v. Grumme's bed; the Chancellor and myself occupied the only two chairs

available in the room, the Captain comfortably seating himself on a table. The outcome of the proceedings was that the Kaiser declared himself completely satisfied with the proposals, only commissioning me, as I have explained, to look after the interests of the North German Lloyd.

"On the afternoon of the following day, after lunch, the Chancellor and I returned to Berlin, this giving me a chance of discussing with the former--as I had previously done with the Kaiser--every question of importance. On October 18th I arrived back in Hamburg."

The negotiations with the North German Lloyd which Ballin had undertaken to enter upon proved to be very difficult, the Director General of that company, Dr. Wiegand, not sharing Ballin's views with respect to the American danger and the significance of the American combination. After Ballin, however, had explained the proposals in detail, the Lloyd people altered their previously held opinion, and in the subsequent London discussions, which were resumed in November, the President of the Lloyd, Mr. Plate, also took part. Nevertheless, it was found impossible to agree definitely there and then, and a further discussion between the two directors general took place at Potsdam on November 13th, both of them having been invited to dinner by the Kaiser, who was sitting between the two gentlemen at the table. Ballin's suggestion that he and Dr. Wiegand should proceed to New York in order to ascertain whether the shipping companies and the American railroads had actually entered into a combination, was heartily seconded by the Kaiser, and was agreed to by Dr. Wiegand. The Lloyd people, however, were still afraid that the proposed understanding would jeopardize the independence of the German lines; but Ballin, by giving detailed explanations of the points connected with the financial provisions, succeeded in removing these fears, and the Board of Trustees of the Lloyd expressed themselves satisfied with these explanations. They insisted upon the omission of the clauses dealing with the financial participation, but agreed to the proposals in every other respect.

The arrangements for such mutual exchange of shares were thereupon dropped in the final drafting of the agreement, and were replaced by a mutual participation in the distribution of dividends, the American concern guaranteeing the German lines a dividend of 6 per cent., and only claiming a share in a dividend exceeding that figure. This change owed its origin to a proposal put forward by Mr. v. Hansemann, the Director of the Disconto-Gesellschaft, who had taken an active interest in the development of the whole matter.

In the course of the negotiations the Lloyd made a further proposal by which it was intended to safeguard the German national character of the two great shipping companies. It was suggested that a corporation--somewhat similar to the Preussische Seehandlung--should be set up by the Imperial Government with the assistance of some privately owned capital. This corporation should purchase such a part of the shares of each company as would defeat any attempts at destroying their national character. Ballin, however, to whom any kind of Government interference in shipping matters was anathema, would have nothing to do with this plan, and thus it fell through.

Ballin thereupon having informed the Kaiser in Kiel on board the battleship _Kaiser Wilhelm II_ regarding the progress of the negotiations, a further meeting with the Lloyd people took place early in December, which led to a complete agreement among the two German companies as to the final proposals to be submitted to the American group; and shortly afterwards, at a meeting held at Cologne, agreement was also secured with Mr. Pirrie. The final discussions took place in New York early in February, Ballin and Mr. Tietgens, the chairman of the Board of Directors, acting on behalf of the Hamburg-Amerika Linie, and President Plate and Dr. Wiegand on that of the Lloyd. Meanwhile, Morgan's negotiations with the White Star Line and other British companies had also led to a successful termination. Concerning the New York meetings we find an interesting entry in Ballin's diary:

"In the afternoon of February 13th, 1902, Messrs. Griscom, Widener, Wilding, and Battle, and two sons of Mr. Griscom met us in conference. Various suggestions were put forward in the course of the proceedings which necessitated further deliberations in private between ourselves and the Bremen gentlemen, and it was agreed to convene a second general meeting at the private office of Mr. Griscom on the 15th floor of the Empire Building. This meeting was held in the forenoon of the following day, and a complete agreement was arrived at concerning the more important of the questions that were still open. I took up the position that the combine would only be able to make the utmost possible use of its power if we succeeded in securing control of the Cunard and Holland American Lines. I was glad to find that Mr. Morgan shared my view. He authorized me to negotiate on his behalf with Director Van den Toorn, the representative of the Holland American Line, and after a series of meetings a preliminary agreement was reached giving Morgan the option of purchasing 51 per cent. of the shares of the Holland American Line. Morgan undertook to negotiate with the Cunard Line through the intermediary of some British friends. It has been settled that, if the control of the two companies in question is secured to the combine, one half of it should be exercised by the American group, and the other half should be divided between the Lloyd and ourselves. This arrangement will assure the German lines of a far-reaching influence on the future development of affairs.

"On the following Thursday the agreements, which were meanwhile ready in print, were signed. We addressed a joint telegram to the Kaiser, informing him of the definite conclusion of the agreement, to which he sent me an exceedingly gracious reply. The Kaiser's telegram was dispatched from Hubertusstock, and its text was as follows:

"'Ballin, Director General of the Hamburg-Amerika Linie, New York. Have received your joint message with sincere satisfaction. Am especially pleased that it reached me in the same place where the outlines gained form and substance in October last. You must be grateful to St. Hubertus. He seems to know something about shipping as well. In recognition of your untiring efforts and of the success of your labours I confer upon you the Second Class of my Order of the Red Eagle with the Crown. Remember me to Henry.--WILHELM I.R.'

"Morgan gave a dinner in our honour at his private residence which abounds in treasures of art of all descriptions, and the other gentlemen also entertained us with lavish hospitality. Tietgens and I returned the compliment by giving a dinner at the Holland House which was of special interest because it was attended not only by the partners of Morgan, but also by Mr. Jacob Schiff, of Messrs. Kuhn, Loeb & Co., who had been Morgan's opponents in the conflict concerning the Northern Pacific. During the following week the Lloyd provided a big dinner on board the _Kronprinz Wilhelm_ for about 200 invited guests.

"Prince Henry of Prussia was one of the passengers of the _Kronprinz Wilhelm_ which, owing to the inclemency of the weather, arrived in New York one day behind her scheduled time. On the day of her arrival--Sunday, February 23rd--I had dinner on board the _Hohenzollern_. We also took part in a number of other celebrations in honour of the Prince. Especially memorable and of extraordinary sumptuousness was the lunch at which Mr. Morgan presided, and at which one hundred captains of industry--leading American business men from all parts of the States--were present. On the evening of the same day the press dinner took place which 1,200 newspaper men had arranged in honour of the Prince. Mr. Schiff introduced me to Mr. Harriman, the chairman of the Union Pacific, with whom I entered into discussions concerning our participation in the San Francisco-Far East business."

At the request of the American group the publication of the agreement was delayed for some time, because it was thought desirable to wait for the final issue of the Congress debates on the Subsidies Bill. A report which Ballin, after some further discussion with Morgan and his London friends had taken place, made for the German Embassy in London, describes the situation as it appeared in April, 1902. It runs as follows:

"(1) Acquisition of the joint control of the Cunard Line by the two German companies and the American syndicate. On this subject discussions have taken place with Lord Inverclyde, the chairman of the Cunard Line. Neither Lord Inverclyde nor any of the other representatives of British shipping interests objected in any way to the proposed transaction for reasons connected with the national interest. He said, indeed, that he thought the syndicate should not content itself with purchasing 51 per cent. of the shares, but that it should rather absorb the whole company instead. The purchase price he named appeared to me somewhat excessive; but he has already hinted that he would be prepared to recommend to his company to accept a lower offer, and it is most likely that the negotiations will lead to a successful issue, unless the British Government should pull itself together at the eleventh hour.

"(2) Public announcement of the formation of the Combine. Whereas until quite recently the American gentlemen maintained that it would be advisable to wait for the conclusion of the negotiations going on at Washington with respect to the proposed subsidy legislation, Mr. Morgan now shares my view that it is not desirable to do so any longer, but that it would be wiser to proceed without any regard to the intentions of Washington. The combine, therefore--unless unexpected obstacles should intervene--will make its public appearance within a few weeks.

"(3) The British Admiralty. An agreement exists between the British Admiralty and the White Star Line conceding to the former the right of pre-emption of the three express steamers _Oceanic, Teutonic,_ and _Majestic._ This agreement also provides that the White Star Line, against an annual subsidy from the Government, must place these boats at the disposal of the Admiralty in case of war. The First Lord has now asked Mr. Ismay whether there is any truth in the report that he wants to sell the White Star Line; and when he was told that such was the case, he declared that, this being so, he would be compelled to exercise his right of pre-emption.

"It would be extremely awkward in the interests of the combine if the three vessels had to be placed at the service of the Admiralty, especially as it is probable that they would be employed in competition with the combine. Therefore a compromise has been effected in such a form that Mr. Morgan is to take over the agreement on behalf of the combine for the three years it has still to run. This means that the steamers will continue to fly the British flag for the present, and that they must be placed at the disposition of the Admiralty in case of war. The Admiralty suggested an extension of the terms of the agreement for a further period of three years; but it was content to withdraw its suggestion when Mr. Morgan declined to accept it. The agreement does not cover any of the other boats of the line which are the biggest cargo steamers flying the Union Jack, and consequently no obligations have been incurred with respect to these.

"(4) Text of the public announcement. A memorandum is in course of preparation fixing the text of the announcement by which the public is to be made acquainted with the formation of the combine. In compliance with the wishes emanating from prominent British quarters, the whole transaction will be represented in the light of a big Anglo-American 'community of interest' agreement; and the fact that it virtually cedes to the United States the control of the North Atlantic shipping business will be kept in the background, as far as it is possible to do so."

The first semi-official announcement dealing with the combine was published on April 19th by the British Press, and at an Extraordinary General Meeting of the Hamburg-Amerika Linie on May 28th, the public was given some carefully prepared information about the German-American agreement. At that meeting Dr. Diederich Hahn, the well-known chairman of the _Bund der Landwirte_ (Agrarian League), rose, to everybody's surprise, to inquire if it was the case that the national interests, and especially the agricultural interests of Germany, would be adversely affected by the agreement. The ensuing discussion showed Ballin at his best. He allayed Dr. Hahn's fears lest the American influence in the combination would be so strong as to eliminate the German influence altogether by convincing him that the whole agreement was built up on a basis of parity, and that the German interests would not be jeopardized in any way. The argument that the close connexion established between the trust and the American railroad companies would lead to Germany being flooded with American agricultural produce he parried by pointing out that the interests of the American railroads did not so much require an increased volume of exports, but rather of imports, because a great disproportion existed between their eastbound and their westbound traffic, the former by far exceeding the latter, so that a further increase in the amount of goods carried from the western part of the country to the Atlantic seaports would only make matters worse from the point of remunerative working of their lines.

What Ballin thought of the system of Government subsidies in aid of shipping matters is concisely expressed by his remarks in a speech which he made on the occasion of the trial trip of the s.s. _Blücher_, when he said: "If it were announced to me to-day that the Government subsidies had been stolen overnight, I should heave a sigh of relief, only thinking what a pity it was that it had not been done long ago."

In Great Britain the news that some big British shipping companies had been purchased by the American concern caused a great deal of public excitement. In Ballin's diary we find the following entry under date of June 5th:

"In England, in consequence of the national excitement, a very awkward situation has arisen. Sir Alfred Jones and Sir Christopher Furness know how to make use of this excitement as an opportunity for shouldering the British nation with the burden which the excessive tonnage owned by their companies represents to them in these days of depression. King Edward has also evinced an exceedingly keen interest in these matters of late, which goes to show that what makes people in England feel most uncomfortable is not the passing of the various shipping companies into American hands, but the fact that the German companies have done so well over the deal. Mr. Morgan has had an interview with some of the British Cabinet ministers at which he declared his readiness to give the Government additional facilities as regards the supply of auxiliary cruisers. We are hopeful that such concessions will take the wind out of the sails of those who wish to create a counter-combination subsidized by grants-in-aid from the Government."

An outcome of the German-American arrangements was that Morgan and his friends were invited by the Kaiser to take part in the festivities connected with the Kiel Week. The American gentlemen were treated with marked attention by the Kaiser, and extended their visit so as to include Hamburg and Berlin as well.

At a conference of the transatlantic lines held in December, 1902, at Cologne, Ballin put forward once more his suggestion that a cabin pool should be established. The proposal, however, fell through owing to the opposition from the Cunard Line.

The depression in the freight business which had set in in 1901, and which was still very pronounced towards the close of 1902, seriously affected the prospects of the transatlantic shipping companies, especially those combined in the Morgan Trust, who were the owners of a huge amount of tonnage used in the cargo business, and whose sphere of action was restricted to the North Atlantic route. "Experience now shows," Ballin wrote in his notes, "that we were doing the right thing when we entered into the alliance with the Trust. If we had not done this, the latter would doubtless have tried to invade the German market in order to keep its many idle ships going."

Meanwhile the Cunard Line had concluded an agreement with the British Government by which the Government bound itself to advance to the company the funds for the building of its two mammoth express liners, the _Mauretania_ and the _Lusitania_, while at the same time granting it a subsidy sufficient to provide for the payment of the interest on and for the redemption of the loan advanced by the Government for the building of the vessels.

Further difficulties seemed to be ahead owing to the aggressive measures proposed by the Canadian Pacific Company, which was already advertising a service from Antwerp to Canada. To ward off the danger threatening from this quarter, Ballin proceeded to New York to take up negotiations with Sir Thomas Shaughnessy, the president of the Canadian Pacific. He went there on behalf of all the Continental shipping companies concerned, and the results he arrived at were so satisfactory to both parties that Ballin corresponded henceforth on terms of close personal friendship with Sir Thomas, who was one of the leading experts on railway matters anywhere. These friendly relations were very helpful to Ballin afterwards when he was engaged in difficult negotiations with other representatives of Sir Thomas's company, and never failed to ensure a successful understanding being arrived at.

On the occasion of this trip to America Ballin had some interesting--or, as he puts it, "rather exciting"--discussions with Morgan and his friends. He severely criticized the management of the affairs of the Trust, and tried to make Morgan understand that nothing short of a radical improvement--i.e. a change of the leading personages--would put matters right. "Morgan," he writes, "finds it impossible to get the right men to take their places, and he held out to me the most alluring prospects if I myself should feel inclined to go to New York as president of the Trust, even if only for a year or two; but I refused his offer, chiefly on account of my relations with the Kaiser."

Ballin's suggestions, nevertheless, led to a change in the management of the Trust. This was decided upon at meetings held in London, where Ballin stayed for a time on his way back to Hamburg. Mr. Pirrie also took part in these meetings.

In the meantime the relations between the Cunard Line and the other transatlantic shipping companies had become very critical. The Hungarian Government, for some time past, had shown a desire to derive a greater benefit from the considerable emigrant traffic of the country--a desire which was shared by important private quarters as well. The idea was to divert the stream of emigrants to Fiume--instead of allowing them to cross the national frontiers uncontrolled--and to carry them from that port to the United States by direct steamers. Ballin had repeatedly urged that the lines which were working together under the pool agreement should fall in with these wishes of the Hungarian Government; but his proposals were not acted upon, mainly owing to the opposition of the North German Lloyd, which company carried the biggest share of the Hungarian emigrants.

To the great surprise of the pool lines it was announced in the early part of 1904 that the Hungarian Government was about to conclude an agreement with the Cunard Line--the only big transatlantic shipping company which had remained outside the Trust--by which it was provided that the Cunard Line was to run fortnightly services from Fiume, and by which the Hungarian Government was to bind itself to prevent--by means of closing the frontiers or any other suitable methods--emigrants from choosing any other routes leading out of the country. Such an agreement would deprive the pool lines of the whole of their Hungarian emigrant business. Discussions between Ballin and the representatives of the Cunard Line only elicited the statement on the part of the latter that it had no power any longer to retrace its steps. An episode which took place in the course of these discussions is of special interest now, as it enables us to understand why the amalgamation of the Cunard Line with the Morgan Trust never took place.

Ballin asked Lord Inverclyde why the attitude of the Cunard Line had been so aggressive throughout. The reply was that the Morgan Trust, and not the Cunard Line, was the aggressor, because Morgan's aim was to crush it. When Ballin interposed that this had never been intended by the Trust--that the Trust, indeed, had attempted to include the Cunard Line within the combination, that Lord Inverclyde himself had also made a proposal towards that end, and that the project had only come to grief on account of the strong feeling of British public opinion against it--Lord Inverclyde answered that, far from this being the case, the Trust had never replied to his proposal, and that he had not even received an acknowledgment of his last letter.

In a letter to Mr. Boas, the general representative of his company in New York, in which he described the general situation, Ballin stated that the statement of Lord Inverclyde was indeed quite correct.

The Hungarian situation became still more complicated after the receipt of some information that reached Ballin from Vienna to the effect that the Austrian Government intended to imitate the example set by the Hungarian Government by running a service from Trieste. After prolonged discussions the Austrian Government also undertook not to grant an emigration licence to the Cunard Line so long as the struggle between the two competing concerns was not settled.

Thereupon this struggle of the pool lines--both the Continental and the British ones--against the Cunard Line was started in real earnest, not only for the British but also for the Scandinavian and the Fiume business. After some time negotiations for an agreement were opened in London in July on the initiative and with the assistance of Mr. Balfour, who was then President of the Board of Trade. These, however, led to no result, and a basis for a compromise was not found until August, 1904, when renewed negotiations took place at Frankfort-On-Main. A definite understanding was reached towards the close of the same year, and then at last this struggle, which was really one of the indirect consequences of the establishment of the Morgan Trust, came to an end.

Looked upon from a purely business point of view, the Morgan Trust--or, to call it by its real name, the "International Mercantile Marine Company," which in pool slang, was simply spoken of as the "Immco Lines"--was doubtless a failure. Only the World War, yielding, as it did, formerly unheard-of profits to the shipping business of the neutral and the Allied countries, brought about a financial improvement, but it is still too early to predict whether this improvement will be permanent. The reasons why the undertaking was bound to be unremunerative before the outbreak of the war are not far to seek, and include the initial failure of its promoters to secure the adhesion of the Cunard Line--a failure which, as is shown by Ballin's notes, was to a large extent due to the hesitating policy of the Hamburg company. To make business as remunerative as possible was the very object for which the Trust was formed, but the more economical working which was the means to reach this end could not be realized while such an essential factor as the Cunard Line not only remained an outsider, but even became a formidable competitor.

It can hardly be doubted that the adhesion of the Cunard Line to the Morgan Trust--or, in other words, the formation of a combine including all the important transatlantic lines without exception--would have brought about such a development of the pool idea as would have led to a much closer linking-up of the financial interests of the individual partners than could be achieved under a pool agreement. Under such a "community of interest" agreement, every inducement to needless competition could be eliminated, and replaced by a system of mutual participation in the net profits of each line. This was the ideal at which Ballin, taught by many years of experience, was aiming.

Over and over again the pool lines had an opportunity of finding out that it paid them better to come to a friendly understanding, even if it entailed a small sacrifice, than to put up a fight against a new competitor. Sometimes, indeed, an understanding was made desirable owing to political considerations. However, the number of participants ultimately grew so large that Ballin sarcastically remarked: "Sooner or later the pool will have to learn how to get along without us," and he never again abandoned his plan of having it replaced by closely-knit community of interest agreements which would be worked under a centralized management, and therefore produce much better results. In other branches of his activities--e.g. in his agreements with the other Hamburg companies and in the one with the Booth Line, which was engaged in the service to Northern Brazil, he succeeded in developing the existing understandings into actual community of interest agreements, and it seems that these have given all-round satisfaction. The negotiations between himself and the North German Lloyd shortly before the outbreak of the war were carried on with the same object.

Throughout the endless vicissitudes in the history of the pool the formation of the Morgan Trust decidedly stands out as the most interesting and most dramatic episode. At the present time the position of the German steamship companies in those days seems even more imposing than it appeared to the contemporary observer. To-day we can hardly imagine that some big British lines should, one after the other, be offered for purchase first to some German, and then to the American concerns. Such a thing was only possible because at that time British shipping enterprise was more interested in the employment of tramp steamers than in the working of regular services, the shipowners believing that greater profits could be obtained by the former method. The result was a noticeable lack of leading men fully qualified to speak with authority on questions relating to the regular business, whereas in Germany such men were not wanting. The transatlantic business threatened, in fact, to become more and more the prerogative of the German-American combination. To-day, of course, it is no longer possible to say with certainty whether the Cunard Line could have been induced to join that combination, if the right moment had not been missed. The great danger with which British shipping was threatened at that time, and the great success which the German lines achieved, not only stirred British public opinion to its depths, but also acted as a powerful stimulus on the shipping firms themselves. This caused a pronounced revival of regular line shipping, which went so far that tramp shipping became less and less important, and which ultimately led to a concentration of the former within the framework of a few large organizations which exercise a correspondingly strong influence on present-day British shipping in general. These organizations differ from the big German companies by the circumstance that they represent close financial amalgamations and that they have not, like the German companies, grown up slowly and step for step with the expanding volume of transatlantic traffic.