Politiek en historie. Opstellen over Nederlandse politiek en vergelijkende politieke wetenschap

[p. 271]

Capitalism, colonialism and the underdeveloped areas
The political economy of (anti-) imperialism^*

A century ago, capitalism and imperialism were widely regarded as inherently opposed to one another. The word imperialism was coined by English liberals around 1860 to stigmatize the vainglorious militarism of Napoleon iii's Second Empire. French expansionism was then felt by many to constitute a major threat to British security, so much so that the British army started to build fortresses on the Kentish and East Anglian Coasts to ward off any possible attack. But then, in 1860, Liberals like Cobden and Chevalier succeeded in uniting the political foes in a commercial treaty which was pregnant of free trade doctrines. The example was soon followed by other European powers. Was better proof conceivable that commerce finally was on the way to be among nations, as among individuals, a bond of union and friendship’?¹

In this same era, colonies were often regarded with Disraeli as millstones round European necks, unprofitable charges on the national exchequer, and undesirable objects of international discord. Cobden had warned his compatriots that their national pride alone gave cunning people the chance to extract money for militarist and colonialist adventures.² Did not the figures show that emancipated colonies like America, and self-governing dominions like Canada and Australia, were Britain's best customers by far, unlike other colonial dependencies of a rapacious mercantilist era? Did not the opening up of Japan in 1854 and the breakdown of the xenophobic seclusion of Ottoman Turkey and Imperial China for the sake of progressive traders augur well for the modernization of these antiquated structures, now given the

* Based on a more extensive thesis presented to Professor S.E. Kleerekoper at the Faculty of Political and Social Sciences, University of Amsterdam, 1953. Originally published in: E. de Vries, ed., Unbalanced Growth: A Century of Disparity and Convergence, The Hague: Publications of the Institute of Social Studies, Series Maior, Vol. X, Mouton, 1962, 133-165, a volume marking the Tenth Anniversary of the Institute of Social Studies in The Hague.

1 Smith, The Wealth of Nations, 1, 436.

2 Thornton, The Imperial Idea and its Enemies, 33. Elsewhere Cobden had described the Empire as ‘but a gorgeous and ponderous appendage to swell our ostensible grandeur without improving our balance of trade’.

[p. 272]

chance to become equal members of a cosmopolitan universe? Would not free trade, allowing the unfettered working of the principle of comparative costs, most quickly increase the wealth of all nations?³

Within half a century this image drastically changed.

A resurgent protectionism destroyed the ideal picture of a world in which individuals rather than states would be the basic units of economic exchange. For a time some lip-service was still paid to the ultimate ideal. Protection, so it was argued, was only a temporary expedient, necessary while infant industries were being nursed to maturity. But once (re-)introduced, protection itself created strong vested interests, powerful enough to block any attempt at restoring free trade. In addition, the danger to which cheap Russian and American grain exposed the agricultural world in the latter part of the 19th century, rallied another powerful sector of the national communities in favour of protectionism. The very principle of comparative costs, working in a world market was challenged by those who, like Germany's Nationaloekonomen, argued that socially balanced economies within the existing state boundaries were preferable to the theoretical gains of international specialization.

The rapid rise of Germany and the usa as powerful industrial competitors, in turn, kindled somewhat similar doctrines in the bastion of free trade, Britain itself. Influential publicists came to argue in favour of a Greater Britain, linked to the Mother Country by a programme of what later ideologues were to call ‘Imperial Free Trade’. Protection of the home market and safeguarding colonial markets, so ran their exhortations, were necessary if Britain were to retain its prosperity and political predominance. The argument met with small favour from the Little Englanders. True to the tradition of the classical economists, anti-colonialists found as little economic profit in neo-Mercantilism as their forefathers had found in Mercantilism. Yet, the economic argument stuck. Once the problem of colonial expansion came to be argued in economic terms, protagonists and adversaries alike came to attribute causal significance to economic interests. If the first pointed to the profits which were to be reaped by the entire nation, the latter attempted to show that small profiteering groups tried to make the nation bleed for selfish interests.

By the end of the 19th century these diverse currents crystallized into a full-scale theory of imperialism which linked colonial conquest to the machinations of capitalism. Originally a term of abuse flung at French immorality,⁴ the word had already been converted into a domestic invective by British opponents of Disraeli's expansionist policies. As so often occurs, the term was upgraded by those denounced. Protagonists of British expansion proudly took up the label Imperialist, while the anti-Imperialists continued to castigate the word, as they castigated the programme. Until the end of the century, however, colonial conflicts continued to be regarded as incidents in which

3 Cf. Thornton, Ch. i; Robinson and Gallagher, Africa and the Victorians: The Official Mind of Imperialism, Ch. i; Winslow, The Pattern of Imperialism: A Study in the Theories of Power, Ch. ii, iv; Winslow, The Cambridge History of the British Empire, ii, 689 ff.

4 See especially Koebner, The Concept of Economic Imperialism, 1-29.

[p. 273]

local interests and distant European Chancelleries had a greater stake than nations.

The Jameson raid and the Boer War itself changed all this. Britain, so it seemed, stepped down publicly from its self-chosen pedestal of high morality into the dirty world of Realpolitiker, out for prestige and profit at the bidding of the capitalists of the South African Rand. Did not the South African War show that capitalist search for profit, colonial domination and international aggressiveness were one? The image of the Pax Britannica stood condemned as a pure ideology. In 1900, a Congress of the Socialist International, meeting in Paris, passed a resolution affirming that the development of capitalism led inexorably to colonial expansion, and hence to intergovernmental conflicts, imperialism, chauvinism, militarism, cruelty and exploitation of subject races. Two years later, J.A. Hobson published his Imperialism: A Study, which quickly became a classic document in the English language. The book attempted to show how the underconsumptionist tendencies of capitalism, and the profiteering proclivities of individual capitalists, were the cause of the New Imperialism. In the next decades similar doctrines were elaborated, in greater detail and with more analytical rigour, by a number of Marxist authors in Germany and Austria, of whom Rudolf Hilferding, Otto Bauer, and Rosa Luxemburg were the most prominent. They were finally presented to the layman in loaded phrases by Lenin in his Imperialism, the Highest Stage of Capitalism (Petrograd, 1917, published in other European languages in 1920).

The theories which attributed colonialism to capitalism were formed to a considerable extent post factum. Colonial conquest had been practically completed, before the theories were formulated. This theoretical (as well as emotional) lag has since persisted. Political developments and academic criticism by economists and historians may have eroded the academic respectability of Marxist theories. They may have failed as an explanation of past history. But their emotional impact has continued to be such that they had, and continue to have, substantial influence on the history of the relations between the West, the Communist block, and the newly emerging nations.

This circumstance makes for a natural division of this chapter into two parts. In the first section, attention is paid to some intellectual flaws and historical errors inherent in histories which seek to explain the new colonialism of the late 19th and early 20th century by an exclusive reference to capitalism and capitalists. This is necessary, on the one hand, to obtain a better perspective of the basically political phenomenon of Imperialism, and, on the other, to reveal certain misunderstandings about the nature of the economic relationships which existed over the past century between the developed Western nations and the still underdeveloped territories in Asia, Africa and Latin America. Then, in the second section, a short summary is given of the impact which such theories have had on the political outlook of

[p. 274]

the historical actors in the West, the Communist world, and the developing areas.

Section I
The economic theories of imperialism

The theories of imperialism which attribute European colonial expansion to the specific workings of capitalism, logically divide into two groups.

One body of theory holds that imperialism was an absolute condition for European capitalism, as a system, to grow. Of this theory, three distinct variants deserve separate treatment: one variant concentrates on the need of capitalism to establish, by imperialist policies, exchange relationships with non-capitalist economies; a second group holds that capitalism needed investment opportunities which could only be obtained and safeguarded through forceful conquest; finally, a third group of more limited theories stresses the role of colonial economies as a regulator of the European business cycle in a particularly crucial state of capitalist development.

Against these somewhat deterministic theories, a second body of theory concentrates less on capitalism as an economic system, as on capitalists as a particularly powerful elite, bending European states to colonial adventures which brought them profits not otherwise obtainable.

As these theories are all economic explanations of a political phenomenon, they should be considered from two angles, that of economic theory and that of historical explanation. In principle, these aspects are independent of one another. The economic analysis may be valid, or faulty, and yet the historical connection of capitalism and imperialism may hold, or not hold, in either circumstance. The ultimate question at stake is the familiar one: did and do economic factors ultimately determine political relationships of such fundamental importance as the origin, the extension, and the demise of the colonial system?

I The expansion of capitalism and the existence of non-capitalist economies

The most detailed formulation of the theory that capitalism could only continue to expand because non-capitalist territories and social groups provided it with markets, was the theory of Rosa Luxemburg.⁵ She laid down her views particularly in two publications: Die Akkumulation des Kapitals (1913, English edition by Joan Robinson, 1951), followed by a polemical pamphlet, Die Akkumulation des Kapitals, oder Was die Epigonen aus der Marxschen Theorie gemacht haben: Eine Antikritik (1915).⁶

5 Earlier traces of this doctrine were found in Marx, Rodbertus and Sismondi. In his preface to the second volume of Capital, Engels explicitly referred to Sismondi's Nouveaux Principes de l'Economie Politique, Vol. 4, Ch. 4; ‘Ainsi donc, par la concentration des fortunes entre un petit nombre de propriétaires, le marché intérieur se resserre toujours plus, et l'industrie est toujours plus réduite à chercher ses débouchés dans les marchés étrangers, où de plus grandes révolutions les attendent’, cf. Neisser, Economic Imperialism re-considered.

6 One of her earliest utterances on the subject was during a short, but noticeable intervention at the Congress of the Second International in Paris (1900), when she first exposed the theory that imperialism was logically the last stage of capitalism. See also: Laurat, L'Accumulation du Capital, d'après Rosa Luxemburg, suivi d'un aperçu sur la discussion du problème après la mort de Rosa Luxemburg; Sternberg, Der Imperialismus; Idem, Der Imperialismus und seine Kritiker; Winslow, chs. vi and vii.

[p. 275]

The fundamental theoretical question posed by Rosa Luxemburg was: how could capitalism continue to expand, at a time when workers lacked adequate purchasing power, and capitalists limited their consumption of surplus value because of their ever-present drive for further accumulation of capital? Marx himself had wrestled with this question. At the end of Volume ii of Capital, he had attempted a solution by constructing an arithmetical scheme of capital accumulation. This scheme rested on certain specific assumptions, however, which had been rejected as unrealistic by Marx himself in other parts of his writing. Marx and his disciples had therefore continued to look for a solution for the prima facie absence of effective demand in capitalism. They had mentioned gold, credit, additional labourers employed in capital formation, a growing population, or foreign trade as possible explanations of the continued expansion of the system. But so far, all these attempts to solve the dilemma within the general framework of the Marxist scheme had not been very satisfactory.

After reviewing these suggestions, Rosa Luxemburg rejected them all. She concluded that Marx's assumption of a closed economy, which consisted of capitalists and labourers only, was in itself unrealistic and untenable. Capitalism, she stated, could not exist as a self-contained system. It could only continue to grow by being parasitical on non-capitalist economies. Only if non-capitalist producers (like farmers at home or producers in virgin areas overseas who had not yet been brought within the ambit of capitalist production) continued to buy otherwise unsaleable capitalist products, could capitalism develop. Consequently, once the entire world were drawn fully into the system of capitalist production, capitalism was bound to succumb to its inner contradictions. ‘Imperialism’, to Rosa Luxemburg, was therefore ‘just as much a historical method to prolong the life of Capital, as the most certain means by which it will be set a definite end in the shortest possible timespan’.⁷

7 Luxemburg, Die Akkumulation des Kapitals, 361. (My translation.)

Theoretical flaws in the argument

Theoretically, Rosa Luxemburg's theory suffered from three basic defects: 1) she underestimated the extent to which investment could provide a continuous effective demand without increasing at the same time the output of consumer goods in search of effective buyers; 2) like other Marxist writers, she also underestimated the general increase of consumer demand which accompanied the rise of national income in European countries; and, finally, 3) even if the tenability of her argument were granted quod non, the solution she offered that non-capitalist buyers could provide the effective demand which was supposedly lacking in a closed capitalist system was little but an escape from the problem she herself proposed to elucidate.

1. The relation between investment and consumption. - Rosa Luxem-

[p. 276]

burg had indignantly rejected Say's Law, which held that each new product which is brought to market creates its own demand. Investment, she argued, could not but increase the eventual production of consumer goods. As these goods would find no buyers, investments themselves would necessarily come to a stop. In putting this, she disagreed with certain passages in Marx's own writings; and she disagreed emphatically with the theories of the Russian Legal Marxist, Tugan Baranowsky.⁸ Reviewing Marx' writings, Tugan Baranowsky had concluded that in a closed capitalist system no difficulties need arise provided capitalists were to accumulate indefinitely, in one continuous process of investment for investment's sake. He had granted that crises might and did arise in the process, when partial overproduction of certain investment goods might lead to temporary dislocations. But he had not hesitated to state bluntly that, as long as investments were to continue unabated, consumer demand could, theoretically, even actually decrease without causing an underconsumptionist crisis.

Rosa Luxemburg had branded this theory a picture of a ‘tireless merry-go-round turning in a vacuum’,⁹ as a ‘vulgarized-economic fata morgana’.¹⁰ But was it? The 19th century showed empirically the long distance which separates the laying of the basis of industrialization and the production of consumer goods. The establishment of heavy industries in Western Europe itself, the building of steamships, the construction of railways over the globe, were one long haul of investment, financed effectively by the ‘waiting’ of Europeans, their non-consuming of a rising national product, which was basically geared to increasing investments. To quote the famous passage from J.M. Keynes' Economic Consequences of the Peace:

The railways of the world, which that age built as a monument to posterity, were, not less than the Pyramids of Egypt, the work of labour which was not free to consume in immediate enjoyment the full equivalent of its efforts.
Thus this remarkable system depended for its growth on a double bluff or deception. On the one hand the labouring classes accepted from ignorance or powerlessness, or were compelled, persuaded, or cajoled by custom, convention, authority, and the well-established order of Society into accepting a situation in which they could call their own very little of the cake, that they and Nature and the capitalists were co-operating to produce. And on the other hand the capitalist classes were allowed to call the best part of the cake theirs and were theoretically free to consume it on the tacit underlying condition that they consumed very little of it in practice. The duty of ‘saving’ became nine-tenths of virtue and the growth of the cake the object of true religion. There grew round the non-consumption of the cake all those instincts of puritanism which in other ages has withdrawn itself from the world and has neglected the arts of production as well as those of enjoyment. And so the cake increased; but to what end was not clearly contemplated. Individuals would be exhorted not so much to abstain as

8 Tugan Baranowsky, Studien zur Theorie und Geschichte der Handelskrisen in England, ch. i, vi, vii an viii.

9 Luxemburg, Die Akkumulation des Kapitals, 259.

10 Ibidem, 246.

[p. 277]

to defer, and to cultivate the pleasures of security and anticipation. Saving was for old age or for your children; but this was only in theory - the virtue of the cake was that it was never to be consumed, neither by you nor by your childeren after you.¹¹

In the country of Tugan Baranowsky itself, Marx' own disciples were to learn and to prove in the 20th century that investment is indeed for a considerable time independent (and actually preventive) of increased consumer demand.

2. The rise in consumer demand. - If investment could supply part of the effective demand of a rising national product, there was equally an increase in consumer demand. As the Revisionists were to recognize, the Marxian tenet of an absolute, or even of a relative, increase in the poverty of the masses under capitalism (Verelendung) did not actually take place in Western economies. In fact, workers' incomes have risen at least pari passu with the rise in national income generally. It is somewhat strange to believe with Lenin that such an increase was only possible through imperialist gains, and to hold at the same time that imperialism was necessary to get rid of the surplus products of the Western economy itself.

3. The fallacy of extra-capitalist demand. - As she over-exposed the contradictions of a capitalist economy, Rosa Luxemburg paid strangely little attention to the effects of her own solution: trade with non-capitalist buyers. It is clear from her analysis that she meant mutual exchange, not investments or cyclical effects. Even a child knew, she wrote, ‘that goods when they are exported, are not destroyed, but exchanged, and that from those non-capitalist areas and strata generally other goods are bought in their place which serve to provide the capitalist economy again with producer and consumer goods’.¹² Or, as she wrote in another passage: it was not necessary ‘to destroy a certain portion of surplus value, to chase it from the earth’, all was a matter ‘of realization, of the metamorphosis, hence of the “changed form” of surplus value’.¹³ But if so, why did her dei ex machina, non-capitalist buyers and sellers, fundamentally alter the problem? If the capitalist economy was provided in return with consumer goods, from where then would suddenly spring the effective demand for them? It is no answer to say that non-capitalist products were different, or more attractive; the most characteristic quality of capitalism has proved to be its extraordinary potential to diversify products, to stimulate the desires of new consumers. Even many products of colonial economies were only discovered through Western invention. If, on the other hand, capitalists obtained producer goods in return for the goods which they themselves sold to non-capitalist buyers, what else, then, is this but an investment transaction, exactly as Tugan Baranowsky had described?

11 Keynes, The Economic Consequences of the Peace, 17-18. It is little realized that the overwhelming proportion of European foreign investments by 1914 was not in private enterprise, but in foreign government bonds, railway stocks, and investments in public utilities, hence in infrastructural provisions, cf. Feis, Europe the World's Banker (1870-1914) 27.

12 Luxemburg, Antikritik, 81.

13 Luxemburg, Die Akkumulation des Kapitals, 238.

[p. 278]

The theory in the light of actual data

In Table 1 figures are given of the percentage of colonial trade for each of the main imperialist powers between 1894 and 1934 with particular areas. From these figures it is quite clear, that throughout the heyday of imperialism, colonial powers traded far more with areas they did not control than with their own colonies.

Tabel 1. Trade with colonies and self-governing territories of the main imperialist powers, as a share of their total foreign trade (1894-1934)

		Imports	Exports	Total
Great Britain	1894-1903	21.27%	30.42%	24.92%
	1904-1913	25.71%	34.75%	26.73%
	1919-1928	33.01%	40.53%	36.07%
	1929-1934	32.89%	44.62%	37.22%
France	1894-1903	9.86%	11.20%	10.49%
	1904-1913	10.58%	12.61%	11.53%
	1919-1928	10.80%	14.91%	12.72%
	1929-1934	16.43%	24.06%	19.74%
Germany	1894-1903	0.10%	0.35%	0.21%
	1904-1913	0.37%	0.62%	0.48%
	1919-1928	-	-	-
	1929-1934	-	-	-
Italy	1894-1903	0.04%	0.30%	0.16%
	1904-1913	0.21%	1.55%	0.75%
	1919-1928	0.49%	1.66%	0.97%
	1929-1934	0.56%	2.47%	0.94%
Japan	1894-1903	1.66%	2.72%	2.15%
	1904-1913	6.85%	7.80%	7.30%
	1919-1928	17.29%	14.40%	15.97%
	1929-1934	23.12%	20.84%	22.02%

Data: Grover Clark, The Balance Sheets of Imperialism: Facts and Figures on Colonies, 1936

Also, they generally found little difficulty in selling to colonies dominated by another power. Conversely, non-colonial powers were rarely excluded from markets, whether in the imperialist mother countries, or in the colonies of the latter. Trade followed first of all not the flag, but effective demand. Most of the effective demand was increasingly concentrated, not in colonial territories, and certainly not in the more recently acquired territories which were the poorest of all, but in rival capitalist markets and in the large areas of the Americas and Australasia, to which European capital and European labour migrated. Britain consistently sold more goods to Germany than to India; its total trade with Germany was almost two-thirds of all its trade with the British dominions. Within the Empire, the self-governing dominions (which often raised tariffs against Britain) were far more effective markets than all

[p. 279]

other colonies together. The trade of recent colonial powers, Italy, Germany, and Japan, with their own dependencies, was pitifully small. If foreign markets were indeed necessary for their massive expansion of industry, colonial rule was patently not.¹⁴

14 The gross trade figures of Table 1 are, admittedly, only a rough measure. They do not reveal the particular type of goods traded, some of which were vital for further European and American industrialization. Nor do they give a clear indication of the relative effect which colonial ties had, after all, on the channels of trade. It can be shown that British trade with the Empire was much larger than it would have been on the basis of simple probability; in contrast, British trade with Germany was less than would have been probable taking the level of German development and population into account (see Deutsch, Towards an Inventory of Basic Trends and Patterns in Comparative and International Politics, 46-48). The network of personal, commercial and financial interests which linked colonial powers and their colonies had considerable effect on where investments and contracts for works in the colonies went. Colonial administrators, European settlers, and those sectors of the indigenous elites which became Westernized, provided a rising demand for Western consumer goods. Conversely, many colonial products were handled by European trading companies. Also, colonial administration often sought to develop the economies of their adminstrative areas, partly to find sources of revenue, and in doing this they naturally relied on metropolitan goods and skills. It is one thing, however, to argue that economic ties did develop, but something rather different to state that colonial domination was established for this specific purpose. If anywhere, the post hoc propter hoc fallacy confuses the issue of causation in this instance.

2 Imperialism and the need for investment opportunities

Rosa Luxemburg had paid little attention to colonial investment (as against colonial trade) in her analysis. Before she wrote, J.A. Hobson (Imperialism, A Study, 1902), Otto Bauer (Die Nationalitätenfrage und die Sozialdemokratie, 1906), and Rudolf Hilferding (Das Finanzkapital, 1910) had given more attention to the supposed need of capitalism to find investment opportunities. As we saw earlier, investments were indeed a means to fill a possible gap in the effective demand within capitalist economies, and Hobson had stressed this fact. He began his analysis by pointing out the fantastic discrepancies between the cost of imperialism to the tax-payer and the actual profit to be derived from colonialism, summing up his conclusions as follows:

First, the external trade of Great Britain bears a small and diminishing proportion to its internal industry and trade. Secondly, of the external trade, that with British possessions bears a diminishing proportion to that with foreign countries. Thirdly, of the trade with British possessions the tropical trade, and in particular the trade with the new tropical possessions, is the smallest, least progressive and most fluctuating in quantity, while it is the lowest in the character of the goods it embraces.¹⁵

Nevertheless, Hobson said, imperialism created investment opportunities which were profitable to influential capitalist circles, and an imperative necessity for capitalism to maintain full employment.

His theory was best set out in the following passage:

An era of cut-throat competition, followed by a rapid process of amalgamation, has thrown an enormous quantity of wealth into the hands of a small number of captains of industry. No luxury of living to which this class could attain kept pace with its rise of income, and a process of automatic saving set in upon an unprecedented scale. The investments of these savings in other industries helped to bring these under the same concentrative forces. Thus a great increase of savings seeking profitable investment is synchronous with a stricter economy of the existing capital. No doubt the rapid growth of a population accustomed to a high and an always ascending standard of comfort, absorbs in the satisfaction of its wants a large quantity of new capital. But the actual rate of saving, conjoined with a more economical application of forms of existing capital, has ex-

15 Hobson, Imperialism, 36.

[p. 280]

ceeded considerably the rise of the national consumption of manufactures. The power of production has far outstripped the actual rate of consumption, and, contrary to the older economic theory, has been unable to force a corresponding increase of consumption by lowering prices.¹⁶

As we shall see presently, Otto Bauer and Rudolf Hilferding based their theories of imperialism in the main on different grounds. Unlike Hobson or Rosa Luxemburg, Hilferding did not hold an under-consumptionist theory of capitalism; he agreed with Tugan Baranowsky that capitalism could theoretically expand indefinitely as long as capitalists continued to buy one another's product for the sake of further investment. But Bauer and Hilferding, too, attributed considerable influence to the need of surplus capital to find investment opportunities. Hilferding particularly stressed the declining rate of profit, caused by the increasing capital intensity of the production process (which diminishes the amount of surplus value produced per unit of constant capital). He furthermore believed that the concentration of ownership in trusts, would increase the amount of idle capital in search of investment.

16 Ibidem, 66.

Theoretical flaws

Whatever its motives, it was argued that capital export was an imperative need for capitalism; without it, so the argument ran, total production was bound to be restricted to levels well below the effective productive potential of the capitalist economy.¹⁷

Against this, it should be reiterated, in the first place, that consumption did not decline in the west, not even relatively, as Hobson and Hilferding, just as Rosa Luxemburg, still held to be true.

In the second place, stating that capital was sent abroad in the heyday of imperialism is not the same thing as saying that it could not have been employed at home. The rates of profit on British foreign investments tended to be not at all, or only marginally, higher than those on home investments during the imperialist era.¹⁸ If Hobson or Hilferding had maintained that not the fact but the lure of greater profits held out by investment bankers made capital move from the main capitalist countries to distant territories, they would probably have been correct. But then the actual returns greatly disappointed the investors. The export of capital was in that case not an economic necessity, but a psychological deception. It is an interesting commentary on the Zeitgeist that Marxist writers, imperial propagandists, and capitalist investors, were equally wrong in overestimating the profits to be obtained from colonial investments.

In the third place, the complex mechanism of long-term capital movements is often misunderstood. Some authors have pointed to the supposed need of capitalist economies to dispose of their own surplus products by

17 Cf. Hobson's preface to the 1938 edition of Imperialism.

18 Cf. Feis, ch. 1. According to studies by R.A. Lehfeldt, returns on British colonial investments were on the average (defaults taken into account) 0.2% higher, those on foreign investments a little over 1% higher than prevailing domestic rates. Data for France are even more telling: the yield on domestic securities at the price of issue in 1889 was 4.20% on domestic securities against 3.85% on foreign securities. As A.K. Cairncross remarks in his Home and Foreign Investment, 1870-1913, 225: ‘The French rentier - the most cautious of capitalists and the most credulous - was content with a gilt-edged return on securities in which no self-respecting gambler would have dabbled.’ In all, France lost two-thirds of the net total of her foreign investments over the imperialist period, ibidem, 224. See also Blaug, Economic Imperialism Reconsidered, 340-341.

[p. 281]

foreign investments. This would ceteris paribus imply an active balance of trade on the part of capitalist nations, and a passive one on that of the underdeveloped areas. If true, this would imply that during the imperialist era more aggregate value was shipped to these latter areas than was drawn from them - a situation which could hardly be described as exploitation. Others have argued, on the contrary, that nations like Britain were essentially rentier nations. They have adduced in evidence the circumstance that Britain tended to have a passive trade balance during most of the 19th century. But in doing so, they have often confused the balance of trade with the balance of payments, and forgotten to take into account British invisible exports which allowed a continuous new flow of capital from Britain to outlying areas. There is some evidence that in the period after 1870 dividends from earlier investments and new foreign investments cancelled one another out, so that in fact little net transfer of goods and services occurred.¹⁹ Profits, in other words, were in toto reinvested. This increased the indebtedness of non-European areas to Europe, but did not necessarily increase the economic burden on their economies. In so far as these investments and re-investments increased the productive capacity of the debtor nations, beyond that necessary to pay the increased interest, the economic advantage was theirs. This is, of course, even more true at the moment that borrowers defaulted in their public debts, or nationalized the assets of private foreign investors within their boundaries.

Finally, it is rash to conclude that capital would not eventually have been invested at lower rates on the home market, if a surplus of capital had pressed for employment there. Nor is it enough to say, that the one-sided character of early industrial capitalism (textiles and steel!) prevented capitalism from finding markets in a satiated domestic economy. There may not have been a market for more railways, but there could have been for other steel products. It is even arguable that the availability of foreign investment markets postponed the differentiation of the European economies, which might otherwise have been forced at a much earlier stage of industrial development.

19 Brand, The Struggle for a Higher Standard of Living: The Problem of the Underdeveloped Countries, 260 ff.

The theory in the light of actual data

Much more important than to engage in speculations on what might have been is it to test the theory against the actual facts of foreign investment in the imperialist era. Even if it were granted that capital exports were a sine qua non for Western development, quod non, this still falls short of proving that capital exports were only possible through imperialism. Actually, the entire theory that ‘imperialism is the policy of forcefully creating opportunities for capital export’ is a classical example of a tautology. The definition is postulated. Then it is proved to one's satisfaction that capitalism needed capital-

[p. 282]

Figure 1. Geographical Distribution of British, French, and German Foreign Investments, 1913-1914
Source: E.W. Stanley, War and the Private Investor, 1936, p. 11

[p. 283]

exports. As capital exports could only be effected through imperialism, capitalism inexorably produced imperialism. The entire argument is a non sequitur. It is a matter of historical record that the greater part of Western capital exports did not go to areas controlled by the imperialist powers.

Figure 1 gives the geographical distribution of the investments of the three largest colonial powers in 1914, Britain, France and Germany. Table ii shows the foreign debts of the main debtor nations in 1929-1930, divided between dependent territories, self-governing British Dominions and independent states. Table iii shows the main capital importing nations, ranked according to their per capita indebtedness to foreign investors during the same years.

Table 2. Foreign indebtedness, in billions of dollars, of the main debtor nations in 1929-1930

Colonies		British Dominions		Independent states
India	2.8	Canada	6.1	United States	4.7
Malaya	1.6	Australia	3.8	China	3.3
Cuba	1.3	South Africa	1.3	Germany	3.2
all others less		all others less		Argentina	3.1
than 0.5 billion		than 0.5 billion		Brazil	2.6
				Mexico	2.3
				Great Britain	1.9
				Chile	1.3
				Japan	1.3
				Belgium	1.2
				Spain	1.0
				all others less
				than 1 billion

Source: E.W. Stanley, War and the Private Investor, 1936, p.13

Table 3. Total long-term investments from abroad per capita of population, 1929

Dollars per capita
Canada	623	Denmark	102
Australia	592	Honduras	85
New Zealand	555	Paraguay	84
Cuba	360	Dominican Rep.	83
Chile	310	Bolivia	67
Uruguay	303	Sweden	65
Argentina	268	Brazil	64
South Africa	163	Peru	63
Belgium	149	Switzerland	62
Norway	143	Persia	56
Mexico	141	Finland	52
Costa Rica	129	Germany	52
Venezuela	127	Guatemala	51

Source: E.W. Staley, War and the Private Investor, 1936, p. 14

These tables establish beyond doubt that the main imperialist powers ex-

[p. 284]

ported more capital to independent states than to their own colonies. Conversely, non-imperialist powers have found it perfectly easy to lend their monies abroad without resorting to any imperialist policies. The country with the highest per capita foreign investment was neutral Switzerland, to Lenin the one country destined to stay a capitalist museum once the world revolution would be successful. Again, whereas many capital-exporting countries showed little tendency towards imperialism, various capital-importing countries, such as Russia and Italy, did so. It is somewhat hard to believe that their imperialism was one of international capital pressure by proxy. Should one really stretch the alleged cosmopolitanism of capitalism so far, as to believe that the patently political investments of Czarist Russia near the Yalu River by the 1890's,²⁰ or the deliberate manufacturing of investment interests in Tripolis by ruling Italian circles in the early 1900's,²¹ was the indirect outcome of the investment need of Dutch, or French, or Swiss capitalists?

The proposition that capitalism needed imperialism to continue to expand is therefore disproved by the facts. It was not necessary for European capitalists to re-conquer the usa to force it to take their money: the money was as secure as circumstances permitted, the eagerness great. Nor did European investors have to resist the granting of self-government to British dominions, for fear that they would lose their investments or investment opportunities in those areas. Imperialism is not equal to capital investment abroad, unless one accepts a tautological definition. Nor should political control be equated with economic ‘control’ except by those who want to know the answer before they investigate the actual record in each particular circumstance.

20 Staley, War and the Private Investor, 55-62.

21 Ibidem, 62-70.

3 Imperialism as a regulator of the business cycle

It has been argued, incidentally, that imperalism was an important factor in the regulation of the business cycle of Western capitalism, during a period when other means to ensure a regular growth pattern of the capitalist economies were not readily available. Before the turn of the century, Tugan Baranowsky had laid considerable stress on the important function of overseas exports to renew an expansion of the capitalist economies after a depression. Almost sixty years later, A.K. Cairncross again found ‘plenty of evidence that it was foreign rather than home investment that pulled Britain out of most depressions before 1914’.²² Zimmerman and Grumbach have given a detailed econometric analysis, purporting to show that between 1890 and 1910 imperialism provided a particularly happy expedient to compensate for a lack of effective demand at home during a depression by a rising demand abroad.²³ It has also been shown, in more structural terms, that there tends to be a peculiar relation between foreign trade and economic development according to a rather specific pattern. Foreign trade has generally

22 Cairncross, 188.

23 Zimmerman and Grumbach, Saving, Investment and Imperialism: A Reconsideration of the Theory of Imperialism, 1-19.

[p. 285]

been small for stagnating, under-developed economies. As economies have expanded, foreign trade has tended to increase disproportionately, to decrease again relatively against the domestic sector as and when the economy has reached a certain level of maturity. Such theories make it possible to hold that imperialism, while not a perennial necessity of capitalist enterprise as Rosa Luxemburg and other Marxist authors held,²⁴ was yet a temporary requirement of capitalist development at a certain stage.

This argument, too, is deficient as a general explanation of imperialism. In the first place, the same tautological fallacy often underlies these theories as it does the more absolute theories which hold that foreign investments were not a cyclical but a structural necessity. Typically, Zimmerman and Grumbach define Imperialism as ‘the foreign policy, which tries usually with the aid of military operations but sometimes with political intrigues only, to get control over under-developed countries to guarantee an outlet of merchandise or capital in those territories’. But in their more detailed econometric analysis, they do not differentiate between trade with colonies and trade with territories outside Europe and the United States generally. Nor do they analyse in detail the relative importance of self-governing territories as against colonial dependencies within the British Empire. It is difficult to find figures to prove or disprove what they themselves have only assumed, i.e., that colonies rather than extra-European economies in toto provided the cyclical regulator they seek to establish. Tables given by Werner Schlote about British trade in the imperialist era show little difference in the relative percentages of trade within the British Empire and that with other trading partners, in years of depression as against years of prosperity.²⁵

Also, is it so surprising to find that foreign investments increased in times of a slackening investment demand at home? Unlike the post World War i period when, according to the findings of Zimmerman and Grumbach, home and foreign investments rose and declined together, the period between 1890 and 1910 was one of long-term prosperity. Is it not rather logical that during steady employment foreign buyers and foreign borrowers had better chances when a temporary lull in the domestic economy made producers and investors more sensitive to the opportunities of foreign markets? If phrased differently: foreign investments were more popular in times of a decline in domestic investment demand than in periods when demand at home was high, is the conclusion quite so striking?

If attention be paid to the long-term effects of capital investments for European economies at this time, it is likely that more attention should be given to the technical qualities of European industries. Was it really only imperialism which gave investment opportunities? Or railways? Why did European colonies not save Europe from the depression of the thirties? And why has the end of colonialism not thrown Europe into a long depression? As Schumpeter correctly observed in 1942, before the demise of colonialism:

24 Deutsch and Eckstein, National Industrialization and the Declining Share of the International Economic Sector.

25 Schlote, British Overseas Trade from 1700 to the 1930's, 162.

[p. 286]

‘We must not confuse geographical frontiers with economic ones’ ... ‘The conquest of the air may well be more important than the conquest of India was.’²⁶

26 Schumpeter, Capitalism, Socialism and Democracy, 117.

4 Imperialism as the policy of finance capitalists

The most important proponents of the theory that imperialism was essentially a consequence of attempts by rival capitalist trusts to conquer the world market, were Otto Bauer and Rudolf Hilferding. Cartels and monopolies, so they argued, were only possible behind protectionist walls. Monopolies allow capitalist interests to exploit the home-market. Both producer and banking interests which have a strong general influence on the economy, therefore do much to create cartels and monopolies. The increased monopoly price, however, curtails production, and increases cost per unit. To achieve the economies of large-scale production, capitalist manufacturers are quite willing to dump some of their products on foreign markets. Tariffs prevent competition of their own cheaply sold products on the home market. Offering cheap manufactures abroad will moreover help to oust competitors from foreign markets, and hence to extend the sway of monopoly.²⁷ The extension of the political area of a given monopoly-controlled economy may also enable particular trusts to dominate precious raw materials. Basically, then, imperialism is a conflict between cartel- and monopoly-dominated governments for the world market and for basic raw materials. The larger the economic area which is protected, the more powerful the position of the monopolies of particular countries. Hence, an unceasing drive for futher expansion: imperialism (or, as Shaw had it, Emporialism).

27 Unlike the earlier theories, this theory can easily explain the fact of the increased volume of trade between fully industrialized states.

Theoretical flaws of the argument

Although couched in economic terms, the basis of the argument is highly political. The unmentioned assumption is that capitalists have ultimate political power to force states to do their bidding. The history of Western capitalist development since the writings of those authors, has shown that both economic and political forces have successfully resisted the tendency towards an absolute concentration of power which Hilferding's concept of Finance Capital assumed. Traders have not become so dependent on industrial interests as he suggested they were becoming, nor industrial interests so much at the beck and call of banks as his theory of Finance Capitalism implied. Monopolies have been established, they have also been broken up. Practically all monopolies have been effectively challenged by producers of new products or independent producers of the same product. Nowhere has Hilferding's Generalkartell of a Gesamtkapitalist been realized in practice. Capitalist interests have continued to be rivals. Some have sought protection, others have combatted it.

[p. 287]

The raw material argument, although prima facie more realistic, is also not acceptable. Cartels of raw material producers have often been coveted, they have as regularly failed, because of the disparity of the geographic and economic interests to be combined. The very assumption of a world cartel based on a particular product conflicts with Hilferding's assumption of Imperialism as a contest of rival trusts and imperialist states for exclusive political and economic domination. Generally, raw material producers have not made difficulties in selling goods indiscriminately to the highest bidder, whatever his national origin. Actually, therefore, the raw material scare was not an economic argument, but one emotionally, and unrealistically, political.²⁸ Enemy states, so it was held, should never be in a position to choke the lifelines of a particular economy. But, then, overseas possessions would only help those who had the military means to preserve them in times of war. Perhaps the loudest clamour for raw material control was heard in Germany. But Bismarck, for one, knew that German colonies would be of little help, as in case of war they could only be hostages to a British enemy.

The limitations of this article, make it impossible to pursue further the very complicated issue whether protectionism is a necessary condition, or at least a powerful instrument, for rapid economic growth. On the one hand, the experience of a number of smaller states, oriented towards a large measure of free trade, would seem to militate against a too easy affirmative answer. On the other hand, the strongest argument of those who attribute colonial underdevelopment to the political control by European states is the affirmation that a lack of independence on their part prevented colonies from erecting protective barriers to nurse their own industries (as did the usa and some British dominions). In this context, one might note an interesting reversal of the protectionist argument. The Liberal economist, Lionel Robbins, argued in his The Economic Causes of War (1939) that the danger of protectionist policies by other colonial powers made British colonial conquest necessary. Not to ensure trade, but to prevent others from closing open doors, British colonial policy, he held, had been morally justified!

28 It is true that certain raw materials were only found in particular parts of the world. The unceasing drive of industrialism has had much to do with the penetration of the economic enterprise and the political authority of the industrialized nations in these regions. But if one should wish to draw a historical-materialist conclusion from this, the ‘sinner’ is more industrialism itself than any particular form of economic organization, like capitalism, socialism or fascism. Soon after 1917, Soviet Russia knew the value of authority over Baku oil. Political independence did and does little to soften the social impact of autochtonous industrialization.

The actual record

Not without justice, Hilferding's theory has often been called a typically German theory. The imperialist disposition of heavy industrial interests in Germany, the powerful influence of banks on industry, and the German historical economists' genuflexion for protection and supposedly necessary Raumwirtschaften have had few resemblances in other imperialist countries.²⁹

This influence had two consequences: it made the Austrian and German Marxist writers exaggerate the bellicose disposition of capitalists generally,

29 Hancock has moreover correctly pointed out in The Wealth of Colonies, that the trustification of the German economy postdated the original imperialist drive of the 1880's in Germany. Britain was imperialist without pressure of domestic monopolies. Domestic monopolies in the usa, on the other hand, did little to make that country imperialist.

[p. 288]

(whereas they in practice only thought of certain imperialist capitalist interests in Germany); and having proved capitalist causation to their own satisfaction, they came to underestimate the influence of other imperialist forces. Although disapproving of German imperialism, they were nevertheless led to take German imperialist complaints about ‘a place under the (colonial) sun’, the clamour for raw materials, and the militarist urge for a strong army and a newly built navy, as representative of conditions in capitalist states generally. Writing in the aftermath of the Boer War, they thought they had seen the undisguised face of capitalist imperialism, instead of an exceptional and controversial manifestation of British colonial policy. They projected the German situation on to Britain and France, even though the economic structure of industry and the banking world in those countries was dissimilar,³⁰ and their political outlook fundamentally different. Consequently, they failed to take note of the strong anti-imperialist tradition of important British capitalist interest. They neglected to draw their conclusions from the fact that French imperialism was not so much the product of the small-scale bourgeois investor in a country which would not be a mature capitalist economy for another sixty or seventy years, as of the revanchist and monarchist Right.³¹ For similar reasons, they also failed to see that political interests in practice manipulated French foreign investments. No foreign loans were permitted on the French exchanges without government approval, and some, like the famous Russian Loans, were little but the buying of uncertain political favours with the aid of private savings, presently to be victimized on the altar of political expediency.

A deductive explanation of imperialism from capitalist interests generally, therefore falls to the ground.

Even so, it is still possible to hold that although capitalists as a group could not be proved to be imperialists par excellence, individual capitalists pushed governments into certain concrete imperialist adventures. Obviously, particular interests can always be found to have played a role in particular colonial adventures. (So could explorers, missionaries, anti-slavery humanitarians, etc.) In view of the fairly widespread anti-capitalist attitude of the Western intelligentsia, it is no wonder that proof of influence has often been constructed by historians to imply actual causation.

Yet here again, renewed historical enquiry was to show differently. Eugene Staley has subjected all possible cases in which historians have held capitalist interests responsible for imperialist policies, to detailed scrutiny in his important study, War and the Private Investor (1936). His cases make interesting reading. He showed how time and again capitalist interests have been used by imperialist interests to manufacture pretexts for intervention. Of course, individual capitalists have often ridden the crest of imperialist waves. But like Cecil Rhodes, they have also often spent millions for no apparent financial, though much emotional, satisfaction. Rhodes' Chartered

30 Cf. Feis, passim.

31 In view of the importance which Hilferding and others attached to the relation of imperialism and protectionism, it is interesting to note that a recent study by Brunschwig, Mythes et Réalités de l'Impérialisme Colonial Français, revealed that French protectionist circles were generally opposed to colonialism, for fear of competition of colonial products on the French home market.

[p. 289]

British South African Company never paid a single dividend in all thirty-three years of its existence. Nevertheless, its shares continued to be popular on the London exchange. Georg von Siemens was to call Rhodes' invention of £ 1-shares ‘die Trägerin des neu-britischen Imperialismus’. No better example could be found of ‘capitalists’ sacrifice of money for none but emotional return, amongst practically all strata of British society. Staley's basic conclusion is unmistakable:

...Private investments seeking purely business advantages (i.e. unmotivated by political expansionism, balance of power strategy, military considerations or other reasons of state) have rarely of themselves brought great powers into serious political clashes. It is where an aura of political ambitions has attached to their investments, and especially where the investments have been pushed for political reasons from the start, that most of the dangerous investment frictions between great states have occurred... Private investments have usually, in actual practice, been subordinated by governments to factors of general political or military strategy, which have a more direct bearing on power. Thus it is that private investors have received strong, even outrageously exaggerated governmental backing where they have been tools and agents of power and prestige politics while other investors, whose projects seemed to run counter to the governmental line of political endeavour, have experienced official indifference or even active opposition.³²

32 Staley, 360, 362.

5 The changing perspective on imperialism

The earliest and most effective criticism of the entire body of Marxian theories of imperialism was Schumpeter's Zur Soziologie der Imperialismen (1918-1919, translated into English under the inadequate title of Imperialism, 1951). Schumpeter's essay had the basic merit of assessing recent imperialist policies in the light of general history. He reviewed extensively past cases of expansionist empires, from the Egyptians and Assyrians onwards. Although he found certain economic interests to have played a role in some cases, he discovered as many or more in which this was not the case. Hence, Schumpeter defined imperialism as ‘the objectless disposition on the part of a state to unlimited expansion’. Schumpeter sought the roots of aggressiveness in particular social structures, differing from one expansionist policy to another. Instead of imperialism, in the singular, one should therefore speak of imperialisms, in the plural. Realistic analysis moreover showed that the main forces in 19th century expansionism were feudal remnants rather than capitalist interests, such as the nobility, the officer castes, nationalist memories of past military prowess, tariff policies from a mercantilist past, etc. To Schumpeter, capitalism was, on the contrary, essentially a rationalizing and individualizing force which diverted natural aggressive instincts to non-po-

[p. 290]

litical fields like economic enterprise. In fact, imperialism should therefore be regarded as an atavistic phenomenon.

Schumpeter's essay was dated. It partook of the fairly optimistic atmosphere of a pre-nazi era, and was still firmly, if negatively, tied to the debate about the capitalist causation of imperialism. In later life, Schumpeter was himself to reject the rosy implications of his own theory. In 1919 he still thought popular imperialism a logical impossibility. Later he came to associate himself with the theory about ‘social imperialism’ of another former Marxist, the Austrian Karl Renner.³³

If Schumpeter called in early history, contemporary history, too, was moving away from a close connection between capitalism and militarist expansionism. The rise of Nazi-Germany, of Fascist Italy, and of ultra-nationalist Japan made many observers aware of the unwarranted optimistic element in the theory that imperial aggression was simply the product of a passing social system, like capitalism, or particularly ‘evil’ men like capitalists. Some still tried to salvage something of the earlier theories by interpreting fascism as a particularly vile issue of a dying capitalism. They pointed to the fundamental anarchical nature of capitalism as responsible for the long drawn-out depression of the ‘thirties’. If it had not been for this basically chaotic feature of capitalism, and for the active anti-socialist support by individual capitalists, madmen like Hitler could never have risen to power by mobilizing the masses and showing that war preparation only could restore full employment. In themselves, such arguments already presupposed a host of sociological and psychological factors entering into the explanation. Since then, the later developments of Nazism in which capitalist interests were sacrificed to racial megalomania, did much to undermine this last stand of a capitalist theory of imperialism. At the same time, the New Deal and Keynesian economics restored the image of Western economies as being after all viable, self-sustaining social systems. Finally, the new expansionism of the ussr came to free capitalism from its exclusive responsibility for imperialist policies.

Thus, three aspects of history have broken the specific link between capitalism and imperialism in the minds of many: (a) the more ready awareness of imperialist expansionism before the rise of capitalism, (b) the contemporary insight that capitalist interests could be anti-imperialist forces, and non-capitalist interests imperialist forces, and (c) the pervading fear for a future in which national interests rather than economic interests, ideology rather than capital exports, weapons more than trade monopolies, seem to endanger human existence.

This reorientation cannot but fructify renewed enquiry into the actual causes of the establishment (as of the demise) of the colonial system.³⁴ Much more influence is now being attributed, for instance, to the mechanism of intra-European power politics at this period. We have come to see that the

33 Schumpeter, Business Cycles, deel 2, 696, n.; cf. Winslow, The Pattern of Imperialism, 235.

34 Cf. Winslow, The Pattern of Imperialism, passim, and Fieldhouse's interesting Imperialism: An Historiographical Revision, 187-209, which was brought to my notice when I was finalizing the manuscript of this chapter.

[p. 291]

Free Trade Era was only a short and not even a complete pause in European expansionism. Between 1815 and 1870 a peculiar pattern of European politics made for a period of relatively little international conflict. At the same time the British Navy ruled supreme. It is now realized that the advent of steamships, and later the discovery of oil, changed the requirements of global strategy. We more readily appreciate the long-term effects of the opening of the Suez Canal in 1869, which gave Britain a new preoccupation in her traditional wish to safeguard the lifelines of the Empire, notably against Russian expansion. In 1870, also, the Franco-German War profoundly upset the international scene. Henceforth, a complicated and shifting system of international alliances was to determine world politics. It was this new internal European power game which made Bismarck somewhat reluctantly stake a claim for German colonies in 1884 and 1885. He thus provoked anew the scramble for colonies, not for gain, only to some extent for prestige, and to a large measure, at least on the British side, for fear that rival powers might enter the areas concerned.

Perhaps the finest example of this new historiography is the study by Robinson and Gallagher. In their Africa and the Victorians: The Official Mind of Imperialism, they have carefully documented the actual motivations of British statesmen and officials during the imperialist epoch. They stress the basic role of India in the British Empire, as the military counterpart of the British Navy, an ‘Eastern barrack in the oriental seas’. As long as communications with India were safe, no British statesman was greatly interested in further imperialist exploits. England, Derby was to say, had enough black subjects already. Africa itself was little but an ‘empty’ space, by-passed on the way to India and the Far East. Typically, documents on Africa were filed for Egypt under Turkey, for East Africa under Bombay, for the rest of Africa under Anti-Slavery, except for Natal and the Cape which had their own files.³⁵ Robinson and Gallagher found therefore little trace of:

new, sustained or compelling impulses towards African empire arising in British politics or business during the Eighteen eighties... The late-Victorians seem to have been no keener to rule and develop Africa than their fathers. The business man saw no greater future there, except in the South, the politician was as reluctant to expand and administer a tropical African empire as the mid-Victorians had been; and plainly Parliament was no more eager to pay for it. British opinion restrained rather than prompted ministers to act in Africa. Hence they had to rely on private companies of colonial governments to act for them.

And again:

West Africa seemed to offer better prospects of markets and raw materials than East Africa and the upper Nile; yet it was upon these poorer countries that the

35 Robinson-Gallagher, 9-13; Thornton, The Imperial Idea and its Enemies, 97.

[p. 292]

British government concentrated its efforts. These regions of Africa which interested the British investor and merchant least, concerned ministers the most... Territorial claims... reached out far in advance of the expanding economy. Notions of pegging out colonial estates for posterity hardly entered into British calculations until the late Eighteen nineties, when it was almost too late to affect the outcome. Nor were ministers gulled by the romantic glories of ruling desert and bush. Imperialism in the wide sense of empire for empire's sake was not their motive. Their territorial claims were not made for the sake of African empire or commerce as such. They were little more than by-products of an enforced search for better security in the Mediterranean and the East. It was not the pomp and profits of governing Africa which moved the ruling elite, but the cold rules of national safety handed on from Pitt, Palmerston, and Disraeli...³⁶

36 Robinson-Gallagher, 462-463.

Section II
The pervasive effects of the Marxist theories of imperialism

The remnants of the Marxist explanations of imperialism continue to have a powerful emotional sway, on the West, on the policies of the Communist block, and on the outlook of the new elites in the emerging states. Although discredited as a causal explanation of imperialism these theories still have a causal influence on national and international politics.

One consequence of the theories of ‘Economic Imperialism’ is that economic and political factors are insufficiently distinguished. Hence the importance of political factors for economic development is often exaggerated and, conversely, too much influence is attributed to the role of economic factors in political developments.

It is held widely, for instance, that imperialism explains the rapid development of the European economies, as it also explains the retarded state of the economies of the poorer regions of the world. Thus, more important factors, like the social preconditions of industrialization, population movements, the international migration of capital and labour, and the importance of infra-structural investments and external economies, have often been lost sight of, even though they are only distantly affected by political factors. The rapid growth of European settlements overseas, and their interaction with the European economies has not been adequately dealt with: the blanket concept of British Empire seemed sufficient, to indicate that this, too, was a process of colonial domination, rather than a drastic shift in the development of the world economy. The fact that most of these nations were independent nations (or became independent) during the imperialist era is minimized, as the absence of political domination could easily be waved away

[p. 293]

with a hasty reference to a continuing ‘economic imperialism’.

The conventional argument, that imperialism reduced the non-European economies to servitude, in making them mere suppliers of raw materials and foodstuffs to their industrialized colonial masters, equally illustrates the confusion of economic and political factors. Political factors, like colonial domination, are hardly necessary to explain why the development of non-European economies took such a one-sided course until now. If the newly independent states continue to find themselves heavily dependent on European markets, this is because many of their export products were first developed under the impact of Western technical and managerial skills. If Western entrepreneurs concentrated in non-Western economies on raw materials and foodstuffs, this was not because Western capitalists as a class, or Western nations as a group, refused to let new industrial competitors arise in other areas of the world, but because individual capitalists found it generally unprofitable to start new industries in distant lands, until such time that external economies and an expansion of the internal market offered reasonable chances of economic profit. The argument that political power was used to prevent indigenous (or foreign) capital to engage in industrial projects in the colonies is more easily stated in debate, than concretely documented. The most one can say is that colonial economies, unlike Japan or the ussr for instance, lacked the positive lever of the state and the aid of protection. But it does not follow from this that colonial economies would have developed more quickly but for Western domination. Nor should it be affirmed too easily that non-industrialization is tantamount to under-development. It is an unfortunate though lasting effect of Liberal and Marxist thought that its industrial bias has often blinded statesmen to the fact that investments in agriculture could conceivably do more for an increase in economic growth than Fehlinvestierungen in industrial projects. It is not generally noted that countries like Canada, Australia, New Zealand, Argentine and Uruguay owed their initial growth to agricultural improvements and heavy capital imports, industrialization only coming in as an aftermath at a time when the domestic market had sufficiently expanded.³⁷

Conversely, the fargoing autonomy of political factors has often been lost sight of. Imperialism, as an all-embracing term apparently was sufficient explanation for the appearance of new powerful states on the world scene. The rise of Russia, Japan and the usa was shrugged of as yet other manifestations of the inevitability of ‘capitalist imperialism’; they were not assessed as basic shifts in the pattern of world politics. Differences in the political intentions and social systems of each of the world powers, in their foreign policies, or their geopolitical interests, have been inadequately understood. Too much importance is still being attached to economic policies as weapons of imperialist penetration, or anti-imperialist defence, while too little attention is paid to more basic social and political processes which may make or mar the independence of nations.

37 Brand, op. cit., 175-176.

[p. 294]

The influence on the West

The first major consequence of the attribution of imperialism to capitalism was to sap the self-confidence of Western colonial powers. For decades, the morality of capitalism itself had been more than dubious. Hence it was fatal for the imperial idea to be tarred by the capitalist brush. The White Man's Burden was reduced to the nefarious money grabbing of sinister interests. Missionary activities came to be regarded as an ideological umbrella for economic exploitation. Guardianship came to be felt as an imposition, a sense of superiority gave way to a definite sense of guilt. Obviously, this did not only weaken the case in the mind of Europeans themselves, but also darkened the chances of success with which they might seek to defend their good intentions (if any) in the international community. The protest of colonial peoples, often in the name of Western ideals themselves, was one major factor in the demise of the colonial system. Lack of confidence among the colonial powers was another. The economic necessity (or desire) to reduce outlying commitments which the existing power felt unable to hold after the Second World War was a third. In addition, constant suspicion of ‘imperialist intentions’ joined the usa, other non-colonial countries in the West, the communist block, and a rapidly increasing number of emancipated former colonies, into one strong anti-imperialist front.

Secondly, there is a curious inverse relationship between the sense of guilt and the type of economic relations which prevailed in past history between the European powers and the rest of the world. The predatory exploits of pirates of the 16th and 17th centuries, when a relatively poor Europe was superior to other civilizations in little but warfare, navigation, and arrogance, are still glorified in European history books as acts of great and good men. When, with the advent of industrialization and improved means of transport, plunder was to an increasing extent replaced by trade, this was considered to be of suspicious portent. But Western enterprise came to be regarded as basically perverse, when it came to invest in underdeveloped areas, even though this was technically accompanied by a transfer of substantive capital assets from the West to those areas. This paradox is not really difficult to understand, unless one continues to cling to a purely economic view of these relationships. Not the direction of the transfer of economic wealth, but the extent of European intervention in the social life of the communities they conquered and ruled, created the fundamental psychological tensions between colonial rulers and subjects. Hurt dignity cried out, rather than indignation about alleged exploitation.

Thirdly, this also explains the short-circuit which is very noticeable in the respective appreciation of foreign aid. Overestimating the economic factor, many Westerners still fail to understand why such aid does not make them more popular. Have they not finally turned into benefactors instead of ex-

[p. 295]

ploiters? Are they not showing moral rehabilitation for past errors? The fundamental reply to this is, that past errors were not first of all economic, they were social and psychological. They continue to have their effect, and are still daily committed.

Finally, the capitalist explanation of imperialism was to weaken the political position of Europe itself, both internally and internationally. The easy belief that European wars were ‘wars of steel and gold’ weakened the solidarity between countries, as it did that between the various social groups of which European nations were composed. Hitler rose to power, partly because American isolationism and European appeasement were powerfully reinforced by the pacifist distaste for fighting another war for ‘capitalist interests’. Collective security crumbled, and national interest and patriotism were weakened by such political naïveté. Thus Hitler was given his chance to upset the world, and by his wager for the control of Europe, to give the control over Europe itself to non-European powers. Munich was the last conference in which European powers thought it possible to settle the fate of the world without the presence of either the usa or the ussr. Within a score of years, the usa and the ussr were to meet alone, to contest or settle the fate of Europe.

The impact on the Communist block

If Lenin's Imperialism was little but a vulgarized amalgam of the earlier doctrines of Hobson, Hilferding, Bauer and Rosa Luxemburg, its political effects have been great.

The adding together of capitalism and imperialism as causally linked phenomena, allowed Lenin and his followers to fashion the explosive formula that the struggle of the European proletariat (and its new Fatherland, the ussr) and that of national liberation movements, even if led by bourgeois nationalist leaders, is essentially a common one. Are not both the victims of capitalist exploitation? If capitalism can only prolong its life by colonial exploitation, does not the alliance of communists and colonial peoples form the most effective way of ending the tyranny of capitalism and imperialism both, holding promise of an international society, with neither classes nor clashes? For the same reason, it became possible to coin the doctrine of two kinds of war: reactionary, anti-historical wars (waged by capitalist, imperialist nations, to be resisted by peace-loving forces anywhere), and progessive, historical wars (waged by socialist and (ex)-colonies, for the sake of peace itself).

The attribution of imperialism to capitalist causes has, at the same time, caused communist (as well as emerging) countries to misjudge developments in Western countries. It has caused them to underestimate the resilience of Western economies, to the extent that they have overestimated their reliance

[p. 296]

on colonial empires. The continuing prosperity of the Western economies as well as the constant improvement of the living standards of Western labour, even though supposed surplus gains from imperialist domination are no longer forthcoming, somehow remained inexplicable. It has taken the communists long to realize that the revolutionary inclinations of Western workers are few and far between, in imperialist as much as in anti-imperialist days.

The impact on the new nations

But most important has been the continuing effect of the Marxist theories on the outlook of the elites of the emerging countries. Its legacy has served to confuse the real issues of past, present and future development. In addition, it has affected the particular role which the new nations intend to play on the international political scene.

The allegation that capitalist development of the European nations was basically parasitical, has been taken up eagerly. It allowed the leaders in the new states to minimize psychologically the widening gap between rich and poor nations. Did not imperialism make the rich countries richer, and the poor countries poorer than they previously were? Would the developed nations have reached their present prosperity but for the gratis support which the world was forced to tender them on the point of bayonets? Would the underdeveloped nations be in the sorry state they are in, if it had not been for colonialism? Such reasoning has made it possible to put forward the paradoxical and anachronistic claim that the presumably exploitative colonial powers ought to have developed the economies of their colonies as welfare governments, at a time when the ideal of the welfare state was not even held in the mother countries themselves.

The exaggeration of the effect of political dependence on economic underdevelopment has, conversely, tended to heighten the expectation of what political independence could do for economic progress. Fundamental resistances in the social structure of the underdeveloped areas are inadequately taken into account. The gap between expectation and fulfilment in postindependence days increases the feeling of frustration in leaders and followers. A scapegoat is readily sought, and is often found in the continued ‘machinations of foreign capitalists’. Had not Marxist theory taught that foreign investments are inherently exploitative? Were countries really emancipated to see former foreign masters still in control of the ‘commanding heights’ of national economies of independent states? Such anti-capitalist attitudes tend to deprive the new nations of the assistance which continuing foreign investment might have given them in their development programmes. Ironically, the Marxist analysis seems on the way to being proved right post factum. If it could not be shown that in the imperial days trade (or capital)

[p. 297]

always followed the flag, nor that the flag inevitably followed trade (or capital), the diagnosis seems to come true now, albeit in a reverse direction. The withdrawal of imperial flags makes capital often fly and trade flounder. Foreign assets, felt to be the illegal fruits of past exploitation, are readily nationalized.³⁸ Aid is demanded as of right. It is one of the strange consequences of the Marxist theories that it has made private capital (usually blamed for having no fatherland but that of profit) often more suspect in new nations than foreign assistance by one state to another (even with definite strings attached to it). Native capitalists may be implicated in such condemnatory attitudes. Their cosmopolitan ties may make them, by definition, potentially anti-national forces. This adds to the importance which many leaders in new states attach to economic development through the state, even though its administrative burden may already be excessive, and its determination of the priorities in development policies often far from effective (or efficient).

Finally, anti-imperialism is often at the root of the particular choices which new nations make in the present struggle of East and West. Most have deliberately chosen a policy of non-alignment, which is more actively anti-Western, the greater its anti-‘imperialist’ ingredient. Communist agitation feeds on the supposed identity of Western policies and imperialism. Military expenditures demand a share of the national income rarely commensurate with any actual threat. As tensions mount at home, foreign policy is often a way to compensate or deflect frustration. Rarely, then, is the choice of particular foreign policies the result of a careful assessment of actual needs or threats.

It has been the argument of this chapter that imperialist policies often hid behind quasi-rational economic arguments. Perhaps it is fitting that anti-imperialism should now at times try to cloak irrational economic views in quasi-rational political formulas.

38 The Economist published on 24th April 1954 a glossary of a proposed English Doubletalk Dictionary of modern economic terms. Foreign Investment was defined as: gifts from the United States Government. Imperialism was denoted by: not sending gunboats, see also foreign investments. Imperialist figures as: a foreigner whose assets are expropriated, and Imperialist, unrepentant as: a foreigner expropriated as above, but who then complains.