After Tamerlane (51 page)

The merchants' interests could be briefly summed up as the ‘open economy', with no barriers to trade, the flows of credit and capital, or the movement of people (especially labour). This was the ‘empire of free trade' that the British had pursued since the 1840s, when they had tried to enforce it (with some degree of success) on Latin America and the Middle East as well as India and China. It had required the newtransport technology to drawthe rest of the world towards the high-pressure zone of Euro-American commerce. But that was not all. As we have seen, one of the main barriers to trade had been the difficulty of striking a balance between two different markets so that each could pay for the purchases that were made in the other. The solution was a multilateral system of foreign exchange to allow a country to buy goods for which it could not pay directly. But, to make that system work, there needed to be a form of ‘common currency' in which most traders had confidence, to serve as a store of all their different claims. Secondly, there had to be a place where they could redeem their claims, or exchange them for goods that were of equal value.

Because it could meet these complex demands, London became the Queen City of the newworld economy. Freely convertible gold-based sterling was the world's hardest currency, and the sterling ‘bill on London' became the most reliable form of international exchange. As a free-trade port, centrally based in the Euro-American sphere, and the imperial capital of the Anglo-Indian ‘system', London was the world's largest marketplace. Among the merchants and bankers crowded into the Square Mile of the ‘City', there was no difficulty exchanging a sterling bill for another currency, finding a customer, or buying a cargo that could be sold elsewhere. London became the headquarters for a wide range of the commercial services on which
trade depended. British overseas banks, insurance companies and shipping took the lion's share of the newtraffic between continents. British shipping agents and steamers became ubiquitous. After 1870, London added foreign investment to its arsenal – a reaction to the fact that the British economy was now growing more slowly than the ‘new' economies overseas. From then until 1914, London was the source of more than half the capital that was sent out of Europe. Much of it went into transport systems that would open new markets and connect newproducers. By 1913, over 40 per cent of British capital abroad had gone into railways – state-controlled (as in Australia and India) or private.
⁷²
The stream of sterling had other important effects. It smoothed the troughs and peaks of the commercial round, and encouraged monetary stability where this was otherwise hard.
⁷³
It strengthened London's grip on the business capitals of the extra-European world, whose prosperity rested (it was easy to believe) on the flowof credits from the world's great lender of last resort. It helped to speed up the remarkable process by which more and more states adopted the ‘gold standard': fixing their currency's value in gold to expand their trade and encourage inward investment.
⁷⁴

London's size and wealth thus grew in sympathy with the surging growth of international trade.
⁷⁵
Among its merchants and bankers, it was an article of faith that what was good for London was good for the world. The idea of free trade and the open economy was adopted in Britain in the 1840s and ' 50s not just as a policy but as a total world-view, an ideology promoted with crusading passion. It imagined a world in which peoples would be freed from their bondage to rulers by the flood tide of commerce. Individual freedom and international trade would move forward together. Free trade was regarded as the key to British economic success, and to the economic progress of the rest of the world. (The alternative – protection – was rejected politically in Britain before 1914, and its supporters were divided over what to protect.) Its champions insisted that letting the market decide on what it made sense to produce was the most efficient way to use economic resources. Countries without capital or an industrial base should concentrate their efforts on the production of ‘staples': the raw materials or foodstuffs for which a world demand existed. They should use the income that their staples earned to buy
the manufactures they needed, and to pay back the interest on the capital they borrowed – since staple production could expand only if there were railways and harbours to bring the goods to market. Any other policy – for example building up industrial production behind a wall of tariffs – was not only inefficient (because industrial goods could be bought more cheaply abroad), it was also unjust. It meant that the consumer was taxed in favour of those who had gained the protection of tariffs, a political process that (so free-traders implied) was invariably corrupt. Enlightened colonial rule should thus enforce free trade (as the British did in India), just as a wise diplomacy should always encourage it. The great growth of exports in the late nineteenth century, including from India and (after 1890) China, seemed further proof of the universal validity of this economic prescription. Thus London's central role in the newworld economy was not only profitable, it was also benign. Even the export of capital could be plausibly described as providing a vital service. ‘Canada' (perhaps the main recipient of British capital in 1900–1914), said the intellectual banker Robert Brand, ‘has as much interest in maintaining unchecked the flowof capital from England as a city has in preventing its water supply from being cut off.'
⁷⁶

Free-trade theory sawcommercial agriculture as the liberation of peasantries throughout the world. It conjured up visions of Indians and Chinese as satisfied customers, clad in Lancashire cottons. It extolled the peace-promoting virtues of economic interdependence. War was unthinkable, declared a famous tract of the time, because the powers that might wage it had too much to lose from the stoppage of trade.
⁷⁷
But this constant harping upon the mutual benefits of the newworld economy underrated its frictions and ignored its precarious stability. It was obvious that many of the new members of the economic club had not been admitted on the same terms as the old. The newadherents to the world economy had to occupy the spaces not already taken. They had to produce the commodities that longer-established competitors did not wish to supply. They had to lower the cost of production to make up for the defects of their commercial machinery: their labour had to be very cheap. To make matters worse, it was often the case that the switch to cash-crop production threatened a social crisis. It was one thing to bring settlers into an empty
land. It was quite another to produce cash crops for export in a densely crowded landscape where the right to cultivate and the demand for rent were the keys to social relations and status. Here ‘clearing' the land of its ‘surplus' peasantry to make room for efficient agricultural production would amount to social revolution. The prospect so frightened the British rulers of India that (from the 1870s onward) they progressively restricted the transfer of land from traditional cultivating castes to urban-based businessmen. In the African scenario, it was often the shortage of labour, not its over-supply, that stalled the kind of development that free trade recommended. It was the constant complaint of mining companies and settlers that the ‘native was lazy', that he would not work for the minimal wages that were all they could afford in this marginal part of the capitalist world. Here the notion of mutual benefit was strained past its limit. To make Africans ‘work' became the excuse for a colonial regime that turned them (at its worst) into a class of serfs. Coercive taxation (to make wage labour compulsory), a savage work discipline,
⁷⁸
the ban on any form of labour organization, and the expropriation of land that had commercial value were part of the armoury of colonial capitalism in its African setting. It was hardly surprising that there and elsewhere the commercial economy was widely identified with white racial privilege.

Even in places where the new world economy was backed by local elites, who (like the Argentinian
estancieros
) expected to profit from the rising value of land and the newurban prosperity, support was much more conditional than free-traders liked to believe. To maintain the flowof credits, attract more capital, and take full advantage of the buoyant market for crops and commodities meant accepting disciplines that were often painful. To keep the currency stable, spending had to be curbed. To encourage trade, tariffs had to be low, and local industry sacrificed. To keep the foreign investor happy, his railway companies and banks had to be petted and courted. There were plenty of those in the extra-European world who thought the free-trade economy a one-sided bargain and resented the power exerted from London. In India and West Africa, where indigenous merchants tended to favour free trade, there were those who resented the favoured position of European business. While the value of trade was on a rising curve, these views were muted. But there could be no
guarantee that the commercial conditions that made the newinternational economy such a dynamic force would be stable or lasting. If the boom in commodities turned into a bust, if the world market was ruptured by a great-power conflict, or if London failed to meet the demands of its role as the source of credit and capital, the enemies of free trade would begin to gather. The other large economies of the Euro-American world were more protectionist-minded. The rapid growth of world trade had restrained this instinct – up to a point. But if expansion was checked and the free-trading zone that was centred on London contracted in area and declined in wealth, the most likely alternative was a series of blocs controlled by the rival world states. The mutual antagonisms of the great world powers would become much fiercer without an ‘open zone' where they had interests in common. The economic regime that had helped to underwrite the creation of global colonialism would have gone into reverse.

Indeed, before 1914 some symptoms of strain were already appearing. The frantic expansion of trade began to ease off. The colossal increase in the export of grain could not be kept up. Among the industrial countries, it was the extraordinary growth of the American economy that really stood out. But it was already a question whether this industrial leviathan might not destabilize the new‘world economy' that was centred in Europe, and especially in London. America had become a great industrial power, but it was largely self-reliant in rawmaterials and foodstuffs. Its market for manufactures was found mainly at home. It had little incentive to adopt free trade, and the level of its tariffs was far higher than that of the European industrial states, with the exception of Russia.
⁷⁹
It had a huge hoard of gold (almost one-third of the world's total supply in 1910),
⁸⁰
and any increase in its share (if gold was sucked in by a spurt in growth) could create crisis conditions in other gold-based economies, because their supply of money would shrink. Yet, if such a crisis arose, the vast size and scale of the American economy, and the growing power of Wall Street, would make it hard to enforce the ‘advice' of the world's bankers in London. If a fissure opened up between the two great halves of the industrial world, the global economy that had just begun to take shape might prove too discordant to manage.

Global colonialism had brought a political hierarchy of imperial powers and colonial (or semi-colonial) dependencies. Across much of the world, the new commercial economy created a parallel universe of (European) industrial-capitalist masters alongside (mainly non-European) commodity-producing ‘servants', who were poorly protected against the shifts and swings of international demand. Global colonialism had a third dimension. It projected a cultural hierarchy of astonishing force and pervasive influence. European cultural primacy was asserted more aggressively in this period than before or since. The sheer scale of Europe's physical predominance after 1880 across Asia, Africa and the Pacific meant that its cultural influence was disseminated more widely and authoritatively than in earlier times. European categories of thought, forms of scientific inquiry, interpretations of the past, ideas of social order, models of public morality, concepts of crime and justice, and modes of literary expression, as well as European recipes for health, notions of leisure, and even styles of dress, became the civilized ‘standard' against which other cultures were measured and usually found wanting. Among the educated elites of the non-European world, who were increasingly exposed to the political authority of European rulers, the alarming disparity in knowledge and power was ruefully acknowledged. To Muslim thinkers it seemed especially dangerous. But howwere they to challenge the cultural claims of an expanding Europe? Rejecting outright Europe's version of modernity would be a self-defeating call for a kind of cultural stasis. Such a cure would accelerate the disease that they had diagnosed. But the alternative course, of adapting European methods to their own cultural requirements – using new European engines to drive their own cultural revival – seemed almost as risky. It threatened to divide the local cultural elite, demoralize tradition, and pave the way by a different route for Europe's ultimate triumph.

The Europeans assumed that their sudden rise to such a dominant position among continents and cultures arose from their discovery of perpetual progress. They alone had broken out of the cycle of growth
and decay to which all other civilizations were subject. They alone had discovered the secret of the wealth of nations. They had achieved an unequalled technological mastery. They had broken through the old barriers of superstition and myth to found their intellectual life on the rigorous collation of empirical knowledge. It was widely assumed that they had reaped this reward by the careful observance of four cardinal rules. The first was to encourage the free exchange of ideas and check the power of those (like priesthoods) who might try to restrain it. The second was to secure the right to individual property (and thus the motive for improvement) against ordinary crime or the predation of despots. The third was to construct a form of social order that would maintain moral, and especially sexual, discipline among those on whose labour material progress depended. The right treatment of women in their ‘separate sphere' became the acid test of a developed society. The last was the promotion of physical vigour and courage, the ‘manly' qualities to which Europeans abroad were inclined to attribute their military prowess and political dominance. But howand why these habits and attitudes had come to be adopted, and howsecurely fixed they were in European societies, remained deeply controversial.