Capitalism as a system [Pre. 1st Ed.]

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OLIVER C.COX

$6.50

The central thesis of Capitalism as a System rests on the distinction the author makes between capitalist societies and the international sys¬ tem which these societies constitute. Dr. Cox feels that to attempt to analyze capitalism as a closed na¬ tional system, as has commonly been done in classical economic theory, must necessarily lead to erroneous conclusions. For, he says, “Capital¬ ism does not and cannot mean the same thing to all nations included in the system. At one extreme it may mean... a more complete existence than mankind has ever before en¬ joyed; at the other it may mean . . . grinding poverty. ’ ’ In this impressively documented study, Dr. Cox shows that the capi¬ talist system has a definable order and structure which determine and limit the sphere of action open to people, not only according to their status in their own societies but also according to the status of their society in the system as a whole. Jacket design by Ernest Socolov

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Capitalism as a System

Books by Oliver C. Cox

Caste, Class and Race The Foundations of Capitalism Capitalism and American Leadership

CAPITALISM AS A SYSTEM

by

OLIVER C. COX Lincoln University, Missouri

Monthly Review Press New York

All Rights Reserved Copyright (c) 1964 by Oliver C. Cox Published by Monthly Review Press 333 Sixth Avenue New York 14, N. Y. Manufactured in the U.S.A. Library of Congress Catalog Card Number: 64-23145

Contents Introduction

ix Part I

Structure and Function

1. STRUCTURE OF THE SYSTEM

The Integral Order Market Situations The Business Enterprise Technique of the Enterprise 2. THE SOCIAL MATRIX

3 4 6 11 15 17

Conditions of the Rise of a Capitalist Nation Government Leadership Citizenship Freedom and Private Enterprise Nationalism The Ethos The Personality 3. THE ROLE OF RELIGION

18 18 20 21 23 26 29 36 46

Social Inertia of the Church Religion: A Capitalist Problem Tolerance: A Capitalist Attribute Protestantism and Capitalism The Secular Society 4. MORAL ASPECTS (I)

47 49 51 53 59 61

The Concept In External Relations The Treaty

61 62 68 V

CONTENTS

VI

Negotiating the Treaty Non-Reciprocating Morality 5. MORAL ASPECTS

(II)

Mandeville and the Morality In Domestic Practice Role of Honesty The Personality Complement

6.

DYNAMICS OF THE SYSTEM

The Spread in Europe Role of the Church Role of the Nobility Summary 7. THE PRIMARY FORCE

The Nature of Capitalist Commerce Production for Consumption Surpluses as a Basis of Trade Some Basic Traits of the Commerce Commerce as a Means of Production The Place of Foreign Commerce Industry and Commerce Distant Trade and Profits Role of the Entrepreneur 8. HOW MUCH FOREIGN TRADE?

The Problem The American Illusion The Pendulum Development of the Capitalist Domestic Market 9. IMPERIALISM

70 74

78 78 80 84 86

89 89 93 94 95

97 97 97 100 101 102 104 106 106 113 117

118 121 125 130 136

Necessity of Imperialism The Backward Peoples Nature of Imperialism Exploitation The Technique

136 138 140 141 142

Situations of Exploitation Meaning of ‘Backward Peoples’

145 148

vii

CONTENTS

Instruments of Exploitation Contributions of Imperialism

150 157

10. CAN IMPERIALISM BE ABOLISHED?

159

Nature of the Argument Alternative Uses of Capital Peculiarities of the Economy Role of Foreign Investment Part II

159 160 163 163

Conceptions of Capitalism

11. THE NARROWING FRONTIERS

Increasing Productive Capacity Physical Shrinkage of Available Area Resistance to Exploitation Declining Appeal of Capitalist Leadership An Alternative Economic System 12. MOVEMENTS TOWARD CHANGE

Viability of Capitalism Nature of the Change The Classes Aims of the Exploited Class Situations of Class Conflict Affiliation of Classes Effects on Class Struggle Intra-Class Antagonism Incidence of Change in Leader Nations 13. THE LAW OF MOTION (I)

The Problem The Business Cycle Maladjustments Location of Business Cycles Prosperity Causes of Maladjustment Stagnation 14. THE LAW OF MOTION (II)

The Marxian Approach

171

172 172 177 181 182 184 184 185 186 188 189 192 194 196 198 200 200 201 201 203 203 206 206 210

210

viii

CONTENTS

The Marxian Analysis The Schumpeterian Schema The Keynesian Solution Moulton’s Optimism

212 218 223 235

15. THE SYSTEM IN TRANSITION

238

Notes Bibliography Index

249 341 359

Introduction To the social scientist, nothing could be more important than an understanding of the nature of capitalism. All major contemporary

social

change

involves,

essentially,

proc¬

esses of the capitalist system—a system so pervasive that, by the opening of the twentieth century, the life of practically every individual on earth had been brought within its pur¬ view. Mankind has known no comparable culture; and, most remarkable, it probably cannot be shown that the system originated and became viable as a “natural” consequence of historical evolution. Feudalism did not produce it. Because capitalism is centered in cities, its expansion has been directly associated with universal urbanization. It roams abroad in quest of commercial opportunities; and, in the process, subordinates backward areas and garners a fabulous living. No earlier social system proved so pervasively and consistently effective in motivating individuals to ambitious achievement (as I attempted to show in Foundations of

Capitalism). Indeed, unless one is clear about the origins of the system, he may not escape the pitfalls that await him when problems of modern social transition call for expla¬ nation. In this book I want to show that capitalism, as a system of societies, is characterized by a definable order and structure which not only differentiates it from other social systems, but also determines and limits interactions of persons within its reach. It is an illusion that capitalism gives businessmen unlimited freedom to plan and dispose of resources at will. IX

INTRODUCTION

X

We shall see, in due course, that it is only on the assumption of a peculiar pattern of societal organization that the eco¬ nomic self-interest of individuals can be realized as the inter¬ est of the society as a whole. In non-capitalist societies there can be no such thing as the businessman as we know him today; he can emerge only within the economic, political, and social structure of capitalism. (Werner Sombart, arguing from a premise of inborn personality traits, disagrees; so do others, as we shall see.) I have found it useful to distinguish between capitalist societies and the universal system which these societies con¬ stitute. The term “system,” it is true, may refer to any func¬ tional ordering of related parts and thus to the internal social organization of any capitalist nation or territory. In¬ deed, this has been the more common usage. But since I seek to emphasize the importance of the constellation of na¬ tions and territories which has come to function as an entity under the influences of capitalism, I use “system” mainly to denote the international order, and “society” to refer to the internal organization of the national units. It should be clear that there can be no capitalist nation outside the capitalist system. And the sequence of motivation has been predomi¬ nantly from system to society: the internal societal organiza¬ tion seems to depend upon demands and imperatives arising chiefly from a play of circumstances peculiar to the system. Furthermore, historically,

the system has, on the whole,

preceded its component societies, which were gradually in¬ cluded as the system expanded. The national units of the system tend to be of unequal economic weight and significance.

Even

those powerful

enough to control minor territories as dependencies tend to cluster, in turn, around a dominant nation which sets the standard for all. Thus, the capitalist system comprises, func¬ tionally, a gradient of nations and territories with a recog¬ nized leader at the top. At all times, however, the internal

INTRODUCTION

xi

organization of the leader nation tends to be reciprocally affected by the circumstances of the led. One obvious, though vital, conclusion to be drawn from this relationship is that capitalism does not and cannot mean the same thing to all nations and territories included in the system. At one extreme it may mean for whole peoples a higher standard of living, greater freedom, and a more com¬ plete existence than mankind has ever before enjoyed; at the other it may mean, for great masses of people, grinding poverty, forced labor, racial humiliation, and the lash. Research on the structure of capitalism, then, may be di¬ rected initially either to the attributes of the system or to the societal characteristics of its components. It goes without saying that neither of these aspects of capitalism can be under¬ stood in exclusion of the other; but it seems to me that to approach the study of capitalism as a closed national system, as has been commonly done in classical economics and other derivative formulations, is to prepare the way to fallacious conclusions. In Foundations of Capitalism, I discussed the unique so¬ cial situation in Venice, which nurtured the first capitalist society. As this society became self-sustaining, it drew into its orbit larger and larger areas of the world. The system, I indicated, had only one origin. Previously non-capitalist communities became capitalist as their internal organizations, especially their economic structures, became critically meshed with the imperious functions of the system. A remarkable trait of the system is its cohesive strength. As noted above, it succeeded, at least up to 1914, in integrating the peoples of virtually the entire globe. Although military force has been, and continues to be, a factor in this achievement, the abiding ties have been forged essentially by capitalist economics, world market relations, diplomacy, and religion. Certain traits of capitalism are peculiar to the system as distinguished from its national units. For example, leader¬ ship, historically, has shifted functionally from one nation

XIV

INTRODUCTION

indeed, all social theories about modern non-socialist society, at least, take capitalism for granted. In Part II, I shall attempt to review the pertinent contributions to the subject of some leading students. An analysis of these conclusions will, no doubt, help to define more clearly my own point of view. My primary con¬ cern in the following pages will thus be to analyze and characterize the significant economic and social phenomena of the capitalist system as they manifest themselves in its economic structure, its societal matrix, and its dynamics.

perfectability of man is absolutely indefinite. . . . The progress of this perfectability, henceforth above the control of every power that would impede it, has no other limit than the duration of the globe upon which ?iature has placed us. The course of this progress may doubtless be more or less rapid, but it can never be retrograde; at least while the earth retains its situation in the system of the universe.

What vicious habit can be mentioned, what practice con¬ trary to good faith, what crime even, the origin and first cause of which may not be traced in the legislation, institutions, and prejudices of the country in which we observe such habit, such practice, or such crime to be committed? —Marie Jean de Condorcet Outlines of an Historical View of the Progress of the Human Mind

'

Part I Structure and F unction

1 Structure of the System We may regard the elementary structure of the capitalist system as constituted of the whole network of its territorial units and their interrelationships. The nations, colonies, and dependent communities thus related tend to form a com¬ mercial and power-status gradient with its most energetic and prestigious component at the top. In this matrix, eco¬ nomic and political positions are in constant flux, the rate depending largely on the vicissitudes of the leader. The latter maintains its position in competition with other major aspirants. Thus, apart from war and diplomacy, international competition takes place in a variety of internal and external market situations, ordinarily with entrepreneurs and busi¬ ness enterprises initiating the transactions. It may be shown, then, that from the very inception of capitalism in Europe, the internal structure of the system has been formed by a continually readjusting and expanding constellation of economically interlocking entities. The sys¬ tem first became irreversibly organized at about the opening of the thirteenth century with two dominating centers: one in the Mediterranean and the other in the Baltic. Then, with the discovery of the New World, Holland gradually emerged as leader of a more unified structure. Later, under the leadership of Great Britain, the process of expansion and unification continued until practically the whole world became integrated into an interdependent, rhythmic unity with a single major nucleus. The system apparently reached 3

CAPITALISM AS A SYSTEM

4

its highest state of perfection between 1870 and the First World War.1 Among many criteria which might be used in classifying the units of the system, the extent to which a community has been able to control its foreign commercial relations seems crucial. The leader nation is normally least subject to the economic restraints and plans of other nations, while it is most influential in altering the affairs of others in its own interests. This does not mean, however, that the leader is ever completely independent. Indeed, leadership has meant greater and greater dependence upon the rest of the system; but this dependence is characterized by progressive diversification. There are no closed capitalist societies; and any disruption of the system must be reflected as a disruption of capitalism itself. Recently, in an address before an assembly of outstand¬ ing businessmen, this point was emphasized by one of their congeners: The capitalist system is essentially an international system. If it cannot function internationally, it will break down completely. . . . Capitalism, even in modified form—that is, with the essentials of private initiative in economic activity maintained—must be recognized as only possible in an integrated world society with full facilities for a maximum of international economic activity assured.2 Thus,

despite

the apparent exclusiveness

of capitalist

nations, they are in fact closely bound together in a logical system of universal market relationships. The Integral Order If we think of this system as it functioned during, say, the decade before 1914 and perhaps during its period of unstable resuscitation in the 1920’s we can recognize its territorial structure headed by a pace-setting nation, Great Britain or the United States, followed by a few advanced European na¬ tions and Japan, each with varying potentialities for growth 1 Footnotes will be found at end of book starting on page 249.

STRUCTURE OF THE SYSTEM

5

and differing competitive capacities. In the face of the United States and Germany, no other country could then reasonably aspire to world leadership. Although some sought to imitate the nationalistic pretension of the leaders, in reality they were more or less resigned subsidiaries. Then, in a relatively subordinate position to these sub¬ sidiaries, came a group of “new nations”—the British do¬ minions and Argentina—each with large stocks of natural resources relative to population and with ambitions and capabilities for development somewhat similar to those of the United States. These may be called the progressives. The progressives, however, did not have the same open road to success as the United States had; and their growth was already limited by plethoric industrial capacity in Europe and the United States. Basic industries in Canada and Latin America, for example, were mostly financed by United States capital and managed by American corporations. In the fourth and fifth categories fell the great areas of capitalist exploitation. Pre-revolutionary Russia,3 China, the Near East, and the rest of South America were considered dependent communities with relatively little self-initiative in foreign commerce and subject to the immediate, self-inter¬ ested, economic calculations of the great powers. The follow¬ ing advice by Willard Straight to the First National Foreign Trade Convention in 1914 illustrates the nature of these cal¬ culations: If we desire to avoid complications with the European powers and develop our own export and import trade in the Carribean Sea, we must, by means of foreign loans, establish ourselves as the guardians of the financial stability as well as the territorial in¬ tegrity of some of our southern neighbors. In China, the Ad¬ ministration of President Taft attempted a task of somewhat more ambitious character. The balance of power in the Far East, to which China owed and still owes her continued existence as a nation, has for some years, and is now, largely maintained by the nice adjustment of the financial and commercial, and therefore political, interests of the great powers. It is to the advantage of all that none should exercise a dominating influence. It is to their

CAPITALISM AS A SYSTEM

4

its highest state of perfection between 1870 and the First World War.1 Among many criteria which might be used in classifying the units of the system, the extent to which a community has been able to control its foreign commercial relations seems crucial. The leader nation is normally least subject to the economic restraints and plans of other nations, while it is most influential in altering the affairs of others in its own interests. This does not mean, however, that the leader is ever completely independent. Indeed, leadership has meant greater and greater dependence upon the rest of the system; but this dependence is characterized by progressive diversification. There are no closed capitalist societies; and any disruption of the system must be reflected as a disruption of capitalism itself. Recently, in an address before an assembly of outstand¬ ing businessmen, this point was emphasized by one of their congeners: The capitalist system is essentially an international system. If it cannot function internationally, it will break down completely. . . . Capitalism, even in modified form—that is, with the essentials of private initiative in economic activity maintained—must be recognized as only possible in an integrated world society with full facilities for a maximum of international economic activity assured.2 Thus,

despite

the apparent

exclusiveness of capitalist

nations, they are in fact closely bound together in a logical system of universal market relationships. The Integral Order If we think of this system as it functioned during, say, the decade before 1914 and perhaps during its period of unstable resuscitation in the 1920’s we can recognize its territorial structure headed by a pace-setting nation, Great Britain or the United States, followed by a few advanced European na¬ tions and Japan, each with varying potentialities for growth 1 Footnotes

will be found at end of book starting on page 249.

STRUCTURE OF THE SYSTEM

5

and differing competitive capacities. In the face of the United States and Germany, no other country could then reasonably aspire to world leadership. Although some sought to imitate the nationalistic pretension of the leadersin reality they were more or less resigned subsidiaries. Then, in a relatively subordinate position to these sub¬ sidiaries, came a group of “new nations”—the British do¬ minions and Argentina—each with large stocks of natural resources relative to population and with ambitions and capabilities for development somewhat similar to those of the United States. These may be called the progressives. The progressives, however, did not have the same open road to success as the United States had; and their growth was already limited by plethoric industrial capacity in Europe and the United States. Basic industries in Canada and Latin America, for example, were mostly financed by United States capital and managed by American corporations. In the fourth and fifth categories fell the great areas of capitalist exploitation. Pre-revolutionary Russia,3 China, the Near East, and the rest of South America were considered dependent communities with relatively little self-initiative in foreign commerce and subject to the immediate, self-inter¬ ested, economic calculations of the great powers. The follow¬ ing advice by Willard Straight to the First National Foreign Trade Convention in 1914 illustrates the nature of these cal¬ culations: If we desire to avoid complications with the European powers and develop our own export and import trade in the Carribean Sea, we must, by means of foreign loans, establish ourselves as the guardians of the financial stability as well as the territorial in¬ tegrity of some of our southern neighbors. In China, the Ad¬ ministration of President Taft attempted a task of somewhat more ambitious character. The balance of power in the Far East, to which China owed and still owes her continued existence as a nation, has for some years, and is now, largely maintained by the nice adjustment of the financial and commercial, and therefore political, interests of the great powers. It is to the advantage of all that none should exercise a dominating influence. It is to their

CAPITALISM AS A SYSTEM

6

mutual interest to maintain the “open door” and share in the general Chinese trade, rather than by the seizure of territory to endeavor to monopolize the commerce of any particular region.4 The dependents tended to be included in the so-called “spheres of influence” of the leading powers. While, however, there was some question as to whether it was sound capitalist strategy to seize direct control of the economic resources of the dependents, no such question

arose concerning

the

passives, the lowest group. The passives constituted virtually all of Africa, the rest of Asia, the West Indies, and the islands of the Pacific. They were regarded by the leading powers as having no international rights. Their peoples were thus voiceless, and their resources were organized directly with a view to the enhancement of the economic welfare of any active capitalist nation that was able to establish and main¬ tain control.5 Although the structural pattern here described developed historically through an interplay of economic, military, and diplomatic forces into a nicely adjusted mechanism, it was in fact a social process continually in flux. Any classification such as I have presented may thus be open to question, especially at the margins. But attempts at absolute precision may detract from the purpose of classification.6 The diagram on page 7 is intended to suggest the position of the groups and their relative population weights in percentages. Market Situations Capitalist production is production for markets and not immediately for consumption. The fundamental opportuni¬ ties for the accumulation of wealth by leader nations in the capitalist system rests in the imbalance of the world market situations. These situations may be characterized in terms of degrees of sophistication, power of self-determination, and kinds of resources. The basic and most coveted market relation is that between leading, highly sophisticated, capital¬ ist nations and backward areas with extensive resources. It

STRUCTURE OF THE SYSTEM

7

Great Britain, the United States, and Germany.

Europe (except Germany and Great Britain) and Japan.

British Dominions and Argentina Pre-revolutionary Russia, China, the Near East, and the rest of Latin America.

Africa, the rest of Asia, the West Indies, and the Islands of the Pacific.

Subsidiaries

Progressives

Dependents

Passives

CAPITALISM AS A SYSTEM

8

is mainly in such markets that trade among the active capital¬ ist nations acquires its momentum. A leading nation may thus actually encourage another nation to exploit a backward country in the interest of greater and more profitable com¬ merce with the secondary country. Already the trade of thirteenth and fourteenth century capitalism had evolved five essential market situations, namely: (a) that between the advanced capitalist and non-capitalist peoples; (b) among the advanced capitalist cities;

(c)

between the advanced

cities and minor European towns; (d) in the highly competi¬ tive situation at the fairs; and (e) in domestic transactions. The commercial network which had Venice and the Hanseatic League as focal points may be indicated by the diagram on page 9. It seems apparent that although the trade with any one of the backward communities may have amounted to less in value than that between Venice and the League, the total trade with the unsophisticated peoples was indispensable to the commerce between these two major national cities (if we may call the organization of the Hanse a city). Indeed, it seems that capitalism itself depends pivotally neither upon the market situation among advanced capitalist nations, nor upon domestic transactions, but rather upon the eco¬ nomic and political relations developing between the major capitalist nations and the backward peoples. Here lies the heart of the imbalance and elasticity of capitalist market situations. There is no substitute for it. When Venice lost its eastern trade and the Hansa its kontors, they both lost their traditional status as capitalist powers. Both needed the products which each acquired abroad, not particularly for domestic consumption but to support their profitable circle of external commerce. Moreover, the economic principles involved in each of these market situations must needs be distinct. Even in this elementary though fundamental pattern of capitalist commerce, the home market tends to become in-

/

/

1-A

\

Hanseatic League

°(Pwesnt)°WnS V

Secondary

Venice

/

towns(east>

\ Secondary European

STRUCTURE OF THE SYSTEM 9

CAPITALISM AS A SYSTEM

10

creasingly complex. The masses are kept busy with the handling and processing of goods; the availability of foreign markets stimulates domestic manufacture; and the city, as a reservoir of profits, expands its consumption of goods and increases its expenditure on science, learning, art, religion, recreation, and so on. The home market becomes, conse¬ quently,

highly

intricate,

interdependent,

and speciously

self-sufficient. The market structure of the fully developed capitalist system under the leadership of Great Britain was more com¬ plicated than that organized by the cities, but its essential elements were retained. The axis of the structure was still the market situation of the leader, Great Britain, vis-a-vis the dependent and passive countries situated mainly

in

the

tropics. The United States, as a leading power opposite Britain, also had major transactions with the tropics, and, as might be expected, with Britain and the dominions as well.7 Germany, a third focus of capitalist commerce, traded precariously with the tropics and the dominions on the one hand and, on the other, largely with European countries, i.e., with the subsidiaries. The weak arm of the German market situation, as this country moved toward a dominant position in the capitalist system, was her tenuous access to the re¬ sources of backward territories.8 And, like Genoa vis-a-vis Venice in another age, she fought desperately against Great Britain and the United States to a frustrating finish for a master’s share of them.9 The place of the fairs was eventually taken largely by the Bank of England and the great stock and commodity ex¬ changes in London, New York, Chicago, Paris, Berlin, and Tokyo.10 The major changes in the home market situation centered in the increasing role of technology in the process¬ ing and manufacture of goods. It seems to me that any formu¬ lation of capitalist economic principles which ignores the im¬ portance of these differential market situations of capitalist commerce must remain inadequate as an explanation of eco¬ nomic reality.

STRUCTURE OF THE SYSTEM

11

The Business Enterprise The representative capitalist enterprise is thus an inter¬ national business organization. The validity of this statement may be most clearly recognized if it is regarded in the light of the experience of the early capitalist cities, and Holland, and England. In a capitalist society, enterprises with exclu¬ sively domestic interests such as those concerned with internal transportation and communication, service, and provisioning may be thought of as complementary to essentially capitalist enterprises. This is another way of saying that in the absence of capitalist businesses identified with foreign relations, there can be no capitalist system. The critical enterprise is thus the domestic unit in whose economic interest the capitalist state fashions its foreign policy. It must follow, therefore, that the national interest in the international relations of an active capitalist state will be represented mainly by the consensus of the leadership of its domestic enterprises engaged in, or immediately affected by, foreign trade. It is in this tightlywoven in-group of business men that nationalism in the capitalist state has its being. In leading nations, the capitalist business enterprise is a relatively

large,

profit-making organization contrived

by

private citizens in their own interest and yielding its wealth chiefly through the commercial or industrial ingenuity of its contrivers. Nevertheless, it abides by the traditions, rules, and laws of the state. Werner Sombart called it an “abstract unity,” and “intellectual construct.”11 The capitalist enter¬ prise cannot, therefore, thrive outside a capitalist society. Indeed, the capitalist society develops essentially in response to the peculiar needs of its dominant business enterprises. The enterprise is accordingly more than an isolated ven¬ ture. It embodies a more or less permanent structure and sys¬ tem of relationships through which the plans and actions of an entrepreneur may be effectuated. It tends, furthermore, to have objective reality, and to persist beyond the lifetime of the businessman. Since, indeed, the welfare of the capital-

CAPITALISM AS A SYSTEM

12

ist state depends upon the success of its enterprises, the state naturally has an interest in this continuity. The durability of the enterprise tends to establish permanent sources of wealth not only for single individuals, but also for generations of families; it becomes the basis of a multiplicity of urban dynasties. In his study of this phenomenon as it occurs in the United States, Henry H. Klein concludes: Dynastic Europe is dead, but the dynasties in America flourish. There are more dynasties in the United States than ever existed in the old world; and their wealth-power is greater than all the king-power combined. Theirs is the power of life and death over the whole human race. There is the Dynasty of Oil and the Dynasty of Copper, the Dynasty of Beef and the Dynasty of Coal, the Dynasty of Steel and the Dynasty of Ships, the Dynasty of Tobacco, the Dynasty of Rubber, the Dynasty of Sugar, the Dynasty of Telephone and Telegraph, and the dynasties of a hundred other things in essential use by the people.12 The dynastic element in the enterprise, of course, has fre¬ quently developed even more strikingly in certain capitalist communities of Europe; for example, the Medici, Fugger, and Rothschild financial dynasties.13 In recent times, however, continuity has been increasingly lodged in the great corpora¬ tion. As I have indicated, a peculiar trait of the capitalist en¬ terprise, as distinct from what has been called passive com¬ mercial establishments, is its tendency to be organized in¬ ternationally. With headquarters at home, it sets up branches or commissions for regularized transactions in foreign com¬ munities. This ordinarily leads to protective involvements of the parent-state: to the maintenance abroad of embassies, consulates, and even military stations. Feudalism knew no such system of foreign representation; and Rome was per¬ manently represented only within her empire. Under capitalism,

the average business enterprise has

tended to increase in size. In foreign trade, the control of ever larger quantities of capital is likely to be an important factor. It was in this trade that the modern corporation, both regu-

STRUCTURE OF THE SYSTEM

13

lated and joint-stock, first became established. The corpora¬ tion facilitated the necessary amassing of capital for the exploitation of distant markets. It was also in foreign com¬ merce that wholesale enterprise had its critical origins. The great merchants of the medieval capitalist cities ordinarily left retailing to domestic shopkeepers. As Pirenne says of these merchants, “It is in gross that they export and im¬ port.”14 In

the capitalist nation,

businesses tend to constitute

an informal hierarchy. The great industries and financial houses on the one hand, and the retail enterprises—the private community groceries, haberdasheries, and so on— on the other, fall into opposite positions of economic power and national significance. The greater the extent of capitalist organization for the production of consumer goods, the less the private community businessman can influence the market for them—hence the familiar phenomenon of commercial, industrial, and financial leadership. Prices are ordinarily de¬ termined by the leaders. The tendency toward monopoly is thus ever present in the system. Professor J. W. Markham observes: “Nearly every major industry in the American econ¬ omy has, in its initial stages of development, been dominated by a single firm—the Slater Mill in cotton textiles, the Fire¬ stone Company in rubber tires, Birdseye in frozen foods, the American Viscose Corporation in rayon yarn, etc.”15 The small, community business man is typically a dis¬ tributor of goods, the prices of which he can do very little to influence. By the opening of the seventeenth century, at least, all the major forms of business organization—the in¬ dividual proprietorship, the partnership, and the corporation —were in operation. The joint-stock company, the most ad¬ vanced of these forms, probably goes back to fourteenthcentury Italy.16 Its advantages have been frequently listed: its greater capacity for survival, its power to accumulate and to impersonalize capital, and the relative security of uncom¬ mitted assets of stockholders from legal involvement, espe-

CAPITALISM AS A SYSTEM

14

cially in bankruptcy proceedings, have made it ideally suited to capitalist needs. In all the leading nations since the rise of Holland, the corporation has had a dominant position. In England, as I have intimated, it was perfected before the industrial revolu¬ tion, mainly in the fields of foreign commerce, banking, and speculation.

Its tendency to expand, apparently without

limit, has sometimes brought it into sharp political conflict with its home government. Capitalist society abhors the rise of any uncontrollable power within its jurisdiction; this was true of the early capitalist cities and it is so today. In their investigation of the American experience, Professors Berle and Means conclude: The rise of the modern corporation has brought a concentra¬ tion of economic power which can compete on equal terms with the modern state—economic power versus political power, each strong in its own field. The state seeks in some aspects to regulate the corporation, while the corporation, steadily becoming more powerful, makes every effort to avoid such regulation. Where its own interests are concerned, it even attempts to dominate the state. The future may see the economic organism, now typified by the corporation, not only on an equal plane with the state, but possibly even superseding it as the dominant form of social organization. The law of the corporations, accordingly, might well be considered as a potential constitutional law for the new economic state.17 But perhaps the authors have gone too far in their specula¬ tions. The political organization is the societal instrument. If any business enterprise, or group of enterprises, were to be¬ come so large and powerful that it could attempt to dominate the state, it would then be matching political power with political power, not economic with political. In the event that the state should lose in such an opposition, capitalist society would break down. The experience of Florence under the Medici and Augsburg under the Fuggers attests to this fact. At any rate, I have quoted the statement by Professors Berle and Means at length because it describes vigorously

STRUCTURE OF THE SYSTEM

15

an inherent relationship between the enterprise and the state. As

I noted earlier, however,

the

interests of the

capitalist state tend to coincide with those of its larger en¬ terprises; there is thus no fundamental antagonism between state and business. What appear to be categorical conflicts may in fact be only factional disputes, or the reaction of some individual firm to the consensus of the others. The Sherman Anti-Trust Act, for instance, is not an anti-corpo¬ ration law; it is rather a businessmen’s regulation in the in¬ terest of wider opportunity for a larger group of corporations. And this accounts in part for the looseness with which the law is enforced, especially in foreign trade relations. Technique of the Enterprise Business technique may be considered as part of the structure of the enterprise; it is available to the entrepreneur as an instrument. Of the various business methods and prac¬ tices, double-entry bookkeeping has ordinarily been given first place. In fact, some students have come very close to ascribing the major influence in the rise of capitalism to the development of bookkeeping.18 Double-entry bookkeeping, however, seems to be but one result of the application of capitalist rationalism to the systematization of business ac¬ counts. That this need is an inherent and continuing one is indicated by the concomitant growth in complexity of ac¬ counting methods and the technology allocated to its service. Double-entry bookeeping evolved in Italy in the first half of the fourteenth century, far in advance of imitations in the North. According to Dr. Florence Edler: “Venice took the lead in the development of the science of bookkeeping and set the style for most of Italy and northern Europe. In¬ deed, bookkeeping by double entry was popularly known in the sixteenth century as ‘bookkeeping according to the method of Venice.’ ”19 The scientific keeping of books allows the entrepreneur to gauge accurately the results of his trans¬ actions.

CAPITALISM AS A SYSTEM

16

Another primary instrument of capitalist enterprise is the bill of exchange, which the Florentines used in their various foreign transactions.20 It has since become indis¬ pensable to leading capitalist nations. The bill of exchange increased the fluidity of capitalist transactions and served in¬ creasingly as the principal means of international commercial settlement.21 At a time when the Dutch had become the leading innovators of techniques in business, Sir Josiah Child, who never missed an opportunity to observe advanced practices in that country, had this to say regarding the ad¬ vantages of the bill of exchange: The law that is in use among them for transferring of bills for debt from one man to another; this is of extraordinary advan¬ tage to them in their commerce; by means of which, they can turn their stocks twice or thrice in trade, for once that we can in Eng¬ land; because having sold our foreign goods here, we cannot buy again to advantage, till we are possest of our money; which perhaps, we shall be six, nine, or twelve months in recovering: and if what we sell be considerable, it is a good man’s work all the year to be following vintners and shopkeepers for money, whereas, were the law for transferring bills in practice with us, we could presently after sale of our goods, dispose of our bills, and close up our accounts, to do which, the advantage, ease, and accommodations it would be to trade, is so great, that none but merchants who have lived where that custom is in use, can value to its due proportion.22 Incidentally, Child’s distinction between “vintners and shopkeepers’’ on the one hand, and “merchants” on the other, is an elementary one which needs to be constantly kept in mind in any analysis of capitalist development. Commercial banking grew hand in hand with the in¬ creasing currency of these credit instruments. The develop¬ ment, furthermore, of risk-bearing institutions in the capital¬ ist cities added still another pillar to the structure of the enterprise. Insurance in various forms helped to stabilize business. It goes without saying that a reliable monetary system constituted the primary matrix of commercial rela¬ tions.

2 The Social Matrix One of the most remarkable traits of capitalist society is its enoromus capacity for assimilating culture. It takes the pick of man’s intellectual and material possessions with an acquisitiveness unknown to feudal and ancient societies. No doubt it was particularly capitalist commerce which Montesquieu had in mind when he said: “Commerce had everywhere diffused a knowledge of the manners of all na¬ tions: these are compared with one another, and from this comparison arise the greatest advantages.”1 Indeed, the extent to which the community readily adopts whatever appears to serve its material or esthetic interests may be taken as an index of its capitalist advancement.2 Professor Knight refers to this phenomenon in paradoxical fashion: “It is especially interesting to note that the five particularly important technical advances by means of which Europe seemed to lift itself from medieval to modern status were all Asiatic in origin—the compass, the Arabic system, gunpowder, paper, and printing. And centuries later Asia begins to learn of capitalism from Europe.”3 But these technical processes in themselves were not really elementary. Their assimilation in the West was determined by the peculiar social organism into which they were in¬ troduced. In my discussion of specific capitalist situations, I em¬ phasized the importance of capitalist societal organization;4 I shall now essay a more generalized statement on the or¬ ganization and social drives in leading capitalist communities. 17

CAPITALISM AS A SYSTEM

18

It would be revealing to consider similarly the social and economic facts in each class of communities within the capitalist structure, but I must forego this desideratum. From the following characterization of the dominant group, how¬ ever, very much may be inferred about the lesser societies. Conditions of the Rise of a Capitalist Nation There are certain conditions which seem indispensably associated with the rise of capitalist nations. These are: (a) an exclusive territory, preferably with access to the sea; (b)

government by a sovereign

assembly of commercial

oligarchs or, at least, by an assembly under the immediate influence of mercantile and industrial classes; (c) control over the leader or administrator-in-chief by election and impeach¬ ment; (d) subordination of organized religion to, or elimi¬ nation of religious influences from, the politics of the state; (e) a bureaucracy of nationalistic functionaries, experts, and technicians, and (f) a capitalist ethos or pattern of values, i.e., a communal determination to make an active foreign com¬ merce the vital core of the economic life of the community so that social status, religious and legal ideology, art, science, and war all contribute to this end.5 Government The political organization of a capitalist nation is thus of primary importance. Professor Tawney’s remark that “organ¬ ization is important, but it is important as a means, not as an end in itself”6 is true; nevertheless, the early capitalists put so much stress upon its significance that they seemed to think that, given favorable institutions, the economic ends would follow as a matter of course. What the great capitalist revo¬ lutions sought was the reorganization of the government.7 In a comparison of feudal government with capitalist ten¬ dencies, Montesquieu observed: In a government of this kind [feudalism] none but the prince ever had, or can have, a treasure; and wherever there is one, it no

THE SOCIAL MATRIX

19

sooner becomes great than it becomes the treasure of the prince. For the same reason, all associations of merchants, in order to carry on particular commerce, are seldom proper in absolute governments. The design of these companies is to give to the wealth of private persons the weight of public riches.8 The government thus established must have no authority superior to the wishes of the mercantile-industrial class; it must become an accommodating instrument of the legitimate designs of individual capitalists. As late as 1951, a represent¬ ative group of American business men gave the following definition of the role of government: It is the function of government, domestically and in the inter¬ national sphere, to make the rules of the game and to assure that the equities of all concerned are properly regarded. But it is not the function of government to determine where or when an economic enterprise shall be undertaken, or what its operating procedures shall be. The management decisions and the tech¬ nological capacities essential to the conduct of a productive enter¬ prise cannot be provided by makeshift “hiring” for government account; nor can there be any substitute for the sense of continu¬ ing responsibility that private ownership entails.9 This seems rather strongly put, but it does express the de¬ sire for subordination of capitalist government. Adam Smith, who appears never fully to have grasped the critical nature of capitalist society and consequently laid himself open to the charge of Utopianism, saw this “subservient” character¬ istic of capitalist government as a defect. Accordingly, he wrote: A company of merchants are, it seems, incapable of considering themselves as sovereigns, even after they have become such. Trade, or buying in order to sell again, they still consider as their principal business, and, by a strange absurdity, regard the char¬ acter of the sovereign as but an appendix to that of the merchant, as something which ought to be made subservient to it, or by means of which they may be enabled to buy cheaper in India, and thereby to sell with a better profit in Europe.10 Smith overlooked the fact that precisely such governments had already worked wonderfully in the capitalist cities of the

CAPITALISM AS A SYSTEM

20

continent and in the United Provinces; and that they were even then considered by mercantilists as the supreme creation of the mercantile state. Leadership In truth, the capitalist “sovereign” tends to be conceived of as an instrument of the capitalist legislature. It was this apparently fantastic inversion of the traditional power struc¬ ture that the old European monarchy found most difficult to digest. Perhaps in order to make the transition more pal¬ atable, the British, after the Caroline upheaval, kept their monarch—but have divested him of every measure of respon¬ sible leadership. His apparent political authority, which re¬ sides actually in the Prime Minister, has been perpetuated essentially because of the vast services it renders to the oli¬ garchy in the latter’s dealings with the backward peoples of the Empire and with the commonality at home. A compar¬ able capitalist strategy of upholding the divinity of the “Em¬ peror” has been carried to an extreme in Japan. There the spectacle of topmost members of the ruling class, in and out of the government, bowing worshipfully before the monarch and uttering his name with awe, must be a bewitching and disarming ritual to the people. In medieval capitalist cities, stupendous pageants were employed to similar ends of social control. The capitalist leader—whether he be doge, gonfalonier, burgomaster, maire, prime minister, or president—must al¬ ways take an oath of loyalty to the territory and to its laws. He is thus made obedient to a written or “unwritten” con¬ stitution. He is ordinarily, and for good reason, a civilian. Although the early townsmen had to defend their city and to follow their goods on land and sea with ready weapons, they were still merchants and not professional soldiers. Under feudalism the ruler is a warrior; but capitalism has made mercenaries out of professional fighting men. The leader, furthermore, must never leave himself open to foreign influ-

THE SOCIAL MATRIX

21

ences; hence there are usually regulations about his receiving presents from abroad, about his movements, and his corres¬ pondence. Since the business class tends to split into factions according to their immediate commercial or industrial in¬ terests, the leader must appear unbiased in making decisions involving these rivalries. This requirement reached its height in some of the Italian cities, which frequently imported podestas from some distant locality to make certain of an im¬ partial, nonpartisan administration. The leader must also be a member of the capitalist class, or, at any rate, amenable to class suggestion, especially in regard to foreign policy; he must not hold convictions so strongly as to cause him to lose his sense of being at the serv¬ ice of a powerful group. At this point, however, the elements of greatness may enter; the outstanding leader will be he who is able to grasp the critical capitalist purpose and carry it out in spite of opposition. Among those who achieved re¬ nown in this office were the Venetian Doge, Enrico Dandolo; the Dutch Grand Pensionary, Oldenbarnevelt; the British Prime Minister, William Pitt the Younger; and the Amer¬ ican President, Abraham Lincoln. Although the capitalist administrator-in-chief is not necessarily opposed to the well¬ being of the masses of working people, he cannot admin¬ ister the state directly in their interest. This is so because production itself is in the hands of private individuals. Pro¬ letarian leaders who, through successful democratic action, have managed to become heads of capitalist states, have in¬ variably failed in attempts to reconcile their obligation of loyalty to the interests of the masses and the demands of capitalist economic principles. Citizenship As the city or nation is the integral unit of the capitalist system, so the citizen constitutes the responsible entity within the nation. The early communes “generally took their rise from an oathbound league of all the inhabitants, brought

CAPITALISM AS A SYSTEM

22

together by the burgal aristocracy.”11 It is partly in this resolution of common destiny that the capitalist collectivity achieves its social solidarity. Citizenship in a capitalist state is a fundamental privilege;12 and this privilege has varied in value not only with the status of the city or nation within the system, but also with the domestic role of the individual. The citizen, ceteris paribus, of the leader nation is better off—his social opportunities and income are on the average greater—than the citizen of lesser nations; and the citizens of ruling-class status within the dominant society are in the most advantaged position of all. In the past, therefore, the rights, immunities, and duties of citizens have been a crucial concern of capitalist legislation; in fact, the law itself has been made by citizens.13 Non-citizens have no rights although they have ordinarily been self-interestedly protected by the law and made to abide by its prescriptions.14 Citizenship has involved mainly two categories of rights: political and economic. Roughly speaking, political rights include the right to hold administrative office, the right to choose officers, the right to sit in the legislature, and the right to exercise suffrage. The economic rights of a citizen allow him to accumulate and hold property, to import and export, to buy and sell in the home market, to manufacture, to labor and to practice the arts, and to consume goods of certain kinds and quantities. These rights, in various combinations and degrees of re¬ finement, may be granted to different classes of citizens. The duties, which are chiefly those of the defense of the nation, keeping the peace, and paying taxes, have also been differ¬ entially assigned to citizens. We should not lose sight, how¬ ever, of the characteristic tendency of capitalist states to concentrate both economic and political power in the hands of their great denizens. We have seen this in Venice, in Florence, in Liibeck, in Holland, in England, and in the United States. In 1416, it may be recalled, the Hanseatic Con¬ gress ruled that any city permitting its senate to be elected

THE SOCIAL MATRIX

23

by popular vote would be expelled from the League. Giry and Reville make the following generalization on the mo¬ nopoly of citizenship rights in the medieval cities: In many cases the liberties belonged only to a minority; the lower class, the artisans, or, as they said, the common people, had no part in the administration. The members of the rich com¬ mercial class, with the addition in the south of some nobles, alone exercised power; they alone were citizens or burgesses, while the manants were not. The manants, said a contemporary, are those who live in towns and cities and do not have the burghal privileges. And in proportion as the prosperity of the towns increased, as the municipal privileges became more desirable and the honors more lucrative, new admissions were more rare, and the governing class was more and more exclusive. While democratic here and there, ordinarily this regime sanctioned the reign of a sort of aris¬ tocracy of wealth.15 The gradual extension of citizenship rights in modern nations, at least the right to vote for some legislators, has gone hand in hand with the continuing struggle of the com¬ mon people for recognition. This struggle is a characteristic of the democratic tendency in capitalist society, and its ulti¬ mate consequence seems clearly to be the termination of capitalist governmental organization. Freedom and Private Enterprise One of the primary—perhaps the primary—social drives of capitalist society is the desire for freedom. Capitalist free¬ dom tends to increase as nations approach leadership in the system, but is denied more or less completely to communities at the lowest rungs of the structure. In both its internal and external manifestations, freedom is indispensable to the suc¬ cess of capitalism—hence the tenacity with which it is held and defended in capitalist societies. Machiavelli was conscious of this when he advised his Prince: A city used to liberty can be more easily held by means of its citizens than in any other way, if you wish to preserve it . . .

CAPITALISM AS A SYSTEM

24

and whoever becomes the ruler of a free city and does not destroy it, can expect to be destroyed by it, for it can always find a motive for rebellion in the name of liberty and of its ancient usages, which are forgotten neither by lapse of time nor by benefits received; and whatever one does or provides, so long as the inhabitants are not separated or dispersed, they do not forget that name and those usages, but appeal to them at once in every emergency, as did Pisa after being so many years held in servitude by the Florentines.16 At the outset, however, it must be emphasized that “free¬ dom” is a societal trait, and that it can have no meaning— except perhaps

in

metaphysical

ratiocination—outside

a

societal situation. Freedom, like power, resides in all societies, but its quality and distribution vary. “The quality of free¬ dom,” observes Ferdinand Schevill, “pertained to the in¬ dividual Lombard by virtue of his twofold capacity of war¬ rior and landlord.”17 The freedoms of feudalism were thus exceedingly valued by the nobility; but there were no means by which they could be retained after the lapse of feudalism; to desire them was to desire a return to feudalism itself. Societal freedom, moreover, tends also to involve restraint. The same implacable champions of liberty for themselves in seventeenth and eighteenth century Britain, for instance, made it a crime for workers to organize in defense of their own interest; these champions of freedom saw no significant inconsistency in slavery on their own plantations, and were ready to open the doors of almost any other country to their commerce by violence. Theoretically, of course, the slaves or the Chinese were assumed to have the same freedom to en¬ slave the British, or to compel them to trade, since, to quote the celebrated Hugo Grotius, “Every nation is free to travel to every other nation, and to trade with it.”18 More realis¬ tically, however, R. H. Tawney observes that “freedom is always relative to power, and the kind of freedom which at any moment it is most urgent to affirm depends on the nature of the power which is prevalent and established.”19 Societal freedom, then, tends to be modified by the nature

THE SOCIAL MATRIX

25

of its function. Self-imposed restrictions are manifestly not borne as limitations upon freedom; these are ordinarily the means of achieving important purposes. Indeed, it may be said that societal freedom tends to be augmented in the measure that more and more people are able to participate voluntarily in disciplining themselves for the achievement of socially desirable ends. Thus the worker’s freedom is enhanced by his submission to the regulations of his labor union; businessmen make all sorts of rules for themselves and laws for their nation in order to increase their own power. It is to this principle of freedom through discipline that Montesquieu refers in the following: It is in the freest countries that the merchant finds innumerable obstacles; and he is never less crossed by laws than in a country of slaves. England prohibits the exportation of her wool; coals must be brought by sea to the capital; no horses, except geldings, are allowed to be exported; and the vessels of her colonies trading to Europe must take in water in England. The English constrain the merchant, but it is in favor of commerce.20 Under capitalism, the commerce which maximizes national wealth is, to reiterate, carried on by private individuals; and the fact that the principal reliance of this trade is upon fungible goods helps to make the opportunities for inven¬ tiveness and ingenuity almost unlimited. It is mainly the incessant play with devices for producing and exchanging goods and for making financial deals most profitable to the individual citizen, that the capitalist state accommodates and encourages. “What the entrepreneur needs first of all for the full play of his capacity,” says Professor Strieder, “is economic freedom.”21 Free enterprise, then, which readily establishes a hierarchy of wealth and power, constitutes the capitalist state’s basic economic process. Economic freedom naturally leads to economic dominance by a few, and con¬ sequently the limitation of economic freedom for others. And yet, in such leading capitalist communities as Venice, Hol¬ land, Britain, and the United States, the ruling class has

CAPITALISM AS A SYSTEM

26

been sufficiently watchful to prevent an extreme concentra¬ tion of wealth—something which Florence, to cite this ex¬ ample again, could not do. The following is a recent idealistic defense of free enterprise and its function by a group of eminent business men: The right to acquire and own property is implicit in the private enterprise concept; and it is through the process of capital forma¬ tion, based upon private ownership, profits and saving, that the dynamic potentialities of private enterprise find release and con¬ summation. The process of capital formation underlies all industry and trade in our industrial civilization, and it consti¬ tutes the mechanism through which private enterprise must function. An understanding of the nature of capital, and of the process by which it is created and put to use in the service of mankind, is therefore essential to an intelligent appreciation of the private enterprise system.22 Individualism, the natural outcome of free enterprise, will therefore be most highly developed in leading capitalist na¬ tions. We should expect it to subside as the nation approaches maturity or yields its leadership. This is so because the chances of individual advancement through enterprise will have been reduced. Individualistic traits thus tend to be typical of the capitalist personality. They represent the basis of the societal drive for freedom. Nationalism Since the nation, as a unit of the system, seeks to be ex¬ clusive and since this exclusiveness implies other exclusive units each struggling to maximize its wealth virtually at the expense of the entire world, a fateful concern for the welfare of one’s own nation—a sentiment comprising such emotions as fear, hostility, and pride—serves to identify and unite a capitalist people. By means of this generalized sentiment, the individual may be successfully appealed to when the national interest is at stake. “The feeling of membership in a national community combines with the idealized conception of the nation to produce action, the aim of the action being

THE SOCIAL MATRIX

27

to bring the ideal of the nation a little closer to realization, and thus indirectly to further the interests of the individual members.”23 Nationalism thus presupposes a world system of unequal national units cooperating antagonistically, as well as of localized citizens whose interests are inextricably bound up with the fate of their country. In other words, national¬ ism is generated by the peculiar international competition and rivalry existing within the capitalist system. Nationalism was as highly developed in the national-capital¬ ist cities as in modern nations. All the elements of intense nationalism are to be found in the relations between Venice and Genoa, Florence and Pisa, and Amsterdam and the Han¬ seatic League. We should expect nationalism to reach its apogee when two nations meet each other in open strife for leadership of the capitalist system. Citizens of opposing na¬ tions, fully aware of the vital stakes, will then be likely to risk everything while calling upon Almighty God for assist¬ ance in their most righteous cause.24 Among modern nations, Japan and especially Germany had developed elaborate systems of philosophy based upon the central importance of power in national progress—in¬ deed, of power as the goal of national existence—and com¬ plete devotion to the aspirations of the state as the supreme virtue of the citizen.23 Power and its violent exercise have undoubtedly been a consistent accompaniment of the rise of nations to leadership; but it now seems clear, if it was not before 1914, that the Germans intended that power should be used as a means to quite definite expansionist goals. The philosophy of national power as an apparent end in itself may thus be regarded as the intellectual component of farreaching designs for achieving esprit de corps among citizens. It cannot reverse the economic realities of capitalist leader¬ ship. In the capitalist system, as has already been noted, nations fall into a gradation of sovereignty. Nations and colonies at the lowest level of the hierarchy have practically no inde-

28

CAPITALISM AS A SYSTEM

pendent foreign trade and consequently do not have the means of aspiring to an independent organization of their external commerce as a way of producing wealth. They tend to be passive in this respect. Their production is controlled and they are “provisioned” by the great nations. Since the capitalist structure is based upon units at least nominally sovereign,26 all non-colonial peoples must either constitute themselves, or be constituted into, nationalistic entities. In the backward nations, then, nationalistic feeling may exist without the essential capitalist interests of citizens which support it in the great nations. Indeed, the peoples of back¬ ward nations may be aroused to action as if they were, in fact, groups of competent citizens. Their leaders may employ the same resounding phrases against oppression which stirred the rising bourgeoisie in England and France, and with some¬ what the same emotional effect; but, in their case, the positive content of capitalist nation-building will be largely absent. Unless a genuine socialist alternative is in view, nationalism among those countries can ordinarily aspire to no more than a degree of solidarity in resisting unlimited foreign exploi¬ tation. I need hardly say that nationalism, in these situations, does not generate that proud, strutting, arrogant, country¬ man personality known to leading nations; it frequently leads rather to frustration and internal conflict. If we bear in mind that nationalism is an abiding trait of capitalism, and not in any sense an excrescence which may be sloughed off, the following comparison by R. H. Tawney should be helpful in pointing up its personality aspect: Nationalism is, in fact, the counterpart among nations of what individualism is within them. It has similar origins and tenden¬ cies, similar triumphs and defects. . . . Like individualism it appeals to the self-assertive instincts, to which it promises oppor¬ tunities of unlimited expansion. Like individualism it is a force of immense explosive power. ... As nationalism, in its brilliant youth, begins as a claim that nations, because they are spiritual beings, shall determine themselves, and passes too often into a claim that they shall dominate others, so individualism begins

THE SOCIAL MATRIX

29

by asserting the right of men to make their own lives what they can, and ends by condoning the subjection of the majority of men to the few whom good fortune or special opportunity or privilege have enabled most successfully to use their rights. They rose together. It is possible that, if ever they decline, they will decline together.27

Their decline, of course, will be determined by the trend of other, more generic, phenomena of capitalism. The Ethos When William Shakespeare wrote The Merchant of Venice, he managed to unite the capitalist personality and its milieu in their classic forms. Indeed, the perspicacious dramatist centered his attention on the crux of capitalist commercial relations: the sanctity of the contract. There may be some question whether Jews were the typical merchants of Venice; but the author, at any rate, brought two traditional repu¬ tations together: Venice as the greatest of all mercantile states and the Jew as the merciless bargainer. He thus gave us a glimpse of the bourgeois personality in its typical milieu. It is with the characterization of the spirit—the elan vital, the value system, the ethos—of capitalist society, which en¬ genders predictable personality types, that I shall deal in this section. The capitalist spirit may be regarded as a primary social attitude manifesting itself in innumerable actions in relation to the economic way of life of the community. As I have noted again and again, the dynamics of capitalism lie in the foreign commerce of nations. In 1933, Arthur S. Hillyer, Chief of the Commercial Intelligence Division of the U. S. Bureau of Foreign and Domestic Commerce, said in a speech before the National Foreign Trade Convention: Secretary of State Hull recently made this reassuring state¬ ment: “World trade does not mean that either side would dis¬ place any well-established business conditions of the other. It primarily means that a nation with sufficient productive capacity, in addition to materially profitable exchanges of commodities

CAPITALISM AS A SYSTEM

30

with another, is willing to go into the uttermost parts of this earth and establish on a constantly increasing scale markets which will absorb every kind of surplus it can produce.”28 It is this spirit, then, embodied in aggressive national organ¬ izations, which vivifies capitalism. “In the Middle Ages it was the international trade ventures,” observes Amintore Fanfani, “that did most to favour the rise of the capitalist spirit.”29 Society, of course, always precedes the individual and thus largely determines his behavior; so that given the capitalist milieu and its drives, the characteristic person¬ alities tend to come into being naturally. Obviously this is what Adam Smith meant when he said: “It is the system of government, the situation in which they are placed, that I mean to censure; not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would, probably, not have acted better themselves.”30 Even so, how¬ ever, Smith appears not to have realized that capitalist society had its own powerful, societal organization designed to regu¬ late the deviant self-interested, economic devices of the in¬ dividual. He did not recognize the communal traits which distinguished capitalist enterprise from an imputed universal impulsion in man to maximize his wealth. Thus the famous passage: Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employ¬ ment which is most advantageous to the society.31 In capitalist society, self-interest invariably has important qualifications: there are obligations to the harmonious work¬ ing of the peculiar domestic order, and there are always prescriptions involving the mercantile community abroad. Although it was the great merchants, acting self-interestedly, who carried on foreign commerce, they had to plan and

31

THE SOCIAL MATRIX

modify their transaction in concert vis-a-vis other nations and peoples. The two areas of concern may be seen differen¬ tiated in the following statement by the thoughtful mercan¬ tilist, Pollexfen: The author [Pollexfen] . . . hath taken pains only in hopes it [his book] may be of some use to the public, without any design against men’s particular interests, further than as such interests were understood to be destructive to the common good; for if we could agree what is our true interest in reference to the public, and to sacrifice our passions and private interests thereto, then, by God’s blessing on our endeavours, we may hope to retrieve our trade.32 We must look for manifestations of the capitalist ethos, therefore, not in the particularistic concern of the merchant or the industrialist, but rather in areas of consensus of the ruling class (as these affect societal behavior) and in the atti¬ tudes and actions of its leaders. Early writers in Italy, France and England, who advised young “traders’

how to conduct

themselves, unwittingly assumed the existence of the capitalist spirit. Such works as Leon B. Alberti’s Del governo della famiglia33

(emphasized by Sombart); John Browne’s The

Merchant Avizo; Richard Steele’s The Trademan’s Calling; Jacques Savary’s Le parfait negociant; Defoe’s The Complete English Trademan; and various writings of Benjamin Frank¬ lin, such as his essay on “The Way to Make Money Plenty in Every Man’s Pocket,” do not concern themselves particularly with the socio-psychological drives of capitalism.34 In fact, al¬ though Franklin was inspired by apparently limitless oppor¬ tunities for individual advancement in his capitalist situation, he sometimes expressed anything but the capitalist spirit. This was particularly the case when he addressed himself to the society as a whole. To illustrate, he once inquired: What occasions ... so much want and misery? It is the employjiigin of men and women in works that produce neither necessaries nor conveniences of life, who, with those who do nothing, con¬ sume necessaries raised by labourers. . . . Look around the world and see the millions employed in doing nothing, or in

32

CAPITALISM AS A SYSTEM

something that amounts to nothing, when the necessaries and conveniences of life are in question. What is the bulk of com¬ merce, for which we fight and destroy each other, but the toil of millions for superfluities, to the great hazard and loss of many lives by the constant dangers of the sea? How much labour is spent in building and fitting great ships to go to China and Arabia for tea and coffee, to the West Indies for sugar, to America for tobacco? These things cannot be called necessaries of life, for our ancestors lived very comfortably without them.35 It seems possible, therefore, to show remarkable intuition in sensing the behavioral requirements for achieving indi¬ vidual success—especially middling, trader success—without grasping the dominant purposes of the social system and the ethos which motivates its ruling class. As Fanfani further points out: “The manifestations of this spirit are of real im¬ portance only when the classes that it informs have become the holders of power, and are in a position to give society the imprint that stamps it as capitalist.”36 Besides the nationalistic pronouncements of the great cap¬ italist parliaments, the designs of such men as Oldenbarnevelt, John de Witt, and Pieter de la Court of Holland; Sir Walter Raleigh, Thomas Gresham, and Sir Josiah Child of England; Richelieu and Colbert of France; Alexander Hamil¬ ton of the United States; and probably Peter the Great of Russia may be taken as representative of leadership intensely affected by the capitalist spirit. The major components of this ethos seem to be nationalism and its variants, racial antagonism and prejudice; imperialism, including a sense of self-righteousness and pride in foreign exploitation; ration¬ alization of a highly indiscriminate acceptance of efficient means; belief in unlimited progress; faith in the ultimate authority of parliamentary law embodying inviolable rights of citizens; emphasis upon the importance of the letter of contracts and of punctuality; approval of the distribution of honor and power mainly according to success in business; speculativeness; and cosmopolitanism. At some time or other in the rise of capitalism, the establishment of all these societal

THE SOCIAL MATRIX

33

values provoked clashes with established social norms. They are correlated and compatible with the dominant societal purpose. The heart of the capitalist ethos appears to be the climate of speculativeness in which the individual operates: it is in the involvements of this trait, as they manifest themselves in foreign economic relations particularly, that the fabulous magic of capitalism lies. Capitalist nations seem to make of themselves wonders of the world out of nothing; a man “by his wits alone” may accumulate more wealth than any mon¬ arch of pre-capitalist days ever saw. In no previous society did such possibilities normally exist. In modern societies, people come to expect extraordinary things from “the market”; it provides the means of winning or losing unlimited amounts of money, depending on one’s knowledge of its ins and outs. Speculativeness is immanent in all business enterprise,37 and its consequences may affect all persons in the society; it is, therefore, a societal condition. Although the “bubbles” of the seventeenth and eighteenth centuries involved relatively little wealth compared to that of an up-and-down swing of a modern business cycle, they were nevertheless striking and highly sensational. Jay B. Botsford describes the British peo¬ ple at the time, excited as they were to fever pitch by a “de¬ sire to get something for nothing:” The magic of limitless opportunity, which certainly existed, lulled the senses of the layman to the inflexible laws of business economy. The open sesame to wealth was simply to gamble on the ‘Change’ or to subscribe to some stock company dealing in overseas commodities. Stock in the successful East India Com¬ pany was high in price and difficult to obtain. Fortunately, though, other ventures, modelled along similar lines, were will¬ ing—nay, anxious—to open their books to new subscribers. While speculation was rife through the century, the most spectacular changes in fortunes occurred during the winter of 1720-1721. The occasion was the meteoric rise of South Sea Stock. At first this security was sold at _£86 a share; in a few months it lose to £1,100—of course a fictitious value, and a proof of the gullibility of the public.38

34

CAPITALISM AS A SYSTEM

In this connection the tulip speculations of the 1630’s in Holland are seldom overlooked. The Dutch, growing rich at a dazzling rate from investments of all kinds at home and abroad, were literally asking for a rainbow of wealth. Accord¬ ing to N. W. Posthumus, their “heated imagination went on and on; the craze spread, till at last doubt began to arise; and, as soon as this uneasiness was expressed, the whole tower of prices collapsed in one or two days, everybody now dis¬ believing in any future possibilities.”39 But not quite “every¬ body.” In such movements there is always an upward draft drawing in the loose wealth of the credulous multitude. It was already recognized by contemporaries that “those in the know can buy and sell two or even three times, till the greatest part of a Kingdom is got into the hands of a few persons.”49 Although speculation has had more stable uses, the element of conscious risk-taking is always present in it; and this im¬ parts an adventurous atmosphere to capitalist society. At the upper reaches of the business world, incomes are made largely by dealings in the capital market. It is, to be sure, individual persons who are subjected to the pressures of the capitalist spirit; but the individual does not, to repeat, create the socio-psychological situation. Rather, he finds himself obligated to play some social role with its privileges and responsibilities. Of all persons in the society, the lot of setting norms and of responding creatively to fun¬ damental urges falls chiefly upon businessmen at the upper levels.41 Accordingly, the solicitude of the haute bourgeoisie for the prosperity of business and the success of the capitalist state is ordinarily taken for granted. In a speech before a group of business leaders in 1916, W. H. Lough, discussing the problem of training young men entering the mercantile profession, said: Any kind of well-directed training of men can exert a tre¬ mendous power in stirring enthusiasm and in engendering the same kind of spirit among the young men who are working under you that permeates yourself ... the spirit of intense interest, of

THE SOCIAL MATRIX

35

concentration, of willingness to work night and day because of their interest in the subject, the same spirit that Mr. Chandler spoke about as animating the missionary. That spirit can animate also—in some instances does animate—a business office. It must be based, however, upon an understanding of the big problems which the manager is facing. . . . One great and important object, therefore, is that of giving such a knowledge of the need of foreign trade, of its basis, of its fundamental principles, that even the young men who are taking their first steps will become enthused and active. They must feel the same keen interest you feel before they can become really able assistants.42 Sometimes this intensity of devotion to business has been called the spirit of capitalism; it has also been variously called greed, the “money-loving instinct,” “acquisitiveness,” etc. “Of one thing we may be sure,” Professor Pirenne asserts. “These men were inspired by a greedy spirit of profit-seeking; they were animated by the capitalist spirit.”43 It may be shown, however, that a similar spirit also existed among pre-capitalist peoples. As Halbwachs, among others, observes: “The urge to acquire money, and to get it by all means, has existed in numerous individuals in all ages; hence it cannot be consid¬ ered as characterizing modern society.”44 But what is dis¬ tinctive of capitalism is that, under it, the great businessman does not work simply to make a good living; he must con¬ stantly augment his wealth through profits, or perish. Capitalism has engendered a taut international and do¬ mestic competitive matrix, which may be disregarded only at the risk of bankruptcy. Andrew Carnegie (who, in distribut¬ ing his wealth, asserted that no man should die rich if he could help it) said of his business: “Always we are hoping that we need expand no farther; yet, ever we are finding that to stop expanding would be to fall behind, and even today the successive improvements and inventions follow each other so rapidly that we see just as much yet to be done as ever. When the manufacturer of steel ceases to grow he begins to decay, so we must keep extending.”45 In the seventeenth century, when the world-wide capitalist system was becoming fully organized, William Petyt pointed

CAPITALISM AS A SYSTEM

36

out to his English countrymen that “the cheapness of the Dutch . . . hath in a manner beaten us out of all the trade from port to port;”46 and Thomas Mun, in turn, declared: “We have found of late years by good experience, that being able to sell cloth cheap in Turkey, we have greatly increased the vent thereof, and the Venetians have lost as much in the utterance of theirs . . . because it is dearer.”47 There are, then, constant pressures to utilize every means of making in¬ creasingly larger profits. During the opening decades of this century, Americans conceived of Germany as the country to be watched. Thus William Pigott of the Seattle Car and Foundry Co., advised his colleagues how to meet German com¬ petition: First. Cut out a third of your personal expenses in the way of luxuries, and you and your families will live longer and happier. Second. Cut out one-third of the go-between and middle men. Third. The higher-ups and supervising class should accomplish at least 25 percent more actual work and could cut down their office room and expenses at least 3314 per cent. Fourth. Most businessmen, and otherwise, could increase their efficiency and output at least 33i/a per cent without either incon¬ venience or injury. Fifth. Cut out the present unreasonable waste of materials. . . . The German merchant, by application, plain living and simple habits, built up a foreign trade that was the wonder of the world. He confined himself to lager beer and smoked a pipe, while his competitors figuratively speaking indulged their appetites in high proof wines and Perfecto cigars.48

It is, then, profit-making and wealth-getting in the cap¬ italist societal milieu, and not as they may manifest them¬ selves universally and timelessly, which is significant for us. The Personality In the same way, the capitalist personality must be defined. At the outset, it should be observed that the bourgeois per¬ sonality, like personalities in any other culture, is impressed upon heredity. It is probable that every generation of human beings produces talented and untalented individuals in about

THE SOCIAL MATRIX

37

the same ratio. Innate genius of any kind, therefore, cannot be held accountable for the achievements of capitalist so¬ ciety. From the point of view of the greater nations, however, capitalism has opened up countless opportunities for the exercise of creativeness and leadership. The businessman is, in a sense, an independent manager of a dynamic project which ordinarily allows him so much latitude for the exercise of ingenuity that his creativity is stimulated to a high pitch. This is what Josiah Child was referring to in his statement, cited above, about the big businessman remaining restless at night. To cite Andrew Carnegie again: I was probably the most inconsiderate superintendent that ever was entrusted with the management of a great property for, never knowing fatigue myself, being kept up by a sense of re¬ sponsibility probably, I overworked the men and was not care¬ ful enough in considering the limits of human endurance. I have always been able to sleep at any time. Snatches of half an hour at intervals during the night in a dirty freight car were sufficient.49 We should expect the number and productivity of creative opportunities to be directly correlated with the position of the nation in the hierarchy of the capitalist system. In other words, at any given time business executives of the leading capitalist nation, or in the nation approaching leadership, will set the tone and express most completely this breathless activity.50 The drive, moreover, pays off; hence the society encourages it. When Moses Beach compiled his list of wealthy citizens in New York City in 1842, he justified it in part by saying: “In a country where money, and not title, is the standard by which merit is appreciated, it is desirable to adjust the standard with as much exactitude as possible in reference to the honest means by which wealth has been ac¬ quired.”51 It is not, then, that all persons in a capitalist society can become rich, but that the “endless variety of encourage¬ ment to the young” leads all to believe that any one might, if only he is willing to exert himself.52 As we go through biographical material on outstanding

CAPITALISM AS A SYSTEM

38

businessmen, this singular trait seems to recur: intense devo¬ tion to the enterprise (sometimes called hard work). Samuel Insull, the “self-made” business magnate, puts the following stress upon it: The men who have gone ahead of us have not done it because of any extraordinary natural ability. The near-geniuses among us have not, as a rule, done so well. I find that near-geniuses have a way of getting tangled up in the special limitation which brilliant people so often seem to have. The men I know who have gone ahead have been just normal fellows. They were set off from the others, in the beginning, only by the fact that they have made a practice of using the constructive little opportunities which others have neglected. And that practice gave them the especial abilities they needed. One of our vice-presidents came with us as an inspector of underground work; another came with us as an office boy. Our secretary and treasurer began with us as an office boy, and so on down the line. None of them was rich or had influential friends to back him. Some of them had not even so much as a high-school education; but they all had the characteristics I have mentioned—a sort of eagerness to be serviceable in unexpected ways. It was this, more than all other factors put together, that has put them where they are today.53 The Milton Bradley Company, in its book on Famous Fortunes, concludes that there are but three essential ele¬ ments to success in business: “hard work, diligent study of the problems of the field in which you labor, and the touch of faith and ‘will to do’ that always grasps what the shiftless or unenterprising never see.”54 It seems obvious that diligence must stand high among the traits of businessmen: yet it may be overemphasized, especially from the mouths of witnesses such as these. The qualities of shrewdness, ruthlessness, pre¬ daciousness, and pugnacity should not be overlooked. The creative spirit in the usual inventor or scientist or artist may lead him to unflagging exertion; and yet, for want of a “sense of business,” he may live his life in ordinary circumstances. Many docile, meticulous office workers have become Dick¬ ensian drudges rather than vice presidents of public-utility empires. It is even conceivable that today it might be to the

THE SOCIAL MATRIX

39

advantage of the common laborer to do as little as he can for his wages. In the business world there is, at any rate, continual strug¬ gle for power. Such financial monarchs as Jay Gould, Cor¬ nelius Vanderbilt, John D. Rockefeller, and J. Pierpont Morgan, when put to their severest tests, have displayed the characteristic personality traits of the pirate or military general.55 What Allan Nevins, among others, calls the “battle of giants” (in describing Rockefeller’s victorious clash in the 1870’s with the Pennsylvania Railroad) was typical of com¬ mercial rivalry in capitalist society.06 In illustration, I cite George

F.

Redmond’s summary of the contest between

Edward H. Harriman (who “died as he lived, ‘with his boots on’ and fighting to the last”) and James J. Hill, allied with J. P. Morgan, for the control of Western railroad interests early in this century. When all attempts at compromise failed, “nothing remained but to fight.” With a daring, the like of which the financial world never knew before, he purchased $65,000,000 of Northern Pacific stock before the Hill-Morgan people knew what was up. Hill was on the Pacific coast. Morgan was in Italy. Hill scented something. He made the fastest run by special train from Puget Sound to New York, that had been made up to that time. He learned from an associate of Harriman what had been clone. When Harriman heard that the enemy had learned of his plans, and how he had learned, his rage was awful. The Hill-Morgan people sent James R. Keene into the market to buy Northern Pacific at any price. Northern Pacific went to $1,000 a share almost before the Street knew what was going on. Transactions were on a vast scale. Men had sold what they did not own. Their plight was pitiful. Thousands of shares were in Europe and thousands of shares were on the ocean. The owners did not know the numbers. Deliveries could not be made. Strong houses were on the verge of ruin. Writers of the events of those days said that Harriman stayed in his office when the Street cried for assistance, but remained impassive and did not heed their cries. The notion is wrong. The banking interests on both sides offered to settle with the shorts, but at an exorbitant price. But theirs was the right and the power. At this juncture the master appeared. Harriman jumped into the banking circle and exclaimed, “I never was a party to a

CAPITALISM AS A SYSTEM

40

corner in my life, and I never will be. I demand that these people be settled with for a nominal sum.” Under his command the big financial interests had to swing into line and hundreds were saved from ruin.57 Notwithstanding this readiness to fight for strategic and monopolistic commerical positions, there is in the bourgeois personality a remarkable strain of sportsmanship. Capitalist society has opposed and discouraged feuding. We have seen it ruthlessly put down in the Tuscan republics, and disciplined in the North as law replaced personal authority. The capital¬ ist is remarkably willing to abide by the rules of the game with their loopholes, and to accept failure or defeat with less rancor than is customary among the ruling class of perhaps any great pre-capitalist society.58 Doubtlessly the foreign orientation of the capitalist community which requires do¬ mestic cooperation as a kind of overlay to competition, helps to mollify inter-personal strife. The objectivity of the market also serves to lessen personal antipathy. Businessmen at the top tend always to become involved either directly or in¬ directly in foreign trade,59 a fact which externalizes the major antagonisms. The discipline of the individual, the rules to which he must subject himself if he is to “stand upright” and be a success in capitalist society, indicate, as certain of his more prescient mentors saw them, what the bourgeois personality shovdd be. These writers—Steele, Defoe, Franklin—were not particularly interested in the behavior of the ruling class, but rather in that of the little man with lofty ambitions. Sometimes, indeed, as in the following precept from Franklin, it almost seems as though they are advising the citizen how he might remain “small” and still be happy: Be wise, and let industry walk with thee in the morning, and attend thee until thou reachest the evening hour for rest. Let honesty be as the breath of thy soul, and never forget to have a penny when all thy expenses are enumerated and paid; then shalt thou reach the point of happiness, and independence shall be thy

THE SOCIAL MATRIX

41

shield and buckler, thy helmet and crown; then shall thy soul walk upright, nor stoop to the silken wretch because he hath riches, nor pocket an abuse because the hand which offers it wears a ring set with diamonds.60

This, it seems, could hardly be the primary goal of a lad with elevated business aspirations. Even so, however, the proffered advice still held up to the ambitious the careers of rich men; and the most engrossing of these were the many who had marched from the ranks of the commonality to the fabulous seats of power. Thus, the more attractive suggestion: I considered it [the Almanac] as a proper vehicle for convey¬ ing instruction among the common people, who bought scarcely any other books. I therefore filled all the little spaces, that occurred between the remarkable days in the Calendar, with proverbial sentences, chiefly such as inculcated industry and frugality, as the means of procuring wealth, and thereby secur¬ ing virtue.61

Franklin’s style of writing made it appear provocatively simple to acquire money. Two easily established conditions— work and thrift—would set any individual on the royal road: In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words, industry and frugality; that is, waste neither time nor money, but make the best use of both. Without industry and frugality nothing will do, and with them everything. He that gets all he can honestly, and saves all he gets (necessary expenses excepted), will certainly become rich, if that Being who governs the world, to whom all should look for a blessing on their honest endeavours, doth not, in his wise providence, otherwise determine.62

Defoe, more than Franklin, associates business occupations with a responsibility to the nation’s welfare. The best citizens, Defoe concluded, ought to go into business because “trade is the readiest way for men to raise their fortunes and fam¬ ilies; and therefore it is a field for men of figure and good families to enter upon.”63 The tradesman should avoid “ex¬ pensive living” which is like a “slow fever” that “feeds upon

CAPITALISM AS A SYSTEM

42

the life and blood of the tradesman; ... it eats into two most essential branches of his trade, namely, his credit and his cash.. . .”64 Furthermore, business calls for the utter devotion of the tradesman. Concern for success should be to him an elementary source of pleasure; and he should be eternally conscious that time spent away from his shop is money lost. Defoe gave the following lecture to the young aspirant to mercantile success: I have heard a young tradesman, who lov’d his bottle, excuse himself, and say, ‘tis true, I have been at the tavern, but I was treated, it cost me nothing.’ And this, he thinks, clears him of all blame; not considering that when he spends no money, yet he spends five times the value of the money in time. Another says, why indeed I was at the tavern yesterday all the afternoon, but I could not help it, and I spent but sixpence. But at the same time perhaps it might be said he spent five pounds worth of his time, his business being neglected, his shop unattended, his books not posted, his letters not written, and the like; for all those things are works necessary to a Tradesman, as well as the attendance on his shop, and infinitely above the pleasure of being treated at the expense of his time. All manner of pleasure should buckle and be subservient to business: He that makes his pleasure be his business, will never make his business to be a pleasure: Innocent pleasures become sinful, when they are used to excess, and so it is here; the most innocent diversion becomes criminal, when it breaks in upon that which is the due and just employment of the man’s life. Pleasures rob the Tradesman, and how then can he call them innocent?65 It is, however, in the notion of work as a “calling,” the Calvinistic duty to work as a religious obligation, that we see the severest pressures put upon people in the new society to find an occupation and to stick to it diligently in the assurance that such is God’s will. With copious support from the Bible, the Reverend Richard Steele argued this from various angles. Said he, typically: “Tho you have no outward necessity to inforce you to take up a calling, yet it may be necessary for you, in respect of your soul, to prevent the corruptions that are apt to breed there.”66 The char¬ acteristic busyness of the capitalist city now gained the assist-

THE SOCIAL MATRIX

43

ance of religion to give it root in a relatively amorphous national environment. The following is Defoe’s continuation written about fifty years later: Pleasures and diversions are thus made criminal, when a man is engaged in duty to a full attendance upon such business as those pleasures and diversions necessarily interfere with, and interrupt; those pleasures, tho’ innocent in themselves, become a fault in him, because his legal avocations demand his at¬ tendance in another place. Thus those pleasures may be lawful to another man, which are not so to him, because another man has not the same obligation to a calling, the same necessity to apply to it, the same cry of a family, whose bread may depend upon his diligence, as a Tradesman has.67 The tradesman, then, should be an industrious, conscien¬ tious worker who lets nothing come between him and his business. We have seen how business as a creative, compet¬ itive vocation tends naturally to induce the business man not only to accept these doctrines but also to demonstrate their utility. Attempts to address the hard-work-and-thrift precepts to the masses, however, fell on stony ground. Even businessmen realized that “no man can get rich on a salary,” let alone wages; hence the motivation that helped shape the bourgeois personality was lacking among the workers. In¬ deed, opposite influences came into play: the harder the laborer exerted himself, the less work there seemed to be for him; the more work he accomplished in a given time, the greater the tendency of the employer to assign larger tasks at the old rate of pay; and, worst of all, the early capitalist dis¬ covered that the best inducement to the laborer’s industrious¬ ness was not to hold out to him the prospect of wealth, but to keep him in a constant state of need. The masses of people thus had few if any of the bourgeois psychological drives toward hard work.GS To obtain best re¬ sults from them, therefore, some sort of goad had to be constantly applied. As Defoe pointed out:

Servants out

of government are like soldiers without an officer, fit for nothing but to rob and plunder. . . .”69 From this, it seems

CAPITALISM AS A SYSTEM

44

manifest that there was a clear basis for the development of at least two major personality types in capitalist society. Although thrift is consistently advocated in admonitions to tradesmen, it should not be assumed that parsimony is a characteristic trait of the capitalist ruling class. A business¬ man, on his way up, may be contented with a bread-andwater dinner; but, as he begins to establish a sure foothold, he enters the principal luxury-consuming group of the so¬ ciety.70 The same Carnegie, for instance, who was “struck with delight” to become a boiler attendant and later a mes¬ senger boy in Pittsburgh, soon found himself, as a fastmoving young businessman, unable to endure the dust and smoke of that city. “The smoke,” he wrote, “permeated and penetrated everything. If you placed your hand on the balustrade of the stair, it came away black.” So he moved to suburban Homewood where, as he wrote in his Autobio¬ graphy : There were country lanes and gardens in abundance. Resi¬ dences had from five to twenty acres of land about them. The Homewood Estates was made up of many hundreds of acres, with beautiful woods and glens and a running brook. . . . With this change to the country came a whole host of new acquaintances. Many of the wealthy families of the district had their residences in this delightful suburb. It was so to speak, the aristocratic quarter. To the entertainment at these great houses the young superintendent [Carnegie] was invited. The young people were musical and we had musical evenings aplenty.71 This, of course, hardly begins to tell the story of the lavish spending among capitalist groups. It ranges all the way from the use of hundreds of millions for humanitarian purposes, the gratification of tastes by furnishing homes with millions of dollars worth of art and the purchasing of sumptuous yachts and royal estates, to the acquisition of fabulous dia¬ mond crowns and the squandering of tens, even hundreds, of thousands of dollars on an evening’s party.72 Although these may be extremes, the fact remains that the wealth of cap¬ italist societies tends to concentrate in the hands of business-

THE SOCIAL MATRIX

45

men; hence they live, on the whole, more extravagantly than any other group in the society. However, their style of life, in contrast to that of a feudal nobility, remains private and individualistic. Capital accumulation, moreover, especially in leading capitalist nations, is always provided for. The consumptive use of capital, as we have seen, is typical of nations in their rentier stage of evolution.

3 The Role of Religion In approaching the problems of the role of Christianity in capitalist development—a role which some students have considered primary—it seems necessary to distinguish its religious, ethical, and social components. Capitalism becomes involved, not particularly with religion per se, i.e., with its articles of faith and theology, but rather with variations in its ethical and social doctrines, its institutional structure and interests. Thomas Hobbes, who lived through the most turbu¬ lent days of the Cromwellian revolution, recognized this: I confess I know very few controversies amongst Christians, of points necessary to salvation. They are the questions of authority and power over the Church, or of profit, or of honour to Churchmen, that for the most part raise all the controversies. For what man is he, that will trouble himself and fall out with his neighbor for the saving of my soul, or the soul of any other than himself.1 Religious cravings, the propensity of the “soul” to “hunger and thirst,” are apparently not the creature of clergy or ritual, which probably serve chiefly to localize and to order the psychological state, and to provide the means of its develop¬ ment and satisfaction. It seems to follow, moreover, that re¬ ligion, to be effectual, must be experienced personally. In one of his variations, William James says: “It consists of the be¬ lief that there is an unseen order, and that our supreme good lies in harmoniously adjusting ourselves thereto. This belief and this adjustment are the religious attitude in the soul.”2 As the personality is a matter of direct concern, so also its 46

THE ROLE OF RELIGION

47

reflection must be individual and conscious. It is this necessity for conscious concern with religious life that opens the way for religious innovation and adoption of new approaches to achievement of “real results” from religion. “It makes,” to cite James again, “a tremendous emotional and practical difference to one whether one accepts the universe in the drab discolored way of stoic resignation to necessity, or with the passionate happiness of Christian saints.”3 Religion some¬ times becomes a last resort of human beings who, unlike lower animals, seem to be endowed with a capacity to ac¬ cumulate psychic burdens even to the point of personality derangement, in which case the social utility of religion may appear to be infinite. The point I seek to emphasize is that religion, broadly defined, seems to be a highly stable component of human ex¬ istence. In some societies all other institutional activity may be made subservient to it. Priests may thus exercise over¬ whelming authority. Social Inertia of the Church Religious ethics, on the other hand, tend to be determined by the necessities of the total social organization. Acceptance of the existing social order as right by the leaders of religious institutions inevitably defines it in the public mind as sacred, beneficent, and permanent. But while this attitude contri¬ butes to the stability of the social order and perhaps to social euphoria, it must also resist movements for social change. As Professor Knight tartly remarks: Religion opposed tooth and nail every phase of what we now view as progress, particularly the intellectual advance. In the second great movement of change, the position of religion difleied from that of the era chiefly in that rationalism had largely destroyed its power for obstruction. In general, it still sanctioned whatever was established, also conquest and enslavement. As soon as any issue in politics or economics became openly con¬ troversial, Christianity was used as an argument on both sides with equal assurance. And as soon as any change was definitely

CAPITALISM AS A SYSTEM

48

accomplished, the result became the state of affairs called for by the original Gospel, and a product of its teachings.4 It was especially this tendency of the Church to sanction and defend the ethical and social status quo that brought it into open conflict with emergent capitalism. Indeed, re¬ ligious institutions tend to become so enmeshed in the social order that any radical change in the latter involves a disrup¬ tion of the vested interests and power structure of the former. In resisting change, the established Church can ordinarily be relied upon to ally itself with the dominant secular interests. The Roman Catholic Church took form in, and accommodated itself principally to, feudal society. It was not unaffected by the early rise of capitalist society any more than feudalism itself remained intact; nevertheless its traditions, as they evolved in the culture of feudalism, tended to remain rela¬ tively stable. Not surprisingly, then, there was conflict all the way be¬ tween the Church and capitalist organization—in Venice, in the autonomous medieval cities, in Holland, and in Eng¬ land.5 In Venice, as we have seen, Roman Catholicism as a faith was hardly ever questioned, but the Church had to be studiously kept out of the affairs of state. This capitalist city did not intend to tolerate any division of secular power. In some other situations, however, the clergy was not so easily resisted. Florence, for example, was in perpetual discord with the Church; and, when national states began to take form, the institutions had eventually to be reformed. Says Professor Walker: “Capitalism in the late fifteenth century could by no means be made compatible with contemporary Catholicism, which was intertwined with the law, thought, needs, and property of feudalism; and which must inevitably go down if the social basis and presuppositions on which it had been built were destroyed by capitalism.”6 That struc¬ ture, indeed, never fully went down. It still nurtures anach¬ ronistic, anti-capitalist elements, besides being a pillar of opposition to social changes beyond capitalism.

THE ROLE OF RELIGION

49-

Religion: A Capitalist Problem Capitalism was thus confronted with a major problem: to mold a religious institution that would be compatible in ethics and social outlook with its own societal needs. It is of vital importance to understand the order of this relationship. To say that a new form of religious organization came into' being on its own initiative, and thus established a favorable situation for the genesis of capitalism, would be to invert and consequently misconstrue every significant attribute of capitalist society. Writing at a time (1667) when the Church in England was not yet fully accommodated to the new social organization, Bishop Thomas Sprat admonished doubtful prelates in these words: “[Men] must be instructed that it is. not the best service that can be done to Christianity to place its chief precepts so much out of the way as to make them unfit for men of business.”7 It was accordingly considered the duty of the Protestant Church to make its doctrines suitable and adjuvant to the society of businessmen. When the anach¬ ronistic economic orientation of Puritanism came into con¬ flict with the practices of the new economy, it was Puritanism which had reluctantly to give ground. “I would to God,” preached William Burten at Norwich (c. 1591),

I could

devise a way to make usurers turn again, but I fear me I shall not, for they which can cozen all laws will be no doubt too cunning for me.”8 What, fundamentally, did capitalism want of the Church? It was not particularly concerned with questions of creed; in this respect,

Roman Catholic variations would probably

have done as well as the Protestant. Venice flourished under the one and Holland under the other. Primarily, capitalist society wanted a church which could conceive of itself as national. This, of course, was the meaning of the rival patron saints of the capitalist cities, of which St. Mark and St. George were among the most famous. The exclusiveness of capitalist organization could not endure a power such as that which

CAPITALISM AS A SYSTEM

50

the Curia exercised over all the feudal world. To be at peace, then, the Church had to become socially and politically oriented to the aspirations of the capitalist state. Regarding the denouement of the Reformation, Professor Knight ob¬ serves:

“The religious result was the establishment of a

number of ‘little Catholicisms,’ primarily along state lines and under state control. In substance this applies to the Church

in countries

which

remained

officially

Catholic

(France and even Spain) as well as to England and other countries which accepted Protestantism.”9 Such nations as Spain, Portugal, and Italy, however, became followers in later capitalist developments. In both Holland and England the bourgeoisie separated the Church from Rome through the agency of the feudality, and in both cases the dominant sect of native Protestants quickly identified itself with interests of the nobility. Civil wars, therefore, with religion as the ostensible cause, were fought to bring both the national sect and feudalism into proper subordination to capitalist organizations.

In

that

major effort, Puritanism made its contribution. “By dividing the clergy and opposing the secular authorities, the advanced reformers created a situation in which it was difficult to en¬ force old rules.”10 Furthermore, the civil wars in these countries brought out another important religious desideratum of capitalist society: its need for religious tolerance.11 In listing the causes of the English Civil War, Thomas Hobbes wrote ruefully: “There were not a few, who in the beginning of the troubles were not discovered, but shortly after declared themselves for a liberty in religion, and those of different opinions one from another. Some of them, because they would have all congre¬ gations free and independent upon one another, were called Independents.”12 The “dictatorship of the righteous” which Calvin founded at Geneva could have had no beneficent place in a leading capitalist nation; and the persecution of English Puritans after the Restoration had logically to come to an

THE ROLE OF RELIGION

51

end.13 Christianity, like other ecumenical religions, tends to be intolerant; and Protestantism, perhaps no less than Catholicism, would righteously have banished every other sect from its locus of authority. Thus, concludes Professor Tawney: If [Puritanism] broke the discipline of the Church of Laud and the State of Strafford, it did so but as a step towards erecting a more rigorous discipline of its own. It would have been scan¬ dalized by economic individualism as much as by religious tolerance, and the broad outlines of its scheme of organization favored unrestricted liberty in matters of business as little as in the things of spirit.14 In Holland, as we have seen, the right wing of Calvinism, the Reformed Church, had to be constantly restrained in its tendency to limit religious freedom.15 Inasmuch as Protes¬ tantism had no effective support outside of the national com¬ munity, however, it had to conform to the social order which had brought it into being. As national power began to con¬ centrate more and more in a capitalist parliament, the Church became increasingly reconciled to the social and economic characteristics of capitalism. It became domesticated as well as nationalized. Tolerance: A Capitalist Attribute While religious intolerance might appear to enhance the power and prestige of a national religion, it severely injures and embarrasses the mercantile class in its economic trans¬ actions. On this matter the leading capitalists were decided. The Dutch ruling class, assisted by fierce nationalistic an¬ tagonism to Catholic Spain, the seat of Christian intolerance, had gone farthest toward the granting of religious freedom _as they had in the advancement of other typical traits of capitalist society—when the English began their struggle for toleration. Listing the reasons for Dutch commercial su¬ premacy, Sir Josiah Child mentioned “their toleration of different opinions in matters of religion: by reason of which

CAPITALISM AS A SYSTEM

52

many industrious people of other countries, that dissent from the established government of their churches, resort to them with their families and estates, and after a few years cohabita¬ tion with them, become of the same common interest.”10 The Church was very much weakened in its opposition to toler¬ ance, primarily because it could not appeal to the capitalist parliament for legislation against freedom of worship. It had, consequently, to accommodate to this important capitalist trait.17 Protestantism, it should be emphasized, did not of itself develop any distinctive form of social organization, unless one counts some tendency toward a theocracy.18 It was highly de¬ pendent upon the evolving social situation. Where it became allied to the feudal element of the changing culture, it tended to become intolerant, aristocratic, and economically static. But its proper milieu was capitalism. The ultimate Protes¬ tant ethic is the capitalist ethic, not vice versa; hence it could thrive only in the capitalist society which it served. This society had already evolved powerful social and ethical tradi¬ tions when the dissident sects began to flower.19 The desire for religious freedom was already strong in Catholic Venice; and Colbert recognized its positive value for France. Tolerance involved a still more significant fact: the sepa¬ ration of the clergy from the civil authority as a normal state of affairs. Indeed, we have seen that this separation had been an abiding desideratum of capitalism. It reached its apogee in the Constitution of the United States. Henri Pirenne ob¬ serves that “the spirit” of capitalist government is purely secular: “However religious and orthodox they might be, they claimed the right to prevent the Church from interfer¬ ing in the domain of temporal interests.”20 The exclusion of the Church from the major body of governmental authority thus limited its use of the secular power as an instrument of intolerance. In summary, then, capitalist society tends to insist upon a national, tolerant, non-political church—which, however,

THE ROLE OF RELIGION

53

does not mean irreligion among capitalists. Roman Cathol¬ icism could not contentedly meet these requirements; Prot¬ estantism arose in the capitalist milieu and accommodated to them. Protestantism and Capitalism Indeed, Protestantism became so tightly meshed with the social and economic interests of rising capitalism that many authorities have thought it to be the determining force in the movement. No one, of course, would hold that nineteenth or twentieth century capitalism turns upon the teachings of the Protestant church; the period usually selected to establish the point is the sixteenth or seventeenth centuries. Before drawing any conclusions on this point, three major consid¬ erations must be taken into account: (1) In the hostilities which resulted in the creation of the first national states, Protestantism almost exclusively provided the ideological drive. Preachers and theologians became not only the philosophers and “social scientists” of the movement, but also the principal propagandists. The Calvinistic churches of Holland and England, during the conflict between those countries and the Catholic-feudalist powers, thus assumed an importance out of all proportion to their real role in the formation of capitalist nations. To accomplish similar ends, the American and French revolutionists relied very much less upon religion. During the period in question, even a socialist revolution, if that is conceivable, would have had its morale provided by preachers and couched in religious doc¬ trine. Therefore, the state of learning and the available means of propaganda and persuasion should be taken into account when the influence of religious drives and motives is being evaluated. We may, for instance, expect a capitalist to be a Protes¬ tant without assuming that his Protestantism caused his “cap¬ italist spirit.” What else, indeed, could a man be—unless he was a Jew—in the Holland or England of the late sixteenth

CAPITALISM AS A SYSTEM

54

or seventeenth century if he were interested in trade or in¬ dustry or science? Roman Catholic France and Spain had driven many of their skilled workers, traders, and scientists all over Europe; they were accepted with open arms in Hol¬ land—where even the nobility, though not the lower agri¬ cultural classes, were Protestant—in England, and in north German cities. In the revolutionary action against both the Spanish-Catholic power and domestic feudalism, capitalists identified their religion with their trade; they defended the one as passionately as they did the other. We should expect, consequently, to find some direct correlation between Protes¬ tantism and all the major tendencies of the contemporary cap¬ italist society. (2) Secondly, the elementary association of Protestantism and capitalist economy should be sought not particularly in domestic relations, with its trader and worker ethics, but in foreign relations, which involved decisive operations of the ruling capitalist class. The separation of church and state did not mean that capitalist society was indifferent to religion as a sanction and support. It meant essentially that the secular order desired to be protected from involvement in purely religious matters such as disputes among sects, from being saddled with contrary religious norms, and from being made the instrument for spreading some controversial dogma among the people. Capitalist society, like all societies according to their peculiar religion, seeks the approval of God. The Protestant-Catholic conflict was crucially an international conflict. The adven¬ turous Dutch and English foreign traders of the seventeenth century seemed to need God’s blessings on their enterprises as acutely as any crusader. Significantly, then, Protestantism became nationalistic and mercantilistic. It is this easy and natural mercantilization of Christianity which appears to con¬ stitute the major relationship between religion and capital¬ ism.21 As Professor Wright concludes: “A close bond devel¬ oped between religion and trade. By and large, the clergy

THE ROLE OF RELIGION

55

of Jacobean England were good mercantilists. The policies they advocated were those that appealed to the men of com¬ merce.”22 In foreign relations, i.e., commercial expansion and antag¬ onism toward “papism,” we observe Protestant churchmen working directly and assiduously in the cause of capitalism. Even more than Benjamin Franklin or Richard Baxter, it seems, the Reverend Richard Hakluyt (1552-1616), indefati¬ gable advocate and geographer of English expansion, evinced the capitalist spirit. In addition to such major ecclesiastics as Samuel Purchase and Richard Eburne, who collected and or¬ ganized geographical information or published imperialist tracts, numberless chaplains who accompanied the trading and colonizing ships,

stimulating and encouraging their

crews, may be thought of as having made basic contributions to capitalist development. The destiny which Englishmen believed to be theirs in their conquest of the world gained the blessings of “God Himself”; thus capitalist expansion ap¬ peared to be a religious duty: “Merchants and mariners sincerely believed that they were the instruments of Provi¬ dence.”23 The relationship here seems clear: the secular influence in foreign commerce was older than Protestantism. In my view, its political organization was the source of early capi¬ talism. But now—even as the nationalized Catholicism of Venice countenanced and supported Venetian trade

the

English and Dutch acquired an exclusive and largely con¬ vinced Church which confirmed their capitalist practices and aspirations. This was a later development of the original ideological desideratum. (3) The third consideration is that of the domestic role of Protestantism. The Church is here concerned not so much with the “spirit of capitalism” as with personality problems of individuals in the capitalist milieu. Again, the fact that preachers should think of themselves as called upon to sanc¬ tion economic practices is partly due to the necessarily broad

CAPITALISM AS A SYSTEM

56

scope of sermons at that time. Their important service to capitalist society was the translation into religious ethics of certain social compulsives applying chiefly to the small busi¬ nessman and workers:

occupation as a divine duty, self-

discipline, frugality, order and social control. The haute bourgeoisie needed support for the emergent social system and for its demands upon the lower classes, not “directions.” “As the religious functions of certain na¬ tional cultures,” Professor Niebuhr says in point:

“The

Protestant sects have supported the authority of the prevail¬ ing governments, and rights of the dominant classes and the current social standards. . . . They enforced the duty of ■obedience to the laws and to accepted moral standards through the addition of religious sanctions.”24 The great leaders of capitalist society were mercantilists who did not wait upon the clergy to originate their ethics, but rather studied closely the practices which proved to have been suc¬ cessful in societies of former leaders of capitalist culture, and then held to them with such tenacity that the very prestige of local preachers tended to rise as they were able correctly to interpret and promulgate them. In regard to one important trait of capitalism, Henri See, among others, thinks that Protestantism favored the accumulation of capital;25 yet, clearly, Protestantism of itself had no immanent need of capital. I may venture a brief schematic restatement of the rela¬ tionship between religion and capitalism. Religious and economic needs are two major concerns in presumably all societies. In some societies, especially the simpler ones, they are hardly separable. Yet the priesthood has been an ancient and continuing specialty. Ordinarily, the religious institu¬ tion is powerfully based in tradition, and therefore does not change readily. The material ways of life are much more subject to innovation. It was, indeed, in the latter area, because of unusual circumstances in the early European Middle Ages, that radical change first took place. But the

THE ROLE OF RELIGION

57

reorganization of the economic order, which had already gained virtually irreversible stability by the sixteenth century, called also for major revisions in its lagging religious comple¬ ment. Not unnaturally, only a section of the priesthood broke away from the traditional Church, and it was encouraged and supported financially by the great merchants.26 Protes¬ tantism remained fundamentally concerned with the religious life of the people. But its only hospitable environment was the great capitalist cities: Antwerp, London, Amsterdam, the free cities of northern Germany, and the “burgher areas” of Switzerland.27 It was, then, in a capitalist milieu that Protestantism developed its compatible religious ethic. The essentially opposite approach by Max Weber and his followers may be briefly stated. Weber does not deal primarily with the elements of capitalist society and their peculiar organization, but with the capitalist spirit as it affects indi¬ viduals within any society or nation—whether predominantly Protestant or Catholic.

His approach is thus essentially

psychological. At the very opening of his famous essay, the hypothesis is suggested: A glance at the occupational statistics of any country of mixed religious composition brings to light with remarkable frequency ... the fact that business leaders and owners of capital, as well as the higher grades of skilled labor, and even more the higher technically and commercially trained personnel of modern enter¬ prises, are overwhelmingly Protestant.28 The reason for this, he concludes, lies chiefly in the fact that “Puritanism carries the ethos of the rational organization of capital and labor.”29 Protestant asceticism restricted indi¬ vidual consumption and thus provided the basis of capital accumulation;30 it defined labor as a divine duty and thus made available to the capitalist an “unusually industrious” class of workmen; and it bequeathed to future generations of capitalists “an amazingly good conscience in the acquisition of money.”31 It seems clear that Weber proposes to make

CAPITALISM AS A SYSTEM

58

Protestantism, and especially Puritanism, the independent variable in the rise of capitalism. Of the varied arguments that have been advanced countering this thesis, three are perhaps cardinal: (a) Weber’s assumption that capitalism was essentially coeval with Calvinism; (b) his insufficient consid¬ eration of many religious tendencies of Calvinism which have been rejected in capitalist society, and thus de-emphasizing the fact that Protestantism had to conform and be assimilated; and (c) the implication that any people who learned and put into practice the Calvinistic Protestant ethic—the Egyptians let us say—would be ipso facto on its way to becoming a viable capitalist nation.32 There seems to be little reason to believe that Protestantism would ever have arisen independently of the capitalist move¬ ment. There was no Protestantism of significance in the Orthodox Catholic world, where there were no prior capitalist cities. Moreover, long before the twentieth-century attempts to conceive of Protestantism as an independent development in which we might look for the traits of capitalism, social thinkers had recognized its adaptability. For instance, Baron de Montesquieu had already said: In the countries themselves where the Protestant religion be¬ came established, the revolutions were made pursuant to the several plans of political government. Luther having great princes on his side would never have been able to make them relish an ecclesiastical authority that had no exterior preeminence; while Calvin, having to do with people who lived under republican governments, or with obscure citizens in monarchies, might very well avoid establishing dignities and preferments.33 For capitalism the significant fact was that either of these theologies—but

particularly

Calvinism—could

far

more

easily be accommodated to nationalistic and individualistic purposes

than

Roman

Catholicism.34

This

major

end

achieved, the Church had virtually no other alternative but to sanction the ethics and morality of the society.35 It is well known that the spread of Lutheranism was checked in south Germany especially because of the peculiar dependence of

I THE ROLE OF RELIGION

59

the cities in that area upon the religious status quo. And this dependence again was due largely to the imbalance of capital¬ ist development in those cities. Here the great Church finan¬ ciers were dominant. The spirit of enterprise, symbolized by the house of Jacob Fugger and its financial interests in the con¬ tinuance of the old religion, outweighed the capitalist spirit which is nationalistic and devoted to more diverse interests of a community of capitalists. Accordingly, it has been pointed out: It is very doubtful whether Catholicism would have been able to retain its hold over southern Germany if the leading towns in this area had not sided with the Catholic Emperor. Their policy contrasted strikingly with that of the free cities of northern Germany, which had always adopted a more indifferent attitude towards the Empire. The motives underlying this contrast were mainly economic in character, for the southern towns regarded the large markets of the non-German Habsburg possessions as being vitally important for their commercial development, par¬ ticularly since the conquest of the Near East by the Turks had blocked up the traditional trade routes and combined with the discoveries to shift the centre of world trade towards the Atlantic.36 In the free cities, in Holland, and in England it was not especially the great financial capitalists who determined domestic policy; it was rather the nationalistic councils of merchants who evolved policies for the disinterested exploita¬ tion of the Catholic world and who consequently supported the Protestant Reformation. The support, it is true, was reciprocal; but it should be emphasized that it was especially in the character of the parliaments and not in the peculiar organization of the churches that capitalist traits were mani¬ fested.

The Secular Society The outstanding ideological contribution of capitalism to the welfare of humanity is perhaps its emphatic demonstra¬ tion of the social utility of a secularized society; and it appears to be a major apprehension that, in the post-capitalist world.

CAPITALISM AS A SYSTEM

60

this secular tradition may be impaired or lost. The economic interests of the ruling capitalist class could be counted upon to keep both Catholics and Protestants from theocratizing the society; but a world oriented toward human ideals—human welfare—can conceivably come under a new influence of re¬ ligious institutions with their persistent claims to possession of the keys to the arcanum of human happiness. Church¬ men ordinarily tend to feel that the Great Book has all the answers not only to questions concerning spiritual life, but also to those of social organization. Social engineering should thus be dependent upon these answers. In a reference to this proclivity, Troeltsch observes: Men think that with the social, that is the ‘sociological’ nature of the Church, they have already solved ‘social’ problems, that is, the problems which belong to the life of the society and the state. They think that if they form an organization which expresses the love which flows forth from God and re¬ turns to Him once more, they are also meeting the needs of the social groups which make up humanity as a whole.37 The post-capitalist world, to be sure, will present social situations so vastly different from those of the past that there might be sufficient room for an insistence upon religious ideals without a suffusion of secular functions. Already, in such futuristic organization as the United Nations, we may observe the neutralizing effects of the confluence of diverse religious sects upon the ritualistic expressions of each. On the other hand, the nature of the religious force may be gleaned from Thornton Merriman’s conclusion that “unless it is possible in some degree to embody its ideals in an economic structure, Christianity is not entitled to serious consideration as a social ethic, since it would then fail modern man at the point of his most serious confusion.”38 Future societies, at any rate, will be in a very much better position than those of pre-capitalist times to circumscribe the assumed omniscient authority of religious leaders.

4 Moral Aspects (I) The Concept It is in the morality of capitalism that genuine social forces are observed coming into conflict with the teachings of Chris¬ tianity.1 Richard Baxter, whose famous “directions” are usu¬ ally taken as exemplary of the nature of the influence of Puritanism upon capitalism, sometimes showed himself to be very much at variance with the inherent morality of capi¬ talists. In an address to a Cromwellian Parliament, he ap¬ pealed innocently: “If honesty and Godliness be the things you aim at, you will find my Principles suited to your ends.”2 In such works as A Holy Commonwealth, we recognize how nearly Utopian were the churchmen when they attempted to think creatively in broad terms of the social ethos. Max Weber might have written a more convincing essay—though one not in accord with his controlling purpose vis-a-vis Karl Marx—from the standpoint of the capitalist conquest of religion.3 Even by his own admission, the “spirit of capi¬ talism” was never the primary concern of any sect.4 Re¬ ligion, to note again, was fundamentally preoccupied with the means of saving men’s souls, yet it was precisely at this point that capitalist morality constrained it to compromise. In this interrelationship, it was the traditional religious ethic which had to be redefined. At the outset, it should be recognized that capitalist morality is not a sociopathological aberration of the system calling for corrective treatment. It is, in reality, an indwell¬ ing attribute and thus quite normal. Nor should we think of 61

CAPITALISM AS A SYSTEM

62

it as common to all men. It may be possible, no doubt, to discover societies with cultural features more sublime or, for that matter, more depraved than those of capitalism, but this fact and its significance do not presently concern us. Judged by the norms of Christianity, capitalist man tends to be immoral, not amoral. He is conscious of a pure Christian ethic, but ordinarily exploits this ethic strategically in pur¬ suance of major material interests. His morality, therefore, may be thought of as opportunistic and correlated with the economic expedients of the nation. As with other significant traits, we shall have to look for the characteristic expression of this attribute in the leading nations of the system. Capitalist morality seems to have two major aspects: the one designed in the interest of its foreign transactions and the other reserved for domestic relationships. In the latter, furthermore, there is distinguishable an industrial or commercial morality, and a personal one. As we should expect, capitalist morality comes into greatest conflict with Christian ethics in its foreign relations. At home, its artifices tend to be modified to conform loosely to the “rules of the game” in business; but these same standards are ordinarily assumed to be nonoperative in interpersonal relations. In foreign relations, the severity with which capitalist morality may be applied to different peoples depends largely upon the position which they occupy in the structure of the capitalist system. In External Relations In my empirical discussion of the rise of capitalist societies, I have frequently referred to the self-righteous acts of leading capitalist communities toward foreign countries. The mach¬ inations of the Venetians in converting the Fourth Crusade to national ends was a colossal achievement of this kind. In order to forestall Pope Innocent II’s objection to their plan of invading a Christian country, the Venetians—whose pre¬ vious role, we may recollect, was that of covenanted carriers

MORAL ASPECTS (I)

63

for the men of the Cross—in the person of their Doge, actu¬ ally took the sacred Crusader’s vow. This act, to be sure, could by no means have transformed businessmen into a feudal religious group; indeed, they did not intend that it should have such an effect.5 From that great deception, consummated at mass in the Doge’s chapel in 1202, to the fall of Constantinople in 1204, intrigue followed intrigue under the penumbra of a hal¬ lowed mission. The rewards proved fabulous; and apparently the Pope eventually condoned the accomplished fact.6 Pre¬ viously, it is true, all sorts of invasions and wars had taken place and the justice of the Crusaders’ purpose may itself be questioned; but here was a new type of exploitation which consciously employed religion to broaden trade relations and to organize foreign territory as permanent economic ad¬ juncts to the home community. The immoral nature of this type of enterprise is not so apparent in the next great capitalist venture upon the outer world. The gradual conquest by the Portuguese of the west coast of Africa had the unreserved sanction of the Pope. This was ostensibly a Christian versus a non-Christian rela¬ tionship; hence the Church looked upon the acquisition of territory and plunder, in both of which it participated, as accretions to the glory of God. The movement reached its historic climax in the settlement of the Spanish-Portuguese argument over the partition of the non-European world between themselves. “The last bull on these matters,” writes Professor Bourne, “is that of Leo X on November 3, 1514. During the year he had received a glowing account of Portu¬ gal’s eastern discoveries and a splendid embassy from King Emmanuel with presents of eastern products. In response he issued a bull filling 45 printed pages which included and con¬ firmed all the previous bulls giving Portugal rights in the East.”7 The indispensable presents frequently had a levelling effect on the Curia’s moral judgments. Even so, the Portuguese and Spaniards were but limping

CAPITALISM AS A SYSTEM

64

capitalists. Although their unscrupulousness and cruelty in trade, conquests, and exploitation far exceeded anything that capitalist society had hitherto known, their feudo-religious outlook diverted their strict business transactions. I need not recount in detad their West Indian and mainland atrocities among backward peoples. The following is a pungent sug¬ gestion from a passage by Hobbes about the Spanish counter¬ part: In Peru, when Atabalipa [Atahualpa] was king, the friar told him that Christ, being King of all the world, had given the disposing of all the kingdom therein to the Pope, and that the Pope had given Peru to the Roman Emperor Charles the Fifth, and required Atabalipa to resign it; and for refusing it, seized upon his person by the Spanish army there present, and mur¬ dered him. You see by this how much they claim, when they have power to make it good.8 The Church itself was thus drawn actively into the vortex of capitalist immorality;

a fact characteristic of modern

Christianity regardless of sect. For about a century after the partition, the purely capitalist cities assumed a largely secondary role in the exploitation of native

peoples;

yet

their

profits

though

Spain

and

Portugal were of major significance in the development of capitalism. When Holland and England had reached matur¬ ity largely by means of this very trade, they began to ques¬ tion the justice of the Spanish-Portuguese monopoly. Hugo Grotius, to whom I have already referred, became the in¬ tellectual champion of the movement; and, since the inter¬ ests and authority of the Pope were involved, he dwelt particularly on the morality of the act. The following passage emphasizes clearly that rising capitalism was perfectly con¬ scious of the nature of right and wrong: Now, [said Grotius] these Indians of the East, on the arrival of the Portuguese, although some of them were idolators, and some Mohammedans, and therefore sunk in grievous sin, had none the less perfect public and private ownership of their goods and possessions, from which they could not be dis-

MORAL ASPECTS (I)

65

possessed without just cause. . . . Surely it is a heresy to believe that infidels are not masters of their own property; consequently, to take from them their possessions on account of their religious belief is no less theft and robbery than it would be in the case of Christians. ... Nor are the East Indians stupid and un¬ thinking; on the contrary they are intelligent and shrewd, so that a pretext for subduing them on the ground of their character could not be sustained. Such a pretext on its very face is an in¬ justice. Wherefore we should be most miserable sinners if we should attempt to extend the religion of Jesus Christ by such means. Nor should we be their lawful rulers but, on the con¬ trary, we should be committing great robberies, and be com¬ pelled to make restitution as unjust conquerors and invaders. There must be sent to them as preachers, good men to convert them to God by their teaching and example; not men who will oppress them, despoil them, subdue and proselytize them, and “make them twofold more the children of hell than themselves.”9 Grotius thus employed the Christian ethic against those who reputedly professed it. And yet, in their transactions with the natives, the Portuguese were mild and yielding compared to their successors, the methodical, nationalistic Dutch in whose interests the philosopher was writing. The Dutch cast out the Portuguese as parasites, only to impose a fiercer and more complete system of exploitation than the East had ever experienced. And the Reformed Church looked on with consummate pride, seeing in the development a factor con¬ tributing to the decay of Catholic power in Europe. The glistening soul of the Dutch, at any rate, was impervious to humanitarian or ethical reasoning when the majesty of their little country came to depend so much upon its capitalist morality. As Miriam Beard observes in point: The true, and appalling, evils perpetrated by the Dutch capitalists were very far away—in the colonies, on the West Indian and Javanese plantations, in the slave-capturing and slave¬ driving trades. And the Dutch stockholders, kept content by the regularity of East India Company dividends, averaging 18 percent over a period of 198 years, were not disposed to look half a world away for muckraking sensations.10 All the great capitalist powers have had, and of necessity must still have, this kind of record. One of the most subtle,

66

CAPITALISM AS A SYSTEM

and from the point of view of the Christian ethic, most in¬ sidious aspects of this morality is its propagation of, and dependence upon, racial prejudice when capitalist design is to keep a people exploitable. From the Spanish justification of their predacity among the Indians by the theory that the latter were degenerate and soulless, hence by nature adapt¬ able to sub-human uses, to the more refined, modern, cul¬ tural theories of racial inferiority, capitalism has had to abandon the brotherhood emphasis of Christianity in favor of the prosperity of the system. We should not expect to find, therefore, the ruling class of leading capitalist nations real¬ istically advocating “human rights’’ for the peoples of the world. And, often enough, immorality in this regard is com¬ pounded by hypocrisy; for, verbalizing the Christian norms, the leader nations usually insist that it is their paramount intention to establish precisely such norms. The point may be illustrated by a situation developing in our contemporary, universalistic council of nations (which, incidentally, harbors certain democratic germs incompatible with capitalistic values.) On April 1, 1953, almost at the conclusion of the drafting of a “covenant on human rights” in the United Nations Commission on Human Rights at Geneva, the United States, through its Secretary of State, declared: “The present Administration intends to encourage the promotion everywhere of human rights and individual freedoms, but to favor methods of persuasion, education, and example rather than formal undertakings.” This was doubtless intended to leave matters about where they stood; and we shall presently see how, by inference, Machiavelli had already suggested that, under such circum¬ stances, it would be discreet for the Secretary to add that his Administration is interested in “spreading throughout the world goals of human liberty to which this nation has been dedicated since its inception.” Commenting upon this diplomacy, Mrs. Eleanor Roosevelt whose immediate family tradition seems hardly representa-

MORAL ASPECTS (I)

67

tive of ruling-class morality in the United States and who previously represented this country on the Commission— pointed out the contradictions between the Administration’s preachments and practice: “We use high sounding phrases but we are afraid. . . . The representatives of many other nations will feel lost and perhaps a little contemptuous of our fears. We are not willing to sign anything that binds us legally in the field of human rights and freedoms.”11 Before 1914, Russia was looked upon as one of the prized areas of capitalist exploitation. It remained semicolonial in spite of many attempts to “westernize” it. Nevertheless, even before a stable capitalist class could assume power, a viable democratic movement had arisen there; it began actively to seek civil and political rights similar to those already enjoyed by Englishmen and the main body of American citizens. The grant of these rights under such conditions would, of course, have tended to be restrictive of both foreign and domestic capitalist expansion. Some thinkers in the leading capitalist nations felt, perhaps naively, that their parliaments should use their influence in the interest of democracy for the Rus¬ sian people. Thus, in 1909, J. A. Hobson derided capitalist morality in England much as Mrs. Roosevelt did with respect to the United States. What is our present position as a nation towards such a na¬ tion as the Russian? Individuals, perhaps a majority of the in¬ dividuals of our nation, have some genuine sympathy with the Russian people in their struggle for self-government: there is even what must be called a national sentiment in this country favourable to that cause. But we are told that our State and our Government, the only instruments by which this general wish of the people could exercise any direct influence over the Russian struggle, have neither an obligation nor a right to inter¬ fere, even to the extent of withholding voluntary manifestations of good will towards a government which is one of criminal op¬ pression.12 It is not that intelligent people in leading nations find it difficult to unravel the paradoxes of capitalist morality; it is

CAPITALISM AS A SYSTEM

68

that they can neither effectively insist upon its insincerity nor devise efficient means of suppressing it. In 1902, W. T. Stead said boldly of Britain, his own country: “We are as piratical as the worst of our neighbors, but we alone make broad our phylacteries while we are plundering, and pray while we prey.”13 Indeed, overt piracy has had an important place in the annals of capitalism as a simple expansion of the drive for profits.14 Thus, many capitalist cities and nations— Genoa, Pisa, the Hanse, Holland, England—found undis¬ guised piracy lucrative as a supplement to their commerce, especially when they were youthful and had no great trade routes of their own to protect. But as the capitalist society matures, organized predacity tends to be eschewed in favor of contractual ingenuity; against weaker and less sophisticated peoples the capitalist leaders found that “legal” transactions were as profitable as physical aggression and less costly and troublesome to use. It is general knowledge that a large portion of the wealth and territory of the world has come into the hands of capi¬ talist nations by such apparently legitimate means. In a his¬ torical note on the arrival of the first British commercial ambassador to the Emperor of China in 1794, David Macpherson had this to say about the presents he carried to Peking: “No automata were sent, though such articles used to be so much fancied in China that they have been sent thither from this country to the amount of about a million sterling. It was believed the Chinese were satiated with the sight of such use¬ less trinkets.”15 Before many backward peoples were able to discover, however, that they were trading their valuables for “glass beads” and other trinkets they were usually sucked dry.16 The Treaty The paradoxes of capitalist morality probably reach their culmination in the subtleties of the international treaty, the traditional instrument of contractual relations in the

MORAL ASPECTS (I)

69

capitalist system. No other social system has employed it so profusely or with such telling effect. Initiative in the con¬ clusion of treaties moves from stronger to weaker nations, or, regardless of existing power differentials, from capitalists to non-capitalist peoples. So far as capitalist morality is concerned, the treaty is ideal because it carries the force of a voluntary engagement, the integrity of which will be pro¬ tected as a matter of course. The treaty has the added virtue that it has given rise to the peculiarly capitalist institution of diplomacy. The greatest diplomatic victories ordinarily in¬ volve the most skillful use of craft and deception in inter¬ national negotiations. Commercially—and it is in commercial relations that the military establishment finds its raison d’etre—the treaty may be used in agreements between two great capitalist powers, in which case each signatory understands perfectly the selfish intentions of the other and the elements of danger residing in certain types of transactions. A treaty also may be negoti¬ ated between a greater and a lesser power (normally to the implicit advantage of the greater); or it may be imposed by a capitalist power upon peoples in various states of pre-capitalist culture, and so on. The treaty may be secret in whole or in part, so that interested parties may be further misled. The wording of a treaty, as far as possible—and especially in its preamble—usually verbalizes the Christian ethic: in earlier times the brotherhood of the parties under God was stressed; more recently, “friendship.” In an up-to-date statement on the place of the treaty in the capitalist system, Austin T. Foster of the Socony-Vacuum Oil Company says: A treaty of friendship and commerce is historically the basic document—it might be called the “Magna Carta —which pro¬ tects you in many of those rights which are fundamental in your operations in a foreign country. In much the same way that the Magna Carta was intended to and did protect the people of Eng¬ land from the arbitrary exercise of power by the government, a treaty of friendship and commerce is the traditional medium

CAPITALISM AS A SYSTEM

70

for the protection of nationals of the United States from the arbitrary exercise of power by the government of a foreign country.17 This assurance fairly indicates the fate which awaits weak countries that have signed treaties with great capitalist na¬ tions. Daniel Defoe, in an early eighteenth century essay to which we have previously referred, helps us to understand further the nature of these capitalist instruments. Demanding that Britain bring Spain to its knees for breach of treaty, he wrote: “All breaches of treaties are breaches of friend¬ ship . . . and the breach of friendship between nations is a kind of declaring war in many respects. And nothing but mere force and invasion can be a more manifest breach of friendship than stopping the intercourse and correspondence of merchants.”18 Since treaties are almost always negotiated in favor of the more powerful nation—occasionally a weak country, situated within a zone of conflict between great powers, may secure some apparent contractual advantage from one or the other of them—there seldom arises any need of inferior nations to insist upon the performance of treaties.19 In any case, the means of coercion are seldom available to them. Thus, the more backward the people, the more unconscionable the de¬ mands upon them by the capitalist powers. Negotiating the Treaty Some of the most

profitable—and

immoral—capitalist

treaties have been made with great semi-feudal or feudal countries. In approaching a feudal monarch, capitalist traders usually introduce themselves as friendly missionaries of their own supposedly feudal lord. The Dutch and English were especially adept at this deception. In 1555, for example, the merchants of the Russia Company carried letters from King Philip and Queen Mary to the Russian Czar, who enter¬ tained them as if they were, in fact, the passive instruments of feudal relations. Then he innocently granted them a capitalist

MORAL ASPECTS (I)

71

commercial treaty that amounted virtually to a signing away of his empire. Among other things, he promised to protect the merchants in trading freely “at all times, with their ships, merchandise, servants, etc. into any part of his domains without any safe conduct or license being required of them.” Beyond this, he bound his successors to do the same. The ill-gotten early gains of Spain and Portugal were looked upon as succulent prizes in the heroic age of capital¬ ism. After the Restoration, the English capitalists used the feudalistic marriage of Charles II to Catherine of Braganza to extract as a dowry strategic Portuguese territory and trading privileges. Says James A. Williamson: “It was the first royal marriage deliberately planned to promote national rather than dynastic interests.”20 Moreover, in a form of imperialistic strategy which has become currently dominant, England engaged to defend Portugal and her colonial posses¬ sions—an early version of the Monroe Doctrine—against any encroachments. Charles II is quoted as saying: ‘ The prin¬ cipal advantages we propose to ourself by this entire con¬ junction with Portugal are the advancement of the trade of this nation and the enlargement of our territories and dominions.”21 The later Methuen Treaty

(1703), which

consigned Portugal largely to vine cultivation, opened its doors to English manufacturers, and drained its precious metals, was sufficient to elicit Defoe’s contemptuous epithet, “the stupid Portuguese.”

“The commercial classes,”

says

Hewins, “regarded the Methuen Treaty as one of the highest achievements of enlightened statesmanship. Ten years later (1713), in the Treaty of Utiecht, the capitalist principle of pyramiding exploitation was even more clearly stated. In this agreement with Spain, Britain stipu¬ lated: Neither the Catholic king, nor any of his heirs and successors, shall sell, yield, pawn, transfer, or by any means, or under any name, alienate from them and the crown of Spain, to tne F rencn, or to any other nation whatsoever any lands, dominions, oi teiii-

CAPITALISM AS A SYSTEM

72

lories, belonging to Spain in America: on the contrary, that the Spanish dominions there may be preserved whole and entire, the Queen of Great Britain engages to endeavour to give assistance to the Spaniards, that the ancient limits of their dominions in the West-Indies be restored and settled as they stood in time of the Catholic king, Charles II. The Treaty also granted Britain the right to supply 4,800 slaves yearly for thirty years to the Spanish domains. All this, to

be

sure,

was

looked

upon

in

England

as

brilliant

diplomacy. Before the Second World War, whenever the great capital¬ ist powers found themselves at loggerheads over rights to exploit backward peoples, the issue was frequently settled by the threat of war. But as time went on, they tended in¬ creasingly to adopt another tactic for settling their quarrels: they would enter into some form of monopolistic agreement against their prostrate hosts. The imperialist nations tend thus to come together in alliance against such unusually intractable peoples as those of China, Egypt, Iran, IndoChina, and Indonesia. The treaty of

1619 between

the

Dutch and English is an early illustration of this character¬ istic of the capitalist moral code. These two groups were contending for commercial position in the East Indies with such ferocity that they began to sense the possibility of mutual extermination; whereupon the following articles of peace—a peace which indeed was short-lived—were agreed to. The treaty is worth quoting at some length as the first inter¬ national cartel arrangement between two giant corporations. I. There shall be, from the date hereof, an amnesty and oblivion of all offences and excesses committed in the East-Indies by either party; and in consequence thereof, the prisoners, ships, and merchandize, of both parties, shall be freely delivered up and restored. II. All the officers and servants of both companies shall afford all possible aid and friendship to each other, as between friends and neighbors so nearly allied; and if any of either party shall happen to be in distress at sea, the people of the other party shall afford them all possible succour.

MORAL ASPECTS (I)

73

III. Commerce in the East-Indies shall be absolutely free for both companies; who may trade with and employ, on their re¬ spective separate accounts, such fund and capital as they shall judge proper. IV. For the common benefit of commerce in India, both companies shall endeavour to bring about a reduction of the duties there, as well as of gifts and presents. V. The like endeavours shall be used by both companies in India to reduce the prices of merchandize there. And as to the sale of India commodities in the countries of both the contract¬ ing parties, a certain price shall be mutually agreed on, below which neither company shall sell the same. VI. To prevent all jealousies between the two companies, the commissioners of both companies shall fix a certain moderate price for the purchase of pepper at Bantam, and other places in Java-Major; which shall be equally divided between the two companies. VII. The English East-India company shall freely enjoy the traffic at Palicate; and bear half the expense of the fort and garrison there. VIII. In the Molucco isles, Banda, and Amboyna, commerce shall be so regulated by common consent, that the English com¬ pany shall enjoy the third part of it, both for import and export; the Dutch company the other two thirds thereof. IX. And for this purpose the factors of both companies shall buy the merchandize at the current prices there, and shall divide them by lot, in due proportion, between both companies. X. And as so remote and so important a commerce cannot be protected without a strong power, 20 ships of war shall be fur¬ nished for that end, 10 by each company, and each ship from 600 to 800 tons burden, carrying 150 men, and 30 pieces of cannon each, besides other needful ammunition; which cannon shall carry balls of 8 to 18 pounds weight. XXVII. Neither company shall forestall or exclude the other from any part of the Indies, by fortifications, or by contracts here¬ after to be made; but all the commerce shall be free and common to both companies in every part of the Indies. XXVIII. No person, not free of either country, shall enjoy the benefit of this treaty, unless by the consent of both companies. And if any subject of the king, or of the States, shall hereafter invade the privileges of either company, in that case both com¬ panies shall jointly and separately oppose all invaders of this trade, and all other companies that may hereafter be set up during the term of this treaty. XXIX. In case of the death of the factors, or other disasters

CAPITALISM AS A SYSTEM

74

happening to either company, their property shall be carefully preserved by the factors of the other company for the proprietors. XXX. This treaty shall continue for twenty years; during which, any disputes which cannot be determined by the council in India, or by the companies in Europe, shall be submitted to his majesty and the states general, who will condescend to settle them.23 Such cartelistic agreements as this tend to be reinforced when the host country is strong enough to take advantage of rivalry between the exploiting powers.24 When the host is unsophisticated and weak,

however,

the rapacity of the

foreigners ordinarily breaks through the syndicate in favor of individual control of the resources. Capitalist morality is thus correlated with the order of power in the system, and the weaker the people, the more ravaging the results. In this regard, Professor Hobson observes: If the attitude of States towards the performance of treaty obligations indicates a feeble conception of moral personality, what shall we say of international morality as indicated by the relations between stronger and weaker, advanced and backward States? Stronger nations have everywhere and always been liable to invade, subdue, and impose their power upon weaker nations. They have almost always acted so, because they have deemed it advantageous to their own national interests to do so. But the fact that they have generally, in modern times at any rate, pre¬ tended and persuaded themselves that their forcible encroach¬ ment is either an act of reprisal or a preventive attack, indicates some sense of a “right” to independence on the part of the weaker nation, or at any rate some sense that other nations may regard the forcible act as an infringement of a right.25 Non-Reciprocating Morality The purely nationalistic nature of capitalist morality may be conveniently illustrated by the Congressional debates in the United States relative to the passage of the Webb-Pomerene Bill, at the termination of the First World War, to allow the formation of combinations and monopolies of American businessmen in foreign trade. This was a time when

MORAL ASPECTS (I)

75

the “mechanisms” of the capitalist system were assumed to be still vigorously functioning, and when the moment of United States leadership seemed unquestionably at hand. American capitalists, not realizing how weakened the great European powers had become, began to flex their muscles for major contests in world markets. In a speech on the bill that was applauded in the House, Representative Little said: Let our citizens abroad take advantage of all local conditions there and meet all foreigners on an equality. It will undoubtedly add to our foreign commerce, give employment to more people at home, and cannot injure any American. Whatever we do at home, whatever laws we make—and we must enforce them all— are not made for the benefit of Europeans or Chinamen. We must present a united front against foreign competition in foreign markets. This is a sound and patriotic principle.26 Those who unsuccessfully opposed the bill questioned its morality. Representative Morgan declared: There is a moral question involved. It is said England, Ger¬ many, France, and Japan authorize monopoly to promote their foreign trade. . . . What they are doing is in the nature of a crime. ... I do not believe that all of the great nations of the world, all of the great commercial nations of the world, should place their foreign commerce in the hands of monopoly and say, “Let the monopolies of England, Germany, and France prey upon our people, and let the monopolies of the United States go out to all the nations of the world—to South America, to North Amer¬ ica, to Asia, Africa, and Oceania—and prey upon the defenseless people of these nations.” That is not sound morals.27 Congressman Buchanan attempted further to expose the inconsistent and unprincipled nature of the bill, the char¬ acteristic of which capitalist society from its inception had serenely accepted. Thus he argued: If combinations for monopoly operating in the United States are indefensible, how are we going to say that they are defensible in operating and preying upon the people of other nations? What grounds or what justification can we give for passing a measure that gives combinations an opportunity to operate through any chicanery that they may adopt and use any despicable methods

CAPITALISM AS A SYSTEM

76

they may choose to employ against foreign people and we prohibit them from using those methods in this country? . . . When you pass legislation here that restricts or that prevents laws applying to the export traders, you are passing laws to protect the most powerful, criminal, and vicious trust that ever existed in the world. These trusts know what they want. They started long ago to get a big battle fleet, so that they might back up their chicanery with the big guns of the Navy, if necessary.28 The following exchange in the Senate between George W. Norris and Atlee Pomerene, promoter of the bill, demon¬ strates again how, in the interest of international capitalist competition, acts regarded as criminal when committed at home, may be encouraged and made respectable when com¬ mitted abroad: Mr. Norris. I wish to ask the Senator several questions in re¬ gard to the bill. First, will not the effect of the passage of the bill be that what would be illegal, even a crime, if committed with re¬ gard to domestic commerce and against our own people at home, would not be illegal if the same thing were done in foreign commerce against foreigners? Mr. Pomerene. Mr. President, I think that point has been covered by our Supreme Court. I do not have before me now the case, but it was in a case involving a contract with respect to bananas, as I remember it, in which it was held that the crim¬ inal provisions of the Sherman law did not apply to a contract with respect to the sale of bananas in foreign countries. . . . Mr. Norris. But would those same associations be illegal under our law if they engaged in our domestic trade? Mr. Pomerene. They would be if they were engaged in domestic trade. The Senator is right. ... I realize that very well, but it was because of that fact we passed the Sherman Antitrust Law of 1890. It was intended to meet a very grievous evil in our domes¬ tic commerce. But now, when it comes to our dealing with our competitois abioad, we are not concerned about giving to the foreign consumer a minimum price. ... Mr. Norris. I think it is perfectly plain that the object is there that they shall not enter into any conspiracy in regard to the articles here in the United States; but is it not the very opposite that they are permitted to do in the foreign trade? Mt. Pomerene. So far as the foreign trade is concerned, we are giving them the right to enter into these associations for the purpose of seizing the foreign trade, if possible, whether in the land of our competitors or in the land of some third nation.

MORAL ASPECTS (I)

77

We believe that as long as these practices exist in the foreign country among their citizens and business men we ought not to deny those privileges to our business people in seeking for foreign trade. . . . Mr. President, from the standpoint of world ethics there is great force in what the Senator from Nebraska says, but we have not reached that high plane of business morals which will permit us to extend the same privileges to the peoples of the earth outside the United States that we extend to those within the United States.29 In further defense of the measure Senator Poindexter said:

'When we come to dealing in foreign countries with

great independent sovereignties we can leave it to them to protect themselves. They control the trade in their domain. We need not be uneasy about our foreign exporters working any injustice upon the people in Great Britain or France, because they have great intelligent governments that know how to enact laws for the protection of themselves from any trade injustice.” To

this.

Senator Smith replied:

“Necessity knows no

bounds. These combinations would take advantage of the world’s necessities, and we would be included in such a raid.”30 Thus, to the extent that a country or people does not have the power of a Great Britain or a France to protect itself, to that extent also it must expect to bear the full force of capitalist immorality. The Congress gave its overwhelming sanction to the bill; in the House it was approved 242 to 29.

5 Moral Aspects (II) Mandeville and the Morality Censure of the manifest moral contradictions in the opera¬ tion of the capitalist system is by no means a novelty. Early in the eighteenth century,

Bernard de

Mandeville

pre¬

cipitated quite a controversy among rationalists and theolo¬ gians when he chose to meet such censure head on. As a Dutchman living in London, he was particularly exposed to the social heritage of capitalism at its dominant nuclei. His essay is significant because it was an audacious appeal to the public to be realistic and accept capitalism in its totality. It was not the system, he believed, but rather its critics who were contradictory; for how could they admire and enjoy its physical fruits and simultaneously reject its efficient means? He was, moreover, under no illusion about the source of capitalist morality.

Thus he insisted:

“No mathematical

demonstration is more true, than that to prohibit navigation and all commerce with strangers is the most effectual way to keep out vice and luxury.”1 In his famous work (which grew by many editions from The Grumbling Hive: or Knaves Turn’d Honest in 1705 to The Fable of the Bees: or Private Vices Public Benefits in 1723), Mandeville was not concerned with purely personal immorality—which he did not countenance—but chiefly with the immanent unscrupulousness of the business world as it served the purpose of national greatness. Accordingly, he addressed his epic to the people of a country that had at¬ tained “glory, wealth and power . . . [one that was] large, rich, and warlike,” saying: 78

MORAL ASPECTS (II)

79

Those who are so fond of the ease and comforts, and reap all the benefits that are the consequence of a great and flourishing nation, would learn more patiently to submit to those incon¬ veniences, which no government upon earth can remedy, when they should see the impossibility of enjoying any great share in the first without partaking likewise of the latter.2 If Mandeville stirred up a hornet’s nest of opposition to this defense of capitalist morality, he had staunch defenders, too. He was contending, in substance, that a great nation can be built only by condonement of “vicious” methods, but that the end vindicated even these means; therefore, the citizens

of such

a

nation,

the

fortunate

“knaves”

and

“rogues” who enjoy the benefits and freedom of such a com¬ munity, should be “honest” with themselves, admit their vices and conceive of them even as virtues. He noted: The main design of the Fable is to show the impossibility of enjoying all the most elegant comforts of life that are to be met with in an industrious, wealthy and powerful nation, and at the same time be bless’d with all the virtue and innocence that can be wish’d for in a golden age; from thence to expose the un¬ reasonableness and folly of those, that desirous of being an oppulent [sic] and flourishing people, and wonderfully greedy after all the benefits they can receive as such, are yet always murmur¬ ing at and exclaiming against those vices and inconveniences.3 Mandeville clearly had in mind the economic and social processes of the vigorously rising capitalist nations about him. One senses in him an enthusiastic mercantilist thinker who recognized a need to justify the morality of his dynamic society and thus to allay the qualms of its commercial build¬ ers.4 He attempted, however, to project his ideas over the annals of human existence “from the beginning of the world to this present day,” which naturally led him into an inter¬ minable discussion about the nature of human nature and abstractions about the elements of vice and virtue. All this, nevertheless, was mainly dished out as a vindication of his original position and purpose. In his argument, he had inevitably to match wits with the theologians of his day, and this led him still farther afield.

CAPITALISM AS A SYSTEM

80

His answers to outraged divines are eminently clever and provocative. He insists that he has a close knowledge of the letter and spirit of the Bible and that he himself believes in them without equivocation. But he contends that his critics have compromised the Scriptures everywhere in the face of actual demands of a progressive society; hence it is they who are dishonest, if, seeing the impossibility of strict ad¬ herence to religious doctrine, they censure those who propose that the community accept reality without whining. Some commentators and critics of the Fable—and I think F. B. Kaye, whose masterly introduction and commentary in the Oxford edition, used here, should be included—have apparently been misled by Mandeville’s incubus of philo¬ sophic ratiocination,

thus by-passing his

simple,

though

powerful, emphasis on capitalist morality.5 Mandeville did not silence the “grumblers” against the vices inherent in the production of capitalist wealth; neither have those vices been eliminated. He might, indeed, have directed his sermon pro¬ phetically to such modern critiques as Professor C. Wright Mills’ Poiuer Elite, especially to the chapter on “Higher Immorality.” His great contribution appears to be his recog¬ nition and exposition of an indigenous and irreducible moral dilemma in capitalist society. He himself refers to this as the “paradox” of “moral evil” and national greatness.6 In Domestic Practice Mandeville preached adjustment to the implicit dishonesty associated with foreign commerce. But what of capitalist morality’s domestic fall-out? Since businessmen were neces¬ sarily involved in competition, they had to fashion rules and regulations that would preserve that degree of cooperation without which there could be no society. Continuity of the social organization, moreover, has always been considered by the group as far more vital than the private interests of any of its members; and, as previously suggested, the rulers of the game are always trying to keep the context of economic opportunity fluid.

81

MORAL ASPECTS (II)

The capitalist legislature is so constituted as to admit of considerable

factional

opposition

without

disintegration.

Questions of national policy may thus be openly moot, and laws may be made in accordance with the power and strategy of interest groups. Domestically, businessmen regu¬ late transactions among themselves by reciprocal laws of contract, property, finance, sales, inheritance, and so on. Laws, once made, are assumed to operate impartially; hence their administration falls to an unbiased Executive who becomes part of the capitalist bureaucracy. The laws, however, are not directly concerned with the devices by which businesses should be run in order to make profits. Since, therefore, the capitalist state is interested primarily in establishing situations that encourage the growth of busi¬ ness enterprise, and since great businesses are built mainly by the employment of wit and ingenuity, there is always avail¬ able a significant range of opportunities for making un¬ scrupulousness pay. Accordingly, in all capitalist society success tends to depend upon the sagacious use of an infinity of sharp moves:

deceptions,

withholding

of

information,

bribes,

“throat cutting,” exploiting the margins of the law, and so on. Most of these arts were perfected quite early in the annals of capitalism. In a summary of his study of capitalist morality in medieval Florence, Guido Bigi explains: It must not be supposed . . . that the mental condition of the people of that day was false and perverse, or that the morality of their theoretical precepts was deliberately intended to con¬ ceal their intention of doing exactly the contrary in real life. . . . The contrast resulted from the manners of the times, and from that rule of daily life which never swerved from certain habitual practices; and the inclination to falsify weights, corrupt justice, swindle in selling—in short to employ every means of furthering their own individual interests—always proved stronger than the honest intention of these theoretical moralists. . . . Shrewdness, and above all, craftiness, is still held to be a valuable quality in the business world. In the matter of morality the merchants of today do not differ very greatly from those of the Trecento and the Renaissance. Only modern merchants do not trouble themselves to give good advice and are ashamed to commit to paper the business methods they may find it needful to employ.7

CAPITALISM AS A SYSTEM

82

Observations such as these apply to all the leading capitalist nations.8 By studied unscrupulousness,

businessmen

may

grow rich, respectable, and “deep down in the hearts of the people,” admired. Andrew Carnegie may exclaim: “You can never be an honest man of business and a speculator,”9 but speculation remains at the core of modern business. That the public itself tends to become suffused by this attribute of capitalism is indicated by its willingness to participate on a large scale in black market operations and in great speculative swindles offering something for nothing. In prin¬ ciple, Rauschenbusch observes, “society has always accepted the morals and manners of the ruling class and standardized the rules of conduct on their pattern. The business class is today our ruling class, and their practical code of honor and morals in business is becoming the code of all.”10 This, of course, is natural enough. The masses of people in capitalist society can hardly be expected to look upon the morality of the ruling class as criminal. In fact, serious criticism of this morality tends to be taken, and perhaps properly so, as an attack upon capitalism itself. As Professor Sutherland observes: “The persons who define business practices as un¬ desirable and illegal are customarily called ‘communists’ or 'socialists’ and their definitions carry little weight.”11 In an ongoing capitalist society, it should be emphasized, the businessman is generally admired and honored; he will thus be inclined to feel very sure of himself. “Many in the world,” said Jacob Fugger, “are hostile toward me. They say I am rich. I am rich by God’s grace, without injury to any man.”12 However, both Sutherland and Clinard13 find that the most egregious white-collar crimes are committed by the great corporations. Centuries ago, likewise, Defoe charged the fabulous Josiah Child with being the arch “stock jobber,”14 and big businessmen of “making the King subject to the caprice of their private interest.”15 On the ultimate role of business in government, Sutherland cites the suggestive re¬ mark

that

“three

Presidents

served

under

Andrew

YV.

MORAL ASPECTS (II)

83

Mellon,”16 the great financial monopolist and Secretary of the Treasury. Indeed, the laws governing business procedure and prac¬ tice are largely suggested by businessmen themselves; and the interests of the consumer and public are normally consid¬ ered collateral. ‘‘The most subtle problem of business ethics consists in discovering the sanctions that prevail in business activities and which therefore must be relied upon in order to effect the appropriate measure of control over business conduct. Whether this control will be relatively extrinsic or intrinsic rests in large part with business men themselves.”17 The rules and statutes intended to govern business operations are thus limited by the nature of the game. When, however, the rules appear to be too restrictive, the players have usually found ways of getting around them. The Report of the Federal Trade Commission investigating monopoly in the American meat-packing industry indicates how this can be done. The ‘‘Big Five” meat packers used their joint funds to employ lobbyists and pay their unaudited expenses; to in¬ fluence legislative bodies; to elect candidates who would wink at violations of the law; and defeat those pledged to fair enforce¬ ment; to control tax officials and thereby evade just taxation; to secure modifications of governmental rules and regulations by devious and improper methods; to bias public opinion by the control of editorial policy through advertising, loans, and sub¬ sidies, and by the publication and distribution at large expense of false and misleading statements.18 Professor Sutherland lists many examples of close relation¬ ships between government and business, and then concludes that ‘‘the initial cultural homogeneity, the close personal relationships, and the power relationships protect business¬ men against critical definitions by government.”19 This, to reiterate, should not be surprising. In a “pure” capitalist society such as that of Venice or Liibeck, government is constituted exclusively by businessmen. Modern democratic tendencies limit, but do not eliminate, this fundamental association; and mercantilists are prone to regard with con-

CAPITALISM AS A SYSTEM

84

tempt laws intended to restrain them—particularly laws promulgated in the interest of social welfare. Businessmen are more likely to deal equitably among themselves than with workers or consumers, because the chances of retaliation by law or in kind are greater within the group than from the uninformed and dispersed outsiders. “White-collar criminality flourishes at points where powerful business and professional men come in contact with persons who are weak.”20 Vast sums of money have been extracted from the American people who never knew that they were being bilked by one or more of the business schemes listed under the “cease and desist orders” of the Federal Trade Com¬ mission Decisions. All sorts of institutions—city, state, and national, besides the courts—are continually kept employed with problems of business unscrupulousness. Role of Honesty And yet, in this discussion of capitalist morality, it should be recognized that honesty has a peculiar and abiding place. Since the necessity to guard against deception and fraud involves certain costs in time and effort, and since in many transactions the parties may have no means of knowing the truth, reliability itself may be promoted as a value favor¬ ing commerce. All through the history of the capitalist system, leading capitalist nations have sought, especially in highly competitive markets, to establish a reputation for honesty and high quality of product. By thus minimizing the caveatemptor anxiety of their customers, they have been able to increase the demand for their commodities. There is, then, in many business situations, competition for good will; and it pays.21 As the mercantilist, Nicholas Barbon, observed: “It is the seller’s interest, from the expectation of further dealing, not to deceive; because his shop, the place of dealing, is known.”22 When, in 1768, the English manufacturer, Matthew Boul¬ ton, was urged to make counterfeit two-sou pieces for use in

MORAL ASPECTS (II)

85

France, he replied: “It is a trade I have much exclaimed against since I saw a possibility of its being prejudicial to our manufactory, and it may cause a more particular and more scrupulous prohibition of all such things as we are now enabled to introduce into France.”23 Sometimes business¬ men, fearing that the market may be ruined for all by the deceptive dealings of a few, voluntarily insist that their mem¬ bers trading in a certain area or commodity do so with clean hands. One of the problems of the English East India Company was that of keeping interlopers from flying the company’s flag and entering Eastern ports, where stable trade relations had been established, to cheat promiscuously the unsuspecting natives. In regard to the efforts of American businessmen to establish

general confidence

in business,

Myron W. Watkins observes: By voluntary action, partly in defense of their own interests but partly also in defense of the public interest, they have for years waged a militant campaign against fraudulent business practices. Through local organizations and through such bodies as The National Association of Credit Men, relying solely on pub¬ licity, they have helped materially to suppress commercial charlatans.24

Honesty, as a value in capitalist society, is not identical with the economic justice developed in medieval thought. It tends to be opportunistic and expedient. The same firm which truthfully asks the public to rely upon the quality of its auto¬ mobiles may defraud the home government on an order for military tanks, and help surreptitiously to finance a revolu¬ tionary government favorable to its commercial designs in South America. The same business may employ honest com¬ petitive methods in one market and deception in another. Capitalist morality tends to remain flexible. In 1919 Edmund Prizer, President of the Vacuum Oil Company, advised Amer¬ ican exporters to make sure that every shipment that leaves this country is up to full standard of quality—the second lot in every respect as good

CAPITALISM AS A SYSTEM

86

as the first. Fulfil every obligation with scrupulous fidelity, even though a bad bargain was made, in the carrying out of which material financial loss is unavoidable. Go to any reasonable length to satisfactorily adjust a bona-fide complaint, for a dis¬ gruntled buyer is a ruinous asset.25 Honesty thus became an instrument in international com¬ petition for foreign markets. The Personality Complement What kind of man does capitalist society produce? Because capitalist society is secular in its principal functions, but nevertheless gives allegiance to powerful religious ideals, the typical capitalist personality tends to be fluid and flexible. “[Everyone] reads that covetousness is the root of all evil,” Thomas Hobbes remarks, “but he thinks and sometimes finds it the root of his estate.”26 It is by his relationship to the lat¬ ter interest and the peculiar societal imperatives involved in securing it that the personality of capitalist man may best be described. The famous advice of Machiavelli to his beloved Lorenzo de Medici involved precisely such a decision to assign second place to the ideals, and he did this with such insight that sometimes modern businessmen have been referred to as “the Machiavellians.” Machiavelli counseled: It is well to seem merciful, faithful, humane, sincere, religious, and also to be so; but you must have the mind so disposed that when it is needful to be otherwise you may be able to change to the opposite qualities. . . . And, therefore, he must have a mind disposed to adapt itself according to the wind, and as the variations of fortune dictate, and . . . not deviate from what is good, if possible, but be able to do evil if constrained. ... In the actions of men, and especially of princes, from which there is no appeal, the end justifies the means.27 Machiavelli s rearing in the Florentine milieu provided ample opportunity for him to observe the efficacy of the nonidealistic, pragmatic, expedient way of life. He was thus closer to the realities of capitalist personality than some of his critics.28 Indeed, one outcome of the Reformation was a theo-

MORAL ASPECTS (II)

87

logical compromise with this way of life. Although the Church postulates a spiritual being identified with the teachings of Christ, it tacitly allows the individual to pursue his mundane existence in conformity with the morality of capitalist cul¬ ture. Businessmen no longer make deathbed confessions of sins incident to business practices. The frank, avowedly self-interested approach to life de¬ picted in Lord Chesterfield's letters to his son is a classic illustration of the individualistic drives of the social system. “Observe,” he said, “the shining part of every man of fashion who is liked and esteemed; attend to and imitate that par¬ ticular accomplishment for which you hear him chiefly cele¬ brated and distinguished; then collect those various parts, and make yourself a mosaic of the whole.”29 Moreover, the ele¬ mentary societal strain toward out-doing one’s neighbor, of getting ahead of the other fellow, of “seeming sincere” whether actually so or not, is clearly perceived by Chesterfield. There is a ring of abiding reality in the following communi¬ cation: You are now but nineteen, an age at which most of your countrymen are illiberally getting drunk in port at the Uni¬ versity. You have greatly got the start of them in learning; and, if you can equally get the start of them in knowledge and manners of the world, you may be very sure of outrunning them in Court and Parliament, as you set out so much earlier than they. . . . The care which has been taken of you, and (to do you justice) the care you have taken of yourself, has left you, at the age of nineteen only, nothing to acquire but the knowledge of the world, manners, address, and those exterior accomplishments. But they are great and necessary acquisitions, to those who have sense enough to know their true value; and your getting them before you" are one-and-twenty, and before you enter upon the active and shining scenes of life, will give you such an advantage over your contemporaries, that they cannot overtake you; they must be distanced.30

The candid realism of Chesterfield’s convictions on person¬ ality values making for success perhaps allows another obser¬ vation. In one of his most confidential letters, he writes: “I began the world, not with a bare desire, but with an insatiable

CAPITALISM AS A SYSTEM

88

thirst, a rage of popularity, applause, and admiration. . . . To this principle of vanity, which philosophers call a mean one, and which I do not, I owe a great part of the figure which I made in life.”31 Besides emphasizing the importance of being well schooled in some area of learning, the young man was thus taught to realize that there is a certain strategy of success determined by the ‘‘world outside”-—the world of the com¬ petitive capitalist milieu. Capitalist morality demands that the individual be con¬ stantly on his guard; that he consider all persons who have meaningful relations with him, save perhaps members of his immediate family, as competitors; that he be conservative, secretive while receptive of the secrets of others, sincere in ap¬ pearance, firm, ruthless, and affable. Although Christian mo¬ rality is opposed to many of these qualities, preachers have adjusted to the point where they seldom find themselves con¬ fronted by impassable paradoxical difficulties. Christianity, expounded on an entirely personal basis, becomes discre¬ tionary and accommodates to the social compulsives of the system. But the divergence of the Christian ethic and capi¬ talist personality norms as manifested in interpersonal re¬ lations is by no means finally resolved. It remains one of the problems of capitalist society with respect not only to person¬ ality adjustment, but also perhaps to the continuity of the system itself.

6 Dynamics of the System The capitalist system never quite reaches a state of equi¬ librium. Apart from war and business cycles, there is an inherent impetus toward economic expansion. The search for new markets goes on ceaselessly, so that the world is brought more and more completely into the network of capitalist commercial relations.1 In this movement, some of the newly included areas succeed in adopting the capitalist way of life, while others either resist it or, conversely, are restrained from acquiring it by the more powerful nations. This widening of the market, especially by leader nations, involves increasing control of the commerce of lesser peoples, and thus a pro¬ gressive concentration of their production and finances in the hands of the dominant nations. Always, then, the leading nations, at least before 1917, tended to become the “shop¬ keeper,” the “workshop,” and the banker of ever larger areas of the world. Although two

advanced

capitalist

nations

may

trade

heavily with each other, the dynamic of capitalist commerce lies not so much in the old capitalist communities as in the “backward” countries. It is the continual expansion into the “unsophisticated” commercial areas that provides the basic opportunities for investment and for windfall piohts. Imper¬ ialism, therefore, whether commercial, financial, or territo¬ rial, is inherent in and indispensable to flourishing capitalism. The Spread in Europe It seems pertinent to consider at this point the process of expansion of capitalist society in Europe. This phenomenon 89

90

CAPITALISM AS A SYSTEM

is remarkable because the Near East, in contact with the movement from its inception, has nevertheless remained rel¬ atively impervious to it. Furthermore, a review of the process may help us to recognize the elementary functions of cul¬ tural imbalance in capitalist development. If we are right in considering Venice the focal point of early capitalism, we should expect to find capitalist society taking root in social situations, comparable to those of the early Venetians. The position of Venice, ensconced as it was in a sort of no-man’s land between the Eastern and Western Empires, provided the opportunity for societal innovation. It was evident that no community on the mainland of Europe or Asia, north or south, would have been allowed the time or the necessary isolation, by either the Church or the feudality, to experiment with and to stabilize capitalist institutions as Venice did. But the Empire of the East differed significantly from that of the West. In the West, there was a coextensive division of authority between the Church and the secular rulers; in the East, authority was strictly centralized in the Emperor, the Church assuming the role of auxiliary to that power. As Norman H. Baynes remarks: “In the East there is one state in which all authority is highly centralized; in West¬ ern Europe of the Middle Ages there is a welter of small states.”2 In the East, furthermore, there was no “confusion,” since in that area the Roman Empire was continued with great vigor; and there was neither opportunity nor need to devise radically new societal forms.3 In the West, then, there was a division of sovereignty, not exactly the same as that which originally allowed Venice to exist, but still favorable to the growth of relatively weak, infant societies. Now that the lagoon city had shown the way, these newer establishments held their ground with far greater pertinacity than if they had to face the indecisions of initiating, untried institutions. The towns thus constituted distinct societal phenomena in which authority tended to converge in town councils. They sprouted, as it were, in the

DYNAMICS OF THE SYSTEM

91

neutral zones of feudalism, and did business with bishop and knight alike. “The relations between the lay and the ecclesiastical seigneurs,” Eleanor Lodge observes, “were favor¬ able to the towns. ... It was a vital moment, and the com¬ munes took advantage of it.”4 This was indeed a critical moment in history. The towns were not altogether passive in regard to the chronic antago¬ nism between

priest and king;

sometimes,

indeed,

they

openly contributed to it. At the center of the area of struggle there were Guelph cities and Ghibelline cities, according as the allegiance of the moment seemed to serve their own interests.5 The cities thus helped to keep the social organ¬ ization of Western Europe fluid. “They prevented,” to quote Ernest Nys, “the formation of theocratic systems similar to those which were developing in the East. They were an obstacle to the triumph of military despotism, the population of the cities rising in defence of liberty as soon as it was threat¬ ened.”6 Sometimes an emperor would throw his military might directly against the cities because of their obstruction of his ambitions. Perhaps the most spectacular example of this was the leveling of Milan by Frederick Barbarossa in 1162, and the consequent formation of the Lombard League of cities under the leadership of Pope Alexander III, which successfully resisted further conquests. This irreconcilable division of power explains essentially why capitalist cities were able to exist in the West and not in the East. To the cities, however, all the territory outside their gates, or beyond the contiguous area which some of them controlled, was foreign;7 and all people within or with¬ out the walls, who had not been made citizens, were alien. The vital necessity for this exclusiveness led to the cities’ continual striving for sovereign charters and to the preserva¬ tion of their integrity by every means available. On the whole, the charter acknowledged the legitimacy of the capi¬ talist way of life; hence the cities proceeded to deal with the precapitalist peoples and the country around them very much

CAPITALISM AS A SYSTEM

92

as Englishmen at a later date, dealt with Indian princes on their initial contact. But, as I have noted, not all cities were national cities; and, even among the latter, capitalist power varied. The Hanseatic League and Venice looked upon vir¬ tually all feudal Europe as backward territory. By giving the King of England a dazzling present, the League hoped to get out of that country exactly what later capitalists hoped to bring away from China on making a similar gesture to its rulers. Trade with feudal Europe was thus based upon concessions from the feudal lord; and the lord’s common subjects, who had virtually no voice in the management of his territory as an estate, ordinarily bore the ultimate cost of the arrange¬ ments.8 The early merchants, especially those from the Italian cities, catered to the expanding demand of the nobility and the Church for the luxuries and spices of the East;9 the merchants even lent them the money with which to make those very purchases and to carry out their favorite feudal enterprises. Thus the Italians tended to have a buyer’s mar¬ ket in the East and a seller’s in the West.10 The lesser no¬ bility, who were drawn into this capitalist commercial vortex, tended readily to collapse; they sometimes merged into the urban organization either by marriage or by entering into business life as citizens.11 The opposite process of business¬ men becoming noble hastened the assimilation of feudalism. The enlargement of the Florentine contado at the expense of the nobility in her vicinity is an excellent example of this process. But since the cities were inevitably nationalistic and ex¬ clusive, they had to limit the extension of the citizenship-and this notwithstanding their inability to impose colonial subjection upon the major feudal lords.12 The princes were made dependent by their reliance upon capitalist enterprise; nevertheless, they held their places until the era of modern nations. As Jacob Strieder points out: “The state ... on account of its financial needs, stood godfather to the modern

DYNAMICS OF THE SYSTEM

93

forms of capitalist organization.”13 Sometimes a lone business genius such as Jacques Coeur, grown rich by his exploitation of the insatiable needs of the French Court, would be ejected, as a Jew, and his wealth confiscated. It was, however, the leader capitalist cities that brought early imperialism to its highest perfection. I need only re¬ call here the Hanse’s domination of Denmark and Norway, its extraterritorial market rights in England; the Venetian control of Adriatic, Aegean, and Levantine territory in the interest of their commerce and industry; the Genoese estab¬ lishments in the Levant and Black Sea area; and the Floren¬ tine conquest of Pisa and general domination of Tuscany. Role of the Church Another element of vast importance in facilitating the spread of capitalism was the fact that the early cities were on the whole Roman Catholic, albeit restive ones. As Catho¬ lics the merchants had rights in the West that Jews, for ex¬ ample, could not have.14 As two eminently expansive forces, therefore, the Church and capitalism walked hand in hand, in “antagonistic cooperation,” each supplementing the powers of the other. Business frequently followed the Cross; and the priests, looking to their consumptive needs, encouraged it.15 The early Church diffused a material culture which was similar to that of the Italian cities, and also established rellative peace and order.16 Furthermore, the teachings of Chris¬ tianity, the recognition of one God and His Commandments, served as the ultimate reliance of the early merchants in the institution and preservation of the sanctity of their contracts. The significance of this may be illustrated by the long invocations

in

the

preambles

to

those

commercial

in¬

struments. The financial system of the Church also served ideally the capital requirements in certain areas of early capitalism. Banking in Florence, and later in Augsburg, owed very much

CAPITALISM AS A SYSTEM

94

of its far-reaching influence and stability to the continuous stream of wealth directed toward Rome from every nook of the Roman Catholic world. Businessmen frequently collected, invested, and spent this income for the Curia. Role of the Nobility When the cities became recognized by the nobility as a desirable form of social organization, worthy of propagation, capitalist society took its ultimate and permanent root in Europe. The capitalist exploitation of feudalism, therefore, had the effect of bringing the entire European economy within the structure of capitalism.17 But the attempts of the great lords to participate in the wealth-producing activities of cities expedited the process of change. Successful cities situated on the domains of the feudality now became recog¬ nized as the major sources of fluid wealth. The feudal magnate ordinarily had rights of taxation; and his chances of receiving presents and getting loans were enhanced. Indeed, very much of the early feudal respect for “inter¬ national law,” for a jus mercatorum, was due to the lord’s desire to attract merchants with their taxable commodities to his domain. As Professor Thompson puts it:

“In the

course of time the feudality not only became tolerant of the town movement, but even grew to promote it, not from demo¬ cratic or proletarian sympathies, but from interest. As com¬ merce and trade increased the nobles discovered that it was profitable to have a commercial centre on their lands.”18 The economic relations between the Counts of Champagne and of Flanders and their towns are probably the clearest example of this situation.19 No feudal noble, of course, could successfully administer a national capitalist city. This fact was generally recognized; and the urban movement which got under way in northern Europe, mainly in France and Germany, in the twelfth cen¬ tury, amounted to relatively lavish grants of privileges by the nobility toward the establishment of towns at points con-

DYNAMICS OF THE SYSTEM

95

sidered favorable to their growth. Sometimes the feudal lord even aided in the construction of the first city wall. The vital germ of the community, however, was always its charter of freedoms.20 The series of liberal charters granted by the Teutonic Knights after their Prussian conquests in the thir¬ teenth century, and the dramatic efforts of the Czar, Peter the Great, in his attempts to westernize Russia at the turn of the seventeenth century, are major events in the expansion of capitalist society.21 Some 200 years earlier, Ivan III, by destroying the thriving city of Novgorod, had blotted out capitalism in his territory; but now Peter, after “sitting at the feet” of Amsterdam and London, returned home con¬ vinced that Russia must either become a capitalist empire or remain backward and perish. Summary The social opportunities which led to the perpetuation of the capitalist movement in Europe may now be broadly re¬ stated. The unsettled conditions after the fall of the Roman Empire in the West, due principally to conquests by non¬ literate peoples, made the rise of new societal forms possible. The uniquely insulated and pioneering situation of the Venetians between the two estranged Empires allowed them to experiment with radically new forms of social organiza¬ tion in the interest of their foreign commerce. This com¬ merce was originally anchored chiefly in the provisioning of the European nobility and the universal Church. An analo¬ gous struggle in the West between the Church and the em¬ perors created power hiatuses between them—zones in which more or less independent towns, following the successful ex¬ ample of Venice, might thrive. In the West, merchants discovered that they could co¬ operate profitably with the expansive movements of the Church. The high point of this mutually self-interested as¬ sociation was doubtless the Venetians’ use of the Fourth Cru-

96

CAPITALISM AS A SYSTEM

sade in winning an empire for themselves. When the nobility, already severely shaken by the sapping effects of capitalist transactions, began to encourage and to rely directly upon the capitalist economy, the viability of capitalism may be said to have been irrevocably established.

/ The Primary Force From an analysis of certain basic characteristics of capi¬ talism, I proceed now to discuss in some detail the nature of its primary force—the pivotal role played by foreign economic relations. The involved history of capitalism since the coming of nations has frequently obscured this funda¬ mental element in the system. It is important, therefore, even at the expense of some repetition, to examine its scope and nature. The Nature of Capitalist Commerce Like almost every other significant aspect of capitalism, foreign trade manifestly did not originate with the system. In pre-capitalist times, Mediterranean, Pacific, and even North Sea commerce had already attained a high level of complexity and organization.1 Clearly, then, it is not the mere fact of trade, but rather its organizational differentials, which identify it as capitalist.2 Furthermore, this organization arises as a function of the peculiar role of commerce. Capi¬ talist commerce is the dynamic aspect of capitalist production. All other forms of production in a leading capitalist society are related to it, if not dependent upon it. Production for Consumption Two introvert concepts of classical and Marxian economics stand in the way of comprehending the significance of capi¬ talist foreign trade. They are:

(a)

that the purpose of all

production is consumption,3 and (b) that foreign trade arises 97

CAPITALISM AS A SYSTEM

98

from the need to exchange the surplus produce of different nations. These concepts are both developed in the Wealth of Nations and they are still influential in contemporary eco¬ nomic thinking. I cite the following paragraph as especially pertinent because in it Smith, in showing the way to classical economics, reveals his characteristic penchant for railing against conditions of capitalist society instead of seeking fully to comprehend and explain them: Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the con¬ sumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system, the interest of the consumer is also constantly sacrificed to that of the producer; and it seems to consider production, and not consump¬ tion, as the ultimate end and object of all industry and com¬ merce.4

That this statement may be shown to be logically and per¬ haps ultimately true cannot indeed be gainsaid, but it is the very element of truth in it which seems to be irrelevant to the economics of capitalist society. Since this assumption may be presumed to embrace production-consumption re¬ lations in all types of societies, it cannot serve critically to distinguish essential economic traits among them. In other words, it universalizes, at the beginning of the analysis, the very relationship which must be societally differentiated.5 In feudal society, through manorial organization, production was based upon consumptive needs. In fact, the simpler the pre-capitalist society, the more nearly we should expect com¬ munal production to be geared to consumption. But it should be constantly remembered that capitalist production is essen¬ tially for impersonal markets. It is this characteristic—not Smith’s generalized, metaphysical truth—which identifies pro¬ duction under capitalism. Pre-capitalist production has been paradoxically called “un¬ productive.” “Medieval capital was lent [to feudal borrowers] for purposes of unproductive consumption. Thus applied.

THE PRIMARY FORCE

99

the money failed to bring about an increase of wealth, but remained . . . ‘barren.’ ”6 But even at that time bourgeois creditors living in towns intended to, and did, exploit the consumptive needs of feudalistic communities to their own profit. It was not so much the production of material goods as a certain strategy in its distribution which characterized the capitalist nexus between production and consumption. It is only by a study of this peculiar relationship that we may, for example, understand the violence with which the mercan¬ tilists reacted to foreign capitalist merchants in the attempt of the latter to provide the national consumptive needs. And it is, incidentally, because of a preference for universalistic models of foreign trade, and a contempt for the study of its capitalist differentials, that classical economics has been so sterile in deriving adequate theories of the ongoing process.7 Capitalist commercial strategy and its consequent material production develop and persist only within a capitalist social milieu. This milieu attains its highest realization in leading capitalist nations. Lesser communities within the capitalist system, especially those at the lower level of its structure, tend to be more or less dependent instruments of the leader¬ ship of capitalism. Global entrepreneurs are seldom unmind¬ ful of the efficacy of national economic policy. For instance, in an address to his colleagues, Edward Riley, General Man¬ ager of the Overseas Operations Division of General Motors Corporation, said: “If ... we are to be realistic in looking at the problems of international trade, we must bear in mind that economics and politics, in both national and interna¬ tional affairs, can never be divorced. Therefore, before we examine the economic aspects of our foreign trade policy, I think we should examine certain political aspects of our for¬ eign policy itself.”8 And Robert N. Lynch, Vice-President of the San Francisco Chamber of Commerce, observed that “Chambers of Com¬ merce can do little, almost nothing, to aid in the develop-

CAPITALISM AS A SYSTEM

100

ment of foreign commerce without a great, broad, constructive policy on the part of the United States. There is nothing San Francisco may do, and the other large cities, if there is not an eager, aggressive, national policy on the question of foreign trade.”9 The principal characteristic of capitalist foreign trade, then, is the capitalist system with its power gradient of nations and communities in which transactions themselves are more or less productive according to their relative power complement. Surpluses as a Basis of Trade The other naturalistic concept which seems to divert think¬ ing about capitalist commerce is that of mutual exchange of surpluses. I turn again to Adam Smith, as an early exponent of this view. When the produce of any particular branch of industry ex¬ ceeds what the demand of the country requires, the surplus must be sent abroad, and exchanged for something for which there is a demand at home. Without such exportation, a part of the productive labour of the country must cease. . . . The land and labour of Great Britain produce generally more corn, woolens, and hardware than the demand of the home market requires. The surplus part of them, therefore, must be sent abroad, and exchanged for something for which there is a de¬ mand at home.10 Few modern orthodox economists would venture so un¬ reserved a statement as this; and yet its substance is implicit in most of their cost-of-production and specialization theories of international trade.11 The economists at a recent Congres¬ sional hearing on foreign commerce remained silent on Senator Fulbright’s statement of the problem as follows: “One of the objectives ... is to find distribution and markets for all our produce, all these great surpluses we have. And how are you going to get them into the hands of people who need them certainly without giving them away?”12 The fact seems to be that trade in surpluses, in the sense of plethoras from bumper crops of non-capitalist peoples, is of no particular

101

THE PRIMARY FORCE

significance in the capitalist world. When a community be¬ comes integrated in the capitalist system, practically all the goods which it produces is “surplus”—surplus in the sense that they are on the market. The excess of woolens and hard¬ ware, of which Smith speaks, is, like the cocoa of West Africa, the oil of Arabia, and tin of Malaya-—products of the capi¬ talist market. And, as we have seen, this market is not a pas¬ sive construct based upon “natural economic laws.” The goods called surpluses, then, are purposively produced; and they ordinarily have political and sometimes eruptive potentialities in the capitalist system. As K. C. McIntosh of the Bank of California admonished American manufacturers: “The simple production of a surplus of manufactures, a kind that other peoples need, is not all there is to be done. We have to meet, in competition, the manufacturers of other nations seeking an outlet for their wares from the same motive which actuates us, and, in many cases, already well entrenched in the fields towards which we look.”13 It was a common obser¬ vation that such leading capitalist cities as Venice and Amster¬ dam, which produced no grain,

became grain exporting

centers; and, subsequently, Britain exported tobacco, sugar, and cotton goods to the world. The notion, then, that capitalist foreign commerce is based upon imports for consumption and exports of domestic “surpluses” is almost always mislead¬ ing. It is worse than useless as a postulate of economic analysis. Some Basic Traits of the Commerce We may now list some of the apparent characteristics of capitalist commerce: (1) It is not based essentially upon an exchange of sur¬ pluses in the sense of an unexpected abundance of goods beyond that required for domestic consumption. (2) It does not rest primarily on a desire to provision do¬ mestic needs. (3) Although it tends to develop specialties in various world areas of production, area specialization has never been its

102

CAPITALISM AS A SYSTEM

dominant purpose. Specialization tends to follow the interests of the ascendant commercial power regardless of whether it proves to be advantageous to the weaker communities. (4) It is, on the other hand, commerce set in motion and maintained by a capitalist society, a society organized prin¬ cipally by a community of merchants according to their own interests. (5) It is commerce conceived of as in itself a fundamental means of producing income; and upon its success the eco¬ nomic welfare of the entire group becomes naturally depen¬ dent. Hence, the society as a whole tends to become concerned about its perfection and expansion. (6) Its major branches, and hence the most profitable, are always largely pre-empted by the dominant nation of the system. (7) Although the commerce of any nation in the system tends, more or less, to affect the economies of all the others, commercial initiative ordinarily stems from the leader na¬ tion and vanishes among the backward peoples. Commerce as a Means of Production A peculiar distinction of capitalist commerce inheres in its power to organize the consumptive needs of other peoples and to direct their productive capacity in the interest pri¬ marily of the leader nation. It is from this very process that the fabulous income of capitalist cities and nations has been mainly derived. All through the history of capitalism, the sub¬ jection of foreign peoples to capitalist discipline has been facilitated by a peculiar exercise of superior economic, po¬ litical, and military power. It is easy to see, for example, that the East Indians on the Coromandel Coast had to be dis¬ ciplined when communal disturbances among them could cause an official of the East India Company to complain: “. . . the Coast cloths . . . intended for Persia, procured by exchanges of pepper and spices from Bantam, could not be made up for the Persian market, a circumstance which neces-

THE PRIMARY FORCE

103

sarily had its effect on the investments in that Quarter.”14 But force has not always been the system’s sole or even prin¬ cipal reliance. Once the economy of non-capitalist peoples has been brought into the markets of the system, it tends rapidly to lose its capacity to subsist outside the system. Capitalist commerce is itself an extremely productive proc¬ ess; but, to repeat, it is not available alike to all nations of the system. In a late eighteenth-century defense of the charter of the East India Company, John Bruce pointed out the company’s value to the British public and to “commerce” as follows:1 To the public, it is of importance to preserve an extensive and valuable foreign dominion, to keep up a great and increas¬ ing revenue, to continue and extend their navigation, and to maintain a superiority over the other European nations trading to the East. To commerce it is of importance, as India is one of the markets for the sale of our manufactures; as it furnishes the requisite materials for the support of others; and as it enables us to sell Eastern commodities in Europe [that is, on the conti¬ nent] in exchange for money, crude materials, and manufactured articles, which are again to pass into the circle of exchange. On the whole, as it contributes, in an important degree, to give Great Britain the balance of trade both in value and in price.15 Foreign trade is not, therefore, a simple question of a plethora of domestic produce vis-a-vis consumptive needs. “The sum which can be obtained for the woollens in the India market, applied to purchase goods [chiefly opium] to be sold in China, or exchanged for China produce to be sent to Europe, must be estimated by the profit which either India or China produce will yield at the Company’s sales in Eu¬ rope.”16 At the time Bruce was writing, only two nations, Britain and Holland, had the necessary organization and power to carry on this sort of productive circular trade. France and colonial America were lesser participants in it; but the vast majority of the world was culturally excluded from in¬ itiating such transactions. That Britain and Holland were able successfully to tap the resources of Asia, America, and continental Europe was due primarily to their peculiar defi-

104

CAPITALISM AS A SYSTEM

nition of foreign commerce and their consequent national organization for developing it. The Place of Foreign Commerce In 1929, Professor John H. Williams wrote: “England pro¬ vides us today with the best illustration of the ultimate logical effects of international trade upon national economic organ¬ ization. . . . International trade is her raison d’etre.”17 This estimate might indeed have applied to all leading capitalist nations, from Venice to the United States. The phenomenon is not so easily discernible in the United States; neverthe¬ less, it may be shown that even the economic progress of colonial America was inextricably tied to the foreign mar¬ ket.18 It was not always generally apparent that international trade is the “raison d’etre” of England. No doubt it would have been difficult to convince Adam Smith that it was. And yet there was an ineluctable commercial logic at work even then, which had as its culmination the present English situ¬ ation. Similarly, because the United States is in the earlier stage of this process, the primary role of its foreign commerce is frequently obscured. Capitalist foreign commerce, let me emphasize, is the prin¬ cipal organizational force not only of the different grades of communities within the capitalist system, but also of their domestic economics and social

institutions.

In a typical

speech the Victorian statesman, Joseph Chamberlain, stressed this point before the Birmingham Chamber of Commerce in 1896: From the moment that we accepted and entered upon the duties of office our most important duty, our most absorbing care, has been not the party legislation which occupies probably the largest part of our public discussions, but the development and the maintenance of that vast agricultural, manufacturing, and commercial enterprise upon which the welfare and even the existence of our great population depends. Now, I think, gentle¬ men, that you may safely give the widest interpretation to the statement that I have just made. All the great offices of State are

THE PRIMARY FORCE

105

occupied with commercial affairs. The Foreign Office and the Colonial Office are chiefly engaged in finding new markets and in defending old ones. The War Office and Admiralty are mostly occupied in preparations for the defence of these markets and for the protection of our commerce. The Boards of Agriculture and of Trade are entirely concerned with those two great branches of industry. Even the Education Department bases its claims to the public money upon the necessity of keeping our people well to the front in the commercial competition which they have to sustain; and the Home Office finds the largest scope for its activity in the protection of the life and health, and in the promotion of the comfort of, the vast army of manual labourers who are engaged in those industries. Therefore it is not too much to say that commerce is the greatest of all political interests, and that Government deserves most the popular approval which does most to increase our trade and to settle it on a firm foundation.19 Can anyone say that an Americanized version of such a speech would seem inappropriate for the President of the United States in mid-twentieth century? It has been recognized, although less insistently by econo¬ mists than by men in critical areas of capitalist action, that no capitalist nation can exist outside of the capitalist system. In 1924, the American National Foreign Trade Council ac¬ cepted this affirmation of one of its committees: Foreign trade is an absolute economic necessity if the develop¬ ment of American life is to continue along the lines on which it has proceeded ever since the first white men landed on these shores. The alternative is so unthinkable that its mere statement is all that is needed to expose convincingly its ridiculous im¬ possibility. ... It is extraordinary that in view of the simplest facts of our history and of the most obvious necessities of our present life there should still be any person in the United States believing in the possibility of economic self-sufficiency.20 And, in addressing this same organization, Edward Prizer, President of the Vacuum Oil Company, observed: “The story of the nations which in the progress of time have succeeded each other in pre-eminence has been simply the story of ex¬ ternal trade; for the qualities of initiative and enterprise which bring success in this venture, are those which underlie national greatness. With the decline of foreign commerce,

106

CAPITALISM AS A SYSTEM

decay sets in.”21 These convictions, as I have noted else¬ where,22 accord with relevant facts in the rise and decline of leading capitalist communities. Industry and Commerce At this juncture, it seems pertinent to recall the nature of the interdependence of industry and capitalist commerce. Whole systems of thought about the dynamics of capitalism have been sidetracked by the technological illusion, a point to which I shall recur. Technological superiority has always been a significant consideration in leading capitalist societies, but technology itself has never been the independent variable in the dynamics of the capitalist system. An outstanding American business man, Willard Straight, points out again the nature of the interdependence of capi¬ talist commerce in its societal matrix and industry: ‘‘A highly efficient mechanism of economic production has only a po¬ tential value. The aggressive strength of a nation depends on its political and financial stability, and its international posi¬ tion upon its investing power and the disposition of its gov¬ ernment effectively to represent its citizens or subjects and to assist in the extension of their trade.”23 Indeed, a “highly efficient mechanism” of production in capitalist society must be nurtured from “infancy” in a de¬ veloping capitalist commercial process.24 It does not come into being spontaneously. Distant Trade and Profits “Distant trade” has been generally regarded as having distinct advantages over domestic commerce. The classical economists, however, have not been wholly in agreement with this. Reference to their views may serve to put in relief my own conclusions on this vital point. Jean-Baptiste Say takes the position of Adam Smith in holding that the internal market is preferable to foreign com¬ merce; that a manufacturing and commercial “nation”—any

107

THE PRIMARY FORCE

nation in any age—is on par with an agricultural nation, and that maritime commerce facilitates commodity exchange, “but too great a dependence on this resource leaves the na¬ tion at the mercy of every natural or political occurrence, which may happen to intercept or derange the intercourse with foreign countries.”25 This naturalistic approach runs through orthodox thinking to our own day. J. R. McCulloch, to retrace, concludes “It is easy to see that foreign trade . . . contributes to increase the wealth of each [country] in pre¬ cisely the same manner that the trade between different provinces of the same Kingdom contributes to increase their wealth.”26 And recently Professor Bertil Ohlin

laid

the

foundation for a major work on the premise that “inter¬ national trade should be regarded as a special case within the general concept of inter-regional, or perhaps rather inter¬ local, trade.”27 The classicists thus ignore the essential traits of capitalist commerce. As John W. Williams has commented:

The clas¬

sical theory assumes as fixed, for purposes of reasoning, the very things which . . . should be the chief objects of study. In fact, orthodox theory does not even raise questions about the dynamics of international trade as they differ in various historical societies and in the asymetric, capitalist system; it gives answers rather to “the wrong questions.”29 Such ques¬ tions as relate to mobility of factors of production, cost of transportation, division of labor, and specialization, when they are taken as points of departure, tend to lead the in¬ vestigator farther and farther away from reality. It is in this area, of course, that air-tight truisms, necessary for construc¬ tion5 of logical models, flourish. The economics of capitalist commerce thus tends to become not a social science but, as Say defines it: “a few principles and a great number of corrollaries drawn from these principles.”30 It may be taken as axiomatic that the greater the extent of the market the greater the specialization and consequently the greater the division of labor. But how are we to accept

108

CAPITALISM AS A SYSTEM

what seems to follow: “It is on this territorial division of labour . . . that the commerce which is carried on between different districts of the same country, and between different countries, is founded.”31 Or, to put it more disarmingly: “After all, the basic object of foreign trade, equally with in¬ ternal trade, is to promote the most economic division of labour, that is, to enable each individual or each organized group to produce those things which they are most efficient at producing and exchange them for goods which others can produce at less cost than they could themselves.”32 Or more sophisticatedly: The gain from foreign trade results from the existence of comparative differences in efficiency. Such comparative differences will exist as between manufactures and primary products even if there is absolute equality of efficiency for manufactures pro¬ vided there is inequality for non-manufactured products. All that would then be true would be that there was no profitable basis for the exchange of manufactures for manufactures.33 The argument thus appears to move forward on its own momentum. As we should expect, however, the truistic element in this logic is of minor consequence for an analysis of the realities of the world. Some of the crucial questions in this reality seem to be the following: Why has the capitalist system, as distinct from pre-capitalist types of social organization, devel¬ oped geographical specialization on a world basis? Was it because all the specialized regions decided that division of labor was most efficient? Did the structure arise “naturally” through “free competition”? What are the uses of division of labor to different types of capitalist communities? What do we mean by national specialization in manufacture? It will prob¬ ably be obvious that arithmetical formulas will not contrib¬ ute significantly in answering such questions. That ancient Rome needed spices but could not grow them does not mean that ipso facto Rome would manufacture and Java grow nutmegs to exchange with each other naturally.

THE PRIMARY FORCE

109

And yet, although the English had no mass consumer demand for opium, they found it so profitable to encourage its cultiva¬ tion in northern India that, it is reported, its cultivation increased the value of the land [c. 1835] “fourfold, enriched the Zemindars, maintained thousands of people in collecting and preparing the drug, and benefited the commerce and shipping of Calcutta.”34 It is difficult to see how a theory of differential efficiency and area specialization could possibly explain such an important economic transition. In one of his famous colonial speeches in 1895 on the “True Imperial Policy,” Joseph Chamberlain said this to the British people: If by any chance you weaken the ties which hold your colonies and yourselves together, you have a very heavy loss to fear. You will lose your most promising market. You will lose a market which is quite different from a foreign market, because it is the market of your own people. ... In every way it is easier to trade with your own kinsfolk [the colonies included much of Asia and Africa] than it is to trade with foreigners; and therefore that is the most hopeful part of your trade.35 It is because the orthodox theories must needs disregard “the most hopeful part” of international trade that they tend to become progressively irrelevant. The first principle in the analysis of international trade, in my opinion, should be that the analyst stick closely to the existing pattern of the power structure of the capitalist system; this structure, let us note again, is organized dynamically by the leadership at the apex in its own interest, and it depends greatly upon passive areas of exploitation at the base. The necessities of this organization tend to vitiate the argument which attributes to naturalistic forces of division of labor and specialization the chief role in the organization of foreign commerce. No leader capitalist nation ever accepts the theory that it must specialize in what it is naturally best able to produce. If that were true, England would today be producing raw wool or indeed “corn”; the Netherlands, and probably some Tuscan cities as well, would be producing cloth, and so on. But it was, in fact, a national

CAPITALISM AS A SYSTEM

110

decision, which Portugal, for instance, was politically unable to make, that led England to devote more of its efforts to the manufacturing of cloth while Portugal increased its produc¬ tion of wine to be exchanged. There is no economic theory to account for the transition of capitalist communities from passive to active trading nations. The orthodox theory does not pose the question at all. For itself, the leader capitalist nation tends to abhor specialization; it strains toward diversification of production. Moreover, because of its advantageous commercial position, its ubiquity and power, it tends to have greater freedom to diversify than other national units of the system.36 Manu¬ facturing increases the capacity of the leadership to spread its risks and productive interests.37 It tends, thus, to limit de¬ pendence upon any one raw-material-producing country, but, because of the restricted specialization of the latter, to in¬ crease the dependence of backward countries upon the manu¬ facturing nation. No dynamic capitalist country could accept the role of specialist in producing raw materials, and leader capitalist nations do not encourage countries specializing in the production of primary goods to manufacture for the foreign market.

Consequently,

those

backward

countries

devoted to the production of one or a few raw materials as a result of social and economic pressures within the capitalist system tend to experience wider and more frequent fluctua¬ tions in income and employment than those of manufacturing nations.38 In an important sense, manufacturing in the leader nations of the capitalist system is not a unitary specialty. It ordinarily constitutes a congeries of industries, many of which tend to consign entire foreign peoples to “real specialization’’ in the production of raw materials to service them. In a leading nation a single corporation or industry may control the manufacture or refining of such raw materials as crude oil, tin, copper, asphalt, cotton, cocoa, rubber, beef, sugar, coffee, and so on; but frequently the entire economy of lesser coun-

THE PRIMARY FORCE

111

tries may depend upon the production of one or a few of these staples. The leader nations, therefore, do not specialize in the same sense that producers of primary goods do; the latter tend to become appendages to the industries of the former, and the relationship is not reversible. To the extent that a country is able to shake itself loose from the economic and sometimes military constraints of the leadership of the capitalist system, to that extent it will refuse to accept a position of producer of raw materials—as we have seen happen in the decisions of such countries as mercantilist England, colonial America, Japan, Russia, and more recently China. From this it would seem to follow that the principal determinant of the geographical specialization in the capitalist structure is not the physical fact of greater efficiency through division of labor, but rather social forces peculiar to capitalist society. One cannot deny the physical fact that division of labor leads to greater efficiency; never¬ theless, to say, for example, that oil from the Near East is refined in England, or oil from Venezuela in Curasao, because the laws of efficiency are thus served is to romanticize the facts of life. James Mill has done this with such elegance, and his position is still so much in harmony with modern ortho¬ dox theory, that it seems enlightening to cite this passage from him: The commerce of one country with another is in fact merely an extension of that division of labour by which so many benefits are conferred upon the human race. As the same country is rendered the richer by the trade of one province with another; as its labour becomes thus infinitely more divided, and more produc¬ tive than it could otherwise have been; and as the mutual supply to each other of all the accommodations which one province has and another wants, multiplies the accommodations of the whole, and the country becomes thus in a wonderful degree more opulent and happy; the same beautiful train of consequences is observable in the world at large, that great empire, of which the different kingdoms and tribes of men may be regarded as the provinces. In this magnificent empire too one province is favor¬ able to the production of one species of accommodation and an¬ other province to another, by their mutual intercourse they are

112

CAPITALISM AS A SYSTEM

enabled to sort and to distribute their labour as most peculiarly suits the genius of each particular spot. The labour of the human race thus becomes much more productive, and every species of ac¬ commodation is afforded in much greater abundance.39 It is as if economists had made a brilliant discovery of a law which would have given the people of the ancient world, if only they could have grasped its operation, all the “opulence and happiness” of modern England. But let us inquire more directly into the significance of “distant trade.” The term distant, as used by the mercan¬ tilists, referred mainly to trade with non-capitalist peoples. These were found chiefly in Russian ports across the White Sea, along the coasts of Africa, in Asia, and in America. Profits from distant trade tended to be vastly more than those which could be made by trade with European countries be¬ cause the capitalist merchants found little or no resistance, bargaining sophistication, or even physical power among the backward peoples. “From the very beginning of the modern era,” says Professor Earl J. Hamilton properly, “trade with the East Indies by the Cape route was almost incredibly lucrative. It is difficult to find in the annals of business either greater profits ... or records of sustained earnings that surpass those of the English and Dutch East India Companies during the seventeenth century.”40 No such simple explana¬ tion as that frequently proffered concerning the differences in product of the tropical and temperate zones could account for this differential flow of wealth to capitalist nations in the West. Indeed, economic theory could well afford to subordi¬ nate these differences, for they have been historically con¬ stant. What has not been constant, however, was the capitalist capacity to tap the “distant” resources. National leadership in the system depended not particu¬ larly upon calculations of cost of transportation and minute price changes resulting in movements of goods and funds among advanced capitalist nations, but rather upon large strategy which gave dominant nations wider access to the

THE PRIMARY FORCE

113

territory of backward peoples. Whoever controlled the major sea routes to the frontiers, where there was no such thing as “open market competition,” dominated the capitalist world. It is this point which Sidney and Beatrice Webb were making when they wrote: The British profit-makers spent their days, not in devising means of competing successfully against each other, or with foreign rivals, but in coping with new demands; searching for new materials; creating new products; adventurously open¬ ing up new markets; risking fortune, and sometimes even life, in commercial ventures, from China to Peru, from the wilds of Western America to the primitive barbarism of the Antipodes. The prizes were, of course, colossal. ‘It was not five per cent or ten percent,’ it has been observed, ‘but thousands per cent,’ that made the fortunes of the Britain of this glorious time.41 It should probably be remarked again that this major economic activity was directly participated in by only a few nations, and with different degrees of success even among them. Role of the Entrepreneur All along in this discussion of the dynamics of capitalism I have emphasized the role of the nation in the system almost to the exclusion of that of the entrepreneur. This distribu¬ tion of weights, however, is probably justified. The fact which distinguishes the capitalist entrepreneur from his congeners in the pre-capitalist world is essentially the nature of the society in which he lives. Major businessmen in leading cap¬ italist nations have the capacity and opportunities to dispose of resources in ways that are not available among subsidiary or dependent peoples. Their economic activities set the standard of entrepreneurial practice for the world; but these norm-setting activities are possible only within, or with reference to, the total social structure of the dominant so¬ ciety. In leading capitalist nations the entrepreneur may exercise his ingenuity with such scope and intensity that the creation

114

CAPITALISM AS A SYSTEM

of wealth seems to depend almost solely upon his wit. In regard to the accumulation of wealth of certain financial giants in the United States, George F. Redmond observes: “His wealth is a product of his own hand, heart, and brain.”42 He is indeed the capitalist miracle in microcosm, for he raises up fabulous fortunes apparently out of nothing. Thus it has been said: The Eastman fortune is truly one of America’s famous for¬ tunes. It has enabled George Eastman to give away 100 million dollars—still leaving many other millions in his possession. It is a fortune built up from nothing by an American with the ability to see a better way of doing something than it had ever been done before, by his willingness to devote all his time, energies and resources to translating his vision into a reality. ... It was the business brain of George Eastman that made the Eastman Kodak Company worth over a half billion dollars. . . . Eastman, al¬ though his company is largely a chemical company, was never a chemist himself. Essentially he is the businessman, the organizer, the manufacturer, the leader with the uncanny ability of sur¬ rounding himself with men who know how to find out the way of doing the things he wants done.43 The adventurous spirit of the major entrepreneur to which the Webbs refer in our quotation above is dramatically il¬ lustrated by the following famous statement of Jay Gould before a Congressional committee: The next great enterprise, if I may call it great, that I en¬ gaged in was the Missouri Pacific. I bought it one day of Com¬ modore Garrison, or, rather, the control of it. I had a very short negotiation with him. He gave me his price, just as we are talking here, and I said, All right; I will take it’; and I gave him a check lor it that day. All that time I did not care about the money made; it was a mere plaything to see what I could do. I had passed the point where I cared about the mere making of money. It was more to show that I could make a combination and make it a success. I took this road and began developing it, bringing; in othei lines which should be tributary to it. I developed new parts of the country, opened up coal mines, etc., and continued until, I think, we have now 10,000 miles of road. When I took the property it was earning $70,000 a week. I have just got the gross earnings for the last month, and they amount to $5,100 000 and we have accomplished that result by developing the country.

THE PRIMARY FORCE

115

and while we have been doing this we have made the country rich, developing coal mines and cattle raising, as well as the production of cotton. We have created this earning power by developing the system. All this 10,000 miles is fully built. The roads pass through the States of Ohio, Illinois, Michigan, Iowa, Missouri, Kansas, Nebraska, Arkansas, Texas, Louisiana and the Indian Territory, and we go into Mexico.44 The drive of leading entrepreneurs may not be limited, therefore, by consumptive needs or even by competition. “The great merchants of Venice, Genoa, and other cities,” Professor Strieder reminds us, “were by no means satisfied with an income merely appropriate to their class.”45 They had opportunities, largely because of their national capitalist situation, virtually crying out for development. It seems very unlikely, on the other hand, that any individual Mexican of the time, regardless of his business acumen, could have had the motivation and the audacity to boast, as Jay Gould did, that he had run a profit-making railroad into the territory of the United States. The critical capitalist entrepreneurs organize their enter¬ prises internationally. Through their foreign commercial and industrial establishments, they bind empires together. The major entrepreneurs of dependent and passive coun¬ tries, therefore, are mostly resident in leading capitalist nations. From there, they control the production and the foreign trade of the backward areas of the world.46 Ordinarily, the entering wedge of the businessman is his offer to supply consumption goods to a people.47 It is chiefly the export of this type of goods that keeps the industries of leading capitalist nations in motion. Moreover, to the extent that these industries can supply such goods to backward peoples, to that extent also the latter’s traditional economy becomes disrupted and subservient to a foreign market.48 The most dramatic rivalries among businessmen from major cap¬ italist nations thus tend to be in the so-called “open-door” areas of the world, i.e., mainly among dependent peoples. The entrepreneurial planning necessary to succeed in this

116

CAPITALISM AS A SYSTEM

market is indicated by Henri Hauser’s description of the German businessman’s methods: Given a market to conquer, [the German] proceeds like the General Staff, like the Military Academy studying a strategic operation. Climate, products, system (political, social, monetary, and customs), organization of transports, psychology of the in¬ habitants, their taste for the simple or the luxurious, their love of the solid or of the flashy, their connections with their present suppliers, and the means for supplanting these suppliers—these are the elements of the problem. . . .49 The capitalist entrepreneur regards the world as a pattern of areas more or less open to economic conquest, and not negatively as a collection of communities prescribed by the principle of economic specialization. Thus, in 1916, F. C. Waterbury, a producer of pharmaceutical goods, explained to the small American manufacturer: I do not believe that the manufacturer has to be a very wealthy man in order to obtain foreign trade. Some nine years ago . . . we were looking around for new markets, and in looking over the world’s map we found that the bulk of the people in the world were in Asia, so we got busy in China and India. I have crossed India four times, and I want to say that it is one of the easiest things to get business from the Orient. . . . You will find in the foreign trade today the best trade in India, the second best in China, and the next best in the Philippine Islands, and the fourth in Australia.50 In foreign trade, the entrepreneur becomes a national figure. His country’s cultural reputation and power go with him; and his success constitutes the vital spark determining political and industrial organization at home.

8 How Much Foreign Trade? From the very beginning of formal economic thinking,, a generic question arose concerning the importance of foreign trade in relation to the total economy. The way in which this question was answered partly determined the channel in which most subsequent thinking about the nature of the economic order flowed. Adam Smith concluded that the external commerce of Britain was so small relative to her internal trade that it was hardly worth the attention which statesmen were then lavishing upon it. In the same tenor, Jean Baptiste Say insisted that "the external commerce of all countries is inconsiderable compared with the inter¬ nal. . . . The internal commerce of a country . . . from its minute ramifications, is less obvious and striking; besides being the most considerable, it is likewise the most advan¬ tageous.”1 During the debate on the Webb bill in the United States Senate in 1917, Mr. William A. Smith said: “I am unable to see why men engaged in our export trade should have any advantage over people engaged in our domestic commerce, which is vastly more important and extensive and vital to our country than the overseas trade which is to be favored by this act.”2 Actually, in 1959, exports of goods and services from the United States was $22.8 billion and imports $23.6 billion, while the gross national product was approximately $480 billion. Thus exports and irnpoi ts each constituted only about five per cent of the GNP, which seems, to corroborate the arguments set forth above. Before Adam Smith, writers on political economy, espe117

CAPITALISM AS A SYSTEM

118

dally in France and England, customarily asserted their own country had everything a self-sufficient nation could desire. “In England,’’ said Andrew Yarranton in 1677, “there are more things to produce strength, riches, and manufacture . . . than in any two kingdoms and any two commonwealths in the world.” For in England there was “the great wool” the best tin, leather, lead, flesh, and “corn sufficient for the life of man.”3 In a similar listing of material blessings in France, the Chancellor of that country in 1484 inquired of the States General: “Can you find a land better provided with all the riches necessary for man’s wants?”4 We may recall also that the Chinese resisted the commercial overtures of the English and the Dutch on the grounds that they “possessed all things.”5 Indeed, many Americans today still think that the United States is “highly self-sufficient,” with all that such an idea implies. The Problem The importance of foreign trade to a capitalist nation cannot be estimated either by its small quantity relative to GNP, or by the extent to which the nation can theoretically exist on its own resources. In their time, such capitalist cities as Venice, Florence, Liibeck, and Amsterdam were among the richest countries on earth, but they had no natural resources of any great consequence. And the relatively back¬ ward England of the early seventeenth century, which seemed to possess in the land all the means of satisfying its people’s wants, has now decisively lost that capacity. In mid-twentieth century, “Great Britain depends on imports for all its copper, gasoline, cotton, sulphur, and rubber; for four-fifths of its wool, and for half of its food and iron ore.”6 Today, imports account for over a third of Britain’s national income. It is not simply because England does not have wool or cotton or gasoline that she must import them. Like all active capitalist societies, she deliberately produced the situation in which great wealth may be acquired only through a sacrifice

HOW MUCH FOREIGN TRADE.T

of self-sufficiency. We should expect that if the

119

United

States had the same foreign space relative to its size as Britain had for its expansion, she too, assuming that her territorial limits had ceased expanding, would become even more rapidly dependent upon imports for the raw materials of her industries—and even for food. In the process, however, the United States would have accumulated such enormous wealth that even her present “affluence” would seem but a paltry nest-egg. To say that Britain imports what she does not have and exports what she has in surplus is a truth, but a palpably otiose one. The quantity and kind of imports which Britain “needs” have been determined by her peculiar role in the capitalist system. Her imports varied significantly with the extension of her empire rather than with the basic consumptive demands of her population. The import and export requirements of nations and coun¬ tries within the capitalist system thus tend to be determined by their position in the structure of the system. Up to the middle of the nineteenth century, Japan was able to live contentedly with almost no foreign trade. But having entered the capitalist system on a dynamic level, she soon acquired insatiable needs for imports of raw materials and markets for her exports. The economies of backward nations under pressure from leading capitalist groups become the counter¬ parts of those of the latter; and, therefore, also come to depend on imports and exports—though in a passive way. Leading capitalist nations declare their needs and then fre¬ quently acquire them by war; consequently, backward peo¬ ples ordinarily have their needs determined for them. Since backward economies do not have the means—or at best only limited ones—of diversifying their output for the foreign market, their production is frequently geared to one or a few commodities. Thus we encounter the seeming paradox that backward countries may be more dependent upon foreign trade than leading capitalist nations. From this point of view, it may be shown that foreign trade means more, say, to

120

CAPITALISM AS A SYSTEM

Venezuela, Chile, Cuba, Ghana, Iran, Egypt, or New Zealand than it does to the United States. By definition, leadership in the capitalist system means domination of the foreign commerce of the world. This domination tends to reduce the leader’s dependence upon economic changes in any one country, but not upon broad movements within the system. The leader seeks to supply both its own consumption needs and those of others. Its capacity to structure the economies of the world in such a way that they become highly dependent upon its finished products and services creates, at the same time, certain critical import situations for it. Thus, although the United States may seem to depend less upon foreign trade because it con¬ stitutes a relatively small proportion of her GNP, she is, nevertheless, like all of her predecessors in the position of leadership, the largest foreign trader in the world. In 1954, to illustrate, her share of world exports and imports was 21.3 and 14.4 per cent respectively, as compared to 9.8 and 11.9 per cent for the United Kingdom, the next highest.7 An important fact about this situation is its dynamic char¬ acter. There are tremendous capitalist pressures toward max¬ imizing the share in world trade of so youthful a leader. In an address to the National Foreign Trade Council, Charles F. Huhlein declared: I wonder whether there is a manufacturer here who does not know that just as soon as he gets to running at full capacity, he is going to enlarge his capacity, so that the next season he will not be running at full capacity, but will be working like the devil to get there. . . . Foreign trade, from the standpoint of a good many of us implement men, is not being gone after exactly in order to be able to run at 100 per cent of our capacity, but to •stabilize our business and to provide a wider field so that a temporary depression here or there will be counterbalanced somewhat by a better condition, a normal condition, somewhere ■else.8 The internal economy thus becomes ever more closely tied to, and intermeshed in, the system. Indeed, the major portion

HOW MUCH FOREIGN TRADE?

121

of the principal products of an advanced capitalist societymay be exported. This fact has been true for the national capitalist cities and for older capitalist nations such as Bel¬ gium, the Netherlands, and Britain. In the process of becom¬ ing workshops, shopkeepers,

and bankers of the world,

capitalist nations create their own fabulous incomes,9 and simultaneously develop critical responsibilities with respect to the economies of other nations. The American Illusion In a capitalist nation such as Venice of the fourteenth century or the United Provinces of the seventeenth, no one would have asked whether foreign commerce is necessary for the prosperity of the community. It would have been crystal clear that neither of these countries could exist as capitalist societies without it. That the same applies to such modern countries as the United States and Canada is frequently overlooked, even though striking proof is available. The great westward movement of American capitalists which, as a phenomenon of capitalism, was not unlike British overseas expansion, tended to create the illusion that America is not immediately dependent upon the capitalist system. What is not always recognized is that the movement itself was an answer to forces generated within the system. Thus, even before its inception as an independent nation, the area con¬ stituting the United States, with its peculiar human and natural resources, began to assume an integral role in the international order, and its eventual leadership could have been predicted.10 The fact that the United States possesses larger quantities of natural resources than, say, Great Britain, does not make her any less dependent upon foreign trans¬ actions; commerce is indispensable to both nations. The vital spark of early American development, as we know, centered in New England, and Boston was its nucleus. It was here especially that the native capitalist interests clashed with those of the mother country. In a note on

CAPITALISM AS A SYSTEM

122

eighteenth century commerce centering in the northeastern American colonies, David Macpherson gives this summary: In addition to the commerce supported by the produce of their fisheries, they drove a very profitable circuitous carrying trade, which greatly enriched them, and supplied most of the money, which circulated among them. Besides building vessels for the service of their own commerce, they built great numbers, but of no very good quality of wood or workmanship, for sale; and from the molasses, which they bought in great quantities from the West-Indies (chiefly from the French islands) they distilled a kind of rum, which, though much inferior to that of the West-Indies, was very acceptable to the Indians, who joyfully received it in exchange for their furs and peltry. They also found a great vent for it among their own fishermen and others engaged in the New¬ foundland fishery; and they carried considerable quantities of it to Africa, where they exchanged it for slaves, or sold it to the resident European slave-merchants for gold dust, ivory, woods, wax, and gums.11 A merchant aristocracy, apparently as nationalistic as that of England and Holland, carried on business with the mother country and the continent.12 They created the mercantilist incidents which led to the war for independence. In a sa¬ tirical admonition by Benjamin Franklin on “Rules by which a Great Empire may be Reduced to a Small One” the core of colonial discontent was disclosed: Forget the restraints you lay on their trade for your own benefit, and the advantage a monopoly of this trade gives your exacting merchants. Think nothing of the wealth those merchants and your manufacturers acquire by the colony commerce; their in¬ creased ability thereby to pay taxes at home; their accumulating, in the price of their commodities, most of those taxes, and so levying them from their consuming customers; all this, and the employment and support of thousands of your poor by the colonists, you are entirely to forget.13 At the very dawn of America’s national existence, Joshua Oddy, a careful English observer, wrote: The Americans are an active, enterprising, spirited, and com¬ mercial people; the political situation of Europe has given them advantages throughout the world, to enrich themselves, and to

HOW MUCH FOREIGN TRADE?

123

create a power that Europe may soon feel; their neutrality en¬ ables them to enter into competition with us in every market on the globe. . . . They have timber very reasonable, and most other stores, within themselves; labour alone is dear, but that by no means counterbalances the other advantages in favour of America.14 Nor were the stakes to be derived from activities within the capitalist system overlooked. “The prosperity of [foreign] commerce,” said The Federalist, “is now perceived and ac¬ knowledged by all enlightened statesmen to be the most useful as well as the most productive source of national wealth; and has accordingly become a primary object of their political cares. By multiplying the means of gratification, by promoting the introduction and circulation of the precious metals, those darling objects of human avarice and enter¬ prise, it serves to vivify and invigorate the channels of in¬ dustry, and to make them flow with greater activity and copiousness.”15 The Jeffersonian embargo may be considered almost as a test of the consequences of abolishing foreign trade upon the American economy. As neutrals in the Napoleonic wars, American ships roamed the seven seas to their great profit.16 Eventually, however, both England and France decided to put limits upon this commerce. These restrictions led the United States to retaliate by refusing entirely to engage in foreign business. But let J. B. McMaster tell the story. Confronted by the challenge to American shipping, the United States had either to fight for her neutral rights, tamely submit, or abandon the ocean. Jefferson chose the last. In December, 1807, he put the Non-Importation Act of 1806 into force, and asked Congress to close the ports of the United States to foreign trade and commerce. An Embargo Act was quickly passed; and from De¬ cember 1807 to March 1809, all trade with foreign countries ceased. On France and Great Britain the Act produced no effect; that on America was ruinous. The people along the frontier evaded the law openly. A long series of supplementary Acts was carried, designed to enforce the embargo and ending with

124

CAPITALISM AS A SYSTEM

a Force Act, authorizing the President to use the army and navy to execute the law. Wherever it was possible, the Acts were defied. Against the Force Act the commercial part of the country rose as one man; and in March, 1809, the embargo was lifted.17 All later attempts at voluntarily limiting foreign com¬ mercial operations failed; consequently, the first alternative, that is, to fight, was decided upon. In June, 1812, war was declared against Great Britain for her part in ruining Ameri¬ can trade.18 The massive movement of the American people into and across the continent after 1815 was closely tied to develop¬ ments in the capitalist system. The rise of machine produc¬ tion in Europe, (in Britain particularly), the expansion into Asia, and the availability of manpower in Africa gave a new impulse to the utilization of resources all over the American •continent.

Especially important was the vastly increased

demand for tobacco, cotton, and sugar, which could be pro¬ duced in the South and sold abroad with greater facility than almost any product of the North. “Here was a group of com¬ modities almost as much in demand everywhere as the pre¬ cious metals themselves, and having large value in small bulk, so they were able to bear the expense of land trans¬ portation for long distances over the poor roads and new settlements.”19 Thus, the expansion of cotton and tobacco plantations in the South correlated with British colonial expansion. But the export of these products stimulated also the manufactures of New England and the agriculture of the midwest. In a very real sense, therefore, the American economy rested upon its foreign commerce, of which slavery became a pivot.20 (The latter, nevertheless, gradually became a limit¬ ing factor to further development). Once momentum was given to internal commerce, all sorts of forces came into play to remove artificial barriers to free exploitation of national resources. One of these was the availability of investment capital, particularly in London and Amsterdam, and the obvious profitability of railroad and industrial expansion in

HOW MUCH FOREIGN TRADE?

125

the South and Far West. As is well known, the Civil War inaugurated the “heroic age” of American capitalism; and British capital, sent in iron rails and locomotives secured by private and public debentures, supported the movement.21 The accumulated capital in the older imperialist nations thus found a profitable outlet in the United States, which, at the same time, tended more firmly to integrate the economic life of the country into the capitalist system. Thus even in its concern with internal expansion, the United States was responding actively to the economic im¬ peratives of the larger system. She employed and assimilated foreign capital in a way that led her “naturally” not only u> bring her own huge domestic market under her productive powers, but also to supersede the older countries in foreign' commerce. A critical index of this was her gradual acquisition of a major share of the world’s manufacturing production„ The following figures show the percentage of the total of this production for the four leaders from 1870 to 1929.22 Country

1870

1896-1900

1926-1929'

United States

23.2

30.1

42.2

Germany

13.2

16.6

11.6

United Kingdom

31.8

19.5

9.4

France

10.3

7.1

6.1

By 1900, American businessmen had entered the great markets of the world, and had become a force of considerable magnitude. Today, most of the South American countries and Canada are dependent on the United States for the major part of their imports and exports. In 1951, India relied on her for 33.5 and 18.5 per cent of her imports and exports re¬ spectively.23 The Pendulum I have essayed a running review of the nature of the in¬ tegration

of

the

American

economy

into

the

capitalist

system. It is time now to return to the question of the small-

126

CAPITALISM AS A SYSTEM

ness of foreign trade relative to internal commerce, and of its significance. I know of no mathematical formula capable of determing for us how much foreign trade a leading capitalist nation must have in order to remain prosperous and thus keep the system in forward motion. The nature and purpose of capitalist commerce forbid any such close calculation. Again, for an intimation of this fact, I go to the businessmen themselves for data. In 1917, W. B. Fleming, addressing the National Foreign Trade Convention in Pittsburgh, said: Gentlemen, if you are to realize your motto, “Greater Prosperity Through Greater Foreign Trade,” and that I know from the magnitude and quality of this Convention you are determined to do, it is necessary for us to do three things: We must have a merchant marine [applause], and whatever unreasonable obsta¬ cles stand in the way of that accomplishment must be removed, [applause] In the second place, we must finance foreign countries and foster American investments in those countries, [applause] Trade follows the flag and trade follows investment, [applause] But, gentlemen, if we accomplish both of these things—and we must accomplish both—we must do a third thing—we must be able to take care of our interests by the negotiation of proper commercial treaties, [applause]24 Clearly, no simple functional relationship between con¬ sumptive needs and income from abroad will do. The foreign commerce of a leader capitalist nation, even though its tendency is to expand without limit, is interlaced with the economic and political movements of the system. The answer to the question “How much foreign trade and under what conditions?” thus tends to vary according to the position of the country in the structure of capitalist societies.25 It has been said that backward countries desire, above all, stable prices for the raw-material specialties which they ex¬ port and the manufactured consumer goods which they im¬ port. “The capacity of economically underdeveloped coun¬ tries for making economic progress is affected by the prices they receive for primary products and by the relation between these prices and the prices of the manufactured goods and

HOW MUCH FOREIGN TRADE?

127

services which they buy abroad.”26 This seems quite obvious. However, the authors of this conclusion discuss it largely in a context of social welfare, not in the context of capitalist processes;

hence,

the

implications are

not

meaningfully

elaborated. For instance, the foreign trade in some of the most backward countries (and consequently those most in need of “progress”) is carried on mainly in the interest of “mother countries.” I have already noted that sometimes the economic life of an entire “underdeveloped” country may depend upon the profit-making decisions of a single corpora¬ tion of a leading capitalist nation. This relationship, it should be emphasized, is not reciprocal. Consumptive goods, which are imported mainly from leading nations, come in far greater variety; and the extent to which the latter approaches parity with the market value of exports tends to be influenced by the position of the backward country in the structure of the capitalist system. It is necessary to consider a number of factors in estimating the role of foreign commerce in the economy of a leading capitalist society. The first and most important of these seems to be the fact that, as the society matures, more and more of its total manufactured product tends to be exported, hence imports are relatively augmented. The capitalist process of attaining and maintaining leadership in the system assures that development. In a capitalist society, therefore, foreign commerce is seminal to the ordering of economic life. Com¬ menting on J. A. Hobson’s reference to the smallness of England’s

foreign commerce,

Paul

Mantoux makes

this

point: In 1710 England consumed goods to the amount of about sixty million pounds. Imported products were only represented by about a fifteenth of this sum, at the outside by four and a half million. This is true, but, if we may borrow an analogy from natural science, only a negligible quantity of ferment is needed to effect a radical change in a considerable volume of matter. The action of foreign trade upon the mechanism of production may be difficult to show, but is not impossible to trace.27

CAPITALISM AS A SYSTEM

128

A number of American businessmen have expressed similar views. In 1915, to illustrate, the Honorable William C. Redfield, Secretary of Commerce, referred to the foreign trade of the United States as a pendulum: I remember [he said] there are those who say that the foreign trade taken at its total bulk is but barely one-tenth in volume of the domestic trade and the home market is after all the supreme thing, and to that I answer that the pendulum is by no means as big as the clock, but it controls the whole movement ■of the mechanism. Today it is visible, as it has not been visible always heretofore, that our foreign trade, our export movement, is that which very largely fixes and controls the place of the United States in the international financial and commercial councils of the world.28 In the second place, a summation of all domestic commerce for purposes of comparison with foreign commerce is very likely to be misleading because capitalist commerce tends to form a hierarchy of importance and interdependence. The trade in herrings, for example, might have been small relative to the total internal commerce of the cities of the Hanseatic Teague, but it was the critical trade, nevertheless; so was the trade in finished woolen cloth for sixteenth and seven¬ teenth century England, and later the trade in cotton goods. Today, control of the market for petroleum and the base metals, and for their refinement and manufacture, tends to determine control of the commercial world. About 40 percent of the South’s cotton is exported and, as G. R. Parker pointed out in 1933, businessmen trying to sell ■goods in the South have a vital interest in cotton exports.29 Between 25 and 42 percent of American tobacco, soybeans, wheat, and rice is exported; 22 to 35 percent of sewing machines, tractors, textile and rolling-mill machinery, and 16 percent of motor trucks and coaches go abroad. On the other hand, all of our rubber, tin, coffee and cocoa, and most of ■our chromite, asbestos, and manganese are imported. So is over a third of our copper, lead, zinc, and aluminum.30 In the third place, some branches of industry tend to have

HOW MUCH FOREIGN TRADE?

129

vast proliferating effects so that all sorts of subordinate in¬ dustries spring from them. The industrial life of Florence, for example, centered on cloth finishing and dyeing; and the decisive strides taken by the British economy after the industrial revolution may be measured by the progress of its cotton manufactures. “The rightly integrated structure of American industry,” says Claude Murchinson in making a similar point, “means that every individual part is in a real sense a contributor to the operations of every other part. Each industry does more than to provide for its own employment. It is responsible for the ability of other industries to em¬ ploy.”31 Such industries as the manufacture of locomotives and automobiles, the milling of flour, and the weaving of cotton textiles are key industries involving an extensive “multiplier effect.” When leading capitalist nations decide that they can ex¬ pand their key industries sufficiently to compensate for loss of minor industries due to imports, they usually advocate free trade.32 Indeed, certain types of exports are particularly generative of demand for other goods from the exporting country. For instance, the export of industrial machinery to backward countries usually calls for the export of skilled labor; hence not only is the continued demand for mainte¬ nance materials created, but also that which derives from the cultural pull of the technicians. Concerning railway con¬ cessions in dependent countries, one distinguished industri¬ alist observes: The intent of all these concessions is so simple and frank that diplomatic subterfuge is dispensed with; all orders and contracts for material for the building of these railways will be placed in the country supplying the loans. It follows that all collateral industries induced by the building of railways, by the improve¬ ment of cities and the surrounding country, telegraph and tele¬ phone lines, manufactories and mills, electric light plants, street railways, and the thousand other ramifications of commerce, will each yield their quota of orders to those supplying the funds for development.33

CAPITALISM AS A SYSTEM

130

Finally, foreign commerce not only acts as a “pendulum,” a stimulator of internal commerce, but it is also a producer of income from operations entirely outside the nation. Great Britain, Holland, Belgium, and France have been able to draw great wealth from other countries through such oper¬ ations. Referring to British investments, the capital for which was accumulated largely by imperialist devices, Herbert Feis observes: “The income received from foreign investment mul¬ tiplied itself three or four times during the three decades preceding 1914, while the total national income scarcely doubled.”34 Thus, the advanced capitalist nations are tied by their pockets to the system—and especially to the back¬ ward areas. Development of the Capitalist Domestic Market Some writers have stressed what might be called the boot¬ strap process of internal development. This generally involves the tacit assumption that capitalism is based upon the use of capital, and that the most advanced countries have found the secret of using capital extensively in “domestic” produc¬ tion. Extensive use of capital heightens productivity all around: the standard of living is raised, engendering in¬ creased demand, which in turn stimulates further investments in capital goods. The trouble with backward countries, ac¬ cording to this theory, is that they are caught in a “vicious circle.” Their “low real income is a reflection of low produc¬ tivity, which in its turn is due largely to lack of capital. The lack of capital is a result of the small capacity to save, and so the circle is complete.”35 The crux of the problem, then, inheres in the condition of the domestic market. The market in backward countries is too small: too limited in extent or too poor.36 Japan is an example of a country which, through domestic planning, broke out of the “vicious circle.” “Japan’s early industrial development,” says Professor Nurkse, “before 1914, was based predominantly on an over-all expansion of the domestic

HOW MUCH FOREIGN TRADE?

131

market. It was not until later that export markets became important for Japanese industry. Capital is made at home.”37 In fact, however, even in the days of the chartered com¬ panies, the foreign market and its culture were already shaking the foundations of the Japanese economy. The revo¬ lutionary changes which occurred in Japan after the middle of the nineteenth century can be explained only in terms of that country’s external relationships. The prerequisite was the prying open of her doors to the capitalist system. It is doubtless unnecessary to add that the domestic approach can hardly raise meaningful questions about the basis of indus¬ trialization in advanced nations, and the reasons for its rel¬ ative absence in backward countries. As I have noted, industrialization in the sense of the use of artificial power is not the critical mark of an advanced capitalist society, even though today as always the two are positively correlated. In a capitalist society, expansion of the domestic market seems to follow that of the foreign market. In simplified terms, this seems to be what happens: (a) The capitalist nation gains control of production of a key product, say, salt, wool, fish, cotton goods, or machinery, and pushes the sale of this abroad with all its power in the face of com¬ petitors. (b) This commerce calls for the employment of an ever-larger part of the population who, taken away from the land, must now live on wages, profits, rent, and interest as means of purchasing consumption goods, (c) Demand is thus created for goods of all kinds, and new businesses arise to satisfy this need, (d) But some of these businesses are pecu¬ liarly dynamic, and will seek to follow the major product abroad and take advantage of the market situation already opened up. (e) This secondary expansion brings more people into an urban situation who work for wages, and not only intensifies the demand for existing consumption products but also makes possible a further commercialization of con¬ sumptive needs, (f) Again new commodities enter the foreign trade of the country.

132

CAPITALISM AS A SYSTEM

Although leading capitalist nations have superseded each other, this process has never ceased.38 Sever the foreign mar¬ ket and the process—the urbanizing process under capitalism —will be reversed. Larger output through widening of the market usually brings decreasing costs, and this further enhances the whole movement. Technological improvement, to be sure, will also augment and expedite the process. As the process unfolds, the nation may find it good policy to exclude certain foreign consumer goods from its home market, and to declare war upon any other power which threatens to obstruct or invade its foreign market. All this calls for the use of relatively large quantities of capital goods—which need not be merely machinery. Demand, then, in a leading capitalist nation, develops intrinsically with the productive growth of the society. The consumers’ demand of a capitalist society is not present, for instance, in a feudal society. It is thus the peculiar capitalist situation, which J. B. Say observed and attempted to formu¬ late into a universal principle, which is of decisive im¬ portance. Like all economic truisms, Say’s law can hardly be categorically denied; indeed, it is easier to accept than to reject it. The suggestion that in the very process of produc¬ ing goods the means by which the demand for them can be satisfied are also created39 may be useful if it is not abstracted from social situations where it may be properly modified. It readily becomes irrelevant when “positive economists” play with it in “elegant” economic games. At least two important facts must be kept in mind when considering the nice adjustment, here described, of demand and supply in the capitalist domestic market: (a) there are likely to be more or less extended lags in the accommodation, and (b) the entire process is anchored in external societies where, because of its operation, there may develop situations of endemic economic maladjustment. The unemployment and chronic vagabondage which resulted from early specializa-

HOW MUCH FOREIGN TRADE?

133

tion in the raising of sheep in Engand were not relieved until English

merchants

began

to

capture

the

markets

for

woolen cloth and other manufactures. During this period, however, English society was being transformed from passive to active capitalism. In backward societies of the capitalist system, the crucial factor of aggressive foreign commercial behavior is lacking. Everyone has heard about the changes which the excessive production of petroleum has wrought upon the Venezuelan economy. It would seem that Venezuela could become an ad¬ vanced nation according to the standards of the capitalist system. Indeed, Professor Nurkse suggests this: Petroleum accounts for 90 per cent of [Venezuela’s] exports, but [this] employs only about 2 per cent of its labour force; the majority of the people work in the interior for a precarious sub¬ sistence in agriculture. If, through the introduction of capital and increased productivity, the domestic economy were to expand so that people working formerly on the land alone would now supply each other with clothing, footwear, houses, and house-furnishings as well as food products, while all the time petroleum exports re¬ mained the same and imports likewise constant in total volume, nothing but gain would result to the inhabitants without any loss to the outside world.40 On its face, this reasoning sounds logical; it does not, however, take into consideration the peculiar constraints of the capitalist system. It misconstrues the nature of the growth of a capitalist society. The fact that leading capitalist nations control the extraction, export, and refining of this dominant commodity constitutes the major influence in the economy. The class structure of the society, the uses of income, the composition of exports and imports, the uses of the arable land—all tend to be subordinated to the conditions of the export of oil. Capitalist nations have an interest in the Venezuelan internal market;

it is consequently infinitely

easier to say that natives can supply it “without loss to the outside world” than for them to do so in fact. To expose that economy to the American productive system is to rele-

CAPITALISM AS A SYSTEM

134

gate native manufacture to a permanently inconsequential place. We may list some of these differentiating conditions obtain¬ ing in the backward countries with Venezuela as a principal illustration: (1) The entrepreneurs of Venezuela’s principal industries, the extractive industries, are citizens of leading foreign capi¬ talist nations. The heart of capitalist planning for the country, therefore,

is not Venezuelan. Capital is concentrated

in

production according to the strategy of foreign enterprises, and Venezuelans are not themselves actively in the foreign market. (2) The Government receives an income from its grant of rights to exploit the national resource; but no matter how great this is, it cannot generate positive capitalist action. The income is paid out heavily to governmental bureaucrats and military personnel as salaries, and as wages to employees on public works—and most of these works may be deter¬ mined by alien exploitative needs, or military and recrea¬ tional objectives. (3) Since personal income is not primarily attracted to business enterprise, it is devoted to consumption and sav¬ ings. There is, consequently, an inordinate demand for luxuries produced abroad; and, paradoxically, for foreign securities. Capital may thus be heavily exported from a country which is “underdeveloped.” (4) A significant part of the income paid to foreign techni¬ cal workers, and in profits to subsidiary foreign enterprises which cluster about the key industry, is also exported. This outward flow is in contrast to a total absence of exploitative inflow to the backward country. (5) Because the inferior home industries are not dynamic, having little or no momentum toward an expanding market, they are put at an increasing disadvantage as foreign exchange becomes available. Department stores become distributing centers

for foreign

manufactures,

while

local

industries

HOW MUCH FOREIGN TRADE?

135

stagnate or decay.41 In this situation, instead of a rising standard of living and an activated demand for consumption goods, native workers may be driven back to the land to exist at a subsistence level. (6) The logic of Say’s law is thus lost in this situation. The manufactured goods offered do not create the means of their absorption in the backward countries themselves. “If we could sell,” says Charles F. Darlington, Foreign Exchange Manager of General Motors Corporation, “throughout the world to any individual who wanted to buy a Chevrolet or a Buick or some other of the Corporation’s products, and who had the money to pay for it, as we can here in the United States, what an immense foreign market we could have! Ours and other American cars please consumers everywhere, and like so many typical American goods, almost do they sell themselves through their quality, attractiveness and moderate price.”42 While the American cars that are purchased in backward countries may enhance the buying capacity of American workers, these cars and other imported manufac¬ tured goods may serve so to curtail native employment that workers in those countries may become even farther removed from the chances of owning a car. The domestic market of a leading capitalist nation and that of a backward country tend, therefore, to develop distinct processes. In the advanced society, effective demand derives from production for an open-ended market; hence part of this demand may even precede the supply of domestic con¬ sumptive goods. In backward countries, consumptive goods from abroad are likely to flood markets in which there is no correlative predisposition or capacity to buy and which may produce more or less grievous consequences in the economic life of the people as a whole. The capitalist system is not circular but pyramidal and open-ended, especially at its broad base_and imperialism secures the dependence of this base.

9 Imperialism Imperialism, as I have attempted to show, seems to be an abiding attribute of capitalism.

It is not,

as sometimes

thought, a late nineteenth century development; rather, it has gone hand in hand with the rise of the capitalist system as a necessary component. Necessity of Imperialism Capitalist foreign trade, especially as it serves dominant nations, proceeds directly into imperialistic relations; hence all the leaders, ranging from the national cities to the United States, have been imperialists. The expansion of capitalist commerce tends to set up relationships abroad that involve the very means of existence of the capitalist nation, which then becomes obligated to protect the markets upon which its internal economy is built.1 This ordinarily leads to some form of control in foreign territory. Moreover, actual or po¬ tential rivalry among capitalist nations sometimes compels them to pre-empt market situations either by annexation of territory or by acquisition of commercial and political in¬ fluence over foreign peoples. Even during the days of the citystate system of capitalism, it was clearly apparent that no national city could rise to eminence without an assured complement of backward areas and their resources. The intrinsic expansionist drive and the cultural capacity to make it effective thus tend to be irresistible forces in capitalist development. Wherever the resources of backward peoples become unduly exposed, the roving ships of the mer136

IMPERIALISM

137

cantile state will not pass them up.2 Since capitalists are not mere wandering traders and pirates, however, their more or less permanent control of these resources becomes a natural means of extracting from them a maximum of wealth. When the Dutch and English began to retrace the old Spanish and Portuguese trade routes, they had principally commerce and plunder as their objectives. And yet, almost from their original voyages, the forces of imperialism came into play. Opportunities for profits were so great that the trade could not be reasonably abandoned. Instead, it had to be made secure. The long journey to the East called for permanent waystations; and in the great markets themselves, “factories” had to be set up in order to assure cargoes. In the West, especially in the West Indies, sugar was gold; to get it, however, the islands had to be appropriated and labor supplied.3 Concerning the evolution of the economic role of the British East India merchants, John Bruce, an official of the company whom we have already met, asserted:

It

ought to be remembered that the relation of Great Britain to its Asiatic dominions is of a mixed and novel kind. It began with commerce; it was reared up by arms; it has termi¬ nated in the acquisition of territories, by treaties and by conquests.”4 Indeed, in an important sense, we may think of imperialism as a vital means by which outstanding capitalist nations seek to stabilize and expand their commercial oppor¬ tunities. This indispensability of imperialist acquisitions, as it related to Great Britain, was starkly enunciated in a foreign policy address by Joseph Chamberlain, illustrious exponent of his country’s interests: The Empire ... is commerce. It was created by commerce, it is founded on commerce, and it could not exist a day without com¬ merce If I were to ask myself the oft-repeated question, whether the Empire is destined to follow the empires of antiquity and to perish, and the memory of it to be forgotten, or whether we are to sink like some of our rivals into a condition of medioc¬ rity or obscurity, I confess my answer would depend not so much upon what may be done or said by the population of these small

CAPITALISM AS A SYSTEM

138

islands, but rather upon the eventual determination of that greater Britain which forms . . . the larger portion of the Empire. . . . We in this country are . . . pretty well convinced of the as¬ sured future of our colonies and our dependencies.5 Imperialism, therefore, is by no means a nugatory excres¬ cence of capitalism; it has, on the contrary, provided its very base, its broad structural underpinning. Accordingly, then, this realization has led all leading capitalist nations properly to associate their imperialist position with their destiny. Since leader nations always seek to secure the lion’s share in all new ventures abroad, there can be no room for content¬ ment with existing possessions. Competition for leadership will not allow it. Again, Chamberlain seems to be in point: I am convinced that it is a necessity as well as a duty for us to uphold the dominion and empire which we now possess. For these reasons, among others, I would never lose the hold which we have over our great Indian dependency, by far the greatest and most valuable of all the customers we have or ever shall have in this country. For the same reasons I approve of the continued occupa¬ tion of Egypt; and for the same reasons I have urged upon this Government . . . the necessity for using every legitimate oppor¬ tunity to extend our influence and control in that great African continent which is now being opened up to . . . commerce; and, lastly, it is for the same reasons that I hold that our navy should be strengthened. . . . Imperial defence is only another name for the protection of Imperial commerce. . . ,6 The Backward Peoples Inasmuch as capitalist commerce thrives upon systemization and efficiency, it abhors the non-technical, irrational economic traits of pre-capitalist peoples, who must conse¬ quently be brought under the influence of the market and made to conform to its rules. Peoples whose culture is such that they cannot make the effort independently, will be taken over

and subjected to the “civilizing” discipline of

capitalist nations. The urge in this direction has been over¬ whelming. In 1915, Willard Straight, President of the Amercan Asiatic Association, made the following analysis of the Chinese situation:

139

IMPERIALISM

In China . . . the government is, and has been, weak. There is constant pressure on all sides. One legation insists that a certain contract should be concluded with this person, another demands that the contract should be concluded with that firm. In many cases the contract is awarded to the people whose diplomatic rep¬ resentatives have brought the strongest influences to bear. The situation is unfortunate. It would be much better for all con¬ cerned if the Chinese government were not so weak, if it could withstand demands of this sort and consider proposals submitted on their commercial merit alone.7 This sort of weakness tends to be an open invitation to the major powers to come in and set the house in order: to the United States in South America, to Great Britain and France in the Middle East, to Japan in China, to all the leaders hastily in Africa, and so on.8 One of the earliest “scrambles”

for the territory of a backward people was that

between the French and English for India. The fate of that country was decided when the following situation arose: During the war which terminated in 1748, France began to form the bold scheme of becoming one of the sovereign powers in Hindoostan. The nature of this undertaking, and the probable success of it, with reason alarmed the English company, who now saw that the seats of their ancient commerce in the East were in danger of falling into the hands of an European rival; and that those profits, which they had for so many years drawn from their trade, might, in a moment, be swept away from them by the united arms of their Indian and French enemies. These alarms were, in appearance, dispelled by the peace of Aix la Chapelle, in 1748, which restored their Indian factories to the French and English nations. It was impossible, however, that either of these powers could be indifferent to a prize of such value as a territory in Hindoostan, which might afford a revenue sufficient to support the force required to defend it, and a surplus sum for the purchase of investments for the European market.9 The outcome of this British anxiety is, of course, well known to all of us. The imperialist scramble involves a situa¬ tion in which rival capitalist nations find a native ruler so im¬ potent that he cannot even guarantee the privileges and concessions which they are able to extort from him. The rivals thus come into conflict over what seems to be their

140

CAPITALISM AS A SYSTEM

rightful interests in the area. The process apparently follows a logic of its own, with the major prizes settling eventually in the hands of the most powerful nation. Nature of Imperialism Capitalist imperialism, then, is a vital part of good business. Specific imperialist projects may default, but on the whole imperialism provides the most lucrative and capitalistically significant branch of business enterprise. The early chartered companies for example, kept books; and they determined that their investments should continue to pay handsomely. The relatively recent direct involvement of the state as imperialist may have obscured this fact. Feudalistic states tended to be apathetic and unconcerned about their subjects’ drive for preferential commercial positions abroad; they seldom, if ever, went to war over trading concessions. But the very earliest capitalist communities, Venice and Genoa, for ex¬ ample, fought each other as nations because of antagonistic imperialist claims in the Eastern Empire and in the Levant. It was largely private business organizations, however, which laid the foundations of the British, Dutch, and French empires. And, as we know, it took time before the British, French, and German nations could identify themselves com¬ pletely with the interests of their businessmen. When this happened, the nations themselves began to feel the same desperate urgency in their imperialist position as did their businessmen all along. The Germans and Japanese were slow to achieve capitalist nationhood. But their bid for a stake in the backward coun¬ tries, say after 1880, did not begin “the imperialistic stage” of capitalism; it simply intensified international rivalry and induced new fears about survival among the old colonial powers. The scramble for China was consequently speeded up, and Africa was finally “partitioned.” “The governments,” observes Grover Clark, “took over the expenses involved in protecting the interests which already had developed and in

IMPERIALISM

141

expanding the opporunities for further trade. But they did not take over the trade itself. That remained in private hands.”10 The governments could well afford to pay these expenses, however, for they now exploited new sources of revenue in the foreign countries. The role of imperialism as a fundamental component of the economies of leading capitalist nations has not changed in essence. It serves to maximize and stabilize domestic in¬ come at the expense of more or less backward peoples. Exploitation The essence of imperialism,

therefore, is exploitation.

Domination facilitates exploitation. It is here that the capi¬ talist uses of the persons and property of others in the interest of domestic enterprise may be observed in their purest forms; that

is,

the

‘‘distinctive

parasitic”

relation

of capitalist

groups to backward peoples.11 Of the many illusions con¬ cerning the nature of imperialism, one of the most deceptive is that at some time after the American Revolution a “new colonial policy” of capitalist nations transformed funda¬ mentally the imperialist intent of leading nations. Following the American secession, it gradually became evident that the colonies of European settlement could not be held in com¬ plete subservience to the mother country; they were, there¬ fore, granted progressively larger measures of self-government. But this was not a fundamental change in colonial policy; it was rather an expedient within that policy. The chive to

expolit

yielded

only

in

the

face

of

opposition;

it

remained intact where opposition was weak. In 1897, for instance, Mr. Chamberlain put it in this way: The British Empire is not confined to the self-governing col¬ onies and the United Kingdom. It includes a much greater area, a much more numerous population in tropical climes, where no considerable European settlement is possible, and where the na¬ tive population must always vastly outnumber the white in-

142

CAPITALISM AS A SYSTEM

habitants; and in these cases also the same change has come over the Imperial idea. Here also the sense of possession has given place to a different sentiment—the sense of obligation.12 That this “sense of obligation” was not new is indicated by the views of the great Colonial Secretary himself. In the more concrete situation of a Parliamentary debate, he gave his reasons for encouraging the colonization of East Africa. “We shall,” he said, “get from this country gum and rubber, and perhaps even wheat, and in return we shall send out large

quantities of manufactures;”13

which

is,

of course, precisely what seventeenth-century mercantilists thought colonies were good for. As Parker T. Moon observes: “In addition to the Dominions there is still the Empire.”14 Even in our own day, the granting of formal self-government to a number of non-European countries does not mean that colonialism in the tropics has all but ended. Other peoples will doubtless be forced to achieve their freedom by making it appear that they are determined and able to take it for themselves. The Technique Imperialism rests ultimately on the peculiar capitalist use of superior

power and deception

among backward

peoples. Moreover, these peoples, unlike even the weakest European nations, tend to fall outside international law and civilized morality: they have no rights. In the dealings of capitalist traders with them, a matter of prime importance has been the form of their political organization. Almost without exception, this organization has been highly auto¬ cratic. The non-political masses lived mainly by agriculture, with minor trade and industry serving chiefly domestic con¬ sumer needs. In none of these countries, not even in pre1860 Japan, did the native merchants hold positions of influence among the ruling classes. This general type of social structure was thus made to order for invasions by capitalist agents.

IMPERIALISM

143

Unlike ordinary wandering traders, the representatives of capitalism sought immediate access to the rulers of native governments.

They

ordinarily

approached

the

latter

as

genuine ambassadors, with greetings and sometimes presents from their own sovereign. What the merchants wanted then, as previously noted, was trading rights; and, usually, the native chief was able to grant these without limit. It was in this peaceful way that a bare handful of capitalist merchants succeeded in striking off the heads of some of the most power¬ ful backward states. Few, if any, of the non-European rulers knew the differ¬ ence between the capitalist entrepreneur and the traditional wandering trader. Hence they could not perceive that free commercial concessions to capitalists involved also a grant of their own authority over their subjects and resources. From the moment such concessions were made and utilized, the economic and social order of the backward country began to deteriorate and to be subjected to a new kind of organiza¬ tion. Most important of all, the native economy entered an international system of markets operating in the interests of capitalists and virtually closed to the comprehension and creative reach of the natives. Sooner or later, by one means or another, the natives and their leaders became conscious of the disintegrating effects of the new commerce, and attempted to resist it. The way in which imperialists have dealt with this reaction has been determined by specific conditions in given situations. The range of these conditions has been such as to call for either direct suppression, various compromises, or even temporary withdrawal. But usually the contact has already made the native ruler dependent upon the new merchants for economic support, thus estranging him from his own people.

He

presently came to realize that he had pressing needs for money to provide for such things as his personal consumption and the maintenance of an army, and that the merchants had money in abundance. The society, having lost forever its

144

CAPITALISM AS A SYSTEM

traditional cohesion, could now be held together only by the ingenious authors of its disintegration. In a note for 1764, the economic historian, David Macpherson, seems to express astonishment over this process when he wrote: “The sovereigns of India, whose protection the Company used formerly to court, were now . . . sunk into the situation of dependents upon the Company (or perhaps to speak more correctly, of [the Company’s] servants in India) at whose pleasure they possessed their precarious dignities.”15 And, in a famous passage. Lord Cromer, de facto ruler of Egypt from 1883 to 1907, describes a more advanced type of transaction between capitalists and the un¬ sophisticated ruler: The maximum amount of harm is probably done when an Oriental ruler is for the first time brought in contact with the European system of credit. He thus finds that he can obtain large sums of money with the utmost apparent facility. His personal wishes can thus be easily gratified. He is dazzled by the ingenious and often fallacious schemes for developing his country which European adventurers will not fail to lay before him in the most attractive light. He is too wanting in foresight to appreciate the nature of the future difficulties which he is creating for himself. The temptation to avail himself to the full of the benefits which a reckless use of credit seems to offer to him, are too strong to be resisted. He will rush into the gulf which lies open before him, and inflict an injury on his country from which not only his contemporaries but future generations will suffer.16 Capitalist foreign traders, in their drive for commercial privileges, have from earliest times to the present day made strategic use of gifts to autocrats. The giving of presents, that seducer of unwary chieftains, has been good business. As we have seen, the Venetians gave presents as a commercial stratagem to Charlemagne; the Hanseats to English sover¬ eigns, and so on.17 Although the giving of presents to Indian princes was a regular practice of the agents of the East India Company, the latter forbade its representatives to receive them. The company required Robert Clive and the gover¬ nors who succeeded him to take an oath that they “would

IMPERIALISM

145

not receive any present from any of the country powers exceeding the amount specified in [their] covenants with the company.”18

The

capitalist

gift

has

been

a

means

of

disarming the feudal or folk ruler and obligating him to the wishes of the merchant. Rhodes and Carthage were great trading communities; but their merchants had perfected no such technique. It is very likely that if Carthage had acquired the secret of capi¬ talist organization, she would not have had to attempt the conquest of Rome through sheer force of arms. She had every opportunity to deprive Rome of the substance of her inflow¬ ing tribute. Venice did precisely that to Constantinople. Out¬ side capitalist Europe and European settlements, only Japan, after a struggle of about 200 years, has been able to survive the socially disruptive effects of capitalist exploitation. Situations of Exploitation In defining imperialist exploitative situations, three major factors should be taken into account: (1) the position of the imperialist nation in the structure of the capitalist system; (2) the historical epoch; and (3) the cultural condition and politi¬ cal posture of the host country. (1) Only leader capitalist nations can make fullest use of the resources of backward peoples. If, through historical accident, retarded countries such as Spain or Portugal come into possession of valuable exploitable areas, the leader nations will ordinarily seek to establish control over those resources either by prying away the territory itself or by working through the authority of the weaker countries and thus pyramiding the exploitation. In the latter event, forces tending to the elimination of the secondary power come into play insistently and cumulatively. With the rise in effective¬ ness of technology, small or inefficient nations have become less and less able to make the best use of the raw-material capacity of their colonial possessions; and some, like Portugal, Belgium, and Holland before the Second World War held

146

CAPITALISM AS A SYSTEM

their possessions mainly because of economic rivalry among the great powers. Diplomatic and military actions relating to indirect ex¬ ploitation are usually very complicated. When it seems profit¬ able and convenient, the most powerful capitalist nation will guarantee the integrity of the subordinate nations’ foreign possessions;19 or it may encourage the “independence” of those possessions when direct relations with them seem more advantageous. Great Britain followed both policies in regard to the Spanish and Turkish empires. It is the implicit policy of the United States today to uphold and protect the stability of all imperialist holdings even against the resistance of the natives. The minerals of the former Belgian Congo, one of the most severely exploited colonies, are of use particularly to American industries. In 1945, Fred I. Kent, Director of the Bankers Trust Company of New York, said in point: We know that in the old days they [the Dutch] met their obliga¬ tions extremely well. But we know another thing: that Holland imported from us more than we imported from Holland; and that the difference was made up largely from imports which we took from the Dutch East Indies. So that, as I recall it, in one year before the war we exported ninety-eight millions to Holland and imported only something like forty millions and took in some¬ thing like sixty-two millions from the Dutch East Indies. That is one thing to think about.20 Exploitation of colonies by non-leader nations tends to be more severe. Among the causes for this is that the secondary nation itself may be looked upon as exploitable by the leaders; hence, the pressures of exploitation may be multi¬ plied in its effects upon the natives. Moreover, the typical exploitative devices—the withholding of modern education, discouragement of political participation, promotion of “cul¬ tural parallelism,” racial intimidation and coercion—are likely to be more extensively used in the pyramided situation. Because of its position as a less efficient, intermediary interest between the major economic power and the ultimate labor¬ ing masses, the secondary imperialist nation tends to absorb

IMPERIALISM

147

the share of income which might otherwise go to the natives. We should expect that the people of Angola, for example, would fare better as colonials of the United States than as Portuguese subjects exploited by United States interests; or, indeed, under any circumstance, than as Portuguese colonial subjects. (2) The historical epoch of imperialist exploitation in¬ volves mainly broad changes in available opportunities and in national justification for imperialist action. If we disregard earlier imperialist expansion in Europe itself, there seem to be four major movements with respect to opportunities: (a) the gathering of large quantities of loose or hoarded wealth in America, Asia, and Africa; (b) the occupation of the choicest areas in these continents and their islands, sometimes for settlement and sometimes for exploitation of their labor and resources; (c) the division and redivision of the peoples and resources of the backward countries between about 1880 and the Second World War; and (d) reaction among the backward peoples, beginning effectively after the First World War and continuing since with increasing energy. These movements—not precisely defined as stages, of course—show that capitalist nations have been finding it more and more difficult to maintain imperialist opportunities. At first, imperialism was justified virtually as a religious duty; then, by about 1600, as a right shared by all nations to participate in the “commerce” and settlement of the world; later, with the coming of the Victorian expansion, as a duty to civilize the backward peoples; and finally, as a “sacred trust of civilization,”—a trust to be held until the people are “able to stand by themselves under the strenu¬ ous conditions of the modern world.” The latter is a principle laid down in Article XXII of the Treaty of Versailles. More recently, one important index that a backward people is not yet strong enough to stand by itself has been any sign that it intends to put itself beyond the reach of capitalist exploita¬ tion.

148

CAPITALISM AS A SYSTEM

The morality involved in rationalizing the capitalist uses of backward peoples thus becomes less and less convincing. Moreover, the previously voiceless peoples to whom these rationalizations have referred are increasingly making them¬ selves heard. (3) As I have already intimated, the state of cultural development and the political posture of backward peoples have been factors determining their exploitative situation. If the people are non-literate, small in mass, and militarily feeble, they are likely to be exterminated. If, however, they are densely settled, and their labor can be effectively or¬ ganized, they will ordinarily be subjected to routine pressures of exploitation. In more advanced and complex cultures, exploitation has been limited; the upper classes have been able to avoid the use of manual subjection. Economic rivalry among the capitalist nations, especially since the latter part of the nineteenth century, has yielded some protection to backward peoples. The “anti-colonialism” and open-door policy of the United States before the Second World War have probably attenuated colonial subjection, particularly in the Middle East and China. The system of “mandates” and “trusteeships” of the League of Nations and the United Nations respectively are the outcome of two capitalist wars waged principally to settle rights to resources in underdeveloped countries; and they have doubtlessly con¬ tributed to the mitigation of imperialist action. Meaning of ‘Backward Peoples’ A word should be said about the meaning of the term “back¬ ward peoples” and “underdeveloped” countries. The early imperialists usually referred to their host peoples, virtually all non-whites and living mainly in the tropics, as “heathens,” “pagans,” “primitives,” “ savages,” and so on. These pejora¬ tive terms had the desired effect of helping to vindicate the uses which “civilization” might make of the subjects. The more modern designations, which I also have been using,

IMPERIALISM

149

convey the idea of the movement of these peoples toward the cultural and political status of leading capitalist nations; they may even suggest that these nations are doing all in their power to bring about this happy state.21 With the exception of Japan, however, whose case seems unique, no backward people subject to European imperialism has become a recognized capitalist nation. The overwhelm¬ ing burden of fact seems to show that imperialist nations have gone as far as they could, consistent with their capitalist interests, to maintain backwardness among their hosts. In¬ deed, an indiscriminate transmission of capitalist culture would speedily produce the means of expelling the im¬ perialists. In a roughly decreasing order of severity, the Belgians in the Congo, the Dutch in Indonesia and in South Africa, the French in Asia and Africa, the English all over the world, have resisted the cultural ambitions of the exploited peoples. In the midst of these peoples the imperialists have segregated themselves; rationed out education strategically and in very much smaller quantities than at home; barred the natives from an education in the schools at home as the Belgians do; and sometimes even withheld the use of modern o languages from them. And yet, paradoxically, imperialism ordinarily can be fully productive only if capitalist order is established in the situa¬ tion. Natives must be taught the law, they must ordinarily be given military and police training, hygienic training, and even engineering and technological skills. They are, however, never taught native nationalism and the essential foreign commercial aggressiveness of the imperialists themselves. But the economic conditions imposed upon backward peoples tend to freeze their situation. No backward people under imperialist control has ever been transformed from an essentially agricultural and mining nation to an essentially manufacturing one. Technological progress has never be¬ come a positive movement in countries subject to imperialism. Backwardness for most of the people of the world thus seems

150

CAPITALISM AS A SYSTEM

to be a relatively permanent condition of the mature capi¬ talist system. It is largely through this imbalance of cultural and political status that the world’s wealth has been funneled into the leading capitalist nations. We should not expect these leaders now to create, voluntarily, any conditions among their exploited peoples which would counteract this flow. Instruments of Exploitation The prime object of imperialism is the monopolization of the major productive capacity and the foreign trade of weaker countries. Ordinarily, as has been pointed out, direct control of the country is necessary in order to assure at least a claim to monopoly. But since the leading capitalist nations naturally compete with each other for foreign trade, they ordinarily insist upon “free trade” or the “open door.” Today, for example, no country can compete on even terms with the United States for the products and market of any considerable backward country. The leader, to be sure, need not have domestic uses for a foreign country’s products; its businessmen are essentially concerned with getting control of the market for the product and not in providing for domestic wants. By controlling the foreign trade of a people, then, a nation may be as effectively imperialist as one who actually dominates their territory. Let us now consider in somewhat more detail the instruments of imperialist exploita¬ tion. (1) CommeYce. There is at least an implied principle of capitalism that no people have a right to live in the world without opening their country to capitalist foreign trade. The preamble of the privileges granted in 1555 by the Rus¬ sian Emperor to the vigorous merchants of a youthful Eng¬ lish capitalism indicates the power of the drive behind this idea. That monarch was made to declare: John Vasilivich by the grace of God Emperor of Russia, great duke of Novogrode, Moscovia, etc. To all people that shall see read, hear or understand these presents, greeting. Forasmuch as

IMPERIALISM

151

God hath planted all realms and dominions in the whole world with sundry commodities, so as the one hath need of the amity and commodities of the other, and by means thereof traffic is used from one to another, and amity thereby increased: and for that as amongst men nothing is more to be desired than amity, without which no creature being of a natural good disposition can live in quietness, so that it is as troublesome to be utterly wanting, as it is perceived to be grievous to the body to lack air, fire or any other necessaries most requisite for the conservation and maintenance thereof in health: considering also how needful merchandise is, which furnisheth men of all that which is convenient for their living and nurture, for their clothing, trimming, the satisfying of their delights, and all other things convenient and profitable for them, and that merchandize bringest the same commodities from divers quarters in so great abundance, as by means thereof nothing is lacking in any part, and that all things be in every place (where intercourse of merchandizes is received and em¬ braced) generally in such sort, as amity thereby is entered into, and planted to continue, and the enjoyers thereof be as men living in a golden world.22 It was God’s will, then, that international trade should flourish; but, as noted earlier, there was even at that time no nation on earth capable of securing trading privileges in England comparable to those which the Russians allowed in this charter. Capitalist commerce is commerce based funda¬ mentally upon the terms of the stronger nation. Thus, in 1839, the British declared war on China as a means of abolishing the latter’s terms of trade; and, about two decades later, the United States began military action against Japan for trading privileges. Backward peoples had to negotiate with capitalist nations either voluntarily or by force. Among the weaker peoples, the cruelty of forced trade sometimes reached the limit of human endurance. In

1772, Harry

Verelst, former governor of Bengal, wrote: The influence of individuals grew with the [English] national power. ... A trade was carried on without payment of duties, in the prosecution of which infinite oppressions were committed. English agents or gomastahs, not contented with injuring the people, trampled on the authority of government, binding and punishing the Nabob’s officers, whenever they presumed to inter¬ fere.23

CAPITALISM AS A SYSTEM

152

It is important to remember that imperialists may also control the internal commerce of a host country in tneir own interests. The income produced here may be completely drained out

of

the

community.

(Incidentally,

economics asks no questions about

orthodox

these vital capitalist

operations). In India the English merchants monopolized such critical articles of consumption as salt, beetlenut, and tobacco,24 and thus brought virtually all local commerce under their control. In describing the effects of this pro¬ cedure, a colonial Governor of the East India Company, Henry Vansittart, cites the following communication received by him. This place was of great trade formerly, but is now brought to nothing by the following practices. A gentleman sends a gomastah here to buy or sell. He immediately looks upon himself as suffi¬ cient to force every inhabitant, either to buy his goods or sell him theirs; and on refusal, (in case of non-capacity), a flogging or confinement immediately ensues. This is not sufficient even when willing, but a second force is made use of, which is to engross the different branches of trade to themselves, and not to suffer any persons to buy or sell the articles they trade in; and if the country people do it, then a repetition of their authority is put in practice; and again, what things they purchase, they think the least they can do is, to take them for a considerable deal less than another merchant, and often times refuse paying that, and by interfering occasions an immediate complaint. These, and many other oppressions more than can be related which are daily used by the Bengal gomastahs, is the reason that this place is growing destitute of inhabitants.25 Forced trade so utterly demoralized the society that it tended naturally to fall into the hands of the imperialists. Further exploitation then called for the institution of a new order, itself a process which was made to yield basic income. (2) Taxation. The Dutch first and then the British dis¬ covered that by taxing the exploited people, they had struck not only a gold mine of profits, but also a powerful instru¬ ment of economic manipulation.26 The tax has since become one of the principal means of forcing colonial peoples to do the bidding of imperialists. Frequently taxes have been de-

IMPERIALISM

153

manded in the form of goods wanted for the foreign market, such as spices, opium, rubber, coffee, cocoa, palm kernels, jute, cotton, and so on. Thus, by making “legal tender” cer¬ tain staples, the imperialists have been able to shift produc¬ tion from one crop to another as their interests dictated. In this way also the people could be made to give up the cultivation of food-bearing plants, and even their domestic manufacture, in favor of imports. When, however, the situa¬ tion demanded recruitment of labor for such enterprises as mining and plantation, taxes might be levied in money. The natives had then to work for wages, which meant, of course, diversion of labor to mines or plantations. As a profit-making organization, for example, the English East India Company soon decided that revenue should be the mainstay of its operations. In 1690, the directors sent the following advice to their agents: The increase of our revenue is the subject of our care as much as our trade; t’is that [which] must make us a nation in India . . . and upon this account it is that wise Dutch, in all their general advices that we have seen, write ten paragraphs concerning their government, their civil and military policy, warfare, and the in¬ crease of their revenue, for one paragraph they write concerning trade.27 This revenue was by no means a static income;

British

commerce in the East turned upon it. The independent country trade, the trade from port-to-port engaged in by Englishmen in the area, made use of it; and it was largely turned over in China before making its way, augmented, to the West. At the end of the eighteenth century, John Bruce wrote: “If the exports have not always brought a profit, still the weight of the revenue has enabled the Company to continue the import trade with advantage to themselves; and even granting that the exports from India to China have not always contributed equally to the China investments, still judging from the number of country ships under the Com-

CAPITALISM AS A SYSTEM

154

pany’s protection employed between India and China

the

indirect profits must be considered.28 During the early nine¬ teenth century, when opium was king, the government—that is, the company—produced opium with part of its revenue, auctioned it to country traders who sold it in China for cash, deposited part of this with the company’s banks in Hong Kong where it was used to purchase tea which was shipped to England and the continent to be sold for still more profits.29 Britain, of course, was the ultimate repository, from which capital was exported for other world projects. All the great imperialists in Africa have used taxation, mainly the head-and-hut tax, either to force the people to labor or to compel them to hand over produce. In reference to certain practices among the British, Dr. Ida C. Greaves writes: At the present time if the failure to pay it can be traced to any defection on the part of the chief he is imprisoned; if the people themselves have omitted to obtain the money they are re¬ quired to work the tax off at the discretion of the Government; but in the earlier stages of development, tax collecting was ac¬ companied by far more drastic methods of compulsion than these. The mildest method appears to have been the “punitive expedi¬ tion’’ of the British, which burnt the huts on which taxes had not been paid, or the kraals of tribes who were in arrears with their poll tax.30 On the whole, the French and Belgians were respectively more oppressive than the British. (3) Culture System. Perhaps the policies of the Dutch in Java and those of the Belgians in the Congo represent the most determined and systematic efforts to exploit the coun¬ tries of backward peoples. The intent, attitude, and practice of these two small and notoriously acquisitive capitalist states were not categorically different from those of other imperialist communities; but they were more calculating and heartless. In describing the growth of capitalist society in Holland, I have referred to the role of colonization. This section is de¬ voted to the observations of one variation in modern im¬ perialism.

IMPERIALISM

155

The culture system which paid the Dutch East India Com¬ pany handsomely, got its name from the plan of General Johannes Van den Bosch, who became Governor General of the Dutch East Indies in 1828—that is, after the unsettled period of the Napoleonic wars. It was a system, just short of slavery, by which the Dutch representative in Java strove to secure the largest revenue for the home government by pre¬ empting a part of the natives’ land and labor (from a fifth to more than a half) to cultivate export crops under European taskmasters. The system was thus a project of the state itself; and it was motivated by the simple question of how the host people and their resources could be organized so as to yield the greatest income in the shortest period of time. As Clive Day points out: “Only one strong motive underlay the foun¬ dation and the maintenance of the culture system, the desire to obtain revenue for the Dutch treasury.”31 The severity of the exploitation tended to be aggravated when the govern¬ ment not only sanctioned it, but also reaped its livings directly from the proceeds. “The spirit of the government pervaded the system and made it much worse than such a system needed to be.”32 The foundation of the system was taxation. The tax in both the Congo, and earlier in Java, was mainly in the form of labor time. This labor, to repeat, was directed by Euro¬ peans ordinarily through the authority of native chiefs. It pro¬ duced money crops for export: in the Congo, ivory, rubber and ore; in Java, sugar, indigo, tea, coffee, nutmeg. The land for these operations was selected with no particular concern for the natives’ welfare. In the Belgian Congo, fabulous con¬ cessions of natives and their territory were also granted by the “government” under similar conditions to private enter¬ prise of other countries. As everyone knows, the cruelty of this system reached its classic heights in the Congo. In both places the food crops of the people were neglected and starva¬ tion followed; there was hardly any limit to the coercion of labor.33 It should not be supposed that, when Leopold II trans-

156

CAPITALISM AS A SYSTEM

ferred the administration of his colony in 1908 to the Belgian parliament, the culture system came to its end. Reforms, it is true, have been gradually and grudgingly instituted,34 but the purpose of the imperialists was not altered. The Congo¬ lese people and their native territory were still considered resources to be farmed in the interests of Belgians and other foreign capitalists; and perhaps nothing was so insidious and hypocritical as the contemporary argument that the native culture should be preserved in order “to avoid turning the natives into substitute Europeans.” More recently, it has been asserted that the Congolese must be taught the methods of sustained labor characteristic of “European civilization”; should be praised for fighting in armies organized by the Belgians; and should be given the “spirit of religion” as taught especially by “Catholic missions.”35 That the primary motive has been the perpetuation of the exploitation of the natives remains transparent. The culture system also has been practiced with inten¬ sity by the British in Kenya.36 The immediate concern of the Government in planting there, the strategic expropriation of the natives so that they might labor on evacuated lands for white planters or perish, and the use of the hut tax as a means of coercing workers, put that colony squarely into the category of the culture system. Sometimes it is argued that backward peoples will not labor unless coercive means are used. One wonders, however, about the tactic of using native chiefs in order to deliver labor for purposes of draining the wealth out of the country or in the selfish interests of a few incomparably wealthy alien capitalists; and what miracles might not have been achieved if these same workers had been able to see before them the results of their handiwork as a means of gaining effective access to the cultural heritage of the world, of improving their economic well-being, and of establishing political mastery over their inherited homeland. Capitalist imperialism, at any

IMPERIALISM

157

rate, has no means of offering backward peoples such in¬ centives. Contributions of Imperialism The outstanding argument of imperialists, even to our own day, has been that imperialism civilizes backward peoples. They point to achievements ranging all the way from elimina¬ tion of head-hunting and cannibalism—and, somehow, most backward peoples before the coming of the imperialists seem to have been involved with cannibalism—-to the introduction of literacy and stable governments. There can be no question about the truth of some of these assertions. Capitalist cul¬ ture could not be fully withheld even from its victims. I do not regard the word “victim” here as an exaggeration. At an earlier day the English, though they received some of their basic education in capitalism from the Hanseatic League, were insistent on describing themselves as the prey of “those Germans.” The British, in turn, thought that they had given the American colonists a priceless heritage of social organization as well as military protection, and that this should have at least merited them the gratitude of the Ameri¬ cans. Nevertheless, the latter resisted with all their might the essential purpose for which the recognized benefits were granted. Indeed, in virtually every colonial situation the imperial power may be able to show some residual contribution to the native culture. For example, a railway in Africa connecting an inland copper mine to a modern seaport may be viewed as a priceless addition to the civilization of the natives. The driver of its locomotive may be an African whose traditional mode of carriage had been his own bare foot and back. For certain purposes it could be argued that it required tens or even hundreds of years, for Europeans to develop the steam locomotive; whereas the imperialists gratuitously bestowed it upon the Africans. The benefits to the people of the region through Avhich it runs may thus be considered as of such

158

CAPITALISM AS A SYSTEM

importance that its original purpose becomes thoroughly obscured. It is not that imperialism makes no positive cultural con¬ tributions to backward peoples; but that, insofar as the wel¬ fare of these peoples is concerned, it is rather the motive from which such contributions are derived which is of ultimate significance. By understanding this motive, we are able to see why most subject peoples—English, American, Chinese, Indian, African—have resisted with all their energy the presence of imperialists. Let us recall that even modern slavery has been justified as a civilizing force. What seems particularly to incite revolt against imperialism is the funda¬ mental exploitative design of the imperialists, the inherent disregard of the welfare of native peoples, and the necessarily incidental, or even reluctant, way by which the relatively meager cultural contributions are made. Since, therefore, “civilization” cannot be the dominant purpose of imperialists —since indeed such a purpose will ordinarily be considered an impediment to the realization of their interests—it cannot be counted as an intention of imperialism. Accordingly, as its major economic motives dictate, the same imperialist interest which has brought literacy to one backward people under certain circumstances, has made the dissemination of literacy a criminal offense under different conditions. Native peoples may always expect their welfare to be disregarded when it comes into conflict with the dominant imperialist interests. Furthermore, imperialism invariably carries with it con¬ tempt for the exploited group. This social fact constitutes the primary source of modern race prejudice and antagonism. It would be next to impossible for, say, the British in East Africa to conceive of the masses as normal human beings and yet maintain their exploitative designs toward them. Because the natives tend to resist this debasing attitude with increas¬ ing determination, the imperialist situation remains charged with insoluble inter-group conflict.37

10 Can Imperialism Be Abolished? Nature of the Argument I have thus far consistently argued that imperialism tends to arise automatically from the expansive experience of capi¬ talism. But this fairly obvious fact has not always been ac¬ cepted. Certain distinguished students of the subject have suggested the possibility of its elimination, though perhaps without fully estimating the consequences. In the following brief consideration of conclusions by Professors Parker T. Moon and John A. Hobson, it will be observed that these conclusions are informed by two classical concepts to which I have already referred; namely, that capitalist production is for domestic consumption and that foreign trade is determined by the availability of domestic surpluses. Professor Moon writes: Backward countries and colonies are not necessities but luxuries for expanding capitalism. Increasing consumption caused by increasing population or by rising standards of living would, with¬ out colonies, afford some room for profits and expansion. It is only when consumption lags too far behind production that additional outlets for surpluses are required in backward countries. Funda¬ mentally, economic imperialism is a symptom of overgrown pro¬ duction and excessive profits—“overgrown” and “excessive,” be it explained, only in relation to the domestic requirements of goods for consumption. But the lag between consumption and produc¬ tion may be reduced either by diminishing production or, more comfortably, by increasing consumption, until the annual surplus (represented by savings from wages and profits) is normally not much more than sufficient to provide the additional factories, mines, or other productive enterprises needed to satisfy a rising standard of living or an increasing population.1 159

160

CAPITALISM AS A SYSTEM

Professor Hobson’s analysis is more detailed. It rests partly upon the debatable assumption that the activities of imperial¬ ists are opposed to the “foreign policy” of the nation. “We have seen,” he writes, “that [imperialism] is motivated not by the interests of the nation as a whole, but by those of certain classes, who impose the policy upon the nation for their own advantage.” Thus, the theory “that any British subject choos¬ ing, for his own private pleasure or profit, to venture his person and his property in the territory of a foreign State can call upon this nation to protect or avenge him in case he or his property is injured” seems palpably unsound. The policy of the nation, according to Mr. Hobson, should be, therefore, “an absolute repudiation of the right of British subjects to call upon their government to protect their per¬ sons or property from injuries or dangers incurred on their private initiative.”2 While it cannot be gainsaid that this view seems morally praiseworthy, it nevertheless attempts to dissociate the inter¬ ests of the businessman—and big business at that—from those of the capitalist state. No doubt, this is a mistake which could never have been made in the national cities of early capitalism; and we should expect it to carry little weight in modern parliaments. It is, in fact, more nearly the duty of capitalist governments to create imperialist opportunities for its citizens; the prospects of abandoning them in the field would be unthinkable.3 Alternative Uses of Capital Again, the following conclusion by Mr. Hobson that im¬ perialism results from a plethora of domestic capital seems, at first glance, to be convincing economic logic: The root questions underlying the phenomena are clearly these: “Why is it that consumption fails to keep pace automatically in a community with power of production?” “Why does under-con¬ sumption or over-saving occur?” For it is evident that the con¬ suming power, which, if exercised, would keep tense the reins

CAN IMPERIALISM BE ABOLISHED?

161

of production, is in part withheld, or in other words, is “saved” and stored up for investment. . . . Saving is economically justified, from the social standpoint, when the capital in which it takes material shape finds full employment in helping to produce com¬ modities which, when produced, will be consumed. It is saving in excess of this amount that causes mischief, taking shape in surplus capital which is not needed to assist current consumption, and which either lies idle, or tries to oust existing capital from its employment, or else seeks speculative use abroad under the pro¬ tection of the Government.4 The relationship between savings and consumption is in¬ deed complex, and yet very much of our economic discussion on this subject assumes a closed domestic economy. In reality, however, no capitalist economy is closed. Historically the capitalist economy was not created to produce the consump¬ tive requirements of the domestic population. In thinking thus, we may digress so widely from the social facts that our conclusions may have reference to a distinctly different type of society, or perhaps even to a fictitious one. Workers in a capitalist society can claim consumption goods only through wages—the possibilities of welfare relief are not now in point. Imperialism contributes to higher wages in two principal ways: it increases the national income by more or less direct foreign exploitation, and it opens valu¬ able markets for commodities produced in the imperialist nation.5 The orthodox theory teaches that, if the foreign in¬ vestment opportunities were cut off, capital would find alter¬ native domestic uses. This assumption, however, is based on the general doctrine of competing opportunities which, be¬ cause of its limitations, should be applied with the utmost care. In reality, the domestic demand for capital tends to be a function of both the position of the nation in the structure of the capitalist system and its capacity for employment of the capital abroad. For example, imperialism established op¬ portunities for the export of cotton goods manufactured in England, a dominant nation. But the prosperity of this manu¬ facture induced a demand for capital at home to be used in

162

CAPITALISM AS A SYSTEM

all sorts of related industries. Consumption and the standard of living were consequently augmented, but manifestly not directly. To have abandoned imperialism and thus the cotton market would have been to destroy the means of increasing consumption. Moreover, in capitalist societies, industries do not compete on even terms or with the same authority for the use of capi¬ tal. In these societies, the majority of industries seek capital only when key industries are developing. When Venice, for example, had the spice trade—and she held it by all sorts of imperialist unscrupulousness and war—there was domestic demand for capital in shipbuilding, in dependent manufac¬ tures of all sorts, and in house building. The standard of living of the masses was high and the well-to-do consumed luxuries lavishly. When that trade was lost, however, capital became plethoric; and it could not be used at home to raise directly the consumptive standard of the people. Capital used in, say, shipbuilding could not be shifted to glassmaking, be¬ cause the prosperity of both these industries was directly correlated. Instead, much of the capital was exported to be invested less profitably than formerly in the new leading nations, while the glory of Venice faded.6 Part of its popula¬ tion emigrated with the capital. In support of his argument, Hobson cites the well-known classical law: There is nothing inherently irrational in such a supposition. Whatever is, or can be produced, can be consumed, for a claim upon it, as rent, profit, or wages, forms part of the real income of some member of the community, and he can consume it, or else exchange it for some other consumable with someone else who will consume it. With everything that is produced, a consuming power is born.7 This doctrine has probably been nowhere less true than in imperialist transactions, wherein systematic exploitation and plunder of foreign peoples draw wealth into a nation year after year. It is quite likely, for instance, that very little or

CAN IMPERIALISM BE ABOLISHED?

163

none of the capital invested in Indonesia by the Dutch capi¬ talist after about 1600 was accumulated in Dutch domestic industry. Imperialism may thus produce the very capital re¬ sources upon which it thrives, besides a surplus for aug¬ mented expenditure on domestic consumption goods. Peculiarities of the Economy Unless we keep steadily before us the fact that capitalist economy did not derive its pattern from a process of circular consumption-production relationships, we are likely to agree with Mr. Hobson that “there is no necessity to open up new foreign markets; the home markets are capable of indefinite expansion. Whatever is produced in England can be con¬ sumed in England, provided that the ‘income’ or power to demand commodities, is properly distributed.”8 This indeed may be true, but decidedly not within the social context of capitalism. Our author seems to recognize this, although not explicitly. When he says, “The power of the imperialist forces within the nation to use the national resources for their private gain . . . can only be overthrown by the establishment of a genuine democracy,”9 he is saying, in effect, that capitalist society must be abandoned if imperialism is to be abolished. With this, I agree. And yet, a genuine democracy need not, perhaps will not, confine itself to circular economic activities at home. The capitalist system has organized a world of in¬ terdependent peoples. This interdependence involves eco¬ nomic and other human values so fundamental that it is very likely that a socialist world will seek not only to preserve but also to enhance them. It may well be that even present na¬ tional boundaries, with their reason for existence rooted in the capitalist system, will not have valid support in such a world. Role of Foreign Investment Foreign investment is a unique and abiding characteristic of capitalist society; it is hardly known to other great social

CAPITALISM AS A SYSTEM

164

systems—or at least not in its institutionalized role.10 At this point, I introduce the subject to show its relevance to imper¬ ialism and to the continuity of the capitalist system. The size and form of foreign investment tend to correlate directly with national leadership. It is in the hands of capitalists in the leader nation especially that capital accumulates. The leaders, moreover, have greater need and opportunity for foreign investment. This greater opportunity—and indeed skill and efficiency—makes the leader nation not only the greatest exporter of capital, but also the most secure com¬ munity in which to invest it. Thus the leader nation tends also to become the largest importer of capital. But its imports and exports of capital are not of the same kind.11 Lesser capitalist countries may hold their bank reserves in the banks or in the short-term moneymarkets of this nation, and private individuals seeking safe and stable investments tend to buy the securities of its great enterprises.

This

process apparently

took

on

pathologi¬

cal dimensions in the United States after the Second World War. With businessmen finding it increasingly difficult to open up investment opportunities abroad, “dollars became scarce” among foreigners, while banks continued to increase their foreign obligations. In his statement to the Joint Com¬ mittee on the Economic Report in 1954, Claude Murchinson, Economic Adviser of the American Cotton Manufacturers Institute, said: It is indeed a strange anomaly that, at a time when the surplus dollar receipts of foreign countries are running at a rate ex¬ ceeding $214 billion a year, the United States should be spending additional billions as gratuities or subsidies to move our goods into foreign markets. The anomaly is all the more startling when we consider that the total foreign gold and dollar holdings is at a tremendous figure of $23 billion, which is a billion dollars more than the gold supply of the United States and which represents an all-time high by a very wide margin.12 It is true that during her less troubled reign as leader na¬ tion, Great Britain was never confronted with exactly such a situation, but the reservoir process was there nonetheless.

CAN IMPERIALISM BE ABOLISHED»

165

As I have already intimated, when a leader capitalist na¬ tion is displaced, the chances for its capitalists to invest in both domestic and foreign production are reduced. Its capital thus becomes dammed-up and, while relatively more of it is consumed, it tends to find its way to the investment houses of the new leader. Thus, capital moved from Venice and Florence to Amsterdam, and from Amsterdam to London. The funds from the older nations are, of course, mostly in¬ vested in the debentures and stocks of the enterprises of the leader, and not directly as they were formerly. Capital seems never to have moved significantly in the reverse di¬ rection: from London to Amsterdam and so on.13 Current pathologies of the capitalist system, however, have created a reverse movement, especially since the First World War, from the United States back to the displaced capitals of Europe so that those centers might be saved from “complete collapse.” There have thus been two major areas of foreign invest¬ ment: in sophisticated money markets and in backward coun¬ tries. On the whole, capital sent to the more enlightened areas seeks the securities market (portfolio investment), while that sent to the backward areas tends to be invested directly. Foreigners seldom expect to operate the major business en¬ terprises in a leading capitalist nation, but they do control such enterprises in dependent and passive countries.14 The highest return to investors ordinarily goes to those who can exploit productive “concessions” in these latter areas, and as I have intimated, such opportunities are particularly avail¬ able to enterprises in the leader nation. Backward peoples can derive no income at all from this type of capitalist activity; in other words, profits from the direct exploitation of foreign areas do not flow into backward countries. Before 1492, at least, the great money lenders were the Lombards

(the Venetians,

Florentines,

Genoese,

Sienese,

Lucchese) and South Germans. The Jews, and their relatively declining significance as capitalist financiers, should also be included. The backward areas were then mainly the feudal

CAPITALISM AS A SYSTEM

166

domains and the property of the Church. Investment in these areas usually called for concessions: the right to trade, to farm the revenues, to collect the customs or the tithe, to mine minerals, to sell future supplies of wool, and so on. “The princes, as such, had very little personal credit; they had regularly to give security for their loans.”13 In the money markets, businessmen made loans to each other mainly for business purposes or to carry out some project of a city, in which case all the citizens became obligated. The transactions involved in such loans ordinarily produced the means of their repayment. The period after 1492 may be regarded, perhaps, as having two major impulsions to foreign investment: the demand for capital (a) to finance the explorations and the distant foreign commerce led by Spain and Portugal, and (b) to satisfy the renewed emphasis upon the production of raw materials in the backward countries to feed the rising indus¬ tries. Among non-capitalist peoples, producers’ capital hardly accumulates; Spain and Portugal are examples of retarded capitalist countries which, even though they tapped the virgin wealth of America and Asia, had constantly to depend upon the resources of the Italians, Germans, and Dutch to finance their operations. Mining in America and the West Indies, the slave trade, and the plantations created vast opportunities for foreign investment. Financing the development of new capitalist nations, such as the United States, Germany, and Japan, and the British Dominions also drew off part of the capital then available principally in England and France.16 By 1900, the new na¬ tions entered definitely into competition for foreign invest¬ ment opportunities—with world-shaking consequences. The export of capital, as everyone knows, is the export of commodities; and this produces claims to future goods which, it is understood, will some time later show up in im¬ ports. But, as we know also, the capitalist system is a com¬ plicated

network

principally of more or less sovereign

CAN IMPERIALISM BE ABOLISHED1

167

entities; and transactions among these need not be exclusively bilateral. Ordinarily, they are multilateral. Debts to Britain in Brazil, for instance, may create equivalent obligations to pay in the United States, and so on. Moreover, the export of capital need not mean that goods actually leave the country of the exporter. For example, Britain might export capital equally well by sending machinery out of England or tin out of Malaya. As Charles K. Hobson observes significantly: “Conquest, confiscation, theft, may result in acquisition of property from which an income is derived, just as may the more

peaceful

methods

of

saving

and

accumulation.”17

Though colonial peoples may work their hands off mining rich ores or raising lush crops, the cargoes sent from their shores seldom if ever become their exports of capital. These people tend always to remain importers of capital. This is because the imperialists manage to own the exports, and it is they who can invest it as part of the capital exports of the mother country. One of the principal reasons for the greater opportunity to invest in leader capitalist nations is the greater power of these nations to control the resources of backward peoples, and to force them to yield incomes which add still further to capital accumulation. Thus it is only militarilystrong, capitalist nations that are able to engage in extensive, direct, foreign investment. This characteristic becomes a mark of leadership. “The power of wealthy European States is manifested not less in the capital which they possess than in their mighty armies and fleets.”1S It is in direct investment that some of the extremest forms of exploitation of backward peoples take place, and it is from direct investment that some of the largest profits are reaped.

Part II Conceptions of Capitalism

11 The Narrowing Frontiers Since the exploitation of resources in backward countries is basic to the systematic functioning of the capitalist order, it follows that the world cannot become a congeries of equally developed capitalist units. As the more advanced countries of the system move forward, their economic designs and pecu¬ liar morality tend to come into conflict with the existing lead¬ ership and open warfare among them becomes inevitable. Therefore, paradoxically, although the social processes of the capitalist system may encourage imitation of the practices of the leading societies, the system itself cannot accommodate indiscriminate advancement of peoples. The development of “underdeveloped” countries cannot mean progress of those countries until they reach the status of the leader nations. It can mean, within the matrix of the powerful interests of the system, development toward more complete exposure of their resources to the exploitative functions of the system; and this may include the propagation of good will toward the leading nations. The fundamental fact of inhospitality to unlimited capital¬ ist development of the lesser nations largely engenders the phenomenon of the narrowing frontiers of capitalism. I shall indicate briefly what seems to be involved in these contrac¬ tions under the following four headings: (a) increasing pro¬ ductive capacity among the leaders and their insistent demand for more “room” to expand; (b) physical shrinkage of the area of the world available to capitalist exploitation; (c) increasing resistance among backward peoples to capitalist exploitation, 171

CAPITALISM AS A SYSTEM

172

and (d) the practical availability of an alternative form of social organization capable of breaking through the cultural impasse of capitalism. Increasing Productive Capacity Under this heading it seems necessary only to refer to the enhancement of productive forces in leader nations. As al¬ ready noted, this tendency has been an immemorial trait of capitalism; and it has never reversed itself. In a well-known League of Nations study directed by Dr. Folke Hilgerdt, it was shown that from 1871 to 1938 the “movement of manu¬ facturing production has been upward for all the leading capitalist nations.” The index for the United States, with 1913 as base, moved from 12 in 1870 to 143 in 1938. (It should be very much higher by now.) For the same dates, Germany rose from 16.3 to 149; the United Kingdom from 44 to 117.6. The U.S.S.R. (not a part of the capitalist system, of course) has had the steepest and smoothest rise: from 12.8 in 1920 to 857.3 in 1938.1 In 1938 the percentage distribution of world manu¬ facturing among the leaders was: U.S., 32.2; U.S.S.R., 18.5; Germany, 10.7; United Kingdom, 9.2; and France, 4.5.2 Output per man-hour has also varied commensurately with advancement in industrialization. In the United States, for example, the National Bureau of Economic Research has shown that “output per man-hour” tripled between 1899 and 1939. This trend continues apace. In the capitalist system, augmented capacity to produce intensifies the need among the leader nations to control sources of raw materials which are mainly accessible in the backward areas. Physical Shrinkage of Available Area It has been reported that when Cecil Rhodes saw the last of Africa being parcelled out among the great powers, he looked longingly to other worlds, saying, “I would annex the planets if I could.”3 This no doubt was a dramatic reaction to the approaching end of an era which started breathlessly in

THE NARROWING FRONTIERS

173

1492. Indeed, the tremendous expansive power of capitalism seems, more than ever in mid-twentieth century, to be project¬ ing itself to the planets. The conquest of outer space is being considered a real possibility; and in this context it may be regarded as an extremity imposed by immediate problems of prolonging capitalist organization.4 With the rise of a new, vigorous power in Germany after 1870 and with ambitions toward capitalist greatness simmer¬ ing in Italy and Japan, the world suddenly seemed to have become too small for capitalism.5 In his nationalistic de¬ scription of the drive toward foreign appropriation of Africa, Sir John Keltie intimated this in 1895: It is only pressure from without that can move them [the com¬ placent British capitalists] to look around and look forward; and, until Germany came into the field ten years ago, that pressure was hardly ever strong enough to produce discomfort or to lead to action. Moreover, it is only within comparatively recent years that the need for new markets has been severely felt; only within the memory of most of us have America, Australia, India, and the East become glutted, has commercial rivalry among the great states become intensified, and the necessity for securing new fields for industrial enterprise been irresistibly forced upon us. The only continent that remained available for extended opera¬ tions was Africa, and on Africa a rush was made without prece¬ dent in the history of the world.6 By about 1900, then, the virgin areas of the world were all gone. The great nations thus began to question each other’s claims to prerogatives in backward areas and to “ex¬ pand” by more intensive exploitation of the countries al¬ ready occupied. The open clash of interests which came to a head in 1914 did not mitigate, but rather aggravated, the problem of finding “room” for development in the system. And, together with her accession to leadership, the United States inherited this problem in acute form. The question of where and how to expand thus became urgent business for the capitalist system. The consensus seems to have been that Europe could not be considered an area

174

CAPITALISM AS A SYSTEM

of dynamic market possibilities. For instance, in 1923, Bruno Newman, President of the American Chamber of Commerce in Mexico City, Mexico, declared: “The European market . .. is and will be for some time a limited market for our goods and at the same time perilous and difficult for the absorption of the American excess products. We must, therefore, prepare new markets in which consumption can be developed in proportion to development of America’s increasing produc¬ tion.”7 If, then, the old capitalist countries could not offer areas for creative expansion, the dependent and passive countries had to provide them. These constituted the treasured “fal¬ low ground” of the system. “The backward countries of the world,” J. F. Farrell said as late as 1933, “form the reserve markets of the twentieth century. To these untilled fields the enterprising foreign trader must turn his steps, where millions of potential consumers must one day demand a higher stand¬ ard of living. The advantages we now possess for the penetra¬ tion of these markets are immeasurably greater than those of 1914. . . . The difficulties that confront us at present in European countries, in the expansion of our foreign trade, render it necessary that we pay greater attention to the pos¬ sibilities that await us in Latin America, the Orient, and Africa.”8 It was understood that the people who occupied these countries might object to being exploited; but it was also believed that the inexorable pressures of the capitalist system demanded expansion. Already, in 1915, Professor W. R. Shepherd made this analysis of the movement: In the world today there are just two great fallow areas that apparently call for exploitation. Whether the people who inhabit them are altogether pleased at the thought of being exploited for the benefit of the foreigner is quite another matter. I am afraid that, in questions of business, it isn’t always possible to consult the wishes of those who are actually on the soil. The world at large has progressed to its present material position mainly through the utilization of regions held by people who were unable of themselves to develop their resources. . . . The two areas to

THE NARROWING FRONTIERS

175

which I refer are South America and China. In . . . respect of possessing immense natural resources which have not been de¬ veloped in any commensurate degree, they are quite alike.9 Over and over again, American businessmen referred to South America, Russia, China, and Africa as the proper places for trade and investment, sometimes emphasizing the importance of one or the other. “Why,” exclaimed one busi¬ ness leader in 1918, “the great raw place of the world is in that great country of Russia! . . . and the ability to handle it be¬ longs properly to the United States of America.”10 The Russian Revolution was even then considered only an ab¬ normal eddy in the ongoing processes of the capitalist system. “This trade [with Russia] when it comes will be so vast in proportion as to be interesting to us in the highest degree, and we must not forget that in some sense Russia’s difficulties have a very considerable effect on us, because the world is so organized for trade now, that it is impossible for any country to flourish properly in isolation.”11 The opportunities for capitalism in China also seemed un¬ bounded. In 1935, a private Economic Mission to China con¬ cluded: “It is a field which now offers, perhaps more surely than any other, the greatest promise of expanding trade.”12 Earlier, the business leader, Earl Hamilton Smith, addressing the National Foreign Trade Convention, was applauded when he remarked: “It is estimated that China s wealth, actual and potential, is five hundred billion dollars. What share shall this country have in developing this mighty em¬ pire of trade and commerce and boundless natural resources? Let this organization be the nucleus of America s advancing host into the boundless Orient.”13 On a similar occasion, Edwin J. Dingle of the Far East Economic Corporation declared: I say unhesitatingly that, even without any consideration being given to other Asiatic markets, China is the logical field for America to look to. . . . One has not time to illustrate America s opportunity, but it is obvious to all beholders that no opportunity

176

CAPITALISM AS A SYSTEM

exists in any part of the world for America as it will exist in Asia, and particularly in China during the next five, ten and twenty years. China is America’s logical held.14 By 1918, it thus seemed that the future role of China was that of any rich, backward country in the capitalist system, i.e., to sit contentedly and be gouged by the “stronger na¬ tions.’’ An official of the General Electric Company described her situation in the following self-righteous terms: We have to deal with a China as it is today, a country of vast undeveloped resources and of four hundred million potential cus¬ tomers. The concern of the great trading nations is how they can best utilize this situation. We of the United States have a similar concern, but we differ from the other powers in respect to our commercial and political relations with China. According to the record we have always treated the people justly, and we have never taken unfair advantage of their weakness. The problem of China is that of every backward country. Because it is weak and its resources are incomparably great, it is the object of the diplo¬ macy and intrigues of stronger nations.15 To be sure, American businessmen intended to marshal the physical might of their government behind their foreign operations. Since, however, most of the backward countries had already been appropriated, the United States insisted on the “open door” at every opportunity.16 Not yet fully conscious of the fact that the First World War had irreparably damaged the very vitals of the capitalist system, businessmen of the different nations, even during that conflict, began to plan their strategy on traditional lines of battle. “Just as you are all agreed that there will be ‘a war after the war’,” said one business spokesman to his fellows assembled, “so perhaps you will be in accord as to the proba¬ ble location of the battlefields. They will be in Russia, China, South Africa, and South America. . . .”17 It was taken for granted that the leading European nations had the upper hand in Russia; the contest among them there, it was felt, would be bitter. England was expected to increase her lead in Africa, and Japan would surely attempt to consolidate her gains in China. While the United States had become com-

THE NARROWING FRONTIERS

177

paratively well entrenched in South America during Europe’s preoccupation with the war, it was expected that a revitalized England and Germany would renew their campaigns in that area. France, moreover, did not intend to allow Latin America to go unnoticed. But China still remained not only the great attraction for the unparalleled expansive powers of the United States, but apparently also the area most likely to precipitate a test of strength among the imperialists. “I think,” said Frank A. Rhea, ‘‘that one of the conditions of peace should be the straightening out of some of these Chinese railway conces¬ sions, particularly the results of the Battle of Concessions, and the Battle of Concessions in China, in my opinion, laid some of the very foundation stones for the present war. And if they are not corrected they will be a contributing element to an¬ other war.”18 Almost before the First World War had ended, it was clear that new hostilities had already begun. The great capitalist nations had reached the point of intensive vertical expansion. All the important ground was in dispute, so that the accom¬ modation of one power involved the supplanting of another. Great Britain, Germany, and Japan were doing their utmost to get control of what would be the world’s greatest com¬ merce; and the United States was determined to stop them. By the end of the Second World War, however, the system had lost two of its major areas of expansion, Russia and China. Hence the vital problem presented by capitalism’s narrowing frontiers became even more pressing. Resistance to Exploitation As I have indicated, backward peoples who are integrated into the capitalist system tend to become dependent not only because of the continuing threat of imperialist violence, but also from the necessities of their economic situation. In the process of producing specialties for the foreign market, their livelihood becomes linked with the powerful functions of that

CAPITALISM AS A SYSTEM

178

market which, to repeat, is the particular instrument of lead¬ ing capitalist nations. If, therefore, a few native rulers in these feudal or prefeudal countries could be made to agree to the exploitation of the labor and natural resources of their country in exchange for a comfortable living, the non-political masses might be held in semi-bondage almost indefinitely. It is such a situ¬ ation to which Sir Alfred Lyall refers as obtaining in the India of the fabulous East India Company. The Indians, he says, “had no inveterate antipathy to the domination of foreigners. The Indian people were, from the beginning, so far from objecting to the English domination in India that they cooperated willingly in promoting it.”19 Nevertheless, there are cumulative forces tending to un¬ settle this apparently stable situation. The purchasable rulers are ordinarily open to all sort of suggestions from competing exploiters, frequently becoming centers of corruption, or of struggle among foreigners for the economic prizes. This situation tends to have a disturbing and awakening effect upon the whole people. If, on the other hand, in order to exclude other capitalist competitors, the dominant exploiters subordinate the native leaders completely, the latter may become foci of discontent among the masses. Moreover, the noisy conflicts between the capitalist nations frequently ex¬ pose their motivations even to the native in the street, thus giving him some consciousness of his real position. When this happens, the people are prepared for the appeals of the nationalist leaders among them. In this way they are led to the realization that the country in which they live is their own. The native thus becomes a political person, one whose opinions must henceforth be taken into consideration. Then, too, events in the councils of the leader nations themselves have conti'ibuted to the rise of nationalism among backward peoples. Ever since the American Secession, with its incisive arguments against imperialism, self-government has been an ambition of all subordinate peoples who have

THE NARROWING FRONTIERS

179

achieved national consciousness. By the end of the First World War, the principle of self-government as a sacred right of all peoples was given lip service, at least, in world councils and this gave fresh impetus to nationalism everywhere. The mandate system of the League of Nations and the trusteeship system of the United Nations emphasized that the welfare of peoples was the primary purpose of any colonial or trustee administration—and any such administration must be con¬ sidered a “sacred trust of civilization.” “In Trust Territories,” Huntington points out, “the administering authorities are not sovereigns but guardians responsible to the United Na¬ tions for the welfare of the peoples committed to their charge.”20 It need hardly be said that capitalist nations are not constituted to administer the territory of backward peoples primarily in the interest and welfare of the people them¬ selves. The record of the efforts of dominant nations since 1920 will show this to be emphatically true. Nevertheless, these moral sanctions penetrate deeply. They have helped to make oppressed peoples violently restive, and have increased the difficulty of explaining capitalist methods to a world be¬ coming ever more divided on the subject. Although the “gunboat” era of imperialism is not yet ended, the use of such coercive instruments in most situations has become more complicated. For instance, in 1924, it was possible for the United States Navy to give the following de¬ scription of the normal way in which intractable South Americans could be kept in line: The special service squadron in the Caribbean consists of five small second-class cruisers of little or no use in the line of battle. They are under the command of a rear admiral and are active in protecting our nationals and our tremendous fruit, sugar, and hemp trades, as well as oil and mining interests. The islands of the West Indies and the Central American Republics are so often the scenes of revolutions, many of which lose their threaten¬ ing aspects soon after the mere arrival of a cruiser flying our flag though sometimes it is necessary to send a landing force ashore.21

180

CAPITALISM AS A SYSTEM

This still remains the simple resort of “mother countries” in subduing the people of their colonies. And yet, current opposition to its use, especially in such spheres as South America, has grown tremendously. It is unthinkable that any capitalist nation would dare to use such tactics against, say, present-day India. Opportunities for direct complaint in the United Nations give some dependent peoples a vast audience for exposing the artifices and ruthlessness of imperialists. The appeal of Guatemala on June 19, 1954, to the Security Council for aid in repelling aggression allegedly sponsored by the United States in favor of the interests of the “United Fruit Company” is an example of complications which the earlier gunboat procedures did not have to contend with.22 It should be recog¬ nized, however, that the imperialist nations still have consid¬ erable power to exclude the grievances of backward peoples from the purview of the United Nations. Moreover, they have been able to neutralize unrest and to liquidate unfriendly governments by setting one dependent country against the other. On the whole, capitalist expansion is now confronted with universal psychological and political resistance. Even among the peoples of Africa, that last great hope of imperialism,23 nationalism has decidedly broken out of its cage. In a preWorld War II statement on this subject, Dr. Cleona Lewis of the Brookings Institution observed: The emergence of responsible governments in many backward countries is complicating investment problems in some parts of the world—putting an end to the good old days when the ex¬ ploitation of labor, and of consumers, was practically unchecked by law, and when valuable rights and concessions were obtainable on extraordinarily easy terms. . . . Several Latin American govern¬ ments, for example, are now undertaking to regain control of their natural resources and to protect their populations from foreign exploitation. ... Everywhere, new labor legislation, land laws, tax legislation, and government control of railway and public utility rates, are serving to reduce the profits formerly realized on many kinds of

THE NARROWING FRONTIERS

181

entrepreneurial ventures, while political shifts of various kinds are further narrowing the field for such investments.24 Contraction of opportunities for the expansion of capital¬ ism by resistance to its methods among backward peoples tends further to be reinforced by the fact that the appeal of the system is no longer unchallenged. Even so, the leaders of backward countries continue to emphasize that imperialism is by no means bedridden.

Declining Appeal of Capitalist Leadership Before

1914, say, the economic advantages accruing to

leadership in the capitalist system were still eagerly coveted by ambitious nations; they were, indeed, something to dote on even among backward countries. The overwhelming pre¬ occupation of the newer nations with ideals of attaining or even surpassing the economic heights of former leaders created a fascinating world atmosphere of progress and rivalry. This rivalry gave the system itself considerable stabil¬ ity and prestige. However, after two tremendous attempts and tragic failures by the German heir-apparent to realize the rags-to-riches career of former leader capitalist nations, the possibility of succession through the usual means seemed to have vanished. Besides, there is evidence that even the day-dreaming of backward peoples has been shocked into revulsion against the typical symbols of capitalist glory and power. More than ever, backward peoples seem to be seeking respect as human beings, something which advanced nations do not have the capacity sincerely to bestow. The following official statement by the American Navy indicates what these people could still expect in the way of “respect” in 1924. The visit of an American warship to a foreign port is always of great assistance to the diplomatic and consular offices of the United States in the country visited. Even in those countries whose governments are thoroughly stable . . . the occasional visit of one of our ships tends to boost our country and increase the prestige

182

CAPITALISM AS A SYSTEM

of our foreign representatives. There is no better advertisement of American merit in foreign parts than a clean, snappy crew of American bluejackets manning their well-kept ships.25 It was, no doubt, some such purpose which the President of the United States had in mind when in 1955 he suggested that an American atom-powered ship be sent to visit the various seaports of the world.26 In a world in which they had nowhere to turn but to one group of capitalists or the other, dependent and passive peoples accepted with awe such demonstrations of power. Today, however, demonstrations of this kind may serve as alienating influences. Forms of social organization other than capitalism have shown a possible way to development in a climate of self-reliance. An Alternative Economic System Resistance to capitalist pressures in dependent countries would be merely futile acts of desperation were not alterna¬ tive forms of social organization available. Since no backward country can ever hope to attain leadership in the capitalist system, or even the power to command the respect of leading nations, it seems manifest that the system affords such coun¬ tries only continued stagnation and oppression. The pressures of the capitalist market, about which the mercantilists have taught us so much, tend to stunt and dissipate most if not all attempts to mechanize and industrialize their economies. Many backward peoples, therefore, refused to accept the limitations of the system, and began to plan their society in the interest of the general welfare.

The Russian break

through the “vicious circle” of the capitalist system furnished the same kind of inspiration to backward peoples as that which, in an earlier day, the English, Dutch and American overthrow of feudalistic constraints afforded young capitalist nations. Thus, there has been a new wave of social progress abroad which originated, not in the dynamic of the old sys¬ tem, but in deliberate government action designed to promote economic growth and its integration “with broad programs of social welfare.”27

THE NARROWING FRONTIERS

183

This movement toward planning in the interest of the welfare of backward peoples constitutes the positive aspect of the contracting frontier of imperialism. Because it appeals to the people themselves, they tend to have a personal stake in its success. It cannot depend upon the exploitation of out¬ side groups; and yet it does not require isolation. The ele¬ mentary values of inter-community exchange of culture and economic goods tend to remain intact, and are indeed sought after. In a planned economy, or one in which planning has be¬ come popular, the masses of people tend to become directly associated with the fate of their country. They do not, conse¬ quently, submit easily to the customary violence of imperial¬ ists. Every able-bodied citizen, male and female, may become a soldier; hence traditional military expeditions by organized capitalist groups are likely to meet with guerrilla warfare on an unprecedented scale. In these situations, no native can be fully trusted by the imperialists; whole communities may become suspect. The power of the modern imperialist is thus opposed by the masses of people in certain backward countries; and this opposition, even though poorly supported with arms, is clearly a most stubborn and persistent one. These, then, are some of the factors contributing to the shrinkage of that critical area of operation of the capitalist system, the backward countries. In tendency, these factors seem to be all progressive.

12 Movements Toward Change Fundamental changes in human society have seldom oc¬ curred without the intervention of social groups. But most societies resist with tremendous tenacity Utopian schemes for their reorganization. Yet change is possible. Indeed, compared to the quasi societies of lower creatures, the crucially differ¬ entiating characteristic of human society is probably its changeability. It is, no doubt, this happy trait of societal plasticity which allows the human being scope for imagining a better way of life and a more advanced civilization than his own. Since a society of any considerable magnitude can hardly be changed fundamentally by artificial design, such mutations as do take place by group implementation are ordinarily encouraged by internal or external cultural developments. These developments tend to be determined by the pattern of the existing social organization. The capacities of different societies for action and reaction are not only distinct, but also sometimes predictable. We should not expect, for ex¬ ample, a feudal society to sustain such a continuous chain of technological inventions as that which culminated in the industrial revolution; neither should we expect to find in that type of society any basic change in social organization as a result of political class action. Viability of Capitalism Fundamental societal changes, then, are not erratic and unexplainable; they are explainable by the peculiar tend184

MOVEMENTS TOWARD CHANGE

185

encies of social situations in given societies. Perhaps no major civilization has been more subject to endogenous social change than capitalism. The system itself, notwithstanding, is an ex¬ tremely viable form of culture. By contact, it has revolution¬ ized every other civilization on earth, without being itself significantly transformed in the process. The extraneous cultural objects which it has sometimes freely borrowed from other systems have been assimilated and made strictly to serve its own ends. Capitalism’s extraordinary ability to trans¬ form what it touches has resulted in the wholesale disintegra¬ tion of traditional cultures as they became involved with it. Native groups everywhere have been put under a desperate necessity to substitute capitalist cultural traits for their own. Thus, even though there are still important survivals of other systems, the way of life characteristic of modern western na¬ tions has become the cultural nucleus of the world. The fact that capitalism has been violently aggressive does not of itself explain its spread. In the past, conquerors have been absorbed by the conquered. But capitalism has never been in any such danger. Nature of the Change Although the system has stood up powerfully in the face of other cultures, it has been subject to its own order of development and decline. We have already considered its ex¬ pansive forces and some which are contributing to its shrink¬ age. In this chapter, we shall be concerned with group action directed against the system’s very existence. Generally speak¬ ing, this opposition has been principally directed not against the culture as a whole, but rather toward its inadequacies and its system of exploitation. But since exploitation con¬ stitutes the fulcrum of capitalism, its elimination anywhere must needs involve some reconstitution of the system itself. It is important to note that the opposition groups are indigenous to the system itself. They constitute, mainly, the classes that are more or less organized around the opposite

186

CAPITALISM AS A SYSTEM

poles of the productive process. The peoples of the backward countries may conceive of themselves as occupying one of these poles. Class organization is a complex phenomenon, varying with the position of the country in the hierarchy of the capitalist system, as well as with the system’s own historical stage of development. Moreover, the chances of success of the oppo¬ sition class are not the same in different countries and at dif¬ ferent times. The struggle necessarily involves not only a particular country, but also the entire system. One may gen¬ eralize that the higher the nation stands in the system, the greater the consequences of its class struggle upon universal capitalism. Taking into consideration the period, then, an overthrow of the ruling class in the leader nation would doubtless result in the overthrow of the global system. There are, however, conditions in leader nations which give them relatively greater power of resistance to direct class action. The Classes We have seen that classes and class struggle are a character¬ istic of capitalist society. Unless we are interested in the generalized phenomena of social conflict, it is of no particular significance to identify class struggle in capitalist society with inter-group antagonisms occurring in other patterns of social organization. The incidence and process of class con¬ flict in the capitalist system are peculiar to the system, and hence can be understood only with respect to the immanent social situations. Both the social-status hierarchy and the di¬ vergent communities of power constituted by interest groups are generally referred to as “the class system.” The two are not identical, however. The structures are related only in¬ sofar as honor and prestige tend to increase directly with the power attributes of the interest groups; otherwise, they are distinct in their organizational and functional character¬ istics. Although it may also include more or less significant mar¬ ginal interest groups, the society of leading capitalist nations

MOVEMENTS TOWARD CHANGE

187

(or cities) is inherently composed of two principal political classes. This fact is determined by the nature of the produc¬ tive process. The critical capitalist method of utilizing re¬ sources with increasing efficiency as a means of producing income defines the larger part of the people in the society as a utilizable factor of production. And, like any other factor, the extent to which this human component can be manipulated in the interest of larger output, to that extent also income may be maximized. Whether given members of the masses of people are in actual employment or not, the fact that they are in an exploitable position engenders certain utilitarian attitudes toward them. The necessities of exploitation tend also to require their docility. The two groups thus tend to be divided both in interests and in feelings. This major conflict of attitudes, as we have seen, occurred in every capitalist city of early capitalism. Professor Thompson recalls the re¬ lationship: Everywhere the wealthy classes controlled the local town gov¬ ernment and local trade and industry, and passed statutes in support of their interests, like privileges and monopolies, or ex¬ pressive of their contempt for the masses. Thus, in Bruges in 1241 the law associated counterfeiters, thieves and artisans together. Strikes and riots in the densely populated industrial regions of Europe, as Lombardy, Tuscany, and Flanders, are common from the middle of the thirteenth century onward. . . . This state of things led to a new form of association—namely leagues of the great guildsmen in all the cities of a province or region—and to attempts on the part of the working classes to form unions in their own midst and even to knit together such combinations in adja¬ cent towns. But all such efforts were abortive in the Middle Ages, except in Florence, and then only successful for a short season.1 Florentine experience, indeed, shows clearly the dilemma of the working class in a leading capitalist community. Al¬ though this class may feel the grinding pressures of exploita¬ tion and suffer the contempt and disparagement of the ruling class, it is hardly competent to bring about the radical changes that would presumably remedy its grievances. Reform, how¬ ever, has been constantly within its reach.

CAPITALISM AS A SYSTEM

188

Aims of the Exploited Class It is possible, through violent uprising, to overthrow the ruling class—that is, the exploiter group—and then discover that the society has fallen back into its traditional mold of social

organization.

After

this

happens,

any constituted

government of workers will inevitably find itself sloughed off. Workers at the head of a capitalist state are in an absurd position; they almost always assume the very attitudes and behavior of the displaced ruling class. This is because the established attitudes and behavior of national leaders are es¬ sentially socio-economic, and not merely political. The class system, therefore, cannot be changed without revolutionizing the societal pattern itself. But such a revolution is manifestly not a simple matter. Although a leading capitalist nation will insist upon its sovereignty above all else, it is by no means independent or isolated. It is dependent upon a more or less universal net¬ work of external relationships for its income, and an over¬ throw of the society may result in a loss of its livelihood. The consequent economic situation may thus be vastly worse for the workers than the first. In capitalist entities such as Venice or Holland at their prime, the certain economic dis¬ aster which would have resulted from a radical overthrow of the oligarchy, would have made any such action extremely unpopular. The integration of individual societies into the capitalist system involves a variety of relations with which workers can hardly cope. They are, for example, confronted with hostil¬ ities from active capitalist units other than their own. As we have seen, it was enough for the Diet of the Hanseatic League to threaten a boycott of some of its leading cities to secure the exclusion of artisans from participation in elections. Indeed, a country may be actually invaded by a sister capital¬ ist nation for the purpose of putting down a worker govern¬ ment. Furthermore, workers of leader nations are contradic-

MOVEMENTS TOWARD CHANGE

189

torily placed with reference to the established network of exploitative foreign relations. The aims of the working class, then, tend to be conditioned by its peculiar social situation. Situations of Class Conflict Situations of capitalist class conflict are defined essentially by the historical period in which they take place, by the position of the country in the system of nations, and by the social status and aims of the workers. The aims of workers have had two major tendencies: reform and revolution. The reformist position tends to be limited to struggle for a larger share of the national income and better working conditions. The revolutionary movement, on the other hand, attacks the social organization itself. There seems to be a correlation between the aims of the workers and the position of the na¬ tion in the system. First, however, let us consider the factor of history. The historical period may be regarded as constituted by the era of capitalist development and that of its maturity. Up to about 1914, the expansive force of capitalism was so ir¬ resistible and the peoples of the backward countries still so unschooled as to the true nature of the forces impinging upon their traditional culture that in no part of the world was there a serious possibility of a worker or proletarian revolution; attempts at revolution constituted predetermined abortions. None of the countries of Europe was psychologi¬ cally or economically able to endure a worker’s state. Besides, the class struggle of the world had no positive ideology until the latter part of the nineteenth century. Workers were not sure whether their salvation lay in emigra¬ tion, in withdrawing to the little ideal communities of the Utopians, in anarchy, or in resignation to intermittent and sporadic conflict with employers and their police when occa¬ sion and opportunity arose to force a better deal. As everyone knows, it was Karl Marx and his collaborator, Frederick Engels, who insisted that there was a social logic

190

CAPITALISM AS A SYSTEM

to the existing class struggle; that the heritage of the workers was inevitably the transformed capitalist system itself; and that this must be so because of the incapacity of the system to perpetuate itself vis-a-vis the unending antagonism it set up between workers and the ruling class. These thinkers argued, moreover, that workers possess a moral obligation to displace the capitalist oligarchy. Their teachings gave exploited peo¬ ples everywhere a logical core of ideas concerning their destiny.2 These ideas became extremely stimulating and viable because they were grounded in observations of the actual processes of the capitalist society. Class struggle may thus be differentiated into pre-and post-Marxian conflicts. The First World War may be taken as marking the age of mature capitalism; by that time it had filled up the important spaces of the earth. The people in the great backward coun¬ tries were also awakened, and they had become equipped to read history in such a way as to circumvent the attractions of the proclaimed ideals of imperialism. The sordid facts of foreign exploitation, the spectacle of the leading nations fighting for rights to control the passive areas, the absence of any reasonable hope of themselves becoming advanced capitalist nations, plus the convincing prospects of socialism, presented strong inducements to revolution in the backward countries. It had once been argued that the overturn of capitalism would most likely be initiated in the nations farthest ad¬ vanced industrially. This, indeed, is a well-known conclusion derived from Marx’s logic of social change. There is evidence, however, which seems to indicate major fallacies in this hypothesis. In the first place, the wealth of a leading capitalist nation is not entirely, or sometimes even mainly, accumulated from the exploitation of domestic workers. The ruling class of Holland, for example, by its systematic draining of foreign resources, was a manifest contributor to the income and wel¬ fare of the Dutch worker, who could not reasonably refer to that class as his exploiter without important reservations. In leading capitalist nations, therefore, workers tend to become

MOVEMENTS TOWARD CHANGE

191

participants in foreign exploitation. It should be recalled that Marx and Engels recognized this fact marginally. Thus in 1883, Engels wrote: “Apart from the unexpected, a really general workers’ movement will only come into existence here when workers are made to feel the fact that England’s world monopoly is broken. Participation in the domination of the world market was and is the basis of the political nullity of the English workers.”3 In such a country, dis¬ content among the workers is likely to center on the size of their share of the general wealth. And, because the pie is available, a larger cut is possible. It is this fact to which Pro¬ fessor Lipson referred when he wrote: In the growing prosperity of the country the working class shared with other sections of the community. Its progress was revealed in the shorter hours of labour; in the advance in wages real as well as nominal; in the more abundant and varied articles of consumption; in the marked decline of intemperance; in the influence exerted upon social habits by the spread of education; in the mounting deposits of savings banks; in the provision—made by friendly societies (whose number even in the eighteenth cen¬ tury ran into thousands) with several million members—for the casualties of life; in building societies to enable working men to own their homes; in the institution of holidays; in the facilities for cheap travel; in the amenities afforded by public authorities, such as libraries, parks, etc.4 The important point here is that while British workers were improving their status and standard of living, workers in the colonies and dependent countries were being subjected to the economic pressures I have previously noted, so that in some cases even their traditionally low plane of living was further depressed. “If capitalism finds a partial escape in colonialism,” Maurice Dobb remarks, “it may avoid forms of pressure on the working class of the metropolis to which it would otherwise have had to resort. Compared with the latter alternative, the metropolitan proletariat may be said to benefit from imperialism.”6 The leading capitalist nation develops, in addition, an important class of workers vitally concerned with the ad¬ ministration of its foreign interests. Police and military per-

CAPITALISM AS A SYSTEM

192

sonnel, civil servants, technicians, and employees in the foreign business bureaucracy tend to form a hard core of relatively well-to-do functionaries whose passion in favor of the status quo could ordinarily be depended upon.6 In Hol¬ land, Belgium, and Great Britain this group has been con¬ siderable and significant; it has been rapidly expanding in the United States.7 The dependent and passive countries, of course, do not possess such a category of workers. Thus, while the “middle class” in leader nations tends to be bound closely to capitalist interests, the relatively few persons of “middle-class” training in backward countries tend to become identified with the discontented masses in opposition to foreign exploitation. This popular attitude is sometimes even transferred to the intermediary native capitalists, whose in¬ terests are associated with and ordinarily adjuvant to those of the foreigners. The

following assertion

by Joseph

Chamberlain

dra¬

matically emphasizes the difference in the situation of workers according to the position of their country in the capitalist system: Believe me, if in any one of these places [dependent countries] to which I have referred any change took place which deprived us of that control and influence of which I have been speaking, the first to suffer would be the working-men of the country. ... If the working-men of this country understood . . . their interests, they will not lend any countenance to the doctrines of those poli¬ ticians who never lose an opportunity of pouring contempt and abuse upon the brave Englishmen, who, even at this moment, in all parts of the world are carving out new dominions for Britain, and are opening up fresh markets for British commerce, and laying out fresh fields for British labour.8 Affiliation of Classes Like the proverbial goose, then, capitalism may inspire solicitude and protectiveness among workers. The remarkable nationalism displayed by this group in the leading capitalist nations has a real basis. It is not to be identified with the

MOVEMENTS TOWARD CHANGE

193

negative or defensive nationalism of backward countries, but rather with the very ambitions and actions of ruling classes. And, once again, it rests upon the workers’ role as participants in the foreign exploits of these classes. When Florence was carving out her destiny among the weaker republics of Tuscany, the seaport of Pisa became an important objective. It finally fell in battle; and the meaning of this to the Florentines has been recorded. “The reception [Florence] gave the news that Pisa had passed under its yoke was

.

.

.

exactly suited to its power outlook.

All

the

chroniclers are agreed that the much-divided population of greater gilds, lesser gilds, magnates, proletariat, and beggars was converted into a single happy family which literally went mad with joy.”9 The imperialist conquest presaged the open¬ ing up of the outer world by sea to Florentine commerce; even beggars recognized their stake in that. The workers of leader nations have quite consistently adopted a similar attitude.10 The affiliation of workers with the ruling class is rooted deeply in the capitalist society. Although employers, because of their concern about minimizing costs, are in an antagonis¬ tic position to labor, they have always as a class exerted them¬ selves to increase employment opportunities for domestic workers. The mercantilists were particularly solicitous in this respect. The income of workers is one primary source of business expansion; hence, capitalists have an abiding in¬ terest in its augmentation. Anything which enhances the consuming power of the masses contributes to business pros¬ perity. “It is thus as much in the interest of the workman as of his employer,” said James A. Farrell, President of the U. S. Steel Corporation, “that provision should be made for the steady sale abroad of the products of the mechanical industry of the United States. It is in the interest of both that the capital needed in that industry should be obtainable on easy terms.”11 Another American business leader identified the interest of workers and employers as follows:

194

CAPITALISM AS A SYSTEM

We seek the combining of all classes in a united effort to uphold our own labor, our industries, in the titanic struggle that the constant war of international commerce forces upon us. This war is inescapable. It is the result of huge masses of popu¬ lation in various parts of the planet. We invite people to come here; having arrived, we must afford them the means of suste¬ nance; of supremest importance is the opportunity of steady em¬ ployment. Steady employment of labor is impossible unless there be con¬ tinuous run of manufacturing plants. Continuity of run is im¬ possible unless there be continuity of disposal of the things made. The absorptive powers of our domestic trade being far in arrear of our productive capacity, the matter of vastly increased exports is not one of choice. It is a matter of industrial life or death.12 It should be pointed out again that workers in backward countries cannot be offered a like program to relieve their unemployment. In fact, the converse of the action taken by the advanced nations may be the aggravation of unemploy¬ ment and the increase of pressure on the land among back¬ ward peoples. Effects on Class Struggle The working class in a leading nation, therefore, has suffi¬ cient reason to walk arm in arm with its oligarchy against the world. On imperialist questions, we should ordinarily expect this class to be nationalistic, because a threat to the imperial position of the nation tends to become a threat to its own welfare. The class struggle thus goes on at home, as I have indicated, for a larger share of the national income.13 But it is a struggle that tends to stop at the water’s edge where antagonisms with rival imperialists and exploited backward peoples begin. The working people of a leading capitalist nation are likely to rise up in wrath against those of their fellows who disclaim the imperialist actions of the govern¬ ment, regarding them as traitors. “Imperialism thus figures,” says Hobson, “as an important and imposing feature of neo-capitalism, seeking to avert internal democratic struggles for economic equalitarianism by providing outlets for surplus

MOVEMENTS TOWARD CHANGE

195

goods and surplus population together with emotional ap¬ peals to the combatant predacity which animates a spirited foreign policy.”14 We should not expect, then, that workers in leader nations will

take

a determined

initiative

in transforming their

society to socialism. The initiative must come from still more disadvantaged groups abroad. The backward peoples are the real exploited and exploitable proletariat of the system. It is apparent that most of the advanced nations, especially the older, smaller ones, could not—at least in the short run— maintain their standard of living under socialism. That standard, as has been made plain, is based significantly on economic relations with backward countries.

Hence, the

abandonment of capitalism by a leader nation, involving as it does its hold on lesser economies, would expedite the col¬ lapse of the entire system. There is no organized proletarian force in either Great Britain or the United States able or willing to challenge directly the position of the ruling class. What seems more likely, and indeed what is already in process, is that the stronger backward countries will throw off the “parasitic” grip of the imperialist nations and then proceed to develop through planning. In these countries the class struggle is at the same time a nationalistic struggle against foreigners. Socialism, for them, is much more feasible because they have no valuable exploita¬ tive claims abroad to relinquish. To the contrary, socialism may provide the reason for expropriating the claims of foreigners, which may give some backward economies an initial material advantage. But this withdrawal from the system by backward areas removes the ultimate supports of leader capitalist nations, and thus generates situations in those nations conducive to the development of real socialism among their workers. The class struggle thus becomes not simply a violent clash between workers in the most advanced capitalist nations

CAPITALISM AS A SYSTEM

196

and their ruling classes, but a conflict between the masses of people, mainly in the more organizable backward countries, led by native socialists or nationalists, and their weak, domes¬ tic bourgeoisie or feudality supported by the system. Na¬ tionalism

and anti-colonialism

have

implicitly come

to

mean anti-capitalism. Intra-Class Antagonism The two world wars, which were essentially intra-class conflicts, have given backward countries invaluable oppor¬ tunities to extricate themselves from the capitalist system. Since the Second World War especially, many of these coun¬ tries have been striving with increasing success—sometimes in the face of appalling violence from the leader nations— to take advantage of these opportunities. The economies of such countries as France and Japan, although they may still seem to possess their former blush of prosperity, have been undermined by this movement. In fact, the primary struggle to keep these nations from abandoning capitalism altogether is currently waged

on

their home

territory

principally

through the military operations and encouragement of the leading capitalist power. It is not, as some writers think, that the class struggle has changed its locus from the advanced nations to the back¬ ward countries.15 The process involves a consistent movement within the capitalist system as a world-wide phenomenon. The economic situation was unfavorable to a workers’ revolu¬ tion in the early capitalist cities. The wealth of a city like Venice could neither have been created nor sustained by a proletarian society. In the new leader nations—Holland, England, the United States—workers became participants in the accumulation and use of wealth. They were thus always profoundly divided on the question of the goal of their struggle with the ruling class. In none of the leader nations—save, perhaps, in Florence—did they achieve the solidarity and resolution necessary to overthrow the ruling

MOVEMENTS TOWARD CHANGE

197

class. Indeed, they never seriously formulated such an inten¬ tion.16 They have been essentially reformists from the be¬ ginning, and perhaps more so in mid-twentieth century than ever. In all the leader nations, moreover, the working class has been divided into its well-known “conservative aristocracy,” and its more radical masses. This aristocracy has identified itself with the masses only under pressure, and never whole¬ heartedly. The reasons for this seem clear. Unionization is indispensable in effective bargaining with employers; but workers strategically placed may more easily improve their status if they can disassociate their unions from those of the masses.

In the

United States, workers are still strongly

divided by bargaining situations in which race has been a critical factor. In some parts of the nation the latter con¬ sideration serves effectively to limit the supply of skilled labor;

consequently,

the

“aristocracy”

has

exploited

the

race issue with vigor and determination. Workers have been divided not only domestically, but also internationally. The working-class leaders in the advanced capitalist nations,

true

to

their traditional conservatism,

have been loath to identify their interests with those of workers in contemporary socialist societies. They have, more¬ over, sought to guard their market area from competition with

“substandard”

workers abroad.

For

instance,

Emil

Rieve, President of the Textile Workers of America, argues in favor of excluding foreign textiles, as follows: This desire of foreign countries to secure a foothold in our tex¬ tile market has been a real threat to the textile worker. Earnings in foreign countries have been relatively lower than those in this country, and working hours have been longer. Before the present war English and German textile workers were receiving one-half to one-third of the American standard, and Japanese workers were receiving only one-twentieth of the present American rate. While the standard working week in the United States was 40 hours, only a few European countries boasted of a similar work week and these have extended their working hours with the an¬ nouncement of the present war. Working hours of Asiatic workers

CAPITALISM AS A SYSTEM

198

ranged from 9 to 11 per day, while most European countries ob¬ served a 48-hour week. Competition with these labor conditions is impossible.17

Proletarian thinkers in the advanced countries have seen perhaps correctly that the workers constitute the real revolu¬ tionary force, but the social situation in these countries has not been heretofore conducive to revolution. The revolu¬ tionary areas have been the backward countries; hence it seems more accurate to say that the critical proletariat of capitalism resides in the backward countries of the system. This does not mean that the last country in, say Africa, will have

to

revolt

successfully

before

the

capitalist

system

begins to undergo transformation. It has, indeed, already lost more of the colonial area than it can afford. The continued withdrawal of this area from capitalist uses seems to be the surest means of bringing about those conditions in the lead¬ ing nations hospitable to a proletarian revolution. The con¬ tinued employment of vast resources to oppose the trend toward withdrawal shows abundantly that this fact is recog¬ nized by capitalism’s ruling classes. I do not, therefore, conceive of the class conflict as having changed its locus from the advanced nations to the dependent and passive capitalist countries. The workers in the advanced nations have done all they could, or intended, to do—which was always something short of revolution.18 But the social situation in the major backward countries is such that revolu¬ tion is not only indicated, but also feasible and largely profitable. Hence revolutionary solidarity seems far more easily attainable among them. Their successes will bring not only a change in the economic orientation and organization of the advanced capitalist nations, but also a new perspective on the benefits of planned economies to workers every¬ where. Incidence of Change in Leader Nations Although the social situation in leading nations tends to limit developments conducive to radical societal change, it

199

MOVEMENTS TOWARD CHANGE

would be a mistake to underestimate the importance of radi¬ cal movements in these countries. The continuing general dis¬ satisfaction with the morality and operation of capitalism, the attempt to find ways out by Utopian or by realistic socialists, the unrest of anarchists, and the parliamentary struggle of the common people for increments of democracy have reduced capitalist freedom of action at home and abroad. This movement provided not only an ideology, but also inspiration and encouragement for defiance of the imperial¬ ists by the subjected countries.

Its existence,

moreover,

frequently helped to buy critical time for revolutionaries in those countries to consolidate socialist gains. At times when certain exploited peoples were so com¬ pletely submerged that their crying could not be heard in the world, it was from the pen, rostrum and pulpit of anti¬ imperialists in the leading capitalist nations that the shame of capitalist methods was broadcast. Thus, within the very heart of the power structure, effective ideological blows against it were and are still being struck. Persons and groups engaged in this ideological battle ordinarily feel the counter blows in no uncertain ways. Furthermore, the reformist political and economic ad¬ vances made by labor in the leading nations should not be excessively discounted. Gradually and almost imperceptibly, the ruling classes in the leader nations have come to lecognize a fundamental responsibility to the working people. The workers can no longer be effectively blamed for un¬ employment. They have been conceded the right to employ¬ ment at an improving standard of living. In essence, this is clearly an increment of socialist transition; and any deter¬ mined down-swing of the business cycle will undoubtedly intensify it. The climate for societal change appears to be far advanced beyond that of, say, the decade before the First World War. The two movements, that in the back¬ ward economies and in the leader nations, thus supplement I

each other.

13 The Law of Motion (I) The Problem The success of the science of mechanics in describing forces and movements in the planetary system encouraged earlier social scientists to look for “laws of motion” in the social organization of human beings. This quest was not alto¬ gether unfounded, because it was even then evident that our highly

dynamic

society

was

not

functioning

erratically.

There had to be greater and lesser influences—independent and dependent interacting forces. It made no sense to con¬ sider every observable factor of change as equivalent. And yet, to the extent that the object of search was natural laws, a fundamentally static concept was

introduced into

the

analysis of societal data. Society changes not only in its institutional and personality inter-relationships, but also in its pattern of social organization; and these changes are his¬ torical rather than natural. In any given society, social and economic behavior tend to be determined by the pattern of social organization, which is normally stable and resistant to deviant innovations or pres¬ sures. Capitalist society is perhaps unique in its tendency to expand apparently without limit and still cohere with great tenacity. Capitalism, as has been indicated, is at once a universal system of societal units and a number of local social organizations differing more or less widely. The universal system is of central importance because the social organiza¬ tion of none of its units can be fully explained without refer¬ ence to its place and role in that structure. 200

THE LAW OF MOTION (I)

201

Although the major powers have the initiative in influenc¬ ing systemic integration and in introducing change, they are nevertheless fundamentally bound to it and to the conse¬ quences of change within it. Furthermore, because of their centripetal position and their collective rights with respect to the lesser communities, the domestic societies of the lead¬ ing nations tend to be functionally more dependent upon, and thus inextricably related to, the system. The more de¬ veloped the capitalist society, therefore, the less the likeli¬ hood of explaining its significant economic and political behavior as a “closed system.” Under the suggestive rubric, “the law of motion,” we shall consider one of the most striking capitalist movements, the “business cycle,” as well as approaches to the analysis of the dynamics of capitalism by such outstanding thinkers as Marx, Schumpeter, and Keynes. Since the dynamics of capi¬ talism can be understood only in constant reference to the capitalist system, I shall attempt to orient the primary assump¬ tions of these writers to their conception of the system. The Business Cycle The term business cycle has been used to designate a number of changes in capitalist society which involve fluctua¬ tion from prosperity to depression and vice versa. The con¬ cept includes at least two distinguishable phenomena: (a) economic maladjustment and (b) economic stagnation. It may refer equally to domestic fluctuations or to world-wide move¬ ments. Frequently the concept has been limited historically only by the apparent availability of data showing economic change. It must be already evident that nothing short of an understanding of the progress of capitalism would be suffi¬ cient for an interpretation of “the business cycle.”1 Maladjustments If we consider the innumerable possibilities of a great business organization failing to meet its obligations or even

202

CAPITALISM AS A SYSTEM

becoming bankrupt, we can conceive of the multiplicity of causes for business maladjustment leading to depression.2 To be sure, the failure of one or a few business concerns need not mean that a business cycle has set in; and yet it might. That depends upon the position of the business in the com¬ mercial hierarchy of the nation, and the position of the nation in the capitalist system. Business failure among concerns of only local patronage may be symptomatic of a cycle, but they are not ordinarily prime barometers. One of the most spec¬ tacular business depressions started in 1339 with the failure of the London branches of the famous Bardi and Peruzzi banks of Florence as a result of over-lending to English kings, especially Edward III. During a period of about ten years the entire banking system of Florence collapsed, and the financial organization of the world was shaken to its foundations. In microcosm, that business depression manifested many of the dominant features of the great 1929 crash and its conse¬ quences. Another type of business maladjustment may come from the failure of the foreign market to absorb the products of key industries. As Professor Tawney observes: During the depression of trade in 1621, which caused wide¬ spread distress in the textile districts and led to the appointment of a Royal Commission, the justices of Suffolk reported to the Privy Council that in 12 towns of the county the clothiers had lost £30,415 in the last five years through their inability to secure payment for cloth sold on credit to merchants and that in 20 towns they had cloth to the value of £39,282 lying on their hands, for which they had incurred all the costs of production, but for which they could now find no sale.3 The causes of obstruction to the usual avenues of com¬ merce are diverse. They may be the result of some decree by a great ruler as when Napoleon attempted to limit the commerce of Britain with the continent; they may be due to dislocations in the markets themselves; or they may be in¬ duced by unwise commercial or governmental policies.

THE LAW OF MOTION (I)

203

Location of Business Cycles Business cycles are phenomena of the capitalist system and not particularly of isolated communities within it. As such, cyclical movements emanate mainly from leader capitalist nations. A depression in the leader nation, whatever its cause, ordinarily results in depression in all other communities of the system; but it is possible to have the most racking hardtimes in backward countries—either temporarily or endemically—without

their

affecting

prosperity

in

the

leading

nation. The tendency of depression in the major nation to depress the economies of all other units in the system seems to have increased with the developing integration of the latter. Hard times or good times in backward economies—when localized they are seldom even referred to as depression and prosperity—may depend upon the decisions or vicissitudes of one or a few businesses in the great nations. We should expect, therefore, that fluctuations in these economies will be more frequent and of greater amplitude than in leader na¬ tions.4 There is probably nothing that people in a backward country ivithin the system can do to create either prosperity or depression in the leader nation.5 Generally speaking, the influence of business conditions in other nations upon the economy of the leader tends to decrease as their status descends in the economic hierarchy of the system. Prosperity There seems to be but one major condition of prosperity in the dominant nation and that is opportunity for commercial and industrial expansion. This means, of course, expansion of the market. The market may be expanded intensively by more effective exploitation of existing areas or extensively by bringing new areas into the capitalist system. War has been a principal means of expanding the market in both respects, but especially as a stimulus to the acquisition of new

204

CAPITALISM AS A SYSTEM

areas. The Dutch and the British wars from about the end of the sixteenth century to the opening of the nineteenth were particularly productive. Commenting on the Dutch war of independence with Spain, Petrus J. Blok says: The war had become a source of commercial prosperity, which could not be checked without affecting the existence of many thousands. In the early stages of the conflict, great profit had been reaped from trade on hostile and neutral ground as well as from piracy. Numerous ships sailed yearly from Holland, Zeeland, and Frisian ports to Spain, Portugal, Flanders, and Brabant—to neutral lands. The new pathway to India had proven, too, a source of profit. Peace would prevent this.6 A similarly great opportunity for expansion came to the United States at the outbreak of the first World War; and leaders were quick to recognize its significance. Accordingly, one of them observed that just before the onset of European hostilities shops were shut down, labor was a drug on the market. The con¬ ditions at present prevailing caused by abnormal demand for our products for war purposes will not last far beyond the declaration of peace. Our shops have been enlarged and new ones have been constructed as a result of this abnormal demand. If those shops are to be operated; if labor is to be given continuous employment, we must begin at once the work of preparation for extending our foreign commerce in manufactured goods.7 War may thus be instrumental in opening the way, but the essential quest is for wider markets. “After the [Ameri¬ can] Revolution,’’ says G. S. Callender, “as well as before, prosperity depended upon our ability to exchange the prodducts of certain industries based upon our natural resources with other countries for all other forms of wealth. Whatever interfered with that exchange brought hard times; whatever promoted it brought prosperity.”8 Two factors, technological advances and domestic popula¬ tion growth, have been sometimes considered as affording basic opportunities for capitalist expansion. These, however, appear to be functions of the extension of the market. It is

THE LAW OF MOTION (I)

205

not the existence of population which produces the oppor¬ tunity for capitalist expansion; it is rather capitalist expan¬ sion which makes it possible to attract and employ a larger population.

“Shopkeepers

of

the

world”

are

necessarily

densely populated communities. Population has increased rapidly with the rise of all leading capitalist nations, and the fact that all of them have been foci of immigration shows that the pull of available opportunity was the dominant factor.9 A declining rate of growth of a population may be a symptom of subsidence of capitalist opportunities in the society; but to assume that such a decline is a cause of de¬ pression is to imply that capitalist economies are closed enti¬ ties. Moreover, the ease with which immigration bars may be let down and the desperate importance of prosperity to capi¬ talist nations belie the theory which conceives of population growth as an independent variable. When a leading capitalist nation is developing, it will ordinarily import population. Technological innovations, as already noted, are also char¬ acteristic of leading capitalist nations. There are few if any inventions or innovations of consequence in backward capi¬ talist countries; and, if by chance one does occur, it will most likely be developed and exploited in the leading nation. Technological advancement is itself a powerful means of capitalist expansion, but it does not seem to be the primary cause. “Nations have converted their swords and muskets into factory implements,” observed Andrew Ure in the early nineteenth century, “and now contend with each other in the bloodless but still formidable strife of trade.” The techno¬ logical developments were indeed at the service of this “formidable strife of trade” to which cause “every nerve and sinew of the people were put upon the strain.

10

To lose this battle, or to be incapable of carrying it on because of inadequate societal organization and military sup¬ port, was to fall behind in capacity to employ technological inventions most efficiently. And, in the capitalist system, a little bit of technology will not do. In an observation on Ger-

206

CAPITALISM AS A SYSTEM

man expansionism during the First World War,

Flenri

Hauser declared: “German industry must appear on this market like a combination of forces. . . . Everything must be regulated with an eye to the object to be attained, which is the systematic exploitation of the world.”11 The innovations themselves are thus instruments of a larger purpose involving other economic factors which determine the extent and area of their use. Causes of Maladjustment As I have intimated, the causes of business maladjustment are many. And yet, when there is room for expansion, most determinants either do not materialize or, if they do, are rendered ineffectual as producers of serious business disturb¬ ances. The tulip mania of Holland was a dramatic crescendo of speculation followed by a crash, but the Dutch economy was not seriously depressed by that cycle. In 1637, the Dutch were vigorous pioneers; there was still room abroad for their capital, and the economy quickly returned to normalcy.12 In leading capitalist nations particularly, war tends to create abnormal opportunities for commercial and industrial expansion. The coming of peace, therefore, is ordinarily a harbinger of business dislocation and depression. Any signifi¬ cant over-expansion of investment and attempts to stop sud¬ denly its absorption of capital are likely to start an economic spiral leading to more or less serious business maladjustment. Sometimes, as in the case of the Manchester cotton shortage during the American Civil War, key capitalist industries may be interrupted by unpredictable causes leading to far-reaching business maladjustments. Stagnation Economic stagnation may be regarded as a chronically de¬ pressed state of a leading capitalist society, or of the capi¬ talist system itself. If it were possible to plot the critical indices of capitalist growth, we should doubtless see a con-

THE LAW OF MOTION (I)

207

tinual upward trend from about the sixth or seventh century to about the first quarter of the twentieth. These indices would manifest themselves particularly in the societies of the leader nations. Barring business maladjustments, capitalism may thus be said to have had a continuous era of prosperity from its beginning to the First World War. Before, say, 1914, it never became bankrupt. And yet, localized capitalist stagnation resulted, in every instance, when there was a change in leadership. The dis¬ placed leader suffered at least relative retrogression; and it lost its dynamic initiative in the system. That was the fate of Venice, Lubeck, Holland, and Britain. Stagnation ordinarily involves different problems for the society from those of temporary business maladjustment and depression. In its earlier manifestations, it meant the relative reduction of capacity to maintain the national position in the capitalist system. When, for example, it appeared that Holland would be superseded by other rising nations (England and France especially), Dutch businessmen, in a report already cited, estimated their situation in this way: The heart of a true Dutchman must be pierced with sorrow, perplexity, and anguish; and he must shudder at the prospect when he seriously considers and reflects on those impending dangers that threaten the republic if no considerable and effectual relief be given ... to our trade. ... For when the evil once is epidemical and so far spread that the merchants gradually retire into foreign countries, the putting then a stop to it will be en¬ tirely ineffectual.13 None of the past leaders of capitalism, unless perhaps some of the great Hanseatic cities integrated into modern Germany, ever attempted to regain initiative in the capitalist system. Stagnation has meant virtual oblivion as powers in the system for some former areas of fabulous capitalist enter¬ prise. The fall of Holland and England, however, was cush¬ ioned by their vast imperialist holdings. Moreover, since the capitalist system as a whole was still in its developmental

CAPITALISM AS A SYSTEM

208

period, these nations, by sophisticated affiliation with the actual leader, could maintain a satisfactory subsidiary exist¬ ence.14 Stagnation has recently taken on a new and more crucial aspect. There is no capitalist nation able to threaten the position of the current leader. But the condition of the system itself has deteriorated as a hospitable milieu for further growth. The world has lost its responsiveness to the system’s inherent expansionist demands. Although the pangs of stagnation are as excruciating to the present dominant class as they were to the Dutch in the days of the fall of that republic, the problem of resisting it is inherently different. Currently the concern is not essen¬ tially with ways and means of retaining the lion’s share of available commercial opportunities, but rather with opposing changes which constrict the totality of opportunities in the system. As early as 1922, James S. Alexander, President of the National Bank of Commerce in New York, asserted: “There can be no final recovery of the domestic trade in any nation until the normal international trade relations which alone support the great international division of labor can be estab¬ lished.”15 The leadership of the system thus finds itself ob¬ ligated to defend against every encroachment upon it, irre¬ spective of the immediate national interests which may be involved. Indeed, any show of weakness or apathy on the part of lesser nations in the struggle to maintain their traditional range of capitalist action tends to be interpreted as an act essentially hostile to the economic welfare of the leader. And this is understandable, since the impact of stagnation any¬ where in the system tends to be compounded in its effect upon the economy of the present leadership. When the system was functioning normally—before 1914, say—adverse economic conditions in individual lesser nations or backward countries ordinarily had little effect upon the leader. But since the period of stagnation set in, the economic policies of even

THE LAW OF MOTION (I)

209

backward countries may produce shocks with repercussions throughout the system. The character of these policies, of course, has changed; now they more frequently tend to restrict rather than expand the operation of the system. As Professor George B. Roorbach emphasizes: “To circumscribe the limits of trade to less than the whole world is to circumscribe by that extent the oppor¬ tunities for industrial expansion and the standards of living of even the largest and richest nations.”16 The severest injury which could be done to the system is thus the withdrawal of a country from its purview. In turning to planned economies, societies no longer look upon commerce as an end in itself; hence they may be able, in a situation of persistent antagon¬ ism with the system, to live tolerably well on their own re¬ sources. “Russian foreign trade thus far,” observes Professor John H. Williams, “has been astonishingly small, and per¬ haps the chief question at this stage is, not whether Russia herself should be included in ITO, but how far she may ex¬ tend her influence and her system over other countries.”17 The primary concern of the ruling class in the leading capitalist nation is to counter the historical forces tending to aggravate stagnation in the capitalist system. But the prob¬ lems of recurring business maladjustment and depression have not been removed. A stagnated capitalist system would be far less able than a developing one to throw off the effects of an ordinary business depression. Moreover, the factors contributing to stagnation seem to be cumulative and pro¬ gressive. A primary question is to what extent and for how long the leader of the system can finance the bankrupt units within it, and thus postpone the consequences of stagnation. Perhaps a consideration of the thinking of certain recog¬ nized authorities on the subject, as given in the following chapter, may prove enlightening.

14 The Law of Motion (II) The Marxian Approach The most valuable contribution of Marx and his collabora¬ tors as social scientists is probably their primacy in asking significant questions about the nature of capitalist society, and their attempt to answer these questions by relying to a considerable extent on historical data. But Marx and his immediate colleague,

Frederick Engels, were also major

leaders of anti-capitalist action groups; and, in that capacity, they assumed the normal charismatic aura of outstanding leadership. The completely rational analysis of society formu¬ lated by these thinkers can scarcely be expected of their fol¬ lowers. To be sure, this is also true—in reverse fashion, so to speak—of the capitalist leadership and its dedicated scholars: a diabolical image tends spontaneously to be evoked whenever any Marxian concept is brought into their purview. They do not allow critical thinking free play. Moreover, because the preponderance of power rests in the existing elite, we should expect—and find—more flagrant and effectual manifestations of intolerance on their side. Some of those who value the opportunity to think inde¬ pendently about the nature of societal organization—among them, perhaps, the writer should be counted—may conclude that intolerance in the class struggle is an inherent evil. This conclusion, however, seems debatable. A fundamental desideratum of action groups is resolution. No one can con¬ sistently applaud the establishment of a socialized society and at the same time censure the consummate belief in the in210

THE LAW OF MOTION (II)

211

tegrity of the leadership which provides the rapport neces¬ sary for its achievement. Although I recognize the impossibility of dissociating the objective reasoning of the most prominent Marxists from their position as symbols in action groups, I shall nevertheless essay briefly to identify their approaches as they relate to the context of my own presentation. Only major assumptions can be touched. If assumptions are clear, however, the super¬ structure of argument generally follows an easy course. To go beyond questionable assumptions or major premises is to become futilely enmeshed in their consequent social or eco¬ nomic logic.1 Perhaps a recent dialogue between Mrs. Joan Robinson, on the one hand, and the Marxists, Joseph M. Gillman and Henri Denis on the other, over the validity of Marx’s labor theory of value illustrates pertinently how intricate and barren a discussion can become when it is based upon “truis¬ tic” but inherently false premises. This exchange, carried in Science and Society, was prompted by Mrs. Robinson’s position, as stated in a previously published work, that no point of substance in Marx’s argument depends upon the labour theory of value. Voltaire remarked that it is possible to kill a flock of sheep by witchcraft if you give them plenty of arsenic at the same time. The sheep, in this figure, may well stand for the complacent apologists of capitalism; Marx’s penetrating insight and bitter hatred of oppression supply the arsenic while the labour theory of value provides the incantations.2 The contention on both sides proceeded for many pages; but the farther it went beyond the primary postulate of the labor theory, the less, manifestly, became the chances of either of them demonstrating or disproving it. At length, therefore, Gillman rested his case upon the original proposition, saying: “According to the Marxist view, wage rates are the price of labor power; labor power is a commodity; all commodities have a dollar price tag on them because a dollar is the name of a unit of absolute value.”3

212

CAPITALISM AS A SYSTEM

Mr. Denis, also bringing his argument back to essentials, concluded: “There is no doubt that for Marx himself the theory of surplus value is the basic application of the value theory. Is profit a deduction from the product of labor whose size is determined by the relation of strength between workers and employers? Obviously, this is the essential question.”4 There seems to be no means by which the corollary theories can be evaluated if this approach is allowed. Thus the long argument began with the Marxian assumption and ended with a restatement of it as something too transparent and inviolable to require proof. The Marxian Analysis Marx’s analysis follows a pattern: it is a tapestry of capi¬ talism woven consistently about the

theme of the class

struggle. His thinking, furthermore, is an instrument of his career. He was born in a period pregnant with revolutionary ferment; and he began early in life as a German revolutionary with no clear understanding of the forces then actually ar¬ rayed against established power. Indeed, no one else had such an understanding. He sought to discover these forces and came at length to the immovable conclusion that they all converged in the working class which, as “obstetrician,” had a special mission to assist in the birth of a new system. He contrived with remarkable success to become the ideological leader of this class; and then devoted the rest of his intellec¬ tual life mainly to a study of the economics and sociology of capitalism in order to provide a theoretical foundation for his proletarian ideology. It goes without saying that if Marx’s preoccupation had originally been the scientific study of capitalism as a form of social organization, with only a derived interest in the contemporary class struggle, his entire theoreti¬ cal work would have been differently informed. Specifically, Marx thinks of capitalism and its dynamics as (a) existing within the context of an essentially closed society; (b) founded upon modern technology and industrialism, par-

THE LAW OF MOTION (II)

213

ticularly as these developed in nineteenth century England; and (c) harboring its critical elements of growth and decay in the peculiar exploitative relations necessarily existing be¬ tween capital and labor in the productive process. An intima¬ tion of this approach and the problems with which it inevitably becomes confronted is given by Marx in the follow¬ ing passage: We have seen how money is changed into capital; how through capital surplus-value is made, and from surplus-value more capi¬ tal. But the accumulation of capital presupposes surplus-value; surplus-value presupposes capitalistic production; capitalist pro¬ duction presupposes the pre-existence of considerable masses of capital and of labor-power in the hands of producers of commo¬ dities. The whole movement, therefore, seems to turn in a vicious circle, out of which we can only get by supposing a primitive accumulation . . . preceding capitalistic accumulation; an accumu¬ lation not the result of the capitalist mode of production, but its starting point. This primitive accumulation plays in Political Economy about the same part as original sin in theology. . . . The money capital formed by means of usury and commerce was prevented from turning into industrial capital—in the coun¬ try by the feudal constitution, in the towns by the guild organiza¬ tion. These fetters vanished with the dissolution of feudal society, with the expropriation and partial eviction of the country popu¬ lation. . . . The discovery of gold and silver in America, the ex¬ tirpation, enslavement and entombment in the mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commerical hunting of blackskins, signalized the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation.5 This, indeed, embodies the “original sin” of the Marxian assumption. It includes, as Joan Robinson points out above, Marx’s justifiable aversion to human exploitation. It is very likely, however, that if this conception of capitalism falls, Marx cannot go on with his labor theory; at least it would have to be so modified that it would hardly be recognizable. He begins his analysis of the nature of capitalism almost where he might have ended it; and as is commonly the case in classical economics, he relegates as subsidiary the very

214

CAPITALISM AS A SYSTEM

things which should have been the center of his study. It is— at least, so it seems to me—capitalist society and its system which he utilizes to extricate himself from the “vicious circle” in which he becomes involved by following his tech¬ nological view of capitalism. His “primitive accumulation” is none other than fundamentally capitalist accumulation; and, to assume that feudal society dissolved before capitalist society began is to over-emphasize the fragility of feudalism and to discount its uses to the development of capitalism.6 Venice had no guilds of consequence and the major guilds in Florence were bourgeois banking and manufacturing or¬ ganizations. These assumptions are fatal to Marxian economics. They lead him to study primarily industrial production in Eng¬ land as a basis for deriving critical conclusions about the system. “In this work,” he writes, “I have to examine the capitalist mode of production, and the conditions of produc¬ tion and exchange corresponding to that mode. Up to the present time, their classic ground is England. That is the reason why England is used as the chief illustration in the development of my theoretical ideas.”7 It is not, of course, that Marx should not have chosen an actual situation for study or that contemporary England was not indeed the most advanced capitalist nation, but rather that his approach and the particular object of study limited his chances of seeing the capitalist system, as distinguishable from the national society, as the crucial entity. To him, it is in England alone that capitalist production is completely developed.8 The pith of his theoretical reasoning about capitalism is thus based upon apparent phenomena in the closed society.9 According to Marx, the criterion of capitalist development in England was industrial advancement. It seems hardly necessary to dilate upon this. Professor Hansen has made the point elaborately in a definitive discussion previously re¬ ferred to.10 The following statement may suffice to indicate the emphasis:

THE LAW OF MOTION (II)

215

Every kind of capitalist production in so far as it is not only a labour process, but also a process of creating surplus-value, bas this in common, that it is not the workman that employs the in¬ struments of labour, but the instruments of labour that employ the workman. But it is only in the factory system that this inver¬ sion for the first time acquires technical and palpable reality.11 It is from this standpoint, then—the mode of production in the modern factory—that the author derives his orienta¬ tion to the capitalist system. The labor theory follows logi¬ cally. As Dr. Sweezy, interpreting Marx, concludes:

“the

buying and selling of labor power is the differentia specified of capitalism.”12 The labor theory is one of the most powerful truisms in classical economics. As everyone knows, it was probably orginally enunciated in the Garden of Eden, and it appar¬ ently would have been still current—with refinements, to be sure—among orthodox economists if Marx and some of his forerunners had not put it to such effective use as the touch¬ stone of working-class ideology.13 Like any of the other universalistic postulates of economic theory, it cannot be denied on its face; like all of them, however, it is what is not uni¬ versally true about it that is societally significant. I shall not attempt a restatement of this theory; it is tied into the arcanum of Marxism and rests upon assumptions which I have already questioned. But its persuasive force is suggested in the following: Capitalist production is not merely the production of commo¬ dities, it is essentially the production of surplus-value. The la¬ bourer produces not for himself, but for capital.. . . That labourer alone is productive, who produces surplus-value for the capitalist, and thus works for the self-expansion of capital.14 If Marx had comprehended the entire capitalist system with its foreign impulsions and sources of wealth available to the leading capitalist nations, he might not have been so satis¬ fied with this industrial explanation of the growth of capital. This takes us directly into the troubled waters of Marxian economics: his explanation of the accumulation of capital.

CAPITALISM AS A SYSTEM

216

The first condition of accumulation is that the capitalist must have contrived to sell his commodities, and to reconvert into capital the greater part of the money so received. . . . Even if that capital was originally acquired by the personal labour of its employer, it sooner or later becomes value appropriated without an equivalent, the unpaid labour of others materialized either in money or in some other object.15 It is at this point that some of the greatest of the later Marxian economists—Lenin, Luxemburg, Dobb—began to feel that something vital was missing. Again, I shall not attempt to review the Marxist logic of the relationship of producers’ goods to consumers’ goods and the consumptive habits of different classes in the closed society by which he supports his theory of accumulation. The pivotal problem faced by some of these Marxian economists was that of breaking through the labor-capitalcommodity-surplus-value frame of reference which seemed to become more and more limiting and unrealistic. It became apparent that the accumulated capital in a leading capitalist nation was not all the product of its factories. Some of it came

from

“outside.”

Accordingly,

Rosa

Luxemburg

reasoned: If we assume . . . that the surplus value is realised outside the sphere of capitalist production, then its material form is inde¬ pendent of the requirements of capitalist production itself. Its material form conforms to the requirements of those non-capi¬ talist circles who help to realise it, that is to say, capitalist surplus value can take the form of consumer goods, e.g. cotton fabrics, or of means of production, e.g. materials for railway construction, as the case may be. If one department realises its surplus value by exporting its products, and with the ensuing expansion of produc¬ tion helps the other department to realize its surplus value on the home market, then the fact still remains that the social surplus value must yet be taken as realised outside the two departments, either mediately or immediately.16 The question is thus raised at the most sensitive point of the Marxian system of analysis. It brings capitalism outside the factory. Accordingly, she writes further:

THE LAW OF MOTION (II)

217

Since the accumulation of capital becomes impossible in all points without non-capitalist surroundings, we cannot gain a true picture of it by assuming the exclusive and absolute domination of the capitalist mode of production. . . . Capital needs the means of production and the labour power of the whole globe for un¬ trammelled accumulation; it cannot manage without the natural resources and the labour power of all territories. Seeing that the overwhelming majority of resources and labour power is in fact still in the orbit of pre-capitalist production—this being the his¬ torical milieu of accumulation—capital must go all out to obtain ascendancy over these territories and social organizations. . . . And in fact, primitive conditions allow of a greater drive and of far more ruthless measures than could be tolerated under purely capitalist social conditions.17 This is undoubtedly an advance toward recognizing the wider scope of capitalism. However, it never quite extricates itself from the Marxian categories. It does not conceive of the capitalist system—backward countries and all—as a func¬ tioning, developing whole. Capitalism is still critically de¬ fined as an industrial mode of production, so that it becomes somehow limited to the area of modern factory production. Our author thus concludes: The decisive fact is that the surplus value cannot be realized by the sale either to workers or to capitalists, but only if it is sold to such social organizations or strata whose own mode of produc¬ tion is not capitalistic. . . . After many centuries of development, the capitalist mode of production still constitutes only a fragment of total world production. Even in the small Continent of Europe, where it now chiefly prevails, it has not yet succeeded in domin¬ ating entire branches of production, such as peasant agriculture and the independent handicrafts; the same holds true, further, for large parts of North America and for a number of regions in the other continents. In general, capitalist production has hitherto been confined mainly to the countries in the temperate zone, whilst it made comparatively little progress in the East, for in¬ stance, and the South. Thus, if it were dependent exclusively on elements of production obtainable within such narrow limits, its present level and indeed its development in general would have been impossible.18 Lenin, Maurice Dobb, and others have considered im¬ perialism as a later stage of capitalism, a stage which fully

218

CAPITALISM AS A SYSTEM

manifested its traits only after Marx had written. Marx could not, therefore, have analyzed its role and included it in his system. These Marxian writers do not, on the whole, accept Luxemburg’s hesitant amendment to the fundamental theory; they hold rather that Marxian economics is broad enough to embody the later development. Thus, according to Professor Dobb: “While imperialism undoubtedly introduced situations which were not and could not have been foreseen in the middle of the nineteenth cen¬ tury, these situations have features which ultimately seem to reinforce, rather than to nullify, the essentials of the forecast which Marx made.”19 Having accepted the fundamental Marxian postulates on the nature of capitalist society, Marxists cannot go back to Venetian, Hanseatic, Dutch or even early English imperialism for the essential concepts of the components of that phe¬ nomenon.20 It thus becomes a crucially limiting position which entails procrustean operations in the handling of the facts of modern social change as they relentlessly impose them¬ selves upon us. The rigid ideas concerning the role of indus¬ trial workers in modern revolutionary movements, and the earlier Marxian predictions giving precedence to the more advanced capitalist nations in the succession of socialist revo¬ lutions, are all derivatives of the theory. The Schumpeterian Schema Schumpeter’s analysis of social change is similar to that of Marx in that it is based upon technology and industry, upon phenomena apparent in the same historical period, and upon a closed economy. He emphasizes at least one of these similarities in saying, “We hold ... (in this respect entirely agreeing with Marx) that technological progress was of the very essence of capitalist enterprise and hence cannot be divorced from it.”21 However, Marx located the source of capitalist societal motion in the industrial process itself, while Schumpeter sees it in the procedure of initiating new indus-

219

THE LAW OF MOTION (II)

tries. Again,

Marx identified

the exploitative, capitalist-

worker relationship as crucial, while Schumpeter considers crucial the role of the entrepreneur.22 The Schumpeterian analysis thus plays down the class struggle. In a recent defense of Schumpeter’s position, Professors Clemence and Doody wrote: One of the merits of the Schumpeterian system is that it is able to explain how, starting from a society without a definite capitalist class, the process of development, by creating family fortunes, brings a group of hereditary wealth owners into being. What is more important, the model enables us to perceive that the ex¬ istence of a capitalist in the Marxist sense is an illusion. . . ,23 Although it may be open to question whether Schumpeter himself would call “capitalists in the Marxist sense an illu¬ sion,” he has nevertheless left the impression that politicalclass

relationships

are

relatively

inconsequential

in

the

processes of modern social change.24 The Schumpeterian model, a fundamental frame of refer¬ ence by which he develops his concept of the

circular flow

of economic life,” is a fictitious abstraction from reality which behaves essentially according to the author’s logic. The fal¬ lible heart of this abstraction is the assumption that the “essence” of capitalism may be found in “an isolated com¬ munity” where “private property, division of labor, and free competition prevail.”25 At any rate, in this closed system Schumpeter establishes a state of economic equilibrium in which developmental motion can arise only “by its own initi¬ ative from within.”26 And, remarkably, this initiative seems to be “spontaneous”: Development in our sense is a distinct phenomenon, entirely foreign to what may be observed in the circular flow or in the tendency toward equilibrium. It is spontaneous and discontinuous change in the channels of the flow, disturbance of equilibrium. ... Our theory of development is nothing but a treatment of this phenomenon and the processes incident to it. These spontaneous and discontinuous changes . . . appear in the sphere of industrial and commercial life, not in the sphere of the wants of the con¬ sumers of final products.27

220

CAPITALISM AS A SYSTEM

Schumpeter’s thesis has thus been stated. There remains only the problem of determining the specific factor in indus¬ trial and commercial life—and, as we shall see, particularly in industrial life—which motivates change. Schumpeter recog¬ nizes a historical dichotomy similar to that of Marx; an earlier commercial period succeeded by industrial society— i.e., in his view, capitalism in being. But he avoids the pitfall of “primitive accumulation,” saying: The fact that, on the whole, commercial enterprise precedes the factory and, up to the sixteenth century, predominates over in¬ dustrial enterprise, as well as the consequent facts that in very many instances the latter was induced and financed by the profits of the former, are all accounted for satisfactorily by the circum¬ stances that in the environment of that time difficulties of trans¬ portation . . . constituted the main problem to be solved. . . . Im¬ provement of productive method was a secondary consideration. Therefore, the entrepreneur of the commercial type imperceptibly shades off into the entrepreneur of the industrial type and the transition of the one to the other does not constitute a problem sui generis.28 The objective locus of Schumpeter’s thinking, then, is a society transformed by technology. The powers of industriali¬ zation are not only inherent but they also determine critically the social organization of society. “It is this industriali¬ zation . . . more than anything else that transformed the England of the Tudors and Stuarts through the change it wrought in production functions.”29 Moreover, change is initiated by men who have not been subjected to restraints acquired in the experiences of past business careers. “We shall assume,” Schumpeter says, “that innovations are always associated with the rise to leadership of New Men. There is no lack of realism about this assumption, which but formu¬ lates a fundamental truth of the sociology of industrial society. Verification abounds and may be gleaned from any textbook on, say, the industrial revolution.”30 I need hardly say, in the light of what has already been said in these pages, that these assumptions are open to question. At any rate, the milieu of capitalist development thus

THE LAW OF MOTION (II)

221

established, the author discovers the germ of growth in the innovation. But the concept of innovation may be defined so broadly that it becomes almost synonymous with economic change itself. This is precisely what Schumpeter does in his generalized definition.31 This definition, however, is largely inconsistent with his “new men” theory. That it required new men to introduce “new commodities,” to “open up new markets,” to “set up new business organizations,” has not been demonstrated by the author. The “new men” theory of certain economic historians was developed particularly with reference to the rise of modern industry;32 and the actual con¬ text of Schumpeter’s innovation shows that it is technological innovation with which he is chiefly concerned.33 Thus he defines the concept operationally as simply “the setting up of a new production function.”34 The technological in¬ vention becomes an innovation when the entrepreneur puts it to use in production: the “new man,” of course, refers to the entrepreneur. The entrepreneur, in Schumpeter’s sense, may be thought of as a promoter. He is neither the routine business executive nor the mere owner of an enterprise; his role is that of an initiator of innovations and his essential trait is

enter¬

prise.”35 The entrepreneur is thus a person with innate qualities of leadership adapted to business enterprise. He is motivated by such inner drives as “the dream and will to found a private kingdom,” the “will to conquer,” and “the joy of creation.”36 A distracting note arises when Schumpeter attempts to universalize this concept. “The entrepreneurial function itself,” he writes, “is not confined to capitalist society, since such economic leadership as it implies would be present, though in other forms, even in a primitive tribe or in a socialist community.”37 The author does not demon¬ strate how this pivotal figure of capitalist dynamics could emerge everywhere indiscriminately. Apparently the conclu¬ sion follows from his analysis of leadership as a natural oc¬ currence among all social groups.38

222

CAPITALISM AS A SYSTEM

The innovation, then, “is the outstanding fact of the economic history of capitalist society’’;39 it “is not only the most important immediate source of gains, but also indirectly produces, through the process it sets going, most of those situa¬ tions from which windfall gains and losses arise.’’40 An im¬ portant Schumpeterian point is that the innovating function of the entrepreneur creates the consumers’ demand upon which it thrives. “Consumers are educated by him if neces¬ sary; they are, as it were, taught to want new things, or things which differ in some respects or other from those which they have been in the habit of using.”41 Consumers’ initiative is, therefore, “negligible.”42 The author liberally illustrates this apparent relationship. This is, manifestly, an exciting picture of capitalism. If it is valid, we should expect that any people on earth may imitate capitalism, and thereby attain the fabulous economic heights of leader capitalist nations—the critical need being only a liberal supply of entrepreneurial leadership. In any backward and static economy, we may “see the figure of the entrepreneur . . . stepping in from outside the existing indus¬ trial organism to upset the equilibrium, to induce imitation, and to enforce adaptation, thereby creating new demand and new economic space for further ventures.”43 It seems to me, however, that had capitalism been this sort of orthogenetic economy, it would never be today facing any problem of survival. Has our population failed to breed a large enough quota of competent entrepreneurs? Perhaps one of the most disquieting questions which Pro¬ fessors Clemence and Doody chose to answer in support of Schumpeter was J. W. Angell’s inquiry: “Why are innovations innovated?”44 Presumably the best answer they could give was: “If innovation failed to appear, the capitalist process would come to an end.”45 Paul M. Sweezy saw clearly, how¬ ever, the outcome of the analysis. “This conception of the entrepreneurs,” he observes, “leads Professor Schumpeter to locate the source of economic change in the personality traits

THE LAW OF MOTION (II)

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of a certain group of men.”46 The origin of change thus becomes “spontaneous,” since Schumpeter does not identify personality with type of society. In the last analysis, the con¬ cept leads inevitably to a biological theory. Discussion here of Schumpeter’s views of the role of bank credit is perhaps unnecessary. As can be seen from his very definition of capitalism as “that form of private property economy in which innovations are carried out by means of borrowed money,”47 credit plays an important, but subsidi¬ ary role. Even so, it does not fit congenially into his logical schema.48 The Keynesian Solution In 1926, J. M. Keynes referred in the following terms to Karl Marx’s work: “Marxian socialism must always remain a portent to the historian of opinion—how a doctrine so illogical and so dull can have exercised so powerful and enduring an influence over the minds of men, and, through them, the events of history.”49 At this time only faint glim¬ merings of the finally matured Keynes could be seen. Per¬ haps he was even then the outstanding model-maker among classical economists. Ten years later, however, the economic facts of life were developing so startlingly, and Keynes found himself so involved without any adequate economic tools for dealing with them, that he decided to re-think the entire doctrinal system of classical economics. More than any other scholar, no doubt, Keynes had the prestige sufficient to shake that vast, fictitious structure to its roots. “The weight of my criticism,” he confessed, “is directed against the inade¬ quacy of the theoretical foundations of the laissez-faire doc¬ trine upon which I was brought up and which for many years I taught.”50 It was not that classical theory needed to be strengthened or to be restated; it was rather that the whole system from its inception was living a life of its own, feeding upon its past and thus existing largely as a science sufficient unto

CAPITALISM AS A SYSTEM

224

itself. Its ideal was not to become a social science, but to imitate the “elegant” formulations of the physical sciences. As Professor Knight put it: “Economic theory . . . deals with the ideal concepts which are probably as universal for rational thought as those of ordinary geometry.”51 This attitude and direction of economic theory had already so infuriated Frederick List that, in the middle of the nine¬ teenth century, he inquired: “What kind of science is that which sheds no light upon the path which practice must follow?”52 But hardly any one, especially in England and America, paid much attention to List. The times were more propitious when Keynes came to the same conclusion, saying: “We, the faculty of economists, prove to have been guilty of pre¬ sumptuous error in treating as a puerile obsession what for centuries has been a prime object of practical statecraft.”53 Keynes’ ultimate critique of classical theory, then, is that it has had its reward in simulating the natural sciences at the expense of being highly irrelevant to economics as a discipline of social phenomena. Indeed, the impact of his thinking in this regard has been so great that his very name has come to suggest the “irrelevance” of classical economics. Keynes reopened the vital question debated by Malthus and Ricardo as to what economic theory should emphasize— i.e., whether it should be concerned with how wealth is created or with how it is distributed. To take the one posi¬ tion or the other is to bring different systems of economics into being. The question of how a society acquires its wealth involves a study of social organization, and this in turn brings to light the fact that economic orders are societal functions, and thus tend to differ just as social organizations differ. On the other hand, to emphasize distribution of in¬ come among factors of production is to open the way for universalistic formulations. By the latter approach, it becomes easy to abstract economic life from its social conditions and to promulgate economic “laws.” The mercantilists, of course.

THE LAW OF MOTION (II)

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were primarily concerned with problems of bringing riches into their country; and it should always be remembered that through the actual practice of mercantilist doctrines, all leading capitalist nations became “opulent.” It is a point which Keynes stresses.54 Keynes’ studied attack on Say’s Law, already verbally re¬ pudiated by Marx, was an attempt to remove the cornerstone from the “automaticity” of the classical system. And yet, strangely, he continued to use the methods of the classi¬ cists. As Arthur F. Burns observes: “Although Keynes and his followers are concerned with a range of problems that the classical economists shunned, by and large they still seek to arrive at economic truth in the manner of Ricardo and his followers.”55 The constraints of tradition seem to have been too great even for the Keynesians. Radicalism would have required that they abandon the concept of capitalism as a closed society and begin by inquiring, like the mercan¬ tilists, into the basis of capitalist wealth. Keynes may be regarded as a classical economist with a proposition calling for an essentially socialist solution. For years he had been deliberating upon the problem of eliminat¬ ing the “extremely objectionable” aspects of capitalism while retaining its good qualities. “Our problem,” he once wrote, “is to work out a social organization which shall be as effi¬ cient as possible without offending our notions of a satis¬ factory way of life.”56 His General Theory is his ultimate answer to this difficulty. He believes that the full employment promised by socialism can be attained while preserving capi¬ talist freedoms. As he puts it: The authoritarian state systems of today seem to solve the prob¬ lem of unemployment at the expense of efficiency and of freedom. It is certain that the world will not much longer tolerate the un¬ employment which, apart from brief intervals of excitement, is associated—and, in my opinion, inevitably associated—with pres¬ ent-day capitalistic individualism. But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom.57

226

CAPITALISM AS A SYSTEM

To do this, government planning and intervention become necessary. The state must be informed about mass economic movements and act as a regulator of consumption and invest¬ ment. Keynes is by no means unaware of the implications for the rampant capitalists—especially in the United States —who have decided to resist any such direction of social change. Thus, in anticipation, he defends his program by saying, “It is the only practicable means of avoiding the destruction of existing economic forms in their entirety and is the condition of the successful functioning of individual initiative.’’58 The Keynesian solution is remarkable in that it is an essen¬ tially domestic adjustment. It will, at any rate, eliminate the realities of capitalist foreign commerce, and substitute a mutually advantageous international exchange of com¬ modities. His position on this vital aspect of capitalism is so germane to his theory that I quote it at length: If nations can learn to provide themselves with full employ¬ ment by their domestic policy (and, we must add, if they can also attain equilibrium in the trend of their population), there need be no important economic forces calculated to set the interest of one country against that of its neighbours. There would still be room for the international division of labour and for interna¬ tional lending in appropriate conditions. But there would no longer be a pressing motive why one country need force its wares on another or repulse the offerings of its neighbour, not because this was necessary to enable it to pay for what it wished to pur¬ chase, but with the express object of upsetting the equilibrium of payments so as to develop a balance of trade in its own favour. International trade would cease to be what it is, namely, a des¬ perate expedient to maintain employment at home by forcing sales on foreign markets and restricting purchases, which, if suc¬ cessful, will merely shift the problem of unemployment to the neighbour which is worsted in the struggle, but a willing and unimpeded exchange of goods and services in conditions of mu¬ tual advantage.59 Incidentally, it should be observed that those classical economists who claimed to have derived “general theories’* of foreign trade never even take into consideration Keynes’

THE LAW OF MOTION (II)

227

critical definition of the process. But what Keynes seems to overlook is that the o snreat leaders of international commerce were always conscious of these very consequences of success or failure in their transactions; and they accepted them as the essence of the game. The new orientation which he suggests may be possible, but not under the motivations of capitalism. There are certain primary assumptions which one must accept before the details of Keynes’ logic become meaningful. These assumptions are (a) that capitalist freedom is and can be dissociated from the capitalist economic order; (b) that capitalism is essentially a domestic economic order; and (c) that a leading capitalist nation can be maintained in pros¬ perity by relating its investments to the consumptive needs of its own inhabitants. Indeed, the latter proposition is in¬ tended to hold for all peoples within the hierarchy of the capitalist system. To be sure, Keynes recognized that the capitalist system would be modified by his solution; but he seemed hardly to have realized the extent to which such a modification would go. He presented little evidence of the consequences of capitalist nations giving up their exploitation of the backward countries. The possibilities of the Keynesian solution might have been suggested by the experience of the First World War. Here was full employment, and thus prosperity, initiated by government action:

War socialism unquestionably achieved

a production of wealth on a scale far greater than we ever knew in peace, for though the goods and services delivered were destined for immediate and fruitless extinction, none the less they were wealth.”60 Could the feat be duplicated in normal times? In war, it is government expenditure which sets the ball rolling; in peace, this should be done by the same means. Hence he conceived the idea “that a somewhat comprehensive socialization of investment will prove the only means of secur¬ ing an approximation to full employment. If the State is able to°determine the aggregate amount of resources devoted to

228

CAPITALISM AS A SYSTEM

augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary.”61 The gravity of the situation, the nature of the problem, and the means of solution thus clearly seen, Keynes proceeds to justify the program by economic logic. The structure of the theory rests upon a postulated rela¬ tionship between the rate of interest and inducements to invest in the society. Capitalism, he thought, is suffering from a relative loss of opportunities to invest. The following statement is significant because it includes in part also Keynes’ theory of capitalist development: When a country is growing in wealth somewhat rapidly, the further progress of this happy state of affairs is liable to be inter¬ rupted, in conditions of laissez-faire, by the insufficiency of the inducements to new investments. Given the social and political environment and the national characteristics which determine the propensity to consume, the well-being of a progressive state essentially depends ... on the sufficiency of such inducements. . . . In conditions in which the quantity of aggregate investment is determined by the profit motive alone, the opportunities for home investment will be governed, in the long run, by the domes¬ tic rate of interest; whilst the volume of foreign investment is necessarily determined by the size of the favorable balance of trade. Thus in a society where there is no question of direct in¬ vestment under the aegis of public authority, the economic ob¬ jects, with which it is reasonable for the government to be pre¬ occupied, are the domestic rate of interest and the balance of foreign trade.62 The classical economist in Keynes comes out in this pas¬ sage. The reasoning, especially the suggested alternative to government intervention, concerns “a country”—any coun¬ try; it is a universalistic approach, and thus it must needs be misleading. Moreover, home investment and foreign invest¬ ment are not seen as interdependent. Suppose we consider Venice in 1550 or the United Provinces in 1650 as countries facing stagnation, would it have been possible for the govern¬ ment by regulating the rate of interest and indeed the “bal¬ ance of foreign trade” to continue the “well-being” of these progressive states? The simple fact seems to be that the state

THE LAW OF MOTION (II)

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of prosperity of these countries was not critically dependent on the rate of interest or on a technical relationship to foreign trade. Capitalist opportunities for expansion are character¬ istically of another sort.63 It is by no means a matter of incon¬ sequence to accept the following analysis of economic trends in Spain, Britain, and India: The economic history of Spain in the latter part of the fifteenth and in the sixteenth centuries provides an example of a country whose foreign trade was destroyed by the effect on the wage-unit of an excessive abundance of the precious metals. Great Britain in the pre-war years of the twentieth century provides an example of a country in which the excessive facilities for foreign lending and the purchase of properties abroad frequently stood in the way of the decline in the domestic rate of interest which was required to ensure full employment at home. The history of India at all times has provided an example of a country impoverished by a preference for liquidity amounting to so strong a passion that even an enormous and chronic influx of the precious metals has been insufficient to bring down the rate of interest to a level which was compatible with the growth of real wealth.64 For certain purposes especially connected with his mone¬ tary arguments, Keynes commendably essays to rehabilitate the mercantilists; even so, however, he overlooks the fact that no reputable mercantilist would have attributed the decay of foreign trade in Spain to an inordinate influx of precious metals, or the impoverishment of India to traditional “liquidity preference.’’ Here again the classical economist attempts to apply economic theory indiscriminately without giving primary consideration to the role of social organization and the position of the nation in the international structure of capitalism. It is, nevertheless, domestic investment within leading capitalist nations with which the Keynesians are essentially concerned. The following is a refinement by Pro¬ fessor Alvin H. Hansen, an eminent member of the school: For an advanced industrial country like the United States, the dynamic factor which sways the movements of income and em¬ ployment is typically domestic or home investment; for the under¬ developed countries, such as many Latin Amencan countiies, the

230

CAPITALISM AS A SYSTEM

value of exports usually calls the turn in the business cycle. For some countries, like Canada, Australia, and Sweden, which are in an intermediate position, home investments and exports are both vitally important, but the predominant influence is likely to be exports.65 The critical motion of capitalism is thus internalized: its primary impulsion becomes the endogenous expansion of the rate of investment, particularly in the United States. Imports follow as a consequence of the induced augmentation of income and the consequent demand for consumers’ goods in addition to the industrial raw materials necessary to supply them. Exports of raw materials to the advanced countries provide the backward countries with the foreign exchange to import manufactured goods. “Thus the circle is complete: Impulses leading to expansion have been transmitted and retransmitted from country to country via the international market mechanism.”66 The problem, then, is still geared to the nature of the “impulses” domestically generated. It appears relatively easy to apply this reasoning to the United States as one of the advanced countries; it would be doubtless more difficult to include Great Britain, Germany, and France in the category. But if the foreign trade of undeveloped and intermediate countries depends upon domestic investments in the advanced countries, and if that trade is vital to their economy, then all rests upon the home investment of the leading capitalist nation. Could it be, then, that Keynes’ theory applies only to contemporary United States? No other country of the capitalist system could put his program into effect without considering its foreign-trade situation. As Hansen observes: The freedom enjoyed by the United States to pursue a domestic policy designed to maintain high and stable levels of income and employment, regardless of impulses coming from outside, is unique in modern history. The size of our internal market, the diversity of our resources and productive facilities, the relatively small dependence on international trade in terms of total gross national product, the vast gold reserves and persistent strength of

THE LAW OF MOTION (II)

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our trade position—all these afford a freedom to carry out, despite adverse influences from abroad, a domestic program of internal stability and fvdl employment. But the matter is far from easy for many other countries which hold a weaker and less sheltered in¬ ternational position.67 This, manifestly, is a concept of capitalism which locates its source of movement in the domestic policies of the lead¬ ing nation. More specifically, it is assumed that the well-being of the entire system depends upon the domestic investment policies of the United States, based upon domestic needs and “regardless of impulses coming from outside.” Thus, con¬ tinued prosperity in the United States becomes the basic prerequisite to the well-being of world economic conditions.68 No doubt this is true. What the Keynesians do not seem fully to keep in sight, however, is the fact that the influence of “world conditions” on the United States is also great and critical. I have already indicated that, although economic conditions in a single backward country may not visibly affect the economy of the United States, an adverse movement among all or most of them will certainly have a major impact. Here also the question resolves itself to one concerning the nature of capitalist wealth. Foreign influence on the Keynesian economy is played down. There is not the slightest intimation that this leading industrialized economy could not exist as it is presently constituted without its peculiar foreign economic opera¬ tions.69 The dynamics of the economy—which, by inference, must be almost exclusively that of the United States—centers on the relationship of investment and consumption. The Keynesian device is thus a short-run compensator designed to keep these two functions at a desired state of equilibrium, the test being full employment. Its logic is complicated be¬ cause it shuttles between reality and the fictitious categories of orthodox economics. For our purpose, the thread of the argument may be stated as follows: The rate of investment is a function of the mar-

232

CAPITALISM AS A SYSTEM

ginal productivity of capital and the rate of interest, so that at any given stage of productivity a lowering of the rate of interest will result in an increase of investment. Consump¬ tion, on the other hand, depends upon the consumptive habits or “propensity to consume” of the population; hence, after the traditional norm of consumption has been reached, any increase or decrease in aggregate real income will be saved or spent in proportion as these go beyond that norm. Under ordinary conditions, consumption expenditure will always lag behind movements of income around the national standard of consumption. It follows, therefore, that actual consumption expenditures will be determined by the “level of income.” But since consumption “limits” production70 and since, furthermore, investment is for the purpose of producing con¬ sumption goods, there is a point at which investment just satisfies, in goods produced, the propensity to consume. The propensity to consume, as the theory holds, is a highly static attribute of the people—varying perhaps from country to country, but stable in any given social situation.71 The dy¬ namic factor is, therefore, investment. Employment is related directly to the rate of investment; hence the greater the increase in investment, the higher the aggregate real income, the greater the gap between consumptive expenditure and savings, and the greater the need for new investment.72 It is thus possible to think of prosperity in a capitalist society as attainable mainly by domestic efforts to increase the rate of investment. The Keynesian theory looks in two directions: it purports to be a description of the actual way in which the economy of a leading capitalist nation functions and at the same time a theory upon which a semi-socialist order might be based. The argument seems to be troubled by an involvement of these two interests. If the theory is designed to show how full employment and an equitable distribution of income might be provided in a closed economy, it cannot at the same time

THE LAW OF MOTION (II)

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be an explanation of the way capitalism works. The simple fact is that capitalist investment is not related in the Key¬ nesian way to

employment and consumption.

Capitalist

investment in the aggregate always calls for “room” beyond the confines of the domestic economy; hence, the nice rela¬ tionship among employment, habits of consumption, and over-saving does not apply to a leading capitalist economy. The frontier of capitalism is, or at least was, the whole world. Its actual or potential consumers are, therefore, vastly greater than the domestic population. And there is char¬ acteristically no obligation whatever to provide full employ¬ ment for the external consumers. Professor Hansen recognizes this dilemma and makes the following suggestion: The frontier for the entire world is largely gone and population is approaching stabilization—if not, indeed, decline. This affects the outlet for the investment in durable goods both at home and abroad. Rural electrification schemes, housing projects, and the like, carried out under the stimulation of low interest rates, may, however, turn out to be really important investment outlets.73 Expanding opportunity for foreign investment might in¬ crease employment at home, increase consumption, and utilize savings to the limit of those opportunities. It is not, therefore, a matter of indifference whether

investments are made

through capitalist commerce abroad or, in the absence of this, through public works at home. The same theory obviously cannot explain both processes. Moreover, Keynes’ important concept, the “propensity’ to consume, seems open to debate. As we have seen, Piofessor Schumpeter maintains that habits of consumption are largely induced by entrepreneurs. According to him, consumptive needs are developed directly with the multiplicity of innova¬ tions. The Keynesians, on the other hand, consider consump¬ tive behavior as a highly durable attribute. Professor Hansen puts this very strongly indeed:

CAPITALISM AS A SYSTEM

234

The ultimate causal forces are therefore found outside of the price system, in the mores, customs, habits, and behavior patterns of the people. The fundamental psychological factors are the psychological propensity to consume, the psychological expecta¬ tion of future yield from capital assets, and the psychological at¬ titude to liquidity. Psychological propensities, mores, and behavior patterns are thus the root forces which lie back of and control consumption and investment and thereby determine what the point of equilibrium shall be.74 It has, of course, been demonstrated empirically that the larger the income among individuals in capitalist society the more of it is saved, and that in times of prosperity savings tend to increase relatively faster than consumption.75 It has been pointed out, furthermore, that in all capitalist nations rising to leadership, the plane of living of the population has also risen commensurably. But Keynes’ treatment of the subjective aspect of the pro¬ pensity to consume is generalized for all societies—as, for instance, in the following: “Man’s habitual standard of life usually has the first claim on his income, and he is apt to save the difference which discovers itself between his actual income and the expense of his habitual standard.’’76 Let us grant, for the moment, that this is so—without reducing the principle to a truism which may overreach into the behavior of some lower animals. Then, as we have seen, habits become an ultimate factor: “Every weakening of the propensity to consume regarded as a permanent habit must weaken the demand for capital as well as the demand for consumption.”77 The point I wish to make here is that in a leading capitalist society habits of consumption are not so stable as Keynes would make them appear.78 A crucial trait of this society is the constant incorporation of more and more of the consump¬ tive needs of the population into its commercial structure, so that in the very process of enlarging investments the con¬ sumptive habits of the people are modified. The commodity content of investments is thus constantly changing, and this has significant repercussions on the social structure. The

235

THE LAW OF MOTION (II)

proportion of income spent for consumptive needs is likely to change with the increasing commercialization of those needs; while the expectation of satisfaction, i.e., the standard of livino-, will tend to change with the accumulation of wealth in that nation. Three factors seem to stand out as detracting from realism in Keynes’ analysis: (a) it is too dependent upon “propensi¬ ties,” traditional attitudes that are not particularly character¬ istic either of capitalism or of modern planned societies; (b) it does not give sufficient weight to the dynamics of the physical content of capital and of its products; and (c) its transactions are essentially those of a closed economy, which fact, when capitalism is implied, is apt to falsify every major conclusion. “War socialism,” for example, brought an increase in the production of wealth. But, it may be asked, what will be the effect upon the economic structure of the world, if, say, the United States were to decide to support prosperity at home by substituting public works for “cold war” expendi¬ tures?

The

change

in

policy would doubtless

make

an

enormous difference, but the introverted emphasis of our author tends to leave this out of sight. Moulton’s Optimism As President of the Brookings Institution, Harold G. Moul¬ ton has been endowed with facilities elaborate enough to secure and analyze the mass data necessary to test hypotheses on the dynamics of capitalist society. And, indeed, the Insti¬ tution has sponsored some valuable studies designed to answer questions suggested by the vast economic movements of the thirties.79 Though by no means of the same Olympian stature as the social scientists previously considered, Moulton may be taken as representative of attempts to deal empirically with the functions of the capitalist system. The theory and position of his findings are brought together in Controlling Factors in Economic Development. Moulton takes explicit exception to Keynes’ “static” analysis and to the latter’s solu-

CAPITALISM AS A SYSTEM

236

tion calling for governmental action to supplement private investment. Both Moulton and Keynes, however, diagnose the endemic maladjustment as arising from a faulty distribution of wealth between domestic consumption and investment; and suggest as a cure the maintenance of a high level of consumption. But while Keynes plans to accomplish this through raising the rate of investment, Moulton prefers to increase directly the real income of the consumers. “The dynamic requirement is to increase income among the masses of the population sufficiently to provide the essential consumption outlets.”80 He holds, in opposition to Keynes, that there is no habitual consumptive propensity among the people, but rather a vast reservoir of latent demand ready to be made effective as purchasing power becomes available. The real brake on con¬ sumption is the increasing concentration of wealth in the hands of “the wealthier classes,” a situation which over¬ emphasizes savings because the greater part of savings and investment takes place among the higher incomes. Balance could thus be restored by a redistribution of the national income.81 The real basis of Moulton’s dynamics is technological ad¬ vancement and the continually increasing productivity of capital. “Building on two established facts—the vast expan¬ sibility of consumer demand and the increasing productivity of improving units of capital—we contemplated a dynamic rather than a static society.”82 If, however, one assumed an optimum distribution of income between the highly wealth¬ consuming part of the population and the investing part, progress must manifestly be left to technological advances. Since advances in the productivity of capital will disturb the desired

equilibrium,

there

should

be

established

some

permanent corrector of the maladjustment. Thus, “. . . as a continuing process, a reduction in the savings ratio may result from a constantly broadening distribution of newly generated income, made possible by technical advances.”83

THE LAW OF MOTION (II)

237

In other words, the increment of wealth due to augmented productivity should be continually transferred to the income of the masses. Moulton suggests three possible means of doing this: “rais¬ ing wage rates, sharing profits, and reducing commodity

prices”;84 and, of these, price reduction is considered most feasible and effective. The technique of advancing wages is too slow and limited in scope; profit sharing will include a still smaller segment of the consuming masses; but price reduction is both “in keeping with sound business policy” and “gives to every purchaser a larger return for his money.”85 In the last analysis, then, the duty of keeping the economy progressive and healthy is left to businessmen who are ex¬ pected to lower prices because: “Experience has proved that companies which have reduced prices as productivity has increased have been successful in improving their competitive position and have obtained larger rather than smaller aggre¬ gate profits.”86 Moulton’s analysis may be viewed as representative of a school of economic optimists. He reviews a number of oppor¬ tunities for capitalist growth mainly through the exploitation of science and technology. He, too, bases his economic analysis upon a simple closed economy, with a circular relationship between investment and consumption. In his critique of the stagnation hypothesis, he conceives of the “vanishing frontier” of capitalism to mean the “American frontier” which closed legally at the end of the last century. The concept of the United States as an integrated unit in the capitalist system, with a dependent domestic economy, is remote from his an¬ alysis.

In the end, therefore,

Moulton’s devices seem to

suggest, at least in effect, leaving the home economy in status quo.

15 The System in Transition If it is true that the capitalist system, with its territorial, economic, and power asymmetry, constitutes the critical entity involving changes and developments within the various units, then problems of transitions must be analyzed with reference to the systemic matrix as a whole. Granted this assumption, there still remain two major approaches to the question, the one emphasizing change in terms of class struggle and the other the consequences of transformation for the various societies of the system. Class-struggle theory seems to hold that a proletarian overthrow of a capitalist society, almost at any point in the system, would ipso facto liberate the energies of the masses to establish a new order in which the common welfare may be enlarged indefinitely. The details of the process are seldom gone into. Indeed Marx himself, the progenitor of this orientation, had very little to say about the operation of the elements of the new order. And yet class struggle, like war, may obscure real issues. The real issues are ensconced in the transformation itself. To know these is to be able to predict even the degree of success that the struggle may attain in various situations. Human beings, it seems, will not be permanently contented with merely a transfer of power to the “people.” If this were true, Utopians would be in very much greater demand. On the contrary, mankind is destined to live in societies organized according to inherent systemic principles. Social planning, it is true, has now come within reach of many peoples, but this too has its limitations. 238

THE SYSTEM IN TRANSITION

239

Let us, then, first attempt to indicate what conditions in the capitalist system contribute to the success of contemporary mass revolt. We may eliminate, as a matter of primary con¬ sideration, discontent among workers in the advanced coun¬ tries. By and large, organized labor in the leading capitalist nations has been pro-capitalist; according to its continuous preachments, the “slaves” reside in socialist countries. The first and basic factor seems to be the irreversible trend toward stagnation in the capitalist system. Since the system at its summit cannot expand naturally—i.e., in conformity with the traditions of the free market—economic problems neces¬ sitating non-market solutions arise throughout its scope. A corollary to this development is the fact that capitalism has been continually losing its international idealism. The inter¬ national afflatus previously generated by rivalry for leader¬ ship no longer obtains; the process of succession has ended. A second indispensable factor is the maturation of rational thought, the growth of secularism, and the advancement of science and technology. These are among the positive products of capitalism, which, in various countries, induce confidence that the means of successful societal planning are available. It is in this sense that socialism goes back for its inspiration to such philosophers as Roger Bacon, Francis Bacon, and Condorcet. Capitalism has constituted a rational, seculai society and has related science and technology functionally to human progress. These two opposite developments, the stagnation of the capitalist market system, necessitating progressive resort to socialistic devices even in the advanced countries, and demon¬ stration of the infinite possibilities of science and technology, continually reinforce the movement toward transition. It is not, however, in those nations which had achieved an advanced capitalist structure before the onset of stagnation, that the futility of capitalism is most keenly felt. The mature nations can still hope to maintain their imperialistic positions by strategically revising the practice. But there is no hope at

CAPITALISM AS A SYSTEM

240

all for backward countries to graduate to a status of fullfledged, prosperous, capitalist nations. It is thus in the latter environment that the values of planned economies tend to become most attractive. It is there that the way may seem open to enter the stream of cultural achievement and progress at an ever faster rate. This indeed can be the only reasonable motive for the initiation of a class conflict whether violent or not. The goal, in any case, remains the same. Few responsible persons, for example, seem to be impressed by those leaders of backward countries who obtain independence for their countries only to occupy the physical place of the deposed imperialists. Adoption of socialism, on the other hand, be¬ comes a very consequential move. As has been pointed out, to abstract the base of backward countries from the system is to accomplish its downfall; and the dominant class in the leading nations is by no means un¬ mindful of this. The struggle for the transition to planned economies

thus

becomes

an

international

phenomenon

centering in the previously passive countries. In attempts to estimate the rate of change, two major contingencies have been traditionally taken into account: the prospects of war among the great capitalist powers, and of the recurrence of depressions of the 1929-1939 variety. But although a capitalist world war or a major depression would doubtless unloose the forces of socialism everywhere, neither the objective situation nor the disposition of the leadership in the great nations seems to warrant the expectation of either. It is not that the system has purged itself of the busi¬ ness cycle, but that the increasing role of government in the economic processes of the system precludes the possibility of a typical depression. (Incidentally, this uncustomary role of government must be reckoned as one significant aspect of the transition.) In

the absence of any protracted preoccupation

with

internal war or depression, the leadership of the system re¬ mains relatively free to counteract by force, boycott, and

THE SYSTEM IN TRANSITION

guile any movement abroad toward socialism.

241

Although

this capacity to resist has been constantly diminishing, it is still able to inflict appalling punishment upon any backward nation seeking to withdraw from the system. The situation, however, is characterized by the need to offer an ever larger carrot before the stick is applied. Besides this active opposition, many backward countries are faced with insuperable problems in their ambition to establish planned economies. The most formidable part of the struggle is not so much the overthrow of a ruling class as it is the organization of a new, viable society. Socialism may provide the answer but it is a far more difficult system to manage than that of a passive version of capitalism. A viable socialist society demands a relatively large, sophisti¬ cated governmental bureaucracy, a tractable military es¬ tablishment, at least a nest egg of native scientists and technicians, a certain critical size of population and quantity of natural resources, and a people capable of being inspired and motivated to endure privation and to labor unremit¬ tingly for a millennium which they may never live to enjoy. Any country withdrawing from the capitalist system must expect to experience cultural shock and more or less serious economic dislocation. The one-crop and mineral-producing countries could be starved out simply by a closure of the market against them; and thus the advocated benefits of socialism may easily appear too costly. Today some of the established socialist countries, especially the Soviet Union and China, may offer assistance to alleviate hardships, but hardly in all situations. It should be constantly borne in mind that socialist de¬ velopment has only one basic reliance, and that is the use of science and technology in such a way as to assure economic productivity at a rate progressively faster than that of the growth of population. Neither direct production nor depen¬ dence on the import of capital goods can achieve this. The country itself must be able to inherit the self-generating

242

CAPITALISM AS A SYSTEM

expansibility characteristic of an unlimited use of capital. There is thus no alternative to major industrialization. How¬ ever, not all contemporary nations can achieve this sort of industrialization. Many are too limited in population and resources. Unlike capitalist nations, socialist countries cannot plan to exploit other peoples’ resources; they must look only to their own land and manpower. The smaller countries, therefore, must expect to remain forever satellites—or become merged into large regions. No nation of the West Indies or mainland Carribbean, for ex¬ ample, can ever hope to profit progressively by the economies of scale inherent to the heavy industries, in production for its necessarily domestic consumption. They must, so far as it is possible to envision, always import the consumer goods which flow from these industries. As part of a larger region involving free population mobility, however, they may be¬ come conscious contributors to the total productive process. In such countries as Russia and China, where both the population and natural-resource complement are favorable, the socialist leadership can develop the desired enthusiasm in the people to make the awesome initial sacrifices in labor and savings, and sustain their hope perpetually by a show of cumulative results. Frustration is overcome by incremental reassurance of progress. The domestic demand is so large that factories,

mills, water-power projects,

irrigation

schemes,

educational institutions, and so on are under steady pressure to operate with increasing efficiency, a fact which tends to demonstrate the necessity of socialist discipline. Capitalist man, it should be recalled, endured his own age of severe discipline. This, then—the rewarding drive to achieve eco¬ nomic and cultural goals—becomes

the basis of human

motivation and incentive in socialist society. Satellite coun¬ tries cannot experience it fully; as entities, they may even ex¬ perience cumulative disillusionment—they cannot “take off.’’ Although both South America and sub-Saharan Africa have resources and population sufficient to assure fundamen-

THE SYSTEM IN TRANSITION

243

tal socialist development, they are confronted by the prohibi¬ tive fact of national and tribal disunity.

As individual

countries—unless it is perhaps Brazil and the Congo—they must continue to suffer the inadequate rate of development, or even decline, imposed by imperialist contrivances, or else make desperate individual attempts at socialism perhaps only to become aware of a dead-end ahead. In these areas, unity becomes the crying prerequisite to progressive development through planning; and, as we should expect, it is precisely this desideratum which the leadership of the capitalist system seeks actively to foil and frustrate. Among the heads of state in Africa who are most painfully conscious of the limiting consequences of disunity are Gamal Nasser in the North and Kwame Nkrumah in the South; and, primarily because of this, they are not only suspect, but also made the targets of easily-fed nationalism in the others. Given the opposition of the advanced nations, the diffi¬ culties of organizing viable socialist states in these two areas are indeed stupendous. An inherent factor inhibiting unifi¬ cation is the general non-complementary nature of produc¬ tion and human skills in the various internal units. Their devotion to agriculture and mining tends to create little if any market among them for each other’s products. They are thus ordinarily oriented, both culturally and economically, toward the industrialized nations. Quite frequently they are forced to communicate with each other circuitously by way of systems centering in the manufacturing countries. And yet social trends favor the movement. Every revolu¬ tionary attempt made by individual nations in South Amer¬ ica, for example, whether successful or not, constrains the leadership of capitalism further to demonstrate to the masses of people that the system is capable of satisfying their needs more effectively than can the revolutionaries. These needs can hardly be “quarantined”; and movements to accom¬ modate

them

invariably

involve

capabilities of free enterprise.

planning

beyond

the

CAPITALISM AS A SYSTEM

244

Even the European Common Market must be considered an important aspect of the transformation. It is partly a response to the actual or threatened loss of colonies and partly a reaction to the competitive challenge of the Soviet Union. Given their colonial territories, even such small countries as Holland and Belgium could make creditable advances as industrial nations; without the colonial assur¬ ances, however, not even Great Britain can feel economically secure. Furthermore, none of the European nations is large enough or sufficiently endowed with raw materials to embark upon an internally oriented program of development that would be self-perpetuating. In other words none, by itself, can fully exploit the self-generating values of science and technology. In unity, however, Europe will have established the population and resource base for a major socialist society. But this is not to say that the architects of the Common Market are consciously planning socialism. It is capitalism, no doubt, that they are seeking to sustain. Many leaders in underdeveloped countries, especially some African leaders, fear the designs of the Common Market as a

means of

perpetuating

imperialist

exploitation.

Thus

Kwame Nkrumah, President of Ghana warns: Imperialism does not change its nature; it only changes its front. . . . The Common Market Organization is aimed at harness¬ ing the African countries to satisfy the profit lust of the imperialist bloc and to prevent us from following an independent neutralist policy. It is easy to see that the imperialists and colonialists are determined to retain the African countries in a position of sup¬ pliers of cheap raw materials. . . . The Organization constitutes an attempt to replace the old system of colonial exploitation by a new system of collective colonialism which will be stronger and more dangerous than the old evils we are striving to liquidate from this continent.1 There can be no doubt about the self-interest of the Common Market. The only effective answer to it is African unification. But those powerfully divisive forces just referred to—nationalism, tribalism, and the non-complementary na-

245

THE SYSTEM IN TRANSITION

ture of the economies involved—have made it possible for the market, by the end of 1962, to achieve a European-cen¬ tered unification of a vital brace of African nations. An agreement signed in Brussels ties the economies of those new nations derived from the former Belgian and French empires to the industrial system of the market. This union frustrates any major African-centered unification, isolates a number of countries, and makes of Ghana, in particular, a relatively small enclave with very limited potentials for development. Would international trade be abolished in a regionalized socialist world? The following question has been sometimes put: if major socialist countries must look to their own labor and land, and not exploitatively to those of others, for their development, would the world not become divided among isolated peoples? Hardly. In the first place, the earth is naturally specialized in its variety of resources;

and the

greater the cultural development of its peoples, the greater also would be their interest in this variety. Then,

too,

human skills are bound to vary from place to place; and both the products of these and differential knowledges would be in demand. In brief, universal industrialization need not mean abolishment of specialization; it may lead to a largei total volume of exchange. It is possible, for example, that if antagonism to socialism were resolved, the contemporary market for American goods and services in China would be greater than ever. There would be an important difference, nevertheless: China would purchase what she needs as deter¬ mined by her plans for development, whereas before the revolution, she ordinarily bought what the industrialized countries wanted to sell and indeed insisted on selling. The question now and for the indefinite future is whether the inhabitants of this globe, made small by instantaneous communication and rapid transportation, can proceed by means of cooperation instead of antagonistic competition toward their great dream of infinite perfectibility. Capital-

246

CAPITALISM AS A SYSTEM

ism has rendered the priceless service of eliminating the great barriers which isolated groups of the human family. These groups now in contact will either develop together with that common objective or limit development of the whole.

Notes

Notes A complete list of works referred to in these Notes will be found beginning on page 341.

CHAPTER 1 1. Cf. Folke Hilgerdt, “The Case for Multilateral Trade,” American Economic Review, Supplement, Vol. 33, No. I, 1943, p. 400. 2. Henry F. Grady address before the National Foreign Trade Convention in Report of the 29th N.F.T. Convention, 1942, pp. 462-463. 3. It could be argued with reason that Russia before the First World War should not be placed so low in this scheme, for she was herself imperialistically aggressive among Asiatic and Balkan peoples. But Russia did not yet have its capitalist revolution; Western capitalists could still make deals directly with its feudalistic Czar; its industrialization was relatively backward; its oil, coal, and steel were heavily controlled by Anglo-French interests; and it was looked upon by England, France, Germany, and even Japan, as an area open not only to investment, but also to territorial conquests. 4. “Foreign Trade and Foreign Loans” in Report of the First National Foreign Trade Convention, pp. 82-83. Wallace R. Farrington said at a later Convention: “It is safe to presume, therefore, that in drawing a perspective of the Pacific Area, no time need be devoted to discussing whether in this day and generation it is necessary to physically conquer a nation 249

250

NOTES TO PAGES 6-12

before its people may be mobilized into a buyer-demand for what we produce. The carving-up method with an allotment of spheres of influence is ancient and dishonored, though some writers on the Orient, suddenly turned statesmen, have proposed it as a present day solution.” Report of the 18th N.F.T. Convention, 1931, p. 24. 5. “Even today,” wrote Gustav Schmoller before the turn of the century, “economic powers seek to utilize their economic superiority in all their international relations, and to retain weaker nations in dependence; even today any half-civilized nation or tribe, among whom the English or French establish themselves, is in danger, first, of a sort of slavery for debt and an unfavourable balance of trade, and, following closely in the wake, of political annexation and economic exploitation.” The Mercantile System, New York, 1896, p. 63; see also Leonard Woolf, Empire and Commerce in Africa, London, 1919, pp. 53-54. 6. For some comparative figures see Merrill K. Bennett, “Popula¬ tion, Food, and Economic Progress,” The Rice Institute Pamphlet, July, 1952, p. 68. 7. Cf. Richard W. Van Alstyne, The Rising American Empire, New York, 1940, Ch. VII. 8. For a more detailed and statistical presentation of this sub¬ ject see League of Nations, The Network of World Trade, Geneva, 1942; also Folke Hilgerdt, “The Case of Multilateral Trade,” American Economic Review, Supplement, Vol. 33, No. I, March 1943, pp. 391-407. 9. Cf. Parker T. Moon, Imperialism and World Politics, New York, 1932, p. 475. 10. Cf. Oliver C. Cox, The Foundations of Capitalism, New York, 1959, pp. 262ff. 11. Der Moderne Kapitalismus, Vol. I, Munich and Leipzig, 1928, p. 321; and “Capitalism,” Encyclopedia of the Social Sciences. 12. Dynastic America arid Those Who Run It, New York, 1921, p. 11.

NOTES TO PAGES 12-16

251

13. In his research on the Fugger family, Jacob Strieder gives particular attention to the problem of the family’s provid¬ ing for succession to leadership in the business. See Jacob Fugger the Rich, trans. by M. L. Hartsough, New York, 1921. 14. Henri Pirenne, “The Stages in the Social History of Capital¬ ism,” The American Historical Review, Vol. XIX, p. 504; cf. James W. Thompson, Economic and Social History of Europe in the Later Middle Ages, New York and London, 1931, p. 586. 15. “The Nature and Significance of Price Leadership,” Ameri¬ can Economic Review, Vol. XLI, December, 1951, pp. 895896. 16. Cf. W. Miller, “The Genoese in Chios, 1346-1566,” English Historical Review, Vol. XXX, 1915, pp. 418-432. 17. Adolf A. Berle, Jr. and Gardiner C. Means, The Modern Corporation and Private Property, New York, 1932, p. 357. See also Edward S. Mason, ed., The Corporation in Modern Society, Cambridge, Mass., 1960, pp. xiii and 169ff. 18. Cf. B. S. Yamey, “Scientific Bookkeeping and the Rise of Capitalism,” Economic History Review, Vol. I. Nos. 2 and 3, London, 1949, pp. 99-113; also J. W. Thompson, Economic ajid Social History of Europe in the Later Middle Ages, New York and London, 1931, p. 449. 19. “The Oldest Example of Double Entry Bookkeeping,” Bul¬ letin of the Business Historical Society, Vol. IV, No. 4, June, 1930, p. 13. 20. Oliver C. Cox, The Foundations of Capitalism, p. 166. 21. Professor J. W. Thompson lists some of the early forms of the bill as follows: “The bill payable to order, and the promissory note; the ordinary bill drawn in the money of the country where it was payable, and the bill payable in another country at the rate current when due; the bill payable in a place specified, or where cargo was discharged; the bill to mature at date fixed, or the draft. The birth of the concept of credit and its conversion to usages of business surely is one

NOTES TO PAGES 16-18

252

of the most important events in European economic history.” Economic History of Europe in the Later Middle Ages, p. 433. 22. A Neiu Discourse of Trade, 5th ed., Glasgow, 1751, p. 5.

CHAPTER 2 1. The Spirit of the Laws, Vol. I, trans. by Thomas Nugent, New York, 1949, p. 316. 2. “The strength of the capitalist system,” William Cunningham concludes, “consists in its ability to utilize the most varied ele¬ ments. Both Holland, and to a less extent England, in receiv¬ ing immigrants from other countries, increased their industrial resources by that most precious of all national possessions—great skill in industrial employments of every kind. Varieties of type and of intelligence have been of the greatest importance in introducing new methods of business and improved processes of production; France and Spain, on the contrary, suffered severely from the policy which insisted on assimilating the whole population to conformity in religious and political thought.” Cambridge Modern History, Vol. I, p. 530. 3. Frank H. Knight, “Historical and Theoretical Issues in the Problem of Modern Capitalism,” Journal of Economic and Business History, Vol. I, 1928-1929, p. 136. There is, further, a well-known sociological generalization concerning the trans¬ mission of culture at the market place. “Where goods are exchanged,” says J. W. Thompson, “so are ideas.” Economic and Social History of Europe in the Later Middle Ages, p. 406. To the same effect Friedrich von Schiller, in his Der Kaufman, wrote: “Euch, ihr Cotter, gehort der Kaufmann. Giiter zu suchen Geht er, doch an sein Schiff knupfet das Cute sich an.” I am concerned at this point, however, with the relative limits of assimilation. 4. Cf. Oliver C. Cox, The Foundation of Capitalism, passim. 5. One mercantilist summarized his views on the determinants of a viable capitalist society as follows: “The principal of

NOTES TO PAGES 18-22

253

these ... is commerce supported by an equitable government, an equitable taxation, a general toleration in religion, and a full security of person and property.” William Temple, A Vindication of Commerce and the Arts, London, 1758, p. 80. 6. R. H. Tawney, Equality, New York, 1931, p. 22. 7. W. Sombart puts more emphasis on business technique, in¬ volving matters less stable and decisive, in describing capitalist organization. He asks, for example, “But what is meant by capitalist body? All those component parts of the capitalist economic system which are outside the soul of the capitalist undertaker. I mean all organization—the treatment of others, general business management, internal economics as exempli¬ fied by (say) the planning of a factory, a particular method of book-keeping, business relations with other firms, or a special system.” The Quintessence of Capitalism, trans. by M. Epstein, London, 1915. 8. The Spirit of the Laws, Vol. I., p. 322. When Professor Ephriam Lipson says, “The truth appears to be that economics and politics are like two blades of a pair of scissors: neither can function properly if separated from the other,” he repeats an axiom that was taken for granted in capitalist societies before the rise of orthodox economics. See his A Planned Economy or Free Enterprise, London, 1944, p. 18. 9. Report of the Thirty-Eighth National Trade Convention, New York, 1952, p. XXXI. 10. Wealth of Nations, J. E. T. Rogers, ed., Vol. 2, Oxford, 1869, pp. 221-222. 11. Arthur Giry and A. Reville, Emancipation of the Medieval Towns, New York, 1907, p. 21. 12. Cf. Oliver C. Cox, The Foundations of Capitalism. 13. It is thus apparent that law in a capitalist state cannot be fully understood by approaching it from the point of view of origins in Anglo-Saxon or Roman legal codes. The canon law was not accepted, even though it had priority and immediacy. Pre-capitalist legal systems that have been modified and in-

NOTES TO PAGES 22-24

254

corporated into the statutes of capitalist nations may be compared to the borrowings of other types of inventions: they tended to have new and different meanings in the capitalist situation. “It should be noticed,” says H. M. Robertson, “that particular legal systems were not of so much importance as the use which their practitioners made of them. . . . The triumph of the common law in England did not act as a primary factor in stimulating an individualist movement. It was rather a witness of the strength of the movement.” Aspects of the Rise of Economic Individualism, Cambridge, 1933, pp. 82 and 84. 14. Cf. P. J. Blok, History of the People of the Netherlands, Vol. I, New York and London, pp. 247-248. 15. Arthur Giry and Andre Reville, Emancipation of the Medieval Towns, pp. 43-44. 16. The Prince (Great Books Foundation ed.), pp. 15-16. 17. History of Florence, New York, 1936, p. 18. 18. The Freedom of the Seas, trans. by R. Magoffin, New York, 1916, p. 7. This was the war cry of the youthful Dutch nation, at the opening of the seventeenth century, against the Spanish and Portuguese monopoly and against English attempts to restrict fishing in “their” waters. In the following, Grotius emphasized the importance of this freedom and the means by which it may be established: “Is it not then an incalculably greater injury for nations which desire reciprocal commercial relations to be debarred therefrom by the acts of those who are sovereigns neither of the nations interested, nor of the element over which their connecting high road runs? Is not that the very cause which for the most part prompts us to execrate robbers and pirates, namely, that they beset and infest our trade routes? . . . But if we are driven into war by the injustice of our enemies, the justice of our cause ought to bring hope and confidence in a happy outcome . . . Therefore, if it be necessary, arise, O nation unconquered on the sea, and fight boldly, not only for your own liberty, but for that of the human race.” Ihid., pp. 10 and 73. The Indonesians

NOTES TO PAGES 24-26

255

would doubtless have been aghast had they read of the coming of the Dutch as a boon to their liberty. On freedom of international trade, Adam Smith, as usual, missed the crux of capitalist commerce in saying: “The interest of a nation in its commercial relations to foreign nations is like that of a merchant with regard to the different people with whom he deals, to buy cheap and to sell as dear as possible. But it will be most likely to buy cheap, when by the most perfect freedom of trade it encourages all nations to bring to it the goods which it has occasion to purchase; and for the same reason, it will be most likely to sell dear, when its markets are thus filled with the greatest number of buyers.” Wealth of Nations, p. 37. There are two situations to which this concept of foreign trade may apply: (a) where a pre¬ capitalist community is interested in provisioning itself, and (b) in fair-towns where increasing volume of exchanges tends to augment the income of the overlord. It has never obtained in national-capitalist countries. Frederick List seems far more conversant with the nature of free capitalist commerce when he writes: “It may even happen that foreign commerce wholly free may lead to national servitude.” National System of Political Economy, trans. by G. A. Matile, Philadelphia, 1856, p. 90. 19. Equality, New York, 1931, p. 226. 20. Montesquieu, Spirit of the Laws, Vol. I, p. 323. 21. Jacob Fugger the Rich, p. 43. 22. “Final Declaration,” Report of the 35tli National Trade Convention, 1949, p. XIV. Says R. H. Tawney on this point: “The modern industrial system took shape in an age when this theory of property was triumphant. The American Con¬ stitution and the French Declaration of the Rights of Man both treated property as one of the fundamental rights which Governments exist to protect. The English Revolution of 1688 .. . had in effect done the same. The great individualists from Locke to Turgot, Adam Smith and Bentham, all re¬ peated, in different language, a similar conception.” The Acquisitive Society, New York, 1920, p. 52. Yet, it should be

NOTES TO PAGES 26-28

256

recognized that this conception of property was taken for granted in the national cities before the rise of the modern nation. The philosophy arose only when an important public had to be assimilated to the capitalist way of life. 23. Report of the Royal Institute of International Affairs, Nation¬ alism, London, 1939, p. 262.

24. “The moral result of this exclusivism,” says Henri Pirenne, “was extraordinary solidarity among the burgesses. Body and soul, they belonged to their little local patrie. . . . Each burgess was obliged, and knew that he was obliged, to take part in the defence of that city: to take up arms for it, to give his life to it. . . . [Some] burgesses gave their fortune to their city.’’ A History of Europe, trans. by Bernard Miall, London, 1939, p. 223. 25. Cf. H. W. C. Davis, The Political Thought of Heinrich von Treitschke, New York, 1915. In the United States, Professor Hans J. Morgenthau is perhaps the most insistent proponent of these doctrines. See his “What is the National Interest of the United States?’’ The Annals, Vol. 282, July, 1952, pp. 1-7; and “The Moral Dilemma in Foreign Policy,” in The Year Book of World Affairs, 1951, Vol. 5, pp. 12-36. 26. “Most of the difficulties which have arisen in discussing the problem of sovereignty,” Professor Smith concludes, “arise from the attempt to treat it as a legal principle rather than as a political fact. If we regard it as a legal principle, we find at once that it evades all our efforts at definition, and this uncertainty of definition naturally stultifies all attempts to draw logical inferences from the principle itself. If we regard it as a fact, we are then able to admit that facts vary greatly, so that there may be many variations and degrees of inde¬ pendence or subordination. It is a fact beyond dispute that most of the States in the world do not admit of the existence of any authority superior to themselves, and upon this fact the whole practice of international intercourse is based.” Herbert A. Smith, “International Law in Making,” Trans¬ actions of the Grotius Society, Vol. 16, 1930, p. 95. See also

NOTES TO PAGES 28-30

257

Conrad Gill, National Power and Prosperity, London, 1916, pp. 75-76. 27. The Acquisitive Society, pp. 48-49. 28. Report of the 20th National Foreign Trade Convention, 1934, p. 76. In a description of the development of this attitude Leonard Woolf observes: “In those conditions economic interests, and the complex of beliefs and desires which gathered round them, became more and more insistent, and the springs of human action were no longer to be found in religious, moral, or caste beliefs, but in the principle of profit-making, of buying in the cheapest and selling in the dearest market. Every instrument was seized upon which could possibly be used to further the economic interests of the nation, class, or individual, and among such instruments obviously one of the most powerful was the organised power of the modern State. Politics became another name for economics and the relation of the State to the economic interests of citizens, according to this new religion or philosophy, is shown by Chamberlain’s belief, universally ac¬ cepted and acted upon, that ‘commerce is the greatest of all political interests.’ ” Economic Imperialism, London, 1921, pp. 28-29. 29. Catholicism, Protestantism and Capitalism, London, 1938, p. 175. 30. Wealth of Nations, Vol. 2, p. 225. 31. Ibid., Vol. 2, p. 26. Again we cite the case of Jacques Coeur (1393-1456) as an illustration of a Frenchman with a capitalist education coming to grief when he gives his enterprise full play in his pre-capitalist country. The following is A. Fanfani’s terse description of his activities: “A merchant, he builds the ships he uses. He sets up warehouses in various trading centres. He manufactures the goods in which he trades. He establishes relations with the court of Charles VII of France, becoming its treasurer and obtaining from the King special facilities for engaging his crews and ordinances which, by abolishing tolls and promoting an improvement of roads and

258

NOTES TO PAGES 30-32 water-ways, help the development of his immense trade. Thus, by indirect methods, Jacques Coeur made the might and power of the sovereign serve his own purpose and that of those who, as his subordinates or following in his footsteps, revived the economic life of France. This French neo-capitalist was able to turn even the authority of the Church to his ad¬ vantage; from Nicholas V he obtained a wide license to trade with infidels.” Catholicism, Protestantism and Capitalism, pp. 41-42. At the conclusion of a similar list of Coeur’s achievements as a famous merchant, Pierre Clement says: “But since in France a man could not become rich by his own great industry, he was immediately envied, suspected, and accused of using illicit means.” Jacques Coeur et Charles VII, Vol. I, Paris, 1853, p. XXXVI; to the same effect see also Rene Bouvier, Un Financier Colonial au XVe Siecle, Jacques Coeur, Paris, 1928, p. 45. Two facts may be mentioned here: (a) in a capitalist nation, Coeur’s self-interest would not have had so unlimited a play as in feudalistic France, but (b) having acquired riches according to capitalist rules, he would have been protected in their enjoyment.

32. John Pollexfen, A Discourse of Trade, London, 1697, p. 167. 33. Cf. L. B. Alberti, Tre lihri della famiglia, F. C. Pellegrini and R. Spongano, eds., Florence, 1946. 34. An important source of guidance to the great leaders of business has been the reports of foreign ambassadors and consuls—those of the Venetians having been among the most celebrated of them. 35. “On Luxury, Idleness, and Industry,” in The Works of Benjamin Franklin, Jared Sparks, ed., Vol. 2, Boston, 1840, pp. 451-452. Franklin said further: “There seem to be but three ways for a nation to acquire wealth. The first is by war, as the Romans did, in plundering their conquered neighbours. This is robbery. The second by commerce, which is generally cheating. The third by agriculture, the only honest way, wherein man receives a real increase of the seed thrown into the ground. . . . The agriculture and fisheries of the United States are the great sources of our increasing

NOTES TO PAGES 32-33

259

wealth. He that puts a seed into the earth is recompens’d perhaps, by receiving twenty out o£ it; and he who draws a fish out of our waters, draws up a piece of silver.” The Writings of Benjamin Franklin, Albert H. Smyth, ed., Vol. 5, p. 202 and Vol. 10, p. 122 (New York, 1907). M. Halbwachs points to the paradox that Benjamin Franklin, who came from a relatively agricultural community in eighteenthcentury Pennsylvania should be thought of as enunciating the gospel of capitalism. “Les origines Puritaines du Capitalisme,” Revue D’histoire et de Philosophie Religieuses, Vol. 5, 1925, pp. 132-133. See also on Franklin and capitalism Kurt Samuelsson, Religion and Economic Action, New York, 1961, pp. 55ff. 36. Catholicism, Protestantism and Capitalism, pp. 18-19. 37. On this point Lord Keynes makes the following observation: “It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance, and also because for the same reason big business is often a lottery, that great inequalities of wealth come about; and these same factors are also the cause of unemploy¬ ment of labour, or the disappointment of reasonable business expectations, and of the impairment of efficiency and pro¬ duction. Yet the cure lies outside the operations of indi¬ viduals; it may even be to the interest of individuals to aggravate the disease.” The End of Laissez-Faire, London, 1926, p. 47. 38. English Society in the Eighteenth Century, New York, 1924, p. 133. The temper of the people at this time—indeed, not unlike that of Americans in the 1920’s—is further intimated by Philip H. Stanhope: “The most exaggerated hopes were raised, and the most groundless rumours set afloat. . . . The exploits of Drake were quoted, and the dreams of Raleigh renewed. This spirit spread throughout the whole nation, and many, who scarcely knew the whereabouts America lies, felt nevertheless quite certain of its being strewed with gold and gems. . . . But the public delusion was not confined to the South Sea Scheme; a thousand other mushroom projects sprung up in that teeming soil.” History of England, Vol. 2,

260

NOTES TO PAGES 33-35 London, 1837, pp. 4-15. For a definitive study see Lewis Melville, The South Sea Bubble, London, 1921.

39. N. W. Posthumus, “The Tulip Mania in Holland in the Years 1636 and 1637,” Journal of Economic and Business History, Vol. I, 1929, p. 449. 40. Quoted by J. B. Botsford, English Society in the Eighteenth Century as Influenced from Oversea, p. 163, from The Country Journal of Craftsmen, 8 January, 1732. “There were,” said Carnegie on his establishing residence in New York, “few even of the business men who had not their ventures in Wall Street to a greater or less extent. . . . Offers were made me by persons who were willing to furnish capital for investment and allow me to manage it—the supposition being that from the inside view which I was enabled to obtain I could invest for them successfully. Invitations were extended to me to join parties who intended quietly to buy up the control of certain properties. In fact the whole specu¬ lative field was laid out before me in its most seductive guise.” Autobiography of Andrew Carnegie, New York, 1920, p. 146. 41. “The more any adventurer hath in the stock,” observed Sir Josiah Child, “the more he is engaged to study and promote the good of it, by all profitable means within his power. An adventurer that hath the smallest interest may be as just and true to the stock as he that hath the greatest: but I can never believe that a small interest will awaken a man so often in the night nor keep him so long from sleeping in the medita¬ tion of any business as a very great and principal concern may do.” Treatise Wherein is Demonstrated . . . the Most National of all Foreign Trades, London, 1681, p. 21. 42. Report of the 3rd National Foreign Trade Convention, 1916, pp. 184-185. 43. A History of Europe, London, 1939, p. 213. 44. Maurice Halbwachs, “Les Origines Puritaines du Capitalisme,” Revue D’Histoire et de Philosophic Religieuses, Vol. 5, p. 138.

NOTES TO PAGES 35-37

261

45. College Lectures, New York, 1896. On December 3, 1955, at a hearing of a Senate Antitrust and Monopoly subcom¬ mittee, Alfred P. Sloan, Jr., Chairman of General Motors’ Board of Directors, was asked by Senator Dirksen “how much bigger” he expected G.M. to become. Sloan replied: I don t think I can answer that question. It’s in the future. . . . You can’t stand still or you lose position.” 46. Britannia Languens, London, 1680, p. 38. 47. England’s Treasure by Foreign Trade, London, 1664, p. 8. 48. Report of the 6th National Foreign Trade Convention, 1919, p. 50. 49. Autobiography, p. 89. Adam Smith, who was relatively near to feudal society in transition, remarked: “Whoever has the fortune to live in a mercantile town situated in an unim¬ proved country, must have frequently observed how much more spirited the operations of merchants were in this way than those of mere country gentlemen. The habits, besides, of order, economy, and attention, to which mercantile busi¬ ness naturally forms a merchant, render him much fitter to execute, with profit and success, any project of improvement. Wealth of Nations, Vol. I, p. 411.

50. In their life story of one of the most spectacular business successes, Jay Gould, Murat Halstead and Frank Beale Jr. say: “He had courage, grit, insight, foresight, tireless enexgy, indomitable will—all great qualities. He conceived his gigantic operations boldly and executed them with con¬ summate coolness and skill. He was the peculiar and un¬ precedented product of a peculiar and unprecedented epoch of material growth, expansion, enterprise, and development. No other country and time than the United States during the past 30 years could have evolved him. It was a period of colossal undertakings, of enormous railroad construction, of vast telegraphic enterprises. Speculation was its keynote bold, vast, hazardous, and, to the losers, often enough ruinous speculation.” Life of Jay Gould, New \oik, pp. -0j 206.

262

NOTES TO PAGES 37-38

51. Moses Y. Beach, Wealth and Pedigree of the Wealthy Citizens of New York City, New York, 1842, p. 2. (Beach’s italics.) Daniel Defoe dwelt on this point of capitalist recognition and honor in England: “The whole glory and greatness of England then being thus raised by trade, it must be un¬ accountable folly and ignorance in us to lessen that one article in our own esteem, which is the only fountain from whence we all, take us as a nation, are raised, and by which we are enriched and maintained. . . . Trade in England makes gentlemen, and has peopled this nation with gentlemen; for after a generation or two the tradesmen’s children or at least their grandchildren, come to be as good gentlemen, statesmen, parliament-men, privy-counsellers, judges, bishops, and noblemen, as those of the highest birth and the most ancient families; and nothing too high for them. . . . Let any one who is acquainted with England, look but abroad into the several counties, especially near London, or within 50 miles of it: How are the ancient families worn out by time and family misfortunes, and the estates possess’d by a new race of Tradesmen, grown up into families of gentry, and establish’d by the immense wealth, gain’d, as I may say, behind the counter; that is in the shop, the warehouse and the countinghouse?” The Complete English Tradesman, Vol. I, London, 1732, pp. 308-319. 52. This point has been elaborately and effectively made by Irvin G. Wyllie in his essay: The Self-Made Man in America, New Brunswick (N. J.), 1954. 53. Quoted in George F. Redmond, Financial Giants of America, Vol. 2, Boston, 1922, pp. 48-49. 54. J. B. Botsford recognizes a more dynamic group of traits in the rising British businessman: “The qualities which elected one to the new aristocracy of business were daring, coupled with shrewdness, industry combined with imagination, and that mysterious ability to sense one’s fellowman—briefly, those same qualities which make up the successful business¬ man of today, or of any day.” English Society in the Eighteenth Century, p. 119.

NOTES TO PAGES 39-40

263

55. In his book. The Robber Barons, New York, 1934, emphasiz¬ ing this aspect of the personality of American capitalists, Matthew Josephson writes: “The members of this new ruling class were generally, and quite aptly, called ‘barons,’ ‘kings,’ ‘empire-builders,’ or even ‘emperors.’ They were aggressive men, as were the first feudal barons; sometimes they were lawless; in important crises, nearly all of them tended to act without those established moral principles which fixed more or less the conduct of the common people of the community, p. vii. 56. John D. Rockefeller: The Heroic Age of American Enter¬ prise, Vol. I, pp. 520ff. For another discussion of the “battle of giants,” see Matthew Josephson, The Robber Barons, pp. 424-453. 57. Financial Giants of America, pp. 24-25. As we should expect, the aggressive traits in the personality of the business leader have undergone modification with the maturation of the system. Big business in the United States is no longer typically a family or personal affair. It is typically institutionalized, regulated, and bureaucratized. The chief executives of the great corporations have thus become “hired men. The struggle, however, though more restrained and professional¬ ized, is carried on at other levels. Cf. Mabel Newcomer, The Bis: Business Executive, New York, 1955, especially pp. 141154. 58. In describing the smooth, non-violent rise of the Rothschilds, Count Egon C. Corti concludes: “We have endeavoured to show how this mass of wealth was acquired. It has always been done by maintaining the closest contact with those in charge of the world’s destinies, and by a clever adaptation to events. The Rothschilds practically never opposed them¬ selves to the authorities in the state for the time being; they almost always sought to come to terms with them, however uncongenial they might sometimes be. This naturally in¬ volved an extensive opportunism, but their success increased the prestige and the power of the family.” The Reign of the House of Rothschild, Vol. 2, London, 1928, pp. 463-464.

NOTES TO PAGES 40-43

264

59. On the early foreign trade of John Jacob Astor (1763-1848), see Arthur D. Smith, Men Who Run America, New York, 1936, pp. 24-25. 60. The Works of Benjamin Franklin, Vol. 2, pp. 82-83. 61. Ibid,., p. 92. 62. “Advice to a Young Tradesman” (1784), Ibid., p. 89. (Italics in text). 63. The Complete English Tradesman, Vol. I, p. 306. 64. Ibid., pp. 111-112. 65. Ibid., pp. 101-102. 66. The Tradesman’s Calling (1684), p. 20. Some ten years earlier (1673), a more famous casuistry, A Christian Directory or a Summ of Practical Cases of Conscience, by Richard Baxter, was published. To employees, the Reverend Baxter gives the following charge: “Take your condition as chosen for you by God, and take your selves as his servants and your work as his, and do all as to the Lord, and not for man; and expect from God your chief reward.” Part II, Ch. xiii, Direction 2. This, however, should be offset by Baxter’s “Directions against Oppression and against Slavery.” 67. The Complete English Tradesman, Vol. I, p. 98. 68. “Be as thrifty for your master,” Richard Baxter advised, “as you would be for yourselves. Waste no more of his goods, than you would do if it were your own. Say not as false servants do, my Master is rich enough, and it will do him no harm.” A Christian Directory, Pt. II, Ch. xiii, Direction 5. On this point, R. H. Tawney says: “To contemporaries the chosen seat of the Puritan spirit seemed to be those classes in society which combined economic independence, educa¬ tion and a certain decent pride in their status, revealed at once in a determination to live their own lives, without truckling to earthly superiors, and in a somewhat arrogant contempt for those who, either through weakness of character or through economic helplessness, were less resolute, less

265

NOTES TO PAGES 43-46

vigorous ancl masterful, than themselves.” Religion and the Rise of Capitalism, Penguin Books edition. New York, 1947, p. 168. 69. The Complete English Tradesman, London, 1732, p. 160. 70. We may think of the early New England settlers as calling upon the rigorous Puritan discipline to carry them through the hardships of conquering the new land but not continuing as an enduring societal form. 71. Autobiography, New York, 1920. “The John D. Rockefeller family,” writes Anna Rochester, “is supposed to live ‘simply’ because some of their tastes are old-fashioned and liquor is ruled out. But the fact is that they have set themselves up with luxurious and expensive estates. At Pocantico Hills, in Westchester county. New York, behind his endless barbed wire fence, the old John D. has had built for his pleasure some seventy miles of private road circling in and out of the vast acreage where a thousand workers are employed to maintain the parklike estate and keep up the houses. Besides this lordly estate at Pocantico Hills, John D. has places in Lakewood, N. J. and Ormond Beach, Florida, and a deserted estate near Cleveland. Also John D„ Jr., has a summer place at Seal Harbor, Maine.” Rulers of America, New York, 1936, p. 60. 72. Cf. Ferdinand Lundberg, America’s 60 Families, New York, 1946, pp. 408-446; and Miriam Beard, A History of the Busi¬ ness Man, New York, 1938, pp. 643-653 et passim; see also Time, January 4, 1960, p. 17, “Minuet in 250 G’s.”

CHAPTER 3 1. “Behemoth,” in The English Works of Thomas Hobbes, Vol. VI, Sir William Molesworth, ed., London, 1839-1845, p. 243. 2. The Varieties of Religious Experience, New York, 1902, p. 53. Jacob Burckhardt refers to an “ancient, unconscious meta¬ physical need.” See Force and Freedom, New York, 1943, p.

122.

66

NOTES TO PAGES 47-48

3. The Varieties of Religious Experience, p. 41. 4. Frank H. Knight and Thornton W. Merriman, The Eco¬ nomic Order and Religion, New York, 1945, p. 24. To the same effect, Rauschenbusch asserts: “All the great national churches of Europe have opposed the conquering march of political democracy. They all execrated the French Revolu¬ tion and fought its spiritual influences. Nothing in the history of the nineteenth century is more thrilling than the passionate longing of Italian patriots for the freedom and unity of Italy. Yet an ancient Church of Italy, whose secular dominion had been the chief obstacle to Italian unity, not only resisted the final achievement of that desire, but 40 years later still stood aside while Italy was celebrating the jubilee of its union. The irreligion so prevalent in France is in part due to the fact that the Church is identified in the common mind with opposition to democracy and fraternity. . . . The Protestant State Church of Germany has insisted on loyalty to the monarchy and to the reigning dynasties as an essential part of a Christian life, and set themselves against both the political democracy of the first half of the nineteenth century, and the social democracy of the second half. The Church of England, too, has long been Tory in its sympathies and political influence.” Christianizing the Social Order, New York, 1913, pp. 35-36. 5. The Church-state conflicts of feudalism were intrasocietal; and in one important sense involved no radical change in the role of either. On this subject, F. W. Maitland writes: “Though consisting of the same units, church and state were not one; each had its laws, its legislature, its courts of justice, its proper sphere of action. Their relation to each other con¬ stituted a standing denial of that theory of sovereignty which has become orthodox in our own time. And it is well for students of jurisprudence to observe that such a denial does not mean anarchy. From time to time there were disputes between the two powers; it is sufficient to recall the quarrel between Henry II and Archbishop Thomas; and through several centuries there is a constant border warfare going on between the temporal and the ecclesiastical courts as to the

NOTES TO PAGES 48-51

267

exact limits of their several domains—but normally the rela¬ tion between the two powers is that of peace.” The Con¬ stitutional History of England, Cambridge, 1950, p. 507. 6. P. E. Gordon Walker, “Capitalism and the Reformation,” The Economic History Review, Vol. VIII (1937), p. 9. See also Ernest Troeltsch, The Social Teachings of the Christian Church, trans. by Olive Wyon, London, 1931, pp. 17-18. 7. The History of the Royal Society, London, 1722 (first pub¬ lished in 1667), p. 377. 8. Quoted in M. M. Knappen, Tudor Puritanism, A Chapter in the History of Idealism, Chicago, 1939, p. 419; see also p. 404. 9. The Economic Order and Religion, New York, 1945, p. 22. 10. M. M. Knappen, Tudor Puritanism, A Chapter in the His¬ tory of Idealism, p. 422. As R. H. Tawney sees it: “Puritan¬ ism, not the Tudor secession from Rome, was the true English Reformation, and it is from its struggle against the old order that an England which is unmistakeably modern emerges.” Religion and the Rise of Capitalism, New York, 1947, p. 165. 11. Josiah Child’s argument for admission of Jews into England suggests the capitalist attitude toward religion in respect to both nationalism and toleration: “It is said, the Jews cannot intermarry with us, and therefore it cannot be supposed they will reside long amongst us, although they were treated never so kindly; why not reside here as well as in Italy, Poland, or Holland? They have now no country of their own to go to, and therefore that is their country, and must needs to be esteemed by them, where they are best used, and have the greatest security.” A New Discourse of Trade, 5th ed„ Glas¬ gow, 1751. 12. “Behemoth," Works, Vol. VI, p. 167. See also Joseph Frank, The Levellers, Cambridge, Mass., 1955, p. 181.

13. See F. W. Maitland, Constitutional History of England, p. 520, for a discussion of the trend toward “complete” religious liberty and equality in Britain.

268

NOTES TO PAGES 51-52

14. Religion and the Rise of Capitalism, p. 177. See also M. M. Knappen, Tudor Puritanism, p. 422. 15. In England, Bishop Baxter took the following attitude: “Liberty in all matters of worship and faith is not the good cause, for this is against, and most inconsistent with, this Government of Christ. ... If magistrates must give liberty for all to propagate a false Religion, then so must parents and masters also. . . . But if all parents and masters should give such liberty, it would be a crime so horrid in the nature and effects, as I am loth to name with its proper titles.” A Holy Commonwealth, London, 1659, Preface. 16. A New Discourse of Trade, p. 4. About the same time (the latter half of the seventeenth century) Sir William Temple wrote: “It is hardly to be imagined, how all the violence and sharpness, which accompanies the differences of religions in other countries, seems to be appeased or softened here [in Holland] by the general freedom which all men enjoy, either by allowance or connivance; nor, how faction and ambition are thereby disabled to colour their interested and seditious designs with the pretences of religion, which has cost the Christian world so much blood for these last hundred fifty years. No man can here complain of pressure in his conscience; of being forced to any public profession of his private faith.” The Works of Sir William Temple, Vol. I, Edinburgh, 1754, p. 116. 17. Cf. Werner Sombart, The Qiiintessence of Capitalism, Lon¬ don, 1915, p. 269. 18. “Puritanism,” Professor Knappen observed, “was primarily a religious movement. This fact cannot be too often repeated in any discussion of its social and economic teaching. The salvation or damnation of the individual was its central theme. To think of it as being primarily concerned with the things of this world is to misrepresent it completely.” Tudor Puritanism, p. 401. 19. “It is highly characteristic,” Pirenne writes, “that the West was not troubled with heresy before the renaissance of the

NOTES TO PAGES 52-55

269

cities. The first and most formidable heresy known to Europe before the advent of Protestantism, that of the Cathars, began to propagate itself in the 11th century, and was there¬ fore precisely contemporaneous with the urban movement. And we must not forget that the sect of the Vaudois (Waldenses) was founded by a merchant of Lyons. Even after the terrible massacres of the Albigenses, the urban popula¬ tions continued, now in this part of Europe, now in that, to harbour their suspect sects.” History of Europe, London, 1939, p. 240. 20. Ibid., p. 241. 21. In a note for 1709, Adam Anderson refers to one mercantilist interest in Protestantism: ‘‘The general naturalization in England of foreign Protestants, has been variously reasoned upon by many persons, in different periods. In the beginning of the year 1709, a bill was ordered into the house of com¬ mons for that end; in favour of which, it was argued, that very great benefits would thereby accrue to Britain; that the king of Prussia, by inviting the French refugees to settle in his dominions, had fertilized a barren and ill-peopled coun¬ try, improved its trade and manufactures, and increased his own revenues, etc. The preamble of the act for naturalizing foreign Protestants, therefore, observes that, whereas the in¬ crease of people is a means of advancing the wealth and strength of a nation, it was therefor enacted.” David Macpherson, Annals of Commerce, Vol. 3, London, 1805. 22. Louis B. Wright, Religion and Empire, Chapel Hill, 1943, p. 151. In another item for 1649, Adam Anderson wrote in his Annals of Commerce: “Of how great benefit it would prove to the British commerce and dominions on the continent of North America, to civilize and christianize the native Indians (even abstracting from a reasonable hope of a bless¬ ing from heaven on such endeavours) needs not to be told to wise and experienced persons, who know how much the French in Canada were benefited thereby, to our great detriment; they having had great numbers of priests amongst their Indians for that end.” Ibid., Vol. 2, p. 438.

NOTES TO PAGES 55-58

270

23. Louis B. Wright, Religion and Empire, pp. 82-83. 24. H. Richard Niebuhr, “Protestantism,” Encyclopedia of the Social Sciences.

25. “Dans quelle mesure Puritains et Juifs ont-ils contribue aux progres du capitalisme moderne?” Revue Historique, Vol. 155, 1927, p. 64. 26. Cf. M. M. Knappen, Tudor Puritanism, p. 3 et passim. 27. Ibid., p. 353. 28. Max Weber, The Protestant Ethic and the Spirit of Capital¬ ism, trans. by Talcott Parsons, New York, 1930, p. 35. 29. Ibid., p. 166. 30. Ibid., p. 172. 31. Ibid., p. 76. 32. For critical statements see R. H. Tawney’s foreword to The Protestant Ethic and the Spirit of Capitalism, Amintore Fanfani’s Catholicism, Protestantism and Capitalism, Robert W. Green’s Protestantism and Capitalism (Boston, 1959); and the most incisive of all, Kurt Samuelsson’s Religion and Economic Action (New York, 1961). In fact, Weber’s essay is equivocal enough to allow of rather extended debate; in due course we shall have to compare his concept of capitalism itself, which seems to be less so. The extent to which Weber’s method may be carried—i.e., the associating of capitalist phenomena with religious ethics, and then imputing the major influence to religion—is ex¬ emplified by W. Sombart’s work, The Jews and Modern Capitalism. Indeed, the latter seems to be, at least in effect, a parody of The Protestant Ethic. Among recent attempts to duplicate Weber’s achievement, Professor Robert K. Merton’s “Science, Technology and So¬ ciety in Seventeenth Century England,” Osiris, Vol. IV, pt. 2, 1938, and “Puritanism, Pietism, and Science,” The Socio¬ logical Review, Vol. 28, 1938, pp. 1-30, are probably most elaborate. Here the project is to show the influence of Puritanism on the rise of science in England. As we should

NOTES TO PAGE 58

271

expect, since both science and Protestantism are positive functions of capitalism, a direct association is discovered. “Puritanism,” observed Paul H. Kocher in one correlation, “was the religion of the middle class merchants who sup¬ ported Gresham College and in many directions displayed their interest in applied sciences like navigation, metallurgy, and land surveying. One might ask, of course, whether they were more interested in these sciences because they were Puritans or because they were merchants. But the form of the question is misleading. They were interested because they were Puritan merchants, Puritanism having allied itself with mercantile utilitarianism in a potent combination of re¬ ligious, economic, and social forces.” (Science and Religion in Elizabethan England, San Marino, Calif., 1953, p. 19.) Merton’s study is open to the same kind of criticisms leveled at Weber’s. For example, in support of his indefinite argument that Protestantism had a determining role in the rise of science in seventeenth century England, he says: “In the earlier periods . . . rationalism was not coupled with an intense motivation for breaking through the traditional order; an anti-authoritarian feature of ascetic Protestantism which led to a positive attitude toward innovation.” (Osiris, p. 497, note 5). One wonders whether it could not be shown that science, though less subject to restrictions in the Protes¬ tant milieu, had to win Protestantism over to its way of thinking. (Cf. Carl W. Miller, “Science as a Source of Secularism,” in J. R. Spann, ed., The Christian Faith and Secularism, Nashville, 1948, pp. 53ff.) Furthermore, religious support of science would obviously not be identified as re¬ ligious motivation of science. As Professor Knappen sug¬ gests, the contribution of Puritanism to science was largely negative. “Puritanism made a negative contribution of furnishing a less effective barrier than Catholicism, and some of the enthusiasms it generated could be redirected to educational ends when the original objectives lost their at¬ traction. But to make the modern ideal of intellectual liberal¬ ism the child of Puritanism is to substitute Ishmael for Isaac, the concubine’s son for the true seed.” Tudor Puritanism, p. 478. Because science and the Puritan ethic are conjointly de-

NOTES TO PAGE 58

272

pendent, they evoke all sorts of questions when we treat them as interacting generically. It is true that the unestablished sects were “anti-authoritarism,” but, as Niebuhr points out, Protestant churches tended to become conservative also: “Their resistance to political innovation is illustrated by the Anglicans and Presbyterians in seventeenth century England, by the New England Puritans in Jeffersonian America and by the Lutherans in republican Germany.” (“Protestantism,” Encyclopedia of Social Sciences.) We should require a wider picture of capitalist society to demonstrate the accuracy of the conclusion that the science of pre-seventeenth century England did not have “a positive attitude toward innova¬ tion.” Cf. Dorothy Stimson, “Puritanism and the New Phi¬ losophy in 17th Century England,” Bulletin of the Institute of the History of Medicine, Vol. Ill, No. 5, May, 1935, pp. 321-334; and George Rosen, “Left-Wing Puritanism and Science,” Bulletin of the History of Medicine, Vol. XV, 1944, pp. 375-380. Probably the heart of misconceptions that arise in dis¬ cussions which take their departure from Weber’s Protestant Ethic, even in those by its critics, resides in a confusion of personality traits in certain capitalist societies. Weber dealt with traits and attitudes of selected personalities; and the norms of his selection, which ought to have been derived from a clearly defined social system, are never clearly stated. Thus his bourgeois personality tends to become a timeless construct. For example, no group of people has insisted upon the divine nature of one’s “calling” more thoroughly than Hindu Brahmins; yet they had no visions of capitalism. 33. The Spirit of the Laws, Vol. 2, p. 31. 34. In this regard, Ernest Troeltsch remarks: “In earlier days the churches found it possible to solve the social problem in their own way, because they were able to keep both Society and the State in a position of natural dependence upon themselves, and because both the State and Society willingly and entirely submitted to the power of the Faith, and the State placed itself at the disposal of the Church for the realization of her ideal. This is the point at which there still

NOTES TO PAGES 58-60

273

remains today the characteristic difference between the Cath¬ olic and Protestant social doctrines; the Catholic Church still demands, even at the present clay, dominion over the State, in order to be able to solve the social problem on ecclesiastical lines; the Protestant churches, with their freedom from the State, are uncertain in their aim; sometimes their aim seems to be a Christian State, and sometimes it is that of a purely ecclesiastical social activity exercised alongside of the State. On the other hand, at the present time, to a great extent the State is inclined to look upon the churches as free associa¬ tions representing private interests, and thus to regard them as part of that ‘society’ from which the State is differentiated.” The Social Teachings of the Christian Churches, p. 33. 35. Cf. Albert Hyma, Christianity, Capitalism, and Communism, Ann Arbor, 1937, pp. 144-163. 36. Royal Institute of International Affairs Report, Nationalism, p. 37. See also Jacob Strieder, Jacob Fugger the Rich, p. 170; and Miriam Beard, History of the Business Man, New York, 1938, pp. 263-265. 37. Social Teachings of the Christian Church, Vol. 1, p. 33. Professor Knight expresses a similar fear: “The greater danger from Christian ethics lies in the tendency to carry the sentimental, brotherhood morality of primitive tribal life—more especially the condemnation of differences in wealth and power which are organizational conditions of efficiency—into practical measures of internal social reform to such an extent, or in such ways, as to work serious injury.” The Economic Order and Religion, New York, 1945, p. 95. 38. Ibid., p. 165. The problem will undoubtedly center on the question of limits. In a recent symposium of distinguished Protestant churchmen, the following thesis was subscribed to: “that Christian salvation also includes the social order; that the Christian Church is responsible for the social con¬ ditions and must provide redemptive measures for society. . . . [Moreover] Christianity must reform the social order, as well as the individual, if ‘God’s will is to be done on earth.

NOTES TO PAGES 60-65

274

The Church and Social Responsibility, J. Richard Spann,

ed., Nashville, 1953, p. 5.

CHAPTER 4 1. Oliver C. Cox, The Foundations of Capitalism, pp. 318ff. 2. A Holy Commonwealth or Political Aphorisms, Preface. 3. The way in which this might have been done is excellently illustrated by Professor John T. McNeill’s article: “Historical Introduction to Secularism” in The Christian Faith and Secularism, John Richard Spann, ed., Nashville, 1948. 4. Thus, “it is not to be understood that we expect to find any of the founders or representatives of these religious move¬ ments considering the promotion of what we have called the spirit of capitalism as in any sense the end of his life work. We cannot well maintain that the pursuit of worldly goods, conceived as an end in itself, was to any of them of positive ethical value. . . . The salvation of the soul and that alone was the centre of their life work.” The Protestant Ethic, pp. 89-90. As we have seen in the preceding chapter, M. M. Knappen reaches a similar conclusion. 5. Cf. Horatio Brown, Venice, London, 1893, p. 122. 6. Cf. W. R. Thayer, A Short History of Venice, New York, 1905, pp. 67-68. 7. Edward G. Bourne, “The History and Determination of the Line of Demarcation Established by Pope Alexander VI, be¬ tween the Spanish and Portuguese Fields of Discovery and Colonization,” Annual Report of the American Historical Association for 1891, Washington, 1892, p. 112. 8. “Behemoth,” Works, Vol. 6, pp. 177-178. 9. The Freedom of the Seas [Mare Literium seu de Jeure quod Batavis Competit ad Indica Commercia], New York, 1916, pp. 13-20.

NOTES TO PAGES 65-70

275

10. History of the Business Man, New York, 1938, p. 305. 11. Newspaper column, “My Day,” April 10, 1953. 12. The Crisis of Liberalism, London, 1909, p. 261. 13. The Americanization of the World, New York, 1902, p. 9. 14. Werner Sombart emphasizes this in The Quintessence of Capitalism, pp, 67-75; see also Philip Gosse, The History of Piracy, New York, 1932, pp. 104ff; Cyrus S. Karraker, Piracy was a Business, Rindge (N.H.) 1953, pp. 42ff; Roger B. Merriman, The Rise of the Spanish Empire, Vol. 4, New York, 1918-1934, pp. 179ff; and J. W. Thompson, Economic and Social History of Europe in the Later Middle Ages, pp. 582583. “It is vexatious to observe,” said Adam Anderson, “that almost the only materials to be found in the public records of the middle ages, which in any way concern commerce and navigation, consist of a shameful and disgusting succes¬ sion of piracies and murders committed by the seafaring people of almost every maritime country of Europe.” (David Macpherson, Annals of Commerce, Vol. 1, London, 1805,

p. 484.) 15. Annals of Commerce, Vol. 4, p. 304. 16. For a discussion of the trade in “singsongs” in China see Michael Greenberg, British Trade and the Opening of China 1800-1842, Cambridge, 1951, pp- 22-29. After the trade in opium especially had resulted in a disruption of the Chinese government and economy, a British merchant, writing in 1833 in the Chinese Courier, a foreign publication in Canton, remarked: “Perhaps nothing could contribute more readily to the final reduction of the Chinese to reasonable terms with foreigners than this steady, non-ceasing impoverishment of the country by the abstraction of the circulating medium.” Ibid., p. 142. The Chinese were, in fact, so reduced.

17. Report of the 31st National Foreign Trade Convention, 1944, p. 226. The Commission on Foreign Economic Policy, Report to the President and the Congress, January 23, 1954, recommended: “The United States Government should con-

NOTES TO PAGES 70-74

276

tinue to use the treaty approach to establish common rules on fair treatment of foreign investment. Negotiations should be undertaken first with like-minded countries, and gradually be extended as additional countries become convinced of the desirability of a friendly attitude toward private enter¬ prise.” p. 17. 18. The Evident Approach of a War and Something to the Neces¬ sity of It in Order to Establish Peace and Preserve Trade,

London, 1727, pp. 30-31. 19. Ordinarily the great capitalist nation, in concluding a treaty with a backward nation or people, stipulates that trading and industrial rights are reciprocal. Frequently the very ex¬ istence of such a clause reveals the immorality of the trans¬ action. For example, in the same Treaty of Westphalia (1648) which the Dutch imposed upon a weak but territorially wide¬ spread Spain, and in which the trading cities of the Spanish Netherlands were bottled up by the closing of the Scheldt and other river mouths leading to them, there was included an article calling for “freedom of commerce on both sides.” 20. A Short History of British Expansion, 2nd ed., New York, 1931, p. 256. 21. Ibid. 22. W. A. S. Hewins, English Trade and Finance, London, 1892, p. 136. For a reproduction of the John Methuen Treaty (Dec. 27, 1703) see George Chalmers, A Collection of Treaties Be¬ tween Great Britain and Other Powers, Vol. 2, London, 1790, pp. 303-305. For the classical analysis of this treaty see Adam Smith, Wealth of Nations, Bk. IV, Ch. VI. 23. See David Macpherson, Annals of Commerce, Vol. 2, pp. 294-296. 24. After the Anglo-Iranian Oil Company, a British monopoly, had been ejected from Iran by a nationalistic movement, the nationalist leaders, through diplomatic maneuvering by the great powers, were deposed; and, instead of only Britain, the concession to exploit the oil was divided, in 1954, among

NOTES TO PAGES 74-76

277

four great imperialist powers: Britain and the United States were given 40% each of the stock; and France and Holland secured the other 20%. The United States was repre¬ sented by a combination of five powerful oil companies. The problems of dealing with imperialism were thus made vastly more complicated. The Iranians could now expect their government, as the Venezuelans already expected theirs, to be made or broken according to the dictates of foreign oil interests. 25. I. A. Hobson, The Crisis in Liberalism, London, 1909, p. 255. 26. Congressional Record, 65th Cong., 1st Ses., Vol. 55, Pt. 4, 1917, p. 3570. 27. Congressional Record, 64th Cong., 1st Ses, Vol. 53, Pt. 13, 1916, p. 13678. And he said again: “We are fraternizing with these other great nations; we are engaged in a war in which those nations are our allies, and commerce is one of the great things that has led, perhaps more than anything, to this conflict that has been going on in Europe for the last three years, a conflict in commerce and trade. And nations want trade. They want trade because it brings wealth to the nation. And this Nation is like other nations. It wants trade, and one of the most difficult things when we come to make a peace will be the question of trade relations between these great nations with which we are allied. And yet we are start¬ ing on a policy against these other nations to allow absolute combinations among our corporations so that they can dictate absolutely the price which the people of England and France and Italy and Russia and our other allies shall pay for everything they buy in this country. It is not along the line of peace that you are moving. It is along the line of conflict, along the line of conflict for trade and commerce, along the line of conflict for wealth. It is a movement of conflict and not a movement for peace.” Congressional Record, 65th Cong., 1st Ses., Vol. 55, Pt. 4, 1917, p. 3573. 28. Congressional Record, 64th Cong., 1st Ses., Vol. 53, Pt. 13, 1916, pp. 13681 and 13683.

NOTES TO PAGES 77-80

278

29. Congressional Record, 65th Cong., 1st Ses., Vol. 55, Pt. 3, 1917, pp. 2786-2787. 30. Ibid., p. 2790.

CHAPTER 5 1. The Fable of the Bees: or Private Vices, Public Benefits, F. B. Kaye, ed., Oxford, 1924, p. 34. 2. Ibid., p. 8. 3. Ibid., p. vii. 4. In his long poem, he sustains the argument: “Then leave complaints: Fools only strive To make a great and honest hive. T’ enjoy the world’s conveniences. Be fam’d in war, yet live in ease. Without great vices, is a vain EUTOPIA seated in the brain. Bare virtue can’t make nations live In splendor. . . .” Ibid., p. 37. 5. In Professor Jacob Viner’s critique of Kaye’s introduction, this loss of the intent of the Fable is apparently compounded. See his introduction to Mandeville, A Letter to Dion (The Augustan Reprint Society), 1953. It needed to be said, how¬ ever, that to identify Mandeville as a forerunner of Adam Smith is to misconstrue the critical orientation of these writers. Ibid., pp. 11 ff. 6. Ibid., p. 21. In a remarkable statement—upon which, how¬ ever, he does not elaborate systematically—he attributed greater significance to social organization than to religious ideals. Thus: “I am of the opinion that the morals of a people in general . . . are not so much influenced by the religion that is professed among them, as they are by the laws of the country, the administration of justice, the politics of the rulers, and the circumstances of the people.’’ Ibid., p. 55.

NOTES TO PAGES 80-82

279

It is doubtless this societally-anchored core of Mandeville’s thought which chiefly accounts for its continuing appeal. 7. Men and, Manners of Old Florence, Chicago, 1909, pp. 9697. 8. Cf. Jacob Strieder, Jacob Fngger the Rich, pp. 160-170; W. Sombart, The Quintessence of Capitalism, trans. by M. Epstein, London, 1915, pp. 47ff and 340-341; Petrus J. Blok, The History of the People of the Netherlands, New York and London, 1898, Vol. 4, p. 93; and Daniel Defoe, The Anatomy of Exchange Alley, London, 1719, pp. 3-4 and 42. 9. College Lectures, New York, 1896, p. 53. 10. Christianizing the Social Order, New York, 1913, p. 318. 11. Edwin H. Sutherland, White Collar Crime, New York, 1949, p. 247. It is only in serious cases of approaching class conflict that attitudes of the working class measure up to the con¬ clusion reached by the Webbs that “the capitalist . . . does actually stand convicted of moral inferiority before the work¬ ing classes; and neither the constitutional socialist nor the gunman-saboteur has any respect for him, or any belief in his necessity as a pillar of society.” The Decay of Capitalist Civilization, New York, 1923, p. 221.

12- Jacob Strieder, Jacob Fugger the Rich, p. 171. 13. Marshall B. Clinard, The Black Market, New York, 1952, pp. 293ff. Clinard quotes and supports the following statement by Leon Henderson, OPA administrator: “Criminal racketeers of the gangster variety have relatively little place in the chiseling now going on. They do not control our slaughter¬ houses, lumber mills, textile centers, and automobile agencies, nor do they have any interest in our retail stores and rail¬ roads. Current racketeering is largely in the hands of men and women with whom we have always done business.” Ibid., p. 294. 14. The Anatomy of Exchange Alley, p. 13. 15. Ibid., pp. 59-60.

NOTES TO PAGES 83-85

280

16. Sutherland, White Collar Crime, pp. 249-250; also “WhiteCollar Criminality” in American Sociological Review, Vol. 5, No. I, February, 1940. 17. C. F. Taeusch, “Business Ethics,” Encyclopedia of the Social Sciences. Edward N. Hurley, an outstanding businessman who was in 1917 Chairman of the Federal Trade Commission, said in an address to business leaders: “If business is made more intelligent, it will become more fair, and there are many practices existing now in our industries which businessmen, either individually or through their trade associations, can and will correct if the evil effects of these practices are brought to light. There are, however, some unfair practices which only the Government can correct. The law under which the Federal Trade Commission operates authorizes us to prevent unfair methods of competition. When private effort fails, the Government must step in in order to make business fair, and under ordinary conditions if competition is made fair, competition will take care of the interests of the consumer and the businessman alike.” Report of the 4th Na¬ tional Foreign Trade Convention, 1917, pp. 503-504. 18. Report of the Federal Trade Commission of the Meat-Pack¬ ing Industry, Pt. I, June 24, 1919, pp. 64-65; see also Pt. Ill, pp. 156-157 for list of “unfair practices” in the business pro¬ cedure of these companies. 19. White Collar Crime, pp. 248-249. 20. Edwin H. Sutherland, “White-Collar Criminality,” American Sociological Review, Vol. 5 (1940), p. 9. 21. Cf. W. Sombart, The Quintessence of Capitalism, p. 122. 22. A Discourse of Trade, pp. 12-13. 23. John Lord, Capital and Steam-Power, London, 1923, p. 208. It is in market situations such as this that the maxim “let the buyer beware” tends to change to “the customer is always right.” 24. National Industrial Conference Board, Public Regulation Of Competitive Practices in Business Enterprise, p. 283.

281

NOTES TO PAGES 86-89

25. Report of the Sixth National Foreign Trade Convention, 1919, pp. 22-23. 26. “Behemoth,” in The English Works of Thomas Hobbes, Sir William Holesworth, ed., Vol. VI, London, 1839-1845, p. 231. 27. The Prince, Great Books Foundation edition, Chicago, 1955, pp. 59-60. 28. Three years after the publication of 11 principe, the Chris¬ tian ideal was presented by Erasmus in his Education of a

Christian Prince (Institutio principis Christian!), 1516. The difference is clear, although Erasmus was not directly answer¬ ing The Prince. Thus: “If you want to make trial of your¬ self with other princes, do not consider yourself superior to them if you take away part of their power or scatter their forces; but only if you have been less corrupt than they, less greedy, less arrogant, less wrathful, less headstrong. . . . While you are conducting yourself in this fashion, which befits a true Christian prince there will be plenty to call you a dolt, and no prince at all! Hold fast to your cause. It is far better to be a just man than an unjust prince.

Desiderius Eiasmus,

The Education of a Christian Prince, trans. by Lester K. Born, New York, 1936, pp. 151 and 155. See also Giovanni Botero,

Religion and the Virtues of a Christian Prince, Against Alachiavelli, Madrid, 1595, trans. by George Albert Moore, Wash¬ ington, D. C., 1949. 29. The Letters of Philip Dormer Stanhope, 4th Earl of Chester¬

field, Bonamy Dobree, ed., 6 vols., London, 1932, lettei no. 1886. 30. Ibid. 31. Ibid., letter no. 1867.

CHAPTER 6 1

During the Napoleonic wars, when continental markets wete partly closed to England, James Mill said: “Let us only con¬ template for one moment the vast extent of the habitable

NOTES TO PAGES 89-90

282

globe, and consider how small in comparison is that por¬ tion of coast over which the sway of Bonaparte extends; and we shall probably conclude with considerable confidence, that, in the wide world, channels will be found for all the commerce to which this little island can administer. Let us look first at the United States of America. To these, we have for years sent more goods of British manufacture than to the whole continent of Europe. The vast commerce of the West India Islands next comes naturally in view. The im¬ mense extent of Portuguese and Spanish America, whose communication with the manufacturing countries may in a great measure be confined to ourselves, will, notwithstanding the disadvantages under which they labour, furnish a growing demand for the produce of our industry. Even the coasts of Africa, miserable as their condition is, might present to the careful explorer something better for the commodities which he may offer, than their wretched population. The Cape of Good Hope itself, improved by British wisdom and British capital, opens a field of boundless extent. The vast shores of the Indian ocean, both continental and insular, with their unrivalled productions, are all our own. Whatever the in¬ genuity of the Indian, the Malay and Chinese can produce, or their various and productive soils can yield, is ready to be exchanged for the commodities which we can supply to the wants of that immense population.” Commerce Defended, London, 1808, pp. 8-9. 2. The Byzantine Empire, London, 1925, pp. 238-239. 3. In regard to this stability, Baynes observes further: “When once in Western Europe the fiscal system of the Empire had broken down, no barbarian king could restore the complex machinery which the Roman administration had maintained. The West lapsed of necessity into a landed economy. But East Rome preserved its money economy; and as part and parcel of that money economy the East Roman State ten¬ aciously asserted its right to tax its subjects according to its own good pleasure. It refused to accept in exchange for that right the straitly covenanted services of Western Feudalism: no Byzantine subject raised the plea that his sovereign must

283

NOTES TO PAGES 90-91

‘live of his own.’ On the revenue derived from this taxation were based the standing army, the diplomacy and the adminis¬ tration of the East Roman Caesars; these essential supports of the throne the emperor did not sustain of his subjects’ grace; they were his rightful appanage. And part of this heritage of state supremacy was the Empire’s single system of faw—that law which emanated from the fount of all authority, the Emperor, and which had behind it the sanction and the prestige of the centuries. . . . But in the West the single law perished with the single state whose creation it was. The law of medieval England is local law, customary law, folk law; and the idea of a sole legislative authority must fight hard for recognition. And since there is no one civil law inherited from a pagan state, a Christian law can arise.

Ibid., pp. 240-

241. 4. Eleanor C. Lodge, Cambridge Medieval History, Vol. V., p. 645. Cf. Jacob Burckhardt, The Civilization of the Renais¬

sance in Italy, New York, 1878, p. 4. 5. The following passage by Professor Schevill illustrates the play of power about the nascent cities: “The struggle be¬ tween the two overlords,

between emperor and countess

[Matilda], explains the famous charters which Henry [IV], he of the memorable Canossa incident, issued in 1081 to Lucca and Pisa respectively. Being at war with the pope and the countess, Henry badly needed the help which two such prosperous towns as Lucca and Pisa could biing to his cause. Therefore, with many compunctions, as we may be sure, he agreed to put the seal of his approval on the municipal activities by which the two towns had partially lifted them¬ selves out of the frame of feudalism and taken their first uncertain steps toward self-government. What Henry had thus granted, his vassal, the countess, did not have the powei to revoke. To be sure, Pisa and Lucca might not, under all circumstances, be able to enforce their proud new status, but since it had been confirmed by the fountainhead of feudal law, it was difficult to see how it could ever again be successfully nullified.” History of Florence, New York, 1936, pp. 58-59.

284

NOTES TO PAGES 91-92

6. Researches in the History of Economics, London, 1899, pp. 43-44. Addressing himself to the question, “Why did western civilization avoid the tragedy of so many oriental ones which . . . sank into immobility?” Professor Herbert Butterfield finds the answer in the division of power rather than in the peripheral rise of a new social order: “The relations between the individual and society were bound to be affected by the situation, since the individual gains when instead of one master there are two who have to compete with one another for dominion over him.” Christianity in European History, London, 1951, pp. 26-28. In the absence of the resistant capitalist order in their midst there seems to be no reason to believe that the Church and Emperor would not have reached a stable alliance, most likely similar to that arrived at in the East. 7. Colonies and markets ordinarily came under the legislative purview of the parent city. 8. In an illustration of a similar point, Montesquieu says, “[Poland] has scarcely any of those things which we call the movable effects of the universe, except corn, the produce of its lands. Some of the lords possess entire provinces; they oppress the husbandmen, in order to have greater quantities of corn, which they send to strangers, to procure the super¬ fluous demands of luxury. If Poland had no foreign trade, its inhabitants would be happier.” The Spirit of the Laws, Vol. I, p. 329. On the need for and uses of money by the nobility, see Richard Ehrenberg, Capital and Finance in the Age of the Renaissance, London, 1928, pp. 26-29. 9. Luxuries, of course, tended to have a one-way movement. The merchants took wool, corn, cattle, pitch, salt, butter, iron, copper, silver, and so on. 10. Cf. Alice Law, “Some Notable ‘King’s Merchants.’ ” The Economic Review, Vol. XII, 1902-1903, p. 310. 11. In this connection, R. H. Tawney says: “What supplied an additional impetus in the sixteenth century, and gave to individual transactions almost the character of an economic

NOTES TO PAGES 92-93

285

movement, was the great increase in the wealth of the busi¬ ness classes, combined with the poverty of the gentry, the long rise in prices, and the conservatism of the existing methods of land tenure. As the outburst of new companies after 1570 shows, the former had money to lend, and the latter were at their wits’ end to obtain it.” In Introduction to Thomas Wilson, A Discourse Upon Usury, New York, 1925, pp. 35-36. 12. With respect to the north German cities, Karl Pagel ob¬ serves: “The relations of the cities to the knights are of less importance because their number and real estate in the cities amounted to less than those of the clergy. They could be forbidden from settling in the urban community without much difficulty; and this, not so much because they were physically feared as the concern for preventing these princely feudal lords from finding a pretext to mix in city affairs. Thus rarely did Knights acquire the citizenship of the city.” Die Hanse, Brunswick, 1952, p. 261. 13. Jacob Fugger the Rich, p. 173. 14. “Christianity,” Herbert Butterfield remarks, “in a some¬ what paganized form operated amongst comparatively primi¬ tive people [of Europe] as the bond of the tribe even more effectually than would seem to be possible for religion in its higher and profounder manifestations. Christianity in Euro¬ pean History, London, 1951, pp. 6 and 18. 15. In regard to conditions at the frontier of expansion, Miriam Beard observes: “Merchants occasionally stored their wares inside cathedrals and held markets in the aisles. By lavish spending, the princes of the Church encouraged the luxury trades, and called upon merchants to bring incense and silken vestments, in exchange for products of cloisters and cleiical domains like salt, wine and grain.” A History of the Business Man, p. 53. And W. Heyd shows that at the beginning of the Middle Ages it was Rome which absorbed the largest quantity of Eastern products. The many churches of Rome needed precious ornaments, magnificent textiles, carpets, tapestiies, altars, and columns “and all the West modeled itself upon

NOTES TO PAGES 93-94

286

Rome.” Histoire du Commerce du Levant au Moyen-Age, Vol. I, Leipzig, 1885, pp. 94-95. 16. “Rome perished,” says Professor Schevill, “but Christianity survived. The cultural catastrophe was therefore not so com¬ plete as appeared at first glance. For Christianity, beginning, like all other mystery religions, as a faith and an aspiration, had under Roman legal influence expanded into a vast organization, a universal church, in which important ele¬ ments of Mediterranean civilization were incorporated and by which they were cherished and preserved. The energetic new institution, famous as the Roman Catholic Church, be¬ came the point of departure of the new or western civiliza¬ tion destined in the course of time to take over and develop the Mediterranean heritage.” History of Florence, pp. 10-11. 17. “The moment the [urban] economic system of life prevailed over the feudal,” says Hendrik Van Loon, “his feudal lordship commenced to starve. The only way to keep from starva¬ tion was by obtaining actual money, not butter and beeswax and cattle and the like. This actual money was not to be found among the peasants, many of whom never saw a coin during their entire lives. It was to be found only within the walls of the cities, and there were two ways in which to get it. One was to take the city and steal its contents. The other was to offer to the city for money what you might have to give it some day for nothing. This latter method was the more advantageous. Gradually the feudal lords, for certain consid¬ erations of cash-down, sold as many rights and privileges as the cities cared to buy.” The Fall of the Dutch Republic, Boston, 1913, p. 6. Country life in the vicinity of the city be¬ came more and more subject to the city’s needs: the organiza¬ tion of the area to facilitate transportation and communica¬ tion, the forcing of peasants to bring their produce to the city markets, the policing of the community, and so on, naturally supplanted the old order. 18. J. W. Thompson, Economic and Social History of the Middle Ages, p. 782. 19. The participation in trading and industrial ventures by six¬ teenth and seventeenth century monarchs is further indica-

287

NOTES TO PAGES 94-97

tion of the pull of capitalist enterprise. As early as 1560, Queen Elizabeth put two of her own ships in the African trade. 20. On this point Maude V. Clarke states: “Artificial town crea¬ tions were unknown in the Netherlands, where the commer¬ cial and industrial vigour of a relatively dense population made them unnecessary; for similar reasons they were rare in Italy. In Germany the foundation of towns was the normal means adopted by both Emperors and princes to defend and develop their territories. . . . Sometimes peasant communities were granted urban rights, but more often a special area was set aside as a town site, settlers were invited and a ready¬ made constitution was granted after the model of those which older towns had already developed for themselves. . . . The free customs granted (1120) by Conrad of Zahringer to Frei¬ burg in Breisgau were not only examples for many places in the Upper Rhineland, but probably helped to bring about Henry the Lion’s more famous foundations of Munich, Bruns¬ wick, and Liibeck, 1158.” The Medieval City State, London, 1926, pp. 13-14. For the movement in France see A. Giry and A Reville, Emancipation of Medieval Towns, New York, 1907, pp. 16-17. 21. In 1730, Daniel Defoe wrote: “Seeing trade then is the fund of wealth and power, we cannot wonder that we see the wisest princes and states anxious and concerned for the increase of the commerce and trade of their subjects, and of the growth of the country. . . . Nor can we wonder that we see such princes and states endeavouring to set up such manu¬ factures in their own countries, which they see are success¬ fully and profitably carried on by their neighbours.” A Plan

of English Commerce, London, 1730, pp. 33-34.

CHAPTER 7

1

Cf. Oliver C. Cox, The Foundations of Capitalism, p. 354

et passim; also The Cambridge Economic History of Europe, Vol. II, Cambridge, 1952, Chapter I.

288

NOTES TO PAGES 97-98

2. As late as the end of the eighteenth century, the vast com¬ merce of China was almost entirely internal. The following comment by David Macpherson depicts a type of trade that is definitely non-capitalistic: “Nearly the whole of [the Chi¬ nese] trade is conveyed upon the inland waters, their foreign active trade being next to nothing, and their timorous dis¬ position inducing them to prefer creeping along the windings of rivers and canals to a direct route in the open sea along the coast. In the management of their fresh-water craft the Chinese are very expert. But in the navigation of the open sea they appear to have fallen off very much from the mari¬ time skill and enterprise of their ancestors, who are said to have sailed as far as the coast of Africa; and, though they have the use of the compass, they have so little confidence in it, or in their own seamanship, that they are never will¬ ing to lose sight of land, and think it too arduous an attempt even to coast along their own shores without intermediate stops.” Annals of Commerce, Vol. 4, p. 307. 3. It is true, as we shall see in a later chapter, that Marx explicitly states that capitalist production “is essentially the production of surplus value;” and that “the real limitation upon capitalist production is capital itself. . . . Production is regarded as production for capital, instead of ... a means of extending the conditions of human life for the benefit of the society of producers.” However, in his assumption of a two-class system producing only consumers’ and producers’ goods for domestic uses, consumption necessarily plays the critical role. Among other things it is the “restricted con¬ sumption of the masses” which precipitates capitalist crises. Cf. Rosa Luxemburg. The Accumulation of Capital, New Haven, 1951, pp. 131ff; and Shigeto Tsuru, “Keynes versus Marx,” in Post Keynesian Economics, ed. by Kenneth K. Kurihara, New Brunswick, 1954, p. 340. 4. Wealth of Nations, Vol. I, p. 244. I shall not attempt here to review the involvements of this doctrine in the writings of economists from say, Ricardo, Malthus, Bohm-Bawerk, Marx, to Keynes and others. In a recent work. Professor Hansen proceeds on one line of reasoning as follows: “All

NOTES TO PAGES 98-99

289

investment is in a fundamental sense related to expectations with respect to the growth of real income. The purpose of all production is indeed consumption. Investment has no purpose except to provide consumers’ goods. All investment is thus regarded as a function of a growing real income.” A Guide to Keynes, New York, 1953, pp. 28-29. (Italics in text.) 5. For example, very little, if any, meaningful thinking about economic behavior in capitalist society can be based upon the following premise: “The end and aim of all production is the making of goods for immediate consumption, or con¬ sumption goods. . . . These consumption goods are dependent for their existence on physical conditions, and are subject to natural laws.” Eugen von Bohm-Bawerk, The Positive Theory of Capital, trans. by W. Smart, London, 1891, pp. 17 and 78. 6. William Cunningham in Cambridge Modern History, Vol. I, p. 499. 7. One of our most eminent adherents of orthodox economic thinking said in a recent lament: “The world has changed greatly, and is now a world of planned economies, of state trading, of substantially arbitrary and inflexible national price structures, and of managed instability in exchange rates. The classical theory is not directly relevant for such a world, and it may be that for such a world there is and can be no relevant general theory.” Jacob Viner, International Eco¬ nomics, Glencoe, 1951, p. 16. To the classical, all the way from Adam Smith, something is always wrong with the world because it always remains intractable to a general theory.” Viner’s disturbing conclusion was given special at¬ tention at the 66th Annual Meeting of the American Eco¬ nomic Association. At the same meeting, Professor Gottfried Haberler was designated to show “The Relevance of the Classical Theory under Modern Conditions.” (See Papers and Proceedings, Vol. XLIV, No. 2, May 1954, pp. 543-551. His effort, however, turned out to be not a demonstration that the classical theory, never clearly stated, continued to apply, but rather a verbal reaffirmation. To Haberler, un¬ fortunately, “the theoretical picture is always messed up if

NOTES TO PAGES 99-101

290

competition is replaced by all sorts of monopolistic impuri¬ ties.” It is not, it seems to me, that classical theory ever was a satisfactory general explanation of international trade, but that, in the past, assumptions were able to disregard “im¬ purities.” They were able to disregard the conditions of that trade in perhaps its major area, which today compels recog¬ nition and makes nonsense of universal economic mechanisms. Cf. B. N. Ganguli, Economic Integration, Poona, 1961, p. 4. 8. Report of the 31st National Foreign Trade Convention, 1944, pp. 16-17. Emphasizing the same point, M. A. Oudin ob¬ serves: “World politics and foreign commerce are practically synonymous terms.” Report of 1st National Foreign Trade Convention, New York, p. 371. 9. Report of 4th National Foreign Trade Convention, 1917, p. 491. 10. Wealth of Nations, Vol. I, p. 377. Professor Henri Hauser puts this point in historical context as follows: “At all times, and in all countries, producers first try to work for the home market. This market has grown progressively wider. In the Middle Ages it was the town and its precincts; since the fifteenth and sixteenth centuries it has become more and more the nation, while in the case of some modern peoples it has included more or less important parts of their colonial empire. In all countries of ancient culture, the internal mar¬ ket absorbs a very great majority of the products of the national activity. It is only the surplus—that portion which the home market has refused—that takes its way abroad.” Germany’s Commercial Grip on the World, trans. by. M. Emanuel, New York, 1917. 11. For a discussion of this see John H. Williams, “The Theory of International Trade Reconsidered,” The Economic Jour¬ nal, Vol. 39, 1929, pp. 203-204. 12. Hearings before the Joint Committee on the Economic Re¬ port, 83rd Congress, 2nd Ses., February 1-18, 1954. 13. Report of the 4th Foreign Trade Convention, 1917, p. 141. In this connection, the following remark by Professor Grover

NOTES TO PAGES 101-105

291

G. Huebner might have suggested to Senator Fulbright, regarding the question he raised above, how capitalist na¬ tions distributed their apparent surpluses without “giving them away”: “The problem of American shipping is only partly an economic and commercial problem. It is also partly a naval and military problem. We know that the efforts made and the achievements accomplished by Great Britain and France in different parts of the world, would have been utterly impossible without the immense auxiliary fleet which has been at their disposal.” “Probable Effects of the War on the Foreign Trade of the United States,” Proceedings of the Academy of Political Science, 1915-1916, p. 185. 14. John Bruce, Annals of the Honorable East-India Company, (1810), Vol. I, pp. 424-425. 15. Historical View of Plans for the Government of British India and Regulation of Trade to the East Indies, London, 1793, pp. 23-24. 16. Ibid., p. 547. This, of course, was not all the profits which flowed into England. Imperialism had other ways of extract¬ ing enviable income. 17. John H. Williams, “The Theory of International Trade Reconsidered,” The Economic Journal, Vol. 39, p. 204. 18. In the opening statement of his study of colonial West Indian commerce, Richard Pares asserts: Historians of the British Empire have long recognized the importance of the trade carried on before the American Revolution between North America and the West Indies. Without it the sugar colonies could not have existed and the North American colonies could not have developed.” Yankees and Creoles, London, 1959, p. 1. 19. Joseph Chamberlain, Foreign and Colonial Speeches, Lon¬ don, 1897, pp. 141-142. Alfred Marshall puts the same con¬ clusion as follows: “In all economic history, and especially in recent economic history, and most of all in the recent history of trade, the international point of view is essential. It is easy to remember that one’s own country is ever growing

NOTES TO PAGES 105-106

292

and changing: but it sometimes requires effort to consider how many of the changes near at hand are partly due to the expansion of life far away.” Industry and Trade, London, 1919, p. 23. 20. Report of the 11th National Foreign Trade Convention, 1924, p. 181. It is revealing to observe how alien is the think¬ ing of naturalistic economics compared to the realities of the capitalist world. For instance, Alfred Marshall says: “A place which produces but few things must necessarily depend largely on external markets. To take an extreme case, a vil¬ lage, given up to fishing, trades away nearly the whole of its produce; and the neighbouring farming villages trade away by far the greater part of theirs. But the country which contains these villages and some towns, with simple manu¬ factures, will be more nearly self-sufficing; and its external trade will be less in proportion to population than that of the farming villages, and much less than that of the fishing village.” Industry and Trade, London, 1919, p. 24. This ap¬ pears to be good, timeless economic logic; but it would hardly explain how England became increasingly dependent upon foreign trade as she moved from an agricultural to an in¬ dustrial nation. 21. Report of the 6th National Foreign Trade Convention, 1919, pp. 8-9. 22. Cf. Oliver C. Cox, The Foundations of Capitalism, 1959. 23. Report of the 1st National Foreign Trade Convention, 1914, p. 179. 24. Some two hundred years ago, David Hume observed: “The few merchants who possess the secret of this importation and exportation make exorbitant profits; and, becoming rivals in wealth to the ancient nobility, tempt other adventurers to become their rivals in commerce. Imitation soon diffuses all those arts; while domestic manufactureres emulate the for¬ eign in their improvement and work up every home-com¬ modity to the utmost perfection of which it is susceptible. Their own steel and iron in such laborious hands becomes

NOTES TO PAGES 106-108

293

equal to the gold and rubies of the Indies.” Political Dis¬ courses, Edinburgh, 1752, pp. 16-17. 25. Catechism of Political Economy, trans. by J. Richter, Phila¬ delphia, 1817, p. 126; Treatise on Political Economy, Phila¬ delphia, 1834, pp. 73, 361, 362 and 382. 26. A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy, p. 98. ‘‘What is true of trade between individuals,” says Alfred Marshall, “is true of trade between towns or provinces, or countries.” Industry and Trade, p. 17. 27. Interregional and International Trade, Cambridge, 1933, p. 589. 28. John H. Williams, “The Theory of International Trade Reconsidered,” The Economic Journal, Vol. 39, 1929, p. 196. 29. Cf. Arthur Smithies, “Modern International Trade Theory and International Policy,” Proceedings of the Sixty-fourth Annual Meeting of the American Economic Association, December 26-29, 1951, p. 169. 30. A Treatise on Political Economy, p. XXVIII. 31. J. R. McCulloch, A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy, p. 97. (Italics in text.) 32. Sir Sydney Caine in Report of the 36th National Foreign Trade Convention, 1949, p. 9. 33. Jacob Viner, “The Prospects for Foreign Trade in the PostWar World,” Transactions of the Manchester Statistical Soci¬ ety, June, 1946, p. 6. In another place, Professor Viner brings this general idea into service to explain industrialization and urbanization in the following way: “Granted that cities are needed as civilizing and educative centers, they rise in adequate degree for these purposes ... as governmental, educational, professional service, and marketing and transportation cen¬ ters, provided the rural population is prosperous enough to need and want urban services in substantial proportions. In Bert F. Hoselitz, ed., The Progress of Underdeveloped

NOTES TO PAGES 108-112

294

Areas, p. 193. The reasoning manifestly is likely to take us back even to the simpler logic of physiocracy. 34. Michael Greenberg, British Trade and the Opening of China, Cambridge, 1951, p. 105. 35. Mr. Chamberlain’s Speeches, Vol. II, London, 1914, p. 299. 36. On the high degree of specialization in backward countries and its dangers see United Nations, Commodity Trade and Economic Development, New York, 1953, pp. 9-10. 37. In an address entitled “The Relation of Our Industrial Ca¬ pacity to our Foreign Trade,” James A. Farrell, President of the United States Steel Corporation, said: “This element [merchants and manufacturers engaged in foreign commerce] understood that if it be wise for a manufacturer to distribute his products in widely different domestic markets, so as to offset the effect of periods of local depression which affect one section and not another, the same principle applies with even greater force to the acquisition of foreign markets. These people found that the steady cultivation of foreign markets enabled them to secure the benefit of full production and continuous employment of labor and not merely when there was a brisk domestic demand, that it helped to stabilize their industry and to neutralize the effect of periods of domestic depression.” Report of the 7th National Foreign Trade Con¬ vention, 1920, pp. 15-16. 38. Cf. United Nations, Department of Economic Affairs, Com¬ modity Trade and Economic Development, New York, 1953, pp. 10 et passim; Instability in Export Markets of UnderDeveloped Countries, New York, 1952, pp. 3-4; and Relative Prices of Exports and Imports of Under-Developed Countries, New York, 1949, pp. 7 et passim. 39. Commerce Defended, London, 1808, pp. 38-39. 40. “American Treasure and the Rise of Capitalism (1500-1700)” Economica, Vol. IX, 1929, p. 348. So, too, R. H. Tawney ob¬ serves: “What Italy, the economic schoolmaster of the middle ages, had begun, is carried further by the results of the dis-

NOTES TO PAGES 112-115

295

coveries. Here, again, foreign commerce is the decisive factor. Its profits are enormous, for trade with America and India is, at first, not so much trade, as the violent looting of the in¬ digenous population. The result is to pour wealth into Europe on an unprecedented scale. It makes the fortune of Antwerp, and then Holland and England, and leads to the develop¬ ment of new forms of capitalist enterprise, such as the joint stock company.” Review of Fes Origines du capitalisme moderne by Henri See in The Economic History Review, Vol. I, No. I, January 1927, p. 158. 41. The Decay of Capitalist Civilization, New York, 1923, p. 103. 42. Financial Giants of America, Vol. I, Boston, 1922, p. XI. 43. Milton Bradley Company, Famous Fortunes, Boston, 1931, pp. 35-46. 44. Murat Halstead and J. Frank Beal, Jr., Fife of Jay Gould, New York, 1892, pp. 80-81. 45. Jacob Strieder, Jacob Fugger the Rich, p. 45. 46. Cf. Julius H. Boeke, Economics and Economic Policy of Dual Societies, New York, 1953, p. 224. 47. “I know a great many men,” said Paul R. Mahoney of the Remington Typewriter Company, ‘‘representing American manufacturers along such lines as shoes, hats, corsets, overalls, underwear, photographic supplies, phonographs, pianos, cash registers, typewriters, adding machines, fountain pens, agri¬ cultural implements—I could go on and recite in the next 20 minutes lines which have been developed in foreign fields by American manufacturers going out and getting that knowl¬ edge, that information on the ground, and working up a selling organization in those things. The world did not take to the cash register, to the typewriter, to the adding machine, to the phonograph and other things merely because they thought they were good. They had to be taught they weie good° before they would buy them.” Report of the Sixth National Foreign Trade Convention, 1919, pp. 171-172. 48. In the following, an outstanding businessman intimates the economic position of the native: ‘‘If you want the seciet

NOTES TO PAGES 115-116

296

of the success of many of our very largest institutions in their quest for trade abroad, for instance the Standard Oil Com¬ pany, the International Harvester Company, the Singer Sew¬ ing Machine Company, or the typewriter companies, as well as of the German and British manufacturers, you will find it in the establishment of strong selling houses financed and controlled by men sent from the manufacturers’ home coun¬ try, and really representing the manufacturer and his country rather than the native viewpoint.” Report of the Fifth Na¬ tional Foreign Trade Convention, 1918, p. 481. (Italics in text.) 49. Germany’s Commercial Grip on the World, New York, 1917, p. 162. In the same way Robert S. Alter, Vice President of the American Tool Works Company, lectured his colleagues at the Fifth National Foreign Trade Convention, 1918: “The exporter must, first of all, consider the market in question from the standpoint of its buying ability for his particular commodity. Much money is wasted every year, and export campaigns do not bring fruit simply because the firms be¬ hind them neglect to study the markets. The matter of climate and altitude should not be overlooked. For example, there is a good market for heavy overcoats in Mexico City, because of its altitude, regardless of the fact that it is far south of us. Many centers of population in tropical countries are situated in altitudes which give them temperate atmos¬ pheric conditions. The occupation of the people will indicate the needs of the community for raw material, machinery, tools, clothing, luxuries, etc., the latter depending greatly upon the degree of refinement of the population. Naturally, those people who can be compared with us in civilization, re¬ gardless of their geographical location, will be interested in buying commodities which we ourselves use and enjoy, such as automobiles, victrolas, pianolas, motor boats, photographic apparatus, etc. On the other hand, the people in savage and semi-savage countries may use cheap cotton cloth and a few simple utensils, but would hardly create a market for laundry machinery, much as they might need it. Knowledge of these conditions, based on study and observation, is the only way

NOTES TO PAGES 116-121

297

to ascertain whether there is a market for a product. It is an interesting and fascinating study, and well worth the time of any businessman who desires to expand the horizon from which he secures orders.” Report, pp. 451-452. 50. Report of the 3rd National Foreign Trade Convention, 1916, pp. 105-106.

CHAPTER 8 1. A Treatise on Political Economy, Philadelphia, 1934, p. 106; see also J. A. Hobson, The Evolution of Modern Capitalism, London, 1904, pp. 11-12. 2. Congressional Record, 65th Congress, 1st Ses., Vol. 55, Pt. 3, 1917, p. 2785. 3. England’s Improvement, London, 1677, Vol I, p. 4. 4. See statement in Charles W. Cole, Colbert, New York, 1939, p. 8. 5. Cf. Earl H. Pritchard, Anglo-Chinese Relations During the Seventeenth and Eighteenth Centuries, University of Illinois Studies, 1929, pp. 176-185. 6. The World Almanac, 1954, p. 320. 7. United Nations, Monthly Bulletin of Statistics, May, 1954, Table A. 8. Report of the 3rd National Foreign Trade Convention, 1916, p. 298. 9

In an address entitled ‘‘Why We Must Have Foreign Trade,” lames S. Alexander, President of the National Bank of Com¬ merce in New York, said: ‘‘It is idle to think of continuing our course of domestic development without a corresponding development of our foreign trade. The two are comple¬ mentary and if either is to progress both must go forward hand-in-hand.” Report of the 9th Foreign Trade Convention, 1922, p. 51.

298

NOTES TO PAGES 121-122

10. In a convincing essay, previously cited, R. W. Van Alstyne explores the American expansionist drive. “Even in infancy,” he writes, “these colonies showed a capacity for growth readily comprehended when we remember their assets. They faced the sea, and they possessed a hinterland of inestimable value; from Britain they attracted both labor and capital. Hubs of empire emerged in various localities: in New England, Boston; on the Hudson River, New York; on the Delaware, Philadelphia; on the Chesapeake Bay, the tobacco colonies, where every plantation had access to deep water; and in the South, Charleston. Each of these hubs was ... a nucleus and each nucleus fattened on its rapidly and methodically ex¬ panding cell. Commerce and agriculture, in perfect balance with each other, supplied the nutriment. In the course of the eighteenth century those cells . . . amalgamated under the impact of revolution into a single organism. Thus, when the United States started on its career as an independent state, its growth pattern was fully established and visible to its im¬ aginative and far-seeing leaders, who regarded its ‘proper domain’ as bounded only by the shores of the continent.” The Rising American Empire (Oxford University Press), New York, I960, p. 195. 11. Annals of Commerce. Vol. 3, p. 568. “It was the West India trade more than anything else, which enabled them to utilize their fisheries, forests and fertile soil, that built up their towns and cities, and that supplied a cargo for their large merchant marine.” Guy Stevens Callender, Selections from the Economic History of the United States, 1765-1860, Boston, 1909, p. 8. See also for details of American foreign commerce before the Civil War: Emory R. Johnson, et. al.. History of Domestic and Foreign Commerce of the United States, Wash¬ ington, D.C., 1915, Vol. II, Chs. 23 and 24. 12. Cf. Virginia D. Harrington, The New York Merchant on the Eve of the Revolution, New York, 1935, p. 37; see also for foreign trade, pp. 163ff; and Arthur M. Schlesinger, The Colonial Merchants and the American Revolution, 1763-1776, New York, 1917, especially pp. 59 Iff.

NOTES TO PAGES 122-124

299

13. The Writings of Benjamin Franklin, A. H. Smyth, ed., Vol. 6, New York, 1906, p. 131. Again the complaint: “Not only the interest of a particular body of merchants, the interest of any small body of British tradesmen or artificers, has been found, they say, to outweigh that of all the King’s subjects in the colonies. There cannot be a stronger natural right than that of a man’s making the best profit he can of the natural prod¬ uct of his lands.” Ibid., Vol. 5, p. 86. 14. Joshua J. Oddy, European Commerce, 1805, p. 605. 15. No. XII, Henry B. Dawson, ed., p. 73. 16. “The chief effect of the European wars,” says Guy S. Cal¬ lender, “was to throw into our hands the greater part of the colonial carrying trade of the world—an economic prize for which European nations had been fiercely struggling for nearly two centuries. A secondary effect was to create a European market for the food products of the northern states.

Selections from the Economic History of the United States, 1765-1860, Boston, 1909, p. 239. 17. J. B. McMaster, in Cambridge Modern History, Vol. VII, p. 331. 18. This course had already been predicted by The Federalists: “The rights of neutrality will only be respected, when they are defended by an adequate power. A nation, despicable by its weakness, forfeits even the privilege of being neutral. ... It would be in the power of the maritime nations ... to prescribe the conditions of our political existence .... in all probability, combine to embarrass our navigation in such a manner as would in effect destroy it and confine us to a passive commerce.” No. XI, Dawson, ed. 19. Guy S. Callender, Selections from the Economic History of

the United States, p. 272. 20. “In the early thirties [cotton] accounted for about half the value of all exports combined; a rapidly growing British manufacturing industry taking by far the greater part of the supply. Both cotton and sugar . . . called for large investments

NOTES TO PAGES 124-125

300

of capital [from abroad] for the purchase and upkeep of slaves and for plantation supplies and equipment.” Cleona Lewis, America’s Stake in International Investments, Wash¬ ington, D. C., 1938, pp. 14 and 15. 21. Cf. Cleona Lewis, America’s Stake in International Invest¬

ments, pp. 15-39. With certain important reservations, the following remark by Professor Edwin F. Gay describes the situation: “For two generations after the Civil War, freed from the political preoccupations which preceded that con¬ flict and stimulated by the rapid growth of railroad trans¬ portation and by a high protective tariff, Americans devoted themselves to the development of our domestic resources and the industrial exploitation of a great internal market. For 50 years, therefore, this country turned its back upon the sea, and its energy was wholly and profitably absorbed in this task at home. . . . The United States produced the food stuffs and the raw materials which the traders of other countries had to come and get in exchange for a large variety of manufactured products. . . . All our own capital and much borrowed capital could be more advantageously used at home than abroad.” Report of the 2nd National Foreign Trade

Convention, 1915, p. 173. 22. Derived from League of Nations, Industrialization and For¬

eign Trade, 1945, p. 13. 23. U. S. Department of Commerce, Foreign Commerce Yearbook, 1951, p. 173. The trade of leading nations is relatively di¬ versified. For example, in 1953, India accounted for less than one per cent of U.S. exports and two per cent of its imports. Venezuelan imports from and exports to the U.S. were (1951) 67 and 30 per cent respectively of its total trade; but this showed up as only about three and four per cent of U.S. exports and imports. Of the Philippines’ total imports and exports, 70 and 63 per cent respectively were with the U.S.; while that country had only about two per cent each of the U.S. exports and imports. (The figures given here are not exactly comparable: those for foreign countries are for 1951 and for the U.S., 1953. For the U.S. see: U.S. Dept, of Com-

301

NOTES TO PAGES 125-128 merce, Business Information Service, International

Trade

Statistics Series, March 16, 1954. See also Emory R. Johnson et. al.. History of Domestic and Foreign Commerce of the United States, Washington, D.C., 1915, Vol. II, Chs. 23 and 24. 24. Report of the 4th National Foreign Trade Convention, 1917, p. 84. 25. In an empirical approach to the question, M. J. Sanders, President of the New Orleans Board of Trade, said in 1916: “I think a rather fundamental question is .. . what percentage our foreign trade should be as compared with our total in order to stabilize conditions in our own country. ... I have observed this to be true, that whenever the export product falls below $2 billion a year, or five per cent of our total product, we have hard times and our factories are closed down. When it runs to two and a half billions a year, we have a normal business, and when it runs to three billions a year, we have a business boom. Therefore, you may say that when we sell abroad seven and a half per cent of our annual product, we have thereby created a balance wheel which keeps the various parts of the machine going. Report of the 3rd Na¬

tional Foreign Trade Convention, p. 366. For a similar line of Our Economy, Washington, D.C., 1950, pp. 7-8 and 37.

reasoning, see Seymour E. Harris, Foreign Aid and

26. United Nations, Commodity Trade and Economic Develop¬

ment, 1953, p. 3. 27. The Industrial Revolution in the Eighteenth Century, trans. by M. Vernon, New York, 1934, p. 105. 28. Report of the 2nd National Foreign Trade Convention, 1915, p. 5. Some have called it the “stabilizer,” the “balance wheel.” “Many of the American manufacturers probably do not fully realize the great advantage it would be to their paiticular industry, as well as to the general, underlying stability of the country, if every manufacturer could develop foreign trade by the sales of his product to the extent of, say 25 per cent. ... It would act like an enormous balance wheel in stabiliz¬ ing industrial conditions of output and employment in this

NOTES TO PAGES 128-129

302

country.” Address by C. G.Young; see Report of the 3rd

National Foreign Trade Convention, 1916, pp. 50-51. 29. “Import Quotas and Other Factors in the Restriction of Trade,” Proceedings of the Academy of Political Science, Vol. 15, 1932-1934, p. 298. 30. See tables in Commission on Foreign Economic Policy, Staff

Papers, 1954, pp. 5-6; and U.S. Bureau of Foreign Commerce, Statistical Reports: Contribution of Imports to U.S. RawMaterial Supplies, 1955. 31. Hearings before the Joint Committee on the Economic Re¬

port, 83rcl Congress, 2nd ses., p. 624. 32. The loss of key industries to competing capitalist nations— or, which amounts to the same thing, the loss of control of vital commodities in international trade—usually means the loss of leadership in the capitalist system. Professor J. Viner recognizes the high percentages of the products of some industries which are exported and which are ironed out in the general average, but he applies the classical theory in estimating their importance to the total economy. Thus he writes: “The uneven impact of shutting off of American ex¬ ports on different American industries would mean catas¬ trophe for some industries, with serious repercussions on other industries not directly concerned with export, so that the adverse effect on industry as a whole would be greater than if the impact were evenly distributed. But in the long run these divergencies of impact would be evened out through transfer of productive resources from the more hard-hit in¬ dustries to other parts of the productive economy, and in¬ dustry

as

a

whole

would

share

more-or-less

evenly

the

adjustment to the elimination of exports.” “Prospects for Foreign Trade in the Post-War World,” Transactions of the

Manchester Statistical Society, June 1946, p. 10. For an ob¬ servation on a similar position taken by J. S. Mill, see J. H. Williams,

“The

Theory

of

International

Trade

Recon¬

sidered,” Economic Journal, Vol. 39, 1929, pp. 203-204; and for a discussion of the importance of foreign commerce to the American economy see U.S. Department of Commerce, “The

303

NOTES TO PAGES 129-130

Role of Foreign Trade in the United States Economy,” in U.S. Congress, House Committee on Ways and Means, For¬

eign Trade Policy: Compendium of Papers on United States Foreign Trade Policy, Washington, 1958, pp. 15-22. 33. Eugene P. Thomas, ‘‘Investment in China,” Proceedings of

the Academy of Political Science, Vol. 6, 1915-1916, p. 155. 34. Europe, the World’s Banker, 1870-1914, New Haven, 1930, p. 15. The amount of foreign trade needed by a leading capitalist country tends to continually increase. In the following ad¬ dress in

1916, James A. Farrell describes the process by

which the United States might become as dependent as Great Britain upon foreign commerce: “We can no longer talk of foreign

trade merely as

an

adjunct of domestic

prosperity. The fact has to be recognized that there can be no stable prosperity at home unless we

are

able

to

make liberal sales of American manufactures abroad. The surplus yield of the products of the soil practically sells itself. Whether as foodstuffs, cotton or copper, it furnishes the raw material of industry in other lands. In this department of export trade, there is no competition that cannot readily be met, because the world’s supply of these crude materials is not a rapidly expanding one. The more highly developed the productive capacity of a country, the more imperative is its need of these and, except ourselves, the most advanced of industrial nations cannot draw on their own resources to supply this need. The fact that, in normal times, about 60 per cent of our exports consists of food-stuffs and raw mateiials gives a standard of measurement for the enormous possibilities of our mechanical production. When the necessities of that production and of its workers absorb all the yearly product of our farms and mines, and there is none to spare for export, we may claim to have reached our full stature as an industiial people, but not before. ... In other words, it would pay us better to convert our own raw materials into finished products here than to sell them for conversion abroad. But our advance in that direction will be relatively slow, without a constantly broadening foreign outlet for articles of American manu¬ facture.” Report of the 3rd National Foreign Trade Conven-

NOTES TO PAGES 130-135

304

tion, 1916, p. 31. See also John T. Madden et ah, America’s Experience As a Creditor Nation, New York, 1937, Ch. V, “Economic Effects of Capital Exports on the United States.” 35. Ragnar Nurkse, Problems of Capital Formation in Under¬

developed Countries, New York, 1953, p. 5. 36. Ibid., pp. 6-7. 37. Ibid., pp. 16 and 141. 38. In a discussion on the Webb bill in a convention of the National Foreign Trade Council, the following assertion was made: “The outstanding development of the last two years has been the entry of smaller manufacturers and merchants into export trade. Factories once content to serve the home market alone have grasped oversea opportunities and have gained a wider outlet as a balance wheel against domestic depression. Workmen once indifferent whether their handi¬ work was sold in Indiana or in India now realize that their employment partly depends upon sustained oversea business.”

Report of the 4th National Foreign Trade Convention, 1917, p. 159. 39. A Treatise of Political Economy, Philadelphia, 1834, p. 319. 40. Ragnar Nurkse, Problems of Capital Formation in Under¬

developed Countries, p. 23. 41. Compare imports and exports of Venezuela in United States Department of

Commerce,

Foreign Commerce

Yearbook,

1951. 42. “The Conduct of Foreign Trade Under Trade Agreements,”

Proceedings of the Academy of Political Science, Vol. 19, 1940-1942, p. 36. “The difficulties in the present situation do not grow out of a lack of markets for our goods—if the goods are furnished on credit. Nor are they concerned with a lack of investment funds. The principal difficulty today is the inability of foreigners to provide themselves with the means of servicing the new obligations that would thus be incurred.” Cleona Lewis, America’s Stake in International

Investments, p. 503.

NOTES TO PAGES 136-137

305

CHAPTER 9 1. On the movement of European nations into the backward areas of the world, Alfred Lyall observes: “The value of the prize for which they were competing was even then perfectly well known; and subsequent history has proved that the wealth, liberties, and political predominance at home of the contending nations depended considerably on their failure or success. It was the foreign imports that brought the revenue which maintained the great fleets and armies of Spain; it was maritime trade that fed the stubborn power of resistance displayed by the Dutch Republic; and the great¬ ness of England has been manifestly founded upon her world¬ ranging commerce.” The Rise and Expansion of the British Dominion in India, London, 1911, pp. 19-20. 2. There could be little doubt, to cite an early instance, about the intent and effect of the following story brought back from Calicut at the opening of the sixteenth century: “When I was in that place, the King lived rather in a state of grief, both on account of the war in which he was engaged with the Portuguese and because he was afflicted by the venereal disease which had got into his throat; yet his ears, hands, legs, and feet, were richly garnished with all sorts of jewels and precious stones, absolutely beyond description. His treas¬ ure is so vast, that it cannot be contained in two immense cellars or warehouses, consisting of precious stones, plates of gold, and other rich ornaments, besides so much gold coin as might load a hundred mules, as was reported by the Bramins, to whom these things are best known. This treasure is said to have been hoarded by 12 kings, his predecessors. In this treasury there is said to be a coffer three spans long and two broad, entirely full of precious stones of inestimable value.” “Travels of Lewes Vertomannus, Gentleman of Rome, in the year 1503,” in A General History and Collection of Voyages and Travels, Robert Kerr and F. A. S. Edin, ed., Vol. VII, London, 1824, pp. 96-97. 3

For the role of imperialism in the West Indies, see Lowell ]. Ragatz, The Fall of the Planter Class in the British Carib-

NOTES TO PAGES 137-139

306

bean, 1763-1833, New York, 1928; Frank W. Pitman, The Development of the British Haven,

West Indies, 1700-1863, New

1917; and Eric Williams, Capitalism and Slavery,

Chapel Hill, 1944. 4. Historical View of Plans for the Government of British India and Regulation of Trade to the East Indies, London, 1793, p. 5. On this point. Sir Alfred Lyall quotes from a letter to Lord Clive, the company’s servant in India, and adds his own comment: “The time now approaches when we may be able to determine whether our remaining as merchants, sub¬ jected to the jurisdiction, encroachments, and insults of the Country Government, or the supporting your privileges and possessions by the sword, are likely to prove more beneficial to the Company;—in other words, whether the Company should openly take up an attitude of independent authority. And he decided, rightly, that nothing else would give them a stable or legitimate position.’’ The Rise and Expansion of the British Dominion in India, London, 1911, p. 157. 5. Foreign and Colonial Speeches, London, 1897, pp. 102-103. 6. Ibid., pp. 132 and 180. Further, in a speech on “The British Occupation of Egypt” in 1890, he defines the position which still carries tremendous force: “A nation is like an individual; it has duties which it must fulfill, or else it cannot live honored and respected as a nation; and I hope that as we have been singled out for the performance of this great duty, the whole nation without distinction of party, will resolve to carry it to a triumphant issue.” Ibid., pp. 43-44. Cf. Julius W. Pratt, America’s Colonial Experiments, New York, 1950, Ch. I. 7. “Governmental Policy and Trade Relations with the Far East,” Proceedings of the Academy of Political Science, Vol. 6, 1915-1916, p. 152. 8. What really happens to these backward countries is that, after contact with capitalist nations, their old order falls to pieces. Referring to the collapse in China as early as 1833, Professor Michael Greenberg observes: “A century earlier,

307

NOTES TO PAGES 139-141

by both Voltaire and the Jesuit missionaries, China had been praised as the most civilized and well-governed country in the world. Now the Mandarin Empire seemed but a ‘wretched burlesque,’ incapable of resisting the new ‘princes’ of Europe, the

spearheads

of

an

industrial

West.”

British

Trade

and the Opening of China, 1800-1842, p. 215. Egypt, having fallen into the same state of helplessness by the turn of the nineteenth century, induced the Earl of Cromer to remark that the “difficulty is to decide who is to interfere, on the assumption that some foreign interference is indispensable. ... If England did not interfere, some other power would do so.” Modern Egypt, Vol. II, New York, 1908, pp. 565-566. 9. John Bruce, Historical View of Plans for the Government of

British India and Regulation of Trade to the East Indies, pp. 12-13. 10. A Place in the Sun, p. 13. It is obviously a developed stage of national imperialism to which Richard Koebner refers in the following definition: “The term ‘economic imperialism —this much should be clear—has a meaning only when the ‘interests’ belong to the spheres of trade, industry, or in¬ vestment; when these ‘interests’ are in the hands of discernible groups of capitalists who put the dependency to their own use; when they form an essential part of the economic in¬ terests to which the home government (the ‘imperial’ govern¬ ment) must pay attention. Only if all these conditions are fulfilled can there be reason for saying that the government and the nation which make themselves responsible for the dependency have become ‘tools of capitalism.

The Con¬

cept of Economic Imperialism,” The Economic History Re¬

view, Vol. II, No. I, 1949, p. 10. One should note, however, that an imperialist nation is not a

tool ; and for the simple

reason that the interests of the state and those of its impel ialists are identical. The fate of the imperialist state is intermeshed with the success of its foreign exploitation. It is in this sense that Cecil Rhodes made the following familiar remark: “These islands can only support six millions out of their 36 millions. . . . We cannot afford to part with one inch of the world’s surface which affords a free and open market

308

NOTES TO PAGES 141-144 to the manufactures of our countrymen.” Quoted by Sarah Gertrude Millin, Rhodes, London, 1937, p. 174.

11. Cf. J. A. Hobson, Imperialism, p. 262. What parasitism means may be indicated by the following journalistic observation of Basil Davidson, distinguished student of African affairs: “Just as in South Africa—and in every other mineral-bearing territory in Africa—so in the Rhodesias have mining com¬ panies continued, year in year out, to dig up their minerals and export them overseas, pocketing their mammoth profits and never giving a thought to the welfare or the future of the territories they were ravaging. Attitudes of contempt toward the African inhabitants enabled the mining companies—and the imperialist peoples for the most part—to rob these ter¬ ritories of their natural wealth (and, in doing so, to ruin the health of a respectable proportion of the inhabitants as if by right, as if these territories had no claim to what was taken from them). And so it comes about that although Northern Rhodesia, for example, has enjoyed the blessings of white man’s government for 50 years, it has managed so far to produce only two African graduates with arts degrees, and not a single one with a science degree, not a single African lawyer, not a single African doctor.” “Empire Building: 1953 Style,” Monthly Review, August, 1953, p. 177. 12. Mr. Chamberlain’s Speeches, C. W. Boyd, ed., Vol. II, Lon¬ don, 1914, pp. 2-3. 13. Joseph Chamberlain, Foreign and Colonial Speeches, London, 1897, p. 127. I. C. Greaves concluded in 1935 that “the state which exercises control over a backward territory expects to perform three functions: to maintain the supply of exports from the territory, to protect the profitability of foreign in¬ vestments in the territory, and to develop among the natives a market for its own manufactured exports.” Modern Produc¬ tion among Backward Peoples, London, 1935, p. 31. 14. Imperialism and World Politics, New York, 1932, p. 522. 15. Annals of Commerce, Vol. 3, London, 1805, p. 387. 16. Modern Egypt, Vol. 1, New York, 1908, pp. 58-59.

NOTES TO PAGES 144-146

309

17. Sixteenth-century capitalism was too weak and its techniques too well known to bring the Mohammedan world under control. In the Mediterranean, the Turks held it temporarily in check. On the Florentine attempts to influence the Sultan after the fall of Constantinople, J. W. Thompson writes: “By a clever policy of bribing and diplomacy, Florence soon won for herself first place in the empire. In 1488 the wool gild decided to make a present of 950 florins to the Sultan out of its own means, and in later days the home government assisted the gild in this bribing process. The presents to the Sultan became so burdensome that the Florentine administra¬ tion found itself compelled to lay new taxes, not only on the export merchants and members of the Lana gild, but also on those who did only an import business with the Levant. But all this helped.” Economic and Social History of Europe in the Later Middle Ages, p. 227.

18. Harry Verelst, A View of the Rise, Progress, and Present State of the English Government in Bengal, London, 1772, p. 125. 19. When, in 1919, Japan’s intention with respect to the exploi¬ tation of China had become clear, Frederick J. Koster, Presi¬ dent of the San Francisco Chamber of Commerce, said: “We, being the larger and richer, and the more powerful, owe the greater obligation of understanding and of generosity in attitude, and I maintain that while we must recognize the fact that there is much antagonism in China toward Japan, because Japan has not always dealt wisely with her big neigh¬ bour; yet, if the Japanese were not, out of their own necessity, and therefore of their own volition, interesting themselves in the raising of slumbering China, the task of development there is so tremendous that we would almost lincl it necessary to urge Japan to help us in the work.” Report of the 6th National Foreign Trade Convention, New York, 1919, p. 295. 20. Report of the 32nd National Foreign Trade Convention, New York, 1946, p. 202. A Frenchman, Capt. Pierre Lantz, Assistant General Secretary of Direction Generale des Services Frangais, speaking before an earlier meeting of this very as-

310

NOTES TO PAGES 146-154 sembly in 1919, made the following suggestion: “I would not like to end without making a brief reference to the new countries whose agricultural and mineral resources are rapidly being developed under French control. I have in mind es¬ pecially northern Africa, Tunis, Algiers, Morocco, whose climate is very similar to the southern California one. They will be called to play an interesting part in the economic life of Europe, and America should not overlook this exten¬ sion of the French market, which can absorb a good many American products, including agricultural implements.” Re¬ port of the 6th National Foreign Trade Convention, New York, 1919, pp. 529-530. See also Basil Davidson, “Cashing in on Old Imperialism,” The Nation, September 13, 1952.

21. The terms underdeveloped, developing, and less-developed have become increasingly popular as designations acceptable to the backward countries. For a discussion of the history and purport of these concepts see Charles Malik in “Report of the First National Conference on International Economic and Social Development,” World Neighbors Working Together for Peace and Plenty, Washington, 1952, p. 20. 22. Richard Hakluyt, Principal Navigations, Vol. II, Glasgow, 1904, pp. 297ff. 23. A View of the Rise, Progress, and Present State of the English Government in Bengal, London, 1772, pp. 46-47. 24. See Henry Vansittart, A Letter to the Proprietors of EastIndia Stock, London, 1767, p. 88. 25. A Narrative of the Transactions in Bengal from 1760 to 1764, Vol. II, London, 1766, pp. 112-113; See also pp. 96ff. 26. The Venetians and Genoese had already made capitalist uses of revenues from their early possessions in the Levant. See W. Heyd, Histoire du Commerce du Levant au Moyen-Age, Vol. I, Leipzig, 1885, p. 156. 27. Quoted in The Rise and Expansion of the British Dominion in India, by Alfred Lyall, London, 1911, pp. 48-49. 28. Historical View etc., London, 1793, p. 536.

NOTES TO PAGES 154-155

311

29. Cf. Michael Greenberg, British Trade and the Opening of China 1800-1842, Cambridge, 1951, passim. 30. Modern Production Among Backward Peoples, London, 1935, p. 143. Furthermore: “In the French and Belgian Congo, and in Portuguese Africa, foreign concessions are granted over wide areas without any reciprocal demarcation of areas for native use, so that the foreign holder virtually obtains also a concession over the people he finds on his land. In the British territories other than West African, exclusive native rights have not been recognized, but, except in Nyasaland, definitive areas were set aside for native occupation as ‘Native Reserves,’ and the other lands passed to the Crown for alienation to non-natives. In Nyasaland, Europeans ob¬ tained large grants of land from native chiefs before the im¬ perial Government took over control, and the people who were living on the land then had to pay rent in the form of labour dues.” Ibid., p. 133. 31. The Policy and Administration of the Dutch in Java, New York, 1904, p. 257. In a readable summary of the situation in the Congo, Arthur Conan Doyle says: “Having claimed . . . the whole land, and therefore the whole of its products, the State—that is, the king—proceeded to construct a system by which these products could be gathered most rapidly and at least cost. The essence of this system was that the people who had been dispossessed (ironically called ‘citizens’) were forced to gather, for the profit of the State, those very products which had been taken from them. This was to be effected by two means; the one, taxation, by which an arbi¬ trary amount, ever growing larger until it consumed almost their whole lives in the gathering, should be claimed for nothing. The other, so-called barter by which the natives were paid for the stuff exactly what the State chose to give, and in the form the State chose to give it, theie being no competition allowed from any other purchaser.” The Crime of the Congo, p. 22. 32. Clive Day, The Policy and Administration of the Dutch in Java, p. 257.

312

NOTES TO PAGES 155-159

33. Cf. Edmond D. Morel, Red Rubber, London, 1906, and Arthur B. Keith, The Belgian Congo and the Berlin Act, Oxford, 1919. 34. Cf. Keith, The Belgian Congo and the Berlin Act, p. 158. 35. See Arthur Wauters, The Belgian Congo: Reservoir of the Allies, published by the Belgian Office of Information, 1942, p. 39 et passim; also Parker T. Moon, Imperialism and World Politics, pp. 85ff. The real purpose of withholding culture from backward peoples is probably indicated in the following admonition by an imperialist partisan, Professor Charles Conant Josey: “Everywhere there is a tendency among us to question our ability, superiority, and right to dominate. In this way we not only dampen the courage of our group and impair its power and solidarity, but implant in subject races the courage and determination to oppose us. The exportation of our ethnological, anthropological, and historical researches and criticisms is doing much to arouse in other races feelings of race equality and even pride. These combined with the general dissemination of our social and political philosophy, are causing a profound hostility in the exploited races toward our group.” Race and National Solidarity, New York, 1923, p. 83. 36. Cf. L. S. B. Leakey, Kenya Contrasts and Problems, London, 1936, pp. 102ff. 37. For a discussion of “the native’s place” see Ida C. Greaves, Modern Production Among Backward Peoples, London, 1935, pp. 126-127; also Oliver C. Cox, Caste, Class, and Race, pp. 317ff; and Louis L. Snyder, Race, A History of Ethnic Theories, New York, 1939.

CHAPTER 10 1. Imperialism and World Politics, New York, 1932, pp. 539-540. This, indeed, was the essence of the position taken by Walter P. Reuther, President of the Congress of Industrial Organiza¬ tions, at the Congressional hearings before the Joint Com-

NOTES TO PAGES 159-160

313

mittee on the Economic Report (1954). “Clearly,” he said, “if you want to turn this [recession] around, you must see that major emphasis now must be placed on strengthening consumption. No one quarrels with the need foi continued high levels of investment. ... But our basic economic problem in 1954 simply is not one of furnishing some new, special incentives for business investment. . . . The expansion of purchasing power in the present economic situation is even more desirable and more necessary. This is simple arithmetic to see that with enough buyers for only five million new cars, and a productive capacity for eight million, the need obviously is for more buyers. . . . See Heatings, pp. 7-5-726. It is not that an augmented purchasing power of wage earners has no measurable effect on consumption, but that Mr. Reuther’s reasoning here seems hardly consistent with the capitalist process. And, apparently, he overlooks the societal consequences of its acceptance. In a remarkable argument on this subject, Professor Joseph A. Schumpeter, following closely the Utopian view of capital¬ ism typical of classical economists, maintains that capitalism is both anti-imperialist and peaceful. He says, furthermore: “In a genuine state of free trade, foreign raw materials and foodstuffs are as accessible to each nation as though they were within its own territory.” Imperialism and. Social Classes, New York, 1951, p. 99. This, clearly, defines a state of things that the capitalist world has never approximated. 2. Imperialism, London, 1938, pp. 356-360. 3. The pre-capitalist Chinese government might be expected to do exactly that. The following event, recorded by Sir George L. Staunton, could certainly not have occurred in a capitalist state. In 1740, the Dutch in Batavia, Java, fearing an attack from the resident Chinese community, massacred all the “heads of families.” The governor then sent a mission to the Emperor of China to explain and justify the deed, for he was apprehensive of retaliation. “Those deputies were agree¬ ably surprised on finding that the Emperor calmly answered, that ‘he was little solicitous for the fate of unworthy subjects, who, in the pursuit of lucre, had quitted their country, and

NOTES TO PAGES 160-163

314

abandoned the tombs of their ancestors.’ ” An Authentic Account of An Embassy from the King of Great Britain to the Emperor of China, Vol. I, London, 1798, pp. 264-265. 4. Imperialism, p. 82. 5. In 1916, James A. Farrell, President of the United States Steel Corporation, said, “The argument that an impoverished Europe will require all that it can save or borrow for do¬ mestic rehabilitation overlooks the fact that Europe’s foreign investments safeguard the prosperity of her industries. A loan which brings from abroad a liberal interest return, while insuring employment for a large proportion of the industrial population, is a doubly valuable domestic asset.” Report of the 3rd National Foreign Trade Convention, 1916, p. 35. 6. Compare the position of Professor Joseph Steindl: “Theory of long-run growth is based on the idea that entrepreneurs invest because they have saved in the past. Internal savings of business provide one basic reason why net additions to the capital stock are carried out in the long run.” Maturity and Stagnation in American Capitalism, Oxford, 1952, p. VII. 7. Imperialism, p. 81. To the same effect: “The fallacy of the supposed inevitability of imperial expansion as a necessary outlet for progressive industry is now manifest. It is not industrial progress that demands the opening up of new markets and areas of investment, but mal-distribution of consuming power which prevents the absorption of com¬ modities and capital within the country. The over-saving which is the economic root of imperialism is found by analysis to consist of rents, monopoly profits, and other unearned or excessive elements of income, which, not being earned by labour of head or hand, have no legitimate raison d’etre.” Ibid., p. 85. 8. Ibid., p. 88. 9. Ibid., p. 360. “It is idle to attack imperialism or militarism as political expedients or policies unless the axe is laid at the economic root of the tree, and the classes for whose in-

315

NOTES TO PAGES 163-165

terest imperialism works are shorn of the surplus revenue which seeks this outlet.” Ibid., p. 93. 10. The U.S. Commission on Foreign Economic Policy gives the following limited definition of the role:

From the stand¬

point of economic welfare of the United States,

foreign

investment: (1) Is one method of providing a market foi the products of American industry and agriculture; (2) Contrib¬ utes in the longer run to a general increase in international trade and prosperity by helping to increase productivity and incomes abroad; (3) Is the principal means by which primaiy resources abroad can be developed to meet the ever-incieasing needs of the American economy for civilian and for defense uses; and (4) Is, and should be even more, a means by which our national income is increased through providing wider and more profitable investment opportunities for American capital.” Staff Papers, February 1954, p. 78. 11. Charles K. Hobson observes in point: “The United States has important investments in Canada, in Mexico, and in Central and South America. At the same time the United States itself is one of the most important fields of European investment. Another instance is that of Germany, which, though a large borrowing country during the greater part of the nineteenth century, nevertheless supplied important sums of capital for use in Russia, Austria, and South-Eastern Europe.” The Export of Capital, New York, 1914, pp. 29-30, see also Herbert Feis, Europe, the Worlds Banker, New Haven, 1930, pp. 60ff. 12. Hearings before the Joint Committee on the Economic Report, 83rd Congress, 2nd Ses., February 1954, p. 620. 13. When, in the first half of the eighteenth century, it had become clear to the Dutch that they were about to lose forever their pre-eminent place in the capitalist system, an official statement (which I have already referred to) review¬ ing the position of the nation was issued. “When trade has once absolutely altered its course,” this document held,

it

would be fruitless labor to endeavour the bringing it to flow in the same current back again upon us: The fate of the

NOTES TO PAGES 165-172

316

Hanse Towns and other trading nations may convince us of the impossibility to recover trade being established in some other place.” Proposals Made by His Late Highness,

Prince of Orange, to their High Mightinesses, The States General, London, 1751, p. 50. 14. Cf. Cleona Lewis, America’s Stake in International Invest¬

ment, p. 78. 15. Richard Ehrenberg, Capital and Finance in the Age of the

Renaissance, London, 1928, p. 35. 16. Cf. Herbert Feis, Europe, the World’s Banker, pp. 23 and 51. 17. Charles K. Hobson, The Export of Capital, p. 1. 18. Ibid., p. XXV.

CHAPTER 11 1. See League of Nations, Industrialization and Foreign Trade, 1945, pp. 18 and 132. There have been many attempts to arrive at more precise indices for the Soviet Union. Professor Donald R. Hodgman has taken great pains to show that some of these indices are exaggerations; he concludes, how¬ ever, that: “The record of Soviet achievement in industrial development remains impressive even after allowance has been made for much overstatement in official claims.” Soviet

Industrial Production 1928-1951, Cambridge, Mass., 1954, p. 128. See also G. Warren Nutter, “Some Observations on Soviet Industrial Growth,” Papers and Proceedings of the 69th Annual Meeting of the American Economic Association, American Economic Review, Vol. XLVII, May 1957, No. 2, pp. 618-630; Victor Perlo, USA and USSR: The Economic Race, New York, 1960, pp. 29ff; and U. S. Congress, Joint Economic Committee, Comparisons of the United States and Soviet Economies, 3 pts., Washington, 1959, pp. 390 et passim. 2. League of Nations, Industrialization p. 13.

and Foreign Trade,

317

NOTES TO PAGES 172-174 3. Cf. Sarah G. Millin, Rhodes, London, 1937, p. 138.

4. In an address to the 25th Republican National Convention, July 9,

1942, Representative Joseph W. Martin, Jr., ex¬

claimed: “They say that science and technical skill are un¬ covering new horizons that all but defy the imagination. To the forward-looking scientists, atomic energy is not just a military weapon, but a tool of humanity, that is opening huge avenues in the fields of medicine, power, transportation, and industry. . . . Interplanetary travel in our solar system— travel in space—no longer is the figment of a cartoonist’s imagination. It is on the verge of reality. . . . These marvelous developments by men of vision, men of foresight, mean mil¬ lions of jobs, millions of opportunities and countless new comforts for mankind in the future. Let no one tell you that our plant is built, that there are no new frontiers, no op¬ portunities for progress, no new horizons.’’ 5. About this time,

the German Chancellor Bismarck said:

“Let us close our doors and erect somewhat higher barriers, and let us thus take care to preserve at least the German market to German industry. The chances of a large export trade are nowadays exceedingly precarious. There are now no more great countries to discover. The globe is circumnavi¬ gated, and we can no longer find any large purchasing nations.” See William H. Dawson, Bismarck and State So¬

cialism, London, 1891, p. 52. Germany, of course, did not intend to experiment for long merely with domestic capital¬ ism. 6. J. Scott Keltie, The Partition of Africa, pp. 87-88. 7. Report of the 10th National Foreign

Trade Convention,

1923, p. 114. Maurice Coster, Vice President of Western Electric In¬ ternational Company, made the following analysis:

‘ It is

perhaps natural that our manufacturers should be thinking of developing their European markets at this time. During the progress of war optimistic hopes were formed of the new export opportunities which would open to the American manufacturer when peace was once concluded. Now that the

NOTES TO PAGES 174-175

318

war is over and it is possible to make an estimate of actual conditions on the other side, it is hard to understand that the rosy hopes, which were formerly

entertained,

cannot

be

realized. No one, who has not talked at first hand with the busi¬ nessmen of the allied nations, can have an accurate under¬ standing of their present situation. In the first place, the war, while it may have brought prosperity to individuals in the allied countries, has left the nations, as nations, prac¬ tically bankrupt. Great Britain, for instance, in addition to the enormous debt which she incurred during the war, has sold almost all her foreign holdings with the exception of two billion pounds sterling of South American securities, which she has retained to prevent the severance of her trade relations in that quarter. The debt of France is so great that it has been estimated that every man, woman and child in France now owes the rest of the world one

National Foreign

thousand dollars.” Report

Trade

Convention,

1919,

of the 6th pp.

387-388.

Again, John M. Parker declared: ‘‘Do not deceive yourselves as to the territory where the foreign commerce of this coun¬ try, with most substantial rewards, is going to offer itself. It is not Europe—war-torn, ruined, demoralized, bankrupt and more than decimated in man power,” Ibid., p. 69. 8. Report of the 20th National Foreign 1934, pp. 10-11.

Trade Convention,

9. “Our Trade with South America and China,” Proceedings

of the American Academy of Political Science, Vol. 6, 19151916, p. 164. See also Oscar R. Hobson, The Function of Foreign Lending, International Chamber of Commerce, 1937, pp. 15-18. 10. See Report of the 5th National Foreign Trade Convention, 1918, p. 505. 11. A. Kains in Report of the 10th National Foreign Trade Con¬

vention, 1923, p. 123. “In Russia . . . when her trade revives, as a result of settled conditions which must come about at the close of the war, there will undoubtedly be an influx of

319

NOTES TO PAGES 175-179

young men into the Russian markets representing all of the big industrial countries; and America will have to provide her commercial army in order to hold her own.” George E. Smith, Report of the 5th National Foreign Trade Conven¬

tion, 1918, p. 482. To the same effect, Alfred O. Corbin remarked: “Russia to the United States of America has always been the country of unlimited possibilities. American capital, brains and fore¬ sight, breadth of vision and creative genius, American busi¬ ness methods adapted to Russian conditions and American organization can work miracles in that undeveloped and wonderful country, so immensely rich in productive foices, so boundless in extent, so amply supplied with brains and healthy and ever-increasing labor.” Ibid., p. 173. 12. “Report of the American Economic Mission to the Far East,”

American Trade Prospects to the Far East, National Foreign Trade Council, New York, 1935, p. 59. 13. Report of the 1st National Foreign Trade Convention, 1914, p. 346. 14. Report of the 10th National Foreign

Trade Convention,

1923, p. 265. 15. M. A. Oudin in Report of the 5th National Foreign Trade

Convention, 1918, p. 356. 16. Benjamin

H. Williams, Economic Foreign Policy

of the

United States, New York, 1929, pp. 308ff. 17. James Carson in Report of the 4th National Foreign Trade

Convention, 1917, p. 486. 18. Report of

the 5th National Foreign Trade Convention,

1918, p. 523. 19. The Rise and Expansion of the British Dominion in India, London, 1911, pp. 2-3. 20. Gilchrist Huntington, “Trusteeship and the Colonial Sys¬ tem,” Proceedings of the Academy of Political Science, Vol. 22, 1946-1948, p. 217.

NOTES TO PAGES 179-191

320

21. U. S. Office of Naval Intelligence, The United States Navy

as an Industrial Asset, Washington, 1924, p. 5. 22. For

a reproduction of Guatemala’s

note

to

the

United

Nations, see The New York Times, June 20, 1954. 23. “The blight which has fallen upon Japan and China,” said A. W. Robertson, Chairman of the Board of Directors of Western

Electric

Corporation,

“has

practically

destroyed

foreign trade in the Far East. On the other hand, trade is increasing with South Africa which is a part of the earth as yet little marred by war. As its natural resources are de¬ veloped, its foreign trade will increase.” Report of the 35th

National Foreign Trade Convention, 1948, p. 269. 24. America’s Stake in International Investments, pp. 507-508; see also by the same author. The United States and Foreign

Investment Problems, Washington, D. C., 1948. 25. U. S. Office of Naval Intelligence, The United States Navy

as an Industrial Asset, 1924, p. 6. 26. Address before the Associated Press, April 25, 1955. 27. League of Nations, Industrialization and Foreign

Trade,

p. 62.

CHAPTER 12 1. J. W. Thompson, Economic and Social History of the Middle Ages, pp. 792-793. 2. Cf. G. D. H. Cole and R. Postgate, The Common People, London, 1946, p. 686 for a discussion of the emergence of a “political mind” among British workers. 3. See Karl Marx and Frederick Engels, Selected Correspondence, (Letter to Bebel, August 30, 1883), p. 420; and to the same effect, F. Engels, The Condition of the Working Class in

England, London, 1949, pp. 246-247. 4. The

Growth

of English Society, London,

1949,

p.

357.

“Capitalist expansion,” says Fritz Sternberg in a similar ob-

321

NOTES TO PAGES 191-193

servation, “which led to a tremendous extension of markets abroad, was one of the main factors which created a situation in which the increasing productivity of labour was accom¬ panied by rising profits and rising wages. Wages rose not merely for a few years, or even for a few decades, but for whole generations, and this was true not only of England, but of all big industrial countries.” Capitalism and Socialism on

Trial, New York, 1952, p. 68. Cf. Cole and Postgate, The Common People, pp. 500 and 648. 5. Political Economy and Capitalism, London, 1937, p. 233. 6. Ibid., pp. 247-248. 7. “The most typically capitalist figure in the world,” Professor Julius H. Boeke observes, “is the man who plays an economic role as a foreigner in a tropical environment. He has broken with the many traditional ties that more or less held him in check in his home surroundings; his thirst for money-making finds expression, unmixed and unimpeded; he can devote himself completely to the achievement of his economic ob¬ ject, concentrate his whole attention upon it. This applies particularly to men who, having come out to the East at the productive age, leave that country when their productive period is over.” Economics and Economic Policy of Dual

Societies, New York, 1953, p. 79. 8. Speech: "Want of Employment and the Development of Free Markets” (Birmingham, January 22, 1894) in Foreign and

Colonial Speeches, London, 1897, p. 133. 9. Ferdinand Schevill, History of Florence, New York, 1936, p. 348. 10. R.

H.

Tawney observes another aspect of this attitude:

“[The workers]

denounce,

and rightly,

the

injustices

of

capitalism; but they do not always realize that capitalism is maintained, not only by capitalists, but by those who, like many of themselves, would be capitalists if they could, and that the injustices survive, not so much because the rich exploit the poor, as because the poor, in their hearts, ad¬ mire

the rich. They know and

complain

that

they

are

NOTES TO PAGES 193-194

322

tyrannized over by the power of money. But they do not yet see that what makes money the tyrant of society is largely their own reverence for it, and that, if they were as deter¬ mined to maintain their dignity as they are, quite rightly, to maintain their wages, they would produce a world in which their material miseries would become less unmanageable, since they would no longer be under a kind of nervous tutelage on the part of the minority, and the determination of their economic destinies would rest in their own hands.”

Equality, New York, 1931, pp. 25-26. 11. Report

of the 3rd National Foreign

Trade Convention,

1916, p. 32. The following figures by the same author may call for refinement, but they show the satisfaction of busi¬ nessmen with the participation of workers in the income of foreign trade: “Probably 80 percent of the value of two and one-half billion dollars of annual exports represents labor at some stage of their production, from the origin in the soil or farm, or in the mines, and all the subsequent processes of manufacture and preparation and finishing, up to shipment. In the final analysis, the bulk of the cost of all manufactures or production is the labor. The wages, which are paid in the production and distribution of the two and one-half billion dollars of exports, amount to approximately two billion dollars annually, and it may, therefore, be reason¬ ably assumed that this involves the employment of two mil¬ lion men in the manufacture or production of exports. There is, therefore, engaged, directly or indirectly, in the produc¬ tion or manufacture of material ultimately destined for the foreign trade, about one out of every ten men in this coun¬ try.” Report of the 1st National Foreign Trade Convention, 1914, p. 35. 12. P. H. W. Ross, President of the National Marine League, in Report of the 1st National Foreign Trade Convention, 1914, p. 140. 13. This fact disturbed F. Engels, who expected the English worker to be consistently revolutionary: “The English labour movement,” he wrote to Bernstein on June 17, 1879, “has been revolving [now and] for a series of years in a narrow

NOTES TO PAGES 194-198

323

vicious circle o£ strikes for wages and shorter working hours, and this not merely as an expedient and a means of prop¬ aganda and organization, but as an end in itself.” Marx and Engels, Selected Correspondence, New York, 1942, p. 420. 14. J. A. Hobson, Imperialism, p. xxii. 15. “The twentieth century,” says Professor Dobb, “was destined to witness a new historical phenomenon in the shape of national-democratic revolts in the province of Empire, to join with the proletarian revolt at the metropolis of which Marx had spoken, to shake the pillars of Capital’s rule. In this new epoch it might well happen that the centre of gravity even would be shifted, and the former, lather than the latter, set the pace of events.” Political Economy and

Capitalism, p. 249. 16. We are not unmindful of the sincerity of radical groups with histories as old as the Diggers and Babeuvists. But neither in France, Holland, Britain, nor the United States has the class struggle, even after the Second World War, developed the force of a progressive mass movement. The stirrings among the workers in the West in the 1840’s, which frightened the rising bourgeoisie and provided the theme for the work of Karl Marx, soon lost their revolutionary char¬ acter—perhaps, in the Marxian sense, never to be regained. 17. “Trade Agreements and Labor,” Proceedings of the Academy

of Political Science, Vol. 19, 1940-1942, p. 30. 18. In a letter from Marx to Engels (October 8, 1858), an im¬ portant deterrent to proletarian revolution in Europe was recognized. “The particular task of bourgeois society is the establishment of the world market, at least in outline, and of production based upon the world market. . . . The diffi¬ cult question for us is this: on the continent the revolution is imminent and will also immediately assume a socialist character. Is it not bound to be crushed in this little corner, considering that in a far greater territory the movement of bourgeois society is still on the ascendent?

respondence, pp. 117-118.

Selected Cor¬

NOTES TO PAGES 201-204

324

CHAPTER 13 1. For a discussion of theories of “recurring business depres¬ sions,’’ see Harold G. Moulton, Controlling Factors in Eco¬

nomic Development, Washington, D.C., 1949, pp. 39-96. 2. There is no generally accepted authority for deciding how much of a decline from “prosperity” constitutes a depression. Since we are not here concerned with a history of business cycles, we shall refer only to those periods involving wide¬ spread business collapse as depressions. 3. R. H. Tawney, Introduction to Thomas Wilson, A Discourse

Upon Usury, New York, 1925, p. 49. 4. Cf. United Nations, Instability in Export Markets of Under-

Developed Countries, New York, 1952, pp. 3ff. 5. On this point. Sir Walter T. Lyton remarked: “The United States plays so great a role in the commodity markets of the world that an upward movement here should help more than anything else to start the ball rolling. . . .We feel in Great Britain, for example, that whatever steps we might have taken to urge or stimulate a movement in Great Britain, could easily be neutralized, would almost certainly be neutralized, by anything like a contrary or adverse movement in this country.” “International Cooperation and Economic Crisis,”

Proceedings of the Academy of Political Science, Vol. 15 (1932-1934), p. 353. 6. History of the People of the Netherlands, Volume 3, London, 1898, pp. 267-268. 7. L. S. Smith of the American Laundry Machinery Company in

Report of the 3rd National Foreign Trade Convention, p. 272. Alba

B. Johnson,

President

of

the

Baldwin

Locomotive

Works, made a similar observation as follows: “Our industries are now overcrowded with war orders, our crops and foods are being shipped as fast as vessels can be found to carry them, new plants

of vast capacity have

been

constructed

and

equipped with machinery, there is a shortage of skilled labor.

325

NOTES TO PAGES 204-205

and our banks are overflowing with idle money. So long as the war continues, we shall enjoy a large degree of prosperity. Beginning with those lines of business which relate closely to the war, it affects secondarily other lines not so related, until the revivifying influence of war orders has infused pros¬ perity throughout perhaps 95 percent of all lines of business.”

Report of the 3rd National Foreign Trade Convention, 1916, p. 9. 8. Selections from the Economic History of the United States, Boston, 1909, p. 239. Referring to the early woolen textile trade of England, Sir William Ashley observes: “As soon as a foreign cloth trade had been created, it began to suffer from grave periodical depression and lack of employment— due usually to a temporary loss of the foreign market owing to various causes, political or economic.”

The Economic

Organization of England, London, 1949, p. 115. 9. The Dutch mercantilists were quite realistic in their views on the relationship of population growth to the availability of capitalist opportunities. They wrote, perhaps a little too anxiously, about their own prospects of a declining popula¬ tion as follows: “The dismal consequences which would at¬ tend a further decline in trade are the more to be apprehended in a country constituted like ours where the decay of it must needs occasion a sudden and immediate wreck of the whole structure. . . . For, if we consider that the major pait and principal inhabitants of this republic consist of merchants, artisans, mechanics, fishermen, owners of shipping, and such whose whole dependence doth arise from thence, it inevitably follows that when the general ruin of a country happens, these men can easily remove their goods, ships, arts, and handicrafts to other places and there occupy the same profes¬ sions. The principal . . . knot that binds . . . these inhabitants to this country ... is interest and the means to get a good subsistence and an affluent fortune, which here they have in more abundance than anywhere besides. These ties once loos¬ ened . . . there will be no remedy left for the retaining them in this republic, but they will be forced to quit it and to settle in . . . other countries, where . . . they will not fail of

NOTES TO PAGES 205-208

326

meeting with all suitable encouragement.” Proposals Made

by His Late Highness . . . for Redressing and Amending the Trade of the Republick, London, 1751, pp. 50-51. Referring to an earlier shift of commerce, William Cun¬ ningham observes: “Augsburg, formerly situated on one of the great routes of the world’s trade, found that the stream of commerce had been diverted: its merchants recognized the trend of affairs, and began to establish themselves in the Low Countries. They could gather the threads of old connexions there.” “Economic Change” in Cambridge Modern History, Vol. I, p. 507. 10. The Philosophy of Manufactures, London, 1861, p. V. To the same effect see Levy-Bruhl, “Les Causes Economiques et Politiques de la Conflagration Europeenne,” Scientia, Vol. XVII, 1915, p. 46. 11. Germany’s Commercial Grip on the World, New York, 1917, pp. 59-60. 12. On early “stock market” speculation, Richard Ehrenberg observes: “From 1552 onwards a real madness or ‘mania’ for the Bourse Loans of Antwerp and Lyons seized on the masses all over Europe, and the last vestiges of the science which should be at hand in all speculations was discarded, and a fever for profiteering rushed like a runner gone mad through the richest domains of all the old painfully gathered capital to meet the inevitable crisis.” Capital and Finance in the

Age of Renaissance, London, 1928, p. 328. 13. Proposals Made by His Late Highness . . . for Redressing

and Amending the Trade of the Republick, p. 51. 14. Adam Smith intimates the process by which lesser European countries might participate in the imperialist spoils of the leader nations. “Some part of the produce of America,” he writes, “is consumed in Hungary and Poland, and there is some demand there for the sugar, chocolate, and tobacco of that new quarter of the world. But those commodities must be purchased with something which is either the produce of the industry of Hungary and Poland, or with something

327

NOTES TO PAGE 208

which had been purchased with some part of that produce. Those commodities of America are new values, new equiva¬ lents, introduced into Hungary and Poland, to be exchanged there for the surplus produce of those countries. By being carried thither they create a new and more extensive market for that surplus produce. They raise its value, and thereby contribute to encourage its increase. Though no part of it may ever be carried to America, it may be carried to other countries which purchase it with a part of their share of the surplus produce of America; and it may find a maxket by means of the circulation of that trade which was originally put into motion by the surplus produce of America. “These great events may even have contributed to increase the enjoyments and to augment the industry of countiies which not only never sent any commodities to America, but never received any from it. Even such countiies may have received a greater abundance of other commodities from countries of which the surplus produce had been augmented by means of the American trade. This greater abundance, as it must necessarily have increased their enjoyments, so it must likewise have augmented their industry.”

Wealth of

Nations, Vol. II, p. 172. In a modernized version of this, Fritz Sternberg observes: “There was a big increase in inter-European trade precisely because this was a period of such tremendous expansion. For instance, in this period Great Britain enjoyed a glowing revenue from her so-called invisible exports, and in particular from her investments all over the world. As a result of these tremendous revenues. Great Britain was in a position to finance increasing import surpluses, and to a very large extent these import surpluses came from Europe. Thus those Euro¬ pean countries which had no colonial empires, and which were therefore not directly imperialist powers, also enjoyed a share in the favourable economic effects of imperialist ex¬ pansion, because it was the latter in particular which allowed Great Britain to finance such a big import surplus from Europe in this period. To argue, therefore, as some people do, that imperialist expansion was not decisive for European

NOTES TO PAGE 208

328

development as a whole because many European countries had either no colonial empires, or only negligible ones, misses the cardinal point of the whole situation.” Capitalism and

Socialism on Trial, p. 69. 15. Report of the 9th National Foreign Trade Convention, 1922, p. 60. In 1936, the banker, Lewis E. Pierson, pointed out that the capitalist system even in apparent prosperity had not returned to “normal.” “The recovery in business,” he said, “which has come to most of the great trading nations, including the United States, has brought a welcome relief from the distress and suffering experienced when business was declining, prices were in a state of collapse, and unem¬ ployment was increasing. Yet in order to view our business and economic problems realistically, it is necessary to recog¬ nize that the recovery throughout the world has come through means which are not altogether satisfactory. In some coun¬ tries increasing business activity has been forced by public works expansion. In others, activity in connection with re¬ armament has been primarily responsible for the improved volume of business and there are but few countries in which there has been a natural recovery free from artificial stimula¬ tion by governments.” Report of the 23rd National Foreign

Trade Convention, 1937, pp. 13-14. To the same effect. Pro¬ fessor Seymour E. Harris, in 1948, observed: “The govern¬ ment has greatly contributed to the inflation which must inevitably end in collapse. Only continued large military budgets and the ERP can save the country from a collapse. Oddly enough, the USSR, basing itself on Marxian theory, is convinced of an impending collapse in the United States; but by adopting aggressive tactics and thus stimulating United States military expenditures and assuring the ERP, the USSR puts off the day of the inevitable crisis. Once the source of excess demand associated with war or preparation for war dries up, the alternatives seem to be either a major depression, or continued prosperity made possible by spending for mili¬ tary purposes inclusive of ERP.” “Issues of Policy” in Foreign

Economic Policy for the United States, S. E. Harris, ed., Cam¬ bridge, 1948, p. 7.

329

NOTES TO PAGES 209-214

16. “Tariffs and Trade Barriers in Relation to International Trade,” Proceedings of the Academy of Political Science, Vol. 15, 1932-1984, p. 227. 17. “International Trade with Planned Economies,” Proceedings

of the Academy of Political Science, Vol. 22, 1946-1948, p. 300.

CHAPTER 14 1. In support of certain students who contest the assumptions of orthodox economics, J.

M.

Keynes

properly remarks:

“[They] have preferred to see the truth obscurely and imper¬ fectly rather than to maintain error, reached indeed with clearness and consistency and by easy logic, but on hypotheses inappropriate to the facts.” The General Theory, New York, 1936, p. 371. 2. An Essay on Marxian Economics, London, 1942, p. 27. For actual discussion see Science and Society, Vol. 18, No. 2, pp. 141-151. See also for an incisive critique: Joan Robinson, “Marxism: Religion and Science,” Monthly Review, Dec., 1962, pp. 423-435. 3. Joan Robinson, “The Labor Theory of Value,

Science and

Society, Vol. 18, No. 2, Spring, 1954, pp. 158-159. 4. Ibid., p. 187. 5. Capital, Vol. I, pp. 784 and 823. The following is a further indication of Marx’s orientation: “In proportion as the ex¬ ploitation of one individual by another is put an end to, the exploitation of one nation by another will also be put an end to. In proportion as the antagonism between classes within the nation vanishes, the hostility of one nation to another will come to an end.” Communist Manifesto, Charles H. Kerr and Company, Chicago, 1902, pp. 38-39. 6. Cf. Rosa Luxemburg, The Accumulation of Capital, trans. by A.

Schwarzschild, New Haven, 1951, pp. 364-365.

7. Capital, Vol. I, p. 13; see also p. 32.

NOTES TO PAGE 214

330

8. Ibid., p. 712. On this point F. Sternberg observes: “Despite all the qualifications made in later formulations, Marx never freed himself from the tendency to generalize on the basis of capitalist development in England in the second quarter of the nineteenth century and to draw fundamental conclusions from the course of development in that particular period to the future development not only of English but of world capitalism.” Capitalism and Socialism on Trial, New York, 1952, p. 56. 9. This question about a closed economy is basic. A distin¬ guished and esteemed student. Dr. Paul M. Sweezy, has taken an explicit position on it. It is only by assuming a closed economy and the adoption thereby of some form of Say’s law that mathematical deduction can be significantly employed in explaining capitalist behavior. In setting up one of his analytical models, therefore, Sweezy says: “We may consider a closed and completely capitalist system.” If the very core of capitalism is, by this assumption, thus disregarded, the necessarily circular mathematical reasoning can have interest only as a play of economic logic. In fairness to the author, his argument should be stated: “There never has been and never will be a closed capitalist system such as we have been assuming in the greater part of the foregoing analysis. This does not mean that we are not justified in making the as¬ sumption of a closed system, nor does it mean that the laws and tendencies of capitalism which have been discovered on the basis of this assumption are non-existent. What it does mean is that we have been abstracting from certain aspects of reality in order the more clearly to identify and analyse others.” The Theory of Capitalist Development, New York, 1942, pp. 222 and 287. Acceptance of this thesis, to repeat, is by no means a matter of indifference. It is not so much that there has “never been” a closed capitalist economy as that there can¬ not be one. To assume its existence, in our opinion, is to dispose of an indispensable attribute of capitalism, and thus to release the logic of the theory from the controls of reality. The reasoning could thus wander at pleasure, with perhaps

NOTES TO PAGES 214-216

331

only the fictitious limitations of the deductive system em¬ ployed. This, I think, has been one of the cardinal errors of model-making. It appears to be responsible for the de¬ generation of economic theory into a variety of non-societal, logical games played with freely abstracted economic con¬ cepts. In making many other useful contributions to our understanding of capitalist dynamics, Dr. Sweezy, like Marx, does not apply, but rather abandons, his classical approach. Cf. Sidney Schoeffler, The Failures of Economics, Cambridge, Mass., 1955, pp. 51-54. For a discussion of this subject as it relates particularly to the theory of Karl Marx, see E. M. Winslow, The Pattern of Imperialism, New York, 1948, p. 146 et passim. 10. Alvin H. Hansen, “The Technological Interpretation of History,” Quarterly Journal of Economics, Vol. 36, 1921-1922, pp. 72-83. 11. Karl Marx, Capital, Vol. I., p. 462. Cf. Henri See, Modern Capitalism, New York, 1928, p. 127. 12. The Theory of Capitalist Development, p. 56. 13. As Albion W. Small points out: “Labor and capital were purely economic categories, and could be treated as abstrac¬ tions, whether on the debit or credit side of the leckoning, without provoking class prejudice. Precisely the opposite was the case when Marx wrote, and this was at all events an im¬ portant factor in deciding that in Marx s hands a labor theory of value became directly a class issue instead of a mere technical distinction.” Adam Smith and Modern So¬ ciology, Chicago, 1917, p. 100. 14. Capital, Vol. I., p. 558. 15. Ibid., pp. 618 and 624. 16. The Accumulation of Capital, pp. 354-355. (Italics in original.) In Marxian economics “Department I” is concerned with the manufacture of producers’ or capital goods and “Department II” with that of “consumers’ goods.” Luxemburg’s view may be emphasized by putting it in

NOTES TO PAGES 216-218

S32

juxtaposition to a relevant Marxian model: “Let us suppose that the whole society is composed only of industrial capitalists and wage workers. ... In that case, a crisis would be ex¬ plained only by a disproportion of production in various branches, and by a disproportion of the consumption of the capitalists and the accumulation of their capitals. But as matters stand, the reproduction of the capitals invested in production depends largely upon the consuming power of the non-producing classes; while the consuming power of the laborers is handicapped partly by the laws of wages, partly by the fact that it can be exerted only so long as the laborers can be employed at a profit for the capitalist class. The last cause of all real crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces in such a way, that only the absolute power of consumption of the entire society would be their limit.” Capital, Vol. Ill, p. 568. (Italics added.) For a statement on the Marxian theory of crisis, see Joan Robinson, An Essay on Marxian Economics, London, 1942, pp. 4ff. 17. The Accumulation of Capital, p. 365. For those who relish a debate, there is very much in the writings of Marx to show that he was conscious of international

impingements

of

capitalism. His comprehensive outline for the study of the capitalist system given in A Contribution to the Critique of Political Economy, New York, 1904, p. 305, indicates that he was aware of the importance of colonial exploitation. But Marx, in spite of the phenomenal range of his thinking, was not an encyclopedist. He developed a system of economics mainly in opposition to, but still relying upon, the formula¬ tions of the great classical writers of his day. And, in his hands, that system struggled for coherence and consistency. 18. The Accumulation of Capital, pp. 351-352 and 356-358. 19. Political Economy

and Capitalism, pp.

245-246.

See also

Lenin, Imperialism: The Last Stage of Capitalism; Anna Rochester, Rulers of America, p. 31; Paul M. Sweezy, “A Marxist View of Imperialism,” Monthly Review, Vol. IV,

333

NOTES TO PAGES 218-219

March, 1953, pp. 414-424, and his “Three Works on Imperial¬ ism,” The Journal of Economic History, Spring, 1953, pp. 194-201. 20. “If we are speaking of capitalism,” says Professor Dobb, “as a specific mode of production, then it follows that we cannot date the dawn of this system from the first signs of the ap¬ pearance of large-scale trading and of a merchant class, and we cannot speak of a special period of ‘merchant capitalism,’ as many have done. We must look for the opening of the capitalist period only when changes in the mode of production occur, in the sense of a direct subordination of the producer to a capitalist. . . . One can say . . . that a capitalist mode of production . . . did not attain to any decisive significance . . . until the closing decades of the Tudor era.” Studies in the

Development of Capitalism, pp.

17-18.

Compare

Tawney’s critique: “A History of Capitalism,

R.

H.

The Economic

History Review, Vol. II, No. 3, 1950, pp. 307-316. 21. Joseph A Schumpeter, Business Cycles, p. 10. 22. To illustrate, both Marx and Schumpeter agree that capital¬ ism will pass away, but for different reasons. In Schumpeter’s own words: “All [Marx’s] arguments, but in particular the one that asserts that labor will be goaded into revolution by steadily increasing misery, can be proved to be untenable. But this does not dispose of the answer itself, because it is possible to arrive at a correct result by faulty methods. The case for the affirmative answer is in fact strong. We observe that, as the capitalist epoch wears on, the individual leadership of the entrepreneur tends to lose in importance and to be increas¬ ingly replaced by the mechanized teamwork of specialized employees within large corporations; that the institutions and traditions that sheltered the structure of capitalism tend to wear away; that the capitalist process by its very success tends to raise the economic and political position of groups that are hostile to it; and the capitalist stratum itself, mainly owing to the decay of the bonds of family life that in turn may be traced to the ‘rationalizing’ influence of the capitalist process, tends to lose some of the grip and part of the scheme

NOTES TO PAGES 219-221

334

of motivation which it formerly had. “Capitalism,” Encyclo¬

pedia Britannica, 1946, reprinted in Joseph A. Schumpeter, Essays, Cambridge, Mass., 1951, pp. 202-203. It should be noted that neither of these explanations suffices for an in¬ terpretation of changes in the backward areas of the system: Russia, China, India, Africa, South America. 23. Richard V. Clemence and Francis S. Doody, The Schumpe¬

terian System, Cambridge, Mass., 1950, p. 35. 24. “Because being an entrepreneur is not a profession and as a rule not a lasting condition, entrepreneurs do not form a social class in the technical sense, as, for example, landowners or capitalists or workmen do.” J. A. Schumpeter, The Theory of Economic Development, Cambridge, Mass., 1934, p. 78. Cf. Horace B. Davis, “Schumpeter as Sociologist,” Science and Society, Winter 1960, pp. 26ff. 25. The Theory of Economic Development, p. 5. 26. Ibid., p. 63. 27. Ibid., pp. 64-65. 28. Business Cycles, New York, 1939, p. 229. 29. The Theory of Economic Development, p. 243. The author recognizes the reciprocal effects of governmental organization and

capitalist

development:

“Economic

success

produced

political power, political power produced policies congenial to the capitalist process, and later in turn responded to these policies by further success.” Essays, p. 189. But his analysis does not emphasize the importance of this relationship. 30. Ibid., p. 96. 31. “By changes in the methods of supplying the commodities we mean a range of events much broader than the phrase covers in its literal acceptance. We include the introduction of new commodities which may even serve as the standard case. Tech¬ nological change in the production of commodities already in use, the opening up of new markets or of new sources of sup¬ ply, Taylorization of work, improved handling of material.

NOTES TO PAGES 221-223

335

the setting up of new business organizations such as depart¬ ment stores—in short, any ‘doing things differently’ in the realm of economic life—all these are instances of what we shall refer to by the term Innovation.” Business Cycles, p. 84. See also The Theory of Economic Development, p. 66. 32. “Of the powerful houses,” says Henri Pirenne, “which are established on all hands and which give the impetus to the modern industries of metallurgy, of the spinning and weaving of wool, linen, and cotton, hardly one is connected with the establishments existing before the end of the eighteenth cen¬ tury. Once again, it is new men, enterprising spirits, and sturdy characters which profit by the circumstances.” “The Stages in the Social History of Capitalism,” The American Historical Review, Vol. XIX, April, 1914, p. 514. 33. For his study of inventions, see Business Cycles, p. 85. 34. Ibid., p. 87. 35. Business Cycles, p. 102. 36. The Theory of Economic Development, p. 93. 37. Business Cycles, p. 223. 38. Cf. The Theory of Economic Development, p. 87. 39. Business Cycles, p. 86. 40. Ibid., pp. 105-106. 41. The Theory of Economic Development, p. 65. 42. Business Cycles, p. 73. 43. Business Cycles, p. 241. 44. Investment and Business Cycles, p. 333. 45. The Schumpeterian System, p. 47. 46. “Professor Schumpeter’s Theory of Innovation,” The Review of Economic Statistics, Vol. XXV, 1943, p. 94. 47. Business Cycles, p. 223.

NOTES TO PAGES 223-231

336

48. Cf. Ibid,., pp. 224 and 230, where capitalism becomes identified historically with the origin of “credit creation.” 49. The End of Laissez-Faire, pp. 34-35. 50. The General Theory of Employment, Interest and Money, New York, 1936, p. 339. (Italics in text.) 51. Frank H. Knight,

The Ethics of Competition and Other

Essays, London, 1935, p. 277. 52. National System of Political Economy, trans. by G. A. Matile, Philadelphia, 1856, p. 62. 53. The General Theory, p. 339. 54. Ibid., pp. 4, 184 and 340. 55. Economic Research and the Keynesian Thinking of Our Time, New York, 1946, p. 4. 56. The End of Laissez-Faire, p. 53. 57. The General Theory, p. 381. 58. The General Theory, p. 380. 59. Ibid., pp. 382-383. 60. The End of Laissez-Faire, p. 35. 61. The General Theory, p. 387. 62. Ibid., p. 335. 63. Cf. Harold G. Moulton, Controlling Factors in Economic Development, pp. 131ff., for a criticism of Keynes’ rate-ofinterest theory. 64. The General Theory, p. 337. See also “The General Theory” (Quarterly Journal of Economics, 1937) reprinted in S. E. Harris, The New Economics, New York, p. 187. 65. Business Cycles and National Income, New York, 1951, pp. 594-595. 66. Business Cycles and National Income, p. 595. 67. Business Cycles, p. 599.

NOTES TO PAGES 231-232

337

68. Ibid., p. 596. 69. Cf. David McCord Wright, “The Prospects for Capitalism” in A Survey of Contemporary Economics, H. S. Ellis, ed., Philadelphia, 1948, p. 459. 70. Keynes agrees with Hobson “that in the normal state of modern industrial communities, consumption limits produc¬ tion and not production consumption.” This is the first ex¬ plicit statement of the fact that capital is brought into existence not by the propensity to save but in response to the demand resulting from actual and prospective consumption. The General Theory, p. 368. 71. However, habits of consumption may be changed by a redis¬ tribution of wealth, in which case the rate of investment will be directly affected. Keynes thus concludes “that measures for the redistribution of incomes in a way likely to raise the pro¬ pensity to consume may prove positively favorable to the growth of capital. . . . Our argument leads toward the con¬ clusion that in contemporary conditions the growth of wealth, so far from being dependent on the abstinence of the rich, as is commonly supposed, is more likely to be impeded by it. One of the chief social justifications of great inequality of wealth is, therefore, removed.” Ibid.., p. 373. On this point Mrs. Robinson observes: “Mr. Keynes justifies Marx’s intuition that the chronic conflict between productive and consumptive power is the root cause of crises. The mal¬ distribution of income restricts consumption, and so increases the rate of investment required to maintain prosperity, while at the same time it narrows the field of profitable investment, by restricting the demand for the consumption goods which capital can produce. . . . Mr. Keynes’ theory gives strong sup¬ port to Marx’s contention that ‘the real barrier of capitalist production is capital itself.’ ” An Essay on Marxian Econom¬ ics, pp. 85-86. 72. The author’s well-known statement of his theory may be repeated here: “When employment increases, aggregate real income is increased. The psychology of the community is such that when aggregate real income is increased aggregate con-

NOTES TO PAGES 232-235

338

sumption is increased, but not by so much as income. Hence employers would take a loss if the whole of the increased employment were to be devoted to satisfying the increased demand for immediate consumption. Thus, to justify any given amount of employment there must be an amount of current investment sufficient to absorb the excess of total output over what the community chooses to consume when employment is at a given level. For unless there is this amount of investment, the receipts of the entrepreneurs will be less than is required to induce them to offer the given amount of employment. It follows, therefore, that, given what we shall call the community’s propensity to consume, the equilibrium level of employment, i.e., the level at which there is no in¬ ducement to employers as a whole either to expand or to con¬ tract employment, will depend on the amount of current investment. The amount of current investment will depend, in turn, on what we shall call the inducement to invest; and the inducement to invest will be found to depend on the rela¬ tion betwen the schedule of the marginal efficiency of capital and the complex of rates of interest on loans of various ma¬ turities and risks.” The General Theory, pp. 27-28. 73. Full Recovery or Stagnation, New York, 1938, pp. 28-29. 74. Full Recovery or Stagnation, p. 18. 75. Keynes puts this in the form of a fundamental psychological

AC . law:

is positive and less than unity, where C = amount

consumed and Y = income. The General Theory, p. 96. 76. Ibid., p. 97. 77. Ibid., p. 106. 78. Cf. Harold G. Moulton, Controlling Factors in Economic Development, p. 378, note 30. 79. Among these are: Edwin G. Nourse et ah, America’s Capacity to Produce; Maurice Leven et ah, America’s Capacity to Con¬ sume; H. G. Moulton, The Formation of Capital; and H. G. Moulton, Income and Economic Progress.

NOTES TO PAGES 236-244

339

80. Controlling Factors in Economic Development, Washington, 1949, p. 120. Compare Alan R. Sweezy’s view: “The basic remedy for a potential excess of capital is an increase in consumption,” and his method of solution, “The Govern¬ ment’s Responsibility for Full Employment,” American Eco¬

nomic Review, Supplement, Vol. XXXIII, March, 1943, pp. 19-26. 81. Moulton’s criticism of Keynes at this point seems not well founded, since Keynes said that “propensity to consume” may be changed by changing the pattern of income distribution. 82. Controlling Factors, p. 133. 83. Ibid., p. 134. Italics in text. 84. Ibid., p. 119. 85. Ibid., p. 120. 86. Ibid., p. 120.

CHAPTER 15 1. Kwame Nkrumah, “Africa’s Liberation and Unity,” an address before the Nationalist Conference of African Freedom Fighters, June 4, 1962, reprinted in Freedom Ways, Fall, 1962, pp. 420421.

'

>

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Yarranton, Andrew, England’s Improvement by the Sea and Land to Out-do the Dutch without Fighting, etc., 2 vols., London, 1677. Young, C. G., “Remarks on Trade and Investments,” Report of the Third National Foreign Trade Convention, New York, 1916, pp. 47-51. Yamey, B. S., “Scientific Bookkeeping and the Rise of Capitalism,” The Economic History Review, Vol. I, Nos. 2 & 3, London, 1949, pp. 99-113.

Index accumulation, of capital, 26; in Marxian economics, 214-217; purported relation to Protestantism, 57 Africa, as area of capitalist exploitation, 6, 138, 142, 147, 149, 172-173, 175, 244-245, 308; disunity, as factor militating against socialist planning, 242-245; head-and-hut tax, 154; nationalism, 180-181, 243-245; partition of, 140, 172; Portuguese conquests, relation to re¬ ligion, 140, 172; slave trade, 122 agressiveness, as core of capitalist ethos, 30 Alberti, Leon B., 31 Alexander III (pope), 91 Alexander, James S., quoted, 208, 297 Alter, Robert S., quoted, 296 America. See Latin America, United States “American illusion,” on self-sufficiency vs. international commerce, 121-130 American Revolution, mercantilist or¬ igins, 122; its role in history of imperi¬ alism, 141 Amsterdam, nationalism, 27 Anderson, Adam, quoted, 269, 275 Angell, J. W., quoted, 222 Angola, as extreme example of imperial¬ ist exploitation, 146-147 annexation, in capitalist imperialism, 136-137, 147 Argentina, former “progressive” position within capitalist system, 5 “aristocracy,” within working class, 197198 Asia, as area of imperialist exploitation, 147. See also China, East India Com¬ pany, India, etc. automobiles, U.S., export of, 135; as key industry, 129 backward areas and peoples, as center of revolutionary movements, 198; changes within, effect on capitalist system, xii; class elements, opposing imperialist exploitation, 192; depression within, its external influence, 203; economic pol¬ icies, potential menace to capitalist system, 208-209; exploitation of, 64, 102103, 136-156, its central role in inter¬ national commerce, 109, as determined by monopolist agreements, 72, signifi¬ cance underestimated by Keynes, 227, varying degrees of, 148; as field of foreign investment, 165; as functional core of capitalist dynamics, xiii, 89, 136156, 217; Hansen’s analysis of their dependence on exports, 229-230; the imperialist interest in maintaining their backwardness, 148-150; as im¬ porters of capital, 167; their incorpora¬ tion into capitalist system, ix, 143-145; their increasing resistance to capitalist imperialist exploitation, xiii, 143, 147148, 15S, 171, 177-182, 190-191; in Keynes’

system, 230; labor, methods of coercion, 154-157; their lack of aggressive com¬ mercial behavior, 133-135; their lack of independent rights under capitalism, 142-145; as market, 6-8, 174; meaning of term “backward people,” 148-150; nationalism, 28, 178-182, 196; nature of their dependency on capitalist leader nations, 110-111, 115-116, 126-127; their passivity within capitalist power struc¬ ture, 6, 27-2S, 119; profits from, 112-113; their prospects under capitalism, stag¬ nation and oppression, 182-183, 239-244; practical problems in attempting socialist solution, 241; raw materials, 110-111, 119, 126-127, 166, 172; the real proletariat of the capitalist system, 195-196; unemployment, 194; unready for revolution under expanding capital¬ ism, 189; the Venezuelan example, 133135; their withdrawal menaces the en¬ tire system, 240 Bank of England, 10 banking, early development, 16, in Florence and Augsburg, 93-94, 202 Barbon, Nicholas, quoted, 84 Baxter, Rev. Richard, quoted, 61, 264, 268, referred to, 55, at variance with capital¬ ist practice, 61 Baynes, Norman H., quoted, 90, 282-2S3 Beach, Moses, on wealth as U.S. stand¬ ard, 37 Beale, Frank, Jr., quoted, 261 Beard, Miriam, on Dutch capitalist morality and profits, 65; quoted, 285 Belgium, export position, 121; imperialist exploitation of Congo, 146, 149-150, 154156; “middle class” dependent on impe¬ rialism, 192 Berle, Adolf A., on corporations, 14 Bigi, Guido, on Florentine and modern capitalist morality, 81 Bismarck, Otto von, quoted, 317 Blok, Petrus J., quoted, 204 Boeke, Julius H., quoted, 321 Bohm-Bawerk, Eugen, on production and consumption, 289 bookkeeping, double-entry, its signifi¬ cance, 15 Bosch, Johannes Van den, 155 Botsford, J. B., quoted, 262 Bourne, Edward G., quoted, 63 Britain, as caitalist leader nation, xii, 3-5, 10; and capitalist morality, 68; the classic example of capitalism in Marx¬ ian economy, 214; competitive position after 1918, 176-177; cotton manufac¬ ture, 129; early economic self-suffi-. ciency, 118; exports, 101, 121; foreign commerce, its significance, 11, 103-105, 117, 120, 127, 282; and freedom, 24-25; imperialism, methods of exploitation, 146 149, 152-154, its origins and develop¬ ment, 130, 137-138. 140-142, 203-204; imports, 118-119; loss of leadership.

359

360 207-208, 229, 244; machine production, 124; mercantilism, 111; “middle class” dependent on imperialism, 192; the monarchy, 20; and Portugal, 70-71, 109110; production, increase in, 172; and Protestantism, relation to capitalist development, 48-55; religious tolera¬ tion, 51-52; rise of corporations, 14; speculativeness, 33; struggle for India, 139; surplus production, 100; trade war with China, 151; and United States, War of 1812, 123-124; woolen cloth trade, 128; working class, affiliation with capitalist interests, 191-193, 195, reformist aims, 196-197 British Dominions, position within cap¬ italist structure, 5, 10, 121, 125 Browne, John, 31 Bruce, John, quoted, 103, 137 Burns, Arthur F., quoted, 225 Burten, William, quoted, 49 business, characteristic unit under cap¬ italism, 11-16; the corporation, 12-14; hierarchic structure, 13; relation with the state, 11-12; significance of foreign trade, 11-12; technique, 15-16. See also business cycle, entrepreneur business cycle, characteristic phenom¬ enon of capitalism, xii, 201-203; com¬ pared with earlier speculative “bub¬ bles,” 33; and depression, 201-203, 206209, 240; emanates principally from capitalist leaders, 203; and maladjust¬ ment, 201-202, 206; and stagnation, 206207 209 239 Butterfield, Herbert, quoted, 285 Callender, Guy S., quoted, 204, 299 Calvinism, in Geneva, 58; in Holland, 51; inculcates the duty to work, 42; the interpretation of Max Weber, 58-59; significance in ideological struggle against feudalism, 53 Canada, dependence on international commerce, 121, on U.S. capitalism, 5, 125 capital, accumulation of, 26, 214, in Marx¬ ian economy, 215-217, 312, purported relation to Protestantism, 57; domestic demand for, 161-162; export of, from backward areas, 134, in leader nations, 164-166 capitalism, and backward areas, their crucial significance for the system, 8, 133, 138-140, 148-150, their withdrawal as menace to system, 195-196, 238-245; the business enterprise its typical unit, 11-16; as a closed system, confusions concerning, xi, 4, 161, 201, 212-215, 218219, 225, 235, 330; commerce as dynamic aspect of, 29, 97, 100-130, 150-152; and the domestic market, 130-135; its dy¬ namics comprehensible only as entire system, 89-96, 118-119, 201; its ethos, 29-36, 52-59; expansionism, ix-xiii, 3, 89, 189; freedom within, 23-26; and imperialism, as indispensable attri¬ bute, 135-158; and industrialization, 106 131-132; its international interdepend¬ ence. 4, 163. 166-167; Keynes’ analysis of, 223-235; law of motion within, ana¬ lyzed. 200-237: leader nations within, xi-xiii, 99, 102, 109-111. 113-116. 127130, 145-146, 164-167, 186-187; Marx’s analysis of, 210-219: monopolist tend¬ ency, 13; its morality, 61-88; H. G. Moulton’s optimistic analysis of, 235-

INDEX 237; narrowing frontiers of the system, 171-183; national units within, 17-23, 26-29; opposition to, within the system, 184-199; personality characteristic of, 29, 36-45; its positive achievements, 245-246; problems of transition, 238-246; relation of production and consump¬ tion, 97-100; and religion, relation to, 46-60; Schumpeter’s analysis of, 218223; stagnation as a danger to, 201, 206209, 239; its structure as fluctuating international hierarchy, ix-x, 3-6, 2728, 62, 214-217, 228-230; and surplus production, 100-101; susceptibility to endogenous social change, 184-185; its viability, 184-185 Carnegie, Andrew, quoted, 35, 37, 44, 82, 260 cartel, East India treaty as early exam¬ ple, 72-74 Catholicism, relation to early capitalist development, 47-60, 90-94 Chamberlain, Joseph, quoted, 104-105, 109, 137-138, 141-142, 192 change, movements toward within cap¬ italist system, 184-199 charter, in early capitalist cities, 91, 95 Chesterfield, Philip Stanhope, 4th Earl, quoted, 87-88 Child, Sir Josiah, quoted, 16, 32, 37, 51-52, 82, 260, 267 China, as area of imperialist exploitation, 5-6, 68, 116, 138-140, 174-177, 309, resist¬ ance to, 118; British war against, 151; early commerce entirely domestic, 288; open door policy, 5-6, 148; opium trade with Britain, 109, 153-154; and social¬ ism, prospects under, 111, 241-242, 245 Christianity, relation to early capitalist development, 46-62, 66, 86-88 cities, early capitalist, charters, 91, 95; citizenship rights within, 22-23, 92; class conflict, 187; commerce, role of, 11, 120-121; domestic leadership, role of, 19-21; German, origins, 287, and religious conflict, 59; as imperialist centers, 90-93, 136-137; market situa¬ tions, 8; money lending and investment, 165-166; nationalism, 27; as prerequi¬ site for development of capitalism, ix; and Protestantism, 57. See also Flor¬ ence, Hanseatic League, Venice citizenship, capitalist, political and eco¬ nomic rights, 21-23; significance in early cities, 92 Clark, Grover, quoted, 140-141 Clarke, Maude V., quoted, 287 class, organization by, within capitalism, 1S6-188. See also class struggle, ruling class, working class class struggle, in backward areas, paral¬ lels national opposition to imperialism, 195-196; as capitalist characteristic, 186-192; as core of contemporary op¬ position to capitalism, 185-199, 238-240; its internationally complex interreac¬ tions, 194-199; intolerance an aspect of, 210; and labor theory of value, 215; in leader nations, centers in income dis¬ tribution, 194-195; in Marxian econ¬ omy, 212, 218, 238, 329; its need for an ideology, 189-190; in Schumpeter, its secondary role, 219 classical economics, on “distant trade,” 106-107; its inadequacy in explaining imperialist reality, xi, 159-163; and international commerce, 226; and

INDEX Keynes, 223-229: and labor theory of value, 215; and Marx, 213-214; on sur¬ plus production and foreign commerce. 97-100. See also Adam Smith Clemence, Richard V. C., quoted, 219, 222 Clinard, Marshall B., cited, 82 closed system, capitalism as a, confu¬ sions concerning', xi, 4, 161, 201, 330; in Keynes’ analysis, 225, 235; in Marx¬ ian economics, 212-215, 218-219; in Schumpeter’s analysis, 218-219; in Sweezy’s elucidation, 330 Coeur, Jacques, 93, 257-258 Colbert, Jean Baptiste, 32 colonialism. See backward areas, exploi¬ tation, imperialism commerce, foreign, basic traits and operations under capitalism, 101-116; and British imperialism, 137-138, 282; and capitalist hierarchy of states, re¬ lationship, 100; its characteristics, 101102; its crucial role in development of capitalism, xii, 4, 10-11, 18, 29, 97, 131132, 231; as determinant of capitalist domestic institutions, 104-105, of cap¬ italist leadership, xii, of capitalist personality, 34-35; and domestic co¬ operation, 40; and domestic production, 294; dynamics of its expansion, 89, 115116; Franklin’s condemnation of, 32; and freedom, 25; and honesty, 80, 85-86; as instrument of exploitation, 150-152; in Keynes’ analysis, 227-229; in leader nations, xii, 109-111, 136; market situa¬ tions, variety of, 6-10; monopolization, 74-77, 150-152; and morality of capital¬ ism, 62; national requirements deter¬ mined by position within capitalist structure, 119; and prosperity, 203-206; and Protestantism, 54-55; quantitative requirements for dynamic capitalism, 117-135; its role in diffusion of culture, 17; in Schumpeter’s analysis, 220; un¬ der socialism, prospects, 245-246; its speculativeness, 33; and surplus pro¬ duction, relationship, 97-101; in United States, 230-231; in Venice, 95-96 competition, among entrepreneurs, 115116; international, as determinant, of capitalist leadership, 3, as foundation of imperialism, 140, as occasional at¬ tenuation of imperialist exploitation, 14S, its replacement by cooperation un¬ der socialism, 245-246, as source of nationalism, 27; personal, as aspect of capitalist ethos, 35-36, and of capital¬ ist morality in Lord Chesterfield, 8788; its role in Schumpeter’s analysis, 219 Congo, under Belgian rule, minerals, 146; as prime example of imperialist exploi¬ tation, 149-150, 154-156, 311 consumption, domestic, need to increase (Moulton), 236, relation to imperialist development, 161-162, relation to in¬ vestment in Keynes, 227; habits of are actually highly flexible (vs Keynes), 234-235; production for, misunder¬ standings concerning, 97-100; the “pro¬ pensity to consume” in Keynes, 228, 232-235; its relationship to production inadequate as key to capitalist econ¬ omy, 6, 163; and savings, relationship, 160-162; of working class, relation to prosperity 193 . corporations, as characteristic capitalist unit, 12-13; their dominant position, 14; typical of capitalist morality, 82

361 Corti, Count Egon Caesar, quoted, 263 Coster, Maurice, quoted, 317-318 cotton, British manufacture, 129; and United States capitalist development, 124, 128 Cromer, Lord, quoted, 144 Crusade, Fourth. Venice’s manipulation for commercial purposes, 62-63, 95-96 Cunningham, William, quoted, 252 cycle. See business cycle Dandolo, Enrico, 21 Darlington, Charles F., quoted, 135 Davidson, Basil, on exploitation in Africa, 308 Day, Clive, quoted, 155 Defoe, Daniel, advice to young trades¬ men, 40-43; on capitalist commerce as source of prosperity, 287; on capitalist morality, 82; on freedom of commerce, 70; referred to, 31, 71; on trade as source of family honor, 262 demand consumers’, its relation to in¬ novation in Schumpeter’s analysis, 222; domestic, its magnitude in contempo¬ rary China and Russia, 242; latent, reservoir of (Moulton), 236; and sup¬ ply, in capitalist domestic market, 132-133, contrast between backward areas and capitalist leading nations, 135 . democracy, relationship to capitalist imperialism, 163; as slight limitation upon direct capitalist control, 83; as tendency within capitalism, 23, within United Nations, 66 Denis, Henri, quoted, 211-212 depression, as aspect of business cycle, 201-203; within capitalist leader na¬ tions, effect on system, 203; chronic, equivalent of economic stagnation, 206-209; of classic dimensions, less probable today, 240; danger of, in¬ creased by general stagnation, 209 Dingle, Edwin J., quoted, 175-176 distant trade, in early capitalism, 112-113 distribution, as determining relation of production and consumption, 99 Dobb, Maurice, on Marx’s analysis of iniperialism, 218; on production in early capitalism, 333; referred to) 216-217; on relative prosperity of working class m leader nations, 191; on significance of revolution in backward areas, 323 Doody, Francis S. D., quoted, 219, 222 Doyle, Arthur Conan, on Belgian exploi¬ tation in the Congo, 311 East India Company (British), cartel agreement for joint exploitation with Dutch East India Company, 72-74; cru¬ cial role in British imperialist develop¬ ment, 137; high price of shares, 33; monopoly position, 85, 139; profits enor¬ mous, 112; referred to 102-103, 144, 152; revenue. 153-154; welcomed by Indian rulers, 178 East India Company (Dutch), cartel agreement for joint exploitation with British East India Company, 72-74; cul¬ ture system, 155; enormous profits, 112 East Indies, exploitation, condemned by Grotius, 64-65, the “rosy down of capi¬ talist production” (Marx), 213 Eastman, George, 114 Eburne, Richard, 55 economic maladjustment, 201-206

362 economics. See classical economics, Keynes, Marx, Schumpeter, Adam Smith, etc. Edler, Florence, quoted, 15 Ehrenberg, Richard, quoted, 32G Eisenhower, Dwight D., 182 embargo, Jeffersonian, its failure, 123124 employment, full, in Keynes’ analysis, 225-22S, 231-232 “end justifies the means” (Machiavelli),

86 Engels, as collaborator with Marx, 189190; quoted, 191, 322; referred to, 210 England. See Britain enterprise, the, as capitalist business unit, 11-16 entrepreneur, his devotion to business, 34-35, 37-39; his dynamic position in Schumpeter’s analysis, 219-223, criti¬ cized by Sweezy, 222; as founder of business dynasties, 11-12; his need for economic freedom, 25; his role in de¬ velopment of capitalism, 113-116, of imperialism, 143-144; the typical per¬ sonality of capitalism, with examples, 36-45 Erasmus, Desiderius, quoted, 281 ethics. See ethos, morality ethos, of capitalism, 18, analyzed, 29-36; characteristic personality, 86-88; rela¬ tion to Protestant ethic, 52-59. See also morality Europe, as center of capitalist expansion, 89-93. See also Britain, Holland, Ven¬ ice, etc. European Common Market, 244-245 exchange, bill of, historical significance, 16 expansion, indispensable to capitalist system, x. 35, 136-137; 203-206; relation to Protestantism, 55; threatened by current developments, 208-209, 242-245; its uniqueness, 200 exploitation, of backward areas, resist¬ ance to, 28; central position in Marxian economics, 213, 219; as determinant of class position, 186-187; the essence of imperialism, 141-148; foreign, as aspect of capitalist ethos, 32, in early capital¬ ism, 64; imperialist, concessions lead¬ ing to, 143; disregard of welfare con¬ siderations, 158; indirect, its complex¬ ity, 146; instruments of, 150-156; by non-leader nations, relatively more severe, 146-147; potential area for steadily contracting, 171; variety of situations, 145-148 export, of capital and commodities, 166167. See also commerce factory system, in Marxian economy, 215 Fanfani, Amintore, quoted, 30, 32, 257258 Farrell, James A., quoted, 174, 193, 294, 303 Federal Trade Commission, 83-S4 Federalist. The. quoted, 123, 299 Feis, Herbert, quoted, 130 feudalism, ix, 48, 213-214; freedoms un¬ der, 24; production for consumption, 98; relationship to developing capital¬ ism, 90-92, 94-95 Fleming, W. B., quoted, 126 Florence, and bills of exchange, 16; and Catholic church, early conflicts, 48; as center of early capitalism, 91-93; class conflict within, 187; class significance

INDEX of victory over Pisa, 193; cloth trade, 129; collapse of banking system, 202; decline, 14; lack of natural resources, 118; as milieu of capitalist morality, 81-86; its nationalism, 27; working class, 196 foreign commerce, See commerce Foster, Austin T., quoted, 69-70 France, economy threatened by with¬ drawal of backward areas, 196; imperi¬ alism, origins, 140; natural resources under early capitalism, 118; struggle for India, 139: and United States, War of 1812, 123-124 Franklin, Benjamin, on agriculture vs. commerce, 258-259; on causes of Amer¬ ican colonial discontent, 122; critical of foreign commerce, 31-32; on frugality, honesty, etc., 40-41; on the natural right to make profits, 299; referred to, 55 free trade, 129-130. See also open door policy freedom, in early capitalist cities, 91; of enterprise, 25; as essential aspect of capitalism, 23-26; in Keynes’ analysis, 225-227; relative to power, 24; a soci¬ etal trait, defined, 24-25 Fugger, Jacob, the dynasty, 12, 14; quoted, 82; relation to religious devel¬ opment, 59 Fulbright, Sen. William, quoted, 100 Gay, Edwin F., quoted, 300 Genoa, nationalism, 27 Germany, attempts to capture capitalist leadership, 181; competitive position, 10, 36, 140, 166, 173, 176-177; expansion¬ ism, 205-206; increased production, 172; methods of entrepreneurs, 116; philos¬ ophy of national power, 27 Ghana, danger of its isolation, 244-245 Ghibeliine-Guelph feud, in early cities, Gillman, Joseph M., quoted, 211 Giry, Arthur, quoted, 23 Gould, Jay, as characteristic capitalist, 39, 261; quoted, 114 government. See state Great Britain. See Britain Greaves, Ida C., quoted, 154, 30S Greenberg, Michael, quoted, 306-307 Gresham, Thomas, 32 gross national product, U.S., compari¬ son with exports and imports, 117-118 Grotius, Hugo, quoted, 24, 64-65, 254 Guatemala, resistance to United States imperialism, 180 Guelph-Ghibelline feud, in early cities,

Hakluyt, Richard, 55 Halbwachs, Maurice, quoted, 35 Halstead, Murat, quoted, 261 Hamilton, Alexander, 32 Hamilton, Earl J., quoted, 112 Hanseatic League, as capitalist leader, xii; dependence on commerce, 8; her¬ ring trade, 128; its imperialism, 92-93, 21S; legislation against democratic suf¬ frage, 22, 188; its nationalism, 27 Hansen, Alvin H., on contemporary con¬ striction of investment outlets, 233; on domestic investment vs. foreign com¬ merce, 229-230; on pre-eminence of psychological propensities as economic causation, 233-234; on relation of pro¬ duction and consumption, 288-289; on

INDEX surplus value and the factory system, 214-215; on uniqueness of U.S. economic situation, 230 Harriman, Edward H., struggle with James J. Hill, 39-40 Harris, Seymour E., quoted, 328 Hauser, Henri, quoted, 116, 206, 290 Henderson, Leon, on respectable position of economic racketeers, 279 Hewins, W. A. S., quoted, 71 Hilgerdt, Polke, quoted, 172 Hill, James, J., struggle with Edward H. Harriman, 39-40 Hobbes, Thomas, on causes of religious conflict, 46; on economic value of cov¬ etousness, 86; on religious toleration, 50; on Spanish exploitation of Peru, 64 Hobson, Charles K., quoted, 315, 167 Hobson, John A., his analysis of imperi¬ alism, 160-163, 194-195; on capitalist morality, 67, 74; referred to, 127 _ Holland, business methods, 16; as capital¬ ist leader, xii, 3; commerce, its signifi¬ cance 11, 36, 103, 121; its exploitation of foreign territories, 64-65, via “cul¬ ture system,” 154-156, in Indonesia, 162-163; and imperialism, 137-140, 218; loss of leadership, cushioned by imperi¬ alist exploitation, 207-208, leads to stagnation, 207, 228-229; “middle class dependent on imperialism, 192; political organization, 20; reformist aims of working class, 196-197; relation of early capitalism to religion, 48-55, 59; and religious toleration, 50-52; role of war in imperialist expansion, 203-204; rul¬ ing class indispensable to working class prosperity, 188-191; speculations in tulips, 34, 206 honesty, its function m capitalist busi¬ ness, 84-86; its opportunism and ex¬ pediency, 85 Huebner, Grover G., quoted, 290-291 Huhlein, Charles F., quoted, 120 Hull, Cordell, on international commerce, 29-30 Hume, David, on cases of capitalist pros¬ perity, 292 Huntington, Gilchrist, quoted, 179 Hurley, Edward N., quoted, 280 ideology, of class struggle, provided by Marx and Engels, 189-192, 212, 215; of working-class revolution, furnished within capitalist leader nations, 198199. See also class struggle imperialism, analyzed, 136-158; capital¬ ism’s most profitable business, 140-141; in cities of early capitalism, 93; defined, 367; exploitation its essence, 141-148; the “gunboat era,” 179; historical de¬ velopment, 146-148; in Marxian eco¬ nomics, 217-21S; its positive contribu¬ tions, 157-158, 244-245; possible abolition of, 159-167; its relation to capitalist ethos, 32, to capitalist morality, 63-68; resistance to within capitalist leader nations, 198-199; as source of modern racism, 158; as structural base of world capitalism, 89, 135-138; its technique, 142-145; its true nature apparent to backward peoples, 190; working class support of, in leader nations, 190-191, 194-195. See also capitalism, commerce, exploitation imports. See commerce income, national, redistribution of (H. G. Moulton), 236-237

363 India, as area of capitalist exploitation, 116, 138-139, 144; its domestic commerce under British control, 152; its prefer¬ ence for liquidity, in Keynes’ analysis, 229 individualism, its analogy to nationalism, 28-29; its relation to free enterprise, 26 industrialization, its central position in Marxian economics, 212-215; in leader nations, 110; a necessity in new socialist countries, 242; not the critical mark of an advanced capitalist society, 131; re¬ lation to commerce in capitalist dy¬ namics, 106; its role in Schumpeter’s analysis, 218-220 Innocent II, 62-63 innovation, its position in Schumpeter’s analysis, 220-222; societal, in early cap¬ italism, 90; technological, relation to capitalist expansion, 205 Insull, Samuel, on the business personal¬ ity. 38 internationalism, as basic feature of cap¬ italism, x investment, domestic, relation to rate of interest in Keynes’ analysis, 228-229; foreign, and the balance of trade (Keynes), 228, its relation to capitalist imperialist development, 163-167; rate of. crucial in Keynes’ analysis. 227-230, 232; relation to consumption, 237 James, William, on religious experience, 46-47 Japan, capitalist development, 130H31; its commerce transformed by capitalism, 119; competitive position, _ 176-177; its economy threatened by withdrawal of backward areas, 196; its exceptional history, 149; its philosophy of national power, 27; referred to, 166; usefulness of the monarchy, 20 Java, as area of Dutch exploitation, 154156 Jews, 29, 93, 165, 267 Johnson, Alba B., quoted, 324 joint-stock company, origins and advan¬ tages, 13 Josephson, Matthew, quoted, 203 Josey, Charles Conant, quoted, 312 Caye, F. B., 80 veltie, Sir John, quoted, 173 Cent, Fred I., quoted, 146 . Ceynes, John Maynard, his analysis an¬ alyzed, 223-235; and classical econom¬ ics 223-225, 228-229; and full employ¬ ment, 225-227, 231-232; on Marxian socialism, 223; and the propensity to consume, 228, 232-235; quoted, 223-229, 234 259, 329; and the rate of invest¬ ment 228-232; summary statement of his theory, 337-338; theoretical inade¬ quacies summarized, 235; his theory applicable only to United States, 230231 Klein, Henry H., quoted, 12 Knappen, M. M., quoted, 268, 271 Knight, Frank H., quoted, 17, 47, 50, 224, 273 Kocher, Paul H., quoted, 271 Koebner, Richard, quoted, 307 Krister. Frederick J., quoted, 309 labor theory of value, in classical eco¬ nomics, 215; in Marxian economics, 211215

364 Latin America, as area for capitalist exploitation, 174-175; dependence on U.S. capitalism, 5, 125; disunity, as fac¬ tor militating' against socialist plan¬ ning, 242-243; increasing resistance to U.S. imperialism, 179-181; revolutionary movements, as threats to capitalist leader nations, 243 law of motion, within capitalist system, 200-237 leader nation, within capitalist system, its characteristic^, xiii; its citizenship valued, 22; class organization within, 186-187; controls foreign investment in backward areas, 167; decline in, rela¬ tion to stagnation, 207; it determines the capitalist personality, 37, the char¬ acter of the entrepreneur, 113-116, the course of international commerce, 99, 102, 109-111, 126-130; displacement of, effect on capital investment, 165; effect of radical movements in, 19S-199; ex¬ panding area of influence, 89; as great¬ est exporter of capital, 164-167; inextri¬ cable relation to functioning of world capitalist system, 201; increased pro¬ duction within, 171-172; its independ¬ ence relative, 4; internal changes, their effect on world system, xii; in Keynes’ system, inaccuracies, 229-233; its “middle class” dependent on imperi¬ alism, 191-192; most fitted for efficient imperialist exploitation, 145-146; oppo¬ sition to international socialism, or any defection from world capitalist system, 239-241; position determined by inter¬ national commerce, especially with backward areas, 113, 120; position of leadership fluctuates, xi-xii; relation of war and expansion, 206: relative strength against class opposition, 186; role within capitalist system, x-xi, 3-4, invariably imperialist, 136, 138; as source of business cycle, 203; and stag¬ nation, 209: strategy of maintaining disunity in backward areas, 243; work¬ ing class, its affiliation with capitalism, 192-193, 197-198 League of Nations, mandate system, 148, 179 legislature, its function under capitalism, 20. 81 Lenin, V. I., 216-217 Lewis, Cleona, quoted, 180-181, 300, 304 Lincoln, Abraham, 21 Lipson, Ephraim, quoted, 191, 253 List, Frederick, quoted, 224 Lodge, Eleanor, quoted, 91 Lombards, formation of Lombard League, 91; as money lenders, 165 Lough, William H., quoted, 34 Liibeck, government by businessmen, 83; lack of natural resources, 118 Luther, Martin, 5S Luxemburg, Rosa, on surplus value and imperialism, 216-217 Lyall, Sir Alfred, quoted. 178, 305-306 Lynch, Robert N., quoted, 99 McCulloch, J. R., quoted, 107 Machiavelli, Niccolo, advice to Lorenzo de Medici (“end justifies the means”), 86; assumes existence of capitalism, xiii; on freedom of cities, 23-24; referred to. 66 machinery, export to backward areas, 129 McIntosh, K. C., quoted, 101 McMaster, J. B., quoted, 123-124

INDEX Macpherson, David, quoted, 68, 122, 144, 28S Mahoney, Paul R., quoted, 295 Maitland, F. W., quoted, 266 maladjustment, economic, as aspect of business cycle, 201-206; causes, 206; variations, 201-202 Malthus, Thomas, 224 Mandeville, Bernard de, Fable of the Bees, its relation to capitalist morality, 78-80 Mantoux, Paul, quoted, 127 manufacture, export of, 127; and factory system, in Marxian economy, 215; its role in leader nation, 110; in United States, 125 market, the determinant for capitalist production, 98; domestic, its complex¬ ity, 8-10, contrast between backward areas and capitalist leaders, 135, fluc¬ tuations, 132-133, relation to capitalist development, 130-135; expansion, in capitalist development, 131-132, con¬ ducive to prosperity, 203-206; foreign, differentiations in, 296-297; failure of in economic maladjustment, 202; spec¬ ulation in, 33-34; variety of its situa¬ tions determines capitalist structure, xi, 6-10 Markham, J. W., quoted, 13 Marshall, Alfred, quoted, 291-292 Martin, Joseph W., quoted, 317 Marx. Karl, his analysis of capitalism, analyzed, 210-219, motivated by early opposition to capitalist oppression, 212; and capital accumulation, 213-216; and capitalism as a closed system, 212, 214; central position of the class struggle, 212, 218, 238, 329; on expansion of capi¬ talism, 323, 331-332; on exploitation, 329; as formulator, with Engels, of working class ideology, 189-190; Keynes’ early opinion of, 223; and labor theory of value 213, 215-216; on production and consumption, 288, 331-332; repu¬ diation of Say’s Law, 225; the role of industrialism, 212-213, 218 Marxian economics, on relation of pro¬ duction and consumption, and ex¬ change of surpluses, 97-100 Means, Gardner C., on the corporation, Medici, as capitalist dynasty, 12, 14; Lor¬ enzo de, 86 Mellon, Andrew W., 82 mercantilism, early American, 122; and Keynes, 224-225; relation to Protestant¬ ism, 54-56; solicitude for increased em¬ ployment, 193-194 Merriman, Thornton, quoted, 60 Merton, Robert K., quoted, 271 Methuen Treaty, 71 Mill, James, quoted, 111-112, 282 Mills, C. Wright. 80 Milton Bradley Co., quoted, 38 Missouri Pacific Railroad, 114 monopoly, in international commerce, 7477; as tendency within national capital¬ ism, 13; in U.S. meat packing, 83 Montesquieu. Charles de Secondat. Baron, on commerce. 17; on condition of Polish peasantry. 284; on feudalism, 18; on freedom, 25; on relation of Protestantism and government, 58 Moon, Parker T., quoted, 142, 159 morality, capitalist, its characteristics and development, 61-88; and Lord Ches¬ terfield, 87-88; as exemplified in Webb-

INDEX Pomerene Act debates, 74-77; and hon¬ esty, 84-86; and imperialism, 65-66, 147; inherent to the system, 61-62; in the international treaty, 68-74; and Machiavelli, 86-87; in Mandeville’s Fable of the Bees, 78-80; its nationalism, 74-75; its opportunism, 62; its paradoxes and contradictions, 67-68, 78-80; relation to racism in exploitation, 65-66; its un¬ scrupulousness, 81-84, sharpened by weakness, 74. See also ethos Morgan, J. Pierpont, 39 motion, law of, within capitalist system, 200-237 . , Moulton, Harold G., analysis of capital¬ ism examined, 235-237; quoted, 236-237 Murchison, Claude, quoted, 129, 164 Nasser, Gamal, 243 . nation, characteristic unit of capitalism, x, 8-10; conditions of its organization and development, 18-20. See also na¬ tionalism National Association of Credit Men, 85 nationalism, as aspect of capitalist ethos, 32; among backward peoples, develop¬ ment, 178-182, now synonymous with anticapitalism, 196; in contemporary Africa, 180-181; as determinant of capi¬ talist morality, 74-80; determined by leading capitalist group, 11; develop¬ ment of the nation as capitalist unit, x, 8-10, 18-20; as permanent aspect of capitalism, 28; relation to religion in developing capitalism, 49-50; its role in world capitalist structure, 26-29; in working class, in capitalist leader na¬ tions, 192-194 Netherlands. See Holland New England, circular trade with West Indies and Africa, 122 New York, wealthy citizens m 1842, 37 Newman, Bruno, quoted, 174 Niebuhr, H. Richard, quoted, 56 . Nkrumah, Kwame, on need for African unity, 243; quoted, 244 Norris, Sen. George., quoted, 76-77 Northern Pacific Railroad, 39-40 Nurkse, Ragnar, quoted, 130-131, 133 Nys, Ernest, quoted, 91 Oddy, Joshua, quoted, 122-123 Ohlin, Bertil, quoted, 107 oil, as determinant of position in capi¬ talist system, 128; in Venezuela. 133135 open door policy, among capitalist leader nations, 115, 150; in China, 5-6, 148; generates most intense competition, 115; United States insistence on, 148, opium, British trade with China, 109, 151, 153-154 opposition to capitalism, within capitalist system, 185-199. See also backward areas, class struggle Pagel, Kurt, quoted, 255 Pares, Richard, quoted, 291 Parker, G. R., quoted, 128 parliaments, function of under capital¬ ism, 20, 81; relation to religious devel¬ opment, 59 Pennsylvania Railroad, 39 . personality, its character under capital¬ ism, 29-30, 36-45, 86-88. See also entre¬ preneur, ethos, morality Peter I (the Great), 32, 95

365 petroleum, 128, 133-135 Pierson, Lewis E., quoted, 328 Pigott, William, quoted, 36 piracy, in early capitalism, 68 Pirenne, Henri, on the capitalist ethos, 35; on entrepreneurship, 335; on heresy, 26S-269; on medieval merchants, 13; on citizens’ solidarity in capitalist cities, 256 Pisa, 27 Pitt, William, 21 planning, economic, its attraction for backward areas, 182-183, 239-240; its ef¬ fect on world capitalist system, 209; its place in Keynes’ analysis, 226-228. See also socialism Pollexfen, John, quoted, 31 Pomerene, Sen. Atlee, quoted, 76-77 population, growth, its relation to capi¬ talist prosperity, 204-205 Portugal, in Angola, 146-147; early ex¬ plorations, 166; partition of non-Euro¬ pean world with Spain, 63-64; relations with Britain, 70-71, 109-110 Posthumus, N. W., quoted, 34 price level, 126-127, 237 Prizer, Edmund, quoted, 85-86, 105 production, capitalist, determines class affiliation, 187; essentially for market rather than for consumption, 6-10, 98, 159, 163; increase of, among leader na¬ tions, 171-172, in H. G. Moulton’s an¬ alysis, 236-237, its parallel with growth of demand, 132-133; relation to con¬ sumption, confusions concerning, 97100, 159-163, in Keynes’ analysis, 232; its significance in Marx’s analysis, 213214 profits, in the capitalist ethos, 36; in “dis¬ tant trade,” 106-113; in international commerce 102, See also commerce, East India Company, exploitation, im¬ perialism proletariat. See working class prosperity, as aspect of business cycle, 201-206; dependent on expansion, 203206; and “war socialism,” 227-228 Protestantism, and capitalist develop¬ ment, 49-60; its conformity to capitalist standards, 51-59; its ethical sanction of capitalist practice, 55-56; its relation to the economy, 54 Purchase, Samuel, 55 Puritanism, its contribution to capitalist development, 49-51; its exemplification in Richard Baxter, 61; Weber’s view of its relation to capitalism, 57-58 racism, as aspect of capitalist ethos, 32; its functions in imperialist exploitation, 65-66, 158; in U.S. working class, 197 railroads, concessions in dependent areas, influence on capitalist develop¬ ment, 129: and U.S. capitalist develop¬ ment, 39-40. 124-125 Raleigh, Sir Walter, 32 Rauschenbusch, Walter, quoted 82, 266 raw materials, as key to economy of backward areas, 110-111, 119, 126-127, 166, 172 Redfield, William C., quoted, 128 Redmond, George F., quoted, 39, 114 reformism, as aim of working class in Britain, Holland, and United States, 196-197; its effect upon ruling class, 199; as tactic in class struggle, 187; versus revolution, 189. See also class struggle

366 religion, and capitalist development, 4660; and nationalism, 49-50; opposition to social change, 47; as personal experi¬ ence, 46; possible future development after capitalism, 60; sanction of early capitalist morality, 64; its subordinate status, 18 Reuther, Walter P., quoted, 312-313 RSville, AndrS, quoted, 23 revolution, against capitalism, in back¬ ward areas, effect upon capitalist lead¬ ers, 198-199; fallacies in Marxian mostadvanced-country hypothesis, 190-191; its initiation within capitalist system, difficulties, 188; in Marxian analysis, 189-191, 212; present-day possibilities, 238-240; unfeasible under early capital¬ ist development, 196-197; versus re¬ formism, 189 Rhea, Frank A., quoted, 177 Rhodes, Cecil, quoted, 172, 307 Ricardo, David, 224-225 Richelieu, Armand du Plessis, due de, 32 Rieve, Emil, quoted, 197 Riley, Edward, quoted, 99 Robertson, H. M., quoted, 254 Robinson, Joan, on Marx’s labor theory of value, 211; on production-consump¬ tion relationship in Marx, 337; referred to, 213 Rochester, Anna, quoted, 265 Rockefeller family, 265; John D., 39 Roorbach, George B., quoted, 209 Roosevelt, Eleanor, quoted, 66-67 Rothschild family, 12, their opportunism, 263 ruling class, as determinant of capitalist morality and behavior, 31, 34, 82; its habits, 44-45. See also class struggle, entrepreneur Russia, as area of capitalist exploitation, 5, 67, 70-71, 150-151, 175-177, 249; in¬ creased production, under socialism, 172; international commerce, presentday, 209; and Peter the Great, 32, 95; its population and resources favorable to socialist development, 242; the Rev¬ olution as inspiration to other sub¬ jects of capitalist exploitation, 182, as initiating restriction of total capitalist area, xiii, 111; as source of aid to new socialist countries, 241

Sanders, M. J., quoted, 301 Savary, Jacques, 31 savings, relation to consumption, 160-162 Say, Jean-Baptiste, quoted, 106-107, 117 Say’s Law, 132, 135, 225 Schevill, Ferdinand, quoted, 24, 283, 286 Schmoller, Gustav, quoted, 250-251 Schumpeter, Joseph A., his analysis of capitalism analyzed, 218-223; on decline within capitalism, 333; and the entre¬ preneur, his crucial role, 219-222, 233, 333, criticized by Sweezy, 222; on free trade, 313; and innovation, 218, 220-222, 233, 334-335; his model, its relevance criticized, 219; and technology, 218, 220221, 334-335 science, its role in new socialist societies, 238-241. See also technology, secularism, characteristic of capitalism in development, 54-60, and of the con¬ temporary world, 239 SSe, Henri, 56 self-government, increasing appeal of, 178-179

INDEX Shakespeare, William, his Merchant of Venice as exemplification of capitalist ethos, 29 Shepherd. W. R., quoted, 174-175 Sherman Anti-Trust Act, 15, 76 slavery, as aspect of capitalist develop¬ ment, 24, 213; its contribution to Dutch profits, 65; its pivotal role in U.S. com¬ merce, 124; the trade, investment in, 166, in New England, 122 Smith, Adam, on the character of the merchant, 261; on exchange of sur¬ pluses, 100, 326-327; on freedom of trade, 255; referred to, xiii, 104, 106, 117; on the relation of production and consumption. 98; on self-interest, 30 Smith, Earl Hamilton, quoted, 175 Smith, Herbert A., quoted, 256 Smith, William A., quoted, 117 socialism, its achievement dependent on backward peoples, 195-196; as contem¬ porary alternative to capitalism, 28, 172, 182-183. 190, 195-196, 240-245; economic and cultural resources needed for its implementation, 241-242; its incentive genuinely human goals, 242; Keynes’ endeavor to evade, 225; its potential strengthened by capitalist depression or wars, 240; revolution, its locus in Marx¬ ian analysis, 218 Sombart, Werner, quoted, 11, 253; re¬ ferred to, x, 31, 270 South America. See Latin America South Sea Bubble, 33 Soviet Union. See Russia Spain, early explorations, 166; exploita¬ tion of Peru, 63-64; partition of nonEuropean world with Portugal, 63-64 specialization, by area within world com¬ merce, 101-102,^ 107-111, 226 speculation, as climate of capitalist ethos, 32-34, 82, 206 Sprat, Bishop Thomas, quoted, 49 stagnation, analyzed, 206-209; as aspect of business cycle, 201-202; as char¬ acteristic of capitalism, xiii; as ir¬ revocable contemporary trend, 239, now cumulative and progressive, 209; local, symptomatic of change in capitalist leadership, 207; its relation to position within capitalist hierarchy 207 Stanhope, Philip H., quoted,’ 259 state, the, characteristic organization under developing capitalism, 18-19; in Keynes’ system, 226-228; and modern imperialism, 160; its relation to capital¬ ist enterprises, 11-12, 14, 81; its subor¬ dinate status, 18-19 Stead, W. T., quoted, 68 Steele, Richard, quoted, 42; referred to, 31 40 Sternberg, Fritz, quoted, 320-321, 327, 330 stock exchanges, 10 Straight, Willard, quoted, 5, 106, 138-139 Strieder, Jacob, quoted, 25, 92, 115 sugar, in U.S. capitalist development, 124; in West Indies, 137 supply and demand, in capitalist domes¬ tic market, 132-133 surplus, production, misunderstandings concerning, 100-101, relation to im¬ perialism, 159-162, to international com¬ merce, 97-101; value, in Marxian theory, 212-213 Sutherland, Edwin H., quoted, 82-83 Sweezy, Paul M., on the closed system as a model, 330; on the entrepreneur in Schumpeter’s analysis, 222-223; on the

INDEX labor theory anlysis, 215

367 of

value

In

Marxian

Tawney, R. H., on foreign commerce, 294-295; on nationalism, 2S-29; on per¬ vasiveness of capitalist moral stan¬ dards, 321-322; on political organiza¬ tion, 18; on property rights, 255; on Puritanism, 51, 264; on the relativity of freedom, 24; on the rise of the busi¬ ness class, 2S4-2S5; on trade depres¬ sion 202 taxation, as technique of capitalist ex¬ ploitation, 152-156 technology, its basic role in new socialist countries, 241; its crucial position in Schumpeter’s analysis, 21S-220; within leader nation, xiii; its relation to de¬ veloping capitalism, 10, 132. in Marxian economy, 212-214; its relation to pros¬ perity, 204-205; as stimulus to contem¬ porary opposition to world capitalism, 239; the “technological illusion” con¬ cerning capitalist dynamics, 106 Temple, Sir William, quoted, 268 Thompson, J. W., quoted, 94, 187, 251-252, 309 thrift, a virtue for capitalist underlings, 41-44 toleration, in religion, a requirement of capitalism, 51-54 towns. See cities trade, “distant,” profits in, 106-113; forced, in imperialist development, 151152; as source of honor in early British capitalism, 262. See also commerce tradesman, his devotion to business, 41-43 treaty, international, as example of capitalist morality, 68-74; its history and typical features, 68-70; its negotia¬ tion a frequent index of superior power, 69-74 Troeltsch, Ernest, quoted, 60, 272-273 underdevelopment. See backward areas United Nations, Commission on Human Rights, 66; and religion, 60; tendencies toward democracy, 66; trusteeship system, as mitigation of imperialist ex¬ ploitation, 148, its relation to resistance to imperialism among backward peo¬ ples, 179-180 United Provinces. See Holland United States, commercial advantages in early history, 122-123; and the corpora¬ tion, 14; dollar position after Second World War, 164; and domestic invest¬ ment, 229-230; domination of Venezue¬ lan economy, 133-134; as early field for foreign investment, 166; and economic self-sufficiency, 118; expansion under impetus of war, 204; its foreign com¬ merce, dependence on, 104-105, 121-130, 303, determines its world position, 128, 150, and German competition, 36; gross national product vs. foreign commerce, 117-118; history of capitalist develop¬ ment, 121-125, 300; increase in produc¬ tive capacity, 172; as leader nation, xii, 4-5, 10, its leadership now accepted within system, 208-209, search for areas for expanded exploitation, 173-177; monopolies in foreign trade, the WebbPomerene Act 74-77; the Navy, its use in imperialist maneuvers, 179-1S2; as the only capitalist nation corresponding to Keynes’ analysis, 230-231; present

policy, to protect stability of all im¬ perialist possessions, 146; role of the state, 19; its susceptibility to develop¬ ment of world capitalism, 231; trade with Holland and Dutch East Indies, 146; westward movement, 121, 124; its working class, accepts capitalism, 195, subject to racism, 197, reformist aims, 196-197; world’s largest foreign trader,

120 urbanization, ix, 131. See also cities Ure, Andrew, quoted, 205 Utrecht, Treaty of, quoted, 71-72 Van Alstyne, R. W., quoted. 298 Van Boon, Hendrik, quoted, 2S6 Vanderbilt, Cornelius, 39 Vansittart, Henry, quoted, 152 Venezuela, as example of backward economy under imperialism, 133-135 Venice, its appropriation of Fourth Crusade, 62-63; its dependence on Com¬ merce, 8, 121, 162; its entrepreneurs, 115; its exploitation of Constantinople, 145; as exporter of grain, 101; its government of businessmen, 83; its imperialism, 218, supported by its work¬ ing class, 188, in war with Genoa, 140; introduces double-entry bookkeeping, 15; lack of natural resources., 118; as leader nation, xii, 29; its nationalism, 27; relations with Catholicism, 48, 55; and stagnation, 22S-229; its unique role in origins of capitalism, xi, 90-92, 95-96 Verelst, Harry, quoted, 151 Viner, Jacob, quoted, 289, 302 Voltaire, Frangois Arouet, de, 211 wages, increase in, relation to imperial¬ ism, 161 Walker, P. E. Gordon, quoted, 48 war, as accompaniment to capitalist ex¬ pansion, 171; relation to prosperity in leader nations, 206; within capitalist system today, possible effect on transi¬ tion from international capitalism, 240 War of 1812, 123-124 Waterbury, F. C., quoted, 116 Watkins, Myron W., quoted, 85 Webb, Sidney and Beatrice, quoted, 113 Webb-Pomerene Act, 74-77, 117 Weber, Max, quoted, 57-58; his views on relation of capitalism and religion disputed, 57-58, 61 West Indies, dependent on regional plan¬ ning in any future socialism, 242; and prosperity of Holland, 65; and sugar, 137 Williams, John H., quoted, 104, 107, 209 Williamson, James A., quoted, 71 Woolf, Leonard, quoted, 257 working class, apathetic response to ap¬ peal of capitalist personality, 43-44; its “aristocracy” in leader nations, 197198; the critical proletariat is now in the backward areas, 198; its crucial role in Marxian analysis and ideology, 189-191, 212-215, 218; early success in Florence, 187; international divisions within 197-198; in leader nations, its affiliation with capitalist interests, 197198, 239, its partic.iDation in imperialist exploitation, 190-191 Wright, Louis B., quoted, 54-55 Yarrenton,

Andrew,

quoted,

118

DR. OLIVER CROMWELL COX lias been a professor of sociology at Lincoln University, Missouri, since 1949. Previously lie taught at the Tuskegee Institute and at Wiley College in Texas. He has an M.A. in economics and a Pli.D. in sociol¬ ogy from the University of Chicago. He also spent two years studying law at Northwestern University. Dr. Cox’s first book, Caste, Class, and Race, was the winner of Double¬ day’s George Washington Carver award in 1948. This book, which has won international recognition as an authoritative work in its field, led Dr. Cox to his study of the determi¬ nants of modern social change and the nature of the capitalist system. In addition to his books, the author has written numerous articles for sociological and educational journals.

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