Chapter 4. The Historical Struggle for Dominance in World Trade

With Europe’s discovery of the sea route to the East and America, the maximum control of natural resources as well as markets for manufactured products could be attained through gaining title to lands of easily conquerable people. The race was on to colonize the world. “By 1900 Great Britain had grabbed 4,500,000 square miles…. France had gobbled up 3,500,000; Germany, 1,000,000; Belgium 900,000; Russia, 500,000; Italy, 185,000; and the United States, 125,000.”1

An imperial center must be careful about importation of manufactured products from either its colonies or from other great powers:

“So it is now,” explained the [British] Protectionist Act of 1562, “that by reason of the abundance of foreign wares brought into this realm from the parts of beyond the seas, the said artificers are not only less occupied, and thereby utterly impoverished … [but] divers cities and towns within this realm greatly endangered, and other countries notably enriched.”2

In the late 17th-Century, Jean Baptiste Colbert, French Naval Secretary of State and Finance Minister, recognized the threat if France became dependent upon British mercantilism—as was being established by Lord Shaftesbury. Therefore, Colbert duplicated Britain’s industrial development efforts. France purchased the latest technology, encouraged skilled workers, protected the home markets, eliminated internal tariffs, and constructed canals and roads. France developed flourishing industries, a profitable shipping industry, and a powerful navy. However, wars, spendthrift governments, the revocation of the Edict of Nantes (which encouraged persecution of Protestants and forced 500,000 of France’s most productive workers to flee) and the 1786 Eden Treaty with Britain (a replay of the Methuen Treaty’s monopoly agreements which severely damaged Portugal, Holland, and Germany) impoverished the French economy.3

Napoleon understood Britain’s economic warfare and in 1807 issued his Continental Decrees to establish manufacturing to protect France’s market from Britain and to prevent the loss of continental wealth:

Napoleon was forced to devise a new tactic to deal with his perpetual enemy [Britain]: the Continental System. Developed during 1806/1807, this policy called for economic warfare against the “nation of shopkeepers,” whereby France, either through the cooperation of friends or by the use of force against enemies, would close the entire European continent to British trade and commerce. By weakening Britain’s economy, Napoleon would destroy her ability to wage war, and also make it impossible for Great Britain to provide the huge subsidies to Continental allies which had characterized all the previous coalitions against France.4

Napoleon resurrection of Colbert’s protective system started the rapid industrialization of Europe. This immense trading bloc would have meant the end of Britain’s dominance of world trade. Britain, the European monarchies, and the Church (fearful of a revolution) quickly entered into a “Holy Alliance” and finally defeated Napoleon at Waterloo. The markets of Europe were breached and industries throughout the continent collapsed.5 This collapse, along with the unequal trades imposed upon the fledgling United States alerted Friedrich List and Alexander Hamilton to the necessity of protecting regional industries and markets. One cannot miss the similarity between the industrial collapse on the Continent and its dependency upon Britain after the French defeat and the 1991-to-1999 collapse of the Russian economy and its dependency on the West.

At its peak Britain was manufacturing 54% of the finished products in world trade. The British “exulted at their unique state, being now (as the economist Jevons put it in 1865) the trading center of the universe.” The world was Britain’s “countryside,” a huge plantation system feeding its developed imperial-center-of-capital:

The plains of North America and Russia are our corn fields; Chicago and Odessa our granaries; Canada and the Baltic our timber forests; Australia contains our sheep farms, and in Argentina and on the Western prairies of North America are our herds of oxen; Peru sends her silver, and the gold of South Africa and Australia flows to London; the Hindus and the Chinese grow our tea for us, and our coffee, sugar and spice plantations are all in the Indies. Spain and France are our vineyards and the Mediterranean our fruit garden; and our cotton grounds, which for long have occupied the Southern United States, are being extended everywhere in the warm regions of the earth.6

To funnel this wealth to the mother countries, exclusive trading companies—East India Company (English, Dutch, and French), Africa Company, Hudson Bay Company, et al., were established.

Forcing the natives to work for nothing while providing their own subsistence created enormous profits. Thus Indians were enslaved in Spanish mines and Africans were enslaved to replace the Indians when over 95% of their population died off under such oppression. Wealth on the periphery—American, African, and Asian colonies—was claimed by Europe in trade for trinkets, knives and guns.

The wealth accumulation power of imperialists was bound only by the limits of their naval and military power which were used to prevent other societies from infringing on their control of trade and accumulation of capital and wealth.

India: Her Vast Wealth siphoned to Britain

In 1897, British statesman Neville Chamberlain wrote a Colonial Office report: “During the present century … you will find that every war, great or small, in which we have engaged, has had at bottom a colonial interest, that is to say, either of a colony or else of a great dependency like India.” The impoverishment of India is a classic example of plunder-by-trade backed by military might. Before being subdued, colonized, and enforced to become dependent upon British industry:

India was relatively advanced economically. Its methods of production and its industrial and commercial organization could definitely be compared with those prevailing in Western Europe. In fact, India had been manufacturing and exporting the finest muslins and luxurious fabrics since the time when most western Europeans were backward primitive peoples.7

Hand weaving was tedious and paid little, so at first the British purchased much of their cloth from India. India had no need or desire for British products, so imports had to be paid for with gold. However, Britain did not make the same mistake as Spain; Indian textiles were embargoed and British cloth was produced with the evolving technology of weaving machinery. After India was conquered, its import and export policies were controlled by Britain, which not only banned Indian textiles from British markets but also taxed them to a disadvantage within India so that British cloth dominated the Indian market. India’s internal production of cloth was not only excluded from their own internal market so as to be undersold by Britain’s inferior cloth, Britain excluded those beautiful and much higher quality fabrics from England while marketing them all over Europe. Controlling India and the seas “entitled” British merchants to buy for a pittance and sell at a high price. Friedrich List points out that the purpose of this control of trade was building Britain’s “productive power”:

Was England a fool in so acting? Most assuredly according to the theories of Adam Smith and J.B Say, the Theory of Values. For, according to them, England should have bought what she required where she could buy them cheapest and best; it was an act of folly to manufacture for herself goods at a greater cost than she could buy them elsewhere, and at the same time give away that advantage to the Continent. The case is quite contrary according to our theory, which we term the Theory of the Powers of Production, and which English Ministry … adopted when enforcing their maxim of importing produce and exporting fabrics…. The English ministers cared not for the acquisition of low-priced and perishable articles of manufacture, but for that of a more costly but enduring manufacturing power…. They have attained their objective to a brilliant degree. At this day [1841] England produces seventy million pounds’ worth of cotton and silk goods, and supplies all of Europe, the entire world, India itself included, with British Manufactures. Her home production exceeds by fifty or a hundred times the value of her former trade in Indian Manufactured goods. What would it have profited her had she been buying for a century the cheap goods of Indian manufacture? And what have they gained who purchased those goods so cheaply of her? The English have gained power, incalculable power, while the others have gained the reverse of power.8

Through the forced sales of British products and the simultaneous embargoing of, or high tariffs on, the cheaper yet higher quality Indian cloths, India’s wealth started flowing toward Britain. “It was [only] by destroying [the] Indian textile industry that [the British textile industry of] Lancaster ever came up at all.”9 Other Indian industries were similarly devastated. In the words of historian Lewis Mumford:

In the name of progress, the limited but balanced economy of the Hindu village, with its local potter, its local spinners and weavers, its local smith, was overthrown for the sake of providing a market for the potteries of the Five Towns and the textiles of Manchester and the superfluous hardware of Birmingham. The result was impoverished villages in India, hideous and destitute towns in England, and a great wastage in tonnage and man-power in plying the oceans between.10

One exceptionally rich sector of India was East Bengal (Bangladesh). When the British first arrived,

[they] found a thriving industry and a prosperous agriculture. It was, in the optimistic words of one Englishman, ‘a wonderful land, whose richness and abundance neither war, pestilence, nor oppression could destroy.’ But by 1947, when the sun finally set on the British Empire in India, Eastern Bengal had been reduced to an agricultural hinterland. In the words of an English merchant, ‘Various and innumerable are the methods of oppressing the poor weavers … such as by fines, imprisonment, floggings, forcing bonds from them, etc.’ By means of every conceivable form of roguery, the company’s merchants acquired the weaver’s cloth for a fraction of its value.11

Later, still under British control and ignoring the fact that the East Bengalis were being impoverished through dispossession of the land which produced their food and cotton, Bengal produced raw materials (indigo and jute) for world commerce, and poppies for the large, externally-imposed, Chinese opium market. As Adam Smith commented, money was lent to farmers “at forty, fifty, and sixty percent” and this, and other profits of trade, would confiscate all wealth except that paid in wages. Of course, Bengali labor was paid almost nothing so Bengal’s wealth was rapidly transferred to Britain. Foreign control enforcing dependency upon British industry and siphoning wealth away through unequal trades in everyday commerce devastated the balanced and prosperous Bengali economy and created the extreme poverty of Bangladesh today. “[O]nce it was the center of the finest textile manufactures in the world … [with] a third of its people … employed in non-agricultural occupations…. Today 90 percent of its workers are in agriculture or unemployed.”12 The destruction of the once thriving economy of East Bengal (Bangladesh) was so thorough that even the long-staple, finely textured local cotton became extinct.13

Anyone who saw the movie Gandhi will remember that Indian citizens were even denied the right to collect salt from the ocean and were required by law to buy their salt and other everyday staples from British monopolies. Such enforced dependencies were little more than a tax upon defeated societies under the guise of production and distribution. Much work was being done, but it could have been done just as well or better by those being dispossessed of their land, denied the right to produce for themselves, and overcharged for monopolized products.

Japan, because it had few valuable natural resources, was the only country not culturally, racially, and religiously tied to Europe that escaped domination during this period. Until Taiwan and South Korea (and now China and Southeast Asia) were industrialized, all under the same protectionist barrier to contain fast expanding socialism, Japan was the only non-white society to industrialize and join the club of wealthy nations.14

In The Discovery of India, Prime Minister Jawaharlal Nehru wrote, “If you trace British influence and control in each region of India, and then compare that with poverty in the region, they correlate. The longer the British have been in a region, the poorer it is.”15 What applies to British colonialism applies to all colonialism and India and China were actually the least damaged of all colonial regions.

Controlling China was a much more Difficult Problem

In 1800, the per-capita standard of living in China exceeded that of Europe.16 Like India, China did not need or want Britain’s products. However, Britain consumed large quantities of Chinese tea and, to avoid the loss of Britain’s gold, it was imperative that something else be traded. Though it was done covertly and not acknowledged by the British government, it became official policy for British merchants to peddle opium to China. “Opium [sold to China] was no hole-in-the-corner petty smuggling trade but probably the largest commerce of the time in any single commodity.”17 This injustice was challenged by Chinese authorities (the Boxer Rebellions) but their attempt to maintain sovereignty was put down by a combined force of 20,000 British, French, Japanese, German, and United States troops (5,000 were Americans) led by a German general.18 It was a blatant attempt to carve up China between those imperial-centers-of-capital.

With the sales of opium exceeding the purchases of tea, Britain lost neither gold nor currency. Their capital and labor costs involved only an internal circulation of money. No wealth was lost to another society, which is the essence of a successful mercantilist policy. This appears productive only because the wealth gained or protected by Britain was considered; the much greater losses suffered by China, India, and much of the world were conveniently left uncalculated.

While the imperial-centers-of-capital were battling each other in WWII, China was laying its base for economic freedom. Although it is little known to Americans, after the war United States troops were guarding key rail lines and ports for the collapsing Chinese government and the OSS, precursor to the CIA, was busy ferrying Chiang Kai-shek’s troops back and forth across China to suppress that revolution. However, China did break free in 1949, was marginalized for years by the imperial nations, yet still built a modest industrial capacity (provided by the Soviet Union), and—by moving under the same protectionist umbrella as Japan, Taiwan, and South Korea—eventually averaged production gains exceeding 9% a year.

Endnotes

1. E.K. Hunt, Howard J. Sherman, Economics (New York: Harper and Row, 1990), p. 144. Back to text
2. William Appleman Williams, Contours of American History (New York: W.W. Norton & Company, 1988), introduction, especially p. 43. Back to text
3. Friedrich List, The National System of Political Economy (Fairfield, NJ: Augustus M. Kelley, 1977), pp. 33, 41-60, 72, 323, 342, 357, 369, 391. Back to text
4. Gordon C. Bond, The Grand Expedition (Athens: University of Georgia Press, 1979), pp. 1-2, 8. Back to text
5. List, National System, Chapters 6 and 25, pp. 39, 72-73, 85-87, 323, 343-45, 357, 421-22. Back to text
6. Paul Kennedy, Rise and Fall of Great Powers (New York: Random House, 1987), pp. 151-52, quoted from R. Hyam, Britain’s Imperial Century 1815-1914 (London: B.T. Batsford, 1976), p. 47. Economist John Stuart Mill also believed the colonies were Britain’s fields (Frances Moore Lappé, Joseph Collins, Food First: Beyond the Myth of Scarcity, rev. (New York: Ballantine, 1979), pp. 63 – 64, reproduced and quoted from Douglas H. Boucher, The Paradox of Plenty; Hunger in a Bountiful World (Food First, 1999). See also these subchapters in Chapter 13: “Conceptually Reversing the Process” and “One Huge Plantation System Providing Food and Resources to the Imperial Center.” Back to text
7. Hunt and Sherman, Economics, p. 142. Back to text
8. List, National System, pp. 43-44. Back to text
9. Dan Nadudere, The Political Economy of Imperialism (London: Zed Books, 1977), p. 35, 68, especially 86. See also Betsy Hartman and James Boyce, Needless Hunger: Voices from a Bangladesh Village (San Francisco: Institute for Food and Development Policy, 1982). Back to text
10. Lewis Mumford, Technics and Civilization (New York: Harcourt Brace Jovanovich, 1963), pp. 184-85. Back to text
11. Hartman and Boyce, Needless Hunger, pp. 10, 12. Back to text
12. Arjun Makhijani, From Global Capitalism to Economic Justice (New York: Apex Press, 1992), p. 79. Back to text
13. Adam Smith, Wealth of Nations, Modern Library edition (New York: Random House, 1937, 1965), pp. 94, 97; Hartmann and Boyce, Needless Hunger, describes this devastation. Back to text
14. Hunt and Sherman, Economics, 1990, pp. 142-47, 624. Back to text
15. Noam Chomsky, The Prosperous Few and the Restless Many (Berkeley: Odonian Press, 1993), p. 56. Back to text
16. Anthony Sampson, The Midas Touch (New York: Truman Talley Books/Plume, 1991), p. 108. Back to text
17. Samuel Flagg Bemis, A Diplomatic History of the United States (New York: Henry Holt and Company, 1936), pp. 1027-1142; Michael Greenberg, British Trade and the Opening of China 1800-1842 (New York: Monthly Review Press), p. 104; Eric R. Wolf, Europe and the People Without History (Berkeley: University of California Press, 1982), pp. 255-58. (emphasis added)Back to text
18. Jack Beeching, The Chinese Opium Wars (New York: Harcourt Brace Jovanovich, 1975). See also Michael Bentley, Politics Without Democracy (London: Fontana Paperbacks, 1984), p. 154. Back to text

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This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.