district. The Deutsche Bank held 16,797 shares, and the Diskontogesellschaft 10,280, out of a total holding of 1,289,195 shares in the Mount Lyell Company. In the Oroya Links, Limited, the Dresdner, Deutsche (London Branch), and Diskonto held respectively 16,590, 11,749 and 8923 shares out of a total of 1,150,000 shares. In the Amalgamated Zinc, Limited, the Diskonto held 4750 shares and the Deutsche 2310 out of 500,000. The South African field was also thoroughly exploited. In 1894 the Deutsche turned its attention in this direction and secured substantial interests in mining companies in South Africa, particularly in A. Goerz and Company, Limited; and the Darmstädter Bank later acquired a large parcel of shares in the African Metals Company, afterwards fused with the Consolidated Mines Selection Company, of London.

(4) They use their own capital, and the capital of the country concerned, for the monopolistic exploitation of an industry. According to Herr Jeidels (pp. 192-7) the German banks have sought to get into exclusively German hands the control of the petroleum supply in every part of the world, except the United States.

(5) They use their loans to advance German industry. The Diskonto stipulated that the rails for certain Russian railways should be delivered by the Dortmunder Union, and those for the Venezuelan Government by Krupp. A director of this bank declared that the German Foreign Office jealously watched the floating of loans by German banks and capitalists, and rightly exerted its influence to establish German banks and commercial houses abroad, in order that German industry might benefit from the expenditure of the loans (Jeidels, pp. 166-7).

Germany has made greater progress than any other country in technical education, and in the application of science to industry; and this in itself has aided infiltration by the banks. The vast development of electrical power in the sphere of German industry was made possible by the careful financial nursing of the banks at home; and the branches abroad were getting the same grip on all foreign industries requiring electrical machinery. This task was rendered the easier because, where a country is preeminent in the industries which depend upon technical science, success in one promotes

success in another with cumulative effect. In introducing chemical products and electrical equipment German financiers pressed the claims of other German wares. Thus the Allgemeine Elektrizitäts-Gesellschaft is related to a banking group representing over a hundred millions sterling; and this connexion assists in the promotion of Germany's foreign trade through two channels. First, organisations like the. A.E.G. and the Siemens Schuckert are in a position to extend any reasonable credit where they have confidence in an enterprise; and secondly, the banks finance many other undertakings in which electrical equipment is only one, though a very important, element.

What has been already said in regard to the German banks' direct participation in industrial enterprise will perhaps suggest that they were specially adapted for the work of financial penetration.' The characteristic feature of the 'great bank' system (das Grossbankentum) is the combining of numerous small banks, each working a particular field of operations independently of the other, into a bank oligarchy, centralised in Berlin but ramifying in influence all over the world. This has an important bearing on the 'industry-policy' of the 'great bank,' and consequently on its activities as a 'peaceful penetrator.' The concentration process in German industry and finance has created conditions under which banks and industrial magnates alike are interested in giving the German trader as much scope as possible to expand ' along national lines.' The combination in the German banking world to-day completes its course side by side with the developments most noticeable in those industries in which the Kartells are a dominant influence-the mining, coal, iron, and metal industries. Here the efforts of the banks to fit themselves into the tendency to concentration resulted, first, in a determination to extend their operations to related industries, especially the electrical and machine industries, and secondly, in increased attention to important products abroad, particularly minerals and ores.

These amalgamations in industry and finance are still proceeding in all directions. Electrical companies, coal syndicates, and chemical industries are

now

concentrating as a preparation for the renewal, with intensified energy, of the economic struggle after the war. The same fusion is noticeable in the banking world. The Diskonto is taking over five important provincial banks; and its capital and deposits, which in 1913 were 10,000,000l. and 33,000,000l. respectively, are now 15,500,000l. and 100,000,000l. The Dresdner is amalgamating with the Rheinisch-Westfälische Diskontogesellschaft (Aix-la-Chapelle) and the Märkische Bank. To-day its capital stands at 13,000,000l. and its deposits at over 100,000,000l. The Deutsche has made important absorptions and is still negotiating for further extensions. When the process is complete, its capital and deposits will exceed those of either of the above-mentioned institutions.

What is called 'long-term credit' (langfristiger Kredit) has developed into one of the most powerful levers of 'penetration' by German finance and industry. The system of taking deposits at long periods, not payable on demand, enables the German banks to invest considerable sums in industrial enterprise; but, in the main, they pursued their policy of financing industry by means of their large capital account and reserve funds. Nor should it be forgotten that, in granting these 'longterm credits,' whether to houses already established, or to an entirely new enterprise, the German bank in the one case had a profound knowledge of the history, resources, and methods of the given firm, and in the other the best available technical or expert advice. The possession of a large number of branches or agencies abroad is particularly useful to German firms and banking houses in allowing this form of credit, because the machinery used for applying the system required full information concerning the purchaser of the goods, and confidential intermediaries in every stage of the

transaction.

The report of the Deutsche Bank for 1902 refers to the very satisfactory results' yielded by the London branch; and the report for 1913 extols the great contribution of the German banks abroad to the development of German commerce 'on national lines.' The meaning of this phrase is explained in detail by Herr Edgar Jaffé (pp. 95-6). The primary aim of the German Vol. 231.-No. 458.

G

banks in London, he tells us, was to get into their own hands the business resulting from the financial settlements arising out of Germany's international trade. But this motive was strongly reinforced by the desire to use London as a financial centre to expand Germany's oversea trade. The London branches financed sound trade wherever an opportunity abroad presented itself, and granted credit to importers and exporters on conditions more accessible and more liquid than English institutions would allow. In this way they emancipated German firms from English banking houses, but they did something more. They secured a firm hold on a circle of English customers for German trade. According to Herr Jaffé, the appearance on the London money market of foreign banks evoked from the English financial world expressions of apprehension which their later success has probably justified. This is especially true of the three great banks' which have been able 'to effect a direct penetration into London's operations (direkt in die dortigen Geschäfte einzugreifen), and to assert themselves as a highly significant factor in these operations. Since the war several well-known German economists have written and spoken on the probable future position of the German banks, and especially on the part which they are destined to play in Weltfinanz. Their special aim, it is declared with remarkable unanimity, should be to oust London from its position as the centre of this world-finance, and thus emancipate Germany from the necessity of resorting to London at all for the purpose of effecting financial settlements.

Until the end of the 'eighties German bankers moved rather tentatively in regard to foreign enterprise. Since that date, however, they have methodically covered practically the whole globe with their agents. They have established abroad either a system of chain banks (daughter-institutions), or they have set up branches of their own in foreign countries.

German 'penetration of Russia is a subject on which it is difficult to speak within reasonable limits to-day. The whole policy, of course, was facilitated by the work of the numerous German traders who lived there and knew the country better even than did the Russians

themselves. But it was also materially promoted by the fact that the German banker and the German trader often began operations at the same time and entered upon a joint campaign for business. They were independent of foreign commission houses. The Mezhdnarodny Bank (Russian Bank for Foreign Trade) was in reality a German institution to a greater extent than the Banca Commerciale Italiana, and was one of the pioneers of German industrial expansion along national lines.' The International Bank was also completely controlled by the influence of German financial institutions, in which the Deutsche Bank predominated; but the Diskonto, the Bank für Handel und Industrie and Mendelssohn were well represented.

The activities of the Banca Commerciale Italiana, which Herr Johannes Kämpf, afterwards president of the Reichstag, helped to found, and of Herren Weil, Joel, and Toeplitz, its three guiding minds in Italy, have been too fully exposed by Giovanni Preziosi and Ezio M. Gray, to require elaboration now. These two acute students of Deutschtum and 'penetration' have shown that the Banca had taken complete possession of some of Italy's leading industries and shipping companies, virtually permitting them to exist only on condition that they did not contribute to the economic security of Italy in a way that would act detrimentally upon Germany's own industrial expansion.

Now it was largely the funds of the country 'penetrated' that the German bank used to promote German industry, which was a structure mainly reared on a foundation of credit. Just as the Germans through the Banca Commerciale used the money of the Italian people to control Italy's industrial development, so, working along different lines, Germans used British money to further German commercial interests. Bills drawn by them and discounted by their own banks were sent to London and there converted into ready money. The annual profits which the Deutsche Bank made out of London in acceptances alone were probably not less than 200,000l. On the outbreak of war the huge mass of acceptances which had been issued, and for which these London branches were responsible, presented a problem to our Government and our commercial