1

THE FIRST ERA OF GLOBALIZATION



It is commerce which is rapidly rendering war obsolete ... [and] it may be said without exaggeration that the great extent and rapid increase of international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race.

-JOHN STUART MILL, Principles of Political Economy, 1848

THE ERA OF PEACE AND FREE TRADE

It all seemed so simple around the middle of the nineteenth century. The world that Mill described seemed to be coming into existence. After more than a century of nonstop fighting, armed conflict had been replaced by trade. There had been no European wars since the final defeat of Napoleon in 1815.

From one point of view, the postwar peace was due to the Congress of Vienna. The victories of Napoleon's armies had been the result of a combination of revolutionary nationalism and traditional dynastic imperialism. The peacemakers in Vienna had sought to put both genies back in the bottle. The restoration of legitimate (prerevolutionary) regimes was to put an end to popular revolutions. The reestablishment of a stable balance of power was to ensure that no country could again seek to dominate the others. The Great Powers, acting in concert, would forestall any further threats to the peace of the continent.

But liberals such as Mill sought the underpinnings of peace elsewhere. It was not democratic nationalism that led to warfare. Once the peoples of Europe were freed from the rule of alien autocracies and allowed to control their own fates, harmony would reign among them, or so it was claimed. As for the balance of power, it was derided by the English radical John Bright as no more than "a gigantic system of outdoor relief for the aristocracy of Great Britain,"1 whose members could indulge their preference for military office rather than productive work by pretending that they were maintaining the peace.

Moreover, liberals questioned the very idea that wars could be economically productive. How wrong it was to think that the mercantilist-driven struggle for empire had achieved, or could ever have achieved, its objectives. In 1824, the economist John Ramsay McCulloch declared such warfare to be economically futile: "The greater part of the wars of the last century ... were waged for the purpose of preserving or acquiring some exclusive commercial advantage. But does any one suppose that these contests could have been carried on, at such infinite expence of blood and treasure, had the mass of the people known that their object was utterly unattainable?"2

What was truly needed to preserve peace was free trade. It was the development of commercial intercourse between nations that would prevent the recurrence of the wars that had blighted the previous two centuries. This message was affirmed in the strongest terms by its most vocal advocate, Richard Cobden.

Free Trade! What is it? Why, breaking down the barriers that separate nations; those barriers, behind which nestle the feelings of pride, revenge, hatred, and jealousy, which every now and then burst their bonds, and deluge whole countries with blood; those feelings which nourish the poison of war and conquest, which assert that without conquest we can have no trade, which foster that lust for conquest and dominion which sends forth your warrior chiefs to sanction devastation through other lands..."3

When Cobden spoke, the battle for free trade was in full swing. He was addressing a meeting in Covent Garden advocating the repeal of the Corn Laws, which had protected British agriculture from foreign imports since the end of the Napoleonic Wars. The debate between Britain's free traders and protectionists was waged with growing intensity over the following decades. A major first step was taken in 1820 when Parliament declared that future legislation should be framed with the advancement of free trade in mind. The outcome of the struggle was decided with the repeal of the Corn Laws in 1846, and three years later of the Navigation Acts, which had for centuries protected British shipping. The repeal of the Corn Laws, in particular, gave rise to a violent political battle that split the Conservative Party and led to the fall of the government. The immediate cause of the repeal was the Irish potato famine, which created a desperate need for cheap imported grain. However, there was a broader economic trend that led to the defeat of protectionism.

The Industrial Revolution led to mass migration from the country to the new manufacturing towns. Although industrialization was accompanied by an agricultural revolution that constantly increased food output, there was a growing shortfall between what the countryside could produce and the needs of the growing urban population. At the same time, the factories were turning out a quantity of manufactured goods that was greater than could be easily absorbed within the country and for which overseas markets were required. The solution to both these problems was free trade, which would open Britain to imports of cheap food, and foreign countries to exports of British manufactures. It is no surprise that the school of thought most closely connected with this belief was to be found in Manchester, the most dynamic of the new manufacturing centers. In many ways, the victory of free trade in 1846 can be characterized as a victory of the town over the country, of merchants and factory workers over landlords and farmers. It was also a victory for the liberal association of trade with peace. Napoleon had banned all trade with Britain during the wars. The Corn Laws had been enacted because the return of peace made possible the importation of cheap European wheat, threatening to put domestic farmers out of business and leaving the country dangerously dependent on foreign supplies in the event of another conflict. Free trade, by rendering war obsolete, would make such concerns redundant-or so it was hoped.

The following twenty years witnessed not only a rapid growth in trade but also the fastest increase of real wages of the entire nineteenth century, justifying the hopes of the Manchester liberals. The British conversion to the cause of free trade was mirrored elsewhere. Perhaps the most important moment was the signing in 1860 of the Cobden-Chevalier Treaty between Britain and France, appropriately named after two of free trade's most vocal advocates. In the wake of the treaty, which led to the doubling of trade between the long-term rivals, the Prussian ambassador was moved to remark that war between the two countries had now become "impossible."4 Until the 1870s, the trend was for the reduction of tariffs and trade barriers throughout Europe. In 1855, a Belgian association for customs reform was set up, inspired by the example of Britain "where, since the introduction of Sir Robert Peel's reforms, agriculture, navigation and industry, far from declining, have flourished in force and energy in the most unexpected way."5 In 1862, Germany* and France lowered duties on many goods by as much as 80 percent, and in the following years a number of intra-European trade treaties were set up with clauses that guaranteed the signatories tariffs no higher than those prevailing with either country's "most-favored nation." This encouraged reciprocity and the ratcheting down of barriers throughout the continent.

The move toward free trade was one of several trends that favored the rapid advance of commerce in the nineteenth century. Among these was what can be described as the first era of decolonization. The footprint of the European empires had reached an apex in the mid-eighteenth century with the expansion of British and French claims to territory on top of the older Spanish and Portuguese dominions. By the 1820s, however, the vast majority of the Americas had been decolonized. The first to achieve independence were Britain's thirteen American colonies in 1783. Then, in 1803, the French territories in North America were sold to the United States by Napoleon. In 1801, the colony of Saint-Domingue, the jewel of the French empire in the Caribbean, rebelled and by 1804 had achieved independence as the republic of Haiti. Spain's mainland colonies were liberated in a series of wars between 1811 and 1825, although its Caribbean empire lingered until the end of the century. Brazil achieved de facto autonomy in 1808 and formal independence in 1822.

To the Manchester liberals, this was as it should be. In a world of peaceful free trade, empires were an unnecessary burden. Richard Cobden argued that "the desire and the motive for large and mighty empires; for gigantic armies and great navies ... will die away; I believe that such things will cease to be necessary."6

Decolonization boosted international trade because the early European empires had operated as closed shops in which trade with the colonies was monopolized by the mother country. The dissolution of the Spanish and Portuguese empires led to the end of their restrictive trade controls, and while the newly independent countries of Latin America set up their own tariff barriers on imported goods, these were less of an impediment to trade than the restrictions they replaced. At the same time, the two Northern European empires were moving away from mercantilist controls and toward trade liberalization. The Dutch East India Company was dissolved in 1808. The English East India Company lost its monopoly of Indian trade in 1813. After 1822, British colonies were allowed to trade with each other as well as with the mother country, and in 1825 customs duties on non-British goods were lowered sharply. After the 1840s, tariffs were either small or nonexistent in most colonies, and the preferential rates that had favored trade with Britain disappeared.

As important as the reduction of barriers to trade was the reduction of transport costs. Road surfaces were progressively improved using the techniques pioneered by John McAdam in the late eighteenth century. These advances were accompanied by the creation of alternative and more cost-effective forms of land-based transport: canals and then railways. By the 1850s, 7,000 miles of railway track had been built in Britain alone; Germany was not far behind, with 5,000 miles. The rate of building in the United States, especially in the second half of the century, was astonishing, as befitted the vast expanses that had to be covered. The first transcontinental line was completed in 1869, and by 1890 America had 130,000 miles of railroad track, of which nearly half were in the West. The railway revolution was not by any means confined to the industrialized world. The British built tracks all over their empire and elsewhere, and by 1913 India had the fourth-largest network in the world.

Steam power also transformed sea trade. When oceangoing steamships were introduced in the 1830s, they were so expensive that they largely carried passengers and high-value goods, like present-day aircraft. However, by the end of the century they were carrying bulk commodities as well, and sail ships had all but disappeared. The cost reduction effected by steamships was cumulative rather than instant, but they have been calculated to have reduced shipping costs by 1.6 percent per year over the second half of the century. When canal-building techniques were applied to sea trade, the result was an immediate reduction in transit times, as with the opening of the Suez Canal in 1869.

The combined effect of these innovations was remarkable. The cost of transporting wheat from America to Britain fell by two-thirds from 1860 to 1910, while the cost of shipping coal from Britain to Italy fell by more than three-quarters. As a result, the prices of goods in different countries started to equalize, even those separated by vast continents and oceans. Between 1870 and 1913, the premium on American bacon in Britain fell from over 90 percent to a mere 18 percent.7

Moreover, after 1915, importers and exporters could operate in a world of stable monetary conditions. The French Revolution had set off a period of monetary instability throughout Europe, but after the war matters rapidly stabilized. In 1821, Britain restored the convertibility of sterling into gold at the prewar exchange rate, and thereafter sterling was the primary anchor of the international financial system. The French franc, which remained stable through a string of political upheavals, provided a secondary international currency, especially within Europe. The unifications of Italy and Germany simplified the monetary map of Europe by creating single currencies within their boundaries. In 1865, France, Italy, Belgium, and Switzerland formed the Latin Monetary Union, which unified their currencies and created interchangeable coins based on the franc. The monetary unification of the world was furthered by the spread of the gold standard, whereby currencies were fixed in relation to a single precious metal. Britain had been on a de facto gold standard since 1821. Other countries joined it from the 1870s onward. By the first decade of the twentieth century, not only were all European countries on the gold standard but also the United States, Canada, Mexico, Argentina, Australia, New Zealand, and Japan. In addition, the currencies of many other parts of the world were fixed to the major European centers through their empires. There was probably never a time in which global monetary arrangements were simpler than the late nineteenth century.

Spurred by these favorable tailwinds, the nineteenth century experienced an unprecedented growth in international trade. Between 1815 and 1914, the volume of European trade rose almost forty times, compared to only two or three times in the eighteenth century. In 1815, exports had amounted to around 3 percent of European GDP. By 1914, they represented 14 percent.

THE LIMITS OF PAX BRITANNICA AND PAX EUROPAEA

The nineteenth century has been described as the first era of globalization. Certainly, with its combination of rising international trade, falling communication costs, and freedom of exchange, the century would seem to fit this description. It has also been referred to as the era of Pax Britannica-when the world economy experienced an unprecedented economic expansion and military conflict was minimal compared to both the prior and the following centuries. But how much did this peaceful expansion owe to the fact that Britannia ruled the waves?

The position of Britain in the middle of the century was certainly remarkable. Victory in the Napoleonic Wars had left it with no global competitors. The remnants of the French colonial empire had disappeared through sale to the United States or annexation by Britain. The Spanish and Portuguese colonies in the Americas gained independence in the 1820s. The British Empire, by contrast, even without its thirteen American colonies, remained formidable. It still possessed extensive territories in the Americas as well as in the Indian subcontinent and Australasia. Although Britain showed little interest in further territorial expansion in the following decades, a series of judicious acquisitions of strategic bases such as Cape Town, Aden, Singapore, and Hong Kong helped to consolidate the empire's global footprint. The empire was protected by the Royal Navy, which by the end of the Napoleonic Wars disposed of forces equivalent to all other navies combined. Even though the navy was scaled back after the war, it remained in a dominant position for the rest of the century, and Britain was able to maintain a "two-power standard"-the principle that the Royal Navy should be as large as the next two forces combined-right up to the outbreak of the First World War.

In addition to its navy and its empire, Britain held an unassailed lead in industrial development. Its dominance reached a peak by the middle of the century, with one study showing that in 1860 Britain had 35 percent of total world manufacturing capacity and was three times as industrialized per capita as its nearest rivals.8 One of the bases of this industrial precociousness was Britain's plentiful supply of coal and iron ore, the two key raw materials of the Industrial Revolution. Coal provided fuel for transport and industry, and together with iron ore it provided the base for the all-important iron and steel industry. In 1850, Britain produced half the world's iron and steel and two-thirds of the world's coal. Abundant coal not only fueled Britain's domestic industry, it also allowed the country to become the main world exporter of this crucial commodity. Coal also helped underpin Britain's continued dominance of shipbuilding and shipping as steam replaced sail. In 1880, British steam-powered merchant tonnage was two and a half times greater than that of the rest of the world combined.

To complement these strengths, Britain was the world's financial powerhouse. The Napoleonic era had destroyed the credit of most of Europe so that after 1815 the British public debt was the only security that could be said to enjoy investment-grade status. Over the course of the century, the interest rates paid by other countries declined, but until the 1880s Britain's borrowing costs were typically 1 percent to 1.5 percent lower than any other Great Power. The Bank of England was central to the operation of the international gold standard, and London was the major source of capital for international investment. Britain's overseas investments rose by leaps and bounds in the second half of the century, and by 1914 amounted to almost 150 percent of the country's GDP. These investments not only gave the country extensive influence around the world but also provided a substantial financial buffer that could be tapped in time of need.

Britain, in other words, disposed of a remarkable set of assets in the nineteenth century. But did it fill the role of a benign hegemon-a global policeman who kept the peace and enhanced the growth of the world economy? It is easier to support the second part of this statement than the first. The progressive reduction of tariffs and other barriers at home and throughout the empire was certainly in part responsible for the expansion of world trade during the century. Equally important was the role of the Royal Navy in protecting the sea-lanes from piracy. And if the word "benign" is to mean anything, a mention should be made of the navy's role in suppressing the slave trade-even if it could be argued that this was one sort of commerce that British action reduced rather than encouraged.

But whether Britain kept world peace is a more difficult proposition to maintain. Those who deployed the term "Pax Britannica" were generally not looking at the question of peace among the Great Powers of Europe. More often than not it was a reference to the Pax Romana-the peace maintained by Rome within the borders of its empire. Imperial eulogists liked to emphasize the advantages of British rule for its subjects: bringing the rule of law and the benefits of civilization where there had been perpetual conflict or anarchy. In 1913, Lord Milner summed up the concept with the classic self-certainty of an imperial ruling class at its apogee: "The British race has become responsible for the peace and order and the just and humane government of three or four hundred millions of people who ... do not possess the gift of maintaining peace and order for themselves ... The Pax Britannica is essential to the maintenance of civilised conditions of existence among one-fifth of the human race."9 Few imperial apologists thought that Pax Britannica held much sway outside the confines of the British Empire-any more than Pax Romana had applied outside the Roman Empire.

It is true that there was no Great Power conflict for almost forty years after Waterloo. But the lull in rivalry was only partly the result of British preeminence. Thanks to British sea power, the other great imperial powers of prior centuries had been reduced to shadows of their former selves, making conflict outside Europe unlikely. Within Europe, however, British naval power meant little. Instead of Pax Britannica there was a Pax Europaea, a "Concert of Europe" policed by the five Great Powers that had sought to establish a durable peace at the Congress of Vienna in 1815. Instead of relying on shifting alliances as in the past, the Great Powers agreed to act in concert whenever developments that might threaten the peace of the continent occurred. The system proved successful in the 1830s, when it averted war over the future of Belgium by guaranteeing Belgium's independence and neutrality. However, the Concert of Europe depended on the cooperation of its members, and it proved incapable of preventing conflict if any of them had other ideas.

In 1854, the long peace was broken when Britain and France went to war to block Russian expansion around the Black Sea. This area was not, strictly speaking, covered by the Congress of Vienna. However, as a military conflict between three of the five members of the Concert of Europe, the Crimean War demonstrated the fragility of the idea of Great Power cooperation. A conference called in Vienna in 1853 had failed to avert the conflict. The Crimean War also demonstrated the limits of Pax Britannica. Russia's ambition to get control of the Turkish Straits and thereby access to the Mediterranean was a direct threat to Britain's control of sea routes (routes that would become even more important with the opening of the Suez Canal). Yet even at the height of its relative power, Britain was not strong enough to impose its will in a matter of strategic importance without resorting to force, and even then it needed allies to succeed.

THE EMERGENCE OF RIVALS

The Crimean War showcased the revival of France as a significant force under Napoleon III. It was unlikely that a nephew of Napoleon Bonaparte would be content with France's hobbled position after 1815, and even though the new emperor hastened to reassure Europe that "l'Empire, c'est la paix" (the Empire means peace), his actions spoke otherwise. In the wake of the war, Napoleon showed that onetime allies could easily become rivals by ordering a naval modernization program (including the early adoption of ironclad hulls, propeller power, and explosive shells) that for a time threatened the invulnerability of the Royal Navy and led to a brief British invasion scare in 1859. French imperial ambitions were revived with the start of its colonial presence in Indochina and with the attempt to bring Mexico under French control by imposing the rule of Austria's Archduke Maximilian.

More significant than any of these overseas ventures was Napoleon's foolhardy decision to encourage the overthrow of the post-1815 settlement in Europe. His support of the kingdom of Piedmont in its attempt to put an end to Austrian rule in northern Italy led to war in 1859 and to the subsequent unification of the whole peninsula under a Piedmontese dynasty. The sudden establishment of a new power in the south altered the balance of power not just in the Mediterranean but potentially throughout Europe as well. Austria, the ultimate conservator of the old order, was weakened, and in the wake of Piedmont's example, Prussia was emboldened to seek the unification of Germany under its own royal house. The stunning successes of the Prussian armies against Austria in 1866 and against France in 1870 led to the installation of William I as the first kaiser of a German empire that stretched from Metz (now in France) to Tilsit (now in Russia), and that became, overnight, the largest state in Europe apart from Russia. This was to have even more far-reaching effects than the unification of Italy-not least the collapse of Napoleon's rule and the terminal weakening of France's position in Europe.

The rise of new powers within the European heartland was complemented by developments beyond its borders. Russian ambitions in the Black Sea were dealt only a temporary blow by the Crimean War, and Russia's eastward expansion was unaffected. By 1860, it had reached the Pacific. Moreover, Alexander II's reforms, designed to modernize the nation in the wake of its Crimean defeat, helped inaugurate a period of industrialization and railway building that culminated with the completion of the Trans-Siberian Railway at the beginning of the twentieth century. A similar process was taking place in the United States, where the end of the Civil War in 1865 allowed the country to refocus its energies on completing the domestication of the West. The first transcontinental railroad was completed in 1869, to be followed by four other routes in the 1880s. By 1890, the West was almost entirely colonized. As in the case of Russia, it was likely that the energies that had hitherto concentrated on creating these enormous continental giants would be felt with increasing intensity beyond their borders.

The arrival of new powers on the international stage might have meant less if Britain had retained its industrial supremacy. But after 1870, Britain's lead over other countries shrank to the point where it was threatened or surpassed. Nowhere was the change more apparent than in iron and steelmaking, the industry that more than any other defined economic and, ultimately, military potential. In 1870, Britain still had around 48 percent of the world's iron- and steelmaking capacity, four times more than either America or Germany. By 1913, however, Britain's share had shrunk to under 12 percent, while Germany's had advanced to 24 percent and America's to over 40 percent.10 If Britain could not impose its will on its rivals even during its heyday, it was increasingly unlikely that it would be able to do so in this far more competitive world.

With Pax Britannica ever less credible, peace among the Great Powers depended on the residual hope that cooperation would avert conflict. In reality, the Concert of Europe had died by 1871. The unification of Italy and Germany had been brought about by wars that broke out without any international attempt to stop them. Yet the hope that the Great Powers might cooperate to keep the peace lingered. Conferences were called in Berlin in 1878 and in London in 1912-1913 to settle the recurring problem of the Balkans. But after the wars of 1854-1871, it was clear that the Great Powers would cooperate only as and when they chose. In July 1914, Britain attempted to convene a conference to settle the crisis in Bosnia, but Germany and Austria-Hungary refused to take part.

The arrival of a multipolar world might not have mattered if the Great Powers had agreed with Cobden's vision of peaceful free trade without empires. However, such a vision looked increasingly remote after the 1870s. The movement toward free trade was reversed and protectionism regained ground. There were a number of interwoven causes in this reversal. First was the challenge to the doctrine of free trade posed by an alternative philosophy that argued for protection as a way to foster industrial development. The most powerful voice of this idea was Friedrich List, whose seminal work, The National System of Political Economy (1841), took issue with Adam Smith. Nations did not rise to preeminence through free trade, as Smith claimed, but rather by protecting and fostering their commerce and industry. This was particularly true of England, which in the Middle Ages had been a simple supplier of wool for the textile industry of Europe. "Had the English left everything to itself-'Laissé faire et laissé aller,' as the popular economical school recommends-the [north German] merchants ... would be still carrying on their trade in London, the Belgians would be still manufacturing cloth for the English, England would have still continued to be the sheep-farm of the Hansards."11

As for Smith's theory of competitive advantage, this would merely condemn nonindustrialized countries to remain as suppliers of raw materials and prevent them from rising to the wealth and power that only manufacturing provided. As a result of generations of protective policies, England had risen to a position of commercial preeminence that allowed it to pursue free trade from a position of advantage. Its economic relations with Europe were reversed from their medieval pattern, and it was happy to keep them this way: "It is therefore no exaggeration if we maintain that the tendency of the English proposals aims at nothing less than the overthrow of the entire German protective system, in order to reduce Germany to the position of an English agricultural colony."12

List was before his time. He died in 1846, just as the tide of free trade was in full swell, but he raised issues that still resonate today. As other forces turned countries toward protection in the 1870s and '80s, his views came more sharply into focus. Germany was among the first to return to a set of policies that had more than a passing resemblance to the supposedly discredited mercantilism of the seventeenth and eighteenth centuries. Industries were protected by a rising barrier of tariffs and by the creation of monopolistic cartels to protect them from the whims of free-market competition. Right-minded opinion in Britain was outraged, The Times declaring in 1877 that "the growth of a strong protectionist party in Germany has been one of the most unsatisfactory signs of the limited political training of that country."13 Only Britain and the Netherlands retained their commitment to free trade in the period before the war. Elsewhere in Europe, tariffs were on the increase. By 1913, typical duties on manufactured goods had risen to 13 percent in Germany, 18 percent in Italy and Austria, and 20 percent in France.

Across the Atlantic, the United States witnessed its own battle between the opposing forces of commercial freedom and protectionism. The agrarian areas of the South and the West, with their highly competitive production of cotton and foodstuffs, had always favored free trade. Other voices, starting with Alexander Hamilton in the 1790s, favored protecting American industry to ensure the country's transformation into a manufacturing power. Henry Clay, the senator from Kentucky, anticipated many of Friedrich List's points in the 1820s and '30s, arguing that nations that cultivate the "manufacturing arts ... will excel in strength, and maintain a superiority."14Confronted with Andrew Jackson's reversal of the protectionist tariffs of the 1820s, he declared that the Democrats misunderstood the implications of free trade: "It is not free trade that they are recommending to our acceptance. It is, in effect, the British colonial system that we are being invited to adopt; and if their policy prevails, it will lead substantially to the recolonization of these states, under the commercial dominion of Great Britain."15 Until the Civil War, the battle between the two forces was relatively evenly waged. But in the wake of the defeat of the South in 1865, the tide turned sharply toward protectionism. In 1868, duties on imported European manufactures were raised to around 50 percent, far higher than any tariffs within Europe, and they remained in that region until 1913, in spite of the attempts of Grover Cleveland, the only Democratic president between 1860 and 1912, to lower them.

The urge to foster industrialization was not the only reason for the resurgence of protectionism. The financial crash of 1873 ushered in an economic depression in Europe that discredited the principle of free trade. Even when recovery got under way, the European economies found their traditional agricultural production undermined by the opening up of the vast potential of the Great Plains of the American West, which by the late 1870s had begun to flood European markets with cheap grain. In January 1879, a leading businessman complained to Bismarck's personal assistant about the sixfold increase in American exports of grain, flour, and meat: "For German agriculture, there must be a grain, flour and meat tariff as an unconditional necessity if we are not to expose it to the same fluctuations as industry."16 As with Britain's Corn Laws, import duties were justified not just as a way of protecting agriculture from competition but also as a way of ensuring adequate domestic food supplies in wartime.

This turn toward protectionism should logically have damaged the growth of international trade, but curiously, this was not the case. In the forty years before the First World War, the volume of world trade trebled. There are several reasons for this outcome, which would appear to contradict the expectations of the liberals. First, Great Britain, the world's largest importer and exporter, did not join the general trend toward protection. Second, the rise in tariffs was offset by the fall in transport costs. Finally, outside tariffs, trade was hampered by few restrictions, and within the operations of the gold standard there was no such thing as currency manipulation or competitive devaluation.

The resurgence of protectionism was therefore, perhaps, less important in itself than as a sign of changing attitudes. It was accompanied by a dramatic return to the process of European empire building. With the exception of the French conquest of Algeria in the 1830s, the continent of Africa had remained largely immune to European expansion, apart from some scattered trading posts along the coastline and the Boer settlements in the south. Excitement at the possibilities of wider settlement was generated by travelers into the interior in the 1850s and '60s who brought back reports of vast unexploited mineral wealth. The trigger for what later became known as the "scramble for Africa" occurred in 1881-1882, when the French annexation of Tunis was followed by the British takeover of Egypt. At the same time, the first step toward colonizing the African interior was being taken by the explorer Arthur Stanley in the Congo at the behest of King Leopold of Belgium. In 1884, a conference was held in Berlin to set down some rules for what was likely to become a race. When huge gold deposits were discovered in Witwatersrand in South Africa in 1886, the stories of Africa's untold mineral wealth seemed to be confirmed. The scramble was now well and truly under way, and by 1913 the continent had been almost entirely divided among the European powers, with only Abyssinia (Ethiopia) and Liberia still under native rule. The lion's shares fell to Britain and France, the two Great Powers that already had a head start in this process, with smaller prizes going to Belgium, Germany, and Italy. The outcome was particularly galling to Germany, which felt that its late arrival on the imperial scene had left it with colonial assets that were not proportional to its industrial power, which had already outstripped France and was rapidly overtaking Britain.

After Africa, the most important remaining portion of the globe that appeared to be ready for colonization was East Asia. As the wave of imperial expansion got under way in the 1880s, Britain asserted control over Burma and the Malay Peninsula, while France expanded its presence on the Vietnamese coast to create a formal colony of French Indochina. The greatest prize of the East, however, was China, which had been attracting interest since the First Opium War in 1841. The calculations of how best to take advantage of this potential market of hundreds of millions were complicated not just by the size of the prize but also by the number of contestants. The scramble for Africa had involved two or three major players. The scramble for Asia drew in not only Britain and France but also Germany, Russia, the United States, and a surprising new entrant into the race: Japan.

Japan had maintained almost total isolation since the early seventeenth century, when it had reacted to the first inroads of European expansion by retreating from all contact with the outside world. Its opening up under the pressure of an American naval contingent in the 1850s should have been no different from the opening of the Chinese and Siamese markets through similar shows of force. However, a significant part of the Japanese ruling class was of the opinion that the only way to beat the foreign barbarians was at their own game. Within a year of Japan's first reluctant acceptance of a commercial treaty with the United States in 1854, it had acquired a modern propeller-driven warship from the Dutch-not in itself an adequate barrier against Western advances but a sign of things to come. After the Meiji Restoration of 1868 demolished feudal tradition, Japan followed a rigorous policy of modernization. A new constitution was adopted, together with a new military system, and a new legal code, a new educational system, and a new calendar-all based on Western models-and the government encouraged industrialization with single-minded determination.

By contrast, China floundered. The Second Opium War of 1856-1860 brought further concessions to foreign powers, with Britain, France, Russia, and the United States obtaining trading and diplomatic rights in a series of unequal treaties. Thereafter, China attempted to modernize under the "Self-Strengthening Movement," but the forces of tradition and corruption were too great an impediment. In 1895, the contrasting trajectories of China and Japan were laid bare by the Sino-Japanese War, which resulted in the shocking defeat of China by a neighbor historically considered very much its inferior. Japan now became an imperial power in its own right, gaining a colony in Formosa (Taiwan) and trading rights on the Chinese mainland comparable to those of the Western powers.

The second major disruption in the status quo in the Far East in the 1890s was the collapse of the remnants of the Spanish Empire, which was replaced by two new imperial contenders: the United States and Germany. The United States had started looking across the Pacific almost as soon as it had acquired California in 1848. William Seward, the future secretary of state under Lincoln, was the first to set out a vision of US involvement with the western Pacific. The United States "must command the empire of the seas, which alone is real empire," he told the Senate in 1850. The contest for empire was "not on the American lakes, nor on the Atlantic coast, nor on the Caribbean sea, nor on the Mediterranean, nor on the Baltic, nor on the Atlantic ocean, but on the Pacific ocean, and its islands and continents."17 It was in pursuit of this vision that Commodore Perry sailed his ships into Yokohama harbor in 1854 to open Japan to the benefits of international commerce, and that the United States sided with Britain in the Second Opium War to do the same for China. However, American influence in the area remained relatively limited until 1898, when it leveraged its military intervention against Spain in support of Cuban independence to take over the Philippines. At the same time, Germany used Spain's discomfiture to acquire its smaller Pacific island chains: the Marianas and the Carolinas. The flock of new entrants into the race for Asian colonies and spheres of influence was such that by the time China attempted to throw the "foreign devils" off its soil in the Boxer uprising of 1900, it found itself opposed by an alliance of eight imperial powers that now included not just Britain and France but also America, Russia, Germany, Japan, Austria-Hungary, and Italy.

THE DYNAMICS OF IMPERIALISM

What drove this wave of imperial expansion? The colonial powers often liked to justify their empires by asserting that they were bringing the light of civilization to their backward subjects. At other times they scarcely appeared to know, acknowledging that the drive for colonies seemed to feed on itself. "L'appétit vient en mangeant" (Appetite comes with eating), as the British prime minister Lord Salisbury explained to the French ambassador as they discussed the reasons for the carve-up of Africa. The French advocate of imperial expansion, Jules Ferry, stated simply that "an irresistible movement is bearing the great nations of Europe towards the conquest of fresh territories. It is like a huge steeplechase into the unknown ... whole continents are being annexed ... especially that huge black continent so full of fierce mysteries and vague hopes."18

Behind such complacent attitudes lay a more complex set of views about the nature of power and prosperity that were simultaneously reassuring and unsettling. The Industrial Revolution had divided the world into manufacturing and raw-material-producing nations. It was clear that true wealth and power were to be found among the former, not the latter. Friedrich List put the case clearly in his outline of European economic history: "If we carefully consider the commercial policy of Venice, we see at a glance that that of modern commercial and manufacturing nations is but a copy of that of Venice, only on an enlarged (i.e. a national) scale ... The maxim thus early held good that it was sound policy to import raw materials from other states and to export to them manufactured goods."19 William Seward, the apostle of American overseas expansion, saw the world in similar terms: "The nation that draws the most materials and provisions from the earth, fabricates the most, and sells the most of productions and fabrics to foreign nations, must be, and will be, the great power of the earth."20

However, the rush to industrialize produced its own complications. As Britain had already discovered, the more developed an economy, the less it was self-sufficient and the more it depended on less-developed economies to complement and sustain its growth. It was inevitable that, in a world of empire, there would be a temptation to ensure that these less-developed areas were under the control of the industrial heartland. These colonies would fulfill three functions: as producers of raw materials, consumers of manufactured goods, and destinations for emigration from an increasingly densely populated mother country. As the French economist Paul Leroy-Beaulieu put it, "the most useful function which colonies perform ... is to supply the mother country's trade with a ready-made market to get its industry going and maintain it, and to supply the inhabitants of the mother country-whether as industrialists, workers or consumers-with increased profits, wages or commodities."21

Leroy-Beaulieu was a liberal writing in the early 1870s. Although he advocated colonial expansion as a useful support for the domestic economy, he still favored an open-door policy whereby countries could trade freely with each other's empires, arguing that "the whole world will benefit from this, for there is no question of going back to the restrictions dating from the days of exclusive trading."22 As time passed, however, the return of protectionism increased the sense that colonies were there to provide a competitive advantage for the mother country. In 1887, the Bordeaux Chamber of Commerce, once a bastion of free trade, argued that France needed colonies to find secure markets for its manufactures: "The revival of differential tariffs would seem justified at this stage by the need to strengthen the links, now too weak, which link France with her colonies. Experience has proved that France, whose overseas exports are held back by ever-increasing competition, must find in colonies inhabited by her own nationals guaranteed markets for her primary and industrial products."23

Other writers went further and argued that empires were a necessity for national survival. The German nationalist writer Friedrich von Bernhardi worried that industrial development without an empire put Germany in a dangerous position:

There is, however, a reverse side to this picture of splendid development. We are absolutely dependent on foreign countries for the import of raw materials, and to a considerable extent also for the sale of our own manufactures. We even obtain a part of our necessaries of life from abroad ... The livelihood of our working classes directly depends on the maintenance and expansion of our export trade. It is a question of life and death for us to keep open our overseas commerce ... If the unfortunate course of our history has hitherto prevented us from building a colonial Empire, it is our duty to make up for lost time.24

Industrialization and empire building were increasingly seen as part of a zero-sum race for success, for it was not clear that there was room for more than a certain number of successful industrialized countries at the same time. The British writer Benjamin Kidd sought to explain the rush for colonies by the need to gain competitive advantage in a world where there were suddenly multiple industrial centers:

As the forces of industrial rivalry have ... developed themselves ... as transport and communication have become cheaper and more rapid, and technical knowledge has been more widely distributed and more easily conveyed, rival industries may be seen flourishing in different countries ... Competing nations in most cases possess but little advantage one over the other.25

In such circumstances, the possession of a colonial empire that provided resources and markets could make the difference between success and failure. The drive for empire was boosted by the perception that, now that the great uncharted expanses of America, Asia, and Africa had been mapped, the planet was finite. It was inevitable that a few powerful industrial nations with global reach would come to dominate the world. Benjamin Kidd wrote of the "the vast world-shaping rivalry ... the struggle of the Western races for the larger inheritance of the future."26Paul Leroy-Beaulieu put France's choice in dramatic terms: "Colonization is for France a question of life and death,-either France must become a great African Power, or she will be in a century or two but a secondary European Power."27 In Germany, the nationalist historian Heinrich von Treitschke spoke in similar terms: "Every virile people has established colonial power ... All great nations in the fullness of their strength have desired to set their mark upon barbarian lands and those who fail to participate in the great rivalry will play a pitiable role in time to come."28

Even in Britain, with its vast possessions, there was anxiety about the future. The geopolitical thinker Halford Mackinder worried that the days of maritime empires like Britain's were threatened by the advent of railways that allowed the uniting of great continental "heartland" empires like Russia. "Is not the pivot region of the world's politics that vast area of Euro-Asia which is inaccessible to ships, but in antiquity lay open to the horse-riding nomads, and is today about to be covered with a network of railways?"29 In response, Britain should not only prevent Russia from gaining access to the sea but also consolidate the empire behind a tariff wall to reinforce its economic and political coherence.

If empires were needed to ensure national success, so too were navies. In 1890, the American naval officer Alfred Mahan published the first of a series of highly influential books that argued that the race for commercial dominance had been won on the high seas. With the ever-growing importance of international trade, navies were not a luxury: They were essential for any country that aspired to power. Without a navy, a country's trade, its overseas possessions, and even its very survival were at the mercy of its rivals.

If navies, as all agree, exist for the protection of commerce, it inevitably follows that in war they must aim at depriving their enemy of that great resource; nor is it easy to conceive what broad military use they can subserve that at all compares with the protection and destruction of trade ... Great Britain's navy, in the French wars, not only protected her own commerce, but also annihilated that of the enemy; and both conditions-not one alone-were essential to her triumph.30

Mahan's work was taken to heart not just in his own country but in the capitals of all the Great Powers. The rush for empire was paralleled by a naval arms race, motivated, as with the drive for colonies, by a combination of ambition and insecurity. In 1880, the total tonnage of the warships of the Royal Navy was 650,000, a figure as great as the next three navies combined. Ten years later, after a decade of complacency, Britain became so alarmed by the erosion of its naval lead that the "two-power standard" was enshrined as a formal national policy. In Germany, 1897 was a wake-up call. Talk of intervention in support of the independent Boer republics in southern Africa against British aggression led to a stern warning to the country's ambassador in London. Britain would if necessary go to war to protect its interests, and "a blockade of Hamburg and Bremen and the annihilation of German commerce on the high seas would be child's play for the English fleet."31 The following year, Admiral Tirpitz introduced a bill in the Reichstag authorizing the rapid buildup of the German navy, arguing that "a state which has actively taken up trade, and has thereby become a considerable competitor in world markets, cannot exist without a certain measure of naval power or else it must go under."32 Asked whether Hamburg could be held in the event of war, he replied that it was irrelevant since "war with Britain meant the extinction of colonies and trade ... We could do nothing except make peace as quickly as possible."33

By 1914, Germany's navy had undergone an extraordinary transformation, growing from only 88,000 tons in 1880 to 1,305,000 tons and becoming the second-largest in the world. Hans Delbrück, the well-known historian of warfare, was arguing that its original defensive role was no longer sufficient: "It was true in the past that our fleet was created to protect our commerce. But today we can set ourselves a higher goal. The purpose of our fleet is not only to protect our overseas trade but also to bring us our fair share of that world domination which is allotted to civilized nations by the very nature of mankind and its higher destiny."34

Impressive though Germany's navy may have been, its growth had been nearly matched by a number of others. By 1914, France, Russia, the United States, and Japan all had navies larger than Britain's in 1880. The American fleet had grown from 169,000 tons in 1880 to 985,000 tons in 1914. The Japanese fleet grew from a tiny 15,000 tons to 700,000 tons.35

This international surge of naval building was viewed with considerable alarm in London. Since Britain had abolished the Corn Laws in 1846, it had depended more and more on food imports. Unlike Germany, Britain had not responded to the arrival of cheap American grain by raising tariff barriers to protect domestic agriculture. Its only insurance against wartime vulnerability was the Royal Navy. In 1902, the Liberal politician Richard Haldane made exactly this point in Parliament, arguing that "the commerce of this country was something approaching £1,000,000,000 and the [naval] Estimates only amounted to some 3 per cent on that. That was not an extravagant premium of insurance."36 Given this dependence on control of the seas, the rapid growth of the foreign navies, especially Germany's, was seen as a major threat to British security.

In 1904, a royal commission was set up to examine the issue of wartime vulnerability. It considered the extent and flexibility of overseas supplies, the transport resources available, and the risks of losses in the light of modern naval technology. It concluded that there would undoubtedly be some "captures of British ships engaged in the carrying trade ... But with a strong fleet we find no reason to fear such an interruption of our supplies as would lead to the starvation of our people" [italics added].37

The commission looked at the idea of stockpiling food but rejected the idea as too expensive and disruptive of the normal workings of the market. This left the Royal Navy bearing the entire responsibility of securing the nation's food supplies. Not surprisingly, the main outcome of its report was to reinforce the naval building program, which began in earnest in 1905. In that year, Admiral John Fisher, the head of the navy, commissioned HMSDreadnought, a battleship whose large guns, heavy armor, and high speed rendered all previous big warships obsolete. The result was a further increase in the pace of the global naval arms race. Fisher demonstrated that Britannia meant to continue ruling the waves, not just by the revolutionary design of the ship but also by the astonishing speed with which it was built. Dreadnought was ready for action in only fifteen months. The rapid progress of technology meant that existing naval assets were liable to instant obsolescence, and this gave a potential advantage to a technological powerhouse like Germany, which might outweigh the far greater starting size of the British navy. However, even when fleets had to be rebuilt from scratch to keep up with technical advances, Britain retained an advantage because of the global dominance of its shipbuilding industry. For the time being it could simply outbuild any rival. By 1914, the Royal Navy had grown to 2,714,000 tons, and the two-power standard was still intact. But even so, Britain could no longer feel sure of its ability to deal with any combination of naval threats in any quarter of the globe at any time.

On the continent of Europe, the arms race was equally visible on land. People were only too aware that between 1859 and 1870 the map of Europe had been redrawn by military force. The effectiveness of the Prussian army, based on a system of compulsory military service, had impressed all observers, and other nations felt that they had to respond. France introduced conscription in 1872, and by the outbreak of the First World War every major continental nation had an army based on compulsory short-term military service. The numbers in the armed forces grew steadily in every country between 1880 and the outbreak of war, rising by 110 percent in Germany, 80 percent in Austria-Hungary, 71 percent in Russia, 68 percent in France, 60 percent in Italy, and 45 percent in Britain. By early 1914, France had 827,000 men under arms (compared to only 144,000 in 2011), Germany had 761,000, and Russia had 1,445,000.38 And behind these figures for peacetime strengths were even larger numbers of military reservists who could be called up at short notice. Germany, for instance, could quickly mobilize an army of more than two million men if it decided to go to war.

This combination of rising protectionism, the drive for imperial expansion, and the inexorable increase in military spending was a terrible setback for the belief that trade should foster peace. Some liberal thinkers, like John A. Hobson, despaired:

Cobden and his friends primarily conceived nations as bound together by the play of purely commercial interests. If we could have free trade established between the different parts of the world, then the material business interests of these different parts would bind together the world so closely and so quickly that it would be impossible for war to be maintained in the future ... Those who see to-day that the fiercest struggles between members of different nations are for the markets of the world smile scornfully on this dream of Richard Cobden.39

Trying to explain what had gone wrong, in 1902 Hobson published Imperialism, a book that was to become the basis of the standard socialist critique of empires for decades to come. Capitalism had a tendency to overproduce and increasingly found itself short of markets for its wares. The result was that competition among firms was replaced by competition among countries as they sought to acquire monopoly markets for their output, without which the profits of industry would fall. The resulting race for colonies was a threat to world peace. However, there was a simple solution: social reform and the redistribution of income so that industrial output could be consumed at home. "The struggle for markets ... is the crowning proof of a false economy of distribution. Imperialism is the fruit of this false economy; 'social reform' is its remedy. The primary purpose of 'social reform' ... is to raise the wholesome standard of private and public consumption for a nation, so as to enable the nation to live up to its highest standard of production."40

But there was an unresolved conundrum in this thesis. Hobson claimed that the ideas of the imperialists were based in part on a false analysis of trade patterns. The bulk of international trade was between industrialized countries, not within their empires, and this trade between the imperial rivals was growing faster than colonial trade. As Hobson put it caustically, "The greatest increase of our foreign trade is with that group of industrial nations whom we regard as our industrial enemies."41 The largest level of intra-imperial trade was, not surprisingly given its scope, within the British Empire. But even there, only 37 percent of British exports went to the empire in 1913. Elsewhere the proportions were far lower. Only 13 percent of French exports went to its colonies, yet France had by far the largest empire after Britain. If Hobson had wanted to make a case about the evils of imperialism, he would have done better to focus on colonies as sources of raw materials rather than as markets for manufactured goods. France absorbed 50 percent of the exports of its colonies; the figure was 90 percent in the Belgian empire. But even here, the case was not very strong. The British colonies sold only 42 percent of their goods to Britain.42

Hobson was not unaware of the possible contradiction in his theory. If capitalists preferred to trade outside the empire, how was it possible to blame them for imperialism? To resolve this difficulty, he had a deus ex machina: the wicked financiers who looked for monopoly profits in their colonial investments. The problem with this idea was that the overseas investments of the imperial powers were, rather like their trade, largely outside the colonies. Even counting its massive investments in the autonomous dominions of Canada and Australia, less than half of British overseas assets were within the empire. The largest single destination of capital flows from London was the United States. The situation in France, the second-largest source of capital after Britain, was even more lopsided. Only 9 percent of French investments were in the French empire, compared to 25 percent in Russia and 13 percent in Latin America. Germans had more excuse for ignoring their relatively modest colonial possessions, investing 46 percent of their funds in Europe, 32 percent in the Americas, and 8 percent in Turkey.43

Hobson's critique was taken up by Marxists such as Hilferding, Bukharin, and Lenin. They agreed with his basic premises of the inherent tendency of capitalism to overproduce, the move from competition between companies to competition between states, and the pernicious role of finance. To Communists, especially once Lenin put his seal on the maxim that "imperialism is the highest stage of capitalism" in 1916, it was an orthodoxy that capitalism meant imperialism, and that imperialism meant war.

There were other voices, however. In 1909, the journalist Norman Angell published his bestselling The Great Illusion, in which he reaffirmed the old beliefs of the Manchester free-trade liberals about the futility of war, but with two new arguments. He contended, not entirely convincingly, that wealth could not be annexed, and rather more credibly that financial interdependence had now been added to commercial interdependence to make conquest self-defeating. A German invasion of London would be futile, he declared. "Because of the internationalization and delicate interdependence of our credit-built finance and industry ... German credit [would] collapse." In colorful language he continued:

The German Generalissimo ... would soon find the difference between himself and Attila. Attila, luckily for him, did not have to worry about a bank rate and such-like complications; but the German General, while trying to sack the Bank of England, would find that ... the value of even the best of his investments dwindled as though by a miracle; and that for the sake of loot, amounting to a few sovereigns apiece among his soldiery, he would have sacrificed the greater part of his own personal fortune.44

Angell, like Hobson, had his supporters on the left. In 1911, August Bebel, the parliamentary leader of the German Socialists, disagreed with those who argued that international finance posed a threat to world peace. A war scare over a colonial dispute between Germany and France was setting off a financial panic, and Bebel told the Reichstag, "I say openly that the greatest guarantee for the preservation of world peace today is found in the international investments of capitalism. These investments make war so dangerous for both sides that it would be pure madness for any government to push things to the brink over Morocco."45

How were these two opinions of the effects of capitalism to be reconciled? One possible answer was that economics had nothing to do with imperialism at all. This was the theory proposed after the war by the political economist Joseph Schumpeter, who argued that the war had been caused not by capitalism but by the relics of feudalism in the upper echelons of governments and armed forces.46 This is an idea with some plausibility, given that the decision to go to war in 1914 was taken by small coteries of men, especially in Germany, Austria, and Russia, who, with the exception of the German chancellor Bethmann-Hollweg, came almost exclusively from aristocratic-military backgrounds.

However, a better line of argument is that in a competitive multipolar world, governments were dealing with a "prisoner's dilemma" of whether they should cooperate or compete. It may have been fine for small countries to rely on the protection of the Royal Navy for their international trade. But was that a safe bet for countries like Germany that were sufficiently large to pose an economic and therefore geopolitical threat to Britain? Given its circumstances, it was logical for Germany to compete for colonies and to build up a navy. Yet the attempt to carve out safety for one country was potentially threatening for others, leading to a self-fulfilling prophecy.

The first person to suggest this paradox was one of the great liberal thinkers of the midcentury, the French political economist Frédéric Bastiat. One of the biggest reasons to protect domestic production, acquire colonies, or build up navies was to reestablish the self-sufficiency that industrialization had eroded-leading to potential vulnerability in time of war. And yet, as Bastiat pointed out, the search for self-sufficiency tended to make war more rather than less likely:

A nation isolates itself looking forward to the possibility of war; but is not this very act of isolating itself the beginning of war?... Let countries be permanent markets for each other's produce; let their reciprocal relations be such that they cannot be broken without inflicting on each other the double suffering of privation and a glut of commodities; and they will no longer stand in need of naval armaments, which ruin them, and overgrown armies, which crush them.47

Curiously, the great apostle of naval power, Alfred Mahan, also perceived the outlines of this paradox. In 1907, he recognized the logic of Germany's naval buildup, while at the same time noting that the country's earlier defenselessness had been more conducive to the maintenance of peace: "In the development of her merchant shipping Germany, to use a threadbare phrase, has given a hostage to Fortune ... Unless she equip a navy adequate to so great a task as protecting fully the carrying trade she has laboriously created ... this trade is ... a circumstance making for peace."48

THE DESCENT INTO WAR

The question is: Did the combination of colonial rivalry and military buildup lead inevitably to war? The causes of the descent into war in July-August 1914 are so hard to fit into a simple pattern that more than thirty thousand books and articles have been written on the subject without coming to a definitive conclusion. After the war, it was easy to blame the escalating prewar imperial rivalries of the belligerents for the conflict, and Communists worldwide, following Lenin's conclusive statement on the matter, never wavered in this belief. Yet this explanation has always encountered difficulties with the fact that war broke out not over some distant, resource-rich colony but over a landlocked province in the Balkans with no obvious raw materials or markets to quarrel about.

There were certainly plenty of moments in the years before 1914 when it looked as if war might break out over colonial rivalries. The first of these crises occurred when competing British and French plans to create empires that spanned Africa from one coast to another met in the middle. In 1898, a French expedition met a British force at Fashoda in southern Sudan, the unclaimed intersection of their territorial axes. A tense military standoff was finally resolved by French acceptance of British claims. In 1905 and again in 1911, France and Germany teetered on the brink of war about Morocco, on which they both had imperial designs.

On the surface, the peaceful resolution of the 1911 Moroccan Crisis seemed to reinforce the liberal view that commercial and financial interdependence was reducing the likelihood of war. The financial panic in Berlin was one of the reasons that Germany backed down and caused Bebel to suggest that international capitalism was becoming a force for peace.

However, Bebel's hopes were premature. The colonial crises, although resolved without resort to arms, had ramifications that made war in Europe more likely. The resolution of the Fashoda incident foreshadowed a fundamental realignment of European politics. Britain abandoned its policy of "splendid isolation" and aligned itself with France. In exchange for French acceptance of Britain's position in Egypt and Sudan, Britain tacitly agreed to accept French claims in Morocco. In 1905 and 1911, Britain came down decisively on the side of France, threatening military action if Germany did not withdraw its claims. From a British perspective, the thought of the German navy gaining bases on the Atlantic and Mediterranean coasts of Morocco was far too dangerous to contemplate. From a German viewpoint, however, the success of the Anglo-French front in 1905 and 1911 only encouraged the country to believe that it was surrounded by enemies intent on denying it its place in the sun and increased its determination to break out of its encirclement. At the same time, by challenging France in Morocco, Germany brought into question one of the unspoken bases of European peace since 1870. Bismarck had encouraged France to expand into Africa as a way of distracting it from its loss of Alsace and Lorraine. A dispute about colonies in Africa reawakened more dangerous antagonisms closer to home.

Moreover, the idea that imperial rivalries would not lead to war falls afoul of an obvious rejoinder: that what can be seen as the first skirmish of the First World War, the Russo-Japanese War of 1904-1905, had already occurred-and it was clearly about colonies.

In 1900, the Great Powers had cooperated in confronting the Boxer uprising in China. However, there were unresolved differences of opinion about how to divide the Qing empire between them. In the earlier part of the century, Britain had been content to establish a local trading base in Hong Kong and bargain for open access to the Chinese market. As competition heated up, the rival powers felt it was best to divide China into spheres of interest as a way of avoiding clashes between them-although the United States continued to argue for open access for everyone. In the north, however, the Russians and Japanese had other ideas and looked to lop bits off the old empire that they could control in a more formal way. Russia gained Outer Manchuria in the 1860s, and in 1895 Japan gained Taiwan.

What happened next confirmed the worst fears of those who believed that imperialism must lead to war. In 1905, the two rivals went to war over Inner Manchuria, which Russia considered vital because it gave it access to a warm-water port on the Pacific,* and to which Japan felt entitled after its victory in 1895, even if it had been forced to return the Chinese cession of the area in the face of the opposition of the Western powers. There had been colonial conflicts before the Russo-Japanese War, but they had always been one-sided events in which an imperial power confronted either some backward tribes or a declining empire like China or Spain. This was the first time that two of the rising contenders for empire had fought one another with the full might of modern military technology. The Russo-Japanese War was shocking not just for its outcome, which witnessed the victory of an Asiatic upstart over one of the traditional Great Powers of Europe, but also precisely because it showed that conflict over empire could not always be avoided.

Why was it that Russia and Japan failed to resolve their differences peacefully whereas the other powers in the area managed to do so? The answer is likely to be proximity. Russia and Japan were neighbors of China and therefore viewed the acquisition of its territory as an inexorable process of national expansion-particularly Russia, which had extended its empire across Asia by precisely this method. The annexation of contiguous land was not only easier to contemplate but also spilled over into questions of national security. For Japan, Russia was not just a colonial competitor but a long-term threat to its safety. For Britain, France, and Germany, by contrast, China was very remote-even more so than Africa.

The same dangers of proximity can be seen in the struggle over the other great crumbling imperium that had long been ripe for dismemberment: the Ottoman Empire. By the beginning of the twentieth century, the empire was already much reduced from its heyday. In Africa it had lost Algeria, Tunis, and Egypt; in Europe it had lost Serbia, Greece, Bulgaria, Montenegro, and its Romanian provinces. The Ottomans retained, however, a huge swath of territory from Turkey through the Middle East. This area was to be the scene of a struggle among the European powers that at times looked as if it might well endanger the peace. The project of a railway linking the Bosphorus to the Persian Gulf was perhaps the most important and certainly most contentious of all the major railway projects of the late prewar period. Germany, which obtained the concession in 1899, aimed to become the major power in the area and to gain access to its vast agricultural and mineral riches (including, people now started to speculate, petroleum). The advantages of the railway went beyond access to resources. It also had a geopolitical dimension. In alliance with Turkey, the railway would provide a method of projecting German military power into Asia where it could threaten the British Empire. In 1903, the German writer Paul Rohrbach made the strategic implications clear:

If it comes to war ... all idea of invading England is purely chimerical ... England can be attacked and mortally wounded by land ... only in one place-Egypt. The loss of Egypt would mean for England not only the end of her dominion over the Suez Canal, and of her connexions with India and the Far East, but would probably entail also the loss of her possessions in Central and East Africa ... Turkey, however, can never dream of recovering Egypt until she is mistress of a developed railway system in Asia Minor and Syria.49

Not surprisingly, Britain was deeply hostile to the project and responded by creating a protectorate in Kuwait to block access to the Persian Gulf, and then refused to allow any increase in Ottoman customs duties to finance the Mesopotamian stretches of the railway.* More than one observer saw the parallels with the tensions that led to the Russo-Japanese War:

The trans-Mesopotamian Railway ... will play in the Near East the same ominous part which the Trans-Siberian played in the Far East; with this important difference, however, that whilst the Far Eastern conflict involved only one European Power and one Asiatic Power, the Near Eastern conflict, if it breaks out, must needs involve all the European Powers, must force the whole Eastern Question to a crisis, and, once begun, cannot be terminated until the map of Europe and Asia shall be reconstructed.50

Unlike Russia and Japan, Britain and Germany managed to resolve their differences without resorting to arms. They did so by the classic Great Power method of dividing the area into spheres of interest. In a series of agreements between 1911 and 1914, Britain agreed to lift its objections to the railway as long as it went no farther than Baghdad, leaving Britain with an unchallenged dominance in southern Mesopotamia and the Gulf. Germany was left with a preeminent position in Anatolia and northern Mesopotamia, while France and Russia were satisfied with Syria and Armenia respectively.

However, even if the quarrels over the Bagdad Railway could be settled peacefully, this did not mean that compromise would always rule the day closer to home. It was in the Ottoman Empire in Europe that the most intractable conflicts arose, and it was in the Balkans that the "long peace" from 1815 to 1914 finally came to an end, when the assassination of the heir to the Austro-Hungarian empire by a Bosnian Serb nationalist led to a war that sucked in all the Great Powers. How could such a disastrous outcome to an apparently localized crisis have come about?

In many ways, the descent into war was the result of a series of missteps in which the Great Powers sleepwalked to disaster.51 Apart from Austria-Hungary, which actually wanted a war, the other powers were gambling in a high-stakes poker game in the expectation that the other side would be forced into a humiliating climb down. The risks were compounded by strict timetables for military mobilization, which gave the decision for war a use-it-or-lose-it quality reminiscent of the Cold War. However, it is also true that the powers would not have been playing poker if they had not had underlying strategic reasons to contemplate resorting to war, and if the Balkan crisis had not seemed an opportune moment to gamble.

The First World War was, like several previous European wars that had involved most of the continent, a series of different conflicts fought concurrently, each with its own causes. It is scarcely surprising that with so many participants it is impossible to disentangle a single cause. Moreover, the Great Powers endeavored to win domestic support for war by presenting their opponents as aggressors and themselves as innocent victims-thus making their words and actions in July 1914 harder to decipher.

For Austria-Hungary, the war was about survival. As a multiethnic empire whose minorities were already chafing at the bit of German and Hungarian domination, it was highly vulnerable. Serbian nationalism threatened more than its Bosnian and Croatian provinces, potentially provoking the complete disintegration of the empire. The lesson of the Spanish-American War was that, in a world now ruthlessly divided into rising and declining empires, being European was no guarantee against being dismembered by more successful rivals. The only solution to Austria-Hungary's existential crisis was to eliminate the Serbian threat once and for all. The assassination in Sarajevo gave it the opportunity to do so.

Russian motives were more complex. As the self-proclaimed protector of Orthodox Christian Slavs throughout Eastern Europe, it could not allow the destruction of its Serbian client without suffering a considerable loss of prestige and influence in the Balkans. But more important were its long-term strategic ambitions in the Black Sea. Russia had never given up on its plans to get control of the Turkish Straits so as to gain unfettered access to the Mediterranean. It had already fought wars to achieve this ambition in the 1850s and the 1870s. As Russia's foreign minister Sergey Sazonov told Tsar Nicholas in January 1914, "The state which possesses the Straits will hold in its hands not only the key of the Black Sea and Mediterranean, but also that of penetration into Asia Minor and the sure means of hegemony in the Balkans."52 But the straits were not only a key to further imperial expansion; they also were a potential threat to Russia's survival. Whoever controlled them could block Russia's use of its only warm-water port in Europe and prevent the export of wheat, the country's major source of foreign exchange. In the Russo-Japanese War, Russia's Black Sea fleet had been prevented from taking part in the campaign against Japan because of Turkey's long-standing prohibition of foreign warships passing through the straits. Now Russia's hope of gaining control of the straits was threatened by Turkey's pending acquisition of two dreadnought battleships that were due to be delivered before the end of 1914. These ships would render Russia's fleet obsolete overnight. Once that occurred, the Russian ambassador in Constantinople warned, "in the event of a crisis,... the Turkish fleet will be able to strike a decisive blow against us. This blow will not only be devastating to our Black Sea fleet, but to our entire position in the Near East."53 Since Britain had consistently opposed any attempt by Russia to take over the straits (and was supplying the dreadnoughts to Turkey), Russia's only hope of resolving this conundrum was to attack Turkey as part of a wider war in which Britain was on Russia's side. The Balkan crisis offered such a possibility.

Germany's calculations were equally complex. Like Russia, it could not stomach the damage to its prestige of a climb down by a close ally-especially after Germany's recent humiliation during the second Moroccan Crisis. And also like Russia, Germany faced a narrowing window of opportunity to go to war before the military odds turned against it.

Since the accession of William II in 1890, Germany had succeeded in maneuvering itself into a military cul-de-sac. Bismarck, once he had succeeded in unifying the country, had shown no further desire for military adventures and was concerned only to avoid making enemies. While there could be no friendship with France after the annexation of Alsace-Lorraine, Germany could at least maintain amicable relations with the other Great Powers. It was Bismarck's diplomacy, as much as anything, that kept the European peace in the 1870s and '80s. William, however, was convinced that Germany should no longer be content with its position in the world. Bismarck was dismissed, and the new aggressive tone of German foreign policy alienated many of the country's previous friends. The key alliance with Russia, which had lasted in different forms since 1815, was allowed to lapse in 1890. France was now able to woo Russia into an alliance in 1892-ending the isolation so carefully orchestrated by Bismarck and threatening Germany with invasion on two fronts in the event of another war. The solution to Germany's military dilemma was the Schlieffen Plan, which counted on knocking France out of the war in a few weeks before the ponderous might of the Russian army could be thrown against it. But after 1913, Russia had embarked on a program to increase the size of its army and, more important, to upgrade and expand its railway system. When completed, Russia would be able to reduce the time for mobilization to just over two weeks, and the Schlieffen Plan would be rendered useless. For Germany, the ideal war was one that started in the Balkans and therefore included Austria-Hungary, which would provide vital assistance against Russia in the crucial early weeks of fighting. It was for this reason that Germany was willing to gamble on the possibility of war by giving the Austrians a blank check to take as firm a position as they wished against Serbia in July 1914.

However, the rulers of Germany did not see war purely in terms of preemptive defense. There was a strong feeling that the worldwide scramble for imperial possessions had left Germany without its due rewards. Africa and East Asia were already carved up (although Admiral Victor Valois of the German navy could declare publicly in 1912 that "the division of continental possessions among the European powers will not be accomplished by claims on territory and colonial treaties. These decisions will be made only on the great European battlefields of the future"54).

There remained Europe. An increasing number of Germans were convinced that the only way for the country to ensure its rightful place among the top world powers was through the economic and political domination of the continent-whether by peaceful or nonpeaceful means. This was the basis of the "September Program," which outlined German aims in the first weeks of the war when a rapid victory still seemed possible. Russia should be thrust back out of Eastern Europe, and its role there replaced by a Central European customs union that would be extended to include France, Belgium, Holland, Demark, and Italy. In theory the union would have little formal authority, but "in practice [it] will be under German leadership and must stabilize Germany's economic dominance over Central Europe [Mitteleuropa]."* As part of this plan, France would have to sign a commercial treaty that would make it "economically dependent on Germany [and secure] the French market for our exports." Holland, related to Germany through ethnic ties, should be brought into a close relationship with the German empire without any compulsion, but in a form that would leave it "independent in externals, but be made internally dependent on us."55 Such phrases make for uncomfortable reading in light of recent events in the eurozone. If Germany had won the war, most of Europe would have become an informal Teutonic empire.

After the war, France liked to portray itself as the hapless victim of German aggression. But its role was less innocent than it appeared. As the Balkan crisis unfolded, the French president Raymond Poincaré visited St. Petersburg, where he encouraged Russia to take a hard line against any Austrian aggression against Serbia. Although it is likely that the leaders of both countries were planning on an Austrian climb down rather than war, the military option was clearly on the table. Russia started to mobilize in secret as soon as Poincaré left. The decisions made in St. Petersburg were as important as those made in Vienna and Berlin in the collapse of peace.

Behind France's gamble lay its long-term rivalry with Germany. The loss of Alsace and Lorraine in 1871 was not only a deep and continuing affront to national pride; it was also a matter of geostrategic importance. Lorraine contained Europe's largest deposits of iron ore, without which Germany's dominance of steelmaking would never have occurred. Before 1870, the iron- and steelmaking capacity of the two countries had been more or less equal; but after Germany's victory, its steel industry had powered ahead until by 1914 its output was almost four times greater than France's. Yet German economic ascendancy depended on "French" iron ore. For the next forty years, the mines of Lorraine were to be at the center of the struggle for the fate of Europe. Although France had no immediate thought of going to war with Germany to reclaim its lost provinces in 1914, they were at the top of any list of potential war aims. The French were well aware that they would have no hope of overcoming their enemy single-handedly. They could hope to succeed only in a general war where Germany would have to fight multiple enemies at once. A war that started in Eastern Europe, and pulled in Russia first, would be to its advantage.

That left Britain. The country had less reason than any other to want war. It had settled its differences with Germany over the Bagdad Railway, and the naval arms race appeared to have cooled down, with Berlin accepting that Kaiserliche Marine would not achieve anything like local parity with the Royal Navy in the foreseeable future. Moreover, Britain's ententes with France and Russia did not oblige it to go to war. Knowing this, Germany attempted to keep Britain out of the war almost as hard as France attempted to pull it in. Yet in the end Britain went to war over a mere "slip of paper"-the treaty that guaranteed Belgium's neutrality-siding with France and Russia in an act that the kaiser condemned as "racial treachery."

However, Britain, like France, Germany, and Russia, had strategic reasons to go to war that went beyond its official justification. For centuries British foreign policy had focused on preventing the rise of a single dominant power in Europe for fear that it would jeopardize British security. There was no reason to abandon this policy now; and in some ways it was even more relevant in 1914 than in earlier centuries because of Britain's growing dependency on sea trade. Whatever Germany said about respecting the territorial integrity of Belgium, it was more than likely that a German victory would give it control of the Belgian seaports, posing a direct threat to British control of the Channel. As the foreign secretary Sir Edward Grey explained the position to the cabinet, there were three fundamental British interests that could not under any circumstances be abandoned: (1) the German fleet should not occupy, under Britain's neutrality, the North Sea and English Channel; (2) Germany should not seize and occupy the northwestern part of France opposite Britain; and (3) Germany should not violate the ultimate independence of Belgium and occupy Antwerp as a standing menace to Britain.56

The other British calculation was more circuitous yet no less important. According to Grey, had Britain not declared war, "We should have been isolated; we should have had no friend in the world; no one would have ... thought our friendship worth having."57 This sounds on the surface like a simple piece of postfactual moralizing. Yet it reflected an important strategic reality. Britain's ententes with France and Russia were skin-deep. Little more than ten years earlier they, not Germany, had been seen as Britain's chief imperial rivals. To abandon them would risk reactivating their anti-British imperial strategies, which, in the case of Russia in particular, were seen as extremely dangerous. As Sir George Buchanan, the British ambassador to Russia, wrote to the Foreign Office in April 1914, "Russia is rapidly becoming so powerful that we must retain her friendship at almost any cost. If she acquires the conviction that we are unreliable and useless as a friend, she may one day strike a bargain with Germany and resume her liberty of action on Turkey and Persia."58 Allies, in an unstable multipolar world, were potentially as dangerous as enemies. In the end, Britain was forced to compromise its long-standing policy of keeping Russia away from the Mediterranean in order to keep Germany away from the Channel.

Trade featured prominently in the motives that drove Europe to war in 1914. For Britain and Russia it was control of straits that in hostile hands threatened economic strangulation. For Germany it was the expansion of its commercial empire. But in a grotesque inversion of the hopes of the liberals, trade was no longer the keeper of peace between nations but was at the center of a fight to the death for survival.

What was certain was that the rising bonds of commercial interdependence had not made war "obsolete" or "impossible" as had been claimed. In 1913, Germany's foreign trade was dominated by three partners: Britain, Russia, and the United States, each of which was more important to it, commercially, than its ally Austria-Hungary. For Britain, Germany was its second-largest trade partner, behind the United States but ahead of India. For Russia, Germany was even more important, constituting a third of its total trade. If the liberals had been right, these countries should never have gone to war-yet they did.



Copyright © 2015 by James Macdonald