Web Assignment 1: Hobson vs. Schumpeter

We have read two short books called "Imperialism": J.A. Hobson's and Joseph Schumpeter. They are engaged in an intellectual cage match with respect to the origins and destiny of imperialism--the western European (and American, and Russian) establishment of formal or informal empires over pretty much the whole world back at the start of the twentieth century. Hobson--the socialist--thinks that the growing progress of capitalism will intensify imperialism. Schumpeter--the liberal, sort of--thinks that the growing progress of capitalism will erode and in the end destroy imperialism. Who wins the cage match?

Surf over to http://delong.typepad.com/pe101/virtual_discussions/ and then to http://delong.typepad.com/pe101/2007/08/web-assignmen-1.html. Write a comment of at least 100 words on whose arguments you found most convincing, and why. Contribute to the discussion that is ongoing at this http://delong.typepad.com/pe101/2007/08/web-assignmen-1.html page--that is, react and respond to not just Hobson and Schumpeter but, to the extent it is appropriate, the earlier posters and commenters on the webpage.

Do this by 5 PM on September 7.

Comments

[Nicholas DeGroot]

John A. Hobson wins this cage match, but I would not argue that he finds “the growing progress of capitalism” to be the source of the woes of imperialism, rather, that the growing progress of imperialism is preventing the full actualization of an efficient, sustainable, international capitalism. Joseph Schumpeter and Hobson both agree that the wasteful, risky, even deadly economics of imperialism does not advance the interests of the average worker and both authors ascribe the primary culprits as a class of well organized industry and finance leaders that have usurped control of democratic states (where they were not in power already). Schumpeter is careful in his analysis of the atavistic nature of empire as it has recurred throughout the millennia, and is exacting in his description of how, even peaceful states, originally in defense, can find their “apatite [for conquest] in the eating.” But Schumpeter diverges from the details on how the economic elite exploits national power. Schumpeter fails to fully justify why we should be less concerned about aggressive export monopolism than we should be about overt military actions.

Unlike Schumpeter, who hides behind the scope of his essay to keep from directly suggesting what should be done about the problem, Hobson does not flinch in characterizing the forces of imperialism as a malignant disease and provides the indicated prescription. Allow the economy to take full advantage of its own production by preventing the inequitable amassment of unearned savings, i.e. tax the rich or require entrepreneurs to share profits with their employees. Avoid imposed public debt by allowing free international trade without unnecessarily or illegally protecting private industry and investment in foreign territory. Allow the state to develop and be governed by a domestic “national intelligence and national will.” Hobson states that the public may not be capable of realizing such an empowered democracy at his point in time; I think Schumpeter, in his reticence would agree. Still, Hobson’s critique of imperialism would serve truly dedicated political leaders more practically than Schumpeter’s wishful thinking.

[Vera Bersudskaya]

I would not say that either of them wins this cage match, rather they complement each other. Both Hobson and Schumpeter view imperialism in a negative light. They agree that imperialism is caused by excessive returns to capitalism on the one hand, and monopolies or cartels on the other. Thus, people who have disproportionate capitals need to find outlets for their investments abroad to avoid decreasing the domestic rate of return by flooding the domestic investment market with their capital. Therefore, they influence the governments to continue the imperial politics in order to secure their investments. The monopolies or cartels are responsible for what Schumpeter refers to as over-production, and Hobson would call under-consumption. Schumpeter criticizes export monopolism that dumps goods that cannot be sold at home (at inflated prices) in the colonies. Hobson, in his turn, believes that the existence of monopolies and cartels produces capitalists with excess wealth which is not channeled back into consumption and workers who cannot consume more because they are underpaid. In this way, there are goods that need to be exported because they are not consumed at home. They also agree that there exist certain people (i.e. ship manufacturers) who have special interests for imperialism.
Thus, both of the authors agree on what are the driving forces behind imperialism. They differ, however, in their views of origins of these forces and of the solutions necessary. Hobson, a socialist, argues that the emergence of monopolies is an advanced stage of capitalism, in which the income distribution becomes more and more unequal; while Schumpeter, a liberal thinker, believes that monopolies and cartels are the remnants of previous economic orders and are surviving due to the government involvement in economics, i.e. protective tariffs.
Hobson’s solution is redistribution of incomes so no one has excess savings and all goods produced are consumed; while Schumpeter’s solution is the attainment of free unregulated competitive market, which will automatically eliminate all excess capital and will achieve the equilibrium of production and consumption.
Neither of their solutions is realistic, since it is as impossible to have a completely equal society as it is to have a completely free market.

[Glory Liu]

While both Hobson and Schumpeter present different, but equally compelling evidence for the downsides of imperialism, Hobson more strongly provides a case for the root problems of imperialism and how to address them, while Schumpeter conveys the fight against imperialism as a futile struggle.

Nicholas already provided a good description of how both Hobson and Schumpeter viewed imperialism as a negative policy that benefited neither the State nor its “subjects.” Furthermore, both Hobson and Schumpeter agree that the true motivations of imperialism—what Schumpeter calls “concrete interests”—are often masked by “fallacies” which the State seemingly pursues in order to gain support of the people. Hobson and history have shown that certain forces and or ideas such as the duty to “bring civilization” to “inferior races,” or achieve “Manifest Destiny.” These kinds of forces resonate with the people of the state, who in turn provide the vital support for any political or economic venture.

Schumpeter, on the other hand, merely describes processes, institutions, and social structures as “inherited” aspects of a society that can only be changed through drastic measures. For example, Schumpeter believes that imperialism will die either by a revolution or by peaceful cession. Individuals who move up in social class are exceptions- a member of a family had to have done “something novel,” having had to depart from the normal routine and take a large risk. Schumpeter would probably argue that this is very unlikely because humans are creatures of habit, and for an individual to change social class would be an exception. Schumpeter’s argument hits a dead end, providing only ideal end situations with hardly any means to achieve them.

Thus, the real fight between Hobson and Schumpeter comes down to whether or not human dispositions can be changed. I agree with Vera that their ultimate solutions are both idealistic (completely equal society or completely free markets), but Hobson sets up his argument so that he makes it seem possible to curb a population against imperialism. If a population has enough willpower to support superficial beliefs of the gains of imperialism with benevolent intentions, that same willpower can also be curbed against imperialism if the people knew its negative consequences and the gains that can be made simply by flexing political muscles domestically. This would then make democracy a “political and economic reality,” which is much closer to his hope for an equal society than Schumpeter’s hope for completely free markets.

[Dave Koken]

In regards to the destiny of imperialism, I believe that Schumpeter is the clear victor of the argument. While Hobson’s belief about the “taproot of imperialism” (a fundamental need to seek out foreign markets to dump surplus product) can partially explain a state’s imperialist tendencies, this purely economic reasoning is not sufficient.

Imperialism can only be fully explained in the larger social context presented by Schumpeter. In his account, Schumpeter notes the power and influence of public opinion, which does not allow a state to engage in openly imperialist policy. He says,

“In the distant past, imperialism had needed no disguise whatever, and in the absolute autocracies only a very transparent one; but today imperialism is carefully hidden from public view—even though there may still be an unofficial appeal to warlike instincts. No people and no ruling class today can openly afford to regard war as a normal state of affairs or a normal element in the life of nations. No one doubts that today it must be characterized as an abnormality and a disaster… And that attitude makes a policy of imperialism more and more difficult “

I generally agree with this assessment and further think it necessary to note that the power of public opinion and increasing governmental transparency almost always coincide with the growth of capitalism because of capitalism’s close ties with democratic government and political freedom.

Hobson was right to point out that economic actors and their interests abroad can help to fuel imperialist tendencies because these actors, like other non-state actors, can exert their influence over government and directly onto foreign citizens. But only Schumpeter considers the larger social context and the more general idea of public opinion in which a state must function. This larger context more accurately describes the inherent checks and balances on a state that exist in a representative system.

Furthermore, the idea that a state should engage in the massive redistribution of wealth that Hobson calls for is far too radical. Some progressive tax policies that help to level the playing field between rich and poor may be good for the general health of the economy, but Hobson takes this leveling much too far.

For these reasons, I agree with Schumpeter’s view that capitalism will help to erode the imperialist tendencies of states. Capitalism brings democracy and political freedom with it and these rights will largely work to defeat imperialist tendencies by allowing citizens to put pressure on states, to voice their opinions and push to avoid war. Most modern nations reflect this notion (the U.S. being, perhaps, the closest thing to an exception) and prove that capitalism does not promote imperialism. Also, consider the fact that two democratic nations, to this point in history, have never engaged in war against one another. Governments may still be able to use well crafted rhetoric to temporarily deceive its citizens and convince them of the benefits of some imperialist agenda, but this will, as Schumpeter notes, get increasingly difficult with the passage of time and the continued growth of capitalism.

[Jonathan Yu]

I agree with Dave. Schumpeter refers to the argument that Hobson makes, that capitalists with excess savings are responsible for controlling the actions of our governments, and makes the compelling point that it is rather difficult to do that. The way governments are set up, especially democracies, make them difficult to act irregardless of public oversight.

In a more personal view, I also find it more difficult to believe in large international conspiracies of shadowy, rich people (something similar to the great Conspiracy in the X-files) that guide entire world affairs. That was kind of what I was getting out of Hobson's essay.

I always have trouble staying in context of time periods while I read essays like this. I could not help but try to come up with particular connections between Hobson's theory and today. I am not naive enough to believe that particular large companies can influence American policy through lobbying and such, but I am rather skeptical to believe that their actions are due to the great desire to spend their accumulated wealth. I believe that today's consumer markets make it very well more than possible for even Bill Gates to blow it all away. I guess it goes back to what the Professor said two lectures ago, with the idea that the rich and poor weren't that far off in terms of life style.

[Evan Fleming]

It was difficult for me to follow Schumpeter's analysis pertaining to the grass root originations and ultimate future of imperialism. His reasoning revolves mostly around the tendencies of the social class, and the aggressive and powerful attitudes of the conflicting social classes. I agree with Schumpeter when he states that the problem with imperialism is the "aggressive attitudes on the part of status can be explained, directly, and unequivocally, only in part by the real and concrete interests of the people". His assertion that individuals are those who are catalysts for imperialistic tendencies is partially correct in my opinion and reminds me of the Hobbes' "state of nature" in that men live amidst environments characterized by power and aggression and those who cannot compete will be taken over by those who are more powerful.

However, I feel that Hobson's analysis contains a little bit more substance and we can use it as a tool to see how imperialism really evolved. Hobson distinctly ties nationalism with nationalism in that he says "aggressive imperialism is an artificial stimulation of nationalism in peoples too foreign to be absorbed and too compact to be permanently crushed".

I think what is important to realize here is that individuals and societies may have imperialistic tendencies but they are not imperialistic. States and governments are, and the intense nationalistic nature that many states choose to manifest is the reason why imperialism has become fueled by militarism and struggle between competing nation-states.

Lastly, I think it is important to mention Hobson's analysis on imperialism and it being used as a mechanism to destablize the inner-workings of democracy. States that choose to be engage themselves in a majority of imperalistic activities cannot consider themselves democratic because the nature of democracy is that it is characterized by diplomacy, freedom of choice, and conducting fair and equal public policy. Imperialism erodes the foundation of all these critical principles and ultimately is the force in which governments are run by.

[Eric Silverman]

John Hobson’s Study of Imperialism reverts back to the basic dichotomy of functions of the economy laid out by the ancient Greeks. At the most fundamental level, the economy is supposed to provide a nation or collective group with a decent distribution of “wealth.” It is the tool utilized too alleviate, to some degree, social inequity and strife in any given area. Clearly, however, this is not the result of Imperialism. Hobson goes through great lengths to highlight how this policy is not only anti-progressive and irrational, but also economically unprofitable for all the countries involved. Frankly, any rational society should see that Imperialism is quite fruitless for human beings as a whole. The only reason that it has been allowed to go this far is because of the second goal of the economy: profit maximizing. A small number of entrepreneurs find Imperialism to be extremely profitable, and even politicians see it as a useful agent to encourage a national identity and unity. Hobson is wary of the fact that any European entrepreneur can waltz into any foreign territory and “call upon this nation to protect or avenge him in case he or his property is injured” (II.VII.2.). The elite few who control the highest ranks of the polity manipulate Imperialism in their favor while simultaneously they undermine the most crucial role of the economy.

Joseph Schumpeter’s Imperialism and Social Classes does not emphasize contemporary economics as an independent cause or force to Imperialism. Instead, he sees it as deeply rooted in the history, psychology, and sociology of mankind. He goes through countless historical examples in Egypt, Assyria, and Persian. Here he discusses how violence and expansion are not means to some other end, but rather are ends onto themselves. The most salient example of this was the Persian, who built a vast empire but did little to change the societies around them. They did not “Persianize”, and local regions kept their native language and culture. Their only desire was to expand. Schumpeter also distinguishes between justifications and reasons. Often, the justification for something can be very far off from the reason. The modern economy is just a new justification for a clandestine reason, and it is a “basic fallacy to describe Imperialism as a necessary phase of Capitalism, or even to speak of the development of Capitalism into Imperialism” (89). He goes through great lengths to describe how modern economics should naturally lead to anti-Imperialist tendencies. There is a great distinction between “the social significance of a given mode of behavior and the social significance of the qualities that make such behavior possible” (162). The answer to the latter can not really be described with economics, but rather through history, psychology, and sociology.

[Kenichiro Nakahara]

It's been great reading everyone's posting and personally, if I were to take a side of Hobson or Schumpeter I would take that of Hobson. I feel that both analyze the future of imperialism very well and although Hobson's solution may seem extreme, I received and impression that he was really thinking hard to solve the problem rather than just analyze the problem like Schumpeter.

Hobson's analysis of imperialism being an "excessive return to capitalism" leading to the rich gaining more I feel is correct, even when we apply it in today's society. With rapid globalization, the world has become a lot smaller and economic power are focused in developed countries while there are still countries in Africa where people are barely able to live 30 years. At a more micro-level and looking at the United States, the gap between the upper class and middle class keeps on spreading with all wealth (and essentially political power) focused in the hands of the rich. Hobson calls this cycle a “disease” and believes that the rich needs to find outlets to invest elsewhere and proposes extreme solutions such as taxing the rich large amounts or redistribute the profits among society. Hobson mentions that this redistribution of wealth should be the responsibility of the “individual” and they should resolve the problems that occur for their greed on their own.

When reading Schumpeter, the term “over production” seemed to stand out. This over-production is caused by institutions where large amounts of products are made but the domestic employees are not able to purchase them because the workers are not paid a high enough wage. This occurs because of monopolies and when producers are not able to sell domestically, they take their markets abroad to colonies or former colonies. In PEIS 100, I remember the term “language colonialism” (or at least something like that…). This is similar to what Schumpeter is analyzing, of how if two countries share the same language, the economically weaker one gets colonized by the bigger one since they are tied together with a sort of “fake family” relationship and the bigger country sort of gets to boss around the economically weaker one.

So it is clear that Hobson feels that the problem is an individualistic one while Schumpeter thinks that the responsibility lies with the institution. However, Hobson was the only one who attempted to solve the upcoming crisis of imperialism. Although Jonathan above seems to disagree, I feel that there is an excessive capitalism going on in today’s society and the rich are the ones behind the curtains running the show even though most countries call their government “democracies.” I do agree with Nicholas that Hobson’s ideas are extreme and may not be possible in a “democracy” but I would like to award Hobson the win in this cage match for his courage to propose a solution so that mankind will not have to face the crisis of imperialism.

[Jazmin Segura]

Reading the arguments presented by J.A. Hobson and Joseph Schumpeter on both the causes for and solutions to imperialism and reading everyone’s analysis, I am inclined to agree with Kenichiro’s argument that Hobson should be giving credit for trying to come up with a solution for Imperialism. Both do a remarkable job at explaining the origins of Imperialism but Hobson goes beyond the analysis and provides us with a solution that might seem absurd today, but at the time it might have had reasonable possibilities of happening.
For Hobson, Imperialism was a policy choice and not an inevitable consequence of capitalism. He argued that an increasing concentration of wealth within the richer countries lead to “under consumption” for the mass of people. Overseas expansion was a way to reduce costs (and thereby increase or maintain profit levels) and also a way to secure new consumption. His method for solving the problem of “under consumption” was by means of increasing the income levels of the majority of the population either through legislation concerning wage levels or through income transfers such as: unemployment compensation, welfare…etc.
Even though I believe Hobson should be recognized for his effort I also want to say that his overall conclusion might be based on a flawed argument. This is because J.A. Hobson’s analysis of over-accumulation and under-consumption, does not explain 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 like the United States and Russia, which were in fact, net borrowers of foreign capital.

[Yu Hsin Chou]

While there have been many compelling arguments made toward both sides, I would disagree with Dave in his support of Schumpeter as the clear victor, as there are many inherent contradictions in Schumpeter’s writing.

Schumpeter writes that “In a purely capitalist world, what was once energy for war becomes simply energy for labor of every kind. Wars of conquest and adventurism in foreign policy in general are bound to be regarded as troublesome distractions, destructive of life's meaning, a diversion from the accustomed and therefore "true" task” (69), and that “where free trade prevails no class has an interest in forcible expansion as such” (75). First, there is no such thing as a purely capitalist world; nor has free trade ever existed anywhere in history, as there is always some type of government intervention. Second, Dave wrote about the United States as an exception to the notion of capitalism not promoting imperialism, but I believe that a) the U.S. should be seen as a primary counterexample to Schumpeter’s argument. The U.S. is arguably one of the most imperialist countries in our time, seeking not only expansion of political influence, but also cultural imperialism—Hollywood movies, McDonald’s and Starbucks, music, etc. In addition (b), even if we do take the U.S. as an exception, there are also many other examples of capitalist countries who were also imperialistic in history. Take Germany, for example, a capitalist country prior to Hitler’s attempt to take over the world. Furthermore, if Schumpeter’s basic premise is that capitalists are war averse, one only needs to look around our world today, where a large percentage of countries have capitalist economic systems, to see the large number of weapons, bombs, and other objects of force.

Schumpeter, then, is too idealistic in his premise of the notion of a purely capitalist world. Instead, I would argue that Hobson is the winner. As capitalism progresses, the ruling class will have a desire to increase capital, and with this comes the need to increase one’s influence, i.e. through imperialism…