Chapter VIII: Politics (1)

Notwithstanding the many business controversies in which Ballin took an important part, it has occasionally been said that he was not really a "fighter." This statement may be allowed to pass quite unchallenged, provided that by the term "fighter" we mean a man whose habit it is to fight to the bitter end. Ballin never indulged in fighting for its own sake, nor was it ever his object to see his vanquished opponent lie prostrate before him. Such a mental attitude he, in his own drastic way, would have described as a "perverted pleasure." Always and everywhere it was his aim to secure to himself and to those he represented the maximum benefit obtainable consistent with the realities of the situation, so that he has been justly described as "a man of compromise."

This feature of his personality, indeed, forms the key-note both to his policy and to the principles on which it was based. Perhaps in other spheres of economic activity it is possible for a struggle between two competing rivals to end in the complete victory of one of them; in the shipping business such an outcome is the exception but not the rule. There a really _weak_ opponent is never met with, unless one's rival happens to be exceptionally inexperienced or constitutionally unsound. The minor competitor, where shipping is concerned, is by no means always the less powerful of the two. On the contrary, the contest which inflicts small losses on him inflicts heavy losses on his big opponent, and may easily exhaust the latter first. The last few decades have witnessed the establishment of many new shipping firms under the auspices of national sentiment. Governments and whole peoples have backed them, and in such cases private undertakings have found it difficult to compete.

During his early training Ballin had so thoroughly convinced himself of the necessity for co-operation and compromise in matters economic that this conviction became the corner-stone of his policy. He also made it his principle never to tie an unwilling partner to an agreement which the latter considered to be detrimental to his vital interests, and he would only approve of an agreement if both parties to it felt satisfied that they had done a good stroke of business by concluding it. The numerous "community of interest" agreements to which he signed his name established, the longer they lasted and the further they were extended, an increasingly intimate contact between the shipping firms all over the world, thus proving that the consistent application of his principles was justified by its success.

In politics, too, he regarded this line of action as the only correct one. Over and over again he described the World War as a "stupid war" or as the "most stupid of all wars," because its origin, the conflict between Austria-Hungary and Serbia, was so utterly meaningless to the progress of the world. Its actual outbreak was caused by the strained economic relations between Hungary and Serbia, or--to put it quite plainly--by the boycott of the Serbian pig, a matter which was surely of no importance to the world's trade and traffic at large. "No Bismarck was needed to prevent _this_ war," he often said when speaking of its immediate origin.

This attitude of his does not mean that he shut his eyes to the deep-seated antagonisms which were at the back of these local squabbles, viz., the Franco-Russian coalition against Germany, and the Anglo-German rivalry. The latter he regarded as sufficient to turn the scale; if it could be adjusted a World War, he felt sure, would be avoided. The possibility of a universal conflagration had been pointed out to him by no less an authority than Prince Bismarck on the occasion of the latter's visit to Hamburg, when he was shown over the express steamer of the Packetfahrt that was to bear his name. "I shall not live to see the World War," Bismarck told him; "but you will, and it will start in the Near East."

With ever-increasing anxiety, Ballin noticed how, as a result of the German naval armaments, the Anglo-German antagonism came into existence, and how in time the position became worse and worse. When the Government, about the year 1900, embarked upon its propaganda for the creation of a big navy, he lent it his active assistance, but in later years he strongly opposed the naval race with Great Britain, trying to the best of his ability to circumvent its disastrous consequences.

The British argument against Germany's naval programme was that a nation which owned one-third of the inhabited globe and intended to maintain its supremacy could not renounce its naval predominance. His knowledge of British mentality--gained, as it was, through many years of intercourse with the English--told him that this reasoning was certainly unassailable from the British point of view, and that England would fight for its recognition to the bitter end. Therefore, he considered the situation could only be met by an Anglo-German understanding. The failure of arriving at such a solution was probably caused--apart from personal motives--by the fact that in Germany the spirit of compromise was not the predominant one, but that its place was taken by an exaggerated opinion of the country's own strength combined with a certain ignorance regarding foreign countries.

This mental attitude is typical of the two factions which were all-powerful in Germany at the time, viz., what might be called the Old Prussian aristocracy, and the representatives of the heavy industries. The common platform on which these two groups met was the policy to be pursued regarding customs tariffs, which, although it formed the basis of the economic greatness of Germany, also prepared the way for serious international conflicts. During the war these two groups were in charge of what was meant to be the political policy of the country, but which was, in fact, nothing but an inferior substitute for it.

Ballin's international position is illustrated by the fact that he was the first to be approached in the matter of a projected Anglo-German rapprochement, an affair which reached its climax with Lord Haldane's visit to Berlin. Owing to its historical interest this episode is worth a detailed account.

The first steps in this direction date back as far as the year 1908, and the ultimate breakdown of the project did not take place until the outbreak of the war. The British negotiator was Sir Ernest Cassel, who, a native of Germany, had settled in England when quite young, and who had become one of the world's most successful financiers. He was the intimate friend of King Edward from the time when the latter was Prince of Wales, and he also acted as his banker and as his political adviser. The King visited his home almost daily during the last few years of his life to take part in a game of bridge. The motives which may have prompted Sir Ernest to lend his assistance and his great influence to an endeavour which aimed at an understanding between his adopted country and the land of his birth need not, in the case of a man so clever and so experienced, be very far to seek. Sir Ernest repeatedly referred to himself as a German, and as such he was deprived of his privy-councillorship during the war. Thus it is quite likely that he might have been prompted no less by an inherited predilection for the one, than by an acquired preference for the other country. This very fact may also have enabled him to see matters with particular clearness of vision and without any prejudice. He and his friends reasoned somewhat along the following lines:

The policy of King Edward having led to a considerable strengthening of the position of France on the Continent, there arose the danger of an armed conflict between the continental Powers, especially as many points of dispute threatened at the same time to disturb the relations between Germany and Great Britain. These differences were caused on the one hand by the political activities of Germany as a world power, and on the other by her commercial and industrial expansion which bid fair to relegate Great Britain to a subordinate position. People in England regarded the want of a system of protection similar to the German protective tariffs as the real cause of this development, a want which retarded the progress of British industrialism, and which prevented British financiers from taking an active interest in these matters. The German financiers, however, exerted all their influence on behalf of the industrial expansion of their country, thus emancipating it more and more from foreign capital. The time during which the financing of the German industries by French money (the so-called French "pensions"), i.e. the discounting by French capitalists of bills drawn by German industrialists, played an important part, and even represented a serious menace in days of political tension, had only just passed, but, thanks to the increasing capital strength of Germany, its effects had now quite ceased to make themselves felt.

The advantage to Great Britain of an understanding with Germany was that it would guarantee her maritime supremacy which she was resolved to maintain at any price, whilst at the same time reducing the burden of her naval armaments which, in her case, too, had become wellnigh insupportable. The Liberal Government then in power was particularly interested in such financial retrenchment, being quite aware that the time had arrived for the State to enter upon an era of social legislation.

Contact between Ballin and the above-mentioned British groups was established through the agency of some friends of his connected with German high finance. The fact that the British selected Ballin to start these negotiations is probably due to his well-known friendship with the Kaiser, which suggested the possibility of approaching the German Government--even if only by informal channels in the first instance. This first attempt, should it prove successful, might at any moment be followed up by direct negotiations between the two governments. In view of the traditional close connexion existing in England between business circles on the one hand, and the politicians, the parties, and the Government on the other, such proceedings did not by any means imply a policy of backstairs, but might be relied upon to open up a way for sounding German official quarters in the most natural manner.

The general tenor of Anglo-German relations at that time was somewhat as follows.

The visit of King Edward to Wilhelmshöhe and that of the German Emperor and Empress to Windsor Castle in the summer of 1907 had been of a very friendly character, and, together with other manifestations of friendship exchanged between various German and British societies, they had exercised a favourable impression on public opinion in both countries. But very soon this friendly feeling was replaced by one of irritation. Great Britain and Russia had concluded an agreement concerning their frontiers in the Middle East, and this led to questions in the Reichstag as to whether German interests had been properly safeguarded. At the same time (in the summer of 1907) the Hague Conference came to an end without having led to an understanding regarding the limitation of armaments, which many people in England would have liked to be brought about. Towards the end of the year the German Government submitted to the Reichstag a Navy Bill by which the life of the capital ships was to be reduced from 25 to 20 years. This was tantamount to asking for the cost of three new ships of the line. Simultaneously a powerful propaganda for the navy was started, and when Prince Rupprecht of Bavaria resigned the protectorate of the Bavarian section of the Navy League, because the League which at that time was presided over by the well-known General Keim had engaged in party politics, his withdrawal had the undesirable effect of focusing public attention on the League's share in this agitation. This step, as was but natural, brought about a change in the chairmanship of the League.

In England the agitation against Germany in general, and against her naval policy in particular, became very violent in the early part of 1908. In February _The Times_ announced that the Kaiser, for the express purpose of interfering with the British naval budget, had sent a letter to that effect to Lord Tweedmouth, the First Lord of the Admiralty. His lordship categorically denied in Parliament that the document had any political character whatever, but in spite of this denial, and in spite of the support which he received from Lord Lansdowne and from Lord Rosebery, the matter produced a violent outburst of feeling on the part of the British Press and public. During March, 1908, both houses of Parliament discussed German and British naval policy in great detail. In an article published by the _National Review_, Lord Esher, the chairman of the Imperial Maritime League, demanded that for every keel laid down by Germany, Britain should lay down two, and General Baden-Powell described the danger of a German invasion as imminent. On the other hand, Sir Edward Grey, the Foreign Secretary, emphasized in one of his speeches the point of view referred to above, viz. that a reduction of the naval burdens would also be desirable in the interest of Britain, but that he could recommend such a policy only if the other governments consented to do the same.

All these considerations might easily suggest to the clear-headed men of business on either side of the North Sea how greatly it would be to the mutual advantage of both if a way could be found towards a limitation of naval armaments.

The first interview between Ballin and Sir Ernest Cassel took place in the summer of 1908, and Ballin afterwards gave the Kaiser a detailed account of it when the latter visited Hamburg and Kiel at the end of June. Another report, based on material supplied by Ballin, was composed by the chief of the Press Department of the Foreign Office, Geheimrat Hammann, for the use of the Imperial Chancellor and the Foreign Secretary, and in the absence of any original account by Ballin himself, it may be permitted to give an outline of its contents below.

Sir Ernest opened the conversation by saying that for a long time back he had desired to discuss the political situation simply in his capacity as a private person, and that he felt qualified to do so because of his intimate acquaintance with some of the leading personages and with politics in general. He would like to contribute his share towards the prevention of a dangerous development of the existing rivalry. The King felt very keenly that the rapid increase of the German naval forces constituted a menace to Britain's maritime position. He was convinced, however, that his nephew would never provoke a wanton conflict, and that, in his heart of hearts, he loathed the horrors of war. Although, therefore, during his--the King's--lifetime the danger of an Anglo-German war was remote, it was nevertheless necessary that, when his son succeeded him, the latter should find Britain's maritime position so strong that the Kaiser's successor should be unable to assail it.

When Ballin interposed at this stage that the British navy, because of its unchallenged superiority in numbers, need not be afraid of the newly created naval power of Germany, Sir Ernest replied that it was well known to British naval experts that the increase of the German navy was considerably greater than the official statements made in the Reichstag would let it appear. Undoubtedly the British navy would always preserve its superiority, not only numerically, but also technically with regard to material, construction, and armaments. Nevertheless, the advantages possessed by the German system of manning the ships and the great efficiency of German naval officers justified an apprehension lest the German superiority in the human factor might outweigh the British superiority in tonnage. The Boer war had taught England how difficult it was to conquer a high-spirited, though numerically weak enemy. He said that fear of the German danger formed the driving power of the whole policy of the Entente, and that this policy was only meant to guard against that menace. Therefore Russia had been advised at the Reval meeting to forgo the enlargement of her navy, and to concentrate all her energies on her army.

Upon Sir Ernest's intimation that at some date Britain, together with France and Russia, might inquire of Germany when she intended to put a stop to her naval armaments, Ballin replied that his friend, if he was anxious to render a really valuable service to Britain and to the cause of peace, could do no better than make it perfectly plain that such an inquiry would mean war. Germany would resist with her whole strength any such attempt which unmistakably suggested the methods employed at Fashoda.

During the progress of the interview Sir Ernest--who showed that he possessed excellent information concerning Germany's finances--observed that the state of the same would render it very difficult for her to make war. In that connexion he pointed out the intimate bearing of international finance on political relations, and he emphasized how much the borrowing countries were dependent on the lending ones. Still, even the creditor nations would sometimes be forced into an uncomfortable position, as was, for instance, the case with Great Britain after the United States had passed on to her the greater part of the Japanese debt. In Japan the disproportion between military burdens and economic strength was becoming more and more pronounced, and if the country were faced with the alternative of choosing between the total financial exhaustion of the people and a stoppage of the payment of interest, it would prefer to take the latter course.

In London Ballin was present at the Constitutional Club when a Member of Parliament made a speech in which he stated, with the general approval of his audience, that the position of Britain was not really so good as the policy pursued by the Entente might lead one to believe. The national balance-sheet had been much more satisfactory during the reign of Queen Victoria; the items now appearing on the credit side being partly bad debts incurred by Spaniards, Portuguese, and Japanese, for whose political good behaviour Britain paid far too high a price, and one should not allow oneself to be misled as to the value of these ententes by balance-sheets which were purposely kept vague.

Geheimrat Hammann told Ballin by letter that Prince Bülow, the Imperial Chancellor, and Herr v. Schön, the Foreign Secretary, were very grateful to him for his information, and that in the opinion of both gentlemen his reply to the suggestion concerning the stoppage of naval armaments was "as commendable as it was correct." Meanwhile the Kaiser had also supplied the Chancellor with a general résumé of Ballin's report to him.

Ballin's visit gave rise to an exchange of letters which it may not be inappropriate to reproduce in this place. By way of explanation, it should first be said that the Sandjak Railway project, to which reference is made in Ballin's letter, had greatly agitated public opinion all over Europe during the spring of 1908. In February, Count Aehrenthal, the Austrian Foreign Minister, at a committee meeting of the delegations, had announced the Government's intention of constructing a railway line connecting the Bosnian system with the town of Mitrovitza in the Sandjak (or province) of Novi Bazar. This announcement led to a violent outburst of the Russian Press, which described this project as a political _démarche_ on the part of Austria in the Balkans and as an interference with the Macedonian reforms aimed at by the Powers. In Austria it was thought that Germany would support her ally as a matter of course, and Prince Bülow, in an interview given to a journalist, tried to pacify the _Novoie Vremia_. He declared that the Russian papers were absolutely mistaken when they alleged that the project was inspired from Berlin, and he stated that Austria, like her German ally, pursued none but commercial aims in the Balkans.

These remarks will be a sufficient explanation of the allusions contained in Ballin's letter of July 13th, 1908, which, after an expression of thanks for the hospitality extended to him, reads as follows:

"By the way, the views I expressed to you on the matter of the
Sandjak Railway are now completely borne out by the facts. Both the
Kaiser and, later, Prince Bülow have given me positive assurances
that the German Government was just as much taken by surprise on
hearing of this Austrian project as were the London and Petrograd
Cabinets.

"I hope that our respective monarchs may soon meet now. There is
nothing that we on our side would welcome more heartily than the
establishment and the maintenance of the most friendly and most
cordial relations between the two sovereigns and their peoples. The
Kaiser will not return home from his Northern cruise and from his
visit to the Swedish Royal Court until the middle of August, but I
think it is probable that the two monarchs may meet when King
Edward returns from Marienbad, and that their Majesties will then
fix the date for the official return visit to Berlin. I sincerely
trust that this Berlin visit will be of the utmost benefit to both
countries."

Sir Ernest Cassel replied:

"I also feel that the meeting of their Majesties must produce a
great deal of good, and, as I now hear, it will after all be
possible to arrange for this meeting to take place on the outward
journey of the King. I am still as convinced as ever that our side
is animated by the same friendly sentiments as yours."

The meeting between the Kaiser and King Edward which was suggested in these letters actually took place on August 11th at Friedrichshof Castle, when the King was on his way to Ischl, and it was accorded a friendly reception in the German Press. It was followed up by an exchange of equally friendly manifestations on the part of the peoples of both countries. Mr. Lloyd George, then Chancellor of the Exchequer, went to Germany in August, 1908, to study the German system of workmen's insurance against disability and old age, and British workmen came to visit German trade unions, and to gather information about German industrial conditions. Official Britain also pronounced herself in favour of an understanding between the two countries which Mr. Lloyd George described as the only means of relieving the European tension, and Mr. Churchill professed similar sentiments.

Shortly afterwards, however, at the end of October, an event took place which severely compromised the Kaiser's policy, viz. the incident of the _Daily Telegraph_ interview. In this the Kaiser, amongst other matters, bitterly complained that his friendship for England received such scant acknowledgment. As a proof of the friendly sentiments by which his actions were guided he stated that he, during the Boer war, had refused the humiliating suggestion put forward by France and Russia that the three Powers conjointly should compel Britain to put a stop to the war; that he had communicated this refusal to King Edward, and that he previously had presented Queen Victoria with a plan of campaign mapped out by himself, to which the one actually pursued by Britain bore a striking resemblance. With regard to Germany's naval programme, he emphasized that his country needed a big fleet in order to command attention when the question of the future of the Pacific was discussed. Finally, with regard to Anglo-German relations, the Kaiser said that the middle and lower classes in Germany did not entertain very friendly feelings towards England.

The effect which this interview produced all over Germany was one of profound consternation. Its publication led to the well-known discussions in the Reichstag in November, 1908, during which the Kaiser, to the great dismay of the nation, was staying at Donaueschingen with Prince Fürstenberg, where he was hunting. In England, and abroad generally, people regarded this interview as proving a great want of consistency in the conduct of Germany's foreign policy, and this impression was by no means changed when it became known that its publication was only due to an unfortunate oversight. The Kaiser had sent the account of it, as he was bound to do by the Constitution, to Prince Bülow, who was then staying at Norderney. Bülow, however, did not read it himself, but passed it on to the Berlin Foreign Office to be examined. There, indeed, an examination took place, but only with a view to finding out whether it contained any errors of fact, and when this was proved not to be the case, it was marked to that effect, passed the various ministries without any further examination, and was published. This unfortunate chain of accidents did not, however, alter the fact that the Kaiser ought to have been aware of the great political importance of his utterances. It has always been a chief fault of his to speak out too impulsively when it would have been politically more expedient to be less communicative. Nor can the entourage of the sovereign be excused for not drawing his and the Chancellor's attention to the great political significance of his utterances. The Chancellor himself and the Foreign Office, profiting from their previous experiences with the Kaiser and his appearances in public, ought to have used a great deal more circumspection, and it would have been well if the permanent officials in the Foreign Office had shown rather more political insight.

The endeavours of the official circles to remove the tension existing between the two countries were not affected by the incident. On February 9th, 1909, King Edward and his Queen paid their visit to Berlin, thus bringing about the event which Ballin in his letter of July 13th, 1908, had described as so very desirable. To appreciate the importance of this strictly official visit, we must bear in mind the fact that it did not take place until the ninth year of the reign of King Edward. This long postponement was no doubt due to a large extent to the estrangement between uncle and nephew, and this, in its turn, had its origin in the natural dislike which the Kaiser felt for his uncle's mode of conducting his private life while still Prince of Wales. It would have been preferable, however, to relegate such personal likes and dislikes to the background where politics or business were concerned. British official comments emphatically underlined the significance of the visit, and the German Press followed suit, although voices were not wanting to warn against any over-estimation of such acts of courtesy. The reply given in the Reichstag by Herr v. Schön, the Foreign Secretary, to a question as to whether any suggestions had been put forward by Great Britain with respect to a reduction of naval armaments was very cool in its tone. His statement amounted to this: that no formal proposal for an understanding which might have served as a basis for negotiations had been received, probably for the reason that it was not customary among friendly Powers to put forward any proposals of which it was doubtful to say whether they would be entertained.

In spite of this cold douche and in spite of other obstacles, the promoters of an understanding, Ballin and Sir Ernest Cassel, did not cease their efforts in that direction. In July, 1909, Ballin paid a second visit to Sir Ernest, during which the political discussions were continued. On these latter he reported to the Kaiser as follows:

"My friend to whom I had intimated in a private letter written
about a week earlier that it was my intention to visit him--at the
same time hinting that, for my personal information, I should like
very much to take up the threads of the conversation we had had a
twelvemonth ago on the subject of the question of the navy--had
evidently used the interval to supply himself at the proper
quarters with authoritative information about this matter. During
the whole of our long talk he spoke with extraordinary assurance,
and every word seemed to be thought out beforehand.

"At the commencement of our conversation I said to my friend that
in view of the great excitement which reigned in England on account
of the German naval armaments, and which was assuming a decidedly
anti-German character, he would quite understand that I should
desire to take up once more the interesting discussions which we
had had on the same subject a year ago. I pointed out that this
excitement--spread as it was by an unscrupulous press and fostered
by foolish politicians--was apt to produce results altogether
different from those which the Government might perhaps consider it
desirable to bring about within the scope of its programme. I
emphasized the fact that, of course, I was merely speaking as a
private citizen, reading with interest the English papers and the
letters of his English friends, so that all my knowledge of the
subject was derived from private sources.

"A year ago, I said, my friend, in the clear and concise manner
that distinguished him, had explained to me the need for an
understanding between Germany and Britain governing the future
development of their naval forces, at the same time requesting me
to exert myself in that sense. This suggestion of his had not been
made in vain. The fact that I had been successful in establishing
complete concord amongst Germans, British, French, Italians,
Austrians, and a whole series of small nations on questions
affecting their highly important shipping interests, and in
replacing an unbridled and economically disastrous competition by
friendly agreements to the benefit of each partner, was bound to
make me sympathize with any measures that it was possible to take
in order to bring about a similar result between the Governments if
only they were met in the right spirit. I, therefore, had made up
my mind to submit such a plan to our Government, but before doing
so, it would be necessary for me to know whether Britain still
adhered to the principles which my friend had enunciated to me at
our previous meeting.

"Sir Ernest's reply was that as far as Britain was concerned a
great change had taken place during the interval, and that he was
no longer able to endorse the views he had held at that time. The
necessity for his country to maintain her supremacy on the sea at
all hazards, and subject to no engagements of any kind, was now
more clearly recognized than it had been a year ago. A one-sided
understanding between Germany and Britain could no longer be
thought of, since both Austria and France had now voted large sums
for the enlargement of their respective navies. Austria would
certainly be found on the German side, but France could by no means
be said to be an asset on which it would be safe for Britain to
rely, to say nothing about the two 'dark horses,' Russia and Italy.
If Britain, in view of these uncertainties, were to permit Germany
to nail her down to a fixed programme, she would dwindle down to a
fifth-rate Power. Germany possessed her overwhelmingly large army
with which she could keep in check Austria, Italy, Russia, and
France, but Britain had nothing but her navy to guarantee her
existence as a world power and to safeguard the roads that linked
her to her colonies. For many decades Britain had enjoyed
opportunities for accumulating big fortunes. These times, however,
had now passed. During the reign of the Emperor William II, who,
with a consistency which it would be difficult to praise too
highly, had made his country a commercial power of world-wide
importance, and who had raised German industrial enterprise and
German merchant shipping to a condition of undreamt-of prosperity,
Britain sustained immense losses in her overseas commerce. British
trade was declining, and there was no doubt but that in the long
run Britain would be compelled to abandon her principles of Free
Trade.

"The question of the Austrian naval armaments appeared to trouble
my friend more than anything, and this circumstance, combined with
the doubtful attitude of Russia and the uncertainty of the
situation in France, was evidently a source of great anxiety to the
King. My friend remarked in this connexion that in his opinion the
moment chosen for the conclusion of an understanding was very
favourable to German but very unfavourable to British interests. It
was useless to talk of an agreement so long as an element of mutual
fear had to be reckoned with. At present this fear manifested
itself in Britain in a manner which was most inopportune, so that
it was bound to make the German public believe that Britain would
be ready to come to an understanding even if the terms of it were
detrimental to her own interests. Britain had got behindhand both
with her commerce and with her naval programme. To fight her
competitors in the world's trade with a fair chance of success was
impossible for more reasons than one, but the elimination of the
disadvantage from which she suffered with respect to her naval
armaments was merely a question of money. The funds that were
required to bring the British Navy up to the necessities of the
international situation would certainly be found, because they had
to be found.

"I told my friend that I was astonished to hear how completely his
views had changed on these matters. Not what he did say, but what
he had left unsaid, made me suspect that official circles in
England--partly, perhaps, through the fault of the German
Government--had arrived at the conclusion that the latter would
refrain from a further strengthening of the navy after the existing
naval programme had been carried out, and that it would merely
content itself with the gradual replacement of the units as they
became obsolete. Such a proceeding could be justified only if the
same plan were adopted by Britain also. If, however, his remarks
implied that in the opinion of his Government the moment had now
arrived for altering the ratio of naval strength existing between
both countries by a comprehensive programme of new building, it
would soon become evident that there were some flaws in that
calculation. In view of any such intentions it was my
opinion--which, however, was quite personal and unofficial--that
Germany would have to decide upon such an increase of her navy as
would enable her to carry on a war of defence with the certainty of
success. If, therefore, Britain meant to go on building warships on
a large scale, this would merely lead to an aimless naval race
between the two countries.

"These remarks of mine concluded our first conversation, and I
accepted my friend's invitation to dine with him that evening in
company with some prominent men of his acquaintance.

"In the evening I was greatly surprised to see that I was the only
guest present. My friend told me that, in order to be alone with
me, he had cancelled his invitations to the other gentlemen,
stating that he did not yet feel well enough to see them. It was
obvious to me that he had, meanwhile, reported on the outcome of
our conversation, and that the atmosphere had changed. This change
had without doubt been brought about by my remarks concerning the
necessity for a further enlargement of the German Navy, if the
action of Britain compelled our Government to take such a course.
The long discussions that followed proved that this view of mine
was correct in every detail.

"Sir Ernest explained that the Liberal Cabinet had acted penny wise
and pound foolish in dealing with the question of the navy. This
was the conviction of the great majority of the British people, and
this action had caused the feelings of apprehension and of
hostility animating them. The Liberal Government had thus made a
serious blunder, and had, in his opinion, prepared its own doom by
doing so. He thought the days of the Liberal party were numbered,
and another party would soon be in office. Anti-German feeling
would be non-existent to-day if the Liberal cabinet had not,
because of its preoccupation with questions of social policy,
neglected the navy. The whole matter was further aggravated by
other questions of a political kind. France, on account of the
French national character, had always been a doubtful asset to
Britain, and, considering the state of her internal politics, she
was so now more than ever. Germany, on the other hand, possessed a
great advantage in that her military preponderance enabled her to
rely with absolute certainty on her Austrian ally. He would say
nothing about Russia, because he had never regarded the
Anglo-Russian _rapprochement_ as politically expedient.

"If it was admitted--and he thought this admission was implied by
my remarks--that her colonial and her commercial interests made it
imperative for Britain to maintain an unchallenged supremacy on the
seas, he felt certain that some reasonable men would, after all, be
able to discover a formula which would make an understanding
between both countries possible. A great difficulty, however, was
presented by my often reiterated demand that Britain must not
abandon her principles of Free Trade. In questions such as these,
she could, indeed, speak for herself, but not for her great
colonies. History had proved that she lost her American colonies as
soon as she tried to foist her own commercial policy on the
colonists. He had no doubt that Germany, despite the disagreeable
surprises which she had experienced when adjusting the system of
her Imperial finances, possessed sufficient wealth to go on
increasing her navy in the same proportion as Britain. The great
mistake committed by the Liberal cabinet and by the other advisers
of the King had been their assumption that financial considerations
would prevent Germany from carrying out her naval programme in its
entirety. German prosperity had grown far more rapidly, he thought,
than even the German Government and German financial experts had
believed to be possible. Signs of it could be noticed wherever one
went, and one would turn round in astonishment if, during the
season, one heard the tourists in Italy or in Egypt talk in any
language but German. He, at any rate, felt certain of Germany's
ability to keep pace with Britain in the naval race, even if that
pace was very greatly accelerated.

"Reasons of internal policy had convinced him that Britain would
not in any case abandon her Free Trade principles within a
measurable period of time, and as it was not intended to conclude a
perpetual agreement, but only one for a limited number of years, he
thought it was not at all necessary that Germany should insist
upon her demand in connexion with this question. As the colonies
enjoyed complete independence in these as in other matters, the
difficulties would be insurmountable. In return for such a
concession on Germany's part, Britain would doubtless be willing to
meet the views of the German Government in other respects. For
these reasons he would be quite ready to change the opinion he had
expressed in the morning, and to agree that it could produce
nothing but good if either side were to appoint some moderate men
for the purpose of discussing the whole question. Such a meeting
would have to be kept absolutely secret, and both parties should
agree that there should be no victor and no vanquished if and when
an agreement was concluded. This condition would have to be a _sine
qua non_.

"I promised Sir Ernest that I would use my best endeavours to this
end when an opportunity should present itself, and we arranged to
have another meeting in the near future.

"There is no doubt but that my friend is an extremely
well-qualified negotiator. I do not recollect that during my long
experience, extending over many years, I have ever come across a
man who could discuss matters for hours at a time with so much
self-reliance, deliberation, and fixity of purpose."

This report was passed on by the Kaiser to Herr v. Tirpitz, the Secretary for the Navy, who not only expressed his approval of the project, but also recommended that the Imperial Chancellor, Herr v. Bethmann-Hollweg, who had succeeded Prince Bülow on July 14th should be kept informed of all that was done to bring about an understanding. The Chancellor, accordingly, was presented by the Kaiser himself with a copy of Ballin's report. This was the correct thing to do, as it avoided a _faux pas_ such as, during the chancellorship of Prince Bülow, had sometimes been made. Future developments, however, proved that this step deprived the whole action of its spontaneity, and its immediate effect was that the Secretary for the Navy was relieved of all responsibility in the matter. Ballin, in later days, summed up his views on this way of dealing with the subject by saying that if Herr v. Tirpitz had been left a free hand in the whole matter--if, for instance, _he_ had conducted it as Imperial Chancellor--it would hardly have turned out a failure. The main object of the negotiations that Ballin had carried on was to ensure that a number of "experts and men of moderate views," i.e. naval experts in the first instance, should join in conference in order to discuss how, without injury to their relative fighting efficiency, both countries could bring about a reduction of their naval armaments. This plan was so simple and so obviously right that, had it been carried out as a preliminary to something else, and had the attention of the experts been drawn to the enormous political importance of their decision, success would have been assured. The procedure, however, which the Chancellor adopted compelled him to combat the active opposition of the various departments involved even before a meeting of the naval experts could be arranged for, and this was a task which far exceeded the strength of Herr v. Bethmann-Hollweg, the most irresolute of all German chancellors, the man to whom Fate afterwards entrusted the most momentous decision which any German statesman has ever had to make.

An interview between Ballin and the Chancellor was followed up, with the consent of the latter, by an exchange of telegrams between Ballin and Sir Ernest Cassel. From these it became clear that official circles in London were favourably disposed towards the opening of discussions in accordance with the terms laid down in Ballin's report, and Ballin approached the Chancellor with the request to let him know whether he should continue to work on the same lines as before, or whether the Chancellor would prefer a different method, by which he understood direct official negotiations. In a telegram to the Chancellor he explained that in his opinion Sir Ernest's reference to the friendly disposition of official London implied that he was authorized to arrange the details about the intended meeting of experts. If, therefore, he went to England again, he would have to know what were the views and intentions of the Chancellor. The reply of the latter, dated August 11th, was as follows:

"Many thanks for your welcome telegram, which has found my closest
attention. I shall send you further details as soon as I have
interviewed the gentlemen concerned, which I intend to do to-morrow
and during the next few days."

This reply clearly showed that the Chancellor had made up his mind to deal with the matter along official lines and in conformity with his own ideas.

The subsequent course of events is indicated by a letter of the Chancellor to Ballin, dated August 21st, in which he says:

"I have to-day taken the official steps of which I told you. As Sir
Ernest Goschen[2] and I have agreed to observe absolute secrecy in
this matter, and as a statement of your friend to the British
Government to the effect that I had undertaken an official
_démarche_, might possibly be regarded as an indiscretion, I
suggest that if you inform your friend at all, you should word your
reply in such a way that this danger need not be feared."

This letter shows, and later events have also proved, that the guiding spirits of Germany's political destiny were unable to meet on such terms as expediency would dictate the overtures of a man like Sir Ernest Cassel, whose status and whose good intentions were beyond criticism. If, on receipt of this news, Sir Ernest, who had been working so hard for an understanding, was not entirely discouraged, it was no doubt due to the diplomatic skill with which Ballin--who was a master of this art, as of so many others--interpreted the Chancellor's rebuff when communicating it to his friend.

That the latter's account of British feeling towards Germany was perfectly unbiased, may also be inferred from another piece of news which reached Ballin about the same time from a British source, and which reads as follows:

"My only object in writing just now is to say that if there is any
feeling in high quarters in your country favourable to coming to an
understanding with this country concerning naval matters, I am
quite satisfied from the inquiries I have made that the present
would be an opportune time for approaching this question, and that
the present Government of this country would be found entirely
favourable to coming to such an arrangement."

However, by that time, the matter was in the hands of the various departments, and they proved unable to make a success of it. Why they failed, and why the step which Herr v. Bethmann had taken with the British Ambassador produced no results, are questions which can only be answered by reference to the files of the Foreign Office.

Mr. Asquith, in a speech dealing with the British naval programme delivered on July 14th, 1910, explained why no understanding with Germany had been arrived at.

"The German Government told us--I cannot complain, and I have no
answer to make--that their procedure in this matter is governed by
an Act of the Reichstag under which the programme automatically
proceeds year by year. That is to say, after the year 1911-12, the
last year in which under that law four Dreadnoughts are
constructed, the rate of construction drops in the two succeeding
years to two each year, so that we are now, we may hope, at the
very crest of the wave. If it were possible, even now, by
arrangement to reduce the rate of construction no one would be more
delighted than his Majesty's Government. We have approached the
German Government on the subject. They have found themselves unable
to do anything; they cannot do it without an Act of the Reichstag,
repealing their Navy Law. They tell us--and no doubt with great
truth--they would not have the support of public opinion in Germany
to a modified programme."

As these statements have never been contradicted, it must be assumed that the departments concerned sheltered themselves behind the formal objection that, owing to public feeling, a repeal or a modification of the Navy Law was out of the question. If this assumption is correct, it is evident that no touch of political genius was revealed in the treatment of this important question. Even the hope that the "crest of the wave" had been reached turned out a disappointment, as was proved by the introduction of the new Navy Bill in 1912.

The objections which Herr v. Bethmann, on March 30th, 1911, raised to an international limitation of armaments can likewise only be described as formal ones. He said:

"If it is the intention of the Powers to come to an understanding
with regard to general international armaments, they must first of
all agree upon a formula defining the relative position of each....
Practically, it might be said, such an order of precedence has
already been established by Great Britain's claim that,
notwithstanding her anxiety to effect a reduction of her
expenditure on armaments, and notwithstanding her readiness to
submit any disputes to arbitration, her navy must under all
circumstances be equal--or even superior--to any possible
combination. Great Britain is perfectly justified in making this
claim, and in conformity with the views I hold on the disarmament
problem, I am the last person in the world to question her right to
do so. But it is quite a different matter to use such a claim as
the basis of an agreement which is to receive the peaceful consent
of the other Powers. What would happen if the latter raised any
counter-claims of their own, or if they were dissatisfied with the
percentage allotted to them? The mere suggestion of questions such
as these is sufficient to make us realize what would happen if an
international congress--because one restricted to the European
Powers alone could not be comprehensive enough--had to adjudicate
on such claims."

If this explanation is intended to be a reply to such statements from the British side as the one just quoted from Mr. Asquith, the fact had been disregarded that the most serious problem under discussion--viz. the Anglo-German rivalry--could quite well be solved without convening an "international congress."

As early as December 10th, 1910, Herr v. Bethmann, in a speech delivered before the Reichstag, had enlarged on this same subject from the political point of view:

"As to the relations between ourselves and Great Britain, and as to
the alleged negotiations with the latter country concerning a
mutual curtailment of naval armaments, I am bound to say that the
British Government, as everybody knows, has more than once
expressed its conviction that the conclusion of an agreement fixing
the naval strengths of the various Powers would conduce to an
important improvement of international relations.... We, too, share
Great Britain's desire to eliminate the question of naval
competition, but during the informal _pourparlers_ which have taken
place from time to time, and which have been conducted in a spirit
of mutual friendship, we have always given prominence to our
conviction that a frank discussion of the economic and political
spheres of interest to be followed up by a mutual understanding on
these points would constitute the safest way of destroying the
feeling of distrust which is engendered by the question of the
respective strengths of the military and naval forces maintained by
each country."

The speech which Sir Edward Grey delivered in the House of Commons on March 14th, 1911, with special reference to this speech of Herr v. Bethmann shows unmistakably that the remarks of the latter did not reassure Great Britain with respect to the only point at issue in which she was interested, viz. the limitation of the German naval programme. Britain, according to Sir Edward, did not desire that her relations with any Power should be of such a nature as to impede the simultaneous existence of cordial relations with Germany. An Anglo-German agreement had been specially suggested. This suggestion required some careful thinking over. If he were to hold out any hope that Germany, in compliance with the terms of some such agreement would be willing to cancel or to modify her naval programme, he would be contradicted at once. Only within the limits of this programme would it be possible to come to some understanding between the two Governments. It might, for instance, be agreed to spread the expenditure voted for the navy over a longer term of years, or to arrange that the present German programme should not be increased in future. Matters such as these could form the subjects for discussion between the two Governments, and it would be desirable from every point of view that an understanding should be arrived at. To this speech the _North German Gazette_ replied that Germany would be quite prepared to fall in with Sir Edward's suggestions if agreements such as those outlined by him could in any way allay the feeling of distrust governing public opinion in Great Britain. If from this semi-official pronouncement it may be inferred that Herr v. Bethmann on his part was favourably disposed towards an agreement, the question arises: "Why was it not concluded?"

In order to understand why the British Cabinet attached so much value to the settlement of the Anglo-German naval questions and to the pacification of public opinion, it must be remembered that the Liberal Cabinet, owing to its hostile attitude towards the House of Lords, had drifted into a violent conflict with the Conservative party, and that the latter, in its turn, during the election campaign had accused the Cabinet of having neglected the navy, driving home its arguments by constantly pointing out the "German danger." Moreover, King Edward had died in the meantime (May 6th, 1910), and of his son and successor it was said that he, at the time of his accession to the throne, was no longer a man of unbiased sentiment, that he was very anti-German, and that he was under the influence of a small group of Conservative extremists.

It may not be out of place to reproduce in this connexion the text of two accounts dealing with the situation in England which Ballin wrote in the spring and in the summer of 1910 respectively, when he was staying in London, and which he submitted to the Kaiser for his information.

In the early part of 1910 he wrote: