What is "natural wealth," and how can trade be carried on with it unless there are markets for it when worked? Would the writer
maintain that markets cannot be permanently or seriously affected by military conquests, especially if conquest be followed by
the imposition upon the vanquished of commercial conditions framed in the interests of the victor?... Germany has derived, and continues to derive, great advantages from the most-favored-nation clause which she compelled France to insert in the Treaty of Frankfurt.... Bismarck, it is true, underestimated the financial resilience of France, and was sorely disappointed when the French paid off the indemnity with such astonishing rapidity, and thus liberated themselves from the equally[Pg 82] crushing burden of having
to maintain the German army of occupation. He regretted not having demanded an indemnity twice as large. Germany would not repeat the mistake, and any country having the misfortune to be vanquished by her in future will be likely to find its commercial prosperity compromised for decades.
To which I replied:
Will your correspondent forgive my saying that while he talks of half-truths, the whole of this passage indicates the domination of that particular half-truth which lies at the bottom of the illusion with which my book deals?
What is a market? Your correspondent evidently conceives it as a place where things are sold. That is only half the truth. It is a place where things are bought and sold, and one operation is impossible without the other, and the notion that one nation can sell for ever and never buy is simply the theory of perpetual motion applied to economics; and international trade can no more be based upon perpetual motion than can engineering. As between economically highly-organized nations a customer must also be a competitor, a fact which bayonets cannot alter. To the extent to which they destroy him as a competitor, they destroy him, speaking generally, and largely, as a customer.
The late Mr. Seddon conceived England as making her purchases with "a stream of golden sovereigns" flowing from a stock all
the time getting smaller. That "practical" man, however, who so despised "mere theories," was himself the victim of a pure theory,
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and the picture which he conjured up from his inner consciousness has no existence in fact. England has hardly enough gold to pay one year's taxes, and if she paid for[Pg 83] her imports in gold she would exhaust her stock in three months; and the process by which she really pays has been going on for sixty years. She is a buyer just as long as she is a seller, and if she is to afford a market to Germany she must procure the money wherewith to pay for Germany's goods by selling goods to Germany or elsewhere, and if that process of sale stops, Germany loses a market, not only the English market, but also those markets which depend in their turn upon England's capacity to buy--that is to say, to sell, for, again, the one operation is impossible without the other.
If your correspondent had had the whole process in his mind instead of half of it, I do not think that he would have written the passages I have quoted. In his endorsement of the Bismarckian conception of political economy he evidently deems that one na-tion's gain is the measure of another nation's loss, and that nations live by robbing their neighbors in a lesser or greater degree. This is economics in the style of Tamerlane and the Red Indian, and, happily, has no relation to the real facts of modern commercial intercourse.
The conception of one-half of the case only, dominates your correspondent's letter throughout. He says, "Germany has derived, and continues to derive, great advantage from the most-favored-nation clause which she compelled France to insert in the Treaty of Frankfurt," which is quite true, but leaves out the other half of the truth, somewhat important to our discussion--viz., that France has also greatly benefited, in that the scope of fruitless tariff war has been by so much restricted.
A further illustration: Why should Germany have been sorely disappointed at France's rapid recovery? The German people are
not going to be the richer for having a poor neighbor--on the contrary, they are[Pg 84] going to be the poorer, and there is not an
economist with a reputation to lose, whatever his views of fiscal policy, who would challenge this for a moment.
How would Germany impose upon a vanquished England commercial arrangements which would impoverish the vanquished and enrich the victor? By enforcing another Frankfurt treaty, by which English ports should be kept open to German goods? But that is precisely what English ports have been for sixty years, and Germany has not been obliged to wage a costly war to effect it. Would Germany close her own markets to our goods? But, again, that is precisely what she has done--again without war, and by a right which we never dream of challenging. How is war going to affect the question one way or another? I have been asking for a detailed answer to that question from European publicists and statesmen for the last ten years, and I have never yet been answered, save by much vagueness, much fine phrasing concerning commercial supremacy, a spirited foreign policy, national prestige, and much else, which no one seems able to define, but a real policy, a modus operandi, a balance-sheet which one can analyze, never. And until such is forthcoming I shall continue to believe that the whole thing is based upon an illusion.
The true test of fallacies of this kind is progression. Imagine Germany (as our Jingoes seem to dream of her) absolute master of Europe, and able to dictate any policy that she pleased. How would she treat such a European empire? By impoverishing its component parts? But that would be suicidal. Where would her big industrial population find their markets?[15] If she set out to develop and enrich the component parts, these would become[Pg 85] merely efficient competitors, and she need not have undertaken the costliest war of history to arrive at that result. This is the paradox, the futility of conquest--the great illusion which the history of our own Empire so well illustrates. We British "own" our Empire by allowing its component parts to develop themselves in their own way, and in view of their own ends, and all the empires which have pursued any other policy have only ended by impoverishing their own populations and falling to pieces.
Your correspondent asks: "Is Mr. Norman Angell prepared to maintain that Japan has derived no political or commercial advantages from her victories, and that Russia has suffered no loss from defeat?"
What I am prepared to maintain, and what the experts know to be the truth, is that the Japanese people are the poorer, not the richer for their war, and that the Russian people will gain more from defeat than they could possibly have gained by victory, since defeat
will constitute a check on the economically sterile policy of military and territorial aggrandizement and turn Russian energies to social and economic development; and it is because of this fact that Russia is at the present moment, despite her desperate internal troubles, showing a capacity for economic regeneration as great as, if not greater than, that of Japan. This latter country is breaking all modern records, civilized or uncivilized, in the burdensomeness of her taxation. On the average, the Japanese people pay 30 per cent.--nearly one-third--of their net income in taxation in one form or another, and so far have they been compelled to push the progressive principle that a Japanese lucky enough to possess an income of ten thousand a year has to surrender over six thousand of it in taxation, a condition of things which would, of[Pg 86] course, create a revolution in any European country in twenty-four hours. And this is quoted as a result so brilliant that those who question it cannot be doing so seriously![16] On the other side, for the first time in twenty years the Russian Budget shows a surplus.
This recovery of the defeated nation after wars is not even peculiar to our generation. Ten years after the Franco-Prussian War
France was in a better financial position than Germany, as she is in a better financial position to-day, and though her foreign trade
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does not show as great expansion as that of Germany--because her population remains absolutely stationary, while that of Germany increases by leaps and bounds--the French people as a whole are more prosperous, more comfortable, more economically secure, with a greater reserve of savings, and all the moral