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CHAPTER IV
AN UNRIPE IMPERIALISM

It was in the year 1898 that the United States made its earliest plunge into imperialism. Then for the first time we secured "dominions beyond the sea"; dominions too thickly populated to be adapted for purposes of colonisation. By our earlier conquests and purchases (Louisiana, Florida, Texas, California, New Mexico), we had secured relatively empty territories which a flow of emigrants from our Eastern States could rapidly Americanise. But in Porto Rico, the Philippines and Hawaii, there was neither prospect nor intention of colonising. The impulse that led to their taking was the desire to possess their wealth, to rule and "civilise" them, and above all not "to haul down the flag." It was an impulse not very different from that which led to the European partition of Africa.³

The change in our policy was startling. We had seemed, after the Civil War, to have reached a stage of satiety, to be through with expansion. Henceforth the ocean was to be our boundary; we were not, like the slave-owners before the war, to scheme for new lands in Central America and the Caribbean. When in 1867 Russia offered us a territory almost three times as large as Germany for a sum about equal to the value of the Equitable Building, we accepted only to oblige Russia and because we believed that we were in honour bound to buy. We refused to purchase St. Thomas and St. Johns, although Denmark offered to sell cheap, and we declined to annex San Domingo or to entertain Sweden's proposal to purchase her West Indian possessions. Again in 1893, instead of annexing Hawaii, we vainly sought to bolster up the sovereignty of a native Queen. Then suddenly Porto Rico, the Philippines and Guam were annexed; Hawaii was incorporated and Samoa was divided up with Germany.

In part this change in foreign policy was due to military considerations. The possession of Hawaii, Panama and Guantanamo in Cuba was obviously necessary for the defence of our coasts. Just as the Monroe Doctrine was intended to protect us from the approach of great military powers, so these new acquisitions were desired to pre-empt near-lying bases, from which, in enemy possession fleets might assail our trade or cut off our communications.⁴

Such strategic considerations, however, do not explain the whole of our new imperialistic policy. Economic motives played their part. We changed our foreign policy because at the same time we were undergoing a commercial and industrial revolution.

As a result of this industrial change our merchants had begun to think in terms of foreign markets and our financiers in terms of foreign investments. We had passed through the stage in which our industrial life was completely self-sufficing. We were becoming a manufacturing nation, requiring markets for the disposal of surplus products. We were, it appeared, being drawn into a great international competition, in which markets in China, South America and backward countries were the prizes. Simultaneously our foreign commerce had changed. Our growing population had made increasing demands upon our food products, leaving less to be exported, and at the same time our exports of manufactures had increased. In 1880 we exported manufactures (ready for consumption) to the value of ninety-three millions of dollars; in 1898 to the value of two hundred and twenty-three millions.

Other industrial factors tended also to bring about a change in our national ideals. We were beginning to believe in the economic efficiency of trust organisation, and our industry, conducted on a larger scale, was being increasingly concentrated. A new class was in financial control of our great industries. The trust magnate, the new conductor of vast industrial enterprises, was looking forward toward a strong unified banking control over industries and a definite expansion of American trade in foreign countries. American capitalists were beginning to believe that their economic needs were the same as those of the European capitalists, who were enticing their nations into imperialism.

Psychologically, also, we were ripe for any imperialistic venture, for we enormously exaggerated the progress we had made towards industrialisation, and were thinking in terms of Europe. We suddenly believed that we too were over-filled with capital and compelled to find an outlet for investments and trade. Innumerable editorials appeared, presenting the arguments for imperialism that had been urged ad nauseam in Europe. We could not resist, it was argued, the ubiquitous economic tendency toward expansion. In all countries, including America, capital was to become congested. An over-saving of capital, invested in manufacturing plants, produced far in excess of the possible consumption of the people. We had reached a stage of chronic over-production, in which increased saving and increased investment of capital would permanently outstrip consumption. Everywhere wealth was being heaped up; the savings-banks overflowed; the rate of interest fell and capital sought desperately for new investments. The capitalist system must either expand or burst.

Certain superficial developments in the United States formed the groundwork of these gloomy prophecies. We had just passed through a commercial depression, during which prices and interest rates fell and great numbers of workers were left unemployed. These facts were exploited by political leaders and industrial magnates, who thought in terms of the subordination of American foreign policy to the needs of big business. It is not surprising therefore that they became infected with the new imperialism, which in Europe had been growing steadily for over fifteen years, and that they came to the conclusion that America could not hold hands off while the markets and investment fields of the world were divided up among her rivals.

"The United States," wrote Charles A. Conant, one of the intellectual leaders of this movement (in 1898), "cannot afford to adhere to a policy of isolation while other nations are reaching out for the command of new markets. The United States are still large users of foreign capital, but American investors are not willing to see the return upon their investments reduced to the European level. Interest rates have greatly declined here within the last five years. New markets and new opportunities for investment must be found if surplus capital is to be profitably employed."

Like so many of the pamphleteers of 1898, Mr. Conant was convinced that imperialism offered the only cure "for the enormous congestion of capital." No civilised state, he contended, would accept the doctrine that saving should be abandoned. And while human desires were expansible, he doubted whether the demand for goods could possibly increase with sufficient rapidity to absorb the new productive capacities of the nation. "There has never been a time," he writes, "when the proportion of capital to be absorbed has been so great in proportion to possible new demands. Means for building more bicycle factories than are needed, and for laying more electric railways than are able to pay dividends, have been taken out of current savings within the last few years, without producing any marked effect upon their amount and without doing more, at the most, than to stay the downward course of the rate of interest."

It therefore follows conclusively that the American conquest of markets and fields for investment must go on. The method of such a conquest is of little importance. "In pointing out," he says, "the necessity that the United States shall enter upon a broad national policy, it need not be determined in just what manner that policy shall be worked out. Whether the United States shall actually acquire territorial possessions, shall set up captain generalships and garrisons, whether they shall adopt the middle ground of protecting sovereignties nominally independent, or whether they shall content themselves with naval stations and diplomatic representations as the basis for asserting their rights to the free commerce of the East, is a matter of detail."

I have quoted Mr. Conant at length because he is so largely typical of the state of mind of the American plutocracy in the year 1898. It would have been easily possible, however, to have presented any amount of confirmatory material of exactly the same nature. An article by W. Dodsworth in the October, 1898 number of the Nineteenth Century is along the same lines. Here again we read of an unprecedented industrial revolution during the preceding half century and a vast increase in foreign trade and accumulated wealth. Again we read of the falling rate of interest and of the failure of trusts and combines to resist the outside pressure of necessitous capital, seeking to force its way into industries. It was held quite impossible for consumption to absorb the products of an over-fertile industry. "I am no pessimist," writes Mr. Dodsworth, "but I cannot conceal my deep conviction that, if this relief is not forthcoming, a stage of grave industrial collapse, attended with the agitation of equally grave political issues, becomes only too probable, and the energies of our seventy-five millions of producers may have to be restrained until we learn to appreciate the penalty of our neglect of foreign enterprise."

Such were the arguments with which in 1898 the United States plunged into imperialism. We were to break out of the narrow circle which confined our economic life to become the work-shop of the world as England had once been, to export and export and ever increasingly export until all the nations should be our debtors. Our capital, like our wares, was to go to all countries. It flattered our pride when, a few years later, Europe trembled at the spectre of an American commercial invasion and even England wondered whether she could withstand the flood of cheap manufactured American goods, dumped on her shores. We pictured a vastly increasing trade with our new colonial possessions and with China; we envisaged opportunities, not only of an immense American investment, but of an even greater American trade.

What we believed of ourselves, Europe only too credulously believed of us. Leading European economists and publicists were completely convinced that the United States was irrevocably embarked on "the sea of imperialism." "The recent entrance of the powerful and progressive nation of the United States of America upon imperialism," wrote Prof. John A. Hobson in 1902, "… not only adds a new formidable competitor for trade and territory, but changes and complicates the issue. As the focus of political attention and activity shifts more to the Pacific States, and the commercial aspirations of America are more and more set upon trade with the Pacific Islands and the Asiatic coast, the same forces which are driving European States along the path of territorial expansion seem likely to act upon the United States."⁵ Professor Hobson and other foreign observers believed that our great trusts, which were being formed with reckless suddenness, would enormously increase the capital seeking an outlet, and that new imperialistic ventures would result. "Cuba, the Philippines, Hawaii," he insisted, "are but the hors d'oeuvre to whet an appetite for an ampler banquet."⁶

This development toward a congestion of capital, though confidently anticipated both in the United States and in Europe, did not take place. About the end of the century an enormous extension of the general field for foreign investment raised interest rates all over the world. The demand for capital grew with astonishing rapidity. In part this was due to British, French and German foreign investments, but it was also the result of a quickened economic tempo in all countries. New industries were created, wages rose (though in most countries not so rapidly as prices) and the outlets for the supposed superfluous capital were greater than ever.

Especially in the United States was the development contrary to that which had been anticipated. Capital was not rendered idle because of any slackening in the nation's consuming capacity, for the men of average and small income were able to purchase more than ever before. The farmers alone, whose property increased in value from twenty and a half billions of dollars in 1900 to forty-one billions in 1910 (an increase of over 100 per cent. as compared with less than 28 per cent. in the previous decade) added stupendously to a new demand for goods of all sorts. Of automobiles, unknown in 1898, there are in 1916 almost three millions. Innumerable other industries arose and expanded; the anticipated arrest of accumulation did not occur.

The result of this economic development soon made itself apparent. We discovered, fortunately for us, that we were not at this time to become the work-shop of the world. We could not continue to produce articles cheaper than England or Germany, and undersell these countries in their home markets. We discovered that our own country still furnished an admirable field for investment. While our foreign commerce increased, it continued to form only a small part of our whole trade. So long as vast new opportunities for the investment of capital in the United States presented themselves, we ceased to worry about foreign or colonial outlets, and for every dollar of American money invested in Porto Rico and the Philippines, hundreds of dollars were invested in the states. Our capital though accumulating at an ever-increasing rate, did not equal the demand.⁷

In other words, the conditions in America did not yet warrant an imperialistic policy. We were economically younger than we had thought; more elastic, with greater capacity for internal growth. As a result of this discovery, our sudden enthusiasm for dominions beyond the seas died down. We were disgusted and bored by the Philippine war; we hated the rôle of oppressors, in which we unwillingly found ourselves. We hated the water cure, punitive expeditions, and the endless controversies over the status of Filipinos under American law. The anti-imperialistic elements in America, men whose interests did not lie in foreign trade and speculation, stolidly opposed the retention of the islands. Had the election of 1900 been fought upon this single issue it would probably have been won by the anti-imperialists. Even though we kept the islands, we set definite limitations to our imperialistic ventures. We secured for the Philippines an administration which prevented the exploitation of the natives and the importation of Chinese labour. We set our faces against any policy of sacrificing the interests of the indigenous population to the interests of American financiers. And to-day, could we do it with due regard to the interests of the Filipinos, we would retire from the archipelago.

As we look over this experiment, we cannot help recognising that it was a precocious, an unripe imperialism. For us it was too early to secure Asiatic islands; too early to worry about American investments in foreign lands. It was an imperialism carried out somnambulistically. Our taking the Philippines was an accident, unforeseen and undesired.⁸ Our hope of being the work-shop and banking centre of the world, of being the heart of a great empire like that of Britain, and of doing all this within a short period, was a dream, which vanished with the new demands made upon American capital by an increasing economic expansion.

The truth is that this unripe imperialism did not represent the interests of the majority nor even of any considerable group of our capital owners. It was doomed to disappearance once the revival of American industry offered opportunities, not only for the ordinary capitalist, but for that more speculative investor, who in other countries clamours for imperialism. The experiment revealed, however, that the same forces which act upon capital in Europe act also upon capital in America, and that the United States, given the right conditions, is liable to the same ambitions as are imperialistic countries and is as likely to engage in war to satisfy these ambitions. The imperialistic trend acts upon all nations at a given stage in their economic development. It cannot be stopped by traditions of peacefulness or by mere protestations, however sincere. It is a part of the great economic strife, out of which devastating wars arise.

CHAPTER V
FACING OUTWARD

While the imperialistic venture of 1898 was premature and did not lead, as had been expected, to a conscious participation of America in the international scramble for colonies, it affected our national thinking and forced us to re-consider the position of America in relation to the ambitions and plans of other great nations. Our acquisition of new dependencies led us to recognise that we were at last a world power, with the responsibilities of a world power. We were obliged to learn from England and other imperialistic nations the lessons of colonial administration. Year by year we were drawn into closer relations with the West Indies and the Caribbean countries, and were compelled to assume financial control of Hayti and San Domingo in the interest both of foreign capital and of the countries themselves. The completion of the Panama Canal increased our sense of international danger and international responsibility. Finally the revolution in Mexico proved to us that whatever our positive action we could not remain passive.

Our Monroe Doctrine also, which had always seemed our charter of independence of Europe, forces us in the end to come to an understanding with Europe. We had set our faces against European conquest in the Americas, and therefore against any punitive expedition, likely to lead to permanent occupation. But if we protected Hayti and San Domingo from Europe, we assumed a certain responsibility for the actions of these countries. In the existing state of international law, a nation assumes the right to protect its citizens from spoliation and to compel debtor countries to meet their obligations. In this right to collect debts by force of arms, which has been the excuse for innumerable imperialistic extensions, all the great creditor nations are interested. Had the United States refused to intervene in San Domingo, while forbidding the great powers to secure redress by threats, we might possibly have been forced to fight against overwhelming odds in defence of a people and cause, for which we had little sympathy. By its very prohibitions the Monroe Doctrine compels us increasingly to intervene between the weaker Latin-American countries and the warlike creditor nations of Europe.

The gradual extension of the Doctrine, moreover, vastly increases our possible area of friction with Europe. Originally planned to prevent European nations from conquering parts of the Americas, the Doctrine has now been extended to forbid foreign corporations subsidised or controlled by an Old World government to acquire any land in the Americas which might menace the safety or communications of the United States. Our action in Mexico indicates that we are determined not only to prevent Europe from introducing monarchical institutions into American countries, but to insist that those countries themselves adhere to the outward forms of popular government. Secretary Olney was speaking no doubt largely for home consumption when he declared that "the United States is practical sovereign on this continent (hemisphere), and its fiat is law upon the subject to which it confines its interpretation." Nevertheless the extension of control either by the United States or some group of powers is almost inevitable, and with the widening of the Monroe Doctrine, as a result of closer relations between Latin America and the Old World, the necessity for some arrangement between the United States and the great European powers becomes increasingly obvious.

Our possession of Hawaii and the Philippines acts in the same manner. In a military sense the Philippines are indefensible; we cannot secure them against a near-lying military power. Nor can we in the present stage of national feeling permit them to be conquered. Consequently we watch the actions of Japan with quite different feelings than if we had not given her provocation and a bait. The building of the Panama Canal equally increases our international liabilities. It contributes a vast new importance to the Caribbean Sea and adds a new weak point to American territory. Having built and fortified the canal, we are compelled to think of ways and means of defending it, of armies, navies, ententes and alliances.

While all these factors, however, have contributed to our changed point of view, it was the World War which most completely revealed to Americans the necessity of accommodating our national development to that of other countries. The war proved that we were in a military sense vulnerable; that undisciplined citizen soldiery was no match for trained armies; that mere distance is no complete safety, and that the initial advantage, which accrues to the prepared nation is out of all proportion more valuable than later victories. The war showed that unarmed neutrality and a mere lack of hostile intention does not always save a nation from invasion. Moreover, we discovered that our interests were affected favourably or adversely by a conflict, in which we had no direct part. We, who had always conceived ourselves as a supremely disinterested nation, a remote island in the blue sea, began to ask whether it was to our advantage to have France defeated, Belgium destroyed, Germany crushed, the British Empire disintegrated. We began to ask how our national interest was affected by the international competition for colonies, by the freedom or unfreedom of the seas, by the extension of the right of blockade, by the abrogation of established laws of warfare; and what the effect upon us would be of an economic alliance against Germany by the Allied Western Powers. In other words, we discovered a real national interest in international arrangements created by the war or to be established after the war.

Our first preoccupation was naturally one of defence. We looked outward, but only saw armed nations ready to seize upon our wealth and territory. Responsible authors predicted that the victor in this war would at his leisure move across the ocean and despoil the United States. From ponderous puerilities of this sort to the lurid descriptions of massacre and pillage, vouchsafed us by magazine and moving picture writers, was a short step. More serious arguments prevailed, and in the end a large addition was made to our military and naval forces. But the whole campaign was based solely upon the theory of defence, and the theory so formulated, was merely a continuation of the policy of isolation. It involved the idea that we were to act alone and protect ourselves alone against all nations. It did not concern itself with our national aims. It was not based upon a definition of our relations to Europe and to the several nations of Europe.

As our preparations increase, however, and as we realise how insufficient our force must be against a European coalition, we shall be faced with the alternative of entering into agreements or alliances (to make our defence real) or into some other policy, which might make defence unnecessary. In either case we must face outward, must look at the world as it is and is to be, and define our relation to Europe. We must substitute a positive for a negative policy.

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

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

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

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

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

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

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