. 6
( 20)


The war was a turning point in the evolution of global electri¬cation. Even
though the United States did not enter the war until April 1917, the
country, its businesses, and its banks were immediately affected. From 1914
to the armistice in 1918 (and the German acknowledgment of defeat), many
changes had profound consequences for globalization and for the role of
multinational enterprises and international ¬nance in the electri¬cation
sector. This introduction brie¬‚y lists the key changes, taking the story line
to roughly 1923“1925, when, as the problems germane to the immediate
postwar years seemed to be straightened out, ambitious plans could “ and
did “ unfold.

1. During the war years, everywhere a new nationalism arose, and with
it increased government intervention, including in the electricity
supply industry. Government spending soared as the nations at war
needed to ¬nance their military forces. Taxes mounted and for the
¬rst time started to impact the organization and plans of modern
business. War brought government-induced restrictions on trade
and international capital movements. Britain suspended the gold
standard, as did most other countries (whether the United States did

Authors: Mira Wilkins, William Hausman, Jonathan Coopersmith, Peter Hertner, Pierre
Lanthier, and Luciano Segreto.

Global Electri¬cation

is controversial).2 The precedent for later large governmental
participation in economies was set.
The Russian Revolution occurred. Whereas before the war 90 percent
of the Russian light and power supplies were foreign-owned and
-controlled, that came to an abrupt end.
The German defeat devastated that nation. As we have seen in
Chapter 3, German businessmen were deeply involved in multina-
tional enterprises and the ¬nancing of global electri¬cation.
The collapse of the Russian, German, Austro-Hungarian and
Ottoman empires led to new political boundaries in the postwar
years with substantial repercussions on multinational enterprises and
international ¬nance, particularly in the electric utility sector.
Great Britain was the great creditor nation before World War I, and
British companies and British ¬nance had assisted in the spread of
electri¬cation. That Britain could not remain on the gold standard
during the war meant that it was no longer the pillar of international
¬nance. Its strategic position in the world economy, already being
challenged before the war by the United States and Germany,
deteriorated relative to the United States. Germany, by contrast,
came out of the war ˜˜a loser™™ in every way.
Although Canada joined its mother country in the wartime effort,
the war years pushed it economically closer to the United States,
setting the stage for the future.
The United States came of age in the war years, catapulting forward
as the world™s economically strongest nation. Because it was neutral
from the summer of 1914 to the spring of 1917, its business leaders
were able to move into markets once dominated by Europeans
(principally the British and the Germans). Before the war, the United
States had already ranked as the world™s leading industrial nation,
including a strong electrotechnical sector; but in ¬nance, Britain had
been supreme. Indeed, prior to 1914, the United States had been a
debtor nation in world accounts. By 1918, it emerged as a key
creditor nation.

To some extent, these seven topics overlap; they need to be explored to
understand how the war and its immediate aftermath signi¬cantly shaped
the global development of electric light and power. We will begin by cov-
ering these topics from 1914 to roughly 1923“1925. Then we will consider
the vast spread of electri¬cation from 1923 to 1929, through the formation
of enclaves, the new large enterprises linked with power-intensive indus-
tries, the revived European plans that stretched beyond that continent, the
role of Canadian enterprise, and, ¬nally, in the penultimate section,
the unprecedented experiences of U.S. companies and ¬nancial inter-
mediaries in providing vast amounts of capital for global electri¬cation.
Chapter 4: War, the First Nationalization 127

The concluding section will give a brief overview. In the late 1920s, we will
see the proliferation of holding companies as organizational devices for
assembling both domestic and international capital, engineering skills, and
managerial know-how. Some of these holding companies were by any
de¬nition multinational enterprises. Some had minority stakes where the
investments were part of the ¬rm™s strategy, but there was no attempt to run
the venture abroad. We reintroduce the iconoclastic thought presented in
Chapter 2 that certain of the holding companies made foreign direct
investments (followed strategies as multinational enterprises), but the
companies in which they invested were not in any meaningful sense run
from abroad.3

nationalism, government enlargement,
and the wartime economies
The war and its immediate aftermath resulted in a formidable surge in
government participation in the electrical business in many countries.
National, state, provincial, and municipal governments woke up to the
economic and military signi¬cance of electric energy as industrial demand
to ¬ll wartime needs soared. The war disrupted prewar ¬‚ows of fuel,
equipment, and people across borders, causing shortages and bottlenecks.
In numerous countries, the growing imbalance between supply and demand
stimulated in¬‚ation, raising costs for utilities and curbing the construction
of new facilities. Obtaining adequate fuel and producing electric energy
more ef¬ciently became important priorities, not just at the local level, but
increasingly at the regional and, in some countries, national levels. Nonethe-
less, many nations saw the construction of new electricity supply facilities.
These wartime investments had payoffs for the years to come. For example,
the great expansion in the energy-intensive aluminum industry, a private-
sector activity, resulted in heavy calls for electricity. Likewise, demands for
nitrates for explosives and fertilizers focused attention on electrochemical
processes and the need for more electricity generation.
During the war, government engagements in the electricity supply sector
occurred on several levels:

 Creating new institutions to understand and handle electric power
shortages. Usually these governmental bodies were part of larger
agencies for industrial mobilization (such as the British Ministry of
Munitions, set up in 1915).
 Establishing the magnitude of the problems by surveying generation,
transmission, and consumption patterns. These pioneer government-
sponsored surveys of electrical use formed the initial comprehensive
Global Electri¬cation

 Setting priorities of users to allocate limited amounts of electric energy.
This was a signi¬cant expansion of state jurisdiction.
 Closing the power plants of factories and connecting them to central
stations for more ef¬cient use of fuel. Firms were often wary of giving up
their assured role in return for the promise of utility-generated electricity
(creating inherent con¬‚icts between the state and private suppliers of
 Interconnecting previously separated electrical grids to raise overall
ef¬ciency or send surplus electricity to another area. This was a quick,
low-cost way of increasing available electric energy.
 Promoting development of local or domestic fuel supplies instead of
imported or distant fuels. In a number of countries, this meant the use of
hydroelectric power; and because many of these sites were located far
away from the consumption centers, it was necessary to install sizable
transmission networks. Another approach was the construction of large
thermal power stations generating inexpensive electricity through
improved steam turbines with low-quality ˜˜color coals™™ as fuel and
sent by high-voltage transmission lines to distant points of consumption.
 Providing tax incentives to electricity supply companies in some

These new roles, all sizable enlargements in the prerogatives, interest,
and knowledge of national governments, were directly spurred by the
demands of the war. National security was a powerful reason to do what
previously could not be done. The results were greater electri¬cation during
the war years and certainly afterward.
Obviously, the war™s combatants were the most affected by the war.
Frequent fuel shortages created serious problems. For instance, St. Petersburg
lost access to British smokeless Cardiff coal, which its utility boilers had
been designed for, forcing engineers to ¬nd substitute fuels for the city.
Imports of coal to northern German ports also stopped, compelling the
creation of new internal ¬‚ows of coal from the Ruhr and Silesia to feed war
industries. Wartime shortages of coal and oil raised their prices, acceler-
ating development of hydro power in France, Italy, Japan, Norway, and
Sweden, which stimulated greater government involvement in electri¬ca-
tion in each country.4
The growing gap between supply and demand of electric power stoked
the ¬res of in¬‚ation. Coupled with the uncertainty about whether postwar
demand would continue at the same high level, utilities were understand-
ably leery about adding expensive capacity that might soon become surplus.
Governments gave direct assistance for expanding capacity that was
considered essential. Thus, the British Ministry of Munitions provided
Chapter 4: War, the First Nationalization 129

£3.15 million of the £23 million (almost 14 percent) in capital expenditures
for power stations and transmission during the war.5 In the United States,
the army and navy paid for some improvements in the Pittsburgh and New
York industrial areas, respectively, while the War Finance Corporation
advanced $41 million to utilities. As in many sectors within the U.S.
economy, the government™s role was greatly enlarged.6 In both the United
States and Germany governments developed synthetic nitrates, which
required energy-intensive processes.7
War fostered the formation of new state agencies to solve electricity crises,
and these agencies had lives of their own. Unsurprisingly, the people involved
tried to expand their horizons to shape postwar electri¬cation as well. In
Britain, the Ministry of Munitions created a Department of Electric Power
Supply in June 1916. Major tasks were coordinating the role of electric
power within the ministry, establishing priorities for supply, encouraging
munitions factories to electrify for more ef¬cient fuel use, and in other ways
promoting the rational use of a limited resource.8 The government proved to
be reluctant to retreat from its involvements after the war.
Prior to the war, industrial leaders from Buffalo, New York, had ¬nanced
the development of Ontario Power Co., which was acquired in 1917 by the
newly formed Hydro-Electric Power Commission of Ontario (a body owned
by a group of Ontario municipalities and designed to provide cheap power to
the municipalities). The properties moved from foreign ownership to local
government ownership and control. Because of the nature of the charter, the
Canadian subsidiary of Niagara Falls Power Company, Canadian Niagara
Power Company Ltd., situated nearby, remained U.S.-owned.9 Other key
foreign investments in electric power in Canada (the American ones in
Shawinigan Water and Power and the British ones in the British Columbia
Electric Railway) were sustained during the war, although regulation
increased.10 But James Duke, with his big plans for Saguenay™s development
in Canada, found his project stymied because, as historian David Massell
concluded, ˜˜business and government failed to reach accord on the industrial
use of Lake St. John within the time frame dictated by wartime power
needs.™™11 The ˜˜government™™ involved in this case was not the Canadian
federal government, but that of the province of Quebec. For six years, Duke™s
project was dormant. Indeed, it was provincial governments in Ontario and
Quebec that expanded state activities. In Canada, as in Europe and the
United States, governments were playing a larger role.
The war, as engineers insisted, demonstrated the ˜˜necessity of organi-
zation and rational utilization™™ of all resources.12 This lesson would not be
forgotten, as engineers and government of¬cials tried to make the nation, or
a region within the nation, and not merely the city the basic unit for
postwar development.13 At the war™s end, many governments, backed by
electrical engineers and industrial leaders, were convinced that electri¬ca-
tion was too important to be left to the private market (domestic or foreign)
Global Electri¬cation

or to local governments. The need to look at electri¬cation from a regional
or national level, its importance as a vital economic resource, and its
insatiable demand for funding would make electri¬cation a continuing
object of state interest long after the last shells were ¬red.14
In a number of cases, nationalism re¬‚ected itself in antiforeign measures.
In 1920, in the immediate aftermath of the war, the United States set up for
the ¬rst time a Federal Power Commission (FPC). The legislation (the
Federal Water Power Act) had a clause restricting licenses to build facilities
at federally controlled water sites to ˜˜citizens of the United States . . . or to
any corporation organized under the laws of the United States or any State
thereof.™™ This act was part of a collection of postwar U.S. nationalistic
measures, but unlike others that impacted inward foreign investment neg-
atively, this one proved to be more symbolic than effective, for it allowed
licenses to corporations organized under U.S. or state laws (and said
nothing about the ownership or the board of directors of those corpora-
tions).15 Yet this kind of legislation was indicative of comparable measures
in other countries that appeared to reserve the development of waterpower
resources to their nationals.
˜˜Nationalism,™™ moreover, did not require the exercise of national state
authority; it might mean a domestication on a subnational basis. In
Canada, provinces, particularly Ontario, took the initiative. In 1919,
British Electric Traction Co. sold its af¬liate Auckland Electric Tramways
Co. Ltd. (New Zealand) to the City of Auckland.16 In Australia in 1920, the
State Electricity Commission of Victoria acquired two large power stations
from the English-registered Melbourne Electric Supply Co. Ltd.; these then
became public-sector activities.17 Similar transfers from private sector/
foreign to the public sector/domestic occurred in other parts of the world.
On the whole, however, the commitments during the war years to
enhanced governmental participation in general, and particularly in the
electric utility sector, would in most countries begin to dissipate (but not by
any means disappear) in the war™s aftermath, especially after the sharp
international 1921 downturn and as recovery took place. Yet the precedent
remained, although for most of the rest of the 1920s, with some marked
exceptions, there was a renewed openness to new private-sector activities
on a global scale.
A crucial impact of the war was the rise in taxes, although there were
certain tax incentives to the electricity supply industries. The expansion of
government meant the need for greater tax revenues, which in turn often
necessitated companies™ restructuring of the conduits for international
investments. This was particularly true in relation to British overseas
investments. Thus, the Bombay Electric Supply and Tramways Company
Ltd. was run from England and operated in British currency until 1916,
˜˜when management and currency operations shifted to India for tax
reasons.™™18 Whether tax was the only consideration, and whether
Chapter 4: War, the First Nationalization 131

management actually shifted for ˜˜tax reasons,™™ is not entirely clear. During
the First World War and subsequently, colonial India developed more
independence in its policies, and the Colonial Government of India often
wanted to set its agenda separate from that of the mother country. Moreover,
while the Bombay company shifted to a local currency and seems to have
become domesticated, other British electricity supply companies in India
remained U.K.-registered. This was the case, for example, of the large
Calcutta Electric Supply Corporation Ltd. On the other hand, elsewhere in
the empire, in 1922 the new company Hong Kong Tramways Ltd., with
registered of¬ces in Hong Kong, would replace the formerly London-
registered Hong Kong Tramway Ltd.19 Taxes during the 1920s would have
immense impact on the structure of British overseas investments.

the russian shock
If in many countries during the war years nationalism and government
activities took on new importance, nowhere was this more evident than in
Russia, and here there would be only a very limited retreat in the postwar years
from the commitment to government direction and ownership (a retreat that
did not involve the provision of electricity). When the war began, takeovers of
enemy German properties in Russia occurred early, ¬rst undertaken by city
councils, then by tsarist of¬cials, although they trailed by many months.20 The
councils acted from patriotic motives and to legitimate or accelerate previous
plans for municipalization. The steps by tsarist of¬cials were in keeping with
the expanded government role, but ultimately that did not matter, for after the
Russian Revolution all foreign properties were nationalized. The Russian
Revolution marked the ¬rst case, worldwide, of comprehensive expropriation.
Private-sector investments, domestic and foreign, in the electrical industry
came to an abrupt halt. This was consequential because the substantial prewar
development of electric utilities in Russia had been dominated by foreign,
particularly German, capital. There was no opportunity for other foreign
investors to replace the German role, because the revolution ended all foreign
direct investment and foreign lending to the electric utility sector. From a
foreign investment standpoint, electric light and power suppliers became
domesticated.21 The ˜˜¬rst nationalization™™ in the title of this chapter refers to
the dramatic happenings in a country where once foreign investors had owned
and controlled the principal suppliers of electricity.

takeovers of german assets, responses, protective
measures, and changes
Although some German properties had been seized in Russia even before
the revolution, in general it was unacceptable to belligerents to allow enemy
ownership. Thus, national governments helped themselves to enemy assets
Global Electri¬cation

located within their frontiers.22 This was true in both England and the
United States (after the U.S. entry as a combatant), although the German
investments in electric utilities in both countries had been small, which was
not the case elsewhere. Sometimes there was a cutting through ˜˜corporate
veils™™ to attempt to ¬gure out what was really enemy-owned. Subsequently,
in many instances the victors would sell con¬scated assets to nationals of
their own country. The takeovers of enemy properties occurred at different
speeds “ on occasion not until after the war was over. Because German
businesses had had major investments in electric utilities around the world,
the disposition of these properties had signi¬cant postwar implications. At
war™s end, the Treaty of Versailles seemed to ratify the sequestration of
German properties. Moreover, the treaty required heavy reparation pay-
ments by Germany. Defeat in the war profoundly in¬‚uenced German
business and ¬nance in subsequent years.
Siemens historian Wilfried Feldenkirchen writes that the shares of that
¬rm™s British af¬liate, Siemens Brothers & Co. Ltd., with its Woolwich
factory, were acquired by British shareholders (after expropriation), while
Siemens Brothers Dynamo Works Ltd., with its Stafford factory, was sold to
the newly formed English Electric Co. Both of these were manufacturing
interests, not those in electric utilities. All the extensive Russian interests of
Siemens were con¬scated after the revolution. In France, Italy, and Belgium, in
particular, Siemens ˜˜suffered considerable losses.™™ As Feldenkirchen put it,
˜˜[A]s a result of the First World War, Siemens had lost almost all its foreign
manufacturing facilities . . . .™™23 Siemens also lost interests that it had in public
utilities on the European continent, in Latin America, and in Africa. It was the
same story with Allgemeine Elektrizita Gesellschaft (AEG), the international
business of which was shattered. Yet in 1919, with the war barely over,
Siemens resolved to set up new distribution companies and manufacturing
facilities abroad. As early as 1921, through Siemens-Bauunion, its construc-
tion subsidiary, Siemens won a major contract to build a giant Shannon,
Ireland, hydroelectric plant. Siemens made no investment in the utility,
however, which came to be crucial in the electri¬cation of Ireland.24
There had been sizable prewar German direct investments in Italy in
electric utilities, controlling some 17 percent of the capital invested in this
sector. Italy entered the war in May 1915, ¬rst as an enemy of Austria-
Hungary and then, in August 1916, it declared war against Germany. The
German investments in electric utilities did not survive into peacetime, for
Italy took them over.25 Other foreign (especially U.S.) investors would
come to play a sizable role in assisting the development of Italy™s electricity
supply sector. Many of the German investments in Italy had been through
Swiss holding companies. (Switzerland remained neutral throughout the
war.) The Swiss holding companies™ investments were not taken over and
indeed would grow as some of the con¬scated German assets migrated to
Swiss ownership and control.26
Chapter 4: War, the First Nationalization 133

At the start of the war, Germany had overrun Belgium, and the Belgians
hated the Germans. Dannie Heineman, who represented German (AEG)
interests in Societe Financiere de Transports et d™Entreprises Industrielles
´´ `
(So¬na), stayed in Brussels during the war, ˜˜careful to keep his distance
from the German occupiers.™™ At war™s end, Heineman was forced to resign
from his position in So¬na, but after a brief interlude the Belgians permitted
him to return as the key administrator in the formerly German-controlled
Belgian holding company. His activities in Belgian war relief boded well for
him. The nationalistic Belgian banks had been responsible for insisting that
Heineman step down from his presidency of So¬na; he ˜˜lost his mandates
on the boards of the Belgian electrical companies.™™ Then, Maurice Despret,
president of the Banque de Bruxelles, which had become an important
shareholder in So¬na, helped Heineman to reclaim his leadership. Despret,
however, became president of So¬na; on his return, Heineman did not hold
that title. Nonetheless, it was under Heineman™s direction during the 1920s
that So¬na would assume an even larger signi¬cance in the international
¬nancing and development of electric utilities.27
Spain was neutral throughout the war. Spanish tramways and electric
utilities had long attracted foreign multinational enterprises, although at
the start of World War I, as in Italy, German interests were less than they
had been in prior years and, in the Spanish case, nearly all German
investments were through Swiss or Belgian holding companies (principally
Elektrobank or So¬na).28 Because Germany was not an enemy of Spain, no
attempts were made to take over the remaining German properties. When
the German army moved into Belgium, however, Alfred Loewenstein, who
had been active in the Canadian-registered Barcelona Traction, Light and
Power Co. (BTLP), ¬‚ed to England, where he remained for the duration of
the war.29 With BTLP™s ambitious plans, its multinational ¬nancial struc-
ture, and the Canadian group™s key London broker (Dunn, Fischer & Co.)
in dif¬culty, BTLP went into bankruptcy on December 31, 1914.30 The
bankruptcy notwithstanding, BTLP, through its subsidiary Ebro Irrigation
and Power Co., developed during the war years an integrated hydroelectric
system and electri¬ed the transportation system for Barcelona and the
Catalan region.31 Canadian born, but a British resident, Edward Peacock
took over the reorganization of BTLP.32 Ultimately, Spanish capital
would substitute for some of the foreign debt, but as Peter Hertner and
H. V. Nelles insist, foreign control was not replaced.33 The Talarn dam (on
the Noguera Pallaresa River, near Lleida, Catalonia), then the tallest in
Europe, was begun in 1913 and completed in 1916.34
Fred Stark Pearson, the American principal engineer-promoter of the
Barcelona project, did not live to see the dam in operation. Pearson, who
was so important in the many Canadian entrepreneurial ventures in Brazil,
Mexico, and Spain, died in 1915 with the sinking of the Lusitania.
Nevertheless, his New York ¬rm, Pearson Engineering, continued to take
Global Electri¬cation

part in Canadian ventures abroad, including BTLP.35 Loewenstein, from
his London outpost, kept involved and soon took on a more instrumental
role in BTLP, as well as in other Canadian ventures. In 1917, Morgan
Grenfell, London, advised Morgan in New York: ˜˜We see no harm in
ordinary Banking transactions with this gentlemen.™™36 Loewenstein would
¬gure as a ˜˜market operator™™ during the 1920s, deeply involved in elec-
tri¬cation ventures.37
BTLP emerged from the war a strong company, and in 1920 it merged
with Energ±a Electrica de Cataluna. (In 1913, BTLP had already acquired
´ ´ ˜
control of this one-time French direct investment.)38 While BTLP main-
tained its Canadian-registered of¬ce, Belgian interests “ those of the now
truly Belgian So¬na as well as Loewenstein “ would vie for its leadership.39
By 1922, BTLP was able to obtain its peak ef¬ciency. From that point on, it
produced suf¬cient energy to support the industrialization of the Catalonian
region of Spain.40 From the war years to 1922“1923, the Germans were very
much in the background and not directly involved.
Indeed, overall, German businessmen and bankers at war™s end recog-
nized that ˜˜any investment of German capital outside Germany must, for
political reasons, be handled with utmost caution, inasmuch as the Allies
would be quick to point out that, if Germany can ¬nd foreign exchange for
foreign investment, she should also be able to do so to meet her reparations
bill.™™41 In July 1920, an AEG representative told Hugo Hirst of the General
Electric Company Ltd., London (the British manufacturing ¬rm that had no
relationship with the U.S. General Electric) that ˜˜they [AEG] were not yet
out for a world policy again, because they needed time to recover their
credit and to develop hydroelectricity within Germany to balance the
postwar German coal shortage.™™42
The British had not been competitive in the electrotechnical industry
before the war and worried about German recovery. Within Britain, new
attention was paid to manufacturing, and it was thought that perhaps
Britain would be able to build on what foreign investors had established.
Not only would British owners take over the German (Siemens) factories,
but British interests (associated with Dudley Docker) also bought the
American Westinghouse plant in the United Kingdom. English Electric was
formed to acquire Siemens™s Stafford factory in England, and Metropolitan
Vickers became the new owner of the Westinghouse facility.43 Although the
British hoped to be able to take advantage of Germany™s reduced role, it
proved to be an idle aspiration.
In 1919“1920, Deutsche Bank decided it was imperative to sell Deutsch-
Uberseeische Elektrizitats-Gesellschaft (DUEG), the German-controlled
giant Argentine electric utility, known in Argentina as CATE (Compan±a ˜´
Alemana Transatlantica de Electricidad). This sale was not forced by the
Allies, but rather occurred because of German capital shortages, the Mark™s
depreciation, and Deutsche Bank™s anxieties related to German reparation
Chapter 4: War, the First Nationalization 135

obligations. Argentina “ like Chile, Colombia, Mexico, Paraguay, Spain,
and Venezuela “ had stayed neutral during World War I.44 In Central
America and the Caribbean, after the United States entered the war, Costa
Rica, Cuba, Guatemala, Haiti, Honduras, Nicaragua, and Panama all
declared on the side of the Allies. In South America, only Brazil joined the
Allies (in 1917). Although Bolivia, Ecuador, Peru, and Uruguay did not
become combatants, they eventually severed diplomatic relations with the
Central Powers.45 Argentina, however, had the largest German investments
in all of Latin America, and it was the most prosperous before the war of all
the nations in that region. Three speci¬c reasons motivated the Deutsche
Bank™s postwar decision to sell DUEG: (1) the Bank no longer had ˜˜the
capital necessary to invest in the amounts and with ¬‚exibility required for
the company to perform effectively™™; (2) ˜˜the shares of DUEG were
denominated in Marks, and the depreciation of the Mark meant that
foreign shareholders, especially the Swiss [including the Swiss holding
company Elektrobank], who were heavily invested in the company, were
receiving no dividend and were holding a depreciating asset™™; and while the
wartime and postwar Swiss and German ties stayed close, other foreigners
were now taking advantage of the depreciated Mark to buy shares in DUEG
(the Germans believed that by early 1920 almost 50 percent of the shares
were in foreign hands); and (3) there was a fear that the German shares
might be seized for reparations. The Germans sought to locate a friendly
buyer for these large assets. Deutsche Bank of¬cials considered the Swiss,
but they decided that the latter™s capital markets were ˜˜overstrained and
not of suf¬cient size™™; moreover, the Swiss were under pressure from the
Allies not ˜˜to rescue™™ the Germans. Finally, there was a better alternative.
In 1920, a Spanish banking consortium (including the in¬‚uential private
bank Banco Urquijo) made the purchase. A new parent company emerged,
Compan±a Hispano-Americana de Electricidad (CHADE), and overnight it
became Spain™s largest multinational enterprise.46 It acquired DUEG™s huge
Argentine investments, some smaller ones in Chile, and an electric tramway
operation in Uruguay.47 The transaction was arranged and structured by
none other than Heineman, at the time temporarily expelled from his
Belgian role in So¬na. When CHADE was organized in 1920, the Spanish
banks and Heineman promised the German electrical manufacturers that
they ˜˜would be entitled to 50 per cent of all contracts for CHADE projects
if their prices were competitive, and that Germans could reappear on the
supervisory board in due course.™™48 Soon So¬na and Heineman would be
active in CHADE (as well as in BTLP).
Meanwhile, German interests in the Swiss holding companies were
reduced. Before the war, Elektrobank and Indelec had been intermediaries for
AEG and Siemens, respectively. After the armistice, with the depreciating
Mark, these Swiss holding companies, which had large interests in Germany,
went through crises. By 1920“1921, they, along with other Swiss ¬rms, were
Global Electri¬cation

in ¬nancial dif¬culty.49 Elektrobank collapsed and had to be reorganized.50
Indelec was particularly hard hit by the expropriations during the Russian
Revolution. The Swiss holding companies with German origins tried to detach
themselves from their former parents and in the process became dominated by
Swiss banks. Whereas before the war Swiss leadership had been present, now
Elektrobank and Indelec came under the direct management of large Swiss
banks “ Credit Suisse and Basler Handelsbank, respectively.51 Serge Paquier
writes that only after the defeat of the Central Powers in November 1918 did
Elektrobank and Indelec become genuinely Swiss. At the same time, the
holding companies retained their prewar linkages, even if informal and even if
the German equity interests were in a minority.52 A Credit Suisse represen-
tative was on the board of CHADE, the Spanish company that acquired the
former German assets in Argentina.53 As earlier noted, many of the German
assets in Italy moved to Swiss holding companies.
Motor fur Angewandte Elektrizitat (Motor), Zurich, which was allied
with the Swiss manufacturer Brown, Boveri, had its main investments in
Switzerland and neighboring France, Germany, and Italy. During the war
years, it recognized the need for connected systems within Switzerland and
with the adjacent countries. In the immediate postwar turmoil, like
Elektrobank and Indelec, Motor faced serious ¬nancial troubles and found
its resources strained. Brown, Boveri™s other holding company (jointly owned
with Italian interests), Columbus AG fur Elektrische Unternehmungen, had
its principal interests in South America and did much better than Motor.
During and after the war, Columbus had expanded in Argentina. Indeed, its
Argentine af¬liate Compan±a Italo-Argentina de Electricidad (CIAE, or Italo-
Argentina) “ having completed a central power station in 1916 and electri¬ed
important districts in Buenos Aires “ offered some competition to the giant
Compan±a Alemana Transatla ´ntica de Electricidad (DUEG/CATE) and in the
postwar era to CHADE. Columbus, owing to its pro¬table Argentine busi-
ness, did not pass through the postwar trauma that Motor and most of the
Swiss elektrizita ¨ts-trusts faced. In November 1923, the two Brown, Boveri
af¬liates, Motor and Columbus, merged, forming Motor-Columbus.54
German interests in France ended with World War I. German
shareholding in the French holding company Societe Centrale pour
´ lectrique (SCIE), for example, ceased, but the Swiss and Belgian
l™Industrie E
bank-dominated holdings of Elektrobank and So¬na kept their stakes in
France.55 When the capital of SCIE was raised in 1920, the French banks
Banque des Pays du Nord and Banque Imperiale Ottomane became
shareholders, as did a Spanish banking group associated with CHADE
(including Banco Urquijo). SCIE had had interests in Turkish utilities before
World War I and in 1921 made investments in CHADE. If the intertwinings
of ¬nancial connections had been complex before World War I, they would
become ever more tangled in the 1920s. Companies were frequently
cross-investors “ that is, a parent invested in a ˜˜daughter company™™ and
Chapter 4: War, the First Nationalization 137

vice versa. For example, So¬na maintained in the postwar years its prewar
investment in SCIE; in 1923“1925, SCIE invested in So¬na. A labyrinth of
business groups spanned political boundaries.56
Around the world “ not only in the countries considered above, but in
Chile, Eastern Europe, Finland, South Africa, Turkey, and throughout the
countries in the Caribbean “ the effects of the war on German interests were
profound, with prewar German interests in electric utilities replaced by
foreign capital intermediated by companies domiciled in the homelands of
the victors, in countries that had been neutral, or in countries that had been
occupied by Germany (namely Belgium). Alternatively, German interests
were sometimes replaced by governments, principally local government-
owned utilities. In the new con¬gurations, however, the one-time principally
German-dominated holding companies in Belgium (So¬na) and Switzerland
(Elektrobank and Indelec) stayed on (the latter surviving the debilitating
1920“1921 crisis); the much lessened German in¬‚uence was backstage.

new political boundaries: the end to the russian,
german, austro-hungarian, and ottoman empires
The war™s end saw a redrawing of maps, with new countries carved out of
the former Russian, German, Austro-Hungarian, and Ottoman empires.
The newborn nations faced formidable problems in developing appropriate
political and economic institutions and in dealing with the rampant in¬‚a-
tion that followed the war. The countries were all capital short, and
because electric utilities were capital-intensive, it was not surprising that
foreign investments were sought. Indeed, when the new countries had been
part of empires, foreign (particularly German) involvements in their light
and power facilities already had a presence in varying amounts. Finland, for
example, which achieved independence in 1917 from the former Russian
empire, during the war sequestered the German investments in its territory.
After the Peace of Brest-Litovsk (March 1918), unlike in the many nations
that never returned enemy assets, the con¬scated properties in Finland
reverted to German ownership. Within Finland, however, there was an
eagerness to municipalize utilities, and AEG, which had controlled the
properties prior to the war, readily negotiated. AEG transferred three of its
four major power facilities immediately after the war to Finnish munici-
palities (with appropriate compensation). The town council in Viipuri did
not accept the terms of AEG™s tender, so the fourth power station stayed in
AEG™s possession.57 That AEG was not reluctant to sell its utilities to town
councils was in line with the Germans™ shortage of capital and linked with
German concerns over reparation demands (the same factors motivating
German strategies vis-a-vis the transformation of DUEG into CHADE).
New borders meant that Swiss companies found their ˜˜German™™
investments in Alsace were now under a new ¬‚ag, becoming inward French
Global Electri¬cation

investments.58 Often German prewar investments in electric utilities in
Eastern Europe had been undertaken through Belgian and Swiss holding
companies; these were retained with their German in¬‚uence sharply
reduced. The Swiss Bank Corporation af¬liates™ investments in electric
utilities in Austria-Hungary were now in Austria and in the Kingdom of the
Serbs, Croats, and Slovenes (set up December 4, 1918), which became
Yugoslavia in October 1929.59 Certain prewar French investments in the
new countries were maintained. Some prewar investments in Eastern
European electric utilities of the Gesellschaft fur Elektrische Unternehmungen
(Gesfurel), a Berlin holding company, appear to have been sustained.
Foreign entries into additional eastern European investments did not occur
quickly at war™s end, because the immediate priority in the new countries
lay in creating the basis for sovereign states and foreign (as well as
domestic) investors hesitated in undertaking large investments under con-
ditions of great uncertainty. Yet the demand for electricity was there, and
¬rms in Western Europe and the United States were poised to ¬ll the need.
In general, the newly constituted states in Central and Eastern Europe in
the immediate aftermath of the war excluded explicit German interests
(those few of Gesfurel were exceptional). For example, in Poland, which
emerged anew out of the Russian, German, and Austro-Hungarian empires,
the prewar German involvements in that territory disappeared entirely,
replaced in good part by state enterprises and other foreign interests.
Likewise, in the new states in the Middle East the German presence prac-
tically vanished. For instance, the sizable prewar German interests in
Turkey came to a close, while the French and Belgian ones persisted.
In the aftermath of the collapse of the Ottoman Empire, Greece and
Turkey fought a war in 1921“1922. Greece had some small, inef¬cient
providers of electricity, while, as noted in Chapter 3, approximately
50 percent of Greek electricity was furnished by Compagnie Hellenique ´
´ lectricite (ChdE), an af¬liate of the French Thomson-Houston (the
d™E ´
manufacturer in which General Electric had a minority interest). To sur-
mount the various dif¬culties that the electricity supply industry faced
during World War I and its aftermath, the National Bank of Greece sought
additional funding abroad. In 1923, the British government was involved in
a Greek refugee loan, and it would become helpful in providing capital for
electri¬cation.60 Indeed, in all these developing nations there was a search
for outside money for electri¬cation, but only after 1923“1925 was there
much success in ¬nding new funding.

the british dilemma
During the war and for a few years afterward, as the British had taken over
the Siemens properties in Great Britain, they also sought to help themselves
to German assets farther a¬eld. Because Britain had been the preeminent
Chapter 4: War, the First Nationalization 139

creditor nation before World War I and British registration of free standing
companies had been a way of raising capital, some German prewar inves-
tors had used or maintained British registration as they became owners of
the equity of certain free standing companies in electric utilities. For
example, Germans had been the principals in the very pro¬table British-
registered Victoria Falls & Transvaal Power Co. Ltd., which operated in
South Africa. In the postwar years, these German interests passed to British
ownership and control (with the control now linked with British South
African mining interests). British registration had opened the way for this
A similar situation applied in Chile, where the British S. Pearson & Son
was successful in replacing large German interests. The prewar activities in
electric utilities of the British construction company S. Pearson & Son had
been con¬ned to Mexico, where that ¬rm had accumulated substantial
expertise. Weetman Pearson (later, Lord Cowdray) had stayed involved in
Mexico during the Mexican Revolution, dif¬culties notwithstanding, com-
bining and further developing existing electric utilities there.62 Cowdray
hired the Canadian Alexander Worswick as his chief engineer. (We have
encountered Worswick earlier, in Chapter 3, as encouraging Cowdray to
expand his pre“World War I Mexican investments into electric light and
power.) In 1920, Worswick reported to the British Pearson group that
˜˜there are exceptionally good opportunities for a powerful public utility
company in Chile,™™ where there was splendid hydroelectric capacity and
where the Germans had been solidly entrenched before the war.63
The German-owned Chilean Electric Tramway and Light Company had
been registered in the United Kingdom. As with Victoria Falls & Transvaal
Power Co., registering a company in a ˜˜safe™™ location had been seen as a
form of protection. World War I radically altered that picture. German
properties in the United Kingdom and those with British registration that
operated overseas were taken over by the British government, which
encouraged British capital to replace the German businesses.
This was the case in Chile, even though the country was neutral during
the war. Chile was well known to British foreign investors due to the sizable
long-standing British mining investments there. The Central Mining and
Investment Corporation (CMIC), a British“South African mining group
with Chilean interests, turned to S. Pearson & Son, with its experience in
electric utilities, to take charge of what the British government had con-
¬scated from the German owners. There had been some earlier connections
between CMIC and the British Pearson group. CMIC was formed in 1905
by the big South African mining houses. It has been described as ˜˜an
ambitious reconstruction by Wernher, Beit™™; our readers will recall from
Chapter 3 that Wernher, Beit & Co. had participated in Mexican and Chi-
lean tramways.64 In 1919“1920, the British ¬rms CMIC and S. Pearson &
Son put in a successful bid of £1 million, on a 40“60 percent basis, to
Global Electri¬cation

acquire the former German assets in Chile, once owned by the German-
owned Chilean Electric. CHADE, the new Spanish company, tried to buy
these Chilean properties from Lord Cowdray, who refused to sell after
receiving ˜˜strong representations™™ from the British Foreign Of¬ce. CMIC,
which had favored the sale to CHADE, sold its minority stake in Chilean
Electric to S. Pearson & Son. And in 1920, Chilean Electric merged with
Compan±a Nacional de Fuerza, a Chilean-owned ¬rm, forming Compan±a
˜´ ˜´
Chilena de Electricidad (Chilena). The latter continued to expand. In early
1923, CHADE, which had inherited some Chilean assets from DUEG, sold
them to Chilena.65 Thus, British interests substituted for the substantial
prewar German stakes in Chile. Chilena, the largest electric power com-
pany in Chile, was now controlled by the British Cowdray group.
S. Pearson & Son (the ˜˜Cowdray group™™) had close British government
connections. During the war, the Bank of England had ˜˜forced™™ Lazard
Freres, New York, to sell its interests in its British house Lazard Brothers &
Co. to the Cowdray group. Sir Robert Kindersley “ on behalf of that group “
took charge of this prominent investment house.66 Another key ¬gure in
Lazard Brothers was Robert Brand.67 In December 1916, Brand had pub-
lished a report on ˜˜Industry and Finance,™™ which compared British and
German banks and, in the praise of the latter, wrote: ˜˜There are no ¬rst-
class ¬nancial institutions in London which act as organisers or reorganisers
of companies, or which issue on their own responsibility industrial secu-
rities . . . . In a word, there are no ¬nancial institutions in London whose
aim it is, as it is the aim of the German banks, to act as a kind of general
staff to industry.™™68 Others in England pointed out that ˜˜there was no bank
in England of any size that would offer to ¬nance a new proposition of any
magnitude [something] of the nature of Victoria Falls [& Transvaal] Power
Co., and say ˜Here are a couple of million for you in order that this contract
may be placed with a British manufacturer.™ The Deutsche Bank and their
friends did that operation in that way.™™69
The group surrounding Cowdray hoped to rectify this British de¬ciency
and to ¬ll in where the Germans had acted. The British government was
sympathetic. In 1919“1922, Cowdray restructured his various businesses,
˜˜transforming his organization into a great Investment Trust controlling
and directing numerous enterprises at home and abroad.™™ In 1919, his ¬rm
set up Whitehall Trust Ltd. as a ¬nance and issuing house; Kindersley was
appointed chairman.70 In addition, S. Pearson & Son had two holding
companies for electrical securities: The ¬rst, Whitehall Securities Corpo-
ration Ltd., had been formed in 1907, but not until 1919 did it become the
holding company for S. Pearson & Son™s important interests in Mexican
utilities. The second, Whitehall Electric Investments Ltd. (organized in
1922), became the holding company for Cowdray™s electric utility interests.
From a direct-investment standpoint these interests were con¬ned to
Mexico and the new Chilean business. S. Pearson & Son had controlling
Chapter 4: War, the First Nationalization 141

ownership of Whitehall Securities, which in turn controlled Whitehall
Electric, which raised funds in Britain for the large projects in electric
utilities of the Pearson group; in time, these would extend beyond Mexico
and Chile.71 Whitehall Trust served as trustee for the securities of a number
of companies where there appears to have been no direct investment by the
Pearson/Cowdray group. In 1921, Brand noted that Lazard Brothers had in
the last two years opened branches in Belgium and Spain.72 Why those
nations? Recall our earlier commentary on So¬na, Loewenstein, and
CHADE. Belgium and Spain (temporarily) were the new postwar centers of
¬nance and management of electrical activities abroad, although obviously
Lazard Brothers had broader plans beyond electri¬cation.73
In December 1921, the British industrialist-entrepreneur Dudley Docker
registered in the United Kingdom the private company Electric and Railway
Finance Corporation (Elra¬n). Its directors were Docker™s son Bernard,
Dannie Heineman (So¬na owned part of the capital of Elra¬n), and
Cowdray™s brother, Sir Edward Pearson (representing Whitehall Securities;
Whitehall Electric had not yet been formed). Elra¬n, run by Docker, was an
attempt to create a British industrial bank. Was this to be a bank of the sort
Brand envisaged in 1916? What is most interesting about Elra¬n are the
networks of capital and how interdependent were the British groups.
Elra¬n and its cluster of ¬rms came to be cross-linked with those on the
continent and around the world.74 Dudley Docker was keen on Britain
having its own electrical manufacturing sector; he was deeply involved in
Metropolitan Vickers, which as noted had acquired the British Westing-
house factory.
In 1921, in keeping with the view that British ¬nance should support
British exports, the British parliament passed the ¬rst of a series of Trade
Facilities Acts. These authorized the British Treasury to guarantee both the
principal and the interest on low-interest loans in exchange for the money™s
being used to purchase British goods. These loan guarantees were often
associated with British overseas investments in electric utilities. Thus, for
example, the Treasury guaranteed 51 percent second-mortgage £500,000
debentures for Calcutta Electric Supply Corporation Ltd., a British free
standing company.75
To enhance the nation™s weakened post“World War I global position,
the British government retained wartime controls over capital movements
for a number of years. The governor of the Bank of England had to be
consulted on all foreign securities issues over £1 million, for fear that
capital exports would restrict domestic credit and require a rise in the bank
rate.76 But the controls deliberately exempted security issues by British
concerns to ¬nance direct investments in other countries (especially those
direct investments that would encourage British exports) and in addition
left large institutional investors (with their political clout) free to acquire
foreign securities issued abroad. Investors could also repurchase securities
Global Electri¬cation

originally issued in London and held abroad by foreigners.77 Thus, the
capital controls were far from all-inclusive (and would be relaxed to meet
con¬‚icting priorities). Historian David Kynaston writes, ˜˜[O]ne is struck by
the global ubiquity of the City™s tentacles during the ¬rst half of the 1920s,™™
in spite of the Bank of England™s attempt to limit capital out¬‚ows so as ˜˜to
prop up sterling and hasten the return to the gold standard.™™78 This was the
British dilemma. The British government wanted to restore London™s
position as the world™s greatest ¬nancial center; to do so, it felt it needed to
return to the gold standard. But returning to the gold standard required
government policies antithetical to free international capital markets.
Moreover, by 1924 New York City was coming of age as a locale for
foreign lending, and this took ˜˜some of the strain off London.™™ The British,
however, were not very comfortable with the challenge from across the
The British were not alone, of course, in seeking to go back to the gold
standard and in retaining capital controls. As Charles Feinstein, Peter
Temin, and Gianni Toniolo have written, the attempt to restore ˜˜the gold
standard dominated the ¬nancial policies of Britain, France, Germany,
Italy, Belgium, the Scandinavian countries, Czechoslovakia, and many
other Central and Eastern European nations™™ in the period after the war.
Yet, nowhere were the problems more fundamental to globalization than in
the United Kingdom, for it had been the greatest creditor nation.80 In
addition, Britain wanted to export. Within Britain, there were calls for
more attention to be paid to British industry, seen as being sacri¬ced to
¬nance. Outward foreign investments in electric utilities were caught up in
the vigorous debates.

the role of canadians
Long before World War I, as we saw in Chapter 3, Canadian groups had
developed a specialty in both domestic and international public electric
utility ¬nance; these groups™ prewar activities in Latin America and Spain
had continued through the war and extended into the postwar era. Just as
Cowdray™s Mexican business had persisted after the downfall of Por¬rio
D±az in 1911 and through the war years, so, too, the largest foreign elec-
trical investments in Mexico, those of the Canadian-registered ¬rms “
Mexican Tramways Company, Mexican Light and Power Co. (controlled
by Mexican Tramways), Monterey Railway, Light & Power Co., Mexican
Northern Power Co. (reorganized as Northern Mexican Power and
Development Co. in 1919), and the holding company International Light &
Power Co. “ remained in business, the great unrest within Mexico not-
withstanding.81 Christopher Armstrong and H. V. Nelles tell how the
management of Mexican Tramways and Mexican Light coped with the
antiforeign rhetoric within Mexico and other adversities.82
Chapter 4: War, the First Nationalization 143

In Brazil, the Canadian-registered holding company Brazilian Traction,
Light and Power Co. (formed in 1912) had been ˜˜a creature of the last bull
market before the First World War.™™83 It was established by the ˜˜Canadian™™
group, made up of the U.S. engineer F. S. Pearson, the Canadian
stockbroker who lived in London James Dunn, the Belgian promoter
Loewenstein, and the Canadian William Mackenzie. It combined the earlier
acquisitions by the Canadians in Sao Paulo and Rio. Like this group™s other,
nearly simultaneous promotion, Barcelona Traction, Light and Power
(1911), the Brazilian venture had relied on British and continental stock
markets for funding.
During the First World War, this large Brazilian enterprise was able to
expand, despite such obstacles as the withdrawal of London™s participation
in its ¬nancing. As an alternative, the group had turned to U.S. capital
markets (and to the New York issue house W. A. Read & Co.), but the loan
proved inadequate. By 1917, Brazilian Traction suspended its dividend, as
stockholders ˜˜fumed at the realization that steadily rising revenues in Brazil
were being used to retire debt and extend the plant,™™ rather than pay out
dividends. The depreciation of the Brazilian currency (milreis) meant that
earnings in local currency ˜˜could not be exchanged for enough pounds to
pay the thousands of shareholders in Europe and North America.™™84 After
U.S. entry into the war, when Brazil joined the Allies, its involvement as a
belligerent put it into ever closer relations with the United Kingdom,
Canada, and the United States.85
Once the war was over, in 1919 the Canadian leadership of Brazilian
Traction turned again to London (to Peacock) for a re¬nancing loan.86 In
1919, Peacock™s City connections notwithstanding, the British were not
prepared to authorize new capital out¬‚ows to meet Brazilian requirements.
Thus, Brazilian Traction appealed to its U.S. friends to renew for another
three years the loan earlier issued by W. A. Read & Co. (a ¬rm that would
become, in 1921, Dillon, Read & Co., as its senior partner Clarence Dillon
put his name in the title).87 This reliance on the United States was indicative
of the new Canadian-U.S. relationships. As far as London (the City) was
concerned, as Gaspard Farrer, a director of Barings, put it in 1922, they saw
the business ventures of the late F. S. Pearson “ Brazilian Traction, Mexican
Light and Power, and Barcelona Traction, Light and Power “ as ˜˜all in the
same state of utter impecuniosity [sic]. . . . ™™ And Farrer added, Peacock
˜˜has brought them through in a wonderful way.™™88 In the early 1920s, as
Great Britain struggled to resume the gold standard, it was unable to
accommodate all the calls for capital from abroad.
Indicative of the new Canadian-U.S. relationships are data on all foreign
capital going into Canada. The Dominion of Canada was both an exporter
and an importer of capital. Before the war, British investments in Canada
far exceeded those from the United States ($1.86 billion vs. $417 million).
In 1923, British investments were slightly larger than before the war, while
Global Electri¬cation

U.S. investments had soared past those of the British ($1.89 billion vs.
$2.42 billion).89 These general ¬gures were re¬‚ected in British and U.S.
investments in electri¬cation. Thus, even though some inward investments
into Canada™s electricity supply industry were reduced as regional gov-
ernmental bodies took over, that decline was more than compensated for by
the further increase in U.S. direct and portfolio stakes in this sector (the pie
grew as the percentage of government holdings rose).

the coming of age of the united states
Out of World War I came a dramatic role for the United States and American
business. Its businesses would not only be deeply involved in outward foreign
direct investments, but Americans became leading players in global ¬nance.
The New York Stock Exchange was transformed from an essentially
domestic body to one newly engaged in major international transactions. In
electric utilities, both U.S. foreign direct investments and U.S. ¬nance took on
immense importance in the 1920s. The wartime transformation of the United
States from debtor to creditor nation set the stage.
In 1917, when the British ¬rm Metropolitan Carriage, Wagon and
Finance Co. Ltd. desired to buy the American Westinghouse™s properties in
Great Britain, the latter agreed to sell. Westinghouse™s giant factory in
Manchester had never been a ¬nancial success. Subsequently, the American
Westinghouse also divested its French and Italian manufacturing busi-
nesses. These retreats were, however, unusual and only partial, for
Westinghouse took part in international business, mainly through exports
and a network of licensing agreements (and by the very end of the 1920s, it
would renew its international investments). In the early 1920s, however, it
was not prominent in the international electric utilities ¬eld. By contrast, the
opposite was true of its rival General Electric, which steadily expanded its
multinational business activities in sales, manufacturing, and public utili-
ties.90 GE™s af¬liate Electric Bond and Share Company substantially enlarged
its electric utilities investments abroad, including replacing German interests
in Latin America.
World War I made the U.S. government nervous over German invest-
ments near the Panama Canal. General Electric had organized Electric
Bond and Share in 1905. GE™s strategy had been to combine domestic (U.S.)
operating utilities under a single umbrella in a unit large enough to raise
money in American capital markets; it would supply management and
technical expertise to the constituent companies, resulting in more ef¬cient
operations. The learning experiences developed in the United States could
be employed in its foreign direct investments. Electric Bond and Share™s
pre“World War I foreign investments had been very limited. In 1917,
encouraged by the U.S. State Department, Electric Bond and Share made its
¬rst signi¬cant foreign direct investments, deploying its talents, sharpened
Chapter 4: War, the First Nationalization 145

in the domestic market, and acquiring the electric systems in Panama City
and Colon, Panama. Its next foreign direct investment was in 1920 in
Guatemala, where it purchased from the Guatemalan government the
formerly German-owned electric company that Guatemala had seized as
enemy property during the war. Two years later, Electric Bond and Share
took over an electric power company in Santiago, Cuba, which was rapidly
followed by a larger acquisition of a Havana utility (apparently, once
controlled by German capital). Panama, Guatemala, and Cuba had all
declared war against Germany in 1917.91
In 1920, Electric Bond and Share (with GE™s subsidiary International
General Electric) started to build an electric railway and a hydroelectric plant
for the state government of Santa Catarina in Brazil.92 This was not a direct
investment, which in the early 1920s were con¬ned to Panama, Guatemala,
and Cuba. Electric Bond and Share™s investments should not be seen solely in
political terms. While the U.S. government did prompt the company to invest
abroad, the latter hoped that ˜˜remodeling™™ and expanding the utilities
abroad would result in purchases of GE machinery and equipment. In the
early 1920s, as indicated, Electric Bond and Share was a GE subsidiary.
Electric Bond and Share also hoped that its foreign investments would bring
good economic returns. Its endeavors were in keeping with a fresh surge of
U.S. business abroad. In December 1923, Electric Bond and Share organized
American & Foreign Power to pursue international business.93
The new position of the United States in the world economy was con-
sequential: With Europeans preoccupied and before the United States
entered the war, Americans had moved into markets once held by
Europeans. The American International Corporation (AIC) was symbolic.
In November 1915, Frank A. Vanderlip, president of National City Bank,
organized AIC to seek global opportunities for American business and
¬nance. Its board included individuals interested in international business.
Three of the participants were especially concerned with developing foreign
electric utilities. One was AIC™s president, Charles Stone of Stone &
Webster, specialists in electric utilities. In 1917, Stone wrote, ˜˜The devel-
opment of a country is essentially an engineering task “ the building of
railroads, of ports, of municipal works, of public utilities.™™ He saw America
as taking on that job internationally. Also on the board of AIC were
Charles A. Cof¬n, chairman of the board of General Electric, and Guy
E. Tripp, chairman of the board of Westinghouse Electric.94 Westinghouse,
even though it was divesting its foreign manufacturing operations, still
wanted to export from the United States. At home and internationally,
America emerged from the war as a giant. Huge opportunities beckoned for
electri¬cation. Even in the United States in 1922, only 39 percent of
American homes had electric light and power.95 Abroad, U.S. companies
would assume leadership in spreading electricity worldwide. It was a dawn
of a new age.
Global Electri¬cation

During the 1920s, multinational enterprises established plantations, mines,
and oil properties worldwide; as in times past, the developers, principally
Americans and Europeans, introduced electric power. Thus, familiarity
with electri¬cation would greatly extend beyond the cities to remote locales
around the globe. Rubber plantations to meet the new demands for tires
were set up and expanded in the Dutch East Indies (Indonesia), French
Indochina (Cambodia, Laos, and Vietnam), Malaya (essentially Malaysia),
Brazil, and Liberia, which meant new company towns and electri¬cation.
Other foreign-owned plantations for bananas, sugar, jute, hemp, and so on
necessitated some electri¬cation. To an even greater extent, the develop-
ments in mining worldwide prompted the introduction or expansion of
electricity. Gold mining and electri¬cation went forward in tandem. Other
mining activities, from copper to phosphates, from bauxite to tin, also
attracted new capital and signi¬ed new energy requirements, especially
electricity. Societe Generale, Brussels, through its interests in its subsidiary
´´ ´ ´
Union Miniere, embarked on major copper-mining activities in the Belgian
Congo, and electricity was introduced in the mining camps. Copper-mining
facilities were also begun in Northern Rhodesia (now Zambia). Some of the
most substantial increases in energy-intensive projects were in Chile, con-
nected with the large-scale copper mining by the U.S. companies Anaconda
and Kennecott. By the end of the 1920s, the American-owned (by
Anaconda) Chilean Exploration Company at Chuquicamata owned the
largest hydroelectric plant in South America, while Braden Copper Co.
(controlled by Kennecott Copper) had electri¬ed all its production processes
at its Chilean mine. Oil drilling and re¬ning brought modern infrastructure
to company towns in Iran, the Dutch East Indies, and Venezuela. Foreign
multinational enterprises located the crude oil, developed the resource,
and supplied electric power in the numerous, often remote, company
towns, as they organized the production, re¬ning, transport, and marketing
of the oil.
Many of these ˜˜enclave form™™ developments did not involve central
power stations, although some of them were suf¬ciently substantial to do
so. Typically, power generation plants were built to ¬ll company town
needs, lights for households, of¬ces, and retail establishments, and, more
important, power for industrial purposes. During the 1920s, company
towns multiplied around the world, both within empires and in indepen-
dent countries. Normally, they were connected to a port by a railroad,
which required switching and other electrical apparatus. Port cities needed
electri¬cation. While the railroad or the port city might have public pro-
visions, the company towns were private-sector activities, and electri¬ca-
tion within the towns was commonly introduced by the dominant
company. Sometimes, an entire region was electri¬ed as a result of these
Chapter 4: War, the First Nationalization 147

economic activities.96 The process that had begun before World War I
expanded enormously during, and particularly after, the war. Through the
enlarged span of activities of Belgian, British, Dutch, French, U.S., and, to
a lesser extent, Australian, Italian, and Portuguese businesses, the ¬rst
introduction of electric lights and power occurred within enclaves in many
parts of the world. The ¬nancing of these activities was done concomitantly
with the development of the speci¬c primary resource.

large power consumers
Certain new manufacturing industries required immense amounts of power.
U.S. capital, in particular, became more involved in Canadian electrical
facilities, linked with newsprint, paper and pulp, and aluminum produc-
tion, and, to some extent, electrochemical plants. At decade™s end, American
and German chemical companies had investments in electrochemical and
power operations in Norway.
The U.S.-controlled International Paper (and its holding company,
organized in November 1928, International Paper and Power Co.) as well
as Aluminum Company of America (Alcoa) made sizable investments
where there was cheap power, especially in Canada.97 Securities of Inter-
national Paper and Power (IPP) and its Canadian subsidiary Canadian
Hydro-Electric Corp. Ltd. were traded and bought for their portfolios
by companies such as the U.S.-headquartered Public Utility Holding
Alcoa invested in power sites in Norway and France, but its biggest
foreign involvements were in Canada. Earlier, we wrote of James Duke™s
dreams for the Saguenay development in Canada, which had been put on
hold during the war and in its immediate aftermath. In 1922, Duke ¬nally
reenergized this project when he lined up Canadian newsprint titan William
Price to be a major power customer. Duke™s plans and those of the
expanding Canadian newsprint industry coincided. But Duke wanted
additional consumers for his ambitious hydroelectrical undertaking. Between
1922 and 1924, on behalf of Alcoa, John E. Aldred “ the American banker
who specialized in light and power projects and who before the war was
deeply involved in the Shawinigan Water and Power Company “ sought to
become a participant in Duke™s Saguenay venture. In 1924, Price died, which
freed Duke to explore this possibility. Aldred joined with Alcoa™s chief
executive of¬cer Arthur Vining Davis and opened new discussions with
Duke. Davis was enthusiastic and desired to be more than a power facility
customer; he wanted Alcoa to be an investor, which he achieved in July 1925,
when Duke and Davis signed a formal contract to merge.99 The Canadian
˜˜political processes™™ offered no barrier to the formidable new plans. Then
Duke became ill and early in October 1925, at age 68, he died. Davis gladly
took up full leadership in the huge Saguenay project. In April 1926,
Global Electri¬cation

Alcoa, through its subsidiary Aluminum Company of Canada, purchased
a controlling interest in the Isle Maligne dam (which had been left out of
the 1925 agreement).100 If completed as planned, Alcoa™s substantial
venture would raise Canada™s hydroelectric capacity by 34 percent.101 By
1926, the work was well underway and went forward briskly in the late
1920s. In 1928, Davis spun off Aluminum Company of Canada, placing it
under the holding company Aluminium Ltd., registered in Canada and
owned by the shareholders of the closely held Alcoa.102 Aluminium Ltd.
acquired nearly all Alcoa™s foreign properties, the major exceptions being
the Dutch Guiana (Suriname) bauxite holdings (which supplied the U.S.
Alcoa) and the uncompleted ˜˜lower development™™ on the Saguenay
(which subsequently would be developed and transferred to Aluminium
Ltd. in 1938).103 Because in 1928 Alcoa and Aluminium Ltd. had identical
shareholders (and family members in management), for all practical
purposes, initially at least, they functioned as part of one multinational
Union Carbide was a U.S. chemical company that needed power for its
electrochemical process. It established the Sauda Falls Co. Ltd., a public
utility in Norway. Union Carbide not only had direct investments in Sauda
Falls Co., but also in Meraker Smelting in Norway.105 Because Sauda Falls
Co. Ltd. required substantial capital, in 1925 it had a $4 million dollar
bond issue on the U.S. market.106 Union Carbide did not have to depend on
its own resources to develop this power source.
Also in Norway, the power-intensive nitrate plant of Norsk Hydro sup-
plied French needs during World War I; the remaining prewar (minority)
German interests exited from involvements in Norsk Hydro. In 1927, how-
ever, when Norsk Hydro wanted to convert from the arc to the Haber-Bosch
process, German chemical manufacturers (now combined into I. G. Farben)
returned; in exchange for knowhow and licensing arrangements, Farben
acquired a 25 percent interest in Norsk Hydro, which shares were lodged in
the German ¬rm™s Swiss af¬liate I. G. Chemie.107

electri¬cation in the late 1920s
Revolutionary Russia was the only nation that had inaugurated across-the-
board nationalizations. Elsewhere, by the mid-1920s it became apparent
that government ownership was not the solution to postwar reconstruction,
although government (usually municipal or provincial) ownership had
spread in the war years and in their immediate aftermath and was, in many
instances, not reversed. On a global basis, government (mainly local or
regional) ownership was larger than before 1914.
Not until the mid-1920s were the numerous postwar uncertainties and
dif¬culties seemingly resolved. In¬‚ation had been tamed in Central Europe
and Germany. Britain succeeded in returning to the gold standard in 1925
Chapter 4: War, the First Nationalization 149

and by the mid-1920s other major nations also returned to the gold
standard. Arrangements for government debt rescheduling and settlement
had taken shape. Finally, the private-sector international investments that
had begun to resume immediately at war™s end, but were temporarily halted
by the global crisis of 1921, once again jumped, and soon there was a
crescendo of new involvements. Foreign investments in electric light and
power not only occurred in enclaves and locales offering cheap power, but
also multiplied in Europe, in the western hemisphere, and, to a lesser
extent, in urban areas farther a¬eld. The vast buildup of electric utilities and
the newly rationalized electric utilities systems required immense amounts
of capital, which meant calls on international capital markets along with
the new activities of foreign direct investors. Foreign direct and foreign
portfolio investments marched together (and sometimes separately).
Municipal and state-owned companies looked for capital beyond their
nation™s borders, raising funds in bond markets.
As the decade progressed and German currency was stabilized, it was
unclear whether the Germans would or could reclaim their prominent
prewar role in global electri¬cation. Capital remained scarce. Reparation
payments continued to be due. While the electrotechnical manufacturers
recovered remarkably and engaged in international business, this failed to
herald a strong German return to the international ¬nancing of electric
utilities, although toward the later part of the 1920s German directors
began to reappear on the boards of electric utility holding companies.108 By
decade™s end, principally through Gesfurel, AEG was reported to have
interests in electric utilities in Hungary, Poland, Portugal, Switzerland, and
Germany, which had been a creditor nation before the war, had become
a heavy borrower abroad. German corporate borrowings in the United
States were second only to those of the Canadians.110 Prominent among the
German borrowers were the electrotechnical manufacturers Siemens and
AEG and also key German public utilities, especially the Rhine-Westphalia
Electric Power Company (RWE).111 We will return to a discussion of these
borrowings and the inward (into Germany) direct investments by American
business when we discuss the expansion of U.S. investments in this sector.
In 1927, the British Electrical & Allied Manufacturers™ Association
issued the report Combines and Trusts in the Electrical Industry: The
Position in Europe in 1927, which documented the complex inter-
relationships among electrical manufacturers, electricity supply companies,
and the so-called power ¬nance companies in Europe. While at times not
fully accurate, the report did give a glimpse of the intricate network of
continental European ¬nance. In power ¬nance, the report concluded, ˜˜The
war and its aftermath destroyed much of the system so carefully prepared
by Germany, and allowed Switzerland and Belgium to obtain a hold in
many countries once considered a German preserve, such as Italy, Spain,
Global Electri¬cation

Poland and South America.™™112 The report also stated that by 1927 there
was some revival of German activity in electricity supply, but that it
remained a shadow of what it once had been.
In Switzerland, the prewar companies Elektrobank, Indelec, and Motor-
Columbus (after 1923), once the early 1920s crises were past, maintained
their activities as important investors in electrical securities. Increasingly,
however, both Elektrobank and Indelec became more bank ¬nancing
companies rather than following the Unternehmergeschaft form. Indelec,
its ties to Siemens loosened, turned from its prewar focus on Germany,
Italy, and Russia to place more of its investments in Switzerland, so the
distribution of its participations in 1929 were Switzerland (26.4 percent),
Czechoslovakia (24.3 percent), Italy (22.0 percent), Germany (10.7
percent), France (4.7 percent), and other countries (0.1 percent).113
Regrettably, we have not been able to locate comparable 1929 geographical
information for Elektrobank™s investments, but it seems clear that the ¬rm
was very much involved in Swiss electri¬cation and retained many inter-
national investments, particularly in Europe. When after World War I
Alsace became French and some of its German assets changed nationality,
new business emerged within France, much of it in connection with So¬na,
especially after 1929.114 Elektrobank, its links with AEG weaker but per-
sisting, seemed, however, to have also enabled German transactions that
might not otherwise have been possible. Thus, Thomas Hughes explains
that for the German utility Rhine-Westphalia Electric Power Company to
expand within Germany by acquiring controlling interest in Elektrizitats ¨
AG vorm. W. Lahmeyer & Co. and its subsidiaries, the German utility
RWE ˜˜had to deal with Elektrobank . . . in Zurich, Switzerland, a company
that ¬nanced electrical undertakings and owned shares in Lahmeyer.™™115
Motor-Columbus kept a sizable in-house engineering staff during the
1920s and remained highly entrepreneurial, strongly supporting the Swiss
manufacturer Brown Boveri and taking the initiative in many new electrical
endeavors. Luciano Segreto argues that Motor-Columbus held to the
strategy Unternehmergeschaft throughout the 1920s. In 1926, Motor-
Columbus helped organize in Zurich the Sudamerikanische Elektrizitats- ¨
Gesellschaft (Sudelkra) and in 1928 the Schweizerisch-Amerikanishe
Elektrizitats-Gesellschaft (SAEG). Later that year, it participated in the
creation of Foreign Light & Power Co. Ltd., Montreal, which would
assemble Swiss, Canadian, and U.S. capital for investments in shares of
European and South American electric supply companies. In the last case,
Motor-Columbus, as was becoming increasingly common, used a Canadian
holding company for its international business. In Argentina Motor-
Columbus™s principal involvements were in Compan±a Italo-Argentina de
Electricidad, which expanded greatly, from an output of 79 million kWh in
1921 to 144 million kWh in 1929.116 Foreign Light & Power came to
control Siebenburgische Elektrizitats AG (Transylvanian Electricity Co.),
Chapter 4: War, the First Nationalization 151

the operating company for a Romanian public utility.117 Motor-Columbus
also had many investments in Italy, where Brown, Boveri was active in the
development of the Italian hydroelectric power industry.118 One estimate
of the distribution of Motor-Columbus™s ˜˜participations™™ in 1929 was
Switzerland (46 percent), South America (38 percent), Italy (12 percent),
Germany (2 percent), France (1 percent), and other (1 percent).119
Two prewar Geneva-headquartered Swiss holding companies also
maintained the important international investments: Societe Franco-Suisse
´ lectrique (Franco-Suisse) and Societe Financiere Italo-
pour l™Industrie E ´´ `
Suisse (Italo-Suisse). Both Franco-Suisse and Italo-Suisse took part in the
¬nancing of the large Italian electricity supply ¬rm Societa Meridionale di
Elettricita (SME or Meridionale). Franco-Suisse participated in the ¬nanc-
ing of both Swiss and French electric utilities.120 There were many other
Swiss holding companies.
All of the Swiss ¬rms cooperated with non-Swiss enterprises (and, at
times, with one another) in making international investments that spurred
electri¬cation worldwide. Thus, for example, in 1923 the Lima Light,
Power and Tramways Company Ltd., a poorly managed, capital-short
enterprise with electric tramways and electric power supply in Lima and
Callao, Peru, raised money with a £1.5 million debenture offering in
London by J. Henry Schroder & Co. As we saw in Chapter 3, Schroder had
¨ ¨
sponsored a £1.2 million issue for the same company in 1910. By now,
however, the Peruvian company was under the control of Italian and Swiss
interests.121 The Italian associations appear to have been with Banca
Commerciale Italiana (BCI) and Impresse Elettriche della America Latina
(Latina Lux), while the Swiss ones were with Motor-Columbus. For Lima
Power & Tramways, its preference shares were payable in Geneva, London,
Milan, and Zurich, while interest on debentures was payable in Basel,
Geneva, Lausanne, London, and Zurich.122
In Belgium, So¬na, under the capable direction of engineer Dannie
Heineman, expanded and developed new links with a dispersed group of
partners. In Brussels in 1924, Heineman founded a scienti¬c laboratory to
develop research in the electrical industry. By the mid-1920s, So¬na was
reported ˜˜to control™™ utilities in Algeria, Argentina, Belgium, Brazil,
France, Italy, Portugal, Spain, Thailand, and Turkey. So¬na controlled the
Spanish-registered CHADE, and in 1924, boasting about its activities in
Argentina, Heineman indicated that CHADE had two central stations with
200,000 kW capacity and was planning to replace them with a single, more
ef¬cient central station. That year, Motor-Columbus™s af¬liate Compan±a ˜´
Italo-Argentina de Electricidad had a smaller central station of 35,000 kW.
Together, Heineman claimed that these two companies, with their three
power stations, provided Buenos Aires™s 2 million inhabitants with the
same amount of power as was supplied (inef¬ciently) by 32 central power
stations in London, England, with a population of almost 4.5 million.
Global Electri¬cation

¬gure 4.1. Dannie Heineman (1872“1962)
Note: Heineman was an electrical engineer by training who led So¬na for ¬fty years
(1905“1955). The date of the photograph is unknown.
Source: Photograph courtesy of AIP Emilio Segre Visual Archives.

A new large central power station was completed by CHADE in Buenos
Aires at Puerto Nuevo in 1928.
Everywhere, So¬na sought to rationalize production by creating grids
within countries. It worked to regroup, reorganize, and make more ef¬cient
the production and distribution of electricity. It declared a ˜˜war on waste.™™
It set up new holding companies to raise money for electri¬cation. Very
active in France, So¬na developed new relationships with the French
Thomson-Houston group and retained its connections with Societe Cen- ´´
´ lectrique (SCIE), with Societe Generale d™Entreprises
trale pour l™Industrie E ´´ ´ ´
(SGE), and with Louis Loucheur and Alexandre Giros, who joined the
So¬na board of directors in 1925. SGE had interests in Turkey and North
Africa, as well as in France. So¬na was involved in the 1927 enlargement of
the capital of Societe Financiere pour le Developpement de l™Electricite,
´´ ` ´ ´
´ lectrique, Paris (Finelec), which
Paris, and its successor, Societe Financiere E
´´ `
assembled funds for French electri¬cation. The latter became involved in
several French colonial ventures. And as the decade progressed, Heineman
Chapter 4: War, the First Nationalization 153

began to contemplate a European grid, crossing national frontiers. Despite
(or perhaps because of) its global reach and its ambitious plans, So¬na lost
money in 1926, 1927, and 1928.123
Thus, So¬na sought additional ¬nancing on an international scale. On
October 19, 1928, a new company was established “ Trust Financiere de `
Transports et d™Entreprises Industrielles “ and on January 22, 1929, So¬na
completed the merger with that company, transferring all of its assets and
liabilities as well as its name. What emerged was Societe Financiere de
´´ `
Transports et d™Entreprises Industrielles (So¬na), the so-called new So¬na.
Investors in many countries subscribed for shares in the greatly enlarged
capital of the new So¬na, making the enterprise extraordinarily interna-
tional in both its ownership and its activities. Its shares were owned by
American, Belgian, British, French, Italian, Spanish, and even some German
¬rms. The headquarters and formal registration remained in Belgium,
and Maurice Despret became president of the Conseil d™Administration.
Heineman continued as ˜˜Administrateur-Delegue, President du Comite
´´ ´ ´ ´
Permanent.™™ Indeed, the New York Times discussed the broad participation
and concluded that Heineman and Oscar Oliven in Berlin ˜˜are today the
two outstanding ¬gures in the public utility industry outside of the United
States. They together handled the details of the plan which resulted in the
creation of the new company.™™ Oliven had been friends with Heineman
since they attended the Technical College of Hanover together in the 1890s.
Over the decades, they would stay close, as Heineman became involved in
So¬na and Oliven remained with Allgemeine Elektrizitats Gesellschaft
(AEG) and the German holding company Gesellschaft fur Elektrische
Unternehmungen (Gesfurel). Oliven™s role in the new So¬na symbolized the
renewed participation of AEG and Gesfurel in international business.124 In
1929, one of the British representatives on the So¬na board was Reginald
McKenna, chairman of Midland Bank; McKenna was a major actor in the
British electrical manufacturing merger in 1929 (see below). Dudley
Docker, although not on the So¬na board, was probably Heineman™s
principal British ally. After the So¬na reorganization, U.S. stock interests in
So¬na were reported to be 18 percent: 8 percent held by the ˜˜Morgan-
General Electric group,™™ 6 percent by the ˜˜Kuhn Loeb (Westinghouse?)
group,™™ with the remaining 4 percent comprised of independent U.S.
shareholders.125 Moody™s Manual (Utilities) 1930 noted that the new
company ˜˜controls important electrical enterprises in France, Spain,
Portugal, Germany, Italy, Turkey, Belgium, Far East, Argentina and owns
interest in many industrial concerns.™™ Moody™s provided a list of forty-two
principal subsidiaries and participations by So¬na, a number of which were
holding companies that in turn held additional public utility properties. The
only explicit Asian involvement listed was in Tramways et Electricite de ´
Bangkok, a Brussels-registered ¬rm. In the convoluted structures of 1920s
¬nance, Banque de Bruxelles was listed in Moody™s Manual (Utilities) 1930
Global Electri¬cation

as one of the ˜˜principal subsidiaries and participations™™ of So¬na.126
Actually, the Banque de Bruxelles, with Despret as its representative, con-
tinued in the leadership of So¬na.
Whereas before the First World War equipment for So¬na™s utilities had
come mainly from Germany, in the 1920s its supplier network was more far-
reaching. While its 1920s associations with the French Thomson-Houston
group were friendly, FTH was far from its sole “ or even principal “ supplier.
Dudley Docker lobbied Heineman to buy from British manufacturers.127
Throughout the decade, Heineman traveled widely, making extensive inter-
national contacts in high places, but at the same time retaining his German
friendships.128 By 1927, the Berlin holding company Gesfurel had direct
representation (Oliven) on the So¬na-controlled CHADE board, and CHADE,
of course, had important Argentine operations. At decade™s end, Oliven was
placed on So¬na™s board.129
In 1929, So¬na organized the Canadian holding company Canadian
International Light and Power Investment Company (Caninlipo), Toronto,
to hold the securities of its French af¬liates and to raise money on their
behalf.130 Note the tangled web of enterprises, involving a Belgian holding
company, a Spanish holding company, operations in Argentina, German
holding company interests, Canadian holding companies, and French
holding and operating companies, along with American, British, French,
Italian, and German shareholdings in the parent Belgian holding company
as well as in a number of the operating companies. Other groups (not
mentioned) were also cross-owners of many of these securities, including
those in CHADE. In addition, Gesfurel was reported to have by 1927
minority interests in Tramways et Electricite de Constantinople and the
Compagnies Reunies Gaz et Electricite, Lisbon. Although the Germans had
´ ´
become involved once more, Belgian interests were ˜˜the deciding factor™™ in
the chain of command. Complexities and networks notwithstanding, So¬na
was a Belgian enterprise, with Dannie Heineman in charge.131
So¬na spawned imitators. Belgian entrepreneur Alfred Loewenstein saw
that ¬rm as his model. In the early 1920s, he made plans to set up a utilities
holding company to take over the old ˜˜Pearson group™™ of companies (here
the reference was to American engineer Fred Stark Pearson).132 In 1922,


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