T. Cliff

The Problem of the Middle East

<p. 38>

Part II
Imperialism in the Arab East

Chapter VI
The Imperialist Powers’ Stake
in the Arab East

The Arab East is important to the imperialist Powers for two main reasons: firstly its being on the route to other regions – India, China, Abyssinia, Indo-China, etc., and secondly its being on its own account of economic value.

I. The Arab East as a Route

The main communications artery passing through the Arab East is the Suez Canal. What is its importance?

First and foremost it allows tremendous saving in the transport route to the East as compared with the route via the Cape of Good Hope. Voyage increases via the Cape route to London are: from the Persian Gulf – 80 per cent, from the west coast of India – 77 per cent, from the East coast of India – 51 per cent, from Mombasa – 45 per cent, from Singapore – 44 per cent, from Hong Kong – 37 per cent.

This saves an enormous amount of freight costs as a very great tonnage passes through the Canal. De Lesseps in his time estimated the tonnage which would pass through at 6 millions, an estimation which was then considered very much exaggerated. In actuality it is much greater: 1870 – 436,609; 1879 – 2,263,332; 1908 – 13,633,283; 1938 – 34,418,187.

Even though during the last seventy years England had descended from her pinnacle of being the ‘workshop of the world’, and from her almost monopolistic position in world trade, still today half the tonnage which passes through the Suez is transported in British ships. The distribution of the tonnage passing through the Suez among the ships of the different countries was as follows in 1938: England 50.4 per cent, Italy – 13.4, Germany – 9.1, Holland – 8.7, France – 5, Norway – 4.3, Japan – 1.9, USA – 1.1 per cent. (Actually the percentage of goods intended for France and passing through Suez is much greater than 5 per cent, as a number of non-French ships have Marseilles as their destination.)

A large part of Britain’s supply of vital necessities comes through the Suez Canal. The supply of goods through the Suez constitutes the following percentages of Britain’s total supply: jute – 100 per cent, tea – 99.3, rubber – 90.8, manganese ore – 85.6, hemp – 73.3, zinc ore, lead and rice 60–65, coffee and wool – 40–50 per cent. As regards other materials the percentage is less, but it yet constitutes more than 30 per cent for oil seeds, sugar and barley, 25–30 for wheat, copper and tin, 15–20 for petroleum and butter, 14–15 per cent for cotton and meat.

As we have seen the second place in Canal trade after England was taken, before the Second World War, by Italy. Three-quarters of the Italian colonies were beyond the Suez Canal. Of all the industrial raw materials which Italy did not produce herself, either wholly or in part, a very large part was brought through the Canal. Thus of her total jute import, 99.9 per cent came through the Canal, rubber – 99.2, tin – 81.2, wool – 44.4, copper – 22.4, cotton – 17, petroleum – 15.2, phosphates – 7.8 per cent. As far as industrial raw materials in which she is partially deficient are concerned, 56 per cent of the total import of oil seeds came through the Canal and 26.1 per cent of manganese. Altogether Italy before the war got about 13 per cent of her total imports through the Suez Canal. With the increase of her exploitation of Abyssinia, the importance of transport through Suez was bound to grow.

The Canal is less important for France than for Italy. A much smaller part of her empire is across the Canal. Even so its value to her is by no means negligible. It forms a transport route between France and Indo-China, French Somaliland and Madagascar. It would be wrong, however to exaggerate the importance of the Suez for France’s connection with her colonies, as the foreign trade of these colonies via the Suez Canal is very small, constituting only slightly more than half the foreign trade of Algeria alone.

<p. 39> The Arab East constitutes also a region through which land routes pass. Germany under the Kaiser planned to construct a railway which would connect her to the Persian Gulf, the Berlin-Baghdad railway. This plan was one of the main immediate causes of the First World War. Germany’s defeat put an end to it. Instead Britain constructed a long railway route connecting nearly all the British colonies in Africa – the Cape–Cairo line which joins up with a network of railways connecting the countries of the Arab East: the Cairo-Haifa line, the Haifa-Beirut-Tripoli line (this line connects up with Anatolia and Istanbul), the Haifa–Hedjaz and Haifa–Beirut–Mosul–Baghdad lines. These railways constitute an iron hoop which consolidates and binds together the British Empire.

With the rise of the aeroplane to importance the ownership of bases in the Middle East becomes an important weapon in the struggle for air supremacy. The air route from London to Bombay, Singapore, Hong Kong and Australia passes through Haifa. The air route which passes through the length of British East Africa to Cape Town starts in Cairo. The French air route to Saigon before the war also passed through this region: Marseilles–Beirut–Baghdad–Bombay–Saigon.

The great importance of the Arab East as a route was one of the main reasons for the struggle between the European Powers during the last century – Napoleon’s expedition, the war against Turkey in 1832, the Crimean War and the conquest Egypt were all connected with this – and also one of the main immediate causes of the First and Second World Wars. Transport routes connecting countries and peoples are not, under capitalism, means for international co-operation and peace, but for imperialist rivalry and war. Renan was most decidedly correct when he mentioned the classic saying, ‘I come not to bring peace, but a sword’, when welcoming Ferdinand de Lesseps to the Academy in April 1885:

‘This saying, must frequently have crossed your mind now that you have cut through it, the isthmus has become a defile, that is to say a battlefield. The Bosporus by itself has been enough to keep the whole civilised world embarrassed up to the present, but now you have created a second and much more serious embarrassment. Not merely does the Canal connect two inland seas, but it serves as a communicating passage to all the oceans of the globe. In case of a maritime war, it will be of supreme importance, and everyone will be striving at top speed to occupy it. You have thus marked out a great battlefield for the future.’

The digging of the Canal turned the Arab East into a large battlefield, but the growth of air transport has fanned and will fan even further the fire of the struggle between the Powers.

II. The Arab East as an Economic Stake

The Arab East constitutes an economic stake from three points of view: as a source of raw materials, as a market for goods, as a field for the investment of capital.

A) Petroleum

The most important raw material is petroleum. Until now only a tiny portion of the oilfields has been investigated, and it seems as if all estimates regarding oil reserves in the Middle East tend towards minimisation. A report prepared for the United States Petroleum Resources Corporation by a delegation of US oilmen at whose head was the distinguished scientist and oil operator E. de Golyer, said:

‘It has been proved that indicated reserves in these areas are comparable to those in the US, yet all Middle East reserves have been discovered by drilling less than 150 ‘wildcat’ wells, whereas in US more than 20 times this number were drilled each year.’

The same report writes on the rising importance of Middle East petroleum:

‘The centre of gravity of world oil production is shifting from the Mexican Gulf and Caribbean area to the Middle East-Persian Gulf area and is likely to continue to shift until it is firmly established in that area.’

The above report and also the reports prepared by the experts of the United States Government Petroleum Administration for the War (PAW) throw much light on the extent of oil resources in the Middle East. According <p. 40> to the best available estimates, the share of various countries in proven oil resources and their part in actual world oil production is as indicated in the following table:–



% of world
oil reserves


% of world


























  9.9 )

     3.1 )


  7.9 )

     1.1 )


  7.9 )


     0.6 )


Saudia, Bahrain

  4.0 )


     0.6 )



  1.0 )

      –   )

Netherlands East Indies



All other countries together






This table shows clearly that while the Middle East produces only 5.7 per cent of the total world production of oil, nearly a third of all oil resources are concentrated there. As against this, USA, which produces two-thirds of world production contains only about 40 per cent of the proven resources of the world. While according to one estimate the output of oil in 1938 constituted 6.3 per cent of the proven oil reserves in USA, which means that within 14–15 years her resources would be exhausted (of course these estimates must not be taken altogether at their face value, as the petroleum companies have described the situation much too drastically), the output in the Middle East was only 0.7 per cent of the proven oil reserves. According to other estimates the richness of the Middle East countries in oil is even greater. According to one, the oil resources in Saudi Arabia alone can satisfy the total world demand for fifteen years. It is assumed that the quantity in Iran and Iraq is not smaller than that in Saudi Arabia.

The position of the various imperialist Powers differs as regards control of the oil in the Middle East. The oilfields of Iran are in the hands of the British alone. The attempts of the USA to acquire a concession over oil in northern Iran have failed owing to Russian opposition. The fields of Saudi Arabia on the Persian Gulf, and Bahrain, are in American hands. USA has also got exploratory leases for areas in Egypt. France has no company of her own independently active in the field of oil output in the Middle East, but a French company is a partner of the Iraq Petroleum Company. In the Iraq Petroleum Company two groups – Anglo-Saxon Petroleum company, and D’Arcy Exploration Company – own 47½ per cent of the shares, an American company – Standard Oil Co. – 23¾ per cent, and a French company – Company Française de Pétroles – 23¾ per cent; the other 5 per cent belongs to a rich Armenian who owns the fields. The Iraq Petroleum Co. has concessions in parts of the Arabian Peninsula, among these the whole length of the Red Sea coast, and also in Syria, Lebanon and Palestine. The concession over Kuwait belongs half to the Anglo-Iranian Co. and half to the Gulf Exploration Co., daughter of the Gulf Oil Corp. of the USA.

At present, seeing that the oil wells of Saudi Arabia and Bahrain are not yet developed, England has a decisive position in the production of oil in the Middle East, as may be seen from the following figures of the distribution of oil production in the Middle East among the different interests (in 1000 barrels):–








































<p. 41> There is no doubt that with the increase in the exploitation of the oilfields in Saudi Arabia and Bahrain, the weight of the American companies in the production of oil in the Middle East will grow tremendously. Harold Ickes, American Petroleum Administrator, touched on the crux of the matter when he said: ‘The capital of the oil empire is on the march to the Middle East. The Untied States had better move in a big way – and fast.’

Connected with the question of the oil resources of the Middle East: in Abadan (Iran), Haifa, Tripoli, Bahrain and Suez, besides small refineries in Iraq which only work for local consumption. At the moment 80 per cent of the refinery capacity is in the hands of the British, but the position will change with the construction of additional American refineries. One of them, the Ras Tanura refinery, is already nearing completion.

There is besides much talk about the extension of the network of pipelines in the Middle East. At the moment only one of the pipelines exists leading from Kirkuk in Iraq to Haditha where the line divides into two, one going to Haifa, the other to Tripoli. The length of the whole line is 974 miles, and its construction cost £14 millions. There has been talk recently of doubling the carrying capacity of the Iraq–Haifa pipeline by building a line parallel to it. And finally there is the much discussed plan of constructing a new pipeline from Saudi, Bahrain, Qatar and Kuwait to the Mediterranean coast – either to Haifa or to Alexandria. The length of the line to Haifa would be 1,600 kilometres; a great reduction in the route of the Arabian oil, seeing that the route around the Arabian Peninsular through the Suez Canal 4,600 kms. long. The cost of the construction of this pipeline is estimated to be 130,165 million dollars. According to another calculation, if the American plan for constructing this pipeline materialises, it will be necessary to build refineries in Haifa to refine 300–350 thousand barrels a day, i.e. two or three times the output of all four refineries in the Middle East together. The annual output of Haifa will then reach 16 million tons. The construction of a refinery of Socony Vacuum in Tripoli in Lebanon is also being spoken about.

It is estimated that that the materialisation of all the existing oil plans of the American companies and the American government would cost £300 million. Such a gigantic sum would cause a tremendous economic, social and political change in the Middle East; it would subjugate it entirely to a handful of English and American oil magnates.

Until the appearance of oil on the horizon of industry, transport, agriculture, the army, the navy, and until the birth of the air force, Britain’s supremacy was assured. Her naval superiority, for instance, was shown in the fact that she had coaling stations dispersed over all the coasts of the ocean, and every ship, English or otherwise was compelled to make use of them. In 1866, Stanley Jevons said that England’s rule would decline after the exhaustion of the coal resources at her disposal. But long before this could happen, a new danger appeared on the horizon which threatened England’s industrial, commercial, naval and military position – a new fuel, oil, rose into prominence.

The constantly growing oil consumption always worried British authorities, mainly because the world oil output was in the main – to the extent of 70–80 per cent – in the hands of the USA. Fortunately for England, the US could not consume all her product, and England could buy the quantity of oil she needed from her.

But this state of affairs is not convenient for England, as it means paying high prices to the monopolistic American concerns, and it is also liable to become a stumbling block with her every military clash with the USA. The dependence of Britain on oil supplies from outside the Empire becomes even less convenient for British capitalism with the deterioration of its balance of payments, which was especially rapid during the Second World War.

Seeing that besides the oil resources in America (53.3 per cent of the world oil resources) and the USSR (11.3 per cent), the main important source of oil is the Middle East (30.7 per cent), it is clear that <p. 42> England’s main quest is after oil resources concentrated in this area. How important this position is economically for British capitalism is made clear in the words of the News Chronicle (according to Reuter, 19.7.44):

‘Middle East oil has an important monetary aspect. At £2 the ton it would bring between £120,000,000 annually and for marketing in Europe and the Middle East this would mainly accrue in the sterling group of currencies. Insofar as the Middle East oil displaces US oil, sterling payment would displace dollars, and thus Middle East oil affects the difficult problems of the British balance of payments and the “dollar scarcity”’.

There is no need to enlarge on the indispensability of Middle East oil for the British navy and air force, and the British Empire’s military strength.

American capitalism is drawn to Middle East oil as it is choked by a surplus of forces of production which outgrows the capitalist property relations and the framework of the national state. Only extensive expansion of the USA on a world scale could temporarily ease the contradictions in which American capitalism is placed or in the pregnant words of the thesis The Fourth International and the War (1934):

‘US capitalism is up against the same problems that pushed Germany of 1914 on the path of war … For Germany it was a question of “organising Europe”. The US must “organise” the world. History is bringing humanity face to face with the volcanic eruption of American imperialism.’

In 1919 and 1920 the American press raised a storm, as they are doing now, because, as they claimed, the oil resources of the USA were on the point of exhaustion. The Anglo-French monopoly of the oil resources of the Middle East roused their ire. The outcome of the struggle over Middle East oil then was a victory for Britain, but with a compromise to the advantage of the American oil companies who got an interest of 23¾ per cent in the oilfields of Iraq. They were also active in Bahrain, which is under the authority of the British Resident, where the Americans have a monopolistic position over the oil resources. In other places in the Middle East the Americans did not manage to stake a claim. Thus, in October 1919 a geologist of Standard Oil Co. discovered a source of oil near the Dead Sea; the English military authorities to whom the discovery was revealed, immediately arrested the geologist, confiscated his sketches, and deported him. The US government sent a strong protest to London, leaning upon Wilson’s fourteen points, and demanded an ‘open door’ policy in mandated countries. The reply of the English foreign ministry excused the behaviour of the military authorities in Jerusalem on the pretext that investigation of oil resources and their exploitation in Palestine was forbidden to English capital also. And that the authorities were behaving without favouritism in their ‘closed door policy.’ (Incidentally this pretext did not prevent the British government from giving concessions in Palestine to the Iraq Petroleum Co., the Palestine Mining Syndicate and the Petroleum Development (Palestine) Ltd.).

In the Second World War, however the USA’s weight in the world was too great for her not to get large portions of Middle East Oil. And her appetite grows as she eats. The Chicago Daily News points out that the entry of the US into the Middle East is important not only for the security of her commercial interest, but also, in the light of the news of possible tension between Britain, USA and Russia, to keep the peace. Ickes declared that the stability of the peace is dependent on agreement being reached over the division of oil resources, and among the matters to be put before the peace conference there is nothing more important than oil.

Into the midst of the struggle over Middle East oil Russia has also entered. When questioned about her interests regarding oil, an official representative replied that her demand was the possibility to export annually 20 million tons, i.e. about half the pre-war consumption of the whole of Europe. (This 20 millions does not include the export of Romania, over which Russia has control.) Russia’s acquisition of concessions over oilfields in Northern Iran plunged her deeper and deeper into the struggle over oil resources and markets. But we shall not enter into a discussion on this, as Iran is not included in the scope of this book, and Russia’s interests in Middle East oil are mainly concentrated there.

Emphasising the importance of oil, Robert Guise wrote in The Wall Street Magazine (3/3/45):
‘The Whole Middle East area today resembles a <p. 43> huge chess-board for economic and political manoeuvre seldom matched anywhere else… The complex struggle for post-war economic and political power is nowhere potentially so disrupting as in that part of the world.’

B) Dead Sea Minerals

Another source of minerals besides the oilfields is the Dead Sea which is rich in potash, magnesium and chloride.

According to a government estimate of 1925, it is possible to extract from the Dead Sea, with very little investment, the following quantities of material (quoted by Blake, The Mineral Resources of Palestine and Transjordan’:–




Potassium chloride


Magnesium bromide


Sodium chloride


Magnesium chloride


Calcium chloride


According to existing market prices, potash costs £11.10.0 a ton and magnesium chloride £16.18.0. The value of these two Dead Sea minerals therefore amounts to £400 milliards. [1]

How infinitesimal is the present production compared to these figures! Only the export figures are available, and these up to 1939 alone, as the publication of export figures during the war was prohibited; but there is no doubt that export figures are nearly the same as the production figures, as practically all Dead Sea products are exported, and that during the war no considerable change in the extent of production took place. The export of Dead Sea products was as follows (tons):–















Magnesium chloride










Thus the output does not amount to even a millionth part of the reserves in the Dead Sea, which fact flows from the restrictive policy laid down by the International potash monopoly of which Palestine Potash Co. is a part.

Magnesium, the important light metal, was hardly extracted at all, so that it should not compete with aluminium, while the high price of aluminium is assured by a world monopoly. The international match agreement also bestowed upon the German cartel, I.G. Farben, the position of monopoly over raw materials needed for match production, and even the American match producers, for instance, had to buy all the potassium chloride needed by them from the German company. In this way the international agreements caused the great treasury of the Dead Sea to be almost entirely unexploited. We have here another example of how imperialist capital, which altogether rules over the natural resources of the East, becomes the greatest fetter on its development by its ‘organisation of scarcity.’

C) Cotton

Besides oil and the chemicals of the Dead Sea, the Middle East supplies yet another very important raw material – cotton. Until a few years ago, Egyptian cotton was the main raw material which this region supplied to the advanced capitalist states especially England.

The following figures of cotton production (1938 or 1938/9) show that Egypt does not occupy a front place in the production of cotton:–



























The world



<p. 44> Thus Egypt occupies a sixth place (according to quantity) among those countries growing cotton, producing 6 per cent of the world’s cotton.

But the picture will take on a different aspect if we take into account the fact that the quality of Egyptian cotton is superior to that of all other countries. It has mainly the finest long fibres with a staple length of 1¼ inches or longer. The US and Brazil grow cotton chiefly of medium grade with a staple length ranging from 7/8 inch to 13/32 inches. Indian cotton is weighted heavily in the coarse grades with a staple length shorter than 7/8 inch. Accordingly, Egyptian cotton prices are higher than those of all other classes of cotton. Thus while Middling American cost 75 gold francs per quintal on the New Orleans market in December 1938, and Broach m.g.F.G. cost 48 gold francs per quintal on the Bombay stock exchange, Sakellaridis cotton F.G.F. on the Alexandria stock exchange cost 83 gold francs, i.e. 45.6 per cent more than American cotton, and 72.9 more than Indian.

In 1938/39 Egypt produced 25.8 per cent of the total quantity of cotton produced in the British Empire and the regions dependent on England, and taking it according to price, more than a third.

But the importance of Egyptian cotton for the British textile industry is greater than the above figures show as will be made clear if we remember that this industry labours over double pressure: on the one hand an almost monopolistic rule of the USA over the supply of raw cotton and on the other hand a rapid development of the textile industry in many countries, including Japan, India and Egypt. The USA, the main producer of world cotton manufactures only a third of the raw cotton she produces; which means that she is the most important supplier of cotton in the world. The Lancashire industry which is the major buyer of cotton in the world market endeavours to free itself from its bonds to the cotton resources of the USA. And so, every source of cotton especially of high quality is of great help to Lancashire.

At the same time the British textile industry is encountering increasing difficulties in finding markets for its products. While between 1927/8 and 1937/8 the world production of cotton fabrics rose by 13 per cent, world exports fell by 27 per cent, because meanwhile the states which had formerly imported cotton cloth, began to produce this commodity themselves. Not only did the world export of cotton decline, but Britain’s relative part in it also declined – from 44 to 25 per cent. This means that absolutely Britain’s export of cotton goods fell to less than a half.

The ousting of Britain from the world market was accentuated during the war years, as the following table clearly shows:–

Export of Cotton Piece Goods
(in million sq. yards)






United Kingdom















But if in general English textile products have left or been pushed out of the world markets, there is yet one sphere in which they are supreme, and in which Lancashire is the undisputed leader of the world – that is the production of finest counts and grades of cotton yarn and fabrics. This continues to be the case at the same time as the British cotton industry has been almost entirely ousted from the markets of medium or low-grade cotton yarn and goods.

If Britain has preserved her position in the production of finest sorts, this is largely thanks to the first–class Egyptian cotton. While in 1936 ‘Egyptian’ spindles made up 4 per cent of the all spindles in the USA, 5 per cent in India and 9 per cent in Japan, in the United Kingdom they made up 41 per cent. And of all the ‘Egyptian’ spindles in the world, 65 per cent were in the UK, 5 per cent in the whole far Eastern bloc (Japan, India, China etc.) and 4 per cent in the USA.

Thus Egyptian cotton is a source of life and condition for the existence of the English textile industry.

<p. 45>

III. The Arab East as a Market and Field for Capital Investment

The Arab East fulfils an important task not only as a source of raw materials, but also as a market for goods and field for capital investment.

The place of these countries as a market for the goods of the imperialist countries will become clear from the following figures relating to annual exports (in £):–



From Britain


From France


From USA

To Egypt (annual average 1936–38)




To Palestine (annual average 1936–39)




To Iraq (annual average 1936–39)




To Syria (annual average 1935–38)








As the question of foreign capital in the Arab East – its fields of investment, the profits it yields etc. – is dealt with in another part of the book, it will suffice here to give some total figures of the amount of foreign capital invested in the Arab East. These figures must perforce be very general. English capital invested in the region under discussion amounts to about £260–270 million (of this £190–200 million in Egypt), and American capital at the moment to not more than £50 millions, although plans for tremendous investment of American capital have been projected as we have seen in petroleum undertakings alone, investments amounting to about £300 millions are planned.

IV. The Importance of Colonies to the ‘Mother’ Countries

The question must now be discussed, at least briefly, what value the economic connections with the Arab East have for the capitalism of the ‘mother’ countries, which question is part of a more general problem.

The exports of the imperialist Powers to the countries of the Arab East make up quite a low percentage of their total exports. The average for 1936–38 was: Britain 3 per cent, France 1.9, USA 0.8 per cent. At the same time the imports of these Powers from the countries of the Arab East made up the following percentages of their total imports: Britain 1.9 per cent, France 1.6, USA 0.6 per cent. (This does not include the import of oil. If oil were included, imports from the countries of the Arab East would account for about 3 per cent of Britain’s total imports, and a like amount of France’s). Of England’s total capital invested abroad before the Second World War, that invested in the Arab East made up 6–7 per cent, of France’s total capital 13–14 per cent, and of the USA’s less than 2 per cent.

At first sight these figures give the impression that the economic connections with the Arab East have very little real influence on the economies of England, France and the USA. And, furthermore, if we examine the economic connections of the imperialist Powers with the colonies in general according to the same method, it would appear that these connections altogether have very little influence on the economy of the ‘mother’ country. Thus in 1936–38 British exports to India and the other British colonies made up only about one sixth of her total exports, and imports from them about one seventh of her total imports. And if we consider that only about 12 per cent of all Britain’s industrial products were exported at all, it turns out that the colonies absorbed only about 2 per cent of her total industrial production. Furthermore the portion of the income from English capital invested abroad was estimated at only 5 per cent of England’s total national income, and as only a quarter of her overseas investments were sunk in her actual colonies (excluding the dominions and Latin America) we arrive at the result that the income from English capital invested in the British colonies made up no more than about one per cent of the national income. If the dominions and Latin America are included, it made up 3ndash;4 per cent. A cursory glance thus seems to show that the importance of the colonies for the ‘mother’ countries is very small indeed, and various economists have indeed raised the results of this cursory glance to a theory. Leonard Barnes, for instance, writes: ‘If the investment yield from all the dependent Empire were suddenly cut off, our position would be like that of a man whose income was reduced from £400 to £396 a year.’ (Empire or Democracy, London 1939, p. 76.) And he adds further that such a reduction of 1 per cent would not be made with the colonies’ gaining their freedom, as econ- <p. 46> omic connections between England and her former colonies would continue. This idea is but a repetition of what J.A. Hobson, who thought like other liberal bourgeois, says in his book Imperialism, that imperialism is not an inevitable result and essential condition for existence of capitalism, but a factor which capitalism can exist without and even thrive without.

Even though this is not the place to enlarge on the problem of the network of economic bonds connecting the agrarian and colonial countries with the ‘mother’ countries, and the influence of these bonds on the economic life of the latter, some comments which will throw light on this focal problem must be made.

The basic contradiction in which capitalism finds itself is the contradiction between the forces of production and the relations of production, between production and consumption, between the accumulation of capital and the purchasing power of the masses, a contradiction which is the result of the antagonistic distribution of the income between the different classes of society. This contradiction reveals itself in a constantly growing disproportion between the different departments of production – between the production of means of production and the production of means of consumption. It is revealed in a decline in the rate of profit, which becomes, from a tendency alone, actual fact. The basic contradiction between the forces of production and the relations of production is bound up with the contradiction between the forces of production and the framework of the national state. These fundamental contradictions reveal themselves in a surplus of goods, capital, labour power, in crises and wars. I shall attempt to describe how the economic connections with the colonies allow the capitalism of the ‘mother’ countries to soften these contradictions for a time, and to make them become temporarily latent, while actually deepening them manyfold, and extending them on a world scale by loading them with more violent explosives.

If the contradiction between the rate of accumulation on the one hand and the rate of increase of the purchasing power of the masses together with the portion of the income of the capitalists which is expended on means of consumption on the other, is revealed in the creation of a surplus of, let us say, 5 per cent of the total production, then even if the colonies buy the industrial products of the ‘mother’ countries at this rate only, they to a great extent ease the difficulties of capitalism. The non-sale of this amount would prevent the realization of that portion of surplus value which is not intended for the consumption of capitalists.

Furthermore the same permanent dependence between the changes in the department of means of production and that of means of consumption which would have been the cause of ceaseless friction, stoppages and crises in a ‘pure’ capitalist economy with no contact with backward agrarian countries is weakened when each of these departments can realize the value of part of its products without exchange with the products of the other departments, but through trade with the colonial countries. Although a great percentage of the products of some branches of the economy remains ‘superfluous’ in the process of exchange between the departments, only a small percentage of the total production of all branches remains ‘superfluous’, and insofar as the colonies absorb this surplus they help the capitalist economy temporarily to pass over these contradictions; and so although the colonies take only a very small part of the products of all the industry of the ‘mother’ country, they take a great part of the products of those branches which have great surpluses.

Capitalism contains an immanent contradiction: that between the production of surplus value and its realization. The more the surplus value increases at the expense of wages, the smaller the possibility of realizing the surplus value. Decreasing wages means increasing the surplus value but it also means a lack of markets for the sale of the surplus products. Increasing the wages means increasing the purchasing power of the workers, widening the markets, but at the same time it also means decreasing the rate and amount of profit, i.e. weakening the motive power of capitalist accumulation and production. The possibility of buying cheap raw materials and foodstuffs in the colonies allows real wages to be increased and at the same time the rate of profit to be increased. The importance of these purchases for the capitalist economy of the ‘mother’ countries is not revealed in the figures relating to the number of pounds or dollars expended on them, but in the difference between the value of the goods <p. 47> bought in the colonies and their price; this difference can be even greater than the market price. The firmer the positions of imperialism the easier the conditions it can dictate for itself for the improvement of the ‘Terms of Trade’ – the price of raw materials and foodstuffs which it buys in the colonies, relative to the price of industrial products which it sells.

We must also not forget that if England sells to the colonies under her direct rule and the dominions only about 2 per cent of all her products it does not mean that every branch of English industry sells only 2 per cent of its products. Whole industries, such as the building industry, light and power etc. sell nothing, and others, such as the different food industries, sell very little. As against this, other industries, especially textile, sell a very large part of their products. It is clear that if the sale of every branch of English industry was cut by 2 per cent, the cumulative influence would be much smaller than if the markets of a few industries were cut to a much more drastic extent. The same thing is true for the supply of raw materials and foodstuffs from the colonies. It is essential to examine not only how much raw material England buys from her colonies, but also what material she buys. Thus a great part of the raw materials that England buys from the Middle East is the foundation of whole branches of English industry.

If the Arab East supplies one-sixth of all the raw materials which England buys from overseas (practically the only raw material England produces herself is coal) it does not mean at all that all the branches of industry buy one-sixth of their raw materials from the Arab East, but that there are industries dependent to a much larger extent on this source of raw materials. The question of price and quality of these raw materials and the question of monopolistic control over them have therefore a much greater importance than appears from the figures regarding the percentage of imports from the Arab East in the total British imports, or even than appears from the figures regarding the percentage of imports of raw materials from the Arab East in the total British imports of raw materials.

Even if the surplus of capital created in the process of capitalist accumulation is very small compared with all the capital of the country, its cumulative influence can be tremendous, as it creates pressure in the capital markets, strengthening the downward trend of the rate of profit. This in turn has cumulative effects of its own on the activity of capital, on the entire economic activity, on employment – and so on the purchasing power of the masses – and so again in a vicious circle on the markets and the rate of profit. Thus if the colonies absorb, let us say, 5 per cent of all English capital, it does not at all mean that without the colonies the profits of the English bourgeoisie would be less by only five per cent. And this especially if we remember that because of the cheap labour and proximity to sources of raw materials etc., the rate of profit yielded by capital invested in the colonies is much higher than the rate of profit in the ‘mother’ country. This difference also has a cumulative influence on the rate of profit in the ‘mother’ country and on all economic activities. It is likewise clear that the higher the wages rise and purchasing power of the masses increases without damaging the rate of profit – which is possible only at the expense of the exploitation of the colonies – the greater is the possibility of the absorption of capital within the ‘mother’ country herself for the purpose of supplying means of consumption to the workers of these countries.

Not only this. The export of capital, by relieving the pressure in the capital markets, diminishes competition between the different enterprises, and so diminishes the need of each to rationalize. (This to some extent explains the technical backwardness during the last half-century of British industry, the pioneer of the industrial revolution in the world, as compared with the industry of Germany, for example.) As the contradictions in the capitalist economy are the product of the fundamental contradiction between the productive power and capitalist property relations, every retarding of technical development retards the ripening of all the contradictions in the economy.

Thus many aspects are revealed of the great cumulative influence of the export of capital on the economy of the ‘mother’ country as a whole.

Furthermore, only on the basis of the super-profits coming from the colonies could the English bourgeoisie throw some crumbs from its table to <p. 48> the upper layer of the proletariat, and so also sow vain hopes in the breasts of the unskilled workers and those not belonging to the camp of ‘white-collar workers,’ that they too might rise and join this camp; and by giving nearly full employment blunt the edge of the class struggle of the whole proletariat. In this way imperialism became a safety valve for the capitalist system.

Thus the economic connections between the ‘mother’ countries, especially England, and their colonies, had a tremendous influence which encompassed the whole capitalist economy. Even, therefore, if a certain group of capitalists took the cream of the colonial profits, it is not at all correct to conclude, as many liberal thinkers and social reformers do, that only one section of the capitalist class enjoys the fruits of imperialism, while the majority of the class are forced to bear only the expenses of colonialism – high taxes, wars etc. No! The colonies are not millstones round the neck of capitalism. The alternatives which have always stood, and today stand in an even sharper form before capitalism are: expansion or expulsion – imperialist extension or socialist revolution.

Another aspect besides the ‘positive’ interest of every imperialist Power to have colonies under its rule deserves mention, and that is the ‘negative’ interest which impels each of them, that the colonies do not fall into the hands of some other imperialist Power.

The vital necessity for capitalism to expand does not preclude the fact that this very expansion breeds powerful forces which more and more threaten capitalism on a world scale.

The industrialization of the colonies has progressively increased. The products of the industries of these countries have begun to oust the products of the ‘mother’ countries. The possibilities for the absorption of capital in the colonial countries have become more and more limited. That very cheapness of raw materials and foodstuffs produced in the colonies which had been one of the causes of prosperity of capitalism in the ‘mother’ countries, has now, in the period of decline of world capitalism, with its crises embracing all countries and all branches of the economy – both industry and agriculture – become one of the reasons for the world crisis: the colonial masses are too poverty-stricken and hungry to constitute a wide market for the products of the industry of the ‘mother’ countries. More than this. That same cheapness of raw materials and foodstuffs and also the cheapness of labour power was one of the most important accelerators of the industrialization of the colonies in the last ten years before the war.

Imperialist rivalry and war make industrialization of the colonies easier. In its competition with others each imperialist Power tries to win the support of the colonial bourgeoisie by giving them concessions in the form of a raising of customs duties. Moreover during the war the lack of supplies, transport difficulties etc. gave excellent opportunities for the development of local industry.

The disproportion between the branches of industry which, during the period of the rise of capitalism, did not cause great disturbances, and did not prevent economic prosperity because of the contact with the backward colonial countries, a contact which at the same time accentuated this disproportion (thus, for instance, the agricultural population in England has disappeared almost completely, while the industrial population has grown very much) – this disproportion becomes, during the period of the shrinkage of world markets, the Achilles heel of English capitalism. The dependence on world markets is not a sign of strength but a source of weakness.

The slowing down of the technical development of England caused by the privileged position of English capitalism, which during the rise of capitalism was a cause of the easing of the contradictions in English capitalism, has, in a world of shrinking markets, become a source of great weakness and of a deepening of the contradictions in it.

The decline of world capitalism is revealed in the increase of obstacles in the way of the export of capital to the colonies, and in the way of the sale of industrial good to them. In order not to enlarge on <p. 49> the subject too much, only a few figures will be given here concerning the decline in the weight of the export of capital in the total capital issues:–

New Capital Issues in London 1911–13 and 1934–36
(Home Government Borrowing Excluded)

Class of Borrower

Percentage of Total Issues




United Kingdom



British Empire






Furthermore during the Second World War, Britain paid for a very great part of her war expenses by increasing her sterling debts. Thus for the camps and roads which colonial workers built, for the raw materials and foodstuffs which the colonial peasants produced, and for the products which were supplied to the army by local industry, Britain paid not in goods, but by the issue of new notes, i.e. pledges to pay after the war. Today England’s debt to the dominions and colonies is about £3 milliards, to India – £1 milliard, to Egypt – £400 millions etc.)

In face of the decline of England’s overseas investments (mainly by their passing over to the USA or the dominions), her ceasing to be the world centre of shipping (because of the sinkings on the one hand and the colossal increase of the American merchant navy on the other), and her increasing debts, it will be more and more difficult for English capitalism to hold its own in competition, and to balance its balance of payments. Imperialism thus from being an instrument for easing the contradictions in capitalism, becomes an instrument for the great deepening and broadening of these contradictions.

But for capitalism there is no such thing as a blind alley. If it is complicated in its contradictions, it brutally cuts the Gordian knot by compelling the masses to pay for these contradictions – first the colonial masses, and then the masses of the ‘mother’ country.

Under the contradictions in which British capitalism finds itself, it is compelled to do away with even that thin cloak of regular trade relations which cover its predatory activities in the colonies. Now the colonies are faced with open spoliation – the large-scale non-payment of debts incurred in the war years, the compulsion to buy the products of the ‘mother’ country at exaggerated prices, and preparations for an attack on the colonial industries which have managed to develop rapidly during the war. Hence the talk in high capitalist circles in England about the need to change the ‘Terms of Trade’ with the colonies, i.e. to buy raw materials cheaply and to sell finished products dearly. (See, for instance, Economist of Feb. 12, 1944); hence the words of the same circles that England must not pay her debts in full according to the official value of the money notes of the colonies; hence the colossal prices the United Kingdom Commercial Corporation is already taking for the products it sells to the East (thus, for instance, the gold sovereigns which it bought for two pound notes it is selling for £5–6; according to one calculation UKCC profited from this operation in Iraq alone to the extent of £14 millions); hence also the obstacles which England is placing today in the way of sending different machines to the East, and the plans of the British Chamber of Commerce in Egypt (for example) to damage the positions of the different industries which flourished during the war. (See the chapter Industry and Banking in Egypt)

In a letter to Marx dated October 7, 1858, Engels wrote:

‘The British working class is actually becoming more and more bourgeois, so that this most bourgeois of all nations is apparently aiming ultimately at the possession of a bourgeois aristocracy and a bourgeois proletariat as well as a bourgeoisie. Of course, this is to a certain extent justifiable for a nation which is exploiting the whole world.’

Today English capitalism cannot throw crumbs to even the tiny layer of petty bourgeoisie, trade union bureaucrats and highly skilled workers, let alone the masses of English proletariat. These latter are sentenced to mass unemployment and wars. Today capitalism-imperialism imprisons both the workers of the ‘mother’ countries and the toilers of the colonial countries in the same train, even though in different carriages, a train which is rolling down into the abyss of crises, starvation, wars and barbarism.


1. One milliard is 1,000 million, today’s billion. (Editor’s note)

Last updated on 28.5.2011