ENGLAND AND GERMANY

BY

DR. E. J. DILLON

WITH AN INTRODUCTION

BY

THE HON. W. M. HUGHES, M.P. PRIME MINISTER OF AUSTRALIA

BRENTANO'S NEW YORK

CHAPMAN & HALL LTD. LONDON

1917

PRINTED IN GREAT BRITAIN BY RICHARD CLAY & SONS, LIMITED, BRUNSWICK ST., STAMFORD ST., S.E. 1, AND BUNGAY SUFFOLK

TO

H.S.H. ALICE PRINCESS OF MONACO

THIS PARTIAL PRESENTMENT OF THE BEGINNINGS OF A WORLD CATACLYSM



INTRODUCTION

Behind any human institution there stand a few men—perhaps only one man—who direct its movement, protect its interests, or serve as its mouthpiece. This applies to nations. If we wish to know for what a nation stands and what are its ideals and by what means it seeks to realise them, we shall do well to know something of the men who lead its people or express their feelings.

It is of vital importance that we should understand the attitude of every one of the nations—both friends and enemies—involved in this war. For in this way only can we know what is necessary to be done to achieve victory.

And the remarkable man who has written this book knows those who lead the warring nations in this titanic conflict very much better than ordinary men know their own townsmen.

Dr. Dillon has moved through the chancelleries of Europe. He has seen and heard what has been denied to all but very few. In the Balkans, that cauldron of racial passions which, overflowing, gave our enemies an ostensible cause for this war, he moved as though an invisible and yet keenly observant figure. He could claim the friendship of Venizelos and other Balkan statesmen. He has travelled as a monk throughout the mountain fastnesses, he has slept in the caves of Albania. He understands the people of all the Balkans, speaks their tongues as a native, and knows and assesses at their true value their leaders.

At the time of the murder of the Archduke Ferdinand and the Archduchess, Dr. Dillon was in Austria, and he remained there through those long negotiations in which Germany tenaciously clung to her design of war.

How well he knows Germany let his book speak. His knowledge of Russia is profound. A master of many languages, he occupied a chair at the Moscow University for many years, and his insight into Russian politics is deep.

In this book he speaks out of the depth of his knowledge, and tells the people of Britain what this war means to them, and what needs to be done before we can hope for victory. He speaks plainly because he feels strongly.

It may be that we cannot agree with him in everything that he says. But no one, after reading Dr. Dillon's remarkable book, will any longer regard the war as but a passing episode. It is a timely antidote to that fatal delusion.

For this war is a veritable cataclysm, and the future of the world hangs upon the result. We must change our lives. Insidiously, while we have called all foreigners brothers and sought foes amongst ourselves, the great force of barbarism, in a new guise and with enormous power of penetration and annexation, has worked for our undoing. This force now stands bared, in the hideous bestiality of Germany's doctrine of Might, and it can be defeated only by an adaptation of its methods that will leave nothing as it was before.

Dr. Dillon's unfolding of the story of German preparation is, it will be admitted, one of fascinating interest. Of its value as a contribution to political and diplomatic history it is not for me to speak. But to its purpose in keying all men to the pitch; all to a sense of the great events in which we are taking part, I bear my testimony. "Germany is wholly alive, physically, intellectually, and psychically. And she lives in the present and future" (p. 311). And the living force of Germany requires us to rise to the very fulness of our powers; for as the champions of truth and right we must prove ourselves physically and morally stronger than the champions of soulless might.

Germany is wholly alive; but she is alive for evil. We whose purpose is good, whose cause is justice and whose triumph is indispensable if honest industry and human right are not to disappear from mankind, are as yet not fully alive to the immensity and necessity of our task. We must awaken, or be awakened, ere it be too late.

Germany is living in the present and in the future. It is a present of determined effort, of unlimited sacrifice, of colossal hope. The future for which she strives and suffers is a future incompatible with those ideals which our race cherishes and reveres. Either our philosophy, our religion and code prevail, or they fade into decay, and Germany's aims remain. The choice is definite.

There can be no parley, no compromise with the evil thing for which Germany fights. There is not room for both. One must go down.

We must win outright. And we can and shall win—if we bend every thought, our whole will, our every energy, our utmost intensity of determination to the great work. Failing this, we shall secure only a victory equivalent to defeat. We chose the part of free men, and, when purified by complete self-sacrifice, shall emerge from the ordeal a great and regenerated people.

W. M. HUGHES.



CONTENTS

CHAP. PAGE

INTRODUCTION BY THE HON. W. M. HUGHES vii

I THE CHARACTER OF GERMANY 1

II THE GERMAN SYSTEM OF PREPARATION 7

III GERMANY AND ITALIAN FINANCE 27

IV THE ANNEXATION MANIA 37

V GERMANY AND RUSSIA 53

VI THE STATESMANSHIP OF THE ENTENTE 81

VII TEUTON POLITICS 88

VIII A MACHIAVELLIAN TRICK BY WHICH RUSSIA'S HAND WAS FORCED 99

IX GERMAN PROPAGANDA IN SCANDINAVIA 108

X GERMANY AND THE BALKANS 116

XI THE RIVAL POLICIES 136

XII PROBLEMS OF LEADERSHIP 146

XIII PROBLEMS OF FINANCE 161

XIV READJUSTMENTS 175

XV THE POSITION OF ITALY 192

XVI ROUMANIA AND GREECE 214

XVII GERMANY'S RESOURCEFULNESS 227

XVIII THE PERILS OF PARTY POLITICS 236

XIX PAST AND PRESENT 246

XX PROBLEMS OF THE FUTURE 272

XXI THE FINAL ISSUE 296



OURSELVES AND GERMANY



CHAPTER I

THE CHARACTER OF GERMANY

During the memorable space of time that separates us from the outbreak of the catastrophic struggle, out of which a new Europe will shortly emerge, events have shed a partial but helpful light on much that at the outset was blurred or mysterious. They have belied or confirmed various forecasts, fulfilled some few hopes, blasted many others, and obliged the allied peoples to carry forward most of their cherished anticipations to another year's account. Meanwhile the balance as it stands offers ample food for sobering reflection, but will doubtless evoke dignified resignation and grim resolve on the part of those who confidently looked for better things.

The items of which that balance is made up are worth careful scrutiny for the sake of the hints which they offer for future guidance. The essence of their teaching is that we Allies are engaged not in a war of the by-past type in which only our armies and navies are contending with those of the adversary according to accepted rules, but in a tremendous struggle wherein our enemies are deploying all their resources without reserve or scruple for the purpose of destroying or crippling our peoples. Unless, therefore, we have the will and the means to mobilize our admittedly vaster facilities and materials and make these subservient to our aim, we are at a disadvantage which will profoundly influence the final result. It will be a source of comfort to optimists to think that, looking back on the vicissitudes of the first twenty months' campaign, they can discern evidences that there is somewhere a statesman's hand methodically moulding events to our advantage, or attempering their most sinister effects. Those who fail to perceive any such traces must look for solace to future developments. For there are many who fancy that the economy of our energies has been carried to needless lengths, that the adjustment of means to ends lacks thoroughness and precision, and that our leaders have kept over rigorously within the narrow range of partial aims, instead of surveying the problem in its totality and enlarging the permanent efficacy of their precautions against unprecedented dangers.

The twenty months that have just lapsed into history have done much to loosen the hold of some of the baleful insular prejudices which heretofore held sway over the minds of nearly all sections of the British nation. It may well be, therefore, that we are now better able to grasp the significance of the principal events of the war, and to seek it not in their immediate effects on the course of the struggle, but in the roots—still far from lifeless—whence they sprang. For it is not so much the upshot of the first phases of the campaign as the deep-lying causes which rendered them a foregone conclusion that force themselves on our consideration. Those causes are still operative, and unless they be speedily uprooted will continue to work havoc with our hopes.

It is now fairly evident that the present war is but a violent phase in the unfolding of a grandiose ground idea—the subjugation of Europe by the Teuton—which was being steadily realized ever since the close of the Franco-German campaign of 1870. It is likewise clear that, despite her "swelled head," Germany's estimate of her ability to try issues with all continental Europe was less erroneous than the faith of her destined victims in their superior powers of resistance. The original plan, having been limited to the continental states, was upset by Great Britain's co-operation with France and Russia. But, despite this additional drag, Germany has achieved the remarkable results recorded in recent history. And with some show of reason she looks forward to successes more decisive still. For in her mode of conceiving the problem and her methods of solving it lie the secret of her progress. But there, too, is to be found the counter-spell by which that progress may be effectually checked; and it is only by mastering that secret and applying it to the future conduct of the struggle that we can hope to ward off the dangers that encompass us.

Germany is like no other State known to human history. She exercises the authority of an infallible and intolerant Church while disposing of the flawless mechanism of an absolute State. She is armed with the most deadly engines of destruction that advanced science can forge, and in order to use them ruthlessly she mixes the subtlest poisons to corrupt the wells of truth and debase the standards of right and wrong. And this she can do without the least qualms of conscience, in virtue of her firm belief in the amorality of political conduct. Her members at home and abroad, whose number is not fewer than a hundred and twenty millions, form a political community of whose compactness, social sense and single-mindedness the annals of the human race offer no other example. All are fired by the same zeal, all obey the same lead, all work for the same object. She sent and is still sending forth missionaries of her political faith, preachers of the gospel of the mailed fist, to every country in which their services may prove helpful. Diplomatists, journalists, bankers, contrabandists, social agitators, spies, incendiaries, assassins and courtesans, willing to offer up their energies and their lives in order to circumvent, despoil or slay the supposed enemies of their race, address themselves each one to his own allotted task and discharge it conscientiously.

Those German colonists abroad are the eyes and arms and tongues of the monster organism of which the brain-centre is Berlin. They endeavoured to stir up dissension between class and class in Russia, France, Britain, Belgium, to plant suspicion in the breast of Bulgaria and Roumania, to create a prussophile atmosphere in Greece, Switzerland and Sweden, and to bring pressure to bear on the Government of the United States in the hope of fomenting discord between the American and British peoples. They have occupied posts of influence in the Vatican, are devoted to the Moslem Caliph, cultivate friendship with the Senussi and the ex-Khedive of Egypt, are intriguing with the Negus of Abyssinia, and spreading lying rumours, false news and vile calumnies throughout the world. During the years that passed between the war of 1870 and the outbreak of the present European struggle, that stupendous organism contrived by those and kindred means to possess itself of the principal strongholds of international opinion and influence, the centres of the chief religions, the press, the exchanges, the world's "key industries," the great marts of commerce and the banks. It has friends at every Court, in every Cabinet, in every European Parliament, and its agents are alert and active in every branch of the administration of foreign lands. And while suppleness marked their dealings with others, they were inflexible only in their fidelity to the Teuton cause. Thus in Russia they were conservative and autocratic in their intercourse with the ruling spheres, and revolutionary in their relations with the Socialists and working classes; in France and Britain they were democrats and pacifists; in Italy they were rabid nationalists or neutralists according to the political sentiments of their environment; in Turkey, Morocco, Egypt and Persia staunch friends of Islam. They intrigued against dynasties, conspired against cabinets, reviled influential publicists, fostered strikes and tumults, set political parties and entire states by the ears, dispelled grounded suspicions and armed various bands of incendiaries and assassins.

But in spite of cogged dice and poisoned weapons, the comprehensive way in which the enterprise was conceived, the consummate skill with which it was wrought out towards a satisfactory issue, the whole-heartedness of the nation which, although animated by a fiery patriotism that fuses all parties and classes into one, is yet governed with military discipline, offer a wide field for imitation and emulation. For the changes brought about by the first phases of the war are but fruits of seed sown years ago and tended ever since with unfailing care, and unless suitable implements, willing hands and combined energies are employed in digging them up and casting them to the winds, the second crop may prove even more bitter than the first.



CHAPTER II

THE GERMAN SYSTEM OF PREPARATION

On the historic third of August when war was formally declared, its nature was as little understood by the Allies as had been its imminence. The statesmen who had to full-front its manifestations were those who had persistently refused to believe in its possibility, and who had no inkling of its nature and momentousness. Most of them, judging other peoples by their own, had formed a high opinion of the character of the German nation and of the pacific intentions of its Government, and continued to ground their policy in war time on this generous estimate, which even when upset by subsequent experience still seems to linger on in a subconscious but not inoperative state. At first their preparations to meet the emergency hardly went beyond the expedients to which they would have resorted for any ordinary campaign. In this they resembled a sea-captain who should make ready to encounter a gale when his ship was threatened by a typhoon. Hence their unco-ordinated efforts, their chivalrous treatment of a dastardly foe, their high-minded refusal to credit the circumstantial stories of sickening savagery emanating first from Belgium and then from France, their gentle remonstrances with the enemy, their carefully worded arguments, their generous understatement of their country's case, and their suppression of any emotion among their own folk akin to hatred or passion. In an insular people for whom peace was an ideal, neighbourliness a sacred duty, and the psychology of foreign nations a sealed book, this way of reading the bearings of the new situation and adjusting them to the nation's requirements was natural and fateful.

To the few private individuals who had the advantage of experience and were gifted with political vision the crisis presented itself under a different aspect. Some of them had foreseen and foretold the war, basing their forecast on the obvious policy of the German Government and on the overt strivings of the German nation. They had depicted that nation as intellectual and enterprising, abundantly equipped with all the requisites for an exhausting contest, fired with enthusiasm for a single idea—the subjugation of the world—and devoid of ethical scruple. And in the clarion's blast which suddenly resounded on the pacific air they recognized the trump of doom for Teuton Kultur or European civilization, and proclaimed the utter inadequacy of ordinary methods to put down this titanic rebellion against the human race. That has been the gist of every opinion and suggestion on the subject put forward by the writer of these lines since the outbreak of the war.

But even without these repeated warnings it should have been clear that a carefully calculating people like the Germans, in whom the gift of organizing is inborn and solicitude for detail is a passion, would not embark on a preventive war without having first established a just proportion between their own equipment for the struggle and the magnitude of the issues dependent on its outcome. It was, further, reasonable to assume that this was no mere onset of army against army and navy against navy according to the old rules of the game, but a mobilization by the two military empires of all their resources—military, naval, financial, economic, industrial, scientific and journalistic—to be utilized to the fullest for the destruction of the Entente group. It was also easy to discern that, whichever side was worsted, the Europe which had witnessed the beginning of the conflict would be transfigured at its close, and that Germany would, therefore, not allow her freedom of action in conducting the war to be cramped by sentimental respect for the checks and restraints of a political system that was already dead. Lastly, it might readily be inferred that the huge resources hoarded up by the enemy during forty years of preparation would be centupled in value by the favourable conditions which rendered them capable of being co-ordinated and directed by a single will to the attainment of a single end. All these previsions, warranted then by unmistakable tokens, have since been justified by historic events, and it is to be hoped that the practical conclusions to which they point may sink into the minds of the allied nations as well as of their Governments, now that nearly two years have gone by since they were first expressed.

The earliest impression which German mobilization left upon the Allies was that of the preventive character of this war. For it could have had no other mainspring than a resolve to paralyse the arm of the Entente, which, if allowed to wax stronger, might smite in lieu of being smitten. For the moment, however, Germany was neither attacked nor menaced. Far from that, her rivals were vying with each other in their strivings to maintain peace. Her condition was prosperous, her industries thriving, her colonial possessions had recently been greatly increased, her influence on the affairs of the world was unquestioned, her citizens were materially well-to-do, her workmen were highly paid, her capitalists, seconding her statesmen and diplomatists, had, with gold extracted from France, Britain and Belgium, woven a vast net in the fine meshes of which most of the nations of Europe, Asia and America were being insensibly trammelled. Already her bankers handled the finances, regulated the industries and influenced the politics of those tributary peoples. And by these tactics a relationship was established between Germany and most states of the globe which cut deep into the destinies of these and is become an abiding factor of the present contest. For that reason, and also because of the paramount influence of the economic factor on the results of the struggle, they are well worth studying.

To her superior breadth of outlook, marvellous organizing powers, the hearty co-operation between rulers and people, and the ease with which, unhampered by parliamentary opposition, her Government was enabled to place a single aim at the head and front of its national policy, Germany is perhaps more deeply indebted for her successes during the first phases of the campaign than to the strategy of Hindenburg or the furious onslaughts of Mackensen. German diplomacy has been ridiculed for its glaring blunders, and German statesmanship discredited for its cynical contempt of others' rights and its own moral obligations. And gauged by our ethical standards the blame incurred was richly deserved. But we are apt to forget that German diplomacy has two distinct aspects—the professional and the economic—and that where the one failed the other triumphed. And if success be nine-tenths of justification, as the Prussian doctrine teaches, the statesmen who preside over the destinies of the Teutonic peoples have little to fear in the way of strictures from their domestic critics. For they left nothing to chance that could be ensured by effort. Trade, commerce, finances, journalism, science, religion, the advantages to be had by royal marriages, by the elevation of German princes to the thrones of the lesser states, had all been calculated with as much care and precision as the choice of sites in foreign countries for the erection of concrete emplacements for their monster guns. No detail seemed too trivial for the bestowal of conscientious labour, if it promised a possible return. When in doubt whether it was worth while to make an effort for some object of no immediate interest to the Fatherland the German invariably decided that the thing should be done. "You never can tell," he argued, "when or how it may prove useful." For years one firm of motor-car makers turned out vehicles with holes, the object of which no one could guess until the needs of the war revealed them as receptacles for light machine-guns.

Nearly two years of an unparalleled struggle between certain isolated forces of the Allies and all the combined resources of the Teutons ought to banish the notion that the results achieved are the fruits only of Germany's military and naval efficiency. In truth, the adequacy of her military and naval forces constitutes but an integral part of a much vaster system. It has hitherto been the fashion among British and French writers to dwell exclusively on the comprehensiveness of the measures adopted by the Germans to fashion their land and sea defences into destructive implements of enormous striking power and scientific precision. But the German conception of the enterprise was immeasurably more grandiose. It included every means of offence and defence actually available or yet to be devised, and testifies to a grasp of the nature of the problem which, so far as one can judge, has not even yet been attained outside the Fatherland. As the present situation and its coming developments present themselves as practical corollaries of causes which the leaders of Germany rendered operative, it may not be amiss to describe these briefly.

The objective being the subjugation of Europe to Teutonic sway, the execution of the plan was attempted by two different sets of measures, each of which supplemented the other: military and naval efficiency on the one hand and pacific interpenetration on the other. The former has been often and adequately described; the latter has not yet attracted the degree of attention it merits. For one thing, it was unostentatious and invariably tinged with the colour of legitimate trade and industry. Practically every country in Europe, and many lands beyond the seas, were covered with networks of economic relations which, without being always emanations of the governmental brain, were never devoid of a definite political purpose. While Great Britain, and in a lesser degree France, distracted by parliamentary strife or intent on domestic reforms, left trade and commerce to private initiative and the law of supply and demand, the German Government watched over all big commercial transactions, interwove them with political interests, and regarded every mark invested in a foreign country not merely as capital bringing in interest in the ordinary way, but also as political seed bearing fruit to be ingathered when Der Tag should dawn. Thus France and Britain advanced loans to various countries—to Greece, for instance—at lower rates of interest than the credit of those states warranted, but they bargained for no political gain in return. Germany, on the contrary, insisted on every such transaction being paid in political or economic advantages as well as pecuniary returns. And by these means she tied the hands of most European nations with bonds twisted of strands which they themselves were foolish enough to supply. Italy, Russia, Turkey, Roumania, Bulgaria, Greece, Belgium and the Scandinavian States are all instructive instances of this plan. Bankers and their staffs, directors of works and factories, agents of shipping companies, commercial travellers, German colonies in various foreign cities, military instructors to foreign armies, schools and schoolmasters abroad, heads of commercial houses in the different capitals, were all so many agencies toiling ceaselessly for the same purpose. The effect of their manoeuvres was to extract from all those countries the wealth needed for their subjugation. One of the most astounding instances of the success of these hardy manipulations is afforded by the Banca Commerciale of Italy, which was a thoroughly German concern, holding in its hands most of the financial establishments, trades and industries of Italy. This all-powerful institution possessed in 1914 a capital of L6,240,000 of which 63 per cent. was subscribed by Italian shareholders, 20 per cent. by Swiss, 14 per cent. by French, and only 2-1/2 per cent. by Germans and Austrians combined! And the astounding exertions put forward by the Germans during the first twelvemonth of the war are largely the product of the economic energies which this line of action enabled them to store up during the years of peace and preparation.

The execution of those grandiose schemes was facilitated by the easy access which Germany had to the principal markets of the globe. One of the main objects of her diplomacy had been to break down the tariff barriers which would have reserved to the great trading empires the main fruits of their own labour and enterprise. By the Treaty of Frankfort the French had been compelled to confer on Germany the most-favoured-nation clause, thus entitling her to enjoy all the tariff reductions which the Republic might accord to those countries with which it was on the most amicable terms. British free trade opened wide the portals of the world's greatest empire to a deluge of Teuton wares and to a kind of competition which contrasted with fair play in a degree similar to that which now obtains between German methods of warfare and our own. Russia, at first insensible to suasion and rebellious to threats, endeavoured to bar the way to the economic flood on her western frontiers, but during the stress of the Japanese war she chose the lesser of two evils and yielded. The concessions then made by my friend, the late Count Witte, to the German Chancellor, drained the Tsardom of enormous sums of money and rendered it a tributary to the Teuton. But it did much more. It supplied Germany with a satisfactory type of commercial treaty which she easily imposed upon other nations. Germany's road through Italy was traced by the mistaken policy of the French Government which, by a systematic endeavour to depreciate Italian consols and other securities, drove Crispi to Berlin, where his suit for help was heard, the Banca Commerciale conceived, and commercial arrangements concluded which opened the door to the influx of German wares, men and political ideals.

A few years sufficed for the fruits of this generous hospitality to reveal themselves. The influx of wealth and the increased population helped to render the German army a match for the combined land forces of her rivals, a formidable navy was created, which ranked immediately after that of Great Britain, and a large part of Europe was so closely associated with, and dependent on, Germany that an extension of the Zollverein was talked of in the Fatherland, and a league of European brotherhood advocated by the day-dreamers of France and Britain. The French, however, never ceased to chafe at the commercial chain forged by the Treaty of Frankfort, but were powerless to break it, while the British lavished tributes of praise and admiration on Germany's enterprise, and construed it as a pledge of peace. Russia, alive to the danger, at last summoned up courage to remove it, and had already decided to refuse to extend the term of the ruinous commercial treaty, even though the alternative were war. That was the danger which stimulated the final efforts of the Kaiser's Government.

Thus the entire political history of Entente diplomacy during this war may be summarized as a series of attempts on the part of the Allies to undo some of the effects of the masterstrokes executed by Germany during the years of abundance which she owed to the favoured-nation clause, British free trade and kindred economic concessions. Interpenetration is the term by which the process has been known ever since Count Witte essayed it in Manchuria and China.

The German procedure was simple, yet effective withal. Funds were borrowed mainly in France, Britain, Belgium, where investors are often timid and bankers are unenterprising. And then operations were begun. The first aim pursued and attained was to acquire control of the foreign trade of the country experimented on. With this object in view banks of credit were established which lavished on German traders every help, information and encouragement. Men of Teuton nationality settled in the land as heads of firms, as clerks without salary, private secretaries, foremen, correspondents, and rapidly contrived to get command of the main arteries of the economic organism. German manufactures soon flooded the country, because those who undertook to import them could count on extensive credit from the institutions founded with the money of the very nations whose trade they were engaged in killing. In this way the competition, not only of all Entente peoples but also of the natives of the country experimented on, was systematically choked. And the customers of these banks, natives as well as Teutons, became apostles of German influence.

Insensibly the great industrial concerns of the place passed into the possession of German banks, behind which stood the German empire. A nucleus of influential business people, having been thus equipped for action, incessantly propagated the German political faith. German schools were established and subsidized by the Deutscher Schulverein, clubs opened, musical societies formed, and newspapers supported or founded, to consolidate the achievements of the financiers. On political circles, especially in constitutional lands, the influence of this Teutonic phalanx was profound and lasting.

In all these commercial and industrial enterprises undertaken abroad for economic gain and political influence, the German State, its organs and the individual firms, went hand in hand, supplementing each other's endeavours. The maxim they adopted was that of their military commanders: to advance separately but to attack in combination. Not only the Consul, but the Ambassador, the Minister, the Scholar, the Statesman, nay the Kaiser[1] himself, were the inspirers, the partners, the backers of the German merchant. Marschall von Bieberstein once told me in Constantinople that his functions were those of a super-commercial traveller rather than ambassadorial. And he discharged them with efficiency. Laws and railway tariffs at home, diplomatic facilities and valuable information abroad smoothed the way of the Teuton trader. Berlin rightly gauged the worth of this pacific interpenetration at a time when Britons were laughing it to scorn as a ludicrous freak of grandmotherly government. To-day its results stand out in relief as barriers to the progress of the Allies in the conduct of the war.

[1] The Kaiser is one of the largest shareholders in the great mercury mines of Italy.

Of this ingenious way of enslaving foreign nations unknown to themselves, Italy's experience offers us an instructive illustration. The headquarters of the German commercial army in that realm were the offices of the Banca Commerciale in Milan. This institution was founded under the auspices of the Berlin Foreign Office, with the co-operation of Herr Schwabach, head of the bank of Bleichroeder. Employing the absurdly small capital of two hundred thousand pounds, not all of which was German, it worked its way at the cost of the Italian people into the vitals of the nation, and finally succeeded in obtaining the supreme direction of their foreign trade, national industries and finances, and in usurping a degree of political influence so durable that even the war is supposed to have only numbed it for a time.

Between the years 1895 and 1915 the capital of this institution had augmented to the sum of L6,240,000, of which Germany and Austria together held but 2-1/2 per cent., while controlling all the operations of the Bank itself and of the trades and industries linked with it.

The Germans, as a Frenchman wittily remarked, are born with the mania of annexation. It runs in their blood. And it is not merely territory, or political influence, or the world's markets that they seek to appropriate. Their appetite extends to everything in the present and future, nay, even in the past which they deem worth having. It is thus that they claim as their own most of Italy's great men, such as Dante, Giotto, Leonardo da Vinci, Botticelli, Galileo, and it is now asserted by a number of Teuton writers that Christ Himself came of a Teutonic stock.

German organisms, as well as German statesmen, display the same mania of annexation, and the Banks in especial give it free scope. German banks differ from French, British and Italian in the nature, extent and audacity of their operations. It was not always thus. Down to the war of 1870 their methods were old-fashioned, cautious and slow. From the year 1872 onward, however, they struck out a new and bold course of their own from which British and French experts boded speedy disaster. Private enterprises were turned into joint stock companies, the capital of prosperous undertakings was increased and gigantic operations were inaugurated. Between the years 1885 and 1889 the industrial values issued each year reached an average of 1,770 million francs; between 1890 and 1895 the average rose to 1,880 millions, and from 1896 to 1900 it was computed at 2,384 millions.[2]

[2] Cf. L'Invasione tedesca in Italia. Ezio M. Gray. Firenze.

Of all German financial institutions the most influential and prosperous is the Deutsche Bank. It has been aptly termed an empire within the empire. Its capital, 250 million francs, exceeds that of the Reichsbank by thirty millions. It is the first of the six great German banks, of which four are known as the "D" group, because the first letter of their respective names is D: Deutsche Bank, Dresdner Bank, Disconto-Gesellschaft and Darmstaedter Bank. The other two are the Schaffhausenscher Bankverein and the Berliner Handelsgesellschaft. The total capital of these six concerns amounts to 1,100 million francs.[3]

[3] Op. cit., p. 113.

None of these houses is hampered by those rules, traditions or scruples which limit the activity of British joint stock banks. They are free to launch into speculations which, to the sober judgment of our own financiers, must seem wild and precarious, but to which success has affixed the hall-mark of approval. Each of the six banks is a centre of German home industries and also of the foreign transformations of these. To mention an industry is almost always to connote some one of the six. Before the war broke out one had but to gaze steadily at the beautiful facade of this or that Russian bank to discern the Lamia-like monster from the banks of the Spree. The famous firm of Krupps, for instance, had its affairs closely interwoven with those of the Berliner Disconto Gesellschaft, and was more than once rescued from bankruptcy by its timely assistance. Similar help was afforded to the celebrated firm of Bauer which is known throughout the world for its synthetical medicines. There were critical moments in its existence when it was confronted with ruin. The Bank extricated the firm from its difficulties, and the present dividend of 33 per cent. has justified its enterprise.

In this way the latter-day German banks upset all financial traditions, opened large credits to industries, smoothed the way for the spread of German commerce, killed foreign competition and seconded the national policy of their Government. As an instance of the push and audacity of these modernized institutions, a master stroke of the Bank of Behrens and Sons of Hamburg may be mentioned: it bought up the entire coffee crop of Guatemala one year to the amazement of its rivals and netted a very large profit by the transaction.

Now as commerce is international and industry depends for its greatest successes upon exportation, it was inevitable that the up-to-date German banks should seek fields of activity abroad and aim at playing a commanding part in the world's commerce. And they tried and succeeded. For they alone instinctively divined the new spirit of the age, which may be termed co-operative and agglutinative. It was in virtue of this new idea that groups of States were leagued together by Germany in view of her projected war, and it is the same principle that impels her, before the conflict has yet been decided, to weld to herself as many tributary peoples as she may to assist her in the economic struggle which will be ushered in by peace. Germans first semiconsciously felt and now deliberately hold that in all departments of modern life, social, economic and political, our conception of quantities must undergo a radical change. The scale must be greatly enlarged. The unit of former times must give place to a group of units, to syndicates and trusts in commerce and industry, to trade unions in the labour world, to Customs-federations in international life. That this shifting of quantities is a correlate of the progress achieved in technical science and in means of communication, and also of the vastness of armies and navies and of the aims of the world's foremost peoples, is since then become a truism, realized not only by the Germans but by all their allies.

For individual enterprise, as well as for national isolation, there is no room in the modern world. Isolation spells weakness and helplessness there. The lesser neutral States must of necessity become the clients of the Great Powers and pay a high price for the protection afforded them. Hence the maintenance of small nations on their present basis, with enormous colonies to exploit but without efficient means of defending them, forms no part of Germany's future programme. And the altruistic professions of the Entente which claims to be fighting for the rights of little States, whose idyllic existence it would fain perpetuate, is scoffed at by the Teutons as chimerical or hypocritical. When this war is over, whatever its upshot, Central Europe with or without the non-German elements will have become a single unit, against whose combined industrial, commercial and military strivings no one European Power can successfully compete. And the difficulties which geographical situation has raised against effective co-operation among the Allies in war time will make themselves felt with increased force during the economic struggle which will then begin.

No mere tariff arrangement, but only a genuine league between all the west European Powers and the British Empire, supplemented by a customs union between them and the other Allies of the Entente, will then avail to ward off the new danger and establish some rough approach to the equilibrium which the present conflict has overthrown. The future destinies of Europe, as far as one may conjecture from the data available to-day, will depend largely on the insight of the Entente nations and their readiness to subordinate national aims and interests to those of the larger unit which will be the inevitable product of the new order of things.

The ideal type of the industrial bank having been thus wrought out, the Germans, whom a thoroughly commercial education had qualified for the work, carried on vast operations with a degree of boldness which was matched only by the thoroughness of their precautions. They advanced money with a readiness and an open-handedness which the West European financier set down as sheer folly, but which was the outcome of close study and careful deliberation. They began by acquainting themselves with the solvency of their clients, with the nature of the transactions which these were carrying on, with their business methods and individual abilities, and to the results of this preliminary examination they adjusted the extent of their financial assistance. They had secret inquiry offices to keep them constantly informed of the condition of the various firms and individuals, and when in doubt they demanded an insight into the books of the company which was seldom denied them. The Spanish Inquisition was but a clumsy agency in comparison with the perfect system evolved by these German banks, which could at any given moment sum up the prospects as well as the actual situation of each of their customers. It was this comprehensive survey which warranted some of the large advances they made to seemingly insolvent firms which afterwards grew to be the most prosperous in the Fatherland.

The methods thus practised at home were adhered to in all those foreign countries which the German financier, manufacturer or trader selected for his field of operations. A bank would be opened in the foreign capital with money advanced mainly by one of the six great financial institutions. It would be called by some high-sounding name, suggestive of the country experimented upon, and little by little the German capital would be diminished to a minimum and local capital substituted, but the supreme control kept zealously in the hands of the Teuton directors. Industries would then be financed and finally bought up. Others would also be financed but deliberately ruined. Competition would in this way be effectively killed, and little by little the life-juices of the country would be canalized to suit the requirements of German trade, industry and politics.

If an industry in the invaded country was judged capable of becoming subsidiary to some German industry, the Bank would maintain it for the purpose of amalgamating the two later on, or else having the foreign concern absorbed by the Teutonic. This was a labour of patriotism and profit. But if the business was recognized as a formidable rival to some German enterprise, it was doomed. The procedure in this case was simple. The Bank advanced money readily, tied the firm financially, rendering it wholly tributary; and then when the hour of destiny struck, the credit was suddenly withdrawn and the curtain rung up in the Bankruptcy Court. When this consummation became public, the unsuspecting foreigner would ask with naive astonishment: "How can it be bankrupt? I understood that Germans were financing it." They were, and it was precisely for that reason, and because it was on the way to prosperity as a rival to some German firm, that it was suffocated.[4]

[4] Cf. L'Invasione tedesca in Italia, pp. 118, 119.

This ingenious system proved exceptionally effective in Brazil. It has been said that that republic is become a dependency of Germany. What cannot be gainsaid is that about one-third of Brazil's national debt[5] is owing to German bankers, and the whole financial and industrial movement of the country is swayed by the Society of Colonization which is German, by the German Society for Mutual Protection, by the German-Brazilian Society and by the three Navigation Companies whose steamers ply between Brazil and the Fatherland.[6] It is because of the far-reaching power and influence which has accrued to Germany from this successful invasion that Professor Schmoller of the Berlin University could write: "It behoves us to desire at any and every cost that, by the next century, a German land of twenty or thirty million inhabitants shall arise in Southern Brazil. It is immaterial whether it remains part of Brazil or constitutes an independent State or enters into close relations with the German Empire. But without a connection guaranteed by battleships, without the possibility of Germany's armed intervention in Brazil, its future would be jeopardized."

[5] 1050 million francs.

[6] Op. cit., p. 120.

It is the Monroe doctrine that is commonly credited with thwarting these designs on South America. But as a matter of plain fact, it is to the British Navy and to nothing else that the credit is due. Were it not for the known resolve of the British nation to co-operate in case of need with the American people in their exertions to uphold that doctrine against Germany, the Berlin Cabinet would long ago have formally established a firm footing in Southern Brazil and the United States Government would have been powerless to prevent it.[7]

[7] An instructive article on the subject by Mr. Moreton Frewen appeared in the Nineteenth Century of February, 1916.



CHAPTER III

GERMANY AND ITALIAN FINANCE

It was in congruity with those principles and methods that the Banca Commerciale, which had its headquarters in Milan, set itself to discharge the complex functions of a financial, industrial, commercial and political agency of German interpenetration in Italy.

To German customers and those Italians who imported German goods, the Banca Commerciale allowed long credits and easy means of payment. To all who were in need of implements, machinery, or materials for a new enterprise, the bank "recommended" German houses, and those who were wise construed the "recommendation" as an ultimatum. For if it was ignored, their names were inscribed on the black books of the bank, and by means of an efficacious system of secret dossiers, handled by a confidential information bureau,[8] they found themselves thrust into a "credit vacuum," boycotted by finance and condemned to bankruptcy. All banks shunned them. Their bonds became mere scraps of paper. Every enterprise to which they set their hands was blighted, and nothing remained for them but to abandon their avocations or surrender at discretion.

[8] This secret information bureau is everywhere a potent engine of attack in German hands. It renders deliberate libellers and defamers immune against the action of the law. The victims feel the effects but cannot point to the cause. The fiches, as the certificates are called, are couched in conventional terms and bear no signature. In the case of persons whom the bank desires to ruin, these documents are sentences of commercial death.

But besides this executive of destruction there was another and still more important board, whose work was wholly constructive. It was commonly known as the "service of information." Its functions were to collect at first hand all useful data about Italian commerce and industry, to draw up tabulated reports for the use of Germans at home engaged in trade and industry. These lists indicated current prices, the qualities of the goods in demand, the favourite ways of packing and consigning these, samples of manufactures, statistics of production, the addresses of all firms dealing with Italians—in a word, every kind of data calculated to enable German trade and industry to compete successfully with their rivals. The manner in which this body of information was drawn up, sifted, classified, and made accessible, deserves unstinted admiration. To say that commercial espionage was practised largely in the working of this comprehensive system is but another way of stating that it was German.

The Banca Commerciale, which was the head and centre of this organization, was, as a matter of course, called Italian. For every similar institution, commercial, journalistic or other, which has for its object the realization of the Teutonic plan of internationalization, invariably wears the mask of the nationality of the country in which it operates. And in this case the mask was supplied by Italians, on whom the bank bestowed all the highest honorary posts, while reserving the influential ones for Germans and Austrians. Thus the moving spirits of this vast organization were Herrn Joel, Weil and Toeplitz, men of uncommon business capacity, who devoted all their time and energies to the attainment of the end in view. And their zeal, industry and ingenuity were rewarded by substantial results, which have left an abiding mark on Italian politics and entered for a great deal into the attitude of the nation towards the two groups of belligerents. In a relatively short span of time foreign competition in Italian markets was checked, German products ousted those of their rivals, and at last the very sources of Italy's economic life were in the hands of the Teuton, whose continued goodwill became almost a vital necessity to the struggling nation.

Already in the year 1912 Germany stood first among Italy's customers, whether we consider the list of her exports or that of imports. Italy bought from that empire goods valued at 626,300,000 francs, and sold it produce worth 328,200,000 francs; whereas Great Britain, who supplies Italy with the bulk of her coal, exported only 577,100,000 francs worth, while her imports were valued at 264,400,000 francs. For France the figures were 289,600,000 and 222,600,000 francs respectively.

The method by which Italian industries were assailed, shaken, and then purchased and controlled by this redoubtable organization, bore, as we saw, all the marks of German commercial ethics. Sharp practice which recognizes as its only limitation the strong arm of the penal law, is a fair description of the plan of campaign. Against this insidious process none of the native enterprises had the strength to offer effective resistance. One by one they were drawn into the vast net woven by the three German Fates—Joel, Weil and Toeplitz. The various iron, mechanical and shipbuilding works, which represented the germs from which native industries were to grow, were sucked into the Teuton maelstrom. The larger and the smaller steamship navigation companies likewise fell under the direction of the Banca Commerciale, which permitted some of them to exist and even to thrive up to a certain point, beyond which their usefulness to the general plan would have turned to harm. In this way Italy's entire mercantile marine became one of the numerous levers in the hands of the interpenetrating German. And the importance of this lever for political purposes can neither be gainsaid nor easily overstated.

In every little town and village which sends a quota of emigrants to the transatlantic liners, agents of the various steamship companies are always about and active. Being intelligent and enterprising, their influence on local politics is irresistible, and it was uniformly employed in those interests which it was the object of the Banca Commerciale to further. "This institution," writes an Italian expert, who has studied the subject with unusual care, "being the mistress of the dominant economic organisms of the nation, makes use of them to carry out a germanophile policy. It employs them for the purpose of exercising a directive action in all elections, commercial, provincial and general. Every servant of a steamship navigation company, every purveyor of emigrants is at the same time and by the very force of things an electoral agent. The position of arbitress and mistress of the steamship companies carries with it possession of the keys of the national wealth, and is consequently a formidable weapon of aggressive competition against all industries, Italian and foreign, which are not affiliated to those of Germany. The Banca Commerciale, having obtained that supremacy, forced the Italian companies to lead a languishing existence in straitened circumstances, whereas they might easily have grown rich and flourishing. It permits our steamship companies to subsist and even to earn somewhat, but only just enough to suffice for the declaration of a modest dividend. That is why Italian navigation companies levy such excessive rates of freight, why their service is not organized in accordance with rational and latter day standards, why they take no thought of winning foreign markets or of national expansion.[9] They have no means of consigning merchandise at the domicile, so that the consignees are put to enormous expense for collection and delivery. And to make matters still worse, Italian navigation companies are bound with those of Germany by special secret conventions, which oblige them to abandon to their rivals certain kinds of merchandise of the Near and the Far East."

[9] Cf. Preziosi, La Germania a la Conquista dell' Italia, p. 57 fol.

If we examine the peculiarly Teuton ways of trade competition in their everyday guise, and without the glamour of political ideals to distract our attention, we are confronted with phenomena of a repulsive character. For the German's keen practical sense, his sustained concentration of effort on the furtherance of material interests, and his scorn of ethical restraints render him a formidable competitor in pacific pursuits and a dangerous enemy in war. His moral sense is not so much dulled by experience as warped by education. It may be likened to a clock which has not stopped but shows the wrong hour. He has been taught that there are times and circumstances when religious and ethical standards may or must be set aside, and he arrogates to himself the right of determining them. Without examining into stories of preternatural meanness and perfidy which have come into vogue since the outbreak of the war, it is fair to say that dirty tricks, destructive of all social intercourse, formed part of the German commercial procedure in France, Britain and Russia, the only proviso being that they were not penalized by the criminal law of the country.

An amusing but nowise edifying instance turns upon Paris fashions. That Berlin, like Vienna, should seek to vie with Paris in setting the fashion of feminine finery to the world is conceivable and legitimate. But that Germans should compete with Paris in Paris fashions connotes a psychological frame of mind which is better understood by the inmates of a prison than by a mercantile community. American ladies visiting the French capital to order their gowns are astonished to note that no fashions really new have been shown to them in the great Paris houses. They had just seen them all in the German capital. And the Paris models destined to be placed on the market next season turn out to be identical with those which the fair visitors had already inspected in Berlin and could have purchased there at a much lower price. How this could be is explained simply. A German merchant in continuous relations with the staffs of the Paris firms clandestinely obtains from some of the members for a high price the models which are still being kept secret, has them copied in large numbers in Berlin and sold at a cheap price. True, the German workmanship lacks the dainty finish of the Paris article, but the difference is such as appeals only to the eye of a connoisseur.

In Italy similar phenomena were observed frequently. A firm in Florence celebrated for special types of wooden utensils which were never successfully imitated elsewhere was ruined by commercial espionage. One day the proprietor engaged the services of two foreign workmen who laboured hard and steadily for some time and then departed, to his great regret. Six months later Germany dumped on the Italian markets the very same articles in vast quantities, and at a price so low that the Italian firm could not hope to compete with them. At first, indeed, the Florence house made a valiant stand against the invasion, but had finally to give up the fight as hopeless. Later on the proprietor learned that the two honest-looking workmen were first-class German engineers, whose only objects in entering his service were to acquaint themselves with his methods, copy his models and then strangle his trade. And these objects they achieved to their satisfaction.[10]

[10] L'Invasione tedesca, p. 147.

Thus, in order to strangle concerns that compete with them successfully, the average German merchant sticks at nothing. His maxim is, that in trade as in all forms of the struggle for existence, necessity knows no law. And he is himself the judge of necessity. The history of German industry in Italy is full of instructive examples of this disdain of moral checks, but one will suffice as a type. It turns upon the struggle which the Teuton invaders carried on against the Italian iron industry, which for a while held its own against all fair competition. In their own country, the German manufacturers sold girders at L6 10s. the ton. The profits made at this price enabled them to offer the same articles in Switzerland for L6, in Great Britain for L5 3s. and in Italy for L3 15s. Now, as the cost of production in Germany fluctuated between L4 5s. and L4 15s. per ton, it is evident that the dead loss incurred by the German manufacturers on Italian sales varied between 10s. and L1 per ton. But this sacrifice was offered up cheerfully because its object was the destruction of the growing iron industry of Northern Italy and the clearing of the ground for a German monopoly.[11] The spirit that animates the Teuton producer, in his capacity as rival, was clearly embodied by one of the principal manufacturers of aniline dyes in Frankfort, who remarked to an Italian business man: "I am ready to sell at a dead loss for ten years running rather than lose the Italian market, and if it were necessary I would give up for the purpose all the profits I have made during the past ten years."[12] To contend with any hope of success against men of this stamp, one should be imbued with qualities resembling their own. And of such a commercial equipment the business community of Great Britain have as yet shown no tokens.

[11] L'Invasione tedesca in Italia, p. 149.

[12] Op. cit., p. 150.

In Italy the Banca Commerciale was wont to send to every firm, whether it had or had not dealings with it, a tabulated list of questions to be answered in writing. The ostensible object was to obtain trustworthy materials to serve for the Annual Review of the economic movement in the country published every year by the Bank. In reality the ends achieved were far more important, as we may infer from the use to which all such information in France was put. There the well-known agency of Schimmelpfeng, which was in receipt of a subvention from the German Chamber of Commerce, was a centre of secret information respecting the solvency, the prospects, the debts and assets of every firm in France, and its tabulated information about French commerce and industry, together with all the knowledge that had been secretly gleaned, was duly sent to Berlin.

Russians complain somewhat tardily of the prevalence of the same system among themselves. "Every day," writes the Novoye Vremya, "fresh details are leaking out respecting a certain German firm, ideal in its resourcefulness, which succeeded in spreading a vast net over all Russia. It has been satisfactorily established that Germans occupied many responsible posts in the organization, and that these[13] officials were subjects of the German Empire. At the head of the entire business in Russia down to a recent date was also a German subject." The kind of information gathered by the agents of the company, "for business purposes," is clear from a circular issued by the firm just a fortnight before the outbreak of the war.

[13] It is an American Company for the sale of certain machines. The Russian organ mentions all the names. For my purpose this is unnecessary. The curious may find them in the Novoye Vremya of 5/18 August, 1915.

THE FIRM OF XYZ

"Tula,

"5/18 July, 1914.

"District Card for the Collectors of the Circuit.

"Form N 246.

"We have forwarded you to-day a number of cards of the printed form N 246, which you are requested to have filled in at once and placed at the head of form 490 of the corresponding district. We draw your attention herewith to the necessity of enumerating on the first table of form N 246 all the villages and other places of the circuit of each district collector, whether or no they contain debtors of ours, and of stating in the second table the number of inhabitants. The registration is to be done by the official charged with that part of the work: each circuit is to be entered separately and the villages and places it contains to be given in alphabetical order. These lists are to be verified every six months and fresh information set out respecting the growing number of our debtors. We request you to take this work in hand at once and without delay.

"THE CONTROL DEPARTMENT, TULA."

When this circular was published in Moscow the general director of the firm wrote to certain provincial newspapers pointing out that the company is American, not German. "It is curious," a Russian journal remarks, "that an American firm should need a map containing all the villages and hamlets of the districts, with the number of their inhabitants, irrespective of the presence there of the company's debtors."[14]

[14] Novoye Vremya, 5/18 July, 1916.



CHAPTER IV

THE ANNEXATION MANIA

Another instructive example of the Annexation mania, as it displays itself in German commercial undertakings, comes to us from Russia.

It is only one of many, a typical instance of a recognized method. The Franco-Russian joint-stock company Provodnik is known throughout Europe. It manufactures tyres and other rubber wares. The capital, which amounted to only 700,000 roubles at the date of its foundation, in the year 1888, had increased to 22,000,000 by the time when war was declared. It is closely connected with another company named the Buffalo, which has its headquarters in Riga and was promoted by the President of the Provodnik, M. Wittenberg, together with several Austrian capitalists. M. Wittenberg is President of both companies, and the Provodnik has assisted the Buffalo on various occasions, even during the war, notwithstanding the fact that the shareholders of the Buffalo are mostly German subjects. On January 2, 1914, another company was created, this time in Berlin, and called the "German Provodnik." Now, according to the instructions laying down the rights of the Board (Par. 24), wares may not be delivered on credit to any firm or institution for the value of more than 50,000 roubles, and not even to this amount unless the solvency of the recipient is beyond question.

In spite of this clearly marked limitation the Board of the Franco-Russian Provodnik, which exerted itself with unwonted zest to supply the German Provodnik with motor-tyres shortly before the war, opened a credit of 498,000 roubles in favour of this firm. The manager of the warehouses of the Riga products in New York is a German subject named Lindner. The managers in Zurich and Copenhagen are also German subjects.[15]

[15] Their names are Johann Assman and Rudolf Meyer. Cf. Novoye Vremya, 11/24 August, 1915.

It is not to be wondered at that countries like Italy and Russia, poor in capital and industry, fell an easy prey to the ruthless German invader, who, with the help of British, French, and even Italian and Russian savings, suffocated the nascent industries of the respective nations, killed foreign competition, earned large profits, obtained control of the country's resources and an intimate knowledge of the political secrets of their respective Governments. "Many Germans," wrote an Italian Review,[16] "serving in Italian establishments are in possession of lists of the fortresses, measurements, distances, positions of the roads and footpaths, they have found the points of triangulation and acquired all requisite data and information about them. And to-morrow, should war break out, they will accompany and guide the German or Austrian invaders."

[16] Rassegna Contemporanea.

How keen they are to make themselves conversant with matters of political moment in the guise of honest workmen is becoming fairly well known to day, although it may be taken for granted that if peace were concluded to-morrow these same commercial spies would find hospitality among some of the easy-going merchants of Great Britain, who still refuse to believe in the obvious danger or to act upon their belief. In November 1912 the Italian Minister of the Marine called for tenders for the supply of silver dinner-plate for the warships. At the critical moment, when the decision was about to be taken, the German firm of Hermann, which has its headquarters in Vienna, reduced its offer first by 18 per cent., then by 20, and finally by 20.13 per cent. in order to get the order. For the order carried with it, for the representative of the firm, Herr Forster, the permanent right of access to all naval arsenals of Italy.[17]

[17] L'Invasione tedesca in Italia, p. 171.

The naivete of Italy in matters of this delicate nature stands out in jarring contrast to the habitual caution of that diplomatic nation, and has not yet been satisfactorily explained from the psychological point of view. One is puzzled to understand how, months after the present war had begun, the press of Genoa could announce that the supply of electric motors for the Italian marine and of ventilators for Italy's fortified places on her eastern frontier had been adjudicated to two German firms, on the ground that their tenders were the lowest.[18]

[18] Op. cit., p. 171.

One of the largest automobile and motor works in the German Empire is the Benz and Rheinische Automobil und Motoren Fabrik Actien Gesellschaft of Mannheim. It supplies the Kaiser with his cars and has branches everywhere. In Italy, too, it exists and flourishes. But there the great German firm is modestly disguised under the name of the Societa Italiana Benz. And it is so modest that in spite of its gorgeous warehouse in the Via Floria (Rome), of its luxurious head-office in the Via Finanze, of its well-equipped workshop for repairing and fitting and its little army of agents actively pushing the business all over Italy, its capital, all told, amounts only to 30,000 lire, or L1,000! The firm is managed by a German engineer whose kith and kin are fighting in the Kaiser's army. And this German engineer, Herr Matt, has free access to the Italian War Minister, even now,[19] when it is question of manufacturing projectiles; and he has continuous relations with the Italian Airmen's Brigade.

[19] Cf. L'Idea Nazionale. The words "even now" refer to November 22, 1915, and may be equally true to-day.

Electricity in Italy, together with all its auxiliary trades and industries, was, like every other lucrative enterprise, in the hands of Germans and German Swiss. The names of the various company directors had the usual familiar Teuton sound. When the European conflict broke out it seemed for a moment as if all these German concerns must come to a sudden and dire end. But just as the German engineer Herr Matt, whose relatives are officers in the Kaiser's army, has free access to the Italian War Minister and carries on his business in Italy as usual, so the electrical concerns had merely to change one or two adjectives in their trading names and were forthwith shielded from harm. A case in point which is valuable because typical occurred recently. The Italian Electro-technical Association published a list of the manufacturers of electric machines and requisites in Italy, and by way of introduction set down the following patriotic remarks: "This list is addressed to those who at the present moment feel it to be their duty to uphold and encourage the production and development of materials for electricity. Importation from abroad, which we favoured when Italian industry was still in an embryonic stage, degenerated especially in consequence of the action of the Germans, into a veritable conquest of the markets; and no weapon, licit or illicit, was spurned to destroy our sources of production, and suffocate our nascent initiative."

These are pathetic words. They are calculated to appeal with force to the Italian who loves his country. But when one looks more closely into the list of Italian producers one is disappointed to find the same familiar names as before:[20] Allgemeine Electricitaets Gesellschaft, Thomson Houston, the Mannesmann Tubes Co., the Italian Brown Boveri Co., etc. The nationalist Italian press organ which first directed public attention to these German subtleties asks pertinently: "Were not and are not the real producers named in this list the same who were the prime movers in the deplorable foreign conquest of the Italian market?"[21]

[20] Felix Deutsch, Karl Zander, Otto Joel, Karl von Siemens, Walter Boveri, Karl Kapp, etc.

[21] L'Idea Nazionale, September 8, 1915.

The Banca Commerciale, which was admittedly an all-powerful German institution, and has the control, direct or indirect, of most of the industries, the silk manufacture, metallurgical and mechanical works of the country and of thirty-four electrical companies in Italy: which possess a capital of 434,000,000 francs and produce energy equal to 940,000 h.p.: found itself in an unpleasant predicament as soon as the King of Italy declared war against Austria-Hungary. But Teuton resourcefulness solved the problem with ease and seeming thoroughness by inducing certain German officials on the board to resign and appointing as Italian director a gentleman known for his philo-Germanism. But the three creators of the bank were left: Herrn Joel, Toeplitz and Weil, and although it was affirmed solemnly that Joel was no longer the director but M. Fenoglio, it has been publicly proved that after the resignation of the former, the latter, before sending a consignment of gold to Berlin,[22] had to ask for and actually received the authorization of Herr Joel.[23]

[22] On May 21, 1915.

[23] L'Idea Nazionale, November 8, 1915.

The following brief summary of the companies and enterprises in which the Banca Commerciale is interested may enable the British reader to form an idea of its decisive influence on the economic and political life of the Italian nation: they include eighteen of the largest companies of textile industries; sixteen of the most important companies of chemical, electrical and kindred industries; six of the chief companies of alimentation; twenty-six transport companies; twenty-seven of the principal companies of mechanical industries and naval construction; six building companies; five of the chief mining companies; twenty-eight of the largest electrical companies; and twenty-two miscellaneous.[24]

[24] Giornale d'Italia, November 17, 1915.

Thus every artery and vein of the economic organism of Italy is swathed and pressed and choked by this German isolator, which nobody dares to pull away. For if we turn from the economic to the political aspect of this curious phenomenon, we shall find that the companies enumerated give work to scores of thousands of operators and employees, through whose willing instrumentality they become vast electoral agencies. "It is obvious," we are authoritatively assured, "that the influence of such companies in administrative and political elections is put forth in congruity with the interests at stake, a circumstance which explains how it comes that many Italian politicians and representatives are, directly or otherwise, chained to the chariot of the Banca Commerciale and indirectly to that of Germany's policy."[25] In Italy the deputies are, with few exceptions, the humble servants of their constituents, and are powerless to shake themselves free from local influences. "It is easy to infer from this what efforts have to be made and what compromises must be acquiesced in by those deputies whose election depends on such institutions which, aware that money is more than ever the nerve of political contests, subscribe to the election expenses, and assure in this way the respectful gratitude of the parliamentary recipients of their benefactions. And all this is executed with order and discipline. Examples could be quoted and names mentioned."[26]

[25] Cf. Preziosi, La Germania a la Conquista dell' Italia, p. 66.

[26] Ibid., p. 67.

The unsuspected ways in which this remarkable organization destroys, constructs and draws its sustenance from its victims are a revelation. Imagine a few British bankers possessed of two hundred thousand pounds and conceiving the plan of wresting the economic markets of Italy from Britain's rivals, building up an all-powerful organization with Italian money, throttling Italian industries and commerce with the help of Italian agents paid for the purpose out of the hard-earned savings of the Italian people, and then yoking the national policy to the interests of Great Britain. One would laugh to scorn such a mad scheme, and set down its authors as wild visionaries. Yet that was the programme of the little band of audacious Germans who conceived the design of teutonizing Italy. And they had almost realized it when the war broke out. Even the halfpence scraped together by poor emigrants and half-starved Sicilian working-men were diverted from the savings banks into banks of German origin, two of which held four hundred million francs of the nation's economies a few months ago.

It was not to be expected that the domain of foreign politics should long escape the notice or be spared the experiments of this all-absorbing organization. What excites our wonder are the superiority of its method and the completeness of its success. To the thinking of Germany's leaders international politics and foreign trade are correlates. In the Near East, where so many of Italy's interests are now concentrated, the Societa Commerciale d'Oriente of Constantinople, being one of the agencies of the Banca Commerciale, was also one of the canals through which this influence passed. Under the Italian flag and with the co-operation of Italian diplomacy, that "little business" of Germany was conscientiously transacted which consisted in the adaptation and employment of Italian expansion as an instrument for Teutonic interpenetration. Whithersoever we turn our gaze we discern, lurking under the comely vesture of Italy, the clumsy form of the Teuton. It is amusing to reflect that the recent railway concessions in Asia Minor, for which Italian statesmen laboured so hard and so long, went in reality to the Banca Commerciale, which is but a roundabout way of saying to Germany. And in order to win their suit and have those advantages conferred on "Italy," King Victor's Government agreed to renounce their claims for the reimbursement of the expenses incurred during the administration of the occupied Turkish islands. This sacrifice meant tens of millions of francs, kept from the pockets of Italian taxpayers and handed over to the German bankers, who spent them in promoting anti-Italian projects. The Bank of Albania was also conceived originally as an organ of German propaganda, and was pushed forward by the same set of agents who induced the Italian Government to employ them as its own.

In those ways the seemingly modest little bank scheme which Friedrich Weil with Crispi's help initiated in 1890, grew until it acquired the influence of a State within the State. And then it began to discharge functions unique in the history of the banking world. Its employees became diplomatists and statesmen at a moment's notice, ended wars, and drafted treaties. The Banca Commerciale put a stop to the campaign against Turkey which was a thorn in the side of Teutonism and settled the terms of peace in accordance with its own judgment. It was not an ambassador or a minister who opened the pourparlers in Stamboul and continued them at Ouchy, but an agent of the Banca Commerciale. It was that same agent who immediately afterwards, in concert with colleagues of his bank, negotiated the treaty, reporting by telegraph to the headquarters of the bank in Milan every important conversation he had with the Turkish delegates.[27] At a later date important conversations between the British Foreign Office and the Consulta were entered into in the name and for the alleged interests of Italy, but the principal part in the drawing up of the terms of the settlement arrived at was taken by Signor Nogara of the Societa Commerciale d'Oriente,—the company which the concessions demanded were destined to benefit. In fine, the parasite had thus become almost equal in power to the body on which it battened.

[27] Signor Preziosi gives the names of those agents as MM. Volpi, Bertolini and Nogara (op. cit., p. 71).

A well-known politician and member of the Italian Legislature, Di Cesaro, narrated the following curious incident in a public speech delivered on March 17, 1915: "An Italian Admiral, having had the audacity to request the immediate delivery of an order for arms manufactured by the works which are under the control of the Banca Commerciale, was relieved of his functions within twenty-four hours, and his place was taken by another Admiral, who by chance happened to be the brother of one of the negotiators of the Italo-Turkish Peace of Ouchy." And as we saw, the negotiators of that peace were officials of the Banca Commerciale. An authority on the subject[28] wrote: "For many years the Banca Commerciale has contrived, directly or indirectly, according to circumstances, to take a hand in the formation of various ministries.... As a matter of fact, on its governing board there are seven senators, many deputies, and a numerous host of political notabilities. It has its tentacles everywhere, high up and low down, in Italy and abroad, in peace time and in war time, when our native land is elated with good fortune and when it is cast down with bad. Its hand lies heavy upon everything and everybody. It is the arbitress in the choice of good and evil and is under no obligation to render an account of its doings to any one.... In war time we are certain to feel greatly hampered by the meshes of such a firmly woven net."[29] This anticipation has since come true.

[28] Professor Bondi, ex-Questor of Milan.

[29] Rivelazioni postume alle Memorie di un questore, 1913. Cf. Preziosi, La Germania a la Conquista dell' Italia, p. 75 ff.

Like the vampire that soothes its victim while drawing its life-blood, the parasitic German organism cast a spell over influential Italians of the community and imparted to them a feeling that things were going well with themselves and their country. Money passed from hand to hand. Labour found remunerative employment. Towns in decay were galvanized into new life. And all Italy was grateful. Milan, the "moral capital" of the kingdom, where a couple of decades before the name of Germany was execrated, became itself very largely Teutonic and was dominated by a rich and flourishing German colony. Venice, Genoa, Rome, Florence, Naples, Palermo and Torino, leavened in the same plentiful degree with pushing subjects of the Kaiser, turned towards Berlin as the sunflower towards the orb of day.

Against Austria, Italians might write and talk to their hearts' content, but towards Germany feelings of respect verging on awe and of gratitude bordering on genuine friendship were cherished by every institution and leading individual in the kingdom. And when the hour struck to wrench Italy from that monster vampire, the task was so arduous and fraught with such danger that no Cabinet without the insistent encouragement of the whole nation would have attempted it. The policy of every Foreign Secretary was and still is dominated by this unnatural relationship to the Teuton, and it came at last to be acknowledged as a political dogma that Germany must in no case be confounded with Austria. Indeed, it is fair to assert that the governing circles of both countries held and hold that nothing should be allowed to mar these friendly feelings, not even the circumstance that Germany as Austria's ally is bound to stand by her during the war. Hence when the friction between Italy and Austria was growing dangerous, Germany was ready with two expedients for keeping her friendly intercourse with the former country intact. She first assumed the role of umpire between them, endeavouring to beat down the demands of the one while spurring on the other to a higher degree of liberality, and when her well-laid and skilfully executed plan unexpectedly failed, in consequence of the interposition of a deus ex machina, she produced a draft treaty, complete in all details, which was to rob war between Italy and herself, if circumstances should render it unavoidable, of all its frightfulness and savagery. The two nations virtually said to one another: "Whatever else we may do, we shall steer clear of mutual hostilities to the best of our ability. But as the action and reaction of alliances may thwart our efforts and force us into war against each other, we hereby undertake that that war shall be but a simulacrum of the struggle that we are at present waging against all our other adversaries. We shall respect each other's property religiously, for we shall both stand in need of each other when the exhausting struggle is ended and the wounds it inflicted have to be dressed and healed. We Germans have invested thousands of millions of francs in Italy, the one foreign country for which we feel genuine affection. You Italians have thriven on our commercial and industrial enterprise. Spare our property now and you shall not rue your self-containment. After the war the Entente people will shun us as lepers, and our only hope of finding outlets for our commerce is through the neutral States. Now, of all the European Great Powers, Italy is the only one qualified to render us great services of this nature. And she will be glad of a partner whose help is free from the alloy of jealousy or hostility. For our interests do not clash, whereas those of Italy and the Entente Powers never can run parallel. In the Adriatic she will find the Slavs pitted against her, in Asia Minor the Russians, French, British, Greeks, and in the Eastern Mediterranean the three last-named States. But at no point does Germany cross her path. Our common hope in the future is based on our experience of the past. It is knowledge rather than trust. We Germans succeeded in laying the foundations of your economic strength. And now that Austria's rivalry has ceased, we will contribute to your political growth. With the help of our organizing talent you will become the France of the future. Your population is already well-nigh equal to that of the Republic. In ten years it will be more numerous, and will still go on increasing. Tunis has been built up by Italian toil. Nature has assigned the Mediterranean to Italy as her natural domain. The overlordship of the Midland Sea is yours by right, and in co-partnership with us you shall assert and enforce this right. Mind your steps, therefore, in performing the difficult egg dance which the European War may impose on us both. You are not, cannot be, friends of France, closely though you are related by blood. Neither can the French become our friends. Therefore you and we are natural allies, as your far-sighted politicians like Crispi perceived. Even Sonnino sees that and acknowledges it. The one political idea of his life was to solder Italy firmly to Germany. And that is still the desire of your aristocracy. Fight with Austria, if you must, but Italy and Germany must not become armed enemies."

Nearly two milliards of francs of German money are invested in commercial and industrial enterprises and immovable property in Italy, besides the value of ships detained at Italian ports, some of which have cargoes valued at several million francs. The Kaiser is himself the largest shareholder in the Italian mercury mines of Monte Amiata, his Foreign Secretary, von Jagow, is another. And they are resolved not to relinquish their hold. That Prince von Buelow should move every lever to save this precious pledge was natural, and that Italian statesmen with their germanophile leanings should readily fall in with his scheme is not to be wondered at. The Kaiser's ambassador proposed that in the case of war each contracting party should respect the property of the other. This formula sounds decorous. Its meaning is profound. A treaty embodying these stipulations was agreed to and secretly signed by Prince von Buelow and Baron Sidney Sonnino, whose admiration for Germany embodied itself in all the more important acts of his political career. This transaction, which the Italian Government wisely refrained from publishing, was announced by the Germans for reasons of their own. The impression produced by this display of eclectic affinities so pronounced that even the world's most ruthless war could not impair them was considerable. And it would have been heightened if the alleged and credible fact had also been divulged that the diplomatic instrument was ratified when Italy had already decided upon war with Austria-Hungary. Between Italy and Germany stands a bridge which both peoples are resolved to keep intact at all costs. Against the facts it is useless to argue.

The struggle between Germany and Italy, therefore, should it ever break out, would differ not merely in degree, but also, one may take it, in kind, from the lawless and ruthless savagery which characterizes the warfare of the Teutons against the Entente Powers. A civilizing mute would deaden the resonance of bestial passion; and even private property—in especial that of Germany—would be safe from confiscation and wanton destruction, and when peace is restored the rich mercury mines of Italy will again belong to the Kaiser and his advisers. Last summer[30] a series of private meetings was held for three days running in Switzerland, at which Germans of high standing took part, for the purpose of dealing with German capital in Italy and safeguarding it during the war. At one of the sittings it was computed that about two milliards of francs belonging to German subjects are buried in Italian undertakings or in house or landed property.