Part 15 (1/2)

The German courts have expressly said that if prices are so low that the manufacturers of a particular article see financial ruin ahead, a formation of a cartel by them must be looked upon as a justified means of self-preservation. The German laws are directed to the end to which it seems to be such laws should logically be directed; namely, to the prevention of unfair compet.i.tion.

So long as the question of monopoly is not involved, compet.i.tion can always be looked for when a combination is making too great profits; and the new and competing corporation and individuals should be protected by law against the danger of price cutting for the express purpose of driving the new compet.i.tor out of business. However, it must be remembered that a combination acting unfairly in compet.i.tion may be more oppressive than a monopoly.

I myself am not convinced by the arguments of either side. It is a matter for the most serious study.

The object of the American trust has been to destroy its compet.i.tors.

The object of the German cartel to force its compet.i.tors to join the cartel.

In fact the government in Germany becomes part of these cartels and takes an active hand in them, as witness the partic.i.p.ation of the German Government in the potash syndicate, when contracts made by certain American buyers with German mines were cancelled and all the potash producing mines of Germany and Austria forced into one confederation; and witness the attempt by the government, which I have described in another chapter, to take over and make a monopoly of the wholesale and retail oil business of the country.

The recent closer combination of dyestuff industries of Germany, with the express purpose of meeting and destroying American compet.i.tion after the war, is interesting as showing German methods.

For a number of years the dye-stuff industry of Germany was practically controlled by six great companies, some of these companies employing as high as five hundred chemists in research work. In 1916 these six companies made an agreement looking to a still closer alliance not only for the distribution of the product but also for the distribution of ideas and trade secrets. For years, these great commercial companies supplied all the countries of the world not only with dyestuffs and other chemical products but also with medicines discovered by their chemists and made from coal tar; which, although really nothing more than patent medicines, were put upon the market as new and great and beneficial discoveries in medicine. The Badische Anilin and Soda Fabrik, with a capital of fifty-four million marks has paid dividends in the ten years from 1903 to 1913, averaging over twenty-six per cent.

The Farbwerke Meister Lucius und Bruning at Hoeckst, near Frankfort, during the same period, with a capital of fifty million marks, has paid dividends averaging over twenty-seven per cent; and the chemical works of Bayer and Company, near Cologne, during the same period with a capital of fifty-four millions of marks has paid dividends averaging over thirty per cent.

Much of the commercial success of the Germans during the last forty years is due to the fact that each manufacturer, each discoverer in Germany, each exporter knew that the whole weight and power of the Government was behind him in his efforts to increase his business. On the other hand, in America, business men have been terrorized, almost into inaction, by constant prosecutions. What was a crime in one part of the United States, under one Circuit Court of Appeals, was a perfectly legitimate act in another.

If we have to meet the intense compet.i.tion of Germany after the war, we have got to view all these problems from new angles. For instance, there is the question of free ports. Representative Murray Hulbert has introduced, in the House of Representatives, a resolution directing the Secretary of the Treasury, the Secretary of War and the Secretary of Commerce to report to Congress as to the advisability of the establishment of free ports within the limits of the established customs of the United States.

Free ports exist in Germany and have existed for a long time, although Germany is a country with a protective tariff. In a free port raw goods are manufactured and then exported, of course to the advantage of the country permitting the establishment of free ports, because by this manufacture of raw materials and their re-export, without being subject to duty, money is earned by the manufacturers to the benefit of their own country and employment is given to many workingmen. This, of course, improves the condition of these workingmen and of all others in the country; as it is self-evident that the employment of each workingman in an industry, which would not exist except for the existence of the free port, withdraws that workingman from the general labour market and, therefore, benefits the position of his remaining fellow labourers.

Although free ports do not exist in the United States, an attempt has been made to give certain industries, by means of what are known as ”drawbacks,” the same benefit that they would enjoy were free ports existant in our country.

Thus the refiners of raw sugar from Cuba pay a duty on this sugar when it enters the United States, but receive this duty back when a corresponding amount of refined sugar is exported to other countries.

There has lately been an attack made upon this system in the case, however, of the sugar refiners only, and the question has been treated in some newspapers as if these refiners were obtaining some unfair advantage from the government, whereas, as a matter of fact, the allowance of these ”drawbacks” enables the sugar refiners to carry on the refining of the sugar for export much as they would if their refineries existed in free ports modelled on the German system.

The repeal of the provision of allowing ”drawbacks” in this and other industries will probably send the industries to Canada or some other territory where this system, equivalent to the free port, is permitted to exist.

A few days before I left Germany I had a conversation with a manufacturer of munitions who employs about eighteen thousand people in his factories, which, before the war, manufactured articles other than munitions. I asked him how the government treated the manufacturers of munitions, and he said that they were allowed to make good profits, although they had to pay out a great proportion of these profits in the form of taxes on their excess or war profits; that the government desired to encourage manufacturers to turn their factories into factories for the manufacture of all articles in the war and required by the nation in sustaining war; and that the manufacturers would do this provided that it were only a question as to how much of their profits they would be allowed to keep, but that if the Government had attempted to fix prices so low that there would have been a doubt as to whether the manufacturer could make a profit or not, the production of articles required for war would never have reached the high mark that it had in Germany.

As a matter of fact, about the only tax imposed in Germany since the outbreak of the war has been the tax upon cost or war profits.

It has been the policy of Germany to pay for the war by great loans raised by popular subscription, after authorisation by the Reichstag. I calculate that the amounts thus raised, together with the floating indebtedness, amount to date to about eighty billions of marks.

For a long time the Germans expected that the expenses of the war would be paid from the indemnities to be recovered by Germany from the nations at war with it.

Helfferich shadowed this forth in his speech in the Reichstag, on August 20, 1915, when he said: ”If we wish to have the power to settle the terms of peace according to our interests and our requirements, then we must not forget the question of cost. We must have in view that the whole future activity of our people, so far as this is at all possible, shall be free from burdens.

The leaden weight of billions has been earned by the instigators of this war, and in the future they, rather than we, will drag it about after them.”

Of course, by ”instigators of the war” Helfferich meant the opponents of Germany, but I think that unconsciously he was a true prophet and that the ”leaden weight of the billions” which this war has cost Germany will be dragged about after the war by Germany, the real instigator of this world calamity.

In December, 1915, Helfferich voiced the comfortable plea that, because the Germans were spending their money raised by the war loans in Germany, the weight of these loans was not a real weight upon the German people. He said: ”We are paying the money almost exclusively to ourselves; while the enemy is paying its loans abroad--a guarantee that in the future we shall maintain the advantage.”

This belief of the Germans and Helfferich is one of the notable fallacies of the war. The German war loans have been subscribed mainly by the great companies of Germany; by the Savings Banks, the Banks, the Life and Fire Insurance and Accident Insurance Companies, etc.

Furthermore, these loans have been pyramided; that is to say, a man who subscribed and paid for one hundred thousand marks of loan number one could, when loan number two was called for, take the bonds he had bought of loan number one to his bank and on his agreement to spend the proceeds in subscribing to loan number two, borrow from the bank eighty thousand marks on the security of his first loan bonds, and so on.

There is an annual increment, not easily ascertainable with exactness, but approximately ascertainable to the wealth of every country in the world. Just as when a man is working a farm there is in normal years an increment or accretion of wealth or income to him above the cost of the production of the products of the soil which he sells, there is such an annual increment to the wealth of each country taken as a whole. Some experts have told me they calculated that, at the outside, in prosperous peace times the annual increment of German wealth is ten billion marks.