Money, Finance, and Empire, 1790-1960

R. F Holland, A. N Porter

• Publisher: Routledge
• Year: 2012
• Print ISBN:
  9780714632735
• eBook ISBN:
  9781136284342
• Topic: Business
• Subtopic: Business General
• Index: Business

Scholars have recently begun to pay renewed attention to the economics of empire, focusing in particular on the requirements of metropolitan Britain's economy and on the activities of imperial businesses. Within this broad field, financial questions, not least the subject of investment overseas or the 'export of capital', have long had a prominent place, and have been equally affected by the development of new appraoches. The consensus as to the volume and direction of Britain's overseas investments is being vigorously challenged. Technological advances have encouraged on a greatly enlarged scale the compilation and analysis of information about British investments and shareholdings abroad. The gradual easing of restrictions on business records has increased facilities for the study, especially, of imperial and colonial banking. Work on the financial policies of central governments is revealing much of interest to students of twentieth-century colonial rule and decolonization. This collection of essays brings together a selection of the latest research on these and other themes, and, for comparative purposes, includes examples of recent continental work.

J. A. Hobson, Financial Capitalism and Imperialism in Late Victorian and Edwardian England^*

by
Peter Cain

I

As is well known, J.A. Hobson’s theory of economic imperialism was formed by the fusion of two important ideas: first, there was the attack on the conventional view that full employment of resources was the norm in capitalist society; secondly, there was the claim that the driving force behind British imperialism in the late nineteenth and early twentieth centuries was financial need, centred on the export of surplus capital. When these two ideas were brought together for the first time in 1898, the argument ran thus:¹ starting from the evidence of a great inequality in the distribution of property in Britain, Hobson went on to infer a maldistribution of income which resulted in under-consumption by the many, oversaving by the few, and a chronic tendency to domestic over-investment. To avoid the consequences of this, those who controlled surplus savings tried to find outlets for them overseas. The search for profitable opportunities abroad and the need to protect them when found was the primary motive force behind imperialism.

Generally speaking, the received view of Hobson’s theory is still that it was an attempt to explain British, and other European, interest in the Scramble for Africa in the late nineteenth century; and, since it can easily be shown that the bulk of overseas capital flows went elsewhere rather than to Africa, it has become commonplace among imperial historians to believe that Hobson was simply wrong and that the Scramble – which is usually taken to be the most important example of imperialist activity between 1880 and 1914 – must have been undertaken for other, probably non-economic reasons.² Recently, however, a number of specialist critics of Hobson’s work have claimed that Hobson was fully aware that British foreign investment largely bypassed Africa. According to this view, Hobson’s interest was in trying to find out how it was that the marginal amounts of British capital involved in Africa could lead on to massive extensions of British political authority there; and, more specifically, how it was that a small group of financiers in Britain, whom Hobson identified as the key agents of imperialism, could wield such a large influence over governments and public opinion. As Dr Allett has recently expressed it, Hobson’s famous book Imperialism. A Study (1902) was an attempt to identify a small group of people – a ‘military-industrial’ complex – organized and directed by those who owned surplus financial wealth and who, he believed, had managed to hijack British foreign policy for their own purpose.³ One interesting extension of this line of reasoning is Trevor Lloyd’s claim that, as regards tropical Africa, Hobson’s thesis may be relevant to the establishment of, for example, the chartered companies. If they absorbed only a tiny fraction of Britain’s overseas capital they were nevertheless vital to the establishment of British control in West and East Africa and Rhodesia.⁴

Despite the radicalism of this attack on the conventional views of Hobson, most of the revisionists still believe that Hobson was principally concerned to explain the African partition. But the most recent contributor to the debate, Dr Norman Etherington, is convinced that Hobson was not interested in the Scramble, except in the case of South Africa, and that in so far as he referred to it in Imperialism he did not use it to illustrate his theory of surplus capital. Etherington argues that when Hobson mentioned acquisitions of territory in tropical Africa he explained them in terms of the influence of colonial bureaucrats, military men, armaments dealers, local traders on the make and other pressures, all of which would have been familiar to Cobden writing 50 years earlier. He goes on to claim that Hobson’s concern, like that of many of his contemporaries in Europe and America, was with what he saw as the very recent emergence of a problem of surplus capital, related to the rise of big business and the spread of industrialization, and leading to pressure on governments to adopt a much more aggressive and protectionist policy in the search for overseas outlets. Hobson thought that the South African crisis, beginning with the Jameson Raid of 1895 and the subsequent struggle for control of the Boer Republics, marked the beginnings of this new imperialism of finance;⁵ and he was far less interested in peripheral matters such as African partition than in the apparently imminent absorption and development of China by the major industrial powers, and the transformation in the economic and political structure of the whole world which he felt must follow.⁶

Hobson was aware that far more British capital went to newly settled countries than to backward parts of the world such as tropical Africa.⁷ Nonetheless, despite Etherington’s argument to the contrary, he appears to have assumed that surplus capital, even in marginal amounts, did influence partition. In his 1898 article, Hobson looked back on a colonial policy where we had spent ‘all our energy and superfluous cash in wrangling with other nations for markets in Africa and Asia’, and it was in this context that he explained how British investors benefited by providing loans which then led to the export of goods.⁸ In Imperialism, directly after a discussion on the extension of Britain’s empire over the previous 20 years, Hobson went on to say that

the policy by which the investing classes used the influence of the State for private business purposes is most richly illustrated in the history of her wars and annexations.⁹

Lloyd’s argument is thus warranted by the evidence of Hobson’s own writings¹⁰ although it cannot be extended to the South African case where British investment was very substantial. On the other hand, neither Lloyd nor any other of Hobson’s recent critics, including Etherington, have considered the significance of Hobson’s belief that the occupation of Egypt in 1882 was a prime example of financial imperialism. Though he refers to Egypt only in passing in Imperialism,¹¹ in later writings Hobson gave the occupation of Egypt the same sort of status which he accorded to the South African war¹² and once explicitly argued that

in our own recent history, the efficient causation of the Boer War and the Occupation of Egypt are perhaps the most instructive instances of the utilization of national forces by private business.¹³

At the time of occupation Egypt could hardly be described as marginal to British investors.¹⁴ Etherington’s emphasis on Hobson’s interest in South Africa and China rather than tropical Africa is very salutary but, as the example of Egypt demonstrates, the events which Hobson was describing and analysing in 1902 were not seen by him as entirely novel but as the culmination of trends going well back into the nineteenth century when viewed in a British perspective.

It was the Egyptian crisis in the 1880s which led to the first clear formulation of the radical view that imperialism was the result of the overweening power of British financial interests;¹⁵ and it is hardly surprising that Hobson, as heir to this radical tradition, should have found theories of imperialism based on financial conspiracy appealing. Conspiratorial explanations of imperialism are pervasive in Hobson’s work, as most of his critics have stressed, and his interest in them was reinforced by the war in South Africa which directed his attention to a small group of financial capitalists, predominantly Jewish and European rather than British, whose main interest was in ‘the promotion and financial manipulation of companies’ or ‘dealing in shares in these companies’ and who directed the savings of a mass of smaller investors.¹⁶ This is the basis for the arguments in Imperialism where Hobson speaks of ‘the financier, the general dealer in investments’ who controls ‘great businesses – banking, bill discounting, loan floating, company promoting’. These groups form the ‘central ganglion of international capitalism’. The conspiratorial strain in the argument in clearly revealed in his claim that the mass of investment funds are ‘controlled by men of single and peculiar race’ who are ‘in a unique position to manipulate the policy of nations’. And it is encapsulated in the rhetorical flourish:

Does one seriously suppose that a great war could be undertaken by any European state, or a great state loan subscribed if the house of Rothschild and its connexions set its face against it?¹⁷

It needs to be emphasized that this rather naive reference to financial power is not the sum of Hobson’s theory. What he argues for, often with great subtlety, is that finance plays the central part in the orchestration of a vast array of interests which make for imperialism. This is what lies behind Hobson’s famous statements that, while other interests provide the ‘motor power’ of imperialism, ‘finance is rather the governor of the imperial engine’ and ‘finance manipulates the patriotic forces which politicians, soldiers, philanthropists and traders generate’.¹⁸ Hobson first offers a list of those who benefit from imperialism – the military, professional administrators, missionaries, armaments manufacturers, certain traders and industrialists with overseas interests.¹⁹ Besides these there are those who profit from the fact that imperialism helps to maintain the status quo by providing economic stability and taking the public mind away from the thought of internal reform.²⁰ They rally instinctively to the cause. Much of the support, as Hobson stresses, comes from groups with a genuine desire to spread civilization, Christianity, liberty and good government. But their support could, like that emanating from the jingoistic and the super-patriotic, be harnessed and manipulated, largely via the press which Hobson was convinced was controlled by those with a clear interest in encouraging overseas adventure. All these forces were important ingredients in encouraging imperialism but ‘final determination rests with the financial power’ because ‘the financial interest has those qualities of concentration and clear sighted calculation which are needed to set Imperialism to work’.²¹

Although conspiracy plays a very prominent rôle in Hobson’s work in 1902 and in later writings²² it does not provide his only answer to questions about the springs of imperial activity. The conspiratorial element is missing from the original 1898 article which offers an explanation of imperialism entirely in terms of structural maladjustments in the British economy. With this in mind it has been suggested that Hobson was interested in working out a theory of financial capitalism which would provide a systematic link between the structure of the British economy and imperial policy, and that his experiences as a journalist in South Africa were not helpful to the cause. The second Boer War inevitably focused his attention upon the machinations of a few financiers such as Rhodes and tempted him to overlay his emerging analysis of British financial capitalism with a conspiracy theory which was not easy to reconcile with it.²³

Dr Peter Clarke has attacked this view vigorously. It is evident that he believes it saddles Hobson with ideas which more properly belong to Hilferding and Lenin. In his view

Hob...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Contents
• Preface
• J. A. Hobson, Financial Capitalism and Imperialism in Late Victorian and Edwardian England
• The Export of British Finance, 1865–1914
• Canada and Argentina: The First Preference of the British Investor, 1904–14
• Anglo-Indian Banking in British India: From the Paper Pound to the Gold Standard
• The Banking Community of London, 1890–1914: A Survey
• The Phases of French Colonial Imperialism: Towards a New Periodization
• Indo-British Relations in the Post-Colonial Era: The Sterling Balances Negotiations, 1947–49
• Britain, the Sterling Area and European Integration, 1945–50
• Notes on the Contributors