John A. Hobson

Imperialism. A Study




These extracts from Hobson’s text present his views on the causes of imperialism. For Hobson it is not the search for new markets but the profitable employment of surplus financial resources that is at the basis of the drive to imperialism. The existence of this surplus is due to the fact that the masses are kept in a condition of under-consumption through a policy of low wages for the workers and high rents for the financiers.

With respect to Hobson’s thesis some points need to be clarified. First, the fact, underlined by A. J. P. Taylor, that the time of maximum export of capital does not coincide with the period of imperialistic adventures; second, that the profits from investing in Africa and Asia were not so high (and sometimes were inexistent) contrary to what asserted by Hobson and, following his lead, by Lenin. In their case, useful and plausible rationalizations replaced unpalatable realities, namely that imperialism is based on the search, by the territorial states, of power for power’s sake and that economic gains are not only highly risky but generally highly improbable or minimal with respect to the energies and resources expended.

Another weak point in Hobson analysis is the weight he attributes to financiers like Rothschild when he writes: “Does anyone seriously suppose that a great war could be undertaken by any European State, or a great State loan subscribed, if the house of Rothschild and its connections set their face against it?”
The outbreak of the First World War, that was certainly not in the interests of an international financial house like the Rothschild, and the expropriations suffered at the hands of the states by big financiers, are the most clear signs that financial capitalists are not so powerful, that imperialism and wars are a product of the state and that the only aspect that interests state rulers is Power and more Power and still more Power.



Quibbles about the modern meaning of the term Imperialism are best resolved by reference to concrete facts in the history of the last thirty years. During that period a number of European nations, Great Britain being first and foremost, have annexed or otherwise asserted political sway over vast portions of Africa and Asia, and over numerous islands in the Pacific and elsewhere. The extent to which this policy of expansion has been carried on, and in particular the enormous size and the peculiar character of the British acquisitions, are not adequately realized even by those who pay some attention to Imperial politics.

Taking the growth of Imperialism as illustrated in the recent expansion of Great Britain and of the chief continental Powers, we find the distinction between Imperialism and colonization . . . closely borne out by facts and figures, and warranting the following general judgements:

First - Almost the whole of recent imperial expansion is occupied with the political absorption of tropical or sub-tropical lands in which white men will not settle with their families.

Second - Nearly all the lands are thickly peopled by 'lower races'. Thus this recent imperial expansion stands entirely distinct from the colonization of sparsely peopled lands in temperate zones, where white colonists carry with them the modes of government, the industrial and other arts of the civilization of the mother country. The 'occupation' of these new territories is comprised in the presence of a small minority of white men, officials, traders, and industrial organizers, exercising political and economic sway over great hordes of population regarded as inferior and as incapable of exercising any considerable rights of self-government, in politics or industry.

Next, let us inquire whether the vast outlay of energy and money upon imperial expansion is attended by a growing trade within the Empire as compared with foreign trade. In other words, does the policy tend to make us more and more an economically self-sufficing Empire? Does trade follow the flag? . . . Taking under survey our whole Empire, we reach the conclusion that, 'excluding our commerce with India, the smallest, least valuable, and most uncertain trade is that done with our tropical possessions, and in particular with those which have come under imperial control since 1870. The only considerable increase of our import trade since 1884 is from our genuine colonies in Australasia, North America, and Cape Colony; the trade with India has been stagnant, while that with our tropical colonies in Africa and the West Indies has been in most cases irregular-and dwindling. Our export trade exhibits the same general character, save that Australia and Canada show a growing resolution to release themselves from dependence upon British manufactures; the trade with the tropical colonies, though exhibiting some increase, is very small and very fluctuating.

As for the territories acquired under the new Imperialism, except in one instance, no serious attempt to regard them as satisfactory business assets is possible. Egypt alone yields a trade of some magnitude; of the other possessions, three only - Lagos, Niger Coast Protectorate, and North Borneo - are proved to do a trade with Great Britain exceeding one million pounds in value . . . . Apart from its quantity, the quality of the new tropical export trade is of the lowest, consisting for the most part . . . of the cheapest textile goods of Lancashire, the cheapest metal goods of Birmingham and Sheffield, and large quantities of gun-powder, spirits, and tobacco.

Such evidence leads to the following conclusions bearing upon the economics of the new Imperialism. First, the external trade of Great Britain bears a small and diminishing proportion to its internal industry and trade. Secondly, of the external trade, that with British possessions bears a diminishing proportion to that with foreign countries. Thirdly, of the trade with British possessions, the tropical trade, and in particular the trade with the new tropical possessions, is the smallest, least progressive, and most fluctuating in quantity, while it is lowest in the character of the goods which it embraces.



Seeing that the Imperialism of the last three decades is clearly condemned as a business policy, in that at enormous expense it has produced a small, bad, unsafe increase of markets, and has jeopardized the entire wealth of the nation in rousing the strong resentment of other nations, we may ask, ‘How is the British nation induced to embark upon such unsound business? The only possible answer is that 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 . . . .

Although the new Imperialism has been bad business for the nation, it has been good business for certain classes and certain trades within the nation. The vast expenditure on armaments, the costly wars, the grave risks and embarrassments of foreign policy, the stoppage of political and social reforms within Great Britain, though fraught with great injury to the nation, have served well the present business interests of certain industries and professions . . . .

In order to explain Imperialism on this hypothesis we have to answer two questions. Do we find in Great Britain to-day any well-organized group of special commercial and social interests which stand to gain by aggressive Imperialism and the militarism it involves? If such a combination of interests exists, has it the power to work its will in the arena of politics?

What is the direct economic outcome of Imperialism? A great expenditure of public money upon ships, guns, military and naval equipment and stores, growing and productive of enormous profits when a war, or an alarm of war, occurs; new public loans and important fluctuations hi the home and, foreign Bourses; more posts for soldiers and sailors and in the diplomatic and consular services; improvement of foreign investments by the substitution of the British flag for a foreign flag; acquisition of markets for certain classes of exports, and some protection and assistance for trades representing British houses in these manufactures; employment for engineers, missionaries, speculative miners, ranchers and other emigrants.

Certain definite business and professional interests feeding upon imperialistic expenditure, or upon the results of that expenditure, are thus set up in opposition to the common good, and, instinctively feeling their way to one another, are found united in strong sympathy to support every new imperialist exploit . . . .

By far the most important factor in Imperialism is the influence relating to investments. The growing cosmopolitanism of capital is the greatest economic change of this generation. Every advanced industrial nation is tending to place a larger share of its capital outside the limit of its own political area, in foreign countries, or in colonies, and to draw a growing income from this source . . . .

Mr Mulhall gives the following estimate of the size and growth of our foreign and colonial investments since 1862:

Year Amount in £ Annual Increase %
1862 144,000,000 ---
1872 600,000,000 45.6
1882 875,000,000 27.5
1893 1,698,000,000 74.8

This last amount is of especial interest, because it represents the most thorough investigation made by a most competent economist for the Dictionary of Political Economy. The investments included under this figure may be classified under the following general heads:

Loans Million £ Railways Million £ Sundries Million £
Foreign 525 U.S.A. 120 Banks 50
Colonial 225 Colonial 140 Lands 100
Municipal 20 Various 128 Mines & c. 390
770 388 540

In other words, in 1893 the British capital invested abroad represented about 15 per cent of the total wealth of the United Kingdom: nearly one-half of this capital was in the form of loans to foreign and colonial Governments; of the rest a large proportion was invested in railways, banks, telegraphs, and other public services, owned, controlled, or vitally affected by Governments, while most of the remainder was placed in lands and mines, or in industries directly dependent on land values . . . .

Now, without placing any undue reliance upon these estimates, we cannot fail to recognize that in dealing with these foreign investments we are facing by far the most important factor in the economics of Imperialism. Whatever figures we take, two facts are evident. First, that the income derived as interest upon foreign investments enormously exceeds that derived as profits upon ordinary export and import trade. Secondly, that while our foreign and colonial trade, and presumably the income from it, are growing but slowly, the share of our import values representing income from foreign investments is growing very rapidly.

In a former chapter I pointed out how small a proportion of our national income appeared to be derived as profits from external trade. It seemed unintelligible that the enormous costs and risks of the new Imperialism should be undertaken for such small results in the shape of increase to external trade . . . . The statistics of foreign investments, however, shed clear light upon the economic forces which are dominating our policy. While the manufacturing and trading classes make little out of their new-markets … it is quite otherwise with the investor.

It is not too much to say that the modem foreign policy of Great Britain primarily a struggle for profitable markets of investment . . . .

Aggressive Imperialism, which costs the tax-payer so dear, which is of so little value to the manufacturer and trader, which is fraught with such grave incalculable peril to the citizen, is a source of great gain to the investor who cannot find at home the profitable use he seeks for his capital and insists that his Government should help him to profitable and secure investments abroad.

If, contemplating the enormous expenditure on armaments, the ruinous wars, the diplomatic audacity of knavery by which modern Governments seek to extend their territorial power, we put the plain, practical question, Cui bono? the first and most obvious answer is, The investor . . . .

Investors who have put their money in foreign lands, upon terms which take full account of risks connected with the political conditions of the country, desire to use the resources of their Government to minimize these risks, and so to enhance the capital value and the interest of their private investments. The investing and speculative classes in general also desire that Great Britain should take other foreign areas under her flag in order to secure new areas for profitable investment and speculation.



If the special interest of the investor is liable to clash with the public interest and to induce a wrecking policy, still more dangerous is the special interest of the financier, the general dealer in investments. In large measure the rank and file of the investors are, both for business and for politics, the cat's-paws of the great financial houses, who use stocks and shares not so much as investments to yield them interest, but as material for speculation in the money market. . . . No great quick direction of capital is possible save by their consent and through their agency. Does anyone seriously suppose that a great war could be undertaken by any European State, or a great State loan subscribed, if the house of Rothschild and its connections set their face against it? Every great political act involving a new flow of capital, or a large fluctuation in the values of existing investments, must receive the sanction and the practical aid of this little group of financial kings. These men, holding their realized wealth and their business capital, as they must, chiefly in stocks and bonds, have a double stake, first as investors, but secondly and chiefly as financial dealers. As investors, their political influence does not differ essentially from that of the smaller investors, except that they usually possess a practical control of the businesses in which they invest. As speculators or financial dealers they can constitute, however, the gravest single factor in the economics of Imperialism . . . .

In view of the part which the non-economic factors of patriotism, adventure, military enterprise, political ambition, and philanthropy play in imperial expansion, it may appear that to impute to financiers so much power is to take a too narrowly economic view of history. And it is true that the motor-power of Imperialism is not chiefly financial: finance is rather the governor of the imperial engine, directing the energy and determining its work: it does not constitute the fuel of the engine, nor does it directly generate the power. Finance manipulates the patriotic forces which politicians, soldiers, philanthropists, and traders generate; the enthusiasm for expansion which issues from these sources, though strong and genuine, is irregular and blind; the financial interest has those qualities of concentration and clear-sighted calculation which are needed to set Imperialism to work.

An ambitious statesman, a frontier soldier, an over-zealous missionary, a pushing trader, may suggest or even initiate a step of imperial expansion, may assist in educating patriotic public opinion to the urgent need of some fresh advance, but the final determination rests with the financial power. The direct influence exercised by great financial houses in 'high politics' is supported by the control which they exercise over the body of public opinion through the Press, which, in every 'civilized' country, is becoming more and more their obedient instrument . . . .

Such is the array of distinctively economic forces making for imperialism, a large loose group of trades and professions seeking profitable business and lucrative employment from the expansion of military and civil services, from the expenditure on military operations, the opening up of new tracts of territory and trade with the same, and the provision of new capital which these operations require, all these finding their central guiding and directing force in the power of the general financier.


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