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PART II THE ECONOMICS OF A SOCIALIST COMMUNITY
SECTION II The Foreign Relations of a Socialist Community
1 Autarky and Socialism
Foreign Trade Under Socialism
A socialist community, which did not include the whole of mankind, would have no
reason to remain isolated from the rest of the world. It is true, that it might
be disquieting for the rulers of such a state that foreign ideas would come over
the frontiers with foreign products. They might fear for the permanence of their
system, if their subjects were able to compare their position with that of foreigners
who were not citizens of a socialist community. But these are political considerations,
and do not apply if the foreign states are also socialistic. Moreover, a statesman
who is convinced of the desirability of Socialism must expect that intercourse with
foreigners will make them also socialists: he will not fear lest it undermine the
socialism of his own compatriots.
The theory of Free Trade shows how the closing of the frontiers of a socialist community
against the import of foreign commodities would injure its inhabitants. Capital
and labour would have to be applied under relatively unfavourable conditions yielding
a lower product than otherwise would have been obtained. An extreme example will
make this clear. At the expense of an enormous outlay of capital and labour a socialist
Germany could grow coffee in greenhouses. But it would obviously be more advantageous
to procure it from Brazil in exchange for products for whose production conditions
in Germany were more favourable.
2 Foreign Trade Under Socialism
Such considerations indicate the principles on which a socialist community would
have to base its commercial policy. In so far as it aspired to let its actions be
guided purely by economic considerations it would have to aim at securing just what
under complete freedom of trade would be secured by the unrestricted play of economic
forces. The socialist community would limit its activities to the production of
those commodities it could produce under comparatively more favourable conditions
than existed abroad, and it would exploit each single line of production only so
far as this relative advantage justified. It would procure all other commodities
from abroad by way of exchange.
This fundamental principle holds good whether or not trade with abroad is carried
out by recourse to a general medium of exchange—by recourse to money—or not. In
foreign trade, just as in internal trade—there is no difference between them—no
rational production could proceed without money reckoning and the formation of prices
for the means of production. On this point, we have nothing to add to what we have
said already. But here we wish to consider a socialist community, existing in a
world not otherwise socialistic. This community could estimate and compute in money
in exactly the same way as a state railway, or a city waterworks, existing in a
society otherwise based upon private ownership of the means of production.
3 Foreign Investment
No one can regard what his neighbour does as a matter of mere indifference. Everyone
is interested in raising the productivity of labour by the widest division of labour
possible under given circumstances. I too am injured if some people maintain a state
of economic self-sufficiency: for, if they were to relax their isolation, the division
of labour could be made even more comprehensive. If the means of production are
in the hands of relatively inefficient agents, the damage is universal.
Under Capitalism the profit-seeking of individual entrepreneurs harmonizes the interests
of the individual with those of the community. On the one hand, the entrepreneur
is always seeking for new markets, and under selling with cheaper and better wares
the dearer and inferior products of less rationally organized production. On the
other, he is always seeking cheaper and more productive sources of raw materials
and opening up more favourable sites for production. This is the true nature of
that expansive tendency of Capitalism, which neo-Marxian propaganda so completely
misrepresents as the "Verwertungsstreben des Kapitals" ("the drive of capital for
profit"), and so amazingly involves into an explanation of modern Imperialism.
The old colonial policy of Europe was mercantilistic, militaristic, and imperialistic.
With the defeat of mercantilism by liberal ideas, the character of colonial policy
completely changed. Of the old colonial powers, Spain, Portugal and France had lost
the greater part of their former possessions. England, who had become the greatest
of the colonial powers, managed her possessions according to the principles of free
trade theory. It was not cant for English free traders to speak of England's vocation
to evaluate backward people to a state of civilization. England has shown by acts
that she has regarded her position in India, in the Crown Colonies, and in the Protectorates,
as a general mandatory of European civilization. It is not hypocrisy when English
liberals speak of England's rule in the colonies as being not less useful for the
inhabitants and for the rest of the world than it is for England. The mere fact
that England preserved Free Trade in India shows that she conceived her colonial
policy in a spirit quite different from that of the states who entered, or re-entered
the sphere of colonial policy in the last decades of the nineteenth century—France,
Germany, the United States, Japan, Belgium and Italy. The wars waged by England
during the era of Liberalism to extend her colonial empire and to open up territories
which refused to admit foreign trade, laid the foundations of the modern world economy.
To measure the true significance of these wars one has only to imagine what would
have happened if India and China and their hinterland had remained closed to world
commerce. Not only each Chinese and each Hindu, but also each European and each
American, would be considerably worse off. Were England to lose India today, and
were that great land, so richly endowed by nature, to sink into anarchy, so that
it no longer offered a market for international trade—or no longer offered so large
a market—it would be an economic catastrophe of the first order.
Liberalism aims to open all doors closed to trade. But it no way desires to compel
people to buy or to sell. Its antagonism is confined to those governments which,
by imposing prohibition and other limitations on trade, exclude their subjects from
the advantages of taking part in world commerce, and thereby impair the standard
of life of all mankind. The Liberal policy has nothing in common with Imperialism.
On the contrary, it is designed to overthrow Imperialism and expel it from the sphere
of international trade.
A socialist community would have to do the same. It, too, would not be able to allow
areas lavishly endowed by nature to be permanently shut off from international trade,
nor whole nations to refrain from exchange. But here Socialism would encounter a
problem which can only be solved under Capitalism—the problem of ownership of capital
Under Capitalism, as Free Traders would have it, frontiers would be without significance.
Trade would flow over them unhindered. They would prohibit neither the movement
of the most suitable producers towards immobile means of production, nor the investment
of mobile means of production in the most suitable places. Ownership of the means
of production would be independent of citizenship. Foreign investment would be as
easy as investment at home.
Under Socialism the situation would be different. It would be impossible for a socialist
community to possess means of production lying outside its own borders. It could
not invest capital abroad even if it would yield a higher product there. A socialist
Europe must remain helpless, while a socialist India exploits its resources inefficiently,
and thereby brings fewer goods to the world market than it would otherwise have
done. New supplies of capital must be utilized under less favourable conditions
in Europe, while in India, for want of new capital, more favourable conditions of
production are not fully exploited. Thus independent socialist communities existing
side by side and exchanging commodities only, would achieve a nonsensical position.
Quite apart from other considerations the very fact of their independence would
lead to a state of affairs under which productivity would necessarily diminish.
These difficulties could not be overcome so long as independent socialist communities
existed side by side. They could only be surmounted by the amalgamation of the separate
communities into a unitary socialist state comprehending the whole world.
It is superfluous to dispute with the autarky plans,
which have been most zealously argued by the naive litterateurs of the "Tat" circle (Fried,
Das Ende des Kapitalismus, Jena 1931). Autarky would probably depress the standard of life of
the German people incomparably more than could the Reparations burden multiplied a
In judging the English policy for opening up China,
people constantly put in the foreground the fact that it was the opium trade which gave the
direct, immediate occasion for the outbreak of war complications. But in the wars which the
English and French waged against China between 1839 and 1860 the stake was the general
freedom of trade and not only the freedom of the opium trade. That from the Free Trade point
of view no barriers ought to be put in the way even of the trade in poisons, and that
everyone should abstain by his own impulse from enjoyments harmful to his organism, is not
so base and mean as socialist and anglophobe writers tend to represent. Rosa Luxemburg, Die
Akkumulation des Kapitals (Berlin, 1913), pp. 363 ff. reproaches the English and French that
it was no heroic act to defeat with European weapons the Chinese, who were provided only with
out of date arms. Ought the French and English also to have taken the field only with ancient
guns and spears?
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