England and Germany
The execution of those grandiose schemes was facilitated by the easy access which Germany had to the principal markets of the globe. One of the main objects of her diplomacy had been to break down the tariff barriers which would have reserved to the great trading empires the main fruits of their own labour and enterprise. By the Treaty of Frankfort the French had been compelled to confer on Germany the most-favoured-nation clause, thus entitling her to enjoy all the tariff reductions which the Republic might accord to those countries with which it was on the most amicable terms. British free trade opened wide the portals of the world’s greatest empire to a deluge of Teuton wares and to a kind of competition which contrasted with fair play in a degree similar to that which now obtains between German methods of warfare and our own. Russia, at first insensible to suasion and rebellious to threats, endeavoured to bar the way to the economic flood on her western frontiers, but during the stress of the Japanese war she chose the lesser of two evils and yielded. The concessions then made by my friend, the late Count Witte, to the German Chancellor, drained the Tsardom of enormous sums of money and rendered it a tributary to the Teuton. But it did much more. It supplied Germany with a satisfactory type of commercial treaty which she easily imposed upon other nations. Germany’s road through Italy was traced by the mistaken policy of the French Government which, by a systematic endeavour to depreciate Italian consols and other securities, drove Crispi to Berlin, where his suit for help was heard, the Banca Commerciale conceived, and commercial arrangements concluded which opened the door to the influx of German wares, men and political ideals.
A few years sufficed for the fruits of this generous hospitality to reveal themselves. The influx of wealth and the increased population helped to render the German army a match for the combined land forces of her rivals, a formidable navy was created, which ranked immediately after that of Great Britain, and a large part of Europe was so closely associated with, and dependent on, Germany that an extension of the Zollverein was talked of in the Fatherland, and a league of European brotherhood advocated by the day-dreamers of France and Britain. The French, however, never ceased to chafe at the commercial chain forged by the Treaty of Frankfort, but were powerless to break it, while the British lavished tributes of praise and admiration on Germany’s enterprise, and construed it as a pledge of peace. Russia, alive to the danger, at last summoned up courage to remove it, and had already decided to refuse to extend the term of the ruinous commercial treaty, even though the alternative were war. That was the danger which stimulated the final efforts of the Kaiser’s Government.
Thus the entire political history of Entente diplomacy during this war may be summarized as a series of attempts on the part of the Allies to undo some of the effects of the masterstrokes executed by Germany during the years of abundance which she owed to the favoured-nation clause, British free trade and kindred economic concessions. Interpenetration is the term by which the process has been known ever since Count Witte essayed it in Manchuria and China.
The German procedure was simple, yet effective withal. Funds were borrowed mainly in France, Britain, Belgium, where investors are often timid and bankers are unenterprising. And then operations were begun. The first aim pursued and attained was to acquire control of the foreign trade of the country experimented on. With this object in view banks of credit were established which lavished on German traders every help, information and encouragement. Men of Teuton nationality settled in the land as heads of firms, as clerks without salary, private secretaries, foremen, correspondents, and rapidly contrived to get command of the main arteries of the economic organism. German manufactures soon flooded the country, because those who undertook to import them could count on extensive credit from the institutions founded with the money of the very nations whose trade they were engaged in killing. In this way the competition, not only of all Entente peoples but also of the natives of the country experimented on, was systematically choked. And the customers of these banks, natives as well as Teutons, became apostles of German influence.
Insensibly the great industrial concerns of the place passed into the possession of German banks, behind which stood the German empire. A nucleus of influential business people, having been thus equipped for action, incessantly propagated the German political faith. German schools were established and subsidized by the Deutscher Schulverein, clubs opened, musical societies formed, and newspapers supported or founded, to consolidate the achievements of the financiers. On political circles, especially in constitutional lands, the influence of this Teutonic phalanx was profound and lasting.
In all these commercial and industrial enterprises undertaken abroad for economic gain and political influence, the German State, its organs and the individual firms, went hand in hand, supplementing each other’s endeavours. The maxim they adopted was that of their military commanders: to advance separately but to attack in combination. Not only the Consul, but the Ambassador, the Minister, the Scholar, the Statesman, nay the Kaiser1 himself, were the inspirers, the partners, the backers of the German merchant. Marschall von Bieberstein once told me in Constantinople that his functions were those of a super-commercial traveller rather than ambassadorial. And he discharged them with efficiency. Laws and railway tariffs at home, diplomatic facilities and valuable information abroad smoothed the way of the Teuton trader. Berlin rightly gauged the worth of this pacific interpenetration at a time when Britons were laughing it to scorn as a ludicrous freak of grandmotherly government. To-day its results stand out in relief as barriers to the progress of the Allies in the conduct of the war.
Of this ingenious way of enslaving foreign nations unknown to themselves, Italy’s experience offers us an instructive illustration. The headquarters of the German commercial army in that realm were the offices of the Banca Commerciale in Milan. This institution was founded under the auspices of the Berlin Foreign Office, with the co-operation of Herr Schwabach, head of the bank of Bleichröder. Employing the absurdly small capital of two hundred thousand pounds, not all of which was German, it worked its way at the cost of the Italian people into the vitals of the nation, and finally succeeded in obtaining the supreme direction of their foreign trade, national industries and finances, and in usurping a degree of political influence so durable that even the war is supposed to have only numbed it for a time.
Between the years 1895 and 1915 the capital of this institution had augmented to the sum of £6,240,000, of which Germany and Austria together held but 2½ per cent., while controlling all the operations of the Bank itself and of the trades and industries linked with it.
The Germans, as a Frenchman wittily remarked, are born with the mania of annexation. It runs in their blood. And it is not merely territory, or political influence, or the world’s markets that they seek to appropriate. Their appetite extends to everything in the present and future, nay, even in the past which they deem worth having. It is thus that they claim as their own most of Italy’s great men, such as Dante, Giotto, Leonardo da Vinci, Botticelli, Galileo, and it is now asserted by a number of Teuton writers that Christ Himself came of a Teutonic stock.
German organisms, as well as German statesmen, display the same mania of annexation, and the Banks in especial give it free scope. German banks differ from French, British and Italian in the nature, extent and audacity of their operations. It was not always thus. Down to the war of 1870 their methods were old-fashioned, cautious and slow. From the year 1872 onward, however, they struck out a new and bold course of their own from which British and French experts boded speedy disaster. Private enterprises were turned into joint stock companies, the capital of prosperous undertakings was increased and gigantic operations were inaugurated. Between the years 1885 and 1889 the industrial values issued each year reached an average of 1,770 million francs; between 1890 and 1895 the average rose to 1,880 millions, and from 1896 to 1900 it was computed at 2,384 millions.2
Of all German financial institutions the most influential and prosperous is the Deutsche Bank. It has been aptly termed an empire within the empire. Its capital, 250 million francs, exceeds that of the Reichsbank by thirty millions. It is the first of the six great German banks, of which four are known as the “D” group, because the first letter of their respective names is D: Deutsche Bank, Dresdner Bank, Disconto-Gesellschaft and Darmstädter Bank. The other two are the Schaffhausenscher Bankverein and the Berliner Handelsgesellschaft. The total capital of these six concerns amounts to 1,100 million francs.3
None of these houses is hampered by those rules, traditions or scruples which limit the activity of British joint stock banks. They are free to launch into speculations which, to the sober judgment of our own financiers, must seem wild and precarious, but to which success has affixed the hall-mark of approval. Each of the six banks is a centre of German home industries and also of the foreign transformations of these. To mention an industry is almost always to connote some one of the six. Before the war broke out one had but to gaze steadily at the beautiful facade of this or that Russian bank to discern the Lamia-like monster from the banks of the Spree. The famous firm of Krupps, for instance, had its affairs closely interwoven with those of the Berliner Disconto Gesellschaft, and was more than once rescued from bankruptcy by its timely assistance. Similar help was afforded to the celebrated firm of Bauer which is known throughout the world for its synthetical medicines. There were critical moments in its existence when it was confronted with ruin. The Bank extricated the firm from its difficulties, and the present dividend of 33 per cent. has justified its enterprise.
In this way the latter-day German banks upset all financial traditions, opened large credits to industries, smoothed the way for the spread of German commerce, killed foreign competition and seconded the national policy of their Government. As an instance of the push and audacity of these modernized institutions, a master stroke of the Bank of Behrens and Sons of Hamburg may be mentioned: it bought up the entire coffee crop of Guatemala one year to the amazement of its rivals and netted a very large profit by the transaction.
Now as commerce is international and industry depends for its greatest successes upon exportation, it was inevitable that the up-to-date German banks should seek fields of activity abroad and aim at playing a commanding part in the world’s commerce. And they tried and succeeded. For they alone instinctively divined the new spirit of the age, which may be termed co-operative and agglutinative. It was in virtue of this new idea that groups of States were leagued together by Germany in view of her projected war, and it is the same principle that impels her, before the conflict has yet been decided, to weld to herself as many tributary peoples as she may to assist her in the economic struggle which will be ushered in by peace. Germans first semiconsciously felt and now deliberately hold that in all departments of modern life, social, economic and political, our conception of quantities must undergo a radical change. The scale must be greatly enlarged. The unit of former times must give place to a group of units, to syndicates and trusts in commerce and industry, to trade unions in the labour world, to Customs-federations in international life. That this shifting of quantities is a correlate of the progress achieved in technical science and in means of communication, and also of the vastness of armies and navies and of the aims of the world’s foremost peoples, is since then become a truism, realized not only by the Germans but by all their allies.
For individual enterprise, as well as for national isolation, there is no room in the modern world. Isolation spells weakness and helplessness there. The lesser neutral States must of necessity become the clients of the Great Powers and pay a high price for the protection afforded them. Hence the maintenance of small nations on their present basis, with enormous colonies to exploit but without efficient means of defending them, forms no part of Germany’s future programme. And the altruistic professions of the Entente which claims to be fighting for the rights of little States, whose idyllic existence it would fain perpetuate, is scoffed at by the Teutons as chimerical or hypocritical. When this war is over, whatever its upshot, Central Europe with or without the non-German elements will have become a single unit, against whose combined industrial, commercial and military strivings no one European Power can successfully compete. And the difficulties which geographical situation has raised against effective co-operation among the Allies in war time will make themselves felt with increased force during the economic struggle which will then begin.
No mere tariff arrangement, but only a genuine league between all the west European Powers and the British Empire, supplemented by a customs union between them and the other Allies of the Entente, will then avail to ward off the new danger and establish some rough approach to the equilibrium which the present conflict has overthrown. The future destinies of Europe, as far as one may conjecture from the data available to-day, will depend largely on the insight of the Entente nations and their readiness to subordinate national aims and interests to those of the larger unit which will be the inevitable product of the new order of things.
The ideal type of the industrial bank having been thus wrought out, the Germans, whom a thoroughly commercial education had qualified for the work, carried on vast operations with a degree of boldness which was matched only by the thoroughness of their precautions. They advanced money with a readiness and an open-handedness which the West European financier set down as sheer folly, but which was the outcome of close study and careful deliberation. They began by acquainting themselves with the solvency of their clients, with the nature of the transactions which these were carrying on, with their business methods and individual abilities, and to the results of this preliminary examination they adjusted the extent of their financial assistance. They had secret inquiry offices to keep them constantly informed of the condition of the various firms and individuals, and when in doubt they demanded an insight into the books of the company which was seldom denied them. The Spanish Inquisition was but a clumsy agency in comparison with the perfect system evolved by these German banks, which could at any given moment sum up the prospects as well as the actual situation of each of their customers. It was this comprehensive survey which warranted some of the large advances they made to seemingly insolvent firms which afterwards grew to be the most prosperous in the Fatherland.
The methods thus practised at home were adhered to in all those foreign countries which the German financier, manufacturer or trader selected for his field of operations. A bank would be opened in the foreign capital with money advanced mainly by one of the six great financial institutions. It would be called by some high-sounding name, suggestive of the country experimented upon, and little by little the German capital would be diminished to a minimum and local capital substituted, but the supreme control kept zealously in the hands of the Teuton directors. Industries would then be financed and finally bought up. Others would also be financed but deliberately ruined. Competition would in this way be effectively killed, and little by little the life-juices of the country would be canalized to suit the requirements of German trade, industry and politics.
If an industry in the invaded country was judged capable of becoming subsidiary to some German industry, the Bank would maintain it for the purpose of amalgamating the two later on, or else having the foreign concern absorbed by the Teutonic. This was a labour of patriotism and profit. But if the business was recognized as a formidable rival to some German enterprise, it was doomed. The procedure in this case was simple. The Bank advanced money readily, tied the firm financially, rendering it wholly tributary; and then when the hour of destiny struck, the credit was suddenly withdrawn and the curtain rung up in the Bankruptcy Court. When this consummation became public, the unsuspecting foreigner would ask with naïve astonishment: “How can it be bankrupt? I understood that Germans were financing it.” They were, and it was precisely for that reason, and because it was on the way to prosperity as a rival to some German firm, that it was suffocated.4
This ingenious system proved exceptionally effective in Brazil. It has been said that that republic is become a dependency of Germany. What cannot be gainsaid is that about one-third of Brazil’s national debt5 is owing to German bankers, and the whole financial and industrial movement of the country is swayed by the Society of Colonization which is German, by the German Society for Mutual Protection, by the German-Brazilian Society and by the three Navigation Companies whose steamers ply between Brazil and the Fatherland.6 It is because of the far-reaching power and influence which has accrued to Germany from this successful invasion that Professor Schmoller of the Berlin University could write: “It behoves us to desire at any and every cost that, by the next century, a German land of twenty or thirty million inhabitants shall arise in Southern Brazil. It is immaterial whether it remains part of Brazil or constitutes an independent State or enters into close relations with the German Empire. But without a connection guaranteed by battleships, without the possibility of Germany’s armed intervention in Brazil, its future would be jeopardized.”
It is the Monroe doctrine that is commonly credited with thwarting these designs on South America. But as a matter of plain fact, it is to the British Navy and to nothing else that the credit is due. Were it not for the known resolve of the British nation to co-operate in case of need with the American people in their exertions to uphold that doctrine against Germany, the Berlin Cabinet would long ago have formally established a firm footing in Southern Brazil and the United States Government would have been powerless to prevent it.7
CHAPTER III
GERMANY AND ITALIAN FINANCE
It was in congruity with those principles and methods that the Banca Commerciale, which had its headquarters in Milan, set itself to discharge the complex functions of a financial, industrial, commercial and political agency of German interpenetration in Italy.
To German customers and those Italians who imported German goods, the Banca Commerciale allowed long credits and easy means of payment. To all who were in need of implements, machinery, or materials for a new enterprise, the bank “recommended” German houses, and those who were wise construed the “recommendation” as an ultimatum. For if it was ignored, their names were inscribed on the black books of the bank, and by means of an efficacious system of secret dossiers, handled by a confidential information bureau,8 they found themselves thrust into a “credit vacuum,” boycotted by finance and condemned to bankruptcy. All banks shunned them. Their bonds became mere scraps of paper. Every enterprise to which they set their hands was blighted, and nothing remained for them but to abandon their avocations or surrender at discretion.
But besides this executive of destruction there was another and still more important board, whose work was wholly constructive. It was commonly known as the “service of information.” Its functions were to collect at first hand all useful data about Italian commerce and industry, to draw up tabulated reports for the use of Germans at home engaged in trade and industry. These lists indicated current prices, the qualities of the goods in demand, the favourite ways of packing and consigning these, samples of manufactures, statistics of production, the addresses of all firms dealing with Italians – in a word, every kind of data calculated to enable German trade and industry to compete successfully with their rivals. The manner in which this body of information was drawn up, sifted, classified, and made accessible, deserves unstinted admiration. To say that commercial espionage was practised largely in the working of this comprehensive system is but another way of stating that it was German.
The Banca Commerciale, which was the head and centre of this organization, was, as a matter of course, called Italian. For every similar institution, commercial, journalistic or other, which has for its object the realization of the Teutonic plan of internationalization, invariably wears the mask of the nationality of the country in which it operates. And in this case the mask was supplied by Italians, on whom the bank bestowed all the highest honorary posts, while reserving the influential ones for Germans and Austrians. Thus the moving spirits of this vast organization were Herrn Joel, Weil and Toeplitz, men of uncommon business capacity, who devoted all their time and energies to the attainment of the end in view. And their zeal, industry and ingenuity were rewarded by substantial results, which have left an abiding mark on Italian politics and entered for a great deal into the attitude of the nation towards the two groups of belligerents. In a relatively short span of time foreign competition in Italian markets was checked, German products ousted those of their rivals, and at last the very sources of Italy’s economic life were in the hands of the Teuton, whose continued goodwill became almost a vital necessity to the struggling nation.
Already in the year 1912 Germany stood first among Italy’s customers, whether we consider the list of her exports or that of imports. Italy bought from that empire goods valued at 626,300,000 francs, and sold it produce worth 328,200,000 francs; whereas Great Britain, who supplies Italy with the bulk of her coal, exported only 577,100,000 francs worth, while her imports were valued at 264,400,000 francs. For France the figures were 289,600,000 and 222,600,000 francs respectively.
The method by which Italian industries were assailed, shaken, and then purchased and controlled by this redoubtable organization, bore, as we saw, all the marks of German commercial ethics. Sharp practice which recognizes as its only limitation the strong arm of the penal law, is a fair description of the plan of campaign. Against this insidious process none of the native enterprises had the strength to offer effective resistance. One by one they were drawn into the vast net woven by the three German Fates – Joel, Weil and Toeplitz. The various iron, mechanical and shipbuilding works, which represented the germs from which native industries were to grow, were sucked into the Teuton maelstrom. The larger and the smaller steamship navigation companies likewise fell under the direction of the Banca Commerciale, which permitted some of them to exist and even to thrive up to a certain point, beyond which their usefulness to the general plan would have turned to harm. In this way Italy’s entire mercantile marine became one of the numerous levers in the hands of the interpenetrating German. And the importance of this lever for political purposes can neither be gainsaid nor easily overstated.
In every little town and village which sends a quota of emigrants to the transatlantic liners, agents of the various steamship companies are always about and active. Being intelligent and enterprising, their influence on local politics is irresistible, and it was uniformly employed in those interests which it was the object of the Banca Commerciale to further. “This institution,” writes an Italian expert, who has studied the subject with unusual care, “being the mistress of the dominant economic organisms of the nation, makes use of them to carry out a germanophile policy. It employs them for the purpose of exercising a directive action in all elections, commercial, provincial and general. Every servant of a steamship navigation company, every purveyor of emigrants is at the same time and by the very force of things an electoral agent. The position of arbitress and mistress of the steamship companies carries with it possession of the keys of the national wealth, and is consequently a formidable weapon of aggressive competition against all industries, Italian and foreign, which are not affiliated to those of Germany. The Banca Commerciale, having obtained that supremacy, forced the Italian companies to lead a languishing existence in straitened circumstances, whereas they might easily have grown rich and flourishing. It permits our steamship companies to subsist and even to earn somewhat, but only just enough to suffice for the declaration of a modest dividend. That is why Italian navigation companies levy such excessive rates of freight, why their service is not organized in accordance with rational and latter day standards, why they take no thought of winning foreign markets or of national expansion.9 They have no means of consigning merchandise at the domicile, so that the consignees are put to enormous expense for collection and delivery. And to make matters still worse, Italian navigation companies are bound with those of Germany by special secret conventions, which oblige them to abandon to their rivals certain kinds of merchandise of the Near and the Far East.”