Hobson, and the Liberal explanation of Imperialism

By the late 1890s, he became convinced that the “new” imperialism, unfolding mainly in Africa and Asia, represented an overriding danger to British democracy. It threatened “peace, economy, reform, and popular self-government,” catalyzing instead militarism, reaction, and jingoism. Imperialism presented a multicausal explanation for the emergence of the “earth hunger” that had gripped the imperial powers since roughly 1870. Its “leading characteristic” was competition between great capitalist empires.

The main stimulus was investment. Oversaving among capitalists and underconsumption by the masses meant that the rich could not invest their money profitably in the domestic market. In search of a high rate of return, they pushed for the opening of foreign markets, which in turn required territorial acquisitions. This system benefitted the few—chiefly financiers and their allies in the political establishment—at the expense of the many. The “business interests of the nation as a whole are subordinated to those of certain sectional interests that usurp control of the national resources and use them for their private gain.” Employing a common radical trope, he argued that imperialism was “irrational from the standpoint of the whole nation,” although “it is rational enough from the standpoint of certain classes in the nation.” Using various forms of manipulation and misleading propaganda, this profit-driven imperialism was disguised as necessary government policy; it was a “calculating, greedy type of Machiavellianism” wrapped in the evocative language of “national destiny” and the spread of “civilization.” Like Hobhouse, he warned against the corrupting effects of disingenuous language.--Duncan Bell (2009) "Hobson, Hobhouse, Liberalism" in (2016) Reordering the World: Essays on Liberalism and Empire, 356-357 (emphasis added) [HT Chris Brooke]

I was directed to Hobson by the following remark by Perry Anderson (recall) in his famous (2019) NLR review of Adam Tooze's Crashed: "Durand’s answer [in Fictitious Capital] is that they represent an updated version of Hobson’s vision of the future at the start of the twentieth century: namely the extraction of high levels of profit from investment in production in zones of cheap labour on the periphery of the system, above all in Asia. If this is so, the ‘enigma of profits without accumulation’ would dissolve, because firms are indeed investing; not in their domestic economies, where growth, employment and wages stagnate, but in overseas locations, where they have secured very high rates of return." In Anderson's argument the mention of Hobson is, at first sight, a mere aside. 

In Durand's Fictitious Capital (2017; originally appeared as Le capital fictif in 2014), Hobson's concerns about the rise of a "new financial aristocracy" in light of (now quoting Durand) China's insertion into the circuits of world capitalism, are presented as "strangely prophetic" (140-141). Durand, in turn, is explicitly echoing Lenin (see here), whom he cites as his source on Hobson. Now Durand -- who is a trained economist -- goes on to summarize Hobson as follows:

The World Hobson describes is characterised by three elements: 1) ‘a financial oligarchy’ dominates the rich countries; 2) the workers of these countries are employed in ‘personal services’ or ‘minor industrial services’; 3) the centre draws a ‘tribute’ from the peripheral countries in the form of both profits and industrial and agricultural products. We can translate this system of relations into contemporary terms: the financial profits that feed the upward concentration of income in the rich countries are founded on the exploitation of industrial labour and natural resources in the countries of the global South. Industrial activities that have become redundant in the countries of the centre are reduced to their bare bones, with the result that workers in such areas find themselves limited to support or service activities with little added value (personal services in particular), which cannot be traded at the level of international commerce. Durand's Fictitious Capital, p141 (emphasis added)

Now, Bell and Durand give a good sense of Hobson's overall argument. And neither of them can be said to misrepresent Hobson's (1902) Imperialism.1 Even so, I think they both end up failing to convey Hobson's underlying argument. (I return to Lenin below)

For, the existence of a "financial oligarchy" that oversaves, and a mass of workers that under-consumes, is for Hobson not a natural fact as it might be taken to be if one thinks it is the ordinary effect of monopoly capitalism. But Hobson is quite clear that such over-saving, "which is the economic root of Imperialism is found by analysis to consist of rents, monopoly profits, and other unearned or excessive elements of income, which, not being earned by labour or by head or hand, have no legitimate raison d'étre." In particular, as he explains on the previous page, such monopoly profits are not themselves the effect of market-forces, but the consequence of "trust[s] or other combine[s]." (Quoted from Chapter VI) In addition, monopoly profits are fueled by tariffs; this is why, for Hobson it is axiomatic that "Imperialism repudiates Free Trade, and rests upon an economic basis of Protection." (Quoted from Chapter V) Why does this matter?

So, rather than seeing Imperialism as a natural outgrowth of the ordinary development of capitalism, Hobson takes imperialism to be the effect of a political corruption of capitalism: it's the imposition of tariffs and the failure to secure proper antitrust law* that create the economic conditions for imperialism.** For, without tariffs and other anti-competitive policies, profits would be lower and wages higher. (Hobson's argument is entirely Smithian.) Once the state has been captured by protectionist interests, which generates high profits, but underconsumption, a military-financial-evangelical complex (a parasatic class) can easily promote Imperialism. Lenin sums up Hobson's point very nicely, "in its economic essence imperialism is monopoly capitalism.... monopoly arose out of the concentration of production at a very high stage. This refers to the monopolist capitalist associations, cartels, syndicates, and trust." (Lenin, 1916 Imperialism, Chapter 10. I return to Lenin below.)

Now, for Hobson imperialism is the effect of political decisions that are reversible if only Great Britain returned to Liberal projects. He thinks that in reversing imperial projects, the working poor of Great Britain will be wealthier, resources for public investment (in a public education, public goods, and perhaps a welfare state) will be opened up; the nation much richer, and also that it would open the door to less dangerous forms of nationalism, even the possibility of pacific international federation. (Something I return to soon.) I don't mean to suggest that Hobson has no interest in colonial (as distinct from imperial) projects or that he is free from an interest in racism/anti-semitism and eugenics--there are plenty of passages that may well have him canceled today. But at bottom Hobson's economic analysis of imperialism is rooted in political economy of a sort that anticipates the ORDO-liberal interpretation of the political dangers of economic concentration.

As I noted, Lenin does justice to Hobson's analysis. But at one point he differs, and I think this helps explain the reception of Hobson I started this post with. After Lenin writes:

At the beginning of the twentieth century, monopolies had acquired complete supremacy in the advanced countries, and although the first steps towards the formation of the cartels were taken by countries enjoying the protection of high tariffs (Germany, America), Great Britain, with her system of free trade, revealed the same basic phenomenon, only a little later, namely, the birth of monopoly out of the concentration of production.   

For Lenin monopoly capitalism just is the natural byproduct of being economically "advanced." And rather than being the exception, Great Britain, with its history of free trade, confirms the rule by also exhibiting monopoly capitalism despite having a different starting point. From Lenin's perspective this is converging evidence. So, if one takes the Leninist diagnosis for granted one need not mention the political conditions that generate a "financial oligarchy" that oversaves, and a mass of workers that under-consumes; it just is the natural condition of developed capitalist economies!

My interest here is not to settle the debate between a putatively Marxist and putatively liberal interpretation of the rise of imperialism. Rather, from my skeptical liberal position, what the confrontation shows, is that there is a challenge, one that has not gone away, that one might formulate toward the liberal position: how does one prevent anti-competitive state capture that serves already existing, powerful economic interests, if these interests benefit or are enriched from such capture? For, it is no good to say that normatively desirable liberalism would not generate imperialism, if really existing liberalism cannot prevent it.+ 

 

1. I have read a 1911 Spelman edition, which I think is based on a 1905 revision. 

*The claim about antitrust law is not explicit, but it follows naturally from his argument.

**Hobson also thinks that inherited aristocratic land privilege is a problem. But his (more Georgist) argument seems to me distinct from the one I am presenting here.

+Hobson himself seems to suggest it was due to elite failure.

Comments

[John Quiggin]

It certainly seems that neoliberalism (broadly defined) has collapsed into monopoly capitalism exactly as described here, but with the outlet of imperialism no longer available. Hence, we get the declining rate of profit for small capital, while huge rents are creamed off the top by the financial sector.