V. The Decline in the World-economic Division of Labour and the Crisis of the European Industrial Countries

The crisis in the European industrial countries is set off in sharp relief from the general crisis. During the war the special advantage of western European industry—a skilled working class, trained in specialised work, which produced at very little cost per unit of product—was partly eliminated. The normal process of industrialising the colonial lands received a severe blow through the interrupted emigration of the European industrial masses. A native industrial working class, capable of working, and native industrial capital developed as a result.

Upon the ending of the world war sharp competition set in on the part of European industry for regaining these markets. But these newly industrialised countries are defending themselves, some by cheap labour power, others by tariffs! India demands a tariff not alone upon twine, but even upon iron. Canada declined the idea of a united British world empire and of preferential tariffs for the raw materials of the colonies, because it wants to carry out its own policy of protective tariffs. All this leads to increasing greatly the difficulties of exporting to these countries from Europe.

Paralleling this situation there is the phenomenon of United States taking up ever closer economic connections with extra-European countries. These countries need capital, which they can obtain more easily from the United States than from Europe. The British colonies, especially Canada, but also Australia, lean heavily upon the United States. In South America the United States have tried to gain economic and political control.

The result of this development is:

(1) The decrease of foreign trade in the world in general. (See Appendix, Table VIII.)

(2) The decrease in foreign trade for European industry in particular.

Let us try to compare the export of the most typical European industrial countries in 1913 with that of 1923 by reducing the data of 1923 concerning the index figures for wholesale trade to those of 1913. This is a rough method and one that gives only approximate results, all the more so since the foreign trade data of France and Germany very rightly are considered as not very reliable.

Thus we see that the exports from the “Industrial Workshop,” with the exception of France, where there was an accretion of territory and an inflation boom, lag far behind those of pre-war times: Belgium 52 per cent., Switzerland 30 per cent., Germany 40 per cent., England 13 per cent. (in the case of England the severance of Ireland plays a part).

(3) The decrease of exports hits particularly those branches of industry that are mainly dependent upon export. This is shown most clearly in the distribution of unemployment in England among the various branches of industry.

In a special Free Trade Supplement of the Economist for November 17, 1923, the following very interesting data is given concerning unemployment in the various industrial branches of England. The various lines of business are divided into three groups; one group in which exports exceed imports; one group in which imports predominate; and one, the so-called home industries, such as building trades, hotels, railways, water works, &c. The groups that in England show a surplus of imports are: fine metals, woodworking, silk goods, oil, leather goods, and paper.

The number of unemployed at the end of September, 1923, may be divided as follows among these groups:

These figures prove that it is not the importation of industrial goods from abroad that is the cause of unemployment in England, for unemployment is greatest in the export industries. For this reason tariffs upon imports would be senseless, all the more so, since the importation of industrial products is less than before the war. Nor does the fault lie in the fact that England’s share in the world’s trade has grown less. On the contrary: according to McKenna’s estimates, England’s share of the world’s trade was as follows:—

The English Free Traders are quite right in their arguments against protective tariffs. In his programmatic free trade speech of November 5, 1923, Asquith was quite right in asserting: “The first real cause is the fact that the whole trade of the world has dwindled . . . . The remedy lies in the re-establishment of the productive capacity and exchange power of the world.”

In other words, this means: the restoration of England and Western Europe in general as the “industrial workshop” of the world. But this seems to be impossible.

“The old markets, that have disappeared, can for the most part never develop again, and that is one of the reasons why continental Europe cannot be reconstructed within its own borders.”

The shifting in the international economic relationships, the decrease in the economic division of work thus calls forth a special crisis in industrialised Western Europe. There is a tendency towards establishing a new equilibrium through the exportation of capital, emigration, return to agriculture, and limitation of offspring. But such a rearrangement needs much time and can only be brought about after severe class struggles. We shall revert to this when dealing with the perspectives.

Under capitalist conditions, of course, things stand quite different, since production there does not take place for the purpose of supplying the need. The president of the American Steel Trust, I.A. Farrel, was right in stating to the Department of Commerce: “In every business there is a certain portion of the produce, roughly figured at 20 per cent., that cannot remain unsold if the first 80 per cent. of the sales are to net a profit. If you leave off the last 80 per cent., the whole operation will cease to yield a profit.” (“Annals of the American Academy of Political and Social Science, 1922.”)

If, therefore, the individual branches of industry in the capitalistic countries are so organised that they dispose of 80 per cent. at home, but must export 20 per cent., and if for these 20 per cent. there is no market, then this simply means that there is no profit; in other words, it means crisis, unemployment, which, corresponding to the structure of capitalism, becomes transferred to all branches of production.

In our own opinion there is, therefore, no contradiction in my contention on the one hand that the importance of export trade for business “in general” is overestimated, and on the other that the limitation of export means a heavy crisis for capitalism. One must only read my contention aright.