Economic Nationalism and World Cooperation

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Economic Nationalism and World Cooperation Author(s): Lewis L. Lorwin Source: Pacific Affairs, Vol. 6, No. 7 (Aug. - Sep., 1933), pp. 361-372Published by: Pacific Affairs, University of British ColumbiaStable URL: http://www.jstor.org/stable/2751441Accessed: 20-09-2015 21:42 UTC

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PACIFIC AFFAIRS VOL. VI AUGUST-SEPTEMBER No. 7

1933

Economic Nationalism and World Cooperation By LEwis L. LORWIN

FOR several months now, we have been witnessing one of the most dramatic-some would say most pathetic-spectacles in

recent world history. After many preliminary negotiations, careful preparation of the agenda, and world-wide discussion of the exi- gencies of the situation, delegates from sixty-six nations assembled in the city of London to promote world recovery have not only been unable to make progress towards the end which they set themselves but have seemingly been drifting further apart in opposite directions. Those who have a vested interest or an acquired taste in sowing the seeds of international disharmony have been jubilant -and rightly so. Few international gatherings in the last decade and a half-which have not been models of international amity- have presented such a picture of strain and of working at cross- purposes.

These facts are leading a growing number of people to the conclusion that the World Economic and Monetary Conference at London proves once again the impossibility of world cooperation and marks the end of efforts to obtain it. We are being exhorted by these newly converted nationalists to abandon all hope of fol- lowing the path of international understandings and to accept cheerfully the alternative of each nation pursuing its own course in its own way, regardless of the rest of the world. Men and women who but a few years ago were proud of their international outlook are now confessing the presumed error of their judgment and ask- ing us to follow them to the other extreme of economic nationalism and national self-sufficiency.

But are these conclusions justified? Despite the growing literature on the need and value of national self-sufficiency, as opposed to world cooperation, the statement of this dilemma seems to be entirely false. The question before mankind today is not national self-sufficiency or world unity. To state the problem in the terms of such an alternative is to misread the facts of world economy and to misinterpret the currents of world history. The prob-

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lem before the world is essentially what it has been during most of the modern epoch-namely to evolve a policy which would reconcile the economic and social needs of individual nations and to build a world society which would recognize and incorporate the legitimate elements of a rational nationalism. What has changed is the world configuration within which this problem has to be solved. New economic, political, and psychological factors have entered the situation, creating new complications and difficulties, and calling for new methods and procedures.

A fresh attack on the whole problem of nationalism and internationalism is thus now in order. A restatement is needed of the major issues involved and of the large facts upon which our thinking must be based. As a matter of tactics, one may accept the challenge of the neonationalists and examine the dilemma which they have formulated. This dilemma is in the center of current discussion of the subject and promises to be the issue around which men and women may well test the bias of their political sentiments for years to come.

W E can understand the economic nationalism of today only if we examine the various elements that enter into it. It is a

complex product of many factors, some of which are transitory in character and some of which may be more permanent. Some are economic, some are social, some are political. Four factors seem of greatest significance:

First, and in many ways one of the strongest factors in the economic nationalism of today, is the reaction on the part of younger and industrially less developed nations and countries against an international division of labor which has not been entirely beneficial to them. As is well known, the expansionist industrialism of the pre-war era, based upon international special- ization and division of labor, accentuated the differentiation between the advanced industrial countries and the backward and semi-colonial countries, a differentiation which subordinated large areas of the world to a few great powers politically, and which retarded the utilization of the economic resources of many countries capable of more or less industrialization. The reaction against this situation began long before 1914, but it became really important only during and after the World War. Such countries as Japan, India, and Russia found that they could not utilize more fully their physical and human resources unless they adopted measures of special protection to their national industries. It may seem strange to put under the same bracket Japan, India, and Russia. But it is a matter of fact that though Soviet Russia has been a pro-



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tagonist of political and revolutionary internationalism, it has in its economics pursued a distinctly nationalistic policy based upon the exclusive reservation of the domestic market for its own industries.

A second factor in the economic nationalism of today is more recent in origin and more political in character. It is the result of the fierce and indomitable desire of the newer nations created by the Versailles Treaty to maintain their political independence even if that means recasting their internal economy on a costly protec- tionist basis. Akin in character is the rising consciousness of nations in other parts of the world, whose emphasis upon the value of racial and historic antecedents has been accompanied by a reaction against the international economy which involved dependence on foreign finances and foreign trade to a degree which was both humiliating and exploitative. Thus a political and cultural nationalism became mixed with a trend towards economic nationalism in Mexico and other Latin-American countries, in China, in the Near East, and elsewhere.

A third major factor in the economic nationalism of today is social in character. It is connected, on the one hand, with a reaction of large elements of the population in almost all countries against the insecurities and injustices of the system of laissez faire, and, on the other, with the accentuation of class differences and class struggles. This is one of the most important transformations of the post-war era, which carries within itself the potentialities of profound changes in the power relations and in the social structure of all western countries. What is happening is the resurgence of the middle classes in an effort to reassert themselves against both individualistic capitalism and collectivistic proletarianism. In this movement the middle classes are appropriating the socialistic program which the socialists had developed since the middle of the nineteenth century. But while the socialists connected their program with a general faith in internationalism, the middle-class groups are hitching it on to a philosophy of extreme nationalism, thus creating a hybrid of national socialism which would have seemed a monstrosity and impossibility to all the socialists of the nineteenth century-from Robert Owen to Karl Marx. The development is a result of the fact that the Marxian forecast-upon which the hope of a proletarian triumph was based-namely, that capitalism would promote a rapid numerical expansion of the workers which would make their assumption of political power painless and easy, has not materialized, at least within the time limits assigned. The unwillingness or incapacity of the socialists in most industrial countries to assume power forcibly created an economic and social impasse which could not but discredit socialist



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political leadership. On the other hand, the dangers to the middle classes exemplified by working-class socialism in Soviet Russia could not but arouse these middle-class groups to try to establish a leadership of their own which would combine social security with nationalistic expansion. Under these conditions, the new nationalism had to become social, because the middle classes had to hold out a social promise to the workers and because they were interested in economic reorganization themselves.

These three factors received a tremendous impetus as a result of the present world depression which brought to a focus all the difficulties of the world economy bequeathed to us by the nineteenth century. The outcry against a capitalism subject to violent fluctuations, the protest against a system of world finance which could create a burden of debt under which no country could stand up, the reaction of mono-culture countries which found themselves impoverished by the fall in the price of their special export commodities-all this culminated in the widespread revolt against laissez-faire capitalism, especially in its world aspects. As laissez faire was combined with faith in the international division of labor and free trade, the odium suffered by laissez-faire capitalism was transferred to the entire liberal and internationalist outlook with which nineteenth century laissez faire was bound up. Instead, the need for economic control and planning as a method to subdue individualist capitalism was interpreted to imply the need also for national self-sufficiency and economic separatism.

II

THE analysis of the factors entering into economic nationalism is a step in the consideration of what may be regarded as the

more important question, namely, what are its valid and invalid points? Briefly, the points which seem valid may be stated as follows:

First, the claim of the industrially backward countries to have a chance to develop their physical and human resources to the fullest extent possible so as to obtain a stronger economic position which is essential to greater political self-assertion in world affairs.

Second, the effort to raise the standards of living of the masses of the people by making the domestic market of every country a greater factor in its industrial development.

Third, the new tendency in each country to be able to control its economic activities in such a way as to reduce to a minimum the insecurity and inequalities of laissez-faire capitalism.

Fourth, the demand that each nation be able to regulate its own activities so as to establish a planned economy of one form or another in order to shape consciously its economic and social destinies.




While admitting these valid ideas and implications of economic nationalism, we must not close our eyes to the elements which cannot be justified on any grounds of rational and civilized living. These objectionable features of present-day nationalism are of supreme importance for a final judgment. Briefly stated, they are as follows:

First, the connection of economic nationalism with extreme racialism, chauvinism, and the stimulation of group animosities and hatreds.

Second, the tendency of nationalistic movements to become mutually exclusive and militaristically aggressive.

Third, the tendency of economic nationalism to develop into political expansionism fraught with all the dangers of political upheavals and conflicts.

But the supreme fact which must determine our attitude towards economic nationalism is that it is based on an impossible ideal of national self-sufficiency. It is obvious that the sixty-six separate and independent nations of the world cannot all practice self-sufficiency. Some of the nations are too small and others are devoid of the minimum of natural resources necessary for such purpose. Unless some of these countries should revert to a more primi- tive stage of existence and carry on life on a much lower economic level, they cannot sever their economic relations with other countries. In other words, economic nationalism in anything approach- ing the form of an enclosed state can only be indulged in or practiced by a few of the larger countries.

Because of this, the movement towards national self-sufficiency is bound to result in the formation of more or less self-contained regional blocs, imperialistic in character and gravitating around the major industrial countries. We may see this process today in outline, in the British Empire, the Soviet Union, the French imperial system, an East-Asiatic Empire under Japanese hegem- ony, and so on.

It is because of this that there is considerable justification for the view that the whole movement towards national economic self- sufficiency is largely a fight between the great powers for further expansion and control of world resources. Since only these great powers can afford to establish more or less self-contained systems, they are bound to try to attach to themselves the smaller countries. Even the United States, regardless of its large resources and great wealth, will continue to depend for some of its raw materials on foreign sources and will therefore seek to control those countries which can supply them and which can serve as a more or less assured outlet for its manufactured goods.

If we keep in mind these inevitable developments, we may judge the validity of some of the arguments of the economic nation-



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alists. It is said, for instance, that national self-sufficiency would be a surer guarantee of world peace. The economic internationalism of the nineteenth century, it is claimed, could not advance the cause of peace because the efforts of individual nations to expand their foreign trade, to capture new markets, to protect and advance their foreign investments, increased the points of friction and turned international trade into a process of sharp competition and rivalry which could not but lead to violent conflicts on an ever- increasing scale. But a world system composed of a small number of large imperial blocs will also be in a state of continuous dis- equilibrium, giving rise to friction and conflict. All historic experience indicates that large economic units will dispute both territory and markets. Besides, the centrifugal forces within these large areas, the tendency of different countries within the large blocs to find the best terms for themselves, will cause upheavals within each regional unit which will lead to collisions between the regional systems themselves.

Another argument advanced for national self-sufficiency is that the increase in world interdependence has been the cause of increasing susceptibility of separate nations to the possibilities of economic distress and dislocations. The very facts that communications have become so easy and so rapid, that the slightest breakdown in the financial and economic mechanism of any one country has reper- cussions throughout the world, are cited as reasons for trying to free ourselves from exposure to such danger. The idea is that we may insulate ourselves from trouble if we isolate ourselves from trade. This, however, is a delusion. Great disturbances in the life of nations occurred in the past before world economy developed to its present complex stage. Many commercial and dynastic wars of the eighteenth and nineteenth centuries were due to various causes, such as greed, jealousies, and the desire of smaller and younger nations to build up great states. National self-sufficiency, under the conditions of the twentieth century, would not mean free- dom from outside attack, nor would it mean the creation of a para- dise at home while infernos surrounded us on all sides. The experience of all nationalistic ventures in the past is sufficient evidence that there is no assurance of peace in any policy of economic and political isolation. The more we disentangle ourselves from the economic system of the rest of the world, the more we shall expose ourselves to the greed, envy, and legitimate protests of less favored nations against our monopolization of the world's best resources. Self-sufficiency thus can be only another road to world catastrophe.

Another claim made by the exponents of self-contained national economy is that such a policy is called for by the great development of productive capacity parallel with a tendency towards



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diminishing markets. The reasoning is that the advantages of economic internationalism, which were more or less obvious in the nineteenth century because of differences in the economic struc- tures of different countries, in their rate of industrialization, and in their opportunities for technical training, have largely disap- peared. It is claimed that the idea of economic internationalism has been undermined by the development of industrial mechanisms in different countries which are exactly of the same type and character. That has meant a decreasing diversity in the output of different countries and an increasing sharpening of competition for world markets.

As indicated before, there is an important element of truth in this contention. It is true that to the extent to which all nations become equipped to make the same things in large quantities, to that extent they reduce the need for international exchange among themselves. But as a matter of fact, this capacity at present is limited only to a few essentials, such as textiles, if it exists at all. Its truth is doubtful even with regard to these essentials. There is much exaggeration in the current discussion of excess capacity and overproduction, especially if one looks at the world market in its potentialities. Tens of millions of human beings throughout the world are still hungry, underclad, and subject to disease due to insanitary and unwholesome conditions of living. There is still much need for developing productive capacity to meet even their most elementary needs.

It is true, however, that the growth of international trade has in some ways been redirected because of the successive development of industrialism in many countries. The fact underlying this is the domination of industry exclusively by profit-seeking motives which often forced a country to expand its exports when that was entirely unjustified from the point of view of national welfare. Russia, for instance, exported wheat to other countries at a time when the peasants who grew the wheat were starving. England set itself with enthusiasm to the task of covering the bodies of naked "heathen" with the cotton goods of Lancashire at a time when hun- dreds of thousands of her own people were running about in rags. This process of exports facilitated the unification and industrialization of the world and increased the volume of international trade, but it certainly was far from having entirely benevolent results all around.

The conclusion to be drawn from this is not that we must dimin- ish our world trade but that we must give it a more rational direction. Trade should expand as the nations of the world raise their standards of living and increase the capacity of their populations to buy more things, so as to be in a position to both offer and



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require more from other nations. We might adopt the principle that no country should undertake to export certain commodities until the consumption of that commodity in the country itself had met an acceptable standard of minimum requirements. For instance, it might be agreed upon that Russia should not exportwheat until and unless her own people were supplied with a minimum amount of wheat necessary to maintain a standard of living which would be in accord with social progress. If we accepted that principle, the fact that many countries can produce the same goods in large quantities might be not a drawback but an advantage.

A large part in building up the economic nationalism of today is held by the advocates of national economic planning. These planners in their reaction against the private and planless economy of laissez faire feel impelled to abandon also the economic internationalism which was part of the laissez faire of the nineteenth century. An added influence affecting this group is the impatience of separate countries, especially the United States, with the pro- longed depression. They feel that we might pull out of this depression much more rapidly if we rely on our own national measures than if we wait for some world scheme of recovery. The argument is also that we need greater national self-sufficiency and greater isolation in order to make more freely our own social experiments, unhampered by world entanglements. In fact, we have a whole school of economic writers who have recently been filling the magazines and newspapers with variations on this theme. We are told by these writers that we shall only jeopardize the success of our national program if we try to plan internationally, that planning on a world scale is impossible because the enforcement of international agreements would require a super-state and would call for master minds beyond the scope of human ability.

As a matter of fact, every step so far taken in the direction of national economic planning is a refutation of that point of view. In the United States the adoption of the Agricultural Adjustment Act forced us at once to consider steps towards the regulation of the wheat production on a world scale. The Industrial Recovery Administration had hardly begun to operate when the newspapers were filled with the report that we would try to obtain an international agreement for a thirty-hour week. The logic of events seems thus to be for national planning to force us also into international planning, whether we desire it or not.

III

IT may help clarity of thinking if I summarize in the form of a series of propositions:




First, economic self-sufficiency and isolation for most nations is impossible economically, undesirable culturally, and dangerous from the point of view of peace.

Second, national self-sufficiency is likely to result in the reorganization of the world into a small number of large blocs which will have to maintain trade and intercourse for the regulation of their relations.

Third, national economic planning under conditions of world trade- which must continue for some time-necessitates some planning on an international scale.

Fourth, the further industrialization of backward countries need not mean increased international competition if systematic efforts are made to raise standards of living in all countries.

Fifth, the simultaneous maximum development by all national groups of their physical and human resources is possible and necessary to avoid conflicts prompted by jealousies and rivalries.

Sixth, while differences in national wealth and incomes must persist in view of differences in resources and aptitudes, they can and should be mini- mized as much as possible by means of systematic developmental projects.

Seventh, as the world economy based on increasing geographic special- ization and relative free trade is giving way to a world economy based on controlled national economies, it is necessary to devise methods of regulat- ing world trade. The supreme task of the twentieth century is the organization of the world market.

And last, but certainly not least, the economic and spiritual unity of the world is and must remain a basic principle in accordance with which world policies must be framed.

In other words, whatever alternative we contemplate, the need for cooperation between nations and regions will continue. Even if we assume a trend towards increasing regional self-sufficiency, we must cooperate to the end that this process take place with a minimum of friction. But the tendency towards greater national and regional economy will be accompanied by efforts to expand the use of all the resources of the world. This may and will mean a change in the content and direction of international economy, but not its disappearance. What we shall see is a new world economy based on greater coordination and on more regional and world planning.

If this analysis is valid, then the problem of world cooperation assumes a different character. Most collective efforts at international cooperation so far have been largely for the purpose of setting the rules of the game, of establishing conditions under which international commercial competition might proceed on a level which would make for world peace. There is no doubt that we have not been entirely successful in that effort. We have had a repetition on a world scale of our experience in national economy. For two generations we tried to set the rules of domestic competition so as to eliminate its abuses. Our American anti-trust legisla- tion was directed to that purpose. Our conclusion now is that the



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problem is to seek a way out from competitive evils not in setting competitive rules, but in organizing cooperation. The answer to the international issue lies in the same direction.

The question then is, what are the objectives towards which world cooperation should aim, and what methods should it apply? On the basis of the analysis made above, the major purpose of world cooperation is to increase simultaneously standards of living throughout the world and to plan production in such a way as to give each country an opportunity to develop its potentialities as fully as possible. The major line of development at present is in international agreements for the regulation of the production and distribution of world commodities. While I am not in entire sym- pathy with the procedure followed in London, which is based more upon the desire to curtail production rather than to seek the possible expansion of demand, I think that it is a beginning; and that, when the pressure of excessive stock accumulations has been removed, greater progress will be made in the direction of increasing demand.

A second line of development might be some form of organized exchange which may have a considerable element of barter in it. A World Exchange Board might be organized to serve as a clear- ing house for the study and promotion of exchange between countries of surplus products with a minimum dependence on gold and monetary movements.

A third line of development is the possibility of developmental projects, such as have been suggested by the International Labour Office-namely, public works carried out under international control and calculated to increase the real income of the countries where they are carried out, and indirectly of the rest of the world.

As to methods, these new needs of world cooperation call for new machinery. If the London Conference fails, it will be not only because of the contradictory interests and thought by which it is guided, but also because of inherent weaknesses of the method itself. The conference method of international negotiation is a post-war product and at one time had both justification and possibilities. It was a valuable means for overcoming the animosities raised by the World War and for bringing people together so as to break national friction and difficulties. Perhaps to some extent it was also a reaction against the pre-war diplomacy which was carried on behind closed doors and which the World War presumably was to abolish by substituting for it "open covenants openly arrived at."

However, the conference method seems to have reached the limit of its usefulness. The problems which are now facing the world are no longer merely matters of good will but problems



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involving careful study and investigation. They require time and systematic application in view of continuously changing conditions. They call for clarification and for the preliminary elimination of preconceived ideas and prejudices.

In view of all this, world cooperation now depends for its success as much upon the invention of new devices as upon the formu- lation of proper objectives. The method which suggests itself is that of continuous negotiation through research carried on cooper- atively by all nations. This method calls for the organization of permanent bodies and committees which would pursue specific programs continuously and which would help the process of conversion within separate countries of those responsible for national policies.

It is in this respect that cooperation between the United States and the League of Nations is both desirable and possible. The technical committees of the League, especially its financial and economic sections, represent the beginnings of such bodies as have been indicated above. They could be made the basis of still larger bodies-with representatives also from the United States and other countries not members of the League-for the continuous study of the problems of world economy as they emerge in the course of ever-changing situations and activities.

In brief, we must apply ingenuity and courage in projecting on a world scale the changes which are taking place in the forms and methods of national life. The general tendency within nations is towards the concentration of the process of formulating policies and of carrying out decisions. To weave such national methods into a world cooperative policy is no easy task. But we must achieve it -for on our success or failure in this respect hinges our fate.

IV

APPLYING these general principles to the Far Eastern situation, I would recommend the organization of a Pacific Devel-

opment Council for the purpose of promoting cooperation in the economic development of the Pacific countries. It may seem pre- posterous to offer such a suggestion at a time when friction in the Far East has reached so high a point. But it is that very fact which makes such an enterprise especially desirable, justifying all the special efforts necessary for its realization. If those countries interested in the Far East could be made to engage directly and system- atically in the investigation of possibilities of developing unutilized resources, of building up the wealth of the entire Far Eastern area and of putting people to work, of stimulating all industries-small and large-and of inaugurating a series of developmental projects on a large scale, we may see a diversion of interest from political



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entanglements and conflicts to economic matters, promising more of the good things of life to all concerned. There are several projects that lie on the surface of things and these could be attacked at once, such as road building, settlements on the land, promotion of rural and small-town industries, flood regulation, etc. What is necessary is to have a permanent body devoted to their study and promotion.

If this idea has any validity, might it not be possible for a committee of the Institute of Pacific Relations to take the initiative in forming the nucleus of the Pacific Development Council which should in the near future become a semi-official body? Such a body might be composed of representatives from the United States, Great Britain, France, the Netherlands, the U.S.S.R., Japan, China, and Australia, with special representation from the League of Nations and the International Labour Office, acting in conjunc- tion with advisory committees of representatives of private busi- ness. Many ideas of this character suggested in the last few years have seemed far-fetched and utopian. At the Kyoto Conference, only four years ago, the writer indicated the possibility of a rapid conversion of all laissez-faire countries to economic control and planning, and also the possibility of international attempts to regulate the production of world commodities and their world distribution. At the time, these ideas seemed abstract and academic. But today they are in the center of world discussion. There are those who delight in analyzing things for the purpose of indicating the difficulties and limitations of change. But may it not be wiser and more helpful, even at the risk of appearing theoretical, to try to glean from the confused thinking of the time the kernel of ideas which belong to the future?



Economic Nationalism and World Cooperation

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