England and Germany

by Emile Joseph Dillon

On the outbreak of war Germany was faced with a group of the most arduous and intricate problems any Government has ever yet had to tackle. For most of them she had had the time and the forethought to prepare. But others arose which had been neither provided for nor foreseen, in consequence of her mistaken assumption that Great Britain would hold aloof from the war. The total value of her exports and imports in the year 1913 was computed at 1,000,000,000 sterling, and an infinity of fine threads bound her industrial activity with foreign countries. By Great Britain’s declaration of war, for which Germany was unprepared until the last days of July, nearly all these threads were snapped asunder, and the industrial and economic life of the Empire had to be swiftly readjusted to the new conditions. And here it was that the nation rose as one man to the unparalleled occasion, faced the tremendous ordeal, and, contrary to the expectations of its adversaries—ever prone to judge others by themselves—has continued not merely to exist, but to extend its conquests ever since.

It was in the financial sphere that the first strain was felt. But perilous though it actually was, it would have been intolerable but for the precautionary measures adopted in July and the ingenious devices applied by the Reichsbank immediately after. The first step taken was to substitute short-terms credit for long. The gold in the Reichsbank increased steadily, and from 1,009,000,000 marks on July 7, 1913, it rose to 1,356,000,000 by July 7, 1914. The war treasure hoarded in the Julius-Tower was doubled, so as to enable the Imperial Bank to issue 720,000,000 marks on the strength of it, whereby its gold cover was augmented from 1,253,000,000 to 1,447,000,000. A further considerable reserve of silver was laid by, which proved extremely useful later on. One result of this policy was that on the fatal 31st July, no less than 4,500,000,000 marks in banknotes could be issued without exceeding the limits prescribed by the law.[109] A network of Loan Banks was also created throughout the country in which every one, possessed of property of any description, could obtain credit to any amount, provided the pledges warranted the advance.

Nor were the large groups of business men neglected who had no pledges to offer yet sorely needed credit. For their behoof War Credit Banks were instituted, which transacted business on curious lines. A city or town subscribed a third or even more of the shares of the borrowing company, and the Imperial Bank conferred the right of rediscounting bills of exchange up to an amount equal to three times the value of the capital, and sometimes even more. Institutions were opened for advancing money on house property, and for assisting special branches of industry. The Hansa-Bund, for instance, founded a War Credit Bank for “the Middle Classes” which, with the authorization of the Reichsbank, rediscounts bills of exchange drawn by individuals for whom the Commune vouches. Associations were constituted in the country and in towns, and the nature of their work is evidenced by the 18,000 rural Savings and Credit Banks and 16,000 urban and trade associations.[110] For farmers and struggling landowners, a Central Board, for the purchase of machines, was created, which also superintended the equitable distribution of orders among industrial firms.

The suddenness of the declaration of war had for its effect, and perhaps also for one of its objects, the stemming of the flow of gold from the Reichsbank before it had exceeded the total of 100,000,000 marks and also the prevention of its disappearance from the country. Soon afterwards gold was brought in astonishing quantities to the bank by all classes of citizens who had hoarded it jealously in peace-time, but now recognized the criminality of applying the principles of individual ownership to what of right belongs to the jeopardized community. For the nation realized the fact that the condition of public danger entitled the Government to wield an unlimited degree of power over the lives and property of the people for the welfare of the community.

If we compare this intelligent appreciation of the position by rulers and ruled, and their readiness to accommodate their respective actions to it and play their parts as organs for the discharge of special functions, with the haziness of conception, the misinterpretation of events, and the utter lack of co-operation displayed by the corresponding sections of the allied communities, we shall grasp the secret of the superiority of the seemingly weaker group of belligerents and the paltry results hitherto achieved by the stronger.

German industry, too, the source of the nation’s prosperity, was shaken to its foundations. It had worked largely for the foreign market. And all at once its exports were cut down by 60 per cent., because of the stoppage of the supplies of raw materials. Imports also fell by 75 per cent. One immediate consequence of this partial stagnation was the enormous increase of the army of the unemployed. Although 4,000,000 men were taken from the various industries and despatched against the Belgians, French and Russians, there were at the end of August no less than 3,400,000 men thrown out of employment.[111] Thus the total number of unemployed was 7,400,000, and as there were 17,000,000 hands employed before the war, it may be inferred that German industry was reduced by 43½ per cent. It was in these conditions that the Teuton capacity for organization was manifested.

Two great industrial organizations flourished in Germany before the war,[112] and although occasionally disagreeing on various points, sensibly furthered the interests of their countrymen at home and abroad. No sooner was war declared than they dropped their differences and constituted a War Committee for German Industry. Among the varied functions of this new body were the distribution of information respecting orders given by the State, new legislation, etc.; co-operation with firms for the fulfilment of contracts despite the outbreak of hostilities; the selection of operatives, clerks, etc., for firms needing these; the obtainment of places for the unemployed and the organization of the credit system.

This Committee also applied for and received permission to have all those skilled artisans recalled from the front whose services were deemed indispensable for war industries. It likewise watched over the distribution of State orders, and saw that each of the various firms received its due share.

The organization of German industry during the war was taken in hand by a group of experts and officials possessed of the insight, knowledge and power necessary for the discharge of the arduous task. Among the members of the Board we find the names of representatives of finances, industries and the Government; the Minister of the Interior, all the members of the Federal Council, M.M. Gwinner, Bleichröder, Siemens, etc. Special bureaux were opened for various kinds of supplies, a Central Office for the War Supply of Tobacco, another for that of chocolate, a third for leather, a fourth for linen, etc.[113] Another group of organizations dealing with the acquisition and distribution of raw stuffs possessed in certain cases the right of expropriation, and is not allowed to make more than a certain limited profit on its transactions. Among them are an association for the supply of metals, another for chemicals, and a third for woollen stuffs.

In consequence of the shortage of raw materials, economy and the employment of substitutes were everywhere resorted to spontaneously before the Government had time to intervene. From every household came old copper vessels, copper wire, worn-out clothing from which the manufacturers removed the wool, leather straps, shoes, bags, etc. From Belgium and France everything that could be utilized as raw material was hurriedly transferred to the Fatherland. At first the supply of aluminium for castings and Zeppelins was insufficient, but a composition of spelter and tin was invented, which answered the main purposes equally well. Nickel being also scarce, coins of 10 pfennige were withdrawn from circulation and utilized, while considerable quantities were imported from Scandinavian countries. The place of jute was taken by paper, and from paper under-garments were made. Roasted acorns, theretofore employed in lieu of coffee only by the poorer classes, thenceforward became the daily beverage of the middle classes as well. A substitute for olive oil was extracted from cherry stones, tainted meat was rendered harmless by chemical methods, nitrates were extracted from the air by a Norwegian process which the Germans had perfected and applied.