Where the Money Actually Went
The long expansion broke in 1873. Banking crashes hit Vienna and New York. This began the Long Depression (1873–1896).
Output still grew, but prices fell. Three main responses followed:
- Protection: tariffs returned across Europe, though Britain remained an exception.
- Concentration: cartels formed in Germany, and trusts arose in the United States.
- Second Industrial Revolution: heavy industry, chemicals and electricity expanded rapidly.
Alongside these shifts came the New Imperialism. Between 1870 and 1914, European powers seized nearly all of Africa and large parts of the South Pacific.
Several thinkers proposed explanations:
| Author | Date | Mechanism proposed |
|---|---|---|
| Hobson | 1902 | Surplus capital seeking overseas outlets |
| Lenin | 1916 | Monopoly finance capital |
| Gallagher & Robinson | 1953 | Crises on the periphery pulling in states |
| Cain & Hopkins | 1980s | Gentlemanly capitalism led by the City |
However, British capital mainly flowed into the United States, Canada, Australia and Argentina. Britain often preferred informal rule, intervening directly only to secure routes to India.
Colonial rule caused immense violence. Leopold II ran the Congo Free State from 1885 until Belgium annexed it in 1908. Germany also conducted a brutal genocide against the Herero and Nama.
Common pitfall: assuming Hobson and Lenin must be right because empire involved money. Their specific claims about capital flows are largely unproven.