Economic Crisis, State-Sponsored Expropriation
It’s the spring of 1933 in Germany, and the Great Depression is in full force. One of the largest department store chains in Germany, Hermann Tietz & Co., is experiencing liquidity problems. Founded in 1882 by a Jewish entrepreneur named Oscar Tietz, in 1933 the business is owned by Tietz’s two sons and another Jewish business associate.
Hearing of the firm’s liquidity problems, one of company’s primary creditors, the Dresdner Bank, suddenly calls in a loan of 14 million Marks, a sum which the company quite obviously cannot pay. The company is on the verge of bankruptcy.
Shortly after the loan was recalled, the three managing directors from Hermann Tietz & Co. were invited to a meeting in Hotel Adlon in March of 1933 with their bank creditors and representatives of the Reich Economics Ministry. As soon as they arrived, the managers’ passports were confiscated by government officials.
Later, in the private meeting room, the Bank indicated that it would be willing to extend further credit, but only under the condition that an “Aryan” CEO would be installed. The Tietz sons could read the writing on the wall. On March 31, 1933, they resigned.
The next day, April 1, the first state-sponsored boycott of Jewish businesses took place. Within a few days, the Tietz family had sold all of its stock in the company to its creditors, among them Commerzbank, Deutsche Bank, and the Dresdner Bank, for somewhere around 10% of their market value. The family eventually fled Germany.
The Nazi Aryanization Policy
The experience of the Tietz family was not unique. Shortly after Adolf Hitler came to power in early 1933, he instituted a program called “Aryanization,” in which Jewish-owned businesses were forcibly expropriated and transferred into non-Jewish, “Aryan” ownership. As justification, the Nazis used the term Volksvermögen, or “People’s Wealth.” The Jews, because they weren’t considered part of the German Volk, couldn’t rightfully own any share of Germany’s wealth.
The goal was to expel Jews from business life in Germany, and was part of the gradually intensifying state-sanctioned persecution of Jews in Germany that culminated in the Holocaust. By 1936, more than 110,000 Jews had fled Germany. The German state finances also benefited enormously from the expropriations. According to the German Historical Museum, at least 9% of the government’s income in 1938/39 was stolen from Jewish individuals and businesses.
A New Company is Formed: Hertie
The story of the Tietz family is particularly notable, not only because of the blatant robbery, but also of what happened to the company after it had been stolen. Georg Karg, a high-level manager at Hermann Tietz & Co., eventually bought the reduced-price stocks from the firm’s creditors and renamed the company Hertie (HERmann TIEtz). An approved Aryan, Karg immediately became one of the most important businessmen in Germany.
During the war years, Hertie produced clothing for the German Army as well as for civilian workers. According to the historian Frank Bajohr, at least some of this clothing was produced within the Jewish ghetto in Litzmannstadt (today Łódź in Poland)
After the war, Hertie under Georg Karg became one of the largest and well known department store chains in Germany. It owned dozens of stores across the country, including the famous KaDeWe in West Berlin. Hertie was purchased by another department store chain, Karstadt, in 1994.
Georg Karg died in 1972. His heirs set up the Hertie Foundation in 1974 to “carry on the life work” of their father. Among the Foundation’s stated goals is “a particular focus on training prospective leaders.” To this end, the Hertie Foundation funded the establishment of, among other institutions, the Hertie School of Governance, where I received my Master’s degree.
What to make of this?
I have little doubt how my Hertie leadership professors would categorize Georg Karg’s decision in 1933 to take advantage of his Jewish bosses’ misfortune, to – what other word is there? – collaborate with the Nazi Aryanization program and earn himself a fortune in the process. It was a failure of morality, of decency, and of leadership.
The questions I ask myself are: what responsibility, if any, does the Hertie Foundation have to atone for the actions of Georg Karg. Is that responsibility shared by the institutions that the Hertie Foundation supports, including the Hertie School of Governance?
The responsibility is not only a moral one – a simple question of conscience. It is also a financial responsibility. According to this article from Die Zeit, the Tietz heirs received a partial monetary compensation from the Hertie concern after the war ended. The compensation was limited to three department stores and five million German Marks, however, because many of the family's original holdings were within the DDR. That is, as far as I can tell, the extent of reparations paid to the Tietz heirs. Presumably, the financial responsibility has thus been addressed.
What is the Moral Legacy?
I’m not surprised that the Hertie Foundation doesn’t mention Georg Karg’s pre-war history on its website, or that I never caught a whisper of the truth during my two years at the Hertie School. Both the Foundation and the School do good work, and try to improve the lives of others. Germany in general has done much to face its criminal past, and at some point it is important to to face oneself to the future.
But I keep coming back to this thought: If the Nazis had never come to power, Georg Karg probably would have led a comfortable, upper-manager life. A nice house, nice clothes, trips abroad. And that would have been it: no fortune, no foundation. But Hitler did come to power, and Karg’s Jewish bosses were kicked out. He saw his opportunity, acted quickly, and within months he was one of the most important businessmen in Germany. It must have seemed almost providential to Karg.
I don’t know how Karg justified his decision, either to himself or to his family. It’s possible he came to regret his actions, which is what helped inspire his children to create the foundation in his honor. It’s also possible that he saw himself as someone caught up in events, who recognized an opportunity for himself and his family and did what many other people would have done.
But I still can’t shake this strange feeling of having benefited, in a small and indirect way, from a brutal Nazi policy. Maybe this is just the first time I’ve noticed it. Or maybe I just haven’t been looking hard enough.