The Merchants of Death

CHAPTER X SEIGNEUR DE SCHNEIDER

If they are patriots, it is a new and singularly impartial kind—British on Monday, Russian on Tuesday, Canadian on Wednesday, Italian on Thursday, and so on, as orders may be got from China to Peru.—Perris, The War Traders.

DOWN in Burgundy there is a dark, somber industrial town, its streets and houses black with soot and smut from the huge chimneys which tower over its factories—a marked contrast to the happy wine-making towns which lie north of it. Its narrow streets cluster about a hill atop which, like a true medieval lord looking down at its vassals, is the Château de Verrerie, mansards and surrounding park and all. Emblematic of the factories below and of its owner, six bronze cannons crouch in its courtyard, their muzzles pointed at the grand portal. This is the home of M. Eugène Schneider, lord of this armament fief of Creusot and one of the most powerful cannon merchants in the world.

Although he bears a suspiciously Teutonic name, M. Schneider is French, and just as indisputably French as Mr. Vickers is English. His forefathers came from Alsace when it was still French territory; and, with the characteristic enterprise of Alsatians, the grandfather of the present owner of Creusot started as a clerk in a bank, became interested in engineering processes and much more than interested in methods of buying up defunct companies, for in 1833, when the foundries at Creusot, which had supplied iron products and arms to French monarchs since Louis XIV, were placed in bankruptcy, he bought Le Creusot.

Krupp was a business man of tireless industry and enterprise; Maxim was an inventor; Sir Basil was the highpressure salesman; but the Schneiders were typical French industrialists, entrepreneurs content to till the field which they knew in France by the methods which were the common property of other French business men of the time. They offered nothing new in the development of the arms industry, but they appropriated very well the technique of other arms merchants in other countries.

The first Schneider, Joseph Eugène, was primarily a banker, with all of the aptitude of French business men for nourishing himself on the politicians who ruled the country. Without great technical ability, he became financially embarrassed as a result of his engineering enterprise and by 1850 was on the verge of bankruptcy. He had the foresight, however, to offer his support to Louis Napoleon who was then planning his famous coup d’état, and when Napoleon cantered triumphantly down the Champs-Elysées M. Schneider was saved from destruction.

Napoleon III created, or at least gave the impetus of creation, to modern industrial France. Under him Baron Haussman changed the face of Paris, and other barons, lifted to nobility by their own commercial acumen and Napoleon’s friendship, built railways, factories, ships, and wooed the money from the traditional sock of the French peasant to finance these enterprises.

Schneider participated in this great development. His factory was adapted to the making of rails, the pig iron and sheet iron which other manufacturers needed, and especially pile-drivers. There was also the imperial army which had to be built up and, as a member of Napoleon’s subservient Corps Législatif, the cunning Alsatian won many contracts for war materials. Likewise, Schneider found the debacle which sent his great benefactor into permanent exile even more profitable. The Franco-Prussian War brought into Creusot so many orders for cannon and ammunition that, when the humiliating peace was signed by the French, Schneider emerged with a tremendous fortune—outside of his plants and real estate holdings he had securities amounting to about 100,000,000 francs.

The latter decades of the nineteenth century were spent mending his political fences and consolidating his industrial power. Like many other Second Empire conservatives he was inclined to favor the monarchists after the republic was declared, but while the inflammatory Gambetta was challenging that royalist Irishman, Marshal MacMahon, he found that the electors of the constituency of Creusot were disinclined to place him in the Chamber of Deputies. He met with a humiliating defeat at the polls and had to suffer a Republican deputy at his doorstep.

Schneider had difficulty in breaking into the international arms business. At the beginning of this century he made strenuous efforts in South America, but everywhere he encountered strong opposition from the ubiquitous Krupp. In 1902 the Brazilian government was seriously considering buying some of Schneider’s French ’75’s. The morning of the test day arrived, and both Krupp and Schneider were certain of victory, but on that very morning a great fire broke out in the storehouses where the French samples were kept and the ’75’s were rendered useless. The French accused the Germans of having started the fire, and the Germans retorted that the French had eliminated themselves because they feared the test.

Again Schneider returned to the fray. New trials were ordered for 1903 by the Brazilian government. The Schneider guns arrived at a Brazilian port but it was discovered that no steamship company would move them inland because they were dangerous “munitions.” When the guns were finally brought to the testing ground, Brazil declared that it was too late.

Schneider did not yet concede defeat. He offered to pay all expenses for another test. Again Krupp swung into action. A German captain of artillery, Von Restsoff, who was at Rio, released a story to the press that Peru was being armed by Schneider to fight Brazil. Brazil must meet this threat by immediately arming itself. Krupp was ready to help Brazil in this danger, if only Brazil would understand the situation in time. Brazil understood and Krupp got the orders.

The rivals moved on to Argentina in 1906. In that year Schneider was invited by the Argentine government to compete in a trial of rapid-fire guns; others taking part in these tests were Ehrhardt (Germany), Krupp, Vickers, and Armstrong. The contestants were informed from the outset that Krupp was now supplying this kind of gun and unless something better was produced there would be no change.

Schneider accepted the terms and entered the trials. Great advantages were granted to Krupp which the others did not enjoy. At any rate, the French charged that Krupp was permitted to rehearse Argentine gunners in the use of his guns before the tests; that when a Krupp gun exploded, he was not automatically eliminated but was permitted to replace the gun; that Krupp tampered with his ammunition to make it better; that Krupp evaded the full test of his guns by pleading lack of ammunition.

In 1908 Schneider was invited by the Chilean government to take part in the trial of special guns, especially mobile field artillery and mountain guns. The tests were to take place in April, 1909. Schneider went to considerable effort to make special guns and was ready to ship them. Then, on January 11, 1909, a cable from Chile canceled the gun trials entirely. The order had been given to Krupp without competitive trials. Schneider protested and demanded an indemnity for his expenses, but the Chilean government was silent. Schneider tried to exert diplomatic pressure on Chile, but without avail. Chile did not reply and Krupp had again triumphed.

But meanwhile the French manufacturer had sought other fields where French influence was stronger and where he hoped for better success. The French republic was bent on maintaining and solidifying its alliance with Russia, and French manufacturers of arms and other industrial products naturally expected trade to follow the flag. Indeed the Russian situation provided exceptional opportunities for these merchants, for Russia was undeveloped economically and needed money.

Huge Russian loans were floated in Paris, and the cautious French investor was persuaded to back up the Czarist regime—to his bitter disillusionment some fifteen years later. But for the moment French manufacturers benefited from this political and financial alliance. When the Russo-Japanese war started, not only industrialists but also French politicians and journalists turned the alliance to good account.

The Russian Soviets have brought to light from the Czarist archives the reports of the Imperial Russian agent in Paris, Arthur Raffalovich. They provide fascinating reading for those who are interested in the condition of French journalism, and its bearing on national policy. Raffalovich’s mission was to bribe the French press, so that reports of Russian revolutionary activities, the violent deeds of the Terrorists, the strikes and the industrial breakdowns would not frighten the French investors from buying the very necessary Russian bonds.

The Havas Agency, the counterpart of our Associated Press, and affiliated with it, was corrupted by the Russians. Ten thousand francs a month were placed at the disposal of this press association to doctor Russian news. But let Raffalovich’s reports speak for themselves:

“Subventions of the (French) press began in February 1904 at the time of the panic provoked by the outbreak of hostilities in the Far East. Upon request of M. Rouvier, Minister of Finance (later Premier of France), the Russian finance minister opened a credit of 200,000 francs. Money was expended through the agent of the French ministry, M. Lenoir, and continued until the assurance of the 800,000,000 loan. . . . The internal events in Russia, disturbances, mutinies, and massacres, caused such an uneasy state of mind among French holders of our securities that if the press had been left to itself it would not have failed to upset public opinion still more. . . . The outlook was so threatening that the Banque de Paris put 50,000 francs at our disposition, which was issued as follows: 10,000 francs to Havas Agency, 7,000 francs to Hebrard of Le Temps, and 4,000 to Le Journal on November 30, and again as much on December 30. The costly sacrifice for Havas and Le Temps are absolutely necessary . . . the support for a majority of the press is unfortunately indispensable until the loan is put through . . . the papers have become greedier . . . we must continue 100,000 francs for three months and look forward to paying Havas 10,000 for an even longer period.”

When Father Gapon led his proletarians up to the doors of the Winter Palace, when the Cossacks massacred these hungry men and the whole abortive revolution of 1905 startled the world, few connected these events with the barrage of Russian propaganda in France. Still fewer discerned any link between the participation in these riots of the Putiloff men with the enterprise of M. Eugène Schneider. The Putiloff factory was a Russian munitions factory in St. Petersburg, and its business had suffered so heavily from international forces that its unemployed workmen were ready for any agitation. Schneider-Creusot, on the other hand, was increasing its personnel, for very good reasons.

It was an embarrassing situation for the Russian government, now struggling to be democratic with its new elective Duma. While the ruling classes which had sought French loans wanted to favor foreign supporters, the Duma and the bourgeois elements clamored for greater participation of Russian business in the new spending program. Finally when all the revolutionary and labor disorders had been stilled and the “tame” Duma had been brought to a conciliatory mood, the Czar obtained from this body appropriations amounting to $620,000,000. But the pan-Slavic supporters insisted that this money should be spent in Russian workshops. “Russia for the Russians” was the popular cry.

A handome slogan, but difficult to abide by, for Russia was not, in an economic sense, independent. She relied on England and Germany for coal, goods had to be brought from afar to the Neva in British bottoms, the securities market in Paris had to be conciliated to obtain loans, and raw materials had to be brought from all over Europe. Moreover, Russia, under the Czar, just as in 1934 under Stalin, needed technical advisers and skilled engineers to direct her industry. All her public services, particularly tramways and light plants, were manned by British and Germans; her coal pits were first exploited by a Welshman; and, in general, this most nationalistic of states had a governing class employing foreign languages as a medium for polite and commercial conversation, schooled by an international corps of tutors and governesses, and permeated by an international outlook. Most important of all, in the manufacture of war materials, Russian plants were not equipped to turn out the highly efficient products of other European firms. No wonder Putiloff and other factories, in spite of Duma resolutions, had to rely on the aid of foreigners.

The most extraordinary polyglot invasion of Russia now took place, an invasion which was far more formidable and successful than Napoleon’s famous foray in 1812. To follow the analogy, the foreigners’ ultimate retreat from Moscow did not come to pass until many years later, and its body blow was not the Muscovite climate but the radical program of the Bolsheviks. But for the time being, it was a most fruitful mass attack.

The foreign firms, for the most part, concentrated their efforts on the new Russian naval building program and so, in the various shipyards on the Baltic and Black Sea, there appeared a motley aggregation of European contractors. John Brown & Co., Vickers Ltd., Armstrong-Whitworth, Franco-Belgian Company, Augustin Normand of Havre, Schneider-Creusot, Karl Zeiss of Riga, F. Schuchau of Elbing—these names indicate the English, French, Belgian and even German elements in the building program.

The situation at the Nickolayeff yards on the Black Sea illustrates this very well. There contracts for three dreadnaughts were let to the Russian Shipbuilding Company and the Franco-Belgian Company. The former was a smoke screen for a mixed foreign combination financed by the Banque Privée of St. Petersburg, which in turn was the subsidiary of the Société Générale, a Parisian bank. This parent bank had close connections with John Brown & Company and Messrs. Thorneycroft, Vickers and other English firms who were to get most of this naval business.

But where was M. Schneider in this last combination? In truth, he was not in it at all. For he was in league with another French bank, the Union Parisienne, which was a bitter rival of the Société Générale. The Union Parisienne had financed the Putiloff works in St. Petersburg, and naturally M. Schneider got the business there. But the Société Générale entrenched themselves on the Black Sea. Thus early in the struggle for contracts two factions among the invading interests formed their battle lines—on the one side Schneider and the Union Parisienne bank; and on the other side the French bank, Société Générale, allied with English, Belgian and other French firms.

Again the Russians returned to the fray, determined to get some part in this great building program and to obtain some shipyards on the Baltic for Putiloff. Putiloff had already been financed by the Schneider bank to the extent of $5,000,000 and this bank was reluctant to advance more of its precious francs. Moreover, this bank, Union Parisienne, had become embarrassed by the freezing of its loans in the Near East by the Balkan War. So it had to refuse its favored client at Creusot the money when he asked for it.

M. Schneider, determined to support Putiloff in its plan, went to the Société Générale, the rival organization, which of course declined to finance Schneider. For were they not allied with the English interests? There was only one alternative for the harassed Frenchman. He had been working hand in glove with the German firm of Krupp in equipping Putiloff. The Russians, while favoring French light artillery, wanted the superior make of Krupp for its big guns, and so Schneider had bought the privilege of using Krupp patents in Russia. Krupp and its subsidiary Skoda in Austria were wealthy; and thus we may see the curious spectacle of a Frenchman seeking German capital for the building of Russian armaments.

But the Société Générale was not bested yet. Its directors were aware of Putiloff’s need of money and M. Schneider’s embarrassment. They determined to make an effort to wrest control of Putiloff from Schneider, who still had to raise the money to underwrite the two-thirds of the stock increase. They made an offer to supply all the funds which Putiloff required. M. Schneider was in a melancholy position—rebuffed in the Urals, humiliated by the English occupation of Tzaritzine and now facing the loss of his last stronghold in Russia, Putiloff. He was ready for the most heroic measures to save his interests in Russia.

On January 27, 1914, the Echo de Paris printed a dispatch from St. Petersburg, as follows: “There is a rumor afloat that the Putiloff factory at St. Petersburg has just been purchased by Krupp and Company. If this news is exact, it will provoke much feeling in France. It is well known, in fact, that the Russian government has adopted French processes for its material of war. Up till now, the greatest part of this material has been constructed in the Putiloff factory with the aid of Creusot and the French personnel from Creusot.”

There was indeed much “feeling” in France on the receipt of this news. The French capital was aroused as it had not been since the Dreyfus affair or the Agadir incident. What? The devilish Krupp firm, the heart of Germany’s menace to France, was buying out the Putiloff works, together with that important “secret,” the design of France’s famous light artillery? The boulevards were aflame with indignation. Premier Doumergue sent a telegram to the French ambassador in St. Petersburg asking him to look into the matter at once. Caillaux admitted the “gravity” of the matter. Even M. Schneider, when questioned by a reporter from La Patrie, admitted that it was “grave.” This reporter learned that M. Schneider knew only what he read in the papers.

REPORTER: “But, Putiloff manufactures for the Russian army material of war invented by Frenchmen?”

M. SCHNEIDER: “The Putiloff factories are indeed constructing material of war on plans furnished by us, and we have representatives from our factories at Creusot with them.”

REPORTER: “But if the House of Krupp has really bought these factories, will the Germans then have access to our own secrets of manufacture?”

M. SCHNEIDER (making a vague gesture of impotence): “It’s very grave.”

REPORTER: “Very grave!”

M. SCHNEIDER: “This news surely must be inexact.” (Same gesture of impotence.)

What eloquence there was in this shrug of the shoulders for the excitable French readers of the newspapers! They saw in the whole affair, a conspiracy between Germany and the treacherous Russians, to whom they had paid out countless millions for the equipment of armies which would, they hoped, defeat the Germans in the next war. Again France had been duped and by its trusted allies. It is difficult to say whether French ire was greater toward Germany than toward Russia. Krupp, indeed, denied that they had anything to do with the matter, but this only increased French suspicions. The Echo de Paris added more fuel to the fire by alleging that the treacherous English were in with Krupp on this scheme. More denials, this time from the representatives of Vickers.

Perhaps in revenge for this unwarranted suspicion, the St. Petersburg correspondent of the London Times wired his paper and gave his “inside” view of the situation. He said, “The whole question of Franco-Russian relations in respects to armament orders is raised. There are complaints that French industry has not received its proportion of orders, especially in matters of naval construction, to which it is entitled in view of the financial and political connections of the two countries. During the last few months, it is asserted that orders for the Russian navy have been given to the extent of 69,000,000 rubles to the Germans, 67,000,000 rubles to Great Britain and only 57,000,000 rubles to the French.”

The Times correspondent did an excellent but rather belated job of “debunking” when he stated the facts about war “secrets.” But he was rather misleading when he declared the wily Slavs were feinting toward Germany to get a loan from Schneider. If he had followed up his news about the projected Russian loan to be floated in Paris, he would have come at the root of the matter; for it was in this loan, which as a matter of fact had already been arranged, that the sorely tried M. Schneider found his palladium, the sovereign way out of his difficulties, the means by which he could defeat his enemies the Société Générale and the English firms. He had indeed conspired well.

This loan was the immense Railway Loan which Russia needed very much and which the diplomats and financiers of the two countries had carefully prepared for the Parisian market. To underwrite this, all the French banks had to combine to float the issue on the Bourse. As we have seen in the great corruptions of 1905 and following years, the press had to be effectively managed so that no news of scandals, mutinies or revolutions would frighten the French investor who would buy the Russian bonds. A careful conditioning of French public opinion was started with ceremonial visits of premiers, princes of the blood and other notables, and the prospective bond buyer stimulated by these affecting sights would presumably rush to the banks to get the bonds.

He would, of course, unless disastrous news like Krupp’s purchase of Putiloff intervened. M. Schneider was well aware of this psychological background for the loan and he saw his opportunity. His paid retainers in the press were therefore given orders to send the false news from St. Petersburg to the Echo and the result, even to his cunningly arranged and delivered interview with histrionic gestures and exclamations of apprehension, was most satisfactory. The news, as M. Schneider put it, was indeed grave, but grave principally for the Russians and the French bankers who had agreed to sell the bonds. The Russian Railway loan was in grave danger of foundering.

The Franco-British combination which was going to take over Putiloff so easily and defeat M. Schneider was aghast. They had, it is true, excellent material for an exposé of Schneider’s own dealings and alliance with the Germans. If it were revealed that Schneider, in league with the villain Krupp, was prepared to sacrifice “French secrets” to the enemy, this patriotic combination of the orthodox entente of France and England would conceivably profit. But if this was disclosed, public opinion in France would be even more upset and the Railway Loan would certainly fail. And the Société Générale would suffer as one of the participants of this loan.

Naturally, there was much hasty conferring behind the scenes and Schneider was not far away from these conferences. The Société Générale saw that, rather than jeopardize the loan, it was better to concede defeat in their scheme to oust Schneider from Putiloff. Events moved rapidly and within three days of the epochal telegram to the Echo a consortium of French banks, including the Société Générale, agreed to underwrite the necessary capital for Putiloff, with Schneider left in control of this much disputed factory. Thus the Franco-German combination had routed the Anglo-French. It was a spectacular triumph for the crafty Alsatian, for he had not only retained his stronghold in Russia, but also forced his rivals to put up the money for its maintenance and expansion.

The London correspondent and M. Tardieu were right. Italy, that temperamental ally of the Central Powers and therefore the potential enemy of France, had for some time enjoyed the use of the exclusive ’75. Indeed, her light artillery was largely composed of this make, supplied by the French.

M. Schneider had learned well the technique of the international arms business. He had done a nice piece of business with Bulgaria. A photograph of Ferdinand of Bulgaria, inspecting the Creusot factories under the personal guidance of M. Eugène himself, tells the story. In 1906, this Balkan prince came to the Burgundian mecca to buy guns. He had the collaboration of the French government in the matter. The order which Ferdinand gave Schneider was so large that the Bulgarian parliament, the Sobranje, called their prince before the Bulgarian Financial Commission and, after hearing him, refused to grant the appropriations. There was a Bulgarian loan pending at this time from France, and the French government now intervened and declared that if the Sobranje did not ratify the appropriations, the loan would not be authorized. The Sobranje took their medicine and ratified the appropriations; the loan was granted and M. Schneider profited by selling guns which were used some years later in Macedonia against General Sarrail’s men.

Thus by the outbreak of the World War, Schneider-Creusot had attained its majority as an armament firm. It had fought gamely through the discouraging contest in South America. It had won its spurs in the famous Putiloff affair. And 1914 found it gathering business from potential enemies of its country. It had reached this stature by certain methods: by cultivating governmental connections, by playing the complicated game of international banking, by stimulating war scares and by manipulating the press. These were the instruments not only of Schneider but also of the armament business in general, and only by examining them in detail is it possible to arrive at a just appreciation of the extraordinary power of this business in creating a situation tending toward war.