70 Historical Perspectives
writings of Adam Smith and David Ricardo, Richard Cobden and other Manchester
industrialists led the fight for free trade, which culminated in 1846 in the abolition
of the “Corn Laws” (restrictions on grain imports), the last major mercantilist
impediment to free trade in Britain. Other countries soon followed example. Indeed,
under Britain’s leadership, Europe entered a period of free trade that lasted from
1860 to 1879 (see Kindleberger, Reading 5). However, this trend toward freer
trade was reversed in the last quarter of the nineteenth century. The purported
causes of this reversal are many, including the decline of British hegemony, the
onset of the first Great Depression (of 1873–1896), and the new wave of
industrialization on the Continent, which led to protection for domestic
manufacturers from British competition (see Gourevitch, Reading 6). For whatever
reason—and the debate continues even today—by 1890, nearly all the major
industrialized countries except Great Britain had once again imposed substantial
restrictions on imports.
Coupled with this trend toward increased protection was a new wave of
international investment and formal colonialism (see Frieden, Reading 7). Britain
had already begun to expand its holdings of foreign territory during the period of
free trade, and after 1880, it was joined by Germany and France. In 1860, Great
Britain possessed 2.5 million square miles of colonial territory, and France, only
.2 million square miles; Germany had not yet entered the colonial race. By 1899,
Britain’s holdings had expanded to 9.3 million square miles, France’s to 3.7 million,
and Germany’s to 1.0 million, an expansion that occurred primarily in Africa and
the Pacific. In 1876, slightly less than 11 percent of Africa and nearly 57 percent
of Polynesia were colonized, yet by 1900, over 90 percent of Africa and almost
99 percent of Polynesia were controlled by European colonial powers and the
United States.
World War I, which many analysts believe to have been stimulated by the race
for colonies, and in particular by Germany’s aggressive attempt to catch up with
Great Britain, destroyed the remaining elements of the Pax Britannica. The mantle
of leadership, which had previously been borne by Britain, was now divided between
Britain and the United States. Yet neither country could—or desired to—play the
leadership role previously performed by Britain (see Lake, Reading 8).
World War I was indeed a watershed in American international involvement.
The terrible devastation caused by the war in Europe served to weaken the traditional
world powers, while it brought the United States a period of unexpected prosperity.
The Allies, which were short of food and weapons, bought furiously from American
suppliers. To finance their purchases, they borrowed heavily from American banks
and, once the United States entered the war, from the U.S. government. As a
result, American factories and farms hummed as the war dragged on; industrial
production nearly doubled during the war years. Moreover, because the war forced
the European powers to neglect many of their overseas economic activities, American
exporters and investors were also able to move into areas they had never before
influenced. When the war began, the United States was a net debtor of the major
European nations; by the time it ended, however, it was the world’s principal
lender and all the Allies were deeply in debt to American banks and the U.S.
government.