THE EVE OF THE WORLD WARTHE ARMS MERCHANTS
An ordinary firm may utilise all available means for securing business on profitable terms. Ordnance manufacturers, in the nature of things, adopt a similar policy ; but because the transactions are with the home and foreign governments, special objections are taken to methods which find numerous parallels in ordinary commercial life. A firm must study its customers and must maintain the closest possible touch with probable requirements. Some people will never understand business.
Arms and Explosives, journal of the British arms industry.
THE modern armament manufacturer is the result of the Machine Age. Rapid technological development and mass production in the arms industry raised the problem of markets and business methods. The sales methods which the arms merchants evolved in the course of time are fundamentally the same as those employed by Big Business everywhere. But because the arms merchants dealt so largely with governments, and because their activities so frequently involved both national and international politics, their business methods have been subjected to a much closer scrutiny. Many of these methods have already been touched upon ; they will be summarised here for purposes of emphasis and further elaboration.
The selection of directors is important in any business. In modern corporations the board of directors is, as a rule, chosen, not for detailed and expert knowledge of the business, but for influence and for window dressing. The president of the board of a powerful American bank recently declared that he knew personally less than half of his fellow directors of whom there were eighty-four.1 Their names, their connections, and their influence were to bring business and to inspire confidence.
The armament manufacturers follow the same practice, due regard being had to the special needs of their industry. In Great Britain they choose their directors from the nobility and from members of Parliament, the Army, or the Admiralty. These names will aid them in securing business, in establishing a front of respectability, and in silencing criticism.
In France, the armament manufacturers boards are made up largely of the great industrialists and bankers. All of these maintain very close relations with important members of the Chamber of Deputies. Many French political leaders are outstanding corporation lawyers, and this makes the tie between the arms makers and their best customer even closer.
In the United States the banker is the all-important person in industry. Hence, while few cases are known where an important government official or a member of Congress has been a director of an armament firm, all arms makers have important financial connections. In the Morgan group will be found the Du Pont Company, the Bethlehem Steel Corporation, the U.S. Steel Corporation, together with copper, oil, electric appliances, locomotive, telephone and telegraph interests. This tie-up also leads over into the great banks, including the National City, Corn Exchange, Chase National, etc. It is the Morgan group of corporation clients and banks which dominates the American arms industry.2
The most significant development in directorates, however, was the internationalisation of many boards of control. The recently published volume by Launay and Sennae, Les Relations Internationales des Industries de Guerre, deals largely with this subject. Alfred Nobel, for instance, the inventor of dynamite, located his companies in almost all parts of the world, from Sweden to South Africa, from Japan to South America. Most of these scattered interests were gathered into two huge trusts, the Nobel Dynamite Trust Company, which combined the German and English companies, and the Societe Centrale de Dynamite, which united the French, Swedish, Italian, Spanish, and South American companies. The boards of these two trusts were made up chiefly of Frenchmen, Englishmen, and Germans, but each country represented had one of its nationals among the directors.3
The Harvey United Steel Company was governed by a board made up of Germans, Englishmen, Americans, Frenchmen, and Italians.4 The Lonza Company of Switzerland was German owned, but had French, Austrian, Italian, and German directors.5 Dillingen, a German firm, had German and French directorats.6 The Whitehead Torpedo Company had a French, British, and Hungarian directorate.7
These international trusts insured the arms merchants against all possible developments. In peace time they could solicit business everywhere, because their local directors would make the proper contacts. Since most of the larger companies also maintained branch factories abroad, the plea of home industries could frequently be made. In war time a separation of some kind might become necessary, but this could readily be patched up again when peace returned. Thus the Great International, which political idealists and labour strategists have sought for so long, was actually taking shape in the armament industry.
The relations between the military departments of governments and the armament industry are always very close. This is attributable just as much to governments as it is to the arms makers. All governments still believe in military preparedness as an essential of national life ; hence they foster and aid the arms makers and co-operate very closely with them. Armament makers, on their part, woo the government and its officials, so that their particular company may be favoured when government contracts are given out.
To illustrate, the armour-plate industry was introduced into the United States because the U.S. Navy urged the steel makers to establish a native industry in this field. The Du Pont Company has recently declared that it has been requested and encouraged by our Government to maintain facilities for the production of munitions. 8 The aeroplane industry announced recently to a Congressional committee that the government had urged it to continue its development in the interest of national defence.9
On the other hand, the individual arms company does all it can to keep in close touch, so that it may obtain government orders. In Great Britain it has become an established practice of the armament men to place retiring admirals and generals on their boards. The reason for this was well expressed by Arms and Explosives : they know the ropes.
In the United States, Du Pont got his first government orders because of the friendship of Thomas Jefferson, President of the United States. Furthermore, the Congressional representatives from the arms-producing states frequently appear as champions of the industry. A particularly interesting illustration of this was recently afforded by Congressman E.W. Goss of Connecticut. Mr. Goss was formerly an officer of the Scovill Manufacturing Company, a firm which, in addition to other products, produces brass cartridge cases and fuses. Five members of the Goss family are closely associated with the firm. When the House Foreign Affairs Committee held hearings on the resolution to declare an embargo on arms in time of war, Representative Goss appeared against the resolution.10
The activities of Krupp were described by an American newspaper correspondent in 1911 : Hence we find that King Krupp of Essen has ambassadors of his own in every great capital of the world, from Tokyo to Constantinople, and from St. Petersburg to Buenos Aires. He has even in Sofia a representative who knows more about local politics and has a larger acquaintance with politicians than all the legations put together. 11 Krupp also placed high military officials on his pay-rolls and kept himself fully informed on government plans through his agents.
Armament work must be financed, and the operations frequently demand large sums and impose the utmost secrecy. Hence armament makers either get control of powerful banks for themselves or they find bankers whom they can trust. In every great country certain banks are known as the armament banks. The Banque de lUnion Parisienne takes care of Schneiders finances, the Deutsche Bank was the banker for the Germans, Morgan takes care of the Americans, the Oesterreichische Kredit-Anstalt für Handel and Gewerbe and the Ungarische Allgemeine Kreditbank did the financial work of Skoda.
The work of the arms merchants frequently involved the necessity of granting international loans, and there again their close connections with both bankers and governments were very valuable. Sometimes the bank would undertake to float such a loan, sometimes the armament manufacturers government would advance funds to the foreign state. The complications into which this might lead are shown by the Putiloff affair in Russia and the Bulgarian armament orders of 1913. In post-war days, France has cemented her friendships and alliances with Poland and the Little Entente with heavy loans, many of which were earmarked for payment of armaments made in France. Loans to China by various governments frequently stipulated similar conditions.
How important these governmental loans might be for the arms merchants is illustrated by an incident from pre-war Serbia. Krupp and Schneider were in competition for the armament contracts of Serbia. A competitive test was held in which Krupp easily emerged as victor. But he did not receive the orders. A French loan had recently been negotiated by Serbia, and it was expressly specified that it must be used in part for French armaments.12
The press is too powerful and important to be neglected by the arms makers. Hence none of the great arms merchants are without their press connections. Sometimes a newspaper is bought outright ; sometimes a controlling interest is sufficient ; sometimes influential newspaper men or owners are put on the pay-rolls or on the directorates of the armament makers.
The Du Pont Company, for instance, controls every daily in Delaware ; Krupp owned three great dailies, and, moreover, the powerful press and moving picture czar, Hugenberg, was a Krupp director. Hugo Stinnes owns or controls 19 newspapers and magazines in Germany, Austria, Hungary, and Norway.13 The French press has generally been for sale to anyone willing to pay the price, as Raffalovich has revealed. Indirect contacts are also valuable. Morgan is the banker for the American armament industry, and it is also represented on the Crowell Publishing Company which publishes a number of widely read magazines.14
In practice the control and use of the press works out in various ways. Newspapers live from advertising. Now armament makers seldom advertise their military wares, although this has happened. It is much better to advertise their ordinary industrial products, such as railway tracks, machines, construction materials, etc. But the same purpose is frequently served by this kind of advertising. Where the press is venal, the journal may be paid for a series of articles on the dangers of disarmament or similar subjects.
The press is useful also in suppressing news or in refusing paid advertisements against the arms makers. During the World War, for instance, almost complete silence was maintained by the French press when great industrialists were accused of treason for trafficking with the enemy. After the war, Le Temps refused to accept an advertisement of Mennevées book on Zaharoff, the mystery man of Europe.15
The arms merchants have likewise put the moving picture into their service. The Barrow works of Vickers-Armstrong have their own cinema theatre where prospective buyers may see exhibitions of tanks, warships, machine guns, etc. in action. These special films of the arms makers are also taken on tour to various nations in order to demonstrate before the very eyes of the purchasing agents what effective killing machines are for sale.
A report of one of these foreign showings appeared in the North Mail on December 5, 1931 :
A special exhibition of British films was given to the King and Queen of Yugoslavia in their new palace at Dedinje. The films were productions made by a British firm of armament makers. There were tanks of all kinds, as well as field guns of all calibres and tractors. A firm of shipbuilders also showed a film of the launching of a Yugoslav warship.
Here is a publicity and sales medium which the arms merchants have only begun to exploit.16
When international relations become strained, the business of the arms industry generally improves. Hence when nations manage to get along with a minimum of friction, the armament manufacturers have sometimes not hesitated to stir up trouble. Every nation has natural or hereditary enemies. The arms makers need do no more than to point out the increasing armaments of the enemy and the virtual helplessness of the threatened country, and before long there is vigorous action for preparedness, which in turn means business for the arms merchants. Sometimes it is sufficient to sell to the enemy the latest engines of war and then to apprise the other government of that fact.
The Mulliner war scare in Great Britain has been considered. The Gontard affair in Germany is just as instructive. Paul Gontard was (and is) one of the mightiest men in the German armament industry. As director of the Ludwig Loewe Company he was eager to get orders for machine guns from the German government. Accordingly he sent a letter to his Paris representative suggesting that an article be inserted in Figaro declaring that the French government had decided to speed up its machine gun programme and to double a recent order. The fact that it was taken for granted that such a notice would be inserted in this French journal speaks for itself.
The procedure suggested by Gontard was too crude for the French press, particularly since the story was not true. Another approach was found. A number of French papers, including Figaro, Matin, and the Echo de Paris carried articles reporting the superiority of French machine guns and the advantage these gave to the French army.
Hardly had these articles appeared when the Prussian delegate in the Reichstag, Schmidt, an ally of the armament manufacturers, read them to the assembled Reichstag members and demanded to know what the government proposed to do about it. After a patriotic flurry the government began to increase its orders for machine guns very considerably. This happened in 1907, and during the three following years (1908-10) Germany spent 40 million marks for machine guns.17
The backward countries of the world have frequently sought the aid of their Big Brothers in training them for war. Hence the system of military and naval missions, to which now are being added aviation instructors. The by-product of this arrangement generally is armament orders for the country from which the mission hails.
In pre-war days the British had a naval mission in Turkey, while the Germans trained the Turkish army. Armament orders were divided between the two countries. Japans modern navy was trained by the British, who also furnished many battleships and vast naval armaments. The United States maintains naval missions in various South American countries, and the American armament men consider this field so promising that they issue their catalogues also in Spanish. China has of late been the scene of American aviation activity. The American companies have furnished an air mission and are selling aeroplanes to the Chinese at the same time.
The utility companies are not the only ones who know that their shareholders may win them important friendships or aid them, particularly if they are widows and orphans, in making public pleas. The arms merchants in some countries use this device very effectively. The last German Kaiser was one of the largest shareholders in at least two arms companies, and these two naturally got most of the German government orders. The British have probably developed this technique more fully than any other group. Among the thousands of shareholders of the British companies were representative people from every walk of life and also common people in plenty. Among those listed as shareholders in 1914 were Lord Balfour, Lord Curzon, Earl Grey, Lord Kinnaird, president of the Y.M.C.A., Sir J.B. Lonsdale, Sir Alfred Mond, the bishops of Adelaide, Chester and Hexham, as well as many other distinguished personages.18
The charge of bribery has frequently been made against the arms merchants. To be sure, graft in business is not limited to the armament industry, as Gustavus Myers, Upton Sinclair, John T. Flynn, and others have shown. The American National Association of Manufacturers recently embarked on a campaign to wipe out bribes in business, which it estimated at about a billion dollars a year.19 But somehow the arms makers seem to attract more attention in their bribing practices.
After 1908 the Young Turk government was in control at Constantinople, and the fires of nationalism were said to have burned out all traces of corruption for which the old regime was notorious. To the armament manufacturers, however, this was simply a legend. One of them confided to a friend that the only difference between the two regimes was that the Young Turks demanded higher bribes.20
Just before the war, Clemenceau charged in a series of articles that the German armament manufacturers were so successful in South America because they bribed so well.21
A story is told of an Englishman who went out to execute a contract for a cruiser which a branch establishment of his firm had procured from the government of a European power. On his arrival he began to pay ' commissions' to various folks, great and small, who were interested in the contract. At last to an officer who came with an exorbitant demand the Englishman cried : How can I build the cruiser ? ' The reply was : What does that matter, so long as you get paid and we get paid ? ' 22
This practice is hard to prove and probably occurs seldom, but the charge appears at times. The Russian government in pre-war days had an important cartridge factory in Poland which manufactured much ammunition. This factory was burned down by an incendiary and was never rebuilt. The newspaper Novoe Vremya charged that the conflagration had been started by German armament manufacturers in order to increase their Russian business.23
A significant by-product of the business methods of the arms merchants is the virtual elimination of military secrets, as far as the manufacture of armaments is concerned. Spies may ferret out strategic plans, naval bases and fortresses, and other military information,24 but the normal industrial and commercial procedure of the arms industry makes most espionage as to actual implements of war unnecessary.
The arms industry practises public testing. Krupp's proving ground at Meppen was open to the ordnance engineers of all nations. The purpose of the test was to demonstrate the efficiency of the new invention and to sell it ; hence secrecy could hardly prevail.
After a successful test, the new device or weapon was offered freely to all. Whoever was willing and able to pay a licence fee and a stipulated royalty could secure exclusive rights of manufacture in his country. Krupp's armour plate is the classic example of this.
Furthermore, most of the technical problems of the arms industry are problems of engineering and chemistry. As might be expected, the journals in these fields also deal with the developments in the arms industry. Even a casual examination of such journals as Engineering, Cassier's Magazine and the American Machinist reveals that all the latest guns, cannon, and war machines are fully discussed. Detailed drawings are generally given showing the construction and operation of these new inventions. Secrecy is impossible under such conditions.
Another standard practice of the arms industry is to exhibit its products wherever possible, especially at world's fairs and industrial exhibitions. From the middle of the last century to the present there was hardly a large exhibition in any part of the world, from London and Paris to South Africa and Australia, which was not attended by the arms makers. And their exhibits received widespread attention and were carefully and fully reported in engineering journals.25
An interesting illustration of the publicity attending a world's fair exhibit of armaments is a report made to the U.S. Government in 1867.26 This was the year of the Paris Exhibition, and all great arms makers were represented. The United States sent two observers to Paris to report on the armaments exhibited. Their report was embodied in a huge volume, fully illustrated, telling of latest developments in all forms of armament from guns and cannon to battleships. The observers were also able to report that they had seen and examined the famous German needle gun, which was supposed to be a closely guarded secret. This gun had not been on public exhibition, but private collections contained it and there was no difficulty in securing access to it.
Many armament manufacturers established branch factories in other countries or they contracted to build arms factories for other governments. In either case all the patents and processes of the company were transferred to the other country, particularly since there was generally a clause in the contract binding the foreign company to that very thing.
How there can be any secrets as to the structure and operation of military implements under these circumstances is difficult to see. Yet arms makers every now and then make a great ado about their trade secrets which they pretend are invaluable to them. In 1915, for instance, when the United States government was planning to erect its own armour-plate factory, because it believed it was being consistently overcharged by the private manufacturers, it appointed a committee to gather all the information it could on the subject. The committee approached the armourplate makers, asked them about their processes and organisation, and about 75 per cent of their questions remained unanswered, because they could not reveal their trade secrets.27 In view of the general practices of the arms industry, it does not seem far-fetched to surmise an entirely different reason for their failure to reply to the committee's questions.
As a matter of fact, new inventions in arms generally make their way round the world in a very short time, due largely to the ordinary business methods of the arms industry. This will explain what has frequently been considered a mystery or the clever work of spies, how certain new developments spread so rapidly in spite of the efforts of governments to keep them secret. One incident is worth telling here. The British had for long been seeking a smokeless powder suitable for all climates. The British armies were to be found in blistering deserts and near snow-clad mountains, hence their need for this kind of explosive. Finally, in the early 1890s, they succeeded in perfecting an explosive which was called cordite. It was exactly what they had wanted and they were elated. Naturally they wished to keep its ingredients a secret. Imagine their surprise and consternation when, in the very next year, a British military man discovered that cordite was already known in Russia, where a climate-proof powder was also sorely needed.28
On the eve of the World War, then, it was clear to all observers that the next war would be a gigantic and terrifying affair. The prophets of doom foresaw a titanic conflict in which armies of millions would face one another with countless new and monstrous death machines, developed and sold indiscriminately to all nations, by the arms merchants. They foretold deaths by the millions, the exhaustion of world economy, the pauperisation of nations, and a grave threat to human civilisation. Unfortunately, the prophets, for once, were right.
1 New Republic, April 19, 1933.
2 New Republic, June 28, 1933, p. 175.
3 Launay and Sennac, op. cit., pp. 1o2ss.
4 Ibid., p. 23s.
5 Ibid., p. 114s.
6 Ibid., p. 66s.
7 Ibid., p. 23s.
8 Stockholders' Bulletin, June 15, 1933.
9 U. S. (House) Foreign Affairs Committee, 72d Congress, 2d Session, Exportation of Arms or Munitions of War. (1933.)
10 William T. Stone, International Traffic in Arms and Ammunition, Foreign Policy Reports, Vol. IX, No. 12, Aug. 16, 1933, p. 137 ; U.S. (House) Foreign Affairs Committee, 72d Congress, 2d Session, Exportation of Arms or Munitions of War. (1933)
11 Francis McCullagh, Syndicates for War, p. 8.
12 Murray H. Robertson, op. cit., pp. 201-204.
13 Launay and Sennac, op. cit., p. 239.
14 The Nation, June 7, 1933.
15 Documents Politiques, June, 1928, p. 34.
16 Fenner Brockway, The Bloody Traffic, pp. 165-166.
17 Anonymous, Hinter den Kulissen des Franzoesischen Journalismus, p. 130 ; Lehmann-Russbueldt, Die Blutige Internationale, p. 19.
18 Murray H. Robertson, op. cit., p. 173.
19 Flynn, Graft in Business, pp. 66, 67.
20 McCullagh, op. cit., p. 9.
21 Ibid., p. 10.
22 F.W. Hirst, The Political Economy of War, p. 98.
23 McCullagh, op. cit., p. 11.
24 Bywater and Ferraby, Strange Intelligence, passim.
25 See, for instance, M. Bacle, Armour Plates at the Paris Exhibition, Engineering, Vol. 71 (1901), pp. 66, 99, 131. 161 ; Anonymous, The Army and Navy Building at the Paris Exhibition, Engineering, Vol. 71 (1901), pp. 325, 36o, 397.
26 Charles B. Norton and W.J. Valentine, Report to the Government of the United States on the Munitions of War Exhibited at the Paris Universal Exhibition, 1867.
27 U. S. (House) 63d Congress, 3d Session, Document No. 162o, Report of the Committee to Investigate the Cost of an Armour Plant for the United States. (1915.)
28 W.H.H. Waters, Secret and Confidential, p. 104.