Hobson, Lenin, and Schumpeter on Imperialism

Author(s): Daniel H. Kruger

Source: Journal of the History of Ideas, Vol. 16, No. 2 (Apr., 1955), pp. 252-259
Published by: University of Pennsylvania Press
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 HOBSON, LENIN, AND SCHUMPETER ON IMPERIALISM

BY DANIEL H. KRUGER
I
In recent years the charge that capitalism is imperialistic has taken
on new meaning. In the ideological war being fought between the free
world and Communism, this charge has become an important weapon in
the Communist propaganda arsenal. As the "cold war" developed and
lines were clearly drawn, the Communists have been beating the prop-
aganda drums incessantly: "Capitalism is imperialistic!" "Capitalism
feeds on war and aggression!" "The capitalist countries are warmon-
gers! " Variations on this theme have been used doggedly by Communist
writers and speakers. Whenever the Soviet delegate arises to speak in the
United Nations, some variant of this theme appears. In numerous articles
in Pravda, as reported in The New York Times in the last few years, the
same charges have reappeared in one form or another. There is a deter-
mined attempt on their part to portray capitalism as imperialistic-
especially to the countries of Asia and Africa.
In view of this " official position" of the Communists, a study of im-
perialism has a modem flavor. The bases for such declarations need to
be examined in an effort to place them in their proper perspective. The
intellectual roots for these charges are found in the writings of Nicolai
Lenin, who in turn borrowed heavily from John A. Hobson. In this paper
the writings of Hobson and Lenin on imperialism will be examined, as well
as those of Joseph A. Schumpeter, who has advanced, in the writer's
opinion, the best counter-declaration to the Communist claim that capital-
ism is inherently imperialistic.
It must be stated at the outset that this study does not purport to
exhaust the subject, even as to the writers covered. Adequate research
on a single item in the vast complex that constitutes imperialism would
require more than a single lifetime. This should not discourage endeavors
to relate the present phenomenon to its intellectual foundation in an effort
to understand better one of the dominant issues in today's ideological battle.
One difficulty in the study of imperialism has been to ascribe a mean-
ingful definition to this term.1 It is certainly misleading to describe by
the same word "imperialism" both the European statesman who plans
ruthlessly to overrun a country in Asia or Africa and the American company
building an automobile assembly plant in Israel. Because the term is
so elusive and covers practices and procedures of such varying and oft-
times contradictory character, no attempt will be made to contribute to
the confusion by spelling out another definition. The definitions used by
the writers under consideration will be presented.
II. JOHN A. HOBSON

In discussing Hobson's writings on imperialism, two time periods must

be considered. In 1902, Mr. Hobson wrote the book on imperialism in
which his original position is stated. After 1911, he altered his theory
so as to negate his original position completely. At the outset of his
Imperialism, Hobson uses the word with some reluctance.
1 For a good discussionof the pitfalls encounteredin the use of this term, see
E. M. Winslow,The Pattern of Imperialism (New York, 1948), 60-64.
252

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 HOBSON, LENIN, AND SCHUMPETER ON IMPERIALISM 253

Amid the welter of vague political abstractions, to lay one's finger

accurately upon any "ism" so as to pin it down and mark it out by
definition seems impossible. ... A certain broad consistency in its rela-
tions to other kindred terms is the nearest approachto definition which
such a term as Imperialism admits. Nationalism, internationalism,
colonialism, its three closest congeners,are equally elusive, equally shifty
and the changeful overlappingof all four demands the closest vigilance
of students of modem politics.2
Imperialism he defines as "the endeavor of the great controllers of
industry to broaden the channel for the flow of their surplus wealth by
seeking foreign markets and foreign investmentsto take off the goods and
capital they cannotsell or use at home."3 Thus, accordingto Hobson, the
most important factor in the economics of imperialismis foreign invest-
ments. The great banking institutions, which form the central ganglion
of international capitalism, are the sinister elements which promote im-
perialistic policies and find profitable markets for investment. These
financial houses use the instrument of the state for private business pur-
poses to implementtheir policies.4
Imperialism is not a choice; it is a necessity. Markets must be ob-
tained for growing manufacturers; new outlets must be found for the
investment of surpluscapital and for the energies of the adventuroussur-
plus of the population. With the great and growingpowers of production,
such expansionis a necessity to the life of an industrial power. Imperial-
ism, Hobson writes, is thus the natural product of economicpressuresof a
sudden advance of capitalism which cannot find occupation at home and
needs foreign markets for goods and investment. As the nations become
more industrialized,the growth of productionexceeds the growth in con-
sumption; more goods are produced than can be sold at a profit; more
capital exists than can find remunerativeinvestment. Since it becomes
more difficult for manufacturers,merchants, and financiers to dispose of
their economic resources,they bring pressure to bear on the government
to secure for their particular use some distant, underdeveloped country
by annexation and protection. It is these economic conditions which form
the " taproot of Imperialism." 5
Hobson contends that it is not industrial progress that demands the
opening up of new markets and areas of investment, but the mal-distribu-
tion of consuming power which prevents the absorption of commodities
and capital within the country. Oversaving is the economic root of
imperialism. This oversaving consists of rents, monopoly profits, and
other unearned or excessive elements of income, which, not being earned
by any labor, have no legitimate raison d'etre. Since these types of
income have no relation to the productive process, and do not increase
consumption, they form a surplus wealth, which, because they have no
proper place in the natural economy of production and consumption, tend
to accumulate as excessive savings.
2 John A. Hobson, Imperialism,a Study (New York, 1902), p. 1.
3Ibid., 91. 4Ibid., 61-68. Ibid., 85-86. Ibid., 91-92.

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254 DANIEL H. KRUGER

According to Hobson, the causes of imperialism would be eliminated

if there were better distribution of wealth.6 If the surplus wealth, that is,
oversavings, were distributed either to the workers in the form of higher
wages or to the community in the form of taxes, so that it were spent
instead of being saved, serving in either of these ways to increase con-
sumption, there would be no need to fight for foreign markets or foreign
areas of investment. A progressive community with substantial equality
of economic and educational opportunities would increase consumption
to correspond with every increase in production and could find uses for
an unlimited quantity of capital and labor within the economy. If incomes
were distributed so as to enable all groups in the economy to increase their
consumption, there could be no overproduction, no underemployment of
capital and labor, and no necessity for the state to pursue a policy of
imperialism.
This, in essence, was Hobson's theory of imperialism in 1902. In a
work published in 1938, he confessed that his heretical view of capitalism
as the source of mal-distribution, oversaving, and the economic impulse
to adventurous imperialism had led him, for a time, to an excessive and
perhaps oversimplified advocacy of the economic determination of history.7
He admitted that when he wrote his volume on imperialism he had not yet
gathered into clear perspective the nature of the interaction among
economics, politics, and ethics. Practical experience with movements and
causes (one of which was anti-imperialism), he added, had given him a
clearer perspective.
In his Imperialism, Hobson viewed international finance as the sinister
element promoting imperialistic policies. By 1911, he had altered this
view and concluded that international finance might be the guarantee of
peace. Though other non-economic motives might eventually bring about
an organized endeavor to expel Western political and financial control from
the backward areas, a prolonged utilization of Western capital would
afford the strongest assurance of pacific development in which all the
creditor nations would take their share of profitable exploitation.8
While nine years previously Hobson had chastised the policies of the
United States, especially those of the larger financial houses, he now stated
that the maintenance of the " open door" policy by the United States
was likely both to promote good order and development among the back-
ward nations and to assuage the jealousies of the Great Powers. He went
on to point out that "unless some reckless racial animosity should over-
9
power the operation of these economic motives," the capitalist countries
investing capital in the backward areas would make for peace and good
government in proportion as finance grew more distinctively international.
Cross ownership of capital involved in international investment would
be a strong and steady pledge of peace.

7Hobson, Confessionsof an Economic Heretic (London, 1938), 63.

Hobson, An Economic Interpretationof Investment (London, 1911), 116-17.
Note the shift away from an economicinterpretation.
9 Ibid., 118. o1Ibid., 95-96. 11 Ibid., 98-102.

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 HOBSON, LENIN, AND SCHUMPETER ON IMPERIALISM 255

In Imperialism, Hobson deprecates foreign investment by Western

countries in the " backward " areas. In his Economic Interpretation of
Investments, foreign investment is viewed as stimulating home industries
to turn out large quantities of goods at lower costs and prices for both
domestic and foreign markets. Another and equally important objective
of foreign investment is to raise the standard of living of the people in
" backward " areas. By building roads for them, by developing their mines,
fields and forests, by supplying them with machinery and other manu-
facturing equipment, by helping to build and equip their cities, by building
railroads to join the sources of raw materials to the ports, by training
and organizing an industrial population, the Western countries would
undoubtedly be raising these people towards a better standard of living.l0
In Hobson's view of 1911, foreign investments aid in a better distri-
bution of income both in the investing country and in the country being
developed." Large imports accruing from foreign investments are advan-
tageous to the consumers of the investing country, in that real incomes
are raised by the lower prices resulting from the accessions to domestic
supplies. With the development of these areas, foreign trade would more
and more be based on the doctrine of comparative advantages, each coun-
try producing that which is most advantageous to it-with the result that
goods would become cheaper both in the undeveloped areas and in the
country supplying the capital. In the former countries, with every sort
of wealth being produced, the competing farmers, transport companies, and
other dealers, by the very process of seeking markets for their goods, would
be obliged to hand over a large share of the gains of development, not
merely to the foreign capitalists in the form of interest, but to local groups
of consumers and other producers who have had dealings with them. Thus
investments would be the great dynamic instrument of the economic system
in determining the distribution of economic energies over the various locali-
ties and industries so as to produce the largest amount of marketable goods
and services. They would forward the production and distribution of
world wealth.
III. NICOLAI LENIN

These later views of Hobson were completely ignored by Lenin in his

book, Imperialism, the Highest Stage of Capitalism. His theory of im-
perialism grew out of a study of two books, Hobson's Imperialism and
Rudolf Helferding's Finanz-Kapitalismus (1910). In his analysis, Lenin
attempted a three-fold objective: (1) to save revolutionary Marxism; (2)
to annihilate the " opportunists," namely, Kautsky, who is painted as the
villain for his defilement of Marxism; and (3) to provide a truly Russian
or Eastern version of socialism which would be applicable to backward,
agricultural, semi-colonial and colonial countries. With the publishing of
this book, a new chapter in European history, "Leninism," was opened.
Leninism, as defined by Stalin, " is Marxism in the epoch of imperialism
and proletarian revolution." 12
12
Joseph Stalin, Leninismtr. E. & C. Paul (New York, 1928), 13.

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256 DANIEL H. KRUGER

Hobson is the hero of Lenin's book. In his preface, Lenin charges

Hobson with adoptingthe point of view of bourgeoissocial reformism,but
holds that he neverthelessgives an excellent and comprehensivedescription
of the principal economicand political characteristicsof imperialism. To
lend credibility and support to his thesis, Lenin quotes Hobson, whom he
regarded,
... as a more reliable witness, since he cannot be suspected of leaning
towards orthodox Marxism; moreover, he is an Englishman who is very
well acquainted with the situation in the country which is richest in
colonies, in finance capital, and in imperialistexperience.l3
In his economicanalysis of imperialism,Lenin merely echoes Hobson:
Imperialism is the monopoly stage of capitalism, or, capitalism in that
stage of developmentin which the domination of monopolies and finance
capital has taken shape; in which the export of capital has acquiredpro-
nouncedimportance,in which the division of the world by the international
trusts has begun,and in which the partition of all the territory of the earth
by the greatest capitalist countrieshas been completed.l4
According to Lenin, the economic quintessence of imperialism is
monopoly capitalism. Monopoly grew out of the concentrationof produc-
tion into the cartels, syndicates and trusts which play a very important
role in moderneconomiclife. These monopolieshave " capturedthe most
important sources of raw materials," which fact in turn has enormously
increased the power of " big capitalists " and has sharpened"the antag-
onism between cartelized and noncartelizedindustry."15
The banks have contributedheavily to this development. Several of
the largest financial institutions in each of the foremostcapitalist countries
control the bulk of the capital and income and exert great influenceover
all the economic and political institutions of their particular country.
Finally, this growth of monopoly has been accentuated by colonial
policies. Finance capital has intensified the struggle for the sources of
raw materials, for the export of capital, for spheres of influence,for profit-
able deals, concessions,and monopolist profits and economic territory in
general. When the whole world had been divided up, a period of colonial
monopoly was ushered in with an intense struggle for the partition and
repartition of the world. The growth of these powerful monopolies and
oligarchies, with their striving for domination, annexation, and ruinous
exploitation of backward areas, has given rise to imperialism,which, as
Lenin puts it, is parasitic or decaying capitalism.
When Lenin was writing his book, the war of 1914-18 was being fought.
He viewed the war as the " first imperialistwar," and concludedthat the
struggle of world imperialismwas becomingmore aggravated. As capital-
ism develops, competitionbecomes more bitter, in obtaining both markets
and sources of raw materials. This in turn has intensifiedthe struggle for
13Nicolai Lenin, Imperialism, the Highest Stage of Capitalism (New York,
1939), 102.
14Ibid., 88-89. 15lbid., 123-127. 16Ibid., 82. 17Ibid., 10.

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 HOBSON, LENIN, AND SCHUMPETER ON IMPERIALISM 257

the acquisition of colonies. "Possession of colonies alone gives complete

guarantee of success to the monopolies against all the risks of the struggle
with competitors, including the risk that the latter will defend themselves
by means of a law establishing a state monopoly." "1 Thus capitalism has
grown into a world system of colonial oppression and of financial strangu-
lation of the overwhelming majority of the people of the world, by a hand-
ful of large capitalist countries, which involves "the whole world in their
war over the sharing of their booty." 17 Under capitalism, Lenin wrote,
the only way to remove the disparity between the development of produc-
tive forces and the accumulation of capital on the one hand, and the
division of colonies and spheres of influence for finance capital on the
other, is through war.
IV. JOSEPH A. SCHUMPETER
While Hobson and Lenin looked to the basic causes of imperialism in
the market place, Schumpeter viewed it as a throwback to a primitive
form of human behavior. In Hobson, this atavistic character of imperial-
ism is incidental and implied rather than worked out. It was left to
Joseph A. Schumpeter to take this idea and develop it into a well-rounded
theory, and at the same time to provide the proponents of capitalism with
a refutation of the charge that capitalism must inherently utilize its
resources for militarism and war in order to find markets for goods and
surplus capital.
At the outset Schumpeter points out that the word " imperialism " has
been so abused as a slogan that it threatens to lose all meaning. Whenever
the word imperialism is used, there is an implication of aggressiveness-of
aggression for its own sake, as reflected in such terms as " hegemony " and
"world dominion." In the light of this common usage, Schumpeter defines
imperialism as "the objectless disposition on the part of a state to un-
limited forcible expansion." 1 By "objectless," he means that the ex-
pansion has no adequate object beyond itself.
To illustrate imperialisms and the basic trait they have in common,
Schumpeter examines the historical record. From his studies he concludes
that not all the causes of imperialism are economic. Among these are:
the necessities of the social structure, the inherited dispositions of its ruling
class, the personal whims of rulers, imperialist individuals who need ever
new military successes to maintain their positions, tradition, and the avail-
ability of appropriate means. Furthermore, his analysis, he contends, has
shown that many wars for expansion and conquest have been waged " with-
out adequate reason-not so much from the moral viewpoint as from that
of reasoned and reasonable interest." 19 Secondly, this " drive to action "
or " will to war " has developed from situations which have required peoples
to become warriors in order to avoid extinction. These psychological dis-
positions and social structures, acquired in the dim past in such situations,
once firmly established, tend to maintain themselves and to continue in
8 Joseph A. Schumpeter, Imperialism and Social
Classes, tr. Heinz Norden
(New York, 1951), 7. 19Ibid., 83.

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 258 DANIEL H. KRUGER

effect long after they have lost their meaning and their life-preserving
function. Thirdly, these inclinations and social structures orientated
toward war are perpetuated by the domestic interests of the ruling class
and by all who stand to gain economically or socially by a war policy.
Therefore, Schumpeterargued, imperialisms differ greatly in detail, but
they all have a commonbasic trait which makes for a single sociological
problemof imperialismin all ages.2
Imperialism,Schumpetermaintains, is a feature surviving from earlier
ages that plays an important role in every concrete situation. It is " an
atavism in the social structure, in individual, physiological habits of
emotional reaction."21 Since the vital needs which created imperialism
have passed away, it too must gradually disappear, even though every
warlike involvement,no matter how non-imperialistin character,tends to
revive it. Imperialismtends to disappear
... as a structural element because the structure that brought it to the
fore goes into a decline, giving way, in the course of social development,to
other structuresthat have no room for it, and eliminatingthe power factors
that supportedit. It tends to disappearin an elementof habitual emotional
reaction, because of the progressive rationalization of life and mind, a
process in which old functional needs are absorbedby new tasks, in which
heretoforemilitary energies are functionally modified.22
By this line of reasoning,Schumpetertakes the position that imperialisms
should decline in intensity the later they occur in the history of a people
and of a culture.
As capitalism developed, Schumpeter wrote, the active structure of
society was rebuilt or modified. The entrepreneursfought for and won
freedom of action. By their success, position, resources,and power, they
became increasingly important elements of the political and social scene.
The working class was also createdwith its new forms of the working day,
of family life and interests. The capitalist processescontinuedto raise the
demand for labor and with it the economic level and social power of the
workersuntil they too were able to assert themselves in a political sense.23
Then too, capitalism provided opportunities for the professionals-jour-
nalists, lawyers, etc. These new groupswere democratized,individualized,
and rationalized. They were democratizedby an environmentof continual
change which the industrial revolutionhad set in motion. They were in-
dividualized because subjective opportunitiesto influencetheir lives took
the place of immutable objective factors. They were rationalized in that
their instability of economic positions made their survival depend on
continual rationalistic decisions.
The capitalist system absorbedthe full energies of these newly formed
groupsat all economiclevels. As conditionsof survival within the system,
there was constant application, attention, and concentration of energy.
There was much less excess energy to be vented in war and conquestthan
20 Ibid., 84.21Ibid., 85. 22 Loc. cit.
23One immediatelynotes the conflictwith Marxismand its theory of increasing
misery and the reserve army.

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 HOBSON, LENIN, AND SCHUMPETER ON IMPERIALISM 259

in any pre-capitalist society. What excess energy there is largely flows into
industry itself and the rest is applied to art, science, technology and the
social struggle. What was formerly energy for war now becomes energy
for labor of every kind. Wars of conquest and adventure in foreign policy
are bound to be regarded as troublesome distractions and destructive of
life's meaning. Business becomes the normal state of affairs and war,
abnormal.
Though Schumpeter's thesis brings hope that imperialism and war may
eventually give way to more economic and rational behavior, the fact
remains that they are still able to challenge the movement towards ration-
alism.24 These tendencies persist in the remnants of the military caste,
in historic memories and military traditions, and in the minds of those who
have not learned to think in terms of economic rationality, but still think
in terms of exclusive rivalry. Although militarism is not at home in an
age of industrialism and is inconsistent with it, it must still be reckoned
as a great force. Recent wars have demonstrated its power to imbue
entire nations with grandiose ideas of conquest by force of arms which,
when backed by modern technology and industry, are frightfully destruc-
tive. But the wars themselves cannot be blamed on the existence of
economic power; blame must rest on other forces which are still powerful
enough, on occasion, to engulf the entire economy in all-out war. Schum-
peter concludes that when these sociological factors-warlike instincts,
structural elements and organizational forms oriented towards war-dis-
appear, imperialism will wither and die.

Schumpeter appears to have presented a theory which exonerates

capitalism from the charge of being inherently imperialistic. He discards
the attempts of Hobson and Lenin to ascribe a purely economic inter-
pretation to the phenomenon of imperialism. Such an interpretation
is incomplete, as non-economic factors must also be considered. Wars,
conquests, annexations and whatever else is included in the term im-
perialism do not necessarily have their roots in the economic soil. The
desire for power for its own sake, the machinations of demented rulers, the
desire to imprint an ideology upon other peoples, the desire to be free, all
have been causes of war.
Imperialism is not built into American capitalism. Since World War II
American capitalism has reached the zenith of its influence in the Council
of Nations. Presumably, if it were imperialism, as the Lenin-Stalin
doctrine maintains, it would have displayed its bellicose actions in policy-
shaping. The Communists and the Non-Communists strongly impregnated
with Marxism insist that such has been the case. They have accepted this
view more or less completely. However, the testimony of the rest of the
world is in complete contradiction. The greater majority of countries in
the free world, at a showdown, have acted to display their confidence in
the United States.
University of Alabama.
24 bid., 96-130.

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