FOREIGN TRADE AND MILITARY POWER
Why trade cannot be destroyed or captured by a military Power--What
the processes of trade really are, and how a navy affects
them--_Dreadnoughts_ and business--While _Dreadnoughts_ protect
British trade from hypothetical German warships, the real German
merchant is carrying it off, or the Swiss or the Belgian--The
"commercial aggression" of Switzerland--What lies at the bottom of
the futility of military conquest--Government brigandage becomes as
profitless as private brigandage--The real basis of commercial
honesty on the part of Government.
Just as Mr. Harrison has declared that a "successful invasion would mean
to the English the total eclipse of their commerce and trade, and with
that trade the means of feeding forty millions in their islands," so I
have seen it stated in a leading English paper that "if Germany were
extinguished to-morrow, the day after to-morrow there is not an
Englishman in the world who would not be the richer. Nations have fought
for years over a city or right of succession. Must they not fight for
1250 million dollars of yearly commerce?"
What does the "extinction" of Germany mean? Does it mean that Britain
shall slay in cold blood sixty or seventy millions of men, women, and
children? Otherwise, even though the fleet and army were annihilated the
country's sixty millions of workers would still remain,--all the more
industrious, as they would have undergone great suffering and
privation--prepared to exploit their mines and workshops with as much
thoroughness and thrift and industry as ever, and consequently just as
much trade rivals as ever, army or no army, navy or no navy.
Even if the British could annihilate Germany, they would annihilate such
an important section of their debtors as to create hopeless panic in
London, and that panic would so react on their own trade that it would
be in no sort of condition to take the place which Germany had
previously occupied in neutral markets, leaving aside the question that
by the act of annihilation a market equal to that of Canada and South
Africa combined would be destroyed.
What does this sort of thing mean? Am I wrong in saying that the whole
subject is overlaid and dominated by a jargon which may have had some
relation to facts at one time, but from which in our day all meaning has
departed?
The English patriot may say that he does not mean permanent destruction,
but only temporary "annihilation." (And this, of course, on the other
side, would mean not permanent, but only temporary acquisition of that
1250 millions of trade.)
He might, like Mr. Harrison, put the case conversely--that if Germany
could get command of the sea she could cut England off from its
customers and intercept its trade for her benefit. This notion is as
absurd as the other. It has already been shown that the "utter
destruction of credit" and "incalculable chaos in the financial world,"
which Mr. Harrison foresees as the result of Germany's invasion, could
not possibly leave German finance unaffected. It is a very open question
whether her chaos would not be as great as the English. In any case, it
would be so great as thoroughly to disorganize her industry, and in that
disorganized condition it would be out of the question for her to secure
the markets left unsupplied by England's isolation. Moreover, those
markets would also be disorganized, because they depend upon England's
ability to buy, which Germany would be doing her best to destroy. From
the chaos which she herself had created, Germany could derive no
possible benefit, and she could only terminate financial disorder, fatal
to her own trade, by bringing to an end the condition which had produced
it--that is, by bringing to an end the isolation of Great Britain.
With reference to this section of the subject we can with absolute
certainty say two things: (1) That Germany can only destroy British
trade by destroying British population; and (2) that if she could
destroy that population, which she could not, she would destroy one of
her most valuable markets, as at the present time she sells to it more
than it sells to her. The whole point of view involves a fundamental
misconception of the real nature of commerce and industry.
Commerce is simply and purely the exchange of one product for another.
If the British manufacturer can make cloth, or cutlery, or machinery, or
pottery, or ships cheaper or better than his rivals, he will obtain the
trade; if he cannot, if his goods are inferior or dearer, or appeal less
to his customers, his rivals will secure the trade, and the possession
of _Dreadnoughts_ will make not a whit of difference. Switzerland,
without a single _Dreadnought_, will drive him out of the market even of
his own colonies, as, indeed, she is driving him out.[14] The factors
which really constitute prosperity have not the remotest connection with
military or naval power, all our political jargon notwithstanding. To
destroy the commerce of forty million people Germany would have to
destroy Britain's coal and iron mines, to destroy the energy, character,
and resourcefulness of its population; to destroy, in short, the
determination of forty million people to make their living by the work
of their hands. Were we not hypnotized by this extraordinary illusion,
we should accept as a matter of course that the prosperity of a people
depends upon such facts as the natural wealth of the country in which
they live, their social discipline and industrial character, the result
of years, of generations, of centuries, it may be, of tradition and
slow, elaborate, selective processes; and, in addition to all these
deep-seated elementary factors, upon countless commercial and financial
ramifications--a special technical capacity for such-and-such a
manufacture, a special aptitude for meeting the peculiarities of such
and-such a market, the efficient equipment of elaborately constructed
workshops, the existence of a population trained to given trades--a
training not infrequently involving years, and even generations, of
effort. All this, according to Mr. Harrison, is to go for nothing, and
Germany is to be able to replace it in the twinkling of an eye, and
forty million people are to sit down helplessly because Germany has been
victorious at sea. On the morrow of her marvellous victory Germany is by
some sort of miracle to find shipyards, foundries, cotton-mills, looms,
factories, coal and iron mines, and all their equipment, suddenly
created in order to take the trade that the most successful
manufacturers and traders in the world have been generations in building
up. Germany is to be able suddenly to produce three or four times what
her population has hitherto been able to produce; for she must either do
that or leave the markets which England has supplied heretofore still
available to English effort. What has really fed these forty millions,
who are to starve on the morrow of Germany's naval victory, is the fact
that the coal and iron exported by them have been sent in one form or
another to populations which need those products. Is that need suddenly
to cease, or are the forty millions suddenly to be struck with some sort
of paralysis, that all this vast industry is coming to an end? What has
the defeat of English ships at sea to do with the fact that the Canadian
farmer wants to buy English manufactures and pay for them with his
wheat? It may be true that Germany could stop the importation of that
wheat. But why should she want to do so? How would it benefit her people
to do so? By what sort of miracle is she suddenly to be able to supply
products which have kept forty million people busy? By what sort of
miracle is she suddenly to be able to double her industrial population?
And by what sort of miracle is she to be able to consume the wheat,
because if she cannot take the wheat the Canadian cannot buy her
products? I am aware that all this is elementary, that it is economics
in words of one syllable; but what are the economics of Mr. Harrison and
those who think like him when he talks in the strain of the passage that
I have just quoted?
There is just one other possible meaning that the English patriot may
have in his mind. He may plead that great military and naval
establishments do not exist for the purpose of the conquest of territory
or of destroying a rival's trade, but for "protecting" or indirectly
aiding trade and industry. We are allowed to infer that in some not
clearly defined way a great Power can aid the trade of its citizens by
the use of the prestige which a great navy and a great army bring, and
by exercising bargaining power, in the matter of tariffs, with other
nations. But again the condition of the small nations in Europe gives
the lie to this assumption.
It is evident that the neutral does not buy English products and refuse
Germany's because England has a larger navy. If one can imagine the
representatives of an English and a German firm meeting in the office
of a merchant in Argentina, or Brazil, or Bulgaria, or Finland, both of
them selling cutlery, the German is not going to secure the order
because he is able to show the Argentinian, or the Brazilian, or the
Bulgarian, or the Finn that Germany has twelve _Dreadnoughts_ and
England only eight. The German will take the order if, on the whole, he
can make a more advantageous offer to the prospective buyer, and for no
other reason whatsoever, and the buyer will go to the merchant of any
nation whatever, whether he be German, or Swiss, or Belgian, or British,
irrespective of the armies and navies which may lie behind the
nationality of the seller. Nor does it appear that armies and navies
weigh in the least when it comes to a question of a tariff bargain.
Switzerland wages a tariff war with Germany, and wins. The whole history
of the trade of the small nations shows that the political prestige of
the great ones gives them practically no commercial advantage.
We continually talk as though carrying trade were in some special sense
the result of the growth of a great navy, but Norway has a carrying
trade which, relatively to her population, is nearly three times as
great as Britain's, and the same reasons which would make it impossible
for another nation to confiscate the gold reserve of the Bank of England
would make it impossible for another nation to confiscate British
shipping on the morrow of a British naval defeat. In what way can her
carrying trade or any other trade be said to depend upon military
power?
As I write these lines there comes to my notice a series of articles in
the London _Daily Mail_, written by Mr. F.A. McKenzie, explaining how it
is that England is losing the trade of Canada. In one article he quotes
a number of Canadian merchants:
"We buy very little direct from England," said Mr. Harry McGee,
one of the vice-presidents of the company, in answer to my
questions. "We keep a staff in London of twenty, supervising
our European purchases, but the orders go mostly to France,
Germany, and Switzerland, and not to England."
And in a further article he notes that many orders are going to Belgium.
Now the question arises: What more can a navy do that it has not done
for England in Canada? And yet the trade goes to Switzerland and
Belgium. Is England going to protect herself against the commercial
"aggression" of Switzerland by building a dozen more _Dreadnoughts_?
Suppose she could conquer Switzerland and Belgium with her
_Dreadnoughts_, would not the trade of Switzerland and Belgium go on all
the same? Her arms have brought her Canada--but no monopoly of the
Canadian orders, which go, in part, to Switzerland.
If the traders of little nations can snap their fingers at the great war
lords, why do British traders need _Dreadnoughts_? If Swiss commercial
prosperity is secure from the aggression of a neighbor who outweighs
Switzerland in military power a hundred to one, how comes it that the
trade and industry, the very life-bread of her children, as Mr.
Harrison would have us believe, of the greatest nation in history is in
danger of imminent annihilation the moment she loses her military
predominance?
If the statesmen of Europe would tell us _how_ the military power of a
great nation is used to advance the commercial interest of its citizens,
would explain to us the _modus operandi_, and not refer us to large and
vague phrases about "exercising due weight in the councils of the
nations," we might accept their philosophy. But, until they do so, we
are surely justified in assuming that their political terminology is
simply a survival--an inheritance from a state of things which has, in
fact, passed away.
It is facts of the nature of those I have instanced which constitute the
real protection of the small State, and which are bound as they gain in
general recognition to constitute the real protection from outside
aggression of all States, great or small.
One financial authority from whom I have quoted noted that this
elaborate financial interdependence of the modern world has grown up in
spite of ourselves, "without our noticing it until we put it to some
rude test." Men are fundamentally just as disposed as they were at any
time to take wealth that does not belong to them, which they have not
earned. But their relative interest in the matter has changed. In very
primitive conditions robbery is a moderately profitable enterprise.
Where the rewards of labor, owing to the inefficiency of the means of
production, are small and uncertain, and where all wealth is portable,
raiding and theft offer the best reward for the enterprise of the
courageous; in such conditions the size of man's wealth depends a good
deal on the size of his club and the agility with which he wields it.
But to the man whose wealth so largely depends upon his credit and on
his paper being "good paper" at the bank, dishonesty has become as
precarious and profitless as honest toil was in more primitive times.
The instincts of the business man may, at bottom, be just as predatory
as those of the cattle-lifter or the robber baron, but taking property
by force has become one of the least profitable and the most speculative
forms of enterprise upon which he could engage. The force of commercial
events has rendered the thing impossible. I know that the defender of
arms will reply that it is the police who have rendered it impossible.
This is not true. There were as many armed men in Europe in the days
when the robber baron carried on his occupation as there are in our day.
To say that the policeman makes him impossible is to put the cart before
the horse. What created the police and made them possible, if it was not
the general recognition of the fact that disorder and aggression make
trade impossible?
Just note what is taking place in South America. States in which
repudiation was a commonplace of everyday politics have of recent years
become as stable and as respectable as the City of London, and have come
to discharge their obligations as regularly. These countries were during
hundreds of years a slough of disorder and a never-ending sanguinary
scramble for the spoils, and yet in a matter of fifteen or twenty years
the conditions have radically changed. Does this mean that the nature of
these populations has fundamentally altered in less than a generation?
In that case many a militarist claim must be rejected. There is a
simpler explanation.
These countries, like Brazil and the Argentine, have been drawn into the
circle of international trade, exchange, and finance. Their economic
relationships have become sufficiently extensive and complex to make
repudiation the least profitable form of theft. The financier will tell
you "they cannot afford to repudiate." If any attempt at repudiation
were made, all sorts of property, either directly or indirectly
connected with the orderly execution of Governmental functions, would
suffer, banks would become involved, great businesses would stagger, and
the whole financial community would protest. To attempt to escape the
payment of a single loan would involve the business world in losses
amounting to many times the value of the loan.
It is only where a community has nothing to lose, no banks, no personal
fortunes dependent upon public good faith, no great businesses, no
industries, that the Government can afford to repudiate its obligations
or to disregard the general code of economic morality. This was the case
with Argentina and Brazil a generation ago; it is still the case, to
some extent, with some Central American States to-day. _It is not
because the armies in these States have grown_ that the public credit
has improved. Their armies were greater a generation ago than they are
now. It is because they know that trade and finance are built upon
credit--that is, confidence in the fulfilment of obligations, upon
security of tenure in titles, upon the enforcement of contract according
to law--and that if credit is seriously shaken, there is not a section
of the elaborate fabric which is not affected.
The more our commercial system gains in complication, the more does the
common prosperity of all of us come to depend upon the reliance which
can be placed on the due performance of all contracts. This is the real
basis of "prestige," national and individual; circumstances stronger
than ourselves are pushing us, despite what the cynical critics of our
commercial civilization may say, towards the unvarying observance of
this simple ideal. When we drop back from it--and such relapses occur as
we should expect them to occur, especially in those societies which have
just emerged from a more or less primitive state--punishment is
generally swift and sure.
What was the real origin of the bank crisis of 1907 in the United
States, which had for American business men such disastrous
consequences? It was the loss by American financiers and American
bankers of the confidence of the American public. At bottom there was no
other reason. One talks of cash reserves and currency errors; but
London, which does the banking of the universe, works on the smallest
cash reserve in the world, because, as an American authority has put it,
English bankers work with a "psychological reserve."
I quote from Mr. Withers:
It is because they (English bankers) are so safe, so straight,
so sensible, from an American point of view so unenterprising,
that they are able to build up a bigger credit fabric on a
smaller gold basis, and even carry this building to a height
which they themselves have decided to be questionable. This
"psychological reserve" is the priceless possession that has
been handed down through generations of good bankers, and every
individual of every generation who receives it can do something
to maintain and improve it.
But it was not always thus, and it is merely the many ramifications of
the English commercial and financial world that have brought this about.
In the end the Americans will imitate it, or they will suffer from a
hopeless disadvantage in their financial competition with England.
Commercial development is broadly illustrating one profound truth: that
the real basis of social morality is self-interest. If English banks and
insurance companies have become absolutely honest in their
administration, it is because the dishonesty of any one of them
threatened the prosperity of all.
Must we assume that the Governments of the world, which, presumably, are
directed by men as far-sighted as bankers, are permanently to fall below
the banker in their conception of enlightened self-interest? Must we
assume that what is self-evident to the banker--namely, that the
repudiation of engagements, or any attempt at financial plunder, is
sheer stupidity and commercial suicide--is for ever to remain
unperceived by the ruler? Then, when he realizes this truth, shall we
not at least have made some progress towards laying the foundations for
a sane international polity?
* * * * *
The following correspondence, provoked by the first edition of this
book, may throw light on some of the points dealt with in this chapter.
A correspondent of London _Public Opinion_ criticized a part of the
thesis here dealt with as a "series of half-truths," questioning as
follows:
What is "natural wealth," and how can trade be carried on with
it unless there are markets for it when worked? Would the
writer maintain that markets cannot be permanently or seriously
affected by military conquests, especially if conquest be
followed by the imposition upon the vanquished of commercial
conditions framed in the interests of the victor?... Germany
has derived, and continues to derive, great advantages from the
most-favored-nation clause which she compelled France to insert
in the Treaty of Frankfurt.... Bismarck, it is true,
underestimated the financial resilience of France, and was
sorely disappointed when the French paid off the indemnity with
such astonishing rapidity, and thus liberated themselves from
the equally crushing burden of having to maintain the German
army of occupation. He regretted not having demanded an
indemnity twice as large. Germany would not repeat the mistake,
and any country having the misfortune to be vanquished by her
in future will be likely to find its commercial prosperity
compromised for decades.
To which I replied:
Will your correspondent forgive my saying that while he talks
of half-truths, the whole of this passage indicates the
domination of that particular half-truth which lies at the
bottom of the illusion with which my book deals?
What is a market? Your correspondent evidently conceives it as
a place where things are sold. That is only half the truth. It
is a place where things are bought and sold, and one operation
is impossible without the other, and the notion that one nation
can sell for ever and never buy is simply the theory of
perpetual motion applied to economics; and international trade
can no more be based upon perpetual motion than can
engineering. As between economically highly-organized nations a
customer must also be a competitor, a fact which bayonets
cannot alter. To the extent to which they destroy him as a
competitor, they destroy him, speaking generally, and largely,
as a customer.
The late Mr. Seddon conceived England as making her purchases
with "a stream of golden sovereigns" flowing from a stock all
the time getting smaller. That "practical" man, however, who so
despised "mere theories," was himself the victim of a pure
theory, and the picture which he conjured up from his inner
consciousness has no existence in fact. England has hardly
enough gold to pay one year's taxes, and if she paid for her
imports in gold she would exhaust her stock in three months;
and the process by which she really pays has been going on for
sixty years. She is a buyer just as long as she is a seller,
and if she is to afford a market to Germany she must procure
the money wherewith to pay for Germany's goods by selling goods
to Germany or elsewhere, and if that process of sale stops,
Germany loses a market, not only the English market, but also
those markets which depend in their turn upon England's
capacity to buy--that is to say, to sell, for, again, the one
operation is impossible without the other.
If your correspondent had had the whole process in his mind
instead of half of it, I do not think that he would have
written the passages I have quoted. In his endorsement of the
Bismarckian conception of political economy he evidently deems
that one nation's gain is the measure of another nation's loss,
and that nations live by robbing their neighbors in a lesser or
greater degree. This is economics in the style of Tamerlane and
the Red Indian, and, happily, has no relation to the real facts
of modern commercial intercourse.
The conception of one-half of the case only, dominates your
correspondent's letter throughout. He says, "Germany has
derived, and continues to derive, great advantage from the
most-favored-nation clause which she compelled France to insert
in the Treaty of Frankfurt," which is quite true, but leaves
out the other half of the truth, somewhat important to our
discussion--viz., that France has also greatly benefited, in
that the scope of fruitless tariff war has been by so much
restricted.
A further illustration: Why should Germany have been sorely
disappointed at France's rapid recovery? The German people are
not going to be the richer for having a poor neighbor--on the
contrary, they are going to be the poorer, and there is not an
economist with a reputation to lose, whatever his views of
fiscal policy, who would challenge this for a moment.
How would Germany impose upon a vanquished England commercial
arrangements which would impoverish the vanquished and enrich
the victor? By enforcing another Frankfurt treaty, by which
English ports should be kept open to German goods? But that is
precisely what English ports have been for sixty years, and
Germany has not been obliged to wage a costly war to effect it.
Would Germany close her own markets to our goods? But, again,
that is precisely what she has done--again without war, and by
a right which we never dream of challenging. How is war going
to affect the question one way or another? I have been asking
for a detailed answer to that question from European publicists
and statesmen for the last ten years, and I have never yet been
answered, save by much vagueness, much fine phrasing concerning
commercial supremacy, a spirited foreign policy, national
prestige, and much else, which no one seems able to define, but
a real policy, a _modus operandi_, a balance-sheet which one
can analyze, never. And until such is forthcoming I shall
continue to believe that the whole thing is based upon an
illusion.
The true test of fallacies of this kind is progression. Imagine
Germany (as our Jingoes seem to dream of her) absolute master
of Europe, and able to dictate any policy that she pleased. How
would she treat such a European empire? By impoverishing its
component parts? But that would be suicidal. Where would her
big industrial population find their markets?[15] If she set
out to develop and enrich the component parts, these would
become merely efficient competitors, and she need not have
undertaken the costliest war of history to arrive at that
result. This is the paradox, the futility of conquest--the
great illusion which the history of our own Empire so well
illustrates. We British "own" our Empire by allowing its
component parts to develop themselves in their own way, and in
view of their own ends, and all the empires which have pursued
any other policy have only ended by impoverishing their own
populations and falling to pieces.
Your correspondent asks: "Is Mr. Norman Angell prepared to
maintain that Japan has derived no political or commercial
advantages from her victories, and that Russia has suffered no
loss from defeat?"
What I am prepared to maintain, and what the experts know to be
the truth, is that the Japanese people are the poorer, not the
richer for their war, and that the Russian people will gain
more from defeat than they could possibly have gained by
victory, since defeat will constitute a check on the
economically sterile policy of military and territorial
aggrandizement and turn Russian energies to social and economic
development; and it is because of this fact that Russia is at
the present moment, despite her desperate internal troubles,
showing a capacity for economic regeneration as great as, if
not greater than, that of Japan. This latter country is
breaking all modern records, civilized or uncivilized, in the
burdensomeness of her taxation. On the average, the Japanese
people pay 30 per cent.--nearly one-third--of their net income
in taxation in one form or another, and so far have they been
compelled to push the progressive principle that a Japanese
lucky enough to possess an income of ten thousand a year has to
surrender over six thousand of it in taxation, a condition of
things which would, of course, create a revolution in any
European country in twenty-four hours. And this is quoted as a
result so brilliant that those who question it cannot be doing
so seriously![16] On the other side, for the first time in
twenty years the Russian Budget shows a surplus.
This recovery of the defeated nation after wars is not even
peculiar to our generation. Ten years after the Franco-Prussian
War France was in a better financial position than Germany, as
she is in a better financial position to-day, and though her
foreign trade does not show as great expansion as that of
Germany--because her population remains absolutely stationary,
while that of Germany increases by leaps and bounds--the French
people as a whole are more prosperous, more comfortable, more
economically secure, with a greater reserve of savings, and all
the moral and social advantages that go therewith, than are the
Germans. In the same way the social and industrial renaissance
of modern Spain dates from the day that she was defeated and
lost her colonies, and it is since her defeat that Spanish
securities have just doubled in value.[17] It is since England
added the "gold-fields of the world" to her "possessions" that
British Consols have dropped twenty points. Such is the outcome
in terms of social well-being of military success and political
prestige!