Abstract
Multinational enterprises headquartered outside the United States have long had an impact on American economic development.1 German firms in the chemical industry were no exception and their impact was perhaps as profound as that of foreign firms in any other sector. This paper seeks to trace the pre-World War II history of the German chemical companies in the United States, putting them in the overall context of other multinational enterprises. At the end, we will very briefly summarize the conditions facing the German firms as they reentered the U.S. market after World War II.
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References
For the pre-1914 impact of foreign multinationals (as well as other foreign investment) on the U.S. economy, see Mira Wilkins, The history of foreign investment in the United States to 1914 (Cambridge, MA, 1989).
Specific writings on I.G. Farben and its predecessors in the United States include Verena Schröter, “Participation in market control through foreign investment: I.G. Farbenindustrie AG in the United States: 1920–1938,” in Alice Teichova, et al., Multinational enterprise in historical perspective (Cambridge, 1986), 171–84
Elisabeth Glaser-Schmidt, “Foreign trade strategies of I.G. Farben after World War I,” Business and economic history, 23 (Fall 1994), 202–203
Kathryn Steen, “Confiscated commerce: American importers of German synthetic organic chemicals, 1914–1929,” History and technology, 12 (1995), 261–284. For more information on German-U.S. chemical relationships in the 1930s
see Gerhard Kümmel, Transnationale Wirtschaftskooperation und der Nationalstaat: Deutsch-amerikanische Unterneh-mensbeziehugen in den dreissiger Jahren (Stuttgart, 1995), 141–202. I have written on German companies in the United States before 1914 in Wilkins (ref. 1) and there will be a full discussion of such businesses in my forthcoming sequel to that book that will carry the story of foreign investment in the United States to the late 1990s (cited herein as “History”). In the present article, I am relying heavily on the research I have done for these two books. In addition, there exists a formidable number of additional books and articles that cover this subject, such as general histories of the chemical industry (including ones on the U.S. chemical industry), histories of particular German chemical firms, histories of individual U.S. and British chemical and oil companies, as well as the large literature on cartels (especially those related to U.S. antitrust policies and their implementation); among the many studies, I have found to be of special value the works of Williams Haynes, L.F. Haber, Fred Aftalion, Peter Hayes, Raymond Stokes, David A. Hounshell and John Kenly Smith, Ervin Hexner, George W. Stocking and Myron W. Watkins, William J. Reader, and Harm Schröter.
Verena Schröter, Kathryn Steen, and Gerhard Kümmel have used such archives; I have not, albeit I have used a great amount of data pulled from these archives during the occupation of Germany after World War II, material now in American archives. Antje Hagen, who has written on German chemical companies’ investment in Great Britain, provides an excellent guide to the German archival sources (many of the same German multinational enterprises that invested in the United Kingdom were also in the United States). See Antje Hagen, “Patents legislation and German FDI in the British chemical industry before 1914,” Business history review, 71 (Autumn 1997), 351–380.
This material is in Record Group 131. The documents are located at the National Archives, but an important collection within this record group is not in the “holdings of the National Archives.” As of the early 1990s, when I last used this material, the World War I data were available at Suitland, Maryland (it is my understanding that these records have been subsequently transferred to the new National Archives II at College Park, MD). By contrast, I had to obtain the World War II data related to Germany under the Freedom of Information Act (these materials were under the legal custody of the Office of Foreign Litigation of the U.S. Department of Justice). On these documents see the “Note on Archival Sources” at the end of this chapter.
These are in Record Group 238/T301 (on microfilm)—Occupation records for Nuremberg trials—Nazi industrialists.
The Du Pont Records are in Wilmington, Delaware, at the Hagley Museum. The Garvan Papers are at the American Heritage Collection at the University of Wyoming, in Laramie, WY. Both sets of records are marvelous.
Some of the best primary source material comes, for example, from hearings on dyestuffs monopolies (U.S. Senate, Committee on Judiciary, Alleged Dye Monopoly, 67th Cong. [1922], henceforth cited as Alleged Dye Monopoly Hearings), from Johnson Committee hearings on the sale of foreign bonds, from the Nye Committee hearings on munitions, from the Temporary National Economic Committee discussions on monopoly practices, from the Bone Committee hearings on patents, from the Kilgore Committee hearings on war mobilization, and from the Truman Committee hearings on national defense (detailed citations on many of these committee hearings can be found in the bibliography of my The maturing of multinational enterprise: American business abroad from 1914 to 1970 (Cambridge, MA, 1974), 448–452). These particular hearings (and there were many more) involved tens of thousands of pages.
I have, for example, used materials from cases against Standard Oil Company (New Jersey)—which was a partner of I.G. Farben in the United States—and cases against the Chemical Foundation—which sought to liberate the U.S. chemical industry from “German control,” Kathryn Steen tells me that the Du Pont Archives in the Hagley Museum, Wilmington have the full transcripts—with the back-up data—of the series of cases (lower court cases and appeals) in U.S. v. Chemical Foundation. There was also additional litigation over the activities of the APC and OAPC; these records have considerable information on German chemical companies and their practices. So, too, the German chemical companies were defendants in numerous other court cases (from those on predatory practices to those involving blocked funds); all of these provide information on their activities in the United States and Germany.
For example, Louis Galambos has used the Merck archives. Other U.S. company archives are open. Below I will cite some added U.S. government archives. The bibliographies of the secondary works cited above and below provide further information on archival sources. Beyond the archival and secondary sources, trade journals in the chemical, drug, textile, paper, oil, and other industries have valuable information on the German chemical companies’ activities in the United States. It should also be noted that all the above primary and secondary sources, and many more contain data on the interconnections between German chemical companies in the United States and companies in “third” countries (for example, Britain, France, Switzerland, and Holland). Since the German chemical companies were multinational and involved in all kinds of international relationships, their associations in the United States were typically not based on merely bilateral strategies.
I use the word “classic” multinational enterprise because recently there has been the identification of other patterns of multinational enterprise. See Mira Wilkins and Harm Schröter, eds., The free-standing company in the world economy, 1830–1996 (Oxford, 1998).
I studied the evolutionary pattern of the “classic” multinational enterprise in relationship to the history of American business abroad in Mira Wilkins, The emergence of multinational enterprise: American business abroad from the colonial period to 1914 (Cambridge, MA, 1970) and in Wilkins (ref. 7). See esp. ibid., 414–436, for the pattern. Recently I have looked again at the American “model” vis-à-vis the general story of the evolution of manufacturing multinational enterprise in Wilkins, “Evolution,” in Wilfried Feldenkirchen, et al., eds., Wirtschaft Gesellschaft Unternehmen: Festschrift für Hans Pohl zum 60. Geburtstag (Stuttgart, 1995), 1209–1236, and in Mira Wilkins, “The evolution of manufacturing multinational enterprise,” in Tamás Szmrecsányi and Ricardo Maranhäo, eds., Historia de Empresas e Desenvolvimento Econômico (Säo Paulo, 1996), 71–104. These articles indicate some of the many other contributors to the literature on the history of manufacturing multinational enterprises.
Wilkins, “Emergence” ibid., and Wilkins (ref. 7).
I define a multinational enterprise as a firm that extends its business over borders, making direct investments (however small). The firm does not have to make large investments to be a multinational enterprise; it can finance its foreign presence in a variety of ways (from the home country or the host country or even a third country). What is important is that the business is moving beyond exports and has operations over borders that it controls or has the potential to control.
Erik Verg et al., Milestones (Leverkusen, 1988), 29.
In Wilkins (ref. 1), 132, 691, n271, I indicated that a number of other authors have written that Bayer established a dyestuff factory in Albany in 1865; I am sure that is wrong. Indeed, Verg (ref. 13), 48, writes that Bayer established its first foreign production unit in Russia in 1876.
Verg (ref. 13), 36. According to Charles C. Mann and Mark L. Plummer, The aspirin wars (Boston, 1991), 19, Carl Rumpff migrated to America at the age of 24 and, subsequent to building up a business in the infant U.S. dyestuffs industry, was hired as Bayer’s New York agent.
Williams Haynes, American chemical industry (6 vols., New York, 1945–1956), 1, 307–308; Haynes does not mention any Bayer manufacturing investment in the United States prior to 1871. I am delighted to see that Steen, “Confiscated commerce” (ref. 2), 264, agrees with Haynes and with me that the Bayer investment in Albany Aniline was in the 1870s.
Haynes (ref. 16), 6, 174, writes that Preiss came to the U.S. in the early 1870s.
Verg (ref. 13), 46.
Wilkins (ref. 1) 132.
Ibid., 374.
Ibid., 374, 389–90. On the early Bayer sales organization in the United States, see Mann and Plummer (ref. 15), 28. I will discuss Bayer’s other products later in this essay.
Wilkins (ref. 1), 392 (this says over 45 years, but I have recalculated).
Ibid., 392–395 (this shows the complicated sequence of agents); when in 1882, Metz joined P. Schulze-Berge it was not yet the representative of Hoechst in the United States; it would very soon become the Hoechst agent. See also Wilkins, “History” (ref. 2) for the post-1914 part of the story.
Wilkins (ref. 1), 392–394.
Ibid., 390. Verg (ref. 13), 156, writes that in 1913, the Rensselaer plant manufactured fifty percent of the pharmaceuticals but only ten percent of the basic dye-stuffs that Bayer sold in America. There were certain products that were imported and not manufactured in America.
Wilkins (ref.1), 393.
Ibid., 389, 395–396.
Ibid., 395–397.
Ibid., 399–400.
Ibid., 400.
Ibid., 407.
Ibid., 409–411.
Ibid., 384.
In 1913 there was an antitrust suit against the German importers, which was dismissed. See Steen, “Confiscated commerce” (ref. 2), 266. After war broke out, accusations would fly wildly and subsequently would be revived periodically.
See analysis in Wilkins (ref. 1), 411–415.
Ibid., 384–385. I cannot overemphasize the importance of the trademarks. On this subject see Mira Wilkins, “The neglected intangible asset: The influence of the trade mark on the rise of the modern corporation,” Business history, 34 (Jan 1992), 66–95.
Wilkins (ref. 1), 386–389, for the global arrangements in explosives.
My discussion of cartels throughout this paper has been enriched by the writings of Harm Schröter. See, for example, his most recent article, “Cartelization and decartelization in Europe, 1870–1995: Rise and decline of an economic institution,” Journal of European economic history, 25 (Spring 1996), 129–153.
Wilkins (ref. 1), 390–391. As Steen, “Confiscated commerce” (ref. 2), 264, points out, some importers had small laboratories in their branch offices to mix chemicals that arrived from Germany and to deal with the specific problems of American consumers.
Wilkins (ref. 1), 391, and Wilkins, “History” (ref. 2).
Wilkins, “History” (ref. 2) and Metz to Secretary of State, 3 Oct 1914, R.G. 59, 165.102/90, National Archives; the S.S. Matanzas arrived in New York on 15 Nov 1914, and two weeks later the S.S. American Sun arrived, also bringing in coal tar dyes. Presumably the State Department discussed this with the British and arrangements were made to bring these “peace time” products through the British blockade. The vessels were American-chartered.
Wilkins, “History” (ref. 2).
Ibid.
Ibid.
Ibid.
APC Report, 1918/19, 40, 50.
U.S. Tariff Commission data in Alleged Dye Monopoly Hearings (ref. 7), 68.
Wilkins, “History” (ref. 2); for the initial German parent company resistance to the expansion, see Mann and Plummer (ref. 15), 47.
Mann and Plummer (ref. 15), 48.
Herman Metz to the Medical Profession, Mar 1917, in file of Dermatological research laboratory at College of Physicians, Philadelphia, Historical Collection. I am indebted to Jonathan Liebenau for sending me a copy of this letter. Liebenau has been extremely helpful to me on this.
Wilkins, “History” (ref. 2).
APC Report 1918/19, 53.
On the pigment production, see Haynes (ref. 16), 3, 104. On Poucher National cyclopaedia, 33, 552, and David A. Hounshell and John Kenly Smith, Jr., Science and corporate strategy (Cambridge, 1988), 80, 83, 86. Poucher’s experience with Badische had been in sales, not production, but he had excellent knowledge of the markets for dyestuffs; moreover, he offered Du Pont the services of eight of his associates, all of whom had worked for the American affiliate of Badische and he provided samples of all the dyes marketed by Badische. It was no humble contribution.
Alleged Dye Monopoly Hearings (ref. 7), 181. 55. APC Report 1918/19, 15–62.
Ibid., 25, 39. Some of the assets had been nominally in the ownership of individual firm’s American representatives. 57. Ibid., 50–51. Steen, “Confiscated commerce” (ref. 2), 269–270, is wonderful on the Cassella impact on National Aniline and Chemical Company.
APC Report 1918/19, 10.
Mann and Plummer (ref. 15), 47–48.
APC Report 1918/19, 218, 220.
Ibid., 60–61; data from the Francis Garvan papers; Haynes (ref. 16), 3, 260–261; Wilkins, “History” (ref. 2). This number is substantially smaller than the number taken over, because a large number of the patents were those of Bayer, which as noted had been sold earlier.
On American business abroad in the 1920s, see Wilkins (ref. 7). This book has data on Du Pont’s overseas activities; Du Pont invested abroad in niches where it had special expertise (some of these were supplies for General Motors business abroad, i.e., artificial leather for car seats and finishes for car exteriors). In the United States and abroad, Du Pont was not involved in petrochemicals, but it kept well informed on everything about I.G. Farben’s relationships with Standard Oil of New Jersey and with Shell.
Hounshell and Smith (ref. 53), is wonderful on all these relationships.
Wilkins, “History” (ref. 2). There are many details on these negotiations in the Nye Committee hearings.
Wilkins, “History” (ref. 2) and Hounshell and Smith (ref. 53), 93–95.
Wilkins, “History” (ref. 2).
Ibid., and I.G. Farben to Reich Ministry of Economics, 24 Jul 1939, RG 238, T301, Reel 70, NI-8496.
See data in Garvan Papers, box 6.
The litigation was long-standing; but eventually, The Chemical Foundation won. Republicans in Washington were not sympathetic to The Chemical Foundation. In the U.S. government suit against The Chemical Foundation, Metz (who was a Democrat) testified for the U.S. government. Wilkins, “History” (ref. 2).
See 25-page letter on Merck history, George W. Perkins, Executive Vice President, Merck & Co., to C.D. Blauvelt, Foreign Fund Control Division, Federal Reserve Bank, 21 Mar 1942, in RG 131, Acc. 61A109, Box 681, Foreign Funds Control Files. As indicated in note 4 above, this material is in the Department of Justice files and was obtained under the Freedom of Information Act. The “Americanization” of German chemical companies is perhaps reflected in George W. Perkins’s role. His father was a former partner in J.P. Morgan; he married George W. Merck’s sister in 1921.
Wilkins, “History” (ref. 2).
Ibid. On the financing of the German rayon companies in the United States, see ibid., but also Lothar Gall, et al, The Deutsche bank (London 1995), 315–316. These details are beyond the scope of this article.
In 1926, the Bayer 50 % interest in the profits of Winthrop Chemical would be transformed into a 50% equity ownership in Winthrop Chemical. Wilkins, “History” (ref. 2).
On the financing, see Wilkins, “History” (ref. 2). B. A. Ludwig is the only enigma. As noted earlier, during World War I the German Cassella interests had been incorporated in National Aniline and Chemical Company (NACC). For Ludwig’s prewar role as a chemist with Matheson and Shaw, see Steen, “Confiscated commerce” (ref. 2), 277. Before Ludwig became the postwar importer for Cassella dyes, he was a vice president of NACC; he became a vice president of G.D.C. in 1925. According to Williams Haynes, Ludwig left NACC when he became the postwar importer for Cassella. Haynes (ref. 16), 4, 233. Ludwig, however, returned to NACC (I do not know when this happened; it is possible that Haynes was mistaken and Ludwig never left NACC). Ludwig was president of NACC all during the 1930s. See his correspondence in 1931, 1932, 1933, and 1939 in U.S Senate, Committee on Patents, Patent hearings, 77th Cong., 2nd sess. (1942), pt. 5,2359, 2361, 2390, 2392 These are the Bone Committee Hearings. What is most tantalizing is that in developing its Latin American business in March 1940, an I.G. Farben representative (Herr Moll) was authorized to get in touch with Herr Ellis of NACC “(for obvious reasons not with Mr. Ludwig direct).” I have no idea what the “obvious reasons” were; could they relate to Ludwig’s earlier close associations with German interests? RG 238/T301, Reel 7, NI-618.
Wilkins, “History” (ref. 2).
Ibid.
American I.G. Chemical Corporation, Annual report, 31 Mar 1930 (in Garvan Papers, Box 76).
Wilkins, “History” (ref. 2).
Schröter, “Participation” (ref. 2), 179 and Interrogation of Hermann Schmitz, 12 Sep 1945, RG 238, T301, Reel 8, NI-711, 13, 18.
Haynes (ref. 16), 5, 336.
Wilkins, “History” (ref. 2).
Ibid.
I have found most useful on Chemnyco and its predecessor, the Memorandum of Agreement between U.S. Transatlantic Service Corporation and I.G. Farben, 7 Nov 1930, the Sworn Statement of Max Braune (Secretary Treasurer of Chemnyco), 3 Jul 1941, as well as other data in File #D-28–517, Acc. 67A0, Box 1303, RG 131, Department of Justice files. See also more extensive sources in Wilkins, “History” (ref.2).
Wilkins, “History” (ref. 2).
Walter Carpenter to Jasper Crane, 23 Oct 1935, p. 5, cited in Alfred D. Chandler, Scale and scope (Cambridge, MA, 1990), 827.
Garvan (still president of the Chemical Foundation) sent a letter to the SEC analyzing the defects of the American I.G.’s initial filing. The letter is in the Garvan Papers, Box 76.
Wilkins, “History” (ref. 2).
Ibid. Kuttroff was listed as a director of American I.G. Chemical Corporation in its Annual report, published in Mar 1930, but not in Mar 1931. Data in the Garvan papers indicates that Kuttroff died in 1930. Materials in the Garvan papers suggest that as early as the 1920s, I.G. Farben (and perhaps even its predecessor companies) embarked on a strategy of seeing to it that “members of the family” who migrated to the United States take on U.S. citizenship as soon as possible.
For the 1936 rules see Office of the Alien Property Custodian, Annual report 1944, 28–29, and Royal Institute of International Affairs, The problem of international investment (London, 1937), 83nl.
Wilkins, “History” (ref. 2). The figures on U.S. production and sales of dye-stuffs are based on data collected by the U.S. Tariff Commission and presented in the Bone Committee hearings (ref. 74), Exhibits, pt. 5, 2481.
Wilkins, “History” (ref. 2). My data are from RG 131; the U.S. Senate, Committee on Military Affairs, Subcommittee on War Mobilization, Monopoly and Cartel Practices: The Hormone Cartel, Hearings, 78th Cong., 1st sess. (9 Dec 1943), pt. 10, also has material on Schering. These are the Kilgore Committee hearings.
Wilkins, “History” (ref. 2) and Report on Winthrop Chemical Co., 8 Jul 1942, by Arthur D. Little, in File D-63–4, Acc. 65A1063, Box 267, RG 131, Department of Justice files.
Wilkins, “History” (ref. 2).
Ibid, contains the details of the “Hague Memorandum,” which was initialed in Holland in the last week of Sep 1939 and served to redefine I.G. Farben’s relationships with Standard Oil of New Jersey. My forthcoming book has lots of added materials on the redefining of other relationships. 95. Ibid.
On the searing impact, see Bennett H. Wall, Growth in a changing environment: A history of Standard Oil Company New Jersey 1950–1972 and Exxon Corporation 1972–1975 (New York, 1988), xxii-xxiii.
Wilkins (ref. 7) and Wilkins (ref. 2).
Schröter (ref. 38), 143. Schröter writes that the prohibition stayed in force until 1957, when “German legislation took over.”
Raymond Stokes, Opting for oil (Cambridge, 1994).
In 1994, for $1 billion Bayer bought, along with other over-the-counter products, the Bayer aspirin line; the acquisition was from SmithKline Beecham PLC— the British headquartered company—that had just purchased the business from Eastman Kodak’s Sterling Winthrop unit. Sterling Products had acquired the Bayer aspirin line in 1918, when it bought Bayer’s U.S. properties from the Alien Property Custodian. In 1988, Eastman Kodak had acquired Sterling Drug Inc. (as it was then called).
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Wilkins, M. (2000). German chemical firms in the United States from the late 19th century to post-World War II. In: Lesch, J.E. (eds) The German Chemical Industry in the Twentieth Century. Chemists and Chemistry, vol 18. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-9377-9_10
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