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J.A. Hobson

J.A. Hobson, 1858–1940, English economist and imperial critic, widely popular as a lecturer and writer. Criticizing classical economics, which centered on inflexible, mathematical laws, he held that economic theory was bound up with the ethical problems of social welfare and should be a guide to reform. The economic measures he supported prefigured the more fully developed ideas of John Maynard Keynes. In Imperialism (1902) he liked imperialism to the excesses of capitalism. His other works include The Evolution of Modern Capitalism (1894), The Economics of Distribution (1900), The Economics of Unemployment (1922), and the autobiographical Confessions of an Economic Heretic (1938).

Table of contents

Historical Background, New Imperialism

In a scramble for overseas markets between the Franco-Prussian War and World War I, Europe added almost 9 million square miles—one-fifth of the land area of the globe—to its overseas colonial possessions. Ushering out the cavalier colonialism of the mid-Victorian era, the age of Pax Britannica, the late nineteenth century Romantic Age was an era of "empire for empire's sake". But scholars debate the causes and ramifications of this period of colonialism, dubbed “The New Imperialism” to distinguish it from earlier eras of overseas expansion, such as the mercantilism of the sixteenth to eighteenth centuries or the liberal age of ‘free trade’ colonialism of the mid-nineteenth century.

Brief Overview:

British liberal writing at the time of the fierce debate on imperialism during the Boer War, observed the spectacle of the ‘Scramble for Africa’ (see colonialism in Africa[?]) and emphasized changes in European social structures and attitudes as well as capital flow, though his emphasis on the latter seems to have been the most influential and provocative. His so-called accumulation theory suggested that that capitalism suffered from under-consumption due the rise of monopoly capitalism and the resultant concentration of wealth in fewer hands, which apparently gave rise to a misdistribution of purchasing power. Logically, this argument is sound, given the huge impoverished industrial working class then often far too poor to consume the goods produced by an industrialized economy. His analysis of capital flight and the rise of mammoth cartels later influenced Lenin in his Imperialism: The Highest Stage of Capitalism, which has become a basis for the modern neo-Marxist analysis of imperialism.

Synopsis of Accumulation Theory:

Long-term economic trends led Britain, and to a lesser extent other industrializing nations following a similar course of development, such as the United States and Germany, to be more receptive to the desires of prospective overseas investment. This is the case even in Britain with an industrial sector arguably declining due to the rise of finance.

Amalgamation of industry and banks, through their connection with industry, enabled finance to exert a great deal of control over the British economy and politics. This prompted imperial critic J.A. Hobson to conclude that finance was manipulating events to its own profit.

During the period of “cut-throat” competition of the mid-Victorian era, produces became aware of the advantages of consolidation, in the forms of larger corporations, but also of mergers and alliances of separate firms, such as mass-production, lobbying power, and efficient union busting. To create and operate such industrial cartels required larger sums than the manufacturer could ordinarily provide, resulting in a new capitalist stage of development. By the 1870s, London financial houses thus achieved an unprecedented control of industry, contributing to an increasing concerns among elite policymakers regarding British ‘protection’ of overseas investments—particularly those in the securities of foreign governments and in foreign-government-backed development activities such as railroads. Although it had been official British policy for years to support such investments, with the large expansion of these investments after about 1860 and with the economic and political instability of many areas of high investment (such as in Egypt), calls upon the government for methodical protection became increasingly pronounced in the years leading up to the Crystal Palace Speech. After the more gentlemanly service sector of the economy (banking, insurance, shipping) became more prominent—possibly at the expense of manufacturing—the influence of London’s financial interest began rising precipitously. The ‘cleaner’ financial sector probably had an effect the decisions taken by Britain’s disproportionately aristocratic bureaucrats and parliamentarians. Late-Victorian political leaders, most of whom were stockholders, shared a common culture with the financial class.

Theoretical Causes:

Hobson and later Lenin linked the problem of shrinking continental markets driving European capital overseas to an inequitable distribution of wealth in industrial Europe. Lenin and that bourgeois economist to his liking contended that the wages of workers did not represent enough purchasing power to absorb the vast amount of capital accumulated during the Second Industrial Revolution. This charge was not baseless, and its logic is even evident in the causes of the interwar Great Depression beginning in the US, which had garnered the coveted center of the world’s capitalist economy following the Great War, not just the Long Depression of 1873-96. For instance, a fundamental misdistribution of purchasing power during the great industrial expansion of the post-World War I era might have been the Second Great Depression’s main contributing factor.

Other Theories, Recent Interpretations:

Porter, however, notes that Britain, “Struck with outmoded physical plants and outmoded forms of business organization… now felt the less favorable effects of being the first to modernize.” He contends that “a kind of vicious circle had been set up, with domestic industry lagging because capital was going elsewhere because industry was lagging.” Unlike Hobson, however, who links under-consumption to a misdistribution of purchasing power, Porter argues that “the best thing that Britain could have done to correct [its balance of payments] would have been to make her export industry more competitive—improve her methods of manufacturing and marketing in order to sell more abroad.”

Contemporary historians, such as Bernard Porter[?], P.J. Cain[?], A.G Hopkins[?] do not downplay the influence of ‘the City’s’ financial interests either, but contest Hobson’s conspiratorial overtones and ‘reductionisms’. Nevertheless, they often acted as repositories of the surplus capital accumulated by a monopolistic system and they were therefore the prime movers in the drive for imperial expansion, their problem being to find fields for the investment of capital.

The Age of Imperialism was, to an extent, the by-product of an undisputable flight of capital. Imperialism, in a sense, heralded a consistent, but gradual internationalization of economic connections from what contemporary World Systems Theorists, Dependency Theorists, and neo-Marxists would call the ‘core’ of the industrial countries to an overseas ‘periphery’.

Such theory is justified when one considers this broader movement of European capital from domestic markets and to other industrial states or overseas in self-governing settler colonies and nominally sovereign states in Asia and Latin America, aside from formal colonies. Imperialism, in a sense, does not merely refer to the appropriation by the western nations of vast expanses of Asia and Africa. New Imperialism was just one means of many of securing overseas markets.


But Hobson’s analysis of over-accumulation and under-consumption alone hardly explains why less developed nations with little surplus capital, such as Italy, participated in colonial expansion. Nor does it fully explain the expansionism of the great powers of the next century—the United States and Russia, which were in fact, net borrowers of foreign capital. Opponents of his accumulation theory also point to many instances in which foreign rulers needed and requested Western capital, such as the hapless modernizer Khedive Ismail Pasha.

But those who disagree that imperialism was sort of a symptom of a gradual movement of surplus capital from a center to an overseas periphery, who contend that export of capital seems to have little direct connection with territorial expansion, point to the United States. Historian and imperial critic William L. Langer[?], for instance, who emphasized the roles of nationalism and mass psychology in the rise of New Imperialism’s empire for empire’s sake notes, “At that time of American expansionism the United States was still a debtor nation, importing rather than exporting capital.” They also point to the expansionism of Crispi’s Italy and Meiji Japan, which were, in many respects, following Britain’s lead although their economies had not yet grown so intrinsically dependent on overseas financial returns. The liberal nationalism Italian figures such as Mazzini, Cavour, and Garibaldi strongly favored modernization, which was associated with the British. Italian, and to a lesser extent French imperialism was often motivated by the desire to ‘catch up’ with Britain economically and culturally.

Recent responses to counterarguments:

As mentioned, his observations seem to hold the most weight with regard to Britain, which remained the world’s largest financial capital, as well as its largest lender, with almost $20 billion in foreign investments by 1914—slightly more than those of France, Germany, Holland, and Belgium combined. In fact, Britain still might have even been ‘ahead’ of its industrial capitalist competitors. Just as industrial capitalism had replaced mercantilism and commercial capitalism in the eighteenth century, finance capitalism[?] supplanted industrial capitalism in the late nineteenth century. Britain may just well have been the world’s first post-industrial economy. It remained the world’s largest financial capital, as well as its largest lender, with almost $20 billion in foreign investments by 1914—slightly more than those of France, Germany, Holland, and Belgium combined. In the 1890s, nevertheless, 92 percent of the new capital Britain invested abroad went outside Europe, and half of it went to such developing and open markets in Africa, the Middle East, the Indian Subcontinent, Southeast Asia, and the South Pacific. As the forerunner of modern Europe, Britain might have been under uniquely great pressure to offload its surplus capital after already having industrialized. But given new political developments on the European continent, drive toward formal imperialism easily reverberated across the modern world.

Protectionism and formal empire, characteristic of an era neo-mercantilism during the age of New Imperialism, thus became the major tool of ‘semi-peripheral’, newly industrialized countries, such as Germany, seeking to usurp Britain’s position at the ‘core’ of the global capitalist system. In Britain, a strategically minded and opportunistic Disraeli, thus ushered in this age of empire for empire’s sake in reaction to both depression at home and a shifting balance of power on the Continent with his watershed Crystal Palace Speech of 1873. Over-accumulation of surplus capital, in this sense, and the rise of national inter-capitalist competition, aided by continental political developments, were thus the primary causes of New Imperialism.

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