One Cause of the War

The Financial Imperialism of the Great Polvers Precipitated Conflict.

December 1 1917

One Cause of the War

The Financial Imperialism of the Great Polvers Precipitated Conflict.

December 1 1917

One Cause of the War

The Financial Imperialism of the Great Polvers Precipitated Conflict.

THE charge, that international complications have been caused almost entirely by “financial imperialism,” is made by Frederick C. Howe in The Atlantic Monthly. He shows that the imperial ambitions of Germany, Britain and France have been due to a very great degree to the work of the big financial interests seeking concessions and means of exploiting the natural resources of uncivilized countries. This, he contends, has led to bickering and jealousy and the need of armaments. Here is how he develops the idea:

Dollar diplomacy is the American equivalent of financial imperialism. It is a phrase which came first into use in this country during the administration of President Taft, in connection with the activity of the State Department in the promotion of loans, contracts, privileges, and concessions in • Central and South America, and especially in relation to the Chinese six-power loan negotiated by the bankers of Europe in 1912. The propriety of the enlistment of the State Department and our diplomatic service in the promotion of overseas interests, and especially the policy that our government should pursue in the protection of investors and concession-seekers in weaker countries, was much discussed prior to the entry of the United States into the war, owing to the rapid shifting of the centre of the world’s finance from London to New York.

Dollar diplomacy, or financial imperialism, should not be confused with international trade or international banking. International trade is -a function of the commercial classes. It differs from domestic trade only in that it is carried on across national boundaries. And international banking is but an agency of international trade. Trade and commerce, the exchange of goods and merchandise, are to be encouraged. They promote better relations. When free from favoritism, the “closed door,” and other privileges, they advance the cause of peace.

Dollar diplomacy is an activity of finance rather than of trade. It is carried on in all the creditor countries by a few great banking houses having close connections with the government. It consists of a variety of related activities, among which are: (1) the lending of money, often to weak or dependent countries or to rulers of doubtful legitimacy; (2) the building of railroads, canals, and public utility enterprises; and (3) the development of mines, plantations, and other resources. Closely allied with the lending of money and the securing of concessions is the sale of munitions, which in all the European powers is carried on with the co-operation of the great banking and exploiting houses which are identified with the making of munitions.

Stated briefly, dollar diplomacy is a merger of finance, economic development or exploitation, and the foreign office. In all the greater powers of Europe it has been an agency for the promotion of imperialistic ambitions and conquest. Almost all the territory annexed by Great Britain, France and Germany in the last fifty years has been taken over in connection with the activities of the exploiting classes. For it is the financier rather than the trader who demands the flag for protection.

Financial imperialism had its origin in surplus wealth seeking investment. As the rates of interest fell in England, France, Germany, Holland and Belgium, accumulated capital sought investment in countries needing development, where higher returns were to be secured. It flowed first into the United States, Ganada, Australia and India. Here It was peaceful and the returns were reasonable. Later, surplus wealth began to venture into the undeveloped places of the earth; into Turkey, the Balkans, North and South Africa, Persia, South and Central America, and China; where local banking was generally

under the control of the great financial houses of Europe. For many years England, France, and Holland were the only lending and developing countries, and they for the most part kept in separate spheres of influence. England and France were primarily interested in lending money to other governments, building railroads, opening mines and plantations. English capital has financed her colonies and dependencies. Vast sums have been placed in South Africa in connection with gold and diamond mining; in Egypt, India, and Mexico. The total overseas investment of Great Britain amounted to $20,000,000,000 in 1913, a sum equal to the foreign investments of France, Germany, the United States, Holland, and Belgium com-

France, like Great Britain, is primarily a money-lending country, and the great banks at Paris are largely devoted to foreign investments. Her .surplus wealth has gone to Russia, the Balkans, Turkey, Tunis, Morocco, and Mexico. French imperialism, unlike that of Great Britain, is participated in by all classes; for the loans of France, amounting to about $9,000,000,000, are made up from the savings of millions of peasants and the middle classes, who purchase foreign securities in small denominations of $30 and $50 through the great investing banks of the capital.

German imperialism is of a somewhat different kind. Germany wants raw materials, especially iron ore, copper, oil, and lands for the raising of wheat and cotton. And her agents have been searching out concessions to supply her with these necessities in Morocco, Turkey, Asia Minor and China. She wants to sell munitions, iron and steel products, and the output of her industries. She has penetrated into many of the countries of South America, where her financiers own or control the public utility corporations in many of the large cities. She controlled or was ascendant in the banking operations of Bulgaria, Roumania, and Turkey, and was also very influential in Italy and Greece. The sale of .munitions is intimately connected with the activities of German overseas finance, while the Foreign Office is quite frankly identified with all these interests. The overseas investments of Germany in 1913 amounted to about $6,000,000,000.

Financial imperialism is thus only incidentally identified with trade and commerce, although it is frequently confused with it.

The Morocco incident, which nearly precipitated Avar in 1911, was primarily traceable to the conflict of bankers and concessionseekers in that country. The Sultan, who was a weak and spendthrift pi'ince, was induced to borrow colossal sums of money on which he paid usurious interest. In seven years the indebtedness of the country was increased from $4,000,000 to $32,500,000. On this loan extortionate commissions wore charged, while the bonds were taken at a very low rate. The customs revenues were set aside to meet the interest demands, and the internal taxes imposed upon the natives to meet the burdens of the■ indebtedness led to disaffection. In addition to the activities of the bankers, German and French concessionaires secured rights for the iron ore deposits in the Sus Valley, which were claimed by the Krupps and Mannesmanns of Germany. These grants were of great value, by virtue of the fact that Germany was desirous of increasing her supply of iron ore. Other concessions for docks, railroads, banks and other privileges were being sought by the several nations, and in 1911 England, France and Germany were on the verge of war over the diplomatic controversies which were traceable to the attempts of these governments to protect their subjects, their privileges, and their concessions in Morocco.

The experience of Egypt, Tunis and Morocco is the experience of Persia, Turkey, Asia Minor, South Africa, Central America, Mexico, and China. In fifty years almost the whole undeveloped world has fallen under the dominion of the greater powers.