In elite circles this was not the dominant view. Albert Sarraut, Radical party politician, Governor-General of Indochina (1912–14 and 1917–19), Minister for Colonies in the early 1920s, briefly Prime Minister in the 1930s, and later, during the German occupation (1940–44), a supporter of Marshal Pétain, reflecting on French colonialism, basked in the idea that the French attitude towards the indigènes was far more egalitarian than that of the ‘Anglo-Saxon’.148 Such myth-making, common at the time, did not prevent him from describing the native as ‘lazy, indolent, improvident. He likes to chat under the banyan tree or the baobab, singing, dancing, smoking, sleeping mostly.’149 Inferior races were not going to be inferior for ever, he added, magnanimously, if appropriately cherished and nurtured.150
In France there was a popular belief that ‘their’ colonialism was humanitarian, whereas that of the British was mainly about plundering resources.151 The British held a parallel view: their colonialism was better than that of anyone else. The British journalist and traveller Herbert Vivian writing in 1898 was shocked by the behaviour of the French in Tunisia:
The more I have travelled about Tunisia the more impatient I have felt at the presence of the French. It is not mere patriotism which makes me say that an English occupation would have been a very different matter … we should, at least, have set up the full polish of civilization in its place.152
A British explorer claiming six years’ experience in east Africa was equally shocked by the Portuguese:
The Portuguese on this coast line have reached a depth of sexual immorality – indeed of sexual criminality – below which it is impossible for humanity to fall … The Portuguese morality in these dark regions is appreciably lower than that of the brute beasts.153
The imperialists, whether French or British, were not at all a force for modernization. Most of the time they allied themselves with local chieftains, princes, and potentates whose traditional powers they sought to preserve all the better to rule without too many problems. In Algeria the French used local sharia courts to maintain order. In Indonesia the Dutch authorities used Islamic courts and schools to administer the colony.154 In Nigeria the Governor, Frederick Lugard, developed the concept of ‘indirect rule’, which involved coming to terms with local Muslim emirs, avoiding drastic reforms that would dislocate traditional rule. It was better, he explained, to rule the natives ‘through their own chiefs and customs’ rather than despotically and directly.155
The arguments, both ‘humanitarian’ and economic, raged backwards and forwards. Just as in England, in France too business interests were not too overt, as though greed and gain were unworthy motives in politics. The leader of the Groupe Colonial in the Chamber, Eugène Étienne, had no doubts that the empire was good for business but he did not feel it necessary or expedient to stress the matter. A far more formidable argument was the need to keep up with the other great powers. In a text published in 1897 he warned that ‘our English, German and Italian competitors’ were going after all the remaining ‘virgin lands of the globe’ (as lands inhabited by non-whites were called) and that, consequently, France must avoid imposing any restraints on her colonial ambitions.156
The pro-colonial discourse constantly used patriotic, humanitarian, and economic considerations. It is quite normal in politics to marshal all possible arguments to justify a policy around which the nation might rally. One pushes all the buttons available, hoping to get some right, in the knowledge that what might not convince some will convince others. The arguments may not be very good, or may be contradictory, but in the end, what matters in politics, particularly parliamentary politics, is winning today’s battle. The arguments used to justify intervention in distant lands are familiar: Western politicians rehash them every few years, confident in the short-term memory of their citizens, thus keeping everyone apathetic and obedient: it’s good for business, it’s what great powers do; it’s a moral duty; it’s good for us; it’s good for them.
19
The First Global Crisis
The scramble for colonies that started in the 1880s coincided with what might be called the first international crisis of capitalism, the so-called Long (or Great) Depression of 1873 to 1896; ‘so-called’ because there is considerable debate over whether it was a depression (it wasn’t since growth continued), whether it was great, or long, or even a crisis. S. B. Saul in his aptly named book The Myth of the Great Depression, 1873–1896 (1969) pointed out that there was no single pattern in that period and concluded by declaring that ‘the sooner the “Great Depression” is banished from the literature, the better.’1
The Long Depression presents inconsistencies. Despite increases in production, contemporaries thought they were in the middle of a very serious crisis that would last a long time. It did: the economic turmoil actually lasted for over twenty years; the drop in prices threatened investments; interest rates fell; profits shrank.2
The significant decrease in prices was due to excess production: too many goods chasing too few buyers. It was, wrote David Landes, ‘the most drastic deflation in the memory of man’,3 though he adds that deflation (falling prices) had started not in 1873 but after the Napoleonic Wars, briefly interrupted by the credit boom of the 1850s. In other words, deflation was normal throughout the nineteenth century.4
Deflation affected everybody differently. Wage earners benefited because they gained twice: first because prices went down, then because their wages went up (lower unemployment and stronger trade unions played a part). In Britain, in particular, average earnings increased by just over 40 per cent in the years 1880–1911, a remarkable improvement in living standards, higher than the continental average, though less than in the United States or Australia.5
The Long Depression was not a ‘depression’, i.e. a downturn in production: every country in Europe saw an increase in production (see Table 16).
Table 16 Per Capita Gross National Product in Europe, 1870–1910 (in 1970 US dollars)
1870 1910
UK 904 1302
Belgium 738 1110
Denmark 563 1050
Germany 579 958
France 567 883
Sweden 351 763
Norway 441 706
Italy 467 548
Source: N. F. R. Crafts, ‘Gross National Product in Europe 1870–1910: Some New Estimates’, Explorations in Economic History, vol. 20, no. 4, October 1983, p. 389.
However, many entrepreneurs keenly felt the pessimism of those years. This is not surprising because increasing wages and falling prices resulted in lower average profits. But it did not happen uniformly. Clever or lucky industrialists, who took advantage of new technologies to reduce their costs, increased their profits. So unlike the more famous Great Crash of 1929, and the subsequent Great Depression of the 1930s, during the years of the ‘Long Depression’ there was economic growth and increased consumption. Between 1860 and 1913 manufacturing output constantly increased, as did globalization, as did capitalism. The pessimism of 1873–96 was followed, though only in some quarters, by the joyous optimism of the Belle Époque, which preceded the less joyous years of the Great War.
What changed was the league table of industrialized countries. Products that Great Britain could sell to others (rails, trains, steel, looms, cotton and silk products, etc.) were now made also in Germany, the United States, Italy, Austria, Russia, Australia, Japan, and India. Since technological improvements were global, the gap between the lead country (Great Britain) and the best of the rest narrowed and eventually vanished.6 In 1860 the United Kingdom was well ahead of everyone, by 1913 it was trailing behind the USA, and, on a per capita basis, the gap with Belgium, Switzerland, and, more importantly, Germany was narrowing (see Table 17). The wages gap between British workers and those in other countries narrowed too (see Table 18).
Table 17 Industrialization Levels Per Capita, 1860–1913 (per capita volume of industrial production) (UK = 100 in 1900)
1860 1913
Austria-Hungary 11 32
France 20 59
Germany 15 85
Italy 10 26
Russia 8 20
Sweden 15 67
Switzerland 26 87
UK 64 115
USA 21 126
Japan 7 20
Source: Paul Bairoch, ‘International Industrialization Levels from 1750 to 1980’, Journal of European Economic History, vol. 11, no. 2, Fall 1982, p. 281.
Table 18 Relative Wages in Engineering, 1850–1905
Source: Vera Zamagni, ‘An International Comparison of Real Industrial Wages, 1890–1913: Methodological Issues and Results’, in Peter Scholliers (eds), Real Wages in 19th and 20th Century Europe: Historical and Comparative Perspectives, Berg, Oxford 1989, p. 117.
In per capita terms Belgium had become, by 1913, the top exporting country in the world, followed by Switzerland, with the United Kingdom lagging in third place (see Table 19).
Table 19 Exports per Inhabitant, 1840–1910 (in dollars adjusted for 1990)
Source: Paul Bairoch, ‘La Suisse dans le contexte international aux XIXe et XXe siècles’, in Paul Bairoch and Martin Körner (eds), La Suisse dans l’économie mondiale, Droz, Geneva 1990, pp. 103–6.
The British themselves had long tried to come to terms with the ‘puzzling signs’ that their own economic fate was without historical precedent and possibly fraught with danger.7 The country had industrialized while sacrificing its agriculture. As a consequence, it needed to import cheap food, maintain a navy, and pursue international trade. The Royal Navy had been an essential part in the construction of the empire. It had seen off the Dutch and the Spaniards in the seventeenth and eighteenth centuries, and had emerged successfully from the Napoleonic Wars. This ensured for British business a disproportionate share of world trade, shipping, and commercial services.8 Hence the popularity of the Royal Navy and the continuing popularity of the Scottish poet James Thomson’s famous lines, ‘Rule, Britannia! rule the waves’, written in 1740 (see Chapter 7).
For Britain the expansion of world trade was a necessity. Its modern empire was connected to the internationalization of capitalism.9 But trade was a necessity also for other industrializing states since Great Britain was a competitor for markets, raw materials, and agricultural products – all problems exacerbated by the ‘Long Depression’ of 1873–96.10 This was one of the many paradoxes of the period: Britain needed a globalized world since it was a massive exporter, yet the globalization of the world meant an increase in competition and, with it, British decline.
This was the period of the great American industrial advance. By 1914 the United States was producing one-third of the world’s industrial output.11 But it was also then, as it is now, the greatest debtor country, with a $7.1 billion debt in 1914. The other countries trailed behind in indebtedness: Russia ($3.8 billion), Canada ($3.7 billion), and Argentina ($3 billion). Even in 2014 the USA was a major debtor country on a per capita basis (third after Japan and Ireland).12 In 1912 an investment banker declared at the first Annual General Meeting of the Investment Banker’s Association of America: ‘We might as well face the situation. We cannot supply all the required capital in the United States. We must look to European countries for assistance, and while this demand for capital continues, we should be most careful not to frighten that capital from our shores.’13 In 1913 the main lenders were the United Kingdom ($18 billion), followed by France with half that amount.14 Much from these loans went to fund the American railways. In 1907 the financial editor of the New York Evening Mail declared:
Without the accumulated and unemployed pound sterling of the Englishman, the francs of the Frenchmen, the Belgians and the Swiss, the guilder of the Dutchman and the marks of the German, the material progress that has been the lot of these United States ever since the close of the Civil War could not continue.15
There were some populist reactions at the prospect of foreigners owning American property, particularly land. On 24 January 1885, The New York Times spoke out against ‘an evil of considerable magnitude – the acquisition of vast tracts of lands in the Territories by English noblemen’. But little was done. State legislatures enacted measures to prohibit alien ownership of land, but one could easily get round them. And, anyway, the populists were quite wrong: the American economy derived considerable benefits from such inward investments. The part played by foreign money and foreign business (and, of course, foreign labour) in making the United States the greatest industrial nation in the world at the end of the nineteenth century was considerable.
In Europe the ‘left’ condemned capital outflow. In Germany socialists denounced it because it brought oppression, in other words imperialism and colonialism, to weaker races.16 According to Rudolf Hilferding, the leading social-democratic theorist and author of the classic Finance Capital (Das Finanzkapital, 1910), capital outflow encouraged an imperialist policy since all capitalists with interest overseas would want a strong state to protect their investments even in the most far-flung parts of the globe.17 In France, various socialists deplored that French bankers sent money to the rest of the world, creating future competitors, instead of investing it at home.18
Borrowing from abroad was not always necessary for industrialization: Japan generated almost all its own capital in the nineteenth century – ‘almost’ because it used a British loan to build the first 18 miles of railway line between Tokyo and Yokohama. But then it used the indemnities extracted from China following the Japanese victory of 1895, a kind of war booty.19 Only later did Western capital begin to pour into Japan.
There were numerous banking failures caused by the Long Depression: Jay Cooke and Company in the United States (1873), the Union Générale de France in 1882, and Baring Brothers in 1890 (due to the wheat failure in Argentina, the country’s subsequent default and consequent ‘Panic of 1893’ in the USA). On 9 May 1873 the Vienna Stock Exchange crashed. In the 1880s the word ‘depression’ was used regularly in many French, British, and American official publications.20 In 1880, The Economist wrote that ‘It is very probable that the six years of depression will, in future, be reckoned from September 1873 to September 1879’ and that the year 1879 had been ‘one of the most sunless and cheerless of the century’.21
Economists had begun to speak a language that would become familiar to us: the language of globalization (though the word was not yet used). Previous crises were not so ‘global’. Charles Kindleberger lists various ‘panics’ (as short economic crashes were then called) before 1825: five in England, one in Germany, one in France, and one in the Netherlands.22 The ‘Panic of 1825’ occurred in the United Kingdom when the stock market crashed because of speculative investments in Latin America gone wrong (the new Latin American states had borrowed heavily). The crisis, however, affected mainly the English banking system, causing many bankruptcies. Scottish and Irish banks were barely affected.23 The panic hardly manifested itself abroad. In fact, it was an intervention of gold from the Banque de France that saved the Bank of England from collapsing. Another major crisis, the American ‘Panic of 1837’, had minor implications outside the United States, though British bond holders were upset when some states, such as Pennsylvania, defaulted.
By the 1870s matters had changed considerably: a major crisis was unlikely to be self-contained. The huge waves of emigration, the remarkable expansion of direct investments, and the massive increase in exports marked a new era in the development of global capitalism, even though, from a global perspective, a large part of production, saving, and consumption was still outside this global market in that the majority of the world’s producers were still small farmers selling to a relatively local market.
Hector Denis, a Belgian economist, writing in 1895, as the economy was finally improving, noted that what had been remarkable about the crisis of the previous years was that it had been a world crisis, one which involved all the nations civilisées.24 He rightly saw that this was due to the growth of interdependence, which he attributed largely to the révolut
ion dans les moyens de transport: the railways, the navy, postal system, and telegraph. But he thought that trade should be increasingly liberalized and that attempts to impose protectionist measures were unlikely to last long. He was wrong about protectionism, as we shall see. One consequence of the depression was an increase in calls for tariffs to protect the home economy. But he was right about transport. One of the consequences of the revolution in transport was that it made products more competitive, particularly agricultural products. It was now easier to import corn and wheat, especially American wheat, which, thanks to the much higher productivity of agriculture in the United States (tractors, harvesters, fertilizers), became cheaper and cheaper. The consequent decrease in international wheat prices damaged European agriculture. It forced Sweden, which had free trade in the 1850s and 1860s, to introduce protection; accelerated the decline of British farming; gave impetus to emigration in Italy; transformed Denmark from a grain-exporting country into an exporter of dairy products, bacon, and eggs; ruined peasants in Romania unable to compete with American cheap grain; and damaged Portuguese growth, which was based on agricultural exports.25 This meant that protectionism could not fade away. In an era of growing democracy in which governments were expected to respond to changes in the economy, it was unrealistic to expect politicians to let the international markets ride roughshod over local interests and people.
In 1881, The Economist had warned that American cheap wheat was not an isolated incident but a permanent factor in the international economic landscape, and that from now on wheat production in the United States would ‘entirely change the general situation of the wheat trade and of land value in the United Kingdom and France’.26 One of the main consequences was an equalization of prices: in 1870 wheat in Liverpool was 57.6 per cent more expensive than in Chicago, by 1895 the difference had dropped to 17.8 per cent.27 Prices dropped because more could be produced by fewer people and could be transported in huge quantities almost anywhere in the world.
The Anxious Triumph Page 67
