Organization of War Economies (Belgium)

By Dirk Luyten

1914-1918 Online

Internal Encyclopedia of the First World War

This text is licensed under Creative Commmons Licence

(Attribution-NonCommercial-NoDerivs 3.0 Germany-CC BY-NC-ND 3.0)

Table of Contents

- 1 Introduction

- 2 The State of Research

- 3 Phases of Economic Exploitation

- 4 Instruments of Economic Control

- 5 The Section for Commerce and Industry

- 6 Massengüter

- 7 Dismantling Industry

- Notes

- Selected Bibliography

- Citation

Introduction

On the eve of the First World War, Belgium was an export-oriented industrialized country, especially in terms of heavy industries such as coal and metalworking, as well as textiles and glass. Economic policy was inspired by economic liberalism and state intervention was limited to modest social legislation. However, in 1895, an interprofessional employers’ organization (Comité Central du Travail Industriel, later renamed Comité Central Industriel) was established to oppose state interventionism and defend economic liberalism. This Comité Central Industriel included a group of fourteen sector associations in heavy industries and textiles.[1]

In 1914, Germany did not have elaborate plans for economic organization and control since it was expected that the war would be short. As war and occupation went on, institutions and procedures were developed to make Belgian industry contribute to the German war effort. This policy was, however, subject to changes over time in line with shifting German strategies of war and exploitation of the Belgian economy.

The State of Research

The Belgian economy during World War I is in general under researched. Indicative of this is a 1927 study on Belgian industry during the First World War which, notwithstanding its anti-German bias, was recently re-published.[2] The current article is to a large extent based on this book, since new research is limited, especially as far as economic organization is concerned. In a recent doctoral thesis on the Belgian coal mines in the first half of the 20th century, attention was paid to the new modes of regulation developed in this sector during the First World War.[3] In 2012, two Belgian historians showed that Belgian industrialists’ attitudes towards the Germans were more diverse than those described in the patriotic literature published during or just after the war.[4] In the 1980s and 1990s, Belgian economic history was studied from the perspective of regulation, but as far as the world wars are concerned, the focal point of research was the second, not the first. This article will focus mainly on legislation and organization rather than on practices and outcomes, since those aspects have not been subjects of research.

Phases of Economic Exploitation

During the first months after the invasion, the German occupier did not have a clear policy towards Belgian industry. As it became apparent that the war would be long, a centrally-managed war economy was developed in Germany. To integrate the Belgian economy into the German war effort, in February 1915, an economic section was established in the political section of the General-Gouvernement, the German administration of occupied Belgium. German economic policy was guided not only by the immediate needs of the war effort, but also by the interests of German industry, for which Belgian industry was in many sectors an international competitor. In general, the position of German industry could be defended in two ways: either Belgian industry could be left intact and, after a German victory, made subservient to the German economy, or it could be dismantled during the war to eliminate competition with German industry. In 1915, the first option prevailed, whereas from 1917 on, Belgian industry was partly dismantled to free up machines, materials (including copper) and workers for the German war industry. However, in general industrial activity was downsized and limited to what was useful for the German war economy or for the food supply of the Belgian population.[5] Consequently, industrial activity dropped dramatically during the war: production in the sectors of coal mines, breweries, steel and sugar was about one third of the level of 1913.[6] One of the reasons for the collapse of industrial production was that the Belgian economy had been heavily dependent on the importation of raw materials, while much of its production was exported. Due to the war and the blockade, international trade became difficult or impossible.[7] The only economic sector which could maintain production was coal mining, albeit on a smaller scale due to a diminished number of miners (many of them of them served in the Belgian army) and their lower productivity because of food shortages.[8]

In the different phases of economic exploitation, the German occupying administration set up structures and developed legislation to steer Belgian industry. In general, institutions were exclusively in the hands of the Germans, without Belgian participation, but with the involvement of the German private sector in certain cases. Steering was based on legislation which controlled trade, for example via monopolization; control of imports and exports; inventorying of stocks and machines; price-setting, authorization or prohibition of production; or confiscation or sequestration of productive facilities and materials. As well as control and coercion, in some cases the Germans offered high prices to try to persuade Belgian industrialists to produce the goods they needed.

Instruments of Economic Control

With the invasion, factories with direct military applications were occupied and the German military took over management. Machines usable for weapons production were requisitioned. Requisitioning was also used if an entrepreneur refused a German order with a military dimension: since the Belgian army was still fighting the Germans, Belgian industrialists were in general reluctant to agree to direct production for the German army.[9]

After the invasion, the Germans aimed at the restoration of economic activity, in the first place to avoid social unrest, but also to increase production for both the Belgian population and the occupying army. This was not a success, however. One of the explanations was the combination of factors produced by German confiscation of raw materials and the blockade (which made it difficult or impossible to import new raw materials). Moreover, the Germans introduced regulatory measures which had a negative effect on production. The transport of raw materials with a military use was subject to restrictions. Goods which could be used for military purposes could be confiscated when intended for export. This hindered industrial recovery, since industrialists who had produced goods that were confiscated by the Germans could be accused of economic collaboration.[10]

Once it became clear that the war would last a long time, the German state organized its economy so that whatever could be used for war production was mobilized for that purpose: this extended to occupied territories.[11]

Since October 1914, export either needed authorization from the ministry of war or was prohibited. The German administration had the power to confiscate goods, with compensation – but the amount was to be determined by a commission appointed by the ministry of war. The owners received a receipt on which the quantity of goods was recorded, but not the value, since the Germans wanted to pay only by the end of the war. Finally, a compromise was found: compensation was paid to a German bank and could be used by industrialists to contract loans with the Société Générale, a big Brussels private bank which had taken over the issuing of money from the National Bank. For the export of goods processed by Belgian industry the Germans fixed the prices, which were rather low. This was only an incentive to produce for small firms, which were more inclined to accept the prices imposed by the Germans than the large production sites.[12]

Since February 1915, export had been subject to more control and regulation, not only to avoid the export of material for the German war economy, but also to protect the interests of German industry on the export markets. The instrument used was primarily price regulation. Belgian industrialists were not allowed to sell their export products under a certain price and in markets without German competitors; Belgian industry was therefore forced to sell at a higher price and to cede part of the extra price in foreign currency to the Germans. Moreover, the export permits were taxed by the Germans. It seems that export control was not only meant to safeguard military needs and the interests of German firms but was also a source of financial revenue and war financing for the Germans.

The German administration wanted to aid the recovery of industrial activity in 1915. However, a joint initiative of Jean Jadot (1862-1932), governor of the Société Générale, and the Comité Central Industriel to organize an import-export system under the control of the Comité national de Secours et d’Alimentation and its international guarantors, the USA, Spain and the Netherlands, ultimately did not succeed since the Germans did not guarantee that the raw materials and finished products for export would not be confiscated. This was difficult for Great Britain to accept.[13] From then on, it became clear that the Belgian export-oriented industry was for the most part condemned to inactivity, except for those who could export to the neutral Netherlands or to Germany. Coal mining was also an exception since the mines were not dependent on the import of raw materials.[14] Even if exploitation of coal profited the Germans, since part of the coal was consumed by them or exported to Switzerland in exchange for foreign currency, the Belgian government in Le Havre agreed to it since continuation of coal production was also in the interests of the Belgian population.[15] There was, in other words, an implicit trade-off between the Germans, the Belgian government and the Belgian coal mine owners: coal production in the interests of Germany was tolerated since its continuation enabled the provision of the Belgian population with coal as well.[16]

In contrast to the coal sector, production in other industrial sectors stopped or was threatened with stoppage. In these sectors the link with the vital needs of the Belgian population was less pronounced. There were exceptions for specific reasons however, particularly for export. For window glass, the Germans tolerated exports to fight British and American competition on the world market: Belgian production served as a substitute for German exports, which had been stopped. So as not to jeopardize the postwar competitiveness of German companies, exports were closely monitored. Conversely, in the cement sector, export was prohibited in order to protect the position of the German cement industry after the war.

In sectors with a low production level such as textiles, the Germans used the instrument of confiscation of raw materials to steer production. Cotton was confiscated and allocated to specific firms which had to use the raw materials for clients determined by the Germans. In the flax industry, where Belgium was a producer of raw materials, centralized purchasing was used to steer production since confiscation was difficult to organize in a sector with many small enterprises. The flax was purchased by a German central office at a sufficiently high price, processed and then supplied mostly to German firms, with a small amount going to those Belgian firms which had authorization to produce. Control over the distribution of raw materials was used in general as a steering instrument: raw materials were allocated only to enterprises whose production was in the German interest.[17]

The most far-reaching means to ensure that Belgian companies produced what the Germans wanted was sequestration or direct exploitation of specific firms. Sequestration was made possible by a decree on 17 February 1915.[18] From the German perspective, sequestration was less costly than direct exploitation: if the Germans exploited a company directly, they had to supply the financial means themselves, while, under sequestration, the capital of the enterprise itself could be used. The threat of sequestration or direct exploitation by the Germans was used to apply pressure when a factory refused to produce for them.[19] Especially in metalworking, machines were seized from enterprises under sequestration and taken to Germany. Where production continued in a factory under sequestration, exploitation did not operate in accordance with normal business principles since German needs were paramount. Sequestration could moreover be a first step to changes in the property structure of companies with enemy (British, French, American) links. In 1916, a special company was created in Essen to transfer such interests to German capital owners. Other companies under sequestration were liquidated.[20]

The Section for Commerce and Industry

As the war went on, German intervention in Belgian industry increased. To coordinate these efforts, in August 1915, a special service was created within the general government: the section for commerce and industry. This centralized service had to develop a more homogeneous policy by controlling imports and exports from the perspective of German needs and by rationalizing economic exploitation. The section could decide to concentrate, stop, or resume production. It consisted of different services and industrial offices, including the Kohlenzentrale. The core of the section was made up of the industrial offices (Zentrale), which controlled the production and distribution in specific sectors (coal and lubricating oil, for example). These offices were financed by contributions to be paid by the companies in the sector and had far-reaching powers. In general, they had a trade monopoly and could decide which enterprises were allowed to continue production or set up new production facilities: they were also involved in the dismantling of machines. They were headed by Germans, except in the food processing industries (including sugar), where Belgians were also involved, which can be explained by the fact that the offices primarily served to supply food to the Belgian population.[21] The Zentrale put an end to free trade.[22]

The coal sector was monitored by the Kohlenzentrale, established in April 1915. The Kohlenzentrale did not intervene directly in production, but rather at the level of distribution. It was a central selling syndicate, with mandatory membership, following the model of the Rheinisch-Westfälisches Kohlen-Syndikat in the Ruhr established at the end of the 19th century. The Kohlenzentrale should have had a monopoly on the sale of Belgian coal, but lobbying by the federation of the coal-mining industry secured an exception for the Belgian market, so coal mines could organize the sale of coal themselves. However, short-term contracts still needed the authorization of the Kohlenzentrale, whose main concern was that priority be given to supplying the German army. In the long term, the Kohlenzentrale was expected to lay the foundations for the control of the German coal mines over the Belgian market and to contribute to the Germanisation of Belgium after the war. During the war, the Kohlenzentrale became part of the German Flamenpolitik. The headquarters of the Kohlenzentrale was based in Antwerp, far from the Walloon coal mines, but Antwerp was the harbor from which German coal was imported.[23]

Since 1917, the distribution of coal to the population in Flanders was in the hands of Kolenverdeeling voor Vlaanderen (Coal Distribution for Flanders), an activisme (collaborationist) organization, for which the distribution of coal was a means not only to gain political impact, but also to finance “activism”. The federation of coal-mining industries reacted by setting up province-level cooperatives in an attempt to keep the distribution of coal to the population in Belgian hands. Coal mines were reluctant to deliver coal distributed by the activist organization.[24]

The Kohlenzentrale was financed by a tax on coal sales and could moreover make profits since it acted as both buyer and seller. Efforts of the Zentrale to intervene directly in production were not successful, as can be seen from an attempt to intensify coke production to generate more derivatives with military applications. It was difficult to find an outlet for the relatively limited production and Belgian industrialists were reluctant to participate in an initiative that would contribute directly to military production.[25]

Massengüter

In 1916, in the context of the intensification of resource mobilization for the German war effort, the section for commerce and industry issued new decrees for the confiscation of all kinds of merchandise that could be useful for war production: raw materials, (semi-) finished goods (so-called Massengüter) and even machines.[26] The regulation techniques differed from sector to sector; in the textile sector, raw materials, semi-finished products and waste had to be declared and sold to a limited number of German offices at a fixed price. Only 10 percent of stock could be sold to non-German clients. Wool and flax had to be sold to a central purchase office, again at a fixed price. Flax could also be sold to spinning mills which had a purchasing license, where a maximum price was set. In the iron industry, production was at the discretion of the German army and could not be traded without military permission. A maximum of 10 percent of the total production could be traded freely. To avoid administrative costs for the handling of Massengüter, special private companies were created, with control boards composed of civil servants. The shares were held by producers and traders in a specific product (for instance wool or leather). Profits were used to reimburse shareholders and invest in state loans.

For production and transport of certain goods, authorization by the section for commerce and industry was required. Following a decree in July 1916, the declaration of metals such as copper and bronze, cables and belts for transport, and machines was mandatory. These materials were later confiscated and sold at a fixed price to a German office; if the owners did not agree with this price, they were dispossessed. This decree was the basis for the massive dismantling of Belgian industrial machinery in 1917 and 1918 to recover metals, including copper and bronze, for the German war industry. Other machines were transported intact to Germany; after an inventory campaign in 1916, a system of authorization for transport was combined with a ban on the selling of machines. The inventory, which had to be made by the enterprises themselves, was controlled by the Germans, and served to make a sort of “catalogue” for German industrialists who could identify the machines they wanted.

In 1917, the German administration went a step further by issuing a decree on the closing of Belgian enterprises. This decree was meant to make sure that the remaining production capacity after the taking of raw materials would be used exclusively in the interest of Germany, and to free workers to replace Germans who could then be sent to the front. The section for commerce and industry was responsible for the implementation of this decree. A policy was developed to make sure that the remaining Belgian industry produced a maximum return. To save on coal and transport, to gain economies of scale and to liberate workers, the section for commerce and industry aimed at concentrating production in a limited number of factories. To avoid price increases however it was necessary to have competition and therefore to maintain several production facilities. Because bigger enterprises were often more reluctant to produce for the Germans, production was mostly dispersed across smaller factories or even home industry. As far as the latter was concerned, a production ban would not liberate many workers for Germany. Enterprises that were allowed to continue production were controlled by the section for commerce and industry, which also determined the preconditions, including the use of coal, raw materials and machines. A powerful means to make companies comply with the guidelines of the section for commerce and industry was the threat to close them and remove their machines. This was especially compelling for small companies which had invested most of their capital in these machines. About 1,800 production facilities could continue their activities, a small fraction of the 260,000 companies existing before the war.

These means of control and coercion enabled the section for commerce and industry to implement an industrial policy tailored to the Germans’ needs in the different economic sectors. For the iron industry, for instance, a subsection was created within the section for commerce and industry. This subsection distributed orders and raw materials over the production facilities still in operation, fixed maximum prices and audited cost prices. Companies that were allowed to produce had to submit a list of orders each month and the subsection for iron decided if these orders would be allowed to be fulfilled. In 1918, authorizations to produce were annulled for various reasons: a lack of new orders or profitability; the refusal of certain orders or non-conforming execution of them; that production was no longer considered to be in the interests of the German war economy; or production was stopped to reduce the machines to scrap for use as raw material in the war industry in Germany. Conversely, other companies were allowed to produce again. In the quarrying sector, which was directly useful for trench warfare, sequestration with exploitation by the Germans was used to counter entrepreneurs and/or workers refusing to fulfil German orders. The leather sector, where enterprises were closed in August 1917, except for those catering to German needs, was controlled by a company, Kriegsleder AG, which had a monopoly on buying leather products at a fixed price.

Dismantling Industry

From the spring of 1917, economic policy shifted from (limited) Belgian production in the German interest and confiscation of merchandise to the systematic dismantling of productive facilities to use the scrap for German industry or to transfer machines to German industry.[27] Two special services, in addition to the section for commerce and industry, played a role in dismantling factories and halls in a systematic way for the needs of the German war industry. The two services, the Waffen- und Munitionsbeschaffungsstelle (Wumba) and the Rohmaterialbeschaffungsstelle (Rohma) had opposite tasks. The Wumba, an office of the Prussian war ministry active in Belgium since 1916, identified the machines which could be reused by German industry, while the Rohma aimed at the identification of machines and material eligible for destruction and transformation into scrap. First, the section of commerce and industry made an inventory of factories which, when dismantled, would yield sufficient scrap. After the factories of military use had been selected, the inventory was transferred to the Wumba and Rohma. A tripartite commission, composed of the section for commerce and industry, the Wumba and the Rohma had to decide what was eligible for transformation into scrap. The Wumba worked fast, which meant that there were more machines for transport to Germany than customers for them. Dismantling was carried out by subcontractors: a consortium of five German metal companies, the Abbau-Gruppe, which was established in February 1917. Its activities were profitable, since for citizens of an enemy state, the value of the machines transferred to Germany was calculated on the basis of prices of scrap iron. About 24,000 machines were transferred to Germany, some of which were not used, while others were used to save the machines already in the German factories.

In general, the economic organization set up during the war to steer Belgian industrial production was top-down, without the participation of Belgian industry, except for some aspects of implementation. The state of research does not allow us to assess how Belgian industry and its organization positioned itself with regards to this far-reaching economic interventionism, which was new for Belgian industry. The example of the coal mines suggests that organized opposition was triggered when the economic organization had points of contact with political collaboration. Another example is the sequestration of one of the coal mines in the new Campine Basin (province of Limburg in Flanders), with French capital involvement. When the Germans made it clear that they wanted to end this participation (the activists proposed expropriating French capital on behalf of the Raad van Vlaanderen, the bogus collaborationist activist parliament), the Société Générale decided to take over the French capital involvement.[28]

However, employers’ organizations also positioned themselves on the issue of economic collaboration: the Federation of Textile Industries refused in October 1914 to make products that could serve the German army (in)directly.[29] The federation of coal mine industries protested in 1915 against confiscations of coal which were not in line with the Hague Convention, which only allowed confiscations for the occupying army.[30] Employers’ organizations protested against the transport of machines from Belgian metalworking factories to Germany.[31] Conversely, the example of the loans given by the Société Générale with German compensation bonds as collateral suggests that this financial group, which held a key position in the Belgian economy, was willing to look for possibilities for Belgian industry to continue production within the German interventionist framework of economic organization. Moreover, the Société Générale, controlling large parts of Belgian industry, was able to make profits during nearly the entire war.[32]

The limited industrial activity in Belgium during the First World War must also be seen against the background of the Comité National de Secours et d’Alimentation, which imported and distributed food to the population. This created large-scale unemployment among the industrial working class and led to a dramatic drop in industrial production.[33]

Dirk Luyten, State Archives of Belgium/CegeSoma

Section Editor : Benoît Majerus

Notes

1. ↑ Brion, R. et al.: 100 ans pour l’entreprise. Fédération des Entreprises de Belgique, Brussels 1995, p. 18.

2. ↑ De Kerchove de Denterghem, C.: L’industrie belge pendant l’occupation allemande, 1914-1918, Paris et al. 1927; new edition Heuclin, Jean / Terrier Didier (eds.): L'industrie belge pendant l'occupation allemande, 1914-1918, Valenciennes 2013.

3. ↑ Coppieters, Guy: L’état un mauvais industriel? De strijd om het Belgische steenkoolbeleid 1901-1951 [The State, a bad industrialist? The struggle on the Belgian coal policy 1901-1951], doctoral thesis, Brussels 2017.

4. ↑ Tilly, Pierre / Deloge, Pascal: Milieux économiques belges et occupation allemande de 1914 à 1918. Une stratégie du moindre mal, in: Entreprises et Histoire 68 (2012), pp. 11-27.

5. ↑ Veraghtert, Karel: De industriële ontwikkeling (1914-1947) [The industrial development (1914-1947)], in: De industrie in België. Twee eeuwen ontwikkeling (1780-1980) [The industry in Belgium, two centuries of development (1780-1980)], Brussels 1981, pp. 145-188; pp. 145-149. Baudhuin, Fernand: Histoire économique de la Belgique 1914-1939, volume 1, Brussels 1946, p. 46.

6. ↑ Scholliers, Peter: Koopkracht en indexkoppeling. De Brusselse levensstandaard tijdens en na de Eerste Wereldoorlog 1914-1925, in: Revue belge d’histoire contemporaine 9 (1978), pp. 333-382; p. 335.

7. ↑ Brion, R. / Moreau, J.-L.: La Société Générale de Belgique 1822-1997, Antwerp 1998, p. 235.

8. ↑ Baudhuin, Histoire économique 1946, pp. 44-45.

9. ↑ Ibid., p. 44.

10. ↑ De Kerchove de Denterghem, L’industrie belge 1927, pp. 19-31.

11. ↑ Ibid., pp. 34-48.

12. ↑ Ibid., p. 41.

13. ↑ Brion / Moreau, La Société Générale 1998, pp. 235-236.

14. ↑ De Kerchove de Denterghem, L’industrie belge 1927, pp. 3-51.

15. ↑ Veraghtert, De industriële ontwikkeling 1981, pp. 147-148.

16. ↑ Liberman, Peter: Does Conquest Pay? The Exploitation of Occupied Industrial Societies, Princeton 1996, p. 84.

17. ↑ De Kerchove de Denterghem, L’industrie belge 1927, pp. 57-70.

18. ↑ Tilly / Deloge, Milieux économiques 2012, p. 13.

19. ↑ Brion / Moreau, La Société Générale 1998, p. 237.

20. ↑ De Kerchove de Denterghem, L’industrie belge 1927, pp. 82-93.

21. ↑ Ibid., pp. 94-107.

22. ↑ Bertrand, Louis: L’occupation allemande en Belgique 1914-1918, volume 2, Brussels 1919, p. 95.

23. ↑ Coppieters, L’état un mauvais industriel? 2017, pp. 87-89.

24. ↑ Vandeweyer, Luc: Kolenverdeeling voor Vlaanderen’ en de financiering van het activisme [Coal distribution for Flanders and financing of activism], in: Wetenschappelijke Tijdingen 50/1 (1991), pp. 28-44. Coppieters, L’état un mauvais industriel? 2017, pp. 91-92.

25. ↑ De Kerchove de Denterghem, L’industrie belge 1927, pp. 56-57.

26. ↑ Ibid., pp. 33-42; 108-150.

27. ↑ Ibid., pp. 151-172.

28. ↑ Brion / Moreau, La Société Générale 1999, p. 237.

29. ↑ Tilly / Deloge, Milieux économiques 2012, p. 18.

30. ↑ Ibid., p. 16.

31. ↑ Ibid., p. 20.

32. ↑ Ibid., pp. 24-25.

33. ↑ Liberman, Does Conquest Pay? 1996, pp. 79, 83.

Citation

Luyten, Dirk: Organization of War Economies (Belgium) , in: 1914-1918-online. International Encyclopedia of the First World War, ed. by Ute Daniel, Peter Gatrell, Oliver Janz, Heather Jones, Jennifer Keene, Alan Kramer, and Bill Nasson, issued by Freie Universität Berlin, Berlin 2022-01-19. DOI: 10.15463/ie1418.11538.

License

This text is licensed under Creative Commmons Licence (Attribution-NonCommercial-NoDerivs 3.0 Germany-CC BY-NC-ND 3.0)

Table of Contents

Table of Contents

Introduction

The State of Research

Phases of Economic Exploitation

Instruments of Economic Control

The Section for Commerce and Industry

Massengüter

Dismantling Industry

Selected Bibliography

Citation

Content