Imperialism and social reform english Social-Imperial Thought 1895-1914



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ON 'TERTIARY' INDUSTRY AND NEO-MERCANTILISM


One of the leading themes in the history of economic thought concerns productive and unproductive factors in an economy. The founders of modern political economy, the Physiocrats, began the debate by their assertion that only work on the land was genuinely productive, all other activities drew their parasitic sustenance from the land. David Ricardo placed the 'unproductive' label upon the landowner and Henry George was later to use the Ricardian law of rent as his argument for the expropriation of the landed property. Karl Marx regarded the worker as productive and the capitalist as unproductively fattening off the surplus value produced by labour. Theorists of protection have consistently vaunted the manufacturer as the productive element in economic life and have looked with the greatest suspicion upon those engaged in commerce.

Perhaps the most complete indictment of the merchant class was presented by the founder of the school of 'national,' protectionist economics, Friedrich List. List grounded his theory upon his rejection of the views of the classical economists, which he regarded as a mere theory of exchange values instead of one of productive powers. He was convinced that 'the power of creating wealth' was 'vastly more important than wealth itself.' 19 His National System of Political Economy lauded manufacturing and opposed 'that insane doctrine which sacrifices the interests of agriculture and manufacturing industry to the pretensions of commerce -- to the claims of absolute free trade'; this was 'the natural offspring of a theory too fully preoccupied with values, and too little with productive power, and which regards the whole world as simply a republic of merchants, one and indivisible.' 20

List was a Swabian bureaucrat turned professor of political economy at the University of Tübingen whose experiences in Germany and then in the United States of the early part of the nineteenth century had convinced him that Free Trade, al-

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19

Friedrich List, National System of Political Economy ( Philadelphia, 1856), p. 208.

20

Ibid., p. 341.

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though it might be good national policy for England, was bad policy for less industrially advanced countries which were thereby held in perpetual bondage to Britain. In his work on the 'national system,' he placed the element of nationality back into economics from which it had been expelled by the classical school. The classical school had confused the notions of private and public economy -- they were, List maintained, entirely different. Classical doctrine was based on a 'chimerical cosmopolitanism' which had 'no regard for national interests,' upon 'a disorganizing individualism,' upon 'a dead materialism,' which thought entirely of the profits of the moment and which took account 'neither of the moral nor of the political interests' of the future 'nor of the productive power of the nation.' 21 Classical doctrine was formulated in the interests of the merchant, List had asserted. The political economists evidently did not perceive

'that the merchants can attain their object, which is wealth, by profits upon the commodities which pass through their hands even at the expense of agriculture and manufactures, at the expense of productive power, nay, even at the expense of national independence. They are under no necessity from the nature of their operations and purposes of regarding the effect which the goods they import or export have upon the morality, the prosperity, or the power of their country. They deal in poisons as readily as medicines.'

The merchants were not concerned with even so important a matter as national employment. The 'interests of the merchants' were consequently opposed to those of the nation. 22

The Tariff Reformers were in many respects disciples of List, as can best be observed by their attitude toward what Colin Clark and other economists have described as 'tertiary industry.' Agriculture, the pastoral pursuits, forestry, hunting and fishing have been classified as primary industries; largescale manufacturing as secondary industry; the term tertiary industry has been used to include not only the principal branches of commerce, but also finance, transportation, communication, the service industries, and small-scale manufacture. During the last part of the nineteenth century, Great Britain found herself in the midst of such a tertiary develop-

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21

Ibid., p. 262.

22

Ibid., p. 341.

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ment, which profitable though it was, became the subject of Tariff Reform concern.

For the Free Trader the matter was quite simple. If Britain were faced with increasingly severe competition in the production of iron, steel, and woollens, she was certainly being amply compensated by her emergence as banker and common-carrier to the world and this was for the best. In accordance with the theory and ideal of the international division of labour, each nation would perform those functions for which it was best suited. If the immutable laws of economics had decreed that Great Britain could best function in the international economy as a centre of commerce and finance, the Free Traders welcomed the outcome, just as they had welcomed the previous decree banishing agriculture in favour of iron and cotton goods. In his study of Imperialism, Hobson presented this interesting brief in defence of tertiary industry:

'When a modern nation has attained a high level of development in those industrial arts which are engaged in supplying the first physical necessaries and conveniences of the population, an increasing proportion of her productive energies will begin to pass into higher kinds of industry, into the transport services, into distribution, and into professional, official, and personal services, which produce goods and services less adapted on the whole for international trade than those simpler goods which go to build the lower stages of a civilization. If this is true, it would appear that, whereas up to a certain point in the development of national life foreign trade will grow rapidly, after that point a decline, not in absolute size or growth but in relative size and growth, will take place. 23

This coincided substantially with the attitude of the LiberalImperialists who also -- witness Mackinder in 1900 -- were ready to see even an absolute decline in production while investments and 'services' bounded ahead.

The Tariff Reformers did not share this easy confidence. While the Free Trader saw Britain as a small production unit within an international, economic organism -- say, a brain within a huge, sprawling body -- the Tariff Reformer looked upon her as the organism entire, needing brain, and muscle,

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23

Hobson, Imperialism, pp. 30-31; see also Colin Clark, The Conditions of Economic Progress ( London: Macmillan, 1951), Chapters VII, IX, passim.

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and senses. The British organism, the Tariff Reformer believed, was engaged in a struggle for survival with other national organisms, which were waiting to strike her down in a moment of weakness. The atrophying of any of her faculties would mean irrevocable disaster. In such a world Britain could not afford to be dependent upon any other nation and must constantly be in a position to wage successful defence against inevitable attack. In such a world the growing of corn and the making of steel could never be replaced by the manufacture of biscuits and lucrative foreign investments.

In the parliamentary session of 1903, Chamberlain launched an attack on the new tendencies of British economic development. He spoke of the ludicrousness of a 'great Empire' founded on 'jam and pickles.' 24 The cry of 'jam and pickles' was shouted from Tariff Reform platforms up and down the country. Sir Gilbert Parker, one of the more active speakers and writers for the Tariff Reform cause, made this appeal to the economic intuition of Britons: 'Do you think that a man who carried a load represents as much capital, represents as much to the country, as the man who fills his carriage with the load? Is it to be believed that a dividend upon a ship is equal to the dividend which represents the profit of the goods carried in that ship?' 'I don't think so,' was Sir Gilbert's answer. 25 Furthermore, the Tariff Reformers saw the great increase in the rate of overseas investments not only as a betrayal of national welfare and strength for thirty pieces of silver but as being 'earned' by artifice as compared with the 'natural profits' of manufacturing. Once more we turn to Sir Gilbert Parker:

'I don't believe that the interest upon a safe and sound investment in railway bonds or foreign loans, takes any place as an alternative against those natural profits which come from good investment in manufactures which give employment to the working man, which keep in the country, actively engaged, that energy, that paying energy, which is necessary for its progress and development.' 26

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24

Quoted in A. S. T. Griffith-Boscawen, Fourteen Years of Parliament ( London: J. Murray, 1907), pp. 272-273.

25

Sir Gilbert Parker, A National Policy: Our Fiscal System and Imperial Reciprocity (Gravesend, n.d.), p. 10.

26

Ibid., p. 110.

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A detailed criticism of tertiary economics was made in the House of Commons, January 30, 1908, by Austen Chamberlain, who had been Balfour's Chancellor from 1903-05. The British economy was faced with chronic unemployment, Chamberlain began. This was due not to intemperance, nor to the lack of education on the part of the workers, as some Radicals had claimed. The cause was more basic. Britons could be divided into those occupied in 'non-productive work and those who were engaged in the service of their fellows in one form or another.' The 1901 Census had indicated an increase, over the Census of 1881, of 19% of those engaged in 'productive' work, and of 41.2% of those performing 'nonproductive' work. 'I think it is a very grave feature of our existing system that so many of our people are led into unproductive instead of productive labour.' Unproductive labour was the unskilled labour of carmen and dockers as well as much of the labour in commerce and service fields -- in a word, unproductive work was work in the tertiary industries:

'Here is a general movement which is turning off people from productive into distributing work; from manufacturing industries to trade distribution and service. I believe that that is responsible, in part . . . and a large part, for the fact that the unemployment has become chronic instead of merely spasmodic and seasonal; and if you want to go to the root of the matter you must increase the amount of productive labour for which the country can find occupation . . . one of the most essential reforms at which you must aim, if you are to deal with this growing question of unemployment, is that you ought to increase productive employment, then fiscal reform is the means by which you must do it.' 27

Unemployment, the Tariff Reformers were convinced, was largely due to the working-out of the system of the 'cosmopolitan' capitalists and would be removed by the policy of the 'self-contained' empire.

The neo-mereantilists argued that their opponents were incapable of using the state to solve the problem of unemployment. The Liberals were accused of focusing attention on such political and social questions as Irish Home Rule, or Welsh disestablishment, or temperance reform, or nonsectarian education, as if these were crucial questions affecting

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27

Parliamentary Debates, Fourth Series, CLXXXIII, 276-278, January 30, 1908.

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the condition of the working class. The Liberals had refused even to recognize that unemployment was a result of economic conditions which could be altered by state action. The Tariff Reformers pointed to statements made by Liberals, like the following which had appeared in a 1909 publication of the Free Trade Union: 'The causes of unemployment are not so much economic as social and they can no more be removed by a schedule of tariffs than can illness or immorality.' 28 This Liberal attitude was held up to ridicule in Tariff League publications. one cartoon pictured a ragged, patched, bearded workman, with cap and pipe, speaking to a tophatted, cigar-holding Asquith:

'Mr. Asquith: "What you wanted, my man, was a better education." Out-of-Work man: "What I want now, guv'nor, is more work".' 29

It is difficult to chart the position of agriculture in the neomercantilist programme. Imperial not national self-sufficiency was the objective of the Tariff Reformers and, in spite of some talk to the contrary, the Chamberlain programme was designed to help colonial, not home, agriculture. This circumstance made some rural Conservatives turn against it as a policy which left British agriculture 'out in the cold.' 30 Jesse Collings, a long-time personal friend of Joseph Chamberlain, had made himself the advocate of what can be called 'peasant proprietorship.' He urged that the Tariff Reformers win the farm labourer's vote by giving 'some prospect of a fair number of them being restored to the land,' but no detailed programme toward this end was set forth. 31 Principally, the Tariff Reformers saw the land as a source of social stability. The unemployed, who might otherwise be troublesome, could go 'back to the land' which served as a towering 'barrier against chaos.' Furthermore, the land could be a chief source of men for the armies needed to maintain Britain's empire, 32 cer-

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28

Free Trade Union, The ABC Fiscal Handbook ( London, 1909), p. 114.

29

Tariff Reform League, Policy of Tariff Reform ( London, n.d.).

30

J. A. Bridges, Reminiscences of a County Politician ( London, 1906), pp. 255-256, 179.

31

The Times, February 8, 1908, 6c.

32

Sir Gilbert Parker, The Land for the People; Small Ownership and Land Banks ( London, 1909?), pp. 9-10.

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tainly good mercantilist doctrine. Many Free Trade imperialists, too, thought in terms of the land as a source of armies. 33
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