York: Penguin, 2004);
Raymond Pearson, The Rise and Fall of the Soviet Empire (New York: Palgrave, 2002);
Westad, The Global Cold War.
2 Volkmann, The National Socialist Economy, 352; Albert Speer, Inside the Third Reich:
Memoirs (New York: Simon and Schuster, 1970), 316; Milward, Reichsmark Bloc,
statistical appendix.
332 Conclusion
that were essential to Romanias and Yugoslavias economic moderniza-

tion came predominantly from Germany. German machine tools, textile
machinery, and agricultural equipment were becoming indispensable to
many of the production processes of Southeastern Europe.3 Germanys
domestic market, moreover, had become the single largest destination
for Southeastern Europes most important exports: grain and other agri-
cultural products. Throughout the Depression these products had been
distressed goods, their prices falling almost continually since 1925. In a
region where 70 to 80 percent of the population lived on the land, the
political leaders of Southeastern Europe were understandably reluctant
to forgo a reliable market for their primary exports.4
By exploiting Southeastern Europes economic dependency, Germany
tilted this region diplomatically away from France and Britain, partic-
ularly after 1938. During the 1930s Milan Stojadinovic Yugoslavias
pro-German Prime Minister who came to admire fascism as a political
form vetoed any attempt to place limits on German trade because he
realized it was simply too important to the Yugoslavian economy. For the
same reason, Yugoslavian negotiators refused to accept British, French,
or Czech plans for a Danubian economic federation. And despite
repeated attempts by France to enmesh Yugoslavia more tightly in their
security arrangements, in 1937 and 1938 Stojadinovic consistently pur-
sued a policy of neutrality vis-a-vis the Great Powers.5 Because Romania
possessed oil, a resource highly prized on the global market, it retained
greater latitude in its foreign economic policy. But here, too, 1938
represents a turning point. This year saw a pro-German government
take the helm of Romania, the new Foreign Minister being the former
ambassador to Germany and a founder of the GermanRomanian cham-
ber of commerce.6 That fall Germany extracted higher deliveries of oil
from Romania, and the following spring German negotiators concluded
the Wohlthat Accords, a far-reaching economic agreement that set up
the institutional machinery for the joint planning and development
3 Sudosteuropa: Vorschlage fur eine neue Deutsche Kapitalpolitik, 6135, R 8119F,

BA.
4 Confidential report from Clodius to Foreign Office, January 7, 1938, 106181,
Handelsabteilung.
5 Gerhard L. Weinberg, Hitlers Foreign Policy: The Road to World War II, 19331939 (New
York: Enigma, 2005), 21819; Grenzebach, Informal Empire, 143; Stirk, Ideas of Eco-
nomic Integration in Interwar Mitteleuropa.
6 As Carl Clodius, director of the Economics Department of the Foreign Office, reported
at the end of the year, the events of 1938 have led to a thoroughgoing change in
Romanian political conceptions . . . The need for a measure of agreement with Germany
has generally been accepted. cited in Kaiser, Economic Diplomacy, 264; Weinberg, Hitlers
Foreign Policy: The Road to World War II , 2345.
of Romanias agricultural, forestry, and oil resources.7 Between 1920

and 1938, in other words, both Yugoslavia and Romania changed from
pro-French states embedded in a collective security system into neutral
states whose leaders increasingly looked to the Third Reich for economic
growth. Economic pressure was a major reason for this transition. Thus
in these two critical respects securing a reliable delivery of supplies and
exerting massive diplomatic pressure Germany managed the affairs of
the world for its own advantage in the manner of an empire.
Second, empires offer a model of modernity for other regions of the
world, whether it be Americas vision of democracy, individual rights,
and free markets; the Soviet Unions model of economic development,
social equality, and a command economy; or the Nazi empire based
on nationalism, race, and a militarized economy.8 German advocates of
Mitteleuropa saw their project very much as a model of modernity, but
one that differed in important respects from the Nazi racial order. For
them, Germanys task was to lead Central and Southeastern Europe into
a new era where the global economy would be partitioned into massive
economic blocs. They held out the prospects of a European economic
sphere subordinated to German industry, but which could make Europe
competitive with America and the British Empire, and which offered
certain advantages to the Balkan states.
Indeed, for soft power or informal empire to be effective a clear vision
or model is essential. Over the 1920s and the 1930s German advocates
of Mitteleuropa fabricated a particular brand of economic development as
the vision of modernity they could sell to Southeastern Europe. Germany
would provide the capital equipment, the technology, and the know-how
to develop Southeastern Europes productivity in primary and tertiary
sectors, increasing its purchasing power. In return, Germany would
acquire a reliable supply of resources and a stable market for its goods.
Already in the Weimar Republic Foreign Minister Gustav Stresemann,
Economics Ministers Eduard Hamm and Hermann Dietrich, and the
founders of Germanys private institutions like Georg Gothein and
Walther Hoffmann, began working out ideas for economic collaboration
between Germany and Southeastern Europe based on this model. By
the 1930s this developmental model became the predominant way Ger-
man economic thinkers envisioned their nations long-term economic
relationship with Southeastern Europe. It shaped the discussions within
Germanys bureaucracy, the programs initiated by Germanys private
institutes, and the public debate over German trade policy with the
7 Wohlthat, Der neue deutsch-rumanische Wirtschaftsvertrag.

8 Bender and Geyer, Empires: Might and Myopia.
334 Conclusion
Balkans. Academic economists like Hermann Gross, liberal publicists

like Wilhelm Grottkopp and Walther Hoffmann, more radical theorists
like Walter Lorch, government officials like Hans Posse, Carl Clodius,
and Helmuth Wohlthat, and even influential National Socialist leaders
like Economics Minister Walther Funk and Advertising Council director
Heinrich Hunke all, to differing degrees, subscribed to the idea of
developing specific productive capacities and improving the purchasing
power of Southeastern Europe as an important step in building a
Grossraumwirtschaft.
A crucial and despicable factor, however, differentiates Germanys
model of imperial modernity for Southeastern Europe from other West-
ern imperial models constructed in Britain, France, or America: anti-
Semitism. German plans to develop Southeastern Europe were built not
only on the platform of mechanizing farming, introducing new and mod-
ern crops, improving mineral extraction, and raising purchasing power,
but also on the promise to drive Jews from the economic life of Yugoslavia
and Romania. Germanys transnational networks succeeded, in other
words, not only because they included elites from the periphery but
also because they excluded other groups. After 1933, and particularly
after the pivotal year 1938, advocates of Mitteleuropa drew on an intel-
lectual tradition, one the Nazis helped entrench in German academia,
which erroneously portrayed Jews as a parasitic group within the econ-
omy that inhibited modernization. By the late 1930s German economists
posited this as one reason behind Southeastern Europes economic back-
wardness, which they proposed to resolve by forcibly removing Jews
from commerce. In this sense, German explanations for and approaches
to economic development departed from the European and American
mainstream. But the Romanian and Yugoslavian radical right, and to a
lesser extent the regions business circles and technocratic leaders, found
this goal attractive and actively worked toward it. The dark promise of
Aryanizing trade thus functioned as a shared agenda, which German
elites claimed would benefit ethnic Romanians, Croatians, and Serbians
as well as Germans.
Third, imperialism defined more broadly stabilizes the gradients
of inequality and dependency across a region, subordinating periph-
eral nationalities within the imperial sphere to the center.9 Indeed,
Germanys vision for modernizing Yugoslavia and Romania entrenched
an economic hierarchy where Southeastern Europes development would
proceed along a prescribed path that served German needs first, and that
cemented the existing industrialagrarian division of labor between the
9 Maier, Among Empires, 2536.

Third Reich and the Balkans. German advocates of Mitteleuropa wanted

to raise the purchasing power of the masses in Southeastern Europe, but
primarily because this was the precondition for exporting [German]
industrial goods. They wanted to improve transportation and commu-
nication infrastructure in the Balkan states, but primarily to ease the
delivery of wares from Southeastern Europe.10
In this sense, German advocates of Mitteleuropa belonged to main-
stream European or American economic thought. Indeed, most modern
empires have reinforced a hierarchical division between the industrial
core and the agrarian periphery, using various methods to do so. During
the nineteenth century Britain advocated free trade and concluded com-
mercial treaties to maintain its position as the industrial first-mover. Its
leaders complemented free trade with imperial governance that actively
and at times coercively turned colonies like India and Egypt into suppli-
ers of raw material for British industry. In doing so they created entirely
new primary product sectors to fuel their factories at home.11 During the
twentieth century imperial powers began using development aid to raise
the standard of living in their colonies, but at the same time to transform
them into more reliable producers of primary products. Britain moved
along this path first in the 1890s, later expanding its development pro-
grams during the Great Depression with the Colonial Development and
Welfare Acts of 1929 and 1940. Germany followed suit with its develop-
ment agenda in Southeastern Europe during the 1930s. France (Fonds
dInvestissement pour le Developpement Economique et Social in 1946)
and America (Harry Trumans Point Four Program in 1949) likewise
turned to development assistance during the 1940s and 1950s to stabi-
lize their colonies and trade partners as suppliers of industrial inputs and
raw materials.12
Importantly, at different moments all of these empires used racial cat-
egories to justify why others should engage in the underpaid, labor-
intensive work required to grow export cash crops. In Burma, for exam-
ple, British officials argued Indians and Burmese were ideally suited for
10 Mitglieder Versammlung des Mitteleuropaische Wirtschaftstag, from May 27, 1940, Mit-
teleuropaische Wirtschaftstag, HAS.
11 Topik and Wells, Commodity Chains; Anthony Howe, Free Trade and Global Order:
The Rise and Fall of a Victorian Order, in Duncan Bell (ed.), Victorian Visions of a
Global Order: Empire and International Relations in the Nineteenth Century (New York:
Cambridge University Press, 2007), 2646; Sven Beckert, Emancipation and Empire:
Reconstructing the Worldwide Web of Cotton Production in the Age of the American
Civil War, American Historical Review 109 (December 2004), 140538; Kenneth Pom-
meranz and Steven Topik, The World that Trade Created: Society, Culture, and the World
Economy, 1400Present (New York: M. E. Sharpe, 2013), 25872.
12 Rist, History of Development; Fieldhouse, The West and the Third World.
336 Conclusion
the dull, monotonous tasks of rice cultivation. German economists

similarly saw Serbians, Croatians, and Romanians as capable of bear-
ing any burden, perfectly suited for producing the labor-intensive goods
like soybeans and wheat that Germanys capital-intensive economy so
desperately needed in the 1930s.13
To secure and legitimize such hierarchical divisions of labor, mod-
ern empires have often created transnational networks of elites in the
periphery that accept submission to the imperial center in return for
their own security or prosperity.14 This is soft power: convincing others
that your goals are legitimate, and granting privileged access to networks
of information and contacts so that groups on the periphery can benefit
from interacting with the core. Again, here Germany was no excep-
tion in using soft power and building networks to support its empire.
German soft power made this economic hierarchy and dependency more
palatable to certain elites from Romania and Yugoslavia. As Southeastern
Europe became increasingly dependent on trade with Germany, German
businessmen, academics, and government officials were simultaneously
forging a local cohort that had a stake in maintaining this dependent
relationship. Private institutions like the Mitteleuropa-Institut and the
Mitteleuropaische Wirtschaftstag directly cultivated personal relation-
ships with the economists and businessmen, exporters and importers,
journalists and academics, and cultural and political leaders of Romania
and Yugoslavia. Other organizations like the Leipzig trade fair and the
GermanRomanian chamber of commerce provided German, Yugosla-
vian, and Romanian merchants assistance with local legal systems, helped
them find reliable commercial counterparties, and created forums for
face-to-face interaction between traders. They made economic news and
contacts accessible to smaller firms from across Central and Southeastern
Europe, and after 1934 helped them navigate the red tape of the bilateral
treaties. All of this enabled the machine tool manufacturers of Saxony,
the artisans of Transylvanian Romania, and the traders of provincial
Yugoslavia to participate in Germanys informal empire.
Germanys institutions supplemented this network of pro-German
elites with German-friendly publicity, a constant presence in the cities
and countryside of Southeastern Europe during the 1930s. For two
months of the year advertisements for the Leipzig fair and promo-
tional information about German technology inundated the radio waves,
13 Adas, The Burma Delta, 10521; Wilmowskys lecture to Verein fur Berliner Kaufleute
und Industrieller, November 11, 1940, pp. 701, 6136, R 8119F, BA; H. Gross, Bau
und Entwicklung, 74, 218; Zimmerman, Alabama in Africa.
14 Maier, Among Empires, 2536.
the cinemas, the trade journals, and the newspapers of Southeastern

Europe. German technical experts and political leaders regularly toured
the region, from Otto Schnellbach to Hjalmar Schacht. And by the late
1930s Germany had regained its status as a center of study for Balkan
students, particularly those studying economics, business, medicine, or
engineering. These students and professionals made lasting connections
with banks, oil and mineral companies, and importexport houses across
Southeastern Europe, in many ways becoming economic pioneers for
Germany and German products.
In building a pro-German cohort in Southeastern Europe, one cru-
cial factor was working in Germanys favor: these states were some of
the only countries in Europe and some of the only primary product
exporters in the world to actually increase their share of international
trade during the 1930s. And they did so because they sent ever more
exports to Germany. By 19368 the real per capita exports from the
nations of Southeastern Europe had already returned to pre-depression
level, except for Romania, which surpassed this level by 22 percent.15
Even the Royal Institute of International Affairs, one of Britains lead-
ing research institutes, conceded that, at any rate up till the spring of
1939, the countries of South-Eastern Europe on balance have gained, in
a material sense and in the short run from their economic involvement
with Germany.16 The general consensus of postwar scholarship main-
tains that the terms of Romanian and Yugoslavian trade with Germany
actually improved during the 1930s. The relative price per unit of their
exports to Germany rose, while the relative price per unit of imports from
Germany declined considerably.17 In other words, not only did the states
of Southeastern Europe sell more grain, livestock, timber, and minerals
to the German market in 1938 than in 1932, in general they received a
higher price for these goods as well.18
Thus before 1941 some commercial elites in Yugoslavia and
Romania agrarian exporters, mine owners, ethnic German trading
15 Lampe, Balkans into Southeastern Europe, 130, 136.

16 Royal Institute of International Affairs, Southeastern Europe: A Political and Economic
Survey, 1989.
17 Milward, Reichsmark Bloc, 3812; Neal, The Economics and Finance of Bilateral
Clearing Agreements.
18 The most recent work by economic historian Albrecht Ritschl shows that when exam-
ining both flows of currency and flows of goods and credit in the Reichsmark bloc,
Germany did not exploit the smaller Balkan countries. Using unpublished foreign
exchange balances from Germanys Economics Ministry, he illustrates how Germany
only began to extract resources without payment from Reichsmark bloc countries after
military occupation in 1940 and 1941. A. O. Ritschl, Nazi Economic Imperialism
and the Exploitation of the Small: Evidence from Germanys Secret Foreign Exchange
Balances, 19381940, Economic History Review (new series) 54 (May 2001), 32445.
338 Conclusion
houses, and even some artisans and manufacturers of semi-finished

products reaped very real gains from economic collaboration with the
Third Reich. By the late 1940s political rhetoric within Southeastern
Europe began to reflect these circumstances. Pivotal leaders like Milan
Stojadinovic and J. Manolescu-Strunga, for example, who had engi-
neered the bilateral treaties for Yugoslavia and Romania, came to adopt
the language of development and complementarity that Germans had
formulated in the 1920s. Stojadinovic frequently presented trade with
Germany as something natural.19 For Manolescu-Strunga, the past
shows that natural conditions point toward as close and harmonious
economic relations with Germany as possible. Whichever sensibilities
incline us toward other countries, we must still clearly see that they do
not offer the possibility of absorbing our surpluses.20
Finally, the informal empire German elites constructed in Southeast-
ern Europe during the 1920s and 1930s aided and abetted the Nazi war
machine, but at its core it was a different imperial project than the quest
for Lebensraum in Eastern Europe. Indeed, Germany constructed two
different continental imperial visions between the 1890s and the 1930s,
one for Eastern Europe and another for Southeastern Europe. The for-
mer strove to annex territory and Lebensraum, deport Poles, Jews, and
Russians, and turn Poland and western Russia into a colonial space for
German farmers. This imperial tradition drew on a legacy of German
thinking about Poland and the East that dated back to the nineteenth
century.21 And, crucially, this vision animated the high Nazi leadership
from Adolf Hitler and Heinrich Himmler to the SS technocrats who
orchestrated Germanys destructive population policy who hoped to
use military conquest to consolidate Germanys racial community and
acquire land to the east.22 By contrast, Southeastern Europe was of
second-tier importance for the coterie of leading Party members that
surrounded Hitler, and thus it fell to another group of businessmen and
academics to elaborate an imperial agenda for this region.
19 Basch, The Danube Basin, 159; Mitteilungen der Deutschen Handelskammer fur Jugoslawien
3 (June 10, 1939).
20 Handelsbeziehungen zu Deutschland, translation of former Trade Minister
Manolescu-Strungas article in Excelsior, September 28, 1937, 112606, Han-
21 Liulevicius, German Myth; Mommsen, Der Ostraum in Ideologie und Politik des
Nationalsozialismus; Burleigh, Germany Turns Eastwards.
22 Wildt, An Uncompromising Generation; Isabel Heinemann, Rasse, Siedlung, deutsches
Blut: das Rasse- und Siedlungshauptamt der SS und die rassenpolitische Neuordnung
Europas (Gottingen: Wallstein, 2003); Czeslaw Madajczy, Vom Generalplan Ost zum
Generalsiedlungsplan, in Mechtild Rossler and Sabine Schleiermacher (eds.), Der
Generalplan Ost: Hauptlinien der nationalsozialistischen Planungs- und Vernichtungspoli-
tik (Berlin: Akademie Verlag, 1993), 1219.
To be sure, much connected the two visions of empire. German

power in Yugoslavia and Romania furthered Hitlers rearmament goals
and stabilized the Reichsmark bloc during the 1930s. Ultimately, Ger-
manys private institutions helped sustain the massive military that
would wreak havoc on Europe after 1939. From an ideological perspec-
tive, furthermore, Mitteleuropa advocates eventually came to incorporate
anti-Semitism into their agenda, particularly after Kristallnacht and the
November Laws of 1938. And while the anti-Semitic policies of the Nazi
regime explain much behind the drive to Aryanize trade in Southeast-
ern Europe, when push came to shove, many leaders of these private
institutions proved quite willing to actively discriminate against Jews.
Yet in the final analysis, the vision offered by Gothein, Wilmowsky,
Hahn, Gross, Clodius, Kohler, Voss, Hoffmann, and Lorch for South-
eastern Europe differed from Hitlers quest for Lebensraum and formal
empire. These men envisioned an economic and cultural hierarchy in
Europe, with Germany on top. But the biological racism and the vis-
ceral animosity of National Socialism toward Slavic nationalities was not
present in their writings or in their activities; nor did they want to empty
the Balkans of its resident peoples to make way for German settlers.23
Instead, their vision had more in common with the contemporary
imperial projects of Britain or France, or America after 1945, insofar as
they were all turning to ideas of economic development and soft power to
legitimize their influence abroad. The advocates of Mitteleuropa believed
the division of labor they planned in the 1920s and 1930s would benefit
the non-Jewish nationalities of Southeastern Europe Romanians, Croa-
tians, and Serbians just as colonial officials in Britain or modernization
theorists in America thought their development schemes would benefit
British colonies or American client states.24 And their vision of empire
23 German and Austrian government officials and academics did develop and execute
plans for deporting Slovenians from what was northern Yugoslavia during World War II,
after Germanys invasion in April 1941. The academic research to support this agenda,
however, came in large part from a different group of specialists than those studied here,
mainly Austrian ethnographic researchers based in Graz and Vienna. See, for example,
Helmut Carstanjen, Sprache und Volkstum in der Untersteiermark (Stuttgart: Engelhorn,
1935); Christian Promitzer, Taterwissenschaft: Das Sudostdeutsche Institut in Graz,
in Beer and Seewann, Sudostforschung im Schatten, 93114; Christian Promitzer, The
South Slavs in the Austrian Imagination: Serbs and Slovenes in the Changing View
from German Nationalism to National Socialism, in Nancy Wingfield (ed.), Creating
the Other: Ethnic Conflict and Nationalism in the Habsburg Central Europe (New York:
Berghahn Books, 2005), 195; Tone Ferenc, The Austrians and Slovenia during the
Second World War, in F. Parkinson (ed.), Conquering the Past: Austrian Nazism Yesterday
and Today (Detroit: Wayne State University Press, 1989), 20723.
24 Gilman, Mandarins of the Future; Leys, The Rise and Fall of Development Theory; Meier,
From Colonial Economics to Development Economics, 17392.
340 Conclusion
suffered from the same inherent problems that British, French, or Amer-
ican development programs did, insofar as specialization in cash crop
exports and raw material extraction have historically caused severe eco-
nomic dislocation and exploitation as often as they have led to genuine
development.
Germanys informal empire and soft power reached its zenith between
1938 and 1941, giving a false veneer of respectability to Nazi rule in
Europe before Operation Barbarossa. In part, this was because business
elites like Wilmowsky and the institutions they worked through main-
tained significant freedom to influence German policy toward Yugoslavia
and Romania before World War II. But after 1941 these two imperial
visions clashed. Those pushing for informal empire either lost influence
to, or put themselves in the service of, a new set of elites with closer
ties to the high Nazi leadership who wanted to forge a formal territo-
rial empire in Europe. Some of the advocates of Mitteleuropa lost their
positions just before or during the war (Raimund Kohler, Tilo Freiherr
von Wilmowsky), or met untimely deaths (Max Hahn). Others oppor-
tunistically changed their views to collaborate more closely with the Nazi
regime (Walter Lorch). Yet in all cases the actual institutions that built
German soft power in the 1920s and 1930s lost the space to operate
during the war, as Germanys economy became increasingly militarized,
and as state officials and Nazi Party hardliners assumed ever more power
over German foreign policy.
Where Germany implemented a more formal and direct economic
control in the Balkans after 1941 in Yugoslavia, in part under Franz
Neuhausen the results were incredibly counterproductive from an eco-
nomic standpoint, as civil war, ethnic cleansing, and misguided mone-
tary policies made the country an economic burden on the Third Reich.
Where the idea of an informal or softer rule was maintained in Romania
under Hermann Neubacher the results were less disastrous. Yet even
here Germany implemented aspects of formal control, stationing troops
to guard the Ploesti oil fields for instance, which generated severe infla-
tion that undermined the Romanian economy. Ultimately, in the war to
forge a territorial empire in Europe the Third Reich imposed demands on
Southeastern Europe that wrecked these societies, and that also wrecked
their ability to contribute to the Nazi war machine.
The global crises spawned by World War I and the Great Depression
led Germans to fashion two imperial strategies to bring stability to their
economy, prosperity to their country, and world influence to their nation:
colonial Lebensraum versus a soft, informal export empire. Before 1939
these two imperial visions existed side-by-side, at times in tension and at
other times in harmony with one another. With the outbreak of war and
the invasion of the Soviet Union, the Third Reichs conquest of Europe
and its ethnic cleansing extinguished the latter vision of German influ-
ence and prosperity based on exports and soft power. Yet after 1945 this
second vision, sanitized of anti-Semitism but still founded on a regional
division of labor that privileged Germanys capital-intensive economy,
would reemerge in a new democratic order. In German foreign policy
today the imperial ambition is gone, along with the racism and unilat-
eralism of National Socialism; the soft power of German exports and
cultural diplomacy remains.
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Index
advertising, 42, 68, 72, 76, 79, 81, 83, 85, area studies, 16, 95, 109, 1246, 133, 135,
86, 89, 923, 1002, 116, 130, 207, 231
212, 217, 226, 229, 231, 232, 304 Association for Defense against anti-
Advertising Council of the German Semitism, 239
Economy, 205, 231, 237, 264, 297, Association for Germans Abroad (Verein
334 fur das Deutschtum im Ausland
AEG Electric, 58, 78 VDA), 38, 109, 114
agriculture Association of Saxon Industrialists
agricultural productivity, 86, 94, 135, (Verband Sachsischer Industrieller
142, 164, 175, 265, 270, 2757, 286, VSI), 59, 67, 74, 75, 82, 116, 123,
290, 307, 328 233
crisis, 88, 15962 Australia, 19, 168
machinery, 22, 69, 96, 261, 267, 268, Austria
276, 283, 285, 288, 298, 301, 310, Anschluss, 17, 195, 253, 273, 293, 299
332 customs union with Germany (1931),
mechanization, 96, 265, 2679, 272, 142, 167, 169, 173, 188, 309
276, 277, 285, 288 economic policy, 44, 612, 86, 143,
prices, 158, 160, 163 147, 165, 169
Albania, 87, 118, 134, 313 foreign policy, 147
Alliance Francaise, 121, 128 Great Depression, 169
Amery, Leopold, 259, 262 relations with Germany, 612, 155,
Amities Francaises, 40 165, 167, 169
Angelescu, Constantin, 233 relations with Romania, 44, 97, 143
Anglo-American order, 21, 111 relations with Southeastern Europe, 14,
anti-Semitism 43, 44, 534, 612, 86, 97, 107, 143,
Aryanization, 22, 223, 241, 243, 251 147
economic thought, 22, 186, 220, 223, relations with Yugoslavia, 612, 65, 67,
241, 244, 309, 334, 341 86, 147
German universities, 238, 240, 245, 334 Vienna, 14, 44, 51, 53, 558, 61, 68,
Hitler, Adolf, 18, 220, 245 86, 90, 97, 107, 124, 137, 143, 146,
Kristallnacht, 241, 339 154, 230, 253, 263, 297, 298, 309,
Mitteleuropa-Institut, 243 311
Mitteleuropaische Wirtschaftstag, 239, autarchy, 1, 163, 176, 186, 1912, 193,
243 207, 216, 292
Romania, 22, 223, 226, 234, 238, 241,
243, 309 Backe, Herbert, 307
trade, 19, 22, 220, 223, 238, 240, 244, balance of power, 14, 31, 32, 171
251 Balkans. See Southeastern Europe
Sombart, Werner, 242 Ballin, Albert, 35
Yugoslavia, 241, 244 banks
Antonescu, Ion, 296, 308, 31112, 320, Banca Generala Romana, 44, 48, 54,
324, 326 64, 92, 98
372
Index 373
Banca Marmorosch, 44, 54 Canada, 19, 51, 148, 158, 168

Banque de lUnion Parisienne (BUP), Caprivi, Leo von, 35
52 Carol II, King, 226, 234
Banque de Paris et des Pays-Bas (BPP), cash crops, 21, 174, 177, 260, 269, 271,
53 274, 275, 2867, 335, 340
Credit-Anstalt, 53, 169, 253 Central Europe, 1, 37, 43, 47, 501, 72,
Deutsche Bank, 35, 44, 48, 54, 100, 98, 101, 107, 114, 1235, 132, 136,
188, 237, 299 139, 143, 146, 154, 156, 157, 161,
Disconto-Gesellschaft, 48 162, 16871, 174
Dresdner Bank, 54, 100, 188, 237, 299 Chamberlain, Joseph, 37, 25760, 262
foreign investment, 10, 14, 29, 35, 44, chambers of commerce, 17, 42, 66, 6874,
48, 54, 58, 59, 64, 90, 100, 188, 190, 76, 81, 845, 86, 98, 102, 131, 177,
284 184, 21112
German banks in Southeastern Europe, China, 4, 10, 28, 42, 274, 279
29, 44, 48, 58, 59, 100, 164, 188, Manchuria, 223, 270, 274
253, 273, 299, 308, 316 Christian National Romanian Student
Great Depression, 169, 1857 Union, 244
imperialism, 10, 14, 44, 52, 253, 299, civilizing mission, 6, 39, 115, 173, 223,
316 245, 251
universal banks, 34, 42 France, 40, 112
Western banks in Southeastern Europe, Class, Heinrich, 33
14, 53, 108 Clodius, Carl, 182, 325, 334, 339
Becker, Carl Heinrich, 112, 115, 126, 136 economic bloc, 290
Berlin Conference, 31 economic development, 2635
Best, Werner, 305 Hahn, Max, 280
Bethmann-Hollweg, Theobald von, 4, 17 inflation, 321, 324
Bismarck, Otto von, 30 Mitteleuropaische Wirtschaftstag,
Blomberg, Werner von, 194, 279, 283, 236
302, 316 Codreanu, Corneliu, 243
Bluher, Bernhard, 123, 128, 231 consumer goods, 75, 77, 80, 102, 174,
Bor mines, 248, 273, 299, 313, 316, 320, 198, 213, 217, 304, 31924
328 corporatism, 71, 151
Bormann, Martin, 304 Coudenhove-Kalergi, Richard, 144
Bramstedt, Paul, 74, 75 cultural diplomacy
Brandsch, Rudolf, 99101, 234 advertising, 42, 68, 72, 76, 81, 83, 85,
Bratianu, Vintila, 159 86, 93, 101, 116, 130, 212, 226, 229
Braudel, Fernand, 71 educational exchange, 8, 16, 108, 109,
Brentano, Lujo, 145, 242 115, 118, 11921, 128, 132, 135,
Brest-Litovsk, Treaty of, 13, 28, 47 227, 23340, 245, 249, 277, 284
Briand, Aristide, 162 film, 85, 93, 102, 116, 131, 137, 212,
Bruning, Heinrich, 138, 140, 1623, 167 224, 225, 232
Bucharest, Treaty of, 48 Foreign Office, 34, 36, 40, 113, 114,
Bulgaria 11718, 121, 123, 224, 226
economic policy, 54, 117, 141, 212, German schools, 17, 38, 40, 107,
214, 217, 237, 269, 27981, 328 11112, 114, 119, 122, 125, 128,
economic structure, 197, 198, 270 132, 222, 235, 236
First World War, 479, 267 language promotion, 40, 108, 118, 121,
relations with France, 44, 108, 273 133, 227, 298
relations with Germany, 39, 42, 47, 54, Mitteleuropa-Institut, 16, 110, 128,
68, 82, 878, 11011, 126, 12933, 1303, 135, 157, 177, 222, 229, 233,
134, 142, 162, 174, 212, 216, 232, 235, 238, 249
237, 245, 2727, 288, 2978, 302, Mitteleuropaische Wirtschaftstag, 109,
309, 313, 328 128, 157, 165, 229, 235, 237, 249,
Bulow, Bernard von, 162, 1657, 169 297
Burma, 258, 269, 287, 335 radio, 85, 93, 102, 224, 336
374 Index
cultural diplomacy (cont.) economic blocs, 33, 36, 66, 81, 111, 140,
technology, 20, 91, 111, 116, 123, 131, 143, 147, 149, 151, 161, 163, 169,
157, 212, 232, 336 175, 262, 333
currency controls, 139, 160, 200, 216 Britain, 257
Curtius, Julius, 162, 165, 167, 169, 176 economic development, 253, 262, 288,
customs union, 117, 139, 142, 144, 290
14753, 160, 163, 1678, 169, 174, Reichsmark bloc, 182, 191, 196, 199,
188, 297, 309 206, 216, 223, 228, 237, 297, 331,
Cuza, Alexander, 226, 243 339
Cvetkovic, Dragisa, 312 economic dependency, 7, 14, 17, 22, 70,
Czechoslovakia, 54, 100, 109, 114, 120, 74, 106, 135, 137, 142, 155, 174,
123, 126, 129, 143, 144, 145, 155, 183, 220, 255, 256, 288, 305, 3313,
156, 1601, 206, 220, 232, 274, 277, 336
332 economic development
backwardness, 79, 80, 241, 267, 272,
DAAD Deutscher Akademischer 285, 334
Austauschdienst, 109, 115, 224 British Empire, 25762
educational exchange, 132, 233, 235, export-led growth, 17, 95, 96, 97, 177,
249 219, 247
Mitteleuropaische Wirtschaftstag, 236, Germany, 145, 149, 219, 254, 256,
238 262, 283, 333
Propaganda Ministry, 227 import-substitution, 95, 259
Daitz, Werner, 303 industrialization, 95, 135, 145, 259,
Danube River, 2, 52, 54, 62, 94, 114, 263, 264, 285, 286, 297
124, 133, 253, 264, 274, 278, 299, overpopulation, 261, 265, 271
308 Romania, 16, 95, 97, 256, 284, 290,
Danubian Federation, 160 294, 301, 309, 321, 332, 334, 338
Darre, Walther, 176, 189, 192 Southeastern Europe, 2, 16, 22, 137,
Dawes Plan, 113, 146, 149 145, 163, 174, 177, 223, 243, 247,
Dencker, C.H., 239, 276 252, 255, 256, 26277, 284, 286,
development policy, 5, 135, 171, 223, 254, 287, 290, 298, 306, 331, 334, 338
283, 298, 331, 334 technology, 143, 177, 248, 255, 261,
agricultural mechanization, 275 267, 272, 277, 298, 333
Aryanization, 223, 242 underdevelopment, 5, 188, 295, 322
Britain, 257 Yugoslavia, 16, 256, 279, 284, 290,
empires, 21, 36, 333 338
German ideas of, 17, 177, 252, 262, Economics Ministry, 80, 126, 149, 264,
339 272, 305
mining, 277 bilateral trade, 175, 188
Romania, 95, 332 chambers of commerce, 99
Southeastern Europe, 145 economic bloc, 169
soybeans, 274 economic development, 275, 278
trade, 142, 219, 247 economic policy, 140, 143, 156, 297
World War II, 299, 306, 308 Great Depression, 187
Dietrich, Hermann, 138, 333 Leipzig trade fair, 210
Duisberg, Carl, 166 Mitteleuropaische Wirtschaftstag, 145,
162, 171, 280
Eastern Europe, 13, 23, 28, 33, 35, 47, 50, pan-European federation, 151
51, 70, 75, 109, 115, 120, 126, 143, Esch, M., 122
160, 222, 223, 225, 286, 290, 303, Ethnic German Liaison Agency, 225
330 Ethnic Germans. See German minorities
German attitudes toward, 67, 334,
41, 221, 247, 251, 271, 338 Fabri, Friedrich, 31
Eberhardt, Rudolf, 568 fascism, 181, 243, 285, 296, 332
Ebert, Friedrich, 73 Ferry, Jules, 36
Index 375
Finance Ministry, 187, 227, 321 Saxony, 75, 115, 133

food supply, 34, 260, 328 terms of trade, 45, 199, 337
Germany, 39, 194, 197, 272, 292, 301, Foreign Trade Association, 63, 146
307, 318, 325 formal empire
Yugoslavia, 317, 318, 323 definition, 89
Foreign Office, 62, 67, 132, 143, 169, 182, history of, 18, 28, 287
233, 282, 309, 315 Hitler, Adolf, 2, 18, 182, 197, 251, 330,
Aryanization, 240, 244, 250 339
chambers of commerce, 98, 204 relation to hard power, 28, 48, 182
consular office / consuls, 29, 5662, 65, relation to soft power, 2, 9, 18, 182,
67, 68, 80, 83, 93, 117, 220, 228, 197, 287
230, 237, 316 Foundation for German Regional Folk and
consular system, 60 Cultural Research, 109
cultural diplomacy, 40, 113, 117, 121, Four-Year Plan
224 currency, 182, 184
economic bloc, 156 Goring, Hermann, 1945, 196, 198
economic development, 263, 272 problems with, 195, 271
economic information, 56 Romania, 198
economic policy, 140, 175, 188, 297 Yugoslavia, 198
Great Depression, 158, 162 France
Leipzig trade fair, 81, 89 Briand Memorandum, 162
Mitteleuropa-Institut, 125, 128 cultural diplomacy, 14, 40, 107, 112,
Mitteleuropaische Wirtschaftstag, 144, 11723, 128, 132, 236
149, 171, 236, 237, 278 economic policy, 14, 18, 53, 87, 158,
pan-European federation, 150 160, 274
Weltpolitik, 34, 38, 42 Fonds dInvestissement pour le
foreign trade, 136 Developpement Economique et
balance of payments, 141, 158, 186, Social, 255
190, 229, 263 foreign investment, 53, 121, 159,
bilateral treaties, 142, 157, 163, 255
16770, 175, 182 foreign policy, 32, 36, 37, 108, 154,
clearing agreements, 16, 188, 190, 194, 159, 169, 175, 193, 253
196, 198, 201, 206, 304 Great Depression, 171, 173
exploitation, 4, 7, 138, 153, 331 Little Entente, 53, 123, 236, 288, 290
GermanRomanian Chamber of relations with Germany, 30, 32, 150,
Commerce, 100, 101 156, 163
Germany, 2, 5, 10, 14, 18, 39, 49, 63, relations with Southeastern Europe, 14,
6871, 75, 80, 1026, 136, 141, 146, 53, 55, 87, 88, 108, 11723, 159,
148, 153, 176, 182, 183, 185, 190, 177, 210, 283, 332
191, 201, 206, 211, 229, 238 universities, 40, 108, 120
Germany and Southeastern Europe, 44, World War II, 274, 292, 2959, 306,
54, 89, 102, 129, 142, 153, 163, 167, 310
175, 202, 206 Franges, Otto, 161, 300
Hitler, Adolf, 18, 176, 1868, 194, Freytag, Gustav, 33
196 Freytag, Hans, 113
imperialism, 2, 10, 39, 142, 153, 238, Friedrich Krupp AG, 78, 100, 214, 242,
331 273, 280, 316
information, 62, 129, 167, 183, 211 Fruh, Cornelio, 935, 1012
legal system, 63, 70, 83, 120, 15960,
201, 308 Gallagher, John, 9
Leipzig trade fair, 76, 211, 217 German Academy, 109, 122, 133,
networks, 11, 14, 15, 29, 60, 66, 69, 80, 227
142, 167, 175, 190, 211, 331 German Association for Chambers of
protectionism, 16, 81, 114, 147, Industry and Trade, 70, 74, 84, 99,
14953, 167, 176, 188, 210, 284 151, 229
376 Index
German Association of Craftsmen Munich, 4, 42, 109, 111, 112, 126,

(Deutscher Werkbund), 36, 111 133, 191, 247, 285, 293
German Democratic Party, 124, 146 Prussia, 27, 33, 36, 76, 112, 146, 227,
German Foreign Institute (Deutsches 233
Ausland-Institut DAI), 109, Ruhr, 14, 79, 124, 130, 146, 165, 166,
114 206, 278
German minorities Saxony, 14, 36, 6881, 91, 102,
cultural diplomacy, 38, 50, 109, 114, 10710, 11518, 1237, 1304,
117, 127, 128, 133, 136, 177, 221, 1367, 184, 202, 2067, 218, 2315,
225, 233 267, 307, 336
educational exchange, 109, 114, 121, Thuringia, 75, 76
177, 221, 233 Gesemann, Gerhard, 242
history of, 2, 3, 20, 38, 109 globalization, 1, 21, 27, 34, 47, 113, 139,
Hitler, Adolf, 225, 251, 314 147, 175, 182, 183, 207, 219, 254,
Mitteleuropa-Institut, 10911, 132, 274, 285, 290, 331, 333
133, 177 Goebbels, Joseph, 224, 264
Mitteleuropaische Wirtschaftstag, 16, cultural diplomacy, 227
145, 222, 235, 238 Leipzig trade fair, 240, 304
revanchism, 109, 221, 253 Mitteleuropa-Institut, 231
Romania, 17, 49, 62, 69, 94, 96, 99, Goerdeler, Carl, 193, 194, 302
102, 106, 114, 121, 132, 206, 225, Goga, Octavian, 243
233, 236, 244 gold standard, 21, 108, 185, 258
Yugoslavia, 17, 49, 69, 102, 106, 114, Goring, Hermann, 280, 282, 287,
132, 233, 236, 244, 319 299300, 307, 309, 316
German Peoples Party, 107 Four-Year Plan, 182, 1958, 282
German Trade Association for the Balkans Gothein, Georg, 18, 239, 333, 339
and the Orient, 43 cultural diplomacy, 136, 229
GermanAustrian Working Committee economic bloc, 147, 152, 176
(DeutschOsterreichischen economic development, 173
Arbeitsgemeinschaft DOAG), 165, Franco-German collaboration, 149
167 free trade, 147
GermanRomanian chamber of commerce Mitteleuropa-Institut, 123
(Deutsch-Rumanische Mitteleuropaische Wirtschaftstag, 145,
Handelskammer DRHK), 16, 69, 162, 164
70, 131, 177, 184, 332, 336 Gottling, Dr., 232
Aryanization, 244 Granitoid AG, 280
bilateral trade, 201, 205, 211, 217, Great Britain
304 Colonial Development Act of 1929, 22,
business network, 102, 219 255
decentralized industrial order, 218 Colonial Development and Welfare Act
foreign trade, 101 of 1940, 262
formation of, 98 colonies, 910, 19, 27, 37, 173, 222,
German minorities, 70, 102 253, 25662, 272, 286
Leipzig trade fair, 211 economic development policy, 14, 22,
reorganization, 202 36, 51, 173, 216, 25662, 26970,
Germany 288, 335
Dresden, 14, 16, 36, 43, 77, 80, 95, economic policy, 158, 185, 187, 278,
109, 111, 123, 1268, 130, 132, 279, 301, 335
1356, 231, 233, 234, 238, 245, exports, 21, 36, 52, 160, 173, 187, 215,
2478, 293, 303 288
Leipzig, 14, 16, 39, 42, 6898, 1016, First World War, 75
109, 111, 112, 117, 1258, 130, foreign investment, 52, 159
1334, 136, 157, 177, 184, 187, 193, foreign policy, 19, 108, 159, 193, 278,
2013, 20619, 231, 2335, 23941, 295, 301, 306, 335
24451, 265, 293, 298, 304, 336 Great Depression, 171, 175, 187
Index 377
Ottawa Accords of 1932, 156, 160, 259, Hamm, Eduard, 63, 73, 163, 166, 176,
262 333
relations with Germany, 30, 32, 40, Hantos, Elemer, 1245, 145, 1534
141, 150, 156, 173, 176 hard power, 1, 18, 23, 65, 106, 291
relations with Southeastern Europe, 14, Definition of, 8
52, 53, 55, 160, 273, 283 Germany 193945, 293, 294, 297,
sterling bloc, 185, 25662 329
World War II, 295, 301, 306 Germany before 1918, 13, 28, 44,
Great Depression 48
bank crisis (1931), 169, 185 Harden, Maximilian, 32
France, 139, 143, 159, 161, 169, 171, Heinhold, Max, 230, 236, 280
173, 177, 284, 288 Heinrichsbauer, August, 303
Germany, 1, 81, 101, 103, 106, 136, Helfferich, Karl, 35
138, 1403, 158, 161, 1625, 170, Hermann, Felix, 280
1757, 181, 185, 203, 206, 212, 228, Heydendorff, Conrad von, 209, 210,
256, 268, 288, 304, 331, 340 212
gold standard, 185, 258 Himmler, Heinrich, 23, 251, 292, 305,
Great Britain, 139, 143, 158, 171, 173, 306, 314, 338
187, 256, 258, 260, 335 Hindenburg, Paul von, 47, 65, 181
Romania, 98, 101, 15862, 176, 206, Hirschman, Albert, 1011, 138, 183, 217,
285, 288 218, 255, 331
stock market crash (1929), 139 Hitler, Adolf, 1, 142, 175, 177, 207, 224,
United States, 139, 158, 164, 176, 268 263, 281, 294, 297, 302, 303, 331
Yugoslavia, 101, 15862, 176, 208, anti-Semitism, 220, 245
285, 288 autarchy, 191
Greece, 68, 71, 878, 134, 208, 217, 230, economic policy, 181
232, 237, 297, 309, 325 empire, 18, 295, 325, 330
Greiner, Erich, 2247 Foreign Office, 227
Grgacevic, Jasa, 208 foreign policy, 251, 288
Groener, Wilhelm, 112 foreign trade, 186
Gross, Hermann, 18, 956, 134, 334, 339 Lebensraum, 292, 338
economic development, 247, 2667, Leipzig trade fair, 240
286 Mutschmann, Martin, 231
overpopulation, 265 Nazi New Order, 23
racial views, 2701 pan-Germanism, 221, 251, 253
Gross, Walter, 2246 rearmament, 183, 193, 217, 257, 277
Grossraumwirtschaft, 253, 297, 303, 334 remilitarization of the Rhineland, 210
Grottkopp, Wilhelm, 334 Romania, 308, 320
Gwinner, Arthur, 35 Yugoslavia, 311, 317, 322
Hoffmann, Walther, 229, 230, 232, 234,
Habsburg Empire/Austria-Hungary, 13, 333, 339
20, 38, 41, 43, 47, 49, 51, 534, 61, advertising, 130
70, 96, 99, 114, 124, 146, 153, 157, cultural diplomacy, 107, 116, 129, 136
223, 322 Mitteleuropa-Institut, 123
Hahn, Max, 18, 184, 275, 288, 313, 316, Hoover, Herbert, 152, 260
339 Hugenberg, Alfred, 175
economic bloc, 170, 172, 254 Humboldt Foundation, 109, 115, 121,
economic development, 176, 266, 269, 132, 233, 234
286 Hungary, 2, 54, 60, 111, 117, 124, 126,
educational exchange, 236 129, 1416, 153, 155, 160, 162,
mining, 278 1678, 174, 189, 198, 212, 213, 216,
Mitteleuropaische wirtschaftstag, 232, 237, 274, 277, 290, 296, 302,
164 313, 325, 328
Neuhausen, Franz, 282, 302 Hunger Plan, 307
raw materials, 197 Hunke, Heinrich, 264, 297, 334
378 Index
IG Farben, 62, 95, 141, 166, 202, 207, Jews

251, 281, 286 and imperialism, 22, 338
Mitteleuropaische Wirtschaftstag, 188, anti-Semitism, 120, 223, 230, 287
278 Aryanization, 238, 250, 256, 298, 309,
Romania, 176, 299 334, 339
sales network, 58, 82, 93 Hitler, Adolf, 18
soybeans, 274 Romania, 97
Yugoslavia, 316 trade networks, 17, 71
Ilgner, Max, 278 World War II, 293, 294
Imperial Board for Technology and Yugoslavia, 314
Agriculture, 166, 168, 239, 267, Jorga, Nicolas, 131
276
Imperial Federation for Catholic Germans Kaiser Wilhelm II, 2, 31, 34, 65, 111
Abroad, 224 Keynes, John Maynard, 50
Imperial Federation for German Industry, Kohler, Raimund, 18, 76, 106, 128, 210,
70, 73, 74, 80, 84, 151 212, 233, 339, 340
India, 27, 259, 2601, 335 decentralized industrial order, 79, 130
inflation, 29, 49, 53, 59, 645, 728, 120, foreign trade, 80, 102
186, 294, 295, 317, 31924, 325, Leipzig trade fair, 73, 81
328, 340 Romania, 210
informal empire, 65, 143, 177, 182, 184, Konradi, Artur Adolf
219, 252, 254, 255, 287, 290, 293, anti-Semitism, 244
300, 305, 306, 308, 324, 328, 336, business network, 203
340 GermanRomanian chamber of
definition, 812 commerce, 2038
history of, 2, 8, 12, 448 Leipzig trade fair, 210
relation to hard power, 2, 8, 18, 23, Kontinental Ol AG, 299, 310
294, 340 Kosier, Ljubomir, 230, 236
relation to soft power, 2, 8, 23, 48, 142, Koster, Adolf, 1213, 156
175, 293, 294, 297, 333, 340 Krosigk, Johann Ludwig Graf Schwerin
Institut fur Mittel- und Sudosteuropaische von, 187
Wirtschaftsforschung IMSWf, 95,
109, 128, 135, 177, 245, 247 Lamprecht, Karl, 28, 3940, 412, 111
area studies, 133 Langnamverein, 164
cultural diplomacy, 110, 111 League of Nations, 260
economic complementarity, 137 collective security, 50, 65, 137
educational exchange, 235 Germany, 50, 113, 149, 162
formation of, 127 internationalism, 20, 108, 293
Institute for Economic Research (Institut minority rights, 223
fur Konjunkturforschung IFK), 78 Southeastern Europe, 159
Interior Ministry, 36, 125, 126 Stresemann, Gustav, 150
international loans and debts, 14, 44, 49, Lebensraum, 2, 3, 33, 194, 251, 292, 338,
51, 53, 63, 878, 141, 150, 152, 340
15960, 163, 1858, 223, 257, 274, Leipzig trade fair, 16, 71, 103, 128, 157,
310, 320 201, 249, 336
internationalism, 21, 111, 137, 223, 293 advertising, 85
Iron Guard, 226, 296, 308, 312 anti-Semitism, 240, 241
Italy, 14, 54, 63, 87, 118, 119, 137, 143, Belgrade office, 68, 82
223, 31213, 327 bilateral trade, 202, 207, 217
business network, 81, 102, 177, 212,
Jackh, Ernst 219
cultural diplomacy, 40, 115 collective exhibition, 86, 94, 208
German minorities, 38, 50 foreign trade, 89
liberal Weltpolitik, 12, 35 German minorities, 70, 94, 97, 102
Japan, 74, 137, 171, 194, 223, 2701, GermanRomanian chamber of
274 commerce, 206, 211
Index 379
history of, 71 formation of, 123

Mitteleuropa-Institut, 233 Propaganda Ministry, 227
National Socialism, 240 reorganization, 230
Romania, 92, 202, 209 Romania, 131
Saxony, 79 Saxony, 127
Second World War, 304 Second World War, 303
technical exhibition, 213, 218 Mitteleuropaische Wirtschaftstag, 16, 107,
Weimar Republic, 72 128, 143, 146, 162, 175, 182, 184,
Yugoslavia, 82, 208 224, 230, 251, 253, 265, 285, 294,
Leipziger Vierteljahresschrift fur 297, 304, 309, 325, 336
Sudosteuropa, 246 agrarian development, 266, 275
Lissa mines, 279 anti-semitism, 243
Locarno, Treaty of, 113, 148, 150 Aryanization, 239, 241
Lorch, Walter, 313, 334, 339, 340 bilateral treaties, 167
anti-Semitism, 243 cultural diplomacy, 109, 222, 229,
educational exchange, 233, 234, 235
238 decline, 302
informal empire, 307 economic bloc, 143, 157, 170, 188,
Leipzig trade fair, 94 237, 254
Mitteleuropa-Institut, 231 economic development, 171, 177, 254,
National Socialism, 303 257, 262, 283, 285, 290
Romania, 233 educational exchange, 236, 249, 297
Loucheur, Louis, 1501 foreign trade, 148, 153
Ludendorff, Erich, 47, 65 founding of, 143
Lujanovitz, Milan, 89, 101 informal empire, 306
mining, 272, 276
Macek, Vladko, 312 Mitteleuropa-Institut, 124
Magee, Gary, 19 Mitteleuropaische Wirtschaftsverein,
Manoilescu, Mihail 43
collaboration with Germany, 301 oil, 281
economic development, 254, 286 racial views, 287
foreign trade, 214 reorganization of, 164
Leipzig trade fair, 210 soybeans, 274
Mitteleuropa-Institut, 234 World Economic Conference of 1927,
Manolescu-Strunga, J., 338 154
Marx, Karl, 241, 266 Mitteleuropaische Wirtschaftsverein, 37,
Marz, Johannes, 59, 76 42, 145
Massow, Ewald von, 237 MolotovRibbentrop agreement, 296, 312
McDonald, Ramsay, 259 Moltke, Helmut von, 324
Meinl, Julius, 1434 Montania AG, 279
Mercantile Board for the Siebenburgen Morgan, J.P., 152
Region, 94, 101, 103 Morsbach, Adolf, 115
Mihailovic, Draza, 314 Muller, Alexander, 43
Mission Laque, 40 Muller, Alexander von, 133
Mitteleuropa, 37, 41, 657, 70, 124, 142, Muller, Lene, 2745
153, 156, 167, 1823, 197, 216, 219, Mutius, Gerhard, 80, 99, 156, 157, 162
254, 284, 3335, 33940. See also Mutschmann, Martin, 207, 231, 235
Central Europe
Mitteleuropa-Institut, 16, 95, 107, 109, National Liberal Party, 35, 37
111, 132, 157, 177, 222, 224, 238, National Socialism
251, 304, 336 Aryanization, 223, 230, 23845, 2501,
anti-Semitism, 243 309, 339
cultural diplomacy, 128, 132, 135, 229 economic policy, 46, 176, 177,
economic complementarity, 137 17983, 1936, 199202, 208, 2547,
educational exchange, 233, 249 28790, 295303, 31011, 31619,
foreign trade, 130 3229
380 Index
National Socialism (cont.) Pasic, Nikola, 87, 281

foreign policy, 12, 1719, 223, 142, Pasic, Rada, 254, 281
165, 1834, 18893, 1979, 21819, Pavelic, Ante, 314
2208, 2312, 2534, 3057, 3401 Peters, Carl, 31
Great Depression, 1848 Petrescu-Comnen, Nicolae, 100
World War II, 2901, 2925, 3034, Pilja, Milivoj, 199
31215, 330, 338 Pirin AG, 281
Naumann, Friedrich, 32, 37, 46 Poensgen, Hellmuth, 166
navalism, 12, 28, 40 Poland, 33, 114, 120, 123, 143, 146, 154,
Nedic, Milan, 313, 318 156, 167, 220, 223, 270
Neubacher, Hermann, 294, 340 German invasion of, 1939, 251, 273,
oil, 301 290, 293, 2958, 301, 307, 338
Romania, 30911, 3246 German view of, 3, 109, 221, 247, 251,
Neuhausen, Franz, 313, 340 271, 306, 338
corruption, 31516 German World War I occupation of, 47
Hahn, Max, 282, 302 Posse, Hans, 1567, 163, 167, 16871,
Mitteleuropaische Wirtschaftstag, 302 176, 334
Yugoslavia, 294, 316, 318 Potopeanu, Gheorghe, 300
Neumann, Erich, 265 Prebisch, Raul, 5
Neurath, Konstantin von, 191, 227, 283, Paul, Prince of Yugoslavia, 279, 296
302, 316 producer goods / capital goods, 68, 75, 77,
New Plan 91, 102, 174, 217
currency, 188, 191, 193 machine tools, 77, 91, 149, 160, 213,
Leipzig fair, 187 332
problems with, 217 Progressive Party, 37
Romania, 188, 217 Propaganda Ministry, 221, 224, 227, 231,
Schacht, Hjalmar, 182, 186, 191, 192, 264
196
Yugoslavia, 188, 217 race / racism, 6, 18, 23, 47, 220, 224, 227,
Northeast Ethnic German Research 294, 304, 314, 335, 339, 341
Society (Nord- und Ostdeutsche and Eastern Europe, 47, 271
Forschungsgemeinschaft), 225 and Jews, 223, 239, 241
NSDAP (Nazi Party), 1, 17, 18, 22, 142, and Southeastern Europe, 247, 251,
182, 186, 189, 193, 196, 221, 224, 271
2258, 231, 237, 239, 241, 263, 264, economic development, 256, 269, 287
273, 282, 287, 340 railroads, 35, 44, 48, 51, 71, 243, 259,
Nye, Joseph, 9, 222 278, 309, 315
Rathenau, Walther, 35
Olshausen, Franz, 68, 84, 156 Ratzel, Friedrich, 33
Ostforschung, 221, 247 raw materials
Ottoman Empire, 12, 35, 44, 51, 223, aluminum, 213
242, 246, 265 antimony, 248, 255, 279, 283
bauxite, 3, 135, 191, 195, 211, 216,
Paneuropa / pan-European federation, 217, 248, 279, 290, 312, 315, 325,
131, 140, 144, 14755, 163 331
pan-Germanism, 6, 12, 13, 19, 225, coal, 37, 47, 149, 154, 160, 195, 200,
228 281, 295, 306, 310, 315, 325, 326,
cultural diplomacy, 17, 99, 223 328
Hitler, Adolf, 221, 251 copper, 3, 48, 135, 191, 195, 197, 200,
Mitteleuropaische Wirtschaftstag, 238 211, 216, 248, 261, 272, 278, 279,
Nazis, 221, 223, 251 280, 290, 295, 312, 316, 323, 325,
Ostforschung, 221 331
Pan-German League, 33, 41 grain, 3, 17, 44, 135, 151, 158, 160,
Volkisch, 18 161, 163, 167, 171, 176, 181, 189,
Panonia AG, 281 195, 212, 216, 261, 275, 286, 292,
Paris peace talks, 4850 301, 307, 315, 318, 321, 332, 337
Index 381
iron, 37, 47, 77, 91, 148, 149, 151, Great Depression, 160, 285, 337
154, 166, 169, 182, 191, 195, 216, oil, 190, 216, 274, 281, 284, 30811,
300, 315, 325 312, 325, 326, 332, 340
manganese, 3, 135, 191, 195, 211, 212, Ploesti, 308, 310, 312, 340
248, 325, 331 relations with Austria, 612, 143,
oil / petroleum, 3, 17, 44, 96, 135, 161, 1545
182, 190, 193, 195, 197, 211, 216, relations with Britain, 14, 54, 55, 160,
265, 281, 290, 293, 299, 308, 310, 274, 306
325, 331 relations with France, 14, 53, 55,
zinc, 195, 200, 209, 248, 272, 273, 108, 118, 1202, 176, 200, 274,
278, 280, 281, 290, 323 284
rearmament, 5, 23, 1813, 187, 1914, relations with Germany, 7, 14, 1618,
196, 206, 216, 273, 277, 339 23, 29, 54, 589, 636, 67, 71,
Reichsbank, 145, 182, 216, 262, 92106, 109, 111, 11819, 126,
287 12835, 137, 142, 145, 156, 163,
bilateral treaties, 264 1679, 177, 1834, 197206, 20814,
clearing agreements, 190 217, 219, 2223, 229, 2318, 2425,
croatia, 320 24951, 254, 256, 263, 28891,
gold reserves, 193 295302, 325, 33640
Great Depression, 185 Siebenburgen Saxons, 94
New Plan, 188 Transylvania, 16, 20, 38, 49, 62, 69,
Romania, 308, 321 92100, 1023, 114, 119, 121, 1345,
World War II, 297 161, 184, 203, 2068, 226, 231, 234,
Reichslandbund, 151, 163, 168, 296, 309, 312, 336
175 World War I, 29, 4751
Reichsnahrstand, 189, 192 Rosenberg, Alfred, 223
Remme, Karl, 122 Rostow, W.W., 266
reparations, 4850, 51, 59, 146, 149 Roume, Ernst, 36
Ries, L.W., 239, 276 Royal Prussian Colonization Commission,
Riezler, Kurt, 41, 111 33
Ritter, Karl, 150, 156 Russia, 3, 6, 7, 13, 27, 28, 34, 37, 47, 51,
Robinson, Ronald, 9 75, 114, 125, 147, 203, 221, 251,
Rodbertus, Carl, 30 274, 292, 307, 322, 338
Rohrbach, Paul, 3842, 111, 133
cultural diplomacy, 28, 39, 115 Salisbury, Robert, 37
German minorities, 38 Sauckel, Fritz, 317
liberal Weltpolitik, 12 Schacht, Hjalmar, 18, 101, 145, 182, 200,
Romania 265, 337
agriculture, 88, 105, 142, 160, 161, economic development, 262,
174, 18990, 248, 265, 26772, 275
2745, 307, 321, 324, 328 foreign trade, 182, 192, 196, 216
anti-Semitism, 22, 220, 2256, 2412, New Plan, 186
245, 334 removal from power, 195
BrasovKronstadt, 92, 94, 103 Scheidemann, Philipp, 146
Bucharest, 16, 29, 54, 59, 60, 64, 67, Schiele, Martin, 163, 168
69, 80, 925, 99102, 118, 122, 131, Schlenker, Max, 1645
157, 160, 199, 2025, 207, 210, 211, Schmitt, Kurt, 187
226, 231, 233, 244, 250, 275, 284, Schnellbach, Otto, 235, 337
290, 296, 299, 304, 30811, 321 Schreiber, Georg, 11415, 136
economic policy, 11617, 141, 176, Schubert, Carl von, 150
253, 31922 Schuster, Hans, 829, 103
economic structure, 3, 1922, 44, Schutzstaffel SS, 305, 306, 338
4554, 623, 80, 15862, 26772, Siemens AG, 58, 82, 141, 166, 188, 207,
2846, 3356 237, 242
German occupation, 23, 2935, Singer, Hans, 5
30811, 3268, 330 Smith, Adam, 147
382 Index
soft power, 2, 3, 18, 22, 40, 48, 106, 142, Tardieu, Andre, 160
219, 228, 254, 330, 333, 336, 339 tariffs, 30, 37, 51, 88, 95, 98, 139, 147,
Aryanization, 241 149, 152, 154, 158, 167, 169, 175,
definition of, 8, 11, 110, 222 183, 185, 190, 200, 201
Germany 191839, 67, 69, 102, 136, Thierfelder, Franz, 133
175, 177, 223, 250, 284 Thompson, Andrew, 19
Germany 193945, 293, 295 Tirpitz, Alfred von, 12, 31, 65, 111
Germany before 1918, 12, 29, 65 Tito, Josef, 315
networks, 16, 137 Titulescu, Nicolae, 200, 210
SOJA AG, 275, 301 Todt, Fritz, 309
Sombart, Werner, 181, 242 transaction costs
South America, 10, 27, 40, 42, 74, 81, information, 11, 137
126, 158, 163, 194 networks, 86, 101, 137
Southeast Institute, Munich, 133 trust, 86, 101
Southeast Institute, Leipzig, 95, 247, Treitschke, Heinrich, 33
251 Trendelenburg, Ernst, 145
Southeastern Europe. See also Bulgaria, Trepca mines, 209, 248, 273, 278, 313,
Yugoslavia, Romania, Hungary 328
economic structure, 2, 43, 44, 514, Turkey, 35, 39, 40, 68, 87, 129, 134, 232
105, 155, 197, 268, 272, 286, 288,
314, 334, 336 United States, 109, 142, 152, 158, 163,
German views of, 3, 14, 2423, 247, 171, 175, 187, 281
2512, 339 as economic bloc, 1921, 37, 66, 139,
World War I, 15, 29, 47, 48, 54, 59, 95 149, 150, 176, 185, 223, 333
World War II, 294, 304, 30819, 322, economic development programs, 4, 51,
325, 328, 339, 340 216, 252, 255, 260, 335, 339
Soviet Union, 291, 296, 301, 304, 307, mass market, 148, 150, 157, 183, 253,
315, 333, 341 258
soybeans, 182, 190, 193, 195, 248, 255, mass production, 4, 14, 37, 79, 144,
26971, 2746, 283, 286, 288, 336 149, 151
Spranger, Eduard, 126 universities, 9, 17, 40, 107, 108, 111,
Stahl, Kurt, 67, 82 11923, 126, 1312, 136, 191, 222,
Standard Oil, 281 228, 230, 233, 2357, 239, 245, 250,
Steaua Romana, 44, 54, 274 284, 298
Stetten, Walter, 99101, 131, 203 Berlin, 112, 243
Stieve, Friedrich, 2268 Bornim, 239, 276
Stojadinovic, Milan, 254, 263, 279, 282, Bucharest, 231
285, 290, 332, 338 Leipzig, 111, 125, 128, 235
Strencioch, Herbert, 1235 Munich, 112
Stresemann, Gustav, 37, 106, 154, 175, Zagreb, 161
333
Atlantic orientation, 157 Valjavec, Fritz, 247
cultural diplomacy, 113 Versailles, Treaty of, 13, 501, 54, 120,
death, 153 146, 149, 156, 177, 225
economic policy, 140 Article 18, 63, 92, 98
Franco-German collaboration, 14952 Voss, Paul, 18, 79, 106, 339
German minorities, 114 advertising, 212
Mitteleuropa-Institut, 127 Belgrade office, 68, 813, 207
Mitteleuropaische Wirtschaftstag, 145, foreign trade, 102
162 Romania, 209, 210
Sudosteuropa-Gesellschaft, 298, 303 Yugoslavia, 208
Sudost-Montan AG, 299, 316
Switzerland, 51, 53, 89, 119, 156 Wagemann, Ernst, 266
synthetic products, 193, 195, 200, 269, Walbeck, Gottfried, 63, 68
281 Waldeck, Rose Goldschmidt, 296
Index 383
Weber, Max, 33, 242 legacy of, 1, 13, 20, 29, 38, 4854, 59,
Wehrmacht 70, 95, 109, 112, 171, 294, 321, 331,
inflation, 318, 320, 3214 340
occupation costs, 299, 318, 320, 326, World War II
327 Eastern Front, 304, 307, 324, 330,
Romania, 294, 308, 311, 327 338
Yugoslavia, 31316, 318, 326, 327 fall of France, 2959, 303, 310
Weimar Republic inflation, 31924, 340
economic policy, 58, 5960, 6871, Nazi occupation of Serbia, 294, 312,
757, 7980, 83, 91, 136, 141, 1479, 315, 319, 320, 326, 327
1513, 1613, 1756, 333 Nazi occupation of Western Europe,
First World War, 4951 273, 2923, 305, 325
foreign policy, 969, 1078, 11112, Nazi occupation of Yugoslavia, 2945,
114, 11721, 128, 133, 227, 239 31119, 328, 339, 340
Great Depression, 1558, 181, 220 Nazi relations with Romania, 294,
Weltpolitik 296, 304, 30811, 322, 325, 339,
after 1918, 65, 142, 165 340
before 1918, 2, 1213, 2742, 115 Operation Barbarossa, 2923, 304, 307,
hard Weltpolitik, 1213, 2833, 65 340
soft Weltpolitik, 12, 28, 3442, 44, 67, Worner, Gerhard, 233
102, 115, 142, 165
Wiedenfeld, Kurt, 1258, 1337, 235 Young Plan, 186
Wilhelmine Empire, 7, 1213, 20, Yugoslavia
2744, 109, 112, 115, 136, 147, 162, agriculture, 86, 105, 135, 142, 160,
296 174, 176, 189, 200, 235, 239, 248,
Wilmowsky, Tilo Freiherr von, 18, 182, 2628, 2725, 285, 288, 318, 324,
279, 290, 302, 309, 313, 324, 339 328, 337
agricultural development, 266, 275 anti-Semitism, 2445
bilateral trade, 167, 197 Banat, 20, 49, 62, 68, 316, 31819
economic development, 177, 254, Belgrade, 16, 29, 51, 52, 54, 60, 67, 69,
286 8290, 95, 101, 118, 1212, 132,
educational exchange, 236, 297 156, 159, 161, 190, 197, 199, 207,
informal empire, 306 218, 227, 230, 235, 245, 279, 282,
Mitteleuropaische Wirtschaftstag, 166 284, 304, 312, 316, 319
Wilson, Woodrow, 21, 49 Bosnia, 87, 214, 292, 314, 327
Winterfeld, Ludwig von, 166 civil war, 23, 294, 31416, 318, 325,
Wintershall AG, 281, 300 340
Wittke, Wilhelm, 75 Croatia, 7, 17, 20, 22, 49, 62, 63, 69,
Woermann, Emil, 298 856, 102, 111, 132, 222, 234, 238,
Wohlthat, Helmut, 290, 330, 332, 334 244, 2456, 2501, 270, 287, 294,
Wohlthat Accord, 290, 330, 332 296, 31218, 31929, 334, 339
Wolff, Julius, 28, 118, 203 economic policy, 86, 87, 135, 141,
Wolff, Otto, 269, 281 199, 21318, 237, 253, 27683,
World Economic Archive, Hamburg, 134 325
World Economic Conference (1927), 140, economic structure, 3, 514, 90, 96,
151, 153, 158, 164 105, 155, 197, 21318, 220, 2628,
World Economic Conference (1933), 176, 273, 288, 314, 317, 334, 336
223 First World War, 2930, 50
World Economic Institute, Kiel, 133 German minorities, 17, 49, 70, 97, 114,
World War I 233, 319
German occupation of Poland, 13, 47 German occupation, 23, 2945,
German occupation of Romania, 48, 31129, 3401
299 Great Depression, 15862, 285
inflation, 29, 49, 53, 645, 72, 76, 120, relations with Austria, 62, 67, 86, 143,
186 155
384 Index
Yugoslavia (cont.) Serbia, 29, 39, 44, 4750, 58, 68, 89,
relations with Britain, 14, 54, 55, 160, 111, 119, 147, 159, 234, 238, 250,
273, 295, 306, 332 287, 292, 294, 299, 31223, 3269
relations with France, 14, 52, 55, 87, Slovenia, 49, 68, 86, 121, 132, 294,
118, 1203, 159, 176, 273, 284, 295, 303, 31314, 318
332 Ustasha, 294, 31315
relations with Germany, 14, 1618, 54, Zagreb, 29, 61, 63, 67, 72, 837,
58, 8292, 1016, 111, 116, 129, 11819, 122, 132, 161, 245, 304,
142, 145, 156, 161, 1756, 1834, 320
18890, 199, 218, 223, 228, 230,
232, 241, 254, 256, 28891, Zajaca mines, 279
296302, 3303, 33740 Zenica Foundry, 214, 273

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German imperialism in Europe evokes images of military aggression and

s t e p h e n g. g r o s s is an Assistant Professor in the Department of

A full list of titles published in the series can be found at:

Cambridge University Press is part of the University of Cambridge.

This publication is in copyright. Subject to statutory exception

List of figures and tables page ix

Introduction: the foundations of soft power and informal

Part I German power in the Wilhelmine Empire

Part II Nazi imperialism

8 The Second World War: informal empire transformed,

5.5 Nutritional supply estimates from Institute of Business

IRELAND DENMARK LATVIA

Throughout the twentieth and twenty-first centuries Germanys prosper-

However, a third group, of businessmen, academics, publicists, and

wars in 1912 and 1913.3 In comparison to Western Europe, before

Scholarship on German trade and imperialism in

of development economics quickly generated criticisms of existing global

other words, portrayed German involvement in Southeastern Europe

13 Hans-Jurgen Schroder, Sudosteuropa als Informal Empire Deutschlands 19331939:

cultural and racial aspects of the Wilhelmine Empire, finding precedents

Informal empire Formal empire

Cultural or economic hierarchy Political hierarchy

Cultural or economic hierarchy Political hierarchy

Figure 0.1 Matrix of power

Soft power, informal empire, and the

from the periphery study in the universities of the core. An example of

enhance their military power. Second, through the influence effect,

26 Ibid., vii, 1734, 923.

privileging some groups at the expense of others. Soft power works, in

The trajectory of German soft power and

Despite Germanys general economic successes, before 1914 soft

Atlantic, community.35 Others, led by an eclectic group of German elites

legacy of German wartime occupation had left an atmosphere of distrust

When examined from this non-state perspective, different challenges

42 Carl Freytag, Deutschlands Drang nach Sudosten: der Mitteleuropaische Wirtschaftstag

preponderance in Southeastern Europe, it can also explain why many

43 The Yugoslavian ambassador to London, Joca Jovanovic: [Yugoslavia] should con-

German imperialism compared

imperial governments, and they largely subscribed to an ideology of pro-

thought, see David Armitage, Foundations of Modern International Thought (Cambridge

programs, which created bonds of dependency between the imperial core

principles of biological racism. With Operation Barbarossa in 1941, the

German power in the Wilhelmine Empire

The Germans excel in the sedulous adaptation of their manufactures to

Before 1914 the empires of Europe governed nearly two-thirds of the

changed, and Germans developed a variety of imperial repertoires or tra-

financial issues in GermanBalkan trade or the political ones trade

Hard-power imperial traditions

German unification, famously proclaimed Germany to be a satiated

including chief of staff Helmut von Moltke, began considering a preven-

The Wilhelmine tradition of a liberal Weltpolitik

industry, commerce, and exports rather than formal overseas colonies or

Wilhelmine cultural diplomacy

would attract Turkish, Bulgarian, and Serbian youth. Karl Lamprecht,

26 Kloosterhuis, Friedliche Imperialisten, 35; Duwell, Deutschlands auswartige Kulturpolitik,

By 191213, then, Jackh, Lamprecht, and Rohrbach were beginning

The institutions of civil society in the Wilhelmine Empire

36 Kloosterhuis, Friedliche Imperialisten, 7593, esp. 82. 37 Ibid., 497501.

their ideas through conferences, lobbying, and publications.38 The

38 Prof. Julius Wolff, Material concerning a Mitteleuropaischen Wirtschaftsverein, July

World War I: dashed visions of soft power and

42 David Hamlin, Constructing Interdependence: Grain, Capital, Petroleum (forthcoming),