Breakdown of Pax Britannica and New Imperialism

In a scramble for overseas markets between the Franco-Prussian War and World War, Europe added almost 9 million square miles (23,000,000 km²) — one-fifth of the land area of the globe — to its overseas colonial possessions. Ushering out the cavalier colonialism of the mid-Victorian era, the age of Pax Britannica, the late nineteenth century Romantic Age was an era of "empire for empire's sake". But scholars debate the causes and ramifications of this period of colonialism, dubbed "The New Imperialism" to distinguish it from earlier eras of overseas expansion, such as the mercantilism of the sixteenth to eighteenth centuries or the liberal age of 'free trade' colonialism of the mid-nineteenth century.

Continental political developments in the late 19th century, relating to the overall breakdown of the Concert of Europe, also rendered this imperial competition feasible, in spite of Britain's centuries of long-established naval and maritime superiority. As unification of Germany by the Prussian 'Garrison State' went forward, contending capitalist powers were thus ready to compete with Britain over stakes in overseas markets. The aggressive nationalism of Napoleon III and the relative political stability of France under the liberal Third Republic also rendered France more capable of challenging Britain's global preeminence. Germany, Italy, and France were simply no longer as embroiled in continental concerns and domestic disputes as they were before the Franco-Prussian War.

Contemporary world-systems theorist Immanuel Wallerstein perhaps better addresses the counter-arguments to Hobson without degrading his underlying inferences. Wallerstein's conception of imperialism as a part of a general, gradual extension of capital investment from the "center" of the industrial countries to an overseas "periphery" thus coincides with Hobson's. According to Wallerstein, "Mercantilism... became the major tool of [newly industrializing, increasingly competitive] semi-peripheral countries [Germany, France, Italy, Belgium, etc.] seeking to become core countries." Wallerstein hence perceives formal empire as performing a function "analogous to that of the mercantilist drives of the late seventeenth and eighteenth centuries in England and France."

The expansion of the Industrial Revolution hence contributed to the emergence of an era of aggressive national rivalry, leading to the late nineteenth century 'scramble for Africa' and formal empire. Hobson's theory is thus useful in explaining the role of over-accumulation in overseas economic and colonial expansionism while Wallerstein perhaps better explains the dynamic of inter-capitalist geopolitical competition.

Recent developments made it easier and more appealing for "semi-peripheral" newly industrialized states to challenge Pax Britannica overseas. With the expansion of the Industrial Revolution, Britain could no longer reap the benefits of being the sole modern, industrial nation. Britain by the outbreak of the Franco-Prussian War was no longer the 'workshop of the world', meaning that its finished goods were no longer produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market.

As these other newly industrial powers, the United States, and Japan after the Meiji Restoration began industrializing at a rapid rate, Britain's comparative advantage in trade of any finished good began diminishing. Just as the power of German and North American capitalisms increased, the relative decline of the British capitalist economy began in the last third of the nineteenth century, contributing to a breakdown of Britain's natural superiority in industry and commerce. Britain's share of world trade fell from one-fourth in 1880, one-sixth in 1913, and one-eighth in 1948. Britain was no longer supplying half the needs in manufactured goods of such nations as Germany, France, Belgium, and the United States. Britain was even growing incapable of dominating the markets of India — a crown colony by 1858 that Disraeli would later deem "the brightest jewel of the crown" — “Manchu China” the coasts of Africa, and Latin America.

To make matters worse, British manufactures in the staple industries of the Industrial Revolution were beginning to experience real competition abroad. The German textiles and metal industries, for example, had by the beginning of the Franco-Prussian War surpassed those of Britain in organization and technical efficiency and usurped British manufacturers in the domestic market. By the turn of the century, the German metals and engineering industries would be producing heavily for the free trade market of what was once "workshop of the world" as well. In midst of Britain's relative industrial decline, the fact that invisible financial exports actually kept Britain "out of the red" is somewhat indicative of both Britain's pressure to secure overseas markets in both nominally independent states and colonies and its newly precarious hegemony over overseas markets.

For the most part, formal empire has its roots in the breakdown of Pax Britannica. With the rise of industrial capitalism in Germany, North America, and Japan, its finished goods no longer had a comparative or absolute advantage in any other market. Industrialization progressed dynamically in Germany and the United States especially, allowing them to clearly prevail over the "old" French and English capitalisms. The "neo-mercantilist" practices of newly industrializing states such as Germany, the United States, and Japan cut Britain off from outlets and even created competition for Britain in sales to these 'peripheral' areas.

With contending, emerging “semi-peripheral” capitalist powers once dependent on British industry ready to vie for competing stakes in overseas markets, inter-capitalist competition also took form of protectionism through higher tariffs, further aggravating the push toward overseas markets: in Germany in 1879, and again following 1902: in the United States in 1890; in France in 1892, 1907, and 1910. The only country to escape this trend was Britain, whose essential strength lay precisely in its preeminence on the world market. German, American, and French imperialists, as mentioned, argued that Britain's world power position gave the British unfair advantages on international markets, thus limiting their economic growth.

This affected Britain in two ways. First, of course, new interest of the emergent industrial powers in colonial expansion brought them into direct competition with Britain. The expansion of the Second Industrial Revolution and the rise of similar economic practices (such as amalgamation of industry) in Germany and the United States intensified the competition for overseas markets and hence formal colonialism.

New Imperialism, as one means of facilitating the inexorable movement of capital from domestic markets to overseas areas, was thus enabled by recent changes in the North Atlantic balance of power, such as the unification of Germany under Prussia and relative political stability under France's Third Republic, but driven by changing economic realities and the spread of industrial capitalism beyond Britain.

By the time Benjamin Disraeli ushered in the age of New Imperialism with his watershed Crystal Palace Speech, which was delivered by no mere coincidence after the Franco-Prussian War and during the Long Depression, Britain was no longer the world's sole modern, industrial nation. Pessimists thus inferred that unless Britain acquired secure colonial markets for its industrial products and secure sources of raw materials, the other industrial states would seize them themselves and would precipitate a more rapid decline of British business, power, and standards of living. The prospect of having to compete to remain the forerunner of the world's economies and empires due to recent changes in the global economy and continental balance of power thus left it ripe for Disraeli's Conservative rule in the 1870s, which would usher in an era of extreme national rivalry that would one day culminate in the Great War.

In this sense, historian Bernard Porter argues that formal imperialism for Britain was a symptom and an effect of its relative decline in the world, and not of strength. Symbolic overtures, in fact, such as Queen Victoria's grandiose title of "Empress of India", celebrated during Disraeli's second premiership in the 1870s, helped to obscure this fact. Joseph Chamberlain thus argued that formal imperialism was necessary for Britain because of the relative decline of the British share of the world's export trade and the rise of German, American, and French economic competition.

As mentioned, the “Scramble for Africa”, rationalized by Rudyard Kipling-style racism and Social Darwinism in predominantly Protestant empires and the paternalistic (but republican and progressive) French-style "mission of civilization", was attractive to many European statesmen and industrialists who wanted to accelerate the process of securing colonies upon anticipating the prospective need to do so. Their reasoning was that markets might soon become glutted, and that a nation's economic survival depends on its being able to offload its surplus products elsewhere.

At a time when the abandonment of free trade limited the European market, some business and government leaders, such as Leopold II and Jules Ferry, concluded that sheltered overseas markets would solve the problems of low prices and over-accumulation of surplus capital caused by shrinking continental markets. Among the new conditions were the short-term effects of the severe economic depression of 1873, which had followed fifteen years of great economic instability. Business after 1873 in practically every industry suffered from lengthy periods of low profit rates and deflation; profits were falling because too much capital were chasing too few markets, especially after the rise of newly industrializing states in export trade with its traditional markets in continental Europe, China, and Latin America.

In addition, such surplus capital was often more profitably invested overseas, where cheap labor, limited competition, and abundant raw materials made a greater premium possible. Another inducement to imperialism, of course, arose from the demand for raw materials unavailable in Europe, especially copper, cotton, rubber, tea, and tin, to which European consumers had grown accustomed and European industry had grown dependent.

Following the lead of Britain under Disraeli, even the once hesitantly imperialistic Bismarck was eventually brought to realize the value of colonies for securing (in his words) "new markets for German industry, the expansion of trade, and a new field for German, activity, civilization, and capital". Examples of strategic competition following the passing of the scene of Bismarck, the era's premier diplomat, that would intensify the drive to consolidate existing spheres of influence and grab new colonies, include the Moroccan Crisis of 1905, the Tangier Crisis resulting from Kaiser Wilhelm's recognition of Moroccan independence, and the second Moroccan Crisis, in which Germany sent its navy to Morocco, thereby testing the precarious Anglo-French Entente. The Entente Cordiale, in fact, was a gentlemen's agreement between Britain and France to curtail further German expansion. The Entente Cordiale and the Franco-Russian alliances were also made because of a common interest.

The absolutist Central Powers, led by a newly unified, dynamically industrializing Germany, with its expanding navy — doubling in size between the Franco-Prussian War and the Great War — were a strategic threat to the markets of these relatively declining empires that would one day consist of the Great War Allies. British policymakers feared the prospect of another German military victory over France, which could have reasonably resulted in a German take-over of France's formal colonies, a sort of reversal of the actual outcome of the Great War, after which Britain occupied the vast majority of German and Ottoman colonies as "protectorates". This prospect was especially frightening considering that French colonies tended to be closely situated to Britain's; Nigeria, for instance, was surrounded by French territory, India was near French Indochina, and so forth.

Th century

By the time of Queen Victoria's death in 1901, other nations, including the United States and Germany, had developed their own industries; the United Kingdom's comparative economic advantage had lessened, and the ambitions of its rivals had grown. The losses and destruction of World War I, the depression in its aftermath during the 1930s, and decades of relatively slow growth eroded the United Kingdom's pre-eminent international position of the previous century. The Great Depression hit the nation especially harshly, as it had still not fully recovered from the war. See also the Great Depression in the United Kingdom.

In World War II, there was again a great deal of destruction to British infrastructure, and the years after the war also saw Britain lose almost all of its remaining colonies as the empire dissolved. In the 1945 general election, the Labour Party was elected, introducing sweeping reforms of the British economy. Taxes increased, industries were nationalized, and a welfare state with national health, pensions, and social security was created. The next years saw some of the most rapid growth Britain had ever experienced, recovering from the devastation of the Second World War and then expanding rapidly past the previous size of the economy.

By the end of the 1960s, this growth began to slow, and by the 1970s Britain entered a long running period of relative economic malaise. This led to the election of Margaret Thatcher, who cut back on the government's role in the economy and weakened the power of the trade unions. The latter decades of the 20th century have seen an increase in service-providers and a drop in industry, combined with privatization of some sections of the economy. This change has led some to describe this as a “Third Industrial Revolution”, though this term is not widely used.

Overview

Following the end of World War II, there was a long interval without a major recession (1945 - 1973) and a growth in prosperity in the 1950s and 1960s. According to the OECD, the annual rate of growth (percentage change) between 1960 and 1973 averaged 2.9%. However, following the severe shock of the 1973 oil crisis and the 1973–1974 stock market crash, the British economy went into recession in 1974, with GDP falling by 1.1%, recording weaker growth than other European nations in the 1970s overall.

A new period of neo-liberal economics began with the advent of the government of Margaret Thatcher of 1979. Most state-owned enterprises in the industrial and service sectors, which since the 1940s had been nationalized, were privatized. As a result, the British Government owned very few industries or businesses. GDP fell 5.9% at first then rose to 5% at its peak in 1988, according to the IMF,^[8][9] as banks and other financial institutions in the UK enjoyed the liberalization of the regulatory structures and greater freedom to explore new investment vehicles with less oversight.

After a mild recession in the early 1990s, there followed (according to the UK Prime Minister Gordon Brown) the longest period of sustained economic growth Britain had seen for more than 150 years, achieving growth in every quarter between 1992 and 2007, one of the highest economic growth rates of major developed economies during that time. GDP growth briefly reached 4% in the early 1990s, gently declining thereafter. Although sustained, growth was relatively anemic compared to past rates of growth, such as the 6.5% peak in the early 1970s,^[10] Annual growth rates averaged 2.68% between 1992-2007 according to the IMF,^[11] with the finance sector growth contributing a greater part than previously.

This boom ended in 2008 when the United Kingdom entered a recession brought about by the global financial crisis. Beginning with the collapse of Northern Rock, which was taken into public ownership in February 2008, major banks failed and were nationalized. The Royal Bank of Scotland Group, which at its peak was the second largest bank in the UK and the fifth largest in the world by market capitalization, was effectively nationalized on 13 October 2008, when the British Government announced it would take a stake of up to 58% in the Group. By mid 2009, the HM Treasury had a 70.33% controlling shareholding in RBS, and a 43% shareholding through UK Financial Investments Limited of Lloyds Banking Group, formerly the fifth largest banking group in the UK.

The UK economy had been one of the strongest EU economies in terms of inflation, interest rates and unemployment, all of which remained relatively low until the 2008-09 recession, when unemployment rose dramatically, and interest rates fell to 0.5%. In 2007, according to the International Monetary Fund, the United Kingdom had the ninth highest level of GDP per capita in the European Union in terms of purchasing power parity, after Luxembourg, Ireland, the Netherlands, Austria, Denmark, Sweden, Belgium and Finland. However, in common with the economies of other English-speaking countries, it has higher levels of income inequality than many European countries. During August 2008 the IMF warned that the UK economic outlook had worsened due to a twin shock: financial turmoil as well as rising commodity prices. Both developments harm the UK more than most developed countries, as the UK obtains revenue from exporting financial services while recording deficits in finished goods and commodities, including food.

In 2007, the UK had the world's third largest current account deficit, despite significant oil revenues, according to the IMF. This was mainly the result of a large deficit in the trade in manufactured goods. During May 2008, the IMF advised the UK government to broaden the scope of fiscal policy to promote external balance.^[13] Although the UK's "labour productivity per person employed" has been progressing well over the last two decades and has overtaken productivity in the united Germany, it lags around 20% behind France's level, where workers have a 35-hour working week. The UK's "labour productivity per hour worked" is currently on a par with the average for the "old" EU (15 countries). The United Kingdom currently ranks 21st on the Human Development Index.

Recent Economic Performance

Official figures from the ONS for annual UK GDP growth in the first quarter of 2009 (revised) stated that GDP contracted by 2.4 per cent (revised down from 1.9%) compared with a decrease of 1.8 per cent in the fourth quarter of 2008. The ONS report shows a four quarter (4q - aggregate) decline of 4.9% of GDP. A single quarter decline of 2.4% has not been seen in the UK since 1958. The four-quarter decline of 4.9% is described as "the biggest year-on-year fall on record" by the BBC. In October 2007, the IMF had forecast British GDP to grow by 3.1% in 2007 and 2.3% in 2008. However, GDP growth slowed to -0.1% by the April-June quarter of 2008 (revised from zero).^[20] However, in September 2008, the OECD forecast contraction for at least two quarters for the UK economy, possibly severe, placing its predicted performance last in the G7 of leading economies.

It has been argued that heavy government borrowing over the past cycle has led to a severe structural deficit, reminiscent of previous crises, which will inevitably exacerbate the situation and place the UK economy in an unfavorable position compared to its OECD partners as attempts are made to stimulate recovery, other OECD nations having allowed greater room for maneuver thanks to contrasting policies of relatively tighter fiscal control prior to the global downturn. In May 2009 the European Commission (EC) stated: "The UK economy is now clearly experiencing one of its worst recessions in recent history." The EC expected GDP to decline 3.8pc in 2009 and projected that growth will remain negative for the first three quarters of 2009. It predicted two quarters of "virtual stagnation" in late 2009-early 2010, followed by a gradual return to "slight positive growth by late 2010".

 

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