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Economic history of Great Britain

Table of contents
1 British expansion and Empire
2 The Age of Mercantilism
3 The First Industrial Revolution, Free Trade, and the decline of Mercantilism
4 The Second Industrial Revolution
5 Foreign investment
6 Breakdown of Pax Britannica and New Imperialism
7 Britain and the Colonization of Africa, Imperialism in Asia
8 20th Century

British expansion and Empire

Begun initially to support William the Conqueror's (c. 1029-1087) holdings in France, Britain's policy of active involvement in continental European affairs endured for several hundred years. By the end of the 14th century, foreign trade, originally based on wool exports to Europe, had emerged as a cornerstone of national policy.

The foundations of sea power were gradually laid to protect English trade and open up new routes. Defeat of the Spanish Armada in 1588 firmly established England as a major sea power. Thereafter, its interests outside Europe grew steadily. Attracted by the spice trade, English mercantile interests spread first to the Far East. In search of an alternate route to the Spice Islands, John Cabot reached the North American continent in 1498. Sir Walter Raleigh organized the first, short-lived colony in Virginia in 1584, and permanent English settlement began in 1607 at Jamestown, Virginia. During the next two centuries, Britain extended its influence abroad and consolidated its political development at home.

Great Britain's Industrial Revolution greatly strengthened its ability to oppose Napoleon and France. By the end of the Napoleonic Wars in 1815, the United Kingdom was the foremost European power, and its navy ruled the seas. Peace in Europe allowed the British to focus their interests on more remote parts of the world, and, during this period, the British Empire reached its zenith. British colonial expansion reached its height largely during the reign of Queen Victoria (1837-1901). Queen Victoria's reign witnessed the spread of British technology, commerce, language, and government throughout the British Empire, which at its greatest extent encompassed roughly one-fifth to one-quarter of the world's area and population. British colonies contributed to the United Kingdom's extraordinary economic growth and strengthened its voice in world affairs. Even as the United Kingdom extended its imperial reach overseas, it continued to develop and broaden its democratic institutions at home.

Britain outlawed the slave trade in the early 19th century and soon began enforcing this law on other nations. By the end of the 19th century Britain had eradicated the world slave trade.

The Age of Mercantilism

The British Empire began in the age of Mercantilism, and economic theory stressing competition between nations for a finite amount of wealth. The modern British Empire first took shape from the early 17th century, with the British settlement of the eastern colonies of North America, which would later become the original United States as well as Canada's Maritime provinces, and the colonizations of the smaller islands of the Caribbean such as Trinidad, Tobago, the Bahamas, Barbados, and Jamaica.

These sugar plantation islands, where slavery became the basis of the economy, were at first Britain's most important and successful colonies. The American colonies providing tobacco, cotton, and rice in the south and naval material and furs in the north were less financially successful, but had large areas of good agricultural land and attracted far larger numbers of British immigrants.

Britain's American empire was slowly expanded by war and colonization. The ever growing American colonies pressed ever westward in search of new agricultural lands. Conflict arose with the Dutch over trade and empire; First Anglo-Dutch War (1652 - 1654); Second Anglo-Dutch War (1665 - 1667); Third Anglo-Dutch War (1672 - 1674); Britain gained control of New Amsterdam, which was renamed New York, but ceded Suriname. They defeated the French, first expanding their hold over the maritime provinces. Then during the Seven Years War the British defeated the French at the Plains of Abraham and captured all of New France in 1760. This gave Britain control over almost all of North America. Fourth Anglo-Dutch War (1780 - 1784); Anglo-Dutch Treaty of 1814; Anglo-Dutch Treaty of 1824.

The First Industrial Revolution, Free Trade, and the decline of Mercantilism

The British colonial system began to decline at the end of the seventeenth century. The empire became less important and less well regarded. The British defeat in the American War of Independence (1775-1783) deprived it of its most populous colony. This loss of the southern American colonies was coupled with a realization that colonies were not particularly economically beneficial. The predominance of Adam Smith and laissez-faire capitalism encouraged the British to grant their colonies self government. This is sometimes referred to as the end of the "first British Empire", indicating the shift of British influence from the Americas between the 16th and 18th Centuries to the "second British Empire" of Africa and especially India from the 18th century.

The fight against Mercantilism and the old colonial system were lead by a number of liberal thinkers, such as Richard Cobden, Joseph Hume, Francis Place and John Roebuck. The men and their disciples considered formal imperialism wasteful. It was realized that the costs of occupation of colonies often exceeded the financial return to the taxpayer. In other words, formal empire afforded no great economic benefit when trade would continue whether the overseas political entities were nominally sovereign or not. The American Revolution helped demonstrate this by showing that Britain could still control trade with the colonies without having to pay for their defence and governance.

This end of the old colonial system was most evident in the repeal of the Corn Laws, the agricultural subsidies on colonial grain. The end of these laws opened the British market to unfettered competition, and grain prices fell and food became more plentiful. The repeal greatly injured Canada, however, whose grain exports lost a great deal of their profitability.

Some argue that this push for free trade was merely because of Britain economic position and was unconnected with any true philosophic dedication to free trade. Roughly between the Congress of Vienna and the Franco-Prussian War, Britain reaped the benefits of being the world's sole modern, industrial nation. Following the defeat of Napoleon, Britain was the 'workshop of the world', meaning that its finished goods were no longer produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market. If political conditions in a particular overseas markets were stable enough, Britain could its economy through free trade alone without having to resort to formal rule or mercantilism. Britain was even supplying half the needs in manufactured goods of such nations as Germany, France, Belgium, and the United States.

Britain, in as sense, continued to adhere to the Cobdenite notion that informal colonialism was preferable — the established consensus among industrial capitalists during the age of Pax Britannica between the downfall of Napoleon and the Franco-Prussian War.

Sovereign areas already hospitable to informal empire largely avoided formal rule, even often during the shift to New Imperialism. China, for instance, was not a backward country unable to secure the prerequisite stability and security for western-style commerce, but a highly advanced empire unwilling to admit western (often drug-pushing) commerce, which may explain the West's contentment with informal 'Spheres of Influence'. China, unlike tropical Africa, was a securable market without formal control.

The victory of forces of the British East India Company at Plassey (1757) opened the great Indian province of Bengal to British rule, though later famine (1770) exacerbated by massive expropriation of provincial government revenues aroused controversy at home. The nineteenth century saw Company rule extended across India after expelling the Dutch, French and Portuguese. Following Indian Mutiny of 1858 India became a crown colony. The territory continued to expand as Ceylon (now Sri Lanka) and Burma were added to Britain's Asian territories, which extended further east to Malaya and (1841) to Hong Kong following successful war in defence of the Company's opium exports to China.

The aftermath of World War I saw the last major extension of British rule, with Britain gaining control through League of Nations Mandates in Palestine and Iraq after the collapse of the Turkish empire in the Middle East.

The Second Industrial Revolution

During the First Industrial Revolution, the industrialist replaced the merchant as the dominant figure in the capitalistic system. In the last decades of the nineteenth century, when the ultimate control and direction of large areas of industry came into the hands of financiers, industrial capitalism gave way to finance capitalism. The establishment of mammoth industrial empires and the ownership and management of their assets by men divorced from production were the dominant features of this third phase.

Amalgamation of industrial cartels in the era of finance capitalism, in the forms of larger corporations and mergers and alliances of separate firms, and technological advancement during the Second Industrial Revolution, particularly the increased utilization of electric power and internal combustion engines fuelled by coal and petroleum, were mixed blessings for British business during the late Victorian era. The ensuing development of more intricate and efficient machines along with monopolistic mass-production greatly expanded output and lowered production costs. As a result, production often exceeded domestic demand. Among the new conditions, more markedly evident in Britain, the forerunner of Europe's industrial states, were the long-term effects of the severe 'Long Depression' of 1873-1896, which had followed fifteen years of great economic instability. Business after 1873 in practically every industry suffered from lengthy periods of low — and falling — profit rates and price deflation.

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. During the period of cut-throat competition of the mid-Victorian era, producers 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 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." This prompted imperial critic J. A. Hobson to conclude that finance was manipulating events to its own profit. Modern historians, such as Bernard Porter, P.J. Cain and 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.

Foreign investment

J.A. Hobson, a British liberal writing at the time of the fierce debate on imperialism during the Boer War, observed the spectacle of the 'Scramble for 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.

The accumulation theory gives a good account of how, in Hobson's words, "imperialism was the natural product of the economic pressure of a sudden advance of capitalism which could not find occupation at home and needed foreign markets for goods and for investments." Hobson was, after all, partially correct. Between 1860 and 1900, the value of British capital invested abroad grew from $7 billion to $20 billion. By the eve of World War I, one-fifth of the foreign investments of France and Germany were in colonial regions. French investments in colonial Africa and Indochina were linked to a broader movement of capital from the metropole to overseas regions. For France, by far the larger part of her exported funds went to what Britain's Lord Salisbury would deem in the 1890s 'dying nations', namely Egypt under the Khedive, Portugal, Spain, Roumania, Russia, and the Ottoman Empire.

The Age of Imperialism was, to an extent, the by-product of an indisputable 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'.

New Imperialism, in a sense, was one way of capturing new overseas markets. By the eve of the Great War, Europe, for instance, represented the largest share (27 percent) of the global 'zones of investment', followed by North America (24 percent), Latin America (19 percent), Asia (16 percent), Africa (9 percent), and Oceania (5 percent) for all industrial powers. Britain, the forerunner of Europe's capitalist powers, however, was clearly the chief world investor, though the direction of its investments underwent a striking change, becoming oriented less toward Europe, the United States, and India, and more toward the rest of the Commonwealth and Latin America. Formal imperialism was often a last resort — an attempt to subjugate new markets in largely tropical areas, largely organized according to seasonal patterns and not wage productivity, where informal control was relatively difficult. Hobson observed this during the Boer War, concluding "It is not indeed necessary to own a country in order to do trade with it or to invest capital in it."

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.

Foreign trade thus tripled in volume between 1870 and 1914, although (again) most of the activity occurred among the industrialized countries, or between them and their suppliers primary goods or their new markets. In 1913, only 11 percent of the world's trade took place between primary producers themselves. Britain ranked as the world's largest trading nation in 1860, but by 1913 it had lost ground to both the United States and Germany: British and German exports in that year each totalled $2.3 bullion, and those of the United States exceeded $2.4 billion. More significant was the emigration of their goods and capital.

As foreign trade increased, so in proportion did the amount of it going outside the Continent. In 1840, 7.7 million pounds of her export and 9.2 million pounds of her import trade was done outside Europe; in 1880 the figures were 38.4 million and 73 million. Europe's economic contacts with the wider world were multiplying, much as Britain's had been doing for years. In these non-industrial regions (such as the Russian and Ottoman empires), which were the principal sources of surplus French capital, and other overseas territories that lacked both the knowledge and the power to direct the capital flow, served to colonize rather than develop them, destroying native industries and creating dangerous political and economic pressures which would, in time, produce the so-called 'north/south divide'. The contemporary Dependency Theory, devised largely by Latin American academics, draws on this inference.

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.

Breakdown of Pax Britannica and New Imperialism

In a scramble for overseas markets between the Franco-Prussian War and World War, 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.

Continental political developments in the late 19th century, relating to the overall breakdown of the Concert of Europe, also rendered this imperial competition feasible, in spite of Britain's centuries of long-established naval and maritime superiority. As unification of Germany by the Prussian 'Garrison State' went forward, contending capitalist powers were thus ready to compete with Britain over stakes in overseas markets. The aggressive nationalism of Napoleon III and the relative political stability of France under the liberal Third Republic also rendered France more capable of challenging Britain's global preeminence. Germany, Italy, and France were simply no longer as embroiled in continental concerns and domestic disputes as they were before the Franco-Prussian War.

Contemporary World-Systems theorist Immanuel Wallerstein perhaps better addresses the counterarguments to Hobson without degrading his underlying inferences. Wallerstein's conception of imperialism as a part of a general, gradual extension of capital investment from the "center" of the industrial countries to an overseas "periphery" thus coincides with Hobson's. According to Wallerstein, "Mercantilism... became the major tool of [newly industrializing, increasingly competitive] semi-peripheral countries [Germany, France, Italy, Belgium, etc.] seeking to become core countries." Wallerstein hence perceives formal empire as performing a function "analogous to that of the mercantilist drives of the late seventeenth and eighteenth centuries in England and France."

The expansion of the Industrial Revolution hence contributed to the emergence of an era of aggressive national rivalry, leading to the late nineteenth century 'scramble for Africa' and formal empire. Hobson's theory is thus useful in explaining the role of over-accumulation in overseas economic and colonial expansionism while Wallerstein perhaps better explains the dynamic of inter-capitalist geopolitical competition.

Recent developments made it easier and more appealing for "semi-peripheral" newly industrialized states to challenge Pax Britannica overseas. With the expansion of the Industrial Revolution, Britain could no longer reap the benefits of being the sole modern, industrial nation. Britain by the outbreak of the Franco-Prussian War was no longer the 'workshop of the world', meaning that its finished goods were no longer produced so efficiently and cheaply that they could often undersell comparable, locally manufactured goods in almost any other market.

As these other newly industrial powers, the United States, and Japan after the Meiji Restoration began industrializing at a rapid rate, Britain's comparative advantage in trade of any finished good began diminishing. Just as the power of German and North American capitalisms increased, the relative decline of the British capitalist economy began in the last third of the nineteenth century, contributing to a breakdown of Britain's natural superiority in industry and commerce. Britain's share of world trade fell from one-forth in 1880, one-sixth in 1913, and one-eight in 1948. Britain was no longer supplying half the needs in manufactured goods of such nations as Germany, France, Belgium, and the United States. Britain was even growing incapable of dominating the markets of India — a crown colony by 1858 that Disraeli would later deem "the brightest jewel of the crown" —, Manchu China, the coasts of Africa, and Latin America.

To make matters worse, British manufactures in the staple industries of the Industrial Revolution were beginning to experience real competition abroad. The German textiles and metal industries, for example, had by the beginning of the Franco-Prussian War surpassed those of Britain in organization and technical efficiency and usurped British manufactures in the domestic market. By the turn of the century, the German metals and engineering industries would be producing heavily for the free trade market of what was once "workshop of the world" as well. In midst of Britain's relative industrial decline, the fact that invisible financial exports actually kept Britain "out of the red" is somewhat indicative of both Britain's pressure to secure overseas markets in both nominally independent states and colonies and its newly precarious hegemony over overseas markets.

For the most part, formal empire has its roots in the breakdown of Pax Britannica. With the rise of industrial capitalism in Germany, North America, and Japan, its finished goods no longer had a comparative or absolute advantage in any other market. Industrialization progressed dynamically in Germany and the United States especially, allowing them to clearly prevail over the "old" French and English capitalisms. The "neo-mercantilist" practices of newly industrializing states such as Germany, the United States, and Japan cut Britain off from outlets and even created competition for Britain in sales to these 'peripheral' areas.

With contending, emerging 'semi-peripheral' capitalist powers once dependent on British industry ready to vie for competing stakes in overseas markets, inter-capitalist competition also took form of protectionism through higher tariffs, further aggravating the push toward overseas markets: in Germany in 1879, and again following 1902: in the United States in 1890; in France in 1892, 1907, and 1910. The only country to escape this trend was Britain, whose essential strength lay precisely in its preeminence on the world market. German, American, and French imperialists, as mentioned, argued that Britain's world power position gave the British unfair advantages on international markets, thus limiting their economic growth.

This affected Britain in two ways. First, of course, new interest of the emergent industrial powers in colonial expansion brought them into direct competition with Britain. The expansion of the Second Industrial Revolution and the rise of similar economic practices (such as amalgamation of industry) in Germany and the United States intensified the competition for overseas markets and hence formal colonialism.

New Imperialism, as one means of facilitating the inexorable movement of capital from domestic markets to overseas areas, was thus enabled by recent changes in the North Atlantic balance of power, such as the unification of Germany under Prussia and relative political stability under France's Third Republic, but driven by changing economic realities and the spread of industrial capitalism beyond Britain.

By the time Disraeli ushered in the age of New Imperialism with his watershed Crystal Palace Speech, which was delivered by no mere coincidence after the Franco-Prussian War and during the Long Depression, Britain was no longer the world's sole modern, industrial nation. Pessimists thus inferred that unless Britain acquired secure colonial markets for its industrial products and secure sources of raw materials, the other industrial states would seize them themselves and would precipitate a more rapid decline of British business, power, and standards of living. The prospect of having to compete to remain the forerunner of the world's economies and empires due to recent changes in the global economy and continental balance of power thus left it ripe for Disraeli's Conservative rule in the 1870s, which would usher in an era of extreme national rivalry that would one day culminate in the Great War.

In this sense, historian Bernard Porter argues that formal imperialism for Britain was a symptom and an effect of its relative decline in the world, and not of strength. Symbolic overtures, in fact, such as Queen Victoria's grandiose title of "Empress of India", celebrated during Disraeli's second premiership in the 1870s, helped to obscure this fact. Joseph Chamberlain thus argued that formal imperialism was necessary for Britain because of the relative decline of the British share of the world's export trade and the rise of German, American, and French economic competition.

As mentioned, the 'Scramble for Africa', rationalized by Rudyard Kipling-style racism and Social Darwinism in predominately Protestant empires and the paternalistic (but republican and progressive) French-style "mission of civilization", was attractive to many European statesmen and industrialists who wanted to accelerate the process of securing colonies upon anticipating the prospective need to do so. Their reasoning was that markets might soon become glutted, and that a nation's economic survival depend on its being able to offload its surplus products elsewhere.

At a time when the abandonment of free trade limited the European market, some business and government leaders, such as Leopold II and Jules Ferry, concluded that sheltered overseas markets would solve the problems of low prices and over-accumulation of surplus capital caused by shrinking continental markets. Among the new conditions were the short-term effects of the severe economic depression of 1873, which had followed fifteen years of great economic instability. Business after 1873 in practically every industry suffered from lengthy periods of low profit rates and deflation; profits were falling because too much capital were chasing too few markets, especially after the rise of newly industrializing states in export trade with its traditional markets in continental Europe, China, and Latin America.

In addition, such surplus capital was often more profitably invested overseas, where cheep labor, limited competition, and abundant raw materials made a greater premium possible. Another inducement to imperialism, of course, arose from the demand for raw materials unavailable in Europe, especially copper, cotton rubber, tea, and tin, to which European consumers had grown accustomed and European industry had grown dependent.

Following the lead of Britain under Disraeli, even the once hesitantly imperialistic Bismarck was eventually brought to realize the value of colonies for securing (in his words) "new markets for German industry, the expansion of trade, and a new field for German, activity, civilization, and capital". Examples of strategic competition following the passing of the scene of Bismarck, the era's premier diplomat, that would intensify the drive to consolidate existing spheres of influence and grab new colonies, include the Moroccan Crisis of 1905, the Tangier Crisis resulting from Kaiser Wilhelm's recognition of Moroccan independence, and the second Moroccan Crisis, in which Germany sent its navy to Morocco, thereby testing the precarious Anglo-French Entente. The Entente Cordiale, in fact, was a gentleman's agreement between Britain and France to curtail further German expansion. The Entente Cordiale and the Franco-Russian alliances were also made because of a common interest.

The absolutist Central Powers, led by a newly unified, dynamically industrializing Germany, with its expanding navy — doubling in size between the Franco-Prussian War and the Great War — were a strategic threat to the markets of these relatively declining empires that would one day consist of the Great War Allies. British policymakers feared the prospect of another German military victory over France, which could have reasonably resulted in a German take-over of France's formal colonies, a sort of reversal of the actual outcome of the Great War, after which Britain occupied the vast majority of German and Ottoman colonies as "protectorates". This prospect was especially frightening considering that French colonies tended to be closely situated to Britain's; Nigeria, for instance, was surrounded by French territory, India was near French Indochina, and so forth.

Britain and the Colonization of Africa, Imperialism in Asia

Until the dismissal of the aging Chancellor Bismarck by the belligerent Kaiser Wilhelm II, the expropriation of vast, unexplored areas of Asia and Africa by emerging imperial powers such as Italy and Germany and more-established empires such as Britain and France was nevertheless relatively orderly. The 1885 Congress of Berlin, initiated by Bismarck to establish international guidelines for the acquisition of African territory, formalized this new phase in the history of Western imperialism. Between the Franco-Prussian War and the Great War (the age of New Imperialism), Europe added almost 9 million square miles — one-fifth of the land area of the globe — to its overseas colonial possessions.

Since the "Scramble for Africa" was the predominate feature of New Imperialism and formal empire, opponents of Hobson's accumulation theory often point to frequent cases when military and bureaucratic costs of occupation exceeded financial returns. In Africa (exclusive of South Africa) the amount of capital investment by Europeans was relatively small before and after the 1885 Congress of Berlin, and the companies involved in tropical African commerce were small and politically insignificant, exerting only a tiny influence on domestic politics. First, this observation might detract from the pro-imperialist arguments of Leopold II, Francesco Crispi, and Jules Ferry, but Hobson argued against imperialism from a slightly different standpoint. He concluded that finance was manipulating events to its own profit, but often against broader national interests.

Second, any such statistics only obscure the fact that African formal control of tropical Africa had strategic implications in an era of feasible inter-capitalist competition, particularly for Britain, which was under intense economic and thus political pressure to secure lucrative markets such as India, China, and Latin America. In Britain's case this process of capitalist diffusion had in many regions led it to acquire colonies in the interests of commercial security; France and Germany would later follow suit. For example, although the then inconspicuously moribund Czarist Empire proved to be little treat to Great Britain following its stunning defeat in the 1905 Russo-Japanese War, British Conservatives in particular feared that Russia would continue to usurp Ottoman territory and acquire a port on the Mediterranean or even Constantinople — a long touted goal of Orthodoxy.

These fears became especially pronounced following the 1869 completion of the near-by Suez Canal, prompting the official rationale behind Disraeli's purchase of the waterway. The close proximity of the Czar's (territorially) expanding empire in Central Asia to India also terrified Lord Curzon, thus triggering the Afghan Wars. Rhodes and Milner also advocated the prospect of a "Cape to Cairo" empire, which would link by rail the extrinsically important canal to the intrinsically mineral and diamond rich South, from a strategic standpoint. Though hampered by German conquest of Tanganyika until the end of the Great War, Rhodes successfully lobbied on behalf of such a sprawling East African empire.

Formal colonies were often, in hindsight, strategic outposts to protect large zones of 'investment', such as India, Latin America, and China. Britain, in as sense, continued to adhere to the Cobdenite notion that informal colonialism was preferable — the established consensus among industrial capitalists during the age of Pax Britannica between the downfall of Napoleon and the Franco-Prussian War. What changed since the Disraeli's Crystal Palace Speech was not necessarily a preference for colonialism over informal empire, but the attitude toward formal rule in largely tropical areas once considered too 'backward' for trade. Sovereign areas already hospitable to informal empire largely avoided formal rule during the shift to New Imperialism. China, for instance, was not a backward country unable to secure the prerequisite stability and security for western-style commerce, but a highly advanced empire unwilling to admit western (often drug-pushing) commerce, which may explain the West's contentment with informal 'Spheres of Influences'. China, unlike tropical Africa, was a securable market without formal control.

Following the First Opium War, British commerce, and later capital invested by other newly industrializing powers, was securable with a smaller degree of formal control than in Southeast Asia, West Africa, and the Pacific. But in many respects, China was a colony and a large-scale receptacle of Western capital investments. Western powers did intervene military there to quell domestic chaos, such as the horrific Taiping Rebellion and the anti-imperialist Boxer Rebellion. For example, General Gordon, later the imperialist 'martyr' in the Sudan, is often accredited as having saved the Manchu dynasty from the Taiping insurrection.

Colonialism in India, however, should dissuade sweeping generalizations and over-simplifications regarding the roles of inter-capitalist competition and accumulated surplus in precipitating the era of New Imperialism. Formal empire in India, beginning with the Government of India Act of 1858, was a means of consolidation, reacting to the abortive Sepoy Rebellion, which was in itself a conservative reaction among Indian traditionalists to the Dalhousie era of liberalization and consolidation of the subcontinent. Local concerns in particular zones of investment, hence, should be of concern as well.

Formal empire in Sub-Saharan Africa, the last vast region of the world largely untouched by "informal imperialism" and "civilization", was also attractive to Europe's ruling elites for other potential reasons. First, insofar as the "Dark Continent" was agricultural or extractive, and no longer "stagnant" since its integration with the world's interdependent capitalist economy, it required more capital for development that it could provide itself. Second, during a time when in nearly every year since the 1813 liberalization of trade onward Britain's balance of trade showed a deficit, and a time of shrinking and increasingly protectionist continental markets, Africa offered Britain an open market that would garner it a trade surplus — a market that bought more from the metropole than it sold overall. Britain, like most other industrial countries, had long since begun to run an unfavorable balance of trade (which was increasingly offset, however, by the income from overseas investments). As perhaps the world's first post-industrial nation, financial services became an increasingly more important sector of its economy. Invisible financial exports, as mentioned, kept Britain out of the red, especially capital investments outside Europe, particularly to the developing and open markets in Africa, predominately white 'settler colonies', the Middle East, the Indian Subcontinent, Southeast Asia, and the South Pacific.

Each of Britain's major elites also found some advantages in formal, overseas expansion: mammoth monopolies wanted imperial support to secure overseas investments against competition and domestic political tensions abroad; bureaucrats wanted more occupations, military officers desired promotion, and the traditional but waning landed gentry wanted formal titles. Observing the rise of trade unionism, socialism, and other protest movements during an era of mass society in both Europe and later North America, the elite in particular was able to utilize imperial "jingoism" to co-opt the support of the impoverished industrial working class. Riding the sentiments of the late nineteenth century Romantic Age, imperialism inculcated the masses with 'glorious' neo-aristocratic virtues and helped instill broad, nationalist sentiments.

20th Century

By the time of Queen Victoria's death in 1901, other nations, including the United States and Germany, had developed their own industries; the United Kingdom's comparative economic advantage had lessened, and the ambitions of its rivals had grown. The losses and destruction of World War I, the depression of the 1930s, and decades of relatively slow growth eroded the United Kingdom's preeminent international position of the previous century.