Dodsworth in the October, 1898 number of the _Nineteenth Century_ is along the same lines. Here again we read of an unprecedented industrial revolution during the preceding half century and a vast increase in foreign trade and acc.u.mulated wealth. Again we read of the falling rate of interest and of the failure of trusts and combines to resist the outside pressure of necessitous capital, seeking to force its way into industries. It was held quite impossible for consumption to absorb the products of an over-fertile industry. "I am no pessimist," writes Mr. Dodsworth, "but I cannot conceal my deep conviction that, if this relief is not forthcoming, a stage of grave industrial collapse, attended with the agitation of equally grave political issues, becomes only too probable, and the energies of our seventy-five millions of producers may have to be restrained until we learn to appreciate the penalty of our neglect of foreign enterprise."

Such were the arguments with which in 1898 the United States plunged into imperialism. We were to break out of the narrow circle which confined our economic life to become the work-shop of the world as England had once been, to export and export and ever increasingly export until all the nations should be our debtors. Our capital, like our wares, was to go to all countries. It flattered our pride when, a few years later, Europe trembled at the spectre of an American commercial invasion and even England wondered whether she could withstand the flood of cheap manufactured American goods, dumped on her {51} sh.o.r.es. We pictured a vastly increasing trade with our new colonial possessions and with China; we envisaged opportunities, not only of an immense American investment, but of an even greater American trade.

What we believed of ourselves, Europe only too credulously believed of us. Leading European economists and publicists were completely convinced that the United States was irrevocably embarked on "the sea of imperialism." "The recent entrance of the powerful and progressive nation of the United States of America upon imperialism," wrote Prof.

John A. Hobson in 1902, "... not only adds a new formidable compet.i.tor for trade and territory, but changes and complicates the issue. As the focus of political attention and activity shifts more to the Pacific States, and the commercial aspirations of America are more and more set upon trade with the Pacific Islands and the Asiatic coast, the same forces which are driving European States along the path of territorial expansion seem likely to act upon the United States."[3] Professor Hobson and other foreign observers believed that our great trusts, which were being formed with reckless suddenness, would enormously increase the capital seeking an outlet, and that new imperialistic ventures would result. "Cuba, the Philippines, Hawaii," he insisted, "are but the _hors d'oeuvre_ to whet an appet.i.te for an ampler banquet."[4]

This development toward a congestion of capital, though confidently antic.i.p.ated both in the United States and in Europe, did not take place. About the end of the century an enormous extension of the general field for foreign investment raised interest rates all over the world. The demand for capital grew with astonishing rapidity. In {52} part this was due to British, French and German foreign investments, but it was also the result of a quickened economic tempo in all countries. New industries were created, wages rose (though in most countries not so rapidly as prices) and the outlets for the supposed superfluous capital were greater than ever.

Especially in the United States was the development contrary to that which had been antic.i.p.ated. Capital was not rendered idle because of any slackening in the nation's consuming capacity, for the men of average and small income were able to purchase more than ever before.

The farmers alone, whose property increased in value from twenty and a half billions of dollars in 1900 to forty-one billions in 1910 (an increase of over 100 per cent. as compared with less than 28 per cent.

in the previous decade) added stupendously to a new demand for goods of all sorts. Of automobiles, unknown in 1898, there are in 1916 almost three millions. Innumerable other industries arose and expanded; the antic.i.p.ated arrest of acc.u.mulation did not occur.

The result of this economic development soon made itself apparent. We discovered, fortunately for us, that we were not at this time to become the work-shop of the world. We could not continue to produce articles cheaper than England or Germany, and undersell these countries in their home markets. We discovered that our own country still furnished an admirable field for investment. While our foreign commerce increased, it continued to form only a small part of our whole trade. So long as vast new opportunities for the investment of capital in the United States presented themselves, we ceased to worry about foreign or colonial outlets, and for every dollar of American money invested in Porto Rico and the Philippines, hundreds of dollars were invested in the states. Our capital {53} though acc.u.mulating at an ever-increasing rate, did not equal the demand.[5]

In other words, the conditions in America did not yet warrant an imperialistic policy. We were economically younger than we had thought; more elastic, with greater capacity for internal growth. As a result of this discovery, our sudden enthusiasm for dominions beyond the seas died down. We were disgusted and bored by the Philippine war; we hated the role of oppressors, in which we unwillingly found ourselves. We hated the water cure, punitive expeditions, and the endless controversies over the status of Filipinos under American law.

The anti-imperialistic elements in America, men whose interests did not lie in foreign trade and speculation, stolidly opposed the retention of the islands. Had the election of 1900 been fought upon this single issue it would probably have been won by the anti-imperialists. Even though we kept the islands, we set definite limitations to our imperialistic ventures. We secured for the Philippines an administration which prevented the exploitation of the natives and the importation of Chinese labour. We set our faces against any policy of sacrificing the interests of the indigenous population to the interests of American financiers. And to-day, could we do it with due regard to the interests of the Filipinos, we would retire from the archipelago.

As we look over this experiment, we cannot help recognising that it was a precocious, an unripe imperialism. For us it was too early to secure Asiatic islands; too early {54} to worry about American investments in foreign lands. It was an imperialism carried out somnambulistically.

Our taking the Philippines was an accident, unforeseen and undesired.[6] Our hope of being the work-shop and banking centre of the world, of being the heart of a great empire like that of Britain, and of doing all this within a short period, was a dream, which vanished with the new demands made upon American capital by an increasing economic expansion.

The truth is that this unripe imperialism did not represent the interests of the majority nor even of any considerable group of our capital owners. It was doomed to disappearance once the revival of American industry offered opportunities, not only for the ordinary capitalist, but for that more speculative investor, who in other countries clamours for imperialism. The experiment revealed, however, that the same forces which act upon capital in Europe act also upon capital in America, and that the United States, given the right conditions, is liable to the same ambitions as are imperialistic countries and is as likely to engage in war to satisfy these ambitions.

The imperialistic trend acts upon all nations at a given stage in their economic development. It cannot be stopped by traditions of peacefulness or by mere protestations, however sincere. It is a part of the great economic strife, out of which devastating wars arise.

[1] "Early in the year 1901, a foreign amba.s.sador at Washington remarked in the course of a conversation that, although he had been in America only a short time, he had seen two different countries, the United States before the war with Spain, and the United States since the war with Spain. This was a picturesque way of expressing the truth, now generally accepted, that the war of 1898 was a turning point in the history of the American republic."--"The United States as a World Power," by Archibald Gary Coolidge. New York, 1912.

[2] For a study of these strategic considerations see "The Interest of America in Sea Power, Present and Future," by Captain (later Rear-Admiral) A. T. Mahan, a series of articles written between 1890 and 1897. Boston, 1911.

[3] John A. Hobson, "Imperialism," p. 23. London, 1902.

[4] _Op. cit._, p. 83.

[5] In 1914, twenty-six years after the cession of the islands our combined import to and export from the Philippines amounted to only $51,246,128, or less than 1/75 of our entire foreign commerce. Our commerce with China, which was to have been opened by our possession of the Philippines was less than one-half of that with Brazil and less than one-twelfth of that with Great Britain.

[6] "At the beginning of the war (with Spain) there was perhaps not a soul in the whole Republic who so much as thought of the possibility of this nation becoming a sovereign power in the Orient."--"World Politics," by Prof. Paul I. Reinsch, New York, 1913, p. 64.

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CHAPTER V

FACING OUTWARD

While the imperialistic venture of 1898 was premature and did not lead, as had been expected, to a conscious partic.i.p.ation of America in the international scramble for colonies, it affected our national thinking and forced us to re-consider the position of America in relation to the ambitions and plans of other great nations. Our acquisition of new dependencies led us to recognise that we were at last a world power, with the responsibilities of a world power. We were obliged to learn from England and other imperialistic nations the lessons of colonial administration. Year by year we were drawn into closer relations with the West Indies and the Caribbean countries, and were compelled to a.s.sume financial control of Hayti and San Domingo in the interest both of foreign capital and of the countries themselves. The completion of the Panama Ca.n.a.l increased our sense of international danger and international responsibility. Finally the revolution in Mexico proved to us that whatever our positive action we could not remain pa.s.sive.

Our Monroe Doctrine also, which had always seemed our charter of independence of Europe, forces us in the end to come to an understanding with Europe. We had set our faces against European conquest in the Americas, and therefore against any punitive expedition, likely to lead to permanent occupation. But if we protected Hayti and San Domingo from Europe, we a.s.sumed a certain {56} responsibility for the actions of these countries. In the existing state of international law, a nation a.s.sumes the right to protect its citizens from spoliation and to compel debtor countries to meet their obligations. In this right to collect debts by force of arms, which has been the excuse for innumerable imperialistic extensions, all the great creditor nations are interested. Had the United States refused to intervene in San Domingo, while forbidding the great powers to secure redress by threats, we might possibly have been forced to fight against overwhelming odds in defence of a people and cause, for which we had little sympathy. By its very prohibitions the Monroe Doctrine compels us increasingly to intervene between the weaker Latin-American countries and the warlike creditor nations of Europe.

The gradual extension of the Doctrine, moreover, vastly increases our possible area of friction with Europe. Originally planned to prevent European nations from conquering parts of the Americas, the Doctrine has now been extended to forbid foreign corporations subsidised or controlled by an Old World government to acquire any land in the Americas which might menace the safety or communications of the United States. Our action in Mexico indicates that we are determined not only to prevent Europe from introducing monarchical inst.i.tutions into American countries, but to insist that those countries themselves adhere to the outward forms of popular government. Secretary Olney was speaking no doubt largely for home consumption when he declared that "the United States is practical sovereign on this continent (hemisphere), and its fiat is law upon the subject to which it confines its interpretation." Nevertheless the extension of control either by the United States or some group of powers is almost inevitable, and with the widening of the Monroe {57} Doctrine, as a result of closer relations between Latin America and the Old World, the necessity for some arrangement between the United States and the great European powers becomes increasingly obvious.

Our possession of Hawaii and the Philippines acts in the same manner.

In a military sense the Philippines are indefensible; we cannot secure them against a near-lying military power. Nor can we in the present stage of national feeling permit them to be conquered. Consequently we watch the actions of j.a.pan with quite different feelings than if we had not given her provocation and a bait. The building of the Panama Ca.n.a.l equally increases our international liabilities. It contributes a vast new importance to the Caribbean Sea and adds a new weak point to American territory. Having built and fortified the ca.n.a.l, we are compelled to think of ways and means of defending it, of armies, navies, _ententes_ and alliances.

While all these factors, however, have contributed to our changed point of view, it was the World War which most completely revealed to Americans the necessity of accommodating our national development to that of other countries. The war proved that we were in a military sense vulnerable; that undisciplined citizen soldiery was no match for trained armies; that mere distance is no complete safety, and that the initial advantage, which accrues to the prepared nation is out of all proportion more valuable than later victories. The war showed that unarmed neutrality and a mere lack of hostile intention does not always save a nation from invasion. Moreover, we discovered that our interests were affected favourably or adversely by a conflict, in which we had no direct part. We, who had always conceived ourselves as a supremely disinterested nation, a remote island in the blue sea, began {58} to ask whether it was to our advantage to have France defeated, Belgium destroyed, Germany crushed, the British Empire disintegrated.

We began to ask how our national interest was affected by the international compet.i.tion for colonies, by the freedom or unfreedom of the seas, by the extension of the right of blockade, by the abrogation of established laws of warfare; and what the effect upon us would be of an economic alliance against Germany by the Allied Western Powers. In other words, we discovered a real national interest in international arrangements created by the war or to be established after the war.

Our first preoccupation was naturally one of defence. We looked outward, but only saw armed nations ready to seize upon our wealth and territory. Responsible authors predicted that the victor in this war would at his leisure move across the ocean and despoil the United States. From ponderous puerilities of this sort to the lurid descriptions of ma.s.sacre and pillage, vouchsafed us by magazine and moving picture writers, was a short step. More serious arguments prevailed, and in the end a large addition was made to our military and naval forces. But the whole campaign was based solely upon the theory of defence, and the theory so formulated, was merely a continuation of the policy of isolation. It involved the idea that we were to act alone and protect ourselves alone against all nations. It did not concern itself with our national aims. It was not based upon a definition of our relations to Europe and to the several nations of Europe.

As our preparations increase, however, and as we realise how insufficient our force must be against a European coalition, we shall be faced with the alternative of entering into agreements or alliances (to make our defence real) or into some other policy, which might make defence unnecessary. In either case we must face outward, must {59} look at the world as it is and is to be, and define our relation to Europe. We must subst.i.tute a positive for a negative policy.

This we are forced to do even though we may have no immediate friction points with Europe. The economic interpenetration of all nations involves us in conflicts of interest and adjustments, which require a positive national policy.

It is our economic development that most strongly pushes us in this direction. We are gradually destroying the complementary industrial system which formerly held us to Europe; we are competing with European countries for world markets and have even begun to compete for investment opportunities in backward countries. We are exporting manufactures, and this exportation is likely to increase. Of the six chief requisites of a great manufacturing nation--coal, iron, copper, wood, cotton and wool--we are the greatest single producer of all except the last, and to this advantage of cheap raw materials, there is added an efficient manufacturing organisation and a large manufacturing capital. From 1880 to 1910 that capital increased six and a half fold (from 2.8 to 18.4 billions of dollars). It is therefore no wonder that we are exporting tools, sewing-machines, locomotives, typewriters, automobiles and electrical apparatus. These products compete increasingly with similar products from England and Germany and invade the markets which Europe desires for herself. Our total exports to Latin America, for example, have almost quadrupled in twenty-two years, increasing from 77 millions of dollars in 1890 to 296 millions in 1912.

The significance of this compet.i.tion, as it exists to-day and will exist to-morrow, is greater for Europe than for us. Our fundamental welfare does not absolutely depend {60} upon this exportation; we could lose a part of this trade, as we lost our shipping, without fatal results, for we should still have our cotton and many half-finished products to exchange for our imports. Were Great Britain, however, to lose her markets for manufactured goods, she would shrink into insignificance, if she did not literally starve. In 1913 the United Kingdom spent $1,400,000,000 on imported foods, drink and tobacco, and for this, as for her importation of raw materials, she must pay. While our export of manufactures still forms but a trifling part (perhaps one thirtieth) of our total product, the British and the German export const.i.tutes an immensely larger proportion. Our export of finished wares, despite its rapid increase, was in 1914 only some seven dollars per capita, while that of the United Kingdom was about forty-five dollars per capita.[1] It will therefore not be wondered at if our increasing export of manufactures both to Europe and to the countries to which Europe exports, causes us to be involved, as we have not been for over a century, in the ambitions, conflicts and life-interests of the great European nations.

For at bottom a commercial war is an industrial war, a struggle for national prosperity. If, for example, Germany fails to hold her foreign markets, she must shut down factories. Her industrial problem is to buy raw materials from abroad cheap, ship to Germany, manufacture into finished products, transport to a country {61} willing to buy, and from this enterprise secure profits enough to purchase food for her people. If she is beaten out, let us say, in the export cotton industry she must turn to something else. She may try to save the industry by increasing efficiency or reducing wages, but if she fails, she must close up some of her mills. If she cannot employ the growing ma.s.ses who depend upon export industries, she must let her surplus people--and with them a part of her capital--emigrate. Like other European countries she has learned this lesson by experience. Thus it often happened when America increased her tariff rates that European factories, unable to compete, migrated, men and capital, to this country. It is true that the world market constantly expands, but the producing capacity of the manufacturing nations also increases, and compet.i.tion becomes ever more severe. The more rapidly America invades the markets which Europe has. .h.i.therto held, the more she squeezes them, the more bitter the feeling against her will become.

That bitterness of feeling (in the conditions preceding the present war) was more likely to arise in Germany than in England and more likely in England than in France. We have spoken of these as rival nations, but there are intensities of rivalry varying in proportion to the similarity of products and of methods of production. Germany, like the United States, is a new-comer in international industry, pushing and aggressive. More scientific and better organised than we, she possesses far more meagre resources. We both have trusts or cartels, and both manufacture huge quant.i.ties of cheap, standardised products.

Our compet.i.tion therefore is of the keenest, and is likely to grow more intense, if, as seems likely, Germany recovers from the effects of this war. Less keen is our compet.i.tion with Great Britain. Like an old firm, grown {62} rich and conservative, Great Britain is not pushing, not scientific, not well organised. We are gaining on her in those branches of manufacture which permit standardisation and production in huge quant.i.ties, and have no hope, and but little wish, of competing in articles of high finish and therefore high labour cost. With France we compete still less, since much of her export trade is in articles of taste and luxury, in which we are hopelessly inferior.[2]

In this battle for the world market, the United States has the disadvantage of coming late and of being intellectually unprepared. On the other hand, not only have we superior natural resources, but also the advantage that to us success is not vital. Whatever trade we gain is a mere improvement of a situation already good. We are playing "on velvet." Finally, like Germany, we have the advantage of large scale production by strong corporations working with what is practically a bounty upon exports. Because of their control of a protected home market, our great corporations can make their sales at home cover all initial and constant costs, and as these costs need not be applied to exports, are able to sell goods cheaper in Rio Janeiro or Lima than in Chicago or New York. They are able to "dump" their surplus goods.[3]

The opening of the Panama Ca.n.a.l cannot but increase the compet.i.tion of the United States especially with the nations bordering on the Pacific Ocean. From 1897-1901 to 1907-11 the average annual exports from the United States to these Pacific countries (Mexico, Central America and Columbia, the remaining West Coast of {63} South America, China, j.a.pan, the Philippines and British Australasia) increased from 104.2 millions to 200.2 millions, a growth of 92.1 per cent., while the export from Germany increased 81.0 per cent. and from the United Kingdom only 51.7 per cent. In the same period our average annual imports from these countries increased 112.9 per cent. (as compared with 113.9 per cent.

for Germany and 62.5 per cent. for the United Kingdom).[4] The trade with these Pacific countries lies largely with the United Kingdom, the United States and Germany (in the order named) and the United States seems to be slowly moving forward to first place.[5] What progress the United States has made, moreover, has been achieved under certain great disabilities which the Panama Ca.n.a.l removes. "By present all-sea routes New York is, in general, at a disadvantage compared with Liverpool."[6] New York by the Suez route is 3 days further away from Australasia (for ten knot vessels) than is Liverpool; by the Panama route New York is from 9 to 12 days nearer. For points on the west coast of North and South America, New York is one and a half days nearer than is Liverpool by the all-sea route and about eleven days nearer by the Panama route. When all the conditions of distance, speed, cost of coal, tolls, etc., are considered, it is found that the Panama Ca.n.a.l gives in many parts of the world an advantage to New York over Liverpool, Antwerp and Hamburg. The result is an impulse towards a keener American compet.i.tion in the Pacific trade.

If our foreign commerce was gaining before the war, it has made even greater progress since the outbreak of {64} hostilities. While Germany's foreign commerce has been temporarily destroyed and that of Great Britain has been hampered by the war, our total commerce has immensely increased. In the year 1915 we exported over a billion dollars in excess of our exports of 1913, our exports in the latter year exceeding those of the United Kingdom or of any other country in any year of its history.[7] This development, it is true, was abnormal and consisted partly in increases in prices and temporary deflections in trade. Nevertheless, while many American industries, especially those engaged in the manufacture of war munitions, will suffer severely at the end of the war, and while our export of such commodities will dwindle, the war cannot but result in a relative advantage to American manufacturers of export commodities.

Moreover, the war by destroying established connections between neutral countries and their natural purveyors of manufactured goods in Europe has opened the way to a future extension of American export. Like a protective tariff, it gives an initial advantage to Americans, and helps them to overcome the early handicaps. It induces American manufacturers to think in terms of foreign markets instead of concentrating their attention upon a protected home market. In the beginning, it is true, the buying capacity of certain countries, such as those of South America, was diminished by the shattering of financial arrangements with Europe. But such a condition is purely temporary. There will always be a demand for {65} the wheat, corn, meats, hides and wool of Argentine, for the copper and nitrates of Chile, for the coffee and rubber of Brazil, for the wool of Uruguay, for the sugar and cotton of Peru, for the tin of Bolivia, for the beef and tagua nuts of Venezuela and Colombia. So long as they sell raw materials, these countries will furnish a demand for finished products.

American manufacturers are to-day determined to secure an increased share of this expanding market.[8] They are slowly learning that you cannot push your goods, in South America let us say, unless you learn to pack your goods, have studied local requirements, are willing to print catalogues in Spanish and Portuguese, and have your salesmen know these languages. In the past Americans have been hampered by their unwillingness or inability to extend long credits, but this drawback is being removed by the improvement of banking facilities. The government, moreover, now seeks actively to promote American trade with foreign countries, and especially with Latin America. A new merchant marine is expected to give additional facilities to American exporters and enable them to meet their British and German compet.i.tors on more nearly equal terms. Moreover, the United States is learning that in the export trade co-operation is desirable, and the {66} Federal Trade Commission seems about to grant permission to manufacturers to combine for the conduct of business in foreign countries.[9]

All this does not mean that American manufacturers are completely to displace their European compet.i.tors in South America and other markets.

Compet.i.tion after the war will be severe, and whatever the course of wages and employment in Europe, a measure of success for industrial countries like Great Britain, Germany and Belgium is absolutely essential to the maintenance of their populations. Desperate efforts will be made by these nations to re-establish their foreign business.

A great part of South America is as near to London and Rotterdam as to New York, and much of the trade and of its future increase will revert to Europe. In the years to come, however, more than in the present or past, the United States will be a formidable compet.i.tor for the world-markets, and will incur enmity and jealousy in the attempt to maintain and improve its position.

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A similar development is taking place in the field of investment. In former years, British, French, Dutch, Belgian and German financiers were requested, indeed begged, to invest their surplus capital in American enterprises. To these financiers we went cap in hand, and they did not lend their money cheaply. The complementary relation between lending Europe and borrowing America was productive of the friendship of mutual benefit. To-day we are still a debtor nation, but only in the sense that the great financier is a debtor. We ourselves have a large capital, and in the main go to Europe merely for the sale of safer and less remunerative bonds, while the common stock of new enterprises is likely to remain in America. Or we graciously "let Europe in on a good thing," conferring, not asking, a favour. In the meantime, we are paying off our indebtedness as is indicated by the balance of trade, which since 1876 has almost invariably been strongly in our favour.[10]

The war has still further reduced our foreign obligations. During the two years ending June 30, 1916 our excess of exports over imports was over three and one-quarter billions of dollars. Moreover, in 1915 we did not incur, as ordinarily, a large debt as a result of the expenditures of Americans in Europe. The result of this development has been twofold; a considerable transfer of European holdings of American securities to Americans, and the direct loan of American capital to Europe. While it is impossible to quote exact figures, the American debt to Europe can hardly have been reduced during the two years ending August 1, 1916, by less than two to {68} two and a half billions, or perhaps a third, or even a half, of our former debt to Europe.[11]

In the meantime the United States though still a debtor nation has also become a creditor nation. Just as Germany, before the war, borrowed from France and loaned to Bulgaria and Turkey, so the United States, while still owing Europe, invested in Mexico, Canada and South America.

It is probable that by 1914 considerably over one and a quarter billion dollars of American capital was invested in Canada, Mexico, Cuba and the Republics of {69} Central and South America, not including the capital represented by the Panama Ca.n.a.l.[12]

Even to-day (Nov. 1, 1916) there is still a probable excess of our debts over our credits with foreign nations of at least two billions of dollars. In comparison with our total wealth, however (estimated by the census of 1910 at 207 billions and since then largely increased), this indebtedness seems comparatively small. The national income is rapidly expanding and as the chance to secure exceptionally large profits in railroad and industrial enterprises diminishes there is an increased temptation for surplus capital to flow abroad. Whether or not we shall again have recourse to the fund of European capital in developing our immense resources, it is hardly to be doubted that we shall increasingly invest in foreign countries, and especially in Mexico, and elsewhere in the Americas.[13]