I. International Cartels
in The Past
In earlier days there have
been successful attempts to secure world-wide monopolies. Before the war, an
international community of capitalist interests had been so successfully
organised in certain fields, that these international ties were not wholly
severed during the war, even when the industrials concerned were, officially
speaking, enemies.* The form taken by such organisations was that of
international cartels - agreements between groups of entrepreneurs engaged in
enterprises of like character. The usual aim of these cartels was to define the
areas of markets, to fix prices and conditions of sale, and to specify
conditions of production. Liefmann estimates that before the war there were
about one hundred international cartels in which German entrepreneurs were
participators.
The best known international
cartels are those connected with the shipping trade. An American investigator
has shown that before the war there were at least eighty cartels of the kind.
This remarkably high figure must not be supposed to imply a disintegration of
the shipping interests. For the most part they were agreements between shipping
companies of different countries. Practically, the freight market was
monopolised by the International Mercantile Marine Co. A British royal
commission held in the year 1909 showed that nearly all the steamship lines of
Europe and America were members of this organisation. Those that tried to hold
aloof from the combine were fought until they decided to join and to accept the
freightage rates prescribed by the international cartel. An especially close
connection between the members was secured through the establishment of a common
treasury out of which definite sums were paid annually to those members who had
been faithful to the terms of the agreement, whereas those that revolted were
left in the lurch. The report of the before-mentioned commission showed that the
cartel had enabled its members in various branches of the shipping trade and at
various times to secure far higher freights than were economically essential.
Generally speaking, said the report, shippers have to pay higher freights than
they would, pay under the regime of free competition.*
The foregoing statement is
phrased with studious moderation. To some of the members of the commission, the
effect of the shipping combine seemed so disastrous that in a minority report
they demanded legislative interference. It was impossible, they said, to
tolerate this monopolisation of the sea by a combine of private entrepreneurs.
Even stronger is the
position of an international cartel that relates to mineral wealth, for such
wealth is restricted to particular parts of the world, and is thus endowed by
nature with monopolist characteristics. Pre-eminent among natural resources of
the land is petroleum. That is why the exploitation of petroleum wells was
accompanied at an early date by the formation of colossal and almost incredibly
ramified agglomerations of international capital. This tendency is especially
favoured by the circumstance that large quantities of capital are needed to work
the oil wells. For the most part these lie remote from the highly developed
industriel areas, and not more than two per cent. of the world's supply of
petroleum is as yet derived from European Wells. The first stage in the oil
industry, the obtaining of the oil from the wells, is the least costly process.
Far more costly are the requisites for the storage, transport, and refining of
the petroleum. Until a few decades back, one great organisation, the Standard
Oil Co. of the United States, had an almost exclusive monopoly and dominated the
world market. Attempts at European competition were beaten down, with one
exception. The only organisation that was able to hold its own against the
American petroleum trust was a combine formed out of the Koninglijke
Nederlandsche Petroleum Mij. and Shell Mex., Ltd., a British firm. This owns
petroIeum wells in the United States, the Dutch Indies, Mexico, Venezuela,
Rumania, etc., and controls about ten per cent. of the world's production. The
struggle between these two combines still continues, chiefly in consequence of
the important part played by the control of petroleum in war time, but it is
rather a fight for raw materials than a fight for markets. Price cutting has
been almost unknown. Last winter a price cartel was established between the
above-mentioned oil trusts and the Anglo-Persian Oil Co., Ltd. (which is mainly
the property of the British Government). The formation of this cartel was merely
the written record of what had long been a working agreement.
The international
collaboration of capital has also made considerable progress in the armaments
industry, although this is apt to be regarded as a region where State secrets
must be carefully preserved. Since, for other reasons than those hitherto
considered, this aspect of international combination is exceptionally worthy of
attention, I shall go into the matter more fully, availing myself of a vivid
account penned by the German writer Hans Wehberg.#
"
Before the war there was an international powder cartel. This was composed of
the Nobel dynamite trust of London, with seven branches in England, five in
Germany, and one in Japan; the Rhine-Siegener group comprising three explosives
factories; the Cologne-Rottweiler powder factories, which collaborated with
British, Russian, and Spanish firms; the Deutsche Waffen- und Munitionsfabriken,
which also had close ties with numerous German and foreign companies; the Société
Française de Dynamite and the (likewise French) Société Franco-Russe de
Dynamite. The two last-named firms were in close touch with similar
undertakings.
"From
1901 to 1903 there existed the United Harvey Steel Co., an organisation in which
the great armour-plate manufacturers and cannon kings of the world coIlaborated
on friendly terms. Almost all the big German, French, British, American, and
Italian firms were represented here: for instance, the great British works of
Vickers, Ltd., and W. G. Armstrong & Co., Ltd.; the American Bethlehem Steel
Co.; Schneider-Creusot; Krupp and the Dillinger Hütte; the Società degli Alti
Forni Fondiere Aciaiene di Terni. The last-named firm had close relationships
with Vickers, and this latter was connected in its turn with another Italian
armaments firm. The firm of Krupp was interested in the Austrian Skoda works and
in the Russian Putiloff works. This Russian company, in which Schneider-Creusot
had a financial interest, was a link between Krupp and the great French armour-plate
manufacturers. An interesting detail is that Armstrong and Vickers jointly owned
half the capital of the Mutoran armour-plate factories in Japan. Armstrong and
Vickers, once more, this time jointly with the British firm of John Brown, have
an interest in the Spanish dockyards known as the Naval Construction
Establishments of Ferrol. Six wellknown English firms have combined to form a
Portuguese Naval Construction Syndicate which is to aid the Portuguese
government in the building of a strong navy. The rebuilding of the Russian navy
after the Russo-Japanese war was the joint work of British, French, German,
Belgian, and American firms. Thus the armour-plate manufacturers throughout the
world are intimately linked.
"In
the years 1905 and 1907 the Deutsche Waffen- und Munitionsfabriken of Berlin and
Karlsruhe, the Mauser arms factory of Oberndorf-on-the-Neckar, and the Fabrique
Nationale d'Armes de Guerre of Herstal in Belgium, on the one hand, and the
Oesterreichische Waffenfabrik-Gesellschaft on the other, entered into an
agreement. The most important clauses of this agreement ran as follows:
'¤
I. Contracts for the delivery of new rep eating rifles or carbines to Russia,
Japan, China, and Abyssinia are to be utilised for the common advantage of the
combine, the profits being divided according to a pre-arranged scale...
¤
3. The factories belonging to the respective groups will give one another all
possible mutual support, so that each factory can carry on its work as quickly
and cheaply as possible. To this end, the drawings and dimensions of the models
ordered and to be made shall be exchanged gratis, on loan, and the requisite
apparatus shall be exchanged at cost price...
¤
4. The parties to this agreement shall always come to an understanding regarding
the price of the arms they deliver or offer for sale...
¤
6. For the purposes specified in ¤ I, a common fund shall be established, and
to this fund every factory working under this agreement shall pay the sum of
fifteen francs for each rifle or carbine manufactured...' Orders given to either
firm separately were not covered by the agreement. Still this reservation does
not mean very much, seeing that the Deutsche Waffen- und Munitionsfabriken owns
nearly all the shares of the Mauser undertaking."~
No doubt these cartels were
spontaneously disrupted at the outbreak of the war, but this did not alter the
fact that in many instances a country's troops were slaughtered by weapons that
had been manufactured by the armaments' industry of their own
"fatherland." Wehberg stresses this.
"At
the Dardanelles," he writes, "the British were bombarded with cannon
supplied by British firms. Furthermore, inasmuch as the Austrian Skoda works had
established on behalf of the Nevsky factory of St. Petersburg some
steel-smelting works for the manufacture of artillery material, the Austrian
soldiers on the Galician front were mowed down by artillery fire for which
Austrian firms were partly responsible."
It was repeatedly proved
during the war that other industrials of a country besides the armament
manufacturers were ready to supply the enemy with materials while the struggle
was still in progress. Interesting details concerning this matter are to be
found in a book entitled Die Tragödie Deutschlands [The Tragedy of Germany]:
"Our
own heavy industry continued during the war to send such large quantities of
material abroad (this meaning, as every child must know, to supply the Entente)
that at times there was not enough left for the needs of our own army. These
industrial circles were the very ones in which "fight to a finish" was
most vigorously proclaimed. "Fight to a finish" was a very useful
motto. The struggle on the Somme almost decided the issue against the Central
Powers owing to lack of war material, and yet during eight months in the year
1916 German heavy industry was supplying the neutral powers with large
quantifies of iron and steel - the monthly average was 150,000 tons, and in one
of these months the export amounted to 250,000 tons. At the front, thousands of
Germans were sacrificed because scarcity of material made it impossible to
construct a sufficiency of barbed-wire entanglements.
"
'Der Kampf,' a daily organ of the independent social democrats, published on May
26, 1920, and in subsequent issues, an almost incredible collection of facts
under the caption 'The Treason of Heavy Industry.' Although the t's were crossed
and the i's were dotted, as far as I know there has been no prosecution. The
issue of June I, 1920, contains amazing instances of the 'business enterprise of
German heavy-industry firms. 'Especially characteristic was what happened at the
Stinnes Differdingen works. The military authorities had sent to these works
large quantifies of scrap iron to be made into rails that were urgently needed.
The rolling of the rails was put off week after week. To pressing official
enquiries, Differdingen replied that the cause of the delay was the lack of
trucks. authorities, on further investigation, found that this was a mere
pretext, seeing that the requisite trucks had been sent long ago. Driven into a
corner, the manager of the rolling-mills at Differdingen explained that he had
had instructions from his chiefs in Dortmund to postpone the manufacture of
rails for the front, and to devote his energies to filling export orders, which
were extremely profitable.'
An item that appeared in the
'Züricher Post' during the autumn of 1917 affords direct evidence that the iron
exported from Germany to "neutral" countries actually went in large
quantities to France, so that the German heavy industrials were arming our
enemies against us.
The passage runs:
"The
address to the Bundesrat from the machine and textile industries points out that
German iron has been sent from Switzerland in large quantities to France and
Italy. Two members of the Bundesrat are to go to Paris in a few days to arrange
for the sending of goods in exchange.' "
The "goods in
exchange" were duly forthcoming. They took the form of nickel, which the
German munitions manufacturers needed as urgently as the French munitions
manufacturers needed German iron and German steel. Evidently, in both countries,
heavy industry had a strong interest in clamouring for "a fight to a
finish." §
The reciprocal supplies
during the war have nothing to do with the cartel system in the proper sense of
the term. I have only referred to them here because they show how vigorously the
mutual interests of the industrialists remain at work even in war time. We can
readily infer how powerfully these interests must operate when the inhibitions
of war sentiment are removed.
Returning to the main theme,
I may give a third example of an international cartel of pre-war days. I refer
to the bottlemakers' cartel, which is worthy of special mention owing to its
peculiar characteristics. The impulse to the formation of this cartel was given
by the invention of a machine which revolutionised bottle manufacture. The whole
bottle industry of the world was threatened with ruin by this invention, for
none of the old-established factories could hope to compete with the new
process. For self-protection, the bottle manufacturers formed national combines
and an international combine, bought the patent jointly, came to an
understanding as to the number of new machines that were to be built in the
various countries, and thus took effective measures to avoid competition in the
world market and a fall in the price of bottles. The movement towards the
formation of international cartels was active in other domains than those
hitherto enumerated, and made its influence felt in all branches of industry and
commerce during the years immediately before the war. In some instances these
international cartels practically replaced the system of protective tariffs.
2. Developments of the
Post War Period
Most of these cartels were
dissolved by the war. There were two main reasons why they were not revived on
the same scale immediately after the war. First of all, there had been such
extensive changes in the national units of Europe; and, in the second place, the
national currencies were in so disturbed a state. Depreciation enabled many of
the industrials to underbid their competitors in the world market, and thereby
to realise greater profits than had been derived before the war from membership
of an international cartel. Such chances of profit-making had to be turned to
account. The principle of free competition held full sway once more.
International agreements would have restricted the possibilities of gain.
But such possibilities are
always exceptional, and are fugitive. The arrest of the movement toward the
formation of international cartels could only be transient. As soon as the
relationship between the various currencies is stabilised (not, as yet, by a
return to the parity of exchange of pre-war days, but simply by a prolonged
arrest of foreign exchanges) the hindrances to the cartelisation movement
disappear. Thereupon, international trusts, cartels, and concerns spring into
being betwixt night and morning-organisations of a more formidable character
than ever before. These new international organisations of capital are of a very
different type from their predecessors. They are no longer the mere expression
of a temporary understanding between interests which harmonise to-day, but may
perhaps conflict to-morrow; they are the final outcome of the international
organisation of huge industriel combines which have assumed a stable form. The
international mingling of capital has united the employing class internationally
for good or for ill. The community of interests is more intimate, the mutual
dependence closer.
We have not now to do with
an alliance into which the parties enter of their own free will. Nor have we to
do with an alliance of capitalist magnates who have recognised the madness and
the curse of industrial imperialism, men whose consciences have been stirred at
the very brink of the pit. Humanist impulses have nothing to do with the
formation of this alliance. Industrial kings of the calibre of Stinnes and
Schneider are not moralists. It is not their aim, through a mutual accommodation
of interests and through a partition of markets, to show that they have Iearned
by the dread experiences of the world war, and that they hope to avoid new
devastations, a fresh unleashing of millionfold slaughter. The only motive that
influences the international capitalists when they make peace with one another
is the desire to safeguard the millions and the milliards into which they have
cunningly minted others' blood and others' deaths.
For there is one memory
which remains very active in their minds. In its final convulsions, the world
war took a dangerous turn, threatening to become a war of mankind against the
sowers of strife. Thrones were tottering the old instruments of dominion were
collapsing. Those who were returning from the field of murder and death were
making more extensive claims upon life, and were beginning to undermine the very
foundations of capitalism.
At that juncture the
bourgeoisie in all lands felt that it would be inexpedient to do anything that
would increase the discontent of the labouring masses. Almost unresistingly, the
capitalist class acceded to the workers' demands, so that with very little
trouble the latter was able to secure advantages for which it had long been
fighting. The bourgeoisie was compelled to confine itself to a defensive
attitude; and even those who were sharing out the world at Versailles thought it
as well, in their blood-stained ledgers, to make a few entries to the advantage
of the working class.
For the first time the
bourgeoisie realised that a new and world-wide power had come into existence,
prepared to challenge the economic and political supremacy of the capitalist
class. For the first time the bourgeoisie became aware of the existence of this
horny-handed opponent, who was ready to interfere with capitalist schemes of
world conquest, and aimed at the complete overthrow of the propertied classes.
The international
bourgeoisie has not forgotten the writing on the wall. The red flag still waves
above the Kremlin to remind the capitalists of the letters of fire traced in the
days of revolution. "United we stand, divided we fall." This is a
familiar alternative, and it is the one which faces the capitalists of all lands
to-day.
The foregoing exposition
shows that they have made their choice. They have renounced the idea of
expansion at the cost of rival capitalise groups. They have renounced the old
imperialist aim, in pursuit of which one section of the bourgeoisie hoped to
raise itself to the detriment of other sections. The dream of subordinating the
world to the interests of the capitaliste of one particular country, the dream
of ruling lands and seas from one metropolis, has been dreamed to a finish. The
need to safeguard their possessions is forcing the national bourgeoisies to bury
the hatchet, for behind every international conflict looms the proletarian
revolution, with its menace to the old foundations of power. More important than
the question whether German capital or French or British is to exploit the
mineral treasures of the world, has become the question, whether capitalism as a
system of exploitation can endure. Perforce, capital had to free itself from the
weaknesses and limitations which it had brought upon itself through the world
war. In other words, bourgeois imperialism can no longer take the form of an
attempt to establish dominion over the bourgeoisies of other lands; it must be
directed against the common people within the frontier, against the working
class of the capitalists' own country.
This involves a complete
change in bourgeois policy. Hitherto, in each country, the members of the
capitalise class, in the pursuit of their imperialist aims, have had to avoid
acrimonious quarrels with the workers. These latter were needed by capital as
fighting forces, and had to be kept in a good humour when capital was
internationally embroiled. This consideration no longer comes into play. The
truce between the capitaliste and the workers directed against all foreign
capitalists, has been replaced by a truce between the bourgeoisies of all
nations directed against the working class of each nation. The design to expand
the sphere of influence at the cost of the bourgeoisies of other lands has been
abandoned. At most, it persists only in the brains, or rather in the mouthings
of a few frenzied nationalists. The bourgeoisie of high finance and heavy
industry holds other views. Reparations are to be collected from the working
class. One indication of this is given by the joint action of the German,
French, and Belgium industriel representatives at the conference of the
International Labour Office held in the end of January 1924. But there are other
plain indications. Read, for instance, the following extract from the 1923
report of the Société Générale de Belgique, the most powerful banking and
industriel corporation in Belgium:
"The year 1924 opens under favourable auspices. There is
good reason to hope for a sensible improvement if the country only has the wit
to grasp that in no other way than by a notable increase in production shall we
be enabled to compensate the excess of imports and thus avert the anticipated
failure to make good the damages caused by the war.
"Everywhere, indeed, people are at length beginning to
realise that solely by hard work and by thrift can the wealth squandered and
destroyed during the war be recreated."
This is a very different
tune from that which the heavy-industry press has hitherto been accustomed to
play. Both in Belgium and in France, the tune was "le Boche payera "
(the Germans will pay). The new tune is, " The working class must
pay." To-day, to the Belgian capitalist, the Belgian worker has become the
"Boche," the worker who for years bore the hardships of the fighting
front in the belief that he was defending home and life against the foreign
destroyer. Everyone now understands perfectly well that the formula
"increased production" is simply a euphemism for "a longer
working day." This is put in plain words in the before-mentioned report:
"The fact that all our workers are now busily employed,
and the fact that our total imports are less than they were in 1913, suffice to
prove that we are not producing a sufficiency under the regime of the eight-hour
day."
Enough said. My only object
in quoting the report of the Société Générale de Belgique is to show that
heavy industry is deliberately changing its front, is deliberately proceeding to
levy reparations from the working class.
But the truce of the
international bourgeoisie has another notable consequence. It is leading the
capitalists of each land to revise their attitude towards their own State.
Hitherto, in each country, it was of great importance to the capitaliste that
their State should be an imposing one, that it should take a formidable place
among the other industrial States. It was to their interest that the State
should possess fighting forces that might help them against attempts to exclude
them from extant markets and might aid them in the opening of new markets. The
State could only protect their interests in the world market officially by
using, or by threatening to use, the strong hand. Even in the remotest corners
of the world, and even as against the greatest of the great powers, their
national flag must inspire respect.
This interest in national
predominance is a thing of the past. To-day large-scale capital can dispense
with the State as an instrument of power in the world market. The capitalist
class in various countries has resolved its discords into a harmony, and in each
country the bourgeoisie finds that the bourgeoisies of other lands can defend
its interests better than the national State could defend them. Bourgeois
interests have taken a new turn. The bourgeoisie has no interest in a State
which not merely fails to inspire fear in other States, but is actually afraid
of itself. The State has ceased to be a factor in world politics. Capital has
degraded the State from the role of world conqueror, to the role of policeman.
That is the real, the
decisive political significance of the general onslaught of private industry
upon State capitalism in all its forms. The State is to be excluded from
economic functions. The whole field of economic life must be the preserve of
private industry, and the State is to be subordinated to private industry.
The reader must not imagine
that this overshadowing of the State by trusts, concerns, and cartels is a
peculiarity of the development of Germany and France. The attempt to subordinate
the State and its institutions is international, and advances just as fast as
the concentration of capital advances, and just as rapidly as (thanks to the
organisational and intellectual development of the labour movement) democracy is
tending to become an instrument that can be used against capital.
These tendencies were
plainly manifested by the International Chamber of Commerce when it unanimously
approved a report presented in the autumn of 1923 by Mr. Ferdinand I. Kent, the
vice-president of the Bankers' Trust CO. of New York. The relevant passages in
the report run as follows*:
"To restore the normal vitality of Europe will need
continuous attention and a great deal of patience. The means will be the
persistent application of reason to the problems of government, which represent
the outward form of the present difficulties of Europe... The business world
must play its part in this matter. We believe that it would be a great step in
advance if in every country the men of industry and commerce were to appoint
special committees in close touch with the International Chamber of Commerce.
The latter would function as a Clearing House, and would transmit to the
committees of other lands the ideas sent in by the committee of any particular
land... To promote the attainment of these ends, it is hereby resolved to make
the present report as widely known as possible; it is agreed that the
international Chamber of Commerce shall set vigorously to work to establish
committees in every country in which it has members; and that it shall open up
relationships with economic groups in other lands."
What is the net upshot of
the suggestions made in Mr. Kent's report? His proposal is to establish a
worldwide organisation, international in its operations, elaborating schemes in
consultation with the industrialists of all lands, schemes that will then be
laid before the individual governments and dictated to these. It is the proposal
to establish an economic world parliament, which shall override the powers of
the old governments, and shall enforce the will of internationally organised
industriel and commercial capital upon governments and parliaments.
In this scheme, class
divisions find their sharpest expression. Such an economic world parliament has
absolutely nothing to do with democratic principles. The only voices that will
have any weight in its councils will be those with which the great concerns and
the great trusts speak. There is no place for any interests but theirs. The
petty entrepreneur will vanish from the scene, and the decline of the middle
class will be finally achieved.
Mankind will not even be
indebted to international capital for the one and only advantage, which might
have accrued from such an international understanding of the industrialists. For
three reasons the system of national armaments will not be allowed to lapse. In
the first place, there is not sufficient confidence in the durability of the
present reconciliation. In the second place, the manufacture of armaments has
been, too lucrative for the profit-makers to be willing to abandon it. The
industrials will continue to insist on the need for "being prepared,"
even when they are on the best possible terms with the enemy against whom the
preparations for war are ostensibly directed-and though in the future the enemy
will be allowed to participate as far as possible, just as he participated in
the past, in the profits of the armaments trade. Last of all, the capitaliste do
not overlook the fact that artillery and machine guns may have a political value
in home affairs, should the victims of their ruthless economic policy rise in
revolt. The State remains to exert its functions as guardian of "law and
order." The capitaliste are not afraid that the police forces of the State
will be turned against themselves, and one of the great advantages of this
ingenious division of labour is that capital will not have to pay for the
services of these protective troops.
Notes
I. International Cartels
in The Past
*
Robert Liefmann, in his book Kartelle und Trusts, writes: "By no means all
the international cartels, not even those which connected us with enemy lands,
were dissolved during the war."
#
See F.M. Wibaut, Scheepvaartkartels, in "Ekonomische
Kronieken".
~
Die internationale Beschränkung der Rüstungen, Politische Bücherei,
Stuttgart, 1919.
§ J.T. Walton Newbold's "How Europe
Armed for War", Blackfriars Press, London, 1916, contains valuable
intimations of the early stages of this interlacement of capitalist interests in
the armaments industry. Furthermore, the volume ends with a remarkable forecast
which bears closely upon the main topic of the present work. On p. 149 Newbold
writes: "The shadow of a terrible despotism looms athwart the workshops of
the world wherein the workers, bound by legal enactments, fettered by official
regulations, forbidden the right to strike, deprived of their trade-union rules,
driven on by fears of national disaster and kept in control by military
authority, may yet become the helpless serfs of an all-powerful combination of
employers, at whose head are the armament syndicates."
2. Developments of the
Post War Period
*
Unfortunately the original English of this document is not accessible before
going to press. We retranslate from a German version of an Italian translation.
The form may have suffered, but the substance is what matters. - E. & C.P.
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