This is the third part of the lecture “World War I: The breakdown of capitalism”. It was delivered by Nick Beams, the national secretary of the Socialist Equality Party of Australia and a member of the WSWS Editorial Board, at the Socialist Equality Party/WSWS summer school held August 14 to August 20, 2005 in Ann Arbor, Michigan. The lecture appeared in five parts and was republished afterward in a single part.
This is the fifth lecture that was given at the school. The first, entitled “The Russian Revolution and the unresolved historical problems of the 20th century” was posted in four parts, from August 29 to September 1. The second, entitled “Marxism versus revisionism on the eve of the twentieth century,” was posted in three parts on September 2, 4 and 5. The third, entitled “The origins of Bolshevism and What Is To Be Done?” was posted in seven parts from September 6 to September 13. The fourth, entitled “Marxism, history and the science of perspective,” was posted in six parts from September 14-20. These lectures were authored by World Socialist Web Site Editorial Board Chairman David North.
The rise of German capitalism and the European crisis
The concentration, so far, on the position of Germany should not be taken to mean that Germany was any more responsible for the war than the other great powers, and therefore should be rightfully saddled with “war guilt” as prescribed by the Treaty of Versailles. Rather, the emphasis on Germany flows from the political economy of international relations at the turn of the century. Above all, it was the dynamic development of German capitalism, following the formation of the Empire in 1871, which upset the balance of power in Europe.
Germany set out to change the status quo in line with the rise of its industry and to advance its economic and geopolitical interests. But in doing so it came into conflict with the other great powers who were satisfied with the status quo, from which they derived great benefit, and who were no less determined to retain it.
Germany’s decision to seize upon the events in Sarajevo in June 1914 in order to bolster its position in southeastern Europe and force a showdown with Russia, Russia’s ally France, and even with Britain if that proved necessary, was motivated by concerns that it was necessary to act in the face of a worsening international and domestic situation.
So far as France was concerned, the eruption of an all-European war was the only road by which she could restore her position on the European continent. French domination in the nineteenth century had depended on the disunity of the German states. But the Franco-Prussian war and the unification of Germany meant that France depended on alliances with other powers against her more powerful rival.
With the German annexation of Alsace-Lorraine following the Franco-Prussian war of 1870-71, Marx had pointed to the inevitable alignment of France with Russia, considered unthinkable at the time because of the vast difference in the political systems of the two countries. “He who is not deafened by the momentary clamour,” he wrote, “and is not interested in deafening the German people, must see that the war of 1870 carried with it, of necessity, a war between Germany and Russia, just as the war of 1866 bore the war of 1870. I say of necessity, unless the unlikely should happen, unless a revolution breaks out in Russia before that time. If this does not occur, a war between Germany and Russia may even now be regarded as un fait accompli. It depends entirely upon the attitude of the German victor to determine whether this war has been useful or dangerous. If they take Alsace-Lorraine, then France with Russia will arm against Germany. It is superfluous to point out the disastrous consequences.” 
Not that France was driven into war with Germany simply out of a desire for revenge. In the four decades that had passed since the annexation, other factors had come into play. The struggle with Germany had gone beyond the confines of Europe as both powers sought colonies and spheres of influence across the globe.
Looking back on the July crisis, the French president, Poincaré, made clear the strategic issues which were bound up with the decision to back Russia and refuse the German demand that France stay neutral.
“On us rested two duties, difficult to reconcile but equally sacred: to do our utmost to prevent a conflict, to do our utmost in order that, should it burst forth in spite of us, we should be prepared. But there were still two other duties, which also at times ran the risk of being mutually contradictory: not to break up an alliance on which French policy had been based for a quarter of a century and the break-up of which could leave us in isolation and at the mercy of our rivals; and nevertheless to do what lay in our power to induce our ally to exercise moderation in matters in which we were much less directly involved than herself.” 
London’s decision to enter the war on the side of France and Russia against Germany was likewise motivated by long-term strategic considerations, above all the belief that at some point Britain would have to take a stand against Germany and that the longer the confrontation was delayed the worse Britain’s position would be.
Why could not a modus vivendi have been struck between Britain and Germany? History and reason seemed to point in that direction. After all, the two nations had never gone to war in the past, shared many common interests and had developed closer economic relations—they were major markets for each other’s products. Yet the rise of Germany increasingly threatened the global position of Britain.
Almost 20 years before the July crisis, Foreign Secretary Edward Grey had summarised his views on the rise of Germany as follows: “The fact is that the success of the British race has upset the tempers of the rest of the world and now that they have ceased quarrelling about the provinces in Europe and have turned their eyes to distant places, they find us in the way everywhere. Hence a general tendency to vote us a nuisance and combine against us. I am afraid we shall have to fight sooner or later, unless some European apple of discord falls amongst the Continental Powers...” 
British political leaders could recognise Germany’s need for global expansion, at least in the abstract. However, in the words of a memorandum prepared on January 1, 1907 by Eyre Crowe, the chief clerk at the Foreign Office, they would maintain “the most unbending determination to uphold British rights and interests in every part of the globe.” 
This memorandum was a detailed discussion of the strategic issues which should guide British foreign policy in relation to Germany and its rising claim to world power status. According to Crowe, either Germany was aiming for general political and maritime ascendancy, or she had no such clear-cut ambition but was merely aiming to use her legitimate position to promote her foreign commerce, spread the benefits of German culture and create fresh German interests all over the world, wherever and whenever a peaceful opportunity presented itself.
How would one be able to tell the difference? There was, in fact, no necessity to undertake such a determination, Crowe explained, because the consequences to Britain would be the same. The second scheme “may at any stage merge into the first, or conscious, design scheme,” and “if ever the evolution scheme should come to be realized, the position accruing to Germany would obviously constitute as formidable a menace to the rest of the world as would be presented by any deliberate conquest of a similar position by ‘malice aforethought.’”
The significance of the Crowe Memorandum is that it points to the objective processes and tendencies at work in the Anglo-German relationship. Whatever the policies pursued by its political elite and whatever its intentions, Crowe maintained that the very economic advance of Germany and the consequent spread of its interests on a global scale represented a danger to the British Empire which had to be countered.
While not denying Germany’s legitimate expansion, he concluded, care had to be taken to “make clear that this benevolent attitude will give way to determined opposition at the first sign of British or allied interests being adversely affected.” One course which had to be abandoned, if the past were to be any guide, was “the road paved with graceful British concessions—concessions made without any conviction either of their justice or of their being set off by equivalent counter-services. The vain hopes that in this manner Germany can be ‘conciliated’ and made more friendly must be definitely given up.”
On the continent of Europe, Britain demanded the maintenance of the “balance of power.” But that “balance” was being disrupted by the spread of capitalist development itself. Germany was seeking to expand its interests, as was Russia, which had experienced rapid growth in the latter years of the nineteenth century and the first decade of the twentieth. Italy was a new force on the Continent, while the old empires of Turkey and Austria-Hungary were in an advanced state of decay.
Irrespective of the policies of the various governments, the old European balance of power was being broken up. At the same time, German expansion in whatever part of the globe it took place inevitably came into conflict with the British Empire. The logic of a policy which sought to maintain the old balance of power coupled with “unbending determination” to uphold British interests in every part of the globe was military conflict.
Indeed, as Churchill admitted in a moment of candour during the 1913-14 debate over naval estimates: “We have got all we want in territory, and our claim to be left in unmolested enjoyment of vast and splendid possessions, mainly acquired by violence, largely maintained by force, often seems less reasonable to others than to us.” 
Britain had already intervened on the side of France in the first Moroccan crisis in 1905. With the eruption of the second crisis in 1911, the issues became even more clearly defined. In the Foreign Office, Crowe defined the issue in terms of the balance of power within Europe.
“Germany,” he noted in a Foreign Office minute, “is playing for the highest stakes. If her demands are acceded to either in the Congo or in Morocco, or—what she will, I believe, try for—in both regions, it will mean definitely the subjection of France. The conditions demanded are not such as a country having an independent foreign policy can possibly accept. The details of the terms are not so very important now. It is a trial of strength, if anything. Concession means not loss of interest or loss of prestige. It means defeat with all its inevitable consequences.” 
These views of the Moroccan crisis were widely shared. According to Sir Arthur Nicholson, the permanent undersecretary of state in the Foreign Office, if Germany had her way, then “our policy since 1904 of preserving the equilibrium and consequently the peace in Europe” would collapse. Britain’s support for France was motivated by the fear that if the Entente collapsed, France might move to an accommodation with Germany, opening the possibility that Britain would be isolated.
For Britain, the eruption of the July crisis was the culmination of a conflict which had been developing over the preceding decade and a half. Unless Germany gave up its demands for an alteration of the European and international order, or Britain accepted great changes in that order, conflict was inevitable. But neither side could shift from its position because what was at stake were not the designs, prestige or policies of politicians, but fundamental economic interests of the states whose interests they represented.
A recent book surveying the decisions which led the great powers to enter the war concludes that in Britain the interests of the capitalist class had no bearing whatsoever. British industrialists had very little influence on the policy-making elite, and the great financiers of the City of London were terrified of war, believing it would bring economic ruin. “Whatever triggered the British declaration of war in 1914, it was not the wishes of the nation’s ‘finance capitalists.’” 
Be that as it may, the decision to go to war was undertaken in defence of the position of the British Empire, which, in turn, was the foundation for the dominant position of British finance capital. A decade before the outbreak of war, the Tory politician Joseph Chamberlain had explained to the City’s bankers, in no uncertain terms, the significance of the Empire for their activities.
“You are the clearing-house of the world,” he told them. “Why? Why is banking prosperous among you? Why is a bill of exchange on London the standard currency of all commercial transactions? Is it not because of the productive energy and capacity which is behind it? Is it not because we have hitherto, at any rate, been constantly creating new wealth? Is it not because of the multiplicity, the variety, and the extent of our transactions? If any one of these things suffers even a check, do you suppose that you will not feel it? Do you imagine that you can in that case sustain the position of which you are justly proud? Suppose—if such a supposition is permissible—you no longer had the relations which you have at present with our great Colonies and dependencies, with India, with the neutral countries of the world, would you then be its clearing-house? No, gentlemen. At least we can recognize this—that the prosperity of London is intimately connected with the prosperity and greatness of the Empire of which it is the centre.” 
And the pivot upon which the Empire turned was India. The British attachment to India was not based on some ill-defined search for power for its own sake. Nor was it grounded on psychological factors. India played a central and increasingly important role in providing the underpinning for both British economic and military power. As the viceroy to India Lord Curzon explained in 1901: “As long as we rule India we are the greatest power in the world. If we lose it we shall drop straight away to a third-rate power.” 
From the very beginning of colonisation, India had played a crucial role in the provision of finances for British capitalism. In the latter decades of the nineteenth century, with the rise of rival industrial powers (Germany and the United States) and the increased competition for markets, this role became even more important. Britain had for a long time run a deficit on the visible balance of trade—the excess of imports over exports. But this had been more than compensated for by the surplus on so-called invisibles—items such as freight and insurance. However, towards the end of the nineteenth century, even this income was becoming insufficient and the stability of British finance came to depend increasingly on investment income and the revenue from the so-called Home Charges levied on India.
The Indian market absorbed a large portion of British exports, while at the same time India generated a trade surplus with the rest of the world—it increased from £4 million to £50 million in the course of the latter half of the nineteenth century—which was then drained off via the charges paid to Britain. In the words of one study, before World War I “the key to Britain’s whole payments pattern lay in India, financing as she did more than two fifths of Britain’s total deficits.” 
But even as Britain became more dependent on India, the threats to her domination of the colony and to the stability of the Empire more generally were growing. The Boer War (1899-1902) proved to be a shock to the British establishment. What was expected to be a short conflict—it will be over by Christmas—dragged on for more than two years, and at great cost in terms of both men killed and finances.
It exposed the weakened military position of Britain, which could certainly be capitalised on by her rivals on the European continent. Definite political conclusions were drawn. No longer could British foreign policy be guided by the preservation of the “splendid isolation” which had characterised it in the nineteenth century. Within five years of the Boer War a series of arrangements had been entered into for the purpose of strengthening Britain’s control of Empire.
First came the alliance with Japan in 1902, and then the settling of differences with France over colonial issues via the entente of 1904, a process which was repeated with the entente with Russia in 1907. In the case of entente with France, British control over Egypt, the key to control over the Middle East and the route to India, was recognised, and with Russia, there was an explicit recognition of British predominance in Afghanistan and an end to the Russian threat to India from the north.
These measures were undertaken to strengthen Britain’s grip on the Empire. But they had the effect of pulling Britain into the conflicts on the European continent.
To be continued
 Cited in Rosa Luxemburg Speaks (New York: Pathfinder Press, 1970), pp. 279-280.
 David Stevenson, Armaments and the Coming of War (Oxford: Clarendon Press, 1996), p. 391.
 Cited in Zara S. Steiner, Britain and the Origins of the First World War (London: Macmillan, 1977), p. 44.
 Ibid, p. 40.
 Cited in Kennedy, The Rise of the Anglo-German Antagonism (London: The Ashfield Press, 1987), p. 467.
 Cited in Berghahn, op cit, pp. 95-96.
 Hamilton and Herwig, Decisions for War, 1914-1917 (Cambridge: Cambridge University Press, 2004), p.133.
 Cain and Hopkins, British Imperialism (London: 2002), pp. 195-196.
 John H. Morrow Jr., The Great War: An Imperial History (London: Routledge, 2004), p. 9.
 See S. B. Saul, Studies in British Overseas Trade, cited in Hobsbawm, Industry and Empire (1968), p. 123.