The Hollow Order
Rebuilding an International System That Works
MANY of the spectres of modern civilization, supposedly banished by the Treaty of Versailles, have returned to stalk their old haunts. Of these, the question of colonial expansion is one of the latest to reveal its threatening potentialities. Japan, moreover, has shown that it is a threat not confined to Europe. One of the most disturbing characteristics of this development is the widespread sympathy with which the expansionist claims of such countries as Italy and Japan are received. Economic exigency is made to excuse, even if it does not justify, the breach of international covenants. Thus lenient critics held that the Japanese plunge into Manchuria had an economic basis; and now we are told that Italy expects to find in the temperate highlands of Ethiopia an outlet for her surplus population as well as raw materials which she lacks. Germany employs an analogous argument in keeping alive claims to her lost colonies.
This strenuous reiteration of the dogma that dense population, paucity of natural resources, or any other kind of national impoverishment, makes overseas colonies an "economic necessity" for the great Power in which these conditions develop, indicates a remarkable change of opinion from that of little more than fifty years ago, when the prospect of colonial acquisitions was anathema to good nationalists in Europe. Cobdenite England regarded international trade as of greater importance than overseas possessions; in France the few protagonists of colonial expansion in the 'seventies and 'eighties met bitter hostility from a public which thought that revanche for the loss of Alsace-Lorraine could be better pursued without colonial impediments; and in 1871 Bismarck replied to the advocates of a colonial policy for Germany with the sneer that for Germany to acquire colonies would be like a poverty-stricken Polish nobleman providing himself with silks and sables when he needed shirts. Clearly, until late in the century at any rate, these countries did not regard the colonization of backward areas as profitable undertakings.
Nevertheless, by the time the new century opened, all the nations that had believed colonies to be liabilities instead of assets were heavily committed to new colonial responsibilities. The next stage of imperial development was ushered in by the Covenant of the League, which declared that territories inhabited by people "not yet able to stand by themselves under the strenuous conditions of the modern world" formed a "sacred trust of civilization." It is in accord with this philosophy that the Powers holding mandates are supposed to administer them. Article 22 which established the mandate system is not free from ambiguity; but one thing clear is that it supplants the old method of "exploitation," which completely subordinated a backward territory to the interests of the ruling Power, with a new concept recognizing the rights of the indigenous inhabitants. If colonial possessions were expensive under the old conditions, they are not likely to become less so under the new, especially since the imperial Powers have declared that the principles embodied in the mandate system now guide the administration of all their colonies.
Obviously, however, overseas possessions still do retain some element of desirability; and since colonial expansion has again become an active manifestation of aggressive nationalism, it may be timely to inquire critically into the claims made on its behalf. As frankly put forward by Italy and Japan, and rather more circumspectly by Germany, these comprise two distinct contentions. One is that an industrial country has an "economic need" of territories producing complementary products and raw materials. The other is that such a country has a right to outlets for national "energies" which lack room for expression at home.
The methods by which colonial empires have been acquired and controlled have varied enormously at different times and places. There is no single set of characteristics applicable to all empires any more than there is a fixed concept of civilization. "Colony," for instance, is a word that in the course of history has changed its meaning considerably. But we need consider here only those types of colonies which answer the professed needs of the imperialist nations. They fall into two groups:
1. Those intended to serve as sources of commodities and raw materials not produced in the mother country.
2. Those intended to serve as outlets for emigration, where the "surplus" population of the ruling Power is expected to find better opportunities than at home. (Settlement under alien governments, as in South America, is not an acceptable alternative.)
In demanding from the rest of the world clemency for the illegal appropriations they have already made and charity for the wants that still remain unsatisfied, the aspirants to empire invite examination of the single and specific question: Can overseas colonies be regarded in any valid sense as "an economic necessity"? The answer can stand or fall quite independently of whether or not there are other reasons for wanting to acquire colonies. Before we accept the "economic" claim as just and reasonable, however, let us be sure that it is not being used merely to obscure the real motives. Let us ask ourselves how far colonial possessions are at present "necessary" to an industrial nation which wants supplies of certain complementary materials. Further, can imperial Powers be said to derive "economic benefits" from their trade relations with their colonies?
In the course of the maritime expansion of the sixteenth and seventeenth centuries, five European nations -- Portugal, Spain, Holland, England and France -- delimited trading areas in Asia and appropriated colonial territories in America. In the nineteenth century this was followed by the partition of Africa between new as well as old imperial Powers, and the annexation of islands in the Pacific. Germany, although a comparative latecomer among colonial empires, obtained several choice areas in this last distribution. But Italy and Japan were too late to find any regions possessing lucrative prospects and needing civilization or protection. Thus came into being two categories of states popularly described as the "Haves" and the "Have-Nots." And the motives and the methods of the early colonial expansionists are adduced as at once an explanation and a justification of similar conduct today on the part of the "Have-Nots." Germany and Italy have recently shown that for them nothing is ever out of date, and it is therefore not strange that colonial aspirations should be revived along with other ancient customs of the Cæsars and the Hohenstaufen. But though motives may derive from history, methods are empirical. And colonies now occupy a very different position in international trade than they did two or three hundred years ago. Modern conditions have no parallel in early colonial days, and historical comparisons that do not take account of the intervening changes in European conditions and world economy will be profoundly misleading.
In the sixteenth century the nations of Western Europe were pursuing almost identical systems of self-sufficing economy by old and primitive methods. They consequently had neither cause nor opportunity to trade much with each other. At the same time, they were becoming increasingly aware of the inadequacy of their own coarse products to provide the means for purchasing desirable Oriental luxuries and delicacies. When in the fifteenth century the Turks closed the caravan routes through the Levant, access to an alternative way to the Far East became a matter of urgent importance, and the new impetus to maritime enterprise resulted in the Great Age of Discovery. After having established an all-sea route to the East, Spain and Portugal next bent their efforts to obtain from the Americas the gold and silver necessary for buying the precious produce of Cathay and the Indies. Apparently they did not doubt that they could obtain everything they wanted as long as they had acceptable purchasing power to offer. They sought of the Mogul not political but trading concessions, and they found that gold and silver were always welcome to merchants in the Orient. These precious metals, however, proved difficult to obtain; and when the other maritime nations came to America they decided to produce for themselves the commodities which they could not raise at home -- sugar, cotton, coffee and spices. By a still more direct method, Holland concentrated on extracting from the East Indies a regular supply of valuable commodities by means of an administration at least as oppressive as that by which the Spaniards wrung gold from Mexico and Peru.
Probably all these countries used the only means then available for securing the overseas products they desired. But does this mean that today a nation must exercise political authority over a territory from which it wants to obtain supplies? At the beginning of the modern era of expansion, as we have seen above, a nation had either to have gold and silver with which to buy exotic products, or tropical colonies in which to produce them. But the primary condition which either method was designed to remedy was the scarcity of the desired products. For the same reason, later on, European "penetration" of backward areas was justified by the argument that savage peoples had no right to withhold from the civilized world valuable resources to which they had happened to fall heir. The argument was forcibly applied to Congo rubber and Transvaal gold alike; and it has proved so successful that there are now no backward peoples left unconvinced. All the resources of the savage are at the disposal of civilization.
Europe has always been optimistic about the value of products from "backward" (usually tropical) areas. We saw the influence of this feeling at work, for instance, when the Congo Treaties prohibited the European Powers with territorial possessions in central Africa from controlling the exports of those colonies by means of discriminatory regulations. On the same principle the League of Nations mandates provide that all member states shall enjoy in all mandated territories (except the Class D areas which become an integral part of the mandatory Powers) the same rights to develop concessions and conduct commerce as the mandatory allows its own nationals. In contrast with this system, France once devised an ingenious scheme known as a détaxe for giving herself first choice of the products from her West African possessions. A tax was imposed on certain exports, but refunded on shipments destined for the mother country. It was expected that this plan would permit French importers to purchase supplies more cheaply than their foreign competitors, while at the same time the latter contributed to the colonial revenue. But the foreign demand did not prove sufficient to make the scheme of any practical importance, and France herself has had to support colonial production by imposing a duty on her own imports from foreign countries.
Indeed, market conditions now make it distressingly obvious that not a single commodity from the widespread areas of imperial exploitation has fulfilled the promise of its profitable beginnings. The fortunes of Congo rubber ended with King Leopold, and those of Malaya and the East Indies, which caused the eclipse of the Congo, have fallen heavily in the last decade. The spices that did so much to spread the ancient glamour of the East are now a drug on the market. Cloves are as difficult to sell as potatoes, and chemistry offers cheap synthetic substitutes for rare essences and condiments. Falling prices led to the restriction of copper production in Northern Rhodesia and the Katanga, just as they did in Peru. In recent years much publicity has been attained by a school of thought which glibly talks of the "White Man's Dividends" as forming the "Black Man's Burden." But although this emendation of patriotism apparently came from historians, it makes the mistake of writing seventeenth century conditions into the twentieth. The most discouraging thing that can be said of colonial investment and enterprise today is the truth. It reveals hard work and little gain.
Except for radium -- and even this is now said to be challenged by a synthetic product -- no single territory has any longer the monopoly of any commodity.[i] Manila hemp and Bengal jute, it is true, are still known by the names of their homes; but for a long time they have been fighting the competition of substitutes from other places. By and large, the same products are grown in Africa as in America, in India as in China, and under the imperial jurisdiction of several different Powers. The one characteristic all regions have in common is a pressing anxiety to sell their products. It cannot be said that Brazil is showing political partisanship in the sale of its coffee, the United States in its cotton, or British West Africa in its cacao. If a purchaser still feels that one exporter is making unfair terms, he can turn to others. The control of tin and rubber production was made possible only by agreement between different governments, and the rise in price affects their own nationals in the same way as it does citizens of other importing countries. Further, it is significant that in spite of American indignation at the unsuccessful Stevenson rubber restriction scheme in 1926, the New Deal introduced a drastic version of the same principle in order to raise the price of agricultural products in the United States, including those previously exported. The method therefore cannot be regarded as peculiarly imperialistic.
Let us now turn to the second point of inquiry, namely, whether any "economic benefits" accrue to a country which can buy complementary products from territories under its own flag.
Here we are confronted with the high cost of imperial responsibility in the form of protective tariffs which most imperial nations have imposed for the benefit of their colonial industries. In other words, the price of imports has to be increased, on behalf of colonial producers, beyond what would be paid to foreign sources for the same commodities. Not only do consumers in the governing country pay producers under their own flag more than foreigners pay them, but indirectly the cost of selling cheaply in the international market frequently falls on the imperial government. A tariff will maintain prices only when the home market can take a large proportion of the total output. In other cases the home country may often have to provide direct assistance for a dependency that cannot pay its way on its production. For it is only from commercial production that the taxes can be raised which pay for the colonies' administration. If these taxes are insufficient the imperial government must finance the deficit.
The French colonies have always needed provision from the home budget. In 1934 the amount reported in Le Journal Officiel was over 798 million francs, or three times as much as the French Foreign Office required. Although the Dutch colonies have traditionally been low-cost producers, and able to undersell others in the open market, the depression has caused a severe contraction in the prices of their products. As a result, the Netherlands Government has been forced to contribute an annual subsidy to the budget of the East Indies. In 1934 the amount was more than one million florins. British colonies reap bigger gains from protection in the home market than others whose imperial markets are not so great: yet both large and small ones have intermittently needed help from the Exchequer. Since the vast Tanganyika Territory was taken under mandate it has regularly had expenditures in excess of revenues; and the railway that serves the colonized area of Kenya represents a still unrefunded cost to the home government of over $20,000,000. This can hardly be regarded as enriching the mother country. On the contrary, it seems that only a rich metropolitan Power can afford prosperity in its colonies. There may of course be military and political reasons, in the view of the nations concerned, for incurring the expense; but they cannot be described as economic.
It is interesting to examine the position of the United States as a purchaser in the light of the fiscal burdens of imperialism. This country is conspicuously lacking in the tropical products which have been the chief goal of overseas expansion. Thus it is the world's greatest importer of coffee, which is also its largest single import. The enormous Brazilian industry developed chiefly in response to the growing demand from the North, as in a lesser degree the cacao industry did in Ecuador and as more recently banana plantations have done in several Central American republics. The United States buys all these products in the open market, that is, wherever the cost of production is lowest. These sources are also open to Great Britain; but by a scheme of imperial preference tariff rates she pays prices 25 percent to 100 percent higher in order to obtain similar products from areas inside her own empire. France does likewise, with a few variations in method.
When we turn from cacao, bananas and coffee to sugar, however, we find the United States pursuing an even more expensive policy than these imperial Powers. Puerto Rico, Hawaii and the Philippines are large producers of sugar cane. In fact, they built up their industry on the prospect of free entry into the American market, and the amount of sugar imported into the United States at a price far above that prevailing in the open market has increased to over two million tons yearly. The valorizing effect that a specific duty on foreign imports has on home products can be clearly seen in the price of Philippine sugar; the price has been well maintained during the depression at the same time that production was increasing. On the other hand, Manila hemp, which is dependent on the international market, has fallen heavily in spite of restriction of production. Domestic sugar growers naturally would like to see the protected market privileges of the Philippine producers abolished by the grant of political independence to the Islands. The producers would get less for their sugar; but that would concern them alone, since the first law of tariffs is that the consumer pays, whoever benefits. If new territorial responsibilities were to lead this country into maintaining an "American standard of living" for the production of chicle, then chewing-gum would cost more.
The cost of buying products at relatively high prices from political dependencies and the subsidizing of their budget deficits falls on income account; but colonial development requires in the first place heavy expenditure on capital account. The reason why Portugal's territories in Africa languish in comparison with England's is not because they are inherently less productive, but because the Portuguese Government has spent less on developing them. For the same reason the effects of French control are not so impressive in French Equatorial Africa as in West Africa, where there has been lavish expenditure on public works. It is easy to see that colonies today are a readier outlet for money than for anything else. It is also important to realize that without capital outlay neither the settlement of colonists nor production for export can take place. The story of centuries-long imperial development from mere trading posts to extensive areas of administration is at the same time the story of the steady growth of capital enterprise and investment. The transformation of jungle into plantation and garden; engineering that spans continents and harnesses rivers; irrigation that makes deserts bloom; the control of floods, pests and disease -- all these achievements have the quality of romance. The cost is often ignored. Yet investment was the indispensable basis of this enterprise which has made every continent yield up an increase. Since no imperialist purpose has succeeded without it in the past, we can reasonably expect that none will in the future.
The extent to which people can be profitably employed as a result of migration depends upon the capital available for their use. The examples we have of this at the present time range all the way from the Chinese peasant who seeks hand-to-mouth subsistence in Manchuria to the English farmer who invests in extensive lands in Rhodesia. In between are the emigrants with a small amount of savings who take up as much land as they can farm themselves. This is the type of settlement which the United States and the British Dominions have encouraged. In addition there are those who emigrate to work as laborers where land and capital furnish them employment -- the most common situation in South America. Since the days of the "Old Plantation," however, much imperial expansion has been accompanied by the export of capital and not of population; and in modern times it is in areas which have a dense indigenous population that plantations have been most successfully developed for the export of the foodstuffs and raw materials needed in northern countries.
Now even though the possession of colonies does not insure a supply of cheap imports, is there not still some advantage for an imperial Power in having a field for investments in territories under its own control? The question can be considered from two standpoints. One, do particularly attractive opportunities for investment exist in colonial areas from which foreign investors are barred? Two, is the export of capital to foreign countries more difficult or risky than investment under one's own national jurisdiction?
In the first place, it is apparent that the imperial Powers at present have no more of a monopoly of financial development in their own territories than they have of exports from them. There are British investments in Java, and Dutch and American investments in British Malaya. The most important working concession in the Belgian Congo is held by a British firm. In the Portuguese territories a large proportion of the capital is supplied by foreigners, while in the Asiatic possessions of the white Powers an increasing amount of business is being conducted by Chinese and Japanese immigrants. Secondly, foreign investors do not have to start enterprises of their own in order to share in the development of a colony. They can buy in the open market securities representing practically every type of undertaking. Such obstacles to this accustomed course as are now encountered have been erected not by the imperial country, but by the governments of other countries which do not want their capital to go abroad. The Stock Exchange lists in London, for example, show that colonial investments as a class do not invariably yield especially attractive returns. Moreover, colonial loans usually return a lower rate of interest than is paid on loans of independent countries of comparable size and resources. When we consider the position of the United States in relation to the export of capital, it is difficult to infer that its overseas investments have been handicapped by the lack of political dependencies. Such enterprises as that of the United Fruit Company in the Caribbean, and more recently the rubber-growing projects of the Firestone Corporation in Liberia and of the Ford Company in Brazil, prove -- if proof is still needed -- the importance of large scale investment for the development of backward areas. But they do not provide grounds for generalizations as to the connection between foreign investment and political control. The security of private investments in a foreign state is a problem quite separate from the imperialistic claims which we are examining here, but it nevertheless is difficult to ignore it entirely, if only because of the loud, but loose, declarations of "economic imperialism" to which it has given rise in recent years. For our purpose it will suffice to remember that if British investments do not threaten the sovereignty of Argentina, whereas United States investments do threaten that of Liberia, the explanation is to be sought in some other cause than foreign investments as such.
Before attributing any economic effects to political causes, we must distinguish clearly between the character of those investments that succeed and those that fail. There are plenty of examples of reckless enterprises that could never be made to pay by either imperial control or diplomatic protection. The most intense political support did not save the "concession régime" in the French Congo from failure, any more than the fact of a common nationality repaid British investors for their losses in the Canadian Grand Trunk Railway. The defaults that United States investors have suffered on their loans to South America are practically all attributable to an initial failure to recognize the limitations of the foreign trade of those countries, the only source for meeting interest charges.
When all the aspects of overseas investment are considered, then, it does not seem unreasonable to conclude that if countries like Italy and Germany have made little overseas investment, this is because they have little capital available for external use. And no military or diplomatic triumph will either increase this important asset, or provide a substitute for its function in developing production.
The imperialist nations have already tried forced labor -- it was widely represented as civilization's educational crusade -- but it has never proved successful for long. Since, however, nations do not appear to learn from each other's experiences, it may be worth noting that involuntary native labor for both public and private purposes has been condemned by successive reports of the League of Nations Commission on Slavery and Forced Labor. Therefore, if Italy had complained to the League that Ethiopia was not fulfilling an agreement that an Italian road should be built through her territory, and if the League had regarded this as a contract that Ethiopia must carry out, the use of compulsory labor would have been impossible. When, however, Italy secures the same opportunity by conquest, then she can conscript natives for labor service and call it civilization or education, as others before her have done.
We may summarize the contemporary economic relations between an imperial country and its dependencies by saying that in order to maintain an acceptable measure of prosperity in the colonies -- and incidentally to meet the expenses of administration -- the home government provides a protected market for colonial producers which enables them to continue production at higher costs than prevail in foreign countries. When this is not sufficient, it must give a direct subsidy from the imperial budget. By such methods it enables more investments to be made in colonial areas than would otherwise be profitable, but the profit is derived entirely from the expense of higher priced products borne by the home market. This is hardly a situation which can be said to confer "economic benefits" on the ruling Power. On the contrary, it seems that colonial possessions do involve the economic disadvantages that Cobdenite England and the early opinion of Bismarck attributed to them. Are we not, therefore, safe in holding that there are no imperial adventures at the present time which are induced by "economic necessity," and none which are likely to provide relief from financial stringency at home?
A nation may still, of course, attribute such political values to imperial status that it bears the relatively disadvantageous terms of colonial trade gladly. But from the standpoint of international equity, there is a difference between wanting a colony because it will be a cheaper source of certain necessary materials, and wanting it as an independent source of supply at any price. The territorial claims which are being made in the name of economic necessity today are only a pseudo-rational disguise for political motives. What the "needy" nations really want is an extension of their respective areas of national autarchy. To this end economic calculations are entirely subsidiary.
[i] There are a few minor products which are exported only from one area because this has proved the cheapest source, e.g. camphor from Formosa and cinchona from Java.