The Great Transformation
Page 39
BAGHDAD RAILWAY
The conflict regarded as settled by the British-German agreement of June 15, 1914: Buell, R. L., International Relations (1929). Hawtrey, R. G., The Economic Problem (1925). Mowat, R. B., The Concert of Europe (1930), p. 313. Stolper, G., This Age of Fable (1942). For the contrary view: Fay, S. B., Origins of the World War, p. 312. Feis, H., Europe, The World’s Banker, 1870–1914 (1930), pp. 335 ff.
CONCERT OF EUROPE
Langer, W. L., European Alliances and Alignments (1871–1890) (1931). Sontag, R. J., European Diplomatic History (1871–1932) (1933). Onken, H., “The German Empire,” in Cambridge Modern History, Vol. XII. Mayer, J. P., Political Thought (1939), p. 464. Mowat, R. B., The Concert of Europe (1930), p. 23. Phillips, W. A., The Confederation of Europe, 1914 (2d ed., 1920). Lasswell, H. D., Politics, p. 53. Muir, R., Nationalism and Internationalism (1917), p. 176. Buell, R. L., International Relation (1929), p. 512.
2. Hundred Years’ Peace
1. The facts. The Great Powers of Europe were at war with one another during the century 1815 to 1914 only during three short periods: for six months in 1859, six weeks in 1866, and nine months in 1870–71. The Crimean War, which lasted exactly two years, was of a peripheric and semicolonial character, as historians including Clapham, Trevelyan, Toynbee, and Binkley agree. Incidentally, Russian bonds in the hands of British owners were honored in London during that war. The basic difference between the nineteenth and previous centuries is that between occasional general wars and complete absence of general wars. Major-General Fuller’s assertion that there was no year free of war in the nineteenth century appears as immaterial. Quincy Wright’s comparison of the number of war years in the various centuries irrespective of the difference between general and local wars seems to bypass the significant point.
2. The problem. The cessation of the almost continuous trade wars between England and France, a fertile source of general wars, stands primarily in need of explanation. It was connected with two facts in the sphere of economic policy: (a) the passing of the old colonial empire, and (b) the era of free trade which passed into that of the international gold standard. While war interest fell off rapidly with the new forms of trade, a positive peace interest emerged in consequence of the new international currency and credit structure associated with the gold standard. The interest of whole national economies was now involved in the maintenance of stable currencies and the functioning of the world markets upon which incomes and employment depended. The traditional expansionism was replaced by an anti-imperialist trend which was almost general with the Great Powers up to 1880. (Of this we deal in Chapter 18.)
There seems, however, to have been a hiatus of more than half a century (1815–80) between the period of trade wars when foreign policy was naturally assumed to be concerned with the furtherance of gainful business and the later period in which foreign bondholders’ and direct investors’ interests were regarded as a legitimate concern of foreign secretaries. It was during this hiatus that the doctrine was established which precluded the influence of private business interests on the conduct of foreign affairs; and it is only by the end of this period that chancelleries again consider such claims as admissible but not without stringent qualifications in deference to the new trend of public opinion. We submit that this change was due to the character of trade which, under nineteenth-century conditions, was no longer dependent for its scope and success upon direct power policy; and that the gradual return to business influence on foreign policy was due to the fact that the international currency and credit system had created a new type of business interest transcending national frontiers. But as long as this interest was merely that of foreign bondholders, governments were extremely reluctant to allow them any say; for foreign loans were for a long time deemed purely speculative in the strictest sense of the term; vested income was regularly in home government bonds; no government thought it as worthy of support if its nationals engaged in the most risky job of loaning money to overseas governments of doubtful repute. Canning rejected peremptorily the importunities of investors who expected the British government to take an interest in their foreign losses, and he categorically refused to make the recognition of Latin-American republics dependent upon their acknowledgment of foreign debts. Palmerston’s famous circular of 1848 is the first intimation of a changed attitude, but the change never went very far; for the business interests of the trading community were so widely spread that the government could hardly afford to let any minor vested interest complicate the running of the affairs of a world empire. The resumption of foreign policy interest in business ventures abroad was mainly the outcome of the passing of free trade and the consequent return to the methods of the eighteenth century. But as trade had now become closely linked with foreign investments of a nonspeculative but entirely normal character, foreign policy reverted to its traditional lines of being serviceable to the trading interests of the community. Not this latter fact, but the cessation of such interest during the hiatus stood in need of explanation.
T O C H A P T E R T W O
3. The Snapping of the Golden Thread
The breakdown of the gold standard was precipitated by the forced stabilization of the currencies. The spearhead of the stabilization movement was Geneva, which transmitted to the financially weaker states the pressures exerted by the city of London and Wall Street.
The first group of states to stabilize was that of the defeated countries, the currencies of which had collapsed after World War I. The second group consisted of the European victorious states who stabilized their own currencies mainly after the first group. The third group consisted of the chief beneficiary of the gold standard interest, the United States.
I. Defeated Countries
II. Victorious European Countries
III. Universal Lender
STABILIZED
STABILIZED
WENT OFF
GOLD
WENT OFF
GOLD
Russia
1923
Great Britain
1925
1931
U.S.A.
1933
Austria
1923
France
1926
1936
Hungary
1924
Belgium
1926
1936
Germany
1924
Italy
1926
1936
Bulgaria
1925
Finland
1925
Estonia
1926
Greece
1926
Poland
1926
The imbalance of the first group was carried for a time by the second. As soon as this second group likewise stabilized its currency, they also were in need of support, which was provided by the third. Ultimately, it was this third group, consisting of the United States, which was most hard hit by the cumulative imbalance of European stabilization.
4. Swings of the Pendulum After World War 1
The swing of the pendulum after World War I was general and swift, but its amplitude was small. In the great majority of countries of Central and Eastern Europe the period 1918–23 merely brought a conservative restoration following upon a democratic (or socialist) republic, the outcome of defeat; several years later almost universally one-party governments were established. And again, the movement was fairly general.
Country
Revolution
Counterrevolution
One-party
government
Austria
Oct. 1928 soc. dem. republic
1920 middle-class republic
1934
Bulgaria
Oct. 1918 radical agrarian reform
1923 fascist counter- revolution
1934
Estonia
1917 socialist republic
1918 middle-class republic
1926<
br />
Finland
Feb. 1917 socialist republic
1918 middle-class republic
—
Germany
Nov. 1918 soc. dem. republic
1920 middle-class republic
1933
Hungary
Oct. 1918 dem. rep.
Mar. 1919 soviets
1919 counterrevolution
—
Jugoslavia
1918 democratic federation
1926 authoritarian military state
1929
Latvia
1917 socialist republic
1918 middle-class republic
1934
Lithuania
1917 socialist republic
1918 middle-class republic
1926
Poland
1919 soc. dem. republic
1926 authoritarian state
—
Romania
1918 agrarian reform
1926 authoritarian regime
—
5. Finance and Peace
On the political role of international finance in the last half-century hardly any material is available. Corti’s book on the Rothschilds covers only the period previous to the Concert of Europe. Their participation in the Suez share deal, the offer of the Bleichroeders to finance the French War indemnity of 1871 through the issuance of an international loan, the vast transactions of the Oriental Railway period are not included. Historical works like Langer and Sontag give but scant attention to international finance (the latter in his enumeration of peace factors omits the mentioning of finance); Leathes’s remarks in the Cambridge Modern History are almost an exception. Liberal freelance criticism was either directed to show up the lack of patriotism of the financiers or their proclivity to support protectionist and imperialist tendencies to the detriment of free trade, as in the case of writers such as Lysis in France, or J. A. Hobson in England. Marxist works, like Hilferding’s or Lenin’s studies, stressed the imperialistic forces emanating from national banking, and their organic connection with the heavy industries. Such an argument, besides being restricted mainly to Germany, necessarily failed to deal with international banking interests.
The influence of Wall Street on developments in the 1920s appears too recent for objective study. There can be hardly any doubt that, on the whole, its influence was thrown into the scales on the side of international moderation and mediation, from the time of the Peace Treaties to the Dawes Plan, the Young Plan, and the liquidation of reparations at and after Lausanne. Recent literature tends to separate off the problem of private investments, as in Staley’s work which expressly excludes loans to governments, whether proffered by other governments or by private investors, a restriction which practically excludes any general appraisal of international finance in his interesting study. Feis’s excellent account, on which we have profusely drawn, comes near to covering the subject as a whole, but also suffers from the inevitable dearth of authentic material, since the archives of haute finance have not yet been made available. The valuable work done by Earle, Remer, and Viner is subject to the same unavoidable limitation.
T O C H A P T E R F O U R
6. Selected References to “Societies and Economic Systems”
The nineteenth century attempted to establish a self-regulating economic system on the motive of individual gain. We maintain that such a venture was in the very nature of things impossible. Here we are merely concerned with the distorted view of life and society implied in such an approach. Nineteenth-century thinkers assumed, for instance, that to behave like a trader in the market was “natural,” any other mode of behavior being artificial economic behavior—the result of interference with human instincts; that markets would spontaneously arise, if only men were let alone; that whatever the desirability of such a society on moral grounds, its practicability, at least, was founded on the immutable characteristics of the race, and so on. Almost exactly the opposite of these assertions is implied in the testimony of modern research in various fields of social science such as social anthropology, primitive economics, the history of early civilization, and general economic history. Indeed, there is hardly an anthropological or sociological assumption—whether explicit or implicit—contained in the philosophy of economic liberalism that has not been refuted. Some citations follow.
(a) The motive of gain is not “natural” to man.
“The characteristic feature of primitive economics is the absence of any desire to make profits from production or exchange” (Thurnwald, Economics in Primitive Communities, 1932, p. xiii). “Another notion which must be exploded, once and forever, is that of the Primitive Economic Man of some current economic textbooks” (Malinowski, Argonauts of the Western Pacific, 1930, p. 60). “We must reject the Idealtypen of Manchester liberalism, which are not only theoretically, but also historically misleading” (Brinkmann, “Das soziale System des Kapitalismus,” in Grundriss der Sozialökonomik, Vol. IV, p. 11).
(b) To expect payment for labor is not “natural” to man.
“Gain, such as is often the stimulus for work in more civilized communities, never acts as an impulse to work under the original native conditions” (Malinowski, op. cit., p. 156). “Nowhere in uninfluenced primitive society do we find labour associated with the idea of payment” (Lowie, “Social Organization,” in Encyclopedia of the Social Sciences, Vol. XIV, p. 14). “Nowhere is labour being leased or sold” (Thurnwald, Die menschliche Gesellschaft, Book III, 1932, p. 169). “The treatment of labour as an obligation, not requiring indemnification …” is general (Firth, Primitive Economics of the New Zealand Maori, 1929). “Even in the Middle Ages payment for work for strangers is something unheard of.” “The stranger has no personal tie of duty, and, therefore, he should work for honour and recognition.” Minstrels, while being strangers, “accepted payment, and were consequently despised” (Lowie, op. cit.).
(c) To restrict labor to the unavoidable minimum is not “natural” to man.
“We can not fail to observe that work is never limited to the unavoidable minimum but exceeds the absolutely necessary amount, owing to a natural or acquired functional urge to activity” (Thurnwald, Economics, p. 209). “Labour always tends beyond that which is strictly necessary” (Thurnwald, Die menschliche Gesellschaft, p. 163).
(d) The usual incentives to labor are not gain but reciprocity, competition, joy of work, and social approbation.
Reciprocity: “Most, if not all economic acts are found to belong to some chain of reciprocal gifts and countergifts, which in the long run balance, benefiting both sides equally.… The man who would persistently disobey the rulings of law in his economic dealings would soon find himself outside the social and economic order—and he is perfectly well aware of it” (Malinowski, Crime and Custom in Savage Society, 1926, pp. 40–41):
Competition: “Competition is keen, performance, though uniform in aim, is varied in excellence.… A scramble for excellence in reproducing patterns” (Goldenweiser, “Loose Ends of Theory on the Individual, Pattern, and Involution in Primitive Society,” in Essays in Anthropology, 1936, p. 99). “Men vie with one another in their speed, in their thoroughness, and in the weights they can lift, when bringing big poles to the garden, or in carrying away the harvested yams” (Malinowski, Argonauts, p. 61).
Joy of work: “Work for its own sake is a constant characteristic of Maori industry” (Firth, “Some Features of Primitive Industry” E. J., Vol. I, p. 17). “Much time and labour is given up to aesthetic purposes, to making the gardens tidy, clean, cleared of all debris; to building fine, solid fences, to providing specially strong and big yam-poles. All these things are, to some extent, required for the growth of the plant; but there can be no doubt that the natives push their conscientiousness far beyond the limit of the purely necessary” (Malinowski, op. cit., p. 59).
Social approbation: “Perfection in gardening is the general index to the social value of a person” (Malinowski, Coral Gardens a
nd Their Magic, Vol. II, 1935, p. 124). “Every person in the community is expected to show a normal measure of application” (Firth, Primitive Polynesian Economy, 1939, p. 161). “The Andaman Islanders regard laziness as an antisocial behaviour” (Ratcliffe-Brown, The Andaman Islanders), “To put one’s labour at the command of another is a social service, not merely an economic service” (Firth, op. cit., p. 303).
(e) Man the same down the ages.
Linton in his Study of Man advises caution against the psychological theories of personality determination, and asserts that “general observations lead to the conclusion that the total range of these types is much the same in all societies.… In other words, as soon as he [the observer] penetrates the screen of cultural difference, he finds that these people are fundamentally like ourselves” (p. 484). Thurnwald stresses the similarity of men at all stages of their development: “Primitive economics as studied in the preceding pages is not distinguished from any other form of economics, as far as human relations are concerned, and rests on the same general principles of social life” (Economics, p. 288). “Some collective emotions of an elemental nature are essentially the same with all human beings and account for the recurrence of similar configurations in their social existence” (“Sozialpsychische Abläufe im Völkerleben,” in Essays in Anthropology, p. 383). Ruth Benedict’s Patterns of Culture ultimately is based on a similar assumption: “I have spoken as if human temperament were fairly constant in the world, as if in every society a roughly similar distribution were potentially available, and, as if the culture selected from these, according to its traditional patterns, had moulded the vast majority of individuals into conformity. Trance experience, for example, according to this interpretation, is a potentiality of a certain number of individuals in any population. When it is honoured and rewarded, a considerable proportion will achieve or simulate it.…” (p. 233). Malinowski consistently maintained the same position in his works.