The Formula for Peace
I
THE American people are beginning to pay for the costliest mistake that they have ever made. They did not prepare for peace, therefore they now are facing war. They listened to the dreamers who had never analyzed peace and they scorned those who taught wisdom, and now the wise and the unwise are paying the cost together. They never have realized that peace and war are parts of the same economic problem. George Washington was a practical pacifist; he admonished us to keep ourselves ready at all times to compel peace. That kind of peace is one that lies within the reach of any practical peace-loving people. It is a taurine peace, such as a wellhorned bull commands in his pasture; the effective and reliable kind that was comprehensible to the great patriot who had led our Colonial armies to the victorious creation of a free republic. Moreover, it is the only kind of pacifism that will work in a world of nations that has never yet solved or even tried to solve the economic problems that make war unnecessary.
It may strike some minds as paradoxical to affirm that war is an economic phenomenon, yet the great majority of all the wars of history and particularly of modern history have been nothing less than attempts to adjust a continuously unfavorable tradebalance by resort to arms. Surely the great gathering of the nations in battle array, that now astounds and awes the human race, can by no possibility be regarded in any other light than that of a transference of the war of trade from the counting-house to the field of Mars. Our minds are likely to be tricked into false reasoning by the boasts of democracy and the thunders of autocracy, for the solution of the great problem of civilization does not lie in mere forms of government — neither in democracies nor in empires. It is far deeper than these; it might be said that, considered as a means of supplying human needs, it is not definitely related to either. It is not the way in which we are governed that determines whether or not we will get on with our neighbors peaceably; it is what we use our government to accomplish for us as nations that determines the matter.
It was just a year ago that a notable meeting of representatives of the Allies was held in Paris to draw up plans for the days after the war. The delegates meant well; they were preparing, as they thought, to cement a union between the Allies that would be effective in restraining Germany from future domination; but the world, even in the stress of a great conflict, holds to its saving sense of humor, and it characterized this plan as a preparation for ‘ the war after the war.’ Such felicitous flashes of world-humor often have in them more sound philosophy than gets written into learned state papers. Is there any peace, is there any relief from poverty, any lessening of the hardships that grow out of national aggrandizement, in a commercial war? Is it conceivable that trade-war can maintain a happy balance of industry, that it can fill the world with cheerful contentment, or encourage the spirit of brotherly love among nations? There is a vast difference between simple commerce and a trade-war, and that difference has not become the basis of reasoning for reform. We saw what happened during the last experience of a trade-war, when the legend ' made in Germany’ was a challenge to the whole industrial world. It did not bring joy and gladness to Manchester and Sheffield to see the cottons and steels of Germany conquering the markets of the world. Instead of reposing in joy England was struggling with the blazing protests of the unemployed.
What happened in England was the menacing growth of a starvation-socialism; it was no mild philosophical socialism, no fanciful scheme for social reorganization, but a stern and fearsome demand, like the cry of a hungry panther that can be met only with guns or with food. It has been said that if Germany had but waited a little longer she might have conquered England by commercial displacement — but Germany could not wait. The weapons of national aggrandizement are like rapiers that finally bend backward and wound the nation that wields them while striking at their victims. The peculiarity of our modern system of commercial struggle, using such aggressive mechanisms as bounties, subsidies, tariffs, and the like, is that the effort to control foreign markets becomes a national movement. That is the same thing as to say that it is collectivistic, which allies it at once with what is called Socialism.
We are familiar with the game as played in a crude unscientific manner in our own country. The politicians of one party explain to the man in the street how he will benefit by the trade stimulus that is certain to follow protected industry. One party shouts itself hoarse for a tariff on iron, on steel, on shoes, on wool and woolens, while the other — but that is part of the threadbare humor of presidential campaigning. It is all so unscientific, so distorted by special pleading, as to teach little to the serious inquirer after the economic bases of those balanced equities which we instinctively feel should operate in a rational world-commerce. The arguments of the free traders and the protectionists in America have been merely political ammunition to be used in the contests between the ‘ins’ and the ‘outs.’ If the leaders were more patriotic than partisan they would find real issues in which there might be room for dispute. It requires little knowledge of political science to see that free trade, containing as it does the germ-principle of the charter for Utopia, would be suicidal to any mature nation attempting to apply it before it had been accepted by all the great commercial powers of the world. What has actually occurred in America has been that, under a high tariff, the manufacturers have profited, and to a degree the laboring classes have also benefited, but they have presently exclaimed at the correspondingly higher cost of living which resulted from complex causes initiated by the disturbance of the economic balance brought about by the altered tariff schedules. When the political pendulum swung back to a lowered tariff, the masses have again suffered by the invasion of foreign goods, which cut off industry at home and reduced the wages for labor.
The topsy-turvy schemes of a country with little international trade experience, a country that is still nearly half pioneer, and that has sustained its shop-workers by manufacturing chiefly for home consumption, while its strength in the world-markets has come mainly from the exportation of foods and cotton, are not to be taken too seriously in a search for the errors in the principle of the trade-war. It is in Germany that the most brilliant national success has been attained by it. Most interesting is it to see how a state committed to this doctrine inevitably accumulates a top-heavy burden of population, with mouths to feed increasing faster than the resources with which to feed them. The only arguments for aggrandizement are race-pride, which is expressed in a desire for dominance, and race-prejudice, which shrinks from expatriation and the consequent loss of racial identity in fusion with foreign peoples. Aggrandizement through a fostering political system offers a tempting solution of the problem. It contemplates the acquisition of lines of trade that will develop manufacturing at home to an abnormal degree; that will provide work for the growing population; but the profit must be elastic enough, which means big enough, to absorb the strains of competition or of reduced foreign purchasing power, due to droughts or other causes. Necessarily, then, the wage-rate will not advance proportionally to the double increase of business and population, so that a shortage of available supplies presently is felt by the working classes, producing social discontent. At the same time the necessity for safe-guarding foreign commerce, and the foodsupply coming from less densely populated countries, as well as the fear of reprisals by competitive nations, compels the intensive culture of militarism, in which is experienced moreover a measure of physical development, that is recognized as valuable in saving the nation from loss of vital energy.
To visualize clearly the forces at work in a nation under the modern system of nationally fomented industry, which is but a more polite phrase for the trade-war, it is necessary to examine some of the elements that enter into this great game of national aggrandizement. A country that contents itself with administering police discipline would, of course, be devoting itself to the simplest and most fundamentally necessary functions that a government is supposed to perform. The next discovery that a nation makes regarding its range of possibilities occurs in the realm of commerce. It appears in the form of special charters granted for monopolies in manufacturing or trade. This extremely crude system has been set aside in England scarcely more than a century. Through the chartered East India Company she once governed her jeweled possessions of the East, until the trial of Warren Hastings brought the evils of political control for commercial purposes forcibly to the understanding of the British people. Their rising sense of justice then opposed extending such arbitrary powers in conjunction with special trade privileges.
Nevertheless, the idea of monopoly based on governmental grant has lingered to our own time. The Rhodesian concession obtained by Cecil Rhodes was an example of yesterday, in which the barbaric method of securing the unfolding of virgin resources through chartered privilege was deemed good enough for a vast, undeveloped, but by no means unpopulated, African wilderness. In a milder form large concessions for exclusive mineral exploration have been granted in Canada in quite recent years. The system of concessions, as every American should know, is also rampant in all the smaller Spanish-American countries, and constitutes the basis on which is founded a large part of the political graft which proves so enticing a bait to envious revolutionaries who possess the physical courage of their predatory ambitions. At the same time American owners of such undemocratic charters soon find themselves hated by the people, because the very nature of these protected enterprises converts the foreigner in their eyes into the embodiment of a grasping, blood-sucking monopoly.
II
In the progress of social evolution a nation presently outgrows these elementary monopolistic forms. Although the apologists may find plausible excuses in the attraction offered to capital and in the development of enterprises that would not have been undertaken without such a shield from competition, the method belongs, nevertheless, by its very essence, to the period of industrial incubation in a nation’s history. It will be seen on further analysis, however, that it is of the same genus as the more familiar tariff, differing in this important respect, that it openly singles out a specific concessionaire on whom its benefits are to be conferred, instead of throwing open a protected trade-opportunity to any citizen who may be in a position to take advantage of it, which is the special characteristic of a fostering tariff. The barbaric crudeness of a protective tariff is glossed over, as also is much of the saving vitality of barbarism in human nature, by association with legal refinements that mask its grossness.
It must not be assumed that a tariff is either morally or ethically wrong because it is crude, nor yet forever right because it is tolerated as a step in the growth of nations toward finer adjustments of the economic problems of existence. We should treasure eternally in our hearts the fact that the State is for the individuals composing it, not the individuals for the State; but the State is, or should become, the practical expression of the idealized system for personal good that is to be attained only through corresponding personal sacrifices in civic coöperation. We shall find at last that these supreme ends of peace and general prosperity are not attainable in nations that attempt a commercial interlocking while they bristle with bayonets of tariff-opposition. Because it is associated with the system of indirect taxation, put into effect partly through customs duties, the nature of a protective tariff is concealed under the folds of this attractive revenue cloak. Its true character is better understood when we go back to what, with some irony, have been called ‘ the expansive days of Queen Elizabeth.’ We there confront industrial protective laws which, for example, made it punishable by death to bring a foreign-made brass or copper article of manufacture into the kingdom. The result of such drastic laws was the development, among other things, of the Cornish and Welsh copper-smelting centres with their dependent train of industries, enduring, though with lessened relative importance, to this very day and hour. That was protection, brutally, cheerfully, frankly barbaric and — effective! Not mincing matters, it did what all protective tariffs are meant to do: it built up business at home. Evidently there is a time for concessions and a time for tariff walls in a country’s development.
While retaining some traces of both of these primitive systems, England passed through its fever of Cobdenism to a new and more highly refined type of the same old genus. She proclaimed herself a free-trade country, and, in a restricted sense of that term, a freetrade country she is; but in the sense of a country with unprotected, unfomented trade, she just as certainly is not. In order to follow understandingly the higher post-graduate methods of Germany in this sphere of economics, one must get the primary college system of the British clearly in mind. Great Britain has discovered the reflex influence of sea-power on domestic trade. A great naval establishment and a great maritime shipping grew as complements to each other. The carrying trade of the world, confined preponderatingly to British bottoms, accomplished many things at once; it gave the British manufacturer a first opportunity to supply foreign markets; it yielded a corresponding advantage for obtaining raw materials and foreign foods cheaply; it brought the British trade propagandist into closer personal touch with other nations, affording a more intimate acquaintance with their peculiar needs, their legal regulations, and their methods of conducting business, so that the British merchant became possessed of a knowledge of practical details which rendered the course of trade easy, while other nations, lacking this information, must of necessity run counter to foreign prejudices and administrative methods, putting them at a great competitive disadvantage.
The history of Britain’s more important foreign wars and diplomatic struggles is almost wholly a history of aggression directed against other nations that were undertaking to develop maritime power. Thus were witnessed the overthrow of the foreign-trade pretensions of Spain, Portugal, the Netherlands, and France. In later years, when Britain was the most deeply interested of all nations in universal means of communication, it was easily possible for her statesmen to demonstrate that the granting of mail subsidies was in the interest of national economy. The manufacturer at Manchester and Sheffield and Birmingham, the importer at London and Liverpool, upon whom the manufacturers depended for raw materials, and also the working classes who found abundant and remunerative work for their ever-increasing numbers, were all protected by the granting of subsidies which helped to maintain the supremacy of British shipping. In this way the world was brought to pay tribute to England, and for a long period there was no surplus of workers, who, in order to live, must seek opportunity by expatriation in foreign lands. Furthermore, money was provided by the government for building merchant ships under a system whereby these vessels were to be available for service as armed cruisers in time of war, and were accordingly designed, in coöperation with the Admiralty, to serve advantageously this double purpose.
These methods perform identically the same function as restrictive tariffs, being designed to protect home industry by giving preferential advantages in foreign trade against competitive nations. Accordingly, though England is a free-trade country, she found other means of putting into effect the selfsame principle of protectionism. Without this, or some equivalent, she would have been reduced to a minor position among the nations decades ago.
III
The principle of free trade in its broader sense of unrestricted commercial intercourse has had but a single trial in the world on a large scale. That was in the United States, where the most impressive example of its beneficent influence that the world has ever seen has been presented. In a continent of self-governing commonwealths trade has been allowed to follow natural laws, unhindered by discriminating advantages except as imposed in some degree by private transportation systems, until finally regulated by the Interstate Commerce laws. Here have been operative the nice adjustments of production and manufacturing that result automatically where trade is regulated in conformity with the economic balance. The iron and steel industry grew at the logical points, near the coal mines of Pennsylvania, Ohio, and Alabama, these happening to coincide with favorable points for distribution of the finished commodities. Cotton-spinning developed at the waterfalls of New England within easy reach of the sea, because, primarily, the raw cotton could be brought cheaply by ocean carriers from the sparsely populated South to water-powers in the North close to the centres of largest consumption. Thence, with the increase of population in the West and South, a corresponding development of cotton manufacturing occurred where a similar advantage of cheap power was available in the Carolinas, in Georgia, and in Alabama. The aluminum industry moved from its first illogical centre at Pittsburgh to the water-power of Niagara, and is now beginning to take advantage of southern water-powers nearer to the bauxite mines that supply the ore.
Under this rational and natural system harmonious growth of industry has reached mighty proportions without arousing interstate jealousies, and without artificial coddling by the several states. No one has ever thought of measuring prosperity by the trade-balances between the states; the only concern has been to assure a suitable provision of bank credits to facilitate trade movement to meet the self-adjusting economic balance. It has been the peculiar distinction of the United States to present this impressive object-lesson to the world, proving the essential equities of industrial opportunity over a vast area when the laws of natural trade are permitted to assert themselves. Commerce has thus grown to mammoth proportions despite the evils of misguided legislation, of blundering tariff and shipping laws, of experimental state constitutions, of political corruption, and widespread indifference to individual civic responsibility. It is free trade over an enormous area, including all the essential elements of a complex and well-balanced industrial life, which has made America great.
Germany adds another startling example of the benefits of free trade. The Napoleonic wars left a multitude of petty kingdoms, duchies, and principalities, completely independent, but not individually self-sustaining. Between them raged a frantic tariff-war, supplemented by trade-agreements having in view commercial advantages which at the same time were offset by their mutual jealousies and restrictive policies. These obstructions existed even between the minor political subdivisions of the separate kingdoms. Prussia led in the direction of reform. Unrestricted trade intercourse within her own dominions was established, and Prussian prosperity followed. The example was a strong argument in favor of extending the principle to associations of the Germanic states. Out of the original Prussian Zollverein of 1818, arose the commercial union which extended until, by 1842, it included the whole of Germany with the exception of the Hanseatic towns, Mecklenberg, Hanover, and Austria. This led logically to the diet of Frankfort in 1848, which proposed a basis of political consolidation.
It is interesting to note that the force which drew Germany into effective national union was the demonstrated advantage of free commercial intercourse. It was free trade that made Germany, not the deliberate political aggressiveness of one of its constituent kingdoms. Indeed, the North German Bund of 1867, which signalized the birth of modern Germany, was consummated only after Frederick William IV of Prussia had conditionally refused the imperial crown offered, him by the Frankfort diet. It required another nineteen years to give further proof that the full benefit of unrestricted trade was not attainable without political confederation. Thus was formed the North German Bund, after the elimination of the Hapsburg pretensions to Germanic leadership which had never included a firmly conceived economic policy, and the Bund then promptly cemented to itself the sympathies of the southern States by the customs union of 1867 that paved the way for the larger plans of imperial unity consummated under the enthusiasm of military successes in 1871.
It was the constructive economic policy of Stein, appealing to the sense of order and system in the people, that laid the foundation of German nationalism, just as it was the political genius of Bismarck that kindled in the national mind the aggressive imperial spirit which seemed able to offer a realization of the dream of pan-Germanism that had so long been cherished in the Teutonic heart. Germany, drawn into union by free trade at home, adopted all the devices of protectionism in her exterior relations. The tariff played its part in keeping for the people of Germany the domestic trade in such goods as she could manufacture. This, however, soon reached its economic limit in a country of restricted natural resources. The principle of charging high prices in the home market in order to produce a surplus to be sold at smaller profits abroad cannot long be tolerated in a country so circumstanced. Just as England found that other methods of protection must be devised, so Germany confronted the need of more refined and permanently helpful stimulants to industry. She followed the essential features of the well-tried shipping policies of England, just as Japan is now so successfully doing; but she went much further.
As all national trade propagandism is necessarily based upon collectivist ideals, Germany eliminated the risk of trade restriction through the whims and favoritisms of individually owned and operated transportation systems. The internal movement of commerce was brought under the dominance of the central authority which planned the utmost economy in distribution, and gave special advantages to raw materials coming into the country destined to be reshipped in manufactured form to foreign markets. This is Socialism in one of its aspects, and Germany has not hesitated to apply Socialistic principles broadly, because at bottom Socialism is in perfect harmony with an autocratic administration, whether personified in an expert commission or in an individual autocrat voicing the conclusions of his expert economic advisers. Germany even ventured to invade the sacred prerogatives of capital by cleverly organizing all capital into a great complex unit for the general good in trade expansion. She did not nationalize capital, which is what the Socialists mean by the extinction of capitalism, nor did she take away from the individual the capitalistic resources that he might call his own, but she created a system of cartels, which consisted in a coalition of individual enterprises similar in kind. These groups were then further coördinated so that each cartel should contribute its quota to the completion of any undertaking that depended upon contributions from a number of different manufacturers.
Through such a highly centralized system it was possible to insure delivery of any article on time from whatever works were found to be best situated to take the contract. The costs of solicitation under a competitive system were largely eliminated; business was equally distributed, and time and money were saved. The banking system also was coördinated for purposes of financing industry, and this took care of all needs for additional capital in operating and development. Every part of this vast system was interdependent in important particulars, and all were mutually supporting through interlocking credits, balanced finally through the central reserve bank, which was in effect an arm of the Imperial government. Thus was industrial Germany financed, directed, provided with materials and with contracts, protected, and fostered as a gigantic unit, working like a well-drilled and wellofficered army in its onslaught upon the world for commercial conquest.
The strength of the Teutonic system is impressive; the weakness that lay in it is less apparent. We become aware of differences by comparison, and as Germany was the first modern nation to attempt collectivism on a great scale, the contrast between her fundamental characteristics and those of other nations lacks an extensive historic background, yet it is plain that in the rapidity of her development she affords an example of the operation of biologic law. Nations are founded on living organisms, and therefore they are subject to biologic laws. A creature that is simple in its structure reaches the climax of its development swiftly. The German system is a simple national structure built up of large and simple units. The individual was specialized, giving him much the effect of a single cell in the civic organization; his power of adaptation through development of new characters was thereby reduced; he was assigned simple and relatively unvarying functions under centralized control. The power of individual initiative was crippled, and the national initiative was thereby intensified for the time by concentrating that function in authority that could control and direct the activities of the unit masses behind it. Through utilizing the principles of protectionism, carried to their logical extreme, it was accordingly possible to make rapid strides toward world-dominance; but the defect of the system is that it is based upon things as they are; it lacks creative power. Instead of having a whole nation expanding in the direction of wide and varied activity, building from generation to generation by transmitted powers of increasing complexity and energy, it was necessarily tending toward fixedness of the special capabilities of the units of which it was composed.
The effect of such a system is seen in the stagnation of the Chinese, which made them as a nation the inflexible conservators of what the individuals had accumulated during an earlier epoch of freer growth. The German collectivist ideal was heading in that direction. The cardinal instinct of the Teutonic mind is to seek authority for guidance. The creative powers of the free lance are feebly operative in his nature. He is at bottom socialistic in his thinking and his habit. Even the great philosopher Hegel, long before there was such a thing as a united German people, recognized and commended what he called their power of ‘ reconciliation of the objective and subjective.’ That puts the bar to individual progress, for in the advancement of man into the unexplored realms of intellectual attainment through learning and applying the forces of the universe, it is his subjective self that projects him forward beyond the apparent limitations of his objective appreciations. He must create for himself newobjective relations beyond his experience, in a spirit of prophecy, and go forward to their concrete discovery. Furthermore, Hegel, as a representative Teutonic intellect, so felt the need of finality, which involves stagnation, that he idealized the autocratic State in which, as he said, “the personal decision of the monarch constitutes the apex, since an ultimate decision is absolutely necessary.’ From these considerations he predicted the pan-Germanism which has recently been attempted. He realized that in it lay a strength which peoples less unified in purpose seem not to possess. There is indeed a power in it; the might of concentrated mass, like the water impounded behind the dam, that can perform prodigies while it lasts but will presently exhaust itself unless perpetually replenished; and the collectivist system is deficient in this, that it omits the vital requisite of renewing and developing power in the individual.
In this also we perceive the value of many nations of men. By multiplying the units, the power of variation and growth is also multiplied, and the progress of the world assured. The wills and ambitions of divers peoples oppose the weak surrender of initiative that would impede the cultural development of the human race were the world reduced to a single civic organism. The natural stimuli of effort and friction and distinctive visions would disappear. If the Teutonic ideal of specialization and intense centralization of these compound, but not complex, units were to prevail, mankind would have reached its biologic zenith from which the rest of its history would be one of decline.
The plan of a league to enforce peace, stripped of its details, is in the direction of unification and denationalization. To carry it out requires the sinking of national aspirations in the will of a controlling central authority, which, to become effective, must progressively enlarge its scope of worlddominance, and that inevitably means the ultimate supremacy of the most aggressive of the represented groups. It is contrary to the fundamental laws of broadly developing life. There is something better than this; something that will preserve the natural tendencies to intellectual growth in the race, without requiring military aggressiveness as a national prerogative. That is to introduce the principle of natural trade by taking steps to eliminate the fostering devices on which national aggrandizement depends. It might not be possible to reach every scheme for artificial trade-development which will lift its head, but the tariff can be stripped off, and the granting of shipsubsidies and bounties, and all the cruder forms of industrial parentalism. This would at least go far toward the organization of the sisterhood of nations on the true competitive basis of relative inherent skill, knowledge, and ability. In that direction lies the open road to peace and progress. The world may not delude itself; it must take that highway, or accept the principle of the trade-war which goes hand in hand with Mars.