The Treaty of Versailles stamped out British imperialism's most formidable competitor in the decades that preceded the war. The antagonism between Britain and Germany was at the centre of the tensions that led to the world conflict. But the threat of German expansionism was only kept in check at the cost of the growing domination of an even more formidable force: the USA, whose power of attraction was such that the centre of the world financial market was shifted from London to New York, while the US annexed many of Britain's markets in Latin America, and even drew Canada, the richest of the Commonwealth Dominions, into its orbit. American capital was able to do this not only because of the technical, organic superiority of its economy, but also because it was also able to exploit its prestige as the world's creditor.
The war also led to the rise of another force threatening British predominance in Asia: Japan, which, during the course of the conflict, actively pursued its penetration into the Asian continent and particularly into China, thus clearly posing the problem of the conquest of this market, which can only be resolved through the next world conflagration.
After redressing an economy profoundly shaken by the war, in 1924 Britain launched the struggle against the USA in order to re-conquer its global hegemony.
In spite of the degeneration of its productive apparatus, an evolution whose main characteristics we analysed in the previous article, British capital aimed to conserve intact the basis of its activity and its control, i.e. the vast network draining surplus value from the four corners of the globe, from which a parasitic bourgeoisie drew what it needed to maintain the most inept, idle existence. We have seen that the banks held the key to this universal organisation. Benefiting from the ‘failure' of the first Labour government, which had been unable to solve the problems posed by the industrial bourgeoisie, the banks, following the coming to power of Baldwin, launched a vast ‘deflationary' offensive in 1925, with the aim of revaluing the Pound. The return to the gold standard was decreed in April of the same year. The antagonism between industrial capital and finance capital, which in Britain remained much more tenacious than in Germany, France or the USA, for the reasons we have indicated, was settled for a long time to the advantage of the banks.
The effects of the deflationary policy on social relations were soon felt. In May 1926 the General Strike broke out like a thunderbolt. Lasting for 12 days and paralysing the whole of economic life, it threw the bourgeoisie into disarray. But capitalism's agents, the Citrines and Co in the TUC, alarmed by the magnificent display of proletarian solidarity in favour of the miners, dissipated the movement, abandoned the miners to their fate and left them to fight on desperately for another six months until they were totally defeated (the central issue behind their struggle had been the lengthening of the working day from 7 hours to 8). The deflationary policy, while improving the position of the Pound, weighed heavily on the productive apparatus and left British industry in an inferior position on the world market, where its competitors could sell on the basis of devalued currencies. We have already examined the striking fall in exports after 1925 and its effects on the level of production.
The collapse of industry came as no surprise when we know that, of the total volume of exports, manufactured goods made up 82% of trade with the colonies and 74% of those with countries outside the Empire. Let's add that, inversely, 2/3 of purchases were made up of food items and that these accounted for 40% of foreign imports.
An examination of the curve of external trade is interesting for two essential reasons: on the one hand, the movement of exports hides a considerable reduction in the weight of British industry on the world market; at the same time, the evolution of imports starkly reveals the parasitism of the British bourgeoisie.
The place of Britain's total trade in the global circuit of exchange has not ceased to fall since the last century: 27% in 1830, 15% in 1913, a decrease by almost a half. This was the price paid by British capitalism for having been the first to produce surplus value in large collective factories, and then seeing its privileges undermined by the extension of capitalist production to the whole world. The same can be said for the freight sector which represented a third of total trade in 1860 and stood at 9% in 1913. Here again the British merchant was losing ground.
Over a 20 year period, from 1891 to 1910, Britain only increased the volume of its trade by about 50%, whereas Germany's went up by 100%, the USA's by 75% and Japan's by 250%.
During the feverish and superficial period of economic revival after the war, overall British trade managed to keep the position it had held in 1913: 15% of world trade. But this was the last favourable period for industrial capital, which, benefiting from the general rise in prices, didn't significantly augment the volume of its exports.
The new political-economic orientation imposed by the bankers in 1924-25 was to wipe out the broad perspectives which had seemed to open up for industry. The reaction was not long in coming. And, in 1928-29, the extreme point of the fallacious and final phase of ‘prosperity' for world capitalism, we saw that while in relation to 1913 British exports had grown in value by 40% (which is explained by the rise in prices), in relation to 1924 they had fallen. Once the world crisis erupted, they fell much more rapidly than in France or Germany for example. Thus in 1931, expressed in gold Pounds, they were only a half of what they had been in 1929. But the dizzying fall in prices made it impossible to precisely measure the repercussions of such a decline on the productive apparatus. By measuring the fluctuations in the volume of exports from 1924 to 1931 we can see (especially with regard to manufactured goods) a 35% reduction, a proportion which reached almost 50% in the iron and steel industry.
But while such a decline in exports eloquently expressed the weakening of British imperialism's ability to realise on the world market the surplus value produced in the metropolis, it still doesn't show its entire depth. To do this you would also have to determine what strength this surplus value extorted from the British proletariat conferred on the bourgeoisie. An approximate way of arriving at this is to establish the percentage of exports against imports, which would thus express the buying power of the former with regard to the latter. Thus in 1913 80% of foreign purchases could have been covered by exports; in 1929, this was down to 65% and in 1931 it fell to 49%, which means that exports could only have paid for one half of the imports. In absolute figures the trade deficit trebled between 1913 and 1931. It is important to add that this figure is considerably attenuated by the fact that between 1924 and 1931 the price of imported materials fell by 50%, while those of exported goods fell by only 25%, thus improving the rate of exchange. Put in another way, in 1931, to cover a given quantity of imported commodities, you needed to export less goods than you did in 1924.
This is confirmed by the fact that the volume of imports grew by 17% between 1924 and 1931, whereas as we have seen the volume of exports plummeted by 35% in the same period. But here we can also see the insouciance of a rentier bourgeoisie, for whom the war seemed to be no more than a parenthesis and which in 1931, in the midst of the crisis, consumed 60% more foreign goods than in 1913, while three million workers had been ejected from the sphere of labour. A violent contrast typical of decaying capitalism.
A trade deficit that trebled in 20 years could hardly have been tolerated unless other factors served to restore a certain equilibrium. This counter-weight was provided by the surplus value produced outside the sphere of British capitalism properly speaking, in the colonies and the rest of the world, in the form of banking commissions, commercial ‘services' (freight etc) and revenue from exported capital.
After 1925, and in the period of the ‘stabilisation' of capitalism, which provided a relative security for the circulation of capital, these various forms of revenue increased considerably and in 1929 the increase reached 50% in relation to 1913. This margin was still not sufficient to counter-balance the fall in exports, and we saw the overall balance of payments, which had been in surplus to the tune of around £200 million before the war, transformed between 1924 and 1931 into a chronic deficit, averaging £400 million on average, except in 1929 when it was positive.
The banks still continued their policy of investment, which very rapidly exceeded the capacities of the capital market, which had been dried out by the persistent deficit in the balance of payments. The latter was only held in some kind of equilibrium thanks to a flow of foreign capital into the City of London, mainly short term placements which the bankers, owing to the lack of home-based capital, soon reinvested in more distant places like Central Europe and South America. Such a policy was well adapted to economic ‘liberalism' on a money market freed from all limitations, but was in diametric opposition to the tendency towards the closing of the economic hatches, towards the fragmenting of the world market into antagonistic ‘autonomous' economies.
The inevitable happened. On the one hand, the budget disequilibrium, the increase in floating debts, even an attempted revolt in the war fleet; on the other hand, the moratorium on debt decreed by failing debtor countries like Germany, Austria, and Argentina, were among the essential reasons leading to insecurity, panic, then the breakdown. The suspension of the gold standard was Britain's response to the massive withdrawal of capital. The resistance of the banks, however, did not reveal any fissures as was to be the case in the USA. The suppleness of the system permitted a remarkable adaptation, this time in favour of industry. But an essential point here was the fact that what had once been the cornerstone of the whole imperial edifice - Free Trade - definitively collapsed, and the Economist even went so far as to affirm that MacDonald's National Government, which took the path of protectionism and nationalism, had "signed the decree for the dissolution of the Empire".
British imperialism, faced with the depreciation of its currency, still thought that this necessity might give rise to some favourable possibilities for struggling on the world market and against American imperialism.
Certainly, an event like the crisis of 1931 could, more easily than in other countries, have had the effect of shaking the economy back to life, but British capitalism had entered the crisis of 1929 almost without any transition, since it merely prolonged the chronic depression which had been paralysing it for ten years. Furthermore, from 1929 to 1931, thanks to the free entry of foreign products, the more than 30% fall in world prices had considerably benefited the powerful buying capacity of the British market. The latter had not been severely disorganised and ‘industrial peace' had been maintained: a 5% fall in nominal wages did not really undermine the buying power of the workers, and this situation was to some extent analogous with the period of stagnation between 1885 and 1905, during which British capitalism, thanks to free trade, had benefited from the steep fall in world prices: the rise in real wages which resulted, and the maintenance of nominal wages contributed to the anaesthetising of the proletariat, to suppressing the least murmurs from the class.
The resort to protectionism provided capital with a unique historic opportunity to exploit an internal market which had been opened to the four winds for nearly a century. Here there was a perspective for a relative expansion of industrial and even agricultural production which the fall in the Pound helped to stimulate - on the one hand, as a universal currency, by exerting a downward pull on world prices, and consequently on the prices of raw materials needed for industry; and on the other hand, by enabling industry to increase its export capacities. The facts however soon gave the lie to all these bright hopes, at least with regard to exports, since the latter, far from increasing, barely managed to stay at the same volume while falling in value, under the joint impact of falling prices, the exacerbation of economic nationalism and the virulent competition from Japan which devaluated the Yen immediately after the devaluation of the Pound - the Yen was reduced by up to 40% of its value in gold whereas the Pound, on the eve of the American crisis of 1933, was only reduced by a third.
As for the internal market, even protected by tariffs, its ability to absorb the surplus from production remained very limited by its very nature - given that it is more or less a pure capitalist market, where the size of the buying power that doesn't derive from the capitalist sphere of production was limited to a very small layer of independent farmers and producers. The backward organisation of monopolies and finance capital also didn't permit a deep exploitation of the mass of consumers and made a rational policy of dumping rather difficult, all the more so because the enormous productive apparatus was disproportionate to the relative extent of the mass of consumers. British capitalism was still less aware of this structural weakness of the monopolies, which it proposed to eliminate through the development of cartels and industrial rationalisation. Meanwhile any increase in the use of its productive capacity could only be achieved by excluding foreign produced goods from the internal market; but these only represented 30% of imports. Purchases of iron, steel and machinery fell by half between 1931 and 1933, those of part-worked textiles by 4/5, while those of raw silk, supplying the luxury industries, grew by 50%.
At the same time, purchases of food products didn't significantly decrease since the devaluation of the currency weakened rather than strengthened the industry's position by provoking reactions by foreign exporters of these products.
On the world market, the retreat of the British economy continued. It turned out that the fall of the Pound didn't enable it to pierce the formidable line of defences erected by each imperialist economy. While in 1932 the volume of exports stayed at their 1931 level in value, they continued to fall behind, especially in the Far East, to the USA, Germany and the countries of the gold bloc. The failure of expansion assumed all the more importance in that the possibility of exploiting the advantages conferred by the fall of the Pound tended to disappear as internal prices, becoming detached from the world wide price falls, began to move upwards under the impact of protectionist tariffs.
Let's leave it to the partisans of ‘planning' and monetary manipulations as a means of ‘increasing the buying power of the workers' to refer to the British model and argue that a devaluation doesn't necessarily lead to a rise in prices: they are doing no more than constructing a stereotype, since although in Britain, immediately after the crisis of 1931, the rise in prices was not obvious, it was still verified by the fact that they stagnated in relation to the world-wide price fall.
Britain seeks to use the Empire as a shield against the crisis
In fact, the lack of new markets in the general crisis of capitalism forced British imperialism to orient itself towards other solutions if it didn't want to see its relative share of global surplus value diminishing. Hence its efforts towards a more rational exploitation of its colonial domain. Here the Ottawa accords of 1932 were an attempt to set up an imperial system of preferential tariffs which, while destined to be integrated into the general evolution of imperialist nationalism, was not able to set up a closed imperial economy, since this was an impossibility.
Developing metropolitan exports in the direction of the Empire and acquiring a monopoly over colonial raw materials: these were the two central objectives Britain was looking for at Ottawa. To what extent will the disintegrative and contradictory factors within the Empire, a product of its heterogeneous nature, prevent the realisation of this programme?
In the first place, the generalisation of tariffs came up against the economic needs of certain Dominions which are closely linked to other economies: Canada lives in the orbit of American capitalism, while Australia sells its wool to Japan on the condition of buying its coarse cotton goods and its silk; apart from these Dominions, India supplies Japan with cotton and buys it back as cloth. In the second place, the protectionism afforded to British agriculture is in conflict with the necessity to import the agricultural products of the colonies and elsewhere (e.g. Argentina), which in turn has repercussions on metropolitan exports.
In the third place, the preferential system constituted a threat to the motherland's extra-imperial outlets and the regulation of its loans, since it resulted in the devaluation of its currency, the basis for the buying power of its market.
In the fourth place, the capitalist nature of the Dominions and their growing industrialisation could only restrict the outlets for products manufactured in the motherland.
What is the definitive balance sheet of the Ottawa regime after only a year, together with two years of the ‘free' monetary regime?
Let's note first of all that Britain's trade balance with the Empire, which was positive in 1913, was 30% in deficit by 1931 and by 1934 this deficit had increased to 60%. On the other hand, the balance with the four Dominions and India, negative in 1913, became positive by 131% in 1931 and 134% in 1934.
As for the displacements towards Europe of a fraction of Britain's total trade between 1931 and 1934, this operated very clearly. In absolute figures, while imports from abroad (including those in transit) fell by 30%, those coming from the Empire tended to increase; exports to the Empire only fell by between 7 and 10% for sales abroad.
The need for British imperialism to prepare for war
In relative figures, the commodities coming from the Empire in 1913 were the equivalent to a quarter of total imports. In 1931 this figure stood at 28.8% and 36.9% in 1933. The relative part of exports to the Empire, which made up 32.9% in 1913, went to 41% in 1933.
From all the internal and external fluctuations of imperial trade, the following conclusions can be drawn.
The specific weight of intra-imperial trade in world trade increased after Ottawa. This was a positive result of considerable importance, even if a relative one, since the total volume of exchanges continued to contract. But imperial trade was the least hard hit. However, if we examine this result from the angle of the position of British imperialism concentrated in the metropolitan centres, it loses a lot of its value. In effect, the displacement of a part of world trade towards the Empire was essentially geared (not absolutely, but relatively) to British purchases from the Empire; and consequently, the inverse movement of colonial purchases from the metropolis was much less profound.
Furthermore, imperial tariffs favoured colonial exports to the metropolis to the detriment of those directed towards areas outside the Empire, but this only feebly stimulated British sales within the Empire.
The metropolitan market still remains a vast outlet for food products, raw materials and luxury goods; and it's not the growing pauperisation of the proletariat which contributes towards this, but the growing parasitism of the bourgeoisie, which up till now has managed to resist the extinction of its own industrial activity thanks to a mass of surplus value gathered throughout its huge imperial domain, and which to a large extent it has devoted to unproductive consumption.
Today it seems that for British imperialism it is no longer its coercive apparatus alone - whose relative importance has in any case diminished - which can maintain the indispensable cohesion of its system of domination. The power of its metropolitan market also represents a centripetal force capable of neutralising the tendencies towards disintegration at work in the Empire.
Not only can British capitalism ill-afford a reduction in the global volume of its profits which condition its buying power - on the contrary it must be in a position to increase them.
Between 1931 and 1933 it did manage to reduce the deficit in its balance of payments, thanks to an improvement in the trade balance; on the other hand revenues derived from exchange (freight, various services) and those from investments have continued to plummet in relation to 1931, and it is clear that the exacerbation of inter-imperialist antagonisms, the tensions in Asia, the stifling ambience in which international trade is taking place today, are elements which can only further exhaust these sources of surplus value. That is to say, those existing outside the direct control of the British bourgeoisie.
In the pre-war phase, the British bourgeoisie will have to return to the neglected problem of the development of its exports, all the more so because the trade balance has again got worse in the first nine months of 1934.
It is becoming clear that Ottawa cannot overcome the contradiction between, on the one hand, the necessity to expand industrial production in the motherland, and, on the other, the continual contraction of foreign markets since 1932, following the further reduction of world trade. For the first nine months of 1934, exports towards the Scandinavian countries and Argentina are in absolute regression, and towards the USA and Japan the decline is even more marked. Exports to Japan are hardly a third of what they were in 1929, while imports have remained at the 1929 level and even rose by 33% between 1933 and 1934. The fall in exports towards Scandinavia and Argentina is the ransom paid by the Sterling zone to the conversions of loans accorded by the City. We can also see that in the same period, in order to preserve its currency, Britain increased its purchases of foreign goods, especially from Europe.
Although British imperialism, because of its basic structure, needs to gear its activity towards the international arena, it is being pushed more and more towards nationalism, which is disarticulating the world economy. Faced with the deepening of imperialist antagonisms, whose nerve centre is Asia, it needs to develop its ability to compete. It needs to completely overhaul its archaic industrial apparatus and adapt the whole of its backward economy to the demands posed by the preparations for the next inter-imperialist war.
Because of this, the British proletariat, which has been gangrened by 50 years of ‘economism' and collaborationism, and whose powerful but short-lived outbreaks of struggle have not raised it to becoming conscious of its historic tasks, is going to face a rude awakening in the near future.
The absence of a revolutionary vanguard today makes us fearful that the leading clique of the Labour Party and the Trade Unions, which has rallied to the imperialist policies of protectionism, will tomorrow succeed in dragging the British workers, and in their wake the workers of the colonies, into the abyss of imperialist war. We thus see confirmed the conclusions drawn recently by Information about the results of the last municipal elections: "the old and traditional wisdom of the British nation will persist. The basics of British policy will not change. Going in turn from Conservatism to Labourism is, for the British, the way to guarantee their greatness and ensure peace"! Mitchell
 The most recent figures, for the first nine months of 1934 indicate an improvement in the coefficient of exchange between the Metropolis and the Empire in relation to 1933. But the general tendency we have noted remains.