4

The Allure of Industry

Industrialization progressed around the globe with varying degrees of success, in ways that were patchy, unpredictable, and not predetermined. While Japan and China were in ferment, the Ottoman Empire was too. In 1839 the proponents of ‘reorganization’ (Tanzimat), led by Sultan Mahmud II (1785–1839), decided that modernization from above was necessary in order to halt the constant decline of the empire. Resistance within the elites, however, was greater here than in Japan and the reforms were essentially concerned with the social and legal aspects of Westernization, rather than the economy. In fact, the Ottoman Empire had no real economic policies and, until the 1860s, little conception that one of the hallmarks of modernity was government responsibility for the economy.¹

There were symbolic gestures, however, and these had significance. Mahmud II ordered his portrait to be hung in public places (like a Western monarch), though it was not an Islamic custom.² He adopted Western forms of dress, even though as recently as 1823 an order had been issued to Grigore Ghica, the Voivode (Lord) of Wallachia, to refrain from wearing ‘French’ (i.e. Western) clothes.³ The Western image of the Turks as ‘unspeakable’ (Gladstone’s term), and the empire as a degenerate nest of bloodthirsty tyrants or lustful ‘Orientals’, was challenged.⁴ Roads and bridges were built, public health and education promoted, but such initiatives were limited. The amount spent on public works, education, health, and so on was a small percentage of state spending.⁵ For the majority of the population, the state manifested itself through conscription and taxation.⁶

The huge debts incurred to pay for the Crimean War (1853–6) had gravely damaged the imperial finances. Sultan Abdülhamid II, one of Mahmud II’s successors, who reigned from 1876 until his deposition in 1909 (the last effective Ottoman ruler), knew that a strong economy was essential and that he had to modernize infrastructures and communications. But military and administrative expenditures during his reign averaged about 60 per cent of government spending, 30 per cent of which went towards servicing the enormous public debt.⁷ The depression in world agricultural prices in the 1870s further strained Ottoman finances. In the face of a dearth of funds, the government was forced to grant monopolies to European concerns in many important mining and other projects. To a certain extent, the Ottoman government was able to use European vested interests to perpetuate its own policies, but the capitulatory commercial and legal privileges enjoyed by European powers, backed by threats of force, left the Ottoman government with little room to manoeuvre. The Sultan chose to continue the free-trade policy embodied in the 1838 Anglo-Turkish commercial Convention, though there was little in it for the Ottoman Empire – its aim was to secure for Britain an increased share of the Middle Eastern market: the Ottoman Empire thought it could not afford to clash with the British Empire. The phrase ‘the sick man of Europe’, attributed to Tsar Nicholas I, was not an inaccurate depiction of the Ottoman Empire.

Later in the century, problems multiplied. In 1873–4 a massive famine ravaged central Anatolia. This was followed by the war with Russia (1877–8), which ended in defeat and population and territorial losses. The so-called ‘Great Depression of 1873–96’ led to a loan default and a weakening of Ottoman trade with the rest of the world, which by then had become very important to the economy of the empire.⁸ Between 1881 and 1903 it was involved in constant debt renegotiations with European powers and bankers, occasionally being able to play off creditors against creditors but never establishing a longer-term plan for its financial affairs.⁹ The consequence was ever-increasing control by European powers over Ottoman finance, leading in 1881 to the establishment of the Ottoman Public Debt Administration.¹⁰

The time was ripe for change. In 1908 a group of officers, intellectuals, and exiles known as the Young Turks staged what amounted to a coup, forcing Sultan Abdülhamid II to restore the constitution of 1876 that he had suspended in 1878 and introduce a relatively democratic system. Inspired by the West, they were a typical ‘Third World’ elite group who wanted to modernize the Ottoman Empire to protect it from the West. Originally they regarded religion as an obstacle to progress, though they later used Islam to unite the country, aspiring to make Turkey the ‘Japan of the Middle East’.¹¹

Political reforms, which is what the Young Turks achieved, are seldom sufficient to stop decline. In fact, they often accelerate it, unsurprisingly since they themselves are often a symptom of decline. By 1914, having lost nearly all of its European territories in the Balkan Wars, the empire depended almost exclusively on exporting agricultural produce.¹² Such decadence contributed to ever-growing resistance to the rule of the sovereign.¹³

The impetus for reforming the empire was not so much the fear of backwardness per se but, as with Japan, the fear of being taken over by Western powers, including Russia. Unlike Japan, however, the Ottoman Empire was a multinational imperium subject to centrifugal pressures from its provinces, above all from the Balkans and from Egypt. Like the Russian and Chinese empires, the Ottoman Empire knew little peace in the nineteenth century and collapsed after the First World War (the Russian Empire had already collapsed in 1917, the Chinese Empire in 1911).

It was not just modernizing Turks, Iranians, and Egyptians who looked to Europe along with the Japanese and the Chinese. The European ‘periphery’ (i.e. eastern Europe) also looked towards the ‘centre’ – England, France, and Germany – and so did the South (Italy, Greece, Spain, and Portugal). In the twentieth century all would look to the United States, and always with the same questions: how can we be like them without being like them? What to take and what to keep? Ideological imports from the West, namely from western Europe and the United States, have been a constant element of the global political struggle in the twentieth century, including, most obviously, the idea of communism. Even the West’s most vociferous opponents in the contemporary era, such as the ideologue of the Islamic Revolution in Iran, the Ayatollah Ruhollah Khomeini, imported the idea of a national state and, indeed, of a republic, from the West, as well as the concept of the political party.¹⁴ And Khomeini himself was following in the footsteps of the Constitutional Revolution of 1906, which used Western values (popular representation and constitutionalism) to challenge Western hegemony.

Ideas are the easiest items to import and the second half of the nineteenth century saw a flourishing global trade in this adaptable commodity. The importers of ideas are often intellectuals from ‘backward’ regions, aware and embarrassed by their backwardness, who cling to the Romantic belief that ideas can change things.

Paradoxically, even the idea of nationalism could be imported. Russian intellectuals, for instance, read Fichte’s Speeches to the German People (1808) and Hegel’s Philosophy of History (1837) in which a particular place was assigned to every ‘historical’ nation (with the Urvolk, the original people, being, obviously, the Germans), and ‘applied’ these ideas to Russia, with Russia, of course, at the heart of things. As Pavel Milyukov (Paul Milyoukov), a liberal Westernizer, wrote in 1905:

Thus, by a curious irony of history, the first and only nationalistic theory ever developed in Russia lay on the foundations of western European philosophic thought; and we must add that this theory was very old in western Europe when it was first heralded by Russian nationalists.¹⁵

The Russian intelligentsia was united in the need to go forward in opposition to the autocracy, but was divided on what could and should be done. As we will discuss in greater depth later, the division was between the Slavophiles, who thought Russia could evolve in its own, non-Western way, and the Westernizers, who believed that there was one path to follow and that the laggards had to go where the pathbreakers had gone before. This great debate was replicated elsewhere, especially in eastern European countries. Let us examine the Romanian case.

In Romania, in the early twentieth century, literary critics such as Eugen Lovinescu and economists such as ştefan Zeletin argued that their country had no choice but to replicate the Western road, ‘the road to civilization’, while the traditionalists insisted on the allegedly unique agrarian character of Romania.¹⁶ But the idea of importing industrialization was already current, unsurprisingly, since, even on the eve of the First World War, four-fifths of the population still lived off agriculture and only 3 per cent worked in industry.¹⁷

In 1881 the nationalist liberal historian Alexandru Dimitrie Xenopol (and later theoretician of the far-right anti-Semitic Iron Guards) wrote that precisely because Romania was a ‘laggard’ state, industrialization had to be imposed from above, directed by the state on a large scale, rather than relying on craft and artisan entrepreneurship.¹⁸ In fact, in countries like Romania, most major changes, such as the abolition of feudalism, were a direct result of Western influence.¹⁹

The country did not have a class of merchants eager to emancipate themselves from the shackles of semi-feudal relations. Romanian elites were largely preoccupied with national unity and, later, its preservation. Nationalism preceded economic modernity.²⁰ The members of the petty nobility (‘the lesser boyars’) preferred the secure employment of state service to the risks associated with entrepreneurship. The educated offspring of traders and artisans soon followed their examples.²¹ The nineteenth-century Romanian economy was characterized by a decline of artisanal industry and its replacement by manufactured imports. Much of the commerce was controlled by foreigners.²² The country’s middle class was a small proportion of the population. In addition the proportion of pupils in Romanian schools in the early 1870s was dismal: there were only 82,145 pupils, whereas advanced Belgium (with a similar population) had 545,000.²³ Eventually, however, the cultural policies of the state were successful and more and more people were educated.²⁴

Romanian liberals, who might have been in favour of capitalist modernity, lamented the rise of a ‘foreign’ entrepreneurial class (mainly Germans and Jews), though, of course, economic rationality required their presence. To cement the unity of the nation, Romania did what many new nations do (and go on doing): she expanded the public sector, thus creating jobs for the scions of the ‘native’ middle classes and of the lower nobility. The result was an elephantine bureaucracy, open to corruption and bribery, paying salaries which, though low, made up one-third of the national budget.²⁵ So the Romanian state grew by borrowing heavily.²⁶

There was no real urban labour market; most rural labourers were sharecroppers, and only one in seven agrarian producers sold the crop regularly for cash. All this added to the complaints of the liberals regarding the lack of ‘maturity’ of the peasantry (i.e. their lack of entrepreneurial spirit).²⁷ Liberals thought that it was possible to modernize agriculture, improve the peasants’ standard of living, diversify the economy, and become a ‘civilized’ state. The conservatives were convinced that Romania was destined to remain an agrarian country for the foreseeable future.²⁸

This was also their wish. Their ideal was a situation in which Romania would export wheat, thus providing enough wealth for its upper class to live it up in Western style; the peasantry could be kept docile by being fed with mămăligă – a porridge of maize – while the more precious wheat could be exported. This powerful and large landowning class (reminiscent of its equivalent in Latin America) preferred to live in Bucharest or spend their time abroad. They were an example of one of the most important obstacles to industrialization throughout the world: a self-satisfied aristocratic class which, thanks to their hold on land and primary products, had no reason to invest in industry, but were content to use their wealth to buy luxuries made elsewhere, so that even their consumption did not benefit the local economy. They often had no incentive to use their capital even for the modernization of their own estates, let alone the modernization of the state.

Their wealth had enabled them to ‘catch up’ with the West, or at least with France, while the country remained backward. Even as early as 1848, according to Hippolyte Desprez (a French diplomat who had travelled extensively in Romania), the Romanian upper classes felt at home in Paris, Vienna, and in Italy, and lived in Bucharest as their counterparts lived in the great capitals of Europe: ‘the salons of Bucharest are the same of ours’.²⁹ They took little interest in technological development or in how to improve agriculture. They leased their estates for fixed sums and spent the revenue on themselves. By 1900 these leaseholders, or arendaşi, many of whom were Jews from the Habsburg Empire, controlled a considerable part of the landowners’ estates.³⁰ Needless to say this only contributed to increasing the anti-Semitism of the peasants. The continuing peasant misery, barely improved by the great agrarian reform of 1864, and the succession of smaller reforms that followed, maintained the rural sector in a state of constant seething discontent.³¹ The reform had introduced capitalist agriculture to the countryside, eliminated the communal village, and given the best land to the landlords. By 1905, 0.6 per cent of all landowners owned almost half the land. The actual cultivation was done by the arendaşi, who paid a rent on the property and then tried to recover it by squeezing the maximum out of the peasants. By 1900 the arendaşi controlled more than half the land over 500 hectares.

The basis of this transformation was the amazing growth of wheat production and export: annual export increased more than five times between 1880 and 1906, when it formed 82.5 per cent of the value of Romania’s total exports.³² But there were problems ahead and not only for Romania. Technology was transforming agriculture, so that, by the end of the nineteenth century, the agriculture–industry distinction was becoming less relevant, especially in America, where farming was being rapidly industrialized. John Deere had pioneered the use of the smooth-sided steel plough in the United States as early as 1837. By 1892, John Froelich had developed the first petrol-powered tractor. After clearing much of American land of its original inhabitants, technological break-throughs and innovations in marketing meant the birth of agribusiness. Wheat, for instance, was now shipped, mixed with that of other growers, as part of a homogeneous commodity to be traded by merchants and bought by anonymous and distant consumers.³³ This was an aspect of modernity highlighted by social theorists such as Georg Simmel: ‘The modern metropolis … is supplied almost entirely by production for … entirely unknown purchasers who never personally enter the producer’s actual field of vision.’³⁴

The United States, Hungary, and Romania were all major exporters of wheat, but American wheat was produced with what was then sophisticated technology that permitted ever-increasing productivity. This severely damaged Romanian exports. Hungary fared better than Romania because it had the technology to transform wheat into flour and export it.³⁵

In Romania, as elsewhere, the main political division was between Liberals and Conservatives. Roughly speaking, the former were stronger in cities, the latter in the countryside, but it was more complex than that. The Liberals were in favour of autarkic protectionist development (since they wanted to promote Romanian industrialists); the Conservatives were open to foreign investment that would not damage their agrarian interests. So the Liberals were statist and protectionists whereas the Conservatives feared a strong state and were in favour of free trade. The Conservatives were pro-Jews and pro-foreign influence. The Liberals were anti-Semitic and nationalist.

In 1900, faced with a considerable deficit, the Conservatives, led by Petre Carp, one of Romania’s leading politicians, granted foreign companies concessions to extract the country’s recently discovered oil, the importance of which was becoming obvious. The Liberals reacted with nationalist slogans: ‘America to the Americans, Europe to the Europeans and Romania to the Romanians’. But when the Liberals, led by Dimitrie Sturdza, formed a government in 1901, they changed track and opened negotiations with foreign interests.³⁶ By 1914 the Romanian economy was dominated by foreign capital – German, Dutch, Austrian, American, and French.³⁷

The backward nature of Romanian development suited the Conservatives. The free-trade policies they favoured would help perpetuate the agrarian character of the Romanian economy since they would facilitate access to foreign markets for the grain and cattle they produced. The Liberals wanted protectionism in the hope that Romanian industry would grow behind a tariff wall. Their hopes were dashed: there was hardly any industrialization (unlike in Russia). Romanian peasants were not threatened by industrialization, because there was too little of it, rather they were threatened because they had too little land and the market for their produce had been shrinking ever since 1875 when the international price for wheat collapsed. Eventually, in 1907, a peasant tax revolt took place, but it was brutally repressed (see Chapter 12).

The kind of economic progress that eventually occurred in Romania relied substantially on the state. Rural inhabitants did not benefit from it. Poverty persisted and Romania remained, by European standards, an underdeveloped country with 82 per cent of the population still living in the countryside in 1912.³⁸ There was of course considerable urbanization, particularly in Wallachia. The population of Bucharest more than doubled between 1860 and the end of the century, but this was due largely to administrative and commercial developments rather than industrial growth. There was also some modest mechanization of agriculture, partly spurred by American competition.³⁹

Nationalists, in Romania as elsewhere, were plagued by contradictory ideas. On the one hand they wanted their country to be a strong nation, with its own culture, language, and traditions. They constantly constructed a national culture of rural values and peasant memory, resistant to the anonymity of urban life. At the same time they wanted to be a modern nation, like all the others, but modernity entailed industry, progress, urbanization, openness to the rest of the world. They looked both ways, towards a mythical past and towards a future full of hope. They were like the Angelus Novus, Paul Klee’s painting (see over), so famously celebrated by Walter Benjamin:

His eyes are opened wide, his mouth stands open and his wings are out-stretched. The Angel of History must look just so. His face is turned towards the past … But a storm is blowing from Paradise, it has caught itself up in his wings and is so strong that the Angel can no longer close them. The storm drives him irresistibly into the future, to which his back is turned, while the rubble-heap before him grows sky-high. That which we call progress is this storm.⁴⁰

One of the leading Romanian nationalists and briefly prime minister in 1931, Nicolae Iorga, in the journal Sămănătorul protested in 1906 that a large number of the plays performed at the National Theatre of Bucharest were in French: this foreign language crushes us, he wrote, it subjugates us, it humiliates us, it divides our people between those who speak our despised language and the others, the good and the great and the rich who speak another language, those who live, love and die in this other language.⁴¹ As if Romania, like all other nations, was not in any case divided between the rich and the poor, between those who went to the theatre and the vast majority who did not.

Hard economic facts were also at work. The decline in world wheat prices forced the Romanian Liberals, the main force behind modernization, to push for an acceleration of industrialization – hence the expansion of rural education under the education minister Spiru Haret (in the hope of turning the peasant into an ‘educated producer’), the Popular Banks laws of 1903, and the establishment of village cooperatives (obştii săteşti) in 1904.⁴²

Romanian Liberals, like Liberals in other east European countries, wanted a strong state with a strong constitution and a proper bureaucracy, the establishment of property rights in land, and labour replacing the corvée and servile obligations with wage labour.⁴³ The problem was that there was no proper banking system and local landlords were not investing. So they borrowed, as did the state. By the beginning of the twentieth century, Romania was one of the leading debtor nations in Europe, with a public debt standing at 116 per cent of national product (1870–1880s), though Serbia’s debt was even worse at 120 per cent.⁴⁴

The role of the state in developing capitalism was crucial, it was agreed, and not just in Romania. Scientific knowledge was vital for modern economic growth, but had capitalism been just a question of technology, it could have been imported from the West in a less traumatic way. However it was also, and mainly, a question of politics. And this was the real problem facing China and Russia, Romania and the Ottoman Empire, as they faced the West: too little state.

To be prosperous it is not necessary to be a manufacturing industrial nation. White European settlers’ colonies – with the United States as the significant exception – never became major manufacturing countries. In Canada, New Zealand, and Australia, primary products (farming, fishing, and mining) dominated the economic landscape, while their populations remained prosperous by any standards.

The same cannot be said for Latin America, however, which, like Australia and New Zealand, exported primary products mainly to Great Britain, France, Germany and the United States while importing manufactured goods.⁴⁵ Even in Argentina, the wealthiest country in Latin America, private wealth was not used to develop industry. Although richer, at the end of the nineteenth century, than Sweden or Norway and with a much larger population (which would have provided a home market), Argentina had a lower level of manufacturing than either of them.⁴⁶ Its significant exports, frozen meat, wheat, and maize, provided Argentina with a higher standard of living than anywhere else in Latin America.⁴⁷ Indeed, on the eve of the First World War, in 1912, Argentina, in GDP per capita, was on a par with the main western European countries, and higher than France and Germany, below only Belgium, the Netherlands, Switzerland, and Great Britain – hence the high level of immigration, particularly from Italy.⁴⁸ Uruguay was not far behind Argentina. Here the contrast with Japan is telling. Japan too, like many Latin American countries, was an exporter of primary products (raw silk and tea). But in Chile the export of nitrates enriched those who controlled it; in Brazil the export of coffee enriched the growers. In Japan the revenue from raw silk and tea was used to buy foreign machinery.⁴⁹

Latin America, or, rather, its elites, became integrated into the world system while remaining peripheral to it, and dependant on the fortunes of industry in the ‘West’, while local production consisted almost entirely of handicrafts.⁵⁰ Of course there was some industrialization before the First World War, but it was limited to products such as cotton textiles in Mexico, Brazil, and Peru.⁵¹ In some countries, such as Chile, there was a transition from the traditional rural estates (the hacienda system) to some kind of agrarian capitalism and the formation of a rural proletariat.⁵² Nevertheless most Latin American countries, though backward compared with the West in terms of industrialization, did better than colonies such as India.

There were major differences between the success of former non-settler colonies such as India in launching their products into the world market, and countries that were not colonies. For example, Indian products (mainly textiles) were in practice excluded from world trade by the British. India was unable to withstand British competition even in its own market: while it produced almost all its textiles in 1833, by 1877 it was producing only 35–42 per cent of what it consumed. Mexico, not a colony, and which produced 60 per cent of the textiles it consumed in 1879, saw this share reach 78 per cent in the period 1906–8.⁵³

In non-industrialized countries, exports remained firmly confined to primary products. Mexico had a variety of exports (and the luck to be near a market the size of the USA). In 1913 coffee accounted for 50 per cent of Brazilian and Venezuelan exports. In Chile the main export was nitrates; in Honduras bananas; in Peru guano and nitrates (and later sugar and copper); in Argentina it was maize (22 per cent of exports), and meat (20 per cent). Cuba produced 25 per cent of the world’s sugar cane.⁵⁴ In Ecuador it was cacao but also straw hats (known as panama hats), quinquina (a popular aromatic herb used, among others, by the French in making the popular aperitif Dubonnet), and tobacco. These four products made up 90 per cent of Ecuador’s exports in the middle of the nineteenth century.⁵⁵

As José Luis González, one of the leading Puerto Rican writers of the twentieth century, exclaimed: ‘Industry! … What interest could have awakened the group of old factories that produced poorly or expensively if consumption could be satisfied by importing from Europe [mainly Britain] or the United States?’⁵⁶

The more a country exported, the more its cosmopolitan and highly urbanized landowning elite enjoyed a higher standard of living and could bask in the benefits of modernization.⁵⁷ They imitated their counterparts in the United States and Europe in their lifestyles and consumption patterns, down to the spread of country clubs such as the Hurlingham in Buenos Aires (developed by the British in 1908 and named after a London sports club) and the Chimont in Montevideo (developed by Americans in 1910). At the same time, unsurprisingly, there was a rejection of nordomanía, as the uncritical attitude towards the USA was called. José Enrique Rodó’s essay Ariel, published in 1900, had an immense influence in Latin America. It called for a revival of an idealized Latin American spirit, while indicting American utilitarianism and democratic mediocrity.⁵⁸ Like many thinkers in the periphery, Rodó (a major Uruguayan modernist writer) exhibited an elitist distaste for the multitude, which can be an instrument of barbarism or civilization, and the spirit of vulgarity (el espíritu de vulgaridad) of American democracy.⁵⁹

After 1870 this dependency on foreign manufactures decreased, but it took the crisis of 1929 to lead to the establishment of state-led import-substituting policies in a somewhat unsuccessful attempt to lessen imports.⁶⁰ Until then, during what came to be known as the ‘Liberal’ era, Latin America, unlike the United States, remained vulnerable to external shocks.⁶¹ Throughout the nineteenth century, economic issues were seldom central to Latin American debates. What moved the elites was the struggle between centralism and federalism and between Church and State. A pragmatic form of free trade had been widely accepted, tempered by some protection for domestic activity, while both foreign investment and immigration were encouraged.⁶²

Latin American governments were weak, even though authoritarian forms of rule prevailed. While territorial stability was remarkable, political instability was uncommonly pronounced. Change occurred through military coups or fraudulent elections. But this did not perturb big business, which had become more or less independent from the political level (thanks, no doubt, to the weakness of the latter).⁶³ What really impinged on enterprises was not the state within which it was operating but what happened in the wider global economy. This confirmed the peripheral status of Latin America, which largely managed to be modern, though with little or no industry.

Modernity was mixed with backwardness in most European countries, too. For instance, in fin-de-siècle Italy, though most of the country was still relatively ‘backward’, what would become known as the ‘industrial triangle’ (Milan-Turin-Genoa) already possessed many of the preconditions for industrial development, including reasonably high literacy rates.⁶⁴ The economy was becoming more diversified, taking in not just textiles and steel (the latter in Terni, Umbria – a project initiated by the state), but also rubber (Pirelli 1872), chemicals (Montecatini 1888), cars (FIAT began production in 1899), electricity (Edison 1884), and engineering (Cantoni Krumm & Co. in 1874, then Franco Tosi in 1894). The working class was still small: 15 per cent of the labour force, according to the 1901 census, and even this was an overestimate since this figure included artisans and owners of workshops, so that in reality industrial workers were probably some 10 per cent of the working population.⁶⁵ Elsewhere in Italy modernity took the form of rapid urbanization without a corresponding industrial growth, usually due to the growth of commerce and public-sector jobs.⁶⁶ During industrialization the gap between north and south increased, partly because the south was incapable of setting up its own enterprises, partly because northern and foreign capital did not invest in the south.⁶⁷ Public utilities, in a metropolis such as Naples with over 500,000 inhabitants in 1900, were in the hands of foreigners: the French controlled the gas supply; the Swiss electricity; the main water supply was in the hands of a British company; the tram system was Belgian.⁶⁸

Some countries were relatively high on the industrial league table, while still being socially backward. Thus Russia combined considerable industrial development with an extremely backward agriculture. Serfdom itself had been abolished only in 1861, while in much of Europe it had been done away with long before: 1788 in Denmark, 1771 in Savoy, 1789 in France (where, at the time, there was very little actual serfdom left), 1798 in Switzerland. In Britain the abolition of serfdom had taken place in the fourteenth century. (There were some countries in which serfdom was abolished even later than in Russia: Romania, for example, where it was abolished formally in 1864, and Tibet, where it was abolished only in 1959.)⁶⁹ In Prussia most feudal rights were abolished late, by 1850, but there was already a powerful class of landlord farmers.⁷⁰

Industry was advancing, slowly and tentatively, in Russia but not (yet) in Greece or Spain or in the Ottoman Empire. Agriculture was central to the Greek economy: before 1914 agricultural products constituted the main export of Greece (75 per cent in 1887 and 78 per cent in 1912, and they are still a major component of Greek exports one hundred years later). These were mainly wine, raisins, olives, olive oil, and tobacco – none of which required much industrial technology. All you needed to do was to dry the grapes for raisins, ferment them for wine, roll the tobacco leaves, and press the olives for the oil. As late as 1874, even road construction remained rudimentary and investments were mainly involved in distribution and finance.⁷¹ Taxes were collected on behalf of the Ottoman Empire by local notables (proestoi), the basis of a later clientele system. In the 1880s some of the preconditions for industrialization came into being (a transport system, a unified internal market, and a strengthening of the mechanism for state intervention), but the Greek working class remained tiny, and peasants remained on the land or emigrated to the United States (the number who left every year was greater than the total number of workers employed in the Greek industry).⁷² Under Charilaos Trikoupis, several times Prime Minister in the 1880s and 1890s, there was considerable modernization of the military, judiciary, and civil service, but the most significant industrial development was in shipping. By 1920 the Greek fleet was one of the largest in the world.⁷³ In 2015 it still was the largest in deadweight tonnage (a measure of how much vessels can transport), though many are registered in other countries such as Panama for tax reasons.⁷⁴ Greece did have a remarkable entrepreneurial class, but it was scattered in various parts of the Ottoman Empire, just like the Lebanese and the Armenians, leaving the country with little industry.⁷⁵

Like Greece, Spain had very little to export to advanced countries such as France, Great Britain, and Belgium, except for its agricultural products like wine (between 1880 and 1914 Spain was the leading wine-exporting country in Europe).⁷⁶ The control of Spanish mines (as well as the rail infrastructure) was in the hands of foreigners, mainly British, French, and German, with the complicity of corrupt local elites.⁷⁷ This was no minor affair since, in the last quarter of the nineteenth century, Spain produced more than 23 per cent of the world lead, 16 per cent of its copper, and large quantities of iron ore and sulphur. Then, at the beginning of the twentieth century, decline set in and other competitors emerged.⁷⁸ These vast resources might have been used to help bridge the gap between backward Spain and the rest of the West. But they weren’t. The state was too bureaucratic to be of much use and the banking system was primitive – two reasons why Spain failed to have an industrial revolution in the nineteenth century.⁷⁹ As early as 1891 an engineer, Pablo de Alzola, lamented that the mineral industries had failed to promote economic growth.⁸⁰ The limited industrialization that existed was confined to Catalonia and the Basque country.⁸¹ Elsewhere industrial development proceeded at a very slow pace and remained so weak that it could not provide sufficient stimulus to increase production in agriculture. Labour remained, unproductively, in the countryside, acting as a restraint on the Spanish economy, as it also did in the case of Portugal.⁸²

The growth of industry in Europe in the decades leading up to the First World War was concentrated in a few regions of the West. Outside the West (and Japan) there was hardly any modern manufacturing. Industrialization remained firmly in the hands of western Europeans and Americans. Only Japan just about challenged this hegemony as the table below makes clear (see Table 10).⁸³

The circumstances surrounding each industrial country were varied. This is hardly surprising. Within the world of advancing capitalism there was remarkable diversity: new countries (Germany and Italy) and old ones (Britain and Sweden), landlocked countries (Switzerland) and islands (Japan and Britain), large countries (the USA and Russia) and small ones (Belgium and Switzerland), multinational (Russia) and fairly ethnically homogeneous states (Sweden and Japan). Some small countries could follow bigger ones by producing manufactured exports for their markets, as was the case for Belgium and Switzerland, whose exports per capita were far higher than any other country, including Britain, throughout the period 1880 to 1914.⁸⁴ In the same period Sweden achieved the highest rate of growth per capita GNP in Europe.⁸⁵ Other small peripheral countries did not do well. Most of the Balkan nations that became independent only in the second half of the nineteenth century faced problems of nation-building while being constrained by unfavourable economic circumstances. Their subsequent history turned out to be most unfavourable to economic prosperity and, as a result, even today they suffer from relative economic backwardness. They lagged behind western Europe before the First World War, between the wars, during communism and after communism.

On the eve of the First World War what we came to call the ‘Third World’ accounted for less than 2–3 per cent of the world’s industrial output.⁸⁶ Western growth was remarkable only in comparison with that of the periphery, and not in comparison with the growth it would experience in the decades after the Second World War, the real Golden Age of Capitalism, when the advanced economies of Europe and North America grew by leaps and bounds.

Table 10 League Table of Industrial Development, 1810–1910

Source: Paul Bairoch, ‘Niveaux de développement économique de 1810 à 1910’.