THE WAR AFTER THE WAR
THE WAR AFTER THE WAR
ISAAC F. MARCOSSON
CO-AUTHOR OF "CHARLES FROHMAN, MANAGER AND MAN" AUTHOR OF "THE AUTOBIOGRAPHY OF A CLOWN," ETC.
NEW YORK: JOHN LANE COMPANY LONDON: JOHN LANE, THE BODLEY HEAD TORONTO: S. B. GUNDY : : : MCMXVII
COPYRIGHT, 1916, BY THE CURTIS PUBLISHING COMPANY COPYRIGHT, 1916, BY THE RIDGWAY COMPANY
Copyright, 1917, BY JOHN LANE COMPANY
Press of J. J. Little & Ives Company New York, U.S.A.
TO LORD NORTHCLIFFE IN GRATEFUL APPRECIATION
For nearly three years Europe has been drenched with blood and rent with bitter strife. Millions of men have been killed or maimed: billions of dollars in property have gone up in smoke and ruin—all part of the mighty sacrifice laid on the Altar of the Great War.
This tragic tumult must inevitably subside. The smoke of battle will clear: the scarred fields will mantle again with springtime verdure: the fighting hosts will once more find their way to peaceful pursuit. Time the Healer will wipe out the wounds of war.
The world already wearies of the Crimson Canvas splashed with martial scene. Heroism has become the most commonplace of qualities: it takes a monster thrill to move a civilisation sick of destruction. With eager eye it looks forward to the era of regeneration. War ends some time.
Business never ceases. Under the shock of mighty upheaval it has been dislocated by the most drastic strain ever put upon the economic fabric. But it will march on long after Peace will have mercifully sheathed the Sword. Therefore the permanent world problem is the Business problem.
This is why I made two trips to Europe: why I submit this little book in the hope that it may point the way to some realisation of the immense responsibilities which will inevitably crowd upon the world and more especially upon the United States.
Peace will be as great a shock as War. Hence the need of Preparedness to meet the inevitable conflict for Universal Trade. We—as a nation—are as unready for this emergency as we are to meet the clash of actual physical combat. Commercial Preparedness is as vital to the national well being as the Training for Arms.
Nor will Commerce be the only thing that we will have to reckon with. When you have heard the guns roar and watched horizons flame with fury and seen men go to their death smiling and unafraid; when the pitiless panorama of carnage has passed before you in terms of terror and tragedy, you realise that there is something human as well as economic in the relentless Thing called War.
It means that just as there was no compromise with dishonour in the approach to the Super-Struggle for which nations are pouring out their youth and fortune, so will there be no flinching in that coming contest for commercial mastery—the bloodless aftermath of History's deadliest and costliest war.
We have reached a place in the World Trade Sun. Unless we are ready to hold it we will slip into the Shadow.
We must prepare.
I. F. M.
I. THE COMING WAR 15
II. ENGLAND AWAKE 40
III. AMERICAN BUSINESS IN FRANCE 71
IV. THE NEW FRANCE 98
V. SAVING FOR VICTORY 120
VI. THE PRICE OF GLORY 164
VII. THE MAN LLOYD GEORGE 210
VIII. FROM PEDLAR TO PREMIER 258
THE WAR AFTER THE WAR
I—The Coming War
While the guns roar from the North Sea to the Mediterranean, and the greatest armed host that history has ever known is still locked in a life-and-death struggle on a dozen fronts, another war, more potent and permanent perhaps than the one which now engulfs Europe, lurks beyond the distant horizon of peace.
Its fighting line will be the boundaries of all human needs; its dynamic purpose a heroic rehabilitation after stupendous loss. It will be the far-flung struggle for the rich prize of International Trade, waiting at the end of the Crimson Lane that sooner or later will have a turning.
Embattled commercial groups will supplant embroiled nations; boycotts, discriminations and exclusions will succeed the strategies of line and trench; the animosities fought out to-day with shell and steel will have their heritage in ruthless rivalries.
How shall we fare in this tumult of tariff and treaty? Where shall we stand when the curtain of fire fades before a task of regeneration that will spell economic rebirth or disaster for millions? Will fiscal punishment be meted out to neutral and foe alike? Will reason rule or revenge dictate a costly reprisal in this war after the war?
These are the questions that rise out of the dust and din of the colossal upheaval which is rending half of the world. Directly or indirectly they touch the whole American people, regardless of rank or wealth. The tide of war has rolled us far upon the shores of world affairs. We have prospered in the kinship of the nations. Will the ebb of peace leave us high and dry amid a mighty isolation?
I went to England and France to study this problem at first hand. I interviewed Cabinet Ministers; I talked with lawmakers, soldiers, captains of capital, masters of industry, and plain, everyday business men. Often the talk was disturbed by shriek of shell or bomb of midnight Zeppelin marauder.
Through all the travail of debt and death that rends the allied peoples runs the clear current of determination to retrieve the immense loss. War is waste; some one must pay—we among the rest. Already the guns are being trained for the inevitable commercial battle, which, willingly or unwillingly, will bring us under fire. Let us examine the plan of campaign.
But before going into the concrete details that mean so much to our future and our fortune, it is important to understand some very essential conditions.
First and foremost is the uncertainty of the war itself. All prophecy—at best a dangerous thing—is purest speculation. No one can tell how long the duel will last; how badly the loser will be beaten; what the terms of peace will be. Yet out of these contingencies will emerge the strong hands that will redraw the trade map of the world. Whatever the outcome, the countries now fighting, especially the Allies, have definitely stated the principles that must govern—for a long time, at least—the whole realignment of commercial relations. Their way shall be the universal way.
In the second place, be you Ally or Teuton and regardless of how you may feel about the ethics of the Great Struggle, it must be remembered that behind the glamour as to whether it is waged to conserve human liberty, maintain the integrity of "scraps of paper" or to safeguard democracy, the larger fact remains that it is a war rooted in commercial jealousies and fanned by commercial aggressions.
Now we come to the really vital point, and it is this: When the guns are hushed you will find that national and industrial defence among the warring countries will be one and the same thing. The Allies learned to their cost that the economic advance of Germany was merely part of her one-time resistless military machine. Her trade and her preparedness went conqueringly hand in hand. Henceforth that game will be played by all. England, for instance, will manufacture dyestuffs not only for her textile trades, but because coal-tar products are essential to the making of high explosives.
Thus, Competition, which was once merely part of the natural progress of a country, will hereafter be a large part of the struggle for national existence.
There is still another factor: No matter who wins, peace must mean prosperity for everybody. For the victor it will take the form of an attempted stewardship of trade and navigation; for the vanquished it will be the dedication of a terrible energy to the twin restoration of pride and product.
Now you begin to see why it is up to the United States to make ready for whatever business fate awaits her beyond the uncertain frontiers of to-morrow. Nor have we been without warning of what may be in store for us. Prohibitive tariffs, blacklists and boycotts, embargoes on mail and cargo, the exclusion from England and France of hundreds of our manufactured articles—all show which way the international trade winds may blow when the belligerents begin to take toll of their losses. Meantime, what are the facts?
Take the case of England. Thirty years ago she was the workshop of the world. From the Tyne to the Thames her factories hummed with ceaseless industry. Her goods went wherever her ships steamed, and that meant the globe. Supreme in her insularity—at once her defence and her undoing—she became infected with the virus of content. Her steel was the best steel; her wares led all the rest. "Take it or leave it!" was her selling maxim. When devices came along that saved labour and increased production she refused to scrap the old to make way for the new. Born, too, was the evil of restricted output. Moss began to grow on her vaunted industrial structure. England lagged in the trade procession.
But as she lagged the assimilative German streamed in through her hospitable door. He served his apprenticeship in British mills; took home the secrets and methods of British art and craft. He geared them to cheap labour, harnessed product to masterful distribution, and became a World Power. Before long he had annexed the dye trade; was competing with British steel; was making once-cherished British goods.
What the German did in England he duplicated elsewhere. The world of ideas was his field and, with insatiate hunger, he garnered them in. He cunningly acquired the sources of raw supply, especially the essentials to national defence; for he overlooked nothing. All was grist to his mills. He pitched his tents upon debatable trade lands. His rivals called it economic penetration, because he invariably took root. For him it was merely good business.
Then England suddenly realised that Germany had left her behind in the race for international commerce. Indifference lay at the root of this backsliding. It was easier and cheaper to buy the German-made product and reship it than to produce the same article at home. Sloth hung like a chain on English energy. What did it matter? No forest of bayonets hemmed her in; she was still Mistress of the Seas.
Meantime Germany dripped with efficiency and ached with expansion. Her amazing teamwork between state and business, stimulated by an interested finance, drove her on to a place in the sun. The shadows seemed far away when the great war crashed into civilisation. Then England woke to the folly of her blindness. The mystery of coal-tar products was shut up in a German laboratory; the secrets of tungsten, necessary to the toughest steel, were imprisoned in a Teutonic mill; and so on down a long list of products vital to industry and defence.
Even those early and tragic reverses of the war did not stir the stolid British bulk. Men fought for a chance to fight; restriction still oppressed factory output. Red tape vied with tradition to block the path of military and industrial preparation.
Then the Lion stirred; the sloth fell away; men and munitions were enlisted; the strong hand was put on labour tyranny; conscription succeeded the haphazard voluntary system. Britain got busy and she has buzzed ever since.
When the kingdom had become a huge arsenal; when the old sex differences vanished under the touchstone of a common peril; when the first khaki host swept to its place in the battle line, and the grey fleets were once more queens of the seas, England turned to the task of commercial rebuilding, once neglected, but thenceforth to be part and parcel of British purpose.
Animating this purpose, stirring it like a vast emotion, was the New Battle Cry of Empire—the kindling Creed of United Dominions, consecrated to the economic mastery of the world.
But this revival was not an overnight performance. If you know England you also know that it takes a colossal jolt to stir the British mind. The war had been in full swing for over a year and the countryside was an armed camp before the realisation of what might happen commercially after the war soaked into the average islander's consciousness.
Under the impassioned eloquence of Lloyd George the munition workers had been marshalled into an inspired working host; with the magic of Kitchener's name, the greatest of all voluntary armies came into being. But it remained for Hughes, of Australia, to point out the fresh path for the feet of the race.
Who is Hughes, of Australia? You need not ask in England, for the story of his advent, the record of his astounding triumph, the thrilling message that he left implanted in the British breast, constitute one of the miracles of a war that is one long succession of dramatic episodes. This Colonial Prime Minister arrived unknown: he left a popular hero.
Thanks to him, Australia was prepared for war; and when the Mother Lioness sent out the world call to her cubs beyond the seas there was swift response from the men of bush and range. The world knows what the Anzacs did in the Dardanelles; how they registered a monster heroism on the rocky heights of Gallipoli; gave a new glory to British arms.
England rang with their achievements. What could she do to pay tribute to their courage? Hughes was their national leader and spokesman; so the Political Powers That Be said:
"Let us invite the Premier to sit in the councils of the empire and advise us about our future trade policy."
Already Hughes had declared trade war on Germany in Australia. Under his leadership every German had been banished from commonwealth business; by a special act of Parliament the complete and well-nigh war-proof Teutonic control of the famous Broken Hill metal fields had been annulled. He stood, therefore, as a living defiance to the renewal of all commercial relations with the Central Powers. But he went further than this: He decreed trade extermination of the enemy—merciless war beyond the war.
With his first speech in England Hughes created a sensation. Before he came commercial feeling against Germany ran high. Hughes crystallised it into a definite cry. He said what eight out of every ten men in the street were thinking. His voice became the Voice of Empire. Up and down England and before cheering crowds he preached the doctrine of trade war to the death on Germany. He denounced the laxness that had permitted the "German taint to run like a cancer through the fair body of English trade"; he urged complete economic independence of the Dominions. His persistent plea was, "We must have the fruits of victory"; and those fruits, he declared, comprised all the trade that Germany had hitherto enjoyed, and as much more as could be lawfully gained.
He urged that the blood brotherhood of empire, quickened by that dramatic S.O.S. call for men across the sea and cemented by the common trench hazard, be followed by a union of empire after the war that should be self-sufficient. Behind all this eloquent talk of protection and prohibition lay the first real menace to America's new place as a world trade power. It was the opening call to arms for the war after the war.
Hughes did more than set England to thinking in imperial terms. He upset most of the calculations of the Powers That Be who invited him. They expected an amiable, able and plastic counsellor; they got an oratorical live wire, who would not be ruled, and who shocked deep-rooted free-trade convictions to the core. He helped to launch a whole new era of thought and action; and the next chapter of its progress was now to be recorded under circumstances pregnant with meaning for the whole universe of trade.
The second winter of war had passed, and with it much of the dark night that enshrouded the Allies' arms. On land and sea rained the first blows of the great assaults that were to make a summer of content for the Entente cause. Its arsenals teemed with shells; its men were fit; victory, however distant, seemed at last assured. The time had come to prepare a new kind of drive—the combined attack upon enemy trade and any other that happened to be in the way.
Thus it came about that on a brilliant sun-lit day last June twoscore men sat round a long table in a stately room of a palace that overlooked the Seine, in Paris. Eminent lawmakers—Hughes, of Australia, among them—were there aplenty; but few practical business men.
On the walls hung the trade maps of the world; spread before them were the red-dotted diagrams that showed the water highways where traffic flowed in happier and serener days. For coming generations of business everywhere it was a fateful meeting because the now famous Economic Conference of the Allies was about to reshape those maps and change the channels of commerce.
All the while, and less than a hundred miles away, Verdun seethed with death; still nearer brewed the storm of the Somme.
These men were assembled to fix the price of all this blood and sacrifice, and they did. In what has come to be known as the Paris Pact they bound themselves together by economic ties and pledged themselves to present a united economic front. They unfurled the banner of aggressive reprisal with the sole object of crushing the one-time business supremacy of their foes.
The chief recommendations were: To meet, by tariff discrimination, boycott or otherwise, any individual or organised trade advance of the Central Powers—already Germany, Austria, Turkey and Bulgaria have reached a commercial understanding; to forego any "favoured-nation" relation with the enemy for an indefinite period; to conserve for themselves, "before all others," their natural resources during the period of reconstruction; to make themselves independent of enemy countries in the raw materials and manufactured products essential to their economic well-being; and to facilitate this exchange by preferential trade among themselves, and by special and state subsidies to shipping, railroads and telegraphs. Another important decree prohibits the enemy from engaging in certain industries and professions, such as dyestuffs, in allied countries when these industries relate to national defence or economic independence.
In short, self-sufficiency became the aim of the whole allied group, to be achieved without the aid or consent of any other nation or group of nations, be they friends or foes.
Here, then, is the strategy that will rule after the war. A huge allied monopoly is projected—a sort of monster militant trust, with cabinets of ministers for directorates, armies and navies as trade scouts, and whole roused citizenships for salesmen.
Throughout this new Bill of World Trade Rights there is scant mention of neutrals—no reference at all to the greatest of non-belligerent nations. Yet the document is packed with interest, fraught even with highest concern, for us. Upon the ability to be translated into offensive and defensive reality will depend a large part of our future international commercial relations.
Is the Paris Pact practical? Will it withstand the logical pressure of business demand and supply when the war is ended? How will it affect American trade?
To try to get the answer I talked with many men in England and France who were intimately concerned. Some had sat in the conference; others had helped to shape its approach; still others were dedicated to its far-spreading purpose. I found an astonishing conflict of opinion. Even those who had attended this most momentous of all economic conferences were sceptical about complete results. Yet no one questioned the intent to smash enemy trade. Will our interests be pinched at the same time?
Regardless of what any European statesman may say to the contrary, one deduction of supreme significance to us arises out of the whole proposition. Summed up, it is this:
Mutual preference by or for the members of either of the great European alliances automatically creates a discrimination against those outside! Whether we face the Teuton or the Allies' group—or both—in the grand economic line-up, we shall have to fight for commercial privileges that once knew no ban.
There are two well-defined beliefs about the practical working out of the pact as a pact. Let us take the objections first. They find expression in a strong body of opinion that the whole procedure is both unhuman and uneconomic—a campaign document, as it were, conceived in the heat and passion of a great war, projected for political effect in cementing the allied lines. In short, it is what business men would call a glorified and stimulated "selling talk," framed to sell good will between the nations that now propose to carry war to shop and mill and mine.
"But," as a celebrated British economist said to me in London, "while all this talk of Economic Alliance sounds well and is serving its purpose, the fact must not be overlooked that, though war ends, business keeps right on. Self-interest will dictate the policy that pays the best." This is a typical comment.
Now we get to the meat of the matter: By the terms of the pact half a dozen important nations—to say nothing of the smaller fry—are bound to a hard-and-fast trade agreement. Business, in brief, is projected in terms of nations.
Go behind this new battle front and you will find that it conflicts with an uncompromising commercial rule. Why? Simply because, so far as business is concerned, nations may propose, but human beings dispose. Individuals, not countries, do business! Being human, these individuals are apt to follow the line of least resistance. Hence, the best-laid plans for imposing international industrial teamwork are likely to founder on those weaknesses of human nature that begin and end in the pocketbook.
After the Franco-Prussian War of 1870-71, and while the Peace of Versailles was being negotiated, commercial travellers of each nation, laden with samples, filled the border villages, ready to dash across the frontier and open accounts. Of course no one dreams that such history will repeat itself after the present war; but there are many persons in England and France to-day who contend that the business needs of peace will be stronger than the costly hang-over of wartime passions.
Trade, after all, is a Colossus that rests with one foot upon Necessity and the other foot upon Convenience.
Will the Allies be such valued commercial helpmates to each other? Perhaps not. When this war is over the fighting countries will be impoverished by years of drain and waste. As a result, they will be poorer customers for each other, but very sharp competitors. International trade is merely an exchange of goods for goods. You cannot sell without buying, and vice versa. No groups of nations can live by taking in each other's washing. They are bound to get outside linen. When peace comes we shall have the lending and purchasing power of the world. Can anybody afford to shut us out?
Again: Can the Allies present a united front or carry on a uniform line of conduct? Will not their interests overlap and cause an inevitable conflict, even when intentions are of the very best?
France, for example, competes with England in chemicals, surgical instruments, high-speed tools, scores of things; Russia's competitors in wheat are not Germany, but Canada, India and Australia; Italy and France are rivals for the same wine markets. Russia for years has kept down the high cost of her living by buying cheap German goods at her front door and having her projects financed by German capital. Will she face bankruptcy by going hundreds—even thousands—of miles out of her way and paying more for products? England for years has made huge profits out of the re-export of Teutonic articles, thanks to the grace of free trade and huge carrying power. Is she likely to forego all this?
In the last analysis Propinquity and the Purse are the Mothers of Trade Alliance.
Finally, will not any organised exclusion of German products, coupled with a definite and organised campaign to throttle German trade the world over, throw the business of the Kaiser's country smack into the lap of the United States? Sober reflection over these possibilities may stay economic reprisal.
On the other hand, there are many ways by which even a near translation of the economic pact into actuality may work hardship—even disaster—to American commercial interests. No matter which way we turn when peace comes we shall face the proverbial millstones in the shape of two great alliances. One is the Allied Group, jealous of our new wealth and world power, bitter with the belief that we have coined gold out of agony; the other is the Teutonic Union, smarting because of our aid to its enemies, stinging under reverses, mad with a desire to recuperate.
Examine our trade relations with warring Europe and you see how hazardous a shift in old-time relations would be. To the fighting peoples and their colonies in normal times we send nearly seventy-eight per cent of our exports, and from them we derive seventy per cent of our exports. The Allies alone, principally England and her colonies, get sixty-three per cent of these exports and send us fifty-four per cent of all we get from foreign lands.
As the National Foreign-Trade Council of the United States points out: "Any sweeping change of tariff, navigation or financial policy on the part of either group of the Allies, and particularly on the part of the Entente Allies, may seriously affect the domestic prosperity of the United States, in which foreign trade is a vital element."
Why is this foreign trade so vital? Because, during these last two years of world upheaval we have rolled up the immense favourable trade balance of over three billion dollars. In peace time this would be paid for in merchandise. But fighting Europe's industries, with the exception of a part of England's, are mobilised for munitions. Therefore, these goods have been paid for largely in gold.
This gold is now part of our basis of credit. When the war ends Europe will make every effort that ingenuity, backed up by trade resource, can devise to get that gold back. One way is through loans from us; the other is by exports to us. Now you see why we must maintain our foreign commerce.
Our huge gold reserve hides another menace: The war demands for our commodities, paid for with the yellow metal, have increased the cost of production; and it will stay up. This will lead to an unequal competition with the cheap labour markets of Europe when the war is over. Both groups of Allies will be able to undersell us.
Turn to the raw materials and you encounter a further danger in the economic pact. If the Allies develop their own sources, it will cut down our export of cotton, copper and oil. If they cannot develop sufficient sources for self-supply they may, through co-operative buying outside their dominions, satisfy their needs. In the third place, they may stimulate, through tariff or shipping concessions, or by subsidies—which are much talked of in Europe to-day—a preference for their own manufactures over American products in both allied and neutral markets.
Take navigation: England controls an immense shipping. As a matter of fact, outside the three-mile limit, she practically owns the waters of the world. If she makes lower rates for her allies, or others to whom she gives preference, where shall we be in our chronic and unpardonable dependence upon foreign bottoms? Here is where we shall pay the price for neglecting our merchant marine.
Still another menace to our trade lies in preferential alliances between Mother Countries and their colonies, which is part of the projected programme. Our next-door neighbour, Canada, has just given an illuminating instance of what may be in store for us. A Co-operative Export Association has been formed in the Dominion to get business throughout the British Empire and the other allied nations. In the circular announcing its organisation it declares that "the products of Canada will be preferred against the products of her great neutral competitor, the United States, who has stayed outside of the war and has borne no sacrifice of life and money made by the allied countries."
Return to the economic pact again and you find that it continues to bristle with dangerous possibilities for us. You will recall that one of the clauses forbids the resumption of a favoured-nation arrangement with enemy countries for a period "to be fixed by mutual agreement." This may be for an indefinite time.
Now the danger here lies in the European interpretation of the favoured-nation idea. To quote an authority: "Most of these countries have treaties under which each must grant most-favoured-nation treatment to the other; and this means that a reduction in duties granted to one country is automatically extended to all other countries with whom such treaties exist. The result is that the lowest rate in any treaty becomes, with exception, the rate extended to all countries."
We have the favoured-nation relation with many European countries, and herein lies the possible danger: The war automatically annulled all treaties between belligerents. When the day of treaty making comes again shall we suffer for the sins of friend and foe in the rearrangement of international trade and lose some precious commercial privileges? It is worth thinking about.
Meantime, regardless of how the economic pact works out, England's policy is "Deeds, not Words," as she prepares for the time when normal life and business succeed the strain and frenzy of fighting days.
No man can range up and down the British Isles to-day without catching the thrill of a galvanic awakening, or feeling an imperial heartbeat that proclaims a people roused and alive to what the future holds and means. The kingdom is a mighty crucible out of which will emerge a new England determined to come back to her old industrial authority. It is with England that our commerce must reckon; it is English competition that will grapple with Yankee enterprise wherever the trade winds blow.
There are many reasons why. "For England," as one man has put it, "victory must mean prosperity. However triumphant she may be in arms, her future lies in a preeminence in world industries. Through it she will rise as an empire or sink to a second-rate nation."
In the second place, as all hope of indemnity fades, England realises that she will not only have to pay all her own bills but likewise some of the bills of her allies. Already her millions have been poured into the allied defence; many more must follow.
Hence, the relentless energy of her throbbing mills; the searching appraisal of her resources; the marshalling of all her genius of trade conquest. Dominating all this is the kindling idea of a self-contained empire, linked with the slogan: "Home Patronage of Home Product." The war found her unprepared to fight; she is determined that peace shall see her fit for economic battle.
This is what she is doing and every act has a meaning all its own for us. Take Industry: Forty-eight hundred government-controlled factories, working day and night, are sending out a ceaseless flood of war supplies. The old bars of restricted output are down; the old sex discrimination has faded away. Women are doing men's work, getting men's pay, making themselves useful and necessary cogs in the productive machine. They will neither quit nor lose their cunning when peace comes.
I have watched the inspiring spectacle of some of these factories, have walked through their forest of American-made automatics, heard the hum of American tools as they pounded and drilled and ground the instruments of death. What does it signify? This: that quantity output of shot and shell for war means quantity output of motors and many other products for peace. You may say that quantity output is a matter of temperament and that the British nature cannot be adapted to it; but speeded-up munitions making has proved the contrary. The British workman has learned to his profit that it pays to step lively. High war wages have accustomed him to luxuries he never enjoyed before, and he will not give them up. Unrestricted output has come to stay.
Five years ago the efficiency expert was regarded in England as an intruder and a quack; to use a stop watch on production was high crime and treason. To-day there are thousands of students of business science and factory management. In the spinning district girls in clogs sit alongside their foremen listening to lectures on how to save time and energy in work. Scores of old establishments are being reborn productively. There is the case of a famous chocolate works that before the war rebuffed an instructor in factory reorganisation. Last year it saw the light, hired an American expert, and to-day the output has been increased by twenty-five per cent.
The infant industries, growing out of the needs of war and the desire of self-sufficiency, are resting on the foundations of the new creed. "Speed up!" is the industrial cry, and with it goes a whole new scheme of national industrial education. The British youth will be taught a trade almost with his A-B-C's.
Formerly in England the standardisation of plan and product was almost unknown. For example, no matter how closely ships resembled each other in tonnage, structure or design, a separate drawing was made for each. Now on the Clyde the same specifications serve for twenty vessels. England has gone into the wholesale production; and what is true of ships in the stress of hungry war demand will be true of scores of articles for trade afterward. The old rule-of-thumb traditions that hampered expansion have gone into the discard, along with voluntary military service and the fetish of free trade.
Typical of the new methods is the standardisation of exports, which have increased steadily during the past year. In a room of the Building of the Board of Trade, down in Whitehall, and where the whole trade strategy of the war is worked out, I saw a significant diagram, streaked with purple and red lines, which shows the way it is done. The purple indicated the rosters of the great industries; the red, the number of men recruited from them for military service. No matter how the battle lines yearn for men, the workers in the factories that send goods across the sea are kept at their task. This diagram is the barometer. For exports keep up the rate of exchange and husband gold.
England is creating a whole new line of industrial defence. The manufacture of dyestuffs will illustrate: This process, which originated in England, was permitted to pass to the Germans, who practically got a world monopoly in it. Now England is determined that this and similar dependence must cease.
For dyemaking she has established a systematic co-operation among state, education and trade. In the University of Leeds a department in colour chemistry and dyeing has been established, to make researches and to give special facilities to firms entering the industry, all in the national interest. A huge, subsidised mother concern, known as British Dyes, Limited, has been formed, and it will take the place of the great dye trust of Germany, in which the government was a partner.
This procedure is being repeated in the launching of an optical-glass industry; this trade has also been in Teutonic hands. I could cite many other instances, but these will show the new spirit of British commercial enterprise and protection.
Everywhere nationalisation is the keynote of trade activity. Coal furnishes an instance: The collieries of the kingdom not only stoke the fires of myriad furnaces but drive the ships of a mighty marine. Through her control of coal England has one whip hand over her allies, for many of the French mines are in the occupied districts, and Italy's supply from Germany has stopped. Coal means life in war or peace. Now England proposes a state control of coal similar to that of railroads.
It spells fresh power over the neutral shipping that coals at British ports. If the government controls the coal it will be in a position to stipulate the use that the consumer shall make of it, and require him to call for his return cargo at specified ports. Such supervision in war may mean similar domination in peace—another bulwark for British control of the sea.
Throughout England all trade facilities are being broadened and bettered. The local Chambers of Commerce, whose chief function for years was solemnly to pass resolutions, have stirred out of their slumbers. The Birmingham body has formed a House of Commerce to stimulate and develop the commerce of the capital of the Midlands.
This stimulation at home is accompanied by a programme of trade extension abroad. The Board of Trade has granted a licence to the Latin-American Chamber of Commerce in Great Britain, formed to promote British trade in Central and South America and Mexico. Sections of the chamber are being organised for each of the important trades and industries in the kingdom, and committees named to enter into negotiations with every one of the Latin-American republics, where offices will be established in all important towns.
The Board of Trade has also learned the lesson of co-operation for foreign trade. As one result, British syndicates, composed of small manufacturers, who share the overhead cost, are forming to open up new markets the world over. These syndicates correspond with the familiar German Cartel, which did so much to plant German products wherever the sun shone.
England, too, has wiped out one other block to her trade expansion: For years many of her consuls were naturalised Germans. Many of them were trustworthy public servants. Others, true to the promptings of birth, diverted trade to their Fatherland. To-day the Consular Service is purged of Teutonic blood. It is one more evidence of the gospel of "England for the English!"
All this new trade expansion cannot be achieved without the real sinew of war, which is capital. Here, too, England is awake to the emergency. Typical of her plan of campaign is the projected British Trade Bank, which will provide facilities for oversea commercial development, and which will not conflict with the work ordinarily done by the joint-stock, colonial and British foreign banks. It will do for British foreign trade what the huge German combinations of capital did so long and so effectively for Teuton commerce. Furthermore, it will make a close corporation of finance and trade, with the government sitting in the board of directors and lending all the aid that imperial support can bestow.
The bank will be capitalised at fifty million dollars. It will not accept deposits subject to call at short notice, which means constant mobilisation of resources; it will open accounts only with those who propose to make use of its oversea machinery; it will specialise in credits for clients abroad, and it will become the centre of syndicate operations. One of its chief purposes, I might add, will be to enable the British manufacturer and exporter to assume profitably the long credits so much desired in foreign trade.
From the confidential report of its organisation let me quote one illuminating paragraph which is full of suggestion for American banking, for it shows the new idea of British preparedness for world business. Here it is:
"Nearly as important as the Board would be the General Staff. It is fair to assume that women will in the future take a considerable share in purely clerical work, and this fact will enable the institution to take fuller advantage of the qualifications of its male staff to push its affairs in every quarter of the globe. Youths should not be engaged without a language qualification, and after a few years' training they should be sent abroad. It could probably be arranged that associated banks abroad would agree to employ at each of their principal branches one of the Institution's clerks, not necessarily to remain there for an indefinite period, but to get a knowledge of the trade and characteristics of the country. Such clerks might in many cases sever their connection with the banks to which they were appointed and start in business on their own account. They would, however, probably look upon the institution as their 'Alma Mater,' Every endeavour should be made to promote esprit de corps; and where exceptional ability is developed it should be ungrudgingly rewarded. If industry is to be extended it is essential that British products should be pushed; and manufacturers, merchants and bankers must combine to push them. It is believed that this pushing could be assisted by the creation of a body of young business men in the way above described."
The scope and purpose of this British Trade Bank suggest another East India Company with all the possibilities of gold and glory which attended that romantic eighteenth-century enterprise. Perhaps another Clive or a second Hastings is somewhere in the making.
That the British Government proposes to follow the German lead and definitely go into business—thus reversing its tradition of aloofness from financial enterprise—is shown in the new British and Italian Corporation, formed to establish close economic relations between Britain and Italy. It starts a whole era in British banking, for it means the subsidising of a private undertaking out of national funds.
It embodies a meaning that goes deeper and travels much farther than this. Up to the outbreak of the great war Germany was the banker of Italy. Cities like Milan and Rome were almost completely in the grip of the Teutonic lender, and his country cashed in strong on this surest and hardest of all dominations. This was the one big reason why the Italian declaration of war against Germany was so long delayed. With this new banking corporation England not only supplants the German influence but forges the economic irons that will bind Italy to her.
The capital of the British and Italian Corporation is nominally only five million dollars. The government, however, agrees to contribute during each of the first ten years of its existence the sum of two hundred and fifty thousand dollars. Though imperial stimulation of trade is one of its main objects, this institution is not without its larger political value. As this and many other similar enterprises show, politics and world trade, so far as Great Britain is concerned, will hereafter be closely interwoven.
Throughout all this British organisation runs the increasing purpose of an Empire Self-Contained. Whether that phase of the Paris Pact which calls for development and mobilisation of natural resources sees the light of reality or not, Britain is determined to take no chances for her own. She is scouring and searching the world for new fields and new supplies. She is planning to increase her tea and coffee growing in Ceylon and make cotton plantations of huge tracts in India and Africa. The control of the metal fields of Australia has reverted to her hands; she will get tungsten and oil from Burma. It took the war to make her realise that, with the exception of the United States, Cuba and Hawaii, all the sugar-cane areas of the world are within the imperial confines. They will now become part of the Empire of Self-Supply. Even a partial carrying out of this far-flung plan is bound seriously to affect our whole export business.
You have seen how this self-contained idea may work abroad. Go back to England and you find it forecasting an agricultural revolution that may be one of the after-war miracles.
For many years England has raised about twenty per cent of her wheat supplies. One reason was her dependence on grass instead of arable land; another was the inherent objection of the British farmer to adopt scientific methods of soil cultivation or engage in co-operative marketing. The old way was the best way; he wanted to go "on his own."
The war has opened his eyes, and likewise the eyes and purse of the ultimate consumer. Denmark did some of this awakening. England depended upon her for enormous supplies of bacon, cheese, butter and eggs. When the war broke out and the ring of steel hemmed Germany in, the speculative prices offered by the Fatherland were too much for the little domain. Holland also "let down" her old customer, poured her food into Germany, and fattened on immense profits. Norway and Sweden, which were also important sources of more or less perishable British food supplies, have done the same thing. When peace comes you may be sure that England will have a reckoning.
This scarcity of food, coupled with the incessant sinking of supply ships by enemy submarines, the rigid censorship of imports, and all those other factors that bring about the high cost of war, has made the Englishman sit up and take notice of his agricultural plight.
"We must grow more of our food," is the new determination. To achieve it plans for collective marketing, for intensive farming, for co-operative land-credit banks, are being made. The gentleman farmer will become a working farmer.
England's gospel of self-sufficiency has a significance for us that extends far beyond her growing independence in foodstuffs and raw materials. It is fashioning a weapon aimed straight at the heart of our overseas industrial development.
Most people who read the newspapers know that many articles of American make, ranging from bathtubs to motor cars, have been excluded from England. The reasons for this—which are all logical—are the necessity for cutting down imports to protect the trade balance and keep the gold at home; the need of ship tonnage for food and war supplies; and the campaign to curtail luxury.
Admirable as are these reasons, there is a growing feeling among Americans doing business in England that this wartime prohibition, which is part of the programme of military necessity, is the prelude to a more permanent, if less drastic, exclusion when peace comes.
Habit is strong with Englishmen, and the shrewd insular manufacturer has been quick to see the opportunities for advancement that lie in this closed-door campaign.
"Get the consumer out of the habit of using a certain American product during the war," he argues, "and when the war is over—even before—he will be a good 'prospect' for the English substitute."
Here is a concrete story that will illustrate how the exclusion works and what lies behind:
Last summer a certain well-known American machine, whose gross annual business in Great Britain alone amounts to more than half a million dollars a year, was suddenly denied entrance into the kingdom. When the managing director protested that it was a necessity in hundreds of British ships he was told that it made no difference.
"But what are the reasons for exclusion?" he asked.
"We don't want English money to go out of England," was the reply.
"Then we shall not only bank all our receipts here but will bring over one hundred thousand pounds more," came from the director.
It had no effect.
"Is it tonnage?" was the next query.
"Yes," said the official.
"Then we shall ship machines in our president's yacht," was the ready response.
This staggered the official. After a long discussion the director received permission to bring in what machines were on the way; and, also, he got a date for a second hearing.
Meantime he adapted a type of machine to the needs of a certain department in the Board of Trade, sold two, and got them installed and working before he next appeared before the Trade Censors, who, by the way, knew absolutely nothing at all about the article they were prohibiting. The first question popped to him was:
"Are machines like yours made in England?"
"Yes," replied the director; "but they have never been practical or commercial."
Then he produced the record of the machines he had sold to the government. Each one saved the labour of eight persons and considerable office space. This made a distinct impression and the company got permission to import two hundred tons of their product. But not even an application for more can be filed until the first of next year. Only the dire necessity for this article, coupled with the fact that it is without British competition, got it over.
I cite this incident to show what many Americans in England believe to be one of the real reasons behind the prohibition, which, summed up, is simply this: England is trying to keep out everything that competes with anything that is made in England or that can be made in England!
For some time after the war began our motor cars went in free. Then followed an ad-valorem duty of thirty-three and a third per cent. Despite this handicap, agents were able to sell American machines, which were both popular and serviceable. The tariff was imposed ostensibly to cut down imports, but mainly to please the British motor manufacturers, who claimed that the surrender of their factories to the government for making munitions left the automobile market at the mercy of the American product, which meant loss of goodwill.
Subsequently a complete embargo was placed on the entry of American pleasure cars and the business practically came to a standstill. What is the result? Let the agent of a well-known popular-priced American car tell his story.
"Before the war and up to the time of the embargo," he said, "I was selling a good many American automobiles. With the embargo on cars also came a prohibition of spare parts. It was absolutely impossible to get any into the country. Many of my customers wanted replacements, and, when I could not furnish them, they abandoned the cars I sold them and bought English-made machines whose parts could be replaced."
All through the motor business in England I found a strong disposition on the part of the British manufacturer and dealer to create a market for his own car as soon as the war is over. Some even talked of a large output of low-priced machines to meet the competition of the familiar car that put the automobile joke on the map. The only American comeback to this growing prejudice is to build factories or assembling plants within the British Isles. This will save excessive freight rates, keep down the costly-tariff "overhead," and get the benefit of all the goodwill accruing from the employment of British labour.
A by-product of British exclusion is the inauguration of a Made-in-England campaign. Buy a hat in Regent Street or Oxford Street and you see stamped on the inside band the words, "British Manufacture." This English crusade is more likely to succeed than our Made-in-U.S.A. attempt, for the simple reason that the government is squarely behind it.
This same spirit dominates newspaper publicity. You find a British fountain pen glowingly proclaimed in a big display advertisement, illustrated with the picture of men trundling boxes of gold down to a waiting steamer. Alongside are these words:
"The man who buys a foreign-made fountain pen is paying away gold, even if the money he hands across the counter is a Treasury note. The British shop may get the paper; the foreign manufacturer gets gold for all the pens he sends over here. What is the sense of carrying an empty sovereign-purse in one pocket if you put a foreign-made fountain pen in another?"
Behind all this British exclusion is an old prejudice against our wares. There has never been any secret about it. I found a large body of opinion headed by brilliant men who have bidden farewell to the Hands-Across-the-Sea sentiment; who have little faith in the theory that blood is thicker than water when it comes to a keen commercial clash.
What of the human element behind the whole British awakening? Will organised labour, an ancient sore on the British body, rise up and complicate these well-laid schemes for economic expansion? As with the question of practicability of the Paris Pact, there is a wide difference of opinion.
On one hand, you find the air full of the menace of post-war unemployment and the problem of replacing the woman worker by the man who went away to fight. To offset this, however, there will be the undoubted scarcity of male help due to battle or disease, and the inevitable emigration of the soldier, desirous of a free and open life, to the Colonies.
On the other hand, there is the conviction that unrestricted output, having registered its golden returns, will be the rule, not the exception, among the English artisans. England's frenzied desire for economic authority proclaims a job for everybody.
I asked a member of the British Cabinet, a man perhaps better qualified than any other in England to speak on this subject, to sum up the whole after-war labour situation, as he saw it, and his epigrammatic reply was:
"After the war capital will be ungrudging in its remuneration to labour; and labour, in turn, must be ungrudging in its output."
No one doubts that after the war the British worker will have his full share of profits. As one large manufacturer told me: "We have so gotten into the habit of turning our profits over to the government that it will be easy to divide with our employees." Here may be the panacea for the whole English labour ill.
But, whatever may be the readjustment of this labour problem, one thing is certain: Peace will find a disciplined England. The five million men, trained to military service, will dominate the new English life; and this means that it will be orderly and productive.
With this discipline will come a democracy—social and industrial—such as England has never known. The comradeship between peer and valet, master and man, born of common danger under fire, will find renewal, in part at least, when they go back to their respective tasks. This wiping out of caste in shop, mill and counting room will likewise remove one of the old barriers to the larger prosperity.
England wants the closest trade relations with her Dominions. But will the Colonies accept the idea of a fiscal union of empire, which practically means intercolonial free trade? Or will they want to protect their own industries, even against the Mother Country? Like the French, they are willing to risk life and limb for a cause, but they likewise want to guard jealously their purse and products. They have not forgotten the click when Churchill locked the home door against them.
This leads to the question that is agitating all England: Will peace bring tariff reform? Both English and American economic destiny will be affected by the decision, whatever it may be.
Canvass England and you encounter a widespread movement that means, as the advocates see it, a broadening of the home market; security for the infant "key" industries; a safeguard for British labour—in short, the end of the old inequality of a Free England against a Protected Germany.
Protection in England, hitched to a world-wide freeze-out business campaign against Germany, would doubtless divert a whole new international discount business to New York. German exporters under these circumstances might refuse payments from their other customers on London, demanding bills on New York instead. To hold this business, however, we should need direct banking and cable connections with all the grand divisions of trade, adequate sea-carrying power, dollar credits, and a government friendly to business.
Then, there is the middle English ground which demands a "tariff for revenue only," and subsidy—not protection—for the new industries.
Combating all this is the dyed-in-the-bone free trader, who points to the fact that free trade made England the richest of the Allies and gave her control of the sea. "How can a nation that is one huge seaport, and which lives by foreign trade, ever be a protectionist?" he asks.
If he has his way we shall have to struggle harder for our share of universal business. More than this, it will block what is likely to be one of Germany's schemes for rehabilitation. Here is the possible procedure:
Germany's financial position after the war will be badly strained. She can be saved only by an effective export policy. To do this she must seek all possible neutral markets; and to get them quickly she will offer broad—even extravagant—reciprocity programmes. They may conflict with the proposed Franco-British programmes of protection and embargo against neutral trade interests.
But if the Franco-British programme leaves the allied markets for goods and money open, as before the war, the German reciprocity scheme will fail of its effect by the sheer force of natural competition. Hence England can throttle the re-establishment of German credit by a free and liberal trade policy, open to all the world. Though poor, after the war she can actually be stronger, in view of her great army and navy, her new individual efficiency, and renewed commercial vitality.
Will all this keep Germany out? There are many people, even in England, who think not. Already Germans by the thousands are becoming naturalised citizens of Holland, Spain, Switzerland and Denmark; building factories there and shipping the product into the enemy strongholds, stamped with neutral names. Much of the "Swiss" chocolate you buy in Paris was made by Teutonic hands.
A French manufacturer who bought a grinding machine in Zurich the other day thought it looked familiar; and when he compared it with a picture in a German catalogue he found it was the identical article, made in Germany, which had been offered to him by a Frankfort firm six months before the war began. Only certificates of origin will bar out the German product.
Amid the hatred that the war has engendered, England wonders at the price she will pay for German exclusion. Men like Sir John Simon solemnly assert in Parliament: "In proportion as we divert German trade after the war we throw the trade of the Central European Powers more and more into the hands of America, with the result that, unhappily, if we became involved in another European war we should not be able to count on the friendly neutrality which America has shown in this war." Others inquire: "What of the future trade of India, the great part of whose cotton crop before the war went to Central Europe?"
Sober-minded and farseeing men, in England and elsewhere, believe that, despite the ravage of her men and trade, Germany will come back commercially.
"You must not forget," said one of them, "that, no matter how badly she is beaten, Germany will still be a going business concern. She will have an immense plant; her genius of efficiency and organisation cannot be killed. Through her magnificent industrial education system she has trained millions of boys to take the vacant stools and stands in shop and mill. England and France have no such reserves. Besides, if we pauperise Germany, no one—not even Belgium—will get a pound of indemnity."
You have now seen the moving picture of half a world in process of significant change, wrought by clash of arms, and facing a complete economic readjustment with peace. Whether the Paris Pact is practical or visionary, no matter if England is free trade or protectionist, regardless of Germany's ability to find herself industrially at once, one thing we do know—the end of the war will find the Empire of World Trade molten and in the remaking.
Fresh paths must be shaped; the race will be to the best-prepared. Whatever our position, be it neutral or belligerent—and no man can tell which now—we shall face a supreme test of our resource and our readiness. What can we do to meet this crisis, which will mean continued prosperity or costly reaction?
Many things; but they must be done now, when immunity from actual conflict gives us a merciful leeway. More than ever before, we shall face united business fronts. Therefore, co-operation among competitors is necessary to a successful foreign trade.
Since the coming trade war will rage round tariffs, it will be well to heed the resolution recently adopted by the National Foreign-Trade Council: "That the American tariff system, whatever be its underlying principle, shall possess adequate resources for the encouragement of the foreign trade of the United States by commercial treaties or agreements, or executive concessions within defined limits, and for its protection from undue discrimination in the markets of the world." In short, we must have a flexible and bargaining tariff.
We must train our men for foreign-trade fields; they must know alien languages as well as needs; we must perfect processes of packing that will deliver goods intact. With these goods, we must sell goodwill through service and contact. Secondhand-business getting will have no place in the new rivalry.
Our money, too, must go adventuring, and courage must combine with capital. Our dawning international banking system, which first saw the light in South America, needs world-wide expansion. Dollar credit will be a world necessity if we capitalise the opportunity that peace may bring us. No financial aid should be so welcome as ours, because it is nonpolitical.
This trade machinery will be inadequate if we have no merchant marine. Chronic failure to heed the warning for a national shipping will make our dependence upon foreign holds both acute and costly.
Our trade needs more than a government professedly friendly to business. It requires a definite co-operation with business. An advisory board of practical men of commercial affairs would be of more constructive benefit to the country than all the lawmakers combined.
Here, then, is the protection against organised European economic aggression, the armour for the inevitable trade conflict. Unless we gird it on, we shall be onlookers instead of participants.
III—American Business in France
Two Americans met by chance one day last summer at a little table in front of the Cafe de la Paix in Paris. One had arrived only a month before; the other was an old resident in France. After the fashion of their kind they became acquainted and began to talk. Before them passed a picturesque parade, brilliant with the uniforms of half a dozen nations, and streaked with the symbols of mourning that attested to the ravage of war.
"There is something wrong with these Frenchmen," said the first American.
"How is that?" asked his companion.
"It's like this," was the reply. "I have sold goods from the Atlantic to the Pacific, and yet I can get nowhere over here. I give these fellows the swiftest line of selling talk in the world and it makes no impression."
"How well do you speak French?" queried his new-found acquaintance.
"Not at all."
"Have you studied the ways and needs of the Frenchman?"
"Of course not. I've got something they want and they ought to take it."
The man who had long lived in France was silent for a moment. Then he said:
"The fault is not with the Frenchman, my friend. Think it over." He did, and with reflection he changed his method. He put a curb on strenuosity; started to study the French temperament; he began to see why he had not succeeded.
This incident illumines one of the strangest and most inconsistent situations in our foreign trade. By a curious irony we have failed to realise our commercial destiny in the one Allied Nation where real respect and affection for us remain. France—a sister Republic—is bound to us by sentimental ties and the kinship of a common struggle for liberty. Her people are warm-hearted and generous and want to do business with us.
Yet, as long and costly experience shows, we have almost gone out of our way to clash with their customs and misunderstand their motives. In short, we have neglected a great opportunity to develop a permanent and worth-while export business with them. It was bad enough before the war. Events since the outbreak of the monster conflict have emphasised it more keenly.
* * * * *
Why have Americans failed so signally in France? There are many reasons. First of all, their whole system of selling has been wrong.
For years many of our manufacturers were represented in Paris and elsewhere in France by German agents, who also represented producers in their own country. The energetic Teuton did not hesitate to install an American machine or a line of American goods. But what happened? When the machine part wore out or the stock of goods was exhausted, there was seldom any American product on hand to meet the swift and sometime impatient demand for replacement or renewal. By a strange "coincidence" there was always an abundant supply of German material available. The German salesman always saw to that. Necessity knows no nationality. The result invariably was that German output supplanted the American. The Frenchman did not want to be caught the second time.
This prompt renewal created an immense goodwill for German goods. Right here is one of the first big lessons for the American exporter to learn, no matter what country he expects to sell in. It lies in keeping goods "on the shelf," and being able to meet emergency demand.
The Frenchman in trade is a sort of Missourian. He must be "shown." He shies at samples; distrusts drawings. He likes to go into a warehouse and look over stocks; it gives him satisfaction to pick and choose. He is the most fastidious buyer in the world and he likes to do things his own way. Any attempt to ram foreign methods—either in buying or selling—down his sensitive throat is bound to react.
Here is a case in point: The General Representative in France of a large American manufacturing concern decided to engage some French salesmen. He was a shark on business system; he fairly oozed with "scientific salesmanship"; he decided to gird his Gallic emissaries with the most improved American selling methods. So he prepared an elaborate "What I did" schedule for them. Into it was to be written every evening the complete record of the business day.
When he handed one of these blanks to his leading French salesman, that gentleman shrugged his shoulders and said:
"It eez imposseeble."
When the American became insistent all the French salesmen resigned in a body. This objection was purely temperamental. If there is one thing above all others that puts a Frenchman into panic it is publicity of his personal affairs. He believes that the greatest crime in the world is to be found out, whether in business or in love. There was nothing perhaps to hide in a biography of his daily work, but it was the wrong tack to take.
In the same way militant and masterful salesmanship also fails. A man may be a crack seller in Kansas City, Denver, and all points West, but he finds to his sorrow that his dynamic process goes straight over the head of a Frenchman. He refuses to be driven; he wants time for mature reflection and an opportunity to talk the thing over with his wife.
This irritating attempt to force uncongenial methods on French buyers is duplicated in a corresponding lack of plain everyday intelligence in meeting the simplest French requirements.
Indeed, the omissions of Americans are wellnigh incredible. Take the matter of postage to France. The head of a great French concern made this statement to me in sober earnestness: "Won't you be good enough to beg American manufacturers to put their office boys through a course of instruction in postal rates between Europe and the United States?"
When I asked him the reason he said: "We sometimes get twenty letters from America in one mail and each comes under a two cent stamp. This has been going on for years despite our repeated protest about it. Some months my firm was required to pay from ten to fifteen dollars in excess postage."
Now the amount of money involved in this transaction is the slightest feature: it is the chronic laxity and carelessness of the American business man that gets on the Frenchman's nerve.
Here is another case in point: A well known French firm has been writing weekly letters for the past eighteen months to a New England factory trying to persuade the Manager to mark his export cases with a stencil plate and in ink rather than with a heavy lead pencil, as the latter marking is almost obliterated by the time the shipment arrives at Havre. In fact, this French firm went to the extent of sending a stencil and brush to New England to be used in marking the firm's cases. But the old pencil habit is too strong and a weekly hunt has to be instituted on the French docks for odd cases containing valuable consignments of machine tools. Vexatious delays result. It is just one more nail that the heedless American manufacturer drives into the coffin of his French business.
These incidents and many more that I could cite, are merely the approach, however, to a succession of mistakes that make you wonder if so-called Yankee enterprise gets stage fright or "cold feet" as soon as it comes in contact with French commercial possibilities. Let me now tell the prize story of neglected trade opportunity.
Last spring the American Commercial Attache in Paris made a speech at a dinner in Philadelphia. He painted such a glowing picture of trade prospects in France that the head of one of the greatest hardware concerns in America, who happened to be present, came to him afterwards with enthusiasm and said: "We want to get some of that foreign business you talked about and we will do everything in our power to land it. Help us if you can."
The Attache promised that he would and returned to his post in Paris. He studied the hardware situation and found a tremendous need for our goods. He was about to make a report to the hardware manufacturer when an alert upstanding young American breezed into his office and said:
"I have been looking into the hardware situation here and I find that there is a big chance for us. In fact, I have already booked some fat orders. Will you put me in touch with the right people in America to handle the business?"
"Certainly," replied the Attache. "I know just the firm you are looking for." He recalled the enthusiastic remarks of the man who came to him after the Philadelphia speech, so he said: "Write to the Blank Hardware Company in ——, and I am sure you will get quick action."
"No," said the enterprising young American, "I will cable." He immediately got off a long wire telling what orders he had and giving gilt edge banking references.
Quite naturally he expected a cable reply, but he was too optimistic. Day after day passed amid a great silence from America. At the end of two weeks he received a letter from the Export Manager of the firm who said, among other things: "We are not prepared to quote any prices for the French trade now. We have decided to wait with any extension of our foreign business until after the war. Meanwhile you might call on our agent in Paris who may be able to do something for you."
The young American dashed up to the agent's warehouse. The agent was an old man becalmed in a sea of empty space. All his young men were off at the front; a few grey beards aided by some women comprised his working staff.
"I have no American hardware in stock," he said, "but I may be able to get you some English or Swiss goods." This did not appeal to the young American. He is now making a study of Russian finance.
Full brother to this episode is the experience of another American in Paris who found out that there was great need among French women for curling irons. Despite war, sacrifice and sudden death, the French woman is determined to look her best. Besides, she is earning more money than ever before and buying more luxuries. Knowing these facts, the Yankee sent the following cable to a well known concern in the Middle West:
"Rush fifty thousand dollars' worth of curling irons. Cable acceptance." He also cabled his financial references which would have started a bank.
He, too, was doomed to disappointment. After a fortnight came the usual letter from America containing the now familiar phrase: "See Blank Blank, our Paris representative. He may be able to take care of you."
Manfully he went to see Monsieur Blank Blank, who not only had no curling irons but refused to display the slightest interest in them.
Still another American took an order for some kid skins, intended for the manufacture of fine shoe uppers. By the terms of the agreement they were to be three feet in width. The money for them amounting to $30,000 was deposited in a New York bank before shipment.
When the skins reached Paris they were found to be heavy, coarse leather and measuring five feet in width. They were absolutely useless for the desired purpose. The average French buyer, however, is not a welcher. He accepted the undesirable stuff, but with a comment in French that, translated into the frankest American, means, "Never again!"
All this oversight is aided and abetted by a twin evil, a lack of knowledge of the French language. Here you touch one of the chief obstacles in the way of our foreign business expansion everywhere. It has put the American salesman at the mercy of the interpreter, and since most interpreters are crooks, you can readily see the handicap under which the helpless commercial scout labours. A concrete episode will show what it costs:
A certain American firm, desirous of establishing a more or less permanent connection in France, sent over one of its principal officers. This man could not speak a word of French, so he secured the services of a so-called "interpreter guide." It was proposed to select a representative for the company from among a number of firms in a certain large French seaport. The firm chosen was to receive and pay for consignments through a local bank and act generally for the American company.
Friend "interpreter guide" said he knew all the big business houses in the city, so he selected a firm which the American accepted without making the slightest investigation. A bank agreed to take care of the shipments and the whole transaction was quickly concluded. The American grabbed the papers in the case (and I might add without the formality of having them examined by a third party) and left France immensely impressed with the ease and swiftness with which business could be transacted with that country.
But there was an unexpected and unfortunate sequel to this performance. A few months later another officer of this American company came post-haste to France to straighten out an ugly tangle. It developed that the French firm chosen by the "interpreter guide" was not of the highest standing: that the interpreter, for reasons and profits best known to himself, had entirely misrepresented the conversation, that instead of paying four per cent for services, the American firm was really paying about ten. The whole transaction had to be called off and a new one instituted at considerable expense of time and money.
Another American came to Paris without knowing the language, used an interpreter every day for nine weeks, and was unable to place a single order. Yet in this time he spent enough money on his language intermediary to pay the rent of a suitable office in Paris for a whole year.
The dependence of Americans with important interests or commissions upon interpreters is well nigh incredible. On the steamer that took me to France last summer was the new Continental Manager of a large American manufacturing company. I assumed, of course, that he could speak French. A few days after I arrived in Paris I met him in the Boulevard des Italiens in the grip of a five franc a day interpreter. He told me with great enthusiasm that an interpreter was "the greatest institution in the world." In six months he will probably reverse his opinion.
The lesson of this lack of knowledge of French as applied to salesmanship is this: That while the average Frenchman is greatly flattered when you tell him that his English is good, he prefers to talk business in his own vernacular. He thinks and calculates better in French. Frequently when you engage him in conversation in English and the question of business comes up, you find that he instinctively lapses into his mother tongue.
I was talking one day with Monsieur Ribot, the French Minister of Finance, whose English is almost above reproach, and who maintained the integrity of his English through a long conversation. But the moment I asked him a question about the proposed bond issue, he shifted into French and kept that key until every financial rock had been passed.
In short, you find that if you want to do business in France, you must know the French language. It is one of the keys to an understanding of the French temperament.
Even when Americans do become energetic in France, they sometimes fail to fortify themselves with important facts before entering into hard and fast transactions. As usual, they pay dearly for such omissions. This brings us to what might be called The Great American Deluge which overwhelmed not a few Yankee pocketbooks and left their owners sadder and saner.
Fully to understand this series of events, you must know that since the beginning of the war the question of an adequate French coal supply has been acute. Indeed, for a while the country faced a real crisis. Many of her mines are in the hands of the Germans and she was forced to turn to England for help. Not only has the English price risen, but to it must be added the high cost of transportation, the heavy war risk, and all those other details that enter into such negotiations.
France had to have coal and various enterprising Americans got on the job. At least, they thought they were enterprising. Before they got through, they wished that they had not been so headlong as the following tale, now to be unfolded, will indicate.
A group of New York men made a contract to deliver three shiploads of coal at Bordeaux at a certain price. After they had signed the contract, freight rates from Baltimore to the French port almost doubled. This was the first of their troubles. When their vessel finally reached Bordeaux, the dock was so crowded with ships unloading war munitions that they could not get pier space. In France demurrage begins the moment a ship stops outside of port. The net result was that these vessels were held up for nearly two weeks and the high price of transportation coupled with the very large demurrage practically wiped out all the profits.
Another group of Americans made a contract to deliver coal to a French railway "subject to call." Without taking the trouble to inquire just what "subject to call" meant in France, they signed and sealed the bargain. Then they discovered that the railroad wanted the coal delivered in irregular instalments. Meanwhile the consignors had to store the coal in French yards where space to-day is almost as valuable as a corner lot on Broadway. They were glad to pay a cash bonus and escape with their skin.
Still another group made a contract with the Paris Gas Company for a large quantity of coal. They discovered later that the company expected the coal to be delivered to their bins in Paris.
"But the American plan is to sell coal f.o.b. Norfolk," said the spokesman.
"We are sorry," replied the Frenchmen, "but the coal must be delivered to us in Paris. The English have been doing it for forty years, and if you expect to do business with us you must do likewise."
When the Americans demurred the company held them to their contract.
This last episode shows one of the great defects in the American system of doing business abroad. We insist upon the f.o.b. arrangement, that is, the price at the American point of shipment. The foreigner, and especially the Frenchman, wants a c.i.f. price which includes cost, insurance and freight and which puts the article down at his door. The German and English shippers, and particularly the former, have made this kind of shipment part of their export creed, and it is one reason why they have succeeded so wonderfully in the foreign field.
The Great American Coal Deluge also precipitated a flood of miserable titled ladies all selling coal for "well known American companies." Most of them were clever American women, married, or thinking they were married, to Italian or French noblemen. Their chief effort was to get a cash advance payment to bind the contract. Such details as price, transportation, credit, and other essentials were unimportant.
Here is a little story which shows how these women did business and undid American good will.
One day last August, the telephone rang in the office of the General Manager of a long established American concern in Paris. A woman was at the other end.
"Is this Mr. Blank?"
"I am Countess A. and I have a letter of introduction for you."
"I represent several large American coal companies and have secured a large order for Italy."
"Can you tell me how I can get the coal to Italy?"
"Splendid! But how?"
"Oh, yes, I know, but have you got the boats and can I get them? I have the order, you see, and that is the main thing."
"But, madam," asked the man, "have you cabled your company in America about the contract?"
"No," answered the woman. "What's the use of doing that. I have no money to spend on cables. Besides, I have full power to act. The price is all right and the buyers are ready to sign but they want to put into the agreement some silly business about delivery and I am asking you to help me get the boats."
"Come and see me," said the Manager.
The woman promised to call the next morning, but she never came. Just what she had in mind the Manager could never quite tell. But one thing was proved in this and similar activities: The "Countess" and most of her sisters who have been trying to put over coal and other contracts in Paris, have little or no real authorisation for their performances, and the principal result has been to prejudice French and Italian buyers against us.
In seeking to make French contracts, some of these adventurers (and they include both sexes) make the most extravagant claims. One group circulated a really startling prospectus. At the top was the imposing name of the corporation with a long list of branches in every part of the world. Then followed a list of names of individuals and firms with their assets supposed to be part and parcel of the corporation. One man whose name I had never heard before and who was set down as a Pittsburgher, was accredited with assets of $250,000,000. Under other individual and firm resources ranged from one to twenty-five million. The list included the name of a great American retail merchant, without his consent I might add, but the promoters had cunningly misspelled his name, which kept them within the pale of the law. The total assets of these "concerns personally responsible for all orders entrusted" was precisely $340,000,000. In spite of this dazzling array of misinformation, let it be said to the credit of the French buyer that he failed to fall for the glittering bait.
The more you go into the reasons why so many of our business men have failed in France, the more you find out that plain everyday business organisation seems to be conspicuously absent. Take, for example, the question of credit. The average American doing business in France proceeds in the assumption that every Frenchman is dishonest. This being his theory, he either exacts cash in advance or sells "cash against documents." Such a procedure galls the Frenchman who is accustomed to long credit from English, German, Swiss and Spanish manufacturers and merchants.
Of course, behind all these American errors in judgment and tact is a lack of organised credit information. To illustrate:
When I was in London, the English Managing Director of one of the greatest of Wall Street Banks received an inquiry from his home office for information about the Compagnie Generale Transatlantique (the French Line). The amazing thing was that this bank, that prides itself on its world-wide information, had no data regarding the leading steamship line between England and France. You may be sure that the Credit Lyonnais or any other French banking institution has a complete record of the American Line.
Not long ago, one of the largest banks in Chicago refused to extend credit to a French concern, although the French Government backed up the purchase. This concern had occasionally done business with a New York Trust Company in the Rue de la Paix, whose French Manager was a live, virile, far-seeing young American. The President of the French Company laid his case before him. Quick as a flash he said:
"All right! If they won't guarantee it, I will, and on my own responsibility."
Whereupon he put the deal through. It was the kind of swift, dramatic performance that appeals to the Frenchman. The net result was that the service has come back a hundredfold to the Trust Company.
The idea prevailing in America that French firms are not worthy of credit is a matter of great surprise all over Europe. Here is the way an Englishman whose firm has done business in France for fifty years, sized up the situation:
"There are no better contracts in the world than those entered into in France. Americans who have had little experience in such matters may find the negotiations leading up to the signing of a French contract somewhat tedious, but we do not mind this and one is so completely protected by the laws of the country, that losses are almost unknown.
"Not long ago we had a case in point. A purchaser of lathes who had already made an advance payment, received his machines and then by various excuses put off the final payments for the remainder from week to week. We waited four weeks and then made our complaint to the judge at the tribunal. Two days later the judge ordered the delinquent firm to pay up in full and we received our money the very same day. How long do you think a New York court would have taken to decide a simple question of business of this kind? The fact is that in spite of the war, French credit remains to-day as good as any you can find."
On top of their resentment over our lack of confidence in their credit is the added feeling which has cropped up since the beginning of the war over the way American manufacturers have ignored many of their French contracts. A French manufacturer summed it up in this way:
"There is no doubt that some American manufacturers who had signed contracts for the delivery of machinery in France, deliberately sold these machines at home at higher prices. It has created a very bad impression and I am afraid that henceforth your salesmen will find it much harder to operate in my country.
"The trouble is that Americans have been spoiled by too many orders. Before the war they were all crying out for business. Now that they have everything their own way, they have become independent and arrogant. With the ending of the war, all this will change, for the French are not likely to forget some of the bitter lessons they have learned. Henceforth they will profit by them."
One reason for our laxity all up and down the French business line is that the American has never taken the French export business any too seriously. On the other hand, stern necessity has been the driving force behind the English and German manufacturer. The American, too, has made the great mistake of assuming that the foreigner, and especially the Frenchman, is not always serious-minded and to be depended upon. If he wants his mind disabused in this matter, let me suggest that he see him at war. He will realise that the superb spirit of aggression and organisation that mark him now is bound to last when peace comes.
You must not get the impression from this long list of American business calamity that all our endeavour has failed in France. Those few great American corporations who have planted the flag of our commercial enterprise wherever the trade winds blow, have long and successfully held up their end throughout the Republic. So, too, with some individuals. The story of what one New Yorker did is an inspiring and perhaps helpful lesson in the right way to do business in France.
This man is resolute and resourceful: he speaks French fluently and he was familiar with the foreign trade field. With the outbreak of war he did not lose his head and try to get business indiscriminately. Instead, he made a careful survey of the field; he did not listen to the optimist who said it would be a short war: his instinct told him, on the contrary, that it would be a long one. "What will France need more than anything else?" he asked himself.
He realised that most of all France would need machine tools. He got the cables busy assembling goods, and by every known route he brought them to France. When he had a warehouse full of material, he began to sell. He not only had what the French were hungering for, but he had them to deliver overnight. While his colleagues were frantically trying to get their stuff in, he was getting all the business. The French like the man who makes good.
This man met their expectations and to-day he stands at the top of the selling heap.
More than this, he is building a factory on the outskirts of Paris where he will make and assemble his product. Ask him the reason why he is doing this, and he will tell you:
"First, it means good will; second, we will get the benefit of native and cheap labour; third, we will be able to replace parts at once; and, fourth, we will get inside the wall of the Economic Alliance."
IV—The New France
No matter how we heed the example of the few progressive Americans who have successfully planted their business interests in France, we will face a new handicap when the war ends. As in England, we will be bang up against an industrial awakening that will mark an epoch. Coupled with this revival will be an efficiency born of the war needs that will act as a tremendous speeder-up.
In France this galvanised industrial life will be stimulated by a brilliant imagination wholly lacking in the English temperament. It will go a long way toward opening up fresh fields of labour and distribution.
Self-sufficiency will be the keynote. The automobile is a striking instance. We had established a very promising motor market (and especially with moderate-and low-priced cars) among the French. When the Government assumed control of the French automobile factories and changed their output to war munitions, the two great automobile syndicates protested that the cutting off of the French motor supply would mean an immense loss of good will. First came a 70 per cent duty on practically all American cars and this was followed up by an almost complete restriction of all American cars.
This prohibition will have the same effect as the English exclusion in that it will stimulate the demand for the native French cars. Here we get to one of the striking phases of the new industrial development of immense concern to us. France has her eye on quantity output. Many signs point to it.
When the war broke out, a certain young French engineer saw great opportunity in shell making. He was immuned from military service, he had a little capital of his own, and with Government aid he set to work. Within four months he had built an enormous plant on the banks of the Seine almost within the shadow of the Eiffel Tower. In six months he had enlarged his capacity so that he was producing 15,000 shells a day. Last summer he sent for the agent of a large American machinery company: "I am going to make automobiles in series after the war." "In series" is the French way of expressing quantity output.
"All right," said the American. "What can I do for you?"
"Simply this," said the Frenchman. "I wish to order sufficient automatics to meet the demand when peace comes."
This is the spirit of the awakened French industry. I know of half a dozen automobile and other producing establishments who are making plans to manufacture popular-priced cars when the war is over. This output will not only affect the sale of American cars in France, but will also interfere with the market for our cheap machines in South America. Already France is making every effort to increase her Latin-American trade. She has immense sums of money invested in Brazil and she will follow up this advantage keenly.
It is important for us to remember that France like England will have a well oiled productive machine after the war. It will not only be better but bigger than ever before. The German ill wind that devastated the northern section will blow good in the end. Hundreds of factories operated by hand labour before the war will now be equipped with American labour-saving machinery. The products of these machines operated by cheap labour will be in competition with our own commodities manufactured by more expensive labour in many of the markets of the world.
Formerly the French artisan could produce an article almost from raw material to finished product: now he has learned to stand at an automatic and labour at a single part. In short, he is becoming a specialist which makes him a cog in the machine of quantity output.
What is true of machines and men is also true of money. The old wariness of the French banker in underwriting industry is passing away. He is thinking in terms of large figures and vast projects.
I could cite many examples of the new Gospel of French Self-Supply. Before the war France manufactured lathes that were beautiful examples of art and precision. The firms that made them were old and solid and took infinite pride in their product. Now they realise that output must dominate. A simple type of machine has been chosen as model and will henceforth be made in large quantities.
Then there is the sewing machine. Before the war two groups—Anglo-American and German—controlled the French market. By the ingenious use of export premiums, the Germans had the best of it.
"Why always pay tribute to strangers?" now asks the French housewife. So far as Germany is concerned, this question is already settled. But the American sewing machine will have to struggle for its existence hereafter in France, for plans have been made for at least three huge factories for its production.
Striking evidence of the growing French industrial independence of Germany is her advance in crucible making. For years Sevres vied with Limoges for ceramic honours. To-day the vast plant which once produced the most exquisite and delicate ware in the world is now producing the less lovely but more serviceable crucibles, condensers and retorts necessary for the distillation of the powerful acid used in modern high explosives. Previous to the war, the Central Empire had a monopoly on this market. Indeed, much of the pottery and glassware used in laboratories and chemical factories was made in Bohemia and marketed by Germany. Now the Sevres plant is shipping these goods to England and Russia.
So, too, with dye stuffs. A whole new French colouring industry is being created. A Societe d'Etude has been formed to make a scientific survey and this will be replaced by a National Company to undertake the manufacture of all coal tar products.
The use of a certain number of new war factories has been guaranteed to the company by the Minister of War. Typical of the purpose which will animate the enterprise is one of the articles of the National Company which provides that the Director of the Dye Stuff Industry must be of French birth. An agreement has also been made with England and Italy to protect the colour output of the three countries with a high tariff after the war. Here you find one tangible evidence of the working out of the Paris Economic Pact.
Even while the invader's hand still lies heavy upon the land, France looks ahead to reconstruction. Last summer Paris flocked to a graphic exhibition of how to rebuild a destroyed city. It was called La Cite Reconstitue, and was held in the Tuileries Garden. Here you could see the modern way of making a Phoenix rise quickly out of the ashes. There were model schoolhouses, churches, factories, and cottages, all with standardised parts which could be thrown together in an almost incredibly short time.
With Self-Sufficiency has come a desire for new business knowledge. Not long ago an American business man who has lived in Paris for many years, received a letter from a young French friend in the trenches at Verdun. The soldier wrote:
"I realise that when this war is over we must be better equipped than ever before to meet world business competition. I want to be a better salesman. Please send me some books on American salesmanship and also some of the American trade papers. I have begun the study of Spanish because I believe we are going to have our part in the Latin-American trade." Here was a young Frenchman risking his life every moment in one of the greatest battles the world has ever known: yet in the midst of death he was looking forward to a new business life.
The whole attitude of the Frenchman toward life has undergone a change, first under the stress of ruthless war, and under the spur of his kindling desire for rehabilitation. Formerly, for example, the French loathed to travel. When he knew he was going away on a journey, he spent a month telling his relatives good-bye. Now he packs his bag and is off in an hour to Lyon, Marseilles, Bordeaux, or any other place where business might dictate.