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THE AMERICAN INVADERS

Publisher's Announcement

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Crown 8vo, cloth, zs. 6d.

" An exposure of the dilettanti politicians who are rapidly losing us our trade supremacy. . . . The book is one which is calculated to set even the governing caste thinking." — T/ze Financial News.

"A sane healthy vindication of the weak spots in the country's armour, and a practical attempt to indicate remedies." — Sunday Special.

Trusts and the State

A Sketch of Competition

By henry W. MACROSTY, B.A.

Crown 8vo, cloth gilt, 51. "This thoughtful and valuable work should be in the library of every one interested in the social problems of his own time, and of the generations which are to follow us."— The Daily Chronicle. " Vigorously and clearly written."

— The Spectator.

LONDON: GRANT RICHARDS

The American Invaders

F. A. McKENZIE

Have the elder races halted ?

Do they droop and end then- lesson, wearied

over there beyond the seas? We take up the task eternal, and the burden and the lesson,

Pioneers ! O Pioneers !

—Walt Whitman.

London

Grant Richards

1902

^\r

BUTLER & TANNER,

THE Selwood Printing Works,

FROME, AND LONDON.

CONTENTS

PREFACE

I. THE EXPANSION OF AMERICA.

II. THE PLAN OF CAMPAIGN

III. THE FIGHT FOR THE ATLANTIC

IV. THE COMING SUBSIDIES .

V. THE AMERICAN BOOT .

VI. IRON AND STEEL ....

VII. THE NEWER INDUSTRIES

VIII. LONDON TRANSIT ....

IX. THE GENESIS OF THE TOBACCO WAR

X. THE TOBACCO WAR IN ENGLAND .

XI. COAL ....

XII. MERELY DOMESTIC.

XIII. RAILWAYS AND LOCOMOTIVES

XIV. THE WESTINGHOUSE WORKS XV. BOOKS AND PUBLISHING

XVI. THE PRINTING WORLD .

XVII. THE COLONIAL MARKETS — CANADA

XVIII. THE COLONIAL MARKETS — SOUTH AFRICA AUSTRALASIA ....

XIX. SPORT ......

XX. THE SECRET OF AMERICAN SUCCESS

XXI. CAN WE MEET AMERICA?

" The war, I fear, is the war of trade which is unmistakably upon us. When I look round me I cannot blind my eyes to the fact that so far as we can predict anything of the twentieth century on which we have now entered, it is that it will be one of acutest international conflict in point of trade. We were the first nation in the world — of the modern world — to discover that trade was an absolute necessity. For that we were nick- named a nation of shop-keepers. But now every nation wishes to be a nation of shop-keepers too ; and when we look at the character of some of these nations, and when we look at the in- telligence of their preparations, we may well feel that it behoves us not to fear, but to gird up our loins in preparation for what is before us. There are two nations which are obviously our rivals and opponents in this commercial warfare that is to come. To America and to Germany we have to look in the future for an acute and increasing competition in regard to our trade, and I am bound to say that in looking at these two countries there is much to apprehend. The alertness of the Americans, their incalculable natural resources, their acuteness, their enterprise, their vast population, which will in all proba- bility within the next twenty years reach 100,000,000, make them very formidable competitors with ourselves."

Lord Rosebery, y^;?. 16, 1901.

PREFACE

It has been my endeavour in this book neither to minimize nor exaggerate the industrial triumphs of America. I have counted it no business of mine unduly to depreciate British manufacturers or to gloss over their successes. So far as I could learn the facts, whether for or against the Americans, I have recorded them. In some parts the views here expressed sharply differ from those of many recog- nized experts on the particular trades dealt with. Where such differences come they have not been made without careful consideration of the facts supporting the other side.

It is no longer necessary to insist on the supreme importance to our trade of the issues here raised. Opinions about the need of industrial reform, which a year ago one dared only state with almost bated breath, are now the commonplaces of the man in the street. We move rapidly in these days, and the entire self-confidence of our industrial supremacy which held the minds of most Englishmen not long since has now given way to a perhaps undue sense of depression. The American invasion of Europe is no longer a matter of abstract discussion. It has

X PREFACE

touched Europe at a hundred points, and has affected no country so largely as our own.

Although the trend of many of the facts in the following pages is of necessity pessimistic, I would protect myself against being supposed to believe that the day of English trade prosperity has finally passed. Undoubtedly our commerce has received a check. We slept while our rivals went ahead. We have been too content to rest satisfied with the great accomplishments of past generations. We have been a little too prosperous, and far too easy going. For this, masters and men must share the blame alike. Are we, then, to conclude that our nation is from now to be regarded as a negligible factor in this world's story ? Are we to believe, as some super- ficial observers proclaim, that while England has played her part — a grand enough part in her time — henceforth she is to be reckoned as a decaying and declining force ? If this were true it would be a bad thing, not only for England, but for all who have dealings with her. Happily it is not true. Those who know anything of the great reserve strength of this Empire are best aware that our nation need only rouse herself in earnest to recover much lost ground. In spite of certain prominent shortcomings, there is yet a stubbornness, a per- sistency, a straightforwardness of dealing and famous honesty of manufacture among English

PREFACE xi

traders to which the world can show no equal. English goods still have a name in many lands of being the best. A great, though unhappily di- minishing prestige is behind us, enormous wealth lies in our hands, and our people were never more intelligent. The future still waits for us if we will to have it. But to hold our own there must be reform far reaching and thorough. It is to help to bring needed changes that this book is written.

CHAPTER I

THE EXPANSION OF AMERICA

" In the four quarters of the globe, who reads an American book ? or goes to an American play ? or looks at an American picture or statue ? What does the world yet owe to American physicians or surgeons ? What new sub- stances have their chemists discovered ? or what old ones have they analyzed ? What new constellations have been discovered by the telescopes of Americans ? What have they done in the mathematics ? Who drinks out of Ameri- can glasses ? or eats from American plates ? or wears American coats or gowns ? or sleeps in American blankets ? -' — Sydney Smith.

America has invaded Europe not with armed men, but with manufactured products. Its leaders have been captains of industry and skilled financiers, whose conquests are having a profound effect on the every-day lives of the masses from Madrid to St. Petersburg.

No nation has felt the results of this invasion more than England. Our one speech, our common ways of life, and the large reserve wealth of our traders, naturally made ours a favourite vantage ground for the Americans in starting their Eastern cam-

' B

2 THE AMERICAN INVADERS

paigns. Men have sometimes spoken as though the dramatic coup of a Morgan, when he took our Atlantic supremacy from us ; of a Schwab, who outbids our steel makers ; of Philadelphian bridge builders, who capture the orders for our biggest viaducts, comprise this invasion. They form but a very small part of it. Such items are merely the sensational incidents in a vast campaign. The real invasion goes on un- ceasingly and with little noise or fuss in five hundred industries at once. From shaving soap to electric motors, and from tools to telephones, the American is clearing the field.

Ten years ago England was easily first in the iron, shipping, cotton, and coal industries. We took from America raw food products in considerable quan- tities, but America was our greatest customer for manufactured goods. Now the situation is changed, and changed with a suddenness which makes the transformation the more vivid. We have lost our supremacy in coal output, and even our export fuel trade is being hotly attacked. In the production of iron and steel we are far outstripped. In cotton we are declining, while America is rapidly expanding. In shipping the ownership of some of our greatest lines has been acquired by American companies : the Atlantic freight trade, where we were once almost alone, has gone in fact, if not in name, from us, and our position in the Pacific is threatened. Still more significant is it that the organization of most of the great schemes proposed on novel lines for England to-day are in American hands and the fruit of American brains.

THE EXPANSION OF AMERICA 3

Where not long since America was our largest customer, we are now the largest and most profitable buyers from America. One-third of the total im- ports that enter this country come from the United States, and for every £1 America pays us for com- mercial products we pay America £3 15s. This of course is a process that cannot go on indefinitely, save by the absorption by Americans of the profits we make from other lands. If there were no other factors in our international trade but these, such unequal exchange would of necessity in due time land us in insolvency. There are, needless to say, many other factors. But the ill-balanced trading has resulted in a considerable transference of British wealth to America. To-day we float large portions of our national loans in New York, and the tax- payers of this country yield revenue to the American holders of our bonds. Ten years ago we held the bonds and the Americans paid us the interest.

The preliminary reports of the census of the United States for 1900, given on the next page, show in most effective form the industrial expansion of the land for thirty years past.

And this expansion is only at its commencement. It will receive its set-backs and will have temporary checks. The present boom may be followed quicker than many expect by a time of real industrial fer- ment and of financial strain. The artificial inflation of securities which has marked the way of American finance recently is bound to cause some trouble. But checks and set-backs can do little more than cause momentary delay. America is bound to ad-

THE AMERICAN INVADERS

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THE EXPANSION OF AMERICA 5

vance, and never will her manufacturing facilities be more formidable in competition for the trade of the world than in the days of falling prices and commercial trouble.

The shifting of the financial control of the world from London to New York is not an affair which can be described by exact statistics, but that it is steadily going on few familiar with international money affairs will deny. The daily operations of the New York Exchange, as Mr. Carnegie points out, exceed those of London. The banking resources of the United States are about twice those of Great Britain. The expansion of American trade has pre- pared the field for American bankers, and now, late in the day, American capital is being launched in bulk in the establishment of trading banks abroad.

The founding of the International Banking Cor- poration, with a capital of $12,000,000, early this year in New York City, is one sign of activity here. This corporation, which largely owes its start to the Equitable Life Assurance Society, has on its list of directors twenty-three of the most solid names in the American business world, including Mr. Harriman, chairman of the Union Pacific Rail- road ; Mr. Edwin Gould ; Mr. Abram S. Hewitt ; Mr. H. E. Huntington ; Mr. Frick, of the Steel Trust ; and Mr. Delano, of Brown, Shipley and Co. These names are sufficient proof that the new corporation can obtain all the money it wants. Its purpose is quite frankly stated. It intends to fight for a share in the banking trade of the Far East, a part of the world once our own banking preserve. It has opened

6 THE AMERICAN INVADERS

its branch in London, it is establishing branches in the great trading centres of the East, and is already securing substantial business. It is part of the rapidly maturing American scheme for the capture of the Pacific.

What the International Banking Corporation is doing other Americans are also attempting. The American financier is more accessible and more open to business than his older European rival. He lends on character, and takes business risks which Lom- bard Street would instantly reject. This is why, with initiative and daring, American financiers are stepping into the very heart of our own businesses. - It is a recognized fact in finance to-day that if capital is required for any great English scheme, particu- larly if it has to do with electric traction, it is simpler and easier to get it from America than England.

Both in exports and imports England is far and away America's largest customer. Of every dollar received by America for foreign trade last year fifty-three cents came from the British Empire. Of these fifty-three cents the United Kingdom alone paid forty cents. Of every dollar America paid abroad for trade the British Empire received thirty- one cents, and England alone seventeen cents. The whole British Empire pays the United States nearly three dollars for every dollar America pays it in way of trade ; and for every four dollars America paid the United Kingdom alone, in the same way we paid it fifteen dollars. To avoid overburdening this chapter with statistics I have placed the exact figures at the end.

THE EXPANSION OF AMERICA 7

The tendency, apart from exceptional years, is for the American imports rapidly to increase. In two years the increase in their value to England has been £18,000,000.

Of what do these imports consist ? It would be easier to say what they do not include. Certain lines of them are a direct source of wealth to us. Ameri- can food, which arrives in enormous quantities, is welcomed by all now that we are no longer an agricultural nation. American raw products, such as pig iron, are further sources of wealth. But a very large part of the imports consists of manu- factured goods in lines which were once produced here. Of these boots are a notable instance, and in Northampton workmen are on short time to-day and children have gone hungry to school during the winter because part of our shoe trade has been taken from us.

Sheffield, long leader in the tool world, now gets its newest machine tools from Pennsylvania — as Paris, long dominant mistress of fashion, now takes many of its styles from New York.

In London the American invasion shows itself on every side. Morgan fights Yerkes for the right to build our tubes. American capital is transforming our dirty and suffocating " undergrounds " to the brightness and cleanness of electricity. The theat- rical trust has its grip over many of our theatres and over a number of our best actors. The English branch of the Oil Trust dictates the price of our petroleum and supplies us with it. The Beef Trust of Chicago regulates the prices and supphes of our

8 THE AMERICAN INVADERS

meat, and grain dealers in the same city control the price of our bread. Our aristocracy marry American wives, and their coachmen are giving place to American-trained drivers of American-built auto- mobiles. American novels are filhng our library shelves, and American schemes of book distribution are revolutionizing our old ways. Parcels dehvery carts may soon give place to a gigantic American pneumatic tube service, now in process of organiza- tion. Whole districts in the centre of London are passing into the hands of American landlords.

Our chemists' shops are full of Transatlantic drugs. Our bootmakers devote their windows to the finest manufactures from Boston, while our leading shopkeepers go across the Atlantic to learn the art of window dressing. For months at a time the stars and stripes float from many of the largest buildings off Trafalgar Square. Some of our hotels are more American than if they were on Broadway, and Bloomsbury from April to October is an Ameri- can colony. Our very jokes are machine-made in the offices of New York pubhshers, for almost every English " comic " paper of the cheaper sort gets its humour, so called, week by week, by columns of clippings from journals on the other side. Our babies are fed on American foods, and our dead buried in American cofhns.

To-day it is Hterally true that Americans are selling their cottons in Manchester and their steel tools in Sheffield. A few months since they were sending their pig iron to Lancashire, and soon they will be doing it again. They send oatmeal to Scot-

THE EXPANSION OF AMERICA 9

land and our national beef to England. It only re- mains for them to take coals to Newcastle. In fact the time seems coming when, as an American wittily put it, we shall find our chief export across the Atlantic to be scions of our nobility, whom America cannot produce on account of the limits imposed by her constitution. And there the balance of trade will be in our favour, even though America sends us her gracious daughters to grace our ducal homes.

" There are hatfuls of gold waiting to be gathered up in London," said a returning Yankee plutocrat to a Chicago reporter not long since. Our fathers went West to make their fortunes ; their sons are coming East to do the same. The word has gone forth from East to West that here in England men with brains and energy can make more and under easier conditions than in America. Hence the rush of men and goods East, a rush which cannot wholly be shown in statistical form, but which touches our trade on every side.

On the Continent of Europe the invasion, although less serious than with us, has produced greater alarm. The facts have been so ably summarized in the official Review of the World's Commerce, issued by the U.S. Government, that I am tempted to make a somewhat lengthy quotation : —

" Austria-Hungary (is) the country in which originated the idea of European combination against American goods, and where the hostility of the industrial forces continues to be most pronounced. Notwithstanding this the imports from the United States, according to Consul-General Hurst of Vienna,

10 THE AMERICAN INVADERS

are increasing rapidly, although American ex- porters have not until recently given general at- tention to that part of Europe, ' which is consider- ably removed from ports in closest touch with Transatlantic commerce.' So formidable is the growth of American imports in fact that ' Austrian manufacturers and agriculturists are making an organized effort to stem the inflow.' At a recent conference in Vienna to take measures against American competition, adds Mr. Hurst, ' it was openly acknowledged that the commercial policy of the present time is dictated and controlled by the United States. . . . Instances of the gigantic strides of our American manufacturing industries are cited to show our capability to forge ahead of all competitors in many fields.'

" In a report upon the commerce and industries of Germany, Consul-General Mason, of Berlin, says the United States again heads the list of countries selling to that country, with a total of nearly $243,000,000, or i6*9 per cent, of the entire bulk of German im- ports, although it should be noted that this covers the values of all American products landed on German soil, ' a large percentage of which simply pass through . . . en route to Russia, Austria- Hungary, Switzerland, and Scandinavia.' It may be expected that later returns will show a falling off in German imports, owing to the recent industrial depression which has seriously impaired the pur- chasing power of the Empire. But in Germany, as in Austria-Hungary, our goods continue to hold their own, and the ' overshadowing competition of the

THE EXPANSION OF AMERICA ii

United States ' is regarded by German economists as of grave importance to the future of German industry and commerce. ' It is recognized by in- telligent Germans,' adds Mr. Mason, ' that in future industrial and trade competitions, that fine com- posite product of American racial qualities, institu- tions and methods, the working man who thinks will, in combination with our unequalled resources, turn the scale in favour of the United States.'

" The same concern is felt in France, in Belgium, in Switzerland, in Great Britain — in other words, in all of the highly-developed manufacturing coun- tries of Europe, and it is a most significant fact that, even in specialties which were once thought to be exclusively their own, the United States is becoming a more and more formidable competitor. Who would have imagined a few years ago that we would make such rapid progress in the manufacture of silk that we would soon cease buying silks from France, with the exception of highly-finished goods, and would actually be exporting silks to that country ? Yet this is what has happened. So of tin plate in Wales. At one time it was doubtful whether we could manufacture tin plate profitably, and it was confidently asserted that the Welsh must always control the American trade. But we now manu- facture all the tin plate we need, and the Welsh have recently imported tin bars from us.

"There are, indeed, surprisingly few of the articles which used to be obtained exclusively abroad that are not now produced in the United States. The woollen as well as the silk industry of France and the

12 THE AMERICAN INVADERS

hosiery industry of Germany are said to be suffering severely from our competition, and the Bohemian glass industry is feeling the effect of the increase of glass manufacture in the United States. Our cottons are steadily gaining in taste and finish, and are now sold in England in competition with the Manchester product.

" Says the Leipziger TageUatt of April lo, 1901 : — * Even in fancy articles, in which the European market has set the styles for the entire world, the American manufacturers are beginning to compete with the European. British calico prints are already receiving competition from America. We hear that travellers of a well-known American house have offered American cotton stuffs in England with much success, and the London authorities declare them to be tasteful and worth their price.'

" A New York company manufacturing cotton stuffs intends to found a Paris house which shall introduce its fancy woven stuffs for women's dresses, and trimmed women's hats are being exported from the United States to Europe. * The reversible cloths which are made in the United States,' said Consul Sawter of Glauchau, in a report sent in 1900, ' are now the style in high-priced goods in the German capital.'

" In agriculture, as in manufactures, we are con- stantly widening the sphere of our production. The orange and lemon growers of southern Europe are feehng the effect of Cahfornia's competition. ' It is ridiculous,' exclaims a Spanish newspaper, ' to think that fruits and vegetables raised on the slopes of the

THE EXPANSION OF AMERICA 13

distant Pacific should compete at the very doors of Spain with those produced in this country. . . • Shall we live to see American oranges on the Valencia market itself ? ' We are producing our own raisins, our prunes, our wines, our olive oil, and are sending them abroad. California prunes now compete in Europe with Bosnian prunes, once a staple article of export to New York.

" In the busy manufacturing district of Liege, Belgium, according to the annual report of Consul Winslow, more American goods are consumed than ever before, in spite of business depression. ' Our sales, in general,' says Mr. Winslow, ' have doubled in the past three years, and it is now common to see articles marked " Americaine " in the shop windows.' Spanish journals complain that steel rails are im- ported from the United States, notwithstanding the production of iron is one of the important industries of Spain. Vice-Consul Wood of Madrid says our goods are to be seen everywhere."

The exact statistics of American foreign commerce as given in the advance sheets on imports and exports for December, 1901, issued by the Treasury Department at Washington may be of value. They show that for the year ending December, 1901, out of a total of $1,465,380,919 exports the United Kingdom took $598,766,799 ; British North America $109,598,695 ; British Australasia took $30,569,814; and the total British Empire took $784,289,681.

Turning to imports, out of a total of $880,421,056 the United Kingdom sent $155,291,927 ; British North America $45,897,256; British East Indies $47,171,558; and the total British Empire $273,956,187.

CHAPTER II

THE PLAN OF CAMPAIGN

What are the means the Americans have adopted in their commercial war against Europe ?

Their weapons have been not one, but many. First among them comes the securing of financial control, and the elimination of competition, as far as possible. The American trusts have centralized American forces, and so enabled the blows against us to be directed with greater force and effect.

One main factor in the European war has been the Standard Oil combine, for the oil magnates, parents of the modern trust system, have accumu- lated such enormous capital in their own hands that they have made themselves, for real power, veritable kings among men.

The Rockefeller group of millionaires was the first to carry to its logical conclusion the altogether sound principle that by combination the producers of one article can obtain greater profits for them- selves without adding to the burden of the public. By extending the^area of their operations, by at first

14

THE PLAN OF CAMPAIGN 15

securing rebates from railway companies, by captur- ing the great pipe lines, they obtained control, though not a monopoly, of the oil market of two- thirds of the world. Their profits have been very great, although it is impossible to give reliable figures. The trust officials — for the Standard Oil is of course a trust in spite of the nominal dissolution of the trust in answer to legal orders — cleverly disguise their gains, for they have a not unnatural idea that this is no business of the outside world. The mere dividends, high as they are (between thirty and forty per cent.) do not represent the total profits, for it has always been a principle of the corporation to keep back enormous sums and use them in all manner of developments. Most great trusts are held by many. This trust is in the hands of few, the overwhelming proportion of Standard Oil stock being centralized. Three dozen names cover the total of the great owners, and the real power and command practically rests with half a dozen men. With profits of tens of millions a year the Standard Oil group has long since ceased to be solely con- cerned with oil. It has become a great railroad owner ; it has stretched out beyond the seas ; it has been the real mover in the conquest of the Atlantic ; it has entered into banking on a large scale. The Standard Oil corporation is the Old Guard of the American invasion, and it is all the stronger because it moves secretly.

Working with the Standard Oil, sometimes to- gether, sometimes apart, have been other groups, some making great gains from street traction and

i6 THE AMERICAN INVADERS

electric power, some from steel, some manufacturers of finished goods. They have heaped up spare capital such as has never in the history of the world been in the hands of a few men before. Behind them has been the savings of the iVmerican people, savings of years of plenty. The money power is the great American weapon. While this country is to-day groaning under rapidly-increasing taxes, and while our Exchequer shows a deficit of over a million pounds a week, America is able to remit its special war taxation and is suffering from an over-gorged Treasury.

The spare capital is in the hands of men who know how to use it. The Americans come over here with business notions that make some of our slower-going folk stand aghast. They are quicker and more ready to change than we are. Let me give a typical case, told me by the man who gave the order. Early this year a big West End business house wished to have its premises reconstructed. It consulted a London contractor, who offered to do the work in fourteen months. Then it approached an American builder who has recently set up in this country. He agreed to get the whole thing completed before the Corona- tion. The American got the contract.

Not long since a short cable tramway was lying un- used on a hill to the north of London. It had had an unfortunate history, and for long could find no pur- chaser. The County Council offered a " scrap-iron " price for the concern, and as there seemed to be no competitors in the field it reckoned it had a real bargain. But just before it completed the deal a

THE PLAN OF CAMPAIGN 17

quiet American stepped in, outbid the Council, and secured the Hne at a fractional part of the original cost. He at once set it working. And if you should wish to see how it pays him, go up on a summer's afternoon to Highgate Hill and notice the crowd on the cable cars there.

Last summer the most striking instance of all the triumphs of American machinery was witnessed in London. Bryant and May had long been looked upon as a great English institution, as secure in its place as the Bank of England. It had practically destroyed all serious English competition : it paid dividends of twenty per cent., and its fame was world-wide.

While this house was resting on its reputation and priding itself on its power, an American manu- facturer studied the match business. He experi- mented, employed several smart men in improving old match-making machinery, and spent quite £10,000 a year in developing new apparatus. He sent agents over the world, and wherever a new improvement in match-making machinery was to be had he bought it.

Six years ago this American — Mr. Barber — came over to Liverpool and opened works there. He could turn out matches so much cheaper and so much better than the Enghsh makers that Bryant and May suddenly awoke to the fact that they had met a dangerous rival. Bryant and May now looked over the world for new machines, but they found they had been preceded everywhere. Their divi- dends declined from twenty to fourteen per cent. ^

i8 THE AMERICAN INVADERS

and they saw that if things went on all dividends would disappear. Then the American stepped up. He told the managers of the English business that he could beat them out of the field, and they knew that he spoke the truth. But, said he, if Bryant and May would consent to surrender their factories and to give up absolutely all control in the management of the match trade he would take over their shares and guarantee them interest on the fourteen per cent, basis. Bryant and May could do nothing but submit, and their works have now passed into Ameri- can hands. They could not obtain the best ma- chinery, for the rights in all the improved machinery were owned by the Americans, and so they were beaten.

Mr. Barber, the President of the American and Liverpool Diamond Match Companies, the clever American who accomplished this, frankly told Bryant and May's shareholders how he had been able to do it. " The machinery now being used in Bryant and May's factory," he said, " was the in- vention of men who had been in the employ of the Diamond company since its inception, but that machinery was discarded by the American company fifteen or sixteen years ago, and we have been gradually improving upon it. I do not think there has been a year when the Diamond company of America has not expended at least 50,000 dollars in experiments in improving their machinery. We have good inventive talent, and we have quite a large number of people working continuously with the sole object of improving our machinery. Then again we

THE PLAN OF CAMPAIGN 19

have representatives always travelling in different parts of the world for the purpose of acquiring any new invention which would be of assistance to our business. In the purchase of patents we have spent in the last year over 250,000 dollars, and in the last twenty years a million. In five years we have suc- ceeded in building up a trade in the United Kingdom equal in quality to that of Bryant and May, and at the same time we have been able to pay interest on every dollar of capital that has gone into the business. Your board has managed the company as well as the facilities which they possess allow them to do, but they did not improve their machinery, for the reason that they have not a ruling genius among them."

The net result is that the entire match industry of England has passed into American hands.

The management of the trust officially estimated the value of this deal to themselves at over a million dollars, for, as was pointed out to the American shareholders, " All the benefits of this combination inure to the Diamond Match Company, as the Bryant and May Company receive as its share of the future profits the same amount per annum that they earned in 1900, which was the lowest per cent, they had made on their property for many years." And Mr. Barber and his associates are not satisfied with this. From England they are now acquiring Europe. At this time they are busy buying works or establishing factories in Germany, in Switzerland, in the Philip- pines, and in Chile. They have factories in opera- tion in South Africa and Peru, and for the year 1901

20 THE AMERICAN INVADERS

they made an actual profit, excluding the possible great gains over the British deal, of about $2,000,000. They bid fair to create a great match trust which shall include the whole of the Western and much of the Eastern world.

And so the story runs on. While we are pluming ourselves on our own commercial astuteness the Americans are stepping in to the centre of our in- dustrial capital, and are taking from under our eyes the most profitable and the easiest speculations. And, unhampered by restrictive conditions, their workmen turn out goods with which our own cannot attempt to compete.

But the main weapon in the hands of the American invaders is yet to be used. Eleven years ago America practically destroyed our import manufacturing trade to her by creating a high tariff. The pro- tected American manufacturers were able to pull themselves together and to secure higher prices owing to the practical penahzing of our goods. Now American-manufactured goods are able to stand on their own merits, for America can produce at less cost than we can. But the heads of the Republican party, in other words the great manufacturers, have no intention of throwing away the commercial weapon which this high tariff has given them. They will go in, not for free trade, but for reciprocal trade advantages. They will auction tariff concessions for tariff favours, and before many years our manu- facturers will find that American dealers have secured special customs and rebates in many lands ; for the American business man believes in getting

THE PLAN OF CAMPAIGN 21

all the advantages he can. The United States Government holds trade to be worth studying and worth building up, and the trader as the great man. Reciprocity will be the key-note of American politics to-morrow, as protection was yesterday.

The assassination of President McKinley has for the time dealt reciprocity a severe blow. In his speech at Buffalo on September 5, 1901, he, for- merly the high priest of Protection, declared for a revolution in the American tariff.

" Our capacity to produce," said he, " has de- veloped so enormously, and our products have so multiplied, that the problem of more markets requires urgent and immediate attention. Only a broad and enlightened policy will keep what we have. By sensible trade arrangements which do not inter- rupt our home production we shall extend the outlets for our increasing surplus. We must not repose in the fancied security that we can for ever sell every- thing and buy little or nothing. We should take from our customers such of their products as we can use without harm to our industries and labour.

" Reciprocity is the natural outgrowth of our wonderful industrial development under the do- mestic policy now firmly established. What we produce beyond our domestic consumption we should send abroad. The period of exclusiveness is past. The expansion of our trade and commerce is a pressing problem. Commercial wars are unprofit- able, and reciprocity treaties are in harmony with the spirit of the times, while measures of retahation are not."

22 THE AMERICAN INVADERS

Mr. Kasson, the sometime Special Commissioner representing the United States in the making of treaties for reciprocal trade, took strongly the same line, and in November, 1901, an important con- ference was held by the American manufacturers on this matter — a conference, however, which was singularly barren of results. Some had hoped that President Roosevelt, himself a free trader when a young man, would specially favour the idea, but the President's declaration on the matter in his message to Congress in December, 1901, was dis- appointing. " Reciprocity," said he, " must be treated as the handmaiden of protection. Our first duty is to see that the protection granted by a tariff in every case where it is needed is maintained, and that reciprocity be sought for so far as it can safely be done without injuring our home industries. Just how far this is must be determined according to the individual case, remembering always that every application of our tariff policy to meet our shifting national needs must be conditioned upon the car- dinal fact that the duties must never be reduced below the point that will cover the difference between the labour here and abroad. The well-being of the wage worker is a prime consideration of our entire policy of economic legislation."

One other thing must not be forgotten. The American business man works harder and works longer than his average English competitor. This is true of almost every grade in the industrial army. Here in England when a man has made a respectable competency he, as a rule, rests on his oars and thinks

THE PLAN OF CAMPAIGN 23

prosperity an excuse for ease. The American busi- ness man, on the contrary, works harder the higher he rises ; and though you may find the wives and daughters of the great Transatlantic industrial kings spending their days in leisured ease, you find the kings themselves, as a rule, with a long-distance telephone at their ears and a couple of stenographers at their elbows. The head of an English business thinks he does well if he reaches his office by ten in the morning : the American is before his desk at eight. The English workman limits his output ; the American prides himself on working his machines to their utmost capacity. The difference this makes may be shown by one case in point. An American contractor undertook, a year or two since, to erect a building in London. He found that his English bricklayers would not lay more than a limited num- ber of bricks each per day. It was not a question of pay, for he was willing to pay them according to their work. In despair the contractor brought over a number of men from New York. He paid them higher wages, but they worked so much harder than the Englishmen that, after allowing for the cost of their passage and return, the contractor materially saved on the deal. And, what was more important for him, he was able to complete his work in time.

" Driving " is the rule in American industry. The foreman or " ganger " there is not a sort of caretaker of the workman's interest, but a watchman for the master's. He sees, as it is his business to see, that every man is kept at the utmost point of exertion during the whole of his working hours. Admittedly

24 THE AMERICAN INVADERS

there are many evil sides to " driving." It means that the weakUngs go to the wall, that the indifferent workers are ruthlessly thrown on one side, that the deHcate are crushed, and that right quickly. It means hard times for the strong, and no mercy for the weak. But between the " driving " of an Ameri- can steel mill and the happy-go-lucky methods of an old-fashioned London office there are intermediate stages.

Already " driving " is coming into London from sheer industrial necessity, and it must come in more and more if we are to hold our own. I recently saw the bad effects of this in a great London warehouse. There, while the hands are well treated, they work at such pressure that the name of their firm has become almost a byword in the city. The results are very apparent. The house in question continually drafts in a large number of lads from the country, and almost as steadily there go back men of broken health, with seeds of consumption sown in them, with ruined constitutions — all brought on through the persistent overwork there maintained. No man of common sense would advocate this. But English masters must find a via media between indifferent workmanship and cruel overwork. On their finding this depends very largely our commercial future.

CHAPTER III

THE FIGHT FOR THE ATLANTIC

Men have almost forgotten that eight years ago America seemed on the verge of a great industrial upheaval. Business was exceedingly bad ; stocks and shares of all kinds had fallen to their lowest ; railway after railway was threatened with ruin ; Coxey and his army of reformers were marching towards Washington ; the bituminous coal trade, after a bitter labour fight, had patched up a tem- porary peace ; Chicago was going through civil war ; the Pullman strike was on ; the main railway sys- tems of the mid-West were locked up ; the terrible Homestead struggle was progressing, and the land rang with the voices of homeless and hungry men. It was the time when the farmers of the West piled up their mortgages, and when the toilers of the Eastern cities found their work brought to an end. What, it may be asked, has that to do with the American fight for our Atlantic trade ? Much every way. It was the industrial trouble of the early nineties that paved the way to power for Mr. Pier- pont Morgan and gave him his grip on the railroad systems of America.

2b

26 THE AMERICAN INVADERS

Mr. Pierpont Morgan was then best known as a leading Anglo-American banker who represented a large portion of the British holders of American se- curities. In this capacity he had much to do with American railroads. He took up hne after line and reorganized it. By supreme business skill he made bankrupt properties solvent. Soon it was found that the interests of various roads were largely identical. Having the power of the purse, he made railroad presidents conform to business principles. Heads of lines who had been indulging in long and costly rate wars at their stockholders' expense were bidden mend their ways.

As times improved and the era of prosperity set in, Mr. Morgan found himself the over-lord of a central group of American railways. The various lines di- rectly under his own hands were about 12,000 miles in extent. In conjunction with Mr. J. J. Hill he controlled some 20,000 miles more. He was in en- tire harmony with the Pennsylvania (Standard Oil) group, controlling 14,000 miles ; he had a com- munity of interests with the Vanderbilts and Goulds and Mr. Harriman, thus having a grip on 110,000 out of the total of 190,000 miles of rail in the country.

The Standard Oil interests practically own the Pennsylvania Railroad, and Standard Oil invest- ments predominate in the International Navigation Company, the aggressively American organization which owns the American and Red Star lines of steamers. Mr. Clement Griscom, the presiding genius of the International Company, was convinced

THE FIGHT FOR THE ATLANTIC 27

that by adopting the principle of combination among Atlantic steamship services great savings could be effected. As a business man, it seemed to him ridiculous that three ships should leave New York in one day for Europe and then two or three days go by and none leave. He objected also to the cutting of rates that often went on.

The same idea occurred to Mr. B. N. Baker, Presi- dent of the Atlantic Transport Line, a company representing very similar interests to the Inter- national Company. They persuaded financiers of the Standard Oil Company of the alhed Widener electrical interests, and Mr. Pierpont Morgan to come in line with them. Both Mr. Morgan and the oil magnates felt that it was rather bad business for the American railroads to pay out over a hundred million dollars a year to foreign steamers for the continuance of the freight traffic which they gathered.

Then began a slow campaign. A syndicate was formed under Mr. Morgan, and about the same time a Shipping Subsidy Bill was actively pushed in the U.S. Congress. Alarmed by the Subsidy Bill, Mr. Ellerman, an exceedingly active British shipowner, and head of the Leyland Line, agreed to sell to Mr. Morgan the whole Leyland concern at what then seemed a very high figure, shares quoted in the market at £12 los. being purchased for £14 los. Mr. Morgan, it may be added, has since re-sold the line to his new company at a price showing a very large profit, so that he did not do quite so bad a bit of business as his critics thought.

The purchase of the Leyland Line was especially

28 THE AMERICAN INVADERS

fortunate. It removed from competition Mr. EUer- man, and it stopped the active freight war the Leyland Line had been waging on the Atlantic Transport. It further placed the syndicate in pos- session of an important line of steamers. Steps were immediately taken to develop the trade of the Ley- land. Since the syndicate partly controlled the great American railways it was easy to open up a new grain trade at Quebec for Leyland boats, at the expense of the Eastern States of America.

By the spring of last year the syndicate had control of the American, Red Star, Atlantic Trans- port, and Leyland Lines. But the real struggle was yet to begin. Until the White Star and the two German Lines — the Hamburg-American and North German Lloyd — were brought in or neutralized, supremacy was impossible. The Cunard Line was less to be feared, for its business is more passenger than freight.

The main efforts of the syndicate were now directed at the White Star Line, but to conquer it was a formidable task. Its profits had been estimated not long before at a million pounds for one year. It was a private company, with a nominal capital of £750,000, and by its articles of association any share- holder wishing to sell had to offer his shares to the others. Above all, it was the pride and glory of the Ismay family, first among English shipowners. Mr. T. H. Ismay, but recently dead, had built up the line in his own lifetime, and his trustees held one-fifth of the shares. Members of the Ismay family held more.

THE FIGHT FOR THE ATLANTIC 29

When talk first arose of negotiations proceeding for the sale of the White Star Line, British shipping men were incredulous. Their unbelief was supported by repeated and emphatic denials by Mr. Bruce Ismay, the Managing Director of the line.

The syndicate were not at the end of their re- sources. Freight rates fell, so that the carriage of goods across the Atlantic ceased to be profitable. Mr. Pirrie, head of Harland and Wolff, the Belfast shipbuilders, builder of the White Star boats and largely interested in the White Star Line, was approached, and the danger of a railway war hung over the White Star directors.

It is easy enough, at this stage, to blame Mr. Bruce Ismay and his colleagues for joining the Americans, but the situation before them was anything but an enviable one. They knew that the American rail- roads could, if they desired, divert a large part of their traffic from them. Without the railroads the steamship lines would be robbed of four-fifths of their trade, and the railway lines were largely controlled by Mr. Morgan. The triumphs of previous years were no promise of future prosperity. Let the rail- ways declare war and the White Star directors might struggle in vain. They must sell out or be beaten out of the field — and the Morgan syndicate were no hard buyers. They offered terms' which might have proved attractive under any circumstances, and to some of the leaders of English shipping they offered greater power in the larger combine.

At the beginning of 1902 Mr. Ismay, Mr. Pirrie, the heads of the German lines, and other English

30 THE AMERICAN INVADERS

shipping leaders went to New York. The gathering attracted great attention, and the pubhc announce- ments that the meeting was only to come to an agreement on the freight question satisfied few. In February an arrangement was arrived at which made the Morgan syndicate supreme on the Atlantic, and which transferred the control of that ocean from England to x\merica. The deal was kept quiet till late in April, when a guarded communication was made through the Times about it. At first it was hoped that the British company had only joined a mutual league. Assurances were given and greedily swallowed that the ships were still to be White Star boats and still to be under the British flag. This required no assurance, for it would have been folly for the syndicate to alter the flag, even had America permitted it. It is much cheaper to run boats under the British flag, and the White Star Line receives substantial subsidies from the British Government. Had the syndicate confessed the truth they might have admitted their fear lest the purchases of the line by a foreign company should make the British Government alter its relations to it.

When the terms of the agreement were issued in May it was seen that British prestige on the seas had received the most severe blow since before the days of Nelson. It was no combination that had been effected, but an absolute purchase, lock, stock, and barrel, by the Americans. And the agreement in- cluded more than this. It transferred the Dominion Line to Messrs. Morgan, and gave the company formed by them the entire right over the output

THE FIGHT FOR THE ATLANTIC 31

of the yard of Messrs. Harland and Wolff, the lead- ing British shipbuilders.

Under the agreement between Messrs. J. P. Mor- gan and Co. and the heads of the steamship lines, the White Star Line was bought, and all the business of Ismay, Imrie and Co., except the Asiatic Steam Navigation Compan}^ for ten times the profits of 1900. The Dominion Line got the same terms. The International Navigation Company was bought for ;f 6, 831, 600, while a large number of shares giving a governing interest in the Leyland Line went at a substantial advance upon the price paid in the sale of 1901. The former owners of the White Star and Dominion Lines bound themselves not to engage in competitive trade for fourteen years.

It had already been announced that a working arrangement was arrived at with the Hamburg- American and North German Lloyd lines. An at- tempt was made last summer to secure control of these lines also. A large amount of American capital was employed in purchasing their shares. Seriously alarmed, the German shipping chiefs held counsel together. In England our shipowners were left to themselves, the Government waiting to act until the sale had been effected. In Germany the heads of the two lines, Herr Ballin and Herr Plathe, met the Kaiser last October, and after long conference a plan was made by which the direction of the com- panies was confined to Germans living in Germany. The German people were not going to allow them- selves to be deprived of one of their national glories by the power of an American syndicate. The pre-

32 THE AMERICAN INVADERS

caution was effectual. But even the Germans had to consent to a working agreement. Had they not done so the Americans would promptly have fought them for their Mediterranean trade.

The sale of the White Star Line has stirred up the English people as few industrial matters have ever done. The nation realizes to some degree that new powers have arisen, at whose bidding the course of trade is changed. But we are setting about meeting the new situation in a way scarcely worthy of our national sense. There is a talk of a fresh combine by which a number of old boats are to be joined together as the British group in opposition to the Morgans. It would be as satisfactory to bombard Portsmouth forts with popguns.

CHAPTER IV

THE COMING SUBSIDIES

" The condition of the merchant marine calls for im- mediate remedial action. We should no longer have to submit to conditions under which only a trifling portion of our great commerce is carried on our own ships. From every standpoint it is unwise for the United States to continue to rely upon the ships of competing nations to distribute our goods." — President Roosevelt.

America has in the past failed to obtain a great ocean navy by ordinary means. It has for some time been cheaper to build vessels in England and to run them under the British flag than to build in America or to maintain under the Stars and Stripes. Given fair play and open competition there is httle doubt but that the British could con- tinue to lead. The latest American statistics show that during the last year more than one-half the imports to the United States brought there on steamships came under the British flag, and two- thirds of the exports were taken out by British ships.

Of 1,255,000,000 tons of exports 846,000,000 were

33 D

34 THE AMERICAN INVADERS

carried out on British vessels, as against 65,000,000 on American. Of 794,000,000 tons of imports 82,000,000 came in American steamships, as against 428,000,000 tons in British ships.

The greater cheapness of British ships is beyond question. Mr. B. N. Baker, head of the Atlantic Transport Line, placed contracts for ships with Harland and Wolff, of Belfast, the New York Ship- building Company, and the Maryland Steel Com- pany. The largest of these boats were of a similar type to the big Atlantic liners, the Minneapolis and the Minnehaha — about 13,000 tons. The British cost £292,000 each : the New York Shipbuilding Company's price was £380,000. For smaller boats the Belfast firm charged £110,000 as against £150,000 by the Maryland Steel Company and the New York Shipbuilding Company.

The higher cost of running American ships was proved by some facts gathered by the United States Government about wages paid on vessels of a cor- responding type. Comparing the American steam- ship St. Louis with the British Oceanic and the German Kaiser Wilhelm der Grosse, it was found that the St. Louis, having 380 men on its pay roll, cost in wages £2,260 ; the Oceanic, with 472 men on its pay roll, cost £1,980 ; and the Kaiser Wilhelm der Grosse, with 500 men, cost £1,543.

The same was shown in the report drawn up by Messrs. Holmer and Goodnough, recognized authori- ties on the question, about a plan to institute a large coal steamer service to Europe. It was proposed to build vessels of 6,500 gross and 4,400 nett tonnage.

THE COMING SUBSIDIES 35

provided with all the latest facilities for carrying coal. The specialists reported that American vessels would be hopelessly out of competition. They gave two reasons — first the high cost, and next the " ridi- culous employment laws." They showed by detailed figures that a vessel of the type proposed, when run under the American flag, would cost in wages ;£4,i8o per year, as against £2,634 for an English vessel. The total operating cost under the American flag would be £32,699 per year, and under the English £26,605. The cost per ton of coal carried would be ys. 6d. if a ship were American, as against 6s. 3^. if it were English. These experts reported in this instance that " there never was, nor is there now, any obstacle to the ownership of British vessels by Americans," and they recommended that the vessels should be run, if necessary, as British boats. This has already been done in many instances, and large numbers of really American ships — American, that is to say, so far as their ownership and management are concerned — are kept under the British flag. American citizens and companies to-day own over a million tons of foreign shipping, nearly all British. The obvious means of counteracting the natural advantages British traders possess is to allow Ameri- can owners a subsidy. This session Senator Frye, of Maine, brought before Congress a Bill providing for this. His Bill passed the Senate, but was dropped in the Lower House owing to fear of public opinion in the West and fear of the results such a law w^ould have on the coming autumn elections. Yet though Senator Frye's Bill has disappeared the subject is

36 THE AMERICAN INVADERS

bound to revive, and it is well we should face it. Senator Frye proposed that ships receiving subsidies must be American built, employing American officers, and with so far as possible American crews. He proposed to give, apart from special mail sub- sidies, a bounty of a halfpenny per gross ton per hundred nautical miles sailed. This bounty he cal- culated would completely counterbalance the present British advantage. It is difficult to overestimate the importance of such a proposal, and the far- reaching results it must have when it passes into law. In this country we are slowly awakening to its importance, but even many shippers at present are careless about it. " You are stirring too soon," said one merchant to me. " You must wait till our shipping is lost to us. Then we will begin to debate the matter, and our Government will appoint a Royal Commission to investigate, but not until then."

I have made opportunity of obtaining the views of many prominent English shipowners on the effects of a proposal such as this. Naturally the ship- owners do not care, for obvious business reasons, that their names should be quoted. Yet their views are well worth studying without their names. The first who writes to me is the managing director of a well- known Transatlantic passenger and freight line. Says he : " If a United States Subsidy Bill only grants subsidies to steamers built by United States shipbuilders, and manned by United States crews, I do not think it will at first materially affect British interests, except by increasing the already heavy

THE COMING SUBSIDIES 37

competition in the North Atlantic trade. With experience no doubt the United States shipbuilders will be able to produce as cheaply as the ship- builders in the United Kingdom, and United States shipping companies will be able to effect economies in wages and other directions. Then of course the unsubsidized British steamer would have to give up the United States trade ; and not merely the United States but Canada also will be affected, because cargo and passengers can even now be freighted as cheaply vid the United States ports of Boston, Port- land, and New York as by the Canadian ports.

" If the Subsidy Bill is to enable the Morgan alliance to obtain subsidies on British-built steamers in consideration of their adding a certain percentage of American-built tonnage, these disastrous results would begin at once ; and without some counter- veiling subsidies from the British Government the North American trade from the Gulf of St. Lawrence to the Gulf of Mexico would be lost to British shipping."

Here is a pessimistic opinion from a London house : " There is a tendency in some quarters to under- estimate the effects that an American Shipping Sub- sidies Bill will have if it passes into law. We think this regrettable, because we say confidently that we have never known any measure passed by any nation more calculated to do injury to British interests. Some of those most qualified to speak on the matter have openly expressed their opinion that the whole of the British freight trade is seriously menaced. In our opinion if the Bill (Senator Frye's) passes through

33

THE AMERICAN INVADERS

into law as it stands at present it will be the end of this trade. The one thing for us to do would be for us to sell our ships to the successful Yankees as soon as possible. The action of those who sold out to Mr. Pierpont Morgan and others some time ago was considerably criticized. They certainly knew what they were about, and they made an excellent ])argain. It w'as a case of audacious foresight thoroughly justified. One cannot help wondering whether the American purchasers were as satisfied with the transaction as were the English managers.

" One fears that it is too late to talk vaguely of remedies. If we had a Government with the slightest perception of the supreme importance of commercial matters, or if we had men in power who had any real knowledge of business, there might still be hope of some thorough and immediate action to meet the threatening state of affairs. No man, however, who thinks of the constitution of a Government such as the present, would look in this direction for any help whatever. A bounty to English ships, subsidizing them as much as their rivals would be subsidized, is the only rational answer to America's new move. They know what they are about. Why cannot our people have at least sufficient knowledge to be able to answer so unmistakable a challenge ? If one could see a bounty on corn added to this bounty on ships one would be still better pleased.

" We estimate the effects will be most felt in three directions, (i) The mileage subsidy will encourage the Americans first of all to attack all branches of the long-distance trade. As experienced shippers

THE COMING SUBSIDIES

39

we expect that their first attempt will be to control the trade of the far East. (2) We believe subsidies will encourage the growth of a vast mercantile marine. This will to some very considerable extent do away with the advantage which we undoubtedly possess on this side of being able to turn out ships faster, better, and cheaper than our rivals can do. Not only can we beat the Americans here, but we can beat every other nation. Shipbuilding is specially dear in France, and the work is far from satisfactory when done as far as the individual work- man is concerned. Yet the subsidies given by the Government have lent a tremendous impetus to the building of ships in that country. It may be mentioned that of the sailing ships leaving England, especially for long-distance voyages, quite an extra- ordinary proportion are French. This applies par- ticularly to Cardiff and Liverpool. (3) The subsidies for speed will tend to make these merchant vessels veritable clippers. We have had experience already of the way in which they can affect our trade, for until the Civil War American ships were very dangerous competitors with ours.

" At the same time it is almost ironical to see exactly what is going to be done without being able to help ourselves. Every practical man can see that this Shipping Subsidy Bill is only meant to be temporary. It is a case of helping the child to walk until it is able to run by itself, and while this process is going on it is hoped that such blows will be dealt to the shipping of other countries that when the inevitable withdrawal of the grant occurs American

38 THE AMERICAN INVADERS

into law as it stands at present it will be the end of this trade. The one thing for us to do would be for us to sell our ships to the successful Yankees as soon as possible. The action of those who sold out to Mr. Pierpont Morgan and others some time ago was considerably criticized. They certainly knew what they were about, and they made an excellent bargain. It was a case of audacious foresight thoroughly justified. One cannot help wondering whether the American purchasers were as satisfied with the transaction as were the English managers.

" One fears that it is too late to talk vaguely of remedies. If we had a Government with the slightest perception of the supreme importance of commercial matters, or if we had men in power who had any real knowledge of business, there might still be hope of some thorough and immediate action to meet the threatening state of affairs. No man, however, who thinks of the constitution of a Government such as the present, would look in this direction for any help whatever. A bounty to English ships, subsidizing them as much as their rivals would be subsidized, is the only rational answer to America's new move. They know what they are about. Why cannot our people have at least sufficient knowledge to be able to answer so unmistakable a challenge ? If one could see a bounty on corn added to this bounty on ships one would be still better pleased.

" We estimate the effects will be most felt in three directions, (i) The mileage subsidy will encourage the Americans first of all to attack all branches of the long-distance trade. As experienced shippers

THE COMING SUBSIDIES 39

we expect that their first attempt will be to control the trade of the far East. (2) We believe subsidies will encourage the growth of a vast mercantile marine. This will to some very considerable extent do away with the advantage which we undoubtedly possess on this side of being able to turn out ships faster, better, and cheaper than our rivals can do. Not only can we beat the Americans here, but we can beat every other nation. Shipbuilding is specially dear in France, and the work is far from satisfactory when done as far as the individual work- man is concerned. Yet the subsidies given by the Government have lent a tremendous impetus to the building of ships in that country. It may be mentioned that of the sailing ships leaving England, especially for long-distance voyages, quite an extra- ordinary proportion are French. This applies par- ticularly to Cardiff and Liverpool. (3) The subsidies for speed will tend to make these merchant vessels veritable clippers. We have had experience already of the way in which they can affect our trade, for until the Civil War American ships were very dangerous competitors with ours.

" At the same time it is almost ironical to see exactly what is going to be done without being able to help ourselves. Every practical man can see that this Shipping Subsidy Bill is only meant to be temporary. It is a case of helping the child to walk until it is able to run by itself, and while this process is going on it is hoped that such blows will be dealt to the shipping of other countries that when the inevitable withdrawal of the grant occurs American

40 THE AMERICAN INVADERS

shipping will be in such a position, and have such a hold over the carrying trade of the world, that outside competition will not be of much avail.

" It should be noted that the subsidies will affect different lines in different ways. Passenger steamers will at first scarcely be affected at all. It is the freight trade that is aimed at. Indirectly also it can be seen that it is part of a great national com- mercial policy, and we must look as much to the department of manufacture and general industry for the final effects of the Subsidy Bill, as to the more direct sphere of shipping."

It will be well perhaps to quote with one less pessimistic forecast. I give this from another Lon- don shipowner :

" One department of British shipping which an American Subsidy Bill will be powerless to affect, whatever it may do in other directions, is our coast- ing trade. Whether it will affect any departments seriously is none too certain if we reason by analogy, and remembering the scare that the passing of the French and the German Subsidy Bills gave us. Then it was said over and over again that the two subsi- dized nations would sweep the seas. What, how- ever, has been the actual result ? Germany has her ships for sale at any price, and France has found that the promise of the bounties has not fulfilled expecta- tions confidently raised. It is worth noting that only two French lines have really benefited to any appreci- able extent by these aids. These are the Message- ries Maritimes and the American liners. The success of the latter has not been totally inimical to us. We

THE COMING SUBSIDIES 41

built some of their best ships at Greenock, and built others for them at St. Nazaire, part of the agreement made being that we should lay down a yard there so as to show them how ships were to be built. In one department the French grants have had a notable effect in calling into existence a splendid fleet of large sailing ships.

" But our coasting trade is impregnable. It is defended in several ways. The freights are ridicu- lously low. We have to go down to bed-rock prices owing to the competition of the Yorkshire and the Durham districts in selling their gas coal. We re- coup ourselves by the cargoes of colonial and other goods which we carry back on the return journey. We have the advantage of getting into the ports at lower rates than other steamers. A coasting steamer is very much less heavily charged than one from a foreign port. Take Liverpool as an example. Two instances of different goods will show the effect. Raw wool pays is. 2d. a ton when brought in by a coasting steamer, and 3s. when from a foreign port. Copper also is similarly cheaper. The coaster pays IS. a ton, and the others 2s. 4^. Even if a steamer has put into an English port before proceeding to Liverpool, or whatever port she may have cargo for, she is still considered as coming from a foreign port. We have to meet the competition of several large lines already, and it is partly to this fact that we are able to compete successfully. The addition of any number of American lines to this competition would make no difference.

"Would the bounty given then, we ask, be sufficient

42 THE AMERICAN INVADERS

to overcome the difference in the charges ? Even if it did we have still another rampart to defend us. This is the question of time. Before the big ship can be unloaded and started again, we have had our goods and delivered them. It pays no one to wait when they can have their consignments without delay. Again, supposing an American vessel wanted to get on even terms in the matter of port dues — there is a way. She would have to unload every item of cargo and re-ship them for the other port. This would at once add to the delay and to the expense in another direction. There would be quay dues to pay.

" However, even supposing that all these ram- parts were carried, a final one remains, and this is practically insurmountable. The Americans do not know the trade. They might have ship following ship from port to port ; they might cut prices as much as they liked ; they might cover the ground as thoroughly as they liked ; but unless they sat where we sit, in our own offices, they could not get the trade. It is the knowledge that this man will want so many bags of sugar carried at such and such a date to such and such a place, that another will have copper for carriage, another want a consign- ment of wool, that brings trade. This knowledge subsidies cannot convey, and no number of bought ships can give to their purchasers. In other words, it is the business that matters and not the instru- ments by means of which that business is carried out. This is where the American cuteness was ap- parent in the Leyland Line deal. They bought the

THE COMING SUBSIDIES 43

business, the goodwill, the connexion. Had the ships merely been bought, Mr. Ellerman might have sold them by the hundred, and still kept all the essential parts in his own hands. I should be willing to sell as many ships as were wanted by any one who chose to buy them. I could replace them all at a week's notice and have them in running order within ten days. So, taking it all round, I think we may say that our coasting trade need fear no in- vaders. If the Americans want to buy up our businesses, that is another matter. Has any one ever met a business man who was averse to con- cluding a transaction provided he stood to benefit by it in a manner which he considered adequate ? Probably all of us would sell on terms.

"If we take the broader field of shipping in general, there is one thing worthy of notice. The cost of building ships on the other side of the At- lantic is already considerably higher than it is here. This disparity will increase. In business language this means that American shipowners will have to capitalize their subsidies in order to pay for the extra expenditure in building their ships. This being so, the competition is fair and level. Honours are easy.

" The one great advantage the American ships possess is having so many harbours on the coast which are capable of receiving vessels of 10,000 tons. This means large ports, large ships, large cargoes. A cargo of 10,000 tons can be more economically handled than one of 1,000 tons. This explains to some extent the remarkably cheap freights which

44 THE AMERICAN INVADERS

have been quoted for the Atlantic carriage of coals to French and Mediterranean ports."

The following is the exact text of Mr. B.N. Baker's letter to the United States Commissioner of Naviga- tion : —

Atlantic Transport Line, Office of the President.

Baltimore,

October 17, 1901.

Dear Mr. Chamberlain, — Referring to my letter of March 16, 1901, and replying to your request with regard to relative difference in cost of ships, our company at present have a contract for two ships with Harland and Wolff, Limited, Belfast (one of which will be completed very early in the spring and the other a little later, say during the summer), of exactly the same size, dimensions, and all particulars as two ships we have contracted for with the New York Shipbuilding Company, of Camden: The cost of the English-built ship, as near as possible (we having just completed two of exactly the same size, dimen- sions, and speed), will be about £2(^2 fyoo ($1,419,120). The same identical ship built at the works of the New York Shipbuilding Company will cost us a little over ;^3 80,000 ($1,846,800).

In addition to this we are building two steamers with the New York Shipbuilding Company of smaller dimensions, for which we have a contract at ^150,000 each ($729,000); also two ships of exactly the same dimensions with the Maryland Steel Company, Sparrow's Point, for ;^i 50,000 each ($729,000). We have two ships of identically the same detail, delivered to us in the last twelve months, built by Harland and Wolff, Belfast, one of which cost me ;{iio,ooo ($534,ooo)j and the other ;^ioo,ooo ($486,000). Very truly yours,

B. N. BAKER, President.

Eugene T. Chamberlain, Esq., Commissioner of Naviga- tion, Washington, D. C.

Senator Frye's own summary of his Subsidies Bill,

THE COMING SUBSIDIES 45

read to the Senate Committee on Commerce, ran thus : —

'' The establishment of this complete American ocean mail service, involving much shipbuilding, will require several years. It will render the United States as indepen- dent of foreign Powers for its ocean mail service as is Great Britain. The cost of the American service by American mail steamers will be $4,700,000. The cost of the British and Colonial service by British mail steamers is $4,700,000? Receipts from ocean postage by the United States are now estimated at $3,000,000. The annual deficit under the new American system proposed, including minor services, will be about $2,000,000. The annual deficit under the British Colonial system is $2,188,000. The postal subsidy pro- visions enable the Postmaster-General to establish an American ocean mail system superior to the systems of Great Britain, France, and Germany. The American ocean mail system outlined contemplates on the Pacific weekly mail service to Hawaii, the Philippines, Japan, China, and Hong Kong, and a fortnightly service to Pago Pago, New Zealand, and Australia. The maximum cost would be $2,335,000. On the Atlantic the Bill contemplates semi- weekly mail services to Jamaica, Havana, and Europe ; weekly to Mexico ; once in ten days to Venezuela ; and fortnightly to Brazil, at a maximum cost of $2,365,000. The report compares in detail American services proposed with British services, and asserts that the Bill will revo- lutionize in American favour as against the Suez route the world's ocean mail connexions with China and Japan, and will affect Australian connexions. It will give the United States forty-two auxiliary merchant cruisers compared with Great Britain's fifty.

" The second part of the report deals with the general subsidy to all American vessels, steam and sail, except mail steamers. It quotes President Roosevelt's message, show- ing that the cost of building American ships is greater than the cost of building ships abroad ; that American wages on shipboard are higher, and that the Government should remedy these inequalities. Discriminating duties, export

46 THE AMERICAN INVADERS

bounties, and subsidies based on export cargoes are in violation of our international obligations, so direct sub- sidies is the only practical method. The subsidy proposed is not a naked bounty, for it is based on public services to be rendered in return. Americans have absolute free trade in foreign-going ships, so no shipbuilders' trust is possible under the Bill. Shipbuilders can import now free of duty materials for ships for foreign trade, so no combination to raise prices of materials is practicable. If an American shipowner will build his vessel in the United States, employ- ing home labour, employing American officers and crew, performing certain services for the American Government, and using the vessel to promote American commerce, he will be paid a subsidy sufficient to put him on an equality with the foreign shipowner, employing foreign labour and serving a foreign Government. The average cost of build- ing ocean steamers, mainly for cargo, is $102 per ton in the United States, and $76 in Great Britain. Average monthly wages on monthly steamers, mainly for cargo, are : Ameri- can $36, British $26, German and Scandinavian $17. The general subsidies proposed equalize American and foreign costs on these bases.

" The Bill will promote the building of new vessels of large carrying capacity, which promote export trade at low freight rates. Combined with our geographical position, it gives special advantages to American vessels in the Pacific trade. Based on actual navigation of American vessels in foreign trade in 1900, the subsidies proposed would amount to $1,072,000, divided as follows : Steam (excluding mail vessels), $559,000; sail, $513,000. Geographically — At- lantic Ocean, $440,000 ; Pacific, $427,000 ; square-rigged ships on both oceans, $161,000. Full compliance with all requirements for the Bill would fix the initial expenditures at between $800,000 and $900,000. Under the general sub- sidy increase in expenditures depends on increase in ship- building. The completion of 200,000 tons of ocean steamers for foreign trade in one year, involving $1,300,000 in sub- sidies, will place the United States in advance of Germany as a shipbuilding nation."-

CHAPTER V

THE AMERICAN BOOT

Four years ago American boots were practically unknown in this country. To-day they form the most prominent display in our shoe shops from Dover to Aberdeen. Sales have gone up fivefold in four years, and the total value of imports of this article was £369,437 in 1901. The iVmericans have also taken an appreciable part of our export shoe trade from us. In Australia, which was once largely supplied from England, British imports have de- clined, while the demand for American shoes has doubled in four years. In France the trade has increased nearly threefold in two years, and the total export trade from America to there rose 63 per cent, between 1899 and 1901.

The failure of our shoe manufacturers to meet successfully American competition has filled North- ampton and Leeds and Leicester with workless men. It has meant want and poverty for many who not long since were earning respectable incomes. Up to

quite recently our shoe manufacturers stubbornly

47

48 THE AMERICAN INVADERS

refused to admit that the Americans were at all serious rivals, and even now they give them the most grudging recognition. For the past year their trade organs have been full of articles denouncing American competition as a bogey, and as mere blustering pretence. To scoff at it has been the fav- ourite occupation at their banquets. They evidently think that if they deny its existence long enough and loudly enough it will disappear. Yet this fight has only begun. The leading Transatlantic shoe manufacturers are now here in person to push their trade. Several of them have opened their own shops, which they run on very attractive lines, with clever advertising devices to attract attention. Some of the more far-sighted of the English traders are adopting the American name and the American style. One large house, well known in Northampton, runs a number of its retail branches under the title of an American shoe company. Not long since it took action against an American who was manufacturing " American " shoes in Leicester to prevent him calling himself American in such a way as to appear to resemble them.

The chief American business, however, is done through ordinary retailers. A leading English journal. The Shoe and Leather Record, issues a supple- ment solely devoted to the wares and methods of our rivals. The British trade, while laughing at the Americans, is cutting its prices and altering its methods to meet them, but British sales are going down and American are ever on the increase. The sale of manufactured shoes, important as it

THE AMERICAN BOOT 49

is in one way, is really the least part of the American conquest of our leather trade. A few years since three men met in a room in New York City, and resolved to wage a war of conquest on the world in general. The free-booting barons of old planted their castles on the tops of hills, at the end of valleys, and exacted toll by force of arms from all passing travellers. The castle of these modern barons was an office in a great New York building. In place of arms they had brains, honesty and ingenuity. But though their methods were different the results are the same. To-day they and their representatives are exacting toll out of almost every person in England and America, and out of a very large proportion of the dwellers on the Continent of Europe.

Who are they ? Their names are certainly not known to fame outside of their own particular trade ; yet the way they have won the world is one of the romances of commerce. They are the " United Shoe Machinery Company."

Their plan of campaign was this. In America they amalgamated many leading firms, and acquired most of the great master patents in shoe manufactur- ing machinery. Shoemaking has long emerged from the stage of being a simple process, and few articles of every-day use require so many mechanical processes. It is said that the better class shoe goes through nearly one hundred machines from first to last before it is completed, each of them different, and most of them of very elaborate character.

After combining the leading firms in America the boot barons came over to Europe and established

E

50 THE AMERICAN INVADERS

their special representative, Mr. Connor, in Frank- fort, from where he practically controls the affairs of this continent for them. In England they bought up firm after firm in this line of business. It is said that they prefer to pay cash where possible, but if necessary they allow desired firms into the com- bination on shares. Such great houses as Pierson and Benyon, the English and American Machinery Company, the Union Machine Company, and Good- year and Company were amalgamated, and the British United Machinery Company was established. In France they formed the " United Machinery Com- pany de France," and in Germany another company was formed. Keen business men in this country saw that it was better to work with the great trust than against it, and so many of them threw their forces on its side.

Then the company set itself deliberately to compel British manufacturers to use its supplies. It had a hard task, and had it not been backed up by the undoubted excellence of its machines it must have failed. The regulations of the trade union did not encourage quicker machinery, and many manu- facturers were welded to old methods. But even the most conservative maker sees in time that he cannot afford to use a machine which makes, say, 500 button-holes in an hour, and requires three pro- cesses to do it, when he can get another that will make 3,000 an hour with only one process.

It was such superiority as this that drove our manufacturers, willing or unwilling, to buy. The United Company does not as a rule sell outright.

THE AMERICAN BOOT 51

It leases its machines for a low payment down and a royalty on production. For instance, one of its machines for wire stitching can be had free of cost on condition that the wire used is bought from the combination. The company in this way now se- cures various royalties on almost every pair of shoes made in England. The mediaeval barons were mere bunglers compared with the enlightened business men of to-day.

Such enterprise has of course encountered serious opposition, but the very success of the United Company enables it to hold the field. There are various British inventors trying to outdo it, but it controls master patents which hamper any imitators. And the British inventor knows as a rule that he can secure better terms from the combination than he can by fighting it. What is more, it is so busy devising improvements that by the time one machine has become public property, owing to the expiration of its patent, it is out of date, and a new apparatus has been placed on the market which outdoes it. By the excellence of their madiines these American over-lords have secured supremacy in our trade.

The introduction of American labour-saving mia- chinery is doubtless an economic gain to us. But the most optimistic can scarcely believe that the importation in large quantities of American shoes, as apart from American shoe machinery, is anything but a loss to British trade. Not many months since it was the fashion to denounce American competition in the shoe trade as a " lath painted to look like iron." We were told that it was a mere passing fad.

52 THE AMERICAN INVADERS

that would go in a few months. In the late autumn of last year, when I was at Northampton, masters and workmen alike had one story. " We are tired of hearing of these American shoes," they said. " The whole thing is an American dodge, and what success the Americans have had is solely through bragging. Wait till the winter comes. Do you think the thin American shoes will ever stand our climate ? Not a bit of it. American shoes will fill English churchyards. It is mere nonsense to regard them as dangerous to us."

Yet as the men were telling me this the state of affairs in their own town might well have bidden them pause. For a thousand houses were empty. Over two thousand people were on the books of the Guardians in the Poor Law district for out-door relief at that time. Large numbers of factories were working — as they have been right through the winter — short time, and men ordinarily earning 28s. a week were, I found in many cases, earning 9s. or I2S., while girls usually paid 12s. or 14s. a week were only making 5s. "or 6s. The children of the poor went hungry to school, and a town relief fund had been started for the unemployed. Twice within the past few weeks crowds had assembled outside the workhouse gates demanding work. On the first day of my visit to the town a man had been taken before the magistrate for breaking a shop window. " Send me to prison," he said ; " I can get no work ; I am starving. Anything is better than this." And that same week at a Town's Meeting, presided over by the Mayor, and called to consider the question of

THE AMERICAN BOOT 53

the unemployed, one speaker had declared that, " The authorities must either find work for the un- employed workmen, or must take upon themselves the more serious responsibility still of introducing to the town a regiment of soldiers to keep the men in order. There are times when patience is a crime, and this is one of them. (Applause and dissent.) If my friends and fellow workers are content to stand quietly by and see men and women and children starve, I am not. (Applause.) Work or food is our cry, and we mean to have it."

That very year a great American last factory had sprung up in the town itself, and one of the largest of the local buyers and manufacturers was stocking his shops with American wares. The manu- facturers themselves were adopting American pat- terns on a wholesale scale, throwing aside the old British style, and shoes were being made in Leicester, if not in Northampton, in imitation of American wares, to be sold as American goods. The whole matter was summarized from the official reports of the Northamptonshire Union of Boot and Shoe Operatives for November, 1901. The general report of this Union says : " Since sending out our last report the returns we have received from a large majority of our branches do not give anything like a favourable account of the condition of the trade. Generally speaking, the secretaries report that it is very bad and quiet. In fact some of the branches have found it necessary not only to pay the contributions of some of their members who have been out of employment

54 THE AMERICAN INVADERS

for weeks, and in some instances months, but have granted large sums from their funds to assist mem- bers out of work. From the general appearance of trade all round we are not likely to be in for a boom yet awhile." The Local Union at Northampton wrote : " Trade is still very bad in the town, the number of unemployed having increased since the October report, in addition to which many of those in work are only earning about sufhcient to pay rent."

There was great hope in the trade that spring- time would see an improvement. There is usually a rush of spring orders, but in the spring of 1902 this rush did not come. In March the condition of things was really serious. Short time was general not only in Northampton, but in Leeds and Leicester and other centres. In Northampton the Mayor was stopped by a crowd of the unemployed one Sunday when returning from an official visit to church, and threatened with violence by the men, who said they were starving. Four of the ringleaders were prose- cuted. In court they refused to apologize, saying that there were hundreds of men going without bread in their town, and that they were working for them. In Leeds some factories abandoned the farce of opening their doors. The financial strain was severely felt, and even the various shoe-trade journals, which usually paint things in the most roseate hues, now print week after week details of undeniable distress. " Is this the beginning of the end ? " one trade paper asked, after telling something of the prevalent slackness.

THE AMERICAN BOOT 55

The American imports continued to grow, as they do at the time of writing this. Right through the winter months, despite the cry that American shoes would fill British churchyards, they came more and more into use. During the month of January American boots and shoes to the value of £32,000 were sent to the United Kingdom, as against £23,000 in January, 1901. In April they came to £53,600, as against £45,000 in 1901. For the ten months end- ing April their value was £335,900, as against £229,000 in the corresponding period ending April, 1901, and £143,100 in 1900. In January and Feb- ruary British exports of British boots and shoes de- clined from 121,011 dozen in the same time in 1901, to 116,022 dozen. Nothing but the abnormal de- mand in South Africa prevented the decline being more marked, for there were decreases shown under every heading in the British official returns except South Africa and " other countries."

How is it that the Americans have been able to take from us an appreciable section of our home trade, and still more of our foreign, at a time when our well-stocked factories are partly closed ? Much is undoubtedly due to the fact that American boots are finer and more stylish than English wares at corresponding prices. They fit better, and Ameri- cans study their customers in a way which English makers up to quite recently did not do. For in- stance, they provide half sizes and will give half a dozen widths as a matter of course.

The makers across the Atlantic obtain a much greater output with the same machinery and number

56 THE AMERICAN INVADERS

of hands, and American manufacturers claim that they can turn out three pairs of boots for two finished by Enghshmen. Even in Northampton it is admitted that the American output with the corresponding machinery is much higher than ours. Apparently both masters and men are responsible for this. The American manufacturer specializes. The English manufacturer attempts to make all kinds of footwear. In an American factory men can be kept on one machine, and perhaps at one or two sizes of last, and consequently they obtain far greater dexterity than when they have, as in England, to manage several different sizes. The American manufacturer also prepares his work more thoroughly for the men than is done in England.

English makers declare that the Union deliber- ately limits output, and refuses to allow the machines to be worked to their full capacity. While there is little or no evidence that this is done by the Union as such, it must be granted that the English workers in the shoe trade do not exert themselves as Ameri- cans do. This point is practically yielded in a recent report of the Northampton branch of the National Union of Boot and Shoe Operatives, where it is said : "It is to be regretted that the Employers' Federa- tion still harp upon restriction of output by the workers, while they themselves are the main and principal cause of restriction, if such a thing does exist. We ask the members of such a body how in any common fairness they can expect men with only the minimum wage to live upon, and the expenses of town life, to turn out the same amount

THE AMERICAN BOOT 57

of work as an American does, when they themselves tell us that American wages are so much higher than our own rate of pay ? If a man has a low rate of wages he must be compelled to live upon poorer food than a man with high wages. Let the manu- facturers, therefore, instead of filling up their report with this padding year by year, do what lies in their power to do — that is, pay higher wages so that a man can get the best of food, and thereby increase his mental and physical powers to enable him to increase output, if that is the desideratum aimed at."

A somewhat similar defence of the working man was made to me by Mr. E. L. Poulton, President of the Northampton Council, and local leader of the Trades Unionists. Mr. Poulton, with evident sin- cerity, emphatically denied that to-day, whatever might have been true in the past, the Union en- courages the men to " ca' canny."

" Those who charge the Northampton workman with being an idler and the Union with limiting output are wrong," he said. " Go in our factories here, and you will see work being carried on at a rate that would surprise many of our competitors. It is said that the output of American workmen in the shoe trade is greater than that of the English with the same machinery. If this is true, there are many reasons to account for it.

" First comes the climate. The American atmo- sphere is drier and more stimulating, making greater exertion possible. Then, the American workman is paid more. According to the statements of the masters he earns twice as much. Now a better-paid

58 THE AMERICAN INVADERS

man is a better-fed man, and when a worker has a higher standard of hving he is capable of doing more work.

" If EngUsh masters would pay American wages, and would prepare the bottom stuff in the same way the Americans do, they would get American output. The houses here that pay the highest wages make no complaint of the output of their men. But it is the firms that pay 28s. or 30s. a week, the usual wage here, which expect to get the work of a £3 man. They cannot do it. A man paid the minimum wage has no incentive to special industry.

" One often hears," continued Mr. Poulton, " of cases of men who have been on piece, and who by straining themselves to the utmost have made as much as 45s. a week. The employers have put them at day work at 30s. a week, expecting the same output. They do not get it, not because the Trade Union makes any restriction, but because conditions under piece and day work are entirely different.

" The different arrangement of the factories in the two countries also partly accounts for the smaller output here per man. In America one man attends to one class of machine, and often one size and style of last. The American factory as a rule specializes in a few styles of boots. Here firms attempt to make a multitude of kinds. Now a man who has to attend to four or five varieties of machines, and who has to work on varied lasts, cannot do so much as the one who is always working at one thing. The specialist is bound to be faster.

"As to whether the arrangements of the factories

THE AMERICAN BOOT 59

could not be improved, that is not the business of the workman. You must go to the manufacturers about that. They insist on the right to conduct their own business in their own way. This right was respected and accepted in 1895. What we ask is good wages for our work, and as to how the work shall be planned and managed — we leave that to the employer.

" Not long since one of the big manufacturers here told me," Mr. Poulton asserted, " that if one of his men were to attempt to dispute with him he would turn him out of the factory at once, even though the man were right and he wrong. ' I will not be answered back in my own factory,' he said. Now, when employers assume this position, how can you expect the men to think out improvements ? "

At the very time when distress was most acute one section of Northamptonshire workmen showed an example of stupid conservatism which it would be hard to beat. Messrs. Nichols, of Raunds, intro- duced a new American lasting machine into their factory, and the riveters and finishers rose in a body one morning to exclude three men who were coming to work the new machines. The strangers were persuaded to return home, and the old hands marched through the town with flags flying and band at their head. They went outside the works of makers thought favourable to the improved machines, hooting and booing and groaning, and in one case throwing dirt and stones.

The employers explained that they had practically no option in the matter. They were compelled by

6o THE AMERICAN INVADERS

contracts to get this work done quickly. As they could not induce their men to work sufficiently to meet their demands they had to have faster ma- chinery. The operatives, who can earn in three days sufficient to keep them for a week, had showed no readiness to help the contractors to do their work in the time required. This case affords an illustra- tion of what I said earlier, that the Trade Union was not responsible for the reactionary policy of the men, for they were non-Unionists. They had refused to join the Union because it was too strict for them, and the Union would certainly have opposed such action as they took.

A writer in the Northampton Daily Reporter, said by the editor to be a prominent local shoe manu- facturer, summarized the case against the British methods last August. After referring to those who were content with existing things as living in a " fool's paradise," he went on to say : " American boots have been sent into this country in increasing quantities the last five years. Do they find favour with the general public ? I say most emphatically that they do. . . . The American boots have been most admired because of their particular quality. They have followed closely the best West End London style ; the fit has been perfect ; they have been ex- ceptionally light of hand and comfortable to wear ; the materials have been of the lightest and finest — in some cases leather which no manufacturer has been able to obtain here.

" The present is an age of machinery not only in our own but in every other of wholesale manufacture.

THE AMERICAN BOOT 6i

That trade has benefited the most that has been able to utihze machinery to its full capacity. How do we stand in relation to this ? Nearly the whole of the machinery we use is of American production ; in fact to use only English would spell ruin. We stand at a great disadvantage in this matter, for naturally the country that has made and invented the ma- chines will know how to use them to the best ad- vantage. Northampton manufacturers have bought largely American machines. Are they used to their full capacity, and is the quality of work such as they are capable of doing ? I say distinctly no. In no case is work produced on them such as is sent over to this country by American manufacturers in best goods. There are not made by any firm in the town best goods wholly by machinery such as is sent over here.

" Northampton manufacturers have been using every effort to adopt the American methods, but up to the present with very little success. The two systems of business are entirely different. The American knows very well that if he is to reap the full benefit of his machinery he must specialize, and therefore he confines his business to one par- ticular class of goods only, and very often at one price. The Northampton manufacturer on the con- trary makes men's, women's, and children's goods in great variety and at all prices, and has therefore very much more detail to attend to.

" Work in the American factory is minutely sub- divided, and, in addition to this, certain parts used in the production of boots are prepared by a separate

62 THE AMERICAN INVADERS

manufacturer entirely. Heels, stiffeners, toe puffs, welting, and many other things are made quite a distinct business, and are supplied to the boot manu- facturer better than he could prepare them himself. This also relieves him of the trouble of supervising their preparation. The American is able to produce the best class of work in such a manner that I venture to say no English firm can produce regardless of cost. Owing to the sub-division of work the American workman gets very proficient in the particular part he is confined to, and is able to work at a much quicker pace.

" Are American boots cheaper than English, quality for quality, price for price ? I say yes. They have no difficulty in beating us from one to two shillings per pair in medium and better class goods. The reason for this is explained by the cost of production. Owing to the facility for making their goods by the aid of machinery the cost of wages per pair is from 12^ per cent, to 20 per cent, less than here. All their workmen are paid by piece work, and earn much higher wages than our own, while the cost per pair is much less than here. I think every manufacturer who has been there, and those who have a personal knowledge of their methods, will say their men are able to do a much larger quantity of work than is done here. It costs more to make a common men's machine-sewn glace boot on the Northampton statement than it does a best men's welted in the States. Mr. John Hanan, a director of the Goodyear Company, and also an American manufacturer, some years ago published

THE AMERICAN BOOT 63

his wages statement for making and finishing best men's goods, which was at least is. ^d. less per pair than the Northampton statement, and he stated that goods of equal quality were made at much less cost than this price. This has never been disputed. The Trade Union has been in a great measure re- sponsible for this. The officials have done all in their power to prevent the machinery being used to its full extent, and have helped to keep wages much lower than they would have been. What are the results ? Our export trade has almost dis- appeared, with the exception of South Africa, and is not nearly so large as it was twenty years ago. To remedy this state of things the suggestion I would make is to bring over here a number of experienced foremen who will train our workmen in better methods. Fight the Union tooth and nail in their Socialistic programme of restricting the output, and by this means the wages of our men could be in- creased considerably, and we should be enabled to meet any foreign competition and largely increase our export trade."

The English shoe trade is slowly waking up. Now it is becoming quite in the order of things to find even among the manufacturers themselves a few leading men openly telling others of the stupidity and short-sightedness of the methods British firms employed in the past. The lines of reform necessary here are clear to any one who investigates the trade. Unless our manufacturers are willing to specialize, and unless masters and men adopt a policy of piece work or premiums for extra production, our trade

64 THE AMERICAN INVADERS

must suffer. Yet there is no reason whatever why, by adopting the improvements which foreign ex- perience has shown to be advantageous, we should not win back all we have lost and that quickly. For, despite all, British manufacture has many advan- tages which, rightly used, should count for much. The British shoe operative, if he were a little more ambitious and were content to drink a little less, need fear no man. The technical skill of the North- ampton shoemaker is far-famed to-day, and tech- nical skill goes a long way.

But there is one way in which we will make no gain. A leading organ of the industry last winter inserted a signed letter by a London trader advo- cating tactics which, if alio wed to go on, will destroy the chief asset of English commerce — honesty of production. England has in the past, with rare exceptions, left false trade marks and scamped work to minor rivals. Unfortunately the attitude taken in this letter, so far as I have seen, met with no repudiation from the trade. In discussing American competition in footwear this shoe merchant says : " I am quite old enough in my trade experience to remember the French invasion of the late sixties and early seventies. . . . Though I am without re- liable statistics, I am of opinion that the importation of French shoes reached figures which the American have not yet achieved. . . . Well, how did we deal with this trouble ? Simply by giving the public what they asked for — French (?) boots, stamped with French sizes, and — should one be ashamed to confess it ? — with French names and labels, conceived

THE AMERICAN BOOT 65

in more or less bad French. In the end the ' in- vasion ' was killed by ridicule, for the lowest pro- ductions of Whitechapel and that ilk were intro- duced as ' modes de Paris,' and gradually the public reverted to its old love."

CHAPTER VI

IRON AND STEEL

There are times when figures sum up a history in more effective fashion than any description. The statistics of iron and steel production in Great Britain and America afford an example of this. Ten years ago England was by far the largest producer of steel and iron in the world, and her supremacy seemed beyond competition. America took each year large quantities of our hard metals, and our manufactured steel goods went everywhere, and everywhere had the name of being the best.

Take pig iron, which Sir Christopher Furness recently,^ paraphrasing Beaconsfield's famous say- ing, declared to be even more than the consumption of chemicals, an index of national progress, pros- perity and civilization. In 1884 England produced nearly twice as much pig iron as the United States 3 by 1900 America had caught us up. In 1899, our record year, we produced 9,305,500 tons, while America then surpassed us with 13,838,634 tons.

' Pall Mall Magazine, March, 1902.

IRON AND STEEL

67

Since then American production has rapidly risen, and ours both absolutely and relatively declined. Up to the early summer of last year America was selling its surplus in the very heart of our manu- facturing districts. This is no longer so, owing to the unequalled home demand in America, and Americans are now actually buying largely in our markets. But the production of each nation for last year was — England (estimated), 8,200,000 tons ; the United States, 15,878,354. These figures require no comment. One State in America alone, Penn- sylvania, produced within as much by a few hundred thousand tons as England. The Americans are now expecting to reach immediately a monthly capacity in their blast furnaces of 1,500,000 tons a month. '■■ A very similar state of affairs is found in the pro- duction of steel. In five years the American output of steel has increased between two and threefold. In 1896 the total output was 5,218,606 : last year the figures had risen to 13,369,611 tons. Our out- put was less than five million tons.

It is to-day literally true that America holds the world's steel market at its mercy. For the moment American competition is not severely felt in other lands. The great home production, the activity in railway construction, building and shipping, give a home market for all the country can produce. But this condition of things is not going to last. Pro- duction, rapidly on the increase, is bound soon to exceed home consumption. Then America once more will compete for the outer markets, and will compete with such advantages as will enable her to

V 4 4

CHAPTER VI

IRON AND STEEL

There are times when figures sum up a history in more effective fashion than any description. The statistics of iron and steel production in Great Britain and America afford an example of this. Ten years ago England was by far the largest producer of steel and iron in the world, and her supremacy seemed beyond competition. America took each year large quantities of our hard metals, and our manufactured steel goods went everywhere, and everywhere had the name of being the best.

Take pig iron, which Sir Christopher Furness recently,^ paraphrasing Beaconsfield's famous say- ing, declared to be even more than the consumption of chemicals, an index of national progress, pros- perity and civilization. In 1884 England produced nearly twice as much pig iron as the United States a by 1900 America had caught us up. In 1899, our record year, we produced 9,305,500 tons, while America then surpassed us with 13,838,634 tons.

' Pall Mall Magazine, March, 1902,

IRON AND STEEL 67

Since then American production has rapidly risen, and ours both absolutely and relatively declined. Up to the early summer of last year America was selling its surplus in the very heart of our manu- facturing districts. This is no longer so, owing to the unequalled home demand in America, and Americans are now actually buying largely in our markets. But the production of each nation for last year was — England (estimated), 8,200,000 tons ; the United States, 15,878,354. These figures require no comment. One State in America alone, Penn- sylvania, produced within as much by a few hundred thousand tons as England. The Americans are now expecting to reach immediately a monthly capacity in their blast furnaces of 1,500,000 tons a month. . A very similar state of affairs is found in the pro- duction of steel. In five years the American output of steel has increased between two and threefold. In 1896 the total output was 5,218,606 : last year the figures had risen to 13,369,611 tons. Our out- put was less than five milHon tons.

It is to-day literally true that America holds the world*s steel market at its mercy. For the moment American competition is not severely felt in other lands. The great home production, the activity in railway construction, building and shipping, give a home market for all the country can produce. But this condition of things is not going to last. Pro- duction, rapidly on the increase, is bound soon to exceed home consumption. Then America once more will compete for the outer markets, and will compete with such advantages as will enable her to

68 THE AMERICAN INVADERS

carry all before her unless our methods are re- organized.

Last autumn I was crossing the ocean with the special representative of a distant Government, who had been examining the works of the great producers in England and America before giving certain big orders. We were talking on the methods of the two countries, and he declared with conviction : " I have come fresh from the plants of both lands, going straight from England to America. All I can say is this : the British plants and equipment are like toys compared with the American. It only needs any British iron master to examine for himself to see this."

My companion spoke truly. And, though he did not know it at the time, British ironmasters had already been over, and were preparing for the coming fight. The year 1901 was marked by the awakening of the British iron trade. The first great sign of this was the long visit of Mr, Arthur Keen, head of the firm of Guest, Keen and Co., to America, accompanied by his colleague, Mr. E. Windsor Richards. It is significant that Mr. Keen should have undertaken this, for he is a veteran of com- merce, well over seventy years old. His Dowlais works have long been known as among the best equipped and most prosperous in this country.

While Mr. Keen was in America he was maturing a scheme for a combination of British iron masters, to meet the great American combination then being formed. His return home was quickly followed by fresh moves. New mining rights were acquired in

IRON AND STEEL 69

Spain, the C3^farthfa iron works were absorbed, and an amalgamation was announced with the Birming- ham house of Nettlefolds, known to the outside world for its former association with Mr. Chamber- lain. At the same time great reconstruction schemes were begun in the Dowlais works on American lines.

Sir Christopher Furness, another of our iron kings, was over in America in the autumn, and came home with plans for reform. Sir Christopher had already done much, and set about to do more. The Millom and Askam Company has shown what could be done in this country by introducing American blast fur- naces, with capacity for enormous output and ade- quate mechanical appliances for handling the metal. This company, with its new furnaces, has an output of over 2,000 tons a week, as against about 800 tons under the old equipment.

To-day the Consett Iron Company, the Dowlais works, and Bolckow, Vaughan and Co. are all pre- paring to reconstruct their works, at large expense, to meet the new condition of things. The recon- structions are mostly in the hands of the Philadelphia engineer, Mr. Roberts, and are being carried out on distinctively American lines. The more active firms are getting together, and one of the develop- ments of the future may be a very considerable amalgamation of British houses. For our Enghsh iron masters now know that maybe soon, maybe not till a httle later, they will have to fight for their very existence. It only needs a dull time in America or a continuance of the present expansion for

70 THE AMERICAN INVADERS

England and Europe to be flooded with American iron and steel.

The gravity of American competition was un- doubtedly increased by the formation, early last year, of the then bilhon dollar (£200,000,000) Steel Trust, planned by Mr. Pierpont Morgan, and financed with the support of the Standard Oil group. The advantages given to American steel production by the formation of this trust were first cheapness of pro- duction, secondly a command of the great means of distribution. The Steel Trust is being worked in har- mony (not as a combination, but, to use the words of a Standard Oil leader, an " aggregation of interests ") with the American railroad and shipping combine.

The result of the formation of the trust has been to enable the Americans to produce at lower cost than ever before. The Iron Age, a premier trade journal of America, whose name is sufficient guar- antee for the accuracy of its editorial statements, specially investigated the question whether the combination had cheapened the cost of production or not. The facts given by the Iron Age were not wholly new, having been to a certain extent re- vealed earlier by Mr. Schwab, President of the Trust, in his evidence before the U.S. Industrial Com- mission. But they are well worth the careful con- sideration of all enquiring the reasons for American industrial progress.

The method the Iron Age found adopted by the United States Steel Corporation was this. There are in the corporation a considerable number of con- stituent companies carrying on like manufacturing

IRON AND STEEL 71

operations. First of all a uniform system of ac- counting was developed, to establish a basis for com- parison. Meetings were held of the chief accoun- tants of the companies, and by conferences they worked out a system. This preliminary process in- volved a very large amount of detail work, for the comparisons to be of value had to allow for many agencies that would influence costs. For instance, one plant may have natural gas as fuel, while another is run on manufactured gas. Such differences had to be brought into consideration. Costs were ana- lyzed, and certain basal cost items selected, but especially the relative efficiency of the different plants. Then comparisons were made in com- petitive sheets, showing the relative strength and weakness of the management of each.

The next step was to see how each company could learn from others doing similar work. Committees were chosen from officers of the constituent com- panies, the ablest of the superintendents, managers, or men in charge of departments engaged in par- ticular branches of manufacture affected. Those committees studied the cost sheets available, and began a tour of inspection of the different plants in order to observe methods, exchange experience with local managers, or make suggestions. It is their work to find why one can produce at lower cost than another. Frequent conferences, abundant dis- cussion, and free speech are the rules of these com- mittees. They attend to the smallest details, know- ing well that it is on the apparently trivial things that the great profits depend.

72 THE AMERICAN INVADERS

By all this a standard of cost is fixed, and any manager whose cost of production of particular items exceeds the average is expected to improve till he comes up to the standard. Statements are pre- pared, showing the various companies what they will gain if they come up to the record of the best. The keenest rivalry is promoted between the different companies, only the rivalry is in this case for mutual benefit rather than for mutual destruction. The Iron Age states, as a result of its own investigation, that in one department the attainable cost, based on an average efficiency of a number of the better- managed works, represents a possible saving of £600,000 a year for all companies manufacturing the same product. Much of this saving has since been effected. The managers are educated up to the practice of the most efficient.

" One point is worthy of mention," adds the Iron Age, " as bearing on the general question of de- veloping the maximum efficiency of works manage- ment, and upon the attainment of a minimum cost of manufacture, and that is, that all the leading men identified with the producing side have an interest in the profits of the concern with which they are identified. The works managers are not simply salaried men. They are practically partners who share in the financial results of the establishment. The putting into practice of the system described has already resulted in economies, which in the aggregate amount to many millions of dollars."

For long there was no more pitiful story in our whole commercial history than that of the South

IRON AND STEEL 73

Wales tin plate trade. In ten years the tin plate trade fell from a gigantic industry to apparently near its end. It had long held the American mar- kets, and seemed secure against all. Then the Americans took up the manufacture themselves. The McKinley tariff gave them an opportunity of which they were not slow to avail themselves. Great mills were erected, fitted with the newest plant, and much money and good brains were put into the business. By 1892 America was turning out 18,000 long tons ; it now averages between three and four hundred thousand tons a year. The British export trade to America was practically destroyed. There is no question here but that we lost much of our trade largely because of the backwardness of our manufacturers. The trade was a profitable one, and, holding a world's supremacy, our manufacturers and men wxnt to sleep. But here again during the past year there has been a decided improvement in methods, and learning from adversity our tin plate makers are entering on a new era.

The American machine tool has triumphed every- where. You find it now used throughout England. Glasgow itself goes to America for its machine tools, while one of the leading firms of American tool im- porters, C. Churchill and Co., Ltd., has a branch in Birmingham. Even the Royal Mint has introduced American annealing furnaces. I understand it has found that they increase the output by about fifty per cent., and are much easier and cleaner to manage. At Woolwich Arsenal a large number of American annealing furnaces of one pattern are in

74 THE AMERICAN INVADERS

use, and more are to come. Oar officials do not boast of their purchase of American machinery, for they know that such purchases, if pubhshed, mean questions in ParHament, charges of lack of patriotism and the like. But they have to buy, all the same. The American machine tool is now found in practi- cally every progressive English working plant. In Sheffield itself, the home of English tools, the makers are now using American apparatus, working from American patterns, and are paying the American inventors heavy royalties. This should be as alarm- ing to those who know anything of trade conditions as is the other fact, that the American consul at Birmingham frequently receives local inquiries for American makers of such peculiarly Midland articles as cold stamped rivets, builders' ironmongery, and steel butt hinges.

The engineering strike was the real commence- ment of the introduction of American steel goods into England ; the great cycling boom was the be- ginning of the introduction of the American auto- matic tool on a large scale. English firms had to increase their output. Some of them sent to America for machine tools. Others saw these tools, and their use spread here like wildfire. In turret lathes and ordinar}^ lathes the Americans have been especially successful. In the old-time British lathe the workman lost time by substituting one tool for another. In the turret lathe a full selection of tools is fitted in the lathe, and the workman by turning his turret brings the tool he wants into use. To save time is to save money, and so, though the

IRON AND STEEL 75

Americans charge high prices, often demand heavy royalties, and though British workmen and masters by no means care for these new inventions, the stress of competition has forced them to adopt them.

To imagine that this American invasion of our iron trade has been easy, or an unbroken success, would be quite wrong. It has been undertaken in face of great difficulties, and the Americans have had to educate our makers. Wherever the Americans have shown weakness they have been driven back. Let me give one case where England held her own. In the height of the cycling boom a number of Ameri- can cycles were despatched to this country. But they so differed from the standard patterns here that they were not welcomed. The rims were wood instead of steel, and the tyres single ; the rear fork end was not adjustable ; mudguards, when supplied, were an inch or two too short, and the machines were considered too light for our roads.

The best American makers proceeded to remedy these defects, but their work was largely thrown away by the action of others. Many of the cheaper American machines were rubbishy, and some of the importers were not over scrupulous. Consequently American cycles got a bad name here, and the trade has never recovered. Each year up to last the American imports of cycles were smaller than the last. But perhaps this is also partly due to the fact that the best brains formerly in the American trade have now abandoned that for automobile manu- facture.

American bridge competition is typical of the

76 THE AMERICAN INVADERS

whole. Ten years ago England was first in this industry : now England is very much second. Here each engineer makes his own patterns, and en- deavours to give his designs an individual touch which shall be the distinctive mark of his work. The Americans have standardized their patterns. Their large practice in constructing new ways in the West has enabled them to perfect their plans, and they have fitted up most elaborate bridge-building ma- chinery. They have reduced the work to an exact science, and, thanks to standardization, the putting together of the greatest bridge is like putting to- gether the parts of a Waltham watch. Hence Ameri- can bridges to-day are cheaper, simpler, better de- signed, and can be much more rapidly constructed than any we can make.

This was first seen when contracts were asked for the making of Atbara bridge, a structure of 622 tons. The English wanted twenty-six weeks for construc- tion, and asked fifteen guineas a ton. The Ameri- cans offered to do the work in fourteen weeks, for £10 13s. 6d. a ton. Our manufacturers complained of favouritism when the Americans got the contract. For the Gokteik Viaduct in Burma the difference was still more striking. This is a much larger work, of 4,332 tons. The Americans asked £15 a ton and one year for construction : the English wanted £26 los. a ton and three years to complete the work. For the Uganda Viaducts of 7,000 tons the Americans wanted £18 a ton and forty-six weeks' time ; the English £21 I2S. 6d. and 130 weeks' time. In each case the work was given out under English engineers

IRON AND STEEL 77

— Sir Douglas Fox for Atbara, and Sir A. Rendel for Gokteik and Uganda. If there had been anything hke equal competition they and the official authori- ties over them would naturally have preferred English makers. But even patriotism must draw the line at giving an English maker sixty per cent, more and delaying our work two years while he does his share.

Once the English watch, clock, and instrument maker was among the most skilled handicraftsmen in the world. Then came the American. His goods were so much cheaper that they swept the field. English and Swiss goods alike went down before them. The Americans had spent enormous sums in designing and perfecting the finest machinery for turning out watches on a wholesale scale. Their wares lacked the finish of the English goods, but they were durable and workable. It seemed as though English watchmaking would become one of the lost crafts, and as though our " makers " would be quickly reduced to " jobbers," who find their em- ployment in repairing American and German time- pieces when they get out of order.

But the English trade woke up. Our manufac- turers put in up-to-date machinery also. Now a big English trade is once more done in home watches. The American and Swiss still hold the field in cheaper lines, both in clocks and watches, but for the better quality articles the English maker is once more to the fore.

CHAPTER VII

THE NEWER INDUSTRIES

One of the most serious aspects of the American industrial invasion is that these incomers have ac- quired control of almost every new industry created during the past fifteen years. In old trades we are hard put to it to hold our own : in the newer we scarce make any pretence of doing so.

What are the chief new features in our modern life ? They are, I take it, the application of elec- tricity to traction and domestic purposes, the telephone, the passenger lift, the typewriter, the automobile, and the multiplication of machine tools.

In each of these, save the petroleum automobile, the American manufacturer is supreme ; in several he is a monopolist. These new industries, be it noted, are enormously profitable. The men they employ are well-paid mechanics, prices rule high, and they form the bases for future advances in industry.

The typewriter affords a striking example of my contention. Machines are brought to England

78

THE NEWER INDUSTRIES 79

from New York to the average value of about 5^4,000 a week. The cost of the raw material used in the typewriter is comparatively trivial, and the greater part of the outlay goes in liberal wages for skilled labour. The typewriter trade employs and gives prosperity to whole communities of me- chanics in America. Time after time English firms have attempted to acquire this trade, but in vain. At present the only serious competitor with the American machines for office use is a Canadian type- writer.

Why have we failed here ? Chiefly because our manufacturers have lacked money enough to put down the proper plant, and partly because we cannot find here mechanics sufficiently skilled in this par- ticular branch of trade. At first Americans were protected by their patents, but the main features in modern machines have now run through their time of patent protection. The original patents of the Remington, for instance, have long been public property.

Every one who knows anything of typewriter manufacture can recall numerous attempts on this side to oust the Americans, but all in vain. In one case an English financier bought the rights of a type- writer for £i,ooo and put another ;£i,ooo into the business, thinking that he could thus cover the market. The Americans would spend many times more on a single machine tool in their factories. In another case the English directors had plenty of money, but they lacked business skill, and they are said to have sacrificed £150,000 before they gave

8o THE AMERICAN INVADERS

up. The Typewriter Union in New York, the central organization, which controls the majority of the leading American machines, has a capital of six millions sterling. Cash registers are another instance of American mechanical ingenuity creating a con- siderable industry. The value of the cash registers sent abroad from America last year was nearly a million dollars.

Turning to telephonic instruments, the action of our own General Post Office supplies the best com- mentary. The telephone, as all the world knows, was invented abroad, but the earliest practical instruments were made in England. At first it seemed as though the great business in manufactur- ing telephonic instruments was to be built up by England. But improvements were made, and Enghsh makers could not obtain the rights to work the best patents. When the patents ran out the telephone exchanges here were almost altogether, if not wholly, under the control of the National Telephone Company. This company, doubtless for adequate business reasons, prefers to give its con- tracts to foreign makers rather than to risk failure on the experimental efforts of the now backward English firms.

Then came the new departure of the Government in commencing active opposition to the National Telephone Company. There seemed a possibility that the British manufacturers might now have a chance. Mr. Hanbury, speaking for the General Post Office in the House of Commons, in March, 1899, said : " Hitherto what I believe might be a great

THE NEWER INDUSTRIES 8i

trade has gone abroad. I hope that we shall get such competition that the trade for making telephonic instruments and the rest will be established in this country, and that we shall not any longer have to make our purchases abroad."

There seems no doubt but that our postal authori- ties were really desirous of helping home manu- facturers if they could. But on inquiry they found that no English firm had facilities for supplying the large number of instruments wanted in the given time. Moreover the American manufacturers were so much ahead that it would have been foohshness not to buy of them. The central battery switches, for instance, and the apparatus designed to work with them, could not be procured in England, as the Western Electric Company of Chicago held the best patents. Even Government departments, how- ever desirous for patriotic reasons of supporting home workers, cannot afford to stock their works with second-rate apparatus. Within the next few years many million pounds will be spent in this country for telephonic installations and instruments. The money for the instruments will go almost wholly to America or to Northern Continental Europe. English makers are out of it.

But it is in the manufacture of electric material and the promotion and control of electric traction enterprises that the greatest triumphs of the Ameri- cans have occurred. When the construction of steam railways opened up a new era in industry England was first, and the rest of the w^orld nowhere. English engineers designed, English

G

82 THE AMERICAN INVADERS

capital financed, and often English labour con- structed the great lines of many lands. To-day steam is hissing its own funeral dirge, and electricity is rapidly taking its place as the motive power of the immediate future. How do we stand here ? There is only one opinion on this matter. England is to-day right behind in the industrial developments of electricity.

On this point it is not necessary to produce much evidence. Let me quote one statement, which in it- self should suffice, the verdict of the leading British electricians themselves. On March 25 last a com- mittee of the Institution of Electrical Engineers, embracing such names as Professor Perry, Professor Ayrton, Professor Sylvanus P. Thompson, and Mr. A. Siemens, drew up a series of resolutions beginning thus : " Notwithstanding that our countrymen have been among the first in inventive genius in electrical science, its development in the United Kingdom is in a backward condition as compared with other countries in respect of practical application to the industrial and social requirements of the nation."

A survey of the trade more than bears this out. Our great electric contracts are continually going abroad. The new Central London Railway was electrically equipped by the General Electric Com- pany of New York, and the same company, through its English selling branch, did much of the equipment for the West London electric tramways. The Lon- don County Council has done its utmost to keep the equipment of its tramwa3^s in English hands, but the underground work of the section so far entered

THE NEWER INDUSTRIES 83

on is in the hands of the London offshoot of the New York electrical house of J. G. White. The point work is American, the trucks for the carriages are supplied by Brill's of Philadelphia, and the ploughs by Messrs. White. When the London underground railways were to be transformed there was a long fight as to whether the system adopted should be American or Hungarian — British was not thought of.

As one New York technical paper put it not long since : " For the past few years when any important English electrical railway contracts were pending, it has not been a question as to who, but as to which American would carry off the prize." Between one- half and two-thirds of the motors for street cars in England to-day are American. The Brill Company of Philadelphia and the Peckham Company of New York hold the field for trucks, although their mo- nopoly is being threatened by another American firm — the Maguire Co., which has now established works in Lancashire. Macartney, McElroy and Co. of New York boast that they are the contractors to fourteen British Corporations. The British Thomp- son-Houston Company, who are the selling agents in this country for the General Electric Company of New York, have provided electrical apparatus for the following street car systems : — Blackpool, Bristol, Devonport, Dublin United, Dudley, Glasgow, Guern- sey, Heme Bay Pier, Douglas Southern, Leeds, Liverpool, London United, Margate and Ramsgate, Manchester, Middlesboro', Stockton and Thomaby, North Staffordshire, Nottingham, Portrush, St. Helen's, Sheffield, Swansea, Brighton, and Rotting-

84 THE AMERICAN INVADERS

dean. The London house of Blackwell, which largely acts as selling agents for American makers, has secured a considerable number of contracts through- out the country. The Westinghouse Company, which shares first place in America with the General Electric Company, secured so many contracts here that it has now formed a British Westinghouse com- pany, and erected gigantic works in Lancashire for its European business — works so important that they are separately described later in this book. J. G. White and Co. of London, the English branch of the well-knowTi New York house of the same name, have not been in England very long, but already have secured the Bournemouth Corporation contract, worth £150,000 ; the conduit work for the London County Council section from Westminster to Tooting, valued at about £171,000; and work in various towns in the provinces. The American houses are finding our field so profitable that they are doing their utmost to become English as quickly as possible. They hold, with some truth, that British corpora- tions would prefer to give their work to be done in England rather than abroad if they could. So they are erecting works here, rushing over American machinery, and in some cases picked American workmen, and are floating English companies.

If English manufacturers have lost their home market, it is not surprising that they have let the foreign and colonial trade go to the Americans. The American engineer to-day is erecting electric plant in Australia and South Africa. The list of great colonial contracts in American hands is too

THE NEWER INDUSTRIES 85

long to be given here. One noted case, the Sydney- City and Suburban Tramways, costing ultimately £700,000, was given by the New South Wales Government to America. The first contract was valued at about £160,000. The generators were from the General Electric Company, the piping from Pitts- burg, the engines from Milwaukee, the steel for the power house from the American Bridge Company. The Auckland, New Zealand, tramways, and the power plant at Kalgoorlie, are being erected by J. G. White and Co.

The electric business will be perhaps the most gigantic of all in the future, and the capital invested in it will in a few years leave the expenditure on steam railways behind. The money now in our electrical enterprises amounts to £165,000,000.^ In street traction expansion is going on rapidly. Muni- cipalities in all parts are transforming their tram- ways to electric power, and there are 2,237 miles of electric lines either constructed or in course of con- struction in this country. If the industry had a free hand, the number would be multiplied fourfold in fewer years. American capitalists have their agents in London to-day eager for the chance of spending their money in this way on us, for there is hardly an investment safer or more profitable. Eng- land, by its compactness, is a land naturally made for this method of transit, and the men of the West know it, if we do not. The short distances between our cities and towns, the great suburbs of our large centres of population, and our many villages, repre-

^ Garcke's Manual of Electrical Undertakings, 1902;

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sent, from the traction experts' point of view, mines of untapped wealth.

The Americans have been checked somewhat by the great difficulty of obtaining Parliamentary con- sent for the construction of new tramways, and by the exclusive policy of many local authorities, which obtain provisional orders for construction, not that they may construct, but in order to prevent out- siders from doing so. But they are not yet at the end of their resources. One of their schemes is to build electric lines along their own roads, as steam railways now are. For some time land has been quietly bought up along picked routes, the promoters estimating that the increased land values made by the opening of the lines will more than repay them, apart from any profit they may get on the electric railways themselves. When these real estate deals are completed Parliament will be asked for powers to construct, and asked with strong local support behind the proposals.

So far, both in this country and America, the business has mainly been confined to laying down electric tramways. Now bigger things are coming. We have the substitution of electricity for steam on the " L " railways in New York, and not only are all our new underground railways in London electric, but the old lines are about to become so. Engineers are already solving the problem of applying electric traction to long-distance trains. The electric mono- rail, with its swift trains, will before many years be familiar, and the change from steam to electricity for all trains inside London must come in time. This

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is already done, with much success, at the beautiful Orleans terminus in Paris. It is a sign of the times that the directors of the New York Central Railroad are enquiring into the possibility of transforming their entire motive power from steam to electricity. One of the most gigantic industries of the twentieth century is springing to maturity under our eyes.

In the summer of 1900 there was a Light Railways' Exhibition in the Agricultural Hall, London, where the overwhelming proportion of exhibits was Ameri- can. Early last autumn a similar Exhibition, on a much larger scale, was held at Madison Square Gar- dens, in New York City. I had the good fortune to attend both, and at the latter I searched the stalls carefully, hoping to find some evidence of British activity in America, as I had formerly witnessed the American activity here. I could not find the name of a single British firm in the catalogue, or any British goods in the show. Another point struck me. In the Agricultural Hall Exhibition the people present were mainly financiers, municipal authorities, and those at the top of the industry. In New York motor men and mechanics from the neighbouring systems flocked in, and examined the details of the newest inventions and best methods with keen interest. They took intelligent concern in their calling, for they knew, as the English work- man does not, that they too might in time come to the top. The President of the Street Railways' As- sociation, the body that was responsible for the exhibition, was himself, when a lad, a mule-car driver in Kansas City. President Vreeland, head of the

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Metropolitan system of New York City, began life as driver of a delivery cart and labourer in a gravel pit. The New York car drivers had some reason for their interest, for they knew that what Holmes and Vreeland did they might do too.

One vigorous effort has been made in England to keep our electric trade for ourselves by Dick, Kerr and Co. Splendid factories have been erected at Preston, fitted with the best American machinery, managed at first largely by American engineers, and with Mr. Sydney H. Short, formerly leading spirit in the American Short Electric Company, as Tech- nical Director. The Preston house has undoubtedly done much to revive electric manufacture in Eng- land. It has competed successfully for much foreign and colonial trade, and is evident proof of our power to progress if we will.

Why have Americans conquered this big trade ? It is easy hastily to blame English manufacturers, but the fault lies not so much with them as with the legislative restrictions that have hampered electrical work here. The electric industry has been crippled at every turn by many laws, and by the often ridiculous and grandmotherly restrictions of the Board of Trade. Conditions have been made so onerous that most people would not invest their money in it, and those who did found it next to impossible to obtain permission for the initiation of any electric traction or power schemes. Corpora- tions and local authorities have done all in their power absolutely to prohibit developments, and Parliament has backed them. We have all been

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terribly afraid lest the promoters of new schemes, in benefiting the public, might make large profits for themselves. We laugh at the opposition of our grandfathers to steam railways. Our fight against electric traction is a more foolish example of the same spirit, and we are giving coming generations good cause to scoff at us. While we kept our en- gineers back, Americans were experimenting. Early electric lines were faulty, but they showed the way to improvements. When in England we were willing to make a small start, we had to go to America for oar apparatus. Americans learned in this way to meet the needs of our market. They had the start, and have kept it. Our makers now must force their way against entrenched and secured rivals.

Again I appeal to the statement of the Committee of the Institute of Electrical Engineers. They re- ported our backwardness to be largely due to the restrictive character of the legislation governing the initiation and development of electric power and traction enterprises. They recommended that the clauses in certain Acts which enable local authorities indefinitely to block local schemes should be re- pealed, that the Government departments which control the industry should be properly staffed, that the departmental regulations affecting engineering developments should be revised, and that the ex- cessive time and expense needed to obtain permis- sion to carry out electrical developments should be seen to.

These are very modest requests, yet the carrying out of them would give the industry the greatest

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possible aid in England. The committee has behind it the hearty support of every one who knows any- thing of electric developments. But what hope is there of obtaining improvements from a Parliament that is profoundly contemptuous of commerce ? Mr. Gerald Balfour, President of the Board of Trade, has, it is true, now advanced so far as to admit that we are behind, electrically, and that our laws may have something to do with it.

The Americans are now strong in their position in the English electrical world. They have secured so great a reputation that it is becoming quite an ordinary thing for English local authorities, when issuing specifications for contracts, to name various makes of American goods which must be provided. The British maker, even though he may have im- proved his products up to the American level, does not even have a chance to compete. This is as though the War Office asked for bids for the supply of pickles, but stipulated that they must be solely of Heinz's make.

To show this, take the supply of car trucks. As I said earlier, two American firms have obtained most of the orders here, orders which are justified by the undoubted excellence of their output. But now the local authorities, having learned that the makes of these two firms are good, refuse in case after case to consider any others, but declare that Brill's or Peckham's must be given regardless of rivals.

That I am not over-stating, a few quotations from recent contracts will show.

The Brighton Corporation, in its tramway con-

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tract specifications issued on January 31 last, stipu- lated : " The trucks are to be of the Peckham standard cantilever."

In the specifications of the Borough of Croydon Tramways, dated January, 1902, it was provided : " Two trucks of Brill or Peckham standard maximum traction type of the latest pattern are to be supplied and fitted to each car, and contractors are to send in with their tenders detailed specification of the type of truck they propose."

Specification of the Lancaster Corporation Tram- ways, November, 1901 : " Each car to be mounted on a Brill or Peckham standard cantilever extension truck of the following general dimensions, viz. ..."

Specification of the Sunderland Corporation Tram- ways, January, 1902 : " Car trucks. — The trucks are to have a wheel base of 6 ft., with four 30-in. wheels, and to be of the Brill type, complete with brakes and equipments, as hereafter specified."

The authorities who prepared these would prob- ably grumble about the backwardness of the British manufacturer, though they give him no chance.

In the manufacture of automobiles we have another instance of an industry throttled by over- legislation. Our makers did not start fair, and it is little wonder if they for long were not able to approach their rivals. In automobiles the Ameri- cans have done a considerable trade here in two kinds, the " run-about " or cheap steam motor, and the electric. One scheme that is now threatening to displace the old-fashioned London coachman is so novel that I must refer to it. Mr. Paris Singer, head

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of the well-known American sewing machine family, had his attention aroused to the possibility of electric carriages for city use. He spent two years in work- ing out details in America and Europe, and last year began a business in London which is bound to revo- lutionize our carriage industry. To indulge in horses and carriage in West London is an expensive luxury, the stabling alone often amounting to a few hundred pounds a year. The horses can be had at as high a price as one cares to pay, the carriage needs constant repairs, and coachman and groom, veteri- nary bills, cost of horses going to grass, and a hundred and one other expenses make the bill one which only a rich man can contemplate with equanimity. And even after all is paid one can obtain but very limited use out of a carriage and pair.

Mr. Singer has set about changing all this. His scheme is to sell automobiles, and then, for a fixed annual charge — about £i8o a year — to stable and clean, supply all the power they require, insure against accidents, provide even new tyres and repairs, and, in short, do everything required except supply a driver. The scheme has caught on greatly among rich men, and electric broughams of the Singer type may now be seen in all parts. The Queen and the Rothschilds are among the earhest to take up the new thing, and the electric brougham is rapidly becoming a fashionable fad. Mr, Singer is now spreading his garages over Europe.

In photography the Kodak has swept all before it. The Kodak is manufactured in America, and is sold

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by a great American photographic trust. So large a business in American photographic goods has been built up that we now import over a million dollars' worth of them each year. A certain proportion of these, however, go from here to the Continent.

CHAPTER VIII

LONDON TRANSIT

London was long the scoff of the world for its absence of rapid transit facilities. Of all great capi- tals, excepting Pekin, it has been the most backward in this matter. The congestion of population, the inconvenient exits and entrances of the old under- grounds, and the total absence of electric traction, made swift movement impossible. Out of the centre of the City, hansoms afford convenient locomotion for the well-to-do ; but they are beyond the reach of the great majority. From Temple Bar to Aldgate even hansoms fail, for they are blocked at every turn by the crush. To this day it remains true that the man who wishes to go from Fetter Lane to, say, Old Street (to mention only one out of many hundred routes), can go quickest by walking.

Other places set London a good example. Even little boroughs like Dover left us behind. Cities of the sleepy East and frontier towns of the far West had facilities beyond our hopes. Until quite recently London did not even attempt to meet the problem. It was ignored. It was left for the Americans tq

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grapple, for they realized, as every student of modern transit knows, that there are mines of wealth here beyond the richest fields of South Africa.

Various efforts were made at times to secure con- cessions in London transit, but in vain. The old tramway companies were prevented by their legal position from instituting changes. The law took as great precautions to check them giving London a swift service as though to do so were a great crime. Some years ago a South African syndicate offered to buy up the tramways on liberal terms and trans- form them into an electric service. The County Council, which was then the tramway authority, prevented this.

The London County Council is itself acquiring the tramways in its own radius as they fall in, and is now transforming them. It has already afforded London a striking example of delay. The majority of members of the Council have left the matter to drift, and tramway construction will be for them a time of great trouble. The few interested deliberately educated the local authorities up to obstructing the one method most applicable to outer districts — the overhead wire. They committed the Council to a policy which will involve an expense and an upheaval of the parts affected such as the majority of members have now apparently little idea. The London County Council is going to under- go a rather harsh education on this matter during the next few years, an education which those best acquainted with the admirable work the Council does in many directions can only regret.

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' The real pioneer of electric traction work in London was Mr. J. Clifton Robinson, who, himself an Englishman, works now largely in association with Mr. Pierpont Morgan. Mr. Robinson took over an old and despised tramway line in the outer Western suburbs of London, and entered into a campaign of education which lasted many years. By the indomitable perseverance of this one man local authorities were conquered, and even Parha- ment was induced to consent to an electric service for the outer West. If ever the story of Mr. Clifton Robinson's crusade is fully told, it will rank as one of the romances of business. Then came the making of the Central London Railway, where American capital played a large part. The tube system, of which it is only fair to say an English company was the pioneer in the City and South London Rail- way, caught on, and Parliament granted powers in various directions. Then money became scarce, and it seemed that some of these concessions must lapse. At this point the Americans came in in force and practically took the whole matter out of our hands. The Americans are in two rival groups, the one headed by Mr. C. T. Yerkes, of Chicago, and the other by Mr. Pierpont Morgan.

Mr. Yerkes, creator and long supreme in the transit systems of Chicago, sold out his holdings in that city and early last year settled in London. Mr. Yerkes formed a syndicate, first of American capitaHsts and then of the Old Colony Trust Com- pany of Boston and the London house of Speyer Brothers. He secured control of the District Rail-

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way, and prepared to transform it to an electric line. Here he was faced by one great difficulty. The Metropolitan District Railway, which owns half of the London underground Inner Circle, re- fused to fall in with Mr. Yerkes. It wanted to adopt a Hungarian system of electrification — the Ganz — while Mr. Yerkes wished for an American. The re- sult was a long fight before a special Parliamentary Committee, for, owing to the close association of the two lines, it was essential that their method should be the same. In the end Mr. Yerkes won, the ParHamentary Committee reporting in his favour.

Meanwhile he was not idle. The Baker Street and Waterloo Railway, in course of construction, had fallen into difficulties owing to the failure of a notorious group of financiers. He acquired control of it. The Charing Cross, Euston and Hampstead line came under him, as did the Brompton and Piccadilly Railway and the line from the Great Northern Railway to the Strand. These lines have yet to be completed. This session various extensions and a new line were applied for.

Meanwhile the Morgan syndicate was working. Mr. Morgan has long been deeply interested in the financial possibilities of electric traction. His group of supporters prepared a bomb for the Yerkes group in the shape of a scheme for a line from Ludgate Hill, past the Temple and Charing Cross, round by Piccadilly Circus up to Hammersmith Broadway. This would go right through a large part of the most profitable territory of the Yerkes group. The Lon-

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don United Tramways, the Clifton Robinson pro- motion, were brought into the scheme. An alUance was secured with the City and North-East Suburban Railway, a line which it is proposed to run from the Mansion House, past Aldgate, to Victoria Park and Hackney. This alliance was secured practically out of the mouth of Mr. Yerkes. At the same time another scheme for a North-Eastern London Rail- way was pushed forward by the same group. The Morgan syndicate agreed to take a half interest in the London United Electric Railways, the company formed for the scheme from Hammersmith to Piccadilly Circus, two-thirds of the capital in the City and the North-Eastern Suburban, and the whole in the Piccadilly and City and the North-East Lon- don. The amount of capital necessary can be judged from the estimate of the engineer. Sir Douglas Fox, that the cost of construction alone, apart from electrical equipment, will be £11,000,000.

The war has been hotly fought before a Parha- mentary Committee. The Yerkes group has already obtained much that it wants, and, although the Morgan group has failed at some points, great con- cessions are being acquired by it. Whether Parlia- ment consents to much or little, the control of in- ternal London transit has definitely passed into American hands, and the control of internal London traffic means a profit beyond the dreams of avarice.

CHAPTER IX

THE GENESIS OF THE TOBACCO WAR

The bold raid of the American Tobacco Company into the British market has excited more attention than any other part of the American invasion, except the conquest of the Atlantic shipping by Mr. Pierpont Morgan.

This raid has come upon us, not because of the supineness of British manufacturers, but because of their activity. The Americans, in their attempt to establish a world-wide tobacco trust, found that the enterprise and triumphs of British manufacturers were everywhere their hindrance. It was this that compelled Mr. James B. Duke, President of the American Tobacco Company, to fight the British com- panies upon their own ground, and to make a great effort once and for all to crush them. Hence the war, beginning with the purchase of Ogden's at a fancy price, and going on to the combination of British manufacturers and the sensational moves on either side, which have attracted such notice during the past six months.

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To understand the campaign we must go back. The struggle for supremacy began over twelve years ago in New York City, when the American Tobacco Company was formed. This great Trust is without question one of the most successful and aggressive of existing trade combinations, headed by one who brings into his campaign the finesse, the foresight, the great plans, and the ruthlessness of a Napoleon. Its resources are almost as great as its ambition. In America manufacturers, jobbers and retail sellers have time after time striven to combine against it. Ordinary law and civil law alike have been appealed to for its suppression. It has had to face vast com- mercial combinations which appeared irresistible. It has had its temporary checks and seeming defeats, but the end of each year has seen it stronger than at the beginning. To-day it is more powerful and richer than ever before, and in America it controls 95 per cent, of the trade.

On Sunday, October ii, 1899, Major Ginter, head of the well-known firm of Allen and Ginter, then recognized as the premier tobacco house in America, conferred with a young manufacturer, Mr. James B. Duke. Proposals had been made before this that they should join forces. Now definite details were discussed. On the same afternoon the two formally met three other leading makers of cigarettes. Major Ginter, by right of the position of his firm, presided over the gathering ; but before the meeting broke up one and all knew that their real leader was young Mr. Duke. He imposed his personality on his former rivals, and he secured for himself better

GENESIS OF THE TOBACCO WAR loi

terms than the others had at first proposed to give. It was seen that he was the man to carry things through to a successful end. Then and there the trust was formed, with a capital of $25,000,000, and embracing five leading houses, Goodwin and Co., W. Duke, Sons and Co., W. S. Kimball and Co., Kinney and Co., and Messrs. Allen and Ginter. Duke's received 30 per cent, of the capital, Allen and Ginter 30 per cent., Kinney 20 per cent., Kimball 10 per cent., and Goodwin 10 per cent. " After this agree- ment had been reached," said Major Ginter in de- scribing the scene, " we all shook hands, and I said ' We are now a company.' "

American public opinion was then strongly op- posed to the idea of trusts, and the new tobacco organization studied to keep itself as much from view as possible. Mr. Duke secured the loyalty of the employees of his own firm by distributing among them a number of shares of common stock in the new company.

Other manufacturers were naturally greatly con- cerned at this combination, and until it knew its own strength the trust sought to concihate them. Thus Messrs. Duke and Son wrote to one firm stating that the union had been formed for the purpose of buying at first hand from the farmers, and so saving inter- mediate profits. Again, it was announced that its great work was to be the forcing of American cigar- ettes^ on all foreign markets.

Meanwhile the Trust was making ready for its campaign. It determined to fight on clearly marked lines. It had control of the great Bonsack cigarette-

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making machine, by which as many cigarettes could be manufactured in a day as a man with hand labour could turn out in a month. Injunctions were sought for against rival machines, and other patents were contested as bitterly and as far as the law would allow.

To capture the public extensive advertising was begun, many of the methods adopted being new. For instance, on one occasion three thousand tele- grams were sent to a town in Connecticut authorizing the persons who received them to obtain from any local retailer a packet of the new brand of cigarettes^ These telegrams cost is. lod. each, but the ad- vertisement was worth it.

When there came the rage for button portraits packets of cigarettes were issued containing coupons for these. On the introduction of Duke's mixture a fine briar pipe was given with every pound packet sold. One December 150 Christmas trees, finely decorated, were placed in the windows of various retail cigarette stores. These were trimmed with ornaments, which were to be given to the consumers of a brand of chewing tobacco then brought out. Art was called to the aid of business. Splendid pictorial advertisements appeared on the hoardings everywhere, and the newspapers were full of pictures of really admirable quality, all proclaiming the virtues of various tobaccos and cigarettes.

The middlemen or jobbers in the tobacco trade practically controlled the retailers. The Trust de- termined to control the jobbers. By March, 1892, having now felt its feet, it took steps to compel the

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jobbers to fall into line with it. A contract was submitted to them, which they had the option of agreeing to or else ceasing to deal in their goods on profitable terms. This contract practically changed the jobbers from independent vendors to agents of the Trust. Under it they were forbidden to handle any other tobaccos than those made by the company. No goods were sold outright to them. They received consignments to dispose of on commission. This commission was practically all their reward, and if they were found handling the goods of any other maker they were deprived of the special rebate.

The Trust did not hesitate to penahze those who disobeyed it. One dealer had several brands of his own, some of which were manufactured for him by Kimball and Co., a firm in the Trust, and others by a firm in New Orleans. The Trust ordered this dealer to place the manufacture of all his brands in the hands of the Trust. He declined to do this, where- upon he was offered the choice between immediate obedience or having his supply of cigarettes cut off. It is said that when the company was formed a sum of ten million dollars was placed on one side as a reserve for fighting purposes, to beat down com- petition and opposition. As soon as a rival company was formed and attempted to do business the Trust never rested until it had absorbed or destroyed it. Rival after rival was bought up. First among them came the National Tobacco works of Louisville, for which £360,000 was paid, a third in cash. About the same time Whitlock's cheroot factory at Richmond was bought up, the price being £60,000, with an

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annuity of £2,000 a year. The Barby Brothers and Gail and Ax, two of the leading firms in the South, doing business annually between them amounting to £600,000 a year, were secured.

As an illustration of the promptitude of the Trust's methods, within two weeks of the purchase of Whitlock's business it had placed upon the European market Whitlock's Old Virginian cheroots. These, known in the States as " five-center " cigars, were sold in London at five for a shilling, or practically the same price.

Mr. Duke ruthlessly employed a method of getting prices to a minimum in order to advertise his wares or to crush a rival. This was clearly brought out in the evidence given by him not long since before the United States Industrial Commission. Mr. Duke said that to introduce a brand, instead of spending a large amount on bill posters and adver- tising in newspapers, one plan is to make cheap prices and leave the dealers to do the advertising and work up the market for themselves. Thus " Battle Ax " was introduced and sold for a time for thirteen cents a pound, though the price was subse- quently raised to thirty cents. This plan had been adopted before the formation of the Trust by Duke, Sons and Co., who had cut the price of cigarettes very low. In North Carolina "American Beauty" cigarettes were sold last year for $1.50 per thousand, exactly the amount of the revenue tax. As a dis- count was allowed to the traders this meant that the American Tobacco Company was actually selling cigarettes for nothing and paying the purchasers for

GENESIS OF THE TOBACCO WAR 105

taking them. " That is only one of the methods followed in order to gain the victory," said Mr. Duke. " After the goods are put in the store you have to rely on the public as to whether you have made something that the public is satisfied with or not. No matter what the inducements are the quahty must sell them, and there is nobody who can stop an article from selling when there is quality in the goods. . . . We take care of the public all right because they are our customers, and we feel just as much interest in every consumer as we do in the dealer. We are not making any schemes to get the dealer. The consumer is the man we want, and through the consumer we get the retailer and the jobber also. We give tags and all other induce- ments we can, as well as the best goods we can, in order to get them to use our goods."

Naturally the methods of the Trust and their purpose to secure domination of the trade aroused intense opposition. The most serious form this assumed was the establishment of the National Cigar and Tobacco Company, with a capital of ;f5oo,ooo, and, as was subsequently stated, with a milhon of reserve to be drawn from as occasion demanded. Its fighting brand was known as the "Admiral" cigarette, which was advertised largely, and was keenly in demand by the public. The retailers would have it, and called in the jobbers to purchase it. This placed the jobbers in a peculiar position, for the Trust notified them individually that if they handled the new cigarette or had any dealings with the new company they would lose the commission

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already due to them and their supplies of the A.T.C.'s goods would be cut off. As the A.T.C. was at this time (1893) making and selling 98 per cent, of the cigar- ettes consumed in the States, it will be understood that the jobbers could not well afford to defy it.

Those of the jobbers who did handle the 'Admiral" cigarettes, to please their customers, found that they could now obtain the Trust's goods only at prices which meant loss to them. Vans attempted surreptitiously to deliver in the depths of the night, but nothing could escape the sleuth hounds of the sleepless Trust. The jobbers had to give in.

Then the National Company rose to the occasion. As its goods could not be delivered in the ordinary way it would undertake to distribute to the re- tailers itself. As a paper at the time expressed it, " They made up their minds to be in at the death when the Trust had finished its fight. They had invested two and a half millions of dollars in a concern of a manufacture protected by law, and they did not propose to show the white feather while their cash held out." Twenty-five delivery wagons day by day carried goods from the com- pany's premises to the retail dealers in New York, and deliveries were arranged for in all the great cities in the country.

At first the National Company seemed likely to succeed. Thus one large dealer in Broadway de- clared his independence. As usual the Trust an- nounced that unless he ceased to stock " Admiral " cigarettes it would not sell him its goods. He re- fused to yield, and here the Trust had to give way,

GENESIS OF THE TOBACCO WAR 107

attempting to save its dignity by announcing that in this particular case it would make a concession.

The hope of the National Company lay in the fact that they had purchased for fifteen years the control of the Elliot cigarette machine, which was said to be equal, if not superior, to the Bonsack machine used in the Trust factories. The Trust did all in its power to prevent the rival company using this machine. It invoked the aid of the law, and when judgment was given against it it appealed again and again, alleging that its patent had been in- fringed. It carried the case from court to court, until the highest tribunal was reached, and in the end it was defeated.

This was apparently one of its recognized methods of warfare.

In the spring of 1896 the National Company carried the war into the enemies' camp. On evidence supplied the directors of the Trust were indicted by the Grand Jury in New York on a charge of conspiracy to control the price of paper cigarettes. The case, which attracted considerable attention, dragged on for several months. In February, 1897, certain charges were sustained by the Judge of the Court of General Session. These charges comprised a conspiracy to coerce and compel all wholesale dealers to sell cigarettes at an arbitrarily fixed price, and refusing to supply those who sold below such prices ; to coerce and compel wholesale dealers to deal exclusively in the Trust's cigarettes, by unlawful aggression, and also by such agreement to fix and control the production, manufacture, and output of

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cigarettes. Of course such prosecutions had little ultimate result.

The National Company scored point after point. In 1896-97 it was said to be running twenty-one of the Baron cigarette machines, with an annual output of 100,000,000 cigarettes. It advertised largely on the lines of the Trust, and offered many prizes, in- cluding one of $1,500, to be run for at the Jockey Club track at New York. Coupons for this were included in every packet of cigarettes. It also gave away with its five-cent packets jewellery estimated by outside people to be fully equal to the price charged for the cigarettes. The Trust answered move with move, and the advertising attractions of its rivals were met by it. The demand for cigar- ettes went up by leaps and bounds.

A trade paper, Tobacco Leaf, gave a graphic picture of the fight about this time. " For a period of three years the commercial world has been within sound of a mighty conflict waged for supremacy between the National Tobacco Company and the American Tobacco Trust. On both sides an efficiency of generalship has been displayed which, if expended in the massing of armed men, would long have commanded the admiration of the world, for if the one side has its Wellington the other has its Bona- parte. The responsibility for the National Company rests with Sigmund Rosenwald, its vice-president, while J. B. Duke commands in the camp of the American Tobacco Combination. In the arts of strategy the two men are about equal. To an out- sider it seems as if they occupied identical positions

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in regard to the confidence of the opulent corpora- tions each upholds. Whatever they do passes un- challenged by those about them. Their word is law. To a considerable extent both Duke and Rosenwald are men of like temperament. They both know they are right, and go ahead. They do not stand in awe of each other. Each appears as if he were face to face with doughty foes. It has been my fortune to hear them complimenting each other at long range, with reserve and reflection, trying somewhat to justify their rival courses. In my conversation with the two kings of tobacco I became impressed wdth the notion that Duke is the more austere. His thoughts of the progress of the fight never leave him. He evidently takes his business problems to bed with him. Rosenwald, on the contrary, while never neglectful of business, loses it when he puts on his evening clothes. Their abihty to despatch and accelerate business is about equal. Perhaps Duke is the better model of method, but what Rosenwald lacks in quality he makes good in nervous energy." What was the end of this great battle ? It can be related in a few words. At the end of October, 1898, Mr. Bernhard Baron, who had been the prime mover and a large shareholder in the National Company, told a representative of the English paper Tobacco the story. For some years they had tried with all the money necessary at their command to gain a foothold in every conceivable way and to obtain the patronage of the American pubHc. The " Admiral " cigarette had been advertised in every corner of the United States, and money had been

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lavished in many directions to get hold of the trade of the public, but without success. All the time the American Tobacco Company grew more and more powerful. ' ' The American Tobacco Company's great stronghold in America," he said, " is the public, both the masses and the classes ; and, controlling and buying as they do from sixty to seventy per cent, of the bright tobaccos of Virginia and North Carolina, they are in a position to give the American public the best article for the least money, which they can do as well if not better than any one else. It is safe to say that any organization, even with a capital of $50,000,000, would not affect the American Tobacco Company in the least, and especially under the presidency of Mr. Duke, whose ability has brought the company to its present high standing. As long as he lives and is at its head it is sure to progress, and will be the greatest concern that the world has ever seen."

This was said when a new combination, the Union Tobacco Company, was being formed, with a capital of £2,000,000, to fight the Trust. Mr. Baron thought such a fight an impossibility, and to oppose the Trust, with its prestige, financial standing and splendid management, was a waste of time, money and energy.

The policy of boycotting rivals was nominally abandoned by the Trust a few years ago, but its opponents maintain that this is still done. Before the Industrial Commission Mr. Hugh Campbell, presi- dent of a rival concern, the United States Tobacco Company of Richmond, Virginia, positively stated

GENESIS OF THE TOBACCO WAR iii

that the Continental Tobacco Company, the associate of the American Tobacco Company, which manufac- tures, owns and controls the brands of between eighty and ninety per cent, of the tobacco sold in New Eng- land, went to the jobbers and promised them a dis- count of three per cent, if they would handle their goods to the exclusion of others. Finding that this was insufficient, the Continental Tobacco Company on January i, 1901, reduced the ordinary discount from two cents per pound to one cent, but raised the extra discount of those who refused to handle inde- pendent goods to live and a half per cent.

Mr. Campbell further said : " The Trust refused to sell jobbers goods, not because there was a question of credit at all, but simply and only because they persisted in handling independent goods. That has had a deterring effect on others. They have been held up as a warning to all who might be inclined to go and do likewise ; and to-day, and for the last twelve months, there has been a ' reign of terror ' in New England. Dealers are afraid to sell as they would like to do goods that they have bought and paid for." In answer to a question why he did not obtain a remedy for this under the Anti-Trust Law, Mr. Campbell said it would be impossible, he thought, to get voluntary evidence, as purchasers would suffer. " It would be too expensive a business for us to go to law with a corporation of this magnitude," he said. " One company tried it for years, and they are out of existence to-day. The National Tobacco Company carried on suits for years in New Jersey against the American Tobacco Company, and they

112 THE AMERICAN INVADERS

were carried over year after year, at least for a long time. If they failed with all the capital they had behind them it would be pretentious for a little concern like us to make such an attack."

This charge of boycotting was emphatically de- nied by Mr. Duke. " Well," he said, " I do not know what the agents have done, but they have not done anything of that kind with the authority of the company ; and I do not believe they have done it, because if the jobber handles another fellow's goods that does not make a market for them. I think every jobber in New England is handling other goods besides ours. . . . There never was any agreement to the effect that parties handling our goods should not handle the goods of other manufacturers — nothing except at one time they got a larger commission from us if they did handle ours exclusively than if they did not. That poHcy was abandoned four or five years ago."

But evidence was further given by various tobacco dealers, showing that they had been offered special discounts by the Trust if they would refuse to handle the goods of competing firms, and then, when they refused this, the Continental Tobacco Company had declined to do business with them or supply them at all with its goods.

Meanwhile the Trust was waging another war. It entered the plug tobacco business in 1895, and came into direct opposition with the great St. Louis firms, chief of which were Leggett and Myers, whose factories occupied a frontage of a mile. The Trust brought out a new brand of plug tobacco, and ad-

GENESIS OF THE TOBACCO WAR 113

vertised it in the newspapers and by posters as never had tobacco been advertised before. The St. Louis manufacturers united, and announced to the retailers tliat as the Trust had struck at their phig trade they in turn would strike at the special trade of the Trust. They brought out a cheap line of their own in plug tobacco, and made preparations also to fight for cigarettes. Within a few days of the Trust entering the plug business representatives of nine of the leading manufacturers met at the Planters' Hall, St. Louis, to organize their cam- paign.

This was not an opposition to be ignored. Mr. Duke announced that there would be no further dividend that year on tlie common stock of the American Tobacco Company, as profits would be kept for buying up new plants and businesses. The Trust never borrows money. This sent American Tobacco Company stock down with a rush, and in a few hours it had fallen from 79 to 70, and then down to 67I-. In April, 1897, a declaration was received from the Circuit Court at Chicago that the American Tobacco Company's attempt to control the cigarette trade was illegal, and prohibiting the Trust from doing business in the State of Illinois. The same judgment declared that the Trust was a monopoly, and as such a menace to commercial integrity.

But the triumphs of its enemies were short lived, and 1898 was for the Trust its great year of victory. Firm after firm in the second or third rank disap- peared. Three of the big independent houses —

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Brown, T. C. Drummond and Co., and Mayo and Bolton — were secured. Organized opposition was for the time broken, but Leggett and Myers, in many ways the greatest firm of all, refused to capitulate. Its president announced that he would never have any dealings with the Trust while breath remained in his body. The Trust in 1899 engineered the formation of a subsidiary company controlling the plug interests it had acquired.

A third great rival, the United Tobacco Company, was started by a former secretary of the Trust, and was practically a split from it. But this opposition was bought out. The president of Leggett and Myers sold his stock and retired in disgust. In April, 1899, the American Tobacco Company in- creased its capital by £7,000,000, and took over entirely the United Company, and at one stroke amalgamated all separate houses, and opposition was destroyed. With the absorption of the United Tobacco Company organized attempts to stem the tide of success of the Trust were for the time broken up. It is worth noting that Mr. Duke is reported to have said that eight per cent, could be guaranteed from the beginning on the capital of the new scheme.

The Trust had captured the cigar trade, and now practically had the American tobacco in its hands.

It would be a mistake to suppose that the great Trust has even now all its own way in America. Rivals are constantly cropping up, but the fight is usually like that of a pigmy against a giant, for the Trust has its agencies everywhere. It

GENESIS OF THE TOBACCO WAR 115

can largely control purchases of the supply of the leaf, and it does things on such a scale, and backed by such resources, that its opponents stand little chance.

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CHAPTER X

THE TOBACCO WAR IN ENGLAND

Mr. Duke in due course felt himself strong enough to attempt the conquest of the world. His two great companies — the American Tobacco Company, with a capital of £16,000,000, and the Continental Tobacco Company, formed at the end of 1898 with a capital of £20,000,000 — were the two wings of his army. These two companies though nomi- nally separate were really one, Mr. Duke being the president of both, and some of the directors direc- tors in the two. The main work of the American Tobacco Company was manufacturing all forms of tobacco except cigars and plug, and the Con- tinental Tobacco Company made plug and smoking mixture. Early in 1902 the nominal separation between the two was broken down and they were openly controlled by a new combine of the Consoli- dated Tobacco Company. The companies have for some years been earning profits which enable them to maintain long and costly wars. The American Tobacco Company had net earnings in 1900 of £1,260,000, and in 1901 of £1,329,000.

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THE TOBACCO WAR IN ENGLAND 117

After paying its dividends early in 1902 it had a surplus of £1,276,000, and assets valued at £18,236,000. The Continental Tobacco Company earned in 1900 £896,000, and in 1901 £1,520,000. It had a surplus at the end of 1901 of £918,000, and assets amounting to £22,324,000. It is worth noting that seven millions of the assets of the American Tobacco Company consist of stock in other commercial concerns and in foreign invest- ments.

The Trust, with this income behind it, was in a position to plan great campaigns, and Mr. Duke was sighing for other lands to conquer. He nego- tiated for the tobacco monopoly in Japan. He had striven hard to acquire the entire trade in France. He bought up a great company in Ger- many, and by his negotiations struck terror into the hearts of manufacturers in Russia. His repre- sentatives went on tours round the world, seeing what countries were worth snapping up. He had a long fight in Australia, where in August, 1894, a company was established under the name of the American Tobacco Company of New South Wales, with a capital of £60,000, and with the sole rights of the Bonsack and Bawn machines hi New South Wales and Queensland. One company of promi- nent manufacturers was brought in. About the same time similar companies were formed in New Zealand, Victoria and South Australia. The Trust had already established itself in South Africa, and in 1895 despatched a representative to Jo- hannesburg to estabhsh a cigarette factory there*

ii8 THE AMERICAN INVADERS

This however did not flourish, owing to the heavy duties on cigarettes and free import of the leaf.

The first great battle in Australia was strangely enough with a firm which afterwards was to be sucked into the Trust. Ogden's was then a British house, sounding the patriotic cry for all it was worth. Its advertisements continually urged the British public to support British industry by buying British goods. National symbols, from the Union Jack onwards, were frequent in its announcements. It had an exceedingly clever advertising manager, who knew how to strike this national note to the full. In 1899 Ogden's ''Guinea Gold" cigarettes had a hard fight with the Trust's brands "Vanity Fair" and "Duke's Cameos," and there was a fierce struggle for supre- macy.

The one country where Mr. Duke for long could do nothing was England. Here he positively lost trade, and in a hundred foreign fields his agents found themselves baffled by the activity of the agents of the great British houses. The American Tobacco Company had settled in England. It had an office at Holborn Viaduct, and on the occasion of the Budget of 1898 it made a special effort to secure the British trade. But American cigarettes made no headway here. Mr. Duke himself, who rarely takes the public into his confidence, was compelled by the United States Industrial Commission to give the world a peep behind the scenes. In his evidence before this body, which is so far as I am aware the only recent

THE TOBACCO WAR IN ENGLAND 119

public statement he has personally made, he said : " We find our chief competitors abroad in cigarettes from England mainly. They buy our tobaccos in North Carolina and Virginia, ship it over there, manufacture cigarettes, and then compete with us in all the foreign markets. That is true of tobaccos as well as of cigarettes. Of course there is limited trade in tobacco in the other countries as compared with here."

Question : " But England is your chief compe- titor ? "

Answer : " Yes. A few years ago England did not do much in the line of cigarettes, but now there are large manufacturers in England, and they use New Carolina and Virginia tobacco. We have lost trade in Great Britain ; we will have to establish factories in England. The duty discriminates against manufactured tobacco. In other words, you can import the leaf there, and pay the duty on it, and manufacture the cigarettes at a total cost of from forty to fifty cents less per thousand than manufactured cigarettes can be exported there from this country. They discriminate against the manu- factured article to that extent. The only means of getting into that market is to establish our own factories there and pay the same duty as the British importers do."

This declaration w^as soon follow^ed by actual developments. In the autumn of 1901 Mr. Duke came to England and bought up the British firm of Ogden's. This house, with an ordinary share capital of £100,000, paying ten per cent., and ;£200,ooo

120 THE AMERICAN INVADERS

of preference shares at five and a half per cent., was purchased for the very high price of £818,000. In excusing the sale the chairman of the company said that the Trust had set aside £6,000,000 to conquer Europe, and if Ogden's did not sell out it would be beaten. The Trust at the same time announced that it would set up its own factories for cigarette making in this country, so saving the extra duty it had up to then to pay on imported cigarettes.

Mr. Duke entered into negotiations with other British firms. It is said that he offered the English house of Wills £9,000,000 for its business ; but the offer was refused. Seriously alarmed, the principal manufacturers prepared to meet their rivals. They sank minor differences, amalgamated their forces, and early in 1902 floated themselves under the name of the Imperial Tobacco Company, with a capital of £15,000,000, of which just on £12,000,000 was paid in cash, shares and debentures to the thirteen firms which formed the combination. Of this Messrs. Wills received £6,992,223.

At first everything seemed in favour of the British combination. Public sympathy was undoubtedly strongly with it, and the retail traders, alarmed by accounts of the methods of the American Trust in other lands, favoured the British concern. The British company had the retail trade of the country almost wholly in its hands. Its brands were well known and popular, far above those of the rival Trust. It seemed that the Napoleon of the tobacco trade had at last met his Waterloo.

By a series of extraordinary moves the British

THE TOBACCO WAR IN ENGLAND 121

combine largely threw away its advantages and played into the hands of its opponents. Its first mistake was the purchase of the great retail firm of Salmon and Gluckstein, the shares of that company being turned into ten per cent, preference shares of the new company. Salmon and Gluckstein were a very enterprising house which, by cutting profits to a minimum, had secured prosperity for themselves and had inflicted heavy loss on the old retailers. Their branches had been established in a few years almost everywhere in England, and they were hated by the rest of the trade to a degree which it is hard for the outside public to realize. By purchasing the business of Salmon and Gluckstein the Imperial Company largely alienated the general body of re- tailers.

This might have been overcome, but a second and worse mistake followed. At the time of the amalga- mation the British company had promised the re- tailers a substantial bonus. No details were given, but the retail trade was led to understand that it would very largely benefit. The announcement of the terms of the bonus was delayed for many months, the reason apparently being that the Imperial Company in the first rush of public enthusiasm be- came somewhat too confident of its strength, and thought that the steps it had first contemplated for conciliating the retailers were now unnecessary.

The announcement of the terms of the bonus was made on March 18 in a circular issued broadcast amongst the trade. The Imperial Company stated that it had set apart a sum of £50,000 for the first

122 THE AMERICAN INVADERS "

half-yearly distribution, and that subsequently a bonus equal to one-fifth of the profits of the Imperial Company on their home trade, after their debenture and preference shareholders had been paid their dividends, would be given. But in order to benefit by this agreement the tobacconists were required to sign an agreement which absolutely bound them not to buy stock or sell in proprietary goods manu- factured or sold by the American Tobacco Company or by others objected to by the Imperial Company, in writing. Mr. Duke's representatives were not slow to see the handle this gave them. " This is a boycott pure and simple," they said, " and is a new element introduced by the Imperial Company into the trade. It is specially stated to be directed against ourselves, but it is a dangerous weapon to place in the hands of the Imperial Company, as apart from ourselves it enables them to debar you from purchasing goods from any person, company or firm they may object to. They may object to your purchasing from any one but themselves, and you will remember that by Clause 2 you have to conform to their prices and terms from time to time. This is a serious question for retailers, as it would enable the Imperial Company practically to make their shops into tied houses, which would be carried on for the benefit of the Imperial Company."

The day after the Imperial offer was announced Mr. Duke made a bid, which by its astounding audacity fairly took away the breath of the British traders. He agreed to give the trade customers of Ogden's the entire net profit earned by the company

THE TOBACCO WAR IN ENGLAND 123

(of course the British company, not the old American concern) and £200,000 per annum as well for the next four years.

The Imperial Company replied by modifying its first agreement. It again circularized the trade, stating that while for the purpose of protection it reserved to itself the power prohibiting the sale of certain goods by those receiving the bonus, it had no intention of exercising its power in an arbitrary or unreasonable manner. It now offered to allow recipients of its bonus to stock the American Trust goods so long as they did not display them in their windows.

It further called its customers' attention to the attempts of the American Tobacco Company else- where to boycott rivals. " We have hitherto an- ticipated," it stated, " that Mr. Duke intends, if he ever obtains the power, to exclude the goods of his competitors. In this day's newspaper we find the following paragraph as illustrating the policy of the American Tobacco Company, which deserves the attention of retailers as well as manufacturers : —

" * From Ottawa it is reported that the representa- tives of the tobacco manufacturers of Ontario and Quebec will meet the members of the Canadian Government to-day and ask for intervention against the American Tobacco Company.

" ' The American Tobacco Company bought up the Empire Company, a Canadian company using Canadian leaf, and is now enforcing a contract agree- ment upon all wholesale grocers and tobacconists, compelling them to refuse to handle any tobacco

124 THE AMERICAN INVADERS

made of Canadian native leaf except that manu- factured by the Empire Company, under the threat, if they refused to comply, of the American Tobacco Company refusing to supply them with any brands of American tobacco.'

"It now appears, however, that Ogden's, Limited (the American Company's organization in England) come forward as advocates of unfettered trade, and in assuming this part they have put forward a perverted view of our bonus scheme."

But the British company had the worst of it, and knew it. The Americans were now before the public in the light of the defenders of free trade : the British as advocates of a policy of boycotting. The public sympathy which the Imperial Company had received up to this point now largely left it. The retail trade, too, rose in rebelhon, and almost wholly refused to sign the agreement. " The Imperial Company," said one retailer representing his fellows, " has out- Americanized the Americans." And the retailers saw that behind the bonus systems of both trusts was the intention of the wholesalers to get the retail trade entirely in their power, and this they determined they would not permit.

While, however, the Imperial Tobacco Company has injured itself at home, it has been active abroad. In foreign fields it has done better. In America in particular it is carrying the war into the enemies' country. There it has formed an alliance with the United States Tobacco Company, headed by Mr. J. P. Butler, who was formerly in the Trust.

The struggle has led to a very great increase in

THE TOBACCO WAR IN ENGLAND 125

tobacco advertising in the newspapers and to the reduction in price of various packet cigarettes in this country. Some of the evening papers have been obhged at times to double their editions, displaying their tobacco advertisements. Thus in one day both the Star and the Evening News of London were enlarged to eight pages for this purpose, and the Evening News received £400 for its advertisement. Packets of cigarettes which formerly fetched five- pence now go for threepence. The fight promises to be a long one.

CHAPTER XI

COAL

British supremacy in the world's coal trade seemed for long absolutely indisputable. This country produced the largest quantity of coal of any nation, and our hard coal was considered so far the best in the world's markets that British merchants would scarcely discuss the possibility of competition. To-day our supremacy has gone. The United States is now the greatest coal producer, and American anthracite is rivalling our own in quality and price in the great foreign centres.

During the latter half of 1899, when the price of coal was artificially and very considerably raised in this country, the industrial combinations that control the Eastern American coal trade cast their eyes on Europe to see if they could not take some of our export business from us. They were heavily handicapped by their great distance from Euro- pean markets, and English mine owners at first thought it absurd for them to dream of fighting us. But there were points in their favour which gave the Americans a growing advantage. Their coal

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COAL 127

is much easier to extract than ours. Owing to the rapid growth of mining in this country, our seams are ever getting smaller, deeper, and more difficult to work. America, on the contrary, has to tap practically virgin seams, often almost on the hill- side itself. America uses coal-cutting machinery more largely than we do, and this means a consider- able reduction in the cost per ton of bringing to the pit mouth. The appliances for handling are more elaborate across the Atlantic than here, and enable the shipping of the coal to be done at a lower rate.

The lowering of the Atlantic freights coming then, the Americans found themselves able to put coal on the markets at prices which for the first time made competition possible. Sample cargoes were con- signed to various European ports, but at first there was very great difficulty in getting them tried. The British held the field, and in commerce as elsewhere the man in possession has many advantages. After a time small orders were obtained, and despite the failure of some cargoes, it was found that the quality of the American product would bear com- parison with our own. Some favoured the one, some the other. Many merchants condemned the American coal for its friability. Others became enthusiastic over it because, they said, it had a smaller percentage of ash. But, as the British Consul at Marseilles has said, " Americans have been able to get their coal on the market, and this alone has considerably modified things in their favour. American seam coal has been tried and

128 THE AMERICAN INVADERS

found to be in quality far superior to expectation. The old prejudice is beginning to disappear. The difference in firing value between British and com- peting American qualities, hitherto estimated at ten per cent, in favour of the British, has already come down to seven per cent. Americans hope before long to be able to convince their customers in the Mediterranean by practical experience that the difference in results is solely due to European ignorance in the handling and firing of their coals. Indeed, they have already succeeded in doing this to an appreciable extent during 1901. . . . The first step has thus been successfully taken."

At Marseilles the American coal imports in- creased from a very small amount in 1899 ^^ about 200,000 tons in 1901. The P.L.M. Railway and the Cie. Generale Transatlantique gave large con- tracts. But the lowering of British prices in the autumn of 1901 injured the American imports, and if the English prices went down a little more, and Americans remained as they are, there would be little hope for the Americans. This state of affairs, however, is not likely to arise. The British prices may, and probably will, go down, but fresh factors will arise on the American side.

In Germany the Americans came sharply into competition with the German industrial combina- tions. The Stettin firm of Stevenson imported the first lot into the country, and made a mistake in the kind selected. Then Herr Schulze, the well- known Berlin buyer, who had hitherto patronized England, went over to the Americans. " I intend

COAL 129

to get rid of all the British coal I have in my docks, and trade solely in American coal," said Herr Schulze to a correspondent of the New York Coal Trades Journal last December. " German manu-