March 16, 2022 | Reading Time: 7 minutes
Charles Koch and what history tells us about the line between profit-earning in peacetime and profiteering in wartime
Koch Industries is staying in Russia.
A major news item this morning was Ukrainian Volodymy Zelenskyy demanding that the United States and its European allies do one of two things: establish a no-fly zone over Ukraine or supply aircraft.
During a virtual speech before members of the United States Congress, he said Europe hasn’t seen terror like this in 80 years. “We are asking for an answer to this terror. Is that a lot to ask? To create a no-fly zone over Ukraine to save people. Is this too much to ask?”
While most headlines communicated his no-fly zone request, Zelenskyy himself offered “an alternative” – send warplanes:
You know what kind of defense systems we need. You know how much depends on the ability to use aircraft to protect our people, our freedom – aircraft that can help Ukraine, help Europe. We know they exist and you have them. They are not in Ukrainian skies.
Behind the headlines was more news from Zelenskyy’s speech (which invoked Pearl Harbor and Sept. 11 and included a video illustrating the depth of Ukrainian suffering). It was in essence about the line between profit-earning in times of peace and profiteering in times of war.
As well as a greater NATO response, Zelenskyy asked US companies to leave Russia and its market “because it is flooded with our blood.” (As I’m writing this, Bloomberg reports that President Biden has pledged more aid to Ukraine, including anti-aircraft systems and drones.)
Members of Congress, if you have companies in your district who financed the Russian military machine, you should put pressure.
I am asking to make sure the Russians do not receive a single penny they used to destroy people in Ukraine, the destruction of our country, the destruction of Europe.
All American ports should be closed for Russian goods.
Peace is more important than income.
It seems most global firms agree.
General Motors, Ford Motor Company, Delta Airlines, McDonald’s, Disney, ebay – these and many more are making good on Zelensky’s request. Goldman Sachs, Wall Street’s vampire squid, is pulling out. So is Deutsche Bank, despite its reputation for laundering Russian cash.
While many companies are staying put, or minimizing their presence, one company stands out: Koch Industries. The private company’s owner, billionaire Charles Koch, is more than anyone responsible for funding and fomenting the white-wing backlash against the first Black president, a backlash that lifted Donald Trump to the White House.
According to Judd Legum, “Koch Industries has given no indication that its business operations have been suspended. On the contrary, the limited public comments made by Koch subsidiaries operating in Russia indicate that their business activities have continued.”
As far as Koch Industries is concerned, laminated glass certainly has potential military implications.
For whose military?
When it comes to American firms profiteering from war between liberal democracy and its enemies, there is a history going back to the Second World War (if not earlier). While other foreign corporations fled Germany and the murderous rise of the Nazi Party, some stayed for reasons having to do with greed, ambition or ideological affinity.
That’s according to my friend, Jay Weixelbaum.
His dissertation was about the devil’s bargain American corporations made with the Hitler regime. In the following interview, Jay tells me about the time Henry Ford made warplanes for the Nazis but refused the British the same. He explains how GM made the trucks that made the Blitzkrieg possible. He recalls how Coca-Cola sucked up to the Nazis hoping for favorable allotments of sugar in Europe.
And he explains that the laminated glass made by Koch subsidiaries in Russia has military applications (eg, in Armored Personnel Carriers).
It’s too soon to say whether Koch is going to profit from war the way GM, Ford and Coke did (and IBM, too). But if history is a guide, he should rethink his loyalties. Business with fascists is bad business.
Koch Industries continues doing business in Russia. Thoughts?
My perspective comes from years studying the business history of American corporations running operations in Nazi Germany.
These companies made plenty of excuses for doing business with an oppressive regime. The excuses were usually due to public pressure.
These excuses, I think, fall under three categories: sunk-cost fallacy, maintaining or expanding market share, and ideological affinity.
The sunk-cost fallacy is the one I think is the most common and understandable from the perspective of corporate behavior.
General Motors invested a huge amount of money, more than most foreign companies, in building up its plants in Germany.
GM had the same problem a lot of foreign companies in Russia are probably having today – the inability to get their money out.
Its profits were locked up in German banks by regulators on both sides of the Atlantic, which meant that the company had to continue to double down on investing in physical plants in that country.
This helped Germany expand military manufacturing. The famed captain of industry, Alfred P. Sloan, choose to deepen involvement with the Nazis by not only making trucks but German warplanes, too.
I think Koch Industries is somewhere between the second and third camps – between market share and ideological affinity.
The case of IBM in Nazi Germany reminds me of Koch.
Tell me about that.
IBM was very aggressive in maintaining market share in Germany. That behavior goes back to the period just after the First World War.
By the time of the Hitler regime, IBM had pushed to ensure a monopoly on the industry of accounting and early computing equipment. This meant accommodating the Nazi regime and suing other corporate entities attempting to encroach on its territory.
So much so that IBM’s founding executive Thomas Watson accepted a medal from Hitler. The medal was created for “honoring foreign nationals who have made themselves deserving of the German Reich.” (After Hitler invaded Poland, though, Watson returned the medal.)
At the very same time, IBM was moving to ensure the rogue manager was outflanked and neutralized to maintain its business in Germany. The company moved with the same intensity to retrieve property after the war when a new regime came in. Market share was its top priority.
Ideological affinity is another matter.
For this, I need to cite my study of the Ford Motor Company.
The public knows about the antisemitic and fascist arguments Henry Ford printed in the Dearborn Independent. But the public doesn’t know about how differently he treated subsidiaries in Britain and Germany.
In the first couple years of the Nazi regime, Germany was in the throes of the Great Depression. Henry Ford was known as a stickler about money in some respects but he liked funding scientific research. In essence, he wrote a blank check for Ford-Werke (Ford Germany).
Germany could buy all the equipment they needed. It didn’t matter to Ford whether it operated at a loss. Within a few years, Ford-Werke was making vehicles for Germany’s military. By the late 1930s, the company was making everything from barges to early missile parts.
Meanwhile, Ford had a plant in Dagenham in Britain.
Even before the blitz started (the Luftwaffe bombing of London, etc.), the British government begged Ford to ramp up military production.
Ford was on Hitler’s side?
In several public interviews, Henry Ford claimed that he cared only about “peace” and that he was against military production.
Based on what we know about the Ford-Werke plants, we know this was a flat lie. Documents show Henry Ford meeting with Nazi officials. There’s no way he didn’t know Ford-Werke was supplying Germany.
Eventually, public pressure rose high enough to give the British what they wanted. Ford relented, but only after complaining about it.
There’s ample evidence, unsurprisingly, of Ford’s affinity for the Nazis. There’s evidence of his willingness to use Ford-Werke to supply them.
I wouldn’t be surprised if the Kochs feel similarly.
To add contrast, I could give you one more case study.
Coca Cola was involved with the Nazis.
I spent months looking at records from the US embassy in Germany. The US had a commercial attaché office there. Records show how the US government viewed US-Nazi business. I digitized a lot of them.
The closest I came to a “smoking gun” was a memorandum I found from September 1939 – which is, of course, the month and year in which Germany invaded Poland, starting World War II in Europe.
The memo from Coke was written in a jubilant tone.
It said that Coke had airlifted thousands of bottles of the soft drink to German troops on the Polish frontier – a great feat of logistics.
Furthermore, such an action was meant to ingratiate themselves with the Nazi regime, so the company might get better allotments of raw materials, like sugar, for its German production facilities.
The comparison I’m trying to make is that Coca Cola was acting like a junior partner noodging for attention, whereas Ford (and perhaps the Kochs, too) appear to be connected ideologically to regime leaders.
So Koch Industries is probably driven by competition for greater market share in Russia. That it doesn’t mind fascists is a bonus.
And as far as Koch Industries is concerned, laminated glass (the product made in Russia) certainly has potential military implications.
For whose military?
Koch subsidiary Guardian “has two glass production plants that operate in Russia. One facility is in Ryazan, Russia, about 120 miles southeast of Moscow. The company added ‘a new jumbo laminated glass production line’ to that facility in August 2021.” Is that right?
According to Judd Legum, yes.
Are you saying current conditions in Russia with respect to Koch look like past conditions in Germany with respect to IBM, Ford and Coke? When US industrialists were making stuff for the enemy?
Yes, it does look like that to me. As you know, we have a saying in my neck of the woods: “Every time history repeats, the price goes up.”
It doesn’t look like the sunk cost fallacy to me. Goldman Sachs is leaving while Koch stays in? That reminds me of GM, Ford and IBM.
Germany was underestimated. Poland had a big army, but Germany was good at the lightning attack, the Blitzkrieg. This’ll burn ya:
What we’re seeing now with the failure of the Russian military forces to overwhelm Ukrainian military forces underscores one of the most important aspects of a successful Blitzkrieg: good logistics.
Germany had that thanks to the legion of General Motors trucks manufactured at the Opel plant, which GM bought in 1928. Not to put too fine a point on it, but the vehicle was called the “Blitz.”
Russia doesn’t have a GM (Opel) Blitz truck. If it had that (or something similar), things might be a whole heck of a lot different right now.
Fortunately, Koch seems to be the outlier rather than the rule. Perhaps the corporate world has learned something from history, after all.
What is laminated glass good for, militarily speaking?
It’s good for military vehicles, especially for those Armored Personnel Carriers that we see the Ukranians blowing the shit out of.
My expertise is, of course, on American companies making military hardware in Germany 80 years ago, but this looks and feels familiar.
From a historian’s view, these facts are familiar.
Remember, IBM, Coke and Ford operated at a loss. They hoped profits would come from the spoils of war, but they never did.
Instead, the money stayed locked up in bank accounts. Factories were damaged or destroyed by bombings. Property was stolen or missing.
By the time their executives accessed their German accounts in the aftermath, it was all in the denomination of a defeated regime.
Lesson: don’t do business with fascists?
John Stoehr is the editor of the Editorial Board. He writes the daily edition. Find him @johnastoehr.