The great industrial nations are the great investing nations. An agriculture community produces little surplus wealth. Land values are low, franchises and special privileges are negligible factors. There can be relatively little speculation. Changes in method of production are infrequent. Changes in values and total wealth are gradual. The owning class in an agriculture civilization may live comfortably. If it is very small in proportion to the total population it may live luxuriously, but it cannot derive great revenues such as those secured by the owning classes of an industrial civilization.
Industrial civilization possesses all of the factors for augmenting surplus wealth which are lacking in agricultural civilizations. Changes in the forms of industrial production are rapid; special privilege yields rich returns and is the subject of wide speculative activity; land values increase; labor saving machinery multiplies man's capacity to turn out wealth. As much surplus wealth might be produced in a year of this industrial life as could have been turned out in a generation or a century of agricultural activity or of hand-craft industry.
England, France, Germany, Holland, Belgium, Japan and the United States, the great industrial nations, have become the great lending nations. Their search for "undeveloped territory" and "spheres of influence" is not a search for trade, but for an opportunity to invest and exploit. If these nations wished to exchange cotton for coffee, or machinery for wheat on even terms, they could exchange with one another, or with one of the undeveloped countries, but they demand an outlet for surplus wealth—an outlet that can only be utilized where the government of the developed country will guarantee the investment of its citizens in the undeveloped territory.
The investing nations either want to take the raw products of the undeveloped country, manufacture them and sell them back as finished material (the British policy in India), or else they desire to secure possession of the resources, franchises and other special privileges in the undeveloped country which they can exploit for their own profit (the British policy in South America).
The Indians, under the British policy, are thus in relatively the same position as the workers in one of the industrial countries. They are paid for their raw material a fraction of the value of the finished product. They are expected to buy back the finished product, which is a manifest impossibility. There is thus a drastic limitation on the exploitation of undeveloped countries, just as there is a limitation on the exploitation of domestic labor. In both cases the people as consumers can buy back less in value than the exploiters have to sell. Obviously the time must come when all the undeveloped sections of the world have been exploited to the limit. Then surplus will go a-begging.
Some of the investors in the great exploiting nations have abandoned the idea of making huge returns by way of the English policy in India. Instead the investors in every nation are buying up resources, franchises and concessions and other special privileges in the undeveloped countries and treating them in exactly the same way that they would treat a domestic investment. In this case the resources and labor of the undeveloped country are exploited for the profit of the foreign investor.
The Roman conquerors subjugated the people politically and then exacted an economic return in the form of tribute. The modern imperialists do not bother about the political machinery, so long as it remains in abeyance, but content themselves with securing possession of the economic resources of a region and exacting a return in interest and dividends on the investment. Political tribute is largely a thing of the past. In its place there is a new form—economic tribute—which is safer, cheaper, and on the whole far superior to the Roman method of exploiting undeveloped regions.
5. The American Home Field
A hundred years ago the United States was an undeveloped country. Its resources were virgin. Its wealth possibilities were immense. Both domestic and foreign capitalists invested large sums in the canals, the railroads and other American commercial and industrial enterprises. The rapid economic expansion of recent years has involved the outlay of huge sums of new capital.
The total capital invested in manufactures was 8,975 millions in 1899 and 22,791 millions in 1914. The total of railway capital was 11,034 millions in 1899 and 20,247 millions in 1914. Manufacturing and railroading alone secured a capital outlay of over 20 billions in 15 years. Some idea of the increase in investments may be gained from the amount of new stocks and bonds listed annually on the New York Stock Exchange. The total amount of new stocks listed for the five years ending with 1914 was 1,420 millions; the total of new bonds was 2,226 million. (The Financial Review Annual, 1918, p. 67.) The total capital of new companies (with an authorized capital of at least $100,000) was in 1918, $2,599,753,600; in 1919, $12,677,229,600, and in the first 10 months of 1920, $12,242,577,700. (Bradstreets, Nov. 6, 1920, p. 731.) The figures showing the amount of stocks and bonds issued do not by any means exhaust the field of new capital. Reference has already been made to the fact that the United States Steel Corporation, between 1903 and 1918 increased its issues of stocks and bonds by only $31,600,000, while, in the same time its assets increased $987,000,000. The same fact is illustrated, on a larger scale, in a summary (Wall Street Journal, August 7, 1919) of the finances of 104 corporations covering the four years, December 31, 1914, to December 31, 1918. During this time, six of the leading steel companies of the United States increased their working capital by $461,965,000 and their surplus by $617,656,000. This billion was taken out of the earnings of the companies. Concerning the entire 104 corporations, the Journal notes that, "After heavy expenditures for new construction and acquisitions, and record breaking dividends, they added a total of nearly $2,000,000,000 to working capital." In addition, these corporations, in four years, showed a gain of $1,941,498,000 in surplus and a gain in inventories of $1,522,000,000.