Hjalmar Schacht

Rise to President of the Reichsbank

Despite the blemish on his record from his service with von Lumm, on 12 November 1923, Schacht became currency commissioner for the Weimar Republic and participated in the introduction of the Rentenmark, a new currency the value of which was based on a mortgage on all of the properties in Germany. Germany entered into a brief period where it had two separate currencies: the Papiermark managed by Rudolf Havenstein, President of the Reichsbank, and the newly created Rentenmark managed by Schacht. Havenstein died on 20 November 1923.

On 22 December 1923, after Schacht's economic policies had helped battle German hyperinflation and stabilize the German Papiermark (Helfferich Plan), he was appointed President of the Reichsbank at the requests of president Friedrich Ebert and Chancellor Gustav Stresemann. Schacht's office during this time was a former charwoman's cupboard. When his secretary, Fräulein Steffeck, was later asked about his work there, she described it as follows:

What did he do? He sat on his chair and smoked in his little dark room, which still smelled of old floor cloths. Did he read letters? No, he read no letters. Did he write letters? No, he wrote no letters. He telephoned a great deal – he telephoned in every direction and to every German or foreign place that had anything to do with money and foreign exchange, as well as with the Reichsbank and the Finance Minister. And he smoked. We did not eat much during that time. We usually went home late, often by the last suburban train, travelling third class. Apart from that, he did nothing.

In 1926, Schacht provided funds for the formation of IG Farben. He collaborated with other prominent economists to form the 1929 Young Plan to modify the way that war reparations were paid after Germany incurred large foreign debts under the Dawes Plan. In December 1929, he caused the fall of the Finance Minister Rudolf Hilferding by imposing upon the government his conditions for obtaining a loan. After modifications by Hermann Müller's government to the Young Plan during the Second Conference of The Hague (January 1930), he resigned as Reichsbank president on 7 March 1930. During 1930, Schacht campaigned against the war reparations requirement in the United States.

Schacht became a friend of the Governor of the Bank of England, Montagu Norman, both men belonging to the Anglo-German Fellowship and the Bank for International Settlements. Norman was so close to the Schacht family that he was godfather to one of Schacht's grandchildren.

Involvement with the NSDAP (Nazi Party) and government

By 1926, Schacht had left the shrinking DDP and began increasingly lending his support to the Nazi Party (NSDAP). He became disillusioned with Stresemann's policies upon believing that closer relations with the United States were failing to provide economic benefits, and after his efforts to negotiate a rapprochement with the United Kingdom by pegging the Reichsmark to the pound sterling failed. Beginning in 1929, he increasingly criticized German foreign and financial policy since 1924, and demanded the restoration of Germany's former eastern territories and overseas colonies. Schacht became closer to the Nazis between 1930 and 1932. Though never a member of the NSDAP, Schacht helped to raise funds for the party after meeting with Adolf Hitler. Close for a short time to Heinrich Brüning's government, Schacht shifted to the right by entering the Harzburg Front in October 1931.

Schacht's disillusionment with the existing Weimar government did not indicate a particular shift in his overall philosophy, but rather arose primarily out of two issues:

• his objection to the inclusion of Social Democratic Party elements in the government, and the effect of their various construction and job-creation projects on public expenditures and borrowings (and the consequent undermining of the government's anti-inflation efforts);
• his desire to see Germany retake its place on the international stage, and his recognition that "as the powers became more involved in their own economic problems in 1931 and 1932 [...] a strong government based on a broad national movement could use the existing conditions to regain Germany's sovereignty and equality as a world power."

Schacht believed that if the German government was ever to commence a wholesale reindustrialization and rearmament despite the restrictions imposed by Germany's treaty obligations, it would have to be during a period lacking clear international consensus among the Great Powers.

After the November 1932 elections, in which the NSDAP saw its vote share fall by four percentage points, Schacht and Wilhelm Keppler organized a petition of industrial and financial leaders, the Industrielleneingabe (Industrial petition), requesting president Paul von Hindenburg to appoint Adolf Hitler as Chancellor. After Hitler took power in January 1933, Schacht won re-appointment as Reichsbank president on 17 March.

On 2 August 1934, when Reich and Prussian Minister of Economics Kurt Schmitt went on an extended medical leave of absence, Hitler provisionally appointed Schacht to take over the running of the ministries. The appointment was made permanent on 31 January 1935, after Schmitt formally resigned. Schacht supported public-works programs, most notably the construction of autobahnen (highways) to attempt to alleviate unemployment – policies which had been instituted in Germany by Kurt von Schleicher's government in late 1932, and had in turn influenced Franklin D. Roosevelt's New Deal in the United States. But years later, Roosevelt seemed to "enjoy" recalling how Dr. Schacht was "weeping on his [FDR's] desk about his poor country." He also introduced the "New Plan", Germany's attempt to achieve economic "autarky", in September 1934. Germany had accrued a massive foreign currency deficit during the Great Depression, which continued into the early years of Nazi rule. Schacht negotiated several trade agreements with countries in South America and southeastern Europe, under which Germany would continue to receive raw materials, but would pay in Reichsmarks. This ensured that the deficit would not get any worse, while allowing the German government to deal with the gap that had already developed. Schacht also found an innovative solution to the problem of the government deficit by using Mefo bills.

Schacht was also made a member of the Academy for German Law. He was appointed General Plenipotentiary for the War Economy in May 1935 by provision of the Reich Defense Law of 21 May 1935 and was awarded honorary membership in the NSDAP and the Golden Party Badge in January 1937.

Schacht disagreed with what he called "unlawful activities" against Germany's Jewish minority and in August 1935 made a speech denouncing Julius Streicher and Streicher's writing in the Nazi newspaper Der Stürmer.

During the economic crisis of 1935–1936, Schacht, together with the Price Commissioner Dr. Carl Friedrich Goerdeler, helped lead the "free-market" faction in the German government. They urged Hitler to reduce military spending, turn away from autarkic and protectionist policies, and reduce state control in the economy. Schacht and Goerdeler were opposed by a faction centering on Hermann Göring. Göring was appointed "Plenipotentiary for the Four Year Plan" on 18 October 1936, with broad powers that conflicted with Schacht's authority. Schacht objected to continued high military spending, which he believed would cause inflation, thus coming into conflict with Hitler and Göring.

In 1937, Schacht met with Chinese Finance Minister Dr. H. H. Kung. Schacht told him that "German-Chinese friendship stemmed in good part from the hard struggle of both for independence". Kung said, "China considers Germany its best friend [...] I hope and wish that Germany will participate in supporting the further development of China, the opening up of its sources of raw materials, the upbuilding of its industries and means of transportation."

On 26 November 1937, Schacht resigned as Reich and Prussian Minister of Economics and as General Plenipotentiary at both his and Göring's request. He had grown increasingly dissatisfied with Göring's near-total ignorance of economics, and was also concerned that Germany was coming close to bankruptcy. His replacement was to be Walther Funk, who would take over in February 1938, with Göring serving as acting minister in the interim. Hitler, however, knew that Schacht's departure would raise eyebrows outside Germany, and insisted that he remain in the cabinet as minister without portfolio and as President of the Reichsbank. Göring also appointed him to the Prussian State Council. In the late 1930s, Schacht had an affair with the sculptor Annie Höfken-Hempel. Höfken-Hempel was a Nazi party member and allegedly was a member of the Gestapo. The affair contributed to Schacht's separation from his wife Luise Sowa, an ardent Nazi party member, in late 1938.

Following the Kristallnacht of November 1938, Schacht publicly declared his repugnance at the events and suggested to Hitler that he should use other means if he wanted to be rid of the Jews. He put forward a plan in which Jewish property in Germany would be held in trust, and used as security for loans raised abroad, which would also be guaranteed by the German government. Funds would be made available for Jewish emigrants, to overcome the objections of countries that were hesitant to accept penniless Jews. Hitler accepted the suggestion and authorised him to negotiate with his London contacts. Schacht, in his book The Magic of Money (1967), wrote that Montagu Norman and Lord Bearstead, a prominent Jew, had reacted favourably, but Chaim Weizmann, leading spokesman for the British Zionist Federation, opposed the plan. A component of the plan was that emigrating Jews would have taken items such as machinery with them on leaving the country, as a means of boosting German exports. The similar Haavara Agreement allowing German Jews to emigrate to Mandatory Palestine under similar terms had been signed in 1933.

On 20 January 1939, Hitler dismissed Schacht from his post as President of the Reichsbank and replaced him with Funk. Schacht remained a Reichsminister without portfolio, receiving the same salary, but was excluded from participation in the government. He retired to his house in the country, but continued to occasionally voice private criticisms, culminating in a letter to Göring in November 1942. In it, he assailed the government's decision to begin calling up 15-year-olds for service in the airfield defense forces, and cited this as one more item in a litany of factors that he concluded would strengthen the public's "misgivings as to how this war will actually end". The response to the letter was that Hitler dismissed him as a Reichsminister without portfolio on 22 January 1943, and he was also dismissed from the Prussian State Council by Göring, who cited his "defeatist letter, calculated to undermine the German people's powers of resistance". Another letter from Martin Bormann demanded that Schacht return the Golden Party Badge that he had received in 1937. When Schacht returned to his Berlin home, he found that it was being watched by the Gestapo.

Resistance activities

Schacht was said to be in contact with the German resistance to Nazism as early as 1934, though at that time he still believed the Nazi regime would follow his policies. By 1938, he was disillusioned and was an active participant in the plans for a coup d'état against Hitler if he started a war against Czechoslovakia. Goerdeler, his colleague in 1935–1936, was the civilian leader of resistance to Hitler. Schacht talked frequently with Hans Gisevius, another resistance figure; when resistance organizer Theodor Strünck's house (a frequent meeting place) was bombed out, Schacht allowed Strünck and his wife to live in a villa he owned. However, Schacht had remained in the government and, after 1941, Schacht took no active part in any resistance.

Still, at Schacht's denazification trial (after his acquittal at the Nuremberg trials), it was declared by a judge that "None of the civilians in the resistance did more or could have done more than Schacht actually did."

After the attempt on Hitler's life on 20 July 1944, Schacht was arrested on 23 July. He was sent to Ravensbrück, then to Flossenbürg, and finally to Dachau. In late April 1945, he and about 140 other prominent inmates of Dachau were transferred to Tyrol by the SS, which left them there. They were liberated by the Fifth U.S. Army on 5 May 1945 in Niederdorf, South Tyrol, Dolomites, Italy.

After the war

Schacht had supported Hitler's gaining power and had been an important official of the Nazi regime. Thus, he was arrested by the Allies in 1945. He was put on trial at Nuremberg for "conspiracy" and "crimes against peace" (planning and waging wars of aggression), but not war crimes or crimes against humanity. Gustave Gilbert, an American Army psychologist, administered a German version of the Wechsler-Bellevue IQ test on Nazi leaders including Schacht. Schacht scored 143, the highest among the leaders tested, after adjustment upwards to take account of his age.

Schacht pleaded not guilty to the charges against him. He cited in his defense that he had lost all official power before the war even began, that he had been in contact with Resistance leaders like Hans Gisevius throughout the war, and that he had been arrested and imprisoned in a concentration camp himself.

His defenders argued that he was just a patriot trying to make the German economy strong. Furthermore, Schacht was not a member of the NSDAP and shared very little of their ideology. The British judges favored acquittal, while the Soviet judges wanted to convict and execute. The British prevailed, and Schacht was acquitted on 1 October 1946. However, at a West German denazification trial, Schacht was sentenced to eight years of hard labor. He was freed on appeal in 1948.

In 1950, Juan Yarur Lolas, the Bethlehem-born founder of the Banco de Crédito e Inversiones and president of the Arab colony in Santiago, Chile, tried to hire Schacht as a "financial adviser" in conjunction with the German-Chilean community. However, the plan fell through when it became news. He served as a hired consultant for Aristotle Onassis, a Greek businessman, during the 1950s. He also advised the Indonesian government in 1951 following the invitation of economic minister Sumitro Djojohadikusumo.

In 1953, Schacht started a bank, Deutsche Außenhandelsbank Schacht & Co., which he led until 1963. He also advised on economics and finance to heads of state of developing countries, in particular the Non-Aligned countries; however, some of his suggestions were opposed, one of which was in the Philippines by the former Bangko Sentral ng Pilipinas head Miguel Cuaderno, who firmly rebuffed Schacht, stating that his monetary schemes were hardly appropriate for an economy needing capital investment in basic industry and infrastructure.

Indirectly resulting from his founding of the bank, Schacht was the plaintiff in a foundational case in German law on the "general right of personality". A magazine published an article criticizing Schacht, containing several incorrect statements. Schacht first requested that the magazine publish a correction, and when the magazine refused, he sued the publisher for violation of his personality rights. The district court found the publisher both civilly and criminally liable; on appeal, the appellate court reversed the criminal conviction, but found that the publisher had violated Schacht's general right of personality.

Schacht had a daughter and a son from his first marriage, Inge and Jens, and two daughters from his second marriage, Konstanze and Cordula. He died in Munich, West Germany, on 3 June 1970.

Portrayal in popular culture

Hjalmar Schacht has been portrayed by the following actors in film, television, and theater productions:

• Felix Basch in the 1943 United States propaganda film Mission to Moscow.
• Władysław Hańcza in the 1971 Polish film Epilog norymberski.
• James Bradford in the 2000 Canadian/U.S. television miniseries Nuremberg.
• Stoyan Aleksiev in the 2006 British television series Nuremberg: Nazis on Trial.