American World Policies

It was no fault or vice of the Europeans, but merely the tragic fact that there was no firm basis for European union. After the downfall of the Western Roman Empire, no power was strong enough to dominate Europe. The dreams of universal dominion of a Charlemagne and of a Rudolf of Hapsburg remained dreams; the great, loose federations like the Holy Roman Empire were no match for the smaller but more compact nations, which grew up after the Middle Ages. These new nations, moreover, inevitably meant increased antagonism, a perpetual struggle for more territory, more trade, more gold; a despotic, militaristic, fighting society. The age of the rise of nations was also that of professional armies under the direction of a despot, and of wars for the spoliation of still unorganised peoples, like the Germans and the Italians.

If European union was difficult to achieve in past centuries, it has become even more difficult to-day. The last century has been the century of nationalities, a period during which nations and nationalistic groups developed consciousness. Group consciousness is, of course, no new thing, for all groups, possessing survival quality, have conceit, self-esteem and veneration for the bond that unites them and for all qualities, characteristics, experiences and institutions which distinguish them. To-day this group consciousness has become national consciousness, and the impulse towards nationalistic expression spreads and makes itself felt not only in organised nations but also among submerged, conquered and dispersed peoples like the Czechs, Poles, Finns and Irish. The clash of Europe's hundreds of millions for a satisfactory existence upon an insufficient area is intensified by the marshalling of these millions into nationalistic groups, speaking different languages and ruled by hostile traditions.

The antagonism is the worse because in many parts of Europe history and geography have conspired to jumble ethnic and linguistic groups without mixing them. In Bohemia, East Prussia, Dalmatia, Macedonia and Lorraine, hostile groups intermingle without fusing. Though the last century has brought about a certain approximation of state boundaries to the boundaries of nationalities, the process is far from complete. About many nations there is a fringe of people of like nationality subject to other states. Roumania, Servia, Italy, each has its Irredenta; Austria-Hungary, Russia and Turkey are loose bundles of nationalities, hating each other, while the Balkan States cannot discover any nationalistic principle upon which to divide up Macedonia. Each nationality seeks independence and strength to maintain itself against the encroachment of rivals, and this desire for self-preservation through size, causes a nationality, which has attained to nationhood, to oppress smaller nationalistic groups within its borders. The condition is artificial and anomalous. Absurd nationalistic claims are advanced in defence of aggression, and while learned Pan-Slavs convert Balkan dwellers into Russians, the Dutch, Flemings and Danes are proved by Pan-Germans to be only Germans once removed.

The progress of democracy has intensified this nationalistic strife and made it a matter of amour propre. So long as no citizen had rights, it mattered little whether the King were German or Hungarian. With the participation of the people in government, however, the subject nationalities feel themselves disgraced. The Pole longs for a free democratic Poland; he is not content to become German, Austrian or Russian. Rather than surrender his nationality he is willing to tear up the map of Europe and thrust the world into war.

In this condition we have the seeds of perpetual conflict in Europe. Partly for the sake of increasing the national strength and partly for the benefit of certain financial groups, the lesser nationalities are ruthlessly exploited by the dominating nationality within a given country. The oppression of Roumanians and Slavs by the Magyar ruling classes of Hungary causes a deep revulsion of feeling in Roumania, Servia and other countries across the border, just as the ambitions of Pan-Germans to make Germany a nationalistic state arouse the indignation of the French and the fears of the Dutch and Danes. Moreover the nationalistic groups often discover that they have antagonistic economic interests.

The danger of this situation is immensely increased by the fact that all these hostile nations impinge territorially on one another, and modern warfare gives an enormous advantage to the nation gaining the initial success. Austria, Belgium, France may be overrun and permanently defeated by a campaign of six or seven weeks, and it is difficult thereafter to retrieve these early defeats. European nations therefore live in the fear of immediate attack and conduct a hair-trigger diplomacy.

This is the true interpretation of Realpolitik, of a nationally selfish policy, devoid of sentiment and laying an excessive emphasis upon immediate and material ends. A nation in danger of annihilation cannot indulge in the luxury of sentiment, cannot consider long time views, cannot be over-generous or trust to the generosity of rivals. Each nation is compelled to enter into offensive and defensive alliances, and these alliances, perpetually suspecting each other, are compelled to prepare for instant war.

But preparation for war under such conditions makes war inevitable. If a nation believes that it is to be assailed, five, ten or fifteen years from now, it is tempted to precipitate the "inevitable" war at the moment when its chances are the best. The doctrine of "the war of prevention," however perilous, is, in the prevailing circumstances, natural. It is meeting a supposedly inevitable danger half way.

Still another element adds to the menace of imperialism. Just as a successful imperialistic policy depends upon the ability of the European nation to defend itself at home, so also it depends upon access to the colonies, upon a control of the seas. Had Spain been a hundred times as powerful on land as the United States, she still could not have defended Cuba. Were Germany to secure valuable colonies, she could not be sure of their retention against England (which lies on Germany's lines of communication), so long as the British possessed an overwhelming naval supremacy. It was therefore natural, and indeed inevitable, that, sooner or later, German colonial ambitions should find expression in a naval expansion, which, whatever the intentions of its promoters, was potentially a menace to the British Empire and even to the very existence of England. The desire for imperialistic expansion thus led, in the absence of any formula of reconciliation upon a higher plane, to an irrepressible conflict between England and Germany, in short, to a world war.

Herein lay and still lies the peril of imperialism, the danger that for fifty years to come Europe, and perhaps America also, will be again and again embroiled in wars immeasurably more destructive than were the long colonial wars of the eighteenth century. The present world war does not automatically end the imperialistic struggle. There is China to consider, there is the independence of Latin America, to say nothing of colonies securely held for the time being by one or another of the European powers. The allies, if successful in this war, will not necessarily remain allies. The ambitions of England, of Russia, of Japan, not to speak of France, Germany, Italy and perhaps the United States, may come into conflict. Nor upon the signing of a treaty of peace will the forces making for imperialism become extinct. In the future, as in the past, a nationalistic competition for colonies will carry with it the seeds of war.

CHAPTER IX

INDUSTRIAL INVASION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CHAPTER X

THE REVOLT AGAINST IMPERIALISM

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