ECONOMIC QUESTIONS
In the preceding chapter I mentioned that Dr. Dernburg's plan for
raising a loan in the United States had failed. Later the direction
of all our economic and financial affairs passed into the hands of
Geheimrat Albert. His original task was to organize in New York
extensive shipments of foodstuffs, particular wheat and fats, which
were to be exported through the New York office of the Hamburg-Amerika
line. This depended, in the first place, on the possibility of
raising the necessary funds, and in the second, on the possibility
that England, out of regard for the neutrals, and particularly the
United States, would be compelled to abide by the codified principles
of international law. Neither of these premises materialized.
As the necessary means for carrying through the scheme could not be
raised it might have been possible to finance it if the Government
had taken over the not inconsiderable funds of the German banks and
the great industrial enterprises, e.g., the chemical factories in
the United States, and used them for the shipments. The suggestions
we made to this effect were not answered until the end of August,
when we arrived in New York and had already lost many weeks in
trying to negotiate the loan. One organ, which immediately after
the war had taken up these questions on its own initiative, failed,
and so nothing was done in the whole wide sphere of credit, supply
of raw materials and foodstuffs and shipping until my arrival with
the other gentlemen, so that the most favorable opportunity was lost.
Remittances from Germany did not arrive until long afterwards, and
then only to a very modest extent. Consequently the whole economic
scheme was considerably narrowed and hampered from the beginning.
The second assumption, that the United States, in consideration
of her great commercial connections with Germany, would maintain
her rights as a neutral State to unrestricted sea trade within the
provisions of international law, proved to be unfounded. The United
States, at any rate according to the view of some very distinguished
Americans, as, for example, in the journal _New Republic_, violated
the spirit of neutrality when she allowed commerce of the neutrals
one with another to be strangled by England. To the interest in
traffic with the neutral States, and indirectly with Germany, was
opposed the interest in the still greater trade with our enemies,
to which was added, and indeed to a rapidly increasing extent,
the supply of war material. The United States did not realize the
extent of their economic power in respect of England, as the
inexperienced, newly-appointed Democratic Government had no statistics
to which to refer, and from a military point of view were defenceless
for want of an army or fleet. So England was able, slowly and
cautiously, but surely, to cut off the Central Powers from the
American market. In view of this state of things the important
thing was to pass all shipments off as neutral. The exporter had
to be an American or a subject of neutral Europe. The financing
had also to be European, at any rate outwardly. The destination
could only be a port in Holland, Scandinavia, Spain or--at that
time--Italy. Consequently it was not long before the consignments
could no longer be made through the New York representative of
the Hamburg-Amerika line, but were taken in hand by Herr Albert
himself, who merely availed himself of the professional advice
of the Hamburg-Amerika line.
All decisions therefore could emanate from the same source, which
prevented loss of time, especially as the financial responsibility
also rested with Herr Albert. The most important thing, however,
was that attention was distracted from the shipping, as for a long
time Herr Albert remained unknown, whereas the Hamburg-Amerika line
from the first was kept under the closest observation by England. On
the other hand, this arrangement exposed the cargoes to condemnation
by the English prize courts as they were now State-owned. But Herr
Albert could assume--and, as it turned out, rightly--that so long
as the English respected neutral property, it would be difficult
as a rule to trace the shipments back to him. Otherwise there would
have been no security for a German private undertaking.
In carrying out his task, Herr Albert at first shipped the purchased
goods by the usual lines (Scandinavia-American line). Soon, however,
difficulties arose, because these lines, in order to avoid being
held up in English ports, would no longer accept cargoes which
were intended, if possible, for Germany, so a special line was
formed sailing under the American flag. The direction of this line
was in the hands of an American firm who represented themselves
as the owners, whereas, in reality, the ships were chartered by
Herr Albert. As, at the beginning of the war, the American flag
was more respected by the English than those of the other neutrals,
a number of these ships got through without much delay. Later this
method of shipping also became impossible. Then single ships were
chartered--mostly under the American flag--and when the owners, from
fear of loss, refused the charter, or when outrageous conditions
made chartering impossible, they were bought outright. The ships
were consigned as blockade runners to a neutral port, and later
either made direct for Germany or were taken in by a German ship
of war. As the most important examples I may mention the _Eir,
Maumee, Winneconne, Duneyre, Andrew, Welch_ and _Prince Waldemar_.
With the tightening up of the English measures and blockade these
undertakings became increasingly difficult, and finally had to be
abandoned. Moreover the cost and the trouble of preparation grew
out of all proportion to the results. Every individual shipment
had to be prepared long beforehand. Out of ten attempts often only
one would succeed. Very often an attempt which had cost weeks of
work would fall through at the last moment owing to the refusal
of credit by the banks, particularly when the political position
was strained, or to an indiscretion, or English watchfulness, or
difficulties with the American port authorities.
The English surveillance had assumed dimensions that would not
have been possible without the tacit connivance, which at times
became active support, of the American authorities. Not only did
the English consuls demand that in each individual case the bills
of lading should be submitted to them, but in addition to this an
efficient surveillance and spy service was organized, partly by
American detective bureaus and partly by a separate and wide-reaching
service. The English had confidential agents in all the shipping
offices, whose services had for the most part been acquired by
bribery. At various times attempts were made to break into Herr
Albert's office, to learn the combination for opening his safe, to
get hold of papers through the charwomen and other employees, and
even to rob him personally of papers. The control of the American
port authorities was within the letter of the law, but in practice
it worked very unfavorably to us. The regulation was that ship
and cargo must be consigned to a definite port. This regulation
was drawn up purely for purposes of statistics, and consequently
no importance was attached to it before the war. As a rule the
bills of lading were filled in by subordinate employees of the
exporter. Soon after the outbreak of the war a special "neutrality
squad" was attached to the "Collector of the Port of New York"
whose duty it was to maintain strict neutrality by seeing that
the said laws were properly observed. This led, in cases where
there was a suspicion that the cargo was not intended for the given
port of destination, but for Germany, to an exhaustive inquiry. This
measure could not fail to act as a deterrent, and even Herr Albert
was seriously hampered in his enterprises. The whole system amounted
to a complement of the English blockade. When Herr Albert finally
succeeded in coming to an agreement with the Customs authorities in
this matter a great number of opportunities had been missed and
the shipments had been made practically impossible by the tightening
of the English blockade.
There was no question of entrusting the shipping to American exporters
who had had long experience of German trade. Herr Albert from the
first considered it advisable to interfere as little as possible
with the existing business relations between the two countries,
and he left it to the firms trading with Germany to carry through
their commissions as best they could. This method of supplying
Germany with food, however, completely failed. The fault also lies
partly with the importers in Germany. In these circles it was for a
long time hoped, but in vain, to obtain consignments from American
firms. Further, they clung too long to the business methods of peace,
demanded estimates, bargained about prices, and, most important of
all, did not realize that the risk to the exporter as a result of
the English blockade made special compensation or payment necessary.
In consequence the valuable time at the beginning of the war was
lost. Very soon, however, the American exporters withdrew completely,
because those who had had previous business relations with Germany
were known to the English, and so were suspected and finally placed
on the black list. A shipment by one of these firms would then at
once have been marked down as destined for Germany, and would have
run risk of capture. Herr Albert, therefore, made use of special
agencies. At first, in addition to employing Danish firms, he founded
several new American export companies. These new organizations
were of course only available for a short time, and, as soon as
they came under English suspicion and were consequently rendered
useless, had to be replaced by others.
The reproach that has been made from time to time that these enterprises
were confined to a small clique of confidential persons and firms
seems to be unjustified by the facts. The circumstances demanded the
closest possible secrecy, for otherwise the origin and destination
of the cargoes would have been discovered by the English secret
service before they left New York. This would have involved the
complete loss of the cargo as a result of the English embargo.
That firms already engaged, even though for a short time, in
German-American commerce could not be considered is obvious. Not only
were they known to the English, but in some cases their German names
already laid them open to suspicion. Accordingly, their occasional
requests that they should carry through enterprises of this nature
were consistently refused. This criticism is only made by a small
circle of German-American firms grouped round the German Union and
the so-called German-American Chamber of Commerce, and originated
in an anxiety, understandable but based on an inadequate knowledge
of the facts, to participate in the undertakings.
Although the export of raw material did not actually come within
the scope of Herr Albert's original commission, it often became
necessary, at special request or from the nature of the case, to
lend a helping hand in the export of raw material, particularly
wool and cotton. In this way, in the autumn of 1914, the American
steamer _Luckenbach_ was successfully run through direct to Germany
with several million pounds of wool on board. With regard to cotton,
Herr Albert, also in the autumn of 1914, by negotiations which he
carried on through me with the State Department and the Foreign
Trade Adviser, succeeded in obtaining English recognition that
cotton should not be regarded as contraband of war. Even after
this recognition, England made the export of cotton practically
impossible by intimidating the cotton exporters in every possible
way, among others by spreading the rumor that the ships would be
captured nevertheless, and by prohibiting English insurance companies
from underwriting such cargoes. Here Herr Albert intervened by
effecting the insurance through German insurance companies, and
proved by the loading and arming of cotton ships, e.g., the American
ship _Carolyn_, that the threat of capture was not to be taken
seriously but was simply an attempt at intimidation on the part
of the English. In this way, confidence was so far restored that
in the autumn of 1914 and the beginning of 1915 a large number
of other firms joined in the business. When, later, cotton was
made unconditional contraband of war, Herr Albert made attempts
to fit out blockade runners--which ended with the arrival at a
German port of the _Eir_ with 10,000 bales of cotton.
The various attempts to export copper, rubber and other raw materials
which were unconditional contraband, apart from the cases already
mentioned of wool and cotton, proved impossible, in spite of repeated,
extensive and very cautious preparation. A very ambitious scheme
of this kind with the S.S. _Atlantic_ had to be abandoned at the
last moment owing to difficulties with the port authorities.
All these enterprises, the purchase, sale and shipment of foodstuffs
and raw material, the chartering, buying and selling of ships, the
founding of shipping lines, new companies, etc., as well as the
financial business had their political as well as their purely
business side. They were either intended to serve as precedents in
the definite phases of development of international maritime law
or to exert influence on American public opinion from an economic
point of view.
When the result of these shipping enterprises is weighed after
the event, it will be seen that they did not play a decisive part
in the supply of Germany with foodstuffs and raw material. Germany
would during the first year of war have managed to get along even
without the few hundred thousand tons which in this way were brought
in via neutral countries. Nevertheless, in conjunction with the
imports from neutral countries, they several times served to relieve
the situation. Very important in this respect was the successful
struggle for the free import of cotton at the end of 1914 and the
beginning of 1915, quite apart from our own shipments. Without
this we should have come to an end of our supplies considerably
earlier.
The question of war and marine insurance very soon called for particular
attention to the interests of our own shipping. The American insurance
market was dominated by the English companies. The latter not only
conducted about two-thirds of the whole insurance business of the
country, but also exerted a decisive influence on the American
companies. In addition to this, they held an authoritative position
as holding a share of the capital. England very soon gave instructions
that English insurance companies should not participate in any
business in which German interests were in any way involved.
Consequently in making shipments to neutral countries, we were
faced with great difficulties, for the power of the German insurance
companies and the few American companies that were independent of
England did not suffice.
The two most important German companies with branches in New York,
the _Norddeutsche Versicherungsgesellschaft_ and the _Mannheimer
Versicherungsgesellschaft_, which was excellently, actively, and
very loyally represented in New York by the firm F. Hermann & Co.,
at first offered an insurance limit of about 75,000 dollars, that
is 150,000 dollars together, which in any case was insufficient.
At first they had no authority to undertake war insurance.
The economic importance of the insurance question is obvious on the
face of it. No marine insurance was possible without war insurance.
In particular the American Government bureau for war insurance made
the covering of the marine insurance an essential condition. This
example was followed by all the American insurance companies. A
satisfactory settlement of the insurance--both war and marine--on
the other hand was a necessary condition for the financing of the
shipments. The shippers only obtained credit from the bank on handing
over the insurance policies. In addition to this it came about later
that the few American shipping lines which remained independent
of England, and so were on the black list, were no longer in a
position to cover the "Hull Insurance," i.e., the insurance of the
ship herself, and therefore the solution of the insurance question
became a necessary condition for obtaining freight space. Here
too, then, it was to our interest to come to the rescue, because
otherwise the lines in question would have been forced to come to
an understanding with the English firms, which would have placed
their tonnage at the service of our enemies.
To begin with, Herr Albert himself undertook the insurance in cases
of exceptional importance. It was at most a question of a small
balance, by the furnishing of which an immediate risk or a dangerous
delay in shipment was avoided. Our chief efforts were directed
towards raising the insurance limit of the German companies. As
a result a pool of German insurance companies was formed whose
limit for marine and war insurance was gradually raised more and
more. In this way it was possible to carry through a number of
shipments to European countries, to keep a not inconsiderable
tonnage--about 30,000 tons--out of the hands of the Allies, as well
as to enable a number of important German firms in South America
to carry on extensive trade between North and South America, and
so to maintain their business activity in spite of the measures
adopted by the English.
About our propaganda I have already spoken in detail in the second
chapter. It may be mentioned again here that the centre of gravity
of our active propaganda lay in the economic question, which was
to a certain extent the key to the understanding of our American
policy during the war.
Though the vast and rapid development of American export trade
through the trade in war material, and the change in position from
debtor to creditor, was only effected gradually, and the loss of
the German market at first made itself adversely felt both actively
and passively, the size of the contracts from the Allies and the
consequent profits at once acted like a narcotic on public opinion.
This was all the more the case as a result of the extraordinarily
skilful way in which the English handled the question. They always
proceeded cautiously and gradually. For instance, they at first
accepted the Declaration of London in principle, but made several
alterations which to the public, who did not realize the extent of
their effect, seemed unimportant and which yet formed the basis for
the gradual throwing overboard of the Declaration of London. After
public opinion had grown accustomed to the English encroachments and
the interests affected had been pacified by the Allied contracts,
the blockade was introduced after careful preparation in the Press;
it was not at first described as a blockade, but was gradually
and systematically tightened. Among other things, the export of
cotton to Germany was expressly agreed to at the end of 1914, but
was afterwards hampered in practice by various measures, as, for
example, the holding up of individual ships, and the refusal of
marine insurance, and finally brought to an end by the declaration
of cotton as unconditional contraband. It is characteristic that
the declaration of cotton as unconditional contraband was made
public on the very day on which the whole American Press was in
a state of great excitement over the _Arabic_ case, so that this
comparatively unimportant incident filled the front pages and leading
articles of the newspapers, while the extremely important economic
measure was published in a place where it would hardly be noticed.
We made vigorous efforts to oppose this English step. We got into
touch with the importers of German goods, who formed an association
and forwarded a protest to Washington. Without attracting attention,
we gave the association the assistance of a firm of solicitors,
whose services were at our disposal, as legal advisers. Relations
were entered into with the cotton interest, which, through the
political pressure of the Southern States, exerted great influence
on public opinion and in Congress. Various projects for buying
cotton on a large scale for Germany were considered, discussed
with the cotton interest and tested by small purchases. In the same
way negotiations were entered upon with the great meat companies,
the copper interest and others by systematic explanation and emphasis
of the interests with regard to the German market. The result, partly
for the reasons given, partly owing to the political development of
the general relations between Germany and the United States, was
small. This, however, can hardly be taken as an argument against
the expediency of the steps taken as at that time. No one could
foresee the later development of the war and particularly the length
of time it was going to last; whereas had the war been shorter
there is no doubt that these measures would have attained their
object.
An important part of the economic propaganda was the institution of
the so-called "Issues," i.e., the attempt by carefully construing
individual incidents to make clear to public opinion the fundamental
injustice of the English encroachments and their far-reaching
consequences in practice. The most important case in this direction
is that of the _Wilhelmina_. According to the prevailing principles
of international law, foodstuffs were only conditional contraband.
They might be imported into Germany if they were intended for the
exclusive use of the civil population. As, however, England succeeded
in restraining the exporters from any attempt to consign foodstuffs
to Germany, especially as in view of the enormous supplies that
were being forwarded to our enemies they had little interest in
such shipment, the question never reached a clear issue. Herr Albert
therefore induced an American firm to ship foodstuffs for the civil
population of Germany on the American steamer _Wilhelmina_, bound
for Hamburg, by himself undertaking the whole risk from behind the
scenes. This was arranged in such a way as to preserve in appearance
the good faith of the American firm, and to make the shipment seem
purely American in the eyes of the American Government and the
English.
The _Wilhelmina_ was taken by the English into Falmouth and detained
on the grounds that Hamburg was a fortified town, and that, according
to the measures adopted by Germany for supplying the civil population
with food--requisitioning, centralization of distribution, etc.--there
was no longer any distinction between the supply of the military
and the civil population. While the negotiations on this question
were still in the air, and seemed to be progressing favorably for
us, England resorted to a general blockade. Consequently the case
lost its interest, both practical and as a question of principle,
especially as England declared her readiness to pay for the goods
at Hamburg prices. As, on the other hand, insistence on the purely
theoretical claims would give rise to the danger that the English
or American secret service might in the end succeed in proving
the German origin of the undertaking, Herr Albert accepted the
proffered payment of the English Government, and received as
compensation a sum which covered all the expenses.
Such incidents could have been construed in several ways. One of
the most important, and also the most popular, was the shipment of
cotton to Germany for the civilian population between the autumn of
1915 and the middle of 1916. The declaration of cotton as absolute
contraband was at first only on paper, as no American exporters had
hitherto ventured to ship cotton. Consequently, detailed discussions
took place as to whether such an undertaking should be entered upon
in the full light of publicity. Great excitement among the cotton
growers proved the extremely keen and widespread interest. England
would have been forced to act on her declaration at a time when the
American Government could not afford to ignore the interests of the
cotton industry, with its influence on domestic politics. The full
effect of the meagreness of the crops, and on the other hand the
increase of consumption in the United States, and consequent rise
in price, was not yet realized by the public, nor even in cotton
circles. The cotton industry viewed with anxiety the increased
difficulty of finding a market, and were anxious for a reopening
of that of the Central Powers.
Certainly a shipment of cotton to Germany would only have been
justified in conjunction with comprehensive other measures, particularly
purchases on the American cotton market on German account. As a
result of detailed discussion with American interested parties,
who repeatedly urged us to such a step, we forwarded proposals
to Berlin on these lines. Their general purport was that about
a million bales of cotton should be bought outright on behalf of
Germany, and that in addition options should be secured on a further
million or two million bales on the understanding that the taking up
of the options should be dependent on the possibility of shipment
to Germany. On the strength of these measures the shipment of one
big consignment should have been undertaken. The plan had sound
prospects of success. In any case there would have been no risk
worth mentioning, as, to the initiated, there was no doubt as to
the rise of prices. In view of the new bank legislation (Federal
Reserve Act), no insuperable difficulties would have stood in the
way of financing the shipment. The indirect political pressure
on the American Government and public opinion, with its reaction
on England, would have been considerable.
Unfortunately the plan was frustrated by the taking up of the matter
in America direct from Germany, without regard to the shipment
difficulty, without going into the question of the options and
without knowledge of the political or economic situation. Bremen
actually placed a contract in New York for one million bales to be
delivered in Bremen at a fixed price. It was, however, clear from
the first to anyone acquainted with the circumstances that such a
step was bound to be futile. The whole thing turned on the question
of shipping. The American Press, again under English influence, at
once pointed the finger of scorn, saying that the contract was
not meant seriously, but was merely a piece of bluff for purposes
of German propaganda.
After this had brought about the collapse of the more ambitious
plan, the shipment of a single cargo still continued to be discussed
and detailed preparations were made. The idea had, however, to be
abandoned, because the difficulties of passing off the shipment as
a purely American enterprise were practically insuperable without
the background of great economic measures, which placed the cost
out of all proportion to the chances of success. The whole cost,
as in the "_Wilhelmina_ case" would have to be guaranteed from
Germany, and would of course have been lost if the English secret
service succeeded in establishing the German connection.
The propaganda for preventing and hampering the supply of war material
to our enemies turned at first on the question of principle whether
such supplies were reconcilable with neutrality. The attempt was
made--as has been briefly mentioned already--with the special support
of the German-American circles, to impress upon the American people
the immorality and essentially unneutral nature of the supplies,
especially in view of the vast scale they were assuming. It is
well known that these attempts, which extended to a strictly legal
exertion of influence on Congress, failed. The lack of unity and
limited political experience of the German-Americans contributed
to this result, but the economic interest of the nation in the
supplies, in which the whole American Administration and industry
were finally concerned, formed the decisive factor.
Attempts too were very soon made to hamper the supplies in a practical
way. In August, 1914, it might perhaps have been possible to buy up
the Bethlehem Steel Works, if the outlay of the necessary capital
had been promptly decided upon. At that time the Americans themselves
did not foresee what a gigantic proportion these supplies were
to assume. The purchase of these works would have deprived the
whole munition industry of its main support. Similar proposals have
repeatedly been worked out by us, as, for example, the proposal
to amalgamate the whole shrapnel industry of the United States.
The fear, well grounded in itself, that such an arrangement was
scarcely within the bounds of practical politics and could have
been got round, could be ignored. In case of disputes as to the
validity of such a step we should have gained more by the publicity
than we stood to lose. At that time, however, the Berlin Government
took up a negative attitude, and did not interest itself in the
question until the beginning of 1915, when the vast supplies of
material from America began to make themselves felt and the
concentration of German industry on the production of munitions
was not yet complete. The Military Attache received instructions
to do everything possible to hamper the fulfilment of the great
outstanding French and Russian contracts for shrapnel, which was
at that time still the chief shell used by the Allies. This was
done successfully, if on a small scale, by founding an undertaking
of our own, called the Bridgeport Projectile Company, and entering
into contracts to establish the most important machinery for the
manufacture of powder and shrapnel. Through this company, which
originally passed as entirely American, the special machinery required
for the manufacture of shrapnel was bought on a scale which seriously
affected the American output, and in particular hindered the acceptance
and carrying through of further contracts from the Allies for a
considerable time. Herr Albert assisted and advised the Military
Attache in making these contracts, arranged the financing of the
enterprise later on, and worked at its development after Herr von
Papen's departure.
Still more successful were the efforts to remove from the market
the surplus benzol, which is the raw product for the production
of picric acid. The benzol was bought up by a company specially
formed for the purpose, who sent it to a chemical works under German
management to be manufactured into salicylic preparations. These
products were sold for the most part for the American market, and
also, with the approval of the Ministry for War, exported to neutral
countries. The undertaking was eventually closed down after making
considerable profits for the Imperial Treasury. In the same way,
for some time, all the bromine coming on to the market, the products
of which were used to manufacture and increase the density of gas,
were bought up.
To these efforts to hamper and delay the supply of war material
belonged also the much-discussed agreement with the Bosch Magneto
Company, the American branch of the Stuttgart firm. The substance
of the arrangement was that this company, which was under German
direction, should not immediately refuse Allied contracts for fuses,
but should appear to accept them and delay their fulfilment, and, to
complete the deception, even occasionally deliver small quantities,
and finally, at the last moment, refuse to complete the contract. This
procedure was attacked at the time by a German-American journalist,
von Skal. On the strength of short notices which Herr von Skal
published in the German Press, in ignorance of the real state of
the case, public opinion in Germany turned against the parent firm,
the Bosch works in Stuttgart. The question then became the subject of
my reports, and was submitted to an inquiry by the home authorities
and the courts. I still hold to my opinion that the whole affair was
unnecessarily exaggerated by German public opinion, and that the
detailed investigation into its legality by the home authorities
and courts was unnecessary, as the managing director of the American
branch and the directors of the German company had acted in perfect
good faith in an attempt to advance the interests of the German
cause. It was merely a question of the result. If their policy
of procrastination had succeeded in delaying the contracts and
had kept our enemies for a considerable time from building their
own factory for fuses and aeroplane magnetoes, their action would
have been justified; in the contrary event it would have been vain,
but blameless from a moral and legal point of view. The fact that at
the beginning the English relied on the possibility of the production
and supply of such fuses from America, and only later gradually
came to a decision to build and fit out their own factories,
consequently under much more difficult circumstances, offered an
opening for this procedure. That difficulties were caused to the
enemy in this respect until quite recently is unmistakably shown
by the messages that reached America from England.
As a result of the extensive purchases of the Allies, there came
about a gradual change in the attitude of the American Government
to the question of issuing loans. At the end of March, 1915, we
succeeded, acting on instructions from Berlin, in raising a small
loan. It involved an unusual amount of trouble. The American financial
world was already completely dominated by the Morgan trust. This
domination resulted from the fact that the Allied commissions were
concentrated in English hands and were placed by England in the
hands of J. P. Morgan & Co., who acted as the agents of the English
Government. As these commissions finally included every sphere of
economic life, all the great American banks and bankers were called
upon, and so drawn into the Morgan circle. The result was that
no big firm could be induced to undertake a German loan. However,
several trust companies of repute, who already had or wished to
have business relations with Germany, declared their readiness
to become partners in a syndicate if we succeeded in finding a
"Syndicate Manager." A certain New York firm which afterwards made
a name for itself, but at that time was comparatively unknown, seemed
suited for this position. When all the preparations and preliminary
agreements had been carried through, the trust companies, under
the pressure of the Morgan influence, declared that their names
must not be associated with the syndicate. Meanwhile the matter
had gone so far that withdrawal would have meant a moral surrender
which would have been dangerous for our credit. Consequently, we
had to make up our minds to negotiate the loan under the signature
of this one firm, which was naturally undesirable for the general
interest.
Looking back, I am of the opinion that we should have done better not
to consider a loan in the United States, but to remit the necessary
funds from Berlin. This had to be done later to redeem the loan,
and at a time when the rate of exchange was much more unfavorable.
When the loan was raised we had certainly no idea that it would
have to be redeemed during the war, as we had reckoned on a shorter
duration of hostilities. On the other hand there is no truth in the
statement that this loan in some way cleared the way for further
Allied loans. These loans, which were the natural result of the
great supplies of material to the Allies, would have come in any
case. We did, however, deprive ourselves by this loan of an argument
to prove the defective neutrality of the United States.
In 1916 we succeeded in getting hold of some five millions in Treasury
notes without formal loan negotiations.
Another economic question which occupied my attention was connected
with the export of German dye-stuffs to the United States. In Berlin
it was held that German dye-stuffs should be withheld from the
United States as a lever for inducing them to protest against the
English blockade, and possibly have it raised. The same point of
view was adopted with regard to other goods which were necessities
for the United States, as, for example, potassic salt, sugar beetroot
seed and other commodities. A change of view did not occur until
the spring of 1916 at my suggestion. It is my belief that the
withholding of these goods proved a serious mistake. The political
aim of bringing pressure to bear on England with a view to the raising
of the blockade was not realized. The American industry partly got over
the difficulty by obtaining dye-stuffs in other ways--importation of
German dyes from China, where they had been systematically bought,
smuggling of German dyes via neutral countries, importation of Swiss
dyes, introduction of natural dyes and dye-substitutes--but more
especially by the foundation of a dye industry of their own. In the
case of potash, they had simply to do with what little they could
get; which was all the easier as the American manure manufacturers
and dealers had already in their own interests begun a systematic
propaganda to prove that potash was not indispensable, but could
be replaced by their own products. It might be observed as a
generalization that ultimately no individual product has proved
to be really indispensable. The result of holding back our exports
was therefore simply--apart from a quite unnecessary straining of
political relations, since England succeeded in diverting all the
odium on to us--a scarcity of important German commodities in the
United States and the substitution of their own production.
In negotiating the German loan, the chief difficulty was that grasping
speculators got hold of the market, discredited the war loan by
underbidding one another and in part by direct dishonorable dealing,
and also that owing to the impossibility of producing ready money,
interest in the war loan flagged. Early on I suggested the issue
of bills _ad interim_. The scheme, however, failed, because the
representative of the Deutsche Bank opposed it, and because the
natural opposition of two great institutions, who were making a
profitable business out of the sale of war loans and the speculations
on the value of the mark, which were closely connected with it, could
not be overcome. I am still of the opinion that with well-timed
organization the sum raised by the war loan could have been increased
by several millions.