WORLD JANUARY 8, 1936
Lately we have heard a great deal about the conflict between "hungry" and "sated" nations. The phrase has been used to describe Mussolini's attack on Ethiopia, Japan's advance into Manchuria and North China, and Hitler's proposed penetration of east Europe. A ''hungry" nation means one without colonies producing raw materials, and this lack is supposed to drive it to eventual war. The image of a world separated into "hungry" and "sated" nations has been a favorite of Mussolini, Hitler and the Japanese blood brotherhoods. In rural villages and congested city districts, millions of humble Italians, Germans and Japanese have listened to speeches on the need for winning colonies and raw materials, and dreamed glorious dreams of a time when they would all he rich and happy. A few miserable Italians and Japanese have already died to fulfill these dreams.
The concept of "hungry" and "sated" countries did not gain respectability, however, until Sir Samuel Hoare, in a speech at Geneva last October, seemed to agree that Mussolini had a case for conquest, and proposed a "redistribution" of raw materials. Hoare's sincerity could not be suspected, since he represented the chief of the "sated" nations. Many people concluded that if an Englishman were ready to admit that Italy, Germany and Japan had been badly used by the colony-possessing countries, it must be so. They were confirmed in this when Hoare's words were cordially, if vaguely, assented to by Secretary Hull, spokesman for the second chief "sated" nation.
The London Economist recently published a list of five "sated" countries, together with the raw materials that each one controls, at least to the extent of 20 percent of world production. The list was: the British empire: chrome ore, coal, cocoa, copper, copra, cotton, gold, ground nuts, jute, lead, manganese ore, nickel, rubber, silver, tin, vegetable oils, wheat, wool and zinc; the French empire: bauxite, cocoa, ground nuts, iron ore, potash and vegetable oils; the Dutch empire: copra, rubber and tin; the United States: copra, corn, cotton, lead, petroleum, silver and zinc; the U.S.S.R: chrome ore, linseed, manganese ore, petroleum and wheat.
This is an impressive demonstration of the degree to which the sources of raw materials are concentrated in a few countries. It is easy to imagine an Italian—or a German or a Japanese—reading this list, and feeling that unless he and his compatriots can force the "sated" nations to disgorge their booty, they are condemned to a life of permanent and dishonorable poverty.
This patriotic rancor, however, is largely mistaken. Even the warmest proponents of the hungry-nation thesis, when they talk about Italy being denied access to raw materials, do not mean it literally. In peacetime, at least, an Italian business man can buy whatever raw materials he can pay for, and on the same terms as the business men of other nations. Sometimes, in his speeches, Mussolini has seemed to imply that the sated countries do not sell to Italians willingly, that they part with their raw materials as grudgingly as a miser gives up gold. But the raw-material dealers in the world markets are in business exclusively for profit, and cases where one of them has refused to sell to an Italian because of his nationality must be practically unknown.
Usually, however, the hungry-nation proponents do not deny that Italians—and Germans and Japanese—can buy raw materials if they have the money with which to pay for them. Instead, their arguments center around the monopoly prices that the sated nations are able to exact for their raw materials. They point, for example, to the fact that England and Holland dominate the world supply of tin. Tin is an essential for industry. Italy must have tin, and must pay what England and Holland demand. Therefore—according to this argument—Italian economy is dependent on England and Holland, and these two countries have Italy "by the throat."
In this form, the hungry-nation thesis has many upholders. Apparently its validity is admitted by Sir Samuel Hoare. Nevertheless, stated in this way, it constitutes a sort of verbal sleight-of-hand trick. In the present-day world, except in the case of the U.S.S.R., raw materials are not ordinarily sold by governments. They are sold by individuals and corporations. It is not true that, in the case of tin, England and Holland have Italy by the throat. All that can be said is that certain individuals or syndicates operating in tin on the London Metals Exchange may or may not have certain Italian consumers of tin by the throat.
This is an important distinction to make, for it changes the whole sense of the hungry-nation argument. It means that the wrath of the peoples of the hungry nations ought to be directed not toward England and the other sated nations, but toward the relatively small group of business men who own the sources of many of the world's raw materials, and who are to some degree above and outside the control of governments. But consumers in hungry nations have no more cause for anger than their brother consumers in the sated countries, for all suffer equally from raw-material monopolies. The hungry-nation argument, if it means anything at all, means that hungry people in every country, except Russia, are exploited by sated owners of mines, oil wells and plantations.
In point of fact, however, the hungry-nation proponents have chosen an unfortunate time in which to make their arguments. The owners of raw materials have done little exploiting during the depression. From 1930 until very recently, raw materials as a group have been selling at panic prices. In two generations, there has been no other period when Italians, Germans and Japanese had the chance to obtain greater supplies of raw materials at less cost. However, it is undoubtedly true that with world recovery, many of the raw-material cartels will be reconstituted, and will thereupon endeavor to exact monopoly prices from the buying public.
Nevertheless, it is hard to see how Mussolini's conquest of Ethiopia will protect the Italian people against this prospective larceny. It is doubtful whether Ethiopia possesses important raw materials, but let us assume that she does. After Mussolini wins Ethiopia, in what way will her raw materials be any more available to the majority of Italians than they are under the dark and barbarous rule of Haile Selassie?
A fair means of answering this question is to see what has already been done under Mussolini's territorial jurisdiction. As it happens, Sicily and Texas together are the source of more than 90 percent of the world's production of brimstone sulphur. In 1923, the year that Mussolini came to power, the Sicilian producers joined with those of Texas to establish a brimstone-sulphur cartel. Within a brief time, they succeeded in raising the world price of sulphur by $4 a ton. There is no record that Italians, because of the purity of their Fascist beliefs, were able to obtain sulphur any more advantageously than Englishmen, Hollanders, Frenchmen or others of inferior nationality. For the Italians who owned the Sicilian deposits, the cartel was a pleasant affair, but it is not clear how the possession of sulphur within their national territory made it any more accessible to the great mass of the Italian people.
Italy also has deposits of bauxite, the raw material of aluminum, in Istria. In 1927, the great Montecatini hydro-electric-chemical interests founded the Societa Italiano dell'Alumino—not, however, with their own capital, but with funds supplied by Mussolini. Italy was a member of the international aluminum cartel, and the Montecatini firm was protected against foreign competition. Production of aluminum, which had averaged about 2,000 tons annually, rose to 11,800 tons in 1933. At this level, Italy was producing more aluminum than the valiant-hearted Fascists, with their low wages, could consume. However, the Montecatini interests did not drop the price of aluminum to a point at which Italians could buy it. Instead, they successfully besought Mussolini to substitute aluminum for steel in the Italian state railways, and thus relieve them of their surplus. The happy result—for the Montecatini company—was that it could declare a 15-percent dividend, although it is believed to have paid no return whatever on the funds that Mussolini had advanced.
Proponents of the hungry-nation thesis, however, usually base their argument on two raw materials, tin and rubber, neither of which is produced by any of the hungry nations. Hair-raising stories can be told about both commodities. The International Tin Committee, reestablished during the London economic conference of 1933, now includes all countries with tin supplies, has its headquarters at The Hague, and exercises more influence in international politics than most small nations. From a low of $425 a ton in 1932, the cartel successfully drove the price of tin up to a high of $1,187 a year later. The chief individual in this manipulation was the Englishman, John Howson, now under investigation following an attempt to corner the world supply of white pepper. According to testimony given last winter before the United States House Foreign Affairs Committee, the average cost of producing tin is about $400 a ton, and the year-by-year profit of cartel members amounts to about 50 percent.
Everyone will agree that tin provides a shocking case of a world monopoly. On the other hand, it is not clear how foreign conquest can be of any aid to Italian tin consumers. Suppose, for a wild moment, that Sir Samuel Hoare and his Tory colleagues should be sufficiently moved by their sympathy for Mussolini voluntarily to cede to him British Malaya, source of the cheapest and best tin, and that, by some miracle, Italian interests were able to raise enough capital to buy the control of the Malayan tin companies. Can anyone believe that the new Italian owners would not become loyal members of the International Tin Committee, and would not cooperate in keeping the price of tin as high as they could?
The international rubber cartel's control of the rubber market was shattered by the depression, and the cartel's position is still so delicate that it does not dare boost prices. However, in 1923, after the adoption of the Stevenson plan, the British plantation owners succeeded in perpetrating the greatest raw-material squeeze of recent years. The price per pound, which had touched a low of 27 cents in 1922,advanced jerkily to 95 cents in 1925, and spot rubber momentarily went to $1.048 on the New York market. Immediately afterwards, because of competitive supplies from native growers in the Dutch East Indies, the price of rubber utterly collapsed.
Mr. Hoover, then Secretary of Commerce, protested against the Stevenson plan with great violence. At present, Americans are the chief objectors to the tin monopoly. It may interest Mr. Frank Simonds and other American upholders of the hungry-nation thesis to know that the United States has by far the best claim to be called hungry. It is wholly dependent on selfish foreign countries for three important raw materials, tin, rubber and coffee. No other nation pays a fraction of what we do to international monopolies. The tribute exacted from Italians is insignificant beside that paid by American coffee drinkers, American users of tin cans and rubber automobile tires. If the road of escape from foreign exploitation lies in conquering colonies, Mr. Roosevelt was obviously derelict in permitting Mussolini to attack Ethiopia before we did. The Harar region of Ethiopia produces coffee, and—if the hungry-nation theory is correct—American Marines ought now to be disputing its conquest with Mussolini's patient Askaris.
Primarily, it is due to American initiative that the raw-material problem was considered in detail at the 1933 London economic conference. Largely because of American pressure, a resolution was adopted laying down the principles that should govern future cartel agreements, it provided that agreements
should as far as possible be worked with the willing cooperation of consuming interests in importing countries who are equally concerned with producers in maintenance of regular supplies at fair and stable prices.
Partly as a result of this resolution, the tin-producing countries consented to the inclusion of a provision in their cartel agreement for a consumers' panel. Previously a similar provision had been incorporated in the rubber agreement. Representatives of consuming nations inquired whether the consumers' panel of the tin cartel would have the right to vote on production quotas, and thus have a voice in determining prices. The private producing interests, whose spokesman was Sir John Campbell, then British Secretary for Colonies, politely refused. They were business men, and they saw no reason why they should not obtain as high prices as possible. The discussions during the London conference offer the clearest possible evidence that as long as the unrestricted right of private ownership in the sources of raw materials is admitted, the raw-material problem will be insoluble. There will never be such a thing as a "good" private cartel.
It would be misleading, however, not to point out that the possibilities of monopoly control vary greatly among raw materials. Tin is easy to control, because of the relatively few known deposits. In practice, the tin cartel receives considerable support from the British and Dutch governments—among other things, a high British export tax on tin ore. Nevertheless, the tin-mining interests are so powerful that they could probably manipulate prices in any event. Oil is another raw material over which monopoly control is easily exercised. Rubber falls in an intermediate group. The fate of the Stevenson plan indicates that any scheme designed to keep prices at an exorbitant level will ultimately fail. Perhaps the least controllable commodity is wheat. The problem with wheat is to prevent its millions of small producers from being victimized by the millers and speculators.
The most important single import of hungry Italy, Germany and Japan is cotton. At present, cotton is subject only to the control exerted through the A.A.A. and the Bankhead act. Since the United States is still much the largest producer, the measures taken by the Roosevelt administration have been able to maintain, and slightly increase, the world price. Nevertheless, both Italy and Japan have succeeded in selling textiles made of American cotton in competition with our own textiles, and even in invading the American domestic market.
Two final arguments of the hungry-nation advocates need brief mention. It is often pointed out that a nation possessing essential raw materials is assured of exports, and, consequently, of an unfailing inflow of foreign currencies. This is true, and during period of disturbance in world trade, this may be of temporary advantage. In normal times, however, the advantage is negligible.
It is also often argued that raw-material-producing colonies are of supreme value in times of war. This is extremely doubtful. If, for example, Mussolini should succeed in conquering Ethiopia, its raw materials would be of no use to him in war unless he controlled the Mediterranean, the Suez Canal and the Red Sea. However, if he did control them, he would be able to obtain Ethiopia's raw materials, no matter to whom she belonged. In short, the advantage of a raw-material-producing colony in wartime depends not on legal ownership, but on naval and air supremacy.
This article originally ran in the January 8, 1936, issue of the magazine.