Albert Ballin

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[Illustration: Albert Ballin]

Albert Ballin

By Bernhard Huldermann

_Translated from the German by W. J. EGGERS, M.A. (London)_

[Illustration: decoration]

Cassell and Company, Limited London, New York, Toronto and Melbourne 1922

To the Memory of ALBERT BALLIN in true veneration and heartfelt gratitude

"_He was a man; take him for all in all, I shall not look upon his like again._"

SHAKESPEARE, _Hamlet_ (_Act I, Scene 2_).

Preface

My principal reason for publishing the information contained in this volume is to keep alive the memory of Albert Ballin. I particularly desire to show what was his share in bringing about the economic advance of Germany during the golden age of the Empire's modern history, and to relate how he--unsuccessfully, alas!--strove to prevent the proud structure which he had helped to raise, from falling to ruin in the time of his country's distress. I believe that much that concerns the latter aspect of his work will be new to most readers. In spite of all that has been said and written concerning the political activities which Ballin displayed (and is alleged to have displayed) both before and during the war, their object--and, more important still, their intimate connexion with his economic activities--is scarcely known. Eminently successful though Ballin had been in creating an atmosphere of mutual understanding between the various nations in the economic sphere, his attempts to reconcile the contending ambitions of those same nations where politics were concerned ended in failure. And yet it is impossible to understand his failure in one respect without first understanding his success in the other; indeed, the connexion between the two sides of his work forms the key to the character of the man and to the historical significance of his achievements.

It is possible that this volume may shed some new light on the causes of Germany's collapse; this idea, at any rate, was before my mind when I decided upon publication. Frederick the Great somewhere remarked that, to the great loss of mankind, the experiences gained by one generation are always useless to the next, and that each generation is fated to make its own mistakes. If this is true, it is nevertheless to be hoped that Germany, considering the magnitude of the disaster that has overtaken her, will not allow the spirit of resignation implied by this remark to determine her actions in the present case.

In thus submitting to the public the information contained in this book, I am carrying out the behest of the deceased, who asked me to collect his papers, and to make whatever use I thought fit of them. Moreover, the fact that I had the privilege of being his collaborator for more than ten years gives me perhaps a special right to undertake this task.

My best thanks are due to Director A. Storm for supplying me with material illustrative of Ballin's early career; to Chief Inspector Emil F. Kirchheim for assistance with the technical details, and to Professor Francke, who was on intimate terms of friendship with Ballin during a number of years, for information concerning many matters relative to Ballin's personal character.

My constant endeavour has been to describe persons and events _sine ira et studio_, and to refrain from stating as a fact anything for which no documentary evidence is available.

The Author.

_October, 1921._

Contents

Chapter Page

1. Morris And Co. 1

2. General Representative Of The Carr Line 12

3. Head Of The Packetfahrt'S Passenger Department 21

4. The Pool 28

5. The Morgan Trust 40

6. The Expansion Of The Hamburg-Amerika Linie 69

7. The Technical Reorganization Of The Hamburg-Amerika Linie 121

8. Politics 131

9. The Kaiser 193

10. The War 213

11. Personal Characteristics 287

Extract Annotated By William II 316

Index 317

Albert Ballin

Chapter I

Morris And Co.

Albert Ballin was a native of Hamburg. Before the large modern harbour basins of the city were built, practically all the vessels which frequented the port of Hamburg took up their berths along the northern shore of the Elbe close to the western part of the town. A long road, flanked on one side by houses of ancient architecture, extended--and still extends--parallel to this predecessor of the modern harbour. During its length the road goes under different names, and the house in which Ballin was born and brought up stood in that portion known as Steinhöft.

A seaport growing in importance from year to year is always a scene of busy life, and the early days which the boy Ballin spent in his father's house and its interesting surroundings near the river's edge left an indelible impression on his plastic mind.

Those were the times when the private residence and the business premises of the merchant and of the shipping man were still under the same roof; when a short walk of a few minutes enabled the shipowner to reach his vessel, and when the relations between him and the captain were still dominated by that feeling of personal friendship and personal trust the disappearance of which no man has ever more regretted than Albert Ballin. Throughout his life he never failed to look upon as ideal that era when every detail referring to the ship and to her management was still a matter of personal concern to her owner. He traced all his later successes back to the stimulating influence of those times; and if it is remembered how enormous was then the capacity for work, and how great the love of it for its own sake, it must be admitted that this estimate was no exaggeration. True, it is beyond doubt that the everyday surroundings in which his boyhood was spent, and the impressions gained from them, powerfully influenced his imagination both as boy and growing youth. It may, however, also be regarded as certain that the element of heredity was largely instrumental in moulding his character.

Ballin belonged to an old Jewish family, members of which--as is proved by ancient tombstones and other evidence--lived at Frankfort-on-Main centuries ago. Later on we find traces of them in Paris, and still later in Central and North Germany, and in Denmark. Documents dating from the seventeenth century show that the Ballins at that time were already among the well-to-do and respected families of Hamburg and Altona. Some of the earliest members of the family that can be traced were distinguished for their learning and for the high reputation they enjoyed among their co-religionists; others, in later times, were remarkable for their artistic gifts which secured for them the favour of several Kings of France. Those branches of the family which had settled in Germany and Denmark were prominent again for their learning and also for their business-like qualities. The intelligence and the artistic imagination which characterized Albert Ballin may be said to be due to hereditary influences. His versatile mind, the infallible discernment he exercised in dealing with his fellow-men, his artistic tastes, and his high appreciation of what was beautiful--all these are qualities which may furnish the key to his successes as a man of business. His sense of beauty especially made him extremely fastidious in all that concerned his personal surroundings, and was reflected in the children of his imagination, the large and beautifully appointed passenger steamers.

Ballin always disliked publicity. When the Literary Bureau of his Company requested him to supply some personal information concerning himself, he bluntly refused to do so. Hence there are but few publications available dealing with his life and work which may claim to be called authentic. Nevertheless--or perhaps for that very reason--quite a number of legends have sprung up regarding his early years. It is related, for instance, that he received a sound business training first in his father's business and later during his stay in England. The actual facts are anything but romantic. Being the youngest of seven brothers and sisters, he was treated with especial tenderness and affection by his mother, so much so, in fact, that he grew up rather a delicate boy and was subject to all sorts of maladies and constitutional weaknesses. He was educated, as was usual at that time, at one of the private day-schools of his native city. In those days, when Hamburg did not yet possess a university of her own, and when the facilities which she provided for the intellectual needs of her citizens were deplorably inadequate for the purpose, visitors from the other parts of Germany could never understand why that section of the population which appreciated the value of a complete course of higher education--especially an education grounded on a classical foundation--was so extremely small. The average Hamburg business man certainly did not belong to that small section; and the result was that a number of private schools sprang up which qualified their pupils for the examination entitling them to one year's--instead of three years'--military service, and provided them with a general education which--without any reflection on their principals--it can only be said would not bear comparison with that, for instance, which was looked upon as essential by the members of the higher grades of the Prussian Civil Service. Fortunately, the last few decades have brought about a great improvement in this respect, just as they have revolutionized the average citizen's appreciation of intellectual culture and refinement.

Albert Ballin did not stand out prominently for his achievements at school, and he did not shine through his industry and application to his studies. In later life he successfully made up for the deficiencies of his school education by taking private lessons, especially in practical mathematics and English, in which language he was able to converse with remarkable fluency. His favourite pastime in his early years was music, and his performances on the 'cello, for instance, are said to have been quite excellent. None of his friends during his later years can furnish authoritative evidence on this point, as at that time he no longer had the leisure to devote himself to this hobby. Apart from music, he was a great lover of literature, especially of books on _belles lettres_, history, and politics. Thanks to his prodigious memory, he thus was able to accumulate vast stores of knowledge. During his extended travels on the business of his Company he gained a first-hand knowledge of foreign countries, and thus learned to understand the essential characteristics of foreign peoples as well as their customs and manners, which a mere study of books would never have given him. So he became indeed a man of true culture and refinement. He excelled as a speaker and as a writer; although when he occasionally helped his adopted daughter with her German composition, his work did not always meet with the approval of the teacher, and was once even returned with the remark, "newspaper German."

In 1874, at the age of seventeen, Ballin lost his father. The business, which was carried on under the firm of Morris and Co., was an Emigration Agency, and its work consisted in booking emigrants for the transatlantic steamship lines on a commission basis. Office premises and dwelling accommodation were both--as already indicated--located in the same building, so that a sharp distinction between business matters and household affairs was often quite impossible, and the children acquired practical knowledge of everything connected with the business at an early age. This was especially so in the case of young Albert, who loved to do his home lessons in the office rooms. History does not divulge whether he did so because he was interested in the affairs of the office, or whether he obtained there some valuable assistance. The whole primitiveness of those days is illustrated by the following episode which Ballin once related to us in his own humorous way. The family possessed--a rare thing in our modern days--a treasure of a servant who, apart from doing all the hard work, was the good genius of the home, and who had grown old as the children grew up. "Augusta" had not yet read the modern books and pamphlets on women's rights, and she was content to go out once a year, when she spent the day with her people at Barmbeck, a suburb of Hamburg. One day, when the young head of Morris and Co. was discussing some important business matters with some friends in his private office, the door was suddenly thrust open, and the "treasure" appeared on the scene and said: "Adjüs ook Albert, ick gah hüt ut!" ("Good-bye, Albert, I am going out to-day!") It was the occasion of her annual holiday.

The firm of Morris and Co., of which Ballin's father had been one of the original founders in 1852, had never been particularly successful up to the time of his death. Albert, the youngest son, who was born on August 15th, 1857, joined the business when his father died. He had then just finished his studies at school. The one partner who had remained a member of the firm after Ballin's death left in 1877, and in 1879 Albert Ballin became a partner himself. The task of providing for his widowed mother and such of his brothers and sisters as were still dependent on his help then devolved on him, and he succeeded in doing this in a very short time. He applied himself to his work with the greatest diligence, and he became a shining example to the few assistants employed by the firm. On the days of the departure of the steamers the work of the office lasted until far into the night, as was usually the case in Hamburg in former years. An incident which took place in those early days proves that the work carried on by Morris and Co. met with the approval of their employers. One day the head of one of the foreign lines for which the firm was doing business paid a personal visit to Hamburg to see what his agents were doing. On entering the office young Albert received him. He said he wanted to see Mr. Ballin, and when the youthful owner replied that he was Mr. Ballin the visitor answered: "It is not you I want to see, young man, but the head of the firm." The misunderstanding was soon cleared up, and when Ballin anxiously asked if the visitor had come to complain about anything connected with the business, the reply was given that such was by no means the case, and that the conduct of the business was considered much more satisfactory than before.

To arrive at a proper understanding of the conditions ruling in Hamburg at the end of the 'seventies, it is necessary to remember that the shipping business was still in its infancy, and that it was far from occupying the prominent position which it gained in later years and which it has only lost again since the war. The present time, which also is characterized by the prevalence of foreign companies and foreign-owned tonnage in the shipping business of Hamburg, bears a strong likeness to that period which lies now half a century back. The "Hamburg-Amerikanische Packetfahrt-Actien-Gesellschaft," although only running a few services to North and Central America, was even then the most important shipping company domiciled in Hamburg; but it counted for very little as an international factor, especially as it had just passed through a fierce struggle against its competitor, the Adler Line, which had greatly weakened it and had caused it to fall behind other lines with regard to the status of its ships. Of the other Hamburg lines which became important in later times, some did not then exist at all, and others were just passing through the most critical period of their infancy. The competitors of the Packetfahrt in the emigrant traffic were the North German Lloyd, of Bremen; the Holland-America Line, of Rotterdam, and the Red Star Line, of Antwerp. Apart from the direct traffic from Hamburg to New York, there was also the so-called indirect emigrant traffic _via_ England, which for the most part was in the hands of the British lines. The passengers booked by the agents of the latter were first conveyed from Hamburg to a British port, and thence, by a different boat, to the United States. It was the time before the industrialization of Germany had commenced, when there was not sufficient employment going round for the country's increasing population. The result was that large numbers of the inhabitants had to emigrate to foreign countries. That period lasted until the 'nineties, by which time the growth of industries required the services of all who could work. Simultaneously, however, with the decrease of emigration from Germany, that from Southern Europe, Austria-Hungary, and the Slavonic countries was assuming huge proportions, although the beginnings of this latter were already quite noticeable in the 'seventies and 'eighties. This foreign emigrant traffic was the mainstay of the business carried on by the emigration agencies of the type of Morris and Co., whereas the German emigrants formed the backbone of the business on which the German steamship lines relied for their passenger traffic. Either the companies themselves or their agencies were in possession of the necessary Government licences entitling them to carry on the emigration business. The agencies of the foreign lines, on the other hand, either held no such licence at all, or only one which was restricted to certain German federal states or Prussian provinces--such, for instance, as Morris and Co. possessed for the two Mecklenburgs and for Schleswig-Holstein. This circumstance naturally compelled them to tap foreign districts rather than parts of Germany; and since the German lines, in order to keep down their competition, refused to carry the passengers they had booked, they were obliged to work in conjunction with foreign ones. They generally provided the berths which the sub-agencies required for their clientèle, and sometimes they would book berths on their own account, afterwards placing them at the disposal of the agencies. They were the connecting link between the shipping companies and the emigrants, and the former had no dealings whatever with the latter until these were on board their steamers. The Hamburg emigration agents had therefore also to provide accommodation for the intending emigrants during their stay in Hamburg and to find the means for conveying them to the British port in question. A number of taverns and hostelries in the parts near the harbour catered specially for such emigrants, and the various agents found plenty of scope for a display of their respective business capacities. A talent for organization, for instance, and skill in dealing with the emigrants, could be the means of gaining great successes.

This was the sphere in which the youthful Albert Ballin gave the first proofs of his abilities and intelligence. Within a few years of his entering the firm the latter acquired a prominent position in the "indirect" emigration service _via_ England, a position which brought its chief into personal contact with the firm of Richardson, Spence and Co., of Liverpool, who were the general representatives for Great Britain of the American Line (one of the lines to whose emigration traffic Morris and Co. attended in Hamburg), and especially with the head of that firm, Mr. Wilding. An intimate personal friendship sprang up between these two men which lasted a lifetime. These close relations gave him an excellent opportunity for studying the business methods of the British shipping firms, and led to the establishment of valuable personal intercourse with some other leading shipping people in England. Thus it may be said that Ballin's connexions with England, strengthened as they were by several short visits to that country, were of great practical use to him and that, in a sense, they furnished him with such business training as until then he had lacked.

How successfully the new chief of Morris and Co. operated the business may be gauged from the fact that, a few years after his advent, the firm had secured one-third of the volume of the "indirect" emigration traffic _via_ England. At that time, in the early 'eighties, a period of grave economic depression in the United States was succeeded by a trade boom of considerable magnitude. Such a transition from bad business to good was always preceded by the sale of a large number of "pre-paids," i.e. steerage tickets which were bought and paid for by people in the United States and sent by them to those among their friends or relatives in Europe who, without possessing the necessary money, wished to emigrate to the States. A few months after the booking of these "pre-paids" a strong current of emigration always set in, and the time just referred to proved to be no exception to the rule. The number of steerage passengers leaving Hamburg for New York increased from 25,000 in 1879 to 69,000 in 1880, and 123,000 in 1881.

It was quite impossible for the biggest Hamburg shipping company--the Packetfahrt--to carry successfully this huge number of emigrants. And even if this had been possible, the Packetfahrt would not have undertaken it, because it intentionally ignored the stream of non-German emigrants. Besides, the Company had neglected for years to adapt its vessels to the needs of the times, and had allowed its competitors to gain so much that even the North German Lloyd, a much younger undertaking, had far outstripped it. The latter, under its eminent chairman, Mr. Lohmann, had not only outclassed the Packetfahrt by the establishment of its service of fast steamers--"Bremen-New York in 9 days"--which was worked with admirable regularity and punctuality, but had also increased the volume of its fleet to such an extent that, in 1882, 47 of the 107 transatlantic steamers flying the German flag belonged to this Company, whereas the Packetfahrt possessed 24 only. For all these reasons it would have been useless for Morris and Co. to suggest to the Packetfahrt that they should secure for it a large increase in its emigrant traffic; and even if they had tried to extend their influence by working in co-operation with the Packetfahrt, such an attempt would doubtless have provoked the liveliest opposition on the part of the firm of August Bolten, the owner of which was one of the founders of the Packetfahrt, and which, because they were acting as general agents for the North American cargo and passenger business, exercised a powerful influence over the management of the Packetfahrt. The firm of August Bolten, moreover, had, like the line they represented, always consistently refused to have any dealings with the emigrant agencies.

Ballin, knowing that the next few years would lead to a considerable increase in the emigrant traffic, therefore approached a newly established Hamburg shipping firm--which intended to run a cargo service from Hamburg to New York--with the proposal that it should also take up the steerage business. His British friends, when they were informed of this step, expressed the apprehension lest their own business with his firm should suffer from it, but Ballin had no difficulty in allaying their fears.

Chapter II

General Representative Of The Carr Line

The new shipping line for which Morris and Co. contracted to act as General Passenger Agents was the privately owned firm of Mr. Edward Carr. The agreement concluded between the two firms shows distinct traces of Ballin's enterprising spirit and of the largeness of his outlook. Morris and Co. undertook to book for the two steamships of the Carr Line then building, viz. the _Australia_ and the _America_, as many passengers as they could carry, and guaranteed to pay the owners a passage price of 82 marks per head, all the necessary expenses and commissions, including those connected with the dispatch of the passengers, to be paid by Morris and Co. The steerage rate charged by the Packetfahrt at that time was 120 marks. It was agreed that, if this rate should be increased, a corresponding increase should be made in the rates of the Carr Line. The number of trips to be performed by each steamer should be about eight or nine per annum. If a third boat were added to the service, the agreement entered into should be extended so as to cover this boat as well. For every passenger short of the total capacity of each steamer Morris and Co. were to pay a compensation of 20 marks, if no arrangements had been made for the accommodation of the passenger, and 35 marks in case such accommodation had been arranged. It was expected that each boat would carry from 650 to 700 passengers. The actual number carried, however, turned out to be slightly less, and amounted to 581 when the first steamer left Hamburg on June 7th, 1881. Morris and Co. also undertook to hand over to the Carr Line all the through cargo they could secure. From the very start the work done by Ballin seems to have met with the unqualified approval of the Carr Line people; because the latter waived their claim to the compensation due to them for the sixty passengers short of the total number which were to be carried on the first trip, as Morris and Co. could prove that these passengers had failed to arrive, although the firm had been advised from Denmark that they were to come. On how small a scale the firm's business was conducted may be gauged from the circumstance that the whole staff consisted of nine employees only, who were paid salaries aggregating 20,302 marks.

In one essential feature the service of the new line differed from those of its old-established competitors. The _Australia_ and the _America_ were ordinary cargo boats, but, in addition to a moderate amount of cargo, they also carried steerage passengers. They thus had not much in common with the usual passenger steamers by which both cabin and steerage passengers were carried. The advantage of the new type to the emigrants was that it gave them much more space than was at their disposal on the older boats. Whereas on the cabin steamers they were practically confined to a very small part of the boat, the Carr Line steamers made no restriction whatever as to their movements on board; all the available space, especially on deck, was thrown open to them. This type was not entirely a novelty, the sailing vessels of the older period used for the emigrant traffic being run on similar lines. The advantages accruing to the owners from their new type of steamers were obvious. The arrangements for the accommodation and provisioning of the emigrants, compared with what was needed in the case of cabin passengers, were of the simplest kind, and thus the cost price of the steamers was considerably less than that of vessels of the usual type. This also meant a saving in the wages bill, as it led to a reduction in the number of hands on board; and since the speed of the new boats was also less than that of the older ones, the working expenses were reduced in proportion. The financial results of the service, therefore, were better, in spite of the low rates charged to the steeragers, than those obtainable by running cabin steamers with steerage accommodation, and than those obtainable by running cargo steamers without any passenger accommodation.

The new line soon made itself felt as a serious competitor to the Packetfahrt, especially so as by 1885 its fleet had increased from two to five steamers. The lower steerage rates charged by the Carr Line led to a general decrease of rates in the New York service, which was not confined to the lines running their services from Hamburg. The passage prices charged from the various ports are naturally closely related to each other, because each port tries to attract as much traffic as possible to itself, and this can only be brought about by a carefully thought-out differentiation. The struggle between the various lines involved which had started in Hamburg quickly extended to other seaports and affected a great many lines in addition to those of Hamburg. The rate-cutting process began in May, 1882. In the following October the Packetfahrt and the Lloyd had reduced their rates to 90 and in June, 1883, to 80 marks, whilst the British lines in February, 1884, charged so little as 30s. The Carr Line, of course, had to follow suit. It not only did so, but in proportion reduced its own rates even more than the other lines. The rates were even lower in practice than they appeared to be, owing to the constantly growing commissions payable to the agents. The agents of the competing lines, by publishing controversial articles in the newspapers, soon took the general public into their confidence; and in order to prevent such publicity being given as to their internal affairs, the managements of the various steamship lines entered into some sort of mutual contact. The worst result of the rate-slashing was that the agreements which the older lines had concluded amongst themselves for the maintenance of remunerative prices soon became unworkable. First those relating to the Westbound rates had to go down before the new competitor; and in 1883, when this competition had really commenced to make itself appreciably felt, the Packetfahrt found itself compelled to declare its withdrawal from the New York Continental Conference by which the Eastbound rate had been fixed at $30 for the passage from New York to the Continent, a rate which was so high that the Carr Line found it easy to go below it.

The Packetfahrt made great efforts to hold its own against the newcomer, but, as the following figures show, its success was but slight. In 1883 the Packetfahrt carried 55,390 passengers on 76 voyages, against 16,471 passengers carried on 29 voyages by the Carr Line, so that the traffic secured by the latter amounted to about 30 per cent. of that of the former. The figures for 1884 show that 58,388 passengers were carried by the Packetfahrt on 86 voyages, against 13,466 steeragers on 30 voyages by the Carr Line. If the figures relative to the direct and the indirect emigrant traffic from Hamburg are studied, it will be seen that a considerable decrease had taken place in the volume of the latter kind within a very few years, thus leading to an improvement in the position of the German lines as compared with that of their British competitors. These figures are as follows:

_Number of Emigrants carried_ _Packetfahrt_ _Carr Line_ _via British ports_

1880 47,000 -- 20,000 1881 68,000 4,000 47,600 1882 68,000 11,000 31,000 1883 55,000 16,000 13,000 1884 58,000 13,000 16,000

At the same time the Packetfahrt, in order to prevent French competition from becoming too dangerous on the Havre-New York route, had to reduce its rates from Havre, and a little later it had to do likewise with regard to the Eastbound freight rates and the steerage rates. The keen competition going on between the lines concerned had led to a lowering of the Eastbound rate to Hamburg from $30 to $18; and as the commission payable to the agents had gone up to $5, the net rate amounted to $13 only. At last the shareholders of the Packetfahrt became restless, and at the annual general meeting held in 1884 one of their representatives moved that the Board of the Company should be asked to enter into an agreement with the competing firm of Edward Carr. The motion, however, was lost; and the further proposal that a pool should be established among the Hamburg emigrant agents fared no better.

It was clear that the rate-war, which continued for a long period, would considerably affect the prosperity of the Carr Line in common with the other shipping companies. This circumstance prompted the proposal of Edward Carr, when the discussions were renewed in the spring of 1885, to carry them on upon a different basis altogether. He proposed, in fact, that the Carr Line itself should be purchased by the Packetfahrt. In the course of the ensuing negotiations Albert Ballin, as the representative of Edward Carr, who was absent from Hamburg for a time, played a prominent part. The Packetfahrt, in the meantime, had received advices from its New York office to the effect that the latter had reconsidered its attitude towards the claims of the Carr Line, that it looked upon a successful termination of the struggle against this Line as hopeless, and that it therefore recommended the granting of the differential rates which formed the obstacle to peace. Nevertheless, it was not until July, 1885, that, at a conference held in Hamburg, an agreement was concluded by the Packetfahrt, the Lloyd, the Carr Line, the Dutch, Belgian, and French lines, and the representative of the British lines. All these companies bound themselves to raise their rates to 100 marks, except that the Carr Line should be entitled to fix theirs at 90 marks. Thus the latter had at length received the recognition of its claim to a differentiation, and of its right to exist side by side with the older Company, although its steamers were not of an equal quality with those of the latter. An agreement was also concluded by which the rates of commission due to the Hamburg emigrant agents were fixed, and at the continued negotiations with the other lines Albert Ballin, from that time onward, in his capacity of representative of the Carr Line, was looked upon as on an equal footing with the representatives of the other lines.

The principal subject of the discussions was the question of eliminating, as far as possible, British influence from the emigrant traffic _via_ Hamburg. The competition of the British was, naturally, very detrimental to the business of all the Continental, but more especially the German lines, because the interests of the respective sides were utterly at variance with each other. The firm foundations of the business transacted by the British lines were laid in England, and the Continental business was merely a source of additional profit; but to the German lines it was the mainstay of their existence, and to make it pay was of vital importance to them. The German lines, therefore, did not rest until, as the result of the continued negotiations among the Continental companies, it was agreed that the uniform rates just fixed should not apply to the traffic which was carried on by the two Hamburg lines from that city. Towards the end of 1885 the first object aimed at by this step was realized: the conclusion of an agreement between the two Hamburg lines and the representatives of the British lines settling the rates and the commissions; but apart from this, no changes of fundamental importance were made in this business until after Albert Ballin, under an agreement proposed by the Packetfahrt, had entered the service of the Packetfahrt, as head of their passenger department. An important exception, however, was the amalgamation suddenly announced in March, 1886, of the Carr Line and the Union Line, which latter company was operated by Rob. M. Sloman and Co., of Hamburg. The fact of this amalgamation considerably weakened the position of the Packetfahrt in its dealings with the Carr Line, because it gave additional strength to the latter.

The details of the five years' agreement between Ballin and the Packetfahrt were approved by the Board of Trustees of that Company about the middle of May, 1886. It was stipulated that, in conformity with the pool agreement concluded between the two lines on May 22nd, the Packetfahrt should appoint Mr. Albert Ballin sole and responsible head of its North American passenger department (Westbound as well as Eastbound services); that his work should include the booking of steeragers for the Union Company's steamers (which, in accordance with the pool agreement, the Packetfahrt had taken over), that he should appoint and dismiss the clerks employed by his department; that he should fix their salaries and commissions; that he should sign passage agreements on behalf of the Company, and that he should issue the necessary instructions to the agents and officers of the Company. All letters and other documents were to be signed "by proxy of the Hamburg-Amerikanische Packetfahrt-Actien-Gesellschaft," and he was required annually to submit to the directors a draft estimate of the expenses of his department. On how modest a scale the whole arrangement was drawn up may be inferred from the figures given in the first year's draft estimate, viz. Salaries, 35,000 marks; advertisements, 50,000 marks; posters and printed matter, 25,000 marks; travelling expenses, 6,000 marks; postage and telegrams, 10,000 marks; extras and sundries, 10,000 marks. Equally modest was the remuneration of the new head who was to receive a fixed salary of 10,000 marks per annum, plus a commission under the pool agreement, allowing the inference that the total annual income of the newly appointed head of the department would work out at something like 60,000 marks, which goes to show that the Company had a high opinion of his capacity for attracting traffic to its services. The conclusion of this agreement meant that the Packetfahrt henceforth took entire control of its passenger business--which, until then, had been looked after by the firm of Aug. Bolten--and that a passenger department had to be specially created. Thus an important step forward was made which could only be undertaken by the firm because such a well-qualified man as Ballin happened to be at their service just then.

If the course of the negotiations between the Packetfahrt and the Carr Line had not already shown it, this agreement would prove without a shadow of doubt that the then head of Morris and Co. had, at the age of twenty-nine, and after twelve years of practical work, gained the premier position in the emigrant business of his native city and also a leading one in the general European emigrant business which in itself is one of the most important branches of the shipping trade. The correspondence between Edward Carr and Ballin furnishes no indication that the latter himself had insisted upon his being taken over by the Packetfahrt or that he had worked with this object.

Chapter III

Head Of The Packetfahrt'S Passenger Department

On May 31st, 1886, Albert Ballin first took part in a joint meeting of the Board of Trustees and the Board of Directors of the Packetfahrt. On this occasion two proposals were put forward by him: one, to provide new premises for the work connected with the booking of passengers at an annual rent of 5,000 marks; the other, to start a direct service from Stettin to New York _via_ Gothenburg. This latter proposal was prompted by the desire to reduce the influence of the British lines competing for the Hamburg business. Such a reduction could only be brought about if it were proved to the British lines that their position was by no means unassailable. The Scandinavian emigrant business to the United States which for long had been a source of great profit to the British, lent itself admirably to such purposes. Ballin's proposal was agreed to by the Company's management, with the result that in July, 1886, a pool agreement was concluded between the Packetfahrt (on behalf of a Stettin Line of steamers) and the Danish Thingvalla Line. Steamers now began to call at Gothenburg and Christiansand on their voyages from Stettin to the United States. The new line was known as the "Scandia Line"; and in later years, when a similar object was aimed at, it was called into existence once more. The aim was not to establish a new steamer service for its own sake, but rather to create an object for compensation which, in the negotiations with the British lines, could be given up again in exchange for concessions on the part of the latter regarding the Hamburg business. If this plan failed, Ballin had another one mapped out: he threatened to attack the British in their own country by carrying steerage passengers either from Liverpool _via_ Havre, or from Plymouth _via_ Hamburg. People in England laughed at this idea. "Surely," they said, "no British emigrant will travel on a German vessel." The British lines replied to Ballin's threat by declaring that they would again reduce to 30s. their rates from Hamburg to New York _via_ a British port. However, the negotiations which Ballin entered into with them in England during the month of September, 1886, soon cleared the air, and led to the conclusion of an agreement towards the end of the year. The Packetfahrt promised to withdraw its Scandia Line, and the British lines, in return, agreed to raise their steerage rates from Hamburg to 85 marks gross, and those from Liverpool, Glasgow, and London to £2 10s. net. A clearing house which should be under the management of a representative of the British lines, and which was also to include the business done by the Bremen agents of the latter, was to be set up in Hamburg. This clearing house was kept on until other and more far-reaching agreements with the British lines made its continued existence superfluous.

The arrangements which Ballin made with the agents represented in the clearing house show his skill in his dealings with other people. The whole agreement, especially the fixing of the terms governing the share to be assigned to the agents--which amounted to 55 per cent, of the Hamburg business--was principally aimed at the realization of as high a rate as possible. This policy proved to be a great success. Another step forward was that the Packetfahrt now consented to accept passengers booked by the agents, thus reversing their previous policy of ignoring them altogether.

The agreement with the British lines also provided that the Union Line should raise its rates to 90 marks, the Packetfahrt to 95 marks, and the Lloyd those charged for its services to Baltimore and New York to 100 and 110 marks respectively. Henceforward both competing groups were equally interested in obtaining as high a rate as possible.

The practical working of the agreement did not fail to give satisfaction, and the Continental lines could, undisturbed by external interference, put their own house in order. A few years later, in 1890, the British lines complained that they did not succeed in getting the percentage of business to which they were entitled. Negotiations were carried on at Liverpool, during which Ballin was present. He pointed out that, considering the whole Continental position, the British lines would be ill-advised to withdraw from the agreement, and he stated that he would be prepared to guarantee them their share (33 per cent.) of the Hamburg business. The outcome was that the British lines declared themselves satisfied with these new stipulations. A few years later, when the British lines joined the Continental Pool, the Hamburg agreement ceased to be necessary, and in 1893 the clearing house was abolished.

The new Emigration Law of 1887--due to the exertions of the North German Lloyd and the Packetfahrt--strengthened the position of the lines running direct services from German ports. Another step forward was the increase of the passage rates which was agreed upon after negotiations had taken place at Antwerp and in England, and after the German, Dutch, and Belgian lines had had a conference at Cologne. Contact was also established with the chief French line concerned.

The improvement, however, was merely temporary. The termination of the struggle for the Hamburg business did not mean that all the differences between all the transatlantic lines had been settled. On the contrary, all the parties concerned gradually realized that it would be necessary to institute quite different arrangements; something to ensure a fairer distribution of the traffic and a greater consolidation of their common interests. A proposal to gain these advantages by the establishment of a pool was submitted by the representative of the Red Star Line at a conference held in the autumn of 1886, and a memorandum written by Ballin, likewise dating from 1886, took up the same idea; but an agreement was not concluded until the close of 1891.

That, in spite of Ballin's advocacy, five years had to elapse before this agreement became perfect is perhaps to some extent due to the fact that Ballin--who at that time, after all, was only the head of the Passenger Department of his Company--could not always speak with its full authority where his own personal views were concerned. Moreover, the influence of his Company was by no means very considerable in those early days. The only passenger boat of any importance which the Company possessed in the early 'eighties, before Ballin had entered its services, was the _Hammonia_, and she was anything but a success. She was inferior both as regards her efficiency and her equipment. At last, however, Ballin's desire to raise the prestige of the Company triumphed, and the building of several fast boats was definitely decided upon. In addition to a comparatively large number of passengers--especially those of the first cabin--they were to carry a moderate amount of cargo. In size they were subject to the restrictions imposed upon them by the shortcomings of the technical knowledge of that time, and by the absence of the necessary improvements in the fairway of the lower Elbe. Speed, after all, was the main consideration; and it was the struggle for the blue riband of the Atlantic which kept the attention of the travelling public riveted on these boats.

A statement giving details of the financial results obtained by the first four of the new fast steamers which were entered into the service of the Company between 1889 and 1891 showed that the earnings up to and including the year 1895 did not even cover the working expenses, and that those up to 1899 were not sufficient to allow for an interest of 4 per cent, on the average book values of the steamers. It must be remembered, however, that the first of these two periods included the disastrous season of 1892-93, when Hamburg was visited by an epidemic of cholera. And a different light is shed on the matter also if we further remember that depreciation had been allowed for on a generous scale, no less than 50 per cent, of the cost price plus the expenditure incurred through an enlargement of the _Auguste Victoria_, the oldest of the boats, having been deducted on that account. The Packetfahrt, like all the other German shipping companies, has always been very liberal in making ample provision for depreciation. When, therefore, these steamers were sold again at the time of the Spanish-American and Russo-Japanese wars, a considerable profit was realized on the transactions which enabled the Company to replace them by a very high-grade type of vessel (the _Deutschland_, _Amerika_, and _Kaiserin Auguste Victoria_). It must be admitted in this connexion that perhaps no shipowner has ever been more favoured by fortune than Ballin where the sale of such difficult objects as obsolete express steamers was concerned. The value which these boats had in relation to the prestige of the Company was very considerable; for, as Ballin expressed it to me one day: "The possession of the old express steamers of the Packetfahrt certainly proved to be something like a white elephant; but just consider how greatly they have enhanced the prestige of the Company." They attracted thousands of passengers to the Line, and acted as feeders to its other services.

The orders for the first two of these steamers were given towards the close of 1887 to the Vulkan yard, at Stettin, and to the firm of Laird respectively, at a price of £210,000 each, and the boats were to be completed early in 1889. They were the first twin-screw steamers, and were provided with the system of "forced draught" for the engines. This system had just been introduced in British yards, and Ballin's attention had been drawn to it by his friend Wilding, who was always ready to give him valuable advice on technical matters. In order to find the means for the construction of these and of some other boats, the general meeting of the shareholders, held on October 6th, 1887, voted a capital increase of 5,000,000 marks and the issue of 6,250,000 marks of debentures. Knowing that an improvement of the services was the great need of the time, Ballin, since the time of joining the Company, had done all he could to make the latter a paying concern again, and in this he succeeded. For the year 1886 a dividend of 5 per cent. was paid, and thus it became possible to sanction an increase of the joint-stock capital.

Further foundations for later successes were laid by the reform of the organization and of the technical services of the Company. His work in connexion with the Carr Line had taught the youthful head of the passenger department that careful attention to the material comfort of the steerage passengers could be of great benefit to the Company. He continued along lines such as these, and at his suggestion the steerage accommodation on two of the Packetfahrt's steamers was equipped with electric light, and provided with some single berths as well. This latter provision was extended still further during the succeeding year. In addition to the fast steamers, some ordinary ones were also ordered to be built. In 1888 two steamers were ordered for the Company's West Indies service, and shortly afterwards eight units of the Union Line were bought at a price of 5,200,000 marks. All these new orders and purchases of steamers led to the joint-stock capital being raised from 20 to 30 million marks. Two more boats were laid down in the Stettin Vulkan yard, and a third with the firm of Laird. The express steamer then building at the Vulkan yard was named _Auguste Victoria_ in honour of the young Empress.

During the summer months of 1887 Ballin, together with Mr. Johannes Witt, one of the members of the Board of Trustees, went to New York in order to discuss with the agents a reorganization of the New York representation, which was looked after by Edward Beck and Kunhardt. In consequence of the negotiations which Ballin carried on to that end, the agents undertook to submit their business for the Company to the control of an officer specially appointed by the Packetfahrt. This small beginning led, in later years, to the establishment in New York of the Company's direct representation under its own management.

When Ballin joined the Packetfahrt, he did not strictly confine his attention to matters connected with the passenger services. When, for instance, the head of the freight department was prevented from attending a meeting called by the Board of Trustees, Ballin put forward a proposal for raising the rates on certain cargo. It was therefore only but fit acknowledgment of his many-sided talents, and recognition that his energetic character had been the guiding spirit in the Company's affairs, that the Board of Trustees appointed Ballin in 1888 a member of the Board of Directors after two years with the Packetfahrt. This appointment really filled a long-felt gap.

Chapter Four

The Pool

The term "pool" may be defined in a variety of ways, but, generally speaking, the root idea underlying its meaning is always the same, both in its application to business and to betting. A pool, in brief, is a combination of a number of business concerns for their own mutual interests, all partners having previously agreed upon certain principles as to the distribution of the common profits. In other words, it is a community of interests concluded upon the basis of dividing the profits realized in a certain ratio. I have been unable to discover when and where this kind of combination was first used in actual practice. Before the transatlantic steamship companies did so, the big trunk lines of the United States railway system are said to have used it in connexion with the westbound emigrant traffic, and possibly for other purposes also.

When Ballin wrote his memorandum of February 5th, 1886, the steamship lines must already have been familiar with the meaning of the term, for the memorandum refers to it as something well known. Ballin begins by stating that the "Conference of the Northern European Lines" might be looked upon as having ceased to exist, seeing that two parties were represented on it whose claims were diametrically opposed to each other. Whereas the North German Lloyd insisted on the right to lower its rates, the Red Star Line claimed that these rates should be raised, so that it might obtain a better differential rate for itself. A reconciliation of these mutually contradictory views, the memorandum went on to say, appeared to be impossible, unless all parties agreed upon an understanding which would radically alter the relations then existing between their respective interests; and a way leading out of the _impasse_ would be found by adopting the pooling system proposed by the representative of the Red Star Line. If we take the number of steeragers carried to New York from 1881 to 1885 by the six lines concerned as a basis, the respective percentages of the total traffic are as follows:

_Percentage_

North German Lloyd 33·45 North German Lloyd (Baltimore Line) 14·80 Packetfahrt 27·00 Union Line 5·53 Red Star Line 12·26 Holland American Line 6·96

It was, however, justly pointed out at a meeting of the Conference that the amount of tonnage must also be taken into account in laying down the principles which were to govern the distribution of the profits. The average figures of such tonnage employed by the six lines during the same period were:

_Tons_ _Percentage_

North German Lloyd 275,520 33·91 North German Lloyd (Baltimore Line) 63,000 7·76 Packetfahrt 199,500 24·55 Union Line 42,840 5·27 Red Star Line 149,600 18·41 Holland American Line 82,080 10·10 ------- ----- Total tonnage 812,540

The average of both sets of percentage figures worked out as follows:

_Percentage_

North German Lloyd 33·68 North German Lloyd (Baltimore Line) 11·28 Packetfahrt 25·77-1/2 Union Line 5·40 Red Star Line 15·33-1/2 Holland American Line 8·53

"It would be necessary," the memorandum continued, "to calculate each Company's share annually on the basis of the average figures obtained for the five years immediately preceding, so that, for instance, the calculation for 1887 would be based on the figures for the five years from 1882 to 1886; that for 1888 on those for the period from 1883 to 1887, and so on. Uniform passage rates and uniform rates of commission would have to be agreed upon. To those lines which, like the North German Lloyd, maintained a service which was run by fast steamers exclusively, would have to be conceded the right to charge in their separate accounts passage money up to 10 marks in excess of the normal rates, seeing that their expenses were heavier than those of the other lines. Those Companies, however, claiming differential rates below the general ones agreed upon would have to make up the difference themselves, which was not to exceed the amount of 30 marks--i.e. they would have to contribute to the common pool a sum equal to the general rate without deduction."

The two cardinal principles lying at the root of this proposal were (1) the assigning to each line of a definite percentage of the total traffic on the basis of the average figures ascertained for a definite period of time, and (2) the possibility of further grading these percentages by taking into account the amount of tonnage which each line placed at the disposal of the joint undertaking. This latter provision--which was known during the early stages of the movement as the tonnage clause--was intended to prevent any single line from stagnation, and to give scope to the spirit of enterprise.

The tonnage clause was not maintained for the whole time during which the pool agreement was in force. It was afterwards abolished at the instance of the North German Lloyd. This event led, in the long run, to the last big crisis which the pool had to pass through by the notice of withdrawal given by the Hamburg-Amerika Linie. When this Company proposed to considerably enlarge its steerage accommodation through the addition to its service of the three big boats of the _Imperator_ class, it demanded a corresponding increase of its percentage figure, and, when this claim fell through owing to the opposition of the North German Lloyd, it gave formal notice of its withdrawal from the pool. Precautions taken to counteract this led to negotiations which had to be discontinued when the war broke out. Nevertheless, the pool, which was first proposed in 1886, and which came into existence in 1892, did a great deal of good. More than once, however, the agreement ceased to be effective for a time, and this was especially the case on the occasion of the struggle with the Cunard Line which followed upon the establishment of the Morgan Trust in 1903.

The secretary of the pool was Heinrich Peters, the former head of the passenger department of the Lloyd. The choice of Mr. Peters is probably not unconnected with the fact that it was he who, at a moment when the negotiations for establishing a pool had reached a critical stage, appeared on the scene with a clearly-defined proposal, so that he, with justice, has been described as "the father of the pool." Shortly before his death in the summer of 1921 Mr. Peters wrote to me concerning his proposal and the circumstances of its adoption:--

"The history of the events leading up to the creation of the 'North Atlantic Steamship Lines Association,'" he wrote in his letter, "was not without complications. So much so that after the Conference at Cologne, at which it had been found impossible to come to an understanding, I went to bed feeling very worried about the future. Shortly afterwards--I don't know whether I was half awake or dreaming--the outline of the plan which was afterwards adopted stood out clearly before my mind's eye, its main features being that each line should be granted a fixed percentage of the traffic on the basis of 'Moore's Statistics' (reports issued periodically and showing the number of passengers landed in New York at regular intervals), and that the principle of compensation should be applied to adjust differences. When I was fully awake I found this plan so obviously right that, in order not to let it slip my memory, I jotted down a note concerning it on my bedside table. Next morning, when Ballin, Reuchlin (of the Holland American Line), Strasser (of the Red Star Line), and myself met again in the smoking-room of the Hotel du Nord, I told them of my inspiration, and my plan was looked upon by them with so much favour that Ballin said to me: 'Well now, Peters, you have discovered the philosopher's stone.' We then left, previously agreeing amongst ourselves that we would think the matter over at our leisure, and that we should refrain from taking any steps leading to a conflict, at least for the time being. On my return to Bremen I went straight to Lohmann (who was director general of the Lloyd at that time), but he immediately threw a wet blanket over my enthusiasm. His objection was that such an agreement would interfere with the progressive development of the Lloyd. A few days later a meeting of the Board of Trustees was held at which I entered into the details of my proposal; but I am sorry to say that my oratorical gifts were not sufficient to defend it against the objections that were raised, nor to prevent its rejection. I can hardly imagine what the representatives of the other lines must have felt on hearing that it was the Lloyd itself which refused to accept the proposal which had been put forward by its own delegate, although the share allotted to it was very generous. Thus the struggle went on for another eighteen months, and it was not until January, 1892, that the principal lines concerned definitely concluded a pool agreement closely resembling the draft agreement I had originally proposed.

"The North Atlantic Steamship Lines Association was originally intended to remain in existence for the period of five years; but as it was recognized by all parties that it was necessarily a step in the dark, people had become so doubtful as to the wisdom of what they had done that a clause was added to the effect that it could be cancelled after the first six months provided a fortnight's notice was given by any partner to it. Nevertheless, the agreement successfully weathered a severe crisis during the very first year of its existence, when the disastrous cholera epidemic paralysed the Hamburg trade and shipping."

That this account is correct is confirmed by the minutes of the Cologne meeting of February 6th, 1890.

The British lines definitely declined in March, 1892, to join the pool. Thus the plan finally agreed upon in 1892 was subscribed to by the Continental lines alone, with the exception of the French line. In contrast with previous proposals, the eastbound traffic was also to be parcelled out by the lines forming the pool.

This so-called North Atlantic Steamship Lines Association, the backbone of the later and greater pool, was built up on the following percentages:

_Westbound_ _Eastbound_ _traffic_ (_p.c._) _traffic_ (_p.c._)

North German Lloyd 46·16 44·53 Packetfahrt (including the Union Line) 28·84 18·47 Red Star Line 15·70 20·68 Holland American Line 9·30 16·32

These percentages were subject to the effect of the tonnage clause by which it was provided that 50 per cent. of the tonnage (expressed in gross registered tons) which any line should possess at any time in excess of that possessed in 1890 should entitle such line to an increase of its percentage.

It has already been stated that Mr. Heinrich Peters was appointed secretary of the pool. He, in compliance with the provision that the secretariat should be domiciled at a "neutral" place, chose the small university town of Jena for his residence. Thus this town, so famous in the literary annals of Germany, became, for more than twenty years, the centre of an international organization with which few, if any, other places could vie in importance, especially since the four lines which had just concluded the original pool were joined, in course of time, by the British lines, the French line, the Austrian line, and some Scandinavian and Russian lines as well. Later on a special pool was set up for the Mediterranean business which, in addition to the German, British, and Austro-Hungarian lines, also comprised the French Mediterranean, the Italian, and the Greek lines, as well as one Spanish line. The business of all these lines was centred at Jena.

Of considerable importance to the smooth working of the pool was the court of arbitration attached to its organization. On account of the prominent position occupied by the German companies, German law was agreed to as binding for the decisions, and since at the time when the pool was founded, Germany did not possess a uniform Code of Civil Law for all parts of the Empire, the law ruling at Cologne was recognized to be applicable to such purposes. Cologne was the city at which the establishment of the pool was decided upon, and there all the important meetings that became necessary in course of time were held. The chairman of the Cologne Association of Solicitors was nominated president of the arbitration court, but later on this office devolved on President Hansen, a member of the Supreme Court for the Hanseatic cities, who filled his post for a long term of years--surely a proof of the confidence and esteem with which he was honoured by all parties concerned. Numerous awards issued by him, and still more numerous resolutions adopted at the many conferences, have supplemented the original pool agreement, thus forming the nucleus of a real code of legislation affecting all matters dealing with the pool in which a large number of capable men drawn from the legal profession and from the world of business have collaborated.

The knowledge of these regulations gradually developed into a science of its own, and each line had to possess one or more specialists who were experts in these questions among the members of its staff. I am sure they will unanimously agree that Albert Ballin surpassed them all in his knowledge of the intricate details. His wonderful memory enabled him, after a lapse of more than twenty years, to recall every phase in the history of the pool, so that he acquired an unrivalled mastery in the conduct of pool conferences. This is abundantly borne out by the fact that in 1908, when negotiations were started in London for the establishment of a general pool--i.e. one comprising the whole of Northern Europe, including Great Britain--Ballin, at the proposal of the British lines, was selected chairman of the conference which, after several critical phases had been passed through, led to a complete success and an all-round understanding.

In 1892 the normal development of business was greatly handicapped by the terrible epidemic of cholera then raging in Hamburg. For a time the United States completely closed her doors to all emigrants from the Continent, and it was not until the following year that conditions became normal again. Nevertheless Ballin, in order to extend the various understandings between the Northern European lines, took an important step, even before the close of 1892, by falling back upon a measure which he had already once employed in 1886. His object was to make the British lines more favourably inclined towards an understanding, and to this end he attacked them once more in the Scandinavian business. The actual occasion which led to the conflict was that the British lines, owing to differences of opinion among themselves, had given notice of withdrawal from the Hamburg agreement and from the Hamburg clearing house. This gave the Packetfahrt a free hand against its British competitors, and enabled it to carry as many as 2,500 Scandinavian passengers via Hamburg in 1892. The position of the Packetfahrt during the ensuing rate war was considerably improved by the agreement which it had concluded with the Hamburg agents of the British lines, who, although their principals had declared their withdrawal from the pool, undertook to maintain the rate which had been jointly agreed upon by both parties.

Some time had to elapse before this move had its desired effect on the British lines. Early in 1894 they declared themselves ready to come to an understanding with the Continental lines on condition that they were granted 7 per cent. of the Continental traffic (in 1891 they had been offered 14 per cent.), and that the Packetfahrt was to discontinue its Scandia Line.

This general readiness of the British companies, however, did not preclude the hostility of some of their number against any such agreement, and so the proposal fell through. The proposed understanding came to grief owing to the refusal of the Cunard Line to join a Continental pool at the very moment when the negotiations with the British lines had, after a great deal of trouble, led to a preliminary understanding with them. A letter which Ballin received from an English friend in January, 1894, shows how difficult it was to make the British come round to the idea of a pool. In this letter it was said that the time was not ripe then for successfully persuading the British lines to join any pool or any other form of understanding which would necessitate agreement on a large number of details. All that could be expected to be done at the time, the writer continued, was a rate agreement of the simplest possible kind, and he thought that if such an understanding were agreed to and loyally carried out, that would be an important step forward towards arriving at a general agreement of much wider scope.

To such vague agreements, however, the Continental lines objected on principle, and the opposition of the Cunard Line made it impossible to agree upon anything more definite. Thus the struggle was chiefly waged against this line. The Continental lines were assisted by the American Line, which had sailings from British ports, and with the management of which Ballin had been on very friendly terms ever since the time when he, as the owner of the firm of Morris and Co., had worked for it. After the conflict had been going on for several months, it terminated with a victory of the Continental lines. Thus the road was at last clear for an attempt to make the whole North Atlantic business pay.

The first step in that direction was the conclusion, in 1896, of an agreement concerning the cabin business. The Packetfahrt's annual report for that year states that the results obtained through the carrying of cabin passengers could only be described as exceedingly unfavourable, considering that the huge working expenses connected with that kind of business had to be taken into account. Nevertheless, this traffic, which had reached a total of more than 200,000 passengers during the preceding year, could be made a source of great profit to the companies if they could be persuaded to act in unison. The agreement then concluded was at first restricted to the fixing of the rates on a uniform scale.

Both these agreements--the one dealing with the steerage and the one dealing with the cabin business--were concluded, in 1895, for three years in the first instance. In May, 1898, discussions were opened in London, at which Ballin presided, with a view to extending the period of their duration, and these proceedings, after a time, led to a successful conclusion, but in June, Ballin again presiding, the desired understanding was reached. A few weeks later an agreement concerning the second cabin rates was also arrived at, and towards the close of the year negotiations were started with a view to the extension of the steerage agreement. In 1899 the pool was extended to run for a further period of five years, under percentages:

_Westbound_ _Eastbound_ _traffic_ (_p.c._) _traffic_ (_p.c._)

North German Lloyd 44·14 41·53 Packetfahrt 30·71 26·47 Red Star Line 15·37 18·68 Holland American Line 9·78 13·32

To the Packetfahrt these new percentages meant a step forward, although the omission of the tonnage clause was a decided hindrance to its further progress.

The next important event in the development of the relations between the transatlantic lines was the establishment of the so-called Morgan Trust and the conclusion of a "community of interest" agreement between it and the German lines.

Chapter V

The Morgan Trust

Speaking generally, the transatlantic shipping business may be said to consist of three great branches, viz. the cargo, the steerage, and the cabin business. The pool agreements that were concluded between the interested companies covered only the cargo business and the steerage traffic. The condition which alone makes it possible for the owners to work the shipping business on remunerative lines is that all needless waste of material must be strictly banned. The great advantage which was secured by concluding the pool agreement was that it satisfied this condition during the more than twenty years of its existence, to the mutual profit of the associated lines. Each company knew that the addition of new steamers to its fleet would only pay if part of a carefully considered plan, and if, in course of time, such an increase of tonnage would give it a claim to an increase of the percentage of traffic allotted to its services.

Much less satisfactory was the state of things with regard to the third branch of the shipping business, viz. the cabin traffic. A regular "cabin pool," with a _pro rata_ distribution of the traffic, was never established, although the idea had frequently been discussed. All that was achieved was an agreement as to the fares charged by each company which were to be graded according to the quality of the boats it employed in its services. Owing to the absence of any more far-reaching understandings, and to the competition between the various companies--each of which was constantly trying to outdo its competitors as regards the speed and comfort of its boats, in order to attract to its own services as many passengers as possible--the number of first-class boats increased out of all proportion to the actual requirements, and frequent and regular services were maintained by each line throughout the year. There was hardly a day on which first-class steamers did not enter upon voyages across the Atlantic from either side, and the result was that the boats were fully booked during the season only, i.e. in the spring and early part of summer on their East-bound, and in the latter part of summer and in the autumn on their Westbound, voyages. During the remaining months a number of berths were empty, and the fares obtainable were correspondingly unprofitable. Ballin, in 1902, estimated the unnecessary expenditure to which the companies were put in any single year owing to this unbusinesslike state of affairs at not less then 50 million marks. The desire to do away with conditions such as these by extending the pool agreement so as to develop it into a community-of-interest agreement of comprehensive scope was one of the two principal reasons leading to the formation of the Morgan Trust. The other reason was the wish to bring about a system of co-operation between the European and the American interests.

This desire was prompted by the recognition of the cardinal importance to the transatlantic shipping companies of the economic conditions ruling in the United States. The cargo business depended very largely on the importation of European goods into the United States, and on the exportation of American agricultural produce to Europe which varied from season to season according to the size of the crop and to the consuming capacity of Europe. The steerage business, of course, relied in the main on the capacity of the United States for absorbing European immigrants, which capacity, though fluctuating, was practically unlimited. The degree of prosperity of the cabin business, however, was determined by the number of people who travelled from the States to Europe, either on business, or on pleasure, or to recuperate their health at some European watering-place, at the Riviera, etc. Social customs and the attractions which the Paris houses of fashion exercised on the American ladies also formed a considerable factor which had to be relied on for a prosperous season. In the transatlantic shipping business, in fact, America is pre-eminently the giving, and Europe the receiving, partner. Thus it was natural to realize the advisability of entering into direct relations with American business men.

To the Packetfahrt, and especially to Ballin, credit is due for having attempted before anybody else to give practical shape to this idea. His efforts in this direction date far back to the early years of his business career. We possess evidence of this in the form of a letter which he wrote in 1891 to Mr. B. N. Baker, who was at the head of one of the few big American shipping companies, the Atlantic Transport Company, the headquarters of which were at Baltimore, and which ran its services chiefly to Great Britain. Mr. Baker was a personal friend of Ballin's. The letter was written after some direct discussions had taken place between the two men, and its contents were as follows:--

"I replied a few days ago officially to your valued favour of the 4th ult. to the effect that in consonance with your expressed suggestion one of the Directors will proceed to New York in September with a view to conferring with you about the matter at issue.

"Having in the meantime made it a point to go more fully into your communication, I find that the opinions which I have been able to form on your propositions meet your expressed views to a much larger extent than you will probably have supposed. I have not yet had an opportunity of talking the matter over with my colleagues, and I therefore do not know how far they will be prepared to fall in with my views. But in order to enable me to frame and bring forward my ideas more forcibly here, I think it useful to write to you this strictly confidential letter, requesting you to inform me--if feasible by cable--what you think of the following project:

"(1) You take charge of our New York Agency for the freight, and also for the passage business, etc.

"(2) You engage those of our officials now attached to our New York branch whom we may desire to retain in the business.

"(3) You take over half of our Baltimore Line in the manner that each party provides two suitable steamers fitted for the transport of emigrants. To this end I propose you should purchase at their cost price the two steamers which are in course of construction in Hamburg at present for our Baltimore Line (320 feet length, 40 feet beam, 27 feet moulded, steerage 8 feet, carrying 3,500 tons on 22 feet and about 450 steeragers, guaranteed to steam 11 knots, ready in October this year), and we to provide two similar steamers for this service. The earnings to be divided under a pool system.

"(4) Your concern takes up one million dollars of our shares with the obligation not to sell them so long as you control our American business. I may remark that just at present our shares are obtainable cheaply in consequence of the general depression prevailing in the European money market, and further, owing to the fact that only a small dividend is expected on account of the very poor return freight ruling from North America. I think you would be able to take the shares out of the market at an average of about 7 per cent. above par. We have paid in the last years since we concluded the pool with the Union Line, viz. in 1886 4 per cent., 1887 6 per cent., 1888 8-1/2 per cent., 1889 11 per cent., 1890 8 per cent. in the way of dividends, and during this time we wrote off for depreciation and added to the reserve funds about 60 per cent.

"The position of our Company is an excellent one, our fleet consisting of modern ships (average age only about five years), and the book values of them being very low.

"I should be obliged to you for thinking the matter over and informing me--if possible by cable--if you would be prepared to enter into negotiations on this basis. I myself start from the assumption that it might be good policy for our Company to obtain in the States a centre of interest and a position similar to that held by the Red Star Line and the Inman Lines in view of their connexion with the Pennsylvania Railroad, etc. It further strikes me that if this project is brought into effect one of your concern should become a member of our Board. I should thank you to return me this letter which, as I think it right expressly to point out to you, contains only what are purely my individual ideas."

It may be assumed that the writing of this letter was prompted not only by the Packetfahrt's desire to strengthen its position in the United States, but also by its wish to obtain a foothold in Great Britain. This would enable it to exercise greater pressure on the competing British lines, which--indirectly, at least--still did a considerable portion of the Continental business. Ballin's suggestion did not lead to any practical result at the time, but was taken up again eight years later, in 1899, on the advice of Mr. (now Lord) Pirrie, of Messrs. Harland and Wolff, of Belfast. Important interests, partly of a financial character, linked his firm to British transatlantic shipping; and his special reason for taking up Ballin's proposal was to prevent an alliance between Mr. Baker's Atlantic Transport Company and the British Leyland Line, a scheme which was pushed forward from another quarter. He induced Mr. Baker to come to Europe so that the matter might be discussed directly. The attractiveness of the idea to Ballin was still further enhanced by the circumstance that the Atlantic Transport Line also controlled the National Line which maintained a service between New York and London, and was, indeed, the decisive factor on the New York-London route. Ballin, accordingly, after obtaining permission from the Board of Trustees, went to London, where he met Mr. Baker and Mr. Pirrie.

It soon became clear, however, that the Board of Trustees did not wish to sanction such far-reaching changes. When Ballin cabled the details of the scheme to Hamburg, it was seen that 25 million marks--half the amount in shares of the Packetfahrt--would be needed to carry it through. Thus the discussions had to be broken off; but the attitude which the Board had taken up was very much resented by Ballin. Subsequent negotiations which were entered into in the early part of 1900 in Hamburg at the suggestion of Mr. Baker also failed to secure agreement, and shortly afterwards the American company was bought up by the Leyland Line.

At the same time a movement was being set on foot in the United States which aimed at a strengthening of the American mercantile marine by means of Government subsidies. This circumstance suggested to Mr. Baker the possibility of setting up an American shipping concern consisting of the combined Leyland and Atlantic Transport Company lines together with the British White Star Line, which was to profit by the expected legislation concerning shipping subsidies. Neither the latter idea, however, nor Mr. Baker's project assumed practical shape; but the Atlantic Transport-Leyland concern was enlarged by the addition of a number of other British lines, viz. the National Line, the Wilson-Furness-Leyland Line, and the West Indian and Pacific Line, all of which were managed by the owner of the Leyland Line, Mr. Ellerman, the well-known British shipping man of German descent. The tonnage represented by these combined interests amounted to half a million tons, and the new combine was looked upon as an undesirable competitor, by both the Packetfahrt and the British lines. The dissatisfaction felt by the latter showed itself, among other things, in their refusal to come to any mutual understanding regarding the passenger business. In the end, Mr. Baker himself was so little pleased with the way things turned out in practice that he severed his connexion with the other lines shortly afterwards, and once more the question became urgent whether it would be advisable for the Packetfahrt--either alone, or in conjunction with the White Star Line and the firm of Messrs. Harland and Wolff--to purchase the Atlantic Transport Line.

That was the time when Mr. Pierpont Morgan's endeavours to create the combine, which has since then become known as the Morgan Trust, first attracted public attention. Ballin's notes give an exhaustive description of the course of the negotiations which lasted nearly eighteen months and were entered into in order to take precautions against the danger threatening from America, whilst at the same time they aimed at some understanding with Mr. Morgan, because the opportunity thus presented of setting up an all-embracing organization promoting the interests of all the transatlantic steamship concerns seemed too good to be lost. Ballin's notes for August, 1901, contain the following entry:

"The grave economic depression from which Germany is suffering is assuming a more dangerous character every day. It is now spreading to other countries as well, and only the United States seem to have escaped so far. In addition to our other misfortunes, there is the unsatisfactory maize-crop in the States which, together with the other factors, has demoralized the whole freight business within an incredibly short space of time. For a concern of the huge size of our own such a situation is fraught with the greatest danger, and our position is made still worse by another circumstance. In the States, a country whose natural resources are wellnigh inexhaustible, and whose enterprising population has immensely increased its wealth, the creation of trusts is an event of everyday occurrence. The banker, Pierpont Morgan--a man of whom it is said that he combines the possession of an enormous fortune with an intelligence which is simply astounding--has already created the Steel Trust, the biggest combination the world has ever seen, and he has now set about to lay the foundations for an American mercantile marine."

A short report on the position then existing which Ballin made for Prince Henckell-Donnersmarck, who had himself called into being some big industrial combinations, is of interest even now, although the situation has entirely changed. But if we want to understand the position as it then was we must try to appreciate the views held at that time, and this the report helps us to do. Ballin had been referred to Prince Henckell-Donnersmarck by the Kaiser, who had a high opinion of the latter's business abilities, and who had watched with lively interest the American shipping projects from the start, because he anticipated that they would produce an adverse effect on the future development of the German shipping companies. The report is given below:--

"In 1830 about 90 per cent. of the United States sea-borne trade was still carried by vessels flying the American flag. By 1862 this percentage had gone down to 50 per cent., and it has shown a constant decrease ever since. In 1880 it had dwindled down to 16 per cent., and in 1890 to as low a figure as 9 per cent. During recent years this falling off, which is a corollary of the customs policy pursued by the United States, has given rise to a number of legislative measures intended to promote the interests of American shipping by the granting of Government subsidies. No practical steps of importance, however, have been taken so far; all that has been done is that subsidies have been granted to run a North Atlantic mail service maintained by means of four steamers, but no success worth mentioning has been achieved until now.

"Quite recently the well-known American banker, Mr. J. Pierpont Morgan, conjointly with some other big American capitalists, has taken an interest in the plan. The following facts have become known so far in connexion with his efforts:

"Morgan has acquired the Leyland Line, of Liverpool, which, according to the latest register, owns a fleet of 54 vessels, totalling 155,489 gross register tons. This purchase includes the West India and Pacific Line, which was absorbed into the Leyland Line as recently as a twelvemonth ago. The Mediterranean service formerly carried on by the Leyland Line has not been acquired by Morgan. He has, however, added the Atlantic Transport Company. Morgan's evident intention is to form a big American shipping trust, and I have received absolutely reliable information to the effect that the American Line and the Red Star Line are also going to join the combine. The shares of the two last-named lines are already for the most part in American hands, and both companies are being managed from New York. Both lines together own 23 steamers representing 86,811 tons.

"A correct estimate of the size of the undertaking can only be formed if the steamers now building for the various companies, and those that have been added to their fleets since the publication of the register from which the above figures are taken, are also taken into account. These vessels represent a total tonnage of about 200,000 tons, so that the new American concern would possess a fleet representing 430,000 gross register tons. The corresponding figures for the Hamburg-Amerika Linie and for the Lloyd, including steamers building, are 650,000 and 600,000 tons respectively.

"The proper method of rightly appreciating the importance of the American coalition is to restrict the comparison, as far as the two German companies are concerned, to the amount of tonnage which they employ in their services to and from United States ports. If this is borne in mind, we arrive at the following figures: German lines--390,000 G.R.T.; American concern--about 430,000 G.R.T. These figures show that, as regards the amount of tonnage employed, the Morgan Trust is superior to the two German companies on the North Atlantic route. It can also challenge comparison with the regular British lines--grand total, 438,566 G.R.T.

"In all the steps he has taken, Morgan, no doubt, has been guided by his confidence in his ability to enforce the passing of a Subsidy Act by Congress in favour of his undertaking. So long as he does not succeed in these efforts of his he will, of course, be obliged to operate the lines of which he has secured control under foreign flags. Up to the present only four steamers of the American Line, viz. the _New York_, _Philadelphia_, _St. Louis_, and _St. Paul_, are flying the United States flag, whereas the remaining vessels of the American Line, and those of the Leyland, the West India and Pacific, the American Transport, the National, and the Furness-Boston lines, are sailing under the British, and those of the Red Star Line under the Belgian flag.

"The organization which Mr. Morgan either has created, or is creating, is not in itself a danger to the two German shipping companies; neither can it be said that the Government subsidies--provided they do not exceed an amount that is justified by the conditions actually existing--are in themselves detrimental to the German interests. The real danger, however, threatens from the amalgamation of the American railway interests with those of American shipping.

"It is no secret that Morgan is pursuing his far-reaching plans as the head of a syndicate which comprises a number of the most important and most enterprising business men in the United States, and that the railway interests are particularly well represented in it. Morgan himself, during his stay in London a few months ago, stated to some British shipping men that, according to his estimates, nearly 70 per cent. of the goods which are shipped to Europe from the North Atlantic ports are carried to the latter by the railroads on Through Bills of Lading, and that their further transport is entrusted to foreign shipping companies. He and his friends, Morgan added, did not see any reason why the railroad companies should leave it to foreign-owned companies to carry those American goods across the Atlantic. It would be much more logical to bring about an amalgamation of the American railroad and shipping interests for the purpose of securing the whole profits for American capital.

"This projected combination of the railroad and sea-borne traffic is, as I have pointed out, a great source of danger to the foreign shipping companies, as it will expose them to the possibility of finding their supplies from the United States _hinterland_ cut off. This latter traffic is indispensable to the remunerative working of our North American services, and it is quite likely that Morgan's statement that they amount to about 70 per cent. of the total sea-borne traffic is essentially correct."

The negotiations which Ballin carried on in this connexion are described as follows in his notes:--

"When I was in London in July (1901), I had an opportunity of discussing this American business with Mr. Pirrie. Pirrie had already informed me some time ago that he would like to talk to me on this subject, but he had never indicated until then that Morgan had actually instructed him to discuss matters with me. A second meeting took place at which Ismay (the chairman of the White Star Line) was present in addition to Pirrie and myself, and it was agreed that Pirrie should go to New York and find out from Morgan himself what were his plans regarding the White Star Line and the Hamburg-Amerika Linie.

"Shortly after Pirrie's return from the States I went to London to talk things over with him. He had already sent me a wire to say that he had also asked Mr. Wilding to take part in our meeting; and this circumstance induced me to call on Mr. Wilding when I passed through Southampton _en route_ for London. What he told me filled me with as much concern as surprise. He informed me that the syndicate intended to acquire the White Star Line, but that, owing to my relations with the Kaiser, the acquisition of the Hamburg-Amerika Linie was not contemplated. Morgan, he further told me, was willing to work on the most friendly terms with us, as far as this could be done without endangering the interests of the syndicate; but the fact was that the biggest American railroad companies had already approached the syndicate, and that they had offered terms of co-operation which were practically identical with a combination between themselves and the syndicate.

"In the course of the discussions then proceeding between Pirrie, Wilding, and myself the situation changed to our advantage, and I was successful in seeing my own proposals accepted, the essence of which was that, on the one hand, our independence should be respected, that the nationality of our company should not be interfered with, and that no American members should be added to our Board of Trustees; whilst, on the other hand, a fairly close contact was to be established between the two concerns, and competition between them was to be eliminated."

The draft agreement, which was discussed at these meetings in London (and which was considerably altered later on), provided that it should run for ten years, and that a mutual interchange of shares between the two concerns should be effected, the amount of shares thus exchanged to represent a value of 20 million marks (equivalent to 25 per cent. of the joint-stock capital of the Hamburg-Amerika Linie). Mutual participation was provided for in case of any future increase in the capital of either company; but the American concern was prohibited from purchasing any additional shares of the Hamburg-Amerika Linie. The voting rights for the Hamburg shares should be assigned to Ballin for life, and those for the American shares to Morgan on the same terms. Instead of actually parting with its shares, the Hamburg company was to have the option of paying their equivalent in steamers. The agreement emphasized that, whilst recognizing the desirability of as far-reaching a financial participation as possible, Ballin did not believe that, with due regard to German public opinion and to the wishes of the Imperial Government, he was justified in recommending an interchange of shares exceeding the amount agreed upon. The American concern was prohibited from calling at any German ports, and the Hamburg company agreed not to run any services to such European ports as were served by the other party. A pool agreement covering the cabin business was entered into; and with respect to the steerage and cargo business it was agreed that the existing understandings should be maintained until they expired, and that afterwards a special understanding should be concluded between both contracting parties.

Immediately after Ballin's return to Hamburg the Board of Trustees unanimously expressed its agreement in principle with the proposals.

"For my own part," Ballin says in his notes on these matters, "I declared that I could only regard the practical execution of these proposals as possible if they receive the unequivocal assent of the Kaiser and of the Imperial Chancellor. Next evening I was surprised to receive two telegrams, one from the Lord Chamberlain's office, and one from the Kaiser, commanding my presence on the following day for dinner at the Hubertusstock hunting lodge of the Kaiser, where I was invited to stay until the afternoon of the second day following. I left for Berlin on the same evening, October 16th (1901); and, together with the Chancellor, I continued my journey the following day to Eberswalde. At that town a special carriage conveyed us to Hubertusstock, where we arrived after a two-hours' drive, and where I was privileged to spend two unforgettable days in most intimate intercourse with the Kaiser. The Chancellor had previously informed me that the Kaiser did not like the terms of the agreement, because Metternich had told him that the Americans would have the right to acquire 20 million marks' worth of our shares. During an after-dinner walk with the Kaiser, on which we were accompanied by the Chancellor and the Kaiser's A.D.C., Captain v. Grumme, I explained the whole proposals in detail. I pointed out to the Kaiser that whereas the British lines engaged in the North Atlantic business were simply absorbed by the trust, the proposed agreement would leave the independence of the German lines intact. This made the Kaiser inquire what was to become of the North German Lloyd, and I had to promise that I would see to it that the Lloyd would not be exposed to any immediate danger arising out of our agreement, and that it would be given an opportunity of becoming a partner to it as well. The Kaiser then wanted to see the actual text of the agreement as drafted in London. When I produced it from my pocket we entered the room adjacent to the entrance of the lodge, which happened to be the small bedroom of Captain v. Grumme; and there a meeting, which lasted several hours, was held, the Kaiser reading out aloud every article of the agreement, and discussing every single item. The Kaiser himself was sitting on Captain 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.

Chapter VI

The Expansion Of The Hamburg-Amerika Linie

The principal work which fell to Ballin's share during the period immediately following his nomination in 1888 on the Board of his company was that connected with the introduction of the fast steamers and the resulting expansion of the passenger business. Offices were established in Berlin, Dresden, and Frankfort-On-Main in 1890, and arrangements were made with the Hamburg-South American S.S. Co., the German East Africa Line, and the Hansa Line--the latter running a service to Canada--by which these companies entrusted the management of their own passenger business to the Packetfahrt. Thus, step by step, the passenger department developed into an organization the importance of which grew from year to year.

The expansion of the passenger business also necessitated an enlargement of the facilities for the dispatch of the Company's steamers. This work had been effected until then at the northern bank of the main Elbe, but in 1888 it was transferred to the Amerika-Kai which was newly built at the southern bank; and when the normal depth of the fairway of the Elbe was no longer sufficient to enable the fast steamers of considerable draught to come up to the city, it was decided to dispatch them from Brunshausen, a small place situated much lower down the Elbe. In the long run, however, it proved very inconvenient to manage the passenger dispatch from there, and the construction of special port facilities at Cuxhaven owned by the Company was taken in hand. The accommodation at the Amerika-Kai, although it was enlarged as early as 1889, was soon found to be inadequate, so that it was resolved to provide new accommodation at the Petersen-Kai, situated on the northern bank of the Elbe, and this project was carried out in 1893.

The number of services run by the Company was augmented in those early years by the establishment of a line to Baltimore and another to Philadelphia. In 1889 a new line starting from New York was opened to Venezuelan and Colombian ports. The North Atlantic services were considerably enlarged in 1892, when the Company took over the Hansa Line.

The desire to find remunerative employment for the fast steamers during the dead season of the North Atlantic passenger business prompted the decision to enter these boats into a service from New York to the Mediterranean during the winter months. The same desire, however, also gave rise to one of the most original ideas carried into practice through Ballin's enterprise, i.e. the institution of pleasure trips and tourist cruises. It may perhaps be of interest to point out in this connexion that, about half a century earlier, another Hamburg shipping man had thought of specially fitting out a vessel for an extended cruise of that kind. I do not know whether this plan was carried out at the time, and whether Ballin was indebted to his predecessor for the whole idea; in any case, the following advertisement which appeared in the _Leipziger Illustrierte Zeitung,_ and which I reprint for curiosity's sake, was found among his papers.

"An Opportunity For Taking Part In A Voyage Round The World

"The undersigned Hamburg shipowner proposes to equip one of his large sailing vessels for a cruise round the world, to start this summer, during which the passengers will be able to visit the following cities and countries, viz. Lisbon, Madeira, Teneriffe, Cap Verde Islands, Rio de Janeiro, Rio de la Plata, Falklands Islands, Valparaiso, and all the intermediate ports of call on the Pacific coast of South America as far as Guayaquil (for Quito), the Marquesas Islands, Friendly Islands (Otaheite), and other island groups in the Pacific, China (Choosan, Hongkong, Canton, Macao, Whampoa), Manilla, Singapore, Ceylon, Île de France or Madagascar, the Cape of Good Hope, St. Helena, Ascension Island, the Azores, and back to Hamburg.

"The cruise is not intended for business purposes of any kind; but the whole equipment and accommodation of the vessel, the time spent at the various ports of call, and the details of the whole cruise, are to be arranged with the sole object of promoting the safety, the comfort, the entertainment, and the instruction of the passengers.

"Admission will be strictly confined to persons of unblemished repute and of good education, those possessing a scientific education receiving preference.

"The members of the expedition may confidently look forward to a pleasant and successful voyage. A first-class ship, an experienced and well-educated captain, a specially selected crew, and a qualified physician are sufficient guarantees to ensure a complete success.

"The fare for the whole voyage is so low that it only represents a very slight addition to the ordinary cost of living incurred on shore. In return, the passenger will have many opportunities of acquiring a first-hand knowledge of the wonders of the world, of the beautiful scenery of the remotest countries, and of the manners and customs of many different nations. During the whole voyage he will be surrounded by the utmost comfort, and will enjoy the company of numerous persons of culture and refinement. The sea air will be of immeasurable benefit to his health, and the experience which he is sure to gain will remain a source of pleasure to him for the rest of his life.

"Full particulars may be had on application to the undersigned, and a stamped envelope for reply should be enclosed.

"Rob. M. Sloman,

"_Hamburg, January_, 1845. _Shipowner in Hamburg._"

Ballin's idea of running a series of pleasure cruises did not meet with much support on the part of his associates; the public, however, took it up with enthusiasm from the very start. Early in 1891 Ballin himself took part in the first trip to the Far East on board the express steamer _Auguste Victoria_. Organized pleasure trips on a small scale were by no means an entire novelty in Germany at that time; the Carl Stangen Tourist Office in Berlin, for instance, regularly arranged such excursions, including some to the Far East, for a limited number of participants. To do so, however, for as many as 241 persons, as Ballin did, was something unheard-of until then, and necessitated a great deal of painstaking preparation. Among other things, the itinerary of the intended cruise, owing to the size and the draught of the steamer used, had to be carefully worked out in detail, and arrangements had to be made beforehand for the hotel accommodation and for the conveyance of passengers during the more extended excursions on shore. All these matters gave plenty of scope to the organizing talents of the youthful director, and he passed the test with great credit.

The first Far Eastern cruise proved so great a success that it was repeated in 1892. In the following year it started from New York, surely a proof that the Company's reputation for such cruises was securely established not in Germany alone, but in the States as well. Meanwhile, however, Hamburg had been visited by a terrible catastrophe which enormously interfered with the smooth working of the Company's express steamer services. This was the cholera epidemic during the summer of 1892. It lasted several weeks, and thousands of inhabitants fell victims to it. Those who were staying in Hamburg in that summer will never forget the horrors of the time. In the countries of Northern Europe violent epidemics were practically unknown, and the scourge of cholera especially had always been successfully combated at the eastern frontier of Germany, so that the alarm which spread over the whole country, and which led to the vigorous enforcement of the most drastic measures for isolating the rest of Germany from Hamburg, may easily be comprehended, however ludicrous those measures in some instances might appear. There are no two opinions as to the damage they inflicted on the commerce and traffic of the city. The severest quarantine, of course, was instituted in the United States, and the passenger services to and from Hamburg ceased to be run altogether, so that the transatlantic lines decided to temporarily suspend the steerage pool agreement they had just concluded. The Packetfahrt, in order not to stop its fast steamer services completely, first transferred them to Southampton, and afterwards to Wilhelmshaven, thus abstaining from dispatching these boats to and from Hamburg. The steerage traffic had to be discarded entirely, after an attempt to maintain it, with Stettin as its home port, had failed. Financially this epidemic and its direct consequences brought the Company almost to the verge of collapse, and the Packetfahrt had to stop altogether the payment of dividends for 1892, 1893, and 1894.

Business was resumed in 1893, but at first it was very slow. Every means were tried to induce the United States to rescind her isolation measures. An American doctor was appointed in Hamburg; disinfection was carried out on a large scale; with great energy the city set herself to prevent the recurrence of a similar disaster. The Packetfahrt, in conjunction with the authorities, designed the plans for building the emigrants' halls situated at the outskirts of the city, which are unique of their kind and are still looked upon as exemplary. These plans owe their origin to the extremely talented Hamburg architect, Mr. Thielen, whose early death is greatly to be regretted.

An important innovation was the establishment of regular medical control and medical treatment for the emigrants from the East of Europe on their reaching the German frontier, a measure which was decided upon and taken in hand by the Prussian Government. The expansion of the Packetfahrt's business, of course, was most adversely affected by the epidemic and its after-effects; and several years of consolidation were needed before the latter could be overcome. Consequently, hardly any new services were opened during the years immediately following upon the epidemic.

An important step forward, which greatly strengthened the earning capacities of the Company's resources, was taken in 1895, when the building orders for the steamers of the "P" class were given. These vessels were of large size but of moderate speed. They were extremely seaworthy, and were capable of accommodating a great many passengers, especially steeragers, as well as of carrying large quantities of cargo. The number of services run by the Company was added to in 1893 by a line from New York to Italy, and in the following year by one from Italy to the River Plate. Pool agreements were concluded with the Lloyd and the Allan Line with respect to the first-named route, and with the Italian steamship companies with respect to the other. The agreement with the Italians, however, did not become operative until a few years afterwards.

In 1897 the Packetfahrt celebrated the fiftieth anniversary of its existence--an event in which large sections of the public took a keen interest. Perhaps the most noteworthy among the immense number of letters of congratulation which the Company received on that occasion is the one sent by the chairman of the Cunard Line, of which the verbatim text is given below. It was addressed to one of the directors in reply to an invitation to attend the celebrations in person.

"It is with great regret I have to announce my inability to join with you in celebrating the fiftieth anniversary of the foundation of your Company, to be held on board your s.s. _Auguste Victoria_.

"I the more regret this as I have the greatest possible admiration of the skill and enterprise which has directed the fortunes of your Company, especially in recent years.

"You were the first to give the travelling public the convenience of a speedy and reliable transit between the two great continents of the world by initiating a regular service of twin-screw steamers of high speed and unexceptionable accommodation.

"You also set the shipping world the example of the great economy possible in the transit of the world's commodities in vessels of greatly increased capacity and proportionate economy, which other nations have been quick to follow and adopt to their great advantage.

"Your Company had furthermore met a felt want in giving most luxurious and well-appointed accommodation for visiting scenes, both new and old, of world-wide interest, and making such journeyings, hitherto beset with anxiety and difficulty, as easy of accomplishment as the ordinary railway journey at home.

"You have succeeded in this, not through any adventitious aids, such as Government subsidies, but by anticipating and then meeting the wants of the travelling and commercial public; and no one, be his nationality what it was, can, in the face of such facts, abstain from offering his meed of praise to the foresight, acumen, and ability that have accomplished such great results in such a comparatively small time as the management and direction of the Hamburg-American Packet Company.

"I would venture, therefore, to thus congratulate you and your colleagues, and whilst reiterating my regret at being prevented from doing so at your forthcoming meeting, allow me the expression of the wish that such meeting may be a happy and satisfactory one, and that a new era of, if possible, increased success to the Hamburg-American Packet Company may take date from it."

Towards the latter end of the 'nineties, at last, a big expansion of the Company's activities set in. In 1897 the Hamburg-Calcutta Line was purchased, but the service was discontinued, the steamers thus acquired being used for other purposes. Shortly before the close of the same year a suggestion was put forward by some Hamburg firms that were engaged in doing business with the Far East that the Packetfahrt should run a service to that part of the world.

Just then the steamship companies engaged in the Far Eastern trade were on the point of coming to a rate agreement among themselves; and the management of the Packetfahrt which, owing to the offer held out to it by Hamburg, Antwerp, and London firms, could hope to rely on finding a sure basis for its Far Eastern business, did not consider it wise to let the favourable opportunity slip. Quick decision and rapid action, before the proposed agreement of the interested lines had become an accomplished fact, were necessary; because, once the gates were closed, an outsider would find it difficult to gain admission to the ring.

Hence the negotiations with a view to the Packetfahrt joining in the Far Eastern business, which had only been started during the second half of December, 1897, came to a close very soon; and in the early days of January, 1898, the Packetfahrt advertised its intention of running monthly sailings to Penang, Singapore, Hongkong, Shanghai, Yokohama, and Hiogo. Six cargo steamers of 8,000 tons burden were entered into the new service; and simultaneously an announcement was made to the effect that large fast passenger boats would be added to it as soon as the need for these should make itself felt.

The participation in the Far Eastern business, and the consequent taking over of competing lines or the establishment of joint services with them, was not the only important event of the year 1898 as far as the development of the Packetfahrt is concerned. In the spring of that same year an agreement was made with the Philadelphia Shipping Company--which, in its turn, had an agreement with the Pennsylvania Railroad Company--by which the Packetfahrt undertook to run a regular service of cargo steamers between Hamburg and Philadelphia.

An event of still greater importance, however, was the outbreak of war between the United States and Spain which also took place in that year. The Spanish Government desired to strengthen the fighting power of its navy by the addition of several auxiliary cruisers; and even some time before the war broke out an offer reached the Packetfahrt through the intermediary of a third party to purchase its two express steamers, _Columbia_ and _Normannia_, which were among the fastest ocean-liners afloat. Before accepting this offer, the Packetfahrt, in order to avoid the reproach of having committed a breach of neutrality, first offered these two steamers to the United States Government; but on its refusal to buy them, they were sold to the British firm acting on behalf of the Spanish Government, and re-sold to the latter. As the Packetfahrt had allowed a high rate of depreciation on the two boats, their book-value stood at a very low figure; and the considerable profit thus realized enabled it to acquire new vessels for the extension of its passenger services.

Meanwhile a new express steamer, the _Kaiser Wilhelm der Grösse_, had been added to the fleet of the North German Lloyd. Ballin, having made a voyage on board this vessel to New York, reported to the Trustees of his Company that he considered her a splendid achievement. Owing to the heavy working expenses, however, she would not, he thought, prove a great success from a financial point of view. He held that the remunerativeness of express steamers was negatived by the heavy working expenses and, as early as 1897, had projected the construction of two steamers of very large proportions, but of less speed. This, however, was not carried out. Instead, the Packetfahrt decided to build a vessel which was to be bigger and faster still than the _Kaiser Wilhelm der Grösse_. The new liner was built by the Stettin Vulkan yard, and completed in 1900. She was the _Deutschland_, the famous ocean greyhound, a great improvement in size and equipment, and she held the blue riband of the Atlantic for a number of years.

About the same time, the express service to New York had been supplemented by the inauguration of an additional passenger service on the same route, which proved a great success in every way. The steamers employed were the combined passenger and cargo boats of moderate speed of the "P" class referred to above; and, their working expenses being very low, they could carry the cargo at very low rates, so that they proved of great service to the rapidly expanding interchange of goods between Germany and the United States. Their great size made it necessary to accelerate their loading and discharging facilities as much as possible. This necessity, among other things, led to the introduction of grain elevators which resulted in a great saving of time, as the grain was henceforth no longer discharged in sacks, but loose. The Company also decided to take the loading and discharging of all its vessels into its own hands. To accelerate the dispatch of steamers to the utmost possible extent, it was decided in 1898 to enlarge once again the Company's harbour facilities, and an agreement was concluded with the Hamburg Government providing for the construction of large harbour basins with the necessary quays, sheds, etc., in the district of Kuhwärder on the southern banks of the Elbe.

It was typical of Ballin's policy of the geographical distribution of risks and of the far-sighted views he held concerning the international character of the shipping business that he attempted at the end of the 'nineties to gain an extended footing abroad for the Company's activities. The Packetfahrt therefore ordered the building of two passenger boats in Italian yards, and it was arranged that these vessels should fly either the German or the Italian flag. In the end, however, a separate Italian shipping company, the Italia, was set up, which was to devote itself more particularly to the River Plate trade. When the financial results of the new enterprise failed to come up to expectations, the shares were sold to Italian financiers in 1905.

The closing years of the nineteenth and the opening years of the twentieth century represented a period of extraordinary prosperity to shipping business all over the world--a prosperity which was caused by the outbreak of the South African war in 1899. An enormous amount of tonnage was required to carry the British troops, their equipment, horses, etc., to South Africa, and the circumstance that this tonnage temporarily ceased to be available for the needs of ordinary traffic considerably s