by N. R. DANIELIAN

1

I TOOK three centuries to bring the British Empire to its apogee, from the reign of Queen Elizabeth to that of Queen Victoria. The greatest advance occurred between the Battle of Waterloo in 1815 and the end of Victoria’s reign; and the glittering climax of empire was the Diamond Jubilee in 1897, when all her subjects paid homage to Victoria’s power and poured their wealth into London. Britain then truly ruled a world of free trade. The sun never set on her possessions, spread over a quarter of the earth’s land area. Commerce on the high seas moved by the grace of the Royal Navy. Industry grew and prospered by the calculated selfinterest of London financiers. Governments in Europe rose and fell by the power of the British Exchequer. From India to South Africa, from Afghanistan to Egypt and all through Europe, from Australia to Canada, the British flag was respected and revered, the British pound sterling coveted as gold.

It is a swift reversal in less than two generations for Britain to owe the world 20 billion dollars, a debt contracted for the privilege of living as free men; to drop the crown of India; to be told in the discussions of the United Nations to get out of Egypt, and quick; to urge others to care for her wards, such as Greece; to equivocate, tragically, between Arab and Jew at the sacrifice of life and prestige; and to admit that she cannot carry the burdens of a victor nation in Germany.

What were the foundations upon which the British people built their supremacy over so long a period? What are the causes of its decline? Is there any hope that the British Isles will regain some of their economic strength, at least enough for their own self-sufficiency? What is the fundamental American interest in the welfare of the British Isles? The last is the most crucial question of all to those on this side of the Atlantic, for since the burden of world order falls upon us, we must chart a course true and effective. There is too much at stake for us to be carried away by crisis psychology, blended of propaganda and sentimentalism.

Four factors made Britain the major power of the nineteenth century: her industrial primacy, her colonial empire, her navy, and her domination of the European balance of power. The Industrial Revolution of the eighteenth century, later fertilized by the principles of free competition and laissez faire, gave rise to a multitude of factories from London to Edinburgh, whose products reached all the ports of the world where ships could carry the Union Jack. Without particular natural advantages, except coal, Britain was able to secure and hold markets because she was ahead of the game in her industrial development. After 1850, when the era of free trade began, her progress continued until the end of the century.

The expansion and consolidation of the colonial empire during the interval from Waterloo to the Boer War gave the mother country prosperous manufacturing, dependable sources of cheap raw materials, and ready markets for her products. From the profits of her industries, from the cotton of Egypt, the hemp of India, the tea of China and Ceylon, the tin and rubber of the Malay Peninsula, the gold and diamonds of South Africa, and the oil of Arabia, from buying cheap and selling dear, a system maintained within the Empire by political control, Britain developed capital which she invested abroad in railroads, in soap factories, oil refineries, chemical plants, and power systems, in banking and insurance, and most important of all, in an international network of cable communications and shipping lines girdling the globe. In 1938, the Brookings Institution estimated British longterm investments abroad, not counting liquid balances and gold, at 22.9 billion dollars, of which 11.6 billions were in Empire countries, 7.5 billions in the United States and in Central and South America, with the rest scattered over Europe and Asia. These investments brought back earnings of nearly a billion dollars a year as dividends and interest. This covered 25 per cent of all imports and constituted 5 per cent of the total national income. Exports of goods paid for only 60 per cent of imports.

It has been a long, long time indeed since Britain has paid for her imports by her exports. In 1900, British exports amounted to approximately 1.8 billion dollars as against imports of 2.6 billion dollars. In 1938, the corresponding figures were: exports, 1.9 billions; imports, 3.7 billions. Between 17 and 20 per cent of the British national income is imported from abroad; but of food, the British people must import 60 per cent. There just is not land enough in the British Isles — the size of Oregon — to produce the necessary food for 48 million people.

During the war, Britain requisitioned and sold 4.5 billion dollars of foreign investments. At the same time, she had to borrow, over and above Lend-Lease aid, about 14 billion dollars, held in blocked sterling (which cannot be spent until released by the British Government) as credits in London, owed to India, Egypt, Argentina, Canada, and many other countries. Add to this the new and almost depleted United States and Canadian credits of 5 billions, and Britain emerges, as a result of the war, 23.5 billion dollars poorer in her international accounts. She has sold 4.5 billion dollars in investments and contracted 19 billion dollars in debts.

The debts contracted abroad on account of the war pretty well balance off the remainder of her overseas long-term investments. Payment of interest and principal on her debts would effectively eliminate investment income as a factor in meeting her import requirements. Hugh Dalton, Chancellor of the Exchequer, summarized the situation pointedly before Parliament: “The period of living on our nineteenth-century investments is over, and that chapter in our history has come to an end.”

While Britain’s means of payment are being curtailed, her obligations have increased. This is the second major reason for Britain’s plight. The Government spent almost 1.2 billion dollars in 1946 for occupation forces and diplomatic and other activities. The estimate for 1947 is 700 million dollars — the British zone of Germany alone is estimated to eat up 300 million dollars a year. There are other heavy expenditures in Italy, Palestine, Arabia, and Egypt.

Prime Minister Attlee has announced that the defense forces will be reduced by 400,000 men to one million by March, 1948. Britain is in no position to support armies abroad that require either dollar expenditures or uncompensated exports of British goods.

It is because the obligations of Britain abroad have increased, and her assets and invisible revenues have diminished, that an increase in the export of physical goods is so important. The Labor Government set 140 per cent of 1938 exports as a goal to be reached by the end of 1947. Handicapped by cold, drought, old equipment, and strikes, all that the British accomplished by December, 1946, was parity with 1938; and by the summer of 1947, exports were only at 111 per cent of 1938. The new target for 1948 is at least 150 per cent of 1938.

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CAN Britain expand exports sufficiently to recoup the loss of her investment income and to meet defense commitments? The historical trend is not encouraging. From the high point of 4 billion dollars in exports in 1924, the trend has been continually downward. Even in the prosperous year 1929, it was 10 per cent less than in 1924. In 1937, allowing for the devaluation of the pound, it was lower by 50 per cent. There are two basic reasons for this condition. England has lost technical priority in the principal exports — coal and textiles — which gave her an initial advantage, and other countries have been developing their own industries.

Even before World War II, Britain was losing out in coal production and exports. In 1913, production had risen to 287 million tons. But in 1946, only 189 million tons were produced and the target for 1947 is set at a modest 200 million tons. In 1913, 73 million tons of coal were exported, producing 250 million dollars in revenue. By contrast the 1947 target is not even enough to meet domestic requirements. The Trades Union Council called the target “trifling with the facts,” and demanded a target of 250 million tons to meet the nation’s “reasonable needs.” But the British Government is having difficulty in meeting its own modest target.

Technology in British mines is archaic and the cost of production high. Instead of keeping pace with advancing technology by using machine cutting and mechanical loading and conveying, the British mine operators took advantage of the defeat of labor in the 1926 coal strike and lowered wages. The financial embarrassment of the coal mining industry in Britain also prevented major investments in new machinery. Another reason for the limited performance of British coal mines is in the physical characteristics of their coal seams — narrow, steep, and deep — making the use of machinery difficult.

Productivity of labor had gone down in 1946 to 259 tons per year per man, as compared with 308 tons in 1937, a reduction of 15 per cent. There were 695,000 miners at work in 1946 to produce a meager 189 million tons. Compare that with total bituminous production of 590 million tons by 416,000 miners in the United States — an average annual output per man of 1419 tons, six times as much as in Britain.

Britain’s early supremacy in industry and commerce was founded upon textile manufactures. Textile exports, all forms, constituted the largest item in the foreign trade of Britain. In this field, too, the trend, ever since World War I, has been running steadily against Britain. Take the cotton and rayon industry: export of piece goods had declined from nearly 7 billion square yards in 1913 to 1.5 billion square yards in 1938. The same condition prevailed in woolen and worsted exports and heavy clothing.

That this was no temporary condition is admitted by the experts of the British Board of Trade. In 1946, a Working Party (Committee) composed of representatives of employers, workers, and Government experts in the cotton industry reported that before the last war, “roughly speaking, two thirds of [Britain’s] export losses were due to development by her former customers of their own industries, and one third was captured by Japan. Right up to 1939 the industry was fighting a retreating rear-guard action.” (Italics supplied)

Immediately after World War I there was a spurt in exports to satisfy delayed demands, and profits in the industry were high. But after 1924, conditions steadily deteriorated. Here is what the industry did during that breathing spell, in the words of the Working Party: “The profits were used, not for strengthening the industry to meet the new competitive conditions, but mainly to pay high dividends and support share gambles. (An examination of 150 companies shows that the average paid by dividend-paying spinning firms in 1920 was 40.2 per cent.) ”

The Platt Mission, which came to the United States in 1944 to study American textile-industry methods, concluded that a substantial portion of the cotton-textile machinery now in place in Britain is not only old but beyond its efficient working life. And here is an amazing fact. Before World War II, British manufacturers were making modern automatic spinning machines, but 95 per cent of them went to export markets. While Lancashire producers dawdled, other countries went heavily into the development of home industry to meet local demand. India, the largest cotton piece goods market in the world, increased home production from 1.1 billion square yards in 1913 to 4.2 billions in 1938, and diminished its imports by 75 per cent. This trend was accelerated by the Government’s tariff policy after World War I.

Japanese competition licked not only Great Britain but also the Dutch, the Italians, and the Americans in the low-grade cotton goods markets everywhere. The only markets in which the British held their own were in the Dominions and quota colonies. No wonder that the British look askance at Assistant Secretary William L. Clayton’s proposals to eliminate Empire preferences.

Many countries have plans for expansion of home industries. It is literally true that the only thing that stands in the way of the permanent ruin of the British cotton export market is the inability of American equipment manufacturers to supply machinery or promise delivery in less than four or five years. Delegations from Persia, Egypt, India, Brazil, and China have repeatedly come to the United States begging for textile machinery but have gone home empty-handed. Sometime in the next five years they will succeed, and then the only hope of British industry will be in Empire preferences and the home market.

The story is the same in woolens, worsteds, heavy clothing, hosiery (except woolen): British exports declined catastrophically between World War I and World War II. The reasons are the same: other countries were developing more efficient industries behind walls of tariff protection. In woolens as in cotton, British reports indicate that equipment in Britain is old and outdated.

The real future of British exports would seem to lie in the more modern industries — aircraft manufactures, durable household goods, electrical machinery. These industries were re-equipped during the war, and they attract young and vigorous talent. The question is: Can they expand the market in these new industries sufficiently to overcome the handicap of the older industries and make up some of the deficit from the loss of their investment income? Other countries want to develop these industries, and when they do they are going to have the advantage over Britain in labor costs, and perhaps also in the use of more up-to-date equipment.

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WHILE the bonds of political interest still exist, the economic ties that have held the Empire together have continually weakened. Ever since the Imperial Conferences were initiated during Queen Victoria’s Golden Jubilee in 1887, it has been clear that though the hearts and the allegiances of the colonies and Dominions belonged to the mother country, their heads and their pocketbooks have been their own. This has led to greater self-government and greater economic self-sufficiency in the Dominions. As the component parts of the Commonwealth became stronger, the mother country suffered economically. This process is continuing. The Dominions learned enough in the common war effort to project their own secondary industries as soon as hostilities ceased — radio and electrical manufacturing in Australia, machine shops and metalworking industries in India, and coal mining and metalworking in South Africa.

The centrifugal force of political and economic independence in the Empire has a serious effect upon Britain’s military strength, for there never has been any formal understanding with other members of the Commonwealth as to their relative responsibilities in common defense. Britain has had to carry the major burdens of defense, war, and occupation for the Empire.

The result is that the military position of Great Britain expresses her economic weakness rather than the strength of the Empire. The British Cabinet does not call in the Empire countries and say, “Look here, we won the war together, and we should occupy Greece and Germany until stable conditions are established. How about contributing to the costs of occupation?” No, all it can do is to warn the United States that Britain must pull out. No one has stressed the responsibilities of the Empire, rather than the British Isles, in these common economic commitments. One must conclude, therefore, that unless there is a new and practical recognition by the Dominions of their responsibilities, the capacity of the British Isles as a bastion of protection of Western values will be limited as long as the British economic position remains weak.

What the value of the colonies and dependencies, as distinct from the Dominions, will be in the balance of world forces is uncertain. The last war revealed an unmistakable indifference to Empire interests in places like Malaya and Burma. And the interest in British success was less than enthusiastic in India. This problem involves the whole orientation of Western colonial policy. Can Britain exact tribute from colonies, protectorates, and mandated territories to defend the Four Freedoms, via London, when they are in revolt against the colonial philosophy of the imperial system?

One must conclude, strictly from the American point of view, that the decline in the economic situation of Britain and her tenuous hold upon the far-flung Empire seriously reduce her potency in the international arena. This does not deny the potential value of the Empire if rightly organized and integrated into the common purpose.

Britain’s balance-of-power politics, as exercised before World War I, had the effect of keeping various nations in their places. Used alternately against the Ottoman Empire, Russia, Germany, Austro-Hungary, or the French Empire or Republic, it achieved one purpose, even at the expense of a few local wars: it stopped any one nation from getting strong enough to challenge British power. A collateral effect of this was, of course, our ability to conquer and develop the resources of the North American continent without fear of encroachment from Europe.

In World War I, France and Britain could not defeat the Kaiser’s armies without American assistance. In World War II, the relative economic and military position of France and Britain together was so much weaker that Hitler could not be defeated except by the combined help of Russia and America. The resultant aggrandizement of Russian power and its geographical spread, and the impoverishment and contraction of the area west of the Iron Curtain, do not give Britain many political assets to play off against the overriding influence of Russia. As a result, Britain is really at the mercy of the military power of the Soviet Union, except to the extent that she can command United States alliance and coöperation. Not since the days of the Holy Roman Empire has the European world been in danger of one-power domination as it is now.

On the assumption that our interest is identical with that of Great Britain in not allowing one power to dominate the Eurasian continent, we have the task of stabilizing the balance of power in Europe. Any mistake in weighing our assets in Europe, such as relying solely upon British revival, as we have done during the two and a half years since V-E Day, will be disastrous. We must take the long view in evaluating the populations, the geographical, natural, and technological resources of all Western Europe, not of Britain alone. In considering the contributions Britain can make to this system, we must give weight to such vital imponderables as her spiritual affinity with Western civilization, her trustworthiness as an ally, her political traditions of freedom. All these factors have weight even in the cold balance sheet of economic and military assets.

But it is no longer possible for 48 million freedomloving people living on an exposed archipelago to stop a juggernaut of 300 million or more people armed with bombers, rockets, bacterial missiles, and atomic weapons. Britain held the fort in 1940, but the advances of military science since then would make it too risky to count on her doing it again.

The protection of the Western Hemisphere requires the full cooperation of all the free people of Western Europe and the Americas. We must carefully consider where we can obtain the quickest and largest results. What would it avail us to finance the rehabilitation of British coal, textile, and steel industries if, by neglect, Western Germany, France, and Italy were to go Communist, carrying with them all their latent resources? To make decisions on such a hard-boiled, realistic basis, devoid of sentimentalism, will require uncommon understanding of facts, clarity of vision concerning ultimate national interest, and a moral fortitude and decisiveness in bold act ion which is challenging both to the State Department and to Congress.

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WE ARE now witnessing one of the epochal shift s in the currents of world history, as momentous as the crumbling of the Roman Empire under the onslaught of the Vandals in the fifth century, as serious in its implications as the elimination of the Byzantine Empire by the Ottoman hordes in the fifteenth century. The Roman Empire in the Mediterranean basin, and Byzantium at the Bosporus and the Dardanelles, had stood guard at the gates of Europe protecting the established values of Western civilization, its legal codes, its Christian and humanistic values inherited from the ancient world, against the attacks of the Persians, the Tatars, the Turks, the Mongols, and the Moors. Once they went down, it took centuries of serfdom throughout the Dark Ages, and countless bloody struggles over five hundred years, for Europe to regain a semblance of order and to establish respect for the individual and his spiritual values.

The British people played a decisive role in the establishment of this order, and made vital contributions to the progress of human freedom. They also stood guard at the gates of Europe, at the Bosporus and Suez and Gibraltar. One need not grant them an accolade of purity in all their purposes, nor commend all their methods, to admit that in the larger movements of history they have played the role of Rome and Byzantium in defense of Western values against the dangers of Oriental penetration of Western Europe, and against the militarism of Napoleon and the barbarities of Hitler. The dark blemishes of Britain’s colonial policy must be cleansed somewhat in the judgment of history by her contribution to the development of free institutions.

Britain’s difficulties have made the European front fluid, and no “fraternal association" will change that instability. Only a wider European concert, with Britain an honored member, can fix the frontiers long enough to permit a negotiated settlement, and make the United Nations a working organization, in such a working concert, with Britain, Italy, France, Western Germany, Belgium, and Holland, there would be over 200 million people, with the highest aptitudes and a potentially large productive capacity. It is the leadership of I his group, under democratic sponsorship, to higher plateaus of economic achievement that promises stability of the European front. In the long run this wall prove to be for the security and well-being of Britain also.

What should Britain do to help herself? One thing is certain: her primary problem now is sellsupport. Having lost about a quarter of the means of payment for foreign purchases, Britain must produce more and sell more abroad than ever before. To achieve this, she must modernize much of her productive resources. It will take a long period of self-abnegation, large investments, and probably twenty years of intensive application.

The basic fact is that Britain is overpopulated for her present resources in agriculture and industry. Complaints about shortage of labor must not be misconstrued. That is a symptom rather than a cause of Britain’s plight. There is a shortage of labor because the productivity in both agriculture and industry is so low that it takes three, four, or five times more labor to produce a given quantity of goods than in the technologically up-to-date countries.

Once Britain has modernized her productive plant, she will be confronted with unemployment, and not shortage of labor. It is the part of wisdom, if her standard of living is not to be depressed, to plan a program of emigration to the Dominions, to Canada, Australia, New Zealand, and South Africa. Better this than let the specter of Malthus wield the wand. There is evidence that British emigration may be just as welcome as British manufactures in some of the Dominions.

The British Isles are better able to support 30 million people with modern equipment than 48 millions. This has its political advantages too. If Britain’s strategic position is weakened, larger British populations in the periphery of the Eurasian heartland may be a help to the United States and to Britain’s own security. And industry located in those faraway places would be safer.

What should be our policy relative to Britain’s needs? It is obvious that we have erred in our evaluation of the British economic position, or else we could not have expected 3.75 billion dollars (whose purchasing power is diminished by our inflation) to last four years and accomplish regeneration of British industry and liberalization of foreign trade.

We must be more tolerant of British economic policy, therefore, and allow a generous time interval during which Britain can make preferential agreements and work out a scheme whereby such preferment may be terminated as costs of production go down to a competitive basis. As of today, Britain could not survive in a free-trade world.

It will cost us less to allow Britain the foibles of Empire preference than to subsidize the inefficiency of present British industry or the unemployment that may result because of British inability to compete in open markets.

One further remedy we could offer the British: a unilateral reduction of tariffs on sonic of their commodities which we could well absorb, such as woolen clothing and pottery. The Kansas farmer, wishing to sell his wheat to Britain, had better develop a taste for British fabrics. The most direct way of putting dollars into British hands to buy our wheat, meat, cheese, eggs, and canned goods is to “Buy British.” As a creditor nation, we must learn this lesson. The only alternative is to give our wealth away, at the expense of the taxpayer.

Lest there be a misconception that the principal concern here is to line up with Britain, or Germany, or any other country against the U.S.S.R., it must be emphasized that the United States wants first, the preservation of peace, and second, the security of the Western Hemisphere. All the suggestions with regard to the stabilization of the present lines in Europe, and the role that Britain can play in it, are made with the conviction that they will prevent universal explosion. That, I submit, is in the interest of Russia and England and the United States and of all humanity.