Charles Addis: Commercial Cosmopolitanism in the Thought of a
Merchant Banker During the First World War
Andrew Smith, University of Liverpool Management School
a.d.smith@liverpool.ac.uk
This paper examines the thinking of the British merchant banker Charles
Addis through the lens provided by Transnational Capitalist Class (TCC) theory.
Addis was a leading figure in the Hongkong and Shanghai Banking Corporation
(HSBC), which was and is an important multinational. In the early twentieth
century, he promoted the ethos I call commercial cosmopolitanism. In this paper,
commercial cosmopolitanism denotes a mental framework in which national
loyalties are subordinated to other abstract principles, such as a code of
commercial honour, loyalty to business partners irrespective of nationality, and
the teachings of classical liberalism. Addis articulated this ideology in his diary,
private correspondence, and public statements.
The world economy at the start of the twentieth century resembles the
present in several crucial respects: it was characterized by extensive
globalization (Rosenberg ed., 2012), high levels of financialization (Rajan and
Zingales, 2003) and inequality (Piketty, 2014) and ongoing investment in
communications and transport technologies that effectively reduced distance.
The outbreak of the First World War in August 1914 ended the first era of
globalization and initiated several decades of de-globalization and definancialization (Ferguson, 2006; Findlay & O’Rourke, 2007; Frieden, 2006,
303; Mollan and Michie, 2012). According to one widespread interpretation,
globalization did not resume until the post-1945 period, when the United States
began to perform many of the functions that the previous liberal capitalist
global hegemon, the British Empire, had discharged during its heyday
(Kindleberger, 1986; Gilpin, 2011, 94-95).
The historical research presented in this paper is significant for
contemporary debates about the impact of globalization on the national
allegiances of members of transnationalized business elite. In the early 1990s, a
number of observers of international political business asserted that many
MNEs were becoming borderless, transnational, and decoupled from any
particular nation-states (e.g., Ohmae, 1990, 95; Reich, 1990). In this context,
activists and social observers on both the left and the anti-globalization right of
the political spectrum came to denounce corporate decision makers for their
lack of patriotism (Nader, 2013; Stanley, 2012, 257). In the late 1990s, the
moniker “Davos Man” has been applied to the elite individuals who gather at
Davos, the annual transnational gathering that takes place in a Swiss resort
(Beneria, 1999, 68; Robinson, 2012). Although some of the hyperglobalist
reports of the death of nation-state power have clearly been exaggerated it is
clear that a shift towards transnationality took place in the closing decades of
the twentieth century and that this shift created an integrated global system that
resembles that which existed on the eve of the First World War (Dicken, 2010,
7, 14, 83, 204).
In more recent years, the business interests associated with globalized
finance have been accused of disloyalty to their respective nation-states. For
instance, in the aftermath of Russia’s recent annexation of Crimea, financiers in
the City of London were criticized in the British press for their alleged
opposition to the imposition of sanctions on Russian banks (Ruparel, 2014).
Similarly, HSBC has recently been attacked in the United States for links to
Mexican drug gangs and for helping Iranian banks (Barrett, 2015) to evade US
sanctions (Morris, 2015). A recurring idea is that financial institutions are
disloyal to the nation-states that charter them, and to the values of those nations.
Similar accusations of the subordination of patriotism to profit were
levied at Charles Addis and his employer during the First World War. Addis’s
wartime experiences allow us to explore the politics of transnational class
solidarity during a period of intense national rivalry. Transnational class
solidarity is an important theme of the works on the First World War by
historians interested in the working-class movements that had been part of the
Second International before the war. Prior to 1914, trade unionists had spoken
of the unity of the world’s workers, but once war broke out, this rhetoric
disappeared: most German social democrats supported their country’s war
efforts and most British and French trade unionists were equally patriotic
(Winter, 2014). Far less has been published on the impact of the First World
War on the bourgeoisie’s transnational loyalties. Like the European trade
unionists and social democrats who were confronted in 1914 with the question
of whether to support the war efforts of their respective nations, Charles Addis
was torn between national and transnational class solidarities.
We should, however, avoid pushing this analogy to far, as the bourgeois
advocates of commercial cosmopolitanism such as Addis tended to come from
the propertied classes in society and thus enjoyed a privileged position.
bourgeois proponents of commercial liberalism were not prosecuted for their
views. For instance, John Morley, the classical liberal politician who resigned
from the British cabinet on 4 August 1914 to protest the country’s decision to
declare war on Germany (Hamer, 1968, 368-9), was unmolested by the British
government, perhaps because his opposition to the war was rooted in an oldfashioned Victorian belief in minimal taxation and non-intervention in foreign
affairs. Addis, who shared Morley’s classical-liberal worldview but reluctantly
supported the war effort (Addis to Mills, 9 August 1914), was even less likely to
suffer because of his views notwithstanding his ongoing commercial interaction
with German firms. In contrast, Britain’s socialist internationalists were
criminally prosecuted during the war (Millman, 2014).
In addition to being privileged due to his wealth, Addis enjoyed another
advantage because he worked in the City (i.e., Britain’s financial service sector).
As numerous scholars of political economy have argued the City has long
enjoyed a privileged status in the British policy-making system that was not
enjoyed by the manufacturing business interests that were geographically
concentrated in northern England (Longstreth, 1979; Rubinstein, 1977, 116;
Ingham, 1984; Morgan, 2012; Marshall, 2013). The City’s privileged
connection to Whitehall help to explain why British financial institutions were
allowed to continue trading with their German counterparts, albeit in a limited
fashion, at a time when factory owners and small businessmen were being
prosecuted under the Trading With the Enemy Act for engaging in commercial
transactions for comparatively small amounts (see Table 1).
The Transnational Capitalist Class
On a theoretical level, this article is informed by the literature on the
Transnational Capitalist Class (TCC) (Sklair, 1997; Sklair, 2012; Murray, 2014)
and the role of ideology in helping the legitimate the activities of members of
that class (Carroll, & Carson, 2003; Sklair and Gherardi, 2012). In writing
about the TCC, it is important to recognize that the TCC overlaps only partially
with the social category of the multinational firm. Some multinationals,
particularly SOEs, defence and aerospace firms, and other “national champions,”
are closely associated with a particular nation state (Liang, Ren, & Sun, 2014).
The managers of such companies cannot be regarded as members of the TCC.
In contrast, other TNCs are far more transnational or, more accurately,
supranational. HSBC, which has used the slogan “the world’s local bank” since
1999, is in this category of multinational. HSBC, both in the present and in the
early twentieth century, can be closely associated with the TCC.
Writing in 1919, in the immediate aftermath of the First World War,
Schumpeter (1919 [1951]) adapted class analysis to explain the interest-group
politics that had contributed to the intensification of national animosities in the
years before the outbreak of the war. Schumpeter identified the existence of two
branches of the bourgeoisie. One element was cosmopolitan and largely pacific
in its outlook. Schumpeter associated this element with the ideology of classical
liberalism and with international trade. The other element of the bourgeoisie,
according to Schumpeter, were the business interests associated with militarism,
economic nationalism, and imperialism. Schumpeter was too sophisticated an
observers to subscribe to the crude “merchants of death” interpretation of the
origins of the First World War, but he nevertheless recognized that business
interests had pulled policymakers in various directions in the period before the
decision to go to war.
Business historians have used archival research and thick description to
show that business transnationality and rootlessness were actually common
during the pre-1914 golden age of globalization. Speaking of the pre-1914
period, Geoffrey Jones (2013, 194) observes that “Ambiguous nationality was
almost the norm rather than the exception in the extensive international business
in services outside Western Europe and North America.” Geoffrey Jones cites a
range of secondary sources that many firms had dynamic rather than static
national identities. As Charles Jones has shown, the rapid growth in
international trade that followed the Industrial Revolution and breakdown of the
mercantilist colonial empires produced a class of cosmopolitan businessmen
who felt comfortably operating in a variety of sovereign states. Jones (1987, 28)
speaks of the creation of a “cosmopolitan trading community centred in London
which nationality was often very blurred.” He remarks that this community’s
“fundamental legitimising ideology was a secular one, economic liberalism: a
profound faith in the collective virtue of aggregated individual self-interest and
the moral validity of market sanctions.” He notes that this ideology was closely
linked to Cobdenism, the radical variant of classical-liberal ideology that
believed that free markets, reduced taxation, and global commerce would help
to ensure world peace. Nineteenth-century commercial liberalism, he says, was
cosmopolitan, individualistic, anti-statist, and anti-militaristic.
Jones observes that “this community and its ideology” collapsed “in the
years after 1890” as “firms and individuals” retreated into “the apron strings of
newly assertive states. Nationalism and regulation, imperialism and racism,
were the hallmarks of the fin de siècle.” The growing emphasis on the
nationality of individuals and firms in the first decades of the twentieth century
contributed to what has been called “the fall of the cosmopolitan bourgeoisie”
(Jones, 1987). Jones argues that this period witnessed fragmentation of a preexisting transnational bourgeoisie into various national bourgeoisies. He argues
that this fragmentation was driven by a range of factors, including a cultural
shift in the direction of more intense nationalism in many countries. It is also
clear that there was considerable resistance to the rise of economic nationalism.
Normal Angell’s 1909 work Europe’s Optical Illusion, which stressed that
economic irrationality of warfare in an era of international economic
interdependence, became a best-seller and popular with many businessmen
involved in international trade (Ceadel, 2011). Moreover, a large bloc of the
British electorate continued to support the policy of Free Trade up until the First
World War, notwithstanding the invocation of nationalist sentiment by
protectionist business inteersts (Trentmann, 2009).
Addis’s Banking Career and Place in the TCC
Charles Stewart Addis was not born into the TCC. In fact, he came from a
middle-class family that was very domestic in its orientation. He was born in
Edinburgh in 1861. His father, who never appears to have left Scotland, was a
minister of the Free Church of Scotland, a Presbyterian denomination that had
been founded in 1843 by Thomas Chalmers, a minister whose extensive and
influential writings on political economy were informed by a strong variant of
the ideology of laissez-faire and the invisible hand (Emmett, 2011; Kennedy,
2014). Although Chalmers did eventually endorse laws limiting child labour
(Blaug, 1958), the main thrust of his writings suggested that market forces were
created by God and that it was impudent for human governments to interfere
with God’s will via protective tariffs or any other departure from laissez-faire.
At Edinburgh’s High School, Addis was exposed to a range of religious,
classical, and modern theories, including the ideas of Scottish Enlightenment.
The historical meta-narrative promoted by Scottish Enlightenment thinkers such
as Robertson, Hume, and Smith described a transition from tribal and feudal
societies to cosmopolitan integrated commercial civilizations in which distant
individuals were connected through a nexus of voluntary agreements (Höpfl,
1978; Herzog, 2013; Berry, 2013). Thomas Carlyle, a nineteenth-century
thinker who attached the methodological individualism and classical liberalism
of the Scottish Enlightenment, dismissively described modern commercial
civilization as based on a cold, calculating “cash nexus.” Carlyle attacked the
emerging social order on grounds that it deracinated individuals by diminishing
the importance of the ties of locality and nationality (Levy, 2002).
In 1880, the young Addis joined the Hongkong and Shanghai Banking
Corporation (HSBC)’s London branch. Thereafter, he was posted to HSBC
branches in Asia, serving in Singapore, Hong Kong, Beijing, Tientsin,
Shanghai, Calcutta, and Rangoon, and Hankow. These posts in Asia involved
extensive interaction with businessmen of various nationalities, European,
North American, and Asian. In 1905, Addis was transferred back to HSBC’s
London Office. In 1911, Addis was promoted to the post of Senior Manager of
HSBC’s London Office, a post he held until 1921. In 1921, Addis retired from
the daily management of HSBC’s London branch, although he remained on its
board and those of other important firms connected to the Far East.
During the First World War, Addis acted as a government advisor. He
was in Paris to advise the British delegation at the Versailles Peace Conference.
In the 1920s and 1930s, Addis acted as a government advisor on a number of
important topics, such as the future of India’s currency, the size of Britain’s
national debt, commercial relations with Brazil, and whether Canada ought to
establish a central bank modelled on the Bank of England. Addis also served on
the General Council of the German Reichsbank, a body that had been
established in promote investor confidence in Germany following the
hyperinflation of 1923. In 1929, he was the British Delegate on the Committee
of Experts for Reparations in Paris. In the early 1930s, Addis served on the
commission that led to the creation of the Bank of Canada. In the late 1930s, as
Addis withdrew from his remaining business and political commitments, he
observed that while old-fashioned liberalism was now deeply unfashionable, he
still adhered to his liberal beliefs. Addis died in 1945. (Dayer, 1988).
Intellectual Context
The Britain to which Addis returned in 1905 was far less committed to
international Free Trade than it had been in 1880, when he signed up for
overseas service in HSBC. In the 1880s, the mid-Victorian consensus in favour
of international Free Trade and domestic laissez-faire was still largely intact. As
Palen (2010) has shown, the highly protectionist tariff introduced by the United
States in 1890 caused many Britons to question the economic orthodoxy of Free
Trade, which had been British policy since the 1840s. The move away from
laissez-faire and so-called economic “individualism” alarmed British classical
liberals such as Herbert Spencer and A.V. Dicey (Taylor, 1992, 36; Perkin,
1977). Spencer (1884) denounced the “New Toryism” and the re-emergence of
collectivist regulations similar to those that had been dismantled by classical
liberals earlier in the nineteenth century. Classical liberalism was attacked by
the “New Liberals” and by so-called “social imperialism”, which advocated an
increasing number of departures from the policy of laissez-faire on the grounds
that they were necessary to strengthen the British as an imperial race (Scally,
1975; Semmel, 1960).
In the early twentieth century, social imperialist ideas influenced both of
Britain’s main political parties, the Conservatives and the Liberals, (Cronin,
1991, 29-30, 37-8), as well as elements within the new Labour Party (Pugh,
2011, 71-77). Many Social Imperialists admired Germany, which under
Bismarck’s leadership had introduced social programs and protective tariffs
while also building up its military strength. For instance, Joseph Chamberlain, a
Conservative who wanted Britain to revert to protective tariffs, admired
Germany (Marsh, 1994). Even the young Winston Churchill, who left the
Conservative Party to show his opposition to Chamberlain’s proposed return to
protective tariffs, said that he wanted to introduce a “big slice of Bismarckism”
into Britain, by which he meant both an activist welfare state and a more robust
military (Himmelfarb, 2012, 258).
Addis’s Defence of Commercial Cosmopolitanism
Addis and Germany
Addis’s belief in commercial cosmopolitanism was, in part, a function of
his upbringing in mid-Victorian Scotland, but his ideas were also congruent
with the needs of his employer, the Hongkong and Shanghai Banking
Corporation (HSBC). HSBC was founded in the British Crown Colony of Hong
Kong in 1865 and was thus legally a British firm. Nevertheless, individuals of a
variety of nationalities were involved in the bank as shareholders, directors, and,
at least in its early days, managers (King, 1988, 18-21, 171, 192-3, 537-9, 594-5,
625). The creators of the bank were “British, Parsee, American, German, and
Jewish. Its first manager, who may have been French or German, was poached
from the Comptoire d’Escompte,” a French bank with an extensive presence in
British India and other Asian markets (C. Jones, 1987, 82).
The highly internationalized nature of the bank reflected a broader pattern
during the early phases of Western economic expansion into China. In this
period, the actions of the Western states in China were frequently cooperative
(Rowe, 2010, 236). For instance, the British authorities welcomed migrants of
every European nationality into the Crown Colony of Hong Kong, at least until
1914 (Mak, 2004). The Colony soon acquired a large German mercantile
community (Manchester Guardian, 18 April 1916). German and British
businessmen lived together and cooperated in Shanghai’s International
Settlement (Pott, 1928, 221) and in other Chinese ports.
HSBC financed the operations of a number of German firms on the China
Coast. These operations resulted in the establishment of a HSBC branch
Hamburg. Four German firms were particularly important to HSBC: Arnhold,
Karberg and Co., Carlowitz and Co., Melchers and Co., and Siemssen and Co.
All four companies were represented on the HBSC’s board, which met in Hong
Kong (King, 1988, 527). Despite deteriorating relations between Germany and
Britain after 1905 (Kennedy, 1980), the bank’s four German directors did not
resign their posts until war actually broke out on 4 August 1914 (South China
Morning Post, 12 August 1914). HSBC’s ventures into public finance deepened
its connection to German capital markets through the formation of syndicates
that included German, as well as French and American, banks. HSBC worked
closely with the Deutsch-Asiatische Bank (DAB), which was connected to
Deutsche Bank, a major German universal bank (McLean, 1973). In 1912,
Addis launched negotiations with banks in other countries to establish the Six
Power China Consortium, which then issued a loan to support the new
Republican government in China. The six nations whose banks were
represented in this consortium were Britain, Germany, France, Russia, Japan,
and the United States (Dayer, 2013).
Charles Addis and Trading With the Enemy
Following its declaration of war against Germany and Austria in August
1914, the British government was confronted with the question of whether it
was going to permit commerce with Germany to continue. The British
government had two contradictory sets of precedents it could follow. One model
was suggested by the laws of the early modern period, when states had sought
to ban virtually all commerce with the subjects of enemy kings during wartime.
The other model was that of the Crimean War of the 1850s, the last major
European war. In a move that reflected the ascendancy of classical liberal ideas
and methodological individualism, which reached their high-water mark in midVictorian era, the British government opted not to interfere in private trade with
Russia or with merchant vessels that belonged to Russian private citizens
(Anderson, 1967, 254-272; Searle, 1998, 206-9). This war had been fought on
the understanding that Britain’s grievance was with the Russian state, not
individual Russian merchants (Levy and Barbieri, 2004).
During the First World War, the British government’s approach to the
issue of trading with the enemy was a somewhat confused mixture of the
medieval and the classical-liberal approaches. It should be remembered that at
the start of the First World War the motto of the British government was
“business as usual” and that it was only towards the end of the conflict that
Britain developed a full-fledged command economy with conscription and food
rationing (Broadberry and Howlett, 2005). In other words, the ideology of
economic liberalism continued to inform British economic policy during the
early phases on the conflict.
Shortly after the declaration of the war in August, the British government
introduced a law that included a blanket ban on trading with enemy alien
citizens and firms anywhere in Europe. A number of small businessmen resident
in the UK were soon prosecuted for trading goods with German merchants via
neutral countries. The goods mentioned in many of these indictments were of a
non-military character, such as silk and lace (see United Kingdom
Parliamentary Papers, 9 March 1915; Manchester Guardian, 22 February 1917).
At the same time, many German citizens resident in the United Kingdom were
interned and their property was entrusted to a custodian of enemy property
(Panayi, 2014). Occasionally, anti-German sentiment led to crowd action
against enemy alien property. For instance, after the sinking of the Lusitania by
a German submarine in 1915, a mob in Liverpool destroyed German and
Chinese businesses in a fit of xenophobic rage (Merseyside Maritime Museum,
2015).
On the face of it, the Trading With the Enemy Act comprehensively
banned dealing with Germans. However, pressure from the cotton merchants
and other business groups with an interest in continuing trade with German
companies led to the creation of numerous exceptions to the rule banning
trading with the enemy (Lambert, 2012, 256-8). The result was the British navy
tolerated an extensive trade with Germany through ports in the Netherlands and
other neutral countries. Moreover, the ban on commercial dealings between
British and enemy alien citizens did not, at first, apply in neutral countries
outside of Europe (Wileman’s Brazilian Review, 7 September 1915;
Manchester Guardian, 13 May 1915).
Over the course of the conflict, as Britain moved towards total war and
made an increasing number of departures from laissez-faire in the management
of its internal economy, the restrictions on trade with enemy aliens became ever
more severe. One political flashpoint were the London branches of the largest
German banks, which were allowed to continue operating, albeit in a restricted
fashion, until 1918. Although most German males in Britain had been interned
as enemy aliens, the London branches of Deutsche Bank, the Dresdner Bank,
and the Disconto-Gesellschaft were allowed to continue using German
managers and clerks. These bankers worked under the supervision of Sir
William Plender, the senior partner of Deloitte, an accountancy firm with
expertise in cross-border finance (Panayi, 1991, 132-5, 142-5). The escalating
British death toll on the Western Front and Zeppelin attacks on the capital itself
meant that the continued presence of these branches angered many Londoners,
especially those who had lost menfolk in the sanguinary British offensive
launched in July 1916 (McKenna, 8 December 1916; Faber, 20 March 1918;
Bonar Law, 20 March 1918). Many citizens expressing dissatisfaction with the
official explanation for the continued existence of these branches, which was
that “the liquidation of a banking business of an international character is of
necessity an operation of the greatest complexity, and at the best of times must
be spread over a very lengthened period” (Leaf and Vassar Smith, 1916, 2).
Plender’s patriotism was attacked in the press (Edwards, 2004).
Table 1. Trading With the Enemy Prosecutions before March 1915
Source: United Kingdom Parliamentary Papers, 9 March 1915.
Nature of Charge
Place of
Trial of
Hearing.
Result.
Sentence
Central
Criminal
Court
Guilty
18 months'
imprisonment
(upheld on
appeal).
Newcastle
Assizes
Guilty
Fined £100
and costs.
Attempt to purchase a large
consignment of bicycle
handles from Germany
Smethwick
Police
Court
Guilty
Fined £500
and £101 10s.
6d. costs.
Contracting
(6) and (7)
Manchester
Guilty, (8)
Police
and (9)
Court
Dismissed
Fined £50 and
£52 10s.
costs.
Mansion
House
Guilty
Fined £100
and £50 costs.
Central
Criminal
Court
Guilty
Sentenced to
1 month
Incitement for the purchase
of ships from a German firm
Protecting
enemy's shares by
transferring them to a
British subject
with a German firm for the
supply of paper
Attempting to import cocoa
into Germany
Paying in London for
transmission to Holland the
amount of a debt of au
enemy owing to a Dutch
firm
Assisting in exporting iron
ore into Germany
Central
Criminal
Court
Fined 1s. and
ordered to pay
costs of
Guilty
prosecution.
Attempt to obtain pocket
knives from Germany for
importation to England
Guildhall.
Guilty
3 months
imprisonment
Importing steel to America,
the profits to go to a German
firm
Obtaining lithographic
transfers from Germany for
use in England
Guilty on
13
Manchester
summonses;
Police
5
Court
summonses
dismissed
Central
Criminal
Court
Guilty
Fined £5 upon
on idictment,
and £1 upon
remaining 12,
and £105
costs.
2 months'
imprisonment,
and to pay
costs of the
prosecution.
Attempt to import asbestos
material from Germany
Liverpool
Police
Court
Attempt to import cotton
goods from Germany via
Sweden
Manchester
Police
Guilty
Court
Exporting balloon silk
Manchester
Police
Court
Importing fancy leather bags
into England from Germany
Central
Criminal
Court
Attempt to buy cotton for
head office in Germany
through neutral country
Manchester
Police
Proceeding
Court
Guilty
Fined £210 on
three
summonses,
and £105 11s.
costs.
Fined £100
and £105
costs.
Throughout the war, Addis consistently lobbied the British government
for the continuation of as much trade as possible with German firms. For
context, it should be explained that while German adult males in the British
colony of Hong Kong had been interned by the authorities by the end of 1914
(Auswärtiges Amt, 1915), German and British citizens and firms uneasily coexisted
in cities in mainland China until that country entered the war in 1917. One
contemporary reported that the British mercantile community in Shanghai was
divided between nationalist-minded people who patriotically wished to help
their mother country and another group of individuals who wished to continue
trading with their German neighbours as far as British law would permit (Not a
Lawyer, May 1916). The industrialists who controlled Britain’s cotton
manufacturing sector, which was concentrated in Manchester, were similarly
divided as to the wisdom of a proposed law prohibiting British firms from
using German distributors in China. Prior to the war, many of these textile firms
had switched from British distributors in China to the more efficient and costeffective German ones. As late as the spring of 1915, many British textiles
destined for retailers in the interior of China passed through the hands of
German-controlled wholesale companies in Chinese ports (Manchester
Guardian, 15 March 1915).
In May 1915, the British government hosted a confidential conference of
business leaders on the subject of trading with German firms in China. The
government’s representatives began the meeting by explaining that they wished
to “cut down on” the volume of trade between British and German companies in
China but in a fashion that would avoid job losses in Britain’s textile
manufacturing towns. It soon became evident to Addis and others in the room
that the issue of whether to ban trading with the enemy in China had divided the
Manchester Chamber of Commerce, with some Manchester factory owners
favouring an immediate ban on all trading with Germans in China. This faction
estimated that only a sixth of Manchester’s exports to China were handled by
enemy alien firms and that the British trading houses in China could quickly
replace the German distributors (Board of Trade, Transcript of Conference of 4
May 1915 ).
Addis argued that British firms should continue to use German
distributors in China. He asserted that more than half of the textiles Britain
exported to China passed through the hands of German firms. Any attempt to
transfer the distribution work to British houses would constitute dangerous
interference with market forces. Addis reasoned that existing international
division of labour, whereby the British manufactured the textiles and the
German distributed them in China, as taking advantage of the comparative
advantage of each nation. Addis praised the “efficiency” of the German firms in
China and said that if British merchants wished to obtain more distribution work,
they ought to emulate the methods and work ethic of the Germans rather than
looking to the government for artificial assistance in the form of the proposed
ban. The views Addis presented at the conference were entirely consistent with
those Addis expressed in internal HSBC correspondence, where he wrote “I
regard with equal disfavour the attempts of The China Association and others to
induce the Government to boycott German firms in China. A British firm here
and there might benefit by only, as you have clearly shown, at the expense of
British trade in general” (Addis to Stabb, 12 March 1915.) While Addis’s
major arguments in favour of continuing to trade with German firms in China
were essentially economic, he also invoked morality and the sanctity of private
property in “trademarks” and “goodwill” when he, declared, rather naively, that
“no one would seriously contend that a state of war justifies stripping even a
German of his private property” (Addis, Memorandum on Conference with
Runicman and Simon 4 May 1915).
Despite Addis’s speech in a favour of the continuation of trade with
Germans in China, the British government decided to ban trading with enemy
alien firms and citizens in that country. In the summer 1915, an era of restricted
trade with the enemy began. At this point, the British government prohibited
exporters in the United Kingdom from sending substantial consignments of
goods to German firms in China. British cotton mills and brokers that continued
to use the services of German distributors faced the threat of criminal
prosecution. For instance, in November 1915 two cotton brokers were convicted
and fined £100 at a trial in Manchester for sending twenty cases of shirts to a
German firm in Shanghai (Manchester Guardian, 16 November 1915).
The rules for British-controlled firms physically located in the Far East
were different. British companies were allowed to pay dividends to German
shareholders resident in China and to supply German customers with water, gas,
and electric current. British subjects in China were still permitted to shop in
German-owned stores and to patronise German physicians (General Licences
Under King’s Regulations, No 10 of 1915). HSBC’s branches in China
continued to work with German clients to help these firms to eliminate their
overdrafts with the bank (Inspector’s Report on Tsingtao branch, 24 July 1915).
HSBC employees also tracked down and negotiated the release of goods
belonging to German firms that had been in transit to Europe at the outbreak of
the war and which had been seized by the Royal Navy. These goods had been
stranded in ports on the routes linking China to Europe (Inspector’s Report on
Shanghai, dated 22 October 1915, 28, 29). China declared war on Germany in
1917. At that point, Chinese officials seized the assets of German firms, arrested
German citizens, and made the British-legal question of trade between British
and German subjects moot (Hynd to Stabb, 17 August 1917; DeutschAsiatische Bank, 1927).
Throughout the war, Charles Addis also used public statements and
private letters to challenge the view that the disruption of German overseas
trade would benefit rather than impoverish Britain (Addis to Mills, 17 May
1919; Nicholson to Addis, 10 December 1916). Addis also firmly distinguished
the German government and its property from German private firms and their
assets, suggesting that while it was legitimate to try to destroy “German
militarism,” it would be immoral for the British state to “prey on private
property” (Paper enclosed with Addis to Mills, 9 January 1915).
Addis and the Politics of British Banking
After 1918, Addis’s new status as a director of the Bank of England
meant that he was a prominent voice in the lively wartime debates about the
future of British banking. Critics of the City of London argued that the
government’s laissez-faire policy with regard to finance had resulted in the
excessive growth of finance at the expense of British manufacturing. Addis’s
main contribution to the national conversation about the future of banking in the
postwar error was his 1918 essay Problems of British Banking. This essay,
which argued the government should refrain from imposing burdensome
regulations on banks, contained extensive passages in which he praised
particular features of the German banking system and revealed that he had
continued to follow developments in German banking since the outbreak of the
war.
Addis said that German banks had a “more efficient administration” than
British ones becauseGerman bank boards included technical experts who were
capable to evaluating loan issues. Drawing on his observations of bank board
meetings in pre-war Berlin, Addis contrasted the quality of the debate with the
discussions in City boardrooms. German board meetings about proposed loans
were characterised by “animation” and the display of extensive “knowledge”
by individual directors. A bank board meeting in London, however, involved
the difficulty “of withdrawing its members even temporarily from their country
pursuits” and “their obvious anxiety to lose no time in returning to them… only
one or two here and there who had no train to catch are willing to discuss the
matters in hand with attention.” Addis said that more generous compensation
for directors might improve the quality of English bank governance by
attracting talented individuals, but that English bank shareholders were reluctant
to emulate their German counterparts by awarding directors higher fees.
In addition to praising the German systems of bank governance and
director compensation, Addis also commended the managers of the leading
German banks for maintaining higher capital ratios than the leading English
domestic banks (1918, 15). Addis mentioned the war had encouraged a wave of
bank mergers in both Germany and England. The crucial difference between the
two countries, he said, was that the newly merged banks in Germany “have
increased their paid-up capital and reserves while the English banks have not.”
Addis does not appear to have thought that his decision to praise the managers
of Germany’s bank might have been perceived as unpatriotic in the context of
ongoing slaughter on the Western Front.
Ever fair-minded, Addis counter-balanced his praise for various elements
of the German banking system with some comments about the benefits of
Britain’s “decentralised” system of banking. Taking aim at the critics who
wanted to regulate Britain’s banks so as to redirect bank lending away from
foreign trade finance and towards domestic manufacturing, he said that the
British tradition of “untrammelled competition” and “freedom” had made
London into a global financial centre. Critics of the British banking system had
noted that the German government intervenes “to ensure that the balance”
between finance and industry “shall be fairly maintained” by stipulating that
foreign loans issued by German banks contain a clause ensuring that related
manufacturing contracts were placed with German firms. For Addis, this
blurring of the lines between politics, industry, and finance was taking things
too far. In this respect, he said, the pre-war British system was superior to that
of Germany.
The chief advantage of the British system of laissez-faire and openness
was, according to Addis, that it had made London the financial centre of the
world and the home of large numbers of foreign banks and commercial agencies.
Commercial transactions between pairs of distant countries, he reminded his
readers, was financed through credit extended in London. To illustrate this point,
Addis used the example of a transaction between a Chinese merchant and a US
company financed by a bill drawn on London. Prior to the war, some Britons
had objected to the diversion of credit from domestic lending to the financing of
trade between pairs of foreign firms on the ground that these operations did not
benefit Britain’s domestic economy. To such critics, Addis replied that
government intervention in international trade finance would “place in jeopardy
the financial supremacy of London as the clearing house of the world. A free
market means that anyone can send bills here for discount and be sure of getting
gold for it when he wants it.” Addis grandly declared that “freedom is the breath
of life for credit and commerce” and the “best service government can render
the London money market is to leave its management and control to the bankers
whose business it is to understand it” (Addis, 1918, 24-25).
In his discussion of the wartime mergers of banks in Britain and Germany,
Addis acknowledged that while there was often a strong business case for
amalgamating banks, the current wave of bank mergers might eventually lead to
increased state regulation of the financial sectors of the two countries. He
reasoned that the newly-merged banks would be too big to fail and would thus
enjoy a “virtual” guarantee from the State. “From government guarantees to
Government control is but a step and but a step more to nationalization.”
Referring to a prominent socialist intellectual, Addis wrote that “we are playing
into the hands of Mr. Sidney Webb and the socialists.” Addis reported to his
British readers the alarming news that the new Prussian Minister of Finance “is
said to be considering a state monopoly of banking” in the country (1918, 10).
Addis appears to have felt sympathy for the German bankers who were now
forced to deal with this dangerous demagogue.
Addis and the Carthaginian Peace
Addis attempted to influence British policy towards Germany. From
1916 onwards, a political debate raged in Britain about whether punitive
reparations payments should be imposed on post-war Germany. In 1916, the
economists John Maynard Keynes and William Ashley had authored a
government report urging that Britain not seek to impose such reparations and
instead focus on reviving Anglo-German trade as quickly as possible at the
conclusion of the hostilities. The debate about whether to impose a collective
punishment on the German people pitted different interest groups in the British
economy against each other (Bunselmeyer, 1975). Reparations were favoured
by many protectionist manufacturing companies, especially those that had
complained loudly about German competition before the war. Such firms
demanded the peace settlement that John Maynard Keynes would famously call
the “Carthaginian Peace” (Skidelsky, 1983, 386)
Within the manufacturing sector, the chief proponent of soft peace terms
for Germany was William Lever, the founder of Lever Brothers, a multinational
soapmaking company that just happened to have a manufacturing subsidiary in
the German city of Mannheim. Lever’s German factory meant that he had a
compelling interest in seeing that the purchasing power of German consumers
was not destroyed by the imposition of punitive reparations. In May 1916,
Lever gave a public address advocating peace terms that would permit the
German economy to make a speedy recovery. Paralleling arguments that were
indirectly derived from Richard Cobden and Norman Angell and which were
later used by Addis, Lever maintained that Germany’s economic recovery
would benefit Britain as a trading nation (Knight to Lever, 15 May 1916, LBC
846). In 1918, Lever, who was now Lord Leverhulme, reiterated his support for
this policy and for the restoration of international Free Trade immediately after
Germany’s surrender (Leverhulme, 1918, 12-13).
Addis had the opportunity to present his views, which were similar to
those of Leverhulme, to senior policymakers. On 26 November 1918, Britain’s
Imperial War Cabinet formed a committee to investigate the issue of a war
indemnity to be levied on Germany. It was chaired by Billy Hughes, the Labor
Party Prime Minister of Australia. The thinking of Hughes and many other
Australian trade-unionists was strongly influenced by British Social Imperialism
(Dyrenfurth, 2012), which meant that his world-view was radically different
from that of Addis. Hughes, who was a staunch advocate of imposing a massive
war indemnity on Germany, ensured that those who agreed with him dominated
the committee. The other members of the committee on German reparations
included the Finance Minister of Canada, two Conservative MPs, and two
businessmen who had been handpicked by Hughes. The MPs were, according to
Keynes, prominent protectionists. Prior to the war, they had demanded the
introduction of protective tariffs to shut German manufactured goods out of the
British market. The two businessmen on the committee, Lord Cunliffe and one
Gibbs, were also noted protectionists (Skidelsky, 1983, pp 355–356).
Addis testified before the British War Cabinet to the effect that any
indemnity imposed on Germany should be no more than £60 million per annum.
Addis claimed that Hughes and other hostile members of the committee
repeatedly “heckled” him during his presentation. In his testimony, Hugo Hirst
of the General Electric Company recommended that Germany be given a soft
peace and a maximum reparations bill of no more than £125 million. When he
reported back to the Imperial War Cabinet, Hughes was dismissive of the
opinions of Addis and Hirst, noting that both men had “German interests and
associations” (IWC, 24 December 1918). Ignoring the advice of Addis and Hirst,
the Hughes Committee decided that Germany should be required to pay the
entire costs of the war, £24 billion. The annual interest and amortization costs
on this debt load would amount to £1.2billion, a figure vastly greater than that
suggested by Addis (Dayer, 1988, 103).
When the Paris Peace Conference was underway at Versailles, Addis and
his allies in the City launched a campaign to persuade the British delegates to
oppose the heavy indemnities advocated by the French. As part of this
campaign, Addis presented a paper on the economics of a war indemnity to the
Institute of Bankers (5 March 1919). Addis began by conceding that Germany
ought to pay something in compensation to the allies. However, he stressed that
while the allies might be morally right to exact a large indemnity, insisting on
all of one’s moral rights was impractical. A war indemnity, he said, “should be
moderate in amount and, as Bagehot said of poetry, soon over.” According to
Addis, the interdependence of nations “makes it impossible to cripple Germany
without to some extent crippling British trade.” The aim of policymakers, he
implied, was to restore the pre-war division of labour as quickly as possible.
Addis also pointed out that any German indemnity would be paid not to British
individuals but to the British government, and that governments had very
mixed track records in managing funds wisely. Here, Addis was arguing that the
private sector in Britain would be better off if the proposed indemnity payment
was left in the pockets of consumers in Germany rather than being transferred to
the public sector in the United Kingdom. Classical liberalism, much like
modern-day neoliberalism, is characterised by the view that it is better to
allocate resources via the private sector than through the public sector. Addis’s
belief in the superiority of the private sector was so strong that he was willing to
leave resources in the private sector of an enemy nation than in the coffers of
his own nation’s elected government.
Conclusion and Implications for the Present
As we have seen, Charles Addis continued to espouse ideas associated
with commercial cosmopolitanism throughout the First World War. The fact he
did so publicly and in a social context marked by intense xenophobia is
testament to the power of the ideas that structured his thinking about the world
economy. The fact he and other City figures were able to continue trading,
albeit in a limited fashion, with German financial institutions is suggestive of
the class and sectoral biases that influenced how the British government applied
its laws against trading with enemy alien citizens and firms.
What are the implications for the present of the historical research
presented in this paper? In the more recent past, the members of the TCC have
used ideologies such as neoliberalism to justify their activities, much as Addis
and his contemporaries drew on classical-liberal principles. The ideology of
neoliberalism fit the ethos of the decade or so after the end of the Cold War,
when it appeared to some observers that history had ended (Fukuyama, 1989)
and that that free-market capitalism was destined to dominate the world. In the
1990s, the advent of a unipolar international system characterized by a single
remaining superpower and the absence of really serious conflict between the
world’s leading economies reinforced this view.
Some observers have concluded that we are witnessing a transition from
an essentially unipolar world back to a multipolar international system (Zakaria,
2011; Ikenberry, 2013; Tyler and Thomas, 2014). Some authors have suggested
that the world economy is transitioning to a period of heightened political risk,
economic nationalism (Bracken et al., 2008), and the re-emergence of Great
Power rivalries similar to those that led to the First World War (Glaser, 2011;
Shambaugh, 2012; Coker, 2014). Many academics and policymakers have
analogised the current Sino-American relationship to the pre-1914 AngloGerman relationship, noting that Germany and the United Kingdom were both
geopolitical rivals and interdependent trading partners. Many find this analogy
persuasive because Germany was a rising economic power, particularly in
manufacturing, and was intent on challenging Britain’s longstanding
international hegemony (Mearsheimer, 2010; Nye, 2014). Other observers of
international business focus their concerns on Sino-Indian tensions or the
relations between Russia and the NATO countries. Speaking in Davos in
January 2014, Japanese Prime Minister Shinzo Abe explicitly compared his
country’s current relations with China with Britain’s pre-1914 relationship with
Germany. The alarming implications of his use of this historical analogy were
not lost on the journalists and businesspeople who heard these remarks
(Rachman, 2014).
When juxtaposed against the historical research presented in this paper,
Prime Minister Abe’s comments raise important questions. For instance, how
would Japanese corporations with substantial investments in China respond to,
say, a diplomatic crisis involving the two countries? Equally uncertain is the
likely reaction of US companies such as Apple to serious naval or military
tension between China and the United States. We simply do not know how
Davos Man would respond to rising Great Power rivalries and the militarization
of existing international tensions. The experience of the international banker
Charles Addis, suggest that twenty-first century members of the TCC would be
torn between the need to display loyalty to their home nation and the practical
realities of running companies with complex transnational value chains.
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