On August 9, 1914, barely one week after the outbreak of the First World War, German Minister of War Erich von Falkenhayn puts Walter Rathenau of the large electronics firm Allgemeine-Elektrizitats-Gellellschaft (AEG) in charge of organizing all the raw materials for Germany’s war production.
The issue of how to effectively collect and utilize raw materials for the production of munitions and other war supplies was especially important for Germany, who was prevented from importing anything by the Allied naval blockade in the North Sea, in place from the beginning of the war. Rathenau, the son of AEG’s founder, had approached the German War Department proposing to "save Germany from strangulation" with an idea of centralizing the management of the war production process under a single organization, a raw materials agency. In Rathenau’s vision, the agency would take inventory of the raw materials available—not only in Germany but in all German-occupied territories, such as Belgium—and allocate them to the firms that could use them best. Each commodity used in war production would have its own raw materials company, with a board of directors drawn from the firms that used the given commodity.
In this way, Rathenau convinced Falkenhayn, he would combine the best aspects of the capitalist free-market system would be united with the principles of collective management to enable a smooth, optimally effective war production process. Falkenhayn was convinced, and made Rathenau the head of what became the KRA, the German war production organization. Appointing Rathenau—who was Jewish—to head war production was an extraordinary step for a Prussian military officer to take at the time.
In the end, however, Rathenau served in the new post only briefly, as many of the businesses the KRA administered bristled under an organization directed by a Jew. In April 1915, Rathenau was forced to resign; he subsequently returned to his post at AEG, becoming chairman of the company upon his father’s death in June 1915. Rathenau remained active in politics, and worked to support the creation of the Third Supreme Command, an effective military dictatorship under Paul von Hindenburg and Erich Ludendorff, in August 1916. He opposed some of the Command’s decisions, however, including the resumption of unrestricted submarine warfare in 1917 and Ludendorff’s desire to annex territory on the Eastern Front. After the war, Rathenau joined the Democratic Party; he served as minister for reconstruction from 1919 to 1921 and became foreign minister in 1922. In June of that year, shortly after signing the controversial Treaty of Rapallo with the Soviet Union—which reestablished diplomatic relations between the two countries—Rathenau was murdered in Berlin by right-wing anti-Semitic extremists.