Capitalism and American Leadership

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TABLE OF CONTENTS

TABLE OF CONTENTS 1

PREFACE 6

INTRODUCTION 8

CHAPTER I — CAPITALIST POSTURE OF THE UNITED STATES 13

THE QUESTION OF UNIQUENESS 13

DIRECT INFLUENCES 14

AMERICA’S CONTRIBUTION 14

DOMESTIC DEVELOPMENT 15

THE OPPORTUNITY 17

THE RIVALS 18

NEW ORGANIZATION FOR RIVALRY 21

CHAPTER II — ASSUMPTION OF LEADERSHIP 24

NATURE OF THE ROLE 24

THE QUEST OF PEACE 25

NEW EMPHASIS UPON THE ROLE OF MANUFACTURE 26

NEW NATIONAL NEEDS 27

ARGUMENT AND CAMPAIGN FOR FOREIGN INVESTMENT 29

THE ACHIEVEMENT 35

CHAPTER III — THE GREAT FRUSTRATION 38

INVESTMENTS IN SOUTH AMERICA 42

THE DEFAULT 44

CAPITALISM AS A PATIENT 45

FRUSTRATION 47

CHAPTER IV — THE DILEMMA OF LEADERSHIP 51

THE PROBLEM 51

ANALOGY WITH GREAT BRITAIN 53

ACCEPTANCE OF AMERICAN LEADERSHIP 54

NEW LOANS 56

THE ROLE OF UNDERDEVELOPED COUNTRIES 65

RESPONSIBILITY OF FOREIGNERS TO ATTRACT AMERICAN CAPITAL 67

CONSCIOUSNESS OF CIRCULARITY 68

CHAPTER V — FREE TRADE AND LEADERSHIP 71

THE QUESTION 71

AN ERRATIC DEVELOPMENT 73

THE ARGUMENT 77

CHAPTER VI — CUMULATIVE EMERGENCIES IN THE SYSTEM 81

MILITARIZATION IN THE EMERGENCIES 81

MILITARY EXPENDITURES AND THE ECONOMY 81

THE THEORY 82

THE POLICY 84

DEPENDENCE UPON GOVERNMENT PURCHASES 88

STOCKPILING 89

SUPPORT OF FOREIGN ECONOMIES 91

CHAPTER VII — PRESSURE IN BACKWARD COUNTRIES 95

THE PROBLEM 95

THE PROGRAM FOR BACKWARD PEOPLES 96

THE AWAKENING 98

THE BANDUNG CONFERENCE 99

MANHOOD NOW 104

CHAPTER VIII — MORAL POSTURE OF AMERICAN LEADERSHIP IN BACKWARD COUNTRIES 108

RACIALISM 108

SEARCH FOR AN ALTERNATIVE 109

A NEW APPROACH 113

MORALITY IN THE UNITED NATIONS 116

THE HUMAN-RIGHTS APPROACH 118

CONTRIBUTIONS TO THE EMERGENCIES 121

CHAPTER IX — STRATEGIC AID TO BACKWARD COUNTRIES 122

THE PROBLEM 122

AID AS FOREIGN POLICY 123

INTEREST OF PRIVATE ENTERPRISE 125

MILITARY CONSEQUENCES 126

INVOLVEMENT WITH U.N. PROGRAM 127

CHAPTER X — THE ISSUE: A CLOSE UP 131

THE PROBLEM 131

THE DOMINANT TREND 133

LIBERAL LEADERSHIP 135

STRADDLED LEADERSHIP 138

INCOHERENCE AND INDECISION 141

THE LAST OF THE LIBERALS 146

CONSERVATIVE LEADERSHIP 147

CHAPTER XI — ANXIETIES IN THE SYSTEM 152

ANXIETY AS A PERPETUAL SOCIAL CLIMATE 152

THE SURPRISE ATTACK 154

TECHNIQUES OF HYSTERIA 155

CONTINUOUS ALERT 158

THE IMAGE OF COMMUNISM 161

THE JUSTIFICATION 164

CHAPTER XII — INCIDENCE OF LABOR RELATIONS 166

THE PROBLEM 166

POSTURE OF ORGANIZED LABOR 171

LABOR IN THE CLASS STRUGGLE 175

CHAPTER XIII — RACE RELATIONS A DETERMINING FACTOR 178

NOT BY RIGHT 178

NATIONAL INFLUENCE OF SOUTHERN OLIGARCHY 181

NEGROES’ ROLE IN THE STRUGGLE FOR DEMOCRACY 184

NATURE OF CURRENT RESISTANCE 185

JOINT EFFORT IN RACE RELATIONS 188

CHAPTER XIV — THE TRANSITION 191

STAGNATION 192

COMPETITION 193

RELATIVE GROWTH RATES 195

REGIONALISM 202

CHAPTER XV — THE PROSPECTS 208

LEADERSHIP AND POLICY 209

DOMESTIC CURRENTS 211

COMPETITION AND MOTIVATION 216

THE UNITED NATIONS 220

BIBLIOGRAPHY 224

CAPITALISM AND AMERICAN LEADERSHIP

by

OLIVER C. COX

Lincoln University, Missouri

PREFACE

In the Foundations of Capitalism I attempted to trace the origins and development of the capitalist system as a distinct form of social organization. The role of leadership of the system is there defined, and its essentially international character is emphasized. Leadership, let us recall, passed from Venice and the Hanseatic League to the United Provinces thence to Great Britain; and, in the process, elemental contributions were made to the institutional structure of capitalism. In the present investigation I shall consider the nature of the leadership of the United States, which is by far the most conspicuous of all.

I have stressed the importance and relationship of backward countries to the leadership of capitalism. It is not always realized that the whole structure of the capitalist market has an indispensable anchor in backward countries. Indeed, the classical economic theory of international trade, especially in its most elegant formulations, all but disregards this elementary fact. It has thus been necessary for me frequently to recur to the role of underdeveloped countries.

On first consideration, also, race relations in the United States may appear to be of only negligible consequence in the structure of America’s leadership of the capitalist system. I have tried to show, to the contrary, that they are among the critical factors. By and large, the economic and political leadership of the South, which emerges from the peculiar context of race relations in that area, provides the most stable element of conservatism in American politics. Both the development of democracy at home and the quality of American leadership of the system, so it happens in practice, tend powerfully to be determined by this conservatism. I have thus sought to give due regard to the place and changing status of race relations.

A word seems in order concerning my reliance on the position of business leaders relative to the major issues of the system. Their wishes, in truth, have constituted the sovereign influence in public policy; and, thus far, the government has adhered to them with only partial or temporary deviations. It seems manifest that this influence is becoming less certain; nevertheless, it is natural and proper in an ongoing capitalist society for the consensus of business executives to become national policy. As Donald K. David, Chairman of the Trustees of the Committee for Economic Development, remarked: It is the business man’s skill, intelligence, and statesmanship that guide our economy. To take one’s bearings mainly from the formal declarations and promotions of these leaders rather than from their derived political expressions should accordingly be more revealing.

In his presidential address to the American Sociological Society (September 1951), Professor Robert C. Angell counseled sociologists, as he might well have social scientists in general, by putting to them the question: Is it fruitful at this stage to work on the development of a theory of international integration? Until now sociologists have theorized about...local communities or national societies...It is deplorable that relatively few sociologists have appreciated this enormous challenge...It is my conviction that we must repair this negligence...Neither those that come after us in sociology, nor our fellow citizens of the present, will forgive us if we fail to make the best contribution to the creation of a world society.

Clearly, this assignment conjures up the dreaded slough of value premises. Is the motive behind excursions in macro-economics or sociology ax-grinding or a legitimate interest in understanding? The suspicion, normally associated with matters involving societal policy, should be incurred with grace by those who think that social science must deal ultimately with social change. It shall be necessary in the present venture to evaluate public policy and personalities as they seem to bear upon American leadership of the system. Some of the data are current and hence likely to be unstable; but not, I think, to the extent of nullifying analyses of major trends. Then, too, the fact that different American executives have defined the international role of the United States in almost diametrical terms should put us on guard about characterizing any policy as eternally American or un-American. I hope that my bias, if there be any, will be in favor of human welfare as one student of society sees it.

Capitalism, more so than any preceding civilization has taught modern man that cultural progress, even in forms of social organization, is a thing of positive value, that such progress may contribute interminably to human comity and well-being. But we know also that major changes in social systems have almost always been fiercely resisted. There are understandable reasons for this. The strength of the opposition to societal change, therefore, cannot be taken as the critical element in determining the researcher’s point of view. It seems to me that his duty as social investigator is to burrow through the complexity of factual material to discover viable social processes, to define them as clearly as possible, and then to point out the factors or derive the theory involved in their development. Moreover, the social scientist who studies problems of social change must either strive to foresee or remain maverick historian.

I am indebted to my colleagues in the social sciences, both in and out of Lincoln University, who discussed with me various aspects of this subject: and especially to those who favored me with divergent interpretations which, perhaps unfortunately, I have not always seen my way to heed. In any extrapolation of social movements, of course, one must rest his case with time, the sovereign keeper of the answers to all such secrets. For patient assistance with the typescript I owe Mrs. Jean I. Rauch many thanks.

INTRODUCTION

Two forces, a separative and an integrative drive, operate simultaneously in the capitalistic system. The various units of the system, the nations and dependencies, are at once driven centripetally into individualistic preoccupation with territorial and productive interest; and, outwardly, by concern for their diplomatic and bargaining position in the system. These forces are so inter-related that a capitalist nation is inconceivable outside the capitalist system. Since the units tend to establish themselves in a power gradient, the nation at the top is manifestly in the position of primary influence. This tendency of capitalism to form a highly integrated, universal structure is perhaps its most remarkable trait.

It may not be amiss to say at this point that capitalism is by all odds the supreme cultural invention of mankind. It has accomplished a breakthrough of development and progress such as no other culture has ever approached. Previous civilizations either advanced toward static dead-ends or attained pinnacles of grandeur only to decline and vanish altogether. What, the question naturally comes, is the reason for this difference?

It is indeed a riddle with which many learned minds have struggled. Capitalism, for one distinction, is uniquely organized from its center in a global network of societies chiefly of business entrepreneurs; and, for another of elementary significance, it is a system which has succeeded in deflating and harnessing the hitherto intractable forces of religion thus overcoming the mastery of belief over the thoughts of men. Capitalist man, as compared to his brothers in all preceding societies, is uniquely rational and practical in his attitudes toward wealth-getting and culture building.

From the time of its initiation some fifteen hundred years ago, mainly by refugees on the desolate Venetian islands, up to its present awesome flowering in the United States, capitalism has had a continuous and spectacular growth. Since the fall of the Roman Empire in the West all the great cultural triumphs of mankind have either emerged from leading capitalist societies or have been influenced by forces generated in them. The recognized leaders of the system before about 1500 A.D. were Genoa, Florence, and especially Venice in southern Europe; and the Hanseatic League of cities with Lübeck as its focus in the North.

During the sixteenth century the United Provinces emerged as the creative center of capitalism so that by 1650 the system decidedly took its bearings from Holland. This leadership was, however, shortlived. Within a hundred years England had out-distanced the smaller country and taken the torch which she indisputably relinquished to another only after the First World War. It was at this time that the United States swiftly became conscious of her paramount responsibilities in the capitalist system.

It is necessary to bear in mind that an inherent characteristic of the capitalist system is its boundless scope. To conceive of it as being circumscribed in some national economy is to misapprehend all its typical traits. Capitalist economies must either expand abroad or stagnate. They cannot be shut-in like feudalism. Most of the major errors of classical and Marxian economics are rooted in an implied or expressed assumption that capitalism can be conceived of as a closed system. The interrelated societies of the system in their various stages of development, have unequal power and unequal opportunities in the market. Thus leadership of the system implies particularly dominance in its most coveted foreign markets.

The question of national position in regard to world markets has been the principal bone of contention in all the great capitalist wars. The Genoese and Venetians fought savagely over it in the Mediterranean; the Dutch and the Hansards measured power for the prized Baltic trade; and the English in turn had to defeat both the Dutch and the French before they could feel reasonably secure in their fabulous American, African, and Asian markets. By 1914 the Germans had presumably overtaken the English in both military power and capacity to exploit resources of the great imperialist areas. Their ambitious bid for superior world power thus followed naturally.

But Germany’s logical reach for leadership of the system was more than matched by the counterpoise of an even more robust aspirant. It was Germany’s misfortune that she and the United States should come of age at the same time; and the critical out-come of her abortive endeavors in the First World War was a vast accretion to America’s prestige and economic standing. As a consequence American leadership of the system was explicitly conceded.

But the latter fact did not finally put to rest German aspirations to undercut the status quo, Accordingly, this nation made another desperate attempt to expand abroad. The effort left capitalist Europe in such a state of prostration and bankruptcy, and it led to so great an enhancement of the stature of the United States that not even the wildest dreams of any other capitalist power could excite any reasonable hope of supplanting her as leader of the system. America, then, has become not only the most powerful, magnificent, and incontestable leader the capitalist system has ever known but also, apparently, the terminus of the development.

The tragedy of American leadership seems to be its inheritance of an over-aged system. All the earlier leaders from Venice to Victorian Britain sat proudly at the head of an expanding, highly productive, universalistic organization. Its wonderful automaticity startled and bewitched the economists. International competition and rivalry without quarter were an exhilarating experience among the leading nations. Victorious wars always more than paid their way. That there was room enough in the world to accommodate a philosophy of national self-interest was manifested in the stimulating game of Machiavellian diplomacy. It was, indeed, in this tradition that the youthful giant of the Western Hemisphere assumed leadership.

During the grueling conflict of World War I, England, France, and Germany were intensely preoccupied with the fighting. This situation, as we shall show in due course, provided the American commercial community with an unprecedented opportunity to make hay. The rich markets of South America, Asia, and even Africa now became exposed and inviting to the plethora of goods from American factories and farms bulging with over-expanded capacity. The obvious strategy was to move in quickly before the old rivals could catch their breath and return to their regular commercial war after the War. I have essayed to show how reliance on this hitherto normal economic process of the capitalist system eventually led to frustration and disillusionment. Before the business community had any realization of it, capitalism had already lost its characteristic elasticity and capacity to accommodate traditional rivalry among its major nations.

After the rude shock of the great depression, the American economy revived under the stimulus of the Second World War and continued to expand. By 1957 its gross national product had reached the phenomenal height of over $400 billion and was still rising apace. Prosperity among the people was almost everywhere apparent. This fact seemed to some men of influence to constitute a new variety of capitalism, a hybrid dubbed people’s capitalism. To illustrate, a group of distinguished scholars and business leaders concluded in 1956: Because we still think in terms of concepts formed under the conditions of the nineteenth century, we have to a great extent failed to recognize that we possess in America today a system which in no small measure combines the dynamic values of capitalism with the wide distribution of benefits commonly associated with socialism.{1}

All ascendant capitalism, however, may be thought of as people’s capitalism. The people, in then own degree, of every preceding leader capitalist nation have been able to see themselves as the most prosperous in the world. True, they have almost invariably had to put up a more or less frenetic struggle for a larger slice of the national-income pie, but the significant fact is that the per-capita product has always been relatively large and consequently, plentifully available. In their understandable desire to extol the virtues of capitalism the exponents of people’s capitalism seem to have succumbed to the common error of assuming a closed American economic order. And still more pertinent is the idea that American capitalism has achieved the critical goal of socialism though the means have not been stressed.

If it is recognized that the internal economy of the United States is inseparably tied into a world system, then not only its progressive dependence on military expenditures but also its relationship to the extremely low standard of living in the back ward countries of the system would readily become apparent. It is easy to see how the welfare of such countries as Great Britain, France, and West Germany, affects the interest of the United States. Today their military posture seems to concern us most.

But military alliances are not of the essence of importance in the capitalist system. It is the capacity of these advanced countries to survive economically, which tells the ultimate story; and this depends upon every cubit of colonial and semi-colonial territory: from the stone-age depths of the Belgian Congo to the gory streets of French Algeria and Cyprus. The United States as a consequence of its leadership, sits at the top of an international structure which rests upon a broad base of backward economies.

But the American economy has undergone changes far more significant than that of wider distribution of income. It has apparently lost its normal capacity to shake off depression. Intrinsically socialist means such as defense spending, farm-price supports, and public works expansion are now looked to for relief. These are unknown to traditional capitalist economies. The system itself has probably finally relinquished great areas of the world to socialist experimentation, while the remainder of the backward countries have steadily grown restive under traditional capitalist influence. Even emphasis on the celebrated plane of living in the United States may have a negative effect upon the minds of the depressed peoples in their urgent effort to find a way out of their immemorial state of poverty. As one Asian writer puts it:

The American, with his wonderful standard of living, cannot understand why anyone should embrace communism. The Asiatic, more and more...cannot understand why he shouldn’t. What else is there for him?

To the Asiatic sunk in the abyss of unrelieved poverty, the ‘Voice of America’ must seem like a voice of the man from the moon....Propaganda about the American way of life is money wasted in Asia. Those who listen to it do not need it; they are already pro-America. Those who should listen cannot understand what the Americans are talking about. The land, the Communists promise, is going to belong to them. That’s all they need to hear. That’s all they need to know.{2}

There are many individuals of unimpeachable integrity, some of them in high office, who sincerely believe that the revolutionary changes taking place in the world today are leading precisely to that state of affairs so tartly depicted in George Orwell’s burlesque, Animal Farm. Perhaps this frame of mind may be written off as a tribute to the collective illusions of our time. It clearly becomes a matter of profound and tragic concern, however, when political leaders of international responsibility rest their decisions upon it.

An even more pervasive view is that the changes are but transitory, that there should be no reconciliation with them because they involve at most only an eddy in the even progress of capitalist development, and that a military victory of the kind recently achieved over active fascism is all that is necessary to eliminate the cliques of miscreants in Russia and China and thus to restore capitalist peace and assurance. It is doubtless some such general orientation of dominant American thought which accounts for the periodic surprise and bewilderment induced by such events as the pertinacity of the Russian people during World War II, the debacle of Chiang Kai-shek and his regime on the Chinese mainland, and the scientific achievement marked by the launching of the first earth satellite. The prime disadvantage of this psychological set seems to be its tendency to obscure the new social realities, and thus encourage reliance on the indwelling logic and legality of the passing system. Victorian convictions about the status of capitalism still seem to becloud western thinking in current international transactions.

In this essay I have sought to identify the problems involved in the transformation of capitalism. It has been the lot, unfortunately if you will, of the United States to have inherited leadership of the system at that very moment in its history when its mechanisms have become fundamentally and irremediably disrupted. Its present aches and pains of transition are closely associated with, though not mainly induced by, the global movement toward planned economies. To some readers my emphasis may seem skewed because I have left the glaring failures and shortcomings of socialist development out of focus. There are two reasons for doing this: (a) the career of capitalism is presently my principal concern, (b) analysis of the two systems of social phenomena seems to require distinct approaches.

The following figure may suggest the difference. The complaints and disorders of capitalism are those of the aged; and, thus far at least, no elixir has been found to unloose the disabling grasp of time. Some of the many hormonal shots already administered have tended to show up as an additional burden on the heart of the system.

On the other hand, the troubles of the planned economies are those of infancy and childhood. They involve problems of passing the worst; set-backs due to ignorance and foolhardiness; and stoppages resulting from blows administered in contests with oldsters. The new system displays some ugly scars left by bums from deliberately playing with fire. But underneath it all there seems to surge the irrepressible recuperative vigor of youth. The study of the development and of the social pathologies of modern socialism thus seems to call for a different set of hypotheses.

But capitalism, let us reiterate, is not moldering away; it is changing at an accelerated pace. It seems not amiss to think of the system in mid-twentieth-century as experiencing its chrysalis stage—from all appearances something to mourn over but in reality the harbinger of new life incomparably more dynamic and socially gratifying. According to our lights, we should expect the system to be transformed into a world of planned regional economies; which will, by rational government, utilize more effectively the invaluable scientific and technological legacy of capitalism. These regions will apparently derive their motivation mainly from an inter-cultural stimulus of cooperation and competition; and success will be gauged by comparative growth and development with the resultant quality of human beings regarded as basic. Human beings, of course, will develop pari passu with their culture.

Already regional configurations seem to be emerging. One may list tentatively: Europa, Latin America, North America, Russia, China, Pan Africa, India, Indonesia. The very geography of this restructuring is manifestly out of agreement with the territorial pattern of capitalism. As we shall hope to show, it is mainly resistance to the on-going transformation in all its significant aspects besides the stupendous difficulties inherent to the very processes of social mutation which cause capitalism under contemporary leadership to seem a drag upon world progress. In fact, merely to describe these phenomena, which must needs be our principal concern, is perhaps to appear to be critical of the changing culture.

CAPITALISM AND AMERICAN LEADERSHIP

CHAPTER I — CAPITALIST POSTURE OF THE UNITED STATES

THE QUESTION OF UNIQUENESS

It has been frequently remarked that American society is distinct from all others; that it is a unique form of capitalism. This idea has become traditional in the United States. Max Farrand relates that when the Constitutional Convention was over, James Wilson of Pennsylvania said: After the lapse of six thousand years since creation of the world, America now presents the first instance of a people assembled to weigh deliberately and calmly, and to decide leisurely and peaceably, upon the form of government by which they will bind themselves and their posterity. In the same vein Gouverneur Morris declared that the whole human race will be affected by the proceedings of this Convention.{3} Thus the belief goes back to the nation’s hoary past.

There can be little doubt but that the framers of the Constitution felt a great responsibility, and that there were manifestly vast spaces opened up to them as innovators. It should be remembered, however, that the principles upon which they operated had already been firmly established in the capitalist world. There was precedent, drawn upon, for both the independence movement among the Colonies and for the proposed federal union. As far back as the early capitalist communities in Italy there had developed a tendency in stronger cities either to subordinate closely situated commercial rivals or, when this was not feasible, to unite with them for the common good. The new states were faced with alternatives such as these.

The characteristic problem confronting the confederation of liberated colonies was first successfully met by Venice in 697 at her assembly of twelve semi-independent communities. We may recall that each of these groups had elected their local tribunes in popular assemblies in which every citizen might speak and vote, thus constituting themselves into political units resembling in their democracy the New England town meeting.{4} The same fundamental cause of American unity also operated in this primordial capitalist situation. There were inevitable rivalries, due to the feuds which they had inherited from their parent cities, or to commercial competition, or to different ideals in government.{5} At the seventh-century Venetian convention, therefore, a doge or chief magistrate was elected, and local authority—especially in foreign affairs—was subordinated. As we have noticed elsewhere, a similar drive for central authority led to the formation of leagues of capitalist cities, of the United Provinces, and of the British nation.{6}

DIRECT INFLUENCES

Indeed, the influence of previous developments was quite direct. The American colonists were immediate descendants of advanced capitalist populations. They came mainly from urban communities in England and Holland after 1600. These communities were among the most highly developed in the world, hence the immigrants brought with them capitalist culture in an advanced stage. The Dutch, especially, had already travelled the road, though far more hesitantly because of its relative newness, which subsequently led to the American Constitution. Benjamin Franklin recognized the power of capitalist culture when he wrote: Had the Netherlands been peopled from Spain, the worst of oppression had probably not provoked them to wish a separation of government.{7}

Franklin was intimating that, on the basis of the Dutch example, the colonists were capable of pulling out on their own. Indeed, it may be shown that the struggle for independence from Britain and the events which led up to it were closely paralleled in the earlier movement for the nationalization of the United Provinces. The drives for religious freedom, for economic self-determination, for political autonomy and against feudalistic pretensions were alike in both countries. When, in 1805, David Macpherson, a British economic historian, referred to Holland as the republic in the whole world most similar to the [United States] in religion, in manners, and even in the events by which both obtained independence,{8} it was Holland which took precedence. This republic was not only a forerunner but at that time also a nation of superior status in the capitalist system. Her institutions had international prestige; they were thus well worth copying.{9}

AMERICA’S CONTRIBUTION

If it can be accepted that England, in constituting the first integrated capitalist nation and in industrializing capitalism, crystallized movements that were already active in the system, and therefore cannot be said to have initiated fundamental changes in capitalist society, contributions of this kind are even harder to find in the United States. The United States may be properly regarded as the lusty child of an already highly developed capitalism. As Henry C. Emery observes: The nation begins its new life with its period of apprenticeship already past....For this reason an account of the economic growth of the United States is rather a chronicle of material achievement than a history of economic institutions.{10} We do not, on this account, look to America for an understanding of the nature of basic capitalist institutions or their societal organization. These have been inherited, accommodated, and perfected in America.

And yet we must agree that the United States was the first deliberately constituted modern nation. It had the best of capitalist experience from which to choose; and its constitution, like the charters and promissioni of some of the leading capitalist cities, became in its turn a model for the writing of fundamental laws of future republics. In its formation of the nation the ruling class{11} was under no critical necessity to take into consideration the interest of feudal estates; and neither the political nor economic welfare of the masses of the people was originally a matter of decisive concern. Only Venice was favored with comparable freedom of action. Beyond this, the vast natural wealth of the United States and the enormous potential domestic market with its imbalance of Northern and Southern economies provided a situation favorable to industrialization. Americans have thus gradually come to lead the world in technological innovation and mechanical production.

DOMESTIC DEVELOPMENT

Before the opening of the twentieth century the United States was heavily engaged in internal expansion, a movement, which, as we have observed, was less spectacular than the overseas expansion of other leading nations, but no less important for an orderly process of capitalist development. Its extent may be indicated by a few well known statistics. In 1790 the area of continental United States was approximately 892,000 square miles, already twice as large as the area of the colonies; in 1850 it was 2,997,000, and in 1900 3,026,000. Territories and possessions added about 597,000 square miles.{12}

The population was also developing in typical capitalist fashion. There was not only a rapid increase in total numbers but also marked urbanization and concentration in the major metropolitan areas. In 1790, 5 per cent of the population lived in urban places of 2,500 and over; in 1900 about 40 per cent; in 1920, 51; and by 1950 about 65 per cent. The data also show a constantly decreasing percentage of the population employed in agriculture, and an upward trend for employment in manufacturing and commerce.

By 1914 the United States had brought its superb natural resources within reach of intensive exploitation. Under the stimulus of its foreign-trade outlets, the financial assistance of the older capitalist nations, and a flexible system of protective tariffs, the nation developed a magnificent network of transportation and communication so that its mines, factories, and farms became integrated into an effectively producing organism having easy access to its great seaports.

By this time also, if not earlier, it had become patently obvious to many business leaders that further internal expansion depended upon far greater emphasis on an ever widening foreign commerce.{13} In this, too, European experience was not overlooked. Germany and England were considered models of great manufacturing nations whose fundamental practices had to be at least selectively copied if American industry would advance as rapidly as it should. In 1914, M. A. Oudin of the General Electric Company, in a suggestion to American business men to study closely German methods, said: Germany, which in the last few years has surpassed the United States in the extent of its exports of manufactures, owes its position and the magnificent volume and character of its trade to the efficiency and discipline of its human working units, the restless energy and intelligence of its manufacturers, and its ability to offer all peoples just what they wish and at a price within their means.{14} Thus with examples abundantly available, major entrepreneurs of the United States proceeded to step up their campaign for expansion abroad.

The War accentuated this movement. It accelerated the growth of American capitalism and impressed upon its leaders as nothing had before the need for external markets. The War, said J. W. Hook, President of the Allied Machinery Company of America, in 1919, has had a permanent effect upon America’s aspect toward foreign trade...Export markets must be sought.{15} These leaders recognized the apparent over-saturation of the domestic market and ominously warned the nation about its consequences for a continued high level production. They analyzed the trends of foreign trade to show the declining significance of agricultural products relative to manufactured goods in total American exports, and, conversely the increase in imports of raw material relative to manufactures. The implications of the argument were easily understood and generally accepted. Thus by 1924 the American business community reached the following settled conviction:

Foreign trade is an absolute economic necessity. Without it our industries would wither and dwindle, and we should be unable to comply with the fundamental condition of prosperity—steady occupation for our workers in all lines, American productive capacity, both agricultural and industrial, is now so great, that in order to maintain remunerative occupation we must have steady and ready access to foreign markets for the sale of part of our products, and at the same time we must have constant and large supplies from foreign sources of numerous kinds of raw materials.{16}

This, then, may be regarded as the stage of mature capitalism in the United States. The country was now decided upon its mission to enter the foreign market with determination and readiness to accept any economic challenge of the major powers.

THE OPPORTUNITY

While the War created productive capacity large enough to stir up the commercial zeal of American capitalists, it also presented yawning economic opportunities abroad. The other leading powers, Great Britain, France, and Germany, were so completely engaged in fighting that their foreign markets and obligations became seriously neglected. The fact that the United States eventually became one of the Allies did not dampen the enthusiasm of American business men to move quickly into areas of weakened competition to sew them up for post-war control. That was traditionally normal capitalist practice. We should clear away all legal obstacles, said President Wilson in his Annual Address to Congress, Dec. 5, 1916, because the opportunity is here and may escape us if we hesitate or delay. And in the same tenor one business magnate had already described the obvious situation:

Now, in a most unexpected way, [he said], the chance of a century has come to us, for, whatever the political results of the war may be, the economic results for ourselves may prove immensely advantageous. To improve the opportunity thus offered is the great task and duty of the hour, and upon the vigor, intelligence and foresight shown by our manufacturers and traders at this time of supreme test will the future course of our economic development and prosperity for generations depend.{17}

The area which was deemed meet likely to yield permanently available markets was not, as we have noticed, in Europe but rather