America Must Prepare for a War Over Taiwan
Being Ready Is the Best Way to Prevent a Fight With China
THE mineral geography of the future has been etched in the earth by recent industrial development. Minerals constitute only a part of what is termed "the natural resource problem," but they furnish a defined basis for an inductive approach to the broader problem. We are just learning to make use of our physical environment; the problem of our mineral resources offers a tempting challenge to our ability to foresee and take intelligent advantage of a new environmental factor, instead, as has been our habit, of allowing ourselves to be overrun by environmental conditions to which we remain passive and more or less oblivious.
The world has used more of its mineral resources in the last twenty years than in all preceding time, and there is nothing to indicate any slackening of the acceleration which has occurred during this period. The production of oil, for example, is now as great for one year as for any ten years preceding 1900; a single company in the United States now produces annually more than did the entire country in that year. The last twenty-five years has seen as much gold production as the four hundred years following the discovery of America. There are important mineral industries (as, for instance, the aluminum industry) which are not yet fifty years old. One of the most significant changes has been in the use of the so-called energy resources--coal, oil, gas and waterpower. If the power used in recent years from these sources be translated roughly into man power it appears that every man, woman, and child in the United States has potential control of the equivalent of from ten to twenty hard-working slaves. The world has just entered on a gigantic experiment in the use of earth materials. Energy is being released on a scale never before approximated, with consequences which cannot yet be appraised.
The Convergence of Demand on the Few Adequate Sources. Vastly increasing mineral requirements have resulted in the intensive exploitation of the comparatively few deposits capable of meeting these requirements. When the demand was small, it was often possible to secure the necessary supplies from a considerable number of scattered sources. As the mineral industries have grown, the units most favorably situated in regard to raw materials and markets have naturally outstripped the others, thereby deepening and widening the trade channels tributary to them. In each of the principal mineral industries there now stand out a few dominating centers of supply and manufacture, which usually cannot be duplicated in regard either to quantity or efficiency of production. Other possible centers are likely to be handicapped in some essential particular--in size or grade of reserves, in cost of transportation to markets, or in some other way.
Iron ores, for example, are widely scattered over the globe, being present in every continent and in almost every country; yet the principal supply is drawn from only a few sources--from the Lake Superior region of the United States, from northeastern France, from the Cleveland, Lincolnshire, Northamptonshire, and Cumberland districts of England, from the Kiruna district of Sweden, and from northern Spain. Together, these sources supply about three-fourths of the world's annual total; the remainder comes from scattered sources in many countries.
The steel industries using these iron ores are concentrated in large units, favorably situated where they may draw on the large reserves and where there are adequate supplies of coking coal, together with access to a consuming population. Of the world's steel-making capacity over 90 percent is confined to three regions: the United States, centering for the most part about the lower Great Lakes; northeastern England, using both local ore and coal; and the Ruhr and adjacent portions of northeastern France. All of these great units draw supplementary supplies from outside sources. As they have become larger and more firmly entrenched, they have been able to reach farther afield for the needed raw materials. In no other region now known would it be possible to duplicate these large units with equal efficiency. Even if some location could be found which would apparently satisfy all of the necessary conditions, the size and efficiency of the units already established, with their ramifications of allied industry, would make competition or duplication difficult for the new district.
Turning to coal, we find that the grade of bituminous coal adapted to coking and to efficient power uses is most extensively exploited in the eastern United States, in England, and in western Germany, these three regions producing about two-thirds of the world's supply. The remaining third comes from many sources, no one of which is in the class with the sources named. The United States has about half of the world's estimated reserves. All the countries of the southern hemisphere have together less than one-tenth of the estimated reserves. In China there are large reserves of proper grade for commercial utilization, but the difficulty there is in the lack of industrial development and initiative on the part of the Chinese.
The anthracite production of the world is still more concentrated, being confined practically to eastern Pennsylvania. Over 95 percent of the world's total comes from that region, the remainder coming mainly from Wales. The only large reserves in sight are the yet unexploited reserves of China.
In recent years the United States has produced about 65 percent more oil than all other countries combined. Southern Russia, Mexico, Dutch East Indies, Rumania, and Galicia have accounted for 30 percent, leaving only about 5 percent for the rest of the world. Productive fields will probably be developed in India, Persia, Mesopotamia, Asia Minor, China, Formosa, and perhaps also in South America and Africa, but the location of the great oil reserves of the future is not nearly so well known as is the case with other mineral commodities, and important shifts in the geography of the industry are to be expected. Making large allowance for such shifts, however, it seems clear that in the future, as in the past, the oil industry will be dominated by a very few districts.
The United States produces nearly 60 percent of the world's copper, and of this nearly 90 percent comes from a few mines in Utah, Arizona, Montana, Michigan, and Alaska. Another 14 percent of the world's production comes from Chile (which probably contains greater reserves than any other country except the United States). The companies controlling the major production of the world are even fewer in number than the principal mines. Two companies in the United States control over 30 percent of the world's output.
The minerals known as the ferro-alloys, necessary in the making of iron and steel, are derived from a very few principal sources. Manganese ore comes mainly from limited districts in India, Georgia (Southern Russia), and Brazil; chromite comes from Rhodesia, India, and New Caledonia; nickel for the most part comes from a single district in Canada; tungsten comes from China (60 percent of the total); and about half of the world's vanadium comes from Peru.
The Malay Straits, Bolivia, and Dutch East Indies account for over three-quarters of the world's tin production. The Union of South Africa produces over half of the world's gold (principally from the Transvaal district) and over two-thirds of the total comes from the British Empire. Mexico and the United States account for two-thirds of the world's silver production, mainly from half a dozen districts. The United States is the greatest lead-producing country, yielding 42 percent of the world's output in 1923; Mexico, Australia, and Spain yield 35 percent. As for zinc, the United States in 1923 produced about one-half of the world's output, and 83 percent of it came from three districts.
If we consider potash we find that the deposits of the Stassfurt district of Germany and, secondarily, those in Alsace, dominate the world's fertilizer markets. Natural nitrates, used in peace times for fertilizers, come almost solely from Chile. The sulphur markets of the world draw predominantly on three deposits in Louisiana and Texas, and present indications are that these are likely to be reduced to two.
This sketchy and necessarily disjointed outline of the distribution of the most essential mineral resources is perhaps sufficient to establish the fact that the dominating centers are few. About thirty of the principal mineral districts account for over three-fourths of the world's mineral production. In any picture of the world mineral situation, then, there stand out a few nodal points, pretty well fixed for the future, with ramifications usually extending far beyond national boundaries and crossing one another in the most intricate fashion. Even though new elements come into the picture, its main outlines will doubtless remain the same. Consolidation and coordination are proceeding rapidly in the interest of more efficient operation. Competition has not been eliminated, but it is now mainly among a few commercial giants.
The International Movement of Minerals Consequent on Centralization of Production. It is clear from the foregoing that the principal mineral trade routes must necessarily be few in number and more or less independent of national boundaries. A substantial portion of the minerals produced is consumed outside the countries of origin. In fact, nearly a third of the world's mineral tonnage moves across international boundaries (of this third coal and iron constitute nearly 90 percent).
The necessity of world-wide movements of minerals puts a premium on freedom of the seas in peace and control of the seas in war. The key to the problem is to be found mainly in the mineral strategy of the north Atlantic Ocean, and secondarily in that of the north Pacific Ocean. The interruption of any one of the main channels of movement between nations is followed by confusion or disaster, because of the difficulty, usually the impossibility, of making up the supply of minerals from other sources. This was strikingly manifested in the Great War. Failure to comprehend this simple fact underlies many futile attempts to close or change these routes by political action. Certain schedules of our own recent tariff law--for illustration the one relating to manganese--were designed to foster domestic mineral industries and limit importations. But it happens that nature omitted to put adequate supplies of the minerals in question in this country when it was created. The actual result, therefore, is only to lay an additional charge on the consumer, without materially changing the volume of movement from foreign sources. As a revenue producer such tariffs may be useful; but this was not their primary purpose. There are other minerals which really warrant tariff protection.
The Exploration and Development Required to Maintain Available Mineral Supplies. Heavy drafts on mineral resources of the kind made in recent years make necessary constant exploration and development if a sufficient "cushion" of available reserves is to be maintained. This is not only because of the high rate of exhaustion, but because it is necessary now to look farther ahead for the raw materials as a matter of insurance on the large operations and the immense capital outlays involved. In proportion as there are world or regional shortages of available reserves--and there are acute ones--the rush for new supplies becomes more strenuous. The fear of a shortage varies with different minerals, with fluctuations in commercial demand, and with conditions of war and peace, but underlying it all is the outstanding fact that the general increase of the world's requirements during the last two decades makes even the largest resources look less adequate than they formerly did.
The effort to maintain adequate reserves has made itself felt in several ways:
Better transportation facilities and enhanced commercial competence have made it possible to go farther afield for raw materials; in fact, there are now few parts of the world which are too remote to be affected by the demands of the mineral industries.
The geographic range of entirely unexpected major discoveries has been much narrowed. Geologically the earth has become well enough known to indicate in large measure what primary sources will remain fixed, the probable directions of geographic shifts of others, and some of the regions or countries of potential discoveries.
As the richer mineral deposits are exhausted the demand must be satisfied by the exploitation of minerals of lower grade. New beneficiation processes are making possible the use of mineral reserves which were not marketable a few years ago. A good illustration is found in the copper industry: the main supply formerly came from ore containing upwards of 5 percent of copper, but now it is won largely as a result of large-scale beneficiation of ores containing 2 percent or less of copper. Lower grade mineral deposits are on the whole much more extensive than high grade deposits, affording a better opportunity for large-scale operations, with correspondingly cheaper costs. The resulting postponement of the time of exhaustion of the richer ores is distinctly conservational in its effect.
Mineral supply and demand, both present and future, are much more carefully measured than formerly. Geologists and engineers are for the first time giving a comprehensive idea of the world's stocks of minerals and of the probable life of each.
Finally, there are important political consequences, to be discussed under a separate heading.
Political Consequences of the Geographic and Commercial Concentration of the Mineral Industry. An examination of the distribution of mineral industries, nation by nation, discloses the fact that about 85 percent of the world's output of minerals originates in countries bordering the North Atlantic basin. The United States far outranks all others. No country, however, not even the United States, has enough of all the essential minerals, and many countries are devoid of nearly all of them. A few decades ago the mineral commodities necessary for the welfare of a nation were not so large in volume but that they could be easily supplied from various sources by the natural processes of trade; if they could not be obtained in one place, they might in another. With the present vastly greater requirements the securing of a steady and adequate supply is a much more serious matter. The sources capable of supplying these larger demands are relatively few and limited; the failure of a regular supply has disastrous consequences; the international competition for them is keen. Hence it is that governments are giving closer attention to questions of supply, not only by aiding their nationals in various ways to secure supplies outside, but by the formulation of measures tending to conserve supplies within their own national boundaries.
A fact of far-reaching significance, made obvious by the war but still often disregarded in discussion, is the overlapping of political and commercial spheres of influence.[i] Commercial interests of one country own minerals in other countries, or international commercial interests control minerals in more than one country. British and American capital play an especially prominent rôle in controlling commercially supplies of minerals in other countries. Extra-national commercial control often carries with it important political influence, and the extension of political control is more and more tending to conform to the commercial spheres determined by the occurrence of raw materials. Such facts are seldom indicated in making up classifications of mineral production by countries.
An illustration of the kind of problem created by the overlapping of the spheres of political and commercial influence is the Ruhr controversy.[ii] The iron and steel industry of western Europe centers about the Ruhr district of western Germany, and overlaps into Belgium, Luxemburg, and northeastern France. France has the iron ore, Germany most of the coking coal. The iron and steel plants have complementary relationships--France produces more raw steel than it can finish, Germany has most of the finishing plants. The industry cannot be successfully divided geographically into self-sustaining parts. Outside competition requires the efficient operation of this industry, which in turn requires coördination, consolidation, and singleness of direction. The very size of the industry puts a premium on the firm possession of all the parts necessary to its operation. The history of this industry shows the growth of powerful economic unity, spreading over national boundaries, which since 1870 has been reflected in stirring political and military events. With the still further consolidation of commercial power, which seems to be inherent in the natural growth of this industry, it is quite possible that there will be further shifts of national boundaries in the effort to unify political and military control; even the creation of a new state is not impossible.
National barriers--such as certain tariffs, embargoes, prohibitions against extra-national ownership or exploitation of minerals, and lack of coöperative enterprise or capital--are likely to be swept aside by the world's necessity for developing new resources and for preserving freedom of movement. The need for the "open door" often comes squarely into conflict with the principle of self-determination of nations. When it happens that one of the few large potential sources of some needed mineral is situated in a country lacking the local capital and initiative necessary for its development, or where there is political opposition to such development, pressure is exerted by the outside mineral industries, and often by their governments, to compel exploitation in one way or another. Cases of this kind are rapidly multiplying. The pressure is constant, insidious, powerful, and is really backed up by world-wide forces. It is idle to argue whether this should or should not be, or whether or not it could be stopped by political action. A world which is rapidly developing habits in the use of the products based on mineral resources will not easily change these habits for the sake of an academic principle. If, for instance, it should be decided that it was unethical to force the development of much-needed supplies of oil in a country where such development would not take place without compulsion, the only practical way of giving effect to this decision would be to find means for lessening the demand for oil. The very man who argues on behalf of national self-determination on ethical and historic grounds is likely to be a user of materials which can be had only by breaking down this principle. Neither the mineral industries nor their agents should be blamed for acting on the demands which they feel pressing behind them. Instead of criticising this tendency it would seem wiser for us to devote our attention to examining and regulating the manner in which it is being translated into action.
An extreme result of the demand for raw materials is seen in one country's actual establishment of political control over all or part of another country. In several recent cases of national expansion the acquisition of mineral resources has been a frankly recognized motive. Less spectacular, but equally real, are the influences of mineral exploitation in determining the political complexion of many a regional settlement, as, for instance, in our own west, or in the case of the Mississippi Valley zinc and lead districts. Historians and geographers have pointed out many interesting instances of this.
Although students of mineral resources see these tendencies and note the steady pressure which is exerted, it is only when some actual political change results that public attention is attracted, and perhaps not then. There is a lag in the emergence of political results, often for many years, after the causative exploitation has started, and this is one reason why the influence described is not more generally recognized. In the case of some of the changes which have occurred since the war the economic spade work was done years ago, just as the exploitation now under way will make itself felt politically some years hence. A wider recognition of the influence of this new environmental factor should go far to clarify international political procedure. The public might well know more generally, both for reasons of self-interest and for the sake of international accord, just what minerals our country has in excess, what must be secured from foreign sources, where they can be secured, what are the vital needs of other nations, and what important explorations are now under way in various parts of the world. With this information available, it should be possible to discriminate between exploitation forced by real national needs and that which is irresponsible or needless, and to graduate political aid, protection, or opposition accordingly. The public might well know, also, the few great channels of international mineral movement fixed by nature, and the futility of attempts to interrupt or divert them by tariffs and embargoes.
Our experience during the war demonstrated clearly that the United States was not acquainted with these facts, and today there is little to show that our tariffs, our diplomatic notes relating to competition for mineral supplies, or our international trade agreements, are constructed on any broad policy reflecting an understanding of the problem as a whole. Too often such measures are enacted with regard only to some special interest which happens to be urging its claims at the moment. In this lack of perspective and comprehensive national policy the United States already is far behind many other nations whom necessity has taught to study these problems and take full stock of factors both of national surplus and deficiency. The information is now available.
It is, of course, not to be overlooked that the exploitation of mineral resources is only one of the many factors, environmental and human, that determine political action. The net political result of the interaction of several factors may be quite different from the effect of any single factor operating independently. But no one factor must be ignored.
The Nationalization of Mineral Resources. Public control of mineral resources takes many forms, among them direct government ownership and operation--control through leases and royalties--many forms of licenses, concessions, taxes, and tariffs--various measures of inspection and regulation of operations--regulations for the improvement of labor conditions--coöperation and even control in marketing--price-fixing--prohibition of monopoly--political, commercial, and military aid given to private interests exploiting foreign reserves--restrictions on the exploration of lands within governmental jurisdiction, particularly for extra-nationals--and a variety of measures for the control of transportation, both rail and water. At one extreme is outright governmental ownership, at the other a fairly full measure of private control, varying in the case of different countries, different mineral commodities, and with conditions of peace and war.
In recent years there has been a pronounced stiffening of public control, particularly over minerals of which there is a regional or world shortage. During the war most nations assumed charge of their own raw materials, in one way or another, for military reasons, and some of the measures then adopted have been carried along in peace times for purposes of commercial defense or offense. But aside from war measures, the tendency toward public control has grown so steadily and so widely, and under so many different conditions, that one seems fairly safe in inferring that it will persist. Noteworthy steps have been the withdrawal of mineral lands from public entry, the participation of governments in commercial operation, exploration, and selling arrangements, measures for the restriction of exploration by extra-nationals, and levies of special taxes. In the United States the movement has as yet been slight, but to show that it exists one need only cite the withdrawal of public lands from mineral entry, new leasing laws, the occupational tax on the iron ores of Minnesota, the special anthracite coal tax of Pennsylvania, the severance tax on minerals of Louisiana, the tax on oil and sulphur in Texas, and the appointment of coal and oil commissions.
This tightening of public control may be broadly designated as nationalization of mineral resources. Nationalization is popularly understood to imply government ownership and operation, but an examination of the discussions on this subject in countries where the problem has become politically acute shows that the term also covers various forms of more or less indirect control, and that it is difficult to draw any distinct line. Perhaps the best picture of the problem of nationalization in the narrower sense can be found in British political discussions of the coal mining industry during the last few years. Recently these discussions have been well summarized in non-technical language by Mr. Lloyd George.
It is not necessary in this article to do more than indicate the actual existence of nationalization, in one form or another, in many parts of the world, and to note its rapidly widening incidence. These are facts, whatever we may think of their desirability. Probably most people familiar with the mineral industry are agreed that it would not have reached its present high state of development under bureaucratic direction, because the problems involved--metallurgical, geological, commercial--are varied and intricate, and seem peculiarly to require the free play of individual initiative. They believe that the government could accomplish little more--probably less--than is already being done in the normal course of private trade. Naturally they view the progress of nationalization with alarm. On the other hand, the world is coming to realize the basic connection between mineral resources and national prosperity, the political advantages accruing to the country possessing mineral resources, and how limited are the reserves of some of these resources in comparison with the life of a nation. "Conservation," so little understood in its practical workings, is popularly assumed to require more direct government control, though the correctness of this assumption is open to argument.[iii] The thought is growing that mineral deposits, so slowly accumulated by nature, are the heritage of all the people and are not to be exploited exclusively for private gain,--or that if the exploitation is left in private hands it must be done in trust for the public.
It is not our purpose here to argue this question, but merely to state it. The problem cannot be solved by ignoring it, as is the disposition in some sections of the mineral industry. To arrive at an intelligent solution will require broad objective study, as free as possible from self-interest, and an understanding of the variety and inter-relation of the various aspects which the problem assumes. The salient facts are not too many and intricate but that they can become fairly generally understood. A special responsibility rests on the leaders of the mineral industry to contribute their knowledge and ideas toward the formulation of a wise national policy. Otherwise nationalization is likely to take forms determined by surges of political sentiment, probably ill-adjusted to the facts of the situation.
The Internationalization of Mineral Resources. One begins to hear the phrase "internationalization of mineral resources." It comes up in connection with the League of Nations, with the peace settlements, and with various projects for world peace. The phrase means different things to different people; the manner of its use often suggests that there is no well-considered plan in mind, that it is more or less of an academic abstraction. Yet the idea behind it is reasonably clear--that some arrangement should be made to protect nations weak in resources against nations better favored by nature; to prevent monopoly by any one nation or group of nations; to minimize the strenuous competition among nations, which sometimes leads to war; to prevent abuses in the exploitation of the resources of backward countries; to insure freedom of search and of international movement. The phrase implies a belief in the possibility of distributing the advantages of local environmental factors in accordance with some sort of political arrangement. It equally implies the belief that the desired results are not being properly accomplished by uncontrolled private trade, or the fear that they will not be so accomplished in the future, and that therefore governments must collectively assume control.
During the Great War the Allies went far in the direction of internationalization of their mineral resources by many measures of pooling and allocation. Before the armistice British and American officials gave consideration to a plan that after the war the exportable surplus of key raw materials controlled by the Allies (mainly by the United States and Great Britain) should continue to be distributed as mutually agreed, as a means of controlling the commercial rehabilitation of the enemy countries during the reparation period. With this in mind the exportable surpluses and deficits of key materials were listed and totaled for the several nations most concerned. One of President Wilson's fourteen points--"the removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance"--was interpreted in some quarters as requiring internationalization of key resources. These ideas received no expression in the Versailles Treaty. But since then the question has reappeared from time to time in connection with various international economic difficulties which were not solved by the Versailles Conference, and it has been given some attention by the Economic Committee of the League of Nations, following a resolution by the International Miners' Congress in 1920, "that there be constituted within a brief period an international office for the distribution of fuel, ores, and other raw materials indispensable for the revival of normal economic life." Recent attempts by France, Germany, and Belgium to make satisfactory working and financial arrangements for the iron and steel industry of western Europe, already cited, are essentially attempts to secure some of the advantages which would follow the internationalization of the coal and iron ore supplies necessary to that industry.
Another significant step toward internationalization, by agreement between private interests and governments, is exemplified in the recent organization of an international company (the Turkish Petroleum Company) to explore and exploit the potential oil fields of Iraq, in Turkey. Four groups are equal partners--The Anglo-Persian, the Royal Dutch-Shell, the Standard Oil and six other American companies, and sixty-five French companies. The British Government is a direct owner of shares in the first two companies named and also is governing Iraq under a mandate. The American and other governments concerned also took more or less of a direct part in formulating this arrangement. Our State Department interceded with England, for example, to allow participation by American companies, and, permission having been granted, was instrumental in seeing that the opportunity was open to more than one American oil company. The purpose of the plan is to insure equal opportunity among the nations represented and to prevent monopoly or exclusion by any one. Of course it does not necessarily insure equal opportunities for other nations.
It seems inevitable that the tendency toward internationalization will continue, in the sense that governments will take a larger hand in the formulation of agreements relating to exploration in foreign countries and to the maintenance of open channels for necessary supplies. The conditions to be met are so varied that probably it is impossible now to devise any comprehensive, precise, and workable plan of internationalization for the future. At best, any general scheme of control now worked out would lack the elasticity and effectiveness of the present procedure based primarily on private initiative. In time such a plan may be evolved, empirically, from the sum total of international experience in this field. Perhaps about as much as could be done now in this direction would be to give international affirmation to the general principle of the open door policy, which is after all the core of the problem, leaving the specific procedure to be worked out as circumstances require. The Permanent Court of International Justice at the Hague furnishes opportunities for the settlement of international controversies relating to resources, and in fact it is now being used in this manner, for instance, in the settlement of the recent suit on power concessions brought by the Greek Government against the British Government. The League of Nations, or a World Court, might also come to exercise a certain measure of supervision over such arrangements.
Internationalization of the tentative and partial kind so far tried accrues to the advantage of the nations possessing most of the supplies to trade with, and does not help less favored nations to the extent of making them equal partners in the control of resources. Certainly the world has not reached the Utopian condition where any nation can be expected voluntarily to yield up to any super-national body the ownership of a part of its resources. A few strong combinations dominate the world's resources. England and the United States alone, by agreeing on the disposition of the mineral supplies they control, are in a position to determine the general course of the mineral industry of the world. It is a question whether such a combination, or any other strong one, would ever really subordinate its own advantage to any broader political or judicial control. It may only be hoped that, with the emergence of larger units of commercial and political control, there may be a fixing of responsibility and a broadening of self-interest which will help insure administration for the good of all.
[i] See "Political and Commercial Geology," edited by J. E. Spurr: McGraw-Hill Book Co., New York, 1920.
[ii] See "The World Iron and Steel Situation in Its Bearing on the French Occupation of the Ruhr," by C. K. Leith: FOREIGN AFFAIRS, Vol. 1, No. 4, pp. 136-151.
[iii] See "Economic Aspects of Geology," by C. K. Leith: Henry Holt & Co., New York, 1921.