Of greater importance than the theories of Edgeworth, Bastiat, and George is the theme of the fourth economic heretic of the age—imperialism. The Victorian Era was a time when Great Britain, France, Germany, Belgium, Portugal, Holland, Italy, and Russia grabbed up colonies and economic concessions in Africa and Asia. The spirit of imperialism swept through the Western world, including the United States. Between the Napoleonic Wars (1803-15) and 1870, the laissez faire doctrine of free trade dominated.
From 1870 onward, however, various factors caused a drastic change in attitude and policy relating to colonial expansion. Notably, as a result of the rise in Europe's population, the desire for military bases, nationalism, and the Industrial Revolution, imperialism became an extremely popular policy with virtually all classes of society; its chief spokesman, Rudyard Kipling, praised its virtues.
Into this setting appeared John A. Hobson, a nervous, stuttering little man who took a critical look at capitalism and imperialism, in particular. He adopted John Ruskin's humanistic viewpoint toward economics, which stressed human values over cold statistics. By coauthoring an economic treatise which suggested that savings might lead to depression and unemployment, he lost favor with orthodox economists and was banished from London University Extension Lectures. As a result, he became a social critic, examining topical questions.
The chief topic of interest to England was Africa, where the Boer War between Dutch colonists and the English in South Africa was brewing. Hobson journeyed to Africa, and his research there convinced him that his warning of the results of oversaving was justified. Returning to England, he quietly prepared a major work, in which the effects of savings and imperialism were combined to form his thesis. He published Imperialism, a Study (1902), a devastating attack on capitalism as well as imperialism.
Hobson, a non-Marxist, went even further than Karl Marx. Whereas Marx predicted that capitalism would destroy itself, Hobson declared that imperialism would become the road to war, leading to the destruction of the world. In his view, capitalism has an insolvable problem: the rich get richer and the poor get poorer. Because of the vast inequality in the distribution of wealth, neither the rich nor the poor can consume enough goods.
Because the rich are few, they can consume only so much. The poor, while large in number, lack the income to purchase more goods. Therefore, the rich—both individuals and corporations—must invest the bulk of their income in savings, which are useless unless spent on further production of goods. Otherwise, purchasing power dries up. But since there is no market for more goods, production leads to a glut on the market.
Here, Hobson injects his comment on imperialism, for the only obvious answer to the problem is the utilization of savings in overseas investment. Foreign investments take off the excess capital, and foreign markets use the excess goods. This problem of excess, then, is the reason for modern imperialism, which is a direct outgrowth of the capitalistic system. But dire consequences lie ahead, he warns. Capitalistic nations each suffering the same glut, race each other to partition the world. With each nation trying to grab the biggest slice, bitter competition and rivalry promote the possibility of war.
Needless to say, Hobson's indictment of capitalism hardly dented the official economic thought of his day. He was dismissed into the same backwater with Bastiat and Henry George. Yet, from one quarter there came a warm response. Lenin, a Russian exile, read Hobson's work and appropriated its thesis, augmenting it and wrapping it in a glittering package—Imperialism, the Highest Stage of Capitalism (1916).
The antithesis of Lenin, Hobson disdained communism; his book analyzed capitalism and imperialism through logic. Hobson avoided class favoritism and refrained from turning thesis into dogma. He was puzzled over periods of history when capitalism showed little interest in imperialism. Further, even though his thesis points to the likelihood of war, he did not maintain that imperialism inevitably leads to war.
On the other hand, Lenin declared that war was a certainty if capitalism and imperialism remained unchecked. He carried Marx's prediction of the doom of capitalism even further, showing that imperialism is the final stage in a downward spiral. For Lenin, imperialism is capitalism's death knell. Not only did Stalin share this view, but hard-line communists today still hold to its truth. During the height of the Cold War, Communist countries charged that all U.S. interest in underdeveloped countries was actually motivated by imperialistic designs, whether that interest was shown by private corporations or the Peace Corps.
The U.S. reply to this charge has been that foreign investment and foreign trade alone do not represent imperialism, for there must be political interference and economic exploitation to justify a claim of imperialism. In point of fact, American foreign policy results from a defense of ideology—to protect less sophisticated nations from the intrusions of socialism. The U.S. differentiates between profit and plunder, noting that the best example of a powerful country looting weaker nations is given by the Soviet Union itself, especially in the cases of Hungary and Afghanistan.
Another aspect to consider in the internationalization of capital is the fact that cheap goods manufactured in Hong Kong, Taiwan, Korea, or Mexico undersell similar products produced by the motherland. Such an intensification of competition ironically threatens American interests. The problem of imperialism has proven that it inevitably lashes back against the nation which created it.
