The development of commercial banking by British interests has everywhere gone hand in hand with the development of British investment and British trade. The accounts of the railways, mercantile firms, steamship lines, public utilities, and other enterprises conducted by their fellow countrymen form the great bulk of the business of the four leading institutions; the Commercial Bank of Spanish America is, however, operating under different conditions. Indeed, it may even be said—again speaking in broad terms—that the English banks have made comparatively little effort to secure the accounts of domestic enterprises. It is certainly safe to say that they have not made efforts in this field at all comparable with the efforts of the German, Spanish, French, and Italian banks. It is interesting to note also in this connection that the management and even the clerical force are, with few exceptions, brought over from England. After more than fifty years the three leading institutions remain as distinctively British as they were at the beginning.
German Banks in South America
To understand the energetic development of German banks in South America during the last forty-five years we must consider the conditions prevailing in Germany during that period and the strong forces working toward industrial and banking expansion.
Beginning immediately after the Franco-Prussian War of 1870-71, German industrial interests, with the strong support of the German Government, began to struggle more vigorously and more effectively than ever before for a larger share of trade in international markets, particularly in the Far East and in South America. It was clearly realised that Germany needed a large and rapidly growing export trade in order to maintain her own prosperous development. In order to get this trade it was necessary to follow a definite programme which included the provision of better shipping facilities and of better facilities for financing. Up to that time Germany had been fully as dependent as the United States is to-day upon foreign ships and foreign banks.
It was also clearly realised that the tendency was toward large scale production in most industries and that those concerns which could secure large sales in the world-wide markets would soon come to enjoy an overwhelming advantage over smaller competitors. The German industries, in conjunction with the great German banks, began to follow, therefore, a programme of concentration, which has since gone steadily forward.
These two forces—expansion in foreign markets and concentration at home—have had a controlling influence on Germany's foreign trade, and incidentally on her foreign banking.
OTHER INFLUENCES IN BANK EXPANSION
Another influence of importance is the fairly well-marked division of German industrial interests into a small number of groups, each one of which centres about and is allied to one of the great banks. To some extent this is true in other countries, especially where banking is centralised—notably in Canada, for instance—but it is especially clear and well recognised in Germany. Hence each one of the great banks is under especially strong pressure to foster and develop the interests of its important clients, even at the expense of some temporary risk or sacrifice for itself. This is doubtless the primary motive which has induced the great German banks one after another to enter foreign fields.
There is a wide-spread notion outside Germany that the German Government has itself actively intervened for the purpose of stimulating foreign trade expansion and has brought pressure to bear on German banking interests, leading them to push ahead more rapidly than their private business interests would have required. This idea may or may not be correct; so far as the writer is aware there is no special evidence pertaining to South American banking development to sustain it. At any rate, it is easy to explain the policy of these banks as being based upon purely business considerations.
As a matter of fact, there has probably been much exaggeration of the thought that the German banks are primarily self-sacrificing instruments of an ambitious national programme rather than ordinary business enterprises. The statement is frequently repeated that the English banks in South America aim first and all the time for profits, while the German banks aim for development of their national interests.