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The Economic Causes of the First World War

Capitalism with its minority ownership of the means of production and distribution, and the resulting economic struggle for profit means the capitalist class has a motive for using armed forces in wars to protect its vested interests. All members of the capitalist class do not have identical interests in foreign trade and investment; there are divisions over free trade and tariffs. The policy of a government is dictated by which capitalist group is predominant at the time but the capitalist class as a whole has the same interest in defending itself and their privileged position based on their private ownership of the means of production and distribution against the working-class. They are all prepared to use armed force to maintain that position against the working-class.

Capitalism is the cause of the international rivalries that lead to war. When socialists say that capitalism is the source of wars we do not mean that wars are deliberately plotted by individual capitalists or groups for the purpose of making money. The capitalist system of society is rooted in conflict, and war is one of the products of that conflict. War is not an accidental interruption of the peaceful operation of capitalism but is inherent in the structure of the system itself, it is not the outcome of diplomatic stupidity or miscalculation, or of the arrogance and mistakes of statesmen. War is an extension of an underlying contest going on at all times. Governments in trying to handle the problems and antagonisms created by capitalism turn to war when other means fail. As Clausewitz wrote 'War is merely the continuation of policy by other means.'

In 1914 an explanation for the First World War was the defence of neutral Belgium but no mention was made on the Allied side of the atrocities in the Congo Free State which had been privately controlled by the King of Belgium. Here defenceless natives were maimed and slaughtered for profit, up to 8 million of the estimated 16 million native inhabitants died between 1885 and 1908. Native Congo labourers who failed to meet rubber collection quotas were often punished by having their hands cut off. The First World War was also blamed on the personality of the Kaiser or the acts of individuals such as the Bosnian Serb Gavrilo Princip at Sarajevo. Professor Pigou in Political Economy of War, dismissed the Sarajevo incident as being the occasion not the cause of war. It was 'the match to the powder magazine. The real fundamental causes are those that lie behind the assembling of the powder.'

Economic competition between capitalist groups leads to the encroaching on the markets and resources of foreign rivals, and governments retaliate with tariffs, quotas, subsidies and other methods of excluding goods from the market. In the last resort the struggle leads to wars of conquest, the object of which is to acquire control over markets, or over territories rich in mineral and other resources and in an exploitable working-class. Marshal Foch, French military leader in the First World War wrote in 1918 of the commercial nature of the forces leading to war: ‘What do we all seek? New outlets for an ever-increasing commerce and for industries which, producing far more than they can consume or sell, are constantly hampered by an increasing competition. And then? Why! New areas for trade are cleared by cannon shot. Even the Stock Exchange, for reasons of interest, can cause armies to enter into campaign' (United Service Magazine, December 1918). Even Keynes in 1936 identified that 'competitive struggle for markets' is the predominant factor in 'the economic causes of war' (The General Theory of Employment, Interest and Money, 1936). Capitalists who have money invested in some foreign territory will do their utmost to secure protection for their property through the activities – including in the last resort war – of their government. So it is capitalism itself which produces these conflicts over markets, trade routes, raw material which cause war. As we wrote in 1914, 'the capitalists of Europe have quarrelled over the question of the control of trade routes and the world’s markets.'

German competition

The origins of the First World War lay in the fact that the nineteenth century industrial, military and naval predominance of British and French capitalism was being challenged by the rapid expansion of Germany. As German industry grew, German production and exports were catching up with the British and the French. Germany was only unified in 1871 and its economic development had been rapid: in 1870 coal production was 40 million tons, in 1913 280 million tons (60 percent from the Ruhr but also from Lorraine, Silesia, and the Saar. Germany was developing modern industries such as the chemical and electrical industries, and in textiles by 1914 they exported more and imported less than Britain. The German annexation of the French provinces of Alsace and Lorraine in 1871 linked Lorraine ore with Westphalian coal, and Germany’s pig-iron production jumped ahead of Britain's.

In Britain a Commission on the Depression of Trade Report of 1886 regarding German competition in world markets stated 'A reference to the reports from abroad will show that in every quarter of the world the perseverance and enterprise of the Germans are making themselves felt. In actual production of commodities we have now few, if any, advantages over them, and in a knowledge of the markets of the world, a desire to accommodate themselves to local tastes or idiosyncrasies, a determination to obtain a footing wherever they can and a tenacity in maintaining it, they appear to be gaining ground upon us.'

France had experienced a loss of prestige after defeat in 1870 by Germany, its pride was hurt by the loss of Alsace and Lorraine with its iron ore and coal mines. Thus France had an outstanding interest in reclaiming Alsace and Lorraine. Also the Saar with its wealth of coal deposits coupled with its location on the border between France and Germany meant the Saar was important. Historically, the Saar was a Prussian/German territory but in 1871 during the Franco-Prussian War the French attempted to seize it but failed.

Places in the sun

A major factor in capitalist rivalries was imperialism, particularly the 'scramble for Africa' and Germany's search for a 'place in the sun.' Germany had entered into the colonial scramble but they developed late and found all the best territories and strategic ocean highways already dominated by Britain, France and others. Britain had acquired most of its empire before 1870; Canada, Australia, New Zealand, India, and other parts of the globe were acquired to protect trade routes. The prime motivator for empire was trade, the East India Company drove the expansion of the British Empire in Asia. First came the missionary and the trader then the soldier and Governor with the flag.

Germany annexed Namibia, Togoland, Cameroon, and Tanganyika and made efforts to connect the south west colonies with the eastern colonies which threatened British expansion north from the Cape. German support for the Boers against Britain in mineral-rich South Africa antagonised the British. Dr Heinrich Schnee, formerly Governor of German East Africa wrote in 1936: 'The colonies offer an assured market for our own industrial produce; they afford a field of investment for the savings and capital of the Mother country.'

Colonies were necessary for investment, resources, raw materials, markets for manufacturers and raw materials not available or in short supply in metropolitan countries e.g. rubber in the Congo. The colonial markets became more important after Free Trade was abandoned in Europe in the 1870s. Joseph Chamberlain, British Secretary of State for the Colonies said in a speech to the Birmingham Chamber of Commerce in 1890 that 'All the great Offices of State are occupied with commercial affairs. The Foreign Office and the Colonial Office are chiefly engaged in finding new markets and in defending old ones. The War Office and the Admiralty are mostly occupied in preparations for the defence of these markets and for the protection of our commerce' (Leonard Woolf, Empire and Commerce in Africa: A Study in Economic Imperialism, 1920).

Prior to 1914 German capitalism was rapidly encroaching on British and French markets, the international situation was intensely difficult with two basic problems: Alsace and Lorraine in the west and in the east the Balkans. The Serbian Pork War inflamed Serbian nationalism in Serbia and amongst Bosnian Serbs, and a Bosnian Serb would assassinate Archduke Franz Ferdinand in Sarajevo. The Berlin-Baghdad Railway, which would link Germany to the oilfields in the Persian Gulf, putting it in striking distance of British oilfields in Persia, Russian oilfields in the Caucasus, and British India, was deemed a serious threat.

The German invasion of Belgium meant British capitalist interests were endangered directly by Germany becoming master of ports on the English Channel. Prime Minister, Asquith wrote on 2 August, 1914: 'It is against British interests that France should be wiped out as a Great Power. We cannot allow Germany to use the Channel as a hostile base. We have to prevent Belgium being utilised and absorbed by Germany.'

British War Aims Achieved

The British war aim in the First World War was to restrict German access to the Persian Gulf and the 1919 Versailles Peace Treaty accomplished everything that Britain and France wanted; Germany lost its colonies in Africa which became mandates of the British Empire, the Ottoman Empire was broken up and Britain received as mandates Mesopotamia and Palestine, and the French got back Alsace and Lorraine, and received the mandates of the Levant (Lebanon and Syria). The Saar Land became a mandate of Britain and France from 1920 to 1935, and after the Second World War the French got their hands on it again but only until 1956. Germany achieved one of its war aims albeit briefly: the March 1918 Brest Litovsk Treaty forced on the new Bolshevik government in Russia meant that Ukraine, 'the bread basket of Europe' with its fertile steppes of rich black soil and vast fields of wheat, gained 'independence' from Russia but was essentially an economic satellite of Germany.

The First World War did not start overnight through an assassin’s bullets at Sarajevo, it was the outcome of years of conflicting capitalist interests. After the war we wrote 'While competition between capitalist groups for routes, markets, and control of raw material exists, the cause of war remains.' We had even written as early as November, 1914: 'the facts point irresistibly to further great wars. They indicate that no sooner will the present struggle have ceased than diplomats will be at work forming new alliances.' And it was these alliances and the rivalries that were engendered by them that eventually led to the next world war in 1939.

STEVE CLAYTON