The German cartel differs from the trust in that it does not represent the absorption of weaker rivals by one powerful concern but is a federation of business units which retain their legal independence but surrender a part of their industrial and commercial autonomy. In the beginning the German cartels represented an effort to regulate prices in the home market, but after the adoption of a protective tariff and during the period when Germany launched out upon a policy of large-scale exportation, the cartels grew in numbers and power. Their policy was to maintain prices at home and sell at a lower rate abroad. But this policy, owing to a near-sighted individualism, injured the German export industry itself. The coal cartel determined its policy irrespective of the interests of the coke cartel, which in turn fixed its prices irrespective of the interests of the iron industry. As a result vast quantities of raw materials and semi-manufactured products were shipped abroad at prices which permitted the foreign manufacturer of finished wares to undersell the German manufacturer. It was a boomerang dumping, which worked to the advantage of the dumped and to the disadvantage of the dumper.
Within the last fifteen years, however, and especially since the report in 1903 of the German Parliamentary Commission on Cartels, this early anarchy has been gradually abolished, and arrangements have been made by which a cartel grants lower prices not only for its own exports but also for such part of its home-sold product as is to be used in the manufacture of more highly finished wares, which are in turn to be exported. The coal used in iron manufactures that are to be shipped to foreign countries is sold cheaper than the coal used in iron manufactures which are not to be exported. A community of interest among the cartels is thus created. The result is an amazing industrial solidarity. "The individual exporter disappeared in the cartel, and the cartel itself is absorbed in this sort of cartel of cartels, which ends by becoming the German industry.... For an economic guerilla warfare there is substituted a mass action, a veritable strategy."[[6]] The excesses of dumping are cured and dumping becomes a national economic policy.
But how can this organised conquest of adjacent industrial countries be averted without some alternative method for the economic expansion of a highly organised industry? The same forces that push Germany and England into an imperialistic policy and into a conquest of the markets of agricultural countries also force them into a competition to secure the markets of industrial countries. The two processes are not quite alike, since the trade between, let us say, Brazil and Germany is a complementary and mutually beneficial commerce, while the dumping of German rails and girders on Italy is a competition or war between two industrial nations. The impulse and motive in both cases is, however, the same. It is the desire to increase buying power. Germany can secure more of the wool of Australia and of the wheat of the Argentine if she can establish even a limited economic dominion over adjoining countries. It is the lack of a sufficient home market that forces Germany to dump her goods on Switzerland and Belgium just as it forces England to sell largely to her colonies and to invest in backward countries.
How far this policy of industrial invasion can safely go is one of the interesting international problems of the future. It is of course not the desire of any country to sell permanently below cost to the foreigner, since such a policy means, if not actual loss, at least a diminution of profits.[[7]] Germany would prefer to get the same price for her girders in England and Italy as she does at home. But she must take what she can get. Her industry is based upon a productiveness in excess of the demands of the home market, and she is under the necessity of paying for large importations of food and raw material and of profitably employing increasing numbers of workmen. Her industrial invasion of neighbouring countries is alternative and supplementary to an attempt to secure a needed colonial market. It is, parenthetically, a necessity imposed upon an industrial nation menaced by a constantly growing population.
Be this policy of invasion ever so well organised, however, it cannot escape inherent limitations and obstacles. The German export policy maintained itself only by holding up prices at home, which meant an increased cost of living and a rise in money wages. The imposition of tariffs by neighbouring countries meant an increase in the difficulties to be overcome in exportation and a reduction in the net profits of the foreign trade. To a considerable extent this export of cheapened goods was at the mercy of the importing nations, which, at any moment, might levy prohibitory duties. At the best the whole development led to strong opposition and prejudice, to counter-attacks, to the violation of favouring commercial treaties and to the imposition of punitive duties (as in the Canadian tariff) especially aimed at dumpings. In the opinion of many observers, the policy provided an insecure base for a top-heavy industry, with the result that in Germany industrial crises were frequent and destructive and the economic development showed the weaknesses of a forced growth.
It is too early to pass judgment upon the relative success or failure of this industrial invasion. Prof. Milloud believes that the policy by 1914 had demonstrated its failure, and that the fear of an industrial débacle forced Germany to escape from an impossible economic position by throwing Europe into war. How far this is true it is difficult to determine.[[8]] It is evident, however, that the difficulty of this German penetration of adjacent countries must have intensified a desire for an easier market in the colonies. The Italian trade for which Germany fought so hard must have seemed unremunerative and unpromising as compared with the practically monopolised market which France possessed in North Africa or with that which Germany could obtain through the Bagdad Railway and the penetration of Asia Minor. The sharpness of the conflict for nearer lying markets illustrated anew the necessity of securing colonial outlets.
If, however, the competition among industrial countries to secure each other's markets results in national antagonism, the competition of the same nations for the exclusive possession of colonies and dependencies leads, as we have seen, to an equally bitter struggle. The choice seems to lie between the devil and the deep sea. It is no wonder therefore that as the rapid expansion of industry brings the great nations into ever keener antagonism, voices are raised against the whole imperialistic policy. Just as the German consumer objects to paying high prices for German commodities which the Belgian or Italian can buy cheap, so also opposition is encountered to a policy of extending colonial development at the expense and imminent risk of the nation and to the obvious benefit of certain preferred classes in the community.
[[1]] "The Ruling Caste and Frenzied Finance in Germany." Boston, 1916, p. 104.
[[2]] See in the first instance Milloud, op. cit., and Prof. Henri Hauser, "Les Méthodes Allemandes d'expansion Economique," Paris, 1916. also G. Preziosi, "La Germania alia conquista dell' Italia," Florence, 1915.
[[3]] Op. cit., pp. 104-5. His italics.