Chapter 1

Produced by The Online Distributed Proofreading Team at http://www.pgdp.net (This file was produced from images generously made available by The Internet Archive/American Libraries.)

THE MORALS OF ECONOMIC INTERNATIONALISM

By

J. A. HOBSON

AUTHOR OF "THE INDUSTRIAL SYSTEM," "THE EVOLUTION OF MODERN CAPITALISM," "WORK AND WEALTH," ETC.

BOSTON AND NEW YORK HOUGHTON MIFFLIN COMPANY The Riverside Press Cambridge 1920

COPYRIGHT, 1920, BY THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

ALL RIGHTS RESERVED

BARBARA WEINSTOCK LECTURES ON THE MORALS OF TRADE

This series will contain essays by representative scholars and men of affairs dealing with the various phases of the moral law in its bearing on business life under the new economic order, first delivered at the University of California on the Weinstock foundation.

THE MORALS OF ECONOMIC INTERNATIONALISM

It ought not to be the case that there is one standard of morality for individuals in their relations with one another, a different and a slighter standard for corporations, and a third and still slighter standard for nations. For, after all, what are corporations but groupings of individuals for ends which in the last resort are personal ends? And what are nations but wider, closer, and more lasting unions of persons for the attainment of the end they have in common, i.e., the commonwealth. Yet we are well aware that the accepted and operative standards of morality differ widely in the three spheres of conduct. If a soul is imputed at all to a corporation, it is a leather soul, not easily penetrable to the probings of pity or compunction, and emitting much less of the milk of human kindness than do the separate souls of its directors and stockholders in their ordinary human relations. There is a sharp recognition of this inferior moral make-up of a corporation in the attitude of ordinary men and women, who, scrupulously honest in their dealings with one another, slide almost unconsciously to an altogether lower level in dealing with a railroad or insurance company. This attitude is due, no doubt, partly to a resentment of the oppressive power which great corporations are believed to exercise, evoking a desire "to get a bit of your own back"; partly to a feeling that any slight injury to, or even fraud perpetrated on, a corporation will be so distributed as to inflict no appreciable harm on any individual stockholder. But largely it is the result of a failure to envisage a corporation as a moral being at all, to whom one owes obligations. Corporations are in a sense moral monsters; we say they behave as such and we are disposed to treat them as such.

The standard of international morality, particularly in matters of commercial intercourse, is on a still lower level. If, indeed, one were to press the theoretic issue, whether a state or a nation is a morally independent being, or whether it is in some sense or degree a member of what may be called an incipient society of states or nations, nearly every one would sustain the latter view. We should be reminded that there was such a thing as international law, however imperfect its sanctions might be, and that treaties, alliances, and other agreements between nations implied the recognition of some moral obligation. How weak this interstate morality is appears not merely from the fact that under strong temptation governments repudiate their most express and solemn agreements--to that temptation individuals sometimes yield in their dealings with one another--but also from the nature of the defence which they make of such repudiation. The plea of state necessity, which Germany made for the violation of the neutrality of Belgium, and which was stretched to cover the brutal mishandling of the Belgian people, is unfortunately but an extreme instance of conduct to which every state has had recourse at times, and--still more significant--which every state defends by adducing the same maxim, "_salus reipublicæ suprema lex_".

Here is the sharpest distinction between individual and national morality. There are certain deeds which a good and honorable man would not do even to save his life; there are no deeds, which it is admitted that a statesman, acting on behalf of his country, may not do to save that country. It is foolish to try to shirk this disconcerting admission. The Machiavellian doctrine of "reason of state" is, in the last resort, the accepted standard of national conduct. This does not signify that a nation and its government admit no obligation to fulfil their promises, or even voluntarily to perform good offices for other nations, but that there is always implied the reservation that the necessity, or, shall we say, the vital interests, of the nation override, cancel, and nullify all such obligations. And when "necessity" is stretched to cover any vital interest or urgent need, it is easy to recognize on what a slippery slope such international morality reposes.

International morality is impaired, however, not only by this feeble sense of mutual obligation, but by the still more injurious assumption of conflicting interests between nations. Nations are represented not merely as self-centered, independent moral systems, but as, in some degree, mutually repellent systems. This notion is partly the product of the false patriotic teaching of our schools and press, which seek to feed our sense of national unity more upon exclusive than inclusive sentiments. Nations are represented as rivals and competitors in some struggle for power, or greatness, or prestige, instead of as coöperators in the general advance of civilization. This presumption of opposing interests is, of course, more strongly marked in the presentation of commercial relations than in any other. Putting the issue roughly, but with substantial truth, the generally accepted image of international trade is one in which a number of trading communities, as, for instance, the United States, Britain, Germany, France, Japan, etc., are engaged in striving, each to win for itself, and at the expense of the others, the largest possible share of a strictly limited objective--the world market.

Now there are three fatal flaws in this image. First comes the false presentation of the United States, Britain, Germany, and other political beings in the capacity of trading firms. So far as world or international trade is rightly presented as a competitive process, that competition takes place, not between America, Britain, Germany, but between a number of separate American, British, German firms. The immediate interests of these firms are not directed along political lines. Generally speaking, the closer rivalry is between firms belonging to the same nation and conducting their business upon closely similar conditions. One Lancashire cotton exporter competes much more closely with other Lancashire exporters than he does with German, American, or Japanese exporters of similar goods. So it is everywhere, save in the exceptional times and circumstances in which governments themselves take over the regulation and conduct of foreign trade.

For certain purposes it is, no doubt, convenient to have balances and analyses of foreign trade presented separately, so as to show the volumes and values of different goods which pass from the members of one nation to those of another. But the imputation of political significance to these statistics, taken either in aggregate or in relation to separate countries, as if they were themselves indices of public gain or public loss, has most injurious reactions upon the intelligent understanding of commerce.

The second flaw is the assumption of a limited amount of market, which carries with it the assumption that the groups of traders, gathered under their national flags, are engaged in a conflict in which they are entitled to embroil their governments. By tariff bargaining and by all sorts of diplomatic weapons each government is called upon to assist its nationals and to cripple or exclude the nationals of other states. Now it is untrue that the world market is strictly limited, with the consequence that every advance of one group of traders is at the expense of another group. The world market is indefinitely expansible, and is always expanding; and commercial experience shows that the rapid expansion of the overseas trade of one country does not preclude the expansion of trade of other countries. I do not, of course, deny that at a particular time and in relation to some particular lucrative opportunity, genuine clashes of interests may arise. But, envisaging the whole range of foreign commerce, one feels that the image of it as a prize which governments can, and ought to win for their traders at the expense of the traders supported by other governments, has been a most fertile source of international misunderstanding.

Perhaps the worst of the three fallacies, and in a sense the deepest-rooted, is the concept of export trade as of more value than import trade. This is often traced back to the time when governments deemed it desirable to accumulate in their countries treasures of gold and silver and to this end encouraged the sale of goods abroad and discouraged the payment for them in foreign goods. There are, however, modern supporters of the assumption that it is more important to sell than to buy, although the money received for sales has no other significance or value than its power to buy, and trade can only be imaged truly as an exchange of goods for goods in which the processes of selling and of buying are complementary.

The economic explanation of the double falsehood of dividing buying from selling and of imputing a higher value to the latter process, lies beyond the scope of this address. But the injuries resulting from the superior pressure upon governments of organized bodies of producers and merchants who have things to sell, to the detriment of the consuming public who have only buying needs, are too grave matters to be neglected here. It is not too much to say that, if the interests of consumers and the interests of producers weighed equally in the eyes of governments, as they should, the strongest of all obstacles to a peaceful, harmonious society of nations would be overcome. For the suspicions, jealousies, and hostilities of nations are inspired more by the tendency of groups of producers to misrepresent their private interests as the good of their respective countries than by any other single circumstance.

This analysis has seemed necessary in order to clear away the intellectual and moral fogs which prevent a true realization of the economic, and therefore the moral, interdependence of nations. For every bond of economic interest involves moral obligation also. If it is true that the fabric of commercial relations is all the time being knit closer between the different peoples of the earth, then the moral isolation and the antagonism which earlier statecraft inculcated, and which still obsess so many minds, must be dissipated and give place to active sentiments of human coöperation.

There were, indeed, those who thought that already the web of commerce and finance had been woven strong enough to save nations from the calamity of war. Their miscalculation arose from underestimating the power over the mind and the passions of that false image of trade. But because the modern internationalism of commerce and finance did not prove strong enough to stem the full and sudden tide of war passions fed from the barbarous traditions of a dateless past, we ought not to disparage the potentiality of this internationalism as the foundation of a new and better world order. For, though those bonds of common interest broke under the strain of war, the confusion in which we find ourselves without them is itself a terrible testimony to their value. The enforced sundering of ordinary trade relations between members of different countries has taught two clear lessons. The first is this: that hardly any civilized nation is or can be economically independent in respect to essential supplies or industries. There is no European country that does not rely for the subsistence of its inhabitants upon supplies of goods and raw materials from foreign lands, mostly from countries outside the European continent. While Britain both leaned more heavily upon other countries and contributed most to other countries from her surplus produce, every other country, in larger or less degree--great countries such as France, Germany, Austria, Italy, little ones like Belgium, Holland, Switzerland, Scandinavia, and Denmark--were increasingly dependent upon outside sources for their livelihood. It is true that there remained a very few great backward countries, such as Russia and China, where a life of economic isolation was possible had they been willing to dispense with the higher products of civilized industry and with the fertilizing streams of capital without which progress is impossible. No civilized European country was self-sufficing in the vital factors of a productive and progressive civilization--food, raw materials, machinery, fuel, transport, finance, and adequate supplies of skilled labor. The services which countries near or distant rendered to one another were becoming constantly more numerous, more complex, and more urgent. The obstructions and stoppages of war has driven home the lesson painfully to the inhabitants of every European country, belligerent or neutral. What lesson? That we have erred in permitting ourselves to grow dependent on the industry, goodwill, and intercourse of other nations, and that we should endeavor to hark back to an earlier economic state of national independence? Well, there are even in Britain rhetorical politicians who speak of the necessity of retaining all "key" or "essential" industries within their national control--who propose to reverse the tide of social evolution by some flimsy apparatus of tariffs and subsidies. This is impossible. The war has left the European peoples, one and all, more than ever dependent for their economic livelihood upon one another, and upon the material resources and labor of other continents.

The second lesson is that, other things equal, it is the most highly civilized and highly developed countries that are the most dependent upon others. In a word, there is a presumption that economic internationalism is an essential feature of civilization.

You will observe that so far I have made no mention of America. And yet all that I have been saying is, in a sense, introductory to the unique problem presented by this country. America is the only civilized country in the world that is virtually self-sufficing as regards the primary requirements of her economic life. Her soil can and does supply nearly all her essential foods, her natural resources include the materials of her great textile, metal, and other basic industries, the heat, light, electricity, and other forms of natural energy which satisfy her national needs. She has access to skilled and unskilled labor sufficient to develop and utilize all these natural resources. Most of her pre-war imports might be placed under four heads: articles of luxury and taste in dress, jewelry, etc.; certain chemical and other scientific products; supplementary supplies of some foods and materials, from other countries of the American continent, for manufactures and export trade; and a number of tropical products, almost all of subsidiary significance in the production and consumption of the American people. This slight dependence upon foreign countries has been considerably reduced as the result of war exigency. The art products of France and Italy, the fine textile goods from Britain, the dye-stuffs, drugs, and scientific instruments from Germany--in a word, the great bulk of the imports from Europe, have either been cut out of American consumption or have been displaced, temporarily, at any rate, by home products. For several generations the main dependence of America upon Europe and particularly upon Britain was for capital to supplement home savings that she might make use of the stream of immigrant labor in the development of her great continent. This dependence upon European capital, of greatly diminishing importance during the last three decades has, of course, now been reversed, and the principal European countries are heavy debtors to the United States.

One other important economic lesson war experience has taught, viz., the vast capacity for increased productivity which every industrial nation possesses, and America especially, in better organization and fuller utilization of natural and human resources. It is evident that, far from the age of great inventions and of mechanical development drawing to a close, we are in the actual process of reaching new discoveries in wealth production, which will make the most famous advances of the nineteenth century mean by comparison. But without drawing upon a speculative future, a better and more systematic application of the knowledge which has been already tested--enlarged production, elimination of waste, and improved business methods--is clearly capable of doubling or trebling the output of material wealth without involving any excessive strain upon human effort.

Here, as in other ways, America stands in a place of unique vantage by reason of the magnitude and variety of her national resources, and the vigor and enterprise of her people.

It is evident that, if any country can afford to stand alone in full economic self-sufficiency, that country is America. It is feasible for America to contract within very narrow limits her commercial and political relations with the rest of the world, or, if she chooses, to confine her commercial and financial relations to this continent, leaving the old world to get on by itself as well as it can. This view is, indeed, conformable with the main tradition of American history up to the close of the last century. Even the Spanish war, with its sequel of imperialism, was but a slight and reparable breach in this tradition. The world war seems at first sight to have plunged America deeper into the European trough. But even this more serious committal is not irretrievable. She can step back to the doctrine and policy of 'America for Americans' and refuse any organic contact with a troublesome, a quarrelsome and, as it seems, a ruined Europe. America's economic status in Europe is not such as to preclude her taking this course. I may be reminded that the indebtedness of Europe to America is a solid economic bond, for it cannot be presumed that America would pursue the policy of liberalism so far as to cancel this debt. But, large as is this credit, it need not constitute a strong or a lasting bond of commerce, compelling America to receive such large imports of goods from Europe as materially to impair her self-sufficiency. A large and increasing part of the interest and capital of this indebtedness would be defrayed by the expenditure of American travellers and residents in Europe, while the importation of objects of art and luxury would not interfere appreciably with the policy of economic nationalism. If America decides to go no further in this business, it will not be too late to draw out.

The choice before her is momentous. So far I have presented it as an economic problem. It is also quite evidently a political and moral problem of the first significance, for economic national self-sufficiency is a phase of political independence. But business and politics alike belong to the wider art of human conduct; and the choice before America is primarily a moral choice.

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

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