V.
I.   Lenin

NOTEBOOK
“β”

(“BETA”)

JEIDELS, RELATION OF THE GERMAN BIG BANKS TO INDUSTRY

Dr. Otto Jeidels,
Relation of the German Big Banks to Industry with Special Reference to the
Iron Industry, Leipzig, 1905 ((Volume 24, No. 2
of Schmoller’s Forschungen)).

[[BOX: The preface is dated: June 1905 ]]

[[BOX: Impossible to read after Riesser:
repetitions, raw material, minor facts, nothing new.
This refers only to the
beginning of the book. Apparently, Riesser stole from it. When it comes to the
relationship to industry, Jeidels is richer, livelier,
cleverer, more scientific. ]]

a common pheno- menon || p. 18: An
example: the buying up of shares (1904) of the Gelsenkirchener
Bergwerksgesellschaft in order to elect Thyssen on to the “Supervisory
Board” (!!).

p. 57: Number of (joint-stock) banks and
private bankers taking part in the issue of industrial stocks:

No. of
bankers

Issues
per
banker

No. of
banks

Issues
per
bank

1871–72

90

4.4

31

6.1

1899

34

2.7

16

12.4

p. 103: The brothers Mannesmann sold their
patents for “seamless pipes” for 16 million marks (!)
(1890).

Every crisis (1857, 1873, 1900) leads to
concentration, but especially 1900:

“Side by side with the gigantic plants in the basic
industries, the crisis of 1900 still found many plants organised on lines that
today would be considered obsolete, the ‘pure’ [non-combined] plants, which were
brought into being at the height of the industrial boom.   The fall in
prices and the falling off in demand put these ‘pure’ enterprises in a
precarious positions which did not affect the gigantic combined enterprises at
all or did so only for a very short time. As a consequence the crisis of 1900
resulted in a far greater concentration of industry || N.B.
than the crisis of 1873; the latter crisis also produced a sort of selection of
the best-equipped enterprises, but owing to the level of technical development
at that time, this selection could not place the firms which success fully
emerged from the crisis in a position of monopoly. Such a durable monopoly
exists to a high degree in the gigantic enterprises in the modern iron and steel
and electrical industries owing to their very complicated technique,
far-reaching organisation and || monopoly magnitude of capital, and, to a lesser
degree, in the engineering industry, certain branches of the metallurgical
industry, transport, etc.” (108)....[1]

p. 111: When it was found necessary to make
the firm Phoenix join the Stahlwerksverband, the
Schaaffhausenscher Bankverein bought up the majority of its shares and
ensured the adoption of the required decision.

In the same way, the Dresdner Bank
“won” two places on the Supervisory Board of the K\"onigs- und Laurah\"utte iron
and steel mills (four years ago) and carried through what it wanted....

The role of the Supervisory Boards is very wide
(in fact it could be = management)....

||| sic! (simple!) ...“Seats on Supervisory
Boards are freely offered to persons of title, also to ex-civil servants, who
are able to do a great deal to facilitate relations with the =
authorities”...[2] (149).

||| the usual story!! “Usually, on the
Supervisory Board of a big bank, there is ... a member of parliament or of the
Berlin City Council” (152)....[3]

155 (in fine)... “But the cases quoted [a number
of “names” are cited: Dernburg—director of the
Darmst\"adter Bank, Gwinner—director of the Deutsche Bank] clearly show that
Industrial leaders are mainly on the Supervisory Board of companies of the same
branch or the same region, whereas directors of the big banks, on the other
hand, are on the boards of the most diverse enterprises”....

1. The director of the Schaaffhausenscher
Bankverein is on the Supervisory Boards of 33
companies!! (p. 155).

p. 150: an example of 35 seats on Supervisory Boards being in the same hands...
(35).

p. 156... “Simultaneously with this
widening of the sphere of activity of certain big industrialists and with the
assignment of provincial bank managers to definite ||
industrial regions, there is a growth of specialisation among the directors of
the big banks. Generally speaking, this specialisation is only conceivable when
banking is conducted on a large scale, and particularly when it has widespread
connections with industry. This division of labour proceeds along two lines: on
the one hand, relations with industry as a whole are entrusted to one director,
as his special function; on the other, each director || “supervision” of social
economy assumes the supervision of separate enterprises, or of a group of
enterprises in the same branch of industry or having similar interests. One
specialises in German industry, sometimes even in West German industry alone,
others specialise in relations ||| with foreign states and
foreign industry, in information on the characters of industrialists, and
others, in Stock Exchange questions, etc. Besides, each bank director often
assigned a special locality or a special branch of industry; one works chiefly
on Supervisory Boards of electric N.B. ||| companies; another,
on chemical, brewing, or beet sugar plants, a third, in a few isolated   industrial
enterprises, but at the same time works on the Supervisory Boards of
non-industrial companies, such as insurance companies. To demonstrate this from
the example of some Berlin bank directors would take us too far into the
personal sphere. In short, there can be no doubt that the growth in the
dimensions and diversity of the big banks’ operations is accompanied by an ever
greater division of labour among their directors with the object (and result)
of, so to speak, lifting them somewhat out of pure banking and making them
better experts, better judges ||| N.B. of the general problems
of industry and the special problems of each branch of industry, thus making
them more capable || “system” of acting within the respective bank’s industrial
sphere of influence. This system is supplemented by the banks’ endeavours to
elect to their Supervisory Boards or those of subordinate banks, men who are
experts in industrial affairs, || such as industrialists, former officials,
especially those with experience in the railway service or in mining,[4] from whom they want not so much connections with
industrial enterprises as expert advice—advice, based less on academic education
than on many years of technical, business and human experience”... (157).

...“But as member of a Supervisory Board, a bank
director has not only the advantage of being interested in conscientious
performance of his office because of his responsibility to the bank; he also is
the best informed as to the state of the || N.B. market and can
make his large office staff carry out the commercial and technical   view of the
“whole” ||| assignments of the Supervisory Board. It is his
knowledge of many companies that facilitates his judgement of a particular one
and guards him against the over estimation that is often observed when a private
person sits on the board of only one company” (157–58).

At the end of 1903, representation of the German
big banks on the SUPERVISORY BOARDS of industrial companies was
as follows (pp. 161–62)[5] :

Deutsche
Bank

Disconto-
gesell-
schaft

Darm-
st\"adter
Bank

Dresdner
Bank

Schaaff-
haus-
enscher
Bank-
verein

Berliner
Handels-
gesellschaft

(My)
total
for six
big
banks

By directors

101

31

51

53

68

40

344

By members of
Supervisory Board . . .

120

61

50

80

62

34

407

Total . . .

221

92

101

133

130

74

1,040 {{

751

By Chairman
or more than
two S.B. members . . .

98

43

36

41

38

33

289

[[DOUBLE BOX: Copied from Riesser? Cf. pp. 170–71:
members of Supervisory Boards according to branches of
industry... pp. 137 and 139: issue of industrial securities ]]

“universal nature” ||| ...“The universal nature of
banking operations in industry, as so far described, the possibility and
necessity for a big bank systematically to use regular business   transactions,
the granting of industrial credit, the issue of securities, and representation
on Supervisory Boards, as a means of close and lasting relations with industrial
enterprises—all this ||| “a tight net” weaves such a tight net around the bank
and the industrial enterprise that a competitive struggle with the latter over a
particular business operation is often, and in the case of many companies
permanently, excluded” (163)....

“An examination of the sum total of industrial
relationships reveals the ||| “universal character” universal character of the
financial establishments working on behalf of industry. || “unlike” (the old)
Unlike other kinds of banks, and contrary to the demand sometimes expressed in
|| the literature that banks should specialise in one kind of business or in one
branch of industry in order to prevent the ground from slipping from under their
feet—the big banks are striving to make their connections with industrial
enterprises as varied ||| as possible in respect of the or
branches of industry and are to eliminate the unevenness in the distribution of
capital among localities and branches of industry resulting from the historical
development of individual enterprises[6] . Hand in hand with this is the effort to base
relations with industry on regular, lasting business connections, to || give
expression to them and to afford them the possibility of becoming wider and
deeper by means of a ramified system of seats on Supervisory Boards. Compared
with these two spheres of influence, the issue of stock is of relatively less
importance for the big banks’ relations with   the
“tendency” |||| industry. One tendency is to make the connections with industry
general; another tendency is to make them durable and close. In the six big
banks both these ||| tendencies are realised, not in full, but to a considerable
extent and to an equal degree” (180)....[7]

“new” relations of industry and the banks ||| “The
connections between the banks and industrial enterprises, with their new
content, their new forms and their new organs, namely, the big banks which are
organised on both a centralised and a de-centralised basis, “scarcely before the
nineties” 1897 ||| were scarcely a characteristic economic phenomenon before the
nineties; in one sense, indeed, this initial date may be advanced to the year
1897, when the important mergers took place, and when, for the first time, the
new form of decentralised organisation was introduced to suit the industrial
policy of the banks. This starting-point could perhaps be placed at an even
later date, for it was the crisis (1900) ||| crisis of 1900 that enormously
accelerated and intensified the process of concentration of industry and of
banking, consolidated that process, for the first time transformed the
connection with industry into an actual monopoly of the big banks, and made this
connection much closer and more active” (181)[8] ....

| after the crisis of 1900 (depression) ...“The
sudden concentration in the Rhine-Westphalian mining industry, the formation of
the Federation of Steel Plants, the mergers of the big electric companies, etc.,
have undoubtedly greatly accelerated practical solution of the question of the
connections between the banks and industry” (182)....

...“Modern industry has led the banks into entirely new
fields of economic life ... the bank is to a certain extent passing from its
role, in the main, of intermediary into the sphere of industrial production....
In this way [through the connection with industry] the big banks are in touch
not |||| N.B. only with development trends in individual plants, but also with
the interrelationship between the different plants of a given industry and
between different industries” (183)....

“Anyone who has watched, in recent years, the changes
of incumbents of directorships and seats on the Supervisory Boards of the big
banks, cannot fail to have noticed that power is gradually ||| N.B. passing into
the hands of men who consider || the active intervention of the big banks in the
general development of industry to be necessary and of increasing importance.
Between these new men and the old bank directors, disagreement on this subject
of a business and often of a personal nature is growing. The issue is whether or
not the banks, as credit institutions, will suffer from this intervention in the
industrial production process, and whether they are sacrificing tried principles
and assured profit to engage in a field of activity which has nothing in common
with their role of middlemen in providing credit and which is leading the banks
into a field where they are more than ever before exposed to the blind forces of
trade fluctuations. This is the opinion of many of the older bank directors,
while most of the young men consider active intervention in industry to be a
necessity as great as that which gave rise, simultaneously with big modern
industry,
transition... to what? ||| to the big banks
and modem industrial banking. The two parties are agreed only on one point:
there are neither firm principles nor a concrete aim in the new activities of
the big banks” (184)[9] .

“Banking business with foreign countries and abroad
falls into three divisions, 1
2
3 ||| each of which
corresponds to a definite stage of development: international payments, the
taking up of foreign loans? and participation in industrial enterprises broad
... each ... has impressed its stamp on a definite period in the foreign policy
of the German big banks.

...“On the significance of loans for German home
industry, a business manager of the Discontogesellschaft, which specialises in
foreign operations, made the following statement ten years ago to the Stock
Exchange Enquiry Commission (Proceedings of the Stock Exchange Enquiry
Commission, p. 371, statement by Russel): ‘I should consider it a very
great disadvantage if ... the floating of foreign loans in Germany was put, not
in the hands of German capital and the German banks, but in N.B. |||| foreign
hands. It was to avoid this that the Foreign Ministry was so greatly—and in my
opinion so rightly—interested in N.B. || our having commercial offices, bank
branches and contacts abroad. For only through such contacts can the desired
foreign orders for German industry be found.

...“‘Theuniversal complaint of our export industry is that
Germany lags greatly behind London in the big-order market. N.B. “orders” |||
Almost all orders are concentrated in London, in this great world market, and it
is only our closer connection with individual foreign firms that gives rise to a
business
relationship and regular employment for industry’” (186–87)....

...“In the dealings of the German big banks with
foreign industrial enterprises, || two stages we should distinguish two stages,
differing in basis and in time. The first, taken historically, coincides
approximately with the flourishing period of foreign loans and relates,
therefore, to different years in different countries: the seventies and eighties
can be regarded as the heyday of foreign railway construction” (187).
||| railways

Two subtypes (“opposite poles”): the
Rumanian railways and participation in American railways.

“This first stage is marked by participation in
foreign industry being closely bound up with loan activity, although German home
industry, as a supplier, can derive some benefit from this. ||| The powerful
initiative of the banks is decisive, but it only indirectly concerns industry,
||| their main attention being devoted to profitable investments in foreign
securities. It requires a situation in which home industry is not yet so
concentrated and, |||| since the nineties at
the same time, so expanding as it has become since the nineties.

|| second stage In the second stage, on the
contrary, foreign loans are of less importance, while the interest of the big
banks in foreign industry increases, for this is less dependent on other
financial connections with the country concerned. The big banks more frequently
sponsor, or co-sponsor, industrial companies in other countries and, at the same
time, collaborate closely with German home industry in foreign business
operations” (188)....

...“In foreign expansion these [German concerns] are
much more dependent on   the banks than in their domestic operations.... The bank
operating abroad [in contrast to domestic operations], however, feels itself at
home, has its branches, ||| controls international payments, and might even be
connected with the government of the given country by helping it float a loan”
(189)....

4 forms ||| “Four forms of bank participation
in foreign industrial enterprises can be distinguished: 1. The formation of
branches or subsidiary enterprises for German home industry....

...“2. The formation ... of separate foreign
enterprises which are only loosely or not at all connected with home
industry.... But the really characteristic case is afford ed by the recent exotic railway projects and the East Asian enterprises of the
big banks jointly participating in the German-Asiatic Bank”.... This is already
my italics | “a link in the conquest
of an economic region” (190).

(Baghdad—China, etc. Colonies.)

...“3. A third form is attempts by the big banks to
secure a place for themselves in an industry abroad by founding their own
enterprises, or in many cases merely by acquiring an interest in existing
ones”... (191) holdings in South African mining companies (Deutsche
Bank since 1894, etc.).

4. ...“The German banking world has establish
“its own” industry ||| also sought to secure for itself, or for German capital
behind it, exclusive exploitation of some branch of industry abroad” (192) ...
for example, the efforts “to organise under its control a part of the
oil industry, mainly the Rumanian ....

division of the world ||| ...“The world oil market is
even today still divided between two great financial groups—Rockefeller’s
American Standard   Oil Co., and Rothschild and Nobel, who control the
Russian oilfields in Baku. The two groups are closely connected. But for several
years five enemies have been threatening their monopoly” (193);

(1) exhaustion of the American oil sources;

(2) the competition of the firm of Mantashev & Co. in Baku;

x (3) the Austrian oilfields;

x (4) the Rumanian oilfields;

x (5) overseas oilfields, particularly in the Dutch
colonies (the extremely rich Samuel, and Shell
Transport and Trading Co.).[10]

[[BOX ENDS: x = Participation of the Deutsche Bank and other German banks. ]]

...“The driving force of the banks’ activity abroad
is not national zeal but the necessity, ||| an elementary truth
which becomes ever more imperative at a certain stage of capitalist development,
of establishing abroad a favourable field for the investment of free German
capital” (197)....

“A similar role [aid to industrial enterprises]
| technical role of the big banks (finance capital) is played
by the banks in establishing societies for technical research, the results of
which are intended to benefit friendly industrial enterprises. Such, for
example, are the Electric Railway Research Association, the Central Bureau of
Scientific and Technical Research, set up by the Loewe concern, and the Central
Mining Bureau, Ltd., in Frankfurt-am-Main, which is financed by leading banks as
well as big industrialists” (210–11).[11]

Sometimes the banks bring various industrial
enterprises into closer association (in some cases leading to a cartel,
in others assisting specialisation, etc.)....

||| bank = “inner connection” between enterprises
...“The bank to a certain extent embodies here the inner connection between a
large number of enterprises which results from the development of large-scale
industry; it represents the community of interests existing between them”
(215)....

“What a rich opportunity of giving employment to
friendly industrial enterprises is afforded the Deutsche Bank by such
an undertaking as the Baghdad Railway!” (217)....

N.B. growth of connections || “However
‘incidental’, so far, the closer association has been of various enterprises and
industries through the granting of bank-sponsored orders, it is at any rate an
important symptom that with the growth of large-scale industry the connections
become more numerous, || N.B. and increasingly complicated and imperspicuous.
The connections and interdependence of various industries and enterprises find
in the big banks an organ which gives them expression and more and more makes
the latent connection into a real hand-in-hand collaboration” (219)....

!! )) Complaints are heard of the
“terrorism” of the banks—(219–20)—they make it
compulsory (for orders and so on) to deal with a particular firm (220). ||

In the electrical industry a special role was
played by the crisis (apparently 1900), and the banks intensified and
accelerated the ruin of the relatively small enterprises and their absorption by
the big ones banks and ruin of enterprises || (pp. 230–32).... “The banks
refused a helping hand to the very firms in greatest need of capital, and
brought on first a frenzied   || boom and then the hopeless failure of the companies
which were not connected with them closely enough” (232).[12]

[[MINI BOX ENDS: details about the electrical
industry not interesting. Cf. more recent ones in Die
Neue Zeit. N.B. ]]

The Loewe group

The Loewe sewing-machine factory, founded in
1889, added production of armaments, then later (in the seventies and eighties)
ordnance, boilers, etc., etc., and later still electrical industry, subsidiary
companies, etc. [not very well described by Jeidels].

In a § on the relation of the big banks to the
cartels (253–58), the author has somewhat “spread himself” and become
incoherent. He distinguishes four forms: (1) indifference (to
unimportant cartels); (2) “definite interest” (254) in cartels such as
that of the coal industry (in cartels which are life-and-death
questions for the industry);

||| difference from No. 2? not “definite
interest”? (3) “help” for a cartel, e.g., steel industry;

(4) a purely “banking relation”—the organisation,
for example, of a “syndicate office” at the Schaaffhausenscher
Bankverein (1899)....

|| 258–65: description of concentration in the
coal industry (Thyssen and others). See Werner’s better
and newer material in Die Neue Zeit, 1913, in the other
notebook.[13]

265 et seq., the electrical industry
(see in Die Neue Zeit[14] ).

“The banks’ highest principle here is primarily
conscious promotion of concentration, which they have already
indirectly assisted by financial support of successful enterprises” (268)....

“The transformation of the big banks’ |||
“transformation” industrial policy from being the policy of a credit institution
to a policy of industrial   ||| concentration reveals a triple contradiction in the
development of modern banking” (268)....

|| 1) ...“The fact of progressive exclusion of
competition among the big banks” (269)....

2) “Decentralisation” of the banks (local
branches and connection with provincial || banks) leads to an “increasing
coalescence of capitals, uniting bank and industry into an integral whole”....

3) ...“increasing concentration implies a more
purposeful organisation”.... (270)

“By expansion of industrial combination, various
directions of which can be seen in the electrical and in large-scale iron and
steel industries, the sphere of this consciously guided production can be
considerably enlarged, and in this unmistakable movement the big banks are an
important factor” (270)....

And the tendency is special patronage of
heavy industry (coal and iron) to the detriment of any other....

N.B. || “The striving of the big banks for
concentration and purposeful guidance of industry is contradictory when it is
restricted to certain branches of industry and thereby results in a still
greater lack of co-ordination in other branches” (271).[15]

End

Notes

[1] See present edition, Vol. 22,
p. 209.—Ed.

[2] Ibid., p. 221.—Ed.

[3] Ibid.—Ed.

[4] See present edition, Vol. 22.,
pp. 221–22.—Ed.

[5] See present edition, Vol. 22,
p. 221.—Ed.

[6] Ibid., p. 223.—Ed.

[7] See present edition, Vol. 22,
p. 223.—Ed.

[8] Ibid., p. 225.–Ed.
—Lenin

[9] See present edition, Vol. 22.
pp. 224–25.—Ed.

[10] See present edition. Vol. 22,
pp. 248–49.—Ed.

[11] Ibid, p. 224.—Ed.

[12] See present edition, Vol. 22,
p. 246.—Ed.

[13] See Notebook “α”, pp. 33–25 of this
volume.—Ed.

[14] See p. 338 of this volume.—Ed.

[15] See present edition, Vol. 22,
p. 208.—Ed.

GILBRETH,
MOTION STUDY

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