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CHAPTER IX
INDUSTRIAL INVASION

The direct competition between great industrial nations for the products and profits of the backward countries would suffice to create an international antagonism even if no other economic forces contributed to this result. Closely though not obviously bound to this struggle for colonies, however, is an equally intense struggle among the industrial nations to force their way economically into each other's home territory. Germany, it is alleged, forces her way industrially into France, Switzerland, Italy, Belgium and Holland. She penetrates these countries economically, crushes their industries, forces upon them her own industrial products, extracts from them the profits which should go to their own manufacturers. Industrially, commercially, financially she seeks to rule Italy and Belgium as Great Britain rules the Argentine or Canada. She holds these countries, so it is claimed, in industrial non-age. It is all a quiet economic infiltration, a matter of buying and selling and of lawful contracts, but it is none the less war. "War is war," admits Prof. Maurice Milloud, a student of this phenomenon of German industrial expansion, "but make no mistake that it is war."⁵⁸

Within the last few years there have appeared numerous books by French, Swiss, Belgian and Italian⁵⁹ publicists attacking the policy by which Germany prior to the war secured a partial control of her neighbouring markets. With the merits of this controversy and with the morality or immorality of the procedure, we need not concern ourselves. To us the only point of interest is the nature of the economic forces leading to such a conflict and the effect of this conflict in creating national animosity and in inciting to war.

All the industrial nations export to one another as well as to the agricultural countries. Why, then, is Germany's course so bitterly resented?

At first glance one might suppose that the chief objection to this German enterprise lay in its ruthlessness and economic terrorism. A French manufacturer of formic acid is crushed outright by a sudden price reduction; a Swiss or Italian manufacturer is ruined by being spied upon by his own employés in the pay of a German competitor. But the main objection to the German competition seems to be its formidableness. Germany exports not only wares but men, and in all the neighbouring countries are to be found German chemists, engineers, business men and clerks. It is claimed that these pioneers hold together, advance together, maintain the cult of Deutschtum in an alien country, and act as agents for the home industry. It is also claimed that Germany "dumps" her goods on foreign markets, thus causing losses or even total destruction to rival industries. Yet all these things have been done before, and even the nations which object are not always innocent of like practices. What is deeply resented, however, is that the German competition is a disciplined state-aided competition, that it is collective rather than individual. The Belgian, Italian or Dutch manufacturer feels that behind his German competitor stand the gigantic power and resources of the whole German nation. It is not individual Germans who compete, but Germany; a patient, resourceful, long-sighted Germany, willing to make temporary sacrifices for permanent gains, a Germany forced to expand industrially and bending its immense wealth and power to this one purpose. Against such an organised body what can a single manufacturer avail?

The means at Germany's disposal in this invasion of near-lying markets are varied and great. Industry is organised; the German has a genius for organisation. In all the near-lying countries, concerns with German connections open up a wide channel for the incoming wares. In Antwerp, in Rotterdam, in Zurich, a large part of the big business is in German hands. German banks are established and these aid directly or indirectly in the importation of German commodities. Moreover, the Germans are better informed than any of their rivals concerning all the minute knowledge necessary to the conquest of a local market. Their business plans are not only far flung but meticulous; they have a card-index method of study and their training is admirably adapted to just these methods of commercial penetration.

No such penetration would be possible, however, but for the intelligence with which German industry is conducted at home. In Germany the scientifically trained man is more highly regarded than in any other country. The chemist, the engineer, the specialist of every sort is called into consultation and the laboratory is united to the factory. The vast expense of maintaining a corps of inventors forever working at new problems is more than compensated for by the frequent technical improvements which result from their studies. The scientific men employed by the German chemical factories have revolutionised methods and given Germany almost a monopoly in this rapidly growing industry. In Germany also, as in America, there is a willingness to discard old methods and machinery, whatever the initial expense. In a few years the losses due to the change are retrieved and the German business is creating values more efficiently than ever.

Such an industry must in its nature be immensely productive. The Germans, like the Americans, are successful in mass production, the fashioning of vast quantities of cheap, standardised articles. Factories tend to grow larger. Formerly competing concerns are united into associations or cartels, which buy or sell in common, save a vast amount of unnecessary friction within the trade and act as a clearing house for information and ideas. A high protective tariff enables these cartels to maintain a remunerative price in the home market while dumping their surplus products upon foreign markets.

What this "dumping" may mean for manufacturers in the countries upon which the wares are dumped may be made clear by an example. "The German ironmasters," writes Prof. Milloud, "sell their girders and channel iron for 130 marks per ton in Germany, for 120 to 125 in Switzerland; in England, South America and the East for 103 to 110 marks; in Italy they throw it away at 75 marks and make a loss of from 10 to 20 marks per ton, for the cost price may be reckoned at 85 to 95 marks per ton."⁶⁰ Other iron products have been sold by Germans in Italy far cheaper than they could be sold or even produced in Germany, with the result that the struggling Italian iron industry is hardly able to exist. Nor is this dumping a mere temporary expedient to relieve the German manufacturer of an unexpected surplus. It is systematic, organised and intentional, designed to destroy competitors and establish a monopoly. It is a procedure with which we in America are unpleasantly familiar, since it has been long the practice of our trusts to destroy competition in a circumscribed local market by temporarily reducing prices and then to raise prices after the competitor is hors de combat.

The most striking difference between the flooding of adjacent markets by German cartels and the destruction of competitors by American trusts is that in the former case the operation is international, and the manufacturers who suffer live in one country and those who profit in another. Moreover, the German Government is itself directly concerned in the process. Not only is the Government one of the associated concerns in certain cartels, but by its railroad policy it gives an immense impetus to dumping. Railroad rates are cheaper if the commodity carried is to be exported. To take one out of a thousand instances "the freight of a double wagon of German coal from Duisbourg to Hamburg, a distance of 367 kilometers, costs 57 marks, whilst, in the reverse direction, from the sea-board to the industrial centres in the interior, the freight charge is 86 marks in the case of German coal, and as high as 93 in the case of foreign coal."⁶¹ The Government grants an export bounty upon coal (and other commodities) in the shape of reduced transportation rates.

We need not study in detail the vastness and complexity of that integration of German industry, which permits it to act as a unit in its invasion of near-lying territories. We need not recount the almost vertiginous growth of the German banking system, with its tendency towards a narrow concentration, its bold conduct and control of German industry and its establishment of branch organisations in the countries to be invaded. Nor need we consider the practice of long credits by which German manufacturers secure a foothold in new markets or the system by which German capital, labour and intelligence migrate to the foreign country, and as branches of a German concern, continue the process of dumping from within. The significant fact is that the entire process is organised and thought out. It is a concrete national policy for securing German economic control in neighbouring industrial countries.

Nothing could better illustrate the collective nature of this economic invasion than the history of the German cartels. "It is evidently to the cartels," writes Fritz-Diepenhorst, "that Germany owes in great measure the conquest of foreign markets."⁶²

The German cartel differs from the trust in that it does not represent the absorption of weaker rivals by one powerful concern but is a federation of business units which retain their legal independence but surrender a part of their industrial and commercial autonomy. In the beginning the German cartels represented an effort to regulate prices in the home market, but after the adoption of a protective tariff and during the period when Germany launched out upon a policy of large-scale exportation, the cartels grew in numbers and power. Their policy was to maintain prices at home and sell at a lower rate abroad. But this policy, owing to a near-sighted individualism, injured the German export industry itself. The coal cartel determined its policy irrespective of the interests of the coke cartel, which in turn fixed its prices irrespective of the interests of the iron industry. As a result vast quantities of raw materials and semi-manufactured products were shipped abroad at prices which permitted the foreign manufacturer of finished wares to undersell the German manufacturer. It was a boomerang dumping, which worked to the advantage of the dumped and to the disadvantage of the dumper.

Within the last fifteen years, however, and especially since the report in 1903 of the German Parliamentary Commission on Cartels, this early anarchy has been gradually abolished, and arrangements have been made by which a cartel grants lower prices not only for its own exports but also for such part of its home-sold product as is to be used in the manufacture of more highly finished wares, which are in turn to be exported. The coal used in iron manufactures that are to be shipped to foreign countries is sold cheaper than the coal used in iron manufactures which are not to be exported. A community of interest among the cartels is thus created. The result is an amazing industrial solidarity. "The individual exporter disappeared in the cartel, and the cartel itself is absorbed in this sort of cartel of cartels, which ends by becoming the German industry.... For an economic guerilla warfare there is substituted a mass action, a veritable strategy."⁶³ The excesses of dumping are cured and dumping becomes a national economic policy.

But how can this organised conquest of adjacent industrial countries be averted without some alternative method for the economic expansion of a highly organised industry? The same forces that push Germany and England into an imperialistic policy and into a conquest of the markets of agricultural countries also force them into a competition to secure the markets of industrial countries. The two processes are not quite alike, since the trade between, let us say, Brazil and Germany is a complementary and mutually beneficial commerce, while the dumping of German rails and girders on Italy is a competition or war between two industrial nations. The impulse and motive in both cases is, however, the same. It is the desire to increase buying power. Germany can secure more of the wool of Australia and of the wheat of the Argentine if she can establish even a limited economic dominion over adjoining countries. It is the lack of a sufficient home market that forces Germany to dump her goods on Switzerland and Belgium just as it forces England to sell largely to her colonies and to invest in backward countries.

How far this policy of industrial invasion can safely go is one of the interesting international problems of the future. It is of course not the desire of any country to sell permanently below cost to the foreigner, since such a policy means, if not actual loss, at least a diminution of profits.⁶⁴ Germany would prefer to get the same price for her girders in England and Italy as she does at home. But she must take what she can get. Her industry is based upon a productiveness in excess of the demands of the home market, and she is under the necessity of paying for large importations of food and raw material and of profitably employing increasing numbers of workmen. Her industrial invasion of neighbouring countries is alternative and supplementary to an attempt to secure a needed colonial market. It is, parenthetically, a necessity imposed upon an industrial nation menaced by a constantly growing population.

Be this policy of invasion ever so well organised, however, it cannot escape inherent limitations and obstacles. The German export policy maintained itself only by holding up prices at home, which meant an increased cost of living and a rise in money wages. The imposition of tariffs by neighbouring countries meant an increase in the difficulties to be overcome in exportation and a reduction in the net profits of the foreign trade. To a considerable extent this export of cheapened goods was at the mercy of the importing nations, which, at any moment, might levy prohibitory duties. At the best the whole development led to strong opposition and prejudice, to counter-attacks, to the violation of favouring commercial treaties and to the imposition of punitive duties (as in the Canadian tariff) especially aimed at dumpings. In the opinion of many observers, the policy provided an insecure base for a top-heavy industry, with the result that in Germany industrial crises were frequent and destructive and the economic development showed the weaknesses of a forced growth.

It is too early to pass judgment upon the relative success or failure of this industrial invasion. Prof. Milloud believes that the policy by 1914 had demonstrated its failure, and that the fear of an industrial débacle forced Germany to escape from an impossible economic position by throwing Europe into war. How far this is true it is difficult to determine.⁶⁵ It is evident, however, that the difficulty of this German penetration of adjacent countries must have intensified a desire for an easier market in the colonies. The Italian trade for which Germany fought so hard must have seemed unremunerative and unpromising as compared with the practically monopolised market which France possessed in North Africa or with that which Germany could obtain through the Bagdad Railway and the penetration of Asia Minor. The sharpness of the conflict for nearer lying markets illustrated anew the necessity of securing colonial outlets.

If, however, the competition among industrial countries to secure each other's markets results in national antagonism, the competition of the same nations for the exclusive possession of colonies and dependencies leads, as we have seen, to an equally bitter struggle. The choice seems to lie between the devil and the deep sea. It is no wonder therefore that as the rapid expansion of industry brings the great nations into ever keener antagonism, voices are raised against the whole imperialistic policy. Just as the German consumer objects to paying high prices for German commodities which the Belgian or Italian can buy cheap, so also opposition is encountered to a policy of extending colonial development at the expense and imminent risk of the nation and to the obvious benefit of certain preferred classes in the community.

CHAPTER X
THE REVOLT AGAINST IMPERIALISM

What determines whether a backward country is to be exploited by its own people or by some beneficent imperialistic power is not any consideration of its own welfare, but the chance of profits held out to certain adventurous financiers in the capitals of Europe. These modern pioneers are a ruthless, dangerous group, with the bold, speculative imagination that has marked adventurers since the world began. They have a domestic and a foreign morality, an ethics for home consumption and a fine contempt for "greasers" and "niggers." They know the difference between five per cent. and twenty per cent., and their business consists in investing their money at high rates of profit (because the enterprise is hazardous) and then in taking out the hazard by making their home government compel the fulfilment of their impossible contracts.

The methods of these men are monotonously similar. They lend, they invest, they support revolutions, they invoke "the protection of the flag." They need not pay attention to the public opinion of the backward countries; they do not believe such countries have a public opinion. All that these speculators need is the support of their home government, and that they may secure through bribery, newspaper influence and patriotism. The first two cost money and are worth all they cost; the third can be had for nothing. As for the excuse for intervention, it is that used by the wolf when he took a fancy to the lamb. Money is loaned at usurious rates to some rogue who poses in history as the President of the lamb republic or to some spendthrift imbecile of a Khedive. Concessions are secured. By a concession in this instance is meant a solemn contract, by which, for and in consideration of nothing, duly paid in hand, the whole nation, its territory and population, are turned over in perpetuity. The negotiations are ratified by a battle cruiser; a few marines are landed, a few barelegged natives are buried in a tropical back-yard, a treaty of peace and amity is concluded between the Imperial Power and its latest morsel, and the real business of imperialism begins. It is good business and pays big dividends.

But to whom do the dividends go? What profit has the French artisan or peasant in all these grand concessions from the illustrious Sultan of Morocco? How does the English workman prosper when English capital employs cheap Indian labour to undersell British factories? Obviously the immediate profits accrue to large capitalists rather than to the mass of the people. If a French peasant can invest his savings in Morocco, he may earn a few extra dollars per year on his holdings of a thousand francs, but his whole interest payment forms a small proportion of his annual income. To the financier, on the other hand, who directs the investment of hundreds of millions, a concession in Morocco is of value.

The case of French foreign investments is pertinent. As a result of the activity of great bankers, who rule both finance and politics, some forty billion francs have been invested in foreign countries. The individual investor has little choice and no intelligent direction in these large affairs. It is even possible that the whole course of French investments has been disadvantageous; that too much French capital has been sent abroad to cultivate foreign fields (or pay for war preparations) and too little has been absorbed at home. The profit to bankers does not prove that the loans are equally profitable to the nation. In any definite imperialistic policy, as that in Morocco, this difference in interest between the directors and small owners of capital becomes even clearer. The promoters can afford even to risk war, while for the small investor, who, after all, can invest elsewhere, the net gain is less apparent, especially as the war, if it comes, must be fought by him and be paid for by him.

From the beginning, therefore, a revolt or opposition has been manifested (in certain sections of the industrial nations) to the whole principle and policy of imperialism. This revolt relies for support upon those elements in the population who believe either that they are not benefited by imperialism or only slightly benefited. Liberal and socialistic sentiment forms the core and centre of this opposition. For the most part the socialists are theoretically opposed to imperialism on the ground that it is immoral, brutal, anti-democratic and uneconomic. It does not, they believe, pay the people who in the end pay for it.

This anti-imperialistic philosophy of the Socialists is chiefly derived from the anti-colonial attitude of the liberals of the early nineteenth century. That attitude was founded on opposition to special trade privileges, which was the basis of the old colonial policy, and also on the belief that colonies did not benefit the mother country. In the middle of the eighteenth century Turgot had declared that "colonies are like fruits which cling to the tree only till they ripen," and he predicted that "as soon as America can take care of herself, she will do what Carthage did." When the American colonies later fulfilled this prediction by securing their independence, and when it was perceived that this separation did not lessen England's commerce with America, the opponents of colonialism, who were also advocates of free trade, were reinforced in their convictions. The only true extension was trade, and to secure trade political domination was unnecessary.

It was by no means contended even by the most doctrinaire free trader that an increase in the population and wealth of new countries, such as the United States and Canada, was undesirable. All they opposed was political dominion by the home country and the adoption of a restrictive trade policy. Similarly the orthodox Socialists of to-day make a sharp distinction between colonisation and imperialism, between the acquisition, by conquest or otherwise, of lands suitable for settlement and the seizure of populous countries to which emigration is impossible. In this distinction it is not the intention but the fact that counts; whatever the motives of the explorers, the new country becomes a colony if it furnishes homes. Such colonising is a direct national gain, benefiting all classes. The redemptioner, who was carried off to the British settlements in America, did in the end improve his economic condition, and his descendants, like those of the free immigrants, now form the population of the country. On the other hand tropical dominions, like Porto Rico or Egypt, can provide profits for investors but no homes for settlers.

This distinction negates by definition the claim that imperialism is an outlet for a redundant population. Of the emigrants from the United Kingdom during the last thirty years only a microscopic percentage went to Britain's tropical colonies. In British India in 1911 only one in every two thousand was British born. Similarly, most French, German, Belgian and Dutch colonies furnish no outlet to the surplus populations of these nations. Even in Algeria the Europeans constitute only one-seventh of the population, and in Tunis only about one-tenth. The entire European population in all German, French and British possessions (exclusive of the five self-governing colonies), is less than the net immigration to the United States every two or three years.⁶⁶

The opponents of imperialism moreover claim that all the regions fit for colonisation are already pre-empted. There is room for many millions in the five self-governing colonies of Great Britain, as there is in Siberia and South America, but where can place be found in regions newly acquired by imperialism? Where can homes be had to-day for some twenty million Germans (the excess of German population in a single generation), to say nothing of tens of millions of Italians, British, Austrians and Poles? It is frequently claimed that the new medical science, which conquers tropical diseases, will make these regions habitable by the whites. But though the sanitary improvement in the Canal Zone permitted thousands of Americans to help build the canal, it did not result in the actual physical work of construction being performed by white men. Despite sanitary improvements, the Jamaica negro could endure a hard day's work under the tropical sun far better than a man from Illinois. The economic advantage of the lower-priced coloured labour is still more decisive. While in the highly organised industries of England, Germany or the United States, high wages frequently mean small labour cost, in the lower-geared industries of the tropics the coloured man, black or yellow, easily holds his own. Since the European excess of births over deaths is about forty millions per decade, the impossibility of finding a place for this excess population in tropical and subtropical countries is manifest.

If the countries still to be overrun are not adapted for colonisation, the benefits accruing from imperialism, according to these anti-imperialists, will go to merchants, manufacturers and investors and not to wage-earners. It is often claimed that this trade which arises from an imperialistic policy is not great enough to exercise a beneficent influence upon the fortunes of the masses. Prof. Hobson, writing in 1902, states that during the period since 1870, when Great Britain launched into its latest imperialistic policy, British foreign commerce did not grow as rapidly as population, and actually declined in proportion to wealth. The British colonies increased their trade with other nations more rapidly than with the home country. The newly acquired colonies, the last fruits of imperialism, were the least profitable. Their commerce was small, fluctuating and of low quality. Mr. Hobson therefore comes to the conclusion "that our modern imperialistic policy has had no appreciable influence whatever upon the determination of our external trade."⁶⁷

When we consider individual countries which have been the cause of much rivalry and dissension, we discover that their commerce is often extremely small. France has almost monopolised the trade of Martinique, but in 1913 her total trade with that country was less than a sixtieth of her trade with the United Kingdom and less than a fiftieth of her trade with Germany. The specifically tropical countries, for which the nations are fighting, do not have a commerce worth a fraction of the cost of their acquisition.⁶⁸ Nor are the investments in the imperialistic domain nearly so large as those in countries over which the European nations exercise no political control. France has invested largely in Russia and the Balkans; Germany has put capital into the United States, South America and Asia Minor; England has gigantic sums in countries over which she exercises no dominion. The profits from imperialistic investments are merely a bonus. Though they loom large in the popular imagination, they are only a small part of the national income, and even at the best these profits go to capitalists and not to the people.

Moreover, what advantage is it to the wage-earner to have his country's wealth exported beyond his reach? Concerning this movement towards absentee ownership of capital, the widest divergence of opinion prevails. The optimists among the investing classes find it all good and sanctified by its results. The exportation of capital, they hold, not only fructifies the waste places of the world but does not decrease the capital in the exporting country, since it raises the rate of interest and thus stimulates saving. But such a rise in the interest rate means an increase in the cost of living and a reduction in the real wages of labour. In so far as it goes into competitive industrial enterprises abroad, it lessens the opportunity of labour at home. Thus if British capital, exported to India, is used to erect cotton mills in Calcutta, India will import fewer cotton goods from England, and British capital will be employing Indian labour and throwing British labour out of employment. This situation is analogous to that which was created when Northern textile manufacturers, instead of increasing their New England plants, built mills in Georgia, thus transferring the demand for employment from the North to the South.

It is further contended by these opponents of imperialism that the export of capital is profoundly demoralising to the exporting nation, which ceases, in a real sense, to be industrial, and becomes financial. Gradually the nation, with a large fixed income derived from foreign labour, ceases to care for its export industry, loses its intensity and keen application to business, becomes conservative in the technique of production, and, being no longer interested in the development of home industries (since its gains come from abroad), converts hundreds of thousands of industrial wage-earners into liveried house-servants, who minister to the cultivated wants of a sport-loving and decoratively idle upper class.

The effect of this development upon England, the classic land of capital export, is portrayed in an acute study by Dr. Schulze-Gaevernitz.⁶⁹ The author shows how the steadily mounting income derived by Great Britain from foreign investments has led to a relative restriction of the field of employment in home manufacturing industries. In 1851 23 per cent. of the population of England and Wales were workers in the chief industries as compared with only 15 per cent. a half century later.⁷⁰ Imports increase; exports do not increase proportionately. An ever larger proportion of the population becomes rentiérs, "living on the sweat of coloured labour, whom it is their first interest to hold in political subjection." Some of these rentiérs, large and small, are wholly unoccupied or only half occupied. They are sleeping partners, briefless barristers, professors of professions which do not exist. To these income-receivers or rentiérs, whom Schulze-Gaevernitz estimates at a million, must be added enormous numbers of servants and lackeys, who are paid, though indirectly, from the Kimberley mines and investments in the Argentine. Upon the industry of the backward countries these idle and semi-idle people make increasing demands, and industry becomes a production of luxuries. In the meantime the nation falls behind in its competition with more purely industrial countries like Germany and the United States. In the machine industry, in ship-building, in applied chemistry England does not hold her own.⁷¹ Her technique of production, her methods in commerce and banking become old-fashioned and ineffective; her invention (as measured by the issuance of patents) does not keep pace with that of her chief competitors. And all this conservatism does not inhere in the British character (for formerly the Briton revolutionised the world) but is attributable to the fact that Great Britain is pre-eminently a Rentnerstaat, a country of pensioners and creditors, increasingly independent and careless of its foreign export, and of the industries which formerly kept that export going.⁷²