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Fourth International, July-August 1947


Doric De Souza

The Crisis of British Imperialism


From Fourth International, July-August 1947, Vol.8 No.7, pp.201-205.
Transcribed, edited & formatted by Ted Crawford & David Walters in 2008 for ETOL.


1. Economic Impasse

Britain is facing a fast maturing crisis which threatens her whole imperialist structure, as well as her position as a ratable world power. The economy of the British Empire, its military and political might, and finally its colonies as a rich field of exploitation, are equally involved. British imperialism is actually in a struggle for its very existence.

We may take the economic question first. Britain was the first of “the great Imperialisms to emerge as a world economic power, drawing immense reserve from her ready made empire, which she used not only as a source of plunder and loot, but also as a source of raw materials for her industries, as a market for her industrial goods, and as a field for the investment of profit-bringing capital. Her national economy was based on a vast export-import trade, backed up by the returns of her capital investments. Being first in the field brought immense advantages. But it had disadvantages too as will be seen. When Britain was faced with the competition of young and healthy rival Imperialisms – Germany, the USA. and Japan – who exercised the “privilege of backwardness” in organizing their industries more rationally, on a more modern basis, Britain did not seek to meet this competition by renovating her own industrial organization which “just grew” on laissez-faire principles, and was relatively inefficient. She took refuge and strength from a renewed export of capital, the proceeds of which compensated for her loss of markets in the face of rival industrial competition. As a result, British economy became more one-sided than ever, and took on a parasitic character. We may illustrate this briefly: Before 1914, Britain had the lion’s share of the Eastern and Far Eastern market, supplying between 40 and 50 per cent of the goods imported by India and China. Between the two world wars, however, Britain lost her footing in these markets. By 1939 she had only 10 to 20 per cent of the import trade of these countries. She was exporting less and less, and her imports, to maintain her luxury standards at home, grew greater and greater. She met her import bills more and more from the returns on her capital investments abroad, which rose to the tune of £4000 millions before World War II.

A good picture of the parasitic state to which Britain was reduced was given by the British themselves when they begged for the American loan. It was then pointed out that Britain imported goods to the tune of $800 odd millions annually, including basic necessities like food, as well as every luxury. But she exported only £400 odd million worth of goods to meet the bill! Where did the balance come from? A small part came from “services” such as shipping, insurance, financial commissions. But the largest part come from dividends on her investments. That was the real essence of British Imperialism.

Let us sum up. Britain’s industry was old fashioned and poorly organized. Her trade was heavily lopsided. She was a parasitic country propped up by her investment returns. But today this prop is gone or going! That is the hub of the economic question for Britain, as she herself pointed out in requesting the American Loan. She has sold these investments and is bound to sell more. That was the price of the war. So how is she to survive?

She can survive if she raises her exports to far above their 1938 standard, nearly to double, and/or reduce imports. But can she do this? As for imports, to reduce them means to lower the standard of living in Britain, and though this is happening, the British masses will not easily put up with this. The attempt to “grow more food” and thus reduce imports has been just as successful as in India, which is not saying much. As for exports, to increase these, means a thoroughgoing reorganization and modernization of British industry.

Now this latter is a Herculean task, far too great for the decadent British capitalists. In the hope that the Labor Party could do something to put Britain’s economic house in order, by means of nationalization, by ousting parasitic privilege and anarchic private enterprise from its grip on British industry, and by modernizing industry, the British people swept Labor into power in 1945. The people were under the illusion first that the Labor Party was a real working class Party, hostile to capitalism; and secondly that a mere Parliamentary majority would suffice to ensure the success of Labor’s allegedly “socialist program.” They will have to learn bitterly from experience that these are hopeless illusions. The first lessons, in the shape of economic crisis, cannot long be delayed.

The Labor Party, despite its vast proletarian base, is essentially a bourgeois Party, wedded to the same Imperialist system as its conservative predecessors. Only it is a party adapted to the pressure of the British working class, in fact a party designed for wholesale class collaboration. For this there was plenty of room in Britain in the past, due to the super-profits drawn from the colonies, a part of which went to bribe the upper privileged layers of the working class.

In the face of popular hostility to capitalism in Britain, and popular disgust with the old “muddling” policies of the Conservatives, so openly designed to protect vested interests, the British capitalist class had no alternative but to let the Labor Party hold the baby, certain that while this party was able to deceive and soothe the masses by its “socialist program” it would do nothing to jeopardize the fundamental interests of British capitalism. This is indeed the kernel of its policy. But the bankruptcy of this policy itself, will not long be concealed from the world.

Let us see how the Labor Party met the threat of the economic crisis. It scratched at the surface of the problem of decaying British industry, and made a pretence of ousting parasitic privilege by its policy of nationalization, which was extended to the coal industry, the transport system, and the Bank of England. But can this make a vital difference? In the first place mere nationalization is no cure-all. Secondly, the policy of nationalization was permitted by the British capitalists only to the extent that it did not endanger their basic interests, but on the contrary served to stabilize private enterprise and profits. The most “difficult,” least profitable, and most “dangerous” sectors of the economy, and these alone, were permitted to be nationalized. The coal industry, for example was despaired of by the capitalists themselves, it had reached such a stage of chaos. It was to the interest of the bourgeoisie to permit the nationalization of this industry, (a) because it left the nation to bear the debts and burdens of this industry; (b) it left capital free to exploit the more profitable sectors of the economy and (c) the difficulties met with in reorganizing this industry might well prejudice the public against nationalization itself. The nationalization of the Bank of England and Transport similarly, do not really prejudice capitalist interests, but safeguard them to a certain extent.

On the other hand, a thorough reorganization of British industry demands not scratching at the surface, but the wholesale expropriation of private enterprise, which the British bourgeoisie will not permit, and the Labor Party has no intention of attempting.

It is easy to prove that the half-hearted policies of the Labor Party will not take Britain anywhere, but will merely help to bring the economic crisis to a head. The huge American Loan of almost 4 billion dollars, would have been a tremendous point of support in reorganizing industry, if this had been at all possible within the framework of capitalism in Britain. But what has happened to this loan? How much of it could be utilized to reorganize industry? Nothing at all, practically. The loan is already running out. British industry is as far away from reorganization as ever. In this colossal fact, that this astronomical loan has served no useful purpose, lies adequate evidence of the bankruptcy of the Labor Government (i.e. of the British capitalist class), in the face of the economic crisis.

But are the facts really as dismal as we make out? Are we not exaggerating? The basic fact of the frittering away of the loan is sufficient to prove the case outlined. But it must be explained why, as yet, there have been no serious manifestations of the crisis.

Only a Breathing Space

The explanation lies in two facts:

  1. American support, economic and political; and
  2. the temporary boom conditions immediately following the war, due to a world shortage of consumer’s goods.

We may give these their due weight.

1. The United States, despite her colossally increased economic bargaining power (her productive capacity doubled during the war), despite her capacity to straddle the whole world, is not for the moment pressing her advantage, as against Britain. This is due to political reasons. Just as the US is freely throwing money to Turkey and Greece, so also is she forced to bolster up Britain in the game of power politics, against the threats “from the USSR” (really the threat of revolution). She cannot at the moment allow Britain to perish on the rocks. Hence she replaced Lend base by the Big Loan. Hence also, though in giving the Big Loan, she could have insisted on Britain throwing open the Empire to her goods, she was content with only partial concessions. Of course the astute Britisher takes full advantage of this even to the extent of blackmailing America with her own weakness, as was done in the appeal for the loan. Thus the artificial shock absorbers provided by America have mu.filed,up to now, the rumblings of the threatening catastrophe for Britain. But these shock absorbers have only temporary value. In the long run Dollar Imperialism has other fish to fry than to dry-nurse an aged and crippled British Imperialism. Of course, so long as American aid comes along, and the tobacco and tea comes along too, the British public may not awaken to the fact that it is sitting on a volcano. But the fact (we stress it again) that this American support cannot be utilized for long term reorganization, and only serves to postpone the real show down – that is what is ominous.

2. As we mentioned above, the crisis in Britain may be delayed somewhat by the fact that due to a world shortage of consumer’s goods, there is still some resiliency in the world market and the competition among sellers (i.e. with the US) is not acute. But these boom conditions are clearly going to be short-lived, since the purchasing power of the masses on a world scale has far from increased. When these boom conditions disappear, then the economic problems of America herself will be so acute, she will be forced to clear away goods produced by her mammoth industries, and will not be able to afford any more charity towards her economic rivals. She will be forced to stave off her own crisis by dumping her goods everywhere, regardless of the political consequences. Thus time is doubly against the British capitalists.

These are the basic reasons why the manifestation of crisis may be postponed for a short time in Britain. But if anyone wants to believe that it is postponed indefinitely, he will have to conjure away the solid facts cited above. The Labor Party in Britain, far from grappling with the economic crisis, has postponed it by playing with the American Loan. Lacking the power or the will to interfere with British capital interests, they are playing for time. But time will soon be up. The only positive long-term planning being done by the British Government (intended in the long run to rehabilitate the economy of the Empire) is in the field of have colonial policy.

2. Crisis of World Relations

Politically and militarily, the basic rivalry in the world today is that between the US and the USS.R. Both in Europe and Asia, Britain’s military might is overshadowed, and she can do little more than to maneuver between the USS.R. and the US In Europe, for example, her finger in the pie is a very small finger. Russia threatens to swallow the whole Eastern half, and the US has intervened decisively in Germany, as well as in Southern Europe, in Greece and Turkey. Incidentally, the US has become a Mediterranean power, straddling the lifeline of the British Empire, and dislodging Britain from her dominant position.

This political and military weakness has also its economic consequences. Quite apart from Britain’s own economic weakness, the consequences of her deterioration as a great power effectively block her out of the world market. Thus she can play only a small part in the “reconstruction” of Europe. She cannot tie Europe to herself economically. One part of Europe will be geared to the USSR, and the other is America’s playground. In the Middle East fight for oil, and the general development of these regions, Britain is similarly left out in the cold. Certainly in the Far East she has to reconcile herself to America taking the economic spoils of victory, for America and not Britain won the Pacific war. South America also is definitely an American preserve. If Britain has any leeway at all to maneuver (and this is doubtful), it must lie within her Empire. That is why it is natural that the British Government, in the face of its crisis, is turning its main attentions to and pinning its only long-term hope of recovery on the Empire.

The Empire itself is threatened in three ways, however. Firstly, there is the threat of colonial revolts, and these have already reached such dimensions that Britain cannot hope to hold them down indefinitely by force alone. Secondly, there is the threat of American economic penetration within the Empire, a threat which, as we have seen, although not unpostponable for a short time, is a very real threat. Thirdly, there is the threat of Russian expansionism, and the whole problem of the Middle East, which threatens to become a terrible battle ground in the not distant future.

As stated above, if the, British Government has a single constructive policy of a long-term character, this policy turns on the question of consolidating the Empire. In this Empire, of course, the chief problems lie not in the Dominions, where a fairly sound basis of partnership (even at the cost of great concessions) has already been set up by Britain. It may be possibIe, without very great difficulty to persuade Australia, Canada and South Africa to link up with Britain in some form of Imperial preference. But the colonies, especially India, present a much more thorny problem. Hence it is to these that the British Government, in one last great effort to stave off collapse, must turn.

Let us look very carefully, therefore, at Britain’s new colonial policy. In the first place, it is a new policy, breaking substantially and radically with the traditions of the past. Some well meaning leftists, in their anxiety to demonstrate that British Imperialism is not being liquidated, make the mistake of acting as if nothing had changed in Britain’s colonial policy, and thus make it easier for those interested in supporting the present British policy (like Gandhi) to pretend that “Britain has suffered a change of heart,” “she is sincere,” and “intends to give freedom to the colonies” etc. Neither of the above estimates is correct. Britain has suffered no change of heart. Perfidious Albion, capable of every hypocrisy and moral cant, remains true to her material interests. Attlee, like Churchill, has not become the King’s first minister to preside over the liquidation of the British Empire. He is trying precisely to save it – but by a radically new policy. Let the Labor Party speak for itself, through the mouth of Patrick Gordon Walker, Secretary to Herbert Morrison: “The aim of the Labor Government is to save the Empire. This will be accomplished by giving India, Burma and Ceylon self-governing status, and seeking to keep them within the Empire. The Empire will be very powerful indeed if that comes off.”

We must grasp the full meaning of this statement, since it represents the basic maneuver of British Imperialism in the face of its deteriorating international position.

Until recently, Britain ruled her colonies politically with an iron hand, while economically she fleeced them left and right. That was Imperialism as Curzon and the old breed of Imperialists understood it. But the structure reared by the old Empire builders, though adequate for its time, was not built to last. Its chief defect was that it gave the colonial regime no substantial base within the colonial population itself. Hitherto, the only colonial class on which Britain relied was the feudal class of Princes and landlords. But in recent times the specific gravity (economically and politically) of these feudal elements became heavily reduced, and with it their capacity to speak for the colonial people as a whole.

The alliance with the native feudalists exclusively further committed British Imperialism to a thoroughly reactionary policy in the agrarian field, a factor adding tremendously to the drive of the colonial revolts. Because of the agrarian problem, the support of the hundreds of millions of India’s peasants is guaranteed to any class that boldly assaults Imperialism.

The extreme poverty and therefore lack of purchasing power of, the mass of the population, and British hostility to industrial expansion, complete the picture of the arrested development of the colonies while they were plundered one way or another by British finance-capital.

Apart from this, the sweep and rise of colonial revolts in Asia have convinced the British that they cannot hold down the colonies by force alone, and have to mix fraud with force, at the least. The August upsurge followed by the INA demonstrations and the Naval Mutiny in India, the resistance to the reoccupation of Burma, the chaos in Malaya, all proved this to the hilt.

This need to thoroughly reorganize the colonial regime, if it is to be maintained at all, was doubled and trebled for the British by her economic crisis. If her economy is to revive at all from the stunning blows of the war period, then the only economic reserves she can mobilize are those of Empire. Political stabilization, in the form outlined below becomes absolutely essential if Britain is to take economic refuge in her Empire resources, and develop some form of self-sufficiency and resistance to US penetration.

The political weakness of the colonial system built up by the Imperialists was demonstrated during the war when at the first threat of external attack the whole edifice in Asia threatened to collapse. Collapse actually took place in Malaya and Burma. No substantial section of the colonial population was ready to raise a finger in defence of the British Empire in the face of Japanese attack. When this was realized in Britain it provoked a great shock, and made the Imperialists understand that the Empire could no longer be run in the old ways.

Hence a new colonial policy was adopted.

3. New Turn in Colonial Policy

The new colonial policy has three main aims, which may list in order of importance. They are

  1. to stave off imminent colonial revolts by securing a broader base for the Imperialist regime;
  2. to use this broader-based regime as a point of support for rehabilitating the colonial and therefore the Imperialist economy, making possible more solid resistance to penetration by the US; and
  3. to strengthen resistance against Russian expansionism through this same political stabilization.

These are the aims of the new colonial policy. Its substance can be stated more simply: to make stable alliances with the colonial bourgeoisie, hitherto in semi-opposition to Imperialism and never fully supporting the imperialist regime. Hitherto Britain used its political and economic power to stunt and frustrate the expansion of the colonial bourgeoisie. Nevertheless they have grown with the capitalist development of the colonies and today represent, in India, a far more important force, socially and politically, than the feudalists. They, in order to secure a better bargain from Imperialism, have put themselves at the head of mass movements against the British regime. Of course since they fear revolution, and its threat to capitalism, as much as the imperialists, they only divert the mass movement to gain their own ends. But the opposition of the bourgeoisie, however non-revolutionary and anti-revolutionary, gives a broader sweep to the mass struggle and weakens the imperialists. The British realize that agreement with the colonial bourgeoisie cannot be postponed.

Economically, the British desperately pin their faith to the idea of joint exploitation of the colonies in partnership with the colonial bourgeoisie. Alliance with the colonial bourgeoisie: this is an “algebraic formula” with a general meaning as follows –

  1. loosening of political ties giving the national bourgeoisie a greater share in the government of the colonies and full responsibility for the regime;
  2. the winning away of the bourgeoisie from the national movement against Imperialism; and
  3. the fostering, by the consent of the native bourgeoisie, of closer politico-economic ties with Britain, and the joint exploitation of the colonial market.

In short, it is a scheme, as the Labor Press puts it, of “Empire by consent” rather than “Empire by force.” The consent, of course, is that of the native bourgeoisie, not of the colonial masses.

The arithmetical values in the algebraic formula, i.e. the actual degree of loosening of political domination, the actual terms of the partnership, must in the nature of things vary from colony to colony, according to the actual relationship of forces. Thus in Ceylon, the tame aspirations of the native bourgeoisie are satisfied with “self-government within the Empire,” which means only a variant of direct rule by Whitehall with the local administration transferred to native hands. In Egypt, where the feudal elements are still very powerful, and the capitalist development backward, the alliance is on a share-and-share basis with the old feudal and new bourgeois allies. In Burma, the situation was complicated by the Japanese invasion and the wholesale breakdown of British rule. Hence the concessions are wider in that colony. In India the situation is met by a qualitative change in the regime, i.e. from direct to indirect rule. The whole responsibility for government will lie in Indian hands. On the other hand, in India the feudal allies are not to be jettisoned entirely. The division of India, the decentralization of rule, and the propping up of the native Princes and the concession of Pakistan in some form mean that Britain wants to retain a more direct base in India.

It must only be emphasized that in no case does the loosening of political ties mean the liquidation of British Imperialism, or the freedom of the colonies. The whole scheme is designed to protect and preserve British imperialism, and there will be adequate safe-guards, both in the finance-capitalist dominance of Britain and in the field of political and military arrangements, to preserve the substance, if not the form of Imperial power.

This is the great long-term plan of British Imperialism to save itself from destruction. Needless to say, it is a thoroughly reactionary plan. Firstly, Imperialism under any disguise, cannot solve any of the urgent problems of the colonial masses. Secondly, economically speaking, it is now one world and it is no longer possible to liberate the productive forces within any artificially sheltered limits, such as Imperial preference would impose.

It is more to the point to ask: Will the whole scheme pay? This is, unfortunately for the British imperialists, very, very problematic. In the first place, it is a relatively long-term policy. But the crisis to be faced cannot be postponed to the Greek Kalends. Can the economic problems at home be solved, or their solution indefinitely postponed? We think not. Will America continue her present policy of bolstering Britain politically and economically for long enough to permit the latter to rally and stand on her own feet? Very doubtful, and in this instance time is not a favorable but an adverse factor, since the post-war consumers’ boom threatens at any moment to dissolve, forcing America to go all out to plunder the world market in order to postpone her own home crisis of overproduction. Finally, will the colonial revolts conveniently postpone themselves till a relative stabilization is achieved? This is least likely. That is why this article began by saying that Britain is face to face with a terrible crisis, greater in some respects even than the crisis of the war. The entangled knot can be cut through successfully only in one way: If the British working class chooses the revolutionary road out of the impasse.

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