Cecil Rhodes and John A Hobson

Alfred Marshall shed no light on imperialism; the lamppost of supply and demand was focused on smaller matters. Besides, warfare seemed greatly removed from equilibrium and harmony. John A. Hobson, an Oxford grad turned public school teacher, was not so constrained. Even Cecil Rhodes, whose raid into the Transvaal had ignited the Boer War between the English and Dutch, justified the Empire as a way of acquiring new lands and providing new markets for the goods produced so efficiently by English capitalism. After having visited Africa and even having dined finely with Rhodes on the eve of the Transvaal raid, Hobson wrote in his Imperialism (1902) something remarkably close to what Rhodes had surmised.

Hobson noted a deep contradiction within capitalism whereby income and wealth distributions became too unequal to sustain it. Even the warm and fuzzy John Stuart Mill never went that far. Marx had found enough contradictions in capitalism to make it pretzellike, but Hobson had no sympathy for Marxism, an irony soon to be evident. The Hobson paradox can be simply stated: Although the masses are great in number, their wages are spent entirely on necessities, limiting the goods they can buy. The rich have gigantic incomes, but they are small in number. Since producers fail if they cannot sell everything they make, oversaving or underconsumption must be avoided. Since wage-earners cannot buy all of those goods and services that gild Lily, only the consumption by the rich can save capitalism at home. And, well, there is the rub (even if it be an indulgent massage). As was well-known, John D. Rockefeller could not possibly spend all of his vast wealth. Even if the rich wanted desperately to avoid savings, sadly, they were left with no choice. Worse, the rich genuinely wanted to save.

Since wage-earners have the desire without the means and the rich have the means without the need or desire, purchasing power might be insufficient. Of course, as noted, J.B. Say, not to mention Smith, Ricardo, and Mill had those excess savings going directly into new investment, leaving no surplus of goods in the overall economy. But, Hobson saw a problem, if wage-earners were having trouble buying all those goods being produced by hyperproductive capitalism, why would entrepreneurs buy still more capital and generate still greater surpluses?

Hobson's solution is the same as Rhodes's. The excess savings of the rich would be used to build factories in Africa; the surfeit of goods going unsold in England could be sold to those poor Africans. The virtuous cycle does not even end there; cheap raw materials such as rubber could be sent back to England for the manufacture of tires. Colonization would save English capitalism.

It sounded too good to be true, for it was. As noted, many nations had by now industrialized—producing surpluses—and were competitors. These nations—Germany, Italy, Belgium, Japan, and the United States—wanted a piece of Africa, India, Latin America, or whatever region had poor people but abundant natural resources. Such imperialism, the aggressive pursuit by the industrial nations for pieces of other markets and resources, paves the way to warfare. The competition for markets ends up at the end of gun barrels. The English getting into the Dutch had started the Boer War. Not that everyone lost; just as the Boer War created a legendary Winston Churchill, the charge up San Juan Hill bequeathed the adventuresome Theodore Roosevelt.

Lenin Arrives on the Scene

While Hobson was ignoring Marx, Vladimir Il'yich Ulyanov (Lenin) was among those reading Marx in the early 1880s and 1890s. In the annals of violence, the Russian Revolution of October 1917 usually is linked to Marx, although at the time he had been dead for more than three decades. It is a tenuous linkage, at best. Marx and Engels had expected the Communist Revolution to occur first in an advanced industrial country, not in a backward, feudal society like Russia. Nonetheless, to Marx's great surprise Das Kapital had been translated into Russian in 1868 and enjoyed greater success there than elsewhere. At arm's length from Marx, the October Revolution was decisively influenced by two events: The outbreak of the Great War in the summer of 1914 and the April 1917 arrival of Lenin at the Finland Station in St. Petersburg.

Russia was ruled by the autocratic Nicholas II. Still poor and agrarian with a discontented peasantry, Russia was now at war with the formidable forces of Prussia's Bismark. The Great War had pushed Russia into the social and political disintegration so poignantly depicted in Boris Pasternak's Dr. Zhivago. The mixed blessing of the war is expressed in its epilogue:

And when the war broke out, its real horrors, its real dangers, its menace of real death were a blessing compared with the inhuman reign of the lie, and they brought relief because they broke the spell of the dead letter.

Discontent with the management of the war and with economic conditions in St. Petersburg led to the fall of the Czar in March, 1917. (Ultimately, too, the outcome led to many movies about Anastasia.) The vicissitudes of war also brought down the short-lived Provisional Government of Aleksandr Kerensky, a caretaker government that took too little care. Lenin, the great revolutionary, did not bring down the Czar or Kerensky. They both fell by weight of their own incompetence.

Lenin nonetheless provided two things, a theory for "revolution" in countries still living off the land and political leadership during a period first of anarchy and then of civil war.

Lenin was born in 1870 in a small town on the storied Volga to parents who could provide him with a good education. In the tradition of the time, Lenin quickly moved into the ranks of the radical intelligentsia. He was a disciple of Marx with a difference. Although Marx looked like a revolutionary whereas Lenin looked more like a CPA, Lenin was much more the revolutionary. Both combined journalism with revolutionary actions, Lenin being a regular contributor to Pravda, or Truth.

Lenin came to Cracow, in what is now Poland, in 1912, after a three-year jail sentence in Siberia. Cracow was a part of the great Austro-Hungarian Empire (ruled from Vienna) and, in Lenin's favor, was only a short distance from the Russian Empire. When Lenin was not smuggling newspaper copy to Pravda, he was holding forth with other revolutionaries in a (still existing) pleasant coffee house, Jama Michalilkowa, the meeting place of choice for revolutionaries.

Lenin Arrives at the Finland Station

The Great War initially created a problem for Lenin. The Austrians, who had thought Lenin to be a useful foil for the Russian Czar, now incompetently presumed he might be a Russian spy. Again, Lenin faced arrest and a short stay in jail before he and his family were allowed to go to Switzerland, then a haven for revolutionaries of all stripes.

In Switzerland, Lenin wrote the always essential revolutionary pamphlet. Imperialism: the Highest Stage of Capitalism was widely discussed in Switzerland but published only after Lenin's return to Russia in 1917. The parallels to Hobson are clear. Capitalism, according to Lenin, had advanced to its highest stage as colonialism, extending its powers imperialistically. Whereas the Marxian orthodoxy saw colonies such as British India as markets for capitalism's surpluses, Lenin saw the colonies as outlets for investment and economic development. Monopolies now had hands across their borders: In this regard, Lenin is closer to Hobson than to Marx.

Lenin noted, accurately, but contrary to Marx, that workers, inconveniently, had become less revolutionary as capitalism had grown stronger through imperialism. With European and American capitalists gaining more power, they could bribe workers with higher wages. Money was a splash of cold water in the face of worker militancy. Worse, imperialism was too successful for its own good. There was little land left to colonize. The Great War was a desperate last land grab by the capitalistic countries, a war patriotically supported by co-opted labor.

The capitalists had always blamed the poor countries for their own backwardness. Lenin now placed the blame for the impoverished countries squarely on the shoulders of the capitalists and their workers. To escape poverty, the poor countries would have to revolt against their colonial masters. Whereas Marx and Engels expected a spontaneous communist revolution only in the industrially advanced nations, Lenin made necessity the mother of all revolutions in Latin America, in Asia, in Africa but, first of all, in Russia.

As noted, in March 1917 there was some kind of "revolution" or at least a revolt in Russia. Lenin learned of it while in Zurich. Since he was supposed to be the revolutionary, Lenin had to go to Russia. But how? If he tried to go through France, they would arrest him, for the French could see no good coming from Lenin back in Russia. If he tried to go through Germany, the Russians would think him a German agent. In one of the great serendipitous events in history, the Germans aided Lenin's flight to Russia because they believed his meddling would serve their aims well.

Lenin, his mistress (the beautiful frenchwoman Inessa Armand), and twenty fellow Bolsheviks sped through Germany in a non-German (or extraterritorial) train! Both Lenin and the Germans were protected because he made his passage in a sealed train, albeit over German railroads. He arrived at the Finland Station in St. Petersburg on April 3, 1917: In November Lenin and the Bolsheviks filled the vacuum formed of Kerensky's Provisional Government. Not denying the force of Lenin's demonic will to revolution, his rise to power depended on the weakness in Russia inflicted by the Great War, Kerensky's vacuousness, and, ironically, a sealed train trip provided by Russia's enemy. Lenin succeeded in great part because others failed.

Thereafter, Lenin's luck was to run out. Although the Bolsheviks occupied the most important cities, the broader outreaches of Russia were brought under control only after three years of brutal civil war. Ultimately to worse effect, Joseph Stalin was assigned the role of hammering out solutions to the remaining tough economic and political power issues. He became general secretary of the Central Committee of the Communist party in 1922. Lenin died in January, 1924, and, his bodily remains carefully preserved, still rests in a tomb in Red Square. Stalin became the undisputed master of Russia by the late 1920s.

Ayn Rand and the Antecedents of the Cold War

Alice Rosenbaum, later to become the novelist Ayn Rand, was a 12-year-old witness to the first shots fired during the Bolshevik Revolution. She and her family lived near the edge of starvation during the civil war and the continuing repression. The experience shaped her hatred of the Bolshevik theme that man must live for the State. This, and the absence of individualism, was the horror at the root of all the other horrors taking place about her—the bloodshed, the arrests in the night, the fear gripping a city she loved. These experiences are retraced in Ayn Rand's first novel, We the Living; they inspired an antithetical view of the State. Alice reached New York just as Stalin was taking over.

Stalin's totalitarian regime, completely at odds with the original goals of Marx, emerged in the 1930s. The coercive apparatus of police and courts was used to collectivize agriculture for the surpluses required for forced industrialization. Stalin's paranoia showed in the Great Purges of 1934 to 1938 in which millions of people, both communists and non-Communists, experienced a nightmare of arrest, torture, slave labor camp, and execution. Stalin, it is claimed, killed more communists than any fascist dictator ever had. Later, the breakup of the Big Three Alliance (Soviet Union, United States, and Great Britain) marked the onset of the Cold War. It was not until the early 1990s that Russia could face—however precariously—the prospect of democracy, something it had never experienced. Although the Soviet brand of communism appears doomed, the Eastern version of Cowboy capitalism may not prevail. By the mid-1990s, the Russian people only began to appreciate socialism after having had a taste of unregulated capitalism.

Whether attributed to economic forces alone or more complex motives, including the hubris of empire and nationalism, what happened in Europe spread as American isolationism came to an end. In turn, the Great War of 1914 to 1918 set in motion social, political, and economic forces that changed America forever. But these changes were for years seen as temporary dislocations that would in time yield naturally to a restoration of the old order. On the whole, as we shall see, the neoclassicals proved to be no more discerning of the future than anyone else.

The Great War brought death and destruction not only to Europe's peoples, but also to Europe's colonial empires and traditions. At the war's end, President Woodrow Wilson and Comrade Lenin (a.k.a. Vladimir Ilich Ulyanov) faced each other at opposite ends of a devastated continent and began to shape the next 70 years of world history. Wilson would dominate the peace conference in Paris, and his 14 points would be the foundation of the Versailles Treaty and the seeds of World War II. Lenin would lead the Bolshevik revolution in Russia and then die, leaving Stalin and set the stage for the Cold War.

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