MN Roy

The Future of the Empire

Date: November 1928
Published: Labour Monthly, pp. 663-674
Transcription: Ted Crawford
HTML Markup: Mike B.
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"It is generally admitted by those competent to form an opinion that savings are smaller than they were before the war, with the result that capital is accumulating at a very much slower rate than was the case fourteen years ago."

This statement made by The Times on October 5 while commenting on Mr. Snowden's scheme of "revolution by taxation," adopted by the Birmingham Conference of the Labour Party, should supply food for thought to those who, complacently look upon the Empire as something eternal. Of course, The Times indicated this sore-spot in the British capitalist system in order to prove that taxation had reached the limit. Nevertheless, it states a fundamental fact which makes the future of the Empire clearly visible. Nor is The Times the first to make this discovery. It simply quotes the opinion of competent authorities who have testified to the shrinkage of national saving. They also did so in order to underestimate the taxable capacity of the British bourgeoisie. The corollary to this finding, of course, is that the burden of taxation be shifted on to the workers or that the wages bill should be reduced to check the declining rate of accumulation.

This remedy for the sickness of the British capitalist system is prescribed either frankly or by implication by bourgeois economists on the strength of their exploded doctrines. Nevertheless, their contentions are essentially supported by the pseudo-socialists of the Labour Party. For example, Mr. Snowden emphatically declared at Birmingham that "no Chancellor of the Exchequer is fit to hold the job and to have the graze responsibility of his office unless he frames his financial policy with the idea of conserving, increasing, and utilising the national resources." He further said that the Labour policy should be "an attempt to increase production, so that the sources available for increased taxation would be correspondingly increased." So Mr. Snowden and the nationalist and imperialist leadership of the Labour Party, whose collective views he expressed, propose to solve the crisis of the British capitalist system by capitalist remedies, namely, by "conserving and increasing" the accumulation of capital. As this can only be done by increasing production, the crisis being one of forced under-production, the next Labour Government would make an effort in that direction. It would first increase the taxable capacity of the bourgeoisie so that its scheme of "revolution by taxation" could be put into practice without violating the British dictum of "justice and fair play." It is not the purpose of this article to examine whether it can be done or not. For the present purpose it is necessary to show that there is a general agreement as regards the decline of the accumulation of capital in Britain. And it is this fact that will determine the future of the Empire.

Export of capital is the basis of imperialism. The ability of any country to export capital primarily depends upon the accumulation at home. Therefore, if it is a fact that to-day capital accumulates in Britain at a slower rate, and that the nature of the crisis is such that the situation cannot be essentially altered, then, the empire is doomed. It may be argued that supposing Britain is no longer in a position to export capital in sufficiently large amounts the ownership of the enormous sums already invested abroad guarantees her position as an imperialist power. It will be presently shown that it is not so. The industrial depression in Britain not only reduces accumulation at home; it has a much more far-reaching effect. It affects Britain's ability to maintain the ownership of capital already invested abroad. To maintain her position as an imperialist power, Britain must keep on exporting capital in addition to what is already invested abroad. In spite of the decline of accumulation at home she is doing so, and precisely thereby is undermining her position as an imperialist power.

A glance at the past growth of the Empire will help the examination of its future. The last two decades of the nineteenth century was the period of colonial expansion and imperialist consolidation. During that period three and three-quarter million square miles of territories were brought under British domination. Indeed, considerable colonial possessions had been acquired before that period; but the guiding principle of the British bourgeoisie in those days was not the extension of political power, but of trade. Those were the hey-days of free competition. In the absence of rival imperialist powers the colonial market did not necessarily depend upon annexation of territories. Trading companies indulged in political adventures and acquired extensive colonial possessions; but the British bourgeoisie looked askance at the policy of colonial conquest. Until the 'sixties of the last century all the leading British politicians declared themselves opposed to the acquisition of colonial territories. Even Disraeli, who, by virtue of his Suez Canal deal, laid the foundation of the modern empire in 1875, had considered colonial possessions as "millstones round our necks."

During the closing decades of the nineteenth century the policy of the British bourgeoisie changed. It became aggressively imperialist -- to establish direct or indirect political domination in the largest possible territories inhabited by "backward" races. Two factors contributed to that change of policy. First, industrial development of other countries challenged the British monopoly of the world market; and second, a large amount of capital had accumulated in the hands of the British bourgeoisie which could not be invested at home at a sufficiently high rate of profit. Export of capital, in its turn, was a means to acquire a monopoly of foreign markets attacked by rival industrial countries. Thus, the British bourgeoisie became decidedly and aggressively imperialist from the time the export of capital became possible, necessary and profitable. In the forty years between 1860 to 1900 the amount of British capital invested abroad increased approximately from £144 millions to the already large sum of £2,480 millions. In the same period of time the colonial empire of Britain expanded from 2.5 million square miles to 9.4 million. (Imperialism, by Lenin.)

"The mobilisation of capital in the form of limited liability companies was one of the most important factors in the development of the Empire." (Knowles: Economic Development of the Overseas Empire.) By the revision of the Companies Acts in the early 'sixties trading monopolies were abolished and the banks handling accumulated surplus capital entered the lucrative business of colonial exploitation. The trade depression in the 'eighties gave the banks the chance to divert the surplus capital to colonial investment. It was during that decade that the great Chartered Companies (under the control of the banks) were formed which conquered the African empire.

The benefits of the policy of predatory imperialism, inaugurated in the closing decades of the last century, were reaped by the British bourgeoisie in the earlier years of the current century up to the world war. Although export of capital through the banks, as the motive force of modern imperialism, had gone on in ever-increasing volume since the 'eighties of the last century, the larger portion of capital, accumulated in Britain, was absorbed by home industries until the opening years of the present century. After a number of years in which the amount invested at home went progressively down while that exported correspondingly increased, the scale definitely turned in 1905. Since then to 1913 a larger and larger portion of capital accumulated in Britain was exported to be invested abroad. The total British foreign investment on the eve of the war has been estimated at figures varying from 3,500 to 4,000 million pounds. Well over half of this huge sum was invested inside the Empire. When this sum is compared with the £144 millions of British foreign investment at the end of the last century it becomes clear how the Empire is based upon capital exported. Even in the twentieth century (up to the war), when she had ceased to be the "workshop of the world" and had lost her monopoly of world trade, Britain still maintained economic and political supremacy of the world by virtue of the fact that she could export much more capital than her rivals. While she possessed £3,500 to £4,000 millions of capital invested abroad, the shares of her principal rivals, France and Germany, were £1,800 and £1,200 millions respectively. (Hobson: The Evolution of Modern Capitalism.) And the United States was still a debtor nation.

Now, in light of these basic facts concerning the growth of the British Empire as the paramount power of the world, let us examine the future. Can Britain still export capital without injury to her home industries? This is the fundamental question the answer to which will be our guide in this examination. We must go down to the bed-rock fact of accumulation in order to find an answer to this question. For the superficial evidence of foreign issues in the London market is deceptive. Most of these issues represent financial jugglery, and prove, if they prove anything, the decrease of Britain's ownership of capital invested abroad.

Reliable statistics about national savings are very scarce. Two estimates were put before the Colwyn Committee on National Debt and Taxation. One was of the Economist (October 10, 1925) which was 4-45o millions. The other was made by W.H. Coates and was £500 millions. The Colwyn Committee found the mean of these two estimates, that is, £475 millions, to be the likely figure of national saving in 1924. The same Committee states in its report that "for 1913 total national savings have been generally put at from £350 to £400 millions. Considering the fall in the value of money since 1913, the savings in 1924 should have been £650 millions to maintain the pre-war level. As it is, the figure indicates a drop of over 30 per cent. in the "rate of accumulation." The Colwyn Committee concludes that "real savings exhibit a decline which may amount in present money value to something like £150 to £200 millions a year." On examining in detail the various sources of national income to ascertain where the decline occurs the committee finds out:-

The most serious factor in the position is clearly the decline in. the internal savings of the heavy industries, which, in addition to providing essential plant and machinery for home trade, manufacture so largely for export; the transport position is also very unsatisfactory. The general maintenance of company savings, therefore, while a ground for satisfaction, does not justify any complacency.

So here is revealed the fact that capital accumulates at a slower rate in precisely those industries which constitute the basis of the entire imperialist structure. Coal-mining, iron and steel, shipbuilding and cotton -- these are the industries on the sick list, and these are the industries which, through their huge and prosperous export trade in the past, supplied the major portion of the capital exported to cement the imperial structure.

Such was the situation in 1924. Now let us see if any improvement has taken place since then. Production should be the deciding factor in this examination. The index of total production compared with 1913 is as follows:--

1913 1924 1925 1926 1927 1928
100 91 87 611 95.82 93.4 (First quarter)
91.83 (Second quarter)

This total includes the production of the new luxury industries which are generally prosperous, catering mainly for the home market. Separated from these industries of secondary importance, the basic industries present a more depressing picture. The report of the Liberal Industrial Inquiry published this year contains the following evidence on the matter: "We cannot be sure that our staple trades will revive to their old dimensions." Another evidence that the main source of accumulation, the basic industries, are no better off at present than in 1924 came out in the monthly meeting of the Associated Chambers of Commerce held at Plymouth on October 4, where the president said:-

Unfortunately these staple (viz., coal, iron, steel, shipbuilding and cotton) industries have been and continue to be in a very depressed state. They have been struggling to maintain trade by selling at less than the cost of production. Immense sums of money have been lost, and companies have been forced to write down drastically their capitals to cover the losses incurred, and further reconstruction will be required.

During the last years company reconstructions have taken place, writing down shares to the total amount of nearly £50 millions. Such important heavy industrial concerns as Vickers, Armstrong, and Baldwins were involved in these reconstruction operations.

The other source of income, foreign trade, has not improved since 1924. It cannot while the slough in production continues and gets worse. Indeed, foreign trade to-day presents a worse picture than three years ago.

Exports and Imports of Merchandise Only
1924 1925 1926 1927 19284
(In millions of pounds)
Exports 801 773 654 709 702
Imports 1,137 1,167 1,116 1,096 1,069
Passive Balance 336 394 387 367 367

These figures show that export trade, which is the principal medium of capital export, is considerably smaller than in 1924. The slight improvement (which is not likely to be maintained at the end of the year) in the adverse balance is more than upset by a decrease in the total volume of foreign trade. This improvement is not due to greater export, but smaller import. And this reduction of imports is in raw materials, indicating that there will be a further shrinkage of production.

An adverse balance in the "visible items" is not new. For a long time it has been a feature of British foreign trade. It was not an alarming feature as long as the gap was not too big to be filled by the income from external sources -- the so-called "invisible export." In the years since the post-war boom the gap has grown wider and wider, eating up practically the entire income from external sources -- leaving hardly any surplus for reinvestment. This is alarming, for this situation affects Britain's ownership of capital invested abroad.

Now let us examine the external sources of income. They are foreign investments, shipping freights, banking commissions and services rendered. The income from shipping is £20 millions a year less now than in 1924. The aggregate annual incomes on these heads are:-

1924 1925 1926 1927
(In millions of pounds)
410 438 465 483

The adverse balance in merchandise account is covered out of these incomes. Therefore, the net revenue from the external sources have been:

1924 1925 1926 1927
(In millions of pounds)5
74 44 2 96

These figures, taken at their face value, which is deceptive, indicate a slight improvement upon the situation in 1924, but still lag far behind the figure of 1923, which was the year which supplied the data for the Colwyn Committee's calculations. The total net revenue from these external sources in 1923 was 178 millions Besides taking the decline in the two preceding years into consideration the figure of 1927 cannot be accepted as the true indicator of the dynamics of the situation. Granted that some improvement has taken place in the income from the external sources, this does not materially alter the situation. Calculated on the basis of production, foreign trade and income from external sources, the rate of accumulation does not appear to be higher than in 1924. On the contrary, a steady decline is clearly noticeable when judged from the standard of production and employment of labour, which after all are the determining factors.

Labour alone produces value which accumulates as capital. Therefore, the continued unemployment of well over a million workers is a factor indicating a lower rate of accumulation. According to the Census of Production of 1924 the number of people "gainfully employed" has increased since 1907 (the year of the last census of production) by somewhat less than a million. The corresponding figure for 1913 is not easily available. It can, however, be reasonable assumed that the increase between 1913 and 1924 could not have been more than half of the number of the present unemployed. Therefore, the number of workers actually engaged in production to-day is less by six or seven hundred thousand than in 1913. It is true that as a result of technical improvement a unit of labour produces more value to-day than previously; but the present unemployment in Britain does not represent the "normal" displacement of workers by machines. It is caused by the inability of capitalism to absorb all the available labour in the process of production. In other words, it is caused by forced under-production. The unemployment means that the rate of accumulation over and above other factors is less by the amount representing the surplus-value that could be produced by more than a million workers.

Examined more closely from the standard of the basic source of accumulation, namely, the labour-power actually employed in the process of production, the situation will be found to be worse than the picture given by the Colwyn Committee on the evidence of expert opinion. According to the Census of Production, the per capita production in the manufacturing industries rose, in terms of money, from £100.9 in 1907 to £210.8 in 1924. Compared to the drop in the value of money in the same period, this is not a high rate of the growth of production. The growth could not have been so meagre for the whole period. It can, therefore, be assumed that there was a greater growth in the period preceding the war which has since been counteracted by the post-war decline.

But let us continue the examination of the future of the Empire from the point of view of the generally admitted situation. The facts set forth in the above paragraphs show that, at best, the situation at present is as good or bad as in 1924, that is, taking all the sources (internal and external) of income into consideration, the accumulation of capital in Britain is over 30 per cent. less than before the war. In spite of slight improvement here and there, now and then, dynamically the tendency has been one of decline since 1924, in which year the situation was much worse than before the war.

What conclusion can be and should be drawn from these facts? Let us quote the finding of the Liberal Industrial Inquiry.

The net result of all these factors is that the margin which remains available for making fresh investments abroad is materially lower than it used to be.... In the last four years our surplus for foreign investment has been fully £100 millions per annum less, not only than it was before, but also than it was so lately as 1922-23. This surplus is the true measure of the net increase of our ownership of capital abroad.

The decline in the rate of accumulation creates a shortage of capital. Foreign investments cannot be maintained at the pre-war level without depriving home industries of the capital required to fit them to the new conditions. While during the ten years preceding the war by far the major portion of the accumulated capital was exported, the scale has turned in the post-war period. During the five years before the war 4863 millions were exported as compared with £466 millions in the corresponding period after the war (Layton in his evidence before the Colwyn Committee). The amounts invested at home were 12 per cent., 36 per cent. and 49 per, cent. of the total new issues in 1912, 1924 and 1927, respectively. ("Commercial History of 1927," The Economist, February 11, 1928.) The following is a comparison of the ratios of home and overseas investments:

1913 1927 1928
20:80 69:31 70:306

The Colwyn Committee estimates the following distribution of the national saving:

Total 1913 1924
375 475
Home 200 375
Abroad 175 100

The last year, 1927, was the record year in the post-war period as far as foreign investments were concerned. Even then, out of the total, new issues of £450 million, only 135 million went abroad. From all these evidences it is clear that after meeting home demands Britain can no longer export that sufficiently large amount of capital that she must do to maintain her position of a first-class imperialist power.

Indeed, the reduced amount of capital that is still being exported does not represent Britain's actual capacity to export. The bourgeoisie are divided on the question of the export of capital. Liberal economists like J.M. Keynes are of the opinion that the present accumulation is just enough to meet the new capital requirements of the home industries. In his opinion "we may jeopardise our revival if we allow our not very abundant flow of new savings to be drained away into foreign loans" Nation, October 23, 1926). In different phraseology the Liberal Industrial Inquiry Committee expresses a similar view. It says: "It might be to the advantage of the country if (say) £50 million less were lent each year to public bodies abroad and £50 million more devoted to the development of the national resources and equipment at home." The cogency of such opinion becomes evident when it is known that owing to the lack of sufficient capital the bourgeoisie cannot carry on their scheme of rationalisation of production at home. The National Fuel and Power Committee, appointed in August, 1926, with Alfred. Mond as the chairman, "to consider and advise upon questions connected with the economic use of fuel, etc.," in its report published recently states that the scheme for the economic use of fuel and power cannot be effectively realised for the lack of sufficient capital to refit the industries necessary for the purpose. Similar statements have been made on other occasions by authoritative persons like directors of banks, etc.

On the background of such a situation, financial transactions ostensibly bearing the appearance of investment of British capital abroad in large amounts have been taking place since the last year. Consequently we have before us a picture showing that Britain is exporting more capital than she can do within the limits of her savings. The following table represents the picture of the situation.

Surplus in the
balance sheet
Foreign issues
exported beyond
(In millions of pounds)
1924 74 134 60
1925 44 88 44
1926 2 112 110
1927 96 139 43

Until 1923, the foreign issues in the London market were within the limits of the exportable surplus capital. Since then they are not. This fact indicates that the roots of the Empire have begun to rot. A considerable portion of the foreign issues in these years represents the transference to other centres of world finance (mainly New York) of foreign securities hitherto held in London. Increasing foreign issues in these years, instead of indicating a recovery of British capitalism, does just the opposite. They show the position of Britain as an imperialist power is shaken to the very roots. Her share of capital invested abroad is decreasing. Already in October, 1926, when the foreign issues in London had not yet reached the proportions of last and this year, Keynes wrote: "At present we have no surplus for foreign investment, and we must be providing for about half of our recent loans by re borrowing in the form of temporary balances and bills held by foreign banks in London."7 Thus, since 1924, Britain's share of the capital invested abroad has decreased by about £250 million pounds -- the sum represented by the issues beyond the limit of the balance for reinvestment. As the same process continues in an increasing tempo the position will be worse at the end of the year.

Prosperity of home industries, huge accumulation of capital resulting therefrom and a monopoly of trade retained by the export of capital -- these were the pillars on which the Empire was reared. To-day the home industries are in a state of irreparable decay; capital accumulates at a diminishing rate; it cannot be exported without harming the home industries; and the monopoly of trade is lost. So the mighty pillars on which the Empire was built are all in a state of decay, if not yet tottering. An increasing portion of capital owned by the British bourgeoisie is being divorced from production and devoted to parasitic speculative use.

Among the remedies proposed to cure the evil is the scheme of "empire development." But this remedy is as ineffective as any other capitalist remedy. The disease is incurable. The scheme of "empire development" means that the falling rate of accumulation at home should be compensated by exploiting more intensively the cheap labour in the colonies. Invested in the colonies, capital will accumulate more rapidly thanks to the greater surplus-value produced. But capital is lacking. Hence the scheme hangs fire. The hopeless nature of the tangle is confessed in the report of the Liberal Industrial Inquiry: "The problem of imperial development has, however, been rendered far more acute by the very economic difficulties which make it at this moment doubly urgent and important; and careful study of the problem has become more needful lest we should waste our diminished resources." The factor that necessitates Empire development at the same time obstructs any, such development. This is a veritable vicious circle; and the future of the Empire is caught inextricably in this vicious circle.


1. Abnormally low owing to the General Strike and Coal Stoppage.

2. Abnormally high making up for the previous year's arrears. The two years' average, that is, 81.4, should be the correct index.

3. Judging from the continued steady decline in the third quarter the year's average can be estimated at 90 which will be below the 1924 peak.

4. Judging from the great slump in September the estimate for 1928 made on the basis of the last eight months' figures will be found excessive at the end of the year.

5. Bullion and specie movements are not included in these figures.

6. Estimate on the basis of eight months' issue.

7. Nation, October 23, 1926.


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