Could it happen again?
This August marked the 100th anniversary of the outbreak of World War I. Could it happen again? Before exploring this question, I should review how the world has changed since those European summer days of a century ago.
I have already examined in this blog the changes in imperialism—the underlying cause of the “Great War”—over the last hundred years. But before I explore the question of whether something like the Great War could happen again, I should briefly summarize these changes.
The main powers in Europe
At the start of 1914, there were a number of independent imperialist “powers,” as they were called, that were in economic, political and, as events were soon to demonstrate, military competition with one another. In Europe, the main powers were Britain, Germany, France, Russia and Austria.
Britain had been for the preceding century—since the defeat of Napoleon—the most powerful country in the world. Britain’s military power was largely naval. As the British chauvinists put it, Britannia ruled the waves. It was naval power that held the English empire—“where the sun never set”—together. In turn, British naval power was made possible by its highly advanced—for the time—industry.
France, which had been Britain’s primary rival in the world war that followed the French Revolution, was a significant imperialist power in its own right. It had a large empire in Africa, Indochina and elsewhere. Its industrialization, however, had always lagged behind that of Great Britain.
As a result, large amounts of idle money capital tended to pile up in France compared to the situation in the more dynamic capitalist countries. Since the French capitalists converted a relatively smaller amount of their money capital into industrial capital, a relatively larger amount was converted into loan capital—finance capital. Much of this capital was loaned abroad, especially in Russia.
By the beginning of the 20th century, however, France was no longer Britain’s most important rival within Europe. Germany, due to its rapid industrialization, had replaced France in that role. In Germany, capitalist production based on the latest technology was developing fast. Because its industrialization had come later than Britain or France’s—Germany wasn’t even unified as a country until the 1870s—Germany had relatively few colonies.
However, unlike the case in France and increasingly Britain, the German capitalists tended to quickly convert the money capital that passed through their hands into productive capital—both constant and variable. Therefore, finance capital developed somewhat differently in Germany than it did in Britain and France. In Germany, there was a need to mobilize every spare penny and place it in the hands of the industrial capitalists. As a result, Germany’s banking system was ultra-modern, with both commercial and investment banking centralized in a small number of huge “universal banks.”
This stood in contrast to the older British and to a large extent even the U.S. pattern, where commercial and investment banking were conducted by separate companies. The biggest of the German universal banks was the Deutsch Bank, which remains to this day Germany’s most powerful bank.