Articles

Fighting over Crumbs

In Economics on August 5, 2010 by AEG Tagged: , , ,

The world has not recently experienced the sort of cutthroat national competition for natural resources that was a relatively common source of conflict during the long first era of industrialization from the mid-19th to the mid-20th Centuries. As Europe and the United States developed into industrial economies, their governments quickly recognized that secure supplies of those resources vital to maintaining growth had to be found. For the U.S., this was not a problem: the vast and barely-tapped resources of the young country kept industry well-supplied with virtually all it needed to continue production. European states, however, did not generally have the luxury of ample supplies of the raw material of industry within their borders; the result was a major impetus behind late-19th Century imperialism. European governments raced each other to secure every unclaimed corner of the globe, whether or not they knew what economic value it held. The competition for Southeast Asian rubber and West African palm oil, Egyptian cotton and Arabian oil to feed the machines became a race between states whose governments believed that they must continue to grow if they were to survive in the face of their ever-expanding rivals. The European imperial powers were moving toward a collective corner of industrial demand outstripping supply by the early decades of the 20th Century.

One might be inclined to wonder if the European leaders had ever heard of simply trading for what they required rather than going to such extravagant lengths to gather it themselves. Indeed, the years preceding the First World War saw global trade rapidly expanding, as ever-larger numbers of steamships moved cargoes around the world to the massive factories of Europe and the teeming markets of Asia, Africa, and South America. Yet even as trade was providing for unprecedented economic expansion, governments worried increasingly about the potential disaster that loomed over every industrialized state: What if our supplies are cut off? Scattered pessimists argued that nothing short of an economic cataclysm would befall them, while even the more numerous optimists understood that the increasingly perilous international diplomatic situation could erupt into war, though many of the latter argued that such a conflict would be short enough that shipping would not be seriously disrupted.

Rising international tension and increasing concern for economic security among the industrial powers were two sides of the same coin, and each fed into the other. While Britain considered the merits of “imperial preference,” a system designed to create a great interlocking economic network in an era of increasing pressure for autonomy among its various imperial holdings, Germany argued that it must be allowed to pursue its rightful “place in the sun” among the world’s great empires, as befitted such an economically powerful and dynamic state. But for each, along with France and Japan, and even the free-trading United States, there was the growing realization that the existing order could only survive as long as the sources of economic stability – natural resources and access to markets – remained secure. In order to do that, military and especially naval strength had to be maintained, strategically important territories acquired, and every effort made to render trade uninterruptible in the event of war or shortage.

As it happened, the privations of the First World War were largely the result of the war itself, not the cause of its outbreak. Yet the effects were clear long before they began to tell. The Allies imposed a naval blockade on the Central Powers design to deprive both their war machine and their industries of the things they needed to survive and triumph. The Central Powers sought to isolate the European Allies from the American market that increasingly kept them supplied with the raw materials and manufactured goods that allowed them to continue the struggle. The British North Sea blockade and the German submarine offensives were the most prominent of these efforts, and the former was far more successful than the latter; the result was economic disaster for Germany, leading to the end of the Kaiser’s regime in 1918, civil disorder, insurrection, and more than a decade of political and economic instability, with complete collapse only forestalled by infusions of American cash to keep the Weimar government afloat.

The lessons were clear: those states that were able to keep open their lines of supply to those things that allowed their economies to continue functioning during war were victorious; those that could not were destined for isolation and eventual defeat. It should have come as no surprise then that when the cycle repeated itself several decades later, the new rising powers of Germany and Japan felt they had little choice but to claw their way into the first rank of Powers by force if they were not to remain forever economically, and thus politically, inferior. There would be little point in developing their economies if they could not ensure that they could be protected; another British blockade of Germany, a reduction in American supplies to Japan would be all that was needed to render them immediately vulnerable. The First World War had shown that these threats were not idle speculation; industry and trade would be targeted directly, and total economic warfare was now something with which every industrial power had to reckon. The onset of the Depression in 1929 and the tariff war that broke out soon thereafter did nothing to assuage concern.

Securing the economic basis of the nation’s prosperity and power was among the foremost considerations of the interwar period for the rising powers. The status quo Powers were focused on maintaining the system as it existed; Britain had worked to focus on securing their overseas trade (though “imperial preference” did not materialize as state doctrine) and the United States was able to thrive for years with only domestic supplies of raw materials and an ever-expanding domestic marketplace (though this slowed considerably with the closing of the frontier in 1890). While not entirely self-sufficient, American and British (and to a lesser extent French) dominance of the global economy meant that their industries were relatively safe from international disruption. For the totalitarian states of the 1930s, however, the status quo meant perpetual weakness. Without directly challenging the Powers that controlled the world’s trade, there was little hope that they too could ensure their economic survival when it came under threat. They saw security in autarky, building empires that were beyond the reach of their rivals, empires that would stand the test of war.

Hitler saw both the strength and weakness of Germany in its continental position. In order to fulfill his vision of a secure Third Reich, he looked to establish a contiguous Eurasian empire, safe from the maritime dominance of the Royal Navy and the distant United States. The vast reaches of Soviet Russia held the key to Germany’s long-term economic security; Hitler viewed it as analogous to the way that the British looked to India as the cornerstone of their global empire (in Hitler’s own words, “Russia will be our India”), and drew heavily on American westward expansion in his conception as well. He knew that Germany must be able to feed its people, supply its factories and arm its soldiers if it were to resist the challenges that lay before it. Before colonization and settlement could occur, however, Germany’s continental rivals had to be eliminated as threats, and more vital resources secured. Only then could the building of a secure empire begin in earnest.

Japan, as an island state, held its naval strength as the first precondition of securing an empire that could feed its industry, but that introduced challenges of its own: a modern navy needed steel and oil in regular supply and prodigious quantities, neither of which Japan had. The push in to mainland Asia began early, with the Sino-Japanese War at the end of the 19th Century and the Russo-Japanese War in the first years of the 20th establishing Japan as the dominant regional power. But these were merely strategic maneuvers that facilitated acquisition of the the real prizes: the mineral and agricultural wealth of China. Beginning with the Manchuria Incident in 1931, and the invasion of China in 1937, Japan moved to actively secure access to the commodities increasingly vital to its industrial growth. The attack on the United States and Britain in December of 1941 was intended primarily to cover the drive to the south to secure the petroleum supplies of the Dutch East Indies, made all the more urgent by the disruption of oil supplies from America caused by the Roosevelt Administration’s increasing concern over Japan’s activities in China.

In both cases the conundrum is obvious: rising Powers must secure the resources they need to continue to grow, but in doing so they are very likely to threaten the interests of the existing Powers. This is particularly problematic in times of global economic difficulty, as well as when shortages of particularly important commodities loom. The Cold War saw very limited competition for most resources, and the peculiarity of the bipolar power structure rendered what competition there was relatively one-sided; for all the Western conflict with the Middle East during the Cold War, there was never any serious question as to which side was the more powerful, or that oil must continue to flow to Western markets. The self-imposed exclusion of the Soviet Union from much of the global economic system rendered inappropriate the experiences of traditional competitive relationships between Great Powers.

All that has changed. With the collapse of the Soviet Union, the end of the Cold War, and the rise of China and India, the resurgence of Russia, and even the (ponderous) movement toward an actually unified European Union, the competitive nature of the international system looks poised to return with a vengeance. The only truly status quo Power remaining is the United States, and it is far less economically secure than it once was. Meanwhile, China is acquiring huge mining concerns in Australia and investing in African oil and Russia is leveraging its ample energy supplies for political advantage. Conflicts over the mineral wealth of such obscure places as the Spratly Islands (claimed by several Southeast Asian states as well as China, and thought to have significant oil deposits) are beginning to emerge as points of tension. Rising middle classes in developing states will demand greater access to manufactured goods, increasing economic pressures on their own governments as well as demand for production, and thus raw materials. Global economic development is not without risk; indeed, history suggests that the movement of states toward economic parity with the leading Powers will invariably lead to conflict. In difficult times, when there are more parties competing for limited supplies and limited markets, the pressure for success may escalate quickly and dramatically, as the alternative is not seen as anything short of existential national defeat.

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