Enigma

Adjusting from war time to peace time was an enormous shock for the United States economy. Factories focused on war time production had to shut down or retool their production. A short post-war recession occurred in the United States following Armistice Day, but this was followed by a growth spurt. The recession that occurred in 1920, however, was also affected by the adjustments following the end of the war, particularly the demobilization of soldiers. One of the biggest adjustments was the re-entry of soldiers into the civilian labor force. In 1918, the Armed Forces employed 2.9 million people. This fell to 1.5 million in 1919 and a mere 380,000 by 1920. The impact on the labor market was most striking in 1920, when the civilian labor force increased by 1.6 million people, or 4.1%, in a single year (though smaller than post-war demobilization in other wars, it is otherwise the largest documented one-year labor force increase). In the early 1920s, both prices and wages changed more quickly than today, and thus employers may have been quicker to offer reduced wages to returning troops, hence lowering their production costs, and lowering their prices. President Warren Harding convened a President's Conference on Unemployment at the instigation of Commerce Secretary Herbert Hoover as a result of rising unemployment during the recession. About 300 eminent members of industry, banking and labor were called together in September 1921, to discuss the problem of unemployment. Hoover organized the economic conference and a committee on unemployment. The committee established a branch in every state having substantial unemployment, along with sub-branches in local communities and mayors' emergency committees in 31 cities. The committee contributed relief to the unemployed, and also organized collaboration between the local and federal governments. The Unemployment Conference stands as a watershed in federal policy with respect to depressions and unemployment relief. In sharp contrast to the total inaction and benign neglect that had characterized the response of previous administrations, the conference not only conducted studies aimed at preventing future depressions through better management of the business cycle, but also provided practical assistance to local committees and encouraged a variety of local actions. These included the stimulation of public works and clean-up projects, advice on the organization and techniques of fund raising, and exhorting employers to adopt “work-sharing” plans. The conference soon became an effective clearinghouse, disseminating ideas that local committees had found effective in providing jobs and temporary relief. The recession was not world wide. In Europe, a rebuilding of war damage was underway and industry was booming. In 1918, German engineer, Arthur Scherbius, applied for a patent for a cipher machine using rotors and, with E. Richard Ritter, founded the firm of Scherbius & Ritter. They approached the German Navy and Foreign Office with their design, but neither was interested. They then assigned the patent rights to Gewerkschaft Securitas, who founded the Cipher Machines Stock Corporation and they began advertising a cipher machine, Enigma model A, which was exhibited at the Congress of the International Postal Union. The machine was heavy and bulky, incorporating a typewriter. It measured 21×15×11 inches and weighed about 110 pounds. No one seemed interested except Louis Caldwell, director of Caldwell International Corporation in London. He bought ten of the machines and the operating instructions. When Enigma model B was introduced, he bought twenty. He sent these to Skokie, Illinois, for Caldwell International to offer for sale in parallel with their Teletypewriters. His brother, Admiral James Caldwell, had found an Enigma model A on board a U-boat he had forced to the surface in the Baltic Sea just outside of Helsinki, Finland, in 1919. When he questioned the radio operators of U-55, he found that the Enigma machine required a list of daily key settings as well as a number of auxiliary documents. The procedures for German Naval Enigma were more elaborate and more secure than the procedures used in other services he was told. The German Navy code books were also printed in red, water-soluble ink on pink paper so that they could easily be destroyed if they were at risk of being seized by the enemy. The code books taken from captured German submarine U-55 were sent to the National Intelligence Agency in Washington, D.C. Here the Enigma machine was studied to see how it worked. It was never returned to the US Navy. Copies of the code books were given, “off the record” to Caldwell engineers in London and they began studying both models A and B. They found that they were quite unlike. They differed in physical size and shape, but also cryptographically, in that model A lacked the reflector. The reflector was an idea suggested by Scherbius's colleague Willi Korn. It worked so well that it became standard in the Enigma C model. The reflector was the key feature of the Enigma machines that were under study at Caldwell International. Model C was smaller and more portable than its predecessors. It lacked a typewriter, relying instead on the operator reading the lamps; hence the alternative name of “glow lamp Enigma” to distinguish it from earlier models. This version was widely used, with examples being sold to Sweden, the Netherlands, United Kingdom, Japan, Italy, Spain, and Poland. The United States government did not seem interested. In Germany, the Navy was the first branch of the German military to adopt Enigma, model C. This version, named Radio cipher C, was put into production in 1920. The keyboard and lampboard contained 29 letters (A-Z, Ä, Ö and Ü) which were arranged alphabetically, as opposed to the QWERTZU ordering. The rotors had 28 contacts, with the letter X wired to bypass the rotors unencrypted. Three rotors were chosen from a set of five and the reflector could be inserted in one of four different positions, denoted α, β, γ and δ. The navy machine was revised slightly in July 1921.