Morals of Economic Internationalism

by J. A. Hobson

By saying this I do not wish to appear to prejudge the issue. I have always felt that a stronger case could be made for the political and economic isolation of America than for that of any other country, partly because, as I have said, she has within her political domain all the resources of national well-being; partly, also, because it is of supreme importance that the great experiment of democracy should not be unduly hampered by excessive inpourings of ill-assimilable foreign blood, and by dangerous contacts with obsolete or inapplicable European institutions. As an economist, steeped in the principles of Cobden and his British school of liberals, my predilections (prejudices if you will) have always been in favor of the freest possible movement, alike of trade and persons, and against fiscal protection and immigrant restrictions. But, when confronted with the special situation of America, I have recognized that a reasoned argument could be addressed to prove that the economy of national security and progress for this country lay along the lines of political, economic and defensive self-containedness. I am convinced that many must be led to support this policy, not on grounds of selfishness, because they desire to conserve for America alone her great opportunities, and not mainly from fear, lest America should be embroiled again in the dangerous quarrels of distant European nations, but because they are animated by that pure desire, which has inspired so many generations of high-minded Americans, that American democracy should grow to its full stature by its own unaided efforts and save the world by its example.

I wish to give due respect to the sincerity of this conviction the more because I wish to lay before you some grounds for questioning its ultimate validity. It is no problem of abstract politics or ethics with which I here confront your minds, but one of concrete and immediate urgency. Distinctively economic in its substance, it brings right into the daylight the hitherto obscure issue of the duty of nations as members of an actual or potential society of nations. As a result of the destruction of war a large part of Europe lies today in economic ruin. By that I do not only, or chiefly, refer to the material havoc wrought by the direct operations of war in France, Belgium, Poland, Servia, and elsewhere. I mean the imminent starvation which this winter awaits large populations of those and other countries, both our allies and our late enemies, and the misery and anarchy arising from their utter inability to resume the ordinary processes of productive industry. It is not only food and clothing but raw materials, tools, machinery, transport, and fuel that are lacking over a large part of the European continent. If they are left to their own unaided resources, millions of these people, especially in Russia, Poland, Austria, and sections of the late Turkish Empire, will perish. They cannot feed themselves. The land remains, but large tracts of it have been untilled; large numbers of the peasantry have fallen in the war, or are wandering as disbanded soldiers, far from home; the women and the aged and the children, underfed and broken in health and spirit, are utterly unequal to the task of growing the food for their livelihood. The factories and workshops are idle or are ill-equipped, for materials, tools, and fuel are everywhere lacking; unemployment holds large industrial populations in destitution and despair. Even where plant and materials are present, the physical strength of the workers is so let down that efficient productivity is impossible. Even in countries that are not war-broken, the blockade, and the long stoppage of normal commerce, have caused great scarcity of many important foods and materials, and famine prices bring grievous suffering to the poorer classes. Britain alone among the belligerent countries is not in immediate distress, but only because she has had larger outside resources and larger borrowing powers on which to draw. Even the few neutral nations which are said to have profited by war are severely crippled by the lack of some essentials of their economic life.

All in different degrees are economic victims of the havoc and the waste of war. It is not Central Europe only, together with large parts of the Balkans, of Russia, and of Eastern Asia, that is in this evil plight. Europe as a whole is unprovided with the foodstuffs with which to feed its population and the raw materials with which to furnish employment. If there were prevailing among them the best of wills and of coöperative arrangements, the European peoples could not keep themselves alive this winter and make any substantial advance towards reparation of the damage of war and industrial recovery. If human coöperation is to save these weak and desperate peoples, it must be a coöperation of more than the nations of Europe. Only by the better provided nations of the world coming to the rescue can the worse-provided nations survive and recover. It would be foolish to mince words in so grave an issue. We are all acquainted with the main facts of the world situation and are familiar with the place which America occupies in it as the chief repository of those surpluses of foods, materials, and manufactured goods which Europe needs so sorely. The term 'surplus' is, of course, somewhat deceptive. Surplus depends largely on home consumption, itself an elastic condition. But for practical purposes we may take the exportable surplus to mean the product which remains for sale abroad after the normal wants of the home population are supplied. It might mean something more, viz., that the home population would voluntarily keep down or reduce their consumption, in order that more might be available for export. The American people actually did exercise this self-denying ordinance to an appreciable extent, in order to help win the war. Are they willing to do the same in order to help the world in a distress as dire as war itself?

It may be said, perhaps truly, that this presumes that America is in the peace as much as she was in the war, that she has decided to link her destiny closely and lastingly with that of Europe, that she definitely accepts a proffered place as a member of the society of nations, and under circumstances which make an immediate call upon her economic and financial resources in a manner in which there can be no direct reciprocity.

Now it may reasonably be urged that America is not prepared for such a committal, that such obligations as she undertook, as an associated power, in the conduct of the war, terminate with the making of peace; and that, as regards the future structure of international relations, she proposes to preserve full freedom to coöperate with other nations, or to stand alone, according to her estimate of each occasion.

It is here convenient to treat separately two issues which are none the less closely related, viz., the issue of international coöperation for the immediate work of the salvage and restoration of Europe, and the issue of a permanent coöperation or agreement for the equitable use of the economic resources of the world. The urgency for Europe of the first issue has been already indicated. If the weaker European nations are left to the ordinary play of economic laws for the supplies they need, they must lapse into starvation and social anarchy. A lifting of the war blockades and embargoes hardly helps them. The formal restoration of free commerce is little better than a mockery to those who lack the power to buy and sell. Free commerce would simply mean that America's surplus, the food, materials, and manufactured goods she has to sell abroad, would be purchased exclusively by those more prosperous foreigners who have the means to pay in money, or in export goods available for credit purposes. Now the populations and the governments of these broken countries have neither money nor goods in hand. The return of peace has left them with depleted purses and empty stores. If the purchase and consumption of the available surplus of foods, materials, and manufactures from America and other prosperous countries is distributed according to the separate powers of purchase in the European countries, the countries and the classes of population which are least in need will get all, those which are most in need, nothing. How can it be otherwise, if immediate ability to pay is the criterion? In ordinary times the machinery of international finance does tend to distribute surplus stocks according to the needs of the different nations, for the production of the actual goods for export trade with which imports are paid for, the true base of credit, is continually proceeding. But the war broke this machinery of regular exchange. It cannot be immediately restored. America or Argentina cannot sell their surplus wheat in the ordinary way to Poland, Austria, Belgium and other needy countries, because, largely for the very lack of these goods and materials, their industries are not operating, so that the goods they should produce, upon which credit would be built, are not forthcoming.

This is one of the most terrible of the vicious circles in which the war has bound the world. The weak nations cannot buy, because they are not producing goods to sell; they cannot produce, because they cannot buy. What are the strong nations, those with surplus goods, the transport, and the credit, going to do about it? It is a question of emergency finance based on an emergency morality. The nations which have surpluses to sell abroad must not only send the goods but provide the credit to pay for them if they are to reach the peoples that need them most. But how, it is said, can you expect the business man in America or any other country to perform such an act of charity? How can you expect them to sell to those who have not credit and cannot pay, instead of selling to those who have credit and can pay? The answer is sometimes stated thus. It is not charity you are asked to perform, but such consideration for customers as a really intelligent sense of self-interest will endorse. We ask you to put up a temporary bridge over the financial chasm in order to afford time for this restoration of the ordinary processes of exchange. If the enfeebled industrial peoples can be furnished now with foods and materials they will set to work, and in the course of time they will be able, out of the product of their industry, to repay your advances and reestablish the normal circle of exchange.

In presenting this course as a policy of intelligent self-interest, I am not really disparaging the claims of humanity or of morals. I am merely maintaining the utilitarian ethics which insist that morality, the performance of human obligations, is the best policy, that policy which in the long run will yield the fullest satisfaction to social beings. If I were an American exporter in control of large amounts of food, it would doubtless pay me better personally at the present time to sell it to firms in European countries which have good credit, for consumption by people who are in no great want. As an individual business man, I could hardly do otherwise with any assurance of financial profit. I am not here presenting the issue as a matter of individual morals. If the surplus of economic supplies is to be distributed according to needs, on an emergency credit basis adjusted to that end, it is evident that this can be done only by international coöperation. This shifts the moral problem from the individual to the nation. Rich nations, or their governments, are asked to assist poor nations by making an apportionment of goods and credit which the individual members of the rich nations, the owners of the surplus, would not make upon their own account. The edge of this issue should not be blunted. If the people and government of America were only concerned to let their individual citizens extort the highest prices they could get for their surplus in the best markets, they would let Central and Eastern Europe starve. If, however, they also take into account the social, political, and economic reactions of a starving Europe upon the future of a world in which they will have to live as members of a world society which must grow ever closer in its physical, economic, and spiritual contacts, they may decide differently. The issue arises in the highest economic sphere, that of finance. Are the nations and governments of the world sufficiently alive to the urgency of the situation to enter into an organization of credit for the emergency use of transport and for the distribution of foods and materials on a basis of proved needs? The richer nations, in proportion to their resources, would appear to be called upon to make a present sacrifice for the benefit of the poorer nations in any such pooling of credit facilities. That risk of sacrifice, however, need not be great, and need not be felt at all by the individual members of rich nations, provided that the hitherto unused resources of national credit can be built into a strong structure of mutual support. If America were invited to find adequate credits for Italian or Polish needs at the present time, she might well hesitate. But if a consortium of European governments, including Britain and the richer neutrals, were joint guarantors of such advances, this coöperative basis might furnish the necessary confidence. It is not within my scope to discuss the various forms a financial consortium might take; whether America, as representative of the creditor nations, should enter such a consortium, or should approach the organized credit of Europe in the capacity of a friendly uncle. It must suffice here to indicate the moral test which this grave issue presents to the nations regarded as economic powers.

Upon the policy adopted for this emergency will doubtless depend in large measure the whole future of economic internationalism. For not only does confidence grow with effective coöperation, but upon this post-war coöperation between nations for an emergency commerce and finance, or its rejection, will depend not only America's future place in a world society but the structure of that world society in its essential character.

For in each great nation of the world the same great choice, the same great struggle of contending principles and policies, is taking place. National self-dependence or internationalism—that is everywhere the issue. It is true that in no European country can that issue be so sharply presented as in America. For economic self-sufficiency in a full sense and, therefore, political isolation, is not possible for any European state. Even a peaceful and reviving Russia must lean upon her more advanced neighbors for the economic essentials of capital and organizing skill. But the several nations can strive to reduce their interdependence and their national aid to the narrowest dimensions, and where they cannot free themselves from extraneous alliances they can restrict the area of economic dependence within a chosen circle. Britain, for example, could set her policy closely and consistently to make her world-wide empire into a self-sufficing system, and if, as is likely, she learned that even the diversified fifth of the entire globe which owns allegiance to her Crown could not satisfy all her wants, she could eke out this inadequacy with some carefully selected and purchased friendships.