Cui Bono? Imperialism and Theory

I have promised to survey theories of empire. My warrant is simply that empire, where it exists, is burdensome and destructive to the lives and property of real human beings in both the imperial center and its protectorates, allies, and possessions. Keeping empire intact and expanding its sway calls for unending military intervention. Some of these exercises are big enough to call wars. I shall not take time to show that war is bad. We can just assume that for now. ("Sherman, set the Way-Back Machine for 1965……")


The intellectual history of theories of imperialism is an odd one. Early liberals like Thomas Paine, Richard Cobden, and John Bright understood imperialism as a projection of state power, paid for by the citizenry, for the economic benefit of particular interest groups. They did not see overseas plundering operations as an "inherent" part of a market economy resting on private property. By the late 19th-century, liberals began forgetting these insights.


The English liberal John A. Hobson wrote in 1902: "The economic taproot of Imperialism is the desire of strong organized industrial and financial interests to secure and develop at the public expense and by the public force private markets for their surplus goods and their surplus capital. War, militarism, and a ‘spirited foreign policy’ are the necessary means to this end." Unfortunately, Hobson muddied the waters by attributing this "surplus" to general "overproduction" and "underconsumption." Surpluses in specific markets and shrinking investment opportunity at home cannot be blamed on reified aggregate concepts, but must – to the extent they exist – be traced to specific political facts at home. Hobson himself later discussed tariffs, patents, franchises, licenses, railroad subsidies, etc., as prime examples of institutional blockage, but failed to stay on this track.


Hobson’s best known work, Imperialism (1902) set the Marxists rolling. In Imperialism – The Highest Stage of Capitalism (1916), Lenin took up Hobson’s argument, characteristically adding that "capitalism" must cause overproduction and underconsumption and that, pending the arrival of communist heaven, such problems would make "capitalist states" fight imperialist wars in a vain attempt at solving them. Other Marxists – Rudolf Hilferding, Rosa Luxemburg, and Nikolai Bukharin – joined in, although Hilferding thought that the wily capitalists might answer Rodney King’s question – "Can’t we all just get along?" – with an International Super-Cartel, thus avoiding endless war. In time, the impression got abroad that only Marxists cared about imperialism or, alternatively, only their impressive theoretical toolkit could handle it adequately. Oddly enough, Marx himself liked Western imperialism, which – tearing backward peoples out of Asiatic despotism – had set them on the path to capitalism and, therefore, to socialism. (All in all, one can easily imagine Marx cheering NATO as the vanguard of social democracy.)


In the 1890s, export-hungry American businesses raised the cry of "over-production" to justify an aggressive foreign policy. But the over-productionist thesis was: 1) a rationalization of entrepreneurial error, 2) an ad hoc argument for grants of privilege, or 3) a mistaken explanation of real trends in particular markets (not "general overproduction"), trends often rooted in state interventions: protectionism, subsidies, and regulatory "reforms," which actually promoted cartels. That the handful of anti-imperialist Progressives like Charles A. Beard accepted the Hobsonian/proto-Keynesian theory of what caused imperialism, meant they shared the export-mavens’ economic premises. This made extra work for them, dreaming up domestic reforms to deal with alleged overproduction/underconsumption. With the best of intentions they unfortunately sidetracked the analysis of imperialism. For most Progressives, however, empire wasn’t an issue, provided it was humane, benevolent, and overseen by them.


Hobson correctly understood imperialism as a predatory alliance of state and businesses. Joseph Schumpeter saw "export monopolism" as the mainspring. Behind tariff walls, prices rose at home and cartelization got under way. Artificial gluts came about, since the full amounts produced would not sell at the protected prices. Yet these amounts had to be produced to realize lower unit costs. (As Andrew Carnegie put it, "The condition of cheap manufacture is running full.") Resulting "surpluses" were dealt with by "dumping" the excess abroad "at a lower price, sometimes… below cost.")

Since "cartels successfully impede the founding of new enterprises," Schumpeter adds, foreign investment outlets were also sought. When export-hungry monopolists from different states crave the same markets, "the idea of military force suggests itself" both "to break down foreign customs barriers" and to "secure control over markets…" Empire, formal or informal, is the outcome. If a firm could not survive without politically won markets, it was, for Schumpeter, "expanded beyond economically justifiable limits" and ought to close shop. There was nothing inevitable here: "trusts and cartels … can never be explained by the automatism of the competitive system" – they arise from state policy.

In Europe, "export monopolism" and imperialism were pre-capitalist phenomena connected with feudalism, mercantilism, and royalist bureaucracy. But the US experience shows that wherever there stands a state apparatus strong enough to meddle with market outcomes, special interests will ask it to meddle for them. Historian Murray Greene observes, "American capitalism, which developed unimpeded by monarchical power, and German capitalism, where the monarchical element was a factor, were both characterized by strong tendencies toward protectionism and monopolism." Both nations had "enjoyed" high tariff protection – the US from 1862, Germany from 1879.


This brings us to monopoly. Much of the literature on the subject – Liberal and Marxist – rests on the groundless assumption that there is in market economies an inherent monopolistic trend. But Schumpeter wrote that "with few exceptions large-scale production does not lead to… one or only a few firms in each industry." Cartels were "quite different from the trend to large-scale production with which [they are] often confused." Ludwig von Mises remarked that "the important place that cartels occupy in our time is an outcome of the interventionist policies adopted by the governments of all countries." Murray Rothbard, too, argued powerfully that monopoly cannot arise on the free market. Real monopoly hinges on grants by the state – direct or indirect – to particular firms, reserving the production of a certain good; these include, in Rothbard’s analysis, tariffs, quotas, licenses, patents, eminent domain, franchises, and other regulations.

Cumulative legislation produced, in time, an American corporatist system – albeit a more "pluralistic" one than the Euro-Japanese model. Corporatism – modern mercantilism "with a human face" – calls for close cooperation of state, business, and labor unions to "stabilize" economic life. The practice is restriction of entry into markets, higher prices, and protection of established companies. Polish economist Oskar Lange – no friend of the market economy – comments: "[I]n present capitalism… interventionism and restrictionism are the dominant economic policies." And F.A. Hayek notes that "[m]ore than by anything else the market order has been distorted by efforts to protect groups from a decline from their former position…."


Here we catch sight of the inner "contradictions" of mercantilism/corporatism. The "unintended consequences" of economic intervention drive its beneficiaries to seek further support from the state, including – sometimes – help breaking into foreign markets. E.M. Winslow, a non-Marxist student of imperialism, wrote that business and labor seek monopolistic privileges partly to protect themselves against the hazards of trade cycles. Grasping the connection between depressions and credit expansion, Winslow called for "social control of the monetary aspects of the economic process." (Oddly enough, a sound laissez faire banking system would provide the "social control.") Certainly, the 1929 depression accounts for part of the drive to corporatism. Even here, the state must answer, since its own credit expansion is at the heart of the business cycle.

Anti-depression "remedies" only added to an existing tendency. In 1943, Robert A. Brady wrote that, beginning with the Bismarck tariff of 1879, neo-mercantilism had been the main drift in the industrialized nations. In each country, trade associations and pressure groups had produced "a generalized system of state aid" with 1) protection against foreign competition, 2) protection against domestic competition, and 3) protection against becoming extra-marginal (with public funds to bail out failed firms and finance public works and armaments). At the end of this road was corporatism, already arrived at, in the fascist form, in Italy, Germany, and Japan. The United States was well down the same road. (John T. Flynn said much the same thing in As We Go Marching [1944].) It means something that in 1937 – after years of futile depression "cures" – the New Dealers came back to seeing export markets as the key to recovery.


Lange observes that under "interventionism and restrictionism, the best businessman is he who best knows how to influence in his interest the decisions of the organs of the state…. What formerly was regarded as a special trait of the munitions industry becomes in interventionist capitalism the general rule." But restrictionist measures generate problems in specific markets.

At times, the side-effects of state monopolistic grants to favored clients do call forth a search for foreign markets. There is no universal law here. A state too weak to expand could not resort to empire to offset the outcome of misconceived economic measures at home. There, the state and allied businesses would have to fiddle with further domestic interventions. On the other hand, a corporation need not be groaning under side-effects of corporatism to want state help overseas. It might just be exploiting a favorable relationship to the state without regard to its domestic position.

Imperialism is power-political (as Hilferding himself admitted in 1941). It is the outcome of an alliance between the permanent state apparatus – with its territorial monopoly of legitimized violence – and business interests bent on looting society. As Thomas Paine put it, "[w]hen the robber becomes the legislator, he feels himself secure." The goals involved may be "economic," but also include power for its own sake, prestige, adventure, and ideology. Empire widens the sphere of "the political means" to wealth (state) at the expense of "the economic means" (market) – to use Franz Oppenheimer’s terms.

Imperialists often have economic motives, but empire is not "economically determined" in the Marxist sense. Empire enlarges the area controlled by a state, which arguably has too much power already, or it wouldn’t be able to take up overseas intervention and endless war. From an ordinary citizen’s standpoint, empire heaps new burdens – conscription, higher taxation, and detailed state surveillance of everything – on a society already struggling under the state’s domestic brainstorms. Overseas, the empire creates a "double layer" of exploitation, superimposing its rule over that of local elites. At times, it undertakes near-genocidal counterinsurgency warfare, "pacification," and terror bombing to keep the locals in line. ("Sam’s Better World-Burghers: Over 4 Zillion Bombed"!)

There are those who make a buck on empire. Commonsense reasoning applies to them ("follow the money"). This just shows that so-called "vulgar Marxism," which takes narrow "pocket book" interests seriously, works better than Scholastic Marxism, reflecting the former’s deeper roots in early liberal analysis of politics-as-plunder. Everything in Marxism that works comes from early laissez-faire liberalism – as Leonard Liggio and Ralph Raico have been saying for years. The liberal approach to imperialism is not the least of these useful ideas.

For some interested parties empire represents an attempt to resolve the "contradictions" of state monopoly capitalism. But empire also draws life from such "irrational" phenomena as will-to-power, militarism, bureaucracy, and Jingoism. For society, the state-corporate alliance is rather parasitic. And yes, Virginia, there are "bourgeois" who don’t give a monkey’s for free markets. Paine wrote that "[m]onarchy… is the master fraud which shelters all others. By admitting a participation in the spoil, it makes itself friends…." Substitute "neo-mercantilist state" for "monarchy," and you know most of what you need to know.

The state, by gathering the political means to wealth (the "means of predation," to lift a phrase from Ernest Gellner), "constitutes" – in Murray Rothbard’s words – "and is the source of, the ‘ruling class’…, and is in permanent opposition to genuinely private capital." Empire, then, is the state writ large. Sundry motives drive the process. In the US case, the engrossing of overseas markets has been the abiding goal of empire-builders since 1898. Widespread support for Open Door empire has rested on a desire to remedy perceived economic dilemmas.

Wealth and power, as Republican theory tells us, are powerful motives. Detailed reconstruction of specific actions of political and economic figures will take us further than big, furry generalizations about the "inherent dynamics of late capitalism" or "postcolonial deconstruction" of the racist white folks. In all this, theory plays an important, if subordinate, role. The legitimate descent is Cobden-Schumpeter-Mises-Rothbard, not the "deviationist" line of Cobden-Hobson-Beard or, worse, Cobden-Hobson-Lenin-Lin Piao.


At the beginning of this terrible century, Marxist writers noted the growing prominence of bankers in the "power elite" of capitalist societies. One need not be a Marxist to second the motion. Central bankers became key players from 1913. In World War II US leaders concluded, on Keynesian grounds, that the US economy needed to expand as a system unified and managed by the state. US control of the world monetary system, after 1945, has been a key lever or "command post" of US hegemony, worth as much in its way as all those bombers. Future reconstruction of the classical liberal theory of empire will have a lot to say about banking.1 Meanwhile, the US leadership seem hell-bent on fulfilling Hilferding’s prophecy of One Big International Cartel presided over by – themselves.

What’s in for the rest of us? War, war, war – with all the usual costs in lost blood, treasure, freedom, and other values. Not very "economical" – is it?

[1] For a good beginning, see Hans-Hermann Hoppe, "Banking, Nation States and International Politics," The Review of Austrian Economics, 4 (1990), 55-87.

Major Sources: Richard J. Barnet, Roots of War (1972); Robert A. Brady, Business as a System of Power (1943); John A. Hobson, Imperialism: A Study (1965[1902]), The Evolution of Modern Capitalism (1926); R. E. Roberts, ed., Selected Writings of Thomas Paine (1945); Murray N. Rothbard, America’s Great Depression (1972) (for a refutation of overproduction/underconsumption analysis, see pp. 55-58); Joseph A. Schumpeter, Imperialism, Social Classes: Two Essays (1955[1919]); E.M. Winslow, The Pattern of Imperialism (1948).