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Monday, August 3, 2015

Capitalism Will (Eventually) Displace Imperialism


[This is the most important excerpt of Joseph Schumpeter’s 1918 book The Sociology of Imperialisms. He examines the history of empire in its many iterations and takes on the Marxist theory the capitalism and imperialism are linked. He rejects that view, and argues the exact opposite. Capitalism, built on a social structure of trade and mutual benefit, is anti-imperialist. All classes discover greater benefit from economic engagement than they could ever gain through conquest, violence, and pillaging. War itself, writes Schumpeter, is like nationalism itself, an old-world holdover from the age of autocracy, and all social, political, and economic forces are gradually working toward its elimination.

“The mode of life that flows logically from the nature of capitalism necessarily implies an anti-nationalist orientation in politics and culture.” Further: “Modern pacifism, in its political foundations if not its derivation, is unquestionably a phenomenon of the capitalist world.”

Schumpeter was writing at the end of the first world war. Did he fail to anticipate the wars that would consume so much life and so many resources in the course of the 20th century? Schumpeter clarifies that he is not predicting the immediate end of militarism but rather its rhetorical redirection under a more limited set of conditions than in the past. Wars must be pushed as defensive, limited in duration, effective for particular purposes. To the extent they are not, the ruling classes who advocated them face political pressure to end them. Here again, Schumpeter seems prescient.

Schumpeter ends his reflection in speaking of the last remaining holdover from old-world forms of government: export monopolies. He sees no future to these policies. The entirety of modern social, economic, and cultural life are bound up with capitalist systems; their life depend on it. There is no going back.

“The precapitalist elements in our social life may still have great vitality; special circumstances in national life may revive them from time to time; but in the end the climate of the modern world must destroy them.” ]

Imperialism is Atavistic

The orientation toward war is mainly fostered by the domestic interests of ruling classes, but also by the influence of all those who stand to gain individually from a war policy, whether economically or socially. Both groups of factors are generally overgrown by elements of an altogether different character, not only in terms of political phraseology, but also of psychological motivation. Imperialisms differ greatly in detail, but they all have at least these traits in common, turning them into a single phenomenon in the field of sociology

Imperialism is atavistic in character. It falls into that large group of surviving features from earlier ages that play such an important part in every concrete social situation. In other words, it is an element that stems from the living conditions, not of the present, but of the past—or, put in terms of the economic interpretation of history, from past rather than present relations of production. It is an atavism in the social structure, in individual, psychological habits of emotional reaction.

Since the vital needs that created it have passed away for good, it too must gradually disappear, even though every warlike involvement, no matter how non-imperialist in character, tends to revive it. It tends to disappear as a structural element because the structure that brought it to the fore goes into a decline, giving way, in the course of social development, to other structures that have no room for it and eliminate the power factors that supported it. It tends to disappear as an element of habitual emotional reaction, because of the progressive rationalization of life and mind, a process in which old functional needs are absorbed by new tasks, in which heretofore military energies are functionally modified.

If our theory is correct, cases of imperialism should decline in intensity the later they occur in the history of a people and of a culture. Our most recent examples of unmistakable, clear-cut imperialism are the absolute monarchies of the eighteenth century. They are unmistakably “more civilized” than their predecessors.

It is from absolute autocracy that the present age has taken over what imperialist tendencies it displays. And the imperialism of absolute autocracy flourished before the Industrial Revolution that created the modern world, or rather, before the consequences of that revolution began to be felt in all their aspects. These two statements are primarily meant in a historical sense, and as such they are no more than self-evident. We shall nevertheless try, within the framework of our theory, to define the significance of capitalism for our phenomenon and to examine the relationship between present-day imperialist tendencies and the autocratic imperialism of the eighteenth century.

Capitalism Ends the Age of Empire

The floodtide that burst the dams in the Industrial Revolution had its sources, of course, back in the Middle Ages. But capitalism began to shape society and impress its stamp on every page of social history only with the second half of the eighteenth century. Before that time there had been only islands of capitalist economy imbedded in an ocean of village and urban economy. True, certain political influences emanated from these islands, but they were able to assert themselves only indirectly. Not until the process we term the Industrial Revolution did the working masses, led by the entrepreneur, overcome the bonds of older life-forms—the environment of peasantry, guild, and aristocracy.

The causal connection was this: a transformation in the basic economic factors (which need not detain us here) created the objective opportunity for the production of commodities, for large-scale industry, working for a market of customers whose individual identities were unknown, operating solely with a view to maximum financial profit. It was this opportunity that created an economically oriented leadership—personalities whose field of achievement was the organization of such commodity production in the form of capitalist enterprise. Successful enterprises in large numbers represented something new in the economic and social sense. They fought for and won freedom of action. They compelled state policy to adapt itself to their needs. More and more they attracted the most vigorous leaders from other spheres, as well as the manpower of those spheres, causing them and the social strata they represented to languish.

Capitalist entrepreneurs fought the former ruling circles for a share in state control, for leadership in the state. The very fact of their success, their position, their resources, their power, raised them in the political and social scale. Their mode of life, their cast of mind became increasingly important elements on the social scene. Their actions, desires, needs, and beliefs emerged more and more sharply within the total picture of the social community. In a historical sense, this applied primarily to the industrial and financial leaders of the movement—the bourgeoisie. But soon it applied also to the working masses which this movement created and placed in an altogether new class situation. This situation was governed by new forms of the working day, of family life, of interests—and these, in turn, corresponded to new orientations toward the social structure as a whole.

More and more, in the course of the nineteenth century, the typical modern worker came to determine the over-all aspect of society; for competitive capitalism, by its inherent logic, kept on raising the demand for labor and thus the economic level and social power of the workers, until this class too was able to assert itself in a political sense. The working class and its mode of life provided the type from which the intellectual developed. Capitalism did not create the intellectuals—the “new middle class.” But in earlier times only the legal scholar, the cleric, and the physician had formed a special intellectual class, and even they had enjoyed but little scope for playing an independent role. Such opportunities were provided only by capitalist society, which created the industrial and financial bureaucrat, the journalist, and so on, and which opened up new vistas to the jurist and physician. The “professional” of capitalist society arose as a class type. Finally, as a class type, the rentier, the beneficiary of industrial loan capital, is also a feature of capitalism. All these types are shaped by the capitalist mode of production, and they tend for this reason to bring other types—even the peasant—into conformity with themselves.

These new types were now cast adrift from the fixed order of earlier times, from the environment that had shackled and protected people for centuries, from the old associations of village, manor house, clan fellowship, often even from families in the broader sense. They were severed from the things that had been constant year after year, from cradle to grave—tools, homes, the countryside, especially the soil. They were on their own, enmeshed in the pitiless logic of gainful employment, mere drops in the vast ocean of industrial life, exposed to the inexorable pressures of competition. They were freed from the control of ancient patterns of thought, of the grip of institutions and organs that taught and represented these outlooks in village, manor, and guild. They were removed from the old world, engaged in building a new one for themselves—a specialized, mechanized world.

Thus they were all inevitably democratized, individualized, and rationalized. They were democratized, because the picture of time-honored power and privilege gave way to one of continual change, set in motion by industrial life. They were individualized, because subjective opportunities to shape their lives took the place of immutable objective factors. They were rationalized, because the instability of economic position made their survival hinge on continual, deliberately rationalistic decisions—a dependence that emerged with great sharpness. Trained to economic rationalism, these people left no sphere of life unrationalized, questioning everything about themselves, the social structure, the state, the ruling class. The marks of this process are engraved on every aspect of modern culture. It is this process that explains the basic features of that culture.

These are things that are well known today, recognized in their full significance—indeed, often exaggerated. Their application to our subject is plain. Everything that is purely instinctual, everything insofar as it is purely instinctual, is driven into the background by this development. It creates a social and psychological atmosphere in keeping with modern economic forms, where traditional habits, merely because they were traditional, could no more survive than obsolete economic forms. Just as the latter can survive only if they are continually “adapted,” so instinctual tendencies can survive only when the conditions that gave rise to them continue to apply, or when the “instinct” in question derives a new purpose from new conditions. The “instinct” that is only “instinct,” that has lost its purpose, languishes relatively quickly in the capitalist world, just as does an inefficient economic practice. We see this process of rationalization at work even in the case of the strongest impulses. We observe it, for example, in the facts of procreation.

We must therefore anticipate finding it in the case of the imperialist impulse as well; we must expect to see this impulse, which rests on the primitive contingencies of physical combat, gradually disappear, washed away by new exigencies of daily life.

There is another factor too. The competitive system absorbs the full energies of most of the people at all economic levels. Constant application, attention, and concentration of energy are the conditions of survival within it, primarily in the specifically economic professions, but also in other activities organized on their model. There is much less excess energy to be vented in war and conquest than in any precapitalist society. What excess energy there is flows largely into industry itself, accounts for its shining figures—the type of the captain of industry—and for the rest is applied to art, science, and the social struggle. In a purely capitalist world, what was once energy for war becomes simply energy for labor of every kind. Wars of conquest and adventurism in foreign policy in general are bound to be regarded as troublesome distractions, destructive of life’s meaning, a diversion from the accustomed and therefore “true” task.

A purely capitalist world therefore can offer no fertile soil to imperialist impulses. That does not mean that it cannot still maintain an interest in imperialist expansion. We shall discuss this immediately. The point is that its people are likely to be essentially of an unwarlike disposition. Hence we must expect that anti-imperialist tendencies will show themselves wherever capitalism penetrates the economy and, through the economy, the mind of modern nations—most strongly, of course, where capitalism itself is strongest, where it has advanced furthest, encountered the least resistance, and preeminently where its types and hence democracy—in the “bourgeois” sense—come closest to political dominion.

War and Capitalism Conflict

We must further expect that the types formed by capitalism will actually be the carriers of these tendencies. Is such the case? The facts that follow are cited to show that this expectation, which flows from our theory, is in fact justified.

1. Throughout the world of capitalism, and specifically among the elements formed by capitalism in modern social life, there has arisen a fundamental opposition to war, expansion, cabinet diplomacy, armaments, and socially entrenched professional armies. This opposition had its origin in the country that first turned capitalist—England—and arose coincidentally with that country’s capitalist development. “Philosophical radicalism” was the first politically influential intellectual movement to represent this trend successfully, linking it up, as was to be expected, with economic freedom in general and free trade in particular. Molesworth became a cabinet member, even though he had publicly declared—on the occasion of the Canadian revolution—that he prayed for the defeat of his country’s arms. In step with the advance of capitalism, the movement also gained adherents elsewhere—though at first only adherents without influence. It found support in Paris—indeed, in a circle oriented toward capitalist enterprise (for example, Frédéric Passy). True, pacifism as a matter of principle had existed before, though only among a few small religious sects. But modern pacifism, in its political foundations if not its derivation, is unquestionably a phenomenon of the capitalist world.

2. Wherever capitalism penetrated, peace parties of such strength arose that virtually every war meant a political struggle on the domestic scene. The exceptions are rare—Germany in the Franco-Prussian war of 1870-1871, both belligerents in the Russo-Turkish war of 1877-1878. That is why every war is carefully justified as a defensive war by the governments involved, and by all the political parties, in their official utterances—indicating a realization that a war of a different nature would scarcely be tenable in a political sense. (Here too the Russo-Turkish war is an exception, but a significant one.) In former times this would not have been necessary. Reference to an interest or pretense at moral justification was customary as early as the eighteenth century, but only in the nineteenth century did the assertion of attack, or the threat of attack, become the only avowed occasion for war. In the distant past, imperialism had needed no disguise whatever, and in the absolute autocracies only a very transparent one; but today imperialism is carefully hidden from public view—even though there may still be an unofficial appeal to warlike instincts.

No people and no ruling class today can openly afford to regard war as a normal state of affairs or a normal element in the life of nations. No one doubts that today it must be characterized as an abnormality and a disaster. True, war is still glorified. But glorification in the style of King Tuglâtî-palisharra is rare and unleashes such a storm of indignation that every practical politician carefully dissociates himself from such things. Everywhere there is official acknowledgment that peace is an end in itself—though not necessarily an end overshadowing all purposes that can be realized by means of war. Every expansionist urge must be carefully related to a concrete goal. All this is primarily a matter of political phraseology, to be sure. But the necessity for this phraseology is a symptom of the popular attitude. And that attitude makes a policy of imperialism more and more difficult—indeed, the very word imperialism is applied only to the enemy, in a reproachful sense, being carefully avoided with reference to the speaker’s own policies.

3. The type of industrial worker created by capitalism is always vigorously anti-imperialist. In the individual case, skillful agitation may persuade the working masses to approve or remain neutral—a concrete goal or interest in self-defense always playing the main part—but no initiative for a forcible policy of expansion ever emanates from this quarter. On this point official socialism unquestionably formulates not merely the interests but also the conscious will of the workers. Even less than peasant imperialism is there any such thing as socialist or other working-class imperialism.

4. Despite manifest resistance on the part of powerful elements, the capitalist age has seen the development of methods for preventing war, for the peaceful settlement of disputes among states. The very fact of resistance means that the trend can be explained only from the mentality of capitalism as a mode of life. It definitely limits the opportunities imperialism needs if it is to be a powerful force. True, the methods in question often fail, but even more often they are successful. I am thinking not merely of the Hague Court of Arbitration but of the practice of submitting controversial issues to conferences of the major powers or at least those powers directly concerned—a course of action that has become less and less avoidable. True, here too the individual case may become a farce. But the serious setbacks of today must not blind us to the real importance or sociological significance of these things.

5. Among all capitalist economies, that of the United States is least burdened with precapitalist elements, survivals, reminiscences, and power factors. Certainly we cannot expect to find imperialist tendencies altogether lacking even in the United States, for the immigrants came from Europe with their convictions fully formed, and the environment certainly favored the revival of instincts of pugnacity. But we can conjecture that among all countries the United States is likely to exhibit the weakest imperialist trend. This turns out to be the truth. The case is particularly instructive, because the United States has seen a particularly strong emergence of capitalist interests in an imperialist direction—those very interests to which the phenomenon of imperialism has so often been reduced, a subject we shall yet touch on. Nevertheless the United States was the first advocate of disarmament and arbitration. It was the first to conclude treaties concerning arms limitations (1817) and arbitral courts (first attempt in 1797)—doing so most zealously, by the way. when economic interest in expansion was at its greatest. Since 1908 such treaties have been concluded with twenty-two states. In the course of the nineteenth century, the United States had numerous occasions for war, including instances that were well calculated to test its patience. It made almost no use of such occasions. Leading industrial and financial circles in the United States had and still have an evident interest in incorporating Mexico into the Union. There was more than enough opportunity for such annexation—but Mexico remained unconquered. Racial catch phrases and working-class interests pointed to Japan as a possible danger. Hence possession of the Philippines was not a matter of indifference—yet surrender of this possession is being discussed. Canada was an almost defenseless prize—but Canada remained independent.

Even in the United States, of course, politicians need slogans—especially slogans calculated to divert attention from domestic issues. Theodore Roosevelt and certain magnates of the press actually resorted to imperialism—and the result, in that world of high capitalism, was utter defeat, a defeat that would have been even more abject, if other slogans, notably those appealing to anti-trust sentiment, had not met with better success.

These facts are scarcely in dispute. And since they fit into the picture of the mode of life which we have recognized to be the necessary product of capitalism, since we can grasp them adequately from the necessities of that mode of life and industry, it follows that capitalism is by nature anti-imperialist. Hence we cannot readily derive from it such imperialist tendencies as actually exist, but must evidently see them only as alien elements, carried into the world of capitalism from the outside, supported by non-capitalist factors in modern life. The survival of interest in a policy of forcible expansion does not, by itself, alter these facts—not even, it must be steadily emphasized, from the viewpoint of the economic interpretation of history.

For objective interests become effective—and, what is important, become powerful political factors—only when they correspond to attitudes of the people or of sufficiently powerful strata. Otherwise they remain without effect, are not even conceived of as interests. The economic interest in the forcible conquest of India had to await free-booter personalities, in order to be followed up. In ancient Rome the domestic class interest in an expansive policy had to be seized upon by a vigorous, idle aristocracy, otherwise it would have been ruled out on internal political grounds. Even the purely commercial imperialism of Venice—assuming that we can speak of such a thing, and not merely of a policy of securing trade routes in a military sense, which was then necessary—even such a policy needed to have examples of a policy of conquest at hand on every side, needed mercenary groups and bellicose adventurers among the nobili in order to become true imperialism.

The capitalist world, however, suppresses rather than creates such attitudes. Certainly, all expansive interests within it are likely to ally themselves with imperialist tendencies flowing from non-capitalist sources, to use them, to make them serve as pretexts, to rationalize them, to point the way toward action on account of them. And from this union the picture of modern imperialism is put together; but for that very reason it is not a matter of capitalist factors alone. Before we go into this at length, we must understand the nature and strength of the economic stake which capitalist society has in a policy of imperialism—especially the question of whether this interest is or is not inherent in the nature of capitalism—either capitalism generally, or a special phase of capitalism.

Where Free Trade Prevails, War Dies

It is in the nature of a capitalist economy—and of an exchange economy generally—that many people stand to gain economically in any war. Here the situation is fundamentally much as it is with the familiar subject of luxury. War means increased demand at panic prices, hence high profits and also high wages in many parts of the national economy. This is primarily a matter of money incomes, but as a rule (though to a lesser extent) real incomes are also affected. There are, for example, the special war interests, such as the arms industry. If the war lasts long enough, the circle of money profiteers naturally expands more and more—quite apart from a possible paper-money economy. It may extend to every economic field, but just as naturally the commodity content of money profits drops more and more, indeed, quite rapidly, to the point where actual losses are incurred.

The national economy as a whole, of course, is impoverished by the tremendous excess in consumption brought on by war. It is, to be sure, conceivable that either the capitalists or the workers might make certain gains as a class, namely, if the volume either of capital or of labor should decline in such a way that the remainder receives a greater share in the social product and that, even from the absolute viewpoint, the total sum of interest or wages becomes greater than it was before. But these advantages cannot be considerable. They are probably, for the most part, more than outweighed by the burdens imposed by war and by losses sustained abroad.

Thus the gain of the capitalists as a class cannot be a motive for war—and it is this gain that counts, for any advantage to the working class would be contingent on a large number of workers falling in action or otherwise perishing. There remain the entrepreneurs in the war industries, in the broader sense, possibly also the large landowner—a small but powerful minority. Their war profits are always sure to be an important supporting element. But few will go so far as to assert that this element alone is sufficient to orient the people of the capitalist world along imperialist lines. At most, an interest in expansion may make the capitalists allies of those who stand for imperialist trends.

It may be stated as being beyond controversy that where free trade prevails no class has an interest in forcible expansion as such. For in such a case the citizens and goods of every nation can move in foreign countries as freely as though those countries were politically their own—free trade implying far more than mere freedom from tariffs. In a genuine state of free trade, foreign raw materials and foodstuffs are as accessible to each nation as though they were within its own territory. Where the cultural backwardness of a region makes normal economic intercourse dependent on colonization, it does not matter, assuming free trade, which of the “civilized” nations undertakes the task of colonization. Dominion of the seas, in such a case, means little more than a maritime traffic police. Similarly, it is a matter of indifference to a nation whether a railway concession in a foreign country is acquired by one of its own citizens or not—just so long as the railway is built and put into efficient operation. For citizens of any country may use the railway, just like the fellow countrymen of its builder—while in the event of war it will serve whoever controls it in the military sense, regardless of who built it. It is true, of course, that profits and wages flowing from its construction and operation will accrue, for the greater part, to the nation that built it. But capital and labor that go into the railway have to be taken from somewhere, and normally the other nations fill the gap.

It is a fact that in a regime of free trade the essential advantages of international intercourse are clearly evident. The gain lies in the enlargement of the commodity supply by means of the division of labor among nations, rather than in the profits and wages of the export industry and the carrying trade. For these profits and wages would be reaped even if there were no export, in which case import, the necessary complement, would also vanish. Not even monopoly interests—if they existed—would be disposed toward imperialism in such a case. For under free trade only international cartels would be possible. Under a system of free trade there would be conflicts in economic interest neither among different nations nor among the corresponding classes of different nations. And since protectionism is not an essential characteristic of the capitalist economy—otherwise the English national economy would scarcely be capitalist—it is apparent that any economic interest in forcible expansion on the part of a people or a class is not necessarily a product of capitalism.

Protective tariffs alone—and harassment of the alien and of foreign commodities—do not basically change this situation as it affects interests. True, such barriers move the nations economically farther apart, making it easier for imperialist tendencies to win the upper hand; they line up the entrepreneurs of the different countries in battle formation against one another, impeding the rise of peaceful interests; they also hinder the flow of raw materials and foodstuffs and thus the export of manufactures, or conversely, the import of manufactures and the export of raw materials and foodstuffs, possibly creating an interest in—sometimes forcible—expansion of the customs area; they place entrepreneurs in a position of dependence on regulations of governments that may be serving imperialist interests, giving these governments occasion to pervert economic relations for purposes of sharpening economic conflicts, for adulterating the competitive struggle with diplomatic methods outside the field of economics, and, finally, for imposing on people the heavy sacrifices exacted by a policy of autarchy, thus accustoming them to the thought of war by constant preparation for war.

Nevertheless, in this case the basic alignment of interests remains essentially what it was under free trade. We might reiterate our example of railway construction, though in the case of mining concessions, for example, the situation is somewhat different. Colonial possessions acquire more meaning in this case, but the exclusion from the colonies of aliens and foreign capital is not altogether good business since it slows down the development of the colonies. The same is true of the struggle for third markets. When, for example, France obtains more favorable tariff treatment from the Chinese government than England enjoys, this will avail only those French exporters who are in a position to export the same goods as their English confreres; the others are only harmed. It is true, of course, that protectionism adds another form of international capital movement to the kind that prevails under free trade—or rather, a modification of it—namely, the movement of capital for the founding of enterprises inside the tariff wall, in order to save customs duties. But this capital movement too has no aggressive element; on the contrary, it tends toward the creation of peaceful interests. Thus an aggressive economic policy on the part of a country with a unified tariff—with preparedness for war always in the background—serves the economy only seemingly rather than really. Actually, one might assert that the economy becomes a weapon in the political struggle, a means for unifying the nation, for severing it from the fabric of international interests, for placing it at the disposal of the state power.

This becomes especially clear when we consider which strata of the capitalist world are actually economically benefited by protective tariffs. They do harm to both workers and capitalists—in contrast to entrepreneurs—not only in their role as consumers, but also as producers. The damage to consumers is universal, that to producers almost so. As for entrepreneurs, they are benefited only by the tariff that happens to be levied on their own product. But this advantage is substantially reduced by the countermeasures adopted by other countries—universally, except in the case of England—and by the effect of the tariff on the prices of other articles, especially those which they require for their own productive process.

The Protective Tariff and Its Future

Why, then, are entrepreneurs so strongly in favor of protective tariffs? The answer is simple. Each industry hopes to score special gains in the struggle of political intrigue, thus enabling it to realize a net gain. Moreover, every decline in freight rates, every advance in production abroad, is likely to affect the economic balance, making it necessary for domestic enterprises to adapt themselves, indeed often to turn to other lines of endeavor. This is a difficult task to which not everyone is equal. Within the industrial organism of every nation there survive antiquated methods of doing business that would cause enterprises to succumb to foreign competition—because of poor management rather than lack of capital, for before 1914 the banks were almost forcing capital on the entrepreneurs. If, still, in most countries virtually all entrepreneurs are protectionists, this is owing to a reason which we shall presently discuss.

Without that reason, their attitude would be different. The fact that all industries today demand tariff protection must not blind us to the fact that even the entrepreneur interest is not unequivocally protectionist. For this demand is only the consequence of a protectionism already in existence, of a protectionist spirit springing from the economic interests of relatively small entrepreneur groups and from non-capitalist elements—a spirit that ultimately carried along all groups, occasionally even the representatives of working-class interests. Today the protective tariff confers its full and immediate benefits—or comes close to conferring them—only on the large landowners.

A protectionist policy, however, does facilitate the formation of cartels and trusts. And it is true that this circumstance thoroughly alters the alignment of interests. It was neo-Marxist doctrine that first tellingly described this causal connection (Bauer) and fully recognized the significance of the “functional change in protectionism” (Hilferding). Union in a cartel or trust confers various benefits on the entrepreneur—a saving in costs, a stronger position as against the workers—but none of these compares with this one advantage: a monopolistic price policy, possible to any considerable degree only behind an adequate protective tariff.

Now the price that brings the maximum monopoly profit is generally far above the price that would be fixed by fluctuating competitive costs, and the volume that can be marketed at that maximum price is generally far below the output that would be technically and economically feasible. Under free competition that output would be produced and offered, but a trust cannot offer it, for it could be sold only at a competitive price. Yet the trust must produce it—or approximately as much—otherwise the advantages of large-scale enterprise remain unexploited and unit costs are likely to be uneconomically high. The trust thus faces a dilemma. Either it renounces the monopolistic policies that motivated its founding; or it fails to exploit and expand its plant, with resultant high costs. It extricates itself from this dilemma by producing the full output that is economically feasible, thus securing low costs, and offering in the protected domestic market only the quantity corresponding to the monopoly price—insofar as the tariff permits; while the rest is sold, or “dumped,” abroad at a lower price, sometimes (but not necessarily) below cost.

What happens when the entrepreneurs successfully pursue such a policy is something that did not occur in the cases discussed so far—a conflict of interests between nations that becomes so sharp that it cannot be overcome by the existing basic community of interests. Each of the two groups of entrepreneurs and each of the two states seeks to do something that is rendered illusory by a similar policy on the part of the other. In the case of protective tariffs without monopoly formation, an understanding is sometimes possible, for only a few would be destroyed, while many would stand to gain; but when monopoly rules it is very difficult to reach an agreement for it would require self-negation on the part of the new rulers. All that is left to do is to pursue the course once taken, to beat down the foreign industry wherever possible, forcing it to conclude a favorable “peace.” This requires sacrifices. The excess product is dumped on the world market at steadily lower prices. Counterattacks that grow more and more desperate must be repulsed on the domestic scene. The atmosphere grows more and more heated. Workers and consumers grow more and more troublesome.

Export as a Tool of Aggression

Where this situation prevails, capital export, like commodity export, becomes aggressive, belying its ordinary character. A mass of capitalists competing with one another has no means of counteracting the decline in the interest rate. Of course they always seek out the places where the interest rate is highest, and in this quest they are quite willing to export their capital. But they are unable to adopt a policy of forced capital exports; and where there is freedom of capital movement they also lack the motive. For any gaps which might be opened up at home would be filled by foreign capital flowing in from abroad, thus preventing a rise of the domestic interest rate. But organized capital may very well make the discovery that the interest rate can be maintained above the level of free competition, if the resulting surplus can be sent abroad and if any foreign capital that flows in can be intercepted and—whether in the form of loans or in the form of machinery and the like—can likewise be channeled into foreign investment outlets.

Now it is true that capital is nowhere cartelized. But it is everywhere subject to the guidance of the big banks which, even without a capital cartel, have attained a position similar to that of the cartel magnates in industry, and which are in a position to put into effect similar policies. It is necessary to keep two factors in mind. In the first place, everywhere except, significantly, in England, there has come into being a close alliance between high finance and the cartel magnates, often going as far as personal identity. Although the relation between capitalists and entrepreneurs is one of the typical and fundamental conflicts of the capitalist economy, monopoly capitalism has virtually fused the big banks and cartels into one. Leading bankers are often leaders of the national economy. Here capitalism has found a central organ that supplants its automatism by conscious decisions.

In the second place, the interests of the big banks coincide with those of their depositors even less than do the interests of cartel leaders with those of the firms belonging to the cartel. The policies of high finance are based on control of a large proportion of the national capital, but they are in the actual interest of only asmall proportion and, indeed, with respect to the alliance with big business, sometimes not even in the interest of capital as such at all. The ordinary “small” capitalist foots the bills for a policy of forced exports, rather than enjoying its profits. He is a tool; his interests do not really matter. This possibility of laying all the sacrifices connected with a monopoly policy on one part of capital, while removing them from another, makes capital exports far more lucrative for the favored part than they would otherwise be. Even capital that is independent of the banks is thus often forced abroad—forced into the role of a shock troop for the real leaders, because cartels successfully impede the founding of new enterprises. Thus the customs area of a trustified country generally pours a huge wave of capital into new countries. There it meets other, similar waves of capital, and a bitter, costly struggle begins but never ends.

In such a struggle among “dumped” products and capitals, it is no longer a matter of indifference who builds a given railroad, who owns a mine or a colony. Now that the law of costs is no longer operative, it becomes necessary to fight over such properties with desperate effort and with every available means, including those that are not economic in character, such as diplomacy. The concrete objects in question often become entirely subsidiary considerations; the anticipated profit may be trifling, because of the competitive struggle—a struggle that has very little to do with normal competition. What matters is to gain a foothold of some kind and then to exploit this foothold as a base for the conquest of new markets. This costs all the participants dear—often more than can be reasonably recovered, immediately or in the future. Fury lays hold of everyone concerned—and everyone sees to it that his fellow countrymen share his wrath. Each is constrained to resort to methods that he would regard as evidence of unprecedented moral depravity in the other.

The Marxist Theory Is Wrong

It is not true that the capitalist system as such must collapse from immanent necessity, that it necessarily makes its continued existence impossible by its own growth and development. Marx’s line of reasoning on this point shows serious defects, and when these are corrected the proof vanishes. It is to the great credit of Hilferding that he abandoned this thesis of Marxist theory.

Nevertheless, the situation that has just been described is really untenable both politically and economically. Economically, it amounts to a reductio ad absurdum. Politically, it unleashes storms of indignation among the exploited consumers at home and the threatened producers abroad. Thus the idea of military force readily suggests itself. Force may serve to break down foreign customs barriers and thus afford relief from the vicious circle of economic aggression. If that is not feasible, military conquest may at least secure control over markets in which heretofore one had to compete with the enemy. In this context, the conquest of colonies takes on an altogether different significance. Non-monopolist countries, especially those adhering to free trade, reap little profit from such a policy. But it is a different matter with countries that function in a monopolist role vis-à-vis their colonies. There being no competition, they can use cheap native labor without its ceasing to be cheap; they can market their products, even in the colonies, at monopoly prices; they can, finally, invest capital that would only depress the profit rate at home and that could be placed in other civilized countries only at very low interest rates.

And they can do all these things even though the consequence may be much slower colonial development. It would seem as though there could be no such interest in expansion at the expense of other advanced capitalist countries—in Europe, for example—because their industry would merely offer competition to the domestic cartels. But it is sufficient for the industry of the conquering state to be superior to that of the one to be subjugated—superior in capital power, organization, intelligence, and self-assertion—to make it possible to treat the subjugated state, perhaps not quite, but very much like a colony, even though it may become necessary to make a deal with individual groups of interests that are particularly powerful.

A much more important fact is that the conqueror can face the subjugated nation with the hearing of the victor. He has countless means at his disposal for expropriating raw material resources and the like and placing them in the service of his cartels. He can seize them outright, nationalize them, impose a forced sale, or draft the proprietors into industrial groups of the victor nation under conditions that insure control by the domestic captains of industry. He can exploit them by a system of quotas or allotments. He can administer the conquered means of communication in the interests of his own cartels. Under the pretext of military and political security, he can deprive the foreign workers of the right to organize, thus not only making cheap labor in the annexed territory available to his cartels, but also holding a threat over the head of domestic labor.

Thus we have here, within a social group that carries great political weight, a strong, undeniable, economic interest in such things as protective tariffs, cartels, monopoly prices, forced exports (dumping), an aggressive economic policy, an aggressive foreign policy generally, and war, including wars of expansion with a typically imperialist character. Once this alignment of interests exists, an even stronger interest in a somewhat differently motivated expansion must be added, namely, an interest in the conquest of lands producing raw materials and foodstuffs, with a view to facilitating self-sufficient warfare.

Still another interest is that in rising wartime consumption. A mass of unorganized capitalists competing with one another may at best reap a trifling profit from such an eventuality, but organized capital is sure to profit hugely. Finally there is the political interest in war and international hatred which flows from the insecure position of the leading circles. They are small in numbers and highly unpopular. The essential nature of their policy is quite generally known, and most of the people find it unnatural and contemptible. An attack on all forms of property has revolutionary implications, but an attack on the privileged position of the cartel magnates may be politically rewarding, implying comparatively little risk and no threat to the existing order. Under certain circumstances it may serve to unite all the political parties. The existence of such a danger calls for diversionary tactics.

Yet the final word in any presentation of this aspect of modern economic life must be one of warning against overestimating it. The conflicts that have been described, born of an export-dependent monopoly capitalism, may serve to submerge the real community of interests among nations; the monopolist press may drive it underground; but underneath the surface it never completely disappears. Deep down, the normal sense of business and trade usually prevails. Even cartels cannot do without the custom of their foreign economic kin. Even national economies characterized by export monopoly are dependent on one another in many respects. And their interests do not always conflict in the matter of producing for third markets. Even when the conflicting interests are emphasized, parallel interests are not altogether lacking.

Furthermore, if a policy of export monopolism is to be driven to the extremes of forcible expansion, it is necessary to win over all segments of the population—at least to the point where they are halfway prepared to support the war; but the real interest in export monopolism as such is limited to the entrepreneurs and their ally, high finance. Even the most skillful agitation cannot prevent the independent traders, the small producers who are not covered by cartels, the “mere” capitalists, and the workers from occasionally realizing that they are the victims of such a policy. In the case of the traders and small producers this is quite clear. It is not so clear in the case of the capitalists, because of the possibility of “dumping” capital in order to raise the domestic interest rate. Against this, however, stands the high cost of such a policy and the curtailment of the competition of entrepreneurs for domestic capital. It is of the greatest importance, finally, to understand that export monopolism injures the workers far more unequivocally than the capitalists. There can be no dumping of labor power, and employment abroad or in the colonies is not even a quantitative substitute.

Curiously enough, this injury to the working class is a matter of controversy. Even neo-Marxist doctrine—and not merely those writers properly characterized as “vulgar Marxists,” who in every respect resemble their ilk of other persuasions—is inclined to admit that the workers derive temporary benefits from export monopolism, limiting the polemic against it to proof that the ultimate effects—economic and especially political—are doubtful, and that even the temporary benefits are purchased by an injury to foreign workers which conflicts with the spirit of socialism. There is an error here. Apparently it is assumed that production for export—and, to the extent that it fosters such production, monopoly capitalist expansion as well—increases the demand for labor and thus raises wages. Suppose we accept as correct the premises implied in this argument, that the increase in demand will outweigh any decrease flowing from monopolistic labor-saving production methods, and also that it will outweigh the disadvantage flowing from the fact that the workers are now confronted, rather than by many entrepreneurs in a single industry, by a single party of the second part who, on the local labor market at least, can engage in monopolistic policies with respect to them, both as workers and as consumers. Even if we accept these premises—which seem doubtful to me—the balance is not even temporarily in favor of the workers.

We have already pointed out that the interest of workers in export, even when free trade prevails, is essentially a consumer interest; that is, it is based on the fact that exports make imports possible. But as a producer the worker will usually fare no worse without exports, since the lack of exports must also eliminate imports. The workers, moreover, have no interest whatever in exports that may result from a policy of export monopolism—in other words, that would not otherwise be exported at all. For if it were impossible to dump these quantities they would by no means remain unproduced. On the contrary, most, if not all, would be offered at home, in general affording the same employment opportunities to the workers and in addition cheapening consumption. If that is not possible—that is to say, if the profit from the increased supply at home, together with the profit from the reduced supply abroad, fails to cover total costs including interest—then the industry in question is expanded beyond economically justifiable limits, and it is in the interest of all the productive factors concerned, excepting only the cartel magnates, for capital and labor to move into other industries, something that is necessary and always possible.

This constellation of interests is not altered by the circumstance that export monopolism is often able and willing to do things for its workers in the social welfare sphere, thus allowing them to share in its profits. For what makes this possible is, after all, nothing but exploitation of the consumer. If we may speak of the impoverishment of the workers anywhere within the world of capitalism, then a tendency to such impoverishment is apparent here, at least in a relative sense—though actually that tendency has slowed up since the turn of the century. If it is ever true that there is not a trace of parallelism of economic interests between entrepreneurs and workers, but instead only a sharp economic conflict—and usually there is much exaggeration in such statements—then this is true here. Chamberlain had every reason to appeal to national sentiment, to mock the petty calculation of immediate advantage, and to call out to the workers: “Learn to think imperially!” For the English worker knew what he was about, despite the banner headlines on the front pages of the yellow press: “Tariff Reform Means Work For All,” and so on.

The fact that the balance sheet of export monopolism is anything but a brilliant success, even for the entrepreneurs, has been glossed over only by an upswing that stemmed from sources other than export monopolism itself. The hope of a future of dominion, to follow the struggles of the present, is but poor solace for the losses in that struggle. Should such a policy become general, the losses—admitted or not—of each individual nation would be even greater, the winnings even smaller. And if the export monopolists have not done too well, the non-monopolist industries of England have hardly suffered from the dumping policies followed by other nations. The British steel industry may have suffered (though it was by no means in serious danger), but in return all the other English industries actually enjoyed, at the expense of the foreign dumpers, a production premium in the form of abnormally low prices for iron and ferrous products. The sugar industry may have been unable to maintain itself in England, but in return sugar-using industries developed in England as they did nowhere else. To those entrepreneurs, moreover, who never succeeded in gaining leading positions in the cartels, the enjoyment of an assured return is often but a poor substitute for lost opportunities for growth.

Thus we can understand the fact that even in entrepreneurial circles dissatisfaction with such a policy arose, and while one group entertained the thought of forcible expansion as a last resort, another was led into an attitude of opposition. In all the protectionist countries, therefore, we have had, for the past twenty years, anti-dumping legislation, primarily as an instrument of tariff policy. This legislation, it is true, is directed primarily against foreign dumping rather than against dumping by domestic enterprise, and hence it becomes a new weapon in the hands of the monopoly interests. But it is also true that its political basis lies partly in circles and attitudes opposed on principle to export aggression and for this reason anxious to make such a policy impossible for domestic enterprise. It must be admitted that such opposition often suffers from inappropriate techniques and from the influence of lay catchwords. But given peaceful development, it may be assumed that the opposition would gradually turn directly against dumping by domestic cartels.

This countermovement against export monopolism, within capitalism rather than opposed to it, would mean little if it were merely the political death struggle of a moribund economic order which is giving way to a new phase of development. If the cartel with its policy of export aggression stood face to face with non-cartelized factory industry, as that industry once faced handicraft industry, then even the most vigorous opposition could scarcely change the ultimate outcome or the fundamental significance of the process. But it cannot be emphasized sharply enough that such is not the case.

Export monopolism does not grow from the inherent laws of capitalist development. The character of capitalism leads to large-scale production, but with few exceptions large-scale production does not lead to the kind of unlimited concentration that would leave but one or only a few firms in each industry. On the contrary, any plant runs up against limits to its growth in a given location; and the growth of combinations which would make sense under a system of free trade encounters limits of organizational efficiency. Beyond these limits there is no tendency toward combination inherent in the competitive system. In particular, the rise of trusts and cartels—a phenomenon quite different from the trend to large-scale production with which it is often confused—can never be explained by the automatism of the competitive system. This follows from the very fact that trusts and cartels can attain their primary purpose—to pursue a monopoly policy—only behind protective tariffs, without which they would lose their essential significance.

But protective tariffs do not automatically grow from the competitive system. They are the fruit of political action—a type of action that by no means reflects the objective interests of all those concerned but that, on the contrary, becomes impossible as soon as the majority of those whose consent is necessary realize their true interests. To some extent it is obvious, and for the rest it will be presently shown, that the interests of the minority, quite appropriately expressed in support of a protective tariff, do not stem from capitalism as such.

Capitalism Is the Only Path

It follows that it is a basic fallacy to describe imperialism as a necessary phase of capitalism, or even to speak of the development of capitalism into imperialism. We have seen before that the mode of life of the capitalist world does not favor imperialist attitudes. We now see that the alignment of interests in a capitalist economy—even the interests of its upper strata—by no means points unequivocally in the direction of imperialism. We now come to the final step in our line of reasoning.

Since we cannot derive even export monopolism from any tendencies of the competitive system toward big enterprise, we must find some other explanation. A glance at the original purpose of tariffs provides what we need. Tariffs sprang from the financial interests of the monarchy. They were a method of exploiting the trader which differed from the method of the robber baron in the same way that the royal chase differed from the method of the poacher. They were in line with the royal prerogatives of safe conduct, of protection for the Jews, of the granting of market rights, and so forth. From the thirteenth century onward this method was progressively refined in the autocratic state, less and less emphasis being placed on the direct monetary yield of customs revenues, and more and more on their indirect effect in creating productive taxable objects. In other words, while the protective value of a tariff counted, it counted only from the viewpoint of the ultimate monetary advantage of the sovereign. It does not matter, for our purposes, that occasionally this policy, under the influence of lay notions of economics, blundered badly in the choice of its methods. (From the viewpoint of autocratic interest, incidentally, such measures were not nearly so self-defeating as they were from the viewpoint of the national economy.)

Every customs house, every privilege conferring the right to produce, market, or store, thus created a new economic situation which deflected trade and industry into “unnatural” channels. All tariffs, rights, and the like became the seed bed for economic growth that could have neither sprung up nor maintained itself without them. Further, all such economic institutions dictated by autocratic interest were surrounded by manifold interests of people who were dependent on them and now began to demand their continuance—a wholly paradoxical though at the same time quite understandable situation. The trading and manufacturing bourgeoisie was all the more aware of its dependence on the sovereign, since it needed his protection against the remaining feudal powers; and the uncertainties of the times, together with the lack of great consuming centers, impeded the rise of free economic competition. Insofar as commerce and manufacturing came into being at all, therefore, they arose under the sign of monopolistic interest. Thus the bourgeoisie willingly allowed itself to be molded into one of the power instruments of the monarchy, both in a territorial and in a national sense.

It is even true that the bourgeoisie, because of the character of its interests and the kind of economic outlook that corresponded to those interests, made an essential contribution to the emergence of modern nationalism. Another factor that worked in the same direction was the financial relation between the great merchant houses and the sovereign. This theory of the nature of the relationship between the autocratic state and the bourgeoisie is not refuted by pointing out that it was precisely the mercantile republics of the Middle Ages and the early modern period that initially pursued a policy of mercantilism. They were no more than enclaves in a world pervaded by the struggle among feudal powers. The Hanseatic League and Venice, for example, could maintain themselves only as military powers, could pursue their business only by means of fortified bases, warehousing privileges, protective treaties. This forced the people to stand shoulder to shoulder, made the exploitation of political gains with a corporate and monopolistic spirit. Wherever autocratic power vanished at an early date—as in the Netherlands and later in England—and the protective interest receded into the background, they swiftly discovered that trade must be free—“free to the nethermost recesses of hell.”

Trade and industry of the early capitalist period thus remained strongly pervaded with precapitalist methods, bore the stamp of autocracy, and served its interests, either willingly or by force. With its traditional habits of feeling, thinking, and acting molded along such lines, the bourgeoisie entered the Industrial Revolution. It was shaped, in other words, by the needs and interests of an environment that was essentially non-capitalist, or at least precapitalist—needs stemming not from the nature of the capitalist economy as such but from the fact of the coexistence of early capitalism with another and at first overwhelmingly powerful mode of life and business. Established habits of thought and action tend to persist, and hence the spirit of guild and monopoly at first maintained itself, and was only slowly undermined, even where capitalism was in sole possession of the field.

Actually capitalism did not fully prevail anywhere on the Continent. Existing economic interests, “artificially” shaped by the autocratic state, remained dependent on the “protection” of the state. The industrial organism, such as it was, would not have been able to withstand free competition. Even where the old barriers crumbled in the autocratic state, the people did not all at once flock to the clear track. They were creatures of mercantilism and even earlier periods, and many of them huddled together and protested against the affront of being forced to depend on their own ability. They cried for paternalism, for protection, for forcible restraint of strangers, and above all for tariffs. They met with partial success, particularly because capitalism failed to take radical action in the agrarian field. Capitalism did bring about many changes on the land, springing in part from its automatic mechanisms, in part from the political trends it engendered—abolition of serfdom, freeing the soil from feudal entanglements, and so on—but initially it did not alter the basic outlines of the social structure of the countryside. Even less did it affect the spirit of the people, and least of all their political goals. This explains why the features and trends of autocracy—including imperialism—proved so resistant, why they exerted such a powerful influence on capitalist development, why the old export monopolism could live on and merge into the new.

These are facts of fundamental significance to an understanding of the soul of modern Europe. Had the ruling class of the Middle Ages—the war-oriented nobility—changed its profession and function and become the ruling class of the capitalist world; or had developing capitalism swept it away, put it out of business, instead of merely clashing head-on with it in the agrarian sphere—then much would have been different in the life of modern peoples. But as things actually were, neither eventuality occurred; or, more correctly, both are taking place, only at a very slow pace. The two groups of landowners remain social classes clearly distinguishable from the groupings of the capitalist world. The social pyramid of the present age has been formed, not by the substance and laws of capitalism alone, but by two different social substances, and by the laws of two different epochs. Whoever seeks to understand Europe must not forget this and concentrate all attention on the indubitably basic truth that one of these substances tends to be absorbed by the other and thus the sharpest of all class conflicts tends to be eliminated.

Whoever seeks to understand Europe must not overlook that even today its life, its ideology, its politics are greatly under the influence of the feudal “substance,” that while the bourgeoisie can assert its interests everywhere, it “rules” only in exceptional circumstances, and then only briefly. The bourgeois outside his office and the professional man of capitalism outside his profession cut a very sorry figure. Their spiritual leader is the rootless “intellectual,” a slender reed open to every impulse and a prey to unrestrained emotionalism. The “feudal” elements, on the other hand, have both feet on the ground, even psychologically speaking. Their ideology is as stable as their mode of life. They believe certain things to be really true, others to be really false. This quality of possessing a definite character and cast of mind as a class, this simplicity and solidity of social and spiritual position extends their power far beyond their actual bases, gives them the ability to assimilate new elements, to make others serve their purposes—in a word, gives them prestige, something to which the bourgeois, as is well known, always looks up, something with which he tends to ally himself, despite all actual conflicts.

The nobility entered the modern world in the form into which it had been shaped by the autocratic state—the same state that had also molded the bourgeoisie. It was the sovereign who disciplined the nobility, instilled loyalty into it, “statized” it, and, as we have shown, imperialized it. He turned its nationalist sentiments—as in the case of the bourgeoisie—into an aggressive nationalism, and then made it a pillar of his organization, particularly his war machine. It had not been that in the immediately preceding period. Rising absolutism had at first availed itself of much more dependent organs. For that very reason, in his position as leader of the feudal powers and as warlord, the sovereign survived the onset of the Industrial Revolution, and as a rule—except in France—won victory over political revolution. The bourgeoisie did not simply supplant the sovereign, nor did it make him its leader, as did the nobility. It merely wrested a portion of his power from him and for the rest submitted to him. It did not take over from the sovereign the state as an abstract form of organization. The state remained a special social power, confronting the bourgeoise.

In some countries it has continued to play that role to the present day. It is in the state that the bourgeoisie with its interests seeks refuge, protection against external and even domestic enemies. The bourgeoisie seeks to win over the state for itself, and in return serves the state and state interests that are different from its own. Imbued with the spirit of the old autocracy, trained by it, the bourgeoisie often takes over its ideology, even where, as in France, the sovereign is eliminated and the official power of the nobility has been broken. Because the sovereign needed soldiers, the modern bourgeois—at least in his slogans—is an even more vehement advocate of an increasing population.

Because the sovereign was in a position to exploit conquests, needed them to be a victorious warlord, the bourgeoisie thirsts for national glory—even in France, worshiping a headless body, as it were. Because the sovereign found a large gold hoard useful, the bourgeoisie even today cannot be swerved from its bullionist prejudices. Because the autocratic state paid attention to the trader and manufacturer chiefly as the most important sources of taxes and credits, today even the intellectual who has not a shred of property looks on international commerce, not from the viewpoint of the consumer, but from that of the trader and exporter. Because pugnacious sovereigns stood in constant fear of attack by their equally pugnacious neighbors, the modern bourgeois attributes aggressive designs to neighboring peoples.

All such modes of thought are essentially non-capitalist. Indeed, they vanish most quickly wherever capitalism fully prevails. They are survivals of the autocratic alignment of interests, and they endure wherever the autocratic state endures on the old basis and with the old orientation, even though more and more democratized and otherwise transformed. They bear witness to the extent to which essentially imperialist absolutism has patterned not only the economy of the bourgeoisie but also its mind—in the interests of autocracy and against those of the bourgeoisie itself.

This significant dichotomy in the bourgeois mind—which in part explains its wretched weakness in politics, culture, and life generally; earns it the understandable contempt of the Left and the Right; and proves the accuracy of our diagnosis—is best exemplified by two phenomena that are very close to our subject: present-day nationalism and militarism.

Nationalism is affirmative awareness of national character, together with an aggressive sense of superiority. It arose from the autocratic state. In conservatives, nationalism in general is understandable as an inherited orientation, as a mutation of the battle instincts of the medieval knights, and finally as a political stalking horse on the domestic scene; and conservatives are fond of reproaching the bourgeois with a lack of nationalism, which from their point of view, is evaluated in a positive sense. Socialists, on the other hand, equally understandably exclude nationalism from their general ideology, because of the essential interests of the proletariat, and by virtue of their domestic opposition to the conservative stalking horse; they, in turn, not only reproach the bourgeoisie with an excess of nationalism (which they, of course, evaluate in a negative sense) but actually identify nationalism and even the very idea of the nation with bourgeois ideology.

The curious thing is that both of these groups are right in their criticism of the bourgeoisie. For, as we have seen, the mode of life that flows logically from the nature of capitalism necessarily implies an anti-nationalist orientation in politics and culture. This orientation actually prevails. We find a great many anti-nationalist members of the middle class, and even more who merely parrot the catchwords of nationalism. In the capitalist world it is actually not big business and industry at all that are the carriers of nationalist trends, but the intellectual, and the content of his ideology is explained not so much from definite class interests as from chance emotion and individual interest. But the submission of the bourgeoisie to the powers of autocracy, its alliance with them, its economic and psychological patterning by them—all these tend to push the bourgeois in a nationalist direction; and this too we find prevalent, especially among the chief exponents of export monopolism.

The relationship between the bourgeoisie and militarism is quite similar. Militarism is not necessarily a foregone conclusion when a nation maintains a large army, but only when high military circles become a political power. The criterion is whether leading generals as such wield political influence and whether the responsible statesmen can act only with their consent. That is possible only when the officer corps is linked to a definite social class, as in Japan, and can assimilate to its position individuals who do not belong to it by birth. Militarism too is rooted in the autocratic state. And again the same reproaches are made against the bourgeois from both sides—quite properly too. According to the “pure” capitalist mode of life, the bourgeois is unwarlike. The alignment of capitalist interests should make him utterly reject military methods, put him in opposition to the professional soldier.

Significantly, we see this in the example of England where, first, the struggle against a standing army generally and, next, opposition to its elaboration, furnished bourgeois politicians with their most popular slogan: “retrenchment.” Even naval appropriations have encountered resistance. We find similar trends in other countries, though they are less strongly developed. The continental bourgeois, however, was used to the sight of troops. He regarded an army almost as a necessary component of the social order, ever since it had been his terrible taskmaster in the Thirty Years’ War. He had no power at all to abolish the army. He might have done so if he had had the power; but not having it, he considered the fact that the army might be useful to him. In his “artificial” economic situation and because of his submission to the sovereign, he thus grew disposed toward militarism, especially where export monopolism flourished. The intellectuals, many of whom still maintained special relationships with feudal elements, were so disposed to an even greater degree.

Just as we once found a dichotomy in the social pyramid, so now we find everywhere, in every aspect of the bourgeois portion of the modern world, a dichotomy of attitudes and interests. Our examples also show in what way the two components work together. Nationalism and militarism, while not creatures of capitalism, become “capitalized” and in the end draw their best energies from capitalism. Capitalism involves them in its workings and thereby keeps them alive, politically as well as economically. And they, in turn, affect capitalism, cause it to deviate from the course it might have followed alone, support many of its interests.

Here we find that we have penetrated to the historical as well as the sociological sources of modern imperialism. It does not coincide with nationalism and militarism, though it fuses with them by supporting them as it is supported by them. It too is—not only historically, but also sociologically—a heritage of the autocratic state, of its structural elements, organizational forms, interest alignments, and human attitudes, the outcome of precapitalist forces which the autocratic state has reorganized, in part by the methods of early capitalism. It would never have been evolved by the “inner logic” of capitalism itself.

This is true even of mere export monopolism. It too has its sources in absolutist policy and the action habits of an essentially precapitalist environment. That it was able to develop to its present dimensions is owing to the momentum of a situation once created, which continued to engender ever new “artificial” economic structures, that is, those which maintain themselves by political power alone. In most of the countries addicted to export monopolism it is also owing to the fact that the old autocratic state and the old attitude of the bourgeoisie toward it were so vigorously maintained.

But export monopolism, to go a step further, is not yet imperialism. And even if it had been able to arise without protective tariffs, it would never have developed into imperialism in the hands of an unwarlike bourgeoisie. If this did happen, it was only because the heritage included the war machine, together with its socio-psychological aura and aggressive bent, and because a class oriented toward war maintained itself in a ruling position. This class clung to its domestic interest in war, and the pro-military interests among the bourgeoisie were able to ally themselves with it. This alliance kept alive war instincts and ideas of overlordship, male supremacy, and triumphant glory—ideas that would have otherwise long since died. It led to social conditions that, while they ultimately stem from the conditions of production, cannot be explained from capitalist production methods alone. And it often impresses its mark on present-day politics, threatening Europe with the constant danger of war.

This diagnosis also bears the prognosis of imperialism. The precapitalist elements in our social life may still have great vitality; special circumstances in national life may revive them from time to time; but in the end the climate of the modern world must destroy them. This is all the more certain since their props in the modern capitalist world are not of the most durable material. Whatever opinion is held concerning the vitality of capitalism itself, whatever the life span predicted for it, it is bound to withstand the onslaughts of its enemies and its own irrationality much longer than essentially untenable export monopolism—untenable even from the capitalist point of view.

Export monopolism may perish in revolution, or it may be peacefully relinquished; this may happen soon, or it may take some time and require desperate struggle; but one thing is certain—it will happen. This will immediately dispose of neither warlike instincts nor structural elements and organizational forms oriented toward war—and it is to their dispositions and domestic interests that, in my opinion, much more weight must be given in every concrete case of imperialism than to export monopolist interests, which furnish the financial “outpost skirmishes”—a most appropriate term—in many wars. But such factors will be politically overcome in time, no matter what they do to maintain among the people a sense of constant danger of war, with the war machine forever primed for action. And with them, imperialisms will wither and die.

It is not within the scope of this study to offer an ethical, esthetic, cultural, or political evaluation of this process. Whether it heals sores or extinguishes suns is a matter of utter indifference from the viewpoint of this study. It is not the concern of science to judge that. The only point at issue here was to demonstrate, by means of an important example, the ancient truth that the dead always rule the living.


  • Joseph Schumpeter (1882-1950) was one of the great economists of the 20th century. Beginning his career an Austrian academic, he immigrated to the U.S. in 1932 and taught at Harvard University. His first book was on development economics. His book on imperialism was his second. During his time at Harvard, a vast amount of time was spent writing his two-volume work on business cycle. His lasting monument is Capitalism, Socialism, and Democracy. Though his ideological leanings could be ambiguous and shifting, his theoretical core was as a champion of markets and the culture of the bourgeoisie.