THE GERMAN SYSTEM OF PREPARATION
On the historic third of August when war was formally declared, its
nature was as little understood by the Allies as had been its
imminence. The statesmen who had to full-front its manifestations were
those who had persistently refused to believe in its possibility, and
who had no inkling of its nature and momentousness. Most of them,
judging other peoples by their own, had formed a high opinion of the
character of the German nation and of the pacific intentions of its
Government, and continued to ground their policy in war time on this
generous estimate, which even when upset by subsequent experience
still seems to linger on in a subconscious but not inoperative state.
At first their preparations to meet the emergency hardly went beyond
the expedients to which they would have resorted for any ordinary
campaign. In this they resembled a sea-captain who should make ready
to encounter a gale when his ship was threatened by a typhoon. Hence
their unco-ordinated efforts, their chivalrous treatment of a
dastardly foe, their high-minded refusal to credit the circumstantial
stories of sickening savagery emanating first from Belgium and then
from France, their gentle remonstrances with the enemy, their
carefully worded arguments, their generous understatement of their
country's case, and their suppression of any emotion among their own
folk akin to hatred or passion. In an insular people for whom peace
was an ideal, neighbourliness a sacred duty, and the psychology of
foreign nations a sealed book, this way of reading the bearings of the
new situation and adjusting them to the nation's requirements was
natural and fateful.
To the few private individuals who had the advantage of experience and
were gifted with political vision the crisis presented itself under a
different aspect. Some of them had foreseen and foretold the war,
basing their forecast on the obvious policy of the German Government
and on the overt strivings of the German nation. They had depicted
that nation as intellectual and enterprising, abundantly equipped with
all the requisites for an exhausting contest, fired with enthusiasm
for a single idea--the subjugation of the world--and devoid of ethical
scruple. And in the clarion's blast which suddenly resounded on the
pacific air they recognized the trump of doom for Teuton Kultur or
European civilization, and proclaimed the utter inadequacy of ordinary
methods to put down this titanic rebellion against the human race.
That has been the gist of every opinion and suggestion on the subject
put forward by the writer of these lines since the outbreak of the
war.
But even without these repeated warnings it should have been clear
that a carefully calculating people like the Germans, in whom the gift
of organizing is inborn and solicitude for detail is a passion, would
not embark on a preventive war without having first established a just
proportion between their own equipment for the struggle and the
magnitude of the issues dependent on its outcome. It was, further,
reasonable to assume that this was no mere onset of army against army
and navy against navy according to the old rules of the game, but a
mobilization by the two military empires of all their resources--military,
naval, financial, economic, industrial, scientific and journalistic--to
be utilized to the fullest for the destruction of the Entente group.
It was also easy to discern that, whichever side was worsted, the
Europe which had witnessed the beginning of the conflict would be
transfigured at its close, and that Germany would, therefore, not
allow her freedom of action in conducting the war to be cramped by
sentimental respect for the checks and restraints of a political
system that was already dead. Lastly, it might readily be inferred
that the huge resources hoarded up by the enemy during forty years of
preparation would be centupled in value by the favourable conditions
which rendered them capable of being co-ordinated and directed by a
single will to the attainment of a single end. All these previsions,
warranted then by unmistakable tokens, have since been justified by
historic events, and it is to be hoped that the practical conclusions
to which they point may sink into the minds of the allied nations as
well as of their Governments, now that nearly two years have gone by
since they were first expressed.
The earliest impression which German mobilization left upon the Allies
was that of the preventive character of this war. For it could have
had no other mainspring than a resolve to paralyse the arm of the
Entente, which, if allowed to wax stronger, might smite in lieu of
being smitten. For the moment, however, Germany was neither attacked
nor menaced. Far from that, her rivals were vying with each other in
their strivings to maintain peace. Her condition was prosperous, her
industries thriving, her colonial possessions had recently been
greatly increased, her influence on the affairs of the world was
unquestioned, her citizens were materially well-to-do, her workmen
were highly paid, her capitalists, seconding her statesmen and
diplomatists, had, with gold extracted from France, Britain and
Belgium, woven a vast net in the fine meshes of which most of the
nations of Europe, Asia and America were being insensibly trammelled.
Already her bankers handled the finances, regulated the industries and
influenced the politics of those tributary peoples. And by these
tactics a relationship was established between Germany and most states
of the globe which cut deep into the destinies of these and is become
an abiding factor of the present contest. For that reason, and also
because of the paramount influence of the economic factor on the
results of the struggle, they are well worth studying.
To her superior breadth of outlook, marvellous organizing powers, the
hearty co-operation between rulers and people, and the ease with
which, unhampered by parliamentary opposition, her Government was
enabled to place a single aim at the head and front of its national
policy, Germany is perhaps more deeply indebted for her successes
during the first phases of the campaign than to the strategy of
Hindenburg or the furious onslaughts of Mackensen. German diplomacy
has been ridiculed for its glaring blunders, and German statesmanship
discredited for its cynical contempt of others' rights and its own
moral obligations. And gauged by our ethical standards the blame
incurred was richly deserved. But we are apt to forget that German
diplomacy has two distinct aspects--the professional and the
economic--and that where the one failed the other triumphed. And if
success be nine-tenths of justification, as the Prussian doctrine
teaches, the statesmen who preside over the destinies of the Teutonic
peoples have little to fear in the way of strictures from their
domestic critics. For they left nothing to chance that could be
ensured by effort. Trade, commerce, finances, journalism, science,
religion, the advantages to be had by royal marriages, by the
elevation of German princes to the thrones of the lesser states, had
all been calculated with as much care and precision as the choice of
sites in foreign countries for the erection of concrete emplacements
for their monster guns. No detail seemed too trivial for the bestowal
of conscientious labour, if it promised a possible return. When in
doubt whether it was worth while to make an effort for some object of
no immediate interest to the Fatherland the German invariably decided
that the thing should be done. "You never can tell," he argued, "when
or how it may prove useful." For years one firm of motor-car makers
turned out vehicles with holes, the object of which no one could guess
until the needs of the war revealed them as receptacles for light
machine-guns.
Nearly two years of an unparalleled struggle between certain isolated
forces of the Allies and all the combined resources of the Teutons
ought to banish the notion that the results achieved are the fruits
only of Germany's military and naval efficiency. In truth, the
adequacy of her military and naval forces constitutes but an integral
part of a much vaster system. It has hitherto been the fashion among
British and French writers to dwell exclusively on the comprehensiveness
of the measures adopted by the Germans to fashion their land and sea
defences into destructive implements of enormous striking power and
scientific precision. But the German conception of the enterprise was
immeasurably more grandiose. It included every means of offence and
defence actually available or yet to be devised, and testifies to a
grasp of the nature of the problem which, so far as one can judge, has
not even yet been attained outside the Fatherland. As the present
situation and its coming developments present themselves as practical
corollaries of causes which the leaders of Germany rendered operative,
it may not be amiss to describe these briefly.
The objective being the subjugation of Europe to Teutonic sway, the
execution of the plan was attempted by two different sets of measures,
each of which supplemented the other: military and naval efficiency on
the one hand and pacific interpenetration on the other. The former has
been often and adequately described; the latter has not yet attracted
the degree of attention it merits. For one thing, it was
unostentatious and invariably tinged with the colour of legitimate
trade and industry. Practically every country in Europe, and many
lands beyond the seas, were covered with networks of economic
relations which, without being always emanations of the governmental
brain, were never devoid of a definite political purpose. While Great
Britain, and in a lesser degree France, distracted by parliamentary
strife or intent on domestic reforms, left trade and commerce to
private initiative and the law of supply and demand, the German
Government watched over all big commercial transactions, interwove
them with political interests, and regarded every mark invested in a
foreign country not merely as capital bringing in interest in the
ordinary way, but also as political seed bearing fruit to be
ingathered when _Der Tag_ should dawn. Thus France and Britain
advanced loans to various countries--to Greece, for instance--at lower
rates of interest than the credit of those states warranted, but they
bargained for no political gain in return. Germany, on the contrary,
insisted on every such transaction being paid in political or economic
advantages as well as pecuniary returns. And by these means she tied
the hands of most European nations with bonds twisted of strands which
they themselves were foolish enough to supply. Italy, Russia, Turkey,
Roumania, Bulgaria, Greece, Belgium and the Scandinavian States are
all instructive instances of this plan. Bankers and their staffs,
directors of works and factories, agents of shipping companies,
commercial travellers, German colonies in various foreign cities,
military instructors to foreign armies, schools and schoolmasters
abroad, heads of commercial houses in the different capitals, were all
so many agencies toiling ceaselessly for the same purpose. The effect
of their manoeuvres was to extract from all those countries the
wealth needed for their subjugation. One of the most astounding
instances of the success of these hardy manipulations is afforded by
the Banca Commerciale of Italy, which was a thoroughly German concern,
holding in its hands most of the financial establishments, trades and
industries of Italy. This all-powerful institution possessed in 1914 a
capital of L6,240,000 of which 63 per cent. was subscribed by Italian
shareholders, 20 per cent. by Swiss, 14 per cent. by French, and only
2-1/2 per cent. by Germans and Austrians combined! And the astounding
exertions put forward by the Germans during the first twelvemonth of
the war are largely the product of the economic energies which this
line of action enabled them to store up during the years of peace and
preparation.
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 Kaiser[1] 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.
[1] The Kaiser is one of the largest shareholders in the
great mercury mines of Italy.
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 Bleichroeder.
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 L6,240,000, of which Germany and Austria
together held but 2-1/2 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]
[2] Cf. _L'Invasione tedesca in Italia_. Ezio M. Gray.
Firenze.
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 Darmstaedter 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]
[3] _Op. cit._, p. 113.
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 naive 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]
[4] Cf. _L'Invasione tedesca in Italia_, pp. 118, 119.
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
debt[5] 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."
[5] 1050 million francs.
[6] _Op. cit._, p. 120.
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]
[7] An instructive article on the subject by Mr. Moreton
Frewen appeared in the _Nineteenth Century_ of February,
1916.