International Economic Disintegration

CHAPTER XVIII THE DRIVING FORCES OF INDUSTRIALIZATION TO-DAY

AFTER having mentioned the changes in rational localization, we now slightly vary the question by asking what, regardless of rational localization, are the real driving forces of industrialization to-day which foster a deliberate policy of industrialization. They may be arranged under the following headings:

(a) Agricultural overproduction, which means that for various reasons—especially on account of excessive agricultural protectionism on the part of the old industrial countries—the relation between agrarian and industrial prices has shifted in favour of the latter. This shift is surely one of the most potent factors making for the industrialization of agrarian countries.1

(b) Agrarian overpopulation, i.e. the congestion of people in agriculture to such an extent that there is poverty and unemployment on the open country. This is, indeed, a factor of industrialization of which the classical examples are in the history of industrialization in England and Germany. It seems that the existence of a rural proletariat has always been the prime condition for the industrialization of every country and that this is the ultimate origin of the industrial proletariat with all its formidable problems. The surplus of rural population may have two causes: (1) the continuous subdivision of farms under the pressure of a high birth-rate and a limited supply of arable land or (2) the prevalence of latifundia. The first condition may be found to-day in most countries of Eastern and South-Eastern Europe (especially in Poland, Bulgaria and Yugoslavia), whereas the second is represented by the classical cases of England and Germany. The same phenomenon can be studied again to-day in countries like Hungary and Spain.2 It is clear that in the latter case industrialization is by no means the only alternative. Since it is the prevalence of latifundia which is artificially decreasing the labour capacity of agriculture, it is probable that an agrarian reform is an even more rational policy for relieving the rural population pressure than industrialization. But even in the former case of an overcrowded peasant agriculture much can be done to increase the labour capacity by rationalizing and intensifying agriculture.3 Moreover, it should not be forgotten that industrialization tends to increase rural overpopulation to some extent by plugging up the outlet which surplus labour had formerly found in handicraft and by-occupations. Lastly, it must be mentioned that the drastic restriction of immigration everywhere to-day has greatly contributed to rural overpopulation in many countries, and therefore to the industrialization of agricultural states.4

(c) The present disturbances in the mechanism of international trade are clearly influencing the industrialization of new countries, though in a way not easy to define. To some extent they are working in favour of industrialization in various ways, among which the influence of pre-war bilateral clearing agreements between Germany and some South American states may be mentioned. By such agreements Germany was compelled to pay for the imports of raw materials directly by industrial exports. Since Germany, however, tended to give in exchange those products which contain a maximum of national skilled labour, it preferred the export of machines and other production goods of high specific value. In other respects, the present disturbances of international trade are hampering industrialization, not only because of the lessening of capital imports, but also because of the rise of prices and the cost of living which bilateral clearing agreements are apt to engender.5

(d) Theories and ideologies in favour of industrialization. Under this point the remarks made in the beginning of this part on the peculiar sociological climate of present-day industrialization should be further elaborated. It is also here that an analysis of special theories, like Manoilesco’s, finds its appropriate place. Likewise the theories and ideologies reflecting the attitude in the old industrial countries toward the industrialization of new countries are worth mentioning in this connexion.6

 

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7 T. E. Gregory, Gold, Unemployment and Capitalism, London, 1933, p. 199.

8 Let us note that both of these conditions are equally pathological and detrimental to a sound structure of agriculture. Where peasants are proletarianized, peasantry loses much of its sociological value. Under these conditions there develops easily that type of mean and niggardly small-peasant which many make the mistake of lumping together with the general peasant farmer type.

9 This point, on which all observers of agriculture in South-Eastern Europe agree, is well illustrated by the fact that the proportion of the rural population, which on the present basis of agricultural technique is really superfluous in Bulgaria, has been estimated at one third (Oskar N. Anderson, Struktur und Konjunktur der bulgarischen Volkswirtschaft, Jena, 1938, p. 9.

10 We must also remember that, given certain conditions, agricultural settlement may involve a much greater immediate outlay of capital than the erection of industries. That seems to be the case in Palestine under the exceptional conditions of that country (cf. K. Grunwald, “The Industrialization of the Near East,” Bulletin of the Palestine Economic Society, vol. vi, No. 3, 1934).

11 Cf. the note in the Economist of 3rd June, 1939, on the hindering of the industrialization of Roumania by the German-Roumanian trade agreement.

12 An attempt to deal more fully with the theories and ideologies of industrialization has been made by the present writer in his article “L’industrialisation des pays agricoles, problème scientifique,” Revue Economique Internationale, vol. iii, No. 1, July, 1938, pp. 131-137. As for the attitude in the old industrial countries it is interesting to note the differences between the various countries—for instance between the more optimistic Germany and the more pessimistic England—and between various groups of interests within the same country. On the latter point cf. Louis Merat, Problèmes coloniaux d’“industrialisation,” Bulletin bimestriel, No. 113, Société Belge d’Etudes et d’Expansion, December, 1938. Manoilesco’s theory has been severely criticized by his compatriot G. Tasca, “Les relations d’échange entre les pays agricoles et les pays industriels,” Mélanges Truchy, Paris, 1938, pp. 508-517.

• 1Cf. my paper “A Value Judgment on Value Judgments” in which I am explaining my attitude in this very important methodological question. It will probably be published in the “American Economic Review.”
• 2The following pages are largely based on a memorandum which the author wrote together with Professor Alexander Rüstow (University of Istanbul) in the summer of 1938.
• 3See also: W. Röpke, Die entscheidenden Probleme des weltwirtschaftlichen Verfalls, Zeitschrift für schweizerische Statistik und Volkswirtschaft, 1938, No. 4.
• 4In current literature there is already some evidence that the understanding of the scientific situation outlined above is growing. See E. F. M. Durbin, “Methods of Research—A Plea for Co-operation in the Social Sciences,” Economic Journal, June, 1938; A. Löwe, Economics and Sociology: a Plea for Co-operation in the Social Sciences, London, 1935: F. Akerman, Das Problem der sozialökonomischen Synthese, Lund, 1938. The essential things have been said on a wider scientific scale by A. N. Whitehead, Science and the Modern World, New York, 1926; and by Ortega y Gasset, El Tema de Nuestro, Tiempo, Madrid, 1923.
• 5See Der deutsche Aussenhandel unter der Einwirkung weltwirtschaftlicher Strukturwandlungen, l.c., pp. 362-363.
• 6The vast literature on this subject has recently been enriched by M. J. Bonn, The Crumbling of Empire, The Disintegration of World Economy, London, 1938; and by Lionel Robbins, The Economic Causes of War, London, 1939.
• 7The purpose of this book is to make a new and more promising approach to the diagnostics of that long-run crisis in international economic relations which is one of the most striking symptoms of the general economic, social, and political crisis of occidental society. I believe that the urgent necessity of such an approach has been enhanced rather than diminished by the outbreak of the war. However, I would betray my own philosophy if I regarded this book as anything more than a mere beginning, an invitation to constructive criticism, and a way of opening or furthering a discussion for which the world seems to be ripe. In submitting this book to criticism, I am not afraid to expose myself as one who believes not only in the scientific legitimacy but even in the utmost scientific necessity of employing a measure of judgments, which is ultimately based on a definite conception of what is wrong with the world, and of what should be done in order to put it right again. Those who are shocked by such an attitude may be reassured that I gave more thought to this methodological problem than I am able to explain on this occasion.
• 8(b) This crisis puts social science in a new situation, which is itself highly critical and which no partial investigation in any field of this science whatever can ignore without running the risk of missing its aim. Nobody conversant with the current development of the social sciences can overlook the fact that the feeling of being on insecure ground is becoming more and more widespread, until even the most tenacious followers of the traditional lines of approach sense the need for reorientation. The growing literature on methodological questions even in countries like England, where it was formerly distinctly unpopular, is a sure token of this scientific situation, as is also the fact that it has been felt necessary to open the present report in such a roundabout way as would have appeared rather strange even five years ago.
• 9As the present historical crisis finds its first, its most painful and its most conspicuous manifestation in the economic sphere, and since the nineteenth century has accustomed us to treat the economic problems as the main ones, it is easy to understand why the crisis is conceived primarily as an economic one and why, therefore, the traditional approaches of economics have been relied upon thus far. Whether or not this traditional conception corresponds to the inner convictions of our scholars and statesmen, it is at least exemplified in the character of by far the greater part of scientific activity in our field. Accordingly, men and means have been mobilized, during the last ten years, on an unprecedented scale. Facts have been piled up sky-high; conferences have been held in endless succession; economic analysis has been brought to an ever greater degree of refinement (and, incidentally, to an ever greater degree of unreality); vast and detailed programmes of research have been elaborated; a complicated machinery of institutionalized science has been set up; and questionnaires have been sent to almost every country and to every section of the population. It would surely be no pessimistic over-statement to say that nobody feels that this hectic activity has brought us any nearer the fundamental diagnosis which alone could serve as the basis for effective therapy.
• 10The real cause of this deficiency in the social sciences seems to lie just in the narrowness of our economic conception and the lack of courage and ability in really synthetic interpretation to connect the economic phenomena with the wider aspects of society. There is, in fact, increasing evidence that the real epicentre of the earthquake does not lie by any means in the strictly economic sphere, but rather that the economic disturbances are only the external manifestations of a deeper organic disease, of which overemphasis on economic matters—a legacy of the nineteenth century—is only one of the many symptoms. If that is true, then it becomes clear that the traditional approach is doomed to failure and that a new point of departure has to be found.
• 11That the development of world economy has been, first of all, a process of intensification is as important as it is evident. It can be deduced from the fact that the most highly developed countries showed the greatest percentage of world trade, which, in view of the reciprocal nature of trade, proves that the bulk of world trade must have belonged to economic interchange within the high-capitalistic sphere itself. This deduction is corroborated by a number of calculations of the relative intensity of this “intraindustrial” economic interchange. One of these calculations, made by the Kiel Institut für Weltwirtschaft und Seeverkehr, shows that the commodity trade between the industrial countries of Europe (Belgium, Germany, France, Great Britain and Ireland, Italy, Austria and Switzerland) amounted in 1913 to 30.2 milliard RM (=$7.2 milliard), which was equal to about one-third of the total reciprocal trade between all industrial and agricultural countries of the world. The same story is told by the calculation that out of average total exports of industrial Europe (comprising the same countries) during the years 1909–1913 slightly more than one half (51%) constituted an exchange of goods among these countries themselves. It is also a well-known fact that such leading countries as England and Germany were practically each other’s best customers. In 1913, for example, exports from the United Kingdom to Germany formed 7.74% of the total export trade of the former (higher than the percentage of any other country except British India), while imports from Germany into the United Kingdom as a percentage of the total import trade (11.56%) were surpassed only by those from the United States. Another very interesting illustration of the same tendency is to be found in the development of reciprocal trade between the two leading industrial countries outside of Europe, i.e. the United States and Japan.
• 12There is no denying the fact that world economy and capitalism have been to a large extent forced upon the “new” countries by political pressure and in some cases—as in the opening-up of China—by undisguised war. The problems thus presented are, at the present moment, far from a universally accepted solution; but it seems clear that no satisfactory study of international economic integration and disintegration could evade them. This holds especially true for one of the many aspects of the problem of economic imperialism—the difficult question of whether and how far extensification and intensification of world economy were, and perhaps still are, correlated to each other. In other words, was it not just the spatial expansion of capitalism which kept the whole mechanism of dynamic development going, by providing more and more new markets for the surplus production which constantly increased as productive technique improved, by giving the necessary stimulus to entrepreneurial initiative and speculative optimism and by allowing the “play” essential for any working mechanism? Allowance must also be made for the possibility that the existence of an economic “frontier” in world economy may have been instrumental in providing that psychological atmosphere essential for the breadth of outlook, which is the basis of a liberal commercial policy. This refers not only to the exploitation of new markets, but also to the opening of overseas territories to human settlement. Thus the vast problem of international migrations would also have to be studied in this context.