American World Policies

This we are forced to do even though we may have no immediate friction points with Europe. The economic interpenetration of all nations involves us in conflicts of interest and adjustments, which require a positive national policy.

It is our economic development that most strongly pushes us in this direction. We are gradually destroying the complementary industrial system which formerly held us to Europe; we are competing with European countries for world markets and have even begun to compete for investment opportunities in backward countries. We are exporting manufactures, and this exportation is likely to increase. Of the six chief requisites of a great manufacturing nation—coal, iron, copper, wood, cotton and wool—we are the greatest single producer of all except the last, and to this advantage of cheap raw materials, there is added an efficient manufacturing organisation and a large manufacturing capital. From 1880 to 1910 that capital increased six and a half fold (from 2.8 to 18.4 billions of dollars). It is therefore no wonder that we are exporting tools, sewing-machines, locomotives, typewriters, automobiles and electrical apparatus. These products compete increasingly with similar products from England and Germany and invade the markets which Europe desires for herself. Our total exports to Latin America, for example, have almost quadrupled in twenty-two years, increasing from 77 millions of dollars in 1890 to 296 millions in 1912.

The significance of this competition, as it exists to-day and will exist to-morrow, is greater for Europe than for us. Our fundamental welfare does not absolutely depend upon this exportation; we could lose a part of this trade, as we lost our shipping, without fatal results, for we should still have our cotton and many half-finished products to exchange for our imports. Were Great Britain, however, to lose her markets for manufactured goods, she would shrink into insignificance, if she did not literally starve. In 1913 the United Kingdom spent $1,400,000,000 on imported foods, drink and tobacco, and for this, as for her importation of raw materials, she must pay. While our export of manufactures still forms but a trifling part (perhaps one thirtieth) of our total product, the British and the German export constitutes an immensely larger proportion. Our export of finished wares, despite its rapid increase, was in 1914 only some seven dollars per capita, while that of the United Kingdom was about forty-five dollars per capita.9 It will therefore not be wondered at if our increasing export of manufactures both to Europe and to the countries to which Europe exports, causes us to be involved, as we have not been for over a century, in the ambitions, conflicts and life-interests of the great European nations.

For at bottom a commercial war is an industrial war, a struggle for national prosperity. If, for example, Germany fails to hold her foreign markets, she must shut down factories. Her industrial problem is to buy raw materials from abroad cheap, ship to Germany, manufacture into finished products, transport to a country willing to buy, and from this enterprise secure profits enough to purchase food for her people. If she is beaten out, let us say, in the export cotton industry she must turn to something else. She may try to save the industry by increasing efficiency or reducing wages, but if she fails, she must close up some of her mills. If she cannot employ the growing masses who depend upon export industries, she must let her surplus people—and with them a part of her capital—emigrate. Like other European countries she has learned this lesson by experience. Thus it often happened when America increased her tariff rates that European factories, unable to compete, migrated, men and capital, to this country. It is true that the world market constantly expands, but the producing capacity of the manufacturing nations also increases, and competition becomes ever more severe. The more rapidly America invades the markets which Europe has hitherto held, the more she squeezes them, the more bitter the feeling against her will become.

That bitterness of feeling (in the conditions preceding the present war) was more likely to arise in Germany than in England and more likely in England than in France. We have spoken of these as rival nations, but there are intensities of rivalry varying in proportion to the similarity of products and of methods of production. Germany, like the United States, is a new-comer in international industry, pushing and aggressive. More scientific and better organised than we, she possesses far more meagre resources. We both have trusts or cartels, and both manufacture huge quantities of cheap, standardised products. Our competition therefore is of the keenest, and is likely to grow more intense, if, as seems likely, Germany recovers from the effects of this war. Less keen is our competition with Great Britain. Like an old firm, grown rich and conservative, Great Britain is not pushing, not scientific, not well organised. We are gaining on her in those branches of manufacture which permit standardisation and production in huge quantities, and have no hope, and but little wish, of competing in articles of high finish and therefore high labour cost. With France we compete still less, since much of her export trade is in articles of taste and luxury, in which we are hopelessly inferior.10

In this battle for the world market, the United States has the disadvantage of coming late and of being intellectually unprepared. On the other hand, not only have we superior natural resources, but also the advantage that to us success is not vital. Whatever trade we gain is a mere improvement of a situation already good. We are playing "on velvet." Finally, like Germany, we have the advantage of large scale production by strong corporations working with what is practically a bounty upon exports. Because of their control of a protected home market, our great corporations can make their sales at home cover all initial and constant costs, and as these costs need not be applied to exports, are able to sell goods cheaper in Rio Janeiro or Lima than in Chicago or New York. They are able to "dump" their surplus goods.11

The opening of the Panama Canal cannot but increase the competition of the United States especially with the nations bordering on the Pacific Ocean. From 1897-1901 to 1907-11 the average annual exports from the United States to these Pacific countries (Mexico, Central America and Columbia, the remaining West Coast of South America, China, Japan, the Philippines and British Australasia) increased from 104.2 millions to 200.2 millions, a growth of 92.1 per cent., while the export from Germany increased 81.0 per cent. and from the United Kingdom only 51.7 per cent. In the same period our average annual imports from these countries increased 112.9 per cent. (as compared with 113.9 per cent. for Germany and 62.5 per cent. for the United Kingdom).12 The trade with these Pacific countries lies largely with the United Kingdom, the United States and Germany (in the order named) and the United States seems to be slowly moving forward to first place.13 What progress the United States has made, moreover, has been achieved under certain great disabilities which the Panama Canal removes. "By present all-sea routes New York is, in general, at a disadvantage compared with Liverpool."14 New York by the Suez route is 3 days further away from Australasia (for ten knot vessels) than is Liverpool; by the Panama route New York is from 9 to 12 days nearer. For points on the west coast of North and South America, New York is one and a half days nearer than is Liverpool by the all-sea route and about eleven days nearer by the Panama route. When all the conditions of distance, speed, cost of coal, tolls, etc., are considered, it is found that the Panama Canal gives in many parts of the world an advantage to New York over Liverpool, Antwerp and Hamburg. The result is an impulse towards a keener American competition in the Pacific trade.

If our foreign commerce was gaining before the war, it has made even greater progress since the outbreak of hostilities. While Germany's foreign commerce has been temporarily destroyed and that of Great Britain has been hampered by the war, our total commerce has immensely increased. In the year 1915 we exported over a billion dollars in excess of our exports of 1913, our exports in the latter year exceeding those of the United Kingdom or of any other country in any year of its history.15 This development, it is true, was abnormal and consisted partly in increases in prices and temporary deflections in trade. Nevertheless, while many American industries, especially those engaged in the manufacture of war munitions, will suffer severely at the end of the war, and while our export of such commodities will dwindle, the war cannot but result in a relative advantage to American manufacturers of export commodities.

Moreover, the war by destroying established connections between neutral countries and their natural purveyors of manufactured goods in Europe has opened the way to a future extension of American export. Like a protective tariff, it gives an initial advantage to Americans, and helps them to overcome the early handicaps. It induces American manufacturers to think in terms of foreign markets instead of concentrating their attention upon a protected home market. In the beginning, it is true, the buying capacity of certain countries, such as those of South America, was diminished by the shattering of financial arrangements with Europe. But such a condition is purely temporary. There will always be a demand for the wheat, corn, meats, hides and wool of Argentine, for the copper and nitrates of Chile, for the coffee and rubber of Brazil, for the wool of Uruguay, for the sugar and cotton of Peru, for the tin of Bolivia, for the beef and tagua nuts of Venezuela and Colombia. So long as they sell raw materials, these countries will furnish a demand for finished products.

American manufacturers are to-day determined to secure an increased share of this expanding market.16 They are slowly learning that you cannot push your goods, in South America let us say, unless you learn to pack your goods, have studied local requirements, are willing to print catalogues in Spanish and Portuguese, and have your salesmen know these languages. In the past Americans have been hampered by their unwillingness or inability to extend long credits, but this drawback is being removed by the improvement of banking facilities. The government, moreover, now seeks actively to promote American trade with foreign countries, and especially with Latin America. A new merchant marine is expected to give additional facilities to American exporters and enable them to meet their British and German competitors on more nearly equal terms. Moreover, the United States is learning that in the export trade co-operation is desirable, and the Federal Trade Commission seems about to grant permission to manufacturers to combine for the conduct of business in foreign countries.17

All this does not mean that American manufacturers are completely to displace their European competitors in South America and other markets. Competition after the war will be severe, and whatever the course of wages and employment in Europe, a measure of success for industrial countries like Great Britain, Germany and Belgium is absolutely essential to the maintenance of their populations. Desperate efforts will be made by these nations to re-establish their foreign business. A great part of South America is as near to London and Rotterdam as to New York, and much of the trade and of its future increase will revert to Europe. In the years to come, however, more than in the present or past, the United States will be a formidable competitor for the world-markets, and will incur enmity and jealousy in the attempt to maintain and improve its position.

A similar development is taking place in the field of investment. In former years, British, French, Dutch, Belgian and German financiers were requested, indeed begged, to invest their surplus capital in American enterprises. To these financiers we went cap in hand, and they did not lend their money cheaply. The complementary relation between lending Europe and borrowing America was productive of the friendship of mutual benefit. To-day we are still a debtor nation, but only in the sense that the great financier is a debtor. We ourselves have a large capital, and in the main go to Europe merely for the sale of safer and less remunerative bonds, while the common stock of new enterprises is likely to remain in America. Or we graciously "let Europe in on a good thing," conferring, not asking, a favour. In the meantime, we are paying off our indebtedness as is indicated by the balance of trade, which since 1876 has almost invariably been strongly in our favour.18

The war has still further reduced our foreign obligations. During the two years ending June 30, 1916 our excess of exports over imports was over three and one-quarter billions of dollars. Moreover, in 1915 we did not incur, as ordinarily, a large debt as a result of the expenditures of Americans in Europe. The result of this development has been twofold; a considerable transfer of European holdings of American securities to Americans, and the direct loan of American capital to Europe. While it is impossible to quote exact figures, the American debt to Europe can hardly have been reduced during the two years ending August 1, 1916, by less than two to two and a half billions, or perhaps a third, or even a half, of our former debt to Europe.19

In the meantime the United States though still a debtor nation has also become a creditor nation. Just as Germany, before the war, borrowed from France and loaned to Bulgaria and Turkey, so the United States, while still owing Europe, invested in Mexico, Canada and South America. It is probable that by 1914 considerably over one and a quarter billion dollars of American capital was invested in Canada, Mexico, Cuba and the Republics of Central and South America, not including the capital represented by the Panama Canal.20

Even to-day (Nov. 1, 1916) there is still a probable excess of our debts over our credits with foreign nations of at least two billions of dollars. In comparison with our total wealth, however (estimated by the census of 1910 at 207 billions and since then largely increased), this indebtedness seems comparatively small. The national income is rapidly expanding and as the chance to secure exceptionally large profits in railroad and industrial enterprises diminishes there is an increased temptation for surplus capital to flow abroad. Whether or not we shall again have recourse to the fund of European capital in developing our immense resources, it is hardly to be doubted that we shall increasingly invest in foreign countries, and especially in Mexico, and elsewhere in the Americas.21

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

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

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

PART II

THE ROOT OF IMPERIALISM

CHAPTER VI

THE INTEGRATION OF THE WORLD

For decades, the foreign and domestic policies of the United States were determined by our ambition to subdue and people a wilderness. Our immediate profit, our ultimate destiny, our ideals of liberty, democracy and world influence, were all involved in this one effort. To us the problem was one of national growth. To-day we are beginning to realise that this Western movement of ours affected all industrial nations, and was only a part of a vaster world movement—an economic revolution, which has been developing for more than a century. That revolution is the opening up of distant agricultural lands and the binding of agricultural and industrial nations into one great economic union. It is a world integration.

To this world development the crude physical hunger of the Western populations has contributed. The urbane Chinese official, who voices the sentiments of Mr. Lowes Dickinson, attributes Europe's solicitous interference in China to the fact that the Western World cannot live alone. "Economically," he says, "your (Western) society is so constituted that it is constantly on the verge of starvation. You cannot produce what you need to consume, nor consume what you need to produce. It is matter of life and death to you to find markets in which you may dispose of your manufactures, and from which you may derive your food and raw material. Such a market China is, or might be; and the opening of this market is in fact the motive, thinly disguised, of all your dealings with us in recent years. The justice and morality of such a policy I do not propose to discuss. It is, in fact, the product of sheer material necessity, and upon such a ground it is idle to dispute."22

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

At the bottom this outward driving force is the breeding impulse, the growth of population. In 1800, one hundred and twenty-two millions of people lived in western Europe, whereas in 1900 the population was two hundred and forty millions,23 and the rate of increase is still rapid. The population has doubled; the area has remained the same. The new millions cannot be fed or clothed according to their present standard of living unless food and raw materials come from abroad. They depend for their existence on outside agricultural countries.

This increase of European population, moreover, has been a net increase, after emigration has been deducted. Although during the last century tens of millions of immigrants have gone from western Europe to the United States, Canada, Brazil and the Argentine; the home population has increased by over one hundred and seventeen millions and is to-day increasing by twenty millions a decade.24 For all of these twenty millions no sufficient outlet can be found either in old or in new lands. The problem, therefore, is not to find homes for them abroad but to secure their existence at home. And this existence can only be secured by raising the necessary food in distant agricultural countries and by turning over a large part of western Europe to manufacturing and commercial enterprises. Colonisation, imperialism, the opening up of new agricultural countries, is therefore the other side of industrialism.

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

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

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

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