german jews were superpatriots -- 10/16/18

Today's selection -- from The Warburgs by Ron Chernow. In the early 1900s, major Jewish banking families like the Warburgs of Hamburg and the Rothschilds of Frankfurt were still subject to great prejudice and excluded from much of German society. This led them to become hyperpatriotic, reasoning that to gain greater acceptance, they needed to go beyond their Christian banking contemporaries in supporting the state. And so it was that they participated vigorously in helping finance German colonial expansion in the early 1900s. But it was their high profile in helping the state that made them easy target for blame by rising right-wing parties for Germany's defeat in World War II, the hyperinflation of 1923, and Germany's Great Depression in the 1930s:

"[Warburg family head] Max Warburg attained eminence in the heyday of imperial intrigue, when statesmen picked countries ripe for exploitation on unfurled maps and bankers served their will. Private bankers were ideal channels for such covert action because they didn't answer to shareholders or publish balance sheets. They also prized intelligence and operated with sphinxlike discretion that mimicked diplomatic activity. The involvement of Jewish bankers in often sub-rosa colonial activity fed popular fantasies that they ran a secret empire, when, in fact, they operated under the strict guidance of the German Foreign Office. Like other private bankers, Jewish bankers mixed business and politics in a way that made them liable to a later political backlash.

"On the eve of World War I, Jewish bankers enjoyed such official favor as to make their later persecution the more perplexing to them. Some analysts have suggested that these Jews, still insecure at bottom, financed colonial expan­sion to certify their patriotism and to curry favor with the kaiser. If so, their talents were abundantly exploited. Service to the imperial state lashed them to Germany's presumed mission in the world.

"Max believed unhesitatingly that bankers should advance the overseas interests of their governments. Noting how his British counterparts stimulated an economic rebound from the Boer War, he observed in his bank's 1904 report, 'This shrewd merger of finance and politics didn't occur equally well in Germany.' A liberal imperialist who thought Germany needed colo­nies to sustain a booming economy and population, he wished to extend German power by peaceful settlement, not by military domination. A close friend of Colonial Secretary Bernhard Dernburg, Max boasted that no German bank more steadfastly supported colonial enterprises than his own. At Dem­burg's prompting, he cofounded the Colonial Institute in Hamburg to train Germans to run the country's colonies. As an institute adviser, he stressed that these pioneers must preserve their German identity in exotic settings. He also helped to cofound -- then twice rescued from bankruptcy -- a Tropical Hygiene Institute.

Max Warburg in 1904

"Max's colonial work strengthened his ebullient, enterprising presence in official Berlin. If his judgment was later badly clouded by patriotism, we must note that his early success was premised on government patronage. It was during its period of colonial involvement that M. M. Warburg & Co. leaped into the first rank of world banking, its balance sheet expanding from assets of 46 million marks in 1900, to 127 million marks In 1914.

"Germany was infused with a sense of manifest destiny about overseas development. Bismarck had displayed only grudging interest in colonies, regarding them as economic burdens that might spark friction with England and France. In contrast, Wilhelm II wanted to compete for colonies and bumptiously asserted German interests. With truculent pride and notable self-pity, German leaders deplored the discrepancy between their robust do­mestic economy and the relative paucity of their overseas holdings. As late­comers to imperial adventure, they tried to compensate by boldly exploiting opportunities to make inroads against the French and British.

"In 1904, Max joined a Deutsche Bank loan to the Imperial Ottoman Empire to bankroll the Baghdad railway. The next year, the Foreign Office lured him into tangled Liberian intrigue. After spurning loans from French and British banks to avoid submission to their governments, Monrovia appealed to Ger­many. Working with [his brother] Paul at [U.S. investment bank] Kuhn, Loeb, Max organized an international loan for Liberia to thwart England and guarantee a market for German goods, a loan so successful that most Liberian commerce ended up in German hands.' By 1907, M. M. Warburg & Co. tied for first place in securities issues among German banks, sharing top honors with the globe-straddling Deut­sche Bank.

"As the great powers jockeyed for influence in Asia and Africa, they formed syndicates with other creditor countries to regulate the competition. The elaborate cartel for China included Germany. By the late 1890s. HAPAG ran freight service there, and major Chinese ports swarmed with German mer­chants. In 1909, U.S. president William Howard Taft insisted that American banks join in financing Chinese railways. With [Kuhn, Loeb leaders] Jacob Schiff and Paul War­burg participating in the American group, Max was recruited by the German Foreign Office to ensure German-American harmony. He later said, 'We succeeded through our good offices, in constant contact with Washington and the Wilhelmstrasse, in achieving an understanding between America and Germany.' Max relished such a middleman role, which proved that international bankers could transcend national differences -- a fond Warburg belief."



Ron Chernow


The Warburgs




Copyright 1993 by Ron Chernow


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