Within the last few years there have appeared numerous books by French, Swiss, Belgian and Italian[[2]] publicists attacking the policy by which Germany prior to the war secured a partial control of her neighbouring markets. With the merits of this controversy and with the morality or immorality of the procedure, we need not concern ourselves. To us the only point of interest is the nature of the economic forces leading to such a conflict and the effect of this conflict in creating national animosity and in inciting to war.
All the industrial nations export to one another as well as to the agricultural countries. Why, then, is Germany's course so bitterly resented?
At first glance one might suppose that the chief objection to this German enterprise lay in its ruthlessness and economic terrorism. A French manufacturer of formic acid is crushed outright by a sudden price reduction; a Swiss or Italian manufacturer is ruined by being spied upon by his own employés in the pay of a German competitor. But the main objection to the German competition seems to be its formidableness. Germany exports not only wares but men, and in all the neighbouring countries are to be found German chemists, engineers, business men and clerks. It is claimed that these pioneers hold together, advance together, maintain the cult of Deutschtum in an alien country, and act as agents for the home industry. It is also claimed that Germany "dumps" her goods on foreign markets, thus causing losses or even total destruction to rival industries. Yet all these things have been done before, and even the nations which object are not always innocent of like practices. What is deeply resented, however, is that the German competition is a disciplined state-aided competition, that it is collective rather than individual. The Belgian, Italian or Dutch manufacturer feels that behind his German competitor stand the gigantic power and resources of the whole German nation. It is not individual Germans who compete, but Germany; a patient, resourceful, long-sighted Germany, willing to make temporary sacrifices for permanent gains, a Germany forced to expand industrially and bending its immense wealth and power to this one purpose. Against such an organised body what can a single manufacturer avail?
The means at Germany's disposal in this invasion of near-lying markets are varied and great. Industry is organised; the German has a genius for organisation. In all the near-lying countries, concerns with German connections open up a wide channel for the incoming wares. In Antwerp, in Rotterdam, in Zurich, a large part of the big business is in German hands. German banks are established and these aid directly or indirectly in the importation of German commodities. Moreover, the Germans are better informed than any of their rivals concerning all the minute knowledge necessary to the conquest of a local market. Their business plans are not only far flung but meticulous; they have a card-index method of study and their training is admirably adapted to just these methods of commercial penetration.
No such penetration would be possible, however, but for the intelligence with which German industry is conducted at home. In Germany the scientifically trained man is more highly regarded than in any other country. The chemist, the engineer, the specialist of every sort is called into consultation and the laboratory is united to the factory. The vast expense of maintaining a corps of inventors forever working at new problems is more than compensated for by the frequent technical improvements which result from their studies. The scientific men employed by the German chemical factories have revolutionised methods and given Germany almost a monopoly in this rapidly growing industry. In Germany also, as in America, there is a willingness to discard old methods and machinery, whatever the initial expense. In a few years the losses due to the change are retrieved and the German business is creating values more efficiently than ever.
Such an industry must in its nature be immensely productive. The Germans, like the Americans, are successful in mass production, the fashioning of vast quantities of cheap, standardised articles. Factories tend to grow larger. Formerly competing concerns are united into associations or cartels, which buy or sell in common, save a vast amount of unnecessary friction within the trade and act as a clearing house for information and ideas. A high protective tariff enables these cartels to maintain a remunerative price in the home market while dumping their surplus products upon foreign markets.
What this "dumping" may mean for manufacturers in the countries upon which the wares are dumped may be made clear by an example. "The German ironmasters," writes Prof. Milloud, "sell their girders and channel iron for 130 marks per ton in Germany, for 120 to 125 in Switzerland; in England, South America and the East for 103 to 110 marks; in Italy they throw it away at 75 marks and make a loss of from 10 to 20 marks per ton, for the cost price may be reckoned at 85 to 95 marks per ton."[[3]] Other iron products have been sold by Germans in Italy far cheaper than they could be sold or even produced in Germany, with the result that the struggling Italian iron industry is hardly able to exist. Nor is this dumping a mere temporary expedient to relieve the German manufacturer of an unexpected surplus. It is systematic, organised and intentional, designed to destroy competitors and establish a monopoly. It is a procedure with which we in America are unpleasantly familiar, since it has been long the practice of our trusts to destroy competition in a circumscribed local market by temporarily reducing prices and then to raise prices after the competitor is hors de combat.
The most striking difference between the flooding of adjacent markets by German cartels and the destruction of competitors by American trusts is that in the former case the operation is international, and the manufacturers who suffer live in one country and those who profit in another. Moreover, the German Government is itself directly concerned in the process. Not only is the Government one of the associated concerns in certain cartels, but by its railroad policy it gives an immense impetus to dumping. Railroad rates are cheaper if the commodity carried is to be exported. To take one out of a thousand instances "the freight of a double wagon of German coal from Duisbourg to Hamburg, a distance of 367 kilometers, costs 57 marks, whilst, in the reverse direction, from the sea-board to the industrial centres in the interior, the freight charge is 86 marks in the case of German coal, and as high as 93 in the case of foreign coal."[[4]] The Government grants an export bounty upon coal (and other commodities) in the shape of reduced transportation rates.
We need not study in detail the vastness and complexity of that integration of German industry, which permits it to act as a unit in its invasion of near-lying territories. We need not recount the almost vertiginous growth of the German banking system, with its tendency towards a narrow concentration, its bold conduct and control of German industry and its establishment of branch organisations in the countries to be invaded. Nor need we consider the practice of long credits by which German manufacturers secure a foothold in new markets or the system by which German capital, labour and intelligence migrate to the foreign country, and as branches of a German concern, continue the process of dumping from within. The significant fact is that the entire process is organised and thought out. It is a concrete national policy for securing German economic control in neighbouring industrial countries.
Nothing could better illustrate the collective nature of this economic invasion than the history of the German cartels. "It is evidently to the cartels," writes Fritz-Diepenhorst, "that Germany owes in great measure the conquest of foreign markets."[[5]]