Why are some nations poor?
often think they are poor POOR NATIONS because their natural progress has been hampered by an external intervention. They are poor today because imperialists have exploited them in the past. Yet it may also be because there have been many lost opportunities. Talk about imperialism is rather cheap talk. Giovanni Arrighi clearly signalled in the opening sentences to his short – but analytically very well argued – study on the geometry of imperialism that the term imperialism was surrounded by a “profound ambiguity”. To wit, the seminar that was called to have a scholarly discussion on imperialism in 1969 at Oxford proved to be at cross-purposes, references to imperialism lacking coherence, and only generated further misunderstanding and spread disenchantment among scholars at that time. As Arrighi says, in the late 1960s and early 1970s, there were at least ten themes related to the over-burdened term imperialism.
SO MANY CONNOTATIONS…
Imperialism in international affairs is the first meaning imputed to this ill-fated term and it is surely not confined to leftist circles. What are the others? Imperialism and underdevelopment, imperialism and capital accumulation, imperialism as the monopoly stage of capitalism (also the last and highest stage in the Leninist lexicon), imperialism as finance capital, imperialism as the cartel solution to an oligopoly game (in the meaning put forth by Kautsky, thus leading to ultra or super-imperialism), imperialism and uneven development, imperialism as tendency to war (first between imperialist powers, then among underdeveloped states as provoked by imperialist powers) were the others. We should also add a qualifier here, to the effect that imperialism manifests itself as militarism before tending towards universal war mongering. Contrary to Hobson, Arrighi claims in passing that imperialism could be characterized as an unstable and temporary
phenomenon, which we may as well add to our list of attributes. So, which is it today? Is there a tractable definition of ‘imperialism’ beyond ‘folk theorems’? I doubt it. We are living in a world where China emerges as defender of free trade, and where the foreign capital share in China’s manufacturing hovers around 35%. Maybe global linkages and long-term foreign investments can also be seen as Defensor Pacis, i.e. ‘the defender of peace’ worldwide even though Marsilio da Padova didn’t intend the title of his 1324 book to be used in this sense.
HISTORICAL APERÇU
The term “imperialism” was coined in the late 1890s during the Boer Wars by the British press. It was meant to designate the greed and the aggressiveness of the Afrikaners. ’Blood diamonds’ aren’t they, white folks descending from the early Dutch colonists, whereas of course in London every descent gentleman sipping his afternoon tea while browsing the latest newspapers couldn’t doubt that the Brits were in South Africa for humanitarian reasons only. Aside from political fun, the term would have withered away had it not been for a very good book published by Hobson in 1902. Henceforth the term “imperialism’ became academic. It didn’t mean only that there was an empire, because empires have always been built somewhere and generally existed for centuries. Rather, it implied new forms of making profit out of colonies. Lenin put it to political use some 15 years after, combining – rather unsuccessfully in my opinion – Hobson’s imperialism with Hilferding ’s finance capital. It was a timely political intervention, though. WWI was still ravaging Europe, Russia, and the Middle East. Lenin claimed that imperialism was capitalism at its highest and last stage, a new phase of capitalism combining financial capital with physical capital, becoming monopolistic and parasitic – inefficient, displaying an ever-increasing tendency for warmongering in the search for new markets where it can both sell goods and export capital. Well, it looked to remain rather well-established fact for many decades, because history has not passed unnoticed the occurrence of a second world war. In the longer run, the debate is still open.
RIGHT̞WING POPULISMS AND ECONOMIC TAIL RISKS
This graphic depicts some landmarks perceived as leading indicators of systemic risks. If anything, after the “soft power” rhetoric of the late 1990s –which, by the way, was nothing more than an artefact of the very high price-earnings ratio (PE) on the S&P500 between 1996 and 2000, itself caused by overseas investments to American stocks – political risks increased. Wars, civil wars, proxy wars, and terror now spring up like mushrooms. Amidst lots of changes politically, militarily – Russia is a force to be reckoned with again, and yes, China is gaining strength, especially with its navy – and economically, the old wisdom of the 1990s is definitely lost.
There is a cartoon from 1914 that shows European nations ready to cut each other’s
throats. Jean Jaurès was the last defender of peace back then. The current situation all too often resembles the last years of peace before 1914, and this is a suggestion frequently repeated in the last few years. However, bygones are bygones, and the past never repeats itself in exactly the same vein. Well, not exactly, but there are similarities. First, Europe is laden with a renewed ascendency of the radical – right-wing this time. Second, in lieu of rivalry between European powers there is now a prolonged war of attrition between the U.S. and China – and Russia. Add to this lots of ‘proxy wars’, Syria being the first and foremost case in point. ‘Proxy wars’ extend to relations with Iran, a die-hard theme of the ‘cold war’ with Russia that can always re-emerge, sanctions, oil prices, and all related topics. If war is not an option it is only because primo, the enemy (of the West) as such is a bit imprecise and secondo, military technology is frighteningly advanced and can easily get out of control.
WHY DO WE GET RICH?
Back in 2010, Deirdre McCloskey compiled evidence from the British industrial revolution. No, there was no massive capital accumulation that took place before the industrial growth engine began marching on at high speed. For instance, capital sunk into fixed assets in the cotton textile industry wasn’t even 25%. It was small at any rate, and the source of industrial investment was short-term loans for inventory management and working capital needs. Longer-term investments were funded by loans from relatives. Anyway, before the railway age, i.e. late 19th Century, large chunks of bank capital weren’t available. In fact, equity capital was also scarce. In any other historical era, we find instances of large investments by the imperial state in China, by the Romans, the Ottomans who had access to huge funds in the form of taxes and so on. Even Mughal India sets an example of massive public works. Yet none of them enjoyed the benefits of rapid industrial development.
ECONOMIC HISTORY
In England, probably neither enclosures nor the slave trade, nor allegedly low wages (which were already high by historical standards in 1840), nor colonization provided the original impulse. Actually whether the original 1880-1914 style imperialism as Hobson put it in 1902 and Lenin reiterated in 1915 was as a whole a profitable business is unclear. It was a debt-driven, small-capital led, innovation-push event that spread across many sectors in the form of gadgets within a short span of time. Obviously, today large funds are directed towards some industries; in fact, the financial industry hypertrophied after 1975 at the expense of some real sectors. Nevertheless, a betterment of technology, life quality, and prosperity seems not to be primarily linked to the availability of vast resources. At least, there are countries that can achieve prosperity without large capital assets or huge chunks of credit available. ‘Accumulate first, grow later’ schemes don’t work anymore even if they worked in the distant past for some countries and some growth strategies; maybe in the 1930s (Soviet Union) or in the 1950s (India).
CONCLUSION
I have voiced some doubts concerning ‘opportunities lost’. My claim was twofold. First, what has become a ‘folk theorem’, namely that developed economies stifle newcomers, although not entirely devoid of content, is a theme that obscures more than it enlightens. Pick someone up randomly in the street and ask her if ‘imperialism’ indeed blocks development either in the Muslim world or in EM countries at large, the answer would probably be ‘yes’. Second, emerging economies rarely find a chance to climb the ladder of development, and forge ahead, reducing the gap between them and the developed world. When there is a window of opportunity, they have better not miss it.