Summary
Alfred Marshall, a refined academician and the most famous economist of the Victorian Age, was both accepted and respected for his Principles of Economics (1890), a tremendous success that is still used as a textbook. His thesis was equilibrium—the self-adjusting and self-correcting nature of economics; the foundation of his economics was the concept of time. For Marshall, there is a short period and a long period to consider. Both have to be weighed in answering the question of value. With diamonds, for example, in the short-run, it is demand which makes them expensive; in the long-run, it is the cost of production. To determine price, the economist must consider both supply and demand as equally important as two blades of a pair of scissors.
To Marshall, a remarkably compassionate scientist, economics was an engine for the discovery of truth concerning the cause and cure of poverty. He contrived an elaborate system of economics which delighted established thought and which satisfied business. Introductory economics courses in England and the U.S. incorporate his system. Even more important is the fact that his most brilliant pupil, John Maynard Keynes, made a large splash in the world of economic thought.
Yet, brilliant as Marshall was, nothing that he said went far enough. The time which he wrote about is an abstract. His economics, therefore, is a world of theory, and those theories are hopelessly unrelated to reality.
Commentary
Imperialism refers to the extension of authority or control, either directly or indirectly, of one people over another. In this sense, imperialism is as old as history. During the early days of Western civilization, Greece and Rome furnished worthy examples. In modern times, the Age of Discovery ushered in a period when the nation-states of Europe raced to stake out colonies and to monopolize overseas trade. Portugal, Spain, Holland, France, and England formed a keen rivalry which provoked colonial wars in the early part of the eighteenth century and continued through the Napoleonic Era. Then interest weakened as the doctrine of laissez faire replaced that of mercantilism.
A new period of imperialism, referred to as new imperialism, or economic imperialism, took place from 1870-1914. This was Europe's golden age of imperialism, motivated by the effects of the Industrial Revolution and characterized by economic and political domination of underdeveloped nations. Western Europe, which controlled most of world finance, commerce, military might, and intellectual life, extended its power over the peoples of Asia and Africa. The entire continent of Africa was so partitioned that only two nations remained independent by 1944—Ethiopia and Liberia. Asia was a fertile hunting ground for Europe, and vast but weak China soon became known as a "ripe melon." By 1914, some 283 million whites controlled over 900 million non-Europeans, mostly in Africa and Asia. This staking out of colonies led to bitter rivalry among European nations and was a strong factor leading to the outbreak of World War I.
The basic question raised by Hobson was whether this stage of imperialism is inseparably related to capitalism. In other words, do capitalism and imperialism naturally go together? Communists charge that they do. The U.S. and Western Europe say otherwise. Current developments today differ, for practically every form of imperialistic holding has reverted to the original owners. At the height of imperialism, five-sixths of the world was needy and defenseless. Today, the poor five-sixths are still impoverished, but they are independent and defiantly aggressive, as was evident in South Africa's struggle against apartheid. The formerly rich one-sixth is still rich, but on the defensive. The key question—and the reason for Hobson's importance to economics—is whether the defiantly aggressive majority will be swayed by Marxism.
