While all these factors, however, have contributed to our changed point of view, it was the World War which most completely revealed to Americans the necessity of accommodating our national development to that of other countries. The war proved that we were in a military sense vulnerable; that undisciplined citizen soldiery was no match for trained armies; that mere distance is no complete safety, and that the initial advantage, which accrues to the prepared nation is out of all proportion more valuable than later victories. The war showed that unarmed neutrality and a mere lack of hostile intention does not always save a nation from invasion. Moreover, we discovered that our interests were affected favourably or adversely by a conflict, in which we had no direct part. We, who had always conceived ourselves as a supremely disinterested nation, a remote island in the blue sea, began to ask whether it was to our advantage to have France defeated, Belgium destroyed, Germany crushed, the British Empire disintegrated. We began to ask how our national interest was affected by the international competition for colonies, by the freedom or unfreedom of the seas, by the extension of the right of blockade, by the abrogation of established laws of warfare; and what the effect upon us would be of an economic alliance against Germany by the Allied Western Powers. In other words, we discovered a real national interest in international arrangements created by the war or to be established after the war.
Our first preoccupation was naturally one of defence. We looked outward, but only saw armed nations ready to seize upon our wealth and territory. Responsible authors predicted that the victor in this war would at his leisure move across the ocean and despoil the United States. From ponderous puerilities of this sort to the lurid descriptions of massacre and pillage, vouchsafed us by magazine and moving picture writers, was a short step. More serious arguments prevailed, and in the end a large addition was made to our military and naval forces. But the whole campaign was based solely upon the theory of defence, and the theory so formulated, was merely a continuation of the policy of isolation. It involved the idea that we were to act alone and protect ourselves alone against all nations. It did not concern itself with our national aims. It was not based upon a definition of our relations to Europe and to the several nations of Europe.
As our preparations increase, however, and as we realise how insufficient our force must be against a European coalition, we shall be faced with the alternative of entering into agreements or alliances (to make our defence real) or into some other policy, which might make defence unnecessary. In either case we must face outward, must look at the world as it is and is to be, and define our relation to Europe. We must substitute a positive for a negative policy.
This we are forced to do even though we may have no immediate friction points with Europe. The economic interpenetration of all nations involves us in conflicts of interest and adjustments, which require a positive national policy.
It is our economic development that most strongly pushes us in this direction. We are gradually destroying the complementary industrial system which formerly held us to Europe; we are competing with European countries for world markets and have even begun to compete for investment opportunities in backward countries. We are exporting manufactures, and this exportation is likely to increase. Of the six chief requisites of a great manufacturing nation—coal, iron, copper, wood, cotton and wool—we are the greatest single producer of all except the last, and to this advantage of cheap raw materials, there is added an efficient manufacturing organisation and a large manufacturing capital. From 1880 to 1910 that capital increased six and a half fold (from 2.8 to 18.4 billions of dollars). It is therefore no wonder that we are exporting tools, sewing-machines, locomotives, typewriters, automobiles and electrical apparatus. These products compete increasingly with similar products from England and Germany and invade the markets which Europe desires for herself. Our total exports to Latin America, for example, have almost quadrupled in twenty-two years, increasing from 77 millions of dollars in 1890 to 296 millions in 1912.
The significance of this competition, as it exists to-day and will exist to-morrow, is greater for Europe than for us. Our fundamental welfare does not absolutely depend upon this exportation; we could lose a part of this trade, as we lost our shipping, without fatal results, for we should still have our cotton and many half-finished products to exchange for our imports. Were Great Britain, however, to lose her markets for manufactured goods, she would shrink into insignificance, if she did not literally starve. In 1913 the United Kingdom spent $1,400,000,000 on imported foods, drink and tobacco, and for this, as for her importation of raw materials, she must pay. While our export of manufactures still forms but a trifling part (perhaps one thirtieth) of our total product, the British and the German export constitutes an immensely larger proportion. Our export of finished wares, despite its rapid increase, was in 1914 only some seven dollars per capita, while that of the United Kingdom was about forty-five dollars per capita.[[1]] It will therefore not be wondered at if our increasing export of manufactures both to Europe and to the countries to which Europe exports, causes us to be involved, as we have not been for over a century, in the ambitions, conflicts and life-interests of the great European nations.
For at bottom a commercial war is an industrial war, a struggle for national prosperity. If, for example, Germany fails to hold her foreign markets, she must shut down factories. Her industrial problem is to buy raw materials from abroad cheap, ship to Germany, manufacture into finished products, transport to a country willing to buy, and from this enterprise secure profits enough to purchase food for her people. If she is beaten out, let us say, in the export cotton industry she must turn to something else. She may try to save the industry by increasing efficiency or reducing wages, but if she fails, she must close up some of her mills. If she cannot employ the growing masses who depend upon export industries, she must let her surplus people—and with them a part of her capital—emigrate. Like other European countries she has learned this lesson by experience. Thus it often happened when America increased her tariff rates that European factories, unable to compete, migrated, men and capital, to this country. It is true that the world market constantly expands, but the producing capacity of the manufacturing nations also increases, and competition becomes ever more severe. The more rapidly America invades the markets which Europe has hitherto held, the more she squeezes them, the more bitter the feeling against her will become.
That bitterness of feeling (in the conditions preceding the present war) was more likely to arise in Germany than in England and more likely in England than in France. We have spoken of these as rival nations, but there are intensities of rivalry varying in proportion to the similarity of products and of methods of production. Germany, like the United States, is a new-comer in international industry, pushing and aggressive. More scientific and better organised than we, she possesses far more meagre resources. We both have trusts or cartels, and both manufacture huge quantities of cheap, standardised products. Our competition therefore is of the keenest, and is likely to grow more intense, if, as seems likely, Germany recovers from the effects of this war. Less keen is our competition with Great Britain. Like an old firm, grown rich and conservative, Great Britain is not pushing, not scientific, not well organised. We are gaining on her in those branches of manufacture which permit standardisation and production in huge quantities, and have no hope, and but little wish, of competing in articles of high finish and therefore high labour cost. With France we compete still less, since much of her export trade is in articles of taste and luxury, in which we are hopelessly inferior.[[2]]
In this battle for the world market, the United States has the disadvantage of coming late and of being intellectually unprepared. On the other hand, not only have we superior natural resources, but also the advantage that to us success is not vital. Whatever trade we gain is a mere improvement of a situation already good. We are playing "on velvet." Finally, like Germany, we have the advantage of large scale production by strong corporations working with what is practically a bounty upon exports. Because of their control of a protected home market, our great corporations can make their sales at home cover all initial and constant costs, and as these costs need not be applied to exports, are able to sell goods cheaper in Rio Janeiro or Lima than in Chicago or New York. They are able to "dump" their surplus goods.[[3]]
The opening of the Panama Canal cannot but increase the competition of the United States especially with the nations bordering on the Pacific Ocean. From 1897-1901 to 1907-11 the average annual exports from the United States to these Pacific countries (Mexico, Central America and Columbia, the remaining West Coast of South America, China, Japan, the Philippines and British Australasia) increased from 104.2 millions to 200.2 millions, a growth of 92.1 per cent., while the export from Germany increased 81.0 per cent. and from the United Kingdom only 51.7 per cent. In the same period our average annual imports from these countries increased 112.9 per cent. (as compared with 113.9 per cent. for Germany and 62.5 per cent. for the United Kingdom).[[4]] The trade with these Pacific countries lies largely with the United Kingdom, the United States and Germany (in the order named) and the United States seems to be slowly moving forward to first place.[[5]] What progress the United States has made, moreover, has been achieved under certain great disabilities which the Panama Canal removes. "By present all-sea routes New York is, in general, at a disadvantage compared with Liverpool."[[6]] New York by the Suez route is 3 days further away from Australasia (for ten knot vessels) than is Liverpool; by the Panama route New York is from 9 to 12 days nearer. For points on the west coast of North and South America, New York is one and a half days nearer than is Liverpool by the all-sea route and about eleven days nearer by the Panama route. When all the conditions of distance, speed, cost of coal, tolls, etc., are considered, it is found that the Panama Canal gives in many parts of the world an advantage to New York over Liverpool, Antwerp and Hamburg. The result is an impulse towards a keener American competition in the Pacific trade.