This
post is the Cat’s rather long book review of A Century of War, by Wm.
Engdahl: Engdahl,
a German historian, makes a persuasive case that all wars of the Twentieth
Century were about oil. He
explains that the British and Americans have never been told the truth about
why WWI was fought. We are told
that it was all some kind of silly mistake. But the real struggle was over oil, and the military and
industrial dominance that flows from control of that oil. Although the fields of France and
Russia were where most of the killing took place, the real prize was the oil
fields of Iraq, and whether England or Germany would control those oil fields. Forget about the Red Baron—it was
Laurence of Arabia who grabbed the real estate that mattered.
But
to explain the conflicts of the 20th century, Engdahl needs to explain the economic
order of the 19th and how that order came into being. So he begins his narrative with The
Congress of Vienna, in 1814, at the end of the Napoleonic wars. The outcome of
this congress was that Britain got what she wanted—the right to dominate the
seas and with it, world trade. The concessions she granted to Austria were
actually self-serving, in that it divided Europe in such a way that no one
power would be large enough to rival Britain in trade or war.
FREE
TRADE-- THE ULTIMATE CAUSE OF WAR.
In
1815, Britain began moving toward a free trade strategy, with the adoption of
the gold standard. At that time,
British industry was far superior to anything in Europe. But to maximize that advantage, Britain
had to pry open foreign markets. So Britain talked Europe into free trade
agreements. The culmination of
this free trade strategy was the repeal of the Corn Laws in 1846. Most
people think that the repeal of the Corn Laws was a victory for workers at the
expense of landowners. Actually,
workers lost. Allowing duty-free
importation of grain lowered the price of bread, but welfare payments were
pegged to the price of bread, and so were most working class wages. When the price dropped to half, so did
income. Also, farm laborers forced
off the land had to compete for urban jobs, which depressed wages even
further. And that was the whole
idea—to make British industry competitive by depressing wages.
The
worst victims of the Corn Law repeal were the Irish tenant farmers. Irish farmers grew potatoes, but they
mainly grew wheat. They had used half the wheat crop to pay rent, and lived off
the other half, plus they had the potatoes. But when the grain price dropped to half, they had to use
the entire wheat crop to pay rent. So when the potato crop failed, they starved to death. During the worst year of the famine,
they had a bumper crop of wheat, which could easily have fed everyone in
Ireland. But it was all
confiscated by the landlords for rent, and millions were left to starve. Free
trade radically lowered the standard of living of every worker in England and
Ireland. But factory owners grew
rich, and so did bankers and shippers.
FREE
TRADE’S SHORT-LIVED ADVANTAGE
In
the mid-nineteenth-century, free trade worked very well for British factory
owners, bankers, and ship owners.
But it did not work well for British workers, nor did it work well for
the countries Britain was trading with.
By 1850, some countries had begun to notice that. So the German states had united into a
customs union, or “Zollverein,” and had begun to follow the protectionist
policies of Frederich List. The
Germans complained that the British free trade argument had always been a
fraud. In 1815, the British had
said, in effect, “We have the most efficient industry in the world, and we have
a free trade economy; so imitate us and you too will prosper.” But Britain hadn’t always been a leader in industry, and they
hadn’t always had free trade. As
late as 1690, they had trailed far behind Europe in every technology. Yet in
the 18th century, they caught up with Europe and surpassed them. But
they did so by creating the most absolutely protectionist economy in history.
During
this time, with imports severely restricted, local industries had a good
potential for profit, so it became profitable to invest capital in them. British wealth was eagerly invested and
re-invested in British industry, and innovation of every kind was fully financed. It was in this protectionist
environment the British industry surpassed Europe. Then, England did an about-face and abruptly opened her
markets, as a way of inducing Europe to open its markets, so as to gain maximum
leverage from the technological lead they had then gained. But by the 1850s,
Europeans had decided that they would gain nothing from this arrangement. Since
their own factories lagged far behind the British, they would be unable to
compete and would fall even further behind and eventually cease to exist. So the Europeans opted for the
protectionist strategies of Frederich List.
THE
FREE TRADE PARADOX.
There
was, from the beginning, a paradox to the British plan. It contained the seeds
of its own destruction. Through a
century of extreme protectionism, they had gained a tremendous technical
lead. But to make any use of this
lead, they needed open markets, and the open markets in themselves would
eventually erode that technical lead. You can’t induce other countries to open
their markets to you unless you open yours. But as soon as you do this, capital investment can flow to
other countries, rather than be invested locally. If some other country, i.e.
India, has wages even lower than Britain, then it will be more profitable to build
new factories in India, rather than in Britain. Even if a new British factory could manage to stay in
business, the wage cost would always be higher, so profit would be lower. There
would always be a strong disincentive to re-investing British profits in
Britain. And there would be little
interest in trying to have a better trained workforce as a way of remaining
competitive, since education would require tax expenditure, and taxes would cut
into profit. But as British
industry was stagnating and British workers were reduced to serfdom, banks
still made profit and no one in power saw any need to change anything.
A
BOOM IN EUROPE.
As
Britain headed downward, Germany was booming. Under the Zollverein, imports were restricted and capital
flows were tightly controlled. Any
outside investment in Germany required government permission, as did German
investment abroad. German
investment was directed toward improvement of German industries, and these
investments were profitable, due to a protected markets price for the products
of those industries.
German
consumers paid a high initial cost for this. They paid higher prices for
everything they bought, but only for one generation. As German industrial output doubled every decade, innovation
flourished, productivity increased, and wages rose sharply. The German plan
also called for heavy investment in education. The first push was for universal literacy, quickly achieved
through a nationwide system of tax-supported primary schools. They then built technical high schools
and polytechnical colleges. By the
end of the 19th century, Germany had the best trained work force in
the world. German agriculture had
also improved, so that as Germany became self-sufficient in food, their workers
were better fed than the English.
And German colleges were turning out scientists and engineers by
the tens of thousands—some of them world-class.
In
the 1870s, Britain went into a depression that lasted over 20 years. But Germany continued to boom. In 1850, when Germany began to shift
away from free trade, they produced only insignificant amounts of iron. By 1900 they passed Britain, and by
1910 their output was 50% higher than Britain, at 15 million tons. Between 1880
and 1900, their steel output rose over 1000%. The situation was the same for coal, textiles, electric
power, and especially for chemicals.
In fact, Germany practically invented the modern chemical industry, with
the huge Bayer and BASF plants leading the way. They also took the lead in
chemical research, inventing aniline dye, aspirin, and several plastics. And the German merchant fleet went from
half a million tons in 1870, to 13 million in 1909. (And, though Engdahl
doesn’t mention it, in 1903, Fritz Haber, a chemist at BASF, developed a
process for extracting nitrogen from the air. This discovery
alone radically altered the balance of power. Germany had poor soil that was never very productive
without added nitrates. Munitions
also require nitrates. The only available source had been bat guano from
Bolivia. This was very expensive, and Germany could never have afforded enough
for high output agriculture and high munitions production at the same time. Besides, the Bolivian shipments had to
get past the British Navy. So war
between Britain and Germany would not have been a possibility. But Haber changed all that.)
Besides falling behind in gross output, Britain was
also no longer the leader in technical innovation. When internal combustion engines began to replace steam, it
was the Germans who won the race to develop the first practical IC engine,
first with the Otto engine, and then with the Diesel. (Engdahl could also
have mentioned that in 1840, Britain was producing the finest steam engines on
earth. But by the 1880s, the American made Corliss Engine was so superior that
British manufacturers were paying American patent royalties for the privilege
of building it. )
While
all this was happening, British bankers just collected the money and
re-invested it everywhere except in England, and did nothing as their country
went to hell in a hand-basket.
That’s the paradox. The
only reason Britain had pressed for free trade was to take full advantage of
their technical lead. But in just over half a century, free trade itself had
evaporated that lead. By the end
of the century, British bankers had noticed what was happening in Germany, and
it scarred them. Privately, they agreed that something would have to be
done about Germany. Using
monopolistic trade practices, Britain nearly ran the whole world during the 19th
century. And they were still
firmly in charge at the end of that century. But by then the top leaders realized that British dominance
would not continue much longer if Britain continued to stagnate, while other
countries, particularly Germany, continued to advance. Yet they failed to see the problem as a
British failure, wrought by their own greed and short-sightedness. They saw it as “the German problem,”
and began looking for a way to “do something about Germany.”
THREE
PILLORS OF THE BRITISH EMPIRE
Engdahl
says the British Empire was based on three things: a monopoly of gold, a monopoly of shipping, and a monopoly
of certain raw materials. To
have these monopolies, you need gold, shipping, and raw materials for
yourself--but you also need a practical way to deny these things to all
potential competitors. And that’s
what the Boer War was about.
When
gold was discovered in the Transvaal, the British seized the area, not out of
greed for gold, but to keep any other country from having it. Nearly all of the
gold from the California Gold Rush was bought up by British banks to keep it
off the market. For shipping, you
need a large merchant marine. But to maintain a shipping monopoly, you
also need the world’s largest navy, so that you can deny shipping to any
competitor, should it suit your convenience to do so. And to maintain a monopoly on raw materials----is what the
empire was for. During the
Nineteenth Century, using these three monopolies, Britain was able to dominate
world trade and dominate the world
INFORMAL EMPIRE
The
Boer War was very nasty and very expensive. So in the 1890s, the ruling class in England began talking
about an “informal empire”---where they would still dominate the world, but use
less military leverage, and more financial leverage. Don’t send in the Army--send in the bankers--and threaten to
cut off their credit. The informal
empire relied on a partnership between the British banks, the leaders in
Parliament, the leaders of key industries, the military, and the foreign
intelligence service, but with the bankers clearly in charge. These were separate entities, but in
dealing with foreign countries, they worked like five fingers of the same fist.
If a foreign company applied for a loan at a branch of a British bank, any
information disclosed to the loan officer would be immediately forwarded to a
foreign intelligence officer, unless the bank employee was a foreign
intelligence officer, which he might easily have been.
In many countries, if a local political
leader caused problems for a British bank, the British Army would be sent in.
And any time the British Army had problems gaining cooperation from political
leaders, the bankers would be sent in---to cut off credit and topple the
regime. Engdahl points out that this tactic, which the U.S. now uses through
the IMF, was learned from the British. The whole system was glued together by
control of information, gathered by the foreign intelligence service. And a pliant parliament passed whatever
laws were needed to make it work. Countries that Britain dealt with never fully
appreciated what they were up against. When the so-called Anglo-Persian Oil
Company was formed, the government of Iran had no idea that the company they
were dealing with was wholly owned by the British government. Even Royal Dutch
Petroleum was a British operation, even though they maintained the fiction of a
corporate hdqrs in Holland and employed mostly Dutch workers and management.
OIL
COMES ON THE SCENE
In
the 1890s, a navy captain named Fischer released a study comparing the
strategic advantage of oil-powered warships to coal-powered. The data showed that in any war fought
between coal-powered and oil-powered ships, the coal-powered warships would always lose. A steamship with an
oil-fired boiler would have only slightly higher speed. But it would have twice
the range. It would also produce
little or no smoke, whereas a coal burner would have a plume visible for forty
miles. A coal burner took
two days to re-fuel vs. two hours for an oil burner. And when firing up a cold boiler, a coal burner took 11 hours
to come up to full steam, and took four hours to get enough steam just to move
the ship. An oil burner could be
at full steam in four hours, and could have enough steam to move the ship in 30
minutes. This was not good news for England--which, as Churchill said, was “an
island made of coal”---but had no oil.
In
1904 Captain Fischer had become First Admiral Lord Fischer, and he began
converting England’s fleet to oil. He also convened a committee to study how
England might obtain that oil.
Since that moment, oil has been a strategic material. From that time, British policy has
focused on not only obtaining oil, but denying it to any potential competitor
wherever possible. As early as 1892, Lord Curzon, later viceroy of India, had
written that. “The concession of a port on the Persian Gulf to Russia would be
a provocation to war.”
In
1905, acting through a covert agent, Britain obtained a franchise on the development
of Iranian oil
from an engineer named D’Arcy. This franchise had been granted to D’Arcy in
1901 by the Shah. It happened that
D’Arcy was a pious Christian. So the British agent, disguised as a priest,
convinced D’Arcy that the new Anglo-Persian Oil Company was a private company
run by good conscientious Christians.
IRAQI
OIL, AND THE GERMANS:
In
1889 some German businessmen formed a plan to build a railway from Berlin to Constantinople.
By 1896 1,000 km had been built, and the Turkish government had agreed to allow
the line to continue to Baghdad, with plans to extend it eventually to Kuwait
and the Persian Gulf. Such a line
would open to Germany a vast West Asian interior market. It would also allow
German goods a short cut to India, one that did not need the Suez Canal. The
British bankers, who were already extremely concerned about Germany, now became
nearly apoplectic. There was only room for one great trading power. If Germany
was in, Britain would be out.
But the last straw was when Germany was awarded the full mineral rights to a 20
km corridor on either side of the proposed railway, right through Mosul, which
is now at the heart of the Iraqi oil region. Over the next 15 years, Britain
did everything possible to stall or prevent the construction of this railway.
BALKAN WARS
The route would have to go through
Germany, Austro-Hungary, Serbia, Bulgaria, and Turkey. One obvious thing that
might obstruct the project would be any kind of destabilizing little war in the
Balkans. Conveniently for the British, in the decade leading up to 1914, a
series of such wars just happened to occur: first the Bulgarian war and then the Turkish war.
Another device for delaying the project
was for England to pretend to be interested in jointly financing the project,
then canceling at the last minute. The Germans had continually begged Britain
to join in the endeavor, as it would be extremely expensive to finance alone.
Finally, in 1913, they realized that the British had no good faith intent of
ever financing the project, so a bill was introduced in the Reichstag to have
the German government fully fund the Berlin to Baghdad Railway. This was the
bill being debated when war broke out in 1914.
THE FINAL SOLUTION
Obviously,
the causes of the First World War are complex. And some historians argue that the outbreak of war was
simply a mistake--a series of unfortunate diplomatic blunders. But Engdahl claims that a full decade
before the war, British government leaders had already concluded that English
trade dominance could not be preserved much longer unless a way could be found
to wreck the German economy, and that this would probably require a war. The
secret three-way alliance between Britain, Russia, and France was in no way a
defensive strategy. If you
wanted a defensive pact, it would make no sense to keep it a secret. Instead,
it was more like a mouse trap. If
any one ally was attacked, it would spring the trap. The idea was to trick
Germany into a war that she couldn’t possibly win, and which would cripple her
economy, and then impose post-war conditions that would keep it crippled
forever. Would the British
really start a war that would kill 20 million people just to maintain trade
supremacy? Well, they probably
didn’t know it would kill 20 million people. They probably thought it would be
one of those minor European wars that no one even remembers. With a tiny
country like Germany up against Russia, France, and Britain, how could the war
possibly last more than a few months? There were many factors that convinced British bankers that
the German economy would have to be destroyed if Britain were to survive. The
fact that German industry and shipping would soon eclipse Britain was one
factor. And the fact that the Germans were building a huge navy to protect
their shipping was another. And
the Berlin to Baghdad Rail route, with a German short cut to the Far East, was
perhaps the main factor. According to Engdahl, even with that, the peace might
have been saved. But when the rail corridor included access to Iraqi oil--that
was it. The battle lines were drawn.
Once
the war started, Britain pulled most of its troops out of the front lines in
France and seized the Arabian Peninsula.
They told the Arabs that they were liberating them from the Ottoman
Empire. But a secret agreement, the Sykes-Picot accord, had carved up the whole
Middle East between Britain, France, and Russia, with Britain getting most of
the oil. After the Bolshevik revolution, the Leninist government in 1917 found
a copy of this accord and made it public. The Arabs realized they’d been duped.
T.E. Lawrence was aware of the
fraud, and he wasn’t happy about it. But he felt if it was a choice between betraying the Arabs
and losing the war, he’d rather win the war. The French were outraged that the British would leave them
to fight the western front mostly alone, but they could do little but accept
it. And when the war was over,
Britain already had troops on the ground over the whole Middle East, so the
French accepted whatever crumbs the British chose to leave them.
After
the war, The British and French insisted on imposing crushing reparations
payments, which was the final blow to a German economy already weakened by war.
Wilson had objected, arguing that the German economy could never be rebuilt
under such a heavy burden. Most of us have been taught that it was out of
French and British ignorance that these reparations were imposed--that the
incompetent French and British politicians simply did not understand what they
were doing. Engdahl says they knew exactly what they were doing--crushing
Germany! That had been the whole purpose of the war----to destroy the German economy.
How
did the U.S. come to intervene?
American banks, through J. P. Morgan, had loaned tens of billions of
dollars to Britain to finance the war. If Britain lost, these loans would never
be repaid and all large American banks would become insolvent. And such a bank failure would have taken
down the entire American economy, along with the economy of the entire world.
Engdahl goes on to explain:
- Why the British
bankers originally backed Hitler.
- How Britain made “debt
vassals” of third world countries, as a way of controlling them, and why
Kissinger used the same strategy, though it nearly wrecked the U.S.
economy.
- Why British banks
backed the establishment of the state of Israel
- Why the U.S. set up
conditions to start a war in Kosovo, and sent the Army in to stop it.
- Which former Soviet
states now have U.S. air bases---and which of these states have oil.
- Which political and
corporate leaders were probably assassinated by British MI5 units.
