9: Trade and Commerce

Cost vs Benefit

In 1890 there was a general assumption that the Empire made Britain wealthy. Cost of Empire was something Gladstone's Liberals were concerned about and there were some radical critics who argued that the Empire was not as beneficial as most people believed. By 1914, a few more people began to question whether the cost of Empire were entirely justified

Benefit of Empire

Empire allowed Britain to prevent/control colonial industries - reducing international competition. The use of a common language and the fixed exchange rates to the sterling facilitated trade with Britain and its colonies because it was simpler. Many parts of the Empire e.g. White Dominions and India were self-financing, being run by taxation

Evidence of Benefit - Imports

Britain was a predominantly industrial society so it expected the colonies to supply food for a population which was outgrowing the capacity of domestic agriculture. e.g. imported vast quantities of wheat/beef from Canada and lamb/dairy products from New Zealand. This trading supply was considered safe and stable. Britain's manufacturing industries sourced raw materials from Empire e.g. cotton, wool, timber, cocoa, tea and palm oil which supported home industries and meant that manufactured goods could be sold on for profit

Evidence of Benefit - Exports

Britain had a lot of trade with Empire, the relationship between export and import prices moved about 10% in Britain's favour between 1870-1914. As Empire grew British exports to Empire increased from 21.2% in 1871-75 to 37.2% in 1913. India alone took 20% of Britain's total exports, worth £150 million to business by 1914. British breweries gained from colonial trade and some beers were specifically developed for colonial conditions e.g. India Pale Ale. Colonial governments bought imports (including expensive railway equipment) from Britain because it was simpler and because they felt it was their duty.

Evidence of Benefit - Commerce

Britain had a lot of trade with Empire, the relationship between export and import prices moved about 10% in Britain's favour between 1870-1914. As Empire grew British exports to Empire increased from 21.2% in 1871-75 to 37.2% in 1913. India alone took 20% of Britain's total exports, worth £150 million to business by 1914. British breweries gained from colonial trade and some beers were specifically developed for colonial conditions e.g. India Pale Ale. Colonial governments bought imports (including expensive railway equipment) from Britain because it was simpler and because they felt it was their duty.

Evidence of Benefit - Investment

40% of British investment overseas took place in Empire because they were considered safe. By 1914 Britain had invested twice the amount of the French and 3 times that of Germany overseas. This invisible trade grew rapidly until 1914.

Lack of Benefit

Empire was not the main source of Britain's trade, only 24.9% of British imports came from the colonies and 37.2% of exports went to the colonies by 1913. Trade with the Empire remained static but other trade was growing and manufacturing exports, in particular, grew much more slowly after 1870. Growing nationalism in the Empire sometimes led to that trade being damaged e.g. in India, which took 20% of British exports, there were strikes and boycotts of British goods in 1905, showing how this trade which was considered 'safe' was in fact becoming volatile

Evidence against Benefit - Imports

Foodstuffs that Britain needed mostly came from non-colonial countries e.g. Britain imported 17.2 million hundredweight per year of wheat from Russia and 30.7 million (which was almost 10 times that of Canada) from the USA. Furthermore, cheap colonial food helped to reduce the profitability of British farm produce. Some cheap imperial products prevented the British from developing its scientific enterprises which proved damaging, in the long run, e.g. while the French, Russians and Germans developed synthetic alternatives to rubber, Britain simply relied on its supplies from Africa and Asia.

Evidence against Benefit - Expense

Some growth of the Empire in this period was expensive to secure but offered little return in terms of trade e.g. the whole of Tropical Africa only amounted to 1.2% of British trade and The Boer War on 1899-1902 cost Britain a huge £250 million, some believed mine owners had tricked Britain into fighting the Boers to preserve their own profits. Within Britain, the middle classes faced an increased tax burden, partly because of the maintenance and defence of the empire. Some argued that if the middle classes had less tax to pay, then they would've modernised their equipment better and perhaps paid their workers more.

Evidence against Benefit - Investment

British investment overseas was expanding in non-colonial areas as well e.g. in the USA. This was considered riskier but could be much more profitable. The benefits of overseas investment were not felt by the majority of people.

Investment in Empire

British investment doubled from £2 bn to £4bn between 1900 and 1913, not all of this was in Empire. Far more British capital went to the USA and India, and the disparity increased. Investment in Empire was regarded as safe, but loans to foreign nations might provide bigger returns. Investment in Empire was also considered dangerous as it might be used to develop rival manufactures e.g. Indian cotton mills.

Colonial Stocks Act

1899 and 1900 facilitates a number of infrastructure projects e.g. rail links into the African interior from the ports of Lagos and Mombasa

Invisibles

Invisibles - refers to any export that provides income but does not have a physical presence e.g. insurance, banking services and return on overseas investments. With huge earnings from these invisibles, Britain could afford to import vastly more than it exported. By 1914, Britain had invested 2x the amount of the French and 3x that of Germany overseas

Gold Standard

Britain set the standard for the international monetary system, forcing other nations to adopt the gold standard. By 1908, only China, Persia and a handful of Central American countries still used a silver standard. The gold standard became the basis for a global monetary system and was effectively a Stirling standard.

John A. Hobson

Economist who wrote 'Problems of Poverty', 'Evolution of Modern Capitalism', 'The Problems of the Unemployed' and 'Imperialism'. His ideas in 'Imperialism' were formulated when he worked as a correspondent for the Manchester Guardian in SA during the Boer War. He believed that mine owners had tricked the British into fighting the Boers in order to maintain their own profits. He believed that modern foreign policy had been primarily a struggle for profitable markets of investments. He thought that the ruling classes who profited from empire had an ever-increasing incentive to employ public policy, the public purse and public forces to extend their field of their personal investment and to safeguard and improve their existing investments. He was a critic of Empire and thought that it was only a benefit for Capitalists. He believed that the investment overseas meant that the mass population remained poor, he believed if the living standards in Britain were raised then there would be no excess capital and therefore not a clamour for imperialism to find markets for it and that low wages in the colonies kept wages and living standards down in Britain as well

Imperial Preference Background

'Mercantilism' had been replaced by 'free trade' in the mid-19th Century. A young Disraeli thought that anybody trying to reintroduce the idea of protection would have serious difficulties. Free trade became a successful approach for most of the rest of the century and helped to make Britain wealthy

Changing Circumstances

International system was changing by the end of the 19th Century. Competition from Europe, especially Germany, had been growing and other industrial and trading rivals were building up e.g. the USA and Japan. Free trade was not working as well for Britain in these circumstances, and some people began talking about the reintroduction of protection. The agricultural depression that affected the last ¼ of the 19th century was a problem for Britain, but Empire trade and supplies helped Britain by preventing this from becoming too serious. This delayed the need to review the policy of free trade

Joseph Chamberlain

A liberal Unionist who was a great supporter of the Empire. Colonial secretary from 1895-1903. Raised the idea of some trade protection. The opportunity to take even more benefit from the Empire and to help the economies of Empire countries was linked to his ideas. His idea was for 'Imperial Preference' which meant that Britain and its Empire would trade freely but they would all protect themselves from foreign competition. It was discussed at the 1902 Colonial Conference in London, and the leaders of countries present, mostly Dominions like Australia, Canada, New Zealand, Newfoundland, Natal and Cape Colony seemed interested. The idea would have boosted imperial trade through mutual customs agreements and protective tariffs against imports from non-imperial powers. Chamberlain believed that imperial trade was preferable because it would be strategically reliable in times of emergency

Opposition

Manufacturers who traded mostly with non-Empire countries opposed the idea because it might reduce their profits. Bankers and investors who had business links with non-Empire countries objected. Some pointed out that the Empire was not completely self-sufficient and so this might cause problems. Most of the public still had an almost emotional link to the idea of free trade and an irrational belief that it was still working for Britain. The 1906 General Election gave the Liberals a massive landslide victory. Balfour's Unionist Government was defeated and this was the final confirmation that Imperial Preference would not be introduced and free trade would continue

Aftermath

Many of the Dominions were disappointed when Imperial Preference was not implemented. Some looked for trade agreements with other countries instead e.g. Canada made its own trade agreements with Germany, France, Italy and Japan. Australia, NZ and SA all imposed their own import tariffs as a means of asserting their national interests over any loyalties or ties to Britain. In India, British textiles and goods were boycotted and burned in the streets as the swadeshi (self-sufficiency) movement sought to undermine the Raj in the years after 1905