Such a development is entirely legitimate and within bounds desirable both for the United States and to the countries to which our capital (and trade) will go. The possible field of investment in Latin America and the Orient, to say nothing of other regions, is still immensely great, and as capital develops these areas their {70} international trade will also grow. There is no reason why the United States should not take its part both in the investment of capital and the development of trade with these non-industrial countries.

As we so invest and trade, however, we must recognise the direction in which our policy is leading us and the dangers, both from within and without, that we are liable to incur. The more we invest the more we shall come into compet.i.tion with the investing nations of Europe. We are already urged to put capital into South America on the just plea that trade follows investment, and the same forces that are pushing our trade outward will seek opportunities for investment in the mines and railroads of the politically backward countries. Like European nations, we too shall seek for valuable concessions, and may be tempted (and herein lies the danger) to use political pressure to secure investment opportunities. What happened in Morocco, Persia, Egypt, where the financial interests of rival nations brought them to the verge of war, may occur in Mexico, Venezuela or Colombia, and the United States may be one of the parties involved.

We seem thus to be entering upon an economic compet.i.tion not entirely unlike that which existed between Germany and England. We too have gone over to a policy of extending our foreign markets and of protecting our foreign investments. More and more we shall be interested in politically and industrially backward countries, to which we shall sell and in which we shall invest. Inevitably we shall face outwards. We shall not be permitted by our own financiers, manufacturers and merchants, to say nothing of those of Europe, to hold completely aloof. We have seen, even in the present Mexican crisis, how American investment tended to precipitate a conflict. We have learned the same lesson from England, {71} France and Germany. As we expand both industrially and financially beyond our political borders we are placed in new, difficult and complicated international relations, and are forced to determine for ourselves the role that America must play in this great development. We can no longer stand aside and do nothing, for that is the worst and most dangerous of policies. We must either plunge into national compet.i.tive imperialism, with all its profits and dangers, following our financiers wherever they lead, or must seek out some method by which the economic needs and desires of rival industrial nations may be compromised and appeased, so that foreign trade may go on and capital develop backward lands without the interested nations flying at each other's throat. Isolation, aloofness, a hermit life among the nations is no longer safe or possible. Whatever our decision the United States must face the new problem that presents itself, the problem of the economic expansion of the industrial nations throughout the world.

[1] This comparison is not exact, since the British statistics include articles under manufactures which we do not include, and exclude articles which we include. I cite these figures merely to show that there is a vast difference in the relative importance to the United Kingdom and the United States of their export of manufactures, but not to show exactly what that difference is. Similarly the comparison above between the total product of American manufacturing and our export of manufactures is approximate.

[2] See an a.n.a.lysis--let us say of Argentine trade.

[3] On the other hand the very extension of our home market tends to make us negligent of foreign exports of manufactures and to consider the profits from this business as a mere by-product. A large and successful foreign market can be maintained only by careful study and continuous work.

[4] Hutchinson (Lincoln), "The Panama Ca.n.a.l and International Trade Compet.i.tion," p. 105 _et seq._ New York, 1915.

[5] Despite the fact that as yet the _absolute_ increase is greater in the British than in the American trade with these countries.

[6] Hutchinson (Lincoln), _op. cit._

[7] From 1914 to 1916 our exports of merchandise increased from 2365 to 4334 millions of dollars (an increase of 83 per cent.) and our balance of exports over imports rose from 471 to 2136 millions (an increase of 354 per cent.). Monthly Summary of Foreign Commerce of the United States, June, 1916. (Corrected to Aug. 9, 1916, subject to revision.)

[8] "In spite of inexperience, crude methods, lack of banks and of ships we have made notable gains in South American trade. There seems to be no reason to question the probability of a continued rapid increase during the next few years.... The process of building and making more efficient our own manufacturing plants has been carried far, so that we are prepared, in the opinion of competent judges, to proceed more rapidly than ever with the production of goods for foreign markets."--William H. Lough, "Banking Opportunities in South America,"

Bureau of Foreign and Domestic Commerce (Dept. of Commerce), Special Agents Series No. 106, Washington, 1915, p. 7.

[9] In a recent address (see date) to the American Iron and Steel Industry, Mr. Edwin W. Hurley, vice-chairman of the Federal Trade Commission, points out how during the last quarter of a century the Germans have co-ordinated their foreign trade, with the result that of the steel business 90 per cent. has been brought under a single control. The effect has been a victory for the German over the British export business. Mr. Hurley states that while a constructive programme has been worked out by the Interstate Commerce Commission for the railroads, and co-operation among the farmers has been stimulated by the Department of Agriculture, the manufacturing industries concerned in the export trade are hampered by provisions of the Anti-Trust Law.

"Is it reasonable to suppose," he asks, "that Congress meant to obstruct the development of our foreign commerce by forbidding the use in export trade of methods of organisation which do not operate to the prejudice of the American public, are lawful in the countries where the trade is to be carried on, and are necessary if Americans are to meet compet.i.tors there on equal terms?"--New York _Evening Sun_, June 21, 1916.

[10] In the last forty years the balance has been against us in only three years, 1888, 1889 and 1893. The real balance is not nearly so great as the apparent balance, but there can be little doubt that it represents a considerable repayment of the princ.i.p.al of our great debt to Europe.

[11] According to W. Z. Ripley the American debt to Europe amounted in 1899 to $3,100,000,000 of which $2,500,000,000 was owed to England, $240,000,000 to Holland, $200,000,000 to Germany, $75,000,000 to Switzerland, $50,000,000 to France, and $35,000,000 to the rest of Europe. After 1899 there was a reduction in the amount of European holdings of American securities (mostly railroad bonds and stocks), but since 1907 there was again an increased purchase, so that by 1914 the American debt to Europe was considerably greater than it had been in 1899. See New York _Journal of Commerce_, Dec. 6, 1911. Also, Hobson, C. K., "The Export of Capital." New York, 1914, p. 153-5. According to a compilation made by President L. F. Loree of the Delaware and Hudson Railroad, the American railroad securities formerly held in foreign hands but which were absorbed by the American market during the eighteen months ending July 31, 1916, amounted to $1,288,773,801 par value and to $898,390,910 market value. The railroad securities remaining abroad (July 31, 1916), amounted to $1,415,628,563 par value with a market value of $1,110,099,090. In other words according to these statistics of returned securities (which Mr. Loree believes are largely underestimated) about 45 per cent. (market value) of the railroad securities held abroad on January 31, 1915, had been returned eighteen months later. (New York _Times_, Sept. 25, 1916.) The New York _Times_ states that "it is high banking opinion that at the outbreak of the war, the total of industrial securities held abroad amounted to about 25 per cent. of the railroad securities, and that the liquidation of industrials since has been in about the same proportion to the total as the liquidation of rails." On this basis the foreign holdings of American railroad and industrial securities on July 31, 1916, would have amounted to only $1,375,000,000 (market value).

[12] For data used as the basis of this estimate, see Hobson, C. K., "Export of Capital" (p. 153 and following), together with sources there cited.

[13] "The adoption of the Federal reserve system has ... released and made available for other forms of financing great sums which were formerly tied up in scattered reserves. We have only to look at the monetary history of the German Empire during the last forty years to see how powerful an influence on industry, trade, and investment is exerted by the centralisation and control of bank reserves. The London _Statist_ has calculated the ultimate increased lending power of American banks, under the Federal reserve system, at $3,000,000,000."--Lough, _op. cit._, p. 8.

{75}

PART II

THE ROOT OF IMPERIALISM

CHAPTER VI

THE INTEGRATION OF THE WORLD

For decades, the foreign and domestic policies of the United States were determined by our ambition to subdue and people a wilderness. Our immediate profit, our ultimate destiny, our ideals of liberty, democracy and world influence, were all involved in this one effort.

To us the problem was one of national growth. To-day we are beginning to realise that this Western movement of ours affected all industrial nations, and was only a part of a vaster world movement--an economic revolution, which has been developing for more than a century. That revolution is the opening up of distant agricultural lands and the binding of agricultural and industrial nations into one great economic union. It is a world integration.

To this world development the crude physical hunger of the Western populations has contributed. The urbane Chinese official, who voices the sentiments of Mr. Lowes d.i.c.kinson, attributes Europe's solicitous interference in China to the fact that the Western World cannot live alone. "Economically," he says, "your (Western) society is so const.i.tuted that it is constantly on the verge of starvation. You cannot produce what you need to consume, nor consume what you need to produce. It is matter of life and death to you to find markets in which you may dispose of your manufactures, and from which you may derive your food and raw material. Such a {76} market China is, or might be; and the opening of this market is in fact the motive, thinly disguised, of all your dealings with us in recent years. The justice and morality of such a policy I do not propose to discuss. It is, in fact, the product of sheer material necessity, and upon such a ground it is idle to dispute."[1]

Necessity is a large and a vague word; it may mean any degree of compulsion or freedom. Yet the Chinese official is right when he emphasises the immensity of the economic forces driving the Western nations outward. Not adventure, ambition or religious propagandism will account for the full momentum of this movement. Back of the missionaries, traders, soldiers, financiers, diplomats, who are opening up "backward" countries stand hundreds of millions of people, whose primary daily needs make them unconscious imperialists.

At the bottom this outward driving force is the breeding impulse, the growth of population. In 1800, one hundred and twenty-two millions of people lived in western Europe, whereas in 1900 the population was two hundred and forty millions,[2] and the rate of increase is still rapid.

The population has doubled; the area has remained the same. The new millions cannot be fed or clothed according to their present standard of living unless food and raw materials come from abroad. They depend for their existence on outside agricultural countries.

This increase of European population, moreover, has been a net increase, after emigration has been deducted. {77} Although during the last century tens of millions of immigrants have gone from western Europe to the United States, Canada, Brazil and the Argentine; the home population has increased by over one hundred and seventeen millions and is to-day increasing by twenty millions a decade.[3] For all of these twenty millions no sufficient outlet can be found either in old or in new lands. The problem, therefore, is not to find homes for them abroad but to secure their existence at home. And this existence can only be secured by raising the necessary food in distant agricultural countries and by turning over a large part of western Europe to manufacturing and commercial enterprises. Colonisation, imperialism, the opening up of new agricultural countries, is therefore the other side of industrialism.

The present revolution in the world to-day is thus in a real sense a sequel to the industrial revolution, which gave birth to our modern industry. That imposing industry depends upon non-industrial populations, who produce food, cotton, wood and copper, and exchange them for manufactured goods. Since the people who fashion and transport products must be fed by those who raise them, agricultural production must be stimulated at home and abroad. The nation must expand economically. This expansion, which is broader than what is usually called imperialism, is not a merely political process. It takes small account of national boundaries, but develops farming wherever possible.

The movement is vast and intricate: Commerce {78} between industry and agriculture is carried to the outermost parts of the earth; Africa is divided up, colonies, dependencies and protectorates are acquired; agriculture is promoted in politically independent countries, and an internal colonisation, a colonisation within one's own country, occurs simultaneously. In Australia, the Canadian West, in Argentine, in Siberia settlers lay virgin fields under the plough, and the new lands are bound commercially to the great complex of Western industrial nations.

They are also bound psychologically. As the machine which conquered the nation now conquers the world, so the spirit of Manchester and London and of Pittsburgh and New York rules ancient peoples, breaking up their rigid civilisations, as it rules naked savages in the Congo forests. It is a materialistic, rationalistic, machine-worshipping spirit. The unconscious Christian missionaries to China, who teach the natives not to smoke opium and not to bind the feet of their women, are unwittingly introducing conceptions of life, as hostile to traditional Christianity as to Confucianism or Buddhism. They are teaching the gospel of steam, the eternal verities of mechanics, and the true doctrine of pounds, shillings and pence. Feudalism, conservatism, family piety, are dissolved; and, as the conquering mobile civilisations impinge upon quiescent peoples, new ambitions and desires are created among populations. .h.i.therto content to live as their forefathers lived. These desires are the inlet of the restless discontent which we call European civilisation. When the ancient peoples, civilised or not, desire guns, whiskey, cotton goods, watches and lamps, their dependence upon Western civilisation is a.s.sured.

Bound to the industrial nations, they toil in mines or on tropical plantations that they may buy the goods they have learned to want, and that Europe may live.

{79}

In this cosmopolitan division of labour, which destroys the old economic self-sufficiency of nations, England took the lead. A hundred years ago, when the British agriculturist sold his produce to the British manufacturer in return for finished wares, and foreign commerce was insignificant, the population was limited by the food it could produce. Every increase in the number of Englishmen meant recourse to less fertile fields, an increase in rents, a lowering of wages and a resultant pauperism. The hideous distress during the Napoleonic Wars and after was largely due to an excessive population striving to live upon narrow agricultural resources.

The alternative presented was to stop bearing children or find food abroad; stagnation or industrialism. If England (with Wales) could in 1821 barely support twelve millions, how could she maintain thirty-six millions in 1911? Only by going over to free trade, by raising her food and raw materials in countries where land was cheap, and employing her people in converting these into finished products. To-day three live in England better than one lived before; on the other hand, a large part of the food supply is raised abroad.

Had Great Britain literally become "the workshop of the world,"

manufacturing for sixteen hundred million inhabitants, there would have been no limit to her possible increase in population. No such national monopoly, however, was possible, or from a world point of view desirable. Belgium, France, Germany and later other thickly populated countries were also faced with the choice between stagnation and industrialism, and as English machines, English industrial methods and English factory organisation could be imported, these nations, one after another, went over to manufacturing, ceased to export food and {80} began to import both food and raw materials, competing with Great Britain for industrial supremacy.

These competing industrial nations had a great common interest, to increase the total food and raw materials to be bought and therefore the manufactured products to be sold. The greater the development of foreign agriculture the better for industry in all these nations. To secure this agricultural base abroad, the nation was not compelled to establish its own colonies, for Belgium and Holland could buy food and raw materials even if the Congo and Java were nonexistent. As a consumer it made little difference to England whether she got her wheat from Russia or India, or her sugar from Germany or Mauritius, so long as the supply was plentiful, cheap and constant. Actually a large part of the food supply came from politically independent countries, the United States alone increasing its food exports from fifty-one millions of dollars in 1860 to five hundred and forty-five millions in 1900, and its cotton in equal ratio.

But as American economic development proves, it is difficult to maintain this common agricultural base. The agricultural nation, in the temperate zone, grows in population, converts itself into an industrial community, and not only consumes its own food and raw materials but draws upon the common agricultural fund of the older industrial nations. To-day the United States is rapidly lessening its food exports, is increasing its imports of sugar, coffee, tea, fish, and other foods, and is thus forcing industrial Europe to find a new agricultural base.

This conversion of agricultural into semi-industrial nations proceeds rapidly. Switzerland, Austria, Italy, j.a.pan, even Russia, increase their manufacturing, and intensify the demand for the world's supply of raw materials. It is a normal and in present circ.u.mstances an inevitable {81} process. When, however, the exportable supply of food and raw material of an agricultural country dwindles, a new equilibrium must be established. New states, territories, colonies, hitherto exporting but little agricultural produce, are opened and their production stimulated. From Russia, the Danube Valley, Canada, Australia, Brazil, Argentine and many parts of Africa, new supplies of raw material are secured. Fresh sources are also discovered for the production of fodder, flax, cotton, wool and ores. It is an equilibrium, forever destroyed and forever re-established, between an increasing number of industrial nations with increasing populations and new agricultural bases, upon which the superstructure of the world's export industry is reared.

It is not, however, by the sale of present manufactured goods alone that the industrial nations can secure their foreign food. One may own abroad as well as earn abroad. An Englishman with a thousand acres in North Dakota or Alberta may export the wheat that he raises exactly as though the farm were in Devon. If he owns shares in the Pennsylvania Railroad, he may with his dividends purchase wheat, which he may ship to his own country without exporting commodities in return. The true economic dominion of England extends wherever Englishmen hold property.

Subject to the laws of the land where the property is held, this ownership gives the same claim to the product of industry as does an investment at home.

As we read the imperialistic literature of to-day, we discover that the chief emphasis is laid on the great value of new countries as a field for this sort of profitable investment. Investment, not commerce, is the decisive factor, and money is to be made out of opportunities to build railroads, open mines, construct harbours and irrigate arid districts. The diamond mines of the Transvaal were more {82} attractive to the English than the chance to trade, and what was of immediate value in Morocco were the iron mines and future railways and not the right to sell tallow candles to the Berbers.

In large part this foreign investment of capital has the effect of broadening the agricultural base. While to the individual investor, capital export means getting eight per cent. instead of four, and to the promoter, a chance to make a few hundred thousand dollars or pounds, to the industrial nation it means that a fund is created which will help pay for a steady flow of agricultural products and raw materials. To the whole complex of industrial nations and to the world at large it means even more. The export of capital increases the capacity of the agricultural nation to serve as a feeder to all industrial peoples. It provides cheap transportation and improved agricultural machinery. Had Great Britain not invested in American railways during the fifties the United States would have exported less food to Europe in the seventies. Freight rates dropped and the industrial nations were flooded with cheap wheat. British capital in American railways aided British manufacturing more than if the same capital had been placed at home. To-day for the same reason the process continues elsewhere. In Russia, South East Europe, Canada, Australia, South America, Asia and Africa, capital, furnished by the industrial countries, is increasing the production and exportation of food and of raw materials, and is thus indirectly promoting the industry of western Europe.[4]

{83}

Such investment abroad is not new. In the Middle Ages the bankers of Northern Italy, and later of Spain and Portugal advanced small sums to impecunious foreign sovereigns. But the thousand marks borrowed by Henry V from Genoese merchants, or the loans made by Holland in the 18th Century, did not compare with the vast sums invested by England since the Napoleonic Wars, nor by other countries since 1850. For, as in manufacturing, so also in the export of capital, France, Belgium, Holland, Germany and even the United States entered the field. The source from which capital could be obtained widened with the increase in the number of wealthy industrial nations, and the volume of investment expanded rapidly. The foreign investments of the United Kingdom, according to an estimate made by Dr. Bowley, amounted in 1854 to two and three-quarter billions of dollars. For 1914, sixty years later, these holdings were estimated at seventeen and one-half billions. It is believed that the French have invested some eight billions of dollars and the Germans four billions.[5] The entire foreign investment of capital by the industrial nations of Europe cannot have amounted (in 1914) to less than thirty-two or thirty-five billions of dollars.[6]

If this great investment were made solely in countries with a highly developed capitalism, with stable political conditions and strong economic ambitions, no imperialistic policy would be necessary.

England need not "own" the United States in order to invest here safely or for purposes of trade. Nor is she under an economic compulsion to rule Canada or Australasia. Were these British colonies quite independent politically, Canadians and Australians would {84} still endeavour to sell wheat and mutton to Europe and to attract and protect European capital. Their own self-interest, not any outside compulsion, makes them serve European, in serving their own interests. In Morocco, on the other hand, and in Tunis, Persia, Jamaica, Senegal and the Congo, the situation is different. The natives of these lands lack most of the elements which make for the ordered economic development demanded by Europe. Under native rule there is governmental incompetence and venality, disorder, revolt, apathy and economic conservatism. Foreign investment is impossible and trade precarious.

It is here where the industrial system of Western Europe impinges upon the backward countries that economic expansion merges into modern imperialism.