Economic Manipulation

Beginning around 1870, the major European powers Great Britain, France, Germany, Portugal, Belgium, Italy, Russia, and the Netherlands began carving up those areas of the globe inhabited by what they saw as "uncivilized" peoples. Thus European imperialism extended its rule of considerable portions of Africa and Asia. By the dawn of the twentieth century, many theories arose as to the causes of this new wave of imperialism. John Atkinson Hobson, who lived through this era of high imperialism, presented in his 1902 work, Imperialism: A Study, his own theory as to why this phenomenon was occurring. The purpose of this paper is to explore his theory on imperialism, following his logic and explaining why he draws the conclusions he does. In Imperialism, Hobson observes that imperialism is inefficient for Britain; it yields no great return or economic benefit to most people living in the imperial power, and Hobson seeks to determine why such an unprofitable system exists. According to Hobson's theory, imperialism arises from the generation of under-consumption and over-saving in the capitalistic economy of the home country. Powerful financiers seek investment opportunities with a high rate of return for their excess savings, driving them to invest in the "uncivilized" lands of Africa and Asia. These investors, looking to minimize risks on their investments while maintaining their high rate of return, use their influence to force their government to provide military protection and eventually to annex outright the areas in which they have invested. Thus, imperialism exists to further the interests of the investor class at the expense of the rest of the nation.

Hobson argues that despite the fact that most people do not benefit from imperialism, the rest of the nation supports these pursuits because of other, non-economic forces such as a sense of moral duty, religion, nationalism, the primitive human need for conquest, and political concerns. Investors offer these other factors as justifications for imperialism in order to mask the true reason for imperialism - to enrich themselves while the public foots the bill. These non-economic forces are "the motor-power of Imperialism" according to Hobson; they are the fuel that allows the economically driven engine to function properly.¹ Hobson therefore concludes that although these non-economic forces are not the real justifications for imperialism, they are powerful and necessary tools for the investors. But in order to understand Hobson's theory, we must explore why he was suspicious of imperialism to begin with, using the Boer War (1899-1902) as a starting point.

I. Imperialism's Inefficiency

The Boer War influenced Hobson greatly as he developed his theory on imperialism. The war began in 1899 between British settlers in South Africa and the Boers (Dutch settlers who had been living in Southern Africa for centuries) living mainly in the neighboring republics of the Transvaal and the Orange Free State. What ensued was a bloody and fierce war the effects of which were felt throughout Britain. Many Britons, Hobson among them, were left disillusioned by the high casualties, including approximately 20,000 British deaths, and the increase in taxes that the war demanded.. In addition, many were outraged by the British army's use of concentration camps for not only Boer prisoners of war, but also for many Boer women and children.²

In Imperialism, Hobson explains that the main cause of the war was British diamond and gold mine owners in South Africa wanting to annex Boer territory in order to acquire even more lucrative mines. Doing so was dangerous, so the owners invoked the help of the British military, drawing them into war.³ Hobson places blame squarely on Cecil Rhodes, the main South African imperialist and Prime Minister of the Cape Colony at the time of the Boer War. Hobson describes how Rhodes

. . . Used the legislature of Cape Colony to support and strengthen the diamond monopoly of De Beers, while from De Beers he financed the [Boer War-provoking Jameson] Raid, debauched the constituencies of Cape Colony, and bought the public press in order to engineer the war, which was to win him full possession of his great 'thought' the North.⁴

Hobson concludes that rich investors caused the war for their own benefit, while the rest of the British citizens were forced to pay for it. This angers Hobson, and from the Boer War he develops the crux of his theory on why such imperialism occurred.

Hobson's theory is designed to show why imperialism exists, even though it runs counter to the vast majority of Western Europeans' (and especially of Britons') interests. Therefore, Hobson begins by showing that imperialism is indeed irrational in the sense that it benefits the few at the expense of the many, yet most Britons still accepted and even encouraged it. Hobson points out in the early chapters of Imperialism that, despite the enormous resources and manpower spent on conquering and developing Africa and Asia, no significant economic benefits to the country as a whole are evident. Hobson argues that while investment in these places remains high, actual return is low. To prove that British foreign investment in particular was high, he shows that in 1884, for instance, British foreign investment in imperial regions was £33,829,124. By 1903 investment in those areas was £63,828,715.5 Although the accuracy of these figures has since been questioned by men such as D.K. Fieldhouse, for the purposes of understanding Hobson's argument, let us assume these numbers are correct and that it seems clear that British imperial investment nearly doubled between 1884 and 1903.

Hobson believes that trade is a good indicator of economic well-being and uses it in his analysis of the benefits of imperialism. He demonstrates that trade changed little during this period, indicating that benefits to the British economy from the colonies were low. Exports and imports to and from the newly acquired colonies scarcely rose at all between the years 1855 and 1903, which included the period of high imperialism in the late nineteenth century. Hobson notes that from 1855 to 1859, for example, Britain received 23.5% of its imports from its colonial possessions. In the same period, 31.5% of all British exports were to its colonial possessions. From 1900 until 1903, however, imports from possessions actually declined to only 20.7% of total imports. Goods shipped to colonial possessions during this same period had risen to only 37% of all exports.⁶ Thus Hobson, again assuming his figures are correct, shows that there is indeed no support for the saying that "Trade follows the flag." ⁷

Furthermore, Hobson observes in Imperialism that the areas that have been taken over by imperialists are not economically valuable, save for a few diamond mines here. He explains, "The distinctive feature of modern Imperialism, from the commercial standpoint, is that it adds to our empire tropical and sub-tropical regions with which our trade is small, precarious and unproductive."⁸ It is sufficient to say that these colonies, according to Hobson's statistics, have not generated any great benefit to the British economy. So why is it that the great powers of Europe spend a great deal of money and lose a great many lives in order to acquire these unproductive territories?

II. Hobson's Theory of Imperialism

Hobson's basic argument is that the economic forces of overproduction and under-consumption cause imperialism. Economic forces take precedence over other forces such as morality, nationalism, political reasons, social forces, etc., forming the "taproot of imperialism." A taproot is the main root in a plant from which smaller roots spring out. Hobson asserts that economic forces are therefore the main root of imperialism and from this main root springs smaller, non-economic forces. All roots are needed for the plant to grow, but the center root - economic forces - is the coordinating and most important root. Hobson argues that the economic forces of over-production and subsequent under-consumption spark a complex chain of events that result in imperialism. In order to understand this progression we must delve further into Hobson's theory.

The primary stimulus for the entire chain reaction is the capitalist system. Hobson explains that capitalism, by nature, creates a competitive environment in which goods and service are bought and sold. This competition leads firms to overproduce goods, as they think that the more of the goods they produce, the higher the profit they will make. Yet to their dismay, the consumers often do not absorb this extra supply leaving the market flooded with goods and driving the price of those goods down. When this happens, " . . . All the mills and factories can only be kept at work by cutting prices down towards a point where the weaker competitors are forced to close down, because they cannot sell their goods at a price which covers the true cost of production."⁹ This has the effect of concentrating an industry in the hands of a few financiers, throwing "an enormous quantity of wealth into the hands of a small number of captains of industry."¹⁰

A state of under-consumption ensues, which according to Hobson is caused in part by firms trying to compensate for the glut of goods from overproduction, but mainly results from the excessively low wages paid to industrial workers. Hobson argues that the investors lower their workers' wages in order to increase their own profits, but doing so means that the workers have less money to spend on goods. Hobson tells us, "Wages are based upon the cost of living, and not upon efficiency of labour."¹¹ Therefore even though more goods are being produced, the workers' wages are not increasing at the same rate so as to consume all of the goods produced. Investors squeeze wages in order to increase their own profits but in doing so they end up reinforcing the state of over-production and under-consumption.

The financiers, with reduced competition, reap handsome profits, leaving them with plenty of money to invest. Yet, despite the wealth of these investors, they will never spend (i.e., consume) enough to compensate for the over-production of goods and thus correct the under-consumption of the market. Indeed, Hobson tells us, "The rich will never be so ingenious as to spend enough to prevent over-production."¹² These investors cannot spend all of their wealth at home, so they begin saving. Because there is so much money, though, banks do not have to offer high, competitive interest rates. Driven by capitalistic greed, Hobson says that these financiers refuse to allow their savings to be left at low rates of interest in Britain, so they begin searching abroad for places to invest. Finding that foreign markets in industrialized nations are suffering from a similar under-consumption, Hobson concludes that the financiers seek new, lucrative, yet risky areas of investment - Africa and Asia.¹³

Investing in Africa and Asia can be very lucrative, but it is also very risky, so the financiers seek to minimize their risks in any way possible. There is always the threat of native unrest, native refusal to cooperate, or the interference in those investments by other European powers. Hobson states that the main way that investors protect their investments is by manipulating the governments of their home nations. The financiers in all industrial nations have established a powerful and even controlling influence upon their governments, and they subsequently induce these governments to use their power to mitigate the risks to the investors. Hobson explains:

[The investors] secure the active co-operation of statesmen and of political cliques who wield the power of "parties," partly by associating them directly in their business schemes, partly by appealing to the conservative instincts of members of the possessing classes, whose vested interest and class dominance are best preserved by diverting the currents of political energy from domestic on to foreign politics.¹⁴

Governmental involvement often begins as military intervention to protect industrial sites in Africa or Asia, but eventually investors realize that the only true way to protect their investments from the native inhabitants and from other capitalist nations is to annex those territories. The result is imperialism, caused by the economic forces of over-production and under-consumption at home, which are in turn by-products of an overzealous modern capitalist economy. But why does Hobson think imperialism is bad?

Hobson argues that imperialism, as an official national policy, does not benefit the vast majority of citizens in the imperial country - it hurts them. True, the investors do gain, and colonial wars and increased military protection do aid a nascent military-industrial complex. Yet the masses who pay and give their lives for imperialism do not reap any benefits from imperialism.¹⁵ The wealthy do not wish to pay for a policy of imperialism, so they divert the funding of imperialism (through the influence on their governments) to the masses. But such a large increase in taxation would not sit well with the bulk of the citizens, especially in democratic nations like Britain, where voters could turn against the government and elect new officials. Financing imperialism must therefore be done indirectly: "The people must pay, but they must not know they are paying."¹⁶ This indirect taxation usually involves raising duties on imports of necessities and chief luxuries. Yet, obviously, the voting public will know that they are losing their lives in the name of imperialism, and some may know what is behind the indirect tax scheme. So why, then, does the public accept imperialism? Simply put, the investors can succeed in deceiving the public because they make use of other, non-economic forces.

III. The Role Played by Non-Economic Forces

While economic forces such as over-production and under-consumption are clearly the driving force behind imperialism, Hobson makes it clear that such a policy cannot be pulled off without the existence of other forces - morality, religion, nationalism, the human need for conquest, control over domestic policies, and concern over rival imperial powers. The propaganda playing upon these forces usually defends imperialistic foreign policy by convincing the public that imperialism has virtuous aims. Hobson says that this notion is utterly false; investors manipulate these non-economic forces in order to gain public support for their personally beneficial imperialistic policies, despite the high cost to the public.¹⁷ Thus, although economic forces are still the taproot of imperialism, non-economic forces play a crucial role in keeping imperialism as a national policy.

Morality and religion play an important role in keeping the public willing to pay and die for an imperialistic national policy. Most of the time, according to Hobson, the professed moral aims of nations are merely lies, although Hobson does say that a few individuals might genuinely be motivated by such concerns.¹⁸ Yet any notion that the home country is pursuing imperialism in order to enlighten the African or Asian people whom they conquer is utterly false, although this justification is frequently used. The Europeans, as the saying went, carry a white man's burden. The imperialists allege that they " . . . organize and superintend the labour of the natives. By doing this they can educate the natives in the arts of industry and stimulate in them a desire for material and moral progress, implanting new 'wants' which form in every society the roots of civilization."¹⁹ Hobson even states that if this were indeed the true aim of imperialists, it would be acceptable:

The claim to justify aggression, annexation, and forcible government by talk of duty, trust, or mission can only be made good by proving that the claimant is accredited by a body genuinely representative of civilization, to which it acknowledges a real responsibility, and that it is in fact capable of executing such a trust.²⁰

But this is practically never the case.

Hobson has already shown that economic, not moral interests have perpetrated this policy of imperialism for their own ends. Hobson cites several examples of economic exploitation of subjugated peoples by British investors where moral issues seem to have no role whatsoever. Before 1897, for instance, the South Africa Charter Company was given the power to compel natives to work for the mining interests. Hobson notes, "…When the chiefs failed to provide labour, [they] sent out native police to 'collect the labour.'"²¹ If humanity or moral concerns were at all evident, this policy of forced labor would be outlawed. Yet economic concerns overpower any sense of morality in this instance.

Another example of British investors' exploitation of indigenous people occurred in Bechuanaland (modern-day Botswana) in 1897. A small riot occurred in that year amongst the native African people over a minor grievance with the British. This riot was easily stamped out by a small group of volunteers, but the diamond mine owners exaggerated this riot into a full-scale rebellion. Hobson says that the mine owners used this as an excuse to drive 8,000 natives from their land, which was then confiscated by the British government, even though this land had been guaranteed to the natives in the Bechuanaland Annexation Act of 1895.²² These 8,000 refugees, most of whom had not been involved in the riot, were then given the choice between "prosecution on a charge of sedition" or "service in the colony upon such conditions and with such rates of wages as the Government might arrange for a term of five years. As a result, "584 men, with three times as many women and children" became indentured servants to colonial farmers.²³ Moral concerns played very little role in making the decision to prosecute these individuals, especially since the actions of the British government in South Africa were illegal by the charter they had signed in 1895. Economics took a dominant role in this case, yet a play to morality was made, as the government labeled the incident a rebellion instead of merely a riot. The miners and the British government were thus able to claim that they had a moral obligation to step in so as to protect the people of the Bechuanaland. In this instance and with imperialism in general, morality becomes a powerful tool of manipulation in order to deceive the public into thinking that their investment of money and manpower is worthwhile, although economic forces are clearly dominant.

Nationalism and patriotism are also powerful forces that the investors use to manipulate public opinion through the press. Investors play upon nationalism, arguing that the country must pursue an imperialistic policy in order to keep up its prestige in competing with other imperialistic nations. Once again, this is not the real reason why imperialism takes place, but nationalism as a concept and an emotion is a manipulative weapon for investors. The financiers "are essentially parasites upon patriotism, and they adapt themselves to its protecting colours. In the mouths of their representatives are noble phrases, expressive of their desire to extend the area of civilisation, to establish good government, promote Christianity, extirpate slavery, and elevate the lower races." Indeed, what better aims could a nation have? The press becomes a powerful tool in manipulating this sense of nationalism with its jingoism and outright support of imperialism in many instances. Jingoism refers to strongly nationalist or propagandistic literature, often in the press, that usually calls for an aggressive or warlike foreign policy. Investors often control the press, according to Hobson, and they use it to generate enthusiasm for imperialism by playing to themes such as patriotism and nationalism.

Hobson says patriotism also taps into a basic human need for power. He explains, "Patriotism appeals to the general lust of power within a people by suggestion of nobler uses, adopting the forms of self-sacrifice to cover domination and the love of adventure." Here, it should be noted, Hobson makes a judgment about human nature in arguing that people inherently want to gain power relative to others. Hobson speaks of "the primitive instincts of the [human] race" and says " . . . the instinct for control of land, drives back to the earliest times . . ." This desire manifests itself in people in the form of a "sense of adventure" and this exciting factor causes people to become enthusiastic supporters of imperialism, which, in their eyes, is the conquering of the "savage" and unknown world. Normally, Hobson explains, people attempt to satisfy this urge through sport, but when the idea of imperialistic adventure is raised, there is simply no comparison to its attractiveness. An appeal to what Hobson sees as an innate human need for power is therefore a significant motivating force for imperialism.
Investors also use control over domestic policy issues to manipulate the public into supporting their economic aims. Imperialism serves as a way for the investors to control the people despite the democratic nature of several Imperial powers, especially in the country with the strongest democratic traditions - Great Britain. Hobson elaborates, "Not only is Imperialism used to frustrate those measures of economic reform now recognized as essential to the effectual working of all machinery of popular government, but it operates to paralyse the working of that machinery itself."²⁸ Imperialism not only diverts funding from what Hobson sees as much needed social reforms (namely raising working class wages and increasing public taxation of the wealthy and public expenditure), but it also allows the investors to become a virtual aristocracy.²⁹ One of the most dreadful consequences of imperialism is that education policy falls under the influence of investors because of their political influence, making it possible to teach the youth that imperialism is good and that the lack of popular control on the matter is not an area of concern. "Popular education," Hobson tells us, "instead of serving as a defence [against the manipulative tendencies of investors], is an incitement towards Imperialism."³⁰

Investors also use international political concerns to manipulate the public into supporting imperialism, exaggerating the threat posed by other European powers. Fear is a powerful motivating factor, and as long as the public is afraid that another nation will become significantly stronger than their own, whether this is true or not, then imperialism is allowed to proceed in the name of national security:

The theory that we may be compelled to fight for the very existence of our Empire against some combination of European powers, which is now used to scare the nation into a definite and irretrievable reversal of our military and commercial policy, signifies nothing else than the intention of the imperialist interests to continue their reckless career of annexation.³¹

Thus, investors use both international and domestic political issues to perpetuate their imperialistic policies.

Hobson points to another force, social concerns, but this force actually runs counter to those of economics and its subordinate forces. Hobson states that imperialism often aims to stop social reform because, to the chagrin of the investors, social reform can eliminate their excessive savings at home instead of abroad where they would be more profitably invested. The main social reforms Hobson discusses are raising wages or increasing public taxation - especially of the wealthy - and government expenditure. These reforms destroy the impetus for imperialism by solving the problem of under-consumption and over-production. As aforementioned, Hobson believes that imperialism results from investors wishing to fully employ their excess savings in an area with a high rate of return. By increasing taxation of the wealthy or the buying power of the working class, Hobson believes that the investors' excess savings would be employed at home and under-consumption would disappear. Without excess savings, there is no need to go abroad with investments, and thus no imperialism will occur.³² It is better for society, argues Hobson, if these savings are consumed by social reform. He states:

If, by some economic readjustment, the products which flow from the surplus saving of the rich . . . could be diverted so as to raise the incomes and the standard of consumption of the inefficient fourth [that percentage of the population with a living standard below bare efficiency], there would be no need for pushful Imperialism, and the cause of social reform would have won its greatest victory.³³

Imperialism is therefore not the only means through which excess savings can be invested, but the rich prefer it because they benefit personally. The alternative measures for spending their excess savings entail being taxed or spending their money for social programs. In other words, they would acquire no personal benefits from their excess savings. The investors thus use other forces to manipulate the government and people into adopting an imperialistic course of action. Nevertheless, social concerns as a force serve as an important alternative and balance to economic forces.

It is true that economic forces (over-production and under-consumption) dominate, organize, and control the imperialistic process, but the system would not work without other influences as well. These forces, although clearly subordinate to economic ones, are still necessary for the manipulation of the great mass of people who pay and are killed for imperialism.

IV. Conclusion

Hobson argues that imperialism is a product of capitalism. Capitalism and its profit motive generate over-production, which leads to concentration in industries. These new wealthy interests, though, cannot possibly spend enough to make up for the general under-consumption of the market (caused by the low wages they pay their workers in order to make even greater profits for themselves), and excess savings result. Unwilling to let these savings fail to realize maximum profit, investors place their money into risky, yet lucrative assets in the "uncivilized" lands of Africa and Asia. Then the investors, wishing to minimize their risks, induce their governments into giving their investments military protection and eventually to annex those areas in which they are invested. Hence, economic forces direct and drive imperialism

Other, non-economic forces are involved as well, although the economic forces control these other forces in order to manipulate the public into supporting imperialism. Most people do not benefit from imperialism - in fact most people are hurt by it, so in the interest of their own economic concerns, the investors play upon morality, religion, nationalism, the basic human desire for power, domestic policies, and the fear of rival imperial powers in order to sway public opinion. It is true that most of the propaganda appealing to these forces as applied is false - imperialism takes place for no other reasons but economic ones. Yet the public will not support such a narrow justification, and as long as they believe that one of these other forces is the real reason that imperialism takes place, even if it is a false belief, then they will support such a policy. Thus although economics are clearly the most important force behind imperialism, non-economic forces have a crucial role as well.