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Highlighting news stories important to the Civic Republican
particularly those that are overlooked or little covered in the main media.
We have come to that time of year when no one who wants to be considered respectable in politics or the media dares be seen in public without wearing a red poppy with a couple of green leaves prominently placed on their chests.
I know many people feel uncomfortable – or at least ambivalent – about this parading. I certainly do.
On the one hand we know the money raised goes to a good cause – ex-service men and women in need of help, but we give to other good causes without advertising the fact publically.
No, there is something else going on here aside from the purely charitable act. It is this that I want to discuss in this newsletter.
Poppies may refer to wars in general but they evoke above all the memory of those who died in WWI
One of the most extraordinary facts about WWI is that no one knows for certain what caused it. Many people would agree it was the most profoundly devastating event of western civilisation. It destroyed the certainty with which this civilisation regarded itself – a certainty that was based on many astonishing achievements - cultural, scientific, technological, artistic and even moral.
But the cause of this catastrophe remains a mystery to historians and everyone else. What prompted prosperous, civilised European nations, sharing a common Christian heritage, to engage in a barbarous slaughter for no real gain - and a huge loss
The usual explanations revolve around the idea that Europe before 1914 was like a chess board of interlocking alliances and that, once a particular pawn fell over, an inevitable sequence of mutual destruction by the major pieces was set in train – until the ultimate stalemate (not checkmate) was arrived at, where all were on their knees and a ceasefire was signed. This ceasefire or armistice lasted twenty years until the war was resumed - with a vengeance.
Few really trust and believe in the chessboard theory.
The respected, popular historian, AJP Taylor, said that the war happened because of an unfortunate incidence of European railway time tables which lead to troop mobilisations, leading unstoppably to war, as these went ahead of political and military decision making. This of course is rank nonsense – but only slightly less useful than the chessboard interpretation.
So what did really cause WWI? There must have been a key driver. And if historians cannot see this key driver then they must be looking at the question in the wrong way. They must be looking at it from the wrong angle or missing out some vital element.
To understand what caused WWI you have to look at both the politics and the economics of the forty or fifty years leading up to the war. Attempts to understand the war purely from the politics of the time will obscure what drove the European nations to mutual destruction. It will only give you the chess board interpretation – which as everyone recognises is patently inadequate.
I wrote in DRP Newsletter No 133 about what makes a prosperous economy in which all participate
Economies prosper and living standards go up when the savings and profits of the economy are retained within the economic unit, that is, the nation. This means that investment takes place within the home industry, employment and wages go up enabling people to buy more and save more and so a virtuous upward spiral results.
Henry Ford put this very simply. He said “I pay my workers well so that they can afford to buy my cars”.
But ... what if the profits generated leave the country and are invested elsewhere? The domestic labour market does not benefit by more employment.
This was, for instance, the primary driver of the construction of the British Empire. Possession and control of foreign lands provided bases for placing exported capital ...
The major European nations in the half century leading up to WWI did not develop their home economies as a priority. The ruling elements were fearful of doing this, as they knew very well that it would lead to better paid workforce leading to less inequality and, as they saw it, (erroneously as Henry Ford would remind them) home industries would be less profitable. The solution to this was to export capital so starving the home industry of investment and growth while reaping rewards for the wealthy
It also has to be put into the equation the existence of the many socialist and Marxist movements of the time that were challenging the very capitalist system. But in truth these movements arose because the system had failed to deliver prosperity except for a few. These were primarily economic revolts dressed up in political ideology
The exportation of the country’s wealth had long been a practice of “bad capitalism”. It leads to a separate capitalist “class” – those with great wealth that they use purely to aggrandise themselves further.
This is not inevitable in a capitalism system but it was encouraged enormously when Adam Smith published his Wealth of Nations in 1776 for this gave a theoretical underpinning to the idea that actions that purely benefited the self were all that was needed to create a good economy.
Smith, himself, in his book considered whether those owning capital would export it but he said this would not happen as it would be far too risky. Those who placed money abroad could well lose the lot.
Smith was dead right in saying that the export of capital was immensely risky but he underestimated the desire of the wealthy to avoid that wealth being redistributed to their fellow countrymen though home investment.
So it came to be that more and more capital was exported from British shores and this process reached a crescendo in the years leading up to the subject of this letter – the First World War.
Christopher Hollis writes in The Two Nations (page 192),
Whereas from 1900 to 1904 the average annual export of capital of long-term of permanent character had been only £21.3 million from 1904 to 1909 it jumped to £109.5 million and from 1910 to 1913 to £183 million.
This is an astronomical jump. This was inevitably accompanied at home by a stagnation of wages and employment just as the nation as a whole was becoming wealthier than ever.
To understand why Britain went to war in 1914 you have to appreciate this context of a nation consistently sending its wealth out to foreign lands. But as Smith correctly pointed out this was inherently risky and indeed huge losses were often made.
Some protection could be afforded by the institutions of the British Empire and, as I have said, the Empire was part of the strategy for exporting capital. The massive expenditure of the Empire’s civil service and military deployment were of course paid for out of taxes raised from all the population – not just the rich who most benefited from it.
With this perspective on Britain we can build up the international picture in 1914. In the run up to the war there were just three great creditor nations (Britain, France and Germany). Although there were of course differences between the three they all pursued essentially the same policy - instead of using wealth to reinvest in the home industry they exported it and invested it overseas.
This meant a separate capitalist class with its own separate interests was created. Meanwhile the wage-earners benefited little, or not at all, from the wealth of the nation of which they were citizens.
There was intense rivalry between the three European creditor nations for access to capital markets overseas. Markets in Latin America, Turkey, Spain, Italy for instance were fought over. Japan became almost exclusively financed by Britain, while French penetration into North Africa was dominant. China was contested as Germany tried to gain access to the markets there. Almost no part of the world was exempt from loans from the great European creditor nations. Even the USA up to 1900 was also in debt to the three creditor nations.
It is important to stress that this was not colonial or "imperial" rivalry. No one thought about colonising Argentina or Japan and even if they did the resources were not there. It was simply access to capital markets by private capital that was sought.
The push for private capital penetration is the missing element that makes WWI inexlicable to conventional historians.
So there was a rivalry for access and control outside Europe. But the situation was made more deadly by the situation within Europe.
Germany had managed to acquire Austria as a debtor and despite competition from others had penetrated the Balkan nations including Greece. But the biggest debt of all was the growing debt of Russia to France. This was dressed up as a “friendship” between the two nations and it was sanctified by a military pact between France and Germany
This was Germany’s worse nightmare as it gave two powerful allied enemies - one on the west, one on the east.
The sense of encirclement that Germany felt is part of the familiar chess board explanation of WWI but in itself it not sufficient to explain the descent to the barbarism of 1914. The driver for this was the desire to expand exported capital or protect existing or destroyed your opponents
If Germany could destroy Russia then with that would go French investment in Russia. If German could destroy France this would open up all sorts of areas of the world, for penetration by German capital.
Britain could have stayed on the sidelines except for its like policy of exporting its own capital. For whoever won on the continent would be in a strong position to challenge the supremacy of British capital in many parts of the world including the Empire.
And let’s, for a moment, be highly cynical – the people who would fight the war from whatever nation would mostly not be the capitalist class that wanted it. Those who died in the trenches were not defending their own portfolios of investments in India and China.
If Britain had concentrated on developing its own wealth domestically it would not have been drawn into the war.
Here I must underline what I have said elsewhere many times. It is not that the capitalist system is wrong in itself. It is one of the modern world’s great inventions. The problem is that it has been perverted so that capital instead of being recycled back into the national economy is siphoned off and to the benefit of a small minority.
Under this, wage earners rarely benefit. Their golden periods were two, both lasting thirty years -1870 to 1900 and 1950 to 1980. Outside of these periods statistics prove that wages have consistently fallen – and of course that is exactly what they are doing now in 2014 and will continue to do. Wage-earners are on a slippery slope downwards as there is more and more capital flight
In the run up to 1914, export of capital from the capital rich countries of Britain, France and Germany reached a frenzy. The countries went to war not to defend their territories for none had any substantial claim on the territory of any other (there was the matter of France wishing to re-acquire Alsace/Loraine lost in the 1870 war but this was not a reason for war).
It was not territory, either European or elsewhere, that the war was fought over but access to capital markets
This rampant desire came from nations wishing to preserve the class structures that they had engineered by the export of capital. So the war sprang fundamentally from the way the capitalist system had been developed.
Marx thought these class structures were inherent in capitalism but this was a fundamental misreading of what makes capitalism tick. The class structures are created by a perversion of the true capitalism.
For capitalism to work you have to restrain the movement of capital out of the country otherwise a tiny minority will benefit not the whole nation. In other words, capital has to be regulated.
But try telling that to any orthodox economist or any members of our pathetic political class.
Hand in hand with the mentality that desires the export of capital goes belief in what economist call a zero-sum game. Under true capitalism the internal market is developed and expanded. But in exported capital led capitalism, that the great nations prior to 1914 desired, you don’t develop markets you steal them. There is only a limited amount available and so what I gain you lose - a zero sum
Capitalism can be creative and it can deliver a good quality of life for all.
Creative is what capitalism does as nothing else can.
David Sainsbury in his recent book Progressive Capitalism set out many pointers to how this is should work (one of the few good recent books on economics).
But we live in a world where the financial classes have again mastered the techniques of siphoning off the wealth of nations to benefit themselves. They still use the old pre-1914 techniques of exporting capital – except now it is called "globalisation".
And they have invented some new tricks ("innovative financial instruments") for achieving the same end. I have described in detail how these work in other DRP newsletters and on the DRP website.
Ironically the attempts in 1914-18 to secure their foreign placements of capital by war lead to the loss of them. In the case of Germany, it lost all of it. France’s Russian loans were extinguished and many British foreign loans were wiped out.
So what did the “victors” do in the Versailles Treaty that formalised the armistice? They might have realised the error of their ways and returned to developing their internal economies but they carried on with the zero-sum game whereby you gain by depriving other nations of their wealth.
Now the target was Germany who was expected to compensate the allies for their overseas capital losses. This was pure folly as John Maynard Keynes pointed out in 1919, for Germany could never pay the so-called “reparations” from its wrecked economy. The wealth, it had had before 1914, had joined the rush to go abroad entailing its complete loss in 1918.
If our present day expert commentators do not know what the causes of WWI were then it may well be because they are so committed to unregulated capitalism that they cannot see that it is was free-booting capital that caused the war.
If the combatants had concentrating on the internal development of their own economies they could have used the immense wealth they undoubtedly had for the benefit of all of the people and for the pride of the nation.
And there would have been no WWI and European civilisation would have flowered as never before
Perhaps if our so-called experts talked about the real causes of the war it would bring them too close to disclosing the truth about the current situation - which is ,in some ways, so different but, in some fundamental ways, so similar.
So rather than seek the truth they wear sad little paper poppies.
Those tell us that they don’t know – and that they don’t really want to know.