The Bankers’ Interests Become More Extensive
The years 1904 to 1909 were lean years, judged by actual progress in the laying of rails from Bulgurlu to Bagdad and Basra. Nevertheless, they were years characterized, on the part of the investors interested in the consummation of the great enterprise, by every possible activity to prepare the way for eventual success on a grand scale. In the spring of 1906, for example, Dr. Karl Helfferich was appointed assistant general manager of the Anatolian Railways, and one year later was elected a managing director of the Deutsche Bank with general supervision over all of the Bank’s railway enterprises in the Near East. The appointment of Dr. Helfferich—who, although he was only thirty-four years of age, had achieved an international reputation—aroused widespread comment and turned out to be an event of first-rate importance in the history of the Bagdad Railway. As a young professor of political science in the University of Berlin, Dr. Helfferich won general recognition as an unusually able economist. He was persuaded to enter the Government service in 1901 and became assistant secretary in the Colonial Department of the Ministry of Foreign Affairs. He was known to be in the good graces of the Emperor and of Prince von Bülow, and it was said that he became their chief adviser on Near Eastern affairs.[14] The choice of such a distinguished person as directing genius of the Anatolian and Bagdad Railways gave renewed confidence in Germany that the Bagdad plan would succeed. In Great Britain the appointment was considered an ominous sign that a very real connection existed between the economic enterprises of the Deutsche Bank and the Near Eastern activities of the German Foreign Office.[15]
In 1907 the Anatolian Railway Company, under a contract with the Turkish Government, completed arrangements for the irrigation of the desert plain southeast of Konia. It was planned to water artificially about one hundred and fifty thousand acres of arid land, thus rendering the region independent of weather conditions. The effects of such an improvement would be far-reaching. Much idle land would be made available for profitable farming, and the yield of soil already under cultivation would be developed materially. Increased production might lead to a surplus of agricultural products for export, and the greater purchasing power of a prosperous Anatolian farming class would stimulate import trade. Agriculture, commerce, and manufacturing alike, therefore, could be served. The Anatolian Railway Company issued some 135,000 new shares of stock to defray its part of the expenses, hoping to be richly compensated by increased traffic on the railway. The Imperial Ottoman Treasury issued £800,000 of Konia Irrigation Bonds, an outlay which it hoped to offset by increased taxes from the Konia district, by rentals and sales of irrigated lands, and by decreased guarantees to this section of the railway.[16]
A number of German banks, meanwhile, were pushing their financial operations in the Near East. The success of the Deutsche Palästina Bank[17] encouraged the formation of other similar institutions. The Nationalbank für Deutschland, in 1904, founded the Banque d’Orient, with offices in Hamburg, Athens, Constantinople, Salonica, and Smyrna. The following year the Dresdner Bank, in coöperation with other large Austro-German financial institutions, inaugurated the important Deutsche Orientbank, with a capital stock of sixteen million marks. This latter bank took over the Hamburg and Constantinople offices of the Banque d’Orient and established a large number of branches of its own, including those at Alexandria, Cairo, and Smyrna. The Deutsche Orientbank became an active promoter of industrial enterprises in Asiatic Turkey; for example, in 1908 it organized La Société pour Enterprises Electriques en Orient, a company which proceeded to take over the surface railways as well as the electric light and power concession of Constantinople. In 1908 the Deutsche Bank itself formally opened an office in Constantinople for the transaction of a general banking business.[18]
The entry of these German banks into the Near Eastern field was of no small importance to the British and French financial institutions already there. The German bankers allowed liberal rates of interest on time and check deposits and permitted reasonable overdrafts at low rates. These practices were in sharp contrast with the rigid regulations of the older-established banks. The Deutsche Bank undertook to collect claims of local merchants against the Turkish Government; through its influence in the Government departments it cut red tape and secured payments which otherwise might have been delayed for years. Constantinople business men welcomed their emancipation from the ultra-conservative methods of the older institutions, and it was not long before a very thriving business was being transacted by the German banks and their agencies in the Near East.[19] Here was a high-powered bomb to disturb the quiet which heretofore had ruled in the banking community of Constantinople and of Asiatic Turkey. Germans were disturbing the financial, as well as the commercial and industrial, status quo in the Near East!
The advance of the German banks in Turkey was almost certain to be the first step in a more general industrial and commercial penetration. This will be the more readily understood if one recalls the close coöperation which characterized the relationships between the German banks and the business interests of the empire. This coöperation which amounted, in effect, to financial interdependence—was one of the striking features of the German economic advance in the generation before the Great War. It strengthened German industrial enterprises at home and promoted German trade and investments abroad. If a great business needed capital, the banks furnished the necessary funds by the purchase of securities which made them at once creditors and copartners in that business. Sooner or later this connection would find expression in the appointment of a representative of the bank on the supervisory council of the industrial enterprise; occasionally a “captain of industry” would be elected to the board of directors of the bank. Although this procedure of interlocking directorates was not unique to Germany—it was an established practice in the United States, certainly—there was no country in which these alliances were so far-reaching, or in which financial power was so centrally controlled, as in the German Empire. In Germany finance and industry were wedded—permanently united for better or for worse.[20]
Of this alliance of banking and business the Deutsche Bank, chief promoter of the Bagdad Railway, was a shining example. Its industrial connections were too numerous to catalogue. It enjoyed intimate financial relations with hundreds of companies engaged in every important branch of manufacturing in Germany; it was represented on the directorates of the North German Lloyd and Hamburg-American steamship lines; it was the organizer of and chief stockholder in the German Petroleum Company. It was the owner of a number of overseas banking corporations stretching their activities from South America on the west to China on the east. The officers of the Deutsche Bank firmly believed that the export of capital and the export of commodities should go hand in hand. The other banks associated in the Bagdad Railway enterprise likewise were closely affiliated with important industrial enterprises. For example, the Dresdner Bank held the vice-chairmanship of Ludwig Loewe & Company, prominent manufacturers of munitions, and the chairmanship of the Orenstein Koppel Company, manufacturers of railway supplies. The Bank für Handel und Industrie possessed interests in the Allgemeine Elektrizitäts-Gesellschaft, the German General Electric Company. A still further evidence of this close association of financial and industrial interests was furnished in January, 1905, when the chief German banks entered into a “community of interests” with August Thyssen and Hugo Stinnes, the steel and coal barons of Germany.[21]
If German business men were likely to be interested in the economic development of Asia Minor, what was the nature of this interest?