From its birth in the 1870s to the end of WWII in 1945, the imperialist world order was characterized by rival great powers and the shifting mutually antagonistic blocs they formed. While British imperialism was overall the most dominant, the period as a whole was not defined by the hegemony of a single power. The multipolar character of imperialism, an expression of the inherently competitive and antagonistic nature of capitalism on a global stage, was accompanied by a commitment by most imperialist states to protectionism and colonialism as tools of exploitation and the accumulation of wealth. This contradiction-ridden global system culminated in two inter-imperialist conflagrations in the first half of the 20th century.
Imperialism was born as monopoly capitalism emerged, first in Britain and then in other advanced capitalist countries in Europe and North America, during a period not of economic boom but of bust. An overaccumulation of capital had led to the Long Depression of 1873–96, which accelerated the processes of concentration and centralization of capital described by Karl Marx during the “free competition” era of industrial capitalism. In his book, The Long Depression, Marxist economist Michael Roberts explains the underlying causes:
“Industrial production growth slowed down because capital investment slumped. Capital investment slumped because the profitability of capital took a dive from the early 1870s and stayed low until the mid-1890s. There were a series of recessions and weak recoveries, and different economies experienced various levels of severity and recovery, but all experienced lower growth, lower investment, lower prices, and, above all, lower profitability.”
Reacting to the crisis, large companies displaced and absorbed weaker competitors, as free competition increasingly gave way to a kind of parasitic and fragmented economic planning conducted by the growing monopolies and oligopolies, integrating production vertically down the supply chain as well as horizontally. Banks, particularly those in upstart powers like Germany, surpassed their previous status as mere financial lubricants of industrial activity to fuse with industrial capital in what the Austrian Marxist economist Rudolf Hilferding called “finance capital.” The spread of the limited-liability joint-stock corporation reduced the dependence of large enterprises upon the fortunes and personal management of individual proprietors. By mobilizing dispersed money-capital, making ownership claims transferable and enabling capital to be gathered on an unprecedented scale, the corporate form facilitated both the centralization and monopolization of production and the growing power of banks, securities markets and financial capital.
By the time of the economic boom that ended the Long Depression at the end of the 19th century, giant finance capital oligopolies had come to dominate the national economies of America and Europe. They had, moreover, essentially merged with their national states through corruption, permeable barriers between political and economic overlordship and the sheer economic weight of monopoly.
Monopoly capitalism transformed the relationship between the leading capitalist countries on the one hand and non- or semi-capitalist societies on the other. Pre-existing colonial relationships established by Europeans with so-called backward regions of the world had contributed to the growth of monopoly capitalism, which subordinated the colonies and semi-colonies to processes of capitalist accumulation in the pioneer capitalist countries. In the first few centuries of capitalism, powerful mercantile interests in Europe had grown through the opening up of new markets in, and export of raw materials from, regions of the world that were subject to a spectrum of colonial domination—from settler colonialism and the genocide of indigenous peoples (e.g., in North America) to the establishment of minority colonial administrations of vast territories (e.g., the British Raj in India).
This early, mercantile form of capitalist expansion led to relatively little investment in the colonies. However, with the crises of the 1870s, capital was increasingly forced by the declining rate of profit in European manufacturing and agriculture towards the colonial frontier. At first this was concentrated in the more developed settler colonies, e.g., in the railroads of the American West, Brazil and the Antipodes. When colonial infrastructure proved unable to bear the weight of this investment, and the depression spread to these countries as well by the 1880s, capital was sent farther afield—to the rapidly expanding system of colonies in Africa, or East Asia.
Unlike during the era of free competition, capitalism in its new monopoly stage—both during the Long Depression but also in the subsequent period of economic upswing—depended more and more on capital export. In his seminal work on the subject, Imperialism, the Highest Stage of Capitalism (1916), V.I. Lenin explained:
“As long as capitalism remains what it is, surplus capital will be utilised not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries. In these backward countries profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, raw materials are cheap. The export of capital is made possible by a number of backward countries having already been drawn into world capitalist intercourse; main railways have either been or are being built in those countries, elementary conditions for industrial development have been created, etc. The need to export capital arises from the fact that in a few countries capitalism has become ’overripe’ and (owing to the backward state of agriculture and the poverty of the masses) capital cannot find a field for ’profitable’ investment.”
In his book, Imperialism and World Economy (1915), Nikolai Bukharin, who shared Lenin’s programmatic and theoretical framework, noted that capital export in the age of monopoly capitalism “has acquired an extraordinary significance, the like of which it never had before. The specific weight of this form of international economic intercourse has so increased, that to a certain degree we may even speak of a new type of economic interrelationship between countries.” Bukharin observed that the massive increase in capital export, driven by the crisis tendencies of capitalism, contributed to a growing “internationalization” (or what we today might call “globalization”) of economic life, drawing together previously unconnected societies. Lenin observed that economic internationalization through capital export had placed giant corporations at the center of an emerging global economy, with more or less exclusive “spheres of influence” claimed by the monopolists:
“Monopolist capitalist associations, cartels, syndicates and trusts first divided the home market among themselves and obtained more or less complete possession of the industry of their own country. But under capitalism the home market is inevitably bound up with the foreign market. Capitalism long ago created a world market. As the export of capital increased, and as the foreign and colonial connections and ’spheres of influence’ of the big monopolist associations expanded in all ways, things ’naturally’ gravitated towards an international agreement among these associations, and towards the formation of international cartels.”
Given the fusion of finance capital with the national state, the emergence of “spheres of influence” for capital export by the corporations led to the creation of an imperialist state system. Lenin noted: “The epoch of the latest stage of capitalism shows us that certain relations between capitalist associations grow up, based on the economic division of the world; while parallel to and in connection with it, certain relations grow up between political alliances, between states, on the basis of the territorial division of the world, of the struggle for colonies, of the ’struggle for spheres of influence’.”
Capital was exported from the advanced capitalist countries not only to the colonies and semi-colonies but to other advanced capitalist countries as well. The internationalization of economic life is a general tendency of capitalism, and it both deepens the exploitative relationship between finance-capital powers and subjugated peoples and fosters the integration of finance capital from different advanced capitalist countries. Bukharin described in detail the phenomenon of international finance capital syndicates and cartels, which he viewed as expressions of the “internationalization of capitalist interests,” i.e., the tendency towards the fusion of the ruling classes of the advanced capitalist countries.
Could the growing together of the finance capital of the different advanced capitalist countries lead to the formation of a unified international monopolist bourgeoisie collectively exploiting the colonial and semi-colonial world? Karl Kautsky, the leading theoretician of the Second International, believed that it could:
“There is no economic necessity for continuing the arms race after the World War, even from the standpoint of the capitalist class itself, with the exception of at most certain armaments interests. On the contrary, the capitalist economy is seriously threatened precisely by the contradictions between its States. Every far-sighted capitalist today must call on his fellows: capitalists of all countries, unite! For, first of all, there is the growing opposition of the more developed of the agrarian zones, which threatens not just one or other of the imperialist States, but all of them together. This is true of the awakening of Eastern Asia and India as well as of the Pan-Islamic movement in the Near East and North Africa.”
—“Ultra-Imperialism,” 1914
Kautsky argued that imperialism, which he defined as “the striving of every great capitalist State to extend its own colonial empire in opposition to all the other empires of the same kind,” was a “policy” that was no longer serving the interests of capital and that it “represents only one among various modes of expansion of capitalism.” Drawing an analogy with the growth of monopolies out of capitalist competition, Kautsky suggested that “the result of the World War between the great imperialist powers may be a federation of the strongest, who renounce their arms race”:
“Hence from the purely economic standpoint it is not impossible that capitalism may still live through another phase, the translation of cartellization into foreign policy: a phase of ultra-imperialism, which of course we must struggle against as energetically as we do against imperialism, but whose perils lie in another direction, not in that of the arms race and the threat to world peace.…
“From the purely economic standpoint, however, there is nothing further to prevent this violent explosion finally replacing imperialism by a holy alliance of the imperialists. The longer the War lasts, the more it exhausts all the participants and makes them recoil from an early repetition of armed conflict, the nearer we come to this last solution, however unlikely it may seem at the moment.”
Lenin and Bukharin did not deny that a period of peace between the capitalist great powers was conceivable. They rejected, however, the prospect that in the future there could be any stable stage of peaceful, internationally cooperative capitalism. Lenin pointed to the fact that “periods of imperialist peace” were merely preparatory to “periods of imperialist war.” Bukharin provided a materialist analysis of a powerful counter-tendency towards the “nationalization of capitalist interests”:
“Capital export unusually sharpens the relations between the great powers. Already the struggle for opportunities to invest capital, i.e., the struggle for concessions, etc., is always reinforced by military pressure. A government or a ’country’ subjected to the manipulations of the financiers of the great powers ordinarily yields to that party which appears to be the strongest militarily. When some pacifists (particularly their English brand) try to influence the ruling classes by logical reasons, when they try to persuade them to disarm on the ground that commodities are supposed to find a market independently of the number of dreadnaughts, they will be cruelly disappointed. For the ’peaceful’ policies that were pursued before the war, and will be pursued after it, were always and everywhere reinforced by the threats of military power.”
Finance capital requires the threat and exercise of violence by the state to conduct its business at home and abroad. While the tendency for finance capital to grow together across national lines is real and observable, so too is the tendency for finance capital to identify first and foremost with the national state it relies on to secure access to market share, natural resources and areas of investment. Bukharin perhaps overstated the degree to which finance capital creates “a very strong tendency towards transforming the entire national economy into one gigantic combined enterprise under the tutelage of the financial kings and the capitalist state, an enterprise which monopolises the national market and forms the prerequisite for organised production on a higher noncapitalist level.” Nevertheless, he was correct in identifying the tendency that pushes in that direction. At least in large and complex capitalist societies, there continue to be significant divisions within the ruling class, though these divisions are constantly shifting and overlapping. Finance capital is the organization of the upper echelons of the capitalist ruling class into interlocking networks of profit-making. These networks are tied by “a thousand threads” to the capitalist state, which articulates a “national” interest and which is increasingly militarized as it confronts other capitalist states organizing the interests of other national finance capitals.
More fundamentally, it is the inherently uneven development of capitalism that causes the tendency towards the “nationalization” of capitalist interests to undermine and eventually overtake the tendency towards the “internationalization” of capitalist interests. Bukharin noted, for instance, that “the existing differences of economic structure and consequently of production-costs make agreements disadvantageous for the advanced ’national’ groups.” Lenin put the matter more clearly and forcefully:
“[T]he only conceivable basis under capitalism for the division of spheres of influence, interests, colonies, etc., is a calculation of the strength of those participating, their general economic, financial, military strength, etc. And the strength of these participants in the division does not change to an equal degree, for the even development of different undertakings, trusts, branches of industry, or countries is impossible under capitalism. Half a century ago Germany was a miserable, insignificant country, if her capitalist strength is compared with that of the Britain of that time; Japan compared with Russia in the same way. Is it ’conceivable’ that in ten or twenty years’ time the relative strength of the imperialist powers will have remained unchanged? It is out of the question.
“… in the realities of the capitalist system, and not in the banal philistine fantasies of English parsons, or of the German ’Marxist,’ Kautsky, ’inter-imperialist’ or ’ultra-imperialist’ alliances, no matter what form they may assume, whether of one imperialist coalition against another, or of a general alliance embracing all the imperialist powers, are inevitably nothing more than a ’truce’ in periods between wars. Peaceful alliances prepare the ground for wars, and in their turn grow out of wars; the one conditions the other, producing alternating forms of peaceful and non-peaceful struggle on one and the same basis of imperialist connections and relations within world economics and world politics.”
—Imperialism, the Highest Stage of Capitalism
It is clear from this that Lenin did not hold a static view of the status or ranking of countries within the global economic system. Before the 1870s, only Britain approximated the advanced capitalism, financialization and colonial monopolies that were characteristic of the later imperialist stage. It was the Long Depression, the flight of capital towards the frontier and the erosion of Britain’s monopoly on colonial trade that compelled its continental rivals to develop comparable systems of monopoly capitalism, colonial trade and military power. However, in most of these rivals, capitalism was still fettered by vestiges of feudalism, peasant agriculture and immature industrial bases kept alive through heavy state intervention and protections.
Tsarist Russia was one of the great powers, but it combined advanced capitalism with “backward” economic forms as a result of uneven development. In The History of the Russian Revolution, Leon Trotsky argued:
“Unevenness, the most general law of the historic process, reveals itself most sharply and complexly in the destiny of the backward countries. Under the whip of external necessity, their backward culture is compelled to make leaps. From the universal law of unevenness thus derives another law which, for the lack of a better name, we may call the law of combined development—by which we mean a drawing together of the different stages of a journey, a combining of separate steps, an amalgam of archaic with more contemporary forms.”
Capital export had enmeshed the globe in capitalist relations and produced combined social formations like Russia and Japan that had, to varying degrees, both finance capital and semi-feudal backwardness. The imperialist countries were never uniform in their level of development, and Lenin believed that their relative fortunes would necessarily change over time. Such instability in the economic foundations of the global system could yield only temporary alliances. Contrary to Kautsky, who defined imperialism as merely one possible “policy” of monopoly capitalism, Lenin insisted that there was an essential identity between imperialism and monopoly capitalism, and the imperialist “stage” of capitalist development on a global scale entailed the integration and “dividing up” of the entire world by rival imperialists:
“If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism. Such a definition would include what is most important, for, on the one hand, finance capital is the bank capital of a few very big monopolist banks, merged with the capital of the monopolist associations of industrialists; and, on the other hand, the division of the world is the transition from a colonial policy which has extended without hindrance to territories unseized by any capitalist power, to a colonial policy of monopolist possession of the territory of the world, which has been completely divided up.”
—Imperialism, the Highest Stage of Capitalism
Lenin’s view was that, in a world which had already been “divided up” by the imperialists, the constantly changing fortunes and uneven development of capitalism would inevitably generate inter-imperialist rivalry and military conflict. He eviscerated Kautsky for generalizing the “peaceful” interlude between wars into the possibility of a stable, higher phase of “ultra-imperialism”:
“in order to pacify the workers and reconcile them with the social-chauvinists who have deserted to the side of the bourgeoisie, over-wise Kautsky separates one link of a single chain from another, separates the present peaceful (and ultra-imperialist, nay, ultra-ultra-imperialist) alliance of all the powers for the ’pacification’ of China (remember the suppression of the Boxer Rebellion) from the non-peaceful conflict of tomorrow, which will prepare the ground for another ’peaceful’ general alliance for the partition, say, of Turkey, on the day after tomorrow, etc., etc. Instead of showing the living connection between periods of imperialist peace and periods of imperialist war, Kautsky presents the workers with a lifeless abstraction in order to reconcile them to their lifeless leaders.”
Events leading up to World War I demonstrated clearly, for those not deluded by the wish to reform away the contradictions of capitalism, that imperialist thirst for expansion would generate inter-imperialist rivalry and war. The “Scramble for Africa,” which began in the early 1880s and lasted until the eve of WWI, is the prime example of “the struggle for colonies, of the ’struggle for spheres of influence’” that Lenin described. In 1870, approximately 10 percent of Africa was controlled by European states; by 1914, the figure had risen to 90 percent. The major players in the “scramble” were Britain, France and Germany, which, at the Berlin Conference of 1884-85, established a framework for colonizing Africa, thus ensuring markets, access to natural resources and fields for profitable investment. The aim of the Berlin Conference was to allow for annexation of territory while avoiding military clashes among the colonial powers.
Yet the balance of economic forces of 1885 was not the balance of economic forces of 1914, as the intervening period was one of decline for British imperialism and rise for German and US imperialism. In 1885, Britain—known as the “workshop of the world”—had accounted for 27 percent of global manufacturing, already down from 32 percent in 1870. By 1913, that figure had dropped still further to 14 percent, while Germany and the US now accounted for 16 percent and 36 percent, respectively (League of Nations, Industrialization and Foreign Trade, 1945). The dream of “peaceful” imperialist cooperation, which was never peaceful for colonized peoples, was shattered by the outbreak of the first inter-imperialist “world” war.
On 3 August 1914, British foreign secretary Sir Edward Grey remarked that “the lamps are going out all over Europe,” as the continent was plunged into an apocalyptic war that would last more than four years, leaving Europe in ruins and 10 million people dead. The victory of Britain, France and (after it joined the fighting in 1917) the United States over Germany and Austro-Hungary gave a boost to the imperialist powers of the Triple Entente (Tsarist Russia had fallen to workers’ revolution in October 1917 and formally withdrew from the war the following spring). But that victory did not reverse the decline of British imperialism, nor did it fundamentally transform the underlying economic reality of rising German and American imperialism, though a humiliated Germany was plunged into crisis. The post-WWI “peace” could only be the interlude between the “war to end all wars” and its sequel.
Bukharin identified “a general tendency towards protecting the ’national economies’ by a high tariff wall” on the part of the competing imperialist powers. Protectionism—which can also involve non-tariff barriers, subsidies to industry and embargoes—was embraced by finance capital that was too weak to compete fully with stronger rivals. Although a declining power when it entered the age of imperialism, Britain remained the industrial powerhouse of the late 19th century. Marxist historian Eric Hobsbawm notes that Britain was “in a position to develop its international trade to an abnormal extent, simply because of the monopoly of industrialization, and of relations with the underdeveloped overseas world which she succeeded in establishing between 1780 and 1815.” Hobsbawm adds: “In a sense her industry expanded into an international vacuum, though parts of it were empty because they had been cleared by the activities of the British navy, and were kept empty because rival trading powers were unable to leap across the British-controlled high seas” (Industry and Empire).
In the 1840s, Britain had embraced free trade, and even with the development of monopoly capitalism, London promoted free trade both inside and outside of its vast colonial empire because British companies could successfully compete with rivals for markets and investment opportunities. Hobsbawm describes the contradictory relationship that the newly industrializing economies of continental Europe had with British free trade:
“An advanced country in the process of industrialization would initially need Britain, because—in the early stages at all events—it would benefit by drawing on the unique supply of capital, machinery and technical skill of Britain, and sometimes it had no alternative. Time and again we find on the continent of Europe the first factories or machine-workshops started by some Englishman, the first native machines copied from some British design.”
Once industrialization took off, however, a rising industrial country’s strategy would shift away from free trade towards protecting domestic industries from British competition, as Hobsbawm explains:
“Even when other ’advanced’ economies were small and struggling, their interest was divided between the urge to speed their own development by drawing on the resources of Britain and the urge to protect themselves against British industrial supremacy. Once they had made what use they could of Britain, they would inevitably tend to veer towards protectionism, unless of course they had advanced so far as to be able to undersell the British. In this case the British might well have to think of protecting themselves and their markets in third countries against them.”
With the onset of the Long Depression in 1873 and the subsequent growth of finance capital, “the situation of the ’advanced’ world was one of rivalry between developed countries; and what is more countries of whom only Britain had a built-in interest in total freedom of trade.” Especially after 1880, most imperialist countries turned increasingly towards tariff barriers and other forms of protectionism. Britain’s growing imperialist rivals, above all Germany and the US, were incubating their own finance capitalism behind tariff walls with considerable success. Hobsbawm notes: “By the early 1890s the USA and Germany both passed Britain in the production of the crucial commodity of industrialization, steel. From then on Britain was one of a group of great industrial powers, but not the leader of industrialization. Indeed, among the industrial powers it was the most sluggish and the one which showed most obvious signs of relative decline.”
It is not surprising that, eventually, Britain too turned to protectionism. It is also not surprising that it was the outbreak of WWI that finally pushed it over the edge with the adoption of the McKenna Duties in 1915, increasing import taxes to fund the war. The logic of warfare in the modern era generates enormous pressure towards state intervention, protectionism and the use of “economic” weapons alongside military ones, and Britain was no less subject to this pressure than its protectionist enemies and allies. Following the war, with German industry temporarily reduced to a shadow of its former self, Britain initially preferred free trade, though its general trajectory moved back towards protectionism as it faced growing competition from the United States.
America was now the rising power, and its economy experienced enormous growth during the war. US leaders at first tried to push for free trade in the postwar period. On 8 January 1918, President Woodrow Wilson addressed a joint session of Congress, where he introduced his famous “Fourteen Points” that he hoped would shape the postwar global order. Point #3 called for “The removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.” Yet Wilson’s vision was not universally supported by American capitalists, and the country moved back towards protectionism, as the US State Department’s “Office of the Historian” recounts:
“With the 1913 Underwood–Simmons Tariff, the United States broke with its tradition of protectionism, enacting legislation that lowered tariffs (and also instituted an income tax). The reversion of Congress to Republican control during the First World War and the 1920 election of Republican Warren Harding to the presidency signaled an end to the experiment with lower tariffs. To provide protection for American farmers, whose wartime markets in Europe were disappearing with the recovery of European agricultural production, as well as U.S. industries that had been stimulated by the war, Congress passed the temporary Emergency Tariff Act in 1921, followed a year later by the Fordney–McCumber Tariff Act of 1922. The Fordney–McCumber Tariff Act raised tariffs above the level set in 1913; it also authorized the president to raise or lower a given tariff rate by 50% in order to even out foreign and domestic production costs.”
—Department of State, “Protectionism in the Interwar Period”
At the 1921 Third Congress, Trotsky delivered the keynote “Report on the World Economic Crisis and the New Tasks of the Communist International” in which he noted that the internationalizing tendency of finance capital had paradoxically led to an increase in trade barriers:
“Why did the war occur? Because the productive forces found themselves too constricted within the frameworks of the most powerful capitalist states. The inner urge of imperialist capitalism was to eradicate the state boundaries and to seize the entire terrestrial globe, abolishing tariffs and other barriers which restrict the development of the productive forces. Herein are the economic foundations of imperialism and the root causes of the war. What were the results? Europe is now richer in boundaries and tariff walls than ever before. A whole galaxy of tiny states has been formed. The territories of the former Austro-Hungarian empire are now criss-crossed by a dozen tariff lines. The Englishman Keynes has called Europe a madhouse, and indeed from the standpoint of economic development this entire particularism of tiny states with their shut-inness, their tariff systems and so on, represent a monstrous anachronism, an insane implantation of medievalism into the twentieth century.”
Given the return to profitability, however, America’s reversion to protectionism and Britain’s embrace of it did not lead to an overall contraction of global trade. In 1913, the total value (in 1990 USD) of merchandise exports from Europe was $119 billion, while in 1929 it had recovered to $123 billion, though both German and British exports declined. For the US, the figures were $19 billion in 1913 and $30 billion in 1929 (OECD, The World Economy, 2006, Table F-2). But the economic boom of the 1920s ended in the stock market crash of 1929, triggering the Great Depression and reinforcing protectionism. In 1930, the US passed the Tariff Act (aka Smoot–Hawley), which aimed to help American corporations weather the storm. This, in turn, provoked retaliatory tariffs by European governments, which in the context of the economic bust did contribute to a collapse of global trade, cutting off potential opportunities for industrial recovery. Across the imperialist countries, it seemed to many observers that capitalism had exhausted itself—a view reinforced by the staggering growth of industry in the planned economy of the Soviet Union (see Alec Nove, An Economic History of the USSR, chapter 8).
It was in this context that American finance capital initiated a reorientation, which would not be completed until after WWII. Instead of sinking further into protectionism, the US opted to pull itself out of the depression by outcompeting its rivals for foreign markets. In 1934, the protectionist trajectory of the US was reversed with the adoption by Congress, pushed for by President Franklin D. Roosevelt, of the Reciprocal Trade Agreements Act (RTAA). Over the next five years, Washington signed trade agreements with several advanced capitalist countries (including Britain, France, Belgium, the Netherlands and Canada) and many semi-colonial countries in Central and South America. Yet the unevenness of capitalist development across the imperialist countries, including most notably the resurgence of Germany under the Nazi dictatorship, had already generated pressures towards a reconfiguration of global relations, which would not be settled through trade agreements but through another world war.
In addition to protectionism, Bukharin argued that “colonial policy,” i.e., the creation of a formal colonial empire facilitating the extraction of super profits by finance capital in the “home” country, was the preferred approach of the imperialists because “it yields a colossal income to the great powers” (Imperialism and World Economy). Lenin acknowledged that finance capital does not require the exclusive territorial domination colonialism offers, but he nonetheless thought that colonialism would be the preference for finance capital:
“Finance capital is such a great, such a decisive, you might say, force in all economic and in all international relations, that it is capable of subjecting, and actually does subject, to itself even states enjoying the fullest political independence; we shall shortly see examples of this. Of course, finance capital finds most ’convenient,’ and derives the greatest profit from, a form of subjection which involves the loss of the political independence of the subjected countries and peoples.…
“The principal feature of the latest stage of capitalism is the domination of monopolist associations of big employers. These monopolies are most firmly established when all the sources of raw materials are captured by one group, and we have seen with what zeal the international capitalist associations exert every effort to deprive their rivals of all opportunity of competing, to buy up, for example, ironfields, oilfields, etc. Colonial possession alone gives the monopolies complete guarantee against all contingencies in the struggle against competitors, including the case of the adversary wanting to be protected by a law establishing a state monopoly. The more capitalism is developed, the more strongly the shortage of raw materials is felt, the more intense the competition and the hunt for sources of raw materials throughout the whole world, the more desperate the struggle for the acquisition of colonies.”
—Imperialism, the Highest Stage of Capitalism
While colonialism is compatible with free trade in some instances (as the British empire after the 1840s illustrates), there is a tendency for protectionism and colonialism to go together. It is not surprising that Wilson’s advocacy of free trade was accompanied by an attempt to at least temper European colonial domination through a “free, open-minded, and absolutely impartial adjustment of all colonial claims, based upon a strict observance of the principle that in determining all such questions of sovereignty the interests of the populations concerned must have equal weight with the equitable claims of the government whose title is to be determined.” It should be noted that America’s opposition to colonialism did not extend to its own colonies like Puerto Rico or Guam.
Britain and France had no intention of giving up their colonial empires after WWI, and they had hoped to simply steal the colonies of their defeated German and Ottoman (Turkish) rivals. Indeed, they had secretly conspired during the war to divide Ottoman possessions in the infamous “Sykes–Picot” agreement of 1916, which Soviet Commissar for Foreign Affairs Leon Trotsky, upon finding a copy of the treaty in Tsarist files, exposed to the world in Izvestia on 22 November 1917. Yet the US resisted French and British efforts to grab the colonies, and a compromise was made by establishing the League of Nations “mandate” system, which was essentially a thinly disguised form of colonialism.
Germany’s African possessions—which included German East Africa (covering territories that later became Burundi, Mozambique, Rwanda and Tanzania), German South West Africa (Namibia), Kamerun (Cameroon) and Togoland (Togo)—were distributed as mandates mainly to Britain and France, though Belgium (which had been forced to take over the Congo Free State in 1908) was granted Rwanda and Burundi. Germany’s former colonies in the Pacific mostly went to Japan, Australia and New Zealand. Turkey’s former possessions in the Middle East, which were deemed by the imperialists to be only temporarily unable to lead an independent existence, were also given as mandates to the victors. Britain was now in charge of the provinces of Iraq, Palestine and Transjordan, while France “got” Lebanon and Syria—articifial entities cutting across religious and ethnic lines but corresponding to European economic interests and military presence during the war. While the details differed, the division of imperialist mandates in the Middle East was essentially a realization of the Sykes–Picot project.
Mandatory Palestine, under British tutelage, would eventually be subject to the influx of European Jews (particularly after the rise of Nazism in Germany) and give way to the creation of the state of Israel in 1948. Zionism, the project of establishing a European Jewish settler colony in Palestine, had received a massive boost as part of British imperialist plans both to control the Middle East following WWI and to undermine the communist movement in Europe. The Balfour Declaration of November 1917 formally committed London to support the establishment of a Jewish “national home” in Palestine (see “Imperialism, Zionism & the Middle East,” 1917 No. 29).
From the turn of the 20th century, the Middle East was of increasing economic (and therefore geostrategic) importance due to the large quantities of oil discovered there. The oil fields of Iran were the first to be developed, with the Anglo-Persian Oil Company (ancestor of BP) founded in 1908, though discoveries were soon made in other areas. Initially, the Sykes–Picot agreement had granted the oil-rich Mosul area of Iraq to France, but Britain seized the territory for itself, violating both Sykes–Picot and the armistice it had signed with the Ottomans. During a private meeting between British Prime Minister David Lloyd George and French Prime Minister Georges Clemenceau in December 1918, Clemenceau acquiesced to the “Mosul cession,” granting Britain control of the whole of northern Mesopotamia. In exchange, France was given Deutsche Bank’s share in the British-controlled Turkish Petroleum Company, netting 25 percent of the profits from Mesopotamian oil. The San Remo Oil Agreement of April 1920, which codified the Franco–British deal, helped spark Arab revolts in the region and later prompted Britain to create the state of Iraq.
Naturally, Britain wanted to maintain its colonialist control over the development of the region’s oil fields, but the Americans were pushing for an “open door” policy that would allow US capital to get in on the action. In 1925, the US and Britain reached a compromise that would allow a consortium of American oil companies (including the forerunners of ExxonMobil) limited access, including almost 24 percent of the shares of the Turkish Petroleum Company (renamed the Iraq Petroleum Company) while guaranteeing British dominance (Nancy M. Gordon, “Great Britain and France Sign the San Remo Agreement”).
By the eve of WWII, however, US imperialism was on track towards global hegemony. Its leaders had already concluded that expansion would best be accomplished by breaking down tariff walls, and its economic ascendency made European colonialism seem all the more intolerable as its corporations sought unfettered access to the cornucopia of wealth in the Middle East and beyond. These contradictions might have led to conflict between the US and Britain, but the rise of Germany presented a common threat, and the outbreak of WWII ultimately short-circuited that historical possibility. The war—with at least 60 million dead and American atomic bombs dropped on two Japanese cities—further downgraded Britain and France in relation to the US, which emerged from the conflict as the dominant imperialist power. The postwar imperialist order would eventually settle into a US-administered free-trade, post-colonial “empire” in which Washington’s allies and defeated rivals learned to pursue their own interests while serving as America’s junior partners. Kautsky was wrong in his prediction that “the result of the [First] World War between the great imperialist powers may be a federation of the strongest, who renounce their arms race,” but his vision of ultra-imperialism came closer to realization following World War II.
Next: Part II: Pax Americana