The Impact of the First World War on International Business

Andrew Smith, Kevin Tennent, Simon Mollan, Andrew Smith, Kevin D Tennent, Simon Mollan, Kevin Tennent, Andrew Smith, Kevin D Tennent, Simon Mollan

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781138930032
• eBook ISBN: 9781317398103
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

People throughout the world are now commemorating the centenary of the start of the First World War. For historians of international business and finance, it is an opportunity to reflect on the impact of the war on global business activity. The world economy was highly integrated in the early twentieth century thanks to nearly a century of globalisation. In 1913, the economies of the countries that were about to go war seemed inextricably linked. The Impact of the First World War on International Business explores what happened to international business organisations when this integrated global economy was shattered by the outbreak of a major war.

Studying how companies responded to the economic catastrophe of the First World War offers important lessons to policymakers and businesspeople in the present, concerning for instance the impact of great power politics on international business or the thesis that globalization reduces the likelihood of inter-state warfare. This is the first book to focus on the impact of the First World War on international business. It explores the experiences of firms in Britain, France, Germany, Japan, China, and the United States as well as those in neutral countries such as the Netherlands, Sweden, and Argentina, covering a wide range of industries including financial services, mining, manufacturing, foodstuffs, and shipping. Studying how firms responded to sudden and dramatic change in the geopolitical environment in 1914 offers lessons to the managers of today's MNEs, since the world economy on the eve of the First World War has many striking parallels with the present.

Aimed at researchers, academics and advanced students in the fields of Business History, International Management and Accounting History; this book goes beyond the extant literature on this topic namely due to the broad range of industries and countries covered. The Impact of the First World War on International Business covers a broad range of geographical areas and topics examining how private firms responded to government policy and have based their contributions mainly on primary sources created by business people.

Part I

Shifting Globalisation

Europe’s Hegemony Challenged

1 Trade After the Deluge

British Commerce, Armageddon, and the Political Economy of Globalisation, 1914–1918

Andrew Dilley

The new protectionism differs from the old in seeking to superimpose the present war map of the world, with its divisions of belligerents, allies, and neutral upon the protectionism of 1903–5, which sought to combine protection for British industries with a closer business connection between the self-governing dominions and the mother-country.

J. A. Hobson, The New Protectionism
(London: T. Fisher Unwin, 1916), ix.

Globalisation ought not only be approached as a material reality, the increasing and increasingly intense connectedness of various parts of the globe, but also as a cultural phenomenon constituted through sets of ideas about the integration of the globe.¹ Such ideas are not only at the heart of the culture of globalisation, hence important in their own right, but also the way in which globalisation is imagined can play an important role in shaping actual exchanges of goods, finance, people, and ideas. Thus, when assessing the impact of the Great War on globalisation, it is necessary not only to consider the war’s impact on patterns of connection and exchange, but also to chart the war’s impact on ideas about economic, and indeed geopolitical, governance. To this end, this chapter considers the impact of the Great War on conceptions of global political economy in Britain and the British Empire. It explores how the war reshaped the ways in which global trade was imagined. Since international businesses lie at the intersection both of the material realities and cultural imaginaries of globalisation, the article focuses on debates on trade and tariff policy after the war amongst businessmen, re-examining the development of what J. A. Hobson called the ‘new protectionism’. It argues that new protection not only signified a significant defeat for British free trade ideology, but also involved a significant re-ordering of spatial understandings of global commerce as the pre-war political economy of tariff reform transformed to accommodate Britain and her empire within a broader global liberal alliance.

Such an examination of the impact of the war on business conceptions of global geopolitical and economic globalisation can be located within, and used to critique, several broader debates about continuity and change prevalent in the literature.² A first, dominant paradigm emphasises the discontinuities caused by the war.³ Thus, globalisation was on this reading unbalanced by financial exertions, productive dislocations, trade reorientations and, finally, supposedly punitive reparations.⁴ Similarly, the war is argued to have destroyed or weakened European empires by promoting nationalism and weakening the imperial metropoles.⁵ Thus, integration was replaced by ‘fragmentation’.⁶ Conversely, a revisionist paradigm stresses continuity, either arguing that the war accentuated developments already apparent prior to the war, or that these developments were less profound than they first appear. Such readings emphasise the continuation of economic integration and the surprising strength of European empires.⁷ J. Adam Tooze’s After the Deluge offers a third way, emphasising neither straightforward continuity nor disintegration, but rather arguing that the war radically reconfigured global economy and global geopolitics. Thus, he writes that the war delivered an ‘unprecedented victory for a distinctive vision of world order’ dominated by the US and the Western Allies, whose dominance was, if anything, reinforced by the weaknesses of the Bolshevik Russia. The British Empire, Tooze argues, was integral to this victory and ‘successfully reinvented the formula of liberal empire [to] … claim for itself a major place in the twentieth-century world as a self-sustaining and self-legitimating unit’. However he then goes on to emphasise the failure of this vision in the interwar period—following the standard account of British imperial decline as opposed to more recent arguments emphasising the continued vitality of British imperialism.⁸ This geopolitical reconfiguration was in part rooted in, and coexisted with, a similar re-distribution of global economic power, with financial and commercial might transferred across the Atlantic. Globalisation was re-ordered by the war, not reversed.⁹ Generally, such debates about continuity and change focus on the impact of the war on globalisation qua integration rather than globalisation qua mentalité. Understanding the war’s impact on conceptions of the political economy of becomes a crucial, and underexplored, aspect of the broader debate about its effect on globalisation.

Businesses, and in particular business associations, played a crucial role in the redevelopment of ideas of political economy in response to ‘Armageddon’. As Martin Daunton and Frank Trentmann have persuasively argued, ideas of political economy are formulated in evolving public discussions, rather than emerging from a self-evident economic logic, from the rarefied reflections of academics or in isolated government offices.¹⁰ Trentmann has emphasised the crucial role played by businessmen as a ‘medium of exchange’ between ‘the economy and politics’: ‘the ways [businessmen] think, talk, and act not only help react to political economy but also help to constitute it’.¹¹ By the twentieth century, collective action by business associations (formal organisations mobilising businesses) lay at the vanguard of the business contribution to political economy described by Trentmann, projecting a legitimated ‘voice’ into broader public discourses and into the deliberations of policymakers.¹² The views of these associations are not unproblematic reflections of the potentially divided opinions of their members. Nonetheless, as political scientist James Wilson has pointed out, ‘few long remain in an organisation that offers them the very opposite of what they want’.¹³ Successful associations therefore must reflect broadly the interests of their members by adopting consensual positions (often through a clear institutional process). At the outbreak of the war, the chambers of commerce movement was arguably the most widespread vehicle through which businesses in Britain and the British Empire could intervene in, and shape, discussions of political economy. In the Anglophone world, chambers of commerce are voluntary associations which draw together businessmen in particular localities to campaign on matters of common interest and to provide shared services.¹⁴ By 1914, in Britain and many of the dominions, they had formed national associations and had mobilised at the imperial and international levels.¹⁵

The remainder of this chapter charts the evolution of new ideas about trade after the war within the chambers of commerce movement, showing also that these ideas contributed significantly to broader discourses on political economy in Britain and the British Empire, not least amongst policymakers. Following contemporaries, notably Hobson, the term ‘new protection’ is adopted for this body of thought, but it must be emphasised at the outset (and again following Hobson) that new protection pursued not only domestic protection, but also a complex hierarchy of global preferential trading relations that involved the imposition of differing levels of tariffs on different trading partners based on their geopolitical allegiances. The chapter traces the evolution of this body of thought, showing that the war not only created an early turn to empire (and an earlier turn to empire than recognised in the existing literature) and the marginalisation of free trade, but also that ideas of preferential trade were quickly reformulated to reconcile domestic protection and imperial integration with the participation in a broader global alliance. The first section of the chapter shows that this imagination of global trade began at the outset of the war and became dominant by the beginning of 1916. The second section shows how new protection had to be legitimated at an imperial level given the evolving political culture of Britain’s relations with the self-governing dominions. The final section explores the impact of the new protection on British and imperial policy in the later years of the war, and shows that, surprisingly, the rise of the US had a relatively limited impact on the political economy of new protection. Overall, the new protection represents a reconfiguration of British and British imperial political economy to meet the demands of a global liberal alliance of precisely the kind emphasised by Tooze. Yet, it constituted an alternate vision of the means to cement that alliance, contrary to US policy of the ‘open door’ in trade, through preferential trading relations. Thus, the continued prevalence of preferential trade into the cold war era raises questions about Tooze’s emphasis on the US power and British decline in the post-1918 world.

Business as Usual? British Trade, Political Culture, and the War: 1914–16

The declaration of war entailed an immediate extension of state activity and significantly disrupted British trade and finance. This was not the intention of policymakers. On the outbreak of war in August 1914, Asquith’s government adopted a strategy of ‘Business as Usual’, aiming to limit the economic dislocations caused by the war. Some scholars have argued that down to 1916, the war’s impact was indeed relatively limited. Thus, John McDermott highlights the continuation of trade with the Central Powers through neutrals until the Trading with the Enemy Act of January 1916 significantly tightened the regulatory framework.¹⁶ David French argues that the commitment to a continental war undermined the strategy ‘Business as Usual’ from the start, but argues that the strategy persisted until 1916.¹⁷ Nonetheless, the ‘limited’ impact of the war from 1914 to 1916 is often more apparent only by comparison with the later zenith of total war. The early years of the war still saw a significant economic rupture with the antebellum world. As early as January 1915, the Chambers of Commerce Journal (the journal of the London chamber of commerce) observed that ‘extraordinary strides have been taken since the war in the direction of State Socialism’.¹⁸ Richard Roberts has ably shown how the financial and credit mechanisms of the City of London were only saved by an enormous state intervention in August 1914.¹⁹

The outbreak of war immediately altered the geopolitical matrix within which British and British imperial trade took place. It rendered important pre-war trades ille...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Tables and Figures
• Acknowledgements
• List of Contributors
• Introduction
• Part I Shifting Globalisation: Europe’s Hegemony Challenged
• Part II New Opportunities: Trans-Border Innovations in Wartime
• Part III Postwar Reconstruction and Its Financing
• Index