# 40

                                        

                                    Economists Meet in England 1913

 

Part Two

 

 

“My beloved Russia has just delivered itself from a terrible war with Japan,” said Leo Yamarov. “It cost us thousands of casualties, a loss of an entire naval fleet. Today, Russia still faces bankruptcy because of the expense of needless imperialism!”

Professor Entaille said, “It is true that the enormous increase of the mineral, agricultural, and manufacturing output of Germany leads to the search for more outlets for her newly accumulated wealth. We can put a dent in their efforts for foreign markets by closing their options in Morocco, Egypt, China, Middle East, and elsewhere. Actually we have made quite a bit of success in this endeavor.”
Coughing on some hot tea that went down the wrong way, Professor Yamarov cried out, “Remember that Germany was frustrated at the Algeciras Conference in 1906, in seeking a bigger slice of Africa! Our countries are the main culprits for putting roadblocks before German ambitions. We are all aware that Germany sought to widen its markets by getting a satisfactory agreement at the Algeciras conference. France ended up by gaining nearly complete control of her share of Morocco, the other half being controlled by Spain.” The Russian wiped his mouth with a wrinkled handkerchief and asked, “So, my wise friends, would not further blocking German economic hopes anger the Germans and drive them to commit acts of war?” Silence was the answer. Instead, the others poured themselves fresh cups of coffee.“

On the other hand,” Professor Lambner continued, “for want of markets German manufacture articles have actually cut their prices. This must make it are hard to pay wages. The manufacturers have not dared to stop the output of their goods for fear of angering workmen and bringing on labor strikes.”

Professor Yamarov posed a question, “I don’t quite understand why Great Britain is so frightened of little old Germany? The aggregate of British overseas investment is ten times that of Germany and so is its aggregate income.”

“You are absolutely correct, my friend,” said Professor Lambner. “In the Transvaal, the Cape, Central Africa, India, the East, in the islands of the Southern Seas, and in the Far Northwest, German and English businessmen each struggle to be first in selling their wares. As I have pointed out, Germany’s industrial progress approaches that of Great Britain. England is first in world commerce so that all world affairs are her concern. Germany exists more and more by her world commerce and less by her home industries. However, trade figures do not make a world power. Germany yearns to reach the status of a world power. German trade competition in the world’s markets and its success is due to its pursuit of profit and not nationalism. Will nationalism move to the front burner in Germany?”

“Mon Dieu! Let us hope not.”

“Because of commercial rivalries abroad, British industry is at low ebb as far back as1879. Commission after commission has studied the problem and concluded that the trouble was German competition.” Let me try to answer your question in greater detail, Professor Yamarov. You see, only a small percentage of British foreign and colonial investment is placed in Europe. The remaining ninety-six percent is invested where, as I have said, it could not suffer from war. This is a most important point! However, Great Britain has an Achilles’ heel! If  Germany strangles industry in Great Britain, it would be like killing the head of an octopus. The tentacles would eventually wither away. Napoleon understood this and sought ways of invading the British Isles. I fear that Germany may have the similar plans. Even if they cannot invade us physically, they can do so by forcing our iron and steel industries to close down. Iron and steel are the lifeblood of the British Isles!”

 His colleagues yawned and grunted in agreement.

“Should iron and steel industry in the British Isles fail and the efforts of Germany to build the Baghdad Railroad succeed, all of our commercial efforts could fall like a house of cards!”

 The Undersecretary lay back in his chair, his hands behind his head inquired, “Outside of war, what can we do?”

 Lambner waved his finger and said, “We must know what Germany plans to do. If we listen carefully, we will hear them say that they need a union that would draw neighboring nations into a single economic group. It would help lessen the distrust of Germany’s neighbors by a great civilizing enterprise. It would be a huge customs union, supported by Kaiser Wilhelm, and would prove to the world that the foundation of the German Empire has been a necessity and could be a genuine benefit to Europe. Imagine German power in thirty years! If they could demonstrate that the concentration of national forces had made them capable of solving great problems of civilization, then, we could no longer accuse then if merely increasing armaments, universal military service and an elaborate militarism that is sucking the marrow from the bones of all nations today. Then, they will become the new world leader.”

 “Isn’t that a bit too theoretical?” said Undersecretary Bacon.

"They believe that they could transform alliance treaties into an instrument to serve the interests of peace. Imagine, a customs organization open to all friendly nations. It is possible that states united by such a customs union could then readily enter into military conventions. France’s inclusion in the proposed customs union is a major objective of Germany.”

 Everyone took a moment to allow Victor Entaille to fill their glasses with booze.

 “Let me discuss for a moment,” continued Professor Lambner, “the economics of iron and steel, are the backbones of Britain, France, and Russia and, of course, Germany. In the last ten years, world steel production increased from fifty million tons annually to seventy five million tons. Guess which the European power leads in this. It is Germany! Pig iron, as you gentlemen know, is the first step in the making of steel. Mix coke with it and the miracle of steel occurs. Unfortunately, Great Britain’s pig iron output is only sixty percent of the German output. Our steel production is half that of the German.production! In 1875, Britain accounted for half of the world production of pig iron and forty percent of the world production of steel. By the new century, the British share of world production had fallen to thirty percent for pig iron and twenty-five percent for steel! Gentlemen, Britain’s iron and steel industry is on a downward spiral compared to Germany!”

 Yamarov stood up and shook his head a half-dozen times to limber up his stiff neck muscles. “It is unimaginable that the greatest power on earth has fallen on such hard times!”

“But, by Heaven,” said the Scotsman, “British exports of steel and steel products rose twenty-five percent since the turn of the century. Hurrah! However, wait just one minute, dear friends. Germany’s export of the steel and steel products rose nearly seventy-seven percent! That, gentlemen, is an ominous sign, don’t you agree?”

 Yamarov sipped his whisky. He pounded the table as he drank. “That is terrible news!”

“For years, our advantage over Europe,” said the Scotsman, with slightly slurred speech, “was that we possessed raw materials, production and transport far greater than most nations. It is now no longer sufficient to undersell continental iron makers at or near their own works.”

As Lambner seemed willing to continue on, Professor Entaille spoke up. “Pardonnez moi, mon ami, le professeur, mais je voudrais faire pisser!”

No one waited for a reply from the man from Edinburgh, but hurriedly left enmasse for the outdoor toilet. Farting sounds emitting from the loo, startled the farmwoman. “My Gawd!” she exclaimed. The Professor Entaille emerged, buttoning up his fly. Sensing the lady’s dismay, he said “Excusez-moi, madam!” She mumbled, “Damned Frogs! They are all alike!”

After a reasonable amount of conviviality, the group returned to the meeting room. They found several bottles of Scotch whisky on the table. The conference stalled until everyone filled their glasses and tasted the golden liquid. Lambner toasted the Triple Entente. Yamarov toasted the governments of England, France and Russia. Entaille slightly inebriated toasted the Follies Bergere. “Cheers!” said George Bacon. “Let us not lose our sense of purpose.”

 A refreshed Lambner took up where he left off. “Now, let me take us back to the tariff problem. Germany turned to economic protectionism in 1879 because they claimed cheap imports threatened her industries and agricultural interests. The dirty little secret, known to all, is that the grain duties proved an important source of revenue to fill German coffers. Its government has encouraged the growth of gigantic industries devoted to the manufacture of iron and steel. Germany believes that anyone visiting the vast Krupp works of Essen would admit that no government would venture on a policy that interferes with the prosperity of such establishments. The acquisition of the Lorraine ores and iron works by the German victory over France in 1871, and the creation of the German Empire heralded a burst of industrial activity never before seen in Europe! They keep their works going at full capacity by underselling Britain’s home markets. Germany’s trade expansion was helped by its geographical proximity to developing markets in central Europe.”

 The undersecretary asked, “What is behind Germany’s amazing success?”

 The professor looked surprised at what he considered a stupid question. Then, he exclaimed forcefully, “Cartels! Hundreds of them formed a single syndicate. By George, the syndicate assists Germany in becoming a formidable a competitor in world export markets. Does the Undersecretary comprehend my meaning?”

 Bacon shrugged his shoulders.

  “A thoroughgoing regulation of German production and sales means that foreign competition in its home market is limited. Tariffs protect their entire iron and steel industry. Today, about three hundred cartels exist throughout German industry. They are a monopoly of great magnitude. For example, its iron and steel industry is one huge cartel. The working of the cartels requires an assessment of each company’s works, carried out by a team of experts. The country has a number of districts and a proportion of the anticipated demand for the product concern allotted to each for distribution among the local works. Orders go to a central office. The orders go to various firms according to the established capacity of each. Payment goes to the central office, which reimburses the firms. Prices are fixed by mutual agreement among firms or by the central office.”

 “I am not surprised,” said Victor Entaille. “Those damned Boche are capable of every dirty trick in the book! They are a bunch of ‘Robber Barons’!”

 Undersecretary Bacon blanched. “I say, that is certainly not cricket!”

 Lambner disregarded the interruption. “I, along, with a delegation of British industrialists, recently visited six German steel works. Germany has a welfare scheme for its workers. Relations between management and workers appeared friendly. Working conditions are rather good. Strikes are almost unknown. Our delegation admired the splendid discipline maintained in the German works. Generally, we saw no slovenliness, undue haste, noises, and idling about. Most of the larger companies provided worker’s with insurance schemes for accident, sickness and pensions that helped produce a high degree of labor stability. Thus, workers feel secure in their jobs. I fear that the prevailing inferior quality in all our products is leading to a drastic reduction in manufacturer’s profit margin. We can no longer afford to neglect means by which we secure excellence of quality and economy of production. Free trade, though philosophically right for Britain, could mean that profit margins disappear and wages fall sharply. As it is, we British are committing economic suicide,”

“I can’t believe it,” said Leo.

 “Yes, colleagues,” exclaimed Lambner enunciating each syllable, “ec-o-nom-ic suicide! Frankly, I do not see tariff protection as the nation’s salvation, but neither is free trade an unchallengeable dogma. Britain is engaged in a war, an industrial war, to be sure. It is a silent war fraught with immense significance for our nation’s destiny.”

 For some reason, Professor Lambner began to sneeze violently. He held his handkerchief to his mouth for several minutes. As his colleagues looked on in astonishment, the sneezing ceased.

 The Scotsman shook his head. “Please excuse me. Must have been some dust. Do you think the Kaiser Willy is listening to my diatribe?”

 Everyone laughed at the jest.

 “So long as Great Britain retains command of the sea, she is likely to be in a better position than any other country to secure foreign ore. It is not impossible that a great British iron industry could be built up and maintained on foreign shores alone.”

 Undersecretary Bacon rubbed his chin and asked, “Is it possible that Germany will continue to supply us with iron and steel goods at a price below their costs of production?”

 “No!” replied the Scotsman testily as though fed up with a stupid pupil, “When the time is right, German prices will skyrocket and we shall repent our folly too late and when we are at their mercy! Failing successful pressure for government action, the British industry could attempt to reach an agreement with its competitors, but the terms are the trouble; there is no sentiment in international trading, the weakest comes off the worst. Great Britain is the weakest, because we open our doors wide and ruin our home trade. Everyone then has the chance to dump their surplus products in Britain’s home market.”

 Heads turned toward Leo Yamarov who shouted, “It is survival of the fittest! N’est-ce pas?”

 “You may very well be correct, Professor Yamarov,” said Lambner, his speech more slurred. “Consequence of intermittent employment has caused deterioration in the physical condition of our workmen. Workmen begin to loaf and find it hard to get back in the harness at the employer’s beck and call. Large unemployment could lead to the spread of socialism or worse in Britain. By the way, Undersecretary Bacon, have you visited our industrial workers lately?”

 George Bacon replied, “Yes, professor I have. I concluded that the boom in shipbuilding is extraordinary. New luxury ships are hitting the waves on a regular basis. Recently, our Admiralty has placed orders for three battleships. Shipbuilding is working at full capacity. Will this upsurge in production help solve the iron and steel problem?”

 Lambner folded his arms. “Such ups and downs in an industry are common in today’s world. You see, Undersecretary, in spite of the shipbuilding spike, the expansion of British industry in general is small. Several blast furnaces have shut down. A respected iron merchant firm in Glasgow just failed. More are teetering on the economic edge between profit and loss. I recently compared the progress of the British and German industries and concluded that the latter’s progress had been purchased at a price and manner alien to British philosophy. That without the vast system of cartels, its almost military-like production and distribution methods, and the organized fostering of export trade by countries, the German iron and steel industries could hardly have obtained their present status. Germany is going ahead because her manufacturers and merchants organize while Britain is almost blindly standing still because her manufacturers and merchants are not organized. We have no overall national industrial policy.”

 “Well, gentlemen,” said the Undersecretary, “I believe that this is a good time for us to enjoy a good, old English, country lunch. While doing so, you economists can express your succinct conclusions about today’s topics that I should bring back to Downing Street.”

 The secretary of the meeting, Lawrence Courtney left the room while the group stood up for a well-deserved stretch. Upon his return, the woman farmer and two men carried trays of hot food and drink.

 Bacon said a prayer taken from a harvest hymn, “…And keep us in His grace, and guide us when perplexed and save us from all ills in this world and the next. Amen!”

 After a half hour of enjoying their meal and bantering about mundane things, the Undersecretary asked for their economic opinions as far as the Triple Entente and Germany are concerned.

 Professor Lambner wiped his lipped with his napkin and offered to speak first.

 “Of course, my dear John,” said Undersecretary Bacon.

 This time without the benefit of notes, Lambner carefully phrased his remarks. “If Germany continues to grow economically and siphons off our foreign commerce, we will become her commercial serfs. I might also add that down the line, the United States will become the leading economic star. I fear that Britain will slowly, but surely, lose many of its dominions and its economic power to the degree that it will become a second rate industrial nation. Britain must commit herself to a strong defense against German economic pressure. That could include war!”

 For a moment, there was a general discussion of Lambner’s point of view.

 “Victor,” said the Undersecretary, “What are your conclusions?”

 Professor Entaille, passing his hand across his brow, said, “My firm conclusion today, mes amis, is that iron, steel, coal and chemicals are the driving forces in today’s economics. Tomorrow, oil will step into a position of worldwide dominance upon which all other industries will rely. Oil resources lie deep in wells not found in many parts of the British Empire. I foresee the oil wealthy nations such as those of the Middle East and the United States will control the direction of world economics. If France, Great Britain and Russia do not act quickly they will become subservient to the oil Powers. Germany has already made its move by beginning the construction of the Berlin-to-Baghdad railway. Kaiser Wilhelm’s trips to the Near East serve to be friend his nation with Arab countries. To date, France, Britain and Russia have not invested much capital in the project. However, I will say that France is now negotiating with Germany to gain a foothold in the railway. Economically, the Triple Entente that binds our three nations together could put a stranglehold on Germany’s cutthroat competition. If we fail, our three nations face a great depression! We must teach Germany a lesson by whatever means we possess. If it means war, then war it shall be!”

 “Thank you, Victor. Jolly well put!”

 The Undersecretary motioned to Professor Yamarov to share his thoughts with the group.

“Spahsseebah, dear gentlemen! I sincerely feel that Russia is the keystone of success the world over. We have only just begun to investigate our resources in every part of our widespread nation. Our Trans-Siberian railroad will allow us to bring raw materials to the hungry maws of our factories in days as opposed to the months it has taken. We need to seek more and more markets in Asia, Africa and North and South America. The Tsar, although a close relative to Kaiser Wilhelm, fears his Pan-German motives. We know that the Kaiser desires more Lebensraum and looks with a watering mouth eastward and, I suppose, eventually to Russia. If Germany can control markets maintaining its tariffs, Russia must look to France and Britain for protection against economic disaster. I submit that all of these economic issues we have discussed are not new. There is historical evidence that unfair economic practices existed since time immemorial. ‘There is no new thing under the sun!’ The Triple Entente is our strongest defense against German economic aggression.”

 The Undersecretary stood up and thanked each participant. “I am certain that the Prime Minister will appreciate your economic thoughts. I will explain to him that Britain and its allies, France and Russia are engaged in an industrial war, silent and peaceful, fraught with immense significance for our nations’ destinies. He is planning a meeting with industrial leaders within a few days where he will certainly share your conclusions to the group.” Thank you and God bless you all!”

 Before entering their waiting vehicles, several cigar-smoking members chatted while watching the tabby cat eagerly spraying a car tire. The Russian pointed to one windshield and exclaimed, “See, dear friends, a bird has shit on my automobile and the cat has pissed on the wheel! What more could happen to me? Is this perhaps an omen?”

Lawrence Courtney finished typing his notes of the meeting. He placed copies of the sheets into an attaché case. “All right Martin, give me your right arm.”

The courier extended his arm while Courtney chained the attaché case to his wrist.

 “Your train leaves Victoria Station at nine o’clock tonight. You can catch the ferry at

  Dover. It is a two-hour trip to Calais. An intelligence officer will meet you at the pier. He will share the code words with you. You will reply with your established response.”

 “I am ready to leave sir. What is the Intelligence officer’s name?”

“Oberstleutnant Richard Hentsch.”

From Donald Britton Conrad, "In the Service of God and Evil."